s
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
|X| Filed by Registrant.
|_| Filed by Party other than the Registrant
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
BLACK WARRIOR WIRELINE CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (check the appropriate box):
|X| No fee required.
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total Fee Paid:
-----------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the Fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement Number:
-----------------------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------------------
4) Date Filed:
-----------------------------------------------------------------------
BLACK WARRIOR WIRELINE CORP.
100 Rosecrest Lane
Columbus, Mississippi 39701
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 23, 2002
Notice is hereby given that the Annual Meeting of Stockholders of Black
Warrior Wireline Corp. (the "Company") will be held at the Wingate Inn, 129
Brickerton Street, Columbus, Mississippi, on Monday, September 23, 2002 at 9:00
AM local time, for the following purposes:
1. To elect three (3) directors of the Company to hold office
until the next Annual Meeting of Stockholders and until their
successors are elected and qualified; and
2. To transact such other business as may properly come before
the meeting or any adjournments thereof.
Information with respect to the above is set forth in the Proxy
Statement which accompanies this Notice. Only stockholders of record at the
close of business on August 14, 2002 are entitled to notice of and to vote at
the Meeting.
We hope that all of our Stockholders who can conveniently do so will
attend the Meeting. Stockholders who do not expect to be able to attend the
Meeting are requested to mark, date and sign the enclosed Proxy and return the
same in the enclosed addressed envelope which requires no postage and is
intended for your convenience.
Dated: August 21, 2002 Allen R. Neel, Secretary
BLACK WARRIOR WIRELINE CORP.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
The enclosed Proxy is solicited by the Board of Directors of Black
Warrior Wireline Corp. (the "Company"), from the holders of shares of Common
Stock, $.0005 par value, to be voted at the Annual Meeting of Stockholders (the
"Meeting") to be held at the Wingate Inn, 129 Brickerton Street, Columbus,
Mississippi, on Monday, September 23, 2002 at 9:00AM local time, and at any
adjournments thereof.
The only business which the Board of Directors intends to present or
knows that others will present at the Meeting is the election of three (3)
Directors of the Company to hold office until the next Annual Meeting of
Stockholders and until their successors have been elected and qualified.
Management does not know of any other business to be brought before the Meeting,
but it is intended that as to any other business, a vote may be cast pursuant to
the Proxy in accordance with the judgment of the person or persons acting
thereunder. Any stockholder giving a Proxy has the power to revoke it at any
time before the Proxy is voted by revoking it in writing, by executing a later
dated Proxy, or appearing at the Meeting and voting in person. Any writing
revoking a Proxy should be addressed to Allen R. Neel, Secretary, at the address
set forth below.
The Directors to be elected at the Meeting will be elected by a
plurality of the votes cast by the stockholders present in person or by proxy
and entitled to vote. Votes may be cast for or withheld from the nominees. Votes
that are withheld will have no effect on the outcome of the election because the
Directors will be elected by a plurality of votes cast.
Under the rules of the New York Stock Exchange, brokers who hold shares
in street name have the authority to vote on certain routine matters on which
they have not received instructions from beneficial owners. Brokers holding
shares of the Company's Common Stock in street name who do not receive
instructions are entitled to vote on the election of Directors. Under applicable
Delaware law, "broker non-votes" on any such proposal (where a broker submits a
proxy but does not vote a customer's shares on such proposal) will be considered
not entitled to vote on that proposal and thus will not be counted in
determining the outcome of such vote. Likewise, where authority to vote for the
election of Directors is withheld by a stockholder, such shares will not be
counted in determining the outcome of such vote. Therefore, broker non-votes
with respect to the election of Directors and stockholders who mark their
proxies to withhold authority to vote their shares will have no effect on the
outcome of such proposal, although broker non-votes and proxies submitted where
the vote for the election of Directors is withheld are counted in determining
the existence of a quorum.
Only stockholders of record as of the close of business on August 14,
2002 are entitled to notice of and to vote at the Meeting or any adjournments
thereof. On such date, the Company
had outstanding voting securities consisting of 12,496,408 shares of Common
Stock, $.0005 par value, each of which shares is entitled to one vote.
The Company's principal executive office address is 100 Rosecrest Lane,
Columbus, Mississippi 39701, and the telephone number is (662) 329-1047. This
Proxy Statement and the enclosed Form of Proxy will be mailed to the Company's
stockholders on or about August 21, 2002.
ELECTION OF DIRECTORS
At the Meeting, it is proposed to elect three (3) Directors to hold
office until the next Annual Meeting of Stockholders and until their respective
successors are elected and qualified. It is intended that, unless otherwise
indicated, the shares of Common Stock represented by proxies solicited by the
Board of Directors will be voted for the election as Directors of the three (3)
nominees hereinafter named. If, for any reason, any of said nominees shall
become unavailable for election, which is not now anticipated, the proxies will
be voted for the other nominees and may be voted for a substitute nominee
designated by the Board of Directors. Each nominee has indicated that he is
willing and able to serve as a Director if elected, and, accordingly, the Board
of Directors does not have in mind any substitute. Each nominee is presently a
Director of the Company and was elected a Director at the 2001 Annual Meeting of
Stockholders held in October, 2001.
