THE SECURITIES REPRESENTED BY THIS NOTE AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY OTHER APPLICABLE SECURITIES LAWS AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS.
THIS NOTE MAY BE SUBORDINATE TO CERTAIN INDEBTEDNESS OF BLACK WARRIOR WIRELINE
CORP. AS AND TO THE EXTENT SET FORTH IN THAT CERTAIN AGREEMENT FOR PURCHASE AND
SALE DATED AS OF THE DATE HEREOF BETWEEN BLACK WARRIOR WIRELINE CORP. AND ST.
JAMES CAPITAL PARTNERS, L.P.
BLACK WARRIOR WIRELINE CORP.
$2,900,000 CONVERTIBLE PROMISSORY NOTE
$2,900,000 Houston, Texas October 10, 1997
BLACK WARRIOR WIRELINE CORP., a Delaware corporation (hereinafter
called the "Company," which term includes any directly or indirectly controlled
subsidiaries or successor entities), for value received, hereby promises to pay
to St. James Capital Partners, L.P., a Delaware limited partnership (hereinafter
called "Holder"), or its registered assigns, the principal sum of Two Million
Nine Hundred Thousand Dollars ($2,900,000), together with interest on the amount
of such principal sum from time to time outstanding, payable in accordance with
the terms set forth below. It is the intention of the parties that the principal
sums of this Note shall be advanced in multiple Advances (as defined below). No
Advance shall be made under this Note if an Event of Default (as defined below)
exists or would exist but for the passage of time. Interest under the Note shall
accrue on amounts actually advanced.
THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SECURED BY A
BORROWER SECURITY AGREEMENT BETWEEN THE COMPANY AND THE HOLDER DATED AS OF JUNE
5, 1997, AS MAY BE AMENDED OR MODIFIED (THE "SECURITY AGREEMENT"). THE
OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE FURTHER SUBJECT TO THE
TERMS OF A SUBSIDIARY SECURITY AGREEMENT BETWEEN THE SUBSIDIARIES OF THE COMPANY
AND THE HOLDER DATED AS OF JUNE 5, 1997, AS MAY BE AMENDED OR MODIFIED (THE
"SUBSIDIARY SECURITY AGREEMENT"), AND A SUBSIDIARY GUARANTY BY EACH OF THE
SUBSIDIARIES OF THE COMPANY IN FAVOR OF THE HOLDER DATED AS OF JUNE 5, 1997, AS
MAY BE AMENDED OR MODIFIED (THE "SUBSIDIARY GUARANTY").
ARTICLE I
DEFINITIONS
1.1 Definitions. For all purposes of this Note, except as otherwise
expressly provided or unless the context otherwise requires: (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular; (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as promulgated from time to time by the
Association of Independent Certified Public Accountants; and (c) the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Note as a whole and not to any particular Article, Section or other
subdivision.
"Advance" means a disbursement of proceeds of this Note.
"Board of Directors" means the board of directors of the Company as
elected from time to time or any duly authorized committee of that board.
"Bridge Loan Note" means the $3,000,000 10% Bridge Loan Promissory Note
of the Company to Holder dated as of June 5, 1997, as may be amended, modified,
substituted or replaced.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.
"Common Stock" means shares of common stock, par value $0.0005 per
share, of the Company.
"Conversion Price" means the price per share determined in accordance
with Articles IV and V (as adjusted in accordance with the terms of this Note)
at which shares of Common Stock shall be delivered to Holder upon conversion of
this Note.
"Default" means any event which is, or after notice or passage of time
would be, an Event of Default.
"Event of Default" has the meaning specified in Section 3.1.
2
"Indebtedness" of any Person means all indebtedness of such Person,
whether outstanding on the date of this Note or hereafter created, incurred,
assumed or guaranteed, (a) for the principal of and premium, if any, and
interest on all debts of the Person whether outstanding on the date of this Note
or thereafter created (i) for money borrowed by such Person (including
capitalized lease obligations), (ii) for money borrowed by others (including
capitalized lease obligations) and guaranteed, directly or indirectly, by such
Person, or (iii) constituting purchase money indebtedness, or indebtedness
secured by property at the time of the acquisition of such property by such
Person, for the payment of which the Person is directly or contingently liable;
(b) for all accrued obligations of the Person in respect of any contract,
agreement or instrument imposing an obligation upon the Person to pay over
funds; (c) for all trade debt of the Person; and (d) for all deferrals,
renewals, extensions and refundings of, and amendments, modifications and
supplements to, any of the indebtedness referred to in (a), (b) or (c) above.
