<PAGE> 1
As filed with the Securities and Exchange Commission on July 28, 1997.
Registration No. 333-26005
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment 1 to
FORM S - 3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------
ONEOK INC.
(Exact name of registrant as specified in its charter)
Delaware 73-0383100
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 West Fifth Street
Tulsa, Oklahoma 74103
918-588-7000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
J. D. NEAL DONALD A. KIHLE, ESQ.
VICE PRESIDENT and GABLE GOTWALS MOCK SCHWABE KIHLE
CHIEF FINANCIAL OFFICER GABERINO, P.C.
ONEOK INC. 100 WEST FIFTH STREET
100 WEST FIFTH STREET SUITE 1000
TULSA, OKLAHOMA 74013 TULSA, OKLAHOMA 74103-4219
918-588-7000 918-585-8141
(Names, addresses, including zip codes, and telephone numbers,
including area codes, of agents for service)
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.|_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box.|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Amount Offering Aggregate Amount of
Class of Securities to be price Offering Registration
to be Registered Registered Per Unit(1) Price(2) Fee
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
without par value 334,252 shs. $ 29.250 $ 9,776,871 $ 3,371
===========================================================================================
</TABLE>
(1) Based on price of $29.250 per share of the Common Stock, the average of
the high and low sales price of the Common Stock published in the Wall
Street Journal report of the New York Stock Exchange for April 22, 1997.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c).
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- -------------------------------------------------------------------------------
<PAGE> 2
===============================================================================
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation, or sale would be lawful prior
to registration or qualification under the securities laws of any such state.
===============================================================================
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 23, 1997
334,252 Shares
ONEOK Inc.
Common Stock
Up to 334,252 presently outstanding shares of common stock of ONEOK Inc. (the
"Company") may be offered for sale from time to time by certain stockholders of
the Company (the "Selling Stockholders"). See "Selling Stockholders." The
Company will not receive any of the proceeds from the sale of shares in this
offering.
Sales of shares by the Selling Stockholders may be effected from time to time
in one or more transactions on the New York Stock Exchange or other exchange on
which the common stock may be listed, in negotiated transactions or in a
combination of any such methods of sale. The selling price of the shares may be
at the market price prevailing at the time of sale, at a price related to such
prevailing market price, or at a negotiated price. The Selling Stockholders may
be deemed to be "underwriters" within the meaning, of the Securities Act of
1933, as amended (the "Securities Act"). See "Plan of Distribution." The
Company has agreed to indemnify the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act.
The Company's common stock is traded on the New York Stock Exchange under the
trading symbol "OKE". On April 22, 1997, the last reported sale price of the
common stock on the New York Stock Exchange was $29.125 per share. See "Common
Stock Dividends and Price Range."
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The Date of this Prospectus is ______________________
2
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Judiciary Plaza, Washington, D.C. 20549, and at the following
regional offices of the Commission: Chicago Regional Office, CitiCorp Center,
500 West Madison Avenue, Suite 1400, Chicago, Illinois 60661-2511; and New York
Regional Office, Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can also be obtained (at prescribed rates) from
the Public Reference Section of the Commission at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. The Company's filings with the Commission are
also available to the public from commercial document retrieval services and at
the Website maintained by the Commission at "http://www.sec.gov." The common
stock of the Company is also listed on the New York Stock Exchange, and such
reports, proxy material, and other information concerning the Company also can
be inspected and copied at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form S-3
(the "Registration Statement") under the Securities Act with respect to the
shares of common stock offered by this prospectus. This prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto, to which reference is made. Statements made in this
prospectus as to the contents of any contract, agreement, or other document
referred to are not necessarily complete, and in each instance reference is
made to the copy of such contract, agreement, or other document filed as an
exhibit to the Registration Statement, and each such statement is qualified in
its entirety by such reference. Any interested party may inspect the
Registration Statement, and the exhibits and schedules thereto, without charge,
at the public reference facilities of the Commission and may obtain copies of
all or any portion of the Registration Statement from the Commission upon
payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by, the Company with the
Commission pursuant to the Exchange Act (Commission File No. 1-2572), are
incorporated in this prospectus by reference and shall be deemed to be a part
hereof:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1996;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
November 30, 1996, February 28, 1997, and May 31, 1997;
(c) The Company's Current Reports on Form 8-K dated December 23, 1996;
(d) The Company's Proxy Statement dated November 7, 1996, in connection
with the Annual Meeting of Shareholders held on December 12, 1996;
and
(e) The description of the Company's common stock contained in the
Company's Form S-16, Registration Statement under the Securities Act,
Registration Number 2-74435, filed October 16, 1981, including any
amendment or report filed for the purpose of updating such
description.
(f) The Company's Annual Report on Form 10-K/A, for the fiscal year ended
August 31, 1996.
3
<PAGE> 4
All other documents filed by the Company pursuant to Section 13(a), 13(c), 14,
or 15(d) of the Exchange Act subsequent to the date of this prospectus and
prior to the termination of the offering made hereby shall be deemed to be
incorporated by reference in this prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained in this
prospectus, in a supplement to this prospectus, or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this prospectus to the extent that a statement
contained herein or in any subsequently filed supplement to this prospectus or
in any document that also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
The Company will provide without charge to each person to whom a copy of this
prospectus has been delivered, on the written or oral request of any such
person, a copy of any or all of the documents referred to above, which have
been or may be incorporated in this prospectus by reference, other than
exhibits to such documents unless such exhibits are specifically incorporated
by reference in such documents. Written or telephone requests for such copies
should be directed to Weldon Watson, Manager of Investor Relations, ONEOK Inc.,
100 West Fifth Street, Post Office Box 871, Tulsa, Oklahoma 74102-0871,
telephone number (918) 588-7000.
4
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in the prospectus and by the more detailed
information and the financial statements and notes appearing in the
incorporated documents.
THE COMPANY
ONEOK Inc. and its subsidiaries (collectively, the "Company") engage in
several aspects of the energy business. The Company 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. The Company 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, the Company distributes natural gas to
approximately 715,000 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. The Company is a Delaware
corporation with its principal executive offices located at 100 West Fifth
Street, P.O. Box 871, Tulsa, Oklahoma 74103-0871, and its telephone number is
(918) 588-7000.
The Company was incorporated in Delaware on November 10, 1933.
The principal executive offices of the Company are located at 100 West Fifth
Street, Tulsa, Oklahoma, and the telephone number is (918) 588-7000.
As of January 9, 1997, a certain Stock Purchase Agreement was entered into
between ONEOK Resources Company, a Delaware Corporation ("Resources') of which
the Company is the sole shareholder and the entities and individuals who owned
all of the issued and outstanding shares of the capital stock of PSEC, Inc. and
PSPC, Ltd., both Oklahoma Corporations (the"Selling Shareholders"), pursuant to
which the shareholders received shares of the Common Stock of the Company in
exchange for such issued and outstanding shares of capital stock (the "Stock
Transaction"). As a result of the Stock Transaction the Shareholders received
shares of the common stock of the Company, as follows:
<TABLE>
<CAPTION>
Individual or Entity Number of Shares
-------------------- ----------------
<S> <C>
Ray H. Potts, Trustee for
Ray H. Potts Living Trust 140,147
Ray H. Potts 71,804
Robert L. Stephenson, Trustee for Robert L.
Stephenson Living Trust 75,455
Robert L. Stephenson 38,659
R. L. Hilbun 5,848
Roger A. Rose 2,339
</TABLE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of shares of
common stock in this offering.
5
<PAGE> 6
COMMON STOCK DIVIDENDS AND PRICE RANGE
The Company has paid regular quarterly dividends on its common stock for the
past six years, since February 1989. Dividends declared per share on common
stock (adjusted for a 2 for 1 stock split effective February 1990) for each
fiscal year beginning with the 1992 fiscal year are as follows:
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
$.96 $1.06 $1.11 $1.12 $1.18 $1.20*
</TABLE>
*Estimated
Future dividends will depend on the Company's earnings, its financial
condition, and other factors.
The Company's common stock is traded on the New York Stock Exchange. The
following table sets forth the high and low sales prices of the Company's
common stock for the periods indicated, as reported by "The Wall Street
Journal" as New York Stock Exchange--Composite Transactions, and dividends
declared during such periods.
<TABLE>
<CAPTION>
Price Range
-----------
Dividends Declared per
Fiscal Year Ended August 31 High Low Share
- --------------------------- ---- --- ------------
<S> <C> <C> <C>
1995
1st Quarter ..................... $ 18 $ 15 7/8 $0.28
2nd Quarter ..................... 18 3/8 16 5/8 $0.28
3rd Quarter ..................... 19 5/8 17 1/4 $0.28
4th Quarter ..................... 23 5/8 18 3/4 $0.28
1996
1st Quarter ..................... $ 24 13/16 $ 22 $0.29
2nd Quarter ..................... 23 5/8 20 $0.29
3rd Quarter ..................... 27 1/2 21 1/8 $0.30
4th Quarter ..................... 28 5/8 24 3/8 $0.30
1997
1st Quarter ..................... $ 28 5/8 $ 25 1/4 $0.30
2nd Quarter ..................... 30 5/8 26 $0.30
3rd Quarter ..................... 31 1/8 25 7/8 $0.30
</TABLE>
The last reported sale price of the common stock on April 22, 1997, on the New
York Stock Exchange was $ 29.125 per share. There were approximately 8,400
beneficial owners of the common stock on March 30, 1997.
MATERIAL CHANGES
On December 12, 1996, Western Resources Inc. ("Western Resources") and the
Company entered into an agreement (the "Agreement") providing for the
transactions (the "Transactions") described below. First, Western Resources
will transfer to a new corporation to be formed by Western Resources ("New
ONEOK") (i) all of the assets, property and interests owned by Western
Resources that are primarily used in, primarily related to or primarily
generated by the field operations of Western Resources's local natural gas
distribution business in the States of Kansas and Oklahoma, including: the gas
gathering, distribution and transmission system and related properties;
inventory in the form of gas, gas liquids and other related substances and
materials; computer hardware, measuring equipment, telemetry equipment,
machinery, furniture, vehicles and other tangible personal property; rights
under agreements, sales and purchase orders, contracts and other commitments;
leasehold interests; intangible personal
6
<PAGE> 7
property; government permits, franchises and licenses; real property leases;
accounts receivable; copies of customer and vendor lists, system maps and sales
materials; easements; rights and claims under insurance policies; and other
properties and assets; (ii) all of the capital stock of Western Resources'
wholly-owned subsidiaries, Mid Continent Market Center, Inc. and Westar Gas
Marketing, Inc. and (iii) all of the debts, claims and liabilities that arise
primarily out of, relate primarily to or are primarily generated by, the field
operations of Western Resources' local natural gas distribution business in the
States of Kansas and Oklahoma (such liabilities and debts to include an
aggregate principal amount of debt of Western Resources of $35 million, subject
to adjustment) and of the wholly-owned subsidiaries.
Immediately thereafter, the Company will merge with and into New ONEOK with New
ONEOK being the surviving corporation, and each outstanding share of common
stock of the Company will be exchanged for one share of New ONEOK Common Stock.
Upon consummation of the merger, (i) the current Company stockholders will hold
27,304,870 shares of New ONEOK Common Stock, representing 90.1% of the voting
power and 55% of the capital stock of New ONEOK, and (ii) Western Resources
will hold 2,996,702 shares of New ONEOK Common Stock, representing 9.9% of the
voting power of New ONEOK, and 19,317,584 shares of New ONEOK Preferred Stock,
which shares will not be entitled to vote in the election of directors, such
shares of New ONEOK Common Stock and New ONEOK Preferred Stock together
representing in the aggregate up to 45% of the capital stock of New ONEOK.
Each share of New ONEOK Preferred Stock will be convertible at Western
Resources' option into one share of New ONEOK Common Stock, subject to
adjustment, following the occurrence of a "regulatory change," which is defined
in the shareholder agreement to be entered into by Western Resources and New
ONEOK prior to the closing of the Transactions (the "Shareholder Agreement") as
(i) a repeal, modification, amendment or other change of the Public Utility
Holding Company Act of 1935 (the "1935 Act") and/or (ii) the receipt by Western
Resources of an exemption, unqualified opinion or no-action letter from the
Securities and Exchange Commission or its staff under the 1935 Act, or Western
Resources's registration under the 1935 Act, either or both of which has the
result of permitting Western Resources to convert its shares of New ONEOK
Preferred Stock into New ONEOK Common Stock.
Upon such conversion, Western Resources will hold up to 45% of the then
outstanding shares of New ONEOK Common Stock. The Shareholder Agreement will
impose certain standstill, transfer and voting restrictions on Western
Resources with respect to its beneficial ownership of New ONEOK capital stock
both before and after the regulatory change and will entitle Western Resources
to designate a number of directors (not exceeding one-third of the entire
Board) to be nominated to the New ONEOK Board.
The Company and New ONEOK filed a Registration Statement on Form S-4 in
connection with the Transactions pursuant to the Securities and Exchange Act of
1934 on March 17, 1997. The stockholders of the Company are expected to vote on
the proposed merger not more than 45 days after the Registration Statement
becomes effective. Consummation of the merger, expected to occur on or about
the third calendar quarter 1997, is conditioned upon the satisfaction or waiver
of all of the conditions to closing specified in the Agreement, including
receipt of state corporation commission orders in reasonably satisfactory form,
receipt of certain orders of the Securities and Exchange Commission pursuant to
the 1935 Act, receipt of certain third-party consents, entry of Western
Resources and the Company into certain ancillary agreements, including the
Shareholder Agreement, and expiration or early termination of waiting periods
required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976.
The description of the Transactions contained herein is qualified in its
entirety by reference to the Agreement and the agreements ancillary thereto,
including the Shareholder Agreement. The Agreement is filed as Exhibit A to the
Company's Form 8-K, dated December 23, 1996, and is incorporated herein by
reference.
7
<PAGE> 8
SELLING STOCKHOLDERS
The following table sets forth certain information as of the date of this
Prospectus with respect to the Selling Stockholders. If all the shares offered
pursuant to this prospectus are sold, none of the Selling Stockholders will
beneficially own any shares of the Company's common stock. Any or all of the
shares offered hereby may be offered for sale by any of the Selling
Shareholders from time to time. Unless otherwise noted, each Selling
Stockholders has sole voting and investment power with respect to such shares.
<TABLE>
<CAPTION>
Number of Shares Owned Number of Shares
Prior to Offering Which May be
Sold Pursuant to
Selling Stockholder Shares Percent of Class this Prospectus
- ------------------- ------ ---------------- ---------------
<S> <C> <C> <C>
Ray H. Potts, Trustee for
140,147 less than 1% 140,147
Ray H. Potts Living Trust 71,804 less than 1% 71,804
Ray H. Potts
Robert L. Stephenson,
Trustee for Robert L 75,455 less than 1% 75,455
Stephenson Living Trust 38,659 less than 1% 38,659
Robert L. Stephenson 5,848 less than 1% 5,848
R. L. Hilbun 2,339 less than 1% 2,339
Roger A. Rose
</TABLE>
In connection with the Stock Transaction, the Company and the Selling
Stockholders executed a Shelf Registration Agreement dated February 28, 1997
(the "Registration Agreement"), pursuant to which the Company agreed to prepare
and file a "shelf" registration statement on Form S-3 pursuant to Rule 415
under the Securities Act or any similar rule that may be adopted by the
Commission with respect to the shares acquired by the Selling Stockholders in
the Stock Transaction (together with any amendments, including post-effective
amendments and supplements thereto, to the "Shelf Registration"), to use its
reasonably best efforts to cause the Shelf Registration to be declared
effective by the Commission within 60 days of the date of the Registered
Statement, and keep the Shelf Registration continuously effective for a period
of 24 months from the date it becomes effective or, if earlier, until (i) all
the shares are sold in accordance with the Shelf Registration, or (ii) in the
opinion of Counsel for the Company, satisfactory to the Selling Stockholders,
registration of the shares is no longer required under the Securities Act and
the holder may sell all remaining shares in the open market without limitation
as to volume and without being required to file any forms or reports with the
Commission under the Securities act or the regulations thereunder. The Company
has also agreed to cause all the shares covered by the Shelf Registration, to
be listed on the New York Stock Exchange and any other exchange on which the
Company's common stock becomes listed. This Prospectus constitutes a part of
the Shelf Registration filed by the Company in accordance with the Registration
Agreement. The Company is responsible for and will bear the costs and expenses
of preparing and maintaining the Shelf Registration.
PLAN OF DISTRIBUTION
Shares of common stock may be sold pursuant to this prospectus from time to
time, in one or more transactions, by the Selling Stockholders, or by pledgees,
donees, transferees, or other successors in interest. Such sales may be made on
the New York Stock Exchange or any other exchange on which the Company's common
stock is listed, in negotiated transactions, or in a combination of any such
methods of sale. The selling price of the shares of common stock may be at the
market price prevailing at the time of sale, at a price related to the
prevailing market price, or at a negotiated price. Any shares which qualify for
sale under Rule 144 or Rule 144A
8
<PAGE> 9
under the Securities Act may be sold under Rule 144 or Rule 144A rather than
pursuant to this prospectus.
EXPERTS
The consolidated financial statements of ONEOK Inc. and subsidiaries as of
August 31, 1996 and 1995, and for each of the years in the three-year period
ended August 31, 1996, have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP covering the August 31, 1996, financial
statements refers to the adoption of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of.
LEGAL MATTERS
The legality of the common stock offered hereby will be passed upon for the
Company by Messrs. Gable Gotwals Mock Schwabe Kihle Gaberino, P. C., Tulsa,
Oklahoma.
9
<PAGE> 10
------------------
No person has been authorized to give any information or make any
representations in connection with this offering other than those contained in
this prospectus and, if given or made, such other information and
representations must not be relied upon as having been authorized. This
prospectus does not constitute an offer to sell or a solicitation of an offer
to buy any securities other than the registered securities to which it relates
or any offer to sell or the solicitation of an offer to buy such securities in
any circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to its date.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information ................................................... 3
Incorporation of Certain
Documents by Reference ................................................ 3
The Company ............................................................. 5
Use of Proceeds ......................................................... 5
Common Stock Dividends
and Price Range ....................................................... 6
Material Changes ........................................................ 6
Selling Stockholders .................................................... 8
Plan of Distribution .................................................... 8
Experts ................................................................. 9
Legal Matters ........................................................... 9
</TABLE>
------------------
------------------
334,252 Shares
Common Stock
ONEOK Inc.
------------------------
P R O S P E C T U S
------------------------
__________, ____
------------------
10
<PAGE> 11
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
All amounts, except SEC registration fees, are estimates.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee ......................... $ 3,371
Printing and copying expenses ................ 1,000
Legal fees and expenses ...................... 10,000
Accounting, fees and expenses ................ 5,000
Miscellaneous ................................ 1,000
------------
Total ............................... $ 20,371
</TABLE>
Item 15. Indemnification of Directors and Officers
The Registrant, as a Delaware corporation, is empowered by section 145 of the
Delaware General Corporation Act of the State of Delaware (the "DGCA"), subject
to the procedures and limitations stated therein, to indemnify any person
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding in which such
person is made or threatened to be made a party by reason of his being or
having been a director, officer, employee or agent of the Registrant. The
statute provides that indemnification pursuant to its provisions is not
exclusive of other rights of indemnification to which a person may be entitled
under any bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise. Article VIII of the By-laws of the Company provides that directors
and officers of the Company shall be indemnified by the Company to the fullest
extent permitted by Delaware law as now or hereafter enforce, including the
advance of related expenses. If any determination is required under applicable
law as to whether a director or officer is entitled to indemnification, such
determination shall be made by the Board, by vote of a quorum of disinterested
directors, or by independent legal counsel by written opinion or by
shareholders.
The Certificate of Incorporation of the Company provides that a director of the
corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except for liability for (i) any breach of the director's duty of loyalty to
the corporation or its shareholders, (ii) acts or omissions not in good faith
or which would involve intentional misconduct or a knowing violation of law,
(iii) payment of unlawful dividends or unlawful stock purchases or redemptions,
or (iv) any transaction from which the director derived an improper personal
benefit.
Pursuant to Article VIII of the bylaws of the Company, upon authorization and
determination either (1) by the board of directors by a majority of a quorum
consisting of directors who were not parties to the action, suit, or proceeding
involved; (2) if such a quorum is not obtainable, or event if obtainable and a
quorum of disinterested directors so directs, by independent counsel in a
written opinion; or (3) by the stockholders, the Company is obligated to
indemnify any person who incurs liability by reason of the fact that he is or
was a director, officer, employee, or agent of the Company, or is or was
serving at its request as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise, or as a
member of any committee or similar body, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. However, in an action by
or in the right of the Company, no indemnification will
II-1
<PAGE> 12
be made if such person shall be adjudged to be liable to the Company, unless
such indemnification is allowed by a court of competent jurisdiction.
Under an insurance policy obtained by the Company, coverage of Company officers
and directors against liability for neglect, errors, omissions, or breaches of
duty in their capacities as such as provided for both the Company, to the
extent that it is obligated to indemnify such officers and directors, and the
officers and directors themselves. Such coverage is provided in the amount of
$85,000,000, with a retained limit by the Company of $200,000. The insurance
company is obligated to pay any loss in excess of the $200,000 retained limit
and defense costs from the first dollar, up to the policy limit of $85,000,000.
