Document:

Exhibit

10.4

 

Outsourcing

Agreement

 

THIS OUTSOURCING AGREEMENT (this “Agreement”),

dated as of July 1, 2002, is by and between Westar Energy, Inc. (“Westar”),

with offices at 818 S. Kansas Avenue, Topeka, Kansas 66612, and Protection One

Data Services, Inc. (“PODS”) with offices at 818 S. Kansas Avenue,

Topeka, Kansas 66612.

 

W I T N

E S S E T H:

 

WHEREAS, Westar desires to outsource

certain services and functions currently performed by Westar to PODS as more

fully described herein;

 

WHEREAS, PODS is willing to assume

responsibility for such outsourced services and functions, all in accordance

with the terms and conditions of this Agreement;

 

NOW, THEREFORE, Westar and PODS hereby

agree as follows:

 

1.             AGREEMENT

AND TERM

 

1.1          Agreement.  Upon the terms and conditions of this

Agreement, PODS shall provide to Westar certain information technology (“IT”)

services currently performed by Westar described in the IT Services Addendum

attached hereto as Schedule 1.1 and such additional addenda that may from time

to time be executed by the parties, each of which shall be attached hereto as

consecutively numbered amendments to Schedule 1.1 (the “IT Services”).

 

1.2          Term.  The term of this Agreement will commence on

July 1, 2002 (the “Effective Date”) and will end on December 31,

2005.  Either party may terminate this

Agreement on six (6) months prior written notice, provided, however, that such

notice may not be given prior to June 30, 2003.  This Agreement may also be terminated as provided in Sections

7.1-7.4.  Unless terminated as provided

herein, the term of this agreement will be automatically extended for

successive additional periods of one year each.  Each successive year commencing on the first day of January

following the Effective Date shall be referred to as an “Agreement Year”.

 

2.             RESPONSIBILITY

FOR RESOURCES

 

2.1          Employees.

 

(a)           With the consent of Westar, PODS has

offered employment to Westar employees previously identified by PODS and listed

on Schedule 2.1 (the “Employees”) effective as of July 1, 2002, in accordance

with PODS’ normal employment policies, upon the terms and conditions set forth

in said Schedule 2.1.  Westar will

provide all payroll, employment tax, and other information relating to the

Employees as may be reasonably requested by PODS consistent with any applicable

confidentiality restrictions.  As to any

Employees not accepting employment offers from PODS, Westar shall have the

option to retain such employees or terminate their

 

 

employment in accordance with Westar’s standard employment

policies.  Responsibility for severance

and any related liability for those Employees not accepting employment offers

from PODS shall be the sole responsibility of Westar.

 

(b)           During the period commencing on the

Effective Date and ending (i) September 30, 2002, as it relates to terminations

and (ii) December 31, 2002, as it relates to relocations, PODS may

identify certain hired Employees that it does not believe to be appropriate for

providing the IT Services and terminate the employment of such Employees, or

may relocate positions and as a result trigger the right of Employees under

employment policies applicable to them to terminate their employment and

receive severance benefits.  As to each

such Employee, Westar agrees to reimburse PODS for severance payments and

related costs made or incurred by PODS to or for such Employee; provided, that

such severance payments will not exceed the amount of severance pay that Westar

would have owed such Employee had the Employee remained a Westar employee up to

the date of termination of employment.

 

(c)           With respect to the hired Employees

whose employment is not terminated pursuant to Section 2.1(b) above, PODS will

maintain such Employees at a salary and benefits comparable to those provided

by PODS as of the Effective Date as provided in Schedule 2.1 until July 1,

2003; provided, however, that any Employee hired by PODS may be terminated for

good cause as defined in PODS’ existing personnel policies or as part of a

general reduction in force adopted by PODS. 

Severance and related liabilities for any Employee hired by PODS and

terminated after September 30, 2002 except as set forth in Section 2.1(b) shall

be the responsibility of PODS.  Nothing

in this Agreement is intended to create any obligation of any party hereto to

any employees of any party, nor to make any employee of any party hereto a

third party beneficiary of this Agreement.

 

2.2          Facilities.  Commencing on the Effective Date and for the

term hereof, Westar will provide to PODS the use of the space specified in the

Facilities Schedule attached hereto as Schedule 2.2(a) which space is currently

occupied by Westar in performing the services and functions to be performed by

PODS hereunder (the “Facilities”), pursuant to the Facilities License attached

hereto as Schedule 2.2(b).  Westar shall

obtain the necessary consents and approvals from Westar’s landlord, if

applicable, with respect to PODS’ use and occupancy of the Facilities.  PODS will have the right to vacate any

portion of the space comprising the Facilities that PODS no longer desires to

use.  Any such space that PODS vacates

will be returned to Westar.

 

2.3          Relocation.  With Westar’s prior written consent, PODS

shall have the right to relocate the site of its services hereunder to an

alternate site at its expense; provided that such relocation shall not affect

either party’s obligation to provide access to the Westar Systems and Third

Party Services as described herein, and shall not result in a material

degradation of service to Westar or any party to whom Westar is contracted to

provide service.

 

2.4          Westar

Equipment.  Commencing

on the Effective Date and for the term hereof, Westar will provide to PODS, in

their then-existing working condition, the use of all furnishings, fixtures,

computers, computer-related equipment, data communication lines and all

 

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other equipment in use by Westar as of the Effective Date in performing

the functions to be performed by PODS for Westar hereunder, including those

items listed on Schedules 2.4(a) and 2.4(b) (the “Westar Equipment”) in

accordance with the following:

 

(a)           Commencing on the Effective Date and

for the term hereof, Westar will provide PODS with access to all Westar

Equipment that is owned by Westar or leased by Westar pursuant to capital

leases or similar financing arrangements and used by Westar in performing the

functions to be performed by PODS hereunder (collectively, the “Westar Owned

Equipment”), including, without limitation, the Westar Equipment listed in

Schedule 2.4(a).  From time to time as

determined by the parties after the Effective Date, the parties will conduct an

inventory of the Westar Owned Equipment and, based on the results of such

inventory, modify Schedule 2.4(a). 