"Maturity Date", when used with respect to this Note, means October 10,
1999 (or such earlier date upon which this Note becomes due and payable under
Section 3.2).
"Note" means this $2,900,000 7% Convertible Promissory Note, as
hereafter amended, modified, substituted or replaced.
"Original Convertible Note" means the $2,000,000 9% Convertible
Promissory Note of the Company in favor of the Holder dated as of June 5, 1997,
as may be amended, modified, substituted or replaced.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, estate,
other entity, unincorporated organization or government or any agency or
political subdivision thereof.
"Subsidiary" means a corporation or other entity more than 50% of the
outstanding voting stock of which, or more than 50% of the equity interest in
which, is owned, directly or indirectly, by the Company or by one or more other
Subsidiaries of the Company, or by any combination of the Company and one or
more other Subsidiaries, provided, however, that the following shall not be
deemed Subsidiaries for purposes of this Note: Black Warrior International,
Inc.; Black Warrior International (Bermuda), Ltd.; Black Warrior Oil and Gas,
Inc.; and Black Warrior Syria, Ltd. (collectively, the "Inactive
Organizations"). However, if any Inactive Organization begins to conduct any
business (other than activities to "wind down" such organization), such Inactive
Organization shall be considered a Subsidiary under this Agreement from that
point forward. For purposes of this definition, "voting stock" means stock which
ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency.
ARTICLE II
PAYMENTS
2.1 Interest. From the date of this Note through the Maturity Date,
interest shall accrue hereunder on the unpaid outstanding principal sum of this
Note at a rate equal to seven percent (7%) per annum calculated on the basis of
a 360-day year. All past due amounts of principal and interest shall bear
interest at fifteen percent (15%) per annum calculated on the basis of a 360-day
year until paid.
2.2 Payment of Principal and Interest. Accrued and unpaid interest
under this Note shall be due and payable on October 10, 1998. The principal and
all remaining accrued and unpaid interest under this Note shall be due and
payable in full on the Maturity Date. At any time, the Holder may, at its option
and in lieu of cash, elect to be paid all accrued and unpaid interest owed to
Holder by the Company in the form of Common Stock, based on a price per share
equal to the Conversion Price (the "Price Per Share"). The amount of all accrued
and unpaid interest on the Maturity Date shall be divided by the Price Per Share
into a whole number of shares of Common Stock, with the remainder, if any, being
paid in cash.
3
2.3 Prepayments. Subject to Holder's right to convert, at any time
before the Maturity Date, the Company may prepay this Note, in whole or in part,
without penalty or discount, upon five days' prior written notice given to
Holder pursuant to Section 7.5. All payments made under this Note shall be
applied first to accrued interest, and the balance, if any, to principal;
provided, however, that interest shall accrue on any remaining principal balance
and shall be payable at the rate provided above.
2.4 Manner of Payment. Cash payments of principal and interest on this
Note will be made by delivery of checks to Holder at its address as set forth in
this Note or wire transfers pursuant to instructions from Holder. If the date
upon which the payment of principal and interest is required to be made pursuant
to this Note occurs other than on a Business Day, then such payment of principal
and interest shall be made on the next occurring Business Day following said
payment date and shall include interest through said next occurring Business
Day.
2.5 Security; Guaranty. This Note is secured by the collateral defined
in the Security Agreement and by the collateral defined in the Subsidiary
Security Agreement. This Note and the obligations hereunder and under the
Security Agreement and the Subsidiary Security Agreement are guaranteed by the
Subsidiaries of the Company pursuant to the Subsidiary Guaranty.
