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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
NOVEMBER 26, 1997
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
ONEOK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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001-13643 783-1520922
OKLAHOMA ------------------------ ---------------------------------
<S> <C> <C>
(STATE OR OTHER JU- (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
RISDICTION
OF INCORPORATION)
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100 WEST FIFTH STREET; TULSA, OK
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
74103
(ZIP CODE)
(918) 588-7000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
ONEOK INC.
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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Item 1 Not applicable
Item 2 Acquisition or Disposition of Assets
THE TRANSACTIONS
The Transactions contemplate (i) the contribution of the Assets referred to
below, including the outstanding capital stock of Westar and MCMC, direct or
indirect wholly-owned subsidiaries of WRI, to WAI, a newly formed Oklahoma
corporation that is wholly-owned by WRI, and, immediately thereafter, (ii) the
Merger of ONEOK with and into WAI, with WAI as the surviving corporation.
THE COMPANIES
ONEOK Inc. ONEOK engages in several aspects of the energy business. ONEOK
purchases, gathers, compresses, transports, and stores natural gas for
distribution to consumers. It transports gas for others, leases pipeline
capacity to others for their use in transporting gas, and leases a small
intrastate transmission system in Texas to others. ONEOK explores for and
produces oil and gas, extracts and sells natural gas liquids, and is engaged
in the gas marketing business. In addition, it leases and operates a
headquarters office building (leasing excess space to others) and owns and
operates a related parking facility. As a regulated natural gas utility, ONEOK
distributes natural gas to approximately 730,000 customers in a geographic
service area comprising approximately three-fourths of the State of Oklahoma,
thereby meeting the natural gas needs of over two million people. ONEOK is a
Delaware corporation with principal executive offices at 100 West Fifth
Street, Tulsa, Oklahoma 74103-0871, and its telephone number is (918) 588-
7000.
Western Resources, Inc. WRI is engaged principally in the production,
purchase, transmission, distribution and sale of electricity, the delivery and
sale of natural gas and the provision of electronic monitored security
services. WRI serves approximately 601,000 electric customers in eastern and
central Kansas, approximately 648,000 natural gas customers in Kansas and
northeastern Oklahoma and approximately 400,000 security customers in 44
states. WRI's non-utility subsidiaries provide security services, market
natural gas primarily to small and medium-sized commercial and industrial
customers, engage in international power project development and provide other
energy-related products and services.
WRI and its divisions and direct or indirect wholly-owned subsidiaries
include KPL, a rate-regulated electric and gas division of WRI, KGE, a rate-
regulated utility and wholly-owned subsidiary of WRI, Westar, Westar Capital,
Inc., Westar Security, Inc., Westar Energy, Ltd. and The Wing Group, Ltd.,
non-utility subsidiaries of WRI, and MCMC, a regulated gas transmission
service provider. KGE owns 47% of Wolf Creek Nuclear Operating Corporation,
the operating company for the Wolf Creek Generating Station.
The Assets to be contributed to WAI pursuant to the Agreement consist of (i)
certain assets and liabilities of the local natural gas distribution
businesses of WRI which are operated in the States of Kansas and Oklahoma and
(ii) all of the outstanding capital stock and liabilities of MCMC and Westar,
direct or indirect wholly-owned subsidiaries of WRI. MCMC offers natural gas
transportation, wheeling, parking, balancing and storage services to customers
throughout the central and midwestern regions of North America. Westar
provides natural gas marketing and sales, purchasing and supply and other
marketing related services. See "The Gas Business."
WRI is a Kansas corporation with its principal executive offices located at
818 Kansas Avenue, Topeka, Kansas 66612 and its telephone number is (913) 575-
6300.
WAI, Inc. WAI is a wholly-owned subsidiary of WRI, newly formed by WRI under
the OGCA on May 16, 1997 for the purpose of effectuating the Transactions
contemplated by the Agreement. Prior to the Merger Effective Time, WRI will
not engage in any activity other than activities related to the Transactions.
WAI is an Oklahoma corporation with executive offices at 818 Kansas Avenue,
Topeka, Kansas 66612, and its telephone number is (913) 575-1950. Following
the Merger Effective Time, WAI will have its executive offices at 100 West
Fifth Street, Tulsa, Oklahoma 74103-0871, and its telephone number will be
(918) 588-7000.
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THE TRANSACTIONS
The Agreement is attached as Appendix A to this Proxy Statement/Prospectus.
The Agreement among WRI, WAI and ONEOK provides that WRI will contribute, or
will cause to be contributed, to WAI all of the Assets. WRI will then cause
WAI to assume all of the liabilities of WRI that arise primarily out of, or
relate primarily to or are primarily generated by, the Assets and
approximately $35 million aggregate principal amount of debt of WRI with terms
permitting prepayment with no more than 30 days' prior notice without penalty
and a maturity of no more than three years (the "Assumed Debt"). The amount of
Assumed Debt will be subject to adjustment based on changes in the working
capital of the Gas Business and the dollar amounts of capital expenditures to
be made by each of ONEOK and WRI for the period from December 1, 1996, through
the Closing Date.
Immediately after the Asset Transaction, ONEOK will merge with and into WAI,
with WAI as the surviving corporation, whereupon WAI's name will be changed to
"ONEOK, Inc." The outstanding shares of ONEOK Common Stock will be converted
on a one-for-one basis into the right to receive shares of New ONEOK Common
Stock. Each share of New ONEOK Common Stock will be issued together with the
corresponding number of associated Rights to purchase one one-hundredths of a
share of Series C Preferred Stock of New ONEOK pursuant to the Rights
Agreement.
Upon consummation of the Transactions, on a fully diluted basis, after
giving effect to the Transactions and based on the number of shares of ONEOK
Common Stock outstanding as of December 12, 1996, WRI will hold 2,996,702
shares of New ONEOK Common Stock and 19,317,584 shares of Series A Convertible
Preferred Stock of New ONEOK, representing up to 9.9% of the New ONEOK Common
Stock outstanding before conversion of the Series A Convertible Preferred
Stock into New ONEOK Common Stock and up to 45.0% of the New ONEOK Common
Stock outstanding after such conversion. Holders of ONEOK Common Stock will
hold shares of New ONEOK Common Stock representing at least 90.1% of the New
ONEOK Common Stock outstanding and not less than 55.0% of the New ONEOK Common
Stock after conversion of the Series A Convertible Preferred Stock to be held
by WRI pursuant to the Agreement. In the event ONEOK issues additional shares
of ONEOK Common Stock between the Original Execution Date and the Closing, WRI
has the right pursuant to the Shareholder Agreement to require WAI at the
Closing to issue to it additional shares of New ONEOK Common Stock and/or
Series A Convertible Preferred Stock, at a price per share equal to the
average market price of the ONEOK Common Stock for the 20 trading days prior
to the Closing, so as to restore WRI's percentage ownership at the Closing to
up to 9.9% of the outstanding New ONEOK Common Stock and up to 45.0% of the
outstanding New ONEOK Common Stock on a fully diluted basis. See "The
Shareholder Agreement."
Pursuant to the Agreement, ONEOK has redeemed all of its outstanding shares
of ONEOK Preferred Stock and will redeem at the Closing of the Merger all
rights contemplated by the ONEOK Rights Agreement at the applicable redemption
price.
A copy of the Agreement (excluding all exhibits, attachments and schedules
thereto), the form of the Shareholder Agreement and the form of the
Certificate of Designations of the Convertible Preferred Stock are attached to
this Proxy Statement/Prospectus as Appendices A, B and C, respectively.
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The following chart illustrates the Transactions and the end result thereof.
THE TRANSACTIONS
----------------- -----------
Western Resources ONEOK, INC.
Inc.
----------------- -----------
WAI WRI Gas Business (including
Common Stock assumed liabilities), Westar and Merger
and MCMC equal capital stock
---------------------------------
WAI, Inc.
(Name to be Changed to
ONEOK, Inc.)
---------------------------------
END RESULT
------------------- -------------------
Public Shareholders Western Resources
of ONEOK, Inc. Inc.
------------------- -------------------
At least 90.1% of the New Up to 9.9% of New
ONEOK Common Stock ONEOK Common Stock
outstanding and not less than outstanding and up to
55.0% of the New ONEOK 45.0% of the New
Common Stock outstanding ONEOK Common Stock
after the conversion of oustanding after the
the Convertible Preferred Stock conversion of the
Convertible Preferred
Stock
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ONEOK, Inc.
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BACKGROUND AND REASONS FOR THE TRANSACTIONS
Background of the Transactions. The Board of Directors of ONEOK believes that
changes in the natural gas business are inevitable and that such changes will
significantly affect the manner in which natural gas and related services are
marketed. In response to this trend, commencing in 1994, senior management of
ONEOK conducted a strategic review of its business and of ongoing developments
in the natural gas distribution and energy related industry regarding
competition, regulation and consolidation. Management concluded that the
domestic natural gas business was undergoing a process of deregulation which
would lead, over the next several years, to "unbundling" of services at the
residential level. In other words, residential consumers would be able to
choose from a number of unregulated service providers to sell natural gas to
them which would be physically transported through existing distribution
systems, resulting in increased competition to sell natural gas to
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residential consumers. Management further concluded that markets for
electricity and natural gas were converging and consolidating and that these
trends and competition for customers would alter the structure and business
practices of companies serving these markets in the future.
In order to better position ONEOK competitively, the ONEOK Board and
management determined that it should seek both to expand its gas distribution
operations and become a provider of energy services not limited to natural
gas. ONEOK sought a strategy to pursue, and began to analyze, possible
acquisitions or strategic alliances with companies that would enhance and
expand its natural gas distribution, marketing and transportation business and
provide ONEOK with the opportunity to deliver to its customers, in addition to
a gas energy product, a variety of other products and services, including
electric energy and other services.
In October 1992, WRI began actively to pursue bids for the sale of its gas
operations. Financial information relating to WRI's Missouri, certain Kansas
and Oklahoma gas operations was distributed to potential purchasers, including
ONEOK. Given WRI's geographic proximity, ONEOK identified WRI's Kansas and
Oklahoma gas operations as being attractive candidates for a strategic
alliance with ONEOK. In May 1993, ONEOK and the Southern Union Company
("Southern Union") submitted a joint proposal to separately acquire certain
portions of the gas business of WRI. Southern Union's bid was for WRI's
Missouri distribution system, while ONEOK's bid was for WRI's Oklahoma and
certain of WRI's Kansas gas distribution systems. On June 22, 1993, ONEOK
publicly announced that WRI and ONEOK were conducting negotiations regarding
the possible sale to ONEOK of WRI's local natural gas distribution operations
in Oklahoma and gas only utility operations in eastern Kansas. Negotiations
between ONEOK and WRI continued through mid-July 1993. The parties were unable
to reach mutual agreement on the terms of the proposed sale, and on July 15,
1993, ONEOK publicly announced the termination of negotiations with WRI.
In February 1995, ONEOK executives, including Larry Brummett, Chairman,
President and Chief Executive Officer of ONEOK, approached John Hayes,
Chairman and Chief Executive Officer of WRI and suggested that their
respective corporations renew discussions. Throughout 1995, there were interim
discussions between executives of ONEOK and executives of WRI regarding
ONEOK's interest in purchasing WRI's Oklahoma local natural gas distribution
system. On January 29, 1996, Eugene Dubay of ONEOK and certain executives of
WRI met in Topeka, Kansas regarding the possible purchase by ONEOK of WRI's
Oklahoma and certain of its Kansas local natural gas distribution systems.
During April 1996, executives of WRI held several discussions with ONEOK
executives regarding the size and form of consideration for the transactions,
and WRI's proposal to retain a significant investment in the business through
ownership of capital equity in the combined business as full or partial
consideration for the transactions.
In June 1996, WRI and ONEOK executed a confidentiality agreement relating,
among other things, to the information to be provided by each company to the
other. Following the execution of such confidentiality agreement, the parties
began their respective due diligence reviews.
On July 16, 1996, managements of ONEOK and WRI met in Topeka, Kansas to
discuss the structure and terms of the transactions and the potential
operating synergies which might result.
On July 18, 1996, the ONEOK Board held a regularly scheduled meeting at
which it reviewed the status of the negotiations with WRI. Following
presentations by ONEOK's management regarding WRI's gas operations and ONEOK's
business and potential operating synergies, the ONEOK Board determined that it
would continue to evaluate the proposed transactions. The ONEOK Board
authorized its management to continue its discussions with WRI and to report
back to the ONEOK Board as discussions progressed. See "The Transactions--
Opinion of Financial Advisor."
On September 4, 1996, senior management of ONEOK and WRI had a meeting in
Tulsa, Oklahoma to further discuss the structure of the transactions and the
prospect of WRI's continued equity ownership in the combined business after
the closing of such proposed transactions. ONEOK management indicated its
willingness to enter into a proposed transaction structure in which WRI would
subsequently hold, subject to
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certain standstill restrictions, up to 45.0% of the common stock of the
combined entity on a fully diluted basis and receive a certain amount of cash.
On September 19, 1996, the ONEOK Board held a regularly scheduled meeting at
which it reviewed the status of ONEOK's negotiations with WRI and heard
presentations from ONEOK's management and legal advisors regarding the
proposed structure. Following such presentations, the ONEOK Board determined
that it would continue to evaluate the proposed transactions and authorized
management to continue discussions with WRI and its advisors and proceed with
due diligence.
During October 1996 through mid-November 1996, members of the respective
senior managements of each of ONEOK and WRI and their respective counsel held
several discussions relating to the terms of the Shareholder Agreement and
other matters, including, but not limited to, the number of shares of the
combined business to be received by WRI in the Transactions, WRI's board
representation in the combined business, WRI's voting rights, a standstill
provision, WRI's top-up rights, the Rights Agreement, WRI's registration
rights, transfer restrictions on WRI regarding its stock holding in New ONEOK,
and a buy/sell option for both WRI and New ONEOK. See "The Shareholder
Agreement." During this time period, WRI and ONEOK exchanged detailed
operational, financial and other business information and the respective
senior managements and legal and financial advisors of each of ONEOK and WRI
continued to conduct their due diligence reviews.
From the end of November 1996 through the beginning of December 1996,
discussions between the respective senior managements of each of ONEOK and WRI
and their counsel progressed toward finalization of the terms of the Agreement
and the Shareholder Agreement.
On December 11, 1996, the WRI Board, at its regularly scheduled meeting,
unanimously approved the Agreement, the Shareholder Agreement and the
Transactions.
On December 11, 1996, the ONEOK Board met to consider approval of the
Agreement, the Shareholder Agreement and the Transactions. At the meeting,
PaineWebber presented its oral opinion to the ONEOK Board that, as of such
date, the proposed Transactions were fair to ONEOK's shareholders from a
financial point of view. After further discussion by the ONEOK Board of the
proposed Transactions, the ONEOK Board concluded that the Transactions were in
the best interest of ONEOK's shareholders and unanimously approved the
Agreement, the Shareholder Agreement, other ancillary agreements and the
Transactions contemplated thereby.
On December 12, 1996, WRI and ONEOK executed the Agreement and publicly
announced the Transactions.
On January 31, 1997, WRI received a letter from the Commission confirming
WRI's continued eligibility to account for a certain other unrelated business
combination as a "pooling of interests." It is a condition to WRI's
obligations to close the Transactions that WRI's accountants confirm such
eligibility.
On May 19, 1997, WRI and ONEOK amended and restated the Agreement to include
New ONEOK as a party and to make several technical revisions.
Reasons for the Transactions. In approving and recommending the
Transactions, the ONEOK Board of Directors considered the following material
information and made various evaluations thereof:
. Consummation of the Transactions would combine ONEOK's roughly $600
million rate base (the amount of investment upon which a utility is
allowed to earn a return) with WRI's roughly $500 million rate base,
nearly doubling ONEOK's gas utility franchise. The Transactions would also
nearly double ONEOK's customer base from 730,000 customers currently to
almost 1.4 million customers, making New ONEOK the eighth largest natural
gas distribution company in the United States, and geographically
diversify ONEOK's distribution network and customer base into the State of
Kansas, enabling ONEOK, in the ONEOK Board's view, to have greater
regulatory and marketing flexibility.
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. The ONEOK Board's belief that the local natural gas distribution and
transmission operations of WRI would be a good strategic fit for the ONEOK
Oklahoma properties by strengthening the earnings capability of ONEOK's
existing system, by benefiting the present customers of ONEOK and the Gas
Business over time through resulting economies of scale and system
coordination with WRI by means of the Shared Services Agreement.
. The ONEOK Board's belief that cross-marketing opportunities arising from
WRI's continued investment in the combined entity and the arrangements
contemplated by the Marketing Agreement, which would provide the
opportunity to (i) in cooperation with WRI, deliver a variety of services
to its customers that ultimately would include gas or electric energy,
home security and other services and (ii) deliver gas and gas services to
WRI's electric customers, thereby enhancing revenues.
. The ONEOK Board's belief that the acquisition of MCMC would enhance
ONEOK's gas marketing efforts.
. The ONEOK Board's belief that recent utility industry restructurings,
combinations and electric and gas company convergences resulting in the
development of energy services companies have increased the size and scale
requirements necessary for future success in the utility industry, and
that consummation of the Transactions places ONEOK in a more competitive
position.
. The Transactions would lower the debt to equity ratio of the combined
business relative to ONEOK prior to the Transactions from 43% to 24%. Pro
forma cash flow from operations as a percentage of debt would increase
from 34% to 51% and from 32% to 39% for the nine months ended May 31, 1997
and the twelve months ended August 31, 1996, respectively. Pro forma
earnings to fixed charges would increase from 4.94x to 7.20x and from
3.42x to 4.33x for the nine months ended May 31, 1997 and the twelve
months ended August 31, 1996, respectively. In the ONEOK Board's view, the
foregoing would strengthen its balance sheet, enabling the combined
business to have greater financial flexibility to pursue other attractive
transactions. The Transactions also create a more competitive company
because of the anticipated financial strength, prospects and cash flow of
the combined business.
. The intended federal income tax consequences of the Transactions
including the ability of the ONEOK shareholders to have a tax-free
exchange of ONEOK Common Stock for New ONEOK Common Stock. See "Certain
Federal Income Tax Consequences of the Transactions."
. The arrangements contemplated by the Shareholder Agreement for corporate
governance restrictions on WRI's significant equity holding in the
combined business, including WRI's agreement not to seek control of New
ONEOK, WRI's right to designate two directors prior to a Regulatory
Change, and additional directors comprising up to one-third of the New
ONEOK Board after a Regulatory Change, and New ONEOK's right to purchase
New ONEOK Common Stock from WRI in the event WRI wishes to sell a greater-
than-5.0% block of New ONEOK capital equity. See "The Shareholder
Agreement."
. The terms and conditions of the Agreement, including the consideration
for the Transactions, the absence of any provision for adjusting such
consideration based on changes in the trading price for the ONEOK Common
Stock after the date of the Agreement, the parties' representations,
warranties and covenants, the conditions to their respective obligations,
and the amount of termination fees payable under the Agreement and the
ONEOK Board's belief that such terms and conditions were appropriate for
the proposed Transactions.
. The ONEOK Board's belief that the incorporation of New ONEOK under the
laws of the State of Oklahoma was desirable in light of the fact that
substantial portions of New ONEOK's operations will be conducted in the
State of Oklahoma.
. The regulatory approvals required to consummate the Transactions,
including the OCC and KCC approvals, and the ONEOK Board's belief that it
was likely that such approvals would be obtained upon terms reasonably
satisfactory to the parties.
. The recommendation of the Transactions by the ONEOK management.
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. The presentations made by management and PaineWebber at the December 11,
1996 ONEOK Board meeting that for fiscal 1998 through fiscal 2000 the
Transactions will improve the combined business' balance sheet and provide
greater flexibility for future transactions as well as the approximately
$26 million potential operating synergies achievable in one to three years
which might result from the combination of contiguous service territories
and resulting operating efficiencies. See "The Transactions--Opinion of
Financial Advisor."
. Additionally, the ONEOK Board relied on the PaineWebber Opinion to the
effect that the proposed Transactions are fair to the shareholders of
ONEOK from a financial point of view. (The full text of the written
opinion of PaineWebber, dated December 11, 1996, which sets forth the
procedures followed, the factors considered and the assumptions made by
PaineWebber, is attached as Appendix F to this Proxy Statement/Prospectus
and is incorporated by reference. You should read the opinion of
PaineWebber carefully and in its entirety.)
. The results of the due diligence review of the Gas Business conducted by
ONEOK's management and legal and financial advisors.
. The oral advice obtained from the Commission that WRI will not be a
holding company under the 1935 Act and New ONEOK will not be a subsidiary
company under the 1935 Act as a result of the Transactions.
In approving the Transactions, the ONEOK Board also considered the following
potentially negative material information and factors relating to the
Transactions which the ONEOK Board determined were outweighed by the benefits
of the Transactions:
. The lack of assurance that the combined entity would achieve the
approximately $26 million expected potential operational cost savings and
efficiencies resulting in revenue enhancements in one to three years.
. The termination and transfer provisions of the Shareholder Agreement,
which under certain circumstances could, subject to applicable law, enable
WRI or its transferee to acquire control of New ONEOK without paying a
control premium to the New ONEOK shareholders, and the fact that WRI's
aggregate voting power in New ONEOK with respect to mergers or similar
transactions involving a Change in Control may make the consummation of
such a transaction, which is opposed by WRI, difficult to obtain. See
"Risk Factors--Risks Relating to the Shareholder Agreement."
. The Board also evaluated other risk factors, including (i) the
uncertainty that New ONEOK may be subject to extensive regulatory and
reporting requirements under the 1935 Act if WRI were to become a
registered holding company under the 1935 Act and (ii) the potential
antitakeover effect of the New ONEOK Certificate, the New ONEOK By-laws,
the New ONEOK Rights Agreement, the Shareholder Agreement and Oklahoma
statutory law. The ONEOK Board determined that these negative factors did
not provide a sufficient basis for rejecting the Transactions. See "Risk
Factors" and "The Shareholder Agreement."
In analyzing the Transactions, the ONEOK Board evaluated the factors and
considerations described above and consulted with its financial and legal
advisors and with ONEOK management. The ONEOK Board did not adopt the
PaineWebber Opinion as the exclusive basis for its determination as to the
fairness of the Transactions; rather, the ONEOK Board, as indicated above,
included the PaineWebber Opinion in the total mix of information regarding the
Transactions that was available to, and evaluated by, it. Given the uncertain
timing of the occurrence of the Regulatory Change, the ONEOK Board, in
evaluating the Convertible Preferred Stock, has considered the conversion
effect of the Convertible Preferred Stock as if it were to occur at Closing.
The ONEOK Board concluded that the combination of the factors discussed above
(including reliance on the PaineWebber Opinion that the Transactions were fair
to the shareholders of ONEOK, from a financial point of view), together with
the ONEOK Board independent evaluation, supported the ONEOK Board's
determination that the
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Transactions were fair to, and in the best interests of, the ONEOK
shareholders. In reaching this conclusion, the ONEOK Board did not assign
relative or specific weights to the above information and factors or determine
that any information or factor was of particular importance. A determination
of various weightings would, in the view of the ONEOK Board, be impractical.
Rather, the ONEOK Board viewed its position and recommendations as being based
on the totality of the information and factors presented to and considered by
it. In addition, individual members of the ONEOK Board may have given
different weight to different information and factors.
For the reasons described above, the ONEOK Board, by a unanimous vote on
December 11, 1996, approved the Agreement and the Transactions and unanimously
recommends that ONEOK shareholders vote for approval and adoption of the
Transactions.
RECOMMENDATION OF THE ONEOK BOARD
THE ONEOK BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE PROPOSED TRANSACTIONS
AT A MEETING HELD ON DECEMBER 11, 1996 AND DETERMINED THAT THE TRANSACTIONS
ARE FAIR TO, AND IN THE BEST INTEREST OF, ONEOK AND ITS SHAREHOLDERS, AND AT A
MEETING HELD ON JULY 17, 1997 UNANIMOUSLY RECOMMENDED THAT THE ONEOK
SHAREHOLDERS VOTE TO APPROVE THE TRANSACTIONS.
In approving the Transactions and making its recommendation, the ONEOK Board
of Directors took into account all of the factors described above under "--
Background and Reasons for the Transactions," and the terms of the Agreement,
as well as events subsequent to December 11, 1996, the date on which the Board
approved the Transactions, including the business and results of operations of
ONEOK since that date, and the increase in the market price of the ONEOK
Common Stock since such date as reflected under the heading "Market Prices."
In addition, the ONEOK Board relied upon the PaineWebber Opinion dated as of
December 11, 1996, which is described below. See "--Opinion of Financial
Advisor." The PaineWebber Opinion has not been updated, and will not be
updated prior to the closing of the Transactions. The Agreement does not
contain a requirement that PaineWebber update its opinion as of a date
subsequent to the date of the PaineWebber Opinion, nor does the ONEOK Board of
Directors deem such to be necessary. In the view of the ONEOK Board of
Directors, no material change has occurred from the date of the PaineWebber
Opinion to the date hereof which altered the reliance of the ONEOK Board of
Directors on the PaineWebber Opinion that the Transactions are fair, from a
financial point of view, to the holders of ONEOK Common Stock. While the ONEOK
Board of Directors is aware that the market price per share of ONEOK Common
Stock has increased approximately 28% since the date of the Agreement, in the
view of the ONEOK Board of Directors, such change in the market price of the
ONEOK Common Stock does not materially change the basis for its approval of
the Transaction.
OPINION OF FINANCIAL ADVISOR
The full text of the opinion of PaineWebber, dated as of December 11, 1996,
which sets forth the assumptions made, procedures followed, matters considered
and limitations on the review undertaken, is attached as Appendix F to this
Proxy Statement/Prospectus. The PaineWebber Opinion has not been updated and
will not be updated prior to the Closing of the Transactions. ONEOK
shareholders are urged to read such opinion carefully and in its entirety. The
summary of the PaineWebber Opinion set forth in this Proxy
Statement/Prospectus is qualified in its entirety by reference to the full
text of such opinion.
ONEOK retained PaineWebber as its financial advisor in connection with
rendering a fairness opinion relating to the Transactions. In connection with
such engagement, ONEOK requested PaineWebber to render an opinion as to
whether or not the proposed Transactions are fair, from a financial point of
view, to the holders of ONEOK Common Stock.
In connection with the ONEOK Board of Directors' consideration of the
Agreement, PaineWebber delivered the PaineWebber Opinion on December 11, 1996
to the effect that, as of the date of the PaineWebber Opinion, and based on
its review and assumptions and subject to the limitations summarized below,
the proposed Transactions were fair to the holders of ONEOK Common Stock from
a financial point of view. The PaineWebber Opinion was prepared at the request
and for the information of the Board of Directors of ONEOK
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and does not constitute a recommendation to any holder of ONEOK Common Stock
as to how any such shareholder should vote with respect to the Transactions.
The PaineWebber Opinion does not address the relative merits of the
Transactions and any other transactions or business strategies discussed by
the Board of Directors of ONEOK as alternatives to the Transactions or the
decision of the Board of Directors of ONEOK to proceed with the Transactions.
ONEOK did not place any limitations upon PaineWebber with respect to the
procedures followed or factors considered in rendering the PaineWebber
Opinion.
In arriving at its opinion, PaineWebber, among other things: (i) reviewed,
among other public information, ONEOK's Annual Reports, Forms 10-K and related
financial information for the four fiscal years ended August 31, 1996; (ii)
reviewed, among other public information, WRI's Annual Reports, Forms 10-K and
related financial information for the four fiscal years ended December 31,
1995, and WRI's Form 10-Q and the related unaudited financial information for
the nine months ended September 30, 1996; (iii) reviewed certain information,
including financial forecasts, relating to the business, earnings, cash flows,
assets and prospects of ONEOK and the Gas Business, provided to PaineWebber;
(iv) conducted discussions with members of the respective senior management of
each of ONEOK and WRI concerning the respective businesses and prospects of
each of their natural gas operations; (v) reviewed the historical market
prices and trading activity for ONEOK shares and compared such prices and
trading histories with those of certain other publicly traded companies which
PaineWebber deemed to be relevant; (vi) compared the financial position and
operating results of ONEOK and the Gas Business with that of certain publicly
traded companies which PaineWebber deemed to be relevant; (vii) compared the
financial terms of the Transactions with the financial terms of certain other
business combinations which PaineWebber deemed to be relevant; (viii)
considered the potential pro forma effects of the Transactions on ONEOK; (ix)
reviewed the draft of the Agreement dated December 10, 1996 and the draft of
the Shareholder Agreement dated December 2, 1996; (x) reviewed certain
information provided to PaineWebber relating to potential stand-alone
operational efficiencies of the Gas Business; and (xi) reviewed such other
financial studies and analyses and performed such other investigations and
took into account such other matters as PaineWebber deemed necessary,
including PaineWebber's assessment of regulatory, general economic, market and
monetary conditions.
In preparing the PaineWebber Opinion, PaineWebber relied on the accuracy and
completeness of all information that was publicly available, supplied or
otherwise communicated to PaineWebber by ONEOK and WRI and PaineWebber has not
independently verified the same. PaineWebber has assumed that the financial
forecasts provided to it were reasonably prepared on bases reflecting the best
currently available estimates and good faith judgments as to the future
performance of ONEOK and the Gas Business, respectively. PaineWebber has also
assumed, with the consent of ONEOK, that (i) the contribution of the Gas
Business will be accounted for under the purchase method of accounting and
(ii) any material liabilities (contingent or otherwise, known or unknown) of
ONEOK and the Gas Business are as set forth in the consolidated financial
statements of ONEOK and WRI, respectively. PaineWebber has not made an
independent appraisal of the assets or liabilities (contingent or otherwise)
of ONEOK or the Gas Business, nor has PaineWebber been furnished with any such
appraisals. The PaineWebber Opinion is based upon regulatory, economic,
monetary and market conditions existing on the date thereof. Furthermore,
PaineWebber expresses no opinion as to the price or trading range at which the
shares of ONEOK or New ONEOK will trade in the future.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant quantitative methods of financial analyses
and the application of those methods to the particular circumstances and,
therefore, such an opinion is not readily susceptible to partial analysis or
summary description. Accordingly, PaineWebber believes that its analysis must
be considered as a whole and that considering any portion of such analysis and
of the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying the
PaineWebber Opinion. In its analyses, PaineWebber made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of ONEOK and WRI. Any
estimates contained in these analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth therein. In addition, analyses
relating to the value of businesses do not
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purport to be appraisals or to reflect the prices at which businesses may
actually be sold. Accordingly, such analyses and estimates are inherently
subject to substantial uncertainty and neither ONEOK nor PaineWebber assume
responsibility for the accuracy of such analyses and estimates.
The following paragraphs summarize the significant analyses delivered to the
ONEOK Board performed by PaineWebber in arriving at the PaineWebber Opinion,
dated as of December 11, 1996.
In its analysis PaineWebber calculated the equity value of the Transactions
as of December 11, 1996 to be $626.3 million based on ONEOK's closing Common
Stock price on December 11, 1996 of $26.50 per share (the "Transaction
Value"). PaineWebber noted that the Transaction Value did not include the $35
million of debt of WRI to be assumed by WAI.
Selected Comparable Public Company Analysis: Using publicly available
information, PaineWebber compared selected historical and projected operating
performance data of the Gas Business to the corresponding data of a group of
comparable companies. The comparable companies included 12 gas distribution
utility companies: AGL Resources, Inc.; Bay State Gas Company; Eastern
Enterprises; Indiana Energy, Inc.; KN Energy, Inc.; Laclede Gas Company;
Northwest Natural Gas Company; NUI Corporation; Piedmont Natural Gas Company,
Inc.; Southwest Gas Corporation; Southern Union Company; and Washington Gas
Light Company (collectively, the "Comparable Companies"). PaineWebber implied
a transaction valuation range of $700 million to $900 million based on an
analysis it conducted as follows: PaineWebber calculated the Comparable
Companies' multiples of market value (share price multiplied by shares
outstanding including in-the-money options and warrants) to latest twelve
months ("LTM") net income, LTM cash flow from operations (net income plus
depreciation and amortization) ("CFFO"), book value of equity, and estimated
1997 and 1998 net income (adjusted to reflect a December year end) as
estimated by First Call research earnings estimates. As of December 6, 1996,
the Comparable Companies' ranges of multiples of LTM net income, LTM CFFO,
book value of equity and estimated 1997 and 1998 net income were 11.1x--20.7x,
5.8x--11.1x, 1.3x--2.4x, 12.3x--16.9x and 10.5x--15.6x, respectively.
PaineWebber calculated comparable Transaction Value multiples of the Gas
Business LTM net income, LTM adjusted net income (LTM net income pro forma for
entire twelve months for (i) a $33.8 million rate increase received in April
1996 and (ii) certain estimated annual stand-alone operational efficiencies as
provided to PaineWebber (the "Operational Efficiencies")), LTM CFFO, LTM
adjusted CFFO (adjusted net income plus depreciation and amortization), book
value of equity and estimated 1997 and 1998 net income (estimated by WRI
management) to be 35.6x (as compared to 11.1x--20.7x), 11.6x (as compared to
11.1x--20.7x), 14.6x (as compared to 5.8x--11.1x), 7.9x (as compared to 5.8x--
11.1x), 1.1x (as compared to 1.3x--2.4x), 10.4x (as compared to 12.3x--16.9x)
and 9.2x (as compared to 10.5x--15.6x), respectively. Based upon discussions
with management, PaineWebber felt it instructive to calculate LTM adjusted net
income and LTM adjusted CFFO, because management considered these calculations
more representative of the performance of the Gas Business going forward than
the LTM net income and LTM CFFO. However, there cannot be any assurances that
such calculations will in the end be more representative. Based upon the
analysis of Transaction Value multiples, PaineWebber concluded that such
multiples fall within the range of fairness.
Selected Comparable Mergers and Acquisitions Analysis: PaineWebber reviewed
publicly available financial information for selected mergers and acquisitions
involving target companies in the gas distribution utility business. The
selected mergers and acquisitions PaineWebber analyzed included
(acquiror/target): Enova Corporation/Pacific Enterprises; Houston
Industries/NorAm Energy Corporation; Atmos Energy Corporation/United Cities
Gas Company; Texas Utilities Company/Enserch Corporation; Puget Sound Power &
Light Company/Washington Energy Company; Atmos Energy Corporation/Greeley Gas
Company; NIPSCO Industries, Inc./North Indiana Fuel and Light Company; Arkla,
Inc./Diversified Energies, Inc.; and Citizens Utilities Company/Louisiana
General Services, Inc. (collectively, the "Comparable Transactions").
PaineWebber noted that there are no directly comparable transactions to the
Transactions. PaineWebber implied a transaction valuation range of $800
million to $1.1 billion based on an analysis it conducted as follows:
PaineWebber calculated the Comparable Transactions' ranges of multiples of
equity purchase prices to LTM net income, LTM CFFO and book value of equity to
be 11.7x--33.9x, 5.7x--11.7x and 2.1x--2.8x, respectively.
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PaineWebber calculated comparable Transaction Value multiples of the Gas
Business LTM net income, LTM adjusted net income, LTM CFFO, LTM adjusted CFFO
and book value of equity to be 35.6x (as compared to 11.7x--33.9x), 11.6x (as
compared to 11.7x--33.9x), 14.6x (as compared to 5.7x--11.7x), 7.9x (as
compared to 5.7x--11.7x) and 1.1x (as compared to 2.1x--2.8x), respectively.
Based upon the analysis of Transaction Value multiples, PaineWebber concluded
that such multiples fall within the range of fairness.
Contribution Analysis: PaineWebber noted that based on the Agreement, WRI
will own no more than 45.0% of the fully-diluted New ONEOK Common Stock.
PaineWebber analyzed ONEOK's and the Gas Business' relative contribution to
the combined entity with respect to LTM and 1997 revenue, earnings before
interest, taxes, depreciation and amortization ("EBITDA"), earnings before
interest and taxes ("EBIT"), net income and CFFO. The Gas Business would have
contributed to LTM revenue, EBITDA, EBIT, net income (assuming LTM adjusted
net income for the Gas Business) and CFFO (assuming LTM adjusted CFFO for the
Gas Business), 32.0%, 37.6%, 43.1%, 50.7% and 38.7%, respectively. Assuming
the Transactions were consummated at the beginning of fiscal 1997, the Gas
Business is projected to contribute to 1997 revenue, EBITDA, EBIT, net income
and CFFO, 31.9%, 42.0%, 43.9%, 51.8% and 45.5%, respectively. PaineWebber also
analyzed the relative contribution of (i) ONEOK's and the Gas Business'
balance sheet items as of August 31, 1996 and September 30, 1996, respectively
(collectively, the "Latest Balance Sheets") and (ii) ONEOK's and the Gas
Business' projected balance sheet items provided to PaineWebber as of August
31, 1997 and September 30, 1997, respectively (collectively, the "1997 Balance
Sheets"). For both the Latest Balance Sheets and the 1997 Balance Sheets the
balance sheet items PaineWebber analyzed included: total assets, book value of
equity and total debt. Based on the Latest Balance Sheets, the Gas Business
would have contributed to total assets, book value of equity and total debt,
37.6%, 57.0% and 9.4%, respectively. Based on the 1997 Balance Sheets and
assuming the Transactions were consummated at the beginning of fiscal 1997,
the Gas Business is projected to contribute to total assets, book value of
equity and total debt, 38.9%, 57.2% and 0.0% (assumes Gas Business debt is
repaid in 1997), respectively. The results of this contribution analysis are
not necessarily indicative of the contributions that the respective businesses
may have in the future.
Discounted Cash Flow Analysis: PaineWebber analyzed the Gas Business based
on an unleveraged discounted cash flow analysis of the projected financial
performance of the Gas Business. Such projected financial performance was
based upon a five-year forecast for the Gas Business provided to PaineWebber.
Based on this analysis, PaineWebber implied a transaction valuation range of
$725 million to $925 million. The discounted cash flow analysis determined the
discounted present value of the unleveraged after-tax cash flows generated
over the five-year period and then added a terminal value based upon a range
of EBITDA multiples from 6.5x to 8.0x. The unleveraged after-tax cash flows
and terminal value were discounted using a range of discount rates from 9.0%
to 10.5%.
Pro Forma Merger Analysis: PaineWebber performed an analysis of the
potential pro forma effect of the Transactions on ONEOK's earnings per share
("EPS") for the fiscal years ending 1997 through 2001. In performing this
analysis, PaineWebber assumed (i) in exchange for the Gas Business, WRI will
hold 3.0 million shares of New ONEOK Common Stock and 19.3 million shares of
Series A Convertible Preferred Stock convertible on a one share for one share
basis into shares of New ONEOK Common Stock upon a Regulatory Change, at WRI's
option; (ii) the contribution of the Gas Business would be accounted for under
the purchase method of accounting; and (iii) no cost savings would be achieved
from the Transactions other than the Operational Efficiencies. PaineWebber
combined the projected operating results of ONEOK provided to PaineWebber with
the corresponding projected operating results of the Gas Business provided to
PaineWebber to arrive at the New ONEOK projected net income. PaineWebber
divided this by the pro forma shares outstanding to arrive at the New ONEOK
EPS. PaineWebber then compared the New ONEOK EPS to ONEOK's projected stand-
alone EPS provided to PaineWebber to determine the pro forma impact on ONEOK's
EPS. This analysis suggested that the Transactions would result in accretion
to ONEOK's EPS (assuming adjusted net income for the Gas Business) on a LTM
ended August 31, 1996 basis of approximately 10% and, assuming the
Transactions were consummated at the beginning of fiscal 1997, should result
in accretion to ONEOK's EPS in 1997 and thereafter.
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ONEOK selected PaineWebber to be its financial advisor in connection with
rendering a fairness opinion relating to the Transactions because PaineWebber
is a prominent investment banking and financial advisory firm with experience
in the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, secondary distributions of
securities, private placements and valuations for corporate purposes.
Pursuant to an engagement letter between ONEOK and PaineWebber, dated
December 2, 1996, PaineWebber has earned a fee of $875,000 for the rendering
of the PaineWebber Opinion. In addition, PaineWebber will be reimbursed for
certain of its related expenses. PaineWebber will not be entitled to any
additional fees or compensation in the event the Transactions are not approved
or otherwise consummated. ONEOK also agreed, under separate agreement, to
indemnify PaineWebber, its affiliates and each of its directors, officers,
agents and employees and each person, if any, controlling PaineWebber or any
of its affiliates against certain liabilities, including liabilities under
federal securities laws.
In the past, PaineWebber and its affiliates have provided financial advisory
services and financing services for ONEOK and have received fees for the
rendering of these services. PaineWebber may provide financial advisory
services to, and may act as underwriter or placement agent for, the combined
company in the future. In the ordinary course of PaineWebber's business,
PaineWebber may actively trade the securities of ONEOK and WRI for its own
account and for the accounts of its customers and, accordingly, may at any
time hold long or short positions in such securities.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS
In considering the Transactions, the ONEOK shareholders should be aware that
WRI and New ONEOK will enter into the Marketing Agreement and the Shared
Services Agreement. The interests of WRI in New ONEOK upon consummation of the
Transactions may create potential conflicts of interest in connection with the
Marketing Agreement and the Shared Services Agreement or other transactions
between New ONEOK and WRI. Under the Agreement, the execution of the Marketing
Agreement and the Shared Services Agreement is a condition to Closing and such
agreements will be negotiated prior to the Merger. Such agreements will be
reached on the basis of arm's-length negotiations between ONEOK, on behalf of
New ONEOK, and WRI prior to the Closing. In connection with approval of
transactions with affiliates, the New ONEOK Certificate provides that, in the
absence of fraud, no contract or other transaction of New ONEOK shall be
affected or invalidated in any way by the fact that any directors of New ONEOK
are in any way interested in or connected with any other party to such
contract or transaction or are themselves parties to such contract or
transaction, provided that such interest is fully disclosed or otherwise known
to the New ONEOK Board at the meeting of the Board at which such contract or
transaction is authorized or confirmed, and provided further that at the
meeting of the New ONEOK Board authorizing or confirming such contract or
transaction there is present a quorum of directors not so interested or
connected and such contract or transaction shall be approved by a majority of
such quorum and no such interested director shall vote on any such contract or
transaction.
Mr. William M. Bell, a director and chairman of Liberty Bank and Trust
Company of Oklahoma City, N.A. and a director of ONEOK, will be a director of
New ONEOK. At the Closing Date, New ONEOK will enter into the Rights Agreement
with Liberty Bank and Trust Company of Oklahoma City, N.A., as rights agent.
ONEOK believes that the transactions with such rights agent will be conducted
on an arm's-length basis and will be on terms no less favorable to New ONEOK
than can be obtained from an unrelated third party.
New ONEOK will provide indemnification and liability insurance arrangements
for officers and directors of ONEOK.
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The Transactions will not trigger any severance policy or employment
agreement of ONEOK. The severance pay policy for ONEOK employees has been
amended to exclude the Transactions. In addition, termination agreements with
certain officers of ONEOK have also been amended to exclude the Transactions.
NEW ONEOK BOARD AND MANAGEMENT FOLLOWING THE TRANSACTIONS
If the proposed Transactions are approved and consummated, holders of ONEOK
Common Stock will become shareholders of New ONEOK, which will be under the
direction of the Board of Directors and management of New ONEOK. Initially,
the directors of New ONEOK are expected to consist of the persons now serving
as directors of ONEOK and two individuals designated by WRI ("Initial
Shareholder Nominees") pursuant to the Shareholder Agreement. WRI has
designated Steven L. Kitchen and Howard R. Fricke, described below, as the
Initial Shareholder Nominees. WRI shall be entitled to representation on
committees of the New ONEOK Board, except that a director designated by WRI
shall not chair a committee of the New ONEOK Board nor serve on the Nominating
Committee prior to the occurrence of a Regulatory Change. If a Regulatory
Change occurs, New ONEOK will cause additional persons designated by WRI to be
elected or recommended for election so that the aggregate number of
Shareholder Nominees (as defined below under "The Shareholder Agreement--Board
Representation") will be equal to (x) four directors if the total size of the
Board is 14 (excluding any Shareholder Nominees) or fewer directors or (y)
one-third (rounding down to the nearest whole director) of the Board if the
total size of the Board is more than 14 directors (excluding any Shareholder
Nominees). See "The Shareholder Agreement--Board Representation."
Mr. Steven L. Kitchen, age 51, has been the Executive Vice President and
Chief Financial Officer of WRI during the past five years. Mr. Kitchen has
served as a director of Central National Bank since March 1994.
Howard R. Fricke, age 61, has been Chairman of the Board, President and
Chief Executive Officer of The Security Benefit Group of Companies since 1988.
Mr. Fricke has served as a director of Payless Shoesource, Inc. since April
1996.
Upon consummation of the Merger, the directors of ONEOK will be elected and
assigned to classes of the Board of Directors of New ONEOK corresponding to
the present classes of the Board of Directors of ONEOK. In addition, Steven L.
Kitchen will be added to the New ONEOK Board class next standing for election
and Howard R. Fricke will be added to the following New ONEOK Board class.
Assuming the Transactions are consummated prior thereto, the first annual
meeting of the shareholders of New ONEOK will be held on January 15, 1998. At
that meeting, shareholders of New ONEOK will, among other things, vote on the
election of directors of the class whose term of office expires at that
meeting.
The executive officers and headquarters personnel of ONEOK will hold similar
positions with New ONEOK and, based upon discussions between ONEOK and certain
persons, the provisions of the Agreement and the Employee Agreement, up to
five officers of the Gas Business will become additional officers of New
ONEOK, with comparable responsibilities, effective as of consummation of the
Transactions.
EFFECTS OF THE TRANSACTIONS ON ONEOK'S EXISTING SHAREHOLDERS
Except as described herein under "Description of Capital Stock,"
"Comparative Rights of Holders of ONEOK and New ONEOK Capital Stock" and
"Description of Convertible Preferred Stock" and as contemplated by the
Agreement and the Shareholder Agreement, the New ONEOK Certificate and the New
ONEOK By-laws will be substantially identical to those of ONEOK. See
"Comparative Rights of Holders of ONEOK and New ONEOK Capital Stock."
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PLANS FOR THE OPERATION OF THE GAS BUSINESS FOLLOWING THE TRANSACTIONS
Immediately following the consummation of the Transactions, New ONEOK will
operate the Gas Business and the businesses of ONEOK. ONEOK does not have a
plan or intention for New ONEOK to dispose of or transfer, whether to related
or unrelated persons, any significant portion of the Assets. New ONEOK expects
to evaluate the individual and combined operations and formulate arrangements,
as appropriate, to effectively integrate the businesses.
Pursuant to the Agreement, WRI and ONEOK will agree, among other things, to
the provision of certain services and shared facilities to each other
following the Closing pursuant to the Shared Services Agreement to be entered
into by WRI and New ONEOK at the Closing. See "Other Agreements--Shared
Services Agreement."
GOVERNMENTAL AND REGULATORY APPROVALS
Antitrust Matters. Under the HSR Act, and the rules promulgated thereunder
by the FTC, the Transactions may not be consummated until the following steps
have been taken: (1) Premerger Notification and Report Forms have been
submitted and certain information has been furnished to the FTC and the
Antitrust Division; and (2) required waiting periods have expired or
terminated.
WRI and ONEOK have agreed, pursuant to the Agreement, to file or cause to be
filed with the FTC and the Antitrust Division such notifications as are
required to be filed under the HSR Act and the rules and regulations
promulgated thereunder; to use all commercially reasonable efforts to make
such filings promptly; and to respond on a timely basis to any requests for
additional information made by either the FTC or the Antitrust Division.
Accordingly, WRI and ONEOK each filed Premerger Notification and Report Forms
with the FTC and the Antitrust Division, on April 4, 1997. The statutory
waiting period expired for ONEOK and WRI on May 4, 1997.
At any time before or after the consummation of the Transactions and
notwithstanding the expiration or termination of the HSR Act waiting period,
any federal or state antitrust authorities could take action under the
antitrust laws as they deem necessary or desirable in the public interest.
Such action could include seeking to enjoin the consummation of the
Transactions or seeking divestiture of all or part of the assets of ONEOK or
the Gas Business. Private parties may also seek to take legal action under the
antitrust laws, if circumstances permit.
If the Antitrust Division, or any other federal or state antitrust
authority, were to challenge the Transactions, the Closing of the Transactions
could be postponed beyond December 12, 1997, the first anniversary of the
original execution date of the Agreement, in which event, either WRI or ONEOK
may terminate the Agreement, pursuant to its terms, at any time after December
12, 1997. See "The Shareholder Agreement--Term."
Public Utility Holding Company Act. WRI is an exempt public utility holding
company under the 1935 Act and, as such, is exempt from all provisions of the
1935 Act except Section 9(a)(2) thereof ("acquisition of securities and
utilities assets and other interests"), which requires approval of the
Commission prior to the acquisition by any person, directly or indirectly, of
5% or more of the voting securities of a second or subsequent utility.
Consummation of the Merger is conditioned upon the receipt of an order of the
Commission under Section 9(a)(2) of the 1935 Act authorizing the Merger and
the receipt of an order or no action letter from the Commission or its staff,
as the case may be, to the effect that, as a result of the Merger, WRI will
not be deemed a "holding company" under Section 2(a)(7) of the 1935 Act and
that New ONEOK will not be deemed a "subsidiary company" under Section 2(a)(8)
of the 1935 Act, in each case, not materially impairing the economic and
strategic benefits of the Transactions and the other transactions contemplated
by the Agreement among WRI, ONEOK and WAI and agreements ancillary thereto.
See "Risk Factors--Uncertainties Regarding WRI's Regulatory Status."
Kansas Corporation Commission; Oklahoma Corporation Commission. WRI is
subject, as a gas and electric utility operating in the States of Kansas and
Oklahoma, to the jurisdiction of the KCC and the OCC, respectively. The KCC
and OCC have general regulatory and supervisory authority regarding the rates,
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extensions, abandonment of service or facilities, valuation of property,
classification of accounts and various other activities of WRI and the Gas
Business. MCMC is similarly regulated by the KCC as a public utility company
in the State of Kansas. The KCC also has jurisdiction over WRI with respect to
the issuance of securities. There is, however, no state regulatory body in
Oklahoma having jurisdiction over WRI in connection with the issuance of
securities.
The KCC has recently initiated an informal investigation into the possible
unbundling of the residential gas market in the state of Kansas. It is
anticipated that this informal investigation will become a formal KCC docket
matter and that a subsequent KCC order will be issued within the next one to
three years.
In May, 1996, the OCC commenced a Notice of Inquiry into unbundling the gas
utility industry. Numerous meetings between the industry and the OCC staff
followed, and after a public hearing in December, the OCC voted to proceed
with a rulemaking to establish the procedures for such unbundling. On February
18, 1997, the OCC issued a Notice of Intent to Solicit Proposed Rules relating
to such unbundling. The final order with respect to unbundling has not yet
been issued, nor has a notice of proposed rulemaking been filed. In addition
to the OCC action, there is also a bill pending in the Oklahoma legislature
which proposes to deregulate the transportation of natural gas under certain
competitive conditions and remove it from the OCC jurisdiction and authority.
ONEOK is actively working with the OCC to develop a plan and schedule to
unbundle services for its Oklahoma customers. Under ONEOK's current proposal,
all of ONEOK's customers who use 150 Mcf of gas or more per year would receive
unbundled services by 1998, and all of ONEOK's remaining customers would
receive unbundled services by 1999.
Under the Agreement, it is a condition precedent to the obligations of WRI,
WAI and ONEOK that the KCC and OCC each issue an order approving the
Transactions which is, in form, substance and scope, reasonably satisfactory
to WRI and ONEOK, respectively. See "The Agreement--Conditions to Closing."
As with the procedures required to be followed under the HSR Act, WRI, WAI
and ONEOK have each agreed, pursuant to the Agreement, to cooperate and use
their respective best efforts to promptly prepare and file all necessary
documentation, to obtain all requisite approvals and to allow the other an
opportunity to review and approve in advance all applications filed by the
filing party and to consult each other in obtaining all necessary orders and
approvals. See "The Agreement."
Neither WRI nor any of its Subsidiaries is engaged in the interstate
transmission or sale of natural gas and therefore is not subject to the
regulatory provisions of the Natural Gas Act.
Federal Energy Regulatory Commission. ONEOK Power Marketing Company, a
subsidiary of ONEOK, has a rate schedule for market based rates (the "Tariff")
issued by the Federal Energy Regulatory Commission (the "FERC"), which
authorizes ONEOK to sell electric power in interstate commerce. ONEOK has not
sold any electric power or capacity pursuant to the Tariff for any purpose.
Notice of cancellation of such Tariff will be filed with the FERC prior to the
Merger. Such cancellation requires FERC approval. Upon such cancellation, any
claim of jurisdiction over the Merger by the FERC should be foreclosed.
However, in the event the FERC were to claim jurisdiction, an application
would be filed under Section 203 of the Federal Power Act for approval of the
Merger, such being the most expedient method under the circumstances of
resolving the matter. Securing approval of cancellation of the Tariff and
approval of the Merger, if required, is a condition precedent to the
obligations of WRI, WAI and ONEOK to effect the Transactions under the
Agreement.
ACCOUNTING TREATMENT OF THE TRANSACTIONS
The Transactions contemplated by the Agreement will be accounted for under
the purchase method of accounting as prescribed under generally accepted
accounting principles. For purposes of applying the purchase method of
accounting, ONEOK is deemed to be the acquiring enterprise and the Gas
Business is deemed to be the acquired enterprises without regard to which
enterprise is the surviving enterprise. Accordingly, the historical
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financial statements of ONEOK are presented as the historical financial
statements of New ONEOK and the assets and liabilities of the Gas Business are
accounted for as required by the purchase method of accounting. The results of
operations of the Gas Business are included in the financial statements of New
ONEOK only from the date of acquisition.
Under the purchase method of accounting, the consideration will be allocated
to the assets acquired and liabilities assumed of the Gas Business based on
their estimated fair values as of the Closing Date. Any excess of purchase
price over the estimated fair value of the net assets acquired will be
recorded as goodwill, which will be amortized on a straight-line basis over
the estimated period of benefit.
INCOME TAX CONSEQUENCES OF THE TRANSACTIONS
See "Certain Federal Income Tax Consequences of the Transactions."
ABSENCE OF APPRAISAL RIGHTS
If the Transactions are consummated, holders of ONEOK Common Stock who do
not vote in favor of the Transactions will not be entitled to appraisal rights
under Delaware law with respect to any of their shares of ONEOK Common Stock.
NAME CHANGE
Pursuant to the Agreement under which the Merger will be consummated, the
name of WAI will be changed to "ONEOK, Inc." immediately prior to or at the
Closing.
STOCK EXCHANGE LISTING; DELISTING AND DEREGISTRATION OF ONEOK COMMON STOCK
It is a condition to the Transactions that upon consummation of the
Transactions, the shares of New ONEOK Common Stock to be issued by New ONEOK
in connection with the Transactions will be authorized for listing on the NYSE
upon official notice of issuance. It is expected that the symbol under which
ONEOK Common Stock now trades will continue to be used for the shares of New
ONEOK Common Stock. If the Transactions are consummated, ONEOK Common Stock
will cease to be listed on the NYSE.
TREATMENT OF STOCK CERTIFICATES
After the Merger Effective Time, each certificate previously representing
shares of ONEOK Common Stock will automatically, with no further action by the
holder thereof, represent the right to receive an equal number of shares of
New ONEOK Common Stock. Liberty Bank & Trust Company of Oklahoma City, N.A. is
a transfer agent and registrar for ONEOK Common Stock and will act in the same
capacities for New ONEOK Common Stock. As soon as reasonably practicable after
the Merger Effective Time, a bank or trust company designated by ONEOK will,
in its capacity as exchange agent (the "Exchange Agent"), mail a letter of
transmittal with instructions to each holder of record of ONEOK Common Stock
outstanding immediately prior to the Merger Effective Time for use in
exchanging certificates formerly representing shares of ONEOK Common Stock for
certificates representing shares of New ONEOK Common Stock. Certificates
should not be surrendered by any holders of ONEOK Common Stock until they have
received the letter of transmittal from the Exchange Agent.
CLOSING DATE; EFFECTIVE TIME
If the shareholders approve the Transactions, the Merger of ONEOK with and
into WAI will become effective upon the effective time of filing of their
respective Certificates of Merger in accordance with the DGCL and the OGCA. It
is expected that the Assets will be contributed to, and substantially all of
the liabilities relating to the Assets will be assumed by WAI in the second
half of fiscal 1997, provided that all conditions to the Closing have been
satisfied (or waived). See "The Agreement--The Transactions" and "--Conditions
to Closing."
THE ONEOK BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL
OF THE TRANSACTIONS.
16
<PAGE>
Item 3-6 Not Applicable
Item 7 Financial Statements and Exhibits
<TABLE>
<S> <C>
7(a) Financial Statements of business acquired F-1 - F-23
7(b) Pro Forma combined condensed financial statements P-1 -P-6
7(c) Appendices
A--Amended and Restated Agreement
B--Form of Shareholder Agreement
C--Form of Certificate of the Designations, Powers, Preferences
and Relative, Participating, Optional or Other Rights, and the
Qualifications, Limitations or Restrictions thereof, of
convertible Preferred Stock
D--Form of Rights Agreement
E--Certificate of Incorporation of WAI, Inc.
F--Fairness Opinion of Paine Webber Incorporated
G--Shared Services Agreement
7(d) Auditors' Consent
</TABLE>
EXHIBIT 7(A)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
I. Audited Financial Statements of the Gas Business
Report of Independent Public Accountants................................ F-2
Statement of Financial Position at August 31, 1996 and 1995............. F-3
Statement of Operations for the years ended August 31, 1996, 1995 and
1994................................................................... F-4
Statement of Equity in Net Assets Acquired for the years ended August
31, 1996, 1995 and 1994................................................ F-5
Statement of Cash Flows for the years ended August 31, 1996, 1995 and
1994................................................................... F-6
Notes to Financial Statements........................................... F-7
II. Unaudited Financial Statements of the Gas Business
Statement of Financial Position at May 31, 1997 and August 31, 1996..... F-19
Statement of Operations for the three months ended May 31, 1997 and 1996
and the nine months ended May 31, 1997 and 1996........................ F-20
Statement of Equity in Net Assets Acquired for the nine months ended May
31, 1997 and 1996...................................................... F-21
Statement of Cash Flows for the nine months ended May 31, 1997 and
1996................................................................... F-22
Notes to Interim Financial Statements................................... F-23
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Western Resources, Inc.:
We have audited the accompanying statement of financial position of the Gas
Business (a business unit of Western Resources, Inc.) as of August 31, 1996
and 1995, and the related statements of operations, cash flows and equity in
net assets acquired for each of the three years in the period ended August 31,
1996. These financial statements are the responsibility of Western Resources,
Inc.'s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Gas Business as of August
31, 1996 and 1995, and the results of its operations and its cash flows for
each of the three years in the period ended August 31, 1996, in conformity
with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Kansas City, Missouri
February 4, 1997
F-2
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
AUGUST 31,
------------------------
1996 1995
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
Property
Distribution system................................. $ 721,762 $ 676,642
Transmission system................................. 76,166 69,437
Gas storage......................................... 25,604 24,871
Gas gathering....................................... 11,166 10,912
Gas processing...................................... 18,522 15,877
Other............................................... 6,186 5,163
----------- -----------
Total Property.................................... 859,406 802,902
Accumulated depreciation............................ (277,964) (261,613)
----------- -----------
Net Property...................................... 581,442 541,289
----------- -----------
Current Assets
Cash and cash equivalents........................... 426 405
Accounts receivable, net............................ 71,386 49,256
Materials and supplies.............................. 5,997 6,659
Gas in storage...................................... 47,495 39,538
Purchased gas cost adjustment....................... 9,816 14,066
Other current assets................................ 1,098 670
----------- -----------
Total Current Assets.............................. 136,218 110,594
----------- -----------
Deferred Charges and Other Assets
Deferred future income taxes........................ 25,280 28,911
Other regulatory assets............................. 30,183 26,159
Other............................................... 96 720
----------- -----------
Total Deferred Charges And Other Assets........... 55,559 55,790
----------- -----------
Total Assets...................................... $ 773,219 $ 707,673
=========== ===========
EQUITY AND LIABILITIES
Equity in Net Assets Acquired......................... $ 532,477 $ 487,815
Long-term debt........................................ 35,000 35,000
Current Liabilities
Accounts payable and other accrued liabilities...... 71,529 46,147
Customers' deposit.................................. 4,742 5,081
----------- -----------
Total Current Liabilities......................... 76,271 51,228
Deferred Credits And Other Liabilities
Deferred income taxes............................... 98,088 98,502
Deferred investment tax credits..................... 9,994 10,665
Customer advances for construction.................. 3,283 3,050
Other............................................... 18,106 21,413
----------- -----------
Total Deferred Credits and Other Liabilities...... 129,471 133,630
Commitments and Contingencies (Notes 4, 5 and 7)
----------- -----------
Total Equity and Liabilities...................... $ 773,219 $ 707,673
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR YEARS ENDED AUGUST 31,
---------------------------
1996 1995 1994
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Operating Revenues
Regulated........................................ $511,341 $381,836 $465,789
Nonregulated:
Marketing...................................... 190,532 120,682 122,892
Processing..................................... 18,877 11,627 9,624
Other.......................................... 65 848 556
-------- -------- --------
Total Nonregulated........................... 209,474 133,157 133,072
-------- -------- --------
Total Operating Revenues..................... 720,815 514,993 598,861
-------- -------- --------
Operating Expenses
Cost of gas...................................... 515,938 342,772 417,215
Operations and maintenance....................... 130,261 122,754 112,902
Depreciation, depletion and amortization......... 25,515 31,327 26,182
General taxes.................................... 13,187 16,915 15,034
Income taxes..................................... 13,979 634 8,767
-------- -------- --------
Total Operating Expenses....................... 698,880 514,402 580,100
-------- -------- --------
Operating Income............................... 21,935 591 18,761
-------- -------- --------
Non-operating expenses
Interest expense and other....................... 2,685 1,592 2,482
-------- -------- --------
Net Income (loss).................................. $ 19,250 $ (1,001) $ 16,279
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
STATEMENT OF EQUITY IN NET ASSETS ACQUIRED
<TABLE>
<CAPTION>
FOR YEARS ENDED AUGUST 31,
---------------------------
1996 1995 1994
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Equity in Net Assets Acquired, beginning of the
year............................................. $487,815 $438,696 $404,282
Net Income (Loss)............................... 19,250 (1,001) 16,279
Net Capital Contributions....................... 25,412 50,120 18,135
-------- -------- --------
Equity in Net Assets Acquired, end of the year.... $532,477 $487,815 $438,696
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR YEARS ENDED AUGUST 31,
-----------------------------
1996 1995 1994
--------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Operating Activities
Net income (loss).............................. $ 19,250 $ (1,001) $ 16,279
Depreciation, depletion and amortization....... 25,515 31,327 26,182
Changes in assets and liabilities:
(Increase) decrease in accounts receivable.... (22,130) (16,018) 4,215
(Increase) decrease in gas in storage,
materials and supplies....................... (7,295) (5,222) 7,375
(Increase) decrease in other assets........... 196 (1,390) --
Decrease in deferred future income taxes...... 3,631 4,000 4,000
Increase in other regulatory assets........... (4,024) (10,463) (4,883)
(Increase) decrease in purchased gas cost
adjustment................................... 4,250 (7,817) (5,916)
Increase in accounts payable and other accrued
liabilities.................................. 25,382 4,689 6,791
Increase (decrease) in customers' deposit..... (339) 281 --
Increase (decrease) in deferred income taxes
and deferred investment tax credits.......... (1,085) 1,827 (12,561)
Increase (decrease) in other deferred credits
and other liabilities........................ (3,074) 9,821 5,382
--------- -------- --------
Cash provided by operating activities........ 40,277 10,034 46,864
--------- -------- --------
Investing Activities
Capital expenditures, net...................... (65,668) (62,421) (65,375)
--------- -------- --------
Financing Activities
Net capital contributions...................... 25,412 50,120 18,135
--------- -------- --------
Change in cash and cash equivalents............. 21 (2,267) (376)
Cash and cash equivalents--beginning of the
year........................................... 405 2,672 3,048
--------- -------- --------
Cash and cash equivalents--end of the year...... $ 426 $ 405 $ 2,672
========= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In December 1996, WRI and ONEOK announced the combination of the local
natural gas distribution business (the "LDC") of Western Resources, Inc.
("WRI"), and WRI's direct or indirect wholly-owned natural gas transportation
and marketing subsidiaries, Mid Continent Market Center, Inc. ("MCMC") and
Westar Gas Marketing, Inc. ("Westar" and, together with MCMC, their respective
subsidiaries and WRI's local natural gas distribution business, the "Gas
Business") with the business of ONEOK in accordance with the terms of the
Agreement, dated as of December 12, 1996 (the "Agreement"), between WRI and
ONEOK, pursuant to which: (A) immediately prior to the Merger Effective Time,
WRI will contribute, or will cause to be contributed, to WAI, Inc. ("WAI"), a
newly formed Oklahoma corporation and wholly-owned subsidiary of WRI, all of
the assets of WRI that are primarily used in, or primarily related to or
primarily generated by, the field operations of the Gas Business, including
all of the outstanding capital stock of Westar and MCMC (the "Assets"),
whereupon WAI will assume (i) all of the liabilities of WRI that arise
primarily out of, or relate primarily to or are primarily generated by, the
Assets and (ii) approximately $35 million (subject to pre-closing adjustment)
aggregate principal amount of debt of WRI and (B)(i) ONEOK will merge with and
into WAI, with WAI as the surviving corporation, whereupon WAI's name will be
changed to "ONEOK, Inc." (WAI being referred to herein, after the effective
time of the Merger, as "New ONEOK"), (ii) shares of ONEOK Common Stock
outstanding as of the Merger Effective Time will be converted on a one-for-one
basis into shares of New ONEOK Common Stock, whereupon, on a fully diluted
basis after giving effect to the Transactions and based on the number of
shares of ONEOK Common Stock outstanding as of December 12, 1996, (a) the
holders of ONEOK Common Stock will hold shares of New ONEOK Common Stock
representing at least 90.1% of the New ONEOK Common Stock to be outstanding
or, assuming conversion of all Series A Convertible Preferred Stock of New
ONEOK to be held by WRI pursuant to the Agreement, not less than 55.0% of the
New ONEOK Common Stock to be outstanding, and (b) WRI will hold 2,996,702
shares of New ONEOK Common Stock and 19,317,584 shares of Series A Convertible
Preferred Stock, together representing in the aggregate up to 9.9% of the New
ONEOK Common Stock to be outstanding prior to conversion of the Series A
Convertible Preferred Stock and up to 45.0% of the New ONEOK Common Stock
outstanding thereafter, and (iii) WRI will be entitled, upon conversion of its
shares of Series A Convertible Preferred Stock at any time following a
Regulatory Change (as defined in the Proxy Statement/Prospectus under "The
Shareholder Agreement"), to receive from New ONEOK an amount equal to $35
million if the conversion were to occur at the Closing, which amount reduces
to zero over 5 years or less as dividends are paid on WRI's shares of Series A
Convertible Preferred Stock. Approximately 1,575 WRI employees are expected to
be reassigned to positions with WAI upon consummation of the transactions. The
transactions require the approval of ONEOK shareholders, the Oklahoma
Corporation Commission (the "OCC"), the Kansas Corporation Commission (the
"KCC") and the Securities and Exchange Commission. It is anticipated that the
transactions will close during the second half of 1997.
WRI's natural gas operations being contributed include its regulated
operations in Kansas and Northeast Oklahoma related to the LDC and MCMC (the
"Regulated Entities"). These Regulated Entities serve approximately 650,000
customers. In addition to the Regulated Entities, WRI will contribute its
wholly-owned indirect subsidiary, Westar. Westar markets and sells natural gas
primarily to small and medium-sized commercial and industrial customers and
its subsidiary Westar Gas Company processes natural gas liquids.
Prior to the Transactions, the Gas Business has been operated as an
integrated part of WRI's overall business and has not been separated from
WRI's other operations for managerial, accounting, administrative or other
purposes. Consequently, the activities of the Gas Business have been included
in the consolidated financial statements of WRI. In the normal course of
business, the Gas Business has various transactions with WRI, including
various expense allocations, which are material in amount. Certain accounts,
principally working capital accounts are maintained by WRI on a common basis.
Amounts applicable to WRI's electric business
F-7
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
which are not being contributed are accounted for in the same general ledger
accounts as WRI's Gas Business. Where it was practical, a determination of
amounts applicable to the Gas Business was made. In other circumstances it was
not possible to make this determination and allocation methodologies were used
to quantify estimated amounts related to the Gas Business. The allocation
methodologies utilized are, in the opinion of WRI, reasonable.
These financial statements have been prepared from records maintained by
WRI, and may not necessarily be indicative of the conditions which would have
existed if the Gas Business had been operated as an independent entity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The accounting policies followed for the Gas Business are in accordance with
generally accepted accounting principles. The regulated operations of the Gas
Business being contributed are accounted for under the provisions prescribed
by Statement of Financial Accounting Standards No. 71 "Accounting for the
Effects of Certain Types of Regulation" ("SFAS 71") and are subject to
regulation by the KCC, the OCC and the Federal Energy Regulatory Commission
(the "FERC"). SFAS 71 sets forth the application of generally accepted
accounting principles for those companies whose rates are established by or
are subject to approval by an independent third-party regulator. The
provisions of SFAS 71 require, among other things, that financial statements
of a regulated enterprise reflect the actions of regulators, where
appropriate. These actions may result in the recognition of revenues and
expenses in time periods that are different than non-regulated enterprises.
When this occurs, costs are deferred as assets in the balance sheet
(regulatory assets) and recorded as expenses when those amounts are reflected
in rates. Also, regulators can impose liabilities upon a regulated company for
amounts previously collected from customers and for recovery of costs that are
expected to be incurred in the future (regulatory liabilities). The principal
accounting policies used in the preparation of the financial statements of the
Gas Business are described below:
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Regulated Property
Regulated property, which includes distribution and transmission systems, is
stated at historical cost. For constructed property, costs include contracted
services, direct labor and materials, indirect charges for engineering,
supervision, general and administrative costs, and an allowance for funds used
during construction ("AFUDC"). The AFUDC rate was 5.79%, 6.05% and 3.84% in
the 1996 Fiscal Year, the 1995 Fiscal Year and the 1994 Fiscal Year,
respectively.
The cost of additions and replacements of units of property is capitalized
while maintenance costs and replacement of minor items of property are charged
to expense as incurred. When units of depreciable property are retired, they
are removed from the plant accounts and the original cost plus removal charges
less salvage are charged to accumulated depreciation.
F-8
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This Statement
imposes stricter criteria for the carrying of regulatory assets on the balance
sheet by requiring that such assets be probable candidates for future recovery
as of each balance sheet date. Based on the regulatory structure in which the
Gas Business operates, the adoption of this standard by the Gas Business in
January 1996 did not have a material impact on the Gas Business.
Depreciation
Depreciation is provided on the straight-line method over estimated useful
lives prescribed by regulators for a substantial percentage of the Gas
Business' fixed assets. The estimated useful lives for the primary components
of property are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Distribution system................................................ 25-30
Transmission system................................................ 30-35
Gas storage........................................................ 20-25
Gas gathering...................................................... 20-25
Gas processing..................................................... 15
</TABLE>
Composite provisions for book depreciation approximated 3.09%, 3.18% and
3.29% in the 1996 Fiscal Year, the 1995 Fiscal Year and the 1994 Fiscal Year
respectively.
Revenues and Gas Purchase Costs
Local gas distribution customers are billed on a monthly-cycle basis. The
related cost of gas is matched with billed revenue through the COGR. An
estimate of unbilled revenues is recognized as gas is delivered or services
are rendered which includes sales from the cycle-billing dates to the end of
the month, unbilled gas purchase costs, and revenue related taxes. The accrual
for unbilled revenues is included in revenues in the accompanying statement of
operations.
Nonregulated revenues from marketing, processing and storage are recognized
as gas is delivered or services are rendered. Credit is typically granted to
these customers on a non-collateralized basis.
Inventories
Materials and supplies are priced at average cost. Noncurrent gas in storage
is classified as property and is priced at cost. Current gas in storage is
valued using the weighted average cost of gas method.
Income Taxes
The results of operations of the Gas Business are included in WRI's
consolidated federal and state income tax returns. The Gas Business' annual
provision for income taxes included in the statement of operations was
determined as if the Gas Business had filed a separate federal and state
income tax return.
The Gas Business accounts for income taxes in accordance with the provisions
of Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" ("SFAS 109"). Under SFAS 109, deferred tax assets and liabilities are
recognized based on temporary differences in amounts recorded for financial
reporting purposes and their respective tax bases (See Note 6).
F-9
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Risk Management
The Gas Business is exposed to price risk from fluctuating natural gas
prices associated with gas marketing activities of Westar. Westar utilizes
various financial instruments to mitigate much of this exposure. These
financial instruments are designated as hedges and as such, gains or losses
associated with these financial instruments are deferred until the commodity
being hedged is delivered.
Regulatory Assets and Liabilities
Certain gas distribution and transmission operations of the Regulated
Entities are subject to regulation. The Regulated Entities apply accounting
standards that recognize the economic effect of regulation, and accordingly
have recorded net regulatory assets related to such operations.
The KCC and OCC have authorized the recovery of take-or-pay settlement costs
through a combination of a surcharge to customers and revenues derived from
certain transportation customers. Costs associated with the settlement of
take-or-pay obligations are included in regulatory assets in the accompanying
statement of financial position.
The Regulated Entities have historically deferred certain service line
replacement costs in accordance with rate orders from the KCC. The deferral of
these costs was discontinued in July 1996 as part of the revised rate order
from the KCC discussed below. Amounts deferred are being amortized each month
to income through June 1999.
The Regulated Entities, under rate orders from the KCC and OCC, recover
increases in natural gas costs through various COGRs for natural gas
customers. The KCC and OCC require the annual difference between actual gas
cost incurred and the cost recovered through the COGR to be deferred and
amortized through rates in subsequent periods.
On August 17, 1995, the Gas Business filed a proceeding with the KCC seeking
an annual increase in revenues for the LDC. On April 15, 1996, the KCC issued
an order allowing a revenue increase which, after further proceedings, was
revised upwards pursuant to a revised order issued by the KCC on July 11,
1996.
Pursuant to FERC Order 636, interstate pipelines' services have been
"unbundled" such that gas supplies are being sold separately from interstate
transportation services. The Gas Business has contracted for a mix of
transportation and storage services which allows them to meet the needs of
their customers. Pipelines are recovering from their customers certain
transition costs associated with the restructuring under Order 636 regulation.
Any such recovery is subject to established review procedures of the FERC.
In November 1994, the KCC issued an order which approved the recovery of
these FERC-allowed transition costs on a volumetric basis from the LDC's sales
and transportation customers. Accordingly, regulatory assets, in amounts
corresponding to the costs incurred but not yet collected, have been recorded.
The commission order has been appealed by consumer advocates and intervenors.
F-10
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following regulatory assets and regulatory liabilities were reflected in
the accompanying statement of financial position as of August 31:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Regulatory Asset
Purchased Gas Cost Adjustment........................... $ 9,816 $14,066
------- -------
Deferred Future Income Taxes, net....................... $25,280 $28,911
------- -------
Other Regulatory Assets
Service Line Replacement Costs......................... $14,643 $11,722
Employee Benefit Obligations........................... 11,864 8,857
Other.................................................. 3,676 5,580
------- -------
$30,183 $26,159
------- -------
Regulatory Liability
Deferred investment tax credits........................ $9,994 $10,665
------- -------
</TABLE>
Nonregulated Property
All other properties are stated at cost and depreciated using the straight-
line method over their estimated useful life.
