<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C> <C> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
/X/ Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
</TABLE>
KANSAS CITY POWER & LIGHT COMPANY (FILE NO. 1-707)
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C>
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)(2) or Item 22(a)
(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3).
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
</TABLE>
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
PER UNIT PRICE
OR OTHER
UNDERLYING
AGGREGATE VALUE OF
NUMBER OF TRANSACTION PROPOSED
SECURITIES TO COMPUTED MAXIMUM
TITLE OF EACH CLASS OF WHICH PURSUANT TO AGGREGATE VALUE AMOUNT OF
SECURITIES TO WHICH TRANSACTION EXCHANGE ACT OF FILING FEE
TRANSACTION APPLIES APPLIES (1) RULE 0-11 (2) TRANSACTION (2) PAID (3)
<S> <C> <C> <C> <C>
Kansas City Power & Light
Company Common Stock, no par
value........................ 61,908,726 $26.8125 $1,659,927,716 $331,986
UtiliCorp United Inc. Common
Stock, par value $1.00 per
share........................ 53,426,452 $29.75 $1,589,436,947 $317,887
UtiliCorp United Inc.
Preference Stock
(Cumulative), no par value,
$2.05 Series................. 1,000,000 $26.25 $26,250,000 $5,250
Total......................... $3,275,614,663 $655,123
</TABLE>
(1) The maximum number of shares of Kansas City Power & Light Company ("KCPL")
common stock, UtiliCorp United Inc. ("UCU") common stock and UCU preference
stock which may be converted into KC United Corp. common stock and KC United
Corp. preferred stock, as the case may be, pursuant to the Agreement and
Plan of Merger to which the Proxy Statement relates (the "Merger
Agreement").
(2) Estimated pursuant to Rules 0-11(c)(1) and 0-11(a)(4) under the Exchange Act
solely for the purpose of calculating the filing fee, based on the average
of the high and low sale prices for shares of KCPL common stock, UCU common
stock and UCU preference stock, as the case may be, on the New York Stock
Exchange Composite Tape on February 15, 1996.
(3) Pursuant to the Merger Agreement, KCPL and UCU have each paid half of the
total fee.
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
April 4, 1996
Dear Shareholder:
We are pleased to invite you to join us at the Annual Meeting of Shareholders of
Kansas City Power & Light Company. This meeting will be held at 10 a.m. on
Wednesday, May 22, 1996 at the Nelson-Atkins Museum of Art, 4525 Oak Street,
Kansas City, Missouri. At this meeting, you will be asked to vote on proposals
relating to the strategic business combination between your Company and
UtiliCorp United Inc. ("UCU") and certain other proposals.
Your Board believes that this "merger of equals" will create a combined
enterprise that will be well-positioned for an increasingly competitive energy
environment. KCPL and UCU will be merged into a new company currently called KC
United Corp. Strategic advantages that KC United Corp. will possess include
substantial operating efficiencies, increased ability to diversify operations
and grow in a prudent manner, and superior marketing skills. KC United Corp.
will also enjoy greater opportunities for earnings and dividend growth through
the combination of KCPL's and UCU's equity, management, human resources and
technical expertise.
Upon completion of the merger, each share of KCPL common stock you own will be
exchanged for one share of KC United Corp. common stock. Holders of UCU common
stock will receive 1.096 shares of KC United Corp. common stock in exchange for
each share of UCU common stock they own. KCPL shareholders and UCU stockholders
will own approximately 55% and 45%, respectively, of the outstanding shares of
KC United Corp. common stock based upon the capitalization of KCPL and UCU on
the date of the merger agreement. Your Board has received the written opinion
from its financial advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
dated the date hereof, to the effect that the exchange ratio is fair to the
holders of KCPL common stock from a financial point of view.
This strategic business combination is subject to your approval as well as the
approval of UCU stockholders. The combination is also subject to certain
regulatory approvals and other conditions. If all required approvals are
received, it is presently anticipated that the transaction will be effective in
the second quarter of 1997.
You will also be asked to approve certain stock incentive and management
incentive compensation plans of KC United Corp. The incentive plans are intended
to replace comparable existing KCPL and UCU plans and will provide management
with incentives linked to the profitability of KC United Corp.'s businesses and
increases in shareholder value. In addition, KCPL shareholders will be asked to
elect nine directors to hold office for a term of one year and until their
successors have been duly elected and qualified. Shareholders will also be asked
to approve your Board's selection of the Company's independent auditors.
Each of the proposals is more fully described in the accompanying Notice of
Annual Meeting and Joint Proxy Statement/Prospectus and its various attachments.
I encourage you to study these materials carefully.
