EXHIBIT 10.10
SHAREHOLDER AGREEMENT. dated as of November 26,1997 (this "Agreement"),
between WAI, Inc., an Oklahoma corporation (the "Company") and Western
Resources, Inc., a Kansas corporation (the "Shareholder").
W I T N E S S E T H:
WHEREAS, the Shareholder, the Company, and ONEOK, Inc., a Delaware
corporation ("ONEOK") have entered into an Agreement, dazed as of December 12,
1996, amended and restated as of May 19, 1997 (the "Merger Agreement"), pursuant
to which ONEOK has been merged with and into the Company (the "Merger") and the
Shareholder has acquired pursuant to the transactions contemplated thereby
Beneficial Ownership (as defined in Article I hereof) of 2,996,702 shares of
common stock of the Company, par value $.01 per share (the "Common Stock") and
19,317,584 shares of Series A Convertible Preferred Stock of the Company, par
value $.01. per share (together with the Company's Series B Convertible
Preferred Stock, the "Convertible Preferred Stock");
WHEREAS, prior to the consummation of the Merger (the "Closing"), the
Company and the Shareholder desire to establish in this Agreement certain terms
and conditions concerning the acquisition and disposition of securities of the
Company by the Shareholder, and related provisions concerning the Shareholder's
relationship with and investment in the Company; and
WHEREAS, concurrently with the execution and delivery hereof, the Company
and the Shareholder are entering into a Registration Rights Agreement, dated as
of the date hereof (the "Registration Rights Agreement"), in the form attached
hereto as Exhibit A.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
Certain Definitions
Section 1.1.
In addition to other terms defined elsewhere in this Agreement, as used in
this Agreement, the following terms shall have the meanings ascribed to them
below:
"Adjusted Maximum Ownership Percentage" shall mean the Maximum Ownership
Percentage minus 10.0%.
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"Affiliate" shall mean, with respect to any person, any other person that
directly or indirectly through one or more intermediaries controls or is
controlled by or is under common control with such person. For the purposes of
this definition, "control," when used with respect to any particular person,
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" shall have the meaning assigned to such term in the
introduction hereto.
"Beneficial Owner" (and, with correlative meanings, "Beneficially Own" and
"Beneficial Ownership") of any interest means a Person who, together with his or
its Affiliates, is or may be deemed a beneficial owner of such interest for
purposes of Rule 13d-3 or 13d-5 under the Exchange Act, or who, together with
his or its Affiliates, has the right to become such a beneficial owner of such
interest (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding, or
upon the exercise, conversion or exchange of any warrant, right or other
instrument, or otherwise.
"Board" shall mean the Board of Directors of the Company in office at the
applicable time, as elected in accordance with the By-laws of the Company and
with the provisions of this Agreement.
"Buy-Back Offer" shall have the meaning assigned to such term in Section
3.5(a) hereof.
"Buyout Tender Offer" shall have the meaning assigned to such term in
Section 3.6(b) hereof.
"Buy/Sell Notice" shall have the meaning assigned to such term in Section
3.6(a) hereof.
"Buy/Sell Option" shall have the meaning assigned to such term in Section
3.6(a) hereof.
"Buy/Sell Price" shall have the meaning assigned to such term in Section
3.6(a) hereof.
"By-laws" shall mean the by-laws of the Company, in the form specified in
the Merger Agreement, as they may be amended from time to time.
"Change in Control" shall mean the occurrence of any one of the following
events:
(1) any Person (other than the Shareholder Group) becoming the
Beneficial Owner, directly or indirectly, of Voting Securities, pursuant to
the consummation of a
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merger, consolidation, sale of all or substantially all of the Company's
assets, share exchange or similar form of corporate transaction involving
the Company or any of its subsidiaries that requires the approval of the
Company's shareholders, whether for such transaction or the issuance of
securities in such transaction, so as to cause such Person's Voting
Ownership Percentage to exceed the Control Percentage (as defined below);
provided, however, that the event described in this paragraph (1) shall not
be deemed to be a Change in Control if it occurs as the result of any of
the following acquisitions: (A) by any employee benefit plan sponsored or
maintained by the Company or any Affiliate, or (B) by any underwriter
temporarily holding securities pursuant to an offering of such securities;
(2) the consummation of a merger, consolidation, sale of all or
substantially all of the Company's assets, share exchange or similar form
of corporate transaction involving the Company or any of its subsidiaries
that requires the approval of the Company's shareholders, whether for such
transaction or the issuance of securities in such transaction, unless
immediately following such transaction more than 50% of the total voting
power of (x) the corporation resulting from such transaction, or (y) if
applicable, the ultimate parent corporation that directly or indirectly has
Beneficial Ownership of 100% of the voting securities eligible to elect
directors of such resulting corporation, is represented by Voting
Securities that were outstanding immediately prior to such transaction (or,
if applicable, shares into which such Voting Securities were converted
pursuant to such transaction), and such voting power among the holders of
such Voting Securities that were outstanding immediately prior to such
transaction is in substantially the same proportion as the voting power of
such Voting Securities among the holders thereof immediately prior to such
transaction; or
(3) the consummation of a plan of complete liquidation or
dissolution of the Company.
"Charter" shall mean the Certificate of Incorporation of the Company, in
the form specified in the Merger Agreement, as it may be amended from time to
time.
"Clearly Credible Tender Offer" shall mean any bona fide offer, tender
offer or exchange offer that is subject to Section 14 of the Exchange Act, other
than any such offer with respect to which (i) the Board of Directors of the
Company is advised in writing by outside counsel of recognized standing that the
consummation of such offer would be in violation of applicable law, or (ii) the
party making such offer has not obtained as of the date of the commencement of
such offer definitive commitment letters from reputable financial institutions
in customary form with respect to the financing of such offer.
"Closing" shall have the meaning assigned in the second recital of this
Agreement.
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"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall have the meaning assigned in the first recital of this
Agreement.
"Company" shall have the meaning assigned in the introduction of this
Agreement.
"Company Decision Period" shall have the meaning assigned in Section
3.6(c)(i) hereof.
"Company Repurchase Notice" shall have the meaning assigned to such term in
Section 3.5(b) hereof.
"Control Percentage" shall mean a Voting Ownership Percentage of 15%,
during the period prior to a Regulatory Change, and a Voting Ownership
Percentage of 35% thereafter.
"Conversion" shall mean the conversion of shares of Convertible Preferred
Stock into shares of Common Stock pursuant to the Charter.
"Convertible Preferred Stock" shall have the meaning assigned in the first
recital of this Agreement.
"Dilutive Issuance" shall have the meaning assigned in Section 3.3(a)(iii)
of this Agreement.
"Dilutive Issuance Right" shall have the meaning assigned in Section
3.3(a)(iii) of this Agreement
"Director" shall mean any member of the Board of Directors of the Company
in office at the applicable time, as elected in accordance with the provisions
of the By-laws of the Company.
"Dividend Premium" with respect to any share of Series A Convertible
Preferred Stock calculated at any time, shall be equal to the aggregate of the
present values as of the date of the Closing (assuming a discount rate of 9.25%)
of the excess of (x) each quarterly dividend actually paid by the Company to the
Shareholder Group with respect to such share of Series A Convertible Preferred
Stock over (y) $0.45.
"Excess Buy-Back Shares" shall have the meaning assigned to such term in
Section 3.5(a) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
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"Independent Director" shall mean any person who is not a Shareholder
Nominee and is independent of and otherwise unaffiliated with any member of the
Shareholder Group, and who is not a director, officer, employee, consultant or
advisor (financial, legal or other) of any member of the Shareholder Group and
has not served in any such capacity in the previous three (3) years.
"Initial Shareholder Nominees Notice" shall have the meaning assigned in
Section 4.1(b) of this Agreement.