Westar will continue to insure the Westar Owned Equipment and shall

retain liability for any loss or damage to the Westar Owned Equipment unless

caused by the negligence or willful misconduct of PODS, including any of its

employees, agents or contractors.

 

(b)           Commencing on the Effective Date and

for the term hereof, Westar will provide to PODS the use of all Westar

Equipment that is leased by Westar other than pursuant to capital leases or

similar financing arrangements and used by Westar in performing the functions

to be performed by PODS hereunder (collectively, the “Westar Leased

Equipment”), including without limitation the Westar Equipment listed in

Schedule 2.4(b).  From time to time

after the Effective Date as determined by the parties, the parties will conduct

an inventory of Westar Leased Equipment and, based on the results of such

inventory, modify Schedule 2.4(b). 

There shall not be any adjustment to the fee schedule as leases are

canceled or added except as set forth in Section 5.2.

 

2.5          Westar

Systems.  Commencing

on the Effective Date and for the term hereof, Westar will and hereby does

provide to PODS a limited, non-transferable license to use and access the

systems currently used by Westar in performing the functions to be performed by

PODS hereunder and any successor systems (the “Westar Systems”) for use in

performing the services hereunder for Westar and for third parties as provided

for herein.  Westar shall also provide

all necessary support for PODS’ continued use and access to the Westar

Systems.  The Westar Systems include all

software described in Schedule 2.5, which includes all programs and

documentation therefor and the tangible media on which such programs are

recorded.  Westar shall be responsible

for obtaining any necessary consents or assignments from any third party

licensors of the Westar Systems prior to the Effective Date to enable PODS to

use the Westar Systems in accordance with this Section.  Notwithstanding the above, Westar shall not

be responsible for any cost associated with support, consents, or assignments

to the extent the support, consents or assignments are needed for use of the

Westar Systems by PODS in performing services for parties other than Westar,

ONEOK, and Wolf Creek.

 

2.6          Upgrades to

Westar Systems.  From time to

time during the term of this Agreement, Westar may elect, at its own expense,

to upgrade or change the Westar Systems, provided that such upgrade or change

provides substantially the same functionality. 

IT Services related to routine upgrades are covered under the

agreement.  IT Services related to major

upgrades will be negotiated separately.

 

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2.7          Third Party

Services.  Commencing

on the Effective Date and for the term hereof, Westar will make available to

PODS other than as specified below, all third party services used by Westar in

performing the functions to be performed by PODS hereunder, including those

described on Schedule 2.7 (the “Third Party Services”).  If requested by PODS and agreed to by

Westar, Westar will, to the extent permitted by such agreement, terminate or

assign to PODS any agreement pursuant to which any Third Party Services are

provided.  PODS will pay, or reimburse

Westar, for any penalties or charges incurred by Westar as a result of any

termination or assignment requested by PODS.

 

2.8          Upgrades/Additions

to Westar Equipment and Westar Systems.  From time to time during the term hereof,

PODS will identify to Westar changes and upgrades to Westar Equipment or Westar

Systems (“New Equipment”) that PODS believes will result in enhanced

performance or reduced costs in providing the IT Services hereunder.  PODS will provide Westar with a reasonably

detailed summary of (a) the anticipated expense associated with the New

Equipment, (b) the anticipated benefits and savings to be derived from the

acquisition of the New Equipment and (c) the proposed adjustment, if any, to

the fees to be paid hereunder.  Westar

will not unreasonably refuse to acquire New Equipment so long as the net impact

on Westar is either to maintain or to reduce fees hereunder, or to materially

enhance the performance of the IT Services. 

In the event the acquisition of the New Equipment will result in reduced

expense to PODS and maintain fees at an equivalent level to Westar (after

adjusting the Fees for the depreciated costs of the New Equipment), PODS will

be allowed to retain the benefit of all such savings.

 

2.9          The Shared

Services Agreement.  Westar and PODS acknowledge that they are parties to a Shared

Services Agreement dated April 1, 1999 (the “Shared Services Agreement”).  The Shared Services Agreement is amended, as

of the Effective Date, to delete the “Information Technology Services”

described in Exhibit 3 thereof.

 

2.10        Westar

Financing Changes.  In

the event Westar elects to change any of the finance arrangements it presently

has in place with respect to Westar Equipment or Westar Systems, and such

financing change adversely affects PODS’ costs in providing the IT Services,

the fees due hereunder shall be equitably adjusted so that PODS does not incur

any additional costs as a result of such a financing change.

 

2.12        Obligations

assumed by PODS.  As

of the Effective Date, PODS shall assume the payment obligations of Westar

related to the Westar Leased Equipment, the Westar Systems and the Third

Party  Services.  PODS will make the payments directly to the

applicable lessor, licensor or other third party when due unless otherwise

agreed by the parties.

 

3.             IT

SERVICES

 

3.1          IT Services

for WESTAR.  PODS will

provide to Westar the IT Services as set forth in the IT Services Addendum.

 

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3.2          IT Services

for ONEOK and Wolf Creek.

 

(a)           The parties acknowledge that Westar

is a party to that certain Shared Services Agreement with ONEOK Inc. (“ONEOK”)

dated November 26, 1997, as renewed and amended.  As part of the IT Services to be provided hereunder, PODS will provide

to ONEOK those services specifically set forth on Schedule 3.2(a)(1) (the

“ONEOK Services”).  The ONEOK services will

be provided as part of the IT Services and Westar will remain the party in

contract with ONEOK.  PODS will not

separately bill ONEOK.  In the event

ONEOK initiates a change request with Westar with regard to the ONEOK services,

Westar will promptly communicate such request to PODS and the parties will

cooperate as reasonably necessary to accommodate such change request in

accordance with the procedures set forth in 3.3 below.  Westar represents and warrants to PODS that

ONEOK is presently paying Westar the fees set forth on Schedule 3.2(a)(2) (the

“ONEOK Fees”), and during the term of this agreement Westar will pay PODS an

amount equal to the ONEOK Fees collected by Westar from ONEOK. Westar is under

no obligation to PODS by virtue of this Section 3.2(a) to keep the Shared

Services Agreement with ONEOK in force and effect.  In the event the Shared Services Agreement is terminated, Westar

shall have no further obligations to make any payments to PODS under this Section

3.2(a) other than payment of any ONEOK Fees received by Westar attributable to

the period prior to such termination and, with respect to the period after such

termination, the payment of the fixed costs previously associated with the

ONEOK Services as agreed to by the parties, provided that PODS makes reasonable

efforts to re-allocate or dispose of the assets to which such fixed costs are

attributable such that Westar’s obligations to make payments will be reduced.