The nominees for Director and their ages are as follows:
NAME AGE
William L. Jenkins 49
Charles E. Underbrink 47
John L. Thompson 42
William L. Jenkins has been President, Chief Executive Officer and a
Director of the Company since March 1989. From 1973 until 1980, Mr. Jenkins held
a variety of field engineering and training positions with Welex - A Halliburton
Company, in the South and Southwest. From 1980 until March 1989, Mr. Jenkins
worked with Triad Oil & Gas, Inc., as a consultant, providing services to a
number of oil and gas companies. During that time, Mr. Jenkins was involved in
the organization of a number of drilling and oil field service companies,
including a predecessor of the Company, of which he served as
Secretary/Treasurer until 1988. Mr. Jenkins has over twenty-five years'
experience in the oil field service business. Mr. Jenkins is the brother-in-law
of Danny Ray Thornton, the Company's Vice President-Operations.
-2-
Charles E. Underbrink was elected a Director on April 1, 1998. From
July 1995 to March 2001, Mr. Underbrink served as the Chief Executive Officer
and Chairman of St. James Capital Corp. and SJMB, L.L.C., Houston-based merchant
banking firms. He continues to serve as Chairman of St. James Capital Corp. and
SJMB, L.L.C. Mr. Underbrink is also a Director of Somerset House Publishing,
HUB, Inc. and Imperial Credit Industries, Inc.
John L. Thompson was elected a Director in June 1997. Since July 1995,
he has served as a Director and President of St. James Capital Corp. and SJMB,
L.L.C., Houston-based merchant banking firms. Since March 1, 2001, Mr. Thompson
has also served as the Chief Executive Officer of St. James Capital Corp. and
SJMB, L.L.C. St. James Capital Corp. also serves as the general partner of St.
James Capital Partners, L.P. and SJMB, L.L.C. serves as the general partner of
SJMB, L.P., investment limited partnerships, specializing in merchant banking
related investments. Prior to co-founding St. James Capital Corp. and SJMB,
L.L.C., Mr. Thompson served as a Managing Director of Corporate Finance at
Harris Webb & Garrison, a regional investment-banking firm with a focus on
mergers and acquisitions, financial restructuring and private placements of debt
and equity issues. Mr. Thompson was elected to the Company's Board of Directors
in June 1997 pursuant to the terms of Agreements between the Company and St.
James Capital Partners, L.P. See "Certain Transactions" for a description of the
transactions.
EXECUTIVE OFFICERS
The current executive officers of the Company are the following:
NAME POSITION
William L. Jenkins President, Chief Executive Officer and
Chief Operating Officer
Allen R. Neel Executive Vice President and Secretary
Danny R. Thornton Vice President-Operations
Mr. Jenkins' employment background is described above.
Allen R. Neel is the Executive Vice-President and Secretary of the
Company and has been employed by the Company since August 1990. He currently
oversees the Company's directional drilling operations, as well as
administration and legal matters. In 1981, Mr. Neel received his BS Degree in
Petroleum Engineering from the University of Alabama. From 1981 to 1987, Mr.
-3-
Neel worked in engineering and sales for Halliburton Services. From 1987 to
1989, he worked as a District Manager for Graves Well Drilling Co. When the
Company acquired the assets of Graves in 1990, Mr. Neel assumed a position with
the Company.
Danny R. Thornton is a Vice-President of the Company and has been
employed by the Company since March 1989. From 1982 to March 1989, Mr. Thornton
was the president and a principal stockholder of Black Warrior Mississippi, the
Company's operational predecessor. Mr. Thornton has been engaged in the oil and
gas services industry in various capacities since 1978. His principal duties
with the Company include supervising and consulting on wireline operations. Mr.
Thornton is Mr. Jenkins' brother-in-law.
EXECUTIVE COMPENSATION - GENERAL
The following table sets forth the compensation paid or awarded to the
President and Chief Executive Officer of the Company and each other executive
officer of the Company who received compensation exceeding $100,000 during 2001
for all services rendered to the Company in each of the years 2001, 2000 and
1999.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- ------------------------------
BONUS/ANNUAL SECURITIES LONG-TERM
NAME AND INCENTIVE UNDERLYING INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR SALARY AWARD OPTIONS PAYOUTS COMPENSATION
- --------------------------------------------------------------------------------------------------------------------
William L. Jenkins 2001 $225,000 $123,376 -- -0- $1,216(1)
President 2000 $195,650 $77,726 -- -0- $1,216(1)
1999 $87,548 $48,376 -- -0- $1,216(1)
Allen R. Neel 2001 $139,000 -0- -- -0- $9,000(2)
Executive Vice President 2000 $119,000 -0- -- -0- $8,400(2)
1999 $85,000 -0- -- -0- $8,400(2)
Danny R. Thornton 2001 $100,208 $41,025 -- -0- $3,500(2)
Vice President 2000 $79,500 $6,576 -- -0- $7,000(2)
1999 $77,813 $19,693 -- -0- -0-
- ---------------------------------
(1) Includes the premiums paid by the Company on a $1,000,000 insurance
policy on the life of Mr. Jenkins which names his wife as beneficiary
and owner of the policy.
