Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
FEBRUARY 15, 2000
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.
Coast Business Credit Loan and Security Agreement
On January 24, 2000, the Company entered into a Loan and Security
Agreement (the "Loan Agreement") with Coast Business Credit, a division of
Southern Pacific Bank ("Coast") pursuant to which it is enabled to make secured
borrowings in the aggregate amount of up to the lesser of $25.0 million or such
maximum aggregate amount as is available to be borrowed under a receivables loan
and two term loans described below. Of such amount, $14.5 million, based on the
lesser of 75% of the appraised net eligible forced liquidation value of the
Company's equipment or $14.5 million, is a term loan (the "Equipment Loan"), an
additional $2.0 million is a term loan (the "Installment Loan"), and the balance
is available to be borrowed in an amount not exceeding 80% of the Company's
eligible receivables (the "Receivables Loan"). The Equipment Loan is repayable
commencing on August 30, 2000 in monthly installments over a term of six years,
with interest only payable monthly prior to August 1, 2000. The Equipment Loan
further requires that the Company make additional monthly principal payments of
50% of its excess cash flow during the preceding month during the period ending
February 28, 2001, 2000, and thereafter additional monthly principal payments of
40% of its excess cash flow during the preceding month. Excess cash flow is
defined to be the Company's net income before income taxes, depreciation and
amortization during a month minus the sum of principal and interest payments
made and taxes paid in cash ("EBITDA"). The Installment Loan is repayable in
monthly installments over four years commencing March 31, 2000, and, after the
Equipment Loan is paid in full, is also repayable out of excess cash flow as
provided above. The Loan Agreement ceases to be in effect on February 28, 2003,
provided, however, the Loan Agreement will automatically renew for additional
terms of one year unless either party elects not to renew the term. In the event
the Loan Agreement is not renewed on February 28, 2003, or at the end of any
renewal term thereafter, all borrowings then outstanding under the Loan
Agreement are then due and payable.
On February 15, 2000, the Company borrowed an aggregate of $15.6
million pursuant to the Loan Agreement. The proceeds were used to repay the
Company's former senior secured lender in the amount of $13.5 million, to repay
other indebtedness aggregating $1.5 million, and the balance was used for
general corporate purposes, including the payment of outstanding accounts
payable.
The Equipment Loan and the Installment Loan bear interest at the prime
rate, as defined, plus 2% per annum, and the Receivables Loan bears interest at
the prime rate, as defined, plus 1% per annum. The Company's obligations under
the Loan Agreement are collateralized by a senior lien and security interest in
substantially all of the Company's assets. Principal and
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interest of up to $5.0 million outstanding under the Loan Agreement has been
guaranteed, subject to certain limitations, by St. James Capital Partners, L.P.
and SJMB, L.P. (collectively, "St. James"), principal stockholders of the
Company, and Charles Underbrink, a principal of St. James and a Director of the
Company. In addition, St. James has guaranteed all of the Company's obligations
under the Loan Agreement, subject to certain limitations. The guaranty of St.
James is backed by a pledge of certain securities owned by it, subject to
certain limitations. Loans under the Loan Agreement were subject to the
fulfillment of a number of closing conditions and the accuracy of the Company's
representations and warranties in the Loan Agreement.
Events of default under the Loan Agreement include (i) any warranty,
representation, statement, report or certificate delivered to Coast by the
Company being untrue or misleading, (ii) the failure of the Company to pay when
due any loans under the Loan Agreement or any other monetary obligation under
the Loan Agreement, (iii) the total of the Company's loans outstanding exceeding
the Company's maximum borrowing limit under the Loan Agreement, (iv) the breach
of various covenants and obligations of the Company under the Loan Agreement,
(v) the insolvency or business failure of the Company or the commencement of any
reorganization or bankruptcy proceedings, (vi) a change of control of the
Company without Coast's consent, (vii) the inability of the Company to pay its
debts as they come due, and (viii) certain other events. Upon such an event of
default, Coast may cease making loans to the Company and accelerate the due date
of all indebtedness outstanding under the Loan Agreement.
The Company is obligated to fulfill various affirmative and negative
covenants contained in the Loan Agreement. The affirmative covenants include
requirements to comply with various financial covenants, maintain insurance
coverage, apply 30% of the proceeds from the sale of equity securities to the
repayment of principal of the term loans, provide written reports to Coast, and
provide Coast with access to the collateral for the indebtedness. The financial
covenants require the Company to have a tangible net worth of $5.0 million on
the closing date under the Loan Agreement and increasing quarterly thereafter by
80% of the Company's net income for the quarter, have a debt service coverage
ratio of 1.25 to 1.00 quarterly, commencing March 31, 2000, and have actual
revenue and EBIDTA of no less than 80% of an amount projected by the Company.
Negative covenants prohibit the Company, without Coast's consent, from merging
or consolidating with another entity; acquiring assets, subject to certain
exceptions; entering into any other transaction outside the ordinary course of
business; selling any assets except in the ordinary course of business;
restrictions on the disposition of inventory; loaning money, subject to certain
exceptions; incurring indebtedness outside the ordinary course of business which
has a material adverse effect on the Company; paying or declaring any dividend
or making any other distributions; or a change in the Company's capital
structure that has a material adverse effect on it.
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<PAGE>
At the closing of its initial borrowings, the Company paid a loan fee
of 2% of the maximum amount able to be borrowed under the Loan Agreement and is
obligated to pay an annual fee of 0.5% of such amount. In addition, the Company
is obligated to pay a facility fee of $15,000 each quarter and an unused
facility fee of 0.375% of the undrawn portion of the maximum amount able to be
borrowed. In the event of the sale or transfer of substantially all the assets
or ownership interests in the Company prior to February 28, 2003, Coast is
entitled to a success fee of $250,000. In the event the Loan Agreement is
terminated by the Company prior to February 15, 2001, Coast is entitled to a fee
of $750,000 and of $500,000 thereafter, provided, if the termination occurs at
any time as a result of the sale of substantially all the Company's assets or a
controlling interest in the Company and the indebtedness to Coast is repaid, the
fee will be $500,000.
Reference is made to the Loan Agreement filed as an Exhibit hereto for
a complete statement of its terms and conditions.
Private Sale of $7.0 Million of Notes and Warrants
During the period through February 14, 2000, the Company sold $7.0
million principal amount of convertible promissory notes (the "Notes") due on
January 15, 2001 and warrants ("Warrants") to purchase 28.7 million shares of
Common Stock. The Notes and Warrants were purchased by 47 "accredited
investors," (the "Purchasers") as defined in Regulation D under the Securities
Act of 1933, as amended. Payment of principal and interest on the Notes is
collateralized by substantially all the assets of the Company, subject, however,
to the terms of a subordination agreement between the Purchasers and Coast. The
Notes bear interest at 10% per annum through September 30, 2000 and thereafter
at the rate of 15% per annum and are convertible into shares of the Company's
Common Stock at a conversion price of $0.75 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. The Warrants are exercisable at a price of $0.75 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 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. The
shares issuable on conversion of the Notes and exercise of the Warrants have
demand and piggy-back registration rights under the Securities Act of 1933. The
Notes contain 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 the Purchasers. Events of default under the Notes include, among
other events, (i) a default in the payment of principal or interest on the
Notes; (ii) a default in the performance of any covenant of the Note Purchase
Agreement or other agreement entered into in connection
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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; and (vi) the commencement of certain bankruptcy or insolvency
proceedings. If an event of default occurs, the Notes may become immediately due
and payable.
Resolution of Litigation
Bendover Litigation. On December 22, 1999, the Company entered into a
Compromise Agreement with Release with Bendover Company ("Bendover") whereby the
parties compromised and settled their disputes arising out of the Company's
acquisition of the assets of Diamondback Directional, Inc. in October 1997.
Pursuant to the agreement, Bendover returned to the Company promissory notes
aggregating $2.0 million principal amount and received in exchange 2,666,666
shares of the Company's Common Stock and a promissory note in the principal
amount of $1,182,890 due on January 15, 2001, bearing interest at 10% per annum.
The note is collateralized by the same assets of the Company as collateralize
the notes owing to St. James and is subject to a subordination agreement with
Coast. The shares of Common Stock issued to Bendover have demand and piggyback
registration rights pursuant to an agreement entered into with the Company. The
agreement also provides for the election of Alan Mann, a principal stockholder
of Bendover, as a Director of the Company, the payment of approximately $26,000
to Mr. Mann on account of outstanding claims against the Company, and the
dismissal of the lawsuit between the Company and Bendover.
Southwick Litigation. On January 26, 2000, the Company paid the sum of
$105,161 to Southwick Investments, Inc. pursuant to an arbitration award entered
against the Company in August 1999. This payment resolved in full the legal
proceedings instituted against the Company by Southwick.
Other Litigation. Since October 1, 1999, the Company has resolved other
pending legal proceedings including, among others, lawsuits instituted by Dreco,
Inc., Thomas Tools, Inc., and Saxon Industries, Inc.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) None required.
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<PAGE>
(b) None required.
(c) Exhibits:
Exhibit Number Description of Document
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10.1 Loan and Security Agreement by and
between the Company and Coast Business
Credit, a division of Southern Pacific
Bank, dated as of January 24, 2000
10.2 Form of Agreement for Purchase and Sale
dated as of December 17, 1999 between
the Company and the Purchasers
10.3 Form of Promissory Note dated December
17, 1999 issued pursuant to the Purchase
and Sale Agreement dated December 17,
1999
10.4 Form of Warrant issued pursuant to the
Purchase and Sale Agreement dated
December 17, 1999
10.5 Form of Registration Rights Agreement
pursuant to the Purchase and Sale
Agreement dated December 17, 1999
10.6 Compromise Agreement with Release dated
December 22, 1999 among the Company,
Bendover Company, Alan Mann and Michael
Dale Jowers
99.9 Press Release dated February 15, 2000
(previously filed).
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<PAGE>
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: March 10, 2000 By: /s/ William L. Jenkins
-----------------------------------
William L. Jenkins, President
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EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
by and between
BLACK WARRIOR WIRELINE CORP.,
a Delaware corporation
and
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
Dated as of January 24, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS ............................................................ 1
Account Debtor ......................................................... 1
Affiliate .............................................................. 1
Audit .................................................................. 1
Borrower ............................................................... 1
Borrower's Address ..................................................... 1
Business Day ........................................................... 1
Change of Control ...................................................... 1
Closing Date ........................................................... 1
Coast .................................................................. 1
Code ................................................................... 1
Collateral ............................................................. 1
Credit Limit ........................................................... 1
Debt Service Coverage .................................................. 1
Default ................................................................ 2
Deposit Account ........................................................ 2
Dollars or $ ........................................................... 2
Early Termination Fee .................................................. 2
EBITDA ................................................................. 2
Eligible Receivables ................................................... 2
Equipment .............................................................. 3
Event of Default ....................................................... 3
GAAP ................................................................... 3
General Intangibles .................................................... 3
Inventory .............................................................. 3
Investment Property .................................................... 3
Loan Documents ......................................................... 4
Loans .................................................................. 4
Material Adverse Effect ................................................ 4
Maturity Date .......................................................... 4
Maximum Dollar Amount .................................................. 4
Minimum Monthly Interest ............................................... 4
Obligations ............................................................ 4
Permitted Liens ........................................................ 4
Person ................................................................. 5
Prime Rate ............................................................. 5
Real Property .......................................................... 5
Receivable Loans ....................................................... 5
Receivables ............................................................ 5
Renewal Date ........................................................... 5
Renewal Fee ............................................................ 5
Solvent ................................................................ 5
Tangible Net Worth ..................................................... 5
Term Loans ............................................................. 5
Year 2000 Problem ...................................................... 5
Other Terms ............................................................ 5
2. CREDIT FACILITIES ...................................................... 6
2.1 Loans ......................................................... 6
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3. INTEREST AND FEES ...................................................... 6
3.1 Interest ...................................................... 6
3.2 Fees .......................................................... 6
4. SECURITY INTEREST ...................................................... 6
5. CONDITIONS PRECEDENT ................................................... 6
5.1 Status of Accounts at Closing ................................. 6
5.2 Minimum Availability .......................................... 6
5.3 Landlord Waiver ............................................... 6
5.4 Real Property ................................................. 6
5.5 Executed Agreement ............................................ 7
5.6 Opinion of Borrower's Counsel ................................. 7
5.7 Priority of Coast's Liens ..................................... 7
5.8 Insurance ..................................................... 7
5.9 Borrower's and Guarantors' Existence .......................... 7
5.10 Organizational Documents ...................................... 7
5.11 Taxes ......................................................... 7
5.12 Year 2000 Problem Assessment Certificate ...................... 7
5.13 Due Diligence ................................................. 7
5.14 Other Documents and Agreements ................................ 7
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER .............. 7
6.1 Existence and Authority ....................................... 7
6.2 Name; Trade Names and Styles .................................. 8
6.3 Place of Business; Location of Collateral ..................... 8
6.4 Title to Collateral; Permitted Liens .......................... 8
6.5 Maintenance of Collateral ..................................... 8
6.6 Books and Records ............................................. 8
6.7 Financial Condition, Statements and Reports ................... 8
6.8 Tax Returns and Payments; Pension Contributions ............... 8
6.9 Compliance with Law ........................................... 9
6.10 Litigation. ................................................... 9
6.11 Use of Proceeds ............................................... 9
6.12 Year 2000 Compliance .......................................... 9
7. RECEIVABLES ............................................................ 9
7.1 Representations Relating to Receivables......................... 9
7.2 Representations Relating to Documents and Legal Compliance...... 9
7.3 Schedules and Documents relating to Receivables................. 9
7.4 Collection of Receivables.......................................10
7.5 Remittance of Proceeds..........................................10
7.6 Disputes....................................................... 10
7.7 Returns........................................................ 10
7.8 Verification................................................... 10
7.9 No Liability................................................... 10
8. ADDITIONAL DUTIES OF THE BORROWER....................................... 10
8.1 Financial and Other Covenants.................................. 10
8.2 Insurance...................................................... 10
8.3 Reports........................................................ 11
8.4 Access to Collateral, Books and Records........................ 11
8.5 Negative Covenants............................................. 11
8.6 Litigation Cooperation......................................... 12
8.7 Further Assurances............................................. 12
9. TERM.................................................................... 12
9.1 Maturity Date.................................................. 12
9.2 Early Termination.............................................. 12
9.3 Payment of Obligations......................................... 12
10. EVENTS OF DEFAULT AND REMEDIES.......................................... 12
10.1 Events of Default.............................................. 12
10.2 Remedies....................................................... 14
10.3 Standards for Determining Commercial Reasonableness............ 15
10.4 Power of Attorney.............................................. 15
10.5 Application of Proceeds........................................ 16
10.6 Remedies Cumulative............................................ 17
11. GENERAL PROVISIONS...................................................... 17
11.1 Interest Computation........................................... 17
11.2 Application of Payments........................................ 17
11.3 Charges to Accounts............................................ 17
11.4 Monthly Accountings............................................ 17
11.5 Notices........................................................ 17
11.6 Severability................................................... 17
11.7 Integration.................................................... 17
11.8 Waivers........................................................ 18
11.9 No Liability for Ordinary Negligence........................... 18
11.10 Amendment...................................................... 18
11.11 Time of Essence................................................ 18
11.12 Attorneys Fees, Costs and Charges.............................. 18
11.13 Benefit of Agreement........................................... 18
11.14 Publicity...................................................... 19
11.15 Paragraph Headings Construction................................ 19
11.16 Governing Law; Jurisdiction; Venue............................. 19
11.17 Mutual Waiver of Jury Trial.................................... 19
<PAGE>
COAST
LOAN AND SECURITY AGREEMENT
Borrower: Black Warrior Wireline Corp., a Delaware corporation
Address: 3748 Highway 45 North
Columbus, MS 39701
Date: January 24, 2000
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between COAST
BUSINESS CREDIT, a division of Southern Pacific Bank ("Coast"), a California
corporation, with offices at 12121 Wilshire Boulevard, Suite 1400, Los Angeles,
California 90025, and the borrower(s) named above, the "Borrower"), whose chief
executive office is located at the above address ("Borrower's Address"). The
Schedule to this Agreement (the "Schedule") shall for all purposes be deemed to
be a part of this Agreement, and the same is an integral part of this Agreement.
(Definitions of certain terms used in this Agreement are set forth in Section 1
below.)
1. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable or General Intangible.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Audit" means to inspect, audit and copy Borrower's books and records and
the Collateral.
"Borrower" has the meaning set forth in the introduction to this Agreement.
"Borrower's Address" has the meaning set forth in the introduction to this
Agreement.
"Business Day" means a day on which Coast is open for business.
"Change of Control" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) (other than the current holders of the
ownership interests in any Borrower) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, as a result of any single transaction, of more than twenty percent
(20%) of the total voting power of all classes of stock or other ownership
interests then outstanding of any Borrower normally entitled to vote in the
election of directors or analogous governing body; provided, however, that the
exercise of warrants or conversion of debt by St. James Capital Partners, L.P.,
SJMB, L.P. or their Affiliates on Borrower's existing securities shall not
constitute a Change of Control.
"Closing Date" date of the initial funding under this Agreement.
"Coast" has the meaning set forth in the introduction to this Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"Collateral" has the meaning set forth in Section 4 hereof.
"Credit Limit" means the maximum amount of Loans that Coast may make to
Borrower pursuant to the amounts and percentages shown on the Schedule.
"Debt Service Coverage" means, in any fiscal period, the ratio of (a)
Borrower's EBITDA during such period, less the sum of all of Borrower's
non-financed capital expenditures and income taxes paid in cash during such
period,
<PAGE>
divided by (b) all principal, interest and capital lease obligations paid or
required to be paid by Borrower during such period, other than payments made out
of Excess Cash Flow as set forth in the Schedule.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
"Dollars or $" means United States dollars.
"Early Termination Fee" means the amount set forth on the Schedule that
Borrower must pay Coast if this Agreement is terminated by Borrower or Coast
pursuant to Section 9.2 hereof.