During the initial eighteen months of the term of this agreement, PODS will be

entitled to recoup any direct expenses incurred by PODS as a result of a

termination of the work order relating to ONEOK prior to reducing fees to

Westar.

 

(b)           The parties acknowledge that Westar

is a party to that certain Owner Work Order with Wolf Creek Nuclear Operating

Corporation. (“Wolf Creek”) dated February 5, 1999.  As part of the IT Services to be provided hereunder, PODS will

provide to Wolf Creek those services specifically set forth on Schedule

3.2(b)(1) (the “Wolf Creek Services”). 

The Wolf Creek Services will be provided as part of the IT Services and

Westar will remain the party in contract with Wolf Creek.  PODS will not separately bill Wolf

Creek.  In the event Wolf Creek

initiates a change request with Westar with regard to the Wolf Creek services,

Westar will promptly communicate such request to PODS and the parties will

cooperate as reasonably necessary to accommodate such change request in

accordance with the procedures set forth in 3.3 below.  Westar represents and warrants to PODS that

Wolf Creek is presently paying Westar the fees set forth on Schedule 3.2(b)(2)

(the “Wolf Creek Fees”), and during the term of this agreement Westar will pay

PODS an amount equal to the Wolf Creek Fees collected by Westar from Wolf

Creek. Westar is under no obligation to PODS by virtue of this Section 3.2(b)

to keep the Owner Work Order with Wolf Creek in force and effect.  In the event the Owner Work Order is

terminated, Westar shall have no further obligations to make any payments to

PODS under this Section 3.2(b) other than payment of any Wolf Creek Fees

received by Westar attributable to the period prior to such termination and,

with respect to the period after such termination, the payment of the fixed

costs previously associated with the Wolf Creek as agreed to by the parties,

provided that PODS makes reasonable efforts to re-allocate or dispose of the

assets to which

 

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such fixed costs are attributable such that Westar’s obligations to

make payments will be reduced. During the initial eighteen months of the term

of this agreement, PODS will be entitled to recoup any direct expenses incurred

by PODS as a result of a termination of the work order relating to Wolf Creek

prior to reducing fees to Westar.

 

3.3          Change

Control Procedures.  Westar may from time to time during the term of this Agreement

request changes in the scope or priority of IT Services being performed by PODS

hereunder.  Upon receipt of each such

request from Westar (a “Change Request”), PODS will evaluate the impact that

the Change Request will have on the resources required by PODS to perform

services hereunder, the addendum on which such services are then being

performed, and the charges then payable to PODS hereunder.  PODS will notify Westar as to the results of

such evaluation (the “Change Proposal”) as soon as reasonably feasible

following receipt of that Change Request, which notice will be submitted in

writing.  To the extent that the changes

set forth in the Change Request increase the scope or priority of IT Services

but can reasonably be performed within the service levels then established for

the applicable IT Services without an increase in the resources then being

utilized by PODS therefor, there will be no adjustment to PODS’ charges

hereunder.  In the event the changes set

forth in the Change Request increase the scope or priority of IT Services and

such increase cannot reasonably be performed without an increase in the

resources then being utilized by PODS for the performance of the IT Services

and Westar so requests, PODS and Westar will work together in good faith to

adjust the service levels and priorities with respect to the other services

being performed by PODS hereunder so as to permit such Change Request to be

implemented without an increase in PODS’ charges.  If the Change Request cannot be implemented without an increase

in PODS’ charges, and Westar agrees to implement the Change Request, resources

utilized by PODS in providing services pursuant to any such approved Change

Request will be charged to Westar at the applicable PODS Rates unless expressly

agreed to otherwise in writing.  Each

Change Proposal will require the written approval of Westar.  The same procedure will apply in the event

the Change Request relates to ONEOK Services or Wolf Creek Services.  As used herein, “PODS Rates” means PODS’

fully-loaded cost of providing a service.

 

3.4          Additional

IT Services.  In the

event Westar requests PODS to provide additional services or functions which

are not changes in scope or priority of IT Services as set forth in Section

3.3, or are services not covered in the IT Services Addendum, PODS and Westar

may execute an additional addendum or addenda referencing this Agreement to

provide for such additional services or functions, which shall be provided at

PODS Rates.  Any such additional

addendum or addenda shall be incorporated herein by reference and shall be

subject to the terms and conditions hereof. 

The same procedure will apply in the event the request for additional

services relates to ONEOK Services or Wolf Creek Services.

 

3.5          Acceptance

of Work Product.  For

work product that is not part of the day-to-day delivery of IT Services

hereunder, including specifically-requested Derivative Systems (as defined in

Section 6.3(c)), following delivery of that work product by PODS to Westar,

Westar shall, within thirty (30) days of delivery by PODS, review the delivered

work product and approve it or notify PODS in writing of non-approval,

documenting in reasonable detail any and

 

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all material defects in that delivered work product. PODS shall, within

thirty (30) days of receipt of such notice, correct any such material failures

and resubmit the work product to Westar.

 

3.6          Systems

Operations.  During

the term of this Agreement, PODS will assume operational responsibility for the

Westar Equipment and Westar Systems and will operate all Westar Equipment and

each Westar System, all at the service levels established therefor from time to

time pursuant to the IT Services Addendum. 

In connection with the operation of such Westar Equipment and Westar

Systems and to the extent so required to meet the service levels so established

with respect thereto, PODS will perform the various systems operation

activities being performed by Westar immediately prior to the Effective Date,

which activities are listed in the IT Services Addendum.