(2) Automobile allowance paid to Mr. Neel and Mr. Thornton.
-4-
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 2001
- ---------------------------------------------
The following table provides information with respect to the above
named executive officers regarding options granted to such persons during the
Company's year ended December 31, 2001.
% OF TOTAL MARKET
NUMBER OF OPTIONS/ PRICE PER
SECURITIES SARS GRANTED TO EXERCISE OR SHARE ON
UNDERLYING SARS/ EMPLOYEES IN BASE PRICE EXPIRATION DATE OF
NAME OPTIONS GRANTED (1) FISCAL YEAR ($/SHARE) DATE GRANT
- ----------------------------------------------------------------------------------------------------------------------
William L. Jenkins 4,000,000 23.9% $0.75 Feb. 2010 $0.37
Allen R. Neel 1,050,000 6.3% $0.75 Feb. 2010 $0.37
Danny R. Thornton 1,250,000 7.5% $0.75 Feb. 2010 $0.37
- --------------------------
(1) Represents shares of Common Stock.
On February 9, 2001, the Company's stockholders approved the adoption
of the Company's 2000 Stock Incentive Plan pursuant to which 17,500,000 shares
are reserved for the grant of options. At December 31, 2001, options to purchase
16,686,000 shares have been granted to 159 employees under the 2000 Stock
Incentive Plan. On February 9, 2001, the Company's stockholders approved an
amendment to the 1997 Omnibus Incentive Plan increasing the number of shares
reserved for the grant of options to 1,000,000 and an amendment to the 1997
Non-Employee Stock Option Plan increasing the number of shares reserved for the
grant of options to 300,000. As of December 31, 2001, options to purchase
315,000 shares and 300,000 shares, respectively, were outstanding under those
plans.
-5-
STOCK OPTION EXERCISES AND HOLDINGS AT DECEMBER 31, 2001.
- ---------------------------------------------------------
The following table provides information with respect to the above
named executive officers regarding Company options exercised during the year
ended December 31, 2001 and options held at December 31, 2001 (such officers did
not exercise any options during the most recent fiscal year).
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31,2001 AT DECEMBER 31, 2001 (1)
SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------------------
William L. Jenkins -0- -0- 4,000,000 -0- -0- -0-
Allen R. Neel -0- -0- 1,050,000 -0- -0- -0-
Danny R. Thornton -0- -0- 1,250,000 -0- -0- -0-
- ----------------------------
(1) Based on the closing sales price on December 31, 2001 of $0.40.
OTHER PLANS
The Company has not adopted any other long-term incentive plans or
defined benefit or actuarial pension plans.
EMPLOYMENT AGREEMENTS
Mr. Jenkins serves as the Company's President, Chief Executive Officer
and a Director pursuant to an employment agreement, as amended effective January
1, 2002, expiring on December 31, 2005. Under the agreement, Mr. Jenkins
receives a base salary of not less than $350,000 per year. If the Company
achieves, during any calendar quarter beginning January 1, 2002, a ratio of
EBITDA to sales of 20% or more, Mr. Jenkins will be paid a bonus for the quarter
of 1% of the Company's EBITDA during the quarter. As an incentive to retain Mr.
Jenkins' services, the Company agreed to loan Mr. Jenkins the sum of $190,000,
bearing interest at the applicable federal rate, to be repaid at the rate of
one-third of the principal, plus accrued interest, on October 1 of each of the
years 2002, 2003 and 2004. If Mr. Jenkins remains employed by the Company on
September 30 preceding the date annual principal and interest is due on the
loan, the sum due and owing the following day is forgiven. In the event of a
Change of Control, as defined, the death or permanent disability of Mr. Jenkins
or in the event his employment is terminated without cause, the entire amount
owing by Mr. Jenkins is forgiven. In
-6-
the event of a Change of Control, as defined, the Company agrees that the
employment agreement will terminate and Mr. Jenkins will be paid a sum equal to
three times the compensation paid to Mr. Jenkins during the twelve months
preceding the Change of Control. A Change of Control is defined in the agreement
as any person or group of persons acquiring 20% or more of the outstanding
shares of voting capital stock of the Company, the sale of more than 25% of the
assets of the Company in a single or series of related transactions, a merger of
the Company with any other person or firm, a change, during any period of twelve
consecutive calendar months, in the individuals who were Directors at the
beginning of such period (including Directors whose election or nomination for
election was approved by at least two-thirds of the Directors then in office who
were Directors at the beginning of the period or whose election was so approved)
and such persons cease for any reason other than death or disability to
constitute a majority of the Directors then in office, or St. James Capital
Corp. ceases to be the general partner, managing partner or otherwise ceases to
control St. James Capital Partners, L.P. or SJMB, L.P. The Company also agreed
to issue to Mr. Jenkins a five-year common stock purchase warrant to purchase
2.5 million shares of stock exercisable at $0.75 per share. In the event of Mr.
