<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
KANSAS CITY POWER & LIGHT COMPANY
(Exact name of registrant as specified in its charter)
------------------------------
<TABLE>
<S> <C> <C>
MISSOURI 4911 44-0308720
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
1201 WALNUT
KANSAS CITY, MISSOURI 64106
(816) 556-2200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JEANIE SELL LATZ, ESQ.
KANSAS CITY POWER & LIGHT COMPANY
1201 WALNUT
KANSAS CITY, MISSOURI 64106
(816) 556-2200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES OF ALL CORRESPONDENCE TO:
<TABLE>
<S> <C>
NANCY A. LIEBERMAN, ESQ. DENNIS P. WILBERT, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM BLACKWELL SANDERS MATHENY WEARY & LOMBARDI L.C.
919 THIRD AVENUE TWO PERSHING SQUARE
NEW YORK, NEW YORK 10022 2300 MAIN STREET, SUITE 1100
(212) 735-3000 KANSAS CITY, MISSOURI 64108
(816) 274-6800
</TABLE>
--------------------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the registration statement becomes
effective, the Merger Agreement (as defined herein) is approved and adopted by
the stockholders of UtiliCorp United Inc. ("UCU"), the issuance of KCPL Common
Stock (as defined herein) pursuant to the Merger Agreement is approved by the
shareholders of Kansas City Power & Light Company ("KCPL") and all conditions
prerequisite to the Mergers (as defined herein) have been satisfied or waived.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED TO BE REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, no par 54,000,000 shares
value.................... (1) (2) $1,461,375,000(2) $503,923(3)
</TABLE>
(1) The amount of common stock, no par value, of Kansas City Power & Light
Company ("KCPL Common Stock") is based on the exchange ratio in the Mergers
of one share of KCPL Common Stock for each outstanding share of common
stock, $1.00 par value, of UCU ("UCU Common Stock").
(2) Estimated pursuant to Rules 457(f)(1) and 457(c) under the Securities Act of
1933, as amended (the "Securities Act"). With regard to KCPL Common Stock,
the Proposed Maximum Aggregate Offering Price is based upon the market value
of the 54,000,000 shares of UCU Common Stock expected to be outstanding
immediately prior to the closing of the Mergers (at $27.0625 per share,
which is the average of the high and low sales prices of UCU Common Stock as
reported on the New York Stock Exchange ("NYSE") on June 7, 1996). Such
shares of UCU Common Stock are to be converted in the Mergers into
54,000,000 shares of KCPL Common Stock.
(3) The fee is $503,923, calculated as 1/29 of one percent of the Proposed
Maximum Aggregate Offering Price. The entire amount of the fee is offset
pursuant to Securities Act Rule 457(b) and Rule 0-11(a)(2) promulgated under
the Securities Exchange Act of 1934, as amended, by fees which have been
previously paid in connection with this transaction by KCPL and UCU. Of the
aggregate fee of $1,078,816 which has been previously paid in connection
with this transaction, $655,123 was paid by KCPL and UCU in connection with
their preliminary Joint Proxy Statement/Prospectus on Schedule 14A, filed
February 21, 1996, and $423,693 was paid on behalf of KC United Corp.
("KCU") by KCPL and UCU in connection with KCU's Registration Statement on
Form S-4, filed April 4, 1996 (File No. 333-02223).
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
KANSAS CITY POWER & LIGHT COMPANY
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN JOINT PROXY STATEMENT/PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................ Facing Page of Registration Statement;
Cross-Reference Sheet; Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Available Information; Incorporation of Certain
Documents by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges, and
Other Information................................... Summary of Joint Proxy Statement/ Prospectus;
Selected Historical and Pro Forma Data
4. Terms of the Transaction............................. Summary of Joint Proxy Statement/ Prospectus; The
Mergers; The Merger Agreement; Description of Newco
Common Stock; Comparison of Stockholders' Rights;
Approval of Newco Plans
5. Pro Forma Financial Information...................... Unaudited Pro Forma Combined Financial Information
6. Material Contacts with the Company Being Acquired.... Summary of Joint Proxy Statement/ Prospectus; The
Mergers; The Merger Agreement; Selected Information
Concerning KCPL and UCU
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters....... *
8. Interests of Named Experts and Counsel............... Opinion of KCPL's Financial Advisor; Opinion of UCU's
Financial Advisor; Experts; Legal Matters
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN JOINT PROXY STATEMENT/PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.......... Incorporation of Certain Documents by Reference;
Selected Historical and Pro Forma Data; Unaudited
Pro Forma Combined Financial Information; Selected
Information Concerning KCPL and UCU
11. Incorporation of Certain Information by Reference.... Incorporation of Certain Documents by Reference;
Description of Newco Common Stock
12. Information with Respect to S-2 or S-3 Registrants... *
13. Incorporation of Certain Information by Reference.... *
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants.............................. *
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies............ Incorporation of Certain Documents by Reference;
Selected Historical and Pro Forma Data; Unaudited
Pro Forma Combined Financial Information; Selected
Information Concerning KCPL and UCU
16. Information with Respect to S-2 or S-3 Companies..... *
17. Information with Respect to Companies Other Than S-3
or S-2 Companies.................................... *
D. VOTING AND MANAGEMENT INFORMATION.
18. Information if Proxies, Consents or Authorizations
are to be Solicited................................. Outside Front Cover Page; Incorporation of Certain
Documents by Reference; Summary of Joint Proxy
Statement/Prospectus; Meetings, Voting and Proxies;
The Mergers; Selected Information Concerning KCPL
and UCU; Proposals of Stockholders
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer..... *
</TABLE>
- ------------------------
* Inapplicable or the answer is negative.
<PAGE>
PRELIMINARY COPY
[LOGO]
, 1996
Dear Shareholder:
The merger agreement between Kansas City Power & Light Company ("KCPL") and
UtiliCorp United Inc. ("UCU") has been revised to increase the value to KCPL
shareholders under a new structure. The revised terms of the merger agreement
provide for a new KCPL subsidiary to be created which will be merged into UCU.
UCU will then merge with KCPL. At the time the mergers are completed, the
combined company will change its name to
[("Newco")]. Shareholders of UCU will receive one share in Newco for each UCU
share held. KCPL shareholders will continue to hold their existing KCPL shares
(which after the mergers will be called Newco shares). Upon completion of the
mergers, the holders of KCPL common stock and the holders of UCU common stock
will own approximately 57% and 43%, respectively, of the outstanding shares of
the combined company based upon the capitalization of KCPL and UCU on the date
of the amended merger agreement. The other significant terms of the revised
mergers will remain substantially the same as the original merger.
A Special Meeting of Shareholders of KCPL is scheduled to be held at on
, 1996 at to
consider and vote upon the issuance of up to a maximum of 54,000,000 shares of
KCPL common stock to be issued in the mergers (the "Share Issuance"). The
attached Joint Proxy Statement/Prospectus describes the recent amendment to the
merger agreement and the transactions related to it, including certain stock
incentive and management compensation plans (the "Plans") which will take effect
if the mergers are consummated. Please review the attached Joint Proxy
Statement/Prospectus carefully.
Western Resources, Inc. ("Western Resources") has announced a proposal to
acquire KCPL and that it intends to commence an unsolicited exchange offer for
KCPL common stock. Your Board of Directors has determined that Western
Resources' proposal was not in the best interests of KCPL and its shareholders.
In accordance with its duties under applicable law, your Board of Directors will
review Western Resources' unsolicited exchange offer if and when it is formally
commenced.
For the reasons described in the attached Joint Proxy Statement/Prospectus, YOUR
BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE KCPL/UCU MERGERS AND THE
TRANSACTIONS CONTEMPLATED THEREBY, AND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF
THE SHARE ISSUANCE AND FOR APPROVAL OF EACH OF THE PLANS.
Whether or not you plan to attend the Special Meeting, PLEASE SIGN AND DATE THE
ACCOMPANYING WHITE PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. EVEN IF YOU SUBMITTED A
PROXY CARD IN CONNECTION WITH THE ORIGINAL MERGER AGREEMENT, YOU WILL STILL NEED
TO SUBMIT A NEW PROXY CARD ON THE REVISED MERGER AGREEMENT. WE URGE YOU NOT TO
SIGN ANY PROXY CARD THAT WESTERN RESOURCES MAY SEND YOU. Again, thank you very
much for your support.
Very truly yours,
/s/ DRUE JENNINGS
Drue Jennings
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
PRELIMINARY COPY
KANSAS CITY POWER & LIGHT COMPANY
1201 WALNUT
KANSAS CITY, MISSOURI 64106
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
, 1996
---------------------
Notice is hereby given that a Special Meeting of Shareholders of Kansas City
Power & Light Company ("KCPL") will be held at
on , , 1996, commencing at
, local time (the "Meeting"). At the Meeting, shareholders will be asked
to consider and vote upon the following matters, which are more fully described
in the accompanying Joint Proxy Statement/Prospectus:
1. A proposal to approve the issuance (the "Share Issuance") of up to a
maximum of 54,000,000 shares of common stock, no par value, of KCPL
("KCPL Common Stock") pursuant to the Amended and Restated Agreement and
Plan of Merger by and among KCPL, KC Merger Sub, Inc. ("Sub"), UtiliCorp
United Inc. ("UCU") and KC United Corp., dated as of January 19, 1996, as
amended and restated as of May 20, 1996 (as amended, the "Merger
Agreement"), providing for (i) the merger of Sub with and into UCU, with
UCU surviving (the "UCU Merger"), and (ii) immediately thereafter, the
merger of UCU, as the corporation surviving the UCU Merger, with and into
KCPL, with KCPL surviving (the "Consolidating Merger" and together with
the UCU Merger, the "Mergers"). As part of the Consolidating Merger,
KCPL, as the corporation surviving in the Consolidating Merger, will be
renamed ("[Newco]"). Pursuant to the
Merger Agreement, each issued and outstanding share of common stock,
$1.00 par value per share, of UCU will be converted into one share of
Newco Common Stock in the UCU Merger. Each issued and outstanding share
of KCPL Common Stock held by KCPL shareholders will remain outstanding
after the Mergers (except that each such share shall be referred to as
one share of Newco Common Stock).
2. A proposal to approve the Newco Stock Incentive Plan, a copy of which is
attached as Annex D to the accompanying Joint Proxy Statement/Prospectus.
3. A proposal to approve the Newco Management Incentive Compensation Plan
(the "Newco MIC Plan"), a copy of which is attached as Annex E to the
accompanying Joint Proxy Statement/Prospectus.
Only shareholders of record at the close of business on , 1996,
will be entitled to notice of and to vote at the Meeting or at any adjournment
or postponement thereof. Approval of the Share Issuance requires the affirmative
vote of the holders of a majority of the shares of KCPL Common Stock voting on
the Share Issuance where the total number of votes cast represents over 50
percent of all outstanding shares of KCPL Common Stock. The affirmative vote of
a majority of the shares of KCPL Common Stock present and entitled to vote is
required to approve the Newco Stock Incentive Plan and the Newco MIC Plan. KCPL
shareholders are not entitled to dissenters' rights of appraisal.
Approval of the Share Issuance is a condition to the consummation of the
Mergers. The consummation of the Mergers is also subject to the approval of the
holders of UCU Common Stock, certain required regulatory approvals and other
conditions. If approved by the shareholders, the Newco Stock Incentive Plan and
the Newco MIC Plan will be implemented only if the Mergers are consummated.
<PAGE>
YOUR BOARD OF DIRECTORS HAS, BY A UNANIMOUS VOTE, APPROVED THE MERGER
AGREEMENT, THE MERGERS AND THE TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS
THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE SHARE ISSUANCE, FOR APPROVAL OF THE
NEWCO STOCK INCENTIVE PLAN AND FOR APPROVAL OF THE NEWCO MIC PLAN.
By Order of the Board of Directors
/s/ JEANIE SELL LATZ
Jeanie Sell Latz
SECRETARY
Kansas City, Missouri
, 1996
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN, DATE AND PROMPTLY RETURN THE
ACCOMPANYING WHITE PROXY USING THE ENCLOSED, SELF-ADDRESSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF FOR ANY REASON YOU SHOULD
DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS VOTED AT THE
MEETING.
2
<PAGE>
PRELIMINARY COPY
[LOGO]
, 1996
Dear UtiliCorp United Inc. Stockholder,
You are cordially invited to attend the Special Meeting of Stockholders of
UtiliCorp United Inc. ("UCU") which will be held at
, on , , 1996, commencing at
, local time. At this important meeting, holders of common stock of UCU will
be asked to consider and to vote on a proposal relating to the strategic
business combination between UCU and Kansas City Power & Light Company ("KCPL").
The merger agreement between UCU and KCPL has been amended and the structure
of the merger has been revised. Under the revised terms of the merger, a new
KCPL subsidiary will be created, and will be merged into UCU with UCU as the
surviving corporation. UCU will then be merged with KCPL to form the combined
company. The combined company will be renamed ("[Newco]") at
the time of the mergers. Shareholders of UCU will receive one share of [Newco]
for each UCU share held. Shareholders of KCPL will continue to hold their shares
of KCPL, which after the merger will become shares of Newco. Under the original
terms of the merger, UCU shareholders would have received 1.096 shares in the
combined company for each share held.
Upon completion of the merger, the holders of UCU common stock and the
holders of KCPL common stock will own approximately 43% and 57%, respectively,
of the outstanding shares of [Newco] common stock based upon the capitalization
of UCU and KCPL on the date of the amended merger agreement. This represents an
increase in value for KCPL shareholders as compared to the original merger. Your
Board has received a written opinion from its financial advisor, Donaldson,
Lufkin & Jenrette Securities Corporation, dated as of the date hereof, to the
effect that the exchange ratio is fair, from a financial point of view, to the
holders of UCU common stock. Other than the changes described above, the other
substantive terms of the merger will remain substantially the same.
Your Board believes that this merger will provide significant benefits to
UCU stockholders and will create a combined enterprise that will be
well-positioned for an increasingly competitive energy environment. Strategic
advantages that [Newco] will possess include substantial operating efficiencies,
increased ability to diversify operations and grow in a prudent manner and
greater financial stability. [Newco] will also enjoy greater opportunities for
earnings and dividend growth through the combination of UCU's and KCPL's equity,
management, human resources and technical expertise.
This merger is subject to certain required regulatory approvals and other
conditions. The merger will be consummated shortly after the necessary
regulatory approvals are obtained and other conditions to the merger are
satisfied or waived. Under Delaware law, you do not have dissenters' rights of
appraisal with respect to the merger.
The attached Joint Proxy Statement/Prospectus reflects the recent amendment
to the merger agreement. As you may know, the original merger agreement was not
voted on at UCU's 1996 Annual Meeting. Accordingly, the attached Joint Proxy
Statement/Prospectus supersedes the Joint Proxy Statement/Prospectus, dated
April 4, 1996, that was previously sent to you as it relates to the proposed
merger. You should review the attached Joint Proxy Statement/Prospectus
carefully.
YOUR BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS AND
CONDITIONS OF THE MERGER AND BELIEVES THAT IT IS FAIR AND IN THE BEST INTERESTS
OF UCU AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE MERGER DESCRIBED IN THE ATTACHED JOINT PROXY STATEMENT/PROSPECTUS.
<PAGE>
BECAUSE A MAJORITY VOTE OF ALL OUTSTANDING SHARES OF UCU COMMON STOCK IS
REQUIRED TO APPROVE THE MERGER, YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES
YOU HOLD. UNDER DELAWARE LAW, THE FAILURE TO VOTE, ABSTENTIONS AND BROKER
NON-VOTES WILL HAVE THE SAME EFFECT AS VOTES CAST AGAINST APPROVAL OF THE
MERGER. TO ENSURE YOUR SHARES WILL BE REPRESENTED AT THE MEETING, WHETHER OR NOT
YOU PLAN TO ATTEND, I URGE YOU TO PROMPTLY SIGN, DATE AND MAIL YOUR PROXY IN THE
ENCLOSED SELF-ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. You may cancel your proxy by voting in person, by written notice
to UCU's Corporate Secretary or by delivery of a later dated proxy, in each case
prior to the closing of the polls for voting at the meeting.
Sincerely,
/s/ Richard C. Green, Jr.
RICHARD C. GREEN, JR.
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
2
<PAGE>
PRELIMINARY COPY
UTILICORP UNITED INC.
911 MAIN STREET
KANSAS CITY, MISSOURI 64105
To the Stockholders of UtiliCorp United Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of the stockholders of
UtiliCorp United Inc. ("UCU"), a Delaware corporation, will be held at
, on , , 1996, commencing
at , local time (the "Special Meeting"). At the Special Meeting,
stockholders will be asked to consider and vote upon the following matter, which
is more fully described in the accompanying Joint Proxy Statement/Prospectus:
A proposal to approve the Amended and Restated Agreement and Plan of
Merger, dated as of January 19, 1996, as amended and restated as of May
20, 1996 (as amended and restated, the "Merger Agreement"), by and among
Kansas City Power & Light Company ("KCPL"), KC Merger Sub, Inc. ("Sub"),
UCU and KC United Corp., a copy of which is attached as Annex A to the
accompanying Joint Proxy Statement/Prospectus. Pursuant to the Merger
Agreement, (i) Sub will be merged with and into UCU, with UCU surviving
(the "UCU Merger"), and (ii) immediately thereafter, the surviving
corporation in the UCU Merger will be merged with and into KCPL. The
combined company will be renamed
.
Stockholders of record at the close of business on 1996, will be
entitled to notice of and to vote at the Special Meeting or any adjournment or
postponement thereof. Approval of the Merger Agreement and the UCU Merger, which
is a condition to the consummation of the transactions contemplated by the
Merger Agreement, requires the affirmative vote of the holders of a majority of
the outstanding shares of UCU Common Stock. The UCU stockholders are not
entitled to dissenters' rights.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED OF THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT AND THE UCU MERGER.
By Order of the Board of Directors
/s/ DALE J. WOLF
Dale J. Wolf
VICE PRESIDENT FINANCE, TREASURER
AND SECRETARY
Kansas City, Missouri
, 1996
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WHETHER OR
NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE SIGN, DATE AND PROMPTLY
RETURN THE ACCOMPANYING WHITE PROXY USING THE ENCLOSED, SELF-ADDRESSED ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF FOR ANY REASON YOU
SHOULD DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS VOTED
AT THE SPECIAL MEETING.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 10, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
JOINT PROXY STATEMENT
OF
<TABLE>
<S> <C> <C>
KANSAS CITY POWER AND UTILICORP UNITED INC.
& LIGHT COMPANY
</TABLE>
------------------------
PROSPECTUS
OF
KANSAS CITY POWER & LIGHT COMPANY
TO BE RENAMED
[NEWCO]
---------------
This Joint Proxy Statement/Prospectus relates to the proposed Mergers (as
defined herein) and certain related transactions contemplated by the Amended and
Restated Agreement and Plan of Merger, dated as of January 19, 1996 (the
"Original Merger Agreement"), as amended and restated on May 20, 1996 (as
amended and restated, the "Merger Agreement"), by and among Kansas City Power &
Light Company, a Missouri corporation ("KCPL"), KC Merger Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of KCPL ("Sub"), UtiliCorp United
Inc., a Delaware corporation ("UCU"), and KC United Corp., a Delaware
corporation ("KCU"). Pursuant to the Merger Agreement, (i) Sub will merge with
and into UCU, with UCU surviving (the "UCU Merger"), and (ii) immediately
thereafter, the surviving corporation in the UCU Merger (the "UCU Surviving
Corporation") will merge with and into KCPL, with KCPL surviving (the
"Consolidating Merger," and together with the UCU Merger, the "Mergers").
Pursuant to the Merger Agreement, the surviving corporation in the Consolidating
Merger will, at the effective time of the Consolidating Merger (the "Effective
Time"), change its name to ("[Newco]"). As used in this Joint
Proxy Statement/Prospectus, "Newco" shall mean KCPL after the consummation of
the Mergers and as renamed as described above.
The Mergers will be consummated on the terms and subject to the conditions
set forth in the Merger Agreement, as a result of which each issued and
outstanding share of common stock, $1.00 par value per share, of UCU ("UCU
Common Stock") (other than shares of UCU Common Stock owned by KCPL or UCU
either directly or through a wholly-owned subsidiary ) shall be converted into
and become one (the "Exchange Ratio") fully paid and nonassessable share of
common stock, no par value, of KCPL ("KCPL Common Stock"). KCPL Common Stock
outstanding after the consummation of the Mergers shall be referred to in this
Joint Proxy Statement/Prospectus as "Newco Common Stock." Each issued and
outstanding share of KCPL Common Stock held by KCPL shareholders will remain
outstanding after the Mergers, unchanged, as one share of Newco Common Stock.
Based on the number of shares outstanding as of the date of the Merger
Agreement, the holders of KCPL Common Stock and the holders of UCU Common Stock
will hold in the aggregate approximately 57% and 43%, respectively, of the total
number of shares of Newco Common Stock outstanding immediately after the
Effective Time. See "THE MERGER AGREEMENT -- The Mergers."
KCPL has agreed in the Merger Agreement to call for redemption before the
effective time of the UCU Merger (the "UCU Effective Time"), all of its
outstanding shares of preferred stock and preference stock (collectively, "KCPL
Preferred Stock") at the applicable redemption prices therefor, together with
all dividends accrued and unpaid through the applicable redemption dates. UCU
has agreed under the Merger Agreement to call for redemption all of the
outstanding shares of UCU's preference stock (cumulative), $2.05 Series ("UCU
Preferred Stock"), which is the only outstanding series of preferred stock of
UCU, on March 3, 1997 or on such later date as KCPL and UCU shall mutually
agree. The redemption price therefor will be $25.00 per share of UCU Preferred
Stock plus all dividends accrued and unpaid through the redemption date. It is a
condition to the closing of the Mergers that the UCU Preferred Stock and KCPL
Preferred Stock be redeemed before the UCU Effective Time. See "THE MERGER
AGREEMENT -- The Mergers."
Holders of UCU Common Stock will not have dissenters' rights of appraisal
under the Delaware General Corporation Law (the "DGCL") with respect to the UCU
Merger or any of the other transactions contemplated by the Merger Agreement.
Holders of KCPL Common Stock will not have dissenters' rights of appraisal under
the Missouri General and Business Corporation Law (the "MGBCL") with respect to
the Consolidating Merger or any of the other transactions contemplated by the
Merger Agreement. See "THE MERGERS -- Dissenters' Rights."
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
The date of this Joint Proxy Statement/Prospectus is , 1996.
This Joint Proxy Statement/Prospectus is first being mailed to the stockholders
of KCPL and UCU on or about , 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This Joint Proxy Statement/Prospectus is being furnished to the common
shareholders of KCPL in connection with the solicitation of proxies by the Board
of Directors of KCPL (the "KCPL Board") for use at a special meeting of KCPL
common shareholders to be held at
, on , , 1996, commencing at
, local time, and at any adjournment or postponement thereof (the "KCPL
Meeting"). At the KCPL Meeting, the holders of KCPL Common Stock will consider
and vote upon (i) a proposal to approve the issuance of up to a maximum of
54,000,000 shares of KCPL Common Stock pursuant to the UCU Merger (the "Share
Issuance"), (ii) a proposal to approve the Stock Incentive Plan of Newco (the
"Newco Stock Incentive Plan"), and (iii) a proposal to approve the Management
Incentive Compensation Plan of Newco (the "Newco MIC Plan" and together with the
Newco Stock Incentive Plan, the "Newco Plans").
This Joint Proxy Statement/Prospectus is being furnished to the common
stockholders of UCU in connection with the solicitation of proxies by the Board
of Directors of UCU (the "UCU Board") for use at a special meeting of UCU common
stockholders to be held at
on , , 1996, commencing at
, local time, and at any adjournment or postponement thereof (the "UCU
Meeting"). At the UCU Meeting, holders of UCU Common Stock will vote on a
proposal to approve and adopt the Merger Agreement and the UCU Merger.
This Joint Proxy Statement/Prospectus also constitutes the prospectus of
KCPL (to be renamed Newco upon consummation of the Consolidating Merger) with
respect to up to a maximum of 54,000,000 shares of Newco Common Stock to be
issued in the UCU Merger to the holders of UCU Common Stock.
All information herein with respect to KCPL has been furnished by KCPL and
all information herein with respect to UCU has been furnished by UCU.
No person is authorized to give any information or to make any
representation other than those contained or incorporated by reference in this
Joint Proxy Statement/Prospectus, and, if given or made, such information or
representation should not be relied upon as having been authorized. This Joint
Proxy Statement/Prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered by this Joint Proxy
Statement/Prospectus, or the solicitation of a proxy, in any jurisdiction, to or
from any person to whom or from whom it is unlawful to make such offer,
solicitation of an offer or proxy solicitation in such jurisdiction. Neither the
delivery of this Joint Proxy Statement/Prospectus nor any distribution of
securities pursuant to this Joint Proxy Statement/Prospectus shall, under any
circumstances, create an implication that there has been no change in the
affairs of any of KCPL or UCU or in the information set forth herein since the
date of this Joint Proxy Statement/Prospectus.
This Joint Proxy Statement/Prospectus does not cover any resale of the
securities to be received by stockholders of UCU upon consummation of the UCU
Merger, and no person is authorized to make any use of this Joint Proxy
Statement/Prospectus in connection with any such resale.
2
<PAGE>
AVAILABLE INFORMATION
Each of KCPL and UCU is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
accordingly, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). Such reports, proxy statements
and other information filed with the SEC are available for inspection and
copying at the public reference facilities maintained by the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's Regional Offices located at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and at 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such documents may also be obtained
from the Public Reference Room of the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, any such
material and other information concerning KCPL and UCU can be inspected at the
New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, 7th Floor, New
York, New York 10005, on which exchange the KCPL Common Stock and the UCU Common
Stock are listed. Information concerning the KCPL Common Stock can also be
inspected at the Chicago Stock Exchange, Inc., 440 South LaSalle Street,
Chicago, Illinois 60605, on which exchange the KCPL Common Stock is also listed.
Information concerning the UCU Common Stock can also be inspected at the Pacific
Stock Exchange, Inc., 301 Pine Street, San Francisco, California 94104, on which
exchange the UCU Common Stock is also listed.
KCPL has filed a registration statement on Form S-4 (together with all
amendments, schedules and exhibits thereto, the "Registration Statement") with
the SEC pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the shares of Newco Common Stock to be issued in
connection with the UCU Merger. This Joint Proxy Statement/Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations of
the SEC. The Registration Statement is available for inspection and copying at
the SEC's principal office in Washington, D.C. Statements contained in this
Joint Proxy Statement/Prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other document, each
such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THOSE DOCUMENTS
(EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED BY REFERENCE THEREIN) ARE
AVAILABLE, WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST FROM, IN THE CASE OF
DOCUMENTS RELATING TO KCPL, MS. JEANIE SELL LATZ, SENIOR VICE PRESIDENT,
CORPORATE SECRETARY AND CHIEF LEGAL OFFICER, KANSAS CITY POWER & LIGHT COMPANY,
1201 WALNUT, KANSAS CITY, MISSOURI 64106-2124, (816) 556-2200, AND, IN THE CASE
OF DOCUMENTS RELATING TO UCU, DALE J. WOLF, VICE PRESIDENT FINANCE, TREASURER
AND CORPORATE SECRETARY, UTILICORP UNITED INC., 911 MAIN STREET, SUITE 3000,
KANSAS CITY, MISSOURI 64105, (816) 421-6600. IN ORDER TO ENSURE TIMELY DELIVERY
OF KCPL AND UCU DOCUMENTS, ALL REQUESTS FOR SUCH DOCUMENTS SHOULD BE MADE BY
, 1996.
The following documents, previously filed with the SEC by KCPL (SEC File No.
1-707) or UCU (SEC File No. 1-3562) pursuant to the Exchange Act, are hereby
incorporated by reference:
1. KCPL's Annual Report on Form 10-K for the year ended December 31, 1995.
2. KCPL's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996.
3. KCPL's Schedule 14A Definitive Proxy Statement, dated April 4, 1996 (the
"KCPL Proxy Statement").
4. UCU's Annual Report on Form 10-K for the year ended December 31, 1995.
5. UCU's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996.
3
<PAGE>
6. UCU's Current Report on Form 8-K/A, dated April 1, 1996.
7. UCU's Schedule 14A Definitive Proxy Statement, dated April 4, 1996 (the
"UCU Proxy Statement").
The information relating to KCPL and UCU contained in this Joint Proxy
Statement/Prospectus does not purport to be comprehensive and should be read
together with the information in the documents incorporated by reference herein.
All documents filed by KCPL and UCU pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date hereof and prior to the date of the
KCPL Meeting, and any adjournment or postponement thereof, or the UCU Meeting,
and any adjournment or postponement thereof, respectively, shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/ Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Joint Proxy Statement/Prospectus.
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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---------
<S> <C>
AVAILABLE INFORMATION...................................................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 3
TABLE OF CONTENTS.......................................................................................... 5
INDEX OF DEFINED TERMS..................................................................................... 8
SUMMARY OF JOINT PROXY STATEMENT/PROSPECTUS................................................................ 12
The Parties.............................................................................................. 12
The KCPL Meeting......................................................................................... 12
The UCU Meeting.......................................................................................... 13
The Mergers.............................................................................................. 14
Exchanges of Stock Certificates.......................................................................... 14
Newco Plans.............................................................................................. 14
Background of the Mergers................................................................................ 15
Reasons for the Mergers.................................................................................. 15
Recommendations of the Boards of Directors............................................................... 15
Opinions of Financial Advisors........................................................................... 15
Conflicts of Interest.................................................................................... 16
Employee Stock Options................................................................................... 17
Management of Newco...................................................................................... 17
Conditions to the Mergers................................................................................ 17
Rights to Terminate, Amend or Waive Conditions........................................................... 18
Certain Federal Income Tax Consequences.................................................................. 18
Newco Following the Mergers.............................................................................. 19
Regulatory Matters....................................................................................... 19
Accounting Treatment..................................................................................... 20
Dissenters' Rights....................................................................................... 20
Dividends................................................................................................ 20
Comparison of Stockholders' Rights....................................................................... 20
Certain Litigation....................................................................................... 21
SELECTED HISTORICAL AND PRO FORMA DATA..................................................................... 22
Comparative Market Prices and Dividends.................................................................. 27
MEETINGS, VOTING AND PROXIES............................................................................... 28
The KCPL Meeting......................................................................................... 28
The UCU Meeting.......................................................................................... 29
THE MERGERS................................................................................................ 30
Background of the Mergers................................................................................ 30
Reasons for the Mergers; Recommendations of the Boards of Directors...................................... 38
Certain Forward-Looking Information...................................................................... 43
Synergies from the Mergers............................................................................... 43
Additional Operational Benefits.......................................................................... 46
Enhancement of Financial Performance..................................................................... 47
Opinion of KCPL's Financial Advisor...................................................................... 50
Opinion of UCU's Financial Advisor....................................................................... 60
Conflicts of Interest.................................................................................... 65
Certain Arrangements Regarding the Directors and Management of Newco..................................... 66
Employment Agreements.................................................................................... 66
Employee Plans and Severance Arrangements................................................................ 67
Newco Plans.............................................................................................. 68
</TABLE>
5
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<TABLE>
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Dividend Reinvestment Plan............................................................................... 69
<S> <C>
Certain Federal Income Tax Consequences.................................................................. 69
Accounting Treatment..................................................................................... 70
Stock Exchange Listing of the Newco Common Stock......................................................... 70
Federal Securities Law Consequences...................................................................... 71
Dissenters' Rights....................................................................................... 71
Regulatory Matters....................................................................................... 71
Certain Litigation....................................................................................... 73
THE MERGER AGREEMENT....................................................................................... 74
The Mergers.............................................................................................. 74
Subsidiaries and Joint Ventures.......................................................................... 75
Representations and Warranties........................................................................... 76
Certain Covenants........................................................................................ 76
No Solicitation of Transactions.......................................................................... 77
Newco Board of Directors................................................................................. 78
Directors' and Officers' Indemnification................................................................. 78
Conditions to Each Party's Obligation to Effect the Mergers.............................................. 79
Benefit Plans............................................................................................ 80
Certain Employment Agreements and Workforce Matters...................................................... 81
Termination.............................................................................................. 81
Termination Fees......................................................................................... 82
Expenses................................................................................................. 83
Amendment and Waiver..................................................................................... 83
Confidentiality Agreement................................................................................ 84
DESCRIPTION OF NEWCO COMMON STOCK.......................................................................... 84
Dividend Rights and Restrictions......................................................................... 84
Voting Rights............................................................................................ 85
Liquidation Rights....................................................................................... 85
Preemptive Rights........................................................................................ 85
Liability to Assessment.................................................................................. 85
Certain Anti-Takeover Provisions......................................................................... 85
COMPARISON OF STOCKHOLDERS' RIGHTS......................................................................... 86
General.................................................................................................. 86
Number of Directors...................................................................................... 86
Classified Board of Directors............................................................................ 86
Vacancies on the Board of Directors...................................................................... 86
Removal of Directors..................................................................................... 86
Voting/Cumulative Voting................................................................................. 87
Special Meetings; Stockholder Action y Written Consent................................................... 87
Indemnification/Limitation of Liability.................................................................. 87
Amendments of Charters................................................................................... 88
Amendment of Bylaws...................................................................................... 88
Notice of Shareholder Proposals/Nominations of Directors................................................. 89
Stockholder Inspection................................................................................... 90
Stockholders' Vote for Mergers........................................................................... 90
Appraisal Rights......................................................................................... 91
Anti-takeover Statutes................................................................................... 91
Business Combinations.................................................................................... 92
APPROVAL OF NEWCO PLANS.................................................................................... 93
Newco Stock Incentive Plan............................................................................... 93
</TABLE>
6
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<TABLE>
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Newco MIC Plan........................................................................................... 98
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION......................................................... 101
SELECTED INFORMATION CONCERNING KCPL AND UCU............................................................... 110
Business of KCPL......................................................................................... 110
Business of UCU.......................................................................................... 110
Certain Business Relationships Between KCPL and UCU...................................................... 110
NEWCO FOLLOWING THE MERGERS................................................................................ 111
Newco Board of Directors................................................................................. 111
Management of Newco...................................................................................... 111
Community Support........................................................................................ 111
Dividends................................................................................................ 112
EXPERTS.................................................................................................... 112
LEGAL MATTERS.............................................................................................. 112
PROPOSALS OF STOCKHOLDERS.................................................................................. 112
</TABLE>
<TABLE>
<S> <C> <C>
Annex A Amended and Restated Agreement and Plan of Merger........................ A-1
Annex B Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated............ B-1
Annex C Opinion of Donaldson, Lufkin & Jenrette Securities Corporation........... C-1
Annex D Form of Newco Stock Incentive Plan....................................... D-1
Annex E Form of Newco Management Incentive Compensation Plan..................... E-1
Annex F Form of Employment Agreement of A. Drue Jennings......................... F-1
Annex G Form of Employment Agreement of Richard C. Green......................... G-1
</TABLE>
7
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
TERM PAGE
- ----------------------------------------------------------------------------------------------------------- ---------
1935 Act................................................................................................... 19
1995 Asset Multiple........................................................................................ 54
1995 EPS Multiple.......................................................................................... 54
1995 EBIT Multiple......................................................................................... 54
1995 EBITDA Multiple....................................................................................... 54
1996 EPS Multiple.......................................................................................... 54
1996 EBIT Multiple......................................................................................... 54
1996 EBITDA Multiple....................................................................................... 54
1996 PE Ratio.............................................................................................. 61
1997 PE Ratio.............................................................................................. 61
1998 PE Ratio.............................................................................................. 61
Acquisition Proposal....................................................................................... 78
AEM........................................................................................................ 53
AGP........................................................................................................ 20
Antitrust Division......................................................................................... 72
Aquila..................................................................................................... 25
Aquila Comparables......................................................................................... 54
Aquila Comparable Acquisition Transactions................................................................. 54
Aquila Power............................................................................................... 53
Application................................................................................................ 72
April 14 Letter............................................................................................ 34
Asset Multiple............................................................................................. 55
Atomic Energy Act.......................................................................................... 19
Blackwell Sanders.......................................................................................... 18
Book Value Multiple........................................................................................ 54
British Columbia Commission................................................................................ 71
Business Combination....................................................................................... 91
Business Transaction....................................................................................... 93
CLC........................................................................................................ 36
CIS........................................................................................................ 45
Closing.................................................................................................... 74
Closing Date............................................................................................... 74
Code....................................................................................................... 18
Colorado Commission........................................................................................ 71
Comparable M&A Transactions................................................................................ 62
Confidentiality Agreement.................................................................................. 78
Consolidating Merger....................................................................................... 1
Continuation Period........................................................................................ 67
Control Shares............................................................................................. 92
DCF........................................................................................................ 52
DGCL....................................................................................................... 1
DLJ........................................................................................................ 16
DLJ Opinion................................................................................................ 60
EBIT Multiple.............................................................................................. 54
EBITDA Multiple............................................................................................ 54
Effective Time............................................................................................. 1
Employment Agreement....................................................................................... 16
Equity Consideration....................................................................................... 62
ERISA...................................................................................................... 76
Ernst & Young.............................................................................................. 15
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
TERM PAGE
- ----------------------------------------------------------------------------------------------------------- ---------
Exchange Act............................................................................................... 3
Exchange Agent............................................................................................. 14
Exchange Ratio............................................................................................. 1
Executive.................................................................................................. 66
Expiration Date............................................................................................ 35
FERC....................................................................................................... 19
FTC........................................................................................................ 72
FTE........................................................................................................ 44
Historical Period.......................................................................................... 56
HSR Act.................................................................................................... 19
IBES....................................................................................................... 54
Incentive Period........................................................................................... 99
Indemnified Parties........................................................................................ 79
Indemnified Party.......................................................................................... 79
Interested Shareholder..................................................................................... 91
Interested Shares.......................................................................................... 92
Interested Stockholder..................................................................................... 92
Iowa Board................................................................................................. 71
ISO Holding Period......................................................................................... 98
ISOs....................................................................................................... 68
IT......................................................................................................... 45
Joint Venture.............................................................................................. 75
Kansas Commission.......................................................................................... 39
KCPL....................................................................................................... 1
KCPL Board................................................................................................. 2
KCPL Bylaws................................................................................................ 20
KCPL Charter............................................................................................... 20
KCPL Common Stock.......................................................................................... 1
KCPL Meeting............................................................................................... 2
KCPL Preferred Stock....................................................................................... 1
KCPL Proxy Statement....................................................................................... 3
KCPL Record Date........................................................................................... 13
KCPL Regulated Business.................................................................................... 51
KCPL Regulated Business Comparables........................................................................ 52
KCPL Severance Agreement................................................................................... 68
KCPL Shareholders' Approval................................................................................ 74
KCPL Unregulated Business.................................................................................. 51
KCU........................................................................................................ 1
KCU Common Stock........................................................................................... 33
KGE........................................................................................................ 39
KLT........................................................................................................ 12
KLT Investments............................................................................................ 49
KPL........................................................................................................ 39
LTM........................................................................................................ 54
Manson..................................................................................................... 73
Mergers.................................................................................................... 1
Merger Agreement........................................................................................... 1
Merrill Lynch.............................................................................................. 15
Merrill Lynch Opinion...................................................................................... 50
MGBCL...................................................................................................... 1
MGU Indenture.............................................................................................. 84
Michigan Commission........................................................................................ 71
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
TERM PAGE
- ----------------------------------------------------------------------------------------------------------- ---------
Minnesota Commission....................................................................................... 71
Missouri Commission........................................................................................ 71
Net Income Multiple........................................................................................ 54
Newco...................................................................................................... 1
Newco Board................................................................................................ 16
Newco Bylaws............................................................................................... 20
Newco Charter.............................................................................................. 20
Newco Common Stock......................................................................................... 1
Newco Compensation Committee............................................................................... 69
Newco MIC Plan............................................................................................. 2
Newco Plans................................................................................................ 2
Newco Preferred Stock...................................................................................... 84
Newco Stock Incentive Plan................................................................................. 2
New Zealand Commission..................................................................................... 71
NYSE....................................................................................................... 3
O&M........................................................................................................ 44
Old Certificate............................................................................................ 14
option price............................................................................................... 95
Original KCPL Exchange Ratio............................................................................... 33
Original Merger............................................................................................ 32
Original Merger Agreement.................................................................................. 1
Original UCU Exchange Ratio................................................................................ 34
Payout Ratio............................................................................................... 63
Performance Goals.......................................................................................... 96
Price/Book Ratio........................................................................................... 61
Projected Period........................................................................................... 56
proper purpose............................................................................................. 90
Proposed Western Resources Merger.......................................................................... 35
Proposed Western Resources Offer........................................................................... 35
Public Comparables......................................................................................... 61
Registration Statement..................................................................................... 3
Regulated Businesses....................................................................................... 63
Related Person............................................................................................. 93
Representatives............................................................................................ 77
ROE........................................................................................................ 63
Rule 16b-3................................................................................................. 94
SARs....................................................................................................... 68
SEC........................................................................................................ 3
Section 83(b) election..................................................................................... 97
Securities Act............................................................................................. 3
Segments................................................................................................... 63
Share Issuance............................................................................................. 2
Skadden Arps............................................................................................... 18
spread..................................................................................................... 97
Stockholders' Approvals.................................................................................... 74
Sub........................................................................................................ 1
Sub Common Stock........................................................................................... 14
Subsidiary................................................................................................. 75
Target Incentive Award..................................................................................... 99
Target Party............................................................................................... 83
Terminal Value............................................................................................. 63
Total Consideration........................................................................................ 62
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
TERM PAGE
- ----------------------------------------------------------------------------------------------------------- ---------
Transaction Fee............................................................................................ 59
Treasurer of Australia..................................................................................... 71
UCU........................................................................................................ 1
UCU Board.................................................................................................. 2
UCU Bylaws................................................................................................. 13
UCU Charter................................................................................................ 13
UCU Common Stock........................................................................................... 1
UCU Effective Time......................................................................................... 1
UCU Meeting................................................................................................ 2
UCU Merger................................................................................................. 1
UCU 1986 Plan.............................................................................................. 16
UCU Plan................................................................................................... 16
UCU Preferred Stock........................................................................................ 1
UCU Proxy Statement........................................................................................ 4
UCU Record Date............................................................................................ 13
UCU Regulated Businesses................................................................................... 52
UCU Regulated Businesses Comparables....................................................................... 53
UCU Severance Agreement.................................................................................... 67
UCU Stock Award............................................................................................ 81
UCU Stock Option........................................................................................... 81
UCU Stockholders' Approval................................................................................. 74
UCU Surviving Corporation.................................................................................. 1
UED........................................................................................................ 110
UER........................................................................................................ 110
UPS........................................................................................................ 110
UtilCo..................................................................................................... 52
UtilCo Comparables......................................................................................... 55
WCNOC...................................................................................................... 73
West Virginia Commission................................................................................... 71
Western Resources.......................................................................................... 21
Western Resources Common Stock............................................................................. 34
Western Resources Exchange Ratio........................................................................... 35
Western Resources Preliminary Prospectus................................................................... 35
Western Resources Form S-4................................................................................. 35
Weil Gotshal............................................................................................... 31
</TABLE>
11
<PAGE>
SUMMARY OF JOINT PROXY STATEMENT/PROSPECTUS
THE FOLLOWING IS A SUMMARY OF CERTAIN IMPORTANT TERMS AND CONDITIONS OF THE
MERGERS AND RELATED INFORMATION. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION
APPEARING IN THIS JOINT PROXY STATEMENT/PROSPECTUS, THE ANNEXES AND THE
DOCUMENTS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS ARE URGED TO READ THIS
JOINT PROXY STATEMENT/PROSPECTUS AND THE ANNEXES IN THEIR ENTIRETY.
THE PARTIES
KCPL. KCPL is a low-cost electric power producer providing energy-related
products and services to customers in its service territory and worldwide.
Headquartered in Kansas City, Missouri, KCPL serves the electric power needs of
over 430,000 customers in and around the metropolitan Kansas City area. Included
in a diverse customer base are about 379,000 residences, 50,000 commercial firms
and 3,000 industrial firms, municipalities and other electric utilities. Low
fuel costs and superior plant performance enable KCPL to serve its customers
well while maintaining a leadership position in the bulk power market. KLT Inc.,
a wholly-owned unregulated subsidiary of KCPL ("KLT"), pursues opportunities in
primarily energy-related ventures throughout the nation and world. KCPL's
commitment to KLT and its holdings reflect KCPL's plans to enhance shareholder
value by capturing growth opportunities in energy-related and other markets
outside KCPL's regulated core utility business. The principal executive offices
of KCPL are located at 1201 Walnut, Kansas City, Missouri 64106-2124 and KCPL's
telephone number is (816) 556-2200. See "SELECTED INFORMATION CONCERNING KCPL
AND UCU -- Business of KCPL."
Upon consummation of the Mergers, KCPL will be renamed Newco. See "NEWCO
FOLLOWING THE MERGERS."
UCU. UCU is an energy company which consists of electric and natural gas
utility operations, natural gas gathering, marketing and processing and
independent power projects managed through four business groups. UCU operates
electric and gas utilities in eight states and one Canadian province. In
addition, UCU has ownership interests in 17 independent power projects in
various locations in the United States and Jamaica. UCU also markets natural gas
in the United Kingdom through several joint ventures, and owns an interest in
and operates energy joint venture interests in New Zealand and Australia. UCU
serves approximately 434,000 electric customers in four states and British
Columbia and approximately 800,000 gas customers in eight states. The Australian
joint venture serves approximately 520,000 electric customers. The principal
executive offices of UCU are located at 911 Main Street, Suite 3000, Kansas
City, Missouri 64105 and UCU's telephone number is (816) 421-6600. See "SELECTED
INFORMATION CONCERNING KCPL AND UCU -- Business of UCU."
THE KCPL MEETING
PURPOSE. At the KCPL Meeting, the holders of KCPL Common Stock will
consider and vote upon (i) a proposal to approve the Share Issuance pursuant to
which up to a maximum of 54,000,000 shares of KCPL Common Stock (such stock on
or after the Mergers is referred to herein as Newco Common Stock) will be issued
in the UCU Merger, (ii) a proposal to approve the Newco Stock Incentive Plan and
(iii) a proposal to approve the Newco MIC Plan. Pursuant to the Merger
Agreement, the consummation of the Mergers is conditioned upon approval of
proposal (i) above, but is not conditioned upon approval by the shareholders of
KCPL of any other of the above proposals. If approved by the shareholders of
KCPL, each of the Newco Plans will be implemented only if the transactions
contemplated by the Merger Agreement are consummated.
THE KCPL BOARD, BY A UNANIMOUS VOTE, HAS APPROVED THE MERGER AGREEMENT, THE
MERGERS AND THE TRANSACTIONS CONTEMPLATED THEREBY, AUTHORIZED THE EXECUTION AND
DELIVERY OF THE MERGER AGREEMENT, AND RECOMMENDS THAT KCPL SHAREHOLDERS VOTE FOR
APPROVAL OF THE SHARE ISSUANCE, FOR APPROVAL OF THE NEWCO STOCK INCENTIVE PLAN
AND FOR APPROVAL OF THE NEWCO MIC PLAN.
See "MEETINGS, VOTING AND PROXIES -- The KCPL Meeting."
12
<PAGE>
DATE, PLACE AND TIME; RECORD DATE. The KCPL Meeting is scheduled to be held
at , on , , 1996,
commencing at , local time. Holders of record of shares of KCPL Common Stock
at the close of business on , 1996 (the "KCPL Record Date") will be
entitled to notice and to vote at the KCPL Meeting. At the close of business on
the KCPL Record Date, shares of KCPL Common Stock were issued and
outstanding and entitled to vote.
VOTING RIGHTS; QUORUM; REQUIRED VOTE. Each outstanding share of KCPL Common
Stock is entitled to one vote upon each matter presented at the KCPL Meeting. A
majority of the voting power of the shares issued, outstanding and entitled to
vote, present in person or by proxy, shall constitute a quorum for the
transaction of business at the KCPL Meeting.
Under the rules of the NYSE, the affirmative vote of the holders of a
majority of the shares of KCPL Common Stock voting on the Share Issuance where
the total number of votes cast represents over 50 percent of all outstanding
shares of KCPL Common Stock outstanding on the KCPL Record Date is required to
approve the Share Issuance. Abstentions and broker non-votes will be disregarded
and will have no effect on the vote on the Share Issuance. The affirmative vote
of a majority of the shares of KCPL Common Stock present and entitled to vote is
required to approve the Newco Stock Incentive Plan and the Newco MIC Plan.
As of the KCPL Record Date, the directors and executive officers of KCPL,
together with their affiliates as a group, beneficially own less than 1% of the
issued and outstanding shares of KCPL Common Stock.
See "MEETINGS, VOTING AND PROXIES -- The KCPL Meeting."
THE UCU MEETING
PURPOSE. At the UCU Meeting, the holders of UCU Common Stock will be asked
to consider and vote upon a proposal to approve the Merger Agreement and the UCU
Merger.
THE UCU BOARD, BY A UNANIMOUS VOTE, HAS APPROVED THE MERGER AGREEMENT AND
THE UCU MERGER, AUTHORIZED THE EXECUTION AND DELIVERY OF THE MERGER AGREEMENT,
AND RECOMMENDS THAT UCU STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT
AND THE UCU MERGER.
See "MEETINGS, VOTING AND PROXIES -- The UCU Meeting."
DATE, PLACE AND TIME; RECORD DATE. The UCU Meeting is scheduled to be held
at on , , 1996,
commencing at , local time. Holders of record of shares of UCU Common Stock
at the close of business on , 1996 (the "UCU Record Date") will be
entitled to notice and to vote at the UCU Meeting. At the close of business on
the UCU Record Date, shares of UCU Common Stock were issued and
outstanding and entitled to vote.
VOTING RIGHTS; QUORUM; REQUIRED VOTE. Each outstanding share of UCU Common
Stock is entitled to one vote upon the Merger Agreement and the UCU Merger. A
majority of the voting power of the shares issued and outstanding and entitled
to vote, present in person or by proxy, shall constitute a quorum for the
transaction of business at the UCU Meeting.
As provided under the DGCL, the Certificate of Incorporation of UCU, as
amended (the "UCU Charter") and the bylaws of UCU (the "UCU Bylaws"), the
affirmative vote of a majority of the outstanding shares of the UCU Common Stock
entitled to vote at the UCU Meeting is required for the approval of the Merger
Agreement and the UCU Merger. Abstentions and broker non-votes will have the
same effect as votes cast against approval of the Merger Agreement and the UCU
Merger.
As of the UCU Record Date, the directors and executive officers of UCU,
together with their affiliates as a group, beneficially own % of the issued
and outstanding shares of UCU Common Stock entitled to vote at the UCU Meeting.
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See "MEETINGS, VOTING AND PROXIES -- The UCU Meeting."
THE MERGERS
The Mergers will be consummated on the terms and subject to the conditions
set forth in the Merger Agreement, as a result of which (i) as of the UCU
Effective Time, Sub will be merged with and into UCU, with UCU surviving in the
UCU Merger and (ii) immediately thereafter at the Effective Time, the UCU
Surviving Corporation will be merged with and into KCPL, with KCPL surviving
(and renamed as Newco) in the Consolidating Merger. In addition, as of the UCU
Effective Time, (i) each issued and outstanding share of UCU Common Stock (other
than shares of UCU Common Stock owned by KCPL or UCU either directly or through
a wholly-owned Subsidiary (as defined herein)) will be converted into and become
one fully paid and nonassessable share of Newco Common Stock and (ii) each
issued and outstanding share of common stock, $1.00 par value per share, of Sub
("Sub Common Stock") will be converted into and become one fully paid and
nonassessable share of common stock, $0.01 par value per share, of the UCU
Surviving Corporation. Each issued and outstanding share of KCPL Common Stock
held by KCPL shareholders will remain outstanding after the Mergers, unchanged,
as one share of Newco Common Stock. Based on the number of shares of KCPL Common
Stock and UCU Common Stock outstanding as of the date of the Merger Agreement,
the holders of KCPL Common Stock and the holders of UCU Common Stock will hold
in the aggregate approximately 57% and 43%, respectively, of the total number of
shares of Newco Common Stock outstanding immediately after the Effective Time.
KCPL has agreed under the Merger Agreement to call for redemption before the
UCU Effective Time all of the outstanding shares of each series and class of
KCPL Preferred Stock at the applicable redemption prices therefor, together with
all dividends accrued and unpaid through the applicable redemption dates. UCU
has agreed under the Merger Agreement to call for redemption all of the
outstanding shares of UCU Preferred Stock, which is the only outstanding series
or class of preferred stock of UCU, on March 3, 1997 or on such later date as
KCPL and UCU shall mutually agree. The redemption price therefor will be $25.00
per share of UCU Preferred Stock plus all accrued and unpaid dividends through
the redemption date. It is a condition to the closing of the Mergers that the
UCU Preferred Stock and KCPL Preferred Stock be redeemed before the UCU
Effective Time.
See "THE MERGER AGREEMENT -- The Mergers."
EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Effective Time, an exchange agent mutually
agreeable to KCPL and UCU (the "Exchange Agent") will mail transmittal
instructions to each holder of record of shares of UCU Common Stock outstanding
at the UCU Effective Time, advising such holder of the procedure for
surrendering such holder's certificates (each, an "Old Certificate") which
immediately prior to the UCU Effective Time represented certificates for shares
of UCU Common Stock that were cancelled in the UCU Merger and became instead the
right to receive shares of Newco Common Stock. Holders of Old Certificates will
not be entitled to receive any payment of dividends or other distributions on
their Old Certificates until such certificates have been surrendered for
certificates representing shares of Newco Common Stock. Holders of shares of UCU
Common Stock should not submit their stock certificates for exchange until a
letter of transmittal and instructions therefor are received. Holders of KCPL
Common Stock will not need to surrender their share certificates. Issued and
outstanding shares of KCPL Common Stock held by KCPL shareholders will remain
outstanding and unchanged after the Mergers but are referred to herein as Newco
Common Stock to reflect the combined company's name change to Newco at the
Effective Time. See "THE MERGER AGREEMENT -- The Mergers."
NEWCO PLANS
Pursuant to the Merger Agreement, Newco will adopt the Newco Stock Incentive
Plan and the Newco MIC Plan to replace comparable plans of KCPL and UCU. The
Newco Stock Incentive Plan is a comprehensive stock compensation plan providing
for the grant of stock options, stock appreciation rights, restricted stock and
performance units. The Newco MIC Plan is a short-term incentive
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compensation plan providing for awards based upon the achievement of individual,
group and corporate performance goals during periods of up to 12 months. The
Newco Plans will only be implemented if they are approved by KCPL shareholders
at the KCPL Meeting and if the Mergers are consummated. For descriptions of the
Newco Plans, see "THE MERGERS -- Newco Plans" and "APPROVAL OF NEWCO PLANS."
BACKGROUND OF THE MERGERS
For a description of the background of the Mergers, see "THE MERGERS --
Background of the Mergers."
REASONS FOR THE MERGERS
KCPL and UCU believe that the Mergers offer significant strategic and
financial benefits to each company and to their respective stockholders, as well
as to their employees and customers and the communities in which they transact
business. These benefits include, among others: increased ability to diversify
into non-regulated areas; greater efficiency; increased purchasing power; lower
future rates due to cost savings resulting from the Mergers; greater
coordination of operations; expanded management resources and the ability to
select leadership from a larger and more diverse management pool; increased size
and financial stability; enhanced access to new customers and to capital
markets; stimulation of local economic growth and development; reduced
administrative costs; cost savings in a variety of other categories, which are
estimated to result in net savings of approximately $636 million over a 10-year
period following the Mergers as identified in a study performed by Ernst & Young
LLP ("Ernst & Young"); additional operational savings identified by the
managements of KCPL and UCU after the announcement of the Original Merger; and
opportunities to enhance revenue growth. See "THE MERGERS -- Reasons for the
Mergers; Recommendations of the Boards of Directors," "-- Synergies from the
Mergers," "-- Additional Operational Benefits" and
"-- Enhancement of Financial Performance."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
In considering the recommendations of the KCPL Board and the UCU Board with
respect to the Mergers, stockholders should be aware that certain members of
KCPL's and UCU's management and Boards of Directors have certain interests in
the Mergers that are in addition to the interests of stockholders of KCPL and
UCU generally. See "THE MERGERS -- Conflicts of Interest."
KCPL. The KCPL Board, by a unanimous vote, has approved and adopted the
Merger Agreement, the Mergers and the transactions contemplated thereby,
believes that the terms of the Mergers are fair to, and in the best interests
of, KCPL's shareholders and recommends that the shareholders of KCPL vote FOR
approval of the Share Issuance and FOR approval of each of the Newco Plans. The
KCPL Board approved and adopted the Merger Agreement after consideration of a
number of factors described under the heading "THE MERGERS -- Reasons for the
Mergers; Recommendations of the Boards of Directors."
UCU. The UCU Board, by a unanimous vote, has approved and adopted the
Merger Agreement and the transactions contemplated thereby, believes that the
terms of the UCU Merger are fair to, and in the best interests of, UCU's
stockholders and recommends that the stockholders of UCU vote FOR approval of
the Merger Agreement and the UCU Merger. The UCU Board approved and adopted the
Merger Agreement after consideration of a number of factors described under the
heading "THE MERGERS -- Reasons for the Mergers; Recommendations of the Boards
of Directors."
OPINIONS OF FINANCIAL ADVISORS
KCPL. On May 20, 1996, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") delivered its oral opinion, which opinion was subsequently
confirmed in a written opinion dated as of May 20, 1996, to the KCPL Board to
the effect that, as of that date and based upon the assumptions made, matters
considered and limits of review as set forth in such opinion, the proposed
Exchange Ratio of one share of Newco Common Stock for each share of UCU Common
Stock pursuant to the UCU Merger is fair to the holders of shares of KCPL Common
Stock (other than UCU and its
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affiliates) from a financial point of view. Merrill Lynch subsequently confirmed
its May 20, 1996 written opinion by delivery of a written opinion dated as of
the date of this Joint Proxy Statement/ Prospectus. The full text of the written
opinion of Merrill Lynch, dated as of the date of this Joint Proxy
Statement/Prospectus, which sets forth the assumptions made, matters considered
and limits of the review undertaken in connection with the opinion, is attached
hereto as Annex B and is incorporated herein by reference. HOLDERS OF SHARES OF
KCPL COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY.
See "THE MERGERS -- Opinion of KCPL's Financial Advisor" and Annex B.
UCU. On May 19, 1996, Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") delivered its oral opinion, which opinion was subsequently confirmed in
a written opinion dated as of May 19, 1996 and a further written opinion dated
the date of this Joint Proxy Statement/Prospectus, to the effect that, as of
such dates, and subject to the assumptions made, matters considered and limits
of the review undertaken, as set forth in such opinions, the Exchange Ratio is
fair, from a financial point of view, to holders of UCU Common Stock. A copy of
the written opinion of DLJ, dated as of the date of this Joint Proxy
Statement/Prospectus, which sets forth the assumptions made, matters considered
and limits of the review undertaken in connection with the opinion, is attached
hereto as Annex C and is incorporated herein by reference. HOLDERS OF SHARES OF
UCU ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. See "THE
MERGERS -- Opinion of UCU's Financial Advisor" and Annex C.
CONFLICTS OF INTEREST
In considering the recommendations of the KCPL Board and the UCU Board with
respect to the Mergers, stockholders should be aware that certain members of
KCPL's and UCU's management and Boards of Directors have certain interests in
the Mergers that are in addition to the interests of stockholders of KCPL and
UCU generally.
BOARD OF DIRECTORS. The Merger Agreement provides that the board of
directors of Newco (the "Newco Board") will consist of 18 directors, nine of
whom will be the then existing directors of KCPL immediately prior to the
Effective Time and nine of whom will be designated by UCU. To date, UCU has not
determined which individuals, in addition to Richard C. Green, Jr., the Chairman
of the Board and Chief Executive Officer of UCU, will be its designees to serve
as directors of Newco as of the Effective Time. However, it is currently
anticipated that the directors of UCU immediately prior to the Effective Time
will serve as UCU's designees to the Newco Board. See "THE MERGERS -- Conflicts
of Interest -- Board of Directors."
EMPLOYMENT AGREEMENTS. Each of A. Drue Jennings, the Chairman of the Board,
President and Chief Executive Officer of KCPL, and Mr. Green will enter into an
employment agreement with Newco to become effective upon the consummation of the
Mergers (each, an "Employment Agreement"). The term of each Employment Agreement
shall last until the fifth anniversary of the Effective Time. Pursuant to Mr.
Jennings' Employment Agreement, from the Effective Time until the date of the
annual meeting of shareholders of Newco that occurs in 2002, Mr. Jennings will
serve as Chairman of Newco, and thereafter until the expiration of his
Employment Agreement will serve as Vice Chairman of Newco. From the Effective
Time until the earlier of the annual meeting of shareholders of Newco that
occurs in 2002 or the date Mr. Jennings ceases to serve as Chairman, Mr. Green
will serve as Vice Chairman and Chief Executive Officer of Newco, and thereafter
until the expiration of his Employment Agreement will serve as Chairman and
Chief Executive Officer. See "THE MERGERS -- Conflicts of Interest -- Employment
Agreements."
EMPLOYEE PLANS AND SEVERANCE ARRANGEMENTS. Under certain agreements entered
into by KCPL and UCU, certain officers of KCPL and UCU may be entitled to
payment of certain severance benefits upon termination of employment following
consummation of the Mergers. In addition, stock options outstanding under UCU's
Amended and Restated 1986 Stock Incentive Plan (the "UCU Plan") and the UCU 1986
Stock Incentive Plan (the "UCU 1986 Plan") vested upon execution of the Original
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Merger Agreement. Restricted stock outstanding under the UCU 1986 Plan will vest
upon consummation of the UCU Merger. The aggregate amount which could be payable
under certain circumstances upon termination of employment after the Mergers to
the five most highly compensated executive officers of KCPL who have entered
into the "KCPL Severance Agreements" (as defined herein) is approximately $6.1
million. In addition, an aggregate of approximately $450,000 in deferred
compensation would be payable to these individuals upon termination of
employment after the Mergers. The aggregate amount which could be payable under
certain circumstances upon termination of employment after the Mergers to the
five most highly compensated executive officers of UCU who have entered into the
"UCU Severance Agreements" (as defined herein) is approximately $4.9 million.
Approximately 290,000 options vested for such officers upon execution of the
Merger Agreement. Approximately 71,800 shares of restricted stock will vest upon
consummation of the UCU Merger. See "THE MERGERS -- Conflicts of Interest --
Employee Plans and Severance Arrangements."
INDEMNIFICATION. The parties have agreed in the Merger Agreement that Newco
will indemnify, to the fullest extent permitted by applicable law, the present
and former officers, directors and employees of each of the parties to the
Merger Agreement or any of their Subsidiaries (as defined herein) against
certain liabilities (i) arising out of actions or omissions occurring at or
prior to the Effective Time that arise from or are based on such service as an
officer, director or employee or (ii) that are based on or arise out of or
pertain to the transactions contemplated by the Merger Agreement, and to
maintain policies of directors' and officers' liability insurance for a period
of not less than six years after the Effective Time, provided that Newco shall
not be required to expend in any year an amount in excess of 200% of the annual
aggregate premium currently paid by KCPL and UCU for such insurance. To the
fullest extent permitted by law, from and after the Effective Time, all rights
to indemnification existing in favor of the employees, agents, directors or
officers of KCPL, UCU and their respective Subsidiaries with respect to their
activities as such prior to the Effective Time, as provided in their respective
articles of incorporation and bylaws in effect on January 19, 1996, or otherwise
in effect on January 19, 1996, shall survive the Mergers and shall continue in
full force and effect for a period of not less than six years from the Effective
Time. See "THE MERGERS -- Conflicts of Interest -- Indemnification" and "THE
MERGER AGREEMENT -- Directors' and Officers' Indemnification."
EMPLOYEE STOCK OPTIONS
All stock options to acquire UCU Common Stock under the existing employee
stock incentive plans of UCU that are outstanding at the UCU Effective Time will
be converted into options to buy Newco Common Stock, and the number of shares
and exercise price under such options will, in most cases, be adjusted to
reflect the Exchange Ratio. See "THE MERGERS -- Newco Plans" and "THE MERGER
AGREEMENT -- Benefit Plans."
MANAGEMENT OF NEWCO
In connection with the Mergers, the Newco Board, at the Effective Time, will
consist of 18 persons, nine of whom will be the then existing directors of KCPL
immediately prior to the Effective Time, and nine of whom will be designated by
UCU. At the Effective Time, A. Drue Jennings will become the Chairman of Newco
and Richard C. Green, Jr., will become Vice Chairman and Chief Executive Officer
of Newco. Robert K. Green, brother of Richard C. Green, Jr., will be the
president of Newco and Marcus Jackson will serve as Newco's executive vice
president and chief operating officer. Robert K. Green is currently president of
UCU and Marcus Jackson is senior vice president and chief operating officer of
KCPL. See "THE MERGERS -- Employment Agreements" and "NEWCO FOLLOWING THE
MERGERS -- Management of Newco."
CONDITIONS TO THE MERGERS
The respective obligations of KCPL and UCU to consummate the Mergers are
subject to the satisfaction of certain conditions, including the approval of the
Share Issuance by the shareholders of KCPL and the approval of the UCU Merger by
the stockholders of UCU; the absence of any injunction that prevents the
consummation of the Mergers; the effectiveness of the Registration Statement;
the
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listing on the NYSE of the shares of Newco Common Stock to be issued in the UCU
Merger; the receipt of all material governmental approvals; the qualification of
the Mergers as a pooling of interests for accounting purposes; obtaining
necessary permits; the performance by the other party in all material respects,
or waiver, of all obligations required to be performed under the Merger
Agreement; the accuracy of the representations and warranties of the other party
set forth in the Merger Agreement as of the Closing Date (as defined herein)
(except for inaccuracies which would not reasonably be likely to result in a
material adverse effect to such other party); the receipt of an officer's
certificate from the other party stating that certain conditions set forth in
the Merger Agreement have been satisfied; there having been no material adverse
effect on the other party; the receipt of opinions of counsel to the effect that
the Mergers will qualify as a tax-free reorganization; the receipt of certain
material third-party consents; and the receipt of letters from affiliates of UCU
with respect to transactions in securities of KCPL or UCU. See "THE MERGER
AGREEMENT -- Conditions to Each Party's Obligation to Effect the Mergers."
RIGHTS TO TERMINATE, AMEND OR WAIVE CONDITIONS
The Merger Agreement may be terminated under certain circumstances,
including: by mutual consent of KCPL and UCU; by any party if the Mergers are
not consummated by December 31, 1997 (which date may be extended to December 31,
1998 under certain circumstances); by any party if the requisite stockholder
approvals are not obtained or if any state or federal law or court order
prohibits consummation of the Mergers; by a non-breaching party if there occurs
a material breach of the Merger Agreement which is not cured within 20 days; or
by either party, under certain circumstances, as a result of a more favorable
third-party tender offer or business combination proposal with respect to such
party. The Merger Agreement requires that termination fees be paid under certain
circumstances, including if there is a material, willful breach of the Merger
Agreement or if, under certain circumstances, a business combination with a
third party is entered into or consummated within two and one-half years of the
termination of the Merger Agreement. The aggregate termination fees under these
provisions may not exceed $58,000,000. See "THE MERGER AGREEMENT -- Termination
Fees."
The Merger Agreement may be amended by the Boards of Directors of the
parties at any time before or after the approval of the Share Issuance by the
shareholders of KCPL and the approval of the UCU Merger by the stockholders of
UCU, but after such approvals, no amendment may be made which alters or changes
(i) the amount or kind of shares, rights or the manner of conversion of such
shares, or (ii) the terms or conditions of the Merger Agreement, if such
alteration or change, alone or in the aggregate, would materially adversely
affect the rights of the KCPL shareholders or UCU stockholders, except for
alterations or changes that could otherwise be adopted by the Newco Board
without the further approval of such stockholders. See "THE MERGER AGREEMENT --
Amendment and Waiver."
At any time prior to the Effective Time, to the extent permitted by
applicable law, the conditions to KCPL's or UCU's obligations to consummate the
Mergers may be waived by the other party. Any determination to waive a condition
would depend upon the facts and circumstances existing at the time of such
waiver and would be made by the waiving party's Board of Directors, exercising
its fiduciary duties to such party and its stockholders. See "THE MERGER
AGREEMENT -- Amendment and Waiver."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The consummation of the Mergers is conditioned upon the receipt by KCPL of
an opinion from Skadden, Arps, Slate, Meagher & Flom ("Skadden Arps") and the
receipt by UCU of an opinion from Blackwell Sanders Matheny Weary & Lombardi
L.C. ("Blackwell Sanders") substantially to the effect that (i) the Mergers will
qualify as a reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"), (ii) no gain or loss will be recognized by
stockholders of UCU who
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exchange their shares of UCU Common Stock for shares of Newco Common Stock as a
result of the Mergers, and (iii) no gain or loss will be recognized by
shareholders of KCPL as a result of the Mergers. See "THE MERGERS -- Certain
Federal Income Tax Consequences."
STOCKHOLDERS OF KCPL AND UCU ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGERS, INCLUDING
THE APPLICATION TO THEM AND POSSIBLE EFFECT UPON THEM OF ANY PENDING
LEGISLATION, THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN INCOME
AND OTHER TAX LAWS.
NEWCO FOLLOWING THE MERGERS
At the Effective Time, KCPL will change its name to Newco or such other name
as KCPL and UCU shall mutually agree. The headquarters of Newco will be in
Kansas City, Missouri. The utility businesses of Newco will serve approximately
860,000 electric customers and 800,000 gas customers in portions of Missouri,
Kansas, Colorado, Iowa, Michigan, Minnesota, Nebraska, West Virginia and British
Columbia. A joint venture in Australia will serve approximately 520,000 electric
customers. The business of Newco will primarily consist of owning and operating
electric and gas utilities, including interests in several international joint
ventures, and also owning and operating various non-utility subsidiaries.
Pursuant to the Merger Agreement, Newco shall provide charitable
contributions and community support within the service areas of KCPL and UCU at
levels substantially comparable to the levels of charitable contributions and
community support provided by such parties within their service areas within the
two-year period immediately prior to the Effective Time.
See "NEWCO FOLLOWING THE MERGERS."
REGULATORY MATTERS
The approval of the Nuclear Regulatory Commission under the Atomic Energy
Act of 1954, as amended (the "Atomic Energy Act"), the Federal Energy Regulatory
Commission (the "FERC") under the Federal Power Act, as well as the approval of
the utility regulators in Missouri, Kansas, Colorado, Iowa, Michigan, Minnesota,
West Virginia and British Columbia under applicable state and provincial laws
and the expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), are required in order to consummate the Mergers. In addition, the
approval of governmental authorities in Australia and New Zealand are required.
The receipt of all of these approvals is presently anticipated to occur by the
second quarter of 1997.
KCPL and UCU intend to request a "no-action" letter from the staff of the
SEC, confirming their view that (i) the Mergers will not require the prior
approval of the SEC pursuant to Section 9(a)(2) of the Public Utility Holding
Company Act of 1935 (the "1935 Act") and (ii) following consummation of the
Mergers, Newco will be a holding company entitled to claim exemption pursuant to
Rule 10 from all provisions of the 1935 Act. In the event that the staff of the
SEC does not concur with this view, KCPL and UCU will file an application with
the SEC for the necessary approvals and exemptions in connection with the
Mergers.
KCPL and UCU possess municipal franchises and environmental permits and
licenses that require the consent of the licensor to the Mergers or may need to
be renewed or replaced as a result of the Mergers. Neither KCPL nor UCU
anticipate any difficulties at the present time in obtaining such consents,
renewals, replacements or transfers.
Assuming the requisite regulatory approvals are obtained, Newco's utility
operations will be subject to regulation by state and provincial utility
regulators in Missouri, Kansas, Colorado, Iowa, Michigan, Minnesota, West
Virginia and British Columbia and certain non-utility operations will be subject
to regulation in Oklahoma, South Dakota and Texas. In addition, certain
investment activities of Newco will be subject to the jurisdiction of regulatory
authorities in Australia and New Zealand.
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Under the Merger Agreement, KCPL and UCU have agreed to use all commercially
reasonable efforts to obtain all governmental authorizations necessary or
advisable to consummate or effect the transactions contemplated by the Merger
Agreement. Various parties may seek intervention in these proceedings to oppose
the Mergers or to have conditions imposed upon the receipt of necessary
approvals. While KCPL and UCU believe that they will receive the requisite
regulatory approvals for the Mergers, there can be no assurance as to the timing
of such approvals or the ability of such parties to obtain such approvals on
satisfactory terms or otherwise. It is a condition to the consummation of the
Mergers that final orders approving the Mergers be obtained from the various
federal and state regulators described above on terms and conditions which would
not have, or foreseeably could not have, a material adverse effect on the
business, assets, financial condition or results of operations of Newco and its
prospective subsidiaries taken as a whole, or which would be materially
inconsistent with the agreements of the parties contained in the Merger
Agreement. There can be no assurance that any such approvals will not contain
terms or conditions that cause such approvals to fail to satisfy such condition
to the consummation of the Mergers.
See "THE MERGERS -- Regulatory Matters."
ACCOUNTING TREATMENT
KCPL and UCU believe that the Mergers will be treated as a pooling of
interests for accounting purposes. See "THE MERGERS -- Accounting Treatment."
The receipt by each of KCPL and UCU of a letter from their respective
independent accountants, stating that the transaction will qualify as a pooling
of interests, is a condition to the consummation of the Mergers. See "THE MERGER
AGREEMENT -- Conditions to Each Party's Obligation to Effect the Mergers."
DISSENTERS' RIGHTS
Holders of KCPL Common Stock and UCU Common Stock will not have dissenters'
rights of appraisal with respect to the Mergers. See "THE MERGERS -- Dissenters'
Rights."
DIVIDENDS
KCPL AND UCU. Pursuant to the Merger Agreement, each of KCPL and UCU have
agreed not to, and have agreed not to permit any of their Subsidiaries to,
declare or pay any dividends on, or make other distributions in respect of, any
of its capital stock, other than (i) to such party or any of its wholly-owned
Subsidiaries, (ii) dividends required to be paid on the UCU Preferred Stock or
series or class of KCPL Preferred Stock, (iii) regular quarterly dividends to be
paid on KCPL Common Stock and UCU Common Stock not to exceed 105% of the
dividends for the comparable period of the prior fiscal year, and (iv) dividends
by Aquila Gas Pipeline Corporation ("AGP"), UtiliCorp U.K., Inc., UtiliCorp U.K.
Limited, West Kootenay Power Ltd., UtiliCorp N.Z., Inc. and any Subsidiaries of
such entities. KCPL currently pays an annual dividend of $1.56 per share, and
UCU currently pays an annual dividend of $1.76 per share. See "THE MERGER
AGREEMENT -- Certain Covenants."
NEWCO. It is the intention of KCPL and UCU, subject to the fiduciary
obligations of the Newco Board, that the initial annual dividend per share of
Newco Common Stock following the Effective Time will be at least $1.85 per
share. See "NEWCO FOLLOWING THE MERGERS -- Dividends" and "DESCRIPTION OF NEWCO
COMMON STOCK."
COMPARISON OF STOCKHOLDERS' RIGHTS
As a result of the UCU Merger, holders of UCU Common Stock will become
shareholders of KCPL (to be renamed Newco upon consummation of the Consolidating
Merger), a Missouri corporation. Such holders will have certain rights as Newco
shareholders that are different than they had as stockholders of UCU, both
because of the differences between KCPL's Restated Articles of Consolidation
(the "KCPL Charter" or, after the name change, the "Newco Charter") and KCPL's
Bylaws (the "KCPL Bylaws" or, after the name change, the "Newco Bylaws"), on the
one hand, and the UCU Charter and the UCU Bylaws, on the other hand, and because
of differences between Missouri and Delaware corporation law. For a comparison
of the charter and bylaw provisions of KCPL and UCU and of Missouri and Delaware
law, see "COMPARISON OF STOCKHOLDERS' RIGHTS."
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CERTAIN LITIGATION
On May 20, 1996, KCPL commenced litigation captioned KANSAS CITY POWER &
LIGHT CO. V. WESTERN RESOURCES, INC., ET AL., C.A. No. 96-0552-CV-W-5 in the
United States District Court for the Western District of Missouri, Western
Division, against Western Resources, Inc. ("Western Resources") and others
seeking certain declaratory judgements. On May 24, 1996, a purported shareholder
of KCPL filed a motion to intervene in the action as a representative of a class
consisting of similarly situated KCPL shareholders. For a description of this
litigation, see "THE MERGERS -- Certain Litigation."
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SELECTED HISTORICAL AND PRO FORMA DATA
The summary below sets forth selected historical financial and market data
and selected unaudited pro forma financial data. The financial data should be
read in conjunction with the historical consolidated financial statements and
related notes thereto of KCPL and UCU, incorporated herein by reference, and in
conjunction with the unaudited pro forma combined financial statements and
related notes thereto of Newco included elsewhere in this Joint Proxy
Statement/Prospectus. See "UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION"
in this Joint Proxy Statement/Prospectus.
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data of each of UCU and KCPL for the five
years ended December 31, 1995, set forth below, have been derived from audited
financial statements. The selected historical financial data of KCPL and UCU as
of and for the three-month period ended March 31, 1996, set forth below, have
been derived from unaudited financial statements.
KANSAS CITY POWER & LIGHT COMPANY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
3 MONTHS ENDED ----------------------------------------------------------
MARCH 31, 1996 1995 1994(A) 1993 1992(B) 1991
--------------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues............. $ 206.6 $ 886.0 $ 868.3 $ 857.5 $ 802.7 $ 825.1
Operating income before income
taxes......................... 48.4 244.1 220.6 225.8 192.3 233.2
Preferred stock dividend
requirements.................. 1.0 4.0 3.5 3.2 3.1 6.0
Earnings available for common
shares........................ 23.6 118.6 101.3 102.6 83.3 97.9
Primary earnings per share..... .38 1.92 1.64 1.66 1.35 1.58
Cash dividends per share....... .39 1.54 1.50 1.46 1.43 1.37
Ratio of earnings to fixed
charges (g)................... 3.86x 3.94x 4.07x 3.80x 3.12x 3.22x
Ratio of earnings to fixed
charges plus preferred
dividend requirements (h)..... 3.54x 3.59x 3.69x 3.51x 2.90x 2.85x
<CAPTION>
DECEMBER 31,
MARCH 31, ----------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................... $ 2,876.4 $ 2,882.5 $ 2,770.4 $ 2,755.1 $ 2,646.9 $ 2,615.0
Long-term debt, net............ 841.1 835.7 798.5 733.7 788.2 822.7
Short-term debt (including
current maturities) (i)....... 90.3 92.8 65.4 163.5 59.5 86.0
Cumulative preferred stock,
net........................... 89.0 89.0 89.0 89.0 89.0 39.0
Cumulative redeemable preferred
stock......................... 1.3 1.4 1.6 1.8 1.9 2.1
Common stock equity............ 897.4 897.9 874.7 866.2 853.9 860.2
Book value per common share.... 14.49 14.50 14.13 13.99 13.79 13.90
</TABLE>
See accompanying Notes to Selected Historical and Pro Forma Data.
22
<PAGE>
UTILICORP UNITED INC.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
3 MONTHS ENDED ----------------------------------------------------------
MARCH 31, 1996 1995(C) 1994 1993(D) 1992(E) 1991
--------------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues............. $ 1,084.4 $ 2,798.5 $ 2,398.1 $ 2,746.1 $ 2,339.0 $ 1,726.2
Operating income before income
taxes......................... 88.0 225.1 228.0 144.0 165.4 192.7
Preferred stock dividend
requirements.................. .5 2.1 3.0 6.9 6.9 7.8
Earnings available for common
shares........................ 36.8 77.7 91.4 79.5 46.0 69.8
Primary earnings per share..... .80 1.72 2.08 1.95 1.32 2.37
Cash dividends per share (f)... .44 1.72 1.70 1.62 1.60 1.54
Ratio of earnings to fixed
charges (g)................... 1.92x 1.87x 2.23x 2.00x 1.73x 2.34x
Ratio of earnings to fixed
charges plus preferred
dividend requirements (h)..... 1.88x 1.83x 2.14x 1.82x 1.58x 2.06x
<CAPTION>
DECEMBER 31,
MARCH 31, ----------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................... $ 3,887.0 $ 3,885.9 $ 3,111.1 $ 2,850.5 $ 2,552.8 $ 2,387.3
Long-term debt, net............ 1,365.9 1,355.4 976.9 1,009.7 890.8 928.1
Short-term debt (including
current maturities) (i)....... 216.7 303.7 321.2 71.8 236.8 114.5
Preference stock, not
mandatorily redeemable........ 25.0 25.0 25.0 25.0 25.0 25.0
Preference stock, convertible
and mandatorily redeemable.... -- -- -- 58.5 60.7 61.7
Preferred stock of subsidiary,
retractable................... .4 .4 .4 .4 9.4 10.4
Company-obligated mandatorily
redeemable preferred
securities of partnership..... 100.0 100.0 -- -- -- --
Common stock equity............ 984.9 946.3 906.8 851.7 661.1 660.7
Book value per common share.... 21.19 20.59 20.24 20.27 18.66 19.18
</TABLE>
See accompanying Notes to Selected Historical and Pro Forma Data.
23
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The following selected unaudited pro forma financial information combines
the historical consolidated balance sheets and statements of income of KCPL and
UCU, including their respective subsidiaries, after giving effect to the
Mergers. The unaudited pro forma combined balance sheet data at March 31, 1996,
and December 31, 1995, 1994 and 1993 give effect to the Mergers as if they had
occurred at the respective balance sheet dates. The unaudited pro forma combined
statements of income for each of the years in the three-year period ended
December 31, 1995, and the three-month period ended March 31, 1996, give effect
to the Mergers as if they had occurred at January 1, 1993. These statements are
prepared on the basis of accounting for the Mergers as a pooling of interests
and are based on the assumptions set forth in the notes thereto. The following
information is not necessarily indicative of the financial position or operating
results that would have occurred had the Mergers been consummated on the date as
of which, or at the beginning of the periods for which, the Mergers are being
given effect nor is it necessarily indicative of future operating results or
financial position. See "UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION" in
this Joint Proxy Statement/Prospectus.
NEWCO
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
3 MONTHS ENDED -------------------------------------
MARCH 31, 1996 1995 1994 1993
--------------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues................................... $ 1,291.0 $ 3,684.5 $ 3,266.4 $ 3,603.6
Operating income before income taxes................. 136.4 469.2 448.6 369.8
Preferred stock dividend requirements................ 1.5 6.1 6.5 10.1
Earnings available for common shares................. 60.4 196.3 192.7 182.1
Primary earnings per share (j)....................... .56 1.83 1.82 1.77
Cash dividends per share (f)(j)...................... .41 1.62 1.58 1.52
Ratio of earnings to fixed charges (g)............... 2.49x 2.49x 2.82x 2.62x
Ratio of earnings to fixed charges plus preferred
dividend requirements (h)........................... 2.39x 2.39x 2.66x 2.40x
<CAPTION>
DECEMBER 31,
MARCH 31, -------------------------------------
1996 1995 1994 1993
--------------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets......................................... $ 6,763.4 $ 6,768.4 $ 5,881.5 $ 5,605.6
Long-term debt, net.................................. 2,207.0 2,191.1 1,775.4 1,743.4
Short-term debt (including current maturities) (i)... 307.0 396.5 386.6 235.3
Preference and cumulative preferred stock, not
mandatorily redeemable (k).......................... 114.0 114.0 114.0 114.0
Preference stock, convertible and mandatorily
redeemable.......................................... -- -- -- 58.5
Cumulative redeemable preferred stock (k)............ 1.3 1.4 1.6 1.8
Preferred stock of subsidiary, retractable........... .4 .4 .4 .4
Company-obligated mandatorily redeemable preferred
securities of partnership........................... 100.0 100.0 -- --
Common stock equity.................................. 1,882.3 1,844.2 1,781.5 1,717.9
Book value per common share.......................... 17.37 17.10 16.69 16.53
</TABLE>
See accompanying Notes to Selected Historical and Pro Forma Data.
24
<PAGE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA DATA
The following notes explain by company certain yearly activities that have
impacted income or earnings:
KCPL:
(a) In 1994, KCPL recorded a $22.5 million expense for a voluntary early
retirement program.
(b) In 1992, KCPL's revenues were adversely impacted by abnormally cool
summer temperatures.
UCU:
(c) In 1995, UCU changed its method of accounting for domestic natural gas
trading operations to the mark-to-market method. This change in
accounting increased operating revenues and operating income before
income taxes by $29.8 million, earnings available for common shares by
$18.3 million and total assets by $201.9 million. This change in
accounting has been reflected from January 1, 1995. The pro forma effect
on prior periods is not material. Also in 1995, UCU recorded a $34.6
million pretax charge related to impaired assets and adoption of
Statement of Financial Accounting Standards No. 121.
(d) In 1993, Aquila Energy Corporation ("Aquila"), a wholly-owned subsidiary
of UCU, recorded a $69.8 million restructuring charge against pretax
earnings related to a change in strategic direction. Aquila also sold 18%
of AGP, its then wholly-owned subsidiary, in an initial public offering
resulting in a non-taxable gain of $47.8 million.
(e) In 1992, Aquila recorded a $17.7 million charge against pretax earnings
for improper payments by former employees.
Other Notes:
(f) On February 7, 1996, UCU increased its quarterly cash dividend on the
UCU Common Stock to $.44 per share from $.43 per share. The annualized
rate is now $1.76 per share of UCU Common Stock.
(g) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consists of net income plus interest charges, income taxes and
the estimated interest component of rents. "Fixed charges" consists of
interest charges and the estimated interest component of rents. The ratio
shown for the three-month period is based on information for the 12
months ended March 31, 1996.
(h) For purposes of computing the ratio of earnings to fixed charges plus
preferred dividend requirements, "earnings" consists of net income plus
interest charges, income taxes and the estimated interest component of
rents. "Fixed charges" consists of interest charges and the estimated
interest component of rents. "Preferred dividend requirements" consists
of the calculated pre-tax preferred dividend requirement. The ratio shown
for the three-month period is based on information for the 12 months
ended March 31, 1996.
(i) Includes notes payable to banks and others, commercial paper borrowings,
and the current portion of long-term debt.
(j) Pro forma per common share amounts give effect to the exchange of each
share of UCU Common Stock outstanding into one share of Newco Common
Stock. See "THE MERGER AGREEMENT -- The Mergers" in this Joint Proxy
Statement/Prospectus. Pro forma per common share amounts do not, however,
give effect to the synergies of the transaction or
25
<PAGE>
transaction costs. For a description of the synergies, see "THE MERGERS
-- Reasons for the Mergers; Recommendations of the Boards of Directors"
in this Joint Proxy Statement/ Prospectus.