 

3.7          Systems

Support Services.  During

the term of this Agreement, PODS will perform maintenance and development

support services for the Westar Systems and PODS Systems as described herein

(collectively, the “Systems”) being operated by PODS hereunder in accordance

with the following:

 

(a)           PODS will perform such maintenance

and development support services for the Westar Equipment and the Westar

Systems as needed to maintain the Westar Equipment and the Westar Systems as

fully functional and operational with up-times consistent with industry

standards for outsourced IT services, as set forth in the Westar Systems

Schedule attached hereto.  Westar shall

have the responsibility for contracting for any additional maintenance services

required for the Westar Equipment and the Westar Systems, but the fees for such

services will be paid by PODS without any increase in the fees charged by PODS

to Westar.

 

(b)           All maintenance and development

support services performed by PODS hereunder will be so performed in accordance

with industry standards, but not less, taken as a whole, than the standard of

the services currently being performed by Westar.  Any expenses required to perform such maintenance and development

support services or implement or operate any modification, enhancement, or

development shall be the responsibility of PODS.  Any additional maintenance or development support services

requested or required by Westar that exceeds the levels set forth in this Section

3.7 will be performed by PODS as an Additional Service in accordance with

Section 3.4 hereof.

 

3.8          Status

Reports.  PODS shall

submit a detailed written progress report to Westar every month during the term

of this Agreement.  Such progress

reports will detail the current status of PODS activities, progress of the work

being performed and resources expended since the last report, as well as a

cumulative total to date, and identification of actual and anticipated problem

areas, the impact thereof on the work effort, and action being taken or

alternative actions to be taken to remedy such problems.

 

3.9          Status

Meetings.  Either

party may request a status meeting be held at any time and a status meeting

shall be held at least once per calendar quarter, to review the status of

activities performed by PODS hereunder.

 

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3.10        IT Services

for Third Parties.  PODS

shall be entitled to utilize the Westar Equipment, Westar Systems and

Third-Party Services for its internal purposes or to provide services to third

parties without accounting to Westar provided, that (a) such services do not

conflict with or impair the IT Services provided to Westar or any other Westar

activities or operations, and (b) PODS is solely responsible for acquiring any

additional licenses or license upgrades as necessary to utilize the Westar

Equipment, Westar Systems and Third-Party Service for internal or third party

services.

 

4.             WESTAR

RESPONSIBILITIES

 

4.1          WESTAR

Obligations.  In

addition to its other obligations hereunder, Westar will, on a timely basis:

 

(a)           Establish appropriate priorities for

Westar that relate to IT Services and communicate the same to PODS.

 

(b)           Cooperate with PODS by, among other

things, making available, as reasonably requested by PODS, timely management

decisions, information, approvals, and acceptance in order that PODS may

properly accomplish its obligations and responsibilities hereunder.

 

(c)           Pay all costs of acquisition,

installation and use of equipment and services not included in the fee shown on

Schedule 5.1(a), as required for the performance of the IT Services as requested

and approved by Westar.

 

4.2          Westar Liaison; PODS Liaison; Management Committee.  (a) During the term of

this Agreement, Westar and PODS will each designate an employee with sufficient

knowledge and background to act as the primary liaison between Westar and PODS

(the “Westar Liaison” or “PODS Liaison” as the case may be).  The Westar Liaison will have primary

operational responsibility for Westar’s responsibilities hereunder and will

serve as Westar’s primary liaison with PODS. 

The respective liaisons will be responsible for coordinating a joint

meeting, not less than quarterly and alternating between a Westar and a PODS

facility to review the status of all operations under this agreement.  The Westar Liaison will have primary

responsibility for establishing the agenda and keeping notes of such meetings.

 

5.             PAYMENTS

TO PODS

 

5.1          Charges.

 

(a)           For the IT Services provided

hereunder from and after the Effective Date, Westar will pay to PODS the

charges set forth in the Payment Schedule attached hereto as Schedule

5.1(a).  The fees are based on the

receipt by PODS of payments from Westar equal to the ONEOK Fees and the Wolf

Creek Fees for the time from and after the Effective Date.

 

(b)           For any additional IT Services

provided hereunder, Westar will pay to PODS the charges as provided in Section

3.4 hereof.

 

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5.2          Adjustments

to Payment Schedule.  The

Payment Schedule attached hereto as Schedule 5.1(a) shall be adjusted not less

frequently than quarterly to reflect removal of Westar Leased Equipment that is

replaced by Westar Owned Equipment purchased after the Effective Date.

 

5.3          Out-of-Pocket

Expenses.  Westar will

pay, or reimburse PODS for, any out-of-pocket expenses, including without

limitation, travel and travel-related expenses, incurred by PODS at the request

or with the approval of Westar other than in the ordinary course of providing

IT Services pursuant to this Agreement.

 

5.4          Taxes.  Westar will pay, or

reimburse PODS, for all sales, use, transfer, privilege, excise or other taxes,

whether national, state or local, however designated, which are levied or

imposed by reason of the services provided to Westar hereunder; excluding,

however, income and franchise taxes on profits which may be levied against

PODS.  PODS will issue invoices that

itemize the fees charged for IT Services in a manner deemed appropriate by the

parties for proper identification of taxable and non-taxable services.

 

5.5          Time of

Payment.  Regular

monthly service fees hereunder shall be due no later than the 10th

day of each month during the term of this agreement. All other undisputed sums

due PODS hereunder for which a time for payment is not otherwise specified will

be due and payable within thirty (30) days after the due date of an invoice

therefor from PODS or as mutually agreed upon by the parties in a specific work

order. If Westar fails to pay any amount due within thirty (30) days from the

date of the invoice or other agreed due date, late charges of the lesser of

1-1/2% per month or the maximum amount allowable by law shall also become

payable by Westar to PODS.