ARTICLE III
REMEDIES
3.1 Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in the payment or mandatory
prepayment of the principal or interest on this Note, or in the payment
or a mandatory prepayment of the principal or interest on the Original
Convertible Note or the Bridge Loan Note, when such principal or
interest becomes due and payable and such default remains uncured for a
period of five days; or
(b) the Company or any Subsidiary defaults in the performance
of any covenant made by the Company, and such default remains uncured
for a period of 45 days in any of (i) those certain Agreements for
Purchase and Sale dated of even date herewith and as of June 5, 1997,
respectively, by and between the Company and Holder (the "Purchase
Agreements"), (ii) the Common Stock Purchase Warrants issued by the
Company to Holder as of the date hereof and as of June 5, 1997,
respectively (the "Warrants"); (iii) that certain Registration Rights
Agreement dated as of June 5, 1997, as may be thereafter amended or
modified, by and between the Company and the Holder, pursuant to which
the Company grants to the Holder certain registration rights in respect
of the shares of Common Stock that may be issued under the Original
Convertible Note, this Note and upon exercise of the Warrants (the
"Registration Rights Agreement"); (iv) the Security Agreement; (v) the
Original Convertible Note or the Bridge Loan Note; (vi) the Subsidiary
Security Agreement; (vii) the Subsidiary Guaranty; or (viii) this Note
(other than a default in the performance of a covenant specifically
addressed elsewhere in this Section 3.1); provided that a default in
the performance of any covenant in Sections 8(a), 8(b), 8(c), 8(d),
8(e), 8(f), 8(h), 8(i), 8(j), 8(k), 8(l), 8(m) or 8(n) of the Security
Agreement or Section 6.1 of this Note shall be an Event of Default
immediately upon occurrence; or
(c) any representation or warranty made by the Company or any
Subsidiary in the Purchase Agreements, the Warrants, the Registration
Rights Agreement, the Original Convertible Note, the Bridge Loan Note,
the Security Agreement, the Subsidiary Security Agreement, the
Subsidiary Guaranty, or this Note or in any certificate furnished by
the Company in connection with the consummation of the transaction
contemplated thereby or hereby, is untrue in any material respect as of
the date of making thereof and such default remains uncured for a
period of 45 days; or
(d) the Company or any Subsidiary defaults in the payment when
due (whether by lapse of time, by declaration, by call for redemption
or otherwise) of the principal of or interest on any Indebtedness of
the Company or such Subsidiary (other than the Indebtedness evidenced
by this Note) having an aggregate principal amount in excess of
$100,000 or on any Indebtedness of the Company to any of its
stockholders and such default remains uncured for a period of 45 days;
or
4
(e) a court of competent jurisdiction enters a judgment or
judgments against the Company or any Subsidiary, or any property or
assets of the Company or any Subsidiary, for the payment of money
aggregating $100,000 or more in excess of applicable insurance coverage
(other than the judgment disclosed on Schedule 3.1(e) hereto) and such
default remains uncured for a period of 45 days; or
(f) a court of competent jurisdiction enters (i) a decree or
order for relief in respect of the Company or any Subsidiary in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or (ii) a
decree or order adjudging the Company or any Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Company or any Subsidiary under any applicable federal or state
law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or any
Subsidiary or of any substantial part of the property of the Company or
any Subsidiary or ordering the winding up or liquidation of the affairs
of the Company or any Subsidiary and any such decree or order of relief
or any such other decree or order remains unstayed for a period of 90
days from its date of entry; or
(g) the Company or any Subsidiary commences a voluntary case
or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the Company or
any Subsidiary files a petition, answer or consent seeking
reorganization or relief under any applicable federal or state law, or
the Company or any Subsidiary makes an assignment for the benefit of
creditors, or admits in writing its inability to pay its debts
generally as they become due; or
(h) any person or group (within the meaning of Section 13(d)
of the Securities Exchange Act of 1934) becomes the beneficial owner of
40% or more of the total voting power of the Company and was not the
beneficial owner of 40% or more of the total voting power of the
Company as of the date hereof; provided that the foregoing shall not
include any person or group who or which acquires the Warrants or
shares of the Company's Common Stock issuable upon exercise of the
Warrants or upon conversion of the Original Convertible Note or this
Note; and further provided that such default has not been cured or
waived within ninety (90) days following such change of beneficial
ownership.
(i) the Company or any Subsidiary (1) merges or consolidates
with or into any other Person (unless the Company or any of its
Subsidiaries is the surviving or acquiring party); (2) dissolves or
liquidates; or (3) sells all or any substantial portion of its assets
(unless the purchaser is a Subsidiary of the Company).
3.2 Acceleration of Maturity. This Note and all accrued interest shall
automatically become immediately due and payable if an Event of Default
described in Sections 3.1(f), 3.1(g) or 3.1(i) occurs and, this Note shall, at
the option of the Holder in its sole discretion, become immediately due and
payable if any other Event of Default occurs, and in every such case the Holder
of the Note may declare the principal and interest on the Note to be due and
payable immediately.