Among the policy exclusions are those which exclude coverage for accounting for
profits made within the meaning of Section 16(b) of the Securities Exchange Act
of 1934, claims based upon or attributable to directors and officers gaining
any personal profit or advantage to which such individuals are not legally
entitled, and for any claims brought about or attributable to the dishonesty of
an officer or director.
The registrant has been advised that, in the opinion of the Securities and
Exchange Commission, provisions providing for the indemnification by a
corporation of its officers, directors, and controlling persons against
liabilities imposed by the Securities Act of 1933 are against public policy as
expressed in said Act and are therefore unenforceable. It is recognized that
the above-summarized provisions of the registrant's bylaws and the applicable
Delaware General Corporation Law may be sufficiently broad to indemnify
officers, directors, and controlling persons of the registrant against
liabilities arising under said Act. Therefore, in the event that a claim of
indemnification against liability under said Act (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit, or
proceeding) shall be asserted by an officer, director, or controlling person
under said provisions, the registrant will, unless in the opinion of its
counsel the question has already been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question of whether or not such
indemnification by it is against public policy as expressed in said Act and
will be governed by the final adjudication of such issue.
<TABLE>
<CAPTION>
Item 16. Exhibits*
<S> <C>
(2)(a)** Stock Purchase Agreement, dated January 9, 1997, between
entities and individuals listed on Exhibit A, attached thereto,
and ONEOK Resources Company
(2)(b)***** Agreement between Western Resources, Inc. and ONEOK Inc., dated
as of December 12, 1996
(3)(a)*** Third Restated Certificate of Incorporation of ONEOK Inc.
(3)(b)**** By-Laws of ONEOK Inc., as Amended
(5)** Opinion and consent of Gable Gotwals Mock Schwabe Kihle
Gaberino, a Professional Corporation
(23)(a)** Consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants
(23)(b)** Consent of Gable Gotwals Mock Schwabe Kihle Gaberino, a
Professional Corporation (included in Exhibit 5)
(24)** Powers of attorney (Included on pages II-5 and II-6)
</TABLE>
II-2
<PAGE> 13
- ---------------------
* Exhibits excluded are not applicable
** Filed herewith
*** Incorporated by reference to Exhibit (3)(a) to Annual Report on
Form 10-K dated August 31, 1996
**** Incorporated by reference to Exhibit (3)(b) to Annual Report on
Form 10-K dated August 31, 1996
***** Incorporated by reference to Exhibit 99.b to Current Report on
Form 8-K dated December 23, 1996
Item 17. Undertakings
1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
2. Insofar as indemnification of liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in said
Act and is therefore unenforceable. In the event that a claim of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has already been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether or not such indemnification by it is against public police as expressed
in said Act and will be governed by the final adjudication of such issue.
3. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to the Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
II-3
<PAGE> 14
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE> 15
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes David L. Kyle and J.
D. Neal, or either of them, as attorneys-in-fact with full power of
substitution, to execute in the name and on behalf of such person, in the
capacity stated below, and to file any and all amendments to this Registrations
Statement, including any and all post-effective amendments and all instruments
necessary or incidental in connection therewith.
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, the registrant has
reasonable grounds to believe that it meets all of the requirements for filing
on Form S-3 and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Tulsa and
the State of Oklahoma, on this 28th day of April, 1997.
ONEOK Inc.
By: Larry W. Brummett
-----------------------------
Larry W. Brummett
Chairman of the Board, President,
and Chief Executive Officer
II-5
<PAGE> 16
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes Larry W.
Brummett, David L. Kyle or J. D. Neal, or any of them, as attorneys-in-fact
with full power of substitution, to execute in the name and on behalf of each
person, individually and in each capacity stated below, and to file any and all
amendments to this Registration Statement, including any and all post-effective
amendments and all instruments necessary or incidental in connection therewith.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated, in the City of Tulsa and the State of Oklahoma, on this 28th day of
April, 1997.
<TABLE>
<CAPTION>
<S> <C>
Larry W. Brummett J. D. Neal
- ---------------------------------------- ----------------------------------------
Larry W. Brummett J. D. Neal
Chairman of the Board, President Vice President, Chief Financial Officer,
Chief Executive Officer, and Director and Treasurer (Principal Financial and
Accounting Officer)
Edwyna G. Anderson Douglas Ann Newsom
- ---------------------------------------- ----------------------------------------
Edwyna G. Anderson Douglas Ann Newsom
Director Director
William M. Bell Gary D. Parker
- ---------------------------------------- ----------------------------------------
William M. Bell Gary D. Parker
Director Director
Douglas R. Cummings J. D. Scott
- ---------------------------------------- ----------------------------------------
Douglas R. Cummings J. D. Scott
Director Director
William L. Ford Deceased April 20, 1997
- ---------------------------------------- ----------------------------------------
William L. Ford G. Rainey Williams
Director Director
J. M. Graves Stanton L. Young
- ---------------------------------------- ----------------------------------------
J. M. Graves Stanton L. Young
Director Director
Stephen J. Jatras David L. Kyle
- ---------------------------------------- ----------------------------------------
Stephen J. Jatras David L. Kyle
Director Director
Bert H. Mackie
- ----------------------------------------
Bert H. Mackie
Director
</TABLE>
II-6
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing Amendment 1 of Form S-3 and has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Tulsa and the State of Oklahoma, on
July 28, 1997.
J. D. Neal
----------------------------------------
J. D. Neal
Vice President, Chief Financial Officer,
and Treasurer (Principal Financial and
Accounting Officer)
II-7
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ------- ----------- --------
<S> <C> <C>
(2)(a)* Stock Purchase Agreement 2a-1
(2)(b)**** Agreement between Western Resources, Inc. and
ONEOK Inc., dated as of December 12, 1996
(3)(a)** Third Restated Certificate of Incorporation of
ONEOK Inc.
(3)(b)*** Bylaws of ONEOK Inc., as Amended
(5)* Opinion and consent of Gable Gotwals Mock Schwabe
Kihle Gaberino, a Professional Corporation 5-1
(23)(a)* Consent of KPMG Peat Marwick LLP, independent
Certified Public Accountants 23a-1
(23)(b)* Consent of Gable Gotwals Mock Schwabe Kihle Gaberino,
a Professional Corporation 23b-1
(24)* Powers of Attorney (Included on pages II-5 and II-6)
</TABLE>
- ----------------
* Filed herewith
** Incorporated by reference to Exhibit (3)(a) to Annual Report on
Form 10-K dated August 31, 1996
*** Incorporated by reference to Exhibit (3)(b) to Annual Report on
Form 10-K dated August 31, 1996
**** Incorporated by reference to Exhibit 99.b to Current Report on
Form 8-K dated December 23, 1996
II-8
<PAGE> 1
EXHIBIT 2(a)
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered as
of the 9th day of January, 1997, by and among the entities and individuals
listed in Exhibit A, attached hereto and made a part hereof (collectively the
"Sellers" and individually a "Seller"), and ONEOK Resources Company, a Delaware
corporation (hereinafter referred to as "Buyer" or "Resources").
WITNESSETH THAT:
WHEREAS, Sellers are the owners of (i) all of the outstanding shares
(the "PSEC Shares") of the capital stock of PSEC, Inc., an Oklahoma corporation
("PSEC"), and (ii) all of the outstanding shares (the "PSPC Shares") of the
capital stock of PSPC, Ltd., an Oklahoma corporation ("PSPC") (the PSEC Shares
and the PSPC Shares are sometimes hereinafter referred to collectively as the
"Shares"); and
WHEREAS, Sellers desire to sell to Buyer and Buyer desires to purchase
from Sellers the Shares on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereinafter expressed, it is hereby agreed as follows:
ARTICLE 1
CORPORATE STRUCTURE; ASSETS
1.1 Corporate Structure. The corporate structure of PSEC, PSPC and
their affiliated entities is as shown in Exhibit B. PSEC presently is the
Manager of N.E. 23rd, L.L.C., an Oklahoma limited liability company ("NE
23rd"). NE 23rd will be liquidated and dissolved promptly after execution of
this Agreement and undivided interests in the properties presently owned of
record by NE 23rd equal to PSEC's interest in NE 23rd will be distributed to
PSEC. The cost of the NE 23rd liquidation and dissolution allocable to PSEC's
interest shall be borne and paid for by Sellers. PSPC is the managing general
partner of Sycamore Gas System ("Sycamore"), a general partnership formed under
the Oklahoma Uniform Partnership Act. PSEC and PSPC are sometimes hereinafter
referred to collectively as the "Companies." For purposes of this Agreement,
(i) PSEC shall be deemed to own "directly" all of the assets owned by PSEC and
"indirectly" an interest in NE 23rd's properties equal to PSEC's interest in NE
23rd (which properties will be owned directly by PSEC following the dissolution
of NE 23rd and the assignment of such properties to PSEC), and (ii) PSPC shall
be deemed to own "directly" all assets owned by PSPC and "indirectly" an
interest in all of the assets owned by Sycamore equal to PSPC's interest in
Sycamore.
2a-1
<PAGE> 2
1.2 Assets. The principal assets owned directly and indirectly by the
Companies are (i) producing and non-producing oil and gas leasehold interests,
together with the wells, personal property, fixtures and equipment located on
the lands covered thereby or used or obtained in connection with the production
and development thereof, and together with all contracts, agreements, licenses,
permits, easements, orders of regulatory agencies and other rights and
interests relating thereto (collectively, the "Properties"), and (ii) PSPC's
indirect interest in the gas gathering system, processing plant and storage
facilities described in Exhibit C, together with all real property, easements,
rights of way, surface use agreements and other interests in real property
related or appurtenant thereto, all personal property, fixtures and equipment
comprising or used in connection therewith, and all contracts and agreements of
every nature whatsoever relating thereto (the "Sycamore System"). The
Properties and the Sycamore System, together with all other assets, properties,
rights, contracts, claims and interests of every kind, whether real, personal
or mixed, owned directly or indirectly by the Companies are hereinafter
referred to collectively as the "Assets."
1.3 Reserve Report Properties. Substantially all of the Properties
described by well or unit name in Exhibit D are included in that certain
Reserve Report dated as of August 23, 1996, prepared by the Companies and
heretofore furnished to Buyer. The Properties described in Exhibit D, whether
or not listed in the Reserve Report, are hereinafter referred to collectively
as the "Reserve Report Properties."
ARTICLE 2
SALE AND PURCHASE OF THE SHARES
2.1 Agreement for Sale and Purchase. Sellers hereby agree to sell to
Buyer and Buyer hereby agrees to purchase from Sellers on the Closing Date (as
hereinafter defined) all, but not less than all, of the Shares.
2.2 Purchase Price; Exchange Shares. The purchase price for the
Shares (the "Purchase Price") shall be the sum of (i) $10,133,977 (the "Base
Price"), which shall be allocated $6,789,180 to the PSEC Shares and $3,344,797
to the PSPC Shares, plus or minus, as appropriate (ii) the Net Adjustment (as
hereinafter defined). The Purchase Price shall be paid by the delivery by
Buyer or by ONEOK Inc. ("ONEOK", the corporate parent of Buyer) to Sellers of
that number of shares (the "Exchange Shares") of the common stock (no par
value) of ONEOK ("ONEOK Stock") having an aggregate Closing Value (hereinafter
defined) equal to the Purchase Price. The Closing Value of each Exchange Share
shall be the average of the daily closing prices of ONEOK Stock as reported in
the Wall Street Journal for the (10) consecutive trading days beginning fifteen
(15) trading days prior to the Closing Date (the "Valuation Period"). No
fractional shares shall be issued to Sellers pursuant to the
2a-2
<PAGE> 3
terms hereof. In lieu of fractional shares, the value of any fractional share
shall be paid in cash to the Sellers based on the value of the shares
established as stated above. Buyer agrees that ONEOK will reserve a sufficient
number of shares of ONEOK Stock necessary to effect the transaction
contemplated by this Agreement.
2.3 Net Adjustment. The Net Adjustment shall be the sum of the
adjustment amounts described in Sections 3.3 and 3.4 (Title Defects), Section
8.5 (Gas Imbalances), Section 8.6 (Disapproved Operations), Section 8.8
(Working Capital) and Section 9.5 (Environmental Defects).
2.4 Deposit. Contemporaneously with the execution of this Agreement,
Buyer is delivering to Boatmen's First National Bank of Oklahoma ("Deposit
Holder"), in immediately available funds in accordance with wire instructions
furnished by Deposit Holder, the sum of $1,000,000 as a deposit toward the
Purchase Price (the "Deposit"). The Deposit shall be held by Deposit Holder
pursuant to the terms of that certain Deposit Agreement of even date herewith
by and among Sellers, Buyer and Deposit Holder in the form attached hereto as
Exhibit E. The Deposit shall be returned to Buyer at the Closing. In the
event that Buyer shall fail to close the transaction contemplated hereby in
accordance with the terms of this Agreement, and provided that the conditions
precedent to the obligations of Buyer as set forth in Article 10 hereof have
been fulfilled or Sellers are ready, willing and able to comply with all such
conditions precedent, Sellers shall be entitled to retain the Deposit as
liquidated damages pursuant to Section 12.2.
2.5 Agreed Values. A portion of the Base Price has been allocated by
the parties among the Reserve Report Properties and PSPC's interest in Sycamore
as set out in Exhibit D. The amounts so allocated and are referred to herein
as the "Agreed Values" of such Assets.
ARTICLE 3
TITLE EXAMINATION; ADJUSTMENTS
3.1 Title Materials. From the date hereof to the Closing Date,
Sellers shall cause the Companies to provide Buyer full opportunity to examine
the books, records and files of the Companies . Sellers make no warranty or
representation, express or implied, with respect to the accuracy or
completeness of any title information, records or other data made available to
Buyer in connection with this Agreement.
3.2 Title Defects; Defensible Title.
(a) Adjustments to the Base Price for failure of title shall
be made only with respect to the Sycamore System and the Reserve Report
Properties (collectively, the "Examined Interests"). As used herein, the term
"Title Defect" shall mean any lien, claim,
2a-3
<PAGE> 4
defect, encumbrance, security interest, burden or deficiency such that the
Companies (directly or indirectly) do not have Defensible Title (hereinafter
defined), as distinguished from technically marketable title, to any item of
the Examined Interests; provided, no Permitted Encumbrance (hereinafter
defined) shall constitute a Title Defect.
(b) As used herein, the term "Defensible Title" (i) with
respect to the Sycamore System means clear, unencumbered and uncontested title
of record in Sycamore to the real and personal property comprising the Sycamore
System, and (ii) with respect to the Reserve Report Properties means clear,
unencumbered and uncontested title of record in PSEC, PSPC or NE 23rd to the
Reserve Report Properties such that (A) after giving effect to existing spacing
orders, operating agreements, unit agreements, unitization orders and pooling
designations, and subject to the limitations, if any, described in Exhibit D,
and after taking into account all royalty interests, overriding royalty
interests, net profit interests, production payments and other burdens on
production, the Companies (directly or indirectly) are entitled to a share
(expressed as a decimal) of all oil, gas and other minerals produced from each
well described in Exhibit D which is not less than the Net Revenue Interest set
out in Exhibit D in connection with the description of such well, (B) the
Companies own an undivided interest (expressed as a decimal) equal to the
Working Interest set out in Exhibit D in connection with the description of
each such well in and to all property and rights incident thereto, including
all rights in, to and under all agreements, leases, permits, easements,
licenses and orders in any way relating thereto, and in and to all wells,
personal property, fixtures and improvements thereon, appurtenant thereto or
used or obtained in connection therewith or with the production or treatment or
sale or disposal of hydrocarbons or water produced therefrom or attributable
thereto, (C) the Companies are obligated for a fraction of the costs relating
to the exploration, development and operation of such well no greater than the
Working Interest set out in Exhibit D in connection with the description of
such well, (D) except as shown in Exhibit D, the Companies' interests in such
wells and the production therefrom are not subject to being reduced by virtue
of reversionary interests owned by third parties and (E) any material failure
on the part of Sellers to comply with the terms and conditions of the
agreements, leases, permits, easements, licenses and orders relating to such
wells and the personal property, fixtures and improvements thereon.
(c) As used herein, the term "Permitted Encumbrances" means
(i) matters described without material omission in any of the Exhibits or
Schedules attached hereto, (ii) royalties, overriding royalties, net profits
interests, production payments and other burdens on production which do not
reduce the Companies' Net Revenue Interest in any of the Reserve Report
Properties to less than that described in Exhibit D, (iii) liens for taxes,
assessments, labor and materials where payment is not due, (iv)
2a-4
<PAGE> 5
operating agreements, unit agreements, unitization and pooling designations and
declarations, gathering and transportation agreements, processing agreements,
gas, oil and liquids purchase, sale and exchange agreements, and other similar
agreements which are not required by the terms of this Agreement to be
disclosed on any Schedule hereto, provided (A) they contain terms and
conditions customary in the oil and gas industry, (B) they do not adversely
affect or burden the ownership of the Sycamore System or the Reserve Report
Properties (C) all amounts due and payable by the Companies thereunder have
been paid in full, and (D) the Companies are not in material default
thereunder, (v) regulatory authority of governmental agencies not presently or
previously violated, easements, surface leases and rights, plat restrictions
and similar encumbrances, provided that they do not materially detract from the
value, materially increase the cost of operation of any item of the Examined
Interests or otherwise adversely affect the operation thereof, and (vi) liens,
charges, encumbrances and irregularities in the chain of title which, because
of remoteness in or passage of time, statutory cure periods, marketable title
acts or other similar reasons, have not affected or interrupted, and are not
reasonably expected to affect or interrupt, the claimed ownership of the
Companies or their predecessors in title or the receipt of production revenues
from the Properties affected thereby.
3.3 Title Examination; Notice of Defects.
(a) Promptly after execution of this Agreement, Buyer shall,
at Buyer's sole cost and expense, commence and pursue such examination of title
to the Examined Interests as Buyer deems necessary or proper. Buyer will
conclude its title review and give notice to Sellers of any asserted Title
Defects affecting the Examined Interests not later than fourteen (14) days
prior to the date scheduled for the Closing in Section 13.1 hereof (the "Title
Notice Date"). Each such notice shall include a brief description of each
Title Defect of which notice is being given, the action required to cure such
Title Defect and the proposed adjustment to the Base Price by reason of the
existence of such Title Defect. Buyer shall be deemed to have waived any Title
Defects existing with respect to the Examined Interests except to the extent
such Title Defects are set out in a notice given on or prior to the Title
Notice Date.
(b) Sellers shall have a period of eleven (11) days after the
Title Notice Date to cure or cause the Companies to cure all or any portion of
the Title Defects described in any notice(s) of Title Defects affecting
Examined Interests properly given by Buyer prior to such date. All costs and
expenses incurred by the Companies in curing Title Defects so noticed by Buyer
shall result in a downward adjustment of the Base Price at the Closing. In the
event Sellers are unable or unwilling to cure or cause the Companies to cure
any of the asserted Title Defects prior to the expiration
2a-5
<PAGE> 6
of each cure period, the parties shall proceed in accordance with Section 3.4.
3.4 Adjustments.
(a) If any uncured Title Defect is based on Buyer's notice
that the Companies own a Net Revenue Interest less than that shown on Exhibit D
with respect to a particular Reserve Report Property, then provided the working
interest owned by the Companies in such Property remains proportionate to that
set out in Exhibit D, the Agreed Value of such Property shall be reduced in the
same proportion that the actual Net Revenue Interest bears to the Net Revenue
Interest shown therefor on Exhibit D and the amount of such reduction shall
constitute the approved adjustment amount with respect to such Title Defect.
(b) If any uncured Title Defect involves a claim against or
uncertainty with respect to the Companies' title to a particular item of the
Examined Interests, the parties shall attempt to negotiate a mutually
acceptable reduction in the Agreed Value of such Property by reason of such
defect. In the event the parties agree on an appropriate reduction in the
Agreed Value, such amount shall constitute the principal amount of Buyer's
approved claim with respect to such Title Defect. If the parties are unable to
agree on an appropriate reduction and Buyer elects not to waive the Title
Defect, then Sellers shall have the option of (i) proceeding to Closing but
reducing the Base Price by the Agreed Value of such Property if acceptable to
Buyer, or (ii) proceeding to Closing but prior thereto causing the Companies to
assign the affected Property to a third party (which may be owned by Sellers)
and reducing the Base Price by the Agreed Value of such Property, or (iii)
proceeding to Closing but directing the Buyer to separately deposit under an
escrow agreement to be established pursuant to Section 3.5 hereof that number
of Exchange Shares having a Closing Value equal to not less than the Agreed
Value of the affected Property and referring to arbitration (to be conducted in
accordance with the procedures set out in Section 3.6 hereof) the dispute
concerning the proper amount, if any, of the reduction of the Base Price (not
to exceed the Agreed Value) by reason of such Title Defect. Option (i) and (ii)
of this subparagraph 3.4(b) shall not be applicable with respect to unresolved
Title Defects affecting the Sycamore System. In the event the aggregate
adjustment for Title Defects exceeds the sum of $1,000,000, either Sellers or
Buyer may terminate this Agreement prior to the Closing by written notice to
the other without further liability to Buyer or Sellers other than return of
the Deposit.