"Initial Shareholder Nominees" shall have the meaning assigned in Section
4.1(b) of this Agreement.
"Market Price" for a Security of the Company shall mean the average of the
closing prices for such Security for the twenty (20) Trading Days immediately
prior to the date on which the Market Price is being determined; provided,
however, that in the event that the current per share market price of such
security is determined during a period following the announcement by the Company
of (a) a dividend or distribution on such security payable in shares of such
security or securities convertible into such shares, or (b) any subdivision,
combination or reclassification of such security and prior to the expiration of
20 Trading Days after the ex-dividend date for such dividend or dissolution, or
the record date for such subdivision, combination or reclassification, then, and
in each such case, the current per share market price shall be appropriately
adjusted to take into account ex-dividend trading or the effects of such
subdivision, combination or reclassification. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if such security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which such security is listed or admitted to trading or,
if such security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System or
such other system then in use, or, if on any such date such security is not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in such security
selected by a majority of the Board or, if on any such date no market maker is
making a market in such security, the fair value as determined in good faith by
a majority of the Board based upon the opinion of an independent investment
banking firm of recognized standing.
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"Make Whole Payment" shall have the meaning assigned to such term in
Section 3.11 hereof.
"Maximum Ownership Percentage" shall mean, calculated at a particular point
in time, a Total Ownership Percentage of 45.0%, less the Voting Power
represented by all Voting Securities Transferred by the Shareholder Group during
the term of this Agreement (including the Voting Power represented by any shares
of Convertible Preferred Stock which were converted into shares of Common Stock
contemporaneously with such Transfer pursuant to the terms of this Agreement).
"Merger" shall have the meaning set forth in the first recital of this
Agreement.
"Merger Agreement" shall have the meaning get forth in the first recital of
this Agreement.
"1935 Act" shall mean the Public Utility Holding Act of 1935, as amended.
"NYSE" shall mean the New York Stock Exchange.
"ONEOK" shall have the meaning assigned in the first recital of this
Agreement.
"Opt-out Amendment" shall have the meaning assigned in Section 4.3(c)
hereof.
"Person" shall mean any individual, partnership, joint venture,
corporation, trust, unincorporated organization, government or department or
agency of a government
"Quarterly Pay Down Amount" shall mean the Total Per Share Pay Down Amount
divided by 20.
"Registration Rights" shall mean the rights and obligations of the
Shareholder Group and the corresponding rights and obligations of the Company
set forth in the Registration Rights Agreement.
"Registration Rights Agreement" shall have the meaning assigned in the
third recital of this Agreement.
A "Regulatory Change" will be deemed to have occurred, with respect to all
or any one of the provisions of this Agreement, upon the receipt by the
Shareholder of an opinion of the Shareholder's counsel (which counsel must be
reasonably acceptable to the Company) to the effect that either (1) the 1935 Act
has been repealed, modified, amended or otherwise changed or (2) the Shareholder
has received an exemption, or, in the unqualified opinion of such counsel, is
entitled without any regulatory approval to claim an exemption, or has received
an approval or no-action letter from the Securities and Exchange Commission or
its
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staff under the 1935 Act or has registered under the 1935 Act or any combination
of the foregoing, and as a consequence of (1) and/or (2) the Shareholder may
fully and legally exercise the rights set forth in such provision(s) of this
Agreement which take effect in the period after a Regulatory Change has
occurred.
"Repurchase" shall have the meaning assigned in Section 3.5(a) of this
Agreement
"Rights Agreement" means the Shareholder Protection Rights Agreement, dated
as of the date hereof, attached hereto as Exhibit B.
"Sale Notice" shall have the meaning assigned in Section 3.4(b)(i) of this
Agreement.
"Sale Option" shall have the meaning assigned in Section 3.4(b) of this
Agreement.
"Sale Period" shall have the meaning assigned in Section 3.4(b)(ii) of this
Agreement.
"Sale Securities" shall have the meaning assigned in Section 3.4.(b)(i) of
this Agreement.
"Securities" shall mean any equity securities of the Company.
"Securities Act" shall mean the Securities Act of 1993, as amended.
"Seller" shall have the meaning assigned in Section 3.4 of this Agreement.
"Series A Convertible Preferred Stock" shall mean the Series A Convertible
Preferred Stock, par value $.01 per share, of the Company.
"Series B Convertible Preferred Stock" shall mean the Series B Convertible
Preferred Stock, par value $.01 per share, of the Company.
"Shareholder" shall have the meaning assigned in the introduction to this
Agreement.
"Shareholder Affiliate" shall mean any Affiliate of the Shareholder.
"Shareholder Group" shall mean the Shareholder, any Shareholder Affiliate
and any Person with whom any Shareholder or any Affiliate of any Shareholder is
part of a 13D Group.
"Shareholder Nominees" shall have the meaning set forth in Section 4.1(d)
of this Agreement.
"Successor Shareholder Nominee Notice" shall have the meaning assigned in
Section 4.1(d) of this Agreement.
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"Successor Shareholder Nominees" shall have the meaning assigned in Section
4.1(d) of this Agreement.
"13D Group" shall mean any group of Persons acquiring, holding, voting or
disposing of any Voting Security which would be required under Section 13(d) of
the Exchange Act and the rules and regulations thereunder to file a statement on
Schedule 13D with the Commission as a "person within the meaning of Section
13(d)(3) of the Exchange Act.
"Total Make Whole Amount" shall mean, with respect to any share of Series A
Convertible Preferred Stock calculated at any time, an amount equal to the Total
Per Share Pay Down Amount minus the sum of (I) the product of (x) the Quarterly
Pay Down Amount and (y) the number of quarters since the date of the Closing in
which the Company has paid a dividend on the Series A Convertible Preferred
Stock of at least $0.45 per share plus (II) the Dividend Premium with respect to
such share through such time.
"Total Ownership Percentage" shall mean, calculated at a particular point
in time, the Voting Power which would be represented by the Securities
Beneficially Owned by the Person whose Total Ownership Percentage is being
determined if all shares of Convertible Preferred Stock (or other Securities
convertible into Voting Securities) Beneficially Owned by such Person were
converted into shares of Common Stock (or other Voting Security).
"Total Per Share Paydown Amount" shall mean the product of (i) $35,000,000
divided by (ii) the total number of shares of Series A Convertible Preferred
Stock issued at the Closing.
"Total Voting Power" shall mean, calculated at a particular point in time,
the aggregate Votes represented by all then outstanding Voting Securities.
"Trading Day", with respect to a Voting Security, shall mean a day on which
the principal national securities exchange on which such Voting Security is
listed or admitted to trading is open for the transaction of business or, it
such security is not listed or admitted to trading on any national securities
exchange, any day other than a Saturday, Sunday or a day on which banking
institutions in the City of New York are authorized or obligated to close.
"Transfer" shall mean any sale, transfer, pledge, encumbrance or other
disposition to any Person, and to "Transfer" shall mean to sell, transfer,
pledge, encumber or otherwise dispose of to any Person.
"Unrestricted Ownership Percentage" shall mean a Voting Ownership
Percentage of 9.9%.
"Votes" shall mean votes entitled to be cast generally in the election of
Directors, not including the votes that would be able to be cast by holders of
shares of Convertible Preferred
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Stock upon Conversion to shares of Common Stock unless such Conversion shall
occur or be deemed to occur.
"Voting Ownership Percentage" shall mean, calculated at a particular point
in time, the Voting Power represented by the Voting Securities Beneficially
Owned by the Person whose Voting Ownership Percentage is being determined.
"Voting Power" shall mean, calculated at a particular point in time, the
ratio, expressed as a percentage, of (a) the Votes represented by the Voting
Securities with respect to which the Voting Power is being determined to (b)
Total Voting Power.