Transportation and Exchange Imbalances
Temporary differences (imbalances) between volumes of gas purchased and
nominated to customers and amounts actually delivered by the pipelines are
included in accounts receivable or accounts payable, as appropriate, and are
stated as amounts not in excess of market.
3. TRANSACTIONS WITH AFFILIATES
The Gas Business engages in various transactions with WRI and its affiliates
that are characteristic of a consolidated group under common control. WRI has
historically provided the Gas Business with various financial and
administrative functions and services for which the Gas Business is charged
associated direct costs and expenses. In addition, certain indirect
administrative costs are allocated to the various business divisions of WRI,
including the Gas Business, principally based on formulas which consider such
proportionate variables as number of customers, number of employees, and
property balances. The methods utilized, in the opinion of WRI's management,
are reasonable.
Direct and indirect corporate administrative costs including employee
benefits, information systems support, accounting and office services, and
other general and administrative costs charged to the Gas Business by WRI
approximated $39.6 million in the 1996 Fiscal Year, $40.5 million in the 1995
Fiscal Year and $34.1 million in the 1994 Fiscal Year. Such corporate
administrative costs are included in operations and maintenance expense in the
accompanying statements of operation.
Long-term debt totaling $35 million is assigned to the Gas Business and will
be assumed by New ONEOK subject to adjustment. The interest expense on this
debt has been calculated at a market-based interest rate of 7.25% for all
periods presented. WRI provides financing and cash management for the Gas
Business through a centralized treasury system. WRI also provides for the
liquidity needs of the Gas Business. Cash payments approximate interest
expense in each period.
Transactions of the Regulated Entities with the Gas Business' other
operations have not been eliminated from the accompanying financial statements
since the Regulated Entities are rate regulated. Westar had revenues
F-11
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
of approximately $8.1 million, $6.5 million and $7.0 million in the 1996
Fiscal Year, in the 1995 Fiscal Year and in the 1994 Fiscal Year,
respectively, from the sale of natural gas to the LDC. In addition, Westar had
purchases of available gas from the LDC of $19.4 million and $12.4 million in
the 1996 Fiscal Year and the 1995 Fiscal Year respectively. Westar's similar
purchases for the 1994 Fiscal Year were not material.
4. RATE MATTERS AND REGULATION
The regulated operations of the Gas Business, pursuant to rate orders from
the KCC and OCC, recovers increases in natural gas costs through various
COGRs. The KCC and the OCC require that the annual difference between actual
gas cost incurred and gas cost recovered through the COGR be deferred and
amortized through rates in subsequent periods.
In July 1996, the KCC issued a rate order authorizing an increase in annual
gas distribution revenues of $34.4 million.
On June 30, 1995, the KCC granted a certificate authorizing the business
operations of MCMC. MCMC began operations on July 1, 1995. WRI contributed
certain natural gas transmission assets having a net book value of
approximately $50 million to MCMC.
In December 1991, the KCC and the OCC approved agreements authorizing WRI to
refund to customers approximately $40 million of the proceeds from the Tight
Sands antitrust litigation settlement to be collected on behalf of WRI's
customers. To secure the refund of settlement proceeds, the KCC and the OCC
authorized the establishment of an independently administered trust to collect
and maintain cash receipts received under Tight Sands settlement agreements
and provide for the refunds made. The trust has a term of ten years. At August
31, 1996, the trust owed approximately $4.3 million on a note which was used
to provide refunds to WRI customers. The trust will continue to collect
settlement proceeds and is expected to repay the note by the end of the fiscal
year ended August 31, 1998.
On November 27, 1996, the KCC issued a Suspension Order and on December 3,
1996, an order which suspended, subject to refund, the LDC's ability to
recover costs related to gas purchases from the Kansas Pipeline Partnership
("KPP") included in the COGR. On December 12, 1996, WRI filed a "Petition for
Reconsideration or For More Definite Statement by the Staff" of the issues to
be addressed in this matter. On January 2, 1997, the KCC issued an order
directing its Staff to file a Bill of Particulars within sixty days specifying
which charges from KPP it asserts are inappropriate for inclusion in the COGR.
Until such time as the amounts in question are identified, it is not possible
to determine the impact of this matter on the Gas Business. WRI believes that
its gas contract and purchasing practices have been prudent, and, therefore,
such costs should be allowed to be recovered.
5. COMMITMENTS AND CONTINGENCIES
Manufactured Gas Sites
The net assets of the Gas Business to be contributed to New ONEOK include 12
former manufactured gas sites located in Kansas which may contain hazardous
materials subject to control or remediation under various environmental laws
and regulations. WRI and the Kansas Department of Health and Environment
("KDHE") entered into a consent agreement governing all future work at the 12
sites. The terms of the consent agreement allows WRI to investigate these
sites and set remediation priorities based upon the results of the
investigations and risk analysis. The prioritized sites will be investigated
over a ten year period. The agreement allows WRI to set mutual objectives with
the KDHE in order to expedite effective response activities and to control
costs and environmental impact. The costs incurred for site investigation and
risk management in the 1996 Fiscal Year, the 1995 Fiscal Year and the 1994
Fiscal Year were immaterial. Since the site investigations are preliminary, no
F-12
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
formal agreement on costs to be incurred has been reached and the minimum
potential liability would not be material to the financial statements, an
accrual for these environmental contingencies has not been reflected in the
accompanying financial statements. WRI's best current estimate of the most
likely range of costs to be incurred per site based upon limited current
information presently available is approximately $100,000 to $10 million. It
should be noted that additional information and testing could result in costs
significantly below or in excess of the amounts noted above to be incurred.
The KCC has permitted another Kansas utility to recover its remediation costs
through rates. To the extent that such remediation costs are not recovered
through rates, the costs could be material to the Gas Business' financial
position or results of operations depending on the degree of remediation
required and number of years over which the remediation must be completed. See
"Other Agreements--Environmental Indemnity Agreement" in the Proxy
Statement/Prospectus for a description of the agreement between ONEOK and WRI
relating to environmental costs and liability in connection with certain of
these sites.
Legal Proceedings
Subject to the approval of the KCC, WRI entered into five new gas supply
contracts with certain entities affiliated with the Bishop Group, Ltd.
("Bishop Entities") which are currently regulated by the KCC. A contested
hearing was held for the approval of those contracts. While the case was under
consideration by the KCC, the FERC issued an order under which it asserted
jurisdiction over the Bishop Entities. On November 3, 1995, the KCC stayed its
consideration of the contracts between WRI and the Bishop Entities until such
time as the FERC takes final appealable action on its assertion of
jurisdiction over the Bishop Entities.
On June 28, 1996, the KCC issued an order dismissing WRI's application for
approval of the contracts with the Bishop Entities and of recovery of related
costs from its customers. WRI appealed this ruling and on January 24, 1997,
the Kansas Court of Appeals reversed the KCC order thereby upholding the
contracts. WRI's recovery of related costs from its customers were approved by
operation of law.
On January 17, 1997, a lawsuit was filed in Wyandotte County, Kansas,
District Court (Wells & Western Resources, et al) alleging negligence on the
part of WRI and several other parties in connection with carbon monoxide
poisoning in a residence and claiming damages in excess of $50,000. The claim
is currently under investigation, but it does not currently appear to WRI that
resolution of the claim will result in any material impact on its financial
results.
See Note 4 for rate matters on regulation.
Leases
At August 31, 1996, the Gas Business had leases covering various property
and equipment. Rental payments for operating leases and estimated rental
commitments are as follows:
<TABLE>
<CAPTION>
FOR YEARS ENDED AUGUST 31, AMOUNT
-------------------------- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1996................................................ $9,630
1995................................................ 9,720
1994................................................ 7,010
Future Commitments
1997................................................ 4,760
1998................................................ 2,641
1999................................................ 678
2000................................................ 117
2001................................................ 53
Thereafter.......................................... 42
------
$8,291
======
</TABLE>
F-13
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES
The income tax expense attributable to the Gas Business has been estimated
as follows:
<TABLE>
<CAPTION>
FOR YEARS ENDED AUGUST 31,
----------------------------
EXPENSE (BENEFIT) 1996 1995 1994
----------------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal
Current...................................... $ 10,027 $ (6,997) $ 14,958
Deferred..................................... 2,872 8,113 (6,673)
Investment tax credit........................ (671) (649) (656)
-------- -------- --------
Total Federal income taxes................. 12,228 467 7,629
-------- -------- --------
State
Current...................................... 1,407 (919) 2,071
Deferred..................................... 344 1,086 (933)
-------- -------- --------
Total state income taxes................... 1,751 167 1,138
-------- -------- --------
Total income tax expense................. $ 13,979 $ 634 $ 8,767
======== ======== ========
</TABLE>
The difference between the income tax provision at the federal statutory
rate and income tax expense in the accompanying statement of operations is as
follows:
<TABLE>
<CAPTION>
FOR YEARS ENDED AUGUST 31,
----------------------------
1996 1995 1994
--------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income tax provision (benefit) at federal
statutory rate............................. $11,630 $(128) $8,766
Effect of:
State income taxes........................ 1,751 167 1,138
Amortization of investment tax credits.... (672) (649) (656)
Flow through and amortization, net........ 1,223 1,173 (522)
Other differences......................... 47 71 41
--------- ------- --------
Total income tax expense.................... $13,979 $ 634 $8,767
========= ======= ========
</TABLE>
Under SFAS 109, temporary differences gave rise to net deferred tax
liabilities at August 31, 1996 and 1995, respectively, as follows:
<TABLE>
<CAPTION>
AUGUST 31,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated Deferred Income Taxes:
Accelerated Depreciation & Other.............. $ 62,695 $ 61,976
Deferred Future Income Taxes.................. 25,280 28,911
Purchased Gas Costs........................... 5,748 9,046
Other......................................... 4,365 (1,431)
----------- -----------
Accumulated Deferred Income Taxes, Net...... $ 98,088 $ 98,502
=========== ===========
</TABLE>
In accordance with various rate orders received from the KCC and the OCC,
the Gas Business has not yet collected through rates the amounts necessary to
pay a significant portion of the net deferred income tax
F-14
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
liabilities. As management believes it is probable that the net future
increases in income taxes payable will be recovered from customers, it has
recorded a deferred asset for these amounts. These assets are also a temporary
difference for which deferred income tax liabilities have been provided. These
amounts, which represent regulatory assets, are disclosed as deferred future
income taxes.
7. EMPLOYEE BENEFIT PLANS
The following pension, postretirement and postemployment data is based on
actuarial estimates for identified and assumed transferred employees and
retirees. These estimates were calculated based on approximately 1,575
employees and 1,100 retired Gas Business' employees who will be transferred
from WRI to ONEOK pursuant to the Employee Agreement. Approximately 400
employees to be transferred are unidentified at this date. Liabilities for
unidentified employees were estimated assuming they are average age non-union
employees with an average length of service. The estimates presented below are
based upon estimates and assumptions which WRI management believes to be
reasonable. A final determination of these estimates will be computed after
all employees to be transferred have been identified. This calculation will be
made on or about the Closing Date which is expected to occur in the second
half of 1997.
Pensions
The employees of the Gas Business participate in WRI's pension plans, which
are qualified non-contributory defined benefit plans covering substantially
all employees of the Gas Business. Pension benefits are based on years of
service and the employee's compensation during the five highest paid
consecutive years of the ten years immediately preceding retirement. WRI's
policy is to fund pension costs accrued, subject to limitations set by the
Employee Retirement Income Security Act of 1974 and the Internal Revenue Code.
The following tables provide information on the estimated components of
pension cost under Statement of Financial Accounting Standards No. 87
"Employers' Accounting for Pension Plans".
Calculation of Estimated Pension Expense
<TABLE>
<CAPTION>
FOR YEARS ENDED AUGUST 31,
------------------------------------
1996 1995 1994
----------- ----------- ----------
(ESTIMATED DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Pension Expense:
Service cost....................... $ 3,400 $ 3,100 $ 3,000
Interest cost on projected benefit
obligation........................ 10,200 9,400 9,100
Expected return.................... (11,300) (10,100) (9,500)
Net amortization................... 500 (100) 200
----------- ----------- ----------
Estimated net expense................ $ 2,800 $ 2,300 $ 2,800
=========== =========== ==========
</TABLE>
F-15
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Calculation of Accrued Pension Cost
<TABLE>
<CAPTION>
AUGUST 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(ESTIMATED DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Reconciliation of Funded Status:
Actuarial present value of benefit
obligations.......................... $ 111,100 $ 108,200 $ 91,800
========== ========== ==========
Plan assets (principally debt and equity
securities) at fair value.............. $ 145,200 $ 135,500 $ 123,300
Projected benefit obligation............ 141,200 136,700 118,300
---------- ---------- ----------
Funded status........................... 4,000 (1,200) 5,000
Unrecognized transition asset........... (900) (1,000) (1,100)
Unrecognized prior service costs........ 16,800 18,200 15,200
Unrecognized net (gain)................. (24,400) (20,000) (21,700)
---------- ---------- ----------
Estimated accrued pension cost.......... $ (4,500) $ (4,000) $ (2,600)
========== ========== ==========
</TABLE>
The vested portion of the actuarial present value of the benefit obligation
is believed to represent a substantial percentage of the total present value
of the benefit obligation based on the average length of service of employees
who are expected to be transferred.
Actuarial Assumptions
<TABLE>
<CAPTION>
FOR YEARS ENDED AUGUST 31,
------------------------------
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
Discount rate............................... 7.50% 7.50% 8.0%
Annual salary increase rate................. 4.75% 4.75% 5.0%
Long-term rate of return.................... 9.0% 9.0% 8.5%
</TABLE>
Postretirement
Postretirement benefits are provided to eligible employees of the Gas
Business. Based on actuarial projections and adoption of the transition method
of implementation which allows a 20-year amortization of the accumulated
benefit obligation, the Gas Business' postretirement benefits expense
approximated $6.0 million, $5.4 million and $5.7 million for the 1996 Fiscal
Year, the 1995 Fiscal Year and the 1994 Fiscal Year, respectively. In
addition, WRI received an order from the KCC permitting the initial deferral
of postretirement benefits expense in excess of amounts recognized on a pay-
as-you-go basis. The amounts of postretirement benefits expense were deferred
under the provisions of Emerging Issues Task Force No. 92-12 ("EITF 92-12").
The amounts of expense deferred at August 31, 1996 and 1995 were $10.7 million
and $7.9 million, respectively. To mitigate the future impact the
postretirement benefits expense accruals would have on LDC rates charged to
customers, WRI planned to offset this expense with income obtained from a
corporate-owned life insurance ("COLI") program with respect to employees.
However, in 1996 the tax benefits from the COLI program were significantly
curtailed through federal legislation, and such COLI contracts will not be
transferred to New ONEOK. Accordingly, in order for the Gas Business to
continue to meet the provisions of EITF 92-12, that permit rate regulated
utilities to defer postretirement benefits costs, the amortization of costs
deferred from January 1, 1993 through December 31, 1997 and future accruals
must either be offset by another form of income source, or the amortization of
prior deferred postretirement benefits costs and current year postretirement
benefits expense must be included in rates effective January 1, 1998. The Gas
Business has the ability to seek recovery of postretirement costs through the
ratemaking process. Based on regulatory precedents established by the KCC, and
the current order which permits the Gas Business to seek recovery of
postretirement costs upon a given
F-16
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
change in legislation, management believes that it is probable that accrued
postretirement benefits can be recovered in rates. If these costs cannot be
recovered in rates charged to customers, the Gas Business would be required to
record a one-time charge to expense the regulatory asset established for
employee benefit plans at August 31, 1996 totaling approximately $10.7 million
for postretirement benefits and $1.2 million for postemployment benefits
discussed below. Future earnings would also be negatively impacted since the
accrual costs of employee benefits would be expensed and only cash payments
related to the employee benefit programs would be recovered from customers.
The following table summarizes the estimated status of the postretirement
benefit plans for employees and retirees expected to be transferred from WRI
to ONEOK who qualify for these benefits. Actuarial calculations are based upon
estimates similar to those described above for pension benefits because not
all employees to be transferred are identified at this date. A final
determination with respect to actual employees will be made prior to the
Closing. Amounts noted below are believed, by management, to be materially
correct.
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
----------------------------------
1996 1995
---------------- ----------------
(ESTIMATED DOLLARS IN THOUSANDS)
<S> <C> <C>
Reconciliation of Funded Status:
Actuarial present value of
postretirement benefit obligations.. $ (44,300) $ (43,600)
Fair value of plan assets............ -- --
---------------- ----------------
Funded Status........................ (44,300) (43,600)
Unrecognized prior service cost...... 800 900
Unrecognized transition obligation... 38,200 40,500
Unrecognized net (gain).............. (5,400) (5,700)
---------------- ----------------
Estimated accrued postretirement
benefit costs......................... $ (10,700) $ (7,900)
================ ================
</TABLE>
<TABLE>
<CAPTION>
FOR YEARS
ENDED
AUGUST 31,
------------
1996 1995
----- -----
<S> <C> <C>
Actuarial Assumptions:
Discount rate................................................ 7.5% 7.5%
Annual salary increase rate.................................. 4.75% 4.75%
Expected rate of return...................................... 9.0% 9.0%
</TABLE>
The estimate assumes that postretirement benefits were accounted for on an
accrual basis beginning September 1, 1993.
For measurement purposes, an annual health care cost growth rate of 10% was
assumed for Fiscal Year 1996, decreasing one percent per year to five percent
in 2001 and thereafter. The health care cost trend rate has a significant
effect on the projected benefit obligation. Increasing the trend rate by one
percent each year would increase the present value of the accumulated
projected benefit obligation by $.6 million and the aggregate of the service
and interest cost components by $.05 million.
Postemployment:
Estimated postemployment benefits have been calculated similar to pension
and postretirement benefits. Estimated expense for eligible employees to be
transferred approximated $556,000, $355,000 and $219,000 for the 1996 Fiscal
Year, the 1995 Fiscal Year and the 1994 Fiscal Year, respectively. At August
31, 1996 and 1995 the estimated liability for these benefits approximated $1.2
million and $1.0 million, respectively. The accounting and future regulatory
requirements for postemployment benefits is the same as for postretirement
benefits. The
F-17
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
amounts of postemployment benefits expense deferred at August 31, 1996 and
1995 were $1.2 million and $1.0 million, respectively.
8. DERIVATIVE FINANCIAL INSTRUMENTS
Westar uses natural gas futures contracts to reduce the effects of natural
gas commodity price volatility on operating results which include price risk
and basis risk. Price risk is the difference between the price of the physical
commodity being hedged and the price of the futures contract used for hedging.
Natural gas options held to hedge price risk provide the right, but not the
requirement, to buy or sell natural gas at a fixed price. Basis risk is the
risk that an adverse change in the futures market will not be completely
offset by an equal and opposite change in the cash price of the commodity
being hedged. Basis risk exists in natural gas primarily due to the
geographical price differentials between cash market locations and futures
contract delivery locations. In general, Westar's risk management policy
requires that positions taken with derivatives be offset by positions in
physical transactions or other derivatives. All of the financial instruments
are held for purposes other than trading.
The price of derivative instruments used to hedge commodity transactions
have historically had a high correlation with commodity prices and are
expected to continue to do so. The correlation of indices and prices is
regularly evaluated by management to ensure that the instruments continue to
be effective hedges. In the event that the correlation falls below allowable
levels, the gains or losses associated with hedging instruments are recognized
in the current period to the extent that correlation was lost. The maturity of
the derivative instruments is timed to coincide with the hedged transaction.
If the hedged transaction is terminated early or if an anticipated transaction
fails to occur, the deferred gain or loss associated with the derivative
instrument is recognized in the period and the hedge is closed.
Westar has historically used natural gas futures and options contracts
traded on the New York Mercantile Exchange and natural gas financial swaps
with various third parties to reduce exposure to price risk when gas is not
bought and sold simultaneously. At August 31, 1996, Westar had a deferred gain
of $289,335 representing unrealized gains on forward commitments that will
mature through the year 2000.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the recorded amounts and fair value of certain
financial instruments used by WRI with respect to the Gas Business.
Substantially all of the items in the table noted below pertain to the
operations of Westar. The estimated fair values have been determined using
quoted market prices of the same or similar securities.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED AUGUST 31,
----------------------------------------------------------------
1996 1995
------------------------------ --------------------------------
NOTIONAL NOTIONAL
VOLUMES ESTIMATED GAIN/ VOLUMES ESTIMATED GAIN/
(MMBTU'S) FAIR VALUE (LOSS) (MMBTU'S) FAIR VALUE (LOSS)
--------- ---------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Natural gas futures..... 3,990,000 $8,060,070 $(271,150) 10,200,000 $18,187,030 $(451,260)
Natural gas swaps....... 3,826,000 5,351,645 560,485 3,994,000 3,583,513 (123,114)
</TABLE>
The recorded amount of accounts receivable and other current financial
instruments approximate fair value.
F-18
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
<TABLE>
<CAPTION>
MAY 31, AUGUST 31,
1997 1996
----------- ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
Property
Distribution system................................ $ 759,259 $ 721,762
Transmission system................................ 81,281 76,166
Gas storage........................................ 25,367 25,604
Gas gathering...................................... 12,717 11,166
Gas processing..................................... 21,824 18,522
Other.............................................. 6,637 6,186
----------- -----------
Total Property................................... 907,085 859,406
Accumulated depreciation........................... (295,182) (277,964)
----------- -----------
Net Property..................................... 611,903 581,442
----------- -----------
Current Assets
Cash and cash equivalents.......................... 722 426
Accounts receivable, net........................... 97,455 71,386
Materials and supplies............................. 5,101 5,997
Gas in storage..................................... 20,522 47,495
Purchased gas cost adjustment...................... 9,739 9,816
Other current assets............................... 697 1,098
----------- -----------
Total Current Assets............................. 134,236 136,218
----------- -----------
Deferred Charges And Other Assets
Deferred future income taxes....................... 25,280 25,280
Other regulatory assets............................ 24,641 30,183
Other.............................................. 2 96
----------- -----------
Total Deferred Charges And Other Assets.......... 49,923 55,559
----------- -----------
Total Assets..................................... $ 796,062 $ 773,219
=========== ===========
EQUITY AND LIABILITIES
Equity in Net Assets Acquired........................ $ 531,103 $ 532,477
Long-term debt....................................... 35,000 35,000
Current Liabilities
Accounts payable and other accrued liabilities..... 91,228 71,529
Customers' deposit................................. 5,072 4,742
----------- -----------
Total Current Liabilities........................ 96,300 76,271
Deferred Credits And Other Liabilities
Deferred income taxes.............................. 101,233 98,088
Deferred investment tax credit..................... 9,522 9,994
Customer advances for construction................. 3,344 3,283
Other.............................................. 19,560 18,106
----------- -----------
Total Deferred Credits And Other Liabilities..... 133,659 129,471
Commitments and Contingencies (Note 2)
----------- -----------
Total Equity and Liabilities..................... $ 796,062 $ 773,219
=========== ===========
</TABLE>
See accompanying notes to financial statements
F-19
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MAY 31, MAY 31,
----------------------- -----------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS) (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Operating Revenues
Regulated.................... $ 132,936 $ 129,903 $ 517,074 $ 449,360
Nonregulated:
Marketing.................. 41,727 47,990 188,257 137,764
Processing................. 6,618 4,849 20,641 13,825
Other...................... -- -- -- --
----------- ----------- ----------- -----------
Total Nonregulated....... 48,345 52,839 208,898 151,589
----------- ----------- ----------- -----------
Total Operating
Revenues................ 181,281 182,742 725,972 600,949
----------- ----------- ----------- -----------
Operating Expenses
Cost of gas.................. 129,532 130,683 529,430 433,863
Operations and maintenance... 31,888 31,338 95,114 91,359
Depreciation, depletion and
amortization................ 8,667 6,703 25,398 17,870
General taxes................ 3,774 3,519 9,732 9,609
Income taxes................. 1,421 3,949 25,310 19,082
----------- ----------- ----------- -----------
Total Operating
Expenses................ 175,282 176,192 684,984 571,783
----------- ----------- ----------- -----------
Operating Income......... 5,999 6,550 40,988 29,166
----------- ----------- ----------- -----------
Non-operating Expenses
Interest expense and other... 4,035 1,118 6,082 2,972
----------- ----------- ----------- -----------
Net Income..................... $ 1,964 $ 5,432 $ 34,906 $ 26,194
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
F-20
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
STATEMENT OF EQUITY IN NET ASSETS ACQUIRED
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MAY 31,
------------------------
1997 1996
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Equity in Net Assets Acquired, beginning of period... $ 532,477 $ 487,815
Net Income......................................... 34,906 26,194
Net Change in Net Assets Acquired.................. (36,280) (4,506)
----------- -----------
Equity in Net Assets Acquired, end of period......... $ 531,103 $ 509,503
=========== ===========
</TABLE>
See accompanying notes to financial statements
F-21
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MAY 31,
------------------------
1997 1996
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Operating Activities
Net income.......................................... $ 34,906 $ 26,194
Depreciation, depletion and amortization............ 25,398 17,870
Changes in assets and liabilities:
Increase in accounts receivable.................... (26,069) (39,401)
Decrease in gas in storage, materials and
supplies.......................................... 27,869 28,015
Decrease in other assets........................... 495 1,390
Decrease in other regulatory assets................ 5,542 1,797
Decrease in purchased gas cost adjustment.......... 77 18,804
Increase in accounts payable and other accrued
liabilities....................................... 19,699 7,585
Increase (decrease) in customers' deposit.......... 330 (631)
Increase (decrease) in deferred income taxes and
deferred investment tax credits................... 2,673 (667)
Increase (decrease) in other deferred credits and
other liabilities................................. 1,515 (6,758)
----------- -----------
Cash provided by operating activities.............. 92,435 54,198
Investing Activities
Capital expenditures, net........................... (55,859) (49,824)
----------- -----------
Financing Activities
Net change in net assets acquired................... (36,280) (4,506)
----------- -----------
Change in cash and cash equivalents.................. 296 (132)
Cash and cash equivalents--beginning of period....... 426 405
----------- -----------
Cash and cash equivalents--end of period............. $ 722 $ 273
=========== ===========
</TABLE>
See accompanying notes to financial statements
F-22
<PAGE>
GAS BUSINESS
(A BUSINESS UNIT OF WESTERN RESOURCES, INC.)
NOTES TO INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENTS
The interim financial statements are unaudited but, in the opinion of
management of the Gas Business, reflect all adjustments (consisting of only
normal recurring adjustments) necessary for a fair presentation of the
financial position and operations for such periods in conformity with
generally accepted accounting principles. The operations for any interim
period are not necessarily indicative of operations for the full year. These
financial statements should be read in conjunction with the audited financial
statements and notes thereto of the Gas Business contained elsewhere in this
Registration Statement.
2. COMMITMENTS AND CONTINGENCIES
Manufactured Gas Plant Sites
The net assets of the Gas Business to be contributed to New ONEOK include 12
former manufactured gas plant sites located in Kansas which may contain
hazardous materials subject to control or remediation under various
environmental laws and regulations. WRI and the KDHE entered into a consent
agreement governing all future work at the 12 sites. The terms of the consent
agreement allows WRI to investigate these sites and set remediation priorities
based upon the results of the investigations and risk analysis. The
prioritized sites will be investigated over a ten year period. The agreement
allows WRI to set mutual objectives with the KDHE in order to expedite
effective response activities and to control costs and environmental impact.
The costs incurred for site investigation and risk management in the 1996
Fiscal Year, the 1995 Fiscal Year and the 1994 Fiscal Year were immaterial.
Since the site investigations are preliminary, no formal agreement on costs to
be incurred has been reached and the minimum potential liability would not be
material to the financial statements, an accrual for these environmental
contingencies has not been reflected in the accompanying financial statements.
WRI's best current estimate of the most likely range of costs to be incurred
per site based upon limited current information presently available is
approximately $100,000 to $10 million. It should be noted that additional
information and testing could result in costs significantly below or in excess
of the amounts noted above to be incurred. The KCC has permitted another
Kansas utility to recover its remediation costs through rates. To the extent
that such remediation costs are not recovered through rates, the costs could
be material to the Gas Business' financial position or results of operations
depending on the degree of remediation required and number of years over which
the remediation must be completed. See "Other Agreements--Environmental
Indemnity Agreement" in the Proxy Statement/Prospectus for a description of
the agreement between ONEOK and WRI relating to environmental costs and
liability in connection with certain of these sites.
Legal Proceedings
On November 27, 1996, the KCC issued a Suspension Order and on December 3,
1996, an order which suspended, subject to refund, the Gas Business' ability
to recover costs related to purchases from KPP included in the COGR. Since the
Staff did not quantify the amount of any proposed disallowance in its
testimony in this matter, it is not possible for WRI to identify the potential
impact of this matter on the Gas Business. However, WRI believes that its gas
purchasing practices are prudent, and, therefore, such costs should be allowed
to be recovered.
On July 9, 1997, WRI entered into a Settlement Agreement with the Bishop
Entities, including KPP, and the KCC Staff which, if approved by the KCC, will
settle all major outstanding issues between WRI and the Bishop Entities. The
proposed Settlement Agreement would also terminate several proceedings before
the KCC, including the investigation of WRI's purchasing practices and the
resulting suspension of WRI's COGR in the December 3, 1996 order. Dismissal of
the KCC investigation would end the suspension and eliminate any potential
refund liability for gas costs related to purchases from KPP included in WRI's
COGR.
F-23
<PAGE>
EXHIBIT 7(B)
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma financial statements give effect to the
business combination contemplated by the Transactions, described elsewhere in
this Proxy Statement/Prospectus. The unaudited pro forma condensed balance
sheet as of May 31, 1997 is presented as if the Transactions had occurred on
that date. The unaudited pro forma condensed statements of income for the year
ended August 31, 1996 and the nine months ended May 31, 1997 assume that the
Transactions occurred at the beginning of the earliest period presented. The
Transactions will be treated as a purchase for accounting purposes. The assets
acquired and the liabilities assumed will be recorded at their fair values.
See "The Transactions -- Accounting Treatment of the Transactions."
The unaudited pro forma financial statements should be read in conjunction
with the historical financial statements of ONEOK (incorporated by reference
herein) and the Gas Business (included elsewhere in this Proxy
Statement/Prospectus) and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of ONEOK (incorporated by reference
herein) and "Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Gas Business" (included elsewhere in this Proxy
Statement/Prospectus). The unaudited pro forma condensed statements of income
are not necessarily indicative of the financial results that would have
occurred had the Transactions been consummated on the indicated dates, nor are
they necessarily indicative of future financial results. The results of
operations for the nine months ended May 31, 1997 are not necessarily
indicative of the results to be expected for the entire fiscal year or any
other interim period.
The pro forma adjustments are based on preliminary assumptions and estimates
made by ONEOK's management and do not reflect adjustments for anticipated
synergies ONEOK expects to achieve as a result of the Merger. The actual
allocation of the consideration paid for the Gas Business may differ from that
reflected in the unaudited pro forma combined condensed financial statements
after a more extensive review of the fair market values of the assets acquired
and liabilities assumed has been completed. Amounts allocated will be based
upon the estimated fair values at the Merger Effective Time, which could vary
from the amounts as of May 31, 1997; however, ONEOK does not expect any
differences to be material.
On August 17, 1995, the Gas Business filed a rate proceeding with the KCC
seeking a $36 million annual increase in revenues from its LDC customers in
order to provide recovery of increased operating costs. The increase in
operating costs resulted from operational changes occurring in the Gas
Business since its last general rate increase granted in December 1991 and is
believed to be indicative of costs to be incurred in the future. The rate
proceeding also sought continuation of the recovery of costs associated with
its service line replacement program including depreciation, property taxes
and carrying costs which had been deferred since January 1992. The KCC had
previously allowed for the recovery of service line costs which had been
deferred prior to January 1992 in the December 1991 rate order. On April 15,
1996, the KCC issued an order allowing a general revenue increase of $33.8
million annually, and on July 11, 1996, issued a revised order increasing the
general revenue requirement to $34.4 million. The revised rate order also
provided for the continuated recovery through rates of the costs associated
with the service line replacement program. The full impact of the rate
increase is not reflected in the unaudited pro forma combined condensed
financial statements described above.
P-1
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
NINE MONTHS ENDED MAY 31, 1997
<TABLE>
<CAPTION>
GAS PRO FORMA COMBINED
ONEOK BUSINESS ADJUSTMENTS TOTAL
-------- -------- ----------- ----------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE
DATA)
---------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues
Regulated.................... $525,011 $517,074 -- $1,042,085
Nonregulated................. 429,020 208,898 -- 637,918
-------- -------- -------- ----------
Total Operating Revenues... 954,031 725,972 -- 1,680,003
-------- -------- -------- ----------
Operating Expenses
Cost of gas.................. 644,722 529,430 -- 1,174,152
Operations and maintenance... 106,952 95,114 -- 202,066
Depreciation, depletion and
amortization................ 55,715 25,398 95 (d) 82,519
1,311 (e)
General taxes................ 16,983 9,732 -- 26,715
Income taxes................. 39,655 25,310 629 (i) 65,594
-------- -------- -------- ----------
Total Operating Expenses... 864,027 684,984 2,035 1,551,046
-------- -------- -------- ----------
Operating Income............... 90,004 40,988 (2,035) 128,957
Interest and other............. 25,819 6,082 (1,689)(c) 30,212
-------- -------- -------- ----------
Net Income..................... 64,185 34,906 (346) 98,745
Preferred Stock Dividends...... 285 -- (285)(f) 26,079
26,079 (g)
-------- -------- -------- ----------
Income Available for Common
Stock..................... $ 63,900 $ 34,906 $(26,140) $ 72,666
======== ======== ======== ==========
Earnings Per Share of Common
Stock......................... $ 2.32 $ 2.38
Average Shares of Common Stock
Outstanding (Thousands)....... 27,518 30,515(h)
</TABLE>
See accompanying Notes to Unaudited Pro Forma Financial Statements.
P-2
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
YEAR ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
GAS PRO FORMA COMBINED
ONEOK BUSINESS ADJUSTMENTS TOTAL
---------- -------- ----------- ----------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
Operating Revenues
Regulated.................. $ 538,169 $511,341 $ -- $1,049,510
Nonregulated............... 686,176 209,474 -- 895,650
---------- -------- -------- ----------
Total Operating
Revenues................ 1,224,345 720,815 -- 1,945,160
---------- -------- -------- ----------
Operating Expenses
Cost of gas................ 807,694 515,938 1,323,632
Operations and
maintenance............... 201,259 130,261 331,520
Depreciation, depletion and
amortization.............. 72,868 25,515 126 (d) 100,257
1,748 (e)
General taxes.............. 21,489 13,187 34,676
Income taxes............... 33,037 13,979 839 (i) 47,855
---------- -------- -------- ----------
Total Operating
Expenses................ 1,136,347 698,880 2,713 1,837,940
---------- -------- -------- ----------
Operating Income............. 87,998 21,935 (2,713) 107,220
Interest and other........... 35,162 2,685 (2,252)(c) 35,595
---------- -------- -------- ----------
Net Income................... 52,836 19,250 (461) 71,625
Preferred Stock Dividends.... 428 -- (428)(f) 34,772
34,772 (g)
---------- -------- -------- ----------
Income Available for
Common Stock............ $ 52,408 $ 19,250 $(34,805) $ 36,853
========== ======== ======== ==========
Earnings Per Share of Common
Stock....................... $ 1.93 $ 1.22
Average Shares of Common
Stock Outstanding
(Thousands)................. 27,136 30,133(h)
</TABLE>
- -------------------------------------------------------------------------------
A rate increase granted by the KCC authorized an increase in annual gas
distribution revenues effective April 15, 1996. It was amended effective July
11, 1996. The rate order provided recovery of increased operating costs and
continuation of the recovery of costs associated with its service line
replacement program including depreciation, property taxes and carrying costs
which had been deferred since January 1992. Had this rate increase been in
effect the entire twelve months ended August 31, 1996, it is estimated that it
would have resulted in an increase in total operating revenues, net income and
earnings per share of Common Stock of $27 million, $16.6 million and $0.56,
respectively.
See accompanying Notes to Unaudited Pro Forma Financial Statements.
P-3
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AT MAY 31, 1997
<TABLE>
<CAPTION>
GAS PRO FORMA COMBINED
ONEOK BUSINESS ADJUSTMENTS TOTAL
---------- -------- ----------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
ASSETS
Property......................... $1,400,223 $907,085 $ 2,013 $2,309,321
Accumulated depreciation,
depletion & amortization........ 572,229 295,182 -- 867,411
---------- -------- --------- ----------
Net Property................... 827,994 611,903 2,013 1,441,910
---------- -------- --------- ----------
Current Assets:
Cash and cash equivalents...... 12,851 722 (6,975)(e) 6,598
Accounts and notes receivable.. 110,310 97,455 -- 207,765
Inventories.................... 64,612 25,623 -- 90,235
Other.......................... 15,892 10,436 -- 26,328
---------- -------- --------- ----------
Total current assets......... 203,665 134,236 (6,975) 330,926
---------- -------- --------- ----------
Deferred charges and other
assets:
Regulatory assets, net......... 146,949 49,921 -- 196,870
Goodwill....................... -- -- 69,920 (e) 69,920
Other.......................... 41,467 2 -- 41,469
---------- -------- --------- ----------
Total deferred charges and
other assets................ 188,416 49,923 69,920 308,259
---------- -------- --------- ----------
Total assets............... $1,220,075 $796,062 $ 64,958 $2,081,095
========== ======== ========= ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Common shareholders' equity.... $ 473,407 $531,103 $ 79,413 (a) $ 552,820
(531,103)(e)
Preferred stock................ -- -- --
Convertible Preferred Stock.... -- -- 546,916 (a) 546,916
---------- -------- --------- ----------
Total shareholders' equity... 473,407 531,103 95,226 1,099,736
---------- -------- --------- ----------
Long-term debt, excluding current
portion......................... 332,073 35,000 (31,062)(b) 336,011
Current Liabilities:
Long-term debt................. 15,050 -- -- 15,050
Notes payable.................. 5,069 -- -- 5,069
Accounts payable............... 74,303 91,228 -- 165,531
Accrued taxes.................. 26,097 -- -- 26,097
Accrued interest............... 12,791 -- -- 12,791
Other.......................... 27,377 5,072 -- 32,449
---------- -------- --------- ----------
Total current liabilities.... 160,687 96,300 -- 256,987
---------- -------- --------- ----------
Deferred credits:
Deferred income taxes.......... 178,740 110,755 794 (e) 290,289
Customers' advances for
construction and other
deferred credits.............. 75,168 22,904 -- 98,072
---------- -------- --------- ----------
Total deferred credits and
other liabilities........... 253,908 133,659 794 388,361
---------- -------- --------- ----------
Commitments and Contingencies.... -- -- -- --
---------- -------- --------- ----------
Total liabilities and
shareholders' equity........ $1,220,075 $796,062 $ 64,958 $2,081,095
========== ======== ========= ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Financial Statements.
P-4
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(a) The fair value of New ONEOK's equity securities to be issued to WRI, as
determined by ONEOK's financial advisor, is $546,916,000 and $79,413,000 for
the Series A Convertible Preferred Stock and Common Stock, respectively. The
Series A Convertible Preferred Stock is convertible, at the option of the
holder, in whole or in part, at any time following the occurrence of a
Regulatory Change, into New ONEOK Common Stock at the rate of one share of New
ONEOK Common Stock for each share of Series A Convertible Preferred Stock (as
adjusted to reflect any stock split or similar events). In addition, any
shares of the Series A Convertible Preferred Stock transferred by WRI to any
person other than WRI or its affiliates is required to be converted into New
ONEOK Common Stock. See "Summary--The Transactions--Terms of the Series A
Convertible Stock."
WRI's common stock equivalent ownership is based upon the assumption that on
a fully diluted basis after giving effect to the Transactions and based upon
the number of shares of ONEOK Common Stock outstanding at October 31, 1996,
WRI will hold 9.9% of the New ONEOK Common Stock prior to the conversion of
the Series A Convertible Preferred Stock and 45.0% thereafter.
(b) In accordance with the terms of the Agreement, New ONEOK will assume all
of the liabilities of WRI that arise primarily out of, or relate primarily to
or are generated by, the assets of the Gas Business, as well as the Assumed
Debt of $35 million. The amount of the Assumed Debt will be subject to
adjustment to provide either for New ONEOK's assumption of additional debt (to
the extent that the Net Amount, as defined, exceeds $40 million) or for a
reduction in the amount of debt assumed by New ONEOK. The Net Amount of the
adjustment to the Assumed Debt means the Working Capital of the Gas Business
as of the Closing Date minus the amount, if any, by which the ONEOK Capital
Expenditures Amount exceeds the WRI Capital Expenditures Amount and plus the
amount, if any, by which the WRI Capital Expenditures Amount exceeds the ONEOK
Capital Expenditures Amount. The pro forma adjustment to Assumed Debt is
calculated based on the following assumptions:
<TABLE>
<CAPTION>
(THOUSANDS)
<S> <C>
Adjustment for changes in working capital:
Gas Business working capital................................ $37,936
Less:
Anticipated capital expenditures to be made by ONEOK in
excess of capital expenditures made by the Gas Business
prior to Closing......................................... 28,998
Base amount of working capital............................ 40,000
--------
Total adjustment to Assumed Debt........................ $(31,062)
========
</TABLE>
(c) Interest expense adjustments to the Assumed Debt are as follows:
<TABLE>
<CAPTION>
(THOUSANDS)
<S> <C>
Adjustment to Assumed Debt--see note (b)..................... $(31,062)
Assumed interest rate on adjustment to Assumed Debt.......... 7.25%
--------
Interest expense adjustment for fiscal 1996.................. $ (2,252)
========
Interest expense adjustment for the nine months ended May 31,
1997........................................................ $ (1,689)
========
</TABLE>
(d) Based upon preliminary analyses, the following adjustments have been
made to reflect the fair value of property, plant and equipment:
<TABLE>
<CAPTION>
(THOUSANDS)
-----------
<S> <C>
Revaluation of gas processing plants to fair value........... $2,013
Adjustment to fiscal 1996 depreciation expense (assumes 16-
year average depreciable life).............................. $ 126
Adjustment to depreciation expense for the nine months ended
May 31, 1997 ............................................... $ 95
</TABLE>
P-5
<PAGE>
(e) The excess of the total purchase price over the allocation of fair value
to the net assets will be recorded as goodwill. ONEOK's calculation of
goodwill is based on the following assumptions and calculations:
<TABLE>
<CAPTION>
NINE
MONTHS ENDED
MAY 31,
1997
------------
(THOUSANDS)
<S> <C>
Fair Value of equity securities owned by WRI-- see note
(a)........................................................ $ 626,329
Transaction costs........................................... 3,475
Involuntary termination and employee relocation costs....... 3,500
---------
Total consideration..................................... $ 633,304
Net asset value of the Gas Business at May 31, 1997......... (531,103)
Adjustment to Assumed Debt -- see note (b).................. (31,062)
---------
Initial purchase price in excess of historical net asset
value...................................................... 71,139
Increase (decrease) from fair value allocations: Property,
plant and equipment-- see note (d)......................... (2,013)
Deferred income tax on fair value allocation adjustments.... 794
---------
Total goodwill.......................................... $ 69,920
=========
Goodwill amortization expense (assumes 40-year life):
Adjustment to fiscal 1996 amortization expense............ $ 1,748
Adjustment to amortization expense for the nine months
ended
May 31, 1997............................................. $ 1,311
</TABLE>
(f) In April, 1997, ONEOK redeemed all outstanding shares of its preferred
stock and, accordingly, $428,000 and $285,000 of preferred stock dividend
payments have been eliminated for the year ended August 31, 1996, and the nine
months ended May 31, 1997, respectively.
(g) To record the payment of the minimum dividend requirements of the Series
A Convertible Preferred Stock issued in connection with the Transactions. The
adjustment is calculated as follows:
<TABLE>
<S> <C>
Series A Convertible Preferred Stock outstanding.................. 19,318
Minimum annual dividend rate per share............................ $1.80
-------
Adjustment to preferred stock dividends for fiscal 1996........... $34,772
=======
Adjustment to preferred stock dividends for the nine months ended
May 31, 1997..................................................... $26,079
=======
</TABLE>
(h) Pro forma number of common shares outstanding represents the sum of
historical weighted average shares outstanding of ONEOK Common Stock and the
estimated number of shares of New ONEOK Common Stock assumed to be issued in
the Transactions. The number of shares is adjusted for additional shares of
New ONEOK Common Stock to be issued at the Closing of the Transactions but
does not include the number of shares of New ONEOK Common Stock issuable upon
conversion of the Convertible Preferred Stock.
(i) Represents the tax effect at the statutory rate of all pre-tax pro forma
adjustments after excluding nondeductible goodwill amortization.
P-6
<PAGE>
EXHIBIT 7(C)
APPENDIX A
AMENDED AND RESTATED AGREEMENT
AMONG
WESTERN RESOURCES, INC.,
WAI, INC.
AND
ONEOK INC.
DATED AS OF MAY 19, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I THE ASSET TRANSACTION.......................................... A-2
1.1 Certain Definitions............................................... A-2
1.2 The Asset Transaction............................................. A-5
1.3 Liabilities Assumed............................................... A-5
1.4 Retained Liabilities.............................................. A-5
1.5 Instruments of Transfer........................................... A-5
1.6 Condition on Assignment or Assumption of Contracts and Rights..... A-5
1.7 Certain Adjustments............................................... A-5
1.8 Certain Taxes..................................................... A-7
ARTICLE II THE MERGER.................................................... A-7
2.1 The Merger; Effective Time of Merger.............................. A-7
2.2 Closing........................................................... A-7
2.3 Effect of the Merger.............................................. A-7
ARTICLE III CONVERSION OF SHARES AND EXCHANGE OF CERTIFICATES............ A-8
3.1 Effect of Merger on Capital Stock................................. A-8
(a)NewCorp Capital Stock Unchanged................................ A-8
(b)Cancellation of Treasury Stock................................. A-8
(c)Exchange of ONEOK Common Stock................................. A-8
3.2 Exchange of Certificates.......................................... A-8
(a)Exchange of Certificates....................................... A-8
(b)Exchange Procedures............................................ A-8
(c)Distributions with Respect to Unexchanged Shares............... A-9
(d)No Further Ownership Rights in ONEOK Common Stock.............. A-9
(e)Termination of Exchange Agent.................................. A-9
(f)No Liability................................................... A-9
ARTICLE IV REPRESENTATIONS AND WARRANTIES................................ A-10
4.1 Representations and Warranties of ONEOK........................... A-10
(a)Organization, Standing and Power............................... A-10
(b)Capital Structure.............................................. A-10
(c)Authority; No Violations; Consents and Approvals............... A-11
(d)SEC Documents.................................................. A-12
(e)Information Supplied........................................... A-13
(f)Absence of Certain Changes or Events........................... A-13
(g)No Undisclosed Material Liabilities............................ A-14
(h)No Default..................................................... A-14
(i)Compliance with Applicable Laws................................ A-14
(j)Litigation..................................................... A-14
(k)Taxes.......................................................... A-15
(l)Employee Matters; ERISA........................................ A-16
(1)Benefit Plans.................................................. A-16
(2)Contributions.................................................. A-16
(3)Qualification; Compliance...................................... A-16
(4)Pension Benefit Plan; Liabilities.............................. A-17
(5)Welfare Plans.................................................. A-17
(6)Documents Made Available....................................... A-17
(7)Payments Resulting From Merger................................. A-18
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
(8)Funded Status of Plans.......................................... A-18
(9)Multiemployer Plans............................................. A-18
(10)Modification or Termination of Plans........................... A-18
(11)Reportable Events; Claims...................................... A-18
(m)Labor Matters................................................... A-19
(n)Intangible Property............................................. A-19
(o)Environmental Matters........................................... A-19
(1)Definitions..................................................... A-19
(2)Compliance...................................................... A-20
(3)Environmental Permits........................................... A-20
(4)Environmental Claims............................................ A-21
(5)Releases........................................................ A-21
(6)Underground Storage Tanks or Surface Impoundments............... A-21
(p)Insurance....................................................... A-21
(q)Contracts....................................................... A-22
(r)Regulatory Proceedings.......................................... A-22
(s)Regulation as a Utility......................................... A-22
(t)Opinion of Financial Advisor.................................... A-22
(u)Vote Required................................................... A-23
(v)Beneficial Ownership of WRI Common Stock........................ A-23
(w)Brokers......................................................... A-23
(x)Related Party Transactions...................................... A-23
(y)Takeover Provisions............................................. A-23
(z)Rights Plan..................................................... A-23
(aa)Title to Properties............................................ A-23
(ab)Condition of Assets............................................ A-24
(ac)Accounts Receivable............................................ A-24
4.2 Representations and Warranties of WRI.............................. A-24
(a)Organization, Standing and Power................................ A-24
(b)Capital Structure............................................... A-24
(c)Sufficiency of Assets........................................... A-25
(d)Authority; No Violations; Consents and Approvals................ A-25
(e)SEC and Other Documents......................................... A-26
(f)Information Supplied............................................ A-27
(g)Absence of Certain Changes or Events............................ A-28
(h)No Undisclosed Material Liabilities............................. A-28
(i)No Default...................................................... A-28
(j)Compliance with Applicable Laws................................. A-28
(k)Litigation...................................................... A-29
(l)Taxes........................................................... A-29
(m)Employee Matters; ERISA......................................... A-30
(1)Benefit Plans................................................... A-30
(2)Contributions................................................... A-31
(3)Qualification; Compliance....................................... A-31
(4)Pension Benefit Plan; Liabilities............................... A-31
(5)Welfare Plans................................................... A-32
(6)Documents Made Available........................................ A-32
(7)Payments Resulting From Merger.................................. A-32
(8)Funded Status of Plans.......................................... A-32
(9)Multiemployer Plans............................................. A-33
(10)Modification or Termination of Plans........................... A-33
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
(11)Reportable Events; Claims...................................... A-33
(n)Labor Matters................................................... A-33
(o)Intangible Property............................................. A-34
(p)Environmental Matters........................................... A-34
(1)Compliance...................................................... A-34
(2)Environmental Permits........................................... A-34
(3)Environmental Claims............................................ A-35
(4)Releases........................................................ A-35
(5)Underground Storage Tanks or Surface Impoundments............... A-35
(q)Contracts and Certain Obligations............................... A-35
(r)Regulatory Proceedings.......................................... A-36
(s)Regulation as a Utility......................................... A-36
(t)Opinion of Financial Advisor.................................... A-36
(u)Title to Properties............................................. A-36
(v)Condition of Assets............................................. A-37
(w)Accounts Receivable............................................. A-37
(x)Beneficial Ownership of ONEOK Common Stock...................... A-37
(y)Brokers......................................................... A-37
(z)Insurance....................................................... A-37
(aa)Business of NewCorp............................................ A-37
(ab)Intercompany Liabilities....................................... A-37
(ac)Related Party Transactions..................................... A-37
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER.......................... A-38
5.1 Conduct of Gas Business Pending the Merger......................... A-38
(a)Ordinary Course................................................. A-38
(b)Changes in Stock................................................ A-38
(c)Issuance of Securities.......................................... A-38
(d)No Acquisitions................................................. A-38
(e)No Dispositions................................................. A-38
(f)No Dissolution, Etc............................................. A-38
(g)Certain Employee Matters........................................ A-38
(h)Leases; Capital Expenditures.................................... A-39
(i)Affiliate Transactions.......................................... A-39
(j)Rate Matters.................................................... A-39
(k)Contracts....................................................... A-39
(l)Insurance....................................................... A-39
(m)Permits......................................................... A-39
(n)Tax Matters..................................................... A-39
(o)Discharge of Liabilities........................................ A-40
(p)Other Actions................................................... A-40
(q)Agreements...................................................... A-40
(r)Business of NewCorp............................................. A-40
(s)Shareholder Agreement........................................... A-40
(t)Rights Agreement................................................ A-40
(u)Material Information............................................ A-40
(v)Intercompany Liabilities........................................ A-40
5.2 Certain Restrictions in Respect of ONEOK........................... A-40
(a)Changes in Stock................................................ A-40
(b)Governing Documents; Other Material Transactions................ A-41
(c)Other Actions................................................... A-41
</TABLE>
A-iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
(d)Rights; Redemption of Capital Stock.......................... A-41
(e)Material Information......................................... A-41
(f)Other Agreements............................................. A-41
(g)Agreements................................................... A-41
(h)Stock Options................................................ A-41
5.3 No Solicitation................................................. A-41
ARTICLE VI ADDITIONAL AGREEMENTS........................................ A-42
6.1 Preparation of Form S-4 and the Proxy Statement................. A-42
6.2 Letter of ONEOK's Accountants................................... A-42
6.3 Letter of WRI's Accountants..................................... A-42
6.4 Access to Information........................................... A-42
6.5 ONEOK Stockholders' Meeting..................................... A-43
6.6 Regulatory and Other Approvals.................................. A-43
(a)HSR Act...................................................... A-43
(b)Other Regulatory Approvals................................... A-43
(c)Other Approvals.............................................. A-43
6.7 Authorization for Shares and Stock Exchange Listing............. A-44
6.8 Stock Options................................................... A-44
6.9 Agreement to Defend............................................. A-44
6.10 Public Announcements............................................ A-44
6.11 Other Actions................................................... A-44
6.12 Advice of Changes; SEC Filings.................................. A-44
6.13 Reorganization.................................................. A-45
6.14 Disclosure Schedules............................................ A-45
6.15 Preparation and Filing of Returns; Payment of Taxes............. A-45
6.16 Access to Information........................................... A-46
6.17 Non-Competition................................................. A-46
6.18 Use of Name..................................................... A-47
6.19 Standstill...................................................... A-47
6.20 Control Share Acquisition Provisions............................ A-47
6.21 Further Assurances.............................................. A-48
6.22 Insurance....................................................... A-48
ARTICLE VII CONDITIONS PRECEDENT........................................ A-48
Conditions to Each Party's Obligation to Effect the
7.1 Transactions................................................... A-48
(a)ONEOK Stockholder Approval................................... A-48
(b)NYSE Listing................................................. A-48
(c)Other Approvals.............................................. A-48
(d)Form S-4..................................................... A-48
(e)No Injunctions or Restraints................................. A-48
(f)Shareholder Agreement; Other Agreements...................... A-48
(g)1935 Act..................................................... A-49
7.2 Conditions of Obligations of WRI and NewCorp.................... A-49
(a)Representations and Warranties............................... A-49
(b)Performance of Obligations of ONEOK.......................... A-49
(c)Tax Opinion.................................................. A-49
(d)Required Consents............................................ A-49
(e)KCC Order.................................................... A-49
(f)Pooling of Interests......................................... A-49
(g)OCC Order.................................................... A-50
7.3 Conditions of Obligations of ONEOK.............................. A-50
(a)Representations and Warranties............................... A-50
(b)Performance of Obligations of NewCorp and WRI................ A-50
</TABLE>
A-iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
(c)Tax Opinion................................................... A-50
(d)Required Consents............................................. A-50
(e)Asset Transaction............................................. A-50
(f)OCC Order..................................................... A-50
(g)KCC Order..................................................... A-50
ARTICLE VIII EMPLOYEE AND EMPLOYEE MATTERS; ENVIRONMENTAL MATTERS......... A-50
ARTICLE IX TERMINATION AND AMENDMENT...................................... A-51
9.1 Termination...................................................... A-51
9.2 Effect of Termination............................................ A-52
9.3 Expenses......................................................... A-52
9.4 Amendment........................................................ A-52
9.5 Extension; Waiver................................................ A-53
ARTICLE X INDEMNIFICATION................................................. A-53
10.1 General Indemnification.......................................... A-53
10.2 Tax Indemnification and Audits................................... A-54
ARTICLE XI GENERAL PROVISIONS............................................. A-55
11.1 Confidentiality Agreement........................................ A-55
11.2 Notices.......................................................... A-55
11.3 Interpretation................................................... A-56
11.4 Counterparts..................................................... A-56
11.5 Entire Agreement; No Third Party Beneficiaries................... A-56
11.6 Governing Law.................................................... A-56
11.7 No Remedy in Certain Circumstances............................... A-56
11.8 Assignment....................................................... A-56
11.9 Bulk Sales Law................................................... A-56
11.10 Non-Survival of Representations and Warrants..................... A-57
</TABLE>
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<PAGE>
GLOSSARY OF TERMS
SECTION
-------
1935 Act............................................................ 4.1(c)
Accounts Receivable................................................. 1.1(b)
Accounting Firm..................................................... 1.7(a)
Acquired Subsidiaries............................................... 4.2(l)
Acquisition Proposal................................................ 5.3(c)
Affiliate........................................................... 5.1(i)
Agreement......................................................... Preamble
Amendment Date.................................................... Preamble
Ancillary Documents................................................. 4.1(c)
Assets.............................................................. 1.1(a)
Asset Transaction................................................. Recitals
Assumed Debt........................................................ 1.1(c)
Assumed Liabilities................................................. 1.1(c)
Certificates........................................................ 3.2(b)
Closing................................................................ 2.2
Closing Date........................................................... 2.2
Closing Working Capital............................................. 1.7(a)
Code.............................................................. Recitals
Confidentiality Agreements............................................. 6.4
Consolidated Financial Information of the Gas Business.............. 4.2(e)
Constituent Corporations............................................ 2.3(a)
Continuing Employees................................................ 1.1(d)
Control Share Acquisition Statute..................................... 6.20
Current Assets...................................................... 1.7(c)
Current Liabilities................................................. 1.7(c)
Deficient Amount.................................................... 1.7(b)
DGCL................................................................... 2.1
Disclosure Schedules.................................................. 6.14
Easements........................................................... 1.1(e)
Effective Date......................................................... 2.1
Effective Time......................................................... 2.1
Employee Agreement....................................................... 8
Environmental Claims................................................ 4.1(o)
Environmental Indemnity Agreement........................................ 8
Environmental Laws.................................................. 4.1(o)
Environmental Permits............................................... 4.1(o)
ERISA............................................................... 1.1(f)
Excess Amount....................................................... 1.7(b)
Exchange Act........................................................ 4.1(c)
Exchange Agent...................................................... 3.2(a)
Exchange Fund....................................................... 3.2(a)
Excluded Assets......................................................... 1.1(g)
excluded capital expenditures........................................... 1.7(a)
Expense Reimbursement Letter............................................ 9.2(b)
Financial Information Statements........................................ 4.2(e)
Form S-4................................................................ 4.1(e)
GAAP.................................................................... 4.1(d)
Gas..................................................................... 1.1(h)
Gas Business.......................................................... Recitals
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<PAGE>
SECTION
-------
Gas Pipelines......................................................... 1.1(i)
Governmental Entity................................................... 4.1(c)
Hazardous Materials................................................... 4.1(o)
HSR Act............................................................... 4.1(c)
Income Tax Contest................................................... 10.2(b)
Income Taxes.......................................................... 4.1(k)
Indebtedness.......................................................... 1.7(a)
indemnified party.................................................... 10.1(c)
Initial Termination Date.............................................. 9.1(c)
Injunction............................................................ 7.1(e)
Inventory............................................................. 1.1(j)
IRS................................................................... 4.1(k)
KCC................................................................... 4.1(c)
Lien................................................................. 4.1(aa)
Losses............................................................... 10.1(a)
Marketing Agreement................................................... 7.1(f)
Material Adverse Change............................................... 1.1(k)
Material Adverse Effect............................................... 1.1(k)
Material Contract..................................................... 4.1(q)
MCMC................................................................ Recitals
Merger.............................................................. Recitals
Merger Effective Date.................................................... 2.1
Merger Effective Time.................................................... 2.1
Net Amount............................................................ 1.7(c)
NewCorp............................................................. Preamble
NewCorp Bylaws........................................................ 2.3(a)
NewCorp Charter....................................................... 2.3(a)
NewCorp Common Stock.................................................. 3.1(c)
NewCorp Preferred Stock.................................................. 6.1
NewCorp Rights Agreement.............................................. 3.1(c)
NewCorp Series C Preferred Stock...................................... 3.1(c)
NewCorp Stock Purchase Rights......................................... 3.1(c)
Notice of Disagreement................................................ 1.7(a)
NYSE.................................................................. 4.2(d)
OCC................................................................... 4.1(c)
OGCA..................................................................... 2.1
ONEOK............................................................... Preamble
ONEOK Affiliate....................................................... 1.1(1)
ONEOK Balance Sheet................................................... 4.1(g)
ONEOK Benefit Plan................................................ 1.1(m)
ONEOK Capital Expenditure Amount.................................. 1.7(a)
ONEOK Common Stock................................................ 3.1(c)
ONEOK Disclosure Schedule............................................ 4.1
ONEOK Gas Contracts............................................... 4.1(q)
ONEOK Intangible Property......................................... 4.1(n)
ONEOK Litigation.................................................. 4.1(j)
ONEOK Options..................................................... 4.1(b)
ONEOK Order....................................................... 4.1(j)
ONEOK Pension Benefit Plan........................................ 1.1(n)
ONEOK Permits..................................................... 4.1(i)
ONEOK Preference Stock............................................ 4.1(b)
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<PAGE>
SECTION
-------
ONEOK Preferred Stock................................................... 4.1(b)
ONEOK Representatives................................................... 5.3(a)
ONEOK Required Consents................................................. 4.1(c)
ONEOK Rights Agreement.................................................. 4.1(b)
ONEOK SEC Documents..................................................... 4.1(d)
ONEOK Stock Plans....................................................... 4.1(b)
ONEOK Stockholder Approval.............................................. 4.1(c)
ONEOK Stockholders' Meeting................................................ 6.5
Opt-out Amendment ........................................................ 6.20
Original Agreement.................................................... Recitals
Original Execution Date............................................... Recitals
PBGC.................................................................... 1.1(o)
Permitted Liens........................................................ 4.1(aa)
Plants.................................................................. 1.1(p)
PP&E Schedules.......................................................... 4.2(e)
Pre-Closing Straddle Period Income Taxes............................... 6.15(c)
Proxy Statement......................................................... 4.1(c)
Reimbursed Expenses..................................................... 9.2(b)
Release................................................................. 4.1(o)
Reportable Event........................................................ 1.1(q)
Retained Gas Manufacturing Plants....................................... 1.1(r)
Retained Liabilities.................................................... 1.1(s)
Retired Employees....................................................... 1.1(t)
Returns................................................................. 4.1(k)
Salomon................................................................. 4.2(t)
SEC..................................................................... 1.1(u)
Securities Act.......................................................... 4.1(c)
Shared Services Agreement............................................... 7.1(f)
Shareholder Agreement................................................... 5.1(s)
Significant Subsidiary.................................................. 1.1(u)
Statement............................................................... 1.7(a)
Stock Consideration..................................................... 3.2(a)
Straddle Period........................................................ 6.15(c)
Subsidiary.............................................................. 1.1(v)
Surviving Corporation................................................. Recitals
Takeover Statute........................................................ 4.1(y)
Taxes................................................................... 4.1(k)
Third Party Claim...................................................... 10.1(c)
Transactions.......................................................... Recitals
Transfer Documents......................................................... 1.5
Transferred Stock..................................................... Recitals
Transferred Subsidiaries.............................................. Recitals
Westar................................................................ Recitals
Working Capital......................................................... 1.7(c)
WRI................................................................... Preamble
WRI Affiliate........................................................... 1.1(w)
WRI Benefit Plan........................................................ 1.1(x)
WRI Capital Expenditure Amount.......................................... 1.7(a)
WRI Disclosure Schedule.................................................... 4.2
WRI Gas Contracts....................................................... 4.2(q)
WRI Litigation.......................................................... 4.2(k)
WRI Orders.............................................................. 4.2(k)
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<PAGE>
SECTION
-------
WRI Pension Benefit Plan................................................ 1.1(y)
WRI Permits............................................................. 4.2(j)
WRI Required Consents................................................... 4.2(d)
WRI SEC Documents....................................................... 4.2(e)
WRI's Refunds.......................................................... 10.2(c)
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<PAGE>
AMENDED AND RESTATED AGREEMENT
AMENDED AND RESTATED AGREEMENT (the "Agreement"), dated as of May 19, 1997
(the "Amendment Date"), by and among ONEOK Inc., a Delaware corporation
("ONEOK"), Western Resources, Inc., a Kansas corporation ("WRI") and WAI,
Inc., an Oklahoma corporation and wholly-owned subsidiary of WRI ("NewCorp").
WHEREAS, ONEOK and WRI have entered into an Agreement (the "Original
Agreement"), dated as of December 12, 1996 (the "Original Execution Date"),
and the parties to the Original Agreement wish to amend and restate such
Original Agreement as specified herein;
WHEREAS, WRI is engaged in the business of local natural gas distribution in
the States of Kansas and Oklahoma (such business, other than the Excluded
Assets and the Retained Liabilities (as such terms are hereinafter defined)
associated therewith, and the business and operations of the Transferred
Subsidiaries (as such term is hereinafter defined), shall be referred to
herein as the "Gas Business");
WHEREAS, WRI owns, either directly or indirectly, 100% of the outstanding
capital stock of Westar Gas Marketing, Inc. ("Westar") and Mid Continent
Market Center, Inc. ("MCMC"; and, together with Westar, the "Transferred
Subsidiaries") (such stock shall be referred to herein as the "Transferred
Stock");
WHEREAS, WRI has formed NewCorp for the sole purpose of effecting the
transactions contemplated by this Agreement;
WHEREAS, ONEOK, WRI and NewCorp have determined to engage in a strategic
business combination in which the Gas Business will be combined with the
business and assets of ONEOK;
WHEREAS, in furtherance thereof, (i) immediately prior to the Merger
Effective Time (as such term is hereinafter defined), WRI will contribute or
cause to be contributed to NewCorp all of the Assets (as such term is
hereinafter defined) and WRI will cause NewCorp to assume all of the Assumed
Liabilities (as such term is hereinafter defined (such contribution and
assumption, the "Asset Transaction")), and (ii) at the Merger Effective Time,
ONEOK will be merged with and into NewCorp (the "Merger," and, together with
the Asset Transaction, the "Transactions"), with NewCorp as the surviving
corporation (NewCorp, in its capacity as such, the "Surviving Corporation");
WHEREAS, the respective Boards of Directors of ONEOK, WRI and NewCorp have
approved this Agreement and the Transactions and have determined that it is in
the best interests of their respective shareholders that the Transactions be
effected under the terms and conditions of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that (i) the Asset
Transaction will be a transfer described in Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code"), and (ii) the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Code;
and
WHEREAS, ONEOK, WRI and NewCorp desire to make certain representations,
warranties, covenants and agreements in connection with the Transactions and
the other transactions contemplated hereby and by the Ancillary Documents (as
hereinafter defined) and also to prescribe various conditions to the
Transactions and the other transactions contemplated hereby and thereby.
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<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties agree as
follows:
ARTICLE I
THE ASSET TRANSACTION
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Assets" shall mean all of the assets, property and interests owned by
WRI that are primarily used in, or primarily related to or primarily generated
by, the field operations of the Gas Business, of every type and description,
tangible and intangible, wherever located and whether or not reflected on the
books and records of WRI and its Subsidiaries (as such term is hereinafter
defined) as of the Closing Date (as such term is hereinafter defined),
including, but not limited to, the following types, categories or items of
assets, properties and interests, in each case, to the extent primarily used
in, or primarily related to, or primarily generated by the field operations of
the Gas Business:
(i) all Gas Pipelines (as such term is hereinafter defined) and Plants
(as such term is hereinafter defined) and construction work in progress on
the Gas Pipelines and Plants;
(ii) all Gas and other substances and materials located in the Gas
Pipelines or at the Plants;
(iii) all gauges, meters and other measuring equipment, telemetry
equipment, regulators, motors, compressors, storage tanks, fittings,
valves, equipment, machinery, tooling, furniture, fixtures, vehicles,
supplies, spare parts, repair parts, materials, fuel, computer hardware and
other tangible personal property;
(iv) all rights under agreements, sales and purchase orders, contracts,
product warranties, guarantees, service agreements and other commitments;
(v) all leasehold interests of equipment, machinery, furniture, and
tangible personal property;
(vi) all government permits, authorizations, franchises, certificates and
licenses to the extent transferable, in whole or in part;
(vii) all leases of real property;
(viii) all intangible personal property rights and regulatory assets as
described in Schedule 1.1(a)(viii);
(ix) all Accounts Receivable (as such term is hereinafter defined);
(x) all of the outstanding capital stock of Westar and MCMC;
(xi) copies of all customer and vendor lists relating to the operation of
the Gas Business or ownership of the Assets, copies of all files and
documents (including lists and credit information) relating to customers
and vendors related to the Gas Business, copies of all financial books and
records of the Gas Business, copies of all continuing property records for
the Plants and the Gas Pipelines, copies of all other records, files,
books, documents, and data bases, or portions thereof, including, but not
limited to, real property instruments (originals where available), rate
case files and records, system maps and operational manuals, sales
materials and correspondence;
(xii) all Easements (as such term is hereinafter defined);
(xiii) all Inventory (as such term is hereinafter defined);
(xiv) all rights and claims relating to the Assets or the Gas Business
under insurance policies (but not the policies themselves), all rights
against third parties arising out of the Assets or the Gas Business, and
the right to maintain or commence suits against such parties and the right
to carry on the Gas Business as successor to WRI and its Subsidiaries, as
applicable, in any and all respects; and
(xv) all other properties and assets of every kind and nature, real or
personal, tangible or intangible, to the extent used primarily in
connection with, or primarily related to or primarily generated by the
field operations of the Gas Business;
provided, however, that Assets shall not include Excluded Assets.
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<PAGE>
(b) "Accounts Receivable" shall mean the accounts and other receivables,
including unbilled revenues, of WRI and the Transferred Subsidiaries to the
extent arising out of the Gas Business, or ONEOK, as applicable.
(c) "Assumed Liabilities" shall mean any and all debts, claims, losses,
liabilities, leases and obligations whatsoever, including, without limitation,
debts, liabilities, obligations, Environmental Claims (as such term is
hereinafter defined) and claims with respect to any contracts included in the
Assets, that arise primarily out of, or relate primarily to or are primarily
generated by, the Assets or field operations of the Gas Business, whether
arising before or after the Asset Transaction and whether known or unknown,
fixed or contingent, other than Retained Liabilities. Assumed Liabilities
shall also include $35 million aggregate principal amount of debt of WRI, with
terms which permit prepayment with no more than 30 days' prior notice without
penalty (other than breakage fees with respect to LIBOR loans) and with a
maturity of no more than 3 years (the "Assumed Debt"), subject to adjustment
pursuant to Section 1.7.
(d) "Continuing Employees" shall mean all employees who are hired by NewCorp
pursuant to the Employee Agreement (as such term is hereinafter defined).
(e) "Easements" shall mean all easements, rights-of-way, permits, licenses,
franchises, leases, surface leases, prescriptive rights and ways of necessity,
whether or not of record.
(f) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
(g) "Excluded Assets" shall mean those assets of WRI and/or any of its
Subsidiaries used in the Gas Business or owned by the Transferred Subsidiaries
which are not being contributed to NewCorp as set forth on Schedule 1.1(g),
including, without limitation, the Retained Gas Manufacturing Plants, and any
intellectual property rights relating to the names "Westar", "Western
Resources", "KPL" or "KGE".
(h) "Gas" shall mean gas, gas liquids and other substances and materials
associated therewith.
(i) "Gas Pipelines" shall mean the gas gathering, distribution and
transmission system and related properties of the Gas Business, including but
not limited to the assets and properties described in Schedule 1.1(i).
(j) "Inventory" shall mean the following:
(i) Gas. The (1) Gas purchased for the Gas Business but not yet delivered
to customers of the Gas Business and unrecovered Gas costs allocable to the
Gas Business, less Gas delivered to customers but not yet purchased by
customers, in each case, limited to those amounts of FERC Account 191; and
(2) Gas in storage purchased for the Gas Business.
(ii) Other Assets. The inventory of WRI and the Transferred Subsidiaries
of materials and supplies and merchandise that are primarily used in, or
primarily relate to or are primarily generated by, the field operations of
the Gas Business.
(k) A "Material Adverse Effect" or "Material Adverse Change" shall mean, in
respect of ONEOK, the Gas Business or NewCorp, as applicable, any effect or
change that is or, is reasonably likely to be, materially adverse to the
business, operations, assets, condition (financial or otherwise), results of
operations or prospects of ONEOK and its Subsidiaries, NewCorp, or the Gas
Business, as applicable, in each case taken as a whole.
(l) "ONEOK Affiliate" means any Subsidiary of ONEOK, and any other trade or
business, whether or not incorporated, that is under control by or treated as
a single employer with ONEOK under Sections 414(b), (c), (m) or (o) of the
Code.
(m) "ONEOK Benefit Plan" means each benefit plan, program, policy, or
arrangement described in Section 4.1(l)(1) (whether or not terminated).
A-3
<PAGE>
(n) "ONEOK Pension Benefit Plan" means each employee pension benefit plan
(within the meaning of Section 3(2) of ERISA) subject to Title IV of ERISA or
the minimum funding requirements of Section 302 of ERISA that is or was
maintained or contributed to by ONEOK or any ONEOK Affiliate at any time
during the six calendar years immediately preceding the Original Execution
Date.
(o) "PBGC" means the Pension Benefit Guaranty Corporation.
(p) "Plants" shall mean the real property interests of WRI, including
Easements, together with the buildings and improvements of WRI located on such
real property, in each case to the extent primarily used in or primarily
related to the Gas Business.
(q) "Reportable Event" means an event constituting a "reportable event"
within the meaning of Section 4043(c) of ERISA for which the 30-day notice
requirement or penalty has not been waived by the PBGC.
(r) "Retained Gas Manufacturing Plants" shall mean the manufactured gas
plants specified in Schedule 1.1(r).
(s) "Retained Liabilities" shall mean (i) all debts, liabilities, leases and
obligations whatsoever of WRI and its Subsidiaries that do not arise primarily
out of, do not relate primarily to, or are not primarily generated by, the
Assets and the field operations of the Gas Business, (ii) liabilities of WRI
and its Subsidiaries other than the Transferred Subsidiaries for Income Taxes
(as such term is hereinafter defined), (iii) all liabilities, including
environmental liabilities, relating to the Retained Gas Manufacturing Plants,
(iv) all liabilities relating to or resulting from, the divestiture by WRI of
the Missouri Gas assets to Southern Union Company, and (v) all liabilities of
WRI and its Subsidiaries, whether or not relating to the Gas Business,
relating to indebtedness for borrowed money or guarantees, other than the
Assumed Debt and other than capital leases primarily related to the Gas
Business.
(t) "Retired Employees" shall mean all vested former employees of the Gas
Business and the Gas Business' predecessors, such other individuals who were
independent contractors and are recharacterized as former employees, and the
surviving beneficiaries of all such former employees and other individuals all
who are entitled to pension benefits from NewCorp pursuant to the Employee
Agreement.
(u) "Significant Subsidiary" means any Subsidiary of ONEOK or WRI, as
applicable, that would constitute a Significant Subsidiary of such party
within the meaning of Rule 1-02 of Regulation S-X of the Securities and
Exchange Commission (the "SEC").
(v) "Subsidiary" shall mean, with respect to any party, any corporation or
other organization, whether incorporated or unincorporated, of which: (i) such
party or any other Subsidiary of such party is a general partner or managing
member (excluding partnerships or limited liability companies, the general
partnership or membership interests of which are held by such party or any
Subsidiary of such party that do not have a majority of the voting interest in
such partnership or limited liability company); or (ii) at least a majority of
the securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is, directly
or indirectly, owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and any one or more of its Subsidiaries.
(w) "WRI Affiliate" means any Subsidiary of WRI, or any other trade or
business, whether or not incorporated, that is under control by or treated as
a single employer with WRI under Section 414(b), (c), (m) or (o) of the Code.
