EXHIBIT 10.12
EXECUTION COPY
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W&T OFFSHORE, INC.
2,000,000 SHARES OF SERIES A PREFERRED STOCK
EXCHANGE AGREEMENT
DATED AS OF NOVEMBER 25, 2002
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TABLE OF CONTENTS
Page
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ARTICLE I AUTHORIZATION, ISSUANCE AND EXCHANGE OF THE SERIES A PREFERRED STOCK........1
1.1 Authorization of the Series A Preferred Stock.................................1
1.2 Issuance of the Series A Preferred Stock......................................1
ARTICLE II CLOSING.....................................................................2
2.1 Stockholder Consent...........................................................2
2.2 Bethea Purchase Agreement.....................................................2
2.3 Closing.......................................................................2
2.4 Deliveries....................................................................2
2.5 Transaction Expenses..........................................................2
ARTICLE III REPRESENTATIONS AND WARRANTIES OF W&T.......................................2
3.1 Representations and Warranties Relating to W&T................................2
3.2 Representations and Warranties Related to the Burlington Assets..............21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...........................22
4.1 Investment Representations...................................................22
4.2 Authorization; Binding Obligations...........................................22
4.3 Compliance with Instruments, etc.............................................22
4.4 Sophistication; Due Diligence................................................23
4.5 Agent's Fees.................................................................23
ARTICLE V CONDITIONS TO OBLIGATIONS OF THE PURCHASERS................................23
5.1 Representations and Warranties Correct.......................................23
5.2 Performance..................................................................23
5.3 Compliance Certificate.......................................................23
5.4 No Impediments...............................................................23
5.5 No Material Adverse Change...................................................24
5.6 Legal Investment.............................................................24
5.7 Qualifications...............................................................24
5.8 Employment Agreement.........................................................24
5.9 Issuance Taxes...............................................................24
5.10 Stockholders' Agreement......................................................24
5.11 Directors....................................................................24
5.12 Credit Agreement.............................................................24
5.13 Bethea Agreements............................................................24
5.14 Burlington Transaction.......................................................25
5.15 Proceedings and Other Documents..............................................25
5.16 Opinions of Counsel..........................................................25
5.17 Consents, Waivers, Etc.......................................................25
5.18 Termination of Stockholders' Agreement.......................................25
5.19 Shareholder Loans............................................................25
5.20 LLC Purchase Agreement.......................................................25
5.21 Other Matters................................................................26
ARTICLE VI CONDITIONS TO OBLIGATIONS OF W&T...........................................26
6.1 Representations and Warranties Correct.......................................26
6.2 Legal Investment.............................................................26
6.3 Presentation of Common Stock Certificates....................................26
6.4 Performance..................................................................26
6.5 Bethea Agreements............................................................26
6.6 Agreement of Toronto Dominion................................................26
ARTICLE VII COVENANTS OF W&T...........................................................27
7.1.1 Reports......................................................................27
7.1.2 Reports to Purchasers Representative.........................................28
7.2 Accounts and Records.........................................................29
7.3 Inspection...................................................................29
7.4 Independent Accountants......................................................30
7.5 Further Assurances...........................................................30
7.6 Operation of Business........................................................30
7.7 Notice of Adverse Change.....................................................30
7.8 Certain Pre-Closing Tax Matters..............................................31
7.9 Additional Covenants.........................................................31
7.10 Burlington Transaction.......................................................32
7.11 Interim Financials...........................................................33
7.12 Long-Term Incentive Compensation Plan........................................33
7.13 Reincorporation in Delaware..................................................33
7.14 By-laws......................................................................33
7.15 Key Man Life Insurance.......................................................33
7.16 Subchapter "S"...............................................................33
ARTICLE VIII REGISTRATION RIGHTS........................................................34
8.1 Restrictive Legend...........................................................34
8.2 Certain Definitions..........................................................34
8.3 Requested Registration.......................................................35
8.4 Piggyback Registrations......................................................36
8.5 Holdback Agreements..........................................................37
8.6 Registration Procedures......................................................38
8.7 Indemnification..............................................................40
8.8 Information by Holders.......................................................42
8.9 Limitations on Registration of Issues of Securities..........................42
8.10 Rule 144 Reporting...........................................................42
8.11 Selection of Underwriters....................................................43
ARTICLE IX TERMINATION................................................................43
9.1 Termination of Agreement.....................................................43
9.2 Effect of Termination........................................................43
ARTICLE X AMENDMENT AND WAIVER.......................................................43
ARTICLE XI LOST OR MUTILATED CERTIFICATES.............................................44
ARTICLE XII MISCELLANEOUS..............................................................44
12.1 Effectiveness................................................................44
12.2 Governing Law................................................................44
12.3 Survival.....................................................................44
12.4 Public Announcements.........................................................45
12.5 Successors and Assigns.......................................................45
12.6 Entire Agreement.............................................................45
12.7 Notices, etc.................................................................45
12.8 Delays or Omissions..........................................................46
12.9 Severability.................................................................46
12.10 Expenses.....................................................................47
12.11 Litigation; Consent to Jurisdiction..........................................47
12.12 Titles and Subtitles.........................................................47
12.13 Counterparts.................................................................47
12.14 Direct Purchase..............................................................47
EXHIBITS
Exhibit A - Form of Stockholders' Agreement
Exhibit B - Form of Amended and Restated Articles of Incorporation
Exhibit C - Form of Krohn Employment Agreement
Exhibit D - Form of Bethea Redemption Agreement
Exhibit E - Form of Bethea Purchase Agreement
Exhibit F - Form of Opinion of Adams and Reese, L.L.P.
Exhibit G - Intentionally Omitted
Exhibit H - Election of Subchapter "S" Status by W&T and Corresponding
Letter of Acceptance from the Internal Revenue Service
Exhibit I - LLC Purchase Agreement
Exhibit J - Stockholder Consent
Exhibit K - Form of Amended and Restated By-Laws
SCHEDULE
Schedule 1 - List of Purchasers and Number of Series A Preferred Stock to be
Issued and Number of W&T Common Stock to be Exchanged
DISCLOSURE SCHEDULES
Schedule Section
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3.1(b) - Subsidiaries, etc.
3.1(c)(i) - Capitalization
3.1(c)(ii) - Capitalization
3.1(d) - Authorization; Binding Obligations
3.1(f) - Litigation
3.1(g) - Financial Statements
3.1(h)(i) - Taxes
3.1(h)(ii) - Taxes
3.1(h)(iii) - Taxes
3.1(h)(iv) - Taxes
3.1(h)(v) - Taxes
3.1(i) - Permits; Governmental and Other Approvals
3.1(j) - Sales Representative Customers and Key Employees
3.1(k) - Intellectual Property
3.1(l) - Material Agreements
3.1(m) - Insurance
3.1(n) - Properties; Liens and Encumbrances
3.1(n)(iv) - Properties; Liens and Encumbrances
3.1(n)(viii) - Properties; Liens and Encumbrances
3.1(o) - Leases
3.1(p)(i) - Environmental, Conservation, and Safety Matters
3.1(p)(ii) - Environmental, Conservation, and Safety Matters
3.1(p)(iii) - Environmental, Conservation, and Safety Matters
3.1(p)(iv) - Environmental, Conservation, and Safety Matters
3.1(p)(v) - Environmental, Conservation, and Safety Matters
3.1(p)(vii) - Environmental, Conservation, and Safety Matters
3.1(q)(i) - Oil and Gas Interests
3.1(q)(iii) - Oil and Gas Interests
3.1(q)(iii-a) - Oil and Gas Interests
3.1(q)(iv) - Oil and Gas Interests
3.1(q)(v) - Oil and Gas Interests
3.1(q)(vii) - Oil and Gas Interests
3.1(s-a) - Wells
3.1(s-b) - Wells
3.1(t) - Ordinary Course; No Material Adverse Change
3.1(u) - Agent's Fees
3.2(a) - Representations and Warranties Related to the Burlington Assets
7.6 - Operation of Business
7.9 - Additional Covenants
EXCHANGE AGREEMENT, dated as of November 25, 2002 (this "Agreement"), is
entered into by and among W&T Offshore, Inc., a Nevada corporation ("W&T"), and
the persons named on the signature pages of this Agreement as purchasers (each,
a "Purchaser" and collectively, the "Purchasers"). Capitalized terms used but
not defined herein shall have the meanings ascribed to them in the Stockholders'
Agreement by and among W&T and each of its stockholders (the "Stockholder's
Agreement") attached hereto as Exhibit A.
WHEREAS, prior to the Closing (as hereinafter defined in Section 2.2),
the Purchasers shall have purchased 1,000 shares of W&T Common Stock (as
hereinafter defined in Section 3.1(c)) from William C. Bethea for an aggregate
purchase price of $50,000,000 in contemplation of exchanging such shares of W&T
Common Stock for Series A Preferred Stock (as defined below) of W&T at the
Closing; and
WHEREAS, prior to the Closing, W&T will amend and restate its Articles
of Incorporation to correspond to Exhibit B attached hereto, with such changes
as are necessary to conform to the Stockholders' Agreement (the "Articles of
Incorporation") authorizing a new class of preferred stock (the "Series A
Preferred Stock");
WHEREAS, the Purchasers wish to exchange their 1,000 shares of W&T
Common Stock for, and W&T wishes to issue to the Purchasers in exchange
therefor, an aggregate of 2,000,000 Series A Preferred Stock of W&TZZZZZ ; and
WHEREAS, the Purchasers and W&T desire to provide for such issuance and
exchange and to establish various rights and obligations in connection
therewith.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto agree as follows:
ARTICLE I
AUTHORIZATION, ISSUANCE AND EXCHANGE OF
THE SERIES A PREFERRED STOCK
1.1 Authorization of the Series A Preferred Stock. Prior to the
Closing, W&T will have filed the Articles of Incorporation with the Secretary of
State of the State of Nevada setting forth, among other things, terms of the
Series A Preferred Stock.
1.2 Issuance of the Series A Preferred Stock. Subject to the terms
and conditions hereof and in reliance on the representations and warranties
contained herein, or made pursuant hereto, W&T will issue to each Purchaser, and
such Purchaser will acquire from W&T, in exchange for all of such Purchaser's
shares of W&T Common Stock, at the Closing Time (as hereinafter defined in
Section 2.2), the number of shares of Series A Preferred Stock set forth
opposite the name of such Purchaser on Schedule 1 attached hereto.
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ARTICLE II
CLOSING
2.1 Stockholder Consent. Prior to January 2, 2003, the Purchasers
shall deliver to W&T a Stockholder Consent, executed by the Purchasers, in the
form of Exhibit J hereto.
2.2 Bethea Purchase Agreement. Immediately prior to the Closing, the
Purchasers shall execute and deliver the Bethea Purchase Agreement (attached
hereto as Exhibit E).
2.3 Closing. The closing of the exchange of shares of W&T Common
Stock for the Series A Preferred Stock (the "Closing") will take place at the
offices of W&T, 8 Greenway Plaza, Suite 1300, Houston, Texas 70046 at 10:00
a.m., local time, on January 2, 2003 if all of the conditions to the obligations
of the parties hereunder set forth in Article V and VI hereof which are capable
of being satisfied prior to the Closing Time have been satisfied or waived, or
such other time, date and place as shall be mutually agreed to by W&T and FS
Private Investments III LLC, on behalf of the Purchasers. Such time and date are
hereinafter referred to as the "Closing Time."
2.4 Deliveries. At the Closing, W&T will deliver to each Purchaser a
certificate or certificates (in definitive form) in such denominations and
registered in the name of such Purchaser (or in the name of such Purchaser's
nominee) representing the Series A Preferred Stock to be acquired by such
Purchaser against surrender to W&T of the shares of W&T Common Stock to be held
by the Purchasers as set forth on Schedule 1, by delivery to W&T of stock
certificates representing all such shares, duly endorsed in blank or accompanied
by stock powers duly endorsed in blank.
2.5 Transaction Expenses. At the Closing, W&T shall remit to the
Purchasers the entire amount of the Transaction Expenses (as hereinafter defined
in Section 12.10).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF W&T
3.1 Representations and Warranties Relating to W&T. For purposes of
the representations and warranties contained in this Section 3.1, W&T shall be
deemed to include, unless the context otherwise requires, W&T and W&T Holdings,
LLC and no other subsidiaries of W&T. Specifically, W&T shall not include W&T
Offshore, LLC or the three subsidiaries of W&T formed to acquire certain assets,
liabilities, business or prospects associated with the assets of Burlington
Resources Offshore, Inc. ("Burlington") that W&T proposes to acquire pursuant to
the Burlington Agreement (as hereinafter defined). W&T represents and warrants
to the Purchasers on the date hereof and on the Closing Time to the following
effects. When used in this Agreement unless expressly stated otherwise, the
phrase "to the knowledge of W&T" shall mean what is actually known by Tracy W.
Krohn and W. Reid Lea, or what either of them would reasonably be expected to
know in view of his position as the chief executive officer and chief financial
officer, respectively, of a business organization similar to W&T. Any matter set
forth
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on any schedule as an exception to one representation and warranty shall be
deemed to be included on every other schedule that would be applicable to such
matter to the extent such other exception is reasonably apparent.
(a) Organization and Existence, etc. W&T (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now conducted and
proposed to be conducted, and (ii) is duly qualified to do business as a foreign
corporation and is in good standing (or the equivalent thereof under applicable
law) in each jurisdiction in which the conduct of its business requires such
qualification by reason of the ownership or leasing of property or otherwise
(except for those jurisdictions in which the failure so to qualify has not had
and will not have a W&T Material Adverse Effect). "W&T Material Adverse Effect"
means any development, change or effect or any series of related developments,
changes or effects that would be reasonably expected to impact the financial
condition or results of operations of W&T by at least $10,000,000. W&T has
furnished the Purchasers with true, correct and complete copies of the articles
of incorporation and By-laws (including any amendments to date of any thereof)
of W&T, each as in full force and effect on the date hereof.
(b) Subsidiaries, etc. Except for those described on
Schedule 3.1(b), (i) W&T has no subsidiaries and owns no securities of other
entities, and (ii) all issued and outstanding shares of capital stock or other
equity ownership interests of W&T's subsidiaries have been duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive rights
and are owned by W&T or a direct or indirect wholly-owned subsidiary of W&T,
free and clear of all Liens. As used herein, "Lien" means any lien, pledge,
claim, option, charge, easement, security interest, financing statement,
right-of-way, encumbrance or other right of any third party.
(c) Capitalization.
(i) As of the date hereof, (A) W&T's authorized
capital stock consists of: 100,000 shares of common stock, $.01 par value per
share ("W&T Common Stock"), of which 3,900 shares are validly issued and
outstanding, fully paid and nonassessable; and (B) W&T has outstanding the
securities set forth on Schedule 3.1(c)(i), which are convertible into or
exercisable or exchangeable for W&T Common Stock (the "W&T Derivative
Securities"). From the date hereof to the Closing Time, there will be no changes
in such authorized capital stock or W&T Derivative Securities, except as
contemplated by this Agreement. At the Closing, after giving effect to the
redemption of the W&T Common Stock from William C. Bethea, a 2,911.48115
stock-for-stock dividend to be effected immediately prior to the Closing Time,
W&T's issuance of the Series A Preferred Stock contemplated hereby and the
issuance of the shares of Common Stock to Jefferies & Company, Inc., as set
forth on Schedule 1, W&T's authorized capital stock shall consist of 20,000,000
shares of Common Stock, of which 7,601,536 shall be validly issued and
outstanding, fully paid and nonassessable, and of which 2,000,000 shall be
reserved for issuance upon conversion of the Series A Preferred Stock and (ii)
2,000,000 shares of Series A Preferred Stock, all of which will be validly
issued and outstanding.