(k) See Note 4 to Notes to Unaudited Pro Forma Combined Financial Statements
for a discussion of the redemption of certain preferred stock issues
prior to consummation of the Mergers.
COMPARATIVE PER SHARE DATA
Set forth below are earnings, cash dividends and book value per common share
data of KCPL and UCU, on both historical and pro forma combined bases. Pro forma
combined earnings per share is derived from the pro forma combined information
presented elsewhere herein, which gives effect to the Mergers under the pooling
of interests accounting method and combines the results of KCPL and UCU for the
periods presented. Pro forma combined cash dividends per share reflect KCPL's
and UCU's cash dividends in the periods indicated. The information set forth
below should be read in conjunction with the respective audited financial
statements of KCPL and UCU incorporated by reference in this Joint Proxy
Statement/Prospectus and the "UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION." See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" in this
Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED OR AS OF
3 MONTHS ENDED DECEMBER 31,
OR AS OF -------------------------------
MARCH 31, 1996 1995 1994 1993
--------------- --------- --------- ---------
(PER SHARE)
<S> <C> <C> <C> <C>
KCPL -- HISTORICAL
Book value per common share...................................... $ 14.49 $ 14.50 $ 14.13 $ 13.99
Cash dividends per common share.................................. .39 1.54 1.50 1.46
Earnings per share
Primary........................................................ .38 1.92 1.64 1.66
Fully diluted.................................................. .38 1.92 1.64 1.66
UCU -- HISTORICAL
Book value per common share...................................... $ 21.19 $ 20.59 $ 20.24 $ 20.27
Cash dividends per common share.................................. .44 1.72 1.70 1.62
Earnings per share
Primary........................................................ .80 1.72 2.08 1.95
Fully diluted.................................................. .79 1.71 2.06 1.92
NEWCO PRO FORMA (1)
Book value per common share...................................... $ 17.37 $ 17.10 $ 16.69 $ 16.53
Cash dividends per common share.................................. .41 1.62 1.58 1.52
Earnings per share
Primary........................................................ .56 1.83 1.82 1.77
Fully diluted.................................................. .56 1.83 1.81 1.77
</TABLE>
- ------------------------
(1) Calculated with converted shares resulting from the Mergers.
26
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS
The following table sets forth, for the periods indicated, the high and low
sales prices of KCPL Common Stock and UCU Common Stock as reported on the NYSE
Composite Tape and dividends declared on such stock.
<TABLE>
<CAPTION>
KCPL UCU
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
--------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
1994
First Quarter............................. $ 23.250 $ 20.625 $ 0.37 $ 31.625 $ 29.000 $ 0.42
Second Quarter............................ 23.000 18.625 0.37 31.375 28.000 0.42
Third Quarter............................. 22.500 19.250 0.38 29.750 26.250 0.43
Fourth Quarter............................ 23.875 21.125 0.38 27.750 25.375 0.43
1995
First Quarter............................. $ 24.500 $ 22.125 $ 0.38 $ 29.500 $ 26.250 $ 0.43
Second Quarter............................ 24.125 22.125 0.38 29.000 27.250 0.43
Third Quarter............................. 24.375 21.500 0.39 28.500 26.625 0.43
Fourth Quarter............................ 26.625 23.500 0.39 29.625 27.500 0.43
1996
First Quarter............................. $ 27.250 $ 24.000 $ 0.39 $ 30.250 $ 28.250 $ 0.44
Second Quarter
(through )...................
</TABLE>
On January 19, 1996, the last full trading day before the public
announcement of the execution and delivery of the Original Merger Agreement, the
closing sales price per share of (i) the KCPL Common Stock on the NYSE Composite
Tape was $26.25, and (ii) the UCU Common Stock on the NYSE Composite Tape was
$28.50. On May 20, 1996, the last full trading day before the public
announcement of the execution and delivery of the Merger Agreement, the closing
sales price per share of (i) KCPL Common Stock on the NYSE Composite Tape was
$26.625, and (ii) the UCU Common Stock on the NYSE Composite Tape was $27.25.
On , 1996, the most recent date for which it was practicable to
obtain market price data prior to printing this Joint Proxy
Statement/Prospectus, the closing sales price per share of KCPL Common Stock on
the NYSE Composite Tape was $ and the closing sales price per share of
UCU Common Stock on the NYSE Composite Tape was $ .
The market prices of the KCPL Common Stock and the UCU Common Stock are
subject to fluctuation. KCPL shareholders and UCU stockholders are urged to
obtain current market quotations for the KCPL Common Stock and the UCU Common
Stock.
27
<PAGE>
MEETINGS, VOTING AND PROXIES
This Joint Proxy Statement/Prospectus is being furnished to (i) the holders
of KCPL Common Stock in connection with the solicitation of proxies by the KCPL
Board from the holders of KCPL Common Stock for use at the KCPL Meeting and (ii)
the holders of UCU Common Stock in connection with the solicitation of proxies
by the UCU Board from the holders of UCU Common Stock for use at the UCU
Meeting. KCPL after the Mergers is referred to herein as "Newco" and KCPL Common
Stock after the Mergers is referred to herein as "Newco Common Stock." This
Joint Proxy Statement/ Prospectus is also being furnished to the holders of UCU
Common Stock in connection with the issuance of the Newco Common Stock in the
UCU Merger.
THE KCPL MEETING
PURPOSE OF KCPL MEETING. The purpose of the KCPL Meeting is to consider and
vote upon: (i) a proposal to approve the Share Issuance pursuant to which a
maximum of up to 54,000,000 shares of Newco Common Stock will be issued in the
UCU Merger, (ii) a proposal to approve the Newco Stock Incentive Plan and (iii)
a proposal to approve the Newco MIC Plan.
The KCPL Board, by a unanimous vote, has adopted and approved the Merger
Agreement, the Mergers and the transactions contemplated thereby, authorized the
execution and delivery of the Merger Agreement, and recommends that KCPL
shareholders vote FOR approval of the Share Issuance, FOR approval of the Newco
Stock Incentive Plan and FOR approval of the Newco MIC Plan.
In considering the recommendation of the KCPL Board with respect to the
Share Issuance and the Newco Plans, shareholders should be aware that certain
members of KCPL's management and the KCPL Board have certain interests in the
Mergers that are in addition to the interests of shareholders of KCPL generally.
See "THE MERGERS -- Conflicts of Interest."
Pursuant to the Merger Agreement, the consummation of the Mergers is
conditioned upon approval of proposal (i) above, but is not conditioned upon
approval by the shareholders of KCPL of the Newco Plans. If approved by the
shareholders, the Newco Plans will be implemented only if the transactions
contemplated by the Merger Agreement are consummated.
DATE, PLACE AND TIME; RECORD DATE; VOTING RIGHTS. The KCPL Meeting is
scheduled to be held at , on , , 1996,
commencing at , local time. Holders of record of shares of KCPL Common
Stock at the close of business on , 1996, the KCPL Record Date, will
be entitled to notice and to vote at the KCPL Meeting. At the close of business
on the KCPL Record Date, shares of KCPL Common Stock were issued and
outstanding and entitled to vote. Each outstanding share of KCPL Common Stock is
entitled to one vote upon each matter presented at the KCPL Meeting.
A majority of the voting power of the shares issued, outstanding and
entitled to vote, present in person or by proxy, shall constitute a quorum for
the transaction of business at the KCPL Meeting. Under the rules of the NYSE,
the affirmative vote of the holders of a majority of the shares of KCPL Common
Stock voting on the Share Issuance where the total number of votes cast
represents over 50 percent of all outstanding shares of KCPL Common Stock
outstanding on the KCPL Record Date is required to approve the Share Issuance.
Abstentions and broker non-votes will be disregarded and will have no effect on
the vote. Approval of the Share Issuance is a condition to consummation of the
Mergers.
The affirmative vote of a majority of the shares of KCPL Common Stock
present and entitled to vote is required to approve the Newco Stock Incentive
Plan and the Newco MIC Plan. Abstentions will have the same effect as votes cast
against such proposals, but broker non-votes will be disregarded and will have
no effect on the vote.
As of the KCPL Record Date, the directors and executive officers of KCPL,
together with their affiliates as a group, beneficially own less than 1% of the
issued and outstanding shares of KCPL Common Stock.
28
<PAGE>
PROXIES. Holders of the KCPL Common Stock may vote either in person or by
properly executed proxy. By returning a properly executed form of WHITE proxy, a
KCPL shareholder authorizes the persons named therein to vote all of such KCPL
shareholder's shares on behalf of such shareholder. Issued and outstanding
shares of KCPL Common Stock which are represented by properly executed proxies,
will, unless such proxies have been revoked, be voted in accordance with the
instructions indicated in such proxies. If no instructions are indicated, such
shares will be voted FOR approval of the Share Issuance, FOR approval of the
Newco Stock Incentive Plan and FOR approval of the Newco MIC Plan. A KCPL
shareholder may revoke a proxy at any time prior to the KCPL Meeting by
delivering to the Secretary of KCPL a notice of revocation or a duly executed
proxy bearing a later date or by attending the KCPL Meeting and voting in
person. Attendance at the KCPL Meeting will not in itself constitute revocation
of a proxy. In addition to the foregoing, UCU and its directors, officers and
employees, without receiving additional compensation therefor, may solicit
proxies from holders of KCPL Common Stock by mail, telephone, telecopy,
telegram, in person or otherwise.
KCPL will bear the cost of soliciting proxies for the KCPL Meeting, except
that KCPL and UCU will share equally expenses incurred in connection with
printing and filing this Joint Proxy Statement/Prospectus and the Registration
Statement. See "THE MERGER AGREEMENT -- Expenses." In addition to soliciting
proxies by mail, directors, officers and employees of KCPL, without receiving
additional compensation therefor, may solicit proxies by telephone, by telecopy,
by telegram, in person or otherwise. KCPL has retained D.F. King & Co., Inc., 77
Water Street, New York, New York 10008. The fee for such services will be
between $200,000 and $400,000 plus reimbursement for reasonable out-of-pocket
expenses.
The KCPL Meeting may be adjourned to another date and/or place for any
proper purpose (including, without limitation, for the purpose of soliciting
additional proxies).
THE UCU MEETING
PURPOSE OF THE UCU MEETING. The purpose of the UCU Meeting is to consider
and vote upon a proposal to approve the Merger Agreement and the UCU Merger.
The UCU Board, by unanimous vote, has adopted and approved the Merger
Agreement, authorized the execution and delivery of the Merger Agreement, and
recommends that UCU stockholders vote FOR approval of the Merger Agreement and
the UCU Merger.
In considering the recommendation of the UCU Board with respect to the UCU
Merger, stockholders should be aware that certain members of UCU's management
and the UCU Board have certain interests in the Mergers that are in addition to
the interests of stockholders of UCU generally. See "THE MERGERS -- Conflicts of
Interest."
Pursuant to the Merger Agreement, the consummation of the UCU Merger is
conditioned upon approval of the Merger Agreement and the UCU Merger.
DATE, PLACE AND TIME; RECORD DATE; VOTING RIGHTS. The UCU Meeting is
scheduled to be held on , , 1996 at , local time, at
. Holders of record of shares of UCU Common Stock at the close of
business on , 1996, the UCU Record Date, will be entitled to notice of
and to vote at the UCU Meeting. As of the UCU Record Date, shares of UCU
Common Stock were issued and outstanding and entitled to vote. A list of
stockholders of record entitled to vote at the UCU Meeting will be available for
inspection by UCU stockholders at UCU's principal business office at 911 Main
Street, Suite 3000, Kansas City, Missouri 64105, prior to the UCU Meeting. The
list will also be available on the date of the UCU Meeting at the meeting site.
A majority of the votes entitled to be cast by holders of shares of UCU
Common Stock, represented in person or by proxy, shall constitute a quorum at
the UCU Meeting. The affirmative vote of a majority of the outstanding shares of
UCU Common Stock entitled to vote thereon is required for approval of the Merger
Agreement and the UCU Merger. THE FAILURE TO VOTE, ABSTENTIONS AND BROKER NON-
VOTES WILL HAVE THE SAME EFFECT AS VOTES CAST AGAINST APPROVAL OF THE MERGER
AGREEMENT AND THE UCU MERGER.
29
<PAGE>
Each outstanding share of UCU Common Stock is entitled to one vote upon the
Merger Agreement and the UCU Merger.
PROXIES. Holders of the UCU Common Stock may vote either in person or by
properly executed proxy. By returning a properly executed form of WHITE proxy,
the UCU stockholder authorizes the persons named therein to vote all the UCU
stockholder's shares on his or her behalf. All completed UCU proxies returned
will be voted in accordance with the instructions indicated on such proxies. If
no instructions are given, the UCU proxies will be voted FOR approval of the
Merger Agreement and the UCU Merger. A UCU proxy may be revoked by voting in
person at the UCU Meeting, by written notice to UCU's Corporate Secretary or by
delivery of a later-dated proxy, in each case prior to the closing of the polls
for voting at the UCU Meeting. Attendance at the UCU Meeting will not in itself
constitute revocation of a proxy.
UCU will bear the cost of the solicitation of proxies for the UCU Meeting,
except that KCPL and UCU will share equally expenses incurred in connection with
printing and filing this Joint Proxy Statement/Prospectus. See "THE MERGER
AGREEMENT -- Expenses." Proxies may be solicited by certain directors, officers
and employees of UCU or its subsidiaries by mail, by telephone, by telecopy,
personally or by other communications, without compensation apart from their
normal salaries. UCU has retained Morrow & Co. to assist in the solicitation of
proxies from UCU stockholders, including brokers' accounts, at a fee for such
services of $50,000 plus reasonable out-of-pocket expenses. In addition to the
foregoing, KCPL and its directors, officers and employees, without receiving
additional compensation therefor, may solicit proxies from holders of UCU Common
Stock by mail, telephone, telecopy, telegram, in person or otherwise.
The UCU Meeting may be adjourned to another date and/or place for any proper
purpose (including, without limitation, for the purpose of soliciting additional
proxies).
As of the UCU Record Date, the directors and executive officers of UCU,
together with their affiliates, beneficially own % of the issued and
outstanding shares of UCU Common Stock.
THE MERGERS
BACKGROUND OF THE MERGERS
KCPL and UCU share the view that the energy industry has entered an era of
inevitable, accelerating change that will have a significant impact on the
future competitive position of utility based energy companies and their ability
to maintain and increase earnings. More than ever, the industry is being
transformed by technological advances, consumer demand and legislative and
regulatory reforms which are leading to greater competition in a once
monopolistic industry.
Both KCPL and UCU believe that these changes are leading to fundamental
changes in the nature of energy related businesses. As a result, public utility
companies face increased business risks and limits to their ability to grow
earnings through rate base increases and are, therefore, pursuing various
business combinations in order to reduce risk and create new avenues and
opportunities for earnings growth. Accordingly, public utilities have invested
and, KCPL and UCU believe, will continue to invest in non-regulated businesses
within the energy sector and in businesses complementary to their traditional
business. In response to intensified competition, public utilities have sought
and, KCPL and UCU believe, will continue to seek opportunities to create
efficiencies and control future costs through consolidation. Efficiency and the
ability to respond quickly to the needs of the market will be rewarded. KCPL and
UCU each share the view that only efficient, low-cost suppliers of energy that
pursue reforms in the regulatory and legislative arenas will be able to compete
successfully in a changing marketplace.
Recognizing this trend, KCPL and UCU each have separately studied strategic
options and opportunities and have from time to time over the last several years
participated in preliminary discussions with other utility and energy companies
regarding possible strategic business combinations. In October 1993, KCPL and
UCU executives and their respective advisors participated in a
30
<PAGE>
number of meetings regarding a business combination involving the two companies.
After an exchange and review of confidential data, the two companies mutually
agreed to cease consideration of a business combination at that time.
In June 1994, KCPL and Western Resources also exchanged confidential
information in connection with preliminary discussions regarding a possible
business combination. Upon review of such confidential information, in August
1994, KCPL advised Western Resources that KCPL was not interested in pursuing a
business combination with Western Resources. Although Western Resources
indicated a continuing interest in pursuing a business combination with KCPL
from late 1994 through early 1996, KCPL reaffirmed to Western Resources the
conclusion of its analysis that a combination with Western Resources was not in
the best interest of KCPL's shareholders.
On May 25, 1995 and again on June 6, 1995, A. Drue Jennings, Chairman of the
Board, President and Chief Executive Officer of KCPL, Richard C. Green, Jr.,
Chairman of the Board, President and Chief Executive Officer of UCU, and a
representative of DLJ, financial advisor to UCU, met to discuss a new potential
joint venture between the two companies involving power operations and
maintenance. Further discussions were held by senior operations executives of
KCPL and UCU on June 10, 1995.
KCPL and UCU subsequently each formed teams, which met throughout the summer
of 1995, to explore new joint alliances in areas including operations,
information technology, marketing and procurement. Pursuant to a confidentiality
agreement, dated September 1, 1995, the two companies exchanged confidential
information in order to facilitate such discussions and related investigations
of each other's business operations in connection therewith.
The KCPL and UCU teams continued to meet through September, October and
November of 1995 and periodically updated their respective Chief Executive
Officers regarding their progress in exploring additional potential joint
ventures and strategic alliances. The meetings between the respective teams of
the two companies as well as discussions between the members of the teams and
their respective Chief Executive Officers revealed that the two companies had
similar visions and strategic outlooks in a number of areas. As a result of
these meetings, both companies continued to discuss the possibility of joint
ventures.
Because of their shared views regarding the accelerating pace of the changes
facing the energy industry and, in particular, the convergence of electric and
gas supplies into a single energy source giving customers the ability to choose
between the two, as well as the unique advantages a combined company would have
to expand into additional opportunities in the unregulated sector and additional
acquisition opportunities, on October 30, 1995, A. Drue Jennings, Richard C.
Green, Jr., Turner White, KCPL Senior Vice President of Retail Services, and
Michael D. Bruhn, UCU Vice President of Corporate Development, met to discuss
the general terms of a possible merger of equals transaction. The parties
recognized that unique opportunities for growth and certain synergies would be
available in a combined company and that additional discussions and due
diligence were warranted. At the conclusion of the meeting, each Chief Executive
Officer agreed to discuss with his respective Board of Directors at their
upcoming regularly scheduled meetings, the concept of such a combination.
The KCPL Board met on November 7, 1995 and agreed that Mr. Jennings should
continue exploratory discussions with UCU. Thereafter, KCPL consulted with
Skadden Arps, a law firm that had previously been engaged by KCPL in connection
with other matters, and on November 14, 1995, KCPL engaged Merrill Lynch as its
financial advisor to advise KCPL with respect to a potential transaction
involving KCPL and UCU.
The UCU Board met on November 9, 1995 and also agreed that Mr. Green should
continue preliminary discussions with KCPL. In addition to its regular outside
legal counsel of Blackwell Sanders, UCU engaged the law firm of Weil, Gotshal &
Manges LLP ("Weil Gotshal") and also retained DLJ as its financial adviser to
advise with respect to the potential transaction involving KCPL and UCU.
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On November 10, 1995, Messrs. Jennings, Green, White and Bruhn met with
representatives of Skadden Arps and Weil Gotshal to conduct preliminary
discussions regarding a merger of equals involving the two companies. On
November 18, 1995, the Strategic Planning Committee of the KCPL Board met to
discuss the merits of such a business combination between KCPL and UCU in light
of KCPL's long-term strategic plans. The committee concluded that the discussion
and analysis should continue.
A meeting of representatives of both companies and their respective
financial advisors was held on November 22, 1995 to discuss business, financial
and other issues. At that meeting, the companies determined that unique
opportunities were present in the proposed business combination and that
additional discussions and due diligence should proceed.
A meeting of representatives of both companies and their respective legal
and financial advisors was also held on November 28, 1995 to commence a more
detailed examination of the numerous structural, corporate governance,
regulatory and other issues relating to the proposed transaction. Also, on
November 28, 1995, KCPL and UCU entered into a confidentiality agreement
pursuant to which the companies and their representatives provided confidential
information to each other in connection with the proposed transaction. Senior
management of both companies analyzed financial, operational, regulatory and
other legal issues relating to such a possible business combination.
During December 1995, the chief executive officers of KCPL and UCU met on
several occasions to discuss key issues relating to the possible business
combination. On December 6, 1995, Ernst & Young was retained by KCPL and UCU to
identify and quantify the potential cost savings from synergies available from a
merger of KCPL and UCU.
Through mid-January 1996, representatives of both KCPL and UCU, their
counsels and financial advisors held numerous meetings and participated in a
number of conference calls to conduct due diligence and discuss and negotiate
the terms of a possible business combination pursuant to which the businesses of
KCPL and UCU would be merged. These ongoing discussions focused on the structure
of the transaction, the conditions to the transaction, the covenants regarding
the operations of each company during the period between signing of an agreement
and consummation of the transactions contemplated thereby, regulatory matters
impacting the combination and possible termination fees.
At a meeting of the KCPL Board on December 8, 1995, Merrill Lynch
representatives reviewed for the KCPL Board preliminary financial data regarding
the two companies. Skadden Arps attorneys also described to the KCPL Board its
legal responsibilities and fiduciary duties to shareholders in evaluating the
proposed transaction. The KCPL Board discussed the rationale for the proposed
transaction and authorized management to continue its analysis and discussion.
At a meeting of the UCU Board on December 9, 1995, DLJ's representatives and
officers of UCU described the status of the proposed transaction with KCPL and
analyzed preliminary financial data. The UCU Board authorized the executive
officers of UCU to continue discussions with representatives of KCPL.
At a meeting of the KCPL Board on January 5, 1996, the KCPL Board was
updated regarding the proposed business combination, including potential
strategic benefits of the transaction and the status of negotiations. These
potential strategic benefits included the ability of a stronger combined company
to operate in a dynamic environment; enhanced opportunities for earnings growth
that would create value for shareholders; diversification and, hence, reduction
of regulatory risks that would result from the combination; and production and
operation cost savings. Merrill Lynch representatives presented a general
overview of the various UCU businesses and the methodologies that might be
relevant to a financial analysis of a business combination, and Skadden Arps
attorneys provided advice regarding relevant regulatory issues, explained the
mechanics of the proposed transaction and outlined the terms of the then current
draft of the Original Merger Agreement. Pursuant to such agreement, KCPL and UCU
would each merge with and into KCU, with KCU surviving in each
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case (the "Original Merger") and stockholders of KCPL and UCU would each receive
common stock of KCU ("KCU Common Stock") in exchange for their shares of KCPL
Common Stock and UCU Common Stock, respectively. The KCPL Board concluded
unanimously that management and its advisors should continue to pursue,
negotiate and evaluate the proposed combination.
At a meeting of the UCU Board on January 12, 1996, the UCU Board was updated
on the merger discussions.
During their discussion regarding the parties' synergies analysis at the
January 5, 1996 meeting of the KCPL Board and the January 19, 1996 meeting of
the UCU Board, Ernst & Young emphasized that the estimated net cost savings of
approximately $619 million over a 10-year period were all created by or
attributable to the proposed merger and did not include other types of savings
that might be achieved without a merger. Ernst & Young explained that the
projected cost savings reflected the creation of cost reductions or cost
avoidance opportunities through the ability to consolidate separate stand-alone
operations into a single entity. This consolidation would thus enable
duplicative functions and positions to be eliminated, similar corporate
activities to be combined, avoided or reduced in scope, external purchases of
goods and services to be aggregated, technical skills and capabilities to be
optimized and shared and capital expenditures to be avoided. Ernst & Young
informed the KCPL Board and the UCU Board that the report was preliminary and
that while components of the analysis might change, the joint synergies analysis
had indicated estimated savings opportunities in the regulated utility business
totalling approximately $619 million net of all anticipated costs to achieve
those savings and costs expected to be incurred to consummate the proposed
merger. The approximately $619 million of net cost savings were composed of
approximately $232 million in labor related cost savings, approximately $128
million of avoidable capital requirements and reductions of approximately $259
million in other non-capital related expenses. The cost savings estimates were
developed and quantified by the parties based on the individual facts regarding
existing and planned costs for each company, the current mode of operation of
each company, the potential organization and operational framework post-merger,
the estimated timing to achieve the savings and the interrelationship of these
factors and the costs and complexity of savings attainment.
During the week of January 15, 1996, the financial advisors of KCPL and UCU
discussed the methodology for determining the appropriate exchange ratios for
the Original Merger and negotiated with respect thereto, and late in the evening
on January 18, 1996, together with senior officers of KCPL and UCU, agreed to
recommend to each company's Board of Directors that each share of KCPL Common
Stock would be converted into the right to receive 1.0 share of KCU Common Stock
and each share of UCU Common Stock would be converted into the right to receive
1.096 shares of KCU Common Stock.
Meetings of the KCPL Board and the UCU Board were held on January 19, 1996
to consider and approve the Original Merger. At each company's meeting, its
senior management and financial and legal advisors discussed material aspects of
the Original Merger and related transactions. At the KCPL Board meeting, Merrill
Lynch representatives reviewed for the KCPL Board various financial and other
information and delivered its oral opinion to the KCPL Board, which opinion was
subsequently confirmed in a written opinion dated as of January 19, 1996, that,
as of such date and based upon the assumptions made, matters considered and the
limits of review as set forth in such opinion, the exchange ratio of 1.0 share
of KCU Common Stock for each share of KCPL Common Stock (the "Original KCPL
Exchange Ratio") was fair to the holders of KCPL Common Stock (other than UCU
and its affiliates) from a financial point of view. Skadden Arps attorneys
summarized recently negotiated terms of the Original Merger Agreement relating
to employee benefit issues and the proposed organizational documents of KCU. In
addition, the KCPL Board was advised as to the reasonableness of the proposed
employment agreements to be entered into at the Effective Time by KCU and each
of Messrs. Jennings and Green based on a review of similar agreements entered
into in connection with similar transactions in the electric utility industry.
After considering and discussing the various presentations at such meeting and
at prior meetings as well as the recommendation of KCPL's
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management, the KCPL Board approved, by a unanimous vote of those directors
present, the Original Merger Agreement, the Original Merger and the transactions
contemplated thereby and authorized the execution of the Original Merger
Agreement.
At a meeting of the UCU Board on January 19, 1996, the UCU Board was
presented with a discussion of the status of the negotiations with KCPL and
various details relating to the proposed Original Merger. Representatives of DLJ
reviewed for the UCU Board various financial and other information and delivered
oral and written opinions that as of such date and subject to the assumptions
made, matters considered and limits of the review undertaken, as set forth in
such opinions and assuming the Original KCPL Exchange Ratio, the exchange ratio
of 1.096 shares of KCU Common Stock for each share of UCU Common Stock (the
"Original UCU Exchange Ratio") was fair, from a financial point of view, to
holders of UCU Common Stock. Representatives from Blackwell Sanders and Weil
Gotshal outlined the terms of the Original Merger Agreement for the UCU Board
and advised as to the fiduciary duties of the directors. After considering and
discussing the various presentations, the UCU Board approved, by a unanimous
vote, the Original Merger Agreement, the Original Merger and the transactions
contemplated thereby and authorized the execution of the Original Merger
Agreement.
The Original Merger Agreement and certain related documents were executed on
January 19, 1996 following such approval by the KCPL Board and the UCU Board.
On April 9, 1996, a joint proxy statement/prospectus of KCPL, UCU and KCU
relating to the Original Merger was mailed to stockholders of KCPL and UCU.
Included in such joint proxy statement/prospectus were notices of annual
meetings of stockholders of KCPL and UCU, as the case may be, establishing May
22, 1996 as the date on which both KCPL and UCU would have their annual meetings
to consider and vote upon, among other things, the Original Merger and related
matters, the election of directors and the ratification of independent auditors.
On April 14, 1996, Mr. Jennings received a telephone call from Mr. John E.
Hayes, Jr., Chairman of the Board and Chief Executive Officer of Western
Resources, in which Mr. Hayes informed Mr. Jennings that he was delivering to
Mr. Jennings an unsolicited proposal to the KCPL Board pursuant to which Western
Resources would acquire all of the outstanding KCPL Common Stock in exchange for
shares of common stock, par value $5.00 per share, of Western Resources
("Western Resources Common Stock") valued at $28.00 per share of KCPL Common
Stock, subject to adjustment.
Following such telephone conversation, on April 14, 1996, Mr. Jennings
received from Western Resources a letter (the "April 14 Letter") setting forth
Western Resources' unsolicited merger proposal. In the letter, Western Resources
proposed that KCPL and Western Resources merge in a transaction in which each
holder of KCPL Common Stock would receive $28.00 worth of Western Resources
Common Stock, subject to a "collar" limiting the amount of Western Resources
Common Stock that holders of KCPL Common Stock would receive to no more than
0.985 shares and no less than 0.833 shares of Western Resources Common Stock for
each share of KCPL Common Stock. Shortly after delivery of the April 14 Letter,
Western Resources publicly announced its unsolicited merger proposal.
On April 15, 1996, Western Resources filed an application with the State
Corporation Commission of the State of Kansas seeking approval of Western
Resources' proposed business combination with KCPL and a Petition to Intervene
in the Original Merger.
A meeting of the KCPL Board was held on April 19, 1996 and reconvened on
April 21, 1996 to consider Western Resources' proposal. At this meeting, the
KCPL Board received presentations from KCPL's management and its financial and
legal advisors. On April 21, the KCPL Board, based upon the presentations given,
the advice received, and the considerations discussed at such meeting of the
KCPL Board, determined that further exploration of the Western Resources
proposal was not in the best interests of KCPL, its shareholders, its employees
and its customers. Also on such date, the KCPL Board reaffirmed its approval of
the Original Merger with UCU.
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On April 22, 1996, Mr. Jennings delivered to Mr. Hayes a letter stating that
the KCPL Board had rejected Western Resources' proposal. Mr. Jennings also
telephoned Mr. Hayes to inform him of the decision of the KCPL Board.
On April 22, 1996, Western Resources announced that it intended to commence
an unsolicited exchange offer, and that it had filed preliminary proxy materials
for use in soliciting proxies from holders of KCPL Common Stock in opposition to
the approval and adoption of the Original Merger, the Original Merger Agreement
and the transactions contemplated thereby. On the same day, Western Resources
filed a Registration Statement on Form S-4 (the "Western Resources Form S-4")
with the SEC which described a proposed offer to exchange Western Resources
Common Stock for all of the outstanding shares of KCPL Common Stock. Pursuant to
a preliminary prospectus included in the Western Resources Form S-4 (the
"Western Resources Preliminary Prospectus"), Western Resources proposed to
offer, upon the terms and subject to the conditions set forth in the Western
Resources Preliminary Prospectus and in a related Letter of Transmittal
(together, the "Proposed Western Resources Offer"), to exchange less than a full
share of Western Resources Common Stock for each outstanding share of KCPL
Common Stock validly tendered on or prior to the "Expiration Date" (as defined
in the Western Resources Preliminary Prospectus) of the Proposed Western
Resources Offer and not properly withdrawn. As initially filed with the SEC,
each such share would be entitled to receive a fraction of a share of Western
Resources Common Stock equal to the "Western Resources Exchange Ratio," defined
as the quotient (rounded to the nearest 1/100,000) determined by dividing $28.00
by the average of the high and low sales prices of the Western Resources Common
Stock (as reported on the NYSE Composite Transactions reporting system as
published in the Wall Street Journal or, if not published therein, in another
authoritative source) on each of the twenty consecutive trading days ending with
the second trading day immediately preceding the Expiration Date; provided, that
the Western Resources Exchange Ratio would not be less than 0.833 nor greater
than 0.985.
According to the Western Resources Preliminary Prospectus, Western Resources
intends, as soon as practicable after consummation of the Proposed Western
Resources Offer, to seek to merge KCPL with and into itself pursuant to
applicable law (the "Proposed Western Resources Merger").
The Proposed Western Resources Offer is subject to numerous conditions. The
Proposed Western Resources Offer is conditioned upon, among other things, (i)
there being validly tendered and not withdrawn prior to the Expiration Date a
number of shares of KCPL Common Stock which will constitute at least ninety
percent of the total number of outstanding shares of KCPL Common Stock on a
fully diluted basis (as though all options or other securities convertible into
or exchangeable for shares had been so converted, exercised or exchanged) as of
the date the shares are accepted for exchange by Western Resources pursuant to
the Proposed Western Resources Offer, (ii) approval of the issuance of shares of
Western Resources Common Stock pursuant to the Proposed Western Resources Offer
and the Proposed Western Resources Merger and approval of an amendment to the
Western Resources articles of incorporation to increase the number of shares of
Western Resources Common Stock authorized for issuance by the holders, voting as
a single class, of a majority of the shares of Western Resources Common Stock
and Western Resources preferred stock outstanding on the applicable record date
and approval of the Proposed Western Resources Merger by the holders, voting as
a single class, of a majority of the Western Resources preferred stock, (iii)
Western Resources being satisfied, in its sole discretion, that the provisions
of Section 351.407 of the MGBCL are inapplicable to Western Resources and the
transactions contemplated by the Proposed Western Resources Offer or full voting
rights for all shares to be acquired by Western Resources pursuant to the
Proposed Western Resources Offer having been approved by the shareholders of
KCPL pursuant to such statute, (iv) Western Resources being satisfied, in its
sole discretion, that the provisions of Section 351.459 of the MGBCL will not
prohibit for any period of time the consummation of the Proposed Western
Resources Merger or any other "Business Combination" (as defined in such
statute) involving KCPL and Western Resources or any subsidiary of Western
Resources, (v) the shareholders of KCPL not having approved the Original Merger
Agreement, (vi) all regulatory approvals required to consummate the Proposed
Western Resources Offer and the Proposed Western Resources Merger having been
obtained and remaining in full force and effect, all statutory waiting periods
in respect thereof having expired and no such approval containing any conditions
or restrictions
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which the Western Resources board of directors reasonably determines in good
faith will have or reasonably could be expected to have a material adverse
effect on Western Resources, KCPL and their respective subsidiaries taken as a
whole, (vii) the receipt by Western Resources of a letter from its independent
public accountants stating that the Proposed Western Resources Merger will
qualify as a pooling of interests transaction under generally accepted
accounting principles and applicable SEC regulations, (viii) Western Resources
being satisfied, in its sole discretion, that it will be able to consummate the
Proposed Western Resources Merger as a "short-form" merger pursuant to the
provisions of Section 351.447 of the MGBCL and Section 17-6703 of the Kansas
General Corporation Code immediately after consummation of the Proposed Western
Resources Offer and (ix) all outstanding shares of KCPL Preferred Stock having
been redeemed.
On May 3, 1996, Western Resources commenced soliciting proxies of KCPL
shareholders in opposition to the Original Merger.
On May 6, 1996, KCPL and UCU announced that they would recommend an annual
dividend of $1.85 per common share for KCU. Also on May 6, 1996, Western
Resources announced that it had increased the lower limit of the "collar" in the
Proposed Western Resources Offer. According to Western Resources, the minimum
number of shares of Western Resources Common Stock that KCPL shareholders would
receive for each share of KCPL Common Stock if the Proposed Western Resources
Offer is consummated would be changed from 0.833 to 0.91. The maximum number was
not changed.
On May 9, 1996, the KCPL Board met in order to review the status of the
Original Merger and the Proposed Western Resources Offer. At such meeting, the
KCPL Board received presentations from its management and financial and legal
advisors regarding recent developments and the financial and legal terms of the
Proposed Western Resources Offer, including the May 6, 1996 change in the
"collar." In addition, representatives from the Palmer Bellevue practice of
Coopers & Lybrand Consulting ("CLC"), which had been retained by KCPL shortly
after the announcement of the Proposed Western Resources Offer, were present.
The CLC representatives reviewed for the KCPL Board the synergy analysis
undertaken on behalf of Western Resources in connection with the Proposed
Western Resources Offer and the synergy analysis conducted by Ernst & Young in
connection with the Original Merger between KCPL and UtiliCorp.
During the period beginning on May 10, 1996 and ending on May 19, 1996,
various meetings were held between executives of KCPL and UCU to discuss a
possible change in the exchange ratios in the Original Merger, certain changes
in the structure of the Original Merger and other possible changes to the terms
of the Original Merger. During the course of such meetings, representatives of
UCU indicated that UCU would consider a change in the Original UCU Exchange
Ratio, but any such change would be conditioned upon a change in the structure
of the transaction to the form set forth in the Merger Agreement. On May 18,
1996, representatives of KCPL and UCU agreed to recommend to their respective
Boards of Directors the Exchange Ratio of one share of KCPL Common Stock for
each share of UCU Common Stock and the structure set forth in the Merger
Agreement and described in this Joint Proxy Statement/Prospectus, subject to the
approvals of the KCPL Board and the UCU Board.
On May 19, 1996, the UCU Board met to consider and approve the Merger
Agreement. At such meeting, UCU's senior management and financial and legal
advisors summarized the proposed merger. Also at such meeting, representatives
of DLJ reviewed for the UCU Board various financial and other information and
delivered an oral opinion that as of such date and subject to the assumptions
made, matters considered and limits of the review undertaken, as set forth in
such opinion, the Exchange Ratio was fair, from a financial point of view, to
holders of UCU Common Stock. The UCU Board also discussed the fact that the
change in the Original UCU Exchange Ratio was conditioned upon a change in the
structure of the transaction to the form set forth in the Merger Agreement.
After considering and discussing the various presentations at such meeting, the
UCU Board approved the Merger Agreement, the UCU Merger and the transactions
contemplated thereby, authorized the execution and delivery of the Merger
Agreement and granted the Chairman and Chief Executive Officer of UCU the
authority to direct the Secretary of UCU to remove from the agenda of the UCU
annual meeting to be held on May 22, 1996 the proposal to approve the Original
Merger Agreement.
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On May 20, 1996, the KCPL Board met to consider and approve the Merger
Agreement. At such meeting, KCPL's senior management and financial and legal
advisors discussed the material aspects of the Mergers. Also at such meeting,
Merrill Lynch representatives reviewed for the KCPL Board various financial and
other information and delivered its oral opinion to the KCPL Board, which
opinion was subsequently confirmed in a written opinion dated as of May 20,
1996, that, as of such date and based upon the assumptions made, matters
considered and limits of review as set forth in such opinion, the Exchange Ratio
was fair to the holders of KCPL Common Stock (other than UCU and its affiliates)
from a financial point of view. After considering and discussing the various
presentations at such meeting and at prior meetings as well as the
recommendation of KCPL's management, the KCPL Board approved the Merger
Agreement and the transactions contemplated thereby and directed that the
proposals to approve the Original Merger Agreement and related transactions be
removed from the agenda of the KCPL annual meeting of shareholders to be held on
May 22, 1996.
The Merger Agreement and certain related documents were executed on May 20,
1996 following such approval by the KCPL Board and the UCU Board, and KCPL and
UCU issued the following joint press release:
KCPL AND UTILICORP AMEND TERMS
OF MERGER AGREEMENT
MAY 22 VOTE ON PREVIOUS ACCORD CANCELLED
KANSAS CITY, Missouri, May 20, 1996 -- Kansas City Power & Light Company
(NYSE: KLT) and UtiliCorp United Inc. (NYSE: UCU) announced today that they
have entered into an Amended and Restated Agreement and Plan of Merger.
Under the revised terms of the merger, a new KCPL subsidiary would be
created, and it would be merged into UtiliCorp. UtiliCorp would then be
merged with KCPL to form the combined company. Shareholders of UtiliCorp
would receive one share in the merged company for each UtiliCorp share held.
KCPL shareholders would continue to hold their existing KCPL shares. Other
substantive terms of the merger will remain the same. Previously, KCPL
holders would have received one share of stock in a new company for each
share held, while UtiliCorp shareholders would have received 1.096 shares
for each share held.
The transaction is anticipated to be tax-free for both UtiliCorp and
KCPL shareholders and will be accounted for as a pooling of interests. The
revised merger agreement was unanimously approved by the boards of directors
of both companies.
The merger of equals will create a diversified energy company with total
assets of approximately $6.4 billion and about 2.2 million customers in
domestic and international markets.
The boards of KCPL and UtiliCorp recommend that the initial annualized
dividend rate upon completion of the merger be set at $1.85 per share. This
compares to UtiliCorp's current dividend of $1.76 per share and KCPL's
current divided of $1.56 per share. Each company will continue its current
dividend policy until completion of the merger.
Drue Jennings, Chairman and Chief Executive Officer of KCPL, said, "This
revised agreement preserves the significant benefits of the KCPL/UtiliCorp
strategic merger for shareholders of both companies and provides
shareholders with even greater value. The merger combines the strengths of
both companies to form a diversified growth company, fully prepared to
compete effectively in the deregulated utility industry. The merger is a
friendly combination designed to distribute benefits equitably between
shareholders and customers. We are confident it will receive all required
regulatory approvals."
"As we have stated since our first announcement, we believe that our
merger will create a truly unique company with a winning growth strategy for
the future," said Richard C. Green, Jr., Chairman and Chief Executive
Officer of UtiliCorp United. "Both KCPL and UtiliCorp want the opportunity
to make that happen. Business is about choices. And, in order to facilitate
this merger, we have chosen another tack to ensure the delivery of benefits
and value to our key constituents."
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Upon completion of the transaction, the board of KCPL will consist of 18
members: nine from KCPL and nine from UtiliCorp.
KCPL and UtiliCorp shareholders will vote on the proposed transaction at
separate special meetings expected to be held this summer. The Amended
Merger Agreement requires an affirmative vote by owners of a majority of the
outstanding shares of UtiliCorp. The Agreement also calls for KCPL to issue
new shares to complete the merger which will require, under New York Stock
Exchange rules, approval by owners of a majority of the KCPL shares voting
at a duly called meeting.
The companies do not expect any interruption in the previously disclosed
regulatory-approval process. The two companies plan in the near future to
file revised proxy soliciting materials pertaining to the amended agreement
with the Securities and Exchange Commission.
As a result of the revised merger, both KCPL and UtiliCorp have
cancelled the shareholder votes on the original merger proposal which were
scheduled to be held at each company's annual meeting on May 22, 1996. Both
annual meetings will still be held on May 22, 1996 in Kansas City to conduct
all non-merger-related business on the agendas.
* * *
Also on May 20, 1996, KCPL commenced litigation against Western Resources
and others seeking certain declaratory judgments in connection with the Merger
Agreement and the transactions contemplated thereby. See "-- Certain
Litigation."
KCPL's and UCU's directors were elected, and the other matters considered
were approved, by each company's respective stockholders at their respective
annual meetings on May 22, 1996.
REASONS FOR THE MERGERS; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
In considering the recommendations of the KCPL Board and the UCU Board with
respect to the Mergers, stockholders should be aware that certain members of
KCPL's and UCU's management and Boards of Directors have certain interests in
the Mergers that are in addition to the interests of stockholders of KCPL and
UCU generally. See "THE MERGERS -- Conflicts of Interest."
KCPL. The KCPL Board believes that the terms of the Mergers are fair to,
and in the best interests of, KCPL, its shareholders, its employees and its
customers. Accordingly, the KCPL Board, by a unanimous vote, has approved the
Merger Agreement and the Mergers and recommends that the holders of KCPL Common
Stock approve the Share Issuance. The KCPL Board believes that the electric
utility industry will undergo tremendous upheaval in the wake of deregulation.
As barriers to the mergers of utilities come down, the utility industry will
come to more closely resemble other industries where competition is intense and
only the strongest companies succeed. The KCPL Board is convinced that in order
to succeed in such a market, KCPL must be a customer focused, low cost energy
supplier with diversified assets and the financial resources to leverage its
strengths. The KCPL Board believes that the Mergers will allow KCPL to achieve
these goals, and that this unique opportunity for KCPL and UCU to merge provides
unusual opportunities for KCPL shareholders to participate in the growth of the
combined company. This growth will derive from operating efficiencies obtained
from economies of scale; the more efficient use of the current investments in
generating and transmission capacity and advanced information systems; improved
opportunities for cost reductions; revenue enhancements made possible by the
combination of KCPL and UCU (see "-- Enhancement of Financial Performance"
below); domestic market diversification, due to UCU's presence in eight
different states, leading to reduced risk; international market diversification,
due to UCU's presence in five foreign countries, both reducing risk and
affording unusual growth opportunities; the addition of natural gas to the
products and services offered to customers and the potential for attracting new
customers through the offering of such additional service; and the long-term
financial capability of a larger company. In the judgment of the KCPL Board,
these factors combine to offer shareholders improved opportunities for earnings
and dividend growth and an enhanced ability to manage risk in the uncertain
environment created by the changing utility market.
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In reaching this conclusion, the KCPL Board considered: (i) the prospective
financial strength of each company individually and the benefits of combination
discussed above, particularly in light of the KCPL Board's familiarity with and
review of KCPL's business, operations, financial condition and earnings on both
an historical and prospective basis, and the KCPL Board's belief that the
strategic alliance with UCU will provide opportunities to achieve benefits for
KCPL's shareholders and customers that would not be available if KCPL and UCU
remained as separate enterprises; (ii) current industry, economic and market
conditions which encourage consolidation to reduce risk and create new avenues
for earnings growth as discussed under "THE MERGERS -- Background of the
Mergers" above; (iii) KCPL's estimated cost savings resulting from the Mergers,
which the KCPL Board believes to be credible and achievable, and the effect of
such savings on the competitive position of Newco; (iv) the enhanced access to
capital that Newco would enjoy due to the size of the combined company; (v)
UCU's experience in energy related non-regulated businesses; (vi) the proposed
structure of the transaction and the terms of the Merger Agreement and other
documents to be executed in connection with the Mergers which provide for
reciprocal representations and warranties, conditions to closing and rights to
termination, and balanced rights and obligations; (vii) that the Mergers are
expected to be treated as a tax-free reorganization and to be accounted for as a
pooling-of-interests transaction (which avoids the reduction in earnings which
would result from the creation and amortization of goodwill under purchase
accounting); (viii) the written opinion of Merrill Lynch to the effect that the
Exchange Ratio is fair to holders of KCPL Common Stock (other than UCU and its
affiliates) from a financial point of view; (ix) the Exchange Ratio in the
Mergers as compared to the exchange ratios in the Original Merger and the
increase in value to KCPL shareholders in the Mergers as compared to the
Original Merger; (x) that approval of the Share Issuance requires the
affirmative vote of the holders of a majority of the shares of KCPL Common Stock
voting thereon as compared to the Original Merger which required the favorable
vote of two-thirds of the outstanding shares of KCPL Common Stock; and (xi) the
expected benefits of the Mergers discussed below under
" -- Expected Benefits of the Mergers." In determining that the Mergers are fair
to and in the best interests of its shareholders, the KCPL Board considered the
above facts as a whole and did not assign specific or relative weights to them.
In making its recommendation in favor of the Mergers, the KCPL Board
considered the Proposed Western Resources Offer but determined to proceed with
the Mergers because of the benefits of a transaction with UCU to KCPL's
shareholders, customers and employees and the Kansas City area. The KCPL Board
also considered certain additional factors concerning the Proposed Western
Resources Offer, including: (i) the incompatibility between (x) the KCPL Board's
desired strategy of diversifying risk by entering into new markets and
unregulated businesses through a merger with UCU, and (y) the concentrated risk
and lack of diversification that would result from a KCPL/Western Resources
combined company, which would operate in relatively uniform climatic, geographic
and regulatory markets, and which would concentrate a substantial amount of
capital and risk in the Wolf Creek nuclear power facility; (ii) the likelihood
that the Kansas State Corporation Commission (the "Kansas Commission") would
impose rate reductions on Western Resources in excess of the $8.7 million
requested by Western Resources, which concern was recently exacerbated by the
recommendation of the staff of the Kansas Commission that Western Resources'
rates be reduced by $105 million; (iii) the KCPL Board's belief, based on a
review of Western Resources synergy analysis, that Western Resources
significantly overestimated the amount of savings that would result from a
KCPL/Western Resources combination; (iv) the KCPL Board's belief that Western
Resources would not be able to retain 70% of the merger related savings due to
the Kansas Commission's stated desire for an equal sharing of benefits between
utilities and their customers, which desire is evidenced in the order approving
the merger of Western Resources' predecessor, Kansas Power and Light Co.
("KPL"), and Kansas Gas and Electric Company ("KGE"); (v) the fact that Western
Resources is under an order from the Kansas Commission to amortize an
acquisition adjustment of approximately $800 million incurred in connection with
the merger of KPL and KGE over a forty-year period commencing August 1995; (vi)
the condition to the Proposed Western Resources Offer that 90% of the
outstanding shares of KCPL Common Stock must be tendered, and the KCPL Board's
belief that such a high threshold would not be met; (vii) the fact that the
Proposed Western Resources Offer is conditioned on the availability of the
pooling of interests method of accounting, when the
39
<PAGE>
Proposed Western Resources Offer would permit the exercise of certain stock
appreciation rights held by KCPL officers that would cancel related stock
options and allow the holders to receive cash payments for securities that are
essentially the same as common stock, which would violate paragraph 47b of APB
Opinion No. 16 of the Accounting Principles Board and thereby prohibit using the
pooling of interests method of accounting; (viii) the fact that Western
Resources stated that no layoffs would result from the Proposed Western
Resources Offer, while the synergy analysis filed by Western Resources with the
Kansas Commission stated that 531 employee positions would be eliminated and
assumed that all resulting savings would be available by January 1, 1998; (ix)
the disparity among rates charged to customers of Western Resources, and the
negative impact upon Western Resources and current KCPL customers of any efforts
to address such disparity; (x) the KCPL Board's doubts regarding Western
Resources' commitment to Kansas City charities and Kansas City community
development efforts; and (xi) the validity of certain assumptions to be
contained in the opinions of Western Resources' tax counsel regarding whether or
not the Proposed Western Resources Offer would be treated as a tax-free
transaction to KCPL shareholders, and the adverse affect on KCPL shareholders if
a merger of KCPL and Western Resources constituted a taxable transaction.
THE KCPL BOARD, BY A UNANIMOUS VOTE, HAS APPROVED THE MERGER AGREEMENT, THE
MERGERS AND THE TRANSACTIONS CONTEMPLATED THEREBY AND BELIEVES THAT THE TERMS OF
THE MERGERS ARE FAIR TO, AND IN THE BEST INTERESTS OF, KCPL'S SHAREHOLDERS. THE
KCPL BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE SHARE ISSUANCE, FOR APPROVAL OF
THE NEWCO STOCK INCENTIVE PLAN AND FOR APPROVAL OF THE NEWCO MIC PLAN.
UCU. The UCU Board believes that the terms of the Mergers are fair to, and
in the best interests of, UCU and its stockholders and customers. Accordingly,
the UCU Board, by a unanimous vote of the directors, has adopted the Merger
Agreement and recommends both approval of the Merger Agreement and of the UCU
Merger by the stockholders of UCU. The UCU Board believes that the Mergers will
provide opportunities to achieve benefits for its stockholders and customers
that would not be available if UCU and KCPL were to remain as separate
enterprises and that, as a result of the combination of UCU's and KCPL's common
stock equity, management, personnel and technical expertise, Newco will be a
company with great financial strength and will be able to compete more
effectively in both its regulated and unregulated markets. The UCU Board
believes that the Mergers will allow UCU stockholders to benefit from the
financial stability of KCPL and its low-cost, efficient manner of operations.
This, in turn, will give Newco increased flexibility and leverage in financing.
In reaching its conclusions, the UCU Board considered the financial performance,
condition, business operations and prospects of each of UCU and KCPL and that,
on a combined basis, the companies will likely have greater financial stability
and strength as a result of the participation in the combined economic climate
and growth of UCU and KCPL, the inherent increase in scale economies, the market
diversification resulting from the combination and the impact of the potential
operation efficiencies and other synergies. As a result, the UCU Board believed
that the Mergers would provide opportunities to achieve benefits for UCU
stockholders that would be greater than those available if UCU remained a
separate entity. The UCU Board also based its conclusions on its belief that
current industry, economic and market conditions will constrain the ability of
public utility companies to increase earnings through additions to rate base,
which as discussed above (see "THE MERGERS -- Background of the Mergers"),
indicates utilities should strongly consider consolidation to reduce and
diversify risk, to create new avenues for earnings growth, and to create greater
efficiencies and abilities to control costs. The UCU Board also considered (i)
the access the combined company will have to the resources of Newco in
diversifying its operations to counteract increased competition in the utility
industry; (ii) the proposed structure of the transaction as a merger of equals;
(iii) that the proposed structure of the transaction is expected to be treated
as a tax-free reorganization and to be accounted for as a pooling-of-interests
transaction (which avoids the reduction in earnings which would result from the
creation and amortization of goodwill under purchase accounting); (iv) the
written opinion of DLJ, dated May 19, 1996, that, subject to the assumptions
made, matters considered and limits of the review undertaken as set forth in
such opinion, the Exchange Ratio is fair, from a
40
<PAGE>
financial point of view, to holders of UCU Common Stock; (v) the proposed terms
of the Merger Agreement; and (vi) the other expected benefits of the Mergers
discussed below. In determining that the Mergers are fair to and in the best
interests of its stockholders, the UCU Board considered the above facts as a
whole and did not assign specific or relative weights to them.
THE UCU BOARD HAS UNANIMOUSLY APPROVED OF THE MERGER AGREEMENT, THE UCU
MERGER AND THE TRANSACTIONS CONTEMPLATED THEREBY AND BELIEVES THAT THE TERMS OF
THE MERGERS ARE FAIR TO, AND IN THE BEST INTERESTS OF, UCU'S STOCKHOLDERS. THE
UCU BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND THE UCU
MERGER.
EXPECTED BENEFITS OF THE MERGERS. The Board of Directors of each of KCPL
and UCU believe that the expected benefits of the Mergers will include:
- Diversification -- The Mergers will result in the increased ability of
KCPL and UCU to diversify their existing operations through acquisitions
of primarily energy related, non-regulated assets or entities, development
and marketing of new products and use of new technology, thereby assisting
Newco in counteracting potential decreases in revenue caused by increased
competition in the utility industry.
- Customer Service -- Newco will rapidly be able to develop and deploy
innovative customer services, especially those using advanced information
technology. These services will reach a wider customer base than would be
possible with each company operating alone.
- Strategic Acquisitions -- The Mergers will provide a larger and more
stable platform from which to acquire properties that mesh with the
strategic intent of the combined enterprise.
- Coordination of Dispatch -- The coordination of the dispatch of Newco's
electric generating units and transmission facilities should permit more
efficient utilization of Newco's resources to meet the combined system's
requirements and provide continued low-cost energy to Newco's customers.
- Increased Purchasing Coordination -- The coordination of purchases of
products including fuel, electric energy and natural gas should enable
Newco to lower costs of such items through economies of scale and
increased bargaining strength and should contribute to more efficient
inventory management.
- Management of Price Increases -- The operating cost savings resulting from
the Mergers will allow Newco to hold future electric rate increases below
what would otherwise be necessary for the individual utilities, thus
maintaining the cost advantage currently enjoyed by customers of KCPL and
UCU.
- Generation Planning Benefits -- Due to the greater size and diversity of
electric generating units which will result from combining the KCPL and
UCU systems, Newco can achieve the same level of reliability for the
combined system with a lower reserve margin than that currently employed
by either KCPL or UCU. Future generation planning should benefit Newco by
improving the existing ability of KCPL and UCU to satisfy customer demand
load by lowering reserve requirements, diversifying periods of peak
customer demands and optimizing base-load plant usage. In addition, the
Mergers will permit the two utilities to reduce the consequences of the
loss of a major base-load power plant. Major extended outages can be very
costly both to utilities and to their customers. Protection against such
costs include backup capacity and provisions for alternative base-load
sources. The risk to any one utility of having problems at any one
facility may also be mitigated through coordinated system planning and
scheduling of power plant maintenance in a large pool of base-load
generating units.
41
<PAGE>
- Peak Demand Reduction Efforts -- As members of a coordinated system, KCPL
and UCU will be able to share their expertise in demand-side management
techniques. Demand-side management includes the reduction of peak loads of
customers through pricing, energy efficiency programs and other load
management programs.
- Deferral of Capital Investments -- It is anticipated that Newco will be
able to eliminate or defer certain capital investments that KCPL and UCU
otherwise would have to make as separate entities. These include the
deferral or elimination of planned peaking capacity additions and the
deferral of planned base-load capacity additions in the early 2000s.
- Operations and Maintenance Activities -- The coordinated allocation of
manpower, equipment, technology and other resources should result in
benefits to customers of the two utilities. Sharing of stored inventory
and other materials should be attainable and may result in reduced costs
to both utilities.
- Expanded Management Resources -- In combination, KCPL and UCU will be able
to draw on a larger and more diverse mid- and senior-level management pool
to lead the combined Newco forward in an increasingly competitive
environment for the delivery of energy.
- Increased Size and Stability -- As a larger entity, Newco will have a more
diverse generating, transmission and customer base. In addition, Newco
will have a larger asset base than either KCPL or UCU, enhancing its
access to capital markets.
- Economic Development Efforts -- A larger, more diverse service territory
and competitive rates should broaden the range of opportunities KCPL and
UCU can offer existing and potential customers, making the combined
service area more attractive to business and helping to stimulate economic
growth in the region.
- Reduced Administrative Costs -- It is anticipated that as a result of
combining staff functions, within several years, Newco will need
approximately 200 fewer employees than KCPL and UCU would need without the
Mergers. These work force reductions will be accomplished, as much as
possible, through restrictions on hirings (which are currently in effect
at both companies), attrition and voluntary early retirement. In addition,
some savings in areas such as insurance, regulatory costs and auditing and
consulting fees should be realizable.
- Community Involvement -- Newco will be a stronger partner in the economic
development efforts of the communities KCPL and UCU now serve. The
philanthropic and volunteer programs currently maintained by the two
companies will be continued with the enhanced resources of the combined
entity. Moreover, Newco's substantial customer base will give it a
stronger voice in national policy debates on issues affecting the region.
42
<PAGE>
CERTAIN FORWARD-LOOKING INFORMATION
This Joint Proxy Statement/Prospectus contains certain forward-looking
information including information provided under the captions "-- Synergies from
the Mergers," "-- Additional Operational Benefits," and "-- Enhancement of
Financial Performance." The Private Securities Litigation Reform Act of 1995
provides a new "safe harbor" for forward-looking information to encourage
companies to provide prospective information about their companies without fear
of litigation so long as such information is identified as forward-looking and
is accompanied by meaningful cautionary statements identifying important factors
that could cause actual results to differ materially from those projected in the
information. KCPL and UCU identify the following important factors which could
cause KCPL's, UCU's and Newco's actual results to differ materially from any
such results which might be projected, forecast, estimated or budgeted by KCPL,
UCU or Newco in forward-looking information. All of such factors are difficult
to predict and many of which are beyond the control of KCPL and UCU.
Accordingly, while KCPL and UCU believe that the assumptions underlying the
forward-looking information are reasonable for purposes of the development of
estimates of revenue enhancements and cost savings, there can be no assurances
that such assumptions will approximate actual experience or that all such
revenue enhancements and cost savings will be realized, and in such event,
actual results could differ materially from the predictions herein. These
important factors include: (a) future economic conditions in the regional,
national and international markets in which KCPL and UCU compete; (b) state,
federal and foreign regulation, including limitations on the amount of synergies
Newco will be able to keep and possible additional reductions in regulated gas
and electric rates; (c) weather conditions; (d) financial market conditions,
including, but not limited to, changes in interest rates; (e) inflation rates;
(f) changing competition, including, but not limited to, the deregulation of the
United States electric utility industry, and the entry of new competitors; (g)
the ability to carry out marketing and sales plans; (h) the ability to eliminate
duplicative administrative functions; (i) the ability to achieve generation
planning goals and the occurrence of unplanned generation outages; (j) the
ability to defer or eliminate certain capital investments which KCPL and UCU
would have to make as separate companies; (k) the ability to enter new markets
successfully and capitalize on growth opportunities in non-regulated businesses;
and (l) adverse changes in applicable laws, regulations or rules governing
environmental, tax or accounting matters.
SYNERGIES FROM THE MERGERS
KCPL and UCU have jointly identified a number of synergies related to the
Mergers which their managements believe can be achieved. KCPL and UCU anticipate
that a portion of these savings from regulated operations will be allocated to
their ratepayers by state regulatory authorities in the various states in which
Newco will conduct business. The companies retained Ernst & Young in 1995 to
assist in identifying, for their regulatory filings, the synergies relating to
combining the regulated utility operations pursuant to the Original Merger. The
Ernst & Young report, which identified potential synergies of $636 million, was
filed with the FERC on March 29, 1996 and complies with the filing requirements
of the FERC. The Ernst & Young synergies amount is consistent with the Joint
Proxy Statement/Prospectus, dated April 4, 1996, relating to the Original
Merger. In addition, the companies have identified other operational
efficiencies in both regulated and non-regulated segments which are discussed
below under the captions "-- Additional Operational Benefits" and "--
Enhancement of Financial Performance." This section and the sections captioned
"-- Additional Operational Benefits" and "-- Enhancement of Financial
Performance" include certain forward-looking information and should be read in
conjunction with the "Certain Forward-Looking Information" section above.
43
<PAGE>
SUMMARY OF KCPL/UCU SYNERGIES BY AREA
<TABLE>
<CAPTION>
SAVINGS IN MILLIONS OF DOLLARS FOR EACH YEAR FOLLOWING THE
MERGERS
FTES
MEGA PROCESS PROCESS/FUNCTION REDUCTIONS 1ST 2ND 3RD 4TH 5TH 6TH 7TH 8TH 9TH 10TH TOTAL
ALL YEARS (1)(3)
(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Generate Energy Fuel Procurement 1 0.2 0.3 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.5 3.8
System Generation -- 4.0 5.2 6.8 12.7 28.1 42.5 43.8 39.9 43.3 42.2 268.5
Generation Processes 41 2.2 3.7 4.0 4.3 4.5 4.6 4.7 4.8 5.0 5.1 42.9
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribute and Transmission 11 0.3 0.4 1.9 2.0 2.2 2.0 1.8 1.3 1.7 1.8 15.4
Transport Energy Distribution 22 0.4 0.3 1.3 1.6 1.8 2.0 2.1 2.3 2.4 2.5 16.7
Serve Customers Customer Service 8 (0.5) (0.2) 0.2 0.5 0.7 0.7 0.7 0.7 0.8 0.8 4.4
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Purchasing/ Purchasing & Materials
Materials and Management 35 0.9 3.5 4.1 4.5 5.0 5.5 6.0 6.5 7.1 7.7 50.8
Facilities Fleet & Facilities -- 1.8 2.6 3.1 2.5 3.1 3.1 3.2 3.3 3.5 3.6 29.8
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Information Enterprise Support 4 4.8 5.9 5.5 5.3 5.0 4.1 4.4 4.1 3.8 3.5 46.4
Technology CIS 10 2.0 2.7 3.3 1.6 1.5 1.3 1.2 1.0 0.9 0.7 16.2
Data Center
Consolidation 19 0.0 1.4 3.3 3.6 3.8 3.9 4.0 4.2 4.3 4.5 33.0
Other IT Issues 12 0.5 0.9 0.7 1.2 1.4 1.5 1.7 1.8 1.8 1.8 13.3
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Executive and Support Function
Administrative Financial Labor 50 0.1 1.1 2.7 3.8 4.1 4.3 4.5 4.8 4.9 5.2 35.4
Support Support Function
Nonfinancial Labor 25 0.1 0.6 1.0 1.5 1.8 2.0 2.2 2.3 2.5 2.6 16.4
Support-Related
Financial Expenditures -- 1.7 2.0 2.3 2.4 2.5 2.6 2.7 2.8 2.9 3.0 24.9
Support-Related
Nonfinancial
Expenditures -- 0.7 1.0 1.7 1.7 1.8 2.1 2.2 2.3 2.4 2.4 18.3
Total Synergies(1)(3) 238 19.2 31.3 42.3 49.6 67.7 82.6 85.6 82.4 87.7 87.9 636.3
</TABLE>
(1) Numbers may not add due to rounding
(2) FTEs mean Full-Time Equivalent employees
(3) Excludes transaction costs
The discussion below provides a brief description of the synergy savings by
category as detailed in the table above and is limited to the material synergy
areas with smaller synergies aggregated in a category total. In the Ernst &
Young study, no synergies were evaluated which relate to non-regulated
businesses. All position reductions or avoided hires are shown on the chart as
reductions in Full-Time Equivalent employees ("FTEs"). Position reductions are
expected to occur over a 10-year period. The managements of KCPL and UCU
believe, based on historical attrition patterns at KCPL and UCU, that such
reductions should be attained primarily through attrition.
In the discussion below, fixed charges represent the annual carrying costs
of avoided capital projects. Carrying costs include depreciation, taxes other
than income taxes, and interest. All synergies discussed below are for a 10-year
period and are approximate amounts. In calculating synergies by year, an
inflation rate of 3.5% was assumed for the 10-year period. The major captions
below correspond to the above chart.
GENERATE ENERGY
FUEL PROCUREMENT -- Expected savings of $3.8 million result from reductions
in fuel procurement, labor and reduced inventory balances.
SYSTEM GENERATION -- Combined dispatch of system generation results in fuel
and variable operation and maintenance costs ("O&M") savings which are
anticipated to be $107.4 million.
44
<PAGE>
Construction of less expensive generation capacity enabled by the Mergers could
result in reductions of plant capital and O&M charges. These reductions are
expected to include $88.6 million of fixed charges and $72.5 million of O&M
savings.
GENERATION PROCESS -- Consolidation of the system operations should result
in estimated labor savings of $30.5 million. Operation of one energy management
system should reduce costs by an estimated $3.8 million. Avoiding maintenance
contract costs by using KCPL crews at UCU's Sibley plant is anticipated to save
$6.0 million. Other synergies were estimated that total $2.6 million.
DISTRIBUTE AND TRANSPORT ENERGY
TRANSMISSION -- Delay or avoidance of the construction of redundant
transmission lines and substations and the avoided purchase of parts and
equipment resulting from the Mergers is anticipated to save $8.7 million in
fixed charges. Consolidation of transmission staffing is anticipated to save
$6.7 million.
DISTRIBUTION -- Delay or elimination of redundant distribution system
capital projects should reduce fixed charges by $3.1 million. Merging of
distribution, engineering, planning, and design functions should save an
estimated $3.4 million in staffing costs. Combining dispatching efforts should
reduce labor costs by $5.9 million and fixed charges by an estimated $3.2
million, the latter related to the avoidance of certain systems. Other potential
synergies were identified that total $1.1 million.
SERVE CUSTOMERS
CUSTOMER SERVICE -- Anticipated savings of $3.1 million should result from
consolidating customer call centers. Other potential synergies were identified
that total $1.3 million.
PURCHASING/MATERIALS MANAGEMENT
PURCHASING AND MATERIALS MANAGEMENT -- Based on a sample of vendors'
materials and services, discounts are expected to be obtained through supplier
consolidation and leveraging the larger scale of purchases. These savings are
estimated at $34.5 million. Labor savings of $14.6 million are anticipated from
consolidating procurement and warehouse functions. Other synergies were
estimated that total $1.7 million.
FLEET AND FACILITIES -- Consolidation of headquarters' buildings, call
centers and other facilities should result in estimated savings of $21.9
million. Estimated fleet maintenance savings of $5.5 million should be achieved
by consolidating functions into existing internal functions. Other synergies
were estimated that total $2.4 million.
INFORMATION TECHNOLOGY ("IT")
ENTERPRISE SUPPORT -- Avoidance of the purchase of duplicate systems for
financial support and certain transmission and distribution functions should
result in anticipated savings for fixed charges of $36.0 million and $10.4
million of labor based O&M costs.
CUSTOMER INFORMATION SYSTEM ("CIS") -- Both companies had plans to replace
their CIS systems. Developing one system for both companies should save an
estimated $15.2 million of fixed charges. Other synergies were estimated that
total $1.0 million.
DATA CENTER CONSOLIDATION -- The consolidation of computer data centers and
the elimination of duplicate functions should save an estimated $33.0 million in
labor and other costs.
OTHER IT ISSUES -- Consolidating the telecommunication and technology
activities of the two companies should save an anticipated $13.3 million of
labor and other costs.
EXECUTIVE AND ADMINISTRATIVE SUPPORT
SUPPORT FUNCTION FINANCIAL LABOR -- Labor reductions anticipated from the
elimination of duplication in accounting, planning and budgeting, cash
management, investor relations and internal audit should result in savings of
$35.4 million.
45
<PAGE>
SUPPORT FUNCTION NONFINANCIAL LABOR -- Labor reductions anticipated from the
elimination of duplication in human resources, rates and regulations,
environmental, governmental relations, communications, and legal should result
in savings of $16.4 million.
SUPPORT-RELATED FINANCIAL EXPENDITURES -- Estimated synergies of $11.1
million should be achieved by combining activities such as lockbox processing
and disbursements, lines of credit, transfer agents and meetings with analysts
and large stockholders. Risk management expense is estimated to decrease by $7.3
million because of the elimination of duplicate coverage and reduced premiums
for the combined companies. Other synergies related to accounting and tax
advisory services are anticipated to save $6.5 million.
SUPPORT-RELATED NONFINANCIAL EXPENDITURES -- Anticipated savings resulting
from the elimination of duplicate legal and communication efforts should be
$11.6 million and $3.4 million, respectively. Other synergies were estimated
that total $3.3 million.
SUMMARY OF SYNERGY SAVINGS
<TABLE>
<CAPTION>
AFTER THE MERGERS
-------------------------------------------
1ST YR. 2ND YR. 3RD YR. 4TH YR.
--------- ---------- --------- ---------
(In millions, except per share amounts)
-------------------------------------------
<S> <C> <C> <C> <C>
Synergies savings............................................................. $19.2 $31.3 $42.3 $49.6
Income taxes.................................................................. (7.5) (12.2) (16.5) (19.3)
--------- ---------- --------- ---------
Net synergies................................................................. $11.7 $19.1 $25.8 $30.3
--------- ---------- --------- ---------
--------- ---------- --------- ---------
Synergies per share........................................................... $.10 $.16 $.22 $.25
--------- ---------- --------- ---------
--------- ---------- --------- ---------
Average common shares outstanding............................................. 116.0 118.0 120.0 122.0
--------- ---------- --------- ---------
--------- ---------- --------- ---------
</TABLE>
- ------------------------------
(1) The combined effective tax rate used is 39%.
(2) Weighted average shares reflect an anticipated issuance of 5.3 million
shares of UCU Common Stock in 1996 and periodic issuances of Newco Common
Stock under various stock plans.
ADDITIONAL OPERATIONAL BENEFITS
Subsequent to the announcement of the Original Merger, UCU and KCPL
identified additional savings related to the Mergers utilizing the methodologies
used by Ernst & Young's synergies study. The additional savings are shown in the
table below.
SUMMARY OF ADDITIONAL OPERATIONAL BENEFITS
<TABLE>
<CAPTION>
AFTER THE MERGERS
-------------------------------------------
1ST YR. 2ND YR. 3RD YR. 4TH YR.
--------- ---------- --------- ---------
(In millions, except per share amounts)
-------------------------------------------
<S> <C> <C> <C> <C>
Benefits before taxes......................................................... $15.7 $15.4 $13.6 $11.8
Income taxes.................................................................. (6.1) (6.0) (5.3) (4.6)
--------- ---------- --------- ---------
Total......................................................................... $9.6 $9.4 $8.3 $7.2
--------- ---------- --------- ---------
--------- ---------- --------- ---------
Benefits per share............................................................ $.08 $.08 $.07 $.06
--------- ---------- --------- ---------
--------- ---------- --------- ---------
Average common shares outstanding............................................. 116.0 118.0 120.0 122.0
--------- ---------- --------- ---------
--------- ---------- --------- ---------
</TABLE>
- ------------------------------
(1) The combined effective tax rate used is 39%.
(2) Weighted average shares reflect an anticipated issuance of 5.3 million
shares of UCU Common Stock in 1996 and periodic issuances of Newco Common
Stock under various stock plans.
46
<PAGE>
The combination of the Missouri and Kansas operations of KCPL and UCU is
expected to produce benefits of approximately $8.5 million, declining to $4.6
million by the fourth year, in dispatch related pre-tax savings due to the
substitution of low variable cost KCPL generated power for UCU supplies
currently generated by UCU or purchased by UCU. In addition, benefits of
approximately $1.3 million per year in production pre-tax savings at UCU's
Sibley power station were identified from the introduction of KCPL low cost coal
purchases as part of the fuel mix.
A review of procurement savings related to the Mergers yields an expected
pre-tax savings increment of $2.1 million per year in non-generating small item
stock purchases and related carrying costs and in contractual services. This
review also found approximately $1.3 million per year in pre-tax savings from
combined purchases of technical information and an additional $2.5 million per
year in pre-tax savings from the internalization of certain legal and regulatory
services.
ENHANCEMENT OF FINANCIAL PERFORMANCE
The Palmer Bellevue practice of Coopers & Lybrand Consulting assisted the
managements of KCPL and UCU in their development of additional information
relating to Newco's ability to enhance its financial performance subsequent to
the Mergers by facilitating discussions between KCPL and UCU and by reviewing
the methodologies utilized in the development of the additional information.
KCPL and UCU believe that their combination offers a substantial alignment
of complementary capabilities for growth in a competitive energy and service
market. There are valuable benefits identified below that arise from the
combination of KCPL and UCU that stem from the rapidly developing international
energy markets, the expansion of gas and electric marketing in an open access
environment and the offering of new products and services to a combined customer
base.
UCU believes that it brings entrepreneurial experience as illustrated by
carrying out a ten-fold expansion of revenues over the past ten years through
foreign and domestic utility acquisitions, independent power investment and
energy marketing ventures. KCPL believes that it is recognized for its financial
strength and management practices which have resulted in low cost generation and
superior performance. The combination of these capabilities should position
Newco for sustained expansion in a competitive energy market. The table below
shows the expected benefits of the enhancements broken into three categories
with a discussion of each category following the table.
SUMMARY OF FINANCIAL PERFORMANCE ENHANCEMENT
<TABLE>
<CAPTION>
AFTER THE MERGERS
------------------------------------------
1ST YR. 2ND YR. 3RD YR. 4TH YR.
--------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
International........................................................... $22.0 $16.4 $30.2 $29.5
Energy marketing........................................................ 7.2 10.9 7.7 9.7
New products............................................................ 9.3 20.8 31.5 48.8
--------- --------- --------- ---------
Benefits before taxes................................................... 38.5 48.1 69.4 88.0
Income taxes............................................................ (15.0) (18.8) (27.1) (34.3)
--------- --------- --------- ---------
Total................................................................. $23.5 $29.3 $42.3 $53.7
--------- --------- --------- ---------
Benefits per share...................................................... $0.20 $0.25 $0.35 $0.44
--------- --------- --------- ---------
Average common shares outstanding....................................... 116.0 118.0 120.0 122.0
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------------
(1) The combined effective tax rate used is 39%.
(2) Weighted average shares reflects an anticipated issuance of 5.3 million
shares of UCU Common Stock in 1996 and periodic issuances of Newco Common
Stock under various stock plans.
INTERNATIONAL
Rapidly developing overseas opportunities in utility acquisitions and
privatizations as well as in power plant development will be a strategic focal
point for Newco. Newco will be well positioned to compete for these projects
because of the financial foundation and operating capabilities resulting
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<PAGE>
from the Mergers. It is anticipated that Newco will be able to combine UCU's
investment and operating experience in existing English-speaking utility markets
with KCPL's involvement in the small power production market in China and KCPL's
in-depth technical and operational expertise and financial strength.
UCU has begun to refocus its gas marketing business in the United Kingdom to
reduce gas supply costs in anticipation of a fully open retail market in 1997.
The financial strength of KCPL should allow the United Kingdom gas marketing and
trading operation to take expanded positions and grow in the de-regulating
United Kingdom gas market.
UCU currently has investments in electric distribution businesses in
Australia and New Zealand. KCPL and UCU intend to apply their operational and
technical skills and ability to access markets to these businesses. This is
expected to result in greater efficiencies and market share.
Anticipated improvements in operational efficiencies from these investments
are expected to produce incremental pre-tax income which ranges between
approximately $16.4 million and $30.2 million over the four-year period after
the Mergers.
ENERGY MARKETING
The combination of KCPL's low variable cost regional wholesale position and
financial strength coupled with UCU's pioneer status in gas and electric
marketing is expected to provide growth opportunities in the power market. This
plan is consistent with the new conditions represented by the April 24, 1996
issuance by the FERC of the electric open access Orders 888 and 889 and with the
potential for gas marketing within the KCPL electric service territory.
AGP, a subsidiary of Aquila and an indirect subsidiary of UCU, recently
reported to stockholders that in 1995 it set company records for natural gas
throughput, volumes of extracted natural gas liquids, total operating wells
connected and operated miles of pipeline. AGP built two new strategic pipelines
in 1995 to facilitate the company's processing plants on the Southeast Texas
Pipeline System. This investment effectively doubles the capacity of AGP's
system.
The increased focus on gas and electric trading opportunities is expected to
produce pre-tax income which ranges between approximately $3.3 million and $6.6
million over the four-year period. In addition, an investment in increased
throughput capacity for AGP's Texas intra-state pipeline system is anticipated
to produce pre-tax earnings which range between $3.9 million and $4.7 million
over the four-year period.
NEW PRODUCTS
Both KCPL and UCU are focusing on expanding the relationship with the
customer by offering value added services beyond the traditional delivery of
electric and gas service. UCU's EnergyOne, the first nationally branded line of
products and services for the electric and gas utility industry, seeks to
provide a portfolio of value-added services and customer energy solutions. The
EnergyOne concept and UCU's partnership with Novell, Inc., a national provider
of network software, can be complemented by KCPL's experience in the widespread
deployment of the CellNet wireless communication and customer premise
communication technologies.
UCU, in cooperation with KCPL, is currently developing an EnergyOne
partnership program that leverages the complementary strengths of each company
and the national brand recognition of EnergyOne. The financial strength and
urban presence of KCPL coupled with the marketing acumen and rural market
coverage by UCU provides an excellent foundation for achieving Newco's goal of
becoming an energy leader worldwide. The partnership will expand to include
other energy companies as well as supply partners.
The combination of these companies is expected to create enhanced
opportunities and capabilities to provide customers with energy information and
communications services, to better manage operational expenses, and to generate
additional revenues from new products and services. These new products and
services include electronic home security, appliance warranty service and
leasing of utility fiber optic capacity for telecommunications.
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<PAGE>
Pre-tax income from new products and services is expected to total
approximately $7.0 million to $19.2 million over the four-year period while the
EnergyOne partnership program is expected to contribute approximately $2.3
million in pre-tax earnings in the first year, growing to $29.6 million by year
four.
CORPORATE GROWTH
HISTORICAL -- Both UCU and KCPL have independently pursued strategies
committed to continuing growth in earnings and stockholder value in both
regulated and non-regulated business segments.
UCU began its aggressive growth in 1983 with the formation of UtiliCorp
United Inc. from its predecessor company Missouri Public Service Corporation.
Since 1983 UCU has:
- Acquired and merged with ten domestic electric and gas utilities,
investing a total of $858 million;
- Purchased interests in four international electric utilities, investing a
total of $426 million;
- Established UtilCo Group and invested $206 million in 17 independent power
projects;
- Established Aquila and invested $303 million in natural gas gathering and
transportation assets.
Over the period from 1985 to 1995, UCU has increased its Assets and Earnings
Before Interest, Taxes, Depreciation and Amortization by 431% and 425%
respectively while also delivering to its stockholders a total return (stock
appreciation plus dividends) in excess of both the average for the S&P 500 and
the utility industry peer group average.*
UCU has also been an industry innovator in marketing and commodity trading.
In 1995, UCU introduced the first national brand in the electric and gas utility
industry. UCU's brand, EnergyOne, has been nationally recognized and has quickly
achieved a high level of consumer awareness. UCU has built one of the industry's
first national sales forces. Because of the success of the EnergyOne brand
strategy, UCU now provides energy solutions to over 125 of the Fortune 500
companies in the United States.
UCU has also been an industry innovator in the application of technology to
the energy industry and to the solution of customer problems. UCU believes that
its alliance with Novell, Inc. holds the promise of a new generation of
information, comfort and security customer solutions. The two companies are
actively working towards product introductions in 1997.
KCPL has also delivered above market and peer-group average total returns to
its shareholders* as a result of its focus on economic value added in its core
business and carefully planned growth through investment in non-regulated
segments.
Over the past ten years, KCPL has significantly reduced its financial risk
and increased its financial strength as indicated by its current A1 bond rating
by Moody's Investors Service, its A+ bond rating by Duff & Phelps Credit Rating
Company and its A bond rating by Standard & Poor's Corporation. Strong cash flow
and interest rate management have allowed KCPL to reduce debt and reduce
interest rates on existing debt which has resulted in one of the lowest average
costs of debt in the electric utility industry.
KCPL has focused its growth activities principally in non-regulated segments
of the energy industry. In 1992, KCPL formed KLT, a non-regulated subsidiary.
KLT invests in independent power projects, oil and gas reserves, utility-related
technologies and services, and tax-advantaged investment opportunities. KLT has
invested approximately $150 million since its inception in 1992.
- ------------------------
* Source for the S&P 500 and utility industry peer group averages: WALL
STREET JOURNAL Shareholder Scoreboard, February 29, 1996.
49
<PAGE>
NEWCO GROWTH STRATEGY
The managements of both KCPL and UCU are committed to a strategy of
continuing growth through investment in both the regulated and non-regulated
segments of the energy business. Overall the goals of the growth strategy are to
provide stockholders:
- total returns above both peer group and broad market averages consistently
and over an extended period of time;
- an investment which carries below market-average risk (beta); and
- an investment in a company which has a diversified base of energy-related
businesses, without undue concentration in (i) fuel source, (ii) customer
mix, or (iii) regulatory jurisdiction.
In order to achieve these objectives the managements of KCPL and UCU intend
for Newco to continue to emphasize aggressive yet carefully planned growth
through investment, acquisition and merger.
OPINION OF KCPL'S FINANCIAL ADVISOR
On January 19, 1996, Merrill Lynch delivered its oral opinion, which opinion
was subsequently confirmed in written opinions dated as of January 19, 1996 and
April 4, 1996, to the KCPL Board to the effect that, as of such dates, and based
upon the assumptions made, matters considered and limits of review, as set forth
in such opinions, the Original KCPL Exchange Ratio was fair to holders of KCPL
Common Stock (other than UCU and its affiliates) from a financial point of view.
On May 20, 1996, Merrill Lynch delivered its oral opinion, which opinion was
subsequently confirmed in written opinions dated as of May 20, 1996 and the date
of this Joint Proxy Statement/ Prospectus, to the KCPL Board to the effect that,
as of such dates, and based upon the assumptions made, matters considered and
limits of review, as set forth in such opinions, the Exchange Ratio is fair to
holders of KCPL Common Stock (other than UCU and its affiliates) from a
financial point of view. References herein to the "Merrill Lynch Opinion" refer
to the written opinion of Merrill Lynch dated May 20, 1996. The Merrill Lynch
opinion dated the date of this Joint Proxy Statement/Prospectus is substantially
the same as the May 20, 1996 opinion.
A COPY OF THE MERRILL LYNCH OPINION DATED AS OF THE DATE OF THIS JOINT PROXY
STATEMENT/PROSPECTUS, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND CERTAIN LIMITATIONS ON THE SCOPE OF REVIEW UNDERTAKEN BY MERRILL LYNCH, IS
ATTACHED AS ANNEX B TO THIS JOINT PROXY STATEMENT/PROSPECTUS. KCPL SHAREHOLDERS
ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY. THE MERRILL LYNCH OPINION IS
DIRECTED ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A FINANCIAL POINT OF
VIEW AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY KCPL SHAREHOLDER AS TO HOW
SUCH SHAREHOLDER SHOULD VOTE AT THE KCPL MEETING. THE SUMMARY OF THE MERRILL
LYNCH OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS, WHILE
CONTAINING ALL MATERIAL ELEMENTS OF SUCH OPINION, IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF THE OPINION OF MERRILL LYNCH, DATED AS OF THE
DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS, ATTACHED AS ANNEX B HERETO.
In arriving at the Merrill Lynch Opinion, Merrill Lynch among other things
(i) reviewed KCPL's Annual Reports, Forms 10-K and related financial information
for the five fiscal years ended December 31, 1995, and Form 10-Q and the related
unaudited financial information for the quarterly period ending March 31, 1996;
(ii) reviewed UCU's Annual Reports, Forms 10-K and related financial information
for the five fiscal years ended December 31, 1995, and Form 10-Q and the related
unaudited financial information for the quarterly period ending March 31, 1996;
(iii) reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets and prospects of KCPL and UCU,
furnished to Merrill Lynch by KCPL and UCU; (iv) conducted discussions with
members of senior management of KCPL and UCU concerning their respective
businesses, regulatory environments, prospects and strategic objectives and
possible operating, administrative and capital synergies which might be realized
for the combined companies following the Mergers; (v) reviewed the historical
market prices and trading activity for KCPL Common Stock and UCU Common Stock
and compared them with those of certain publicly traded companies deemed by
Merrill Lynch to be reasonably similar to KCPL and UCU, respectively; (vi)
compared the results of operations of KCPL and UCU with those of certain
companies deemed by Merrill Lynch to be reasonably
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<PAGE>
similar to KCPL and UCU, respectively; (vii) analyzed the relative valuation of
KCPL Common Stock and UCU Common Stock using various valuation methodologies
which Merrill Lynch deemed to be appropriate; (viii) considered the pro forma
effect of the Merger on KCPL's capitalization ratios and earnings, dividends and
book value per common share of KCPL Common Stock; (ix) reviewed the Merger
Agreement; and (x) reviewed such other financial studies and performed such
other analyses and took into account such other matters deemed necessary by
Merrill Lynch for purposes of rendering the Merrill Lynch Opinion.
In preparing the Merrill Lynch Opinion, Merrill Lynch relied on the accuracy
and completeness of all information supplied or otherwise made available to it
by KCPL and UCU, and did not independently verify such information or any
underlying assumptions. Merrill Lynch did not undertake an independent appraisal
or physical inspection of the assets or liabilities (contingent or otherwise) of
KCPL or UCU. Merrill Lynch also assumed that the financial forecasts furnished
to it by KCPL and UCU were reasonably prepared in accordance with accepted
industry practices and reflected the best currently available estimates and
judgments of KCPL's and UCU's management, as the case may be, as to the expected
future financial performance of KCPL and UCU, respectively, and as to the
expected future projected outcomes of various legal, regulatory and other
contingencies. Merrill Lynch also assumed that the Mergers will be free of
Federal tax to KCPL, UCU, Sub and the respective holders of KCPL Common Stock
and UCU Common Stock, and further assumed that the Mergers will be accounted for
as a pooling of interests. The Merrill Lynch Opinion is based upon general
economic, market, monetary and other conditions as they existed and could be
evaluated, and the information made available to it, as of May 20, 1996.