(x) "WRI Benefit Plan" means each benefit plan, program, policy, or
arrangement described in Section 4.2(m)(1) (whether or not terminated).
(y) "WRI Pension Benefit Plan" means each employee pension benefit (within
the meaning of Section 3(2) of ERISA) subject to Title IV of ERISA or the
minimum funding requirements of Section 302 of ERISA that is or was maintained
or contributed to by WRI or any WRI Affiliate at any time during the six
calendar years immediately preceding the Original Execution Date.
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1.2 The Asset Transaction. Immediately prior to the Merger Effective Time
and as a condition precedent to the Merger, WRI shall contribute, or cause to
be contributed, to NewCorp, and WRI shall cause NewCorp to acquire, all of the
right, title and interest of WRI in, to and under the Assets, free and clear
of all Liens (as such term is hereinafter defined) other than Permitted Liens
(as such term is hereinafter defined).
1.3 Liabilities Assumed. Concurrently with the contribution of the Assets to
NewCorp pursuant to Section 1.2, WRI will cause NewCorp to assume and agree to
pay, perform and discharge when due the Assumed Liabilities.
1.4 Retained Liabilities. Except for the Assumed Liabilities, WRI shall or
shall cause its Subsidiaries (other than Westar and MCMC) to, retain and have
full responsibility for and obligation with respect to the Retained
Liabilities.
1.5 Instruments of Transfer. The conveyance, transfer, assignment and
delivery of the Assets to NewCorp and the assumption of Assumed Liabilities by
NewCorp shall be effected by one or more Assignments, assumption agreements,
bills of sale, and regulatory orders (collectively, the "Transfer Documents"),
as may be necessary or as ONEOK or the Surviving Corporation may reasonably
require. As to the real property interests included in the Assets, the
conveyance shall be by general warranty deed for those interests for which WRI
received a general warranty deed and the remainder shall be by special
warranty deed.
1.6 Condition on Assignment or Assumption of Contracts and Rights. Anything
in this Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement to assign or assume any claim, contract, lease,
commitment or any claim or right or any benefit arising thereunder or
resulting therefrom if an attempted assignment or assumption thereof, without
the consent of a third party thereto, would constitute a breach thereof. If
such consent is not obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights of WRI or its Subsidiaries thereunder
so that NewCorp or the Surviving Corporation would not in fact receive all
such rights, WRI will, and will cause its Subsidiaries to, cooperate with the
Surviving Corporation in any arrangement reasonably designed to provide for
the Surviving Corporation, at the expense of the Surviving Corporation, the
benefits under any such claims, contracts, licenses, leases or commitments
including, without limitation, enforcement for the benefit of the Surviving
Corporation of any and all rights of WRI and its Subsidiaries against a third
party thereto arising out of the breach or cancellation by such third party or
otherwise; and any transfer or assignment to NewCorp or the Surviving
Corporation by WRI or its Subsidiaries of any property or property rights or
any contract or agreement which shall require the consent or approval of any
third party, shall be made subject to such consent or approval being obtained;
provided, however, that any third party consents to the assignment of such
contracts shall provide that WRI shall be released in full from its
obligations under such contracts.
1.7 Certain Adjustments. (a) 45 days before the Closing Date, WRI shall
prepare and deliver to ONEOK a statement (the "Statement"), certified by an
officer of WRI, setting forth the anticipated Working Capital (as such term is
hereinafter defined) of the Gas Business as of the close of business on the
Closing Date (the "Closing Working Capital"), and the dollar amount
anticipated to be expended by WRI with respect to capital expenditures and
construction work in progress relating to the Gas Business for the period from
December 1, 1996, through the Closing Date (the "WRI Capital Expenditure
Amount"). ONEOK shall prepare and deliver to WRI for inclusion on the
Statement, the dollar amount anticipated to be expended by ONEOK, for the
purpose of this paragraph ONEOK shall mean only Oklahoma Natural Gas Company
Division and ONG Transmission Company, with respect to capital expenditures
and construction work in progress (excluding capital expenditures and
construction work in progress resulting from any acquisition of, whether by
merging or consolidating with, by purchasing an equity interest in or a
portion of the assets of or in any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof, the "excluded capital expenditures") for the period from
December 1, 1996, through the Closing Date, less the aggregate net increase of
any Indebtedness (as defined below) incurred or assumed by, or any equity
issued by, ONEOK from December 1, 1996 to the Closing Date, to the extent the
proceeds thereof are used to finance any capital expenditure or construction
work in progress of ONEOK (the "ONEOK Capital Expenditure Amount") and, based
on the foregoing, WRI shall include on the Statement, the Net Amount (as such
term is hereinafter defined). As used in this Section, the term "Indebtedness"
shall mean the total long-term debt and short-term debt incurred under a
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revolving credit, working capital or other comparable credit facilities, but
shall exclude debt incurred to finance the "excluded capital expenditures."
During the 10-day period following ONEOK's receipt of the Statement, WRI and
ONEOK and their respective independent auditors shall be permitted to review
the working papers relating to the Statement. The Statement shall become final
and binding upon the parties on the tenth day following delivery thereof,
unless WRI or ONEOK gives written notice of its disagreement with the
Statement ("Notice of Disagreement") to the other party prior to such date.
Any Notice of Disagreement shall specify in reasonable detail the nature of
any disagreement so asserted. If a Notice of Disagreement is received in a
timely manner, then the Statement (as revised in accordance with clause (A) or
(B) below) shall become final and binding upon ONEOK and WRI on the earlier of
(A) the date ONEOK and WRI resolve in writing any differences they have with
respect to the matters specified in each Notice of Disagreement or (B) the
date any disputed matters are finally resolved in writing by the Accounting
Firm (as such term is hereinafter defined).
During the 5-day period following the delivery of a Notice of Disagreement,
ONEOK and WRI shall seek in good faith to resolve in writing any differences
which they may have with respect to the matters specified in each Notice of
Disagreement. During such period, WRI and ONEOK and their respective auditors
shall have access to the working papers of each other and its auditors
prepared in connection with the Notice of Disagreement. At the end of such 5-
day period, ONEOK and WRI shall submit to an independent accounting firm (the
"Accounting Firm") for review and resolution any and all matters which remain
in dispute and which were properly included in any Notice of Disagreement. The
Accounting Firm shall be a nationally recognized independent public accounting
firm as shall be reasonably agreed upon by ONEOK and WRI in writing. In the
event ONEOK and WRI are unable to agree upon the choice of Accounting Firm
within 2 days after the end of such 5-day period, either party may request the
American Arbitration Association to promptly choose the Accounting Firm, and
the American Arbitration Association shall promptly choose an Accounting Firm
which has not performed services for ONEOK or WRI in the two years prior to
the Original Execution Date. Promptly, but no later than 10 days after its
acceptance of its appointment as Accounting Firm hereunder, the Accounting
Firm shall determine, based solely on presentations by ONEOK and WRI, and not
by independent review, only those issues in dispute and shall render a report
as to the dispute and the resulting computation of the Statement, which shall
be conclusive and binding upon the parties. The cost of any dispute resolution
(including the fees and expenses of the Accounting Firm and reasonable
attorney fees and expenses of the parties) pursuant to this Section 1.7 shall
be borne by ONEOK and WRI in inverse proportion to the extent to which they
may prevail on matters resolved by the Accounting Firm, which proportionate
allocations shall also be determined by the Accounting Firm at the time the
determination of the Accounting Firm is rendered on the merits of the matters
submitted.
(b) To the extent that the Net Amount (as such term is hereinafter defined),
as specified in a Statement which becomes final pursuant to Section 1.7(a),
exceeds $40,000,000 (such excess shall be referred to herein as the "Excess
Amount"), the Surviving Corporation shall correspondingly assume at the
Closing additional debt of WRI with terms comparable to the terms of the
Assumed Debt in an aggregate principal amount equal to the Excess Amount. To
the extent the Net Amount as specified in a Statement which becomes final
pursuant to Section 1.7(a) is less than $40,000,000 (such deficiency being
referred to herein as the "Deficient Amount"), the aggregate principal amount
of Assumed Debt to be assumed by the Surviving Corporation shall be
correspondingly reduced by an amount equal to the lesser of (i) the Deficient
Amount and (ii) the aggregate amount of the Assumed Debt.
(c) The term "Working Capital" shall mean Current Assets minus Current
Liabilities. The terms "Current Assets" and "Current Liabilities," for the
purpose of this Section 1.7, shall mean the current assets (exclusive of cash
and cash equivalents) and current liabilities of the Gas Business, calculated
consistently with WRI's past practice based upon the books and records of WRI
and the Consolidated Financial Information of the Gas Business. The term "Net
Amount" shall mean the Working Capital of the Gas Business as of the close of
business on the Closing Date minus the amount, if any, by which the ONEOK
Capital Expenditure Amount exceeds the WRI Capital Expenditure Amount and plus
the amount, if any, by which the WRI Capital Expenditure Amount exceeds the
ONEOK Capital Expenditure Amount, as applicable.
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1.8 Certain Taxes. ONEOK shall pay all transfer, stamp, sales or use taxes
and any filing, recording, regulatory or similar fees or assessments payable
or determined to be payable in connection with the execution, delivery or
performance of this Agreement or the contribution to NewCorp of the Assets
contemplated hereby pursuant to the Transfer Documents.
ARTICLE II
THE MERGER
2.1 The Merger; Effective Time of Merger. Upon, and pursuant to the terms
and subject to the conditions of this Agreement, at the Merger Effective Time,
ONEOK will be merged into NewCorp in accordance with the Delaware General
Corporation Law ("DGCL") and the Oklahoma General Corporation Act ("OGCA"),
the separate existence of ONEOK shall thereupon cease and NewCorp shall
continue as the surviving corporation in the Merger. Subject to the terms and
conditions hereof, the Merger shall be consummated as promptly as practicable
after satisfaction or, to the extent permitted hereunder, waiver of all of the
conditions to each party's obligation to consummate the Merger specified in
Article VII, by filing appropriate certificates of merger, in such form as is
required by, and executed in accordance with, the relevant provisions of the
laws of the States of Delaware and Oklahoma, as applicable. The Merger shall
be effective at such time as the foregoing certificates of merger are duly
filed with the Secretaries of State of the States of Delaware and Oklahoma, in
accordance with Delaware or Oklahoma law, as applicable, or at such later
times as specified in the foregoing certificates of merger (the "Merger
Effective Time" or "Effective Time"). The date on which the Merger Effective
Time shall occur is referred to herein as the "Merger Effective Date" or the
"Effective Date".
2.2 Closing. The closing of the Merger (the "Closing") shall take place at
the offices of WRI as promptly as practicable after satisfaction or, to the
extent permitted hereunder, waiver of all of the conditions to each party's
obligation to consummate the Merger contained in Article VII, or at such other
place or time as the parties hereto shall agree (the date of the Closing being
referred to herein as the "Closing Date").
2.3 Effect of the Merger. (a) At the Merger Effective Date: (i) ONEOK shall
be merged with and into NewCorp, the separate existence of ONEOK shall cease
and NewCorp shall continue as the surviving corporation (ONEOK and NewCorp
being sometimes referred to hereinafter as the "Constituent Corporations");
(ii) the Certificate of Incorporation of NewCorp in effect immediately prior
to the Merger, which shall be in a form to be reasonably mutually agreed upon
in good faith by WRI and ONEOK prior to the Merger, which shall include the
provisions summarized in Exhibit A hereto and which shall not contain other
provisions inconsistent with the terms of the Shareholder Agreement (as such
term is hereinafter defined), shall be the Certificate of Incorporation of the
Surviving Corporation (the "NewCorp Charter"), provided, however, that the
Certificate of Incorporation of NewCorp shall be amended immediately prior to
or at the Merger Effective Time to change the name of NewCorp to "ONEOK,
Inc."; and (iii) the Bylaws of NewCorp in effect immediately prior to the
Merger, which shall be in a form to be reasonably mutually agreed upon in good
faith by WRI and ONEOK prior to the Merger and which shall include the
provisions summarized in Exhibit A hereto and which shall not contain other
provisions inconsistent with the terms of the Shareholder Agreement, shall be
the Bylaws of the Surviving Corporation (the "NewCorp Bylaws").
(b) The directors and officers of the Surviving Corporation will be those of
ONEOK immediately prior to the Merger Effective Time, provided, however, that
the Surviving Corporation shall add additional directors to the Board of
Directors of the Surviving Corporation as contemplated by the Shareholder
Agreement and 5 persons who are currently officers of WRI with respect to the
Gas Business (inclusive of the officers of the Transferred Subsidiaries
referred to in the next sentence) will be appointed as officers, with
comparable responsibilities, of the Surviving Corporation. The current
officers of the Transferred Subsidiaries will either retain their positions
post-Closing as officers of the Transferred Subsidiaries or be granted
comparable positions with the Surviving Corporation.
(c) The Merger shall have the effect provided for in the DGCL and the OGCA
and the provisions of this Section 2.3.
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ARTICLE III
CONVERSION OF SHARES AND
EXCHANGE OF CERTIFICATES
3.1 Effect of Merger on Capital Stock. At the Merger Effective Time, by
virtue of the Merger and without any action on the part of the owners of the
capital stock of ONEOK or NewCorp:
(a) NewCorp Capital Stock Unchanged. Each issued and outstanding share of
the capital stock of NewCorp shall not be converted or otherwise affected by
the Merger and shall remain outstanding after the Merger.
(b) Cancellation of Treasury Stock. All shares of the capital stock of
ONEOK, if any, that are owned by ONEOK as treasury stock and any share of
capital stock of ONEOK owned by any Subsidiary of ONEOK shall be canceled and
retired and shall cease to exist and no stock of NewCorp or other
consideration shall be delivered in exchange therefor.
(c) Exchange of ONEOK Common Stock. Each share of Common Stock, without par
value, of ONEOK ("ONEOK Common Stock") issued and outstanding immediately
prior to the Merger Effective Time (other than shares canceled in accordance
with Section 3.1(b) above) shall be converted into one share of common stock,
par value $.01 per share, of the Surviving Corporation ("NewCorp Common
Stock"), together with the corresponding number of associated rights ("NewCorp
Stock Purchase Rights") to purchase one one-hundredth of a share of NewCorp
Series C Participation Preferred Stock, par value $.01 per share, of the
Surviving Corporation ("NewCorp Series C Preferred Stock") pursuant to a
Rights Agreement entered into prior to the Closing between NewCorp and Liberty
Bank and Trust Company of Oklahoma City, N.A., as Rights Agent (the "NewCorp
Rights Agreement"), in a form to be reasonably mutually agreed upon in good
faith by ONEOK and WRI prior to the Merger, which shall include the provisions
summarized in Exhibit A hereto and which shall not contain other provisions
inconsistent with the terms of the Shareholder Agreement. All references in
this Agreement to the NewCorp Common Stock shall be deemed to include the
associated NewCorp Stock Purchase Rights. All such shares of ONEOK Common
Stock, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive shares of NewCorp
Common Stock in accordance herewith.
3.2 Exchange of Certificates. (a) Exchange of Certificates. As of the Merger
Effective Time, WRI shall cause NewCorp to deposit with such bank or trust
company (the "Exchange Agent") to be designated by ONEOK with the consent of
WRI (such consent not to be unreasonably withheld or delayed), for the benefit
of the holders of shares of ONEOK Common Stock, for exchange in accordance
with this Article III, through the Exchange Agent, certificates representing
shares of NewCorp Common Stock (such shares representing the "Stock
Consideration", and together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund") issuable
pursuant to this Article III in exchange for outstanding shares of ONEOK
Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the Merger
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which, immediately prior to the Merger Effective
Time, represented outstanding shares of ONEOK Common Stock (the
"Certificates"), which holder's shares of ONEOK Common Stock were converted
into the right to receive the same number of shares of NewCorp Common Stock
(Stock Consideration): (i) a letter of transmittal (which shall specify that
delivery shall be effected and risk of loss and title to the Certificates
shall pass only upon delivery of the Certificates to the Exchange Agent, and
shall be in such form and have such other provisions as ONEOK or the Surviving
Corporation may reasonably specify); and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Stock
Consideration. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, and
any other required documents, the holder of such
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Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of NewCorp Common Stock which such
holder has the right to receive pursuant to the provisions of this Article III
and the Certificate so surrendered shall forthwith be canceled. In the event
of a transfer of ownership of ONEOK Common Stock which is not registered in
the transfer records of ONEOK, a certificate representing the appropriate
number of shares of NewCorp Common Stock may be issued to a transferee if the
Certificate representing such shares is presented to the Exchange Agent
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 3.2, each Certificate shall be
deemed at any time after the Merger Effective Time to represent only the right
to receive upon such surrender the Stock Consideration. The Exchange Agent
shall not be entitled to vote or exercise any rights of ownership with respect
to the NewCorp capital stock held by it from time to time hereunder, except
that it shall receive and hold all dividends or other distributions paid or
distributed with respect thereto for the account of persons entitled thereto.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to NewCorp Common Stock declared or made after the
Merger Effective Time with a record date after the Merger Effective Time shall
be paid to the holder of any unsurrendered Certificate until the holder of
such Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder thereof, without interest, if such holder is entitled to
receive the Stock Consideration: (i) at the time of such surrender, the amount
of dividends or other distributions with a record date after the Merger
Effective Time theretofore paid with respect to such whole shares of such
Stock Consideration; and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Merger Effective
Time but prior to surrender and a payment date subsequent to surrender payable
with respect to such whole shares of NewCorp Common Stock.
(d) No Further Ownership Rights in ONEOK Common Stock. All shares of NewCorp
Common Stock issued upon the surrender for exchange of shares of ONEOK Common
Stock in accordance with the terms hereof shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of ONEOK Common
Stock, subject, however, to the Surviving Corporation's right to pay any
dividends or make any other distributions with a record date on or prior to
the Merger Effective Time that may have been declared or made by ONEOK on such
shares of ONEOK Common Stock in accordance with the terms of this Agreement
and which remain unpaid at the Merger Effective Time, and after the Merger
Effective Time there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of ONEOK
Common Stock that were outstanding immediately prior to the Merger Effective
Time. If, after the Merger Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article III.
(e) Termination of Exchange Agent. Any portion of the Exchange Fund that
remains undistributed to the former stockholders of ONEOK for one year after
the Merger Effective Time shall be delivered to the Surviving Corporation
which shall after the Merger Effective Time act as the Exchange Agent, and any
former stockholders of ONEOK who have not complied with this Article III prior
to the Merger Effective Time shall thereafter look only as a general creditor
to the Surviving Corporation for payment of their claim for the Stock
Consideration and any dividends or distributions with respect to NewCorp
Common Stock if such holder is entitled to receive the Stock Consideration.
(f) No Liability. None of ONEOK, WRI or the Surviving Corporation shall be
liable to any holder of shares of ONEOK Common Stock for such shares (or
dividends or distributions with respect thereto), delivered to a public
official pursuant to any applicable abandonment, escheat or similar law. Any
amounts remaining unclaimed by holders of any such shares six years after the
Merger Effective Time (or such earlier date immediately prior to the time at
which such amounts would otherwise escheat to or become property of any
governmental entity) shall, to the extent permitted by applicable law, become
the property of the Surviving Corporation free and clear of any claims or
interest of any such holders or their successors, assigns or personal
representatives previously entitled thereto.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of ONEOK. ONEOK represents and warrants
to WRI as follows, except as set forth in the disclosure schedule signed by an
authorized officer of ONEOK and delivered to WRI by ONEOK (the "ONEOK
Disclosure Schedule") on the Amendment Date, each of which exceptions shall
specifically identify the relevant Section hereof to which it relates:
(a) Organization, Standing and Power. Each of ONEOK and its Significant
Subsidiaries is a corporation or partnership duly organized, validly existing
and in good standing under the laws of its state of incorporation or
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted, and is
duly qualified and in good standing to do business in each jurisdiction in
which the business it is conducting, or the operation, ownership or leasing of
its properties, makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify would not have a Material
Adverse Effect on ONEOK. ONEOK has heretofore delivered to WRI complete and
correct copies of ONEOK's and its Significant Subsidiaries' certificates of
incorporation and bylaws, each as amended and in full force and effect on the
Original Execution Date. All Significant Subsidiaries of ONEOK and their
respective jurisdictions of incorporation or organization are identified on
Section 4.1(a) of the ONEOK Disclosure Schedule.
(b) Capital Structure. As of the Original Execution Date, the authorized
capital stock of ONEOK consists of 60,000,000 shares of ONEOK Common Stock,
without par value, 340,000 shares of ONEOK Preferred Stock, par value of $50
per share ("ONEOK Preferred Stock"), and 3,000,000 shares of ONEOK Preference
Stock, without par value ("ONEOK Preference Stock"). As of the Original
Execution Date, (i) 27,304,870 shares of ONEOK Common Stock and 180,000 shares
of ONEOK Preferred Stock were issued and outstanding, and 4,350,000 shares of
ONEOK Common Stock were reserved for issuance as follows:
ONEOK Employee Stock Purchase Plan.............................. 350,000
ONEOK Key Employee Stock Plan................................... 1,000,000
Thrift Plan for Employees of ONEOK Inc. and Subsidiaries........ 3,000,000
(collectively, the "ONEOK Stock Plans"; the options outstanding pursuant to
the ONEOK Stock Plans being referred to herein as the "ONEOK Options"); (ii)
no shares of ONEOK Preference Stock are outstanding; (iii) 148,482 shares of
ONEOK Series A Participating Preference Stock have been reserved for issuance
pursuant to the Shareholder Protection Rights Agreement, dated as of March 21,
1988 between ONEOK and The Chase Manhattan Bank, N.A. (the "ONEOK Rights
Agreement"); (iv) no shares of ONEOK Common Stock were held by ONEOK in its
treasury; and (v) no bonds, debentures, notes or other indebtedness having the
right to vote (or convertible into securities having the right to vote) on any
matters on which ONEOK stockholders may vote were issued or outstanding. All
such issued and outstanding shares of ONEOK Common Stock and ONEOK Preferred
Stock are validly issued, fully paid and nonassessable and are not subject to
preemptive rights. Other than 148,482 shares of Preference Stock, ONEOK has no
shares of Common Stock, Preferred Stock or Preference Stock reserved for
issuance pursuant to the ONEOK Rights Agreement. Section 4.1(b) of the ONEOK
Disclosure Schedule contains a correct and complete list as of December 12,
1996 of each outstanding option to purchase shares of capital stock of ONEOK
outstanding pursuant to the ONEOK Stock Plans, including the holder, date of
grant, exercise price and number of shares subject thereto. All outstanding
shares of capital stock of the Subsidiaries of ONEOK are owned by ONEOK, or a
direct or indirect wholly owned Subsidiary of ONEOK, free and clear of all
Liens, and are validly issued, fully paid and nonassessable and are not
subject to preemptive rights. Except (i) as set forth above and as
contemplated by the ONEOK Rights Agreement, (ii) for changes since December
12, 1996 resulting from the exercise of employee stock options granted
pursuant to, or from issuance or purchases under, the ONEOK Stock Plans and
ONEOK's Direct Stock Purchase and Dividend Reinvestment Plan, (iii) as
contemplated by this Agreement, and (iv) for transactions effected by ONEOK
after the Original Execution Date without breaching the terms hereof, there
are, as of the Original Execution Date,
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outstanding: (A) no shares of capital stock; (B) no securities of ONEOK or any
Subsidiary of ONEOK convertible into or exchangeable for shares of capital
stock, or other voting securities of ONEOK or any Subsidiary of ONEOK; and (C)
no options, warrants, calls, subscriptions, convertible securities, or other
rights (including preemptive rights), commitments or agreements to which ONEOK
or any Subsidiary of ONEOK is a party or by which it is bound in any case
obligating ONEOK or any Subsidiary of ONEOK to issue, deliver, sell, purchase,
redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed
or acquired, additional shares of its capital stock or any securities of ONEOK
or any Subsidiary of ONEOK exercisable for, exchangeable for or convertible
into such capital stock, or obligating ONEOK or any Subsidiary of ONEOK to
grant, extend or enter into any such option, warrant, call, subscription,
convertible securities, or other right, commitment or agreement. Except with
respect to the Shareholder Agreement, there are not as of the Original
Execution Date and there will not be at the Merger Effective Time any
stockholder agreements, voting trusts or other agreements or understandings to
which ONEOK is a party or by which it is bound relating to the voting of any
shares of the capital stock of ONEOK that will limit in any way the
solicitation of proxies by or on behalf of ONEOK from, or the casting of votes
by, the stockholders of ONEOK with respect to the Merger. There are no
restrictions on ONEOK to vote the stock of any of its Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(1) The Board of Directors of ONEOK has approved the Merger and this
Agreement, and declared the Merger and this Agreement to be in the best
interest of the stockholders of ONEOK. ONEOK has and will have all
requisite corporate power and authority to enter into this Agreement and
the other agreements contemplated hereby, including the Marketing Agreement
(as such term is hereinafter defined), the Shared Services Agreement (as
such term is hereinafter defined), the Transfer Documents, the Shareholder
Agreement, the Employee Agreement (as such term is hereinafter defined) and
the Environmental Indemnity Agreement (as such term is hereinafter defined)
(collectively, the "Ancillary Documents") to the extent it is a party
thereto, to perform its obligations hereunder and thereunder and to
consummate the Transactions and the other transactions contemplated hereby
and thereby, subject to the approval of this Agreement and the Merger by
the holders of a majority of the voting power of the ONEOK Common Stock,
assuming the redemption of the ONEOK Preferred Stock as contemplated by
Section 5.2(d), in accordance with the DGCL and ONEOK's certificate of
incorporation and bylaws, as amended (the "ONEOK Stockholder Approval").
The execution and delivery of this Agreement and each Ancillary Document to
which ONEOK is a party, the performance of obligations hereunder and
thereunder by ONEOK and the consummation of the Transactions and the other
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of ONEOK, subject to the ONEOK
Stockholder Approval. This Agreement has been duly executed and delivered
by ONEOK and, subject to the ONEOK Stockholder Approval, constitutes and
the Ancillary Documents to which ONEOK is a party, when executed and
delivered by ONEOK, will constitute, valid and binding obligations of
ONEOK, enforceable against ONEOK in accordance with their respective terms,
subject, in each case, as to enforceability, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general principles of equity (assuming
such documents constitute a valid and binding obligation on the other
parties thereto).
(2) The execution and delivery of this Agreement and the Ancillary
Documents to which ONEOK is a party do not, and the consummation of the
Transactions and the other contemplated hereby and thereby and compliance
with the provisions hereof and thereof will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time,
or both) under, or change the rights or obligations of any party under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a material benefit under, or result in the
creation of any Lien, upon any of the properties or assets of ONEOK or any
of its Subsidiaries under, any provision of (A) the certificate of
incorporation or bylaws of ONEOK, as amended, or any provision of the
charter or other organizational documents of any of its Subsidiaries, (B)
subject to obtaining the third-party consents set forth in Section
4.1(c)(2) of the ONEOK Disclosure Schedule (the "ONEOK Required Consents"),
any loan or credit agreement, note, bond, mortgage, indenture, lease or
other material agreement, instrument, permit, franchise or license
applicable to ONEOK or any of its Subsidiaries or (C) assuming the
consents, approvals, authorizations or permits and
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filings or notifications referred to in Section 4.1(c)(3) of the ONEOK
Disclosure Schedule are duly and timely obtained or made and the ONEOK
Stockholder Approval has been obtained, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to ONEOK or any of
its Subsidiaries or any of their respective properties or assets, other
than, in the case of clause (B) or (C), any such conflicts, violations,
defaults, rights, or Liens, that, individually or in the aggregate, would
not have a Material Adverse Effect on ONEOK, materially impair the ability
of ONEOK to perform its obligations hereunder or under any Ancillary
Document to which ONEOK is a party or prevent the consummation of any of
the Transactions and the other transactions contemplated hereby or thereby.
(3) No notice, report, consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any court,
governmental, regulatory or administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a
"Governmental Entity"), is required by or with respect to ONEOK or any of
its Subsidiaries in connection with the execution and delivery by ONEOK of
this Agreement or any Ancillary Documents to which ONEOK is a party or the
consummation by ONEOK of the Transactions and the other transactions
contemplated hereby or thereby, as to which the failure to obtain or make
would have a Material Adverse Effect on ONEOK or prevent or materially
burden or materially impair the ability of ONEOK to consummate the
Transactions and the other transactions contemplated by this Agreement or
by the Ancillary Documents, except for: (A) the filing of a premerger
notification report by ONEOK under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the expiration or
termination of the applicable waiting period with respect thereto; (B) the
filing with the SEC of (x) a proxy statement in preliminary and definitive
form relating to the meeting of the holders of ONEOK capital stock to be
held in connection with the Merger (the "Proxy Statement") and (y) such
reports under Section 13(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and such other compliance with the Exchange
Act and the Securities Act of 1933, as amended (the "Securities Act") and
the rules and regulations thereunder, as may be required in connection with
this Agreement and the Transactions and the other transactions contemplated
hereby; (C) a filing for a determination by the SEC or its Staff in the
form of an order or a no-action letter that NewCorp will not be a
subsidiary company under Section 2(a)(8) of the Public Utility Holding
Company Act of 1935 (the "1935 Act"), for the purposes of the 1935 Act as a
result of the Merger and the obtaining of such an order or no-action letter
from the SEC or its Staff to such effect; (D) the approval of the Merger by
the SEC under Section 9(a)(2) of the 1935 Act; (E) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware;
(F) filings with, and the approval of, or notices to, the Oklahoma
Corporation Commission (the "OCC") and the Kansas Corporation Commission
(the "KCC"); (G) such filings and approvals as are set forth on Section
4.1(c)(3) of the ONEOK Disclosure Schedule in connection with the transfer
of ONEOK's municipal franchises; (H) such filings and approvals as may be
required by any applicable state securities, "blue sky" or takeover laws;
and (I) such filings and approvals as may be required by any other
premerger notification, securities, corporate or other law, rule or
regulation.
(d) SEC Documents. ONEOK has made available to WRI a true and complete copy
of each report, schedule, registration statement and definitive proxy
statement or information statement filed by ONEOK with the SEC and/or prepared
by ONEOK since August 31, 1993 and prior to the Original Execution Date (the
"ONEOK SEC Documents") which are all the documents (other than preliminary
material) that ONEOK was required to file with the SEC since such date. As of
their respective dates, the ONEOK SEC Documents complied in all material
respects with the requirements of the Securities Act, or the Exchange Act, as
the case may be, and the rules and regulations of the SEC thereunder
applicable to such ONEOK SEC Documents, and none of the ONEOK SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
for the applicable periods, not misleading. The financial statements
(including the related notes and schedules) of ONEOK included in the ONEOK SEC
Documents complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted
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by Rule 10-01 of Regulation S-X of the SEC) and fairly present in accordance
with applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments, none of which will be material)
the consolidated financial position of ONEOK and its consolidated Subsidiaries
as of their respective dates and the consolidated results of operations, the
consolidated cash flows, the retained earnings and the changes in financial
position of ONEOK and its consolidated Subsidiaries for the periods presented
therein. Except as disclosed in the ONEOK SEC Documents, there are no
agreements, arrangements or understandings between ONEOK and any party who is
as of the Original Execution Date or was at any time prior to the Original
Execution Date but after August 31, 1993 an Affiliate of ONEOK that are
required to be disclosed in the ONEOK SEC Documents.
(e) Information Supplied. None of the information supplied or to be supplied
by ONEOK for inclusion or incorporation by reference in the Registration
Statement on Form S-4 to be filed with the SEC by NewCorp in connection with
the issuance of shares of NewCorp Common Stock in the Merger (the "Form S-4")
will, at the time the Form S-4 becomes effective under the Securities Act or
at the Merger Effective Time, contain any 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, in light of the circumstances under which they
were made, not misleading, and none of the information supplied or to be
supplied by ONEOK and included or incorporated by reference in the Proxy
Statement will, at the date mailed to stockholders of ONEOK or at the time of
the meeting of such stockholders to be held in connection with the Merger or
at the Merger Effective Time, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading. If at any time prior to the Merger
Effective Time any event with respect to ONEOK or any of its Subsidiaries, or
with respect to other information supplied by ONEOK for inclusion in the Proxy
Statement or the Form S-4, shall occur which is required to be described in an
amendment of, or a supplement to, the Proxy Statement or the Form S-4, such
event shall be so described, and such amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
stockholders of ONEOK. The Proxy Statement, insofar as it relates to ONEOK or
its Subsidiaries or other information supplied by ONEOK for inclusion therein,
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
(f) Absence of Certain Changes or Events. Except (I) as disclosed in, or
reflected in the financial statements included in, the ONEOK SEC Documents
and/or Section 4.1(f) of the ONEOK Disclosure Schedule, (II) as contemplated
by this Agreement, or (III) for transactions effected or actions taken by
ONEOK or its Subsidiaries after the Original Execution Date without breaching
the terms hereof, in the case of clauses (iv) through (xi) below, since August
31, 1996, ONEOK has conducted its business in the ordinary course of such
business consistent with past practice, and since August 31, 1996, there has
not been: (i) any event or events which, individually or in the aggregate,
have had or would have a Material Adverse Effect on ONEOK; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of ONEOK's capital
stock, except for regular quarterly cash dividends on ONEOK Common Stock or
the regular quarterly cash dividend on ONEOK Preferred Stock (or a pro rata
amount for any dividend less than a full quarter) with usual record and
payment dates for such dividends; (iii) any amendment of any material term of
any outstanding equity security of ONEOK or any Subsidiary of ONEOK; (iv) any
repurchase, redemption or other acquisition by ONEOK or any Subsidiary of
ONEOK of any outstanding shares of capital stock or other equity securities
of, or other ownership interests in, ONEOK or any Subsidiary of ONEOK, except
as contemplated by any ONEOK Benefit Plans; (v) any material change in any
method of accounting or accounting practice by ONEOK or any Significant
Subsidiary of ONEOK; (vi) any increase in the salaries or other compensation
payable to any officer or employee of ONEOK or any of its Subsidiaries (except
for normal increases in the ordinary course of business consistent with past
practice) or any increase in, or addition to, other benefits to which any
officer or employee may be entitled (except as required by the terms of plans
as in effect on the Original Execution Date or as required by law); (vii) any
incurrence of indebtedness for borrowed money (except in the ordinary course
of business consistent with past practice); (viii) any Material Adverse Change
or threat of a Material Adverse Change in ONEOK's or any of its Subsidiaries'
relations with, or any loss or, to the knowledge of ONEOK, threat of loss of,
any of ONEOK's or any of its Subsidiaries' material suppliers or
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customers, except to the extent such loss does not and would not have a
Material Adverse Effect on ONEOK; (ix) any termination, cancellation or waiver
of any contract or other right material to the operation of the business of
ONEOK and its Subsidiaries taken as a whole, except to the extent such
termination, cancellation or waiver does not and would not have a Material
Adverse Effect on ONEOK; (x) any amendment of any material term of the
respective certificates of incorporation or bylaws of ONEOK or any Subsidiary
of ONEOK; or (xi) any other transaction, commitment, dispute or other event or
condition (financial or otherwise) of any character (whether or not in the
ordinary course of business) that does have or would have a Material Adverse
Effect on ONEOK.
(g) No Undisclosed Material Liabilities. Except as disclosed in the ONEOK
SEC Documents and/or Section 4.1(g) of the ONEOK Disclosure Schedule, to the
knowledge of ONEOK, there are no liabilities or obligations, including
Environmental Claims, of ONEOK or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and whether or not required to be disclosed, nor are there any
facts or circumstances of which ONEOK has or its Subsidiaries have knowledge
that could result in obligations or liabilities of ONEOK, its Subsidiaries or
any of their Affiliates, that have or would have a Material Adverse Effect on
ONEOK, other than: (i) liabilities adequately provided for on the balance
sheet of ONEOK dated as of August 31, 1996 (including the notes thereto)
contained in ONEOK's Annual Report on Form 10-K for the year ended August 31,
1996 (the "ONEOK Balance Sheet"); and (ii) liabilities under this Agreement or
the Ancillary Documents.
(h) No Default. Neither ONEOK nor any of its Subsidiaries is in default or
violation (and no event has occurred which, with notice or the lapse of time
or both, would constitute a default or violation) of any term, condition or
provision of (i) their respective charters, bylaws or other respective
organizational documents, (ii) any material note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which ONEOK or any of
its Subsidiaries is now a party or by which ONEOK or any of its Subsidiaries
or any of their respective properties or assets may be bound, or (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to
ONEOK or any of its Subsidiaries, except in the case of (ii) and (iii) for
defaults or violations which in the aggregate do not and would not have a
Material Adverse Effect on ONEOK.
(i) Compliance with Applicable Laws. Except as specifically addressed in
other representations in this Section 4.1 or set forth in Section 4.1(i) of
the ONEOK Disclosure Schedule, ONEOK and its Subsidiaries hold all permits,
licenses, variances, exemptions, orders, franchises and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "ONEOK Permits"), except where the failure so to hold does not
and would not have a Material Adverse Effect on ONEOK. Except as set forth in
Section 4.1(i) of the ONEOK Disclosure Schedule, ONEOK and its Subsidiaries
are in compliance with the terms of the ONEOK Permits, except where the
failure so to comply does not and would not have a Material Adverse Effect on
ONEOK. Except as disclosed in the ONEOK SEC Documents or set forth in Section
4.1(i) of the ONEOK Disclosure Schedule, the businesses of ONEOK and its
Subsidiaries are not being conducted in violation of any law, ordinance,
regulation of any Governmental Entity, except for violations which do not and
would not have a Material Adverse Effect on ONEOK. Except as set forth in
Section 4.1(i) of the ONEOK Disclosure Schedule, neither ONEOK nor any of its
Subsidiaries has been notified of any pending investigation or review by any
Governmental Entity nor, to the knowledge of ONEOK and its Subsidiaries, is
any investigation or review by any Governmental Entity with respect to ONEOK
or any of its Subsidiaries pending or threatened, other than those the outcome
of which does not and is not reasonably likely to have a Material Adverse
Effect on ONEOK.
(j) Litigation. Except as disclosed in the ONEOK SEC Documents and/or
Section 4.1(j) of the ONEOK Disclosure Schedule or otherwise within this
Section 4.1, as of the Original Execution Date, there is no suit, action or
proceeding pending, or, to the knowledge of ONEOK and its Subsidiaries,
threatened against or affecting ONEOK or any Subsidiary of ONEOK ("ONEOK
Litigation"), at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that, individually or in
the aggregate, has had or would have a Material Adverse Effect on ONEOK, and
ONEOK and its Subsidiaries have no knowledge of any facts that are likely to
give rise to any ONEOK Litigation, that (in any case) would have a Material
Adverse Effect on ONEOK, nor is there any judgment, decree, injunction, rule
or order of any
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Governmental Entity or arbitrator outstanding against ONEOK or any Subsidiary
of ONEOK ("ONEOK Order") that has or would have a Material Adverse Effect on
ONEOK or ONEOK's ability to consummate the transactions contemplated by this
Agreement or any of the Ancillary Documents.
(k) Taxes. Except as, individually or in the aggregate, do not and would not
have a Material Adverse Effect on ONEOK:
(1) ONEOK and each of its Subsidiaries has (A) timely (taking into
account any extensions) filed all material federal, state, local and
foreign returns, declarations, reports, estimates, information returns and
statements ("Returns") required to be filed or sent by or with respect to
it in respect of any Taxes (as hereinafter defined), (B) timely paid all
Taxes that are shown to be due thereon, (C) established reserves that are
adequate for the payment of all Taxes not yet due and payable with respect
to the results of operations of ONEOK and its Subsidiaries, and (D) to the
knowledge of ONEOK or any Subsidiary of ONEOK, timely withheld from
employee wages and paid over to the proper governmental authorities all
amounts required to be so withheld and paid over.
(2) Section 4.1(k)(2) of the ONEOK Disclosure Schedule sets forth the
last taxable period through which the federal Income Tax Returns of ONEOK
and its Subsidiaries have been examined by the Internal Revenue Service
("IRS") or otherwise closed. No material Tax audits or other administrative
proceedings or court proceedings are presently pending with regard to any
Taxes for which ONEOK or any of its Subsidiaries could be liable, and
except as provided for in the ONEOK Balance Sheet, no material deficiency
for any such Taxes has been proposed, asserted or assessed pursuant to such
examination against ONEOK or any of its Subsidiaries by any Governmental
Entity with respect to any period.
(3) Neither ONEOK nor any of its Subsidiaries has executed or entered
into with the IRS or any taxing authority (A) any agreement or other
document extending or having the effect of extending the period for
assessments or collection of any federal Income Taxes for which ONEOK or
any of its Subsidiaries could be liable or (B) a closing agreement pursuant
to Section 7121 of the Code, or any predecessor provision thereof or any
similar provision of state or local Tax law that relates to the assets or
operations of ONEOK or any of its Subsidiaries.
(4) Neither ONEOK nor any of its Subsidiaries has made an election under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is defined
in Section 341(f)(4) of the Code) owned by ONEOK or any of its
Subsidiaries.
(5) Except as set forth in the ONEOK SEC Documents or Section 4.1(k)(5)
of the ONEOK Disclosure Schedule, neither ONEOK nor any of its Subsidiaries
is a party to, is bound by or has any obligation under any tax sharing
agreement or similar agreement or arrangement which has as a party a person
other than ONEOK or any of its Subsidiaries.
(6) Section 4.1(k)(6) of the ONEOK Disclosure Schedule sets forth a list
of federal, state, local or foreign jurisdictions in which ONEOK and its
Subsidiaries have paid any Taxes or filed any Returns during the past 3
years. No jurisdiction not listed on Section 4.1(k)(6) of the ONEOK
Disclosure Schedule has made a claim, assertion or, to the knowledge of
ONEOK and its Subsidiaries, threat that ONEOK or its Subsidiaries is
subject to taxation in such jurisdiction.
(7) Except as disclosed in Section 4.1(k)(7) of the ONEOK Disclosure
Schedule, neither ONEOK nor any of its Subsidiaries maintains any
compensation plans, programs, or arrangements the payments under which
would not be expected to be deductible as a result of the limitation of
Section 162(m) of the Code and the regulations issued thereunder.
(8) Except as disclosed in Section 4.1(k)(8) of the ONEOK Disclosure
Schedule, as a result, directly or indirectly, of the Transactions or the
other transactions contemplated by this Agreement (including without
limitation, any terminations of employment prior to or following the Merger
Effective Time), none of ONEOK, its Subsidiaries or NewCorp will be
obligated to make a payment (including without limitation
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any acceleration of vesting or payment) with respect to employees of ONEOK
or its Subsidiaries who are "disqualified individuals" that would be
characterized as an "excess parachute payment" (as such terms are defined
in Section 280G of the Code).
For purposes of this Agreement, (i) "Taxes" shall mean any federal, state,
local or foreign taxes, charges, fees, levies or other assessments, without
limitation, all net income, gross income, sales and use, valorem, transfer,
gains, profits, excise, franchise, real and personal gross receipts, capital
stock, production, business and disability, employment, payroll, license,
estimated, stamp, duties, severance or withholding taxes or charges imposed by
any Governmental Entity, and (ii) "Income Taxes" shall mean any federal,
state, local or foreign income or franchise taxes, or other taxes measured in
whole or in part by income, and in each of (i) and (ii), any interest,
penalties and additions to any such taxes, charges, fees or levies and any
expenses incurred in connection with the settlement or litigation of any
liability for any of the foregoing.
(l) Employee Matters; ERISA.
(1) Benefit Plans. Section 4.1(l)(1) of the ONEOK Disclosure Schedule
contains a true and complete list, as of the Original Execution Date, of
each item described below, whether formal or informal, written or
unwritten, legally binding or not:
a. each material "employee benefit plan" within the meaning of
Section 3(3) of ERISA that is or was maintained or contributed to at
any time during the six calendar year period immediately preceding the
Original Execution Date by ONEOK or any ONEOK Affiliate and each
similar plan, program, policy or arrangement maintained for non-
employee directors or other non-employees who have provided services to
ONEOK or any ONEOK Affiliate;
b. each material plan, program, policy, payroll practice or
arrangement not listed in a. above that provides for bonuses, profit-
sharing, incentive compensation, deferred compensation, equity-based
compensation (including stock options or other stock purchases,
restricted stock, stock appreciation rights, performance units and
dividend equivalents), holiday pay, vacation pay, sick pay, dependent
care benefits, flexible benefits (including any cafeteria plan governed
by Section 125 of the Code), paid or unpaid leave (including sick
leave, parental leave, military leave and bereavement leave), tuition
assistance, relocation or any similar type of benefits, that has been
adopted or implemented by ONEOK or any ONEOK Affiliate (including any
such plan, program, policy or arrangement that has been terminated
before the Original Execution Date); and
c. each material employment contract, severance contract, parachute
agreement, option agreement, stock appreciation right agreement, bonus
or other incentive award agreement, deferred compensation agreement,
supplemental benefit agreement, split dollar agreement or other
personal service or benefit contract or arrangement with or covering a
current or former officer, director, employee or independent contractor
of ONEOK or any ONEOK Affiliate.
(2) Contributions. All material contributions and other material payments
required to have been made by ONEOK or any ONEOK Affiliate under Section
412 of the Code or pursuant to any ONEOK Benefit Plan (or to any person
pursuant to the terms thereof) have been timely made or will be timely made
in accordance with Section 404(a)(6) of the Code.
(3) Qualification; Compliance. The following representations apply to
ONEOK Benefit Plans being continued by NewCorp or for which NewCorp may
have liability.
a. Each ONEOK Benefit Plan that is intended to be "qualified" within
the meaning of Section 401(a) of the Code (1) currently meets all
qualification requirements under the Code both in form and in
operation, except any failure that can be corrected without material
liability, and (2) has received a favorable determination letter from
the IRS on its qualification or application for such a determination
has been made prior to the expiration of the applicable remedial
amendment period, and to the knowledge of ONEOK there are no
circumstances existing likely to result in revocation of any such
favorable determination letter.
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b. Each ONEOK Benefit Plan is and has been operated in compliance
with, all applicable laws, rules and regulations governing such plan,
including, without limitation, ERISA and the Code, and all filings,
disclosures and notices required have been timely made, except for
violations that would not have a Material Adverse Effect on ONEOK. All
amendments and actions required to bring each of the ONEOK Benefit
Plans into conformity with all of the applicable provisions of ERISA
and the Code and other applicable legal requirements have been made or
taken except to the extent that such amendments or actions are not
required by law to be made or taken until a date after the Merger
Effective Time and except for actions the failure of which to take
would not have a Material Adverse Effect on ONEOK.
c. To the knowledge of ONEOK, no individual or entity has engaged in
any transaction in connection with which ONEOK or any ONEOK Affiliate,
or any ONEOK Benefit Plan or any trust, trustee or administrator
thereof, could be subject to liability pursuant to Section 409 or
Section 502 of ERISA, or subject to an excise tax pursuant to Section
4975 of the Code, which could in either case have a Material Adverse
Effect on ONEOK.
d. Except for matters that would not have a Material Adverse Effect
on ONEOK:
1. To the knowledge of ONEOK, no ONEOK Benefit Plan is subject to
any ongoing audit, investigation or other administrative proceeding
of the IRS, the Department of Labor or any other Governmental Entity
or, to the knowledge of ONEOK, is scheduled to be subject to such an
audit, investigation or proceeding; and
2. No ONEOK Benefit Plan is the subject of any pending application
for administrative relief under any voluntary compliance program of
any Governmental Entity (including, without limitation, the IRS'
Voluntary Compliance Resolution Program or Walk-in Closing Agreement
Program, or the Department of Labor's Delinquent Filer Voluntary
Compliance Program).
(4) Pension Benefit Plan; Liabilities. Except as set forth in Section
4.1(l)(4) of the ONEOK Disclosure Schedule, with respect to the ONEOK
Pension Benefit Plans, individually and in the aggregate, no termination or
partial termination of any ONEOK Pension Benefit Plan has occurred and no
event has occurred that would be reasonably expected to subject ONEOK or
any ONEOK Affiliate to any liability arising under the Code, ERISA or any
other applicable law (including, without limitation, any liability to or
under any such plan or to the PBGC, or under any indemnity agreement to
which ONEOK or any ONEOK Affiliate is a party), which liability could have
a Material Adverse Effect on ONEOK (excluding liability for benefit claims
and funding obligations payable in the ordinary course and liability for
PBGC insurance premiums payable in the ordinary course).
(5) Welfare Plans. To the knowledge of ONEOK, no circumstances exist that
could subject ONEOK or any ONEOK Affiliate to an excise tax under Section
4976 of the Code that would have a Material Adverse Effect on ONEOK.
(6) Documents Made Available. ONEOK has made available to WRI a true and
correct copy of each collective bargaining agreement to which ONEOK or any
ONEOK Affiliate is a party and under which ONEOK has obligations or joint
and several liability; and, with respect to each ONEOK Benefit Plan, ONEOK
has made available to WRI a true and correct copy of each of the following,
as applicable:
a. the current plan document (including all amendments adopted since
the most recent restatement) and its most recently prepared summary
plan description and all summaries of material modifications prepared
since the most recent summary plan description;
b. annual reports or Code Section 6039D information returns (IRS Form
5500 Series), including financial statements, for the last two years;
c. the most recent IRS determination letter or other opinion letter
with respect to the qualified status under Code Section 401(a) of such
plan or under Code Section 501 of the related trust;
d. actuarial reports or valuations for the last two years; and
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e. trust instruments and insurance contracts; any Form 5310 or Form
5330 filed with the IRS during the last six years.
(7) Payments Resulting From Merger. Except as set forth on Section
4.1(l)(7) of the ONEOK Disclosure Schedule or as provided under any ONEOK
Benefit Plan or any agreement described in Section 4.1(l)(1)c. above, the
consummation or announcement of any transaction contemplated by this
Agreement will not directly or indirectly (either alone or upon the
occurrence of any additional or further acts or events) result in any:
a. payment (whether of severance pay or otherwise) becoming due from
ONEOK or any ONEOK Affiliate to any current or former officer,
director, employee or independent contractor of ONEOK or any ONEOK
Affiliate or to the trustee under any "rabbi trust" or other funding
arrangement, which would reasonably be expected to result in liability
to NewCorp; or
b. benefit under any ONEOK Benefit Plan being established or
increased or becoming accelerated, vested or payable, except for a
payment or benefit that would have been payable under the same terms
and conditions without regard to the transactions contemplated by this
Agreement, which would reasonably be expected to result in liability to
NewCorp.
(8) Funded Status of Plans. Except as disclosed in Section 4.1(l)(8) of
the ONEOK Disclosure Schedule, (A) each ONEOK Pension Benefit Plan has been
maintained in compliance with the minimum funding standards of ERISA and
the Code, (B) no ONEOK Pension Benefit Plan has incurred any "accumulated
funding deficiency" (within the meaning of Section 302 of ERISA or Section
412 of the Code) and (C) all required payments to the PBGC with respect to
each ONEOK Pension Benefit Plan have been made on or before their due
dates, in each case with respect to ONEOK Pension Benefit Plans which would
reasonably be expected to result in liability to ONEOK or any ONEOK
Subsidiary. Except as disclosed in Section 4.1(l)(8) of the ONEOK
Disclosure Schedule, neither ONEOK nor any of its Subsidiaries has
provided, or is required to provide, security to any ONEOK Pension Benefit
Plan pursuant to Section 401(a)(29) of the Code.
(9) Multiemployer Plans. Except as disclosed in Section 4.1(l)(9) of the
ONEOK Disclosure Schedule, no ONEOK Benefit Plan is a "multiemployer plan"
(within the meaning of Section 4001(a)(3) of ERISA), a multiple employer
plan described in Section 413(c) of the Code or a "multiple employer
welfare arrangement" (within the meaning of Section 3(40) of ERISA); and
none of ONEOK or any ONEOK Affiliate is obligated to contribute to, has
incurred or is expected to incur any withdrawal liability or has had any
liability under Title IV of ERISA with respect to, or any liability in
connection with the reorganization or termination of, any multiemployer
plan, multiple employer plan, or multiple employer welfare arrangement.
(10) Modification or Termination of Plans. Except as disclosed in Section
4.1(l)(10) of the ONEOK Disclosure Schedule or as required pursuant to a
collective bargaining agreement or as required to secure a favorable
determination letter from the IRS, neither ONEOK nor any ONEOK Affiliate is
subject to any legal obligation, or has any formal plan, to enter into any
form of material compensation or employment agreement or to establish any
employee benefit plan of any nature, including (without limitation) any
pension, profit sharing, welfare, post-retirement welfare, stock option,
stock or cash award, non-qualified deferred compensation or executive
compensation plan, policy or practice or to modify or change any existing
ONEOK Benefit Plan and, to the knowledge of ONEOK, there has been no
communication to employees by ONEOK or any ONEOK Affiliate that would
reasonably be expected to promise or guarantee such employees retiree
health or life insurance benefits on a permanent basis.
(11) Reportable Events; Claims. Except as disclosed in Section 4.1(l)(11)
of the ONEOK Disclosure Schedule:
a. No Reportable Event has occurred with respect to any ONEOK Pension
Benefit Plan that would reasonably be expected to result in a liability
to ONEOK, and
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b. No liability, claim, action or litigation exists, has been made,
commenced or, to the actual knowledge of ONEOK, threatened, by or
against ONEOK or any ONEOK Affiliate with respect to any ONEOK Benefit
Plan (other than for benefits or PBGC premiums payable in the ordinary
course) that would reasonably be expected to result in a liability to
ONEOK, and
c. The PBGC has not instituted proceedings to terminate any ONEOK
Pension Benefit Plan, and, to the knowledge of ONEOK, no condition
exists that presents a likely risk that such proceedings will be
instituted.
(m) Labor Matters. Except as set forth in Section 4.1(m) of the ONEOK
Disclosure Schedule or the ONEOK SEC Documents:
(1) Neither ONEOK nor any of its Subsidiaries is a party to, or bound by,
any collective bargaining agreement or other current labor agreement with
any labor union or organization, and there is no current union
representation question involving employees of ONEOK or any of its
Subsidiaries, nor does ONEOK or its Subsidiaries have knowledge of any
activity or proceeding of any labor organization (or representative
thereof) or employee group (or representative thereof) to organize or
threaten to organize any such employees;
(2) There is no unfair labor practice charge or grievance arising out of
a collective bargaining agreement or other grievance procedure against
ONEOK or any of its Subsidiaries pending, or, to the knowledge of ONEOK or
its Subsidiaries, threatened, that would have a Material Adverse Effect on
ONEOK;
(3) There is no strike, dispute, slowdown, work stoppage or lockout
pending or, to the knowledge of ONEOK or its Subsidiaries, threatened,
against or involving ONEOK or any of its Subsidiaries that would have a
Material Adverse Effect on ONEOK; and
(4) ONEOK and each of its Subsidiaries is in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health, except for non-compliance that would not have a Material Adverse
Effect on ONEOK.
(n) Intangible Property. ONEOK and its Subsidiaries possess or have adequate
rights to use all trademarks, trade names, patents, service marks, brand
marks, brand names, computer programs, databases, industrial designs and
copyrights necessary for the operation of the businesses of each of ONEOK and
its Subsidiaries (collectively, the "ONEOK Intangible Property"), except where
the failure to possess or have adequate rights to use such properties would
not have a Material Adverse Effect on ONEOK.
(o) Environmental Matters.
(1) Definitions. For purposes of this Agreement:
a. "Environmental Claims" means, with respect to any person, (x) any
and all administrative, regulatory or judicial actions, suits, demands,
demand letters, directives, claims, Liens, investigations, proceedings
or notices of non-compliance or violation in writing by or from any
person or entity (including any Governmental Entity), or (y) oral
notification provided by a Governmental Entity that written action of
the type described in the foregoing clause is in process, which (in
case of either (x) or (y)) alleges potential liability (including,
without limitation, potential liability for enforcement, investigatory
costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages, personal
injuries or penalties) arising out of, based on or resulting from (1)
the presence, or Release (as such term is hereinafter defined) or
threatened Release into the environment, of any Hazardous Materials (as
such term is hereinafter defined) at any location, whether or not
owned, operated, leased or managed by ONEOK or any of its Subsidiaries
(for purposes of Section 4.1(o)) or by WRI or any of its Subsidiaries
(for purposes of Section 4.2(p)), (2) pollution, protection of the
environment and human health or safety from the effects of Hazardous
Materials,
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health or safety of employees or sanitation, (3) circumstances forming
the basis of any violation, or alleged violation, of any Environmental
Law (as hereinafter defined), or (4) any and all claims by any third
party seeking damages, civil or criminal fines or penalties,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence, Release, manufacture,
processing, distributing, use, treatment, storage, disposal, transport
or handling of any Hazardous Materials.
b. "Environmental Laws" means all federal, state and local laws,
rules, regulations and guidances, as well as common law causes of
action or contractual obligations, relating to pollution or the
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata), including, without limitation, laws and regulations
relating to Releases or threatened Releases of Hazardous Materials or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials.
c. "Hazardous Materials" means (x) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid containing
polychlorinated biphenyls, (y) any chemicals, materials, substances or
wastes which are now defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances" or "toxic pollutants," or words of similar import, under
any applicable Environmental Law, and (z) any other chemical, material,
substance or waste, exposure to which is now prohibited, limited or
regulated under any applicable Environmental Law in a jurisdiction in
which ONEOK or any of its Subsidiaries operates (for purposes of
Section 4.1(o)) or in which WRI or any of its Subsidiaries operates
(for purposes of Section 4.2(p)).
d. "Release" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, subsurface, surface water, groundwater or property.
(2) Compliance.
a. To the actual knowledge of the executive officers of ONEOK and the
officer or employee of ONEOK with responsibility for environmental
matters, after due inquiry, except as set forth in the ONEOK SEC
Documents or Section 4.1(o)(2)(a) of the ONEOK Disclosure Schedule,
ONEOK and each of its Subsidiaries is in compliance with all applicable
Environmental Laws, except where the failure to be so in compliance
would not have a Material Adverse Effect on ONEOK.
b. To the actual knowledge of the executive officers of ONEOK and the
officer or employee of ONEOK with responsibility for environmental
matters, after due inquiry, except as set forth in the ONEOK SEC
Documents or Section 4.1(o)(2)(b) of the ONEOK Disclosure Schedule,
neither ONEOK nor any of its Subsidiaries has received any
Environmental Claim from any person or Governmental Entity that alleges
that ONEOK or any of its Subsidiaries is not in compliance with
applicable Environmental Laws, except where the failure to be so in
compliance would not have a Material Adverse Effect on ONEOK.
c. Except as set forth in Section 4.1(o)(2)(c) of the ONEOK
Disclosure Schedule, to the actual knowledge of the executive officers
of ONEOK and the officer or employee of ONEOK with responsibility for
environmental matters, after due inquiry, neither ONEOK nor any of its
Subsidiaries has used any waste disposal site, or otherwise disposed
of, transported, or arranged for the transportation of, any Hazardous
Materials to any place or location, in violation of any Environmental
Laws.
(3) Environmental Permits. To the actual knowledge of the executive
officers of ONEOK and the officer or employee of ONEOK with responsibility
for environmental matters, after due inquiry, except as set forth in the
ONEOK SEC Documents or Section 4.1(o)(3) of the ONEOK Disclosure Schedule,
ONEOK
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and each of its Subsidiaries has obtained or applied for all environmental,
health and safety permits and authorizations (collectively, "Environmental
Permits") necessary for the construction of their facilities and the
operation of their respective businesses, as presently conducted and for
the use, storage, treatment, transportation, release, emission and disposal
of raw materials, by-products, wastes and other substances used or produced
by or otherwise relating to its business, and all such permits are in good
standing and in all material respects in full force and effect or, where
applicable, a renewal application has been timely filed, is pending and
agency approval is expected to be obtained, and ONEOK and its Subsidiaries
are in compliance in all material respects with all terms and conditions of
all such Environmental Permits and are not required to make any expenditure
in order to obtain or renew any Environmental Permits necessary for the
operation of their respective businesses, as presently conducted, except
where the failure to obtain or be in compliance with such Environmental
Permits and the requirement to make such expenditures would not have a
Material Adverse Effect on ONEOK
(4) Environmental Claims. To the actual knowledge of the executive
officers of ONEOK and the officer or employee of ONEOK with responsibility
for environmental matters, after due inquiry, except as set forth in the
ONEOK SEC Documents or Section 4.1(o)(4) of the ONEOK Disclosure Schedule,
there is no Environmental Claim pending or, to the actual knowledge of the
executive officers of ONEOK and the officer or employee of ONEOK with
responsibility for environmental matters, threatened:
a. against ONEOK or any of its Subsidiaries,
b. against any person or entity whose liability for such
Environmental Claim ONEOK or any of its Subsidiaries has retained or
assumed, either contractually or by operation of law, or
c. against any real or personal property or operations that ONEOK or
any of its Subsidiaries owns, leases or manages, in whole or in part,
that, in the case of a, b or c, if adversely determined, would have a
Material Adverse Effect on ONEOK.
(5) Releases. To the actual knowledge of the executive officers of ONEOK
and the officer or employee of ONEOK with responsibility for environmental
matters, after due inquiry, except as set forth in the ONEOK SEC Documents
or Section 4.1(o)(5) of the ONEOK Disclosure Schedule, and except for
Releases of Hazardous Materials the liability for which would not have a
Material Adverse Effect on ONEOK, ONEOK and its Subsidiaries have not
caused any Release of any Hazardous Materials at any place or property,
including, but not limited to, properties owned, leased or occupied by
ONEOK or any Subsidiary of ONEOK or any predecessor of ONEOK or any
Subsidiary of ONEOK, nor has it transported or arranged for the
transportation of any Hazardous Materials to any place or property where a
Release has occurred or allegedly has occurred, where such transportation
or arrangement has had, or would have, a Material Adverse Effect on ONEOK.
(6) Underground Storage Tanks or Surface Impoundments. To the actual
knowledge of the executive officers of ONEOK and the officer or employee of
ONEOK with responsibility for environmental matters, after due inquiry,
except as set forth in Section 4.1(o)(6) of the ONEOK Disclosure Schedule,
there are no underground storage tanks or surface impoundments at, on,
under or within any real property owned, leased or occupied by ONEOK or any
of its Subsidiaries, or any portion thereof, other than those liabilities
which would not have a Material Adverse Effect on ONEOK.
(p) Insurance. ONEOK and its Subsidiaries maintain insurance coverage as is
customary for the industry in which ONEOK and each of its Subsidiaries
operates, respectively (taking into account the cost and availability of such
insurance), and the Transactions and the other transactions contemplated
hereby and by the Ancillary Documents will not materially adversely affect
such coverage. All such insurance policies are with reputable insurance
carriers. There are no claims pending under any of such policies as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or in respect of which such underwriters have reserved their rights,
except for claims that would not have a Material Adverse Effect on ONEOK. All
premiums payable under all such policies have been paid and ONEOK and its
Subsidiaries have otherwise complied fully with the terms and conditions of
all such policies.
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(q) Contracts.
(1) Except as set forth in Section 4.1(q)(1) of the ONEOK Disclosure
Schedule, neither ONEOK nor any of its Subsidiaries is a party to or bound
by any Material Contract. "Material Contract" shall mean any contract or
obligation pursuant to which any party thereto would be required to pay
$5,000,000 or more. Except as set forth in Section 4.1(q)(1) of the ONEOK
Disclosure Schedule, all Material Contracts are in full force and effect,
and each of ONEOK and its Subsidiaries which is a party to or bound by such
Material Contract has performed its obligations thereunder as of the
Original Execution Date and, to the knowledge of ONEOK and its
Subsidiaries, each other party thereto has performed its obligations
thereunder as of the Original Execution Date, other than any failure of a
Material Contract to be in full force and effect or any nonperformance
thereof that would not have a Material Adverse Effect on ONEOK.
(2) Neither ONEOK nor any of its Subsidiaries engages in any natural gas
or other futures or options trading or is a party to any price swaps,
hedges, futures or similar instruments, except for transactions and
agreements entered into or hedge contracts for the purchase or sale of
hydrocarbons to which ONEOK or any of its Subsidiaries is a party which are
commercially reasonable and in accordance with the general practices of
other similarly situated companies in the industry.
(3) Neither ONEOK nor any of its Subsidiaries have been given notice of
any default under, or action to alter, terminate, rescind or procure a
judicial reformation of, any material provisions of any Material Contract.
(4) (i) Section 4.1(q)(4)(i) of the ONEOK Disclosure Schedule sets forth
a list of (a) all Gas purchase contracts which are Material Contracts, (b)
all gathering, exchange and transportation contracts which are Material
Contracts, and (c) all other contracts relating to Gas supply and
transportation which are Material Contracts, in each case, to the extent
ONEOK or any of its Subsidiaries is a party thereto, (collectively, the
"ONEOK Gas Contracts").
(ii) Except as set forth in Section 4.1(q)(4)(ii) of the ONEOK Disclosure
Schedule, (a) all ONEOK Gas Contracts to which ONEOK or any of its
Subsidiaries is a party have been approved or reviewed by the OCC to the
extent such approval or review is required, (b) all costs under the ONEOK
Gas Contracts are currently being passed through to the customers and (c)
ONEOK and its Subsidiaries have no reason to believe that (a) and (b) will
not continue in the future.
(r) Regulatory Proceedings. Except as set forth in the ONEOK SEC Documents
or in Section 4.1(r) of the ONEOK Disclosure Schedule, other than purchase gas
adjustment provisions, neither ONEOK nor any of its Subsidiaries all or part
of whose rates or services are regulated by a Governmental Entity (i) has
rates which have been or are being collected subject to refund, pending final
resolution of any rate proceeding pending before a Governmental Entity or on
appeal to the courts or (ii) is a party to any rate proceeding before a
Governmental Entity or on appeal from orders of a Governmental Entity which
could result in orders having a Material Adverse Effect on ONEOK.
(s) Regulation as a Utility.
(1) Neither ONEOK nor any of its Subsidiaries is a "holding company," a
"subsidiary company" or an "affiliate" of any public utility company (other
than ONEOK) within the meaning of Section 2(a)(7), 2(a)(8) or 2(a)(11) of
the 1935 Act, respectively, and none of the Subsidiaries of ONEOK is a
"public utility company" within the meaning of Section 2(a)(5) of the 1935
Act.
(2) ONEOK and certain of its Subsidiaries are regulated as public
utilities in the State of Oklahoma and in no other state. Neither ONEOK nor
any "subsidiary company" or "affiliate" (as each such term is defined in
any relevant statute, rule or regulations) of ONEOK is subject to
regulation as a public utility or public service company (or similar
designation) by any other state in the United States or any foreign
country.
(t) Opinion of Financial Advisor. The Board of Directors of ONEOK has
received the opinion of PaineWebber Incorporated to the effect that, as of
December 11, 1996, the date on which the Board of Directors of ONEOK approved
the Transactions, the Transactions are fair to ONEOK and its shareholders from
a financial point of view.
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(u) Vote Required. The ONEOK Stockholder Approval is the only vote of the
holders of any class or series of capital stock of ONEOK necessary to approve
this Agreement, the Transactions and the other transactions contemplated
hereby.
(v) Beneficial Ownership of WRI Common Stock. Neither ONEOK nor any of its
Subsidiaries "beneficially owns" (as defined in Rule 13d-3 under the Exchange
Act) any outstanding shares of WRI Common Stock.
(w) Brokers. Except for the fees and expenses payable to PaineWebber
Incorporated, which fees are reflected in its agreement with ONEOK, no broker,
investment banker or other person is entitled to any broker's, finder's or
other similar fee or commission in connection with the negotiations leading to
this Agreement or the consummation of the Transactions or the other
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of ONEOK or any of its Subsidiaries.
(x) Related Party Transactions. There are no contracts, arrangements or
transactions in effect between ONEOK or any of its Subsidiaries, on the one
hand, and any officer, director or 5% stockholder of ONEOK, or any Affiliate
or immediate family member of any of the foregoing persons, on the other hand,
except as set forth in Section 4.1(x) of the ONEOK Disclosure Schedule.
(y) Takeover Provisions. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation (each a
"Takeover Statute") or any applicable anti-takeover provision in ONEOK's
certificate of incorporation or bylaws, as amended, is, or at the Merger
Effective Time will be, applicable to ONEOK, the shares of ONEOK's capital
stock, the Merger or the other transactions contemplated by this Agreement or
any of the Ancillary Documents. The Board of Directors of ONEOK has taken all
action necessary so that WRI will not become an "Interested Stockholder"
within the meaning of Section 203 of the DGCL.
(z) Rights Plan. ONEOK has taken such action as may be necessary to provide
under the ONEOK Rights Agreement that WRI shall not be deemed an Acquiring
Person (as defined therein), the Distribution Date (as defined therein) shall
not be deemed to occur, and the Rights will not separate from ONEOK's shares
of capital stock, as a result of entering into this Agreement or consummating
the Merger and/or the other transactions contemplated hereby or by any of the
Ancillary Documents.
(aa) Title to Properties.
(1) ONEOK and its Subsidiaries, individually or together, have good and
sufficient title to all of the assets that they purport to own, including
all of the properties and assets reflected in the balance sheet as of
August 31, 1996, included in the ONEOK Balance Sheet, and all properties
and assets purchased or otherwise acquired since August 31, 1996. Such
assets are sufficient to enable ONEOK and its Subsidiaries to conduct the
business of ONEOK or its Subsidiaries as currently conducted without
material interference, free and clear of Liens, other than Permitted Liens.
ONEOK and its Subsidiaries, individually or together, hold under valid
lease agreements all of their real and personal properties reflected in the
ONEOK Balance Sheet, and all real and personal property that is subject to
the operating leases to which reference is made in the notes to the ONEOK
Balance Sheet, and enjoy peaceful and undisturbed possession of such
properties under such leases, other than any properties as to which such
leases will have terminated in the ordinary course since the date of the
ONEOK Balance Sheet. None of ONEOK, its Subsidiaries or any of their
predecessors has received any written notice of any adverse claim to the
title to any properties owned by them or with respect to any lease under
which any properties are held by them, other than any claims that,
individually or in the aggregate, would not have a Material Adverse Effect
on ONEOK. For the purposes hereof, the term "Lien" shall mean any mortgage,
pledge, security interest, encumbrance, lien, claim, condition, equity
interest, option, right of first refusal, charge or restriction of any kind
(including any agreement to give any of the foregoing), any conditional
sale or other title retention agreement, any lease in the nature thereof or
the filing of or agreement to give any financing statement under the
Uniform
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Commercial Code of any jurisdiction, and the term "Permitted Liens" shall
mean (i) Liens for taxes and assessments, general and special, not yet due
and payable, and (ii) Liens, encumbrances and other defects which,
individually or in the aggregate, do not and will not materially interfere
with or impair the continued ownership, possession, use or operation of the
assets as such assets are used in the business of ONEOK or the Gas
Business, as applicable.
(2) Neither ONEOK nor any of its Subsidiaries is in violation of the
terms of any Easement except any such violations that, individually or in
the aggregate, would not have a Material Adverse Effect on ONEOK. Except as
would not have a Material Adverse Effect on ONEOK, all Easements in favor
of ONEOK are valid and enforceable and grant the rights purported to be
granted thereby and all rights necessary thereunder for the operation of
the business of ONEOK. Except as would not have a Material Adverse Effect
on ONEOK, to the knowledge of ONEOK, there are no spatial gaps in the
Easements in favor of ONEOK that would have a Material Adverse Effect on
ONEOK and all parts of the pipeline assets which constitute a portion of
the assets of ONEOK and its Subsidiaries are located either on property
which is owned in fee by ONEOK or its Subsidiaries or on property which is
subject to an Easement in favor of ONEOK or its Subsidiary.
(ab) Condition of Assets. To the knowledge of ONEOK and its Subsidiaries,
the buildings, plants, structures, and equipment of ONEOK and its Subsidiaries
are structurally sound, are in good operating condition and repair, and are
adequate for the uses to which they are being put, and none of such buildings,
plants, structures, or equipment is in need of maintenance or repairs except
for ordinary, routine maintenance and repairs that are not material in nature
or cost.
(ac) Accounts Receivable. All Accounts Receivable of ONEOK represent or will
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of the business of ONEOK. Unless
paid prior to the Closing, the Accounts Receivable are or will be, as of the
Closing, collectible, subject only to allowance for doubtful accounts, and
calculated consistently with past practice. There is no contest, claim or
right of set-off, under any contract or with any obligor of an Account
Receivable relating to the amount or validity of such Accounts Receivable,
which would have a Material Adverse Effect on ONEOK.
4.2 Representations and Warranties of WRI. WRI and, solely to the extent of
representations and warranties concerning NewCorp, NewCorp represents and
warrants to ONEOK as follows, except as set forth in the disclosure schedule
signed by an authorized officer of WRI and delivered to ONEOK by WRI (the "WRI
Disclosure Schedule") on the Amendment Date, each of which exceptions shall
specifically identify the relevant Section hereof to which it relates:
(a) Organization, Standing and Power. Each of WRI, Westar, MCMC and the
Significant Subsidiaries of Westar and MCMC is, and NewCorp as of the Closing
will be, a corporation duly organized, validly existing and in good standing
under the laws of its respective state of incorporation or organization, and
has, and NewCorp as of the Closing will, subject to the satisfaction of the
closing conditions, have, all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
and is, and NewCorp as of the Closing will be, duly qualified and in good
standing to do business in each jurisdiction in which the business it is
conducting, or the operation, ownership or leasing of its properties, makes
such qualification necessary, other than in such jurisdictions where the
failure so to qualify would not have a Material Adverse Effect on the Gas
Business. WRI has heretofore delivered to ONEOK complete and correct copies of
its articles of incorporation and bylaws, as amended as of the Original
Execution Date. WRI has heretofore delivered to ONEOK complete and correct
copies of the certificate of incorporation and bylaws of each of Westar and
MCMC each, as amended and in full force and effect as of the Original
Execution Date.
(b) Capital Structure. Subject to the provisions of the Shareholder
Agreement, upon the consummation of the Transactions, on a fully diluted basis
after giving effect to the Transactions and based on the number of shares of
ONEOK Common Stock outstanding as of December 12, 1996, (i) 2,996,702 shares
of NewCorp Common Stock will be issued and outstanding and owned by WRI and
the remaining then outstanding shares of NewCorp Common Stock shall constitute
the Stock Consideration issued and/or issuable to the shareholders of
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ONEOK pursuant to Article III and (ii) 19,317,584 shares of Series A
Convertible Preferred Stock will be issued and outstanding and owned by WRI.
As of the Original Execution Date, the authorized capital stock of Westar
consists of 1,000 shares of common stock, without par value, of which 1,000
shares of common stock are issued and outstanding and owned by Westar Energy
Inc., a wholly-owned Subsidiary of WRI. As of the Original Execution Date, the
authorized capital stock of MCMC consists of 1,000 shares of common stock,
without par value, of which 1,000 shares of common stock are issued and
outstanding and owned by WRI. All issued and outstanding shares of the
Transferred Stock are validly issued, fully paid and nonassessable and are not
subject to preemptive rights. Upon the contribution by WRI of the Transferred
Stock to NewCorp at the Closing, pursuant to the Transfer Documents, NewCorp
will own the Transferred Stock, free and clear of all Liens.
(c) Sufficiency of Assets. Except as disclosed in Section 4.2(c) of the WRI
Disclosure Schedule, the Assets to be contributed to NewCorp pursuant to the
Asset Transaction will constitute all of the assets and properties of WRI and
its Subsidiaries (other than the Excluded Assets) that are primarily used in,
or primarily related to, or primarily generated by the field operations of the
Gas Business as conducted by WRI immediately prior to the Asset Transaction.
(d) Authority; No Violations; Consents and Approvals.
