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 JANUARY 23, 1998 BETWEEN BLACK WARRIOR WIRELINE CORP. AND ST.
JAMES CAPITAL PARTNERS, L.P. (90% OF THE INTERESTS AND 100% OF THE OBLIGATIONS
UNDER WHICH WERE ASSIGNED TO SJMB, L.P. ON MARCH 1, 1998, AND THE REMAINING 10%
OF THE INTERESTS UNDER WHICH WERE ASSIGNED TO SJMB, L.P. AS OF MARCH 16, 1998).
THIS NOTE IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF MARCH
13, 1998 IN FAVOR OF FLEET CAPITAL CORPORATION, AS LENDER, WHICH AGREEMENT IS
INCORPORATED HEREIN BY REFERENCE.
THIS NOTE IS GIVEN IN REPLACEMENT OF THAT CERTAIN $500,000 CONVERTIBLE
PROMISSORY NOTE DATED JULY 27, 1998 OF BLACK WARRIOR WIRELINE CORP. TO SJMB,
L.P., HOWEVER, THE LIENS SECURING SUCH $500,000 NOTE AND THE INTEREST ACCRUED
THEREON ARE NOT EXTINGUISHED HEREBY, BUT ARE CARRIED FORWARD.
BLACK WARRIOR WIRELINE CORP.
$2,000,000 CONVERTIBLE PROMISSORY NOTE
$2,000,000 Houston, Texas October 30, 1998
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 SJMB, L.P., a Delaware limited partnership (hereinafter called the "Holder"),
or its registered assigns, the principal sum of up to Two Million Dollars
($2,000,000), 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), subject to the satisfaction of the
conditions precedent set forth in Section 1.8 of the Agreement of Purchase and
Sale between the Company and the Holder dated as of the date hereof (the
"Agreement"). 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 this Note shall accrue on amounts actually advanced.
THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SUBJECT TO THAT
CERTAIN BORROWER SECURITY AGREEMENT BETWEEN THE COMPANY AND ST. JAMES CAPITAL
PARTNERS, L.P., A DELAWARE LIMITED PARTNERSHIP ("SJCP"), DATED AS OF JUNE 5,
1997, AS MAY BE AMENDED OR MODIFIED AND AS AMENDED MARCH 1, 1998 TO INCLUDE THE
HOLDER AND AS FURTHER AMENDED AS OF THE DATE HEREWITH (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 SJCP DATED AS OF JUNE 5, 1997, AS MAY BE AMENDED OR MODIFIED
AND AS AMENDED MARCH 1, 1998 TO INCLUDE THE HOLDER AND AS FURTHER AMENDED AS OF
THE DATE HEREWITH (THE "SUBSIDIARY SECURITY AGREEMENT"), AND A SUBSIDIARY
GUARANTY BY EACH OF THE SUBSIDIARIES OF THE COMPANY IN FAVOR OF SJCP DATED AS OF
JUNE 5, 1997, AS MAY BE AMENDED OR MODIFIED AND AS AMENDED MARCH 1, 1998 TO
INCLUDE HOLDER AND AS FURTHER AMENDED AS OF THE DATE HEREWITH (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.
"Advances" shall have the meaning assigned to that term in Article II,
Section 2.1 hereof.
"Board of Directors" means the board of directors of the Company as elected
from time to time or any duly authorized committee of that board.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.
"Common Stock" means shares of common stock, par value $0.0005 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.
"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 March 16, 2001
(or such earlier date upon which this Note becomes due and payable under Section
3.2).
"Note" means this $2,000,000 10% Convertible Promissory Note, as hereafter
amended, modified, substituted or replaced.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, estate,
other entity, unincorporated organization or government or any agency or
political subdivision thereof.
"Subsidiary" means a corporation or other entity more than 50% of the
outstanding voting stock of which, or more than 50% of the equity interest in
which, is owned, directly or indirectly, by the Company or by one or more other
Subsidiaries of the Company, or by any combination of the Company and one or
more other Subsidiaries, 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.
"Transaction Documents" shall have the meaning assigned to such term in the
Agreement and Purchase for Sale executed as of even date herewith.