5
ARTICLE IV
CONVERSION OF NOTE
Subject to and upon compliance with the provisions of this Article, at
the option of Holder, all or any part of this Note may be converted at any time,
at the principal amount hereof together with accrued and unpaid interest
thereon, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100 of a share) of Common Stock. The Conversion
Price shall initially be $4.6327 per share. Notwithstanding anything else to the
contrary set forth herein, the Holder shall have the right to convert this Note
pursuant to the terms set forth herein at any time, including the 30 Business
Days following (i) the Maturity Date or (ii) any prepayment pursuant to Section
2.3 hereof. If Holder elects to convert this Note after a prepayment has been
made pursuant to Section 2.3, then Holder shall return all or such portion of
the funds paid to Holder as to which Holder has elected to convert.
ARTICLE V
ADJUSTMENT OF CONVERSION PRICE
5.1 Anti-Dilution Provisions. The Conversion Price shall be subject to
adjustment from time to time as hereinafter provided. Upon each adjustment of
the Conversion Price, the holder of this Note shall thereafter be entitled to
purchase, at the Conversion Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Conversion Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Conversion Price resulting from such adjustment.
5.2 Adjustment of Conversion Price Upon Issuance of Common Stock.
5.2.1 (A) If and whenever after the date hereof the Company
shall issue or sell any Common Stock for no consideration or for a
consideration per share less than the Conversion Price then, forthwith,
upon such issue or sale, the Conversion Price shall be reduced (but not
increased, except as otherwise specifically provided in Section 5.2.2),
to the price (calculated to the nearest one-ten thousandth of a cent)
determined by dividing (x) an amount equal to the sum of (i) the
aggregate number of shares of Common Stock outstanding immediately
prior to such issue or sale multiplied by the then existing Conversion
Price plus (ii) the consideration received by the Company upon such
issue or sale by (y) the aggregate number of shares of Common Stock
outstanding immediately after such issue or sale.
(B) Notwithstanding the provisions of this Section
5.2, no adjustment shall be made in the Conversion Price in the event
that the Company issues, in one or more transactions, (i) Common Stock
upon exercise of any options issued to officers, directors or employees
of the Company pursuant to a stock option plan or an employment,
severance or consulting agreement as now or hereafter in effect, in
each case approved by the Board of Directors (provided that the
aggregate number of shares of Common Stock which may be issuable,
including options issued prior to the date hereof, under all such
employee plans and agreements shall at no time exceed the number of
such shares of Common Stock outstanding on the date hereof on a fully
diluted basis that are issuable under currently effective employee
plans and agreements); (ii) Common Stock upon exercise of the Original
Convertible Note or this Note or any other warrant issued pursuant to
the terms of the Purchase Agreements; (iii) Common Stock upon exercise
of any stock purchase warrant or option (other than the options
referred to in clause (i) above) or other convertible security
outstanding on the date hereof; or (iv) Common Stock issued as
consideration in acquisitions. In addition, for purposes of calculating
any adjustment of the Conversion Price as provided in this Section 5.2,
all of the shares of Common Stock issuable pursuant to any of the
foregoing shall be assumed to be outstanding prior to the event causing
such adjustment to be made.