KCPL's management has advised Merrill Lynch that the KCPL Board believes
there are significant contingencies and uncertainties associated with the
proposal of Western Resources to acquire the outstanding KCPL Common Stock by
means of the Proposed Western Resources Offer due to the speculative nature of
certain assumptions made by Western Resources in the Proposed Western Resources
Offer relating to Western Resources' ability to achieve and retain certain
estimated aggregate cost savings, and the likelihood of substantially greater
rate reductions affecting Western Resources in a pending rate proceeding than
those assumed by Western Resources. KCPL's management has also advised Merrill
Lynch that it believes the Proposed Western Resources Offer is not consistent
with KCPL's strategic objectives. In view of the foregoing, Merrill Lynch has
not been asked by the KCPL Board to consider, and Merrill Lynch has not
considered, the Proposed Western Resources Offer in arriving at its opinion.
The matters considered by Merrill Lynch in arriving at the Merrill Lynch
Opinion are based on numerous macroeconomic, operating and financial assumptions
with respect to industry performance, general business and economic conditions,
many of which are beyond the control of KCPL and UCU, and involve the
application of complex methodologies and educated judgment. Any estimates
incorporated in the analyses performed by Merrill Lynch are not necessarily
indicative of actual past or future results or values, which may be
significantly more or less favorable than such estimates. Estimated values do
not purport to be appraisals and do not necessarily reflect the prices at which
businesses or companies may be sold in the future. The Merrill Lynch Opinion
does not present a discussion of the relative merits of the Merger as compared
to any other business plan or opportunity that might be presented to KCPL, or
the effect of any other arrangement in which KCPL might engage. Merrill Lynch
also advised the KCPL Board that the valuation approaches utilized in the
relative valuation of KCPL and UCU for purposes of determining the Exchange
Ratio were not intended to reflect the maximum short-term value that could be
realized for holders of KCPL Common Stock, including through a sale of KCPL.
The following is a summary of the material financial and comparative
analyses performed by Merrill Lynch in arriving at its January 19, 1996 opinion.
KCPL VALUATION
Merrill Lynch performed its valuation of KCPL by separately analyzing KCPL's
two major business segments, the regulated utility business (the "KCPL Regulated
Business") and the unregulated businesses (the "KCPL Unregulated Businesses")
operated by KCPL's unregulated businesses
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subsidiary, KLT, Merrill Lynch analyzed the KCPL Regulated Business by
performing an analysis of publicly traded comparable companies and a discounted
cash flow ("DCF") analysis. Merrill Lynch analyzed KLT by performing a DCF
analysis of KLT Investments Inc., a passive investment portfolio company ("KLT
Investments"), and by valuing the remaining KLT businesses at various multiples
of book value.
KCPL REGULATED BUSINESS. Based upon the valuation techniques described
below, Merrill Lynch derived an estimated enterprise valuation range for the
KCPL Regulated Business of $2,300 million to $2,475 million.
PUBLICLY TRADED COMPARABLE COMPANY ANALYSIS. Using publicly available
information, Merrill Lynch compared certain financial and operating information
and ratios (described below) for the KCPL Regulated Business with the
corresponding financial and operating information and ratios for a group of
publicly traded companies that Merrill Lynch deemed to be reasonably similar to
the KCPL Regulated Business. The companies included in the KCPL comparable
company analysis were: DQE, Inc., MidAmerican Energy Company, Oklahoma Gas and
Electric Company, Portland General Corporation, Union Electric Company and
Western Resources, Inc. (collectively, the "KCPL Regulated Business
Comparables"). Merrill Lynch selected the companies in the KCPL Regulated
Business Comparables based upon their financial and operating characteristics.
Merrill Lynch derived implied equity values for the KCPL Regulated Business
by selecting certain multiples (price per share/research analysts' 1995
estimated earnings per share, price per share/ research analysts' 1996 estimated
earnings per share and price per share/book value of common equity per share)
from the KCPL Regulated Business Comparables and applying them to the KCPL
Regulated Business' projected 1995 earnings, 1996 earnings and book value of
common equity for the year ended December 31, 1995. The relevant multiple ranges
for price per share/research analysts' 1995 estimated earnings per share, price
per share/research analysts' 1996 estimated earnings per share and price per
share/book value of common equity per share were 12.2x to 14.6x, 12.0x to 14.5x
and 1.4x to 1.9x, respectively. Merrill Lynch then added projected debt and
preferred stock (less cash) for the KCPL Regulated Business at December 31, 1995
to arrive at an estimated enterprise valuation range for the KCPL Regulated
Business.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a DCF analysis for
the KCPL Regulated Business using KCPL management projections and calculated an
estimated enterprise valuation range. The DCF was calculated assuming discount
rates ranging from 7.75% to 8.75%, and was comprised of the sum of the present
value of (i) the projected unlevered free cash flows for the years 1996 through
2000, and (ii) the 2000 terminal value based upon two techniques (a) a range of
multiples from 12.5x to 13.5x projected 2000 net income, and (b) a range of
multiples from 1.5x to 1.7x projected 2000 book value of common equity, in each
case adding projected debt and preferred stock (less cash) at year-end 2000.
KCPL UNREGULATED BUSINESSES. Merrill Lynch performed a DCF analysis for KLT
Investments using KCPL management projections and calculated an estimated
enterprise valuation range. The DCF was calculated assuming discount rates
ranging from 6.0% to 7.0% and was comprised of the present value of the
projected unlevered free cash flows for the years 1996 through 2006, subtracting
projected non-recourse debt (plus cash) at December 31, 1995. The remaining KLT
entities were valued at 1.0x to 1.5x projected December 31, 1995 book values as
provided by KCPL management. Based upon these valuation techniques, Merrill
Lynch derived an estimated valuation range (after the deduction for non-recourse
debt of KLT which is included in KCPL's consolidated financial statements) for
KLT of $95 million to $115 million.
UCU VALUATION
Merrill Lynch performed its valuation analysis of UCU by analyzing the
following four business segments: regulated businesses ("UCU Regulated
Businesses"), Aquila, UtilCo Group ("UtilCo") and all other businesses. For
purposes of its valuation, contribution and pro forma analyses, Merrill Lynch
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included a December 31, 1995 pro forma adjustment to the UCU management
projections, furnished to it by UCU management, of a delayed common stock
offering of five million UCU shares, which offering is expected to occur in the
third quarter of 1996.
UCU REGULATED BUSINESSES. The UCU Regulated Businesses include all U.S.
electric and gas utility operations. Based upon the valuation techniques
described below, Merrill Lynch derived an estimated enterprise valuation range
for the UCU Regulated Businesses of $1,700 million to $1,850 million.
PUBLICLY TRADED COMPARABLE COMPANY ANALYSIS. Using publicly available
information, Merrill Lynch compared certain financial and operating information
and ratios (described below) for the UCU Regulated Businesses with the
corresponding financial and operating information and ratios for a group of
publicly traded companies that Merrill Lynch deemed to be reasonably similar to
the UCU Regulated Businesses. The companies included in the UCU comparable
company analysis were: Central Hudson Gas & Electric Corporation, CILCORP Inc.,
Delmarva Power & Light Company, LG&E Energy Corp., Orange and Rockland
Utilities, Inc. and Southern Indiana Gas and Electric Company (collectively, the
"UCU Regulated Businesses Comparables"). Merrill Lynch selected the companies in
the UCU Regulated Businesses Comparables based upon their financial and
operating characteristics.
Merrill Lynch derived implied equity values for the UCU Regulated Businesses
by selecting certain multiples (price per share/research analysts' 1995
estimated earnings per share, price per share/research analysts' 1996 estimated
earnings per share and price per share/book value of common equity per share)
from the UCU Regulated Businesses Comparables and applying them to the UCU
Regulated Businesses' projected 1995 earnings, 1996 earnings and book value of
common equity for the year ended December 31, 1995. The relevant multiple ranges
for price per share/research analysts' 1995 estimated earnings per share, price
per share/research analysts' 1996 estimated earnings per share and price per
share/book value of common equity per share were 11.5x to 14.4x, 11.3x to 13.6x
and 1.2x to 1.7x, respectively. Merrill Lynch then added projected debt and
preferred stock (less cash) for the UCU Regulated Businesses at December 31,
1995 to arrive at an estimated enterprise valuation range for the UCU Regulated
Businesses.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a DCF analysis for
the UCU Regulated Businesses using UCU management projections and calculated an
estimated enterprise valuation range. The DCF was calculated assuming discount
rates ranging from 7.5% to 8.5%, and was comprised of the sum of the present
value of (i) the projected unlevered free cash flows for the years 1996 through
2000, and (ii) the 2000 terminal value based upon two techniques (a) a range of
multiples from 13.0x to 14.0x projected 2000 net income, and (b) a range of
multiples from 1.5x to 1.7x projected 2000 book value of common equity, in each
case adding projected debt and preferred stock (less cash) at year-end 2000.
AQUILA ENERGY CORPORATION. Merrill Lynch performed a segment valuation
analysis of Aquila that involved the individual analysis of AGP, Aquila Energy
Marketing ("AEM") and Aquila Power Corporation ("Aquila Power"). For AGP and
AEM, Merrill Lynch utilized three valuation methodologies: publicly traded
comparable company analysis, comparable company acquisition analysis and DCF
analysis. For Aquila Power, Merrill Lynch performed a DCF analysis.
Based upon the valuation techniques described below, Merrill Lynch derived
an estimated enterprise valuation range for Aquila after adjusting for certain
unallocated corporate amounts and before deducting minority interest related to
AGP, of $585 million to $675 million.
PUBLICLY TRADED COMPARABLE COMPANY ANALYSIS. Using publicly available
information, Merrill Lynch compared certain financial and operating information
and ratios (described below) for AGP and AEM, with the corresponding financial
and operating information and ratios for a group of publicly traded companies
that Merrill Lynch deemed to be reasonably similar to both AGP and AEM. The
companies included in the Aquila comparable company analysis were: NGC
Corporation, Tejas Gas
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Corporation, Tejas Power Corporation and Western Gas Resources, Inc.
(collectively, the "Aquila Comparables"). Merrill Lynch selected the companies
in the Aquila Comparables based upon their financial and operating
characteristics.
In the case of AGP, which is publicly traded on the New York Stock Exchange,
Merrill Lynch compared the market value of AGP Common Stock as a multiple of (a)
estimated 1995 EPS (the "1995 EPS Multiple"), which estimates were obtained from
Institutional Brokers Estimating Service ("IBES") and (b) estimated 1996 EPS
(the "1996 EPS Multiple"), which estimates were obtained from IBES to the
corresponding ratios for the Aquila Comparables. Additionally, Merrill Lynch
compared the market capitalization of AGP as a multiple of (a) 1995 projected
EBITDA (the "1995 EBITDA Multiple"), (b) 1996 projected EBITDA (the "1996 EBITDA
Multiple"), (c) 1995 projected EBIT (the "1995 EBIT Multiple"), (d) 1996
projected EBIT (the "1996 EBIT Multiple") and (e) 1995 projected total assets
(the "1995 Asset Multiple") to the corresponding ratios for the Aquila
Comparables. Merrill Lynch derived an estimated enterprise valuation range for
AGP by applying these multiples to the comparable AGP values. In the case of the
1995 EPS Multiple and the 1996 EPS Multiple, Merrill Lynch added projected debt
(less cash) to arrive at estimated enterprise values for AGP. The relevant
multiple ranges for the 1995 EPS Multiple, the 1996 EPS Multiple, the 1995
EBITDA Multiple, the 1996 EBITDA Multiple, the 1995 EBIT Multiple, the 1996 EBIT
Multiple and the 1995 Asset Multiple were 21.0x to 22.3x, 14.4x to 16.1x, 7.9x
to 9.4x, 6.9x to 8.3x, 13.3x to 13.9x, 10.3x to 12.5x and 0.9x to 1.3x,
respectively. As used herein, "EPS" means earnings per share, "EBITDA" means
earnings before interest, taxes, depreciation and amortization, and "EBIT" means
earnings before interest and taxes.
Merrill Lynch derived an estimated enterprise valuation range for AEM using
both the market values of the Aquila Comparables as multiples of (a) 1995
estimated EPS, which estimates were obtained from IBES and (b) 1996 estimated
EPS, which estimates were obtained from IBES and the market capitalizations of
the Aquila Comparables as multiples of (a) 1995 projected EBITDA and (b) 1996
projected EBITDA. In the case of the 1995 EPS Multiple and the 1996 EPS
Multiple, Merrill Lynch added projected debt (less cash) to arrive at estimated
enterprise values for AEM. The relevant multiple ranges for the 1995 EPS
Multiple, the 1996 EPS Multiple, the 1995 EBITDA Multiple and the 1996 EBITDA
Multiple were 21.0x to 22.3x, 14.4x to 16.1x, 7.9x to 9.4x and 6.9x to 8.3x,
respectively.
COMPARABLE COMPANY ACQUISITION ANALYSIS. Using publicly available
information, Merrill Lynch reviewed ten transactions announced between July 1993
and August 1995 involving the acquisition of selected natural gas gathering,
processing and marketing companies (the "Aquila Comparable Acquisition
Transactions") to derive estimated enterprise valuation ranges for both AGP and
AEM. The Aquila Comparable Acquisition Transactions and the date each
transaction was announced were as follows: Atlanta Gas Light Company/Sonat Gas
Marketing Company (August 1995), The Williams Companies, Inc./Gas Company of New
Mexico (June 1995), El Paso Natural Gas Company/Eastex Energy, Inc. (May 1995),
LG&E Energy Corp./Hadson Corporation (May 1995), Associated Natural Gas
Corporation/Grand Valley Gas (February 1995), Panhandle Eastern
Corporation/Associated Natural Gas Corporation (December 1994), NGC
Corporation/Trident NGL, Inc. (August 1994), Red Cedar Gathering Co./WestGas
Gathering, Inc. (August 1994), KN Energy, Inc./ American Oil & Gas Corporation
(March 1994) and Western Gas Resources, Inc./Mountain Gas Resources, Inc. (July
1993).
In the case of AGP, Merrill Lynch (i) compared the equity value in each of
the Aquila Comparable Acquisition Transactions as a multiple of then publicly
available (a) latest 12 months ("LTM") net income available to common stock (the
"Net Income Multiple") and (b) book value of common equity for the most recently
available fiscal quarter preceding such transaction (the "Book Value Multiple")
and (ii) compared the transaction value (defined as the equity value plus the
liquidation value of preferred stock plus the principal amount of debt less
cash) for each of the Aquila Comparable Acquisition Transactions as a multiple
of then publicly available (a) LTM EBITDA (the "EBITDA Multiple"), (b) LTM EBIT
(the "EBIT Multiple") and (c) the total assets for the most recently
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available fiscal quarter preceding such transaction (the "Asset Multiple"). The
relevant multiple ranges for the Net Income Multiple, the Book Value Multiple,
the EBITDA Multiple, the EBIT Multiple and the Asset Multiple were 24.4x to
30.0x, 1.3x to 2.1x, 7.6x to 10.6x, 13.6x to 16.8x and 0.7x to 1.1x,
respectively.
In the case of AEM, Merrill Lynch (i) compared the equity value in each of
the Aquila Comparable Acquisition Transactions as a multiple of then publicly
available LTM net income available to common stock and (ii) compared the
transaction value for each of the Aquila Comparable Acquisition Transactions as
a multiple of then publicly available (a) LTM EBITDA and (b) LTM EBIT. The
relevant multiple ranges for the Net Income Multiple, the EBITDA Multiple and
the EBIT Multiple were 24.4x to 30.0x, 7.6x to 10.6x, and 13.6x to 16.8x,
respectively.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed DCF analyses for
AGP, AEM and Aquila Power using UCU management projections and calculated
estimated enterprise valuation ranges for each business. For AGP, the DCF was
calculated assuming discount rates ranging from 7.0% to 12.0%, and was comprised
of the sum of the present value of (i) the projected unlevered free cash flows
for the years 1996 through 2001 and (ii) the 2001 terminal value based upon a
range of multiples from 6.0x to 9.0x projected EBITDA. For both AEM and Aquila
Power, the DCFs were calculated assuming discount rates ranging from 8.0% to
12.0%, and were comprised of the sum of the present value of (i) the projected
unlevered free cash flows for the years 1996 through 1999 and (ii) the 1999
terminal value based upon a range of multiples from 6.0x to 9.0x projected
EBITDA.
UTILCO GROUP. Based upon the valuation techniques described below, Merrill
Lynch derived an estimated enterprise valuation range for UtilCo of $165 million
to $200 million.
PUBLICLY TRADED COMPARABLE COMPANY ANALYSIS. Using publicly available
information, Merrill Lynch compared certain financial and operating information
and ratios (described below) for UtilCo with the corresponding financial and
operating information and ratios for a group of publicly traded companies that
Merrill Lynch deemed to be reasonably comparable to UtilCo. The companies
included in the analysis were: The AES Corporation, California Energy Company,
Inc., Destec Energy, Inc., Enron Global Power & Pipelines L.L.C., Ogden
Corporation and Sithe Energies, Inc. (collectively, the "UtilCo Comparables").
Merrill Lynch selected the companies in the UtilCo Comparables based upon their
financial and operating characteristics.
Merrill Lynch derived an estimated enterprise valuation range for UtilCo by
selecting certain multiples (price per share/research analysts' 1995 estimated
earnings per share, price per share/ research analysts' 1996 estimated earnings
per share, price per share/book value of common equity per share, market value
of common stock/cash flow, market capitalization/revenues, market
capitalization/EBITDA and market capitalization/EBIT) from the UtilCo
Comparables and applying them to UtilCo's projected 1995 and 1996 earnings,
December 31, 1995 book value of common equity, 1996 revenues, EBITDA and EBIT.
In the case of price per share/research analysts' 1995 estimate earnings per
share, price per share/research analysts' 1996 estimated earnings per share,
price per share/book value of common equity per share and market value of common
stock/cash flow, Merrill Lynch added projected debt and preferred stock (less
cash) for UtilCo at December 31, 1995 to arrive at estimated enterprise values
for UtilCo. The relevant multiple ranges for price per share/research analysts'
1995 estimated earnings per share, price per share/research analysts' 1996
estimated earnings per share, price per share/book value of common equity per
share, market value of common stock/cash flow, market capitalization/revenues,
market capitalization/EBITDA and market capitalization/EBIT were 14.1x to 15.6x,
12.2x to 13.3x, 1.0x to 1.8x, 4.2x to 7.7x, 1.0x to 3.9x, 8.2x to 9.8x and 10.5x
to 12.7x, respectively.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a DCF analysis for
UtilCo using UCU's management projections of future project cash flows for each
of UtilCo's existing projects in operation or under construction and calculated
an estimated valuation range. The analysis did not include value for estimated
earnings from future development projects that were not under signed or awarded
power contracts. The DCF was calculated assuming discount rates ranging from
11.5% to 12.5% and was comprised of the sum of the present value of (i) the
projected unlevered free cash flows
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generated by each project over the remaining term of the project's power
purchase agreement and (ii) by assigning a terminal value at the end of the term
of the power purchase agreement to each project based on each project's
remaining useful life.
OTHER BUSINESSES. Other businesses include UCU Australia, UCU British
Columbia, UCU Marketing Services, UCU New Zealand, UCU United Kingdom and
Unallocated and Other Items. Using various valuation methodologies, including a
comparable company analysis, DCF analysis and book value approaches, similar to
those described above, Merrill Lynch derived an estimated enterprise valuation
range for these businesses of $426 million to $577 million.
IMPLIED EXCHANGE RATIO RANGE
Based upon the estimated valuations of KCPL and UCU set forth above, Merrill
Lynch derived estimated enterprise and common equity valuation ranges for both
companies and calculated an implied exchange ratio range of 0.883 to 1.332
shares of UCU Common Stock to a share of KCPL Common Stock.
TRADING RATIO ANALYSIS
Merrill Lynch reviewed the performance of the per share market prices of
KCPL Common Stock and UCU Common Stock over the five-year period ended January
12, 1996. Merrill Lynch also calculated the ratio of the average of the per
share market prices of UCU Common Stock to the per share market prices of KCPL
Common Stock from January 11, 1991 to January 12, 1996, January 15, 1993 to
January 12, 1996, January 20, 1995 to January 12, 1996, July 14, 1995 to January
12, 1996, October 13, 1995 to January 12, 1996 and December 15, 1995 to January
12, 1996. This analysis showed that over the five-year, three-year, one-year,
six-month, three-month and one-month periods, the per share market prices of UCU
Common Stock compared to the per share market prices of KCPL Common Stock,
traded at average ratios of 1.25, 1.26, 1.20, 1.17, 1.13 and 1.11, respectively.
Merrill Lynch noted for the KCPL Board that based on January 12, 1996 closing
prices, the trading ratio of UCU Common Stock compared to KCPL Common Stock was
1.096.
CONTRIBUTION ANALYSIS
In order to determine an implied exchange ratio based upon contribution
analysis, Merrill Lynch calculated the contribution of KCPL and UCU to the pro
forma combined company with respect to (i) earnings per common share, (ii)
dividends per common share and (iii) book value of equity per common share, for
the years ended 1993 through 1994 (the "Historical Period") and, using
management projections (excluding estimated potential synergies) provided by the
respective managements of KCPL and UCU, for the years 1995 through 2000 (the
"Projected Period"). The analysis of earnings per common share yielded a range
of implied exchange ratios for UCU Common Stock to KCPL Common Stock of 1.273 to
1.299 during the Historical Period and 0.980 to 1.163 during the Projected
Period. The analysis of dividends per common share yielded a range of implied
exchange ratios of 1.109 to 1.132 during the Historical Period and 1.081 to
1.114 during the Projected Period. The analysis of book value of common equity
per common share yielded a range of implied exchange ratios of 1.439 to 1.449
during the Historical Period and 1.406 to 1.461 during the Projected Period.
PRO FORMA ANALYSIS
Merrill Lynch also analyzed certain pro forma effects resulting from the
Original Merger, including the potential impact to KCPL's projected stand-alone
earnings per share, dividends per share, dividend payout ratios and total debt
to total capitalization ratios. Using the projected earnings for the years 1995
through 2000 provided by the respective managements of KCPL and UCU, Merrill
Lynch compared the projected earnings per share of KCPL on a stand-alone basis
(assuming the Original Merger does not occur) to the earnings per share of
common stock of KCU assuming the exchange ratios contemplated by the Original
Merger Agreement. In addition, Merrill Lynch considered certain estimated
synergies expected to be achieved as a result of the Original Merger. For
conservatism, Merrill Lynch excluded certain savings in the area of capital
deferral. For its pro forma analysis, based upon input from KCPL management,
Merrill Lynch assumed 50% of the estimated pre-tax labor and non-labor synergies
would be realized by stockholders of Newco.
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Assuming inclusion of the synergies as detailed above, the analysis
indicated that the Original Merger would be dilutive to the projected earnings
per share of a KCPL shareholder in the amount of 3.4% in 1995, accretive to the
projected earnings per share of a KCPL shareholder in the amount of 0.6% in
1996, dilutive to the projected earnings per share of a KCPL shareholder in the
amount of 0.6% in 1997 and accretive to the projected earnings per share of a
KCPL shareholder in the amounts of 0.8% in 1998, 2.1% in 1999 and 4.9% in 2000.
KCPL's stand-alone dividend payout ratios were projected to be 81.7% in 1995,
81.5% in 1996, 75.5% in 1997, 70.2% in 1998, 67.6% in 1999 and 67.5% in 2000
compared to KCU's projected dividend payout ratios of 86.9% in 1995, 81.1% in
1996, 76.0% in 1997, 69.9% in 1998, 66.2% in 1999 and 64.3% in 2000. KCPL's
stand-alone total debt to total capitalization ratios were projected to be 44.5%
in 1996, 44.4% in 1997, 42.7% in 1998, 41.6% in 1999 and 40.7% in 2000 compared
to Newco's projected total debt to total capitalization ratios of 51.2% in 1996,
50.7% in 1997, 48.8% in 1998, 46.8% in 1999 and 46.2% in 2000.
In addition, Merrill Lynch made a similar comparison assuming the exchange
ratios contemplated by the Original Merger Agreement with no synergies. The
analysis indicated that the Original Merger would be dilutive to the projected
earnings per share of a KCPL shareholder in amounts of 3.4% in 1995, 1.4% in
1996, 4.6% in 1997, 4.6% in 1998, 3.9% in 1999 and 1.8% in 2000. KCPL's stand-
alone dividend payout ratio was projected to be 81.7% in 1995, 81.5% in 1996,
75.5% in 1997, 70.2% in 1998, 67.6% in 1999 and 67.5% in 2000 compared to KCU's
projected dividend payout ratio of 86.9% in 1995, 82.7% in 1996, 79.2% in 1997,
73.5% in 1998, 70.3% in 1999 and 68.7% in 2000. KCPL's stand-alone total debt to
total capitalization ratio was projected to be 44.5% in 1996, 44.4% in 1997,
42.7% in 1998, 41.6% in 1999 and 40.7% in 2000 compared to KCU's projected total
debt to total capitalization ratio of 51.2% in 1996, 51.1% in 1997, 49.4% in
1998, 47.7% in 1999 and 47.6% in 2000. In both analyses, Merrill Lynch assumed
that KCU would assume the same dividend policy as KCPL.
The following is a summary of the material financial and comparative
analyses performed by Merrill Lynch in connection with its presentation to the
KCPL Board on May 20, 1996 and used by Merrill Lynch in arriving at its May 20,
1996 opinion.
RELATIVE STOCK PRICE PERFORMANCE
Merrill Lynch reviewed the performance of the per share market prices of
KCPL Common Stock and UCU Common Stock over the five-year and one-year periods
ended May 17, 1996. Merrill Lynch compared the per share market prices of KCPL
Common Stock and UCU Common Stock versus the S&P Electric Companies Index and an
index of regional companies which included IES Industries Inc., MidAmerican
Energy Company, Oklahoma Gas and Electric Company, Union Electric Company and
Western Resources, Inc.
TRADING RATIO ANALYSIS
Merrill Lynch calculated the ratio of the average of the per share market
prices of UCU Common Stock to the per share market prices of KCPL Common Stock
from May 17, 1991 to May 17, 1996, May 14, 1993 to May 17, 1996, May 19, 1995 to
May 17, 1996, November 17, 1995 to May 17, 1996, February 16, 1996 to May 17,
1996 and April 12, 1996 to May 17, 1996. This analysis showed that over the
five-year, three-year, one-year, six-month, three-month and one-month periods,
the per share market prices of UCU Common Stock, compared to the per share
market prices of KCPL Common Stock, traded at average ratios of 1.24, 1.25,
1.16, 1.12, 1.12, and 1.09, respectively.
PRO FORMA ANALYSIS -- EXCLUDING REVENUE ENHANCEMENTS
Merrill Lynch analyzed certain pro forma effects resulting from the Mergers
excluding certain revenue enhancements, or unregulated business growth
opportunities, as provided by the managements of KCPL and UCU, as described
below. Merrill Lynch analyzed the potential impact of the Mergers on KCPL's
projected stand-alone earnings per share, dividends per share and dividend
payout ratios, using both management projections and First Call consensus
earnings estimates and management projections for dividends per share. In both
analyses, Merrill Lynch compared the projected earnings per share, dividends per
share and dividend payout ratios of KCPL for the years 1996 through 2000 on a
stand-alone basis (assuming the Mergers do not occur) to the earnings per
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share, dividends per share and dividend payout ratios of Newco Common Stock
(assuming the Effective Time of the Mergers is January 1, 1997) assuming the
Exchange Ratio contemplated by the Merger Agreement. In addition, Merrill Lynch
considered the financial effects of certain estimated synergies (including
amounts, timing of realization and retention rates to Newco shareholders)
expected to be achieved as a result of the Mergers as provided by Ernst & Young
and included in KCPL's and UCU's filing with the FERC relating to the Original
Merger. Merrill Lynch did not consider the financial effects of the additional
operational benefits discussed above under the caption "THE MERGERS --
Additional Operational Benefits."
Using the projected earnings for the years 1996 through 2000 provided by the
respective managements of KCPL and UCU, the analysis indicated that the Mergers
would be accretive to the projected earnings per share of a KCPL shareholder in
the amounts of 3.8% in 1996, 1.5% in 1997, 3.3% in 1998, 7.0% in 1999 and 10.2%
in 2000. Assuming Newco dividends per share of $1.85 in 1997, $1.90 in 1998,
$1.95 in 1999 and $2.00 in 2000, the analysis indicated that the Mergers would
be accretive to the projected dividends per share of a KCPL shareholder in the
amounts of 15.6% in 1997, 15.9% in 1998, 16.1% in 1999 and 16.3% in 2000. KCPL's
stand-alone dividend payout ratios were projected to be 74.4% in 1997, 69.2% in
1998, 66.7% in 1999 and 66.9% in 2000 compared to Newco's projected dividend
payout ratio of 84.8% in 1997, 77.6% in 1998, 72.4% in 1999 and 70.6% in 2000.
Using the projected earnings for the years 1996 through 2000 derived from
First Call consensus earnings estimates, the analysis indicated that the Mergers
would be accretive to the projected earnings per share of a KCPL shareholder in
the amounts of 4.7% in 1996, 5.7% in 1997, 10.4% in 1998, 14.8% in 1999 and
18.1% in 2000. Assuming Newco dividends per share of $1.85 in 1997, $1.90 in
1998, $1.95 in 1999 and $2.00 in 2000, the analysis indicated that the Mergers
would be accretive to the projected dividends per share of a KCPL shareholder in
the amounts of 15.6% in 1997, 15.9% in 1998, 16.1% in 1999 and 16.3% in 2000.
KCPL's stand-alone dividend payout ratios were projected to be 77.7% in 1997,
77.8% in 1998, 78.0% in 1999 and 78.0% in 2000 compared to Newco's projected
dividend payout ratio of 84.9% in 1997, 81.7% in 1998, 78.8% in 1999 and 76.8%
in 2000.
PRO FORMA ANALYSIS -- INCLUDING REVENUE ENHANCEMENTS
In addition, Merrill Lynch separately analyzed certain pro forma effects of
the Mergers including certain revenue enhancements, as provided by the
management teams from both KCPL and UCU. CLC assisted the managements of KCPL
and UCU in their identification of these revenue enhancements by facilitating
discussions between KCPL and UCU and by reviewing the methodologies utilized in
the identification of these revenue enhancements. Merrill Lynch's analysis
consisted of a revenue enhancement sensitivity assuming $30, $45 and $60 million
of pre-tax revenue enhancements per year. Merrill Lynch assumed that 50% of
these pre-tax revenue enhancements would be realized in 1997, and 100% of these
pre-tax revenue enhancements would be realized thereafter.
Using the projected earnings for the years 1997 through 2000 provided by the
respective managements of KCPL and UCU and assuming $30 million of pre-tax
revenue enhancements per year, the analysis indicated that the Mergers would be
accretive to the projected earnings per share of a KCPL shareholder in the
amounts of 5.3% in 1997, 10.3% in 1998, 13.5% in 1999 and 16.7% in 2000. KCPL's
stand-alone dividend payout ratios were projected to be 74.4% in 1997, 69.2% in
1998, 66.7% in 1999 and 66.9% in 2000 compared to Newco's projected dividend
payout ratio of 81.7% in 1997, 72.7% in 1998, 68.2% in 1999 and 66.7% in 2000.
Assuming $45 million of pre-tax revenue enhancements per year, the analysis
indicated that the Mergers would be accretive to the projected earnings per
share of a KCPL shareholder in the amounts of 7.3% in 1997, 13.8% in 1998, 16.8%
in 1999 and 19.9% in 2000. KCPL's stand-alone dividend payout ratios were
projected to be 74.4% in 1997, 69.2% in 1998, 66.7% in 1999 and 66.9% in 2000
compared to Newco's projected dividend payout ratio of 80.2% in 1997, 70.4% in
1998, 66.2% in 1999 and 64.9% in 2000. Assuming $60 million of pre-tax revenue
enhancements per year, the analysis indicated that the Mergers would be
accretive to the projected earnings per share of a KCPL shareholder in the
amounts of 9.2% in 1997, 17.4% in 1998, 20.1% in 1999 and
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23.2% in 2000. KCPL's stand-alone dividend payout ratios were projected to be
74.4% in 1997, 69.2% in 1998, 66.7% in 1999 and 66.9% in 2000 compared to
Newco's projected dividend payout ratio of 78.8% in 1997, 68.3% in 1998, 64.4%
in 1999 and 63.2% in 2000.
Using the projected earnings for the years 1997 through 2000 derived from
First Call consensus earnings estimates and assuming $30 million of pre-tax
revenue enhancements per year, the analysis indicated that the Mergers would be
accretive to the projected earnings per share of a KCPL shareholder in the
amounts of 9.8% in 1997, 18.3% in 1998, 22.5% in 1999 and 25.6% in 2000. KCPL's
stand-alone dividend payout ratios were projected to be 77.7% in 1997, 77.8% in
1998, 78.0% in 1999 and 78.0% in 2000 compared to Newco's projected dividend
payout ratio of 81.8% in 1997, 76.2% in 1998, 73.9% in 1999 and 72.2% in 2000.
Assuming $45 million of pre-tax revenue enhancements per year, the analysis
indicated that the Mergers would be accretive to the projected earnings per
share of a KCPL shareholder in the amounts of 11.8% in 1997, 22.3% in 1998,
26.3% in 1999 and 29.4% in 2000. KCPL's stand-alone dividend payout ratios were
projected to be 77.7% in 1997, 77.8% in 1998, 78.0% in 1999 and 78.0% in 2000
compared to Newco's projected dividend payout ratio of 80.3% in 1997, 73.8% in
1998, 71.6% in 1999 and 70.1% in 2000. Assuming $60 million of pre-tax revenue
enhancements per year, the analysis indicated that the Mergers would be
accretive to the projected earnings per share of a KCPL shareholder in the
amounts of 13.8% in 1997, 26.2% in 1998, 30.2% in 1999 and 33.1% in 2000. KCPL's
stand-alone dividend payout ratios were projected to be 77.7% in 1997, 77.8% in
1998, 78.0% in 1999 and 78.0% in 2000 compared to Newco's projected dividend
payout ratio of 78.9% in 1997, 71.5% in 1998, 69.5% in 1999 and 68.2% in 2000.
The summary set forth above does not purport to be a complete description of
the analyses performed by Merrill Lynch in arriving at the Merrill Lynch Opinion
or the written opinion dated as of January 19, 1996. The preparation of a
fairness opinion is a complex process not necessarily susceptible to partial or
summary description. Merrill Lynch believes that its analyses must be considered
as a whole and that selecting portions of its analyses and of the factors
considered by it, without considering all such factors and analyses, could
create a misleading view of the process underlying its analyses set forth in the
Merrill Lynch Opinion and its opinion dated as of January 19, 1996. No company
in the KCPL Regulated Business Comparables, the UCU Regulated Businesses
Comparables, the Aquila Comparables or the UtilCo Comparables is identical to
the KCPL Regulated Business, the UCU Regulated Businesses, AGP and AEM, or
UtilCo, respectively. Accordingly, an analysis of publicly traded comparable
companies is not mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable companies and other factors that could affect the public trading
value of the comparable companies or company to which they are being compared.
The KCPL Board selected Merrill Lynch to render a fairness opinion because
Merrill Lynch is an internationally recognized investment banking firm with
substantial experience in transactions similar to the Merger and because it is
familiar with KCPL and its business. Merrill Lynch has from time to time
rendered investment banking, financial advisory and other services to KCPL for
which it has received customary compensation. As part of its investment banking
business, Merrill Lynch is continually engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions.
Pursuant to the terms of an engagement letter dated November 14, 1995, KCPL
has agreed to pay Merrill Lynch (i) a $150,000 retainer fee and (ii) a
transaction fee equal to $7,000,000 (the "Transaction Fee") against which the
amount referred to in clause (i) will be credited. The Transaction Fee is
payable in three installments (a) 33 1/3% upon the execution of a definitive
agreement to effect the Merger, (b) 33 1/3% upon shareholder approval and (c)
any remaining unpaid portion upon closing of the Merger. KCPL has also agreed to
reimburse Merrill Lynch for its reasonable out-of-pocket expenses, subject to
certain limitations, and to indemnify Merrill Lynch and certain related persons
against certain liabilities in connection with its engagement, including certain
liabilities under the federal securities laws.
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Pursuant to the terms of an engagement letter dated March 4, 1995, KCPL has
retained Merrill Lynch as its exclusive financial advisor with respect to
certain events, including, among other things, (a) any acquisition by a person
or group of persons of 5% or more of any class of KCPL's equity securities, (b)
any solicitation of proxies or shareholder consents in opposition to, or without
the support of the KCPL Board, (c) any oral or written proposal to KCPL or any
of its shareholders relating to an acquisition of, or a business combination
involving KCPL (by merger, tender offer or otherwise) or relating to the
acquisition of any of its capital stock or all or a substantial portion of its
revenues or income by way of a joint venture, negotiated purchase, lease,
license, exchange or other means or (d) any other extraordinary transactions
involving KCPL. Pursuant to such engagement letter, KCPL has agreed to retain
Merrill Lynch on terms and conditions customarily established by major
investment banking firms for similar services in similar circumstances at such
time.
In the ordinary course of Merrill Lynch's business, Merrill Lynch may
actively trade the securities of KCPL and UCU for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities.
OPINION OF UCU'S FINANCIAL ADVISOR
UCU has engaged DLJ to act as its financial advisor in connection with the
transactions contemplated by the Merger Agreement and to render its opinion to
the UCU Board as to the fairness, from a financial point of view, to the
stockholders of UCU of the terms of the Exchange Ratio pursuant to the Merger
Agreement. DLJ was retained based on its experience, expertise in the industry,
reputation and prior relationship with UCU.
On May 19, 1996, DLJ delivered its oral opinion to the UCU Board, which
opinion was subsequently confirmed in a written opinion dated as of May 19, 1996
and a further written opinion dated the date of this Joint Proxy
Statement/Prospectus, to the effect that, as of such dates and subject to the
assumptions made, matters considered and limits of the review undertaken, as set
forth in such opinions, the Exchange Ratio is fair, from a financial point of
view, to holders of UCU Common Stock. Reference herein to the "DLJ Opinion"
refers to the written opinion of DLJ dated as of May 19, 1996. The DLJ Opinion
dated the date of this Joint Proxy Statement/Prospectus is substantially the
same as the May 19, 1996 opinion.
A COPY OF THE WRITTEN OPINION OF DLJ, DATED AS OF THE DATE OF THIS JOINT
PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITS OF THE REVIEW UNDERTAKEN BY DLJ, IS ATTACHED HERETO AS
ANNEX C AND IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS OF UCU ARE URGED
TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. THE DLJ OPINION IS DIRECTED
ONLY TO THE FAIRNESS OF THE UCU EXCHANGE RATIO FROM A FINANCIAL POINT OF VIEW TO
HOLDERS OF UCU COMMON STOCK AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY UCU
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE UCU MEETING. THE
SUMMARY OF THE DLJ OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS,
WHILE CONTAINING ALL MATERIAL ELEMENTS OF SUCH OPINION, IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION OF DLJ, DATED AS OF THE
DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS, ATTACHED AS ANNEX C HERETO.
In arriving at the DLJ Opinion, DLJ reviewed, among other things, (i) the
draft Merger Agreement, dated May 18, 1996; (ii) Annual Reports to Stockholders
and Annual Reports on Form 10-K of UCU and KCPL for the five fiscal years ended
December 31, 1995 and Quarterly Reports on Form 10-Q of UCU and KCPL for the
periods ending June 30, 1995, September 30, 1995 and March 31, 1996; (iii) FERC
Forms 1 of UCU and KCPL; (iv) certain other communications from UCU and KCPL to
their respective stockholders; (v) certain internal financial analyses and
projections, including analyses and projections of certain operating
efficiencies and financial synergies expected to be achieved as a result of the
Mergers, provided to DLJ by each of UCU and KCPL; (vi) the historical prices and
trading volumes of the common stock of each of UCU and KCPL; (vii) publicly
available financial data and stock market performance data of companies which
DLJ deemed comparable in relevant respects to UCU and KCPL; and (viii) the
financial terms, including prices and premiums paid, of certain recent business
combinations in the gas and electric utility industry. DLJ also held discussions
with members of the senior management of UCU and KCPL regarding the past and
current business operations, financial condition and future prospects of their
respective companies
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and their analyses of strategic benefits of the Mergers, including, without
limitation, the amount and timing of realization of the synergies referred to
above. In addition, DLJ performed such other financial studies, analyses and
investigations, and took into account such other matters as DLJ considered
appropriate for purposes of rendering the DLJ Opinion.
In connection with its review, DLJ did not independently verify any of the
foregoing information or any underlying assumptions, including certain synergies
expected to be achieved in the Mergers, and relied on the accuracy, completeness
and fairness of all financial and other information that was available to DLJ
from public sources, that was provided to DLJ by UCU, KCPL or their respective
representatives, or that was otherwise reviewed by DLJ, including the outcomes
projected by UCU and KCPL of legal, regulatory and other contingencies. With
respect to the financial projections supplied to DLJ, DLJ assumed that they had
been reasonably prepared on the basis reflecting the best currently available
estimates and judgment of the managements of UCU and KCPL as to the future
financial performance of UCU and KCPL, as the case may be, and as to the
outcomes projected of legal, regulatory and other contingencies. DLJ did not and
does not assume any responsibility for the information or projections provided
to it, and DLJ has further relied upon the assurances of the managements of UCU
and KCPL that they are unaware of any facts that would make the information or
projections provided to DLJ incomplete or misleading. In addition, DLJ, with
UCU's consent, did not make an independent evaluation and appraisal of the
assets and liabilities of UCU or KCPL or any respective subsidiaries and DLJ has
not been furnished with any such evaluation or appraisal. In arriving at its
opinion, DLJ assumed, with UCU's consent, that the consummation of the
transactions contemplated by the Merger Agreement will be accounted for as a
pooling of interests under generally accepted accounting principles. In
addition, DLJ assumed that the Mergers will be a reorganization as described in
Section 368(a) of the Code, and the regulations thereunder, and that UCU and the
stockholders of UCU who exchange their shares solely for stock of Newco will
recognize no gain or loss for federal income tax purposes as a result of the
consummation of the Mergers. The DLJ Opinion is necessarily based on economic,
market and other conditions, and the information made available to it, as of May
19, 1996.
In rendering the DLJ Opinion, DLJ performed a variety of financial analyses.
All such material analyses are summarized below.
COMPARABLE PUBLIC COMPANIES. DLJ reviewed and compared certain publicly
available historical financial information, projected 1996, 1997 and 1998
financial results (based on research analysts' estimates as reported by IBES)
and stock market performance for UCU and KCPL to corresponding information for
selected publicly-traded companies including Cilcorp, Inc., Citizens Utilities
Company, MidAmerican Energy Company, MDU Resources Group, Inc. and Western
Resources, Inc. (collectively, the "Public Comparables"). The Public Comparables
were chosen because they are publicly-traded companies with operations that for
purposes of analysis may be considered similar to UCU and KCPL.
DLJ examined, among other things, (i) the market capitalization; (ii) the
per share market price as a multiple of (a) EPS for the latest twelve months for
which financial reports had been filed with the SEC; (b) 1996 projected EPS (the
"1996 PE Ratio"); (c) 1997 projected EPS (the "1997 PE Ratio"); (d) 1998
projected EPS (the "1998 PE Ratio") and (e) per share book value of common
equity (the "Price/Book Ratio") for the most recent fiscal quarter for which
financial information was available and (iii) the enterprise value (defined as
market capitalization plus the principal amount of debt and liquidation value of
preferred stock less cash and cash equivalents) as a multiple of (a) LTM
revenue; (b) LTM EBITDA; and (c) LTM EBIT of UCU, KCPL and the Public
Comparables. Although DLJ considered each of the foregoing multiples, DLJ
attributed relatively greater weight to the 1996 PE Ratio, 1997 PE Ratio, 1998
PE Ratio and the Price/Book Ratio for purposes of its analyses of the Public
Comparables.
The analysis indicated that the average (excluding the maximum and minimum
values) 1996 PE Ratio, 1997 PE Ratio, 1998 PE Ratio and Price/Book Ratio of the
Public Comparables was 13.0x, 12.4x, 11.9x and 1.4x, respectively. The analysis
also indicated that UCU's 1996 PE Ratio, 1997 PE
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Ratio, 1998 PE Ratio and Price/Book Ratio were 12.8x, 12.3x, 11.7x and 1.3x,
respectively, and KCPL's 1996 PE Ratio, 1997 PE Ratio, 1998 PE Ratio and
Price/Book Ratio were 13.4x, 12.9x, 12.5x and 1.8x, respectively. Such
multiples, except the Price/Book Ratio, were based on a composite of research
analyst estimates of projected 1996, 1997 and 1998 EPS as reported by IBES. The
comparison of trading levels for UCU Common Stock and KCPL Common Stock to the
average trading levels for the Public Comparables provided an indication that
neither UCU Common Stock nor KCPL Common Stock were trading at levels materially
different than the Public Comparables.
COMPARABLE MERGER & ACQUISITION TRANSACTION ANALYSIS. DLJ reviewed
comparable transactions involving proposed or completed mergers between or
acquisitions of regulated gas and electric utilities occurring between June 1994
and November 1995 (the "Comparable M&A Transactions"). The companies involved in
the Comparable M&A Transactions were IES Industries, Interstate Power and WPL
Holdings; Washington Energy Company and Puget Sound Power & Light; Potomac
Electric Power Company and Baltimore Gas and Electric; Southwestern Public
Service and Public Service Co. of Colorado; Pennsylvania Power & Light and PECO
Energy; CIPSCO and Union Electric; Northern States Power and Wisconsin Energy
Corp.; Iowa-Illinois Gas & Electric Company and Midwest Resources Inc.; and
Sierra Pacific Resources and Washington Water Power Co. DLJ studied certain
publicly available data for each of the Comparable M&A Transactions including
the market value of the consideration to be received by the stockholders of the
company (the "Equity Consideration") as a multiple of the LTM net income and
book value. In addition, DLJ calculated the "Total Consideration" (defined as
Equity Consideration plus the principal amount of debt and the liquidation value
of preferred stock minus cash and cash equivalents and option proceeds) as a
multiple of LTM revenue, LTM EBITDA and LTM EBIT.
The analysis of Comparable M&A Transactions yielded average Equity
Consideration multiples of LTM net income and book value of 14.8x and 1.6x,
respectively, and Total Consideration multiples of LTM revenue, LTM EBITDA and
LTM EBIT of 2.2x, 7.4x and 11.3x, respectively. Based on the Exchange Ratio, DLJ
calculated per share Equity Consideration multiples of LTM EPS and per share
book value of common equity of 12.0x and 1.3x, respectively, and Total
Consideration multiples of LTM revenue, LTM EBITDA and LTM EBIT of 0.9x, 6.6x
and 10.2x, respectively, for UCU and per share Equity Consideration multiples of
LTM EPS and per share book value of common equity of 14.0x and 1.9x,
respectively, and Total Consideration multiples of LTM revenue, LTM EBITDA and
LTM EBIT of 3.0x, 7.5x and 11.2x, respectively, for KCPL.
Because the reasons for and circumstances surrounding each of the Comparable
M&A Transactions analyzed were diverse and because of the inherent differences
between the operations of UCU, KCPL and the companies engaged in the Comparable
M&A Transactions, DLJ believed that a purely quantitative comparable transaction
analysis would not be particularly meaningful in the context of the Mergers. DLJ
believed that an appropriate use of a comparable transaction analysis in this
instance would involve qualitative judgments concerning differences between the
characteristics of these transactions and the Mergers which would affect the
relative values of the merged companies and UCU and KCPL.
PRO FORMA MERGER ANALYSIS. DLJ analyzed the pro forma impact of the Mergers
on the holders of shares of UCU Common Stock, based on the Exchange Ratio. The
analysis was based on projections for UCU and KCPL prepared by their respective
managements for the years 1996, 1997, 1998, 1999 and 2000. The UCU projections,
provided by UCU management, included a common stock offering of approximately
five million shares expected to be completed in 1996. DLJ compared the EPS of
UCU Common Stock, on a stand-alone basis, to the EPS of Newco on a pro forma
basis (as adjusted for the Exchange Ratio). Based on such analysis and assuming
no synergies, the proposed transaction would be dilutive to the holders of UCU
Common Stock on an EPS basis in the years 1996, 1997, 1998, 1999 and 2000. The
proposed transaction would be accretive to UCU stockholders on an EPS basis in
the years 1996, 1997, 1998, 1999 and 2000 assuming $25 million of annual pretax
retained synergies (amounts DLJ believed to be achievable based on its
discussions with UCU and KCPL).
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DLJ also analyzed the pro forma impact of the Mergers on the common dividend
per share and dividend payout ratio (the "Payout Ratio") (defined as the common
dividend per share divided by EPS) to holders of UCU Common Stock. Based on
Newco's announced common dividend per share of $1.85 beginning in 1998, DLJ
determined that Newco's common dividend per share would be accretive to UCU's
stand-alone projected common dividend per share. In addition, DLJ compared the
Payout Ratio of UCU Common Stock, on a stand-alone basis, to the Payout Ratio of
Newco on a pro forma basis. Based on such analysis and assuming no synergies,
the higher common dividend per share would increase the Payout Ratio for holders
of UCU Common Stock in the years 1996, 1997, 1998, 1999 and 2000. As synergies
are realized and retained, the Payout Ratio will be reduced. The proposed
transaction would decrease the Payout Ratio for holders of UCU Common Stock in
the years 1996, 1997, 1998, 1999 and 2000 assuming $25 million of annual pretax
retained synergies.
In addition, DLJ determined the pro forma impact of the Mergers on the
end-of-year return on common equity ("ROE") (defined as the net income available
to the common equity divided by end-of-year common equity). DLJ compared the ROE
of UCU Common Stock, on a stand-alone basis, to the ROE of Newco on a pro forma
basis. Based on such analysis and assuming no synergies, the proposed
transaction would increase the ROE to holders of UCU Common Stock in the years
1996, 1997, 1998, 1999 and 2000.
RELATIVE CONTRIBUTION ANALYSIS. DLJ calculated the contribution of each of
UCU and KCPL to Newco with respect to, among other things, equity market
capitalization, enterprise value and net income available to common. The
analysis indicated that UCU would contribute 44.5% of the equity market
capitalization, 52.5% of the aggregate enterprise value and 46.3% of the net
income available to common of Newco. The analysis indicated that UCU contributed
a higher percentage of enterprise value than equity market capitalization and
net income available to common because of its higher debt level. DLJ compared
UCU's relative contribution to 43.0%, its pro forma ownership of Newco based on
the Exchange Ratio.
DISCOUNTED CASH FLOW ANALYSIS. DLJ performed a DCF analysis of UCU and KCPL
using their respective management's projections.
DLJ's DCF analysis of UCU consisted of a segment valuation of UCU's
regulated domestic and international utility businesses (the "Regulated
Businesses"), Aquila, UCU's non-regulated gas marketing, transportation and
processing subsidiary, and UtilCo, UCU's non-regulated subsidiary with ownership
interests in independent power projects (collectively the "Segments"). For each
of the Segments, DLJ calculated the present value of (i) the projected five-year
free cash flow and (ii) the year 2000 value (the "Terminal Value") based upon a
range of multiples of projected year 2000 EBIT. The projections used in DLJ's
DCF analysis were provided to DLJ by UCU management. DLJ used multiples of EBIT
ranging from 9.0 to 11.0 for the Regulated Businesses, 13.0 to 15.0 for Aquila
and 10.0 to 12.0 for UtilCo. These multiples were selected based on comparable
companies for each Segment's business and based on DLJ's experience and
judgment. For the Regulated Businesses, DLJ reviewed the multiples of the Public
Comparables. For Aquila, DLJ reviewed the multiples for selected publicly-traded
companies including Tejas Gas Corp., Western Gas Resources, Inc., NGC
Corporation and Mitchell Energy & Development Corp. For UtilCo, DLJ reviewed the
multiples for selected publicly-traded companies including AES Corp., California
Energy Co. Inc., Destec Energy Inc., Sithe Energies Inc., Trigen Energy Corp.
and Enron Global Power & Pipelines. DLJ calculated the enterprise value of UCU
by taking the summation of the present values calculated above for each of the
Segments. In performing this analysis, DLJ used discount rates ranging from 7.0%
to 8.5% for each of the Segments. These discount rates were selected by
calculating the weighted average cost of capital for each of the Segments
according to the Capital Asset Pricing Model. The analysis indicated enterprise
values for UCU ranging from $3,208.5 million to $4,043.0 million.
DLJ calculated the present value of free cash flows for KCPL for the years
1996 through 2000 using discount rates ranging from 7.5% to 9.5%. DLJ calculated
KCPL's Terminal Value in the year 2000 based on multiples of EBIT ranging from
9.0 to 11.0 (which DLJ believed to be appropriate based on KCPL's business and
based on DLJ's experience and judgment) and discounted this value by
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discount rates ranging from 7.5% to 9.5%. These discount rates were selected by
calculating the weighted average cost of capital for KCPL according to the
Capital Asset Pricing Model. The analysis indicated enterprise values for KCPL
ranging from $2,295.3 million to $2,898.9 million. DLJ does not believe that the
exchange ratios implied by the DCF of UCU and KCPL should be viewed as more
reliable than any other valuation methodology DLJ used in arriving at its
opinion.
DIVIDEND DISCOUNT VALUATION ANALYSIS. DLJ performed a dividend discount
valuation analysis for UCU and KCPL. DLJ calculated a range of equity values for
UCU Common Stock based upon the sum of the present value of (a) its projected
dividends for the years 1996 through 2000 and (b) the year 2000 value of UCU
Common Stock assuming perpetual dividend growth rates ranging from 2.0% to 4.0%,
utilizing equity discount rates ranging from 10.0% to 11.5%. The equity discount
rates were calculated according to the Capital Asset Pricing Model. This
analysis was based upon projections and other information provided to DLJ by UCU
management. DLJ calculated a range of equity values for KCPL Common Stock
utilizing the same perpetual dividend growth rates and based upon projections
and other information provided to DLJ by KCPL management, utilizing equity
discount rates ranging from 10.5% to 12.0%. This analysis yielded exchange
ratios ranging from 1.160x to 1.180x. In arriving at the DLJ Opinion, DLJ
considered, as one of the factors in its analysis, that the Exchange Ratio is
outside the exchange ratios implied by the dividend discount valuation of UCU
and KCPL.
DLJ has indicated to UCU that it believes that its analyses must be
considered as a whole and that selecting portions of the factors considered and
analyses performed, without considering all factors and analyses, could create
an incomplete view of the processes underlying DLJ's analyses and the DLJ
Opinion. The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analyses or summary description. In its
analyses, DLJ did not attribute any particular weight to any analysis factor
considered by it; rather, DLJ made its determination as to fairness from a
financial point of view based on qualitative judgments as to the significance
and relevance of the financial and comparative analyses and factors described
above, taken as a whole. No company or transaction used in the above analyses as
a comparison is identical to UCU or KCPL or the contemplated transaction.
Accordingly, an analysis of public comparables and comparable transactions is
not purely quantitative; rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable companies and other factors that could affect the public trading
value of the comparable companies or company to which they are being compared.
The analyses were prepared solely for the purpose of assisting DLJ in providing
the DLJ Opinion to the UCU Board as to the fairness from a financial point of
view of the Exchange Ratio to holders of UCU Common Stock and do not purport to
be appraisals and do not necessarily reflect the prices at which companies may
actually be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than as set forth herein. Because such estimates are
inherently subject to uncertainty, DLJ assumes no responsibility for their
accuracy. Although DLJ evaluated the fairness from a financial point of view of
the Exchange Ratio to holders of UCU Common Stock, the specific Exchange Ratio
was determined by UCU and KCPL through arm's-length negotiation. The foregoing
summary does not purport to be a complete description of the analysis performed
by DLJ and is qualified by reference to the DLJ Opinion set forth in Annex C
hereto.
DLJ is an internationally recognized investment banking firm which is
continually engaged in the valuation of businesses and their securities in
connection with transactions and acquisitions and other purposes. In the
ordinary course of its business, DLJ may actively trade the debt and equity
securities of UCU, KCPL and their subsidiaries for its own account and for the
accounts of customers and, accordingly, may, at any time, hold long or short
positions in such securities. DLJ has provided financial advisory and investment
banking services to UCU, KCPL and its affiliates in the past, for which services
it has received customary fees.
For its services as financial advisor, DLJ has received $2,000,000 in fees
to date and will receive an additional $5,000,000 advisory fee upon the closing
of the Mergers. UCU has also agreed to indemnify DLJ and certain related parties
against certain liabilities in connection with its engagement, including certain
liabilities under the federal securities laws.
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CONFLICTS OF INTEREST
In considering the recommendations of the KCPL Board and the UCU Board with
respect to the Mergers, stockholders should be aware that certain members of
KCPL's and UCU's management and Boards of Directors have certain interests in
the Mergers that are in addition to the interests of stockholders of KCPL and
UCU generally. The Boards of Directors of each of KCPL and UCU were aware of
these interests and considered them, among other matters, in approving the
Merger Agreement, the Mergers and the transactions contemplated thereby.
EMPLOYMENT AGREEMENTS. The Employment Agreements with each of Messrs.
Jennings and Green will become effective upon the consummation of the Mergers.
The term of each Employment Agreement shall last until the fifth anniversary of
the Effective Time. Pursuant to Mr. Jennings' Employment Agreement, from the
Effective Time until the date of the annual meeting of shareholders of Newco
that occurs in 2002, Mr. Jennings will serve as Chairman of Newco, and
thereafter until the expiration of his Employment Agreement will serve as Vice
Chairman of Newco. From the Effective Time until the earlier of the annual
meeting of shareholders of Newco that occurs in 2002 or the date Mr. Jennings
ceases to serve as Chairman, Mr. Green will serve as Vice Chairman and Chief
Executive Officer of Newco, and thereafter until the expiration of his
Employment Agreement will serve as Chairman and Chief Executive Officer. See "--
Employment Agreements." The Employment Agreements with Messrs. Jennings and
Green provide that each will receive an annual base salary, short-term and
long-term incentive compensation and supplemental retirement benefits no less
than they received before the Effective Time. In 1995, Mr. Jennings received
aggregate annual cash compensation from KCPL totalling $535,062 and Mr. Green
received aggregate annual cash compensation from UCU totalling $548,730.
EMPLOYEE PLANS AND SEVERANCE ARRANGEMENTS. Under certain severance
arrangements entered into by KCPL and UCU, certain payments may become payable
in connection with the Mergers. In addition, stock options outstanding under the
UCU Plan and the UCU 1986 Plan vested upon execution of the Original Merger
Agreement. Restricted stock outstanding under the UCU 1986 Plan will vest upon
consummation of the Mergers. See "-- Employee Plans and Severance Arrangements."
Each of KCPL's five most highly compensated executive officers have entered
into a KCPL Severance Agreement. Payments which could be made under certain
circumstances to such individuals in the event of their termination of
employment after the Mergers are as follows: Mr. A. Drue Jennings -- $2,275,384;
Mr. Bernard J. Beaudoin -- $1,129,949; Mr. Marcus Jackson -- $861,161; Mr.
Ronald G. Wasson -- $1,045,065; Mr. J. Turner White -- $780,736. In addition,
each of these individuals, if they receive the severance payments described
above, would also receive the following amounts in deferred compensation: Mr.
Jennings -- $282,196; Mr. Beaudoin -- $54,025; Mr. Jackson -- $0; Mr. Wasson --
$113,493; and Mr. White -- $0.
Except for Mr. Charles Dempster, each of the five most highly compensated
executive officers of UCU entered into a UCU Severance Agreement. Payments which
could be made under certain circumstances to such individuals upon termination
of their employment after the Mergers are as follows: Mr. Richard Green --
$1,890,000, Mr. Robert Green -- $1,440,000; Mr. Burgess -- $722,304; and Mr.
Miller -- $841,548.
Stock options vested for the five most highly compensated executive officers
of UCU are as follows: Mr. Richard Green -- 120,565 shares; Mr. Robert Green --
74,194; Mr. Burgess -- 21,744; Mr. Dempster -- 41,582; and Mr. Miller -- 32,022.
Restricted stock which will vest for such officers is as follows: Mr. Richard
Green -- 44,536 shares; Mr. Robert Green -- 19,601; Mr. Burgess -- none; Mr.
Dempster -- 4,132; and Mr. Miller -- 3,493.
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BOARD OF DIRECTORS. As provided in the Merger Agreement, at the Effective
Time, the Newco Board will consist of 18 directors, nine of whom will be the
then existing directors of KCPL immediately prior to the Effective Time,
including Mr. Jennings, and nine of whom will be designated by UCU. To date, UCU
has not determined which individuals, in addition to Richard C. Green, Jr., will
be its designees to serve as directors of Newco as of the Effective Time.
However, it is currently anticipated that the directors of UCU immediately prior
to the Effective Time will serve as UCU's designees to the Newco Board. See
"NEWCO FOLLOWING THE MERGERS -- Newco Board of Directors."
INDEMNIFICATION. The parties have agreed in the Merger Agreement that Newco
will indemnify, to the fullest extent permitted by applicable law, the present
and former officers, directors and employees of each of the parties to the
Merger Agreement or any of their Subsidiaries against certain liabilities (i)
arising out of actions or omissions occurring at or prior to the Effective Time
that arise from or are based on such service as an officer, director or employee
or (ii) that are based on or arise out of or pertain to the transactions
contemplated by the Merger Agreement, and to maintain policies of directors' and
officers' liability insurance for a period of not less than six years after the
Effective Time, provided that Newco shall not be required to expend in any year
an amount in excess of 200% of the annual aggregate premium currently paid by
KCPL and UCU for such insurance. To the fullest extent permitted by law, from
and after the Effective Time, all rights to indemnification existing in favor of
the employees, agents, directors or officers of KCPL, UCU and their respective
Subsidiaries with respect to their activities as such prior to the Effective
Time, as provided in their respective articles of incorporation and bylaws in
effect on January 19, 1996, or otherwise in effect on January 19, 1996, shall
survive the Mergers and shall continue in full force and effect for a period of
not less than six years from the Effective Time. See "THE MERGER AGREEMENT --
Directors' and Officers' Indemnification."
CERTAIN ARRANGEMENTS REGARDING THE DIRECTORS AND MANAGEMENT OF NEWCO
In connection with the Mergers, the Newco Board, at the Effective Time, will
consist of 18 persons, nine of whom will be the then existing directors of KCPL
immediately prior to the Effective Time, and nine of whom will be designated by
UCU. To date, UCU has not determined which individuals, in addition to Richard
C. Green, Jr., will be its designees to serve as directors of Newco as of the
Effective Time. However, it is currently anticipated that the directors of UCU
immediately prior to the Effective Time will serve as the initial directors of
Newco. Robert K. Green, brother of Richard C. Green, Jr., will be the president
of Newco and Marcus Jackson will serve as Newco's executive vice president and
chief operating officer. Robert K. Green is currently president of UCU and
Marcus Jackson is senior vice president and chief operating officer of KCPL. See
"NEWCO FOLLOWING THE MERGERS -- Newco Board of Directors" and "-- Management of
Newco."
The Merger Agreement provides that during the three-year period commencing
at the Effective Time, certain provisions thereof (including provisions relating
to existing employee agreements, workforce matters, benefit plans, stock option
and other plans and certain officer positions of Newco) may be enforced on
behalf of the officers, directors and employees of KCPL and UCU, as the case may
be, by the directors of Newco designated by KCPL and UCU, respectively (or their
successors).
EMPLOYMENT AGREEMENTS
Forms of the Employment Agreements of Messrs. Jennings and Green are
attached hereto as Annexes F and G, respectively. Messrs. Jennings and Green are
sometimes hereinafter individually referred to as the "Executive." The
Employment Agreements will become effective only at the Effective Time. The
provisions of the Employment Agreements which relate to the Executive serving as
a director on the Newco Board assume that the Executive is elected to the Newco
Board by Newco shareholders.
The term of each Employment Agreement shall last until the fifth anniversary
of the Effective Time. Pursuant to Mr. Jennings' Employment Agreement, from the
Effective Time until the date of the annual meeting of shareholders of Newco
that occurs in 2002, Mr. Jennings will serve as Chairman of Newco, and
thereafter until the expiration of his Employment Agreement will serve as Vice
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Chairman of Newco. From the Effective Time until the earlier of the annual
meeting of shareholders of Newco that occurs in 2002 or the date Mr. Jennings
ceases to serve as Chairman, Mr. Green will serve as Vice Chairman and Chief
Executive Officer of Newco, and thereafter until the expiration of his
Employment Agreement will serve as Chairman and Chief Executive Officer.
Each Employment Agreement provides that the Executive will receive an annual
base salary, short-term and long-term incentive compensation (including stock
options and restricted stock) and supplemental retirement benefits no less than
they received before the Effective Time, as well as life insurance providing a
death benefit of three times their annual base salaries. The Executive is also
entitled to retirement and welfare benefits on the same basis as other
executives, and certain fringe benefits and to an unreduced early retirement
benefit under certain circumstances.
CERTAIN OBLIGATIONS OF NEWCO UPON TERMINATION OF EMPLOYMENT AGREEMENT. If
Newco terminates the employment of the Executive without "cause" (as defined in
the Employment Agreements) or the Executive terminates his employment for "good
reason" (as defined in the Employment Agreements, and which term includes a
termination by the Executive for any reason during the 30-day period commencing
on the third anniversary of the UCU Effective Time), (i) Newco shall pay to the
Executive in a lump sum, a cash amount equal to (a) the present value of the
Executive's annual base salary and incentive compensation (assuming targets have
been met) payable through the end of the term of the Employment Agreement or, if
longer, for a period of three years (the "Continuation Period"), each at the
rate in effect at the time of termination of the Executive's employment, (b)
except with respect to benefits described in clause (ii) below, the value of all
insurance, expenses and fringe benefits to which he would have been entitled
through the Continuation Period and (c) the value of all deferred compensation
amounts (together with accrued interest or earnings thereon), and all executive
life insurance benefits whether or not then vested or payable, and (ii) Newco
shall continue medical and welfare benefits to the Executive and/or his family
at least equal to those which would have been provided had he remained employed
by Newco through the end of the Continuation Period. If the Executive dies
during the term of the Employment Agreement, Newco will pay to the Executive or
his beneficiaries or estate all compensation earned through the date of death
(including previously deferred compensation and pro rata incentive compensation
based upon the maximum potential awards). If the Executive is terminated by
Newco for cause or if the Executive terminates his employment without good
reason, Newco will pay his base salary through the date of termination plus any
previously deferred compensation. Any amounts paid to the Executive pursuant to
his severance agreement will be netted against amounts due under his Employment
Agreement. See "-- Employee Plans and Severance Arrangements."
EMPLOYEE PLANS AND SEVERANCE ARRANGEMENTS
UCU has entered into Severance Compensation Agreements with 36 of its
officers (each, a "UCU Severance Agreement"). The UCU Severance Agreements are
intended to provide for continuity of management in the event of a "change of
control" of UCU or a "spin-off " of a business unit of UCU. Under such
agreements, executives are entitled to certain severance benefits if, following
a (a) "change of control," the executive's employment with UCU is terminated
within the three-year period following the "change of control," (b) "spin-off "
affecting the executive, the executive is terminated and does not become
employed by the "spin-off purchaser" or (c) "spin-off " affecting the executive,
the executive's employment with the "spin-off purchaser" is terminated within
the one-year period following the "spin-off," unless such termination is a
result of the executive's (i) "disability," (ii) "retirement," (iii) termination
for "cause," or (iv) decision to terminate employment other than for "good
reason" (each as defined in the UCU Severance Agreements). Severance benefits
include (A) a lump-sum cash amount equal to 2.99 times the executive's "average
annual compensation" in the event of a "change in control," or (B) 1.0 times the
executive's "average annual compensation" in the event of a "spin-off." In
addition, each UCU Severance Agreement provides for (1) acceleration of stock
options granted to the executive pursuant to UCC's stock incentive plan, (2)
lapsing of any restrictions relating to stock awards under such plan, (3) a
lump-sum cash payment of any deferred compensation, (4) immediate vesting in any
long-term incentive compensation under
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UCU's long-term incentive plan, (5) payment of a percentage of the cost of
insurance continuation benefits on behalf of the executive pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1986 and any other benefits
relating to health or medical care that are available under UCU policy to the
executive following termination of employment, and (6) a lump-sum cash amount
equal to the annual incentive paid to the executive in each of the immediately
preceding two calendar years, in the event of a "change in control," other than
a "spinoff," or in the immediately preceding calendar year in the event of a
"spin-off." Severance benefits to executives are effectively limited by Section
280G of the Code, and are therefore subject to adjustment in the event it is
determined that such benefits exceed or fall below the maximum amount permitted
under the Code. The Mergers will, at the Effective Time, constitute a "change in
control." If benefits become payable under all of the UCU Severance Agreements,
the aggregate amount that Newco would be required to pay thereunder would be
approximately $20.5 million.
KCPL has entered into severance agreements with a number of its executives,
including its seven most senior executives (each agreement with such senior
executives, a "KCPL Severance Agreement"). Each of the KCPL Severance Agreements
provides for the payment of severance benefits upon termination of employment
with KCPL (a) during the three-year period beginning with a "change in control"
of KCPL (or, if later, beginning with the consummation of the transaction the
approval of which by KCPL's shareholders constitutes a change in control),
unless such termination of employment is (i) by KCPL for "cause," (ii) by the
senior executive for any reason other than "good reason" (each as defined in the
KCPL Severance Agreements) or (iii) as a result of the senior executive's death
or disability or (b) during the 30-day period commencing one year after change
in control (or, if later, beginning with the consummation of the transaction the
approval of which by KCPL's shareholders constitutes a change in control).
If a senior executive's employment is terminated under the circumstances
described in the immediately preceding paragraph, KCPL is obligated to pay or
provide to such executive the following benefits: (A) a lump-sum cash amount in
an amount equal to (i) three times the senior executive's highest annual base
salary as in effect during the 12-month period immediately prior to the date of
termination, plus (ii) three times the senior executive's average annualized
incentive compensation awards paid or payable pursuant to the KCPL Incentive
Compensation Plan during the five fiscal years immediately preceding the fiscal
year in which the Mergers occur; (B) a lump-sum cash amount equal to the value
of three additional years of credit service under the KCPL Management Pension
Plan and any related agreement, and (C) a lump-sum cash amount equal to the
value of the unvested portion (if any) of such senior executive's employer
matching contributions under the KCPL Cash or Deferred Arrangement. In addition,
each KCPL Severance Agreement provides for three years' continuation of all
medical, accident, disability and life insurance plans with respect to the
senior executive. The KCPL Severance Agreements provide for an additional
payment to be made to the senior executive in order to indemnify the senior
executive for any excise tax imposed by Section 4999 of the Code on any payment
or distribution by KCPL or its affiliated companies to or for the benefit of the
senior executive. If benefits become payable under the KCPL Severance
Agreements, the aggregate amount that Newco would be required to pay thereunder
to the five most highly compensated officers of KCPL would be approximately $6.1
million.
NEWCO PLANS
Pursuant to the terms of the Merger Agreement, Newco will implement the
Newco Plans described below, subject to shareholder approval thereof at the KCPL
Meeting. Each of the Newco Plans will become effective as of the Effective Time.
NEWCO STOCK INCENTIVE PLAN. This plan is a comprehensive stock compensation
plan designed to provide Newco with the ability to provide incentives linked to
the profitability of its businesses and increases in stockholder value. The
Newco Stock Incentive Plan provides for the grant of stock options, including
incentive stock options ("ISOs"), stock appreciation rights ("SARs"), restricted
stock and performance units. The maximum number of shares of Newco Common Stock
available for
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issuance under the plan is 9,000,000 shares, but not more than 3,000,000 shares
may be issued as restricted stock, no participant may be granted awards covering
in excess of 600,000 shares of Newco Common Stock in any one year and no
participant may be granted performance units in any one calendar year payable in
cash in an amount that would exceed $2,000,000. The Nominating and Compensation
Committee of the Newco Board (the "Newco Compensation Committee") will
administer the plan and make awards thereunder, and will have broad authority to
fix the terms and conditions of individual agreements with participants. This
plan is being submitted to shareholders of KCPL for approval, and is described
in greater detail under "APPROVAL OF NEWCO PLANS -- Newco Stock Incentive Plan"
elsewhere in this Joint Proxy Statement/Prospectus; a copy of the plan is
attached as Annex D. Following implementation of the Newco Stock Incentive Plan,
no further obligations will be incurred under the existing stock incentive plans
of KCPL and UCU.
NEWCO MIC PLAN. This plan is a short-term incentive compensation plan
designed to benefit eligible employees of Newco and its subsidiaries. The Newco
MIC Plan rewards key management personnel for meeting established individual,
group and corporate goals. Employees who participate in this plan will be
granted awards payable in cash, shares of Newco Common Stock or such other form
as may be determined by the Newco Compensation Committee to the extent
predetermined goals are attained within the performance period. Awards are based
on a percentage of a participant's annual base salary. This plan is being
submitted to shareholders of KCPL for approval, and is described in greater
detail under "APPROVAL OF NEWCO PLANS -- Newco MIC Plan" elsewhere in this Joint
Proxy Statement/Prospectus; a copy of the plan is attached as Annex E. Following
implementation of the Newco MIC Plan, no further obligations will be incurred
under the existing short-term incentive plans of KCPL and UCU.
ACTIONS WITH RESPECT TO EXISTING STOCK OPTIONS AND CERTAIN OTHER EXISTING
ARRANGEMENTS. All stock options to acquire UCU Common Stock under the UCU
Employee Stock Option Plan and UCU 1986 Stock Incentive Plan that are
outstanding at the Effective Time will be converted into options to buy Newco
Common Stock, and the number of shares and exercise price under such options
will be adjusted so as to preserve both the same aggregate gain or loss
immediately after the Effective Time as existed immediately before the Effective
Time and the ratio of the exercise price per share subject to such stock option
to the fair market value per underlying share, provided, however, that in the
case of any stock option which is intended to be an ISO, the conversion shall be
adjusted, if necessary, to comply with Section 424(a) of the Code. Newco will
assume the obligation to honor such options and any other outstanding awards
under the existing stock incentive plans of UCU, and the terms and conditions of
such options and awards will otherwise remain the same as before the Effective
Time after giving effect to the conversion ratio of the UCU Common Stock. See
"THE MERGER AGREEMENT -- Benefit Plans."
DIVIDEND REINVESTMENT PLAN
It is anticipated that, after the Effective Time, Newco will have a dividend
reinvestment and stock purchase plan. Participants in the KCPL Dividend
Reinvestment Plan immediately prior to the Effective Time will continue to
participate in the Newco dividend reinvestment and stock purchase plan after the
Effective Time. Following the Effective Time, former common stockholders of UCU
will be able to participate in the Newco dividend reinvestment and stock
purchase plan with respect to the shares of Newco Common Stock that they receive
in the UCU Merger, and to have their accounts under the UCU Dividend
Reinvestment and Common Stock Purchase Plan transferred to the Newco dividend
reinvestment and stock purchase plan. Stockholders of KCPL and UCU will be
notified as to the terms of the Newco dividend reinvestment and stock purchase
plan as soon as practicable after such terms have been finalized.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
CONSEQUENCES TO EXCHANGING STOCKHOLDERS. The consummation of the Mergers is
conditioned upon the receipt by KCPL of an opinion from Skadden Arps and the
receipt by UCU of an opinion from Blackwell Sanders, each dated as of the
Effective Time, substantially to the effect that, on the basis of
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facts, representations and assumptions set forth therein: (i) no gain or loss
will be recognized by KCPL, UCU or Newco pursuant to the Mergers; (ii) with
respect to the opinion of Blackwell Sanders, no gain or loss will be recognized
by stockholders of UCU who exchange their shares of UCU Common Stock for shares
of Newco Common Stock as a result of the Mergers; and (iii) with respect to the
opinion of Skadden Arps, no gain or loss will be recognized by shareholders of
KCPL as a result of the Mergers.
The aggregate tax basis of the Newco Common Stock received in the UCU Merger
will be the same as the tax basis in the UCU Common Stock surrendered in
exchange therefor. The holding period of the Newco Common Stock received in the
UCU Merger will include the period during which the UCU Common Stock surrendered
in exchange therefor was held (provided such UCU Common Stock was held as a
capital asset at the UCU Effective Time).
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND
DOES NOT ADDRESS THE STATE, LOCAL, FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF
THE MERGERS. FURTHER, THE DISCUSSION MAY NOT APPLY TO PARTICULAR CATEGORIES OF
STOCKHOLDERS OF UCU, INCLUDING (I) STOCKHOLDERS WHO ACQUIRED SHARES OF UCU
COMMON STOCK PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION, (II) INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES, (III) FOREIGN CORPORATIONS AND (IV) ENTITIES THAT ARE OTHERWISE SUBJECT
TO SPECIAL TAX TREATMENT UNDER THE CODE (SUCH AS INSURANCE COMPANIES, TAX-EXEMPT
ENTITIES AND REGULATED INVESTMENT COMPANIES). THE DISCUSSION IS BASED ON THE
CODE AS IN EFFECT ON THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS, WHICH
MAY DIFFER AT THE EFFECTIVE TIME. STOCKHOLDERS OF UCU ARE URGED TO CONSULT THEIR
TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
MERGERS, INCLUDING THE APPLICATION TO THEM AND POSSIBLE EFFECT UPON THEM OF ANY
PENDING LEGISLATION, THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN
INCOME AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
It is intended that the Mergers will qualify as a pooling of interests for
accounting and financial reporting purposes. Under this method of accounting,
the recorded assets and liabilities of KCPL and UCU will be carried forward to
the consolidated financial statements of Newco at their recorded amounts; income
of Newco will include income of KCPL and UCU for the entire fiscal year in which
the Mergers occur; and the reported income of the separate corporations for
prior periods will be combined and restated as income of Newco. The receipt by
each of KCPL and UCU of a letter from their respective independent accountants,
stating that the Mergers will qualify as a pooling of interests, is a condition
precedent to consummation of the Mergers. Representatives of Coopers & Lybrand
L.L.P. and Arthur Andersen LLP are expected to be present at the KCPL Meeting
and the UCU Meeting, respectively. See "THE MERGER AGREEMENT -- Conditions to
Each Party's Obligation to Effect the Mergers" and "UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION."
STOCK EXCHANGE LISTING OF THE NEWCO COMMON STOCK
KCPL will apply for the listing on the NYSE of the Newco Common Stock to be
issued in the UCU Merger. It is a condition to the consummation of the Mergers
that the Newco Common Stock to be issued in the UCU Merger be approved for
listing on the NYSE, subject to official notice of issuance. So long as UCU
continues to meet applicable requirements, the UCU Common Stock will continue to
be listed on the NYSE and each of the other securities exchanges on which it is
listed until the UCU Effective Time. In addition, until called for redemption,
all classes and series of preferred stock of KCPL and of UCU will remain listed
on any securities exchange on which such preferred stock is presently listed.
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FEDERAL SECURITIES LAW CONSEQUENCES
All shares of Newco Common Stock received by holders of UCU Common Stock
will be freely transferable, except that shares of Newco Common Stock received
by persons who are deemed to be "affiliates" (as such term is defined under the
Securities Act) of UCU prior to the Mergers may be resold by them only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act (or Rule 144, in the case of such persons who become
affiliates of Newco) or as otherwise permitted under the Securities Act. Persons
who may be deemed to be affiliates of UCU or Newco generally include individuals
or entities that control, are controlled by, or are under common control with,
such party and may include certain officers and directors of such party as well
as principal stockholders of such party. The Merger Agreement requires UCU to
use all reasonable efforts to cause each of its affiliates to execute a written
agreement to the effect that such affiliate will not offer or sell or otherwise
dispose of (i) any shares of Newco Common Stock during the period beginning 30
days prior to the Effective Time and continuing until such time as results
covering at least 30 days of post-Effective Time operations of Newco have been
published or (ii) any of the shares of UCU Common Stock or any shares of Newco
Common Stock issued to such affiliate in or pursuant to the Mergers in violation
of the Securities Act or the rules and regulations promulgated by the SEC
thereunder.
This Joint Proxy Statement/Prospectus does not cover resales of Newco Common
Stock received in the Mergers by any person who may be deemed to be an affiliate
of UCU or Newco.
DISSENTERS' RIGHTS
KCPL. Holders of KCPL Common Stock will not have dissenters' rights of
appraisal under the MGBCL with respect to the Consolidating Merger or any of the
other transactions contemplated by the Merger Agreement.
UCU. Holders of UCU Common Stock will not have dissenters' rights of
appraisal under the DGCL with respect to the UCU Merger or any of the other
transactions contemplated by the Merger Agreement.
REGULATORY MATTERS
As indicated below, consummation of the Mergers is subject to numerous
regulatory approvals, which are presently anticipated to be received by the
second quarter of 1997. KCPL and UCU do not expect that obtaining such required
regulatory approvals will be delayed by reason of amending the Original Merger
Agreement. Set forth below is a summary of the material regulatory requirements
affecting the Mergers.
STATE APPROVALS AND RELATED MATTERS. KCPL currently is subject to the
jurisdiction of the Missouri Commission and the Kansas Commission with respect
to its utility operations in those states.
UCU currently is subject to the jurisdiction of the Kansas Commission, as
well as the Colorado Public Utilities Commission (the "Colorado Commission"),
the Iowa State Utilities Board (the "Iowa Board"), the Michigan Public Service
Commission (the "Michigan Commission"), the Minnesota Public Utilities
Commission (the "Minnesota Commission"), the Missouri Public Service Commission
(the "Missouri Commission") and the West Virginia Public Service Commission (the
"West Virginia Commission") with respect to its utility operations in those
states. In addition, certain utility activities of UCU and certain of its
Subsidiaries are subject to the jurisdiction of the British Columbia Utilities
Commission (the "British Columbia Commission"). The Treasurer of Australia
(Foreign Investment Review Board) (the "Treasurer of Australia") and the New
Zealand Overseas Investment Commission (the "New Zealand Commission") also
regulate the investment activities of UCU in Australia and New Zealand.
Applications for approval, or waiver of approval, of the Mergers and related
transactions, including, in the case of certain commissions, the issuance of
securities in connection therewith, are being
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filed with the Missouri Commission, the Kansas Commission, the Colorado
Commission, the Iowa Board, the Michigan Commission, the Minnesota Commission,
the West Virginia Commission, the British Columbia Commission, the Treasurer of
Australia and the New Zealand Commission.
Assuming the requisite regulatory approvals are obtained, Newco's utility
operations will be subject to regulation by the Missouri Commission, the Kansas
Commission, the Colorado Commission, the Iowa Board, the Michigan Commission,
the Minnesota Commission, the West Virginia Commission and the British Columbia
Commission, and certain non-utility operations will be subject to regulation in
Oklahoma, South Dakota and Texas. In addition, certain investment activities of
Newco in Australia and New Zealand will be subject to the jurisdiction of the
Treasurer of Australia and the New Zealand Commission, respectively.
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935. KCPL is an electric utility
company within the meaning of the 1935 Act, and exempt from all provisions of
the 1935 Act except Section 9(a)(2). UCU is a gas and electric utility company
and a holding company that is exempt pursuant to Rule 10 from all provisions of
the 1935 Act except Section 9(a)(2), which generally requires SEC approval prior
to the direct or indirect acquisition of 5% or more of the voting securities of
more than one electric or gas utility company.
KCPL and UCU intend to request a "no-action" letter from the staff of the
SEC, confirming their view that (i) the Mergers will not require the prior
approval of the SEC pursuant to Section 9(a)(2) of the 1935 Act and (ii)
following consummation of the Mergers, Newco will be a holding company entitled
to claim exemption pursuant to Rule 10 from all provisions of the Act. In the
event that the staff of the SEC does not concur with this view, KCPL and UCU
will file an application with the SEC for the necessary approvals and exemptions
in connection with the Mergers.
FEDERAL POWER ACT. Section 203 of the Federal Power Act provides that no
public utility shall sell or otherwise dispose of its jurisdictional facilities
or, directly or indirectly, merge or consolidate such facilities with those of
any other person or acquire any security of any other public utility without
first having obtained authorization from the FERC. The approval of the FERC is
required in order to consummate the Mergers. Under Section 203 of the Federal
Power Act, the FERC will approve a merger if it finds such merger "consistent
with the public interest." In reviewing a merger, the FERC generally evaluates:
(i) whether the merger will adversely affect competition, (ii) whether the
merger will adversely affect operating costs and rates, (iii) whether the merger
will impair the effectiveness of regulation, (iv) whether the purchase price is
reasonable, (v) whether the merger is the result of coercion, and (vi) whether
the accounting treatment is reasonable. On March 29, 1996, KCPL and UCU filed a
combined application with the FERC requesting that the FERC approve the Mergers
under Section 203 of the Federal Power Act (the "Application"). The Application
will be amended to reflect the terms of the Merger Agreement as compared to the
Original Merger Agreement. In connection with the Application, KCPL and UCU also
filed a comparable transmission service tariff under Section 205 of the Federal
Power Act, to become effective upon consummation of the Mergers.
ANTITRUST CONSIDERATIONS. The HSR Act and the rules and regulations
promulgated thereunder provide that certain transactions (including the Mergers)
may not be consummated until certain information has been submitted to the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the Federal Trade Commission (the "FTC") and specified HSR Act waiting period
requirements have been satisfied. The expiration or earlier termination of the
HSR Act waiting period would not preclude the Antitrust Division or the FTC from
challenging the Mergers on antitrust grounds. Neither KCPL nor UCU believes that
the Mergers will violate federal antitrust laws. If the Mergers are not
consummated within 12 months after the expiration or earlier termination of the
initial HSR Act waiting period, KCPL and UCU would be required to submit new
information to the Antitrust Division and the FTC, and a new HSR Act waiting
period would have to expire or be earlier terminated before the Mergers could be
consummated. KCPL and UCU intend to file their
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premerger notifications pursuant to the HSR Act at such time as they believe
will result in the expiration or termination of the waiting period thereunder
within 12 months before the anticipated consummation of the Mergers.
ATOMIC ENERGY ACT OF 1954, AS AMENDED. KCPL holds an interest in an NRC
license in connection with its ownership interest in the Wolf Creek nuclear
generating facility and its operator, the Wolf Creek Nuclear Operating
Corporation ("WCNOC"). The WCNOC operating license authorizes KCPL to own 47% of
the facility and 47% of WCNOC. The Atomic Energy Act provides that such licenses
or any rights thereunder may not be amended or transferred or in any manner
disposed of, directly or indirectly, to any person through transfer of control
unless the NRC finds that such transfer is in accordance with the Atomic Energy
Act and consents to the transfer. Pursuant to the Atomic Energy Act, KCPL and
UCU will seek approval from the NRC to reflect the fact that after the Mergers,
WCNOC and the Wolf Creek nuclear generating facility will be owned 47% by Newco.