ARTICLE II
COMMITMENT AND ADVANCES
2.1 Advances. Subject to the terms and conditions and relying on the
representations and warranties set forth herein and in the other Transaction
Documents, Holder agrees to advance to the Company a sum equaling a principal
amount not to exceed $2,000,000 in one or more advances, which advances shall be
made at Holder's sole and absolute discretion. Holder shall exercise reasonable
good faith in the exercise of its discretion, and shall not unreasonably
withhold additional advances. All such advances shall mature and be due and
payable in full on the Maturity Date (or such earlier date upon which this Note
becomes due and payable under Section 3.2). Each advance shall be made in
accordance with the procedures set forth in Article II, Section 2.2 and as
provided in Article I, Section 1.8 of the Agreement.
2.2 Borrowing Procedures of Advances. In order to effect an advance, the
Company shall submit a Request for Advance in writing or by telecopy (or
telephone notice promptly confirmed in writing or by telecopy) to Holder not
later than 10:00 a.m., Houston, Texas time, on such dates as Company determines.
The Requests for Advances shall refer to this Note and specify in sufficient
detail the corporate use of the proceeds of such Advance, and the principal
amount of such Advance. The obligation of the Holder to make any advance
pursuant to such a Request for Advance is subject to the satisfaction of the
Holder that (i) the proceeds will be used for a proper purpose and (ii) on the
date of such advance, no Default or Event of Default, as those terms are defined
herein, then exists or will exist after such advance is made.
2.3 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 ten percent (10%) 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. The Company acknowledges that interest at the rate of ten percent
(10%) per annum on the principal amount of $500,000 has accrued since July 27,
1998 and is payable under this Note.
2.4 Payment of Principal and Interest. The principal and all accrued and
unpaid interest under this Note shall be due and payable in full on the Maturity
Date. At any time, the Holder may, at its option and in lieu of cash, elect to
be paid all accrued and unpaid interest owed to Holder by
the Company in the form of Common Stock, based on a price per share equal to the
Conversion Price (the "Price Per Share"). The amount of all accrued and unpaid
interest on the Maturity Date shall be divided by the Price Per Share into a
whole number of shares of Common Stock, with the remainder, if any, being paid
in cash.
2.5 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.
2.6 Manner of Payment. Cash payments of principal and interest on this Note
will be made by delivery of a check to Holder at its address as set forth in
this Note or a wire transfer pursuant to instructions from Holder.
2.7 Use of Proceeds. The proceeds of all advances shall be used to provide
working capital required by the Company and to provide funds necessary to
complete various capital projects, namely the construction and completion of two
offshore "skids". No portion of the proceeds of any Advance under this Note
shall be used by the Company in any manner that might cause the borrowing or the
application of such proceeds to violate Regulation U, Regulation T, or
Regulation X or any other regulation of the Federal Reserve Board or to violate
the Securities Exchange Act of 1934, as amended, in each case as in effect on
the date of such borrowing and such use of proceeds.
ARTICLE III
REMEDIES
3.1 Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in the payment or mandatory prepayment of the
principal or interest on this Note when such principal or interest becomes
due and payable and such default remains uncured for a period of five days;
or
(b) the Company 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 and of (i) that certain Agreement for Purchase and Sale dated
as of even date herewith (the "Purchase Agreement"); (ii) the Common Stock
Purchase Warrants issued by the Company to Holder pursuant to the terms of
the Purchase Agreement and dated as of the date hereof (the "Warrants");
(iii) the Registration Rights Agreement; (iv) the Security Agreement,
Subsidiary Security Agreement or Subsidiary Guaranty; or (v) this Note
(other than a default in the performance of a covenant specifically
addressed elsewhere in this Section 3.1);
provided that a default in the performance of any covenant in Sections
8(a), 8(b), 8(c), 8(d), 8(e), 8(f), 8(h), 8(i), 8(j), 8(k), 8(l), 8(m) or
8(n) of the Security Agreement or Section 6.1 of this Note shall be an
Event of Default immediately upon occurrence; or
(c) any representation or warranty made by the Company or any
Subsidiary in the Purchase Agreement, the Warrants, the Registration Rights
Agreement, the Security Agreement or this Note or in any certificate
furnished by the Company in connection with the consummation of the
transaction contemplated thereby or hereby, is untrue in any material
respect as of the date of making thereof and such default remains uncured
for a period of 45 days; or
(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
(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 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.
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 $2.25 per share. Notwithstanding anything else to the contrary set
forth herein, the Holder shall have the right to convert this Note pursuant to
the terms set forth herein at any time, including the 30 Business Days following
(i) the Maturity Date or (ii) any prepayment pursuant to Section 2.5 hereof. If
Holder elects to convert this Note after a prepayment has been made pursuant to
Section 2.5, then Holder shall return all or such portion of the funds paid to
Holder as to which Holder has elected to convert.