Jenkins' death, subject to any restrictions contained in the Company's agreement
with General Electric Capital Corporation (GECC), the Company agreed to
repurchase the shares and options held by Mr. Jenkins at the fair market value
of the shares, as to shares repurchased, and the difference between the fair
market value and the option exercise price, as to options repurchased. Under the
agreement, the fair market value is the average of the mid-point between the bid
and asked prices for the Company's common stock for the twenty trading days
preceding death. The Company also confirmed the prior agreement to pay to Mr.
Jenkins in the event of a sale of the Company, a sum equal to 1% of the gross
sale proceeds or gross value of any stock received, subject to a maximum payment
of $500,000. The amended employment agreement further provides that while in the
employ of the Company and thereafter Mr. Jenkins will not divulge or use any
confidential information of the Company and during the term of his employment
will not engage in activities in competition with the Company.
The Company has entered into five-year employment agreements
terminating on March 31, 2006 with each of Allen R. Neel, Executive
Vice-President and Danny R. Thornton, Vice-President, Operations, of the
Company. Mr. Neel receives base compensation of $139,000 per year. Mr. Thornton
receives base compensation of $115,000 per year. On each anniversary date of the
agreements, the Company and the employee agree to renegotiate the base salary
taking into account the rate of inflation, overall profitability and the cash
position of the Company, the performance and profitability of the areas for
which the employee is responsible and other factors. The agreements contain
restrictions on such persons engaging in activities in competition with the
Company during the term of their employment and for a period of two years
thereafter.
-7-
DIRECTORS' COMPENSATION REPORT
The Company's full Board of Directors acts on matters
involving the compensation of the Company's executive officers and employees and
the grant of options under the Company's option plans other than the 2000 Stock
Incentive Plan. At the present time, a compensation committee of the Board of
Directors has not been appointed. Messrs. Jenkins and Thompson have been
appointed to the option committee under the 2000 Stock Incentive Plan. Executive
officers who are Directors whose compensation is being considered do not
participate in board or committee actions regarding their compensation. The
Board of Directors seeks to assure that the Company's executive officers are
adequately and fairly compensated and that their compensation is competitive
with other similar-sized companies in the oilfield service industry and, at the
same time, reflecting their individual performance and responsibilities within
the Company. Historically, the Board has compensated executive officers
primarily through the payment of salaries. In recent years, the Company's
ability to pay salaries has been impacted by its limited financial resources.
Mr. Jenkins, the Company's chief executive officer, is employed
pursuant to an employment agreement, as amended effective January 1, 2002,
whereby he is to receive a base salary of not less than $350,000 per year. If
the Company achieves, during any calendar quarter beginning January 1, 2002, a
ratio of EBITDA to sales of 20% or more, Mr. Jenkins will be paid a bonus for
the quarter of 1% of the Company's EBITDA during the quarter. This employment
agreement is more fully described above.
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
Company's (BWWC) cumulative total stockholder return on its Common Stock with
the cumulative total return on the published Standard & Poor's 500 Stock Index
(S&P 500) and the cumulative total return on Standard & Poor's 500 Oil and Gas
Equipment and Services Index (S&P 500 O&G) over the preceding five-year period.
The following graph is presented as required by SEC rules.
-8-
[GRAPHIC OMITTED]
---------------------------------------------------
1996 1997 1998 1999 2000 2001
---------------------------------------------------
S&P 500 100 133.3 171.3 207.4 188.5 166.2
- ------------------------------------------------------------------------
S&P 500 O&G 100 153.3 87.81 117.8 156.1 102.5
- ------------------------------------------------------------------------
BWWC 100 174.3 24.27 15.05 8.98 9.7
- ------------------------------------------------------------------------
The comparison of total return on investment (change in year-end stock
price plus reinvested dividends) assumes that $100 was invested on December 31,
1996 in the Company's Common Stock, the S&P 500 Index and the S&P 500 Oil and
Gas Equipment and Services Index. It includes the reinvestment of any dividends.
The Company has never paid any cash dividends.
The Report of the Compensation Committee or Executive Compensation and
the Performance Graph are not deemed to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, or incorporated by reference in any
documents so filed.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
Board of Directors. The Company's Board of Directors held four meetings
during the year ended December 31, 2001. Each of the Company's Directors
participated in all of the meetings of the Board and of each committee of the
board of which he is a member, except that Mr. Alan W. Mann, a Director until
September, 2001, and Mr. Thompson each missed attending one meeting of the Board
of Directors.
