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CONSENT SOLICITATION STATEMENT EXHIBIT 99.1
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BLACK WARRIOR WIRELINE CORP.
SOLICITATION OF CONSENTS
WITH RESPECT TO ALL OUTSTANDING
1999 CONVERTIBLE PROMISSORY NOTES
OF
BLACK WARRIOR WIRELINE CORP.
This Solicitation Of Consents Will Expire At 5:00 P.M. Central Time On
Monday, July 19, 2004 Or Such Date Thereafter On Which The Company Announces By
Way Of A Press Release That The Requisite Consents Have Been Received. Such Date
Is Referred To As The "Consent Date." Consents May Be Revoked At Any Time On Or
Prior To 5:00 P.M. Central Time On The Consent Date. The Company Reserves The
Right To Extend The Consent Date From Time to Time.
HOLDERS WHO WISH TO CONSENT SHOULD DELIVER, BY REGULAR MAIL, AIR
COURIER, MESSENGER OR FAX, THEIR PROPERLY COMPLETED, EXECUTED AND DATED CONSENT
DOCUMENTS TO THE COMPANY IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH HEREIN.
ALL FACSIMILE TRANSMISSIONS MUST BE FOLLOWED BY DELIVERY OR ORIGINALLY EXECUTED
CONSENTS. THE ADDRESS OF THE COMPANY IS AS FOLLOWS:
VIA HAND OR OVERNIGHT DELIVERY VIA REGULAR MAIL FACSIMILE TRANSMISSION
Black Warrior Wireline Corp. Black Warrior Wireline Corp. (662) 329-1089
100 Rosecrest Lane P.O. Box 9188 Attn: Cheryl Hicks
Columbus, Mississippi 39701 Columbus, Mississippi 39705 (Originally executed consents
Attn: Cheryl Hicks Attn: Cheryl Hicks must follow for any consent sent
by facsimile)
Confirm by Telephone:
(662) 329-1047
FOR YOUR CONVENIENCE, A PRE-ADDRESSED ENVELOPE IS ENCLOSED.
Dated: June 25, 2004
Black Warrior Wireline Corp., a Delaware corporation (the "Company"),
hereby solicits (the "Solicitation") consents (the "Consents") of the record
holders of the Company's outstanding Convertible Secured Promissory Notes issued
during the period December 1999 through February 2000, and which are referred to
herein as the "1999 Notes", to the following:
The Transaction
o The Company has entered into an agreement (the "Agreement") dated
June 3, 2004 with Multi-Shot, LLC, a Texas limited liability
company, to sell the assets of the Company associated with its
business of directional drilling, downhole surveying, measurement
while drilling, steering tools and drilling motor rentals to oil and
gas operators (referred to as the "Multi-Shot Business").
o 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 are referred to as the Key Multi-Shot
Employees. Based on information provided by the Key Multi-Shot
Employees, the Company understands that the Key Multi-Shot Employees
will purchase an equity interest in the buyer of up to approximately
6.0% at the closing of the sale of the Multi-Shot Business.
o The purchase price for the Multi-Shot Business is $11.0 million, of
which approximately $10,382,000 is payable in cash and approximately
$618,000, calculated as of May 31, 2004, is payable by assignment by
the Key Multi-Shot Employees of their claims that may be due under
their employment agreements with the Company to change of control
payments in that aggregate amount. The purchase price is subject to
adjustment at and as of the closing of the sale for increases and
decreases in the Multi-Shot division's net working capital of
$270,000 as of November 30, 2003 and increases and decreases in the
division's inventory of approximately $5,207,000 as of December 31,
2003.
o The closing of the transaction is subject to a number of material
conditions including the Company obtaining all consents, waivers and
amendments as may be required under the terms of its outstanding
1999 Notes to consummate the transaction as well as a number of
other closing conditions. The other principal closing conditions
include:
[ ] the receipt of the consent of General Electric Capital
Corporation (GECC), the Company's senior secured lender,
[ ] the receipt of the required consents of the Company's
subordinated secured lenders,
[ ] the buyer having obtained financing for the transaction,
[ ] the accuracy of the parties' respective representations and
warranties as of the closing,
[ ] the Company's good title to the assets sold,
[ ] the absence of certain changes or events, and
[ ] the receipt by the Company's Board of Directors of a fairness
opinion from Simmons & Company International.
o The transaction does not include the sale of any of the Company's
wireline, plug and abandonment ("P&A") and tubing conveyed
perforating ("TCP") business which the Company will continue to own
and operate. Also excluded from the sale are cash and cash
equivalents of the Company, the Company's properties in Broussard,
Louisiana and Corpus Christi, Texas which are used in the Company's
wireline business and certain other assets.
o The Buyer has agreed to assume and pay certain specified liabilities
of the Multi-Shot Business, as well as jobs in progress as of the
closing date, current liabilities estimated at $2.8 million, as of
March 31, 2004, and obligations of the Company under contracts
assumed.
o The net cash proceeds from the sale of the Multi-Shot Business are
expected to be approximately $10.1 million. The foregoing estimate
reflects the payment of expenses of the transaction and recognition
of receipt by the Company of approximately $400,000 in working
capital and inventory adjustments under the terms of the agreement,
as such adjustments have been estimated based on the division's
balance sheet at March 31, 2004. However, such adjustments are
subject to fluctuation through the closing of the transaction. These
net cash proceeds are intended to be paid in reduction of the
Company's indebtedness owing to GECC under the terms of the
Company's Credit Agreement with GECC dated September 14, 2001.
o The Company will assign to the buyer the accounts receivable
outstanding as of the closing date relating to the Multi-Shot
Business.
The Agreement is more fully described below. See "Description of
Agreement."
The Company cannot assure you that the sale of the Multi-Shot Business
will be consummated.