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(ii) Schedule 3.1(c)(ii) lists each of the
shareholders and other security holders of record of W&T (other than the
Purchasers and Jefferies & Company, Inc.) and the number of shares and other
securities so held as of the date hereof and as of the Closing Time. At the
Closing, all the issued and outstanding shares of capital stock of W&T will be
free of preemptive and similar rights (except as provided in Section V of the
existing Stockholders' Agreement of W&T, a copy of which has been delivered to
the Purchasers) and will have been and will be offered, issued, sold and
delivered by W&T in transactions in compliance with applicable federal, state
and foreign securities laws. There are no outstanding agreements or commitments
requiring W&T to issue capital stock or W&T Derivative Securities, except for
this Agreement, W&T's obligations to issue 31,685 shares of W&T's Common Stock
to Jefferies & Company, Inc. and up to 505,344 shares of Common Stock as
contemplated by the Long-Term Incentive Compensation Plan.
(d) Authorization; Binding Obligations.
(i) Subject to the ratification to be provided by
the Board of Directors of W&T prior to the Closing Time, and subject to the
approval of the stockholders of W&T as set forth on Exhibit J and as otherwise
set forth on Schedule 3.1(d), W&T has full right, power and authority to execute
and deliver this Agreement, and such other documents furnished or to be
furnished by W&T hereunder, including the Stockholders' Agreement, and, subject
to and in accordance with the terms hereof and of the Stockholder's Agreement,
to consummate the transactions contemplated hereby and thereby and to perform
its obligations hereunder and thereunder. This Agreement, the Stockholders'
Agreement and each of the other agreements required to be delivered hereunder or
thereunder to which W&T is a party will be prior to the Closing Time, duly
authorized, executed and delivered by W&T, and each constitutes, or will
constitute when executed and delivered, a legal, valid and binding agreement of
W&T, enforceable against W&T in accordance with its terms, subject to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity.
Subject to the foregoing, the compliance by W&T with the provisions of this
Agreement, the Stockholders' Agreement or any of the other agreements required
to be delivered hereunder to which it is a party, and the consummation of the
other transactions herein or therein contemplated will not result in the
creation or imposition of any Lien upon any of the assets of W&T pursuant to the
terms or provisions of, or result in a breach or violation of or conflict with
any of the terms or provisions of, or constitute a default under, or give any
other party a right to terminate any of its obligations under, or result in the
acceleration of any obligation under, (i) the Articles of Incorporation and/or
By-laws or other governing instruments of W&T, (ii) any contract or other
agreement to which W&T is a party or by which W&T or any of its properties is
bound or affected, or (iii) any judgment, ruling, decree, order, statute, rule
or regulation (except state securities laws) of any court or other governmental
agency or body, domestic or foreign, applicable to the business or properties of
W&T.
(ii) The Series A Preferred Stock to be issued to the
Purchasers shall be duly authorized for issuance prior to the Closing, and, when
issued and delivered in accordance with the provisions of this Agreement, shall
be validly issued and outstanding, fully paid and nonassessable, will be free of
preemptive rights and free and clear of any Liens (other
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than as set forth in the Stockholders' Agreement) and will have the
designations, preferences and relative, participating, optional and special
rights as set forth in the Articles of Incorporation.
(iii) The shares of W&T Common Stock issuable upon
conversion of the Series A Preferred Stock (the "Conversion Shares") shall be
duly authorized and reserved for issuance prior to the Closing, and when issued
and delivered in accordance with the provisions of the Articles of
Incorporation, will be validly issued and outstanding, fully paid and
nonassessable and will be free of preemptive rights and granted clear of any
Liens (other than as set forth in the Stockholders' Agreement).
(e) Compliance with Instruments, etc. W&T is not in breach
or violation of, or in default under, any term or provision of (i) its
organizational and governing documents, (ii) any indenture, mortgage, deed of
trust, voting trust agreement, shareholders agreement, note agreement or other
agreement or instrument to which it is a party or by which it is or may be bound
or to which any of its property or assets is or may be bound or affected, or any
indebtedness, the effect of which breach or default, individually or in the
aggregate, may have a W&T Material Adverse Effect, or (iii) any statute,
judgment, decree, order, rule or regulation applicable to W&T or of any
arbitrator, court, regulatory body, administrative agency or any other
governmental agency or body, domestic or foreign, having jurisdiction over W&T
or any of its respective activities or properties and the effect of which breach
or default, individually or in the aggregate, would have a W&T Material Adverse
Effect.
(f) Litigation. Except as set forth on Schedule 3.1(f),
there has been no action, suit, proceeding, arbitration or investigation against
W&T (i) since January 1, 1992 but prior to January 1, 1997 which resulted in a
judgment or settlement involving in excess of $10,000,000 or (ii) since January
1, 1997. Except as set forth on Schedule 3.1(f), there is no action, suit,
proceeding, arbitration or investigation pending, or, to the knowledge of W&T,
threatened, against W&T before or by any court, regulatory body, arbitration
proceeding, or administrative agency or any other governmental agency or body,
domestic or foreign, or any action, suit, proceeding, arbitration or
investigation pending, or, to the knowledge of W&T, threatened, which (1)
challenges the validity of any action taken or to be taken pursuant to or in
connection with this Agreement or the consummation of the transactions
contemplated hereunder, including the issuance of the Series A Preferred Stock
to the Purchasers or (2) if adversely decided, could have a W&T Material Adverse
Effect. W&T has either furnished the Purchasers with true, correct and complete
copies of all material documentation related to the matters listed on Schedule
3.1(f), or has permitted representatives of the Purchasers to discuss such
matters with attorneys for W&T. Except as set forth on Schedule 3.1(f), W&T is
not subject to any judgment, order, writ, injunction, assessment, notice, claim
or decree of any governmental entity that has had or would be reasonably
expected to have a W&T Material Adverse Effect.
(g) Financial Statements. W&T has previously delivered to
the Purchasers true, correct and complete copies of its financial statements (on
a consolidated and consolidating basis) as at and for the years ended December
31, 1999, 2000 and 2001, and as at and for the nine-month period ended September
30, 2002 or such later period as may be available (such
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interim financial statements being referred to as the "Interim W&T Financial
Statements" and all such financial statements being collectively referred to as
the "W&T Financial Statements"). A true, correct and complete copy of the
Interim W&T Financial Statements are set forth on Schedule 3.1(g). The W&T
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied, and fairly present the
financial position of W&T as of the dates thereof and the results of its
consolidated operations and cash flows for the periods then ended. The W&T
Financial Statements (except for the Interim W&T Financial Statements) have been
audited by Ernst & Young LLP who are independent public accountants within the
meaning of the Securities Act and the rules and regulations promulgated
thereunder and they have expressed an opinion thereon. Except as set forth on
the balance sheet included in the Interim W&T Financial Statements or on
Schedule 3.1(g), W&T has no liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) (i) that would normally be required to be
reflected on a balance sheet or disclosed in the notes thereto in accordance
with GAAP consistently applied, except for liabilities incurred since the date
of such balance sheet in the ordinary course of business or (ii) to any officer,
director, shareholder or employee of W&T.
(h) Taxes.
(i) Except as set forth on Schedule 3.1(h)(i), (A)
all Tax (as hereinafter defined) returns and reports (including information
returns, declarations and reports) and amended or substituted returns and
reports required to be filed with any Taxing Authority (as hereinafter defined)
by or on behalf of W&T (collectively, the "W&T Tax Returns" and singularly, a
"W&T Tax Return"), have been or will be duly and timely filed when due in
accordance with all applicable laws (including any extensions of such due date);
(B) as of the time of filing, the W&T Tax Returns correctly reflected (and, as
to any W&T Tax Returns not filed as of the date hereof, will correctly reflect)
in all material respects the income or other measure of Tax and any other
information required to be shown therein; (C) all Taxes shown or required to be
shown as due and payable on the W&T Tax Returns have been timely paid or
withheld (or, with respect to returns that have not yet been filed, adequate
provision has been made therefor); (D) the charges, accruals and reserves for
deferred and contingent Taxes reflected on the Interim W&T Financial Statements
are adequate to cover all Taxes that are or may become payable by W&T with
respect to all periods covered by such financial statements, and the books and
records of W&T will contain accruals and reserves in the amount set forth on
Schedule 3.1(h)(i) adequate to cover all Taxes that are or may become payable by
W&T for all periods ending on or prior to the Closing; (E) W&T is not delinquent
in the payment of any Tax and has not requested any extension of time within
which to file any W&T Tax Return, which W&T Tax Return either has not since been
filed or with respect to which such extended period has not yet expired; (F)
there are no pending or, to the knowledge of W&T, threatened audits,
investigations, claims, administrative or judicial proceedings, or collection
actions against or with respect to W&T in respect of any Tax or assessment; (G)
there are no Liens for Taxes upon the assets of W&T except Liens for current
Taxes not yet due; (H) W&T has not and is not required to file Tax Returns in
any jurisdiction outside of the United States of America; and (I) Schedule
3.1(h)(i) sets forth the taxable years of W&T as to which audits have been
completed, those years which are currently under audit, those years for which
audits have not been initiated,
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and those years for which required W&T Tax Returns have not yet been filed. As
used herein, (x) "Tax" or "Taxes" means (1) all forms of taxation, charges,
levies or other assessments, whether direct or indirect and whether levied by
reference to net income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, franchise, profits, license, withholding
(whether with respect to receipts or payments), payroll, privilege, employment,
excise, severance, capital gains, transfer gains, stamp, occupation, premium or
similar tax measured by insurance premiums, real and personal property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, and any interest
or any penalty, addition to tax or additional amount, imposed by any Taxing
Authority, (2) liability, whether to a Taxing Authority or pursuant to an
agreement with or legal obligation to any person or entity, for the payment of
any amounts of the type described in clause (1) of this definition as a result
of being a member of an affiliated, consolidated, combined or unitary group for
any taxable period or being an electing "S corporation" as defined in Section
1361 of the Internal Revenue Code of 1986, as amended (the "Code"), or a
stockholder thereof, and (3) liability for the payment of any amounts of the
type described in clause (1) or (2) of this definition as a result of an
obligation to indemnify any other person and (y) "Taxing Authority" means a
governmental entity or authority responsible for and having requisite
jurisdiction with respect to the imposition of Taxes.
(ii) W&T's payroll, property or receipts, or other
factors used in a particular state's apportionment or allocation formula, do not
result in an apportionment or allocation of business income to any state other
than the States listed in Schedule 3.1(h)(ii), and W&T has no nonbusiness income
that is allocated, apportioned or otherwise sourced to any state other than such
States.
(iii) Except as qualified on Schedule 3.1(h)(iii), but
subject to W&T's actual knowledge to the contrary, (A) W&T is treated for
federal income tax purposes as a Subchapter "S" corporation, within the meaning
of Sections 1361 et seq. of the Code, and all distributions have been made pro
rata to the stock ownership of the shareholders for the respective periods shown
on Schedule 3.1(h)(iii), and (B) W&T and its stockholders have made a properly
filed and executed election to be treated for federal income tax purposes as a
Subchapter "S" corporation, within the meaning of Sections 1361 et seq. of the
Code, for all tax periods shown on Schedule 3.1(h)(iii) through the date hereof,
and have made an equivalent election for purposes of Taxes imposed by each state
in which W&T is required to file a W&T Tax Return. Each Purchaser acknowledges
and agrees that W&T's Subchapter "S" election will be revoked on or immediately
prior to the Closing.
(iv) Schedule 3.1(h)(iv) sets forth (A) all
assumptions used by W&T in calculating the 2002 income taxes of its shareholders
with respect to the actual and projected profits of W&T in 2002; (B) the amount
of tax distributions made by W&T to its stockholders as of the date of this
Agreement with respect to 2002 profits of W & T; and (C) the amount of
additional tax distributions that W&T estimates will be necessary in order to
permit W&T shareholders to pay all taxes due with respect to W&T's 2002 profits.
The anticipated tax distributions of W&T set forth on Schedule 3.1(h)(iv) have
not been included in the Interim
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W&T Financial Statements. Schedule 3.1(h)(iv) sets forth a reasonable estimate
of such additional tax liability.
(v) Except as set forth on Schedule 3.1(h)(v), W&T
shall bear full responsibility for the payment of any and all Taxes which are
owed by it that have not been reserved for on the Interim W&T Financial
Statements and for any and all Taxes owed in connection with its operations for
2002, up to and including the Closing. W&T shall have no responsibility, and the
W&T shareholders shall bear full responsibility, for the payment of any and all
Taxes which are owed by the W&T shareholders by reason of their ownership of
stock in W&T. Except as set forth on Schedule 3.1(h)(v), W&T shall have no
responsibility, and none of its assets, properties, rights or business shall be
subject to any Lien, for the payment of any and all Taxes which are owed by the
W&T shareholders by reason of their ownership of stock in W&T.
(i) Permits; Governmental and Other Approvals. To the
knowledge of W&T, and except as set forth on Schedule 3.1(i), W&T has such
licenses, permits, consents, orders, approvals and other authorizations
necessary for the conduct of its business as now being conducted and proposed to
be conducted by W&T. Except as set forth in Schedule 3.1(i), no approval,
consent, authorization or other order of, and no designation, filing,
registration, qualification or recording with any governmental authority,
domestic or foreign, is required for W&T's performance of this Agreement or the
consummation of the transactions contemplated hereby.
(j) Sales Representatives, Customers and Key Employees. To
the knowledge of W&T, except as set forth on Schedule 3.1(j), no employee of, or
party or person providing services to W&T has any intention to terminate his,
her or its relationship with W&T, or, in the case of employees, leave the employ
of W&T. Except as contemplated by this Agreement, all personnel of W&T are
employed on an "at will" basis and may be terminated upon notice of not more
than 30 days.
(k) Intellectual Property.
(i) Except for those matters disclosed on Schedule
3.1(k), to the knowledge of W&T, having made appropriate inquiries of the
relevant senior W&T executives responsible for such matters, W&T has full and
exclusive right, title and interest in and to, or license rights to, or other
rights to use, all patents, patent applications, registered or unregistered
trademarks, service marks and trade names, registered or unregistered copyrights
and applications therefor, licenses, approvals or governmental authorizations to
conduct its business as now conducted, know-how, proprietary rights and
processes, trade secrets, customer lists, methodologies, proprietary development
and marketing information and know-how, inventions, inventors' notes (to the
extent such notes exist), drawings, software, databases, geological data,
geophysical data, engineering data, maps, interpretations, lease, land, title
and other files, records and other similar information, subject to the
limitations contained in the agreements governing the use of the same, which
limitations are customary for companies engaged in the business of the
exploration or production of oil, gas, condensate, related hydrocarbons, and
other minerals
-8-
produced from the properties comprising the Oil and Gas Interests (as
hereinafter defined), including oil in storage (the "Hydrocarbons"), designs
associated with the foregoing, and other technical and/or confidential
information (collectively, "W&T Intellectual Property") relating to its business
as presently conducted and proposed to be conducted by W&T or otherwise used in
or necessary for the proper conduct of its business, free and clear of all Liens
and Encumbrances, other than Permitted Encumbrances (as such terms are
hereinafter defined); and W&T has no obligation to any other person with respect
to the W&T Intellectual Property or any product or process of W&T utilizing or
embodying any W&T Intellectual Property. There are no limitations contained in
agreements of the type described in this Section 3.1(k) which in any way relate
to the W&T Intellectual Property which, upon consummation of the transactions
contemplated by this Agreement, will materially alter or impair any such rights,
materially breach any such agreement with any third party vendor, or require
payments of additional sums thereunder. W&T is in compliance in all material
respects with such licenses and agreements and there are no pending or, to the
knowledge of W&T, threatened proceedings challenging or questioning the validity
or effectiveness of any license or agreement relating to such property or the
right of W&T or any subsidiary to use, copy, modify or distribute the same.
(ii) W&T does not have any patents or patent
applications nor are any patents or patent applications required for the conduct
of its business as now conducted.
(iii) To the knowledge of W&T, having made appropriate
inquiries of the relevant senior W&T executives responsible for such matters,
there is (A) no infringement, misuse or misappropriation of any W&T Intellectual
Property owned, licensed or controlled by any third party arising out of any
business activities now or previously conducted by or on behalf of W&T, (B) no
pending or, to the knowledge of W&T, threatened claim or challenge of or
proceeding for infringement, misuse or misappropriation of or interference with
any W&T Intellectual Property owned, licensed or controlled by any third party
arising out of any business activities now or previously conducted by or on
behalf of W&T, (C) no pending or threatened or potential claim, challenge or
proceeding by W&T against any third party for infringement, misuse or
misappropriation of or interference with any W&T Intellectual Property owned,
licensed or controlled by W&T or (D) no notice or, to the knowledge of W&T,
facts or information rendering any W&T Intellectual Property owned, controlled
or licensed by W&T invalid or unenforceable, nor, to the knowledge of W&T, is
there any allegation that any such W&T Intellectual Property is invalid or
unenforceable.
