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)
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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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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(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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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
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William L. Jenkins, President
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