The 1999 Notes and Borrower Security Agreement
The Company has outstanding, as of March 31, 2004, approximately $6.9
million principal amount of the 1999 Notes. These notes were issued during the
period December 1999 through February 2000 and are referred to as the 1999
Notes. These notes together with their related security agreements contain
provisions whereby the Company would be in default of the 1999 Notes or breach
the terms of the related security agreement if it failed to obtain this Consent
from the holders of the 1999 Notes and nevertheless completed the transaction.
The following is a summary of the provisions involved:
o Under the terms of the 1999 Notes, among its other terms,
conditions, provisions and restrictions, an event of default occurs
if the Company sells all or any substantial portion of its assets.
The sale of the Multi-Shot Business involves the sale of a
substantial portion of the Company's assets.
o The Company has covenanted in the 1999 Notes that, without the
consent of the holders of the 1999 Notes, it will not sell or
transfer all or a substantial portion of its assets to any person.
Accordingly, the transaction could result in a default under the
1999 Notes as well as a breach of a covenant contained in the 1999
Notes.
o The 1999 Notes also provide in Section 7.1 as follows:
"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."
The 1999 Notes are collateralized, pursuant to a Borrower Security
Agreement dated December 17, 1999 (the "Borrower Security Agreement"), by the
Company's present and future rights and ownership interest in substantially all
of its assets. This lien is subordinated, however, to the lien of GECC,
collateralizing the loans of GECC to the Company which loans from GECC are
outstanding in the principal amount of approximately $15.2 million as of March
31, 2004 and are due and payable on September 14, 2004. The provisions of the
Borrower Security Agreement relevant to this transaction are as follows:
o Under the terms of the Borrower Security Agreement, the Company has
covenanted and agreed that, without the consent of the holders of
the 1999 Notes, the Company will not sell, assign,
lease or otherwise dispose of any of its assets, with certain
exceptions that are not applicable to the transactions relating to
the sale of the Multi-Shot Business.
o The Borrower Security Agreement also provides that it can only be
amended by a writing jointly executed by the Company and the holder
of a 1999 Note. In addition, the 1999 Notes provide that:
"All actions required or permitted to be taken hereunder by the
holder of the 1999 Note may be taken at the election of the holders
of at least two-thirds of the indebtedness evidenced by Notes."
CONSENT SOLICITED
Attached is a document identified as Consent to Sale and Release of
Liens and Waiver of Defaults (the "Consent Document"). The Company is soliciting
your execution and return of the Consent Document. The execution of the Consent
Document by the requisite holders of 1999 Notes will have the effect of
permitting the Company to do the following without violating the terms of the
1999 Notes and the Borrower Security Agreement:
o It will permit the Company to complete the sale of the Multi-Shot
Business on the terms set forth in the Agreement.
o It will constitute the noteholder's consent to the sale of those
assets and a waiver of any default under the terms of the 1999 Notes
and a waiver of any claim that the sale is a breach of a covenant
under the terms of the 1999 Notes.
o It will permit the release of the lien held by the holders of the
1999 Notes to the extent of the assets that are associated with the
Company's Multi-Shot Business and will be sold pursuant to the
Agreement.
o It will constitute the noteholder's consent and agreement that the
sale of the assets of the Multi-Shot Business will not violate any
covenant in the Borrower Security Agreement.
DESCRIPTION OF THE AGREEMENT
On June 3, 2004, the Company entered into the Agreement with
Multi-Shot, LLC for the sale of the Multi-Shot Business. 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, P&A and 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 and obligations arising out of non-compliance
with environmental laws.
The purchase price is $11.0 million of which approximately $10,382,000
is payable in cash at the closing and the balance of approximately $618,000 is
to be paid by the release and assignment by the Multi-Shot Key Employees of
their claims, calculated as of May 31, 2004, 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.
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 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.
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 returned 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 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 technical services agreement at the
closing whereby the Company will agree to provide for up to 180 days after the
closing to the buyer certain consulting services of its director of information
technology, human services, chief financial officer and human resources and
benefits administrator, as well as access to the Company's computer network.
CLAIMS OF OTHER CREDITORS OF THE COMPANY
As of March 31, 2004, the Company's outstanding indebtedness includes
the following approximate amounts:
CREDITOR(S) INDEBTEDNESS OUTSTANDING SENIORITY AND SUBORDINATION TERMS
INCLUSIVE OF ACCRUED INTEREST
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GECC Revolving Loan - $1,914,236 Advances under the GECC
Term Loan - $8,482,667 credit facility are
Capex Loan - $4,762,976 collateralized by a senior lien
Total: $15,159,879 against substantially all of the
Company's assets.
Holders of 1999 Notes Principal - $6,916,882 Substantially all of the
Interest - $4,211,665 Company's assets are pledged as
Total: $11,128,547(A) collateral for the Company's debts.
All of the debt and
interest owed to the holders of
the 1999 Notes and rights in the
collateral of such holders is
subordinated to the Company's GECC
credit facility and cannot be
repaid until all the amounts owed
pursuant to the GECC credit
facility have been repaid in full.
St. James (B) Principal - $16,650,000 Substantially all of the
Interest - $10,552,655 Company's assets are pledged as
Total: $27,202,655 collateral for the Company's debts
owing to St. James.
All of the debt and interest
owed to St. James and St. James'
rights in the collateral are
subordinated to the indebtedness
owing to the holders of the 1999
Notes and to GECC. Such indebtedness
ranks on a parity with indebtedness
owing to Falcon Seaboard Investment
Co.
Falcon Seaboard Principal - $1,000,000 Substantially all of
Investment Co. Interest - $697,611 the Company's assets are pledged
Total: $1,697,611 as collateral for the Company's
debts owing to the Falcon Seaboard
Investment Co.