OTHER. KCPL and UCU possess municipal franchises and environmental permits
and licenses that require the consent of the licensor to the Mergers or may need
to be renewed, replaced or transferred as a result of the Mergers. Neither KCPL
nor UCU anticipate any difficulties at the present time in obtaining such
consents, renewals, replacements or transfers.
GENERAL. Under the Merger Agreement, KCPL and UCU have agreed to use all
commercially reasonable efforts to obtain all necessary permits, consents,
approvals and authorizations of all governmental authorities necessary or
advisable to consummate or effect the transactions contemplated by the Merger
Agreement. Various parties may seek intervention in these proceedings to oppose
the Mergers or to have conditions imposed upon the receipt of necessary
approvals. While KCPL and UCU believe that they will receive the requisite
regulatory approvals for the Mergers, there can be no assurance as to the timing
of such approvals or the ability of such parties to obtain such approvals on
satisfactory terms or otherwise. It is a condition to the consummation of the
Mergers that final orders approving the Mergers be obtained from the various
federal and state commissions described above on terms and conditions which
would not have, or foreseeably could not have, a material adverse effect on the
business, assets, financial condition or results of operations of Newco and its
prospective subsidiaries taken as a whole, or which would be materially
inconsistent with the agreements of the parties contained in the Merger
Agreement. There can be no assurance that any such approvals will not contain
terms or conditions that cause such approvals to fail to satisfy such condition
to the consummation of the Mergers.
CERTAIN LITIGATION
On May 20, 1996, KCPL commenced litigation captioned KANSAS CITY POWER &
LIGHT CO. v. WESTERN RESOURCES, INC., ET AL., C.A. No. 96-0552-CV-W-5 in the
United States District Court for the Western District of Missouri, Western
Division, against Western Resources and Robert L. Rives. In this litigation,
KCPL is seeking a declaratory judgment that the Merger Agreement and the
transaction contemplated thereby were adopted and may be completed in accordance
with Missouri law and are not void, voidable, subject to injunction or
rescission based upon any claim that KCPL's directors, officers or agents acted
illegally or inequitably in adopting the Merger Agreement. KCPL also seeks a
declaratory judgment that Western Resources lacks standing to challenge the
Merger Agreement, the transaction contemplated thereby, or the acts leading to
its adoption.
On May 24, 1996, Jack R. Manson ("Manson"), a purported shareholder of KCPL,
filed a motion to intervene in the above action as a representative of a class
consisting of similarly situated KCPL shareholders. Manson also requested leave
to file an answer to the complaint, in which he would assert counterclaims
against KCPL and each of its directors, who would be joined as counterclaim
defendants. The proposed counterclaims would allege that KCPL and its directors
breached fiduciary duties of care, loyalty and disclosure in responding to
Western Resources' acquisition overtures, including their adoption of the Merger
Agreement; that their actions in adopting the Merger Agreement were illegal and
ULTRA VIRES; that the adoption of the Merger Agreement illegally deprived KCPL
shareholders of voting and appraisal rights under Missouri law; and that the
adoption of the Merger
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Agreement was a disproportionate response to Western Resources' acquisition
offer. KCPL believes that the proposed counterclaims are without merit and will
vigorously defend in the event Mr. Manson's motion to intervene is granted.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement,
which is attached as Annex A hereto and is incorporated herein by reference.
Such summary is qualified in its entirety by reference to the Merger Agreement.
THE MERGERS
IN GENERAL. The Merger Agreement provides that, following the approval of
the Share Issuance by the shareholders of KCPL (the "KCPL Shareholders'
Approval"), and following the approval of the Merger Agreement and the UCU
Merger by the stockholders of UCU (the "UCU Stockholders' Approval" and,
together with the KCPL Shareholders' Approval, the "Stockholders' Approvals"),
and the satisfaction or waiver of the other conditions to the Mergers, including
obtaining the requisite regulatory approvals, (i) Sub will be merged with and
into UCU, with UCU surviving in the UCU Merger and (ii) immediately thereafter
at the Effective Time, the UCU Surviving Corporation will be merged with and
into KCPL, with KCPL surviving (and renamed as Newco) in the Consolidating
Merger.
If the Stockholders' Approvals are obtained, and the other conditions to the
Mergers are satisfied or waived, the closing of the Mergers (the "Closing") will
take place on the second business day immediately following the date on which
the last of the conditions referred to below under the caption "-- Conditions to
Each Party's Obligation to Effect the Mergers" is fulfilled or waived, or at
such other time and date as KCPL and UCU mutually agree (the "Closing Date").
Subject to the condition that the opinions of Merrill Lynch and DLJ
described under the caption "THE MERGERS -- Opinion of KCPL's Financial Advisor"
and "-- Opinion of UCU's Financial Advisor" shall not have been withdrawn, KCPL
and UCU have agreed to call, give notice of, convene and hold a meeting of their
respective stockholders as soon as reasonably practicable for the purpose of
securing the Stockholders' Approvals.
CONSUMMATION OF THE MERGERS. The Mergers will be consummated on the terms
and subject to the conditions set forth in the Merger Agreement, as a result of
which (i) as of the UCU Effective Time, Sub will be merged with and into UCU,
with UCU surviving in the UCU Merger and (ii) immediately thereafter at the
Effective Time, the UCU Surviving Corporation will be merged with and into KCPL,
with KCPL surviving (and renamed as Newco) in the Consolidating Merger. In
addition, as of the UCU Effective Time, (i) each issued and outstanding share of
UCU Common Stock (other than shares of UCU Common Stock owned by KCPL or UCU
either directly or through a wholly-owned Subsidiary) will be converted into and
become one fully paid and nonassessable share of Newco Common Stock and (ii)
each issued and outstanding share of Sub Common Stock will be converted into and
become one fully paid and nonassessable share of common stock, $0.01 par value
per share, of the UCU Surviving Corporation. Each issued and outstanding share
of KPCL Common Stock held by KCPL shareholders will remain outstanding after the
Mergers, unchanged, as one share of Newco Common Stock. Based on the number of
shares of KCPL Common Stock and UCU Common Stock outstanding as of the date of
the Merger Agreement, the holders of KCPL Common Stock and the holders of UCU
Common Stock will hold in the aggregate approximately 57% and 43%, respectively,
of the total number of shares of Newco Common Stock outstanding immediately
after the Effective Time.
KCPL has agreed under the Merger Agreement to call for redemption before the
UCU Effective Time all of the outstanding shares of each series and class of
KCPL Preferred Stock at the applicable redemption prices therefor, together with
all dividends accrued and unpaid through the applicable redemption dates. UCU
has agreed under the Merger Agreement to call for redemption all of the
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outstanding shares of UCU Preferred Stock, which is the only outstanding series
or class of preferred stock of UCU, on March 3, 1997 or on such later date as
KCPL and UCU shall mutually agree. The redemption price therefor will be $25.00
per share of UCU Preferred Stock plus all accrued and unpaid dividends through
the redemption date. It is a condition to the closing of the Mergers that the
UCU Preferred Stock and KCPL Preferred Stock be redeemed before the UCU
Effective Time.
Pursuant to the Merger Agreement, at the Effective Time, (i) the Restated
Articles of Consolidation of KCPL as in effect immediately prior to the
Effective Time, and as amended in respect of clause (iii) below, will be the
Restated Articles of Consolidation of Newco until thereafter amended as provided
by law and such Restated Articles of Consolidation, (ii) the Bylaws of KCPL as
in effect immediately prior to the Effective Time will be the Bylaws of Newco
until thereafter amended as provided by law, the Restated Articles of
Consolidation of Newco and such by-laws, and (iii) KCPL will change its name to
Newco or such other name as KCPL and UCU shall mutually agree. Subject to the
foregoing, the additional effects of the Consolidating Merger will be as
provided in the applicable provisions of the DGCL and the MGCL.
EXCHANGE OF CERTIFICATES. As soon as practicable after the UCU Effective
Time, the Exchange Agent will mail to each holder of record of an Old
Certificate, a letter of transmittal and instructions for use in effecting the
surrender of Old Certificates in exchange for certificates representing shares
of Newco Common Stock. Upon surrender of Old Certificates to the Exchange Agent
for cancellation, together with a duly executed letter of transmittal and such
other documents, if any, as the Exchange Agent shall require, the holder of such
Old Certificates will be entitled to receive a certificate or certificates
representing that number of whole shares of Newco Common Stock which such holder
has the right to receive pursuant to the provisions of the Merger Agreement.
Until surrendered, each Old Certificate will be deemed at any time after the UCU
Effective Time to represent only the right to receive upon such surrender the
certificate representing Newco Common Stock.
The letter of transmittal may, at the option of Newco, provide for the
ability of a holder of one or more Old Certificates to elect that the shares of
Newco Common Stock to be received be issued in uncertificated form or to elect
that such shares be credited to an account established for the holder under
Newco's dividend reinvestment and stock purchase plan.
No dividends or other distributions declared or made after the UCU Effective
Time with respect to Newco Common Stock with a record date after the UCU
Effective Time will be paid to the holder of any unsurrendered Old Certificates
until such Old Certificates have been surrendered by such holder. Following such
surrender, subject to applicable law, there will be paid to such holder, without
interest, the unpaid dividends and distributions to which such holder is
entitled.
HOLDERS OF UCU COMMON STOCK SHOULD NOT SEND IN THEIR STOCK CERTIFICATES
UNTIL THEY RECEIVE A TRANSMITTAL FORM.
HOLDERS OF KCPL COMMON STOCK WILL NOT NEED TO SURRENDER THEIR SHARE
CERTIFICATES. ISSUED AND OUTSTANDING SHARES OF KPCL COMMON STOCK HELD BY KCPL
SHAREHOLDERS WILL REMAIN OUTSTANDING AFTER THE MERGERS BUT ARE REFERRED TO
HEREIN AS NEWCO COMMON STOCK TO REFLECT KCPL'S NAME CHANGE TO NEWCO.
SUBSIDIARIES AND JOINT VENTURES
The Merger Agreement defines "Subsidiary" to mean any corporation or other
entity of which at least a majority of the voting power will at the time be
held, directly or indirectly, by KCPL or UCU, as the case may be. The Merger
Agreement also defines "Joint Venture" to mean specified joint ventures of KCPL
and UCU, as the case may be. The covenants of KCPL and UCU in the Merger
Agreement apply to the parties themselves and their Subsidiaries. Certain of the
representations and warranties of KCPL and UCU in the Merger Agreement apply to
the parties, their Subsidiaries and their Joint Ventures.
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REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties by
each of KCPL and UCU relating to, among other things and subject to certain
qualifications, (a) their respective organizations, the organization of their
respective Subsidiaries and Joint Ventures and similar corporate matters; (b)
their respective capital structures; (c) the authorization, execution, delivery,
performance and enforceability of the Merger Agreement and related matters; (d)
required regulatory approvals; (e) their compliance with applicable laws and
agreements; (f) reports and financial statements filed with the SEC or other
regulatory authorities and the accuracy of information contained therein; (g)
the absence of any material adverse effect on their business, assets, financial
condition, results of operations or prospects; (h) the absence of adverse
material claims, suits, actions or proceedings, and other litigation issues; (i)
the accuracy of information supplied by each of KCPL and UCU for use in the
Registration Statement of which this Joint Proxy Statement/Prospectus forms a
part; (j) tax matters; (k) retirement and other employee benefit plans and
matters relating to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"); (l) agreements relating to certain employment and benefits
matters; (m) labor matters; (n) compliance with all applicable material
environmental laws, possession of all material environmental, health, and safety
permits and other environmental issues; (o) the regulation of KCPL and UCU and
their subsidiaries as public utilities in specified states; (p) the stockholder
vote required in connection with the Merger Agreement and the transactions
contemplated thereby, as set forth in this Joint Proxy Statement/Prospectus,
being the only vote required; (q) that neither KCPL nor UCU nor any of their
respective affiliates has taken or agreed to take any action that would prevent
Newco from accounting for the Mergers as a pooling of interests; (r) the
delivery of fairness opinions by Merrill Lynch, in the case of KCPL, and DLJ, in
the case of UCU; (s) the adequacy of insurance; and (t) the applicability of
certain provisions in the KCPL Charter and the UCU Charter relating to certain
changes in control.
KCPL and Sub have also made certain representations and warranties (i)
concerning Sub's organization and capitalization and (ii) with respect to Sub,
the authorization, execution, delivery, performance and enforceability of the
Merger Agreement and related matters. UCU has additionally represented and
warranted that it has and will continue to have sufficient cash resources or a
sufficient line of credit to redeem the UCU Preferred Stock as specified in the
Merger Agreement.
CERTAIN COVENANTS
Pursuant to the Merger Agreement, each of KCPL and UCU has agreed that
during the period from the Original Execution Date until the UCU Effective Time
or earlier termination of the Merger Agreement, except as permitted by the
Merger Agreement (including the disclosure schedules thereto) or as the other
party otherwise consents in writing, it will (and each of its Subsidiaries
will), subject to certain exceptions specified therein, among other things: (a)
carry on its business in the ordinary course consistent with prior practice; (b)
not declare or pay any dividends on or make other distributions in respect of
any of its capital stock, other than (i) to such party or its wholly-owned
Subsidiaries, (ii) dividends required to be paid on any UCU Preferred Stock or
KCPL Preferred Stock, (iii) regular quarterly dividends to be paid on KCPL
Common Stock and UCU Common Stock not to exceed 105% of the dividends for the
comparable period of the prior fiscal year, and (iv) dividends by AGP, UtiliCorp
U.K., Inc., UtiliCorp U.K. Limited, West Kootenay Power Ltd., UtiliCorp N.Z.,
Inc., and any Subsidiaries of such entities; (c) not effect certain other
changes in its capitalization other than redeeming all series and classes of
KCPL Preferred Stock and the UCU Preferred Stock, or funding employee stock
ownership plans in accordance with past practice; (d) not issue, sell or dispose
of any capital stock or securities convertible into capital stock other than (i)
intercompany issuances of capital stock and (ii) up to 2,000,000 shares of KCPL
Common Stock or UCU Common Stock, as the case may be, to be issued during any
fiscal year pursuant to employee benefit plans, stock option and other incentive
compensation plans, directors' plans and stock purchase and dividend
reinvestment plans, except that, as set forth in the disclosure schedules, UCU
may issue approximately 5.3 million additional shares of UCU Common Stock; (e)
not incur indebtedness (or guarantees thereof), other than (i) indebtedness or
guarantees or "keep well" or other agreements either in the ordinary course
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of business consistent with past practice, or not aggregating more than $250
million, (ii) arrangements between such party and its Subsidiaries or among its
Subsidiaries, (iii) in connection with the refunding of existing indebtedness,
(iv) in connection with any permitted redemption of any series or class of KCPL
Preferred Stock or of UCU Preferred Stock, or (v) as may be necessary in
connection with certain permitted acquisitions or capital expenditures; (f) not
engage in material acquisitions, except individual acquisitions not exceeding
$25 million in equity invested and not requiring board of directors' approval,
provided that the total amount invested in any fiscal year does not exceed $150
million; (g) not make any capital expenditures during any fiscal year exceeding
125% of the amounts budgeted; (h) not sell or dispose of assets during any
fiscal year singularly or in an aggregate amount equalling or exceeding $25
million, other than dispositions in the ordinary course of business consistent
with past practice; (i) not enter into, adopt or amend or increase the amount or
accelerate the payment or vesting of any benefit or amount payable under any
employee benefit plan or other contract, agreement, commitment, arrangement,
plan, trust, fund or policy, except for normal increases in the ordinary course
of business consistent with past practice that, in the aggregate, do not result
in a material increase in benefits or compensatory expenses; (j) not enter into
or amend any employee severance agreement other than in the ordinary course of
business consistent with past practice; (k) not deposit into any trust
(including any "rabbi trust") amounts in respect of any employee benefit
obligations or obligations to directors, provided that transfers into any trust,
other than a rabbi or other trust with respect to any non-qualified deferred
compensation, may be made in accordance with past practice; (l) not engage in
any activity which would cause a change in its status under the 1935 Act; (m)
not make any changes in its accounting methods other than as required by law or
in accordance with generally accepted accounting principles; (n) not take any
action to prevent Newco from accounting for the Mergers as a pooling of
interests; (o) not take any action that would adversely affect the status of the
Mergers as a tax-free reorganization under the Code; (p) not enter into any
material agreements with affiliates (other than wholly-owned subsidiaries) or
the parties' respective Joint Ventures, other than on an arm's-length basis; (q)
cooperate with the other party, provide reasonable access to its books and
records and notify the other party of any significant changes; (r) subject to
applicable law, discuss with the other party any proposed changes in its rates
or charges (other than pass-through fuel and gas rates or charges) or standards
of service or accounting; consult with the other prior to making any filing (or
any amendment thereto), or effecting any agreement, commitment, arrangement or
consent with governmental regulators; and not make any filing to change its
rates on file with the FERC that would have a material adverse effect on the
benefits associated with the Mergers; (s) use all commercially reasonable
efforts to obtain certain third-party consents to the Mergers; (t) not take any
action reasonably likely to materially breach the Merger Agreement or any of its
representations and warranties; (u) not take any action that is likely to
jeopardize the qualification of KCPL's or UCU's outstanding revenue bonds as
"exempt facility bonds" or as tax-exempt industrial development bonds; (v)
create a joint transition management task force to examine alternatives to
effect the integration of the parties after the Effective Time; (w) refrain from
taking specified actions relating to tax matters; (x) maintain customary and
adequate insurance and existing governmental permits; and (y) not discharge or
satisfy any material claims, liabilities or obligations, other than discharges
(in the ordinary course of business or in accordance with their terms) of
liabilities reflected in the most recent consolidated financial statements.
The Merger Agreement provides that the parties will execute such further
documents and instruments and take such actions as are necessary and reasonably
requested by the other party to consummate the Mergers in accordance with the
terms of the Merger Agreement.
NO SOLICITATION OF TRANSACTIONS
The Merger Agreement provides that neither KCPL nor UCU will, and that
neither will authorize or permit any of its officers, directors, employees,
accountants, counsel, investment bankers, financial advisors and other
representatives (collectively, "Representatives") to, directly or indirectly,
initiate, solicit or encourage (including by way of furnishing information) or
take any other action to facilitate knowingly any inquiries or the making of any
proposal which constitutes or may reasonably be
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expected to lead to an Acquisition Proposal (as defined below) from any person,
or engage in any discussion or negotiations relating thereto or accept any
Acquisition Proposal; provided, however, that notwithstanding any other
provision of the Merger Agreement, a respective party may (i) at any time prior
to the time the parties' stockholders shall have voted in respect of the KCPL
Shareholders' Approval or the UCU Stockholders' Approval, as the case may be,
engage in discussions or negotiations with a third party who (without any
solicitation, initiation, encouragement, discussion or negotiation, directly or
indirectly, by or with the party or its Representatives after January 19, 1996)
seeks to initiate such discussions or negotiations and may furnish such
third-party information concerning the party and its business, properties and
assets if, and only to the extent that, (A)(x) the third party has first made an
Acquisition Proposal that is financially superior to the Mergers and has
demonstrated that financing for the Acquisition Proposal is reasonably likely to
be obtained (as determined in good faith in each case by the party's Board of
Directors after consultation with its financial advisors) and (y) the party's
Board of Directors concludes in good faith, after considering applicable
provisions of state law, on the basis of oral or written advice of outside
counsel that such action is necessary for the Board of Directors to act in a
manner consistent with its fiduciary duties under applicable law and (B) prior
to furnishing such information to or entering into discussions or negotiations
with such person or entity, such party (x) provides prompt notice to the other
party to the effect that it is furnishing information to or entering into
discussions or negotiations with such person or entity and (y) receives from
such person or entity an executed confidentiality agreement in reasonably
customary form on terms not in the aggregate materially more favorable to such
person or entity than the terms contained in the Confidentiality Agreement,
dated November 28, 1995 (as amended from time to time, the "Confidentiality
Agreement"), (ii) comply with Rule 14e-2 promulgated under the Exchange Act with
regard to a tender or exchange offer, and/or (iii) accept an Acquisition
Proposal from a third party, provided such respective party terminates the
Merger Agreement pursuant to the provisions of Section 9.1(e) or 9.1(f) thereof,
as applicable (which provisions are described in clause (e) under "--
Termination," below). Each party has agreed to cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any parties conducted previously by the party or its Representatives with
respect to the foregoing. Each party has agreed to notify the other party orally
and in writing of any such inquiries, offers or proposals (including, without
limitation, the terms and conditions of any such proposal and the identity of
the person making it), within 24 hours of the receipt thereof, shall keep the
other party informed of the status and details of any such inquiry, offer or
proposal, and shall give the other party five days' advance notice of any
agreement to be entered into with or any information to be supplied to any
person making such inquiry, offer or proposal. As used herein, "Acquisition
Proposal" means any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving the party or any material
Subsidiary of the party, or any proposal to acquire in any manner a substantial
equity interest in or a substantial portion of the assets of the party or any
material Subsidiary.
NEWCO BOARD OF DIRECTORS
The Merger Agreement provides that at the Effective Time, the Newco Board
will consist of 18 persons, nine of whom will be the then existing directors of
KCPL prior to the Effective Time and nine of whom will be designated by UCU
prior to the Effective Time. If, prior to the Effective Time, any of such
designees declines or is unable to serve, the party that designated such person
will designate another person to serve in such person's stead. As of the date of
this Joint Proxy Statement/Prospectus, UCU has not decided who, in addition to
Mr. Green, will be designated to serve on the Newco Board after the Effective
Time.
DIRECTORS' AND OFFICERS' INDEMNIFICATION
The Merger Agreement provides that, to the extent, if any, not provided by
an existing right of indemnification or other agreement or policy, from and
after the Effective Time, Newco will, to the fullest extent permitted by
applicable law, indemnify, defend and hold harmless each person who is on, or
who has been at any time prior to, January 19, 1996, or who becomes prior to the
Effective Time, an
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officer, director or employee of any of the parties thereto or any Subsidiary
(each an "Indemnified Party," and collectively, "Indemnified Parties") against
all losses, expenses (including reasonable attorney's fees and expenses),
claims, damages or liabilities or, subject to the proviso of the next succeeding
sentence, amounts paid in settlement, arising out of actions or omissions
occurring at or prior to the Effective Time (and whether asserted or claimed
prior to, at or after the Effective Time) that are, in whole or in part, based
on or arising out of the fact that such person is or was a director, officer or
employee of such party, and all such indemnified liabilities to the extent they
are based on or arise out of or pertain to the transactions contemplated by the
Merger Agreement. In the event of any such loss, expense, claim, damage or
liability (whether or not arising before the Effective Time), (i) Newco will pay
the reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel must be reasonably satisfactory to Newco, promptly after
statements therefor are received and otherwise advance to such Indemnified Party
upon request reimbursement of documented expenses reasonably incurred, in either
case to the extent not prohibited by the MGCL, (ii) Newco will cooperate in the
defense of any such matter and (iii) any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under the MGCL, the Restated Articles of Consolidation or Bylaws of
Newco will be made by independent counsel mutually acceptable to Newco and the
Indemnified Party; provided, however, that Newco will not be liable for any
settlement effected without its written consent (which consent must not be
unreasonably withheld). The Merger Agreement further provides that the
Indemnified Parties as a group may retain only one law firm with respect to each
related matter except to the extent there is, in the opinion of counsel to an
Indemnified Party, under applicable standards of professional conduct, a
conflict on any significant issue between positions of such Indemnified Party
and any other Indemnified Party or Indemnified Parties.
In addition, the Merger Agreement requires that for a period of six years
after the Effective Time, Newco will cause to be maintained in effect policies
of directors' and officers' liability insurance maintained by KCPL and UCU for
the benefit of those persons who were covered by such policies on January 19,
1996, on terms no less favorable than the terms of such insurance coverage,
provided that Newco will not be required to expend in any year an amount
exceeding 200% of the annual aggregate premiums currently paid by KCPL and UCU
for such insurance. If the annual premiums of such insurance coverage exceed
such amount, Newco will be obligated to obtain a policy with the best coverage
available, in the reasonable judgment of the Newco Board, for a cost not
exceeding such amount. The Merger Agreement also provides that to the fullest
extent permitted by law, from and after the Effective Time, all rights to
indemnification existing in favor of the employees, agents, directors and
officers of KCPL, UCU and their respective Subsidiaries with respect to their
activities as such prior to the Effective Time, as provided in their respective
articles of incorporation and by-laws in effect on January 19, 1996, or
otherwise in effect on January 19, 1996, will survive the Mergers and will
continue in full force and effect for a period of not less than six years from
the Effective Time.
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS
The respective obligations of KCPL and UCU to effect the Mergers are subject
to the following conditions: (a) the approval of the Share Issuance by the
shareholders of KCPL and the UCU Merger by the stockholders of UCU shall have
been obtained; (b) no temporary restraining order, preliminary or permanent
injunction or other order shall be in effect that prevents consummation of the
Mergers; (c) the Registration Statement shall have become effective and shall
not be the subject of a stop order; (d) the shares of Newco Common Stock
issuable in connection with the UCU Merger shall have been authorized for
listing on the NYSE, upon official notice of issuance; (e) the receipt of all
material governmental authorizations, permits, consents, orders or approvals
which do not impose terms or conditions that could reasonably be expected to
have a material adverse effect; (f) the receipt by each of KCPL and UCU of
letters from their independent public accountants stating that the Mergers will
qualify as a pooling-of-interests transaction under generally accepted
accounting principles and applicable SEC regulations; (g) with respect to each
of KCPL and UCU, the performance in all material respects of all obligations of
the other party required to be performed under the Merger Agreement,
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including the redemption of the KCPL Preferred Stock and UCU Preferred Stock, as
the case may be; (h) with respect to each of KCPL and UCU, the accuracy of the
representations and warranties of the other party set forth in the Merger
Agreement as of January 19, 1996 (except with respect to representations and
warranties made as of May 20, 1996, which shall be accurate as of such date) and
as of the Closing Date (except in all cases as would not reasonably be likely to
result in a material adverse effect); (i) KCPL's and UCU's having received
officers' certificates from each other stating that certain conditions set forth
in the Merger Agreement have been satisfied; (j) with respect to each of KCPL
and UCU, there having been no material adverse effect on the business, assets,
financial condition, results of operations or prospects of the other party and
its subsidiaries taken as a whole; (k) receipt of tax opinions from counsel to
each party to the effect that the Mergers will be treated as a tax-free
reorganization under Section 368(a) of the Code; (l) with respect to each of
KCPL and UCU, the receipt by the other party of certain material third-party
consents; and (m) with respect to UCU, the receipt by KCPL of letter agreements
relating to trading in securities of KCPL and UCU (substantially in the form
attached as an exhibit to the Merger Agreement), duly executed by each affiliate
of UCU.
In addition, the Merger Agreement provides that it is a condition to the
obligation of KCPL to hold the KCPL Meeting that the opinion of Merrill Lynch
attached hereto as Annex B shall not have been withdrawn, and it is a condition
to the obligation of UCU to hold the UCU Meeting that the opinion of DLJ
attached hereto as Annex C shall not have been withdrawn.
At any time prior to the UCU Effective Time, to the extent permitted by
applicable law, the conditions to KCPL's or UCU's obligations to consummate the
Mergers may be waived by the other party. Either party's agreement to such a
waiver is valid if set forth in a written instrument signed on behalf of such
party. See "-- Amendment and Waiver."
BENEFIT PLANS
The Merger Agreement provides that KCPL and UCU have agreed to cooperate and
agree upon the employee benefit plans and programs to be provided by Newco, and
that each participant of any KCPL benefit plan or UCU benefit plan shall receive
credit for purposes of eligibility to participate, vesting and eligibility to
receive benefits under any benefit plan of Newco or any of its subsidiaries or
affiliates that replaces a KCPL benefit plan or UCU benefit plan; provided,
however, that such crediting of service shall not operate to duplicate any
benefit to any such participant or the funding for any such benefit. In
addition, the UCU Supplemental Contributory Retirement Plan shall be revised to
provide that references to UCU Common Stock shall instead refer to Newco Common
Stock.
Upon the consummation of the Mergers, no additional obligations will be
incurred under the existing short-term incentive compensation plans of KCPL and
UCU. Subject to shareholder approval thereof at the KCPL Meeting, the Newco MIC
Plan will become effective at the Effective Time. The Newco MIC Plan provides
for annual bonuses, based on percentages of base salaries, to be awarded based
upon the achievement of performance goals determined in advance by the Newco
Compensation Committee. With respect to those participants in the new plan who
are, or who the Newco Compensation Committee determines are likely to be,
"covered individuals" within the meaning of Section 162(m) of the Code with
compensation in excess of the limitations set forth in Section 162(m), the
performance goals are to be objective standards that are approved by
shareholders in accordance with the requirements for exclusion from the limits
of Section 162(m) of the Code as performance-based compensation. See "APPROVAL
OF NEWCO PLANS -- Newco MIC Plan" and Annex E.
Following the implementation of the Newco Stock Incentive Plan, no
additional awards will be made under the existing stock incentive plans of KCPL
and UCU. Subject to shareholder approval thereof at the KCPL Meeting, the Newco
Stock Incentive Plan will become effective at the Effective Time. The Newco
Stock Incentive Plan provides for the grant of stock options, SARs, restricted
stock and such other awards based upon Newco Common Stock as the Newco
Compensation Committee may determine, subject to shareholder approval of the
Newco Stock Incentive Plan. Newco intends to
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reserve 9,000,000 shares of Newco Common Stock for issuance under this plan.
Accordingly, the Newco Stock Incentive Plan is being submitted to shareholders
for approval. See "APPROVAL OF NEWCO PLANS -- Newco Stock Incentive Plan" and
Annex D.
At the Effective Time, (i) an option to purchase shares of UCU Common Stock
under the existing stock incentive plans of UCU (each, a "UCU Stock Option")
will constitute an option to acquire, on the same terms and conditions (subject
to the adjustments necessary to give effect to the Mergers), shares of Newco
Common Stock based on the same number of shares of Newco Common Stock as the
holder of such UCU Stock Option would have been entitled to receive pursuant to
the Mergers had such holder exercised such option in full immediately prior to
the Effective Time and (ii) each other outstanding award under the existing
stock incentive plans of UCU (each, a "UCU Stock Award") will constitute an
award based upon the same number of shares of Newco Common Stock as the holder
of such UCU Stock Award would have been entitled to receive pursuant to the
Mergers had such holder been the owner, immediately before the Effective Time,
of the shares of UCU Common Stock on which such UCU Stock Award is based, and
otherwise on the same terms and conditions as governed such UCU Stock Award
immediately before the Effective Time. See "THE MERGERS -- Newco Plans."
CERTAIN EMPLOYMENT AGREEMENTS AND WORKFORCE MATTERS
Subject to certain provisions in the Merger Agreement, Newco and its
Subsidiaries have agreed to honor, without modification, all contracts,
agreements, collective bargaining agreements and commitments of KCPL and UCU
prior to the date of the Merger Agreement that apply to any current or former
employee or current or former director of the parties hereto. Subject to
applicable collective bargaining agreements, for a period of three years
following the Effective Time, any reductions in workforce in respect of
employees of Newco shall be made on a fair and equitable basis, without regard
to whether employment was with KCPL or the KCPL Subsidiaries or UCU or the UCU
Subsidiaries, and any employee whose employment is terminated or job is
eliminated by Newco or any of its Subsidiaries during such period shall be
entitled to participate on a fair and equitable basis in the job opportunity and
employment placement programs offered by Newco or any of its Subsidiaries. Any
workforce reductions carried out following the Effective Time by Newco and its
Subsidiaries shall be done in accordance with all applicable collective
bargaining agreements and all laws and regulations governing the Worker
Adjustment and Retraining Notification Act and regulations promulgated
thereunder, and any comparable state or local law.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Closing
Date, whether before or after the Stockholders' Approvals have been obtained:
(a) by mutual written consent of the KCPL Board and the UCU Board; (b) by either
KCPL or UCU if (i) the other party (x) has breached certain agreements and
covenants relating to dividends or issuance of securities but only to the extent
such agreements and covenants apply to KCPL or UCU and not their respective
Subsidiaries, or (y) has breached any representations, warranties, covenants or
agreements set forth in the Merger Agreement, which breaches individually or in
the aggregate would result in a material adverse effect on such party and, in
the case of either (x) or (y), the breach has not been cured within 20 business
days following the breaching party's receipt of notice of such breach or
adequate assurance of such cure is not given by or on behalf of the breaching
party within such 20 business-day period, (ii) the Board of Directors of the
other party or any committee thereof (A) withdraws or modifies in any manner
adverse to such party its approval or recommendation of the Merger Agreement or
the Mergers, (B) fails to reaffirm such approval or recommendation upon such
party's request, (C) approves or recommends any acquisition of the other party
or a material portion of its assets or any tender offer for the other party's
capital stock, in each case by a party other than such party or any of its
affiliates or (D) resolves to take any of the actions specified in clause (A),
(B) or (C), or (iii) any state or federal law, order, rule or regulation is
adopted or issued, which has the effect, as supported by the written opinion of
outside counsel of such party, of prohibiting the Mergers, or any court of
competent jurisdiction in the U.S. or any state shall have issued an order,
judgment or decree permanently
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restraining, enjoining or otherwise prohibiting the Mergers, and such order,
judgment or decree shall have become final and nonappealable; (c) by any party
thereto, if the Effective Time shall not have occurred on or before December 31,
1997 (which date will be extended to December 31, 1998 if the required statutory
approvals and third-party consents have not been obtained by December 31, 1997,
but all other conditions to the Closing shall be fulfilled or shall be capable
of being fulfilled); provided, however, that such right to terminate the Merger
Agreement will not be available to any party whose failure to fulfill any
obligation under the Merger Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before December 31, 1997; (d) by
any party thereto, if the Stockholders' Approvals shall not have been obtained;
(e) by KCPL or UCU, upon five days' prior notice to the other party and prior to
approval of the Merger Agreement by the other party's stockholders, if, as a
result of an Acquisition Proposal by a person other than the other party or any
of its affiliates, the Board of Directors of such party determines in good faith
after considering applicable provisions of state law, on the basis of oral or
written advice of outside counsel, that acceptance of the Acquisition Proposal
is necessary for such Board of Directors to act in a manner consistent with its
fiduciary duties under applicable law; provided, however, that (i) such Board of
Directors shall have concluded in good faith, after considering applicable
provisions of state law and after giving effect to all concessions which may be
offered by the other party pursuant to clause (ii) below, on the basis of oral
or written advice of outside counsel, that such action is necessary for the
Board of Directors to act in a manner consistent with its fiduciary duties under
applicable law and (ii) prior to any such termination, such party will, and will
cause its respective financial and legal advisors to, negotiate with the other
party to make such adjustments in the terms and conditions of the Merger
Agreement as would enable such party to proceed with the transactions
contemplated thereby on such adjusted terms.
In the event of termination of the Merger Agreement by either KCPL or UCU as
provided above, there will be no liability or obligation on the part of either
KCPL or UCU or their respective officers or directors thereunder other than to
hold in strict confidence all documents furnished to the other in accordance
with the Confidentiality Agreement; to pay certain fees and expenses pursuant to
certain specified provisions of the Merger Agreement described below under the
captions "-- Termination Fees" and "-- Expenses" and to comply with certain
other specified provisions of the Merger Agreement.
TERMINATION FEES
The Merger Agreement provides that if the Merger Agreement is terminated at
such time as it is terminable by either (but not both) of KCPL and UCU for
breaches of any representations or warranties contained in the Merger Agreement,
or of agreements and covenants contained in the Merger Agreement pursuant to the
provisions of the Merger Agreement described in clause (b) (i) under the caption
"-- Termination" above, then the breaching party will pay the non-breaching
party a fee equal to $10 million in cash, minus amounts previously paid by a
breaching party in respect of termination, provided however, if termination
results from a willful breach, the breaching party will pay the nonbreaching
party a fee equal to $35 million in cash minus any amounts previously paid by a
breaching party in respect of termination. If at the time of the breaching
party's willful breach, pursuant to the provisions of the Merger Agreement
described in such clause (b) (i) there shall have been previously made an
Acquisition Proposal (whether or not such Acquisition Proposal shall have been
rejected or withdrawn prior to the time of termination) involving the breaching
party or one of its affiliates, and within two and one-half years of any
termination by the non-breaching party, the breaching party or an affiliate
becomes a Subsidiary of such offeror or of an affiliate thereof, or accepts a
written offer to consummate or consummates an Acquisition Proposal with such
third party or affiliate thereof, then such breaching party (jointly and
severally with its affiliates), upon the signing of a definitive agreement
relating to such an Acquisition Proposal, or, if no such agreement is signed,
then at the closing (and as a condition to the closing) of such breaching
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party becoming such a Subsidiary or of such Acquisition Proposal, shall pay to
the non-breaching party an additional fee equal to $58 million in cash minus any
such amounts as may have previously been paid by the breaching party due to a
termination.
If the Merger Agreement is terminated because UCU's stockholders fail to
approve the UCU Merger, in the case of UCU, or KCPL's shareholders fail to
approve the Share Issuance, in the case of KCPL, such party will pay to the
other a fee of $5 million; provided that such fee shall be reduced (but not
below zero) by any termination fee previously paid.
The Merger Agreement also requires payment of a termination fee of $58
million in cash minus any amounts previously paid by the Target Party (as
defined below in this paragraph) to the other party, if (i) the Merger Agreement
is terminated (A) as a result of the acceptance by such party of an Acquisition
Proposal pursuant to the provisions of the Merger Agreement described in clause
(e) under the caption "-- Termination" above, (B) following a failure of the
stockholders of such party to grant the KCPL Shareholders' Approval or the UCU
Stockholders' Approval, as the case may be, or (C) as a result of such party's
material failure to convene a stockholder meeting, distribute proxy materials
and, subject to its Board of Directors' fiduciary duties, recommend the UCU
Merger to its stockholders, in the case of UCU, or recommend the approval of the
Share Issuance, in the case of KCPL; (ii) at the time of such termination or
prior to the meeting of such party's stockholders, there shall have been an
Acquisition Proposal involving such party or any of its affiliates (whether or
not this Acquisition Proposal shall have been rejected or withdrawn prior to the
time of termination); and (iii) within two and one-half years of any such
termination described in clause (i) above, such party or such affiliate (the
"Target Party") becomes a Subsidiary of such offeror or accepts an offer to
consummate or consummates an Acquisition Proposal with such offeror of an
affiliate, then the Target Party (jointly and severally with its affiliates),
upon the signing of a definitive agreement relating to such an Acquisition
Proposal, or, if no such agreement is signed, then at the closing (and as a
condition to the closing) of such party's becoming such a Subsidiary or of such
Acquisition Proposal.
The Merger Agreement further provides that all termination fees constitute
liquidated damages and not penalties and that, notwithstanding any other
provision of the Merger Agreement, if one party should fail to pay any
termination fee due, in addition to payment of such amount, the defaulting party
will pay the costs and expenses in connection with any action taken to collect
payment, together with interest on the amount of any unpaid termination fee.
EXPENSES
Except as set forth above, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby will be paid
by the party incurring the expense, except that those expenses incurred in
connection with printing and filing of the Registration Statement, of which this
Joint Proxy Statement/Prospectus forms a part, will be shared equally by KCPL
and UCU.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the Board of Directors of the parties
thereto at any time before or after approval thereof by the stockholders of KCPL
and UCU and prior to the Effective Time, but after such approvals no such
amendment will alter or change the amount or kind of shares, rights or manner of
exchange of such shares, or alter or change any of the terms and conditions of
the Merger Agreement if any of the alterations or changes, alone or in the
aggregate, would materially adversely affect the rights of holders of KCPL
Common Stock or UCU Common Stock, except for alterations or changes that could
otherwise be adopted by the Newco Board without the further approval of such
stockholders. At any time prior to the UCU Effective Time, the parties to the
Merger Agreement may by a signed written agreement extend the time for the
performance of any of the obligations or other acts of the other parties
thereto, waive any inaccuracies in the representations and warranties contained
therein or in any document delivered pursuant thereto, and waive compliance with
any of the agreements or conditions contained in the Merger Agreement to the
extent permitted by law.
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CONFIDENTIALITY AGREEMENT
KCPL and UCU have agreed pursuant to the Confidentiality Agreement that, for
a three-year period commencing on November 28, 1995, unless and until such party
shall have received the prior written approval of a majority of the Board of
Directors of the other party, neither party, nor its representatives or
affiliates, will directly or indirectly (a) acquire, agree to acquire or make
any proposal to acquire any securities of the other party or any of its
subsidiaries, any warrant or option to acquire any such securities, any security
convertible into or exchangeable for any such securities or any other right to
acquire any such securities, (b) seek or propose any merger, consolidation,
business combination, tender or exchange offer, sale or purchase of assets or
securities, dissolution, liquidation, restructuring, recapitalization or similar
transactions of or involving the other party or any of its subsidiaries, (c)
make, or in any way participate in, any "solicitation" of proxies or consents
with respect to any securities of the other party or any of its subsidiaries, or
seek to advise or influence any person with respect to the voting of any
securities of the other party or any of its subsidiaries, (d) form, join or in
any way participate in a "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) with respect to any voting securities of the other party or any of
its subsidiaries, (e) otherwise act, alone or in concert with others, to seek to
control or influence, in any manner, the management, Board of Directors or
policies of the other party or any of its subsidiaries, (f) have any discussions
or enter into any arrangements, understandings or agreements with, or advise,
finance, assist or encourage, any other persons in connection with any of the
foregoing, or (g) make any publicly disclosed proposal regarding any of the
foregoing.
DESCRIPTION OF NEWCO COMMON STOCK
The following statements contain, in summary form, certain information
relating to KCPL Common Stock (which herein is termed Newco Common Stock when
referring to KCPL Common Stock after the Mergers). They do not purport to be
complete or to reflect or give effect to statutory law and are intended to
outline the information presented in general terms only. Such statements are
subject to the detailed provisions of the KCPL Charter, which after the
Effective Time will be renamed and become the Newco Charter, and the detailed
provisions of the KCPL Bylaws, which after the Effective Time will be renamed
and become the Newco Bylaws.
DIVIDEND RIGHTS AND RESTRICTIONS
Subject (i) to the preferential dividends of the Newco Preferred Stock (as
defined herein), (ii) to certain provisions for the protection of holders of
Newco Preferred Stock, and (iii) to other restrictive provisions referred to
below, dividends may be paid on shares of Newco Common Stock from funds
available for that purpose, when and as declared by the Newco Board. Pursuant to
the Merger Agreement, KCPL is obligated to redeem all outstanding shares of the
KCPL Preferred Stock before the Effective Time. However, Newco will have the
ability to issue preferred stock ("Newco Preferred Stock") after the Effective
Time.
No dividends may be declared or paid on Newco Common Stock and no Newco
Common Stock may be purchased or redeemed or otherwise retired for consideration
(a) unless all past and current dividends on shares of outstanding Newco
Preferred Stock have been paid or set apart for payment and (b) except to the
extent of retained earnings.
In addition, cash dividends on and the acquisition of Newco Common Stock
will be restricted by provisions of the Indenture of Michigan Gas Utilities, an
operating division of UCU, dated as of July 1, 1951, as amended and supplemented
(the "MGU Indenture"), securing a portion of Newco's mortgage bonds. The
obligations under the MGU Indenture were assumed by UCU and will be, at the
Effective Time, assumed by Newco. Under the most restrictive of the provisions
contained in the MGU Indenture, Newco may not declare or pay any dividend (other
than a dividend payable in shares of its capital stock), whether in cash, stock
or otherwise, or make any other distribution, on or with respect to any class of
its capital stock, or purchase or otherwise acquire any shares of any class of
its capital stock if, after giving effect thereto, the sum of (i) the aggregate
amount of all dividends declared and all other
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distributions made (other than dividends declared or distributions made in
shares of its capital stock) on shares of its capital stock, of any class,
subsequent to December 31, 1984, plus (ii) the excess, if any, of the amount
applied to or set apart for the purchase or other acquisition of any shares of
its capital stock, of any class, subsequent to December 31, 1984, over such
amounts as shall have been received by Newco as the net cash proceeds of sales
of shares of its capital stock, of any class, subsequent to December 31, 1984,
would exceed the sum of the net income of Newco since January 1, 1985, plus $50
million. In addition, Newco may not declare such dividends unless it maintains a
tangible net worth of at least $250 million and the aggregate principal amount
of its outstanding indebtedness does not exceed 70% of its capitalization. On a
pro forma basis and as of the date of this Joint Proxy Statement/Prospectus,
none of Newco's retained earnings would be restricted as to payment of cash
dividends on its capital stock as of the Effective Time pursuant to the MGU
Indenture.
In addition, the cash payment of dividends on, and the acquisition of, Newco
Common Stock will be restricted by provisions of the Indenture of UCU, dated as
of June 1, 1995, relating to UCU's 8 7/8% Junior Subordinated Deferrable
Interest Debentures, Series A, due 2025, which provide that in the event UCU
elects to defer interest on such debentures, UCU may not declare any dividend on
or acquire any shares of its capital stock during such deferral period. The
obligations of UCU under this Indenture will be, prior to or at the Effective
Time, assumed by Newco.
VOTING RIGHTS
The holders of Newco Common Stock exclusively possess full voting powers for
the election of directors (who may be voted for cumulatively) and for all other
purposes, except (a) as by statute otherwise mandatorily provided, (b) that the
consent of specified percentages of holders of outstanding shares of Newco
Preferred Stock is required to authorize certain actions which may affect their
interest, and (c) that if at any time dividends on any of the outstanding shares
of certain series of Newco Preferred Stock shall be in default in an amount
equivalent to four or more full quarterly dividends, the holders of outstanding
shares of such series, voting as a single class, shall be entitled (voting
cumulatively) to elect the smallest number of directors necessary to constitute
a majority of the full Newco Board, which right shall continue in effect until
all dividend arrearages shall have been paid.
LIQUIDATION RIGHTS
In the event of voluntary dissolution or liquidation of Newco, after there
shall have been paid to or set aside for the holders of shares of outstanding
Newco Preferred Stock the full preferential amounts to which they are
respectively entitled, the holders of outstanding shares of Newco Common Stock
shall be entitled to receive pro rata, according to the number of shares held by
each, the remaining assets of Newco available for distribution.
PREEMPTIVE RIGHTS
No holder of outstanding shares of Newco Common Stock has any preemptive
right to subscribe for or acquire any shares of stock or any securities of any
kind issued by Newco.
LIABILITY TO ASSESSMENT
The outstanding shares of Newco Common Stock when issued in accordance with
the terms of the Merger Agreement will be fully paid and nonassessable.
CERTAIN ANTI-TAKEOVER PROVISIONS
The Newco Charter and Newco Bylaws contain provisions that may have the
effect of discouraging persons from acquiring large blocks of Newco Common Stock
or delaying or preventing a change in control of Newco. For a description of
these provisions, see "COMPARISON OF STOCKHOLDERS' RIGHTS."
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COMPARISON OF STOCKHOLDERS' RIGHTS
GENERAL
KCPL is incorporated in the State of Missouri, and UCU is incorporated in
the State of Delaware. UCU stockholders, whose rights are currently governed by
Delaware law (including the DGCL), the UCU Charter and the UCU Bylaws, will,
upon consummation of the Mergers, become shareholders of KCPL (which is to be
renamed Newco at the Effective Time). After such time, their rights will then be
governed by Missouri law (including the MGBCL), the Newco Charter and the Newco
Bylaws.
Certain differences, including all material differences, that may affect the
rights and interests of stockholders of Newco and UCU are set forth below. This
summary is not intended to be an exhaustive or detailed description of the
provisions discussed. It is qualified in its entirety by reference to the MGBCL,
DGCL, the Newco Charter, the Newco Bylaws, the UCU Charter and the UCU Bylaws.
NUMBER OF DIRECTORS
Under the Newco Charter and the Newco Bylaws, the Newco Board must be
comprised of at least three directors, the exact number to be fixed by the Newco
Bylaws. The Newco Bylaws presently provide that the exact number of directors
will be nine, but the Newco Bylaws may be amended by the KCPL Board to change
such number. See "-- Amendment of Bylaws." KCPL has agreed in the Merger
Agreement to take such action as may be necessary to cause the number of
directors comprising the Newco Board at the Effective Time to be 18 persons.
Under the UCU Charter and the UCU Bylaws, the UCU Board must be comprised of at
least three directors, the exact number to be fixed by the UCU Bylaws.
Currently, the UCU Board consists of nine directors. Under the UCU Bylaws, a
majority vote of the UCU Board is required to alter the size of the UCU Board.
CLASSIFIED BOARD OF DIRECTORS
The Newco Board is not classified, and the Newco Bylaws provide that each
director will be elected annually to a one-year term. The UCU Charter and UCU
Bylaws provide for the UCU Board to be divided into three classes. At each
annual meeting of stockholders of UCU, one class is to be elected to a
three-year term.
VACANCIES ON THE BOARD OF DIRECTORS
Under the Newco Charter and the Newco Bylaws, vacancies on the Newco Board
may be filled by the designee of a majority of the directors then in office,
even if less than a quorum. A director so designated will hold office for a term
coinciding with the term of the class to which such director is elected.
Vacancies on the UCU Board are filled in the same manner.
REMOVAL OF DIRECTORS
The Newco Charter and the Newco Bylaws are silent as to the removal of any
director, but, under the MGBCL, one or more directors or the entire Newco Board
may be removed, with or without cause, at a meeting of the shareholders by a
vote of the holders of a majority of the shares then entitled to vote. In
addition, if less than the entire Newco Board is to be removed, no one of the
directors may be removed if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
Newco Board. The UCU Charter provides that directors of UCU may be removed, with
or without cause, by a majority of the shares then entitled to vote at an
election of directors cast at a meeting of the stockholders called for that
purpose. If less than the entire UCU Board is to be removed, however, no one
director may be removed if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the class
of directors of which he is a member. The UCU Charter further provides that,
notwithstanding the foregoing or the fact that the law may specify a lesser
percentage, the entire UCU Board may be removed only by an affirmative vote of
holders of at least 80% of the shares of outstanding UCU capital stock entitled
to vote generally in the election of directors cast at a meeting of the
stockholders called for that purpose.
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VOTING/CUMULATIVE VOTING
The Newco Bylaws provide for cumulative voting in connection with the
election of directors and otherwise provide that each outstanding share entitled
to vote under the Newco Charter is entitled to one vote on each matter submitted
to a shareholder vote. The UCU Charter and the UCU Bylaws also provide for
cumulative voting in connection with the election of directors and also
otherwise provide that each outstanding share entitled to vote is entitled to
one vote on each matter submitted to a stockholder vote. Cumulative voting means
that in electing directors, each stockholder has the right to cast as many votes
in the aggregate as equals the number of shares held multiplied by the number of
directors to be elected at the election.
The Newco Bylaws state that unless required otherwise by law, the Newco
Charter or the Newco Bylaws, issues brought before a meeting of shareholders
will, except with respect to the election of directors, be decided by a vote of
the holders of a majority of the shares represented and entitled to vote. The
UCU Bylaws contain a similar provision.
SPECIAL MEETINGS; STOCKHOLDER ACTION BY WRITTEN CONSENT
The Newco Bylaws state that, in general, special shareholders' meetings may
only be called by the Chairman of the Newco Board, by the President of Newco or
at the written request of a majority of the Newco Board. The Newco Bylaws also
state that unless otherwise provided by law or in the Newco Charter, any action
required to be taken by shareholders may be taken without a meeting if a consent
in writing, stating the action taken, is signed by all shareholders entitled to
vote on the matter. The UCU Charter and the UCU Bylaws state that special
meetings of UCU stockholders may be called by the President, the Vice President,
a majority of the UCU Board and holders of at least one-fifth of all outstanding
shares entitled to vote at such meeting. Under the UCU Charter, no action
permitted or required to be taken at a special or annual meeting of the holders
of UCU Common Stock may be taken by their written consent in lieu of such a
meeting.
INDEMNIFICATION/LIMITATION OF LIABILITY
The MGBCL and the DGCL permit indemnification on substantially similar
terms. A corporation may indemnify any person made or threatened to be made a
party to any legal proceeding, including any suit by or in the name of the
corporation, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation in any capacity with respect to another enterprise, against expenses
and other amounts reasonably incurred by him in connection with such legal
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. The foregoing notwithstanding, no indemnification may be made in
respect of any claim brought by or in the name of the corporation as to which
such person is adjudged to be liable to the corporation unless and only to the
extent that a proper court determines that in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses that the court deems proper. These indemnification rights are not
exclusive of any other rights to which the person seeking indemnification is
entitled and do not limit a corporation's right to make further indemnification
as allowed by law.
The Newco Charter provides that it will indemnify to the fullest extent
permitted by the MGBCL any person made or threatened to be made a party to a
legal proceeding by reason of the fact that the person is or was a director,
officer or employee of Newco, or is or was serving at the request of Newco as a
director, officer or employee of another enterprise, against all expense,
liability or loss (including attorneys' fees and judgments) actually and
reasonably incurred by such person. The Newco Board has the discretion to
indemnify agents of Newco under similar terms. These indemnification rights are
not exclusive of any other rights to which the person is entitled by law or
under any other Newco
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authorizations. Newco may, without shareholder approval, provide its officers,
directors and employees with greater indemnification than the MGBCL offers,
provided that such further indemnity will not be offered to a person whose
conduct was finally adjudged to have been knowingly fraudulent or deliberately
dishonest, or to have constituted willful misconduct.
The UCU Charter contains a provision that eliminates the personal liability
of UCU's directors to UCU or its stockholders for monetary damages for breach of
fiduciary duty to the fullest extent permitted by the DGCL. A provision in the
UCU Bylaws entitles officers and directors to be indemnified by UCU against
costs and expenses, attorneys' fees, judgments, fines and amounts paid in
settlement that are actually and reasonably incurred in connection with any such
action, suit or proceeding, including actions brought by or in the right of UCU,
to which such persons are made or threatened to be made a party, by reason of
their being a director or officer of UCU. Such right, however, may only be
authorized by (i) a majority vote of a quorum of disinterested directors, or
(ii) if such quorum is not obtainable or, if obtainable, a majority thereof so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders of UCU, upon a determination that the person seeking
indemnification acted in good faith and in the manner that he reasonably
believed to be in or not opposed to UCU's best interest, or, if the action is
criminal in nature, upon a determination that the person seeking indemnification
had no reasonable cause to believe that his conduct was unlawful. This provision
also requires UCU, upon authorization by the UCU Board, to advance costs and
expenses, including attorneys' fees, reasonably incurred in defending such
actions; provided that any person seeking such an advance first provide UCU with
an undertaking to repay any amount as to which it may be determined such person
is not entitled.
AMENDMENT OF CHARTERS
The Newco Charter may, in general, be amended only by an affirmative vote of
holders of a majority of the outstanding shares of Newco Common Stock entitled
to vote. However, the provisions in the Newco Charter concerning certain
business combinations (see "-- Business Combinations" below) may not be changed
without the affirmative vote of the holders of at least 80% of the outstanding
shares of Newco Common Stock entitled to vote. Notwithstanding any of the
foregoing to the contrary, no amendment to the Newco Charter provisions
concerning indemnification may adversely affect the right of a person entitled
to indemnification which arises out of circumstances that occur prior to such
amendment.
The UCU Charter provides that provisions of the UCU Charter dealing with the
number, election, and removal of directors, director powers, and certain
business combinations may not be repealed or amended without the affirmative
vote of holders of at least 80% of the outstanding shares of voting stock. The
UCU stockholders may otherwise amend, alter, change or repeal any provision in
the UCU Charter as the DGCL provides.
AMENDMENT OF BYLAWS
The Newco Charter and the Newco Bylaws provide that the Newco Board may
make, alter, amend or repeal the Newco Bylaws by a majority vote of the entire
Newco Board. This provision does not limit shareholders' power to make, alter,
amend or replace the Newco Bylaws by a majority vote of shareholders present and
entitled to vote at an annual or special meeting, provided that a quorum is
present. The UCU Charter authorizes the UCU Board to make, alter and repeal
bylaws, subject to the rights of stockholders at any regular or special meeting
to alter or repeal bylaws made by the UCU Board, and to the rights, if any, of
the holders of any class of stock. Notwithstanding the previous sentence, the
affirmative vote of the holders of at least 80% of the outstanding shares of UCU
capital stock entitled to vote generally in director elections is required to
amend or repeal, or to adopt any provision inconsistent with, the sections of
the UCU Bylaws dealing with the UCU Board (Article Two) and amending the UCU
Bylaws (Article Six, Section 6), unless first approved by the affirmative vote
of at least two-thirds of the Continuing Directors, as defined in the UCU
Charter. The DGCL provides that a corporation's bylaws may otherwise be amended
by the affirmative vote of the holders of a majority of the outstanding shares
of the corporation entitled to vote thereon.
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NOTICE OF SHAREHOLDER PROPOSALS/NOMINATIONS OF DIRECTORS
The Newco Bylaws have certain requirements for providing advance notice of
the introduction by shareholders of business to be transacted at annual
shareholders' meetings. For any such proposal properly to be brought before an
annual meeting, a shareholder of record, on the date both of giving such notice
and of determining shareholders entitled to vote at the annual meeting, must
give timely notice of such proposal in a proper written form to the company's
corporate Secretary, as provided in the Newco Bylaws. To be timely, a
shareholder's notice to the Secretary must be delivered to or mailed and
received at the company's principal executive offices not less than 60 nor more
than 90 days prior to the date of the annual meeting of shareholders, provided,
however, that if less than 70 days' notice or prior public disclosure of the
date of the meeting is given to shareholders, notice by the shareholder to be
timely must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever occurs first.
The Newco Bylaws require that a shareholder's notice include (i) a
description of the proposed business and the reasons for conducting such
business, (ii) the name and record address of such shareholder, (iii) the class
and number of shares that are owned beneficially or of record by such
shareholder, (iv) a description of any financial or other interest of each such
shareholder in the proposal, and (v) a representation that such shareholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
The Newco Bylaws permit shareholders to nominate persons for election to the
Newco Board at any annual shareholders' meeting if they are shareholders of
record as of both the date of giving such notice and the date of determining
shareholders entitled to vote at the annual meeting. A shareholder must give
timely notice thereof in a proper written form to the corporate Secretary, as
provided in the bylaws. To be timely, a shareholder's notice must meet the same
timeliness requirements as described above for providing advance notice of
business to be transacted at a shareholders' meeting.
To be in proper written form, a shareholder's notice to the Secretary must
set forth (a) as to each person whom the shareholder proposes to nominate for
election as a director (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or employment of the person, (iii)
the class or series and number of shares of capital stock of the company that
are owned beneficially or of record by the person and (iv) any other information
relating to the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with solicitations
of proxies for election of directors pursuant to Section 14 of the Exchange Act,
and the rules and regulations promulgated thereunder; and (b) as to the
shareholder giving the notice (i) the name and record address of such
shareholder, (ii) the class or series and number of shares of capital stock of
the company that are owned beneficially or of record by such shareholder, (iii)
a description of all arrangements or understandings between such shareholder and
each proposed nominee and any other person or persons (including their names)
pursuant to which the nomination(s) are to be made by such shareholder, (iv) a
representation that such shareholder intends to appear in person or by proxy at
the meeting to nominate the persons named in the notice and (v) any other
information relating to such shareholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee to being named
as a nominee and to serve as a director if elected.
The UCU Bylaws provide that any stockholder who intends to bring any matter
other than the election of directors before a meeting of stockholders and is
entitled to vote on such matter must deliver written notice of such
stockholder's intent to bring such matter before the meeting of stockholders,
either by personal delivery or by United States mail, postage pre-paid, to the
Secretary of UCU. Such notice must be received by the Secretary not later than
the following dates: (1) with respect to an annual meeting of stockholders, 60
days in advance of such meeting if such meeting is to
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be held on a day which is within 30 days preceding the anniversary of the
previous year's annual meeting or 90 days in advance of such meeting if such
meeting is to be held on or after the anniversary of the previous year's annual
meeting; and (2) with respect to any other annual meeting of stockholders, or a
special meeting of stockholders, the close of business on the tenth day
following the date of public disclosure of the date of such meeting.
Any UCU stockholder entitled to vote for the election of a director at a
meeting called for such purpose may nominate one or more persons for such
election only if written notice of the stockholder's intent to make the
nomination is given, either by personal delivery or by United States mail
postage pre-paid, to the Secretary of UCU. The timing for receipt of the notice
is the same as for receiving notice of stockholders' proposals. Such written
notice must set forth (i) the name, age, business address and residence address
of each nominee proposed in such notice, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares of capital stock of
UCU which are beneficially owned by each such nominee, and (iv) such other
information concerning each such nominee as would be required, under the rules
of the SEC, in a proxy statement soliciting proxies for the election of such
nominee as a director. Such notice will include a signed consent of each such
nominee to serve as a director of UCU, if elected.
STOCKHOLDER INSPECTION
Under the DGCL, any stockholder may inspect the corporation's stock ledger,
stockholder list and other books and records for any proper purpose. A "proper
purpose" is defined as a purpose reasonably related to such person's interest as
a stockholder. The DGCL specifically provides that a stockholder may appoint an
agent for the purpose of examining the stock ledger, list of stockholders or
other books and records of the corporation. A stockholder may apply to the
Delaware Court of Chancery to compel inspection in the event the stockholder's
request to examine the books and records is refused. In general, the corporation
has the burden of proving an improper purpose where that stockholder requests to
examine only the stockholder ledger or the stockholder list, and in all other
circumstances, the stockholder has the burden of proving a proper purpose. The
right of shareholders to inspect under the MGBCL is generally similar to that of
stockholders under the DGCL. Neither the MGBCL nor Missouri case law, however,
provides specific guidance as to whether a shareholder may appoint an agent for
the purpose of examining books and records or the extent to which a shareholder
must have a "proper purpose." Accordingly, in comparison with the DGCL, in a
given situation, a Missouri shareholder may be provided with less guidance as to
the scope of his or her ability to inspect the books and records of the
corporation.
The Newco Bylaws provide that a shareholder has the right to inspect Newco's
books only to the extent that the right is conferred by law, the Newco Charter,
the Newco Bylaws, or a resolution of the Newco Board. The list of shareholders
entitled to vote at any meeting will be kept on file at Newco's registered
office for ten days before the meeting and will be subject to Newco shareholder
inspection at any time during that period, during usual business hours.
The UCU Bylaws provide that the UCU Board may determine from time to time
whether and, if allowed, when and under what conditions and regulations UCU's
books and records will be open to stockholder inspection. Rights in this respect
will be limited accordingly, except as the law requires otherwise. Under no
circumstances will any stockholder have the right to inspect UCU's books or
records or receive any statement for an illegal or improper purpose. A complete
list of stockholders entitled to vote at each meeting of stockholders, prepared
in accordance with the UCU Bylaws, shall be prepared by UCU's Secretary and
shall be open for examination by any stockholder, for any purpose germane to the
meeting, during ordinary business hours for a period of at least 10 days before
every meeting, either at a place within the city where the meeting is to be
held, or, if not so specified, at the place where the meeting will be held.
STOCKHOLDERS' VOTE FOR MERGERS
In the area of mergers or other corporate reorganizations, the DGCL differs
from the MGBCL in a number of respects. A corporation incorporated under the
DGCL must obtain the affirmative vote
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(except as indicated below and unless its certificate of incorporation provides
otherwise) of the holders of a majority of the outstanding shares of the
corporation entitled to vote thereon to approve a merger with another
corporation, the sale of substantially all of the corporation's assets or the
voluntary dissolution of the corporation. In the same situations, the MGBCL
requires the approval of persons holding at least two-thirds of the outstanding
shares entitled to vote thereon.
The DGCL does not require a stockholder vote of the surviving corporation in
a merger if (i) the merger agreement does not amend the existing certificate of
incorporation, (ii) each outstanding share of the surviving corporation before
the merger is unchanged, and (iii) the number of shares to be issued in the
merger does not exceed 20% of the shares outstanding immediately prior to such
issuance. The MGBCL has no such exception.
Both the MGBCL and the DGCL do not require a vote of a corporation's
stockholders if such corporation is merged with and into a parent corporation
that owns 90 percent or more of such corporation's stock.
APPRAISAL RIGHTS
Both the DGCL and the MGBCL provide appraisal rights to shareholders
entitled to vote in merger transactions (except as indicated below). The MGBCL
also provides such rights in a sale of assets, unless pursuant to a voluntary
dissolution of the corporation, whereas the DGCL does not. The DGCL does not
recognize dissenters' rights of appraisal in a merger or consolidation if the
dissenting shares of the corporation are listed on a national securities
exchange, designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or held
of record by more than 2,000 stockholders, or if the corporation is the
surviving corporation and no vote of its stockholders is required, subject to
certain exceptions.
ANTI-TAKEOVER STATUTES
The MGBCL and DGCL contain certain provisions which may be deemed to have an
anti-takeover effect.
The Missouri business combination statute protects domestic corporations
from unsolicited takeovers by prohibiting certain transactions. The statute
restricts certain "Business Combinations" between a corporation and an
"Interested Shareholder" and its "Affiliates" and "Associates" (as defined
therein). A "Business Combination" includes a merger or consolidation, certain
sales, leases, exchanges, mortgages, transfers, pledges and similar dispositions
of corporate assets or stock and any reclassifications, recapitalizations and
reorganizations that increase the proportionate voting power of the Interested
Shareholder. An "Interested Shareholder" includes any person or entity which
beneficially owns or controls 20% or more of the outstanding voting shares of
the corporation. Pursuant to the Missouri business combination statute, a
Missouri corporation may at no time engage in a Business Combination with an
Interested Shareholder other than (i) a Business Combination approved by the
board of directors prior to the date on which the Interested Shareholder
acquired such status; (ii) a Business Combination approved by the holders of a
majority of the outstanding voting stock not beneficially owned by the
Interested Shareholder or its Affiliates or Associates at a meeting called no
earlier than five years after the date on which the Interested Shareholder
acquired such status; or (iii) a Business Combination that satisfies certain
detailed fairness and procedural requirements. Notwithstanding the foregoing,
unless the board of directors of the corporation approved such Business
Combination prior to the date on which the Interested Shareholder acquired such
status, no such Business Combination may be engaged in for a period of five
years after such date.
The MGBCL exempts from its business combination provisions: (i) corporations
not having a class of voting stock registered under Section 12 of the Exchange
Act; (ii) corporations which adopt
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provisions in their original articles of incorporation or, under certain
circumstances, adopt amendments to their bylaws expressly electing not to be
covered by the statute; and (iii) certain circumstances in which a shareholder
inadvertently becomes an Interested Shareholder. The Newco Charter and the Newco
Bylaws do not "opt out" of the Missouri business combination statute.
The MGBCL also contains a "Control Share Acquisition Statute" which provides
that an "Acquiring Person" who, after any acquisition of shares of a publicly
traded corporation, has the voting power, when added to all shares of the same
corporation previously owned or controlled by the Acquiring Person, to exercise
or direct the exercise of (i) 20% but less than 33 1/3%, (ii) 33 1/3% or more
but less than a majority or (iii) a majority of the voting power of outstanding
stock of such corporation, must obtain shareholder approval for the purchase of
the "Control Shares." If approval is not given, the Acquiring Person's shares
lose the right to vote. The statute prohibits an Acquiring Person from voting
its shares unless certain disclosure requirements are met and the retention or
restoration of voting rights is approved by both (i) a majority of the
outstanding voting stock, and (ii) a majority of the outstanding voting stock
after exclusion of "Interested Shares." "Interested Shares" are defined as
shares owned by the Acquiring Person, by directors who are also employees, and
by officers of the corporation. Shareholders are given dissenters' rights with
respect to the vote on Control Share Acquisitions and may demand payment of the
fair value of their shares.
A number of acquisitions of shares are deemed not to constitute Control
Share Acquisitions, including good faith gifts, transfers pursuant to wills,
purchases pursuant to an issuance by the corporation, mergers involving the
corporation which satisfy the other requirements of the MGBCL, transactions with
a person who owned a majority of the voting power of the corporation within the
prior year, or purchases from a person who has previously satisfied the
provisions of the Control Share Acquisition Statute so long as the transaction
does not result in the purchasing party having voting power after the purchase
in a percentage range (such ranges are as set forth in the immediately preceding
paragraph) beyond the range for which the selling party previously satisfied the
provisions of the statute. Additionally, a corporation may exempt itself from
application of the statute by inserting a provision in its articles of
incorporation or bylaws expressly electing not to be covered by the statute. The
Newco Charter and the Newco Bylaws do not "opt out" of the Control Share
Acquisition Statute.
The DGCL sections applicable to UCU contain a business combination statute
similar to that contained in the MGBCL. Like the Missouri business combination
statute, the Delaware business combination statute generally prohibits a
domestic corporation from engaging in mergers or other business combinations
with any person who is the beneficial owner of 15% or more of the outstanding
voting stock of the corporation (an "Interested Stockholder"). The prohibition
can be avoided if, prior to the date on which the stockholder becomes an
Interested Stockholder, the Board of Directors of a Delaware corporation
approves either the business combination or the transaction which resulted in
the stockholder becoming an Interested Stockholder. The MGBCL imposes a longer
prohibition period on transactions with Interested Stockholders than the
three-year prohibition provided for under the DGCL, thereby potentially
increasing the period during which an unsolicited takeover may be frustrated. In
addition, the DGCL, unlike its Missouri counterpart, does not apply if the
Interested Stockholder obtains at least 85% of the corporation's voting stock
upon consummation of the transaction which resulted in the stockholder's
becoming an Interested Stockholder. Thus, a person acquiring at least 85% of the
corporation's voting stock could circumvent the defensive provisions of the DGCL
while being unable to do so under the MGBCL.
The DGCL does not contain a control share acquisition statute similar to
that contained in the MGBCL.
BUSINESS COMBINATIONS
The Newco Charter provides that the affirmative vote of the holders of at
least 80% of voting power of Newco Common Stock is required to approve any
Business Combination with an Interested Shareholder unless certain exceptions
are satisfied. A "Business Combination" is defined to include
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certain transactions by Newco or any of its subsidiaries, including, without
limitation, (i) any merger or consolidation with an Interested Shareholder; (ii)
any sale, lease, exchange, transfer or other disposition (in one transaction or
a series) of a Substantial Part (as defined therein) of the assets of Newco to
an Interested Shareholder; (iii) the issuance of any securities to an Interested
Shareholder other than on a pro rata basis to all holders of the same class
pursuant to a stock split or stock dividend; (iv) any recapitalization,
reclassification, or similar transaction that increases the Interested
Shareholder's proportionate voting power; (v) any liquidation, spinoff, split-up
or dissolution of Newco that the Interested Shareholder proposes; or (vi) any
agreement, contract or arrangement providing for an action specified in (i)-(v).
An "Interested Shareholder" is defined as any person and its affiliates and
associates that beneficially owns 5% or more of the outstanding Newco Common
Stock. The 80% voting requirement referred to above is not applicable if either
(a) a majority of the Continuing Directors (as defined in the Newco Charter)
approved the Business Combination, or (b) the cash or fair market value of other
consideration received per share by the holders of Newco Common Stock in the
Business Combination equals or exceeds the highest share price that the
Interested Shareholder paid for Newco Common Stock during the five years
preceding the announcement of the Business Combination.
The UCU Charter provides that the affirmative vote of the holders of at
least 80% of UCU stock entitled to vote is required to approve any "Business
Transaction" with a "Related Person," or any Business Transaction in which a
Related Person has an interest (except proportionately as a UCU stockholder)
unless certain exceptions are satisfied. A "Business Transaction" is defined to
include certain transactions by UCU or any of its subsidiaries, including,
without limitation, (i) any merger or consolidation of UCU or a subsidiary; (ii)
any sale, lease, exchange, transfer or other disposition (in one transaction or
a series of transactions) of 20% or more of the assets of UCU or a subsidiary;
(iii) any sale, lease, exchange transfer or other disposition (in one
transaction or a series) of 20% or more of the assets of a Related Person to
UCU; (iv) the issuance, sale, exchange, transfer or other disposition of any
securities of UCU or a subsidiary by UCU or a subsidiary; (v) any
recapitalization, reclassification or similar transaction that increases a
Related Person's proportionate voting power; (v) any liquidation, spinoff,
split-up or dissolution of UCU; and (vi) any agreement, contract or arrangement
providing for an action specified in (i)-(v). A "Related Person" is defined as
any person and any affiliate or associate which beneficially owns 20% or more of
UCU outstanding Voting Stock. The 80% voting requirement referred to above is
not applicable if either (a) a majority of the Continuing Directors (as defined
in the UCU Charter) approved the Business Transaction, or (b) the Business
Transaction was a merger or consolidation, or sale of all or substantially all
of UCU assets, and the cash or fair market value of other consideration received
per share by common stockholders (other than the Related Person) in the Business
Transaction equals at least the greater of (1) the highest amount of
consideration that the Related Person paid for a share of UCU Common Stock at
any time such person was a Related Person or in the transaction that resulted in
such person's becoming a Related Person, provided, however, that the highest
purchase price will be appropriately adjusted to reflect reclassification,
recapitalization, stock splits, reverse stock splits or other similar
adjustments in the number of shares, or the declaration of a stock dividend
thereon, between the last date upon which the Related Person paid the highest
price and the effective date of the merger or consolidation or the date of
distributing proceeds from the sale of all or substantially all of UCU assets to
stockholders, or (2) 110% of the book value per share of UCU Common Stock
immediately before the first public announcement of the proposed business
transaction or on the date the Related Party became a Related Party, whichever
is higher.
APPROVAL OF NEWCO PLANS
NEWCO STOCK INCENTIVE PLAN
Pursuant to the Merger Agreement, it was agreed that Newco would adopt a
stock compensation plan to replace the existing stock incentive plans of KCPL
and UCU (except with respect to obligations
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incurred or attributable to employment prior to the Effective Time) subject to
approval by stockholders. Accordingly, the Newco Stock Incentive Plan is
submitted to the shareholders of KCPL for approval, as more fully described
below. The Newco Stock Incentive Plan will become effective only if approved by
stockholders as described below, in which event it will become effective at the
Effective Time and will terminate ten years thereafter.
The purpose of the Newco Stock Incentive Plan is to enable Newco and its
Affiliates (as defined in the Newco Stock Incentive Plan) to attract, retain and
motivate officers and employees and to provide Newco and its Affiliates with the
ability to provide incentives linked to the profitability of Newco's businesses,
increases in stockholder value and the enhancement of performance relating to
customers.
The Newco Stock Incentive Plan has been designed to comply with the
provisions of Section 162(m) of the Code which imposes limits on the ability of
a public company to claim tax deductions for compensation paid to certain highly
compensated executives. Section 162(m) of the Code generally denies a corporate
tax deduction for annual compensation in excess of $1,000,000 paid to the chief
executive officer and the four other most highly compensated officers of a
public company. Certain types of compensation, including performance-based
compensation, are generally excluded from this deduction limit. In an effort to
ensure that stock awards under the Newco Stock Incentive Plan will qualify as
performance-based compensation, which is generally deductible, the Newco Stock
Incentive Plan is being submitted to stockholders of KCPL for approval at the
KCPL Meeting. KCPL believes compensation payable pursuant to the Newco Stock
Incentive Plan will be deductible for federal income tax purposes under most
circumstances. However, under certain circumstances such as death, disability
and change in control (all as defined in the Newco Stock Incentive Plan),
compensation not qualified under Section 162(m) of the Code may be payable. By
approving the Newco Stock Incentive Plan, the stockholders will be approving,
among other things, the performance measures, eligibility requirements and
limits on various stock awards contained therein. The affirmative vote of a
majority of the votes entitled to be cast by the holders of the shares of KCPL
Common Stock represented at the KCPL Meeting and entitled to vote thereon is
required to approve the Newco Stock Incentive Plan with respect to Section
162(m) of the Code. Such vote will also satisfy the stockholder approval
requirements of Section 422 of the Code with respect to the grant of ISOs and
Rule 16b-3 under the Exchange Act ("Rule 16b-3"). THE BOARD OF DIRECTORS OF
KCPL, BY A UNANIMOUS VOTE, RECOMMENDS A VOTE FOR APPROVAL OF THE NEWCO STOCK
INCENTIVE PLAN.
Set forth below is a summary of certain material features of the Newco Stock
Incentive Plan, which summary is qualified in its entirety by reference to the
actual plan attached as Annex F to this Joint Proxy Statement/Prospectus:
ADMINISTRATION. The Newco Stock Incentive Plan will be administered by the
Newco Compensation Committee or such other committee of the Newco Board as the
Newco Board may from time to time designate, which will be composed solely of
not less than two directors who qualify as "disinterested persons" for purposes
of Rule 16b-3 and as "outside directors" for purposes of Section 162(m) of the
Code. Among other things, the Newco Compensation Committee will have the
authority, subject to the terms of the Newco Stock Incentive Plan, to select
officers and employees to whom awards may be granted, to determine the type of
award as well as the number of shares of Newco Common Stock to be covered by
each award, and to determine the terms and conditions of any such awards. The
Newco Compensation Committee also will have the authority to adopt, alter and
repeal such administrative rules, guidelines and practices governing the Newco
Stock Incentive Plan as it shall deem advisable, to interpret the terms and
provisions of the Newco Stock Incentive Plan and any awards issued thereunder
and to otherwise supervise the administration of the Newco Stock Incentive Plan.
All decisions made by the Newco Compensation Committee pursuant to the Newco
Stock Incentive Plan will be final and binding.
ELIGIBILITY. Officers and salaried employees of Newco and its Affiliates
designated by the Newco Compensation Committee who are responsible for or
contribute to the management, growth and
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profitability of Newco are eligible to be granted awards under the Newco Stock
Incentive Plan. No grant will be made under the Newco Stock Incentive Plan to a
director who is not an officer or a salaried employee. The initial determination
of persons eligible to participate in the Newco Stock Incentive Plan will not be
made until after the Effective Time by the Newco Compensation Committee as then
constituted. Accordingly, it is not possible to estimate at this time the number
of persons who will be eligible to participate in the Newco Stock Incentive
Plan.
PLAN FEATURES. The Newco Stock Incentive Plan authorizes the issuance of up
to 9,000,000 shares of Newco Common Stock pursuant to the grant or exercise of
stock options (including ISOs), SARs, restricted stock and performance units,
but not more than 3,000,000 shares may be issued as restricted stock. No single
participant may be granted awards pursuant to the Newco Stock Incentive Plan
covering in excess of 600,000 shares of Newco Common Stock in any one calendar
year and no participant may be granted performance units in any one calendar
year payable in cash in an amount that would exceed $2,000,000. Subject to the
foregoing limits, the shares available under the Newco Stock Incentive Plan can
be allocated among the various types of awards and among the participants as the
Newco Compensation Committee deems appropriate. The shares subject to grant
under the Newco Stock Incentive Plan are to be made available from authorized
but unissued shares or from treasury shares as determined from time to time by
the Newco Board. Awards may be granted for such terms as the Newco Compensation
Committee may determine, except that the term of an ISO may not exceed ten years
from its date of grant. No awards outstanding on the termination date of the
Newco Stock Incentive Plan shall be affected or impaired by such termination.
Awards will not be transferable, except by will and the laws of descent and
distribution and, in the case of nonqualified stock options and any related
SARs, as a gift to an optionee's children. The Newco Compensation Committee will
have broad authority to fix the terms and conditions of individual agreements
with participants.
As indicated above, several types of stock-related grants can be made under
the Newco Stock Incentive Plan. A summary of these grants is set forth below:
STOCK OPTIONS. The Newco Stock Incentive Plan authorizes the Newco
Compensation Committee to grant options to purchase Newco Common Stock at an
exercise price (the "option price") to be determined by the Committee. The Newco
Stock Incentive Plan permits optionees, with the approval of the Newco
Compensation Committee, to pay the exercise price of options in cash, stock
(valued at its fair market value on the date of exercise) or a combination
thereof. As noted above, options may be granted either as ISOs or nonqualified
options. The principal difference between ISOs and nonqualified options is their
tax treatment. See "-- Certain Federal Income Tax Consequences."
SARS. The Newco Stock Incentive Plan authorizes the Newco Compensation
Committee to grant SARs in conjunction with all or part of any stock option
granted under the Newco Stock Incentive Plan. An SAR entitles the holder to
receive upon exercise the excess of the fair market value of a specified number
of shares of Newco Common Stock at the time of exercise over the option price
per share specified in the related stock option. Such amount will be paid to the
holder in shares of Newco Common Stock (valued at its fair market value on the
date of exercise), cash or combination thereof, as the Newco Compensation
Committee may determine. An SAR may be granted in conjunction with a
contemporaneously granted ISO or a previously or contemporaneously granted
nonqualified option. The option will be cancelled to the extent that the related
SAR is exercised and the SAR will be cancelled to the extent the related option
is exercised.
RESTRICTED STOCK. The Newco Stock Incentive Plan authorizes the Newco
Compensation Committee to grant restricted stock to individuals with such
restriction periods as the Newco Compensation Committee may designate. The Newco
Compensation Committee may, prior to granting shares of restricted stock,
designate certain participants as "Covered Employees" upon determining that such
participants are or are expected to be "covered employees" (within the meaning
of Section 162(m)(3) of the Code), with compensation in excess of the limitation
provided in Section 162(m) of the Code, and will provide that restricted stock
awards to these Covered Employees cannot vest unless applicable
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performance goals established by the Newco Compensation Committee within the
time period prescribed by Section 162(m) of the Code are satisfied. These
performance goals must be based on the attainment of specified levels of
earnings per share, market share, stock price, sales, costs, net operating
income, cash flow, retained earnings, return on equity, return on assets,
economic value added, results of customer satisfaction surveys, aggregate
product price and other product price measures, safety record, service
reliability, demand-side management (including conservation and load
management), operating and maintenance cost management, energy production
availability and individual performance measures. Such performance goals also
may be based on the attainment of specified levels of Newco's performance under
one or more of the measures described above relative to the performance of other
corporations. Performance goals based on the foregoing factors are hereinafter
referred to as "Performance Goals." With respect to Covered Employees, all
Performance Goals must be objective performance goals satisfying the
requirements for "performance-based compensation" within the meaning of Section
162(m)(4) of the Code. Notwithstanding the foregoing, the Newco Compensation
Committee shall have the discretion to grant to an employee who has become
entitled to an award under the Newco MIC Plan (see "-- Newco MIC Plan"), in
payment of all or any part of such award, shares of restricted stock that shall
vest without regard to the attainment of Performance Goals. The Newco
Compensation Committee also may condition the vesting of restricted stock awards
to participants who are not Covered Employees upon the satisfaction of these or
other applicable performance goals. The provisions of restricted stock awards
(including any applicable Performance Goals) need not be the same with respect
to each participant. During the restriction period, the Newco Compensation
Committee may require that the stock certificates evidencing restricted shares
be held by Newco. Restricted stock may not be sold, assigned, transferred,
pledged or otherwise encumbered. Other than these restrictions on transfer and
any other restrictions the Newco Compensation Committee may impose, the
participant will have all the rights of a holder of stock holding the class or
series of stock that is the subject of the restricted stock award.
PERFORMANCE UNITS. The Newco Stock Incentive Plan authorizes the Newco
Compensation Committee to grant performance units. Performance units may be
denominated in shares of Newco Common Stock or cash, or may represent the right
to receive dividend equivalents with respect to shares of Newco Common Stock, as
determined by the Newco Compensation Committee. Performance units will be
payable in cash or shares of Newco Common Stock if applicable Performance Goals
(based on one or more of the measures described in the section entitled "--
Restricted Stock" above) determined by such committee are achieved during an
award cycle. An award cycle will consist of a period of consecutive fiscal years
or portions thereof designated by the Newco Compensation Committee over which
performance units are to be earned. At the conclusion of a particular award
cycle, the Newco Compensation Committee will determine the number of performance
units granted to a participant which have been earned in view of applicable
Performance Goals and shall deliver to such participant (i) the number of shares
of Newco Common Stock equal to the value of performance units determined by the
Newco Compensation Committee to have been earned and/or (ii) cash equal to the
value of such earned performance units. The Newco Compensation Committee may, in
its discretion, permit participants to defer the receipt of performance units on
terms and conditions established by the Newco Compensation Committee.
The Newco Compensation Committee will have the authority to determine the
officers and employees to whom and the time or times at which performance units
shall be awarded, the number of performance units to be awarded to any
participant, the duration of the award cycle and any other terms and conditions
of an award. In the event that a participant's employment is involuntarily
terminated or in the event of the participant's retirement, the Newco
Compensation Committee may waive in whole or in part any or all remaining
payment limitations, provided, however, that the satisfaction of applicable
Performance Goals by a designated Covered Employee cannot be waived unless such
Covered Employee's employment is terminated by death, disability or change of
control.
AMENDMENT AND DISCONTINUANCE. The Newco Stock Incentive Plan may be
amended, altered or discontinued by the Newco Board, but no amendment,
alteration or discontinuance may be made
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which would (i) impair the rights of an optionee under an option or a recipient
of an SAR, restricted stock award or performance unit award previously granted
without the optionee's or recipient's consent, except such an amendment made to
qualify the Newco Stock Incentive Plan for the exemption provided by Rule 16b-3
or (ii) disqualify the Newco Stock Incentive Plan from the exemption provided by
Rule 16b-3. Except as expressly provided in the Newco Stock Incentive Plan, the
Newco Stock Incentive Plan may not be amended without stockholder approval to
the extent such approval is required by law or agreement.
CHANGES IN CAPITALIZATION; CHANGE IN CONTROL. The Newco Stock Incentive
Plan provides that, in the event of any change in corporate capitalization, such
as a stock split, or a corporate transaction, such as any merger, consolidation,
share exchange, separation, spin-off or other distribution of stock or property
of Newco or any reorganization or partial or complete liquidation of Newco, the
Newco Compensation Committee or the Newco Board may make such substitutions or
adjustments in the aggregate number and kind of shares reserved for issuance
under the Newco Stock Incentive Plan, in the number, kind and option price of
shares subject to outstanding stock options and SARs, and in the number and kind
of shares subject to other outstanding awards granted under the Newco Stock
Incentive Plan as may be determined to be appropriate by the Newco Compensation
Committee or the Newco Board, in its sole discretion. The Newco Stock Incentive
Plan also provides that in the event of a change in control (as defined in the
Newco Stock Incentive Plan) of Newco (i) any SARs and stock options outstanding
as of the date of the change of control which are not then exercisable and
vested will become fully exercisable and vested, (ii) the restrictions
applicable to restricted stock will lapse and such restricted stock shall become
free of all restrictions and fully vested and (iii) all performance units will
be considered to be earned and payable in full and any restrictions will lapse
and such performance units will be settled in cash as promptly as practicable.
The holders of options (other than options of holders subject to Section 16(b)
of the Exchange Act that were granted not more than six months before the change
in control) will have the right, for a period of 60 days after such date, to
surrender such options in exchange for a cash payment based on the change in
control price (as defined in the Newco Stock Incentive Plan). However, if
settlement in cash would disqualify a transaction from pooling-of-interests
accounting treatment, the Newco Compensation Committee may substitute stock.