 

6.             PROPRIETARY

AND RELATED RIGHTS

 

6.1          Westar

Data.  All

Intellectual Property, including without limitation, documents, files or client

and customer data, provided to PODS hereunder by Westar (“Westar Data”) are and

shall remain Westar’s property and, upon the termination of this Agreement for

any reason, such Westar Data will be returned to Westar by PODS.  Westar Data will not be utilized by PODS for

any purpose other than those purposes related to rendering services to Westar

under this Agreement, nor will Westar Data or any part thereof be disclosed to

third parties by PODS, its employees or agents except for purposes related to

PODS’ rendering of services to Westar under this Agreement or as required by

law, regulation, or order of a court or regulatory agency or other authority

having jurisdiction thereover.  PODS

will establish and maintain reasonable safeguards against the destruction, loss

or alteration of Westar Data in the possession of PODS which safeguards will be

no less comprehensive than those presently employed by Westar.  In the event that additional safeguards for

Westar Data are reasonably requested by Westar, PODS will provide such

additional safeguards and Westar will reimburse PODS for any additional costs

thereby incurred by PODS.  Westar shall

have the right to establish backup security for data and to keep backup data

and data files in its possession if it so chooses; provided, however, that PODS

will have access to such backup data and data files as is reasonably required

by PODS.  Notwithstanding the foregoing,

PODS shall have the right to retain in its possession all

 

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workpapers and files prepared by it in performance of its services

hereunder which may include necessary copies of Westar Data.  PODS shall have access to Westar Data, at

reasonable times, during the term of this Agreement and thereafter for purposes

related to PODS’ rendering of services to Westar under this Agreement, or as

required by law, regulation or order of a court or regulatory agency or other

authority having jurisdiction thereover. The term “Intellectual Property” means

trademarks, service marks, trade dress, inventions, discoveries, patents and

applications for patents, trade secrets, confidential information, copyrights,

know-how, software, data and any other intellectual property or proprietary

rights or interests.

 

6.2          Confidentiality.  Each party agrees that it

shall not disclose to any third party or use any information proprietary to the

other including information concerning the clients, trade secrets, methods,

processes or procedures or any other confidential information of the other

party which it learns during the course of its performance of this Agreement,

and the terms and conditions of this Agreement, without the prior written

consent of the other party, except for purposes related to PODS’ rendering of

services to Westar under this Agreement or as required by law, regulation, or

order of a court or regulatory agency or other authority having jurisdiction

thereover.  Notwithstanding the

foregoing, the confidentiality obligations set forth in this Section 6.2 will

not apply to any information which the recipient party can establish to have

(i) become publicly available without breach of this Agreement, (ii) been

independently developed by the recipient party outside the scope of this

Agreement and without reference to the confidential information received under

this Agreement, or (iii) been rightfully obtained by the recipient party from

third parties which are not known by the recipient to be obligated to protect

its confidentiality.

 

6.3          System

Rights.

 

(a)           Each

Westar System in existence as of the Effective Date is and will remain the

property and confidential information of Westar or the third party licensor of

that Westar System, and PODS will have no rights or interests therein, except

as provided in this Agreement.

 

(b)           All

software owned, developed or otherwise provided by PODS or used by PODS in the

performance of the IT Services that are not derived from or based upon a Westar

System, including all programs and documentation therefor and the tangible

media on which such programs are recorded, are “PODS Systems.”  Each PODS System in existence as of the

Effective Date is and will remain the property and confidential information of

PODS.

 

(c)           All

software owned, developed or otherwise provided by PODS or used by PODS in the

performance of the IT Services, including all programs and documentation

therefor and the tangible media on which such programs are recorded which are

derived from or based upon a Westar System (“Derivative Systems”) shall be

created as works made for hire for Westar. 

PODS hereby assigns all right, title and interest in and to all

Derivative Systems (including any Derivative Systems that are deemed by a court

not to be works made for hire) to Westar and agrees that PODS shall take any

action necessary to effectuate such assignment. PODS shall have a royalty-free

license to use Derivative Systems in the performance of IT Services for Westar

and third parties as contemplated by this agreement.

 

10

 

(d)           All

software owned, developed or otherwise provided by PODS or used by PODS in the

performance of the IT Services that are derived from or based upon a PODS

System or are independently developed by PODS and used in providing IT

Services, including all programs and documentation therefor and the tangible

media on which such programs are recorded, are “Developed Systems.”  Each Developed System is and will remain the

property and confidential information of PODS; provided, however, that to the

extent a Developed System is used by PODS in providing IT Services hereunder,

upon termination of this agreement Westar shall have a non-exclusive,

royalty-free license to use the Developed Systems, which license shall be

non-sublicenseable except to direct or indirect majority-owned subsidiaries of

Westar.

 

7.             TERMINATION

 

7.1          Termination

for Cause.  In the

event that either party hereto materially or repeatedly defaults in the

performance of any of its duties or obligations hereunder and does not cure

such default within thirty (30) days after being given written notice

specifying the default, or, with respect to those defaults which cannot

reasonably be cured within thirty (30) days, if the defaulting party fails to

proceed promptly after being given such notice to commence curing the default

and thereafter to proceed to cure the same, then the party not in default may,

by giving notice thereof to the defaulting party, terminate this Agreement as

of a date specified in such notice of termination.

 

7.2          Termination

in the Event of Separation. 

In the event Westar ceases to own, directly or indirectly, at least 50%

of the voting common stock of Protection One, Inc., the parent of PODS, either

party may terminate this Agreement by giving notice thereof to the other party,

such termination to be effective as of a date specified in such notice of termination.

 

7.3          Termination

to Comply with Regulatory Order.  Westar may terminate this Agreement at any time upon written

notice in the event such termination is deemed necessary by Westar to comply

with an order of the Kansas Corporation Commission, such termination to be

effective as of the date specified in such notice of termination.

 

7.4          Termination

for Insolvency.  In

the event that either party hereto becomes or is declared insolvent or

bankrupt, is the subject of any proceedings relating to its liquidation,

insolvency or for the appointment of a receiver or similar officer for it,

makes an assignment for the benefit of all or substantially all of its

creditors, or enters into an agreement for the composition, extension, or

readjustment of all or substantially all of its obligations, then the other

party hereto may, by giving written notice thereof to such party, terminate

this Agreement as of a date specified in such notice of termination.

 

7.5          Termination

Assistance.  Upon the

termination of this Agreement for any reason, PODS will provide to Westar such

termination assistance relating to IT Services provided pursuant hereto, as may

be reasonably requested by Westar.