(l) Material Agreements. Except as set forth in Schedule
3.1(l), W&T has no currently existing contract, obligation, agreement, plan,
arrangement, commitment or the like (written or oral) of any material nature,
including, without limitation, the following, exclusive of Basic Oil and Gas
Documents (as hereinafter defined):
(i) Employment, bonus or consulting agreements,
pension, profit sharing, deferred compensation, incentive compensation, stock
bonus, retirement, stock option, stock or similar plans, including agreements
evidencing rights to purchase securities of W&T and agreements among
shareholders and W&T or an "employee benefit plan" as that term is
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defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA");
(ii) Loan or other agreements, notes, indentures, or
instruments relating to or evidencing indebtedness for borrowed money, or
mortgaging, pledging or granting or creating a Lien on any of W&T's property or
any agreement or instrument evidencing any guaranty by W&T of payment or
performance by any other person requiring the payment of more than $1,000,000;
(iii) Agreements with dealers, sales representatives,
brokers or other distributors, jobbers, advertisers or sales agencies;
(iv) Agreements with any labor union or collective
bargaining organization or other labor agreements;
(v) Any contract or series of contracts with the
same person for the furnishing or purchase of machinery, equipment, goods or
services involving sums in excess of $1,000,000;
(vi) Any indenture, agreement or other document
(including private placement brochures) relating to the sale or repurchase of
shares;
(vii) Any joint venture contract or arrangement or
other agreement involving a sharing of profits or expenses to which W&T is a
party;
(viii) Agreements limiting the freedom of W&T to
compete in any line of business or in any geographic area or with any person;
(ix) Agreements providing for disposition of the
business, assets or shares of W&T, agreements of merger or consolidation to
which W&T is a party or letters of intent with respect to the foregoing;
(x) Letters of intent or agreements with respect to
the acquisition of the business, assets or shares of any other business; and
(xi) Insurance policies, health insurance plans,
medical plans or any other benefit plans.
W&T has made available to the Purchasers for their review a true,
correct and complete copy of each of the contracts that are referred to on
Schedule 3.1(l), together with all material amendments, waivers or other changes
to all such documents.
W&T, and to W&T's knowledge, having made appropriate inquiries of the
relevant senior W&T executives responsible for such matters (including W&T's
landman, Jamie Vasquez (the "W&T Landman")), each other party or obligor
thereto, has complied with all the material provisions of all contracts,
obligations, agreements, plans, arrangements, and commitments and
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is not in default thereunder, except for defaults in any one case or in the
aggregate that would not have a W&T Material Adverse Effect. Each employee
benefit plan has been administered and operated in compliance in all material
respects with the applicable requirements of ERISA and the Code. Each such
contract, obligation, agreement, plan, arrangement and commitment is in full
force and effect, except as indicated on Schedule 3.1(l), and W&T has no reason
to believe that any such contract, obligation, agreement, plan, arrangement and
commitment will be terminated prior to its expiration date.
(m) Insurance. Except as set forth on Schedule 3.1(m), W&T
has in full force and effect insurance (including, but not limited to property
and casualty insurance, environmental liability insurance and errors and
omissions insurance), in such amounts and coverages with currently active
syndicates at Lloyd's, London and other insurance markets that, in the
reasonable judgment of the chief executive officer and the chief financial
officer of W&T, is adequate to protect W&T and its financial condition against
such losses and risks and in such amounts and with such deductibles as are
prudent and customary in the businesses in which it is engaged. W&T does not
maintain business interruption insurance. W&T has no reason to believe that,
given its claims rate as of the date hereof, it would not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business or W&T's proposed business, in each case at a cost not in excess of the
current cost, other than increases as a result of changes or developments
affecting the insurance industry generally that do not disproportionately impact
W&T compared to similarly situated companies in the same industry.
(n) Properties; Liens and Encumbrances. Schedule 3.1(n) sets
forth the address of all parcels of real property owned, leased or operated by
W&T, other than Oil and Gas Interests (as hereinafter defined in Section
3.1(q)(i)). To the knowledge of W&T, with the exceptions set forth on Schedule
3.1(n), W&T has good and marketable title in fee to such of its fixed assets as
are real property, and good and merchantable title to all of its other assets
(tangible or intangible), now carried on its books, including those reflected in
the balance sheet included in the Interim W&T Financial Statements, or acquired
since the date of such balance sheet (except personal property disposed of since
said date in the ordinary course of business), free and clear of any Lien or
Encumbrance, except for Permitted Encumbrances. As used herein, "Encumbrance"
shall mean and include all Liens and shall also include reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
property. For the purposes hereof, W&T shall be deemed to be the owner of any
property which it has acquired or holds subject to a conditional sale agreement
or other arrangement pursuant to which title to the property has been retained
by or vested in some other person for security purposes. For the purposes
hereof, "Permitted Encumbrances" shall mean and include:
(i) Encumbrances for taxes, assessments, or other
governmental charges not yet due or which are being contested in good faith by
appropriate action promptly initiated and diligently conducted, if such accruals
as shall be required by GAAP shall have been made therefor;
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(ii) any (A) undetermined or inchoate Liens or
charges constituting or securing the payment of expenses that were incurred
incidental to maintenance, development, production or operation of oil and gas
properties or for the purpose of developing, producing or processing oil, gas or
other hydrocarbons therefrom or therein securing payment of expenses not yet due
or which are being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such accruals as shall be required by
GAAP shall have been made therefor, and (B) materialman's, vendors', mechanics',
repairman's, employees', contractors', operators' or other similar Liens or
charges for liquidated amounts arising in the ordinary course of business
securing payment of amounts not yet due or which are being contested in good
faith by appropriate action promptly initiated and diligently conducted, if such
accruals as shall be required by GAAP shall have been made therefor;
(iii) any liens or security interests created by law
or reserved in oil and gas leases for lessor royalty, bonus or rental payments
not yet due or which are being contested in good faith by appropriate action
promptly initiated and diligently conducted, if such reserves as shall be
required by GAAP shall have been made therefor;
(iv) preferential rights to purchase or similar
rights not applicable to the transactions contemplated hereby, as listed on
Schedule 3.1(n)(iv);
(v) third party consents to assignment or similar
consent rights of third parties not required for nor applicable to the
transactions contemplated hereby;
(vi) all rights to consent by, required notices to,
filings with, or other actions by any regulatory authority, administrative
agency or any other governmental agency or body, domestic or foreign, in
connection with the sale or conveyance of the oil and gas leases or interests
therein;
(vii) inchoate liens arising under ERISA to secure the
contingent liabilities, if any, permitted by this Agreement; and
(viii) the Encumbrances described in Schedule
3.1(n)(viii) hereto.
(o) Leases. Set forth on Schedule 3.1(o) is a correct and
complete list (including the amount of rents called for and a description of the
leased property) of all material leases under which W&T is a lessee, other than
leases comprising any of the Oil and Gas Interests. Except as set forth on
Schedule 3.1(o), W&T enjoys peaceful and undisturbed possession under all such
leases and, all of such leases are valid and subsisting and neither W&T nor, to
the knowledge of W&T, any other party, is in default under any such leases in
any material respect.
(p) Environmental, Conservation and Safety Matters.
(i) To the knowledge of W&T, having made appropriate
inquiries of the relevant senior W&T executives responsible for such matters,
and except as set forth on Schedule 3.1(p)(i), W&T has in effect all federal,
state and local governmental approvals,
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authorizations, certificates, filings, franchises, licenses, notices, permits
and rights ("Operating Permits") required under applicable statutes, laws,
ordinances, rules, orders and regulations which are administered, interpreted or
enforced by the U.S. Environmental Protection Agency, Minerals Management
Service, U.S. Coast Guard or other federal, state and local agencies with
jurisdiction over protection of natural resources or the environment, or the
exploration, development, and production of oil and gas properties
(collectively, "Environmental, Conservation or Safety Laws") necessary for it to
carry on its business as now conducted, and W&T is, and has been, in compliance
in all material respects with such Operating Permits.
(ii) Except as set forth on Schedule 3.1(p)(ii), to
the knowledge of W&T, having made appropriate inquiries of the relevant senior
W&T executives responsible for such matters, W&T is, and has been, in compliance
with all applicable Environmental, Conservation or Safety Laws in all material
respects. Except as set forth on Schedule 3.1(p)(ii) and to the knowledge of
W&T, having made appropriate inquiries of the relevant senior W&T executives
responsible for such matters, W&T is not subject to any liability, penalty or
expense (including legal fees) and will not hereafter suffer or incur any loss,
liability, penalty or expense (including legal fees) by virtue of any violation
of any Environmental, Conservation or Safety Law occurring prior to the Closing
Time, any activity regulated by such Laws and conducted at or prior to the
Closing Time or any regulated condition existing on or with respect to any
property at or prior to the Closing Time, in each case whether or not W&T
permitted or participated in such act or omission.
(iii) Except as set forth on Schedule 3.1(p)(iii),
there is no suit, claim, action, proceeding, investigation or inquiry pending
or, to the knowledge of W&T, threatened before any court, governmental agency or
authority or other forum in which W&T has been or, with respect to threatened
suits, actions and proceedings, may be named as a defendant or respondent (A)
for alleged noncompliance (including by any predecessor) with any Environmental,
Conservation or Safety Law or (B) relating to the release or threatened release
into the environment of any Hazardous Material (as defined below), asbestos,
naturally occurring radioactive materials (as defined by Louisiana
Administrative Code LAC 33:XV.1403), polychlorinated biphenyls or petroleum,
including crude oil or any fraction or product thereof (such materials, together
with Hazardous Materials, collectively, "Regulated Materials"), whether or not
occurring at, on, under or involving a site owned, leased or operated by W&T.
"Hazardous Material" shall mean any pollutant, contaminant, or hazardous
substance within the meaning of the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Sections 6901 et seq., as amended
("CERCLA"), oil within the meaning of the Oil Pollution Act of 1990, 33 U.S.C.
Sections 2701 through 2761, or any similar state or local law.
(iv) To the knowledge of W&T, having made appropriate
inquiries of the relevant senior W&T executives responsible for such matters,
and except as set forth on Schedule 3.1(p)(iv), there are no physical or
environmental conditions existing on any of the Oil and Gas Interests operated
by W&T or resulting from W&T's operations or activities, past or present, at any
location, that would give rise to any on-site or off-site remedial obligations
under any application of any Environmental, Safety or Conservation Law, other
than normal and ordinary remedial work associated with plugging and abandoning
of oil and gas facilities.
-13-
(v) Except as set forth on Schedule 3.1(p)(v), (A)
to the knowledge of W&T, having made appropriate inquiries of the relevant
senior W&T executives responsible for such matters, and except as set forth on
Schedule 3.1(p)(v), during the period of ownership and operation, and (B) to the
knowledge of W&T without any duty of inquiry, prior to the period of ownership
by W&T of any of its current properties and during the period of ownership by
W&T of any of its current non-operated properties, there have been no
underground storage tanks (whether currently active or not) and no
polychlorinated biphenyls in transformers or other electrical equipment and
there have been no releases of Regulated Materials in, on, under or affecting
such properties or from any such properties onto any surrounding site. Except as
set forth on Schedule 3.1(p)(v), to the knowledge of W&T, prior to the period of
operation, and to the knowledge of W&T without any duty of inquiry, prior to the
period of ownership, by W&T of any of its current properties there were no
releases of Regulated Materials in, on, under or affecting any such property or
any surrounding site.
(vi) To the knowledge of W&T, having made appropriate
inquiries of the relevant senior W&T executives responsible for such matters,
W&T has not treated, stored, recycled or disposed of, or allowed or arranged for
any third person to treat, store, recycle or dispose of, any Regulated Material
other than in accordance with applicable law. To the knowledge of W&T, W&T has
not transported any Regulated Material or arranged for the transportation of any
Regulated Material to any location that is listed or proposed for listing on the
National Priorities List pursuant to CERCLA, or any other location that is the
subject of federal, state or local enforcement action or other investigation
that may lead to claims against W&T for cleanup costs, remedial action, damages
to natural resources, or to other property or for personal injury including
claims under CERCLA. None of the properties leased or operated by W&T is either
listed or known to W&T as being proposed for listing on the National Priorities
List pursuant to CERCLA, or is subject to any other federal, state or local law
or regulation requiring remedial investigation or cleanup.
(vii) W&T has made available to the Purchasers true,
correct and complete copies of all reports and filings made or filed by W&T
pursuant to the Occupational Safety and Health Act, or pursuant to worker health
and safety regulations enforced by the Minerals Management Service or the U.S.
Coast Guard. To the knowledge of W&T, having made appropriate inquiries of the
relevant senior W&T executives responsible for such matters, and except as set
forth on Schedule 3.1(p)(vii), W&T has not violated in any material respect or
failed to comply in any material respect with, or been subject of any written
allegation regarding worker health and safety by the Occupational Safety and
Health Administration, the Minerals Management Services or Coast Guard, or
violated in any material respect or, failed to comply in any material respect
with the worker health and safety rules or regulations promulgated by those
agencies.
(q) Oil and Gas Interests.
(i) Schedule 3.1(q)(i) contains a complete and
accurate list of all oil, gas and/or mineral leases, mineral rights and
servitudes, fee interests owned for the purpose of mineral development,
MMS-approved pipeline rights-of-way and servitudes held by W&T or in
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which W&T owns any interest (the "Oil and Gas Interests"). Schedule 3.1(q)(i)
designates those Oil and Gas Interests that collectively comprise the "Material
Oil and Gas Interests." The Material Oil and Gas Interests represent in excess
of 80 percent of the value of the Oil and Gas Interests. Schedule 3.1(q)(i) also
indicates which Oil and Gas Interests are operated by W&T.
(ii) To the knowledge of W&T, having made appropriate
inquiries of the relevant senior W&T executives responsible for such matters,
W&T has good and defensible title to the Material Oil and Gas Interests free and
clear of any Encumbrance other than Permitted Encumbrances. To the knowledge of
W&T, having made appropriate inquiries of the relevant senior W&T executives
responsible for such matters, the ownership interests of W&T in the Material Oil
and Gas Interests do and will, as of the Closing Time, (A) with respect to each
tract of land described in Schedule 3.1(q)(i) (whether described directly in
Schedule 3.1(q)(i) or described by reference to another instrument) in
connection with such Material Oil and Gas Interests, (1) entitle W&T to receive
a decimal or percentage share of the Hydrocarbons produced from, or allocated
to, such tract equal to not less than the decimal or percentage share set forth
in Schedule 3.1(q)(i) in connection with such tract directly opposite the
designation "NRI" or "Net Revenue Interest" (or words or abbreviations of
similar import), (2) cause W&T to be obligated to bear a decimal or percentage
share of the cost of exploration, development, operation and abandonment of such
tract of land not greater than the decimal or percentage share set forth in
Schedule 3.1(q)(i) in connection with such tract directly opposite the
designation "WI" or "Working Interest" (or words or abbreviations of similar
import), and (B) if any such Material Oil and Gas Interest is shown on Schedule
3.1(q)(i) to be subject to a unit or units, with respect to each such unit, (1)
entitle W&T to receive a decimal or percentage share of all Hydrocarbons covered
by such unit which are produced from, or allocated to, such unit equal to not
less than the decimal or percentage share set forth in Schedule 3.1(q)(i) in
connection with such Material Oil and Gas Interest opposite the words "Unit Net
Revenue Interest" or words of similar import (and if such Material Oil and Gas
Interest is subject to more than one unit, words identifying such interest with
such unit), and (2) obligate W&T to bear a decimal or percentage share of the
cost of exploration, development, operation and abandonment of such unit not
greater than the decimal or percentage share set forth in Schedule 3.1(q)(i) in
connection with such Material Oil and Gas Interest opposite the words "Unit
Working Interest" or words of similar import (and if such Material Oil and Gas
Interest is subject to more than one unit, words identifying such interest with
such unit). With respect to each property described as a Material Oil and Gas
Interest on Schedule 3.1(q)(i) which is subject to a voluntary or involuntary
pooling, unitization or communitization agreement and/or order, the term "tract
of land" as used in this subparagraph shall mean the pooled, unitized or
communitized area as an entirety and shall not be deemed to refer to any
individual tract committed to said pooled, unitized or communitized area.