(c) If, prior to the Title Notice Date, either Sellers or Buyer
determine that the Net Revenue Interest owned by the Companies in any Reserve
Report Property is greater than that set forth on Exhibit D, then provided the
Working Interest owned by the Companies in such Property remains proportionate
to that set out
2a-6
<PAGE> 7
in Exhibit D, the Agreed Value of such Property shall be increased in the same
proportion that the actual Net Revenue Interest bears to the Net Revenue
Interest shown therefor in Exhibit D and such increase shall constitute an
upward adjustment to the Base Price. The party discovering any such error
promptly shall notify the other so that the appropriate adjustment may be made.
3.5 Title Escrow. In the event the Base Price adjustment by reason of
any asserted Title Defect is not determined at or prior to the Closing pursuant
to the provisions of Section 3.4 hereof and Sellers elect to refer the
determination of the appropriate adjustment, if any, to arbitration, then at
the Closing Sellers, Buyer and the Deposit Holder shall execute an escrow
agreement in the form attached hereto as Exhibit F (the "Escrow Agreement"),
and Buyer will deposit with the Deposit Holder (defined under the Escrow
Agreement as the "Escrow Agent") that number of Exchange Shares having a
Closing Value equal to not less than the Agreed Values of the interests in the
Properties affected by said asserted Title Defects (such Exchange Shares being
referred to herein as the "Title Escrow"), with said Title Escrow to be held,
administered and distributed pursuant to the terms of the Escrow Agreement.
3.6 Arbitration. In the event any Title Defect claim timely and
properly noticed by Buyer is referred by Sellers to arbitration, a binding
arbitration proceeding promptly shall be conducted in Oklahoma City, Oklahoma,
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA"). The arbitration proceeding shall be conducted by a single
arbitrator agreed to by the parties, or if they are unable to agree, selected
by the AAA. The arbitrator shall be a licensed attorney experienced in oil and
gas title examination or systems such as the Sycamore System, as appropriate.
The decision of the arbitrator with respect to the amount, if any, of the
allowed claim for each Title Defect referred to arbitration shall be conclusive
and binding upon the parties; provided, however, that in no event shall the
allowed claim exceed the Agreed Value of the Property subject to the claimed
Title Defect. The general expenses of arbitration, including the fees of the
AAA if necessitated by reason of the failure of the parties to agree upon an
arbitrator, shall be borne equally by Sellers and Buyers; however, each party
shall bear and pay the fees and expenses of its own witnesses, legal counsel
and of the collection and presentation of its evidence. The decision of the
arbitrator shall be effected by joint written instructions from the parties to
the Escrow Agent, subject to the threshold requirements of Section 3.5 hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS RELATING TO THE COMPANY
Each Seller does hereby severally, and not jointly with any other
Seller, represent and warrant to Buyer as of the date
2a-7
<PAGE> 8
hereof as follows (the following representations and warranties relating to NE
23rd must be considered with reference to the fact that between the date of
this Agreement and the Closing Date, NE 23rd will be liquidated and dissolved,
so that certain representations and warranties concerning NE 23rd, for example
those concerning its legal existence and status, while made by Sellers and true
of the date of this Agreement will not be made and will not be true as of the
Closing Date):
4.1 Compliance With Agreements and Laws. No material default exists
under any of the terms and provisions, express or implied, of any material
agreement, contract or commitment to which any of the Companies, Sycamore or NE
23rd is a party or to which any part of the Assets is subject, and the
Companies have not received any notice of any claim of such default. All wells
included in the Properties have been drilled, completed and operated, and all
production therefrom has been accounted for and paid to the persons entitled
thereto, and the Properties and the Sycamore System have been operated, in
substantial compliance with all applicable Federal, state and local laws and
applicable rules and regulations of the Federal, state and local regulatory
authorities having jurisdiction thereof. Seller has made available to Buyer
for examination all material agreements to which the Companies, Sycamore or NE
23rd is a party or is obligated in any way.
4.2 Sale of Production. Except as disclosed in Schedule 4.2, neither
of the Companies nor Sycamore nor NE 23rd is obligated by virtue of any
prepayment made under any production sales contract or any other contract
containing a take-or-pay clause, or under any other arrangement whether
similar or not, to deliver oil, gas or other minerals produced from or
allocated to any of the Properties at any time after September 1, 1996, without
receiving full payment therefor at the time of delivery. Except for routine
suspense on new wells, proceeds from the sale of oil and gas from the Reserve
Report Properties are being received by the Companies in a timely manner and
are not being held in suspense for any reason. Sellers have described in
Schedule 4.2 and made available to Buyer for examination all agreements having
a term extending beyond July 1, 1997 (other than agreements terminable upon
less than sixty (60) days' notice) pursuant to which hydrocarbons produced from
the Properties are sold, transported, processed or otherwise disposed of or
marketed.
4.3 Production and Ad Valorem Taxes. All ad valorem, property,
production, severance and similar taxes based on or measured by the ownership
of property or the production or removal of hydrocarbons or the receipt of
proceeds therefrom have been timely paid and all required returns and reports
related thereto filed.
4.4 Claims or Litigation. There is no suit, action or other
proceeding pending before any court or governmental agency,
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nor to the knowledge of Seller has any claim, dispute, suit, action or other
proceeding been threatened, against the Companies, Sycamore or NE 23rd or
affecting any of the Assets.
4.5 Material Executory Contracts Relating to the Assets. Sellers have
described in Schedule 4.5 all agreements and other obligations of the
Companies, Sycamore and NE 23rd which, after the Closing, will (i) require an
expenditure by any of the Companies, Sycamore or NE 23rd in excess of $50,000
with respect to any one project, failing which the Companies, Sycamore or NE
23rd may be liable for damages, (ii) entitle a third party to earn or purchase
any of the Reserve Report Properties or the Sycamore System, or (iii) require
payments for leased office space, leased equipment, surface use, salt water
disposal or similar lease or license obligations in excess of $50,000 per year.
4.6 Consummation of Transactions. The consummation of the
transactions contemplated hereby will not constitute a violation or breach of,
or an event of default under, the organizational documents of the Companies,
Sycamore or NE 23rd or under any contract or agreement to which either of the
Companies, Sycamore or NE 23rd is a party, or constitute the happening of a
condition upon which any other party to such a contract may exercise any right
or option which will adversely affect any of the Assets; nor will the happening
of such event result in any liability of the Companies, Sycamore or NE 23rd to
any person under the terms of any contracts of employment, consultancy or for
services of any kind.
4.7 Existence and Qualification. Each of the Companies is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Oklahoma, and is qualified to carry on its business and in
good standing in each jurisdiction where Reserve Report Properties are located.
No other qualification in any other jurisdiction is required. Each of the
Companies has the corporate power and authority to own and use its properties
and to transact the business in which it is engaged, and holds all franchises,
licenses and permits necessary and required therefor. Sellers have furnished
to Buyer true and correct copies of the organizational documents of the
Companies. NE 23rd is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Oklahoma. NE 23rd
has the power and authority to own and use its properties and to transact the
business in which it is engaged, and holds all franchises, licenses and permits
necessary and required therefor. Sellers have furnished to Buyer true and
correct copies of the organizational documents of NE 23rd. Prior to the
Closing, NE 23rd will be liquidated, by distribution of its assets to its
members, and dissolved in accordance with the laws of the State of Oklahoma.
4.8 Sycamore Existence and Qualification. Sycamore is a partnership
duly organized, validly existing and in good standing under the laws of the
State of Oklahoma, and is duly qualified to
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carry on its business as a partnership in Oklahoma. Sycamore has the power and
authority under its partnership agreement and applicable law to own and use its
properties and to transact the business in which it is engaged, and holds all
franchises, licenses and permits necessary and required therefor. All of the
operations and business of Sycamore are carried on in the State of Oklahoma.
Sellers have furnished to Buyer true and correct copies of the organizational
documents of Sycamore.
4.9 Capitalization. The entire authorized capital stock (i) of PSEC
consists of 10,000,000 shares of common stock, par value $.10 per share (the
"PSEC Common Stock"), and (ii) of PSPC consists of 200,000 shares of common
stock, par value $1.00 per share (the "PSPC Common Stock"). There are
presently outstanding (i) 8,200,514 shares of PSEC Common Stock, and (ii)
171,000 shares of PSPC Common Stock, all of which shares are duly authorized,
validly issued, fully paid and nonassessable, and all of which shares are owned
by Sellers. There are no outstanding warrants, options, contracts, calls, or
other rights of any kind or restriction on the right of transfer with regard to
any issued and outstanding, authorized and unissued, or issued but not
outstanding, shares of stock or any other security of the Companies of any
kind.
4.10 Subsidiaries and Other Activities. The Companies have no
subsidiaries and, except for Sycamore and NE 23rd, do not own any interest in
any other corporation, partnership, joint venture, limited liability company or
other entity. PSEC's interest in NE 23rd and PSPC's interest in Sycamore are
not subject to any options, contracts or rights of any other person nor are
there any restrictions on the right to transfer such interests other than as
specified in the respective organizational documents. The interests are free
and clear or all liens, claims, encumbrances, security interests or burdens of
any kind or description.
4.11 Financial Statements.
(a) Attached hereto as Schedule 4.11(a) are copies of the
following financial statements of the Companies (the "Financial Statements"),
each of which presents fairly the financial position of the reporting entity as
of the date stated and the results of operations for the period then ended and
except as disclosed in Schedule 4.11 have been prepared in accordance with
generally accepted accounting principles, consistently applied:
(i) The unaudited Balance Sheet of PSEC as at December
31, 1995, and the Statement of Revenues and Expenses for the year then ended;
(ii) The unaudited Balance Sheet of PSEC as at August
31, 1996 (the "Balance Sheet Date") and the Statement of Revenues and Expenses
for the eight-month period then ended;
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(iii) The unaudited Balance Sheet of PSPC as at December
31, 1995 and the Statement of Revenues and Expenses for the year then ended;
and
(iv) The unaudited Balance Sheet of PSPC as at the
Balance Sheet Date, and the Statement of Revenues and Expenses for eight-month
period then ended.
(b) Neither PSEC nor PSPC has, and as of the Closing Date will
have, any material liabilities or obligations except for those (i) reflected
or reserved against in the Financial Statements described at (a)(ii) and (iv)
above, (ii) otherwise disclosed in this Agreement, or (iii) incurred in the
ordinary course of business since the Balance Sheet Date.
(c) Neither Sycamore nor NE 23rd has, and as of the Closing Date
will have, any material liabilities or obligations except for those incurred in
the ordinary course of business .
4.12 Absence of Certain Changes and Events. Since the Balance Sheet
Date, and except as permitted by Section 8.7, 8.8 or disclosed on Schedule 4.12
or any other Schedule attached hereto, there has not/have not been:
(a) Any change in the affairs, business, financial condition,
or operations of the Companies, Sycamore or NE 23rd which has had or is
expected to have a material adverse effect on the business or financial
condition of the Companies, Sycamore or NE 23rd;
(b) Any damage, destruction or casualty loss (whether or not
covered by insurance) to any of the Assets which has had or is expected to have
a material adverse effect on the business or financial condition of the
Companies, Sycamore or NE 23rd;
(c) Any change in the Articles of Incorporation or Bylaws of
the Companies or in the partnership agreement of Sycamore or in the Articles of
Organization or Operating Agreement of NE 23rd, except as provided above with
respect to the liquidation and dissolution of NE 23rd;
(d) Any dividends declared or paid or other distribution with
respect to, or any issuance or delivery of any stocks, bonds or corporate
securities (whether authorized and unissued or held in treasury) by either of
the Companies, or any grant by either of the Companies of any options, warrants
or other rights calling for the issuance thereof by either of the Companies;
(e) Any sale, assignment or transfer of any part of the Assets
other than (i) in the ordinary course of business for fair consideration, or
(ii) transfers of certain oil and gas properties from PSEC to Ray H. Potts,
Trustee of the Ray H. Potts
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Living Trust ("Potts"), as of September 1, 1996, all of which properties are
being acquired by Buyer from Potts effective as of September 1, 1996;
(f) Any borrowing of money by either of the Companies, or by
Sycamore or NE 23rd, or the incurrence of any material obligation by either of
the Companies, or by Sycamore or NE 23rd, other than in the ordinary course of
business;
(g) Any capital expenditure or commitment by either of the
Companies, or by Sycamore or NE 23rd, to make a capital expenditure (exclusive
of expenditures for normal repair or maintenance of equipment) other than in
the ordinary course of business;
(h) Any incurrence of losses or knowing waiver of any rights
of value by either of the Companies, or by Sycamore or NE 23rd, in connection
with any aspect of its business which has had or is expected to have a material
adverse effect on the business or financial condition of said Company, Sycamore
or NE 23rd;
(i) Any material change in or any cancellation, termination or
substantive amendment of any material contract, agreement, license or other
instrument to which either of the Companies, Sycamore or NE 23rd is a party
which has had or is expected to have a material adverse effect on the business
or financial condition of said Company, Sycamore or NE 23rd;
(j) Any lending or advancement (other than in the ordinary
course of business) of money by either of the Companies, Sycamore or NE 23rd;
(k) Any mortgage, pledge, lien, security interest or
encumbrance created or perfected on any of the Assets, other than a Permitted
Encumbrance;
(l) Any material increase in the compensation of any officer or
the rate of pay of its employees as a group, except as part of regular
compensation increases in the ordinary course of business;
(m) Any agreement by or commitment of either of the Companies,
Sycamore or NE 23rd to do any of the foregoing;
(n) Any transactions, other than those described in or permitted
by the terms of this Agreement, entered into other than in the ordinary course
of business;
(o) Any resignation or termination of employment of any officer
or key employee of the Companies; or
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(p) Any other event or condition of any character which, in
any one case or in the aggregate, has materially adversely affected, or which
might reasonably be expected to materially adversely affect, the condition
(financial or otherwise), Assets, operations, liabilities, or business of
either of the Companies, Sycamore or NE 23rd, except as hereinabove provided
with respect to the liquidation and dissolution of NE 23rd.
4.13 Accounts Receivable. All accounts receivable of the Companies
existing on the Closing Date (net of the allowance for doubtful accounts
reflected on Schedule 4.13 as updated to the Closing Date) will be (i) valid,
genuine and subsisting, (ii) subject to no known defenses, setoffs or
counterclaims, and (iii) to Seller's knowledge, collectible.
4.14 Tax Returns and Audit. All federal and state income tax returns
and reports required by law to be filed on or prior to the Closing Date
relating to the income or operations of the Companies, Sycamore or NE 23rd
shall have been filed on or prior to the Closing Date, and all taxes shown on
such returns and reports shall have been paid in full. The Companies, Sycamore
and NE 23rd have not received any notice of any audit, investigation, or action
by any taxing authority relating to a redetermination of previously reported
income, deductions, tax credits, or tax liabilities of either of the Companies
or for Sycamore or NE 23rd for any taxable period ended on or prior to the
Closing Date which remains open for assessment or redetermination at Closing.
All income, profits, franchise, sales, use, occupation, property, excise, ad
valorem and other taxes due prior to the Closing Date have been fully paid.
There has not been any intentional disregard of any applicable statute,
regulation, rule, or published ruling in the preparation of any tax returns or
reports filed by or on behalf of the Companies or of Sycamore or NE 23rd.
4.15 No Restrictions. There exists no restriction or reservation
affecting either of the Company's or of Sycamore's or NE 23rd's title to or the
utility of its Assets which would prevent it from occupying or utilizing such
Assets, or any part thereof, after the Closing, to the same full extent that it
might continue to do so if the transaction contemplated hereby did not take
place.
4.16 Other Contracts and Commitments. Neither of the Companies nor
Sycamore nor NE 23rd has outstanding (i) any contract, bid or offer to provide
services to third parties which (A) Sellers know or have reason to believe is
at a price which would result in a net loss in providing such services, or (B)
includes terms and conditions the Companies, Sycamore or NE 23rd cannot
reasonably expect to satisfy or fulfill in their entirety; (ii) any revocable
or irrevocable power of attorney to any person, firm or corporation for any
purpose whatsoever; (iii) any loan agreement, indenture, promissory note,
conditional sales agreement or other similar type of agreement, except to the
extent the indebtedness thereunder is
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reflected on the August 31, 1996 Financial Statements (including inter-Company
indebtedness eliminated by principles of consolidation); or (iv) except as
disclosed on Schedule 4.5, any other material contract or commitment not
directly related to operations on the Properties which is not cancelable
without liability or penalty on sixty (60) days notice or less.
4.17 Indebtedness to and from Officers, Directors and Others. Neither
Company is indebted to any of its shareholders, directors, officers, employees
or agents, or their respective heirs, legatees, beneficiaries or legal
representatives, except for amounts due as normal salaries, wages, bonuses,
commissions and in reimbursement of ordinary expenses, all on a current basis
and consistent with historical practices. All obligations, whether arising by
operation of law, contract, agreement, or otherwise, for payments to trusts or
other funds or to any governmental agency or to any employees, directors,
officers, agents, or any other individual (or any of their respective heirs,
legatees, beneficiaries, or legal representatives) with respect to profit
sharing, pension or retirement benefits, or any other employee benefit of any
kind whatsoever have been paid, if due, or adequate accruals for such payments,
if such accruals are required in accordance with generally accepted accounting
principles, are reflected on the August 31, 1996 Financial Statements. No
present or former shareholder, director, officer, employee or agent of either
of the Companies is indebted to the Companies other than for advancements for
ordinary business expenses in a normal amount.
4.18 Employees. The employees of the Companies are listed in Schedule
4.18. Sycamore and NE 23rd have no employees. Sellers have made available to
Buyer copies of all OSHA citations, EEOC claims and workers' compensation
claims received by the Companies for the five (5) year period prior to the date
of this Agreement.
4.19 Labor Agreements, Employee Benefit Plans, and Employment
Agreements. Except as disclosed in Schedule 4.19, neither of the Companies is
a party to (i) any union collective bargaining or similar agreement, (ii) any
profit sharing, deferred compensation, bonus, stock option, stock purchase,
retainer, consulting, health, welfare or incentive plan, agreement, policy or
arrangement of any kind whatsoever, whether legally binding or not, which will
continue or be binding in any way on either of the Companies beyond the Closing
(such existing plans, policies and arrangements are referred to herein as the
"Benefit Plans"), or (iii) any agreement relating to employment or severance
from employment which will continue beyond the Closing. Copies of all
documents relating to the Benefit Plans and of all existing employment and
severance agreements have been furnished to Buyer.
4.20 Overtime, Back Wages, Vacation and Minimum Wages. No present or
former employee of the Company has any material claim
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against the Companies on account of or for (i) overtime pay, other than
overtime pay for the current payroll period, (ii) wages or salary for any
period other than the current payroll period, (iii) vacation, time off or pay
in lieu of vacation or time off other than that earned in respect of the
current year, or (iv) any violation of any statute, ordinance or regulation
relating to minimum wages or minimum hours of work.
4.21 Insurance Policies. Set forth on Schedule 4.21 is a list of all
material insurance policies in force covering the Companies, Sycamore and NE
23rd and any of their respective properties, operations or personnel. All such
insurance or equivalent insurance shall be maintained through the Closing Date.
4.22 Short-Term Investments, Bank Accounts and Safe Deposit Boxes.
Set forth on Schedule 4.22 is a list of (i) all short-term investments of the
Companies together with the location of the certificate(s) or other evidence of
such investments, and (ii) all bank accounts maintained by the Companies
together with the names of authorized signatories on each such account and the
location of all safe deposit boxes maintained by the Companies together with
the names of the persons authorized access thereto. Sycamore and NE 23rd have
no short-term investments.
4.23 Other Assets. The Assets other than the Properties and the
Sycamore System, title to which is covered by Article 3 hereof, are free and
clear of all liens, encumbrances, security interests, claims or charges of
every kind or description, other than routine maintenance agreements and
Permitted Encumbrances.
4.24 Permits and Authorizations. The Companies, Sycamore and NE 23rd
possess all governmental licenses, permits, certificates, orders, consents,
approvals, franchises and authorizations (collectively, the "Permits") required
to enable them to conduct their business and operations as historically
conducted. The Companies, Sycamore and NE 23rd are in compliance in all
material respects with the Permits.
4.25 Securities Laws. To Seller's knowledge, there has been
compliance in all material respects with all applicable state and federal
securities laws in respect of the offer and sale of interests in Sycamore and
NE 23rd.
4.26 Disclosure. Except as specifically provided in this Agreement, to
Seller's knowledge none of the information furnished to Buyer in writing in
connection with the transaction contemplated hereby, including, without
limitation, information contained in the reports, financial statements and
documents described in this Article IV and in the Schedules attached hereto,
includes an untrue statement of a material fact or omits to state a material
fact necessary in order to make the facts stated, in light of the circumstances
under which they were made, not false or misleading.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLERS
RELATING TO THIS AGREEMENT AND THE SHARES
Each Seller, severally and not jointly, hereby represents and warrants
to Buyer as of the date hereof, and by proceeding with the Closing will be
deemed to represent and warrant to Buyer as of the Closing Date, as follows:
5.1 Agreement Valid. This Agreement constitutes the valid and
binding agreement of Seller enforceable against Seller in accordance with its
terms. All instruments required hereunder to be executed and delivered by
Seller at the Closing will constitute valid and binding agreements of Seller
enforceable against Seller in accordance with their terms.
5.2 Ownership. Seller is, and at the Closing Date will be, the
record and beneficial owner of the number of Shares set forth opposite the name
of such Seller in Exhibit A.
5.3 Title. Seller now has, and at the Closing Date will have, good
and marketable title to the number of Shares set forth opposite name of such
Seller in Exhibit A, free and clear of all adverse claims, options, liens,
security interests, restrictions and other encumbrances.