ARTICLE V
ADJUSTMENT OF CONVERSION PRICE
5.1 Anti-Dilution Provisions. The Conversion Price shall be subject to
adjustment from time to time as hereinafter provided. Upon each adjustment of
the Conversion Price, the holder of this Note shall thereafter be entitled to
purchase, at the Conversion Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Conversion Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Conversion Price resulting from such adjustment.
5.2 Adjustment of Conversion Price Upon Issuance of Common Stock.
5.2.1 (A) If and whenever after the date hereof the Company shall issue
or sell any Common Stock for no consideration or for a consideration per
share less than the Conversion Price, issue convertible securities other
than this Note, issue warrants other than the Warrants issued as of the
date hereof, grant stock options, or issue any other common stock
equivalent (other than shares reserved for issuance to officers, employees,
directors, consultants or advisors of the Company pursuant to existing
stock option or restricted stock purchase plans) then, forthwith, upon such
issue or sale, the Conversion Price shall be reduced (but not increased,
except as otherwise specifically provided in Section 5.2.2), to the lower
price per share (calculated to the nearest one-ten thousandth of a cent,
but in any event not less than $0.001 per share).
(B) Notwithstanding the provisions of this Section 5.2, no
adjustment shall be made in the Conversion Price in the event that the
Company issues, in one or more transactions, (i) Common Stock upon exercise
of any options issued to officers, directors or employees of the Company
pursuant to a stock option plan or an employment, severance or consulting
agreement as now or hereafter in effect, in each case approved by the Board
of Directors (provided that the aggregate number of shares of Common Stock
which may be issuable, including options issued prior to the date hereof,
under all such employee plans and agreements shall at no time exceed the
number of such shares of Common Stock outstanding on the date hereof on a
fully diluted basis that are issuable under currently effective employee
plans and agreements); (ii) Common Stock upon conversion of this Note or
any other warrant issued pursuant to the terms of the Purchase Agreement;
(iii) Common Stock upon exercise of any stock purchase warrant or option
(other than the options referred to in clause (i) above) or other
convertible security outstanding on the date hereof; or (iv) Common Stock
issued as consideration in acquisitions.
5.2.2 For purposes of this Section 5.2, the following shall be
applicable:
(A) Issuance of Rights or Options. In case at any time after the date
hereof the Company shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock or securities being herein called
"Convertible Securities") (other than warrants, options or convertible
securities issued as consideration for or assumed in conjunction with an
acquisition or to officers, directors, or employees of the acquired entity
in conjunction therewith), whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which shares of Common
Stock are issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by
dividing (i) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of such rights or options, or plus, in the
case of such rights or options that relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon
the issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options) shall be less than the Conversion Price
in effect as of the date of granting such rights or options, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options shall be
deemed to be outstanding as of the date of the granting of such rights or
options and to have been issued for such price per share, with the effect
on the Conversion Price specified in Section 5.2.1 hereof. Except as
provided in Section 5.2.2 hereof, no further adjustment of the Conversion
Price shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon exercise of such rights or options or upon
the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(B) Change in Option Price or Conversion Rate. Upon the happening of
any of the following events, namely, if the purchase price provided for in
any right or option referred to in Section 5.2.2 above, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in Section 5.2.2(A) hereof, or the rate
at which any Convertible Securities referred to in Section 5.2.2(A) hereof,
are convertible into or exchangeable for Common Stock shall change (other
than under or by reason of provisions designed to protect against
dilution), the Conversion Price then in effect hereunder shall forthwith be
readjusted (increased or decreased, as the case may be) to the Conversion
Price that would have been in effect at such time had such rights, options
or Convertible Securities still outstanding provided for such changed
purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold. On the expiration of any such option or right
referred to in Section 5.2.2(A) hereof, or on the termination of any such
right to convert or exchange any such Convertible Securities referred to in
Section 5.2.2(A) hereof, the Conversion Price then in effect hereunder
shall forthwith be readjusted (increased or decreased, as the case may be)
to the Conversion Price that would have been in effect at the time of such
expiration or termination had such right, option or Convertible Securities,
to the extent outstanding immediately prior to such expiration or
termination, never been granted, issued or sold, and the Common Stock
issuable thereunder shall no longer be deemed to be outstanding. If the
purchase price provided for in Section 5.2.2(A) hereof or the rate at which
any Convertible Securities referred to in Section 5.2.2(A) hereof are
convertible into or exchangeable for Common Stock shall be reduced at any
time under or by reason of provisions with respect thereto designed to
protect against dilution, then in case of the delivery of Common Stock upon
the exercise of any such right or option or upon conversion or exchange of
any such Convertible Securities, the Conversion Price then in effect
hereunder shall, if not already adjusted, forthwith be adjusted to such
amount as would have obtained had such right, option or Convertible
Securities never been issued as to such Common Stock and had adjustments
been made upon the issuance of the Common Stock delivered as aforesaid, but
only if as a result of such adjustment the Conversion Price then in effect
hereunder is thereby reduced.