"EBITDA" means, in any fiscal period, Borrower's consolidated net income or
net loss (other than extraordinary or non-recurring gains of Borrower for such
period), plus (i) the amount of all interest expense, income tax expense,
depreciation expense and amortization expense of Borrower for such period, on a
consolidated basis, and plus or minus (as the case may be) (ii) any other
non-cash charges which have been added or subtracted, as the case may be, in
calculating Borrower's consolidated net income for such period.
"Eligible Receivables" means Receivables arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
Coast, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Coast may from time to time deem appropriate. Eligible
Receivables shall not include the following:
(a) Receivables that the Account Debtor has failed to pay within 120
days of invoice date, provided there is verifiable credit history with a large
or rated company, as approved by Coast in its sole and absolute discretion,
otherwise, Receivables that the Account Debtor has failed to pay within 90 days
of invoice date, or Accounts with selling terms of more than net 30 days;
(b) Receivables owed by an Account Debtor or its Affiliates where
twenty-five percent (25%) or more of all Receivables owed by that Account Debtor
(or its Affiliates) are deemed ineligible under clause (a) above;
(c) Receivables with respect to which the Account Debtor is an
employee, Affiliate, or agent of Borrower, provided, however, that for purposes
of this subsection (c), Collins & Ware, Inc. shall not be deemed an Affiliate;
(d) Receivables with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or other terms
by reason of which the payment by the Account Debtor may be conditional;
(e) Receivables that are not payable in Dollars or with respect to
which the Account Debtor: (i) does not maintain its chief executive office in
the United States, or (ii) is not organized under the laws of the United States
or any State thereof, or (iii) is the government of any foreign country or
sovereign state, or of any state, province, municipality, or other political
subdivision thereof, or of any department, agency, public corporation, or other
instrumentality thereof;
(f) Receivables with respect to which the Account Debtor is either (i)
the United States or any department, agency, or instrumentality of the United
States (exclusive, however, of Accounts with respect to which Borrower has
complied, to the satisfaction of Coast, with the Assignment of Claims Act, 31
U.S.C. ss. 3727), or (ii) any State of the United States (exclusive, however, of
Receivables owed by any State that does not have a statutory counterpart to the
Assignment of Claims Act);
(g) Receivables with respect to which the Account Debtor is a creditor
of Borrower, has or has asserted a right of setoff, has disputed its liability,
or has made any claim with respect to the Receivables;
(h) Receivables with respect to an Account Debtor whose total
obligations owing to Borrower exceed twenty percent (20%) of all Eligible
Receivables, to the extent of the obligations owing by such Account Debtor in
excess of such percentage;
2
<PAGE>
(i) Receivables with respect to which the Account Debtor is subject to
any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation proceeding, or becomes insolvent, or goes out of
business;
(j) Receivables the collection of which Coast, in its reasonable
credit judgment, believes to be doubtful by reason of the Account Debtor's
financial condition;
(k) Receivables with respect to which the goods giving rise to such
Receivable have not been shipped and billed to the Account Debtor, the services
giving rise to such Receivable have not been performed and accepted by the
Account Debtor, or the Receivable otherwise does not represent a final sale;
(l) Receivables with respect to which the Account Debtor is located in
the states of New Jersey, Minnesota, Indiana, or West Virginia (or any other
state that requires a creditor to file a Business Activity Report or similar
document in order to bring suit or otherwise enforce its remedies against such
Account Debtor in the courts or through any judicial process of such state),
unless Borrower has qualified to do business in New Jersey, Minnesota, Indiana,
West Virginia, or such other states, or has filed a Notice of Business
Activities Report with the applicable division of taxation, the department of
revenue, or with such other state offices, as appropriate, for the then-current
year, or is exempt from such filing requirement; and
(m) Receivables that represent progress payments or other advance
billings that are due prior to the completion of performance by Borrower of the
subject contract for goods or services.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dies, jigs, goods and
other goods (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"Event of Default" means any of the events set forth in Section 10.1 of
this Agreement.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"General Intangibles" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, investment property, inventions, designs, drawings,
blueprints, patents, patent applications, trademarks and the goodwill of the
business symbolized thereby, names, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, security and
other deposits, rights in all litigation presently or hereafter pending for any
cause or claim (whether in contract, tort or otherwise), and all judgments now
or hereafter arising therefrom, all claims of Borrower against Coast, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation life
insurance, key man insurance, credit insurance, liability insurance, property
insurance and other insurance), tax refunds and claims, computer programs,
discs, tapes and tape files, claims under guaranties, security interests or
other security held by or granted to Borrower, all rights to indemnification and
all other intangible property of every kind and nature (other than Receivables).
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
all raw materials, work in process, finished goods and goods in transit, and
including without limitation all farm products), and all materials and supplies
of every kind, nature and description which are or might be used or consumed in
Borrower's business or used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise or other
personal property, and all warehouse receipts, documents of title and other
documents representing any of the foregoing.
"Investment Property" has the meaning set forth in Section 9115 of the Code
as in effect as of the date hereof.
"Loan Documents" means this Agreement, the agreements and documents listed
on Section 5 of the Schedule, and any other agreement, instrument or document
executed in connection herewith or therewith.
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"Loans" has the meaning set forth in Section 2.1 hereof.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, condition (financial or otherwise) or results of operations of
Borrower or any subsidiary of Borrower or any guarantor of any of the
Obligations, (ii) the ability of Borrower or any guarantor of any of the
Obligations to perform its obligations under this Agreement (including, without
limitation, repayment of the Obligations as they come due) or (iii) the validity
or enforceability of this Agreement or any other agreement or document entered
into by any party in connection herewith, or the rights or remedies of Coast
hereunder or thereunder.
"Maturity Date" means the date that this Agreement shall cease to be
effective, as set forth on the Schedule, subject to the provisions of Section
9.1 and 9.2 hereof.
"Maximum Dollar Amount" has the meaning set forth in Section 2 of the
Schedule.
"Minimum Monthly Interest" has the meaning set forth in Section 3 of the
Schedule.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Coast, whether evidenced by this Agreement or any note
or other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Coast in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorneys'
fees (including attorneys' fees and expenses incurred in bankruptcy), expert
witness fees, audit fees, letter of credit fees, collateral monitoring fees,
closing fees, facility fees, termination fees, minimum interest charges and any
other sums chargeable to Borrower under this Agreement or under any other
present or future instrument or agreement between Borrower and Coast.
"Permitted Liens" means the following:
(i) purchase money security interests in specific items of Equipment;
(ii) leases of specific items of Equipment;
(iii) liens for taxes not yet payable;
(iv) additional security interests and liens consented to in writing
by Coast, which consent shall not be unreasonably withheld;
(v) security interests being terminated substantially concurrently
with this Agreement;
(vi) liens of materialmen, mechanics, warehousemen, carriers, or other
similar liens arising in the ordinary course of business and securing
obligations which are not delinquent;
(vii) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above in
clauses (a) or (b) above, provided that any extension, renewal or replacement
lien is limited to the property encumbered by the existing lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase;
(viii) liens in favor of customs and revenue authorities which secure
payment of customs duties in connection with the importation of goods; or
(ix) subordinated liens securing $19,400,000 of existing subordinated
debt of Borrower to SJMB, L.P., St. James Capital Partners, L.P. and/or their
Affiliates, $5,000,000 of other existing subordinated debt of Borrower or
$2,000,000 of additional subordinated debt of Borrower, in each case subject to
subordination agreements in form and substance satisfactory to Coast.
Coast will have the right to require, as a condition to its consent under clause
(d) above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Coast's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Coast, and
agree not to take any action to enforce its subordinate
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security interest so long as any Obligations remain outstanding, and that
Borrower agree that any uncured default in any obligation secured by the
subordinate security interest shall also constitute an Event of Default under
this Agreement.
"Person" means any individual, sole proprietorship, general partnership,
limited partnership, limited liability partnership, limited liability company,
joint venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Prime Rate" means the actual "Reference Rate" or the substitute therefor
of the Bank of America NT & SA whether or not that rate is the lowest interest
rate charged by said bank. If the Prime Rate, as defined, is unavailable, "Prime
Rate" shall mean the highest of the prime rates published in the Wall Street
Journal on the first business day of the applicable month, as the base rate on
corporate loans at large U.S. money center commercial banks.
"Real Property" means Borrower's real property located in Ector County,
Texas, Nueces County, Texas, Campbell and Gillette Counties, Wyoming and
Lafayette County, Louisiana.
"Receivable Loans" means the Loans described in Section 2(a) of the
Schedule.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents, securities accounts,
security entitlements, commodity contracts, commodity accounts, investment
property and all other forms of obligations at any time owing to Borrower, all
guaranties and other security therefor, all merchandise returned to or
repossessed by Borrower, and all rights of stoppage in transit and all other
rights or remedies of an unpaid vendor, lienor or secured party.
"Renewal Date" shall mean the Maturity Date if this Agreement is renewed
pursuant to Section 9.1 hereof, and each anniversary thereafter that this
Agreement is renewed pursuant to Section 9.1 hereof.
"Renewal Fee" means the fee that Borrower must pay Coast upon renewal of
this Agreement pursuant to Section 9.1 hereof, in the amount set forth on the
Schedule.
"Solvent" means, with respect to any Person on a particular date, that on
such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
"Tangible Net Worth" means consolidated Owner's equity, plus subordinated
debt otherwise permitted hereunder, less, goodwill, patents, trademarks,
copyrights, franchises, formulas, leasehold interests, leasehold improvements,
non-compete agreements, engineering plans, deferred tax benefits, organization
costs, prepaid items, and any other assets of Borrower that would be treated as
intangible assets on Borrower's balance sheet prepared in accordance with GAAP.
"Term Loans" means the Loans described in Sections 2(b) and (c) of the
Schedule.
"Year 2000 Problem" means the risk that computer systems, software and
applications used by a Person may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any dates after
December 31, 1999.
"Other Terms." All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
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2. CREDIT FACILITIES.
2.1 LOANS. Coast will make loans to Borrower (the "Loans"), in amounts and
in percentages to be determined by Coast in its good faith discretion, up to the
Credit Limit, provided no Default or Event of Default has occurred and is
continuing. In addition, Coast may create reserves against or reduce its advance
rates based upon Eligible Receivables or Eligible Inventory without declaring a
Default or an Event of Default if it determines that there has occurred a
Material Adverse Effect.
3. INTEREST AND FEES
3.1 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Coast's discretion, be charged to Borrower's
loan account, and the same shall thereafter bear interest at the same rate as
the other Loans. Regardless of the amount of Obligations that may be outstanding
from time to time, Borrower shall pay Coast Minimum Monthly Interest during the
term of this Agreement with respect to the Receivable Loans and the Term Loans
in the amount set forth on the Schedule.
3.2 FEES. Borrower shall pay Coast the fee(s) shown on the Schedule, which
are in addition to all interest and other sums payable to Coast and are deemed
fully earned and are nonrefundable.
4. SECURITY INTEREST.
To secure the payment and performance of all of the Obligations when due,
Borrower hereby grants to Coast a security interest in all of Borrower's
interest in the following, whether now owned or hereafter acquired, and wherever
located: All Receivables, Inventory, Equipment, Investment Property, and General
Intangibles, including, without limitation, all of Borrower's Deposit Accounts,
and all money, and all property now or at any time in the future in Coast's
possession (including claims and credit balances), and all proceeds of any of
the foregoing (including proceeds of any insurance policies, proceeds of
proceeds, and claims against third parties), all products of any of the
foregoing, and all books and records related to any of the foregoing (all of the
foregoing, together with all other property in which Coast may now or in the
future be granted a lien or security interest, is referred to herein,
collectively, as the "Collateral")
5. CONDITIONS PRECEDENT.
The obligation of Coast to make the Loans is subject to the satisfaction,
in the sole discretion of Coast, at or prior to the first advance of funds
hereunder, of each, every and all of the following conditions:
5.1 STATUS OF ACCOUNTS AT CLOSING. No accounts payable shall be due and
unpaid ninety (90) days past its invoice date except for such accounts payable
being contested in good faith in appropriate proceedings and for which adequate
reserves have been provided.
5.2 MINIMUM AVAILABILITY. Borrower shall have minimum availability
immediately following the initial funding in the amount set forth on the
Schedule.
5.3 LANDLORD WAIVER. Coast shall have received duly executed:
(a) landlord waivers and access agreements in form and substance
satisfactory to Coast, in Coast's sole and absolute discretion, and, when deemed
appropriate by Coast, in form for recording in the appropriate recording office,
with respect to all leased locations where Borrower maintains any inventory or
equipment.
(b) mortgagee waivers in form and substance satisfactory to Coast, in
Coast's sole and absolute discretion, and when deemed appropriate by Coast, in
form for recording in the appropriate recording office, with respect to all
mortgaged locations where Borrower maintains any inventory or equipment.
5.4 REAL PROPERTY. Coast shall have received duly executed mortgages and/or
deeds of trust in form and substance satisfactory to Coast, in Coast's sole and
absolute discretion, in form for recording in the appropriate recording office,
with respect to the Real Property.
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5.5 EXECUTED AGREEMENT. Coast shall have received this Agreement duly
executed and in form and substance satisfactory to Coast in its sole and
absolute discretion.
5.6 OPINION OF BORROWER'S COUNSEL. Coast shall have received an opinion of
Borrower's counsel, in form and substance satisfactory to Coast in its sole and
absolute discretion.
5.7 PRIORITY OF COAST'S LIENS. Coast shall have received the results of "of
record" searches satisfactory to Coast in its sole and absolute discretion,
reflecting its Uniform Commercial Code filings against Borrower indicating that
Coast has a perfected, first priority lien in and upon all of the Collateral,
subject only to Permitted Liens.
5.8 INSURANCE. Coast shall have received copies of the insurance binders or
certificates evidencing Borrower's compliance with Section 8.2 hereof, including
lender's loss payee endorsements.
5.9 BORROWER'S AND GUARANTORS' EXISTENCE. Coast shall have received copies
of Borrower's and any guarantor's articles or certificate of incorporation and
all amendments thereto, and a Certificate of Good Standing, each certified by
the Secretary of State of the state of Borrower's or such guarantor's
organization, and dated a recent date prior to the Closing Date, and Coast shall
have received Certificates of Foreign Qualification for Borrower from the
Secretary of State of each state wherein the failure to be so qualified could
have a Material Adverse Effect.
5.10 ORGANIZATIONAL DOCUMENTS. Coast shall have received copies of
Borrower's and any guarantor's By-laws and all amendments thereto, and Coast
shall have received copies of the resolutions of the board of directors of
Borrower and such guarantor, authorizing the execution and delivery of this
Agreement and the other documents contemplated hereby, and authorizing the
transactions contemplated hereunder and thereunder, and authorizing specific
officers of Borrower and such guarantor to execute the same on behalf of
Borrower and such guarantor, in each case certified by the Secretary or other
acceptable officer of Borrower and such guarantor as of the Closing Date.
5.11 TAXES. Coast shall have received evidence from Borrower that Borrower
has complied with all tax withholding and Internal Revenue Service regulations,
in form and substance satisfactory to Coast in its sole and absolute discretion.
5.12 YEAR 2000 PROBLEM ASSESSMENT CERTIFICATE. Coast shall have received a
certificate from the relevant officer of Borrower to the effect that, as the
result of a comprehensive assessment undertaken by Borrower of Borrower's
computer systems, software and applications and after due inquiry made to
Borrower's material suppliers, vendors and customers, Borrower knows of no facts
that would cause Borrower to reasonably believe that the Year 2000 Problem will
cause a Material Adverse Effect.
5.13 DUE DILIGENCE. Coast shall have completed its due diligence with
respect to Borrower.
5.14 OTHER DOCUMENTS AND AGREEMENTS. Coast shall have received such other
agreements, instruments and documents as Coast may require in connection with
the transactions contemplated hereby, all in form and substance satisfactory to
Coast in Coast's sole and absolute discretion, and in form for filing in the
appropriate filing office, including, but not limited to, those documents listed
in Section 5 of the Schedule.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER
In order to induce Coast to enter into this Agreement and to make Loans,
Borrower represents and warrants to Coast as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:
6.1 EXISTENCE AND AUTHORITY. Borrower is and will continue to be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would have a Material Adverse Effect. The execution, delivery and performance by
Borrower of this Agreement, and all other documents contemplated hereby (a) have
been duly and validly authorized, (b) are enforceable against Borrower in
accordance with their terms (except as enforcement may be limited by equitable
principles and by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to creditors' rights generally), and (c) do not violate Borrower's
articles or certificate of incorporation, or Borrower's by-laws, or any law or
any material agreement or instrument which is binding upon Borrower or its
property,
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and (d) do not constitute grounds for acceleration of any material indebtedness
or obligation under any material agreement or instrument which is binding upon
Borrower or its property.
6.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Coast thirty (30) days' prior written notice before changing
its name or doing business under any other name. Borrower has complied, and will
in the future comply, with all laws relating to the conduct of business under a
fictitious business name.
6.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Coast at least thirty (30) days'
prior written notice before opening any additional place of business, changing
its chief executive office, or moving any of the Collateral to a location other
than Borrower's Address or one of the locations set forth on the Schedule.
6.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. Coast now has, and will continue
to have, a first-priority perfected and enforceable security interest in all of
the Collateral, subject only to the Permitted Liens, and Borrower will at all
times defend Coast and the Collateral against all claims of others. None of the
Collateral now is or will be affixed to any real property in such a manner, or
with such intent, as to become a fixture. Borrower is not and will not become a
lessee under any real property lease pursuant to which the lessor may obtain any
rights in any of the Collateral and no such lease now prohibits, restrains,
impairs or will prohibit, restrain or impair Borrower's right to remove any
Collateral from the leased premises. Whenever any Collateral is located upon
premises in which any third party has an interest (whether as owner, mortgagee,
beneficiary under a deed of trust, lien or otherwise), Borrower shall, whenever
requested by Coast, use its best efforts to cause such third party to execute
and deliver to Coast, in form acceptable to Coast, such waivers and
subordinations as Coast shall specify, so as to ensure that Coast's rights in
the Collateral are, and will continue to be, superior to the rights of any such
third party. Borrower will keep in full force and effect, and will comply with
all the terms of, any lease of real property where any of the Collateral now or
in the future may be located.