"Voting Securities" shall mean the Common Stock and shares of any other
class of capital stock of the Company then entitled to vote generally in the
election of Directors, and shall not include Convertible Preferred Stock (or
other Securities convertible into Voting Securities) prior to Conversion into
Common Stock (or other Voting Security).
ARTICLE II
Representations and Warranties
Section 2.1. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to the Shareholder as of the date
hereof as follows:
(a) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Oklahoma and
has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder.
(b) This Agreement has been duly and validly authorized by the Company
and all necessary and appropriate action has been taken by the Company to
execute and deliver this Agreement and to perform its obligations
hereunder.
(c) This Agreement has been duly executed and delivered by the Company
and assuming due authorization and valid execution and delivery by the
Shareholder, this Agreement is a valid and binding obligation of the
Company, enforceable in accordance with its terms.
Section 2.2. Representations and Warranties of the Shareholder.
-------------------------------------------------
The Shareholder represents and warrants to the Company as of the date
hereof as follows:
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(a) The Shareholder has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Kansas and
has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder.
(b) This Agreement has been duly and validly authorized by the
Shareholder and all necessary and appropriate action has been taken by the
Shareholder to execute and deliver this Agreement and to perform its
obligations hereunder.
(c) This Agreement has been duly executed and delivered by the
Shareholder and assuming due authorization and valid execution and delivery
by the Company, this Agreement is a valid and binding obligation of the
Shareholder, enforceable in accordance with its terms.
(d) As of the effectiveness of this Agreement the Shareholder Group
Beneficially Owns 2,996,702 shares of Common Stock and 19,317,584 shares of
Series A Convertible Preferred Stock and does not Beneficially Own any
other Voting Security, warrant option, convertible security or other
similar right to acquire Common Stock or shares of any other class of
capital stock of the Company which are entitled to vote generally in the
election of directors.
ARTICLE III
Shareholder and Company Conduct
Section 3.1. Standstill Provision.
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Subject to the provisions of this Agreement during the term of this
Agreement, the Shareholder agrees with the Company that without the prior
approval of a majority of the Board, the Shareholder will not, and will cause
each Shareholder Affiliate not to, take any of the following actions:
(a) prior to the occurrence of a Regulatory Change, but not
thereafter, singly or as part of a partnership, limited partnership,
syndicate or other 13D Group, directly or indirectly, acquire Beneficial
Ownership of any Voting Security so as to cause. the Shareholder Group's
Voting Ownership Percentage to exceed the Unrestricted Ownership
Percentage;
(b) singly or as part of a partnership, limited partnership, syndicate
or other 13D Group, directly or indirectly, acquire, propose to acquire, or
publicly announce or otherwise disclose an intention to propose to acquire,
or offer or agree to acquire, by purchase or otherwise, Beneficial
Ownership of any Security so as to cause the Share-
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holder Group's Total Ownership Percentage to exceed the Maximum Ownership
Percentage;
(c) deposit (either before or after the date of the execution of this
Agreement) any Security in a voting trust or subject any Security to any
similar arrangement or proxy with respect to the voting of such Security;
(d) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies", or become a "Participant" in a "solicitation"
(as such terms are used in Regulation 14A under the Exchange Act) to seek
to advise or influence any person to vote against any proposal or director
nominee recommended to the shareholders of the Company or any of its
subsidiaries by at least a majority of the Board of Directors;
(e) form, join or in any way participate, in a 13D Group with respect
to any Security of the Company or any securities at its subsidiaries;
(f) commence (including by means of proposing or publicly announcing
or otherwise disclosing an intention to propose, solicit, offer, seek to
effect or negotiate) a merger, acquisition or other business combination
transaction relating to the Company;
(g) initiate a "proposal," as such term is used in Rule 14a-8 under
the Exchange Act, "propose", or otherwise solicit the approval of, one or
more stockholders for a "proposal" or induce or attempt to induce any other
person to initiate a "proposal";
(h) otherwise act, alone or in concert with others, to seek to control
or influence the management, the Board or policies of the Company;
(i) take any other action to seek or effect control of the Company
other than in a manner consistent with the terms of this Agreement
This Section 3.1 shall not be interpreted to restrict the Shareholder or
any Shareholder Affiliate from taking any action or exercising any right
consistent with the terms of this Agreement, including engaging in private and
confidential discussions with the Board or the management of the Company. In
addition, this section shall not be deemed to restrict the Shareholder Nominees
from participating as board members in the direction of the Company.
Section 3.2. Required Reduction of Ownership Percentage.
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If at any time the Shareholder becomes aware that the Shareholder Group's
Total Ownership Percentage (excluding Excess Buy-Back Securities) exceeds the
Maximum Ownership Percentage and/or, prior to the occurrence of a Regulatory
Change and not thereafter, that
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the Shareholder Group's Voting Ownership Percentage (excluding Excess Buy-Back
Securities) exceeds the Unrestricted Ownership Percentage, in each case other
than as permitted pursuant to the terms of this Agreement, then the Shareholder
shall, or shall cause the Shareholder Affiliates to, consistent with the
provisions of Section 3.4 of this Agreement, promptly take all action necessary
to reduce the amount of Securities or Voting Securities, as the case may be,
Beneficially Owned by the Shareholder Group such that the Shareholder Group's
Total Ownership Percentage (excluding Excess Buy- Back Securities) is not
greater than the Maximum Ownership Percentage and that the Shareholder Group's
Voting Ownership Percentage (excluding Excess Buy-Back Securities) is not
greater than the Unrestricted Ownership Percentage, as the case may be.
Section 3.3. Top-Up Rights; Dilutive Issuance Right
--------------------------------------
(a) During the term of this Agreement and prior to the occurrence of a
Regulatory Change, but not thereafter:
(i) if the Shareholder Group's Voting Ownership Percentage falls
below the Unrestricted Ownership Percentage, the Shareholder may at its
option (A) purchase Voting Securities from time to time in the open market
or otherwise or (B) convert shares of Convertible Preferred Stock into
shares of Common Stock pursuant to the terms of the Charter, in each case
in an amount sufficient in order to restore the Shareholder Group's Voting
Ownership Percentage to the Unrestricted Ownership Percentage.
(ii) If the Shareholder Group's Total Ownership Percentage falls
below the Maximum Ownership Percentage, the Shareholder may at its option
purchase Voting Securities from time to time in the open market or
otherwise in an amount sufficient in order to restore the Shareholder
Group's Total Ownership Percentage to the Maximum Ownership Percentage;
provided, however, that the Shareholder shall present for exchange, and the
Company shall exchange at no cost to the Shareholder, Common Stock
purchased pursuant to this paragraph for shares of Series B Convertible
Preferred Stock (at a ratio of one share of Series B Convertible Preferred
Stock in exchange for each share of Common Stock (as appropriately adjusted
to reflect any stock split, stock dividend, reverse stock split,
reclassification or any other transaction with a comparable effect)) in an
amount sufficient to ensure that the Shareholder Group is in compliance
with its obligations under Section 3.1 (a) hereof.