(1) The Board of Directors of WRI has approved the Merger and this
Agreement. WRI has and will have all requisite corporate power and
authority to enter into this Agreement and the Ancillary Documents to the
extent it is a party thereto, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and each Ancillary
Document to which WRI is a party, the performance of obligations hereunder
and thereunder by WRI and the consummation of the Transactions and the
other transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of WRI. This
Agreement has been duly executed and delivered by WRI and constitutes, and
the Ancillary Documents to which WRI is a party when executed and delivered
by WRI, will constitute, valid and binding obligations of WRI, enforceable
against WRI in accordance with their respective terms, subject, in each
case, as to enforceability, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors'
rights and to general principles of equity (assuming such documents
constitute a valid and binding obligation on the other parties thereto).
(2) As of the Amendment Date, (i) the Board of Directors and shareholders
of NewCorp have approved the Transactions and this Agreement, (ii) NewCorp
has all requisite corporate power and authority to enter into this
Agreement and the Ancillary Documents to the extent that it is a party
thereto, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby, (iii) the
execution and delivery of this Agreement and each Ancillary Document to
which NewCorp is a party, the performance of obligations hereunder and
thereunder by NewCorp and the consummation of the Transactions and the
other transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of NewCorp. As of
the Amendment Date, this Agreement has been duly executed and delivered by
NewCorp and constitutes, and the Ancillary Documents to which NewCorp is a
party when executed and delivered by NewCorp, will constitute, valid and
binding obligations of NewCorp, enforceable against NewCorp in accordance
with their respective terms, subject, in each case, as to enforceability,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity (assuming such documents constitute a valid and
binding obligation on the other parties thereto).
(3) The execution and delivery of this Agreement and the Ancillary
Documents to which WRI and/or NewCorp is a party do not, and the
consummation of the Transactions and the other transactions contemplated
hereby and thereby and compliance with the provisions hereof and thereof
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or change the rights or
obligations of any party under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Gas Business under, any provision of (A) the
certificates of
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incorporation or bylaws of WRI, Westar and MCMC, as amended, or the
certificate of incorporation or bylaws of NewCorp as they may be amended at
the Closing, or any provision of the charters or organizational documents
of any of the respective Subsidiaries of Westar or MCMC, (B) subject to
obtaining the third-party consents set forth in Section 4.2(d)(3) of the
WRI Disclosure Schedule and the assignments of contracts, in the manner
contemplated by Section 1.6 of this Agreement (the "WRI Required
Consents"), any loan or credit agreement, note, bond, mortgage, indenture,
lease or other material agreement, instrument, permit, franchise or license
applicable to WRI with respect to the Gas Business and/or the Transferred
Subsidiaries, or (C) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in Section 4.2(d)(4) are
duly and timely obtained or made, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to WRI or, at the Amendment
Date or the Closing, NewCorp with respect to the Gas Business and/or any of
the Transferred Subsidiaries or any of their respective properties or
assets, other than, in the case of clause (B) or (C), any such conflicts,
violations, defaults, rights or Liens, that, individually or in the
aggregate, would not have a Material Adverse Effect on the Gas Business,
materially impair the ability of WRI or NewCorp to perform its obligations
hereunder or under any Ancillary Document to which WRI and/or NewCorp is a
party or prevent the consummation of any of the Transactions and the other
transactions contemplated hereby or thereby.
(4) Except as set forth in Section 4.2(d)(4) of the WRI Disclosure
Schedule, no notice, report, consent, approval, order or authorization of,
or registration, declaration or filing with, or permit from any
Governmental Entity is required by or with respect to WRI relating to the
Gas Business and/or any of the Transferred Subsidiaries or, as of the
Closing, NewCorp in connection with the execution and delivery by WRI
and/or NewCorp of this Agreement or any Ancillary Document to which WRI
and/or NewCorp is a party, or the consummation by WRI and/or NewCorp of the
Transactions and the other transactions contemplated hereby or thereby, as
to which the failure to obtain or make would have a Material Adverse Effect
on the Gas Business or prevent or materially burden or materially impair
the ability of WRI, NewCorp or the Transferred Subsidiaries to consummate
the transactions contemplated by this Agreement, except for: (A) the filing
of a premerger notification report by WRI under the HSR Act and the
expiration or termination of the applicable waiting period with respect
thereto; (B) the filing with the SEC of the Form S-4, such reports under
Section 13(a) of the Exchange Act and such other compliance with the
Securities Act and the Exchange Act and the rules and regulations
thereunder as may be required in connection with this Agreement and the
Transactions and the other transactions contemplated hereby, and the
obtaining from the SEC of such orders as may be so required; (C) a filing
for a determination by the SEC or its Staff in the form of an order or a
no-action letter that WRI will not be a holding company under Section
2(a)(7) of the 1935 Act for the purposes of the 1935 Act as a result of the
Merger and the obtaining of such an order or no-action letter from the SEC
or its Staff to such effect; (D) the approval of the Merger by the SEC
under Section 9(a)(2) of the 1935 Act; (E) filings with, and the approvals
of, or notices to, the KCC and the OCC; (F) in the case of NewCorp, the
filing of the Certificate of Merger with the Secretary of State of the
State of Oklahoma; (G) filings with, and approval of, the New York Stock
Exchange ("NYSE") in connection with the listing of the NewCorp Common
Stock; (H) such filings and approvals as may be required by any applicable
state securities, "blue sky" or takeover laws; (I) such filings and
approvals as may be required in connection with the transfer of WRI's
municipal franchises with respect to the Gas Business; and (J) such filings
and approvals as may be required by any other premerger notification,
securities, corporate or other law, rule or regulation.
(e) SEC and Other Documents.
(1) WRI has made available to ONEOK a true and complete copy of each Form
10-K and Form 10-Q filed by WRI with the SEC since January 1, 1994 and
prior to the Original Execution Date (the "WRI SEC Documents"). As of their
respective dates, the WRI SEC Documents as they relate to the Gas Business
complied in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations
of the SEC thereunder applicable to such WRI SEC Documents, and none of the
WRI SEC Documents as they relate to the Gas Business contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the
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statements therein, in light of the circumstances under which they were
made, for the applicable periods, not misleading.
(2) The audited financial statements of the Gas Business included as
Exhibit B hereto for the three years ended August 31, 1996, 1995 and 1994
and the unaudited financial statements of the Gas Business for the six-
month period ended February 28, 1997 (the "Consolidated Financial
Information of the Gas Business") were prepared, consistent with WRI's past
practices, based upon the books and records of WRI, and fairly present, in
all material respects, as they relate to the Assets of the Gas Business,
the matters indicated therein. Section 4.2(e)(2) of the WRI Disclosure
Schedule specifies all accounting principles utilized in connection with
the preparation of the Consolidated Financial Information of the Gas
Business which are not in conformity with GAAP. Except as disclosed in the
WRI SEC Documents, there are no agreements, arrangements or understandings
with respect to the Gas Business between WRI or the Transferred
Subsidiaries and any party who is at the Original Execution Date or was at
the time prior to the Original Execution Date but after January 1, 1996 an
Affiliate of WRI or the Transferred Subsidiaries that are required to be
disclosed in the WRI SEC Documents.
(3) WRI has delivered to ONEOK a true and correct copy of WRI's FERC Form
2 for the years ended December 31, 1995, December 31, 1994, and December
31, 1993, required to be filed with the OCC and KCC, which includes the
appropriate Supplement containing certain financial information related to
the gas utility business of WRI (the "Financial Information Statements").
The Financial Information Statements: (i) have been prepared, consistent
with WRI's past practices, based upon the books and records of WRI, and
(ii) fairly present, in all material respects, the matters indicated for
the periods indicated therein, in conformity with the regulations of the
OCC, KCC and the FERC (subject to normal recurring adjustments, none of
which are material). WRI has also delivered to ONEOK the unaudited PP&E
Schedules "Intangible Personal Property; Regulatory Assets; Miscellaneous
Debits," and "Gas Pipelines and Plants," in each case relating to the gas
utility business as of September 30, 1996 (together, the "PP&E Schedules").
The PP&E Schedules: (i) have been prepared consistent with WRI's past
practices based on the books and records of WRI, and (ii) fairly present,
in all material respects, the matters indicated, as of the date indicated
(subject to normal recurring adjustments, none of which are material). The
financial records, ledgers and subledgers, account books and other
accounting records of WRI relating to the Gas Business have been maintained
in accordance with good business practice and are current, complete,
accurate and correct, except for normal month end adjustments, in all
material respects.
(4) The unaudited financial information of Westar and MCMC delivered to
ONEOK were prepared consistent with WRI's past practices, based upon the
books and records of WRI and the Transferred Subsidiaries, and fairly
present, in all material respects, the matters indicated therein. Section
4.2(e)(4) of the WRI Disclosure Schedule specifies all accounting
principles utilized in connection with the preparation of the financial
information of Westar and MCMC which are not in conformity with GAAP.
(f) Information Supplied. None of the information supplied or to be supplied
by WRI or NewCorp for inclusion or incorporation by reference in the Form S-4
will, at the time the Form S-4 becomes effective under the Securities Act or
at the Merger Effective Time, contain any 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, in light of the circumstances under which they
were made, not misleading, and none of the information supplied or to be
supplied by WRI or NewCorp and included or incorporated by reference in the
Proxy Statement will, at the date mailed to the shareholders of ONEOK or at
the time of the meeting of such shareholders to be held in connection with the
Merger or at the Merger Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior
to the Merger Effective Time any event with respect to the Gas Business, or
with respect to other information supplied by WRI or NewCorp for inclusion in
the Proxy Statement or the Form S-4, shall occur which is required to be
described in an amendment of, or a supplement to, the Proxy Statement or the
Form S-4, such event shall be so described, and such amendment or supplement
shall be promptly filed with the SEC.
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(g) Absence of Certain Changes or Events. Except (I) as disclosed in, or
reflected in the financial statements included in, the WRI SEC Documents
and/or Section 4.2(g) of the WRI Disclosure Schedule, (II) as contemplated by
this Agreement, or (III) for transactions effected or actions taken by WRI or
the Transferred Subsidiaries after the Original Execution Date without
breaching the terms hereof in the case of clauses (iii) through (viii) below,
since August 31, 1996, the Gas Business has been conducted in the ordinary
course of business consistent with past practice, and since August 31, 1996
there has not been: (i) any event or events which, individually or in the
aggregate have had or would have a Material Adverse Effect on the Gas
Business; (ii) any amendment of any material term of any outstanding equity
security or the respective certificates of incorporation or bylaws of Westar
or MCMC; (iii) any non-cash dividend or distribution by Westar or MCMC or any
repurchase, redemption or other acquisition by Westar or MCMC of any
outstanding shares of capital stock or other equity securities of, or other
ownership interests in, Westar or MCMC or any Significant Subsidiary of Westar
or MCMC; (iv) any material change in any method of accounting or accounting
practice by WRI relating to the Gas Business and the Transferred Subsidiaries;
(v) any increase in the salaries or other compensation payable to any officer
or employee of WRI relating to the Gas Business or any of the Transferred
Subsidiaries (except for normal increases in the ordinary course of business
consistent with past practice) or any increase in, or addition to, other
benefits to which any such officer or employee may be entitled (except as
required by the terms of plans as in effect on the Original Execution Date or
as required by law); (vi) any Material Adverse Change or threat of a Material
Adverse Change in the relations of WRI relating to the Gas Business or the
Transferred Subsidiaries with, or any loss or, to the knowledge of WRI, threat
of loss of, any of the material suppliers or customers of the Gas Business or
the Transferred Subsidiaries, except to the extent such loss does not and
would not have a Material Adverse Effect on the Gas Business; (vii) any
termination, cancellation or waiver of any contract or other right material to
the operation of the Gas Business taken as a whole, except to the extent such
termination, cancellation or waiver does not and would not have a Material
Adverse Effect on the Gas Business; or (viii) any other transaction,
commitment, dispute or other event or condition (financial or otherwise) of
any character (whether or not in the ordinary course of business) that does
have or would have a Material Adverse Effect on the Gas Business.
(h) No Undisclosed Material Liabilities. Except as disclosed in the WRI SEC
Documents and/or Section 4.2(h) of the WRI Disclosure Schedule, to the
knowledge of WRI, WRI with respect to the Gas Business and the Transferred
Subsidiaries do not have any liabilities or obligations, including
Environmental Claims, of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and whether or not required
to be disclosed, nor are there any facts or circumstances of which WRI has or
the Transferred Subsidiaries have knowledge that could result in obligations
or liabilities of WRI, the Transferred Subsidiaries or any of their
Affiliates, that have or would have a Material Adverse Effect on the Gas
Business, other than: (i) liabilities adequately provided for in the
Consolidated Financial Information of the Gas Business; and (ii) liabilities
under this Agreement or the Ancillary Documents.
(i) No Default. With respect to the Gas Business, neither WRI nor any of the
Transferred Subsidiaries is in default or violation (and no event has occurred
which, with notice or the lapse of time or both, would constitute a default or
violation) of any term, condition or provision of (i) their respective
charters, bylaws or other respective organizational documents, (ii) any
material note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which WRI or any of the Transferred Subsidiaries
is now a party or by which WRI or any of the Transferred Subsidiaries or any
of their respective properties or assets may be bound, or (iii) any order,
writ, injunction, decree, statute, rule or regulation applicable to WRI or any
of the Transferred Subsidiaries, except in the case of (ii) and (iii) for
defaults or violations which in the aggregate do not and would not have a
Material Adverse Effect on the Gas Business.
(j) Compliance with Applicable Laws. Except as specifically addressed in
other representations in this Section 4.2 or as disclosed in, or reflected in
the financial statements included in, the WRI SEC Documents, or as disclosed
or reflected in the Consolidated Financial Information of WRI and/or as set
forth in Section 4.2(j) of the WRI Disclosure Schedule, WRI and the
Transferred Subsidiaries hold, and subject to the terms of this Agreement and
the Ancillary Documents, will transfer, to the extent transferable, to NewCorp
on or before the Closing, all permits, licenses, variances, exemptions,
orders, franchises and approvals of all Governmental Entities necessary for
the lawful conduct of the Gas Business (the "WRI Permits"), except where the
failure so to hold does not and would not have a Material Adverse Effect on
the Gas Business. Except as disclosed in, or
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reflected in the financial statements included in, the WRI SEC Documents, or
as disclosed or reflected in the Consolidated Financial Information of WRI
and/or as set forth in Section 4.2(j) of the WRI Disclosure Schedule, WRI and
the Transferred Subsidiaries are in compliance with the terms of the WRI
Permits, except where the failure so to comply does not and would not have a
Material Adverse Effect on the Gas Business. Except as disclosed in the WRI
SEC Documents as disclosed in, or reflected in the financial statements
included in, the WRI SEC Documents, or as disclosed or reflected in the
Consolidated Financial Information of WRI and/or as set forth in Section
4.2(j) of the WRI Disclosure Schedule, the Gas Business is not being conducted
in violation of any law, ordinance or regulation of any Governmental Entity,
except for violations which do not and would not have a Material Adverse
Effect on the Gas Business. Except as disclosed in, or reflected in the
financial statements included in, the WRI SEC Documents, or as disclosed or
reflected in the Consolidated Financial Information of WRI and/or as set forth
in Section 4.2(j) of the WRI Disclosure Schedule, neither WRI nor any of the
Transferred Subsidiaries has been notified of any pending investigation or
review by any Governmental Entity nor, to the knowledge of WRI or the
Transferred Subsidiaries, is any investigation or review by any Governmental
Entity with respect to WRI and/or any of the Transferred Subsidiaries, in each
case, to the extent relating to the Gas Business, pending or, to the knowledge
of WRI, threatened, other than those the outcome of which does not and is not
reasonably likely to have a Material Adverse Effect on the Gas Business.
(k) Litigation. Except as disclosed in the WRI SEC Documents and/or Section
4.2(k) of the WRI Disclosure Schedule or otherwise within this Section 4.2, as
of the Original Execution Date, there is no suit, action or proceeding
pending, or, to the knowledge of WRI or any of the Transferred Subsidiaries,
threatened against or affecting WRI relating to the Gas Business or any of the
Transferred Subsidiaries ("WRI Litigation"), at law or in equity, or before or
by any federal or state commission board, bureau, agency or instrumentality,
that, individually or in the aggregate, has had or would have a Material
Adverse Effect on the Gas Business, and WRI and the Transferred Subsidiaries
have no knowledge of any facts that are likely to give rise to any WRI
Litigation, that (in any case) would have a Material Adverse Effect on the Gas
Business, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against WRI or any of the
Transferred Subsidiaries ("WRI Orders") that has or would have a Material
Adverse Effect on the Gas Business or the ability of WRI to consummate the
transactions contemplated by this Agreement or any of the Ancillary Documents.
(l) Taxes. Except as, individually or in the aggregate, do not and would not
have a Material Adverse Effect on the Gas Business:
(1) WRI, each of the Transferred Subsidiaries and, as of the Closing,
NewCorp has (A) timely (taking into account any extensions) filed all
material federal, state, local and foreign Returns required to be filed or
sent by or with respect to it in respect of any Taxes, (B) timely paid all
Taxes that are shown to be due thereon, (C) established reserves that are
adequate for the payment of all Taxes not yet due and payable with respect
to results of operations, and (D) to the knowledge of WRI or any of the
Transferred Subsidiaries timely withheld from employee wages and paid over
to the proper governmental authorities all amounts required to be so
withheld and paid over.
(2) Section 4.2(l)(2) of the WRI Disclosure Schedule sets forth the last
taxable period through which the Returns of WRI, NewCorp and each of the
Transferred Subsidiaries have been examined by the IRS or otherwise closed.
No material Tax audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes for which WRI,
any of the Transferred Subsidiaries or, as of the Closing, NewCorp could be
liable, and except as provided for in the Consolidated Financial
Information of the Gas Business, no material deficiency for any such Taxes
has been proposed, asserted or assessed pursuant to such examination
against WRI, any of the Transferred Subsidiaries or, as of the Closing,
NewCorp by any Governmental Entity with respect to any period.
(3) None of WRI, the Transferred Subsidiaries or, as of the Closing,
NewCorp has executed or entered into with the IRS or any taxing authority
(A) any agreement or other document extending or having the effect of
extending the period for assessments or collection of any federal Income
Taxes for which NewCorp or any of the Transferred Subsidiaries could be
liable or (B) a closing agreement pursuant to
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Section 7121 of the Code, or any predecessor provision thereof or any
similar provision of state or local Tax law that relates to the assets or
operations of NewCorp or any of the Transferred Subsidiaries or the Gas
Business.
(4) Neither the Transferred Subsidiaries nor, as of the Closing, NewCorp
has made an election under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code) owned by
NewCorp or any of the Transferred Subsidiaries.
(5) As of the Closing Date, neither NewCorp nor any of the Transferred
Subsidiaries, nor any Subsidiary of the Transferred Subsidiaries (such
Subsidiaries, together with the Transferred Subsidiaries, the "Acquired
Subsidiaries") will be a party to, will be bound by or will have any
obligation under any tax sharing agreement or similar agreement or
arrangement that includes any entity other than NewCorp or the Acquired
Subsidiaries.
(6) Section 4.2(l)(6) of the WRI Disclosure Schedule sets forth a list of
federal, state, local or foreign jurisdictions in which WRI, with respect
to the Gas Business, or the Transferred Subsidiaries has paid any Taxes or
filed any Returns during the past 3 years. No jurisdiction not listed on
Section 4.2(l)(6) of the WRI Disclosure Schedule has made a claim,
assertion or, to the knowledge of WRI and the Transferred Subsidiaries,
threat that WRI, with respect to the Gas Business, or any of the
Transferred Subsidiaries is subject to taxation in such jurisdiction.
(7) For purposes of subsections (1) and (2) of Section 4.2(l), the use of
the terms "Tax" or "Taxes" in conjunction with WRI shall refer only to (i)
Taxes which are reported on a consolidated, combined or unitary basis with
respect to a group that includes NewCorp or either of the Transferred
Subsidiaries or (ii) Taxes which arise primarily out of or relate primarily
to the Gas Business.
(8) Except as disclosed in Section 4.2(l)(8) of the WRI Disclosure
Schedule, as a result, directly or indirectly, of the Transactions or the
other transactions contemplated by this Agreement (including without
limitation, any terminations of employment prior to or following the
Effective Time), as of the Closing Date, NewCorp will not be obligated to
make a payment (including without limitation any acceleration of vesting or
payment) with respect to Continuing Employees or Retired Employees who are
"disqualified individuals" that would be characterized as an "excess
parachute payment" (as such terms are defined in Section 280G of the Code).
(m) Employee Matters; ERISA.
(1) Benefit Plans. Section 4.2(m)(1) of the WRI Disclosure Schedule
contains a true and complete list, as of the Original Execution Date, of
each item described below, whether formal or informal, written or
unwritten, legally binding or not, each of which have been or will be made
available to ONEOK:
a. each material "employee benefit plan" within the meaning of
Section 3(3) of ERISA that is or was maintained or contributed to at
any time during the six calendar year period immediately preceding the
Original Execution Date by WRI or any WRI Affiliate in which Continuing
Employees or Retired Employees participate and each similar plan,
program, policy or arrangement maintained for non-employee directors or
other non-employees who have provided services to WRI or any WRI
Affiliate;
b. each material plan, program, policy, payroll practice or
arrangement not listed in a. above that provides for bonuses, profit-
sharing, incentive compensation, deferred compensation, equity-based
compensation (including stock options or other stock purchases,
restricted stock, stock appreciation rights, performance units and
dividend equivalents), holiday pay, vacation pay, sick pay, dependent
care benefits, flexible benefits (including any cafeteria plan governed
by Section 125 of the Code), paid or unpaid leave (including sick
leave, parental leave, military leave and bereavement leave), tuition
assistance, relocation or any similar type of benefits, that has been
adopted or implemented by WRI or any WRI Affiliate and in which
Continuing Employees or Retired Employees participate (including any
such plan, program, policy or arrangement that has been terminated
before the Original Execution Date); and
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c. each material employment contract, severance contract, parachute
agreement, option agreement, stock appreciation right agreement, bonus
or other incentive award agreement, deferred compensation agreement,
supplemental benefit agreement, split dollar agreement or other
personal service or benefit contract or arrangement with or covering a
Continuing Employee or Retired Employee.
(2) Contributions. All material contributions and other material payments
required to have been made by WRI or any WRI Affiliate under Section 412 of
the Code in respect of any WRI Pension Benefit Plan which covers Continuing
Employees or Retired Employees or pursuant to the terms of any WRI Pension
Benefit Plan which covers Continuing Employees or Retired Employees (or to
any person pursuant to the terms thereof) have been timely made or will be
timely made in accordance with Section 404(a)(6) of the Code.
(3) Qualification; Compliance. The following representations apply to WRI
Benefit Plans for which NewCorp may have joint and several liability or
with respect to which assets are being contributed from the WRI Benefit
Plans to plans established by NewCorp pursuant to the Employee Agreement.
a. Each WRI Benefit Plan that is intended to be "qualified" within
the meaning of Section 401(a) of the Code (1) currently meets all
qualification requirements under the Code both in form and in
operation, except any failure that can be corrected without material
liability, and (2) has received a favorable determination letter from
the IRS on its qualification or application for such a determination
has been made prior to the expiration of the applicable remedial
amendment period, and to the knowledge of WRI there are no
circumstances existing likely to result in revocation of any such
favorable determination letter.
b. Each WRI Benefit Plan is and has been operated in compliance with,
all applicable laws, rules and regulations governing such plan,
including, without limitation, ERISA and the Code, and all filings,
disclosures and notices required have been timely made, except for
violations that would not have a Material Adverse Effect on NewCorp.
All amendments and actions required to bring each of the WRI Benefit
Plans into conformity with all of the applicable provisions of ERISA
and the Code and other applicable legal requirements have been made or
taken except to the extent that such amendments or actions are not
required by law to be made or taken until a date after the Merger
Effective Time and except for actions the failure of which to take
would not have a Material Adverse Effect on NewCorp.
c. To the knowledge of WRI, no individual or entity has engaged in
any transaction in connection with which WRI or any WRI Affiliate, or
any WRI Benefit Plan or any trust, trustee or administrator thereof,
could be subject to liability pursuant to Section 409 or Section 502 of
ERISA, or subject to an excise tax pursuant to Section 4975 of the
Code, which could in either case have a Material Adverse Effect on
NewCorp.
d. Except for matters that would not have a Material Adverse Effect
on NewCorp:
1. To the knowledge of WRI, no WRI Benefit Plan is subject to any
ongoing audit, investigation or other administrative proceeding of
the IRS, the Department of Labor or any other Governmental Entity
or, to the knowledge of WRI, is scheduled to be subject to such an
audit, investigation or proceeding; and
2. No WRI Benefit Plan is the subject of any pending application
for administrative relief under any voluntary compliance program of
any Governmental Entity (including, without limitation, the IRS'
Voluntary Compliance Resolution Program or Walk-in Closing Agreement
Program, or the Department of Labor's Delinquent Filer Voluntary
Compliance Program).
(4) Pension Benefit Plan; Liabilities. Except as disclosed in Section
4.2(m)(4) of the WRI Disclosure Schedule, with respect to the WRI Pension
Benefit Plans, individually and in the aggregate, no termination or partial
termination of any WRI Pension Benefit Plan has occurred and no event has
occurred that would be reasonably expected to subject the Gas Business or
NewCorp, by reason of joint and several
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liability, to any liability arising under the Code, ERISA or any other
applicable law (including, without limitation, any liability to or under
any such plan or to the PBGC, or under any indemnity agreement to which WRI
or any WRI Affiliate is a party), which liability could have a Material
Adverse Effect on the Gas Business or NewCorp, by reason of joint and
several liability (excluding liability for benefit claims and funding
obligations payable in the ordinary course and liability for PBGC insurance
premiums payable in the ordinary course).
(5) Welfare Plans. To the knowledge of WRI, no circumstances exist that
could subject WRI or any WRI Affiliate to an excise tax under Section 4976
of the Code that would have a Material Adverse Effect on the Gas Business
or NewCorp by reason of joint and several liability.
(6) Documents Made Available. WRI has made available to ONEOK, or will
make available to ONEOK upon request, a true and correct copy of each
collective bargaining agreement to which WRI or any WRI Affiliate is a
party or under which WRI has obligations relating to the Gas Business or to
NewCorp by reason of joint and several liability; and, with respect to each
such WRI Benefit Plan relating to the Gas Business or to NewCorp by reason
of joint and several liability, WRI has made available or will make
available upon request to ONEOK a true and correct copy of each of the
following, as applicable:
a. the current plan document (including all amendments adopted since
the most recent restatement) and its most recently prepared summary
plan description and all summaries of material modifications prepared
since the most recent summary plan description;
b. annual reports or Code Section 6039D information returns (IRS Form
5500 Series), including financial statements, for the last two years;
c. the most recent IRS determination letter or other opinion letter
with respect to the qualified status under Code Section 401(a) of such
plan under Code Section 501 of the related trust;
d. actuarial reports or valuations for the last two years; and
e. trust instruments and insurance contracts; any Form 5310 or Form
5330 filed with the IRS during the last six years.
(7) Payments Resulting From Merger. Except as set forth on Section
4.2(m)(7) of the WRI Disclosure Schedule or as provided under any WRI
Benefit Plan or any agreement described in Section 4.2(m)(1)c. above, the
consummation or announcement of any transaction contemplated by this
Agreement will not directly or indirectly (either alone or upon the
occurrence of any additional or further acts or events) result in any:
a. payment (whether of severance pay or otherwise) becoming due from
WRI or any WRI Affiliate to any current or former officer, director,
employee or independent contractor of WRI or any WRI Affiliate or to
the trustee under any "rabbi trust" or other funding arrangement, which
would reasonably be expected to result in liability to NewCorp; or
b. benefit under any WRI Benefit Plan being established or increased
or becoming accelerated, vested or payable, except for a payment or
benefit that would have been payable under the same terms and
conditions without regard to the transactions contemplated by this
Agreement, which would reasonably be expected to result in liability to
NewCorp.
(8) Funded Status of Plans. Except as disclosed in Section 4.2(m)(8) of
the WRI Disclosure Schedule, (A) each WRI Pension Benefit Plan has been
maintained in compliance with the minimum funding standards of ERISA and
the Code, (B) no WRI Pension Benefit Plan has incurred any "accumulated
funding deficiency" (within the meaning of Section 302 of ERISA or Section
412 of the Code) and (C) all required payments to the PBGC with respect to
each WRI Pension Benefit Plan have been made on or before their due dates
in each case with respect to such WRI Pension Benefit Plans covering
Continuing Employees or Retired Employees or which would reasonably be
expected to result in liability to NewCorp.
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Except as disclosed in Section 4.2(m)(8) of the WRI Disclosure Schedule,
neither WRI nor any of its Subsidiaries has provided, or is required to
provide, security to any WRI Pension Benefit Plan pursuant to Section
401(a)(29) of the Code in each case with respect to such WRI Pension
Benefit Plans covering Continuing Employees or Retired Employees or which
would reasonably be expected to result in liability to NewCorp.
(9) Multiemployer Plans. Except as disclosed in Section 4.2(m)(9) of the
WRI Disclosure Schedule, no WRI Benefit Plan is a "multiemployer plan"
(within the meaning of Section 4001(a)(3) of ERISA), a multiple employer
plan described in Section 413(c) of the Code or a "multiple employer
welfare arrangement" (within the meaning of Section 3(40) of ERISA); and
none of WRI or any WRI Affiliate is obligated to contribute to, has
incurred or is expected to incur any withdrawal liability or has had any
liability under Title IV of ERISA with respect to, or any liability in
connection with the reorganization or termination of, any multiemployer
plan, multiple employer plan, or multiple employer welfare arrangement
which relates to the Gas Business or which would reasonably be expected to
result in liability to NewCorp by reason of joint and several liability.
(10) Modification or Termination of Plans. Except as disclosed in Section
4.2(m)(10) of the WRI Disclosure Schedule or as required pursuant to a
collective bargaining agreement or as required to secure a favorable
determination letter from the IRS, neither WRI nor any WRI Affiliate is
subject to any legal obligation, or has any formal plan, to enter into any
form of material compensation or employment agreement or to establish any
employee benefit plan of any nature which would reasonably be expected to
result in liability to NewCorp or in which Continuing Employees or Retired
Employees may participate, including (without limitation) any pension,
profit sharing, welfare, post-retirement welfare, stock option, stock or
cash award, non-qualified deferred compensation or executive compensation
plan, policy or practice or to modify or change any existing WRI Benefit
Plan in which Continuing Employees or Retired Employees participate and, to
the knowledge of WRI, there has been no communication to Continuing
Employees or Retired Employees by WRI or any WRI Affiliate that would
reasonably be expected to promise or guarantee such employees retiree
health or life insurance benefits on a permanent basis.
(11) Reportable Events; Claims. Except as disclosed in Section 4.2(m)(11)
of the WRI Disclosure Schedule:
a. No Reportable Event has occurred with respect to any WRI Pension
Benefit Plan that would reasonably be expected to result in liability
to NewCorp, and
b. No liability, claim, action or litigation exists, has been made,
commenced or, to the actual knowledge of WRI, threatened, by or against
WRI or any WRI Affiliate with respect to any WRI Benefit Plan (other
than for benefits or PBGC premiums payable in the ordinary course) that
would reasonably be expected to result in liability to NewCorp, and
c. The PBGC has not instituted proceedings to terminate any WRI
Pension Benefit Plan, and, to the knowledge of WRI, no condition exists
that presents a likely risk that such proceedings will be instituted.
(n) Labor Matters. Except as set forth in Section 4.2(n) of the WRI
Disclosure Schedule or the WRI SEC Documents, to the extent related to the Gas
Business:
(1) Neither WRI nor any of the Transferred Subsidiaries is a party to, or
bound by, any collective bargaining agreement or other current labor
agreement with any labor union or organization, and there is no current
union representation question involving employees of WRI relating to the
Gas Business or any of the Transferred Subsidiaries, nor does WRI or the
Transferred Subsidiaries have knowledge of any activity or proceeding of
any labor organization (or representative thereof) or employee group (or
representative thereof) to organize or threaten to organize any such
employees;
(2) There is no unfair labor practice charge or grievance arising out of
a collective bargaining agreement or other grievance procedure against WRI
relating to the Gas Business or any of the Transferred Subsidiaries
pending, or, to the knowledge of WRI or any of the Transferred
Subsidiaries, threatened, that would have a Material Adverse Effect on the
Gas Business;
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(3) There is no strike, dispute, slowdown, work stoppage or lockout
pending, or, to the knowledge of WRI or any of the Transferred
Subsidiaries, threatened, against or involving WRI with respect to the Gas
Business and/or any of the Transferred Subsidiaries that would have a
Material Adverse Effect on the Gas Business; and
(4) WRI and the Transferred Subsidiaries are in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health, except for non-compliance that would not have a Material Adverse
Effect on the Gas Business.
(o) Intangible Property. WRI and the Transferred Subsidiaries possess or
have adequate rights to use all trademarks, trade names, patents, service
marks, brand marks, brand names, computer programs, databases, industrial
designs and copyrights necessary for the operation of the Gas Business, except
where the failure to possess or have adequate rights to use such properties
would not have a Material Adverse Effect on the Gas Business.
(p) Environmental Matters.
(1) Compliance.
To the extent related to the Gas Business,
a. To the actual knowledge of the executive officers of WRI and the
officer or employee of WRI with responsibility for environmental
matters, after due inquiry, except as set forth in the WRI SEC
Documents or Section 4.2(p)(1)(a) of the WRI Disclosure Schedule, WRI
and each of the Transferred Subsidiaries is in compliance with all
applicable Environmental Laws, except where the failure to be so in
compliance would not have a Material Adverse Effect on the Gas
Business.
b. To the actual knowledge of the executive officers of WRI and the
officer or employee of WRI with responsibility for environmental
matters, after due inquiry, except as set forth in the WRI SEC
Documents or Section 4.2(p)(1)(b) of the WRI Disclosure Schedule,
neither WRI nor any of the Transferred Subsidiaries have received any
Environmental Claim from any person or Governmental Entity that alleges
that WRI or any of the Transferred Subsidiaries is not in compliance
with applicable Environmental Laws, except where the failure to be so
in compliance would not have a Material Adverse Effect on the Gas
Business.
c. Except as set forth in Section 4.2(p)(1)(c) of the WRI Disclosure
Schedule, to the actual knowledge of the executive officers of WRI and
the officer or employee of WRI with responsibility for environmental
matters, after due inquiry, neither WRI nor any of the Transferred
Subsidiaries has used any waste disposal site, or otherwise disposed
of, transported, or arranged for the transportation of, any Hazardous
Materials to any place or location, in violation of any Environmental
Laws.
(2) Environmental Permits. To the actual knowledge of the executive
officers of WRI and the officer or employee of WRI with responsibility for
environmental matters, after due inquiry, except as set forth in the WRI
SEC Documents or Section 4.2(p)(2) of the WRI Disclosure Schedule, WRI with
respect to the Gas Business has, and the Transferred Subsidiaries have,
obtained or applied for all Environmental Permits necessary for the
construction of their facilities and the operation of their respective
businesses, as presently conducted, and for the use, storage, treatment,
transportation, release, emission and disposal of raw materials, by-
products, wastes and other substances used or produced by or otherwise
relating to the Gas Business, and all such permits are in good standing and
in all material respects in full force and effect or, where applicable, a
renewal application has been timely filed, is pending and agency approval
is expected to be obtained, and WRI, with respect to the Gas Business, is
and the Transferred Subsidiaries are in compliance in all material respects
with all terms and conditions of all such Environmental Permits and are not
required to make any expenditure in order to obtain or renew any
Environmental Permits necessary for the operation of the Gas Business, as
presently conducted, except where the failure to obtain or be in compliance
with such Environmental Permits and the requirement to make such
expenditures would not have a Material Adverse Effect on the Gas Business.
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(3) Environmental Claims. To the actual knowledge of the executive
officers of WRI and the officer or employee of WRI with responsibility for
environmental matters, after due inquiry, except as set forth in the WRI
SEC Documents or Section 4.2(p)(3) of the WRI Disclosure Schedule, there is
no Environmental Claim pending or, to the actual knowledge of the executive
officers of WRI and the officer or employee of WRI with responsibility for
environmental matters, threatened
a. against WRI relating to the Gas Business, or any of the
Transferred Subsidiaries,
b. against any person or entity whose liability for such
Environmental Claim WRI in connection with the Gas Business or any of
the Transferred Subsidiaries has retained or assumed either
contractually or by operation of law, or
c. against any real or personal property or operations that WRI,
relating to the Gas Business, or any of the Transferred Subsidiaries
owns, leases or manages, in whole or in part,
that, in the case of a, b or c, if adversely determined, would have a
Material Adverse Effect on the Gas Business.
(4) Releases. To the actual knowledge of the executive officers of WRI
and the officer or employee of WRI with responsibility for environmental
matters, after due inquiry, except as set forth in Section 4.2(p)(4) of the
WRI Disclosure Schedule or the WRI SEC Documents, and except for Releases
of Hazardous Materials the liability for which would not have a Material
Adverse Effect on the Gas Business, with respect to the Gas Business,
neither WRI, with respect to the Gas Business, nor any of the Transferred
Subsidiaries has caused any Release of any Hazardous Materials at any place
or property, including but not limited to, properties owned, leased or
occupied by WRI or any of the Transferred Subsidiaries or any predecessor
of WRI or any of the Transferred Subsidiaries, nor has it transported or
arranged for the transportation of any Hazardous Materials to any place or
property where a Release has occurred or allegedly has occurred, where such
transportation or arrangement has had, or would have, a Material Adverse
Effect on the Gas Business.
(5) Underground Storage Tanks or Surface Impoundments. To the actual
knowledge of the executive officers of WRI and the officer or employee of
WRI with responsibility for environmental matters, after due inquiry,
except as set forth in Section 4.2(p)(5) of the WRI Disclosure Schedule,
with respect to the Gas Business, there are no underground storage tanks or
surface impoundments at, on, under or within any of real property owned,
leased or occupied by WRI or any of the Transferred Subsidiaries, or any
portion thereof, other than those liabilities which would not have a
Material Adverse Effect on the Gas Business.
(q) Contracts and Certain Obligations.
(1) Except as set forth in Section 4.2(q)(1) of WRI's Disclosure
Schedule, neither WRI nor any of the Transferred Subsidiaries is a party to
or bound by any Material Contract with respect to the Gas Business. Except
as set forth in Section 4.2(q)(1) of the WRI Disclosure Schedule, all
Material Contracts relating to the Gas Business are in full force and
effect, and each of WRI and the Transferred Subsidiaries which is a party
to or bound by such Material Contract has performed its obligations
thereunder as of the Original Execution Date and, to the knowledge of WRI
and the Transferred Subsidiaries, each other party thereto has performed
its obligations thereunder as of the Original Execution Date, other than
any failure of a Material Contract to be in full force and effect or any
nonperformance thereof that would not have a Material Adverse Effect on the
Gas Business.
(2) With respect to the Gas Business, neither WRI nor any of the
Transferred Subsidiaries engages in any natural gas or other futures or
options trading or is a party to any price swaps, hedges, futures or
similar instruments, except for transactions and agreements entered into or
hedge contracts for the purchase or sale of hydrocarbons to which WRI with
respect to the Gas Business or any of the Transferred Subsidiaries is a
party which are commercially reasonable and in accordance with the general
practices of other similarly situated companies in the industry.
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(3) With respect to the Gas Business, neither WRI nor any of the
Transferred Subsidiaries have been given notice of any default under, or
action to alter, terminate, rescind or procure a judicial reformation of,
any material provisions of any Material Contract relating to the Gas
Business.
(4) (i) Section 4.2(q)(4)(i) of the WRI Disclosure Schedule sets forth a
list of (a) all gas purchase contracts which are Material Contracts (b) all
gathering, exchange and transportation contracts which are Material
Contracts, and (c) all other contracts relating to Gas supply and
transportation which are Material Contracts, in each case, to the extent
WRI or any of the Transferred Subsidiaries is a party thereto and to the
extent to which they relate to the Gas Business (collectively, the "WRI Gas
Contracts"); (ii) Except as set forth in Section 4.2(q)(4)(ii) of the WRI
Disclosure Schedule, (a) all WRI Gas Contracts which relate to the Gas
Business have been approved or reviewed by the KCC, to the extent such
approval or review is required, (b) all costs under the WRI Gas Contracts
which relate to the Gas Business are currently being passed through to the
customers and (c) neither WRI nor any of the Transferred Subsidiaries has
any reason to believe that (a) and (b) will not continue in the future.
(r) Regulatory Proceedings. Except as set forth in the WRI SEC Documents or
Section 4.2(r) of the WRI Disclosure Schedule and other than purchase gas
adjustment provisions, no portion of the Gas Business in relation to which all
or part of the rates or services are regulated by a Governmental Entity (i)
has rates which have been or are being collected subject to refund, pending
final resolution of any rate proceeding pending before a Governmental Entity
or on appeal to the courts or (ii) is a party to any rate proceeding before a
Governmental Entity or on appeal from orders of a Governmental Entity which
could result in orders having a Material Adverse Effect on the Gas Business.
(s) Regulation as a Utility.
(1) WRI is an exempt Holding Company under Section 3(a) of the 1935 Act
and as such is exempt from all provisions of the 1935 Act except Section
9(a)(2) thereof.
(2) The Gas Business of WRI is regulated as a public utility in the
States of Kansas and Oklahoma and in no other states. MCMC is a regulated
utility in the State of Kansas.
(t) Opinion of Financial Advisor. The Board of Directors of WRI has received
the opinion of Salomon Brothers Inc ("Salomon") to the effect that, as of the
date on which the Board of Directors of WRI approved the Transactions, the
Transactions are fair to WRI from a financial point of view.
(u) Title to Properties.
(1) WRI with respect to the Gas Business and the Transferred
Subsidiaries, individually or together, have good and sufficient title to
all of the Assets that they purport to own, including all of the properties
and assets reflected in the balance sheet as of September 30, 1996,
included in the Consolidated Financial Information of the Gas Business and
all properties and assets purchased or otherwise acquired since September
30, 1996. Such assets are sufficient to enable WRI with respect to the Gas
Business and the Transferred Subsidiaries to conduct the Gas Business as
currently conducted without material interference, and, at the Closing,
will be free and clear of Liens, other than Permitted Liens. WRI, with
respect to the Gas Business, and the Transferred Subsidiaries, individually
or together, hold under valid lease agreements all real and personal
properties which constitute part of the Assets or are reflected in the
Consolidated Financial Information of the Gas Business as being held under
capitalized leases and enjoy peaceful and undisturbed possession of such
properties under such leases, other than any properties as to which such
leases will have terminated in the ordinary course of business since the
date of such financial information. Neither WRI, with respect to the Gas
Business, nor any of the Transferred Subsidiaries, nor any of their
predecessors has received any written notice of any adverse claim to the
title to any properties owned by them or with respect to any lease under
which any properties are held by them, other than any claims that,
individually or in the aggregate, would not have a Material Adverse Effect
on the Gas Business.
(2) With respect to the Gas Business, neither WRI nor any of the
Transferred Subsidiaries is in violation of the terms of any Easement
except any such violations that, individually or in the aggregate,
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would not have a Material Adverse Effect on the Gas Business. Except as
would not have a Material Adverse Effect on the Gas Business, all Easements
in favor of the Gas Business are valid and enforceable and grant the rights
purported to be granted thereby and all rights necessary thereunder for the
operation of the Gas Business. Except as would not have a Material Adverse
Effect on the Gas Business, to the knowledge of WRI, there are no spatial
gaps in the Easements in favor of the Gas Business that would have a
Material Adverse Effect on the Gas Business and all parts of the pipeline
assets which constitute a portion of the Assets are located either on
property which is owned in fee by WRI or the Transferred Subsidiaries or on
property which is subject to an Easement in favor of WRI or a Transferred
Subsidiary.
(v) Condition of Assets. To the knowledge of WRI and the Transferred
Subsidiaries, the buildings, plants, structures, and equipment of WRI relating
to the Gas Business and the Transferred Subsidiaries are structurally sound,
are in good operating condition and repair, and are adequate for the uses to
which they are being put, and none of such buildings, plants, structures, or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost.
(w) Accounts Receivable. All Accounts Receivable with respect to the Gas
Business represent or will represent, as of the Closing, valid obligations
arising from sales actually made or services actually performed in the
ordinary course of business of WRI with respect Gas Business and of the
Transferred Subsidiaries. Unless paid prior to the Closing, the Accounts
Receivable relating to the Gas Business are or will be, as of the Closing,
collectible, subject only to allowance for doubtful accounts, and calculated
consistently with past practice. There is no contest, claim or right of set-
off, under any contract or with any obligor of an Account Receivable relating
to the Gas Business relating to the amount or validity of such Account
Receivable which would have a Material Adverse Effect on the Gas Business.
(x) Beneficial Ownership of ONEOK Common Stock. Neither WRI nor any of its
Subsidiaries "beneficially owns" (as defined in Rule 13d-3 under the Exchange
Act) any of the outstanding ONEOK Common Stock or ONEOK Preferred Stock.
(y) Brokers. Except for the fees and expenses payable to Salomon, which fees
are reflected in its agreement with WRI and will be for the account of and
paid by WRI and not by NewCorp, no broker, investment banker or other person
is entitled to any broker's, finder's or other similar fee or commission in
connection with the negotiations leading to this Agreement or the consummation
of the Transactions and the other transactions contemplated by this Agreement
based upon arrangements made by or on behalf of WRI or any of the Transferred
Subsidiaries.
(z) Insurance. With respect to the Gas Business, WRI and the Transferred
Subsidiaries maintain insurance coverage as is customary for the industry in
which the Gas Business operates (taking into account the cost and availability
of such insurance). All such insurance policies are with reputable insurance
carriers. There are no claims pending under any of such policies as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or in respect of which such underwriters have reserved their rights,
except for claims that would not have a Material Adverse Effect on the Gas
Business. All premiums payable under all such policies have been paid and WRI
and the Transferred Subsidiaries have otherwise complied fully with the terms
and conditions of all such policies.
(aa) Business of NewCorp. Prior to the Closing, NewCorp shall not have
engaged in any business or incurred any liabilities, except as expressly
contemplated by this Agreement.
(ab) Intercompany Liabilities. Prior to the Closing, all liabilities of the
Transferred Subsidiaries to WRI and its Subsidiaries shall have been
discharged.
(ac) Related Party Transactions. With respect to the Gas Business, there are
no contracts, arrangements or transactions in effect between WRI or any of the
Transferred Subsidiaries, on the one hand, and any officer, director or 5%
stockholder of WRI, or any Affiliate or immediate family member of any of the
foregoing persons, on the other hand, except as set forth in Section 4.2(ac)
of the WRI Disclosure Schedule.
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Conduct of Gas Business Pending the Merger. During the period from the
Original Execution Date and continuing until the Merger Effective Time, WRI
agrees as to itself and the Transferred Subsidiaries that (except as expressly
contemplated or permitted by this Agreement, as provided in Section 5.1 of the
WRI Disclosure Schedule (each of which exceptions shall specifically identify
the relevant subsection hereof to which it relates) or to the extent that
ONEOK shall consent in writing, which consent will not be unreasonably
withheld or delayed):
(a) Ordinary Course. WRI and each of the Transferred Subsidiaries shall
carry on the Gas Business in the usual, regular and ordinary course in
substantially the same manner as conducted on the Original Execution Date and,
to the extent consistent therewith, shall use all commercially reasonable
efforts to preserve intact the present business organizations of the Gas
Business, keep available the services of the current officers and employees of
the Gas Business, and endeavor to preserve the relationships of the Gas
Business with customers, suppliers, distributors, creditors, lessors,
employees and business associates to the end that the goodwill and ongoing
business of the Gas Business shall not be impaired in any material respect at
the Merger Effective Time.
(b) Changes in Stock. WRI shall not permit Westar or MCMC to (i) split,
combine or reclassify any of the outstanding shares of capital stock of Westar
or MCMC or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution for shares of capital stock of
Westar or MCMC or pay or declare any dividends; or (ii) repurchase, redeem or
otherwise acquire, any shares of the capital stock of Westar or MCMC.
(c) Issuance of Securities. Except for the issuance of capital stock as
contemplated by Article III hereof, NewCorp shall not issue, deliver, pledge,
dispose of, encumber or sell, or authorize or propose to issue, deliver,
pledge, dispose of, encumber or sell, any shares of its capital stock of any
class, or other voting securities of NewCorp or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, or other
voting securities or convertible securities.
(d) No Acquisitions. Except as provided for in Article I of this Agreement,
WRI shall not, and it shall not permit any of the Transferred Subsidiaries to,
acquire or agree to acquire by merging or consolidating with, or 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 in the local natural gas distribution
business in the States of Kansas, Missouri or Oklahoma which will form a part
of the Assets with an aggregate book value of $6,500,000 or more.
(e) No Dispositions. Other than dispositions in the ordinary course of
business consistent with past practice that are not material to the Gas
Business and other dispositions with an aggregate of inventory and equipment
book value not to exceed $6,500,000, WRI shall not, and it shall not permit
any of the Transferred Subsidiaries to, sell, lease, encumber or otherwise
dispose of, or agree to sell, lease (whether such lease is an operating or
capital lease), encumber or otherwise dispose of, any of the Assets.
(f) No Dissolution, Etc. NewCorp shall not authorize, recommend, propose or
announce an intention to adopt a plan of complete or partial liquidation or
dissolution of NewCorp.
(g) Certain Employee Matters. Except as specified in Section 5.1(g) of the
WRI Disclosure Schedule, as required by collective bargaining agreements, as
may be required by applicable law or as expressly contemplated by this
Agreement, including Section 5.1(c) hereof, WRI, with respect to employees of
the Gas Business, shall not, nor shall it permit any of the Transferred
Subsidiaries with respect to employees of the Gas Business, other than in the
ordinary course of business that, in the aggregate, does not result in a
material increase in benefits or compensation expense to the Gas Business, to:
(1) amend, or increase the amount of (or accelerate the payment or
vesting of) any benefit or amount payable under, any employee benefit plan
or any other contract, agreement, commitment, arrangement, plan
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or policy providing for compensation or benefits to any current or former
officer or employee, and maintained by, contributed to or entered into by,
WRI or any of the Transferred Subsidiaries with respect to employees of the
Gas Business;
(2) increase (or enter into any contract, agreement, commitment or
arrangement to increase in any manner) the compensation or fringe benefits,
or otherwise to extend, expand or enhance the engagement, employment or any
related rights, of any current or former officer or employee, except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Gas Business;
(3) adopt, establish or implement any plan, policy or other arrangement
providing for any form of benefits or other compensation to any current or
former officer or employee;
(4) enter into or amend any employment agreement, severance agreement, or
other contract, agreement or arrangement with any current or former officer
or employee; or
(5) pay or agree to pay any pension, retirement allowance or other
benefit not required or contemplated by any of the existing WRI Benefit
Plans as in effect on the Original Execution Date to any current or former
officer or employee.
(h) Leases; Capital Expenditures. With respect to the Gas Business, WRI
shall not, nor shall WRI permit any of the Transferred Subsidiaries to, (i)
except in the ordinary course of business, enter into any lease (whether such
lease is an operating or capital lease) or (ii) incur Liens on the Assets,
other than Permitted Liens, or (iii) make or commit to make capital
expenditures outside the ordinary course of business or in excess of budgeted
amounts previously disclosed to ONEOK, except to the extent necessary to meet
applicable legal or regulatory requirements or to maintain the safety of the
operations.
(i) Affiliate Transactions. WRI shall not, nor shall it permit any of the
Transferred Subsidiaries to, enter into any agreement or arrangement with
respect to the Gas Business with any of their respective Affiliates (as such
term is defined in Rule 405 under the Securities Act, an "Affiliate"), on
terms materially less favorable to the Gas Business than could be reasonably
expected to have been obtained with an unaffiliated third party on an arm's-
length basis.
(j) Rate Matters. Except as required by statute, regulation or judicial rule
or order, with respect solely to the Gas Business, WRI shall not, and shall
not permit any of the Transferred Subsidiaries to, make any filing with any
Governmental Entity regarding any changes in rates or charges (other than
pass-through fuel and gas rates or charges under existing tariffs or rate
schedules), standards of service, accounting, or the services provided by the
Gas Business (or any amendment thereto).
(k) Contracts. With respect to the Gas Business, WRI shall not, nor shall it
permit any of the Transferred Subsidiaries to, except in the ordinary course
of business consistent with past practice, modify, amend, terminate, renew or
fail to use reasonable business efforts to renew any Material Contract or
agreement to which it or any of the Transferred Subsidiaries is a party or
waive, release or assign any material rights or claims. With respect to the
Gas Business, WRI shall not, nor shall it permit any of the Transferred
Subsidiaries to, enter into any contract involving total consideration of
$10,000,000 or more, with a term longer than one year which is not terminable
by WRI or any such Transferred Subsidiary without penalty upon no more than 90
days' prior notice.
(l) Insurance. WRI shall, and shall cause the Transferred Subsidiaries to,
maintain with financially responsible insurance companies insurance with
respect to the Gas Business, in such amounts and against such risks and losses
as are consistent with the past practices of WRI.
(m) Permits. WRI shall, and shall cause the Transferred Subsidiaries to, use
reasonable efforts to maintain in effect all existing WRI Permits which are
material to the operations of the Gas Business.
(n) Tax Matters. WRI shall not and shall not permit any of the Acquired
Subsidiaries to (i) make or rescind any material express or deemed election
relating to Taxes with respect to the Gas Business, unless it is
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reasonably expected that such action will not adversely affect the Gas
Business, including elections for any and all joint ventures, partnerships,
limited liability companies, working interests or other investments, (ii)
settle or compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes with
respect to the Gas Business, except where such settlement or compromise will
not adversely affect the Gas Business, or (iii) change in any material respect
any of the methods utilized by the Gas Business in reporting income or
deductions for federal income tax purposes, except as may be required by
applicable law or except for such changes that are reasonably expected not to
adversely affect the Gas Business.
(o) Discharge of Liabilities. With respect to the Gas Business, WRI shall
not, nor shall it permit any of the Transferred Subsidiaries to, pay,
discharge or satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business consistent with past practice (which includes the payment of final
and unappealable judgments) or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the Consolidated
Financial Information of the Gas Business, or incurred in the ordinary course
of business consistent with past practice.
(p) Other Actions. WRI shall not, and shall not permit any of the
Transferred Subsidiaries to, take or fail to take any other action which would
reasonably be expected to prevent or materially impede, interfere with or
delay the Merger or the Transactions or the other transactions contemplated by
this Agreement, the Ancillary Documents, or the Transfer Documents.
(q) Agreements. WRI shall not, nor shall it permit any of the Transferred
Subsidiaries to, agree in writing or otherwise to take any action inconsistent
with the foregoing.
(r) Business of NewCorp. WRI shall not permit NewCorp to engage in any
business or incur any liabilities or be a party to any contract or agreement,
other than as contemplated by this Agreement or the Ancillary Documents.
(s) Shareholder Agreement. Immediately prior to the Closing, WRI and NewCorp
shall enter into the Shareholder Agreement, in the form attached hereto as
Exhibit C (the "Shareholder Agreement").
(t) Rights Agreement. WRI shall use best efforts to take or cause to be
taken, all actions and to do or cause to be done, all things necessary to
adopt the NewCorp Rights Agreement.
(u) Material Information. With respect to the Gas Business, without limiting
other obligations imposed by this Agreement, WRI will use best efforts to keep
ONEOK informed of any material business developments of WRI and the
Transferred Subsidiaries, including but not limited to significant Gas
contracts, material acquisitions and dispositions.
(v) Intercompany Liabilities. WRI will use best efforts to take or cause to
be taken, all actions and to do or cause to be done, all things necessary to
discharge any liabilities of the Transferred Subsidiaries to WRI or its other
Subsidiaries prior to Closing.
5.2 Certain Restrictions in Respect of ONEOK. During the period from the
Original Execution Date and continuing until the Merger Effective Time, ONEOK
agrees as to itself and its Subsidiaries that (except as expressly
contemplated or permitted by this Agreement, as provided in Section 5.2 of the
ONEOK Disclosure Schedule (each of which exceptions shall specifically
identify the relevant subsection hereof to which it relates) or to extent that
WRI shall otherwise consent in writing):
(a) Changes in Stock. ONEOK shall not (i) engage in any repurchase,
recapitalization, restructuring, redemption, other acquisition or
reorganization with respect to its capital stock, including, without
limitation, by way of any extraordinary dividends on or other extraordinary
distributions in respect of any of its capital stock, (ii) split, combine or
reclassify any of the outstanding shares of capital stock of ONEOK or issue,
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of capital stock
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of ONEOK, or (iii) amend any material term or provision of the ONEOK Common
Stock or ONEOK Preferred Stock. Notwithstanding the foregoing, ONEOK shall
have the right to cause the ONEOK Preferred Stock to be redeemed or
repurchased at any time prior to the Merger Effective Time pursuant to Section
5.2(d) hereof, provided that the aggregate redemption or repurchase price
shall not exceed the redemption price required to be paid under the ONEOK
Certificate of Incorporation upon such redemption.
(b) Governing Documents; Other Material Transactions. ONEOK shall not amend
or propose to amend its articles of incorporation or bylaws, as amended
through the Original Execution Date. ONEOK shall not effect any transactions
which if effected after Closing would constitute a "Change of Control" as
defined in Section 1.1 of the Shareholder Agreement. For any matter that is
being presented to the Board of Directors of ONEOK, other than with respect to
an Acquisition Proposal and the enforcement or interpretation by ONEOK of its
rights under the Agreement or the Ancillary Documents, ONEOK shall (i) provide
written notice to WRI 10 days prior to the time of such presentation or, if
not possible, at the same time that the Board of Directors will receive such
notice and (ii) deliver to WRI any written materials to be provided to the
Board of Directors of ONEOK at the same time they are provided to the members
of the Board of Directors of ONEOK relating thereto and, if not possible,
prior to the applicable meeting of the Board of Directors.
(c) Other Actions. ONEOK shall not, and shall not permit any of its
Subsidiaries to, take or fail to take any other action which would reasonably
be expected to prevent or materially impede, interfere with or delay the
Transactions or the other transactions contemplated hereby or by the Ancillary
Documents.
(d) Rights; Redemption of Capital Stock. ONEOK shall (i) cause the rights
contemplated by the ONEOK Rights Agreement to be redeemed prior to the Merger
Effective Time and (ii) repurchase or redeem all of the outstanding shares of
the ONEOK Preferred Stock with the result that the holders of the ONEOK
Preferred Stock will not have the right to vote on the Merger.
(e) Material Information. Without limiting other obligations imposed by this
Agreement, ONEOK will use its best efforts to keep WRI informed of any
material business developments, including but not limited to significant Gas
contracts, material acquisitions and dispositions.
(f) Other Agreements. Prior to Closing, ONEOK and its Subsidiaries will use
their best efforts, take or cause to be taken all actions and do or cause to
be done all things necessary, to enter into the Shared Services Agreement and
the Marketing Agreement.
(g) Agreements. ONEOK shall not agree, nor shall it permit any of its
Subsidiaries to agree, in writing or otherwise to take any action inconsistent
with the foregoing.
(h) Stock Options. ONEOK will not issue any ONEOK Options.
(i) ONEOK shall not issue any equity securities except in connection with
the acquisition, by merger or otherwise, of any third party or the assets of
any third party.
5.3 No Solicitation. (a) From and after the Original Execution Date, ONEOK
will not, and will not authorize or permit any of its officers, directors,
employees, investment bankers, attorney or agents and other representatives or
those of any of its Subsidiaries (collectively, "ONEOK Representatives") to,
directly or indirectly, solicit, initiate or encourage (including by way of
providing information to any prospective buyer) the making of any proposal
that constitutes, or may reasonably be expected to lead to, an Acquisition
Proposal (as hereinafter defined) from any person or engage in any discussions
or negotiations or providing any non-public information or data with respect
thereto or otherwise cooperate with or assist or participate in, or facilitate
any effort or attempt to make or implement, any such proposal; provided,
however, that, notwithstanding any other provision of this Agreement, (i)
ONEOK's Board of Directors may take and disclose to ONEOK's stockholders a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act, and
(ii) prior to approval of this Agreement by ONEOK's stockholders and following
receipt from a third party (without any solicitation,
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initiation, encouragement, discussion or negotiation, directly or indirectly,
by or with ONEOK or any ONEOK Representatives) of an unsolicited bona fide
Acquisition Proposal, (x) ONEOK may engage in discussions or negotiations with
such third party and/or may furnish such third party information concerning
ONEOK and its business, properties and assets if such third party executes a
confidentiality agreement in favor of ONEOK and (y) the Board of Directors of
ONEOK may withdraw, modify or not make its recommendation referred to in
Section 6.5. In the event ONEOK or the Board of Directors of ONEOK takes any
of the actions specified in clauses (x) or (y) of the immediately preceding
sentence, WRI shall be notified of the taking of such action contemporaneously
with the taking of such action and the provisions of Section 6.19 shall
thereupon terminate without any further action on the part of WRI or ONEOK.
(b) ONEOK shall immediately cease and cause to be terminated any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any parties conducted heretofore by ONEOK or any ONEOK Representatives
with respect to any Acquisition Proposal existing on the Original Execution
Date.
(c) As used in this Agreement, "Acquisition Proposal" means any proposal or
offer, other than the Merger, for, or that could be reasonably expected to
lead to, a tender or exchange offer, a merger, consolidation or other business
combination involving ONEOK or any proposal to acquire in any manner a
substantial equity interest in, or any substantial portion of, the assets of
ONEOK.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of Form S-4 and the Proxy Statement. As promptly as
practicable after the Amendment Date, ONEOK shall prepare and file with the
SEC the Proxy Statement and WRI shall prepare and file with the SEC the Form
S-4, in which the Proxy Statement will be included as a prospectus. WRI shall
use its best efforts to have the Form S-4 declared effective under the
Securities Act as promptly as practicable after filing. ONEOK shall use its
best efforts to cause the Proxy Statement to be mailed to the shareholders of
ONEOK at the earliest practicable date. WRI shall use its best efforts to
obtain all necessary state securities laws or "blue sky" permits, approvals
and registrations in connection with the issuance of NewCorp Common Stock and,
if applicable, Series A NewCorp Convertible Preferred Stock and Series B
NewCorp Convertible Preferred Stock ("NewCorp Preferred Stock"), in the Merger
and shall furnish all information concerning ONEOK and the holders of ONEOK
Common Stock as may be reasonably requested in connection with obtaining such
permits, approvals and registrations. ONEOK shall bear 55% and WRI shall bear
45% of the final cost of preparing and filing the Form S-4 and requisite
financial statements filed with the Form S-4 and all other filings required to
be made under the Securities Act and the Exchange Act, including, without
limitation, the Consolidated Financial Information of the Gas Business. Upon
the consummation of the Merger, the Surviving Corporation shall reimburse WRI
in full for that portion of the expenses borne by WRI as contemplated by this
Section 6.1 (other than the fees and expenses of counsel and fees and expenses
payable to financial advisors).
6.2 Letter of ONEOK's Accountants. ONEOK shall use its best efforts to cause
to be delivered to NewCorp a letter of KPMG Peat Marwick, L.L.P., ONEOK's
public accountants, dated a date within two business days before the date on
which the Form S-4 shall become effective and addressed to WRI and ONEOK, in
form and substance reasonably satisfactory to WRI and customary in scope and
substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
6.3 Letter of WRI's Accountants. WRI shall use its best efforts to cause to
be delivered to ONEOK a letter of Arthur Andersen, L.L.P., WRI's public
accountants, dated a date within two business days before the date on which
the Form S-4 shall become effective and addressed to ONEOK and WRI, in form
and substance reasonably satisfactory to ONEOK and customary in scope and
substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
6.4 Access to Information. Upon reasonable notice, and in all events to the
extent reasonably related to the Transactions and the other transactions
contemplated by this Agreement and the Ancillary Documents, WRI
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and ONEOK shall each (and WRI shall cause the Transferred Subsidiaries and
ONEOK shall cause its Subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives of the other, access, during
normal business hours during the period prior to the Merger Effective Time, to
all its properties, books, contracts, commitments and records and, during such
period, each of WRI and ONEOK shall (and WRI shall cause the Transferred
Subsidiaries and ONEOK shall cause its Subsidiaries to) furnish promptly to
the other (a) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to SEC
requirements and (b) all other information concerning its business, properties
and personnel as such other party may reasonably request. Each of WRI and
ONEOK agrees that it will not and will cause its respective representatives
not to, use any information obtained pursuant to this Section 6.4 for any
purpose unrelated to the consummation of the Transactions and the other
transactions contemplated by this Agreement and the Ancillary Documents. The
Confidentiality Agreement dated June 17, 1996 between WRI and ONEOK (the
"Confidentiality Agreement") shall apply with respect to information furnished
thereunder or hereunder and any other activities contemplated thereby.
6.5 ONEOK Stockholders' Meeting. ONEOK shall (i) call a meeting of its
common stockholders (the "ONEOK Stockholders' Meeting") to be held as promptly
as possible after the Amendment Date for the purpose of voting upon this
Agreement and the Merger, (ii) through its Board of Directors, recommend to
its stockholders approval of such matters and, subject to the provisions of
Section 5.3, not rescind such recommendation, (iii) use its best efforts to
obtain approval and adoption of this Agreement and the Merger by its common
stockholders, and (iv) use all reasonable efforts to hold such meeting as soon
as practicable after the date upon which the Form S-4 becomes effective,
provided, however, that nothing herein obligates ONEOK to take any action that
would cause its Board of Directors to act inconsistently with their fiduciary
duties as determined by the Board of Directors of ONEOK in good faith. The
ONEOK Stockholders' Meeting shall be held on such date as soon as practicable
after the date upon which the Form S-4 becomes effective as ONEOK and WRI
shall mutually determine.
6.6 Regulatory and Other Approvals. (a) HSR Act. Each party hereto shall
file or cause to be filed with the Federal Trade Commission and the Department
of Justice any notifications required to be filed by their respective
"ultimate parent entities" within the meaning of the HSR Act under the HSR Act
and the rules and regulations promulgated thereunder with respect to the
Transactions and the other transactions contemplated hereby and by the
Ancillary Documents. Such parties will use all commercially reasonable efforts
to make such filing promptly and to respond on a timely basis to any requests
for additional information made by either of such agencies.
(b) Other Regulatory Approvals. Each party hereto shall cooperate and use
its best efforts to promptly prepare and file all necessary documentation, to
effect all necessary applications, notices, petitions, filings and other
documents, and to use all commercially reasonable efforts to obtain (and will
cooperate with each other in obtaining) any consent, acquiescence,
authorization, order or approval of, or any exemption or nonopposition by, any
Governmental Entity required to be obtained or made by ONEOK, WRI or any of
their respective Subsidiaries in connection with the Transactions and the
other transactions contemplated by the Ancillary Documents and hereby or the
taking of any action contemplated thereby or by this Agreement, including
without limitation the ONEOK Required approvals and the WRI Required
Approvals. Each party shall have the right to review and approve in advance
(such approvals not to be unreasonably withheld based upon the economic
benefits expected to be realized by such party from the Transactions and the
other transactions contemplated by the Ancillary Documents and this Agreement)
all applications for approvals to be filed by the other party. Each party
shall consult with the other with respect to the obtaining of all such
necessary or advisable permits, consents, approvals and authorizations of
Governmental Authorities.
(c) Other Approvals. Each party hereto will, and will cause its Subsidiaries
to, take all commercially reasonable actions necessary to obtain (and will
cooperate with each other in obtaining) all ONEOK Required Consents and all
WRI Required Consents, as the case may be.
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6.7 Authorization for Shares and Stock Exchange Listing. Prior to the Merger
Effective Time, WRI shall have caused NewCorp to take all action necessary to
permit it to issue the number of shares of NewCorp Common Stock required to be
issued pursuant to Sections 3.1 and 3.2. Prior to the Closing Date, WRI shall
cause NewCorp to take all reasonable efforts to cause the shares of NewCorp
Common Stock to be issued in the Merger and the shares of NewCorp Common Stock
to be reserved for issuance upon exercise of the ONEOK Options assumed by
NewCorp pursuant to Section 6.8 and issuances under the ONEOK Stock Plans to
be approved for listing on the NYSE, subject to official notice of issuance.
6.8 Stock Options. (a) At the Merger Effective Time, each outstanding ONEOK
Option, whether vested or unvested, shall be assumed by NewCorp. Each such
option shall be deemed to constitute an option to acquire, on the same terms
and conditions as were applicable under each ONEOK Option, a number of shares
of NewCorp Common Stock equal to the number of shares of ONEOK Common Stock as
the holder of such ONEOK Option would have been entitled to receive pursuant
to the Merger had such holder exercised such option in full immediately prior
to the Merger Effective Time, at a price per share equal to (y) the aggregate
exercise price for ONEOK Common Stock otherwise purchasable pursuant to such
ONEOK Option, divided by (z) the number of full shares of NewCorp Common Stock
deemed purchasable pursuant to such ONEOK Option. In no event shall NewCorp be
required to issue fractional shares of NewCorp Common Stock. In the case of
any option which is an "incentive stock option" (as defined in Section 422 of
the Code), the adjustments made pursuant to this subsection shall be and are
intended to be effected in a manner which is consistent with the requirements
of Section 424(a) of the Code.
(b) As soon as practicable after the Merger Effective Time, NewCorp shall
file with the SEC a registration statement on Form S-8 (or any successor form)
or another appropriate form with respect to the shares of NewCorp Common Stock
subject to the ONEOK Options assumed in accordance with this Section 6.8 and
shall use all commercially reasonable efforts to maintain the effectiveness of
such registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so
long as the ONEOK Options remain outstanding.
6.9 Agreement to Defend. In the event any claim, action, suit, investigation
or other proceeding by any governmental body or other person or other legal or
administrative proceeding is commenced that questions the validity or legality
of the Transactions and the other transactions contemplated hereby and by the
Ancillary Documents or seeks damages in connection therewith, the parties
hereto agree to cooperate and use their reasonable efforts to defend against
and respond thereto.
6.10 Public Announcements. WRI and ONEOK will consult with each other before
issuing any press release or otherwise making any public statements with
respect to the Transactions and the other transactions contemplated by this
Agreement and the Ancillary Documents, and shall not issue any such press
release or make any such public statement prior to such consultation, except
as may be required by applicable law or by obligations pursuant to any listing
agreement with any national securities exchange or transaction reporting
system.
6.11 Other Actions. Except as contemplated by this Agreement, neither WRI
nor ONEOK shall, and none of them shall permit any of their respective
Subsidiaries to, take or agree or commit to take any action that is reasonably
likely to result in any of its respective representations or warranties
hereunder being untrue in any material respect or in any of the conditions to
the Merger set forth in Article VII not being satisfied, in each case as of
the Closing Date.
6.12 Advice of Changes; SEC Filings. WRI and ONEOK shall confer on a regular
basis with each other, report on operational matters and promptly advise each
other orally and in writing of any change or event having, or which, insofar
as can reasonably be foreseen, could have, a Material Adverse Effect on the
Gas Business or ONEOK, as the case may be. ONEOK and WRI shall promptly
provide each other (or their respective counsel) copies of all filings made by
such party with the SEC or any other Governmental Entity in connection with
this Agreement and the Transactions and the other transactions contemplated
hereby and by the Ancillary Documents.
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6.13 Reorganization. It is the intention of the parties hereto that the
Merger will qualify as a reorganization described in Section 368(a) of the
Code (and any comparable provisions of applicable state law) and the Asset
Transaction will qualify as a transfer described in Section 351 of the Code
(and any comparable provisions of applicable state law) and the parties will
so characterize the Merger and the Asset Transaction for the purpose of all
Returns and other filings. None of WRI, ONEOK nor NewCorp (nor any of their
respective Subsidiaries) will take or omit to take any action (whether before,
on or after the Closing Date) that would cause the Merger or the Asset
Transaction not to be so treated.
6.14 Disclosure Schedules. The ONEOK Disclosure Schedule and the WRI
Disclosure Schedule (collectively, the "Disclosure Schedules") are an integral
part of this Agreement and shall modify or otherwise affect the respective
warranties, covenants or agreements of the parties hereto contained in this
Agreement.
6.15 Preparation and Filing of Returns; Payment of Taxes. (a) WRI shall
include each of the Acquired Subsidiaries for all taxable periods of each of
the Acquired Subsidiaries ending on or before the Closing Date in any
consolidated, combined or unitary Income Tax Returns for which they are
eligible to do so. WRI shall cause to be timely prepared and filed all such
consolidated, combined or unitary Returns. NewCorp agrees to cooperate with
WRI and its Affiliates in the preparation of the portions of such Returns
pertaining to each of the Acquired Subsidiaries. For purposes of this Section
6.15(a), WRI shall treat (and shall cause each of the Acquired Subsidiaries to
treat) the Closing Date as the last date of the taxable period of each of the
Acquired Subsidiaries in which they shall be included in such Returns. WRI
shall cause to be timely paid all Taxes to which such Returns relate for all
periods covered by such Returns.
(b) WRI shall cause to be timely prepared and filed all required Income Tax
Returns of each of the Acquired Subsidiaries (other than those to be filed by
WRI pursuant to paragraph (a) of this Section 6.15) for any period which ends
on or before the Closing Date for which Income Tax Returns have not been filed
as of the Closing Date. WRI shall pay all Taxes to which such Returns relate
for all periods covered by such Returns (after taking into account any
estimated Taxes paid prior to the Closing).
(c) NewCorp shall cause to be timely prepared and filed, subject to review
by WRI, all required Income Tax Returns of NewCorp and each of the Acquired
Subsidiaries for any period which begins before and ends after the Closing
Date (a "Straddle Period") and shall cause to be paid all Taxes with respect
to the Returns to be caused to be filed by NewCorp pursuant to this Section
6.15(c). Such Taxes to be caused to be paid by NewCorp, to the extent
attributable to the portion of a Straddle Period ending on the Closing Date,
shall be referred to herein as "Pre-Closing Straddle Period Income Taxes."
Except to the extent taken into account as a Current Liability in the
calculation of the Closing Working Capital, WRI shall pay to NewCorp an amount
equal to the Pre-Closing Straddle Period Income Taxes due with respect to any
such Returns caused to be filed by NewCorp (after taking into account any
estimated Taxes paid prior to the Closing). Such Pre-Closing Straddle Period
Income Taxes shall be calculated as though the taxable year of NewCorp and
each of the Acquired Subsidiaries terminated at the close of business on the
Closing Date; provided, however, that, in the case of a franchise Tax not
based on income, sales, receipts, or other transactions, Pre-Closing Straddle
Period Income Taxes shall be equal to the amount of franchise Tax for the
taxable year which would have been imposed if such Tax were determined based
on the assets and liabilities of NewCorp and each of the Acquired Subsidiaries
(as applicable) as of the Closing, multiplied by a fraction, the numerator of
which shall be the number of days from the beginning of the taxable year
through the Closing Date and the denominator of which shall be the number of
days in the taxable year. Any amounts owed by WRI to NewCorp pursuant to this
Section 6.15(c) shall be paid by WRI within five days of NewCorp's request
therefor or five days prior to the date on which NewCorp is required to cause
to be paid the related Tax liability, whichever is later.
(d) To the extent permitted by applicable Law, all Returns prepared pursuant
to this Section 6.15 shall be prepared in all material respects, and all
elections with respect to such Returns shall be made, consistent with prior
practice with respect to each of the Acquired Subsidiaries, except as may be
mutually agreed by NewCorp and WRI.
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(e) NewCorp shall, with the assistance of WRI, prepare and file or cause to
be prepared and filed all Returns with respect to Taxes described in Section
1.8.