(C) Consideration for Stock. In case at any time Common Stock or
Convertible Securities or any rights or options to purchase any such Common
Stock or Convertible Securities shall be issued or sold for cash, the
consideration 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.
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.
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 Holder. In case at any time the Company proposes:
(i) to declare any dividend upon its Common Stock payable in
capital stock or make any special dividend or other distribution (other
than cash dividends) to the holders of its Common Stock;
(ii) to offer for subscription pro rata to all of the holders of
its Common Stock any additional shares of capital stock of any class or
other rights;
(iii) to effect any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation, merger or share
exchange of the Company
with another Person, or sale, transfer or other disposition of all or
substantially all of its assets; or
(iv) to effect a voluntary or involuntary dissolution, liquidation
or winding up of the Company,
then, in any one or more of such cases, the Company shall give the holder hereof
(a) at least 10 days (but not more than 90 days) prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (b) in the case of any such issuance,
reorganization, reclassification, consolidation, merger, share exchange, sale,
transfer, disposition, dissolution, liquidation or winding up, at least 10 days
(but not more than 90 days) prior written notice of the date when the same shall
take place. Such notice in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto, and
such notice in accordance with the foregoing clause (b) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock, as the case may be, for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
as the case may be.
5.10 Company to Prevent Dilution. If any event or condition occurs as to
which other provisions of this Article are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
this Note evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect the
exercise or purchase rights of the holder hereof under any provisions of this
Note, then the Company shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such exercise and purchase rights as aforesaid, and any adjustments
necessary with respect to the Conversion Price and the number of shares
purchasable hereunder so as to preserve the rights of the holder hereunder. In
no event shall any such adjustment have the effect of increasing the Conversion
Price as otherwise determined pursuant to this Article except in the event of a
combination of shares of the type 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.
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.
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: SJMB, L.P., c/o
St. James Capital Corp., 777 Post Oak Boulevard, Suite 950, Houston, Texas
77056, Attn: Jay Brown, 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).
7.8 Usury. It is the intention of the parties hereto to conform strictly
to the applicable laws of the State of Delaware and the United States of
America, and judicial or administrative interpretations or determinations
thereof regarding the contracting for, charging and receiving of interest for
the use, forbearance, and detention of money (hereinafter referred to in this
Section 7.8 as "Applicable Law"). The Holder shall have no right to claim, to
charge or to receive any interest in excess of the maximum rate of interest, if
any, permitted to be charged on that portion of the amount representing
principal which is outstanding and unpaid from time to time by Applicable Law.
Determination of the rate of interest for the purpose of determining whether
this Note is usurious under Applicable Law shall be made by amortizing,
prorating, allocating and spreading in equal parts during the period of the
actual time of this Note, all interest or other sums deemed to be interest
(hereinafter referred to in this Section 7.8 as "Interest") at any time
contracted for, charged or received from the Company in connection with this
Note. Any Interest contracted for, charged or received in excess of the maximum
rate allowed by Applicable Law shall be deemed a result of a mathematical error
and a mistake. If this Note is paid in part prior to the end of the full stated
term of this Note and the Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by Applicable Law, Holder shall
credit the amount of the excess against any amount owing under this Note or, if
this Note has been paid in full, or in the event that it has been accelerated
prior to maturity, Holder shall refund to the Company the amount of such excess,
and shall not be subject to any of the penalties provided by Applicable Law for
contracting for, charging or receiving Interest in excess of the maximum rate
allowed by Applicable Law. Any such excess which is unpaid shall be canceled.
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
[Signature Page -- Convertible Note]