(iii) If the Shareholder Group's Total Ownership Percentage would
fall below the Maximum Ownership Percentage as a result of any security
issuance (a "Dilutive lssuance") by the Company, except as provided in
paragraph 13(a)(y) below, the Shareholder shall have the right (the
"Dilutive Issuance Right") to require the Company to issue to the
Shareholder (A) additional Common Stock, up to the maximum
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number of such shares that would permit the Shareholder Group to remain in
compliance with Section 3.1(a) hereof, and (B) additional shares of Series
B Convertible Preferred Stock, up to an amount of such shares of Common
Stock and Series B Preferred Stock as may be necessary to restore the
Shareholder Group's Total Ownership Percentage to the Maximum Ownership
Percentage. Shares of Common Stock or Series B Preferred Stock issued
pursuant to the exercise of a Dilutive Issuance Right shall be issued for
cash concurrently with the closing of the Dilutive Issuance. The issue
price per share for shares of Common Stock and shares of Series B
Convertible Preferred Stock issued pursuant to the Dilutive Issuance Right
shall be equal to the issue price per share of the Dilutive Issuance. Such
issue price shall in turn be equal to the aggregate amount of cash plus the
fair market value of any other property received by the Company in
consideration of the Dilutive Issuance, divided by the number of shares
being issued in such Dilutive Issuance, with such fair market value being
determined in good faith by the Board of Directors of the Company, provided
that if the Shareholder shall object to such valuation within 30 days of
its receipt of notice thereof, then the fair market value of such property
shall be determined at the Company's sole expense by an independent
nationally recognized financial advisor mutually acceptable to the
Shareholder and the Company.
(iv) The Shareholder must provide the Company with notice of its
intention to exercise the Dilutive Issuance Right sixty (60) days prior to
the expected closing of the Dilutive Issuance, which expected closing date
will be provided to the Shareholder by or on behalf of the Company not less
than ninety (90) days prior to such expected closing date.
(v) The Company shall not be obligated to provide the Shareholder
with a Dilutive lssuance Right (I) in connection with issuances of
securities pursuant to employee benefit plans and programs of the Company
in the ordinary course of business or (II) which would require the issuance
of fewer than 25,000 shares of Series B Convertible Preferred Stock;
provided, however, that any share issuances not required to be made
pursuant to this clause (II) shall be carried forward and taken into
account in determining whether the Company must provide the Shareholder
with a subsequent Dilutive Issuance Right. In addition, in the case of any
Dilutive Issuance in connection with any acquisition or other business
combination transaction, by merger or otherwise, by the Company, the
Company shall be required to provide the Shareholder with a Dilutive
Issuance Right only to the extent of restoring the Shareholder Group's
Total Ownership Percentage to the Adjusted Maximum Ownership Percentage.
(vi) At the Closing, the Shareholder shall be entitled to require
the Company to issue to the Shareholder, at a price per share equal to the
Market Price as of the date of the Closing, additional Common Stock up to
the maximum number of shares that
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would permit the Shareholder Group to remain in compliance with Section
3.1(a) and additional shares of Series A Convertible Preferred Stock so as
to restore the Shareholder Group's Total Ownership Percentage to the
Maximum Ownership Percentage.
(b) From time to time following a Regulatory Change and during the term of
this Agreement:
(i) If the Shareholder Group's Total Ownership Percentage falls
below the Maximum Ownership Percentage, the Shareholder may at its option
purchase Voting Securities from time to time in the open market or
otherwise in an amount sufficient in order to restore the Shareholder
Group's Total Ownership Percentage to the Maximum Ownership Percentage.
(ii) If the Shareholder Group's Total Ownership Percentage would
fall below the Adjusted Maximum Ownership Percentage as a result of a
Dilutive Issuance by the Company pursuant to primary or secondary
offerings, mergers, acquisitions or otherwise, the Shareholder shall have a
Dilutive Issuance Right (for the issuance of Common Stock only and not
Series B Convertible Preferred Stock) to the extent of restoring the
Shareholder Group's Total Ownership Percentage to the Adjusted Maximum
Ownership Percentage.
(iii) The Shareholder must provide the Company with notice of its
intention to exercise the Dilutive Issuance Right sixty (60) days prior to
the expected closing of the Dilutive Issuance, which expected closing date
will be provided to the Shareholder by or on behalf of the Company not less
than ninety (90) days prior to such expected closing date.
(c) All Securities acquired by purchase or conversion pursuant to this
Section 3.3 shall be subject to the terms of this Agreement. In no event shall
the Shareholder Group's exercise of the Dilutive Issuance Right be interpreted
to be a waiver by the Shareholder of its right to make purchases of Securities
pursuant to this Section.
Section 3.4. Restrictions on Transfer.
------------------------
None of the members of the Shareholder Group shall directly or indirectly
Transfer any Securities without the prior written consent of a majority of the
Independent Directors, except the following Transfers:
(a) Transfers of Securities representing upon Transfer Voting Power of
less than 5.0% to any Transferee, without prior notice to the Company, so
long as such Transferee and any Affiliate of such Transferee and any such
person who is a member
-15-
of a 13D Group with such Transferee does not have a Voting Ownership
Percentage of 5.0% or more immediately prior to giving effect to at the
time of each such Transfer.
(b) Transfers of Securities representing upon Transfer Voting Power of
5.0% or more pursuant to the following procedure (the "Sale Option"):
(i) The Seller must provide written notice (a "Sale Notice")
of its intention to sell to the Company Securities representing, upon
Transfer, Voting Power of 5.00/6 or more (the "Sale Securities").
The-Sale Notice shall specify the number of Sale Securities and the
cash price per share at which the Company or its designee may purchase
the Sale Securities, which cash price shall equal 98.5% of the Market
Price of such Sale Securities determined as of the date of the Sale
Notice; provided, however, that the cash price per share at which the
Company or its designee shall purchase shares of Convertible Preferred
Stock pursuant to this subsection shall equal 98.5% of the Market
Price of the Common Stock determined as of the date of the Sale
Notice.
(ii) The Company shall have a period ending on the later of
ninety (90) days after the date of the Sale Notice and thirty (30)
days from the date of receipt of all necessary regulatory approvals
(the "Sale Period") (provided, that in no event shall the Sale Period
exceed one hundred eighty (180) days) within which to effect a closing
of the Company's or its designee's purchase of all, but not less than
all, of the Sale Securities.
(iii) If the Company or its designee shall for any reason fail
to effect a closing of the purchase of all, but not less than all, of
the Sale Securities within the Sale Period, the Company shall at its
option inform the Seller in writing that it shall reimburse the Seller
for the aggregate difference between the Market Price of the Sale
Securities as of the date of the Sale Notice and the Market Price of
the Sale Securities as of the date that the Seller completes its
transfer of the Sale Securities, in which event such transfer by the
Seller must be completed within the later of 180 days from the date of
the Sale Notice or 30 days from the receipt of all necessary
regulatory approvals. Otherwise, if the Company shall not have so
informed the Seller, the Seller shall have 16 months from the date of
the Sale Notice to complete such transfer. In the event that such
transfer by the Seller is not so completed within the applicable
period, the Sale Securities shall thenceforth again be subject to this
Section 3.4.
(c) Transfers of Securities to the public in a bona fide underwritten
offering pursuant to the Registration Rights Agreement; provided, however,
that the Seller and the representative or representatives of the
underwriters previously agree in writing with the Company that all
reasonable efforts will be made to achieve a wide distribution
-16-
of the Voting Securities in such offering and to ensure that no Transferee
in such offering acquires for its own account Beneficial Ownership of
Securities representing upon Transfer Voting Power of 5.0% or more.
(d) Transfers of all or part of the Shareholder Group's Securities
pursuant to a pro rata distribution of Securities among the shareholders of
the Shareholder.
(e) Transfers of Securities among members of the Shareholder Group;
provided, however, that any such transferee shall agree with the Company in
writing prior to each such transfer to be bound by the terms of this
Agreement with respect to its Beneficial Ownership of Securities.
(f) If a Clearly Credible Tender Offer for the Company has been
commenced, at the Shareholder's option Transfers of Securities by means of
tenders into such Clearly Credible Tender Offer in an amount not exceeding
the percentage (on the basis of total Votes and assuming the conversion of
all shares of Convertible Preferred Stock into shares of Common Stock) of
the Voting Securities of which it is the Beneficial Owner equal to the
highest percentage (on the basis of total Votes) of the aggregate of all
Voting Securities not Beneficially Owned by any member of the Shareholder
Group which has ever been announced to have been tendered into such Clearly
Credible Tender Offer.