6.16 Access to Information. From and after the Closing:
(a) WRI and each of its Affiliates shall grant to the Surviving Corporation
(or its designees) access at all reasonable times to all of the information,
books and records relating to the Surviving Corporation and its Subsidiaries
within the possession of WRI or any of its Affiliates (including work papers
and correspondence with taxing authorities), shall afford to the Surviving
Corporation (or its designees) the right (at the Surviving Corporation's
expense) to take extracts therefrom and to make copies thereof, and shall
render other reasonable assistance, to the extent reasonably necessary to
permit the Surviving Corporation or any of its Affiliates (or its designees)
to prepare Returns, to conduct negotiations with Tax authorities, to fulfill
an obligation to any Governmental Authority imposed by law, regulation or
order and to implement the provisions of, or to investigate or defend any
claims between the parties arising under, this Agreement.
(b) The Surviving Corporation shall grant or cause its Subsidiaries to grant
to WRI or any of its Affiliates (or its designees) access at all reasonable
times to all of the information, books and records relating to the Gas
Business within the possession of the Surviving Corporation, or its
Subsidiaries (including work papers and correspondence with taxing
authorities), shall afford to WRI (or its designees) the right (at WRI's
expense) to take extracts therefrom and to make copies thereof, and shall
render other reasonable assistance, to the extent reasonably necessary to
permit WRI (or its designees) to prepare Returns, to conduct negotiations with
Tax authorities, to fulfill an obligation to any Governmental Authority
imposed by law, regulation or order and to implement the provisions of, or to
investigate or defend any claims between the parties arising under, this
Agreement or otherwise.
(c) Each of the parties hereto will preserve and retain all schedules, work
papers and other documents relating to any Returns of or with respect to the
Gas Business or to any claims, audits or other proceedings affecting the Gas
Business until the expiration of the statute of limitations (including
extensions) applicable to the taxable period to which such documents relate or
until the final determination of any controversy with respect to such taxable
period, and until the final determination of any payments that may be required
with respect to such taxable period under this Agreement.
(d) Notwithstanding the foregoing provisions of this Section, neither the
Surviving Corporation nor WRI shall be required to grant or cause to be
granted to the other access to information, books and records or to furnish
extracts or copies thereof if such information, books and records also include
information regarding such party or any of its Affiliates unrelated to the Gas
Business. In such circumstances, such party shall either (i) provide
appropriately detailed summaries of the information contained therein, or (ii)
in providing extracts or copies thereof, redact the information relating to
such party or its Affiliates unrelated to the Gas Business.
(e) The information received by a party pursuant to this Section shall be
treated as if it were "Evaluation Material," and the receiving party hereunder
were the receiving party, under the Confidentiality Agreement.
6.17 Non-Competition. (a) In order to induce ONEOK to enter into this
Agreement, WRI covenants and agrees that from the Closing Date until the fifth
(5th) anniversary of the Closing Date, it shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly,
(i) own, manage, operate, join, control, finance or participate in the
ownership, management, operation, control or financing, of, or be connected
as a partner, principal, agent, representative, consultant or otherwise
with, or use or permit its name to be used in connection with, any local
natural gas distribution business or enterprise in the States of Kansas,
Oklahoma, or Missouri; or
(ii) solicit any contracts or business relationships involving local
natural gas distribution in the States of Kansas, Oklahoma, or Missouri.
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Notwithstanding the foregoing, nothing in this Section 6.17 shall prohibit
WRI or its Subsidiaries from: (A) acquiring and retaining any entity which
engages (at the time of such acquisition or thereafter) in one or more
business(es) which compete(s) with the Surviving Corporation in the business
of local natural gas distribution in the States of Kansas, Oklahoma and/or
Missouri, provided that the assets of such competing business(es) do not
constitute more than 20% of the consolidated assets of such acquired entity at
the time of such acquisition (or thereafter, during the term of this
Agreement); or (B) acquiring, in the aggregate, "beneficial ownership" (as
defined under the Exchange Act) of not more than 20% of any class of publicly-
traded equity securities or any profit or loss interest in any publicly-held
entity which competes with the Surviving Corporation in the business of local
natural gas distribution, in the States of Kansas, Oklahoma and/or Missouri.
(b) If any part of the restrictions set forth in Section 6.17(a) should, for
any reason whatsoever, be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of such
restriction shall not thereby be adversely affected and shall be enforced to
the full extent permitted by law. If any of such restrictions are deemed to be
unreasonable by a court of competent jurisdiction, then WRI shall submit to
the reduction or modification thereof as said court deems reasonable.
(c) The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of Section 6.17, Section 6.18, Section 6.19
or Section 6.20 were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Section
6.17, Section 6.18 or Section 6.19 and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
6.18 Use of Name. From and after the Closing, neither WRI nor any of its
Subsidiaries shall use the name "Mid Continent Market Center," or any similar
name.
6.19 Standstill. WRI agrees that, for the period from the Original Execution
Date through the Closing, except as expressly contemplated by the Asset
Transaction or as permitted by this Agreement, including without limitation
Section 5.2(b) hereof, it shall not, and shall not permit any of its
Subsidiaries to, (a) in any manner acquire, agree to acquire or make any
proposal to acquire, directly or indirectly, any securities or property of
ONEOK or any of its Subsidiaries, (b) except at the specific written request
of ONEOK, propose to enter into, directly or indirectly, any merger or
business combination involving ONEOK or any of its Subsidiaries or to
purchase, directly or indirectly, a material portion of the assets of ONEOK or
any of its Subsidiaries, (c) make, or in any way participate, directly or
indirectly, in any "solicitation" or "proxies" (as such terms are used in the
proxy rules of the SEC) to vote, or seek to advise or influence any person
with respect to the voting of, any voting securities of ONEOK or any of its
Subsidiaries, (d) form, join or in any way participate in a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with respect to any
voting security of ONEOK or any of its Subsidiaries, (e) otherwise act, alone
or in concert with others, to seek to control or influence the management,
Board of Directors or policies of ONEOK, (f) disclose any intention, plan or
arrangement inconsistent with the foregoing or (g) advise, assist or encourage
any other persons in connection with any of the foregoing. WRI also agrees
during such period not to (i) request ONEOK (or its directors, officers,
employees or agents), directly or indirectly, to amend or waive any provision
of this Section 6.19 (including this sentence), or (ii) take any action which
might require ONEOK to make a public announcement regarding the possibility of
a business combination or merger.
6.20 Control Share Acquisitions Provisions. At the earlier of NewCorp's
first annual meeting of its shareholders after the Merger Effective Time
(provided that the Merger Effective Time shall have occurred at least 60 days
prior to the annual meeting), or at a special meeting to be held no later than
120 days after the Merger Effective Time, NewCorp shall, through its Board of
Directors, propose and recommend and use its best efforts to obtain, approval
of an amendment (the "Opt-out Amendment") to the NewCorp Charter that provides
(i) that Sections 1145 through 1155 of Title 18 of the Oklahoma Statutes, as
the same may be amended (the "Control Share Acquisition Statute") shall not
apply to NewCorp as of a date no more than two days after the date of such
shareholders' meeting and (ii) that such Opt-out Amendment may be further
amended only by the affirmative vote of at least sixty-six and two-thirds per
cent (66 2/3%) of the voting power of all outstanding equity securities of New
ONEOK, voting as a class, and shall properly file the Opt-out Amendment, if so
approved, with the Secretary of State of Oklahoma pursuant to Section
1148(E)(1) of Title 18 of the Oklahoma Statutes.
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6.21 Further Assurances. Subject to the terms and conditions of this
Agreement, each of ONEOK and WRI shall use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Transactions and the other transactions
contemplated by this Agreement, including the satisfaction of the conditions
specified in Article VII of this Agreement. In case at any time after the
Merger Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement shall take all necessary actions to the extent not
inconsistent with their other duties and obligations or applicable law.
6.22 Insurance. To the extent reasonably requested by the Surviving
Corporation, at the direction and expense of the Surviving Corporation, WRI
will assist the Surviving Corporation in pursuing any claims under insurance
policies relating to the Gas Business and enforcing any claims or rights under
such policies.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Transactions. The
respective obligation of each party to consummate the Transactions and the
other transactions contemplated hereby and by the Ancillary Documents shall be
subject to satisfaction prior to the Closing Date of the following conditions:
(a) ONEOK Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the affirmative vote of the holders of a majority
of the outstanding votes of ONEOK Common Stock.
(b) NYSE Listing. The shares of NewCorp Common Stock issuable to ONEOK
shareholders pursuant to this Agreement and such other shares of NewCorp
Common Stock required to be reserved for issuance in connection with the
Merger shall have been authorized for listing on the NYSE upon official notice
of issuance.
(c) Other Approvals. The waiting period applicable to the consummation of
the Transactions and the other transactions contemplated by the Transfer
Documents, this Agreement and the Ancillary Documents shall have expired or
been terminated and all filings required to be made prior to the relevant
Merger Effective Time with, and all consents, approvals, permits and
authorizations required to be obtained prior to the relevant Merger Effective
Time from, any Governmental Entity in connection with the execution and
delivery of this Agreement and the consummation of the Transactions and the
other transactions contemplated hereby and by the Ancillary Documents by
ONEOK, WRI and NewCorp shall have been made or obtained (as the case may be),
except for such consents, approvals, permits and authorizations the failure of
which to be obtained would not, in the aggregate, be reasonably likely to
result in a Material Adverse Effect on ONEOK or the Gas Business or to
materially adversely affect the consummation of the Transactions and the other
transactions contemplated hereby and by the Ancillary Documents or the
economic and strategic benefits to be achieved by the party invoking these
conditions, and no such consent, approval, permit or authorization shall
impose terms or conditions that would have, or would be reasonably likely to
have, a Material Adverse Effect on ONEOK or the Gas Business.
(d) Form S-4. The Form S-4 shall have become effective under the Securities
Act and shall not be the subject of any stop order or proceedings seeking a
stop order.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction, no order of any Governmental Entity having
jurisdiction over ONEOK, WRI or the Gas Business, and no other legal restraint
or prohibition shall be in effect (an "Injunction") preventing or making
illegal the consummation of the Transactions or the other transactions
contemplated hereby and by the Ancillary Documents; provided, however, that
prior to any party invoking this condition, such party shall have complied
fully with its obligations under Section 6.6.
(f) Shareholder Agreement; Other Agreements. The Shareholder Agreement shall
be executed and delivered by WRI and NewCorp. WRI and ONEOK, on behalf of
NewCorp, shall have entered into a Shared
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Services Agreement (the "Shared Services Agreement") relating to functions and
services where synergies can be achieved between the parties to avoid
unnecessary duplication of expenses and a Marketing Agreement (the "Marketing
Agreement") in form, scope and substance reasonably satisfactory to WRI and
ONEOK.
(g) 1935 Act. Receipt of an order of the SEC under Section 9(a)(2) of the
1935 Act authorizing the Merger and receipt of an order or no-action letter
from the SEC or its Staff that WRI will not be a holding company under Section
2(a)(7) of the 1935 Act and that NewCorp will not be a subsidiary company
under Section 2(a)(8) of the 1935 Act for the purposes of the 1935 Act as a
result of the Merger, in each case, not materially impairing the economic and
strategic benefits of the Transactions and the other transactions contemplated
by this Agreement to WRI or ONEOK.
7.2 Conditions of Obligations of WRI and NewCorp. The obligations of WRI and
NewCorp to consummate the Transactions and the other transactions contemplated
hereby and by the Ancillary Documents is subject to the of the following
conditions, any or all of which may be waived in whole or in part by WRI and
NewCorp.
(a) Representations and Warranties. Each of the representations and
warranties of ONEOK set forth in this Agreement shall be true and correct in
all material respects as of the Original Execution Date, the Amendment Date
and the Closing Date as if made on or as of each such date (except to the
extent any such representation or warranty speaks as of a specific date),
except where the failure to be so true and correct (without giving effect to
the individual materiality qualifications and thresholds otherwise contained
in Section 4.1 hereof) could not reasonably be expected to have a Material
Adverse Effect on ONEOK or as otherwise contemplated by this Agreement, and
WRI shall have received a certificate signed by the Chief Executive Officer
and the Chief Financial Officer of ONEOK to such effect.
(b) Performance of Obligations of ONEOK. ONEOK shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and WRI shall have received a
certificate signed on behalf of ONEOK by the Chief Executive Officer and the
Chief Financial Officer of ONEOK to such effect.
(c) Tax Opinion. WRI shall have received (x) either (i) an opinion of
Sullivan & Cromwell, counsel to WRI, in form and substance reasonably
satisfactory to WRI, dated the Closing Date, or (ii) a private letter ruling
from the IRS, in each case to the effect that, if the Asset Transaction is
consummated in accordance with the terms of this Agreement the Asset
Transaction will be treated for federal Income Tax purposes as a transfer
described in Section 351 of the Code and (y) the opinion of Fried, Frank,
Harris, Shriver & Jacobson delivered to ONEOK pursuant to Section 7.3(c), to
the effect that, if the Merger is consummated in accordance with the terms of
this Agreement, the Merger will be treated for federal Income Tax purposes as
a reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinion, Sullivan & Cromwell may receive and rely upon
appropriate representations of fact, including facts contained in certificates
of WRI and ONEOK, which representations are in form and substance reasonably
satisfactory to such counsel.
(d) Required Consents. The ONEOK Required Consents and the WRI Required
Consents shall have been obtained, except for such ONEOK Required Consents or
WRI Required Consents the failure of which to be obtained would not have a
Material Adverse Effect on ONEOK or WRI, as the case may be.
(e) KCC Order. The KCC Order shall be in such form and substance and shall
cover such matters as shall be reasonably satisfactory to WRI.
(f) Pooling of Interests. WRI shall have received a letter from Arthur
Andersen, L.L.P., its independent public accountants (based on consultation
with the office of the Chief Accountant of the SEC) stating that, as a result
of the consummation of the Transactions and the other transactions
contemplated by this Agreement, WRI shall not be precluded from accounting for
any potential business combination between WRI and Kansas City Power & Light
Company as a "pooling of interests" as defined by Accounting Principles
Bulletin No. 16 (APB 16) regarding Accounting for Business Combinations and
SEC or SEC Staff interpretations thereunder.
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(g) OCC Order. The OCC Order shall be in such form and substance and shall
cover such matters as shall be reasonably satisfactory to WRI.
7.3 Conditions of Obligations of ONEOK. The obligation of ONEOK to effect
the Transactions and the other transactions contemplated hereby and by the
Ancillary Documents is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by ONEOK:
(a) Representations and Warranties. Each of the representations and
warranties of WRI and NewCorp set forth in this Agreement shall be true and
correct in all material respects as of the Original Execution Date, the
Amendment Date and the Closing Date as if made on or as of each such date
(except to the extent any such representation or warranty speaks as of a
specific date), except where the failure to be so true and correct (without
giving effect to the individual materiality qualifications and thresholds
otherwise contained in Section 4.2 hereof) could not reasonably be expected to
have a Material Adverse Effect on the Gas Business or as otherwise
contemplated by this Agreement, and ONEOK shall have received a certificate
signed by the Chief Executive Officer and the Chief Financial Officer of WRI
to such effect.
(b) Performance of Obligations of NewCorp and WRI. Each of WRI and NewCorp
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and
ONEOK shall have received a certificate signed on behalf of WRI by the Chief
Executive Officer and the Chief Financial Officer of WRI to such effect.
(c) Tax Opinion. ONEOK shall have received (x) an opinion of Fried, Frank,
Harris, Shriver & Jacobson, counsel to ONEOK, in form and substance reasonably
satisfactory to ONEOK, dated the Closing Date, to the effect that, if the
Merger is consummated in accordance with the terms of this Agreement, the
Merger will be treated for federal Income Tax purposes as a reorganization
within the meaning of Section 368(a) of the Code and (y) either (i) the
opinion of Sullivan & Cromwell delivered to WRI pursuant to Section 7.2(c) or
(ii) a private letter ruling from the IRS, in each case to the effect that, if
the Asset Transaction is consummated in accordance with the terms of this
Agreement, the Asset Transaction will be treated for federal Income Tax
purposes as a transfer described in Section 351 of the Code, a copy of each of
which will be furnished to Donald A. Kihle of Arrington Kihle Gaberino & Dunn,
counsel to ONEOK. In rendering such opinion, Fried, Frank, Harris, Shriver &
Jacobson may receive and rely upon appropriate representations of fact,
including facts contained in certificates of NewCorp, WRI and ONEOK and
certain stockholders and members of management of ONEOK and NewCorp, which
representations are in form and substance reasonably satisfactory to such
counsel.
(d) Required Consents. The WRI Required Consents and the ONEOK Required
Consents shall have been obtained, except for such WRI Required Consents or
ONEOK Required Consents the failure of which to be obtained would not have a
Material Adverse Effect on the Gas Business or ONEOK, as the case may be.
(e) Asset Transaction. The Asset Transaction shall have been consummated
pursuant to this Agreement, the Ancillary Documents and the Transfer
Documents, which Transfer Documents shall be in form and substance reasonably
satisfactory to ONEOK.
(f) OCC Order. The OCC Order shall be in such form and substance and cover
such matters as shall be reasonably satisfactory to ONEOK.
(g) KCC Order. The KCC Order shall be in such form and substance and shall
cover such matters as shall be reasonably satisfactory to ONEOK.
ARTICLE VIII
EMPLOYEE AND EMPLOYEE MATTERS; ENVIRONMENTAL MATTERS
The terms of the Employee Agreement, in the form attached hereto as Exhibit
D (the "Employee Agreement") and the Environmental Indemnity Agreement, in the
form attached hereto as Exhibit E (the "Environmental Indemnity Agreement")
are hereby incorporated herein by reference as if fully set forth herein.
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ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Merger Effective Time, whether before or
after the matters presented in connection with the Merger have been approved
by the stockholders of ONEOK:
(a) by mutual written consent of ONEOK and WRI or by mutual action of their
respective Boards of Directors;
(b) by either ONEOK or WRI if (i) any Governmental Entity shall have issued
any Injunction or taken any other action permanently restraining, enjoining or
otherwise prohibiting the consummation of the Transactions or the other
transactions contemplated by this Agreement and the Ancillary Documents and
such Injunction or other action shall have become final and nonappealable; or
(ii) the ONEOK Stockholders' Approval shall not have been obtained by reason
of the failure to obtain the required vote upon a vote held at the ONEOK
Stockholders' Meeting, or at any adjournment thereof;
(c) by either ONEOK or WRI if the Merger shall not have been consummated by
the first anniversary of the Original Execution Date (the "Initial Termination
Date"); provided, however, that the right to terminate this Agreement under
this Section 9.1(c) shall not be available to any party whose breach of any
representation or warranty or failure to fulfill any covenant or agreement
under this Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date; and provided further, that if on the
Initial Termination Date the conditions to the Closing set forth in Section
7.1(d) shall not have been fulfilled but all other conditions to the Closing
shall have been fulfilled or shall be capable of being fulfilled, then the
Initial Termination Date shall be extended to June 30, 1998;
(d) by WRI if (i) for any reason ONEOK fails to call and hold the ONEOK
Stockholders' Meeting for the purpose of voting upon this Agreement and the
Merger by July 31, 1997 (provided that the right to terminate this Agreement
under this Section 9.1(d) shall not be available to WRI if (x) the Form S-4
shall not have been declared effective by the SEC at least 45 days prior to
the date of termination or (y) ONEOK would be entitled to terminate this
Agreement under Section 9.1(e)); (ii) ONEOK shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by ONEOK at or prior to such date
of termination (provided such breach has not been cured within 30 days
following receipt by ONEOK of notice of such breach and is existing at the
time of termination of this Agreement); (iii) any representation or warranty
of ONEOK contained in this Agreement shall not be true and correct in all
material respects when made or on or at the time of termination as if made on
such date of termination (except to the extent it relates to a particular
date) provided such breach has not been cured within 30 days following receipt
by ONEOK of notice of such breach and is existing at the time of termination
of this Agreement, except where the failure to be so true and correct (without
giving effect to the individual materiality qualifications and thresholds
otherwise contained in Section 4.1 hereof) could not reasonably be expected to
have a Material Adverse Effect on ONEOK; (iv) after the Original Execution
Date there has been any Material Adverse Change with respect to ONEOK; or (v)
any Governmental Entity shall have issued any Injunction or taken any other
action permanently imposing, prohibiting or compelling any of the limitations,
prohibitions or compulsions specified in Section 7.1(e) and such Injunction or
other action shall have become final and nonappealable;
(e) by ONEOK if (i) WRI or NewCorp shall have failed to comply in any
material respect with any of their covenants or agreements contained in this
Agreement to be complied with or performed by them at or prior to such date of
termination (provided such breach has not been cured within 30 days following
receipt by WRI and NewCorp of notice of such breach and is existing at the
time of termination of this Agreement); (ii) any representation or warranty of
WRI and/or NewCorp contained in this Agreement shall not be true and correct
in all material respects when made or on or at the time of termination as if
made on such date of termination (except
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to the extent it relates to a particular date) provided such breach has not
been cured within 30 days following receipt by WRI and NewCorp of notice of
such breach and is existing at the time of termination of this Agreement,
except where the failure to be so true and correct (without giving effect to
the individual materiality qualifications and thresholds otherwise contained
in Section 4.2 hereof) could not reasonably be expected to have a Material
Adverse Effect on the Gas Business; (iii) after the Original Execution Date
there has been any Material Adverse Change with respect to the Gas Business;
or (iv) any Governmental Entity shall have issued any Injunction or taken any
other action permanently imposing, prohibiting or compelling any of the
limitations, prohibitions or compulsions specified in Section 7.1(e) and such
Injunction or other action shall have become final and nonappealable.
9.2 Effect of Termination. (a) In the event of termination of this Agreement
by any party hereto as provided in Section 9.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of WRI,
NewCorp or ONEOK except (i) with respect to this Section 9.2, the second and
third sentences of Section 6.4, Section 9.3 and Article X, and (ii) a party
shall be liable to the extent that such termination results from the willful
breach by such party hereto of any of its representations or warranties or of
any of its covenants or agreements contained in this Agreement.
(b) If WRI or ONEOK terminates this Agreement pursuant to Section 9.1(b)(ii)
and, at the time of the ONEOK Stockholders' Meeting, there shall be
outstanding and publicly announced, an Acquisition Proposal, ONEOK shall,
within 3 days after WRI delivers to ONEOK the Expense Reimbursement Letter (as
such term is herein defined), reimburse WRI for all expenses incurred by WRI
and its Subsidiaries in connection with the Transactions and the other
transactions contemplated hereby and by the Ancillary Documents, up to
$1,500,000, as specified in writing by WRI to ONEOK (such writing shall be
referred to herein as the "Expense Reimbursement Letter"), by a payment in
cash by wire transfer of immediately available funds to an account designated
by WRI (the "Reimbursed Expenses"). In addition, upon the consummation of an
Acquisition Proposal which was entered into within 12 months after termination
of the Agreement pursuant to Section 9.1(b), whereby ONEOK shall be obligated
to reimburse WRI for expenses pursuant to this Section 9.2(b), ONEOK shall pay
WRI, by a payment in cash by wire transfer of immediately available funds to
an account designated by WRI, an amount equal to $20,000,000 less the amount
of the Reimbursed Expenses.
(c) If WRI terminates this Agreement as a result of the failure to be
satisfied of the condition specified in Section 7.2(e) or, if ONEOK terminates
this Agreement as a result of the failure to be satisfied of the condition
specified in Section 7.3(f), then the terminating party shall promptly
reimburse the non-terminating party for expenses reasonably incurred by the
non-terminating party in connection with this Agreement in an amount not to
exceed $1,500,000.
9.3 Expenses. The parties agree that the agreements contained in Section 9.2
are an integral part of the Transactions and the other the transactions
contemplated by this Agreement and by the Ancillary Documents and represent
liquidated damages and are not a penalty. Notwithstanding anything to the
contrary contained in Section 9.2, if one party fails to promptly pay to the
other any fee due under Section 9.2, in addition to any amounts paid or
payable pursuant to such Section, the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the
publicly announced prime interest rate of Citibank, N.A. from the date such
fee was required to be paid. Except as otherwise provided in this Agreement,
ONEOK shall pay its fees and expenses, and WRI shall pay its fees and expenses
and the fees and expenses of NewCorp, incurred in connection with the
Transactions and the other transactions contemplated hereby and by the
Ancillary Documents.
9.4 Amendment. This Agreement may be amended by mutual agreement of ONEOK,
WRI and NewCorp, by action taken or authorized by their respective Boards of
Directors, at any time prior to the Merger Effective Time. This Agreement may
not be amended except by an instrument in writing signed on behalf of each the
parties hereto.
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9.5 Extension; Waiver. At any time prior to the Merger Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto; (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto; and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party.
ARTICLE X
INDEMNIFICATION
10.1 General Indemnification. (a) WRI hereby agrees to indemnify ONEOK and
its Affiliates (including from and after the Closing, the Surviving
Corporation) and their respective officers, directors, employees,
stockholders, agents and representatives against, and agrees to hold them
harmless from, any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) ("Losses"), as incurred (payable quarterly
upon written request), for or on account of or arising from or in connection
with or otherwise with respect to (i) any breach of any covenant of WRI
contained in this Agreement or any document delivered in connection herewith
and (ii) the Retained Liabilities.
(b) ONEOK, and from and after the Closing, the Surviving Corporation, hereby
agrees to indemnify WRI and its Affiliates and their respective officers,
directors, employees, stockholders, agents and representatives against, and
agrees to hold them harmless from, any Losses, as incurred (payable quarterly
upon written request), for or on account of or arising from or in connection
with or otherwise with respect to (i) any breach of any covenant of ONEOK
contained in this Agreement or any document delivered in connection herewith
and (ii) the Assumed Liabilities.
(c) In order for a party (the "indemnified party"), to be entitled to any
indemnification provided for under this Agreement in respect of, arising out
of or involving a claim made by any person against the indemnified party (a
"Third Party Claim"), such indemnified party must notify the indemnifying
party in writing of the Third Party Claim within a reasonable time after
receipt by such indemnified party of written notice of the Third Party Claim
unless the indemnifying party shall have previously obtained actual knowledge
thereof. Thereafter, the indemnified party shall deliver to the indemnifying
party, within a reasonable time after the indemnified party's receipt thereof,
copies of all notices and documents (including court papers) received by the
indemnified party relating to the Third Party Claim.
(d) If a Third Party Claim is made against an indemnified party, the
indemnifying party will be entitled to participate in the defense thereof and,
if is so chooses, to assume the defense thereof with counsel selected by the
indemnifying party; provided such counsel is not reasonably objected to by the
indemnified party; and provided further that the indemnifying party first
admits in writing its liability to the indemnified party with respect to all
material elements of such claim. Should the indemnifying party so elect to
assume the defense of a Third Party Claim, the indemnifying party will not be
liable to the indemnified party for any legal expenses subsequently incurred
by the indemnified party in connection with the defense thereof. If the
indemnifying party elects to assume the defense of a Third Party Claim, the
indemnified party will (i) cooperate in all reasonable respects with the
indemnifying party in connection with such defense, (ii) not admit any
liability with respect to, or settle, compromise or discharge, any Third Party
Claim without the indemnifying party's prior written consent and (iii) agree
to any settlement, compromise or discharge of a Third Party Claim which the
indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the indemnified party completely in
connection with such Third Party Claim and which would not adversely affect
the business carried on by the indemnified party. In the event the
indemnifying party shall assume the defense of any Third Party Claim, the
indemnified party shall be entitled to participate in (but not control) such
defense with its own counsel at its own expense. If the
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indemnifying party does not assume the defense of any such Third Party Claim,
the indemnified party may defend the same in such manner as it may deem
appropriate, including but not limited to settling such claim or litigation
after giving notice to the indemnifying party of such terms and the
indemnified party will promptly reimburse the indemnified party upon written
request. Anything contained in this Agreement to the contrary notwithstanding,
the indemnifying party shall not be entitled to assume the defense of any
Third Party Claim if the Third Party Claim seeks an order, injunction or other
equitable relief or relief for other than money damages against the
indemnified party which, if successful, would adversely affect the business of
the indemnified party.
10.2 Tax Indemnification and Audits. (a) From and after the Closing, WRI
shall indemnify and hold harmless the Surviving Corporation and each of the
Acquired Subsidiaries against (i) any and all liability assessed against the
Surviving Corporation or any of the Acquired Subsidiaries for Income Taxes
with respect to taxable periods ending on or before the Closing Date; (ii) any
liability assessed against the Surviving Corporation or any of the Acquired
Subsidiaries by reason of the Surviving Corporation or any of the Acquired
Subsidiaries being severally liable for Income Taxes of WRI or any of its
Affiliates pursuant to Treasury Regulation Section 1.1502-6 (or any analogous
provision of state, local or foreign tax law); and (iii) except to the extent
taken into account as a Current Liability in the calculation of Closing
Working Capital, any liability for Pre-Closing Straddle Period Income Taxes
assessed against the Surviving Corporation or any of the Acquired Subsidiaries
(other than Pre-Closing Straddle Period Income Taxes for which WRI has paid
the Surviving Corporation pursuant to Section 6.15(c)), including without
limitation in each of (i) through (iii) above, any liability resulting from
changes made on audit. For purposes of clauses (i) and (iii) of the preceding
sentence, the taxable year of any partnership or other pass-through entity in
which WRI, the Surviving Corporation or any of the Acquired Subsidiaries is a
partner or other beneficial interest holder shall be deemed to terminate at
the close of business on the Closing Date. Any indemnification payable by WRI
to the Surviving Corporation or any of the Acquired Subsidiaries pursuant to
this Section 10.2(a) shall be paid within the later of five days of the
Surviving Corporation's request therefor and five days prior to the date on
which the liability upon which the indemnification is based is required to be
satisfied by the Surviving Corporation or any of the Acquired Subsidiaries as
the case may be.
(b) Each party shall promptly notify the other in writing upon receipt of
notice of any pending or threatened federal, state, local or foreign Tax
audits or assessments which may affect the Tax liabilities of the Surviving
Corporation or any of the Acquired Subsidiaries with respect to periods ending
on or before the Closing Date; provided, however, that the failure of the
Surviving Corporation to give WRI prompt notice as provided herein shall not
relieve WRI of any of its obligations hereunder, except to the extent that
WRI's position is actually and materially prejudiced as a result of such
failure. WRI shall, at its own expense, control any audit or determination by
any authority, initiate any claim for refund or amended return, and contest,
resolve and defend against any assessment, notice of deficiency, or other
adjustment or proposed adjustment of Income Taxes of the Surviving Corporation
or any of the Acquired Subsidiaries (collectively, an "Income Tax Contest")
attributable to taxable periods ending on or before the Closing Date, and
shall be responsible for the timely payment of any liability for Income Taxes
that relate to such periods; provided, however, that to the extent such audit
or assessment relates to an Income Tax for which the Surviving Corporation or
any of the Acquired Subsidiaries could be held liable or affects the amount of
Income Taxes to be paid or caused to be paid by the Surviving Corporation, the
Surviving Corporation shall have the right to participate in any such Income
Tax Contest in the manner it deems appropriate and WRI shall be prohibited
from reaching a settlement with regard to such Income Tax Contest without the
Surviving Corporation's consent, which consent shall not be unreasonably
withheld. The Surviving Corporation shall, at its own expense, control all
Income Tax Contests attributable to taxable periods ending after the Closing
Date, and shall be responsible for the timely payment of any liability for
Income Taxes that relate to such periods; provided, however, that to the
extent such audit or assessment relates to an Income Tax for which WRI could
be held liable or affects the amount of Income Taxes to be paid or caused to
be paid by WRI, WRI shall have the right to participate in any such Income Tax
Contest in the manner it deems appropriate and the Surviving Corporation shall
be prohibited from reaching a settlement with regard to such Income Tax
Contest without WRI's consent, which consent shall not be unreasonably
withheld.
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(c) Any refunds or credits of Income Taxes of any of the Acquired
Subsidiaries received by or credited to the Surviving Corporation or any of
the Acquired Subsidiaries attributable to periods ending on or before the
Closing Date or to such portions of Straddle Periods ending at the close of
business on the Closing Date, (collectively, "WRI's Refunds"), shall be for
the benefit of WRI. The Surviving Corporation shall cause any such refund (net
of any Tax liability resulting from such refund) to be paid to WRI within ten
days of the Surviving Corporation's or any of the Acquired Subsidiaries'
receipt thereof.
(d) WRI agrees that if any of the Acquired Subsidiaries carries back any
item of loss, deduction or credit which arises in any taxable period ending
after the Closing Date into any taxable period beginning before the Closing
Date, then such Acquired Subsidiary shall be entitled to any Tax benefit or
refund of Taxes realized as a result thereof (after giving priority to any
existing Tax attributes of WRI). The Surviving Corporation and WRI shall
negotiate in good faith to resolve any dispute with respect to the calculation
of any such benefit. Any unresolved disputes with respect to the calculation
of any such Tax benefits shall be submitted to a "Big Six" accounting firm for
arbitration, the costs of which shall be shared equally by the Surviving
Corporation and WRI.
ARTICLE XI
GENERAL PROVISIONS
11.1 Confidentiality Agreement. The Confidentiality Agreement shall survive
the execution and delivery of this Agreement and the provisions of the
Confidentiality Agreement shall apply to all information and material
delivered hereunder.
11.2 Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by certified or registered mail, postage prepaid, and shall be deemed
to be given, dated and received when so delivered personally, telegraphed or
telecopied, if mailed, five business days after the date of mailing to the
following address or telecopy number, or to such other address or addresses as
such person may subsequently designate by notice given hereunder:
(a) if to WRI or NewCorp (prior to the Merger Effective Time):
Western Resources, Inc.
818 Kansas Avenue
Topeka, Kansas 66612
Attention: President
with copies to:
Western Resources, Inc.
818 Kansas Avenue
Topeka, Kansas 66612
Attention: John K. Rosenberg, Esq.
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Francis J. Aquila, Esq.
(b) if to ONEOK or the Surviving Corporation (after the Merger Effective
Time), to:
ONEOK Inc.
100 West Fifth Street
Tulsa, Oklahoma 74103
Attention: President
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with copies to:
Gable Gotwals Mock Schwabe Kihle Gaberino
100 W. Fifth Street, Suite 1000
Tulsa, Oklahoma 74103
Attention: Donald A. Kihle, Esq.
and
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: F. William Reindel, Esq.
11.3 Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents, glossary of defined terms and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Whenever
words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." Unless the
context otherwise requires, "or" is disjunctive but not necessarily exclusive,
and words in the singular include the plural and in the plural include the
singular.
11.4 Counterparts. This Agreement may be executed in two or more
counterparts all of which shall be considered one and the same agreement and
become effective when two or more counterparts have been signed by each of
parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
11.5 Entire Agreement; No Third Party Beneficiaries. This Agreement as
amended and restated (together with the Confidentiality Agreements, the
Ancillary Documents and any other documents and instruments referred to
herein) (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereto, and (b) except as expressly provided
herein, is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
11.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
11.7 No Remedy in Certain Circumstances. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or
part to be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby, unless the foregoing inconsistent action or the failure
to take an action constitutes a material breach of this Agreement or makes
this Agreement impossible to perform, in which case this Agreement shall
terminate pursuant to Article IX hereof. Except as otherwise contemplated by
this Agreement, to the extent that a party hereto took an action inconsistent
herewith or failed to take action consistent herewith or required hereby
pursuant to an order or judgment of a court or other competent authority, such
party shall not incur any liability or obligation unless such party breached
its obligations under Section 6.6 or did not in good faith seek to resist or
object to the imposition or entering of such order or judgment.
11.8 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
11.9 Bulk Sales Law. The parties hereto each waive compliance by the other
with the provisions of any applicable bulk transfer law and the provisions of
any statute of any other state or jurisdiction regulating bulk sales or
transfers which may be applicable to the transfer of assets.
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11.10 Non-Survival of Representations and Warranties. The representations
and warranties of the parties hereto shall not survive the Closing.
IN WITNESS WHEREOF, each party has caused this Agreement to be signed by
respective officers thereunto duly authorized, all as of the Amendment Date.
ONEOK INC.
/s/ Larry W. Brummett
By: _________________________________
Name: Larry W. Brummett
Title: Chairman of the Board
WESTERN RESOURCES, INC.
/s/ David C. Wittig
By: _________________________________
Name: David C. Wittig
Title: President
WAI, INC.
/s/ Richard D. Terrill
By: _________________________________
Name: Richard D. Terrill
Title: Secretary and Treasurer
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APPENDIX B
FORM OF SHAREHOLDER AGREEMENT
BETWEEN
WAI, INC.,
AN OKLAHOMA CORPORATION
AND
WESTERN RESOURCES, INC.,
A KANSAS CORPORATION
DATED AS OF , 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
CERTAIN DEFINITIONS
<C> <S> <C>
Section 1.1. ............................................................. B-1
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of the Company.............. B-6
Section 2.2. Representations and Warranties of the Shareholder.......... B-7
ARTICLE III
SHAREHOLDER AND COMPANY CONDUCT
Section 3.1. Standstill Provision....................................... B-7
Section 3.2. Required Reduction of Ownership Percentage................. B-8
Section 3.3. Top-Up Rights; Dilutive Issuance Right..................... B-8
Section 3.4. Restrictions on Transfer................................... B-10
Section 3.5. Buy-Back Options........................................... B-11
Section 3.6. Buy/Sell Option............................................ B-11
Section 3.7. Charter and By-Laws........................................ B-12
Section 3.8. Rights Agreement........................................... B-13
Section 3.9. Agreement Not to Convert................................... B-13
Section 3.10. Taxes Upon Conversion or Exchange.......................... B-13
Section 3.11. Make Whole Payment......................................... B-13
Section 3.12. Prohibition on Senior Securities........................... B-13
ARTICLE IV
BOARD REPRESENTATION AND VOTING
Section 4.1. Directors Designated by the Shareholder.................... B-13
Section 4.2. Resignation of Shareholder Nominees........................ B-15
Section 4.3. Voting..................................................... B-15
ARTICLE V
EFFECTIVENESS AND TERMINATION
Section 5.1. Effectiveness.............................................. B-16
Section 5.2. Termination................................................ B-16
ARTICLE VI
MISCELLANEOUS
Section 6.1. Compliance With Law........................................ B-17
Section 6.2. Regulatory Matters......................................... B-17
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Section 6.3. Injunctive Relief.......................................... B-18
Section 6.4. Successors and Assigns..................................... B-18
Section 6.5. Amendments; Waiver......................................... B-18
Section 6.6. Notices.................................................... B-18
Section 6.7. Applicable Law............................................. B-19
Section 6.8. Headings................................................... B-19
Section 6.9. Integration................................................ B-19
Section 6.10. Severability............................................... B-19
Section 6.11. Consent to Jurisdiction.................................... B-19
Section 6.12. Counterparts............................................... B-20
</TABLE>
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<PAGE>
SHAREHOLDER AGREEMENT, dated as of , 1997 (this "Agreement"), between
WAI, Inc., an Oklahoma corporation (the "Company"), and Western Resources,
Inc., a Kansas corporation (the "Shareholder").
W I T N E S S E T H:
WHEREAS, the Shareholder, the Company, and ONEOK, Inc., a Delaware
corporation ("ONEOK") have entered into an Agreement, dated as of December 12,
1996, amended and restated as of May 19, 1997 (the "Merger Agreement"),
pursuant to which ONEOK has been merged with and into the Company (the
"Merger") and the Shareholder has acquired pursuant to the transactions
contemplated thereby Beneficial Ownership (as defined in Article I hereof) of
2,996,702 shares of common stock of the Company, par value $.01 per share (the
"Common Stock") and 19,317,584 shares of Series A Convertible Preferred Stock
of the Company, par value $.01 per share (together with the Company's Series B
Convertible Preferred Stock, the "Convertible Preferred Stock");
WHEREAS, prior to the consummation of the Merger (the "Closing"), the
Company and the Shareholder desire to establish in this Agreement certain
terms and conditions concerning the acquisition and disposition of securities
of the Company by the Shareholder, and related provisions concerning the
Shareholder's relationship with and investment in the Company; and
WHEREAS, concurrently with the execution and delivery hereof, the Company
and the Shareholder are entering into a Registration Rights Agreement, dated
as of the date hereof (the "Registration Rights Agreement"), in the form
attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. In addition to other terms defined elsewhere in this Agreement,
as used in this Agreement, the following terms shall have the meanings
ascribed to them below:
"Adjusted Maximum Ownership Percentage" shall mean the Maximum Ownership
Percentage minus 10.0%.
"Affiliate" shall mean, with respect to any person, any other person that
directly or indirectly through one or more intermediaries controls or is
controlled by or is under common control with such person. For the purposes of
this definition, "control," when used with respect to any particular person,
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" shall have the meaning assigned to such term in the introduction
hereto.
"Beneficial Owner" (and, with correlative meanings, "Beneficially Own" and
"Beneficial Ownership") of any interest means a Person who, together with his
or its Affiliates, is or may be deemed a beneficial owner of such interest for
purposes of Rule 13d-3 or 13d-5 under the Exchange Act, or who, together with
his or its Affiliates, has the right to become such a beneficial owner of such
interest (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding, or
upon the exercise, conversion or exchange of any warrant, right or other
instrument, or otherwise.
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<PAGE>
"Board" shall mean the Board of Directors of the Company in office at the
applicable time, as elected in accordance with the By-laws of the Company and
with the provisions of this Agreement.
"Buy-Back Offer" shall have the meaning assigned to such term in Section
3.5(a) hereof.
"Buyout Tender Offer" shall have the meaning assigned to such term in
Section 3.6(b) hereof.
"Buy/Sell Notice" shall have the meaning assigned to such term in Section
3.6(a) hereof.
"Buy/Sell Option" shall have the meaning assigned to such term in Section
3.6(a) hereof.
"Buy/Sell Price" shall have the meaning assigned to such term in Section
3.6(a) hereof.
"By-laws" shall mean the by-laws of the Company, in the form specified in
the Merger Agreement, as they may be amended from time to time.
"Change in Control" shall mean the occurrence of any one of the following
events:
(1) any Person (other than the Shareholder Group) becoming the Beneficial
Owner, directly or indirectly, of Voting Securities, pursuant to the
consummation of a merger, consolidation, sale of all or substantially all
of the Company's assets, share exchange or similar form of corporate
transaction involving the Company or any of its subsidiaries that requires
the approval of the Company's shareholders, whether for such transaction or
the issuance of securities in such transaction, so as to cause such
Person's Voting Ownership Percentage to exceed the Control Percentage (as
defined below); provided, however, that the event described in this
paragraph (1) shall not be deemed to be a Change in Control if it occurs as
the result of any of the following acquisitions: (A) by any employee
benefit plan sponsored or maintained by the Company or any Affiliate, or
(B) by any underwriter temporarily holding securities pursuant to an
offering of such securities;
(2) the consummation of a merger, consolidation, sale of all or
substantially all of the Company's assets, share exchange or similar form
of corporate transaction involving the Company or any of its subsidiaries
that requires the approval of the Company's shareholders, whether for such
transaction or the issuance of securities in such transaction, unless
immediately following such transaction more than 50% of the total voting
power of (x) the corporation resulting from such transaction, or (y) if
applicable, the ultimate parent corporation that directly or indirectly has
Beneficial Ownership of 100% of the voting securities eligible to elect
directors of such resulting corporation, is represented by Voting
Securities that were outstanding immediately prior to such transaction (or,
if applicable, shares into which such Voting Securities were converted
pursuant to such transaction), and such voting power among the holders of
such Voting Securities that were outstanding immediately prior to such
transaction is in substantially the same proportion as the voting power of
such Voting Securities among the holders thereof immediately prior to such
transaction; or
(3) the consummation of a plan of complete liquidation or dissolution of
the Company.
"Charter" shall mean the Certificate of Incorporation of the Company, in the
form specified in the Merger Agreement, as it may be amended from time to
time.
"Clearly Credible Tender Offer" shall mean any bona fide offer, tender offer
or exchange offer that is subject to Section 14 of the Exchange Act, other
than any such offer with respect to which (i) the Board of Directors of the
Company is advised in writing by outside counsel of recognized standing that
the consummation of such offer would be in violation of applicable law, or
(ii) the party making such offer has not obtained as of the date of the
commencement of such offer definitive commitment letters from reputable
financial institutions in customary form with respect to the financing of such
offer.
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<PAGE>
"Closing" shall have the meaning assigned in the second recital of this
Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall have the meaning assigned in the first recital of this
Agreement.
"Company" shall have the meaning assigned in the introduction of this
Agreement.
"Company Decision Period" shall have the meaning assigned in Section
3.6(c)(i) hereof.
"Company Repurchase Notice" shall have the meaning assigned to such term in
Section 3.5(b) hereof.
"Control Percentage" shall mean a Voting Ownership Percentage of 15%, during
the period prior to a Regulatory Change, and a Voting Ownership Percentage of
35% thereafter.
"Conversion" shall mean the conversion of shares of Convertible Preferred
Stock into shares of Common Stock pursuant to the Charter.
"Convertible Preferred Stock" shall have the meaning assigned in the first
recital of this Agreement.
"Dilutive Issuance" shall have the meaning assigned in Section 3.3(a)(iii)
of this Agreement.
"Dilutive Issuance Right" shall have the meaning assigned in Section
3.3(a)(iii) of this Agreement.
"Director" shall mean any member of the Board of Directors of the Company in
office at the applicable time, as elected in accordance with the provisions of
the By-laws of the Company.
"Dividend Premium" with respect to any share of Series A Convertible
Preferred Stock calculated at any time, shall be equal to the aggregate of the
present values as of the date of the Closing (assuming a discount rate of
9.25%) of the excess of (x) each quarterly dividend actually paid by the
Company to the Shareholder Group with respect to such share of Series A
Convertible Preferred Stock over (y) $0.45.
"Excess Buy-Back Shares" shall have the meaning assigned to such term in
Section 3.5(a) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Independent Director" shall mean any person who is not a Shareholder
Nominee and is independent of and otherwise unaffiliated with any member of
the Shareholder Group, and who is not a director, officer, employee,
consultant or advisor (financial, legal or other) of any member of the
Shareholder Group and has not served in any such capacity in the previous
three (3) years.
"Initial Shareholder Nominee Notice" shall have the meaning assigned in
Section 4.1(b) of this Agreement.
"Initial Shareholder Nominees" shall have the meaning assigned in Section
4.1(b) of this Agreement.
"Market Price" for a Security of the Company shall mean the average of the
closing prices for such Security for the twenty (20) Trading Days immediately
prior to the date on which the Market Price is being
B-3
<PAGE>
determined; provided, however, that in the event that the current per share
market price of such security is determined during a period following the
announcement by the Company of (a) a dividend or distribution on such security
payable in shares of such security or securities convertible into such shares,
or (b) any subdivision, combination or reclassification of such security and
prior to the expiration of 20 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to take into account ex-dividend trading
or the effects of such subdivision, combination or reclassification. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if such security is not
listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which such
security is listed or admitted to trading or, if such security is not listed
or admitted to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System or such other system then
in use, or, if on any such date such security is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by
a professional market maker making a market in such security selected by a
majority of the Board or, if on any such date no market maker is making a
market in such security, the fair value as determined in good faith by a
majority of the Board based upon the opinion of an independent investment
banking firm of recognized standing.
"Make Whole Payment" shall have the meaning assigned to such term in Section
3.11 hereof.
"Maximum Ownership Percentage" shall mean, calculated at a particular point
in time, a Total Ownership Percentage of 45.0%, less the Voting Power
represented by all Voting Securities Transferred by the Shareholder Group
during the term of this Agreement (including the Voting Power represented by
any shares of Convertible Preferred Stock which were converted into shares of
Common Stock contemporaneously with such Transfer pursuant to the terms of
this Agreement).
"Merger" shall have the meaning set forth in the first recital of this
Agreement.
"Merger Agreement" shall have the meaning set forth in the first recital of
this Agreement.
"1935 Act" shall mean the Public Utility Holding Act of 1935, as amended.
"NYSE" shall mean the New York Stock Exchange.
"ONEOK" shall have the meaning assigned in the first recital of this
Agreement.
"Opt-out Amendment" shall have the meaning assigned in Section 4.3(c)
hereof.
"Person" shall mean any individual, partnership, joint venture, corporation,
trust, unincorporated organization, government or department or agency of a
government.
"Quarterly Pay Down Amount" shall mean the Total Per Share Pay Down Amount
divided by 20.
"Registration Rights" shall mean the rights and obligations of the
Shareholder Group and the corresponding rights and obligations of the Company
set forth in the Registration Rights Agreement.
"Registration Rights Agreement" shall have the meaning assigned in the third
recital of this Agreement.
A "Regulatory Change" will be deemed to have occurred, with respect to all
or any one of the provisions of this Agreement, upon the receipt by the
Shareholder of an opinion of the Shareholder's counsel (which counsel must be
reasonably acceptable to the Company) to the effect that either (1) the 1935
Act has been repealed, modified, amended or otherwise changed or (2) the
Shareholder has received an exemption, or, in the unqualified
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<PAGE>
opinion of such counsel, is entitled without any regulatory approval to claim
an exemption, or has received an approval or no-action letter from the
Securities and Exchange Commission or its staff under the 1935 Act or has
registered under the 1935 Act, or any combination of the foregoing, and as a
consequence of (1) and/or (2) the Shareholder may fully and legally exercise
the rights set forth in such provision(s) of this Agreement which take effect
in the period after a Regulatory Change has occurred.
"Repurchase" shall have the meaning assigned in Section 3.5(a) of this
Agreement.
"Rights Agreement" means the Shareholder Protection Rights Agreement, dated
as of the date hereof, attached hereto as Exhibit B.
"Sale Notice" shall have the meaning assigned in Section 3.4(b)(i) of this
Agreement.
"Sale Option" shall have the meaning assigned in Section 3.4(b) of this
Agreement.
"Sale Period" shall have the meaning assigned in Section 3.4(b)(ii) of this
Agreement.
"Sale Securities" shall have the meaning assigned in Section 3.4(b)(i) of
this Agreement.
"Securities" shall mean any equity securities of the Company.
"Securities Act" shall mean the Securities Act of 1993, as amended.
"Seller" shall have the meaning assigned in Section 3.4 of this Agreement.
"Series A Convertible Preferred Stock" shall mean the Series A Convertible
Preferred Stock, par value $.01 per share, of the Company.
"Series B Convertible Preferred Stock" shall mean the Series B Convertible
Preferred Stock, par value $.01 per share, of the Company.
"Shareholder" shall have the meaning assigned in the introduction to this
Agreement.
"Shareholder Affiliate" shall mean any Affiliate of the Shareholder.
"Shareholder Group" shall mean the Shareholder, any Shareholder Affiliate
and any Person with whom any Shareholder or any Affiliate of any Shareholder
is part of a 13D Group.
"Shareholder Nominees" shall have the meaning set forth in Section 4.1(d) of
this Agreement.
"Successor Shareholder Nominee Notice" shall have the meaning assigned in
Section 4.1(d) of this Agreement.
"Successor Shareholder Nominees" shall have the meaning assigned in Section
4.1(d) of this Agreement.
"13D Group" shall mean any group of Persons acquiring, holding, voting or
disposing of any Voting Security which would be required under Section 13(d)
of the Exchange Act and the rules and regulations thereunder to file a
statement on Schedule 13D with the Commission as a "person" within the meaning
of Section 13(d)(3) of the Exchange Act.
"Total Make Whole Amount" shall mean, with respect to any share of Series A
Convertible Preferred Stock calculated at any time, an amount equal to the
Total Per Share Pay Down Amount minus the sum of (I) the
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<PAGE>
product of (x) the Quarterly Pay Down Amount and (y) the number of quarters
since the date of the Closing in which the Company has paid a dividend on the
Series A Convertible Preferred Stock of at least $0.45 per share plus (II) the
Dividend Premium with respect to such share through such time.
"Total Ownership Percentage" shall mean, calculated at a particular point in
time, the Voting Power which would be represented by the Securities
Beneficially Owned by the Person whose Total Ownership Percentage is being
determined if all shares of Convertible Preferred Stock (or other Securities
convertible into Voting Securities) Beneficially Owned by such Person were
converted into shares of Common Stock (or other Voting Security).
"Total Per Share Paydown Amount" shall mean the product of (i) $35,000,000
divided by (ii) the total number of shares of Series A Convertible Preferred
Stock issued at the Closing.
"Total Voting Power" shall mean, calculated at a particular point in time,
the aggregate Votes represented by all then outstanding Voting Securities.
"Trading Day", with respect to a Voting Security, shall mean a day on which
the principal national securities exchange on which such Voting Security is
listed or admitted to trading is open for the transaction of business or, if
such security is not listed or admitted to trading on any national securities
exchange, any day other than a Saturday, Sunday or a day on which banking
institutions in the City of New York are authorized or obligated to close.
"Transfer" shall mean any sale, transfer, pledge, encumbrance or other
disposition to any Person, and to "Transfer" shall mean to sell, transfer,
pledge, encumber or otherwise dispose of to any Person.
"Unrestricted Ownership Percentage" shall mean a Voting Ownership Percentage
of 9.9%.
"Votes" shall mean votes entitled to be cast generally in the election of
Directors, not including the votes that would be able to be cast by holders of
shares of Convertible Preferred Stock upon Conversion to shares of Common
Stock unless such Conversion shall occur or be deemed to occur.
"Voting Ownership Percentage" shall mean, calculated at a particular point
in time, the Voting Power represented by the Voting Securities Beneficially
Owned by the Person whose Voting Ownership Percentage is being determined.
"Voting Power" shall mean, calculated at a particular point in time, the
ratio, expressed as a percentage, of (a) the Votes represented by the Voting
Securities with respect to which the Voting Power is being determined to (b)
Total Voting Power.
"Voting Securities" shall mean the Common Stock and shares of any other
class of capital stock of the Company then entitled to vote generally in the
election of Directors, and shall not include Convertible Preferred Stock (or
other Securities convertible into Voting Securities) prior to Conversion into
Common Stock (or other Voting Security).
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of the Company. The Company
represents and warrants to the Shareholder as of the date hereof as follows:
(a) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Oklahoma and
has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder.
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<PAGE>
(b) This Agreement has been duly and validly authorized by the Company
and all necessary and appropriate action has been taken by the Company to
execute and deliver this Agreement and to perform its obligations
hereunder.
(c) This Agreement has been duly executed and delivered by the Company
and assuming due authorization and valid execution and delivery by the
Shareholder, this Agreement is a valid and binding obligation of the
Company, enforceable in accordance with its terms.
Section 2.2. Representations and Warranties of the Shareholder. The
Shareholder represents and warrants to the Company as of the date hereof as
follows:
(a) The Shareholder has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Kansas and
has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder.
(b) This Agreement has been duly and validly authorized by the
Shareholder and all necessary and appropriate action has been taken by the
Shareholder to execute and deliver this Agreement and to perform its
obligations hereunder.
(c) This Agreement has been duly executed and delivered by the
Shareholder and assuming due authorization and valid execution and delivery
by the Company, this Agreement is a valid and binding obligation of the
Shareholder, enforceable in accordance with its terms.
(d) As of the effectiveness of this Agreement, the Shareholder Group
Beneficially Owns 2,996,702 shares of Common Stock and 19,317,584 shares of
Series A Convertible Preferred Stock and does not Beneficially Own any
other Voting Security, warrant, option, convertible security or other
similar right to acquire Common Stock or shares of any other class of
capital stock of the Company which are entitled to vote generally in the
election of directors.
ARTICLE III
SHAREHOLDER AND COMPANY CONDUCT
Section 3.1. Standstill Provision. Subject to the provisions of this
Agreement, during the term of this Agreement, the Shareholder agrees with the
Company that, without the prior approval of a majority of the Board, the
Shareholder will not, and will cause each Shareholder Affiliate not to, take
any of the following actions:
(a) prior to the occurrence of a Regulatory Change, but not thereafter,
singly or as part of a partnership, limited partnership, syndicate or other
13D Group, directly or indirectly, acquire Beneficial Ownership of any
Voting Security so as to cause the Shareholder Group's Voting Ownership
Percentage to exceed the Unrestricted Ownership Percentage;
(b) singly or as part of a partnership, limited partnership, syndicate or
other 13D Group, directly or indirectly, acquire, propose to acquire, or
publicly announce or otherwise disclose an intention to propose to acquire,
or offer or agree to acquire, by purchase or otherwise, Beneficial
Ownership of any Security so as to cause the Shareholder Group's Total
Ownership Percentage to exceed the Maximum Ownership Percentage;
(c) deposit (either before or after the date of the execution of this
Agreement) any Security in a voting trust or subject any Security to any
similar arrangement or proxy with respect to the voting of such Security;
(d) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies", or become a "Participant" in a "solicitation"
(as such terms are used in Regulation 14A under the Exchange Act) to seek
to advise or influence any person to vote against any proposal or director
nominee recommended to the shareholders of the Company or any of its
subsidiaries by at least a majority of the Board of Directors;
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<PAGE>
(e) form, join or in any way participate in a 13D Group with respect to
any Security of the Company or any securities of its subsidiaries;
(f) commence (including by means of proposing or publicly announcing or
otherwise disclosing an intention to propose, solicit, offer, seek to
effect or negotiate) a merger, acquisition or other business combination
transaction relating to the Company;
(g) initiate a "proposal," as such term is used in Rule 14a-8 under the
Exchange Act, "propose", or otherwise solicit the approval of, one or more
stockholders for a "proposal" or induce or attempt to induce any other
person to initiate a "proposal";
(h) otherwise act, alone or in concert with others, to seek to control or
influence the management, the Board or policies of the Company;
(i) take any other action to seek or effect control of the Company other
than in a manner consistent with the terms of this Agreement.
This Section 3.1 shall not be interpreted to restrict the Shareholder or any
Shareholder Affiliate from taking any action or exercising any right
consistent with the terms of this Agreement, including engaging in private and
confidential discussions with the Board or the management of the Company. In
addition, this section shall not be deemed to restrict the Shareholder
Nominees from participating as board members in the direction of the Company.
Section 3.2. Required Reduction of Ownership Percentage. If at any time the
Shareholder becomes aware that the Shareholder Group's Total Ownership
Percentage (excluding Excess Buy-Back Securities) exceeds the Maximum
Ownership Percentage and/or, prior to the occurrence of a Regulatory Change
and not thereafter, that the Shareholder Group's Voting Ownership Percentage
(excluding Excess Buy-Back Securities) exceeds the Unrestricted Ownership
Percentage, in each case other than as permitted pursuant to the terms of this
Agreement, then the Shareholder shall, or shall cause the Shareholder
Affiliates to, consistent with the provisions of Section 3.4 of this
Agreement, promptly take all action necessary to reduce the amount of
Securities or Voting Securities, as the case may be, Beneficially Owned by the
Shareholder Group such that the Shareholder Group's Total Ownership Percentage
(excluding Excess Buy-Back Securities) is not greater than the Maximum
Ownership Percentage and that the Shareholder Group's Voting Ownership
Percentage (excluding Excess Buy-Back Securities) is not greater than the
Unrestricted Ownership Percentage, as the case may be.
Section 3.3. Top-Up Rights; Dilutive Issuance Right. (a) During the term of
this Agreement and prior to the occurrence of a Regulatory Change, but not
thereafter:
(i) If the Shareholder Group's Voting Ownership Percentage falls below
the Unrestricted Ownership Percentage, the Shareholder may at its option
(A) purchase Voting Securities from time to time in the open market or
otherwise or (B) convert shares of Convertible Preferred Stock into shares
of Common Stock pursuant to the terms of the Charter, in each case in an
amount sufficient in order to restore the Shareholder Group's Voting
Ownership Percentage to the Unrestricted Ownership Percentage.
(ii) If the Shareholder Group's Total Ownership Percentage falls below
the Maximum Ownership Percentage, the Shareholder may at its option
purchase Voting Securities from time to time in the open market or
otherwise in an amount sufficient in order to restore the Shareholder
Group's Total Ownership Percentage to the Maximum Ownership Percentage;
provided, however that the Shareholder shall present for exchange, and the
Company shall exchange at no cost to the Shareholder, Common Stock
purchased pursuant to this paragraph for shares of Series B Convertible
Preferred Stock (at a ratio of one share of Series B Convertible Preferred
Stock in exchange for each share of Common Stock (as appropriately adjusted
to reflect any stock split, stock dividend, reverse stock split,
reclassification or any other transaction with a comparable effect)) in an
amount sufficient to ensure that the Shareholder Group is in compliance
with its obligations under Section 3.1(a) hereof.
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<PAGE>
(iii) If the Shareholder Group's Total Ownership Percentage would fall
below the Maximum Ownership Percentage as a result of any security issuance
(a "Dilutive Issuance") by the Company, except as provided in paragraph
3.3(a)(v) below, the Shareholder shall have the right (the "Dilutive
Issuance Right") to require the Company to issue to the Shareholder (A)
additional Common Stock, up to the maximum number of such shares that would
permit the Shareholder Group to remain in compliance with Section 3.1(a)
hereof, and (B) additional shares of Series B Convertible Preferred Stock,
up to an amount of such shares of Common Stock and Series B Convertible
Preferred Stock as may be necessary to restore the Shareholder Group's
Total Ownership Percentage to the Maximum Ownership Percentage. Shares of
Common Stock or Series B Preferred Stock issued pursuant to the exercise of
a Dilutive Issuance Right shall be issued for cash concurrently with the
closing of the Dilutive Issuance. The issue price per share for shares of
Common Stock and shares of Series B Convertible Preferred Stock issued
pursuant to the Dilutive Issuance Right shall be equal to the issue price
per share of the Dilutive Issuance. Such issue price shall in turn be equal
to the aggregate amount of cash plus the fair market value of any other
property received by the Company in consideration of the Dilutive Issuance,
divided by the number of shares being issued in such Dilutive Issuance,
with such fair market value being determined in good faith by the Board of
Directors of the Company, provided that if the Shareholder shall object to
such valuation within 30 days of its receipt of notice thereof, then the
fair market value of such property shall be determined at the Company's
sole expense by an independent nationally recognized financial advisor
mutually acceptable to the Shareholder and the Company.
(iv) The Shareholder must provide the Company with notice of its
intention to exercise the Dilutive Issuance Right sixty (60) days prior to
the expected closing of the Dilutive Issuance, which expected closing date
will be provided to the Shareholder by or on behalf of the Company not less
than ninety (90) days prior to such expected closing date.
(v) The Company shall not be obligated to provide the Shareholder with a
Dilutive Issuance Right (I) in connection with issuances of securities
pursuant to employee benefit plans and programs of the Company in the
ordinary course of business or (II) which would require the issuance of
fewer than 25,000 shares of Series B Convertible Preferred Stock; provided,
however, that any share issuances not required to be made pursuant to this
clause (II) shall be carried forward and taken into account in determining
whether the Company must provide the Shareholder with a subsequent Dilutive
Issuance Right. In addition, in the case of any Dilutive Issuance in
connection with any acquisition or other business combination transaction,
by merger or otherwise, by the Company, the Company shall be required to
provide the Shareholder with a Dilutive Issuance Right only to the extent
of restoring the Shareholder Group's Total Ownership Percentage to the
Adjusted Maximum Ownership Percentage.
(vi) At the Closing, the Shareholder shall be entitled to require the
Company to issue to the Shareholder, at a price per share equal to the
Market Price as of the date of the Closing, additional Common Stock up to
the maximum number of shares that would permit the Shareholder Group to
remain in compliance with Section 3.1(a) and additional shares of Series A
Convertible Preferred Stock so as to restore the Shareholder Group's Total
Ownership Percentage to the Maximum Ownership Percentage.
(b) From time to time following a Regulatory Change and during the term of
this Agreement:
(i) If the Shareholder Group's Total Ownership Percentage falls below the
Maximum Ownership Percentage, the Shareholder may at its option purchase
Voting Securities from time to time in the open market or otherwise in an
amount sufficient in order to restore the Shareholder Group's Total
Ownership Percentage to the Maximum Ownership Percentage.
(ii) If the Shareholder Group's Total Ownership Percentage would fall
below the Adjusted Maximum Ownership Percentage as a result of a Dilutive
Issuance by the Company pursuant to primary or secondary offerings,
mergers, acquisitions or otherwise, the Shareholder shall have a Dilutive
Issuance Right (for the issuance of Common Stock only and not Series B
Convertible Preferred Stock) to the extent of restoring the Shareholder
Group's Total Ownership Percentage to the Adjusted Maximum Ownership
Percentage.
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(iii) The Shareholder must provide the Company with notice of its
intention to exercise the Dilutive Issuance Right sixty (60) days prior to
the expected closing of the Dilutive Issuance, which expected closing date
will be provided to the Shareholder by or on behalf of the Company not less
than ninety (90) days prior to such expected closing date.
(c) All Securities acquired by purchase or conversion pursuant to this
Section 3.3 shall be subject to the terms of this Agreement. In no event shall
the Shareholder Group's exercise of the Dilutive Issuance Right be interpreted
to be a waiver by the Shareholder of its right to make purchases of Securities
pursuant to this Section.
Section 3.4. Restrictions on Transfer. None of the members of the
Shareholder Group shall directly or indirectly Transfer any Securities without
the prior written consent of a majority of the Independent Directors, except
the following Transfers:
(a) Transfers of Securities representing upon Transfer Voting Power of
less than 5.0% to any Transferee, without prior notice to the Company, so
long as such Transferee and any Affiliate of such Transferee and any such
person who is a member of a 13D Group with such Transferee does not have a
Voting Ownership Percentage of 5.0% or more immediately prior to giving
effect to at the time of each such Transfer.
(b) Transfers of Securities representing upon Transfer Voting Power of
5.0% or more pursuant to the following procedure (the "Sale Option"):
(i) The Seller must provide written notice (a "Sale Notice") of its
intention to sell to the Company Securities representing, upon
Transfer, Voting Power of 5.0% or more (the "Sale Securities"). The
Sale Notice shall specify the number of Sale Securities and the cash
price per share at which the Company or its designee may purchase the
Sale Securities, which cash price shall equal 98.5% of the Market Price
of such Sale Securities determined as of the date of the Sale Notice;
provided, however, that the cash price per share at which the Company
or its designee shall purchase shares of Convertible Preferred Stock
pursuant to this subsection shall equal 98.5% of the Market Price of
the Common Stock determined as of the date of the Sale Notice.
(ii) The Company shall have a period ending on the later of ninety
(90) days after the date of the Sale Notice and thirty (30) days from
the date of receipt of all necessary regulatory approvals (the "Sale
Period") (provided, that in no event shall the Sale Period exceed one
hundred eighty (180) days) within which to effect a closing of the
Company's or its designee's purchase of all, but not less than all, of
the Sale Securities.
(iii) If the Company or its designee shall for any reason fail to
effect a closing of the purchase of all, but not less than all, of the
Sale Securities within the Sale Period, the Company shall at its option
inform the Seller in writing that it shall reimburse the Seller for the
aggregate difference between the Market Price of the Sale Securities as
of the date of the Sale Notice and the Market Price of the Sale
Securities as of the date that the Seller completes its transfer of the
Sale Securities, in which event such transfer by the Seller must be
completed within the later of 180 days from the date of the Sale Notice
or 30 days from the receipt of all necessary regulatory approvals.
Otherwise, if the Company shall not have so informed the Seller, the
Seller shall have 16 months from the date of the Sale Notice to
complete such transfer. In the event that such transfer by the Seller
is not so completed within the applicable period, the Sale Securities
shall thenceforth again be subject to this Section 3.4.
(c) Transfers of Securities to the public in a bona fide underwritten
offering pursuant to the Registration Rights Agreement; provided, however,
that the Seller and the representative or representatives of the
underwriters previously agree in writing with the Company that all
reasonable efforts will be made to achieve a wide distribution of the
Voting Securities in such offering and to ensure that no Transferee in such
offering acquires for its own account Beneficial Ownership of Securities
representing upon Transfer Voting Power of 5.0% or more.
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(d) Transfers of all or part of the Shareholder Group's Securities
pursuant to a pro rata distribution of Securities among the shareholders of
the Shareholder.
(e) Transfers of Securities among members of the Shareholder Group;
provided, however, that any such transferee shall agree with the Company in
writing prior to each such transfer to be bound by the terms of this
Agreement with respect to its Beneficial Ownership of Securities.
(f) If a Clearly Credible Tender Offer for the Company has been
commenced, at the Shareholder's option Transfers of Securities by means of
tenders into such Clearly Credible Tender Offer in an amount not exceeding
the percentage (on the basis of total Votes and assuming the conversion of
all shares of Convertible Preferred Stock into shares of Common Stock) of
the Voting Securities of which it is the Beneficial Owner equal to the
highest percentage (on the basis of total Votes) of the aggregate of all
Voting Securities not Beneficially Owned by any member of the Shareholder
Group which has ever been announced to have been tendered into such Clearly
Credible Tender Offer.
Section 3.5. Buy-Back Options. (a) During the term of this Agreement, if the
Company purchases Securities from the public, whether by tender offer, open
market purchase or otherwise (a "Repurchase"), the Company shall
contemporaneously with the Repurchase offer to repurchase from the Shareholder
on the same terms and conditions, including price, as in the Repurchase, a
percentage (on the basis of total Votes and assuming the conversion of all
shares of Convertible Preferred Stock into shares of Common Stock) of those
Securities Beneficially Owned by the Shareholder equal to the percentage (on
the basis of total Votes and assuming the conversion of all shares of
Convertible Preferred Stock into shares of Common Stock) of Securities to be
Repurchased from the Beneficial Owners of Securities other than the
Shareholder or any Shareholder Affiliate (the "Buy-Back Offer"). The
Shareholder may accept such Buy-Back Offer in its sole discretion; provided,
however, that in the event of a Repurchase the Shareholder shall be required
to sell Securities or Voting Securities of which it is the Beneficial Owner to
the Company in an amount sufficient to ensure that its Total Ownership
Percentage does not exceed the Maximum Ownership Percentage and/or, prior to
the occurrence of a Regulatory Change and not thereafter, that the Shareholder
Group's Voting Ownership Percentage does not exceed the Unrestricted Ownership
Percentage, in each case other than as permitted pursuant to the terms of this
Agreement; and provided further that the Shareholder shall not be required to
comply with the preceding mandatory sale requirement (i) during any period
when doing so would cause the Shareholder to incur any liability under Section
16(b) of the Exchange Act or the rules and regulations promulgated thereunder,
and (ii) to the extent that compliance with such mandatory sale requirement
would have an adverse effect on the availability of pooling-of-interests
accounting treatment with respect to any business combination involving the
Shareholder or any of the Shareholder's subsidiaries that has either been
announced or is under bona fide consideration by the Shareholder at the time
of such Repurchase, but the Shareholder shall be required to comply with such
mandatory sale requirement immediately upon the conditions set forth in (i)
and (ii) above no longer being applicable. Any Securities Beneficially Owned
by the Shareholder Group as permitted by the preceding sentence which cause
the Shareholder Group's Total Ownership Percentage to exceed the Maximum
Ownership Percentage and/or, prior to the occurrence of a Regulatory Change
and not thereafter, the Shareholder Group's Voting Ownership Percentage to
exceed the Unrestricted Ownership Percentage shall be referred to in this
Agreement as "Excess Buy-Back Securities."
(b) The Company shall provide notice to the Shareholder of its intention to
engage in a Repurchase not less than 30 days in advance of the date on which
the Repurchase is to begin (the "Company Repurchase Notice"). The Shareholder
must provide notice to the Company within ten (10) days of receipt of the
Company Repurchase Notice of (i) whether the Shareholder intends to accept the
Buy-Back Offer and (ii) in good faith whether the Shareholder is aware that
the Shareholder would be subject to any of the conditions set forth in (i) or
(ii) above as a result of such Repurchase.
Section 3.6. Buy/Sell Option. (a) At the fifteenth and at each succeeding
anniversary of the date hereof, if at such times this Agreement remains in
force, each of the Shareholder and the Company may at its option (the
"Buy/Sell Option") provide notice (the "Buy/Sell Notice") to the other party
of a price (the "Buy/Sell
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Price") at which such notifying party intends in good faith either to sell to
the receiving party all, but not less than all, of the Securities Beneficially
Owned by the notifying party or to buy from the receiving party all, but not
less than all, of the Securities Beneficially Owned by the receiving party;
provided, however, that the Buy/Sell Price shall apply equally to shares of
Convertible Preferred Stock and shares of Common Stock and provided, further,
that all references in this Section 3.8 to Securities Beneficially Owned by
the Company shall be deemed to refer only to outstanding Securities
Beneficially Owned by shareholders of the Company other than the Shareholder
Group.
(b) Upon receipt by the Shareholder of a Buy/Sell Notice from the Company,
the Shareholder Group shall have ninety (90) days (the "Shareholder Decision
Period") within which either to (i) agree to sell for cash all, but not less
than all, of the Securities Beneficially Owned by the Shareholder Group to the
Company at the Buy/Sell Price or (ii) make a bona fide Clearly Credible Tender
Offer (a "Buyout Tender Offer") at the Buy/Sell Price for any and all
Securities Beneficially Owned by the Company, which Buyout Tender Offer the
Company hereby agrees not to oppose. A non-waivable condition to the
consummation of the Buyout Tender Offer shall be the valid tender into such
offer, on or prior to the 20th day following the receipt of all regulatory
approvals required for the consummation of such offer, of Voting Securities
representing in the aggregate two-thirds ( 2/3) of the Voting Power
represented by all Voting Securities held by shareholders of the Company other
than the Shareholder Group.
(c) (i) Upon receipt by the Company of a Buy/Sell Notice from the
Shareholder, the Company shall have ninety (90) days (the "Company Decision
Period") within which to (A) agree to purchase for cash all but not less than
all of the Securities Beneficially Owned by the Shareholder Group at the
Buy/Sell Price or (B) agree to seek an opinion from an independent,
internationally recognized investment banking firm relating to the fairness to
the Company's shareholders of the Offer Price in the Buyout Tender Offer with
respect to the acquisition by the Shareholder of all Securities Beneficially
Owned by the Company at the Buy/Sell Price.
(ii) If the Company shall not agree to repurchase the Voting Securities
Beneficially Owned by the Shareholder Group pursuant to Section 3.6(c)(i)
above, the Company shall have the right, within ninety (90) days following
the end of the Company Decision Period, to obtain the fairness opinion and
execute a merger agreement between the Company and any member of the
Shareholder Group pursuant to which the Shareholder or a Shareholder
Affiliate shall acquire Beneficial Ownership of all remaining Securities at
the Buy/Sell Price. The terms of such merger agreement shall include
customary provisions regarding the non-solicitation of alternative
transactions by the Company and the recommendation of the Merger to the
Company's shareholders, if required.
(iii) If the Company fails to satisfy the condition pursuant to Section
3.6(c)(ii) above by the end of such ninety (90) day period, or if the
Company cannot obtain a fairness opinion by the end of such ninety (90) day
period, this Agreement shall immediately terminate.
(d) If the Shareholder and the Company each provide a Buy/Sell Notice to the
other party on the same day, the Buy/Sell Notice containing the higher valued
Buy/Sell Price shall be the effective and controlling Buy/Sell Notice. In the
event that (i) the Buy/Sell Price set forth in either or both of the Buy/Sell
Notices consists of consideration other than cash, and (ii) the parties are
unable to reach agreement as to which of the Buy/Sell Prices is higher valued
for purposes of this subsection (d), an independent, internationally
recognized investment banking firm mutually agreeable to both parties shall
conclusively make such determination.
(e) Any purchase by the Company of the Shareholder Group's Securities
pursuant to this Section shall be closed within a period ending ninety (90)
days after the end of the Shareholder Decision Period or the Company Decision
Period, as the case may be, or thirty (30) days after the date of receipt of
all necessary regulatory approvals, whichever is later.