5.4 Right to Transfer. Seller now has, and at the Closing Date will
have, full legal right and power to transfer and deliver to Buyer the number of
Shares set forth opposite the name of such Seller in Exhibit A in the manner
provided in this Agreement, and upon delivery of such Shares pursuant to the
terms of this Agreement, Buyer will receive good and marketable title thereto,
free and clear of all adverse claims, options, liens, security interests,
restrictions and other encumbrances.
5.5 Brokers and Finders. Neither Seller nor the Companies have
incurred any liability, contingent or otherwise, for brokers' or finders' fees
in respect of this transaction for which Buyer or the Companies shall have any
responsibility whatsoever.
5.6 No Breach; Consents. Neither the execution and delivery of this
Agreement or of the instruments or documents contemplated hereby nor the
consummation of the transactions contemplated herein or therein will directly
or indirectly (i) violate any provision of any applicable law, rule or
regulation to which Seller is subject, (ii) violate any order, judgment or
decree applicable to Seller, or (iii) conflict with or result in breach under
any organizational documents of Seller, or any agreement to which Seller is a
party or by which it may be bound.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
6.1 Organization. Each of Resources and ONEOK is a corporation duly
organized and validly existing under the laws of the State of Delaware.
Resources is a wholly-owned, first tier subsidiary of ONEOK.
6.2 Agreement Authorized. This Agreement has been duly authorized,
executed and delivered by Buyer and all instruments and agreements required
hereunder to be extended and delivered by Buyer or ONEOK at the Closing will be
duly authorized, executed and delivered by Buyer or ONEOK and all requisite
corporate action has been taken to authorize the execution hereof, the
transactions contemplated hereby and all things necessary or desirable in order
to accomplish the purchase of the Shares, and Buyer or ONEOK has all necessary
authority under its charter, bylaws and other governing documents and otherwise
has good right and lawful authority to consummate the same.
6.3 Valid Agreement. This Agreement constitutes the valid and
binding agreement of Buyer enforceable against Buyer in accordance with its
terms, and all instruments required hereunder to be executed and delivered by
Buyer at the Closing will constitute valid and binding agreements of Buyer
enforceable against Buyer in accordance with their terms.
6.4 Brokers and Finders. Buyer has incurred no liability, contingent
or otherwise, for brokers' or finders' fees in respect of this transaction for
which Sellers shall have any responsibility whatsoever.
6.5 Securities Law Matters. Buyer hereby acknowledges that the
Shares will not be registered under the Securities Act of 1933 or any
applicable state securities laws. Buyer represents and warrants to Sellers
that Buyer (i) has reviewed such information as Buyer has deemed relevant in
connection with Buyer's acquisition of the Shares, and (ii) is acquiring the
Shares for investment purposes only and not for resale with a view to, or in
connection with, a distribution.
6.6 Capital Structure. As of the date hereof, the authorized
capital stock of ONEOK consists of 60,000,000 shares of common stock, without
par value ("ONEOK Common Stock"), 340,000 shares of preferred stock, par value
of $50 per share ("ONEOK Preferred Stock"), and 3,000,000 shares of preference
stock, without par value ("ONEOK Preference Stock"). At the close of business
on January 3, 1997: (i) 27,311,617 shares of ONEOK Common Stock and
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180,000 shares of ONEOK Preferred Shares were issued and outstanding and
3,848,886 shares of ONEOK Common Stock were reserved for issuance pursuant to
ONEOK's Employee Stock Purchase Plan, Key Employee Stock Plan, and Thrift Plan
for Employees of ONEOK and subsidiaries, (collectively, the "ONEOK Stock
Plans"); (ii) no shares of ONEOK Preference Stock are outstanding; (iii)
200,000 shares of ONEOK Participating Preference Stock have been reserved for
issuance pursuant the exercise of ONEOK Stock Purchase rights; (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 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. 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, charges, encumbrances, claims and options
of any nature (collectively, "Liens"), other than those which would not have a
Material Adverse Effect. Except (i) as set forth above and as contemplated by
that certain Shareholder Protection Rights Agreement dated as of March 21, 1998
between ONEOK and The Chase Manhattan Bank, as rights agent (the "ONEOK Rights
Agreement"), (ii) for changes since August 31, 1996 resulting from the exercise
of employee stock options granted pursuant to, or from issuances or purchases
under, the ONEOK Stock Plans and ONEOK's Direct Stock Purchase and Dividend
Reinvestment Plan, and (iii) as contemplated by this Agreement, there are
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. As used
herein, a "Material Adverse Effect" or "Material Adverse Change" shall mean, in
respect of ONEOK or its business, as the case may be, 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 or their business, in each case
taken as a whole.
6.7 SEC Documents. ONEOK has furnished to Seller a true and
complete copy of each report, schedule, registration statement
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<PAGE> 19
and definitive proxy statement or information statement filed by ONEOK with the
Securities and Exchange Commission ("SEC") since August 31, 1995 and prior to
the date of this Agreement (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 of 1933, as amended (the "Securities Act") or the Securities and
Exchange Act of 1934, as amended (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, 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 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 and the
consolidated cash flows of ONEOK and its consolidated Subsidiaries for the
periods presented herein.
6.8 Litigation. Except as disclosed in the ONEOK SEC Documents,
there is no suit, action or proceeding pending, or, to the actual knowledge of
the executive officers of ONEOK, threatened against or affecting ONEOK or any
subsidiary of ONEOK ("ONEOK Litigation"), at law or 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 the executive officers of ONEOK and its subsidiaries have
no actual 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
Governmental Entity or arbitrator outstanding against ONEOK or any subsidiary
of ONEOK that has had or would have a Material Adverse Effect on ONEOK or its
ability to consummate the transactions contemplated by this Agreement.
6.9 No Undisclosed Material Liabilities. Except as disclosed in
the ONEOK SEC Documents, there are no liabilities of ONEOK or any of its
subsidiaries of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or
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otherwise, that does 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 the thereto) contained
in ONEOK's Annual Report on Form 10-K for the year ended August 31, 1996; and
(ii) liabilities under this Agreement.
6.10 Disclosure. None of the information furnished to Sellers in
connection with the transaction contemplated hereby, including, without
limitation, the information contained in the reports, financial statements and
documents described in this Article 6, is false or misleading in any material
respect, omits to state any material fact required to be stated therein, or
omits to state any fact necessary in order to make the facts stated therein not
false or misleading.
ARTICLE 7
COVENANTS OF SELLERS PENDING CLOSING
Sellers covenant and agree with Buyer that from and after the date of
this Agreement and until the Closing, Sellers will cause the Companies to
conduct their business and that of Sycamore and NE 23rd in strict compliance
with the following provisions and limitations:
7.1 Ordinary Course. The Properties and the Sycamore System will be
maintained and operated in a good and workmanlike manner consistent with
historical practices, and the Companies will timely pay or cause to be paid all
costs and expenses incurred in connection therewith.
7.2 Restrictions on Operations. Subject to the provisions of Section
8.6 hereof, no operations will be conducted for the drilling of any new well,
the reworking or redrilling of any existing well or the making of any other
capital expenditure on the Properties or the Sycamore System requiring an
expenditure by the Companies in excess of $25,000 for any single project.
Neither of the Companies nor Sycamore will waive any rights or enter into any
new agreements or commitments other than in the ordinary course of business,
abandon any well capable of commercial production (based upon prevailing
economic conditions), release or abandon any of the Reserve Report Properties,
or encumber, sell or otherwise dispose of any of the Reserve Report Properties
other than personal property thereon which is replaced by equivalent property
or consumed in the operation of such Properties in the ordinary course of
business.
7.3 Maintenance of Files. The Companies will exercise reasonable
diligence in safeguarding and maintaining secure all files, books and records
currently maintained.
7.4 Access of Buyer. Buyer shall have access to the employees,
offices, properties, records, files, geological and
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geophysical data, engineering reports and evaluations, books of account, and
all other information of the Companies, Sycamore and NE 23rd pertaining to the
business, properties and affairs of the Companies and Sycamore; provided,
however, that such investigation shall be conducted during normal business
hours and in a manner that does not unreasonably interfere with the Companies'
normal operations and employee relationships. Sellers shall cause the
Companies' personnel to reasonably assist Buyer in making such investigation
and shall cause the counsel, accountants, employees and other representatives
of the Companies, Sycamore and NE 23rd to be reasonably available to Buyer for
such purposes. During such investigation, Buyer shall have the right, at
Buyer's sole cost and expense, to make copies of such records, files and other
materials as Buyer may deem advisable.
ARTICLE 8
ADDITIONAL AGREEMENTS OF THE PARTIES
8.1 Return of Informational Material. If this Agreement is not
consummated, Buyer shall return to Sellers or the Companies all of the items of
information which Sellers or the Companies have delivered to Buyer hereunder,
including all copies of same made by Buyer.
8.2 Confidentiality of Information. If the purchase and sale of the
Shares as contemplated by this Agreement is not completed, Buyer (i) will keep
the information furnished to Buyer hereunder or in contemplation hereof
strictly confidential, except to the extent such information (A) becomes public
other than as a result of dissemination by Buyer, (B) was already known to
Buyer other than as a result of a breach of a confidentiality restriction, or
(C) is furnished to Buyer by a third party independently of Buyer's
investigation pursuant to this Agreement, and (ii) will not use any of such
information to Buyer's financial advantage or in competition with the Companies
or Sycamore. Notwithstanding the provisions of Section 14.6 hereof, this
provision shall not be construed as superseding or limiting the provisions of
any confidentiality agreement heretofore executed by and between Buyer and the
Companies.
8.3 Compliance with Conditions. Buyer and Sellers, respectively,
will proceed diligently using all reasonable efforts to cause all of the
conditions to the obligations of Sellers and Buyer, respectively, to be timely
satisfied.
8.4 Condemnation or Casualty Loss. Buyer's obligation to close shall
not be excused and no adjustment to the Purchase Price shall be required if,
after the execution of this Agreement and prior to the Closing Date, any item
of the Assets is damaged or destroyed by fire or other casualty or is taken
under the right of eminent domain. Prior to the Closing Date, neither of the
Companies nor Sycamore shall voluntarily compromise, settle or adjust any
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claims, causes of action or demands against third parties, arising out of such
damage, destruction or taking, or commit, use or apply any insurance proceeds
or payments toward the repair, restoration or replacement of the affected
property without the prior written consent of Buyer. Notwithstanding the above
to the contrary, in the event that the Assets are damaged or destroyed by fire
or other casualty or is taken under the right of eminent domain and the value
of the Assets as a result thereof is reduced by an amount exceeding the sum of
Five Million and No/100 Dollars ($5,000,000), Buyer may terminate this
Agreement in its entirety without further liability to Seller and Buyer's
deposit will be promptly returned to Buyer. If the parties cannot agree on
such values, the matter shall be referred to arbitration (to be conducted in
accordance with the procedures set forth in Section 3.6 hereof).
8.5 Gas Imbalances. Sellers acknowledge that there are certain gas
imbalances with respect to production from or attributable to certain of the
Reserve Report Properties as set forth on Schedule 8.6. The Base Price shall
be adjusted at the Closing by an amount equal to $2.00 per Mcf for the net gas
imbalance (that is, the difference between aggregate overproduction
attributable to the Companies' interest in Properties and the aggregate
underproduction attributable to such interest) existing at the Closing Date.
The adjustment may be either a positive or negative number.
8.6 Capital Expenditures. During the period from the execution of
this Agreement to the Closing Date, Sellers will cause representatives of the
Companies to consult with Buyer from time to time with respect to any operation
on the Properties or the Sycamore System proposed by either of the Companies,
or by a third party and recommended for approval by the Companies, reasonably
expected to require an expenditure by either of the Companies in excess of
$25,000 for any single project, and will provide Buyer with all information
reasonably available to the Companies with respect thereto. Buyer shall,
within ten (10) days after receipt of the Companies' recommendation for
conducting or participating in any such project, or within such lesser period
as may be required by the terms of any applicable agreement, approve or
disapprove such project. Failure of Buyer to respond within the time required
will be deemed to constitute disapproval by Buyer of the project. In the event
Buyer approves such project, the Company shall conduct, propose or elect to
participate in such project and shall incur and pay as they become due the
expenditures associated therewith. In the event the project or operation is a
well proposed by an unrelated third party and the affected Company must, by
operation of an applicable agreement or order of a regulatory agency, elect
either to participate in such well or lose the right to participate in such
well and/or other rights in the unit in which such well is proposed (for
example, but not by way of limitation, a non-consent penalty under a joint
operating agreement, requirement to accept consideration in lieu of
participation under a pooling order or
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forfeiture of the right to participate in future development under an area of
mutual interest agreement), and Buyer disapproves or is deemed to have
disapproved participation by the affected Company in such well, then, upon five
(5) days written notice to Buyer (during which time Buyer may reverse its
decision and approve participation by the Company), Sellers may elect to cause
the affected Company to assign the entire Property on which such operation is
to be conducted to an affiliate of Sellers and reduce the Base Price by the
Agreed Value of such Property.
8.7 Liquidating Distribution of NE 23rd Properties. Prior to the
Closing, NE 23rd will distribute to its members all of NE 23rd's interests in
its oil and gas properties. The Properties expected to be distributed to and
received by PSEC by reason of its "indirect" ownership of such properties are
included in Exhibit D and have been taken into account in determining the Base
Price under this Agreement.
8.8 Working Capital Distribution. Prior to the Closing Date, Sellers
shall cause PSEC and PSPC to distribute to those Sellers who were stockholders
of the Companies on the Balance Sheet Date an amount equal to the working
capital (that is, total current assets less total current liabilities) of each
of PSEC and PSPC as of the Balance Sheet Date as reflected in the Financial
Statements attached as Schedules 4.11(a)(ii) and 4.11(a)(iv), less all cash
distributions with respect to stock made to the stockholders of PSEC and PSPC
after August 31, 1996. In the event there is insufficient cash in the Companies
to make the authorized distribution prior to the Closing Date, the Base Price
shall be adjusted upward at the Closing by the amount authorized but not
distributed due to such shortfall.
8.9 Conduct of Buyer's Business During the Valuation Period. During
the period from the beginning of the Valuation Period until the Closing, Buyer
shall conduct its business in accordance with historical practices, not issue
new stock or rights with respect to stock, distribute or dispose of any
material assets, declare any extraordinary dividends, or take any other action
that would cause the value of the Exchange Shares to be less than such value
would have been if Buyer had not taken such action.
8.10 Severance Payments. Sellers shall reimburse the Companies for
all severance payments made by the Companies under the severance policy of the
Companies in effect as of the Closing Date for employees of the Companies
terminated at or within ninety (90) days after the Closing Date.
ARTICLE 9
ENVIRONMENTAL MATTERS
9.1 Physical Condition of the Properties. The Properties (solely for
purposes of this Article, the term "Properties" shall
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include the Sycamore System) have been used for oil and gas drilling,
production, gathering and processing operations, related oil field operations
and possibly for other operations, whether of a similar or dissimilar nature.
Physical changes in or under the Properties or adjacent lands may have occurred
as a result of such uses. The Properties also may contain buried pipelines and
other equipment, whether or not of a similar nature, the locations of which may
not be known to Sellers or be readily apparent by a physical inspection of the
Properties. Third parties may have used the Properties or the surface rights
thereon for other purposes as well. Buyer understands that the Companies do
not have the requisite information with which to determine the exact nature or
condition of the Properties nor the effect any such use has had on the physical
condition of the Properties. Buyer is hereby notified that detectable amounts
of regulated and unregulated chemicals and other substances which may pose a
threat to health or to plants or wildlife, or which are known to cause
illnesses, diseases, cancer, birth defects and other reproductive harm, may be
found in, on or around the Properties. Adverse physical conditions, including
the presence of such chemicals and other substances, may not be revealed by
Buyer's investigation. In addition, Buyer acknowledges that some oil field
production equipment may contain various contaminants or hazardous substances,
including without limitation, asbestos and/or naturally-occurring radioactive
material ("NORM"). In this regard, Buyer expressly understand that NORM may
affix or attach itself to the inside of wells, materials, pipes and equipment
as scale or in other forms, and that wells, materials, pipes and equipment
located on the Properties described herein may contain NORM and that NORM-
containing materials may be buried or have been otherwise disposed of on the
Properties. Buyer also expressly understands that special procedures may be
required for the removal and disposal of various contaminants or hazardous
substances, including without limitation asbestos and NORM, from the Properties
where it may be found. The statements in this Section 9.1 are intended as
disclosures and acknowledgments of possible conditions existing on the
Properties.
9.2 Environmental Assessment. Buyer shall have the right, at Buyer's
sole cost, risk, and expense, to undertake an environmental assessment of the
Properties during the period ending on the Title Notice Date (the "Inspection
Period"). Buyer and its agents shall have the same right as the Companies to
enter upon the Properties, inspect the same, conduct soil and water sampling,
analysis and monitoring, including soil borings (and, after notice and
consultation with the Companies, drilling groundwater monitoring wells), an
generally conduct such tests, examinations, investigations and studies as Buyer
deems necessary or appropriate for preparing appropriate engineering and other
reports and making judgments relating to the Properties, their condition, and
the presence of chemicals and other substances. Sellers shall cooperate with
any efforts of Buyer and its agents to obtain third party consents for access
to those parcels of land within the Properties to which the Companies may not
presently have access. Buyer and its
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agents shall have reasonable access to the Companies' agents and employees in
the course of conducting Buyer's environmental assessment. Seller has caused
to be provided to Buyer copies of all reports, citations, notices and
complaints relating to environmental matters affecting the Properties or the
Sycamore System received by the Companies, Sycamore and NE 23rd (i) within the
five (5) year period prior to the date of this Agreement, or (ii) that remain
outstanding, unremedied or unresolved. Buyer agrees to provide to Sellers a
copy of all facts discovered in the course of conducting Buyer's environmental
assessment, including all direct observations (if in writing or other tangible
or transferable medium), data and summaries thereof. Buyer shall keep any data
or information acquired in the course of such examinations and the results of
all analyses of such data and information strictly confidential and not
disclose same to any person or agency without the prior written approval of the
Companies, except that Buyer may disclose to authorities having jurisdiction
such information as is required by law or by court order at the same time that
Buyer provides such information to Sellers. If Buyer determines that
conditions on a Property do not satisfy the environmental standards set forth
in Section 9.4 below in a material respect, then Buyer may notify Sellers of
such condition by providing Sellers, on or prior to the Title Notice Date, a
written "Notice of Environmental Defect" setting forth in detail the facts
giving rise to the claimed defect, the environmental standard which Buyer
claims is not satisfied, any Applicable Environmental Law (hereinafter defined)
which Buyer contends has been breached or violated and, if the claimed defect
arises from information contained in a document, a copy of such document or the
relevant parts thereof. Buyer shall be deemed to have accepted without
objection the environmental conditions described in Schedule 9.4.
9.3 Access; Indemnification. Access to the Properties to conduct
Buyer's environmental assessment shall be subject to the following conditions:
Buyer waives and releases all claims against Sellers, the Companies, and their
directors, officers, employees and agents, for injury to or death of persons or
damage to property arising in any way from the exercise of rights granted to
Buyer hereby or the activities of Buyer or its employees, agents or contractors
on the Properties, provided that Buyer does not hereby assume the risk of
damage, injury or death attributable to the willful misconduct or gross
negligence of Sellers or the Companies. Buyer shall indemnify Sellers, the
Companies, and their directors, officers, employees, and agents, and shall hold
each and all of said indemnities harmless from and against any and all loss
whatsoever arising out of (i) any and all statutory or common-law liens or
other encumbrances for labor or materials furnished in connection with such
tests, samplings, studies or surveys as Buyer may conduct with respect to the
Properties, and (ii) any injury to or death of persons or damage to property
occurring in, on or about the Properties as a result of such exercise or
activities (except for any such injuries or damages caused by the gross
negligence or willful
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misconduct of any said indemnities). Notwithstanding any provision of this
Agreement to the contrary, the foregoing obligation of indemnity shall survive
the Closing or the termination of this Agreement without Closing.
9.4. Environmental Standards. This section sets out the environmental
standards applicable to the Properties for purposes of this Agreement and the
Sellers do hereby represent and warrant as of the date hereof, as follows:
(a) The Properties shall not have been used for the
generation, treatment, storage or disposal of a Hazardous Substance (as defined
below) in a manner or to an extent that would subject the Companies to a
material liability for violation of any Applicable Environmental Laws (as
defined below). Except as disclosed in Schedule 9.4, there shall not have been
any release or discharge of a Hazardous Substance from the Properties in a
manner or to an extent that would subject the Companies to a material liability
for violation of any Applicable Environmental Laws. "Hazardous Substance"
shall mean any hazardous substance, pollutant, contaminant, solid or hazardous
waste, hazardous waste constituents, hazardous material or toxic substance
subject to regulation or liability under Applicable Environmental Laws in force
as of the date hereof, including asbestos, radioactive substances, and any
other substance or material that would constitute or cause a health, safety or
environmental hazard on or at the Properties under Applicable Environmental
Laws. "Applicable Environmental Laws" shall mean (i) all federal statutes
regulating or prescribing restrictions regarding the use of the Properties or
other activities affecting the environment (air, water, land, animal and plant
life), including but not limited to the following: the Clean Air Act, Clean
Water Act, Comprehensive Environmental Response, Compensation and Liability
Act, Emergency Planning and Community Right-to-Know Act, Endangered Species
Act, Hazardous Materials Transportation Act, Migratory Bird Treaty Act,
National Environmental Policy Act, Occupational Safety and Health Act, Oil
Pollution Act of 1990, Resource Conservation and Recovery Act, Safe Drinking
Water Act, and Toxic Substances Control Act; (ii) any regulations promulgated
under such federal statutes, (iii) any state law counterparts of such federal
statutes and the regulations promulgated thereunder; (iv) any other state or
local statutes, rules, regulations or ordinances regulating the use of or
affecting the environment, and (v) all common law rights, duties and
obligations regarding the use of or matters affecting the environment.