-9-
Audit Committee. Messrs. Jenkins, Underbrink and Thompson, constituting
all of the Company's Directors, also constitute the Audit Committee of the
Company's Board of Directors. The Audit Committee, among other things, meets
with the Company's independent accountants to review the Company's accounting
policies, internal controls and other accounting and auditing matters; makes
recommendations as to the engagement of independent accountants; and reviews the
letter of engagement and statement of fees relating to the scope of the annual
audit and special audit work which may be recommended or required by the
independent accountants. Each of Messrs. Underbrink and Thompson is, in the
opinion of the Company's Board of Directors, an "independent director," as that
term is defined under the Rules relating to the NASDAQ Stock Market. As an
employee of the Company, Mr. Jenkins is not an "independent director" as defined
in the Rules. His presence on the Audit Committee has been considered required
in the best interests of the Company because of his knowledge and familiarity
with the Company. In the year 2000, the Securities and Exchange Commission
adopted new rules relating to the disclosure of information about companies'
audit committees. The new rules require that the Company's proxy statement
contain a report of the audit committee addressing specific matters and that a
company's audit committee charter be included as an attachment to the proxy
statement at least once every three years. The audit committee charter was
included as an exhibit to the Company's proxy statement dated September 14,
2001.
The Audit Committee's Report follows.
Audit Committee Report
The Audit Committee has reviewed and discussed the Company's audited
consolidated financial statements with management. Further, the Audit Committee
has discussed with the independent public accountants the matters required to be
discussed by the Statement on Auditing Standards No. 61 (SAS 61 - Communication
with Audit Committees), as amended, relating to the accountants' judgment about
the quality of the Company's accounting principles, judgments and estimates, as
applied in its financial reporting.
The Audit Committee also has received the written disclosures and the
letter from the independent public accountants required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees)
that relates to the accountants' independence from the Company and its
subsidiaries and has discussed with the independent public accountants their
independence.
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2001, for filing with the Securities and Exchange Commission.
-10-
Audit Committee
Charles E. Underbrink, Chairman
John L. Thompson
William L. Jenkins
Other Committees. The Company's Board of Directors has not appointed
either a compensation committee or a nominating committee. Messrs. Underbrink,
Thompson and Jenkins constitute the Executive Committee of the Board of
Directors.
-11-
2001 AUDIT AND RELATED FEES
The following sets forth fees incurred by the Company during the year
ended December 31, 2001 for services provided by PricewaterhouseCoopers LLP, the
Company's independent public accountant:
Financial Information
Financial Statement Systems Design and All Other
Fees Implementation Fees Fees
- ------------------------------------- ------------------------------------------ ------------------------
$364,245 $-0- $28,354
The Company's Board of Directors believes that the provision of the
services during the year ended December 31, 2001 other than those relating to
Financial Statement Fees is compatible with maintaining the independence of
PricewaterhouseCoopers LLP
CERTAIN TRANSACTIONS
Commencing in June 1997 through February, 2000, the Company entered
into a series of transactions whereby it sold to St. James Capital Partners,
L.P., SJMB, L.P. and their affiliates (collectively referred to as "St. James")
on the following dates for an aggregate purchase price of $26.4 million the
principal amounts of 15% Convertible Promissory Notes and common stock purchase
warrants, all expiring on December 31, 2004, to purchase the number of shares
stated as follows:
DATE PRINCIPAL AMOUNT OF NOTES(1) NUMBER OF WARRANTS (5)
--------------------------- ------------------------------ ------------------------
June 6, 1997 $2.0 million(2) 2,442,000
October 9, 1997 $2.9 million 4,478,277
January 23, 1998 $10.0 million(3) 18,000,000
October 30, 1998 $2.0 million 4,000,000
February 18, 1999 $2.5 million 4,150,000
December 17, 1999 $3.5 million 14,350,000
February 14, 2000 $3.5 million(4) 14,350,000
- ---------------------------
(1) Convertible at a current conversion price of $0.75 per share, as
adjusted through December 17, 1999 pursuant to anti-dilution
adjustments, subject to further possible adjustment as provided in the
terms of the warrants.
(2) Excludes an additional $3.0 million borrowed in June 1997 that was
repaid in October 1997.
-12-
(3) On December 14, 2000 $1,750,000 of this note was converted into
2,333,333 shares of Common Stock, leaving a remaining principal balance
of $8,250,000 convertible into an aggregate of 11,000,000 shares of
Common Stock.
(4) On September 14, 2001, $83,118 of this principal balance was repaid,
leaving a remaining principal balance of $3,416,882 convertible into
an aggregate of 4,555,843 shares of Common Stock.
(5) Each warrant represents the right to purchase one share of Common Stock
at $0.75 per share, subject to possible further anti-dilution
adjustments. In March 2002, in connection with the extension of the
maturity date of $17.7 million indebtedness, the Company agreed to
extend the expiration date of all these warrants to December 31, 2004.