Section 3.7 Charter and By-Laws. During the term of this Agreement the
Company shall not amend, alter or repeal, or propose the amendment, alteration
or repeal of, any provision of the Charter or the By-Laws in any manner which
is inconsistent with the terms of this Agreement and which adversely affects
the rights of the
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Shareholder Group under the terms of this Agreement. If at any time during the
term of this Agreement the provisions of this Agreement shall conflict with
the provisions of the Charter and the By-Laws, the provisions of this
Agreement shall be controlling.
Section 3.8. Rights Agreement. During the term of this Agreement, the
Company hereby agrees not to amend any provision of the Rights Agreement in
any manner which is inconsistent with the terms of this Agreement or the
Merger Agreement and which adversely affects the rights of the Shareholder
Group under the terms of this Agreement.
Section 3.9. Agreement Not to Convert. During the term of this Agreement and
prior to the occurrence of a Regulatory Change, the Shareholder agrees that it
shall not, and shall cause each Shareholder Affiliate not to, Convert shares
of Convertible Preferred Stock Beneficially Owned by the Shareholder or any
Affiliate into shares of Common Stock except to the extent any such shares of
Convertible Preferred Stock are Converted (a) concurrently with the Transfer
of such shares to any Person other than the Shareholder or any Shareholder
Affiliate or (b) pursuant to the Shareholder's top-up rights as set forth in
Section 3.3(a)(i)(B).
Section 3.10. Taxes Upon Conversion or Exchange. The Company hereby agrees
to pay any and all stock transfer and documentary stamp taxes that may be
payable in respect of any issuance or delivery of (i) any shares of
Convertible Preferred Stock, (ii) any shares of Common Stock issued in a
Conversion of shares of Convertible Preferred Stock, or (iii) any exchange of
shares of Common Stock for shares of Convertible Preferred Stock, or
certificates or instruments evidencing any of such shares or securities. The
Company shall not, however, be required to pay any such tax which may be
payable in respect of any transfer involved in the issuance or delivery of
shares of Common Stock in a Conversion of shares of Convertible Preferred
Stock in a name other than that in which the shares of such Convertible
Preferred Stock were registered.
Section 3.11. Make Whole Payment. Immediately upon the Conversion of any
share of Series A Preferred Stock, the Company shall pay to the Shareholder an
amount (a "Make Whole Payment") with respect to such share equal to the Total
Make Whole Amount for such share as of the date of such Conversion; provided,
however, that the Company shall not be required to make a Make Whole Payment
in respect of the Conversion of fewer than 25,000 shares of Series A
Convertible Preferred Stock; provided, further, that any Make Whole Payments
not required to be made pursuant to this sentence shall be carried forward and
taken into account in determining whether the Company must provide the
Shareholder with a subsequent Make Whole Payment.
Section 3.12. Prohibition on Senior Securities. During the term of this
Agreement, the Company hereby agrees that it shall not create, authorize or
reclassify any authorized stock of the Company into (x) any class or series of
the Company's capital stock ranking prior to the Convertible Preferred Stock
as to dividends or as to distributions of assets upon liquidation, dissolution
or winding up of the Company, whether voluntary or involuntary, or (y) any
class or series of the Company's capital stock entitled to vote separately as
a class on any matter whatsoever, other than an amendment to the Charter which
would have the effect of modifying the voting powers, designations,
preferences, rights and qualifications, limitations or restrictions of such
class or series so as to affect the holders thereof adversely, or (z) any
security convertible into shares of any class or series described in (x) or
(y) above.
ARTICLE IV
BOARD REPRESENTATION AND VOTING
Section 4.1. Directors Designated by the Shareholder. (a) Immediately
following the Closing, the Board shall expand the size of the Board by two (2)
Directors and shall appoint as additional Directors the two (2) Initial
Shareholder Nominees (as defined in Section 4.1(b) below) who have been
designated by the Shareholder in the Initial Shareholder Nominee Notice (as
defined in Section 4.1(b) below) attached as Exhibit C hereto. One Initial
Shareholder Nominee shall be placed in the class of Directors next standing
for election, and the remaining Initial Shareholder Nominee shall be placed in
the class of Directors next but one standing for election.
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Immediately following the occurrence of a Regulatory Change, the Board shall
expand the Board as may be necessary and shall appoint additional Initial
Shareholder Nominees as designated by the Shareholder in an additional Initial
Shareholder Nominee Notice in a number sufficient to ensure that Shareholder
Nominees comprise a number of Directors which is (x) 4 Directors if the total
size of the Board is 14 or fewer Directors (excluding any Shareholder
Nominees) or (y) one-third (rounding down to the nearest whole Director) of
the Board if the total size of the Board is more than 14 Directors (excluding
any Shareholder Nominees). Such additional Initial Shareholder Nominees shall
be distributed among the classes of Directors as evenly as possible. In the
event of a vacancy caused by the disqualification, removal, resignation or
other cessation of service of any Initial Shareholder Nominee from the Board,
the Board shall elect as a Director (to serve until the Company's immediately
succeeding annual meeting of shareholders) a new Initial Shareholder Nominee
who has been designated by the Shareholder in an additional Initial
Shareholder Nominee Notice that has been provided to the Company at least
seven (7) days prior to the date of a regular meeting of the Board.
(b) The Shareholder shall provide notice to the Company (the "Initial
Shareholder Nominee Notice") as required by Section 4.1(a) above, which notice
shall contain the following information: (i) the name of the person(s) it has
designated to become Director(s) (the "Initial Shareholder Nominees"), and
(ii) all information required by Regulation 14A and Schedule 14A under the
Exchange Act with respect to each such Initial Shareholder Nominee.
(c) Following the occurrence of a Regulatory Change and during the term of
this Agreement, until such time as the Initial Shareholder Nominees and the
Successor Shareholder Nominees (as defined in Section 4.1(d) below) together
comprise a number of Directors which is one-third (rounding down to the
nearest whole Director) of the Board, at the first annual meeting of
shareholders of the Company following the occurrence of a Regulatory Change
and at each subsequent annual meeting of shareholders of the Company at which
(i) the term of any Director is to expire or (ii) a vacancy is caused by the
removal, resignation, retirement, death, disability or disqualification or
other cessation of service of any Director, the Company shall at its option
(i) cause such directorship to remain vacant, with the size of the Board
correspondingly being reduced, or (ii) designate as a replacement Director a
Successor Shareholder Nominee to be included in the slate of nominees
recommended by the Board to the Company's shareholders for election as
Directors and use its best efforts to cause the election of each such
Successor Shareholder Nominee to the Board, including soliciting proxies in
favor of the election of such persons. The Successor Shareholder Nominees
shall be divided as nearly equally as possible among all the classes of
Directors, as specified in the Successor Shareholder Nominee Notice (as
defined in Section 4.1(d) below).
(d) Following the occurrence of a Regulatory Change and during the term of
this Agreement, until such time as the Initial Shareholder Nominees and the
Successor Shareholder Nominees together comprise a number of Directors which
is one-third (rounding down to the nearest whole Director) of the Board, the
Shareholder shall provide notice to the Company in writing sixty (60) days
prior to each annual meeting of the Company's shareholders ("Successor
Shareholder Nominee Notice"), indicating (i) the name of the person(s) it has
designated to become Director(s) ("Successor Shareholder Nominees" and
together with Initial Shareholder Nominees, "Shareholder Nominees"), if any,
(ii) the class of Directors to which each such Successor Shareholder Nominee
shall be assigned, and (iii) all information required by Regulation 14A and
Schedule 14A under the Exchange Act with respect to each such Successor
Shareholder Nominee.
(e) The Shareholder shall consult with the Company in connection with the
identity of any proposed Shareholder Nominee. In the event the Company is
advised in writing by its outside counsel that a proposed Shareholder Nominee
would not be qualified under the Company's Charter or By-Laws or any
applicable statutory or regulatory standards to serve as a Director, or if the
Company otherwise reasonably objects to a proposed Shareholder Nominee,
including without limitation because such Shareholder Nominee either (i) is a
director or officer of a direct competitor of the Company or (ii) has engaged
in any adverse conduct that would require disclosure under Item 7 of Schedule
14A promulgated under the Exchange Act, the Shareholder agrees to withdraw
such proposed Shareholder Nominee and nominate a replacement therefor (which
replacement
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would be subject to the requirements of this Section 4.1(e)). Any such
objection by the Company must be made no later than one (1) month after the
Shareholder first informs the Company of the identity of the proposed
Shareholder Nominee; provided, however, that the Company shall in all cases
notify the Shareholder of any such objection sufficiently in advance of the
date on which proxy materials are mailed by the Company in connection with
such election of directors to enable the Shareholder to propose an alternate
Shareholder Nominee pursuant to and in accordance with the terms of this
Agreement. Prior to the occurrence of a Regulatory Change, no more than one
Shareholder Nominee may be a director, officer or employee of the Shareholder.
Following the occurrence of a Regulatory Change, no more than two (2)
Shareholder Nominees may be directors, officers or employees of the
Shareholder.
(f) During the term of this Agreement the Company agrees to include each
Shareholder Nominee to be added to or retained on the Board pursuant to this
Agreement in the slate of nominees recommended by the Board to the Company's
shareholders for election as Directors and shall use its best efforts to cause
the election or reelection of each such Shareholder Nominee to the Board,
including soliciting proxies in favor of the election of such persons.
(g) During the term of this Agreement and prior to the occurrence of a
Regulatory Change, but not thereafter, no Shareholder Nominee shall chair a
committee of the Board and no Shareholder Nominee shall serve on the
Nominating Committee of the Board. Following the occurrence of a Regulatory
Change and during the term of this Agreement, the Shareholder shall be
entitled to designate Shareholder Nominees to be members of each committee of
the Board (including without limitation the executive committee, the audit
committee, the nominating committee and the executive compensation committee),
and to fill any vacancies caused by the departure of Shareholder Nominees from
any such committees if no other Shareholder Nominee is a member of such
committee, for so long as Shareholder Nominees are not represented pro rata,
based on the number of Directors who are Shareholder Nominees (rounding down
to the nearest whole Director), with respect to each committee of the Board.
Section 4.2. Resignation of Shareholder Nominees. Unless otherwise agreed by
the Company, the Shareholder shall cause each of the Shareholder Nominees then
serving on the Board to offer their resignations from the Board immediately
upon the earlier to occur of the following:
(a) The termination of this Agreement pursuant to and in accordance with
Section 5.2 hereof; and
(b) The Shareholder Group's Total Ownership Percentage falling below
10.0%.
Section 4.3. Voting. During the term of this Agreement, the Shareholder, as
a holder of shares of Voting Securities, agrees that:
(a) The Shareholder shall, and shall cause each Shareholder Affiliate to, be
present, in person or by proxy, at all meetings of shareholders of the Company
so that all Voting Securities having voting rights which are Beneficially
Owned by the Shareholder and the Shareholder Affiliates may be counted for the
purpose of determining the presence of a quorum at such meetings.
(b)(i) With respect to the election of Directors, the Shareholder shall, and
shall cause each Shareholder Affiliate to, vote all Voting Securities
Beneficially Owned by the Shareholder and any Shareholder Affiliate in favor
of the election of all candidates for Director nominated by the Company's
Board (including the Shareholder Nominees) and (ii) with respect to any
proposal initiated by a shareholder of the Company relating to the redemption
of the rights issued pursuant to the Rights Agreement or any modification of
the Rights Agreement (other than nonbinding precatory resolutions with respect
to which subsection (c) hereof shall apply), the Shareholder shall, and shall
cause each member of the Shareholder Group to, vote all Voting Securities
Beneficially Owned by the Shareholder or any member of the Shareholder Group
in accordance with the recommendation of the Board.
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(c)(i) With respect to the Opt-out Amendment (as defined in the Merger
Agreement), the Shareholder and any member of the Shareholder Group may vote
any or all of the Securities Beneficially Owned by them in their sole
discretion; and (ii) with respect to any proposed amendment to the Charter or
By-laws which would reasonably have the effect of modifying in any way the
Opt-out Amendment or would reasonably cause the Company to become subject to
(a) the Control Share Acquisition Statute (as defined in the Merger Agreement)
or (b) any other provisions which are substantially similar to the Control
Share Acquisition Statute, the Shareholder Group shall have the right to
abstain or vote against such amendment.
(d) With respect to all other matters submitted to a vote of the Company's
shareholders, prior to the occurrence of a Regulatory Change, but not
thereafter, and during the term of this Agreement, the Shareholder and any
member of the Shareholder Group may vote any or all of the Voting Securities
Beneficially Owned by them, in their sole discretion. Following the occurrence
of a Regulatory Change and during the term of this Agreement, (i) the
Shareholder and each member of the Shareholder Group may vote in their sole
discretion a number of Voting Securities Beneficially Owned by the Shareholder
Group having voting rights with respect to such other matters representing in
the aggregate a Voting Ownership Percentage not in excess of the Unrestricted
Ownership Percentage, and (ii) the Shareholder shall, and shall cause each
member of the Shareholder Group to, vote all Voting Securities Beneficially
Owned by the Shareholder Group having voting rights with respect to such other
matters representing in the aggregate a Voting Ownership Percentage in excess
of the Unrestricted Ownership Percentage in the same proportion (based on
total Votes) as all Voting Securities voted on any such other matter are voted
by the shareholders of the Company other than the Shareholder or any member of
the Shareholder Group, provided, however, that the Shareholder and any member
of the Shareholder Group may vote any or all of the Voting Securities
Beneficially Owned by them in their sole discretion with respect to a vote of
the Company's shareholders on any transaction or series of transactions which
would, if consummated, constitute a Change in Control of the Company.
Notwithstanding the foregoing, at all times prior to or following the
occurrence of a Regulatory Change, the Shareholder shall, and shall cause each
member of the Shareholder Group to, vote all Excess Buy-Back Securities having
voting rights with respect to any matter (including the election of Directors)
in the same proportion (based on total Votes) as all Voting Securities voted
on such matter are voted by the shareholders of the Company other than the
Shareholder or any member of the Shareholder Group.
(e) At all times the Shareholder Group may exercise in its sole discretion
such voting rights as the Convertible Preferred Stock may have from time to
time pursuant to the Charter and with respect to an amendment to the Charter
which would have the effect of modifying the voting powers, designations,
preferences, rights and qualifications, limitations or restrictions of such
class or series so as to affect the holders thereof adversely.
ARTICLE V
EFFECTIVENESS AND TERMINATION
Section 5.1. Effectiveness. This Agreement shall take effect immediately
upon the Closing and shall remain in effect until it is terminated pursuant to
Section 5.2 hereof.
Section 5.2. Termination. Unless otherwise agreed in writing by the
Shareholder, this Agreement shall terminate upon the earliest to occur of the
following:
(a) The Company's quarterly dividend on its Common Stock falling below
$0.30 per share (as appropriately adjusted to reflect any stock split,
stock dividend, reverse stock split, reclassification or any other
transaction with a comparable effect) in any five (5) quarters during the
term of this Agreement.
(b) The Company's failure to pay the stated quarterly dividend on any
series of Convertible Preferred Stock in any five (5) quarters during the
term of this Agreement.
(c) The election to the Board of a majority of Directors other than those
nominated by the Nominating Committee of the Board.
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(d) The size of the Board being increased to more than 21 directors.
(e) The Shareholder Group's Total Ownership Percentage falling below 9.9%
at any time.
(f) The Shareholder Group's Total Ownership Percentage falling below
30.0% at any time following the fifteenth (15th) anniversary of the date
hereof.
(g) The material breach of this Agreement or the Merger Agreement by the
Company, provided that the Company has not cured the breach within thirty
(30) days after receiving notice of such breach, or if cure within such
time is not possible, the Company has not made reasonable efforts to cure
such breach, provided, further that in no event shall such cure period
extend longer than ninety (90) days from the date of first notice of such
breach.
(h) Mutual written agreement of the Company and the Shareholder at any
time to terminate this Agreement, which termination shall occur at a time
to be fixed in such mutual agreement.
(i) The entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of the Company's property, or ordering the winding up or liquidation
of the Company's affairs; and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a
period of sixty (60) consecutive days.
(j) The commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by the Company to
the entry of a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against the
Company, or the filing by the Company of a petition or answer or consent
seeking reorganization or relief under any applicable Federal or State law,
or the consent by the Company to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or
of any substantial part of the Company's property, or the making by the
Company of an assignment for the benefit of creditors, or the admission by
the Company in writing of the Company's inability to pay its debts
generally as they become due, or the taking of corporate action by the
Company in furtherance of any such action.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Compliance With Law. Notwithstanding anything to the contrary
in this Agreement, no Transfer of Securities shall be deemed to be required or
permitted pursuant to this Agreement if such Transfer would (a) result in an
adverse effect on the exemptions from the 1935 Act of the Shareholder or any
Shareholder Affiliate or the Company or any subsidiary of the Company, or (b)
require regulatory approvals which, individually or in the aggregate with
respect to such Transfer, would have a material adverse impact on the Company
or any of its subsidiaries or the Shareholder or any Shareholder Affiliate.
Section 6.2. Regulatory Matters. During the term of this Agreement, the
Company agrees to take all commercially reasonable steps to assist the
Shareholder in (a) with respect to each provision of this Agreement, causing a
Regulatory Change which would not reasonably be expected to have an adverse
effect on the Company to occur as soon as reasonably practicable, and (b)
securing such regulatory approvals as would not reasonably
B-17
<PAGE>
be expected to have a material adverse effect on the Company and as may be
necessary to allow the Shareholder to exercise its rights under the Agreement
at all times, including without limitation the right of the Shareholder to
Transfer Securities free of the restrictions and limitations imposed by
Section 6.1. Following the occurrence of a Regulatory Change, if the Company
believes in good faith that the Shareholder's regulatory status as modified by
such Regulatory Change would place an unreasonable restriction on the
Company's implementation of the Company's strategic business plan, then the
Company shall have an immediate right to exercise its Buy-Sell Option as
provided in Section 3.6 hereof, without regard to whether Section 3.6 would
otherwise then be applicable.
Section 6.3. Injunctive Relief. Each party hereto acknowledges that it would
be impossible to determine the amount of damages that would result from any
breach of any of the provisions of this Agreement and that the remedy at law
for any breach, or threatened breach, of any of such provisions would likely
be inadequate and, accordingly, agrees that each other party shall, in
addition to any other rights or remedies which it may have, be entitled to
seek such equitable and injunctive relief as may be available from any court
of competent jurisdiction to compel specific performance of, or restrain any
party from violating, any of such provisions. In connection with any action or
proceeding for injunctive relief, each party hereto hereby waives the claim or
defense that a remedy at law alone is adequate and agrees, to the maximum
extent permitted by law, to have each provision of this Agreement specifically
enforced against him or it, without the necessity of posting bond or other
security against him or it, and consents to the entry of injunctive relief
against him or it enjoining or restraining any breach or threatened breach of
such provisions of this Agreement.
Section 6.4. Successors and Assigns. This Agreement shall be binding upon,
shall inure to the benefit of and shall be enforceable by the Company and by
the Shareholder and their respective successors and permitted assigns, and no
such term or provision is for the benefit of, or intended to create any
obligations to, any other Person.
Section 6.5. Amendments; Waiver. (a) This Agreement may be amended only by
an agreement in writing executed by the parties hereto. Any approval of an
amendment of this Agreement upon the part of the Company shall require the
approval of a majority of the Independent Directors at a duly convened meeting
thereof or all of the Company's directors by written consent thereto.
(b) Either party may waive in whole or in part any benefit or right provided
to it under this Agreement, such waiver being effective only if contained in a
writing executed by the waiving party. No failure by any party to insist upon
the strict performance of any covenant, duty, agreement or condition of this
Agreement or to exercise any right or remedy consequent upon breach thereof
shall constitute a waiver of any such breach or of any other covenant, duty,
agreement or condition, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter. Any waiver of any benefit or right provided
to the Company under this Agreement shall require the approval of a majority
of the Board and a majority of the Independent Directors at a duly convened
meeting thereof or all of the Company's directors by written consent thereto.
Section 6.6. Notices. Except as otherwise provided in this Agreement, all
notices, requests, claims, demands, waivers and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
by hand, when delivered personally or by courier, three days after being
deposited in the mail (registered or certified mail, postage prepaid, return
receipt requested), or when received by facsimile transmission if promptly
confirmed by one of the foregoing means, as follows:
If to the Company:
WAI, Inc.
100 W. Fifth Street
Tulsa, Oklahoma
Attention: President
Fax: (918) 588-7960
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with a copy to:
Gable Gotwals Mock Schwabe Kihle
100 W. Fifth Street
Suite 1000
Tulsa, Oklahoma 74103
Attention: Donald A. Kihle, Esq.
Fax: (918) 588-7873
If to the Shareholder:
Western Resources, Inc.
818 Kansas Avenue
Topeka, Kansas 66612
Attention: President
Fax: (913) 575-8061
with a copy to:
Western Resources, Inc.
818 Kansas Avenue
Topeka, Kansas 66612
Attention: General Counsel
Fax: (913) 575-1788
or to such other address or facsimile number as either party may, from time to
time, designate in a written notice given in a like manner.
Section 6.7. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF OKLAHOMA
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 6.8. Headings. The descriptive headings of the several sections in
this Agreement are for convenience only and do not constitute a part of this
Agreement and shall not be deemed to limit or affect in any way the meaning or
interpretation of this Agreement.
Section 6.9. Integration. This Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof contain the
entire understanding of the parties with respect to its subject matter. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to its subject matter. There are no restrictions,
agreements, promises, representations, warranties, covenants or undertakings
with respect to its subject matter other than those expressly set forth or
referred to herein.
Section 6.10. Severability. If any term or provision of this Agreement or
any application thereof shall be declared or held invalid, illegal or
unenforceable, in whole or in part, whether generally or in any particular
jurisdiction, such provision shall be deemed amended to the extent, but only
to the extent, necessary to cure such invalidity, illegality or
unenforceability, and the validity, legality and enforceability of the
remaining provisions, both generally and in every other jurisdiction, shall
not in any way be affected or impaired thereby.
Section 6.11. Consent to Jurisdiction. In connection with any suit, claim,
action or proceeding arising out of this Agreement, the Shareholder and the
Company each hereby consent to the in personam jurisdiction of the United
States federal courts and state courts located in Tulsa, Oklahoma; the
Shareholder and the Company each agree that service in the manner set forth in
Section 6.5 hereof shall be valid and sufficient for all purposes; and the
Shareholder and the Company each agree to, and irrevocably waive any objection
based on forum non conveniens or venue not to, appear in any United States
federal court state court located in Tulsa, Oklahoma.
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<PAGE>
Section 6.12. Counterparts. This Agreement may be executed by the parties
hereto in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Shareholder have caused this
Agreement to be duly executed by their respective authorized officers as of the
date set forth at the head of this Agreement.
WAI, INC.
By:__________________________________
Name:
Title:
WESTERN RESOURCES, INC.
By:__________________________________
Name:
Title:
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<PAGE>
APPENDIX C
FORM OF CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, OF
CONVERTIBLE PREFERRED STOCK
OF
WAI, INC.
PURSUANT TO SECTION 1032 OF THE
GENERAL CORPORATION ACT OF THE STATE OF OKLAHOMA
<PAGE>
WAI, INC., an Oklahoma corporation (the "Corporation"), does hereby certify
that the Board of Directors of the Corporation duly adopted the following
resolution, at a meeting duly convened and held on , in
respect of two series of Preferred Stock, par value $0.01 per share, of the
Corporation, pursuant to authority conferred upon the Board by Article Fourth
of the Certificate of Incorporation of the Corporation and in accordance with
Section 1032 of the General Corporation Act of the State of Oklahoma:
BE IT RESOLVED, that the issuance of two series of Preferred Stock of the
Corporation is hereby authorized, and the designation, amount, powers,
preferences and relative, participating, optional and other special rights and
qualifications, limitations and restrictions thereof, of the shares of such
series of Preferred Stock of the Corporation, are hereby fixed as follows:
1. Designation; Class and Amount; Certain Definitions. The two series of
Preferred Stock, the issuance of which is hereby authorized, shall comprise
twenty million (20,000,000) shares the distinctive serial designation of which
shall be "Preferred Stock, Series A", which is sometimes herein referred to as
"Convertible Preferred Stock, Series A" and thirty million (30,000,000) shares
the distinctive serial designation of which shall be "Preferred Stock, Series
B", which is sometimes herein referred to as "Convertible Preferred Stock,
Series B" and, together with the Convertible Preferred Stock, Series A, the
"Convertible Preferred Stock". Each share of Convertible Preferred Stock,
Series A shall be identical in all respects with all other shares of
Convertible Preferred Stock, Series A and each share of Convertible Preferred
Stock, Series B shall be identical in all respects with all other shares of
Convertible Preferred Stock, Series B. The number of shares of Convertible
Preferred Stock which are purchased or otherwise acquired by the Corporation
or converted into Common Stock shall be canceled and shall revert to
authorized but unissued shares of Convertible Preferred Stock undesignated as
to series. Certain capitalized terms used herein have the meanings specified
therefor in Section 10 below.
2. Dividends; Priority. (a)(i) Payments of Dividend; Convertible Preferred
Stock, Series A. Each Holder of shares of Convertible Preferred Stock, Series
A shall be entitled to receive, when and if declared by the Board of
Directors, in respect of each share of Convertible Preferred Stock, Series A,
out of the funds of the Corporation legally available therefor, quarterly cash
dividend payments for each Dividend Period or portion thereof during which
such share of Convertible Preferred Stock, Series A is outstanding. Such
dividend payments shall be made, (A) during the First Dividend Stage, in an
amount determined by multiplying (x) the dividend amount declared in respect
of each share of the Corporation's common stock, par value $0.01 per share
(the "Common Stock") for such Dividend Period (such amount payable being
adjusted appropriately as set forth in Section 7(d) to reflect any stock
split, stock dividend, reverse stock split, reclassification or any
transaction with a comparable effect upon the Common Stock), times (y) 1.5;
and (B) during the Second Dividend Stage, in an amount determined by
multiplying (x) the dividend amount declared in respect of each share of
Common Stock of the Corporation for such Dividend Period (such amount payable
being adjusted appropriately as set forth in Section 7(d) to reflect any stock
split, stock dividend, reverse stock split, reclassification or any
transaction with a comparable effect upon the Common Stock), times (y) 1.25,
provided, however, that in no event during either the First or the Second
Dividend Stage shall the aggregate annual dividend amount payable in respect
of each share of Convertible Preferred Stock, Series A be less than $1.80. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on shares of Convertible Preferred Stock,
Series A, which are not paid.
(ii) Payments of Dividend; Convertible Preferred Stock, Series B. Each
Holder of shares of Convertible Preferred Stock, Series B, shall be entitled
to receive, when and if declared by the Board of Directors, in respect of each
share of Convertible Preferred Stock, Series B, out of the funds of the
Corporation legally available therefor, quarterly cash dividend payments for
each Dividend Period or portion thereof during which such share of Convertible
Preferred Stock, Series B is outstanding. Such dividend payments shall be made
in an amount determined by multiplying (x) the dividend amount declared in
respect of each share of Common Stock of the Corporation for such Dividend
Period (such amount payable being adjusted appropriately as set forth in
Section 7(d) to reflect any stock split, stock dividend, reverse stock split,
reclassification or any transaction with a
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comparable effect upon the Common Stock), times (y) 1.25, provided, however,
that in no event, during the First Dividend Stage, shall the aggregate annual
dividend amount payable in respect of each share of Convertible Preferred
Stock, Series B be less than $1.50 and provided, further, that in no event,
during the Second Dividend Stage, shall the aggregate annual dividend amount
payable in respect of each share of Convertible Preferred Stock, Series B be
less than $1.80. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on shares of
Convertible Preferred Stock, Series B, which are not paid.
(b) Payment and Record Dates. Dividends accrued on the Convertible Preferred
Stock in respect of each Dividend Period shall be payable, when and if
declared by the Board of Directors, in arrears prior to or concurrently with
each date of payment (each such date, a "Dividend Payment Date") by the
Corporation of quarterly cash dividends on the Common Stock in respect of such
Dividend Period; provided, however, that if any such day is not a Business Day
the applicable Dividend Payment Date shall be the next succeeding day that is
a Business Day; and provided, further that if no quarterly cash dividends are
paid on the Common Stock in respect of any such Dividend Period, the Dividend
Payment Date shall mean such date as may be determined by the Board of
Directors within three months following the end of such Dividend Period.
Dividends on the Convertible Preferred Stock shall accrue based on the then-
current dividend amount on a daily basis from the commencement of each
Dividend Period. Dividends will cease to accrue in respect of any shares of
Convertible Preferred Stock on the Surrender Date (as defined below) in
respect of a mandatory conversion pursuant to Section 7(c) or on the Surrender
Date in respect of a voluntary conversion pursuant to Section 7(a). Dividends
payable on the Convertible Preferred Stock for any Dividend Period
constituting less than a full fiscal quarter shall be computed ratably on the
basis of a 360-day year of 12 30-day months. Dividends for any Dividend Period
shall not be cumulative to the extent not paid in full on each Dividend
Payment Date. Dividends on the Convertible Preferred Stock in respect of any
Dividend Period unpaid as of the Dividend Payment Date for such Dividend
Period shall permanently remain unpaid. The foregoing notwithstanding,
dividends on account of arrears for any past Dividend Periods may be declared
and paid at any time, without reference to any regular Dividend Payment Date.
Dividends shall be payable to the Holders as they appear on the Stock Books
not exceeding 40 days preceding the relevant Dividend Payment Date. Dividends
shall be paid in cash, by wire transfer in immediately available funds to the
accounts designated by the respective Holders in written notices given to the
Corporation at least five Business Days prior to the payment date or by such
other means as may be agreed to by the Corporation and the respective Holders,
such wire transfer to be effected for good value on or before the Dividend
Payment Date.
(c) Dividend Rate; Calculation of Dividend Rate; Notice.
(i) The First Dividend Stage shall commence upon the initial issuance of
Convertible Preferred Stock and shall cease upon the fifth anniversary of
the Closing Date.
(ii) The Second Dividend Stage shall commence upon the fifth anniversary
of the Closing Date and shall continue for so long as any shares of
Convertible Preferred Stock shall remain outstanding.
(iii) Notwithstanding anything in this Certificate of Designations to the
contrary, the holders of the Convertible Preferred Stock shall participate
in all Special Dividends on a share for share basis with the holders of
Common Stock, as if shares of the Convertible Preferred Stock were
converted into Common Stock immediately prior to the record date with
respect to each such Special Dividend, and Special Dividends shall not be
taken into account in determining the annual dividend rate of the
Convertible Preferred Stock for purposes of Section 2(a) hereof.
(d) The Corporation will cause written notice of each dividend amount on the
Convertible Preferred Stock to be given to each Holder within five Business
Days after it is determined by the Board of Directors. Notwithstanding the
foregoing, if the Corporation shall not declare quarterly cash dividends on
its Common Stock for any Dividend Period, the dividend amount on the
Convertible Preferred Stock for purposes of Section 2(a) hereof shall be
computed by reference to the dividend amount on the Common Stock for the most
recent Dividend Period in respect of which dividends (other than Special
Dividends) were paid.
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(e) Priority as to Dividends; Restriction on Dividends, Redemption, etc. The
Corporation shall not, for so long as the Convertible Preferred Stock shall
remain outstanding, directly or indirectly, declare or pay or set apart for
payment any dividends (including cumulative dividends) or make (or permit any
Subsidiary to make) any other distributions on, or payment on account of the
purchase, redemption or other retirement or acquisition for value of the
Common Stock, any other capital stock of the Corporation ranking junior to the
Convertible Preferred Stock as to dividends or as to distribution of assets
upon any liquidation, dissolution or winding up of the affairs of the
Corporation or any options, warrants or rights to purchase or acquire Common
Stock or any such capital stock or any securities convertible into or
exchangeable for shares of Common Stock or any such capital stock, except that
such payment of dividends and such other distributions and payments may be
made so long as full dividends payable on the Convertible Preferred Stock for
the Dividend Period commencing immediately prior to the date of such dividend,
distribution or other payment have been or are concurrently paid (or a sum
sufficient for the payment thereof set apart for such payment subject to
declaration thereof); provided, however, that the foregoing restrictions shall
not apply to: (i) any dividend payable solely in shares of any stock of the
Corporation ranking, as to dividends and as to distribution of assets upon any
liquidation, dissolution or winding-up of the affairs of the Corporation,
junior to the Convertible Preferred Stock (or payable solely in options,
warrants or rights to purchase or acquire any such stock) or (ii) any
distribution pursuant to any employee or director incentive or benefit plan or
arrangement (including any employment, severance or consulting agreement) of
the Corporation or any Subsidiary heretofore or hereafter adopted; or (iii)
any distribution pursuant to a redemption, at the stated redemption price, of
any rights granted to Holders of Common Stock pursuant to a stockholder rights
plan; or (iv) any dividend approved in writing by the holders of at least 66
2/3 percent of all shares of Convertible Preferred Stock then outstanding.
Holders of shares of Convertible Preferred Stock shall be entitled to receive
dividends in accordance with the foregoing clause (a) of this Section 2 in
preference to and in priority over any dividend upon any securities junior to
the Convertible Preferred Stock.
3. Voting Rights. (a) Holders of shares of Convertible Preferred Stock,
voting together as a single class with holders of shares of Common Stock (and
with holders of any other class or series of stock which may similarly be
entitled to vote with the holders of Common Stock) shall be entitled at any
meeting of stockholders called for the purpose of voting on (or acting by
written consent without need of any advance notice) (i) the Opt-out Amendment
(as defined in the Merger Agreement) (ii) any proposed amendment to the
Certificate of Incorporation or By-Laws which would reasonably have the effect
of modifying in any way the Opt-out Amendment or would reasonably cause the
Corporation to become subject to (a) the Control Share Acquisition Statute (as
defined in the Merger Agreement) or (b) any other provisions which are
substantially similar to the Control Share Acquisition Statute or (iii) any
transaction or series of transactions submitted to a vote of the stockholders
of the Corporation which, if consummated, would constitute a Change in
Control, to vote with respect to such proposal or transaction(s). When voting
together with the holders of shares of Common Stock on any such
transaction(s), each share of Convertible Preferred Stock shall carry, as of
the record date applicable to such vote, a number of votes equal to the number
of votes carried in the aggregate by the number of shares of Common Stock
issuable upon conversion of one share of Convertible Preferred Stock into
Common Stock in accordance with Section 7 below.
(b) Except as provided by this Section 3 and Sections 4 and 8 below, or as
otherwise may be required by applicable law, the Holders of Convertible
Preferred Stock shall not be entitled, by virtue of their being Holders
thereof, to vote in any election of directors to the Board of the Corporation,
or with respect to any other matter submitted to the stockholders of the
Corporation. Where a vote of the Holders, voting as a separate class, may be
required by applicable law or by this Section 3 or Section 4 or 8, each share
of Convertible Preferred Stock, Series A and each share of Convertible
Preferred Stock, Series B, shall carry one vote.
4. Covenants. So long as any shares of Convertible Preferred Stock are
outstanding, the Corporation covenants and agrees with and for the benefit of
the Holders of such shares that without the affirmative vote or consent of
Holders of 66 2/3 percent of all shares of the Convertible Preferred Stock
then outstanding, voting as a separate class in person or by proxy or by
written consent delivered to the Secretary of the Corporation, the Corporation
shall not amend, alter or repeal any provision of the Certificate of
Incorporation of the Corporation, this Certificate of Designations, or any
amendment or supplement to any of the foregoing, so as to affect adversely the
rights, powers, preferences, qualifications, limitations or restrictions of
any Holder of Convertible Preferred Stock.
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5. Redemption. Shares of the Convertible Preferred Stock shall not be
redeemable, in whole or in part, in any event, at the option of the
Corporation.
6. Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, the
Holders of shares of Convertible Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders an amount per share in cash equal to the
amount that would be payable on one share of Common Stock (such amount payable
being adjusted appropriately to reflect any stock split, stock dividend,
reverse stock split, or any transaction with comparable effect upon the Common
Stock and assuming conversion of all shares of Convertible Preferred Stock
then outstanding into shares of Common Stock immediately prior to such
liquidation, dissolution or winding up), plus all dividends then due on the
Convertible Preferred Stock (the "Liquidation Preference"). This entitlement
of the Holders of shares of Convertible Preferred Stock shall be satisfied
before any similar payment shall be made or any assets distributed to the
holders of the Common Stock or any other security junior in rank to the
Convertible Preferred Stock as to distribution of assets upon such
dissolution, liquidation or winding up. If the assets of the Corporation are
not sufficient to pay in full the liquidation payments payable to all of the
Holders of the outstanding shares of Convertible Preferred Stock, then the
Holders of all such shares shall share ratably in such distribution of assets
in accordance with the respective liquidation preferences to which they are
entitled. For the purposes of this section, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Corporation nor the consolidation or merger of the Corporation with one or
more other corporations shall be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary, unless such voluntary sale, conveyance,
exchange or transfer shall be in connection with a dissolution or winding up
of the business of the Corporation.
7. Conversion. (a) Conversion Right. At any time after the occurrence of a
Regulatory Change, each share of Convertible Preferred Stock shall be
convertible at the option of the Holder thereof into one fully paid and
nonassessable share of Common Stock (as adjusted pursuant to Section 7(d)
hereof).
(b)(i) Conversion Procedures. Any Holder of shares of Convertible Preferred
Stock desiring to convert such shares into Common Stock shall surrender the
certificate(s) evidencing such shares of Convertible Preferred Stock of the
Holder at the office of the transfer agent appointed for the purpose of such
conversion by the Corporation. Such surrendered certificate(s), if the
Corporation shall so require, shall be duly endorsed to the Corporation or in
blank, or accompanied by proper instruments of transfer to the Corporation or
in blank, and, in the case of any conversion other than a mandatory conversion
pursuant to clause (c) of this Section 7 below, shall be accompanied by
written notice to the Corporation that the Holder elects so to convert such
shares of Convertible Preferred Stock, which notice shall specify the name or
names (with address or addresses) in which the Holder wishes the
certificate(s) evidencing shares of Common Stock to be issued, in exchange for
that certificate or those certificates so surrendered.
(ii) The Corporation shall, within five Business Days after such
surrender of certificates evidencing shares of Convertible Preferred Stock
accompanied by written notice and in compliance with any other conditions
contained herein, issue and deliver, or cause to be issued and delivered,
to the person(s) for whose account such certificate(s) evidencing shares of
Convertible Preferred Stock were so surrendered, or to the nominee(s) of
such Person(s), certificates representing the number of full shares of
Common Stock to which such Person shall be entitled pursuant to the then-
applicable conversion rate. Such conversion shall be deemed to have been
made on the date of such surrender of the certificate(s) evidencing shares
of Convertible Preferred Stock to be converted (the "Surrender Date") and
the Person(s) entitled to receive the Common Stock deliverable upon
conversion of such Convertible Preferred Stock shall be treated for all
purposes as the record holder(s) of such Common Stock on such date and
thereafter. Conversion of Preferred Stock may otherwise be achieved in
accordance with such procedures as the Corporation and a majority of the
Holders may agree.
(iii) In the event that fewer than all shares of Convertible Preferred
Stock represented by a surrendered certificate are to be converted
hereunder, a new certificate shall be issued at the Corporation's expense
representing the shares of Convertible Preferred Stock not so converted.
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(iv) Effective on the day following the Surrender Date, dividends shall
cease to accrue on any shares of Convertible Preferred Stock surrendered
for conversion, such shares of Convertible Preferred Stock shall no longer
be deemed outstanding, all rights of the Holders thereof as preferred
stockholders of the Corporation shall cease (other than the right to
receive dividends declared or otherwise payable to Holders of Convertible
Preferred Stock on a record date prior to the Surrender Date) and thereupon
the certificate(s) theretofore representing shares of Convertible Preferred
Stock shall represent only the right to receive the Common Stock
deliverable upon conversion in respect thereof.
(v) If any shares of Convertible Preferred Stock are surrendered for
conversion subsequent to the record date preceding a Dividend Payment Date
but on or prior to such Dividend Payment Date (except shares called for
redemption on a redemption date between such record date and such Dividend
Payment Date), the Holder of such shares at the close of business on such
record date shall be entitled to receive the dividend payable on such
shares on such Dividend Payment Date notwithstanding the conversion
thereof.
(c) Mandatory Conversion. Immediately upon the transfer of Beneficial
Ownership of any share of Convertible Preferred Stock to any Person other than
the Shareholder or an Affiliate of the Shareholder, such share of Convertible
Preferred Stock shall convert into one fully-paid and non-assessable share of
Common Stock (as adjusted pursuant to Section 7(d)), in accordance with the
procedures provided in clause (b) of this Section 7.
(d) The conversion rate shall be adjusted from time to time as follows:
(i) In case the Corporation shall, at any time or from time to time while
any of the shares of Convertible Preferred Stock are outstanding, (A) pay a
dividend in shares of its Common Stock, (B) subdivide its outstanding
shares of Common Stock into a smaller number of shares, or (C) combine its
outstanding shares of Common Stock into a smaller number of shares, the
conversion rate in effect immediately prior to such action shall be
adjusted so that the Holder of any shares of Convertible Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock which such Holder would have owned or have
been entitled to receive immediately following such action had such shares
of Convertible Preferred Stock been converted immediately prior thereto. An
adjustment made pursuant to this Section 7(d)(i) shall become effective
retroactively to immediately after the opening of business on the Business
Day following the record date in the case of a dividend and shall become
effective immediately after the opening of business on the Business Day
following the effective date in the case of a subdivision or combination.
If, as a result of an adjustment made pursuant to this Section 7(d)(i), the
Holder of any shares of Convertible Preferred Stock thereafter surrendered
for conversion shall become entitled to receive shares of two or more
classes of capital stock of the Corporation, the Board of Directors (whose
determination shall be conclusive) shall determine the allocation of the
adjusted conversion rate between or among shares of such classes of capital
stock.
(ii) In case the Corporation shall, at any time or from time to time
while any of the shares of Convertible Preferred Stock are outstanding,
issue rights or warrants to all holders of shares of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock (or
securities convertible into or exchangeable for Common Stock) at a price
per share less than the current Market Price per share of Common Stock, at
such record date, the conversion rate shall be adjusted so that it shall
equal the rate determined by multiplying the conversion rate in effect
immediately prior to the date of issuance of such rights or warrants by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus
the number of additional shares of Common Stock offered for subscription or
purchase, and the denominator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of the total
number of shares so offered would purchase at such current market price.
For the purposes of this Section 7(d)(ii), the issuance of rights or
warrants to subscribe for or purchase securities convertible into Common
Stock shall be deemed to be the issuance of rights or
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<PAGE>
warrants to purchase the shares of Common Stock into which such securities
are convertible at an aggregate offering price equal to the aggregate
offering price of such securities plus the minimum aggregate amount (if
any) payable upon conversion of such securities into shares of Common
Stock; provided, however, that if all of the shares of Common Stock subject
to such rights or warrants have not been issued when such rights or
warrants expire, then the conversion rate shall promptly be readjusted to
the conversion rate which would then be in effect had the adjustment upon
the issuance of such rights or warrants been made on the basis of the
actual number of shares of Common Stock issued upon the exercise of such
rights or warrants. The foregoing provision shall not apply to issuances of
rights pursuant to a stockholder rights plan provided that such rights are
issued together with the Common Stock upon conversion of the Convertible
Preferred Stock. An adjustment made pursuant to this Section 7(d)(ii) shall
become effective retroactively immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
(iii) In case the Corporation shall, at any time or from time to time
while any of the shares of Convertible Preferred Stock are outstanding,
distribute to all holders of shares of its Common Stock evidences of its
indebtedness or securities or assets (excluding cash dividends payable out
of consolidated earnings or retained earnings or dividends payable in
shares of Common Stock) or rights or warrants to subscribe for securities
of the Corporation or any of its subsidiaries (excluding those referred to
in Section 7(d)(ii)), then in each such case the conversion rate shall be
adjusted so that it shall equal the rate determined by multiplying the
conversion rate in effect immediately prior to the date of such
distribution by a fraction, the numerator of which shall be the current
Market Price per share of the Common Stock on the record date referred to
below, and the denominator of which shall be such current market price per
share of the Common Stock less the then fair market value of the portion of
the assets or evidences of indebtedness or securities or assets so
distributed or of such subscription rights or warrants applicable to one
share of Common Stock. Such adjustment shall become effective retroactively
immediately after the record date for the determination of stockholders
entitled to receive such distribution.
(iv) The Corporation shall be entitled at its option to make such
additional adjustments in the conversion rate, in addition to those
required by subsections 7(d)(i), 7(d)(ii) and 7(d)(iii), as shall be
necessary in order that any dividend or distribution in shares of stock,
subdivision or combination of shares of Common Stock, issuance of rights or
warrants, evidences of indebtedness or assets (other than cash dividends
payable out of consolidated earnings or retained earnings) referred to
above, shall not be taxable to the Holders of shares of Convertible
Preferred Stock.
(v) In any case in which this Section 7(d) shall require that an
adjustment be made retroactively immediately following a record date, the
Corporation may elect to defer (but only for five (5) Business Days
following the filing of the statement referred to in Section 7(d)(vii))
issuing to the holder of any shares of this Series converted after such
record date (A) the shares of Common Stock and other capital stock of the
Corporation issuable upon such conversion over and above (B) the shares of
Common Stock and other capital stock of the Corporation issuable upon such
conversion on the basis of the conversion rate prior to adjustment.
(vi) Notwithstanding any other provisions of this Section 7(d), the
Corporation shall not be required to make any adjustment of the conversion
rate (A) in respect of any Special Dividend in which the holders of
Convertible Preferred Stock participate as provided in Section 2(c)(iii) or
(B) unless such adjustment would require an increase or decrease of at
least 1% in such rate (any lesser adjustment shall be carried forward and
shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least 1% in such
rate).
(vii) Whenever an adjustment in the conversion rate is required, the
Corporation shall forthwith place on file with its Transfer Agent a
statement signed by its Chief Executive Officer, Chief Financial Officer or
a Vice President and by its Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer, stating the adjusted conversion rate determined as
provided herein. Such statements shall set forth in reasonable detail
C-6
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such facts as shall be necessary to show the reason and the manner of
computing such adjustment. Promptly after the adjustment of the conversion
rate, the Corporation shall mail a notice thereof to each holder of shares
of Convertible Preferred Stock.
(e) Reservation of Shares; Etc. (i) The Corporation shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
and unissued stock, such number of shares of its Common Stock as shall from
time to time be sufficient to effect the conversion of all shares of the
Convertible Preferred Stock from time to time outstanding, solely for the
purpose of effecting such conversion. The Corporation shall, from time to
time, in accordance with the laws of the State of Oklahoma, increase the
authorized number of shares of Common Stock if at any time the number of
shares of authorized and unissued Common Stock shall not be sufficient to
permit the conversion of all the then-outstanding shares of Convertible
Preferred Stock.
(ii) If any shares of Common Stock required to be reserved hereunder for
purposes of conversion require registration with or approval of any
governmental authority under any Federal or state law before such shares
may be issued upon conversion, the Corporation shall, in good faith and as
expeditiously as possible, cause such shares to be duly registered or
approved as the case may be. If the Common Stock is listed on the New York
Stock Exchange or any other national or foreign securities exchange, the
Corporation shall, if permitted by the rules of such exchange, list and
keep listed on such exchange, upon official notice of issuance, all shares
of Common Stock issuable upon conversion of Convertible Preferred Stock.
(iii) The Corporation will pay any and all taxes that may be payable in
respect of the issuance or delivery of shares of Common Stock upon
conversion of shares of Convertible Preferred Stock pursuant hereto. The
Corporation shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of
shares of Common Stock in a name other than that in which the shares of
Convertible Preferred Stock so converted were registered and no such
issuance or delivery shall be made unless and until the person requesting
such issuance has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax has been
paid.
(f) Reclassifications, Consolidations, Mergers or Sales of Assets. In case
of (i) any reclassification or change of outstanding shares of Common Stock
(other than a change in par value or from par value to no par value or from no
par value to par value, or as a result of a subdivision or combination) or
(ii) any consolidation or merger of the Corporation with one or more other
corporations (other than a consolidation or merger in which the Corporation is
the continuing corporation and which does not result in any reclassification
or change of outstanding shares of Common Stock issuable upon conversion of
Convertible Preferred Stock), (iii) any sale or conveyance to another
corporation or other entity of all or substantially all of the property of the
Corporation, or (iv) any other transaction which would constitute a Change in
Control of the Corporation, then the Corporation, or such successor
corporation or other entity, as the case may be, shall make appropriate
provision so that the holder of each share of Convertible Preferred Stock then
outstanding shall have the right to convert such share into the kind and
amount of shares of stock or other securities and property receivable upon
such consolidation, merger, sale, reclassification, change or conveyance by a
holder of the number of shares of Common Stock into which such shares of
Convertible Preferred Stock might have been converted immediately prior to
such consolidation, merger, sale, reclassification, change or conveyance,
subject to adjustment which shall be as nearly equivalent as may be
practicable to the adjustments provided for in Section 7(d). The provisions of
this paragraph shall apply similarly to successive consolidations, mergers,
sales or conveyances.
8. Priority. The Convertible Preferred Stock shall be senior in rank, both
as to dividends and as to distribution of assets upon any liquidation,
dissolution or winding up of the affairs of the Corporation, to the Common
Stock, or any class of equity securities of the Corporation which by its terms
are junior to the Convertible Preferred Stock, and shall not be junior in rank
with respect to any class or series of preferred stock that may be issued by
the Corporation, unless the Holders of 66 2/3 percent of the outstanding
shares of the Convertible Preferred Stock shall consent to the creation,
reclassification or authorization of any class or series of the Corporation's
capital stock ranking prior to the Convertible Preferred Stock as to dividends
or as to
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distributions of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, or any security convertible
into shares of such class or series. Except as otherwise provided in this
Certificate of Designations, the Convertible Preferred Stock, Series A shall
be deemed to rank on a parity with the Convertible Preferred Stock, Series B.
9. Notices. The Corporation shall provide notice to each Holder of any
action taken or proposed to be taken or any determination made by the
Corporation and/or the Shareholder under the terms of this Certificate of
Designations. Notice of any such action or determination by the Corporation
and/or the Shareholder and all other notices and other communications provided
for in this Certificate of Designations shall be delivered by facsimile and by
reputable overnight courier,
(a) if to the Corporation, to:
WAI, Inc.
Tulsa, Oklahoma 74103
Facsimile: (918) 588-7960
Attn: President
with a copy to:
Gable Gotwals Mock Schwabe Kihle Gaberino
100 West Fifth Street, Suite 1000
Tulsa, Oklahoma 74103
Facsimile: (918) 588-7873
Attn: Donald H. Kihle, Esq.
and
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Facsimile: (212) 859-4000
Attn: F. William Reindel, Esq.
or such other address as the Corporation shall have furnished to the Holders
in writing,
(b) if to a Holder and/or the Shareholder, to the address and facsimile
number of such Holder listed on the Stock Books of the Corporation.
10. Definitions. Certain capitalized terms are used herein as defined below:
"Affiliate" shall mean, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls or is
controlled by or is under common control with such Person. For the purposes of
this definition, "control," when used with respect to any particular Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Beneficial Owner" (and, with correlative meanings, "Beneficially Own" and
"Beneficial Ownership") of any interest means a Person who, together with his,
her or its Affiliates, is or may be deemed a beneficial owner of such interest
for purposes of Rule 13d-3 or 13d-5 under the Exchange Act of 1934, or who,
together with his, her, or its Affiliates, has the right to become such a
beneficial owner of such interest (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise, conversion or exchange of
any warrant, right or other instrument, or otherwise.
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"Board" shall mean the Board of Directors of the Corporation in office at
the applicable time, as elected in accordance with the By-Laws of the
Corporation and with the Stockholder Agreement.
"Business Day" means any day other than a Saturday, a Sunday, a day on which
the New York Stock Exchange is closed or a day on which state or federally
chartered banking institutions in New York, New York are not required to be
open.
"By-Laws" shall mean the By-Laws of the Corporation, in the form specified
in the Merger Agreement, as they may be amended from time to time.
"Certificate of Designations" means this Certificate of Designations,
Powers, Preferences and Relative, Participating, Optional or other Rights, and
the Qualifications, Limitations or Restrictions Thereof, creating the
Convertible Preferred Stock, Series A and Convertible Preferred Stock, Series
B.
"Certificate of Incorporation" shall mean the Certificate of Incorporation
of the Corporation, in the form specified in the Merger Agreement, as it may
be amended from time to time.
"Change in Control" shall mean the occurrence of any one of the following
events:
(1) any Person (other than WRI and/or its Affiliates) becoming the
Beneficial Owner, directly or indirectly, of Voting Securities, pursuant to
the consummation of a merger, consolidation, sale of all or substantially
all of the Corporation's assets, share exchange or similar form of
corporate transaction involving the Corporation or any of its subsidiaries
that requires the approval of the Corporation's shareholders, whether for
such transaction or the issuance of securities in such transaction, so as
to cause such Person's Voting Ownership Percentage to exceed the Control
Percentage (as defined below); provided, however, that the event described
in this paragraph (1) shall not be deemed to be a Change in Control if it
occurs as the result of any of the following acquisitions: (A) by any
employee benefit plan sponsored or maintained by the Corporation or any
Affiliate, or (B) by any underwriter temporarily holding securities
pursuant to an offering of such securities;
(2) the consummation of a merger, consolidation, sale of all or
substantially all of the Corporation's assets, share exchange or similar
form of corporate transaction involving the Corporation or any of its
subsidiaries that requires the approval of the Corporation's shareholders,
whether for such transaction or the issuance of securities in such
transaction, unless immediately following such transaction more than 50
percent of the total voting power of (x) the corporation resulting from
such transaction, or (y) if applicable, the ultimate parent corporation
that directly or indirectly has Beneficial Ownership of 100 percent of the
voting securities eligible to elect directors of such resulting
corporation, is represented by Voting Securities that were outstanding
immediately prior to such transaction (or, if applicable, shares into which
such Voting Securities were converted pursuant to such transaction), and
such voting power among the holders of such Voting Securities that were
outstanding immediately prior to such transaction is in substantially the
same proportion as the voting power of such Voting Securities among the
holders thereof immediately prior to such transaction; or
(3) the consummation of a plan of complete liquidation or dissolution of
the Corporation.
"Closing Date" means the date of consummation of the merger of ONEOK with
and into the Corporation, as provided in the Merger Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning specified in Section 2(a)(i) above.
"Control Percentage" shall mean a Voting Ownership Percentage of 15 percent,
during the period prior to a Regulatory Change, and a Voting Ownership
Percentage of 35 percent thereafter.
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"Convertible Preferred Stock" has the meaning specified in Section 1 above.
"Dividend Period" means the applicable period from (and including) the
Closing Date to the end of the first fiscal quarter after the Closing Date,
and each fiscal quarter thereafter.
"Dividend Rate" has the meaning specified in Section 2(c) above.
"First Dividend Stage" has the meaning specified in Section 2(c)(iii) above.
"Holder" means a holder of record of a share or shares of Convertible
Preferred Stock.
"Liquidation Preference" has the meaning specified in Section 6 above.
The "Market Price" for the Common Stock shall mean the average of the
closing prices for such Common Stock for the twenty (20) Trading Days
immediately prior to the date on which the Market Price is being determined;
provided, however, that in the event that the current per share market price
of the Common Stock is determined during a period following the announcement
by the Corporation of (a) a dividend or distribution on the Common Stock
payable in shares of Common Stock or securities convertible into Common Stock,
or (b) any subdivision, combination or reclassification of the Common Stock
and prior to the expiration of 20 Trading Days after the ex-dividend date for
such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current per
share market price shall be appropriately adjusted to take into account ex-
dividend trading or the effects of such subdivision, combination or
reclassification. The closing price for each Trading Day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system of the New
York Stock Exchange or, if the Common Stock is no longer listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to the principal
national securities exchange on which the Common Stock is then listed or
admitted to trading or if the Common Stock is no longer listed or admitted to
trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the over-the-
counter market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System or such other system then in use, or, if on
any such date the Common Stock is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in such security selected by a majority of the
Board or, if on any such date no market maker is making a market in such
security, the fair value as determined in good faith by a majority of the
Board based upon the opinion of an independent investment banking firm of
recognized standing.
"Merger Agreement" means the Agreement, dated as of December 12, 1996,
between ONEOK and WRI, as amended and/or restated from time to time.
"ONEOK" means Oneok, Inc., a Delaware corporation.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization, government or any agency or political
subdivision thereof, or any other entity.
A "Regulatory Change" will be deemed to have occurred upon the receipt by
the Shareholder of an opinion of the Shareholder's counsel (which counsel must
be reasonably acceptable to the Corporation) to the effect that either (1) the
Public Utility Holding Company Act of 1935 (the "1935 Act") has been repealed,
modified, amended or otherwise changed or (2) the Shareholder has received an
exemption, or, in the unqualified opinion of such counsel, is entitled without
any regulatory approval to claim an exemption, or has received an approval or
no-action letter from the Securities and Exchange Commission or its staff
under the 1935 Act or has registered under the 1935 Act, or any combination of
the foregoing, and as a consequence of (1) and/or (2) the Shareholder may
fully and legally exercise the rights set forth in the Shareholder Agreement
which take effect in the period after a Regulatory Change has occurred.
"Second Dividend Stage" has the meaning specified in Section 2(c)(ii) above.
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"Shareholder" means WRI.
"Shareholder Agreement" means the Shareholder Agreement, dated as of ,
1997 between WAI and WRI.
"Special Dividend" means a dividend declared or paid on the Common Stock in
respect of a recapitalization, spin-off, reorganization or other extraordinary
transaction of the Corporation.
"Stock Books" means the stock transfer books of the Corporation relating to
its Common Stock and Preferred Stock.
"Surrender Date" has the meaning specified in Section 7 above.
"Total Voting Power" shall mean, calculated at a particular point in time,
the aggregate Votes represented by all then outstanding Voting Securities.
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open
for the transaction of business.
"Votes" shall mean votes entitled to be cast generally in the election of
any member of the Board, as elected in accordance with the provisions of the
By-Laws, not including the votes that would be able to be cast by holders of
shares of Convertible Preferred Stock upon the conversion of such shares to
shares of Common Stock, unless such conversion shall occur or be deemed to
occur.
"Voting Ownership Percentage" shall mean, calculated at a particular point
in time, the Voting Power represented by the Voting Securities Beneficially
Owned by the Person whose Voting Ownership Percentage is being determined.
"Voting Power" shall mean, calculated at a particular point in time, the
ratio, expressed as a percentage, of (a) the Votes represented by the Voting
Securities with respect to which the Voting Power is being determined to (b)
Total Voting Power.
"Voting Securities" shall mean the Common Stock and shares of any other
class of capital stock of the Corporation then entitled to vote generally in
the election of any member of the Board, as elected in accordance with the
provisions of the By-Laws and shall not include the Convertible Preferred
Stock (or other securities convertible into Voting Securities) prior to its
conversion into Common Stock (or other Voting Securities).
"WRI" means Western Resources, Inc., a Kansas corporation.
IN WITNESS WHEREOF, WAI, INC. has caused this Certificate to be made under
the seal of the Corporation and signed and attested by the undersigned
officers of the Corporation this day of , 1997.
WAI, INC.
By___________________________________
Name:
Title:
(Corporate Seal)
Attest:
By___________________________________
Name:
Title:
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APPENDIX D
ONEOK, INC.
AND
LIBERTY BANK AND TRUST COMPANY OF
OKLAHOMA CITY, N.A., AS
RIGHTS AGENT
FORM OF RIGHTS AGREEMENT
DATED AS OF NOVEMBER 26, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Section 1. Certain Definitions.......................................... 1
Section 2. Appointment of Rights Agent.................................. 4
Section 3. Issue of Right Certificates.................................. 4
Section 4. Form of Right Certificate.................................... 5
Section 5. Countersignature and Registration............................ 5
Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificate................................................. 6
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights...................................................... 6
Section 8. Cancellation and Destruction of Right Certificates........... 8
Section 9. Reservation and Availability of Capital Stock................ 8
Section 10. Preferred Shares Record Date................................. 9
Adjustment of Purchase Price, Number and Kind of Shares or
Section 11. Number of Rights............................................ 9
Section 12. Certificate of Adjusted Purchase Price or Number of Shares... 14
Consolidation, Merger or Sale or Transfer of Assets or
Section 13. Earning Power............................................... 14
Section 14. Fractional Rights and Fractional Shares...................... 16
Section 15. Rights of Action............................................. 17
Section 16. Agreement of Right Holders................................... 17
Section 17. Right Certificate Holder Not Deemed a Stockholder............ 18
Section 18. Concerning the Rights Agent.................................. 18
Section 19. Merger or Consolidation or Change of Name of Rights Agent.... 18
Section 20. Duties of Rights Agent....................................... 19
Section 21. Change of Rights Agent....................................... 20
Section 22. Issuance of New Right Certificates........................... 21
Section 23. Redemption and Termination................................... 21
Section 24. Exchange..................................................... 22
Section 25. Notice of Certain Events..................................... 23
Section 26. Notices...................................................... 23
Section 27. Supplements and Amendments................................... 24
Section 28. Determination and Actions by the Board of Directors, etc..... 24
Section 29. Successors................................................... 24
Section 30. Benefits of this Agreement................................... 24
Section 31. Severability................................................. 24
Section 32. Governing Law................................................ 25
Section 33. Counterparts................................................. 25
Section 34. Descriptive Headings......................................... 25
Signatures ............................................................. 26
Exhibit A --Certificate of Designation, Preferences and Rights of
Series C Participating Preferred Stock of ONEOK, Inc.
Exhibit B --Form of Right Certificate
Exhibit C --Summary of Rights to Purchase Preferred Shares
</TABLE>
D-i
<PAGE>
DEFINED TERM CROSS REFERENCE SHEET
<TABLE>
<S> <C>
Acquiring Person............................................. Section 1(a)
Act.......................................................... Section 1(b)
Adjusted Number of Shares.................................... Section 11(a)(iii)
Adjusted Purchase Price...................................... Section 11(a)(iii)
Adjustment Shares............................................ Section 11(a)(ii)
Affiliate.................................................... Section 1(c)
Agreement.................................................... Preface
Associate.................................................... Section 1(c)
beneficially own............................................. Section 1(d)
Beneficial Owner............................................. Section 1(d)
Business Day................................................. Section 1(e)
capital stock equivalent..................................... Section 11(a)(iii)
Close of Business............................................ Section 1(f)
Common Shares................................................ Section 1(g)
Corporation.................................................. Preface
current per share market price............................... Section 11(d)(i)
Disinterested Directors...................................... Section 1(h)
Distribution Date............................................ Section 1(i)
equivalent preferred shares.................................. Section 11(b)
Exchange Act................................................. Section 1(c)
Exchange Ratio............................................... Section 24(a)
Final Expiration Date........................................ Section 1(j)
Interested Stockholder....................................... Section 1(k)
NASDAQ....................................................... Section 11(d)(i)
Permitted Offer.............................................. Section 1(l)
Person....................................................... Section 1(m)
Preferred Shares............................................. Section 1(n)
Principal Party.............................................. Section 13(b)
Proration Factor............................................. Section 11(a)(iii)
Purchase Price............................................... Section 4(a)
Record Date.................................................. Preface
Redemption Date.............................................. Section 1(o)
Redemption Price............................................. Section 23(a)(i)
Right........................................................ Preface
Right Certificate............................................ Section 3(a)
Rights Agent................................................. Preface
Section 11(a)(ii) Event...................................... Section 1(p)
Section 13 Event............................................. Section 1(q)
Security..................................................... Section 11(d)(i)
Shareholder Agreement........................................ Section 1(r)
Shares Acquisition Date...................................... Section 1(s)
Subsidiary................................................... Section 1(t)
Summary of Rights............................................ Section 3(b)
then outstanding............................................. Section 1(d)
Trading Day.................................................. Section 11(d)(i)
Transaction.................................................. Section 1(u)
Transaction Person........................................... Section 1(v)
Triggering Event............................................. Section 1(w)
voting securities............................................ Section 13(a)
</TABLE>
D-ii
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of November 26, 1997 (the "Agreement"), between
ONEOK, Inc., an Oklahoma corporation (the "Corporation"), and LIBERTY BANK AND
TRUST COMPANY OF OKLAHOMA CITY, N.A. (the "Rights Agent").
The Board of Directors of the Corporation has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common
Share (as hereinafter defined) of the Corporation outstanding at 5:00 P.M.,
Eastern Standard Time, on November 26, 1997 (the "Record Date"), each Right
representing the right to purchase one one-hundredth (subject to adjustment as
provided herein) of a Preferred Share (as hereinafter defined), upon the terms
and subject to the conditions herein set forth, and has further authorized and
directed the issuance of one Right with respect to each Common Share that
shall become outstanding between the Record Date and the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date (as such
terms are hereinafter defined); provided, however, that Rights may be issued
with respect to Common Shares that shall become outstanding after the
Distribution Date and prior to the earlier of the Redemption Date and the
Final Expiration Date in accordance with the provisions of Section 22 of this
Agreement.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of 15%
or more of the then outstanding Common Shares (other than as a result of a
Permitted Offer) or was such a Beneficial Owner at any time after the date
hereof, whether or not such person continues to be the Beneficial Owner of 15%
or more of the then outstanding Common Shares. Notwithstanding the foregoing,
(A) the term "Acquiring Person" shall not include (i) the Corporation, (ii)
any Subsidiary of the Corporation, (iii) any employee benefit plan of the
Corporation or of any Subsidiary of the Corporation, (iv) any Person or entity
organized, appointed or established by the Corporation for or pursuant to the
terms of any such plan acting in such capacity, (v) any member of the
Shareholder Group, but only to the extent of Common Shares held or acquired by
such Shareholder Group member in accordance with the terms of the Shareholder
Agreement (as hereinafter defined), and provided that the exemption provided
under this clause (v) shall permanently expire at such time as the Total
Ownership Percentage of WRI and its affiliates first falls below 10% or (vi)
any Transferee who acquires Beneficial Ownership of Common Shares from the
Shareholder Group pursuant to Sections 3.4(a) or 3.4(b) of the Shareholder
Agreement or who acquires Beneficial Ownership of less than 5% of the Common
Shares in a public offering pursuant to Section 3.4(c) of the Shareholder
Agreement, but only to the extent of Common Shares acquired in accordance with
the terms of the Shareholder Agreement (it being understood that, any such
Transferee shall become an Acquiring Person upon the concurrent or subsequent
acquisition by such Transferee, or its Affiliates or Associates, of any
additional Common Shares if, after giving effect to such acquisition, and
taking into account all shares Beneficially Owned by the Transferee including
the shares acquired from the Shareholder Group, such Transferee would be an
Acquiring Person but for the provisions of this clause (vi)) (Defined terms
used in clauses (v) and (vi) above which are defined in the Shareholder
Agreement shall have the same respective meanings as such terms have in the
Shareholder Agreement), and (B) no Person shall become an "Acquiring Person"
(i) as a result of the acquisition of Common Shares by the Corporation which,
by reducing the number of Common Shares outstanding, increases the
proportional number of shares beneficially owned by such Person together with
all Affiliates and Associates of such Person, provided, that if (1) a Person
would become an Acquiring Person (but for the operation of this subclause (i))
as a result of the acquisition of Common Shares by the Corporation, and (2)
after such share acquisition by the Corporation, such Person, or an Affiliate
or Associate of such Person, becomes the Beneficial Owner of any additional
Common Shares, then such Person shall be deemed an Acquiring Person; or (ii)
if (1) within five Business Days after such Person would otherwise have become
or, if such Person did so inadvertently, after such Person discovers that such
Person would otherwise have become, an Acquiring Person
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(but for the operation of this subclause (ii)), such Person notifies the Board
of Directors that such Person did so inadvertently, and (2) within two
Business Days after such notification, such Person divests itself of a
sufficient number of Common Shares so that such Person is the Beneficial Owner
of such number of Common Shares that such Person no longer would be an
Acquiring Person.
(b) "Act" shall mean the Securities Act of 1933, as amended and as in effect
on the date of this Agreement.
(c) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended and as in effect on the date of
this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable immediately
or only after the passage of time) pursuant to any agreement, arrangement
or understanding, or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the Beneficial Owner
of, or to beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1) arises
solely from a revocable proxy or consent given to such Person in response
to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations promulgated under the
Exchange Act and (2) is not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any other
Person (or any Affiliate or Associate thereof) with which such Person (or
any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide
public offering of securities) relating to the acquisition, holding, voting
(except to the extent contemplated by the proviso to Section l(d)(ii)(B))
or disposing of any securities of the Corporation.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Corporation, shall mean
the number of such securities then issued and outstanding together with the
number of such securities not then actually issued and outstanding which
such Person would be deemed to own beneficially hereunder.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or
federal holiday.
(f) "Close of Business" on any given date shall mean 5:00 P.M., New York
City time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(g) "Common Shares" when used with reference to the Corporation shall mean
the shares of Common Stock, par value $0.01 per share, of the Corporation or,
in the event of a subdivision, combination or consolidation with respect to
such shares of Common Stock, the shares of Common Stock resulting from such
subdivision, combination or consolidation. "Common Shares" when used with
reference to any Person other than the Corporation shall mean the capital
stock (or equity interest) with the greatest combined economic and
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voting power of such other Person or, if such other Person is a Subsidiary of
another Person, the Person or Persons which ultimately control such first-
mentioned Person.
(h) "Disinterested Directors" shall mean the members of the Board of
Directors who are not (i) officers of the Corporation, (ii) Acquiring Persons
or their Affiliates or Associates or representatives of any of them, or (iii)
any Person who was directly or indirectly proposed or nominated as a director
of the Corporation by a Transaction Person.
(i) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(j) "Final Expiration Date" shall have the meaning set forth in Section 7
hereof.
(k) "Interested Stockholder" shall mean any Acquiring Person or any
Affiliate or Associate of an Acquiring Person or any other Person in which any
such Acquiring Person, Affiliate or Associate has an interest which represents
in excess of 5% of the total combined economic or voting power of such person,
or any other Person acting directly or indirectly on behalf of or in concert
with any such Acquiring Person, Affiliate or Associate.
(l) "Permitted Offer" shall mean (i) a tender or exchange offer for all
outstanding Common Shares which is at a price and on terms determined, prior
to the purchase of shares under such tender or exchange offer, by at least a
majority of the Disinterested Directors, to be adequate and otherwise in the
best interests of the Corporation, its stockholders and its other relevant
constituencies (other than the Person or any Affiliate or Associate thereof on
whose behalf the offer is being made) taking into account all factors that
such Disinterested Directors may deem relevant and (ii) any tender or exchange
offer required or permitted to be made by the Shareholder Group (as defined in
the Shareholder Agreement) pursuant to, and in accordance with, the
Shareholder Agreement.
(m) "Person" shall mean any individual, firm, partnership, corporation,
limited liability company, trust, association, joint venture or other entity,
and shall include any successor (by merger or otherwise) of such entity.
(n) "Preferred Shares" shall mean shares of Series C Participating Preferred
Stock, par value $0.01 per share, of the Corporation having the relative
rights, preferences and limitations set forth in the Form of Certificate of
Designation, Preferences and Rights attached to this Agreement as Exhibit A.
(o) "Redemption Date" shall have the meaning set forth in Section 7 hereof.
(p) "Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii) hereof.
(q) "Section 13 Event" shall mean any event described in clause (x), (y) or
(z) of Section 13(a) hereof.
(r) "Shareholder Agreement" shall mean the Shareholder Agreement between
WAI, Inc., an Oklahoma corporation and Western Resources, Inc. a Kansas
corporation, to be entered immediately prior to the closing of the
transactions contemplated in the Agreement among WAI, Inc., Western Resources
Inc. and ONEOK Inc., dated as of December 12, 1996, as amended and restated,
dated as of May 19, 1997.
(s) "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to the Exchange Act) by the Corporation or
an Acquiring Person that an Acquiring Person has become such.
(t) "Subsidiary" of any Person shall mean any corporation or other Person of
which a majority of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
(u) "Transaction" shall mean any merger, consolidation or sale of assets
described in Section 13(a) hereof or any acquisition of Common Shares of the
Corporation which would result in a Person becoming a Transaction Person.
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(v) "Transaction Person" with respect to a Transaction shall mean (x) any
Person who (i) is or will become an Acquiring Person if the Transaction were
to be consummated and (ii) directly or indirectly proposed or nominated a
director of the Corporation which director is in office at the time of
consideration of the Transaction, or (y) an Affiliate or Associate of such a
Person.
(w) "Triggering Event" shall mean any Section 11(a)(ii) Event or any Section
13 Event.
Section 2. Appointment of Rights Agent. The Corporation hereby appoints the
Rights Agent to act as agent for the Corporation and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution
Date also be the holders of Common Shares) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Corporation may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier to occur of
(i) the Shares Acquisition Date or (ii) the Close of Business on the tenth
Business Day (or such later date as may be determined by action of the
Corporation's Board of Directors) after the date of the commencement by any
Person (other than the Corporation, any Subsidiary of the Corporation, any
employee benefit plan of the Corporation or of any Subsidiary of the
Corporation or any Person or entity organized, appointed or established by the
Corporation for or pursuant to the terms of any such plan) of, or of the first
public announcement of the intention of any Person (other than the
Corporation, any Subsidiary of the Corporation, any employee benefit plan of
the Corporation or of any Subsidiary of the Corporation or any Person or
entity organized, appointed or established by the Corporation for or pursuant
to the terms of any such plan) to commence (which intention to commence
remains in effect for five Business Days after such announcement), a tender or
exchange offer the consummation of which would result in any Person becoming
an Acquiring Person (including, in the case of both (i) and (ii), any such
date which is after the date of this Agreement and prior to the issuance of
the Rights), the earlier of such dates being herein referred to as the
"Distribution Date," (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for Common Shares
registered in the names of the holders thereof (which certificates shall also
be deemed to be Right Certificates) and not by separate Right Certificates,
and (y) the right to receive Right Certificates will be transferable only in
connection with the transfer of the underlying Common Shares (including a
transfer to the Corporation); provided, however, that if the tender offer is
terminated prior to the occurrence of a Distribution Date, then no
Distribution Date shall occur as a result of such tender offer. As soon as
practicable after the Distribution Date, the Corporation will prepare and
execute, the Rights Agent will countersign, and the Corporation will send or
cause to be sent by first-class, postage-prepaid mail, to each record holder
of Common Shares as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Corporation, a Right
Certificate, substantially in the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right for each Common Share so held. As of and
after the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) As promptly as practicable following the Record Date, the Corporation
will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares as
of the close of business on the Record Date, at the address of such holder
shown on the records of the Corporation. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Distribution Date,
the Rights will be evidenced by such certificates registered in the names of
the holders thereof together with a copy of the Summary of Rights attached
thereto. Until the Distribution Date (or the earlier of the Redemption Date or
the Final Expiration Date), the surrender for transfer of any certificate for
Common Shares outstanding on the Record Date, with or without a copy of the
Summary of Rights attached thereto, shall also constitute the transfer of the
Rights associated with such Common Shares.
(c) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last sentence
of this paragraph (c)) after the Record Date but prior to the
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earliest of the Distribution Date, the Redemption Date or the Final Expiration
Date shall be deemed also to be certificates for Rights and shall bear the
following legend:
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Rights Agreement between WAI, Inc. and Liberty
Bank and Trust Company of Oklahoma City, N.A., dated as of , 1997 (the
"Rights Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices
of WAI, Inc. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and will
no longer be evidenced by this certificate. WAI, Inc. will mail to the
holder of this certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor from such holder. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or held
by, any Person who is, was or becomes an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement) and certain
related persons, whether currently held by or on behalf of such Person or
by any subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
In the event that the Corporation purchases or acquires any Common Shares
after the Record Date but prior to the Distribution Date, any Rights
associated with such Common Shares shall be deemed cancelled and retired so
that the Corporation shall not be entitled to exercise any Rights associated
with the Common Shares which are no longer outstanding.