6.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Coast in writing of any
material loss or damage to the Collateral.
6.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.
6.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements
now or in the future delivered to Coast have been, and will be, prepared in
conformity with GAAP (except, in the case of monthly unaudited financial
statements, for the absence of footnotes, statements of cash flow and statements
of shareholders equity, and subject to normal year-end adjustments) and now and
in the future will fairly reflect the financial condition of Borrower, at the
times and for the periods therein stated. Between the last date covered by any
such statement provided to Coast and the date hereof, there has been no Material
Adverse Effect. Borrower is now and will continue to be Solvent.
6.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Coast in writing
of the commencement of, and any material development in, the proceedings, and
(iii) posts bonds or takes any other steps required to keep the contested taxes
from becoming a lien upon any of the Collateral. As of the date hereof, Borrower
is unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any
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other governmental agency. Borrower shall, on a monthly basis, provide Coast
with a certificate of its certified public accountants that all outstanding
payroll taxes have been paid in full.
6.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all material foreign, federal, state
and local laws and regulations relating to Borrower, including, but not limited
to, the Fair Labor Standards Act, and those relating to Borrower's ownership of
real or personal property, the conduct and licensing of Borrower's business, and
environmental matters.
6.10 LITIGATION. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in a Material Adverse Effect.
Borrower will promptly inform Coast in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or against
Borrower involving an amount set forth on the Schedule.
6.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
6.12 YEAR 2000 COMPLIANCE. As the result of a comprehensive review and
assessment undertaken by Borrower of Borrower's computer systems, software and
applications and after due inquiry made of Borrower's material suppliers,
vendors and customers Borrower represents and warrants that the Year 2000
problem will not result in a Material Adverse Effect.
7. RECEIVABLES.
7.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to Coast as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made,
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business.
7.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Coast as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Receivables are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all respects what they purport to be. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and indorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.
7.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall deliver
to Coast via facsimile, unless otherwise directed by Coast, at such locations
and at such intervals as Coast may request, transaction reports and loan
requests, schedules of Receivables, and schedules of collections, all on Coast's
standard forms; provided, however, that Borrower's failure to execute and
deliver the same shall not affect or limit Coast's security interest and other
rights in all of Borrower's Receivables, nor shall Coast's failure to advance or
lend against a specific Receivable affect or limit Coast's security interest and
other rights therein. Loan requests received after 10:30 A.M. Los Angeles,
California time, will not be considered by Coast until the next Business Day.
Together with each such schedule, or later if requested by Coast, Borrower shall
furnish Coast with copies (or, at Coast's request, originals) of all contracts,
orders, invoices, and other similar documents, and all original shipping
instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Receivables, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Coast an aged accounts receivable trial balance
in such form and at such intervals as Coast shall request. In addition, Borrower
shall deliver to Coast the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Receivables, upon receipt thereof and in the same form as received, with all
necessary indorsements, all of which shall be with recourse. Borrower shall also
provide Coast with copies of all credit memos as and when requested by Coast.
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7.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect all
Receivables, unless and until an Event of Default has occurred. Borrower shall
hold all payments on, and proceeds of, Receivables in trust for Coast, and
Borrower shall deliver all such payments and proceeds to Coast within one (1)
Business Day after receipt by Borrower, in their original form, duly endorsed to
Coast, to be applied to the Obligations in such order as Coast shall determine.
Coast may, in its discretion, require that all proceeds of Collateral be
deposited by Borrower into a lockbox account, or such other "blocked account" as
Coast may specify, pursuant to a blocked account agreement in such form as Coast
may specify. Coast or its designee may, at any time, notify Account Debtors that
Coast has been granted a security interest in the Receivables.
7.5 REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of
any Collateral shall be delivered to Coast within one (1) Business Day after
receipt by Borrower, in their original form, duly endorsed to Coast, to be
applied to the Obligations in such order as Coast shall determine. Borrower
agrees that it will not commingle proceeds of Collateral with any of Borrower's
other funds or property, but will hold such proceeds separate and apart from
such other funds and property and in an express trust for Coast. Nothing in this
Section limits the restrictions on disposition of Collateral set forth elsewhere
in this Agreement.
7.6 DISPUTES. Borrower shall notify Coast promptly of all disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (a) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Coast on the regular reports provided to Coast; (b) no Default or
Event of Default has occurred and is continuing; and (c) taking into account all
such discounts settlements and forgiveness, the total outstanding Loans will not
exceed the Credit Limit. Coast may, at any time after the occurrence of an Event
of Default, settle or adjust disputes or claims directly with Account Debtors
for amounts and upon terms which Coast considers advisable in its reasonable
credit judgment and, in all cases, Coast shall credit Borrower's Loan account
with only the net amounts received by Coast in payment of any Receivables.
7.7 RETURNS. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to Borrower in the ordinary course
of its business, Borrower shall promptly determine the reason for such return
and promptly issue a credit memorandum to the Account Debtor in the appropriate
amount. In the event any attempted return occurs after the occurrence of any
Event of Default, Borrower shall (a) hold the returned Inventory in trust for
Coast, (b) segregate all returned Inventory from all of Borrower's other
property, (c) conspicuously label the returned Inventory as subject to Coast's
security interest, and (d) immediately notify Coast of the return of any
Inventory, specifying the reason for such return, the location and condition of
the returned Inventory, and on Coast's request deliver such returned Inventory
to Coast.
7.8 VERIFICATION. Coast may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Coast or such other name as Coast may choose anything.
7.9 NO LIABILITY. Coast shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall Coast be deemed to be responsible for any of Borrower's obligations under
any contract or agreement giving rise to a Receivable. Nothing herein shall,
however, relieve Coast from liability for its own gross negligence or willful
misconduct.
8. ADDITIONAL DUTIES OF THE BORROWER
8.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.
8.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Coast, in such form and amounts as Coast may
reasonably require, and Borrower shall provide evidence of such insurance to
Coast, so that Coast is satisfied that such insurance is, at all times, in full
force and effect. All liability insurance policies of Borrower shall name Coast
as an additional insured, and all property casualty and related insurance
policies of Borrower shall name Coast as a loss payee
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thereon and Borrower shall cause a lender's loss payee endorsement in form
reasonably acceptable to Coast. Upon receipt of the proceeds of any such
insurance, Coast shall apply such proceeds in reduction of the Obligations as
Coast shall determine in its sole discretion, except that, provided no Default
or Event of Default has occurred and is continuing, Coast shall release to
Borrower insurance proceeds with respect to Equipment totaling less than the
amount set forth in Section 8 of the Schedule, which shall be utilized by
Borrower for the replacement of the Equipment with respect to which the
insurance proceeds were paid. Coast may require reasonable assurance that the
insurance proceeds so released will be so used. If Borrower fails to provide or
pay for any insurance, Coast may, but is not obligated to, obtain the same at
Borrower's expense. Borrower shall promptly deliver to Coast copies of all
reports made to insurance companies.
8.3 REPORTS. Borrower, at its expense, shall provide Coast with the written
reports set forth in Section 8 of the Schedule, and such other written reports
with respect to Borrower (including budgets, sales projections, operating plans
and other financial documentation), as Coast shall from time to time reasonably
specify.
8.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times but not
less frequently than quarterly and on one (1) Business Day's notice, Coast, or
its agents, shall have the right to perform Audits. Coast shall take reasonable
steps to keep confidential all confidential information obtained in any Audit,
but Coast shall have the right to disclose any such information to its auditors,
regulatory agencies, and attorneys, and pursuant to any subpoena or other legal
process. The Audits shall be at Borrower's expense and the charge for the Audits
shall be Seven Hundred Fifty Dollars ($750) per person per day (or such higher
amount as shall represent Coast's then current standard charge for the same),
plus reasonable out-of-pocket expenses. Borrower will not enter into any
agreement with any accounting firm, service bureau or third party to store
Borrower's books or records at any location other than Borrower's Address,
without first notifying Coast of the same and obtaining the written agreement
from such accounting firm, service bureau or other third party to give Coast the
same rights with respect to access to books and records and related rights as
Coast has under this Loan Agreement. Borrower shall also take all necessary
steps to assure that its material accounting and software, systems and
applications, and those of its accounting firm, service bureau or any other
third party vendor or supplier, will, on a timely basis, adequately and
completely address the Year 2000 Problem in all material respects.
8.5 NEGATIVE COVENANTS. Borrower shall not, without Coast's prior written
consent, do any of the following:
(a) merge or consolidate with another entity, except in a transaction
in which (i) the owners of the Borrower hold at least fifty percent (50%) of the
ownership interest in the surviving entity immediately after such merger or
consolidation, and (ii) the Borrower is the surviving entity;
(b) acquire any assets, except (i) in the ordinary course of business,
or (ii) in a transaction or a series of transactions not involving the payment
of an aggregate amount in excess of the amount set forth in Section 8 of the
Schedule;
(c) enter into any other transaction outside the ordinary course of
business;
(d) sell or transfer any Collateral, except for the sale of finished
Inventory in the ordinary course of Borrower's business, and except for the sale
of obsolete or unneeded Equipment in the ordinary course of business;
(e) store any Inventory or other Collateral with any warehouseman or
other third party;
(f) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis;
(g) make any loans of any money or other assets, except (i) advances
to customers or suppliers in the ordinary course of business, (ii) travel
advances, employee relocation loans and other employee loans and advances in the
ordinary course of business, and (iii) loans to employees, officers and
directors for the purpose of purchasing equity securities of the Borrower;
(h) incur any debts, outside the ordinary course of business, which
would have a Material Adverse Effect;
(i) guarantee or otherwise become liable with respect to the
obligations of another party or entity;
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(j) pay or declare any dividends or distributions on the ownership
interests in Borrower (except for dividends or distributions payable solely in
stock form of ownership interests in Borrower);
(k) make any change in Borrower's capital structure which would have a
Material Adverse Effect; or
(l) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default is continuing or would occur as a
result of such transaction.
8.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Coast with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Coast, make available Borrower and
its officers, employees and agents and Borrower's books and records, to the
extent that Coast may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
8.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Coast, to execute all documents and take all actions, as Coast, may deem
reasonably necessary or useful in order to perfect and maintain Coast's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
9. TERM.
9.1 MATURITY DATE. This Agreement shall continue in effect until the
Maturity Date; provided that the Maturity Date shall automatically be extended,
and this Agreement shall automatically and continuously renew, for successive
additional terms of one year each, unless one party gives written notice to the
other, not less than one hundred twenty (120) days prior to the Maturity Date or
the next Renewal Date, that such party elects to terminate this Agreement
effective on the Maturity Date or such next Renewal Date. If this Agreement is
renewed under this Section 9.1, Borrower shall pay to Coast a Renewal Fee in the
amount shown in Section 3 of the Schedule. The Renewal Fee shall be due and
payable on the Renewal Date and thereafter shall bear interest at a rate equal
to the rate applicable to the Receivable Loans.
9.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (a) by Borrower, effective three (3) Business Days
after written notice of termination is given to Coast; or (b) by Coast at any
time after the occurrence of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower or by Coast under this
Section 9.2, Borrower shall pay to Coast an Early Termination Fee in the amount
shown in Section 3 of the Schedule. The Early Termination Fee shall be due and
payable on the effective date of termination and thereafter shall bear interest
at a rate equal to the rate applicable to the Receivable Loans.
9.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Notwithstanding any termination of this Agreement, all of Coast's security
interests in all of the Collateral and all of the terms and provisions of this
Agreement shall continue in full force and effect until all Obligations have
been paid and performed in full; provided that, without limiting the fact that
Loans are subject to the discretion of Coast, Coast may, in its sole discretion,
refuse to make any further Loans after termination. No termination shall in any
way affect or impair any right or remedy of Coast, nor shall any such
termination relieve Borrower of any Obligation to Coast, until all of the
Obligations have been paid and performed in full. Upon payment and performance
in full of all the Obligations and termination of this Agreement, Coast shall
promptly deliver to Borrower termination statements, requests for reconveyances
and such other documents as may be required to fully terminate Coast's security
interests, including without limitation releases of any and all landlords'
waivers and subordinations.
10. EVENTS OF DEFAULT AND REMEDIES.
10.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Coast immediate written notice thereof:
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(a) Any warranty, representation, statement, report or certificate
made or delivered to Coast by Borrower or any of Borrower's officers, employees
or agents, now or in the future, shall be untrue or misleading and results in a
Material Adverse Effect; or
(b) Borrower shall fail to pay when due any Loan or any interest
thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any time
shall exceed the Credit Limit; or
(d) Borrower shall fail to deliver the proceeds of Collateral to Coast
as provided in Section 7.5 above, or shall fail to give Coast access to its
books and records or Collateral as provided in Section 8.4 above, or shall
breach any negative covenant set forth in Section 8.5 above; or
(e) Borrower shall fail to comply with the financial covenants (if
any) set forth in the Schedule or shall fail to perform any other non-monetary
Obligation which by its nature cannot be cured; or
(f) Borrower shall fail to perform any other non-monetary Obligation,
which failure is not cured within five (5) Business Days after the date due; or
(g) Any levy, assessment, attachment, seizure, lien or encumbrance
(other than a Permitted Lien) is made on all or any part of the Collateral which
is not cured within ten (10) days after the occurrence of the same; or
(h) any default or event of default occurs under any obligation
secured by a Permitted Lien, which is not cured within any applicable cure
period or waived in writing by the holder of the Permitted Lien; or
(i) Borrower breaches any material contract or obligation, which has
or may reasonably be expected to have a Material Adverse Effect, unless such
breach is capable of being cured and is cured within five (5) Business days
after the occurrence thereof; or
(j) Dissolution, termination of existence, insolvency or business
failure of Borrower or any guarantor of any of the Obligations; or appointment
of a receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding by Borrower or any guarantor of any of the Obligations under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or
(k) the commencement of any proceeding against Borrower or any
guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, which is (i) not
timely controverted, or (ii) not cured by the dismissal thereof within thirty
(30) days after the date commenced; or
(l) revocation or termination of, or limitation or denial of liability
upon, any guaranty of the Obligations or any attempt to do any of the foregoing,
or commencement of proceedings by any guarantor of any of the Obligations under
any bankruptcy or insolvency law; or
(m) revocation or termination of, or limitation or denial of liability
upon, any pledge of any certificate of deposit, securities or other property or
asset of any kind pledged by any third party to secure any or all of the
Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or
(n) Borrower or any guarantor of any of the Obligations makes any
payment on account of any indebtedness or obligation which has been subordinated
to the Obligations, other than as permitted in the applicable subordination
agreement, or if any Person who has subordinated such indebtedness or
obligations terminates or in any way limits his subordination agreement; or
(o) Except as permitted under Section 8.5(a), Borrower shall suffer or
experience any Change of Control without Coast's prior written consent, which
consent shall be in the discretion of Coast in the exercise of its reasonable
business judgment; or
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(p) Borrower shall generally not pay its debts as they become due, or
Borrower shall conceal, remove or transfer any part of its property, with intent
to hinder, delay or defraud its creditors, or make or suffer any transfer of any
of its property which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law; or
(q) there shall be any Material Adverse Effect.
Coast may cease making any Loans or extending any credit hereunder during any of
the above cure periods.
10.2 REMEDIES. Upon the occurrence, and during the continuance, of any
Event of Default, Coast, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following:
(a) Cease making Loans or otherwise extending credit to Borrower under
this Agreement or any other document or agreement;
(b) Accelerate and declare all or any part of the Obligations to be
immediately due, payable and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation;
(c) Take possession of any or all of the Collateral wherever it may be
found, and for that purpose Borrower hereby authorizes Coast without judicial
process to enter onto any of Borrower's premises without interference to search
for, take possession of, keep, store or remove any of the Collateral, and remain
on the premises or cause a custodian to remain on the premises in exclusive
control thereof, without charge for so long as Coast deems it reasonably
necessary in order to complete the enforcement of its rights under this
Agreement or any other agreement; provided, however, that should Coast seek to
take possession of any of the Collateral by Court process, Borrower hereby
irrevocably waives:
(i) any bond and any surety or security relating thereto required
by any statute, court rule or otherwise as an incident to such possession;
(ii) any demand for possession prior to the commencement of any
suit or action to recover possession thereof;
(iii) and any require-ment that Coast retain possession of, and
not dispose of, any such Collateral until after trial or final judgment;
(d) Require Borrower to assemble any or all of the Collateral and make
it available to Coast at places designated by Coast which are reasonably
convenient to Coast and Borrower, and to remove the Collateral to such locations
as Coast may deem advisable;
(e) Complete the processing, manufacturing or repair of any Collateral
prior to a disposition thereof and, for such purpose and for the purpose of
removal, Coast shall have the right to use Borrower's premises, vehicles,
hoists, lifts, cranes, equipment and all other property without charge. Coast 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, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and Borrower's rights under all
licenses and all franchise agreements shall inure to Coast's benefit;
(f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time Coast obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Coast shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Coast deems reasonable, or on Coast's premises, or elsewhere and the
Collateral need not be located at the place of disposition. Coast may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale;
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(g) Demand payment of, and collect any Receivables and General
Intangibles comprising Collateral and, in connection therewith, Borrower
irrevocably authorizes Coast to endorse or sign Borrower's name on all
collections, receipts, instruments and other documents, to take possession of
and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof, and, in Coast's sole
discretion, to grant extensions of time to pay, compromise claims and settle
Receivables and the like for less than face value; and
(h) Demand and receive possession of any of Borrower's federal and
state income tax returns and the books and records utilized in the preparation
thereof or referring thereto.
All attorneys' fees, expenses, costs, liabilities and obligations incurred
by Coast (including attorneys' fees and expenses incurred in connection with
bankruptcy) with respect to the foregoing shall be due from the Borrower to
Coast on demand. Coast may charge the same to Borrower's loan account, and the
same shall thereafter bear interest at the same rate as is applicable to the
Receivable Loans. Without limiting any of Coast's rights and remedies, from and
after the occurrence of any Event of Default, the interest rate applicable to
the Obligations shall be increased by an additional three percent per annum.