Except for those terms relating to the amounts of securities purchased,
maturity and expiration dates, interest rates, and conversion and exercise
prices, each of such transactions contained substantially identical terms and
conditions relating to the purchase of the securities involved. Payment of
principal and interest on all the notes is collateralized by substantially all
the assets of the Company, subordinated to borrowings by the Company from GECC
in the maximum aggregate amount of $40.0 million. The notes are convertible into
shares of the Company's Common Stock at the conversion prices set forth in the
tables above. The conversion price of the Notes and the exercise price of the
Warrants is subject to anti-dilution adjustments for certain issuances of
securities by the Company at prices per share of Common Stock less than the
conversion or exercise price then in effect in which event the conversion price
and exercise price are reduced to the lower price at which such shares were
issued. As a consequence of several transactions involving the Company and St.
James, the conversion and exercise prices have been reduced pursuant to the
anti-dilution adjustments to $0.75 per share. The shares issuable on conversion
of the notes and exercise of the warrants have demand and piggy-back
registration rights under the Securities Act of 1933. The Company agreed that
one person designated by St. James would be nominated for election to the
Company's Board of Directors. Mr. John L. Thompson, currently a Director of the
Company, serves in this capacity. The Agreements grant St. James certain
preferential rights to provide future financings to the Company, subject to
certain exceptions. The notes also contain various affirmative and negative
covenants, including a prohibition against the Company consolidating, merging or
entering into a share exchange with another person, with certain exceptions,
without the consent of St. James. Events of default under the notes include,
among other events, (i) a default in the payment of principal or interest; (ii)
a default under any of the notes and the failure to cure such default for five
days, which will constitute a cross default under each of the other notes; (iii)
a breach of the Company's covenants, representations and warranties under any of
the Agreements; (iv) a breach under any of the Agreements between the Company
and St. James, subject to certain exceptions; (v) any person or group of persons
acquiring 40% or more of the voting power of the Company's outstanding shares
who was not the owner thereof as of October 30, 1998, a merger of the Company
with another person, its dissolution or liquidation or a sale of all or
substantially all its assets; and (vi) certain events of bankruptcy. In the
event of a default under any of the notes, subject to the terms of an agreement
between St. James and GECC, St. James could seek to foreclose against the
collateral for the notes.
-13-
On December 14, 2000, St. James converted $1,750,000 principal amount
of a note and $2,013,111 of accrued interest on indebtedness owing to it into
5,017,481 shares of the Company's Common Stock at a conversion price of $0.75
per share.
In February, 2000, Hub, Inc., a corporation of which Mr. Underbrink is
a Director, purchased for $500,000 an $800,000 note of the Company payable to
Fleet Capital Corporation, the Company's previous senior secured lender. Hub,
Inc. agreed to accept $500,000 from the Company in payment of the note. Hub,
Inc. was paid $500,000 in February, 2000.
In February 2001, the Company issued to Mr. Underbrink and St. James
five-year warrants to purchase 700,000 and 400,000 shares, respectively, of the
Company's Common Stock at exercise prices of $0.75 per share. The warrants were
issued in consideration of guarantees extended to the Company by Mr. Underbrink
and St. James in connection with the Company's borrowings from Coast Business
Credit in 2000. The holders of the warrants have the right to include the shares
issuable on exercise included in any registration statement filed by the Company
under the Securities Act of 1933, as amended, subject to certain limitations.
On June 17, 1999, the Company sold for $200,000 approximately $329,000
of trade accounts receivable, which was fully reserved due to the customer
declaring bankruptcy, to RJ Air, LLC, an entity partially owned by John L.
Thompson, a member of the Company's Board of Director's. As of December 31,
2000, the Company has collected $100,000 of the sale price. The remaining
$100,000 is represented by an unsecured promissory note executed by Mr. Thompson
dated March 1, 2002 in the principal amount of $100,000 bearing interest at the
rate of 6% per annum from the inception of sale of the accounts receivable with
$50,000, plus one-half of the interest then accrued, due on December 31, 2002
and the balance of principal and interest due on June 30, 2003.
In connection with the GECC refinancing, the Company agreed with the
holders to extend the maturity date of $6.9 million of the $7.0 million
principal amount of promissory notes due on June 30, 2001 to December 31, 2004.
The remainder of the outstanding principal notes was repaid. The notes bear
interest at 15% per annum and are convertible into shares of the Company's
common stock at a conversion price of $0.75 per share, subject to an
anti-dilution adjustment for certain issuances of securities by the Company at
prices per share of common stock less than the conversion price then in effect,
in which event the conversion price is reduced to the lower price at which the
shares were issued. As a condition to extend the maturity date, holders of the
notes are to receive additional five-year common stock purchase warrants
exercisable at $0.75 per share to such holders if the Company has not entered
into a purchase or merger agreement on or before certain dates. Because such an
agreement was not entered into by December 31, 2001, the Company became
obligated to issue approximately 2.4 million additional warrants. In the event
such an agreement is not entered into by December 31, 2002 with a closing by
March 31, 2003, the Company will be obligated to issue approximately 5.2
-14-
million additional warrants and if such agreement is not entered into by
December 31, 2003 with a closing by March 31, 2004, the Company will be
obligated to issue approximately 10.4 million additional warrants. Under the
terms of the note extensions, in the event that the Company has not entered into
a purchase or merger agreement by December 31, 2003 with a closing date no later
than March 31, 2004, an aggregate of 18.2 million additional warrants will have
been issued. The exercise price of the warrants that are to be issued are
subject to anti-dilution adjustments for certain issuances of securities by the
Company at prices per share of common stock less than the exercise price then in
effect in which event the exercise price is reduced to the lower price at which
such shares were issued.