(b) Except as disclosed in Schedule 9.4, there are no
agreements, consent or administrative orders, injunctions, decrees, judgments,
license or permit conditions, or other directives of governmental authorities
based on any Applicable Environmental Laws that require any material change in
the present condition of the Properties, and the Companies, Sycamore, and NE
23rd have not received any notice from any governmental authority
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or private or public entity advising the Companies, Sycamore, and NE 23rd that
it is or is potentially responsible for response costs under an Applicable
Environmental Law as a result of said Company's ownership or activities in
connection with the Properties.
(c) Except as disclosed in Schedule 9.4, no conditions or
circumstances exist on the Properties that would subject the Companies,
Sycamore, and NE 23rd to any material damages, penalties, injunctive relief or
cleanup or closure costs under any Applicable Environmental Laws or that would
require cleanup, removal, remedial or corrective action or other response
involving a material expenditure by the Companies pursuant to Applicable
Environmental Laws.
9.5 Properties Subject to Environmental Defect. Sellers shall have a
period of eleven (11) days after the Title Notice Date to cure or cause the
Companies to cure or remediate the environmental defect(s) set out in any
Notice of Environmental Defect timely and properly given by Buyer. All costs
and expenses incurred by the Companies in curing such environmental defects
shall result in a downward adjustment to the Base Price at the Closing. In the
event Sellers are unable or unwilling to cure or remediate any such defect
prior to Closing, one of the following shall occur:
(a) The parties shall agree upon an adjustment to the Purchase
Price to compensate Buyer (i) for the defect and all future liability
associated therewith or resulting therefrom, and (ii) for agreeing to
indemnify, defend and hold harmless Sellers from and against any and all loss,
cost, liability or expense associated therewith or resulting therefrom.
(b) If the parties are unable to reach agreement pursuant to
(a) above, Sellers, at their sole discretion, may elect either (i) to proceed
to Closing but prior thereto cause the Companies to assign the affected
Property to a third party (which may be owned by Sellers) and reduce the Base
Price by the Agreed Value of such Property, or (ii) to proceed to Closing but
prior thereto cause the Company to assign to such third party the affected
Property together with any other Properties of Sellers' choosing having Agreed
Values sufficient to offset, in Sellers' sole judgment and discretion, the
estimated cost of remediation or cure of the defect, and to reduce the Base
Price by the sum of the Agreed Values thereof, or (iii) if either Party's good
faith estimation the cost of remediation or cure of all environmental defects
of which notice is timely and properly given by Buyer may exceed $1,000,000,
terminate this Agreement in its entirety without further liability to any
party.
(c) Notwithstanding the provisions of (a) and (b) above,
Purchaser shall not be entitled to an adjustment of the Base Price pursuant to
the provisions of this Section 9.5 unless the cumulative amount of all such
adjustments exceeds $50,000.
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9.6 Indemnification of Sellers. Subject to Sellers' indemnification
obligations under this Agreement with respect to representations and warranties
concerning environmental matters, all liabilities attributable to conditions
existing and operations conducted on the Properties (other than Properties
assigned to a third party prior to the Closing pursuant to Section 9.5 hereof)
under Applicable Environmental Laws and under all future environmental laws
shall be liabilities of the Companies or of Sycamore, as applicable, and Buyer
shall indemnify, defend, and hold harmless Sellers from and against all loss,
cost, liability or expense attributable thereto or resulting therefrom.
ARTICLE 10
CONDITIONS TO OBLIGATIONS OF BUYER
The obligation of Buyer to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Buyer to
waive any one or more of such conditions:
10.1 Representations and Warranties of Sellers. Each of the
representations and warranties of Sellers set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement
(except to the extent such representations and warranties speak to an earlier
date), and as of the Closing Date as though made on such date, except where the
failure to be so true and correct (without giving effect to the individual
materiality, qualification and thresholds otherwise contained in Sections 4 and
5 hereof) would not reasonably be expected to have a Material Adverse Effect on
Buyer or as otherwise contemplated by this Agreement and Buyer shall have
received a certificate signed by the Chief Executive Officer of PSEC and PSPC
to such effect.
10.2 Performance of This Agreement. Sellers shall have duly performed
or complied in all material respects with all of the obligations to be
performed or complied with by Sellers under the terms of this Agreement on or
prior to the Closing Date and Buyer shall have received a certificate signed by
the Chief Executive Officer of PSEC and PSPC to such effect.
10.3 Resignations. Buyer shall have received the written resignations
of each member of the Board of Directors and each officer of the Companies that
is a Seller or an affiliate of a Seller.
10.4 Opinion of Counsel. Buyer shall have received an opinion of McAfee
& Taft A Professional Corporation, dated the Closing Date, substantially in the
form attached hereto as Exhibit G.
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10.5 Closing of Related Agreements. The contemporaneous, separate but
related Sale and Purchase Agreements between Sellers and their affiliates, as
Sellers, and Buyer shall close simultaneously with the Closing under this
Agreement.
ARTICLE 11
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers to consummate the transactions provided for
in this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Sellers to
waive any one or more of such conditions:
11.1 Representations and Warranties of Buyer. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in
all material respects at and as of the Closing Date, and Sellers shall have
received a certificate signed by a Vice President of Buyer to such effect.
11.2 Performance of This Agreement. Buyer shall have duly performed
or complied in all material respects with all of the obligations to be
performed or complied with by Buyer under the terms of this Agreement on or
prior to the Closing Date, and Sellers shall have received a certificate signed
by a Vice President of Buyer to such effect.
11.3 Shelf Registration Agreement. ONEOK shall have executed and
delivered to the Sellers a Shelf Registration Agreement substantially in the
form attached hereto as Exhibit I (the "Shelf Registration Agreement").
11.4 Opinion of Counsel. Sellers shall have received an opinion of
Arrington, Kihle, Gaberino & Dunn, dated as of the Closing Date, substantially
in the form attached hereto as Exhibit H.
11.5 Closing of Related Agreements. The contemporaneous, separate but
related Sale and Purchase Agreements between Sellers and their affiliates, as
Sellers, and Buyer shall close simultaneously with the Closing under this
Agreement.
ARTICLE 12
TERMINATION
12.1. Noncompliance by Sellers. Buyer may terminate this Agreement by
written notice to Sellers if the conditions to Buyer's obligations under this
Agreement, as set forth in Article 10 hereof, shall not have been complied with
or performed in all material respects (and Sellers shall not be prepared to
comply with or
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perform the same) by the date on which the Closing is to occur (as set forth in
Section 13.1), and such non-compliance or non-performance shall not have been
waived in writing by Buyer. Under such circumstances, Buyer shall be entitled
to a return of the Deposit, which shall be Buyer's sole remedy hereunder unless
such termination is a result of Sellers' failure or refusal to close the
transaction contemplated hereby under circumstances in which all conditions
precedent to Sellers' obligations as set forth in Article 11 have been
performed or satisfied in all material respects, in which event Buyer shall be
entitled to pursue any remedies existing at law or in equity.
12.2. Noncompliance by Buyer. Sellers may terminate this Agreement by
written notice to Buyer if the conditions to Sellers' obligations under this
Agreement, as set forth in Article 11 hereof, shall not have been complied with
or performed in all material respects (and Buyer shall not be prepared to
comply with or perform the same) by the date on which the Closing is to occur
(as set forth in Section 13.1), and such non-compliance or non-performance
shall not have been waived in writing by Sellers. In such event, Sellers shall
retain the Deposit as liquidated damages for Buyer's failure to purchase the
Shares at the time specified herein. The parties hereto agree that time is of
the essence for the consummation of the transactions contemplated hereby, that
the amount of damages caused by Buyer's breach would be very difficult to
calculate exactly, and that the provision for liquidated damages contained in
this Section 12.2 shall not be construed as a penalty provision. Such right to
liquidated damages shall be Sellers' sole remedy hereunder.
12.3. Cooperation by Buyer. In the event of termination of this
Agreement by mutual agreement of the parties, Sellers shall be free to sell the
Shares to any third party without any limitation under or by reason of this
Agreement. Buyer shall cooperate with Sellers in effectuating any such sale by
promptly executing any instrument reasonably requested by Sellers evidencing
the termination of this Agreement or Buyer's right to acquire the Shares.
12.4. Arbitration. In the event this Agreement is terminated by Buyer
pursuant to Section 12.1 hereof or by Sellers pursuant to Section 12.2 hereof
and a dispute exists between the parties with respect to entitlement to the
Deposit, such dispute shall be resolved by binding arbitration conducted in
accordance with the Commercial Arbitration Rules of the AAA. The arbitration
proceedings shall be conducted in Oklahoma City, Oklahoma, by a single
arbitrator agreed to by the parties, or if they are unable to agree, selected
by the AAA. The arbitrator shall be a licensed attorney experienced in
transactions involving the sale and purchase of the stock or assets of oil and
gas companies. The arbitrator shall be instructed to make a determination that
either Buyer is entitled to return of the entire Deposit or Sellers are
entitled to retain the entire Deposit. The decision of the arbitrator shall be
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conclusive and binding on the parties. The general expenses of arbitration,
including the fees of the AAA if necessitated by reason of the failure of the
parties to agree upon an arbitrator, shall be borne equally by Sellers and
Buyer; however, each party shall bear and pay the fees and expenses of its own
witnesses, legal counsel and of the collection and presentation of its
evidence.
ARTICLE 13
CLOSING; POST-CLOSING
13.1 Date and Place. The Closing shall be held at 10:00 o'clock a.m.
on February 27, 1997 (the date on which the Closing actually occurs is referred
to herein as the "Closing Date"). The Closing shall take place in the offices
of PSEC, 100 N. Broadway, Suite 3200, Oklahoma City, Oklahoma.
13.2 Satisfaction of Conditions. Not later than two (2) business
days prior to the Closing Date, each party shall provide the other party such
evidence of satisfaction of conditions under Articles 10 and 11 hereof as the
other party shall have reasonably and timely requested.
13.3 Transfer of the Shares. At the Closing, Sellers shall deliver
to Buyer certificates registered in the name of Sellers, endorsed in blank,
representing the Shares, free and clear of all liens, encumbrances, security
interests and adverse claims.
13.4 Determination of Purchase Price. On the day that is two (2)
business days prior to the Closing Date, Sellers shall furnish to Buyer (i) a
summary of the Base Price adjustments to be effected at the Closing pursuant to
Sections 3.3, 3.4, 8.5, 8.6, 8.8 and 9.5 hereof, and (ii) based upon the
information at (i), a calculation of the Purchase Price. Buyer and Sellers
shall work together diligently and in good faith to agree upon the amount of
the Purchase Price prior to the Closing, and if they do so agree, the agreed
amount shall be conclusively established as the Purchase Price. If they cannot
agree, the Closing shall occur as scheduled based on Sellers' reasonable, good
faith estimate of the Purchase Price ("Sellers' Estimate") and certificates
representing the number of Exchange Shares so determined shall be issued to
Sellers; however, all of such certificates shall be deposited in escrow with
the Escrow Agent pending a determination of the final Purchase Price. In such
event the final Purchase Price shall be determined either (i) by subsequent
agreement of the parties, or (ii) by binding arbitration pursuant to an
arbitration proceeding initiated and conducted substantially in accordance with
the procedures set out in Section 12.4 hereof. In the event arbitration is
necessary to determine the Purchase Price, prior to initiating the arbitration,
each party shall furnish to the other a statement of such party's calculation
of the Purchase Price. All fees and expenses of the arbitration, including
attorneys' fees, expert witness fees and all other out-of-pocket expenses of
both parties,
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shall be paid by the party whose calculation of the Purchase Price bears the
greatest difference from the Purchase Price determined by the arbitrator. The
award of the arbitrator shall not be subject to appeal or judicial review of
any nature and shall be promptly furnished to the Escrow Agent who shall make
distribution of the Exchange Shares in a manner consistent with such award or,
if new certificates are required in order to effect the award of the
arbitrator, shall deliver the escrowed certificates upon receipt from Buyer of
new certificates representing the number of shares corresponding to the
Purchase Price determined by such award. In the event new certificates are
required and Buyer does not furnish such certificates within ten (10) days
after receipt by Escrow Agent of the award, Escrow Agent shall deliver all
originally deposited certificates to Sellers.
13.5 Transfer of the Exchange Shares.
(a) At the Closing, Buyer shall deliver to Sellers (or to the
Escrow Agent if the Purchase Price has not been agreed upon) stock certificates
evidencing Exchange Shares having an aggregate Closing Value (less the value of
any fractional share which shall be paid in cash) equal to the Purchase Price
(or Sellers' Estimate if the Purchase Price has not been agreed upon), together
with cash for any fractional shares. If Sellers have referred to arbitration
the resolution of a Title Defect pursuant to Section 3.5, the number of
Exchange Shares representing the Title Escrow which are delivered to the Escrow
Agent under the Title Escrow Agreement shall be deducted from the number of
Exchange Shares delivered to Sellers or the Escrow Agent pursuant to the
preceding sentences of this Section 13.5. The number of Exchange Shares issued
in the name of each Seller shall be determined by multiplying the aggregate
number of Exchange Shares to be issued by the percentage set opposite the name
of such Seller in Exhibit A. Fractional shares shall not be issued, in which
event the number of shares to be issued to a Seller shall be rounded down to
the nearest whole share and the cash for any fractional shares resulting from
the Purchase Price shall be distributed to Sellers in proportion to the number
of shares received.
(b) Each of the Sellers represents and warrants to Buyer that
the Exchange Shares it will receive under this Agreement are not being acquired
with a view to, or in connection with, a distribution of such Exchange Shares
in violation of the Securities Act of 1933, as amended (the "Securities Act").
Sellers understand that (i) the Exchange Shares may not be sold or transferred
for value except pursuant to an effective registration statement under the
Securities Act or an exemption or exception from the registration requirements
under the Securities Act, (ii) a stop transfer instruction will be issued with
respect to the Exchange Shares, and (iii) the following legend will be placed
on the certificates representing the Exchange Shares:
2a-32
<PAGE> 33
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED FOR VALUE
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR AN
OPINION OF COUNSEL, WHICH OPINION SHALL BE REASONABLY
SATISFACTORY TO THE ISSUER, THAT SUCH REGISTRATION IS NOT
REQUIRED.
ARTICLE 14
MISCELLANEOUS
14.1 Notices. All communications required or permitted to be given
under this Agreement shall be in writing and delivered, mailed or transmitted
to the parties at the addresses set out below. Notices shall be deemed given
when received except that notices given by facsimile transmission on weekends,
holidays or after 5:00 p.m. Central Time, shall be deemed received on the next
business day. If delivered by commercial delivery service or mailed by
registered or certified mail, the delivery receipt shall be evidence of the
date of receipt. Either party may, by written notice so delivered to the
other, change the address to which delivery shall thereafter be made.
(a) Notices to Buyer:
Mr. J. C. Kneale, Vice President
ONEOK Resources Company
100 W. Fifth Street
Tulsa, Oklahoma 74103
Fax No. (918) 588-7773
With copy to:
Donald A. Kihle, Esq.
Arrington Kihle Gaberino & Dunn
100 W. Fifth Street, Suite 1000
Tulsa, Oklahoma 74103
Fax No. (918) 588-7873
(b) Notices to Sellers:
Mr. Ray Potts
PSEC, Inc.
100 N. Broadway, Suite 3200
Oklahoma City, OK 73102
Fax No. (405) 235-1223
2a-33
<PAGE> 34
With copy to:
C. David Stinson, Esq.
McAfee & Taft A Professional Corporation
Tenth Floor, Two Leadership Square
Oklahoma City, Oklahoma 73102
Fax No. (405) 235-0439
14.2 Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that Buyer may not assign this Agreement or any of
its rights or obligations hereunder without the prior written consent of
Sellers, which consent may be withheld in Sellers' sole discretion.
14.3 Counterparts. This Agreement may be executed in any number of
counterparts which taken together shall constitute one and the same instrument
and each of which shall be considered an original for all purposes.
14.4 Expenses. Each party hereto will bear and pay its own expenses
of negotiating and consummating the transactions contemplated hereby.
14.5 Section Headings. The section headings contained in this
Agreement are for convenient reference only and shall not in any way affect the
meaning or interpretation of this Agreement.
14.6 Superseding Effect. This Agreement supersedes any prior
agreement or understanding between the parties with respect to the subject
matter hereof.
14.7 Governing Law; Enforcement. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of Oklahoma
applicable to contracts made and to be performed entirely therein. The
prevailing party in any litigation initiated to enforce rights under or collect
damages for breach of this Agreement shall be entitled to reimbursement from
the non-prevailing party of all costs and expenses, including attorneys' fees,
incurred by the prevailing party in connection with such litigation.
14.8 Exhibits and Schedules. The Exhibits and Schedules referred to
herein are attached hereto and by this reference made a part hereof.
14.9 Announcements. Sellers and Buyer shall consult with each other
with regard to all press releases and other announcements issued by either
party concerning this Agreement or the transaction contemplated hereby and,
except as may be required by applicable laws or the applicable rules and
regulations of any governmental agency or stock exchange, neither Buyer nor
Sellers shall issue any
2a-34
<PAGE> 35
such press release or other publicity without the prior written consent of the
other party.
14.10 Survival of Warranties and Representations and Indemnification.
Notwithstanding any investigation conducted before or after the closing, the
parties shall, subject to any state of facts or limitations set forth in the
Schedules attached hereto or otherwise specifically provided in this Agreement,
be entitled to rely upon the warranties and representations set forth herein
and the obligations of the parties with respect thereto shall survive the
Closing and continue in full force and effect until the first anniversary of
the Closing Date, at which time all warranties and representations set forth in
this Agreement and all liabilities of the parties with respect thereto shall
terminate, except for warranties and representations relating to income taxes
and except for claims relating to any other warranties or representations which
are asserted in writing on or before such first anniversary of the Closing
Date. Warranties and representations concerning income taxes and all
liabilities of the parties with respect thereto shall continue in effect for a
period of five years after the Closing Date. Subject to any applicable
statutes of limitation, the liabilities of the parties with respect to all
other warranties and representations as to which timely claims have been
asserted in writing shall continue until such claims have been finally decided,
settled or adjudicated. Each party will indemnify and hold the other party
harmless from any and all actual loss, cost, liability and expense (including
reasonable attorneys' fees) resulting from such breach of its warranties,
representations, and obligations under this Agreement. Each party's liability
resulting from any breach of its warranties, representations, or other
obligations set forth herein to another party shall be limited, in the
aggregate, to the excess of any loss resulting therefrom over $50,000 and
Seller's liability shall be limited to the Purchase Price.
14.11 Further Assurances. After the Closing the parties shall, at the
sole cost and expense of the requesting party if more than an immaterial
expense is involved, (i) furnish such additional information, (ii) execute and
deliver such additional documents, and (iii) perform such additional acts, as
may be necessary and reasonably requested by the other party or parties to
effect the transaction contemplated by this Agreement.
14.12 Waiver. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power or privilege under this
Agreement or the documents referred to herein will operate as a waiver of such
right, power or privilege, and no single or partial exercise of any such right,
power or privilege will preclude any other or further exercise of such right,
power or privilege or the exercise of any other right, power or privilege. To
the maximum extent permitted by applicable law, (i) no waiver of any claim or
right under this Agreement will be valid
2a-35
<PAGE> 36
unless evidenced by a writing signed by the waiving party, (ii) no waiver given
by a party will be applicable except in the specific instance for which it is
given, and (ii) no notice to or demand on a party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement or the documents referred to herein.
Executed as of the date first above written.
SELLERS:
-------
----------------------------------------
Ray H. Potts, Individually and as
Trustee of the Ray H. Potts Living
Trust
----------------------------------------
Robert L. Stephenson, Individually and
as Trustee of the Robert L. Stephenson
Living Trust
----------------------------------------
R. L. Hilbun
----------------------------------------
Roger A. Rose
BUYER:
-----
ONEOK RESOURCES COMPANY, a Delaware
corporation
By
--------------------------------------
Vice President
2a-36
<PAGE> 37
LIST OF EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
Exhibits
- --------
A Sellers and Stock Ownership
B Corporate Structure
C Sycamore System
D Listing of Properties (by well, with WI and NRI), together with
Agreed Values
E Deposit Agreement
F Escrow Agreement
G Opinion of Sellers' Counsel
H Opinion of Buyer's Counsel
Schedules
- ---------
4.2 Long term sale/purchase agreements; contracts involving
prepayments and makeup rights
4.5 Material executory contracts
4.11 Financial statements
4.12 Changes since the Balance Sheet Date
4.13 Past due/problem accounts receivable
4.18 Employees
4.19 Employee benefits
4.21 Insurance
4.22 Short term investments; bank accounts
8.5 Gas imbalances
</TABLE>
2a-37
<PAGE> 38
EXHIBIT A
<TABLE>
<CAPTION>
Ownership (Shares and %)
-----------------------------------------
Seller PSEC, Inc. PSPC, Ltd.