All of the debt and interest
owed to Falcon Seaboard Investment
Co. and Falcon Seaboard Investment
Co.'s rights in the collateral are
subordinated to the indebtedness
owing to the holders of the 1999
Notes and to GECC. Such indebtedness
ranks on a parity with indebtedness
owing to St. James.
Other Creditors $2,607,417 General unsecured creditors.
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(A) Of this indebtedness, approximately $1,677,374 of principal and
approximately $1,022,229 of accrued interest on the 1999 Notes is owing to
Charles E. Underbrink and his affiliates (excluding St. James Capital Partners,
L.P. and SJMB, L.P.) Mr. Underbrink is a Director of the Company and Chairman of
St. James Capital Corp. and SJMB, L.L.C. St. James Capital Corp. and SJMB,
L.L.C. are the general partners of St. James Capital Partners, L.P. and SJMB,
L.P., respectively. St. James Capital Partners, L.P. does not hold any of the
1999 Notes. Of the 1999 Note indebtedness, approximately $1,950,000 principal
amount and approximately $1,180,332 of accrued interest as of March 31, 2004 is
owing to SJMB, L.P. Accordingly, Mr. Underbrink, his affiliates and St. James
Capital Corp. and SJMB, L.L.C. exercise direct or indirect control over an
aggregate of $3,627,374 principal amount of 1999 Notes and $2,202,561 of accrued
interest. The balance of the 1999 Notes are held by various persons not
affiliated with Mr. Underbrink, St. James Capital Corp. and SJMB, L.L.C.,
however, certain of the persons holding 1999 Notes are also limited partners of
St. James Capital Partners, L.P. and SJMB, L.P.
(B) St. James includes St. James Capital Partners, L.P. and SJMB, L.P. The
amounts owing to St. James do not include amounts owing on 1999 Notes of
approximately $1,950,000 principal and approximately $1,180,332 of interest
owing to SJMB, L.P. as of March 31, 2004. Mr. Underbrink is a Director of the
Company and is also a Director of St. James Capital Corp. and SJMB, L.L.C. James
H. Harrison, also a Director of the Company, is the Chief Financial Officer of
St. James Capital Corp. and SJMB, L.L.C. Mr. Harrison holds no 1999 Notes or
other indebtedness of the Company.
GECC Credit Agreement
The Company's Credit Agreement with GECC includes a revolving loan of
up to $15.0 million, but not exceeding 85% of eligible accounts receivable, a
term loan in the original principal amount of $17.0 million, and a capex loan of
up to $8.0 million, but not exceeding a borrowing base of the lesser of 70% of
the hard costs of acquired eligible equipment, 100% of its forced liquidation
value and the Company's EBITDA for the month then ended, less certain principal,
interest and maintenance payments. As of March 31, 2004, an aggregate of $15.2
million was outstanding under the Credit Agreement.
Assuming the Company (i) realizes net cash proceeds from the sale of
the Multi-Shot Business of approximately $10.1 million, including the estimated
post closing net working capital and inventory adjustments under the terms of
the Agreement, and applies those net proceeds to the indebtedness owing to GECC
as set forth in note (C) below, (ii) has monthly revenues and cash flow from its
wireline services division continuing at least through September 14, 2004 at
amounts substantially equal to amounts realized during the three months ended
March 31, 2004, (iii) makes the required payments of principal and interest when
due on the term loan and capex loan as required by the credit agreement, and
(iv) fulfills the assumptions in the footnotes following the table, the Company
estimates the outstanding indebtedness under the GECC credit agreement will be
approximately as follows at approximately the following times:
Outstanding as of Outstanding as of Outstanding as of
March 31, 2004(A) Closing (B)(C) September 14,
2004(B)(C)(D)
Revolving Loan $1,914,236 (E) (E)
Term Loan $8,482,667 $2,003,000 $1,435,000
Capex Loan $4,762,976 $-0- $-0-
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(A) Represents amounts actually outstanding under the three facilities at March
31, 2004.
(B) Assumes the sale of the Multi-Shot Business will occur on or about July 15,
2004.
(C) Assumes principal payments from the proceeds of the sale of the Multi-Shot
Business and additional scheduled payments of principal on the term loan and
capex loan from April 1, 2004 through the closing of the sale of the Multi-Shot
Business are approximately as follows:
Proceeds from Sale Additional Scheduled Payments of
Principal
Term Loan $ 5,626,000 $ 852,000
Capex Loan $ 4,441,000 $ 322,000
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Total $10,067,000 $1,174,000
(D) Assumes additional scheduled payments of principal on the term loan paid
subsequent to the closing of the sale of the Multi-Shot Business and prior to
September 14, 2004 total approximately $568,000.
(E) The outstanding indebtedness under the revolving loan fluctuates. As of May
31, 2004, the outstanding principal on the revolving loan was approximately $4.6
million. Management of the Company estimates, assuming the present monthly
levels of revenues continue until the closing of the sale of the Multi-Shot
Business, that the outstanding principal of the revolving loan will decline to
approximately $3.0 million at September 14, 2004.
Based upon the foregoing assumptions, management of the Company
estimates that at September 14, 2004, there will be total indebtedness owing to
GECC in the amount of approximately $4,435,000. The foregoing includes an
estimated approximately $3,000,000 outstanding under the revolving loan and
approximately $1,435,000 outstanding under the term loan. As is described below,
under the caption, "Future Business and Plans of the Company," if this
indebtedness remains outstanding at September 14, 2004 and the Company has not
entered into in another transaction prior to then regarding a possible merger,
sale of assets or other business combination, the Company will seek to refinance
this indebtedness. Management is unable to state the terms on which this
indebtedness may be able to be refinanced at that time or assure that the
indebtedness can be refinanced when it matures.