FEDERAL INCOME TAX CONSEQUENCES. The following discussion is intended only
as a brief summary of the federal income tax rules relevant to stock options,
SARs, restricted stock and performance units. The laws governing the tax aspects
of awards are highly technical and such laws are subject to change.
- NONQUALIFIED OPTIONS AND SARS. Upon the grant of a nonqualified option
(with or without an SAR), the optionee will not recognize any taxable income
and Newco will not be entitled to a deduction. Upon the exercise of such an
option or an SAR, the excess of the fair market value of the shares acquired
on the exercise of the option over the option price (the "spread"), or the
consideration paid to the optionee upon exercise of the SAR, will constitute
compensation taxable to the optionee as ordinary income. In determining the
amount of the spread or the amount of consideration paid to the optionee,
the fair market value of the stock on the date of exercise is used, except
that in the case of an optionee subject to the six month short-swing profit
recovery provisions of Section 16(b) of the Exchange Act (generally officers
and directors of Newco), the fair market value will be determined six months
after the date on which the option was granted (if such date is later than
the exercise date) unless such optionee elects to be taxed based on the fair
market value at the date of exercise. Any such election (a "Section 83(b)
election") must be made and filed with the IRS within 30 days after exercise
in accordance with the regulations under Section 83(b) of the Code. Newco,
in computing its federal income tax, will generally be entitled to a
deduction in an amount equal to the compensation taxable to the optionee.
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- ISOS. An optionee will not recognize taxable income on the grant or
exercise of an ISO. However, the spread at exercise will constitute an item
includable in alternative minimum taxable income, and thereby may subject
the optionee to the alternative minimum tax. Such alternative minimum tax
may be payable even though the optionee receives no cash upon the exercise
of his ISO with which to pay such tax.
Upon the disposition of shares of stock acquired pursuant to the
exercise of an ISO after (i) two years from the date of grant of the ISO and
(ii) one year after the transfer of the shares to the optionee (the "ISO
Holding Period"), the optionee will recognize long-term capital gain or
loss, as the case may be, measured by the difference between the stock's
selling price and the exercise price. Newco is not entitled to any tax
deduction by reason of the grant or exercise of an ISO, or by reason of a
disposition of stock received upon exercise of an ISO if the ISO Holding
Period is satisfied. Different rules apply if the optionee disposes of the
shares of stock acquired pursuant to the exercise of an ISO before the
expiration of the ISO Holding Period.
- RESTRICTED STOCK. A participant who is granted restricted stock may make a
Section 83(b) election to have the grant taxed as compensation income at the
date of receipt, with the result that any future appreciation (or
depreciation) in the value of the shares of stock granted shall be taxed as
capital gain (or loss) upon a subsequent sale of the shares. However, if the
participant does not make a Section 83(b) election, then the grant will be
taxed as compensation income at the full fair market value on the date that
the restrictions imposed on the shares expire. Unless a participant makes a
Section 83(b) election, any dividends paid on stock subject to the
restrictions are compensation income to the participant and compensation
expense to Newco. Newco is generally entitled to an income tax deduction for
any compensation income taxed to the participant, subject to the provisions
of Section 162(m) of the Code.
- PERFORMANCE UNITS. A participant who has been granted a performance unit
award will not realize taxable income until the applicable award cycle
expires and the participant is in receipt of the stock distributed in
payment of the award or an equivalent amount of cash, at which time such
participant will realize ordinary income equal to the full fair market value
of the shares delivered or the amount of cash paid. At that time, Newco
generally will be allowed a corresponding tax deduction equal to the
compensation taxable to the award recipient, subject to the provisions of
Section 162(m) of the Code.
NEW PLAN BENEFITS. It cannot be determined at this time what benefits or
amounts, if any, will be received by or allocated to any person or group of
persons under the Newco Stock Incentive Plan if such plan is adopted or what
benefits or amounts would have been received by or allocated to any person or
group of persons for the last fiscal year if the plan had been in effect. These
determinations will be made by the Newco Compensation Committee.
NEWCO MIC PLAN
Pursuant to the Merger Agreement, it was agreed that Newco would adopt,
subject to shareholder approval, an annual incentive plan to replace the
existing short-term incentive compensation plans of KCPL and UCU (except with
respect to obligations incurred or attributable to employment prior to the
Effective Time), effective as of the Effective Time. The Newco MIC Plan will not
become effective with respect to individuals who are subject to Section 162(m)
of the Code unless the shareholder approval described below is obtained.
The purpose of the Newco MIC Plan is to provide a significant and flexible
economic opportunity to selected officers and salaried employees of Newco and
its Affiliates (as defined in the Newco MIC Plan) in an effort to reward their
individual and group contributions to Newco and to more closely link the
financial interests of management, shareholders and customers.
The Newco MIC Plan is designed to take into account Section 162(m) of the
Code, which generally denies a corporate tax deduction for annual compensation
exceeding $1,000,000 paid to the chief executive officer and the four other most
highly compensated officers of a public company. Certain
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types of compensation, including performance-based compensation, are excluded
from this deduction limit. In an effort to ensure that compensation payable
under the Newco MIC Plan to certain executives will qualify as performance-based
compensation that is generally tax-deductible, the Newco MIC Plan is being
submitted to shareholders of KCPL for approval at the KCPL Meeting. KCPL
believes that compensation payable pursuant to the Newco MIC Plan will be
deductible for federal income tax purposes under most circumstances. However,
under certain circumstances such as death, disability and change in control (all
as defined in the Newco MIC Plan), compensation not qualified under Section
162(m) of the Code may be payable. By approving the Newco MIC Plan, KCPL's
shareholders will be approving, among other things, the performance measures,
eligibility requirements and annual incentive award limits contained therein.
The affirmative vote of a majority of the votes entitled to be cast by the
holders of the shares of KCPL Common Stock represented at the KCPL Meeting and
entitled to vote thereon is required to approve the Newco MIC Plan. THE BOARD OF
DIRECTORS OF KCPL, BY A UNANIMOUS VOTE, RECOMMENDS A VOTE FOR APPROVAL OF THE
NEWCO MIC PLAN.
Set forth below is a summary of certain material features of the Newco MIC
Plan, which summary is qualified in its entirety by reference to the actual plan
attached as Annex G to this Joint Proxy Statement/Prospectus:
ADMINISTRATION. The Newco MIC Plan will be administered by the Newco
Compensation Committee, or such other committee of the Newco Board as the Newco
Board may from time to time designate, which, unless the Newco Board determines
otherwise, will be composed solely of not less than two "disinterested persons"
who qualify as "outside directors" for purposes of Section 162(m) of the Code.
The Newco Compensation Committee will have sole authority to make rules and
regulations relating to the administration of the Newco MIC Plan, and any
interpretations and decisions of the Newco Compensation Committee with respect
to the Newco MIC Plan will be final and binding.
ELIGIBILITY. The Newco Compensation Committee will, in its sole discretion,
determine those officers and salaried employees of Newco who shall be eligible
to participate in the Newco MIC Plan for a given period (an "Incentive Period").
These participants will be selected based upon their opportunity to have a
substantial impact on Newco's results. Participation in the Newco MIC Plan by a
participant during a given Incentive Period does not require continued
participation by such participant in any subsequent Incentive Period. The
initial determination of persons eligible to participate in the Newco MIC Plan
will not be made until after the Effective Time by the Newco Compensation
Committee as then constituted. Accordingly, it is not possible to estimate at
this time the number of persons who will be eligible to participate in the Newco
MIC Plan.
PLAN FEATURES. The Newco MIC Plan provides for the payment of incentive
awards to participants designated by the Newco Compensation Committee, which
payments may be conditioned upon the attainment of pre-established performance
goals or upon such other factors or criteria as the Newco Compensation Committee
shall determine. Such performance goals may be different for each participant.
Bonus amounts are determined by multiplying a participant's "Target Incentive
Award" by a percentage which varies depending on the extent to which the
performance goals or other factors or criteria are satisfied. A participant's
Target Incentive Award, in turn, is determined by multiplying such participant's
base salary as of the last day of the applicable Incentive Period by a
percentage designated by the Newco Compensation Committee, in its sole
discretion, which percentage need not be the same for each participant (and
which may exceed 100%). The Newco Compensation Committee may, in its sole
discretion, increase or decrease the amount of any incentive awards payable to a
participant and may, in recognition of special circumstances, pay incentive
awards even if not earned, provided that the Newco Compensation Committee cannot
increase the amount of any incentive awards payable to certain designated
"Covered Employees." Incentive awards payable under the Newco MIC Plan to
certain designated "Covered Employees" are subject to special restrictions
described in the following section. Incentive awards are payable in cash, shares
of Newco Common Stock or in such other form as the Newco Compensation Committee
may determine.
99
<PAGE>
DESIGNATED COVERED EMPLOYEES. The Newco Compensation Committee will have
the authority, in its sole discretion, to designate certain participants as
"Covered Employees" for a specified Incentive Period upon determining that such
participants are or are expected to be "covered employees" (within the meaning
of Section 162(m) of the Code) for such Incentive Period with compensation in
excess of the limitation provided in Section 162(m) of the Code. Not more than
90 days after the beginning of the Incentive Period, and, in any event, before
25% or more of the Incentive Period has elapsed, the Newco Compensation
Committee will establish the performance goals for the bonus award opportunities
of these Covered Employees. Such performance goals are to be comprised of one or
more of the following measures: earnings per share, market share, stock price,
sales, costs, net operating income, cash flow, retained earnings, return on
equity, economic value added, results of customer satisfaction surveys,
aggregate product price and other product price measures, safety record, service
reliability, demand-side management (including conservation and load
management), operating and maintenance cost management, energy production
availability and individual performance measures. Such performance goals also
may be based on the attainment of specified levels of performance by Newco under
one or more of the measures described above relative to the performance of other
corporations. With respect to Covered Employees, all Performance Goals must be
objective performance goals satisfying the requirements for "performance-based
compensation" within the meaning of Section 162(m) of the Code. Incentive awards
payable to Covered Employees are to be calculated in the same manner described
in the "-- Plan Features" section above, except that subjective individual
performance ratings cannot be used to increase the amount of incentive awards
payable to Covered Employees. No incentive awards will be paid to Covered
Employees if the minimum applicable pre-established Performance Goals are not
satisfied, unless the Covered Employee's employment is terminated because of
death, disability or a change of control. Furthermore, the Newco Compensation
Committee will have the authority to decrease, but not to increase, the amount
of incentive awards otherwise payable to Covered Employees pursuant to
pre-established performance goals and payment formulas. The maximum amount
payable to any Covered Employee for any fiscal year of Newco will be $3,000,000.
AMENDMENT AND DISCONTINUANCE. The Newco Board may amend, alter, discontinue
or otherwise modify the Newco MIC Plan from time to time, but no amendment will,
without the consent of the participant affected, impair any award made prior to
the effective date of the modification.
NEW PLAN BENEFITS. It cannot be determined at this time what benefits or
amounts, if any, will be received by or allocated to any person or group of
persons under the Newco MIC Plan if the Newco MIC Plan is adopted or what
benefits or amounts would have been received by or allocated to any person or
group of persons for the last fiscal year if the Newco MIC Plan had been in
effect.
100
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma financial information combines the
historical consolidated balance sheets and statements of income of KCPL and UCU,
including their respective subsidiaries, after giving effect to the Mergers. The
unaudited pro forma combined balance sheet at March 31, 1996, gives effect to
the Mergers as if they had occurred at March 31, 1996. The unaudited pro forma
combined statements of income for each of the three years in the period ended
December 31, 1995 and the three-month periods ended March 31, 1996, and 1995,
give effect to the Mergers as if they had occurred at January 1, 1993. These
statements are prepared on the basis of accounting for the Mergers as a pooling
of interests and are based on the assumptions set forth in the notes thereto.
The following pro forma financial information has been prepared from, and
should be read in conjunction with, the historical consolidated financial
statements and related notes thereto of KCPL and UCU, incorporated herein by
reference. The following information is not necessarily indicative of the
financial position or operating results that would have occurred had the Mergers
been consummated on the date, or at the beginning of the periods, for which the
Mergers are being given effect nor is it necessarily indicative of future
operating results or financial position. See "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE" in this Joint Proxy Statement/Prospectus.
101
<PAGE>
NEWCO
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1996
(THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
UCU KCPL ----------------------------
(AS REPORTED) (AS REPORTED) TOTAL ADJUSTMENTS COMBINATION
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Utility plant in service:
Electric............................ $ 1,649,684 $ 3,399,478 $ 5,049,162 -- $ 5,049,162
Gas................................. 1,071,361 -- 1,071,361 -- 1,071,361
------------- ------------- ------------- ------------- -------------
2,721,045 3,399,478 6,120,523 -- 6,120,523
Less -- accumulated depreciation.... 1,030,945 1,177,540 2,208,485 -- 2,208,485
------------- ------------- ------------- ------------- -------------
Net utility plant in service.......... 1,690,100 2,221,938 3,912,038 -- 3,912,038
Construction work in progress......... 63,952 86,138 150,090 -- 150,090
Nuclear fuel, net..................... -- 54,422 54,422 -- 54,422
------------- ------------- ------------- ------------- -------------
Total utility plant, net.............. 1,754,052 2,362,498 4,116,550 -- 4,116,550
------------- ------------- ------------- ------------- -------------
Aquila Energy plant assets............ 424,656 -- 424,656 -- 424,656
------------- ------------- ------------- ------------- -------------
Investments and other................. 705,418 188,059 893,477 -- 893,477
------------- ------------- ------------- ------------- -------------
Current assets:
Cash and cash equivalents........... 117,969 28,749 146,718 -- 146,718
Funds on deposit.................... 33,211 -- 33,211 -- 33,211
Accounts receivable, net............ 335,951 46,858 382,809 -- 382,809
Fuel inventories, at average cost... 32,260 17,020 49,280 -- 49,280
Materials and supplies, at average
cost............................... 38,072 45,672 83,744 -- 83,744
Price risk management assets........ 48,292 -- 48,292 -- 48,292
Prepayments and other............... 59,823 4,264 64,087 -- 64,087
------------- ------------- ------------- ------------- -------------
Total current assets.................. 665,578 142,563 808,141 -- 808,141
------------- ------------- ------------- ------------- -------------
Deferred charges and other assets:
Regulatory assets................... 143,000 165,993 308,993 -- 308,993
Price risk management assets........ 155,325 -- 155,325 -- 155,325
Other............................... 38,935 17,338 56,273 -- 56,273
------------- ------------- ------------- ------------- -------------
Total deferred charges and other
assets............................... 337,260 183,331 520,591 -- 520,591
------------- ------------- ------------- ------------- -------------
Total........................... $ 3,886,964 $ 2,876,451 $ 6,763,415 -- $ 6,763,415
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
102
<PAGE>
NEWCO
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1996
(THOUSANDS)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
PRO FORMA
UCU KCPL ----------------------------
(AS REPORTED) (AS REPORTED) TOTAL ADJUSTMENTS COMBINATION
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Capitalization:
Common stock and premium on common
stock (Note 1)..................... $ 863,283 $ 449,697 $ 1,312,980 -- $ 1,312,980
Retained earnings................... 122,682 449,377 572,059 -- 572,059
Other stockholders' equity.......... (1,022) (1,714) (2,736) -- (2,736)
------------- ------------- ------------- ------------- -------------
Total common equity................. 984,943 897,360 1,882,303 -- 1,882,303
Preference and cumulative preferred
stock (Note 4)..................... 25,000 89,000 114,000 -- 114,000
Preferred stock of subsidiary,
retractable and cumulative
preferred stock (redeemable) (Note
4)................................. 356 1,276 1,632 -- 1,632
Company-obligated mandatorily
redeemable preferred securities of
partnership........................ 100,000 -- 100,000 -- 100,000
Long-term debt, net................. 1,365,935 841,040 2,206,975 -- 2,206,975
------------- ------------- ------------- ------------- -------------
Total capitalization.................. 2,476,234 1,828,676 4,304,910 -- 4,304,910
------------- ------------- ------------- ------------- -------------
Current liabilities:
Current maturities of long-term
debt............................... 15,224 80,303 95,527 -- 95,527
Short-term debt..................... 201,490 10,000 211,490 -- 211,490
Accounts payable.................... 427,857 52,041 479,898 -- 479,898
Accrued taxes....................... 57,260 41,269 98,529 -- 98,529
Accrued interest.................... 30,109 21,791 51,900 -- 51,900
Price risk management liabilities... 87,653 -- 87,653 -- 87,653
Other............................... 94,844 31,736 126,580 -- 126,580
------------- ------------- ------------- ------------- -------------
Total current liabilities............. 914,437 237,140 1,151,577 -- 1,151,577
------------- ------------- ------------- ------------- -------------
Deferred credits:
Deferred income taxes............... 259,059 649,042 908,101 -- 908,101
Investment tax credits.............. 19,571 70,246 89,817 -- 89,817
Price risk management liabilities... 75,707 -- 75,707 -- 75,707
Other............................... 141,956 91,347 233,303 -- 233,303
------------- ------------- ------------- ------------- -------------
Total deferred credits................ 496,293 810,635 1,306,928 -- 1,306,928
------------- ------------- ------------- ------------- -------------
Total........................... $ 3,886,964 $ 2,876,451 $ 6,763,415 -- $ 6,763,415
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
103
<PAGE>
NEWCO
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
UCU KCPL ----------------------------
(AS REPORTED) (AS REPORTED) TOTAL ADJUSTMENTS COMBINATION
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Operating revenues:
Electric................................. $ 143,053 $ 206,624 $ 349,677 -- $ 349,677
Gas...................................... 300,084 -- 300,084 -- 300,084
Energy related businesses and other...... 641,297 -- 641,297 -- 641,297
------------- ------------- ------------- ------------- -------------
Total revenues............................. 1,084,434 206,624 1,291,058 -- 1,291,058
------------- ------------- ------------- ------------- -------------
Operating expenses:
Fuel used for generation................. 19,074 30,773 49,847 -- 49,847
Purchased power.......................... 33,516 13,985 47,501 -- 47,501
Gas purchased for resale................. 782,147 -- 782,147 -- 782,147
Other operating and maintenance.......... 111,355 61,528 172,883 -- 172,883
Depreciation and amortization............ 31,881 27,620 59,501 -- 59,501
General taxes............................ 18,495 24,361 42,856 -- 42,856
------------- ------------- ------------- ------------- -------------
Total expenses............................. 996,468 158,267 1,154,735 -- 1,154,735
------------- ------------- ------------- ------------- -------------
Operating income before income taxes....... 87,966 48,357 136,323 -- 136,323
------------- ------------- ------------- ------------- -------------
Interest charges:
Long-term debt........................... 27,807 13,424 41,231 -- 41,231
Short-term debt and other interest....... 7,109 834 7,943 -- 7,943
Other:
Equity in earnings of investments and
partnerships............................ (7,575) -- (7,575) -- (7,575)
Other, net............................... (4,346) 2,384 (1,962) -- (1,962)
------------- ------------- ------------- ------------- -------------
Total interest charges and other........... 22,995 16,642 39,637 -- 39,637
------------- ------------- ------------- ------------- -------------
Income before income taxes................. 64,971 31,715 96,686 -- 96,686
------------- ------------- ------------- ------------- -------------
Income taxes............................... 27,659 7,192 34,851 34,851
------------- ------------- ------------- ------------- -------------
Net income................................. 37,312 24,523 61,835 -- 61,835
Preference and preferred stock dividend
requirements (Note 4)..................... 513 957 1,470 -- 1,470
------------- ------------- ------------- ------------- -------------
Earnings available for common shares....... $ 36,799 $ 23,566 $ 60,365 -- $ 60,365
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Weighted average common shares outstanding
(Note 1)
-- Primary........................... 46,233 61,902 -- 108,135
-- Fully diluted (Note 5)............ 46,568 61,902 -- 108,470
Earnings per share
-- Primary........................... $ 0.80 $ 0.38 -- $ 0.56
-- Fully diluted (Note 5)............ $ 0.79 $ 0.38 -- $ 0.56
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
104
<PAGE>
NEWCO
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
UCU KCPL PRO FORMA
(AS (AS -------------------------
REPORTED) REPORTED) TOTAL ADJUSTMENTS COMBINATION
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenues:
Electric.................................. $ 129,906 $ 198,906 $ 328,812 -- $ 328,812
Gas....................................... 245,852 -- 245,852 -- 245,852
Energy related businesses and other....... 350,545 -- 350,545 -- 350,545
------------ ------------ ----------- ----------- ------------
Total revenues.............................. 726,303 198,906 925,209 -- 925,209
------------ ------------ ----------- ----------- ------------
Operating expenses:
Fuel used for generation.................. 17,920 34,719 52,639 -- 52,639
Purchased power........................... 29,015 6,732 35,747 -- 35,747
Gas purchased for resale.................. 443,167 -- 443,167 -- 443,167
Other operating and maintenance........... 98,131 65,123 163,254 -- 163,254
Depreciation and amortization............. 37,593 27,415 65,008 -- 65,008
General taxes............................. 18,992 23,857 42,849 -- 42,849
------------ ------------ ----------- ----------- ------------
Total expenses.............................. 644,818 157,846 802,664 -- 802,664
------------ ------------ ----------- ----------- ------------
Operating income before income taxes........ 81,485 41,060 122,545 -- 122,545
------------ ------------ ----------- ----------- ------------
Interest charges:
Long-term debt............................ 24,229 12,333 36,562 -- 36,562
Short-term debt and other interest........ 6,653 690 7,343 -- 7,343
Other:
Equity in earnings of investments and
partnerships............................. (2,164) -- (2,164) -- (2,164)
Other, net................................ (1,507) (6,803) (8,310) -- (8,310)
------------ ------------ ----------- ----------- ------------
Total interest charges and other............ 27,211 6,220 33,431 -- 33,431
------------ ------------ ----------- ----------- ------------
Income before income taxes.................. 54,274 34,840 89,114 -- 89,114
------------ ------------ ----------- ----------- ------------
Income taxes................................ 22,108 11,953 34,061 -- 34,061
------------ ------------ ----------- ----------- ------------
Net income.................................. 32,166 22,887 55,053 -- 55,053
Preference and preferred stock dividend
requirements (Note 4)...................... 513 1,026 1,539 -- 1,539
------------ ------------ ----------- ----------- ------------
Earnings available for common shares........ $ 31,653 $ 21,861 $ 53,514 -- $ 53,514
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
Weighted average common shares outstanding
(Note 1)
-- Primary............................ 44,743 61,902 -- 106,645
-- Fully diluted (Note 5)............. 45,242 61,902 -- 107,144
Earnings per share
-- Primary............................ $ 0.71 $ 0.35 -- $ 0.50
-- Fully diluted (Note 5)............. $ 0.70 $ 0.35 -- $ 0.50
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
105
<PAGE>
NEWCO
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
UCU KCPL ----------------------------
(AS REPORTED) (AS REPORTED) TOTAL ADJUSTMENTS COMBINATION
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Operating revenues:
Electric............................ $ 577,739 $ 885,955 $ 1,463,694 -- $ 1,463,694
Gas................................. 616,816 -- 616,816 -- 616,816
Energy related businesses and
other.............................. 1,603,998 -- 1,603,998 -- 1,603,998
------------- ------------- ------------- ------------- -------------
Total revenues........................ 2,798,553 885,955 3,684,508 -- 3,684,508
------------- ------------- ------------- ------------- -------------
Operating expenses:
Fuel used for generation............ 74,734 139,371 214,105 -- 214,105
Purchased power..................... 118,387 38,783 157,170 -- 157,170
Gas purchased for resale............ 1,688,699 -- 1,688,699 -- 1,688,699
Other operating and maintenance..... 433,753 257,038 690,791 -- 690,791
Depreciation and amortization....... 145,390 109,832 255,222 -- 255,222
General taxes....................... 77,840 96,821 174,661 -- 174,661
Provisions for asset impairments.... 34,639 -- 34,639 -- 34,639
------------- ------------- ------------- ------------- -------------
Total expenses........................ 2,573,442 641,845 3,215,287 -- 3,215,287
------------- ------------- ------------- ------------- -------------
Operating income before income
taxes................................ 225,111 244,110 469,221 -- 469,221
------------- ------------- ------------- ------------- -------------
Interest charges:
Long-term debt...................... 110,227 52,184 162,411 -- 162,411
Short-term debt and other
interest........................... 25,447 2,338 27,785 -- 27,785
Other:
Equity in earnings of investments
and partnerships................... (23,811) -- (23,811) -- (23,811)
Other, net.......................... (18,564) 199 (18,365) -- (18,365)
------------- ------------- ------------- ------------- -------------
Total interest charges and other...... 93,299 54,721 148,020 -- 148,020
------------- ------------- ------------- ------------- -------------
Income before income taxes............ 131,812 189,389 321,201 -- 321,201
Income taxes.......................... 52,035 66,803 118,838 -- 118,838
------------- ------------- ------------- ------------- -------------
Net income............................ 79,777 122,586 202,363 -- 202,363
Preference and preferred stock
dividend requirements (Note 4)....... 2,050 4,011 6,061 -- 6,061
------------- ------------- ------------- ------------- -------------
Earnings available for common
shares............................... $ 77,727 $ 118,575 $ 196,302 -- $ 196,302
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Weighted average common shares
outstanding (Note 1)
-- Primary...................... 45,077 61,902 106,979
-- Fully diluted (Note 5)....... 45,474 61,902 107,376
Earnings per share
-- Primary...................... $ 1.72 $ 1.92 $ 1.83
-- Fully diluted (Note 5)....... $ 1.71 $ 1.92 $ 1.83
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
106
<PAGE>
NEWCO
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
UCU KCPL ----------------------------
(AS REPORTED) (AS REPORTED) TOTAL ADJUSTMENTS COMBINATION
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Operating revenues:
Electric............................ $ 557,001 $ 868,272 $ 1,425,273 -- $ 1,425,273
Gas................................. 618,548 -- 618,548 -- 618,548
Energy related businesses and
other.............................. 1,222,596 -- 1,222,596 -- 1,222,596
------------- ------------- ------------- ------------- -------------
Total revenues........................ 2,398,145 868,272 3,266,417 -- 3,266,417
------------- ------------- ------------- ------------- -------------
Operating expenses:
Fuel used for generation............ 77,438 135,106 212,544 -- 212,544
Purchased power..................... 113,335 33,929 147,264 -- 147,264
Gas purchased for resale............ 1,385,065 -- 1,385,065 -- 1,385,065
Other operating and maintenance..... 375,048 274,772 649,820 -- 649,820
Depreciation and amortization....... 145,470 107,463 252,933 -- 252,933
General taxes....................... 73,759 96,362 170,121 -- 170,121
------------- ------------- ------------- ------------- -------------
Total expenses........................ 2,170,115 647,632 2,817,747 -- 2,817,747
------------- ------------- ------------- ------------- -------------
Operating income before income
taxes................................ 228,030 220,640 448,670 -- 448,670
------------- ------------- ------------- ------------- -------------
Interest charges:
Long-term debt...................... 89,526 43,962 133,488 -- 133,488
Short-term debt and other
interest........................... 14,157 3,454 17,611 -- 17,611
Other:
Equity in earnings of investments
and partnerships................... (18,371) -- (18,371) -- (18,371)
Other, net.......................... (3,814) 2,072 (1,742) -- (1,742)
------------- ------------- ------------- ------------- -------------
Total interest charges and other...... 81,498 49,488 130,986 -- 130,986
------------- ------------- ------------- ------------- -------------
Income before income taxes............ 146,532 171,152 317,684 -- 317,684
Income taxes.......................... 52,087 66,377 118,464 -- 118,464
------------- ------------- ------------- ------------- -------------
Net income............................ 94,445 104,775 199,220 -- 199,220
Preference and preferred stock
dividend requirements (Note 4)....... 2,982 3,457 6,439 -- 6,439
------------- ------------- ------------- ------------- -------------
Earnings available for common
shares............................... $ 91,463 $ 101,318 $ 192,781 -- $ 192,781
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Weighted average common shares
outstanding (Note 1)
-- Primary...................... 43,965 61,903 105,868
-- Fully diluted (Note 5)....... 45,178 61,903 107,081
Earnings per share
-- Primary...................... $ 2.08 $ 1.64 $ 1.82
-- Fully diluted (Note 5)....... $ 2.06 $ 1.64 $ 1.81
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
107
<PAGE>
NEWCO
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
UCU KCPL ----------------------------
(AS REPORTED) (AS REPORTED) TOTAL ADJUSTMENTS COMBINATION
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Operating revenues:
Electric............................ $ 546,853 $ 857,450 $ 1,404,303 -- $ 1,404,303
Gas................................. 686,140 -- 686,140 -- 686,140
Energy related businesses and
other.............................. 1,513,091 -- 1,513,091 -- 1,513,091
------------- ------------- ------------- ------------- -------------
Total revenues........................ 2,746,084 857,450 3,603,534 -- 3,603,534
------------- ------------- ------------- ------------- -------------
Operating expenses:
Fuel used for generation............ 72,854 130,117 202,971 -- 202,971
Purchased power..................... 124,384 31,403 155,787 -- 155,787
Gas purchased for resale............ 1,763,359 -- 1,763,359 -- 1,763,359
Other operating and maintenance..... 358,902 263,183 622,085 -- 622,085
Depreciation and amortization....... 140,716 111,284 252,000 -- 252,000
General taxes....................... 72,036 95,659 167,695 -- 167,695
Restructuring charge................ 69,788 -- 69,788 -- 69,788
------------- ------------- ------------- ------------- -------------
Total expenses........................ 2,602,039 631,646 3,233,685 -- 3,233,685
------------- ------------- ------------- ------------- -------------
Operating income before income
taxes................................ 144,045 225,804 369,849 -- 369,849
------------- ------------- ------------- ------------- -------------
Interest charges:
Long-term debt...................... 89,027 50,118 139,145 -- 139,145
Short-term debt and other
interest........................... 12,607 2,321 14,928 -- 14,928
Other:
Equity in earnings of investments
and partnerships................... (16,432) -- (16,432) -- (16,432)
Gain on sale of subsidiary stock.... (47,751) -- (47,751) -- (47,751)
Other, net.......................... (9,772) (360) (10,132) -- (10,132)
------------- ------------- ------------- ------------- -------------
Total interest charges and other...... 27,679 52,079 79,758 -- 79,758
------------- ------------- ------------- ------------- -------------
Income before income taxes............ 116,366 173,725 290,091 -- 290,091
Income taxes.......................... 30,018 67,953 97,971 -- 97,971
------------- ------------- ------------- ------------- -------------
Net income............................ 86,348 105,772 192,120 -- 192,120
Preference and preferred stock
dividend requirements (Note 4)....... 6,926 3,153 10,079 -- 10,079
------------- ------------- ------------- ------------- -------------
Earnings available for common
shares............................... $ 79,422 $ 102,619 $ 182,041 -- $ 182,041
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Weighted average common shares
outstanding (Note 1)
-- Primary...................... 40,737 61,909 102,646
-- Fully diluted (Note 5)....... 44,273 61,909 106,182
Primary earnings per share
-- Primary...................... $ 1.95 $ 1.66 $ 1.77
-- Fully diluted (Note 5)....... $ 1.92 $ 1.66 $ 1.77
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
108
<PAGE>
NEWCO
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. The pro forma combined financial statements reflect the conversion of each
outstanding share of UCU Common Stock into one share of Newco Common Stock,
as provided in the Merger Agreement. The pro forma combined financial
statements are presented as if the companies were combined during all
periods included therein.
2. The allocation between KCPL and UCU and their customers of the approximately
$600 million in net estimated cost savings over the 10-year period following
the Mergers, less transaction costs, will be subject to regulatory review
and approval. Transaction costs, currently estimated to be approximately $40
million (including fees for financial advisors, attorneys, accountants,
consultants, filings and printing), are being deferred for post-Mergers
amortization in accordance with future regulatory approval. As of March 31,
1996, $5.4 million and $4.2 million in merger-related costs had been
deferred by KCPL and UCU, respectively.
The net estimated cost savings and transactions costs do not reflect certain
other costs that could be incurred by Newco, such as increases or decreases
in costs caused by the provisions of the Employment Agreements with Messrs.
Jennings and Green, Severance Agreements with certain executives and the
Newco Plans. See "THE MERGERS -- Employment Agreements," "-- Employee Plans
and Severance Arrangements," "-- Newco Plans" and "APPROVAL OF NEWCO PLANS"
in this Joint Proxy Statement/Prospectus.
The net estimated costs savings, transaction costs and certain other costs
have not been reflected in the pro forma combined financial statements
because of the inability to predict regulatory treatment or estimate the
amount of such costs that would impact any one period.
3. Intercompany transactions (including purchased and exchanged power
transactions) between KCPL and UCU during the periods presented were not
material and, accordingly, no pro forma adjustments were made to eliminate
such transactions. All financial statement presentation and accounting
policy differences are immaterial and have not been adjusted in the pro
forma combined financial statements.
4. Prior to the consummation of the Mergers, KCPL and UCU must redeem their
preferred stock outstanding as provided in the Merger Agreement. Because the
basis of accounting for the Mergers is a pooling of interests, the effect of
these redemptions is not required to be reflected in the pro forma combined
financial statements. The only redemption premium, as of December 31, 1995,
is $755,000 applicable to KCPL Preferred Stock. The on-going effect of these
redemptions is anticipated to be immaterial.
5. The fully diluted earnings per common share was determined assuming UCU's
outstanding Convertible Subordinated Debentures and UCU's $1.775 Series
Cumulative Convertible Preference Stock were converted into UCU Common Stock
at the beginning of the periods presented. In calculating fully diluted
earnings per share, earnings available for common shares were adjusted to
eliminate interest expense, net of tax, and to eliminate dividends on the
Convertible Preference Stock.
6. In other parts of this Joint Proxy Statement/Prospectus, EBITDA, which means
earnings before interest, taxes, depreciation and amortization, is used as a
financial measurement. EBITDA is not intended to replace net income or cash
flows from operations computed under generally accepted accounting
principles. The Unaudited Pro Forma Combined Financial Statements contain
financial information prepared on a basis consistent with generally accepted
accounting principles.
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SELECTED INFORMATION CONCERNING KCPL AND UCU
BUSINESS OF KCPL
KCPL is a low-cost electric power producer providing energy-related products
and services to customers in its service territory worldwide. Headquartered in
Kansas City, Missouri, KCPL serves the electric power needs of over 430,000
customers in and around the metropolitan Kansas City area. Included in a diverse
customer base are about 379,000 residences, 50,000 commercial firms and 3,000
industrial firms, municipalities and other electric utilities. Low fuel costs
and superior plant performance enable KCPL to serve its customers well while
maintaining a leadership position in the bulk power market. KLT, a wholly-owned,
unregulated subsidiary of KCPL, pursues opportunities in primarily
energy-related ventures throughout the nation and world. KCPL's commitment to
KLT and its holdings reflects KCPL's plans to enhance shareholder value by
capturing growth opportunities in energy-related and other markets outside
KCPL's regulated core utility business.
Additional information concerning KCPL and its subsidiaries is included in
the KCPL documents filed with the SEC which are incorporated by reference
herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Upon consummation of the Mergers, KCPL will be renamed Newco. See "NEWCO
FOLLOWING THE MERGERS."
BUSINESS OF UCU
UCU is an energy company which consists of electric and natural gas utility
operations, natural gas gathering, marketing and processing and independent
power projects managed through four business groups. The business groups are
UtiliCorp Energy Delivery ("UED"), consisting primarily of transmission and
distribution utility operations; UtiliCorp Power Services ("UPS"), consisting
primarily of electricity generation and independent power projects; UtiliCorp
Energy Resources ("UER"), consisting of gas marketing, processing and gathering
and electricity marketing; and UtiliCorp Marketing Services, consisting of
appliance service contracts, gas marketing and other energy related products and
services.
UCU had approximately 1.2 million utility customers and 4,700 employees at
December 31, 1995. UCU's electric utility operations are in the states of
Missouri, Kansas, Colorado, West Virginia and the Canadian province of British
Columbia. UCU's gas utility operations are in the states of Missouri, Kansas,
Colorado, Iowa, Nebraska, Minnesota, Michigan and West Virginia. Aquila, a
wholly-owned subsidiary of UCU, markets natural gas in 45 states and Ontario,
Canada. Aquila's 82% owned subsidiary AGP owns and operates 10 natural gas
gathering systems and four natural gas processing plants in Texas and Oklahoma.
UCU owns interests through its UtilCo Group subsidiary in 17 independent power
projects in seven states and Jamaica. UCU also markets natural gas in the United
Kingdom through several joint ventures and owns and operates energy joint
ventures in New Zealand and Australia.
UCU serves approximately 434,000 electric customers in four states and
British Columbia and approximately 800,000 gas customers in eight states. The
Australian joint venture serves approximately 520,000 electric customers.
Additional information concerning UCU and its subsidiaries is included in the
UCU documents filed with the SEC which are incorporated by reference herein. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
CERTAIN BUSINESS RELATIONSHIPS BETWEEN KCPL AND UCU
KCPL and UCU are involved in various ventures on an arm's-length basis,
including (i) the MOKAN Power Pool, pursuant to which they engage in joint
planning activities and purchase power and energy and, along with Western
Resources, operate a Wichita-Topeka-Kansas City-Sibley interconnection, (ii) the
Southwest Power Pool and NERC Regional Reliability Council, pursuant to which
110
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they engage in joint transmission planning, (iii) pursuant to a Multiple
Interconnection and Transmission Contract providing for coordinated transmission
planning and support in Missouri service territories, and (iv) pursuant to a
Missouri Coordination Agreement providing for the operation of a Sibley-Overton
interconnection.
In the normal course of business, KCPL and UCU buy and sell electric power
from and to each other in arm's-length transactions pursuant to filed rate
schedules.
NEWCO FOLLOWING THE MERGERS
At the Effective Time, KCPL will change its name to Newco or such other name
as KCPL and UCU shall mutually agree. The headquarters of Newco will be in
Kansas City, Missouri.
BOARD OF DIRECTORS OF NEWCO
In connection with the Mergers, the Newco Board, at the Effective Time, will
consist of 18 persons, nine of whom will be the then existing directors of KCPL
immediately prior to the Effective Time, and nine of whom will be designated by
UCU. To date, UCU has not determined which individuals, in addition to Richard
C. Green, Jr., will be its designees to serve as directors of Newco as of the
Effective Time. However, it is currently anticipated that the directors of UCU
immediately prior to the Effective Time will serve as the initial directors of
Newco. See "THE MERGER AGREEMENT -- Newco Board of Directors."
KCPL and UCU have agreed that the Newco Board will have the following
committees: an Executive Committee, a Nominating and Compensation Committee, an
Audit Committee and a Nuclear Oversight Committee. The Executive Committee will
consist of six members, three of whom (including the chair of such committee)
will be designated by KCPL and three of whom will be designated by UCU. The
remaining committees will each consist of five members with KCPL and UCU each
selecting two members and the fifth member, being in each case the chair of the
committee, selected, in the case of the Nuclear Oversight Committee, by KCPL
and, in the case of the Nominating and Compensation Committee and the Audit
Committee, by UCU.
Descriptions of the present composition of the KCPL Board and the UCU Board
are included in the KCPL Proxy Statement and the UCU Proxy Statement,
respectively, and are incorporated herein by reference. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
MANAGEMENT OF NEWCO
A. Drue Jennings will be Chairman of Newco and Richard C. Green, Jr. will be
Vice Chairman and Chief Executive Officer of Newco. Each of Mr. Jennings and Mr.
Green will have an employment agreement with Newco following the Merger. See
"THE MERGERS -- Employment Agreements." Robert K. Green, brother of Richard C.
Green, Jr., will be the president of Newco and Marcus Jackson will serve as
Newco's executive vice president and chief operating officer. Robert K. Green is
currently president of UCU and Marcus Jackson is senior vice president and chief
operating officer of KCPL.
For a description of certain compensation arrangements after the Effective
Time concerning Messrs. Jennings and Green, see "THE MERGERS -- Employment
Agreements." Subject to the approval of the shareholders of KCPL, Newco will
adopt at the Effective Time the Newco Stock Incentive Plan and the Newco MIC
Plan. See "APPROVAL OF NEWCO PLANS."
COMMUNITY SUPPORT
Pursuant to the Merger Agreement, Newco shall provide charitable
contributions and community support within the service areas of KCPL and UCU at
levels substantially comparable to the levels of charitable contributions and
community support provided by such parties within their service areas within the
two-year period immediately prior to the Effective Time.
111
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DIVIDENDS
It is the intention of KCPL and UCU, subject to the fiduciary obligations of
the Newco Board, that the initial annual dividend per share of Newco Common
Stock following the Effective Time will be at least $1.85 per share. For a
description of certain restrictions on Newco's ability to pay dividends on the
Newco Common Stock, see "DESCRIPTION OF NEWCO COMMON STOCK."
EXPERTS
The consolidated financial statements incorporated in this Joint Proxy
Statement/Prospectus by reference to the Annual Report on Form 10-K of KCPL for
the year ended December 31, 1995 have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as stated in their report, which is incorporated herein
by reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements and schedules included in UtiliCorp
United Inc.'s Annual Report on Form 10-K for the years ended December 31, 1995,
1994 and 1993, which are incorporated by reference in this Joint Proxy
Statement/Prospectus, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
giving said reports.
The financial statements of United Energy Ltd. included in UtiliCorp United
Inc.'s Form 8-K/A, dated November 14, 1995, as amended on April 1, 1996, for the
period May 11, 1994 to June 30, 1995, which are incorporated by reference in
this Joint Proxy Statement/Prospectus, have been audited by Arthur Andersen,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated herein in reliance upon the authority of said firm
as experts in giving said report.
LEGAL MATTERS
Jeanie Sell Latz, Esq., Senior Vice President, Corporate Secretary and Chief
Legal Officer of KCPL, will pass upon the legality of the shares of Newco Common
Stock to be issued in connection with the UCU Merger. As of June 3, 1996, Ms.
Latz owned 1,850.50 shares of KCPL Common Stock and had options, both vested and
unvested, to acquire an aggregate of 15,375 additional shares of KCPL Common
Stock.
PROPOSALS OF STOCKHOLDERS
Proposals of shareholders intended to be presented at KCPL's 1997 Annual
Meeting of Shareholders must be received at KCPL's Corporate Secretary's Office
on or before December 9, 1996, for consideration for inclusion in the proxy
statement and form of proxy relating to that meeting.
Proposals of stockholders intended to be presented at UCU's 1997 Annual
Meeting of Stockholders must be received at UCU's Corporate Secretary's Office
on or before December 9, 1996 for consideration for inclusions in the proxy
statement and form of proxy relating to that meeting.
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ANNEX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
KANSAS CITY POWER & LIGHT COMPANY
KC MERGER SUB, INC.,
UTILICORP UNITED INC.,
AND
KC UNITED CORP.
Dated as of January 19, 1996
As amended and restated as of May 20, 1996
A-1
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I THE MERGERS................................................................ A-7
Section 1.1 The Mergers................................................... A-7
Section 1.2 Effects of the Mergers........................................ A-7
Section 1.3 Effective Time of the Mergers................................. A-8
ARTICLE II TREATMENT OF SHARES........................................................ A-8
Section 2.1 Effect of the Mergers on Capital Stock........................ A-8
Section 2.2 Issuance of New Certificates.................................. A-9
ARTICLE III THE CLOSING............................................................... A-11
Section 3.1 Closing....................................................... A-11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF KCPL AND SUB............................. A-11
Section 4.1 Organization and Qualification................................ A-11
Section 4.2 Subsidiaries.................................................. A-11
Section 4.3 Capitalization................................................ A-12
Section 4.4 Authority; Non-Contravention; Statutory Approvals; A-12
Compliance...................................................
Section 4.5 Reports and Financial Statements.............................. A-14
Section 4.6 Absence of Certain Changes or Events.......................... A-14
Section 4.7 Litigation.................................................... A-14
Section 4.8 Registration Statement and Proxy Statement.................... A-15
Section 4.9 Tax Matters................................................... A-15
Section 4.10 Employee Matters; ERISA....................................... A-16
Section 4.11 Environmental Protection...................................... A-18
Section 4.12 Regulation as a Utility....................................... A-20
Section 4.13 Vote Required................................................. A-20
Section 4.14 Accounting Matters............................................ A-20
Section 4.15 Article Twelfth of KCPL's Restated Articles of A-20
Consolidation................................................
Section 4.16 Opinion of Financial Advisor.................................. A-20
Section 4.17 Insurance..................................................... A-20
Section 4.18 KCPL Not a Related Person..................................... A-21
Section 4.19 Representations With Respect to Sub........................... A-21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF UCU....................................... A-21
Section 5.1 Organization and Qualification................................ A-21
Section 5.2 Subsidiaries.................................................. A-22
Section 5.3 Capitalization................................................ A-22
Section 5.4 Authority; Non-Contravention; Statutory Approvals; A-23
Compliance...................................................
Section 5.5 Reports and Financial Statements.............................. A-24
Section 5.6 Absence of Certain Changes or Events.......................... A-24
Section 5.7 Litigation.................................................... A-24
Section 5.8 Registration Statement and Proxy Statement.................... A-25
Section 5.9 Tax Matters................................................... A-25
Section 5.10 Employee Matters; ERISA....................................... A-26
Section 5.11 Environmental Protection...................................... A-28
Section 5.12 Regulation as a Utility....................................... A-28
Section 5.13 Vote Required................................................. A-29
Section 5.14 Accounting Matters............................................ A-29
Section 5.15 Article Eight of UCU's Certificate of Incorporation........... A-29
Section 5.16 Opinion of Financial Advisor.................................. A-29
Section 5.17 Insurance..................................................... A-29
Section 5.18 UCU Not an Interested Shareholder............................. A-29
Section 5.19 Cash Resources for Redemption of UCU Preferred Stock.......... A-29
</TABLE>
A-2
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<TABLE>
<S> <C> <C>
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGERS................................... A-29
Section 6.1 Covenants of the Parties...................................... A-29
ARTICLE VII ADDITIONAL AGREEMENTS..................................................... A-34
Section 7.1 Access to Information......................................... A-34
Section 7.2 Joint Proxy Statement and Registration Statement.............. A-35
Section 7.3 Regulatory Matters............................................ A-35
Section 7.4 Shareholder Approval.......................................... A-36
Section 7.5 Directors' and Officers' Indemnification...................... A-36
Section 7.6 Public Announcements.......................................... A-37
Section 7.7 Rule 145 Affiliates........................................... A-37
Section 7.8 Employee Agreements and Workforce Matters..................... A-38
Section 7.9 Employee Benefit Plans........................................ A-38
Section 7.10 Stock Option and Other Stock Plans............................ A-39
Section 7.11 No Solicitations.............................................. A-40
Section 7.12 Surviving Corporation Board of Directors...................... A-41
Section 7.13 Surviving Corporation Officers................................ A-41
Section 7.14 Employment Contracts.......................................... A-41
Section 7.15 Post-Merger Operations........................................ A-41
Section 7.16 Expenses...................................................... A-42
Section 7.17 Further Assurances............................................ A-42
Section 7.18 Termination of Company's Obligations.......................... A-42
ARTICLE VIII CONDITIONS............................................................... A-42
Section 8.1 Conditions to Each Party's Obligation to Effect the Mergers... A-42
Section 8.2 Conditions to Obligation of UCU to Effect the Mergers......... A-43
Section 8.3 Conditions to Obligation of KCPL and Sub to Effect the A-44
Mergers......................................................
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER......................................... A-45
Section 9.1 Termination................................................... A-45
Section 9.2 Effect of Termination......................................... A-46
Section 9.3 Termination Fee; Expenses..................................... A-46
Section 9.4 Amendment..................................................... A-47
Section 9.5 Waiver........................................................ A-47
ARTICLE X GENERAL PROVISIONS........................................................ A-48
Section 10.1 Non-Survival; Effect of Representations and Warranties........ A-48
Section 10.2 Brokers....................................................... A-48
Section 10.3 Notices....................................................... A-48
Section 10.4 Miscellaneous................................................. A-49
Section 10.5 Interpretation................................................ A-49
Section 10.6 Counterparts; Effect.......................................... A-49
Section 10.7 Parties' Interest............................................. A-49
Section 10.8 Waiver of Jury Trial and Certain Damages...................... A-50
Section 10.9 Enforcement................................................... A-50
</TABLE>
A-3
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INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE
- -------------------------------------------------------------------------- ----
<S> <C>
1935 Act.................................................................. A-11
Acquisition Proposal...................................................... A-41
Affiliate................................................................. A-20
Affiliate Agreement....................................................... A-38
Agreement................................................................. A-7
Amendment Date............................................................ A-7
Atomic Energy Act......................................................... A-14
Cancelled Shares.......................................................... A-9
Certificates.............................................................. A-9
Closing................................................................... A-11
Closing Agreement......................................................... A-16
Closing Date.............................................................. A-11
Code...................................................................... A-7
Committee................................................................. A-39
Company................................................................... A-7
Confidentiality Agreement................................................. A-35
Consolidating Effective Time.............................................. A-8
Consolidating Merger...................................................... A-7
Control................................................................... A-20
DGCL...................................................................... A-7
DLJ....................................................................... A-29
Effective Time............................................................ A-8
Environmental Claim....................................................... A-19
Environmental Laws........................................................ A-19
Environmental Permits..................................................... A-18
ERISA..................................................................... A-17
Exchange Act.............................................................. A-14
Exchange Agent............................................................ A-9
FERC...................................................................... A-14
Final Order............................................................... A-42
GAAP...................................................................... A-14
Governmental Authority.................................................... A-13
Hazardous Materials....................................................... A-19
HSR Act................................................................... A-35
Indemnified Liabilities................................................... A-36
Indemnified Parties....................................................... A-36
Indemnified Party......................................................... A-36
Initial Termination Date.................................................. A-45
IRS....................................................................... A-17
Joint Proxy/Registration Statement........................................ A-35
KCPL...................................................................... A-7
KCPL Benefit Plans........................................................ A-17
KCPL Common Stock......................................................... A-8
KCPL Cumulative Preferred Stock........................................... A-12
KCPL Disclosure Schedule.................................................. A-11
KCPL Financial Statements................................................. A-14
KCPL Incentive Plan....................................................... A-38
KCPL Incentive Stock Plan................................................. A-38
KCPL Joint Venture........................................................ A-11
</TABLE>
A-4
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<TABLE>
<CAPTION>
TERM PAGE
- -------------------------------------------------------------------------- ----
<S> <C>
KCPL Material Adverse Effect.............................................. A-14
KCPL Meeting.............................................................. A-36
KCPL No Par Preferred..................................................... A-12
KCPL Preference Stock..................................................... A-12
KCPL Preferred Stock...................................................... A-12
KCPL Required Consents.................................................... A-13
KCPL Required Statutory Approvals......................................... A-13
KCPL SEC Reports.......................................................... A-14
KCPL Shareholders' Approval............................................... A-20
KCPL Shares............................................................... A-9
KCPL Stock Plans.......................................................... A-12
KCPL Subsidiary........................................................... A-11
Mergers................................................................... A-7
Merrill Lynch............................................................. A-20
MGCL...................................................................... A-8
NRC....................................................................... A-14
NYSE...................................................................... A-10
Original Execution Date................................................... A-7
Original Merger Agreement................................................. A-7
PBGC...................................................................... A-17
PCBs...................................................................... A-19
person.................................................................... A-10
Power Act................................................................. A-14
Proxy Statement........................................................... A-15
Registration Statement.................................................... A-15
Release................................................................... A-20
Representatives........................................................... A-34
SEC....................................................................... A-14
Securities Act............................................................ A-13
Sub....................................................................... A-7
Sub Common Stock.......................................................... A-8
Subsidiary................................................................ A-11
Surviving Corporation..................................................... A-7
Surviving Corporation Incentive Plan...................................... A-39
Surviving Corporation Replacement Plans................................... A-38
Surviving Corporation Stock Awards........................................ A-40
Surviving Corporation Stock Benefits...................................... A-40
Surviving Corporation Stock Plan.......................................... A-39
Target Party.............................................................. A-47
Task Force................................................................ A-33
Tax Return................................................................ A-15
Tax Ruling................................................................ A-15
Taxes..................................................................... A-15
Three Year Period......................................................... A-50
UCU....................................................................... A-7
UCU Benefit Plans......................................................... A-26
UCU Class A Common Stock.................................................. A-22
UCU Common Stock.......................................................... A-8
UCU Disclosure Schedule................................................... A-21
UCU Effective Time........................................................ A-8
UCU Financial Statements.................................................. A-24
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- -------------------------------------------------------------------------- ----
<S> <C>
UCU Incentive Plan........................................................ A-38
UCU Incentive Stock Plan.................................................. A-38
UCU Joint Venture......................................................... A-20
UCU Material Adverse Effect............................................... A-24
UCU Meeting............................................................... A-36
UCU Merger................................................................ A-7
UCU Preferred Stock....................................................... A-22
UCU Required Consents..................................................... A-23
UCU Required Statutory Approvals.......................................... A-23
UCU SEC Reports........................................................... A-24
UCU Shareholders' Approval................................................ A-29
UCU Stock Awards.......................................................... A-39
UCU Stock Plans........................................................... A-22
UCU Subsidiary............................................................ A-22
UCU Surviving Corporation................................................. A-7
Violation................................................................. A-13
Voting Debt............................................................... A-12
</TABLE>
A-6
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated
as of January 19, 1996 (the "ORIGINAL EXECUTION DATE"), as amended and restated
as of May 20, 1996 (the "AMENDMENT DATE"), by and among Kansas City Power &
Light Company, a Missouri corporation ("KCPL"), KC Merger Sub, Inc. ("SUB"),
UtiliCorp United Inc., a Delaware corporation ("UCU"), and KC United Corp., a
Delaware corporation (the "COMPANY").
WHEREAS, KCPL, UCU and the Company have entered into an Agreement and Plan
of Merger, dated as of January 19, 1996 (the "Original Merger Agreement"), and
the parties to the Original Merger Agreement wish to amend and restate such
Original Merger Agreement in its entirety, add Sub as a party thereto and
eliminate the Company as a party thereto;
WHEREAS, KCPL and UCU have determined to engage in a business combination as
peer firms;
WHEREAS, in furtherance thereof, the respective Boards of Directors of KCPL,
Sub, UCU and the Company have approved this Agreement and the merger of Sub with
and into UCU, with UCU being the surviving corporation (the "UCU MERGER"), and
the Board of Directors of KCPL has approved the further merger of UCU (as the
surviving corporation in the UCU Merger) with and into KCPL, with KCPL being the
surviving corporation (the "CONSOLIDATING MERGER," and together with the UCU
Merger, the "MERGERS");
WHEREAS, it is intended that the Mergers shall be recorded for accounting
purposes as a pooling-of-interests; and
WHEREAS, for United States federal income tax purposes, it is intended that
the Mergers together shall constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"),
and this Agreement is intended to be and is adopted as a plan of reorganization
within the meaning of Section 368(b) of the Code.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGERS
Section 1.1 THE MERGERS. Upon the terms and subject to the conditions of
this Agreement:
(i) THE UCU MERGER. At the UCU Effective Time (as defined in SECTION
1.3), Sub shall be merged with and into UCU in accordance with the laws of
the State of Delaware. UCU shall be the surviving corporation in the UCU
Merger and shall continue its corporate existence under the laws of the
State of Delaware. The effects and the consequences of the UCU Merger shall
be as set forth in Section 1.2(a). The surviving corporation after the UCU
Merger is sometimes referred to herein as the "UCU Surviving Corporation."
(ii) THE CONSOLIDATING MERGER. At the Consolidating Effective Time (as
defined in SECTION 1.3), UCU shall be merged with and into KCPL in
accordance with the laws of the States of Missouri and Delaware. KCPL shall
be the surviving corporation in the Consolidating Merger and shall continue
its corporate existence under the laws of the State of Missouri. KCPL after
the Consolidating Effective Time is sometimes referred to herein as the
"Surviving Corporation." The effects and the consequences of the
Consolidating Merger shall be as set forth in Section 1.2(b).
Section 1.2 EFFECTS OF THE MERGERS. (a) At the UCU Effective Time, (i)
the Certificate of Incorporation of UCU, as in effect immediately prior to the
UCU Effective Time, shall be the Certificate of Incorporation of the UCU
Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation, and (ii) the by-laws of UCU, as in effect
immediately prior to the UCU Effective Time, shall be the by-laws of the UCU
Surviving Corporation until thereafter amended
A-7
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as provided by law, the Certificate of Incorporation of the UCU Surviving
Corporation and such by-laws. Subject to the foregoing, the additional effects
of the UCU Merger shall be as provided in the applicable provisions of the
Delaware General Corporation Law (the "DGCL").
(b) At the Consolidating Effective Time, (i) the Restated Articles of
Consolidation of KCPL, as in effect immediately prior to the Consolidating
Effective Time and as amended in respect of clause (iii) of this Section 1.2(b),
shall be the Restated Articles of Consolidation of the Surviving Corporation
until thereafter amended as provided by law and such Restated Articles of
Consolidation, (ii) the by-laws of KCPL, as in effect immediately prior to the
Consolidating Effective Time, shall be the by-laws of the Surviving Corporation
until thereafter amended as provided by law, the Restated Articles of
Consolidation of the Surviving Corporation and such by-laws, and (iii) the name
of the Surviving Corporation shall be such name as KCPL and UCU shall mutually
agree. Subject to the foregoing, the additional effects of the Consolidating
Merger shall be as provided in the applicable provisions of the DGCL and the
Missouri General and Business Corporation Law (the "MGCL").
Section 1.3 EFFECTIVE TIME OF THE MERGERS. On the Closing Date (as defined
in SECTION 3.1), (a) with respect to the UCU Merger, a certificate of merger
complying with the requirements of the DGCL shall be executed and filed by UCU
and Sub with the Secretary of State of the State of Delaware, and (b) with
respect to the Consolidating Merger, articles of merger shall be executed and
filed by KCPL and the UCU Surviving Corporation with the Secretary of State of
the State of Missouri pursuant to the MGCL and a certificate of merger shall be
executed and filed by KCPL and the UCU Surviving Corporation with the Secretary
of State of the State of Delaware pursuant to the DGCL. The UCU Merger shall
become effective at the time specified in the certificate of merger filed with
respect to the UCU Merger (the "UCU EFFECTIVE TIME"). The Consolidating Merger
shall become effective at the later of (i) the time of the issuance of the
certificate of merger with respect to the Consolidating Merger by the Secretary
of State of the State of Missouri and (ii) the time that the certificate of
merger filed with respect to the Consolidating Merger shall be duly filed with
the Secretary of State of the State of Delaware (the "CONSOLIDATING EFFECTIVE
TIME" or the "EFFECTIVE TIME"). The effective time specified in the certificate
of merger to be filed with respect to the UCU Merger shall be prior to the
effective time specified in the articles of merger and certificate of merger
filed with respect to the Consolidating Merger.
ARTICLE II
TREATMENT OF SHARES
Section 2.1 EFFECT OF THE MERGERS ON CAPITAL STOCK. (a) As of the UCU
Effective Time, by virtue of the UCU Merger and without any action on the part
of any holder of any capital stock of UCU or Sub:
(i) CAPITAL STOCK OF UCU AND SUB. Subject to Section 2.1(a)(ii) and
Section 2.2, (x) each issued and outstanding share of Common Stock, $0.01
par value per share, of Sub ("SUB COMMON STOCK") will be converted into and
become one fully paid and nonassessable share of Common Stock, $1.00 par
value per share, of the UCU Surviving Corporation and (y) each issued and
outstanding share of Common Stock, $1.00 par value per share, of UCU ("UCU
COMMON STOCK"), (other than shares of UCU Common Stock owned by KCPL or UCU
either directly or through a wholly owned Subsidiary (as defined in SECTION
4.1)), shall be converted into and become 1.0 (the "CONVERSION RATIO") fully
paid and nonassessable shares of Common Stock, no par value, of KCPL ("KCPL
COMMON STOCK"). All such shares of UCU Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease
to exist, and each holder of a Certificate (as defined in SECTION 2.2(B)),
formerly representing any such shares shall cease to have any rights with
respect to such shares, except the right to receive shares of KCPL Common
Stock to be issued in consideration therefor upon the surrender of such
Certificate in accordance with Section 2.2.
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(ii) CANCELLATION OF CERTAIN UCU COMMON STOCK. Any shares of UCU Common
Stock that are owned by UCU as treasury stock or by KCPL or by any wholly
owned Subsidiary of UCU or KCPL shall be cancelled and retired and shall
cease to exist and no stock of KCPL or other consideration shall be issued
or delivered in exchange therefor.
(iii) REDEMPTION OF KCPL PREFERRED STOCK. Prior to the UCU Effective
Time, the Board of Directors of KCPL shall call for redemption all
outstanding shares of KCPL Preferred Stock (as defined in SECTION 4.3), at a
redemption price equal to the amount set forth in the Restated Articles of
Consolidation of KCPL, together with all dividends accrued and unpaid to the
date of such redemption. All shares of KCPL Preferred Stock shall be
redeemed so that no such shares shall be deemed to be outstanding at the UCU
Effective Time or entitled to vote on the approval of this Agreement and the
transactions contemplated hereby.
(iv) REDEMPTION OF UCU PREFERRED STOCK. The Board of Directors of UCU
shall take all action necessary to cause all outstanding shares of UCU
Preferred Stock (as defined in SECTION 5.3) to be redeemed on March 3, 1997
or on such later date as KCPL and UCU shall mutually agree, at a redemption
price equal to the amount set forth in the Certificate of Incorporation of
UCU, together with all dividends accrued and unpaid to the date of such
redemption. All shares of UCU Preferred Stock shall be redeemed so that no
such shares shall be deemed to be outstanding at the UCU Effective Time or
entitled to vote on the approval of this Agreement and the transactions
contemplated hereby. The redemption price shall be paid in cash by UCU from
its own cash resources or its own line of credit. UCU and KCPL agree that
under no circumstances shall the payment of the redemption price be
financed, guaranteed, secured, loaned, reimbursed or otherwise facilitated
or provided directly or indirectly by KCPL or any of the KCPL Subsidiaries.
(b) As of the Consolidating Effective Time, by virtue of the Consolidating
Merger and without any action on the part of any holder of any capital stock of
KCPL or the UCU Surviving Corporation, each issued and outstanding share of
capital stock of the UCU Surviving Corporation shall no longer be outstanding
and shall automatically be cancelled and retired and shall cease to exist.
Section 2.2 ISSUANCE OF NEW CERTIFICATES.
(a) DEPOSIT WITH EXCHANGE AGENT. As soon as practicable after the UCU
Effective Time, KCPL shall deposit, in trust for the benefit of holders of
Certificates, with such bank or trust company mutually agreeable to UCU and KCPL
(the "EXCHANGE AGENT"), certificates representing shares of KCPL Common Stock
required to effect the issuance referred to in Section 2.1(a)(i), together with
cash payable in respect of fractional shares pursuant to Section 2.2(d).
(b) ISSUANCE PROCEDURES. As soon as practicable after the UCU Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate or
certificates (the "CERTIFICATES") which immediately prior to the UCU Effective
Time represented outstanding shares of UCU Common Stock (the "CANCELLED SHARES")
that were cancelled and became instead the right to receive shares of KCPL
Common Stock (the "KCPL SHARES") pursuant to Section 2.1(a)(i): (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon actual delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates representing KCPL
Shares. Upon surrender of a Certificate to the Exchange Agent for cancellation
(or to such other agent or agents as may be appointed by agreement of KCPL and
UCU), together with a duly executed letter of transmittal and such other
documents as the Exchange Agent shall require, the holder of such Certificate
shall be entitled to receive a certificate or certificates representing that
number of whole KCPL Shares which such holder has the right to receive pursuant
to the provisions of this Article II. In the event of a transfer of ownership of
Cancelled Shares which is not registered in the transfer records of UCU, a
certificate representing the proper number of KCPL Shares may be issued to a
transferee if the Certificate representing such Cancelled Shares is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence satisfactory to the
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Exchange Agent that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the UCU Effective Time to represent only the right to
receive upon such surrender the certificate representing KCPL Shares and cash in
lieu of any fractional shares of KCPL Common Stock as contemplated by this
Section 2.2.
(c) DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED SHARES. No dividends or
other distributions declared or made after the UCU Effective Time with respect
to KCPL Shares with a record date after the UCU Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the KCPL Shares
represented thereby and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.2(d) until the holder of record of
such Certificate shall surrender such Certificate. Subject to the effect of
unclaimed property, escheat and other applicable laws, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole KCPL Shares issued in consideration therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of KCPL Common Stock to which such holder
is entitled pursuant to Section 2.2(d) and the amount of dividends or other
distributions with a record date after the UCU Effective Time theretofore paid
with respect to such whole KCPL Shares and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the UCU
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole KCPL Shares.
(d) NO FRACTIONAL SECURITIES. No certificates or scrip representing
fractional shares of KCPL Common Stock shall be issued upon the surrender for
exchange of Certificates and such fractional shares shall not entitle the owner
thereof to vote or to any other rights of a holder of KCPL Common Stock. A
holder of UCU Common Stock who would otherwise have been entitled to a
fractional share of KCPL Common Stock shall be entitled to receive a cash
payment in lieu of such fractional share in an amount equal to the product of
such fraction multiplied by the average of the last reported sales price,
regular way, per share of KCPL Common Stock on the New York Stock Exchange
("NYSE") Composite Tape for the five business days prior to and including the
last business day on which KCPL Common Stock was traded on the NYSE, without any
interest thereon.
(e) BOOK ENTRY. Notwithstanding any other provision of this Agreement, the
letter of transmittal referred to in Section 2.2(b) may, at the option of KCPL,
provide for the ability of a holder of one or more Certificates to elect that
KCPL Shares to be received in exchange for the Cancelled Shares formerly
represented by such surrendered Certificates be issued in uncertificated form or
to elect that such KCPL Shares be credited to an account established for the
holder under the dividend reinvestment and stock purchase plan of KCPL.
(f) CLOSING OF TRANSFER BOOKS. From and after the UCU Effective Time, the
stock transfer books of UCU shall be closed and no registration of any transfer
of any capital stock of UCU shall thereafter be made on the records of UCU. If,
after the UCU Effective Time, Certificates are presented to KCPL, they shall be
cancelled and exchanged for certificates representing the appropriate number of
KCPL Shares, as provided in this Section 2.2.
(g) TERMINATION OF EXCHANGE AGENT. Any certificates representing KCPL
Shares deposited with the Exchange Agent pursuant to Section 2.2(a) and not
exchanged within one year after the UCU Effective Time pursuant to this Section
2.2 shall be returned by the Exchange Agent to KCPL, which shall thereafter act
as Exchange Agent. All funds held by the Exchange Agent for payment to the
holders of unsurrendered Certificates and unclaimed at the end of one year from
the UCU Effective Time shall be returned to KCPL; after which time any holder of
unsurrendered Certificates shall look as a general creditor only to KCPL for
payment of such funds to which such holder may be due, subject to applicable
law. KCPL shall not be liable to any person for such shares or funds delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law. As used in this Agreement, the term "PERSON" shall mean any natural
person, corporation, general or limited partnership, limited liability company,
joint venture, trust, association or entity of any kind.
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ARTICLE III
THE CLOSING
Section 3.1 CLOSING. The closing of the Mergers (the "CLOSING") shall take
place at the offices of Blackwell Sanders Matheny Weary & Lombardi L.C., 2300
Main, Suite 1100, Kansas City, Missouri 64108 at 10:00 A.M., local time, on the
second business day immediately following the date on which the last of the
conditions set forth in Article VIII hereof is fulfilled or waived, or at such
other time, date and place as KCPL and UCU shall mutually agree (the "CLOSING
DATE"); PROVIDED, HOWEVER, that the Closing Date shall not occur before March 3,
1997.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF KCPL AND SUB
KCPL makes the representations and warranties to UCU contained in Sections
4.1 to 4.18 hereof. KCPL and Sub make the representations and warranties to UCU
contained in Section 4.19 hereof. Notwithstanding anything in this Agreement to
the contrary, any representation or warranty which is qualified by reference to
the KCPL Disclosure Schedule (as defined in SECTION 4.1 hereof) shall be deemed
to be made as of the Original Execution Date. To the extent that the KCPL
Disclosure Schedule would be incomplete or inaccurate as of the Original
Execution Date by virtue of the change in structure of the Mergers reflected in
this Agreement as compared to the Original Merger Agreement, KCPL shall deliver
a revised or updated KCPL Disclosure Schedule not later than 30 days after the
Amendment Date and any changes reflected in such revised or updated KCPL
Disclosure Schedule shall be deemed to be made as of the Original Execution
Date. KCPL shall have no obligation to update the KCPL Disclosure Schedule for
any changes of facts or circumstances other than those resulting from a change
in the structure of the Mergers as set forth above.
Section 4.1 ORGANIZATION AND QUALIFICATION. Except as set forth in Section
4.1 of the schedule delivered by KCPL on the Original Execution Date (the "KCPL
DISCLOSURE SCHEDULE"), KCPL and each of the other KCPL Subsidiaries (as defined
below) and, to the knowledge of KCPL, each of the KCPL Joint Ventures (as
defined below) is a corporation or other entity duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization, has all requisite power and authority, and has been duly
authorized by all necessary approvals and orders to own, lease and operate its
assets and properties to the extent owned, leased and operated and to carry on
its business as it is now being conducted and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its assets and properties makes such
qualification necessary other than in such jurisdictions where the failure so to
qualify would not have a material adverse effect on KCPL and the KCPL
Subsidiaries taken as a whole. As used in this Agreement, (a) the term
"SUBSIDIARY" of a person shall mean any corporation or other entity (including
partnerships and other business associations) of which at least a majority of
the voting power represented by the outstanding capital stock or other voting
securities or interests having voting power under ordinary circumstances to
elect directors or similar members of the governing body of such corporation or
entity shall at the time be held, directly or indirectly, by such person, (b)
the term "KCPL SUBSIDIARY" shall mean a Subsidiary of KCPL including Sub (it
being understood that references to "Subsidiary" or "KCPL Subsidiary" made with
respect to a date when Sub was not in existence shall not be deemed to include
Sub), and (c) the term "KCPL JOINT VENTURE" shall mean each entity identified as
such on Section 4.1 of the KCPL Disclosure Schedule.
Section 4.2 SUBSIDIARIES. Section 4.2 of the KCPL Disclosure Schedule sets
forth a list as of the Original Execution Date of (a) all the KCPL Subsidiaries
and (b) all other entities in which KCPL has an aggregate equity investment in
excess of $25 million. Except as set forth in Section 4.2 of the KCPL Disclosure
Schedule, neither KCPL nor any of the KCPL Subsidiaries is a "holding company,"
a "subsidiary company" or an "affiliate" of any public utility company within
the meaning of Section 2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility
Holding Company Act of 1935, as amended (the "1935 ACT"), respectively and none
of the KCPL Subsidiaries is a "public utility company" within the
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meaning of Section 2(a)(5) of the 1935 Act. Except as set forth in Section 4.2
of the KCPL Disclosure Schedule, all of the issued and outstanding shares of
capital stock of each KCPL Subsidiary are validly issued, fully paid,
nonassessable and free of preemptive rights, and are owned, directly or
indirectly, by KCPL free and clear of any liens, claims, encumbrances, security
interests, charges and options of any nature whatsoever and there are no
outstanding subscriptions, options, calls, contracts, voting trusts, proxies or
other commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating any such KCPL Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of its capital stock or obligating it to grant, extend or enter into any
such agreement or commitment.
Section 4.3 CAPITALIZATION. As of the Original Execution Date, the
authorized capital stock of KCPL consists of 150,000,000 shares of KCPL Common
Stock, without par value, 404,357 shares of Cumulative Preferred Stock, par
value $100.00 per share ("KCPL CUMULATIVE PREFERRED"), 1,572,000 shares of
Cumulative No Par Preferred Stock, without par value ("KCPL NO PAR PREFERRED"),
and 11,000,000 shares of Preference Stock, without par value ("KCPL PREFERENCE
STOCK") (KCPL Cumulative Preferred, KCPL No Par Preferred and KCPL Preference
Stock hereinafter collectively referred to as the "KCPL PREFERRED STOCK"). At
the close of business on December 31, 1995, (i) 61,908,726 shares of KCPL Common
Stock were issued, not more than 10,000,000 shares of KCPL Common Stock were
reserved for issuance pursuant to KCPL's Long Term Incentive Plan and Employee
Savings Plus Plan (401(k) Plan) and Dividend Reinvestment Plan (such Plans,
collectively, the "KCPL STOCK PLANS"), (ii) 6,643 shares of KCPL Common Stock
were held by KCPL in its treasury or by its wholly owned Subsidiaries, (iii)
404,357 shares of KCPL Cumulative Preferred were issued and of such issued
shares, 3,192 were held by KCPL in its treasury or by its wholly owned
Subsidiaries, (iv) 500,000 shares of KCPL No Par Preferred were outstanding and
none were held by KCPL or its Subsidiaries in its treasury, (v) no shares of
KCPL Preference Stock were outstanding and (vi) no bonds, debentures, notes or
other indebtedness having the right to vote (or convertible into securities
having the right to vote) on any matters on which stockholders may vote ("VOTING
DEBT"), were issued or outstanding. All outstanding shares of KCPL Common Stock
and KCPL Preferred Stock are validly issued, fully paid and nonassessable and
are not subject to preemptive rights. As of the Original Execution Date, except
as set forth in Section 4.3 of the KCPL Disclosure Schedule or pursuant to this
Agreement and the KCPL Stock Plans, there are no options, warrants, calls,
rights, commitments or agreements of any character to which KCPL or any material
KCPL Subsidiary is a party or by which it is bound obligating KCPL or any
material KCPL Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or any Voting Debt
securities of KCPL or any material KCPL Subsidiary or obligating KCPL or any
material KCPL Subsidiary to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. Except as set forth in Section
4.3 of the KCPL Disclosure Schedule, or other than in connection with the KCPL
Stock Plans, after the UCU Effective Time, there will be no option, warrant,
call, right, commitment or agreement obligating KCPL or any material KCPL
Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold,
any shares of capital stock or any Voting Debt of KCPL or any material KCPL
Subsidiary, or obligating KCPL or any material KCPL Subsidiary to grant, extend
or enter into any such option, warrant, call, right, commitment or agreement.
Section 4.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE.
(a) AUTHORITY. KCPL has all requisite power and authority to enter into
this Agreement and, subject to the receipt of the applicable KCPL Shareholders'
Approval (as defined in SECTION 4.13) and the applicable KCPL Required Statutory
Approvals (as defined in SECTION 4.4(C)), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation by KCPL of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of KCPL, subject to
obtaining the applicable KCPL Shareholders' Approval. This Agreement has been
duly and validly executed and delivered by KCPL and, assuming
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the due authorization, execution and delivery hereof by the other signatories
hereto, constitutes the valid and binding obligation of KCPL enforceable against
it in accordance with the terms of this Agreement.
(b) NON-CONTRAVENTION. Except as set forth in Section 4.4(b) of the KCPL
Disclosure Schedule, the execution and delivery of this Agreement by KCPL does
not, and the consummation of the transactions contemplated hereby will not, in
any respect, violate, conflict with or result in a material breach of any
provision of, or constitute a material default (with or without notice or lapse
of time or both) under, or result in the termination or modification of, or
accelerate the performance required by, or result in a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or result in the creation of any material lien, security interest, charge
or encumbrance upon any of the properties or assets of KCPL or any of the KCPL
Subsidiaries or the KCPL Joint Ventures (any such violation, conflict, breach,
default, right of termination, modification, cancellation or acceleration, loss
or creation, is referred to herein as a "VIOLATION" with respect to KCPL and
such term when used in Article V having a correlative meaning with respect to
UCU) pursuant to any provisions of (i) the Restated Articles of Consolidation,
by-laws or similar governing documents of KCPL or any of the KCPL Subsidiaries
or the KCPL Joint Ventures, (ii) subject to obtaining the KCPL Required
Statutory Approvals and the receipt of the KCPL Shareholders' Approval, any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any Governmental Authority (as defined in SECTION
4.4(C)) applicable to KCPL or any of the KCPL Subsidiaries or the KCPL Joint
Ventures or any of their respective properties or assets or (iii) subject to
obtaining the third-party consents set forth in Section 4.4(b) of the KCPL
Disclosure Schedule (the "KCPL REQUIRED CONSENTS"), any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which KCPL or
any of the KCPL Subsidiaries or the KCPL Joint Ventures is a party or by which
it or any of its properties or assets may be bound or affected, except in the
case of clause (ii) or (iii) for any such Violation which would not have a KCPL
Material Adverse Effect (as defined in SECTION 4.6).
(c) STATUTORY APPROVALS. No declaration, filing or registration with, or
notice to or authorization, consent or approval of, any court, federal, state,
local or foreign governmental or regulatory body (including a stock exchange or
other self-regulatory body) or authority (each, a "GOVERNMENTAL AUTHORITY") is
necessary for the execution and delivery of this Agreement by KCPL or the
consummation by KCPL of the transactions contemplated hereby except as described
in Section 4.4(c) of the KCPL Disclosure Schedule or the failure of which to
obtain would not result in a KCPL Material Adverse Effect (the "KCPL REQUIRED
STATUTORY APPROVALS," it being understood that references in this Agreement to
"obtaining" such KCPL Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notices; obtaining such
authorizations, consents or approvals; and having such waiting periods expire as
are necessary to avoid a violation of law).
(d) COMPLIANCE. Except as set forth in Section 4.4(d), Section 4.7,
Section 4.10 or Section 4.11 of the KCPL Disclosure Schedule, or as disclosed in
the KCPL SEC Reports (as defined in SECTION 4.5) filed prior to the Original
Execution Date, neither KCPL nor any of the KCPL Subsidiaries nor, to the
knowledge of KCPL, any KCPL Joint Venture is in violation of, is, to the
knowledge of KCPL, under investigation with respect to any violation of, or has
been given notice or been charged with any violation of, any law, statute,
order, rule, regulation, ordinance or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any Governmental
Authority, except for possible violations which individually or in the aggregate
would not have a KCPL Material Adverse Effect. Except as set forth in Section
4.4(d) of the KCPL Disclosure Schedule or in Section 4.11 of the KCPL Disclosure
Schedule, or as expressly disclosed in the KCPL SEC Reports, KCPL and the KCPL
Subsidiaries and, to the knowledge of KCPL, the KCPL Joint Ventures have all
permits, licenses, franchises and other governmental authorizations, consents
and approvals necessary to conduct their businesses as presently conducted which
are material to the operation of the businesses of KCPL and the KCPL
Subsidiaries. Except as set forth in Section 4.4(d) of the KCPL
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Disclosure Schedule, KCPL and each of the KCPL Subsidiaries and, to the
knowledge of KCPL, the KCPL Joint Ventures is not in breach or violation of or
in default in the performance or observance of any term or provision of, and no
event has occurred which, with lapse of time or action by a third party, could
result in a default by KCPL or any KCPL Subsidiary or, to the knowledge of KCPL,
KCPL Joint Venture under (i) its articles of incorporation or by-laws or (ii)
any contract, commitment, agreement, indenture, mortgage, loan agreement, note,
lease, bond, license, approval or other instrument to which it is a party or by
which KCPL or any KCPL Subsidiary or KCPL Joint Venture is bound or to which any
of its property is subject, except for possible violations, breaches or defaults
which individually or in the aggregate would not have a KCPL Material Adverse
Effect.
Section 4.5 REPORTS AND FINANCIAL STATEMENTS. The filings required to be
made by KCPL and the KCPL Subsidiaries and KCPL Joint Ventures since January 1,
1991 under the Securities Act of 1933, as amended (the "SECURITIES ACT"); the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"); the 1935 Act;
the Federal Power Act (the "POWER ACT"); the Atomic Energy Act of 1954, as
amended (the "ATOMIC ENERGY ACT") and applicable state public utility laws and
regulations have been filed with the Securities and Exchange Commission (the
"SEC"), the Federal Energy Regulatory Commission (the "FERC"), the Nuclear
Regulatory Commission ("NRC") or the appropriate state public utilities
commission, as the case may be, including all forms, statements, reports,
agreements (oral or written) and all documents, exhibits, amendments and
supplements appertaining thereto, and complied, as of their respective dates, in
all material respects with all applicable requirements of the appropriate
statutes and the rules and regulations thereunder, except for such filings the
failure of which to have been made would not result in a KCPL Material Adverse
Effect. KCPL has made available to UCU a true and complete copy of each report,
schedule, registration statement and definitive proxy statement filed with the
SEC by KCPL pursuant to the requirements of the Securities Act or Exchange Act
since January 1, 1991 (as such documents have since the time of their filing
been amended, the "KCPL SEC REPORTS"). As of their respective dates, the KCPL
SEC Reports did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim financial statements of KCPL included in the KCPL SEC Reports
(collectively, the "KCPL FINANCIAL STATEMENTS") have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
("GAAP") (except as may be indicated therein or in the notes thereto and except
with respect to unaudited statements as permitted by Form 10-Q of the SEC) and
fairly present the financial position of KCPL as of the dates thereof and the
results of its operations and cash flows for the periods then ended, subject, in
the case of the unaudited interim financial statements, to normal, recurring
audit adjustments. True, accurate and complete copies of the Restated Articles
of Consolidation and by-laws of KCPL, as in effect on the Original Execution
Date, are included (or incorporated by reference) in the KCPL SEC Reports.
Section 4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the KCPL SEC Reports filed prior to the Original Execution Date or as set forth
in Section 4.6 of the KCPL Disclosure Schedule, since December 31, 1994, KCPL
and each of the KCPL Subsidiaries have conducted their business only in the
ordinary course of business consistent with past practice and there has not
been, and no fact or condition exists which would have or, insofar as reasonably
can be foreseen, could have, a material adverse effect on the business, assets,
financial condition, results of operations or prospects of KCPL and the KCPL
Subsidiaries taken as a whole (a "KCPL MATERIAL ADVERSE EFFECT").
Section 4.7 LITIGATION. Except as disclosed in the KCPL SEC Reports filed
prior to the Original Execution Date or as set forth in Section 4.7, Section 4.9
or Section 4.11 of the KCPL Disclosure Schedule, (a) there are no claims, suits,
actions or proceedings by any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator, pending or, to the
knowledge of KCPL, threatened, nor are there, to the knowledge of KCPL, any
investigations or reviews by
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any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator pending or threatened against, relating to or
affecting KCPL or any of the KCPL Subsidiaries or, to the knowledge of KCPL, the
KCPL Joint Ventures which would have a KCPL Material Adverse Effect, (b) there
have not been any significant developments since December 31, 1994 with respect
to such disclosed claims, suits, actions, proceedings, investigations or reviews
that would have a KCPL Material Adverse Effect and (c) there are no judgments,
decrees, injunctions, rules or orders of any court, governmental department,
commission, agency, instrumentality or authority or any arbitrator applicable to
KCPL or any of the KCPL Subsidiaries or, to the knowledge of KCPL, applicable to
any of the KCPL Joint Ventures, except for such that would not have a KCPL
Material Adverse Effect.
Section 4.8 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information supplied or to be supplied by or on behalf of KCPL for inclusion or
incorporation by reference in (a) the registration statement on Form S-4 or any
post-effective amendment to a registration statement on Form S-4 to be filed
with the SEC by KCPL in connection with the issuance of shares of KCPL Common
Stock in the UCU Merger (the "REGISTRATION STATEMENT") will, at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (b) the joint proxy
statement, in definitive form, relating to the meetings of KCPL and UCU
shareholders to be held in connection with the Mergers and the transactions
related thereto (the "PROXY STATEMENT") will, at the dates mailed to
shareholders and at the times of the meetings of shareholders to be held in
connection with the Mergers, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Registration Statement and the Proxy
Statement will comply as to form in all material respects with the provisions of
the Securities Act and the Exchange Act and the rules and regulations
thereunder.
Section 4.9 TAX MATTERS. "Taxes," as used in this Agreement, means any
federal, state, county, local or foreign taxes, charges, fees, levies or other
assessments, including all net income, gross income, sales and use, AD VALOREM,
transfer, gains, profits, excise, franchise, real and personal property, gross
receipt, capital stock, production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom duties, severance or
withholding taxes or charges imposed by any governmental entity, and includes
any interest and penalties (civil or criminal) on or additions to any such
taxes. "TAX RETURN," as used in this Agreement, means a report, return or other
information required to be supplied to a governmental entity with respect to
Taxes including, where permitted or required, combined or consolidated returns
for any group of entities that includes KCPL or any KCPL Subsidiary or UCU or
any UCU Subsidiary, as the case may be.
Except as set forth in Section 4.9 of the KCPL Disclosure Schedule:
(a) FILING OF TIMELY TAX RETURNS. KCPL and each of the KCPL
Subsidiaries have filed (or there has been filed on its behalf) all Tax
Returns required to be filed by each of them under applicable law, except
for those the failure of which to file would not have a KCPL Material
Adverse Effect. All such Tax Returns were and are in all material respects
true, complete and correct and filed on a timely basis.
(b) PAYMENT OF TAXES. KCPL and each of the KCPL Subsidiaries have,
within the time and in the manner prescribed by law, paid all material Taxes
that are currently due and payable, except for those contested in good faith
and for which adequate reserves have been taken.
(c) TAX RESERVES. KCPL and the KCPL Subsidiaries have established on
their books and records reserves adequate to pay all material Taxes and
reserves for deferred income taxes in accordance with GAAP.
(d) TAX LIENS. There are no Tax liens upon the assets of KCPL or any
of the KCPL Subsidiaries except liens for Taxes not yet due.
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(e) WITHHOLDING TAXES. KCPL and each of the KCPL Subsidiaries have
complied in all material respects with the provisions of the Code relating
to the withholding of Taxes, as well as similar provisions under any other
laws, and have, within the time and in the manner prescribed by law,
withheld and paid over to the proper governmental authorities all amounts
required.
(f) EXTENSIONS OF TIME FOR FILING TAX RETURNS. Neither KCPL nor any of
the KCPL Subsidiaries has requested any extension of time within which to
file any Tax Return, which Tax Return has not since been filed.
(g) WAIVERS OF STATUTE OF LIMITATIONS. Neither KCPL nor any of the
KCPL Subsidiaries has executed any outstanding waivers or comparable
consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns.
(h) AUDIT, ADMINISTRATIVE AND COURT PROCEEDINGS. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of KCPL or any of the KCPL Subsidiaries.
(i) POWERS OF ATTORNEY. No power of attorney currently in force has
been granted by KCPL or any of the KCPL Subsidiaries concerning any Tax
matter.