Without limitation of the foregoing, the ownership by W&T of the Material Oil
and Gas Interests does and will, as of the Closing Time, with respect to each
well or unit identified in Schedule 3.1(q)(i), made a part hereof, entitle W&T
to receive a decimal or percentage share of the oil, gas and other Hydrocarbons
produced from, or allocated to, such well or unit equal to not less than the
decimal or percentage share set forth for such well or unit in the column headed
"Net Revenue Interest" in Schedule 3.1(q)(i), and cause W&T to be obligated to
bear a decimal or percentage share of the cost of operation of such well or unit
equal to not more than the decimal or percentage share set forth for such well
or unit in the column headed "Working
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Interest" in Schedule 3.1(q)(i). The above-described shares of production which
W&T is entitled to receive and shares of expenses which W&T is obligated to bear
are not and will not be as of the Closing Time subject to change (other than
changes which arise pursuant to non-consent provisions of operating agreements
described in Schedule 3.1(q)(i) in connection with operations hereafter
proposed), except, and only to the extent that, such changes are reflected in
Schedule 3.1(q)(i).
(iii) To the knowledge of W&T, including the knowledge
of W&T Landman, the oil, gas and/or mineral leases, contracts, servitudes and
other agreements forming a part of the Material Oil and Gas Interests described
in Schedule 3.1(q)(i) and operated by W&T and, to the actual knowledge of W&T,
including the actual knowledge of the W&T Landman, operated by others, are in
full force and effect, having been maintained in accordance with the terms
thereof, except as indicated on Schedule 3.1(q)(iii). Schedule 3.1(q)(iii-a)
sets forth a list of the material contracts and agreements relating to the
Material Oil & Gas Interests, or which may affect W&T's interest therein as
described in Schedule 3.1(q)(i) (the "Basic Oil and Gas Documents"). W&T has
made available to the Purchasers for their review a true, correct and complete
copy of each of the Basic Oil & Gas Documents, together with all material
amendments, waivers or other changes to all such documents. W&T has no reason to
believe that any Basic Oil and Gas Document will be terminated prior to its
expiration date. All payments (including all delay rentals, royalties, shut-in
royalties and valid calls for payment or prepayment under operating agreements)
owing under the Basic Oil and Gas Documents have been and are being made
(timely, and before the same became delinquent) by W&T in all material respects
(and, where the non-payment of same by a third party could reasonably be
expected to materially adversely affect the ownership, operation, value or use
of a Material Oil and Gas Interest after the Closing Time have been and are
being made, to W&T's knowledge, by such third parties). For the purposes of the
representations contained in this subparagraph (and without limitation of such
representations), the non-payment of an amount, or non-performance of an
obligation, where such non-payment or non-performance could reasonably be
expected to result in the forfeiture or termination of rights of W&T under a
Basic Oil and Gas Document, shall be considered material. W&T is not in default
with respect to W&T's obligations (and W&T is not aware of any default by any
third party acting on W&T's behalf with respect to such third party's
obligations) under such leases, contracts, servitudes and other of the Basic Oil
and Gas Documents, or otherwise attendant to the ownership or operation of any
part of the Material Oil and Gas Properties by W&T where such default could
reasonably be expected to materially adversely affect the ownership or operation
of the Material Oil and Gas Properties; and to W&T's knowledge, each other party
or obligor thereto has complied with all the material provisions of the Basic
Oil and Gas Documents and is not in default thereunder. W&T is not currently
accounting (and will not, through the Closing Time, hereafter agree to account)
for any royalties, or overriding royalties or other payments out of production,
on a basis (other than delivery in kind) less favorable to W&T than the value of
the proceeds received by W&T (calculated at the well) from sale of production,
and there are no situations where W&T is aware that a contingent liability may
exist to account on a basis less favorable to W&T than the basis on which W&T is
currently accounting.
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(iv) Except as set forth in Schedule 3.1(q)(iv), W&T
has not abandoned any wells (or removed any material items of equipment, except
those replaced by items of materially equal suitability) included in the
Material Oil and Gas Interests and identified on or considered in the generating
of the Reserve Report since the effective date of the Reserve Report.
(v) Schedule 3.1(q)(v) sets forth a list of all of
the contracts to which W&T is a party providing for the transportation,
processing or sale of substantially all of the Hydrocarbons (the "Schedule
3.1(q)(v) Contracts"). W&T has made available to the Purchasers for their review
a true, correct and complete copy of each of the Schedule 3.1(q)(v) Contracts,
together with all material amendments, waivers or other changes to all such
documents. Except for the Schedule 3.1(q)(v) Contracts, W&T has no currently
existing contract, obligation, agreement, plan, arrangement, commitment or the
like (written or oral) relating to the transportation, sale, or processing of
Hydrocarbons. None of the Oil and Gas Interests is subject to any contractual or
other arrangement (A) whereby payment for production is or can be deferred for a
substantial period after the month in which such production is delivered (i.e.,
in the case of oil, not in excess of 60 days, and in the case of gas, not in
excess of 90 days) except by W&T's choice, or (B) whereby payments are made to
W&T other than by checks, drafts, wire transfer advises or other similar
writings, instruments or communications for the immediate payment of money. The
Schedule 3.1(q)(v) Contracts (A) may or may not be cancelable on 120 days (or
less) notice but are priced at market rates and indexes until termination and
(B) are bona fide arm's length transactions with third parties not affiliated
with W&T. W&T is presently receiving a price for production from (or
attributable to) each of the Oil and Gas Interests covered by the Schedule
3.1(q)(v) Contracts as computed in accordance with the terms of such contracts,
and is not having deliveries of production from such properties curtailed
substantially below such properties' delivery capacity by the purchasers or
transporters of the production. As of December 31, 2001, W&T had not, and, since
December 31, 2001, to W&T's knowledge, W&T has not, received prepayments for
oil, gas or other Hydrocarbons (A) that, except as set forth on Schedule
3.1(q)(v), were produced from the Oil & Gas Interests prior to the date hereof
(or the Closing Time, as applicable) that have not been satisfied from
Hydrocarbons produced prior to the date hereof (or the Closing Time, as
applicable) from such Oil & Gas Interests and (B) that are to be produced from
the Oil & Gas Interests after the date hereof (or the Closing Time, as
applicable). To W&T's actual knowledge, none of W&T's predecessors in title has
received prepayments for oil, gas or other Hydrocarbons (A) that were produced
from the Oil & Gas Interests prior to the date hereof (or the Closing Time, as
applicable) that have not been satisfied from Hydrocarbons produced prior to the
date hereof (or the Closing Time, as applicable) from such Oil & Gas Interests
and (B) that are to be produced from the Oil & Gas Interests after the date
hereof (or the Closing Time, as applicable). Except as set forth on Schedule
3.1(q)(v-a), (A) W&T has not, to its knowledge, prior to the date hereof, taken
more ("overproduced") or less ("underproduced") oil or gas from the lands
covered thereby (or pooled or unitized therewith) than its ownership interest in
such properties would entitle it to take and excepting that normal daily
operations of oil and gas production and sales by W&T and its partners results
in routine and ongoing overproduction and underproduction and (B) some of the
properties affected by the Schedule 3.1(q)(v) Contracts may be subject to a gas
balancing arrangement under which one or more third parties may take a portion
of the production attributable to such property without payment (or without full
payment) therefore as a result of
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production having been taken from, or as a result of other actions or inactions
with respect to, other properties. None of the properties comprising the Oil and
Gas Interests is subject at the present time to any regulatory refund obligation
that would result in an expense or liability to W&T, and, to W&T's knowledge, no
facts exist which might cause the same to be imposed.
(vi) W&T maintains its equipment, inventory,
improvements, fixtures, goods and other tangible personal property in good
repair, consistent with prudent industry standards. W&T has no reason to believe
that the amount that will be spent on maintenance, including capital
maintenance, will be materially greater in 2003 (after giving credit for
insurance proceeds), as compared to such expenditures in 2002 with respect to
properties which were owned in both periods (and excluding the assets of
Burlington).
(vii) To the knowledge of W&T, having made appropriate
inquiries of the relevant senior W&T executives responsible for such matters,
the Material Oil and Gas Interests that are operated by W&T, and to the actual
knowledge of W&T, including the actual knowledge of the W&T Landman, those that
are not operated by W&T, (and properties unitized therewith) are being
maintained, operated and developed in a good and workmanlike manner, in
accordance with prudent industry standards and in conformity in all material
respects with all applicable laws and all rules, regulations and orders of all
duly constituted authorities having jurisdiction and in conformity with all oil,
gas and/or other mineral leases and other material contracts and agreements
forming a part of the Material Oil and Gas Interests; specifically in this
connection, to the knowledge of W&T, having made appropriate inquiries of the
relevant senior W&T executives responsible for such matters, none of the wells
that are operated by W&T, and to the actual knowledge of W&T, including the
actual knowledge of the W&T Landman, those that are not operated by W&T and
located on any lands covered by, or otherwise forming part of, the Material Oil
and Gas Interests (or properties unitized therewith) are or will be deviated
from the vertical more than the maximum permitted by applicable laws,
regulations, rules and orders, and such wells are, and will remain, as of the
Closing Time, bottomed under and producing from, with the well bores wholly
within, the lands covered by the Material Oil and Gas Interests (or in the case
of wells located on properties unitized therewith, such unitized properties). To
the knowledge of W&T, having made appropriate inquiries of the relevant senior
W&T executives responsible for such matters, there are no wells being drilled,
deepened, plugged back or reworked by W&T, or to the actual knowledge of W&T,
including the actual knowledge of the W&T Landman, by others, and no other
similar operations by W&T are being conducted, for which consent of other
interest owners is required and has not been obtained or which is not covered by
the non-consent provisions of the applicable operating agreement. There are no
proposals currently outstanding (whether made by W&T or, to W&T's knowledge, by
any other party) to drill, deepen, plug back, sidetrack, or rework wells or to
conduct any other similar operations, or to abandon any wells (nor are there any
such proposals which have been approved either by W&T or, to W&T's knowledge, by
any other party, with respect to which the operations covered thereby have not
been commenced), which involve an expenditure to W&T in excess of $10,000,000,
except as set forth in Schedule 3.1(q)(vii) or which would otherwise be outside
the normal course of W&T's business. To the knowledge of W&T, having made
appropriate inquiries of the relevant senior W&T executives responsible for such
matters, W&T has all governmental licenses and permits necessary to own and
operate the Material Oil and Gas
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Interests that are operated by it and W&T has not received notice of any
violations or, to W&T's knowledge, possible violations, with respect to any such
licenses or permits.
(viii) W&T represents that Schedule 3.1(q)(viii) is a
printout dated November 12, 2002, generated from the accounting records
maintained by and for W&T, that lists, among other things, all of the oil, gas
or other Hydrocarbon properties with respect to which W&T has received revenues
and/or paid expenses since 1996, and that such listing includes properties that
are currently active, properties that are inactive and properties that have been
sold or abandoned or have otherwise expired.
(ix) W&T represents that Schedule 3.1(q)(ix) is a
printout dated November 12, 2002, generated from the accounting records
maintained by W&T for W&T Offshore, LLC, that lists, among other things, all of
the oil, gas or other Hydrocarbon properties with respect to which W&T Offshore,
LLC has received revenues and/or paid expenses since 1996, and that such listing
includes properties that are currently active, properties that are inactive and
properties that have been sold or abandoned or have otherwise expired.
(r) Gas and Oil Reserves. W&T has delivered to the Purchaser
Representative (as hereinafter defined) a copy of W&T's most recent Reserve
Report, as prepared by W&T's independent reserve engineers. W&T has no reason to
believe that the conclusions of such Reserve Report are not correct in all
material respects as of the effective date of such Reserve Report.
(s) Wells. Schedule 3.1(s-a) includes a complete and
accurate list of each oil or gas well owned by W&T included in its Reserve
Reports (each a "Reserve Report Well") and the production status, working
interest and operating interest of W&T therein. None of W&T's wells is currently
subject to a compliance order or other similar order of a governmental agency
having jurisdiction to plug and abandon such well prior to the actual expiration
of the lease of the property on which such well is situated except that the
wells on Schedule 3.1(s-b) are on leases that will require their abandonment in
an amount of time estimated to be within the next year. W&T has provided to the
Purchaser Representative a copy of a report of Twachtman Snyder & Byrd, Inc.
("Twachtman"), dated April 22, 1998, regarding the properties to be acquired by
the Burlington Agreement. In the opinion of W&T, the costs of plugging and
abandoning all of W&T's existing wells will be approximately $35,000,000, net to
W&T after salvage. W&T has no reason to believe that the conclusions of
Twachtman or of W&T are not correct in all material respects.
(t) Ordinary Course; No Material Adverse Change. Since
December 31, 2001, W&T, except as set forth on Schedule 3.1(t) or as explicitly
contemplated by this Agreement or any Schedule or Exhibit hereto, has conducted
its business in the ordinary course, has not incurred any material obligation,
absolute or contingent, or entered into any material transactions not in the
ordinary course of business, and, except as set forth on Schedule 3.1(t), has
not declared or paid any dividends or other distributions, tax or otherwise, on
its capital stock. Since December 31, 2001, there has been no event, occurrence,
development, change or effect that has had, individually or in the aggregate, a
W&T Material Adverse Effect.
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Notwithstanding the foregoing, the parties agree that (i) upon execution of the
Bethea Redemption Agreement (attached hereto as Exhibit D), W&T shall declare a
dividend in the amount of $11,400,000 payable to stockholders of record as of
the date that the Bethea Redemption Agreement is executed and (ii) W&T shall pay
a bonus in respect of 2002 to Tracy W. Krohn in the amount of $250,000.
(u) Agent's Fees. Except for Jefferies & Company, Inc.,
whose fees are set forth on Schedule 3.1(u) and will be paid by W&T, W&T has not
retained a finder or broker in connection with the transactions contemplated by
this Agreement nor is W&T obligated to pay any other fees or expenses (including
of Jefferies & Company, Inc.) of a finder.
(v) W&T Expenses. There are no expenses reimbursed, or
reimbursable, by W&T to any of its employees, consultants, officers, directors,
shareholders, agents or representatives other than reasonable, ordinary and
properly-vouchered expenses incurred in the performance of services to W&T in
accordance with reasonable policies as in effect from time to time.
(w) Bethea Disclosure. At the time of the closing of the
transactions contemplated by the Bethea Redemption Agreement, W&T will have
fully provided the Bethea Group with all the information that the Bethea Group
will have reasonably requested in deciding whether to sell its equity interest
in W&T and W&T Offshore LLC. The information with respect to W&T provided to the
Bethea Group upon such requests did not, or will not, as the case may be,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements and
writings contained therein not false or misleading in the light of the
circumstances under which they were made. The term "Bethea Group" shall mean
William C. Bethea, individually ("Bethea"), Claudette Bethea, individually, and
William C. Bethea, as Trustee for each of the separate irrevocable trusts
established for the benefit of each of Claude Bethea, James Bethea, Michael
Bethea, William Bethea, II, and Lori Reixach (the "Bethea Trusts").
(x) Burlington Disclosure. W&T has made available to the
Purchasers true, accurate and complete copies of the Agreement and Plan of
Merger, dated as of May 7, 2002 (the "Merger Agreement"), by and among
Burlington Resources Offshore, Inc., The Louisiana Land and Exploration Company,
LLOXY Holdings, Inc. and W&T Offshore, Inc. (including any amendments to date
thereof) and all agreements ancillary to the Merger Agreement (collectively, the
"Burlington Agreement").