5.2.2 For purposes of this Section 5.2, the following shall be
applicable:
6
(A) Issuance of Rights or Options. In case at any time after
the date hereof the Company shall in any manner grant (whether directly
or by assumption in a merger or otherwise) any rights to subscribe for
or to purchase, or any options for the purchase of, Common Stock or any
stock or securities convertible into or exchangeable for Common Stock
(such convertible or exchangeable stock or securities being herein
called "Convertible Securities") (other than warrants, options or
convertible securities issued as consideration for or assumed in
conjunction with an acquisition or to officers, directors, or employees
of the acquired entity in conjunction therewith), whether or not such
rights or options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per
share for which shares of Common Stock are issuable upon the exercise
of such rights or options or upon conversion or exchange of such
Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the
exercise of such rights or options, or plus, in the case of such rights
or options that relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such rights or options) shall be less than the
Conversion Price in effect as of the date of granting such rights or
options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such rights or options or upon conversion
or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options shall be deemed to be outstanding as
of the date of the granting of such rights or options and to have been
issued for such price per share, with the effect on the Conversion
Price specified in Section 5.2.1 hereof. Except as provided in Section
5.2.2 hereof, no further adjustment of the Conversion Price shall be
made upon the actual issuance of such Common Stock or of such
Convertible Securities upon exercise of such rights or options or upon
the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(B) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any right or option referred to in Section 5.2.2 above,
the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in Section 5.2.2(A)
hereof, or the rate at which any Convertible Securities referred to in
Section 5.2.2(A) hereof, are convertible into or exchangeable for
Common Stock shall change (other than under or by reason of provisions
designed to protect against dilution), the Conversion Price then in
effect hereunder shall forthwith be readjusted (increased or decreased,
as the case may be) to the Conversion Price that would have been in
effect at such time had such rights, options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold. On the expiration of any such option
or right referred to in Section 5.2.2(A) hereof, or on the termination
of any such right to convert or exchange any such Convertible
Securities referred to in Section 5.2.2(A) hereof, the Conversion Price
then in effect hereunder shall forthwith be readjusted (increased or
decreased, as the case may be) to the Conversion Price that would have
been in effect at the time of such expiration or termination had such
right, option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been
granted, issued or sold, and the Common Stock issuable thereunder shall
no longer be deemed to be outstanding. If the purchase price provided
for in Section 5.2.2(A) hereof or the rate at which any Convertible
Securities referred to in Section 5.2.2(A) hereof are convertible into
or exchangeable for Common Stock shall be reduced at any time under or
by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the
exercise of any such right or option or upon conversion or exchange of
any such Convertible Securities, the Conversion Price then in effect
hereunder shall, if not already adjusted, forthwith be adjusted to such
amount as would have obtained had such right, option or Convertible
Securities never been issued as to such Common Stock and had
adjustments been made upon the issuance of the Common Stock delivered
as aforesaid, but only if as a result of such adjustment the Conversion
Price then in effect hereunder is thereby reduced.
7
(C) Consideration for Stock. In case at any time Common Stock
or Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for
cash, the consideration therefor shall be deemed to be the amount
received by the Company therefor. In case at any time any Common Stock,
Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for
consideration other than cash, the amount of the consideration other
than cash received by the Company shall be deemed to be the fair value
of such consideration, as determined reasonably and in good faith by
the Board of Directors of the Company. In case at any time any Common
Stock, Convertible Securities or any rights or options to purchase any
Common Stock or Convertible Securities shall be issued in connection
with any merger or consolidation in which the Company is the surviving
corporation, the amount of consideration received therefor shall be
deemed to be the fair value, as determined reasonably and in good faith
by the Board of Directors of the Company, of such portion of the assets
and business of the nonsurviving corporation as such Board of Directors
may determine to be attributable to such Common Stock, Convertible
Securities, rights or options as the case may be. In case at any time
any rights or options to purchase any shares of Common Stock or
Convertible Securities shall be issued in connection with the issuance
and sale of other securities of the Company, together consisting of one
integral transaction in which no consideration is allocated to such
rights or options by the parties, such rights or options shall be
deemed to have been issued without consideration.
(D) Record Date. In the case the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common Stock
or Convertible Securities, or (ii) to subscribe for or purchase Common
Stock or Convertible Securities, then such record date shall be deemed
to be the date of the issuance or sale of the Common Stock or
Convertible Securities deemed to have been issued or sold as a result
of the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription
or purchase, as the case may be.
(E) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned directly
by the Company in treasury, and the disposition of any such shares
shall be considered an issuance or sale of Common Stock for the purpose
of this Section 5.2.
5.3 Stock Dividends. In case the Company shall declare a dividend or
make any other distribution upon any shares of the Company, payable in Common
Stock or Convertible Securities, any Common Stock or Convertible Securities, as
the case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
5.4 Stock Splits and Reverse Splits. In the event that the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of Shares into
which this Note may be converted immediately prior to such subdivision shall be
proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased and the number of Shares into which this Note
may be converted immediately prior to such combination shall be proportionately
reduced. Except as provided in this Section 5.4 no adjustment in the Conversion
Price and no change in the number of Shares shall be made under this Article V
as a result of or by reason of any such subdivision or combination.