(j) TAX RULINGS. Neither KCPL nor any of the KCPL Subsidiaries has
received a Tax Ruling (as defined below) or entered into a Closing Agreement
(as defined below) with any taxing authority that would have a continuing
adverse effect after the Closing Date. "TAX RULING," as used in this
Agreement, shall mean a written ruling of a taxing authority relating to
Taxes. "CLOSING AGREEMENT," as used in this Agreement, shall mean a written
and legally binding agreement with a taxing authority relating to Taxes.
(k) AVAILABILITY OF TAX RETURNS. KCPL has made available to UCU
complete and accurate copies of (i) all federal and state income Tax Returns
for open years, and any amendments thereto, filed by KCPL or any of the KCPL
Subsidiaries, (ii) all audit reports or written proposed adjustments
(whether formal or informal) received from any taxing authority relating to
any Tax Return filed by KCPL or any of the KCPL Subsidiaries and (iii) any
Closing Agreements entered into by KCPL or any of the KCPL Subsidiaries with
any taxing authority.
(l) TAX SHARING AGREEMENTS. Neither KCPL nor any KCPL Subsidiary is a
party to any agreement relating to allocating or sharing of Taxes.
(m) CODE SECTION 280G. Neither KCPL nor any of the KCPL Subsidiaries
is a party to any agreement, contract or arrangement that could result in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code or any amount that would be non-deductible pursuant to
Section 162(m) of the Code.
(n) LIABILITY FOR OTHERS. None of KCPL or any of the KCPL Subsidiaries
has any liability for Taxes of any person other than KCPL and the KCPL
Subsidiaries (i) under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law), (ii) by contract, or (iii)
otherwise.
(o) SECTION 341(F). Neither KCPL nor any of the KCPL Subsidiaries has,
with regard to any assets or property held or acquired by any of them, filed
a consent to the application of Section 341(f)(2) of the Code, or agreed to
have Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f)(4) of the Code) owned
by KCPL or any of the KCPL Subsidiaries.
Section 4.10 EMPLOYEE MATTERS; ERISA. Except as set forth in Section 4.10
of the KCPL Disclosure Schedule:
(a) BENEFIT PLANS. Section 4.10(a) of the KCPL Disclosure Schedule
contains a true and complete list of each written or oral material employee
benefit plan, policy or agreement covering employees, former employees or
directors of KCPL and each of the KCPL Subsidiaries or their
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beneficiaries, or providing benefits to such persons in respect of services
provided to any such entity, including, but not limited to, any employee
benefit plans within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and any severance or
change in control agreement (collectively, the "KCPL BENEFIT PLANS").
(b) CONTRIBUTIONS. All material contributions and other payments
required to be made by KCPL or any of the KCPL Subsidiaries to any KCPL
Benefit Plan (or to any person pursuant to the terms thereof) have been made
or the amount of such payment or contribution obligation has been reflected
in the KCPL Financial Statements.
(c) QUALIFICATION; COMPLIANCE. Each of the KCPL Benefit Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code has been
determined by the Internal Revenue Service (the "IRS") to be so qualified,
and, to the best knowledge of KCPL, no circumstances exist that are
reasonably expected by KCPL to result in the revocation of any such
determination. KCPL is in compliance in all material respects with, and each
of the KCPL Benefit Plans is and has been operated in all material respects
in compliance with, all applicable laws, rules and regulations governing
such plan, including, without limitation, ERISA and the Code. Each KCPL
Benefit Plan intended to provide for the deferral of income, the reduction
of salary or other compensation, or to afford other income tax benefits,
complies with the requirements of the applicable provisions of the Code or
other laws, rules and regulations required to provide such income tax
benefits. No prohibited transactions (as defined in Section 406 or 407 of
ERISA or Section 4975 of the Code) have occurred for which a statutory
exemption is not available with respect to any KCPL Benefit Plan, and which
could give rise to liability on the part of KCPL, any KCPL Benefit Plan, or
any fiduciary, party in interest or disqualified person with respect thereto
that would be material to KCPL or would be material to KCPL if it were
KCPL's liability.
(d) LIABILITIES. With respect to the KCPL Benefit Plans, individually
and in the aggregate, no event has occurred, and, to the best knowledge of
KCPL, there does not now exist any condition or set of circumstances, that
could subject KCPL or any of the KCPL Subsidiaries to any material liability
arising under the Code, ERISA or any other applicable law (including,
without limitation, any liability to any such plan or the Pension Benefit
Guaranty Corporation (the "PBGC")), or under any indemnity agreement to
which KCPL or any of the KCPL Subsidiaries is a party, excluding liability
for benefit claims and funding obligations payable in the ordinary course.
(e) WELFARE PLANS. None of the KCPL Benefit Plans that are "welfare
plans," within the meaning of Section 3(1) of ERISA, provide for any
benefits with respect to current or former employees for periods extending
beyond their retirement or other termination of service, other than
continuation coverage required to be provided under Section 4980B of the
Code or Part 6 of Title I of ERISA.
(f) DOCUMENTS MADE AVAILABLE. KCPL has made available to UCU a true
and correct copy of each collective bargaining agreement to which KCPL or
any of the KCPL Subsidiaries is a party or under which KCPL or any of the
KCPL Subsidiaries has obligations and, with respect to each KCPL Benefit
Plan, where applicable, (i) such plan and summary plan description, (ii) the
most recent annual report filed with the IRS, (iii) each related trust
agreement, insurance contract, service provider or investment management
agreement (including all amendments to each such document), (iv) the most
recent determination of the IRS with respect to the qualified status of such
KCPL Benefit Plan, and (v) the most recent actuarial report or valuation.
(g) PAYMENTS RESULTING FROM THE MERGERS. The consummation or
announcement of any transaction contemplated by this Agreement will not
(either alone or upon the occurrence of any additional or further acts or
events, including, without limitation, the termination of employment of any
officers, directors, employees or agents of KCPL or any of the KCPL
Subsidiaries) result in any (i) payment (whether of severance pay or
otherwise) becoming due from KCPL or any of the KCPL Subsidiaries or, to the
knowledge of KCPL, any of the KCPL Joint Ventures, to any officer,
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employee, former employee or director thereof or to the trustee under any
"rabbi trust" or similar arrangement, or (ii) benefit under any KCPL Benefit
Plan being established or becoming accelerated, vested or payable.
(h) LABOR AGREEMENTS. As of the Original Execution Date, neither KCPL
nor any of the KCPL Subsidiaries is a party to any collective bargaining
agreement or other labor agreement with any union or labor organization. To
the best knowledge of KCPL, as of the Original Execution Date, there is no
current union representation question involving employees of KCPL or any of
the KCPL Subsidiaries, nor does KCPL know of any activity or proceeding of
any labor organization (or representative thereof) or employee group to
organize any such employees. Except as disclosed in the KCPL SEC Reports
filed prior to the Original Execution Date or except to the extent such
would not have a KCPL Material Adverse Effect, (i) there is no unfair labor
practice, employment discrimination or other material complaint against KCPL
or any of the KCPL Subsidiaries pending, or to the best knowledge of KCPL,
threatened, (ii) there is no strike, lockout or material dispute, slowdown
or work stoppage pending or, to the best knowledge of KCPL, threatened
against or involving KCPL, and (iii) there is no proceeding, claim, suit,
action or governmental investigation pending or, to the best knowledge of
KCPL, threatened in respect of which any director, officer, employee or
agent of KCPL or any of the KCPL Subsidiaries is or may be entitled to claim
indemnification from KCPL or such KCPL Subsidiary pursuant to their
respective articles of incorporation or by-laws or as provided in the
indemnification agreements listed in Section 4.10(h) of the KCPL Disclosure
Schedule.
Section 4.11 ENVIRONMENTAL PROTECTION.
(a) Except as set forth in Section 4.11 of the KCPL Disclosure Schedule or
in the KCPL SEC Reports filed prior to the Original Execution Date:
(i) COMPLIANCE. KCPL and each of the KCPL Subsidiaries and, to the
knowledge of KCPL, the KCPL Joint Ventures is in compliance with all
applicable Environmental Laws (as defined in Section 4.11(c)(ii)) except
where the failure to so comply would not have a KCPL Material Adverse
Effect, and neither KCPL nor any of the KCPL Subsidiaries has received any
communication (written or oral), from any person or Governmental Authority
that alleges that KCPL or any of the KCPL Subsidiaries or the KCPL Joint
Ventures is not in such compliance with applicable Environmental Laws. To
the best knowledge of KCPL, compliance with all applicable Environmental
Laws including, without limitation, all laws relating to the storage,
handling, use and disposal of nuclear fuel or wastes, will not require KCPL
or any KCPL Subsidiary or, to the knowledge of KCPL, any KCPL Joint Venture
to incur costs beyond that currently budgeted in the five KCPL fiscal years
beginning with January 1, 1996 that will be reasonably likely to result in a
KCPL Material Adverse Effect, including but not limited to the costs of KCPL
and KCPL Subsidiary and KCPL Joint Venture pollution control equipment or
equipment for the storage, handling, use or disposal of nuclear fuel or
wastes, required or known to be required in the future.
(ii) ENVIRONMENTAL PERMITS. KCPL and each of the KCPL Subsidiaries and,
to the knowledge of KCPL, the KCPL Joint Ventures has obtained or has
applied for all environmental, health and safety permits and governmental
authorizations (collectively, the "ENVIRONMENTAL PERMITS") necessary for the
construction of their facilities or the conduct of their operations except
where the failure to so obtain would not have a KCPL Material Adverse
Effect, and all such Environmental Permits are in good standing or, where
applicable, a renewal application has been timely filed and is pending
agency approval, and KCPL and the KCPL Subsidiaries and, to the knowledge of
KCPL, the KCPL Joint Ventures are in material compliance with all terms and
conditions of the Environmental Permits.
(iii) ENVIRONMENTAL CLAIMS. There is no Environmental Claim (as defined
in SECTION 4.11(C)(I)) which would have a KCPL Material Adverse Effect
pending (A) against KCPL or any of the KCPL Subsidiaries or, to the
knowledge of KCPL, any of the KCPL Joint Ventures, (B) to the best knowledge
of KCPL, against any person or entity whose liability for any Environmental
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Claim KCPL or any of the KCPL Subsidiaries or, to the knowledge of KCPL, any
of the KCPL Joint Ventures has or may have retained or assumed either
contractually or by operation of law, or (C) against any real or personal
property or operations which KCPL or any of the KCPL Subsidiaries or, to the
knowledge of KCPL, any of the KCPL Joint Ventures owns, leases or manages,
in whole or in part.
(iv) RELEASES. KCPL has no knowledge of any Releases (as defined in
SECTION 4.11(C)(IV)) of any Hazardous Material (as defined in SECTION
4.11(C)(III)) that would be reasonably likely to form the basis of any
Environmental Claim against KCPL or any of the KCPL Subsidiaries or the KCPL
Joint Ventures, or against any person or entity whose liability for any
Environmental Claim KCPL or any of the KCPL Subsidiaries or the KCPL Joint
Ventures has or may have retained or assumed either contractually or by
operation of law except for any Environmental Claim which would not have a
KCPL Material Adverse Effect.
(v) PREDECESSORS. KCPL has no knowledge, with respect to any
predecessor of KCPL or any of the KCPL Subsidiaries or the KCPL Joint
Ventures, of any Environmental Claim which would have a KCPL Material
Adverse Effect pending or threatened, or of any Release of Hazardous
Materials that would be reasonably likely to form the basis of any
Environmental Claim which would have a KCPL Material Adverse Effect.
(b) DISCLOSURE. To KCPL's best knowledge, KCPL has disclosed in writing to
UCU all facts which KCPL reasonably believes form the basis of an Environmental
Claim which would have a KCPL Material Adverse Effect arising from (i) the cost
of KCPL pollution control equipment currently required or known to be required
in the future, (ii) current KCPL remediation costs or KCPL remediation costs
known to be required in the future or (iii) any other environmental matter
affecting KCPL.
(c) DEFINITIONS. As used in this Agreement:
(i) "ENVIRONMENTAL CLAIM" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims,
liens, investigations, proceedings or notices of noncompliance or violation
(written or oral) by any person or entity (including any Governmental
Authority) alleging potential liability (including, without limitation,
potential responsibility for or liability for enforcement, investigatory
costs, cleanup costs, governmental response costs, removal costs, remedial
costs, natural resources damages, property damages, personal injuries or
penalties) arising out of, based on or resulting from (A) the presence,
Release or threatened Release into the environment of any Hazardous
Materials at any location, whether or not owned, operated, leased or managed
by KCPL or any of the KCPL Subsidiaries or KCPL Joint Ventures (for purposes
of this Section 4.11) or by UCU or any of the UCU Subsidiaries or UCU Joint
Ventures (for purposes of Section 5.11); or (B) circumstances forming the
basis of any violation or alleged violation of any Environmental Law or (C)
any and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting
from the presence or Release of any Hazardous Materials.
(ii) "ENVIRONMENTAL LAWS" means all federal, state and local laws, rules
and regulations relating to pollution, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human health as it relates to the
environment including, without limitation, laws and regulations relating to
Releases or threatened Releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials.
(iii) "HAZARDOUS MATERIALS" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or other
equipment that contain dielectric fluid containing polychlorinated biphenyls
("PCBS"); (B) any chemicals, materials or substances which are now defined
as or
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included in the definition of "HAZARDOUS SUBSTANCES," "HAZARDOUS WASTES,"
"HAZARDOUS MATERIALS," "EXTREMELY HAZARDOUS WASTES," "RESTRICTED HAZARDOUS
WASTES," "TOXIC SUBSTANCES," "TOXIC POLLUTANTS," or words of similar import
under any Environmental Law and (C) any other chemical, material, substance
or waste, exposure to which is now prohibited, limited or regulated under
any Environmental Law in a jurisdiction in which KCPL or any of the KCPL
Subsidiaries operates (for purposes of this Section 4.11) or in which UCU or
any of the UCU Subsidiaries operates (for purposes of Section 5.11).
(iv) "RELEASE" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property.
Section 4.12 REGULATION AS A UTILITY. KCPL is regulated as a public
utility in the States of Kansas and Missouri and in no other state. Except as
set forth in Section 4.12 of the KCPL Disclosure Schedule, neither KCPL nor any
"subsidiary company" or "affiliate" (as each such term is defined in the 1935
Act) of KCPL is subject to regulation as a public utility or public service
company (or similar designation) by any other state in the United States or any
foreign country.
Section 4.13 VOTE REQUIRED. Provided that the KCPL Preferred Stock has
been redeemed pursuant to Section 2.1, the approval of the issuance of the
shares of KCPL Common Stock to be issued in the UCU Merger by a majority of the
shares of KCPL Common Stock voting on such approval where the total number of
votes cast represents over 50 percent of all shares of KCPL Common Stock
outstanding on the record date for the meeting at which such vote is taken (the
"KCPL SHAREHOLDERS' APPROVAL") is the only vote of the holders of any class or
series of the capital stock of KCPL or any of its Subsidiaries that is required
to approve this Agreement, the Mergers and the other transactions contemplated
hereby.
Section 4.14 ACCOUNTING MATTERS. Neither KCPL, nor, to KCPL's best
knowledge, any of its Affiliates have taken or agreed to take any action that
would prevent Surviving Corporation from accounting for the transactions to be
effected pursuant to this Agreement as a pooling of interests in accordance with
GAAP and applicable SEC regulations. As used in this Agreement, the term
"AFFILIATE," except where otherwise defined herein, shall mean, as to any
person, any other person which directly or indirectly controls, or is under
common control with, or is controlled by, such person. As used in this
definition, "CONTROL" (including, with its correlative meanings, "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise).
Section 4.15 ARTICLE TWELFTH OF KCPL'S RESTATED ARTICLES OF
CONSOLIDATION. The provisions of Article Twelfth of KCPL's Restated Articles of
Consolidation will not, prior to the termination of this Agreement, assuming the
accuracy of the representation contained in Section 5.18 (without giving effect
to the knowledge qualification thereof), apply to this Agreement, the Mergers or
to the transactions contemplated hereby.
Section 4.16 OPINION OF FINANCIAL ADVISOR. KCPL has received the opinion
of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"), dated
as of the Amendment Date, to the effect that, as of the date thereof, the
Conversion Ratio is fair from a financial point of view to the holders of KCPL
Common Stock.
Section 4.17 INSURANCE. Except as set forth in Section 4.17 of the KCPL
Disclosure Schedule, KCPL and each of the KCPL Subsidiaries is, and has been
continuously since January 1, 1991, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary in
all material respects for companies conducting the business as conducted by KCPL
and the KCPL Subsidiaries during such time period. Except as set forth in
Section 4.17 of the KCPL Disclosure Schedule, neither KCPL nor any of the KCPL
Subsidiaries has received any notice of
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cancellation or termination with respect to any material insurance policy of
KCPL or any of the KCPL Subsidiaries. The insurance policies of KCPL and each of
the KCPL Subsidiaries are valid and enforceable policies in all material
respects.
Section 4.18 KCPL NOT A RELATED PERSON. As of the Original Execution Date,
neither KCPL nor, to KCPL's reasonable knowledge, any of its Affiliates, is a
"Related Person" as such term is defined in Article Eight of UCU's Certificate
of Incorporation.
Section 4.19 REPRESENTATIONS WITH RESPECT TO SUB. KCPL and Sub represent
and warrant to UCU as follows:
(a) Sub is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no other
business activities, has conducted its operations only as contemplated
hereby and has no Subsidiaries.
(b) As of the Amendment Date, the authorized capital stock of Sub
consists of 1000 shares of Sub Common Stock, all of which are validly
issued, fully paid and nonassessable and are owned by KCPL.
(c) Sub has all requisite power and authority to enter into this
Agreement and, subject to the receipt of the applicable KCPL Required
Statutory Approvals, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation by Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Sub. This Agreement has been duly and
validly executed and delivered by Sub and, assuming the due authorization,
execution and delivery hereof by the other signatories hereto, constitutes
the valid and binding obligation of Sub enforceable against it in accordance
with the terms of this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF UCU
UCU makes the following representations and warranties to KCPL.
Notwithstanding anything in this Agreement to the contrary, any representation
or warranty which is qualified by reference to the UCU Disclosure Schedule (as
defined in SECTION 5.1 hereof) shall be deemed to be made as of the Original
Execution Date. To the extent that the UCU Disclosure Schedule would be
incomplete or inaccurate as of the Original Execution Date by virtue of the
change in structure of the Mergers reflected in this Agreement as compared to
the Original Merger Agreement, UCU shall deliver a revised or updated UCU
Disclosure Schedule not later than 30 days after the Amendment Date and any
changes reflected in such revised or updated UCU Disclosure Schedule shall be
deemed to be made as of the Original Execution Date. UCU shall have no
obligation to update the UCU Disclosure Schedule for any changes of facts or
circumstances other than those resulting from a change in the structure of the
Mergers as set forth above.
Section 5.1 ORGANIZATION AND QUALIFICATION. Except as set forth in Section
5.1 of the schedule delivered by UCU on the Original Execution Date (the "UCU
DISCLOSURE SCHEDULE"), UCU and each of the UCU Subsidiaries (as defined below)
and, to the knowledge of UCU, each of the UCU Joint Ventures (as defined below)
is a corporation or other entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has all requisite power and authority, and has been duly authorized by all
necessary approvals and orders to own, lease and operate its assets and
properties to the extent owned, leased and operated and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such qualification
necessary other than in such jurisdictions where the failure so to qualify would
not have a material adverse effect on UCU and the UCU Subsidiaries taken as a
whole. As used
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in this Agreement, (a) the term "UCU SUBSIDIARY" shall mean a Subsidiary of UCU,
and (b) the term "UCU JOINT VENTURE" shall mean each entity identified as such
on Section 5.1 of the UCU Disclosure Schedule.
Section 5.2 SUBSIDIARIES. Section 5.2 of the UCU Disclosure Schedule sets
forth a list as of the Original Execution Date of (a) all the UCU Subsidiaries
and (b) all other entities in which UCU has an aggregate equity investment in
excess of $25 million. Except as set forth in Section 5.2 of the UCU Disclosure
Schedule, neither UCU nor any of the UCU Subsidiaries is a "holding company," a
"subsidiary company" or an "affiliate" of any public utility company within the
meaning of Section 2(a)(7), 2(a)(8) or 2(a)(11) of the 1935 Act, respectively,
and none of the UCU Subsidiaries is a "public utility company" within the
meaning of Section 2(a)(5) of the 1935 Act. Except as set forth in Section 5.2
of the UCU Disclosure Schedule, all of the issued and outstanding shares of
capital stock of each UCU Subsidiary are validly issued, fully paid,
nonassessable and free of preemptive rights, and are owned, directly or
indirectly, by UCU free and clear of any liens, claims, encumbrances, security
interests, charges and options of any nature whatsoever and there are no
outstanding subscriptions, options, calls, contracts, voting trusts, proxies or
other commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating any such UCU Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of its capital stock or obligating it to grant, extend or enter into any
such agreement or commitment.
Section 5.3 CAPITALIZATION. As of the Original Execution Date, the
authorized capital stock of UCU consists of 100,000,000 shares of UCU Common
Stock, par value $1.00 per share, 20,000,000 shares of Class A Common Stock, par
value $1.00 per share ("UCU CLASS A COMMON STOCK"), and 10,000,000 shares of
Preference Stock, without par value ("UCU PREFERRED STOCK"). At the close of
business on December 31, 1995, (i) 45,980,814 shares of UCU Common Stock were
issued, not more than 10,000,000 shares of UCU Common Stock were reserved for
issuance pursuant to UCU's Employee Stock Purchase Plan, 1986 Stock Incentive
Plan, 1992 Employee Non-Qualified Stock Option Plan, Bond Dividend Reinvestment
Plan, Non-Employee Director Plan, Dividend Reinvestment and Common Stock
Purchase Plan and 401(k) and Employee Stock Contribution Plan (such Plans,
collectively, the "UCU STOCK PLANS") and conversion of UCU's Convertible
Subordinated Debentures, (ii) 4252 shares of UCU Common Stock were held by UCU
in its treasury or by its wholly owned Subsidiaries, (iii) no shares of UCU
Class A Common Stock were issued or held by UCU or its Subsidiaries in its
treasury, (iv) 1,000,000 shares of UCU Preferred Stock were issued and of such
issued shares, none were held by UCU in its treasury or by its wholly owned
Subsidiaries and (v) except for UCU's Convertible Subordinated Debentures, due
July 1, 2011, no Voting Debt is issued or outstanding. All outstanding shares of
UCU Common Stock and UCU Preferred Stock are validly issued, fully paid and
nonassessable and are not subject to preemptive rights. As of the Original
Execution Date, except as set forth in Section 5.3 of the UCU Disclosure
Schedule or pursuant to this Agreement and the UCU Stock Plans, there are no
options, warrants, calls, rights, commitments or agreements of any character to
which UCU or any material UCU Subsidiary is a party or by which it is bound
obligating UCU or any material UCU Subsidiary to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or any
Voting Debt securities of UCU or any material UCU Subsidiary or obligating UCU
or any material UCU Subsidiary to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. Except as set forth in Section
5.3 of the UCU Disclosure Schedule, or other than in connection with the UCU
Stock Plans, after the UCU Effective Time, there will be no option, warrant,
call, right, commitment or agreement obligating UCU or any material UCU
Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold,
any shares of capital stock or any Voting Debt of UCU or any material UCU
Subsidiary, or obligating UCU or any material UCU Subsidiary to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement.
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Section 5.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE.
(a) AUTHORITY. UCU has all requisite power and authority to enter into
this Agreement and, subject to the receipt of the applicable UCU Shareholders'
Approval (as defined in SECTION 5.13) and the applicable UCU Required Statutory
Approvals (as defined in SECTION 5.4(C)), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation by UCU of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of UCU, subject to
obtaining the applicable UCU Shareholders' Approval. This Agreement has been
duly and validly executed and delivered by UCU and, assuming the due
authorization, execution and delivery hereof by the other signatories hereto,
constitutes the valid and binding obligation of UCU enforceable against it in
accordance with its terms.
(b) NON-CONTRAVENTION. Except as set forth in Section 5.4(b) of the UCU
Disclosure Schedule, the execution and delivery of this Agreement by UCU does
not, and the consummation of the transactions contemplated hereby will not,
result in a Violation pursuant to any provisions of (i) the certificate of
incorporation, by-laws or similar governing documents of UCU or any of the UCU
Subsidiaries or the UCU Joint Ventures, (ii) subject to obtaining the UCU
Required Statutory Approvals and the receipt of the UCU Shareholders' Approval,
any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any Governmental Authority applicable to
UCU or any of the UCU Subsidiaries or the UCU Joint Ventures or any of their
respective properties or assets or (iii) subject to obtaining the third-party
consents set forth in Section 5.4(b) of the UCU Disclosure Schedule (the "UCU
REQUIRED CONSENTS"), any material note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which UCU or any of the UCU
Subsidiaries or the UCU Joint Ventures is a party or by which it or any of its
properties or assets may be bound or affected, except in the case of clause (ii)
or (iii) for any such Violation which would not have a UCU Material Adverse
Effect (as defined in SECTION 5.6).
(c) STATUTORY APPROVALS. No declaration, filing or registration with, or
notice to or authorization, consent or approval of, any Governmental Authority
is necessary for the execution and delivery of this Agreement by UCU or the
consummation by UCU of the transactions contemplated hereby except as described
in Section 5.4(c) of the UCU Disclosure Schedule or the failure of which to
obtain would not result in a UCU Material Adverse Effect (the "UCU REQUIRED
STATUTORY APPROVALS," it being understood that references in this Agreement to
"obtaining" such UCU Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notices; obtaining such
authorizations, consents or approvals; and having such waiting periods expire as
are necessary to avoid a violation of law).
(d) COMPLIANCE. Except as set forth in Section 5.4(d), Section 5.7,
Section 5.10 or Section 5.11 of the UCU Disclosure Schedule, or as disclosed in
the UCU SEC Reports (as defined in SECTION 5.5) filed prior to the Original
Execution Date, neither UCU nor any of the UCU Subsidiaries nor, to the
knowledge of UCU, any UCU Joint Venture is in violation of, is, to the knowledge
of UCU, under investigation with respect to any violation of, or has been given
notice or been charged with any violation of, any law, statute, order, rule,
regulation, ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any Governmental Authority,
except for possible violations which individually or in the aggregate would not
have a UCU Material Adverse Effect. Except as set forth in Section 5.4(d) of the
UCU Disclosure Schedule or in Section 5.11 of the UCU Disclosure Schedule, or as
expressly disclosed in the UCU SEC Reports, UCU and the UCU Subsidiaries and, to
the knowledge of UCU, the UCU Joint Ventures have all permits, licenses,
franchises and other governmental authorizations, consents and approvals
necessary to conduct their businesses as presently conducted which are material
to the operation of the businesses of UCU and the UCU Subsidiaries. Except as
set forth in Section 5.4(d) of the UCU Disclosure Schedule, UCU and each of the
UCU Subsidiaries and, to the knowledge of UCU, UCU Joint Ventures is not in
breach or violation of or in default in the performance or observance of any
term or provision of, and no event has occurred which, with lapse of time or
action by a third party, could result in a
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default by UCU or any UCU Subsidiary or, to the knowledge of UCU, UCU Joint
Venture under (i) its certificate of incorporation or by-laws or (ii) any
contract, commitment, agreement, indenture, mortgage, loan agreement, note,
lease, bond, license, approval or other instrument to which it is a party or by
which UCU or any UCU Subsidiary or UCU Joint Venture is bound or to which any of
its property is subject, except for possible violations, breaches or defaults
which individually or in the aggregate would not have a UCU Material Adverse
Effect.
Section 5.5 REPORTS AND FINANCIAL STATEMENTS. The filings required to be
made by UCU and the UCU Subsidiaries and UCU Joint Ventures since January 1,
1991 under the Securities Act, the Exchange Act, the 1935 Act, the Power Act and
applicable state public utility laws and regulations have been filed with the
SEC, the FERC or the appropriate state public utilities commission, as the case
may be, including all forms, statements, reports, agreements (oral or written)
and all documents, exhibits, amendments and supplements appertaining thereto,
and complied, as of their respective dates, in all material respects with all
applicable requirements of the appropriate statutes and the rules and
regulations thereunder, except for such filings the failure of which to have
been made would not result in a UCU Material Adverse Effect. UCU has made
available to KCPL a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed with the SEC by UCU
and by Aquila Gas Pipeline Corporation pursuant to the requirements of the
Securities Act or Exchange Act since January 1, 1991 (as such documents have
since the time of their filing been amended, the "UCU SEC REPORTS"). As of their
respective dates, the UCU SEC Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of UCU and Aquila Gas
Pipeline Corporation included in the UCU SEC Reports (collectively, the "UCU
FINANCIAL STATEMENTS") have been prepared in accordance with GAAP (except as may
be indicated therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q of the SEC) and fairly present
the financial position of UCU and Aquila Gas Pipeline Corporation as of the
dates thereof and the results of their respective operations and cash flows for
the periods then ended, subject, in the case of the unaudited interim financial
statements, to normal, recurring audit adjustments. True, accurate and complete
copies of the Certificate of Incorporation and by-laws of UCU and Aquila Gas
Pipeline Corporation, as in effect on the Original Execution Date, are included
(or incorporated by reference) in the UCU SEC Reports.
Section 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the UCU SEC Reports filed prior to the Original Execution Date or as set forth
in Section 5.6 of the UCU Disclosure Schedule, since December 31, 1994, UCU and
each of the UCU Subsidiaries have conducted their business only in the ordinary
course of business consistent with past practice and there has not been, and no
fact or condition exists which would have or, insofar as reasonably can be
foreseen, could have, a material adverse effect on the business, assets,
financial condition, results of operations or prospects of UCU and the UCU
Subsidiaries taken as a whole (a "UCU MATERIAL ADVERSE EFFECT").
Section 5.7 LITIGATION. Except as disclosed in the UCU SEC Reports filed
prior to the Original Execution Date or as set forth in Section 5.7, Section 5.9
or Section 5.11 of the UCU Disclosure Schedule, (a) there are no claims, suits,
actions or proceedings by any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator, pending or, to the
knowledge of UCU, threatened, nor are there, to the knowledge of UCU, any
investigations or reviews by any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator pending or threatened
against, relating to or affecting UCU or any of the UCU Subsidiaries or, to the
knowledge of UCU, the UCU Joint Ventures which would have a UCU Material Adverse
Effect, (b) there have not been any significant developments since December 31,
1994 with respect to such disclosed claims, suits, actions, proceedings,
investigations or reviews that would have a UCU Material Adverse Effect and (c)
there are no judgments, decrees, injunctions, rules or orders of any court,
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governmental department, commission, agency, instrumentality or authority or any
arbitrator applicable to UCU or any of the UCU Subsidiaries or, to the knowledge
of UCU, applicable to any of the UCU Joint Ventures, except for such that would
not have a UCU Material Adverse Effect.
Section 5.8 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information supplied or to be supplied by or on behalf of UCU for inclusion or
incorporation by reference in (a) the Registration Statement will, at the time
the Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (b) the Proxy
Statement will, at the dates mailed to shareholders and at the times of the
meetings of shareholders to be held in connection with the Mergers, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
Registration Statement and the Proxy Statement will comply as to form in all
material respects with the provisions of the Securities Act and the Exchange Act
and the rules and regulations thereunder.
Section 5.9 TAX MATTERS. Except as set forth in Section 5.9 of the UCU
Disclosure Schedule:
(a) FILING OF TIMELY TAX RETURNS. UCU and each of the UCU Subsidiaries
have filed (or there has been filed on its behalf) all Tax Returns required
to be filed by each of them under applicable law, except for those the
failure of which to file would not have a UCU Material Adverse Effect. All
such Tax Returns were and are in all material respects true, complete and
correct and filed on a timely basis.
(b) PAYMENT OF TAXES. UCU and each of the UCU Subsidiaries have,
within the time and in the manner prescribed by law, paid all material Taxes
that are currently due and payable, except for those contested in good faith
and for which adequate reserves have been taken.
(c) TAX RESERVES. UCU and the UCU Subsidiaries have established on
their books and records reserves adequate to pay all material Taxes and
reserves for deferred income taxes in accordance with GAAP.
(d) TAX LIENS. There are no Tax liens upon the assets of UCU or any of
the UCU Subsidiaries except liens for Taxes not yet due.
(e) WITHHOLDING TAXES. UCU and each of the UCU Subsidiaries have
complied in all material respects with the provisions of the Code relating
to the withholding of Taxes, as well as similar provisions under any other
laws, and have, within the time and in the manner prescribed by law,
withheld and paid over to the proper governmental authorities all amounts
required.
(f) EXTENSIONS OF TIME FOR FILING TAX RETURNS. Neither UCU nor any of
the UCU Subsidiaries has requested any extension of time within which to
file any Tax Return, which Tax Return has not since been filed.
(g) WAIVERS OF STATUTE OF LIMITATIONS. Neither UCU nor any of the UCU
Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) AUDIT, ADMINISTRATIVE AND COURT PROCEEDINGS. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of UCU or any of the UCU Subsidiaries.
(i) POWERS OF ATTORNEY. No power of attorney currently in force has
been granted by UCU or any of the UCU Subsidiaries concerning any Tax
matter.
(j) TAX RULINGS. Neither UCU nor any of the UCU Subsidiaries has
received a Tax Ruling or entered into a Closing Agreement with any taxing
authority that would have a continuing adverse effect after the Closing
Date.
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(k) AVAILABILITY OF TAX RETURNS. UCU has made available to KCPL
complete and accurate copies of (i) all federal and state income Tax Returns
for open years, and any amendments thereto, filed by UCU or any of the UCU
Subsidiaries, (ii) all audit reports or written proposed adjustments
(whether formal or informal) received from any taxing authority relating to
any Tax Return filed by UCU or any of the UCU Subsidiaries and (iii) any
Closing Agreements entered into by UCU or any of the UCU Subsidiaries with
any taxing authority.
(l) TAX SHARING AGREEMENTS. Neither UCU nor any UCU Subsidiary is a
party to any agreement relating to allocating or sharing of Taxes.
(m) CODE SECTION 280G. Neither UCU nor any of the UCU Subsidiaries is
a party to any agreement, contract or arrangement that could result in the
payment of any "excess parachute payments" within the meaning of Section
280G of the Code or any amount that would be non-deductible pursuant to
Section 162(m) of the Code.
(n) LIABILITY FOR OTHERS. None of UCU or any of the UCU Subsidiaries
has any liability for Taxes of any person other than UCU and the UCU
Subsidiaries (i) under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law), (ii) by contract, or (iii)
otherwise.
(o) SECTION 341(F). Neither UCU nor any of the UCU Subsidiaries has,
with regard to any assets or property held or acquired by any of them, filed
a consent to the application of Section 341(f)(2) of the Code, or agreed to
have Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f)(4) of the Code) owned
by UCU or any of the UCU Subsidiaries.
Section 5.10 EMPLOYEE MATTERS; ERISA. Except as set forth in Section 5.10
of the UCU Disclosure Schedule:
(a) BENEFIT PLANS. Section 5.10(a) of the UCU Disclosure Schedule
contains a true and complete list of each written or oral material employee
benefit plan, policy or agreement covering employees, former employees or
directors of UCU and each of the UCU Subsidiaries or their beneficiaries, or
providing benefits to such persons in respect of services provided to any
such entity, including, but not limited to, any employee benefit plans
within the meaning of Section 3(3) of ERISA and any severance or change in
control agreement (collectively, the "UCU BENEFIT PLANS").
(b) CONTRIBUTIONS. All material contributions and other payments
required to be made by UCU or any of the UCU Subsidiaries to any UCU Benefit
Plan (or to any person pursuant to the terms thereof) have been made or the
amount of such payment or contribution obligation has been reflected in the
UCU Financial Statements.
(c) QUALIFICATION; COMPLIANCE. Each of the UCU Benefit Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code has been
determined by the IRS to be so qualified, and, to the best knowledge of UCU,
no circumstances exist that are reasonably expected by UCU to result in the
revocation of any such determination. UCU is in compliance in all material
respects with, and each of the UCU Benefit Plans is and has been operated in
all material respects in compliance with, all applicable laws, rules and
regulations governing such plan, including, without limitation, ERISA and
the Code. Each UCU Benefit Plan intended to provide for the deferral of
income, the reduction of salary or other compensation, or to afford other
income tax benefits, complies with the requirements of the applicable
provisions of the Code or other laws, rules and regulations required to
provide such income tax benefits. No prohibited transactions (as defined in
Section 406 or 407 of ERISA or Section 4975 of the Code) have occurred for
which a statutory exemption is not available with respect to any UCU Benefit
Plan, and which could give rise to liability on the part of UCU, any UCU
Benefit Plan, or any fiduciary, party in interest or disqualified person
with respect thereto that would be material to UCU or would be material to
UCU if it were UCU's liability.
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(d) LIABILITIES. With respect to the UCU Benefit Plans, individually
and in the aggregate, no event has occurred, and, to the best knowledge of
UCU, there does not now exist any condition or set of circumstances, that
could subject UCU or any of the UCU Subsidiaries to any material liability
arising under the Code, ERISA or any other applicable law (including,
without limitation, any liability to any such plan or the PBGC), or under
any indemnity agreement to which UCU or any of the UCU Subsidiaries is a
party, excluding liability for benefit claims and funding obligations
payable in the ordinary course.
(e) WELFARE PLANS. None of the UCU Benefit Plans that are "welfare
plans," within the meaning of Section 3(1) of ERISA, provides for any
benefits with respect to current or former employees for periods extending
beyond their retirement or other termination of service, other than
continuation coverage required to be provided under Section 4980B of the
Code or Part 6 of Title I of ERISA.
(f) DOCUMENTS MADE AVAILABLE. UCU has made available to KCPL a true
and correct copy of each collective bargaining agreement to which UCU or any
of the UCU Subsidiaries is a party or under which UCU or any of the UCU
Subsidiaries has obligations and, with respect to each UCU Benefit Plan,
where applicable, (i) such plan and summary plan description, (ii) the most
recent annual report filed with the IRS, (iii) each related trust agreement,
insurance contract, service provider or investment management agreement
(including all amendments to each such document), (iv) the most recent
determination of the IRS with respect to the qualified status of such UCU
Benefit Plan, and (v) the most recent actuarial report or valuation.
(g) PAYMENTS RESULTING FROM THE MERGERS. The consummation or
announcement of any transaction contemplated by this Agreement will not
(either alone or upon the occurrence of any additional or further acts or
events, including, without limitation, the termination of employment of any
officers, directors, employees or agents of UCU or any of the UCU
Subsidiaries) result in any (i) payment (whether of severance pay or
otherwise) becoming due from UCU or any of the UCU Subsidiaries or, to the
knowledge of UCU, any of the UCU Joint Ventures, to any officer, employee,
former employee or director thereof or to the trustee under any "rabbi
trust" or similar arrangement, or (ii) benefit under any UCU Benefit Plan
being established or becoming accelerated, vested or payable.
(h) LABOR AGREEMENTS. As of the Original Execution Date, neither UCU
nor any of the UCU Subsidiaries is a party to any collective bargaining
agreement or other labor agreement with any union or labor organization. To
the best knowledge of UCU, as of the Original Execution Date, there is no
current union representation question involving employees of UCU or any of
the UCU Subsidiaries, nor does UCU know of any activity or proceeding of any
labor organization (or representative thereof) or employee group to organize
any such employees. Except as disclosed in the UCU SEC Reports filed prior
to the Original Execution Date or except to the extent such would not have a
UCU Material Adverse Effect, (i) there is no unfair labor practice,
employment discrimination or other material complaint against UCU or any of
the UCU Subsidiaries pending, or to the best knowledge of UCU, threatened,
(ii) there is no strike, lockout or material dispute, slowdown or work
stoppage pending or, to the best knowledge of UCU, threatened against or
involving UCU, and (iii) there is no proceeding, claim, suit, action or
governmental investigation pending or, to the best knowledge of UCU,
threatened in respect of which any director, officer, employee or agent of
UCU or any of the UCU Subsidiaries is or may be entitled to claim
indemnification from UCU or such UCU Subsidiary pursuant to their respective
articles of incorporation or by-laws or as provided in the indemnification
agreements listed in Section 5.10(h) of the UCU Disclosure Schedule.
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Section 5.11 ENVIRONMENTAL PROTECTION.
(a) Except as set forth in Section 5.11 of the UCU Disclosure Schedule or in
the UCU SEC Reports filed prior to the Original Execution Date:
(i) COMPLIANCE. UCU and each of the UCU Subsidiaries and, to the
knowledge of UCU, the UCU Joint Ventures is in compliance with all
applicable Environmental Laws except where the failure to so comply would
not have a UCU Material Adverse Effect, and neither UCU nor any of the UCU
Subsidiaries has received any communication (written or oral), from any
person or Governmental Authority that alleges that UCU or any of the UCU
Subsidiaries or the UCU Joint Ventures is not in such compliance with
applicable Environmental Laws. To the best knowledge of UCU, compliance with
all applicable Environmental Laws will not require UCU or any UCU Subsidiary
or, to the knowledge of UCU, any UCU Joint Venture to incur costs beyond
that currently budgeted in the five UCU fiscal years beginning with January
1, 1996 that will be reasonably likely to result in a UCU Material Adverse
Effect, including but not limited to the costs of UCU and UCU Subsidiary and
UCU Joint Venture pollution control equipment required or known to be
required in the future.
(ii) ENVIRONMENTAL PERMITS. UCU and each of the UCU Subsidiaries and,
to the knowledge of UCU, the UCU Joint Ventures has obtained or has applied
for all the Environmental Permits necessary for the construction of their
facilities or the conduct of their operations except where the failure to so
obtain would not have a UCU Material Adverse Effect, and all such
Environmental Permits are in good standing or, where applicable, a renewal
application has been timely filed and is pending agency approval, and UCU
and the UCU Subsidiaries and, to the knowledge of UCU, the UCU Joint
Ventures are in material compliance with all terms and conditions of the
Environmental Permits.
(iii) ENVIRONMENTAL CLAIMS. There is no Environmental Claim which would
have a UCU Material Adverse Effect pending (A) against UCU or any of the UCU
Subsidiaries or, to the knowledge of UCU, any of the UCU Joint Ventures, (B)
to the best knowledge of UCU, against any person or entity whose liability
for any Environmental Claim UCU or any of the UCU Subsidiaries or, to the
knowledge of UCU, any of the UCU Joint Ventures has or may have retained or
assumed either contractually or by operation of law, or (C) against any real
or personal property or operations which UCU or any of the UCU Subsidiaries
or, to the knowledge of UCU, any of the UCU Joint Ventures owns, leases or
manages, in whole or in part.
(iv) RELEASES. UCU has no knowledge of any Releases of any Hazardous
Material that would be reasonably likely to form the basis of any
Environmental Claim against UCU or any of the UCU Subsidiaries or the UCU
Joint Ventures, or against any person or entity whose liability for any
Environmental Claim UCU or any of the UCU Subsidiaries or the UCU Joint
Ventures has or may have retained or assumed either contractually or by
operation of law except for any Environmental Claim which would not have a
UCU Material Adverse Effect.
(v) PREDECESSORS. UCU has no knowledge, with respect to any predecessor
of UCU or any of the UCU Subsidiaries or the UCU Joint Ventures, of any
Environmental Claim which would have a UCU Material Adverse Effect pending
or threatened, or of any Release of Hazardous Materials that would be
reasonably likely to form the basis of any Environmental Claim which would
have a UCU Material Adverse Effect.
(b) DISCLOSURE. To UCU's best knowledge, UCU has disclosed in writing to
KCPL all facts which UCU reasonably believes form the basis of an Environmental
Claim which would have a UCU Material Adverse Effect arising from (i) the cost
of UCU pollution control equipment currently required or known to be required in
the future, (ii) current UCU remediation costs or UCU remediation costs known to
be required in the future or (iii) any other environmental matter affecting UCU.
Section 5.12 REGULATION AS A UTILITY. UCU is regulated as a public utility
in the States of Colorado, Iowa, Kansas, Michigan, Missouri, Minnesota,
Nebraska, South Dakota and West Virginia
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and in no other state. Except as set forth in Section 5.12 of the UCU Disclosure
Schedule, neither UCU nor any "subsidiary company" or "affiliate" (as each such
term is defined in the 1935 Act) of UCU is subject to regulation as a public
utility or public service company (or similar designation) by any other state in
the United States or any foreign country.
Section 5.13 VOTE REQUIRED. Provided that the UCU Preferred Stock has been
redeemed pursuant to Section 2.1, the approval of the UCU Merger by the holders
of a majority of the voting power entitled to be cast by all holders of UCU
Common Stock (the "UCU SHAREHOLDERS' APPROVAL") is the only vote of the holders
of any class or series of the capital stock of UCU or any of its Subsidiaries
required to approve this Agreement, the Mergers and the other transactions
contemplated hereby.
Section 5.14 ACCOUNTING MATTERS. Neither UCU nor, to UCU's best knowledge,
any of its Affiliates has taken or agreed to take any action that would prevent
the Surviving Corporation from accounting for the transactions to be effected
pursuant to this Agreement as a pooling of interests in accordance with GAAP and
applicable SEC regulations.
Section 5.15 ARTICLE EIGHT OF UCU'S CERTIFICATE OF INCORPORATION. The
provisions of Article Eight of UCU's Certificate of Incorporation will not,
prior to the termination of this Agreement, assuming the accuracy of the
representation contained in Section 4.18 (without giving effect to the knowledge
qualification thereof), apply to this Agreement, the Mergers or to the
transactions contemplated hereby.
Section 5.16 OPINION OF FINANCIAL ADVISOR. UCU has received the opinion of
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), dated the Amendment
Date, to the effect that, as of the date thereof, the Conversion Ratio is fair
from a financial point of view to the holders of UCU Common Stock.
Section 5.17 INSURANCE. Except as set forth in Section 5.17 of the UCU
Disclosure Schedule, UCU and each of the UCU Subsidiaries is, and has been
continuously since January 1, 1991, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary in
all material respects for companies conducting the business as conducted by UCU
and the UCU Subsidiaries during such time period. Except as set forth in Section
5.17 of the UCU Disclosure Schedule, neither UCU nor any of the UCU Subsidiaries
has received any notice of cancellation or termination with respect to any
material insurance policy of UCU or any of the UCU Subsidiaries. The insurance
policies of UCU and each of the UCU Subsidiaries are valid and enforceable
policies in all material respects.
Section 5.18 UCU NOT AN INTERESTED SHAREHOLDER. As of the Original
Execution Date, neither UCU nor, to its reasonable knowledge, any of its
Affiliates, is an "Interested Shareholder" as such term is defined in Article
Twelfth of KCPL's Restated Articles of Consolidation.
Section 5.19 CASH RESOURCES FOR REDEMPTION OF UCU PREFERRED STOCK. UCU has
and will continue to have sufficient cash resources or a sufficient line of
credit to enable UCU to redeem all the outstanding shares of UCU Preferred Stock
in the manner prescribed in Section 2.1(a)(iv) hereof.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGERS
Section 6.1 COVENANTS OF THE PARTIES. KCPL and UCU each agree, each as to
itself and to each of the KCPL Subsidiaries and the UCU Subsidiaries, as the
case may be, that after the Original Execution Date and prior to the UCU
Effective Time or earlier termination of this Agreement, except as
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expressly contemplated or permitted in this Agreement or to the extent the other
parties hereto shall otherwise consent in writing, which decision regarding
consent shall be made as soon as reasonably practicable:
(a) ORDINARY COURSE OF BUSINESS. Each party hereto shall, and shall
cause its respective Subsidiaries to, carry on their respective businesses
in the usual, regular and ordinary course in substantially the same manner
as heretofore conducted and use all commercially reasonable efforts to
preserve intact their present business organizations and goodwill, preserve
the goodwill and relationships with customers, suppliers and others having
business dealings with them and, subject to prudent management of work force
needs and ongoing programs currently in force, keep available the services
of their present officers and employees, provided, however, that nothing
shall prohibit either party or any of its Subsidiaries from transferring
operations to such party or any of its wholly owned Subsidiaries. Except as
set forth in Section 6.1(a) of the KCPL Disclosure Schedule or Section
6.1(a) of the UCU Disclosure Schedule, respectively, no party shall, nor
shall any party permit any of its respective Subsidiaries to, enter into a
new line of business involving any material investment of assets or
resources or any material exposure to liability or loss, in the case of
KCPL, to KCPL and the KCPL Subsidiaries taken as a whole, and in the case of
UCU, to UCU and the UCU Subsidiaries taken as a whole; provided, however,
that notwithstanding the above, a party or any of its respective
Subsidiaries may enter into a new line of business to the extent the
investment (which shall include the amount of equity invested plus the
amount of indebtedness incurred, assumed, or otherwise owed by or with
recourse to UCU or KCPL, as the case may be) in a new line of business does
not exceed $10 million, individually, and $25 million, in the aggregate, for
all such investments during any fiscal year.
(b) DIVIDENDS. No party shall, nor shall any party permit any of its
respective Subsidiaries to, (i) declare or pay any dividends on or make
other distributions in respect of any of their capital stock other than to
such party or its wholly owned Subsidiaries and other than (A) dividends
required to be paid on any UCU Preferred Stock or KCPL Preferred Stock in
accordance with the respective terms thereof, (B) regular quarterly
dividends on KCPL Common Stock with usual record and payment dates not,
during any period of any fiscal year, in excess of 105% of the dividends for
the comparable period of the prior fiscal year, (C) regular quarterly
dividends on UCU Common Stock with usual record and payment dates not,
during any period of any fiscal year, in excess of 105% of the dividends for
the comparable period of the prior fiscal year and (D) dividends by Aquila
Gas Pipeline Corporation, UtiliCorp U.K., Inc., UtiliCorp U.K. Limited, West
Kootenay Power Ltd., UtiliCorp N.Z., Inc. and any Subsidiaries of such
entities, (ii) split, combine or reclassify any of their capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of their capital
stock or (iii) redeem, repurchase or otherwise acquire any shares of their
capital stock, other than (A) redemptions, purchases or acquisitions
required by the respective terms of any series of KCPL Preferred Stock or
(B) for the purpose of funding employee stock ownership plans in accordance
with past practice. Notwithstanding the foregoing, KCPL may redeem the KCPL
Preferred Stock pursuant to the provisions of Section 2.1, and UCU may
redeem the UCU Preferred Stock pursuant to the provisions of Section 2.1.
The last record date of each of KCPL and UCU on or prior to the UCU
Effective Time which relates to a regular quarterly dividend on KCPL Common
Stock or UCU Common Stock, as the case may be, shall be the same date and
shall be prior to the UCU Effective Time.
(c) ISSUANCE OF SECURITIES. Except as set forth in Section 6.1(c) of
the KCPL Disclosure Schedule or Section 6.1(c) of the UCU Disclosure
Schedule, no party shall, nor shall any party permit any of its Subsidiaries
to, issue, agree to issue, deliver, sell, award, pledge, dispose of or
otherwise encumber or authorize or propose the issuance, delivery, sale,
award, pledge, disposal or other encumbrance of, any shares of their capital
stock of any class or any securities convertible into or exchangeable for,
or any rights, warrants or options to acquire, any such shares or
convertible or exchangeable securities, other than (i) intercompany
issuances of capital stock and
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(ii) issuances (A) in the case of UCU and the UCU Subsidiaries, of up to
2,000,000 shares of UCU Common Stock during any fiscal year to be issued
pursuant to employee benefit plans, stock option and other incentive
compensation plans, directors plans and stock purchase and dividend
reinvestment plans and (B) in the case of KCPL and the KCPL Subsidiaries, of
up to 2,000,000 shares of KCPL Common Stock during any fiscal year to be
issued pursuant to employee benefit plans, stock option and other incentive
compensation plans, directors plans and stock purchase and dividend
reinvestment plans. The parties shall promptly furnish to each other such
information as may be reasonably requested including financial information
and take such action as may be reasonably necessary and otherwise fully
cooperate with each other in the preparation of any registration statement
under the Securities Act and other documents necessary in connection with
issuance of securities as contemplated by this Section 6.1(c), subject to
obtaining customary indemnities.
(d) CHARTER DOCUMENTS. No party shall amend or propose to amend its
respective charter, by-laws or regulations, or similar organic documents,
except as contemplated herein.
(e) NO ACQUISITIONS. Except as set forth in Section 6.1(e) of the KCPL
Disclosure Schedule or Section 6.1(e) the UCU Disclosure Schedule, other
than individual acquisitions by (i) KCPL and the KCPL Subsidiaries the
consummation of which would not exceed $25 million of equity invested nor
require the approval of the Board of Directors of KCPL, provided, that the
aggregate equity invested in all such acquisitions pursuant to this clause
(e) shall not exceed $150 million of equity invested during any fiscal year,
or (ii) UCU and the UCU Subsidiaries the consummation of which would not
exceed $25 million of equity invested nor require the approval of the Board
of Directors of UCU, provided, that the aggregate equity invested in all
such acquisitions pursuant to this clause (e) shall not exceed $150 million
of equity invested during any fiscal year, no party shall, nor shall any
party permit any of its Subsidiaries to, acquire, or publicly propose to
acquire, or agree to acquire, by merger or consolidation with, or by
purchase or otherwise, an equity interest in or a substantial portion of the
assets of, any business or any corporation, partnership, association or
other business organization or division thereof, nor shall any party acquire
or agree to acquire a material amount of assets other than in the ordinary
course of business consistent with past practice.
(f) CAPITAL EXPENDITURES. Except as set forth in Section 6.1(f) of the
KCPL Disclosure Schedule or Section 6.1(f) of the UCU Disclosure Schedule or
as required by law, no party shall, nor shall any party permit any of its
Subsidiaries to, make capital expenditures during any fiscal year in excess
of 125% of the amount budgeted for such fiscal year by such party for
capital expenditures as set forth in Section 6.1(f) of the KCPL Disclosure
Schedule or Section 6.1(f) of the UCU Disclosure Schedule.
(g) NO DISPOSITIONS. Except as set forth in Section 6.1(g) of the KCPL
Disclosure Schedule or 6.1(g) of the UCU Disclosure Schedule, other than
dispositions by a party or its Subsidiaries of less than $25 million in
sales price and indebtedness assumed by the acquiring party and its
Affiliates, singularly or in the aggregate during any fiscal year, no party
shall, nor shall any party permit any of its Subsidiaries to, sell or
dispose of any of its assets other than dispositions in the ordinary course
of its business consistent with past practice.
(h) INDEBTEDNESS. Except as contemplated by this Agreement, no party
shall, nor shall any party permit any of its respective Subsidiaries to,
incur or guarantee any indebtedness (including any debt borrowed or
guaranteed or otherwise assumed including, without limitation, the issuance
of debt securities or warrants or rights to acquire debt) or enter into any
"keep well" or other agreement to maintain any financial statement condition
of another person or entity or enter into any arrangement having the
economic effect of any of the foregoing other than (i) indebtedness or
guarantees or "keep well" or other agreements in the ordinary course of
business consistent with past practice (such as the issuance of commercial
paper, the use of existing credit facilities or hedging activities), (ii)
other indebtedness or "keep well" or other
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agreements not aggregating more than $250 million, (iii) arrangements
between such party and its Subsidiaries or among its Subsidiaries, (iv) as
set forth in Section 6.1(h) of the KCPL Disclosure Schedule or Section
6.1(h) of the UCU Disclosure Schedule, (v) in connection with the refunding
of existing indebtedness, (vi) in connection with the redemption of the KCPL
Preferred Stock as set forth in Section 2.1, (vii) in connection with the
redemption of the UCU Preferred Stock as set forth in Section 2.1 or (viii)
as may be necessary in connection with acquisitions permitted by Section
6.1(e) or capital expenditures permitted by Section 6.1(f).
(i) COMPENSATION, BENEFITS. Except as set forth in Section 6.1(i) of
the KCPL Disclosure Schedule or Section 6.1(i) of the UCU Disclosure
Schedule, as may be required by applicable law or as contemplated by this
Agreement, no party shall, nor shall any party permit any of its
Subsidiaries to, (i) enter into, adopt or amend or increase the amount or
accelerate the payment or vesting of any benefit or amount payable under,
any employee benefit plan or other contract, agreement, commitment,
arrangement, plan, trust, fund or policy maintained by, contributed to or
entered into by such party or any of its Subsidiaries or increase, or enter
into any contract, agreement, commitment or arrangement to increase in any
manner, the compensation or fringe benefits, or otherwise to extend, expand
or enhance the engagement, employment or any related rights, of any
director, officer or other employee of such party or any of its
Subsidiaries, except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to such party or any
of its Subsidiaries; (ii) enter into or amend any employment, severance or
special pay arrangement with respect to the termination of employment or
other similar contract, agreement or arrangement with any director or
officer or other employee other than in the ordinary course of business
consistent with past practice; or (iii) deposit into any trust (including
any "rabbi trust") amounts in respect of any employee benefit obligations or
obligations to directors; provided that transfers into any trust, other than
a rabbi or other trust with respect to any non-qualified deferred
compensation, may be made in accordance with past practice.
(j) 1935 ACT. Except as set forth in Section 6.1(j) of the KCPL
Disclosure Schedule or Section 6.1(j) of the UCU Disclosure Schedule, no
party shall, nor shall any party permit any of its Subsidiaries to, except
as required or contemplated by this Agreement, engage in any activities
which would cause a change in its status, or that of its Subsidiaries, under
the 1935 Act.
(k) ACCOUNTING. Except as set forth in Section 6.1(k) of the KCPL
Disclosure Schedule or Section 6.1(k) of the UCU Disclosure Schedule, no
party shall, nor shall any party permit any of its Subsidiaries to, make any
changes in their accounting methods, except as required by law, rule,
regulation or GAAP.
(l) POOLING. No party shall, nor shall any party permit any of its
Subsidiaries to, take any action which would, or would be reasonably likely
to, prevent the Surviving Corporation from accounting for the transactions
to be effected pursuant to this Agreement as a pooling-of-interests in
accordance with GAAP and applicable SEC regulations, and each party hereto
shall use all reasonable efforts to achieve such result (including taking
such commercially reasonable actions as may be necessary to cure any facts
or circumstances that could prevent such transactions from qualifying for
pooling-of-interests accounting treatment).
(m) TAX-FREE STATUS. No party shall, nor shall any party permit any of
its Subsidiaries to, take any actions which would, or would be reasonably
likely to, adversely affect the ability of the Mergers to qualify for
tax-free treatment under the Code, both to the parties and their respective
shareholders (except for any cash received in lieu of fractional shares),
and each party hereto shall use all reasonable efforts to achieve such
result.
(n) AFFILIATE TRANSACTIONS. Except as set forth in Section 6.1(n) of
the KCPL Disclosure Schedule or Section 6.1(n) of the UCU Disclosure
Schedule, no party shall, nor shall any party permit any of its Subsidiaries
to, enter into any material agreement or arrangement with any of their
respective Affiliates (other than wholly owned Subsidiaries) or, in the case
of UCU, the UCU
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Joint Ventures, or, in the case of KCPL, the KCPL Joint Ventures, on terms
materially less favorable to such party than could be reasonably expected to
have been obtained with an unaffiliated third-party on an arm's length
basis.
(o) COOPERATION, NOTIFICATION. Each party shall (i) confer on a
regular and frequent basis with one or more representatives of the other
party to discuss, subject to applicable law, material operational matters
and the general status of its ongoing operations, (ii) promptly notify the
other party of any significant changes in its business, properties, assets,
condition (financial or other), results of operations or prospects, (iii)
promptly advise the other party of any change or event which has had or,
insofar as reasonably can be foreseen, is reasonably likely to result in, in
the case of KCPL, a KCPL Material Adverse Effect or, in the case of UCU, a
UCU Material Adverse Effect and (iv) promptly provide the other party with
copies of all filings made by such party or any of its Subsidiaries with any
state or federal court, administrative agency, commission or other
Governmental Authority in connection with this Agreement and the
transactions contemplated hereby.
(p) RATE MATTERS. Subject to applicable law, each of KCPL and UCU
shall, and shall cause its respective Subsidiaries to, discuss with the
other any changes in its or its Subsidiaries' rates or the services it
provides or charges (other than pass-through fuel and gas rates or charges),
standards of service or accounting from those in effect on the Original
Execution Date and consult with the other prior to making any filing (or any
amendment thereto), or effecting any agreement, commitment, arrangement or
consent with governmental regulators, whether written or oral, formal or
informal, with respect thereto, and no party will make any filing to change
its rates or the services it provides on file with the FERC that would have
a material adverse effect on the benefits associated with the business
combination provided for herein.
(q) THIRD-PARTY CONSENTS. KCPL shall, and shall cause its Subsidiaries
to, use all commercially reasonable efforts to obtain all KCPL Required
Consents. KCPL shall promptly notify UCU of any failure or prospective
failure to obtain any such consents and, if requested by UCU, shall provide
copies of all KCPL Required Consents obtained by KCPL to UCU. UCU shall, and
shall cause its Subsidiaries to, use all commercially reasonable efforts to
obtain all UCU Required Consents. UCU shall promptly notify KCPL of any
failure or prospective failure to obtain any such consents and, if requested
by KCPL, shall provide copies of all UCU Required Consents obtained by UCU
to KCPL.
(r) NO BREACH, ETC. No party shall, nor shall any party permit any of
its Subsidiaries to, willfully take any action that would or is reasonably
likely to result in a material breach of any provision of this Agreement or
in any of its representations and warranties set forth in this Agreement
being untrue on and as of the Closing Date.
(s) TAX-EXEMPT STATUS. No party shall, nor shall any party permit any
Subsidiary to, take any action that would likely jeopardize the
qualification of KCPL's or UCU's outstanding revenue bonds which qualify on
the Original Execution Date under Section 142(a) of the Code as "exempt
facility bonds" or as tax-exempt industrial development bonds under Section
103(b)(4) of the Internal Revenue Code of 1954, as amended, prior to the Tax
Reform Act of 1986.
(t) TRANSITION MANAGEMENT. As soon as practicable after the Original
Execution Date, the parties shall create a special transition management
task force (the "TASK FORCE"), which shall be jointly headed by Turner White
and Michael D. Bruhn. The Task Force shall examine various alternatives
regarding the manner in which to best organize and manage the business of
the Surviving Corporation after the Effective Time, subject to applicable
law. Turner White and Michael D. Bruhn will have joint decision-making
authority regarding the Task Force.
(u) CONTRACTS. No party shall, nor shall any party permit any of its
respective Subsidiaries to, except in the ordinary course of business
consistent with past practice, modify, amend,
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terminate, renew or fail to use reasonable business efforts to renew any
material contract or agreement to which such party or any Subsidiary of such
party is a party or waive, release or assign any material rights or claims.
(v) INSURANCE. Each party shall, and shall cause its Subsidiaries to,
maintain with financially responsible insurance companies insurance in such
amounts and against such risks and losses as are customary for companies
engaged in the electric and gas utility industry and employing methods of
generating electric power and fuel sources similar to those methods employed
and fuels used by such party or its Subsidiaries.
(w) PERMITS. Each party shall, and shall cause its Subsidiaries to,
use reasonable efforts to maintain in effect all existing governmental
permits which are material to the operations of such party or its
Subsidiaries.
(x) TAX MATTERS. Except as set forth in Section 6.1(x) of the KCPL
Disclosure Schedule or Section 6.1(x) of the UCU Disclosure Schedule,
neither party shall (i) make or rescind any material express or deemed
election relating to taxes unless such election will have the effect of
minimizing the tax liabilities of KCPL or UCU or any of their respective
Subsidiaries, including elections for any and all joint ventures,
partnerships, limited liability companies, working interests or other
investments where KCPL or UCU has the capacity to make such binding
elections, (ii) settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to taxes unless such settlement or compromise results in (A) a
change in taxable income or tax liability that will reverse in future
periods and is therefore, by its nature, a timing difference or (B) a change
in taxable income or tax liability that will not reverse in future periods
and is therefore, by its nature, a permanent difference unless the tax
liability resulting from the increase is less than $1 million, or (iii)
change in any material respect any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of its federal income tax return for the taxable year ending
December 31, 1994, except as may be required by applicable law or except for
such changes that would reduce consolidated federal taxable income or
alternative minimum taxable income.
(y) DISCHARGE OF LIABILITIES. No party shall, nor shall any party
permit any of its respective Subsidiaries to, pay, discharge or satisfy any
material claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice (which includes the payment of final and unappealable judgments) or
in accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements
(or the notes thereto) of such party included in such party's reports filed
with the SEC, or incurred in the ordinary course of business consistent with
past practice.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 ACCESS TO INFORMATION. Upon reasonable notice, each party
shall, and shall cause its Subsidiaries to, afford to the officers, directors,
employees, accountants, counsel, investment bankers, financial advisors and
other representatives of the other (collectively, "REPRESENTATIVES") reasonable
access, during normal business hours throughout the period prior to the
Effective Time, to all of its properties, books, contracts, commitments and
records (including, but not limited to, Tax Returns) and, during such period,
each party shall, and shall cause its Subsidiaries to, furnish promptly to the
other (i) access to each report, schedule and other document filed or received
by it or any of its Subsidiaries pursuant to the requirements of federal or
state securities laws or filed with or sent to the SEC, the FERC, the NRC, the
Department of Justice, the Federal Trade Commission, or any other federal or
state regulatory agency or commission and (ii) access to all information
concerning themselves, their Subsidiaries, directors, officers and shareholders
and such other matters as may be reasonably requested by the other party in
connection with any filings, applications or approvals
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required or contemplated by this Agreement or for any other reason related to
the transactions contemplated by this Agreement. Each party shall provide access
to those premises, documents, reports and information described above of
Subsidiaries of such party that are not Subsidiaries to the extent such party
has or is able to obtain such access. Each party shall, and shall cause its
Subsidiaries and Representatives to, hold in strict confidence all documents and
information concerning the other furnished to it in connection with the
transactions contemplated by this Agreement in accordance with the
Confidentiality Agreement, dated November 28, 1995, between KCPL and UCU, as it
may be amended from time to time (the "CONFIDENTIALITY AGREEMENT").
Section 7.2 JOINT PROXY STATEMENT AND REGISTRATION STATEMENT.
(a) PREPARATION AND FILING. The parties will prepare and file with the SEC
as soon as reasonably practicable after the Amendment Date the Registration
Statement and the Proxy Statement (together, the "JOINT PROXY/REGISTRATION
STATEMENT"). The parties hereto shall each use reasonable efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as practicable after such filing. Each party hereto shall also take
such action as may be reasonably required to cause the shares of KCPL Common
Stock issuable in connection with the UCU Merger to be registered or to obtain
an exemption from registration under applicable state "blue sky" or securities
laws; PROVIDED, HOWEVER, that no party shall be required to register or qualify
as a foreign corporation or to take other action which would subject it to
service of process in any jurisdiction where the Surviving Corporation will not
be, following the Mergers, so subject. Each of the parties hereto shall furnish
all information concerning itself which is required or customary for inclusion
in the Joint Proxy/Registration Statement. The parties shall use reasonable
efforts to cause the shares of KCPL Common Stock issuable in the UCU Merger to
be approved for listing on the NYSE upon official notice of issuance. The
information provided by any party hereto for use in the Joint Proxy/Registration
Statement shall be true and correct in all material respects without omission of
any material fact which is required to make such information not false or
misleading. No representation, covenant or agreement is made by any party hereto
with respect to information supplied by any other party for inclusion in the
Joint Proxy Statement/Registration Statement.
(b) LETTER OF KCPL'S ACCOUNTANTS. KCPL shall use its best efforts to cause
to be delivered to UCU letters of Coopers & Lybrand, dated a date within two
business days before the date of the Joint Proxy/Registration Statement, and
addressed to UCU, in form and substance reasonably satisfactory to UCU and
customary in scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration statements on
Form S-4.
(c) LETTER OF UCU'S ACCOUNTANTS. UCU shall use its best efforts to cause
to be delivered to KCPL a letter of Arthur Andersen & Co., dated a date within
two business days before the date of the Joint Proxy/Registration Statement, and
addressed to KCPL, in form and substance reasonably satisfactory to KCPL and
customary in scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration statements on
Form S-4.
(d) FAIRNESS OPINIONS. It shall be a condition to the mailing of the Joint
Proxy/Registration Statement to the shareholders of KCPL and UCU that (i) KCPL
shall have received an opinion from Merrill Lynch, dated the date of the Joint
Proxy/Registration Statement, to the effect that, as of the date thereof, the
Conversion Ratio is fair from a financial point of view to the holders of KCPL
Common Stock and (ii) UCU shall have received an opinion from DLJ, dated the
date of the Joint Proxy/Registration Statement, to the effect that, as of the
date thereof, the Conversion Ratio is fair from a financial point of view to the
holders of UCU Common Stock.
Section 7.3 REGULATORY MATTERS.
(a) HSR FILINGS. Each party hereto shall file or cause to be filed with
the Federal Trade Commission and the Department of Justice any notifications
required to be filed by their respective "ultimate parent" companies under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), and the rules and regulations promulgated thereunder with respect to the
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transactions contemplated hereby. Such parties will use all commercially
reasonable efforts to make such filings promptly and to respond on a timely
basis to any requests for additional information made by either of such
agencies.
(b) OTHER REGULATORY APPROVALS. Each party hereto shall cooperate and use
its best efforts to promptly prepare and file all necessary documentation, to
effect all necessary applications, notices, petitions, filings and other
documents, and to use all commercially reasonable efforts to obtain all
necessary permits, consents, approvals and authorizations of all Governmental
Authorities necessary or advisable to obtain the KCPL Required Statutory
Approvals and the UCU Required Statutory Approvals.
Section 7.4 SHAREHOLDER APPROVAL.
(a) APPROVAL OF UCU SHAREHOLDERS. Subject to the provisions of Section
7.4(c) and Section 7.4(d), UCU shall, as soon as reasonably practicable after
the Amendment Date (i) take all steps necessary to duly call, give notice of,
convene and hold a meeting of its shareholders (the "UCU MEETING") for the
purpose of securing the UCU Shareholders' Approval, (ii) distribute to its
shareholders the Proxy Statement in accordance with applicable federal and state
law and with its Certificate of Incorporation and by-laws, (iii) subject to the
fiduciary duties of its Board of Directors, recommend to its shareholders the
approval of the Mergers, this Agreement and the transactions contemplated hereby
and (iv) cooperate and consult with KCPL with respect to each of the foregoing
matters.
(b) APPROVAL OF KCPL SHAREHOLDERS. Subject to the provisions of Section
7.4(c) and Section 7.4(d), KCPL shall, as soon as reasonably practicable after
the Amendment Date (i) take all steps necessary to duly call, give notice of,
convene and hold a meeting of its shareholders (the "KCPL MEETING") for the
purpose of securing the KCPL Shareholders' Approval, (ii) distribute to its
shareholders the Proxy Statement in accordance with applicable federal and state
law and with its Restated Articles of Consolidation and by-laws, (iii) subject
to the fiduciary duties of its Board of Directors, recommend to its shareholders
the approval of the issuance of the KCPL Common Stock to be issued pursuant to
the UCU Merger, and (iv) cooperate and consult with UCU with respect to each of
the foregoing matters.
(c) MEETING DATE. The UCU Meeting for the purpose of securing the UCU
Shareholders' Approval and the KCPL Meeting for the purpose of securing the KCPL
Shareholders' Approval shall be held on such date as KCPL and UCU shall mutually
determine.
(d) FAIRNESS OPINIONS NOT WITHDRAWN. It shall be a condition to the
obligation of KCPL to hold the KCPL Meeting that the opinion of Merrill Lynch,
referred to in Section 7.2(d), shall not have been withdrawn, and it shall be a
condition to the obligation of UCU to hold the UCU Meeting that the opinion of
DLJ, referred to in Section 7.2(d), shall not have been withdrawn.
Section 7.5 DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) INDEMNIFICATION. To the extent, if any, not provided by an existing
right of indemnification or other agreement or policy, from and after the
Effective Time, the Surviving Corporation shall, to the fullest extent permitted
by applicable law, indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, an officer, director or employee of any of the parties hereto or
any Subsidiary (each an "INDEMNIFIED PARTY" and collectively, the "INDEMNIFIED
PARTIES") against (i) all losses, expenses (including reasonable attorney's fees
and expenses), claims, damages or liabilities or, subject to the proviso of the
next succeeding sentence, amounts paid in settlement, arising out of actions or
omissions occurring at or prior to the Effective Time (and whether asserted or
claimed prior to, at or after the Effective Time) that are, in whole or in part,
based on or arising out of the fact that such person is or was a director,
officer or employee of such party (the "INDEMNIFIED LIABILITIES"), and (ii) all
Indemnified Liabilities to the extent they are based on or arise out of or
pertain to the transactions contemplated by this Agreement. In the event of any
such loss, expense, claim, damage or liability (whether or not arising
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before the Effective Time), (i) the Surviving Corporation shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Surviving Corporation,
promptly after statements therefor are received and otherwise advance to such
Indemnified Party upon request reimbursement of documented expenses reasonably
incurred, in either case to the extent not prohibited by the MGCL, (ii) the
Surviving Corporation will cooperate in the defense of any such matter and (iii)
any determination required to be made with respect to whether an Indemnified
Party's conduct complies with the standards set forth under the MGCL and the
Restated Articles of Consolidation or by-laws of the Surviving Corporation shall
be made by independent counsel mutually acceptable to the Surviving Corporation
and the Indemnified Party; PROVIDED, HOWEVER, that the Surviving Corporation
shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld). The Indemnified Parties as a
group may retain only one law firm with respect to each related matter except to
the extent there is, in the opinion of counsel to an Indemnified Party, under
applicable standards of professional conduct, a conflict on any significant
issue between positions of such Indemnified Party and any other Indemnified
Party or Indemnified Parties.
(b) INSURANCE. For a period of six years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect policies of
directors and officers' liability insurance maintained by KCPL and UCU for the
benefit of those persons who are currently covered by such policies on terms no
less favorable than the terms of such current insurance coverage; PROVIDED,
HOWEVER, that the Surviving Corporation shall not be required to expend in any
year an amount in excess of 200% of the annual aggregate premiums currently paid
by KCPL and UCU for such insurance; and PROVIDED, FURTHER, that if the annual
premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall be obligated to obtain a policy with the best coverage
available, in the reasonable judgment of the Board of Directors of the Surviving
Corporation, for a cost not exceeding such amount.
(c) SUCCESSORS. In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person or entity, then and in either such case,
proper provisions shall be made so that the successors and assigns of the
Surviving Corporation shall assume the obligations set forth in this Section
7.5.
(d) SURVIVAL OF INDEMNIFICATION. To the fullest extent permitted by law,
from and after the Effective Time, all rights to indemnification as of the date
hereof in favor of the employees, agents, directors and officers of KCPL, UCU
and their respective Subsidiaries with respect to their activities as such prior
to the Effective Time, as provided in their respective articles of incorporation
and by-laws in effect on the date thereof, or otherwise in effect on the date
hereof, shall survive the Mergers and shall continue in full force and effect
for a period of not less than six years from the Effective Time.
(e) BENEFIT. The provisions of this Section 7.5 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
Section 7.6 PUBLIC ANNOUNCEMENTS. Subject to each party's disclosure
obligations imposed by law, KCPL and UCU will cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement or any of the transactions
contemplated hereby and shall not issue any public announcement or statement
with respect hereto or thereto without the consent of the other party (which
consent shall not be unreasonably withheld).
Section 7.7 RULE 145 AFFILIATES. UCU shall identify in a letter to KCPL
all persons who are, and to UCU's best knowledge who will be at the Closing
Date, "affiliates" of UCU as such term is used in Rule 145 under the Securities
Act (or otherwise under applicable SEC accounting releases with respect to
pooling-of-interests accounting treatment). UCU shall use all reasonable efforts
to cause its
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affiliates (including any person who may be deemed to have become such an
affiliate after the date of the letter referred to in the prior sentence) to
deliver to KCPL on or prior to the Closing Date a written agreement
substantially in the form attached as EXHIBIT 7.7 (each, an "AFFILIATE
AGREEMENT").
Section 7.8 EMPLOYEE AGREEMENTS AND WORKFORCE MATTERS.
(a) CERTAIN EMPLOYEE AGREEMENTS. Subject to Section 7.9, Section 7.10,
Section 7.13 and Section 7.14, the Surviving Corporation and its Subsidiaries
shall honor, without modification, all contracts, agreements, collective
bargaining agreements and commitments of the parties prior to the date hereof
that apply to any current or former employee or current or former director of
the parties hereto; PROVIDED, HOWEVER, that this undertaking is not intended to
prevent the Surviving Corporation from enforcing such contracts, agreements,
collective bargaining agreements and commitments in accordance with their terms,
including, without limitation, any reserved right to amend, modify, suspend,
revoke or terminate any such contract, agreement, collective bargaining
agreement or commitment.
(b) WORKFORCE MATTERS. Subject to applicable collective bargaining
agreements, for a period of 3 years following the Effective Time, any reductions
in workforce in respect of employees of the Surviving Corporation shall be made
on a fair and equitable basis, without regard to whether employment was with
KCPL or the KCPL Subsidiaries or UCU or the UCU Subsidiaries, and any employee
whose employment is terminated or job is eliminated by the Surviving Corporation
or any of its Subsidiaries during such period shall be entitled to participate
on a fair and equitable basis in the job opportunity and employment placement
programs offered by the Surviving Corporation or any of its Subsidiaries. Any
workforce reductions carried out following the Effective Time by the Surviving
Corporation and its Subsidiaries shall be done in accordance with all applicable
collective bargaining agreements and all laws and regulations governing the
employment relationship and termination thereof including, without limitation,
the Worker Adjustment and Retraining Notification Act and regulations
promulgated thereunder, and any comparable state or local law.
Section 7.9 EMPLOYEE BENEFIT PLANS.
(a) COMPANY PLANS. KCPL and UCU agree to cooperate and agree upon the
employee benefits plans and programs to be provided by the Surviving
Corporation.
(b) EFFECT OF THE MERGERS. The consummation of the Mergers shall not be
treated as a termination of employment for purposes of any UCU Benefit Plan or
KCPL Benefit Plan.
(c) UCU SUPPLEMENTAL CONTRIBUTORY PLAN. The UCU Supplemental Contributory
Retirement Plan shall be revised to provide that, from and after the Effective
Time, the reference to "UCU COMMON SHARES" shall instead refer to "KCPL COMMON
STOCK."
(d) CREDIT FOR PAST SERVICE. Without limitation of the foregoing
provisions of this Section 7.9, each participant of any KCPL Benefit Plan or UCU
Benefit Plan shall receive credit for purposes of (i) eligibility to
participate, vesting and eligibility to receive benefits under any benefit plan
of the Surviving Corporation or any of its subsidiaries or affiliates that
replaces a KCPL Benefit Plan or a UCU Benefit Plan, and (ii) benefit accrual
under any severance or vacation pay plan, for service credited for the
corresponding purpose under such KCPL Benefit Plan or UCU Benefit Plan;
provided, however, that such crediting of service shall not operate to duplicate
any benefit to any such participant or the funding for any such benefit.
(e) ADOPTION OF SURVIVING CORPORATION REPLACEMENT PLANS. With respect to
the KCPL annual incentive plan (the "KCPL INCENTIVE PLAN"), the UCU annual and
long-term incentive plan (the "UCU INCENTIVE PLAN"), the KCPL long-term
incentive plan (the "KCPL INCENTIVE STOCK PLAN") and the UCU stock incentive
plan (the "UCU INCENTIVE STOCK PLAN"), the Surviving Corporation and its
subsidiaries shall adopt replacement plans as set forth in this Section 7.9(e)
(collectively, the "SURVIVING CORPORATION REPLACEMENT PLANS"). Subject to
shareholder approval thereof by the KCPL shareholders and the UCU shareholders,
the Surviving Corporation Replacement Plans shall go into effect
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at the Effective Time. Upon the consummation of the Mergers, no additional
obligations shall be incurred under the KCPL Incentive Plan, the UCU Incentive
Plan, the KCPL Stock Incentive Plan or the UCU Incentive Stock Plan, except to
the extent such obligations are attributable to employment prior to the
Effective Time and are consistent with past practice under the applicable plan.
The KCPL Incentive Plan and the UCU Incentive Plan shall be replaced (except
with respect to obligations incurred or attributable to employment prior to the
Effective Time) by a new annual bonus plan (the "SURVIVING CORPORATION INCENTIVE
PLAN") under which bonuses, based on percentages of base salaries and payable in
cash, shares of KCPL Common Stock or such form as shall be determined by the
Compensation Committee of the Board of Directors of the Surviving Corporation
(the "COMMITTEE"), are awarded based upon the achievement of performance goals
determined in advance by the Committee. With respect to those participants in
the Surviving Corporation Incentive Plan who are, or who the Committee
determines are likely to be, "covered employees" within the meaning of Section
162(m) of the Code, whose compensation is likely to exceed the amount specified
in Code Section 162(m)(1), the performance goals shall be objective standards
that are approved by shareholders in accordance with the requirements for
exclusion from the limitations of Section 162(m) of the Code as
performance-based compensation. The KCPL Incentive Stock Plan and the UCU
Incentive Stock Plan shall be replaced (except with respect to obligations
incurred or attributable to employment prior to the Effective Time) by a stock
compensation plan (the "SURVIVING CORPORATION STOCK PLAN"). The Surviving
Corporation Stock Plan shall provide for the grant of stock options, stock
appreciation rights, restricted stock and such other awards based upon the KCPL
Common Stock as the Committee may determine, subject to shareholder approval of
the Surviving Corporation Stock Plan. The Surviving Corporation shall reserve an
appropriate number of shares for issuance under the Surviving Corporation Stock
Plan.
(f) KCPL AND UCU ACTION. With respect to each of the Surviving Corporation
Replacement Plans, each of KCPL and UCU shall take all corporate action
necessary or appropriate to obtain the approval of their respective shareholders
with respect to such plan prior to the Effective Time.
Section 7.10 STOCK OPTION AND OTHER STOCK PLANS.
(a) UCU STOCK OPTIONS. As of the Effective Time, each of the UCU Stock
Options which is outstanding as of the UCU Effective Time shall be assumed by
the Surviving Corporation and converted into an option (or a new substitute
option shall be granted) to purchase the number of shares of KCPL Common Stock
(rounded up to the nearest whole share) equal to the number of shares of UCU
Common Stock subject to such option multiplied by the Conversion Ratio, at an
exercise price per share of KCPL Common Stock (rounded down to the nearest
penny) equal to the former exercise price per share of UCU Common Stock under
such option immediately prior to the UCU Effective Time divided by the
Conversion Ratio; PROVIDED, HOWEVER, that in the case of any UCU Stock Option to
which Section 421 of the Code applies by reason of its qualification under
Section 422 of the Code, the conversion formula shall be adjusted, if necessary,
to comply with Section 424(a) of the Code. Except as provided above, the
converted or substituted UCU Stock Options shall be subject to the same terms
and conditions (including, without limitation, expiration date, vesting and
exercise provisions) as were applicable to UCU Stock Options immediately prior
to the UCU Effective Time, except that the acceleration of vesting and
exercisability as a result of the Mergers shall not be given effect. For
purposes of such terms and conditions, the Mergers shall not be treated as an
event which shall affect the period for exercising UCU Stock Options. UCU Stock
Options shall not be treated as expiring as of the UCU Effective Time solely due
to the fact that UCU shall cease to exist as of the Effective Time.
(b) KCPL STOCK OPTIONS. The Mergers shall not be treated as an event which
shall cause the acceleration of vesting and exercisability of KCPL Stock Options
or affect the period for exercising KCPL Stock Options.
(c) OTHER UCU STOCK AWARDS. Each outstanding award under the UCU Incentive
Stock Plan other than the UCU Stock Options (the "UCU STOCK AWARDS") shall
constitute an award based upon the same number of shares of KCPL Common Stock as
the holder of such UCU Stock Award would
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have been entitled to receive pursuant to the Mergers in accordance with Article
II hereof had such holder been the absolute owner, immediately before the UCU
Effective Time, of the shares of UCU Common Stock on which such UCU Stock Award
is based, and otherwise on the same terms and conditions as governed such UCU
Stock Award immediately before the UCU Effective Time (the "SURVIVING
CORPORATION STOCK AWARDS"). At the UCU Effective Time, the Surviving Corporation
shall assume each agreement relating to the UCU Stock Awards. Notwithstanding
the foregoing, this paragraph shall not be construed, interpreted or applied so
as to cause a duplication of any benefit to any individual.
(d) SURVIVING CORPORATION ACTION. As soon as practicable after the
Effective Time, the Surviving Corporation shall deliver to the holders of UCU
Stock Options and UCU Stock Awards appropriate notices setting forth such
holders' rights pursuant to the Surviving Corporation Stock Plan and Surviving
Corporation Stock Awards (the "SURVIVING CORPORATION STOCK BENEFITS") and each
underlying stock award agreement, each as assumed by the Surviving Corporation.
As soon as practicable after the Effective Time the Surviving Corporation will
cause to be filed one or more registration statements on Form S-3 or Form S-8
under the Securities Act (or any successor or other appropriate forms), in order
to register the shares of KCPL Common Stock issuable in connection with the
Surviving Corporation Stock Benefits, and the Surviving Corporation shall use
its best efforts to maintain the effectiveness of such registration statements
(and maintain the current status of the prospectuses contained therein) for so
long as such benefits and grants remain payable and such options remain
outstanding. At or prior to the UCU Effective Time, the Surviving Corporation
shall take all corporate action necessary to reserve for issuance a sufficient
number of shares of KCPL Common Stock for delivery in connection with the
Surviving Corporation Stock Benefits. The Surviving Corporation shall take all
corporate action necessary or appropriate to (i) obtain shareholder approval
with respect to the Surviving Corporation Stock Benefits to the extent such
approval is required for purposes of the Code or other applicable law, or (ii)
enable any plan pursuant to which such benefits are issued to comply with Rule
16b-3 promulgated under the Exchange Act. With respect to those individuals who
subsequent to the Mergers will be subject to the reporting requirements under
Section 16(a) of the Exchange Act with respect to equity securities of the
Surviving Corporation, the Surviving Corporation shall administer such Surviving
Corporation Stock Benefits, where applicable, in a manner that complies with
Rule 16b-3 promulgated under the Exchange Act.