Section 4. Form of Right Certificate. (a) The Right Certificates (and the
forms of election to purchase and of assignment to be printed on the reverse
thereof) shall be substantially in the form set forth in Exhibit B hereto and
may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Corporation may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the
Right Certificates shall entitle the holders thereof to purchase such number
of one one-hundredths of a Preferred Share as shall be set forth therein at
the price per one one-hundredth of a Preferred Share set forth therein (the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights which are null and void pursuant to Section 7(e)
of this Agreement and any Right Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Right Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
The Rights represented by this Right Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Right Certificate and the Rights represented
hereby are null and void.
Provisions of Section 7(e) of this Rights Agreement shall be operative whether
or not the foregoing legend is contained on any such Right Certificate.
Section 5. Countersignature and Registration. The Right Certificates shall
be executed on behalf of the Corporation by its Chairman of the Board, its
Chief Executive Officer, its President, any of its Vice Presidents, or its
Treasurer, either manually or by facsimile signature, shall have affixed
thereto the Corporation's seal or a facsimile thereof, and shall be attested
by the Secretary or an Assistant Secretary of the Corporation, either manually
or by facsimile signature. The Right Certificates shall be countersigned by
the Rights Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Corporation who shall have signed
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any of the Right Certificates shall cease to be such officer of the
Corporation before countersignature by the Rights Agent and issuance and
delivery by the Corporation, such Right Certificates may nevertheless be
countersigned by the Rights Agent and issued and delivered by the Corporation
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Corporation; and any
Right Certificate may be signed on behalf of the Corporation by any person
who, at the actual date of the execution of such Right Certificate, shall be a
proper officer of the Corporation to sign such Right Certificate, although at
the date of the execution of this Rights Agreement any such person was not
such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its office designated as the appropriate place for surrender of such
Right Certificate for transfer, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the
certificate number and the date of each of the Right Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificate. Subject
to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any
time after the close of business on the Distribution Date, and at or prior to
the close of business on the earlier of the Redemption Date or the Final
Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number
of one one-hundredths of a Preferred Share (or, following a Triggering Event,
other securities, as the case may be) as the Right Certificate or Right
Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right Certificates
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Right Certificate or Right Certificates to be transferred, split
up, combined or exchanged at the principal office or offices of the Rights
Agent designated for such purpose. Neither the Rights Agent nor the
Corporation shall be obligated to take any action whatsoever with respect to
the transfer of any such surrendered Right Certificate until the registered
holder shall have completed and signed the certificate contained in the form
of assignment on the reverse side of such Right Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the
Corporation shall reasonably request. Thereupon the Rights Agent shall,
subject to Section 4(b), Section 7(e) and Section 14 hereof, countersign and
deliver to the Person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested. The Corporation may require
payment of a sum sufficient to cover any tax or governmental charge that may
be imposed in connection with any transfer, split-up, combination or exchange
of Right Certificates.
Upon receipt by the Corporation and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Corporation's request,
reimbursement to the Corporation and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate if mutilated, the Corporation will make
and deliver a new Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered holder in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the principal office or offices of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase Price for the
total number of one one-hundredths of a Preferred Share (or other securities,
as the case may be) as to which such surrendered Rights are exercised, at or
prior to the earliest of (i) the Close of Business on November 26, 2007 (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date"), (iii) the time at which
the
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Rights are exchanged as provided in Section 24 hereof, or (iv) the
consummation of a transaction contemplated by Section 13(d) hereof.
(b) The Purchase Price for each one-hundredth of a Preferred Share pursuant
to the exercise of a Right shall initially be $80.00, shall be subject to
adjustment from time to time as provided in the next sentence and in Sections
11 and 13(a) hereof and shall be payable in accordance with paragraph (c)
below. Anything in this Agreement to the contrary notwithstanding, in the
event that at any time after the date of this Agreement and prior to the
Distribution Date, the Corporation shall (i) declare or pay any dividend on
the Common Shares payable in Common Shares or (ii) effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares) into a greater or
lesser number of Common Shares, then in any such case, each Common Share
outstanding following such subdivision, combination or consolidation shall
continue to have one Right (subject to adjustment as provided herein)
associated therewith and the Purchase Price following any such event shall be
proportionately adjusted to equal the result obtained by multiplying the
Purchase Price immediately prior to such event by a fraction the numerator of
which shall be the total number of Common Shares outstanding immediately prior
to the occurrence of the event and the denominator of which shall be the total
number of Common Shares outstanding immediately following the occurrence of
such event. The adjustment provided for in the preceding sentence shall be
made successively whenever such a dividend is declared or paid or such a
subdivision, combination or consolidation is effected.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment of the Purchase Price for the Preferred Shares (or
other securities, as the case may be) to be purchased and an amount equal to
any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 6 hereof by certified check, cashier's
check or money order payable to the order of the Corporation, the Rights Agent
shall thereupon promptly (i) (A) requisition from any transfer agent of the
Preferred Shares certificates for the number of Preferred Shares to be
purchased and the Corporation hereby irrevocably authorizes its transfer agent
to comply with all such requests, or (B) requisition from the depositary agent
(if the Corporation, in its sole discretion, shall have elected to deposit the
Preferred Shares issuable upon exercise of the Rights hereunder into a
depositary) depositary receipts representing such number of one one-hundredths
of a Preferred Share as are to be purchased (in which case certificates for
the Preferred Shares represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Corporation will direct the
depositary agent to comply with such requests, (ii) when appropriate,
requisition from the Corporation the amount of cash to be paid in lieu of
issuance of fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates or depositary receipts, cause the same to
be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, and (iv) when appropriate, after receipt thereof, deliver such cash to
or upon the order of the registered holder of such Right Certificate. In the
event that the Corporation is obligated to issue other securities (including
Common Shares) of the Corporation pursuant to Section 11(a) hereof, the
Corporation will make all arrangements necessary so that such other securities
are available for distribution by the Rights Agent, if and when appropriate.
In addition, in the case of an exercise of the Rights by a holder pursuant
to Section 11(a)(ii), the Rights Agent shall return such Right Certificate to
the registered holder thereof after imprinting, stamping or otherwise
indicating thereon that the rights represented by such Right Certificate no
longer include the rights provided by Section 11(a)(ii) of the Rights
Agreement and if less than all the Rights represented by such Right
Certificate were so exercised, the Rights Agent shall indicate on the Right
Certificate the number of Rights represented thereby which continue to include
the rights provided by Section 11(a)(ii).
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof, or the
Rights Agent shall place an appropriate notation on the Right Certificate with
respect to those Rights exercised.
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(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any
Affiliate or Associate thereof) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of any
Affiliate or Associate thereof) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has a continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors of the Corporation has determined is
part of a plan, arrangement or understanding which has as a primary purpose or
effect the avoidance of this Section 7(e), shall become null and void without
any further action and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. The Corporation shall use all reasonable efforts to
insure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Corporation shall be obligated to undertake any action
with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall
have (i) completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise, and (ii) provided such additional evidence of
the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Corporation shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise (other than a partial
exercise), transfer, split up, combination or exchange shall, if surrendered
to the Corporation or to any of its agents, be delivered to the Rights Agent
for cancellation or in canceled form, or, if surrendered to the Rights Agent,
shall be canceled by it, and no Right Certificates shall be issued in lieu
thereof except as expressly permitted by any of the provisions of this Rights
Agreement. The Corporation shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and retire, any other
Right Certificate purchased or acquired by the Corporation otherwise than upon
the exercise thereof. The Rights Agent shall deliver all canceled Right
Certificates to the Corporation, or shall, at the written request of the
Corporation, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Corporation.
Section 9. Reservation and Availability of Capital Stock. The Corporation
covenants and agrees that at all times prior to the occurrence of a Section
11(a)(ii) Event it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares, or any authorized and issued
Preferred Shares held in its treasury, the number of Preferred Shares that
will be sufficient to permit the exercise in full of all outstanding Rights
and, after the occurrence of a Section 11(a)(ii) Event, shall, to the extent
reasonably practicable, so reserve and keep available a sufficient number of
Common Shares (and/or other securities) which may be required to permit the
exercise in full of the Rights pursuant to this Agreement.
So long as the Preferred Shares (and, after the occurrence of a Section
11(a)(ii) Event, Common Shares, or any other securities, as the case may be)
issuable upon the exercise of the Rights may be listed on any national
securities exchange, the Corporation shall use its best efforts to cause, from
and after such time as the Rights become exercisable, all shares reserved for
such issuance to be listed on such exchange upon official notice of issuance
upon such exercise.
The Corporation covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares (or Common Shares and/or
other securities, as the case may be) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares or other
securities (subject to payment of
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the Purchase Price), be duly and validly authorized and issued and fully paid
and non-assessable shares or securities.
The Corporation further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares (or Common Shares and/or other securities, as the case
may be) upon the exercise of Rights. The Corporation shall not, however, be
required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares (or Common Shares and/or other securities, as the case may be) in a
name other than that of, the registered holder of the Right Certificate
evidencing Rights surrendered for exercise, or to issue or to deliver any
certificates or depositary receipts for Preferred Shares (or Common Shares
and/or other securities, as the case may be) upon the exercise of any Rights,
until any such tax shall have been paid (any such tax being payable by the
holder of such Right Certificate at the time of surrender) or until it has
been established to the Corporation's reasonable satisfaction that no such tax
is due.
The Corporation shall use its best efforts to (i) file, as soon as
practicable following the Shares Acquisition Date (or, if required by law, at
such earlier time following the Distribution Date as so required), a
registration statement under the Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause
such registration statement to become effective as soon as practicable after
such filing, and (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Act and the
rules and regulations thereunder) until the date of the expiration of the
rights provided by Section 11(a)(ii). The Corporation will also take such
action as may be appropriate under the blue sky laws of the various states.
Section 10. Preferred Shares Record Date. Each Person in whose name any
certificate for Preferred Shares (or Common Shares and/or other securities, as
the case may be) is issued upon the exercise of Rights shall for all purposes
be deemed to have become the holder of record of the Preferred Shares (or
Common Shares and/or other securities, as the case may be) represented thereby
on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable transfer taxes) was made; provided,
however, that, if the date of such surrender and payment is a date upon which
the Preferred Shares (or Common Shares and/or other securities, as the case
may be) transfer books of the Corporation are closed, such person shall be
deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares (or Common Shares and/or other securities, as the case may
be) transfer books of the Corporation are open.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares or other
securities covered by each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Corporation shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the
Preferred Shares (including any such reclassification in connection with a
consolidation or merger in which the Corporation is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a) and
Section 7(e) hereof, the Purchase Price in effect at the time of the record
date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Right had
been exercised immediately prior to such date and at a time when the Preferred
Shares transfer books of the Corporation were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par
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value of the shares of capital stock of the Corporation issuable upon exercise
of one Right. If an event occurs which would require an adjustment under both
Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) In the event any Person, alone or together with its Affiliates and
Associates, shall become an Acquiring Person, then proper provision shall be
made so that each holder of a Right (except as provided below and in Section
7(e) hereof) shall, for a period of 60 days after the later of (i) the
occurrence of any such event or (ii) the effective date of an appropriate
registration statement under the Act pursuant to Section 9 hereof, have a
right to receive, upon exercise thereof at a price equal to the then current
Purchase Price, in accordance with the terms of this Agreement, such number of
Common Shares (or, in the discretion of the Board of Directors, one one-
hundredths of a Preferred Share) as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one one-
hundredths of a Preferred Share for which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(ii) Event and (y) dividing
that product by 50% of the then current per share market price of the
Corporation's Common Shares (determined pursuant to Section 11(d) hereof) on
the date of such first occurrence (such number of shares being referred to as
the "Adjustment Shares"); provided, however, that if the transaction that
would otherwise give rise to the foregoing adjustment is also subject to the
provisions of Section 13 hereof, then only the provisions of Section 13 hereof
shall apply and no adjustment shall be made pursuant to this Section
11(a)(ii).
(iii) In the event that there shall not be sufficient treasury shares or
authorized but unissued (and unreserved) Common Shares to permit the exercise
in full of the Rights in accordance with the foregoing subparagraph (ii) and
the Rights become so exercisable (and the Board has determined to make the
Rights exercisable into fractions of a Preferred Share), notwithstanding any
other provision of this Agreement, to the extent necessary and permitted by
applicable law, each Right shall thereafter represent the right to receive,
upon exercise thereof at the then current Purchase Price in accordance with
the terms of this Agreement, (x) a number of (or fractions of) Common Shares
(up to the maximum number of Common Shares which may permissibly be issued)
and (y) one one-hundredth of a Preferred Share or a number of (or fractions
of) other equity securities of the Corporation (or, in the discretion of the
Board of Directors, debt) which the Board of Directors of the Corporation has
determined to have the same aggregate current market value (determined
pursuant to Sections 11(d)(i) and (ii) hereof, to the extent applicable) as
one Common Share (such number of (or fractions of) Preferred Shares (or other
equity securities or debt of the Corporation) being referred to as a "capital
stock equivalent"), equal in the aggregate to the number of Adjustment Shares;
provided, however, if sufficient Common Shares and/or capital stock
equivalents are unavailable, then the Corporation shall, to the extent
permitted by applicable law, take all such action as may be necessary to
authorize additional Common Shares or capital stock equivalents for issuance
upon exercise of the Rights, including the calling of a meeting of
stockholders; and provided, further, that if the Corporation is unable to
cause sufficient Common Shares and/or capital stock equivalents to be
available for issuance upon exercise in full of the Rights, then each Right
shall thereafter represent the right to receive the Adjusted Number of Shares
upon exercise at the Adjusted Purchase Price (as such terms are hereinafter
defined). As used herein, the term "Adjusted Number of Shares" shall be equal
to that number of (or fractions of) Common Shares (and/or capital stock
equivalents) equal to the product of (x) the number of Adjustment Shares and
(y) a fraction, the numerator of which is the number of Common Shares (and/or
capital stock equivalents) available for issuance upon exercise of the Rights
and the denominator of which is the aggregate number of Adjustment Shares
otherwise issuable upon exercise in full of all Rights (assuming there were a
sufficient number of Common Shares available) (such fraction being referred to
as the "Proration Factor"). The "Adjusted Purchase Price" shall mean the
product of the Purchase Price and the Proration Factor. The Board of Directors
may, but shall not be required to, establish procedures to allocate the right
to receive Common Shares and capital stock equivalents upon exercise of the
Rights among holders of Rights.
(b) In case the Corporation shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of
Preferred Shares entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Preferred Shares (or
shares having the same rights and privileges
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as the Preferred Shares ("equivalent preferred shares") or securities
convertible into Preferred Shares or equivalent preferred shares at a price
per Preferred Share or equivalent preferred share (or having a conversion
price per share, if a security convertible into Preferred Shares or equivalent
preferred shares) less than the then current per share market price of the
Preferred Shares (as determined pursuant to Section 11(d) hereof) on such
record date, the Purchase Price to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of Preferred
Shares which the aggregate offering price of the total number of Preferred
Shares and/or equivalent preferred shares so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current per share market price, and the
denominator of which shall be the number of Preferred Shares outstanding on
such record date plus the number of additional Preferred Shares and/or
equivalent preferred shares to be offered for subscription or purchase (or
into which the convertible securities so to be offered are initially
convertible); provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Corporation issuable upon exercise of one
Right. In case such subscription price may be paid in a consideration part or
all of which shall be in a form other than cash, the value of such
consideration shall be determined in good faith by the Board of Directors of
the Corporation, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent. Preferred
Shares owned by or held for the account of the Corporation shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed; and in the event that
such rights, options or warrants are not so issued, the Purchase Price shall
be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Corporation shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the then current per share market price (as
determined pursuant to Section 11(d) hereof) of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Corporation, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one
Preferred Share and the denominator of which shall be such current per share
market price of the Preferred Shares; provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Corporation to
be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per share
market price" of any security (a "Security" for the purpose of this Section
11(d)(i)) on any date shall be deemed to be the average of the daily closing
prices per share of such Security for the thirty (30) consecutive Trading Days
(as such term is hereinafter defined) immediately prior to such date;
provided, however, that in the event that the current per share market price
of the Security is determined during a period following the announcement by
the issuer of such Security of (A) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares,
or (B) any subdivision, combination or reclassification of such Security and
prior to the expiration of thirty (30) Trading Days after the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect the current
market price per share equivalent of such Security. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
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place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the New York Stock Exchange or, if the Security is not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Security is listed or
admitted to trading or, if the Security is not listed or admitted to trading
on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-
counter market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") or such other system then in use,
or, if on any such date the Security is not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Security selected by the Board of
Directors of the Corporation. If on any such date no such market maker is
making a market in the Security, the fair value of the Security on such date
as determined in good faith by the Board of Directors of the Corporation shall
be used. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the Security is listed or admitted to
trading is open for the transaction of business or, if the Security is not
listed or admitted to trading on any national securities exchange, a Business
Day. Subject to Section 11(d)(ii), if any Security is not publicly held or so
listed or traded, "current per share market price" of such Security shall mean
the fair market value per share as determined in good faith by the Board of
Directors of the Corporation, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights
Agent.
(ii) For the purpose of any computation hereunder, the "current per share
market price" of the Preferred Shares shall be determined in accordance with
the method set forth in Section 11(d)(i). If the Preferred Shares are not
publicly traded, the current per share market price of the Preferred Shares
shall be conclusively deemed to be the current per share market price of the
Common Shares as determined pursuant to Section 11(d)(i) (appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof), multiplied by one hundred. If neither the
Common Shares nor the Preferred Shares are publicly held or so listed or
traded, "current per share market price" shall mean the fair value per share
as determined in good faith by the Board of Directors of the Corporation,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent.
(e) Notwithstanding anything herein to the contrary, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the
nearest cent or to the nearest one one-hundredth-thousandth of a Preferred
Share or one ten-thousandth of any other share or security, as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three (3) years from the date of the transaction which mandates such
adjustment or (ii) the Final Expiration Date.
(f) If, as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the Corporation
other than Preferred Shares, thereafter the number of other shares so
receivable upon exercise of any Right shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Shares contained in Sections 11(a)
through (c), inclusive, and the provisions of Sections 7, 9, 10, 13 and 14
with respect to the Preferred Shares shall apply on like terms to any such
other shares.
(g) All Rights originally issued by the Corporation subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
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(h) Unless the Corporation shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Purchase Price, that number of one one-
hundredths of a Preferred Share (calculated to the nearest one one-hundredth
thousandths of a Preferred Share) obtained by (i) multiplying (x) the number
of Preferred Shares covered by a Right immediately prior to this adjustment of
the Purchase Price by (y) the Purchase Price in effect immediately prior to
such adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.
(i) The Corporation may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of one one-hundredths of a Preferred Share purchasable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of
the number of Rights shall be exercisable for the number of one one-hundredths
of a Preferred Share for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Corporation
shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the
date on which the Purchase Price is adjusted or any day thereafter, but, if
the Right Certificates have been issued, shall be at least ten (10) days later
than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Corporation shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date
Right Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Corporation, shall cause to be distributed to such
holders of record in substitution and replacement for the Right Certificates
held by such holders prior to the date of adjustment, and upon surrender
thereof, if required by the Corporation, new Right Certificates evidencing all
the Rights to which such holders shall be entitled after such adjustment.
Right Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein and shall be registered in the
names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-hundredths of a Preferred Share issuable upon the exercise
of the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-hundredths of
a Preferred Share which were expressed in the initial Right Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the number of one one-
hundredths of a Preferred Share, Common Shares or other securities issuable
upon exercise of the Rights, the Corporation shall take any corporate action
which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue such number of fully paid and
nonassessable one one-hundredths of a Preferred Share, Common Shares or other
securities at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment in
the Purchase Price be made effective as of a record date for a specified
event, the Corporation may elect to defer until the occurrence of such event
the issuance to the holder of any Right exercised after such record date the
Preferred Shares, Common Shares or other securities of the Corporation, if
any, issuable upon such exercise over and above the Preferred Shares, Common
Shares or other securities of the Corporation, if any, issuable upon exercise
on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Corporation shall deliver to such holder a due
bill or other appropriate instrument evidencing such holder's right to receive
such additional shares upon the occurrence of the event requiring such
adjustment.
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(m) Notwithstanding anything in this Section 11 to the contrary, the
Corporation shall be entitled to make such reductions in the Purchase Price,
in addition to those adjustments expressly required by this Section 11, as and
to the extent that it in its sole discretion shall determine to be advisable
in order that any (i) consolidation or subdivision of the Preferred Shares,
(ii) issuance wholly for cash of Preferred Shares at less than the current
market price, (iii) issuance wholly for cash of Preferred Shares or securities
which by their terms are convertible into or exchangeable for Preferred
Shares, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Corporation to holders
of its Preferred Shares shall not be taxable to such stockholders.
(n) The Corporation covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than
a Subsidiary of the Corporation in a transaction which does not violate
Section 11(o) hereof), (ii) merge with or into any other Person (other than a
Subsidiary of the Corporation in a transaction which does not violate Section
11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11(o) hereof), if (x)
at the time of or immediately after such consolidation, merger, sale or
transfer there are any charter or by-law provisions or any rights, warrants or
other instruments or securities outstanding or agreements in effect or other
actions taken, which would materially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (y) prior to, simultaneously
with or immediately after such consolidation, merger or sale, the stockholders
of the Person who constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates. The
Corporation shall not consummate any such consolidation, merger, sale or
transfer unless prior thereto the Corporation and such other Person shall have
executed and delivered to the Rights Agent a supplemental agreement evidencing
compliance with this Section 11(n).
(o) The Corporation covenants and agrees that, after the Distribution Date,
it will not, except as permitted by Section 23 or Section 27 hereof, take (or
permit any Subsidiary to take) any action the purpose of which is to, or if at
the time such action is taken it is reasonably foreseeable that the effect of
such action is to, materially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.
(p) The exercise of Rights under Section 11(a)(ii) shall only result in the
reduction of rights under Section 11(a)(ii) to the extent so exercised and
shall not otherwise affect the rights represented by the Rights under this
Rights Agreement, including the rights represented by Section 13.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Sections 11 or 13
hereof, the Corporation shall promptly (a) prepare a certificate setting forth
such adjustment, and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for
the Common Shares and the Preferred Shares a copy of such certificate and (c)
mail a brief summary thereof to each holder of a Right Certificate in
accordance with Section 26 hereof. The Rights Agent shall be fully protected
in relying on any such certificate and on any adjustment therein contained and
shall not be deemed to have knowledge of such adjustment unless and until it
shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power. (a) In the event that, on or following the Shares Acquisition Date,
directly or indirectly, (x) the Corporation shall consolidate with, or merge
with and into, any Interested Stockholder or, if in such merger or
consolidation all holders of Common Shares are not treated alike, any other
Person, (y) the Corporation shall consolidate with, or merge with, any
Interested Stockholder or, if in such merger or consolidation all holders of
Common Shares are not treated alike, any other Person, and the Corporation
shall be the continuing or surviving corporation of such consolidation or
merger (other than, in a case of any transaction described in (x) or (y), a
merger or consolidation which would result in all of the securities generally
entitled to vote in the election of directors ("voting securities") of the
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Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into securities of the
surviving entity) all of the voting securities of the Corporation or such
surviving entity outstanding immediately after such merger or consolidation
and the holders (and relative percentage holdings of each such holder) of such
securities not having changed as a result of such merger or consolidation), or
(z) the Corporation shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one transaction or a series
of related transactions, assets or earning power aggregating more than 50% of
the assets or earning power of the Corporation and its Subsidiaries (taken as
a whole) to any Interested Stockholder or Persons or, if in such transaction
all holders of Common Shares are not treated alike, any other Person (other
than the Corporation or any Subsidiary of the Corporation in one or more
transactions each of which does not violate Section 11(o) hereof), then, and
in each such case (except as provided in Section 13(d) hereof), proper
provision shall be made so that (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the then current Purchase Price, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of freely tradable Common Shares of the Principal Party (as
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall equal the result obtained by (A)
multiplying the then current Purchase Price by the number of one one-
hundredths of a Preferred Share for which a Right is then exercisable (without
taking into account any adjustment previously made pursuant to Section
11(a)(ii)) and dividing that product by (B) 50% of the then current per share
market price of the Common Shares of such Principal Party (determined pursuant
to Section 11(d) hereof) on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the
Corporation pursuant to this Agreement; (iii) the term "Corporation" shall
thereafter be deemed to refer to such Principal Party; it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; and (iv)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares) in connection with
the consummation of any such transaction as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to the Common Shares thereafter deliverable upon the
exercise of the Rights.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y) of the
first sentence of Section 13(a), the Person that is the issuer of any
securities into which Common Shares of the Corporation are converted in
such merger or consolidation, and if no securities are so issued, the
Person that is the other party to such merger or consolidation (including,
if applicable, the Corporation if it is the surviving corporation); and
(ii) in the case of any transaction described in clause (z) of the first
sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions; provided, however, that in any of the
foregoing cases, (1) if the Common Shares of such Person are not at such
time and have not been continuously over the preceding twelve (12) month
period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Shares of
which are and have been so registered, "Principal Party" shall refer to
such other Person; (2) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Shares of two or more of
which are and have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common Shares having the
greatest aggregate market value; and (3) in case such Person is owned,
directly or indirectly, by a joint venture formed by two or more Persons
that are not owned, directly or indirectly, by the same Person, the rules
set forth in (1) and (2) above shall apply to each of the chains of
ownership having an interest in such joint venture as if such party were a
"Subsidiary" of both or all of such joint venturers and the Principal
Parties in each such chain shall bear the obligations set forth in this
Section 13 in the same ratio as their direct or indirect interests in such
Person bear to the total of such interests.
(c) The Corporation shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
its authorized Common Shares which have not been issued or
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reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Corporation and
such Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable
after the date of any consolidation, merger, sale or transfer mentioned in
paragraph (a) of this Section 13, the Principal Party at its own expense
shall:
(i) prepare and file a registration statement under the Act with respect
to the Rights and the securities purchasable upon exercise of the Rights on
an appropriate form, and use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such filing
and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Final Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the blue sky laws
of such jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights historical financial statements
for the Principal Party which comply in all respects with the requirements
for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. The rights under this
Section 13 shall be in addition to the rights to exercise Rights and
adjustments under Section 11(a)(ii) and shall survive any exercise thereof.
(d) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraphs (x) and
(y) of Section 13(a) if: (i) such transaction is consummated with a Person or
Persons who acquired Common Shares pursuant to a Permitted Offer (or a wholly
owned Subsidiary of any such Person or Persons); (ii) the price per Common
Share offered in such transaction is not less than the price per Common Share
paid to all holders of Common Shares whose shares were purchased pursuant to
such Permitted Offer; and (iii) the form of consideration offered in such
transaction is the same as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by
this Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares. (a) The Corporation
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights
would have been otherwise issuable. The closing price for any day shall be the
last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or,
if the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Corporation. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by the Board of Directors
of the Corporation shall be used.
(b) The Corporation shall not be required to issue fractions of Preferred
Shares (other than fractions which are one one-hundredths or integral
multiples of one one-hundredth of a Preferred Share) upon exercise of the
Rights or to distribute certificates which evidence fractional Preferred
Shares (other than fractions which are one one-hundredths or integral
multiples of one one-hundredth of a Preferred Share). Fractions of Preferred
Shares in integral multiples of one one-hundredth of a Preferred Share may, at
the election of the corporation, be
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evidenced by depositary receipts, pursuant to an appropriate agreement between
the Corporation and a depositary selected by it; provided that such agreement
shall provide that the holders of such depositary receipts shall have the
rights, privileges and preferences to which they are entitled as beneficial
owners of the Preferred Shares represented by such depositary receipts. In
lieu of fractional Preferred Shares that are not one one-hundredth or integral
multiples of one one-hundredth of a Preferred Share, the Corporation shall pay
to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of
the current market value of one Preferred Share. For the purposes of this
Section 14(b), the current market value of a Preferred Share shall be the
closing price of a Preferred Share (as determined pursuant to Section
11(d)(ii) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) Following the occurrence of one of the transactions or events specified
in Section 11 giving rise to the right to receive Common Shares, capital stock
equivalents (other than Preferred Shares) or other securities upon the
exercise of a Right, the Corporation shall not be required to issue fractions
of shares or units of such Common Shares, capital stock equivalents or other
securities upon exercise of the Rights or to distribute certificates which
evidence fractions of such Common Shares, capital stock equivalents or other
securities. In lieu of fractional shares or units of such Common Shares,
capital stock equivalents or other securities, the Corporation may pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of a share or unit of such Common Shares, capital stock
equivalents or other securities. For purposes of this Section 14(c), the
current market value shall be determined in the manner set forth in Section
11(d) hereof for the Trading Day immediately prior to the date of such
exercise and, if such capital stock equivalent is not traded, each such
capital stock equivalent shall have the value of one one-hundredth of a
Preferred Share.
(d) The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Rights or any fractional share upon
exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the
Right Certificates (and, prior to the Distribution Date, the registered
holders of the Common Shares); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Shares),
without the consent of the Rights Agent or of the holder of any other Right
Certificate (or, prior to the Distribution Date, of the Common Shares), may,
in his own behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Corporation to enforce, or
otherwise act in respect of, his right to exercise the Rights evidenced by
such Right Certificate in the manner provided in such Right Certificate and in
this Agreement. Without limiting the foregoing or any remedies available to
the holders of Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any breach of this
Agreement and will be entitled to specific performance of the obligations
under, and injunctive relief against actual or threatened violations of the
obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Corporation and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the
principal office or offices of the Rights Agent designated for such
purpose, duly endorsed or accompanied by a proper instrument of transfer
and with the appropriate form fully executed;
(c) subject to Section 6 and Section 7(f) hereof, the Corporation and the
Rights Agent may deem and treat the person in whose name the Right
Certificate (or, prior to the Distribution Date, the associated Common
Shares certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Right Certificate or the associated Common Shares
certificate made by anyone other than the Corporation or the Rights Agent)
for all purposes
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whatsoever, and neither the Corporation nor the Rights Agent, subject to
the last sentence of Section 7(e) hereof, shall be required to be affected
by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Corporation nor the Rights Agent shall have any liability to any holder
of a Right or a beneficial interest in a Right or other Person as a result
of its inability to perform any of its obligations under this Agreement by
reason of any preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such
obligation; provided, however, the Corporation must use its best efforts to
have any such order, decree or ruling lifted or otherwise overturned as
soon as possible.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder, as
such, of any Right Certificate shall be entitled to vote, receive dividends or
be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Corporation which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of
any Right Certificate, as such, any of the rights of a stockholder of the
Corporation or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25
hereof), or to receive dividends or other distributions or to exercise any
preemptive or subscription rights, or otherwise, until the Right or Rights
evidenced by such Right Certificate shall have been exercised in accordance
with the provisions hereof.
Section 18. Concerning the Rights Agent. The Corporation agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Corporation also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability in the
premises.
The Rights Agent shall be protected and shall incur no liability for, or in
respect of any action taken, suffered or omitted by it in connection with, its
administration of this Agreement in reliance upon any Right Certificate or
certificate for Common Shares or for other securities of the Corporation,
instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or
other paper or document believed by it to be genuine and to be signed,
executed and, where necessary, verified or acknowledged, by the proper Person
or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
all or substantially all of the corporate trust business of the Rights Agent
or any successor Rights Agent, shall be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent
under the provisions of Section 21 hereof. In case at the time such successor
Rights Agent shall succeed to the agency created by this Agreement, any of the
Right Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Right Certificates so countersigned; and in case at
that time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Right Certificates shall have the full force provided in
the Right Certificates and in this Agreement.
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In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in
its changed name; and in all such cases such Right Certificates shall have the
full force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Corporation and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Corporation), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of an Acquiring Person and the
determination of the current market price of any Security) be proved or
established by the Corporation prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Treasurer or the Secretary of the Corporation and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent
for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature on such Right Certificates) or be
required to verify the same, but all such statements and recitals are and
shall be deemed to have been made by the Corporation only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity
or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Corporation of
any covenant or condition contained in this Agreement or in any Rights
Certificate; nor shall it be responsible for any adjustment required under
the provisions of Section 11 or Section 13 hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after
receipt of the certificate described in Section 12 hereof); nor shall it by
any act hereunder be deemed to make any representation or warranty as to
the authorization or reservation of any Preferred Shares or Common Shares
or other securities to be issued pursuant to this Agreement or any Right
Certificate or as to whether any Preferred Shares or Common Shares or other
securities will, when issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Corporation agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Treasurer or the Secretary of the
Corporation, and to apply to such officers for advice or instructions in
connection with its duties, and shall not be liable for any action taken or
suffered by it in good faith in accordance with instructions of any such
officer. Any application by the Rights Agent for written instructions from
the Corporation may, at the option of the Rights Agent, set forth
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in writing any action proposed to be taken or omitted by the Rights Agent
under this Rights Agreement and the date on or after which such action
shall be taken or such omission shall be effective. The Rights Agent shall
not be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the
date specified in such application (which date shall not be less than five
Business Days after the date any officer of the Corporation actually
receives such application, unless any such officer shall have consented in
writing to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have
received written instruction in response to such application specifying the
action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or contract with or
lend money to the Corporation or otherwise act as fully and freely as
though it were not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the
Corporation or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Corporation resulting
from any such act, default, neglect or misconduct, provided reasonable care
was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnification against such risk or liability is
not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not
been completed, the Rights Agent shall not take any further action with
respect to such requested exercise of transfer without first consulting
with the Corporation.
Section 21. Change of Rights Agent. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon
thirty (30) days' notice in writing mailed to the Corporation and to each
transfer agent of the Preferred Shares or Common Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Corporation may remove the Rights Agent or any successor Rights
Agent upon sixty (60) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Preferred Shares or Common Shares by registered or certified mail, and to
holders of the Right Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Corporation shall appoint a successor to the Rights Agent. If the Corporation
shall fail to make such appointment within a period of sixty (60) days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Corporation), then the registered
holder of any Right Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Corporation or by such a court, shall be a
corporation organized and doing business under the laws of the United States
or any state of the United States, in good standing, which is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject
to supervision or examination by federal or state authority and which has at
the time of its appointment as Rights Agent a combined capital and surplus of
at least $100,000,000 (or such lower number as approved by the Corporation's
Board of Directors). After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment the Corporation shall
file notice thereof in
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writing with the predecessor Rights Agent and each transfer agent of the
Preferred Shares or Common Shares and mail a notice thereof in writing to the
registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Corporation
may, at its option, issue new Right Certificates evidencing Rights in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.
In addition, in connection with the issuance or sale of Common Shares
following the Distribution Date and prior to the earliest of the Redemption
Date, the Final Expiration Date and the consummation of a transaction
contemplated by Section 13(d) hereof, the Corporation (a) shall with respect
to Common Shares so issued or sold pursuant to the exercise of stock options
or under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities, notes or debentures issued by the Corporation, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Corporation, issue Right Certificates representing the
appropriate number of Rights in connection with such issuance or sale;
provided, however, that no Right Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
Section 23. Redemption and Termination. (a) (i) The Board of Directors of
the Corporation may, at its option, redeem all but not less than all the then
outstanding Rights at a redemption price of $0.01 per Right, as such amount
may be appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the "Redemption Price"), at any time prior to
the earlier of (x) the occurrence of a Section 11(a)(ii) Event, or (y) the
Final Expiration Date, and the Corporation may, at its option, pay the
Redemption Price either in Common Shares (based on the current per share
market price, as defined in Section 11(d) hereof, of the Common Shares at the
time of redemption) or cash; provided, however, that if the Corporation elects
to pay the Redemption Price in Common Shares, the Corporation shall not be
required to issue any fractional Common Shares and the number of Common Shares
issuable to each holder of Rights shall be rounded down to the next whole
share.
(ii) In addition, the Board of Directors of the Corporation may, at its
option, at any time following a Shares Acquisition Date but prior to any
Section 13 Event, redeem all but not less than all of the then outstanding
Rights at the Redemption Price in connection with any Section 13 Event in
which all holders of Common Shares are treated alike and not involving (other
than as a holder of Common Shares being treated like all other such holders) a
Transaction Person.
(b) In the case of a redemption permitted under Section 23(a)(i),
immediately upon the date for redemption set forth (or determined in the
manner specified in) in a resolution of the Board of Directors of the
Corporation ordering the redemption of the Rights, evidence of which shall
have been filed with the Rights Agent, and without any further action and
without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. In the case of a redemption permitted
only under Section 23(a)(ii), evidence of which shall have been filed with the
Rights Agent, the right to exercise the Rights will terminate and represent
only the right to receive the Redemption Price upon the later of ten Business
Days following the giving of notice or the expiration of any period during
which the rights under Section 11(a)(ii) may be exercised. The Corporation
shall promptly give public notice of any such redemption; provided, however,
that the failure to give, or any defect in, any such notice shall not affect
the validity of such redemption. Within ten (10) days after such date for
redemption set forth in a resolution of the Board of Directors ordering the
redemption of the Rights, the Corporation shall mail a notice of redemption to
all the holders of the then outstanding Rights at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer
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agent for the Common Shares. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which the payment of
the Redemption Price will be made. Neither the Corporation nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights
at any time in any manner other than that specifically set forth in this
Section 23 and other than in connection with the purchase of Common Shares
prior to the Distribution Date.
(c) In the case of a redemption permitted under Section 23(a)(i), the
Corporation may, at its option, discharge all of its obligations with respect
to the Rights by (i) issuing a press release announcing the manner of
redemption of the Rights in accordance with this Agreement and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at
their last addresses as they appear on the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the Transfer
Agent of the Common Shares, and upon such action, all outstanding Rights and
Right Certificates shall be null and void without any further action by the
Corporation.
Section 24. Exchange. (a) The Board of Directors of the Corporation may, at
its option, at any time after the time that any Person becomes an Acquiring
Person, exchange all or part of the then outstanding and exercisable Rights
(which shall not include Rights that have become void pursuant to the
provisions of Section 7(e) and Section 11(a)(ii) hereof) for Common Shares of
the Corporation at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction involving either the Common Shares or the Preferred Shares
occurring after the date hereof (such exchange ratio being hereinafter
referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board
of Directors shall not be empowered to effect such exchange at any time after
any Person (other than the Corporation, any Subsidiary of the Corporation, any
employee benefit plan of the Corporation or any such Subsidiary, any entity
holding Common Shares for or pursuant to the terms of any such plan or any
trustee, administrator or fiduciary of such a plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50%
or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the Corporation
ordering the exchange of any Rights pursuant to subsection (a) of this Section
24 and without any further action and without any notice, the right to
exercise such rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of such rights held by such holder multiplied by the Exchange Ratio.
The Corporation shall promptly give public notice of any such exchange;
provided, however, that the failure to give, or any defect in, such notice
shall not affect the validity of such exchange. The Corporation promptly shall
mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights
Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Shares
for Rights will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 7(e) and Section 11(a)(ii)
hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Corporation, at its
option, may substitute Preferred Shares (or equivalent preferred shares, as
such term is defined in Section 11(b) hereof) for some or all of the Common
Shares exchangeable for Rights, at the initial rate of one-hundredth of a
Preferred Share (or equivalent preferred share) for each Common Share, as
appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Shares pursuant to the terms thereof, so that the fraction of a
Preferred Share delivered in lieu of each Common Share shall have the same
voting rights as one Common Share.
(d) The Board of Directors of the Corporation shall not authorize any
exchange transaction referred to in Section 24(a) hereof unless at the time
such exchange is authorized there shall be sufficient Common Shares or
Preferred Shares issued but not outstanding or authorized but unissued to
permit the exchange of Rights as contemplated in accordance with this Section
24.
D-22
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Section 25. Notice of Certain Events. (a) In case the Corporation shall
propose (i) to pay any dividend payable in stock of any class to the holders
of its Preferred Shares or to make any other distribution to the holders of
its Preferred Shares (other than a regularly quarterly cash dividend), (ii) to
offer to the holders of its Preferred Shares rights or warrants to subscribe
for or to purchase any additional Preferred Shares or shares of stock of any
class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Shares (other than a reclassification
involving only the subdivision of outstanding Preferred Shares), (iv) to
effect any consolidation or merger into or with any other Person (other than a
Subsidiary of the Corporation in a transaction which does not violate Section
11(o) hereof), or to effect any sale or other transfer (or to permit one or
more of its Subsidiaries to effect any sale or other transfer) in one or more
transactions, of 50% or more of the assets or earning power of the Corporation
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Corporation and/or any of its Subsidiaries in one or more
transactions each of which does not violate Section 11(o) hereof), or (v) to
effect the liquidation, dissolution or winding up of the Corporation, then, in
each such case, the Corporation shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action to the extent feasible and file a certificate with the Rights Agent to
that effect, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Preferred Shares, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty (20) days prior to the record date
for determining holders of the Preferred Shares for purposes of such action,
and in the case of any such other action, at least twenty (20) days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the Preferred Shares, whichever shall be the
earlier.
(b) In case of a Section 11(a)(ii) Event, then (i) the Corporation shall as
soon as practicable thereafter give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of the occurrence of such event,
which notice shall describe such event and the consequences of such event to
holders of Rights under Section 11(a)(ii) hereof and (ii) all references in
the preceding paragraph (a) to Preferred Shares shall be deemed thereafter to
refer also, if appropriate, to Common Shares and/or, if appropriate, other
securities of the Corporation.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Corporation shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
ONEOK, Inc.
100 West Fifth Street
Tulsa, Oklahoma 74103
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Corporation or by the
holder of any Right Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Corporation) as
follows:
Liberty Bank and Trust Company of Oklahoma City, N.A.
P.O. Box 25848
Oklahoma City, Oklahoma 73125-0848
Attention: John Brown
Notices or demands authorized by this Agreement to be given or made by the
Corporation or the Rights Agent to the holder of any Right Certificate or, if
prior to the Distribution Date, to the holder of certificates representing
Common Shares shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as
shown on the registry books of the Corporation.
D-23
<PAGE>
Section 27. Supplements and Amendments. Prior to the Distribution Date, the
Corporation and the Rights Agent shall, if the Corporation so directs,
supplement or amend any provision of this Agreement without the approval of
any holders of certificates representing Common Shares. From and after the
Distribution Date, the Corporation and the Rights Agent shall, if the
Corporation so directs, supplement or amend this Agreement without the
approval of any holders of Right Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provisions herein, (iii) to
shorten or lengthen any time period hereunder or (iv) to change or supplement
the provisions hereunder in any manner which the Corporation may deem
necessary or desirable and which shall not adversely affect the interests of
the holders of Right Certificates (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person); provided, however, that this
Agreement may not be supplemented or amended to lengthen, pursuant to clause
(iii) of this sentence, (A) a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable, or (B) any other
time period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights. Upon the delivery of a certificate from an appropriate officer of the
Corporation which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment, provided that such supplement or amendment does
not adversely affect the rights or obligations of the Rights Agent under
Section 18 or Section 20 of this Agreement. Prior to the Distribution Date,
the interests of the holders of Rights shall be deemed coincident with the
interests of the holders of Common Shares.
Section 28. Determination and Actions by the Board of Directors, etc. The
Board of Directors of the Corporation shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Corporation, or as may be necessary
or advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including, without limitation, a
determination to redeem or not redeem the Rights or to amend the Agreement and
whether any proposed amendment adversely affects the interests of the holders
of Right Certificates). For all purposes of this Agreement, any calculation of
the number of Common Shares or other securities outstanding at any particular
time, including for purposes of determining the particular percentage of such
outstanding Common Shares or any other securities of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act as
in effect on the date of this Agreement. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y)
below, all omissions with respect to the foregoing) which are done or made by
the Board in good faith, shall (x) be final, conclusive and binding on the
Corporation, the Rights Agent, the holders of the Right Certificates and all
other parties, and (y) not subject the Board to any liability to the holders
of the Right Certificates.
Section 29. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Corporation or the Rights Agent shall bind and
inure to the benefit of their respective successors and assigns hereunder.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Corporation, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Corporation, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 31. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
D-24
<PAGE>
Section 32. Governing Law. This Agreement, each Right and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Oklahoma and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
D-25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and attested, all as of the date and year first above written.
ONEOK, Inc.
By: /s/ Jerry D. Neal
_________________________________
Name: Jerry D. Neal
Title: Vice President
Liberty Bank and Trust Company of
Oklahoma City, N.A.
By: /s/ Edith Schuler
_________________________________
Name: Edith Schuler
Title: Assistant Vice President
D-26
<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES C PARTICIPATING
PREFERRED STOCK OF ONEOK, INC.
(PURSUANT TO SECTION 1032 OF THE GENERAL CORPORATION ACT OF THE STATE OF
OKLAHOMA)
We, Larry W. Brummett, Chairman, President, and Chief Executive Officer and
Deborah B. Barnes, Secretary of ONEOK, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Act of the State of
Oklahoma, in accordance with the provisions of Section 1007 thereof, DO HEREBY
CERTIFY as follows:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the said Corporation, said Board of Directors
on November 26, 1997, voted to create a series of one million shares of
Preferred Stock designated as Series C Participating Preferred Stock:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation in accordance with the provisions of the
Corporation's Certificate of Incorporation and Section 1032(g) of the General
Corporation Law of the State of Oklahoma, the Board of Directors hereby
creates a series of Preferred Stock of the Company and hereby states the
designation and number of shares, and fixes the relative rights, preferences
and limitations thereof (in addition to the provisions set forth in the
Corporation's Certificate of Incorporation which are applicable to the
Preferred Stock of all classes and series) as follows:
Section 1. Designation and Amount. There shall be a series of Preferred
Stock, par value $0.01 per share, of the Corporation which shall be designated
as "Series C Participating Preferred Stock," par value $0.01 per share, and
the number of shares constituting such series shall be one million. Such
number of shares may be increased or decreased by resolution of the Board of
Directors or by resolution of the Executive Committee of the Board of
Directors; provided, that no decrease shall reduce the number of shares of
Series C Participating Preferred Stock to a number less than that of the
shares then outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares of
any series of Preferred Stock and Preferred Stock ranking prior and superior
to the Series C Participating Preferred Stock with respect to dividends, the
holders of shares of Series C Participating Preferred Stock in preference to
the holders of shares of Common Stock, par value $0.01 per share (the "Common
Stock"), of the Corporation and any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on the
last day of each fiscal quarter of the Corporation in each year or such other
dates as the Board of Directors of the Corporation shall approve (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series C Participating Preferred
Stock in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since
the immediately preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series C Participating Preferred Stock. In the
event the Corporation shall at any time after November 26, 1997 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide (by a stock split or otherwise) the
outstanding
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<PAGE>
Common Stock, or (iii) combine (by a reverse stock split or otherwise) the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series C Participating Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series C
Participating Preferred Stock as provided in paragraph (A) above at the time
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided, that in the event no
dividend or distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series C
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) So long as any shares of the Series C Participating Preferred Stock are
outstanding, no dividends or other distributions shall be declared, paid or
distributed, or set aside for payment or distribution, on the Common Stock
unless, in each case, the dividend required by this Section 2 to be declared
on the Series C Participating Preferred Stock shall have been declared.
(D) The holders of the shares of the Series C Participating Preferred Stock
shall not be entitled to receive any dividends or other distributions except
as provided herein.
(E) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series C Participating Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares of Series C Participating
Preferred Stock unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares of Series C
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series C Participating Preferred Stock in an amount less
than the total of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series C Participating Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than sixty (60) days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series C Participating
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series C Participating Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide (by a stock split or otherwise) the
outstanding Common Stock, or (iii) combine (by a reverse stock split or
otherwise) the outstanding Common Stock into a smaller number of shares, then
in each such case the number of votes per share to which holders of shares of
Series C Participating Preferred Stock were entitled immediately prior to such
event shall be adjusted by multiplying such number by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
D-28
<PAGE>
(B) Except as otherwise provided herein or by law, the holders of shares of
Series C Participating Preferred Stock and the holders of shares of Common
Stock shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) (i) If at any time dividends on any Series C Participating Preferred
Stock shall be in arrears in an amount equal to at least six (6) full
quarterly dividends (whether or not declared and whether or not consecutive)
thereon, the occurrence of such contingency shall mark the beginning of a
period (herein called a "default period") which shall extend until such time
when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series
C Participating Preferred Stock then outstanding shall have been declared and
paid or set apart for payment. During each default period, all holders of
Preferred Stock (including holders of the Series C Participating Preferred
Stock) with dividends in arrears in an amount equal to at least six (6) full
quarterly dividends (whether or not declared and whether or not consecutive)
thereon, voting as a class, irrespective of series, shall have the right to
elect two (2) Directors.
(ii) During any default period, such voting right of the holders of Series C
Participating Preferred Stock may be exercised initially at a special meeting
called pursuant to subparagraph (C)(iii) of this Section 3 or at any annual
meeting of stockholders, and thereafter at annual meetings of stockholders;
provided, that neither such voting right nor the right of the holders of any
other series of Preferred Stock or Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall be exercised unless
the holders of one-third (1/3) in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The absence of a quorum of
the holders of Common Stock shall not affect the exercise by the holders of
Preferred Stock of such voting right. At any meeting at which the holders of
Preferred Stock shall exercise such voting right initially during an existing
default period, they shall have the right, voting as a class, to elect
Directors to fill such vacancies, if any, in the Board of Directors as may
then exist up to two (2) Directors or, if such right is exercised at an annual
meeting, to elect two (2) Directors. If the number which may be so elected at
any special meeting does not amount to the required number, the holders of the
Preferred Stock shall have the right to make such increase in the number of
Directors as shall be necessary to permit the election by them of the required
number. After the holders of the Preferred Stock shall have exercised their
right to elect Directors in any default period and during the continuance of
such period, the number of Directors shall not be increased or decreased
except by vote of the holders of Preferred Stock as herein provided or
pursuant to the rights of any equity securities ranking senior to or pari
passu with the Series C Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of Preferred
Stock outstanding, irrespective of series, may request, the calling of a
special meeting of the holders of Preferred Stock, which meeting shall
thereupon be called by the Chairman of the Board or the President of the
Corporation. Notice of such meeting and of any annual meeting at which holders
of Preferred Stock are entitled to vote pursuant to this subparagraph (C)(iii)
of Section 3 shall be given to each holder of record of Preferred Stock by
mailing a copy of such notice to him at his last address as the same appears
on the books of the Corporation. Such meeting shall be called for a time not
earlier than ten (10) days and not later than sixty (60) days after such order
or request, or in default of the calling of such meeting within sixty (60)
days after such order or request, such meeting may be called on similar notice
by any stockholder or stockholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Preferred Stock outstanding.
Notwithstanding the provisions of this subparagraph (C)(iii) of Section 3, no
such special meeting shall be called during the period within sixty (60) days
immediately preceding the date fixed for the next annual meeting of the
stockholders.
(iv) In any default period, the holders of Common Stock, and other classes
of stock of the Corporation if applicable, shall continue to be entitled to
elect the whole number of Directors until the holders of Preferred Stock shall
have exercised their right to elect two (2) Directors voting as a class, after
the exercise of which right (x) the Directors so elected by the holders of
Preferred Stock shall continue in office until their successors shall have
been elected by such holders or until the expiration of the default period,
and (y) any vacancy in the
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<PAGE>
Board of Directors may (except as provided in subparagraph (C)(ii) of this
Section 3) be filled by a vote of a majority of the remaining Directors
theretofore elected by the holders of the class of stock which elected the
Director whose office shall become vacant. References in this paragraph (C) to
Directors elected by the holders of a particular class of stock shall include
Directors elected by such Directors to fill vacancies as provided in clause
(y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of
the holders of Preferred Stock as a class to elect Directors shall cease, (y)
the term of any Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as may
be provided for in the Corporation's Certificate of Incorporation or By-laws
irrespective of any increase made pursuant to the provisions of subparagraph
(C)(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the Corporation's Certificate
of Incorporation or By-laws). Any vacancies in the Board of Directors effected
by the provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series C Participating Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions payable
on the Series C Participating Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series C Participating
Preferred Stock outstanding shall have been paid in full, the Corporation
shall not:
(i) Declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Participating Preferred Stock;
(ii) Declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series C Participating
Preferred Stock except dividends paid ratably on the Series C Participating
Preferred Stock and all such parity stock on which dividends are payable or
in arrears in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) Redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series C Participating Preferred Stock;
provided, however, that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series C Participating
Preferred Stock; or
(iv) Purchase or otherwise acquire for consideration any shares of Series
C Participating Preferred Stock or any shares of stock ranking on a parity
with the Series C Participating Preferred Stock except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
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<PAGE>
Section 5. Reacquired Shares. Any shares of Series C Participating Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding up
of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series C Participating Preferred Stock unless, prior
thereto, the holders of shares of Series C Participating Preferred Stock shall
have received per share, the amount of $1.00, plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not declared, to
the date of such payment (the "Series C Liquidation Preference"). Following
the payment of the full amount of the Series C Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series C
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series C Liquidation
Preference by (ii) 100 (as appropriately adjusted as set forth in paragraph
(C) of this Section 6 below to reflect such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock) (such number
in clause (ii), the "Adjustment Number"). Following the payment of the full
amount of the Series C Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series C Participating Preferred Stock
and Common Stock, respectively, holders of Series C Participating Preferred
Stock and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event there are not sufficient assets available to permit payment
in full of the Series C Liquidation Preference and the liquidation preferences
of all other series of Preferred Stock, if any, which rank on a parity with
the Series C Participating Preferred Stock, then such remaining assets shall
be distributed ratably to the holders of such parity shares in proportion to
their respective liquidation preferences. In the event there are not
sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. If the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such event the shares
of Series C Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to the Adjustment Number times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common
Stock is changed or exchanged.
Section 8. No Redemption. The shares of Series C Participating Preferred
Stock shall not be redeemable.
Section 9. Ranking. The Series C Participating Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
D-31
<PAGE>
Section 10. Fractional Shares. The Series C Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series C Participating Preferred Stock.
Section 11. Amendment. The Certificate of Incorporation of the Corporation
shall not be further amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series C Participating
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series C
Participating Preferred Stock, voting separately as a class.
Section 12. Effective Date. This Certificate of Designation, Preferences and
Rights of Series C Participating Preferred Stock of ONEOK, Inc. shall be
effective at 5:00 P.M., Eastern Standard Time, on , 1997.
IN WITNESS WHEREOF, I have executed and subscribed this Certificate and do
affirm the foregoing as true under penalties of perjury this day of ,
1997.
By: _________________________________
Name:
Title:
Attest:
_____________________________________
Name:
Title: Secretary
D-32
<PAGE>
EXHIBIT B
FORM OF RIGHT CERTIFICATE
Certificate No. R- Rights
NOT EXERCISABLE AFTER NOVEMBER 26, 2007, OR EARLIER IF REDEEMED BY THE
CORPORATION. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS DEFINED IN THE RIGHTS
AGREEMENT) AND CERTAIN RELATED PERSONS, WHETHER CURRENTLY HELD BY OR ON
BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, SHALL BECOME NULL AND
VOID.
RIGHT CERTIFICATE
ONEOK, INC.
This certifies that , or registered assigns, is the registered owner of
the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of November 26, 1997 (the "Rights Agreement"), between
ONEOK, Inc., an Oklahoma corporation (the "Corporation"), and Liberty Bank and
Trust Company of Oklahoma City, N.A. (the "Rights Agent"), to purchase from
the Corporation at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 P.M., New York City time,
on November 26, 2007, unless the Rights evidenced hereby shall have been
previously redeemed by the Corporation, at the principal office or offices of
the Rights Agent designated for such purpose, or at the office of its
successor as Rights Agent, one one-hundredth of a fully paid non-assessable
share of Series C Participating Preferred Stock, par value $0.01 per share
(the "Preferred Shares"), of the Corporation, at a purchase price of $80.00
per one one-hundredth of a Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-hundredths of a Preferred Share which
may be purchased upon exercise hereof) set forth above, and the Purchase Price
set forth above, are the number and Purchase Price as of , 1997 based on
the Preferred Shares as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in
the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate who
becomes a transferee after the Acquiring Person becomes such, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of any
such Acquiring Person, Associate or Affiliate who becomes a transferee prior
to or concurrently with the Acquiring Person becoming such, such Rights shall
become null and void and no holder hereof shall have any right with respect to
such Rights from and after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number of
one one-hundredths of a Preferred Share or other securities which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain
events, including Triggering Events (as such term is defined in the Rights
Agreement).
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the
rights, limitations of rights,
D-33
<PAGE>
obligations, duties and immunities hereunder of the Rights Agent, the
Corporation and the holders of the Right Certificates, which limitations of
rights include the temporary suspension of the exercisability of such Rights
under the specific circumstances set forth in the Rights Agreement. Copies of
the Rights Agreement are on file at the principal executive offices of the
Corporation and the principal office or offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares or other securities as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder
to purchase. If this Right Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Right Certificate
or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Corporation at a redemption price of
$.01 per Right (subject to adjustment as provided in the Rights Agreement)
payable in Common Shares or cash.
The Corporation shall not be required to issue fractions of Rights or to
distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current
market value of a whole Right as defined in the Rights Agreement.
The Corporation will not be required to issue fractions of Preferred Shares
(other than fractions which are one one-hundredths or integral multiples of
one one-hundredth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions which are one one-hundredths or integral multiples of one one-
hundredth of a Preferred Share). In lieu of fractional Preferred Shares other
than fractions that are multiples of one one-hundredth of a Share, the
Corporation will pay to the registered holders of Right Certificates at the
time such Rights are exercised an amount in cash equal to the same fraction of
the current market value of one Preferred Share as defined in the Rights
Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or
of any other securities of the Corporation which may at any time be issuable
on the exercise hereof, nor shall anything contained in the Rights Agreement
or herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Corporation or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or other
distributions or to exercise any preemptive or subscription rights, or
otherwise, until the Right or Rights evidenced by this Right Certificate shall
have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
D-34
<PAGE>
WITNESS the signature of the proper officers of the Corporation and its
corporate seal. Dated as of , 1997.
[SEAL]
ATTEST: ONEOK, Inc.
Attest:
By __________________________________ By __________________________________
Name: Name:
Title: Title:
Countersigned:
[RIGHTS AGENT]
By __________________________________
Authorized Signatory
Name:
Title:
D-35
<PAGE>
FORM OF REVERSE SIDE OF RIGHT CERTIFICATE
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ____________________________________________________________
hereby sells, assigns and transfers unto ______________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint Attorney, to
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: ,
_____________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank, savings association, credit union or
trust company having an office or correspondent in the United States or other
eligible guarantor institution which is a participant in a signature guarantee
medallion program.
- -------------------------------------------------------------------------------
The undersigned hereby certifies that (1) the Rights evidenced by this Right
Certificate are not being sold, assigned or transferred by or on behalf of a
Person who is or was an Acquiring Person or an Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement) and (2) after due inquiry
and to the best knowledge of the undersigned, the undersigned did not acquire
the Rights evidenced by this Right Certificate from any Person who is or was
an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement).
_____________________________________
Signature
D-36
<PAGE>
FORM OF REVERSE SIDE OF RIGHT CERTIFICATE--CONTINUED
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder
if such holder desires to exercise Rights
represented by the Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise Rights represented by
this Right Certificate to purchase the Preferred Shares, Common Shares or such
other securities issuable upon the exercise of such Rights at this time as
follows:
Please Insert
Number of Rights To Be Exercised
(i) Preferred Shares Exercise
__________
(ii) Section 11(a)(ii) Exercise
__________
(iii) Section 13 Exercise __________
The undersigned requests that certificates for such Preferred Shares, Common
Shares or other securities be issued in the name of:
Please insert social security
or other identifying number ___________________________________________________
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
- -------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number ___________________________________________________
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
- -------------------------------------------------------------------------------
Dated: , 19
_____________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank, savings association, credit union or
trust company having an office or correspondent in the United States or other
eligible guarantor institution which is a participant in a signature guarantee
medallion program.
D-37
<PAGE>
The undersigned hereby certifies that (1) the Rights evidenced by this Right
Certificate are not being exercised by or on behalf of a Person who is or was
an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement) and (2) after due inquiry and to the best
knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Rights Certificate from any Person who is or was an
Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement).
_____________________________________
Signature
- -------------------------------------------------------------------------------
NOTICE
The signature on the foregoing Forms of Assignment and Election and
certificates must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Corporation and the Rights Agent will deem the Beneficial Owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as such terms are defined in the Rights Agreement) and
such Assignment or Election to Purchase will not be honored.
D-38
<PAGE>
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED
TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE THEREOF (AS DEFINED IN THE RIGHTS AGREEMENT) AND
CERTAIN RELATED PERSONS, WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON
OR BY ANY SUBSEQUENT HOLDER, SHALL BECOME NULL AND VOID.
On November 26, 1997, the Board of Directors of ONEOK, Inc., an Oklahoma
corporation (the "Corporation"), declared a dividend distribution of one
preferred share purchase right (a "Right") for each outstanding share of
Common Stock, par value $0.01 per share (the "Common Shares"), of the
Corporation. The dividend is payable to the stockholders of record as of 5:00
P.M., Eastern Standard Time, on November 26, 1997 (the "Record Date"), and
with respect to Common Shares issued thereafter until the Distribution Date
(as defined below) and, in certain circumstances, with respect to Common
Shares issued after the Distribution Date. Except as set forth below, each
Right, when it becomes exercisable, entitles the registered holder to purchase
from the Corporation one one-hundredth of a share of Series C Participating
Preferred Stock, par value $0.01 per share (the "Preferred Shares") at a price
of $80.00 per one one-hundredth of a Preferred Share (the "Purchase Price"),
subject to adjustment. The description and terms of the Rights are set forth
in a Rights Agreement, dated as of November 26, 1997 (the "Rights Agreement"),
between the Corporation and Liberty Bank and Trust Company of Oklahoma City,
N.A. (the "Rights Agent").
Initially, the Rights will be attached to all certificates representing
Common Shares then outstanding, and no separate Right Certificates (as
hereinafter defined) will be distributed. The Rights will separate from the
Common Shares on the earliest to occur of (i) the first date of public
announcement that a person or "group" has acquired beneficial ownership of 15%
or more of the outstanding Common Shares (except pursuant to a Permitted
Offer, as hereinafter defined); or (ii) 10 business days (or such later date
as the Board may determine) following the commencement of, or announcement of
an intention to commence, a tender offer or exchange offer the consummation of
which would result in a person or group becoming an Acquiring Person (as
hereinafter defined) (the earliest of such dates being called the
"Distribution Date"). A person or group whose acquisition of Common Shares
causes a Distribution Date pursuant to clause (i) above is an "Acquiring
Person." The first date of public announcement that a person or group has
become an Acquiring Person is the "Shares Acquisition Date." "Disinterested
Directors" are directors who are not officers of the Corporation and who are
not Acquiring Persons or their affiliates, associates or representatives of
any of them, or any Person who directly or indirectly proposed or nominated as
a director of the Corporation by a Transaction Person (as defined below).
Notwithstanding the foregoing, an Acquiring Person does not include (i) any
member of the Shareholder Group, but only to the extent of Common Shares held
or acquired by such Shareholder Group member in accordance with the terms of
the Shareholder Agreement (as defined in the Agreement between WAI, Inc.,
Western Resources, Inc. and ONEOK Inc., dated December 12, 1996, as restated
and amended, dated May 19, 1997), and provided that the exemption provided
under this clause (i) shall permanently expire at such time as the Total
Ownership Percentage of Western Resources, Inc. and its affiliates first falls
below 10% or (ii) any Transferee who acquires Beneficial Ownership of Common
Share from the Shareholder Group pursuant to Sections 3.4(a) or 3.4(b) of the
Shareholder Agreement or who acquires Beneficial Ownership of less than 5% of
the Common Share in a public offering pursuant to Section 3.4(c) of the
Shareholder Agreement, but only to the extent of Common Shares acquired in
accordance with the terms of the Shareholder Agreement (it being understood
that, any such Transferee shall become an Acquiring Person upon the concurrent
or subsequent acquisition by such Transferee, or its Affiliates or Associates,
of any additional Common Shares if, after giving effect to such acquisition,
and taking into account all shares Beneficially Owned by the Transferee
including the shares acquired from the Shareholder Group, such Transferee
would be an Acquiring Person but for the provisions of this clause (ii))
(Defined terms used in clauses (i) and (ii) above which are defined in the
Shareholder Agreement shall have the same respective meanings as such terms
have in the Shareholder Agreement).
D-39
<PAGE>
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights) new
Common Share certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date, even without such notation or
a copy of this Summary of Rights being attached thereto, will also constitute
the transfer of the Rights associated with the Common Shares represented by
such certificate. As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Common Shares as of the close of business
on the Distribution Date (and to each initial record holder of certain Common
Shares issued after the Distribution Date), and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will expire
at 5:00 P.M., New York City time, on November 26, 2007, unless earlier
redeemed by the Corporation as described below.
In the event that any person becomes an Acquiring Person (except pursuant to
a Permitted Offer as defined below), each holder of a Right will have (subject
to the terms of the Rights Agreement) the right (the "Flip-In Right") to
receive upon exercise the number of Common Shares, or, in the discretion of
the Board of Directors, of one one-hundredth of a Preferred Share (or, in
certain circumstances, other securities of the Corporation) having a value
(immediately prior to such triggering event) equal to two times the exercise
price of the Right. Notwithstanding the foregoing, following the occurrence of
the event described above, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person or any affiliate or associate thereof will be null and
void. A "Permitted Offer" is a tender or exchange offer for all outstanding
Common Shares which is at a price and on terms determined, prior to the
purchase of shares under such tender or exchange offer, by a Majority of
Disinterested Directors to be adequate (taking into account all factors that
such Disinterested Directors deem relevant) and otherwise in the best
interests of the Corporation, its stockholders and its other relevant
constituencies (other than the person or any affiliate or associate thereof on
whose basis the offer is being made) taking into account all factors that such
directors may deem relevant and (ii) any tender or exchange offer required or
permitted to be made by the Shareholder Group (as defined in the Shareholder
Agreement) pursuant to, and in accordance with, the Shareholder Agreement).
In the event that, at any time following the Shares Acquisition Date, (i)
the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding Common Shares
immediately prior to the consummation of the transaction are not the holders
of all of the surviving corporation's voting power, or (ii) more than 50% of
the Corporation's assets or earning power is sold or transferred, in either
case with or to an Acquiring Person or any affiliate or associate or any other
person in which such Acquiring Person, affiliate or associate has an interest
or any person acting on behalf of or in concert with such Acquiring Person,
affiliate or associate, or, if in such transaction all holders of Common
Shares are not treated alike, any other person, then each holder of a Right
(except Rights which previously have been voided as set forth above) shall
thereafter have the right (the "Flip-Over Right") to receive, upon exercise,
common shares of the acquiring company having a value equal to two times the
exercise price of the Right.
The Purchase Price payable, and the number of one-hundredths of a Preferred
Share or other securities issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion
price, less than the then current market price of the Preferred Shares or
(iii) upon the distribution to holders of the Preferred Shares of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
The Purchase Price is also subject to adjustment in the event of a stock
split of the Common Shares or a stock dividend on the Common Shares payable in
Common Shares or subdivisions, consolidations or combinations of the Common
Shares occurring, in any such case, prior to the Distribution Date.
D-40
<PAGE>
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional one-hundredths of a Preferred Share will be
issued and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day price to the date
of exercise.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1.00 per share but, if greater, will be
entitled to an aggregate dividend per share of 100 times the dividend declared
per Common Share. In the event of liquidation, the holders of the Preferred
Shares will be entitled to a minimum preferential liquidation payment of $1.00
per share; thereafter, and after the holders of the Common Shares receive a
liquidation payment of $0.01 per share, the holders of the Preferred Shares
and the holders of the Common Shares will share the remaining assets in the
ratio of one hundred to 1 (as adjusted) for each Preferred Share and Common
Share so held, respectively. Finally, in the event of any merger,
consolidation or other transaction in which Common Shares are exchanged, each
Preferred Share will be entitled to receive one hundred times the amount
received per Common Share. These rights are protected by customary
antidilution provisions. In the event that the amount of accrued and unpaid
dividends on the Preferred Shares is equivalent to at least six full quarterly
dividends, the holders of the Preferred Shares shall have the right, voting as
a class, to elect two directors in addition to the directors elected by the
holders of the Common Shares until all cumulative dividends on the Preferred
Shares have been paid through the last quarterly dividend payment date or
until non-cumulative dividends have been paid regularly for at least one year.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, the Corporation may
redeem the rights in whole, but not in part, at a price of $0.01 per Right
(the "Redemption Price"), which redemption shall be effective upon the action
of the Board of Directors. Additionally, the Corporation may redeem the then
outstanding Rights in whole but not in part, at the Redemption Price after the
triggering of the Flip-in Right and before the expiration of any period during
which the Flip-in Right may be exercised in connection with a merger or other
business combination transaction or series of transactions involving the
Corporation in which all holders of Common Shares are treated alike but not
involving a Transaction Person (as defined below). Upon the effective date of
the redemption of the Rights, the right to exercise the Rights will terminate
and the only right of the holders of Rights will be to receive the Redemption
Price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Corporation, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders of the Corporation, stockholders may, depending
upon the circumstances, recognize taxable income should the Rights become
exercisable or upon the occurrence of certain events thereafter.
D-41
<PAGE>
APPENDIX E
CERTIFICATE OF INCORPORATION OF WAI, INC.
The undersigned, in order to form a corporation pursuant to Section 1006 of
the General Corporation Act of the State of Oklahoma (the "OGCA"), does hereby
certify as follows:
FIRST
The name of the Corporation is WAI, Inc.
SECOND
The principal office or place of business of the Corporation in the State of
Oklahoma is to be located at 100 West Fifth Street, Suite 1000, in the City of
Tulsa, County of Tulsa. The name of its resident agent is The Corporation
Company and the address of said resident agent is 735 First National Building,
Oklahoma City, Oklahoma 73102.
THIRD
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the OGCA.
FOURTH
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 200,000,000 shares divided into
two classes of which 100,000,000 shares, par value $0.01 per share, shall be
designated Preferred Stock and 100,000,000 shares, par value $0.01 per share,
shall be designated Common Stock.
1. Preferred Stock.
(a) Issuance. The Board of Directors is authorized, subject to limitations
prescribed by law, to provide for issuance of shares of Preferred Stock in one
or more series, to establish the number of shares to be included in each such
series, and to fix the designations, powers, preferences, and rights of the
shares of each such series, and any qualifications, limitations, or
restrictions thereof.
2. Common Stock.
(a) Dividends. Subject to the preferential rights, if any, of the Preferred
Stock, the holders of shares of Common Stock shall be entitled to receive,
when and if declared by the Board of Directors, out of the assets of the
Corporation which are by law available therefor, dividends payable either in
cash, in property, or in shares of Common Stock.
(b) Voting Rights. At every annual or special meeting of shareholders of the
Corporation, every holder of Common Stock shall be entitled to one vote, in
person or by proxy, for each share of Common Stock standing in his name on the
books of the Corporation.
(c) Liquidation, Dissolution or Winding Up. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the affairs of the
Corporation, after payment or provision for payment of the debts and other
liabilities of the Corporation and of the preferential amounts, if any, to
which the holders of Preferred Stock shall be entitled, the holders of all
outstanding shares of Common Stock shall be entitled to share ratably in the
remaining net assets of the Corporation.
FIFTH
The Corporation shall have perpetual existence.
SIXTH
The private property of the shareholders shall not be subject to the payment
of the corporate debts to any extent whatever.
E-1
<PAGE>
SEVENTH
1. The business of the Corporation shall be managed by the Board of
Directors, except as otherwise required by law. The Board of Directors may by
resolution or resolutions, passed by a majority of the whole Board, designate
one or more committees, each committee to consist of one (1) or more of the
Directors of the Corporation, which to the extent provided in said resolution
or resolutions or in the By-Laws of the Corporation, shall have and may
exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation, and may have power to authorize the
seal of the Corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be stated in the
By-Laws of the Corporation or as may be determined from time to time by
resolution adopted by the Board of Directors.
2. Initially, the Board of Directors of the Corporation shall consist of two
persons. Upon the consummation of the Merger (such term having the meaning
specified in the Agreement, dated as of December 12, 1996, between Western
Resources, Inc. and ONEOK Inc., as the same may be further amended (the
"Agreement")), the number of Directors of the Corporation shall be not less
than nine (9) nor more than thirty-one (31) persons and shall be fixed from
time to time by the Board of Directors. Commencing concurrently with the
effective time of the Merger, the Directors shall be divided into three
classes (A, B and C), as nearly equal in number as possible. The initial term
of office for members of Class A shall expire at the annual meeting of
shareholders in January 1998; the initial term of office for members of Class
B shall expire at the next annual meeting of shareholders; and the initial
term of office for members of Class C shall expire at the following annual
meeting of shareholders. At each annual meeting of shareholders following such
initial classification and election, Directors elected to succeed those
Directors whose terms expire shall be elected for a term of office to expire
at the third succeeding annual meeting of shareholders after their election,
and shall continue to hold office until their respective successors are
elected and qualified. In the event of any increase in the number of Directors
fixed by the Board of Directors, the additional Directors shall be so
classified that all classes of Directors have as nearly equal numbers of
Directors as may be possible. In the event of any decrease in the number of
Directors of the Corporation, all classes of Directors shall be decreased
equally as nearly as may be possible.
3. Newly created directorships resulting from any increase in the authorized
number of Directors or any vacancies in the Board of Directors resulting from
death, resignation, retirement, disqualification, removal from office or other
cause shall be filled by the affirmative vote of a majority of the Directors
then in office, though less than a quorum, or by the sole remaining Director,
or by the shareholders at their next annual meeting or at any special meeting
of shareholders called for that purpose. Each Director so chosen shall hold
office until the expiration of the term of the Director, if any, whom he has
been chosen to succeed or if none, until the expiration of the term of the
class assigned to the additional directorship to which he has been elected, or
until his earlier death, resignation or removal. No decrease in the number of
Directors constituting the Board of Directors shall shorten the term of any
incumbent Director. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any Director or the entire Board of
Directors may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least eighty percent (80%) of the
voting power of all outstanding Voting Shares (as defined in Article Tenth).
4. The shareholders and Directors of the Corporation may hold their meetings
and have an office or offices outside of the State of Oklahoma if the By-Laws
so provide.
5. None of the Directors need be a shareholder of the Corporation or a
resident of the State of Oklahoma.
6. The By-Laws or any By-Law may be adopted, amended or repealed only by the
affirmative vote of not less than a majority of the Directors then in office
at any regular or special meeting, or by the affirmative vote of the holders
of at least eighty percent (80%) of the voting power of all outstanding Voting
Shares, voting as a single class, at any annual meeting or any special meeting
called for that purpose.
7. The Board of Directors shall have power from time to time to set apart
out of any funds of the Corporation available for dividends a reserve or
reserves for any proper purpose, and to abolish such reserve in
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the manner in which it was created and to fix and determine and to vary the
amount of the working capital of the Corporation, and to direct and determine
the use and disposition of the working capital and of any surplus or net
profits over and above the capital stock paid in.
8. The shareholders and the Board of Directors shall have power to keep the
books, documents and papers of the Corporation outside of the State of
Oklahoma, except as otherwise required by the laws of the State of Oklahoma.
9. The Board of Directors from time to time shall determine whether and to
what extent and at what times and places, and under what conditions and
regulations the accounts and books of the Corporation, or any of them, shall
be open to the inspection of the shareholders, and no shareholders shall have
any right to inspect any account, book or documents of the Corporation except
as conferred by statute or as authorized by resolution of the Board of
Directors.