8
5.5 Reorganizations and Asset Sales. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that holders of Common Stock
shall be entitled to receive capital stock, securities or assets with respect to
or in exchange for their shares, then the following provisions shall apply:
5.5.1 As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition
(except as otherwise provided below in Section 5.5.3), lawful and adequate
provisions shall be made whereby the holder of this Note shall thereafter have
the right to purchase and receive upon the terms and conditions specified in
this Note and in lieu of the shares immediately theretofore receivable upon the
exercise of the rights represented hereby, such shares of capital stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares immediately theretofore so receivable had such reorganization,
reclassification, consolidation, merger, share exchange or sale not taken place,
and in any such case appropriate provision reasonably satisfactory to such
holder shall be made with respect to the rights and interests of such holder to
the end that the provisions hereof (including, without limitation, provisions
for adjustments of the Conversion Price and of the number of shares receivable
upon the exercise) shall thereafter be applicable, as nearly as possible, in
relation to any shares of capital stock, securities or assets thereafter
deliverable upon the exercise of this Note.
5.5.2 In the event of a merger, share exchange or
consolidation of the Company with or into another Person as a result of which a
number of shares of common stock or its equivalent of the successor Person
greater or lesser than the number of shares of Common Stock outstanding
immediately prior to such merger, share exchange or consolidation are issuable
to holders of Common Stock, then the Conversion Price in effect immediately
prior to such merger, share exchange or consolidation shall be adjusted in the
same manner as though there were a subdivision or combination of the outstanding
shares of Common Stock.
5.5.3 The Company shall not effect any such consolidation,
merger, share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other than
the Company) resulting from such consolidation, share exchange or merger or the
Person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to the Holder hereof at the
last address of such Holder appearing on the books of the Company the obligation
to deliver to such Holder such shares of capital stock, securities or assets as,
in accordance with the foregoing provisions, such Holder may be entitled to
receive, and all other liabilities and obligations of the Company hereunder.
Upon written request by the Holder hereof, such Successor Person will issue a
new Note revised to reflect the modifications in this Note effected pursuant to
this Section 5.5.
5.5.4 If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange or
sale, transfer or other disposition of all or substantially all of the Company's
assets with the Person having made such offer or with any affiliate of such
Person, unless prior to the consummation of such consolidation, merger, share
exchange, sale, transfer or other disposition the holder hereof shall have been
given a reasonable opportunity to then elect to receive upon the conversion of
this Note either the capital stock, securities or assets then issuable with
respect to the Common Stock or the capital stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance with
such offer.
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5.6 Adjustment for Asset Distribution. If the Company declares a
dividend or other distribution payable to all holders of shares of Common Stock
in evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared by the Board of
Directors), capital stock (other than Common Stock, Convertible Securities or
options or rights thereto) or other property), the Conversion Price in effect
immediately prior to such declaration of such dividend or other distribution
shall be reduced by an amount equal to the amount of such dividend or
distribution payable per share of Common Stock, in the case of a cash dividend
or distribution, or by the fair value of such dividend or distribution per share
of Common Stock (as reasonably determined in good faith by the Board of
Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for purpose
of such dividend or distribution or, if a record is not taken, the date as of
which holders of record of Common Stock entitled to such dividend or
distribution are determined.
5.7 De Minimis Adjustments. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon conversion of the Note and no adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease of at least $.01 in the Conversion Price; provided, however, that any
adjustments which by reason of this Section 5.7 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest full share or nearest one
hundredth of a dollar, as applicable.
5.8 Notice of Adjustment. Whenever the Conversion Price or the number
of Shares issuable upon the conversion of the Note shall be adjusted as herein
provided, or the rights of the holder hereof shall change by reason of other
events specified herein, the Company shall compute the adjusted Conversion Price
and the adjusted number of Shares in accordance with the provisions hereof and
shall prepare an Officer's Certificate setting forth the adjusted Conversion
Price and the adjusted number of Shares issuable upon the conversion of this
Note or specifying the other shares of stock, securities or assets receivable as
a result of such change in rights, and showing in reasonable detail the facts
and calculations upon which such adjustments or other changes are based. The
Company shall cause to be mailed to the Holder hereof copies of such Officer's
Certificate together with a notice stating that the Conversion Price and the
number of Shares purchasable upon conversion of this Note have been adjusted and
setting forth the adjusted Conversion Price and the adjusted number of Shares
purchasable upon conversion of this Note.