 

7.6          Continuation

of Services.  Either

party shall have the option, exercisable upon termination, to request that the

IT Services and this Agreement continue on a month to month

 

11

 

basis after the termination date or the expiration date, as applicable,

for the then-applicable fees set forth in the Payment Schedule attached to the

IT Services Addendum.  Each party shall

have the right to have this Agreement continue on a monthly basis pursuant to

this Section 7.6 for up to ninety (90) days. 

If this Agreement is terminated by PODS for breach by Westar, then

Westar will continue to pay PODS in accordance with the payment schedule.

 

8.             INDEMNITIES

AND LIABILITY LIMITATION

 

8.1          Westar

Indemnity.  Westar

agrees to indemnify, defend and hold PODS harmless from any and all claims,

actions, damages, liabilities, costs and expenses, including reasonable

attorneys’ fees and expenses arising out of or relating to any claim by ONEOK

or Wolf with respect to the IT Services as provided by Westar prior to or after

the Effective Date hereof unless such claim results from the negligence or

willful misconduct of PODS.

 

8.2          Intellectual

Property Rights Indemnity.  PODS

and Westar each agree to indemnify, defend and hold the other harmless from any

and all claims, actions, damages, liabilities, costs and expenses, including

reasonable attorneys’ fees and expenses, arising out of any third party claims

of infringement of any Intellectual Property rights alleged to have occurred

related to property provided, or work performed, by the indemnitor.

 

8.3          Rent and

Utility Indemnity.  Westar

agrees to indemnify, defend and hold harmless PODS from any and all claims,

actions, damages, liabilities, costs and expenses, including reasonable

attorneys’ fees and expenses, arising out of any claims for rent or utilities

at any location where Westar is required to furnish space and/or utilities to

PODS pursuant to this Agreement.

 

8.4          Personal

Injury and Property Damage Indemnity.  PODS

and Westar each agree to indemnify, defend and hold harmless the other from any

and all claims, actions, damages, liabilities, costs and expenses, including

reasonable attorneys’ fees and expenses, arising out of third party claims for

bodily injury or damage to physical property, to the extent caused directly and

proximately by the negligence or willful misconduct of the indemnitor, its

employees or agents.

 

8.5          Indemnification

Procedures.  For

purposes of this Section 8, the term PODS shall include PODS, its employees and

agents.  The indemnities set forth in

Sections 8.1, 8.2, 8.3 and 8.4 hereof will not apply to the extent the party

claiming the indemnification was responsible for giving rise to the matter upon

which the claim for indemnification is based and will not apply unless the

party claiming indemnification promptly notifies the other of any matters in

respect of which the indemnity may apply and of which the notifying party has

knowledge and gives the other full opportunity to control the response thereto

and the defense thereof, including without limitation any agreement relating to

the settlement thereof, provided that neither party shall settle any claim

without the prior written consent of the indemnified party.  The indemnified party’s failure to promptly

give notice shall affect the indemnifying party’s obligation to indemnify the

indemnified party only to the extent the indemnifying party’s rights are

materially prejudiced by such failure. 

The indemnified party may participate, at its

 

12

 

own expense, in such defense and in any settlement discussions directly

or through counsel of its choice.

 

8.6          Limitation

of Liability.  NEITHER

PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR PUNITIVE DAMAGES.

 

8.7           Further

Limitation of Liability and Warranty Disclaimer.  In the event PODS is no longer a direct or

indirect majority-owned subsidiary of Westar, the following further limitation

on the liability of the parties and disclaimer of warranties shall apply:

 

(a)           PODS

warrants only that all services shall be performed in a workmanlike manner and

in accordance with the specifications and description of such services as set

forth in the IT Services Addendum. 

EXCEPT AS SET FORTH IN THIS SECTION 8.7(a), PODS MAKES NO WARRANTIES

WITH RESPECT TO ITS SERVICES OR WORK PRODUCT HEREUNDER, EXPRESS OR IMPLIED, INCLUDING,

BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A

PARTICULAR PURPOSE, TITLE, OR NON-INFRINGEMENT.

 

(b)           PODS

SHALL HAVE NO LIABILITY WITH RESPECT TO ITS OBLIGATIONS UNDER THIS AGREEMENT OR

OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL, INDIRECT, OR INCIDENTAL

DAMAGES, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.  IN ANY EVENT, THE LIABILITY OF PODS TO

WESTAR FOR ANY REASON AND UPON ANY CAUSE OF ACTION OR CLAIM IN CONTRACT, TORT

OR OTHERWISE, SHALL BE LIMITED TO THE AMOUNT PAID BY WESTAR TO PODS IN THE SIX

(6) MONTH PERIOD BEFORE THE ACCRUAL OF THE ACTION OR CLAIM FOR THE SPECIFIC

SERVICE THAT IS THE SUBJECT OF THE ACTION OR CLAIM.  THIS LIMITATION APPLIES TO ALL CAUSES OF ACTION OR CLAIMS IN THE

AGGREGATE, INCLUDING WITHOUT LIMITATION, BREACH OF CONTRACT, BREACH OF

WARRANTY, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION AND OTHER TORTS.  FURTHER, NO CAUSE OF ACTION THAT ACCRUED

MORE THAN TWO (2) YEARS BEFORE THE FILING OF A SUIT ALLEGING SUCH CAUSE OF ACTION

MAY BE ASSERTED AGAINST PODS.  CLIENT

AND PODS EXPRESSLY ACKNOWLEDGE AND AGREE THAT THE LIMITATIONS AND EXCLUSIONS

CONTAINED HEREIN REPRESENT THE PARTIES’ AGREEMENT AS TO THE ALLOCATION OF RISK

BETWEEN THE PARTIES IN CONNECTION WITH PODS’S OBLIGATIONS UNDER THIS

AGREEMENT.  THE PAYMENTS PAYABLE TO PODS

HEREUNDER REFLECT THIS ALLOCATION OF RISK AND THE EXCLUSION OF CONSEQUENTIAL

DAMAGES IN THIS AGREEMENT.

 

9.             MISCELLANEOUS

 

9.1          Assignment.  Neither party hereto shall

assign, subcontract, or otherwise convey or delegate its rights or duties

hereunder to any third party without the prior written consent of the other

party to this Agreement, and shall require that the assignee agrees to be

subject to all the terms and conditions of this Agreement.  This Agreement shall apply to, inure to the

benefit

 

13

 

of, and be binding upon the parties hereto and upon their permitted

successors in interest and permitted assigns.