GECC Eighth Amendment to Credit Agreement
The Company has entered into an Eighth Amendment dated June 16, 2004 to
the Credit Agreement with GECC. The Eighth Amendment provides that, subject to
the Company applying not less than $9.6 million of the proceeds from the sale of
the Multi-Shot Business to the indebtedness owing to GECC in a manner acceptable
to GECC, the payment of $150,000 to GECC owing to GECC under a prior amendment
to the Credit Agreement as a fee and an assignment of the representations,
warranties, indemnities and rights of the Company against the buyer of the
Multi-Shot Business under the Agreement, GECC will consent to the sale of the
Multi-Shot Business. The Eighth Amendment is subject to the closing under the
Agreement having occurred on or prior to August 1, 2004, unless such date is
extended by mutual agreement.
Without entering into this Amendment and payment of the sum to GECC,
the Company would be unable to complete the sale of the Multi-Shot Business.
Consent of Holders of 1999 Notes
The Company is soliciting this Consent of the holders of the 1999 Notes
in order to consummate the sale of the Multi-Shot Business. Unless the requisite
Consents are obtained from the holders of the 1999 Notes, the Company will fail
to meet the closing conditions of the Agreement and will be unable to consummate
the sale of the Multi-Shot Business.
Mr. Charles Underbrink, a Director of the Company, who holds or
exercises direct or indirect control over an aggregate of $3,627,374 principal
amount of the 1999 Notes has advised the Company that he intends to execute the
Consent Document as solicited in this Consent Solicitation Statement.
Accordingly, the consents of the holders of the remaining outstanding 1999
Notes, of approximately $3,298,508 as of March 31, 2004, will be required to
complete the sale of the Multi-Shot Business.
Consent of St. James Capital Partners, L.P. and SJMB, L.P. ("St. James")
Excluding their holdings of the 1999 Notes, at March 31, 2004, St.
James held an aggregate of approximately $16.7 million principal amount and
approximately $10.6 million of accrued interest of other subordinated secured
notes of the Company. By agreements dated June 22, 2004, St. James Capital
Partners, L.P. and SJMB, L.P. each consented to the sale of the Multi-Shot
Business and the release of the liens they held against the assets intended to
be sold and the proceeds from the sale, subject to the closing of the sale of
the Multi-Shot Business, there being no further amendments to the Agreement and
all cash proceeds from the sale, less approved expenses, being applied to the
payment of the Company's senior debt.
Consent of Falcon Seaboard Investment Co. ("Falcon Seaboard")
The Company is soliciting the consent of Falcon Seaboard in order to
consummate the sale of the Multi-Shot Business. At March 31, 2004, Falcon
Seaboard held approximately $1.0 million principal amount and approximately
$698,000 of accrued interest of other subordinated secured notes of the Company.
Unless the requisite consent is obtained from Falcon Seaboard , the Company will
be unable to consummate the sale of the Multi-Shot Business. As of June, 25,
2004, the Company had not received the consent of Falcon Seaboard.
BACKGROUND OF THE TRANSACTION
In November 2001, the Company retained Simmons & Company International
("Simmons") as its financial advisor in connection with examining various
alternative means to maximize stockholder value including a possible merger,
sale of assets or other business combination involving the Company. Because of
declining revenues and operating results, the Company's Board made a decision at
that time to delay the process of seeking to enter into such a transaction until
the Company's operating results improved.
In February 2003, at the Board's request, Simmons intensified again its
efforts as the Company's financial advisor in connection with examining various
alternatives to maximizing stockholder value including a possible merger, sale
of assets or other business combination. The process of seeking a transaction on
the best price obtainable and on acceptable terms was ongoing throughout the
remaining portion of 2003. During this period, numerous persons considered by
the Company and Simmons to have a possible likely interest in entering into a
transaction were contacted and provided with information concerning the Company
on a confidential basis. These efforts led to two proposals to acquire the
entire Company. While one party entered into a letter of intent with the
Company, transactions were unable to be concluded with either party. In
addition, by late 2003, the revenues and operating results of the Multi-Shot
Business were declining. Also during this period, another party had expressed an
interest in acquiring the Multi-Shot Business separately, but did not make a
formal offer and cited the decline in the Multi-Shot Business revenues as a
basis for not proceeding.
As a consequence of these efforts the Company's Board of Directors
pursued throughout much of 2003, conversations with and responses received from
possible interested acquirors, and information and advice the Board received
from Simmons, the Board reached the conclusion in late 2003 that the Multi-Shot
Business was detracting from the ability of the Company to achieve the best
price from a sale of the Company's remaining wireline, P&A and TCP business and
the likelihood of concluding a successful transaction would be improved if
the Multi-Shot Business were sold separate and apart from the remainder of the
Company's business.
Based on reaching that conclusion, in the fourth quarter of 2003, the
Company's Board of Directors commenced negotiations with certain management
employees of the Company's Multi-Shot division who expressed an interest in
investigating a management buy-out of that business. In late November 2003,
Catalyst Hall Growth Capital ("Catalyst"), in conjunction with the Key
Multi-Shot Employees, indicated an interest in acquiring the Multi-Shot Business
for $10.5 million and in January 2004, Catalyst submitted an offer of $11.0
million for the Multi-Shot Business. On February 27, 2004, Catalyst signed a
letter of intent with the Company whereby the Company would sell to an entity to
be organized by Catalyst the Multi-Shot Business for $11.0 million. Among other
provisions of the letter of intent was a condition to closing the transaction
with Catalyst that the Company would receive a fairness opinion from Simmons &
Company International, its financial advisor.
