Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
JUNE 3, 2004
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.)
100 ROSECREST LANE, COLUMBUS, MISSISSIPPI 39701
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(Address of principal executive offices)
Registrant's telephone number, including area code: (662) 329-1047
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(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
On June 3, 2004, Black Warrior Wireline Corp. (the "Company") entered
into an Asset Purchase Agreement (the "Agreement") with Multi-Shot, LLC for the
sale of the assets of the Company associated with its business of directional
drilling, downhole surveying, measurement while drilling, steering tools and
drilling motor rentals (referred to as the "Multi-Shot Business"). The purchaser
of the Multi-Shot Business under the Agreement is a newly organized Texas
limited liability company, with the name Multi-Shot, LLC, which includes among
its members Allen Neel, currently the Executive Vice President of the Company,
as well as two of the Company's other employees employed in the Multi-Shot
Business. These persons, referred to as the Key Multi-Shot Employees, are
expected to initially hold less than an approximately 10% equity interest in the
buyer.
The transaction includes the sale of all the Company's assets used in
the Multi-Shot Business, including certain real property located in Conroe,
Texas; improvements and fixtures located on the property; machinery, equipment,
trucks, trade fixtures, data processing equipment, furniture, spare parts, and
all other tangible personal property used in connection with the Multi-Shot
Business; raw materials, jobs in progress inventory, equipment and components
held for service, rent or sale, and supply inventory; customer and supplier
files, accounting and financial and other records; contracts, leases, agreements
and other written or verbal arrangements and customer pre-payments for unshipped
goods and services; technical data, written specifications, assembling and
process information; governmental and other licenses and permits, to the extent
transferable; service marks, trade marks and intellectual property; general
intangibles; accounts and other receivables as of the closing date; deposits,
goodwill; and prepaid rentals.
The assets to be sold exclude the Company's cash and cash equivalents
(other than deposits), real property located in Broussard, Louisiana and Corpus
Christi, Texas, investments, the purchase price for the Multi-Shot Business, and
all assets of the Company used in its wireline, plug and abandonment ("P&A") and
tubing conveyed perforating ("TCP') business. The buyer will assume specified
liabilities, jobs in progress, current liabilities estimated at $2.8 million, as
of March 31, 2004, and obligations of the Company under contracts assumed.
Liabilities to be assumed by the buyer do not include taxes imposed on the
Company arising out of the operation of the Multi-Shot Business, liabilities or
expenses of the Company arising out of the transaction, obligations of the
Company under employee benefit plans, liabilities arising from the sale of
products or services by the Multi-Shot Business prior to the closing date of the
sale, including claims asserted under pre-closing warranties, liabilities
associated with any claim, proceeding or litigation, deferred revenue, and
liabilities
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and obligations arising out of non-compliance with environmental laws.
The purchase price is $11.0 million of which approximately $10,406,000
is payable in cash at the closing and the balance of approximately $594,000 is
to be paid by the release and assignment by the Multi-Shot Key Employees of
their claims to change of control payments that may be due as of May 31, 2004 in
that aggregate amount under the terms of their employment agreements with the
Company. The purchase price is subject to adjustment at the closing, on an
initial basis, and again 45 days thereafter, on a final basis, for the amounts
by which the net working capital and inventory of the Multi-Shot Business are
more or less than the net working capital and inventory of the Multi-Shot
Business on November 30, 2003, with respect to net working capital, and December
31, 2003, with respect to inventory, of $270,000 and $5,207,000, respectively.
The Agreement contains provisions for the resolution of disputes that may arise
in determining these adjustments.
In addition to post closing adjustments, at the closing of the
transaction the buyer will issue a note payable to the Company for certain
capital expenditures made by the Company related to the Multi-Shot Business. The
note will bear interest at the prime interest rate and will be due two years
after the closing of the transaction, but will become immediately due upon a
change of control of the Company or upon a sale or merger of Multi-Shot LLC or a
sale of all or substantially all of the assets of Multi-Shot LLC. The final
amount of the note will be calculated based on certain capital expenditures made
by the Company related to the Multi-Shot Business through the date of the
closing of the transaction, which are estimated to be in the amount of
approximately $200,000.