- ------ ---------- ----------
<S> <C> <C>
Ray H. Potts, Trustee of 5,200,000 (63.41%)
the Ray H. Potts Living
Trust
Ray H. Potts 108,432 (63.41%)
Robert L. Stephenson, 2,800,000 (34.14%)
Trustee of the Robert L.
Stephenson Living Trust
Robert L. Stephenson 58,386 (34.14%)
R. L. Hilbun 143,224 ( 1.75%) 2,987 ( 1.75%)
Roger A. Rose 57,290 ( 0.70%) 1,195 ( 0.70%)
--------- -------
Totals 8,200,514 171,000
</TABLE>
2a-38
<PAGE> 39
EXHIBIT "B"
<TABLE>
<S> <C>
PSEC, INC.
An Oklahoma Sub "S" Corp. PSPC, LTD.
| An Oklahoma Sub "S" Corp.
| |
| |
N.E. 23RD L.L.C. |
An Oklahoma Limited Liability SYCAMORE GAS SYSTEM
Corp. Oklahoma General Partnership
PSEC, Inc. Managing Partner PSPC, Inc., General Partner
</TABLE>
2a-39
<PAGE> 40
EXHIBIT "C"
1. The Sycamore Gas System facilities include, but are not limited to, the
following:
a. A gas gathering system which consists of 18.9 miles of
various sizes and types of pipe, as generally depicted on the
attached plat. The pipe ranges in size from 2" to 8".
b. Gas processing plant which is currently not in use.
c. Two compressors, 200 hp each.
d. Four storage tanks: 714 bbl., 238 bbl., 210 bbl., 100 bbl.
e. Portable building used as an office. A trailer is used as a
warehouse for materials and supplies.
2. The gas plant is located on approximately 10 acres in Section 12-T3S-
R1E, Carter County, Oklahoma. The 10 acres is leased under a long term
lease dated November 27, 1984, a copy of which has been made available
for review by Buyer.
2a-40
<PAGE> 41
&A EXHIBIT "D"
Exhibit "D-1" PSEC, Inc.
<TABLE>
<CAPTION>
Well Name nbr def PSEC WI PSEC NRI PSEC RI PSEC ORRI PSEC net
<S> <C> <C> <C> <C> <C> <C>
Anderson 1-21 pdp 0.04083620 0.03243710 4,401
Beeson 1-23 pdp 0.18883900 0.15052925 496
Bobcat 1-27 pdp 0.02742072 0.02299008 7,513
Boren 1-34 pdp 0.00966795 0.00813228 1,235
Boren 2-34 prb 0.00966795 0.00813228 0
Bowman 2-10 pdp 0.24562500 0.19957040 1,472
Bryan Bolin 1-25 pdp 0.01068750 0.00883970 1,770
Burch * 2-12 pud 0.02862431 0.02215527 0.00715543 0.01741137 70,842
Burch, Arbuckle ** 3-12 pud 0.02862431 0.02215527 0.00715543 0.01741137 0
Burch, Springer ** 1-12 pbp 0.02862431 0.02215527 0.00715543 0.01741137 7,783
Burch, Sycamore * 1-12 pdp 0.02862431 0.02215527 0.00715543 0.01741137 202,832
Burch, Woodford * 1-12 pbp 0.02862431 0.02215527 0.00715543 0.01741137 0
Buzzard 1-26 pdp 0.02250000 0.01771020 943
City of Ardmore 1-13 pdp 0.26214184 0.20597814 121,010
City of Ardmore 2-13 pud 0.26214184 0.20597814 0
City of Ardmore, Arbuckle 3-13 pud 0.26214184 0.20597814 0
City of Ardmore, Springer 1-13 pbp 0.26214184 0.20597814 0
Colorado Coal Prospect 0.01541666 0.01187083 50,000
Condor 1-27 pdp 0.02250000 0.01856310 0
Danker 1-35 pdp 0.02250000 0.01743568 4,492
Davis Unit 1-27 pdp 0.02250000 0.01816227 0.01708985 23,983
Dennis 1-36 pud 0.01107420 0.00927250 4,119
Donald 1-14 pdp 0.10807300 0.08780900 16,948
Downs * 2-07 pud 0.06361801 0.06214500 0.00721585 0.00534640 187,215
Downs * 3-07 pud 0.06361801 0.06214500 0.00721585 0.00534640 50,682
Downs, Arbuckle 4-07 pud 0.06361801 0.06214500 0.00721585 0.00534640 0
Downs, Springer * 1-07 pbp 0.06361801 0.06214500 0.00721585 0.00534640 13,772
Downs, Sycamore 1-07 pdp 0.06361801 0.06214500 0.00721585 0.00534640 146,587
Downs, Woodford * 1-07 pbp 0.06361801 0.06214500 0.00721585 0.00534640 19,138
Eagle 1-27 pdp 0.02250000 0.01816227 0.01708985 2,281
Emily Taylor 2-23 pdp 1.00000000 0.81164560 0.06250000 262,878
Estella George 1-25 pdp 0.00637936 0
Fable # 1-24 pdp 0.01296877 0.01018038 0
Falcon 1-34 pdp 0.02250000 0.01743570 1,052
Festus 1-24 pdp 0.09778590 0.07240261 1,773
Galt, 3 wells ** C unit pdp 0.25000000 0.21875000 0
Goss 1-36 pdp 0.02277859 0.01785728 4,478
Griffith 1-03 pdp 0.06850950 0.05498290 11,839
Guy 1-35 pdp 0.09375000 0.08203000 0
Harper-Stine 1-28 pdp 0.00687500 0.00559270 752
HDS Corp, Cromwell 1-24 pdp 0.47057614 0.37066456 12,624
HDS Corp, Hunton 1-24 pdp 0.47057614 0.41047096 48,740
</TABLE>
Page 1
2a-41
<PAGE> 42
&A
Exhibit "D-1" PSEC, Inc.
<TABLE>
<CAPTION>
Well Name nbr def PSEC WI PSEC NRI PSEC RI PSEC ORRI PSEC net$
<S> <C> <C> <C> <C> <C> <C>
Hendricks, Arbuckle 5-01 pud 0.03992804 0.03120732 0.00000842 0.01287641 0
Hendricks, Springer * 1-01 pbp 0.03992804 0.03120732 0.00000842 0.01287641 3,104
Hendricks, Syc & Wdfd * 2-01 pud 0.03992804 0.03120732 0.00000842 0.01287641 107,383
Hendricks, Syc & Wdfd * 3-01 pud 0.03992804 0.03120732 0.00000842 0.01287641 50,606
Hendricks, Syc & Wdfd * 4-01 pud 0.03992804 0.03120732 0.00000842 0.01287641 17,365
Hendricks, Sycamore 1-01 pdp 0.03992804 0.03120732 0.00000842 0.01287641 50,640
Hendricks, Woodford * 1-01 pbp 0.03992804 0.03120732 0.00000842 0.01287641 10,491
Hennessey 1-26 pdp 0.02250000 0.01771490 0
Hennessey 2-26 prb 0.02250000 0.01771490 0
Herndon, Checkerboard * 1-35 pbp 0.01074780 0.00882832 3,127
Herndon, Cleveland 1-35 pdp 0.01074780 0.00882832 885
Hissom 1-18 pdp 0.22727310 0.18151883 0.00525214 21,687
Hissom, Arbuckle 2-18 pud 0.22727310 0.18151883 0.00525214 0
Hissom, Woodford * 1-18 pbp 0.22727310 0.18151883 0.00525214 73,109
Humphries 1-25 pdp 0.01089840 0.00887390 197
Humphries, Chckrd * 1-25 pbp 0.01089840 0.00887390 3,330
Janes 1-26 pdp 0.02250000 0.01901250 1,872
Jimmie B 1-33 pdp 0.24500000 0.19500000 0
Jones 1-11 pdp 0.22257773 0.17786610 0.00203987 0.00216085 163,838
Jones 4-11 pud 0.22257773 0.17786610 0.00203987 0.00216085 0
Jones * 2-11 pud 0.22257773 0.17786610 0.00203987 0.00216085 243,498
Jones * 3-11 pud 0.22257773 0.17786610 0.00203987 0.00216085 135,064
Jones, Arbuckle 5-11 pud 0.22257773 0.17786610 0.00203987 0.00216085 0
Jud Little, Arbuckle 3-06 pud 0.05010000 0.04138286 0.00027866 0
Jud Little, Sycamore 1-06 pdp 0.05010000 0.04138286 0.00027866 229,129
Jud Little, Sycamore * 2-06 pud 0.05010000 0.04138286 0.00027866 140,473
Jud Little, Viola 1-06 pdp 0.05010000 0.04105155 11,479
Jud Little, Woodford * 1-06 pbp 0.05010000 0.04138286 0.00027866 7,145
King Baker ** C115 pdp 0.06293500 0.05507000 0
Kubiak # 1-23 pdp 0.03473690 0.02526320 1,744
Life 1-04 pdp 0.24500000 0.19919110 57,626
Lion 1-34 pdp 0.00966800 0.00811030 2,653
Lion, Checkerboard * 1-34 pbp 0.00966800 0.00811030 2,887
Lowery 1-35 pdp 0.02250000 0.01754390 1,165
Markham 1-05 pdp 0.30430320 0.22565416 0.00016436 77,471
Markham, Arbuckle 2-05 pud 0.30430320 0.22565416 0.00016436 0
Markham, Woodford * 1-05 pbp 0.30430320 0.22565416 0.00016436 55,578
Max Yeager 1-06 pdp 0.05010000 0.04138286 0.00027866 42,197
Max Yeager, Springer * 1-06 pbp 0.05010000 0.04138286 0.00027866 1,437
Max Yeager, Sycamore * 2-06 pud 0.05010000 0.04138286 0.00027866 104,408
Max Yeager, Woodford * 1-06 pbp 0.05010000 0.04138286 0.00027866 10,354
Micheal 1-32 pdp 0.24090066 0.19272052 0
Newbern 1-15 pdp 0.39500000 0.29624990 4,767
Noah 1-08 pdp 0.03333300 0.02588020 0
O'Day 1-25 pdp 0.01187599 0.00973106 121
O'Harro 1-33 pdp 0.24500000 0.19416250 23,751
O'Harro Waterflood pdp 0.24500000 0.19416250 0
</TABLE>
Page 2
2a-42
<PAGE> 43
&A
Exhibit "D-1" PSEC, Inc.
<TABLE>
<CAPTION>
Well Name nbr def PSEC WI PSEC NRI PSEC RI PSEC ORRI PSEC net$
<S> <C> <C> <C> <C> <C> <C>
Owl 1-34 pdp 0.00966800 0.00811030 820
Pannell, prod & swd ** 1&2-34 pdp 0.25000000 0.21875000 0
Panther, Checkerboard 1-26 pbp 0.02742072 0.02299008 8,276
Panther, Cleveland 1-26 pdp 0.02742072 0.02299008 7,513
Payne 1-27 pdp 0.02250000 0.01887370 1,281
Payne 2-27 prb 0.02250000 0.01887370 0
Pearl # 1-23 pdp 0.12121330 0.09939491 0
Pletcher * 2-12 pud 0.01633798 0.01319247 0.00715543 0.01741137 43,417
Pletcher, Springer 1-12 pbp 0.01633798 0.01319247 0.00715543 0.01741137 0
Pletcher, Sycamore 1-12 pdp 0.01633798 0.01319247 0.00715543 0.01741137 32,559
PSEC Inc. Income, etc. 1.00000000 1.00000000 2,300,000
Rackley 1-35 pdp 0.01074780 0.00882830 215
Roundup 1-20 pdp 0.10763900 0.08598090 11,096
Roundup, Arbuckle 2-20 pud 0.10763900 0.08598090 0
Shaffner 1-21 pdp 0.01778229 0.01407691 0
Smith 2-01 pdp 0.15997940 0.12314130 5,344
Stansberry 1-31 pdp 0.12500000 0.09954350 0
State 1-16 pdp 0.03333334 0.02497400 452
Stein 2-03 pdp 0.12434940 0.10393110 0.00391721 0
Storey # 1-24 pdp 0.04042665 0.03295464 18,930
Strader 1-08 pdp 0.29825069 0.23835735 0.00501713 1,263
Strader, Arbuckle 3-08 pud 0.29825069 0.23835735 0.00501713 0
Strader, Sycamore 2H-08 prb 0.29825069 0.23835735 0.00501713 0
Strader, Woodford 1-08 pbp 0.29825069 0.23835735 0.00501713 0
Strader,Springer * 1-08 pbp 0.29825069 0.23835735 0.00501713 94,851
Tiger 1-26 pdp 0.02250000 0.01901250 6,225
Tucker 1-35 pdp 0.11538450 0.08913450 0
Tunder A1-11 pdp 0.03749940 0.02915000 28,126
Van Gundy 1-36 pdp 0.01107420 0.00927250 331
Van Gundy ** 2-36 prb 0.01107420 0.00927250 0
Varner 1-02 pdp 0.19040610 0.15043826 0.00327226 0.00392231 439,287
Varner * 2-02 pud 0.19040610 0.15043826 0.00327226 0.00392231 563,567
Varner * 3-02 pud 0.19040610 0.15043826 0.00327226 0.00392231 211,596
Varner, Arbuckle ** 4-02 pud 0.19040610 0.15043826 0.00327226 0.00392231 0
Varner, Woodford * 1-02 pbp 0.19040610 0.15043826 0.00327226 0.00392231 25,642
Way 1-04 pdp 0.24500000 0.19919110 631
Whitnah 1-34 pdp 0.01092360 0.00890360 31
Whitnah 2-34 prb 0.01092360 0.00890360 0
Wilma 1-33 pdp 0.24500000 0.19500000 0
Yates 1-02 pdp 0.08903044 0.06772830 43,496
6,789,180
</TABLE>
Page 3
2a-43
<PAGE> 44
EXHIBIT E
DEPOSIT AGREEMENT
THIS DEPOSIT AGREEMENT (this "Agreement") is made and entered into as of
the 9th day of January, 1997 by and among the entities and individuals
executing this Agreement as Sellers (collectively the "Sellers" and
individually a "Seller"), ONEOK RESOURCES COMPANY, a Delaware corporation
("Buyer"), and BOATMEN'S FIRST NATIONAL BANK OF OKLAHOMA ("Escrow Agent").
W I T N E S S E T H:
THAT WHEREAS, this Agreement is being executed and delivered
contemporaneously with the execution and delivery of that certain Stock
Purchase Agreement of even date herewith between Sellers and Buyer (the "Stock
Purchase Agreement"), pursuant to which Sellers have agreed to sell and Buyer
has agreed to purchase all of the outstanding shares of the capital stock of
PSEC, Inc. and PSPC, Ltd.; and
WHEREAS, Section 2.4 of the Stock Purchase Agreement provides for the
contemporaneous execution and delivery of a deposit agreement substantially in
the form of this Agreement; and
WHEREAS, Escrow Agent has agreed to execute this Agreement and to hold
the amount deposited hereunder in escrow subject to the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, and of other good and valuable
consideration, the parties to this Agreement hereby agree as follows:
1. Deposit. Simultaneously with the execution of this Agreement,
Buyer is delivering to Escrow Agent, by wire transfer of immediately available
funds in accordance with instructions received from Escrow Agent, the sum of
$1,000,000 (the "Deposit"), which shall be held, administered and distributed
by the Escrow Agent as hereinafter provided.
2. Nature of Deposit. Escrow Agent shall hold the Deposit, and all
instruments and certificates received by Escrow Agent as a result of investing
the Deposit, and all interest and other earnings thereon, in escrow for the
benefit of Sellers and Buyer, and the same shall never become part of the
general assets of Escrow Agent but shall always be specifically identified as
part of the escrow created hereunder. The obligation of Escrow Agent to
deliver the Deposit, and all interest and earnings thereon, in accordance with
the terms of this Agreement shall never be considered as a general obligation
or indebtedness of Escrow Agent, but rather shall be an obligation to return
money, certificates, interest and other property held in escrow.
3. Investments. The Deposit shall be invested by Escrow Agent in
U.S. government obligations, money market obliga-
2a-44
<PAGE> 45
tions, other short-term cash equivalents or fully-insured bank time deposits
(which may be issued by Escrow Agent or its affiliates), as Escrow Agent may
deem appropriate. All time deposits issued by Escrow Agent or its affiliates
shall be registered in the name of Ray H. Potts and Robert L. Stephenson, as
Co-trustees; however, for income tax purposes all income earned on the Deposit
shall be allocated to and borne by the party or parties receiving such income.
Escrow Agent shall reinvest from time to time all income received by it from
investment of the Deposit and all such income shall become a part of the
Deposit when and as received.
4. Fees and Expenses. For its services hereunder, Escrow Agent
shall be entitled to a fee of $750.00 for the period ending March 31, 1997, and
an annual fee of $600.00 for each 12-month period after such time that any
amounts remain in escrow hereunder (to be reduced prorata for any fractional
portion of a year), plus its actual out-of-pocket expenses. All such fees and
expenses shall be paid through a charge against the Deposit.
5. Distributions; Termination. The Escrow Agent shall make
distribution of the Deposit (i) as directed by written notice to Escrow Agent
executed by Sellers and Buyer, or (ii) to either Sellers or Buyer as determined
by a written arbitration award certified to Escrow Agent by either Sellers or
Buyer as the award issued as the result of arbitration proceedings between
Sellers and Buyer concerning entitlement to the Deposit, whichever of (i) or
(ii) above first is received by Escrow Agent. This Agreement and the escrow
arrangement created hereunder shall terminate at such time as the entire
Deposit has been distributed in accordance with the provisions of this Section
5.
6. Agents for Sellers; Authority; Indemnification. By execution of
this Agreement, Sellers hereby designate Ray H. Potts and Robert L. Stephenson
as their agents for purposes of giving and receiving notices, instructions and
other communications to and from the Escrow Agent pursuant to the terms of the
Agreement. Sellers do hereby ratify and confirm each such notice, instruction
or other communication hereafter given by the said Ray H. Potts or Robert L.
Stephenson, and do hereby agree to hold the Escrow Agent harmless with respect
to, and waive any claim that may arise by reason of the Escrow Agent treating
as valid or complying with the terms of, any such notice, instruction or other
communication. All distributions of the Deposit made to Sellers shall be made
to a joint account in the name of Ray H. Potts and Robert L. Stephenson, Co-
trustees, to be opened and maintained with Escrow Agent's banking department
specifically for the purpose of receiving distributions from the Deposit
pursuant to the terms of this Agreement. Escrow Agent is specifically
authorized by all parties Seller to make all distributions to Sellers pursuant
to this Agreement to said joint account, and upon making any such distribution
shall be relieved of all liability or responsibility with
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<PAGE> 46
respect to the allocation or further distribution thereof among Sellers.
7. Inspection; Reports. All money or other property held as a part
of the Deposit shall at all times be clearly identified as being held by Escrow
Agent under and pursuant to the terms of this Agreement. Any party hereto may
inspect the Deposit at any time during Escrow Agent's normal business hours.
Escrow Agent shall furnish to Sellers and Buyer, within five (5) business days
after receipt of a written request therefor, a report which describes all
investments made by Escrow Agent with respect to the Deposit and the balance
thereof as of the date of such report. A final report shall be furnished by
Escrow Agent within ten (10) days after final distribution of the Deposit.
8. Escrow Agent. Escrow Agent hereby accepts its appointment and
agrees to act as Escrow Agent on the terms and subject to the conditions set
out in this Agreement. In taking any action hereunder, Escrow Agent shall be
protected in relying upon any notice, communication or other document believed
by it to be genuine and upon any evidence deemed by it to be sufficient, and in
no event shall Escrow Agent be liable for any act performed or omitted to be
performed by it hereunder in the absence of gross negligence or willful
misconduct. The Escrow Agent may consult with counsel of its choosing in
connection with its duties hereunder and shall be fully protected with respect
to any act taken, suffered or permitted by it in good faith in accordance with
the advice of such counsel. Escrow Agent shall be entitled to recover, as an
expense pursuant to Section 4 hereof, the reasonable fees and expenses of such
counsel.
9. Litigation Involving Escrow Agent. In the event Escrow Agent
becomes involved in litigation by reason of the performance of its duties as
Escrow Agent hereunder, it is hereby authorized to deposit with the clerk of
the court in which the litigation is pending any and all funds, securities or
other property held by it pursuant hereto and thereupon shall stand fully
relieved and discharged of any further duties hereunder. Also, in the event
Escrow Agent is threatened with litigation by reason hereof, or if a successor
Escrow Agent is not agreed upon by the parties as provided in Section 10
hereof, it is hereby authorized to interplead all interested parties in any
court of competent jurisdiction and deposit with the clerk of such court any
funds, securities or other property held by it pursuant hereto and thereupon
shall stand fully relieved and discharged of any further duties hereunder.
10. Resignation. Escrow Agent may, in its sole discretion, resign
and terminate its position as escrow agent hereunder upon thirty (30) days
prior written notice to Buyer and Sellers. Such resignation shall, when
effective, terminate all obligations and duties of Escrow Agent hereunder,
except as
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<PAGE> 47
hereinafter set forth. On the effective date of such resignation, Escrow Agent
shall deliver this Escrow Agreement together with any and all related
instruments and documents, and together with the Deposit, to any successor
Escrow Agent agreed to by the parties. If the parties are unable to agree,
Escrow Agent may proceed under Section 9 hereof.