Section 3.5. Buy-Back Options.
----------------
(a) During the term of this Agreement, if the Company purchases Securities
from the public, whether by tender offer, open market purchase or otherwise (a
"Repurchase"), the Company shall contemporaneously with the Repurchase offer to
repurchase from the Shareholder on the same terms and conditions, including
price, as in the Repurchase, a percentage (on the basis of total Votes and
assuming the conversion of all shares of Convertible Preferred Stock into shares
of Common Stock) of those Securities Beneficially Owned by the Shareholder equal
to the percentage (on the basis of total Votes and assuming the conversion of
all shares of Convertible Preferred Stock into shares of Common Stock) of
Securities to be Repurchased from the Beneficial Owners of Securities other than
the Shareholder or any Shareholder Affiliate (the "Buy-Back Offer"). The
Shareholder may accept such Buy-Back Offer in its sole discretion; provided,
however, that in the event of a Repurchase the Shareholder, shall be required to
sell Securities or Voting Securities of which it is the Beneficial Owner to the
Company in an amount sufficient to ensure that its Total Ownership Percentage
does not exceed the Maximum Ownership Percentage and/or, prior to the occurrence
of a Regulatory Change and not thereafter, that the Shareholder Group's Voting
Ownership Percentage does not exceed the Unrestricted Ownership Percentage, in
each case other than as permitted pursuant to the terms of this Agreement; and
provided, further that the Shareholder shall not be required to comply with the
preceding mandatory sale requirement (i) during any period when
-17-
doing so would cause the Shareholder to incur any liability under Section 16(b)
of the Exchange Act or the rules and regulations promulgated thereunder, and
(ii) to the extent that compliance with such mandatory sale requirement would
have an adverse effect on the availability of pooling-of-interests accounting
treatment with respect to any business combination involving the Shareholder or
any of the Shareholders subsidiaries that has either been announced or is under
bona fide consideration by the Shareholder at the time of such Repurchase, but
the Shareholder shall be required to comply with such mandatory sale requirement
immediately upon the conditions set forth in (i) and (ii) above no longer being
applicable. Any Securities Beneficially Owned by the Shareholder Group as
permitted by the preceding sentence which cause the Shareholder Group's Total
Ownership Percentage to exceed the Maximum Ownership Percentage and/or, prior to
the occurrence of a Regulatory Change and not thereafter, the Shareholder
Group's Voting Ownership Percentage to exceed the Unrestricted Ownership
Percentage shall be referred to in this Agreement as "Excess Buy-Back
Securities."
(b) The Company shall provide notice to the Shareholder of its intention to
engage in a Repurchase not less than 30 days in advance of the date on which the
Repurchase is to begin (the "Company Repurchase Notice"). The Shareholder must
provide notice to the Company within ten (10) days of receipt of the Company
Repurchase Notice of (i) whether the Shareholder intends to accept the Buy-Back
Offer and (ii) in good faith whether the Shareholder is aware that the
Shareholder would be subject to any of the conditions set forth in (i) or (ii)
above as a result of such Repurchase.
Section 3.6. Buy/Sell Option.
---------------
(a) At the fifteenth and at each succeeding anniversary of the date hereof,
if at such times this Agreement remains in force, each of the Shareholder and
the Company may at its option (the "Buy/Sell Option") provide notice (the
"Buy/Sell Notice") to the other parry of a price (the "Buy/Sell Price") at which
such notifying party intends in good faith either to sell to the receiving party
all, but not less than all, of the Securities Beneficially Owned by the
notifying party or to buy from the receiving party all, but not less than all,
of the Securities Beneficially Owned by the receiving party; provided, however,
that the Buy/Sell Price shall apply equally to shares of Convertible Preferred
Stock and shares of Common Stock and provided, further, that all references in
this Section 3.8 to Securities Beneficially Owned by the Company shall be deemed
to refer only to outstanding Securities Beneficially Owned by shareholders of
the Company other than the Shareholder Group.
(b) Upon receipt by the Shareholder of a Buy/Sell Notice from the Company,
the Shareholder Group shall have ninety (90) days (the "Shareholder Decision
Period") within which either to (i) agree to sell for cash all, but not less
than all, of the Securities Beneficially Owned by the Shareholder Group to the
Company at the Buy/Sell Price or (ii) make a bona fide Clearly Credible Tender
Offer (a "Buyout Tender Offer") at the Buy/Sell Price for any and
-18-
all Securities Beneficially Owned by the Company, which Buyout Tender Offer the
Company hereby agrees not to oppose. A non-waivable condition to the
consummation of the Buyout Tender Offer shall be the valid tender into such
offer, an or prior to the 20th day following the receipt of all regulatory
approvals required for the consummation of such offer, of Voting Securities
representing in the aggregate two-thirds (2/3) of the Voting Power represented
by all Voting Securities held by shareholders of the Company other than the
Shareholder Group.
(c) (i) Upon receipt by the Company of a Buy/Sell Notice from the
Shareholder, the Company shall have ninety (90) days (the "Company Decision
Period") within which to (A) agree to purchase for cash all but not less than
all of the Securities Beneficially Owned by the Shareholder Group at the
Buy/Sell Price or (B) agree to seek an opinion from an independent,
internationally recognized investment banking firm relating to the fairness to
the Company's shareholders of the Offer Price in the Buyout Tender Offer with
respect to the acquisition by the Shareholder of all Securities Beneficially
Owned by the Company at the Buy/Sell Price.
(ii) If the Company shall not agree to repurchase the Voting
Securities Beneficially Owned by the Shareholder Group pursuant to Section
3.6(c)(i) above, the Company shall have the right within ninety (90) days
following the end of the Company Decision Period, to obtain the fairness
opinion and execute a merger agreement between the Company and any member
of the Shareholder Group pursuant to which the Shareholder or a Shareholder
Affiliate shall acquire Beneficial Ownership of all remaining Securities at
the Buy/Sell Price. The terms of such merger agreement shall include
customary provisions regarding the non-solicitation of alternative
transactions by the Company and the recommendation of the Merger to the
Company's shareholders, if required.
(iii) If the Company fails to satisfy the condition pursuant to
Section 3.6(c)(ii) above by the end of such ninety (90) day period, or if
the Company cannot obtain a fairness opinion by the end of such ninety (90)
day period, this Agreement shall immediately terminate.
(d) If the Shareholder and the Company each provide a Buy/Sell Notice to
the other party an the same day, the Buy/Sell Notice containing the higher
valued Buy/Sell Price shall be the effective and controlling Buy/Sell Notice. In
the event that (i) the Buy/Sell Price set forth in either or both of the
Buy/Sell Notices consists of consideration other than cash, and (ii) the parties
are unable to reach agreement as to which of the Buy/Sell Prices is higher
valued for purposes of this subsection (d), an independent, internationally
recognized investment banking firm mutually agreeable to both parties shall
conclusively make such determination.
(e) Any purchase by the Company of the Shareholder Group's Securities
pursuant to this Section shall be closed within a period ending ninety (90) days
after the end of the
-19-
Shareholder Decision Period or the Company Decision Period, as the case may be,
or thirty (30) days after the date of receipt of all necessary regulatory
approvals, whichever is later.
Section 3.7. Charter and By-laws.
-------------------
During the term of this Agreement the Company shall not amend, alter or
repeal, or propose the amendment, alteration or repeal of, any provision of the
Charter or the By-laws in any manner which is inconsistent with the terms of
this Agreement and which adversely affects the rights of the Shareholder Group
under the terms of this Agreement if at any time during the term of this
Agreement the provisions of this Agreement shall conflict with the provisions of
the Charter and the By-Laws, the provisions of this Agreement shall be
controlling.