(y) Disclosure. The information with respect to W&T
heretofore provided and to be provided, by W&T pursuant to this Agreement,
including the Schedules and Exhibits hereto and the Burlington Agreement, and
each of the agreements, documents, certificates and writings to be delivered to
the Purchasers or their representatives at or prior to the Closing, does not and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated herein or therein or necessary in order to
make the statements and writings contained herein and therein not false or
misleading in the light of the circumstances under which they were made;
provided, however, that to the extent the foregoing representation regards
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a statement or omission by any party other than W&T such representation is made
subject to the knowledge of W&T. To the knowledge of W&T, there is no fact that
would have a W&T Material Adverse Effect that has not been set forth herein or
otherwise disclosed in writing to the Purchasers.
(z) Registration Rights. Except as may be provided in this
Agreement or in the Stockholders' Agreement, W&T is not under any obligation to
register any of its currently outstanding securities or any of its securities
that may hereafter be issued.
(aa) Credit Agreement. W&T has no reason to believe that it
will not be able to make commercially reasonable arrangements with its lenders
in order to satisfy the condition set forth in Section 5.12.
(bb) Offering. Assuming the accuracy of the Purchasers'
representations and warranties in Section 4.1, the offer and issuance of the
Series A Preferred Stock to be acquired by them as contemplated by this
Agreement, are not subject to the registration requirements of the Securities
Act of 1933, as amended (the "Securities Act"), and neither W&T nor anyone
acting on its behalf has taken or will take any action that would cause such
registration requirements to be applicable.
(cc) Stockholder Equity. As of the Closing Time, after giving
effect to the consummation of the transactions contemplated hereunder W&T's
total stockholder equity shall equal at least $180,000,000, calculated without
giving effect to any adjustment to the balance sheet of W&T resulting from the
change to the accrual method of accounting or the transactions contemplated by
the Burlington Agreement. W&T estimates, in good faith, that the reduction in
total stockholder equity resulting from the change to the accrual method of
accounting for tax purposes will not exceed $$15,000,000 in respect of the next
four tax periods.
(dd) W&T Offshore LLC. Attached hereto as Schedule 3.1(dd) is
a statement of the assets owned by W&T Offshore LLC as of September 30, 2002.
3.2 Representations and Warranties Related to the Burlington Assets.
(a) W&T has made available to the Purchasers for their
review true, correct and complete copies of the Burlington Agreement. W&T is not
aware of a breach of any of the representations, warranties, covenants, terms or
provisions of the Burlington Agreement. Except as set forth in Schedule 3.2(a),
W&T has satisfied all of its conditions necessary to consummate the transactions
contemplated by the Burlington Agreement and has no reason to believe that
Burlington will not satisfy its conditions on or prior to February 28, 2003. W&T
makes no additional representations and with respect to the assets and
liabilities acquired from Burlington Resources Offshore, Inc.
(b) The consummation of the Burlington Agreement will not
involve the issuance of any capital stock by W&T.
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(c) Upon consummation of the transactions contemplated by
the Burlington Agreement, all issued and outstanding shares of capital stock or
other equity ownership interests of W&T Energy I LLC, W&T Energy II LLC and W&T
Energy III LLC shall have been duly authorized and validly issued and shall be
fully paid, nonassessable and free of preemptive rights and shall be owned by
W&T or a direct or indirect wholly-owned subsidiary of W&T, free and clear of
all Liens.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally but not jointly, represents and warrants to
W&T (as to itself only) as follows:
4.1 Investment Representations. (i) It is an "accredited investor"
as that term is defined in Rule 501(a) promulgated under the Securities Act,
(ii) it has the requisite knowledge and experience in financial and business
matters to be capable of evaluating the merits and risks of an investment in
W&T, (iii) it is acquiring the Series A Preferred Stock and, upon conversion of
the Series A Preferred Stock, such Purchaser will acquire the Conversion Shares
(as hereinafter defined), for investment for its own account and not with a view
to, or for resale in connection with, any distribution thereof, except pursuant
to sales registered or exempted under the Securities Act; provided, however,
that by making the representations herein, it does not agree to hold any shares
of the Series A Preferred Stock or the Conversion Shares for any minimum or
other specific term and reserves the right to dispose of shares of the Series A
Preferred Stock or the Conversion Shares at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act
and in accordance with the terms of the Stockholders' Agreement, and (iv) it
understands that the shares of Series A Preferred Stock and the Conversion
Shares, if any, to be acquired by it have not been registered under the
Securities Act and it will not offer, sell, transfer, pledge, hypothecate or
otherwise dispose of any shares of the Series A Preferred Stock or Conversion
Shares, if any, except pursuant to an exemption from, or otherwise in a
transaction not subject to, the registration requirements of the Securities Act
or pursuant to an effective registration statement under the Securities Act,
and, in each case, in accordance with any applicable state securities or "blue
sky" laws.
4.2 Authorization; Binding Obligations. (i) The person executing
this Agreement on behalf of such Purchaser has the appropriate authority to act
on behalf of such Purchaser and (ii) this Agreement has been duly authorized,
executed and delivered by such Purchaser and constitutes a legal, valid and
binding agreement of such Purchaser, enforceable against such Purchaser in
accordance with its terms, subject to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors' rights
and to general principles of equity.
4.3 Compliance with Instruments, etc. It is not in material breach
or violation of, or in default under, any term or provision of (i) its
organizational and governing documents, (ii) any indenture, mortgage, deed of
trust, voting trust agreement, shareholders agreement, note
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agreement or other agreement or instrument to which it is a party or by which it
is or may be bound or to which any of its property is or may be subject or (iii)
any statute, judgment, decree, order, rule or regulation applicable to such
Purchaser or of any arbitrator, court, regulatory body, administrative agency or
any other governmental agency or body, domestic or foreign, having jurisdiction
over such Purchaser or any of its activities or properties.
4.4 Sophistication; Due Diligence. (i) It is a sophisticated and
professional investor with extensive experience and expertise in making
investments similar to the Series A Preferred Stock. It has been represented in
its negotiations with W&T by attorneys, accountants and other financial advisors
(including advisors expert in the field of oil and gas investments), and it and
its advisors had access to all premises, assets, documentation and information
necessary to form an independent determination as to the value of W&T's assets,
liabilities and the financial condition, results of operations, business and
prospects of W&T and the value of the Series A Preferred Stock. It and its
advisors have had the opportunity to question the management of W&T as to all
matters that it and its advisors deemed material in making its decision to
invest in the Series A Preferred Stock, and it has received satisfactory answers
to all such questions. The transactions contemplated by this Agreement were
jointly structured by the Purchasers, on the one hand, and W&T, on the other
hand.
4.5 Agent's Fees. It has not retained a finder or broker in
connection with the transactions contemplated by this Agreement.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
The obligations of the Purchasers under this Agreement are subject to
the fulfillment to their reasonable satisfaction on or prior to the Closing Time
of each of the following conditions:
5.1 Representations and Warranties Correct. The representations and
warranties of W&T in Article III shall be true and correct in all material
respects on and as of the date hereof, and shall be true and correct in all
material respects on and as of the Closing Time with the same force and effect
as if they had been made on and as of the Closing Time.
5.2 Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with on or prior to the Closing
Time by W&T shall have been performed or complied with by W&T on or prior to the
Closing Time.
5.3 Compliance Certificate. W&T shall have delivered to the
Purchasers a certificate of the chief executive officer of W&T, dated the
Closing Time, certifying to the fulfillment of the conditions specified in
Sections 5.1, 5.2 and 5.5 of this Agreement and such other matters as the
Purchasers shall reasonably request.
5.4 No Impediments. No statute, judgment, order, decree of any
court, regulatory body, administrative agency or any other governmental agency
or body shall be in effect which
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would impose any material limitation on the ability of the Purchasers to
exercise full rights of ownership of the Series A Preferred Stock.
5.5 No Material Adverse Change. Since December 31, 2001, except as
expressly provided for or contemplated by this Agreement (or any Schedule or
exhibit hereto), there shall have been no event, occurrence, development, change
or effect that, in any one case or in the aggregate, has had a W&T Material
Adverse Effect.
5.6 Legal Investment. At the time of the Closing, the acquisition by
the Purchasers of the Series A Preferred Stock to be acquired by them hereunder
shall, be legally permitted by all statutes, rules and regulations to which the
Purchasers and W&T are subject.
5.7 Qualifications. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body that are now required in
connection with the lawful issuance and sale of the Series A Preferred Stock
pursuant to this Agreement shall have been duly obtained and shall be in full
force and effect on and as of the Closing Time.
5.8 Employment Agreement. W&T shall have in effect a five-year
employment agreement, containing non-competition, non-solicitation and
confidentiality provisions, with Tracy W. Krohn, in the form attached hereto as
Exhibit C.
5.9 Issuance Taxes. All Taxes imposed by law in connection with the
initial issuance, sale and delivery of the Series A Preferred Stock shall have
been fully paid by W&T, and all laws imposing such Taxes shall have been fully
complied with.
5.10 Stockholders' Agreement. W&T and each of its shareholders shall
have executed and delivered the Stockholders' Agreement in the form attached
hereto as Exhibit A.
5.11 Directors. Messrs. James L. Luikart and Stuart B. Katz shall
have been elected to the Board of Directors of W&T effective on the Closing
Time.
5.12 Credit Agreement. W&T shall have made arrangements under the
Credit Agreement with the lenders parties thereto and Toronto Dominion Bank, as
Administrative Agent (the "Credit Agreement"), in form and substance reasonably
satisfactory to the Purchasers, to permit borrowing of up to $180.0 million
thereunder, contingent upon the closing of the transactions contemplated by the
Burlington Agreement, or $130.0 million, not contingent upon the closing of the
transactions contemplated by the Burlington Agreement.
5.13 Bethea Agreements.
(a) Bethea and each of the Bethea Trusts shall have executed
and delivered the Bethea Redemption Agreement and ancillary documentation, in
form and substance satisfactory to the Purchasers, providing for the redemption
by W&T of 300 shares of W&T Common Stock owned by Bethea and the Bethea Trusts.
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(b) Bethea and each of the Bethea Trusts shall have entered
into the Bethea Purchase Agreement (a form of which is attached hereto as
Exhibit E) and ancillary documentation, in form and substance satisfactory to
the Purchasers, providing for the sale by Bethea and the Bethea Trusts to the
Purchasers of 1,000 shares of W&T Common Stock owned by Bethea and the Bethea
Trusts.
(c) The transactions contemplated by the Bethea Redemption
Agreement and the Bethea Purchase Agreement shall have been consummated prior to
the Closing in a manner satisfactory to the Purchasers.
5.14 Burlington Transaction. The Burlington Agreement shall be in
full force and effect and shall not have been amended or modified in any manner
materially adverse to W&T.
5.15 Proceedings and Other Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and such other documents contemplated hereby and thereby shall have been taken
by W&T, and the Purchasers shall have received such other documents and
instruments in form and substance reasonably satisfactory to them and their
counsel, as to such other matters incident to the transactions contemplated
hereby as they may reasonably request.
5.16 Opinions of Counsel. The Purchasers shall have received the
opinion of Adams & Reese, L.L.P., counsel for W&T, dated the Closing Time,
substantially in the form attached hereto as Exhibit F. The Purchasers shall
have received an opinion of Nevada counsel in form and substance satisfactory to
the Purchasers.
5.17 Consents, Waivers, Etc. Prior to the Closing, W&T shall have
obtained all consents or waivers, if any, required by the Purchasers necessary
to execute and deliver this Agreement and to issue the Series A Preferred Stock
and carry out the transactions contemplated hereby, and all such consents and
waivers shall be in full force and effect.
5.18 Termination of Stockholders' Agreement. Prior to the Closing,
the Stockholders' Agreement, dated December 30, 1989, between W&T and the
stockholders signatory thereto (the "Old Stockholders' Agreement") shall have
been terminated and no provision of the Old Stockholders' Agreement shall
survive and be of further force and effect.
5.19 Shareholder Loans. All outstanding loans made by W&T to its
stockholders, as described under Note 2 - "Related Party Transactions" to the
W&T Financial Statements for fiscal years 2001 and 2000, shall be repaid in
their entirety prior to the Closing, except that the $300,000 loan to William
Bethea reflected on the W&T balance sheet will be written off upon the closing
of the Bethea Redemption Agreement.
5.20 LLC Purchase Agreement. W&T, Tracy W. Krohn and Ann K. Freel
shall have entered into the LLC Purchase Agreement (attached hereto as Exhibit
I) providing for the sale by W&T of its ownership interest in W&T Offshore LLC
to Tracy W. Krohn and Ann K. Freel.
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5.21 Other Matters. W&T shall have delivered to the Purchasers (i)
certificates (in definitive form) in the denominations specified by the
respective Purchasers and registered in their respective names (or in the names
of their respective nominees) representing the Series A Preferred Stock acquired
by them, and (ii) the following: (A) a certified copy of W&T's articles of
incorporation and all amendments thereto, appropriately authenticated; (B) a
copy of W&T's By-laws, as amended to date, certified as being true by a
principal officer of W & T; and (C) a certificate of good standing of W&T
certified as of a recent date by the Secretary of State of the State of Nevada,
and from every jurisdiction in which W&T is qualified to do business.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF W&T
W&T's obligations under this Agreement are subject to the fulfillment to
its reasonable satisfaction on or prior to the Closing Time of each of the
following conditions:
6.1 Representations and Warranties Correct. The representations and
warranties of the Purchasers in Article IV shall be true and correct in all
material respects on and as of the date hereof and shall be true and correct in
all material respects on and as of the Closing Time with the same force and
effect as if they had been made on and as of the Closing Time.
6.2 Legal Investment. At the time of the Closing, the acquisition by
the Purchasers of the Series A Preferred Stock to be acquired by them hereunder
shall be legally permitted by all statutes, rules and regulations to which the
Purchasers and W&T are subject.
6.3 Presentation of Common Stock Certificates. W&T shall have
received certificates representing the Purchasers' 1,000 shares of W&T Common
Stock, executed in blank.
6.4 Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with on or prior to the Closing
Time by the Purchasers shall have been performed or complied with in all
respects on or prior to the Closing Time.
6.5 Bethea Agreements. Bethea and the Bethea Trusts shall have
executed and delivered the Bethea Redemption Agreement and the Bethea Purchase
Agreement.
6.6 Agreement of Toronto Dominion. Toronto Dominion, on behalf of
the entire bank lending group, shall have consented to the transactions
contemplated by this Agreement including without limitation the transactions
contemplated by the Bethea Redemption Agreement.
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ARTICLE VII
COVENANTS OF W&T
For so long as the FS Stockholders are the holders, in the aggregate, of
at least 5% of the Total Voting Power of W&T or in the case of Sections 7.1
through 7.6, Sections 7.8 through 7.11 and Section 7.13 until the closing of a
Qualified IPO:
7.1.1 Reports. W&T will deliver to the Purchasers Representative for
delivery to the Purchasers:
(a) Financial Information.
(i) within 30 days after the end of each of the
twelve monthly accounting periods in each fiscal year (or when furnished to the
Board of Directors of W&T, if earlier), unaudited consolidated and consolidating
statements of income and retained earnings and cash flows of W&T and its
subsidiaries, if any, for each monthly period and for the period from the
beginning of such fiscal year to the end of such monthly period, together with
consolidated and consolidating balance sheets of W&T and its subsidiaries, if
any, as at the end of such monthly period, setting forth in each case
comparisons to budget and to corresponding periods in the preceding fiscal year
(on a pro forma basis, if necessary);
(ii) within 120 days after the end of each fiscal
year, consolidated and consolidating statements of income and retained earnings
and cash flows of W&T and its subsidiaries, if any, for the period from the
beginning of such fiscal year to the end of such fiscal year, and consolidated
and consolidating balance sheets as at the end of such fiscal year, setting
forth in each case in comparative form corresponding figures for the preceding
fiscal year, accompanied by:
(A) a certificate of the chief financial
officer of W&T, addressed to each Purchaser, stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default (each, as defined in the Credit Agreement) (an "Event of
Noncompliance"), except as specified in such certificate; and
(B) an unqualified report on the
consolidated statements of Ernst & Young LLP or another public accounting firm
currently known as one of the "Big Four" (an "Approved Accounting Firm"); for
purposes of this Section, a report including a "going concern" paragraph shall
not be considered "unqualified"; and
(iii) within 60 days after the end of each fiscal
year, preliminary and unaudited (A) consolidated and consolidating statements of
income and retained earnings and cash flows of W&T and its subsidiaries, if any,
for the period from the beginning of such fiscal year to the end of such fiscal
year, and (B) consolidated and consolidating balance sheets as at the end of
such fiscal year, setting forth in each case in comparative form corresponding
figures for the preceding fiscal year;
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(iv) within ten days after transmission or receipt
thereof, copies of all financial statements, reports and other communications
which W&T sends to its stockholders, copies of all press releases and other
statements made generally available by W&T to the public concerning material
developments in the business of W&T and its subsidiaries, if any, and copies of
all material communications sent to and received from any lender to W&T or any
subsidiary of W & T; and
(v) with reasonable promptness such other
information and financial data concerning W&T and its subsidiaries, if any, as a
Purchaser may reasonably request, including, without limitation, information and
financial data with respect to the use of proceeds by W&T from the issuance of
the Series A Preferred Stock to the Purchasers.