In the Agreement, the Company has made representations and warranties
as to its due organization, authority to execute and perform the Agreement, its
title to and condition of the assets sold, matters relating to the contracts
assumed by the buyer, ownership and condition of the equipment sold, title to
inventory and absence of liens, the existence of licenses to conduct the
Multi-Shot Business, matters as to employment of employees, compliance with
laws, absence of litigation and default or breach of any leases, contracts or
licenses, the absence of any lien or breach of the Agreement arising out of the
transaction, the enforceability of the Agreement, the accuracy of certain
financial information provided to the buyer, employee benefits, the absence of
certain changes or events, required consents and approvals, absence of adverse
information, liens on assets, identity of customers, insurance, interest in
customers, business practices, environmental laws and accuracy of disclosure.
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The buyer has represented and warranted its due organization, its
authority to execute and perform the Agreement, the enforceability against it of
the Agreement, and the absence of any breach or violation of other agreements.
The closing of the transaction is conditioned on the accuracy as of the
closing of the respective representations and warranties of the parties, the
absence of any condition or event that had or would reasonably be expected to
have a material adverse effect on the Multi-Shot Business or on the Company's
ability to complete the transaction, the compliance by the parties with all the
covenants and agreements contained in the Agreement as of the closing, the
delivery of closing officers' certificates, documents and opinions, the absence
of any litigation seeking to restrain or prohibit the transaction or asserting
ownership of a material portion of the assets sold or any claim by any person
that it is entitled to all on any portion of the purchase price, the buyer
obtaining financing for the transaction, the Company having obtained all
necessary approvals and consents to complete the transaction, and the Company
having obtained a fairness opinion from Simmons & Company International.
The closing is to be held within five (5) days of the later of the
Company receiving all required approvals to complete the transaction, and the
buyer obtaining the financing to complete the transaction, subject to
fulfillment or waiver of all other closing conditions.
Either party can terminate the Agreement if any of the closing
conditions to be fulfilled by the other party are incapable of being satisfied.
The buyer can terminate the Agreement if: it discovers facts that would or could
reasonably be expected to have a material adverse effect on the Multi-Shot
Business, or determines that, based on material changes in disclosure to it, it
no longer desires to proceed with the transaction; buyer is unable to obtain
financing for the transaction on terms reasonably acceptable to it; the Company
is in material breach of any representation, warranty, covenant or agreement
which is not cured after notice; or the buyer determines for any reason not to
consummate the closing. The Company can terminate the Agreement if: it is unable
to obtain the necessary approvals to consummate the transaction; if the buyer is
in material breach of any representation, warranty, covenant or agreement which
is not cured after notice; or the Company determines for any reason not to
consummate the closing. If the buyer terminates the Agreement for any reason
other than the buyer's inability to obtain financing or it determines for any
reason not to consummate the closing or if the Company terminates the Agreement
because it is unable to obtain the necessary approvals or it determines for any
reason not to consummate the closing, the Company is obligated to pay to the
buyer $50,000.
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The Agreement provides that the Company will indemnify the buyer, its
members, managers, officers, partners, agents and employees against costs,
lawsuits, liabilities, deficiencies, claims and expenses (referred to in the
Agreement as Damages) arising out of a breach of a covenant or warranty, the
inaccuracy of any representation in the Agreement or other document furnished
under the Agreement, or based upon or arising out of any liability or obligation
of the Multi-Shot Business relating to any period prior to the closing date,
other than assumed liabilities, arising out of facts and circumstances existing
prior to the closing date, other than assumed liabilities, or arising out of
facts or circumstances existing on the closing date which are a violation of the
Agreement or relate to the violation of any government regulation with respect
to real property while the Company was in possession of the property.
The Agreement provides that the buyer will indemnify the Company, its
directors, officers, partners, agents and employees from Damages arising out of
a breach of a covenant or warranty, the inaccuracy of any representation in the
Agreement or other document furnished under the Agreement, or based upon or
arising out of any liability or obligation of the Multi-Shot Business relating
to any period on and after the closing date, arising out of facts and
circumstances existing as of or after the closing date, other than those based
upon or arising out of liabilities retained by the Company, or arising out of
facts or circumstances existing on and after the closing date which are a
violation of the Agreement.