 

9.2          Notices.  Any notice provided

pursuant to this Agreement, if specified to be in writing, shall be in writing

and shall be deemed given (i) if by hand delivery, upon receipt thereof, (ii)

if mailed, three (3) days after deposit in the United States mails, postage

prepaid, certified mail return receipt requested, (iii) if by next day delivery

service, upon such delivery and (iv) if by e-mail, upon electronic

confirmation that such notice has been received.  All notices shall be addressed as follows (or such other address

as either party may in the future specify in writing to the other):

 

	

  In the case of PODS:

  
	

   

  	

   

  
	

   

  	

  Protection One Data Services, Inc.

  
	

   

  	

   

  
	

   

  	

  800 East Waterman

  
	

   

  	

  Wichita, KS 67207

  
	

   

  	

  Attention: Mack Sands

  
	

   

  	

  Tel:  316-352-2501

  
	

   

  	

  Fax:  316-352-2435

  
	

   

  	

   

  
	

  In the case of Westar:

  
	

   

  	

   

  
	

   

  	

  Westar Energy, Inc.

  
	

   

  	

  818 S. Kansas Avenue

  
	

   

  	

  Topeka, Kansas 

  66612

  
	

   

  	

  Attention: Bruce A. Akin, Vice President

  
	

   

  	

  Tel: 

  785-575-6354

  
	

   

  	

  Fax: 

  785-575-1936

  

 

9.3          Counterparts.  This Agreement may be

executed in several counterparts, all of which taken together shall constitute

one single agreement between the parties hereto.

 

9.4          Headings.  The section headings used

herein are for reference and convenience only and shall not enter into the

interpretation hereof.

 

9.5          Independent

Contractor.  PODS, and

any and all PODS personnel, in performance of this Agreement, are acting as

independent contractors and are not employees or agents of Westar.  Except as contemplated by Section 2

hereof, PODS shall be solely responsible for the payment of compensation of

PODS personnel assigned to perform services hereunder and such personnel are

not entitled to the provisions of any Westar employee benefits.  Westar shall not be responsible for payment

of worker’s compensation, disability benefits and unemployment insurance or for

withholding and paying employment taxes for any PODS personnel performing

services hereunder, but such responsibility shall be that of PODS.

 

14

 

9.6          Services

for Others.  Westar

understands and agrees that PODS may perform for third parties similar services

using the same personnel, subject to PODS’ confidentiality obligations

hereunder, that PODS may utilize such personnel for rendering services for

Westar hereunder.

 

9.7          Approvals

and Similar Actions.  Where

agreement, approval, acceptance, consent or similar action by either party

hereto is required by any provision of this Agreement, such action shall not be

unreasonably delayed or withheld.

 

9.8          Force

Majeure.  Neither

party shall be liable to the other for any delay or failure to perform any of

the services or obligations set forth in this Agreement due to causes beyond

its reasonable control.  Performance

times shall be considered extended for a period of time equivalent to the time

lost because of such delay.  Without

limiting the foregoing, PODS’ time of performance shall be enlarged, if and to

the extent reasonably necessary, in the event that: (a) Westar fails to submit

data or information in the prescribed form or in accordance with the agreed

upon schedules; (b) special requests by Westar or any governmental agency

authorized to regulate or supervise Westar or any authority having jurisdiction

over Westar impact PODS’ normal schedule; or (c) Westar fails to provide

any equipment, software, facility or performance called for by this Agreement,

and the same is necessary for PODS’ performance hereunder.  PODS will notify Westar of the estimated

impact on its performance schedule, if any.

 

9.9          Severability.  If any provision of this

Agreement is invalid under any applicable statute or rule of law, it is to that

extent to be deemed omitted, and replaced with an acceptable provision that

most closely states the intent of the parties.

 

9.10        Waiver.  The waiver or failure of

either party to exercise any right in any respect provided for herein shall not

be deemed a waiver of any further right hereunder.

 

9.7          Amendments.  No amendment, change,

waiver, or discharge hereof shall be valid unless in writing and signed by an

authorized representative of the party against which such amendment, change,

waiver, or discharge is sought to be enforced.

 

9.8          Westar

Identification.  With  Westar’s

prior written consent, PODS may use of the name of Westar in identifying Westar

as a client, in advertising, publicity, or similar materials distributed to

prospective clients.

 

9.9          Kansas

Law.  This Agreement

and performance hereunder shall be governed by the laws of the State of Kansas

without regard to conflict of laws. 

PODS and Westar hereby agree on behalf of themselves and any person claiming

by or through them that the sole jurisdiction and venue for any litigation

arising from or relating to this Agreement that is not subject to arbitration

or contests the arbitrability of any dispute shall be an appropriate federal or

state court located in Kansas.

 

9.10        Survival.  All provisions of this

Agreement relating to confidentiality, indemnity, non-disclosure and

non-solicitation shall survive the termination of this Agreement.

 

15

 

9.11        Entire Agreement.  This Agreement, including

any Addenda or Schedules referred to herein and attached hereto, each of which

is incorporated herein for all purposes, constitutes the entire agreement

between the parties hereto with respect to the subject matter hereof and there

are no representations, understandings or agreements relative hereto which are

not fully expressed herein.

 

IN WITNESS WHEREOF, PODS and Westar have each caused

this Agreement to be signed and delivered by its duly authorized officer, all

as of the date first set forth above.

 

	

  Protection One Data Services, Inc.

  	

   

  	

  Westar Energy, Inc.

  
	

   

  	

   

  	

   

  
	

  By:

  	

  /s/ Anthony D.

  Somma

  	

   

  	

  By:

  	

      Bruce A. Akin

  	

   

  
	

  Name: 

  Anthony D. Somma

  	

   

  	

  Name:  Bruce

  A. Akin

  
	

  Title: 

  Treasurer

  	

   

  	

  Title:   

  Vice President

  
	

   

  	

   

  	

   

  
	

  Date:

  	

  July 8, 2002

  	

   

  	

  Date:

  	

  July 8, 2002

  
								

 

16Exhibit

10.5

 

STOCK PURCHASE AGREEMENT

 

STOCK PURCHASE AGREEMENT, dated as of June 5 2002 (the

“Agreement”), by and between Westar Industries, Inc., a Delaware

corporation (“Westar”) and Protection One, Inc. , a Delaware corporation

(“POI”).