During the course of negotiating definitive agreements for the
transaction, the Company received an appraisal for the assets of the Multi-Shot
Business. That appraisal reflected an orderly liquidation value of approximately
$24.6 million and a forced liquidation value of approximately $18.8 million for
the Multi-Shot assets. The Board of Directors concluded, based on its
unsuccessful efforts to sell the Company, and including the unsuccessful efforts
to sell the Multi-Shot division separately, and its discussions with Simmons &
Company International that, notwithstanding the appraisal, the Company could not
sell the assets of the Multi-Shot Business for the amounts reflected in the
appraisal. The values in the appraisal were not based on recent sales of similar
equipment but instead were based on the replacement cost of the equipment.
Simmons and Company International advised the Board that after extensive
marketing efforts it had not located any buyers for the assets of the Multi-Shot
Business able to complete a transaction at a purchase price above that to be
paid under the Asset Purchase Agreement. As a condition to closing the
transaction, the Company's Board of Directors is to receive a fairness opinion
from Simmons & Company International.
Negotiations between the Company and Catalyst to arrive at mutually
acceptable terms of definitive purchase and sale documents proceeded through
June 3, 2004, at which time the Agreement was executed. Throughout this period,
Catalyst continued to conduct due diligence inquiries into the Multi-Shot
Business and to seek financing for the transaction. The Company's Board of
Directors has been advised by Catalyst that Catalyst expects that it will obtain
financing to complete the transaction.
None of the Company's Directors or executive officers, other than Mr.
Neel, has any direct or indirect ownership or other interest in the buyer.
FUTURE BUSINESS AND PLANS OF THE COMPANY
Following the closing of the sale of the Multi-Shot Business, the
Company intends to continue to operate its wireline P&A and TCP service
activities in substantially the same manner as such activities have heretofore
been conducted, subject, however to its ability to timely repay, refinance or
restructure its indebtedness. These operations contributed revenues of $45.8
million (approximately 69.9% of total revenues) in 2003.
During the year ended December 31, 2004, the Company's credit facility
with GECC will expire. At that time, before reflecting any payment out of the
net proceeds from the sale of the Multi-Shot Business and assuming the Company
pays through September 14, 2004 all required payments of principal under the
credit facility, an estimated $14.3 million in senior secured indebtedness will
mature and be payable, including approximately $3.0 million under the Revolving
Loan. The Company's estimates as to the indebtedness owing to GECC after payment
of the net proceeds from the sale of the Multi-Shot Business and other payments
of principal to GECC are described above. See "Claims of Other Creditors of the
Company." In addition, on December 31, 2004, principal of approximately $24.6
million and accrued interest of approximately $18.3 million owing on the
Company's subordinated secured indebtedness will be repayable under the terms of
subordination agreements entered into between the Company and the holders of
that indebtedness. This indebtedness includes the approximately $6.9 million of
principal and approximately $4.2 million of interest owing to the holders of the
1999 Notes.
The Company's sale of its Multi-Shot Business and the application of
the net proceeds to the reduction of its senior secured indebtedness forms the
initial part of its plans for the repayment, refinancing or restructuring of its
outstanding indebtedness. The net cash proceeds from the sale of the Multi-Shot
Business are intended to be applied to the reduction of the Company's
indebtedness owing to GECC.
While the Company has no specific plans for the further repayment,
restructuring or refinancing of its outstanding indebtedness subsequent to the
sale of the Company's Multi-Shot Business, the Company intends to continue its
efforts commenced initially in late 2001 and intensified thereafter in 2003,
through Simmons & Company International as its financial advisor, to examine
various alternative means to maximize its value to stockholders and repay,
refinance or restructure its indebtedness. These efforts are expected to include
efforts regarding a possible merger, sale of assets or other business
combination involving the Company. These efforts are also expected to include
efforts regarding a possible reorganization, recapitalization, restructuring or
refinancing of the Company's obligations on its balance sheet in order to
maximize its value to stockholders and repay its existing obligations.
At June 25, 2004, other than the Agreement, the Company has not entered
into any definitive agreements with respect to any such merger, sale or other
business combination or reorganization, recapitalization, restructuring or
refinancing transactions and there can be no assurance that any definitive
agreements will be entered into or that the Company will be successful in
pursuing its plans for the reorganization, recapitalization, restructuring or
refinancing of its outstanding indebtedness.
In the event the Company's plans for the repayment of its indebtedness
owing to GECC are unsuccessful, GECC could assert its rights to foreclose on the
Company's assets. The Company intends to engage in ongoing efforts to pursue its
plans, but there can be no assurance these efforts will be successful.
EFFECTS OF THE TRANSACTION
The Company reports in its financial statements the operating results
of its wireline, P&A and TCP business as a separate business unit from the
Multi-Shot Business (or Directional Drilling business) which is also reported as
a separate business unit. A third business unit, workover and completion, that
was reported as a separate segment, was discontinued during 2001 and the results
of its operations prior to its discontinuance are reported as a discontinued
operation.
The following tables set forth, for each of the two business segments,
the segment revenues, the segment cost of sales and selling general and
administrative (SG&A) expenses , segment earnings before interest, taxes,
depreciation and amortization (EBITDA), and segment assets for each of the
quarters ended March 31, 2004 and March 31, 2003 and each of the years ended
December 31, 2003, December 31, 2002 and December 31, 2001.