11. Notices. All notices, instructions and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person or by commercial courier service, or mailed by certified
mail, return receipt requested, as follows:
(a) If to Sellers:
Mr. Ray. H. Potts
PSEC, Inc.
3200 Liberty Tower
100 N. Broadway
Oklahoma City, OK 73102
Fax No. (405)235-1223
and to:
Mr. Robert L. Stephenson
PSEC, Inc.
3200 Liberty Tower
100 N. Broadway
Oklahoma City, OK 73102
Fax No. (405)235-1223
(b) If to Buyer:
Mr. J. C Kneale, Vice President
ONEOK Resources Company
100 W. Fifth Street
Tulsa, OK 74103
Fax No. (918)588-7773
(c) If to the Escrow Agent:
Boatmen's First National Bank of Oklahoma
P.O. Box 25189
Oklahoma City, OK 73128
Attn: Ms. Sue Shipman
Corporate Trust Department
or to such other address as any party hereto may designate by prior written
notice to the other parties.
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<PAGE> 48
12. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
13. Modification. This Agreement may be amended or modified only by
a subsequent written agreement executed by Sellers, Buyer and Escrow Agent.
14. Governing Law. This Agreement shall be governed by construed and
enforced in accordance with the laws of the State of Oklahoma applicable to
contracts made and to be performed entirely therein.
15. Counterparts. This Agreement may be executed 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. It shall not be
necessary for every party hereto to sign each counterpart but only that each
party shall sign at least one such counterpart.
16. Headings. Paragraph headings contained in this Agreement are for
convenient reference only and shall not affect in any way the meaning or
interpretation of any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SELLERS:
-------
----------------------------------------
Ray H. Potts, Individually and as
Trustee of the Ray H. Potts Living
Trust
----------------------------------------
Robert L. Stephenson, Individually and
as Trustee of the Robert L. Stephenson
Living Trust
----------------------------------------
R. L. Hilbun
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<PAGE> 49
----------------------------------------
Roger A. Rose
BUYER:
-----
ONEOK RESOURCES COMPANY, a Delaware
corporation
By
--------------------------------------
Vice President
ESCROW AGENT:
------------
BOATMEN'S FIRST NATIONAL BANK OF
OKLAHOMA
By
--------------------------------------
Vice President and Trust Officer
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<PAGE> 50
EXHIBIT F
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of
the ___ day of _______, 1997, by and among the entities and individuals
executing this Agreement as Sellers (collectively the "Sellers" and
individually a "Seller"), ONEOK RESOURCES COMPANY, a Delaware corporation
("Buyer"), and BOATMEN'S FIRST NATIONAL BANK OF OKLAHOMA ("Escrow Agent").
W I T N E S S E T H:
THAT WHEREAS, pursuant to the terms of that certain Stock Purchase
Agreement dated as of January __, 1997 between Sellers and Buyer (the "Stock
Purchase Agreement"), Sellers agreed to sell and Buyer agreed to purchase all
of the outstanding shares of the capital stock of PSEC, Inc. and PSPC, Ltd.;
and
WHEREAS, Section 3.5 of the Stock Purchase Agreement provides that under
certain circumstances an escrow agreement substantially in the form of this
Agreement shall be executed and delivered by and among the parties at the
closing of the transaction contemplated by the Stock Purchase Agreement; and
WHEREAS, Escrow Agent has agreed to execute this Agreement and to hold
the stock certificates deposited hereunder in escrow subject to the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, and of other good and valuable
consideration, the parties to this Agreement hereby agree as follows:
1. Escrow Fund. Simultaneously with and as a part of the closing of
the transaction contemplated by the Stock Purchase Agreement, Buyer shall
deliver to Escrow Agent stock certificates issued in the names of Sellers
representing an aggregate of _____ shares of the common capital stock of ONEOK
Inc. (the "Escrow Fund"), which shall be held, administered and distributed by
the Escrow Agent as hereinafter provided.
2. Nature of Escrow Fund. Escrow Agent shall hold the Escrow Fund,
and all dividends, interest and other earnings thereon, in escrow for the
benefit of Sellers and Buyer, and the same shall never become part of the
general assets of Escrow Agent but shall always be specifically identified as
part of the escrow created hereunder. The obligation of Escrow Agent to
deliver the Escrow Fund, and all dividends, interest and earnings thereon, in
accordance with the terms of this Agreement shall never be considered as a
general obligation or indebtedness of Escrow Agent, but rather shall be an
obligation to return money, certificates, interest and other property held for
the benefit of Sellers and Buyer.
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<PAGE> 51
3. Investments. To the extent the Escrow Fund is comprised of cash,
such cash shall be invested by Escrow Agent in U.S. government obligations,
money market obligations, other short-term cash equivalents or fully-insured
bank time deposits (which may be issued by Escrow Agent or its affiliates).
All time deposits issued by Escrow Agent or its affiliates shall be registered
in the name of Ray H. Potts and Robert L. Stephenson, as Co-trustees; however,
for income tax purposes all income earned on the Escrow Fund shall be allocated
to and borne by the party or parties receiving such income. Escrow Agent shall
reinvest from time to time all income received by it from investment of the
Escrow Fund and all such income shall become a part of the Escrow Fund when and
as received.
4. Fees and Expenses. For its services hereunder, Escrow Agent
shall be entitled to a fee of $_______ for the period ending May 31, 1997, and
an annual fee of $_______ for each 12-month period after such time that any
amounts remain in the Escrow Fund (to be reduced prorata for any fractional
portion of a year), plus its actual out-of-pocket expenses. All such fees and
expenses shall be paid through a charge against the Escrow Fund or equally by
Sellers and Buyer if there is no cash in the Escrow Fund.
5. Distributions; Termination. The Escrow Agent shall make
distribution of the Escrow Fund (i) as directed by written notice to Escrow
Agent executed by Sellers and Buyer, or (ii) to either Sellers or Buyer as
determined by a written arbitration award certified to Escrow Agent by either
Sellers or Buyer as the award issued as the result of arbitration proceedings
between Sellers and Buyer concerning entitlement to the Escrow Fund, whichever
of (i) or (ii) above first is received by Escrow Agent. This Agreement and the
escrow arrangement created hereunder shall terminate at such time as the entire
Escrow Fund has been distributed in accordance with the provisions of this
Section 5.
6. Agents for Sellers; Authority; Indemnification. By execution of
this Agreement, Sellers hereby designate Ray H. Potts and Robert L. Stephenson
as their agents for purposes of giving and receiving notices, instructions and
other communications to and from the Escrow Agent pursuant to the terms of the
Agreement. Sellers do hereby ratify and confirm each such notice, instruction
or other communication hereafter given by the said Ray H. Potts or Robert L.
Stephenson, and do hereby agree to hold the Escrow Agent harmless with respect
to, and waive any claim that may arise by reason of the Escrow Agent treating
as valid or complying with the terms of, any such notice, instruction or other
communication. All cash distributions made to Sellers from the Escrow Fund
shall be made to a joint account in the name of Ray H. Potts and Robert L.
Stephenson, as Co-trustees, to be opened and maintained with Escrow Agent's
banking department specifically for the purpose of receiving distributions from
the Escrow Fund pursuant to the terms of this Agreement. All stock
certificates distributed to Sellers
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<PAGE> 52
from the Escrow Fund shall be delivered to Ray H. Potts and Robert L.
Stephenson for further distribution to Sellers. Escrow Agent is specifically
authorized by all Sellers to make all distributions to Sellers pursuant to this
Agreement in accordance with the foregoing, and upon making any such
distribution shall be relieved of all liability or responsibility with respect
to the allocation or further distribution thereof to or among Sellers.
7. Inspection; Reports. All money or other property held as a part
of the Escrow Fund shall at all times be clearly identified as being held by
Escrow Agent under and pursuant to the terms of this Agreement. Any party
hereto may inspect the Escrow Fund at any time during Escrow Agent's normal
business hours. Escrow Agent shall furnish to Sellers and Buyer, within five
(5) business days after receipt of a written request therefor, a report which
describes all investments made by Escrow Agent with respect to the Escrow Fund
and the balance thereof as of the date of such report. A final report shall be
furnished by Escrow Agent within ten (10) days after final distribution of the
Escrow Fund.
8. Escrow Agent. Escrow Agent hereby accepts its appointment and
agrees to act as Escrow Agent on the terms and subject to the conditions set
out in this Agreement. In taking any action hereunder, Escrow Agent shall be
protected in relying upon any notice, communication or other document believed
by it to be genuine and upon any evidence deemed by it to be sufficient, and in
no event shall Escrow Agent be liable for any act performed or omitted to be
performed by it hereunder in the absence of gross negligence or willful
misconduct. The Escrow Agent may consult with counsel of its choosing in
connection with its duties hereunder and shall be fully protected with respect
to any act taken, suffered or permitted by it in good faith in accordance with
the advice of such counsel. Escrow Agent shall be entitled to recover, as an
expense pursuant to Section 4 hereof, the reasonable fees and expenses of such
counsel.
9. Litigation Involving Escrow Agent. In the event Escrow Agent
becomes involved in litigation by reason of the performance of its duties as
Escrow Agent hereunder, it is hereby authorized to deposit with the clerk of
the court in which the litigation is pending any and all funds, securities or
other property held by it pursuant hereto, less fees and expenses, and
thereupon shall stand fully relieved and discharged of any further duties
hereunder. Also, in the event Escrow Agent is threatened with litigation by
reason hereof, or if a successor Escrow Agent is not agreed upon by the parties
as provided in Section 10 hereof, it is hereby authorized to interplead all
interested parties in any court of competent jurisdiction and deposit with the
clerk of such court any funds, securities or other property held by it pursuant
hereto, less fees and expenses, and thereupon shall stand fully relieved and
discharged of any further duties hereunder. Upon deposit with the court of all
such funds, securities or other
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<PAGE> 53
property held by it hereunder, Escrow Agent shall be indemnified by Sellers and
Buyer against any further costs or liabilities arising under this Agreement.
10. Resignation. Escrow Agent may, in its sole discretion, resign
and terminate its position as escrow agent hereunder upon thirty (30) days
prior written notice to Buyer and Sellers. Such resignation shall, when
effective, terminate all obligations and duties of Escrow Agent hereunder,
except as hereinafter set forth. On the effective date of such resignation,
Escrow Agent shall deliver this Escrow Agreement together with any and all
related instruments and documents, and together with the Escrow Fund, to any
successor Escrow Agent agreed to by the parties. If the parties are unable to
agree, Escrow Agent may proceed under Section 9 hereof.
11. Notices. All notices, instructions and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person or by commercial courier service, or mailed by certified
mail, return receipt requested, as follows:
(a) If to Sellers:
Mr. Ray. H. Potts
3200 Liberty Tower
100 N. Broadway
Oklahoma City, OK 73102
Fax No. (405)235-1223
and to:
Mr. Robert L. Stephenson
3200 Liberty Tower
100 N. Broadway
Oklahoma City, OK 73102
Fax No. (405)235-1223
(b) If to Buyer:
Mr. J. C Kneale, Vice President
ONEOK Resources Company
100 W. Fifth Street
Tulsa, OK 74103
Fax No. (918)588-7773
(c) If to the Escrow Agent:
Boatmen's First National Bank of Oklahoma
P.O. Box 25189
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<PAGE> 54
Oklahoma City, OK 73128
Attn: __________________
Corporate Trust Department
or to such other address as any party hereto may designate by prior written
notice to the other parties.
12. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
13. Modification. This Agreement may be amended or modified only by
a subsequent written agreement executed by Sellers, Buyer and Escrow Agent.
14. Governing Law. This Agreement shall be governed by construed and
enforced in accordance with the laws of the State of Oklahoma applicable to
contracts made and to be performed entirely therein.
15. Counterparts. This Agreement may be executed 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. It shall not be
necessary for every party hereto to sign each counterpart but only that each
party shall sign at least one such counterpart.
16. Headings. Paragraph headings contained in this Agreement are for
convenient reference only and shall not affect in any way the meaning or
interpretation of any provision of this Agreement.
17. Enforcement. Any litigation involving this Escrow Agreement
shall be brought either in the District Court of Oklahoma County, Oklahoma, or
the United States District Court for the Western District of Oklahoma. All
parties hereby consent to venue in either such court. The prevailing party in
any litigation initiated by Sellers or Buyer under or to enforce this Agreement
shall be entitled to reimbursement from the non-prevailing party (Sellers or
Buyer) of all costs and expenses, including attorneys fees, incurred by the
prevailing party in connection with such litigation. By way of example, but
not limitation, in the event either Sellers or Buyer assert by written notice
given to the other that joint instructions be given to the Escrow Agent to
distribute certain certificates or a certain sum from the Escrow Fund in a
particular manner pursuant to the terms of the Stock Purchase Agreement, and
the other party objects or refuses to join in such written notice, the party
seeking to require such notice may initiate litigation seeking a court order
requiring the party refusing to sign such joint instructions to sign such
instructions,
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<PAGE> 55
or directing the Escrow Agent to make the requested distribution. If such
litigation is initiated by either party and an order is entered directing the
other party to sign a written notice to the Escrow Agent requesting, or
directing Escrow Agent to make, a distribution substantially as requested by
the initiating party, such other party shall bear and pay all costs of such
litigation, including reasonable attorneys fees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SELLERS:
-------
----------------------------------------
Ray H. Potts, Individually and as
Trustee of the Ray H. Potts Living
Trust
----------------------------------------
Robert L. Stephenson, Individually and
as Trustee of the Robert L. Stephenson
Living Trust
----------------------------------------
R. L. Hilbun
----------------------------------------
Roger A. Rose
BUYER:
-----
ONEOK RESOURCES COMPANY, a Delaware
corporation
By
--------------------------------------
Vice President
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<PAGE> 56
ESCROW AGENT:
------------
BOATMEN'S FIRST NATIONAL BANK OF
OKLAHOMA
By
--------------------------------------
Vice President and Trust Officer
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<PAGE> 57
EXHIBIT G
LAW OFFICES
MCAFEE & TAFT
A PROFESSIONAL CORPORATION
TENTH FLOOR, TWO LEADERSHIP SQUARE
211 NORTH ROBINSON
OKLAHOMA CITY, OKLAHOMA 73102-7101
(405) 235-9621
FAX (405) 235-0439
February 28, 1997
ONEOK Resources Company
100 West Fifth Street
Tulsa, Oklahoma 74103
Re: Stock Purchase Agreement dated as of January 9, 1997, by and
among the entities and individuals executing same as Sellers
(collectively the "Sellers" and individually a "Seller"), and
ONEOK Resources Company, a Delaware corporation ("Buyer") (the
"Agreement")
Ladies and Gentlemen:
We have acted as counsel to Sellers in connection with the negotiation
and execution of the Agreement and the Closing of the transactions contemplated
thereby. This opinion is being furnished to you pursuant to Section 10.4 of
the Agreement. Capitalized terms used but not defined herein have the meanings
ascribed to such terms in the Agreement.
In rendering this opinion, we have reviewed (i) a fully executed
counterpart original of the Agreement, (ii) the Certificate of Incorporation,
Bylaws, stock records and minute book of each of PSEC, Inc. and PSPC, Ltd. (the
"Companies"), (iii) the partnership agreement of Sycamore Gas System, a general
partnership (Sycamore"), and (iv) originals or photocopies, authenticated to
our satisfaction, of such records, certificates of public officials,
certificates of officers of the Companies, instruments and other documents as
we have deemed necessary to render the opinions expressed herein.
We have assumed the authenticity of all documents submitted to us as
originals and the conformity to the originals of all documents submitted to us
as copies. We also have assumed the genuineness of all signatures appearing on
all documents reviewed by us, the legal capacity of all natural persons
executing such documents and the authority of all persons executing such
documents in a representative capacity.
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<PAGE> 58
Based upon the foregoing and subject to the conditions, qualifications
and limitations set forth herein, it is our opinion that:
1. Each of the Companies is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Oklahoma and is
qualified to do business and is in good standing in each jurisdiction where
Reserve Report Properties are located. Each of the Companies has the corporate
power and authority to own and use its properties and to transact the business
in which it is engaged.
2. Sycamore is a general partnership duly organized and validly
existing under the laws of the State of Oklahoma. Sycamore has the power and
authority under its partnership agreement and applicable law to own and use its
properties and to transact the business in which it is engaged.
3. The entire authorized capital stock of PSEC consists of
10,000,000 shares of common stock, par value $.10 per share. There are
presently outstanding 8,200,514 shares of PSEC Common Stock, all of which are
duly authorized, validly issued, fully paid and non-assessable. To our
knowledge, there are no outstanding warrants, options, contracts, calls or
other rights of any kind or restriction on the right of transfer with regard to
any shares of PSEC Common Stock.
4. The entire authorized capital stock of PSPC consists of 200,000
shares of common stock, par value $1.00 per share. There are presently
outstanding 171,000 shares of PSPC Common Stock, all of which are duly
authorized, validly issued, fully paid and non-assessable. To our knowledge,
there are no outstanding warrants, options, contracts, calls or other rights of
any kind or restriction on the right of transfer with regard to any shares of
PSPC Common Stock.
5. Each Seller is the record owner of the number of shares of PSEC
Common Stock and PSPC Common Stock set forth opposite the name of such Seller
in Exhibit A to the Agreement.
6. With respect to each Seller, the Agreement constitutes the valid
and binding agreement of Seller, enforceable against Seller in accordance with
its terms, and all certificates, instruments and agreements executed and
delivered by Seller at the Closing constitute valid and binding agreements of
Seller, enforceable against Seller in accordance with their respective terms.
The foregoing opinions are subject to and qualified in all respects by
the following:
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<PAGE> 59
A. The opinions expressed herein are limited to matters governed by
the laws of the State of Oklahoma and applicable federal law.
B. We express no opinion as to PSEC's, PSPC's or Sycamore's title to
any of their respective assets or their right to own or operate any of said
assets under applicable local, state, federal or Indian laws, rules or
regulations.
C. We assume no obligation to advise or supplement this opinion to
reflect any facts or circumstances which hereafter may come to our attention or
any change in any laws or legislative action, judicial decisions or otherwise
which hereafter may occur.
D. Our opinion in paragraph 2 as to the organization and existence
of Sycamore is based solely on our review of the applicable partnership
agreement and certificates executed by officers of PSPC.
This opinion is being furnished to you solely in connection with the
Closing of the transactions contemplated by the Agreement and may be relied
upon and used by you solely for such purpose. This opinion may not be filed
with any governmental agency or furnished to or relied upon by any other person
in any other context or for any other purpose.
Very truly yours,
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<PAGE> 60
EXHIBIT H
[Arrington, Kihle letterhead]
____________, 1997
Mr. Ray H. Potts, Individually
and as Trustee of the Ray
H. Potts Living Trust
Mr. Robert L. Stephenson, Individually
and as Trustee of the Robert L.
Stephenson Living Trust
Mr. R. L. Hilbun
Mr. Roger A. Rose
c/o PSEC, Inc.
3200 Liberty Tower
100 N. Broadway
Oklahoma City, OK 73102
Re: Stock Purchase Agreement dated as of January __, 1997, by and
among the entities and individuals executing same as Sellers
(collectively the "Sellers" and individually a "Seller"), and
ONEOK Resources Company, a Delaware corporation ("Buyer") (the
"Agreement")
Ladies and Gentlemen:
We have acted as counsel to Buyer and to ONEOK Inc., the corporate
parent of Buyer, in connection with the negotiation and execution of the
Agreement and the Closing of the transactions contemplated thereby. This
opinion is being furnished to you pursuant to Section 11.4 of the Agreement.
Capitalized terms used but not defined herein have the meanings ascribed to
such terms in the Agreement.
In rendering this opinion, we have reviewed (i) a fully executed
counterpart original of the Agreement, (ii) the Certificate of Incorporation,
Bylaws, stock record and minute book of each of Resources and ONEOK, (iii) the
ONEOK SEC Documents, (iv) the agreements (including, without limitation, the
Shelf Registration Agreement) and the stock certificates evidencing the
Exchange Shares executed and delivered by Buyer at the Closing, and (v)
originals or photocopies, authenticated to our satisfaction, of such records,
certificates of public officials, certificates of officers of Buyer,
instruments and other documents as we have deemed necessary to render the
opinions expressed herein.
We have assumed the authenticity of all documents submitted to us as
originals and the conformity to the originals of all
2a-60
<PAGE> 61
documents submitted to us as copies. We also have assumed the genuineness of
all signatures appearing on all documents reviewed by us, the legal capacity of
all natural persons executing such documents and the authority of all persons
executing such documents in a representative capacity.
Based upon the foregoing and subject to the conditions, qualifications
and limitations set forth herein, it is our opinion that:
1. Each of Resources and ONEOK is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.
Resources is a wholly-owned, first tier subsidiary of ONEOK.
2. The Agreement has been duly authorized, executed and delivered by
Buyer. All certificates, instruments and agreements executed and delivered by
Buyer at the Closing, including, without limitation, the Shelf Registration
Agreement, have been duly authorized, executed and delivered by Buyer and all
requisite corporate action has been taken to authorize the execution thereof
and the performance of the transactions contemplated thereby. Buyer has all
necessary authority under its certificate of incorporation, bylaws and other
governing documents and otherwise has good right and lawful authority to
consummate the same.
3. The Agreement and all certificates, instruments and agreements
executed and delivered by Buyer at the Closing, including, without limitation,
the Shelf Registration Agreement, constitute the valid and binding agreements
of Buyer, enforceable against Buyer in accordance with their respective terms.