(b) Notice of Adverse Change. Promptly after the occurrence
thereof (but in any event within seven days after such occurrence is known to
W&T) notice of any condition or event which constitutes, or the occurrence of,
any of the following:
(i) any Event of Noncompliance;
(ii) the institution or threatened institution of an
action, suit or proceeding against W&T or any of its subsidiaries by or before
any court, regulatory authority, administrative agency or any other governmental
agency or body, domestic or foreign, which, if adversely decided, could have a
W&T Material Adverse Effect; or
(iii) any information relating to any event,
development or circumstance with respect to or affecting W&T or any of its
subsidiaries which, in W&T's reasonable judgment, could have a W&T Material
Adverse Effect or materially and adversely affect the ability of W&T to perform
its obligations under this Agreement and the transactions contemplated hereby.
Any notice given under this Section 7.1(b)(iii) shall specify the nature and
period of existence of the condition, event, information, development or
circumstance, the anticipated effect thereof and what actions W&T has taken
and/or proposes to take with respect thereto.
7.1.2 Reports to Purchasers Representative
(a) W&T will deliver to the Purchasers Representative:
(i) the management letter of the Approved Accounting
Firm, if issued;
(ii) promptly upon receipt thereof, any additional
reports or other detailed information concerning significant aspects of the
operations and condition, financial or otherwise, of W&T and its subsidiaries,
if any, given to W&T by its independent accountants;
(iii) promptly upon receipt thereof, any reserve
reports or reports describing estimated reserves; and
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(iv) within 60 days following the Closing and at
least 30 days prior to the end of each fiscal year thereafter, a detailed annual
operating budget and operating plan (which shall include a detailed capital
expenditures budget) for W&T and any subsidiaries for the balance of fiscal
2002. Such budgets shall be prepared on a monthly basis, displaying consolidated
statements of anticipated income and retained earnings, consolidated statements
of anticipated cash flow and projected consolidated balance sheets, setting
forth in each case the assumptions (which assumptions and projections shall
represent and be based upon the good faith best judgment in respect thereof of
the chief executive officer and the chief financial officer of W&T) behind the
projections contained in such financial statements, and which budgets shall have
been approved by the Board of Directors of W&T for fiscal 2002 or prior to the
beginning of each twelve-month period thereafter to which they pertain and,
promptly upon preparation thereof, any other budgets that W&T may prepare and
any revisions of such annual or other budgets.
(b) The Company shall provide brief summaries of the
foregoing information to the Purchasers Representative for delivery to the Other
Investors. The Company may exclude from such summaries any confidential
information which could impair the Company's competitive position.
7.2 Accounts and Records. W&T shall keep true records and books of
account in which entries will be made of all dealings or transactions in
relation to the business and affairs of W&T and its subsidiaries, if any, in
accordance with good accounting practice.
7.3 Inspection. W&T shall grant the Purchasers the right, which the
Purchasers may exercise through their designated representative, FS Private
Investments III LLC, or any of their respective officers, employees,
representatives or such other person as the Purchasers may designate (the
"Purchaser Representative"), upon five business days' prior notice and during
normal business hours as often as such Purchaser Representative may request, to
visit and inspect the offices and properties of W&T or any of its subsidiaries,
and (i) to make extracts or copies of the books, accounts and records of W&T or
any of its subsidiaries, and (ii) to discuss the affairs, finances and accounts
of W&T or any of its subsidiaries, with W&T and officers of W&T and its
independent public accountants. The Purchaser Representative shall have the
right to participate in the semi-annual reserve reviews conducted for the
benefit of W&T's banks. W&T will furnish the Purchaser Representative with such
financial and operating data and other information with respect to the business
and properties of W&T as the Purchaser Representative may, from time to time,
reasonably request. W&T acknowledges that the rights set forth in this Section
7.3 are essential to the Purchasers as a means of evaluating their investment in
W&T and agree that in no event will they make any claim of any kind as a result
of the exercise by the Purchasers of such rights and hereby waive any and all
rights it may have to make such claims. The Purchaser Representative will not be
allowed to copy geological or geophysical data, but will be allowed to inspect
such data at W&T's offices; provided, that, the Purchaser Representative shall
not be entitled to inspect such data if any employee, member or Affiliate of an
FS Management Company serves on the board of directors (or similar governing
body) of a Competing Person; provided, however, that Ascent Energy, Inc. shall
not be a Competing Person for purposes of this Section 7.3. The Purchaser
Representative shall not disclose to the
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Purchasers any specific geological or geophysical data (that is not, or has not
become publicly available), but may present summary information about the
classification and amount of W&T's reserves. The rights of the Purchasers and
the Purchaser Representative under this Section 7.3 shall also be in effect from
the date hereof through the Closing Time. Notwithstanding any other provision of
this Agreement and the Stockholders' Agreement, the rights of the Purchasers and
the Purchaser Representative under this Section 7.3 shall be in addition to, and
not in lieu of, any of the rights granted to the Purchasers and their
representatives under and pursuant to the Stockholders' Agreement, including,
without limitation, Article IV and Section 5.06 thereof.
7.4 Independent Accountants. W&T will retain an Approved Accounting
Firm to audit W&T's financial statements at the end of each fiscal year. If the
services of the Approved Accounting Firm shall be terminated, W&T shall promptly
notify the Purchasers of the occurrence of such event and shall promptly
thereafter request the firm of independent public accountants whose services are
terminated to deliver to the Purchasers a letter of such firm setting forth its
understanding as to the reasons for the termination of its services and whether
there were, during the two most recent fiscal years or such period during which
said firm had been retained by W&T, any disagreements between it and W&T on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure. In its notice, W&T shall state whether the change
of accountants was recommended or approved by the Board of Directors of W&T or
any committee thereof. In the event of such termination, W&T will promptly
thereafter engage another Approved Accounting Firm approved by the Purchasers
which approval shall not be unreasonably withheld.
7.5 Further Assurances. From time to time, W&T shall execute and
deliver to the Purchaser Representative such documents and take such actions as
may be reasonably requested by the Purchaser Representative to implement and
effectuate the terms and provisions of this Agreement.
7.6 Operation of Business. Prior to the Closing, unless otherwise
expressly contemplated by Schedule 7.6 and this Agreement or consented to in
writing by the Purchasers, W&T shall (i) operate in the ordinary course of
business, consistent with past custom and practice and in accordance with
applicable laws; (ii) preserve in all material respects its goodwill and
business organization, maintain its rights and franchises, use its commercially
reasonable efforts to retain the services of its principal officers and key
employees and maintain its relationships with its principal lessors, licensors,
suppliers, contractors, distributors, customers and others having material
business relationships with it; (iii) maintain and keep its properties and
assets in as good repair and condition as at present, ordinary wear and tear
excepted; and (iv) keep in full force and effect insurance comparable in amount
and scope of coverage to that currently maintained.
7.7 Notice of Adverse Change. W&T shall deliver to the Purchasers
promptly after the occurrence thereof (but in any event within seven days after
such occurrence is known to W&T) notice of any condition or event that
constitutes, or the occurrence of, any of the following: (a) the institution or
threatened institution of an action, suit or proceeding against W&T or any of
its subsidiaries by or before any court, regulatory authority, administrative
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agency or any other governmental agency or body, domestic or foreign, which, if
adversely decided, could have a W&T Material Adverse Effect; or (b) any
information relating to any event, development or circumstance with respect to
or affecting W&T or any of its subsidiaries which, in W&T's reasonable judgment,
could have a W&T Material Adverse Effect or materially and adversely affect the
ability of W&T to perform its obligations under this Agreement and the
transactions contemplated hereby. Any notice given under this Section 7.7 shall
specify the nature and period of existence of the condition, event, information,
development or circumstance, the anticipated effect thereof and what actions W&T
has taken and/or proposes to take with respect thereto. Notwithstanding the
foregoing, if, following the closing of a Qualified IPO, delivery of a notice
required to be given under this Section 7.7 would, in the opinion of counsel to
W&T, require W&T to provide additional material public disclosure under federal
or state securities law in excess of the public disclosure that would be
required under federal or state securities laws had such notice not been given,
then W&T shall not be required to give such notice.
7.8 Certain Pre-Closing Tax Matters. Except as expressly
contemplated by this Agreement, without prior notice to the Purchasers, W&T
shall not make or change any election, file any amended Tax Return, enter into
any closing agreement, settle any Tax claim or assessment relating to W&T,
surrender any right to claim a refund of Taxes, consent to any extension or
waiver of the limitation period applicable to any Tax claim or assessment
relating to W&T, fail to timely file any Tax Return, take a position on a Tax
Return not in keeping with prior practice or take any other similar action, or
omit to take any action relating to the filing of any Tax Return or the payment
of any Tax, if such election, adoption, change, amendment, agreement,
settlement, surrender, consent or other action or omission could have the effect
of increasing the present or future tax liability or decreasing any present or
future tax asset of W&T, W&T or the Purchasers. The Purchasers acknowledge and
agree that W&T will allow or cause its Subchapter "S" election status to lapse
at or prior to the Closing.
7.9 Additional Covenants. Except as expressly contemplated by
Schedule 7.9 and this Agreement or otherwise consented to in writing by the
Purchasers, from the date hereof until the Closing Time, W&T shall not:
(a) (i) increase the compensation payable to any of its
directors, officers or employees, except for increases in salary, wages or
bonuses payable to non-managerial employees in the ordinary course of business;
or (ii) grant any severance or termination pay to, or enter into or modify any
employment or severance agreement with, any of its directors, officers or
employees, except as may be required by any settlement of pending litigation; or
(iii) adopt or amend any employee benefit plan or arrangement, except as may be
required by any settlement of pending litigation or except as may be required by
applicable law;
(b) declare, set aside or pay any dividend on, or making
other distributions in respect of, any of its capital stock;
(c) (i) redeem, repurchase or otherwise reacquire any shares
of its capital stock or any securities or obligations convertible into or
exercisable or exchangeable for any
-31-
shares of its capital stock, or any options, warrants or conversion or other
rights to acquire any shares of its capital stock or any such securities or
obligations; (ii) effect any reorganization or recapitalization; or (iii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of its capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize
or propose the issuance, delivery, award, grant or sale of, any shares of any
class of its capital or other equity securities, any securities or obligations
directly or indirectly convertible into or exercisable or exchangeable for any
such shares, or any rights (including, without limitation, stock appreciation or
stock depreciation rights), warrants or options to acquire, any such shares or
securities or any rights, warrants or options directly or indirectly to acquire
any such shares or securities; or (ii) amend or otherwise modify the terms of
any such securities, obligations, rights, warrants or options;
(e) acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire all or substantially all assets of any other person;
(f) sell, lease, license, exchange, mortgage, pledge,
transfer, abandon or otherwise dispose of, or agree to sell, lease, exchange,
mortgage, pledge, transfer or otherwise dispose of, any of its assets (tangible
or intangible including its W&T Intellectual Property), except for sales of
inventory and other dispositions or abandonments of assets in the ordinary
course of business;
(g) adopt any amendments to the Articles of Incorporation or
By-laws (provided, however, W&T may (i) amend and restate its Articles of
Incorporation to correspond to Exhibit B and (ii) amend its By-laws to
correspond to Exhibit K);
(h) change any of its methods of accounting in effect at
December 31, 2001, except as may be required by law or GAAP;
(i) pay any of its long-term debt otherwise than in
accordance with its terms, or incur any obligation for borrowed money, whether
or not evidenced by a note, bond, debenture or similar instrument, other than
(i) indebtedness (including its reimbursement obligations under letters of
credit and sight drafts) incurred in the ordinary course of business under its
existing loan agreements or under any refinancing, renewal or refunding thereof,
and (ii) trade payables incurred in the ordinary course of business;
(j) take any action that would or would reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being untrue; or
(k) agree in writing or otherwise to do any of the
foregoing.
7.10 Burlington Transaction. The Burlington Agreement shall not be
amended or modified in any manner adverse to W&T without the prior written
consent of FS Private
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Investments III LLC. W&T shall deliver to FS Private Investments III LLC
promptly upon the occurrence thereof, notice of any proposed amendment or
modification to the Burlington Agreement, or of any information relating to any
material event, development or circumstance with respect to or affecting the
Burlington Agreement, or the ability of any party thereto to perform its
obligations under the Burlington Agreement or consummate the transactions
contemplated thereby.
7.11 Interim Financials. Not later than five business days prior to
the Closing Time, W&T shall provide to the Purchasers a true, correct and
complete copy of its most recent financial statements (on a consolidated and
consolidating basis) which have been prepared in accordance with GAAP
consistently applied, and which fairly present the financial position of W&T as
of the dates thereof and the results of its consolidated operations and cash
flows for the periods then ended.
7.12 Long-Term Incentive Compensation Plan. The aggregate number of
shares of W&T Common Stock issued pursuant to W&T's existing Long-Term Incentive
Compensation Plan shall not exceed 5% of the W&T Common Stock on a Fully Diluted
Basis.
7.13 Reincorporation in Delaware. W&T shall exercise its best efforts
to take all actions necessary to cause W&T to be reincorporated in Delaware on
or prior to February 28, 2003.
7.14 By-laws. The By-laws of W&T shall be amended in the form
attached hereto as Exhibit K. As part of such reincorporation the Company shall
revise the Articles of Incorporation to comply with Delaware law and utilize the
right granted under Delaware business corporation law to incorporate by
reference the terms and provisions of the Stockholders' Agreement.
7.15 Key Man Life Insurance. The Company shall use commercially
reasonable efforts to help FS Private Investments III LLC obtain a seven-year
(or longer) twenty million dollar ($20,000,000) renewable "key man" insurance
policy on the life of Tracy W. Krohn, naming FS Private Investments III LLC as
beneficiary.
7.16 Subchapter "S". If a Stockholder of W&T receives any refund of
Taxes as a result of any successful challenge to W&T's status as a Subchapter
"S" corporation within the meaning of Section 1361 et seq. of the Code
(including, but not limited to, any refund of Taxes as a result of any
successful challenge by a taxing authority of W&T's status as a Subchapter "S"
corporation) prior to the Closing Date, then, such stockholder shall pay to W&T
the amount of such refund (together with any interest thereon actually received
by the Stockholder) within five days of receipt thereof. For purposes of this
covenant, any credit against other Taxes of a stockholder shall be treated, upon
the filing of a tax return claiming such credit, as a refund of Taxes paid on
account of W&T's status as a Subchapter "S" corporation.
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ARTICLE VIII
REGISTRATION RIGHTS
8.1 Restrictive Legend. Any certificates representing the Series A
Preferred Stock or the Conversion Shares and any other securities issued in
respect of such securities upon any split, dividend, recapitalization, merger,
consolidation or similar event, shall be stamped or otherwise imprinted with a
legend in the following form (in addition to any legend required under
applicable state securities laws):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE 'ACT'), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD
OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO W&T
OFFSHORE, INC., THAT SUCH REGISTRATION IS NOT
REQUIRED."