Years Ended
DIRECTIONAL
2003 WIRELINE DRILLING TOTAL
- ---------- ------------- ------------- ------------
Segment revenues $ 45,756,892 $ 19,692,262 $ 65,449,154
Segment cost of sales and SG&A expenses $ 37,430,470 $ 20,885,681 $ 58,316,151
Segment EBITDA $ 8,326,422 $ (1,193,419) $ 7,133,003
Segment assets $ 27,857,652 $ 13,487,342 $ 41,344,994
DIRECTIONAL
2002 WIRELINE DRILLING TOTAL
- ---------- ------------- -------------- ------------
Segment revenues $ 34,093,891 $ 22,489,270 $ 56,583,161
Segment cost of sales and SG&A expenses $ 30,366,217 $ 20,142,575 $ 50,508,792
Segment EBITDA $ 3,727,674 $ 2,346,695 $ 6,074,369
Segment assets $ 27,513,052 $ 22,096,959 $ 49,610,011
DIRECTIONAL
2001 WIRELINE DRILLING TOTAL
- ---------- ------------- ------------- ------------
Segment revenues $ 39,681,966 $ 36,424,954 $ 76,106,920
Segment cost of sales and SG&A expenses $ 27,469,776 $ 29,146,321 $ 56,616,097
Segment EBITDA $ 12,212,190 $ 7,278,633 $ 19,490,823
Segment assets $ 24,647,035 $ 25,770,536 $ 50,417,571
Three Months Ended:
March 31, 2004
DIRECTIONAL
WIRELINE DRILLING TOTAL
-------------- ------------- ------------
Segment revenues $ 10,539,320 $ 3,908,741 $ 14,448,061
Segment cost of sales and SG&A expenses $ 9,254,617 $ 3,575,030 $ 12,829,647
Segment EBITDA $ 1,284,703 $ 333,711 $ 1,618,414
Segment assets $ 25,898,990 $ 12,960,733 $ 38,859,723
March 31, 2003
DIRECTIONAL
WIRELINE DRILLING TOTAL
------------- ------------- ------------
Segment revenues $ 10,369,814 $ 5,212,872 $ 15,582,686
Segment cost of sales and SG&A expenses $ 9,088,833 $ 4,744,185 $ 13,833,018
Segment EBITDA $ 1,280,981 $ 468,687 $ 1,749,668
Segment assets $ 21,196,017 $ 20,147,476 $ 41,343,493
Certain expenses of the Company that are not allocated to individual
operating segments and a reconciliation of total segment EBITDA to loss from
operation for the above periods is as follows:
Years Ended
2003 2002 2001
------------- ------------- ------------
EBITDA
Total segment EBITDA $ 7,133,003 $ 6,074,369 $ 19,490,823
Depreciation and amortization (7,691,720) (8,040,892) (6,629,064)
Net loss on early extinguishment of debt -- -- (1,147,478)
Unallocated corporate expense -- (453,492) (1,275,854)
------------- ------------- ------------
Income (loss) from continuing operations $ (558,717) $ (2,420,015) $ 10,438,427
------------- ------------- ------------
ASSETS
Total segment assets $ 41,344,994 49,610,011 50,417,571
Unallocated corporate assets 56,435 61,098 63,304
------------- ------------- ------------
Total assets $ 41,401,429 $ 49,671,109 $ 50,480,875
============= ============= ============
Three months ended March 31:
2004 2003
EBITDA
Total segment EBITDA $ 1,618,414 $ 1,749,668
Discontinued segment EBITDA (333,711) (468,687)
Depreciation and amortization (1,199,134) (1,197,911)
Corporate expense allocated to discontinued operations (471,616) (605,082)
------------- -------------
Loss from continuing operations $ (386,047) $ (522,012)
ASSETS
Total segment assets $ 38,859,723 $ 41,343,493
Unallocated corporate assets 55,136 57,936
------------- -------------
Total assets $ 38,914,859 $ 41,401,429
Condensed Pro Forma Balance Sheet of the Company After Reflecting the Sale of
the Multi-Shot Business
The following is a condensed pro forma balance sheet of the Company as
of March 31, 2004 (unaudited) and as adjusted to reflect the sale as of March
31, 2004 of the Multi-Shot Business.
PRO FORMA
POST
MULTI-SHOT SALE MULTI-SHOT
MARCH 31, PRO FORMA MARCH 31,
2004 ADJUSTMENTS 2004
------------- --------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 626,193 $ 626,193
Restricted cash 786,817 786,817
Accounts receivable, net 6,263,274 6,263,274
Accounts receivable held for sale 3,181,218 (3,181,218)(1) --
Other receivables 150,646 150,646
Prepaid expenses 2,494,260 2,494,260
Other current assets 1,444,511 1,444,511
------------- ------------
Total current assets 14,946,919 11,765,701
Inventories of tool components
and sub-assemblies held for sale, net 5,486,026 (5,486,026)(1) --
Property, plant and equipment, less
accumulated depreciation 12,368,704 12,368,704
Property, plant and equipment
held for sale, less
accumulated depreciation 4,174,000 (4,174,000)(1) --
Other assets 328,145 328,145
Other assets held for sale 20,095 (20,095)(1) --
Goodwill and other intangible assets 1,590,970 1,590,970
------------- ------------
Total assets $ 38,914,859 $ 26,053,520
============= ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 2,799,057 $ 2,799,057
Accounts payable held for sale 2,024,142 (2,024,142)(1) --
Accrued salaries and vacation 802,318 802,318
Accrued salaries and vacation
held for sale 202,234 (202,234)(1) --
Other accrued expenses 1,046,480 1,046,480
Other accrued expenses held for sale 568,254 (568,254)(1) --
Accrued interest payable 181,007 181,007
Current maturities of long-term debt 17,464,499 (10,066,709)(2) 7,397,790
Accrued interest payable to related parties 15,465,931 15,465,931
Notes payable to related parties, net of
unamortized discount 24,443,645 24,443,645
------------- ------------
Total current liabilities 64,997,567 52,136,228
Long-term debt, less current maturities 302,792 302,792
Deferred revenue 109,975 109,975
------------- ------------
Total liabilities 65,410,334 52,548,995
------------- ------------
Stockholders' deficit:
Preferred stock, $.0005 par value, 2,500,000
shares authorized,
none issued at March 31, 2004 or
December 31, 2003 -- --
Common stock, $.0005 par value, 175,000,000
shares authorized,
12,499,528 shares issued and
outstanding at
March 31, 2004 and December 31,
2003 6,252 6,252
Additional paid-in capital 20,275,963 20,275,963
Accumulated deficit (46,153,102) (46,153,102)
Treasury stock, at cost, 4,620 shares at
March 31, 2004 and December 31, 2003 (583,393) (583,393)
Loan to shareholder (41,195) (41,195)
------------- ------------
Total stockholders' deficit (26,495,475) (26,495,475)
------------- ------------
Total liabilities and
stockholders' deficit $ 38,914,859 $ 26,053,520
============= ============
(1) Elimination of net working capital and fixed assets to be purchased by