Section 3.8. Rights Agreement
----------------
During the term of this Agreement, the Company hereby agrees not to amend
any provision of the Rights Agreement in any manner which is inconsistent with
the terms of this Agreement or the Merger Agreement and which adversely affects
the rights of the Shareholder Group under the terms of this Agreement.
Section 3.9. Agreement Not to Convert.
------------------------
During the term of this Agreement and prior to the occurrence of a
Regulatory Change, the Shareholder agrees that it shall not, and shall cause
each Shareholder Affiliate not to, Convert shares of Convertible Preferred Stock
Beneficially Owned by the Shareholder or any Affiliate into shares of Common
Stock except to the extent any such shares of Convertible Preferred Stock are
Converted (a) concurrently with the Transfer of such shares to any Person other
than the Shareholder or any Shareholder Affiliate or (b) pursuant to the
Shareholder's top-up rights as set forth in Section 3.3(a)(i)(B).
Section 3.10. Taxes Upon Conversion or Exchange.
---------------------------------
The Company hereby agrees to pay any and all stock transfer and documentary
stamp taxes that may be payable in respect of any issuance or delivery of (i)
any shares of Convertible Preferred Stock, (ii) any shares of Common Stock
issued in a Conversion of shares of Convertible Preferred Stock or (iii) any
exchange of shares of Common Stock for shares of Convertible Preferred Stock, or
certificates or instruments evidencing any of such shares or securities. The
Company shall not, however, be required to pay any such tax which may be payable
in respect of any transfer involved in the issuance or delivery of shares of
Common Stock in a Conversion of shares of Convertible Preferred Stock in a name
other than that in which the shares of such Convertible Preferred Stock were
registered.
-20-
Section 3.11. Make Whole Payment.
------------------
Immediately upon the Conversion of any share of Series A Preferred Stock,
the Company shall pay to the Shareholder an amount (a "Make Whole Payment") with
respect to such share equal to the Total Make Whole Amount for such share as of
the date of such Conversion; provided, however, that the Company shall not be
required to make a Make Whole Payment in respect of the Conversion of fewer than
25,000 shares of Series A Convertible Preferred Stock; provided, further, that
any Make Whole Payments not required to be made pursuant to this sentence shall
be carried forward and taken into account in determining whether the Company
must provide the Shareholder with a subsequent Make Whole Payment.
Section 3.12. Prohibition on Senior Securities.
--------------------------------
During the term of this Agreement, the Company hereby agrees that it shall
not create, authorize or reclassify any authorized stock of the Company into (x)
any class or series of the Company's capital stock ranking prior to the
Convertible Preferred Stock as to dividends or as to distributions of assets
upon liquidation, dissolution or winding up of the Company. whether voluntary or
involuntary, or (y) any class or series of the Company's capital stock entitled
to vote separately as a class on any matter whatsoever, other than an amendment
to the Charter which would have the effect of modifying the voting powers,
designations, preferences, rights and qualifications, limitations or
restrictions of such class or series so as to affect the holders thereof
adversely, or (z) any security convertible into shares of any class or series
described in (x) or (y) above.
ARTICLE IV
Board Representation and Voting
Section 4.1. Directors Designated by the Shareholder.
---------------------------------------
(a) Immediately following the Closing, the Board shall expand the size of
the Board by two (2) Directors and shall appoint as additional Directors the two
(2) Initial Shareholder Nominees (as defined in Section 4.1(b) below) who have
been designated by the Shareholder in the Initial Shareholder Nominee Notice (as
defined in Section 4.1(b) below) attached as Exhibit C hereto. One Initial
Shareholder Nominee shall be placed in the class of Directors next standing for
election, and the remaining Initial Shareholder Nominee shall be placed in the
class of Directors next but one standing for election. Immediately following the
occurrence of a Regulatory Change, the Board shall expand the Board as may be
necessary and shall appoint additional Initial Shareholder Nominees as
designated by the Shareholder in an additional Initial Shareholder Nominee
Notice in a number sufficient to ensure that Shareholder Nominees comprise a
number of Directors which is (x) 4 Directors if the total size of the Board is
14 or fewer Directors (excluding any Shareholder Nominees) or (y) one-third
(rounding down to the
-21-
nearest whole Director) of the Board if the total size of the Board is more than
14 Directors (excluding any Shareholder Nominees). Such additional Initial
Shareholder Nominees shall be distributed among the classes of Directors as
evenly as possible. In the event of a vacancy caused by the disqualification,
removal, resignation or other cessation of service of any Initial Shareholder
Nominee from the Board, the Board shall elect as a Director (to serve until the
Company's immediately succeeding annual meeting of shareholders) a new Initial
Shareholder Nominee who has been designated by the Shareholder in an additional
Initial Shareholder Nominee Notice that has been provided to the Company at
least seven (7) days prior to the date of a regular meeting of the Board.
(b) The Shareholder shall provide notice to the Company (the "Initial
Shareholder Nominee Notice") as required by Section 4.1 (a) above, which notice
shall contain the following information: (i) the name of the person(s) it has
designated to become Director(s) (the "Initial Shareholder Nominees"), and (ii)
all information required by Regulation 14A and Schedule 14A under the Exchange
Act with respect to each such Initial Shareholder Nominee.
(c) Following the occurrence of a Regulatory Change and during the term of
this Agreement, until such time as the Initial Shareholder Nominees and the
Successor Shareholder Nominees (as defined in Section 4.1(d) below) together
comprise a number of Directors which is one-third (rounding down to the nearest
whole Director) of the Board, at the first annual meeting of shareholders of the
Company following the occurrence of a Regulatory Change and at each subsequent
annual meeting of shareholders of the Company at which (i) the term of any
Director is to expire or (ii) a vacancy is caused by the removal, resignation,
retirement, death, disability or disqualification or other cessation of service
of any Director, the Company shall at its option (i) cause such directorship to
remain vacant, with the size of the Board correspondingly being reduced, or (ii)
designate as a replacement Director a Successor Shareholder Nominee to be
included in the slate of nominees recommended by the Board to the Company's
shareholders for election as Directors and use its best efforts to cause the
election of each such Successor Shareholder Nominee to the Board, including
soliciting proxies in favor of the election of such persons. The Successor
Shareholder Nominees shall be divided as nearly equally as possible among all
the classes of Directors, as specified in the Successor Shareholder Nominee
Notice (as defined in Section 4.1 (d) below).
(d) Following the occurrence of a Regulatory Change and during the term of
this Agreement, until such time as the Initial Shareholder Nominees and the
Successor Shareholder Nominees together comprise a number of Directors which is
one-third (rounding down to the nearest whole Director) of the Board, the
Shareholder shall provide notice to the Company in writing sixty (60) days prior
to each annual meeting of the Company's shareholders ("Successor Shareholder
Nominee Notice"), indicating (i) the name of the person(s) it has designated to
become Director(s) ("Successor Shareholder Nominees" and together with Initial
Shareholder Nominees, "Shareholder Nominees"), if any, (ii) the class of
Directors to which each such
-22-
Successor Shareholder Nominee shall be assigned, and (iii) all information
required by Regulation 14A and Schedule 14A under the Exchange Act with respect
to each such Successor Shareholder Nominee.