The Company also extended until December 31, 2004 the promissory notes
totaling $17.7 million owing to St. James which matured in March, 2001. The
notes bear interest at 15% per annum and are convertible into shares of the
Company's common stock at a conversion price of $0.75 per share, subject to an
anti-dilution adjustment for certain issuances of securities by the Company at
prices per share of common stock less than the conversion price then in effect,
in which event the conversion price is reduced to the lower price at which the
shares were issued.
In connection with the extension of the maturity date of $6.9 million
and $17.7 million of indebtedness described above, the Company agreed to extend
the expiration date of warrants to purchase an aggregate of 33,070,277 shares of
the Company's common stock to December 31, 2004.
The Company has agreed to pay to SJMB, L.P. a fee of approximately
$274,000 in consideration of SJMB, L.P. providing cash collateral of $8.2
million deposited to secure the performance of the continuing guaranty extended
by SJMB, L.P. of the Company's borrowing from Coast. In addition, SJMB, L.L.C.
received a fee in September, 2001 of $200,000 for services provided by SJMB,
L.L.C. in connection with the Company's borrowing from GE Capital. Under the
terms of the Credit Facility, the Company is restricted from paying any further
sums to either of SJMB, L.P. or SJMB, L.L.C. unless the Company's quarterly
report on Form 10-Q reflects that the Company had EBITDA of at least $7.0
million for the quarter ended September 30, 2001 and the amount of such payment
is limited to no more than $150,000. The EBITDA sum was not met and the $274,000
balance due SJMB, L.P. is deferred.
On November 20, 2000, the Company entered into an equipment lease with
Big Foot Rental Tool Service, L.L.C., a Louisiana limited liability company of
which Mr. Neel is an approximately 20% owner. The Company leased for a term of
twenty-four months oil and gas well service equipment with an original cost of
approximately $539,000 for a monthly rental of approximately $24,200 over the
term of the lease. At the expiration of the lease, the Company had the option to
purchase the equipment for approximately $54,000. The Company entered into the
lease with Big Foot Rental Tool Service, L.L.C. to provide needed well service
equipment at times when other sources of financing to acquire the equipment was
unavailable. The rental agreement was terminated in September 2001 and the
Company purchased the equipment for $393,000.
-15-
PRINCIPAL AND OTHER STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of August 14, 2002 (a) by each person
who is known by the Company to own beneficially more than five percent (5%) of
the Company's Common Stock, (b) by each of the Company's Directors and officers,
and (c) by all Directors and officers as a group. As of August 14, 2002, the
Company had 12,496,408 shares of Common Stock outstanding.
NUMBER OF SHARES PERCENTAGE OF
NAME AND ADDRESS (1)(2) OWNED OUTSTANDING SHARES(3)
------------------------------------------- ------------------------- -----------------------
William L. Jenkins 6,710,000(4) 34.9%
Danny R. Thornton 1,250,666(5) 9.1%
Allen R. Neel 1,443,261(6) 10.4%
Charles E. Underbrink 113,259,378(7) 93.8%
c/o St. James Capital Partners, L.P.
4295 San Felipe
Suite 200
Houston, TX 77027
John L. Thompson 108,916,938(8) 93.6%
c/o St. James Capital Partners, L.P.
4295 San Felipe - Suite 200
Houston, TX 77027
St. James Capital Partners, L.P. 106,937,077(9) 93.5%
("SJCP"), SJMB, L.P. ("SJMB"), and
affiliates
4295 San Felipe - Suite 200
Houston, Texas 77027
Bendover Corp. (10) 3,814,235 30.5%
Alan W. Mann
M. Dale Jowers
1053 The Cliffs Blvd.
Montgomery, TX 77356
All Directors and Officers as a Group
(5 persons) 122,663,305 94.4%
(1) This tabular information is intended to conform with Rule 13d-3
promulgated under the Securities Exchange Act of 1934 relating to the
determination of beneficial ownership of securities. The tabular
information gives effect to the exercise of warrants or options
exercisable within 60 days of the date of this table owned in each case
by the person or group whose percentage ownership is set forth opposite
the respective percentage and is based on the assumption that no other
person or group exercise their option.
-16-
(2) Unless otherwise indicated, the address for each of the above is c/o
Black Warrior Wireline Corp., 100 Rosecrest Lane, Columbus, Mississippi
39701.