Multi-Shot, LLC
(2) Estimated net proceeds to be applied to GECC senior secured indebtedness
CERTAIN MATTERS RELATING TO THE CONSENT
Holders of the 1999 Notes are requested to return their completed and
signed Consent Documents to the Company no later than 5:00 p.m. Central time on
Monday, July 19, 2004. Such date or such date thereafter on which the Company
announces by way of a press release that the requisite consents have been
received and including any extensions, is referred to as the "Consent Date". The
Company reserves the right to extend the Consent Date from time to time. If on
the Consent Date the holders of 100% in principal amount of 1999 Notes as of
that date have returned their properly completed and signed Consent Documents,
the Company will promptly advise the buyer of the Multi-Shot Business of that
fact. Provided that the buyer is able to confirm to the Company that it has then
obtained the financing for the transaction, it is intended that the parties will
thereupon schedule a closing of the transaction to take place within five (5)
days thereafter, unless otherwise mutually agreed by the parties. Provided all
other conditions to the closing contained in the Agreement are met on the
closing date, the transaction will be completed and the Multi-Shot Business sold
at that time.
It is not intended to give any further advance notice to the holders of
the 1999 Notes of the closing date of the sale of the Multi-Shot Business.
The executed Consent Document will (unless revoked as provided herein)
bind the holders of the 1999 Notes executing the Consent Document and any
subsequent assignee or holder of the 1999 Note. However, a Consent Document may
be revoked at any time before the Consent Date by the holder of the 1999 Note.
Consents may not be revoked after the Consent Date. A holder of a 1999 Note
seeking to revoke his Consent Document must cause his or her written revocation
notice to be delivered to the Company on or prior to the Consent Date at its
address set forth below under the caption "Procedures for Delivering Consents."
Any such revocation notice must set forth the signature of the holder, the exact
name of the holder, the holder's address, and the principal amount of 1999 Notes
held and a statement that the Consent Document delivered, identified by date, is
revoked. The name of the holder on the revocation of the Consent Document must
correspond exactly to the name on the Consent Document previously submitted,
subject, however, to any intervening assignment or transfer meeting the
requirements for an acceptable assignment or transfer described below.
Under the terms of the Consent Document, the Consent of a holder of a
1999 Note will permit the Company and the buyer of the Multi-Shot Business to
further amend the Agreement without obtaining any further consent from the
holder provided the amendment does not reduce the purchase price for the
Multi-Shot Business or change the categories of the assets to be sold or
conveyed.
A "holder" of a 1999 Note shall be deemed by the Company to be the
person or entity whose name appears on the face of the 1999 Note, unless the
Company has received a written notice of the assignment or transfer of the 1999
Note with a medallion signature guarantee or the Company otherwise consented in
writing to the transfer. If such an assignment or transfer of a 1999 Note occurs
at any time before the Consent Date, the assignee or transferee will be deemed
by the Company to be the holder and be entitled to execute the Consent Document.
The delivery of a Consent Document will not affect the holder's right
to assign or transfer the 1999 Note.
Extensions of Consent Date
The Company reserves the right (i) to extend the Consent Date at any
time prior to or after the Consent Date (whether or not the requisite consents
have been received) and (ii) to amend at any time or from time to time the terms
of this Solicitation. Any such extension of the Consent Date will be effective
if transmitted orally or in writing by U.S. mail or recognized overnight
delivery service not later than 5:00 p.m. Central time on the second business
day after the Consent Date or previously announced Consent Date. Any termination
or amendment of the Solicitation prior to the Consent Date shall be effective
upon the transmission of written notice thereof to the holders of the 1999
Notes.
Consent Procedures
Holders who desire to consent to the transaction should sign and date
and return the Consent Document to the Company at the address provided below.
Consent Documents should be executed in exactly the same manner as the 1999
Notes held. If 1999 Notes are held by two or more persons, all such holders
should sign the Consent Document. If 1999 Notes are registered in different
names, separate Consent Documents must be executed by each holder.
All questions as to the validity, form, eligibility (including the time
of receipt) and acceptance of Consent Documents and revocations of consents will
be resolved by the Company in its sole discretion, whose determination shall be
final and binding. The Company reserves the right to reject any and all Consent
Documents not validly given or the acceptance of which could, in the opinion of
the Company or its counsel, be unlawful. The Company also reserves the right to
waive any defects, irregularities or conditions of delivery as to particular
Consent Documents. Unless waived, all such defects and irregularities must be
cured prior to the Consent Date, and any Consent Document with such a defect or
irregularity will not be deemed to have been properly given until so cured or
waived. Neither the Company nor any other person shall be under any duty to give
notification of any such defects or irregularities,
nor shall any of them incur any liability for failure to give such notification.
The Company's interpretation of the terms and conditions of this consent
solicitation shall be conclusive and binding. After the Consent Date, all
holders and all subsequent holders, of the Notes will become bound by the terms
of the Consents.