(e) The Shareholder shall consult with the Company in connection with the
identity of any proposed Shareholder Nominee. In the event the Company is
advised in writing by its outside counsel that a proposed Shareholder Nominee
would not be qualified under the Company's Charter or By-laws or any applicable
statutory or regulatory standards to serve as a Director, or if the Company
otherwise reasonably objects to a proposed Shareholder Nominee, including
without limitation because such Shareholder Nominee either (i) is a director or
officer of a direct competitor of the Company or (ii) has engaged in any adverse
conduct that would require disclosure under Item 7 of Schedule 14A promulgated
under the Exchange Act the Shareholder agrees to withdraw such proposed
Shareholder Nominee and nominate a replacement therefor (which replacement would
be subject to the requirements of this Section 4.1(e)). Any such objection by
the Company must be made no later than one (1) month after the Shareholder first
informs the Company of the identity of the proposed Shareholder Nominee;
provided, however, that the Company shall in all cases notify the Shareholder of
any such objection sufficiently in advance of the date on which proxy materials
are mailed by the Company in connection with such election of directors to
enable the Shareholder to propose an alternate Shareholder Nominee pursuant to
and in accordance with the terms of this Agreement. Prior to the occurrence of a
Regulatory Change, no more than one Shareholder Nominee may be a director,
officer or employee of the Shareholder. Following the occurrence of a Regulatory
Change, no more than two (2) Shareholder Nominees may be directors, officers or
employees of the Shareholder.
(f) During the term of this Agreement the Company agrees to include each
Shareholder Nominee to be added to or retained on the Board pursuant to this
Agreement in the slate of nominees recommended by the Board to the Company's
shareholders for election as Directors and shall use its best efforts to cause
the election or reelection of each such Shareholder Nominee to the Board,
including soliciting proxies in favor of the election of such persons.
(g) During the term of this Agreement and prior to the occurrence of a
Regulatory Change, but not thereafter, no Shareholder Nominee shall chair a
committee of the Board and no Shareholder Nominee shall serve-on the Nominating
Committee of the Board. Following the occurrence of a Regulatory Change and
during the term of this Agreement, the Shareholder shall be entitled to
designate Shareholder Nominees to be members of each committee of the Board
(including without limitation the executive committee, the audit committee, the
nominating committee and the executive compensation committee), and to fill any
vacancies caused by the departure of Shareholder Nominees from any such
committees if no other Shareholder Nominee is a member of such committee, for so
long as Shareholder Nominees are not repre-
-23-
sented pro rata, based on the number of Directors who are Shareholder Nominees
(rounding down to the nearest whole Director), with respect to each committee of
the Board.
Section 4.2. Resignation of Shareholder Nominees.
-----------------------------------
Unless otherwise agreed by the Company, the Shareholder shall cause each of
the Shareholder Nominees then serving on the Board to offer their resignations
from the Board immediately upon the earlier to occur of the following:
(a) The termination of this Agreement pursuant to and in accordance
with Section 5.2 hereof; and
(b) The Shareholder Group's Total Ownership Percentage falling below
10.0%.
Section 4.3. Voting.
------
During the term of this Agreement the Shareholder, as a holder of shares of
Voting Securities, agrees that:
(a) The Shareholder shall, and shall cause each Shareholder Affiliate
to, be present, in person or by proxy, at all meetings of shareholders of
the Company so that all Voting Securities having voting rights which are
Beneficially Owned by the Shareholder and the Shareholder Affiliates may be
counted for the purpose of determining the presence of a quorum at such
meetings.
(b) (i) With respect to the election of Directors, the Shareholder
shall, and shall cause each Shareholder Affiliate to, vote all Voting
Securities Beneficially Owned by the Shareholder and any Shareholder
Affiliate in favor of the election of all candidates for Director nominated
by the Company's Board (including the Shareholder Nominees); and (ii) with
respect to any proposal initiated by a shareholder of the Company relating
to the redemption of the rights issued pursuant to the Rights Agreement or
any modification of the Rights Agreement (other than nonbinding precatory
resolutions with respect to which subsection (c) hereof shall apply), the
Shareholder shall, and shall cause each member of the Shareholder Group to,
vote all Voting Securities Beneficially Owned by the Shareholder or any
member of the Shareholder Group in accordance with the recommendation of
the Board.
(c) (i) With respect to the Opt-out Amendment (as defined in the
Merger Agreement), the Shareholder and any member of the Shareholder Group
may vote any or all of the Securities Beneficially Owned by them in their
sole discretion; and (ii) with respect to any proposed amendment to the
Charter or By-laws which would reasonably
-24-
have the effect of modifying in any way the Opt-out Amendment or would
reasonably cause the Company to become subject to (a) the Control Share
Acquisition Statute (as defined in the Merger Agreement) or (b) any other
provisions which are substantially similar to the Control Share Acquisition
Statute, the Shareholder Group shall have the right to abstain or vote
against such amendment.
(d) With respect to all other matters submitted to a vote of the
Company's shareholders, prior to the occurrence of a Regulatory Change, but
not thereafter, and during the term of this Agreement, the Shareholder and
any member of the Shareholder Group may vote any or all of the Voting
Securities Beneficially Owned by them, in their sole discretion. Following
the occurrence of a Regulatory Change and during the term of this
Agreement, (i) the Shareholder and each member of the Shareholder Group may
vote in their sole discretion a number of Voting Securities Beneficially
Owned by the Shareholder Group having voting rights with respect to such
other matters representing in the aggregate a Voting Ownership Percentage
not in excess of the Unrestricted Ownership Percentage, and (ii) the
Shareholder shall, and shall cause each member of the Shareholder Group to,
vote all Voting Securities Beneficially-Owned by-the Shareholder Group
having voting rights with respect to such other matters representing in the
aggregate a Voting Ownership Percentage in excess of the Unrestricted
Ownership Percentage in the same proportion (based on total Votes) as all
Voting Securities voted on any such other matter are voted by the
shareholders of the Company other than the Shareholder or any member of the
Shareholder Group, provided, however, that the Shareholder and any member
of the Shareholder Group may vote any or all of the Voting Securities
Beneficially Owned by them in their sole discretion with respect to a vote
of the Company's shareholders on any transaction or series of transactions
which would, if consummated, constitute a Change in Control of the Company.
Notwithstanding the foregoing, at all times prior to or following the
occurrence of a Regulatory Change, the Shareholder shall, and shall cause
each member of the Shareholder Group to, vote all Excess Buy-Back
Securities having voting rights with respect to any matter (including the
election of Directors) in the same proportion (based on total Votes) as all
Voting Securities voted on such matter are voted by the shareholders of the
Company, other than the Shareholder or any member of the Shareholder Group.
(e) At all times the Shareholder Group may exercise in its sole
discretion such voting rights as the Convertible Preferred Stock may have
from time to time pursuant to the Charter and with respect to an amendment
to the Charter which would have the effect of modifying the voting powers,
designations, preferences, rights and qualifications, limitations or
restrictions of such class or series so as to affect the holders thereof
adversely.
-25-
ARTICLE V
Effectiveness and Termination
Section 5.1. Effectiveness.
-------------
This Agreement shall take effect immediately upon the Closing and shall
remain in effect until it is terminated pursuant to Section 5.2 hereof.
Section 5.2. Termination.
-----------
Unless otherwise agreed in writing by the Shareholder, this Agreement shall
terminate upon the earliest to occur of the following:
(a) The Company's quarterly dividend on its Common Stock falling below
$0.30 per share (as appropriately adjusted to reflect any stock split,
stock dividend, reverse stock split, reclassification or any other
transaction with a comparable effect) in any five (5) quarters during the
term of this Agreement.
(b) The Company's failure to pay the stated quarterly dividend on any
series of Convertible Preferred Stock in any five (5) quarters during the
term of this Agreement.
(c) The election to the Board of a majority of Directors other than
those nominated by the Nominating Committee of the Board.
(d) The size of the Board being increased to more than 21 directors.
(e) The Shareholder Group's Total Ownership Percentage falling below
9.9% at any time.
(f) The Shareholder Group's Total Ownership Percentage falling below
30.0% at any time following the fifteenth (15th) anniversary of the date
hereof.