4. The entire authorized capital stock of ONEOK consists of 60,000,000
shares of ONEOK Common Stock, 340,000 shares of ONEOK Preferred Stock, and
3,000,000 shares of Preference Stock. At the close of business on January 3,
1997: (i) 27,311,617 shares of ONEOK Common Stock and 180,000 shares of ONEOK
Preferred Shares were issued and outstanding and 3,848,886 shares of ONEOK
Common Stock were reserved for issuance pursuant to ONEOK's Employee Stock
Purchase Plan, Key Employee Stock Plan, and Thrift Plan for Employees of ONEOK
and subsidiaries, (collectively, the "ONEOK Stock Plans"); (ii) no shares of
ONEOK Preference Stock were outstanding; (iii) 200,000 shares of ONEOK
Participating Preference Stock have been reserved for issuance pursuant the
exercise of ONEOK Stock Purchase rights; (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 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.
All outstanding shares of capital stock of the subsidiaries of ONEOK are owned
by
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<PAGE> 62
ONEOK, or a direct or indirect wholly owned subsidiary of ONEOK. To our
knowledge, except (i) as set forth above and as contemplated by the ONEOK
Rights Agreement, (ii) for changes since August 31, 1996 resulting from the
exercise of employee stock options granted pursuant to, or from issuances or
purchases under, the ONEOK Stock Plans and ONEOK's Direct Stock Purchase and
Dividend Reinvestment Plan, and (iii) as contemplated by the Agreement, there
are 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.
5. The Exchange Shares issued to Sellers at the Closing have been
duly authorized and validly issued, are fully paid and non-assessable. The
Exchange Shares represent voting stock of ONEOK entitling the holders of such
stock to vote on all significant matters as to which stockholders of a
corporation normally are entitled to vote, including, without limitation, the
election of directors, and to our knowledge no actions have been taken by ONEOK
to render the voting power of the ONEOK Stock illusory or insignificant as a
class.
The foregoing opinions are subject to and qualified in all respects by
the following:
A. Except as hereinafter provided, the opinions expressed herein are
limited to matters governed by the laws of the State of Oklahoma and applicable
federal law. While we are not licensed to practice law in the State of
Delaware, we have become familiar with and have considerable expertise with
respect to those provisions of Delaware corporate law by which matters
affecting the governance of Resources and ONEOK, as Delaware corporations, are
bound. Accordingly, the opinions expressed herein are intended to extend to,
cover and include matters governed by Delaware corporate law.
B. The opinions expressed herein are limited to the matters stated
herein and no opinion shall be deemed implied or inferred beyond the matters
specifically and expressly stated. We assume no obligation to advise or
supplement this opinion to
-3-
2a-62
<PAGE> 63
reflect any facts or circumstances which hereafter may come to our attention or
any change in any laws or legislative action, judicial decisions or otherwise
which hereafter may occur.
C. The opinions expressed herein are subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
or an implied covenant of good faith and fair dealing.
This opinion is being furnished to you solely in connection with the
Closing of the transactions contemplated by the Agreement and may be relied
upon and used by you solely for such purpose. This opinion may not be filed
with any governmental agency or furnished to or relied upon by any other person
in any other context or for any other purpose.
Very truly yours,
-4-
2a-63
<PAGE> 64
SCHEDULE 4.2
Long-term Sale/Purchase Agreements
o Gas Purchase Agreement dated April 1, 1990 and amended to end March 31,
2000, between all working interest owners in Springer Field and Sycamore
Gas System. (Applicable to Springer Field, Carter County, OK)
o Gas Processing and Gathering Contract between Mobil Natural Gas Inc.
(now PanEnergy) and Sycamore Gas System, ending December 31, 2001.
(Applicable to Springer Field, Carter County, OK)
o Gas Purchase Contract between Unimark L.L.C. (PSEC's gas marketer) and
Centoma Gas System, Inc., ending November 1, 1997. (Applicable to
Wellston Field, Lincoln County, OK)
Contracts Involving Prepayments
o Settlement Agreement dated February 15, 1988, between PSEC's principals
and Arkla Energy Resources (now NORAM) for prepayment of gas that
expires June 30, 1999. (Applicable to Reynolds well, Pittsburg County,
OK)
2a-64
<PAGE> 65
SCHEDULE 4.5
1. Lease for Office Space
3200 Liberty Tower, Oklahoma City, OK
Liberty Property Management
Expires 7/31/97
Monthly lease payments of $5,170
(A copy of this contract has been made available for review by Buyer)
2a-65
<PAGE> 66
SCHEDULE 4.11(a)(ii)
PSEC, INC.
BALANCE SHEET
AUGUST 31, 1996 (UNAUDITED)
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
CASH 1,170,152
ACCOUNTS RECEIVABLE 569,622
----------
TOTAL CURRENT ASSETS 1,739,774
----------
PROPERTY & EQUIPMENT
PRODUCING PROPERTIES 990,075
FURNITURE & OFFICE EQUIPMENT 198,341
AUTOMOBILES 27,442
LEASE & WELL EQUIPMENT 136,887
DEPRECIATION & DEPLETION (763,431)
----------
TOTAL PROPERTY & EQUIP 589,314
----------
OTHER ASSETS
PROSPECT INVENTORY 54,359
UNDEVELOPED LEASEHOLD 36,802
OTHER 45,889
----------
137,050
----------
TOTAL ASSETS 2,466,138
==========
LIABILITIES & EQUITY
LIABILITIES
ACCOUNTS PAYABLE 337,026
OIL & GAS REVENUE PAYABLE 789,776
ADVANCED DRILLING COSTS 31,852
----------
T0TAL LIABILITIES 1,158,654
----------
EQUITY
COMMON STOCK 820,051
RETAINED EARNINGS 291,333
CURRENT YEAR INCOME 196,100
----------
TOTAL EQUITY 1,307,484
----------
TOTAL LIABILITIES & EQUITY 2,466,138
==========
</TABLE>
See Notes to PSEC, Inc. Financial Statements
2a-66
<PAGE> 67
PSEC, INC.
STATEMENT OF REVENUES AND EXPENSES
EIGHT MONTHS ENDED 8/31/96
(UNAUDITED)
<TABLE>
<S> <C>
REVENUES
OIL AND GAS SALES $ 501,054
OVERHEAD INCOME 444,638
SALE OF PROSPECTS 14,294
INTEREST & DIVIDEND INCOME 30,687
OTHER (6,828)
---------
$ 983,845
---------
EXPENSES
INTANGIBLE DRILLING COSTS $ 71,176
LEASE OPERATING EXPENSE 177,695
PRODUCTION TAXES 34,897
DEPRECIATION & DEPLETION EXP 15,000
GENERAL & ADMINISTRATIVE 486,950
OTHER 2,027
---------
$ 787,745
---------
NET INCOME $ 196,100
=========
</TABLE>
See Notes to PSEC, Inc. Financial Statements
2a-67
<PAGE> 68
Schedule 4.11 (a)(iv)
PSPC, LTD.
BALANCE SHEET (UNAUDITED)
AUGUST 31, 1996
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
CASH $206,370
INVESTMENT IN SECURITIES 234,571
ACCOUNTS RECEIVABLE 214,509
-----------
TOTAL CURRENT ASSETS $655,450
-----------
OTHER ASSETS
INVESTMENT IN PARTNERSHIP $35,739
PRODUCING PROPERTIES 160,441
LEASE & WELL EQUIPMENT 13,613
DEPRECIATION & DEPLETION (45,886)
-----------
TOTAL OTHER ASSETS $163,907
-----------
TOTAL ASSETS $819,357
===========
LIABILITIES AND EQUITY
LIABILITIES
ACCOUNTS PAYABLE $1,794
-----------
EQUITY
CAPITAL STOCK $171,000
PAID IN CAPITAL 49,000
RETAINED EARNINGS 190,248
CURRENT YEAR INCOME 407,315
-----------
TOTAL EQUITY $817,563
-----------
TOTAL LIABILITIES AND EQUITY $819,357
===========
</TABLE>
See Notes to PSPC, Ltd. Financial Statements
2a-68
<PAGE> 69
PSPC, LTD.
STATEMENT OF REVENUES & EXPENSES
EIGHT MONTHS ENDED AUGUST 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
REVENUES
OIL AND GAS SALES $47,994
OVERHEAD INCOME 38,621
PARTNERSHIP INCOME-SYCAMORE GAS 287,277
INTEREST & DIVIDEND INCOME 9,528
OTHER INCOME 51,163
-----------
$434,583
-----------
EXPENSES
LEASE OPERATING EXPENSE $12,003
PRODUCTION TAXES 3,387
DEPRECIATION & DEPLETION EXP. 5,000
GENERAL & ADMINISTRATIVE 6,878
-----------
$27,268
-----------
NET INCOME $407,315
===========
</TABLE>
See Notes to PSPC, Ltd. Financial Statements
2a-69
<PAGE> 70
SCHEDULE 4.12
1. On October 4, 1996, PSPC, Ltd. received a $114,565 cash distribution
from Sycamore Gas System. This represented PSPC's share of a $275,000
quarterly cash distribution made by SGS.
2. On October 10, 1996, PSPC, Ltd. made a cash distribution to its
shareholders totaling $395,000.
3. PSEC agreed to assign and transfer to Ray Potts, Robert Stephenson,
Mark Potts and Saundra Johnson the following described personal property
prior to the closing: [Attached]
4. Working capital distribution authorized by Section 8.8.
<TABLE>
<S> <C>
PSEC, Inc. net working capital $ 581,120
12/96 contributions made by shareholders (5,000)
---------
Working capital distribution $ 576,120
PSPC, Ltd. net working capital $ 653,656
Distributions made 10/96 to shareholders (395,000)
---------
Working capital distribution $ 258,656
</TABLE>
2a-70
<PAGE> 71
Schedule 4.13
<TABLE>
<CAPTION>
BALANCE
OWNER AMOUNT 2/26/97
- ------- ------------ ------------
<S> <C> <C>
Premier Development Corp. $19,313 (1) $19,313
R.E. Dawson, Inc. $1,563 (2) $1,343
Robin Sue Perona $1,315 (3) $1,297
------------ ------------
Total $22,191 $21,953
============ ============
</TABLE>
(1) PSEC has filed a lawsuit in the District Court of Oklahoma County in an
effort to collect this past due account. Case no. CJ-96-57-63. A
default judgement has been received.
(2) PSEC filed a claim in Small Claims Court, however we did not get good
service. No further action has been taken.
(3) PSEC receives an average of $160 per month from oil revenues from this
interest to apply to this account balance as well as the monthly
operating expenses. We expect this account to ultimately be collected.
2a-71
<PAGE> 72
SCHEDULE 4.18
<TABLE>
<S> <C>
Office Personnel
- ----------------
R.L. Hilbun Roger A. Rose
Vice President/Operations Vice President/Finance
Date Hired: 11/1/81 Date Hired: 10/1/82
Mark C. Potts S. Janelle Miller
Geologist Land Manager
Date Hired: 1/1/92 Date Hired: 6/16/86
Saundra L. Johnson Dana Cowns
Office Mgr. & Sec. to Pres. & Executive V.P. Revenue Accounting
Date Hired: 4/1/81 Date Hired: 5/9/88
Joyce Guilliams Kathy Allen
Operations Secretary Accts. Pay./Accts. Rec. Accounting
Date Hired: 6/7/95 Date Hired: 2/16/83
Carol Babb
Receptionist
Date Hired: 12/1/90
- --------------------------------------------------------------------------------
Field Personnel
- ---------------
Phil Bly Don Guy
Pumper - Wellston Field Prod. & Drilling Foreman - Springer
Date Hired: 4/1/87 Date Hired: 5/1/88
Paul Stanfield Chris Stanfield
Pumper - Featherston Field Pumper - Featherston Field
Date Hired: 5/1/80 Date Hired: 6/15/92
</TABLE>
2a-72
<PAGE> 73
SCHEDULE 4.19
Employee Benefits
Listed below are various benefits provided by PSEC for its employees. Some of
these benefits are addressed more completely in PSEC's Company Policy.
I. Medical Insurance
PSEC has a contract with Blue Cross and Blue Shield of Oklahoma (PPO)
to provide medical care to its employees at no charge to the employee.
However, if the employee elects to have dependent coverage, the employee is
responsible for a small portion of the premium. Because of the high
deductible, PSEC assumes a portion of this deductible after certain
requirements are met. Copy of this benefit summary is available upon request.
(PSEC's cost = $2,678.40/month)
II. Dental Insurance
PSEC has a contract with Delta Dental to provide dental care to its
employees at no charge to the employee. However, if the employee elects to
have dependent coverage, the employee is responsible for a small portion of the
premium. (PSEC's cost = $710.28/month)
III. Life Insurance
PSEC has a contract with Member Service Life to provide life insurance
to its employees at no charge to the employee. This coverage ceases with the
termination of employment. PSEC does not provide this coverage for dependents
of employees. (PSEC's cost = $86.00/month)
IV. Cafeteria Plan
PSEC has a contract with The Summit Group to provide a medical
cafeteria plan to employees who wish to enroll. Employees are responsible for
a small administration fee for this service.
V. Savings Plan
PSEC has a contract with The Principal Financial Group to offer all
eligible employees who meet the necessary requirements the option to
participate in a 401(K) savings plan. PSEC matches 50% of savings
contributions, up to 6% of employee's salary. Summary of this plan is
available upon request. (PSEC's cost currently $925.76/month, but can
fluctuate)
VI. Bonus Plan
PSEC has established a bonus plan for its eligible employees. Copy of
PSEC's Bonus Plan is available upon request.
VII. Parking Benefits
PSEC provides monthly covered parking at no cost to its employees.
VIII. Overtime
PSEC employees are required to work 37.5 hours per week. However,
overtime rate does not become effective until the employee has worked a total
of 40 hours per week.
IX. Vacations
Employees start earning vacation after six months of continuous
employment. Further details regarding vacations are addressed in PSEC's
Company Policy. Copy of Company Policy is available upon request.
X. Other
Other benefits such as pay during authorized absences and holidays are
addressed in PSEC's Company Policy. Copy of Company Policy is available upon
request.
2a-73
<PAGE> 74
Schedule 4.21
Insurance Company: Chubb Group - Federal Insurance Company
<TABLE>
<CAPTION>
Effective Expiration
Type Policy # Date Date Limits
<S> <C> <C> <C> <C>
Commercial General Liability 37103734 8/17/96 8/17/97 $2,000,000
Automobile Liability 73167475 8/17/96 8/17/97 $1,000,000
Excess Liability 79073868 8/17/96 8/17/97 $2,000,000
Pollution 73192892 8/17/96 8/17/97 $1,000,000
</TABLE>
2a-74
<PAGE> 75
Schedule 4.22
INVESTMENTS
PSPC, Ltd. -- Merrill Lynch Acct. #84H 07A23
Select Ten 96A Dow Equity Income Fund
Merrill Lynch Acct. #753672
Institutional Intermediate Bond Fund
Note-These securities were sold in October & November 1996.
A portion of the proceeds were deposited in a Merrill Lynch
Ready Asset Trust, acct. #063-84H-07A23-9.
PSEC, Inc. -- Bancfirst Certificate of Deposit #4007004142
Note-Redeemed and deposited in the PSEC Operating Acct. in
12/96
BANK ACCOUNTS
PSEC, Inc. Bancfirst, OKC, OK Operating Account $0400504448
Bancfirst, OKC, OK Revenue Distribution Account #0400504421
Liberty Bank, OKC, OK Payroll Account #0157236
PSPC, Ltd. Bank of Oklahoma, OKC, OK Account #000109520
Sycamore Gas System Bank of Oklahoma, OKC, OK Account #000109509
Authorized signers on all bank accounts are:
Ray H. Potts
Robert L. Stephenson
Roger A. Rose
Safe Deposit Boxes
PSEC, Inc. Liberty Bank, OKC, OK box #4594C
2a-75
<PAGE> 76
Schedule 8.5
GAS IMBALANCES
<TABLE>
<CAPTION>
Statement
Well Name Over/(Under) - MCF Date
- --------- ------------------ -----
<S> <C> <C>
HDS 1-24 (H & C) (1,579) 8/96
</TABLE>
2a-76
<PAGE> 1
EXHIBIT 5
[GABLE GOTWALS MOCK SCHWABE KIHLE GABERINO LETTERHEAD]
April 24, 1997
ONEOK Inc.
100 West Fifth Street
Tulsa, OK 74103
Re: Form S-3, Registration Statement Under the
Securities Act of 1933, relating to 334,252
shares of Common Stock, Without Par Value of
ONEOK Inc.
Gentlemen:
We are retained as regular counsel for ONEOK Inc., a Delaware
corporation (hereinafter called the "Company") which will file with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, a Registration Statement on Form S-3 (including a Prospectus) relating
to the registration of three hundred thirty-four thousand, two hundred fifty-
two (334,252) presently outstanding shares of the common stock of the Company
(the "Common Stock") held by certain stockholders of the Company ("Selling
Stockholders"), as more fully described in the Prospectus.
We have examined (a) the above-mentioned Registration Statement which is
being filed with the Securities and Exchange Commission; (b) the Third Restated
Certificate of Incorporation and the By-laws, as amended, of the Company; (c)
the corporate actions taken by the Board of Directors of the Company in connec-
tion with the issuance of the Common Stock; and (d) other documents as we have
considered relevant to the matters covered by this opinion.
In connection with the foregoing, we wish to advise you as follows:
5-1
<PAGE> 2
ONEOK Inc.
(Date)
Page 2
1. The Company is a corporation validly organized and existing under
the laws of the State of Delaware and is duly qualified to do business as a
foreign corporation in the State of Oklahoma.
2. The filing of the above-mentioned Registration Statement has been
duly authorized by the proper corporate action on the part of the Company.
3. The Common Stock when sold by the Selling Shareholders will be
legally issued, fully paid and non-assessable in the hands of the owners
thereof.
We hereby consent to:
1. Being named in the above-mentioned Form S-3 Registration
Statement and the Prospectus which is being made a part thereof, and in any
amendments thereto, under the caption "Experts," and "Legality," as counsel for
the Company, passing upon legal matters in connection with the Common Stock and
having reviewed the matters of law and legal conclusions under "Description of
Common Stock" contained in said Prospectus which are included therein under our
authority as experts.
2. The filing of this opinion as an exhibit to the above-mentioned
Form S-3 Registration Statement.
Very truly yours,
GABLE GOTWALS MOCK SCHWABE KIHLE
GABERINO
By /s/ DONALD A. KIHLE
-----------------------------------
Donald A. Kihle
DAK:bb
5-2
<PAGE> 1
EXHIBIT 23(a)
The Board of Directors
ONEOK Inc.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Prospectus. Our
report refers to the adoption of Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-lived Assets and Long-lived
Assets to be Disposed Of in 1996.
KPMG Peat Marwick LLP
Tulsa, Oklahoma
July 28, 1997
23a-1
<PAGE> 1
EXHIBIT 23(b)
[GABLE GOTWALS MOCK SCHWABE KIHLE GABERINO LETTERHEAD]
April 24, 1997
ONEOK Inc.
100 West Fifth Street
Tulsa, OK 74103
Re: Form S-3, Registration Statement Under the
Securities Act of 1933, relating to 334,252
shares of Common Stock, Without Par Value of
ONEOK Inc.
Gentlemen:
We are retained as regular counsel for ONEOK Inc., a Delaware
corporation (hereinafter called the "Company") which will file with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, a Registration Statement on Form S-3 (including a Prospectus) relating
to the registration of three hundred thirty-four thousand, two hundred fifty-
two (334,252) presently outstanding shares of the common stock of the Company
(the "Common Stock") held by certain stockholders of the Company ("Selling
Stockholders"), as more fully described in the Prospectus.
We have examined (a) the above-mentioned Registration Statement which is
being filed with the Securities and Exchange Commission; (b) the Third Restated
Certificate of Incorporation and the By-laws, as amended, of the Company; (c)
the corporate actions taken by the Board of Directors of the Company in connec-
tion with the issuance of the Common Stock; and (d) other documents as we have
considered relevant to the matters covered by this opinion.
In connection with the foregoing, we wish to advise you as follows:
23b-1
<PAGE> 2
ONEOK Inc.
(Date)
Page 2
1. The Company is a corporation validly organized and existing under
the laws of the State of Delaware and is duly qualified to do business as a
foreign corporation in the State of Oklahoma.
2. The filing of the above-mentioned Registration Statement has been
duly authorized by the proper corporate action on the part of the Company.
3. The Common Stock when sold by the Selling Shareholders will be
legally issued, fully paid and non-assessable in the hands of the owners
thereof.
We hereby consent to:
1. Being named in the above-mentioned Form S-3 Registration
Statement and the Prospectus which is being made a part thereof, and in any
amendments thereto, under the caption "Experts," and "Legality," as counsel for
the Company, passing upon legal matters in connection with the Common Stock and
having reviewed the matters of law and legal conclusions under "Description of
Common Stock" contained in said Prospectus which are included therein under our
authority as experts.
2. The filing of this opinion as an exhibit to the above-mentioned
Form S-3 Registration Statement.
Very truly yours,
GABLE GOTWALS MOCK SCHWABE KIHLE
GABERINO
By /s/ DONALD A. KIHLE
-----------------------------------
Donald A. Kihle
DAK:bb
23b-2