10.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Coast agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable:
(a) Notice of the sale is given to Borrower at least seven (7) days
prior to the sale, and, in the case of a public sale, notice of the sale is
published at least seven (7) days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted;
(b) Notice of the sale describes the collateral in general,
non-specific terms;
(c) The sale is conducted at a place designated by Coast, with or
without the Collateral being present;
(d) The sale commences at any time between 8:00 a.m. and 6:00 p.m Los
Angeles, California time;
(e) Payment of the purchase price in cash or by cashier's check or
wire transfer is required; and
(f) With respect to any sale of any of the Collateral, Coast may (but
is not obligated to) direct any prospective purchaser to ascertain directly from
Borrower any and all information concerning the same.
Coast shall be free to employ other methods of noticing and selling the
Collateral, in its discretion, if they are commercially reasonable.
10.4 POWER OF ATTORNEY. Borrower grants to Coast an irrevocable power of
attorney coupled with an interest, authorizing and permitting Coast (acting
through any of its employees, attorneys or agents) at any time, at its option,
but without obligation, with or without notice to Borrower, and at Borrower's
expense, to do any or all of the following, in Borrower's name or otherwise, but
Coast agrees to exercise the following powers in a commercially reasonable
manner:
(a) Execute on behalf of Borrower any documents that Coast may, in its
sole discretion, deem advisable in order to perfect and maintain Coast's
security interest in the Collateral, or in order to exercise a right of Borrower
or Coast, or in order to fully consummate all the transactions contemplated
under this Agreement, and all other present and future agreements;
(b) Execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose of
or to lease (as lessor or lessee) any real or personal property which is part of
Coast's Collateral or in which Coast has an interest;
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(c) Execute on behalf of Borrower, any invoices relating to any
Receivable, any draft against any Account Debtor and any notice to any Account
Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien;
(d) Take control in any manner of any cash or non-cash items of
payment or proceeds of Collateral; endorse the name of Borrower upon any
instruments, or documents, evidence of payment or Collateral that may come into
Coast's possession;
(e) Endorse all checks and other forms of remittances received by
Coast;
(f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same;
(g) Grant extensions of time to pay, compromise claims and settle
Receivables and General Intangibles for less than face value and execute all
releases and other documents in connection therewith;
(h) Pay any sums required on account of Borrower's taxes or to secure
the release of any liens therefor, or both;
(i) Settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor;
(j) Instruct any third party having custody or control of any books or
records belonging to, or relating to, Borrower to give Coast the same rights of
access and other rights with respect thereto as Coast has under this Agreement;
and
(k) Take any action or pay any sum required of Borrower pursuant to
this Agreement and any other present or future agreements.
Any and all sums paid and any and all costs, expenses, liabilities, obligations
and attorneys' fees incurred by Coast (including attorneys' fees and expenses
incurred pursuant to bankruptcy) with respect to the foregoing shall be added to
and become part of the Obligations, and shall be payable on demand. Coast may
charge the foregoing to Borrower's loan account and the foregoing shall
thereafter bear interest at the same rate applicable to the Receivable Loans. In
no event shall Coast's rights under the foregoing power of attorney or any of
Coast's other rights under this Agreement be deemed to indicate that Coast is in
control of the business, management or properties of Borrower. Borrower shall
pay, indemnify, defend, and hold Coast and each of its officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them in connection with or as a result of or related
to the execution, delivery, enforcement, performance, and administration of this
Agreement and any other Loan Documents or the transactions contemplated herein,
and with respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities").
Borrower shall have no obligation to any Indemnified Person hereunder with
respect to any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful
misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations.
10.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale of the Collateral shall be applied by Coast first to the costs, expenses,
liabilities, obligations and attorneys' fees incurred by Coast in the exercise
of its rights under this Agreement, second to the interest due upon any of the
Obligations, and third to the principal of the Obligations, in such order as
Coast shall determine in its sole discretion. Any surplus shall be paid to
Borrower or other persons legally entitled thereto; Borrower shall remain liable
to Coast for any deficiency. If, Coast, in its sole discretion, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Coast shall have the option, exercisable at
any time, in its sole discretion, of either reducing the Obligations by the
principal amount of purchase price or deferring the reduction of the Obligations
until the actual receipt by Coast of the cash therefor.
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10.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth
in this Agreement, Coast shall have all the other rights and remedies accorded a
secured party in equity, under the Code, and under all other applicable laws,
and under any other instrument or agreement now or in the future entered into
between Coast and Borrower, and all of such rights and remedies are cumulative
and none is exclusive. Exercise or partial exercise by Coast of one or more of
its rights or remedies shall not be deemed an election, nor bar Coast from
subsequent exercise or partial exercise of any other rights or remedies. The
failure or delay of Coast to exercise any rights or remedies shall not operate
as a waiver thereof, but all rights and remedies shall continue in full force
and effect until all of the Obligations have been indefeasibly paid and
performed.
11. GENERAL PROVISIONS
11.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Coast (including
proceeds of Receivables and payment of the Obligations in full but excluding
regularly scheduled installment payments on the Term Loans and required payments
thereon from Excess Cash Flow) shall be deemed applied by Coast on account of
the Obligations three (3) Business Days after receipt by Coast of immediately
available funds, and, for purposes of the foregoing, any such funds received
after 10:30 AM Los Angeles, California time, on any day shall be deemed received
on the next Business Day. Coast shall be entitled to charge Borrower's account
for such three (3) Business Days of "clearance" or "float" at the rate(s) set
forth in Section 3 of the Schedule on all checks, wire transfers and other items
received by Coast, regardless of whether such three (3) Business Days of
"clearance" or "float" actually occur, and shall be deemed to be the equivalent
of charging three (3) Business Days of interest on such collections. This
across-the-board three (3) Business Day clearance or float charge on all
collections is acknowledged by the parties to constitute an integral aspect of
the pricing of Coast's financing of Borrower. Coast shall not, however, be
required to credit Borrower's account for the amount of any item of payment
which is unsatisfactory to Coast in its sole discretion, and Coast may charge
Borrower's loan account for the amount of any item of payment which is returned
to Coast unpaid. The provisions of this Section 11.1 regarding three (3)
Business Days of "clearance" or "float" shall not apply in the calculation of
availability under the Receivable Loans.
11.2 APPLICATION OF PAYMENTS. Subject to Section 7.5 hereof, all payments
with respect to the obligations may be applied, and in Coast's sole discretion
reversed and re-applied, to the Obligations, in such order and manner as Coast
shall determine in its sole discretion.
11.3 CHARGES TO ACCOUNTS. Coast may, in its discretion, require that
Borrower pay monetary Obligations in cash to Coast, or charge them to Borrower's
Loan account, in which event they will bear interest from the date due to the
date paid at the same rate applicable to the Loans.
11.4 MONTHLY ACCOUNTINGS. Coast shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Coast), unless Borrower
notifies Coast in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or omissions.
11.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, facsimile or certified mail return
receipt requested, addressed to Coast or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. Notices to Coast shall be directed to the Commercial
Finance Division, to the attention of the Division Manager or the Division
Credit Manager. All notices shall be deemed to have been given upon delivery in
the case of notices personally delivered, faxed (at time of confirmation of
transmission), or at the expiration of one (1) Business Day following delivery
to the private delivery service, or two (2) Business Days following the deposit
thereof in the United States mail, with postage prepaid.
11.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
11.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Coast and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and
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integrated in this Agreement. There are no oral understandings, representations
or agreements between the parties which are not set forth in this Agreement or
in other written agreements signed by the parties in connection herewith.
11.8 WAIVERS. The failure of Coast at any time or times to require Borrower
to strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and Coast shall not waive or
diminish any right of Coast later to demand and receive strict compliance
therewith. Any waiver of any Default shall not waive or affect any other
Default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Coast shall be deemed to have been waived
by any act or knowledge of Coast or its agents or employees, but only by a
specific written waiver signed by an authorized officer of Coast and delivered
to Borrower. Borrower waives demand, protest, notice of protest and notice of
default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by Coast on which
Borrower is or may in any way be liable, and notice of any action taken by
Coast, unless expressly required by this Agreement.
11.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Coast, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Coast, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast, but nothing herein shall relieve Coast from
liability for its own gross negligence or willful misconduct.
11.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Coast.
11.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
11.12 ATTORNEYS FEES, COSTS AND CHARGES. Borrower shall reimburse Coast for
all attorneys' fees (including attorneys' fees and expenses incurred pursuant to
bankruptcy) and all filing, recording, search, title insurance, appraisal,
audit, and other costs incurred by Coast, pursuant to, or in connection with, or
relating to this Agreement (whether or not a lawsuit is filed), including, but
not limited to, any attorneys' fees and costs (including attorneys' fees and
expenses incurred pursuant to bankruptcy) Coast incurs in order to do the
following: prepare and negotiate this Agreement and the documents relating to
this Agreement; obtain legal advice in connection with this Agreement or
Borrower; enforce, or seek to enforce, any of its rights; prosecute actions
against, or defend actions by, Account Debtors; commence, intervene in, or
defend any action or proceeding; initiate any complaint to be relieved of the
automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim; examine, audit, copy, and inspect any
of the Collateral or any of Borrower's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce Coast's security interest
in, the Collateral; and otherwise represent Coast in any litigation relating to
Borrower. If either Coast or Borrower files any lawsuit against the other
predicated on a breach of this Agreement, the prevailing party in such action
shall be entitled to recover its costs and attorneys' fees (including attorneys'
fees and expenses incurred pursuant to bankruptcy), including (but not limited
to) attorneys' fees and costs incurred in the enforcement of, execution upon or
defense of any order, decree, award or judgment. Borrower shall also pay Coast's
standard charges for returned checks and for wire transfers, in effect from time
to time. All attorneys' fees, costs and charges (including attorneys' fees and
expenses incurred pursuant to bankruptcy) and other fees, costs and charges to
which Coast may be entitled pursuant to this Agreement may be charged by Coast
to Borrower's loan account and shall thereafter bear interest at the same rate
as the Receivable Loans.
11.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Coast; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Coast, and any prohibited
assignment shall be void. No consent by Coast to any assignment shall release
Borrower from its liability for the Obligations. Coast may assign its rights and
delegate its duties hereunder without the consent of Borrower. Coast reserves
the right to syndicate all or a portion of the transaction created herein or
sell, assign, transfer, negotiate, or grant participations in all or any part
of, or any interest in Coast's rights and benefits hereunder. In connection with
any such syndication, assignment or participation, Coast may disclose all
documents and information which Coast now or hereafter may have relating to
Borrower or Borrower's business. To the extent that Coast assigns its
18
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rights and obligations hereunder to a third Person, Coast thereafter shall be
released from such assigned obligations to Borrower.
11.14 PUBLICITY. Coast is hereby authorized, at its expense, to issue
appropriate press releases and to cause a tombstone to be published announcing
the consummation of this transaction and the aggregate amount thereof.
11.15 PARAGRAPH HEADINGS CONSTRUCTION. Paragraph headings are only used in
this Agreement for convenience. Borrower and Coast acknowledge that the headings
may not describe completely the subject matter of the applicable paragraph, and
the headings shall not be used in any manner to construe, limit, define or
interpret any term or provision of this Agreement. The term "including",
whenever used in this Agreement, shall mean "including (but not limited to)".
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against Coast or Borrower under any rule of construction or
otherwise.
11.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Coast and Borrower
shall be governed by the internal laws of the State of California, without
regard to its conflicts of law principles. As a material part of the
consideration to Coast to enter into this Agreement, Borrower (a) agrees that
all actions and proceedings relating directly or indirectly to this Agreement
shall, at Coast's option, be litigated in courts located within California, and
that the exclusive venue therefor shall be Los Angeles County; (b) consents to
the jurisdiction and venue of any such court and consents to service of process
in any such action or proceeding by personal delivery or any other method
permitted by law; and (c) waives any and all rights Borrower may have to object
to the jurisdiction of any such court, or to transfer or change the venue of any
such action or proceeding.
11.17 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND COAST EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR BORROWER, IN ALL
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
BLACK WARRIOR WIRELINE CORP.,
a Delaware corporation
By
---------------------------------------
President or Vice President
By
---------------------------------------
Secretary or Ass't Secretary
COAST:
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
By
---------------------------------------
Title:
19
<PAGE>
COAST
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: Black Warrior Wireline Corp., a Delaware corporation
ADDRESS: 3748 Highway 45 North
Columbus, MS 39701
DATE: January 24, 2000
This Schedule forms an integral part of the Loan and Security Agreement between
Coast Business Credit, a division of Southern Pacific Bank, and the
above-borrower of even date.
- --------------------------------------------------------------------------------
SECTION 2 - CREDIT FACILITIES
SECTION 2.1 - CREDIT LIMIT: Loans in a total amount at any time
outstanding not to exceed the
lesser of a total of Twenty-Five
Million and no/00 Dollars
($25,000,000.00) at any one time
outstanding (the "Maximum Dollar
Amount"), or the sum of (a), (b)
and (c) below:
(a) Receivable Loans in an amount not
to exceed 80% of the amount of
Borrower's Eligible Receivables (as
defined in Section 1 of the
Agreement), plus
(b) Term Loan A in the original
principal amount not to exceed the
lesser of (1) seventy-five percent
(75%) of the appraised net eligible
forced liquidation value of
Borrower's existing Equipment; or
(2) Fourteen Million Five Hundred
Thousand Dollars ($14,500,000.00).
Term Loan A will be repayable as
follows: for the first six (6)
months of the Term, Borrower will
make monthly payments on the last
day of each month in the amount of
interest on the then outstanding
balance of Term Loan A; thereafter,
commencing on the last day of the
seventh month following the Closing
Date, the balance of Term Loan A
shall be fully amortized in
seventy-two (72) equal monthly
installments of principal, plus
interest on the then outstanding
balance of Term Loan A. In addition
to the foregoing payments, on the
last day of each month during the
first year following the Closing
Date, Borrower will make principal
payments in the amount of fifty
percent (50%) of its Excess Cash
Flow during the immediately
preceding month, and on the last
day of each month thereafter,
Borrower will make principal
payments in the amount of forty
percent (40%) of its Excess Cash
Flow during the immediately
preceding month. Further, in the
event the actual amount of the
Excess Cash Flow during the three
(3) months ending July 31,
20
<PAGE>
2000 is less than the applicable
amount set forth in the Projections
attached hereto as Exhibit A, then
on August 31, 2000, Borrower will
make a principal payment equal to
fifty percent (50%) of the
difference of such projected amount
minus such actual amount. "Excess
Cash Flow" during any month means
the EBITDA of Borrower during such
month, minus the sum of (1)
principal and interest payments
made by Borrower during such month,
plus (2) taxes paid by Borrower in
cash during such month.
(c) Term Loan B in the original
principal amount not to exceed Two
Million Dollars ($2,000,000.00).
Term Loan B will be repayable as
follows: Borrower will make monthly
payments on the last day of each
month, commencing with the first
month following the Closing Date,
in the amount obtained by
amortizing the original principal
amount of Term Loan B fully over
forty-eight (48) months, plus
interest on the then outstanding
balance of Term Loan B.
Additionally, after repayment in
full of Term Loan A, the monthly
payments from Excess Cash Flow as
provided in Subsection (b) above
shall be applied to the repayment
of the remaining principal balance
of Term Loan B.
SECTION 3 - INTEREST AND FEES
SECTION 3.1 - INTEREST RATE: (a) Receivables Loan-- a rate equal to
the Prime Rate plus 1.0% per annum,
calculated on the basis of a
360-day year for the actual number
of days elapsed.
(b) Term Loans -- a rate equal to the
Prime Rate plus 2.0% per annum,
calculated on the basis of a
360-day year for the actual number
of days elapsed.
(c) The interest rate applicable to all
Loans shall be adjusted effective
monthly as of the first day of each
month, and the interest to be
charged for each month shall be
based on the highest Prime Rate in
effect during said month, but in no
event shall the rate of interest
charged on any Loans in any month
be less than 9% per annum.
SECTION 3.1 - MINIMUM MONTHLY
INTEREST: An amount equal to the interest that
would have accrued had the daily
aggregate outstanding balance of
all Loans been equal to forty
percent (40%) of the Maximum Dollar
Amount.
SECTION 3.2 - LOAN FEE: Two percent (2.0%) of the Maximum
Dollar Amount payable on the
Closing Date and one-half of one
percent (.5%) of the Maximum Dollar
Amount on each anniversary of the
Closing Date. The Loan Fee shall be
fully earned on the Closing Date,
and any unpaid balance shall be due
and payable in full if the Term is
earlier terminated as provided in
this Agreement.
SECTION 3.2 - FACILITY FEE: $15,000.00, per quarter, payable on the
Closing Date (prorated for any
partial quarter at the beginning of
the term of this Agreement)
SECTION 3.2 - UNUSED LINE FEE: Three Hundred Seventy-Five One
Thousandths percent (.375%) per
annum of the undrawn portion of the
Maximum Dollar Amount payable
monthly, commencing one month after
the Closing Date.
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<PAGE>
SECTION 3.2 - SUCCESS FEE: (a) As an inducement to enter into this
Agreement and to make the Loans,
Borrower shall pay to Coast a
Success Fee (as hereinafter
defined) in accordance with the
provisions of Subsections (b) and
(c) below. The Success Fee shall be
deemed to be earned in full upon
receipt by Coast. In no event shall
Coast be obligated to return any
payments received pursuant to this
Section. The Success Fee is in
addition to, and is not to be set
off against, any other payments
made or due to, or claimed to be
due to, Coast.
(b) The Success Fee shall be due and
payable during the first three (3)
years of the Term in the event of a
Transfer Event. A "Transfer Event"
means any of the following: (x) any
sale, assignment, transfer,
exchange or other disposition of
substantially all of the assets of
Borrower, or; (y) any sale,
assignment, transfer, exchange or
other disposition of all or
substantially all of the ownership
interests in Borrower, including
any merger, consolidation,
recapitalization or reorganization
of Borrower; provided, however,
that the Success Fee shall not be
due in the event of a
recapitalization or reorganization
of Borrower through the exercise of
warrants or conversion of debt by
St. James Capital Partners, L.P.,
SJMB, L.P. or their Affiliates as
otherwise permitted hereunder.