Section 7.11 NO SOLICITATIONS. From and after the date hereof, KCPL and
UCU will not, and will not authorize or permit any of their respective
Representatives to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing information) or take any other action to
facilitate knowingly any inquiries or the making of any proposal which
constitutes or may reasonably be expected to lead to an Acquisition Proposal (as
defined herein) from any person, or engage in any discussion or negotiations
relating thereto or accept any Acquisition Proposal; PROVIDED, HOWEVER, that
notwithstanding any other provision hereof, the respective party may (i) at any
time prior to the time the respective party's stockholders shall have voted to
approve this Agreement engage in discussions or negotiations with a third party
who (without any solicitation, initiation, encouragement, discussion or
negotiation, directly or indirectly, by or with the party or its Representatives
after the date hereof) seeks to initiate such discussions or negotiations and
may furnish such third party information concerning the party and its business,
properties and assets if, and only to the extent that, (A) (x) the third party
has first made an Acquisition Proposal that is financially superior to the
Mergers and has demonstrated that financing for the Acquisition Proposal is
reasonably likely to be obtained (as determined in good faith in each case by
the party's Board of Directors after consultation with its financial advisors)
and (y) the party's Board of Directors shall conclude in good faith, after
considering applicable provisions of state law, on the basis of oral or written
advice of outside counsel that such action is necessary for the Board of
Directors to act in a manner consistent with its fiduciary duties under
applicable law and (B) prior to furnishing such information to or entering into
discussions or negotiations with such person or entity, such party (x) provides
prompt notice to the other party to the effect that it is furnishing information
to or entering into discussions or negotiations with such person or entity and
(y) receives from such person or entity an executed confidentiality agreement in
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reasonably customary form on terms not in the aggregate materially more
favorable to such person or entity than the terms contained in the
Confidentiality Agreement, (ii) comply with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender or exchange offer, and/or (iii) accept an
Acquisition Proposal from a third party, provided such respective party
terminates this Agreement pursuant to Section 9.1(e) or 9.1(f), as applicable.
Each party shall immediately cease and terminate any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any parties
conducted heretofore by the party or its Representatives with respect to the
foregoing. Each party hereto shall notify the other party orally and in writing
of any such inquiries, offers or proposals (including, without limitation, the
terms and conditions of any such proposal and the identify of the person making
it), within 24 hours of the receipt thereof, shall keep the other party informed
of the status and details of any such inquiry, offer or proposal, and shall give
the other party five days' advance notice of any agreement to be entered into
with or any information to be supplied to any person making such inquiry, offer
or proposal. As used herein, "ACQUISITION PROPOSAL" shall mean a proposal or
offer (other than by another party hereto) for a tender or exchange offer,
merger, consolidation or other business combination involving the party or any
material Subsidiary of the party or any proposal to acquire in any manner a
substantial equity interest in or a substantial portion of the assets of the
party or any material Subsidiary.
Section 7.12 SURVIVING CORPORATION BOARD OF DIRECTORS. The Board of
Directors of KCPL will take such action as may be necessary (including the
amendment of the KCPL by-laws) to cause the number of directors comprising the
full Board of Directors of KCPL immediately prior to or at the Effective Time to
be 18 persons, 9 of whom shall be the then existing directors of KCPL prior to
the Effective Time and 9 of whom shall be designated by UCU prior to the
Effective Time. If, prior to the Effective Time, any of such designees shall
decline or be unable to serve, the party which designated such person shall
designate another person to serve in such person's stead.
Section 7.13 SURVIVING CORPORATION OFFICERS. At the Effective Time,
pursuant to the terms hereof and of the employment contracts referred to in
Section 7.14 (a) A. Drue Jennings shall hold the position of Chairman of the
Board of the Surviving Corporation and shall be entitled to serve in such
capacity until the annual meeting of stockholders of the Surviving Corporation
that occurs in 2002, at which time he shall be entitled to serve in the position
of Vice Chairman of the Board of the Surviving Corporation until the end of his
employment contract entered into pursuant to Section 7.14 and (b) Richard C.
Green, Jr. shall hold the positions of Vice Chairman of the Board and Chief
Executive Officer of the Surviving Corporation and shall be entitled to serve in
such capacities until the earlier of (i) the date of the annual meeting of
stockholders of the Surviving Corporation that occurs in 2002, and (ii) the date
on which A. Drue Jennings shall no longer serve as Chairman of the Board, at
which time he shall be entitled to serve in the positions of Chairman of the
Board and Chief Executive Officer of the Surviving Corporation and to serve in
all such capacities until his successor is elected or appointed and shall have
qualified in accordance with the Restated Articles of Consolidation and By-laws
of the Surviving Corporation . If either of such persons is unable or unwilling
to hold such offices as set forth above his successor shall be selected by the
Board of Directors of the Surviving Corporation in accordance with its By-laws.
The authority, duties and responsibilities of the Chairman of the Board, Vice
Chairman of the Board and Chief Executive Officer of the Surviving Corporation
shall be as set forth in Annex A to A. Drue Jennings and Richard C. Green, Jr.'s
employment contracts entered into pursuant to Section 7.14.
Section 7.14 EMPLOYMENT CONTRACTS. The Surviving Corporation shall, as of
or prior to the Effective Time, enter into employment contracts with A. Drue
Jennings and Richard C. Green, Jr. in the forms set forth in EXHIBIT 7.14.1 and
EXHIBIT 7.14.2, respectively.
Section 7.15 POST-MERGER OPERATIONS.
(a) PRINCIPAL CORPORATE OFFICES. At the Effective Time, the Surviving
Corporation's principal corporate offices shall be in Kansas City, Missouri.
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(b) CHARITIES. After the Effective Time, the Surviving Corporation shall
provide charitable contributions and community support within the service areas
of the parties and each of their respective Subsidiaries at levels substantially
comparable to the levels of charitable contributions and community support
provided by the parties and their respective Subsidiaries within their service
areas within the two-year period immediately prior to the Effective Time.
Section 7.16 EXPENSES. Subject to Section 9.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, except that those
expenses incurred in connection with printing the Joint Proxy/ Registration
Statement, as well as the filing fee relating thereto, shall be shared equally
by KCPL and UCU.
Section 7.17 FURTHER ASSURANCES. Each party will, and will cause its
Subsidiaries to, execute such further documents and instruments and take such
further actions as may reasonably be requested by any other party in order to
consummate the Mergers in accordance with the terms hereof.
Section 7.18 TERMINATION OF COMPANY'S OBLIGATIONS. All of the rights and
obligations of the Company under the Original Merger Agreement are hereby
terminated.
ARTICLE VIII
CONDITIONS
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGERS. The respective obligations of each party to effect the Mergers shall
be subject to the satisfaction on or prior to the Closing Date of the following
conditions, except, to the extent permitted by applicable law, that such
conditions may be waived in writing pursuant to Section 9.5 by the joint action
of the parties hereto:
(a) SHAREHOLDER APPROVALS. The UCU Shareholders' Approval and the KCPL
Shareholders' Approval shall have been obtained.
(b) NO INJUNCTION. No temporary restraining order or preliminary or
permanent injunction or other order by any federal or state court preventing
consummation of the Mergers shall have been issued and be continuing in
effect, and the Mergers and the other transactions contemplated hereby shall
not have been prohibited under any applicable federal or state law or
regulation.
(c) REGISTRATION STATEMENT. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act,
and no stop order suspending such effectiveness shall have been issued and
remain in effect.
(d) LISTING OF SHARES. The shares of KCPL Common Stock issuable in the
UCU Merger pursuant to Article II shall have been approved for listing on
the NYSE upon official notice of issuance.
(e) STATUTORY APPROVALS. The KCPL Required Statutory Approvals and the
UCU Required Statutory Approvals shall have been obtained at or prior to the
UCU Effective Time, such approvals shall have become Final Orders (as
defined below) and such Final Orders shall not impose terms or conditions
which, in the aggregate, would have, or insofar as reasonably can be
foreseen, could have, a material adverse effect on the business, assets,
financial condition or results of operations of the Surviving Corporation
and its prospective Subsidiaries taken as a whole or which would be
materially inconsistent with the agreements of the parties contained herein.
A "FINAL ORDER" means action by the relevant regulatory authority which has
not been reversed, stayed, enjoined, set aside, annulled or suspended, with
respect to which any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has expired, and as to
which all conditions to the consummation of such transactions prescribed by
law, regulation or order have been satisfied.
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(f) POOLING. Each of KCPL and UCU shall have received a letter of its
independent public accountants, dated the Closing Date, in form and
substance reasonably satisfactory, in each case, to KCPL and UCU, stating
that the transactions to be effected pursuant to this Agreement will qualify
as a pooling of interests transaction under GAAP and applicable SEC
regulations.
(g) PERMITS. To the extent that the continued lawful operations of the
business of KCPL or any KCPL Subsidiary or UCU or any UCU Subsidiary after
the Mergers require that any license, permit or other governmental approval
be transferred to the Surviving Corporation or issued to the Surviving
Corporation, such licenses, permits or other authorizations shall have been
transferred or reissued to the Surviving Corporation at or before the
Closing Date, except where the failure to transfer or reissue such licenses,
permits or other authorizations would not have a material adverse effect on
the business, assets, financial condition, results of operations or
prospects of the Surviving Corporation and its Subsidiaries taken as a whole
immediately after the UCU Effective Time.
Section 8.2 CONDITIONS TO OBLIGATION OF UCU TO EFFECT THE MERGERS. The
obligation of UCU to effect the Mergers shall be further subject to the
satisfaction, on or prior to the Closing Date, of the following conditions,
except as may be waived by UCU in writing pursuant to Section 9.5:
(a) PERFORMANCE OF OBLIGATIONS OF KCPL. KCPL and Sub (and/or KCPL's
appropriate Subsidiaries) will have performed in all material respects its
agreements and covenants contained in or contemplated by this Agreement
which are required to be performed by it at or prior to the UCU Effective
Time including, without limitation, agreements and covenants contained in
Section 2.1(a)(iii) hereof.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of KCPL set forth in Sections 4.1 through 4.18 of this Agreement shall be
true and correct (i) on and as of the Original Execution Date (except with
respect to representations and warranties made as of the Amendment Date
which shall be true and correct as of the Amendment Date) and (ii) on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except for
representations and warranties that expressly speak only as of a specific
date or time which need only be true and correct as of such date or time)
except in each of cases (i) and (ii) for such failures of representations or
warranties to be true and correct (without giving effect to any materiality
qualification or standard contained in any such representations and
warranties) which, individually or in the aggregate, would not be reasonably
likely to result in a KCPL Material Adverse Effect. The representations and
warranties of KCPL and Sub set forth in Section 4.19 of this Agreement shall
be true and correct (i) on and as of the Amendment Date and (ii) on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except for
representations and warranties that expressly speak only as of a specific
date or time which need only be true and correct as of such date or time)
except in each of cases (i) and (ii) for such failures of representations or
warranties to be true and correct (without giving effect to any materiality
qualification or standard contained in any such representations and
warranties) which, individually or in the aggregate, would not be reasonably
likely to result in a KCPL Material Adverse Effect.
(c) CLOSING CERTIFICATES. UCU shall have received a certificate signed
by the chief financial officer of KCPL, dated the Closing Date, to the
effect that, to the best of such officer's knowledge, the conditions set
forth in Section 8.2(a) and Section 8.2(b) have been satisfied.
(d) KCPL MATERIAL ADVERSE EFFECT. No KCPL Material Adverse Effect
shall have occurred and there shall exist no fact or circumstance which is
reasonably likely to have a KCPL Material Adverse Effect.
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(e) TAX OPINION. UCU shall have received an opinion from Blackwell
Sanders Matheny Weary & Lombardi L.C., counsel to UCU, in form and substance
reasonably satisfactory to UCU, dated as of the Effective Time,
substantially to the effect that (i) no gain or loss will be recognized by
KCPL, UCU or the Surviving Corporation pursuant to the Mergers, and (ii) no
gain or loss will be recognized by stockholders of UCU who exchange their
shares of UCU Common Stock for shares of KCPL Common Stock as a result of
the Merger (except to the extent that cash is received in lieu of fractional
share interests). In rendering such opinion, Blackwell Sanders Matheny Weary
and Lombardi L.C., may require and rely upon representations contained in
certificates of officers of KCPL, UCU and others.
(f) KCPL REQUIRED CONSENTS. The KCPL Required Consents the failure of
which to obtain would have a KCPL Material Adverse Effect shall have been
obtained.
Section 8.3 CONDITIONS TO OBLIGATION OF KCPL AND SUB TO EFFECT THE
MERGERS. The obligation of KCPL and Sub to effect the Mergers shall be further
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions, except as may be waived by KCPL and Sub in writing pursuant to
Section 9.5:
(a) PERFORMANCE OF OBLIGATIONS OF UCU. UCU (and/or its appropriate
Subsidiaries) will have performed in all material respects its agreements
and covenants contained in or contemplated by this Agreement which are
required to be performed by it at or prior to the UCU Effective Time
including, without limitation, agreements and covenants contained in Section
2.1(a)(iv) hereof.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of UCU set forth in this Agreement shall be true and correct (i) on and as
of the Original Execution Date (except with respect to representations and
warranties made as of the Amendment Date which shall be true and correct as
of the Amendment Date) and (ii) on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as
of the Closing Date (except for representations and warranties that
expressly speak only as of a specific date or time which need only be true
and correct as of such date or time) except in each of cases (i) and (ii)
for such failures of representations or warranties to be true and correct
(without giving effect to any materiality qualification or standard
contained in any such representations and warranties) which, individually or
in the aggregate, would not be reasonably likely to result in a UCU Material
Adverse Effect.
(c) CLOSING CERTIFICATES. KCPL shall have received a certificate
signed by the chief financial officer of UCU, dated the Closing Date, to the
effect that, to the best of such officer's knowledge, the conditions set
forth in Section 8.3(a) and Section 8.3(b) have been satisfied.
(d) UCU MATERIAL ADVERSE EFFECT. No UCU Material Adverse Effect shall
have occurred and there shall exist no fact or circumstance which is
reasonably likely to have a UCU Material Adverse Effect.
(e) TAX OPINION. KCPL shall have received an opinion from Skadden,
Arps, Slate, Meagher & Flom, counsel to KCPL, in form and substance
reasonably satisfactory to KCPL, dated as of the Effective Time,
substantially to the effect that (i) no gain or loss will be recognized by
KCPL, UCU or the Surviving Corporation pursuant to the Mergers, and (ii) no
gain or loss will be recognized by stockholders of KCPL as a result of the
Mergers. In rendering such opinion, Skadden, Arps, Slate, Meagher & Flom,
may require and rely upon representations contained in certificates of
officers of KCPL, UCU and others.
(f) UCU REQUIRED CONSENTS. The UCU Required Consents the failure of
which to obtain would have a UCU Material Adverse Effect shall have been
obtained.
(g) AFFILIATE AGREEMENTS. KCPL shall have received Affiliate
Agreements, duly executed by each "Affiliate" of UCU, substantially in the
form of EXHIBIT 7.7, as provided in Section 7.7.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval by the shareholders
of the respective parties hereto contemplated by this Agreement:
(a) by mutual written consent of the Boards of Directors of KCPL and
UCU;
(b) by either UCU or KCPL (i) if there has been (x) any breach of the
covenants and agreements contained in Section 6.1(b) to the extent such
applies to UCU or KCPL but not to their respective Subsidiaries or Section
6.1(c) of this Agreement to the extent such applies to UCU or KCPL but not
to their respective Subsidiaries or (y) any breach of any representations,
warranties, covenants or agreements on the part of the other set forth in
this Agreement, which breaches individually or in the aggregate would result
in a UCU Material Adverse Effect or a KCPL Material Adverse Effect, as the
case may be, and, in the case of (x) or (y), which breaches have not been
cured within 20 business days following receipt by the breaching party of
notice of such breach or adequate assurance of such cure shall not have been
given by or on behalf of the breaching party within such 20 business-day
period, (ii) if the Board of Directors of the other or any committee of the
Board of Directors of the other (A) shall withdraw or modify in any adverse
manner its approval or recommendation of this Agreement or the Mergers, (B)
shall fail to reaffirm such approval or recommendation upon the other's
request, (C) shall approve or recommend any acquisition of such party or a
material portion of its assets or any tender offer for shares of capital
stock of such party, in each case, other than by a party hereto or an
Affiliate thereof or (D) shall resolve to take any of the actions specified
in clause (A), (B) or (C), or (iii) if any state or federal law, order, rule
or regulation is adopted or issued, which has the effect, as supported by
the written opinion of outside counsel for such party, of prohibiting the
Mergers, or by any party hereto if any court of competent jurisdiction in
the United States or any state shall have issued an order, judgment or
decree permanently restraining, enjoining or otherwise prohibiting the
Mergers, and such order, judgment or decree shall have become final and
nonappealable;
(c) by any party hereto, by written notice to the other parties, if the
Effective Time shall not have occurred on or before December 31, 1997 (the
"INITIAL TERMINATION DATE"); PROVIDED, HOWEVER, that the right to terminate
the Agreement under this Section 9.1(c) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before this date; and PROVIDED, FURTHER, that if on the Initial Termination
Date the conditions to the Closing set forth in Sections 8.1(e), 8.2(f)
and/or 8.3(f) shall not have been fulfilled but all other conditions to the
Closing shall be fulfilled or shall be capable of being fulfilled, then the
Initial Termination Date shall be extended to December 31, 1998;
(d) by any party hereto, by written notice to the other parties, if the
UCU Shareholders' Approval shall not have been obtained at a duly held UCU
Meeting, including any adjournments thereof, or the KCPL Shareholders'
Approval shall not have been obtained at a duly held KCPL Meeting, including
any adjournments thereof;
(e) by KCPL, prior to the approval of this Agreement by the shareholders
of KCPL, upon five days' prior notice to UCU, if, as a result of an
Acquisition Proposal by a party other than UCU or any of its Affiliates, the
Board of Directors of KCPL determines in good faith, after considering
applicable provisions of state law, on the basis of oral or written advice
of outside counsel that acceptance of the Acquisition Proposal is necessary
for the Board of Directors to act in a manner consistent with its fiduciary
duties under applicable law; PROVIDED, HOWEVER, that (i) the Board of
Directors of KCPL shall have concluded in good faith, after considering
applicable provisions of state law and after giving effect to all
concessions which may be offered by the other party pursuant to clause (ii)
below, on the basis of oral or written advice of outside counsel that such
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action is necessary for the Board of Directors to act in a manner consistent
with its fiduciary duties under applicable law and (ii) prior to any such
termination, KCPL shall, and shall cause its respective financial and legal
advisors to, negotiate with UCU to make such adjustments in the terms and
conditions of this Agreement as would enable KCPL to proceed with the
transactions contemplated herein; or
(f) by UCU, prior to the approval of this Agreement by the shareholders
of UCU, upon five days' prior notice to KCPL, if, as a result of an
Acquisition Proposal by a party other than KCPL or any of its Affiliates,
the Board of Directors of UCU determines in good faith, after considering
applicable provisions of state law, on the basis of oral or written advice
of outside counsel that acceptance of the Acquisition Proposal is necessary
for the Board of Directors to act in a manner consistent with its fiduciary
duties under applicable law; PROVIDED, HOWEVER, that (i) the Board of
Directors of UCU shall have concluded in good faith, after considering
applicable provisions of state law and after giving effect to all
concessions which may be offered by the other party pursuant to clause (ii)
below, on the basis of oral or written advice of outside counsel that such
action is necessary for the Board of Directors to act in a manner consistent
with its fiduciary duties under applicable law; and (ii) prior to any such
termination, UCU shall, and shall cause its respective financial and legal
advisors to, negotiate with KCPL to make such adjustments in the terms and
conditions of this Agreement as would enable UCU to proceed with the
transactions contemplated herein.
Section 9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either KCPL or UCU pursuant to Section 9.1 there shall be no
liability on the part of either KCPL or UCU or their respective officers or
directors hereunder, except that Section 7.16 and Section 9.3, the agreement
contained in the last sentence of Section 7.1, Section 10.2 and Section 10.8
shall survive the termination.
Section 9.3 TERMINATION FEE; EXPENSES.
(a) TERMINATION FEE UPON BREACH OR WITHDRAWAL OF APPROVAL. If this
Agreement is terminated at such time that this Agreement is terminable pursuant
to Section 9.1(b)(i), then: (i) the breaching party shall promptly (but not
later than five business days after receipt of notice from the non-breaching
party) pay to the non-breaching party in cash an amount equal to $10 million in
cash, minus any such amounts as may have been previously paid by such breaching
party pursuant to this Section 9.3; PROVIDED, HOWEVER, that, if this Agreement
is terminated by a party as a result of a willful breach by the other party, the
breaching party shall pay to the non-breaching party a fee equal to $35 million
in cash, minus any such amounts as may have been previously paid by such
breaching party pursuant to this Section 9.3, and (ii) if (A) at the time of the
breaching party's willful breach of this Agreement, there shall have been
previously made an Acquisition Proposal involving such party or any of its
Affiliates (whether or not such Acquisition Proposal shall have been rejected or
shall have been withdrawn prior to the time of termination) and (B) within two
and one-half years of any termination by the non-breaching party, the breaching
party or an Affiliate thereof becomes a Subsidiary of such offeror or a
Subsidiary of an Affiliate of such offeror or accepts a written offer to
consummate or consummates an Acquisition Proposal with such offeror or an
Affiliate thereof, then such breaching party (jointly and severally with its
Affiliates), upon the signing of a definitive agreement relating to such
Acquisition Proposal, or, if no such agreement is signed then at the closing
(and as a condition to the closing) of such breaching party becoming such a
Subsidiary or of such Acquisition Proposal, shall pay to the non-breaching party
an additional fee equal to $58 million in cash minus any such amount as may have
been previously paid by such breaching party pursuant to this Section 9.3.
(b) TERMINATION FEE UPON FAILURE TO OBTAIN SHAREHOLDER APPROVAL. If this
Agreement is terminated following a failure of the shareholders of any one of
the parties to grant the necessary approval described in Section 4.13 or 5.13,
the party not receiving shareholder approval shall pay to the other a
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fee equal to $5 million; provided that if any fee is otherwise payable or has
been paid under Section 9.3(a) or Section 9.3(c), any amounts (x) paid pursuant
to this Section 9.3(b) shall be deducted from such amounts, or (y) otherwise
payable pursuant to this Section 9.3(b) shall not be paid.
(c) ADDITIONAL TERMINATION FEES. If (i) this Agreement (A) is terminated
by any party pursuant to Section 9.1(e) or Section 9.1(f), (B) is terminated in
the circumstances described in Section 9.3(b) above, or (C) is terminated as a
result of such party's breach of Section 7.4, (ii) at the time of such
termination or prior to the meeting of such party's shareholders there shall
have been an Acquisition Proposal involving, such party or any of its Affiliates
(whether or not such offer shall have been rejected or shall have been withdrawn
prior to the time of such termination or of the meeting) and (iii) within two
and one-half years of any such termination described in clause (i) above, the
party or its Affiliate which is the subject of the Acquisition Proposal (the
"TARGET PARTY") becomes a Subsidiary of such offeror or accepts a written offer
to consummate or consummates an Acquisition Proposal with such offeror or
Affiliate thereof, then such Target Party (jointly and severally with its
Affiliates), upon the signing of a definitive agreement relating to such an
Acquisition Proposal, or, if no such agreement is signed then at the closing
(and as a condition to the closing) of such Target Party becoming such a
Subsidiary or of such Acquisition Proposal, shall pay to the other party a
termination fee equal to $58 million in cash minus any amounts as may have been
previously paid by the Target Party pursuant to this Section 9.3.
(d) EXPENSES. The parties agree that the agreements contained in this
Section 9.3 are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. Notwithstanding
anything to the contrary contained in this Section 9.3, if one party fails to
promptly pay to the other any fee due under Sections 9.3(a), (b) or (c), in
addition to any amounts paid or payable pursuant to such sections, the
defaulting party shall pay the costs and expenses (including legal fees and
expenses) in connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment, together with interest on the
amount of any unpaid fee at the publicly announced prime rate of Citibank, N.A.
from the date such fee was required to be paid.
Section 9.4 AMENDMENT. This Agreement may be amended by the Boards of
Directors of the parties hereto, at any time before or after approval hereof by
the shareholders of KCPL and UCU and prior to the Effective Time, but after such
approvals, no such amendment shall (a) alter or change the amount or kind of
shares, rights or any of the proceedings of the treatment of shares under
Article II or (b) alter or change any of the terms and conditions of this
Agreement if any of the alterations or changes, alone or in the aggregate, would
materially adversely affect the rights of holders of KCPL Common Stock or UCU
Common Stock, except for alterations or changes that could otherwise be adopted
by the Board of Directors of the Surviving Corporation, without the further
approval of such shareholders, as applicable. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 9.5 WAIVER. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein, to the extent permitted by applicable law. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such party.
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ARTICLE X
GENERAL PROVISIONS
Section 10.1 NON-SURVIVAL; EFFECT OF REPRESENTATIONS AND WARRANTIES. No
representations or warranties in this Agreement shall survive the Effective
Time, except as otherwise provided in this Agreement.
Section 10.2 BROKERS. KCPL represents and warrants that, except for
Merrill Lynch whose fees have been disclosed to UCU prior to the Original
Execution Date, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Mergers or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of KCPL. UCU represents and warrants that, except for DLJ, whose
fees have been disclosed to KCPL prior to the Original Execution Date, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Mergers or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
UCU.
Section 10.3 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given (a) when delivered personally, (b) when
sent by reputable overnight courier service, or (c) when telecopied (which is
confirmed by copy sent within one business day by a reputable overnight courier
service) to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(i) If to KCPL or Sub, to:
Kansas City Power & Light Company
1201 Walnut
Kansas City, Missouri 64106
Attn: Chief Executive Officer
Telecopy: (816) 556-2418
Telephone: (816) 556-2200
with a copy to
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attn: Nancy A. Lieberman, Esq.
Telecopy: (212) 735-2000
Telephone: (212) 735-3000
and
(ii) if to UCU, to:
UtiliCorp United Inc.
911 Main Street
Suite 3000
Kansas City, Missouri 64105
Attn: Chief Executive Officer
Telecopy: (816) 467-3595
Telephone: (816) 421-6600
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<PAGE>
with a copy to
Blackwell Sanders Matheny Weary & Lombardi L.C.
2300 Main Street, Suite 1100
Kansas City, Missouri 64108
Attn: Ralph G. Wrobley, Esq.
Telecopy: (816) 274-6914
Telephone: (816) 274-6800
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Stephen E. Jacobs, Esq.
Telecopy: (212) 310-8007
Telephone: (212) 310-8000
(iii) if to the Company, to:
c/o Chief Executive Officer of KCPL at
the address set forth above
and
c/o Chief Executive Officer of UCU at
the address set forth above.
Section 10.4 MISCELLANEOUS. This Agreement as amended as of the Amendment
Date (including the documents and instruments referred to herein) (a)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof other than the Confidentiality Agreement,
(b) shall not be assigned by operation of law or otherwise and (c) shall be
governed by and construed in accordance with the laws of the State of Missouri
applicable to contracts executed in and to be fully performed in such State,
without giving effect to its conflicts of law rules or principles and except to
the extent the provisions of this Agreement (including the documents or
instruments referred to herein) are expressly governed by or derive their
authority from the MGCL.
Section 10.5 INTERPRETATION. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section or Exhibit of this
Agreement, respectively, unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "INCLUDE," "INCLUDES" or "INCLUDING" are used in this Agreement, they
shall be deemed to be followed by the words "WITHOUT LIMITATION."
Section 10.6 COUNTERPARTS; EFFECT. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
Section 10.7 PARTIES' INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except for rights of
Indemnified Parties as set forth in Section 7.5, nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Notwithstanding the foregoing and any other provision of this Agreement, and in
addition to any other required action of the Board of Directors of the Surviving
Corporation (a) a majority of the directors (or their successors) serving on the
Board of Directors of the Surviving Corporation who are designated by KCPL
pursuant to Section 7.12 shall be entitled during the three year period
commencing at the Effective Time (the
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"THREE YEAR PERIOD") to enforce the provisions of Section 7.8, Section 7.9,
Section 7.10 and Section 7.13 on behalf of the KCPL officers, directors and
employees, as the case may be, and (b) a majority of the directors (or their
successors) serving on the Board of Directors of the Surviving Corporation who
are designated by UCU pursuant to Section 7.12 shall be entitled during the
Three Year Period to enforce the provisions of, Sections 7.8, Section 7.9,
Section 7.10 and Section 7.13 on behalf of the UCU officers, directors and
employees, as the case may be. Such directors' rights and remedies under the
preceding sentence are cumulative and are in addition to any other rights and
remedies they may have at law or in equity, but in no event shall this Section
10.7 be deemed to impose any additional duties on any such directors. The
Surviving Corporation shall pay, at the time they are incurred, all costs, fees
and expenses of such directors incurred in connection with the assertion of any
rights on behalf of the persons set forth above pursuant to this Section 10.7.
Section 10.8 WAIVER OF JURY TRIAL AND CERTAIN DAMAGES. Each party to this
Agreement waives, to the fullest extent permitted by applicable law, (a) any
right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to this Agreement and (b) without
limitation to Section 9.3, any right it may have to receive damages from any
other party based on any theory of liability for any special, indirect,
consequential (including lost profits) or punitive damages.
Section 10.9 ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Missouri or in Missouri state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of Missouri or
any Missouri state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal or state court sitting in the State
of Missouri.
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IN WITNESS WHEREOF, KCPL, Sub, UCU and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
<TABLE>
<S> <C>
KANSAS CITY POWER & LIGHT COMPANY
Attest: /s/ JEANIE SELL LATZ By: /s/ A. DRUE JENNINGS
------------------------------------
Secretary ------------------------------------------
Name: A. Drue Jennings
Title: Chairman of the Board, President
and Chief Executive Officer
KC MERGER SUB, INC.
Attest: /s/ JEANIE SELL LATZ By: /s/ A. DRUE JENNINGS
------------------------------------
Secretary ------------------------------------------
Name: A. Drue Jennings
Title: President
UTILICORP UNITED INC.
Attest: /s/ DALE J. WOLF By: /s/ RICHARD C. GREEN, JR.
------------------------------------
Secretary ------------------------------------------
Name: Richard C. Green, Jr.
Title: Chairman of the Board, President
and Chief Executive Officer
KC UNITED CORP.
Attest: /s/ RICHARD C. GREEN, JR. By: /s/ A. DRUE JENNINGS
------------------------------------
Secretary ------------------------------------------
Name: A. Drue Jennings
Title: President
</TABLE>
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<PAGE>
FORM OF MERRILL LYNCH OPINION
ANNEX B
, 1996
Board of Directors
Kansas City Power & Light Company
1201 Walnut
Kansas City, Missouri
64106-2124
Attention: Drue Jennings
Chairman of the Board and President
Gentlemen and Madam:
Kansas City Power & Light Company (the "Company"), KC Merger Sub, Inc.
("Sub"), UtiliCorp United Inc. (the "Merger Partner") and KC United Corp. have
entered into an Amended and Restated Agreement and Plan of Merger, dated as of
January 19, 1996, as amended and restated as of May 20, 1996 (the "Agreement"),
pursuant to which (i) Sub will merge with and into Merger Partner, with the
Merger Partner surviving (the "UCU Merger"), and (ii) immediately thereafter,
the surviving corporation in the UCU Merger will merge with and into the
Company, with the Company surviving (together with the UCU Merger, the
"Mergers"). In the Mergers, (a) each issued and outstanding share of common
stock, par value $1.00 per share, of the Merger Partner (the "Merger Partner
Shares") (other than the Merger Partner Shares owned by the Merger Partner or by
any wholly-owned subsidiary of the Merger Partner, or by the Company, all of
which shall be canceled and retired) will be converted into the right to receive
1.0 share (the "Exchange Ratio") of the Company's common stock, without par
value (the "Company Shares"), and (b) each issued and outstanding share of the
Company Shares shall remain outstanding. The Mergers are expected to be
considered by the shareholders of the Company and the Merger Partner at separate
shareholder's meetings in August 1996.
You have asked us whether, in our opinion, the proposed Exchange Ratio
pursuant to the proposed Mergers is fair to the holders of Company Shares (other
than the Merger Partner and its affiliates) from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related financial
information for the five fiscal years ended December 31, 1995, and Form
10-Q and the related unaudited financial information for the quarterly
period ending March 31, 1996;
(2) Reviewed the Merger Partner's Annual Reports, Forms 10-K and related
financial information for the five fiscal years ended December 31, 1995,
and Form 10-Q and the related unaudited financial information for the
quarterly period ending March 31, 1996;
(3) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets and prospects of the Company
and the Merger Partner, furnished to us by the Company and the Merger
Partner;
(4) Conducted discussions with members of senior management of the Company
and the Merger Partner concerning their respective businesses, regulatory
environments, prospects and strategic objectives and possible operating,
administrative and capital synergies which might be realized for the
combined companies following the Mergers;
(5) Reviewed the historical market prices and trading activity for the
Company Shares and the Merger Partner Shares and compared them with that
of certain publicly traded companies which we deemed to be reasonably
similar to the Company and the Merger Partner, respectively;
(6) Compared the results of operations of the Company and the Merger Partner
with that of certain companies which we deemed to be reasonably similar
to the Company and the Merger Partner, respectively;
B-1
<PAGE>
(7) Analyzed the relative valuation of the Company Shares and the Merger
Partner Shares using various valuation methodologies which we deemed
appropriate;
(8) Considered the pro forma effect of the Mergers on the Company's
capitalization ratios and earnings, dividends and book value per share;
(9) Reviewed the Agreement; and
(10) Reviewed such other financial studies and performed such other analyses
and took into account such other matters as we deemed necessary.
In preparing our opinion, we have relied on the accuracy and completeness of
all information supplied or otherwise made available to us by the Company and
the Merger Partner, and we have not independently verified such information or
undertaken an independent appraisal of the assets or liabilities, contingent or
otherwise, of the Company or the Merger Partner. With respect to the financial
forecasts furnished by the Company and the Merger Partner, we have assumed that
they have been reasonably prepared in accordance with accepted industry practice
and reflect the best currently available estimates and judgment of the Company's
and the Merger Partner's management as to the expected future financial
performance of the Company or the Merger Partner, as the case may be, and as to
the expected future projected outcomes of various legal, regulatory and other
contingencies. We have also assumed that the Mergers will be free of Federal tax
to the Company, the Merger Partner and Sub and the respective holders of Company
Shares and Merger Partner Shares, and we further assume that the Mergers will be
accounted for as a pooling of interests. Our opinion is based upon general
economic, market, monetary and other conditions as they exist and can be
evaluated, and the information made available to us, as of the date hereof.
We have, in the past, provided financial advisory and financing services to
the Company and have received fees for the rendering of such services. In
addition, in the ordinary course of our securities business, we may actively
trade debt and equity securities of the Company and the Merger Partner for our
own account and the accounts of our customers, and we therefore may from time to
time hold a long or short position in such securities.
Management of the Company has advised us that it believes there are
significant contingencies and uncertainties associated with the proposal of
Western Resources, Inc. ("WR") to acquire the outstanding Company Shares by
means of an exchange offer and merger (as set forth in the Proxy Statement of WR
dated May 3, 1996 and the preliminary Registration Statement on Form S-4 filed
by WR with the Securities and Exchange Commission on April 22, 1996 (the "WR
Proposal")), due to the speculative nature of certain assumptions made by WR in
the WR Proposal relating to WR's ability to achieve and retain certain estimated
aggregate cost savings, and the likelihood of substantially greater rate
reductions affecting WR in a pending rate proceeding than those assumed by WR.
Management of the Company has also advised us that it believes that the WR
Proposal is not consistent with the strategic objectives of the Company. In view
of the foregoing, we have not been asked by the Board of Directors of the
Company to consider, and we have not considered, the WR Proposal in arriving at
our opinion.
On the basis of, and subject to the foregoing and other matters which we
deem relevant, we are of the opinion that, as of the date hereof, the proposed
Exchange Ratio pursuant to the Mergers is fair to the holders of Company Shares
(other than the Merger Partner and its affiliates) from a financial point of
view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
B-2
<PAGE>
FORM OF DLJ OPINION
ANNEX C
------, 1996
Board of Directors
UtiliCorp United Inc.
911 Main Street
Kansas City, Missouri 64105
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of UtiliCorp United Inc. (the "Company") of the
exchange ratio applicable to the determination of the number of shares to be
received by such shareholders pursuant to the terms of the Agreement and Plan of
Merger dated as of January 19, 1996 as amended and restated on May 20, 1996,
among the Company, Kansas City Power & Light Company ("KCPL"), KC Merger Sub,
Inc. ("Sub") and KC United Corp., ("KCU"), (the "Agreement"). Pursuant to the
Merger Agreement, Sub will merge with and into the Company (the surviving
entity) and immediately thereafter, the Company will merge with and into KCPL,
with KCPL being the surviving entity. It is our understanding that the
transactions described in the Agreement (the "Mergers") are intended to qualify
for pooling of interests treatment for financial reporting purposes and as
tax-free reorganizations for United States income tax purposes and that none of
the Company, KCPL, Sub or KCU will recognize any gain or loss for United States
income tax purposes as a result of the Mergers. We further understand that
consummation of the Mergers is subject to the terms and conditions set forth in
the Agreement.
Purusant to the Agreement, each share of common stock of the Company will be
converted into the right to receive 1.000 shares of common stock, no par value
of KCPL.
In arriving at our opinion, we have reviewed the Agreement as well as
financial and other information that was publicly available or furnished to us
by the Company and KCPL including information provided during discussions with
their respective managements concerning their respective businesses and
prospects. Included in the information provided during discussions with the
respective managements were certain financial projections of the Company for
calendar years begining with 1995 and ending in 2000 prepared by the management
of the Company and certain fiinancial projections of KCPL for the calendar years
beginning with 1995 and ending in 2000 prepared by the management of KCPL. We
analyzed the respective contributions in terms of assets, earnings, and cash
flow of each of the Company and KCPL to the combined company and also analyzed
the valuation of each company's shares using various valuation methodologies
which we deemed appropriate. In addition, we have compared certain financial and
securities data of the Company and KCPL with various other companies who
securities are traded in public markets, reviewed the historical stock prices
and trading volumes of the common stock of each of the Company and KCPL,
reviewed prices and premiums paid in other business combinations and conducted
such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion. We were not requested to, nor did we,
solicit the interest of any other party in acquiring the Company.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to us from public sources, that was provided to us by the Company,
KCPL or their respective representatives, or that was otherwise reviewed by us.
In particular, we have relied upon the estimates of the management of the
Company of the operating synergies that can be achieved as a result of the
Mergers and retained upon our discussion of such synergies with the management
of KCPL. With respect to the financial projections supplied to us, we have
assumed that they have been reasonably prepared on the basis reflecting the best
currently available estimates and judgments of the mangement of the Company as
to the future operating and financial performance of the Company and KCPL. We
have not assumed any responsibility for making an independent evaluation of the
Company's or KCPL's assets or liabilities or for
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making any independent verification of any of the information reviewed by us. We
have relied as to all legal matters relating to the Mergers, including without
limitation, the tax treatment of the Mergers, on advice of counsel to the
Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which shares of KCPL will trade either prior to, or following the
Mergers. Our opinion does not constitute a recommendation to any shareholders as
to how such shareholder should vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. DLJ has performed
investment banking and other services for the Company and KCPL in the past and
has been compensated for such services.
Based upon the foregoing and such other factors as we deemed relevant, we
are of the opinion that the exchange ratio applicable to the determination of
the number of shares to be received by the shareholders of the Company pursuant
to the Agreement is fair to the shareholders of the Company from a financial
point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
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ANNEX D
NEWCO STOCK INCENTIVE PLAN
Section 1. PURPOSE; DEFINITIONS. The purpose of the Plan is to give the
Company and its Affiliates a competitive advantage in attracting, retaining and
motivating officers and employees and to provide the Company and its Affiliates
with the ability to provide incentives more directly linked to the profitability
of the Company's businesses, increases in shareholder value and enhancement of
performance relative to customers.
For purposes of the Plan, the following terms are defined as set forth
below:
(a) "AFFILIATE" means (i) a corporation at least fifty percent of the
common stock or voting power of which is owned, directly or indirectly by
the Company, and (ii) any other corporation or other entity controlled by
the Company and designated by the Committee from time to time as such.
(b) "AWARD" means a Stock Appreciation Right, Stock Option, Restricted
Stock or Performance Units.
(c) "AWARD CYCLE" shall mean a period of consecutive fiscal years or
portions thereof designated by the Committee over which Performance Units
are to be earned.
(d) "BOARD" means the Board of Directors of the Company.
(e) "CHANGE IN CONTROL" and "CHANGE IN CONTROL PRICE" have the meanings
set forth in Sections 9(b) and (c), respectively.
(f) "CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
(g) "COMMISSION" means the Securities and Exchange Commission or any
successor agency.
(h) "COMMITTEE" means the Committee referred to in Section 2.
(i) "COMMON STOCK" means common stock, par value $.01 per share, of the
Company.
(j) "COMPANY" means NEWCO (as defined herein), a Missouri corporation.
(k) "COVERED EMPLOYEE" shall mean a participant designated prior to the
grant of shares of Restricted Stock or Performance Units by the Committee
who is or may be a "covered employee" within the meaning of Section
162(m)(3) of the Code in the year in which Restricted Stock or Performance
Units are taxable to such participant and who has or is expected to have
compensation in excess of the limitation provided in Section 162(m) of the
Code.
(l) "DISABILITY" means permanent and total disability as determined
under procedures established by the Committee for purposes of the Plan.
(m) "DISINTERESTED PERSON" shall mean a member of the Board who
qualifies as a disinterested person as defined in Rule 16b-3(c)(2), as
promulgated by the Commission under the Exchange Act, or any successor
definition adopted by the Commission, and as an "outside director" for
purposes of Section 162(m) of the Code.
(n) "EFFECTIVE TIME" means the Effective Time as defined in the Merger
Agreement.
(o) "EARLY RETIREMENT" of an employee means Termination of Employment
with the Company or an Affiliate at a time when the employee is entitled to
early retirement benefits pursuant to the early retirement provisions of the
applicable defined benefit pension plan of such employer.
(p) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
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(q) "FAIR MARKET VALUE" means, except as provided in Sections 5(j) and
6(b)(ii)(2), as of any given date, the mean between the highest and lowest
reported sales prices of the Common Stock on the New York Stock Exchange
Composite Tape or, if not listed on such exchange, on any other national
securities exchange on which the Common Stock is listed or on NASDAQ. If
there is no regular public trading market for such Common Stock, the Fair
Market Value of the Common Stock shall be determined by the Committee in
good faith.
(r) "INCENTIVE STOCK OPTION" means any Stock Option designated as, and
qualified as, an "incentive stock option" within the meaning of Section 422
of the Code.
(s) "MERGER AGREEMENT" means the Amended and Restated Agreement and Plan
of Merger by and among Kansas City Power & Light Company ("KCPL"), KC Merger
Sub, Inc., UtiliCorp United Inc., and KC United Corp., dated as of January
19, 1996, as amended and restated as of May 20, 1996. Pursuant to the Merger
Agreement, KCPL will, at the Effective Time, change its name to ("NEWCO").
(t) "NONQUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.
(u) "NORMAL RETIREMENT" of an employee means Termination of Employment
with the Company or an Affiliate at a time when the employee is entitled to
normal retirement benefits pursuant to the applicable defined benefit
pension plan of such employer.
(v) "PERFORMANCE GOALS" means the performance goals established by the
Committee prior to the grant of Restricted Stock or Performance Units that
are based on the attainment of goals relating to one or more of the
following: earnings per share, market share, stock price, sales, costs, net
operating income, cash flow, retained earnings, return on equity, economic
value added, results of customer satisfaction surveys, aggregate product
price and other product price measures, safety record, service reliability,
demand-side management (including conservation and load management),
operating and maintenance cost management, energy production availability,
and individual performance measures. Such Performance Goals also may be
based upon the attainment of specified levels of performance of the Company
or one or more Affiliates under one or more of the measures described above
relative to the performance of other corporations. With respect to Covered
Employees, all Performance Goals shall be objective performance goals
satisfying the requirements for "performance-based compensation" within the
meaning of Section 162(m)(4) of the Code, and shall be set by the Committee
within the time period prescribed by Section 162(m) of the Code and related
regulations.
(w) "PERFORMANCE UNITS" means an award made pursuant to Section 8.
(x) "PLAN" means the NEWCO Stock Incentive Plan, as set forth herein and
as hereinafter amended from time to time.
(y) "RESTRICTED STOCK" means an award granted under Section 7.
(z) "RETIREMENT" means Normal or Early Retirement.
(aa) "REPORTING PERSON" means an officer or director who is potentially
or actually subject to the reporting provisions of Section 16(a) of the
Securities Exchange Act.
(bb) "RULE 16B-3" means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.
(cc) "STOCK APPRECIATION RIGHT" means a right granted under Section 6.
(dd) "STOCK OPTION" means an option granted under Section 5.
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(ee) "TERMINATION OF EMPLOYMENT" means the termination of the
participant's employment with the Company and any Affiliate. A participant
employed by an Affiliate shall also be deemed to incur a Termination of
Employment if the Affiliate ceases to be an Affiliate and the participant
does not immediately thereafter become an employee of the Company or another
Affiliate.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
Section 2. ADMINISTRATION. The Plan shall be administered by the
Compensation Committee of the Board or such other committee of the Board as the
Board may from time to time determine, composed solely of not less than two
Disinterested Persons, each of whom shall be appointed by and serve at the
pleasure of the Board. The Committee shall have plenary authority to grant
Awards pursuant to the terms of the Plan to officers and employees of the
Company and its Affiliates. Among other things, the Committee shall have the
authority, subject to the terms of the Plan:
(a) to select the officers and employees to whom Awards may from time to
time be granted;
(b) to determine whether and to what extent Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock and
Performance Units or any combination thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to be covered by
each Award granted hereunder;
(d) to determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the option price (subject to Section 5(a)),
any vesting condition, restriction or limitation (which may be related to
the performance of the participant, the Company or any Affiliates) and any
vesting acceleration or forfeiture waiver regarding any Award and the shares
of Common Stock relating thereto, based on such factors as the Committee
shall determine;
(e) to modify, amend or adjust the terms and conditions of any Award, at
any time or from time to time, including but not limited to Performance
Goals; PROVIDED, HOWEVER, that the Committee may not adjust upwards the
amount payable to a designated Covered Employee with respect to a particular
award upon the satisfaction of applicable Performance Goals;
(f) to determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to an Award shall be deferred;
and
(g) to determine under what circumstances an Award may be settled in
cash or Common Stock under Sections 5(j) and 8(b)(i).
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members hereof may (i) delegate to an officer of the Company the
authority to make decisions pursuant to paragraphs (c), (f), (g), (h) and (i) of
Section 5 (provided that no such delegation may be made that would cause Awards
or other transactions under the Plan to cease to be exempt from Section 16(b) of
the Exchange Act) and (ii) authorize any one or more of their number or any
officer of the Company to execute and deliver documents on behalf of the
Committee.
Any determination made by the Committee or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Award shall be made
in the sole discretion of the Committee or such delegate at the time of the
grant of the Award or, unless in contravention of any express term of the Plan,
at any time thereafter. All decisions made by the Committee or any appropriately
delegated officer pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Company and its Affiliates and Plan
participants.
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Section 3. COMMON STOCK SUBJECT TO PLAN; OTHER LIMITATIONS. The total
number of shares of Common Stock reserved and available for issuance under the
Plan shall be 9,000,000; PROVIDED, HOWEVER, that not more than 3,000,000 of such
shares shall be issued as Restricted Stock. No participant may be granted Awards
covering in excess of 600,000 shares of Common Stock in any one calendar year.
Shares subject to an Award under the Plan may be authorized and unissued shares
or may be treasury shares. No participant may be granted Performance Units in
any one calendar year payable in cash in an amount that would exceed $2,000,000.
Subject to Section 7(c)(iv), if any shares of Restricted Stock are
forfeited, or if any Stock Option (and related Stock Appreciation Right, if any)
terminates without being exercised, or if any Stock Appreciation Right is
exercised for cash, shares subject to such Awards shall again be available for
distribution in connection with Awards under the Plan.
In the event of any change in corporate capitalization, such as a stock
split, or a corporate transaction, such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock or property of
the Company, any reorganization (whether or not such reorganization comes within
the definition of such term in Section 368 of the Code) or any partial or
complete liquidation of the Company, the Committee or Board may make such
substitution or adjustments in the aggregate number and kind of shares reserved
for issuance under the Plan, in the number, kind and option price of shares
subject to outstanding Stock Options and Stock Appreciation Rights, in the
number and kind of shares subject to other outstanding Awards granted under the
Plan and/or such other equitable substitution or adjustments as it may determine
to be appropriate in its sole discretion; PROVIDED, HOWEVER, that the number of
shares subject to any Award shall always be a whole number. Such adjusted option
price shall also be used to determine the amount payable by the Company upon the
exercise of any Stock Appreciation Right associated with any Stock Option.
Section 4. ELIGIBILITY. Officers and employees of the Company and its
Affiliates who are responsible for or contribute to the management, growth and
profitability of the business of the Company and its Affiliates are eligible to
be granted Awards under the Plan. No grant shall be made under this Plan to a
director who is not an officer or a salaried employee.
Section 5. STOCK OPTIONS. Stock Options may be granted alone or in
addition to other Awards granted under the Plan and may be of two types:
Incentive Stock Options and Nonqualified Stock Options. Any Stock Option granted
under the Plan shall be in such form as the Committee may from time to time
approve.
The Committee shall have the authority to grant any optionee Incentive Stock
Options, Nonqualified Stock Options or both types of Stock Options (in each case
with or without Stock Appreciation Rights); PROVIDED, HOWEVER, that grants
hereunder are subject to the aggregate limit on grants to individual
participants set forth in Section 3. Incentive Stock Options may be granted only
to employees of the Company and its subsidiaries (within the meaning of Section
424(f) of the Code). To the extent that any Stock Option is not designated as an
Incentive Stock Option or even if so designated does not qualify as an Incentive
Stock Option, it shall constitute a Nonqualified Stock Option.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is intended to be an agreement for an Incentive Stock Option or a
Nonqualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee by resolution selects an individual to be a participant in any
grant of a Stock Option, determines the number of shares of Common Stock to be
subject to such Stock Option to be granted to such individual and specifies the
terms and provisions of the Stock Option. The Company shall notify a participant
of any grant of a Stock Option, and a written option agreement or agreements
shall be duly executed and delivered by the Company to the participant. Such
agreement or agreements shall become effective upon execution by the Company and
the participant.
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Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered nor
shall any discretion or authority granted under the Plan be exercised so as to
disqualify the Plan under Section 422 of the Code or, without the consent of the
optionee affected, to disqualify any Incentive Stock Option under such Section
422.
Stock Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions as the
Committee shall deem desirable:
(a) OPTION PRICE. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee and
set forth in the option agreement.
(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than 10
years after the date the Stock Option is granted.
(c) EXERCISABILITY. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the Committee
provides that any Stock Option is exercisable only in installments, the
Committee may at any time waive such installment exercise provisions, in
whole or in part, based on such factors as the Committee may determine. In
addition, the Committee may at any time accelerate the exercisability of any
Stock Option.
(d) METHOD OF EXERCISE. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Company specifying
the number of shares of Common Stock subject to the Stock Option to be
purchased.
Such notice shall be accompanied by payment in full of the purchase price by
certified or bank check or such other instrument as the Company may accept. If
approved by the Committee, payment in full or in part may also be made in the
form of unrestricted Common Stock already owned by the optionee of the same
class as the Common Stock subject to the Stock Option and, in the case of the
exercise of a Nonqualified Stock Option, Restricted Stock subject to an Award
hereunder which is of the same class as the Common Stock subject to the Stock
Option (based, in each case, on the Fair Market Value of the Common Stock on the
date the Stock Option is exercised); PROVIDED, HOWEVER, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of already owned
shares of Common Stock of the same class as the Common Stock subject to the
Stock Option may be authorized only at the time the Stock Option is granted.
If payment of the option exercise price of a Nonqualified Stock Option is
made in whole or in part in the form of Restricted Stock, the number of shares
of Common Stock to be received upon such exercise equal to the number of shares
of Restricted Stock used for payment of the option exercise price shall be
subject to the same forfeiture restrictions to which such Restricted Stock was
subject, unless otherwise determined by the Committee.
In the discretion of the Committee, payment for any shares subject to a
Stock Option may also be made by delivering a properly executed exercise notice
to the Company, together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds to pay the
purchase price, and, if requested by the Company, the amount of any federal,
state, local or foreign withholding taxes. To facilitate the foregoing, the
Company may enter into agreements for coordinated procedures with one or more
brokerage firms.
No shares of Common Stock shall be issued until full payment therefor has
been made. Subject to any forfeiture restrictions that may apply if a Stock
Option is exercised using Restricted Stock, an Optionee shall have all of the
rights of a shareholder of the Company holding the class or series of Common
Stock that is subject to such Stock Option (including, if applicable, the right
to vote the shares and the right to receive dividends), when the optionee has
given written notice of exercise, has paid in full for such shares and, if
requested, has given the representation described in Section 13(a).
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(e) NONTRANSFERABILITY OF STOCK OPTIONS. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws of
descent and distribution or (ii) in the case of a Nonqualified Stock Option,
pursuant to a gift to such optionee's children, whether directly or
indirectly or by means of a trust or partnership or otherwise, if expressly
permitted under the applicable option agreement. All Stock Options shall be
exercisable, during the optionee's lifetime, only by the optionee or by the
guardian or legal representative of the optionee, it being understood that
the terms "holder" and "optionee" include the guardian and legal
representative of the optionee named in the option agreement and any person
to whom an option is transferred by will or the laws of descent and
distribution or, in the case of a Nonqualified Stock Option, a gift
permitted under the applicable option agreement.
(f) TERMINATION BY DEATH. Unless otherwise determined by the
Committee, if an optionee's employment terminates by reason of death, any
Stock Option held by such optionee may thereafter be exercised, to the
extent then exercisable, or on such accelerated basis as the Committee may
determine, for a period of one year (or such other period as the Committee
may specify in the option agreement) from the date of such death or until
the expiration of the stated term of such Stock Option, whichever period is
the shorter.
(g) TERMINATION BY REASON OF DISABILITY. Unless otherwise determined
by the Committee, if an optionee's employment terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time of
termination, or on such accelerated basis as the Committee may determine,
for a period of three years (or such shorter period as the Committee may
specify in the option agreement) from the date of such termination of
employment or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; PROVIDED, HOWEVER, that if the optionee
dies within such three-year period (or such shorter period), any unexercised
Stock Option held by such optionee shall, notwithstanding the expiration of
such three-year (or such shorter) period, continue to be exercisable to the
extent to which it was exercisable at the time of death for a period of 12
months from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter. In the event of
termination of employment by reason of Disability, if an Incentive Stock
Option is exercised after the expiration of the exercise periods that apply
for purposes of Section 422 of the Code, such Stock Option will thereafter
be treated as a Nonqualified Stock Option.
(h) TERMINATION BY REASON OF RETIREMENT. Unless otherwise determined
by the Committee, if an optionee's employment terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time of
such Retirement, or on such accelerated basis as the Committee may
determine, for a period of three years (or such shorter period as the
Committee may specify in the option agreement) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter; PROVIDED, HOWEVER, that if
the optionee dies within such three-year (or such shorter) period any
unexercised Stock Option held by such optionee shall, notwithstanding the
expiration of such three-year (or such shorter) period, continue to be
exercisable to the extent to which it was exercisable at the time of death
for a period of 12 months from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of Retirement,
if an Incentive Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Nonqualified Stock Option.
(i) OTHER TERMINATION. Unless otherwise determined by the Committee,
if an optionee incurs a Termination of Employment for any reason other than
death, Disability or Retirement, any Stock Option held by such optionee
shall thereupon terminate, except that such Stock Option, to the extent then
exercisable, or on such accelerated basis as the Committee may determine,
may be exercised for the lesser of three months from the date of such
Termination of
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Employment or the balance of such Stock Option's stated term if such
Termination of Employment of the optionee is involuntary; PROVIDED, HOWEVER,
that if the optionee dies within such three-month period, any unexercised
Stock Option held by such optionee shall, notwithstanding the expiration of
such three-month period, continue to be exercisable to the extent to which
it was exercisable at the time of death for a period of 12 months from the
date of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter. Notwithstanding the foregoing, if
an optionee incurs a Termination of Employment at or after a Change in
Control (as defined in Section 9(b)), other than by reason of death,
Disability or Retirement, any Stock Option held by such optionee shall be
exercisable for the lesser of (1) six months and one day from the date of
such Termination of Employment, and (2) the balance of such Stock Option's
stated term. In the event of Termination of Employment, if an Incentive
Stock Option is exercised after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, such Stock Option will
thereafter be treated as a Nonqualified Stock Option.
(j) CASHING OUT OF STOCK OPTION. On receipt of written notice of
exercise, the Committee may elect to cash out all or part of the portion of
the shares of Common Stock for which a Stock Option is being exercised by
paying the optionee an amount, in cash or Common Stock, equal to the excess
of the Fair Market Value of the Common Stock over the option price times the
number of shares of Common Stock for which the Option is being exercised on
the effective date of such cash-out.
Cash-outs pursuant to this Section 5(j) relating to Options held by
optionees who are Reporting Persons shall comply with the "window period"
provisions of Rule 16b-3, to the extent applicable, and, in the case of
cash-outs of Nonqualified Stock Options held by such optionees, the
Committee may determine Fair Market Value under the pricing rule set forth
in Section 6(b)(ii)(2).
(k) CHANGE IN CONTROL CASH-OUT. Notwithstanding any other provision of
the Plan, during the 60-day period from and after a Change in Control (the
"Exercise Period"), unless the Committee shall determine otherwise at the
time of grant, an optionee shall have the right, whether or not the Stock
Option is fully exercisable and in lieu of the payment of the exercise price
for the shares of Common Stock being purchased under the Stock Option and by
giving notice to the Company, to elect (within the Exercise Period) to
surrender all or part of the Stock Option to the Company and to receive
cash, within 30 days of such notice, in an amount equal to the amount by
which the Change in Control Price per share of Common Stock on the date of
such election shall exceed the exercise price per share of Common Stock
under the Stock Option (the "Spread") multiplied by the number of shares of
Common Stock granted under the Stock Option as to which the right granted
under this Section 5(k) shall have been exercised; PROVIDED, HOWEVER, that
if the Change in Control is within six months of the date of grant of a
particular Stock Option held by an optionee who is a Reporting Person, no
such election shall be made by such optionee with respect to such Stock
Option prior to six months from the date of grant. However, if the end of
such 60-day period from and after a Change in Control is within six months
of the date of grant of a Stock Option held by an optionee who is a
Reporting Person, such Stock Option shall be cancelled in exchange for a
cash payment to the optionee, effected on the day which is six months and
one day after the date of grant of such Option, equal to the Spread
multiplied by the number of shares of Common Stock granted under the Stock
Option.
Section 6. STOCK APPRECIATION RIGHTS.
(a) GRANT AND EXERCISE. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Nonqualified Stock Option, such rights may be granted either at or
after the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option.
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A Stock Appreciation Right may be exercised by an optionee in accordance
with Section 6(b) by surrendering the applicable portion of the related Stock
Option in accordance with procedures established by the Committee. Upon such
exercise and surrender, the optionee shall be entitled to receive an amount in
the manner prescribed in Section 6(b). Stock Options which have been so
surrendered shall no longer be exercisable to the extent the related Stock
Appreciation Rights have been exercised.
(b) TERMS AND CONDITIONS. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only at such time or
times and to the extent that the Stock Options to which they relate are
exercisable in accordance with the provisions of Section 5 and this Section
6; PROVIDED, HOWEVER, that a Stock Appreciation Right shall not be
exercisable during the first six months of its term by an optionee who is a
Reporting Person, except that this limitation shall not apply in the event
of death or Disability of the optionee prior to the expiration of the
six-month period.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall
be entitled to receive an amount in cash, shares of Common Stock or both
equal in value to the excess of the Fair Market Value of one share of Common
Stock over the option price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment.
In the case of Stock Appreciation Rights relating to Stock Options held
by optionees who are Reporting Persons, the Committee:
(1) may require that such Stock Appreciation Rights be exercised for
cash only in accordance with the applicable "window period" provisions of
Rule 16b-3; and
(2) in the case of Stock Appreciation Rights relating to Nonqualified
Stock Options, may provide that the amount to be paid in cash upon
exercise of such Stock Appreciation Rights during a Rule 16b-3 "window
period" shall be based on the highest of the daily means between the
highest and lowest reported sales prices of the Common Stock on the New
York Stock Exchange or other national securities exchange on which the
shares are listed or on NASDAQ, as applicable, on any day during such
"window period."
(iii) Stock Appreciation Rights shall be transferable only to permitted
transferees of the underlying Stock Option in accordance with Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or
part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set forth in
Section 3 on the number of shares of Common Stock to be issued under the
Plan, but only to the extent of the number of shares as to which the Stock
Appreciation Right is exercised at the time of exercise.
Section 7. RESTRICTED STOCK.
(a) ADMINISTRATION. Shares of Restricted Stock may be awarded either alone
or in addition to other Awards granted under the Plan. The Committee shall
determine the officers and employees to whom and the time or times at which
grants of Restricted Stock will be awarded, the number of shares to be awarded
to any participant (subject to the aggregate limit on grants to individual
participants set forth in Section 3), the conditions for vesting, the time or
times within which such Awards may be subject to forfeiture and any other terms
and conditions of the Awards, in addition to those contained in 7(c).
Subject to the immediately succeeding sentence, the Committee shall in the
case of Covered Employees, and may in the case of other Participants, condition
the grant or vesting of Restricted
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Stock upon the attainment of Performance Goals established before or at the time
of grant. Notwithstanding the foregoing, the Committee shall have the discretion
to grant to an employee who has become entitled to an award under the Company's
Management Incentive Compensation Plan, in payment of all or any part of such
award, shares of Restricted Stock that shall vest without regard to the
attainment of Performance Goals. The Committee may, in addition to requiring
satisfaction of any applicable Performance Goals, also condition vesting upon
the continued service of the participant. The provisions of Restricted Stock
Awards (including the applicable Performance Goals) need not be the same with
respect to each recipient.
(b) AWARDS AND CERTIFICATES. Shares of Restricted Stock shall be evidenced
in such manner as the Committee may deem appropriate, including book-entry
registration or issuance of one or more stock certificates. Any certificate
issued in respect of shares of Restricted Stock shall be registered in the name
of such participant and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award, substantially in the
following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the NEWCO Stock Incentive Plan and a Restricted Stock
Agreement. Copies of such Plan and Agreement are on file at the offices of
NEWCO at ."
The Committee may require that the certificates evidencing such shares be
held in custody by the Company until the restrictions thereof shall have lapsed
and that, as a condition of any Award of Restricted Stock, the participant shall
have delivered a stock power, endorsed in blank, relating to the Common Stock
covered by such Award.
(c) TERMS AND CONDITIONS. Shares of Restricted Stock shall be subject to
the following terms and conditions:
(i) Subject to the provisions of the Plan (including Section 5(d)) and
the Restricted Stock Agreement referred to in Section 7(c)(vi), during the
period, if any, set by the Committee, commencing with the date of such Award
for which such participant's continued service is required (the "Restriction
Period"), and until the later of (i) the expiration of the Restriction
Period and (ii) the date the applicable Performance Goals (if any) are
satisfied, the participant shall not be permitted to sell, assign, transfer,
pledge or otherwise encumber shares of Restricted Stock. Within these
limits, the Committee may provide for the lapse of restrictions based upon
period of service in installments or otherwise and may accelerate or waive,
in whole or in part, restrictions based upon period of service or upon
performance; PROVIDED, HOWEVER, that in the case of Restricted Stock with
respect to which a participant is a Covered Employee, any applicable
Performance Goals have been satisfied.
(ii) Except as provided in this paragraph (ii) and Section 7(c)(i) and
the Restricted Stock Agreement, the participant shall have, with respect to
the shares of Restricted Stock, all of the rights of a shareholder of the
Company holding the class or series of Common Stock that is the subject of
the Restricted Stock, including, if applicable, the right to vote the shares
and the right to receive any cash dividends. If so determined by the
Committee in the applicable Restricted Stock Agreement and subject to
Section 13(f) of the Plan, (1) cash dividends on the class or series of
Common Stock that is the subject of the Restricted Stock Award shall be
automatically deferred and reinvested in additional Restricted Stock, held
subject to the vesting of the underlying Restricted Stock, or held subject
to meeting Performance Goals applicable only to dividends, and (2) dividends
payable in Common Stock shall be paid in the form of Restricted Stock of the
same class as the Common Stock with which such dividend was paid, held
subject to the vesting of the underlying Restricted Stock, or held subject
to meeting Performance Goals applicable only to dividends.
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(iii) Except to the extent otherwise provided in the applicable
Restricted Stock Agreement, any applicable employment agreement and Section
7(c)(i), 7(c)(iv) and 9(a)(ii), upon a participant's Termination of
Employment for any reason during the Restriction Period or before the
applicable Performance Goals are satisfied, all shares still subject to
restriction shall be forfeited by the participant.
(iv) Except to the extent otherwise provided in Section 9(a)(ii), in the
event that a participant retires or such participant's employment is
involuntarily terminated, the Committee shall have the discretion to waive
in whole or in part any or all remaining restrictions (other than, in the
case of Restricted Stock with respect to which a participant is a Covered
Employee, satisfaction of the applicable Performance Goals to the extent
necessary for the shares to be deductible by the Company or its Affiliates,
unless the participant's employment is terminated by reason of death or
Disability) with respect to any or all of such participant's shares of
Restricted Stock.
(v) If and when the applicable Performance Goals are satisfied and the
Restriction Period expires without a prior forfeiture of the Restricted
Stock, unlegended certificates of such shares shall be delivered to the
participant upon surrender of the legended certificates.
(vi) Each Award shall be confirmed by, and be subject to the terms of, a
Restricted Stock Agreement.
Section 8. PERFORMANCE UNITS
(a) ADMINISTRATION. Performance Units may be awarded either alone or in
addition to other Awards granted under the Plan. Performance Units may be
denominated in shares of Common Stock or cash, or may represent the right to
receive dividend equivalents with respect to shares of Common Stock, as the
Committee shall determine. The Committee shall determine the officers and
employees to whom and the time or times at which Performance Units shall be
awarded, the form and number of Performance Units to be awarded to any
participant (subject to the aggregate limit on grants to individual participants
set forth in Section 3), the duration of the Award Cycle and any other terms and
conditions of the Award, in addition to those contained in Section 8(b).
The Committee shall condition the settlement of Performance Units upon the
attainment of Performance Goals. The provisions of such Awards (including the
applicable Performance Goals) need not be the same with respect to each
recipient.
(b) TERMS AND CONDITIONS. Performance Units Awards shall be subject to the
following terms and conditions:
(i) Subject to the provisions of the Plan and the Performance Unit
Agreement referred to in Section 8(b)(vi), Performance Units may not be
sold, assigned, transferred, pledged or otherwise encumbered during the
Award Cycle. At the expiration of the Award Cycle, the Committee shall
evaluate actual performance in light of the Performance Goals for such Award
and shall determine the number of Performance Units granted to the
participant which have been earned and the Committee may then elect to
deliver cash, shares of Common Stock, or a combination thereof, in
settlement of the earned Performance Units, in accordance with the terms
thereof.
(ii) Except to the extent otherwise provided in the applicable
Performance Unit Agreement and Sections 8(b)(iii) and 9(a)(iii), upon a
participant's Termination of Employment for any reason during the Award
Cycle or before the applicable Performance Goals are satisfied, the rights
to the shares still covered by the Performance Units Award shall be
forfeited by the participant.
(iii) Except to the extent otherwise provided in Section 9(a)(iii), in
the event that a participant's employment is involuntarily terminated, the
Committee shall have the discretion to waive
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in whole or in part any or all remaining payment limitations (other than, in
the case of Performance Units with respect to which a participant is a
Covered Employee, satisfaction of the applicable Performance Goals unless
the participant's employment is terminated by reason of death or Disability)
with respect to any or all of such participant's Performance Units.
(iv) A participant may elect to further defer receipt of the Performance
Units payable under an Award (or an installment of an Award) for a specified
period or until a specified event, subject in each case to the Committee's
approval and to such terms as are determined by the Committee (the "Elective
Deferral Period"). Subject to any exceptions adopted by the Committee, such
election must generally be made prior to commencement of the Award Cycle for
the Award (or for such installment of an Award).
(v) If and when the applicable Performance Goals are satisfied and the
Elective Deferral Period expires without a prior forfeiture of the
Performance Units, payment in accordance with Section 8(b)(i) hereof shall
be made to the participant.
(vi) Each Award shall be confirmed by, and be subject to the terms of, a
Performance Unit Agreement.
Section 9. CHANGE IN CONTROL PROVISIONS.
(a) EFFECT OF EVENT. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control:
(i) Any Stock Options and Stock Appreciation Rights outstanding as of
the date of such Change in Control and not then exercisable and vested shall
become fully exercisable and vested.
(ii) The restrictions applicable to any Restricted Stock shall lapse,
and such Restricted Stock shall become free of all restrictions and become
fully vested and transferable.
(iii) All Performance Units shall be considered to be earned and payable
in full and any deferral or other restriction shall lapse and such
Performance Units shall be settled in cash as promptly as is practicable.
(b) DEFINITION OF CHANGE IN CONTROL. For purposes of the Plan, a "Change
in Control" shall mean the happening of any of the following events:
(i) any Person is or becomes the "beneficial owner" (within the meaning
of Rule 13d-3 promulgated under Section 13 of the Exchange Act), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its affiliates other than in connection with the acquisition by
the Company or its affiliates of a business) representing 20% or more of
either the then outstanding shares of common stock of the Company or the
combined voting power of the Company's then outstanding securities; or
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the
date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was
previously so approved; or
(iii) there is consummated a merger or consolidation of the Company (or
any direct or indirect subsidiary of the Company) with any other
corporation, other than (i) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior to such
merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity or any parent
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thereof), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company,
at least 80% of the combined voting power of the voting securities of the
Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the beneficial owner,
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its subsidiaries other than in connection with
the acquisition by the Company or its subsidiaries of a business)
representing 20% or more of either the then outstanding shares of common
stock of the Company or the combined voting power of the Company's then
outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated a sale or
disposition by the Company of all or substantially all of the Company's
assets, other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least 80% of the
combined voting power of the voting securities of which are owned by Persons
in substantially the same proportions as their ownership of the Company
immediately prior to such sale.
For purposes of the above definition of Change in Control, "Person"
shall have the meaning set forth in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (i) the Company or any of its subsidiaries, (ii) a trustee
or other fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company.
(c) CHANGE IN CONTROL PRICE. For purposes of the Plan, "Change in Control
Price" means the higher of (i) the highest reported sales price, regular way, of
a share of Common Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national exchange on which such shares are
listed or on NASDAQ during the 60-day period prior to and including the date of
a Change in Control or (ii) if the Change in Control is the result of a tender
or exchange offer or a Corporate Transaction, the highest price per share of
Common Stock paid in such tender or exchange offer or Corporate Transaction;
PROVIDED, HOWEVER, that (x) in the case of a Stock Option which (A) is held by
an optionee who is an officer or director of the Company and is subject to
Section 16(b) of the Exchange Act and (B) was granted within 180 days of the
Change in Control, then the Change in Control Price for such Stock Option shall
be the Fair Market Value of the Common Stock on the date such Stock Option is
exercised or deemed exercised and (y) in the case of Incentive Stock Options and
Stock Appreciation Rights relating to Incentive Stock Options, the Change in
Control Price shall be in all cases the Fair Market Value of the Common Stock on
the date such Incentive Stock Option or Stock Appreciation Right is exercised.
To the extent that the consideration paid in any such transaction described
above consists all or in part of securities or other noncash consideration, the
value of such securities or other noncash consideration shall be determined in
the sole discretion of the Board.
Section 10. LOANS. The Company may make loans to a participant in
connection with Awards subject to the following terms and conditions and such
other terms and conditions not inconsistent with the Plan as the Committee shall
impose from time to time, including without limitation (i) the rate of interest,
if any, (ii) the extent to which the participant shall be required to provide
collateral for such loan, and (iii) whether such loan shall be recourse or
nonrecourse.
No loan made under the plan shall exceed the sum of (i) the aggregate price
payable with respect to the Award in relation to which the loan is made, plus
(ii) the amount of the reasonably estimated combined amounts of Federal and
state income taxes payable by the participant.
No loan shall have an initial term exceeding ten (10) years; PROVIDED,
HOWEVER, that the loans under the Plan shall be renewable at the discretion of
the Committee; and FURTHER PROVIDED, HOWEVER,
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that the indebtedness under each loan shall become due and payable, as the case
may be, on a date no later than (i) one year after Termination of Employment due
to death, Retirement or Disability, or (ii) the day of Termination of Employment
for any reason other than death, Retirement or Disability.
Loans under the Plan may be satisfied by the participant, as determined by
the Committee, in cash or, with the consent of the Committee, in whole or in
part in the form of unrestricted Common Stock already owned by the participant
where such Common Stock shall be valued at Fair Market Value on the date of such
payment.
When a loan shall have been made, Common Stock with a Fair Market Value on
the date of such loan equivalent to the amount of the loan (or such other
security as shall be required by the Committee in its sole discretion) may be
pledged by the participant to the Company as security for payment of the unpaid
balance of the loan. Any portions of such Common Stock may, in the discretion of
the Committee, be released from time to time as it deems not to be needed as
security.
The making of any loan is subject to satisfying all applicable laws, as well
as any regulations and rules of the Federal Reserve Board and any other
governmental agency having jurisdiction.
Section 11. TERM, AMENDMENT AND TERMINATION. The Plan will terminate 10
years after the effective date of the Plan. Awards outstanding as of such date
shall not be affected or impaired by the termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would (i) impair the rights of
an optionee under a Stock Option or a recipient of a Stock Appreciation Right,
Restricted Stock Award or Performance Unit Award theretofore granted without the
optionee's or recipient's consent, except such an amendment made to cause the
Plan to qualify for the exemption provided by Rule 16b-3, or (ii) disqualify the
Plan from the exemption provided by Rule 16b-3 or from the provisions of Section
162(m)(4)(c) of the Code. In addition, no such amendment shall be made without
the approval of the Company's shareholders to the extent such approval is
required by law or agreement.
The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any holder without the holder's consent except such an
amendment made to cause the Plan or Award to qualify for the exemption provided
by Rule 16b-3.
Subject to the above provisions, the Board shall have authority to amend the
Plan to take into account changes in law and tax and accounting rules, as well
as other developments and to grant Awards which qualify for beneficial treatment
under such rules without shareholder approval.
Section 12. UNFUNDED STATUS OF PLAN. It is presently intended that the
Plan constitute an "unfunded" plan for incentive and deferred compensation. The
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Common Stock or make payments;
PROVIDED, HOWEVER, that, unless the Committee otherwise determines, the
existence of such trusts or other arrangements is consistent with the "unfunded"
status of the Plan.
Section 13. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing or receiving shares
pursuant to an Award to represent to and agree with the Company in writing that
such person is acquiring the shares without a view to the distribution thereof.
The certificates for such shares may include any legend which the Committee
deems appropriate to reflect any restrictions on transfer.
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Notwithstanding any other provision of the Plan or agreements made pursuant
thereto, the Company shall not be required to issue or deliver any certificate
or certificates for shares of Common Stock under the Plan prior to fulfillment
of all of the following conditions:
(1) The listing or approval for listing upon notice of issuance, of such
shares on the New York Stock Exchange, Inc., or such other securities
exchange as may at the time be the principal market for the Common Stock;
(2) Any registration or other qualification of such shares of the
Company under any state or Federal law or regulation, or the maintaining in
effect of any such registration or other qualification which the Committee
shall, in its absolute discretion upon the advice of counsel, deem necessary
or advisable; and
(3) The obtaining of any other consent, approval, or permit from any
state or Federal governmental agency which the Committee shall, in its
absolute discretion after receiving the advice of counsel, determine to be
necessary or advisable,
(b) Nothing contained in the Plan shall prevent the Company or any Affiliate
from adopting other or additional compensation arrangements for its employees.
(c) The adoption of the Plan shall not confer upon any employee any right to
continued employment nor shall it interfere in any way with the right of the
Company or any Affiliate to terminate the employment of any employee at any
time.
(d) No later than the date as of which an amount first becomes includible in
the gross income of the participant for federal income tax purposes with respect
to any Award under the Plan, the participant shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any federal,
state, local or foreign taxes of any kind required by law to be withheld with
respect to such amount. Unless otherwise determined by the Company, withholding
obligations may be settled with Common Stock, including Common Stock that is
part of the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due the participant. The Committee may establish such procedures as it
deems appropriate, including the making of irrevocable elections, for the
settlement of withholding obligations with Common Stock.
(e) At the time of grant, the Committee may provide in connection with any
grant made under the Plan that the shares of Common Stock received as a result
of such grant shall be subject to a right of first refusal pursuant to which the
participant shall be required to offer to the Company any shares that the
participant wishes to sell at the then Fair Market Value of the Common Stock,
subject to such other terms and conditions as the Committee may specify at the
time of grant.
(f) The reinvestment of dividends in additional Restricted Stock at the time
of any dividend payment shall only be permissible if sufficient shares of Common
Stock are available under Section 3 for such reinvestment (taking into account
then outstanding Stock Options and other Awards).
(g) The Committee shall establish such procedures as it deems appropriate
for a participant to designate a beneficiary to whom any amounts payable in the
event of the participant's death are to be paid or by whom any rights of the
participant, after the participant's death, may be exercised.
(h) In the case of a grant of an Award to any employee of an Affiliate, the
Company may, if the Committee so directs, issue or transfer the shares of Common
Stock, if any, covered by the Award to the Affiliate, for such lawful
consideration as the Committee may specify, upon the condition or understanding
that the Affiliate will transfer the shares of Common Stock to the employee in
accordance with the terms of the Award specified by the Committee pursuant to
the provisions of the Plan.
(i) Notwithstanding any other provision of the Plan, if any right granted
pursuant to this Plan would make a Change in Control transaction ineligible for
pooling of interests accounting under
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APB No. 16 that but for the nature of such grant would otherwise be eligible for
such accounting treatment, the Committee shall have the ability to substitute
for the cash payable pursuant to such grant Common Stock (or the common stock of
the issuer for which the Common Stock is being exchanged in such Change in
Control transaction) with a Fair Market Value equal to the cash that would
otherwise be payable hereunder.
(j) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Missouri,
without reference to principles of conflict of laws.
Section 14. EFFECTIVE DATE OF PLAN. The Plan shall be effective at the
Effective Time, but only if it is previously approved by the affirmative vote of
the holders of a majority of the securities of KCPL present, or represented, and
entitled to vote at a meeting duly held in accordance with the applicable laws
of the state of Missouri.
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ANNEX E
NEWCO
MANAGEMENT INCENTIVE COMPENSATION PLAN
I
PURPOSE AND EFFECTIVE TIME
This NEWCO Management Incentive Compensation Plan (the "Plan") is designed
to provide a significant and flexible economic opportunity to selected officers
and employees of the Company and its Affiliates as a reflection of their
individual and group contributions to the success of the Company and its
Affiliates. Payments pursuant to Section IX of the Plan are intended to qualify
under Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as amended, as
excluded from the term "applicable employee remuneration" (such payments being
hereinafter referred to as "Excluded Income"). The Plan shall be effective at
the Effective Time, as defined below, if the shareholder approvals required by
Section XII of the Plan are obtained.
II
DEFINITIONS
"AFFILIATE" means (i) a corporation at least 50% of the common stock or
voting power of which is owned, directly or indirectly, by the Company and (ii)
any other corporation or other entity controlled by the Company and designated
by the Committee from time to time as such.
"BOARD" shall mean the Board of Directors of the Company.
"CHANGE IN CONTROL" shall mean the happening of any of the following events:
(a) any Person is or becomes the "beneficial owner" (within the meaning of
Rule 13d-3 promulgated under Section 13 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its affiliates other than in
connection with the acquisition by the Company or its affiliates of a business)
representing 20% or more of either the then outstanding shares of common stock
of the Company or the combined voting power of the Company's then outstanding
securities; or
(b) the following individuals cease for any reason to constitute a majority
of the number of directors then serving: individuals who, at the Effective Time,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of the Company) whose appointment or election by the Board
or nomination for election by the Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment, election or nomination
for election was previously so approved; or
(c) there is consummated a merger or consolidation of the Company (or any
direct or indirect subsidiary of the Company) with any other corporation, other
than (i) a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent thereof) in
combination with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, at least 80% of the
combined voting power of the voting securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person is
or becomes the beneficial owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such Person any
securities acquired
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directly form the Company or its subsidiaries other than in connection with the
acquisition by the Company or its subsidiaries of a business) representing 20%
or more of either the then outstanding shares of common stock of the Company or
the combined voting power of the Company's then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete liquidation
or dissolution of the Company or there is consummated an agreement for the sale
or disposition by the Company of all or substantially all of the Company's
assets, other than a sale or disposition by the Company of all or substantially
all of the Company's assets to an entity, at least 80% of the combined voting
power of the voting securities of which are owned by Persons in substantially
the same proportions as their ownership of the Company immediately prior to such
sale.
For purposes of the above definition of Change in Control, "Person" shall have
the meaning set forth in Section 3(a)(9) of the Exchange Act, as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall not
include (i) the Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any of its subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITTEE" shall mean the Compensation Committee of the Board, or such
other committee of the Board as the Board may from time to time determine,
which, except as specifically decided otherwise by the Board, is composed solely
of not less than two Disinterested Persons, each of whom shall be appointed by
and serve at the pleasure of the Board.
"COMPANY" shall mean NEWCO (as defined herein), a Missouri corporation.
"COVERED EMPLOYEES" shall mean Participants designated by the Committee
prior to the award of an Incentive Award opportunity hereunder who are or are
expected to be "covered employees" within the meaning of Section 162(m)(3) of
the Code for the Incentive Period as to which an Incentive Award hereunder is
payable, who have or are expected to have compensation in excess of the
limitation provided in Section 162(m) of the Code and for whom the Committee
intends that amounts payable hereunder constitute Excluded Income.
"DISINTERESTED PERSON" shall mean a member of the Board who qualifies as an
"outside director" for purposes of Section 162(m) of the Code.
"EFFECTIVE TIME" shall mean the Effective Time as defined in the Merger
Agreement.
"INCENTIVE AWARD" shall mean an award payable to a Participant pursuant to
the terms of the Plan, including a Special Incentive Award.
"INCENTIVE PERIOD" shall mean the period with respect to which a Participant
is eligible to earn an Incentive Award.
"MERGER AGREEMENT" shall mean the Amended and Restated Agreement and Plan of
Merger by and among Kansas City Power & Light Company, KC Merger Sub, Inc.,
UtiliCorp United Inc., and KC United Corp., dated as of January 19, 1996,
amended and restated as of May 20, 1996. Pursuant to the Merger Agreement, KCPL
will, at the Effective Time, change its name to
- ------- ("Newco").
"PARTICIPANT" shall have the meaning set forth in Article IV hereof.
"PAYMENT DATE" shall mean the date following the conclusion of a particular
Incentive Period on which the Committee certifies that applicable Performance
Goals have been satisfied and authorizes payment of corresponding Incentive
Awards.
"PERFORMANCE GOALS" shall have the meaning set forth in Article IX hereof.
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"SPECIAL INCENTIVE AWARD" shall have the meaning set forth in Article IX
hereof.
"TARGET INCENTIVE AWARD" shall mean the amount determined by multiplying a
Participant's base salary as of the last day of the applicable Incentive Period
by a percentage designated by the Committee in its sole discretion at the time
the award is granted, which percentage need not be the same for each
Participant.
III
ADMINISTRATION
The Plan shall be administered by the Committee. In administering the Plan,
the Committee may at its option employ compensation consultants, accountants and
counsel (who may be the compensation consultants, independent auditors and
outside counsel of the Company or an Affiliate) and other persons to assist or
render advice to the Committee, all at the expense of the Company. The Committee
shall have sole authority to make rules and regulations relating to the
administration of the Plan, and any interpretations and decisions of the
Committee with respect to the Plan shall be final and binding.
IV
ELIGIBILITY
The Committee shall, in its sole discretion, determine for each Incentive
Period those officers and salaried employees of the Company and its Affiliates
who shall be eligible to participate in the Plan (the "Participants") for such
Incentive Period based upon such Participants' opportunity to have a substantial
impact on the operating results of the Company or an Affiliate. Nothing
contained in the Plan shall be construed as or be evidence of any contract of
employment with any Participant for a term of any length nor shall participation
in the Plan in any Incentive Period by any Participant require continued
participation by such Participant in any subsequent Incentive Period.
V
DETERMINATION OF INCENTIVE AWARDS
Subject to Article IX hereof, the amount and terms of each Incentive Award
to a Participant shall be determined by and in the discretion of the Committee.
The Committee may condition the earning of an Incentive Award upon the
attainment of specified performance goals, measured over a period ending no
later than the end of the applicable Incentive Period. Such performance goals
may relate to the Participant or the Company, or any Affiliate, division or
department of the Company for or within which the Participant is primarily
employed, or upon such other factors or criteria as the Committee shall
determine, and may be different for each Participant. Incentive Awards payable
under the Plan will consist of an award from the Company, based upon a
percentage (which may exceed 100%) of the Target Incentive Award and, if
applicable, the degree of achievement of such performance goals. Incentive
Awards under this Plan for Covered Employees shall be subject to preestablished
Performance Goals in accordance with Article IX hereof. Except with respect to
Covered Employees, the Committee may, in its sole discretion, increase or
decrease the amount of any Incentive Award payable to a participant and, in
recognition of changed or special circumstances, may award Incentive Awards to
Participants even though the Incentive Awards are not earned. Incentive Awards
earned or otherwise awarded will be paid as soon as administratively feasible on
or after the Payment Date. Incentive Awards shall be paid in cash, shares
(including restricted shares) of the Company's common stock, par value $.01 per
share, or in such combination of cash and shares or such other form as the
Committee shall determine.
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VI
TERMINATION OF EMPLOYMENT
In the event that a Participant's employment with the Company and its
Affiliates terminates for any reason during the Incentive Period with respect to
any Incentive Awards, the balance of any Incentive Award which remains unpaid at
the time of such termination shall be payable to the Participant, or forfeited
by the Participant, in accordance with the terms of the award granted by the
Committee; PROVIDED, HOWEVER, that in the case of a Covered Employee, to the
extent necessary for such amount to be deductible by the Company or its
affiliates, no amount shall be payable pursuant to the Plan unless the
Performance Goals are satisfied or the termination of employment of the Covered
Employee is due to death or disability. A Participant who remains employed
through the Incentive Period but is terminated prior to the Payment Date shall
be entitled to receive any Incentive Award payable to such Participant with
respect to such Incentive Period.
VII
AMENDMENT AND DISCONTINUANCE
The Board shall have the right to amend, alter, discontinue or otherwise
modify the Plan from time to time but no such modification shall, without the
consent of the Participant affected, impair any award made prior to the
effective date of the modification.
VIII
MISCELLANEOUS
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation of
trusts or other arrangements to meet the payment obligations created under the
Plan; PROVIDED, HOWEVER, that, unless the Committee otherwise determines, the
existence of such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan. The Plan shall be governed by and construed in
accordance with the laws of the State of Missouri, without regard to its
principles of conflict of laws.