WHEREAS, Westar owns of record and beneficially 100%

of the outstanding capital stock, no par value (the “Shares”), of Westar

Aviation, Inc. (“Westar Aviation”);

WHEREAS, Westar desires to sell the Shares to POI and

POI desires to purchase such Shares;

WHEREAS, after the aforementioned sale of the Shares,

POI will own all of the issued and outstanding capital stock of the Westar

Aviation;

NOW THEREFORE, in consideration of the

representations, warranties and agreements herein contained, and for other good

and valuable consideration, the parties hereto agree as follows:

1.                                       Sale and Transfer 

                Westar shall sell the Shares to

POI, deliver any and all certificates representing the Shares to POI and

execute a stock power in the name of POI for each certificate or otherwise properly

endorse such certificates to POI. 

Westar shall further cause the name of holder of the Shares to be

transferred on the books of Westar Aviation from its name to the name of POI.

2.                                       Purchase Price

                POI shall pay to Westar the

purchase price of $1,518,672.13 for the Shares in immediately available funds.

3.                                       Representations and

Warranties by Westar

Westar hereby

represents and warrants to POI:

 

 

 

(a)           that Westar is a corporation duly

organized, validly existing and in good standing under the laws of the state of

Delaware with full power and authority to conduct its business;

(b)           that Westar has full corporate power

and authority to enter into and perform this Agreement and consummate the

transactions contemplated herein in accordance with the terms and conditions

hereof; and

(c)           that compliance with the terms and

conditions hereof and the transactions contemplated hereby will not violate or

conflict with any provision of the Certificate of Incorporation of Westar or

result in the breach or termination of any provision of or constitute a default

under any agreement or other instrument of which Westar is a party or by which

any other assets of Westar may be bound or affected.

4.                                       Representations and

Warranties by POI 

POI hereby

represents and warrants to Westar:

(a)           that POI is a corporation duly

organized, validly existing and in good standing under the laws of the state of

Delaware with full power and authority to conduct its business;

(b)           that POI has full corporate power and

authority to enter into and perform this Agreement and consummate the

transactions contemplated herein in accordance with the terms and conditions

hereof;

(c)           that POI understands that any

subsequent transfer of the Shares is subject to certain restrictions and

conditions and agrees to be bound by, and not to resell, pledge or otherwise

transfer the Shares except in compliance with, such restrictions and conditions

and the Securities Act of 1933, as amended (the “Securities Act”); and

(d)           that POI is not acquiring the Shares

with a view toward the distribution thereof in a transaction that would violate

the Securities Act or the securities laws of any State of the United States or

any other applicable jurisdiction.

5.                                       Triggering Event and

Indemnity

(a)           In the event (i) Western Resources,

Inc. (“Western Resources”), a Kansas corporation, and its affiliates

cease to own more than 50% of Westar’s voting 

 

2

 

stock and, at the direction of POI’s board of

directors, POI requests Westar in writing to repurchase the Shares from POI or

(ii) Westar ceases to own more than 50% of POI’s voting stock (each of clause

(i) and (ii) being a “Triggering Event”), Westar and POI agree to

promptly take such steps as are necessary or appropriate to rescind this

Agreement ab  initio.

(b)           To

effect such rescission, Westar shall repurchase the Shares from POI and POI

shall deliver to Westar, against payment therefor of the amount referred to in

the next sentence, any and all certificates representing the Shares to Westar

and execute a stock power in the name at Westar for each certificate or

otherwise properly endorse such certificates to Westar.  Westar shall, no later than 10 days from the

Triggering Event, pay to POI upon receipt of the Shares the greater of (i) net

book value of the Shares and (ii) the purchase price of $1,518,672.13 plus

interest on such amount at a per annum rate equal to LIBOR plus 375 basis

points calculated from the date of this Agreement.

(c)           Westar agrees to indemnify and hold

POI, its directors and officers harmless against any and all losses, damages

liabilities or claims that arise out of or based on POI’s ownership of the

Shares and performance under this Agreement. 

Westar also agrees to reimburse POI for expenses incurred in connection

with the recission transaction contemplated by this Section 5.

6.                                       Entire Agreement

This Agreement constitutes the entire agreement

between the parties hereto relating to the subject matter hereof. There are no

terms, obligations, covenants, representations, statements or conditions other

than those contained herein or in exhibits or other instruments delivered or to

be delivered pursuant to the terms hereof. No variation or modification of this

Agreement nor waiver of any of the terms and provisions hereof shall be deemed

valid unless in writing and signed by the parties hereto.

7.                                       No Third Party

Beneficiary

Each party hereto intends

that this Agreement shall not benefit or create any right or cause of action in

or on behalf of any person other than the parties hereto.

8.                                       Successors and

Assigns

All terms and provisions of this Agreement shall be

binding upon and shall inure to the benefit of the parties hereto and the

respective successors and assigns; provided, 

 

 

3

 

however,

that this Agreement may not be assigned by either party hereto without the

written consent of the other party.

 

9.                                       Governing Law

The construction, performance, execution and

enforcement of this Agreement and any dispute, whether in contract or tort, of

whatsoever nature arising out of or in connection with this Agreement or

performance under it, including any remedy thereof, shall be governed exclusively

by the laws of Delaware.

 

 

4

IN

WITNESS WHEREOF,

the parties hereto have caused their duly authorized representatives to execute

and deliver this Agreement on the day and year first above written.

 

	

  WESTAR INDUSTRIES, INC.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

     /s/ Paul R. Geist

  
	

   

  	

   

  	

  Name:  Paul R. Geist

  
	

   

  	

   

  	

  Title:  President

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  PROTECTION ONE, INC.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

     /s/ Anthony D. Somma

  
	

   

  	

   

  	

  Name: 

  Anthony D. Somma

  
	

   

  	

   

  	

  Title: 

  Senior Vice President

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