(c) The Success Fee shall be in an
amount equal to one percent (1%) of
the Maximum Dollar Amount and shall
be payable simultaneously with the
closing of the transaction which
gives rise to the payment, and
receipt of such Success Fee shall
be a condition to Coast's
obligation to release its security
interest in the Collateral upon
payment in full of all of the
Obligations.
SECTION 9.1 - RENEWAL FEE: .50% of the Maximum Dollar Amount per
year.
SECTION 9.2 - EARLY TERMINATION
FEE: An amount equal to three percent (3%)
of the Maximum Dollar Amount (as
defined in the Schedule), if
termination occurs on or before the
first anniversary of the effective
date of this Agreement; and two
percent (2%) of the Maximum Dollar
Amount, if termination occurs after
the first anniversary of the
effective date of this Agreement.
In the event that substantially all
of the assets of, or controlling
interest in, Borrower is sold
during the Term, in an arm's length
transaction and all of Borrower's
Obligations to Coast are paid in
full, the Early Termination Fee
shall be an amount equal to two
percent (2%) of the Maximum Dollar
Amount.
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SECTION 5 - CONDITIONS PRECEDENT
SECTION 5.2 - MINIMUM
AVAILABILITY: $1,000,000.00
SECTION 5.14 - OTHER DOCUMENTS
AND AGREEMENTS: 1. Satisfactory completion of a field
audit and all searches and
background checks.
22
<PAGE>
2. Validity Guaranty of William
Jenkins, Allen R. Neel and Ron
Whitter.
3. UCC-1 financing statements, fixture
filings and termination statements;
4. Security Agreements on all assets
of Borrower (including all tangible
and intangible assets, copyrights,
patents and trademarks);
5. Borrower's receipt of Five Million
and no/100 Dollars ($5,000,000.00)
in equity and/or debt subordinated
to the Loans, in form and substance
acceptable to Coast in its sole and
absolute discretion;
6. All taxes to be current at date of
funding and ongoing;
7. No accounts payable of Borrower
shall be over ninety (90) days past
invoice date at date of funding;
8. All collections of receivables
shall be made through a lockbox
approved by Coast;
9. Subordination of all existing debt
to Borrower's shareholders in form
and substance acceptable to Coast
in its sole and absolute
discretion;
10. Principal and Interest Payment
Guaranty of St. James Capital
Partners, L.P., SJMB, L.P. and
Chuck Underbrink (personally)
covering up to $5,000,000.00 of any
principal or interest payments that
are not made when due;
11. Unlimited Continuing Guaranty of
St. James Capital Partners, L.P.
and SJMB, L.P., provided that the
principal amount of the Obligations
covered by such Guaranty will be
reduced to $4,000,000.00 if
Borrower complies with the covenant
regarding Revenues and EBITDA
during the applicable twelve (12)
consecutive months as set forth in
Subsection (c) of Section 8.1
below.
12. Final Settlement of litigation with
former owners of Diamondback
Directional, Inc. and issuing of
$2,000,000.00 in stock and a
$1,182,890.25 note to said owners
and the subordination of said
$1,182,890.25 note by the former
owners of Diamondback Directional,
Inc. in form and substance
acceptable to Coast, in its sole
and absolute discretion;
13. Re-issued appraisal issued by
Superior Auctioneers to Coast of
Borrower's machinery and equipment
with no material adverse changes,
as determined by Coast, in its sole
and absolute discretion;
14. Endorsed certificates of title on
all vehicles;
15. Completion of patent search;
23
<PAGE>
16. Evidence that Borrower has received
at least $850,000.00 in vendor debt
reductions, as compared to the
vendor debts previously furnished
to Coast by Borrower;
17. Evidence that a $100,000.00
arbitration settlement has been
paid to Southwick Investments,
Inc.;
18. Current personal financial
statement of Chuck Underbrink;
19. Final draft of BDO Seidman's Rate
of Return Estimate on Doerge
Capital Management;
20. Evidence that Borrower's insurance
policies cover any liabilities and
damages arising from its explosives
in a manner satisfactory to Coast;
21. Appraisal of the Equipment of
Borrower not covered by the prior
appraisal, which shall be in form,
issued by an appraiser, and with
results satisfactory to Coast;
22. Stock Pledge Agreement of SJMB,
L.P., covering the capital stock
owned by it in Collins & Ware,
Inc., and any proceeds of sale
thereof; in the event of sale of
such capital stock, the amount of
$10,000,000.00 of the sale proceeds
will be pledged in cash and in a
manner satisfactory to Coast to
secure the Guaranties of SJMB,
L.P., and the balance of the sale
proceeds will be released by Coast,
provided, however, that if Borrower
complies with the covenant
regarding Revenues and EBITDA
during the applicable twelve (12)
consecutive months as set forth in
Subsection (c) of Section 8.1
below, such pledged amount will be
reduced to $4,000,000.00. Coast
understands that a proposal may be
made for the disposition of the
foregoing capital stock through a
merger, exchange or pooling
arrangement whereby Coast would not
receive cash proceeds equal to the
amounts required to be pledged
above. Coast will consider any such
proposal in light of the new
securities to be pledged in
substitution for the Collins &
Ware, Inc. capital stock; provided,
however, that any such proposed
disposition shall be subject to the
prior written approval of Coast in
its sole but reasonable discretion.
23. Copy of valuation report issued by
Bankers Trust on Collins & Ware,
Inc. with results satisfactory to
Coast;
24. Intercreditor Agreements of U.S.
Bank and First Capital with respect
to the capital stock of Collins &
Ware, Inc.; and
25. Projections of Borrower for the
period from January 1, 2001 through
July 31, 2001, subject to the
review and approval of Coast.
24
<PAGE>
26. All of the conditions precedent
shall be satisfied, and the Closing
Date shall be, on or before January
31, 2000.
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SECTION 6 - REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 6.2 - PRIOR NAMES OF
BORROWER: Boone Wireline Co., Inc. ("Boone")
EIN #613-1030744
Note: Boone was a wholly-owned
subsidiary of Borrower. In the
summer of 1999, Boone was merged
into Borrower. Boone was treated as
an operating division of Borrower.
SECTION 6.2 - EXISTING TRADE NAMES
OF BORROWER: Black Warrior Wireline Corp.
EIN #11-2904094
Incorporated in Delaware on August 28,
1987
TRADE NAMES (CURRENT):
Black Warrior Drilling & Completion
(Alabama only)
Petro-Log, Incorporated, a BWWC company
(Used in Rockies, primarily Wyoming)
Diamondback Directional Company
(Used primarily in Texas and
Louisiana, also some of the western
states)
Multi-Shot
(Used in Texas and Louisiana)
SECTION 6.3 - OTHER LOCATIONS
AND ADDRESSES: See attached Exhibit B.
SECTION 6.10 - MATERIAL ADVERSE
LITIGATION: See attached Exhibit C.
SECTION 6.10 - FUTURE CLAIMS AND
LITIGATION: Borrower will promptly inform Coast in
writing of any claim, proceeding,
litigation or investigation in the
future threatened or instituted by
or against Borrower involving any
single claim of Fifty Thousand and
no/100 Dollars ($50,000.00) or more,
or involving One Hundred Thousand
and no/100 Dollars ($100,000.00) or
more in the aggregate.
- --------------------------------------------------------------------------------
SECTION 8 - ADDITIONAL DUTIES OF BORROWER
SECTION 8.1 - OTHER PROVISIONS: (a) Borrower shall maintain Tangible
Net Worth of not less than Five
Million Dollars ($5,000,000) on the
Closing Date,
25
<PAGE>
increasing quarterly by an amount
equal to eighty percent (80%) of
Borrower's net income for said
quarter, but in no event shall
Tangible Net Worth be less than the
prior quarter;
(b) Debt Service Coverage shall be
1.25:1.00 to be tested quarterly,
commencing on the quarter ending
March 31, 2000;
(c) Actual Revenue and EBIDTA during
each of the twelve (12) consecutive
months commencing with August 2000
shall be no less than eighty percent
(80%) of the applicable amount set
forth in the Projections attached
hereto as Exhibit A as supplemented
by the Projections approved by Coast
under Subsection 25 of Section 5.14
above; provided, however, that if
Coast does not make Loans in excess
of $20,000,000.00 in the aggregate
outstanding pursuant to Subsection
(h) below, the Projections shall be
modified accordingly subject to the
written approval of Coast;
(d) Borrower shall, at its expense,
on a semi-annual basis, provide
machinery and equipment appraisals
in form, and issued by an appraiser,
satisfactory to Coast;
(e) Thirty percent (30%) of the net
proceeds of any equity securities
issued by Borrower after the Closing
Date shall be applied first to the
principal balance of Term Loan A and
then to the principal balance of
Term Loan B, and credited to the
principal installments becoming due
on the applicable Term Loan in the
inverse order at their maturity;
(f) Subject to the limitations in
Subsection 8.5(b) of the Agreement
all capital expenditures that are
not financed shall be funded by
SJMB, L.P. and/or St. James Capital
Partners, LP or by Excess Cash Flow
not paid to Coast hereunder;
(g) The net proceeds of the sale of
any Equipment of Borrower shall be
applied first to the principal
balance of Term Loan A and then to
the principal balance of Term Loan
B, and credited to the principal
installments becoming due on the
applicable Term Loan in the inverse
order of their maturity; and
(h) Any Loans in excess of
$20,000,000.00 in the aggregate
outstanding shall be at the sole and
absolute discretion of Coast, and
subject to Coast obtaining an
acceptable co-lender or participant
on the Loans upon terms satisfactory
to Coast.
SECTION 8.2 - INSURANCE: Subject to the limitations set forth in
Section 8.2 of the Agreement, Coast
shall release to Borrower insurance
proceeds with respect to Equipment
totaling less than One Hundred
Thousand Dollars ($100,000.00).
SECTION 8.3 - REPORTING: Borrower shall provide Coast with the
following:
1. Monthly Receivable agings, aged by
invoice date, within ten (10) days
after the end of each month.
2. Monthly accounts payable agings,
aged by invoice date, and
outstanding or held check registers
within ten (10) days after the end
of each month.
26
<PAGE>
3. Monthly report detailing the
locations of all Equipment.
4. Monthly internally prepared
financial statements, as soon as
available, and in any event within
thirty (30) days after the end of
each month.
5. Quarterly internally prepared
financial statements (10Q), as soon
as available, and in any event
within forty-five (45) days after
the end of each fiscal quarter of
Borrower.
6. Quarterly customer lists, including
customer name, address, and phone
number.
7. Annual financial statements (10K),
as soon as available, and in any
event within ninety (90) days
following the end of Borrower's
fiscal year, containing the
unqualified opinion of, and
certified by, an independent
certified public accountant
acceptable to Coast.
8. Annual personal financial statement
of Chuck Underbrink as of the last
day of each year, as soon as
available, and in any event within
ninety (90) days of such last day.
SECTION 8.5 - NEGATIVE COVENANTS
(ACQUIRED ASSETS): Fifty Thousand Dollars ($50,000.00)
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SECTION 9 - TERM
SECTION 9.1 - MATURITY DATE: The last Business Day of the month
three (3) years from the Closing
Date, subject to early termination
as provided in Section 9.2 of the
Agreement.
27
EXHIBIT 10.2
AGREEMENT FOR PURCHASE AND SALE
This Agreement for Purchase and Sale (the "Agreement"), is made and entered
as of December 17, 1999, by and among Black Warrior Wireline Corp., a Delaware
corporation ("Seller"), the parties listed as purchasers on the signature page
below (collectively, the "Purchaser") and sets forth the terms and conditions of
the sale and purchase of one or more Convertible Promissory Notes in the
aggregate original principal amount of up to $7,000,000, with at least
$3,000,000 being issued as of the date hereof and substantially in the form
attached hereto as Exhibit A (the "Notes").
WHEREAS, Seller desires to issue and sell to Purchaser, and Purchaser
desires to purchase and accept from Seller, the Notes in the form of Exhibit A,
on the terms and subject to the conditions set forth herein and in the amounts
set forth, for each Purchaser, on the signature page for such Purchaser to this
Agreement.
WHEREAS, the obligations of Seller under the Notes are secured by that
certain Borrower Security Agreement between Seller and the Purchaser, dated as
of the date hereof, as may be amended or modified (the "Security Agreement").
WHEREAS, Seller and Purchaser desire to make certain representations,
warranties and agreements in connection with the purchase and sale of the Notes
contemplated hereby.
WHEREAS, Seller desires to sell to Purchaser warrants ("Warrants") to
purchase shares of Seller's common stock, par value $0.005 per share (the
"Common Stock"), for a number of shares as set forth on the signature page of
each Purchaser hereto 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 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 Notes
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 the date hereof between Seller and Purchaser as amended
and modified (the "Registration Rights Agreement").
WHEREAS, St. James Capital, L.P. and SJMB, L.P., each a Delaware limited
partnership (together, "St. James") have agreed to subordinate the indebtedness
of the Seller (other than any indebtedness hereunder) to the indebtedness owing
to the Purchaser hereunder pursuant to the terms of a Subordination Agreement
among St. James and the Purchaser dated the date hereof (the "Junior
Subordination Agreement").
WHEREAS, this Agreement, the Notes, the Security Agreement, the Warrants,
the Junior Subordination Agreement, and the Registration Rights Agreement are
collectively referred to herein as the "Transaction Documents".
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein, the parties agree as follows:
1
<PAGE>
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale of the Notes and the Warrants. Subject to the terms
of this Agreement, Seller agrees to and does hereby issue, sell and deliver the
Notes and the Warrants to Purchaser at the Closing (as defined herein), and
Purchaser agree to and do hereby purchase and accept the Notes and the Warrants
from Seller.
1.2 Consideration for Purchase of the Notes. Subject to the terms of this
Agreement (including Section 1.5 hereof), Purchaser hereby agrees to pay to
Seller, by check or wire transfer to the account of Seller, up to $7,000,000,
with at least $3,000,000 being as of the date hereof, as the consideration for
the purchase of the Notes (the "Note Consideration").
1.3 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 Seller $0.000487805 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"). Each
new Purchaser pursuant to Section 1.5 shall pay Warrant Consideration to Seller
in an amount equal to $0.000487805 per share subject to the Warrants.
1.4 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 0.002% of the entire amount of each Note, for the
payment of the Note Consideration. Seller shall pay to each new Purchaser under
Section 1.5 an Origination Fee equal to 0.002% of the entire amount of the new
Note purchased by such new Purchaser.
1.5 Sale of Additional Notes. Seller agrees to use its best efforts to sell
additional Notes such that the aggregate principal amount of Notes issued is
$5,000,000. Each purchaser of such additional Notes shall assume the obligations
and obtain the rights of a Purchaser hereunder and under each of the other
Transaction Documents, including, without limitation, financing statements,
pursuant to documentation reasonably acceptable to the Seller and the then
existing Purchasers. The Company shall have the option of selling additional
Notes of up to $2,000,000 in an aggregate principal amount (resulting in a total
maximum aggregate amount of Notes sold equal to $7,000,000) upon the same terms
and conditions of this Section 1.5. Each new Note shall be issued in form and
substance substantially the same as the form of Note attached as Exhibit A. Each
sale of any additional Note shall occur on or prior to February 15, 2000. The
Seller shall issue to each such Purchaser, Warrants to purchase Common Stock of
the Seller, substantially in the form of the Warrants attached as Exhibit B and
for a number of shares proportionate to the amount of the Note purchased by such
Purchaser as reflected in the Warrants.
1.6 Subordination. Purchaser agrees that the indebtedness hereunder and the
security granted therefor are subject to the Subordination Agreement (the
"Senior 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. Each
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new Purchaser pursuant to Section 1.5 shall assume the obligations of the
Purchaser under the Subordination Agreement as a condition precedent to the
purchase of any additional Note.
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. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state 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. Seller 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. Subject to Section 3.2 hereof, Seller 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. Subject to Section 3.2 hereof, 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). Subject to
Section 3.2 hereof, 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 other than vendor
judgments to be satisfied with the Note Consideration.
2.3 Approvals. Subject to Section 3.2 hereof, 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.
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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, 1998.
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, 1998, together with all amendments thereto,
Seller's quarterly report on Form 10-Q for the fiscal quarters ended March
31, 1999, June 30, 1999 and September 30, 1999, 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 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 September 30,
1999, (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. Except as
set forth on Schedule 2.6, 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.
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2.7 Capitalization. Seller has authorized capital stock of (a) 12,500,000
shares of Common Stock of which, as of the date hereof, there are 4,812,260
shares issued and outstanding, and (b) 2,500,000 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, Seller has reserved for
issuance (i) an aggregate of 1,062,250 shares of Common Stock issuable on
issuance of stock options to employees, officers, directors and other persons,
and the Board of Directors of Seller has approved amendments to the plans in
respect of such options to increase the shares available thereunder to an
aggregate of 1,735,450 shares of Common Stock, subject to the approval of the
shareholders of Seller, and (ii) an aggregate of 36,601,652 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 Seller or contracts, commitments,
understandings or arrangements by which Seller 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. Subject to
Section 3.2 hereof, 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 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. Seller has no subsidiaries.
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 September 30, 1999,
or (b) incurred in the ordinary course of business since September 30, 1999.
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.
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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 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 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.
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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.
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 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 American Stock Transfer & Trust 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.
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2.20 Stockholder Agreements. Except as set forth in Schedule 2.20 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.
2.21 ERISA. Except as disclosed on Schedule 2.21, Seller has no employee
benefit plans subject to the Employment Retirement Income Security Act of 1974.
2.22 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
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.
2.23 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 2.23, 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.
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2.24 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 any entity of which Seller obtains
control (directly or indirectly) of more than 50% of the outstanding voting
stock or equity interests shall execute a Subsidiary Security Agreement and
Subsidiary Guaranty, substantially in form and substance acceptable to
Purchaser.
