EXHIBIT 10.22
AMENDMENT NO. 1 TO
ASSET ALLOCATION AND SEPARATION AGREEMENT
THIS AMENDMENT NO. 1 dated as of May 2, 2001 (this "Amendment") to the
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Asset Allocation and Separation Agreement, dated as of November 8, 2000 (the
"Allocation Agreement"), by and between Western Resources, Inc., a Kansas
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corporation ("Western"), and Westar Industries, Inc., a Kansas corporation
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("Westar").
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Capitalized terms used but not defined in this Amendment shall have
the meaning given such terms in the Allocation Agreement.
W I T N E S S E T H :
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WHEREAS, Western and Westar desire to amend certain terms of the
Allocation Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
Section 1. Amendment to the Allocation Agreement. Section 2.02 of the Allocation
Agreement is hereby amended by deleting the first sentence of the first
paragraph of such section in its entirety and substituting the following
sentences in its place:
Section 2.02. Intercompany Transfers and Settlement of
Intercompany Debt. After the date hereof and until the earlier of the Cut
Off Date or the secured debt of Western's electric utility operations
receiving an investment grade rating from ▇▇▇▇▇'▇ and Standard & Poor's
Westar shall (a) pay to Western the net cash proceeds of any sale by Westar
of its ownership interest in ONEOK, Inc. and Western Resources, whether
presently owned or hereafter acquired (including common stock or preference
stock of Western Resources issued to Westar after the date hereof as a
result of the conversion of the Intercompany Receivable as provided
herein), (b) pay to Western the net cash proceeds of any borrowings by
Westar secured by a
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pledge of or security interest in any of the assets described in the
foregoing clause (a), and (c) pay to Western the net cash proceeds of the
Rights Offering. All such payments shall be for the purposes and subject to
the limits provided in Section 3.2(a)(i) of the Merger Agreement, or to
acquire indebtedness of Western. Net cash proceeds as used herein shall
mean cash proceeds of a sale transaction received by Westar after deduction
of expenses, commission, etc., tax payments for local, federal or state
entities, and any debt owed on the asset sold. Westar may convert any
outstanding amount of the Intercompany Receivable as provided in Section
3.2(a)(ii) of the Merger Agreement, provided any remaining balance of the
Intercompany Receivable that has not been converted on or before the Merger
Effective Time shall be so converted at the Effective Time, and Westar
shall provide written notice to Western of its choice of conversion options
on or prior to the Cut Off Date. Western shall use all proceeds received
from Westar as provided above or from the exercise by Westar of its rights
under the Westar Option to reduce or minimize its debt. This amendment may
be terminated if (x) the Kansas Corporation Commission (the "Commission")
issues an order with respect to the restructuring of Western's assets, debt
or the matters covered by this Section 2.02 which is inconsistent with this
amendment, or (y) the Commission staff (the "Staff") on its own or others
initiate a docket with respect to the restructuring of Western's assets,
debt or the matters covered by this Section 2.02 which is inconsistent with
this amendment and which causes the Rights Offering to be terminated prior
to the successful completion of said Rights Offering or Western and Westar
do not issue the rights contemplated by the Rights Offering or the Rights
Offering is not successfully completed. This amendment may also be
terminated if after successful completion of the Rights Offering, the
Kansas Corporation Commission issues an Order or Orders attempting to set
aside or materially alter this Agreement or the Rights Offering. If this
amendment is terminated, the terms of this Section 2.02 as in effect prior
to this amendment shall automatically be reinstated and be in full force
and effect.
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If the Merger is terminated, Western will meet with the Staff within
60 days following such termination to discuss the appropriate level of debt for
Western. If agreement cannot be reached, Western or the Staff may submit the
matter to the Commission for a hearing and an order. If the Merger is
terminated, Western will reduce its total debt by at least $100 million per
year, until its debt level reaches the agreed upon debt level, or until it
reaches the debt level established by a final, non-appealable Commission order.
Western will raise the funds needed to make this debt reduction by the following
options, including, but not be limited to, (i) selling Westar stock, (ii)
selling Western stock , (iii) converting the outstanding balance of the
Intercompany Receivable (expected to be approximately $291 million at the Cut
Off Date) to common stock or preference stock of Western, (iv) selling assets of
Westar presently owned or hereafter acquired by Westar, or (v) taking other
actions providing for an orderly reduction of such debt. The parties acknowledge
that multiple methodologies may be appropriate to achieve such reduction in debt
and the methodologies utilized will be governed by the events existing at the
time of the discussions.
Western and Westar further agree that prior to the Merger, Western
will not sell more than 19.9% of the stock of Westar, and if the Merger is
terminated Western will continue as owner of at least 80.1% of Westar's stock,
unless Western first provides not less than 30 days advance notice to the
Commission. Western agrees that other than as allowed in the Merger Agreement,
it will not dividend Westar Industries, Inc. to Western's shareholders until
Western or the Staff will have resolved their issues as herein provided or will
have submitted their issues to the Commission as provided in this Agreement, or
the Commission and the Parties hereto shall have otherwise agreed.
Western agrees that from the date of this Amendment, excluding the
existing credit facilities between Westar and Protection One ($155 Million
Dollar credit facility), it will not incur additional indebtedness or pledge
utility assets for additional indebtedness, for its unregulated business
entities until the issues set forth herein are resolved pursuant to the
Agreement.
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Section 2. Representations and Warranties. Each party hereto hereby represents
and warrants that (i) it has the power and authority and the legal right to
make, deliver and perform this Amendment, (ii) it has taken all necessary
actions to authorize the execution, delivery and performance of this Amendment,
and (iii) this Amendment is legal, valid and binding on, and enforceable
against, such party.
Section 3. Continuing Effect. Except as expressly waived or otherwise agreed
hereby, the Allocation Agreement shall continue to be and shall remain in full
force and effect in accordance with its terms. This Amendment shall not
constitute a waiver or amendment of any other term, condition or provision of
the Allocation Agreement.
Section 4. Governing Law. This Amendment shall be governed by, and construed
and interpreted in accordance with, the laws of the State of New York.
Section 5. Counterparts. This Amendment may be executed by the parties hereto
on any number of separate counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
Section 6. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that neither party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the prior written consent of the other party, which consent shall not be
unreasonably withheld, and unless the Merger Agreement shall have been
terminated in accordance with its terms, any such assignment shall require the
written consent of Parent. If any party or any of its successors or assigns (i)
shall consolidate with or merge into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) shall transfer all or substantially all of its properties and assets to any
Person, then, and in each such case, proper provisions shall be made so that the
successors and assigns of such party shall assume all of the obligations of such
party under each of the Split-Off Documents.
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IN WITNESS WHEREOF, the parties hereto have executed this instrument
as of the date and year first above written.
WESTERN RESOURCES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman, Chief
Executive Officer
and President
WESTAR INDUSTRIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: President