(3) The percentage of outstanding shares calculation is based upon
12,496,408 shares outstanding as of August 14, 2002, except as
otherwise noted.
(4) Includes 6,500,000 shares issuable on exercise of options.
(5) Includes 1,250,000 shares issuable on exercise of an option.
(6) Includes 1,050,000 shares issuable on exercise of an option. Also
includes an aggregate of 393,261 shares issuable on exercise of
warrants and conversion of notes and accrued interest through August
14, 2002.
(7) Includes an aggregate of 106,937,077 shares held directly by SJCP, SJMB
and their affiliates and shares issuable on exercise of warrants and
conversion of notes and accrued interest through August 14, 2002 deemed
held beneficially by Messrs. Underbrink and Thompson because of their
relationships with SJCP and SJMB. Also includes an aggregate of
6,322,301 shares issuable on exercise of warrants and conversion of
notes and accrued interest through August 14, 2002 held directly by Mr.
Underbrink and shares issuable on conversion of notes and accrued
interest through August 14, 2002 held jointly by Messrs. Underbrink and
Thompson.
(8) Includes an aggregate of 106,937,077 shares held directly by SJCP, SJMB
and their affiliates and shares issuable on exercise of warrants and
conversion of notes and accrued interest through August 14, 2002 deemed
held beneficially by Messrs. Underbrink and Thompson because of their
relationships with SJCP and SJMB. Also includes an aggregate of
1,979,861 shares issuable on exercise of warrants and conversion of
notes and accrued interest through August 14, 2002 held directly by Mr.
Thompson and shares issuable on conversion of notes and accrued
interest through August 14, 2002 held jointly by Messrs. Underbrink and
Thompson.
(9) Includes shares issuable to St. James Capital Partners, LP and St.
James Merchant Bankers L.P. and their affiliates on conversion of
notes and accrued interest through August 14, 2002 and exercise of
warrants. See "Certain Transactions."
(10) Based on information contained in the Schedule 13D dated October 9,
1997. On October 9, 1997, the Company issued 647,569 shares and paid
$586,000 in cash to purchase substantially all the assets of
Diamondback Directional, Inc. (which corporation subsequently changed
its name to Bendover Corp.). As of December 22, 1999, the Company
issued an additional 2,666,667 shares to Bendover Corp. as part of the
consideration paid to resolve certain litigation. Messrs. Mann and
Jowers each own approximately 42.5% of the outstanding capital stock of
Bendover Corp.
CERTIFYING ACCOUNTANT
No principal accountant has been selected or is being recommended to
security holders for election, approval or ratification in the current year. The
Company's Board of Directors has not completed its selection procedures.
The Company expects a representative of PricewaterhouseCoopers LLP to
be present at the Meeting and to be available to respond to appropriate
questions or make a statement if they desire to do so.
SUBMISSION OF STOCKHOLDERS' PROPOSALS FOR 2003 ANNUAL MEETING
Any proposals which Stockholders intend to present for a vote of
Stockholders at the Company's 2003 Annual Meeting, and which such Stockholders
desire to have included in the Company's Proxy Statement and Form of Proxy
relating to that Meeting, must be sent to the Company's executive office and
received by the Company on or before April 23, 2003.
-17-
GENERAL
The cost of soliciting proxies will be borne by the Company. In
addition to solicitation by use of the mails, certain officers and regular
employees may solicit proxies personally and by telephone, and the Company will
request banks, brokerage houses and nominees and fiduciaries to forward
soliciting material to their principals and will reimburse them for their
reasonable out-of-pocket expenses.
The Company's annual report on Form 10-K for the year ended December
31, 2001, including financial statements, and its quarterly report on Form 10-Q
for the quarter and six months ended June 30, 2002 are being mailed to
Stockholders herewith. Such reports are not, however, a part of this proxy
statement.
By Order of the Board of Directors
Dated: August 21, 2002 Allen R. Neel, Secretary
-18-
APPENDIX: FORM OF PROXY
BLACK WARRIOR WIRELINE CORP.
100 Rosecrest Lane
Columbus, Mississippi 39701
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William L. Jenkins and Danny Ray
Thornton, and each of them, as proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and vote, as designated
below, all the shares of common stock of Black Warrior Wireline Corp. held of
record by the undersigned on August 14, 2002 at the Annual Meeting of
Shareholders to be held on September 23, 2002 or any adjournment thereof.
1. Election of Directors
|_| For all nominees listed below (except as marked to
contrary below)
|_| Withhold Authority to vote for all nominees listed
below
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
William L. Jenkins
Charles E. Underbrink
John L. Thompson
2. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR EACH OF THE DIRECTORS.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING
AS ATTORNEY, AS EXECUTOR, ADMINISTRATOR, TRUSTEE, OR GUARDIAN, PLEASE GIVE FULL
TITLE AS
-19-
SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT
OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME
BY AUTHORIZED PERSON.
Dated: , 2002
--------------
-------------------------------------
Signature
Title (if required)
-------------------------------------
Signature (if held jointly)
-20-