The Company's representations and warranties as to title to assets,
taxes and environmental matters survive the closing of the transaction for the
period of the applicable statute of limitations. The Company's other
representations and warranties survive the closing for a period ending on the
earlier of twenty-four (24) months following the closing date or a change of
control of the Company, provided in any event such representations and
warranties will survive the closing for a period of twelve (12) months. The
representations and warranties of the buyer survive the closing for a period
ending on the earlier of twenty-four (24) months from the closing or a change in
control of the Company, provided in any event such representations and
warranties will survive the closing for a period of twelve (12) months. Neither
party is entitled to indemnification for any individual claim of less than
$5,000 or until the total of all individual claims exceeding that amount exceed
$100,000, at which time the indemnified party will be entitled to
indemnification for all amounts exceeding $100,000. The Company's liability to
buyer for indemnification arising out of breaches of representations and
warranties relating to title of assets, taxes and environmental matters, and
including any other indemnification payments, is limited to the amount of the
final purchase price. Otherwise, a party's liability to the other for
indemnification is limited to $5.0 million with respect to claims made during
the first twelve months after the closing date or $2.5 million with respect to
claims made during the second twelve
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months after the closing date, provided, however, if there is a change in
control of the Company consummated at any time prior to twenty-four months after
the closing date, then upon the later of (a) the change in control of the
Company, or (b) one year following the closing date, the liability of both
parties is reduced to $-0- as to claims for Damages occurring thereafter.
Other covenants in the Agreement include the following:
o If, within twelve months of the closing, there is a change of
control of the Company, the Company has agreed that it will not
dissolve its corporate entity prior to the end of the
indemnification period described above and it will deposit
$500,000 to be held in escrow and if such change of control
occurs prior to December 31, 2004, the Company agreed not to
distribute prior to December 31, 2004 the proceeds from such
event to its stockholders to the extent it causes the Company to
have less than $5.0 million in liquid assets,
o After termination of the Agreement or the closing, the parties
will not divulge, communicate or use to the detriment of the
other or for the benefit of any other person, any confidential
information or trade secrets of such party.
In addition, the Agreement provides that at the closing each party will
execute a non-competition agreement, whereby each party agrees that for a period
of two years from the closing date neither party (and including the affiliates
of the parties) will participate in a business in competition with the business
engaged in by the other party as of the closing under the Agreement in the Gulf
Coast, Rocky Mountain or Mid-Continent areas of the United States. The Company's
non-competition agreement will terminate upon the sale of 50% or more of the
capital stock of the Company in a bona-fide transaction to a third party
purchaser in which the current officers or directors of the Company own,
cumulatively, not more than a 10% interest. Additionally, the Company's
non-competition agreement will not apply to any third party purchaser of 50% or
more of the assets of the Company in a bona-fide transaction to a third party
purchaser in which the current officers or directors of the Company own,
cumulatively, not more than a 10% interest, nor will the provisions of the
Company's non-competition agreement apply to any third party, unrelated
investment entity and its affiliates that become an affiliate of the Company by
virtue of making an investment in the Company.
The parties will enter into a transition services agreement at the
closing whereby the Company will agree to provide for up to six (6) months after
the closing to the buyer certain consulting services of its director of
information technology, human services,
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chief financial officer and human resources and benefits administrator, as well
as access to the Company's computer network.
The parties entered into an amendment to the Agreement on June 10, 2004
to correct a drafting error.
Reference is made to the Agreement and the amendment thereto, filed as
Exhibits to this Current Report on Form 8-K, for a complete statement of its
terms and conditions.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired. Not applicable
(b) Pro forma financial information Not applicable
(c) Exhibits:
10.1 Asset Purchase Agreement dated June 3, 2004 between
Multi-Shot, LLC and the Registrant
10.2 First Amendment dated June 10, 2004 to Asset Purchase
Agreement between Multi-Shot, LLC and the Registrant
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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: June 18, 2004 By: /s/ William L. Jenkins
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William L. Jenkins, President
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