3.2 Capitalization. Seller agrees that, at or before its next annual
shareholders meeting, the Seller shall secure an amendment to Seller's Articles
or Certificate of Incorporation to increase the number of shares that the Seller
is authorized to issue to a number sufficient to authorize the issuance of the
current outstanding shares of the Seller and all shares that are issuable upon
the conversion of all of the Seller's convertible notes and securities and upon
the exercise of any warrants or options to purchase the Seller's Common Stock.
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 an aggregate amount of at least $3,000,000
of the Notes and the associated Warrants (the "Closing") will take place as of 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 an aggregate of at least $3,006,000.
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 copies, certified by the Secretary of State of Delaware as of a
recent date, of the charter of Seller and all amendments thereto and a
certificate of an Officer of Seller certifying that there have been no
amendments to such charter since such date;
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4.3.2 copies, certified by the Secretary of each of Seller as of the
Closing Date, of the bylaws of each of Seller, and all amendments thereto;
4.3.3 copies, certified by a certificate of the Secretary of Seller as
of the Closing Date, of resolutions duly adopted by the board of directors
of Seller, authorizing the execution and delivery by Seller of the
Transaction Documents and all other agreements attached hereto as Exhibits
or contemplated herein, the completion of the sale of the Notes 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
Notes and Warrants;
4.3.4 the Agreement;
4.3.5 the Notes for an aggregate principal amount of at least
$3,000,000;
4.3.6 Warrants to purchase up to an aggregate of 28,700,000 shares of
Common Stock;
4.3.7 the Registration Rights Agreement;
4.3.8 the Security Agreement;
4.3.9 the Junior Subordination Agreement;
4.3.10 Bendover conversion and settlement documents;
4.3.11 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
4.3.12 a certificate of an Officer of Seller to the effect that the
representations and warranties of Seller 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 Seller 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
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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: At the addresses set forth on the signature page
of Purchaser
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.
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 Notes, 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 Notes and Warrants in favor of such Assignor to the Seller, and the
Seller shall issue
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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 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.
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5.9 Restrictions on Transfer.
(a) Purchaser shall not transfer their rights under the Notes 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 Notes are 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 Holder grants a security interest in the Notes
shall be entitled to exercise all remedies to which it is entitled by
contract or by law, including (without limitation) transferring the Notes
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.
Each Purchaser acknowledges that it has, independent of and without
reliance upon any other Purchaser or any information provided by any other
Purchaser and based on the financial statements of Seller and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Purchaser also
acknowledges that it will, independent of and without reliance upon any other
Purchaser and based on such documents and information as it shall deem
appropriate at that time, continue to make its own credit decisions in taking or
not taking action under this Agreement and any other documents relating thereto.
5.11 Power of Attorney. Each Purchaser hereby appoints, and each new
Purchaser under Section 1.5 shall appoint, SJMB, L.P. as its attorney-in-fact,
with full power of substitution, solely for the purposes of (a) negotiating,
executing and delivering the Senior Subordination Agreement and (b) executing
and filing Seller Security Agreements and financing statements. This power of
attorney shall not extend to the negotiation, execution and delivery of the
Junior Subordination Agreement.
5.12 Representation. Each party to this Agreement other than SJMB, L.P.
acknowledges that Gardere Wynne Sewell & Riggs, L.L.P. has represented,
represents and shall represent only SJMB, L.P. with respect to the drafting,
negotiation, execution and delivery of the Transaction Documents and any related
documents or instruments, and that each party has had adequate opportunity to
consult with its own counsel in connection therewith and any other aspect of
this transaction. Each party to this Agreement further acknowledges that a
portion of the proceeds will be used to reimburse St. James for expenses it has
previously incurred.
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SELLER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Seller has signed this Agreement as of the date first
written above.
BLACK WARRIOR WIRELINE CORP.
By:
-----------------------------
John L. Thompson, Director
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PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Purchaser has signed this Agreement as of the date
first written above.
-------------------------------------
Address:
-------------------------------------
- ----------------------------------- John L. Thompson and Charles E.
Underbrink, tenants in common
- -----------------------------------
- ----------------------------------- -------------------------------------
Social Security/Tax I.D. - Thompson
-------------------------------------
Social Security/Tax I.D. - Underbrink
Note Principal Amount: $750,000
-----------------
Number of Warrants: 3,075,000
-----------------
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<PAGE>
PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Purchaser has signed this Agreement as of the date
first written above.
Address: -----------------------------------
[Name of Purchaser]
- --------------
- --------------
Note Principal Amount: _____________ -----------------------------------
Number of Warrants: ________________ [Signature of Purchaser]
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<PAGE>
PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Purchaser has signed this Agreement as of the date
first written above.
Address: -----------------------------------
[Name of Purchaser]
- --------------
- --------------
Note Principal Amount: _____________ -----------------------------------
Number of Warrants: ________________ [Signature of Purchaser]
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<PAGE>
PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Purchaser has signed this Agreement as of the date
first written above.
Address: -----------------------------------
[Name of Purchaser]
- --------------
- --------------
Note Principal Amount: _____________ -----------------------------------
Number of Warrants: ________________ [Signature of Purchaser]
18
EXHIBIT 10.3
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 IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT, WHICH AGREEMENT
IS INCORPORATED HEREIN BY REFERENCE.
BLACK WARRIOR WIRELINE CORP.
$____________ CONVERTIBLE PROMISSORY NOTE
$________________ Houston, Texas _________________
BLACK WARRIOR WIRELINE CORP., a Delaware corporation (hereinafter called
the "Company," which term includes any directly or indirectly controlled
subsidiaries or successor entities), for value received, hereby promises to pay
to ________________________________ (hereinafter called the "Holder"), or its
registered assigns, the principal sum of up to _____________________Dollars
($_____________), together with interest on the amount of such principal sum
from time to time 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, subject to the Agreement of Purchase and Sale between the
Company and the Holder dated as of December 17, 1999 (the "Agreement").
THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SUBJECT TO THAT
CERTAIN BORROWER SECURITY AGREEMENT BETWEEN THE COMPANY AND HOLDER, DATED AS OF
DECEMBER ___, 1999, AS MAY BE AMENDED OR MODIFIED (THE "SECURITY AGREEMENT").
<PAGE>
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.
"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.
"Common Stock" means shares of common stock, par value $0.005 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.
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"Maturity Date", when used with respect to this Note, means January 15,
2001 (or such earlier date upon which this Note becomes due and payable under
Section 3.2).
"Note" means this 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. 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.
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 the Note
principal amount in one advance.
2.2 Interest. From the date of this Note through September 30, 2000,
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. From October 1, 2000 through the Maturity Date, interest shall
accrue hereunder on the unpaid outstanding principal sum of this Note at a rate
equal to fifteen percent (15%) 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.
2.3 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 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.
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<PAGE>
2.4 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.
2.5 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.
2.6 Use of Proceeds. The proceeds of all advances shall be used to provide
working capital required by the Company. 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 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; or (v) this
Note (other than a default in the performance of a covenant specifically
addressed elsewhere in this Section 3.1); 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 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
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<PAGE>
(d) the Company 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 (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 property or assets of the Company, 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 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 a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of the property
of the Company or ordering the winding up or liquidation of the affairs of
the Company 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 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 files a petition, answer or consent seeking
reorganization or relief under any applicable federal or state law, or the
Company makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts generally as they become due; or
(h) the Company (1) merges or consolidates with or into any other
Person (unless the Company is the surviving or acquiring party); (2)
dissolves or liquidates; or (3) sells all or any substantial portion of its
assets.
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.
5
<PAGE>
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 $0.75 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
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
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<PAGE>
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.
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.
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(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 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 therefore shall be deemed to be the amount received by the
Company therefore. 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 therefore shall be deemed to be the fair value, as
determined reasonably and in good faith
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<PAGE>
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 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
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<PAGE>
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
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
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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 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.
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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 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
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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.
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 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 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 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 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 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
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event 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. On or before June 30, 2000, the
Company will amend its charter as necessary to authorize the issuance of shares
of its common stock in sufficient number for purposes of the conversion of the
Notes and exercise of the Warrants.
6.9 Mergers and Acquisitions. Without the consent of the Holder, the
Company 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.
6.19 Indebtedness. Without the consent of the Holder, the Company will not
incur any indebtedness for borrowed money, nor grant or suffer to exist any
liens on its properties other than those existing on the date hereof, or
refinance existing indebtedness for borrowed money.
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,
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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 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 at the 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.
7.9 Purchase Agreement. This Note is one of a number of notes being issued
and sold pursuant to that certain Agreement of Purchase and Sale dated as of
December 17, 1999, among the Company, Holder and the other purchasers named
therein.
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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
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THE SECURITIES REPRESENTED BY THIS WARRANT 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 LAW AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS WARRANT MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE
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.
EXHIBIT 10.4
WARRANTS
to Purchase Common Stock of
Black Warrior Wireline Corp.
Expiring on December 31, 2004
This Warrant to Purchase Common Stock (the "Warrant") certifies that for
value received, SJMB, LP (the "Holder"), or its assigns, is entitled to
subscribe for and purchase from the Company (as hereinafter defined), in whole
or in part, 3,075,000 shares of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (as hereinafter defined) at an initial
Exercise Price (as hereinafter defined), subject, however, to the provisions and
upon the terms and conditions hereinafter set forth. The number of Warrants (as
hereinafter defined), the number of shares of Common Stock purchasable
hereunder, and the Exercise Price therefor are subject to adjustment as
hereinafter set forth. This Warrant and all rights hereunder shall expire at
5:00 p.m., Houston, Texas time, on December 31, 2004.
As used herein, the following terms shall have the meanings set forth
below:
"Company" shall mean Black Warrior Wireline Corp., a Delaware corporation,
and shall also include any successor thereto with respect to the obligations
hereunder, by merger, consolidation or otherwise.
"Common Stock" shall mean and include the Company's Common Stock, par value
$.0005 per share, authorized on the date of the original issue of this Warrant
and shall also include (i) in case of any reorganization, reclassification,
consolidation, merger, share exchange or sale, transfer or other disposition of
assets of the character referred to in Section hereof, the stock, securities
provided for in such Section , and (ii) any other shares of common stock of the
Company into which such shares of Common Stock may be converted.
<PAGE>
"Exercise Price" shall mean the initial purchase price of $0.75 per share
of Common Stock payable upon exercise of the Warrants. The Exercise Price shall
be adjusted from time to time pursuant to the provisions hereof.
"Market Price" for any day, when used with reference to Common Stock, shall
mean the price of said Common Stock determined as follows: (i) the last reported
sale price for the Common Stock on such day on the principal securities exchange
on which the Common Stock is listed or admitted to trading or if no such sale
takes place on such date, the average of the closing bid and asked prices
thereof as officially reported, or, if not so listed or admitted to trading on
any securities exchange, the last sale price for the Common Stock on the
National Association of Securities Dealers National Market System or SmallCap
Market on such date, or, if there shall have been no trading on such date or if
the Common Stock shall not be listed on such system, the average of the closing
bid and asked prices in the over-the-counter market as furnished by any NASD
member firm selected from time to time by the Company for such purpose, in each
such case, unless otherwise provided herein, averaged over a period of ten (10)
consecutive Trading Days prior to the date as of which the determination is to
be made; or (ii) if the Common Stock shall not be listed or admitted to trading
or the closing bid and asked prices are unable to be furnished by an NASD member
firm, as provided in clause (i) above, the fair market value of the Common Stock
as determined in good faith by the Board of Directors of the Company.
"Note" shall mean the Convertible Promissory Note of the Company issued to
Holder as of the date hereof in the original principal amount of up to $750,000,
as may be amended, modified, substituted or replaced.
"Outstanding," when used with reference to Common Stock, shall mean (except
as otherwise expressly provided herein) at any date as of which the number of
shares thereof is to be determined, all issued shares of Common Stock, except
shares then owned or held by or for the account of the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Days" shall mean any days during the course of which the principal
securities exchange on which the Common Stock is listed or admitted to trading
is open for the exchange of securities.
"Warrant" shall mean the right upon exercise to purchase one Warrant Share.
"Warrant Shares" shall mean the shares of Common Stock purchased or
purchasable by the holder hereof upon the exercise of the Warrants.
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ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise. The Warrants represented hereby may be exercised by
the holder hereof, in whole or in part, at any time and from time to time on or
after the date hereof until 5:00 p.m., Houston, Texas time, on December 31,
2004. To exercise the Warrants, the holder hereof shall deliver to the Company,
at the Warrant Office designated in Section hereof, (i) a written notice in the
form of the Subscription Notice attached as an exhibit hereto, stating therein
the election of such holder to exercise the Warrants in the manner provided in
the Subscription Notice; (ii) payment in full of the Exercise Price (A) in cash
or by bank check for all Warrant Shares purchased hereunder, or (B) through a
"cashless" or "net-issue" exercise of each such Warrant ("Cashless Exercise");
the holder shall exchange each Warrant subject to a Cashless Exercise for that
number of Warrant Shares determined by multiplying the number of Warrant Shares
issuable hereunder by a fraction, the numerator of which shall be the difference
between (x) the Market Price and (y) the Exercise Price for each such Warrant,
and the denominator of which shall be the Market Price; the Subscription Notice
shall set forth the calculation upon which the Cashless Exercise is based, or
(C) a combination of (A) and (B) above; and (iii) this Warrant. The Warrants
shall be deemed to be exercised on the date of receipt by the Company of the
Subscription Notice, accompanied by payment for the Warrant Shares and surrender
of this Warrant, as aforesaid, and such date is referred to herein as the
"Exercise Date". Upon such exercise, the Company shall, as promptly as
practicable and in any event within ten (10) business days, issue and deliver to
such holder a certificate or certificates for the full number of the Warrant
Shares purchased by such holder hereunder, and shall, unless the Warrants have
expired, deliver to the holder hereof a new Warrant representing the number of
Warrants, if any, that shall not have been exercised, in all other respects
identical to this Warrant. As permitted by applicable law, the Person in whose
name the certificates for Common Stock are to be issued shall be deemed to have
become a holder of record of such Common Stock on the Exercise Date and shall be
entitled to all of the benefits of such holder on the Exercise Date, including
without limitation, the right to receive dividends and other distributions for
which the record date falls on or after the Exercise Date and the right to
exercise voting rights.
1.2 Expenses and Taxes. The Company shall pay all expenses and taxes
(including, without limitation, all documentary, stamp, transfer or other
transactional taxes) other than income taxes attributable to the preparation,
issuance or delivery of the Warrants and of the shares of Common Stock issuable
upon exercise of the Warrants.
1.3 Reservation of Shares. The Company shall reserve at all times so long
as the Warrants remain outstanding, or shall have available in reserve by June
30, 2000, free from preemptive rights, out of its treasury Common Stock or its
authorized but unissued shares of Common Stock, or both, solely for the purpose
of effecting the exercise of the Warrants, a sufficient number of shares of
Common Stock to provide for the exercise of the Warrants.
1.4 Valid Issuance. All shares of Common Stock that may be issued upon
exercise of the Warrants will, upon issuance by the Company, be duly and validly
issued, fully
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paid and nonassessable and free from all taxes, liens and charges with respect
to the issuance thereof and, without limiting the generality of the foregoing,
the Company shall take no action or fail to take any action which will cause a
contrary result (including, without limitation, any action that would cause the
Exercise Price to be less than the par value, if any, of the Common Stock).
1.5 Purchase Agreement. The Warrants represented hereby are part of a duly
authorized issuance and sale of warrants to purchase Common Stock issued and
sold pursuant to that certain Agreement of Purchase and Sale dated as of
December 17, 1999 (the "Agreement"), among the Company, the Holder and other
Purchasers. The holder hereof shall be entitled to registration under the
Securities Act and any applicable state securities or blue sky laws to the
extent set forth in the Registration Rights Agreement, as hereafter amended. The
terms of the Agreement are hereby incorporated herein for all purposes and shall
be considered a part of this Warrant as if they had been fully set forth herein.
Notwithstanding the previous sentence, in the event of any conflict between the
provisions of the Agreement and of this Warrant, the provisions of this Warrant
shall control.
1.6 Acknowledgment of Rights. At the time of the exercise of the Warrants
in accordance with the terms hereof and upon the written request of the holder
hereof, the Company will acknowledge in writing its continuing obligation to
afford to such holder any rights (including, without limitation, any right to
registration of the Warrant Shares) to which such holder shall continue to be
entitled after such exercise in accordance with the provisions of this Warrant;
provided, however, that if the holder hereof shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.7 No Fractional Shares. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of this Warrant. If more than
one Warrant shall be presented for exercise at the same time by the same holder,
the number of full shares of Common Stock which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of whole shares
of Common Stock purchasable on exercise of the Warrants so presented. If any
fraction of a share of Common Stock would, except for the provisions of this
Section , be issuable on the exercise of this Warrant, the Company shall pay an
amount in cash calculated by it to be equal to the Market Price of one share of
Common Stock at the time of such exercise multiplied by such fraction computed
to the nearest whole cent.
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ARTICLE II
TRANSFER
2.1 Warrant Office. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's offices at 3748 Highway #45 North, Columbus, Mississippi 39701
and may subsequently be such other office of the Company or of any transfer
agent of the Common Stock in the continental United States as to which written
notice has previously been given to the holder hereof. The Company shall
maintain, at the Warrant Office, a register for the Warrants in which the
Company shall record the name and address of the Person in whose name this
Warrant has been issued, as well as the name and address of each permitted
assignee of the rights of the registered owner hereof.
2.2 Ownership of Warrants. The Company may deem and treat the Person in
whose name the Warrants are registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Article II. Notwithstanding the foregoing, the Warrants
represented hereby, if properly assigned in compliance with this Article II, may
be exercised by an assignee for the purchase of Warrant Shares without having a
new Warrant issued.
2.3 Restrictions on Transfer of Warrants. The Company agrees to maintain at
the Warrant Office books for the registration and transfer of the Warrants.