10. In the absence of fraud, no contract or other transaction of the
Corporation shall be affected or invalidated in any way by the fact that any
of the Directors of the Corporation are in any way interested in or connected
with any other party to such contract or transaction or are themselves parties
to such contract or transaction, provided that such interest shall be fully
disclosed or otherwise known to the Board of Directors at the meeting of said
Board at which such contract or transaction is authorized or confirmed, and
provided further that at the meeting of the Board of Directors authorizing or
confirming such contract or transaction there shall be present a quorum of
Directors not so interested or connected and such contract or transaction
shall be approved by a majority of such quorum, and no such interested
Director shall vote on any such contract or transaction. Any contract,
transaction or act of the Corporation or of the Board of Directors or of any
committee thereof which shall be ratified by a majority of a quorum of the
shareholders of the Corporation having voting power at any annual meeting, or
any special meeting called for such purpose, shall be as valid and as binding
as though ratified by every shareholder of the Corporation. Any Director of
the Corporation may vote upon any contract or other transaction between the
Corporation and any subsidiary corporation without regard to the fact that he
is also a Director of such subsidiary corporation. No contract or agreement
between the Corporation and any other corporation or party which owns a
majority of the capital stock of the Corporation or any subsidiary of any such
other corporation shall be made or entered into without the affirmative vote
of a majority of the whole Board of Directors at a regular meeting of the
Board.
11. Notwithstanding anything to the contrary in the foregoing paragraph 10,
in the case of contracts, transactions and acts of the Corporation, of the
Board of Directors or of committees thereof that require shareholder approval
under any provision of this Certificate or of applicable law by a higher
proportion of the voting power of the outstanding Voting Shares than a
majority of a quorum of the shareholders, ratification by the shareholders of
such contracts, transactions and acts shall require the affirmative vote of
such higher proportion of such voting power, and any contract, transaction,
act or agreement referred to in such paragraph 10 shall be subject to any such
applicable provisions of the Certificate or of applicable law.
12. All salaries and compensation paid by the Corporation to its Directors
and executive officers shall be fixed from time to time by the Board of
Directors at a meeting of the Board to be held as provided by the By-Laws, and
any payment of any character to any Director or executive officer of the
Corporation or any contract made with such Director or executive officer must
be approved by a majority of the whole Board of Directors at a regular meeting
of the Board, before such payment is made or contract executed.
13. No Director shall be personally liable to the Corporation or its
shareholders for monetary damages for any breach of fiduciary duty by such
Director as a Director, except (i) for breach of the Director's duty of
loyalty to the Corporation or its shareholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) pursuant to Section 1053 of Title 18 of the OGCA, or (iv) for
any transaction from which the Director derived an improper personal benefit.
Any repeal or modification of this paragraph 13 shall not adversely affect any
right to protection of a Director of the Corporation existing at the time of
such repeal or modification with respect to acts or omissions occurring prior
to such repeal or modification.
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14. The affirmative vote of the holders of at least eighty percent (80%) of
the voting power of all outstanding Voting Shares shall be required to amend,
repeal, or adopt any provision inconsistent with paragraphs 2, 3, 6, 11 or 13
of this Article SEVENTH or this paragraph 14.
EIGHTH
Whenever compromise or arrangement is proposed between this Corporation and
its creditors or any class of them and/or between this Corporation and its
shareholders or any class of them, any court of equitable jurisdiction within
the State of Oklahoma may, on the application in a summary way of this
Corporation or of any creditor or shareholder thereof, or on the application
of any receiver or receivers appointed for this Corporation under the
provisions of Section 1106 of Title 18 of the OGCA, or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of Section 1100 of Title 18 of the OGCA,
order a meeting of the creditors or class of creditors, and/or of the
shareholders or class of shareholders of this Corporation, as the case may be,
to be summoned in such manner as the said Court directs. If holders of
liabilities representing three-fourths (3/4) in value of the creditors or
class of creditors and/or if holders of shares representing three-fourths
(3/4) of the shares held by such shareholders or class of shareholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the Court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
shareholders or class of shareholders, of this Corporation, as the case may
be, and also on this Corporation.
NINTH
Other than as set forth in the Shareholder Agreement (the "Shareholder
Agreement"), to be entered into by the Corporation and Western Resources, Inc.
pursuant to the Agreement, no holder of stock of the Corporation of any class
shall have any preferential, preemptive or other right to subscribe for or to
purchase from the Corporation any stock of the Corporation of any class
whether or not now authorized, or to purchase any bonds, certificates of
indebtedness, debentures, notes, obligations or other securities which the
Corporation may at any time issue, whether or not the same shall be
convertible into stock of the Corporation of any class or shall entitle the
owner or holder to purchase stock of the Corporation of any class.
TENTH
1. Higher Vote for Certain Business Combinations. At any time after
consummation of the Merger, a Business Combination (as hereinafter defined)
with or upon a proposal by a Related Person (as hereinafter defined) shall
require, in addition to such approvals as are required by law, the approval of
the Business Combination by either (a) a majority vote of all of the
Independent Directors or (b) the holders of at least two-thirds (66 2/3%) of
the shares otherwise entitled to vote as a single class with the Common Stock
to approve such Business Combination (the "Applicable Shares"), excluding any
shares owned by such Related Person; provided, however, that the provisions of
this Article Tenth shall not apply (i) to any Related Person who becomes a
Related Person pursuant to a single transaction in which such Related Person
acquires 85% of the Applicable Shares then outstanding in a single transaction
and (ii) to the Shareholder Group (as such term is defined in the Shareholder
Agreement) after the termination of the Shareholder Agreement to the extent
the Shareholder Group acquires, in a single transaction, an amount of
Applicable Shares equal to the difference between (a) 85% of the then
outstanding Applicable Shares and (b) the amount of Applicable Shares owned by
the Shareholder Group on the date the Shareholder Agreement is terminated;
provided, further, that for the purpose of the immediately preceding proviso,
Applicable Shares owned by (i) persons who are directors and also officers of
the Corporation and (ii) employee stock plans, shall be excluded.
2. Certain Definitions. For purposes of this Article TENTH:
(a) A "person" shall mean any individual, firm, corporation or other
entity, or a group of "persons" acting or agreeing to act together in the
manner set forth in Rule 13d-5 under the Securities Exchange Act of 1934,
as in effect on January 1, 1997 (the "1934 Act").
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(b) The term "Business Combination" shall mean any of the following
transactions, when entered into by the Corporation or a subsidiary of the
Corporation with, or upon a proposal by, a Related Person:
(1) The merger or consolidation of the Corporation or any subsidiary
of the Corporation; or
(2) The sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one or a series of transactions) of any assets of the
Corporation or any subsidiary of the Corporation having an aggregate
fair market value of Five Million Dollars ($5,000,000) or more; or
(3) The issuance or transfer by the Corporation or any subsidiary of
the Corporation (in one or a series of transactions) of securities of
the Corporation or that subsidiary having an aggregate fair market
value of Five Million Dollars ($5,000,000) or more, provided that
issuances of Common Stock pursuant to conversions of Preferred Stock
shall not be deemed a "Business Combination"; or
(4) The adoption of a plan or proposal for the liquidation or
dissolution of the Corporation; or
(5) The reclassification of securities (including a reverse stock
split), recapitalization, consolidation or any other transaction
(whether or not involving a Related Person) which has the direct or
indirect effect of increasing the voting power, whether or not then
exercisable, of a Related Person in any class or series of capital
stock of the Corporation or any subsidiary of the Corporation; or
(6) Any agreement, contract or other arrangement providing directly
or indirectly for any of the foregoing.
(c) The term "Related Person" shall mean any person (other than the
Corporation, a subsidiary of the Corporation or any profit sharing,
employee stock ownership or other employee benefit plan of the Corporation
or a subsidiary of the Corporation or any trustee of or fiduciary with
respect to any such plan acting in such capacity) that is the direct or
indirect beneficial owner (as defined in Rule 13d-3 and Rule 13d-5 under
the 1934 Act) of more than ten percent (10%) of the outstanding Voting
Shares of the Corporation and any Affiliate or Associate of any such
person.
(d) The term "Independent Director" shall mean any member of the Board of
Directors who is not affiliated with or nominated by a Related Person.
(e) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the 1934 Act.
(f) The term "Voting Shares", at any time, shall mean the Common Stock
and shares of any other class of capital stock of the Corporation then
entitled to vote generally in the election of directors.
(g) A majority of all Independent Directors shall have the power to make
all determinations with respect to this Article TENTH, including, without
limitation, the transactions that are Business Combinations, the persons
who are Related Persons, the time at which a Related Person became a
Related Person, and the fair market value of any assets, securities or
other property, and any such determinations of such directors shall be
conclusive and binding.
3. Applicability of the OGCA. Section 1090.3 of Title 18 of the OGCA shall
be applicable to this Corporation.
4. No Effect on Fiduciary Obligations of Related Persons. Nothing contained
in this Article TENTH shall be construed to relieve any Related Person from
any fiduciary obligation imposed by law.
5. Amendment, Repeal, etc. The affirmative vote of the holders of at least
eighty percent (80%) of the voting power of all outstanding Voting Shares of
the Corporation, voting together as a single class, shall be required in order
to amend, repeal or adopt any provision inconsistent with this Article TENTH.
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ELEVENTH
1. At any time after consummation of the Merger, unless otherwise
specifically provided in this Certificate (including any Certificate of
Designation with respect to any class or series of Preferred Stock), any
action required or permitted to be taken by the shareholders of the
Corporation must be effected by a vote of the shareholders at a duly called
annual meeting or special meeting called for that purpose and may not be
effected by any consent in writing of such shareholders.
2. The affirmative vote of the holders of at least eighty percent (80%) of
the voting power of all outstanding Voting Shares, voting as a single class,
shall be required to amend, repeal, or adopt any provision inconsistent with
this Article ELEVENTH.
3. The name and mailing address of the Incorporator is as follows:
Name
Mailing Address
Richard Terrill c/o Western Resources, Inc.
818 Kansas Avenue
Topeka, Kansas 66612
4. The initial directors of the Corporation consist of John K. Rosenberg and
Richard Terrill and their mailing address is as follows:
c/o Western Resources, Inc.
818 Kansas Avenue
Topeka, Kansas 66612
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IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of May, 1997
and I affirm that the foregoing certificate is my act and deed and that the
facts stated therein are true.
/s/ Richard D. Terrill
_____________________________________
Name: Richard D. Terrill,
Incorporator
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APPENDIX F
FAIRNESS OPINION OF PAINEWEBBER INCORPORATED
December 11, 1996
Board of Directors
ONEOK Inc.
100 West Fifth Street
Tulsa, OK 74103
Madames and Gentlemen:
ONEOK Inc. (the "Company") and Western Resources, Inc. ("Western") have
entered into an Agreement and Plan of Merger (the "Agreement") pursuant to
which (i) the Company will merge with and into a newly formed company ("New
Oneok") with the stockholders of the Company receiving an aggregate of
approximately 55% of the fully diluted common stock of New Oneok in exchange
for their shares and (ii) Western will contribute certain gas assets (the
"Western Gas Assets") to New Oneok in exchange for (a) approximately 9.9% of
the fully diluted common stock of New Oneok, (b) New Oneok preferred stock
convertible into approximately 35.1% of the fully diluted common stock of New
Oneok upon a Regulatory Change (as defined in the Agreement) at Western's
option and (c) the assumption by New Oneok of certain indebtedness of Western
in the aggregate amount of $35 million. In connection with the Agreement,
Western and New Oneok propose to enter into a Shareholder Agreement (the
"Shareholder Agreement") pursuant to which, among other things, Western has
agreed to certain standstill provisions relating to New Oneok's securities and
corporate governance. The aforementioned transactions contemplated by the
Agreement and the Shareholder Agreement are collectively referred to herein as
the "Transaction".
You have asked us whether or not, in our opinion, the proposed Transaction
is fair to the shareholders of the Company from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed, among other public information, the Company's Annual
Reports, Forms 10-K and related financial information for the four fiscal
years ended August 31, 1996;
(2) Reviewed, among other public information, Western's Annual Reports,
Forms 10-K and related financial information for the four fiscal years
ended December 31, 1995 and Western's Form 10-Q and the related unaudited
financial information for the nine months ended September 30, 1996;
(3) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the Company
and the Western Gas Assets, furnished to us by the Company and Western,
respectively;
(4) Conducted discussions with members of senior management of the
Company and Western concerning their respective businesses and prospects;
(5) Reviewed the historical market prices and trading activity for the
Company's shares and compared such prices and trading activity with those
of certain publicly traded companies which we deemed to be relevant;
(6) Compared the financial position and operating results of the Company
and the Western Gas Assets with that of certain publicly traded companies
which we deemed to be relevant;
(7) Compared the financial terms of the Transaction with the financial
terms of certain other business combinations which we deemed to be
relevant;
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(8) Considered the potential pro forma effects of the Transaction on the
Company;
(9) Reviewed the draft of the Agreement dated December 10, 1996 and the
draft of the Shareholder Agreement dated December 2, 1996;
(10) Reviewed an independent third party's analysis, dated September 15,
1995, of potential stand-alone operational efficiencies of the Western Gas
Assets; and
(11) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary including our assessment of regulatory, general economic,
market and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness of
all information that was publicly available, supplied or otherwise
communicated to us by the Company and Western and we have not independently
verified the same. We have assumed that the financial forecasts examined by us
were reasonably prepared on bases reflecting the best currently available
estimates and good faith judgments of the management of the Company and
Western as to the future performance of the Company and the Western Gas
Assets, respectively. We have also assumed, with your consent, that: (i) the
contribution of the Western Gas Assets will be accounted for under the
purchase method of accounting and (ii) any material liabilities (contingent or
otherwise, known or unknown) of the Company and the Western Gas Assets are as
set forth in the consolidated financial statements of the Company and the
Western Gas Assets, respectively. We have not made an independent appraisal of
the assets or liabilities (contingent or otherwise) of the Company or the
Western Gas Assets, nor have we been furnished with any such appraisals. Our
opinion is based upon economic, monetary and market conditions existing on the
date hereof. Furthermore, we express no opinion as to the price or trading
range at which the common shares of the Company or New Oneok will trade from
the date hereof.
Our opinion is directed to the Board of Directors of the Company and does
not constitute a recommendation to any shareholder of the Company as to how
any such shareholder should vote on the Transaction. This opinion does not
address the relative merits of the Transaction and other transactions or
business strategies discussed by the Board of Directors of the Company as
alternatives to the Transaction or the decision of the Board of Directors of
the Company to proceed with the Transaction.
This opinion has been prepared solely for the use of the Board of Directors
of the Company and shall not be reproduced, summarized, described or referred
to or given to any other person or otherwise made public without the prior
written consent of PaineWebber Incorporated; provided, however, that this
letter may be reproduced in full in a proxy statement/prospectus relating to
the Transaction.
PaineWebber Incorporated is currently acting as financial advisor to the
Company in connection with the Transaction and will receive a fee upon the
delivery of this opinion. In the past, PaineWebber Incorporated and its
affiliates have provided investment banking services to the Company and have
received fees for rendering these services.
In the ordinary course of our business, we may trade the securities of the
Company and Western for our own account and for the accounts of our customers
and, accordingly, may at any time hold long or short positions in such
securities.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the proposed Transaction is fair to the shareholders of
the Company from a financial point of view.
Very truly yours,
/s/ PAINEWEBBER INCORPORATED
PAINEWEBBER INCORPORATED
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APPENDIX G
SHARED SERVICES AGREEMENT
THIS AGREEMENT, made this day of , 1997, by and between Western
Resources, Inc, a Kansas corporation, ("WRI") and ONEOK Inc., a Delaware
corporation, ("ONEOK").
WITNESSETH:
WHEREAS, WRI and ONEOK have determined that it is in their respective best
interests to engage in a strategic business alliance in which, among other
things, the gas business of WRI would be combined with the gas business and
other assets of ONEOK.
WHEREAS, to accomplish such a combination, a certain Amended and Restated
Agreement (the "Transaction Agreement"), dated May 19, 1997, was entered into
between WRI, ONEOK and WAI, Inc. ("NewCorp") amending and restating a certain
agreement, dated December 12, 1996, between WRI and ONEOK pursuant to which
WRI will contribute its Gas Business, as defined in the Transaction Agreement,
to NewCorp and ONEOK will be merged into NewCorp with NewCorp to be the
surviving corporation (the "Merger").
WHEREAS, as a condition to each party's obligation to effect the
transactions contemplated by the Transaction Agreement, the parties have
agreed in Section 7.1(f) of the Transaction Agreement, among other things, to
enter into a shared services agreement relating to the functions and services
where synergies can be achieved between the parties to avoid unnecessary
duplication, in form, scope and substance reasonably satisfactory to WRI and
ONEOK.
WHEREAS, the parties are entering into the Agreement with the understanding
and agreement that the Agreement complies fully with the requirements of
Section 7.1(f) of the Transaction Agreement; and
WHEREAS, the terms and conditions of the Agreement will be binding on
NewCorp after the Merger as the successor to ONEOK (NewCorp's name to be
changed at such time to ONEOK, Inc.).
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Certain Definitions. As used in this agreement, the following terms
shall have the following meanings:
a. "Agreement" shall mean this agreement, as the same may be amended or
modified from time to time and includes all Service Orders agreed to
between WRI and NewCorp.
b. "Annual Shared Facility Extension Period" shall mean the annual
extension, if any, during the term of the Agreement, of the sharing of
Shared Facilities following the expiration of the Initial Shared Facilities
Period.
c. "Company" shall mean the party being provided Shared Facilities or
Services hereunder.
d. "Effective Date" shall have the same meaning as defined in the
Transaction Agreement.
e. "Initial Services" shall mean those services to be initially furnished
under the Agreement as specified in the Shared Services Schedules.
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f. "Initial Shared Facilities Period" shall be the five year period
beginning on the Effective Date and ending at 11:59 p.m. on the date five
years after the Effective Date.
g. "Other Services" shall mean those services provided by a Provider to
the Company pursuant to Service Orders.
h. "Provider" shall mean the party providing Shared Facilities or
Services hereunder.
i. "Services" shall mean Initial Services and Other Services being
provided from time to time under the terms of the Agreement.
j. "Service Orders" shall mean the documents signed by the Provider and
the Company pursuant to which Other Services will be provided under the
terms of the Agreement. A form of Service Order is attached hereto as
Exhibit A.
k. "Shared Facilities" shall be those facilities owned or leased by
Provider and provided to the Company from time to time under the terms of
this Agreement, such facilities being provided during the Initial Shared
Facilities Period being as initially specified on Schedules 1 and 2,
attached hereto. Those facilities listed on Schedule 1 as it may be
modified from time to time hereunder, are those facilities being provided
by ONEOK hereunder and are hereinafter referred to as the "ONEOK Shared
Facilities." Those facilities listed on Schedule 2 as it may be modified
from time to time hereunder, are those facilities being provided by WRI
hereunder and are hereinafter referred to as the "Western Resources Shared
Facilities." (Schedules 1 and 2 are subject to being modified at the end of
the Initial Shared Facilities Period and each Annual Shared Facilities
Extension Period thereafter in the manner set forth in Section 3(d) below.)
l. "Shared Services Schedules" shall mean Schedule 3.1 through 3.26,
attached hereto.
m. "Transaction Agreement" shall have the meaning specified in the second
recital paragraph above.
2. Basic Agreement. The Agreement is the basic agreement between the
parties pursuant to which the Shared Facilities and the Services will be
furnished. The Agreement is also the blanket agreement between the parties
pursuant to which Other Services may be added to the Agreement from time to
time in the future. In the event of a conflict between the Agreement and
any of the Service Orders, the Agreement will control unless the Service
Order expressly provides to the contrary. It is understood and agreed that
neither party shall be required to either provide or take any Other
Services under the Agreement, except as agreed to by the parties.
3. Shared Facilities. (a) Schedules. Schedules 1 and 2 specify, among
other things, the location, space and facilities being provided by each
party (including necessary common areas, if any, rights of ingress and
egress, and parking), and such other matters as the parties may specify and
agree on therein in respect to each of the Shared Facilities, as
applicable.
(b) Payment for Excess Space During Initial Shared Facilities Period. For
the purposes of this Agreement it is agreed that for the Initial Shared
Facilities Period that the aggregate total amount of space provided to WRI
in the ONEOK Shared Facilities is 95,952 square feet, the aggregate total
amount of space provided to ONEOK in the Western Resources Shared
Facilities is 56,799 square feet and that WRI shall pay to ONEOK monthly,
the sum of $37,467.000 for the excess space.
(c) Payment for Excess Space During Annual Shared Facilities Extension
Period. During each Annual Shared Facility Extension Period, Provider will
not charge Company for space it provides Company to the extent Company
provides the same number of square feet in return. To the extent that
either party provides more space than the other party during any Annual
Shared Facility Extension Period, the party with the shortfall will pay the
party which provides more space during such Annual Shared Facility
Extension Period for the excess square feet provided. The charge for excess
square feet being provided during such Annual Share Facility Extension
Period shall be determined pursuant to (d) below.
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(d) Extension of Period. Not less than one year prior to the end of the
Initial Shared Facilities Period and one year prior to the expiration of
each Annual Shared Facility Extension Period thereafter, either party may
notify the other party of its election to terminate this Agreement as to
Shared Facilities at the end of the Initial Shared Period or next Annual
Shared Facilities Extension Period, as applicable. If no such election is
made by either party, the parties shall meet to determine what the charge
per square foot rate for space will be during the next Annual Shared
Facility Extension Period for any excess square footage provided during
such Annual Shared Facility Extension Period. Such charge shall be agreed
upon by the parties acting in good faith within 30 days of the initial
meeting. If the parties, acting in good faith, cannot agree on such charge,
the charge shall be determined under the Dispute Resolution Procedures in
Section 10 below. Within thirty days following the determination of such
charge, each party shall have the right and option to notify the other
party of those portions of the Shared Facilities owned by the other which
they no longer elect to occupy. Within three months of such notice, the
ONEOK Shared Facility Schedule shall be revised and the Western Resources
Shared Facility Schedule shall be revised for the next Annual Shared
Facility Extension Period to reflect such elections, if any.
(e) Vacating of Space. During the term of the Initial Shared Facilities
Period or any Annual Shared Facility Extension Period, either party may
vacate any of the Shared Facilities it occupies, in whole or in part, upon
not less than sixty (60) days prior written notice to the other party;
provided, however, that except as provided in (f) below, there shall be no
adjustment to the ONEOK Shared Facility Schedule or the Western Resources
Shared Facility Schedule until the end of the applicable Period and there
will be no change in the payment for excess space during such applicable
Period.
(f) Fire or other Casualty and Eminent Domain. If any of the ONEOK Shared
Facilities or Western Resources Shared Facilities becomes unusable for a
period reasonably anticipated by the other party to exceed 60 days during
the Initial Shared Facilities Period or any Annual Shared Facility
Extension Period, due to fire or other casualty or as a result of a taking
under eminent domain (the "Damaged Shared Facilities"), the parties shall
meet as soon as possible and determine in good faith whether the Damaged
Shared Facilities should be repaired or a new facility should be built in
replacement therefore. If Company does not desire to occupy the Damaged
Shared Facilities, it shall advise Provider within thirty (30) days after
the event and may seek space for its own needs in any location it desires
and neither party shall have any obligations thereafter to use or provide
such space hereunder. The square footage attributable to Provider for such
Shared Facility shall be adjusted downwards and any payments owed by it or
to it shall be adjusted based on the number of square feet attributable to
the Damaged Shared Facilities as of the date the event occurred. If the
Provider does not desire to repair or replace the damaged facilities, it
shall advise Company of such decision within 30 days of the event, and both
parties may seek space for its own needs in any location it desires and
neither party shall have any obligations thereafter to use or provide such
space hereunder. The square footage attributable to the Provider shall be
adjusted downwards and any payments owed by it or to it shall be adjusted
based on the number of square feet attributable to the Damaged Shared
Facilities as of the date the damage occurred. If the parties agree that
the Damaged Shared Facilities should be repaired or replaced, the parties
shall find space for their own needs at their own cost during such interim
period and the square footage attributable to the Provider shall be
adjusted downwards and any payments owed by it or to it shall be adjusted
based on the square feet attributable to Provider's damaged facility where
it leased space as of the date of the event through the date the Damaged
Shared Facilities are repaired or new facilities constructed and occupied.
If the amount of square feet to be occupied by Company in the repaired or
new facility increases, as determined by the mutual agreement of both
parties, the amount of space attributable to Provider shall be adjusted
upwards and payments owed by it or to it shall be adjusted accordingly.
(g) Shared Facilities Terms and Conditions. The Shared Facilities shall
be furnished pursuant to the terms and condition specified in Schedules 1
and 2, as they may be modified from time to time as provided for herein,
the general terms and conditions of this Agreement and the following
special terms and conditions which apply only to the Shared Facilities.
Provider also agrees to furnish Company while occupying office or other
space as part of the Shared Facilities the following services at Provider's
cost and expense, subject to the limitations and provisions hereinafter set
forth.
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(i) General. The space provided by each party to the other shall be
maintained in the same general manner as the space was being maintained
as of the Effective Date, reasonable wear and tear excepted. Provider
shall be responsible for self insuring or procuring insurance from
nationally recognized insurance companies for the building or other
structure in which space is being provided to cover damage thereto and
such policy shall permit waiver of subrogation rights against Company.
Company shall be responsible for self insuring or procuring insurance
from nationally recognized insurance companies for the equipment,
supplies, and other personal property owned by the Company located at
the Shared Facility and such insurance policy shall permit waiver of
subrogation rights against Provider. Each party shall be responsible
for purchasing its own general liability and workers compensation
insurance. Provider shall be responsible for the payment of property
taxes attributable to the Shared Facility other than equipment,
supplies and personal property owned by Company which are located at
the Shared Facility. Provider shall provide all general janitorial
service for such space which is part of the Shared Facilities to the
extent provided at the Effective Date and shall provide replacement of
bulbs in the building standard ceiling light fixtures. Provider shall
provide heated and cooled air conditioning ("HVAC") in season and other
utilities for all space which is part of the Shared Facilities to the
extent provided at the Effective Date. Should Company's use of the
Shared Facility require supplemental air conditioning or heating units
in such space, the reasonable cost of such supplemental HVAC equipment
shall be paid by Company.
(ii) Hazardous Materials. Any party utilizing or possessing any
hazardous materials as defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42
U.S.C.A. 9601 et seq.) and the regulations adopted pursuant thereto or
any other federal, state or local environmental law, ordinance, rule or
regulation at a Shared Facility shall be responsible for its use,
treatment, handling, storage, disposal and any environmental
investigation and remediation associated with the hazardous material,
and shall indemnify and hold harmless the other party against all
claims, loss, liabilities, damage, cost and expenses (including
reasonable attorney fees and court costs) arising out of or in any way
connected with such hazardous materials. To the extent any hazardous
materials are released by a party it must be cleaned up by such party
which shall be responsible therefore. This clause shall survive
termination of this Agreement.
(iii) Permitted Use, Adverse Use and Prohibited Use. The Shared
Facilities are to be used and occupied by Company solely for the
purposes specified on Schedules 1 and 2 (the "Sole Permitted Use").
Company shall not suffer or permit the Shared Facilities or any part
thereof to be used in any manner, or anything to be done therein, or
suffer or permit anything to be brought into or kept in the Shared
Facilities which would in any way (A) violate any law or requirement of
public authorities, (B) cause structural injury to the building or any
part thereof, (C) interfere with the normal operation of the HVAC,
plumbing, or other mechanical or electrical systems of the building or
the elevators installed therein, (D) constitute a public or private
nuisance, (E) alter the appearance of the exterior of the building or
any portion of the interior thereof other than the Shared Facilities,
or (F) violate the rules and regulations for the Shared Facilities as
provided for in the subsection below entitled "Rules."
(iv) Repairs and Re-entry. Provider will, at its sole cost and
expense, maintain and keep the common and parking areas, and the HVAC
System, plumbing and other mechanical and electrical systems used by
the Company for the Shared Facilities and any Provider alterations and
additions thereto in sound condition and good repair, ordinary wear and
tear excepted; provided Company shall reimburse Provider for the
reasonable cost to repair or replace any damage or injury done to such
areas or systems by Company or Company's agents, employees or invitees.
Company will not commit or allow any waste or damage to be committed on
any portion of the Shared Facilities. If Company vacates any Shared
Facility at any time during the term of this Agreement, or upon the
termination of the Agreement, Company shall deliver up the Shared
Facilities to Provider in as good condition as of the date of first
possession by Company, ordinary wear and tear excepted. If Company
vacates any Shared Facility for any reason other than those set forth
in paragraph 3(f), Provider shall have the right to re-enter and resume
possession of that space within the Shared Facility which had been
occupied by Company.
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(v) Assignment or Subletting. The Company shall have no right to
assign its rights to or sublease the Shared Facilities without the
prior written consent of the Provider.
(vi) Alterations. The Company shall make no alteration or addition to
the Shared Facilities without the prior written consent of the
Provider, which shall not be unreasonably withheld, except for
installation of moveable trade fixtures which shall be removed prior to
termination and any damage to the premises resulting from such removal
repaired prior to termination.
(vii) Legal Use--Nuisance. Company will not occupy or use, nor permit
any portion of the Shared Facilities to be occupied or used, for any
purpose which is unlawful, disreputable, or hazardous. Company will
conduct its business, and control its agents, employees, and invitees
in such a manner as not to create any nuisance.
(viii) Laws and Regulations. Subject to Provider's obligation to
provide general janitorial and other services for the Shared
Facilities, Company, at Company's sole expense, will maintain the space
it occupies within the Shared Facilities in a clean and healthful
condition and Provider and Company shall comply with all laws,
ordinance, orders, rules, regulations, directions and requirements, now
in force or which may hereafter be in force, of any governmental
authority or agency having jurisdiction over the parties and the
subject matter of the Agreement (including regulatory authorities)
which shall impose a duty on Provider or Company with respect to the
Shared Facilities.
(ix) Acceptance of Shared Facilities. By moving into the Shared
Facilities or taking possession thereof, Company accepts the Shared
Facilities as suitable for the purposes for which the same are to be
used and accepts the premises and each and every appurtenance thereof.
(x) Rules. Company will comply and cause its agents, employees and
invitees to comply fully with such rules and regulations as the
Provider may reasonably promulgate from time to time for the Shared
Facilities. The rules and regulations shall apply generally to all in
the building or premises in which the Shared Facilities are located.
(xi) Entry for Repairs and Inspection. Except as may be otherwise
provided, Company will permit Provider and its agents and
representatives the right to enter into and upon any and all parts of
the Shared Facilities, at all reasonable hours (or, in any emergency,
at any hour) to inspect same or clean or make repairs as Provider may
deem necessary.
(xii) Subrogation: Liability and Indemnity: Insurance.
(A) Anything in the Agreement to the contrary notwithstanding, in respect
to the Shared Facilities, each party hereto hereby releases and waives all
claims, rights of recovery and causes of action that either such party or
any party claiming by, through or under such party may now or hereafter
have by subrogation or otherwise against the other party or any of the
other party's directors, officers, employees or agents for (I) any loss or
damage that may occur to the Shared Facilities, the building containing the
Shared Facilities and the common areas related thereto, or any of the
contents of any of the foregoing by reason of fire, act of God, the
elements, or any other cause that are insured against under the terms of
standard all risk property insurance policies, or (II) any other loss
covered by insurance of the respective parties provided, however, that this
waiver shall be ineffective against any insurer of Provider or Company to
the extent that such waiver is prohibited by the laws or applicable
insurance regulations. Provider shall not be liable to Company for any
inconvenience or loss to Company in connection with any of the repair,
maintenance, damage, destruction, restoration or replacement referred to
herein.
(B) Except for the claims, rights of recovery and causes of action that a
party has released and waived pursuant to the preceding paragraph hereof,
and in addition to any other indemnification obligations of a party
contained in the Agreement, each party shall indemnify, defend and hold
harmless the other party and the other party's agents, directors, officers,
employees, invitees and contractors, from all claims, losses, costs,
damages or expenses (including, but not limited to, reasonable attorneys'
fees) resulting or arising from any and all injuries or death of any
persons or damage to any property caused by any act, omission, or
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neglect of such party or such party's directors, officers, employees,
agents, invitees or guests. If any proceeding is filed against a party or
any related indemnified party, the other party agrees to defend such party
or indemnified party in such proceeding at the party's sole cost by legal
counsel reasonably satisfactory to the party being so defended. The above
indemnification provisions shall survive the termination of the Agreement.
(C) Each party shall procure (from nationally recognized insurance
companies or through self insurance) and maintain throughout the Agreement
term a policy or policies of insurance, at its sole cost and expense, for
general liability claims for injury or death of a person or persons,
occasioned by or arising out of or in connection with the use or occupancy
of the shared premises, the building in which the Shared Facilities is
located and the common and parking areas relating thereto, as applicable,
the limits of such policy or policies to be in an amount not less than
$1,000,000 with respect to injuries to or death of any one person and in an
amount of not less than $3,000,000 with respect to any one accident or
disaster (subject to standard deductions on policies carried by the
parties). Company shall also procure (from nationally recognized insurance
companies or through self insurance) and maintain fire and casualty
insurance covering all equipment, fixtures and personal property of Company
located on the Shared Facilities for the full replacement cost thereof.
Provider shall procure (from nationally recognized insurance companies or
through self insurance) and maintain fire and casualty insurance covering
the building, all equipment, fixtures and personal property of Provider
located in the building for the full replacement cost thereof. Each policy
shall provide that it will not be canceled except after not less than 30
days notice. Each party shall promptly deliver to the other party
certificates of insurance or statements of self insurance evidencing the
existence of all insurance or self insurance that is required to be
maintained hereunder. If either party either receives from or provides to
its insurance carrier a notice of termination, that party shall notify the
other party of such notice of termination.
(xiii) Third Party Lease of Shared Facilities. To the extent that any
of the Shared Facilities listed on Schedules 1 and 2 are subject to a
lease from a third party, the parties hereto agree to comply with the
terms of such lease.
4. Services. The Initial Services to be provided under the Agreement are
as specified on the Shared Services Schedules, attached hereto. All Other
Services to be provided under the Agreement shall be pursuant to Service
Orders duly signed by both parties thereto. All of the Services shall be
provided by the Provider's employees and staff and shall not be provided by
any contractor or other party without the prior written consent of the
Company. During the performance of Services hereunder, the Provider shall
be an independent contractor and not an agent of the Company. Provider
shall supervise the performance of the Services and shall be solely
responsible and have control over the means, methods, techniques, sequences
and procedures by which the Services are performed, subject to compliance
with the Agreement. Employees and agents of the Provider shall not be
deemed as employees or agents of the Company for any purpose. Nothing
contained in the Agreement shall be construed to be inconsistent with such
status. Services shall be furnished pursuant to the general terms and
conditions of the Agreement, the terms and conditions of the Service
Orders, as applicable, and the following special terms and conditions which
will apply only to the Services:
a. Term. Except as specifically provided for any individual Service in
the Shared Services Schedules or in any Service Order, all Services shall
be for a period of one year from the Effective Date and year to year
thereafter, unless terminated by either party upon not less than six months
prior written notice prior to the end of the initial one year term or any
yearly extension thereafter.
b. Quality of Service. It is acknowledged that both parties operate
public utility businesses and neither party is generally engaged in the
business of providing service for others, except to its affiliates.
Provider shall perform Services with the same care, skill and diligence
that it provides similar services as part of its public utility business,
provided the Services being provided shall in any event be not less than
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the minimum standards for such services in the industry. If Provider fails
to meet such standards, Provider shall, without additional compensation or
cost to the Company, correct or make good any deficiencies.
c. Information Provided. Provider, in providing the Services hereunder,
may rely on information made available by the Company as being accurate
without independent investigation or verification.
d. Tangible Personal Property. If the Provider provides tangible personal
property as part of the Services and the Company reasonably determines that
such property is defective in quality or workmanship, upon written request,
Provider shall replace such defective property at its sole cost and expense
and upon such replacement, Provider shall have no further obligation to the
Company in respect to such defective property.
e. Performance. Provider shall supply all labor, equipment, materials and
other items necessary to fully and completely perform the Services
hereunder except as otherwise provided in the Shared Services Schedules.
f. Cost. The charge for the Services being provided shall be as specified
in the Shared Services Schedules or the Service Orders, as applicable plus
applicable sales and/or use tax. The charge may be based on a lump sum,
periodic payment or unit price with or without guaranteed minimum price,
exchange of equivalent Services, or such other method or methods as the
parties may agree, as so specified in the Shared Services Schedules or the
Service Orders, as applicable. Notwithstanding the charges specified in the
Shared Services Schedules or the Service Orders, the parties shall meet
prior to the end of the sixth month in each one year period to determine
whether the charges shall be adjusted for the next six months in the
applicable one year period. The parties shall act in good faith to
determine whether the charges should be adjusted, but are under no
obligation to adjust the prices.
g. Quarterly Invoice. Provider shall submit a detailed invoice quarterly
not less than ten (10) days after the end of each quarter for all payments
due for Services rendered during the prior quarter. Company shall pay the
invoice within ten (10) days of receipt, except for such items as Company
shall reasonably dispute and reject and so notifies Provider, including the
reason for such rejection. If the parties cannot agree and settle the
disputed item within sixty (60) days after such notification, the matter
will be determined under the provisions of Section 10, Dispute Resolution.
h. Licenses and Permits; Compliance with Applicable Laws. Provider shall
possess any and all permits or licenses required to perform the work
required under the Agreement. Provider shall comply with federal, state and
local statutes, regulations, ordinances, and codes applicable to Provider's
performance of the work Provider performs under the Agreement. Provider
shall also comply with the requirements of any authority having
jurisdiction over such work which may be identified in the course of
performance under the Agreement.
i. Patents and Copyrights. Unless otherwise agreed, any and all patents
or copyrights owned or licensed to Provider and utilized by Provider in the
performance of the Agreement shall remain the sole property of Provider and
the use of the same shall be strictly limited to the completion of work
under the Agreement.
j. Intellectual Property. Unless otherwise agreed in writing, all
intellectual property developed, owned or possessed by Provider at the time
the Agreement or a Service Order is executed, including any modification or
improvement to existing intellectual property of Provider, which is used in
the completion of provider's work under the Agreement shall remain the sole
property of Provider. Such property, if
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delivered to Company, shall be clearly marked as the sole property of
Provider and Company warrants against the unauthorized or unlawful use of
said property. This provision shall not apply to intellectual property
specifically developed by Provider as a deliverable in fulfillment of the
Services under the Agreement which is otherwise paid for by Company.
k. Subrogation, Liability and Indemnity; Insurance (i) In respect to the
Services, each party hereto hereby releases and waives all claims, rights
of recovery and causes of action that either such party or any party
claiming by, through or under such party may now or hereafter have by
subrogation or otherwise against the other party or any of the other
party's directors, officers, employees or agents for any loss or damage
that may occur as a result of the Services.
(ii) Provider shall defend, indemnify, and hold the Company, its
directors, officers, employees and agents, harmless from and against all
claims asserted by a third party (or parties) and related damages, losses
and expenses, including reasonable attorneys' fees, arising out of or
resulting from the Services performed or obligated to be performed by
Provider hereunder, provided that any such claim, damage, loss or expense
is caused by the acts, omissions or negligence of Provider, anyone directly
or indirectly employed by Provider, or anyone for whose acts Provider may
be liable. If any proceeding is filed against Company, for which
indemnification is called for hereunder, Provider agrees to defend Company
at Provider's sole cost by legal counsel reasonably satisfactory to
Company. The above indemnification provisions shall survive the termination
of Agreement.
(iii) Provider shall purchase and maintain general liability, automobile
liability and workers compensation insurance, (either through nationally
recognized insurance companies or through self insurance) for such risks
and perils and in such form and in such amounts as is consistent with
prudent utility practice for similar companies insuring against such claims
and losses which may arise out of or result from Provider's performance or
obligation to perform Services under the Agreement.
l. Separate Contracts. The Company may let other contracts in connection
with the Services. Provider shall cooperate, and schedule and coordinate
performance of the Services, with the services of any separate consultants
or contractors so as not to unduly delay or interfere with their services,
or with timely completion of the work.
5. Term and Termination.
a. Term. The Agreement shall be effective from the date first above
written and shall continue for a period of fifteen (15) years and from year
to year thereafter unless terminated by either party upon not less than
ninety (90) days prior notice prior to the end of the initial term or any
yearly extension thereafter. Notwithstanding the above, in the event the
Shareholder Agreement, as defined in the Transaction Agreement, shall
terminate, the Agreement may be terminated by either party upon not less
than ninety (90) days prior notice to the other party.
b. Termination by Force Majeure. In the event there is a condition of
force majeure that prevents the Provider from providing any of the Services
for a continuous period of ninety (90) days, the Company shall have the
right to terminate such Services under the Agreement upon notice delivered
to the Provider.
c. Delivery of Data. Upon termination of any Service, Provider shall
promptly deliver to the Company all reports, plans, data, estimates,
summaries and other materials or information, whether complete or in
process, delivered to or developed by the Provider in the performance of
the Services.
6. Limit on Damages. In respect to any claim or cause of action between
the parties related directly or indirectly to this Agreement, damages shall
be limited to actual and direct damages incurred and neither party shall be
liable for any consequential, special, exemplary, punitive, incidental or
indirect damages, including without limitation, loss of profit or goodwill.
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7. Oral Statements. The written terms and provisions of the Agreement
shall supersede all prior oral statements of representatives of the
parties, and such statements shall not be incorporated into the Agreement.
8. Binding Effect and Assignment. The terms and conditions of the
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties hereto. This is an
agreement for services and shared facilities and neither party shall
assign, sublet, transfer, subcontract or contract any of its rights or
obligations, or assign any payments to be made to it under the Agreement
without the other party's prior written consent, provided however the
Provider of a Shared Facility may enter into such contracts as it deems
necessary in the ordinary course of business to operate and maintain the
Shared Facility. Any attempted violation of this provision shall constitute
a breach of the Agreement and shall render such action immediately void as
of the date of the attempted or actual violation.
9. Confidentiality. Both parties acknowledge that their performance of
the Agreement may involve access to trade secrets, pending patents,
proprietary or business information or practices or other matters which are
proprietary and confidential in nature to Company, Provider, or their
affiliates or customers. Accordingly, except as reasonably required in the
performance of the Agreement, neither party shall disclose to third parties
any such information belonging to the other party, nor use such information
in any way, directly or indirectly. However, neither party shall be
restricted in any way from releasing information in response to a subpoena,
court order, or legal process (unless the relationship of WRI, ONEOK or
NewCorp is subject to a legally recognized privilege) but shall promptly
notify the other party of the demand for information before responding to
such demand.
10. Dispute Resolution. No party to the Agreement shall be entitled to
take legal action with respect to any dispute relating hereto until it has
complied in good faith with the following alternative dispute resolution
procedures. This Section shall not apply to the extent it is deemed
necessary to take legal action immediately to preserve a party's adequate
remedy. However, nothing shall prevent any party from resorting to the
judicial proceedings mentioned in this Section if interim relief from the
court is necessary to prevent serious and irreparable injury to one of the
parties.
a. Negotiation. The parties shall attempt promptly and in good faith to
resolve any dispute arising out of or relating to the Agreement, through
negotiations between representatives who have authority to settle the
controversy. Any party may give the other party notice of any such dispute
not resolved in the normal course of business. Within 20 days after
delivery of the notice, representatives of both parties shall meet at a
mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary, to exchange information and to attempt to
resolve the dispute, until the parties conclude that the dispute cannot be
resolved through unassisted negotiation. Negotiations extending sixty days
after notice shall be deemed at an impasse, unless otherwise agreed by the
parties.
If a negotiator intends to be accompanied at a meeting by an attorney, the
other negotiator(s) shall be given at least three working days' notice of such
intention and may also be accompanied by an attorney.
b. ADR Procedure.
(1) If a dispute with more than $20,000 at issue has not been resolved
within 60 days of the disputing party's notice, a party wishing resolution
of the dispute ("Claimant") shall initiate assisted Alternative Dispute
Resolution (ADR) proceedings as described in this Section. Once the
Claimant has notified the other ("Respondent") of a desire to initiate ADR
proceedings, the proceedings shall be governed as follows: By mutual
agreement, the parties shall select the ADR method they wish to use. That
ADR method may include arbitration, mediation, mini-trial, or any other
method which best suits the circumstances of the dispute. The parties shall
agree in writing to the chosen ADR method and the procedural rules to be
followed within 30 days after receipt of notice of intent to initiate ADR
proceedings. To the extent the parties are unable to agree on procedural
rules in whole or in part, the current Center for Public Resources
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(CPR) Model Procedure for Mediation of Business Disputes, CPR Model Mini-
trial Procedure, or CPR Commercial Arbitration Rules--whichever applies to
the chosen ADR method--shall control, to the extent such rules are
consistent with the provisions of this Section. If the parties are unable
to agree on an ADR method, the method shall be arbitration.
(2) The parties shall select a single neutral third party ("Neutral") to
preside over the ADR proceedings, by the following procedure: Within 15
days after an ADR method is established, the Claimant shall submit a list
of 5 acceptable Neutrals to the Respondent. Each Neutral listed shall be
sufficiently qualified, including demonstrated neutrality, experience and
competence regarding the subject matter of the dispute. A Neutral shall be
deemed to have adequate experience if an attorney or former judge. None of
the Neutrals may be present or former employees, attorneys, or agents of
either party. The list shall supply information about each Neutral,
including address, and relevant background and experience (including
education, employment history and prior ADR assignments). Within 15 days
after receiving the Claimant's list of Neutrals, the Respondent shall
select one Neutral from the list, if at least one individual on the list is
acceptable to the Respondent. If none on the list are acceptable to the
Respondent, the Respondent shall submit a list of 5 Neutrals, together with
the above background information, to the Claimant. Each of the Neutrals
shall meet the conditions stated above regarding the Claimant's Neutrals.
Within 15 days after receiving the Respondent's list of Neutrals, the
Claimant shall select one Neutral, if at least one individual on the list
is acceptable to the Claimant. If none on the list are acceptable to the
Claimant, then the parties shall request assistance from the Center for
Public Resources, Inc., to select a Neutral.
(3) The ADR proceeding shall take place within 30 days after the Neutral
has been selected. The Neutral shall issue a written decision within 30
days after the ADR proceeding is complete. Each party shall be responsible
for an equal share of the costs of the ADR proceeding. The parties agree
that any applicable statute of limitations shall be tolled during the
pendency of the ADR proceedings, and no legal action may be brought in
connection with the Agreement during the pendency of an ADR proceeding.
(4) The Neutral's written decision shall become final and binding on the
parties, unless a party objects in writing within 10 days of receipt of the
decision. The objecting party may then file a lawsuit, application or
complaint in any court or regulatory agency having jurisdiction. The
Neutral's written decision shall be admissible in the objecting party's
lawsuit or regulatory proceeding.
(5) Subject to subsection (4) above, all negotiations and information
obtained pursuant to ADR proceedings hereunder are confidential and shall
be treated as compromise and settlement negotiations for purposes of the
Federal and state Rules of Evidence.
11. Third Party Rights. Nothing in the Agreement shall be construed to
give any rights or benefits to anyone other than the parties hereto.
12. Headings. The headings herein are included for convenience of
reference only and shall be disregarded in the construction or
interpretation hereof.
13. Waiver. No waiver by either party of any breach or non-observance of
any of the covenants, terms or provisions in the Agreement on the part of
any other party to be performed or observed shall be or be construed to be
a general waiver or waiver of a continuing breach or non-observance. Any
such waiver shall relate only to the particular breach or non-observance in
respect of which it is made.
14. Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or registered mail, postage prepaid, and
shall be deemed to be given, dated and received when so delivered
personally, telegraphed or telecopied, if mailed, five (5) business days
after the date of mailing to the following address or telecopy number, or
to such other address or addresses as such person may subsequently
designate by notice given hereunder.
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If to WRI:
Western Resources, Inc.
818 Kansas Avenue
Topeka, Kansas 66612
ATTN: Steven L. Kitchen
Fax: (913) 575-1563
with a copy to:
Western Resources, Inc.
818 Kansas Avenue
Topeka, Kansas 66612
ATTN: General Counsel
Fax: (913) 575-1788
If to ONEOK and NewCorp:
ONEOK Inc.
100 W. Fifth Street, Suite 1800
Tulsa, OK 74103
ATTN: Eugene N. Dubay
Fax: (918) 588-7960
with a copy to:
ONEOK Inc.
100 W. Fifth Street, Suite 1800
Tulsa, OK 74103
ATTN: General Counsel
Fax: (918) 588-7960
15. Governing Law. The Agreement shall be governed by the laws of the
State of Kansas without giving effect to conflict of laws principles
thereof.
16. Entire Agreement. The Agreement represents the entire agreement
between the parties, and may be amended only by written agreement of the
parties.
17. Condition Precedent. The Agreement is effective only upon the Closing
under and as defined in the Transaction Agreement.
18. Counterparts. The Agreement may be executed in two or more
counterparts each of which shall be considered an original and such
counterparts shall together constitute one agreement.
19. Amendments. No amendment, modification or alteration of the terms and
conditions of the Agreement (including any of the Service Orders) shall be
binding unless the same shall be in writing and duly executed by the
parties hereto or thereto.
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IN WITNESS WHEREOF, the parties have executed this Shared Services Agreement
the day and year first above written.
Western Resources, Inc.
By: _________________________________
NAME
TITLE
ONEOK Inc.
By: _________________________________
NAME
TITLE
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ONEOK INC.
OFFICERS' CERTIFICATE
The undersigned, Larry W. Brummet, Chairman of the Board and Chief Executive
Officer of ONEOK Inc. a Delaware corporation ("ONEOK"), and Jerry D. Neal,
Vice President and Chief Financial Officer of ONEOK, pursuant to Section
7.2(a) of the Amended and Restated Agreement dated as of May 19, 1997 among
Western Resources, Inc. ("WRI"), ONEOK and WAI, Inc. (the "Agreement"), do
hereby certify on behalf of ONEOK as follows:
1. As to the matters herein set forth, we either have personal knowledge or
have obtained information from officers or employees of ONEOK in whom we have
confidence and whose duties require them to have personal knowledge thereof,
and we make this certificate pursuant to Section 7.2 (a) of the Agreement with
the intent that this certificate be relied upon by WRI as a basis for
effecting the alliance of WRI with ONEOK upon the terms and conditions
contained in the Agreement and for consummating the other transactions
contemplated thereby. Capitalized terms not otherwise defined in this
Certificate shall have the meanings given to such terms in the Agreement.
2. Except as disclosed on Exhibit A, attached hereto, to the best of our
knowledge:
(a) ONEOK has performed in all material respects its agreements and
covenants contained in or contemplated by the Agreement required to be
performed at or prior to the Effective Time.
(b) The representations and warranties of ONEOK set forth in the
Agreement are in all material respects true and correct at, or have been
complied with in all material respects by, the Effective Time as if made at
and as of such time except where the failure to be so true and correct
(without giving effect to the individual materiality qualifications and
thresholds otherwise contained in Section 4.1 of the Agreement) could not
reasonably be expected to have a Material Adverse Effect on WRI or as
otherwise contemplated by the Agreement.
IN WITNESS WHEREOF, the undersigned have signed this instrument on behalf of
WRI this 26th day of November, 1997.
ONEOK INC.
By: _________________________________
Larry W. Brummet
Chairman of the Board and
Chief Executive Officer
By: _________________________________
Jerry D. Neal
Vice President and
Chief Financial Officer
G-13
<PAGE>
SCHEDULE 3.1
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Call Center Back-up
Description of Work to be Performed:
WR at its Wichita Call Center (Wichita, Kansas) will provide back-up to
OKE's Topeka Call Center (Topeka, Kansas), in emergency situations defined
as major distribution system outages or inoperative call center.
Beginning Date:Transaction Closing
Term:1 Year from date of closing
Contract Price: $500 per hour of back-up service provided in excess of 72
aggregate total hours of back-up service annually.
G-14
<PAGE>
SCHEDULE 3.2
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: ONEOK Inc. ("OKE")
COMPANY: Western Resources, Inc. ("WR")
Project Name: Call Center Back-up
Description of Work to be Performed:
OKE at its Topeka Call Center (Topeka, Kansas) will provide back-up to WR's
Wichita Call Center (Wichita, Kansas), in emergency situations defined as
major distribution system outages or inoperative call center.
Beginning Date:
Transaction Closing
Term: 1 Year from date of closing
Contract Price:
$500 per hour of back-up service provided in excess of 72
aggregate total hours of back-up service annually.
G-15
<PAGE>
SCHEDULE 3.3
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: ONEOK Inc. ("OKE")
COMPANY: Western Resources, Inc. ("WR")
Project Name: Claims Services
Description of Work to be Performed:
OKE will provide WR claims related services as follows.
1) During normal business hours, when WR requests OKE's assistance on an
incident involving WR, OKE will send its own investigator, if available, to
initiate and/or assist with the initial investigation. (If OKE determines a
OKE investigator is not available, OKE shall have no obligation.) As soon
as practical, WR shall assume responsibility for the investigation and case
handling.
2) Each year, a duty schedule including both WR and OKE Claims personnel
will be developed jointly and distributed to all operating offices and
others as may be appropriate. Information included will be days covered,
name of investigator on duty, office, home, mobile and pager numbers. After
normal hours, calls will be received by the "on duty" person. If an
immediate response is needed the "on-duty" person will respond if it is
geographically reasonable or contact the nearest investigator (first
preference would be an investigator from the Company involved in the
incident) to make the response. If in a WR incident WR did not make the
initial response, then as soon as practical, WR will send an investigator
to assume responsibility for the investigation and case handling.
Beginning Date:
Transaction Closing
Term: 1 Year from date of closing
Contract Price:
None
G-16
<PAGE>
SCHEDULE 3.4
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Claims Services
Description of Work to be Performed:
WR will provide OKE claims related services as follows.
1) During normal business hours, when OKE requests WR's assistance on an
incident involving OKE, WR will send its own investigator, if available, to
initiate and/or assist with the initial investigation. (If WR determines a
WR investigator is not available, WR shall have no obligation.) As soon as
practical, OKE shall assume responsibility for the investigation and case
handling.
2) Each year, a duty schedule including both WR and OKE Claims personnel
will be developed jointly and distributed to all operating offices and
others as may be appropriate. Information included will be days covered,
name of investigator on duty, office, home, mobile and pager numbers. After
normal hours, calls will be received by the "on duty" person. If an
immediate response is needed the "on-duty" person will respond if it is
geographically reasonable or contact the nearest investigator (first
preference would be an investigator from the Company involved in the
incident) to make the response. If in an OKE incident OKE did not make the
initial response, then as soon as practical, OKE will send an investigator
to assume responsibility for the investigation and case handling.
Beginning Date:
Transaction Closing
Term: 1 Year from date of closing
Contract Price:
None
G-17
<PAGE>
SCHEDULE 3.5
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: ONEOK Inc. ("OKE")
COMPANY: Western Resources, Inc. ("WR")
Project Name: Combination Service, CSS Service Orders
Description of Work to be Performed:
<TABLE>
<S> <C> <C>
Mission Emporia Parsons
Pittsburg Ft. Scott Wichita
Hiawatha Atchison Hutchinson
Newton Wellington Humbolt
Kinsley Topeka
Manhattan Junction City
Marysville El Dorado
Lawrence Arkansas City
Leavenworth Salina
Abilene
</TABLE>
It is the intention for the CSS service order work to be worked as
combination orders with one person performing operations with both the
electric and the gas meters. In the combination divisions listed above,
this work will be done by OKE service persons except in those towns within
such divisions normally worked by WR agents. The orders will be traced in
the CSS system by order type. The following charges will be utilized to
determine the costs to be billed monthly to each company.
Beginning Date: Transaction Closing
Term: 1 Year from date of closing
Contract Price:
<TABLE>
<CAPTION>
Special Conditions: CSS ORDER CODE $/ORDER
<S> <C> <C>
SOAC 4.15
SOHB 4.15
SOIS 4.15
SOMO* 4.15
SONP 4.15
SORD 2.07
SORM 4.15
SOTF 4.15
SOTN 4.15
SUCC 2.07
</TABLE>
- --------
* Positive diversion investigation and installing tamper resistant locks are
currently reported on SOMO, but will be charged at $21.63 due to time
involved.
G-18
<PAGE>
DESCRIPTION OF CSS ORDER CODES
<TABLE>
<C> <S>
SOAC Meter change (for test or replace non registering meter, etc.)
SOHB High bill investigation
SOIS Set new meter or reset removed meter
SOMO* Maintenance Orders (odorant checks, odorometer test, maintenance of
meter loop, negative diversion investigation, non-registering meter
investigations, etc.)
SONP Collections for non-pay
SORD Reread
SORM Meter remove
SOTF Turn off
SOTN Turn on (Non pay or normal)
SUCC Succession
</TABLE>
G-19
<PAGE>
SCHEDULE 3.6
TO SHARED SERVICES AGREEMENT
DATED________________________
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Combination Service, CSS Service Orders
Description of Work to be Performed:
<TABLE>
<CAPTION>
Parsons Humbolt
<S> <C>
Emporia Pittsburg
Ft. Scott Atchison
Newton Hutchinson
Lyons Kinsley
Great Bend Topeka
Manhattan Junction City
Marysville El Dorado
Lawrence Arkansas City
Salina McPherson
Abilene
</TABLE>
It is the intention for the CSS service order work to be worked as
combination orders with one person performing operations with both the
electric and the gas meters. In the combination divisions listed above,
this work will be done by WR agents except in those towns within such
divisions normally worked by OKE service persons. The orders will be traced
in the CSS system by order type. The following charges will be utilized to
determine the costs to be billed monthly to each company.
<TABLE>
<S> <C>
Beginning Date: Transaction Closing
Term: 1 Year from date of closing
</TABLE>
Contract Price:
G-20
<PAGE>
<TABLE>
<S> <C> <C>
Special Notations: CSS ORDER CODE $/ORDER
SOAC 56.00
SODC 28.54
SOHB 28.54
SOIS 56.00
SOMO** 28.54
SONP 28.54
SORD 25.11
SORM 28.54
SOTF 28.54
SOTN 38.84
SUCC 25.11
TOGS 56.00
</TABLE>
- --------
** Positive diversion investigation and installing tamper resistant locks are
currently reported on SOMO, but will be charged at $96.78 due to time in-
volved. Agents will continue ordorant checks in the following divisions and
a monthly charge as set forth below, in lieu of charges for individual or-
ders, will be issued.
<TABLE>
<S> <C> <C> <C>
Atchinson $ 225.99 Hutchinson $2,109.24
Emporia 426.87 Hutchinson (Great Bend) 200.88
Topeka 878.85 Newton 326.43
Manhattan 1,807.92 Humboldt 1,632.15
Salina 1,205.28 Parsons 100.44
</TABLE>
DESCRIPTION OF CSS ORDER CODES
<TABLE>
<C> <S>
SOAC Meter change (for test or replace non registering meter, etc.)
SODC Dial change on gas meter
SOHB High bill investigation
SOIS Set new meter or reset removed meter
SOMO* Maintenance Orders (odorant checks, odorometer test, maintenance of
meter loop,
negative diversion investigation, non-registering meter investigations,
etc.)
SONP Collections for non-pay
SORD Reread
SORM Meter remove
SOTF Turn off
SOTN Turn on (Non pay or normal)
SUCC Succession
TOGS Gas Leak Investigation
</TABLE>
G-21
<PAGE>
SCHEDULE 3.7
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: ONEOK Inc. ("OKE")
COMPANY: Western Resources, Inc. ("WR")
Project Name: Provision of Customer Service by OKE
Description of Work to be Performed:
OKE will provide customer service for all WR electric customers who request
such services in one of OKE's Business Offices listed below that are
staffed exclusively by OKE's employees.
<TABLE>
<C> <S> <C>
HutchinsonPittsburg
El DoradoGreat Bend
Kansas CityArkansas City
Beginning Date: Transaction Closing
Term: 1Year from date of closing, or when conversion of
gas customers to OKE's CSS is complete, whichever
occurs first. OKE shall give notice 30 days in
advance of such conversion.
Contract Price: None
</TABLE>
G-22
<PAGE>
SCHEDULE 3.8
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Provision of Customer Service by WR
Description of Work to be Performed:
WR will provide customer service for all OKE gas customers who request such
services in one of WR's Business Offices listed below that are staffed
exclusively by WR's employees.
Salina Junction City
Manhattan Emporia
Leavenworth Atchison
Hiawatha Ft. Scott
Independence Newton
Lawrence Olathe
Beginning Date:
Transaction Closing
Term: 1 Year from date of closing, or when conversion of gas customers
to OKE's CSS is complete, whichever occurs first. OKE shall give
notice 30 days in advance of such conversion.
Contract Price:
None
G-23
<PAGE>
SCHEDULE 3.9
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Provision of Customer Service by WR
Description of Work to be Performed:
WR will provide customer service for all OKE gas customers who request such
services in one of WR's Business Offices listed below that are staffed
exclusively by WR's employees.
<TABLE>
<S> <C>
Salina Junction City
Manhattan Emporia
Leavenworth Atchison
Hiawatha Ft. Scott
Independence Newton
Lawrence Olathe
</TABLE>
Beginning Date: Transaction Closing
Term: 1 Year from date of closing, or when conversion of gas
customers to OKE's CSS is complete, whichever occurs first. OKE
shall give notice 30 days in advance of such conversion.
Contract Price:None
G-24
<PAGE>
SCHEDULE 3.10
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Service Dispatch
Description of Work to be Performed:
WR will provide dispatching services to OKE in the following service areas:
<TABLE>
<S> <C>
Atchison
Ft. Scott Arkansas City
Leavenworth Abilene
Emporia
</TABLE>
Transaction Closing
Beginning Date:
Term:
1 Year from date of closing
Contract Price: $94,445/year
Special Notations:
The combination divisions of Hutchinson, Salina and Manhattan
will continue to provide backup dispatch services for each
other at no charge.
G-25
<PAGE>
SCHEDULE 3.11
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: ONEOK Inc. ("OKE")
COMPANY: Western Resources, Inc. ("WR")
Project Name: Meter Reading
Description of Work to be Performed:
All meters in the service areas listed below will be read or, combination
routes with one reader obtaining reads from both electric and gas meters
along the route. OKE will provide combination meter reading in the
following areas in Kansas:
<TABLE>
<S> <C>
Kansas City Great Bend/Pratt
Hutchinson/Lyons Wichita
</TABLE>
Transaction Closing
Beginning Date:
Term:
1 Year from date of closing
Contract Price: $0.40 / meter
G-26
<PAGE>
SCHEDULE 3.12
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Meter Reading
Description of Work to be Performed:
All meters in the service areas listed below will be read or combination
routes with one reader obtaining reads from both electric and gas meters
along the route. WR will provide combination meter reading in the following
areas in Kansas:
<TABLE>
<S> <C>
Emporia Topeka
Hiawatha/Atchison Leavenworth
Lawrence/Olathe Manhattan/Junction City/Marysville
Abilene Salina
Kinsley/Lyons area El Dorado
Arkansas City Independence
Parsons/Humboldt Pittsburg/Baxter Springs
Newton
</TABLE>
Transaction Closing
Beginning Date:
Term:
1 Year from date of closing
Contract Price: $0.40 / meter
G-27
<PAGE>
SCHEDULE 3.13
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: ONEOK Inc. ("OKE")
COMPANY: Western Resources, Inc. ("WR")
Project Name: Stores Operation
Description of Work to be Performed:
OKE will provide storeroom operation services to WR in the following
areas:
Emporia
Ft. Scott
Hiawatha
Beginning Date: Transaction Closing
Term:1 Year from date of closing
Contract Price: $73,935/year
G-28
<PAGE>
SCHEDULE 3.14
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Stores Operation
Description of Work to be Performed:
WR will provide storeroom operation services to OKE in the following areas:
<TABLE>
<S> <C> <C>
Parsons Pittsburg Junction City
Atchison Manhattan Kinsley
Marysville El Dorado
Arkansas City Leavenworth
Salina Abilene
</TABLE>
Transaction Closing
Beginning Date:
Term:
1 Year from date of closing
Contract Price: $164,832/year
G-29
<PAGE>
SCHEDULE 3.15
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: ONEOK Inc. ("OKE")
COMPANY: Western Resources, Inc. ("WR")
Project Name: Training
Description of Work to be Performed:
OKE will provide training necessary for gas operations to WR at Abilene,
Kansas, Kansas City, Kansas, Pittsburg, Kansas, Topeka, Kansas and Wichita,
Kansas, the training grounds, instruction equipment, and procedures for
training. OKE trainers will provide WR in training combination service
work, meter reading, HAZMAT, Fire Safety School, and ditching machine
operation. OKE will share with WR in the following areas: Video,
Production, Training Documentation, Training Verification, special projects
(development of programs, etc.), utilization of and software for scheduling
training, developmental training programs, P.C. training programs, training
programs facilitation, and training resources and referral.
Beginning Date: Transaction Closing
Term: 1 Year from date of closing
Contract Price:
None
G-30
<PAGE>
SCHEDULE 3.16
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Training
Description of Work to be Performed:
WR will provide training necessary for electric operations to OKE at the
Wichita Training Center (Wichita, Kansas) and the Topeka Service Center
(Topeka, Kansas) the training grounds, instruction, equipment and processes
for training. WR trainers will provide OKE training in combination service
work, CDL Licensing and appliance electricity. WR will share with OKE in
the following areas: Video, Production, Training Documentation, Training
Verification, special projects (development of programs, etc.), utilization
of and software for scheduling training, developmental training programs,
P.C. training programs, training programs facilitation, and training
resources and referral.
Beginning Date: Transaction Closing
Term: 1 Year from date of closing
Contract Price:
None
G-31
<PAGE>
SCHEDULE 3.17
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Bill Insertion Services
Description of Work to be Performed:
WR will provide bill insertion services for OKE's Kansas customers and
those Oklahoma gas customers formerly served by WR, in the same manner as
provided at closing, including mailing of bills, return envelopes, and
insertion materials. Postage and handling included.
Beginning Date: Transaction Closing
Gas only customers bills: 1 year from date of closing, or when
Term: conversion to OKE's CSS is complete, whichever occurs first.
OKE shall give notice 30 days in advance of such conversion.
Combination customer bills: 1 year from date of closing.
Contract Price:
$0.32 per gas-only customer bill
$0.16 per combination customer bill
G-32
<PAGE>
SCHEDULE 3.18
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Customer Service System (CSS) Processing Functions
Description of Work to be Performed:
WR will provide the CSS function for OKE's Kansas property and those
Oklahoma gas customers formerly served by WR, in the same manner as
provided at closing. WR will provide the necessary software licenses to
all WR application systems so that WR has the ability to process for
OKE to the extent permissible. WR will provide modifications to the WR
CSS to facilitate combination services and separation of gas
receivables. WR will provide the Accounts Payable and Treasury
functions necessary to issue gas customer refund checks requested from
the CSS system.
Beginning Date: Transaction Closing
Term: 1 Year from date of closing, or when conversion of gas
customers to OKE's CSS is complete, whichever occurs first.
Contract Price:
$0.19 per gas customer per month
$0.434 per separate gas customer refund check plus aggregate
dollar amount of refund checks net of voids, cancels and stop
payments.
Special Notations:
1) Development of interfaces between the OKE and WR systems required to
meet requirements of OKE will be at OKE's cost.
2) Anderson licensing is provided at no cost to the extent permissible.
G-33
<PAGE>
SCHEDULE 3.19
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Data Network Services
Description of Work to be Performed:
WR and OKE data networks will be connected via T1 between the Topeka and
Tulsa data centers.
Beginning Date: Transaction Closing
Term: 1 Year from date of closing
Contract Price: T1 connection: To be treated as OKE owned facility and paid by
OKE.
Network usage: See attached documents that detail circuit and
equipment costs for each types of facility.
Internet access: $150.00 per user per year. All users are
subject to appropriate approvals.
Both WR and OKE will be responsible for costs associated with
each of their owned facilities. In shared facilities, a
percentage based on the number of users served will be used to
prorate the costs.
Data networking costs for each facility include leased circuit
charges, equipment leases, and any maintenance agreements
required.
Labor to install and support the network will be provided by
each company for the facilities it owns.
Special Notations:
Only the following protocols (TCP/IP, IPX/SPX and SNA) will be
supported. All addressing schemes associated with the network
will be managed by WR.
G-34
<PAGE>
SCHEDULE 3.20
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: ONEOK Inc. ("OKE")
COMPANY: Western Resources, Inc. ("WR")
Project Name: Network Support
Description of Work to be Performed:
OKE will provide computer network support to WR for normal priority work,
emergency, and after hours support.
Beginning Date: Transaction Closing
Term: 1 Year from date of closing, or as long as OKE retains
allocated employees that currently perform this function
whichever occurs first. If terminated prior to the one year
date, OKE shall give notice 30 days prior to such termination.
Contract Price:
Normal priority work: $35/hr
Emergency/After hours support: $52/hr
G-35
<PAGE>
SCHEDULE 3.21
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Processing for the following systems: Leak Data System (LDS) /
Premise Data System (PDS)/Gas Purchase System (GPS)/Geographical
Information System (GIS)/Mainfram CADAM (CADAM)
Description of Work to be Performed:
WR will provide the LDS/PDS/GPS/GIS/CADAM processing in the same manner as
provided at closing including but not limited to database storage, batch
processing, annual gas purchase payment processing, and on-line system
access with the following exceptions:
1) Application maintenance to be performed at OKE's expense.
2) WR will provide necessary software licenses to provide such
processing.
Beginning Date: Transaction Closing
Term: 1 Year from date of closing.
Contract Price:
$1,833 per month LDS/PDS
$ 150 per month GPS
$3,200 per month CADAM
$ 53.50 per hour plus expenses for support of GIS System
G-36
<PAGE>
SCHEDULE 3.22
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Purchasing of Common Materials
Description of Work to be Performed:
WR will purchase common materials for storerooms shared by OKE and WR.
Beginning Date: Transaction Closing
Term: 1 Year from date of closing
Contract Price: Actual cost of materials.
Special Notations:
Common materials are those items in inventory which are
consumed by both WR and OKE issued by a shared storeroom. WR
will own the common material inventory and be responsible for
inventory levels. As disbursements of common materials occur,
the appropriate company will be expensed.
G-37
<PAGE>
SCHEDULE 3.23
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Remittance Processing Center Services
Description of Work to be Performed:
WR will provide remittance processing services for OKE's Kansas customers
and those Oklahoma gas customers formerly served by WR in the same manner
as provided at closing.
Beginning Date: Transaction Closing
Term: Gas only customers bills: 1 year from date of closing, or when
conversion to OKE's CSS is complete, whichever occurs first. OKE
shall give notice 30 days in advance of such conversion.
Combination customer bills: 1 year from date of closing.
Contract Price: $0.085 / customer payment applied to account plus any third
party processing fees associated with payment plans for gas
only or combination service customers.
G-38
<PAGE>
SCHEDULE 3.24
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Building Security System
Description of Work to be Performed:
WR will provide building security system and access services in the
following facilities: 501 Gage, Topeka, 1st and Quincy, Topeka, 300 South
Main, Wichita, and 1021 E. 26th, Wichita. These locations will be served by
the WR Facilities Management group. Such services do not include self
monitored or third party security monitoring services.
Beginning Date: Transaction Closing
Term: 1 Year from date of closing
Contract Price:
$5.00 annually per card provided
G-39
<PAGE>
SCHEDULE 3.25
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources, Inc. ("WR")
COMPANY: ONEOK Inc. ("OKE")
Project Name: Voice System Services
Description of Work to be Performed:
WR will provide voice system services for employees in facilities that
include OKE owned, OKE owned/shared, and WR owned/shared. These locations
are ones that contain circuits and telephone equipment that make up the WR
voice system. The following three types of service shall be covered in this
Schedule, labor related items, private network usage, and public network
access for local and long distance calling.
1) Labor related items are to include moves, adds, and changes (MACS) of
the telephone itself, and PBX maintenance or repair. OKE shall pay for all
repair parts, instruments and labor for work in OKE owned and OKE
owned/shared facilities. WR will be equally responsible in WR owned and WR
owned/shared facilities.
2) Network usage services include voice mail, network free dialing
between offices, access to long distance carrier at the point of service
which offers best rate, and access to exchanges in any city that has PBX in
the office.
3) Local and long distance services will be OKE's sole responsibility for
payment in OKE owned facilities. In OKE owned/shared facilities and in WR
owned/shared facilities, a percentage of the bill will be calculated based
on the rate of OKE employees to total employees in each location.
Beginning Date: Transaction Closing
Term: 1 Year from date of closing
Contract Price: T & M $35.00 per hour for normal priority work. Emergency
service to be billed at $52.00 per hour. Network usage $5.00
per month per phone.
G-40
<PAGE>
SCHEDULE 3.26
TO SHARED SERVICES AGREEMENT
DATED
BETWEEN
WESTERN RESOURCES, INC. AND ONEOK INC.
This Schedule is made a part of and is subject to all terms and conditions
set forth in that Shared Services Agreement (the "Agreement") to which this
Exhibit is attached by and between ONEOK Inc. and Western Resources, Inc. All
terms, conditions, specifications, and special instructions of the Agreement
applying to the Services (as defined therein) shall apply to this Schedule.
Supplemental Terms and Conditions, if any, shall be attached hereto as
Attachment 1 and when so attached will be deemed a part hereof and if appended
shall apply to Services under this Schedule only.
PROVIDER: Western Resources ("WR")
COMPANY: ONEOK, Inc. ("OKE")
Project Name: Trunked Radio System--RF Communications
Description of Work to be Performed:
WR will provide OKE use of the trunked radio system infrastructure. This
includes, but is not limited to: All tower sites, repeaters, zone and
controllers identified or associated with FCC call signs: [list call
signs]. OKE shall operate its own mobile units, which shall be licensed by
WR. OKE will have equitable rights and responsibilities with respect to the
system, subject to WR's ultimate control over the trunked radio system
facilities.
Beginning Date:Transaction Closing.
Term: Effective life of the system or termination of Agreement which
ever occurs first.
Attribution of Costs:
The use of the 900 MHZ system shall be provided by WR to OKE on
a non-profit, cost recovery basis, notwithstanding any other
provision of the Agreement. All costs for maintaining system
(leased circuits, leases, upgrades, repairs, interconnection,
and labor) are to be allocated between the parties based on the
rate of an individual party's subscriber units to the total of
both party's subscriber units.
Special Notations:
The parties acknowledge that WR retains ultimate control over
the trunked radio facilities. To this end, the parties
acknowledge that WR retains the right to terminate OKE's
operations without notice, or to take such other action as may
reasonably be required to ensure compliance with applicable law
or regulation concerning the shared facilities, any other
provision of the Shared Services Agreement notwithstanding.
Subject to this ultimate control, OKE retains input on
decisions regarding the general policies and practices of the
trunked radio system.
The obligation to comply with all laws and regulations and the
requirements of any authority with jurisdiction set forth in
Section 4. h. of the Agreement shall apply equally to Company
as well as Provider.
The provision for resort to interim relief from the court, set
out in Section 10 of the Agreement shall be deemed to apply as
well to other regulatory authority.
Section 15 of the Agreement shall be deemed to read: "The
Agreement shall be governed by the laws of the State of Kansas,
without giving effect to the conflict of laws principles
thereof, as well as by the federal Communications Act, and the
rules, regulations and decisional authority of the Federal
Communications Commission, where applicable."
G-41
<PAGE>
EXHIBIT 7(D)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report for the Gas Business, a business unit of Western Resources, Inc., dated
February 4, 1997, and to all references to our Firm included in or made a part
of this Form 8-K. It should be noted that we have not audited any financial
statements of the Gas Business subsequent to August 31, 1996 or performed any
audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Kansas City, Missouri
November 26, 1997
<PAGE>
Item 8-9 Not Applicable