5.9 Notifications to Holders. In case at any time the Company proposes:
(i) to declare any dividend upon its Common Stock
payable in capital stock or make any special dividend or other
distribution (other than cash dividends) to the holders of its
Common Stock;
(ii) to offer for subscription pro rata to all of the
holders of its Common Stock any additional shares of capital
stock of any class or other rights;
(iii) to effect any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation, merger or share exchange of the Company with
another Person, or sale, transfer or other disposition of all
or substantially all of its assets; or
(iv) to effect a voluntary or involuntary
dissolution, liquidation or winding up of the Company,
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then, in any one or more of such cases, the Company shall give the holder hereof
(a) at least 10 days (but not more than 90 days) prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (b) in the case of any such issuance,
reorganization, reclassification, consolidation, merger, share exchange, sale,
transfer, disposition, dissolution, liquidation or winding up, at least 10 days
(but not more than 90 days) prior written notice of the date when the same shall
take place. Such notice in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto, and
such notice in accordance with the foregoing clause (b) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock, as the case may be, for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
as the case may be.
5.10 Company to Prevent Dilution. If any event or condition occurs as
to which other provisions of this Article are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
this Note evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect the
exercise or purchase rights of the holder hereof under any provisions of this
Note, then the Company shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such exercise and purchase rights as aforesaid, and any adjustments
necessary with respect to the Conversion Price and the number of shares
purchasable hereunder so as to preserve the rights of the holder hereunder. In
no event shall any such adjustment have the effect of increasing the Conversion
Price as otherwise determined pursuant to this Article except in the event of a
combination of shares of the type contemplated in Section 5.4 hereof, and then
in no event to an amount greater than the Conversion Price as adjusted pursuant
to Section 5.4 hereof.
ARTICLE VI
COVENANTS
The Company covenants and agrees that, so long as this Note is
outstanding:
6.1 Payment of Principal and Accrued Interest. The Company will duly
and punctually pay or cause to be paid the principal sum of this Note, together
with interest accrued thereon from the date hereof to the date of payment, in
accordance with the terms hereof.
6.2 Corporate Existence. The Company will, and will cause each
Subsidiary to, do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights (charter and statutory)
and franchises; provided, however, that the Company or a Subsidiary shall not be
required to preserve any such right or franchise if it shall reasonably
determine that the preservation thereof is no longer desirable in the conduct of
its business.
6.3 Taxes; Claims; etc. The Company will, and will cause each
Subsidiary to, promptly pay and discharge all lawful taxes, assessments, and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any of its properties, real, personal, or mixed, before the same shall
become in default, as well as all lawful claims for labor, materials, and
supplies or otherwise which, if unpaid, might become a lien or charge upon such
properties or any part thereof, and which lien or charge will have a material
adverse effect on the business of the Company; provided, however, that neither
the Company nor any Subsidiary shall be required to pay or cause to be paid any
such tax, assessment, charge, levy, or claim prior to institution of foreclosure
proceedings if the validity thereof shall concurrently be contested in good
faith by appropriate proceedings and if the Company shall have established
reserves deemed by the Company adequate with respect to such tax, assessment,
charge, levy, or claim.
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6.4 Maintenance of Existence and Properties. The Company will, and will
cause each Subsidiary to, keep its material properties in good repair, working
order, and condition, ordinary wear and tear excepted, so that the business
carried on may be properly conducted at all times in accordance with prudent
business management.
6.5 SEC Reports. The Company will deliver to the Holder within 20 days
after it files them with the SEC, copies of its annual and quarterly reports and
of the information, documents, and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) which
the Company is required or elects to file with the SEC pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934. The Company will timely comply
with its reporting and filing obligations under the applicable federal
securities laws.
6.6 Notice of Defaults. The Company will promptly notify the Holder in
writing of the occurrence of (i) any Event of Default under this Note, and (ii)
any event of default (or if any event of default would result upon any payment
with respect to this Note) with respect to any Indebtedness as such event of
default is defined therein or in the instrument under which it is outstanding,
permitting holders to accelerate the maturity of such Indebtedness.
6.7 Compliance with Laws. The Company will promptly comply with all
laws, ordinances and governmental rules and regulations to which it is subject,
the violation of which would materially and adversely affect the Company.
6.8 Amendments to Charter. The Company will not amend or modify its
charter without the prior written consent of Holder.
6.9 Mergers and Acquisitions. Without the consent of the Holder, the
Company or any Subsidiary will not dissolve, liquidate, consolidate, merge or
enter into a share exchange with or sell or transfer all or a substantial
portion of its assets to any Person.