Subject to the restrictions on transfer of the Warrants in this Section , the
Company, from time to time, shall register the transfer of the Warrants in such
books upon surrender of this Warrant at the Warrant Office properly endorsed or
accompanied by appropriate instruments of transfer and written instructions for
transfer satisfactory to the Company. Upon any such transfer and upon payment by
the holder or its transferee of any applicable transfer taxes, new Warrants
shall be issued to the transferee and the transferor (as their respective
interests may appear) and the surrendered Warrants shall be canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes
or income taxes) and all other expenses and charges payable in connection with
the transfer of the Warrants pursuant to this Section .
2.3.1 Restrictions in General. The holder of the Warrants agrees that
it will not transfer the Warrants unless registration of such Warrant
Shares under the Securities Act and any applicable state securities or blue
sky laws has become effective or the holder has provided to the Company an
opinion of counsel acceptable to the Company that such registration is not
required. Prior to any transfer (other than the grant of a security
interest) as provided herein, the transferor shall provide written notice
to the Company and an opinion of counsel to the effect that the proposed
transfer is exempt from registration under all applicable securities laws,
all in form and substance reasonably satisfactory to the Company. Any
lender or lenders to which the Holder grants a security interest in the
Warrants shall be entitled to exercise all remedies to which it is
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entitled by contract or by law, including (without limitation) transferring
the Warrants 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.
2.4 Compliance with Securities Laws. Subject to the terms of the
Registration Rights Agreement among the Holder, the other parties named therein
and the Company dated as of December 17, 1999, as may be amended from time to
time (the "Registration Rights Agreement"), and notwithstanding any other
provisions contained in this Warrant except Section 2.3.1, the holder hereof
understands and agrees that the following restrictions and limitations shall be
applicable to all Warrant Shares and to all resales or other transfers thereof
pursuant to the Securities Act:
2.4.1 The holder hereof agrees that the Warrant Shares shall not be
sold or otherwise transferred unless the Warrant Shares are registered
under the Securities Act and applicable state securities or blue sky laws
or are exempt therefrom.
2.4.2 A legend in substantially the following form will be placed on
the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND,
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
RESOLD, PLEDGED, OR OTHERWISE 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."
2.4.3 Stop transfer instructions will be imposed with respect to the
Warrant Shares so as to restrict resale or other transfer thereof, subject
to this Section .
ARTICLE III
ANTI-DILUTION
3.1 Anti-Dilution Provisions. The Exercise Price shall be subject to
adjustment from time to time as hereinafter provided. Upon each adjustment of
the Exercise Price, the holder of this Warrant shall thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Exercise 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 Exercise Price resulting from such adjustment.
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3.2 Adjustment of Exercise Price Upon Issuance of Common Stock.
3.2.1 (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 Exercise Price, then, forthwith upon such issue or
sale, the Exercise Price shall be reduced (but not increased, except as
otherwise specifically provided in Section hereof), to the lower price per
share (calculated to the nearest one-ten thousandth of a cent) but in any
event not less than $.001 per share.
(B) Notwithstanding the provisions of this Section , no
adjustment shall be made in the Exercise Price in the event that the
Company issues, in one or more transactions, (i) Common Stock or
convertible securities 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 that are
issuable under currently effective employee plans and agreements);
(ii) 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; (iii)
Common Stock upon conversion of the Note; or (iv) Common Stock issued
as consideration in acquisitions (including warrants, options or
convertible securities issued as consideration for an acquisition or
to officers, directors or employees of the acquired entity in
conjunction therewith). In addition, for purposes of calculating any
adjustment of the Exercise Price as provided in this Section , all of
the shares of Common Stock issuable pursuant to any of the foregoing
shall be assumed to be outstanding prior to the event causing such
adjustment to be made.
3.2.2 For purposes of this Section , the following Sections to
inclusive, 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
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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 Exercise 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 Exercise Price specified in Section hereof. Except as
provided in Section hereof, no further adjustment of the Exercise
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 , the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in Section , or the rate at which
any Convertible Securities referred to in Section , are convertible
into or exchangeable for Common Stock shall change (other than under
or by reason of provisions designed to protect against dilution), the
Exercise Price then in effect hereunder shall forthwith be readjusted
(increased or decreased, as the case may be) to the Exercise 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 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 , or on
the termination of any such right to convert or exchange any such
Convertible Securities referred to in Section , the Exercise Price
then in effect hereunder shall forthwith be readjusted (increased or
decreased, as the case may be) to the Exercise 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 or the rate at which any Convertible
Securities referred to in Section are convertible is 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 Exercise 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
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delivered as aforesaid, but only if as a result of such adjustment the
Exercise 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
with 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 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 .
3.3 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.
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3.4 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 Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced and the number of Warrant Shares purchasable
pursuant to this Warrant 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 Exercise Price in effect immediately prior to such combination shall
be proportionately increased and the number of Warrant Shares purchasable upon
the exercise of this Warrant immediately prior to such combination shall be
proportionately reduced. Except as provided in this Section , no adjustment in
the Exercise Price and no change in the number of Warrant Shares purchasable
shall be made under this Article III as a result of, or by reason of, any such
subdivision or combination.
3.5 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 a holder of Common Stock of
the Company 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:
3.5.1 As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition
(except as otherwise provided below in this Section ), lawful and adequate
provisions shall be made whereby the holder of Warrants shall thereafter
have the right to purchase and receive upon the terms and conditions
specified in this Warrant and in lieu of the Warrant 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 Warrant Shares immediately
theretofore so receivable 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 Exercise Price and of the number of
Warrant 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
Warrants.
3.5.2 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 Exercise 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.
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3.5.3 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 of 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 warrant
revised to reflect the modifications in this Warrant effected pursuant to
this Section .
3.5.4 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 exercise of the Warrants 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.
3.6 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 Exercise Price in effect
immediately prior to 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 the
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.
3.7 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 an exercise of each Warrant and no adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or
decrease of at least $0.01 in the Exercise Price; provided, however, that any
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adjustments which by reason of this Section 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.
3.8 Notice of Adjustment. Whenever the Exercise Price or the number of
Warrant Shares issuable upon the exercise of the Warrants 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 Exercise
Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Exercise Price and the adjusted number of Warrant Shares issuable upon
the exercise of the Warrants 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 Exercise Price and the number of Warrant Shares purchasable upon exercise of
the Warrants have been adjusted and setting forth the adjusted Exercise Price
and the adjusted number of Warrant Shares purchasable upon the exercise of the
Warrants.
3.9 Notifications to Holders. 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 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 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,
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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.
3.10 Company to Prevent Dilution. If any event or condition occurs as to
which other provisions of this Article III are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
the Warrants 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
Warrant, 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 Exercise Price and the number of Warrant 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 Exercise
Price as otherwise determined pursuant to this Article III except in the event
of a combination of shares of the type contemplated in Section hereof, and then
in no event to an amount greater than the Exercise Price as adjusted pursuant to
Section hereof.
ARTICLE IV
MISCELLANEOUS
4.1 Entire Agreement. This Warrant, together with the Agreement, contains
the entire agreement between the holder hereof and the Company with respect to
the Warrant Shares purchasable upon exercise hereof and the related transactions
and supersedes all prior arrangements or understandings with respect thereto.
4.2 Governing Law. This warrant shall be governed by and construed in
accordance with the laws of the State of Delaware.
4.3 Waiver and Amendment. Any term or provision of this Warrant may be
waived at any time by the party which is entitled to the benefits thereof and
any term or provision of this Warrant may be amended or supplemented at any time
by agreement of the holder hereof and the Company, except that any waiver of any
term or condition, or any amendment or supplementation, of this Warrant shall be
in writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Warrant shall not in any way effect, limit or waive a party's
rights hereunder at any time to enforce strict compliance thereafter with every
term or condition of this Warrant.
4.4 Illegality. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the
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remaining provisions of this Warrant shall not, at the election of the party for
whom the benefit of the provision exists, be in any way impaired.
4.5 Copy of Warrant. A copy of this Warrant shall be filed among the
records of the Company.
4.6 Notice. Any notice or other document required or permitted to be given
or delivered to the holder hereof shall be in writing and delivered at, or sent
by certified or registered mail to such holder at, the last address shown on the
books of the Company maintained at the Warrant Office for the registration of
this Warrant or at any more recent address of which the holder hereof shall have
notified the Company in writing. Any notice or other document required or
permitted to be given or delivered to the Company, other than such notice or
documents required to be delivered to the Warrant Office, shall be delivered at,
or sent by certified or registered mail to, the offices of the Company at 3748
Highway #45 North, Columbus, Mississippi 39701 or such other address within the
continental United States of America as shall have been furnished by the Company
to the holder of this Warrant.
4.7 Limitation of Liability; Not Stockholders. No provision of this Warrant
shall be construed as conferring upon the holder hereof the right to vote,
consent, receive dividends or receive notices (other than as herein expressly
provided) in respect of meetings of stockholders for the election of directors
of the Company or any other matter whatsoever as a stockholder of the Company.
No provision hereof, in the absence of affirmative action by the holder hereof
to purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the holder hereof, shall give rise to any liability of such
holder for the purchase price of any shares of Common Stock or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
4.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of
this Warrant, and in the case of any such loss, theft or destruction upon
delivery of a bond of indemnity or such other security in such form and amount
as shall be reasonably satisfactory to the Company, or in the event of such
mutilation upon surrender and cancellation of this Warrant, the Company will
make and deliver a new warrant of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Warrant. Any warrant issued under the provisions of this
Section in lieu of any Warrant alleged to be lost, destroyed or stolen, or in
lieu of any mutilated Warrant, shall constitute an original contractual
obligation on the part of the Company. This Warrant shall be promptly canceled
by the Company upon the surrender hereof in connection with any exchange or
replacement. The Company shall pay all taxes (other than securities transfer
taxes or income taxes) and all other expenses and charges payable in connection
with the preparation, execution and delivery of warrants pursuant to this
Section .
4.9 Registration Rights. The Warrant Shares shall be entitled to such
registration rights under the Securities Act and under applicable state
securities laws as are specified in the Registration Rights Agreement and the
Agreement.
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4.10 Headings. The Article and Section and other headings herein are for
convenience only and are not a part of this Warrant and shall not affect the
interpretation thereof.
15
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
name.
Dated as of December 17, 1999.
BLACK WARRIOR WIRELINE CORP.
By: ______________________________
Name: William L. Jenkins
Title: President
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SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented thereby for, and to purchase thereunder,
_______ shares of the Common Stock covered by such Warrant through a "cashless"
or "net issue" exercise of such Warrant ("Cashless Exercise") pursuant to
Section 1.1 of such Warrant, and requests that certificates for such shares (and
any other securities or other property issuable upon such exercise) be issued in
the name of, and delivered to ________________.
The calculation upon which the Cashless Exercise is based is as follows:
(No. of Warrants) ((Market Price - Exercise Price)/Market Price) = No. of shares
of Common Stock
- OR -
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented thereby for, and to purchase thereunder,
_______ shares of the Common Stock covered by such Warrant, and herewith makes
payment in full for such shares, and requests (a) that certificates for such
shares (and any other securities or other property issuable upon such exercise)
be issued in the name of, and delivered to ________________, and (b) if such
shares shall not include all of the shares issuable as provided in such Warrant,
that a new Warrant of like tenor and date for the balance of the shares issuable
thereunder be delivered to the undersigned.
Signature: _____________________________________
Date: _________________________________________
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ASSIGNMENT
For value received, _______________________, hereby sells, assigns, and
transfers unto _________________________ the within Warrant, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ________________________ attorney, to transfer such Warrant on the books
of the Company, with full power of substitution.
Signed: __________________________
Date: ____________________________
18
EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Registration Rights
Agreement") is made as of December 17, 1999, by and between Black Warrior
Wireline Corp., a Delaware corporation (the "Company"), and the parties listed
on the signature page below (collectively, the "Purchaser" or "Purchasers").
WHEREAS, the Purchasers have acquired or may acquire from the Company,
Promissory Notes in the aggregate original principal amount of up to $7,000,000
(the "Notes"), convertible into Common Stock of the Company, subject to
adjustment (the "Note Shares");
WHEREAS, the Purchasers have acquired or may acquire from the Company,
Common Stock Purchase Warrants (collectively, the "Warrants") which may be
exercised to initially acquire up to 28,700,000 shares of the Company's Common
Stock (the "Warrant Shares" and, together with the Note Shares, the "Shares"),
par value $0.005 per share ("Common Stock"), subject to adjustment;
WHEREAS, the Company wishes to grant the Purchasers certain
registration rights in respect of the Shares, as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
ARTICLE I
Definitions
As used in this Registration Rights Agreement, the following terms
shall have the meanings set forth below:
1.1 "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
1.2 "Holder" shall mean Purchaser and any transferee of any Warrants or
holder of any Shares issued upon exercise of any Warrants.
1.3 "Registrable Securities" shall mean (i) the Shares; and (ii) any
Common Stock issued or issuable at any time or from time to time in respect of
the Shares upon a stock split, stock dividend, recapitalization or other similar
event involving the Company until such Common Stock is sold pursuant to a
Registration Statement or the exemption from registration under Rule 144(k) (or
successor Rule) under the Securities Act is available with respect to the
Shares.
1.4 The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
<PAGE>
1.5 "Registration Expenses" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by the Company in complying with this
Registration Rights Agreement, including, without limitation, all registration,
qualification and filing fees, exchange listing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
1.6 "Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
1.7 "Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
a Purchaser and, except as set forth above, all fees and disbursements of
counsel for such Purchaser.
1.8 "Underwritten Public Offering" shall mean a public offering in
which the Common Stock is offered and sold on a firm commitment basis through
one or more underwriters, all pursuant to an underwriting agreement between the
Company and such underwriters.
ARTICLE II
Registration Rights
2.1 Demand Registration.
2.1.1 On any date following the first shareholders meeting of
the Company after the date hereof, and on demand of Purchasers holding at least
66 2/3% of the indebtedness evidenced by the Notes ("Demand Purchasers"), the
Company shall file with the Commission a shelf registration statement covering
the resale of the Shares on Form S-1, S-2, or S-3 (the "Registration Statement")
which shall remain effective for the lesser of: (i) 3 years, or (ii) until such
time as the Holder does not beneficially own any Registrable Securities. The
Company shall use its reasonable best efforts to cause such Registration
Statement to become effective as soon as practicable and to cause the Shares to
be qualified in such state jurisdictions as the Demand Purchasers may request.
2.1.2 Except as set forth herein, the Company shall take all
reasonable steps necessary to keep the Registration Statement current and
effective until all Shares have been distributed by the Purchaser including any
necessary refiling of additional registration statements.
2.1.3 The Company shall be entitled to require that the
parties refrain from effecting any public sales or distributions of the
Registrable Securities pursuant to a Registration Statement that has been
declared effective by the Commission or otherwise, if the board of directors of
the Company reasonably determines that such public sales or distributions would
interfere in any material respect with any transaction involving the Company
that the board of directors reasonably determines to be material to the Company.
The board of directors shall, as
2
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promptly as practicable, give the Purchaser written notice of any such
development. In the event of a request by the board of directors of the Company
that the Purchaser refrain from effecting any public sales or distributions of
the Registrable Securities, the Company shall be required to lift such
restrictions regarding effecting public sales or distributions of the
Registrable Securities as soon as reasonably practicable after the board of
directors shall reasonably determine public sales or distributions by the
Purchaser of the Registrable Securities shall not interfere with such
transaction, provided, that in no event shall any requirement that the Purchaser
refrain from effecting public sales or distributions in the Registrable
Securities extend for more than 90 days.
2.2 Piggyback Registration.
2.2.1 Subject to the terms hereof, if: (i) at any time or from
time to time the Company or any shareholder of the Company shall determine to
register any of its securities (except for registration statements on Form S-8
or relating to employee benefit plans or exchange offers), either for its own
account or the account of a security holder; and (ii) the Purchaser is the
beneficial owner of any Registrable Securities; the Company will promptly give
to the Purchaser written notice thereof no less than 10 days prior to the filing
of any registration statement; and include in such registration (and any related
qualification under blue sky laws or other compliance), and in the underwriting
involved therein, if any, such Registrable Securities as Purchaser may request
in a writing delivered to the Company within 5 days after Purchaser's receipt of
Company's written notice.
2.2.2 The Purchaser may participate in any number of
registrations until all of the Registrable Securities held by such Purchaser
have been distributed pursuant to a registration.
2.2.3 If any registration statement is an Underwritten Public
Offering, the right of a Purchaser to registration pursuant to this Section
shall be conditioned upon such Purchaser's participation in such reasonable
underwriting arrangements as the Company shall make regarding the offering, and
the inclusion of Registrable Securities in the underwriting shall be limited to
the extent provided herein. The Purchaser and all other shareholders proposing
to distribute their securities through such underwriting shall (together with
the Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section, if the managing underwriter
concludes in its reasonable judgment that the number of shares to be registered
for selling shareholders (including the Purchaser) would materially adversely
effect such offering, the number of Shares to be registered, together with the
number of shares of Common Stock or other securities held by other shareholders
proposed to be registered in such offering, shall be reduced on a pro rata basis
based on the number of Shares proposed to be sold by the Purchaser as compared
to the number of shares proposed to be sold by all shareholders. If a Purchaser
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company and the managing underwriter,
delivered not less than ten days before the effective date. The Registrable
Securities excluded by the managing underwriter or withdrawn from such
underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 120 days after the effective date
of the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.
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2.2.4 The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section prior to the
effectiveness of such registration whether or not a Purchaser has elected to
include securities in such registration.
2.3 Expenses of Registration. All Registration Expenses shall be borne
by the Company. Unless otherwise stated herein, all Selling Expenses relating to
securities registered on behalf of any Purchaser shall be borne by such
Purchaser.
2.4 Best Registration Rights. If, on or after the date of this
Registration Rights Agreement, the Company grants to any person with respect to
any security issued by the Company registration rights that provide for terms
that are in any manner more favorable to the holder of such registration rights
than the terms granted to the Purchaser (or if the Company amends or waives any
provision of any Agreement providing registration rights of others or takes any
other action whatsoever to provide for terms that are more favorable to other
holders than the terms provided to the Purchaser) then this Registration Rights
Agreement shall immediately be deemed amended to provide the Purchaser with any
(or all) of such more favorable terms as the Purchaser shall elect to include
herein.