IX
PROCEDURES FOR CERTAIN DESIGNATED PARTICIPANTS
Incentive Awards under the Plan to Participants who are Covered Employees
shall be subject to preestablished Performance Goals as set forth herein.
Notwithstanding Article V hereof, the Committee shall not have discretion to
modify the terms of awards to such Participants except as specifically set forth
in this Article IX.
(a) TARGET BONUS. On or before the 90th day of each Incentive Period, and
in any event before 25% or more of the Incentive Period has elapsed, the
Committee shall establish in writing specific Performance Goals for the
Incentive Period, upon the attainment of which will be conditioned the payment
of Incentive Awards ("Special Incentive Awards") to such of the Participants who
may be Covered Employees. A Special Incentive Award shall consist of an award
from the Company to be based upon a percentage (which may exceed 100%) of a
Target Incentive Award. The extent, if any, to which a Special Incentive Award
will be payable will be based upon the degree of achievement of preestablished
Performance Goals over a specified Incentive Period; PROVIDED, HOWEVER, that the
Committee may, in its sole discretion, reduce the amount which would otherwise
be payable with respect to an Incentive Period.
(b) INCENTIVE PERIOD. The Incentive Period will be a period of up to
twelve months, unless a shorter period is otherwise selected and established in
writing by the Committee at the time the Performance Goals are established with
respect to such Incentive Period.
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(c) PERFORMANCE GOALS. The Performance Goals established by the Committee
at the time a Special Incentive Award is granted will be based on one or more of
the following: earnings per share, market share, stock price, sales, costs, net
operating income, cash flow, retained earnings, return on equity, return on
assets, economic value added, results of customer satisfaction surveys,
aggregate product price and other product price measures, safety record, service
reliability, demand-side management (including conservation and load
management), operating and maintenance cost management, energy production
availability, and individual performance measures; PROVIDED, HOWEVER, that all
Performance Goals shall be objective performance goals satisfying the
requirements for "performance-based compensation" within the meaning of Section
162(m)(4) of the Code. Such Performance Goals also may be based on the
attainment of levels of performance of the Company and/or any Affiliates under
one or more of the measures described above relative to the performance of other
corporations.
(d) PAYMENT OF AN INCENTIVE AWARD. At the time the Special Incentive Award
is granted, the Committee shall prescribe a formula to determine the percentage
of the Target Incentive Award which may be payable based upon the degree of
attainment of the Performance Goals during the Incentive Period. If the minimum
Performance Goals established by the Committee are not met, no payment will be
made to a Participant who is a Covered Employee. To the extent that the minimum
Performance Goals are satisfied or surpassed, and upon written certification by
the Committee that the Performance Goals have been satisfied to a particular
extent and any other material terms and conditions of the Special Incentive
Awards have been satisfied, payment shall be made on the Payment Date in
accordance with the prescribed formula based upon a percentage of the Target
Incentive Award unless the Committee determines, in its sole discretion, to
reduce the payment to be made.
(e) MAXIMUM PAYABLE. The maximum amount payable to a Covered Employee
under this Plan for any fiscal year of the Company pursuant to this Plan shall
be $3,000,000.
X
CHANGE IN CONTROL
Notwithstanding any other provision of this Plan, (i) upon a Change in
Control, each Participant who is employed by the Company or an Affiliate
immediately before the Change in Control shall be entitled to receive a payment
equal to his or her Target Incentive Award for the Incentive Period that
includes the date of the Change in Control, and (ii) any Incentive Award that
becomes payable to such a Participant for that Incentive Period, to the extent
that it is duplicative of the amount of the payment made to such Participant
pursuant to clause (i) of this Article X, shall be reduced (but not below zero)
by such prior payment.
XI
DEFERRAL ELECTIONS
The Committee may at its option establish written procedures pursuant to
which Participants are permitted to defer the receipt of Incentive Awards
payable hereunder.
XII
SHAREHOLDER APPROVAL
This Plan shall not become effective with respect to individuals who are
Covered Employees unless it shall have been approved by the affirmative vote of
the holders of a majority of the securities of the Company present, or
represented, and entitled to vote at a meeting duly held in accordance with the
applicable laws of the state of Missouri.
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ANNEX F
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made and entered into as of the day of
, 199 , by and between , a Missouri
corporation formerly known as Kansas City Power & Light Company (the "Company"),
and A. Drue Jennings (the "Executive");
WHEREAS, the Executive is currently serving as Chairman, President and Chief
Executive Officer of the Company, and the Company desires to secure the
continued employment of the Executive in accordance herewith;
WHEREAS, the Company has entered into a severance agreement (the "Severance
Agreement") with the Executive as of May 7, 1993, as amended on January 15,
1996;
WHEREAS, pursuant to the Amended and Restated Agreement and Plan of Merger
(the "Merger Agreement"), dated as of January 19, 1996, as amended and restated
as of May 20, 1996, by and among the Company, KC Merger Sub Inc., a Delaware
corporation, UtiliCorp United Inc., a Delaware corporation ("UCU"), and the KC
United Corp., a Delaware corporation, the parties thereto have agreed to merge
pursuant to the terms thereof;
WHEREAS, the Executive is willing to commit himself to be employed by the
Company on the terms and conditions herein set forth and thus to forego
opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement, as of the
Effective Date, as hereinafter defined, setting forth the terms and conditions
for the employment relationship of the Executive with the Company during the
Employment Period (as hereinafter defined).
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. EMPLOYMENT AND TERM.
(a) EMPLOYMENT. The Company agrees to employ the Executive, and the
Executive agrees to be employed by the Company, in accordance with the terms and
provisions of this Agreement during the term thereof (as described below).
(b) TERM. The term of this Agreement shall commence as of the Closing Date
(the "Effective Date") of the "UCU Merger" (as defined in the Merger Agreement)
and shall continue until the fifth anniversary of the Effective Date (such term
being referred to hereinafter as the "Employment Period"); and FURTHER PROVIDED,
HOWEVER, that if the Merger Agreement is terminated, then, at the time of such
termination, this Agreement shall be deemed cancelled and of no force or effect.
As a condition to the "Mergers" (as defined in the Merger Agreement), the
parties hereto agree that the Company shall be responsible for all of the
premises, covenants and agreements set forth in this Agreement.
2. DUTIES AND POWERS OF EXECUTIVE.
(A) POSITION; LOCATION. During the Employment Period, the Executive shall
serve from the Effective Date until the date of the annual meeting of
shareholders of the Company that occurs in 2002, as the Chairman of the Board of
Directors of the Company (the "Board") with such authority, duties and
responsibilities with respect to such position as set forth on Annex A attached
hereto, and thereafter the Executive shall serve as the Vice Chairman of the
Board with such authority, duties and responsibilities with respect to such
position as set forth on Annex A attached hereto. The titles, authority, duties
and responsibilities set forth in Annex A attached hereto may be changed from
time to time but only with the mutual written agreement of the Executive and the
Company. The Executive's services shall be performed primarily at the Company's
headquarters which shall be located in the Kansas City metropolitan area.
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(b) BOARD MEMBERSHIP. The Executive shall be a member of the Board on the
first day of the Employment Period, and the Board shall propose the Executive
for re-election to the Board throughout the Employment Period.
(c) ATTENTION. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
3. COMPENSATION. The Executive shall receive the following compensation
for his services hereunder to the Company:
(a) SALARY. During the Employment Period, the Executive's annual base
salary (the "Annual Base Salary"), payable in accordance with the Company's
general payroll practices, in effect from time to time, shall be at the
annual rate established by the Board, but in no event less than the greater
of his annual base salary with the Company as in effect as of the day before
the Effective Date and the annual base salary of any other senior executive
officer of the Company or its subsidiaries. The Board may from time to time
direct such upward adjustments in Annual Base Salary as the Board deems to
be necessary or desirable, including, without limitation, adjustments in
order to reflect increases in the cost of living. The Annual Base Salary
shall not be reduced after any increase thereof. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation of the
Company under this Agreement.
(b) INCENTIVE COMPENSATION. During the Employment Period, the
Executive shall participate in short-term incentive compensation plans and
long-term incentive compensation plans (the latter to consist of plans
offering stock options, restricted stock and other long-term incentive
compensation) providing him with the opportunity to earn, on a year-by-year
basis, short-term and long-term incentive compensation (the "Incentive
Compensation") at least equal to the greater of (i) the amounts that he had
the opportunity to earn under the comparable plans of the Company as in
effect immediately before the Effective Time, or (ii) the amounts that any
other senior executive officer of the Company has the opportunity to earn
under the plans of the Company and its subsidiaries for that year.
(c) RETIREMENT, INCENTIVE AND WELFARE BENEFIT PLANS. In addition to
3(b), during the Employment Period and so long as the Executive is employed
by the Company, he shall be eligible to participate in all other incentive,
stock option, restricted stock, performance unit, savings, retirement and
welfare plans, practices, policies and programs applicable generally to
employees and/or senior executive officers of the Company and its
subsidiaries, except with respect to any benefits under any plan, practice,
policy or program to which the Executive has waived his rights in writing.
Notwithstanding anything in this Agreement to the contrary, and in addition
to any other payments or benefits provided hereunder, for all periods
following the termination of the Executive's employment (i) for any reason
during the term of this Agreement but after the Executive has satisfied the
requirements for early retirement under any retirement plans or arrangements
maintained by the Company, as in effect on the Effective Date or by the
Company after the Effective Date (the "Plans") or (ii) at any other time
upon the consent of the Board, the Company shall provide the Executive (and,
if elected by the Executive pursuant to the following sentence, his
designated beneficiary) with retirement income, in addition to any benefits
provided under the Plans, in an amount each year during the Executive's life
(and, if elected by the Executive pursuant to the following sentence, the
life of his designated beneficiary) equal to the
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excess, if any, of (i) sixty percent (60%) of the Executive's Annual Base
Salary in effect immediately prior to his termination of employment (reduced
based upon the actuarial assumptions set forth in the Company's
tax-qualified defined benefit retirement plan (the "Qualified Plan") if the
Executive elects a form of benefit payment other than a straight life
annuity pursuant to the following sentence) over (ii) the aggregate amount
of retirement income, if any, that would have been paid to the Executive
under the Plans during such year had the Executive elected to receive his
benefits thereunder in the same form as he elects to receive his benefits
hereunder pursuant to the following sentence. The Executive may elect to
receive the amounts payable pursuant to the preceding sentence in any form
permitted under the Qualified Plan. Such election must be made not less than
90 days preceding the payment of any such benefits. In addition, the Company
shall assume and continue the Severance Agreement.
(d) INSURANCE. During the Employment Period, the Company shall provide
the Executive with life insurance coverage providing a death benefit to such
beneficiary or beneficiaries as the Executive may designate of not less than
three times his Annual Base Salary.
(e) EXPENSES. The Company shall reimburse the Executive for all
expenses, including those for travel and entertainment, properly incurred by
him in the performance of his duties hereunder in accordance with policies
established from time to time by the Board.
(f) FRINGE BENEFITS. During the Employment Period and so long as the
Executive is employed by the Company, he shall be entitled to receive fringe
benefits in accordance with the plans, practices, programs and policies of
the Company from time to time in effect, commensurate with his position and
at least the same as those received by any senior executive officer of the
Company.
4. TERMINATION OF EMPLOYMENT.
(a) DEATH. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.
(b) BY THE COMPANY FOR CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean the conviction of the Executive for the commission
of a felony which, at the time of such commission, has a materially adverse
effect on the Company.
(c) BY THE COMPANY WITHOUT CAUSE. Notwithstanding any other provision of
this Agreement, the Company may terminate the Executive's employment other than
by a termination for Cause during the Employment Period, but only upon the
affirmative vote of two-thirds of the membership of the Board.
(d) BY THE EXECUTIVE FOR GOOD REASON. The Executive may terminate his
employment during the Employment Period for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:
(i) the reduction in the Executive's Annual Base Salary as specified in
Section 3(a) of this Agreement, the Executive's Incentive Compensation
benefit as specified in Section 3(b) of this Agreement, or any other benefit
or payment described in Section 3 of this Agreement;
(ii) the change without the Executive's consent of the Executive's
title, authority, duties or responsibilities as specified in Section 2(a) of
this Agreement;
(iii) the Company's requiring the Executive without his consent to be
based at any office or location other than the Company's headquarters which
shall be located in the Kansas City metropolitan area; or
(iv) any breach by the Company of any other material provision of this
Agreement;
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PROVIDED, HOWEVER, that during the 30-day period commencing on the third
anniversary of the Effective Date, the termination by the Executive for any
reason shall constitute a termination by the Executive of his employment for
Good Reason.
(e) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 10(b) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) if the Date of
Termination (as defined in Section 4(f)) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
30 days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company hereunder or preclude the Executive or the Company
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(f) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's employment is terminated by reason
of death, the Date of Termination shall be the date of death.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) TERMINATION OTHER THAN FOR CAUSE. During the Employment Period, if the
Company shall terminate the Executive's employment (other than in the case of a
termination for Cause), the Executive shall terminate his employment for Good
Reason or the Executive's employment shall terminate by reason of death
(termination in any such case being referred to as a "Termination"):
(i) the Company shall pay to the Executive a lump sum amount in cash
equal to the sum of (A) the Executive's Annual Base Salary through the Date
of Termination to the extent not theretofore paid, (B) an amount equal to
the Incentive Compensation benefit described in Section 3(b) of this
Agreement for the fiscal year that includes the Date of Termination
multiplied by a fraction the numerator of which shall be the number of days
from the beginning of such fiscal year to and including the Date of
Termination and the denominator of which shall be 365, and (C) any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in each case to
the extent not theretofore paid. (The amounts specified in clauses (A), (B)
and (C) shall be hereinafter referred to as the "Accrued Obligations".) The
amounts specified in this Section 5(a)(i) shall be paid within 30 days after
the Date of Termination; and
(ii) in the event of Termination other than by reason of the Executive's
death, then (A) the Company shall pay to the Executive a lump sum amount, in
cash, equal to the present value of the Annual Base Salary and the Incentive
Compensation benefit described in Section 3(b) of this Agreement payable
through the end of the Employment Period or, if longer, for a period of
three years (the "Continuation Period"), each, at the rate, in effect at the
time Notice of Termination is given, and, with respect to the Incentive
Compensation, assuming the full achievement of all target performance goals
in effect at the time that Notice of Termination is given, such amount to be
paid within 30 days of such Date of Termination; (B) except with respect to
the benefits provided pursuant to clause (d) below, the Company shall pay to
the Executive the value of all benefits to which the Executive would have
been entitled under Sections 3(d) and (f) had he remained in employment with
the Company until the end of the Continuation Period; (C) the Company shall
pay the value of all deferred compensation amounts (together with any
accrued
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interest or earnings thereon) and all executive life insurance benefits
whether or not then vested or payable; and (D) the Company shall continue
medical and welfare benefits to the Executive and/or the Executive's family
at least equal to those which would have been provided had the Executive
remained in employment to the end of the Continuation Period (excluding
benefits to which the Executive has waived his rights in writing), such
benefits to be in accordance with the most favorable medical and welfare
benefit plans, practices, programs or policies (the "M&W Plans") of the
Company as in effect and applicable to any senior executive officer of the
Company and his or her family during the 90-day period immediately preceding
the Date of Termination or, if more favorable to the Executive, as in effect
at any time thereafter with respect to any senior executive officer of the
Company (but on a prospective basis only unless and then only to the extent,
such more favorable M&W Plans are by their terms retroactive); PROVIDED,
HOWEVER, that if the Executive becomes employed with another employer and is
eligible to receive medical or other welfare benefits under another
employer-provided plan, the benefits under the M&W Plans shall be secondary
to those provided under such other plan during such applicable period of
eligibility.
(b) TERMINATION BY THE COMPANY FOR CAUSE OR BY THE EXECUTIVE OTHER THAN FOR
GOOD REASON. Subject to the provisions of Section 6 of this Agreement, if the
Executive's employment shall be terminated for Cause during the Employment
Period, or if the Executive terminates employment during the Employment Period
other than a termination for Good Reason, the Company shall have no further
obligations to the Executive under this Agreement other than the obligation to
pay to the Executive the Annual Base Salary through the Date of Termination plus
the amount of any compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon), in each case to the extent
theretofore unpaid.
(c) SEVERANCE AGREEMENT. Notwithstanding the foregoing, the benefits
provided under subsections (a) and (b) of this Section 5 shall be reduced by any
amounts paid pursuant to the Severance Agreement.
6. NONEXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, plan,
program, policy or practice provided by the Company and for which the Executive
may qualify (except with respect to any benefit to which the Executive has
waived his rights in writing), nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement entered into after the Effective Date with the Company. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any benefit, plan, policy, practice or program of, or any contract or
agreement entered into with, the Company shall be payable in accordance with
such benefit, plan, policy, practice or program or contract or agreement except
as explicitly modified by this Agreement.
7. FULL SETTLEMENT; MITIGATION. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts
(including amounts for damages for breach) payable to the Executive under any of
the provisions of this Agreement and, except as provided in Section 5(a)(ii)(D),
such amounts shall not be reduced whether or not the Executive obtains other
employment. If there occurs a dispute between the Executive and the Company as
to the interpretation, terms, validity or enforceability of (including any
dispute about the amount of any payment pursuant to this Agreement) this
Agreement, the Company agrees to pay all legal fees and expenses which the
Executive may reasonably incur as a result of any such dispute.
8. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret, confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies (either before or after the Effective Date) and that shall not have
been or now or hereafter have
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become public knowledge (other than by acts by the Executive or representatives
of the Executive in violation of this Agreement). During the Employment Period,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it.
9. SUCCESSORS.
(a) ASSIGNMENT BY EXECUTIVE. This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) SUCCESSORS AND ASSIGNS OF COMPANY. This Agreement shall inure to the
benefit of and be binding upon the Company, its successors and assigns.
(c) ASSUMPTION. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its businesses and/or assets as
aforesaid that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri, without reference to its
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a committee thereof,
shall have authority on behalf of the Company to agree to amend, modify, repeal,
waive, extend or discharge any provision of this Agreement or anything in
reference thereto.
(b) NOTICES. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return-receipt requested, postage prepaid, addressed, in
either case, at the Company's headquarters or to such other address as either
party shall have furnished to the other in writing in accordance herewith.
Notice and communications shall be effective when actually received by the
addressee.
(c) SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) TAXES. The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) NO WAIVER. The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(d) of this Agreement,
or the right of the Company to terminate the Executive's employment for Cause
pursuant to Section 4(b) of this Agreement shall not be deemed to be a waiver of
such provision or right or any other provision or right of this Agreement.
(f) ENTIRE AGREEMENT. Except for the Severance Agreement, which shall
remain in full force and effect and, in accordance with its terms, be assumed by
the Company as of the Effective Date, this
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instrument contains the entire agreement of the Executive, the Company or any
predecessor or subsidiary thereof with respect to the subject matter hereof, and
all promises, representations, understandings, arrangements and prior agreements
are merged herein and superseded hereby.
IN WITNESS WHEREOF, the Executive and, pursuant to due authorization from
its Board of Directors, the Company have caused this Agreement to be executed as
of the day and year first above written.
[Company]
--------------------------------------
Name:
Title:
--------------------------------------
A. Drue Jennings
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<PAGE>
ANNEX A
TO EMPLOYMENT
AGREEMENT
CHAIRMAN OF THE BOARD
The Chairman of the Board shall be a director and shall preside at meetings
of the Board and meetings of shareholders. The Chairman shall be responsible for
(a) board and shareholder governance, (b) external relations with industry,
cities and communities, (c) economic development initiatives, (d) oversight of
issues relating to the Nuclear Regulatory Commission and nuclear operations, (e)
corporate wide business management and (f) implementation of business plans with
other team members. The Chairman shall share with the Chief Executive Officer
responsibility for (a) implementation of the Mergers, (b) external relations
with the financial community, (c) corporate governance, (d) setting the agenda
for all meetings of the Board (and committees thereof) and (e) enterprise
support. The Chairman of the Board shall be a member of the Executive Committee
and an ex officio member of all standing committees.
VICE-CHAIRMAN OF THE BOARD
The Vice-Chairman of the Board shall be a director and shall preside at
meetings of the Board and meetings of shareholders in the absence of the
Chairman of the Board or upon the inability of the Chairman of the Board to act.
The Vice-Chairman shall perform such duties as may from time-to-time be assigned
to him by the Board.
CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall be a director, shall submit a report of
the operations of the Company for the fiscal year to the shareholders at their
annual meeting and from time-to-time shall report to the Board all matters
within his knowledge which the interests of the Company may require be brought
to their notice. The Chief Executive Officer shall be responsible for (a) the
strategic direction, development and oversight of the Company, (b) the
international growth of the Company and (c) the deployment of strategic assets
of the Company (including executive management). The Chief Executive Officer
shall share with the Chairman of the Board responsibility for (a) implementation
of the Mergers, (b) external relations with the financial community, (c)
corporate governance, (d) setting the agenda for all meetings of the Board (and
committees thereof) and (e) enterprise support. The Chief Executive Officer
shall be a member of the Executive Committee and an ex officio member of all
standing committees. The President, the Chief Operating Officer, Chief Financial
Officer and Internal Auditing Department will report directly to the Chief
Executive Officer.
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ANNEX G
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made and entered into as of the day of ,
199 , by and between , a Missouri corporation
formerly known as Kansas City Power & Light Company (the "Company"), and Richard
C. Green, Jr. (the "Executive");
WHEREAS, the Executive is currently serving as Chairman, President and Chief
Executive Officer of UtiliCorp United Inc., a Delaware corporation ("UCU"), and
the Company desires to secure the continued employment of the Executive in
accordance herewith;
WHEREAS, UCU has entered into a severance agreement (the "Severance
Agreement") with the Executive as of October 17, 1995;
WHEREAS, pursuant to the Amended and Restated Agreement and Plan of Merger
(the "Merger Agreement"), dated as of January 19, 1996, as amended and restated
as of May 20, 1996, by and among the Company, KC Merger Sub Inc., a Delaware
corporation, UCU and KC United Corp., a Delaware corporation, the parties
thereto have agreed to merge pursuant to the terms thereof;
WHEREAS, the Executive is willing to commit himself to be employed by the
Company on the terms and conditions herein set forth and thus to forego
opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement, as of the
Effective Date, as hereinafter defined, setting forth the terms and conditions
for the employment relationship of the Executive with the Company during the
Employment Period (as hereinafter defined).
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. EMPLOYMENT AND TERM.
(a) EMPLOYMENT. The Company agrees to employ the Executive, and the
Executive agrees to be employed by the Company, in accordance with the terms and
provisions of this Agreement during the term thereof (as described below).
(b) TERM. The term of this Agreement shall commence as of the Closing Date
(the "Effective Date") of the "UCU Merger" (as defined in the Merger Agreement)
and shall continue until the fifth anniversary of the Effective Date (such term
being referred to hereinafter as the "Employment Period"); and FURTHER PROVIDED,
HOWEVER, that if the Merger Agreement is terminated, then, at the time of such
termination, this Agreement shall be deemed cancelled and of no force or effect.
As a condition to the "Mergers" (as defined in the Merger Agreement), the
parties hereto agree that the Company shall be responsible for all the premises,
covenants and agreements set forth in this Agreement.
2. DUTIES AND POWERS OF EXECUTIVE.
(a) POSITION; LOCATION. During the Employment Period, the Executive shall
serve from the Effective Date until the earlier of (i) the date of the annual
meeting of shareholders of the Company that occurs in 2002, and (ii) the date on
which A. Drue Jennings shall no longer serve as Chairman of the Board of
Directors of the Company (the "Board"), as the Vice-Chairman of the Board and
Chief Executive Officer of the Company with such authority, duties and
responsibilities with respect to such positions as set forth on Annex A attached
hereto, and thereafter the Executive shall serve as Chairman of the Board and
Chief Executive Officer of the Company with such authority, duties and
responsibilities with respect to such positions as set forth on Annex A attached
hereto. The titles, authority, duties and responsibilities set forth in Annex A
attached hereto may be changed from time to time but only with the mutual
written agreement of the Executive and the Company. The Executive's services
shall be performed primarily at the Company's headquarters which shall be
located in the Kansas City metropolitan area.
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(b) BOARD MEMBERSHIP. The Executive shall be a member of the Board on the
first day of the Employment Period, and the Board shall propose the Executive
for re-election to the Board throughout the Employment Period.
(c) ATTENTION. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
3. COMPENSATION. The Executive shall receive the following compensation
for his services hereunder to the Company:
(a) SALARY. During the Employment Period, the Executive's annual base
salary (the "Annual Base Salary"), payable in accordance with the Company's
general payroll practices, in effect from time to time, shall be at the
annual rate established by the Board, but in no event less than the greater
of his annual base salary with UCU as in effect as of the day before the
Effective Date and the annual base salary of any other senior executive
officer of the Company or its subsidiaries. The Board may from time to time
direct such upward adjustments in Annual Base Salary as the Board deems to
be necessary or desirable, including, without limitation, adjustments in
order to reflect increases in the cost of living. The Annual Base Salary
shall not be reduced after any increase thereof. Any increase in the Annual
Base Salary shall not serve to limit or reduce any other obligation of the
Company under this Agreement.
(b) INCENTIVE COMPENSATION. During the Employment Period, the
Executive shall participate in short-term incentive compensation plans and
long-term incentive compensation plans (the latter to consist of plans
offering stock options, restricted stock and other long-term incentive
compensation) providing him with the opportunity to earn, on a year-by-year
basis, short-term and long-term incentive compensation (the "Incentive
Compensation") at least equal to the greater of (i) the amounts that he had
the opportunity to earn under the comparable plans of UCU as in effect
immediately before the Effective Time, or (ii) the amounts that any other
senior executive officer of the Company has the opportunity to earn under
the plans of the Company and its subsidiaries for that year.
(c) RETIREMENT, INCENTIVE AND WELFARE BENEFIT PLANS. In addition to
3(b), during the Employment Period and so long as the Executive is employed
by the Company, he shall be eligible to participate in all other incentive,
stock option, restricted stock, performance unit, savings, retirement and
welfare plans, practices, policies and programs applicable generally to
employees and/or senior executive officers of the Company and its
subsidiaries, except with respect to any benefits under any plan, practice,
policy or program to which the Executive has waived his rights in writing.
Notwithstanding anything in this Agreement to the contrary, and in addition
to any other payments or benefits provided hereunder, for all periods
following the termination of the Executive's employment (i) for any reason
during the term of this Agreement but after the Executive has satisfied the
requirements for early retirement under any retirement plans or arrangements
maintained by UCU, as in effect on the Effective Date or by the Company
after the Effective Date (the "Plans") or (ii) at any other time upon the
consent of the Board, the Company shall provide the Executive (and, if
elected by the Executive pursuant to the following sentence, his designated
beneficiary) with retirement income, in addition to any benefits provided
under the Plans, in an amount each year during the Executive's life (and, if
elected by the Executive pursuant to the following sentence, the life of his
designated beneficiary) equal to the excess, if any, of (i) sixty percent
(60%) of the Executive's Annual Base Salary in effect immediately prior to
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his termination of employment (reduced based upon the actuarial assumptions
set forth in the Company's tax-qualified defined benefit retirement plan
(the "Qualified Plan") if the Executive elects a form of benefit payment
other than a straight life annuity pursuant to the following sentence) over
(ii) the aggregate amount of retirement income, if any, that would have been
paid to the Executive under the Plans during such year had the Executive
elected to receive his benefits thereunder in the same form as he elects to
receive his benefits hereunder pursuant to the following sentence. The
Executive may elect to receive the amounts payable pursuant to the preceding
sentence in any form permitted under the Qualified Plan. Such election must
be made not less than 90 days preceding the payment of any such benefits. In
addition, the Company shall assume and continue the Severance Agreement.
(d) INSURANCE. During the Employment Period, the Company shall provide
the Executive with life insurance coverage providing a death benefit to such
beneficiary or beneficiaries as the Executive may designate of not less than
three times his Annual Base Salary.
(e) EXPENSES. The Company shall reimburse the Executive for all
expenses, including those for travel and entertainment, properly incurred by
him in the performance of his duties hereunder in accordance with policies
established from time to time by the Board.
(f) FRINGE BENEFITS. During the Employment Period and so long as the
Executive is employed by the Company, he shall be entitled to receive fringe
benefits in accordance with the plans, practices, programs and policies of
the Company from time to time in effect, commensurate with his position and
at least the same as to those received by any senior executive officer of
the Company.
4. TERMINATION OF EMPLOYMENT.
(a) DEATH. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.
(b) BY THE COMPANY FOR CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean the conviction of the Executive for the commission
of a felony which, at the time of such commission, has a materially adverse
effect on the Company.
(c) BY THE COMPANY WITHOUT CAUSE. Notwithstanding any other provision of
this Agreement, the Company may terminate the Executive's employment other than
by a termination for Cause during the Employment Period, but only upon the
affirmative vote of two-thirds of the membership of the Board.
(d) BY THE EXECUTIVE FOR GOOD REASON. The Executive may terminate his
employment during the Employment Period for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:
(i) the reduction in the Executive's Annual Base Salary as specified in
Section 3(a) of this Agreement, the Executive's Incentive Compensation
benefit as specified in Section 3(b) of this Agreement, or any other benefit
or payment described in Section 3 of this Agreement;
(ii) the change without the Executive's consent of the Executive's
title, authority, duties or responsibilities as specified in Section 2(a) of
this Agreement;
(iii) the Company's requiring the Executive without his consent to be
based at any office or location other than the Company's headquarters which
shall be located in the Kansas City metropolitan area; or
(iv) any breach by the Company of any other material provision of this
Agreement;
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<PAGE>
provided, however, that during the 30-day period commencing on the third
anniversary of the Effective Date, the termination by the Executive for any
reason shall constitute a termination by the Executive of his employment for
Good Reason.
(e) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 10(b) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) if the Date of
Termination (as defined in Section 4(f)) is other than the date of receipt of
such notice, specifies the termination date (which date shall not be more than
30 days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company hereunder or preclude the Executive or the Company
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(f) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's employment is terminated by reason
of death, the Date of Termination shall be the date of death.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) TERMINATION OTHER THAN FOR CAUSE. During the Employment Period, if the
Company shall terminate the Executive's employment (other than in the case of a
termination for Cause), the Executive shall terminate his employment for Good
Reason or the Executive's employment shall terminate by reason of death
(termination in any such case being referred to as a "Termination"):
(i) the Company shall pay to the Executive a lump sum amount in cash
equal to the sum of (A) the Executive's Annual Base Salary through the Date
of Termination to the extent not theretofore paid, (B) an amount equal to
the Incentive Compensation benefit described in Section 3(b) of this
Agreement for the fiscal year that includes the Date of Termination
multiplied by a fraction the numerator of which shall be the number of days
from the beginning of such fiscal year to and including the Date of
Termination and the denominator of which shall be 365, and (C) any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in each case to
the extent not theretofore paid. (The amounts specified in clauses (A), (B)
and (C) shall be hereinafter referred to as the "Accrued Obligations".) The
amounts specified in this Section 5(a)(i) shall be paid within 30 days after
the Date of Termination; and
(ii) in the event of Termination other than by reason of the Executive's
death, then (A) the Company shall pay to the Executive a lump sum amount, in
cash, equal to the present value of the Annual Base Salary and the Incentive
Compensation benefit described in Section 3(b) of this Agreement payable
through the end of the Employment Period or, if longer, for a period of
three years (the "Continuation Period"), each, at the rate, in effect at the
time Notice of Termination is given, and, with respect to the Incentive
Compensation, assuming the full achievement of all target performance goals
in effect at the time that Notice of Termination is given, such amount to be
paid within 30 days of such Date of Termination; (B) except with respect to
the benefits provided pursuant to clause (d) below, the Company shall pay to
the Executive the value of all benefits to which the Executive would have
been entitled under Sections 3(d) and (f) had he remained in employment with
the Company until the end of the Continuation Period; (C) the Company shall
pay the value of all deferred compensation amounts (together with any
accrued
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<PAGE>
interest or earnings thereon) and all executive life insurance benefits
whether or not then vested or payable; and (D) the Company shall continue
medical and welfare benefits to the Executive and/or the Executive's family
at least equal to those which would have been provided had the Executive
remained in employment to the end of the Continuation Period (excluding
benefits to which the Executive has waived his rights in writing), such
benefits to be in accordance with the most favorable medical and welfare
benefit plans, practices, programs or policies (the "M&W Plans") of the
Company as in effect and applicable to any senior executive officer of the
Company and his or her family during the 90-day period immediately preceding
the Date of Termination or, if more favorable to the Executive, as in effect
at any time thereafter with respect to any senior executive officer of the
Company (but on a prospective basis only unless and then only to the extent,
such more favorable M&W Plans are by their terms retroactive); PROVIDED,
HOWEVER, that if the Executive becomes employed with another employer and is
eligible to receive medical or other welfare benefits under another
employer-provided plan, the benefits under the M&W Plans shall be secondary
to those provided under such other plan during such applicable period of
eligibility.
(b) TERMINATION BY THE COMPANY FOR CAUSE OR BY THE EXECUTIVE OTHER THAN FOR
GOOD REASON. Subject to the provisions of Section 6 of this Agreement, if the
Executive's employment shall be terminated for Cause during the Employment
Period, or if the Executive terminates employment during the Employment Period
other than a termination for Good Reason, the Company shall have no further
obligations to the Executive under this Agreement other than the obligation to
pay to the Executive the Annual Base Salary through the Date of Termination plus
the amount of any compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon), in each case to the extent
theretofore unpaid.
(c) SEVERANCE AGREEMENT. Notwithstanding the foregoing, the benefits
provided under subsections (a) and (b) of this Section 5 shall be reduced by any
amounts paid pursuant to the Severance Agreement.
6. NONEXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, plan,
program, policy or practice provided by the Company and for which the Executive
may qualify (except with respect to any benefit to which the Executive has
waived his rights in writing), nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement entered into after the Effective Date with the Company. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any benefit, plan, policy, practice or program of, or any contract or
agreement entered into with, the Company shall be payable in accordance with
such benefit, plan, policy, practice or program or contract or agreement except
as explicitly modified by this Agreement.
7. FULL SETTLEMENT; MITIGATION. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts
(including amounts for damages for breach) payable to the Executive under any of
the provisions of this Agreement and, except as provided in Section 5(a)(ii)(D),
such amounts shall not be reduced whether or not the Executive obtains other
employment. If there occurs a dispute between the Executive and the Company as
to the interpretation, terms, validity or enforceability of (including any
dispute about the amount of any payment pursuant to this Agreement) this
Agreement, the Company agrees to pay all legal fees and expenses which the
Executive may reasonably incur as a result of any such dispute.
8. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret, confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by UCU and the Company or any of their
affiliated
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<PAGE>
companies and that shall not have been or now or hereafter have become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). During the Employment Period, the
Executive shall not, without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it.
9. SUCCESSORS.
(a) ASSIGNMENT BY EXECUTIVE. This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) SUCCESSORS AND ASSIGNS OF COMPANY. This Agreement shall inure to the
benefit of and be binding upon the Company, its successors and assigns.
(c) ASSUMPTION. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its businesses and/or assets as
aforesaid that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri, without reference to its
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a committee thereof,
shall have authority on behalf of the Company to agree to amend, modify, repeal,
waive, extend or discharge any provision of this Agreement or anything in
reference thereto.
(b) NOTICES. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return-receipt requested, postage prepaid, addressed, in
either case, at the Company's headquarters or to such other address as either
party shall have furnished to the other in writing in accordance herewith.
Notice and communications shall be effective when actually received by the
addressee.
(c) SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) TAXES. The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) NO WAIVER. The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(d) of this Agreement,
or the right of the Company to terminate the Executive's employment for Cause
pursuant to Section 4(b) of this Agreement shall not be deemed to be a waiver of
such provision or right or any other provision or right of this Agreement.
(f) ENTIRE AGREEMENT. Except for the Severance Agreement, which shall
remain in full force and effect and, in accordance with its terms, be assumed by
the Company as of the Effective Date, this
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instrument contains the entire agreement of the Executive, the Company or any
predecessor or subsidiary thereof with respect to the subject matter hereof, and
all promises, representations, understandings, arrangements and prior agreements
are merged herein and superseded hereby.
IN WITNESS WHEREOF, the Executive and, pursuant to due authorization from
its Board of Directors, the Company have caused this Agreement to be executed as
of the day and year first above written.
[Company]
--------------------------------------
Name:
Title:
--------------------------------------
Richard C. Green, Jr.
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<PAGE>
ANNEX A
TO EMPLOYMENT
AGREEMENT
CHAIRMAN OF THE BOARD
The Chairman of the Board shall be a director and shall preside at meetings
of the Board and meetings of shareholders. The Chairman shall be responsible for
(a) board and shareholder governance, (b) external relations with industry,
cities and communities, (c) economic development initiatives, (d) oversight of
issues relating to the Nuclear Regulatory Commission and nuclear operations, (e)
corporate wide business management and (f) implementation of business plans with
other team members. The Chairman shall share with the Chief Executive Officer
responsibility for (a) implementation of the Mergers, (b) external relations
with the financial community, (c) corporate governance, (d) setting the agenda
for all meetings of the Board (and committees thereof) and (e) enterprise
support. The Chairman of the Board shall be a member of the Executive Committee
and an ex officio member of all standing committees.
VICE-CHAIRMAN OF THE BOARD
The Vice-Chairman of the Board shall be a director and shall preside at
meetings of the Board and meetings of shareholders in the absence of the
Chairman of the Board or upon the inability of the Chairman of the Board to act.
The Vice-Chairman shall perform such duties as may from time-to-time be assigned
to him by the Board.
CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall be a director, shall submit a report of
the operations of the Company for the fiscal year to the shareholders at their
annual meeting and from time-to-time shall report to the Board all matters
within his knowledge which the interests of the Company may require be brought
to their notice. The Chief Executive Officer shall be responsible for (a) the
strategic direction, development and oversight of the Company, (b) the
international growth of the Company and (c) the deployment of strategic assets
of the Company (including executive management). The Chief Executive Officer
shall share with the Chairman of the Board responsibility for (a) implementation
of the Mergers, (b) external relations with the financial community, (c)
corporate governance, (d) setting the agenda for all meetings of the Board (and
committees thereof) and (e) enterprise support. The Chief Executive Officer
shall be a member of the Executive Committee and an ex officio member of all
standing committees. The President, the Chief Operating Officer, Chief Financial
Officer and the Internal Auditing Department will report directly to the Chief
Executive Officer.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 351.355(1) and (2) of the MGBCL provide that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, except that, in the case
of an action or suit by or in the right of the corporation, the corporation may
not indemnify such persons against judgments and fines and no person shall be
indemnified as to any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation unless and only to the extent that the court in
which the action or suit was brought determines upon application that such
person is fairly and reasonably entitled to indemnity for proper expenses.
Section 351.355 further provides that, to the extent that a director, officer,
employee or agent of the corporation has been successful in the defense of any
such action, suit or proceeding or any claim, issue or matter therein, he shall
be indemnified against expenses, including attorney's fees, actually and
reasonably incurred in connection with such action, suit or proceeding. Section
351.355 also provides that a Missouri corporation may provide additional
indemnification to any person indemnifiable under subsection (1) or (2),
provided such additional indemnification is authorized by the corporation's
articles of incorporation or an amendment thereto or by a shareholder-approved
by-law or agreement, and provided further that no person shall thereby be
indemnified against conduct which was finally adjudged to have been knowingly
fraudulent, deliberately dishonest or willful misconduct.
The KCPL Charter provides that KCPL will indemnify to the fullest extent
permitted by the MGBCL any person made or threatened to be made a party to a
legal proceeding by reason of the fact that the person is or was a director,
officer or employee of KCPL, or is or was serving at the request of KCPL as a
director, officer or employee of another enterprise, against all expense,
liability or loss (including attorneys' fees and judgments) actually and
reasonably incurred by such person. The KCPL Board has the discretion to
indemnify agents of KCPL under similar terms. These indemnification rights are
not exclusive of any other rights to which the person is entitled by law or
under any other KCPL authorizations. KCPL may, without shareholder approval,
provide its officers, directors and employees with greater indemnification than
the MGBCL offers, provided that such further indemnity will not be offered to a
person whose conduct was finally adjudged to have been knowingly fraudulent or
deliberately dishonest, or to have constituted willful misconduct.
The Merger Agreement provides that, to the extent, if any, not provided by
an existing right of indemnification or other agreement or policy, from and
after the Effective Time, KCPL will, to the fullest extent permitted by
applicable law, indemnify, defend and hold harmless each person who is on, or
who has been at any time prior to, January 19, 1996, or who becomes prior to the
Effective Time, an officer, director or employee of any of the parties thereto
or any Subsidiary (each an "Indemnified Party," and collectively, "Indemnified
Parties") against all losses, expenses (including reasonable attorney's fees and
expenses), claims, damages or liabilities or, subject to the proviso of the next
succeeding sentence, amounts paid in settlement, arising out of actions or
omissions occurring at or prior to the Effective Time (and whether asserted or
claimed prior to, at or after the Effective Time) that are, in whole or in part,
based on or arising out of the fact that such person is or was a director,
officer or employee of such party, and all such indemnified liabilities to the
extent they are based on or arise out of or pertain to the transactions
contemplated by the Merger Agreement. In the event of any
II-1
<PAGE>
such loss, expense, claim, damage or liability (whether or not arising before
the Effective Time), (i) KCPL will pay the reasonable fees and expenses of
counsel selected by the Indemnified Parties, which counsel must be reasonably
satisfactory to KCPL, promptly after statements therefor are received and
otherwise advance to such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred, in either case to the extent not
prohibited by the MGBCL, (ii) KCPL will cooperate in the defense of any such
matter and (iii) any determination required to be made with respect to whether
an Indemnified Party's conduct complies with the standards set forth under the
MGBCL, the KCPL Charter and the KCPL Bylaws will be made by independent counsel
mutually acceptable to KCPL and the Indemnified Party; provided, however, that
KCPL will not be liable for any settlement effected without its written consent
(which consent must not be unreasonably withheld). The Merger Agreement further
provides that the Indemnified Parties as a group may retain only one law firm
with respect to each related matter except to the extent there is, in the
opinion of counsel to an Indemnified Party, under applicable standards of
professional conduct, a conflict on any significant issue between positions of
such Indemnified Party and any other Indemnified Party or Indemnified Parties.
In addition, the Merger Agreement requires that for a period of six years
after the Effective Time, KCPL will cause to be maintained in effect policies of
directors and officers' liability insurance maintained by KCPL and UCU for the
benefit of those persons who were covered by such policies on January 19, 1996,
on terms no less favorable than the terms of such insurance coverage, provided
that KCPL will not be required to expend in any year an amount exceeding 200% of
the annual aggregate premiums currently paid by KCPL and UCU for such insurance.
If the annual premiums of such insurance coverage exceed such amount, KCPL will
be obligated to obtain a policy with the best coverage available, in the
reasonable judgment of the KCPL Board, for a cost not exceeding such amount. The
Merger Agreement also provides that to the fullest extent permitted by law, from
and after the Effective Time, all rights to indemnification existing in favor of
the employees, agents, directors and officers of KCPL, UCU and their respective
Subsidiaries with respect to their activities as such prior to the Effective
Time, as provided in their respective articles of incorporation and bylaws in
effect on January 19, 1996, or otherwise in effect on January 19, 1996, will
survive the Mergers and will continue in full force and effect for a period of
not less than six years from the Effective Time.
The foregoing statements are subject to the detailed provisions of the
MGBCL, the KCPL Charter and the Merger Agreement.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The exhibits to this Registration Statement are listed in the Exhibit
Index hereto and are incorporated herein by reference.
(b) The financial statement schedules are incorporated by reference to
KCPL's Annual Report on Form 10-K for the fiscal year ended December 31, 1995,
KCPL's Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1996, UCU's Annual Report on Form 10-K for the fiscal year ended December 31,
1995 and UCU's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1996.
(c) The opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
included in Part I as Annex B to the Joint Proxy Statement/Prospectus included
in this Registration Statement, is incorporated herein by reference. The opinion
of Donaldson, Lufkin & Jenrette Securities Corporation, included in Part I as
Annex C to the Joint Proxy Statement/Prospectus included in the Registration
Statement, is incorporated herein by reference.
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<PAGE>
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for the purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(6) That every prospectus: (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes
II-3
<PAGE>
of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(7) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions referred to in Item 20 of this
registration statement, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(8) To respond to requests for information that is incorporated by
reference into the Joint Proxy Statement/Prospectus pursuant to Item 4, 10(b),
11 or 13 of this Form, within one business day of receipt of such request, and
to send the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding to
the request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement or Amendments thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Kansas City, and State of Missouri on
the 10th day of June, 1996.
KANSAS CITY POWER & LIGHT COMPANY
By: /s/ A. DRUE JENNINGS
-----------------------------------
(A. Drue Jennings)
CHAIRMAN OF THE BOARD, PRESIDENT
AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------- ----------------------------------------- -----------------
<C> <S> <C>
/s/ A. DRUE JENNINGS Chairman of the Board, President and
---------------------------------------- Chief Executive Officer (Principal June 10, 1996
(A. Drue Jennings) Executive Officer)
/s/ JOHN DESTEFANO
---------------------------------------- Senior Vice President -- Finance June 10, 1996
(John DeStefano) (Principal Financial Officer)
/s/ NEIL ROADMAN
---------------------------------------- Controller (Principal Accounting Officer) June 10, 1996
(Neil Roadman)
*
---------------------------------------- Director
(David L. Bodde)
*
---------------------------------------- Director
(William H. Clark)
*
---------------------------------------- Director
(Robert J. Dineen)
*
---------------------------------------- Director
(Arthur J. Doyle)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------- ----------------------------------------- -----------------
*
---------------------------------------- Director
(W. Thomas Grant II)
<C> <S> <C>
*
---------------------------------------- Director
(George Nettels, Jr.)
*
---------------------------------------- Director
(Linda Hood Talbott)
*
---------------------------------------- Director
(Robert H. West)
*By /s/A. DRUE JENNINGS
(A. Drue Jennings) June 10, 1996
ATTORNEY-IN-FACT
</TABLE>
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- ------------------------------------------------------------------------------------------------
<S> <C> <C>
2-a Agreement and Plan of Merger, dated as of January 19, 1996, as amended and restated as of May
20, 1996, by and among Kansas City Power & Light Company, KC Merger Sub, Inc., UtiliCorp United
Inc. and KC United Corp. (Included as Annex A to the Joint Proxy Statement/Prospectus contained
in this Registration Statement (the "Joint Proxy Statement/Prospectus")).
4-a *General Mortgage and Deed of Trust dated as of December 1, 1986, between KCPL and UMB Bank,
n.a. (formerly United Missouri Bank) of Kansas City, N.A., Trustee (Exhibit 4-bb to Form 10-K
for the year ended December 31, 1986).
4-b *Third Supplemental Indenture dated as of April 1, 1991, to Indenture dated as of December 1,
1986 (Exhibit 4-aq to Registration Statement, Registration No. 33-42187).
4-c *Fourth Supplemental Indenture dated as of February 15, 1992, to Indenture dated as of December
1, 1986 (Exhibit 4-y to Form 10-K for year ended December 31, 1991).
4-d *Fifth Supplemental Indenture dated as of September 15, 1992, to Indenture dated as of December
1, 1986 (Exhibit 4-a to Form 10-Q dated September 30,1992).
4-e *Sixth Supplemental Indenture dated as of November 1, 1992, to Indenture dated as of December 1,
1986 (Exhibit 4-z to Registration Statement, Registration No. 33-54196).
4-f *Seventh Supplemental Indenture dated as of October 1, 1993, to Indenture dated as of December
1, 1986 (Exhibit 4-a to Form 10-Q dated September 30, 1993).
4-g *Eighth Supplemental Indenture dated as of December 1, 1993, to Indenture dated as of December
1, 1986 (Exhibit 4 to Registration Statement, Registration No. 33-51799).
4-h *Ninth Supplemental Indenture dated as of February 1, 1994, to Indenture dated as of December 1,
1986 (Exhibit 4-h to Form 10-K for year ended December 31, 1993).
4-i *Tenth Supplemental Indenture dated as of November 1, 1994, to Indenture dated as of December 1,
1986 (Exhibit 4-l to Form 10-K for year ended December 31, 1994).
4-j *Resolution of Board of Directors Establishing 3.80% Cumulative Preferred Stock (Exhibit 2-R to
Registration Statement, Registration No. 2-40239).
4-k *Resolution of Board of Directors Establishing 4% Cumulative Preferred Stock (Exhibit 2-S to
Registration Statement, Registration No. 2-40239).
4-1 *Resolution of Board of Directors Establishing 4.50% Cumulative Preferred Stock (Exhibit 2-T to
Registration Statement, Registration No. 2-40239).
4-m *Resolution of Board of Directors Establishing 4.20% Cumulative Preferred Stock (Exhibit 2-U to
Registration Statement, Registration No. 2-40239).
4-n *Resolution of Board of Directors, Establishing 4.35% Cumulative Preferred Stock (Exhibit 2-V to
Registration Statement, Registration No. 2-40239).
4-o *Certificate of Designation of Board of Directors Establishing the $50,000,000 Cumulative No Par
Preferred Stock, Auction Series A (Exhibit 4-a to Form 10-Q dated March 31, 1992).
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
4-p *Indenture for Medium-Term Note Program dated as of April 1, 1991, between KCPL and The Bank of
New York (Exhibit 4-bb to Registration Statement, Registration No. 33-42187).
4-q *Indenture for Medium-Term Note Program dated as of February 15, 1992, between KCPL and The Bank
of New York (Exhibit 4-bb to Registration Statement, Registration No. 33-45736).
4-r *Indenture for Medium-Term Note Program dated as of November 15, 1992, between KCPL and The Bank
of New York (Exhibit 4-aa to Registration Statement, Registration No. 33-54196).
4-s *Indenture for Medium-Term Note Program dated as of November 17, 1994, between KCPL and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Smith Barney Inc. (Exhibit
4-s to Form 10-K for year ended December 31, 1994).
4-t *Restated Articles of Consolidation of KCPL dated as of May 5, 1992 (Exhibit 4 to Registration
Statement, Registration No. 33-54196).
4-u *By-laws of KCPL, as amended April 1, 1996 (Exhibit 3(ii) to Form 10-Q dated March 31, 1996).
5 Opinion of Jeanie Sell Latz, Esq.
8-a Opinion of Skadden, Arps, Slate, Meagher & Flom.
8-b Opinion of Blackwell Sanders Matheny Weary & Lombardi L.C.
10-a Form of Employment Agreement by and between Newco and A. Drue Jennings (Included as Annex F to
the Joint Proxy Statement/Prospectus contained in this Registration Statement).
10-b Form of Employment Agreement by and between Newco and Richard C. Green, Jr. (Included as Annex G
to the Joint Proxy Statement/Prospectus contained in this Registration Statement).
10-c Form of Newco Stock Incentive Plan (Included as Annex D to the Joint Proxy Statement/Prospectus
contained in this Registration Statement).
10-d Form of Newco Management Incentive Compensation Plan (Included as Annex E to the Joint Proxy
Statement/Prospectus contained in this Registration Statement).
10-e *Copy of Wolf Creek Generating Station Ownership Agreement between Kansas City Power & Light
Company, Kansas Gas and Electric Company and Kansas Electric Power Cooperative, Inc. (Exhibit
10-d to Form 10-K for the year ended December 31, 1981).
10-f *Copy of Receivables Purchase Agreement dated as of September 27, 1989, between KCPL, Commercial
Industrial Trade-Receivables Investment Company and Citicorp North America, Inc., (Exhibit 10-p
to Form 10-K for year ended December 31, 1989).
10-g *Copy of Amendment to Receivables Purchase Agreement dated as of August 8, 1991, between KCPL,
Commercial Industrial Trade-Receivables Investment Company and Citicorp North America, Inc.
(Exhibit 10-m to Form 10-K for year ended December 31, 1991).
10-h *Long-Term Incentive Plan (Exhibit 28 to Registration Statement, Registration 33-42187).
10-i *Copy of Executive Incentive Compensation Plan (Exhibit 10-g to Form 10-K for year ended
December 31, 1986).
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10-j *Copy of Indemnification Agreement entered into by KCPL with each of its officers and directors
(Exhibit 10-f to Form 10-K for year ended December 31, 1995).
10-k *Copy of Severance Agreement entered into by KCPL with certain of its executive officers
(Exhibit 10 to Form 10-Q dated June 30, 1993).
10-l *Copy of Amendment to Severance Agreement dated January 15, 1996, entered into by KCPL with
certain of its executive officers (Exhibit 10-h to Form 10-K for year ended December 31, 1995).
10-m *Copy of Supplemental Executive Retirement and Deferred Compensation Plan (Exhibit 10-h to Form
10-K for year ended December 31, 1993).
10-n *Copy of $50 million Letter of Credit and Reimbursement Agreement dated as of August 19, 1993,
with The Toronto-Dominion Bank (Exhibit 10-i to Form 10-K for year ended December 31, 1993).
10-o *Copy of $56 million Letter of Credit and Reimbursement Agreement dated as of August 19, 1993,
with Societe Generale, Chicago Branch (Exhibit 10-j to Form 10-K for year ended December 31,
1993).
10-p *Copy of $50 million Letter of Credit and Reimbursement Agreement dated as of August 19, 1993,
with The Toronto-Dominion Bank (Exhibit 10-k to Form 10-K for year ended December 31, 1993).
10-q *Copy of $40 million Letter of Credit and Reimbursement Agreement dated as of August 19, 1993,
with Deutsche Bank AG, acting through its New York and Cayman Islands Branches (Exhibit 10-l to
Form 10-K for year ended December 31, 1993).
10-r *Copy of Railcar Lease dated as of April 15, 1994, between Shawmut Bank Connecticut, National
Association, and KCPL (Exhibit 10 to Form 10-Q for period ended June 30, 1994).
10-s *Copy of Amendment No. 2 to Receivables Purchase Agreement between KCPL and Ciesco L.P. and
Citicorp North America, Inc. (Exhibit 10 to Form 10-Q for period ended September 30, 1994).
10-t *Copy of Railcar Lease dated as of January 31, 1995, between First Security Bank of Utah,
National Association, and KCPL (Exhibit 10-o to Form 10-K for year ended December 31, 1994).
10-u *Copy of Lease Agreement dated as of October 18, 1995, between First Security Bank of Utah,
N.A., and KCPL (Exhibit 10 to Form 10-Q for period ended September 30, 1995).
12-a Statement re Computation of Ratios of Kansas City Power & Light Company.
12-b Statement re Computation of Ratios of UtiliCorp United Inc.
12-c Statement re Computation of Ratios of Newco.
23-a Consent of Coopers & Lybrand, L.L.P., dated June 5, 1996.
23-b Consent of Arthur Andersen LLP, dated June 7, 1996.
23-c Consent of Arthur Andersen, dated June 7, 1996.
23-d Consent of Jeanie Sell Latz, Esq. (Included in Exhibit 5).
23-e Consent of Skadden, Arps, Slate, Meagher & Flom (Included in Exhibit 8-a).
23-f Consent of Blackwell Sanders Matheny Weary & Lombardi L.C. (Included in Exhibit 8-b).
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
23-g Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated June 10, 1996.
23-h Consent of Donaldson, Lufkin & Jenrette Securities Corporation, dated June 10, 1996.
24 Powers of Attorney.
99-a Form of Proxy to be used in connection with the Annual Meeting of Shareholders of Kansas City
Power & Light Company.
99-b Form of Proxy to be used in connection with the Annual Meeting of Stockholders of UtiliCorp
United Inc.
</TABLE>
- ------------------------
* Filed with the SEC as exhibits to prior registration statements (except as
otherwise noted) and are incorporated herein by reference and made a part
hereof. The exhibit number and file number of the documents so filed, and
incorporated herein by reference, are stated in parenthesis in the description
of such exhibit.
Copies of any of the exhibits filed with the SEC in connection with this
document may be obtained from KCPL upon written request.
<PAGE>
Exhibit 5
June 10, 1996
Kansas City Power & Light Company
1201 Walnut
Kansas City, Missouri 64106-2124
Ladies & Gentleman:
I have acted as counsel to Kansas City Power & Light Company ("KCPL"), a
Missouri corporation, in connection with the transactions contemplated by the
Agreement and Plan of Merger by and among KCPL, KC Merger Sub, Inc. ("Sub"),
UtiliCorp United Inc. ("UCU"), and KC United Corp., dated as of January 19,
1996, as amended and restated as of May 20, 1996 (the "Merger Agreement").
This opinion is being furnished in accordance with the requirements of
Item 601 (b) (5) of Regulation S-K under the Securities Act of 1933, as
amended (the "Securities Act").
Pursuant to the Merger Agreement, (I) Sub will be merged with and into UCU,
with UCU as the surviving corporation (the "UCU Merger"); (ii) each issued
and outstanding share of common stock, $ 1.00 per value per share of
<PAGE>
UCU, will be converted into and become 1.0 fully paid and nonassessable share of
common stock, no par value, of KCPL (the "KCPL Common Stock"); and (iii) as
soon as practicable thereafter, UCU shall be merged with and into KCPL, with
KCPL as the surviving corporation.
In connection with the transactions contemplated by the Merger Agreement,
KCPL has filed with the Securities and Exchange Commission (the "Commission")
a Registration Statement on Form S-4 (the "Registration Statement") relating
to the registration under the Securities Act of the shares of KCPL Common
Stock to be issued in the UCU Merger.
In connection with this opinion, I have examined and am familiar with the
originals or copies, certified or otherwise identified to my satisfaction, of
(i) the Registration Statement; (ii) the Restated Articles of Consolidation
of KCPL; (iii) the Merger Agreement; (iv) the resolutions of the Board of
Directors of KCPL relating to the UCU Merger and related transitions; and (v)
the applications to various governing bodies for approval of the Merger
Agreement and transactions contemplated thereby. I have also examined
originals or copies, certified or otherwise identified to my satisfaction, of
such other documents as I have deemed necessary of appropriate as a basic for
the opinion set forth herein.
<PAGE>
Based upon and subject to the foregoing, I am of the opinion that the
shares of KCPL Common Stock, when issued upon the consummation of the UCU
Merger in accordance with the terms of the Merger Agreement and as set forth
in the Registration Statement, will be validly issued, fully paid and
nonassessable.
I hereby consent to the use of my name in the Joint Proxy
Statement/Prospectus included in the Registration Statement and to the filing
of this opinion with the Commission as an exhibit to the Registration
Statement. In giving this consent, I do not thereby admit that I am within
the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the Commission promulgated
thereunder.
Very truly yours,
/s/ JEANIE SELL LATZ
Jeanie Sell Latz
<PAGE>
Exhibit 8-a
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 Third Avenue
New York, NY 10022
(212) 735-3000
Fax: (212) 735-2000
June 10, 1996
Kansas City Power & Light Company
1201 Walnut
Kansas City, Missouri 64106
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Kansas City Power & Light Company,
a Missouri corporation ("KCPL"), in connection with (i) the proposed merger of
KC Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of
KCPL ("Sub") with and into UtiliCorp United Inc., a Delaware corporation
("UCU"), with UCU surviving (the "UCU Merger"), and (ii) the proposed merger,
immediately thereafter, of the surviving corporation in the UCU Merger with and
into KCPL, with KCPL surviving and renamed as KCPL and UCU shall
mutually agree ("Newco") (the "Consolidating Merger," and together with the UCU
Merger, the "Mergers"), pursuant to an Amended and Restated Agreement and Plan
of Merger, dated as of January 19, 1996, as amended and restated on May 20,
1996, by and among KCPL, Sub, UCU, and KC United Corp., a Delaware corporation
(the "Merger Agreement").
All capitalized terms used herein, unless otherwise specified, have
the meanings assigned to them in the Joint Proxy Statement/Prospectus of KCPL
and UCU with respect to the Mergers (the "Joint Proxy State-
<PAGE>
ment/Prospectus") filed by KCPL on June 10, 1996 as part of the Registration
of Form S-4 (the "Registration Statement").
The delivery of an opinion on or prior to the Closing Date, in
substantially the form hereof, is a condition to the consummation of the Mergers
pursuant to Section 8.3(e) of the Merger Agreement.
In rendering our opinion, we have examined and relied upon the
accuracy and completeness of the facts, information, covenants and
representations contained in originals or copies, certified or otherwise
identified to our satisfaction, of the Merger Agreement, the Joint Proxy
Statement/Prospectus and such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below. Our opinion is
expressly conditioned on, among other things, the accuracy as of the date
hereof, and the continuing accuracy of all such facts, information, covenants
and representations up to and including the Closing Date.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents. We also have assumed that the
transactions related to the Mergers or contemplated by the Merger Agreement will
be consummated in accordance with the Merger Agreement and as described in the
Joint Proxy Statement/Prospectus. Furthermore, we have assumed that we will
receive, immediately prior to the Effective Time, certificates from an
appropriate officer of each of KCPL and UCU containing customary
representations.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations promulgated thereunder, pertinent judicial authorities, interpretive
rulings of the Internal Revenue Service and such other authorities as we have
considered relevant. It should be noted that statutes, regulations, judicial
decisions and administrative interpretations are subject to change at any time
and, in some circumstances, with retroactive effect. A material change in the
authorities upon which our opinion is based could affect our conclusions.
2
<PAGE>
OPINION
Based solely upon and subject to the foregoing, we are of the opinion
that for United States federal income tax purposes:
(i) The Mergers will constitute a reorganization within the meaning
of Section 368(a) of the Code;
(ii) KCPL, UCU and Newco will each be a party to the reorganization
within the meaning of Section 368(b) of the Code;
(iii) no gain or loss will be recognized by KCPL, UCU or Newco
pursuant to the Mergers; and
(iv) no gain or loss will be recognized by shareholders of KCPL as a
result of the Mergers.
Except as set forth above, we express no other opinion. This opinion
may not be used, circulated, quoted or otherwise referred to for any purpose
without the express consent of Skadden, Arps, Slate, Meagher & Flom.
We hereby consent to the filing of this opinion as Exhibit 8-a to the
Registration Statement and the references to Skadden, Arps, Slate, Meagher &
Flom in the section of the Joint Proxy Statement/Prospectus entitled "THE
MERGERS - Certain Federal Income Tax Consequences." In giving such consent,
we do not thereby admit or imply that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM
3
<PAGE>
[LETTERHEAD]
EXHIBIT 8-b
June 10, 1996
UtiliCorp United Inc.
3000 Commerce Tower
911 Main Street
Kansas City, Missouri 64105
Ladies and Gentlemen:
We have acted as counsel to UtiliCorp United Inc. ("UCU"), a Delaware
corporation, in connection with (i) the proposed merger (the "UCU Merger") of KC
Merger Sub, Inc. ("Sub"), a Delaware corporation and a wholly owned subsidiary
of Kansas City Power & Light Company ("KCPL"), a Missouri corporation, with and
into UCU, with UCU surviving, and (ii) the proposed merger (the "Consolidating
Merger," and together with the UCU Merger, the "Mergers"), immediately
thereafter of the surviving corporation in the UCU Merger with and into KCPL,
with KCPL surviving and renamed as such name as KCPL and UCU shall mutually
agree ("Newco"), pursuant to an Amended and Restated Agreement and Plan of
Merger (the "Merger Agreement"), dated as of January 19, 1996, as amended and
restated on May 20, 1996, by and among KCPL, Sub, UCU, and KC United Corp., a
Delaware corporation. The delivery of this opinion on or prior to the
Closing Date, in substantially the form hereof, is a condition to the Mergers
pursuant to Section 8.2(e) of the Merger Agreement.
All capitalized terms used herein, unless otherwise specified, have
the meanings assigned to them in the Joint Proxy Statement/Prospectus of KCPL
and UCU with respect to the Mergers (the "Joint Proxy Statement/Prospectus")
filed by KCPL on June 10, 1996 as part of a Registration on Form S-4 (the
"Registration Statement").
In rendering our opinion, we have examined and relied upon the
accuracy and completeness of the facts, information, covenants and
representations contained in originals or copies, certified or otherwise
identified to our satisfaction, of the Merger Agreement, the Joint Proxy
Statement/Prospectus, and such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below. Our opinion is
conditioned on, among other things, the accuracy as of the date hereof and the
continuing accuracy of all of such facts, information, covenants and
representations up to and including the Closing Date.
<PAGE>
UtiliCorp United Inc.
June 10, 1996
Page 2
In our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents. We also have assumed that
the transactions related to the Mergers or contemplated by the Merger
Agreement will be consummated in accordance with the Merger Agreement and as
described in the Joint Proxy Statement/Prospectus. Furthermore, we have
assumed that we will receive, immediately prior to the Effective Time,
certificates from an appropriate officer of each of KCPL and UCU containing
customary representations.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations promulgated thereunder, pertinent judicial authorities, interpretive
rulings of the Internal Revenue Service and such other authorities as we have
considered relevant. It should be noted that statutes, regulations, judicial
decisions and administrative interpretations are subject to change at any time
and, in some circumstances, with retroactive effect. A material change in the
authorities upon which our opinion is based could affect our conclusions.
OPINION
Based solely upon and subject to the foregoing, we are of the opinion
that for United States federal income tax purposes:
(i) the Mergers will constitute a reorganization within the
meaning of Section 368(a) of the Code;
(ii) KCPL, UCU and Newco will each be a party to the
reorganization within the meaning of Section 368(b) of the Code;
(iii) no gain or loss will be recognized by KCPL, UCU or Newco
pursuant to the Mergers; and
(iv) no gain or loss will be recognized by stockholders of UCU
who exchange their shares of UCU Common Stock for shares of KCPL
Common Stock as a result of the Mergers.
<PAGE>
UtiliCorp United Inc.
June 10, 1996
Page 3
Except as set forth above, we express no opinion to any party as to
the consequences of the Mergers or of any transactions related thereto. We are
furnishing this opinion to you solely for your use and benefit in connection
with Section 8.2(e) of the Merger Agreement; this opinion may not be used,
circulated, quoted or otherwise referred to for any other purpose without our
express consent.
We hereby consent to the filing of this opinion as Exhibit 8-b to the
Registration Statement and the references to Blackwell Sanders Matheny Weary &
Lombardi L.C. in the section of the Joint Proxy Statement/Prospectus entitled
"THE MERGERS - Certain Federal Income Tax Consequences." In giving such
consent, we do not thereby admit or imply that we are in the category of
persons whose consent is required under Section 7 of the Securities Act
of 1933.
Very truly yours,
/s/ BLACKWELL SANDERS MATHENY WEARY & LOMBARDI L.C.
<PAGE>
EXHIBIT 12-a
KANSAS CITY POWER & LIGHT COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND TO COMBINED FIXED CHARGES AND PREFERRED DIVIDEND REQUIREMENTS
<TABLE>
<CAPTION>
12 MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- -------- -------- -------- -------- ---------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income from continuing operations.................. $ 124,222 $122,586 $104,775 $105,772 $ 86,334 $103,893
---------- -------- -------- -------- -------- --------
Income taxes and Kansas City earnings tax.............. 62,962 67,761 66,901 68,448 52,578 60,520
---------- -------- -------- -------- -------- --------
Interest component of rents............................ 7,944 8,269 6,732 7,273 6,366 5,075
Interest on long-term debt............................. 53,275 52,184 43,962 50,118 54,266 63,057
Interest on short-term debt............................ 687 1,189 1,170 750 2,749 3,299
Other interest expense and amortization................ 3,600 3,112 4,128 4,113 2,173 2,665
---------- -------- -------- -------- -------- --------
Total fixed charges.................................... 65,506 64,754 55,992 62,254 65,554 74,096
---------- -------- -------- -------- -------- --------
Earnings before taxes on income and fixed charges...... 252,690 255,101 227,668 236,474 204,466 238,509
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
Ratio of earnings to fixed charges..................... 3.86 3.94 4.07 3.80 3.12 3.22
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
Preferred dividends.................................... 3,942 4,011 3,457 3,153 3,062 6,023
Income taxes required.................................. 1,998 2,217 2,207 2,045 1,865 3,508
---------- -------- -------- -------- -------- --------
Earnings before income taxes required for preferred
dividends............................................. 5,940 6,228 5,664 5,198 4,927 9,531
Fixed charges (above).................................. 65,506 64,754 55,992 62,254 65,554 74,096
---------- -------- -------- -------- -------- --------
Total combined fixed charges and preferred dividend
requirements.......................................... $ 71,446 $ 70,982 $ 61,656 $ 67,452 $ 70,481 $83,627
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
Ratio of earnings to combined fixed charges and
preferred dividend requirements....................... 3.54 3.59 3.69 3.51 2.90 2.85
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
</TABLE>
<PAGE>
EXHIBIT 12-b
UTILICORP UNITED INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND TO COMBINED FIXED CHARGES AND PREFERRED DIVIDEND REQUIREMENTS
<TABLE>
<CAPTION>
12 MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- -------- -------- -------- -------- --------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income from continuing operations.................. $ 84,923 $ 79,777 $ 94,445 $ 86,348 $ 52,910 $ 77,637
---------- -------- -------- -------- -------- --------
Income taxes and Kansas City earnings tax.............. 57,586 52,035 52,087 30,018 31,631 43,580
---------- -------- -------- -------- -------- --------
Interest component of rents............................ 15,590 15,346 15,329 15,008 14,600 6,548
Interest on long-term debt............................. 113,805 110,227 89,526 89,027 88,857 65,100
Interest on short-term debt............................ 10,724 10,512 3,981 2,262 7,001 6,297
Other interest expense and amortization................ 15,179 14,935 10,176 10,345 5,728 12,642
---------- -------- -------- -------- -------- --------
Total fixed charges.................................... 155,298 151,020 119,012 116,642 116,186 90,587
---------- -------- -------- -------- -------- --------
Earnings before taxes on income and fixed charges...... 297,807 282,832 265,544 233,008 200,727 211,804
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
Ratio of earnings to fixed charges..................... 1.92 1.87 2.23 2.00 1.73 2.34
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
Preferred dividends.................................... 2,050 2,050 2,982 6,926 6,864 7,856
Income taxes required.................................. 1,367 1,283 1,867 4,336 4,206 4,332
---------- -------- -------- -------- -------- --------
Earnings before income taxes required for preferred
dividends............................................. 3,417 3,333 4,849 11,262 11,070 12,188
Fixed charges (above).................................. 155,298 151,020 119,012 116,642 116,186 90,587
---------- -------- -------- -------- -------- --------
Total combined fixed charges and preferred dividend
requirements.......................................... $ 158,715 $154,353 $123,861 $127,904 $127,256 102,775
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
Ratio of earnings to combined fixed charges and
preferred dividend requirements....................... 1.88 1.83 2.14 1.82 1.58 2.06
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
</TABLE>
<PAGE>
EXHIBIT 12-c
NEWCO
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND TO
COMBINED FIXED CHARGES AND PREFERRED DIVIDEND REQUIREMENTS
<TABLE>
<CAPTION>
12 MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- -------- -------- -------- -------- --------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income from continuing operations.................. $ 209,145 $202,363 $199,220 $192,120 $139,244 $181,530
---------- -------- -------- -------- -------- --------
Income taxes and Kansas City earnings tax.............. 120,548 119,796 118,988 98,466 84,209 104,100
---------- -------- -------- -------- -------- --------
Interest component of rents............................ 23,534 23,615 22,061 22,281 20,966 11,623
Interest on long-term debt............................. 167,080 162,411 133,488 139,145 143,123 128,157
Interest on short-term debt............................ 11,411 11,701 5,151 3,012 9,750 9,598
Other interest expense and amortization................ 18,779 18,047 14,304 14,458 7,901 15,307
---------- -------- -------- -------- -------- --------
Total fixed charges.................................... 220,804 215,774 175,004 178,896 181,740 164,683
---------- -------- -------- -------- -------- --------
Earnings before taxes on income and fixed charges...... 550,497 537,933 493,212 469,482 405,193 450,313
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
Ratio of earnings to fixed charges..................... 2.49 2.49 2.82 2.62 2.23 2.73
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
Preferred dividends.................................... 5,992 6,061 6,439 10,079 9,926 13,879
Income taxes required.................................. 3,365 3,500 4,074 6,381 6,071 7,840
---------- -------- -------- -------- -------- --------
Earnings before income taxes required for preferred
dividends............................................. 9,357 9,561 10,513 16,460 15,997 21,719
Fixed charges (above).................................. 220,804 215,774 175,004 178,896 181,740 164,683
---------- -------- -------- -------- -------- --------
Total combined fixed charges and preferred dividend
requirements.......................................... $ 230,161 $225,335 $185,517 $195,356 $197,737 $188,402
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
Ratio of earnings to combined fixed charges and
preferred dividend requirements....................... 2.39 2.39 2.66 2.40 2.05 2.42
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
</TABLE>
<PAGE>
Exhibit 23-a
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Kansas City Power & Light Company on Form S-4 of our report dated January 31,
1996 on our audits of the consolidated financial statements of Kansas City Power
& Light Company and Subsidiary as of December 31, 1995 and 1994, and for the
years ended December 31, 1995, 1994, and 1993, which report is included in the
Annual Report on Form 10-K. We also consent to the reference to our firm under
the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
-------------------------------
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
June 5, 1996
<PAGE>
Exhibit 23-b
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Joint Proxy Statement of Kansas City Power & Light Company and
UtiliCorp United Inc. and Prospectus (S-4) of Kansas City Power & Light Company
of our reports dated February 6, 1996, incorporated by reference and included in
UtiliCorp United Inc.'s Annual Report on Form 10-K for the year ended December
31, 1995, and to all references to our Firm included in this Joint Proxy
Statement/Prospectus.
/s/ARTHUR ANDERSEN L.L.P.
Kansas City, Missouri,
June 7, 1996
<PAGE>
EXHIBIT 23-c
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Joint Proxy Statement of Kansas City Power & Light Company and
UtiliCorp United Inc. and Prospectus (S-4) of Kansas City Power & Light Company
of our report dated November 10, 1995, included in UtiliCorp United Inc.'s Form
8-K/A dated November 14, 1995, as amended on April 1, 1996, and to all
references to our Firm included in this Joint Proxy Statement/Prospectus.
/s/ARTHUR ANDERSEN
Melbourne, Australia,
June 7, 1996
<PAGE>
EXHIBIT 23-g
CONSENT OF
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
June 10, 1996
The Board of Directors
Kansas City Power & Light Company
1201 Walnut Street
Kansas City, Missouri 64106-2124
Dear Members of the Board:
We hereby consent to the references to our opinion letters dated
January 19, 1996, April 4, 1996 and May 20, 1996, respectively, to the Board of
Directors of Kansas City Power & Light Company ("KCPL"), contained in the Joint
Proxy Statement of KCPL and UtiliCorp United Inc. ("UCU") and the Prospectus of
KCPL which form a part of the Registration Statement on Form S-4 of KCPL
originally filed on June 10, 1996, with the Securities and Exchange Commission,
under the captions "Summary of Joint Proxy Statement/Prospectus" and "The
Mergers." In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder, nor do we thereby admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "experts" as used in the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/ DANIEL V. SCHLEIFMAN
-----------------------------
Director
Investment Banking Group
<PAGE>
Exhibit 23-h
CONSENT OF DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
We hereby consent to all references to our name in the sections
captioned "SUMMARY OF JOINT PROXY STATEMENT/PROSPECTUS" and "THE MERGERS -
Opinion of UCU's Financial Advisor" as shown in the Joint Proxy
Statement/Prospectus of Kansas City Power & Light Company ("KCPL") and
UtiliCorp United Inc. which Joint Proxy Statement/Prospectus is part of the
Registration Statement on Form S-4 of KCPL filed with the Securities and
Exchange Commission by KCPL on June 10, 1996 (the "Registration Statement").
In giving such consent, we do not admit that we come within the category of
persons whose consent is required under, and we do not admit and we disclaim
that we are "experts" for purposes of, the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
/s/ DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
New York, New York
June 10, 1996
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City Power & Light Company, a
Missouri corporation, does hereby constitute and appoint Drue Jennings or
Jeanie Sell Latz, his true and lawful attorney and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
director a Registration Statement on Form S-4 or any post-effective
amendments on Form S-4 together with all amendments, schedules and
exhibits thereto; hereby granting unto such attorney and agent full power of
substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorney and agent may do or cause to be done by
virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 4th day of
June, 1996.
/s/ David L. Bodde
--------------------
David L. Bodde
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 4th day of June, 1996, before me the undersigned, a Notary
Public, personally appeared David L. Bodde, to be known to be the person
described in and who executed the foregoing instrument, and who, being by me
first duly sworn, acknowledged that he executed the same as his free act and
deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year last above written.
/s/ Jacquetta L. Hartman
------------------------
Notary Public
My Commission Expires:
April 8, 2000
- ----------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City Power & Light Company, a
Missouri corporation, does hereby constitute and appoint Drue Jennings or
Jeanie Sell Latz, his true and lawful attorney and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
director a Registration Statement on Form S-4 or any post-effective
amendments on Form S-4 together with all amendments, schedules and
exhibits thereto; hereby granting unto such attorney and agent full power of
substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorney and agent may do or cause to be done by
virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 4th day of
June, 1996.
/s/ William H. Clark
--------------------
William H. Clark
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 4th day of June, 1996, before me the undersigned, a Notary
Public, personally appeared William H. Clark, to be known to be the person
described in and who executed the foregoing instrument, and who, being by me
first duly sworn, acknowledged that he executed the same as his free act and
deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year last above written.
/s/ Jacquetta L. Hartman
------------------------
Notary Public
My Commission Expires:
April 8, 2000
- ----------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City Power & Light Company, a
Missouri corporation, does hereby constitute and appoint Drue Jennings or
Jeanie Sell Latz, his true and lawful attorney and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
director a Registration Statement on Form S-4 or any post-effective
amendments on Form S-4 together with all amendments, schedules and
exhibits thereto; hereby granting unto such attorney and agent full power of
substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorney and agent may do or cause to be done by
virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 4th day of
June, 1996.
/s/ Robert J. Dineen
--------------------
Robert J. Dineen
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 4th day of June, 1996, before me the undersigned, a Notary
Public, personally appeared Robert J. Dineen, to be known to be the person
described in and who executed the foregoing instrument, and who, being by me
first duly sworn, acknowledged that he executed the same as his free act and
deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year last above written.
/s/ Jacquetta L. Hartman
------------------------
Notary Public
My Commission Expires:
April 8, 2000
- ----------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City Power & Light Company, a
Missouri corporation, does hereby constitute and appoint Drue Jennings or
Jeanie Sell Latz, his true and lawful attorney and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
director a Registration Statement on Form S-4 or any post-effective
amendments on Form S-4 together with all amendments, schedules and
exhibits thereto; hereby granting unto such attorney and agent full power of
substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorney and agent may do or cause to be done by
virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 4th day of
June, 1996.
/s/ Arthur J. Doyle
--------------------
Arthur J. Doyle
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 4th day of June, 1996, before me the undersigned, a Notary
Public, personally appeared Arthur J. Doyle, to be known to be the person
described in and who executed the foregoing instrument, and who, being by me
first duly sworn, acknowledged that he executed the same as his free act and
deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year last above written.
/s/ Jacquetta L. Hartman
------------------------
Notary Public
My Commission Expires:
April 8, 2000
- ----------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City Power & Light Company, a
Missouri corporation, does hereby constitute and appoint Drue Jennings or
Jeanie Sell Latz, his true and lawful attorney and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
director a Registration Statement on Form S-4 or any post-effective
amendments on Form S-4 together with all amendments, schedules and
exhibits thereto; hereby granting unto such attorney and agent full power of
substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorney and agent may do or cause to be done by
virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 4th day of
June, 1996.
/s/ W. Thomas Grant II
-----------------------
W. Thomas Grant II
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 4th day of June, 1996, before me the undersigned, a Notary
Public, personally appeared W. Thomas Grant II, to be known to be the person
described in and who executed the foregoing instrument, and who, being by me
first duly sworn, acknowledged that he executed the same as his free act and
deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year last above written.
/s/ Jacquetta L. Hartman
------------------------
Notary Public
My Commission Expires:
April 8, 2000
- ----------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City Power & Light Company, a
Missouri corporation, does hereby constitute and appoint Drue Jennings or
Jeanie Sell Latz, his true and lawful attorney and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
director a Registration Statement on Form S-4 or any post-effective
amendments on Form S-4 together with all amendments, schedules and
exhibits thereto; hereby granting unto such attorney and agent full power of
substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorney and agent may do or cause to be done by
virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 4th day of
June, 1996.
/s/ George E. Nettels, Jr.
--------------------------
George E. Nettels, Jr.
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 4th day of June, 1996, before me the undersigned, a Notary
Public, personally appeared George E. Nettels, Jr., to be known to be the
person described in and who executed the foregoing instrument, and who, being
by me first duly sworn, acknowledged that he executed the same as his free act
and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year last above written.
/s/ Jacquetta L. Hartman
------------------------
Notary Public
My Commission Expires:
April 8, 2000
- ----------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City Power & Light Company, a
Missouri corporation, does hereby constitute and appoint Drue Jennings or
Jeanie Sell Latz, his true and lawful attorney and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
director a Registration Statement on Form S-4 or any post-effective
amendments on Form S-4 together with all amendments, schedules and
exhibits thereto; hereby granting unto such attorney and agent full power of
substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorney and agent may do or cause to be done by
virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 4th day of
June, 1996.
/s/ Linda H. Talbott
---------------------
Linda H. Talbott
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 4th day of June, 1996, before me the undersigned, a Notary
Public, personally appeared David L. Bodde, to be known to be the person
described in and who executed the foregoing instrument, and who, being by me
first duly sworn, acknowledged that he executed the same as his free act and
deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year last above written.
/s/ Jacquetta L. Hartman
------------------------
Notary Public
My Commission Expires:
April 8, 2000
- ----------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City Power & Light Company, a
Missouri corporation, does hereby constitute and appoint Drue Jennings or
Jeanie Sell Latz, his true and lawful attorney and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
director a Registration Statement on Form S-4 or any post-effective
amendments on Form S-4 together with all amendments, schedules and
exhibits thereto; hereby granting unto such attorney and agent full power of
substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorney and agent may do or cause to be done by
virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 4th day of
June, 1996.
/s/ Robert H. West
--------------------
Robert H. West
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 4th day of June, 1996, before me the undersigned, a Notary
Public, personally appeared Robert H. West, to be known to be the person
described in and who executed the foregoing instrument, and who, being by me
first duly sworn, acknowledged that he executed the same as his free act and
deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year last above written.
/s/ Jacquetta L. Hartman
------------------------
Notary Public
My Commission Expires:
April 8, 2000
- ----------------------
<PAGE>
EXHIBIT 99-a
KANSAS CITY POWER & LIGHT COMPANY
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS, , 1996
The undersigned hereby appoints A.D. Jennings, J.S. Latz and J.J. DeStefano,
and each or any of them, proxies for the undersigned, with power of
substitution, to vote the stock of the undersigned at the Special Meeting of
Shareholders on , 1996, and any adjournment or adjournments thereof,
on the following matters, and in their discretion upon such other matters as may
properly come before the meeting.
The shares represented by this Proxy will be voted as directed by the
shareholder. If no direction is given when the duly signed Proxy is returned,
such shares will be voted FOR each of the proposals.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
<PAGE>
PROXY AND VOTING INSTRUCTION CARD
The Board of Directors recommends a vote FOR each of the following proposals.
Please mark your votes as in this example. /X/
1. Approval of the issuance of up to a maximum of shares of KCPL common
stock, no par value, pursuant to the Merger Agreement with UtiliCorp United
Inc.
/ / FOR / / AGAINST / / ABSTAIN
2. Approval of Newco Stock Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Approval of Newco Management Incentive Compensation Plan.
/ / FOR / / AGAINST / / ABSTAIN
Dated:
----------------------------,1996
-----------------------------------------
SIGNATURE
-----------------------------------------
SIGNATURE
PLEASE SIGN EXACTLY AS NAME(S) IS(ARE)
PRINTED HEREIN. WHEN SIGNING AS ATTORNEY,
ADMINISTRATOR, EXECUTOR, GUARDIAN OR
TRUSTEE, PLEASE ADD YOUR TITLE AS SUCH.
IF STOCK IS BEING HELD JOINTLY, EACH
PARTY SHOULD SIGN. IF SIGNATURE IS FOR A
COMPANY, PLEASE SIGN FULL CORPORATE NAME
BY AUTHORIZED OFFICER.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS.
<PAGE>
EXHIBIT 99-b
PROXY/VOTING INSTRUCTION CARD
Proxy Solicited on Behalf of the Board of Directors of the Company for
the Special Meeting on ______________, 1996. The undersigned hereby constitutes
and appoints Richard C. Green, Jr., Stanley O. Ikenberry and Avis G. Tucker and
each of them, true and lawful agents and proxies with full power of substitution
in each, to represent and to vote, as designated below, all of the shares of
common stock of UtiliCorp United Inc. held of record by the undersigned on
_________, 1996, at the Special Meeting of Stockholders to be held at the _____
________ ________ ________, Kansas City, Missouri on _________, ________, 1996,
at __________ (Kansas City time) and at any adjournments thereof, on all
matters coming before said meeting. IF NO DIRECTION AS TO THE MANNER OF VOTING
THE PROXY IS MADE, THE PROXY WILL BE VOTED FOR THE PROPOSAL.
COMMENTS
____________________________
____________________________
____________________________
____________________________
(If you have written in the above
space, please mark the
corresponding box on the reverse
side of the card)
You are encouraged to specify your choice by marking the appropriate box
(SEE REVERSE SIDE) but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendation. However, the Proxies
cannot vote your shares unless you SIGN AND RETURN THIS CARD.
FOLD AND DETACH HERE
UTILICORP UNITED INC.
SPECIAL
MEETING OF
STOCKHOLDERS
-------------------------------------, 1996,-.M.
------------------------------------------------
------------------------------------------------
------------------------------------------------
KANSAS CITY, MO
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROSPOSAL.
<TABLE>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN
1. TO APPROVE THE MERGER AGREEMENT / / / / / /
WITH KANSAS CITY POWER & LIGHT
COMPANY.
</TABLE>
<TABLE>
<S> <C> <C>
SIGNATURE(S) DATE
NOTE: Please sign exactly as name appears on the form, Joint owners
should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
<CAPTION>
Please check this box. If you have written / /
comments on the reverse side.
</TABLE>
FOLD AND DETACH HERE
Your vote is important to us!
Please follow these steps to ensure that your proxy is properly executed and
returned in time to be counted.
1. Mark your vote for the Proposal in one of the three boxes to the right of
the Proposal.
2. Sign at right in the space provided, exactly as your name appears on the
form. Joint owners should each sign. Also enter the date.
3. Check the box above your signature if you are adding comments on the
other side.
4. Tear off at perforation and mail the completed card with signature(s) in
the enclosed reply envelope to:
UtiliCorp United Inc.
P.O. Box 8621
Edison, NJ 08818-9128