(g) The material breach of this Agreement or the Merger Agreement by
the Company, provided that the Company has not cured the breach within
thirty (30) days after receiving notice of such breach, or if cure within
such time is not possible, the Company has not made reasonable efforts to
cure such breach, provided, further, that in no event shall such cure
period extend longer than ninety (90) days from the date of first notice of
such breach.
-26-
(h) Mutual written agreement of the Company and the Shareholder at any
time to terminate this Agreement, which termination shall occur at a time
to be fixed in such mutual agreement.
(i) The entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of the Company's property, or ordering the winding up or liquidation
of the Company's affairs; and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a
period of sixty (60) consecutive days.
(j) The commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by the Company to
the entry of a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against the
Company, or the filing by the Company of a petition or answer or consent
seeking reorganization or relief under any applicable Federal or State law,
or the consent by the Company the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or
of any substantial part of the Company's property, or the making by the
Company of an assignment for the benefit of creditors, or the admission by
the Company in writing of the Company's inability to pay its debts
generally as they become due, or the taking of corporate action by the
Company in furtherance of any such action.
ARTICLE VI
Miscellaneous
Section 6.1. Compliance With Law.
-------------------
Notwithstanding anything to the contrary in this Agreement, no Transfer of
Securities shall be deemed to be required or permitted pursuant to this
Agreement if such Transfer would (a) result in an adverse effect on the
exemptions from the 1935 Act of the Shareholder of any
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Shareholder Affiliate or the Company or any subsidiary of the Company, or (b)
require regulatory approvals which, individually or in the aggregate with
respect to such Transfer, would have a material adverse impact on the Company or
any of its subsidiaries or the Shareholder or any Shareholder Affiliate.
Section 6.2. Regulatory Matters.
------------------
During the term of this Agreement the Company agrees to take all
commercially reasonable steps to assist the Shareholder in (a) with respect to
each provision of this Agreement, causing a Regulatory Change which would not
reasonably be expected to have an adverse effect on the Company to occur as soon
as reasonably practicable, and (b) securing such regulatory approvals as would
not reasonably be expected to have a material adverse effect on the Company and
as may be necessary to allow the-Shareholder to exercise its rights under the
Agreement at all times, including without limitation the right of the
Shareholder to Transfer Securities free of the restrictions and limitations
imposed by Section 6.1. Following the occurrence of a Regulatory Change, if the
Company believes in good faith that the Shareholders regulatory status as
modified by such Regulatory Change would place an unreasonable restriction on
the Company's implementation of the Company's strategic business plan, then the
Company shall have an immediate right to exercise its Buy-Sell Option as
provided in Section 3.6 hereof, without regard to whether Section 3.6 would
otherwise then be applicable.
Section 6.3. Injunctive Relief.
-----------------
Each party hereto acknowledges that it would be impossible to determine the
amount of damages that would result from any breach of any of the provisions of
this Agreement and that the remedy at law for any breach, or threatened breach,
of any of such provisions would likely be inadequate and, accordingly, agrees
that each other party shall, in addition to any other rights or remedies which
it may have, be entitled to seek such equitable and injunctive relief as may be
available from any court of competent jurisdiction to compel specific
performance of, or restrain any party from violating, any of such provisions. In
connection with any action or proceeding for injunctive relief, each party
hereto hereby waives the claim or defense that a remedy at law alone is adequate
and agrees, to the maximum extent permitted by law, to have each provision of
this Agreement specifically enforced against him or it without the necessity of
posting bond or other security against him or it, and consents to the entry of
injunctive relief against him or it enjoining or restraining any breach or
threatened breach of such provisions of this Agreement.
Section 6.4. Successors and Assigns.
----------------------
This Agreement shall be binding upon, shall inure to the benefit of and
shall be enforceable by the Company and by the Shareholder and their respective
successors and permitted as-
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signs, and no such term or provision is for the benefit of, or intended to
create any obligations to, any other Person.
Section 6.5. Amendments; Waiver.
------------------
(a) This Agreement may be amended only by an agreement in writing executed
by the parties hereto. Any approval of an amendment of this Agreement upon the
part of the Company shall require the approval of a majority of the Independent
Directors at a duly convened meeting thereof or all of the Company's directors
by written consent thereto.
(b) Either party may waive in whole or in part any benefit or right
provided to it under this Agreement, such waiver being effective only if
contained in a writing executed by the waiving party. No failure by any party to
insist upon the strict performance of any covenant, duty, agreement or condition
of this Agreement or to exercise any right or remedy consequent upon breach
thereof shall constitute a waiver of any such breach or of any other covenant
duty, agreement or condition, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter. Any waiver of any benefit or right provided to the
Company under this Agreement shall require the approval of a majority of the
Board and a majority of the Independent Directors at a duly convened meeting
thereof or all of the Company's directors by written consent thereto.
Section 6.6. Notices.
-------
Except as otherwise provided in this Agreement, all notices, requests,
claims, demands, waivers and other communications hereunder shall be in writing
and shall be deemed to have been duly given when delivered by hand, when
delivered personally or by courier, three days after being deposited in the mail
(registered or certified mail, postage prepaid, return receipt requested), or
when received by facsimile transmission if promptly confirmed by one of the
foregoing means, as follows:
If to the Company:
WAI, Inc.
000 X. Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx
Attention: President
Fax: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxx Mock Xxxxxxx Xxxxx
000 X. Xxxxx Xxxxxx, Xxxxx 0000
-00-
Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
If to the Shareholder:
Western Resources, Inc.
000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxx 00000
Attention: President
Fax: (000) 000-0000
with a copy to:
Western Resources, Inc.
000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxx 00000
Attention: General Counsel
Fax: (000) 000-0000
or to such other address or facsimile number as either party may, from time to
time, designate in a written notice given in a like manner.
Section 6.7. APPLICABLE LAW.
--------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF OKLAHOMA WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.
Section 6.8. Headings.
--------
The descriptive headings of the several sections in this Agreement are for
convenience only and do not constitute a part of this Agreement and shall not be
deemed to limit or affect in any way the meaning or interpretation of this
Agreement.
Section 6.9. Integration.
-----------
This Agreement and the other writings referred to herein or delivered
pursuant hereto which form a part hereof contain the entire understanding of the
parties with respect to its subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. There are no restrictions, agreements, promises,
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representations, warranties, covenants or undertakings with respect to its
subject matter other than those expressly set forth or referred to herein.
Section 6.10. Severability.
------------
If any term or provision of this Agreement or any application thereof shall
be declared or held invalid, illegal or unenforceable, in whole or in part,
whether generally or in any particular jurisdiction, such provision shall be
deemed amended to the extent, but only to the extent necessary to cure such
invalidity, illegality or unenforceability, and the validity, legality and
enforceability of the remaining provisions, both generally and in every other
jurisdiction, shall not in any way be affected or impaired thereby.
Section 6.11. Consent to Jurisdiction.
-----------------------
In connection with any suit, claim, action or proceeding arising out of
this Agreement, the Shareholder and the Company each hereby consent to the in
personam jurisdiction of the United States federal courts and state courts
located in Tulsa, Oklahoma; the Shareholder and the Company each agree that
service in the manner set forth in Section 6.5 hereof shall be valid and
sufficient for all purposes; and the Shareholder and the Company each agree to,
and irrevocably waive any objection based on forum non conveniens or venue not
to, appear in any United States federal court state court located in Tulsa,
Oklahoma.
Section 6.12. Counterparts.
------------
This Agreement may be executed by the parties hereto in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Company and the Shareholder have caused this
Agreement to be duly executed by their respective authorized officers as of the
date set forth at the head of this Agreement.
WAI, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: President
WESTERN RESOURCES, INC.
By: /s/ Xxxxxx X. Kitchen
-----------------------------------------
Name: Xxxxxx X. Kitchen
Title: Executive Vice President
and Chief Financial Officer