2.5 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Registration Rights Agreement, the Company will keep the Purchaser advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. At its expense, the Company will:
2.5.1 Prepare and file with the Commission a registration
statement with respect to such securities and use its commercially reasonable
efforts to cause such registration statement to become and remain effective
until the distribution described in such registration statement has been
completed;
2.5.2 Furnish to each underwriter such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such underwriter
may reasonably request in order to facilitate the public sale of the shares by
such underwriter, and promptly furnish to each underwriter and the Purchaser
notice of any stop-order or similar notice issued by the Commission or any state
agency charged with the regulation of securities, and notice of any Nasdaq or
securities exchange listing.
2.5.3 Use its best efforts to cause the Shares to be listed on
the Nasdaq SmallCap Market and each Securities Exchange on which the Common
Stock is approved for listing.
4
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2.6 Indemnification.
2.6.1 To the extent permitted by law, the Company will
indemnify the Purchaser, each of its officers and directors and partners, and
each person controlling the Purchaser within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, to the extent such
expenses, claims, losses, damages or liabilities arise out of or are based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement, prospectus, offering circular or other similar
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse Purchaser, each of
its officers and directors and partners, and each person controlling Purchaser,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action; provided, however, that the indemnity contained herein shall not apply
to amounts paid in settlement of any claim, loss, damage, liability or expense
if settlement is effected without the consent of the Company (which consent
shall not unreasonably be withheld); provided, further, that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by Purchaser, such
controlling person or such underwriter specifically for use therein.
Notwithstanding the foregoing, insofar as the foregoing indemnity relates to any
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) made in the preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the Commission at the time the registration
statement becomes effective or in the final prospectus filed with the Commission
pursuant to the applicable rules of the Commission or in any supplement or
addendum thereto, the indemnity agreement herein shall not inure to the benefit
of any underwriter if a copy of the final prospectus filed pursuant to such
rules, together with all supplements and addenda thereto, was not furnished to
the person or entity asserting the loss, liability, claim or damage at or prior
to the time such furnishing is required by the Securities Act.
2.6.2 To the extent permitted by law, each Purchaser will, if
securities held by such Purchaser are included in the securities as to which
such registration, qualification or compliance is being effected pursuant to
terms hereof, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act,
5
<PAGE>
and each other person selling the Company's securities covered by such
registration statement, each of such person's officers and directors and each
person controlling such persons within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
such Purchaser of any rule or regulation promulgated under the Securities Act
applicable to such Purchaser and relating to action or inaction required of such
Purchaser in connection with any such registration, qualification or compliance,
and will reimburse the Company, such other persons, such directors, officers,
persons, underwriters or control persons for any legal or other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Purchaser
specifically for use therein; provided, however, that the indemnity contained
herein shall not apply to amounts paid in settlement of any claim, loss, damage,
liability or expense if settlement is effected without the consent of such
Purchaser (which consent shall not be unreasonably withheld). Notwithstanding
the foregoing, the liability of such Purchaser under this subsection (b) shall
be limited in an amount equal to the net proceeds from the sale of the shares
sold by such Purchaser, unless such liability arises out of or is based on
willful conduct by such Purchaser. In addition, insofar as the foregoing
indemnity relates to any such untrue statement (or alleged untrue statement) or
omission (or alleged omission) made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the Commission at the time
the registration statement becomes effective or in the final prospectus filed
pursuant to applicable rules of the Commission or in any supplement or addendum
thereto, the indemnity agreement herein shall not inure to the benefit of the
Company or any underwriter if a copy of the final prospectus filed pursuant to
such rules, together with all supplements and addenda thereto, was not furnished
to the person or entity asserting the loss, liability, claim or damage at or
prior to the time such furnishing is required by the Securities Act.
2.6.3 Notwithstanding the foregoing paragraphs (a) and (b) of
this Section, each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or as to which the
Indemnifying Party is asserting separate or different defenses, which defenses
are inconsistent with the defenses of the Indemnified Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
6
<PAGE>
all liability in respect to such claim or litigation. No Indemnified Party shall
consent to entry of any judgment or enter into any settlement without the
consent of each Indemnifying Party.
2.6.4 If the indemnification provided for in this Section is
unavailable to an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and all shareholders offering
securities in the offering (the "Selling Security Holders") on the other from
the offering of the Company's securities, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the Selling
Security Holders on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Selling Security Holders on the other shall be
the net proceeds from the offering (before deducting expenses) received by the
Company on the one hand and the Selling Security Holders on the other. The
relative fault of the Company on the one hand and the Selling Security Holders
on the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Selling Security Holders and the parties' relevant intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Selling Security Holders agree that
it would not be just and equitable if contribution pursuant to this Section were
based solely upon the number of entities from whom contribution was requested or
by any other method of allocation which does not take account of the equitable
considerations referred to above in this Section. The amount paid or payable by
an Indemnified Party as a result of the losses, claims, damages and liabilities
referred to above in this Section shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim, subject to the provisions
hereof. Notwithstanding the provisions of this Section, no Selling Security
Holder shall be required to contribute any amount or make any other payments
under this Agreement which in the aggregate exceed the proceeds received by such
Selling Security Holder. No person guilty of fraudulent misrepresentation
(within the meaning of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
2.7 Certain Information.
2.7.1 Each Purchaser agrees, with respect to any Registrable
Securities included in any registration, to furnish to the Company such
information regarding such Purchaser, the Registrable Securities and the
distribution proposed by such Purchaser as the Company may reasonably request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to herein.
7
<PAGE>
2.7.2 The failure of a Purchaser to furnish the information
requested pursuant to this Section shall not affect the obligation of the
Company to the other Selling Security Holders who furnish such information
unless, in the reasonable opinion of counsel to the Company or the underwriters,
such failure impairs or may impair the legality of the Registration Statement or
the underlying offering.
2.8 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of Restricted Securities (used herein as defined in Rule 144 under the
Securities Act) to the public without registration, the Company agrees to use
its best lawful efforts to:
2.8.1 Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times during which the Company is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
2.8.2 File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act (at all times during which the Company is subject to such reporting
requirements); and
2.8.3 So long as the Purchaser owns any Restricted Securities
(as defined in Rule 144 promulgated under the Securities Act), to furnish to
Purchaser forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 and with regard to
the Securities Act and the Exchange Act (at all times during which the Company
is subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as the Purchaser may reasonably request in availing itself of any
rule or regulation of the Commission allowing the Purchaser to sell any such
securities without registration.
2.9 Transferability. The rights conferred by this Registration Rights
Agreement shall be freely transferable to a recipient of Registrable Securities.
2.10 Governing Law. This Registration Rights Agreement shall be
governed in all respects by the laws of the State of Delaware.
2.11 Entire Agreement; Amendment. This Registration Rights Agreement
constitutes the full and entire understanding and agreement between the parties
with regard to the subject hereof. This Registration Rights Agreement, or any
provision hereof, may be amended, waived, discharged or terminated upon the
written consent of the Company and the Purchaser.
8
<PAGE>
2.12 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger
including Federal Express or similar courier service, addressed (a) if to the
Purchaser: to the addresses set forth on the signature page hereof or at such
other address as any Purchaser shall have furnished to the Company in writing,
or (b) if to the Company: to Black Warrior Wireline Corp., 3748 Highway #45
North, Columbus, Mississippi 39701, or at such other address as the Company
shall have furnished to the Purchaser. Each such notice or other communication
shall for all purposes of this Agreement be treated as effective upon receipt.
2.13 Delays or Omissions. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any party to this
Registration Rights Agreement shall impair any such right, power or remedy of
such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party of any breach or default under this Registration Rights
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Registration Rights Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Registration Rights Agreement or by law or otherwise
afforded to any party to this Registration Rights Agreement, shall be cumulative
and not alternative.
2.14 Counterparts. This Registration Rights Agreement may be executed
in any number of counterparts, each of which shall be enforceable against the
parties actually executing such counterparts, and all of which together shall
constitute one instrument.
2.15 Severability. In the event that any provision of this Registration
Rights Agreement becomes or is declared by a court of competent jurisdiction to
be illegal, unenforceable or void, this Registration Rights Agreement shall
continue in full force and effect without said provision.
2.16 Titles and Subtitles. The titles and subtitles used in this
Registration Rights Agreement are used for convenience only and are not
considered in construing or interpreting this Registration Rights Agreement.
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THE COMPANY'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has executed this Registration Rights
Agreement effective upon the date first set forth above.
BLACK WARRIOR WIRELINE CORP.
By:
--------------------------------
Name: John L. Thompson
Title: Director
10
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PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Purchaser has signed this Registration Rights
Agreement as of the date first written above.
Address:
- ---------------------------- ---------------------------------
[Purchasers Name]
- ----------------------------
- ----------------------------
----------------------------
Social Security/Tax I.D.
Note Principal Amount: $
-------------
Number of Warrants:
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11
EXHIBIT 10.6
STATE OF TEXAS )
DATE: December 22, 1999
COUNTY OF MONTGOMERY )
COMPROMISE AGREEMENT WITH RELEASE
This Agreement is made and entered into this 22nd day of December,
1999, among Black Warrior Wireline Corp., in its own name, and as successor by
merger to Boone Wireline Co., Inc. ("BWWC"), Bendover Company, formerly known as
Diamondback Directional, Inc. ("Bendover"), Alan Mann ("Mann") and Michael Dale
Jowers ("Jowers").
WITNESSETH
WHEREAS, the parties have certain agreements and business
relationships, some of which are in dispute, and some of which are the subject
of that certain lawsuit styled Bendover Company vs. Boone Wireline Co., Inc., et
al, numbered 99-05-02669-CV pending in the District Court of Montgomery County,
Texas, 9th Judicial Circuit (the "Lawsuit"); and
WHEREAS, the parties desire to compromise their disputes, enter into
new agreements, provide for the dismissal of the Lawsuit and grant one another
mutual releases;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and the documents to be exchanged pursuant hereto, the parties
do hereby agree as follows:
I.
NOTES, STOCK, ETC.
1.1 EXCHANGE OF EXISTING NOTES. Effective as of December 20, 1999, that
certain $3 Million Promissory Note due August 31, 1999, and that certain Amended
Promissory Note for Net Receivables due August 31, 1999 (collectively, the
"Original Notes"), running from BWWC to Bendover, are hereby canceled and
exchanged for the stock described in Section 1.2 and the Promissory Note
described in Section 1.3. Interest shall be paid on the Original Notes as set
forth in Section 1.5 hereof. Bendover shall return the Original Notes to BWWC.
1.2 STOCK AND ISSUANCE. In lieu of principal in the amount of $2
Million due under the Original Notes, BWWC shall issue to Bendover 2,666,666 of
its common stock ( "Stock"), at the price of seventy-five cents ($0.75).
1.3 NEW NOTE. In lieu of the balance of the principal due on the
Original Notes, which is agreed by the parties to be $1,182,890.25, BWWC shall
issue to Bendover the promissory note (the
<PAGE>
"New Note") in said amount, in the form attached hereto as Exhibit 1.3, said
note being due on January 15, 2001, providing for a pre-default interest rate of
ten percent (10%), providing for periodic payment of interest and principal as
provided therein. The schedule of interest and principal payments provided in
the New Note shall be subject to the obligations of Section II of this
agreement. The note shall be secured by a security package in pari passu to the
debt of BWWC to St James Capital Partners, LP and SJMB, LP issued prior to
December 16, 1999. BWWC shall cause St James to cause its attorneys to draft the
security agreements, financing statements and other documents needed to put in
place this security package, and deliver same to Bendover not earlier than
January 14, 2000.
1.4 INVESTMENT REPRESENTATION LETTER. Issuance of the stock is subject
to the terms of the Investment Representation Letter to be executed by Bendover
to BWWC in the form attached hereto as Exhibit 1.4.
1.5 ACCRUED INTEREST. Upon the closing of this transaction, BWWC shall
pay to Bendover accrued interest due on the Original Notes in the compromise sum
of $273,813.24, which Bendover warrants and represents to be all interest due by
BWWC to Bendover through December 20, 1999.
1.6 REGISTRATION RIGHTS AGREEMENT. The Stock and the New Note are
subject to the terms of the Registration Rights Agreement to be executed by BWWC
and Bendover in the form attached hereto as Exhibit 1.6.
1.7 SUBORDINATION AGREEMENT. Immediately following funding of the
amounts due hereunder, Bendover shall execute the Subordination Agreement with
Fleet in the form attached as Exhibit 1.7, and deliver same to the attorney for
Fleet by facsimile and by mail, with a copy to the attorney for BWWC.
Notwithstanding said subordination agreement, BWWC shall use its best efforts to
secure permission of Fleet to pay interest per the New Note.
II.
COOPERATION, FUTURE FINANCING
This agreement is being closed contemporaneously with the sale by BWWC
of Three and one-half Million Dollars ($3,500,000) of new subordinated notes
(the"December,1999Notes"), as well as the Sixth Forbearance Agreement, Sixth
Amendment and Waiver to Loan and Security Agreement with BWWC's senior secured
lender, Fleet Capital Corporation (the "Forbearance"). Pursuant to the
Forbearance, among other matters, BWWC must be refinanced by February 29, 2000.
BWWC is currently negotiating with Coast Business Credit toward refinancing.
Coast, or another new senior secured lender will require debt holders of BWWC
who are affiliated with BWWC to enter into agreements which are commonly known
as "Subordination Agreements," "Standstill Agreements," etc. Bendover recognizes
this reality and agrees to cooperate in executing such agreements in the future,
and, without limiting the generality of the foregoing, agrees that (i) if the
new loan with Coast closes, it will execute the Subordination Agreement with
Coast in substantially the form attached hereto as Exhibit 2.0 or in such other
form as Coast may request, and (ii) it will execute such subordination
agreements or loan modification agreements as required by the
<PAGE>
replacement lender (whether Coast or another lender) provided the holders of the
December, 1999 Notes execute agreements in substantially the same form. Bendover
acknowledged and agrees that these documents may limit the payment of interest
to the holders of the December, 1999 Notes and Bendover until the new senior
lender is paid in full or BWWC achieves certain excess cash flow thresholds.
III.
EMPLOYMENT MATTERS
It is a condition to the closing of this Agreement that the following
employment matters be resolved as follows:
3.1 BWWC shall pay to Mann the following amounts due to Mann:
Back Salary $29,974.32
Trailer Purchased for Company 7,000.00
Phone Bill 1,359.00
Car Allowance 2,723.63
------------
Subtotal $41,056.95
Less amount advanced October 6, 1999 -15,000.00
Total Due Mann $26,056.95
IV.
DISMISSAL OF LAWSUIT
Immediately following closing, the Lawsuit shall be dismissed with
prejudice.
The parties shall execute and deliver to one another the mutual
releases in the forms attached hereto as Exhibit 4.0 and Exhibit 4.1
V.
BOARD MATTERS
At closing, BWWC shall deliver the Action by Unanimous Consent of its
Directors in the form attached hereto as Exhibit 5.0, by which this transaction
is approved and Alan Mann is appointed to the Board of Directors of BWWC.
VI.
CLOSING
<PAGE>
Closing shall occur not later than December 17, 1999. It is anticipated
that executed copies of this agreement and the documents and things called for
hereby shall be deposited in trust with the attorney for Bendover, Roger B.
Williams of Houston, Texas, who shall hold same pending joint instructions from
the parties hereto with respect to the disbursement thereof. In the interest of
time, the parties agree that facsimile signatures may be used, and shall be as
binding as originally signed documents. However, for additional verification,
the parties agree to replace any facsimile signatures with original signatures
within five (5) business days after the closing.
VII.
MISCELLANEOUS
7.1 NO ASSIGNMENT. Neither this Agreement, nor any right, interest or
obligation hereunder, may be assigned by either of the parties hereto without
the prior written consent of the other party(ies).
7.2 MULTIPLE COUNTERPARTS. Any number of counterparts of this Agreement
may be executed, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one and the
same agreement, binding on both the parties notwithstanding that both parties
have not signed the same counterpart.
7.3 CAPTIONS. The titles of the Articles and Paragraphs and the
captions of this Agreement have been assigned thereto for convenience and
reference only and in no way define, describe, extend, or limit, nor be
construed as limiting, defining or affecting the substantive terms, scope or
intent of this Agreement.
7.4 ENTIRE AGREEMENT, INTEGRATION, AMENDMENT. This Agreement, together
with the accompanying Exhibits attached hereto, constitutes the entire agreement
among the parties hereto, as a complete and final integration thereof. All
understandings and agreement heretofore had between and among the parties are
merged into this Agreement, which alone fully and completely expresses their
understandings, and this Agreement supersedes all prior memoranda,
correspondence, conversations and negotiations. There have been and are no
agreements, representations or warranties between the parties other than those
set forth or provided herein. No representation or warranty made by any party
which is not contained in this Agreement or expressly referred to herein has
been relied on by any party in entering into this Agreement.
7.5 NOTICES. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly given and
delivered upon personal delivery or, if mailed, upon depositing such notice in
the United States mail, with first class postage prepaid, and
(i) If to Black Warrior:
Black Warrior Wireline Corp
3748 Highway 45 North
Post Office Box 9188
<PAGE>
Columbus, Mississippi 39705
Attention: William L. Jenkins
(ii) If to Bendover:
Bendover Company
1053 The Cliffs Boulevard
Montgomery, Texas 77356
(iii) If to Mann or Jowers:
Mr. Alan Mann
1053 The Cliffs Boulevard
Montgomery, Texas 77356
Mr. Michael Dale Jowers
12445 Thomson Road
Willis, TX 77378
Any party may change the address to which notices are to be
delivered to such party, by notice given in accordance with this subparagraph to
the other party.
7.6 GOVERNING LAW. The laws of the State of Texas shall govern the
validity, construction, and interpretation of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed, effective on the
date first set forth above.
BLACK WARRIOR WIRELINE CORP.
By: /s/William L. Jenkins
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William L. Jenkins, President
BENDOVER COMPANY
By:
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Its:
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Alan Mann
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Michael Dale Jowers
