The purchase price in the transaction is $45,000,000 in cash adjusted as of the closing date by the amount by which Black Warrior's net operating working capital, as defined in the letter of intent, is greater or less than $3,600,000 and further adjusted as of the closing date by the amount by which Black Warrior's unrestricted cash is greater or less than $500,000. Also added to the purchase price will be the amount of certain to-be-agreed upon capital expenditures made by Black Warrior during the period commencing September 30, 2004 through the closing date. Black Warrior's net operating working capital is defined in the letter of intent as its restricted cash, plus trade accounts receivable, plus inventories, plus prepaid expenses, plus other current operating assets; and minus trade accounts payable, minus accrued operating expenses, minus other current operating liabilities, minus the current interest-bearing debt for financing business insurance coverage. The $3,600,000 net operating working capital sum is subject to possible increase to a mutually agreed level based upon the acquiror's due diligence analysis of the Company's level of sustainable accounts payable. From the cash payment at closing will be deducted an amount sufficient to pay substantially all of the Company's outstanding interest bearing indebtedness and the acquirer will not bear any of the Company's liabilities other than the operating working capital liabilities.
After repayment at the closing of substantially all the Company's outstanding interest bearing indebtedness, the sum remaining, less transaction expenses, will be available for payment to the Company's stockholders. Because the sum remaining for stockholders will be dependent upon adjustments based on the amounts of the Company's net operating working capital and unrestricted cash at the closing as well as the to be agreed upon capital expenditures through closing and the Company's operating results and cash flow through the closing, the Company is unable to state at this time the sum it expects to be remaining after the closing for distribution to stockholders.
The proposed transaction is subject to numerous conditions, including the negotiation and execution of a definitive agreement. Closing of the transaction will be subject to stockholder approval, among other closing conditions. Black Warrior believes the proposed transaction, if completed, will probably close late in the first quarter or in the second quarter of 2005.
In connection with obtaining stockholder approval for the transaction, the Company will solicit the vote of its stockholders at a meeting to be scheduled and will mail prior to the meeting to all stockholders as of a record date to be determined a proxy statement describing the proposed transaction. Stockholders are advised to read the proxy statement when it is available because it will contain important information. Stockholders and investors will be able to obtain the proxy statement after it is filed and any other relevant documents for free at the website of the Securities and Exchange Commission.
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