8.2 Certain Definitions. As used in this Article VIII, the following
terms shall have the following respective meanings:
"Holders" shall mean the holders of Registrable Securities.
"Initiating Holders" shall mean any persons who in the aggregate are
holders of at least 25% of the Registrable Securities.
"IPO" shall mean the first sale of equity securities by W&T pursuant to
a registration statement under the Securities Act.
"Registrable Securities" shall mean (i) the Conversion Shares (ii) the
Common Stock held by Jefferies & Company, Inc. and (iii) any other securities
issued in respect of such Conversion Shares or Common Stock upon any split,
dividend, recapitalization, merger, consolidation or similar event; provided,
however, that Registrable Securities shall not include any securities that have
previously been registered or that have been sold to the public either pursuant
to a registration statement or under Rule 144 promulgated under the Securities
Act, or that have been sold in a private transaction in which the transferor's
rights under this Agreement are not assigned.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
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"Registration Expenses" shall mean all expenses incurred by W&T in
compliance with Sections 8.3 and 8.4, including, without limitation, all
registration and filing fees (including with respect to filings required to be
made with the National Association of Securities Dealers, Inc. and the NASD
Regulation, Inc.), printing expenses, fees and disbursements of counsel for W&T,
blue sky fees and expenses (including fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications), fees and disbursements
of all independent certified public accountants of W&T (including the expenses
of any special audits and "comfort" letters required by or incident to such
performance), fees and expenses incurred in connection with the listing of the
securities on a securities exchange or quotation system, and rating agency fees,
except for Selling Expenses.
"Restricted Securities" shall mean the securities of W&T required to
bear or bearing the legend set forth in Section 8.1.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
"Underwritten Offering" shall mean the offering and sale of Registrable
Securities in a registration pursuant to a firm commitment underwriting to an
underwriter at a fixed price for reoffering or pursuant to agency or best
efforts arrangements with a placement agent or underwriter.
8.3 Requested Registration.
(a) Requests for Registration. At any time after six months
from the date that the Securities and Exchange Commission (the "SEC") declares
effective an IPO, the Initiating Holders may request registration of all or part
of their Registrable Securities under the Securities Act. Within ten days after
receipt of any such request, W&T will give written notice of such requested
registration to all other Holders of Registrable Securities. W&T will include in
such registration all Registrable Securities with respect to which it has
received written requests for inclusion therein within 20 days after delivery of
W&T's notice. All registrations effected by W&T under this Section 8.3 are
referred to herein as "Demand Registrations." The Holders of Registrable
Securities will be entitled to two Demand Registrations.
(b) Cooperation by W&T. W&T shall and shall cause its
management to cooperate fully and to use its best efforts to effect the
registration of Registrable Securities and the sale of Registrable Securities
pursuant to a request for a Demand Registration as promptly as is practicable;
provided, however, that in the event that W&T is not then eligible to use a
registration statement on Form S-3 or other short form registration statement
under the Securities Act and W&T furnishes to the Holders a certificate of a
senior executive officer of W&T stating that the Board of Directors of W&T has
determined, in its good faith judgment, that effecting the registration at such
time would materially and adversely affect a material financing, acquisition,
disposition of assets or securities, merger or other comparable transaction by
W&T, or would require W&T to make public disclosure of information the public
disclosure of which would have a W&T Material Adverse Effect, then W&T's
obligation to effect such registration shall be deferred but not more than once
in any twelve-month period for not more than 90 days in the
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aggregate. Cooperation by W&T and its management shall include, but not be
limited to, management's attendance and reasonable presentations in respect of
W&T at road shows with respect to the offering of Registrable Securities.
(c) Expenses. W&T will pay all Registration Expenses for
each Demand Registration. A registration will not count as a Demand Registration
until it has become effective; provided, however, that in any event W&T shall
not be required to pay any Registration Expenses if, as a result of the
withdrawal of a request for registration by the Initiating Holders (other than
due to a material adverse change in the business of W&T or any refusal to
proceed based upon the advice of counsel that the registration statement, or any
prospectus contained therein, contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, in which case, W&T will be required
to pay all Registration Expenses), the registration statement does not become
effective, in which case the Holders of Registrable Securities requesting
registration shall bear such Registration Expenses pro rata to the number of
Registrable Securities so included in the registration request, unless they
agree to count such registration as a Demand Registration.
(d) Priority on Demand Registrations. If a Demand
Registration is an Underwritten Offering, and the managing underwriters advise
W&T in writing that in their opinion the number of Registrable Securities
requested to be included exceeds the number which, in the opinion of such
managing underwriters, may be sold in such offering without materially adversely
affecting the distribution or pricing of such securities, W&T will include in
such registration such number of securities, which in the opinion of such
underwriters, may be sold, allocated among the Holders electing to participate
pro rata in accordance with the amounts of securities requested to be so
included by the respective Holders; provided, however, if less than 75% of the
Registrable Securities requested to be included in such Demand Registration have
been sold thereunder (other than at the discretion of the Holders) such
registration shall not count as a Demand Registration. W&T will not include in
any Demand Registration any securities that are not Registrable Securities
without the written consent of the Holders of a majority of the Registrable
Securities requesting such registration.
8.4 Piggyback Registrations.
(a) Right to Piggyback. Whenever W&T proposes to register
any of its securities under the Securities Act (other than pursuant to a Demand
Registration, a registration relating solely to employee benefit plans on Form
S-8 or any other similar form for employee benefit plans, a registration on Form
S-3 or any similar form relating solely to a dividend reinvestment plan or a
registration relating solely to a Rule 145 transaction) and the registration
form to be used may be used for the registration and contemplated disposition of
Registrable Securities (a "Piggyback Registration"), W&T will give prompt
written notice to all Holders of Registrable Securities of its intention to
effect such a registration so that such notice is received by each Holder at
least 20 business days before the anticipated filing date. W&T will include in
such registration all Registrable Securities with respect to which W&T has
received written requests for inclusion therein within ten business days after
the receipt of W&T's notice.
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(b) Piggyback Expenses. The Registration Expenses of the
Holders of Registrable Securities will be paid by W&T.
(c) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of W&T, and the
managing underwriters advise W&T in writing that in their opinion the
distribution of the Registrable Securities to be included in the Piggyback
Registration concurrently with the securities being registered on behalf of W&T
would materially adversely affect the distribution of such securities by W&T,
W&T will include in such registration (i) first, the securities W&T proposes to
sell, (ii) second, the Registrable Securities, with each holder of Registrable
Securities desiring to register its Registrable Securities participating pro
rata in accordance with the total number of Registrable Securities requested by
such holder to be included in such registration and (iii) third, any other
securities requested to be included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
W&T's securities, and the managing underwriters advise W&T in writing that in
their opinion the distribution of the Registrable Securities in such Piggyback
Registration concurrently with the securities being registered on behalf of
holders of W&T's securities would materially adversely affect the distribution
of such securities, W&T will include in such registration (i) first, the
securities requested to be included therein by the holders requesting such
registration, (ii) second, the Registrable Securities, with each holder of
Registrable Securities desiring to register its Registrable Securities
participating pro rata in accordance with the total number of Registrable
Securities requested by such holder to be included in such registration and
(iii) third, any other securities requested to be included in such registration.
(e) Other Restrictions. W&T hereby agrees that if it has
previously filed a registration statement with respect to Registrable Securities
pursuant to Section 8.3 or pursuant to this Section 8.4, and if such previous
registration has not been withdrawn or abandoned, W&T will not file or cause to
be effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any other similar form for employee
benefit plans or on Form S-3 or any similar form for a registration of shares to
be issued solely pursuant to a dividend reinvestment plan), whether on its own
behalf or at the request of any holder or holders of such securities, until (i)
six months has elapsed from the effective date of such previous registration or
(ii) sooner if all Registrable Securities included in such previous registration
have been sold.
8.5 Holdback Agreements.
(a) Each Holder of Registrable Securities which is a party
to this Agreement agrees not to effect any sale or distribution of equity
securities of W&T, or any securities convertible into or exchangeable or
exercisable for such securities, during the period commencing seven days prior
to and ending 90 days after the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration except for a Piggyback
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Registration in connection with the IPO, in which case the period shall end 180
days after the effective date of the IPO (except as part of such underwritten
registration or with the consent of the managing underwriter), provided that the
executive officers and directors (or their equivalents) and each of the holders
of 5% or more of the then outstanding equity securities of W&T on a fully
diluted basis shall have entered into similar agreements. The commencement of
such period shall be determined in good faith by the managing underwriter and
advised to the Holders.
(b) W&T agrees (i) not to effect any sale or distribution of
its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the period commencing seven days prior
to and ending 90 days after the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except (A) as part of
such underwritten registration, (B) with the consent of the managing underwriter
of such underwritten registration or (C) pursuant to registrations on Form S-8
or any other similar form for employee benefit plans or on Form S-3 or any other
similar form for the registration of securities to be issued solely pursuant to
a dividend reinvestment plan), and (ii) to use its reasonable best efforts to
cause each holder of its equity securities, or any securities convertible into
or exchangeable or exercisable for such securities, purchased from W&T at any
time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any public sale or distribution of any such
securities during such period (except as part of such underwritten registration,
if otherwise permitted, or with the consent of the managing underwriter). The
commencement of such period shall be determined in good faith by the managing
underwriter.
8.6 Registration Procedures. Whenever the Holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Article VIII, W&T will promptly take all such actions to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto W&T will as
expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement
with respect to such Registrable Securities, and use its best efforts to cause
such registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
W&T will furnish to each of the Holders of Registrable Securities covered by
such registration and counsel selected by such Holders, copies of all such
documents proposed to be filed, which documents will be subject to their review
and approval);
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period set forth in Section 8.6(l) and comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement during such period in accordance with the
intended methods of disposition by the Holders thereof set forth in such
registration statement;
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(c) furnish to each Holder of Registrable Securities covered
by such registration such number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such registration
statement (including each preliminary prospectus) and such other documents as
such Holder may reasonably request in order to facilitate the disposition of
such Registrable Securities;
(d) use its best efforts to register or qualify Registrable
Securities covered by such registration under such other securities or blue sky
laws of such jurisdictions as any Holder reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
the Holders thereof to consummate the disposition in such jurisdictions of the
Registrable Securities as requested by such Holders (provided that W&T will not
be required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subsection, (ii) subject
itself to taxation in any such jurisdiction, or (iii) consent to general service
of process in any such jurisdiction);
(e) notify each Holder of Registrable Securities covered by
such registration, at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, of the happening of any event as a result
of which the prospectus included in such registration statement (or any document
incorporated therein by reference) contains an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and W&T will prepare a
supplement or amendment to such prospectus (or any document incorporated therein
by reference) immediately thereafter so that such prospectus (or any document
incorporated therein by reference) will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities covered by such
registration to be listed on each securities exchange or automated quotation
system on which similar securities issued by W&T are then listed or quoted;
(g) provide a transfer agent and registrar for all
Registrable Securities covered by such registration not later than the effective
date of such registration statement;
(h) enter into such customary agreements (including an
underwriting agreement) and take all such other actions as the Holders of a
majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities;
(i) make available for inspection by any Holder of
Registrable Securities covered by such registration, any underwriter
participating in any disposition pursuant to such registration, and any
attorney, accountant or other agent retained by any such Holder or underwriter,
all financial and other records, pertinent corporate documents and properties of
W&T, and cause W&T's officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney, accountant or
agent in connection with such registration statement;
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(j) obtain (i) a "comfort letter" from W&T's independent
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters and (ii) opinions of counsel from W&T's
counsel in customary form and covering such matters of the type customarily
covered in a public issuance of securities, in each case, in form and substance
reasonably satisfactory to the Holders and any underwriters and addressed to the
Holders and any underwriters;
(k) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make generally available to its
security holders, earnings statements satisfying the provisions of Section 11(a)
of the Securities Act, no later than 45 days after the end of any 12-month
period (i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold and (ii) beginning with the first month of W&T's first
fiscal quarter commencing after the effective date of the registration
statement, which statements shall cover said 12-month periods; and
(l) keep each registration statement effective until the
Holders of Registrable Securities covered by such registration have completed
the distribution described in the registration statement relating thereto
(including a shelf registration) or until Rule 144(k) under the Securities Act
becomes available with respect to the Registrable Securities covered by such
registration.
8.7 Indemnification.
(a) W&T will indemnify each Holder, each Holder's officers,
directors, managers, members and partners, and each person controlling such
Holder (within the meaning of the Securities Act and the rules and regulations
thereunder), against all claims, losses, damages, liabilities (or actions in
respect thereof) and expenses arising out of or based on any untrue or alleged
untrue statement of a material fact contained in any registration statement,
prospectus or preliminary prospectus or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by W&T of the Securities
Act or any rule or regulation thereunder applicable to W&T and relating to
action or inaction required of W&T in connection with any such registration,
qualification or compliance, and will reimburse each such Holder, such Holder's
officers, directors, managers, members and partners, and each person controlling
such Holder for any legal and any other expenses incurred in connection with
investigating or defending any such claim, loss, damage, liability or action;
provided, that W&T will not be liable in any such case to the extent that any
such claim, loss, damage, liability or action arises out of or is based on any
untrue or alleged untrue statement or omission or alleged omission of material
fact based upon written information furnished to W&T by such Holder and stated
to be specifically for use therein.
(b) Each Holder will, severally and not jointly, if
Registrable Securities held by it are included in the securities as to which
such registration is being effected, indemnify W&T, each of W&T's directors and
officers and each person who controls W&T (within the meaning of the Securities
Act and the rules and regulations thereunder), each other Holder whose
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securities are included in such registration and each of such other Holder's
officers, directors, managers, members and partners and each person controlling
such other Holder, against all claims, losses, damages and liabilities (or
actions in respect thereof) and expenses arising out of or based on any untrue
or alleged untrue statement of a material fact contained in any such
registration statement, prospectus or preliminary prospectus, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
W&T, its officers and directors, each person controlling W&T, each other Holder,
and such other Holder's officers, directors, managers, members, partners and
control persons for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement or omission is made in such registration statement,
prospectus or preliminary prospectus in reliance upon and in conformity with
written information furnished to W&T by such Holder and stated to be
specifically for use therein.
(c) Each party entitled to indemnification under this
Section 8.7 (a "Section 8.7 Indemnified Party") shall give notice to the party
required to provide indemnification (a "Section 8.7 Indemnifying Party")
promptly after such Section 8.7 Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and, unless in such Section 8.7
Indemnified Party's reasonable judgment, a conflict of interest may exist
between such Section 8.7 Indemnified Party and such Section 8.7 Indemnifying
Party with respect to such claim, shall permit the Section 8.7 Indemnifying
Party to assume the defense of any such claim or any litigation resulting
therefrom; provided, that counsel for the Section 8.7 Indemnifying Party, who
shall conduct the defense of such claim or any litigation resulting therefrom,
shall be reasonably satisfactory to the Section 8.7 Indemnified Party, and the
Section 8.7 Indemnified Party may participate in such defense at such party's
expense; provided, further, that the failure of any Section 8.7 Indemnified
Party to give notice as provided herein shall not relieve the Section 8.7
Indemnifying Party of its obligations under this Article VIII, except to the
extent that the Section 8.7 Indemnifying Party's ability to conduct such defense
shall have been materially prejudiced by such failure. To the extent that, in
the written opinion of counsel to the Section 8.7 Indemnified Party, a conflict
of interest exists between a Section 8.7 Indemnified Party and the Section 8.7
Indemnifying Party, then such Section 8.7 Indemnified Party shall be entitled to
separate counsel at the expense of the Section 8.7 Indemnifying Party. Each
Section 8.7 Indemnified Party shall furnish such information regarding itself or
the claim in question as an Section 8.7 Indemnifying Party may reasonably
request in writing and as shall be reasonably required in connection with the
defense of such claim and any litigation resulting therefrom.
(d) To the extent any indemnification by a Section 8.7
Indemnifying Party is prohibited or limited by law, the Section 8.7 Indemnifying
Party agrees to make the maximum contribution with respect to any amounts for
which it would otherwise be liable under this Section 8.7 to the fullest extent
permitted by law; provided, however, that: (i) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution under this Section 8.7(d) from any person who
was not guilty of fraudulent misrepresentation; and (ii) contribution by any
Holder of Registrable Securities shall
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be limited in amount to the net amount of proceeds received by such Holder from
the sale of such Registrable Securities pursuant to a registration.