Procedures for Delivering Consents
HOLDERS WHO WISH TO CONSENT SHOULD DELIVER, BY REGULAR MAIL, AIR
COURIER, MESSENGER OR FAX, THEIR PROPERLY COMPLETED, EXECUTED AND DATED CONSENT
DOCUMENTS TO THE COMPANY IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH HEREIN.
ALL FACSIMILE TRANSMISSIONS MUST BE FOLLOWED BY DELIVERY OR ORIGINALLY EXECUTED
CONSENTS. THE ADDRESS OF THE COMPANY IS AS FOLLOWS:
VIA HAND OR OVERNIGHT DELIVERY VIA REGULAR MAIL FACSIMILE TRANSMISSION
Black Warrior Wireline Corp. Black Warrior Wireline Corp. (662) 329-1089
100 Rosecrest Lane P.O. Box 9188 Attn: Cheryl Hicks
Columbus, Mississippi 39701 Columbus, Mississippi 39705 (Originally executed consents
Attn: Cheryl Hicks Attn: Cheryl Hicks must follow for any consent sent
by facsimile)
Confirm by Telephone:
(662) 329-1047
FOR YOUR CONVENIENCE, A PRE-ADDRESSED ENVELOPE IS ENCLOSED.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS SOLICITATION OF CONSENTS OTHER
THAN AS SET FORTH HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THE DELIVERY OF THIS CONSENT SOLICITATION STATEMENT SHALL NOT, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AFTER THE DATE HEREOF.
AVAILABLE INFORMATION CONCERNING THE COMPANY
The Company is subject to the informational filing requirements of the
U.S. Securities Exchange Act of 1934, as amended, and its rules and regulations.
This means that it files reports,
proxy and information statements and other information with the U.S. Securities
and Exchange Commission. The reports, proxy and information statements and other
information that it files can be read and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street,
Northwest, Washington, DC 20549. Please call the Commission at 1-800-SEC-0330
for information on the operation of the public reference room. Copies of such
material can also be obtained from the Commission at prescribed rates through
its Public Reference Section at 450 Fifth Street, NW, Washington, DC 20549. The
Commission maintains a Web site that contains the reports, proxy and information
statements and other information that the Company files electronically with the
Commission and the address of that Web site is http://www.sec.gov.
MISCELLANEOUS
Enclosed with this Consent Solicitation Statement are copies of the
Company's Annual Report on Form 10-K for the year ended December 31, 2003 and
its Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
With the exception of historical matters, the matters discussed in this
Consent Solicitation Statement are "forward-looking statements" as defined under
the Securities Exchange Act of 1934, as amended, that involve risks and
uncertainties. The Company intends that the forward-looking statements herein be
covered by the safe-harbor provisions for forward-looking statements contained
in the Securities Exchange Act of 1934, as amended, and this statement is
included for the purpose of complying with these safe-harbor provisions.
Forward-looking statements include, but are not limited to, the matters
described herein regarding our intended sale of our Multi-Shot Business, our
future business and plans, including our plans to maximize the value of the
Company to its stockholders, engage in a merger, sale of assets or other
business combination transaction or a possible reorganization, recapitalization,
restructuring or refinancing transaction and our plans regarding the reduction
of our outstanding indebtedness owing to GECC under our credit facility with
GECC. Such forward-looking statements also relate to the Company's ability to
generate revenues and attain and maintain profitability and cash flow, the
stability and level of prices for oil and natural gas, predictions and
expectations as to the fluctuations in the levels of oil and natural gas prices,
pricing in the oil and gas services industry and the willingness of customers to
commit for oil and natural gas well services, the ability of the Company to sell
the Multi-Shot Business on the terms contained in the Agreement or to sell that
division on any other terms, the belief of management that the sale of its
directional drilling division will facilitate a merger, sale,
refinancing, restructuring or reorganization of its wireline division after such
a sale, the ability of the Company to engage in any other strategic transaction,
including any possible merger, sale of all or a portion of the Company's assets
or other business combination transaction involving the Company, the ability of
the Company to raise additional debt or equity capital to meet its requirements
and to obtain additional financing when required, the ability of the Company to
restructure its outstanding indebtedness at or before maturity or refinance its
debt obligations as they come due on September 14, 2004 and December 31, 2004 or
to obtain extensions of the maturity dates for the payment of principal, or to
engage in another recapitalization or reorganization transaction, the Company's
ability to maintain compliance with the covenants of its various loan documents
and other agreements pursuant to which securities, including debt instruments,
have been issued and obtain waivers of violations that occur and consents to
amendments as required, the Company's ability to implement and, if appropriate,
expand a cost-cutting program, the ability of the Company to compete in the
premium oil and gas services market, the ability of the Company to re-deploy its
equipment among regional operations as required, and the ability of the Company
to provide services using state of the art tooling. The inability of the Company
to meet these objectives or requirements, including in particular our plans to
reduce our indebtedness owing to GECC, or the consequences on the Company from
adverse developments in general economic conditions, changes in capital markets,
adverse developments in the oil and gas industry, developments in international
relations and the commencement or expansion of hostilities by the United States
or other governments and events of terrorism, declines and fluctuations in the
prices for oil and natural gas, and other factors could have a material adverse
effect on the Company. Material declines in the prices for oil and gas can be
expected to adversely affect the Company's revenues. The Company cautions
readers that various risk factors could cause the Company's operating results
and financial condition to differ materially from those expressed in any
forward-looking statements made by the Company and could adversely affect the
Company's financial condition and its ability to pursue its business strategy
and plans. These and other risk factors are also described in the Company's
Annual Report on Form 10-K for the year ended December 31, 2003 and its
Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 which
accompany this Consent Solicitation Statement.