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6.10 Election of Director. The Company will use its best efforts to
cause the election, at all shareholders' meetings called for the purpose of
electing directors of the Company or in any other action taken to elect such
directors, of one person designated by Holder as a nominee (the "Designated
Director"). If a vacant directorship arises due to the resignation or disability
of the Designated Director, or if the Designated Director is removed for any
reason, the Company will use its best efforts to cause the appointment of
another person designated by Holder to replace the Designated Director.
ARTICLE VII
MISCELLANEOUS
7.1 Consent to Amendments. This Note may be amended, and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if and only if the Company shall obtain the
written consent to such amendment, action or omission to act from the holders of
a majority of the aggregate principal amount of this Note.
7.2 Benefits of Note; No Impairment of Rights of Holder of Senior
Indebtedness. Nothing in this Note, express or implied, shall give to any
Person, other than the Company, Holder, and their successors any benefit or any
legal or equitable right, remedy or claim under or in respect of this Note.
7.3 Successors and Assigns. All covenants and agreements in this Note
contained by or on behalf of the Company and the Holder shall bind and inure to
the benefit of the respective successors and assigns of the Company and the
Holder.
7.4 Restrictions on Transfer. Holder shall not transfer this Note
except (by the grant of a security interest) to its lender or lenders. As
between Holder and its lender or lenders, this Note is transferable in the same
manner and with the same effect as in the case of a negotiable instrument
payable to a specified person. Any lender to which Holder grants a security
interest in this Note shall be entitled to exercise all remedies to which it is
entitled by contract or by law, including (without limitation) transferring this
Note into its own name or into the name of any purchaser at any sale undertaken
in connection with enforcement by such lender of its remedies.
7.5 Notice; Address of Parties. Except as otherwise provided, all
communications to the Company or Holder provided for herein or with reference to
this Note shall be deemed to have been sufficiently given or served for all
purposes on the third business day after being sent as certified or registered
mail, postage and charges prepaid, to the following addresses: if to the
Company: Black Warrior Wireline Corp., 3748 Highway #45 North, Columbus,
Mississippi 39701, or at any other address designated by the Company in writing
to Holder; if to Holder: St. James Capital Partners, L.P., _ St. James Capital
Corp., 1980 Post Oak Boulevard, Suite 2030, Houston, Texas 77056, Attn: John L.
Thompson, or at any other address designated by Holder to the Company in
writing.
7.6 Separability Clause. In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions in such jurisdiction shall not in
any way be affected or impaired thereby; provided, however, such construction
does not destroy the essence of the bargain provided for hereunder.
7.7 Governing Law. This Note shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware (without regard to
principles of choice of law).
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7.8 Usury. It is the intention of the parties hereto to conform
strictly to the applicable laws of the State of Delaware and the United States
of America, and judicial or administrative interpretations or determinations
thereof regarding the contracting for, charging and receiving of interest for
the use, forbearance, and detention of money (hereinafter referred to in this
Section 7.9 as "Applicable Law"). The Holder shall have no right to claim, to
charge or to receive any interest in excess of the maximum rate of interest, if
any, permitted to be charged on that portion of the amount representing
principal which is outstanding and unpaid from time to time by Applicable Law.
Determination of the rate of interest for the purpose of determining whether
this Note is usurious under Applicable Law shall be made by amortizing,
prorating, allocating and spreading in equal parts during the period of the
actual time of this Note, all interest or other sums deemed to be interest
(hereinafter referred to in this Section 7.9 as "Interest") at any time
contracted for, charged or received from the Company in connection with this
Note. Any Interest contracted for, charged or received in excess of the maximum
rate allowed by Applicable Law shall be deemed a result of a mathematical error
and a mistake. If this Note is paid in part prior to the end of the full stated
term of this Note and the Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by Applicable Law, Holder shall
credit the amount of the excess against any amount owing under this Note or, if
this Note has been paid in full, or in the event that it has been accelerated
prior to maturity, Holder shall refund to the Company the amount of such excess,
and shall not be subject to any of the penalties provided by Applicable Law for
contracting for, charging or receiving Interest in excess of the maximum rate
allowed by Applicable Law. Any such excess which is unpaid shall be canceled.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
BLACK WARRIOR WIRELINE CORP.
By:
William L. Jenkins, President