8.8 Information by Holders. FS Private Investments III LLC, on
behalf of each Holder of Registrable Securities included in any registration,
shall furnish to W&T such information regarding such Holder and the distribution
proposed by such Holder as W&T may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Article VIII. It is understood that in the case
of any such information with respect to a Holder other than one of the Initial
FS Stockholders, FS Private Investments III LLC shall merely transmit such
information without any responsibility for its accuracy or completeness.
8.9 Limitations on Registration of Issues of Securities. From and
after the date of this Agreement, W&T shall not enter into any agreement with
any holder or prospective holder of any securities of W&T giving such holder or
prospective holder the right to require W&T to register any securities of W&T
equal to or more favorable than the rights granted under this Article VIII,
unless such action is consented to by Holders holding at least a majority of the
Registrable Securities. Any right given by W&T to any holder or prospective
holder of W&T's securities in connection with the registration of securities
shall be conditioned such that it shall be consistent with the provisions of
this Article VIII and with the rights of the Holders provided in this Agreement
and such holder or prospective holder agrees to be bound by the terms of this
Article VIII.
8.10 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the SEC which may permit the sale of the
Restricted Securities to the public without registration, W&T agrees to:
(a) make and keep public information available as those
terms are understood and defined and interpreted in and under Rule 144 under the
Securities Act, at all times from and after 90 days following the effective date
of the IPO;
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of W&T under the Securities Act
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), at any
time after it has become subject to such reporting requirements; and
(c) so long as the Holders own any Restricted Securities,
furnish to such Holders forthwith upon request a written statement by W&T as to
its compliance with the reporting requirements of Rule 144 (at any time from and
after 180 days following the effective date of the IPO) and of the Securities
Act and the Exchange Act (at any time after it has become subject to such
reporting requirements), a copy of the most recent annual or quarterly report of
W&T, and such other reports and documents so filed as such Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing such
Holder to sell any such securities without registration.
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8.11 Selection of Underwriters. If any Demand Registration is an
underwritten offering, the Holders of a majority of the Registrable Securities
included in such registration shall have the right to select the investment
banker(s) and manager(s) to administer the offering, subject to the approval of
W&T (which approval will not be unreasonably withheld).
ARTICLE IX
TERMINATION
9.1 Termination of Agreement. Anything herein to the contrary
notwithstanding, this Agreement shall terminate if the Closing does not occur on
or before the close of business on January 31, 2003 (the "Termination Date"),
unless extended by mutual written consent of the parties hereto and otherwise
may be terminated at any time before the Closing as follows:
(a) by mutual consent in writing of all of the parties
hereto; or
(b) by the Purchasers or W&T if there has been a material
representation or other material breach by the other party in its
representations, warranties, or covenants set forth herein; provided, however,
that if such breach is susceptible to cure, the breaching party shall have ten
calendar days after receipt of notice from the other party of its intention to
terminate this Agreement if such breach continues in order to cure such breach.
9.2 Effect of Termination. If this Agreement shall be terminated
pursuant to Section 9.1, then all further obligations of the parties under this
Agreement shall terminate without any further liability of any party to another;
provided that the obligations of the parties contained in Section 12.10 shall
survive any such termination. A termination under Section 9.1 shall not relieve
any party of any liability for breach of, or for any misrepresentation under
this Agreement, or be deemed to constitute a waiver of any available remedy for
any such breach or misrepresentation.
ARTICLE X
AMENDMENT AND WAIVER
This Agreement may not be amended or modified (or any provision hereof
waived), except that W&T and the Purchasers (and assignees of the Purchasers)
holding at least a majority of the Series A Preferred Stock and the Conversion
Shares purchased or to be purchased hereunder may by written instrument amend or
waive any term or condition of this Agreement relating to the rights or
obligations of such holders, but in no event shall the obligation of any holder
of Series A Preferred Stock or Conversion Shares hereunder be increased, except
upon the written consent of each such holder; provided, however, that the
provisions of Article VIII hereof may only be amended with the consent of the
holders of a majority of the Registrable Securities.
W&T and each holder of Series A Preferred Stock and Conversion Shares
shall be bound by any amendment or waiver effected in accordance with the
provisions of this Article X, whether or not such Series A Preferred Stock or
Conversion Shares shall have been marked to
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indicate such modification, but any Series A Preferred Stock or Conversion
Shares issued thereafter shall bear a notation as to any such modification.
Promptly after obtaining the written consent of the holders herein provided, W&T
shall transmit a copy of such modification to all holders of Series A Preferred
Stock and Conversion Shares.
ARTICLE XI
LOST OR MUTILATED CERTIFICATES
Upon receipt of evidence satisfactory to W&T of the loss, theft,
destruction or mutilation of any certificate representing Series A Preferred
Stock, and, in the case of any such loss, theft, or destruction, upon delivery
of a bond of indemnity satisfactory to W&T (provided that if the holder is a
financial institution, its own agreement will be satisfactory), or in the case
of any such mutilation, upon surrender and cancellation of such certificate, W&T
will issue a new certificate of like tenor as if the lost, stolen, destroyed or
mutilated certificate were then surrendered for exchange in lieu of such lost,
stolen, destroyed or mutilated certificate.
ARTICLE XII
MISCELLANEOUS
12.1 Effectiveness. This Agreement shall not be binding upon the
parties hereto until, and shall only become effective upon and contemporaneously
with, the approval by the Board of Directors of W&T of the transactions
contemplated hereby.
12.2 Governing Law. This Agreement and the rights of the parties
hereunder shall be governed in all respects by the laws of the State of
Delaware, without giving effect to the provisions thereof relating to conflicts
of law. W&T agrees that it will not assert against any partner of the Purchasers
(or against any partner, officer, director, employee or agent of the Purchasers
or any of their affiliates) any claim it may have under this Agreement by reason
of any failure or alleged failure by a Purchaser to meet its obligations
hereunder. FS Private Investments III LLC agrees to indemnify W&T and hold
harmless W&T, and any director, officer or equity holder of W&T against any
claim made or threatened to be made against any such person by any beneficial
owner of any interest in any Purchaser if such claim relates to any alleged
untrue statement of a material fact in the information provided to such person
by a Purchaser or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading
with respect to an investment in the Series A Preferred Stock.
12.3 Survival. The representations, warranties, covenants and
agreements made herein shall survive (i) any investigation made by the
Purchasers and (ii) the Closing for the two-year period immediately following
the Closing Time, except that (A) the representations contained in Sections
3.1(a), 3.1(b), 3.1(c), 3.1(d), and 3.1(z) shall survive indefinitely and (B)
the representations in Section 3.1(h) shall survive until the applicable statute
of limitations (including all waivers or extensions thereof) has expired with
respect to each matter addressed therein; and provided that any claims made or
asserted by a party within the applicable time
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period prescribed above shall survive until such claim is finally resolved and
all obligations with respect thereto are fully satisfied.
12.4 Public Announcements. W&T shall consult with, and obtain the
prior written consent of, FS Private Investments III LLC before issuing any
press release or otherwise making any public comment, statement or communication
with respect to, or otherwise disclose or permit the disclosure of the existence
of discussions regarding, a possible transaction among the parties or any of the
terms, condition or other aspects of the transaction contemplated by this
Agreement, and shall not issue any such press release or make any such public
comment, statement or communication prior to such consultation, except to the
extent required by applicable law.
12.5 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding upon
and enforceable by and against, the successors, permitted assigns, heirs,
executors and administrators of the parties hereto. Neither W&T nor its existing
stockholders may assign any of their rights or obligations under this Agreement
without the prior written consent of the Purchasers holding a majority of the
Series A Preferred Stock purchased or to be purchased hereunder. The Purchasers
may assign to Other Investors all or any part of their rights and obligations
hereunder to purchase not more than 40% in the aggregate of the Series A
Preferred Stock purchased or to be purchased hereunder, but only during the
180-day period immediately following the Closing Time, and provided that, as a
condition to any such transfer, the transferor will obtain representations from
the transferee comparable to those in Section 4.1, which representations shall
state explicitly that such representations are for the benefit of W&T. An Other
Investor to whom all or a part of the Purchasers' rights are assigned shall
become a party to this Agreement, entitled to all the rights and benefits
hereunder. The rights and powers of the Purchasers hereunder are granted to the
Purchasers as owners of the Series A Preferred Stock and Conversion Shares
purchased or to be purchased hereunder. Any subsequent owner of any Series A
Preferred Stock or Conversion Shares purchased or to be purchased hereunder
during the 180-day period following the Closing Time, whether becoming such by
transfer, assignment, operation of law or otherwise, shall be deemed to be a
Purchaser hereunder, shall have the same rights and powers which a Purchaser
owning such securities has hereunder, and shall be entitled to exercise them in
full. Each Holder shall have the rights and powers set forth in Article VIII
hereof and in the Stockholders' Agreement.
12.6 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subject matter hereof and thereof.
12.7 Notices, etc. All notices, demands or other communications given
hereunder shall be in writing and shall be sufficiently given if delivered
either personally or by a United States nationally recognized courier service
marked for next business day delivery or sent by facsimile or in a sealed
envelope by first class mail, postage prepaid and either registered or
certified, addressed as follows:
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(a) if to W&T:
W&T Offshore, Inc.
8 Greenway Plaza
Suite 1300
Houston, Texas 70046
Attention: Tracy W. Krohn
Telephone: (713) 626-8525
Facsimile: (713) 686-8527
with a copy to:
Adams & Reese, L.L.P.
One Shell Square, 45th Floor
New Orleans, LA 70139
Attention: Virginia Boulet, Esq.
Telephone: (504) 585-0331
Facsimile: (504) 566-0210
If to a Purchaser, to it at the address and facsimile number set forth on
Schedule 1, with copies to such Purchaser's representatives as set forth on
Schedule 1, or to such other address with respect to any party hereto as such
party may from time to time notify (as provided above) the other parties hereto.
Any such notice, demand or communication shall be deemed to have been received
(i) on the date of delivery, if delivered personally, (ii) one business day
after delivery to a nationally recognized overnight courier service, if marked
for next day delivery, (iii) five business days after the date of mailing, if
mailed or (iv) on the date of transmission, if sent by facsimile.
12.8 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Series A Preferred Stock or
Conversion Shares upon any breach or default of W&T under this Agreement shall
impair any such right, power or remedy of such holder nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence, therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any holder of any breach or
default under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement must be, made in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
12.9 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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12.10 Expenses. Except as set forth in the following sentence, if the
transactions contemplated by this Agreement are not consummated, each party
shall bear its own expenses and legal fees incurred with respect to the
negotiation of the transactions contemplated by this Agreement. If the
transactions contemplated by this Agreement are consummated, W&T shall pay, in
addition to its own expenses and legal fees, an amount equal to $1,000,000 in
respect of the expenses and legal fees of the Purchasers (collectively, the
"Transaction Expenses"). W&T shall not be liable to make any other payment to
the Purchasers in respect of their expenses and legal fees.
12.11 Litigation; Consent to Jurisdiction.
(a) Each party to this Agreement hereby consents to personal
jurisdiction, service of process and venue in any court in which any claim is
brought by a third party against any of the parties hereto related to this
Agreement or by any other person entitled to the benefits of Section 8.7 hereof.
(b) In the event of any litigation between the parties
related to this Agreement, the parties agree that the losing party in such
litigation shall be responsible for the expenses (including reasonable legal
fees and expenses) incurred by the winning party.
(c) Except as set forth in clause (a) above, in the event of
any disputes between the parties hereto not involving third parties, the parties
hereto agree that any action or proceeding arising directly, indirectly or
otherwise in connection with, out of, related to or from this Agreement, any
breach hereof or any transaction covered hereby, shall be resolved within the
County of New Castle, City of Wilmington and State of Delaware. Accordingly, the
parties consent and submit to the jurisdiction of the federal and state courts
seated therein. The parties further agree that any such action or proceeding
brought by either party to enforce any right, assert any claim, or obtain any
relief whatsoever in connection with this Agreement shall be brought by such
party exclusively in federal or state courts located within the County of New
Castle, City of Wilmington and State of Delaware.
12.12 Titles and Subtitles. The titles of the articles, sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
12.13 Counterparts. This Agreement may be executed in counterparts,
including via facsimile, each of which shall be an original, but all of which
together shall constitute one instrument.
12.14 Direct Purchase. If W&T should redeem all the shares of W&T
Common Stock owned by the Bethea Group and issue the Series A Preferred Stock to
the Purchasers for cash, then the parties shall, in good faith, negotiate
amendments to Article I and Article II of this Agreement and such other
provisions of this Agreement as must be changed if the Series A Preferred Stock
is to be purchased for cash, provided that such amendments shall not adversely
affect the rights and obligations of, or economic consequences to, either W&T or
the Purchasers.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
W&T OFFSHORE, INC.
By: /s/ Tracy W. Krohn
-------------------------------
Name: Tracy W. Krohn
Title: CEO
PURCHASERS:
ING FURMAN SELZ INVESTORS III L.P.
ING BARINGS U.S. LEVERAGED EQUITY PLAN LLC
ING BARINGS GLOBAL LEVERAGED EQUITY PLAN LTD.
By: FS PRIVATE INVESTMENTS III LLC
By: /s/James L. Luikart
-------------------------------
Name: James L. Luikart
Title: Managing Member
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With respect to Article VIII only:
JEFFERIES & COMPANY, INC.
By: /s/ Daniel O. Conwill IV
-------------------------------
Name: Daniel O. Conwill IV
Title: EVP
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Exhibit A - Form of Stockholders' Agreement
Exhibit B - Form of Amended and Restated Articles of Incorporation
Exhibit C - Form of Krohn Employment Agreement
Exhibit D - Form of Bethea Redemption Agreement
Exhibit E - Form of Bethea Purchase Agreement
Exhibit F - Form of Opinion of Adams and Reese, L.L.P.
Exhibit G - Intentionally Omitted
Exhibit H - Election of Subchapter "S" Status by W&T and
Corresponding Letter of Acceptance from the Internal Revenue Service
Exhibit I - LLC Purchase Agreement
Exhibit J - Stockholder Consent
Exhibit K - Form of Amended and Restated By-Laws
Schedule 1
Purchasers
Number of shares Number of shares of
of Series A W&T Common Stock to
Preferred Stock be Exchanged by Representative's
Name and Address of Purchaser to be Issued by W&T Purchaser Name and Address
- --------------------------------------------- ------------------- ------------------- -----------------------------
ING Furman Selz Investors III L.P. Stroock & Stroock & Lavan LLP
c/o FS Private Investments III LLC 180 Maiden Lane
520 Madison Avenue New York, NY 10038
8th Floor Attn: Melvin Epstein, Esq.
New York, NY 10022 1,393,590 696.795 Tel: (212) 806-5400
Attention: Mr. Brian Friedman Fax: (212) 806-6006
Telephone: (212) 284-1701
Facsimile: (212) 284-1717
ING Barings U.S. Leveraged Equity Plan LLC Stroock & Stroock & Lavan LLP
c/o FS Private Investments III LLC 180 Maiden Lane
520 Madison Avenue New York, NY 10038
8th Floor Attn: Melvin Epstein, Esq.
New York, NY 10022 423,805 211.9025 Tel: (212) 806-5400
Attention: Mr. Brian Friedman Fax: (212) 806-6006
Telephone: (212) 284-1701
Facsimile: (212) 284-1717
ING Barings Global Leveraged Equity Plan Ltd. Stroock & Stroock & Lavan LLP
c/o FS Private Investments III LLC 180 Maiden Lane
520 Madison Avenue New York, NY 10038
8th Floor Attn: Melvin Epstein, Esq.
New York, NY 10022 182,605 91.3025 Tel: (212) 806-5400
Attention: Mr. Brian Friedman Fax: (212) 806-6006
Telephone: (212) 284-1701
Facsimile: (212) 284-1717
------------------- -------------------
Total: 2,000,000 1,000
=================== ===================