YOUR BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS AND
CONDITIONS OF THE MATTERS TO BE VOTED UPON AND BELIEVES THAT THEY ARE IN THE
BEST INTERESTS OF KCPL AND ITS SHAREHOLDERS AND RECOMMENDS, BY A UNANIMOUS VOTE
OF THOSE DIRECTORS PRESENT, THAT SHAREHOLDERS VOTE "FOR" EACH OF THE PROPOSALS
DESCRIBED IN THE ATTACHED NOTICE OF ANNUAL MEETING AND JOINT PROXY
STATEMENT/PROSPECTUS.
BECAUSE A TWO-THIRDS SUPERMAJORITY VOTE OF ALL OUTSTANDING SHARES OF KCPL COMMON
STOCK ENTITLED TO VOTE IS REQUIRED TO APPROVE THE MERGER, YOUR VOTE IS VERY
IMPORTANT. PLEASE KEEP IN MIND THAT UNDER MISSOURI LAW, 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 MERGER. THEREFORE, TO ENSURE YOUR
SHARES WILL BE REPRESENTED AT THE
<PAGE>
MEETING, WHETHER OR NOT YOU PLAN TO ATTEND, I URGE YOU TO PROMPTLY COMPLETE AND
MAIL YOUR PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DO ATTEND AND WISH TO VOTE IN
PERSON, YOU CAN REVOKE YOUR PROXY BY GIVING WRITTEN NOTICE TO THE SECRETARY OF
KCPL OR BY CASTING YOUR BALLOT.
Holders of KCPL common stock are entitled to dissenters' rights, as described in
the accompanying Joint Proxy Statement/Prospectus. A shareholder who wishes to
dissent from the merger must not vote "FOR" adoption of the merger and must
comply with the other procedural requirements described in the accompanying
Joint Proxy Statement/Prospectus. If no instructions are indicated on a signed
proxy, such proxy (unless revoked) will be voted "FOR" the merger and each of
the other proposals.
The other directors and I look forward to meeting you at the Annual Meeting. In
the meantime, please review the Joint Proxy Statement/Prospectus and take
advantage of your right to vote.
Sincerely,
/s/ DRUE JENNINGS
Drue Jennings
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
2
<PAGE>
KANSAS CITY POWER & LIGHT COMPANY
1201 WALNUT
KANSAS CITY, MISSOURI 64106
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 1996
---------------------
Notice is hereby given that the Annual Meeting of Shareholders of Kansas
City Power & Light Company ("KCPL") will be held at the Nelson-Atkins Museum of
Art, 4525 Oak Street, Kansas City, Missouri, on Wednesday, May 22, 1996,
commencing at 10:00 a.m., 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 and adopt (A) the Agreement and Plan of Merger,
dated as of January 19, 1996 (the "Merger Agreement"), by and among KCPL,
UtiliCorp United Inc., a Delaware corporation ("UCU"), and KC United
Corp., a Delaware corporation ("Newco"), providing for the merger of each
of KCPL and UCU with and into Newco, with Newco surviving (the "Merger"),
and (B) the Merger, pursuant to which (i) each outstanding share of
common stock, no par value, of KCPL ("KCPL Common Stock"), other than any
shares owned by KCPL, UCU, Newco or any of their wholly-owned
subsidiaries (which shares will be cancelled in the Merger), shall be
converted into and become one fully paid and nonassessable share of
common stock, par value $0.01 per share, of Newco ("Newco Common Stock"),
(ii) each outstanding share of common stock, par value $1.00 per share,
of UCU, other than any shares owned by KCPL, UCU, Newco or any of their
wholly-owned subsidiaries (which shares will be cancelled in the Merger),
shall be converted into and become 1.096 fully paid and nonassessable
shares of Newco Common Stock, and (iii) if the consummation of the Merger
shall occur before March 1, 1997, each outstanding share of UCU
preference stock (cumulative), $2.05 Series, shall be converted into one
share of preferred stock (cumulative), $2.05 Series, of Newco, provided
that if the consummation of the Merger shall occur after March 1, 1997,
such preferred stock of UCU shall be redeemed by UCU prior to or as of
the effective time of the Merger. A copy of the Merger Agreement is
attached as Annex A to the accompanying Joint Proxy Statement/Prospectus.
2. A proposal to approve the Newco Stock Incentive Plan, a copy of which is
attached as Annex F to the accompanying Joint Proxy Statement/Prospectus.
3. A proposal to approve the Newco Management Incentive Compensation Plan,
a copy of which is attached as Annex G to the accompanying Joint Proxy
Statement/Prospectus.
4. A proposal to elect nine directors to hold office for a term of one year
and until their successors have been duly elected and qualified.
5. A proposal to ratify and approve the Board of Directors' appointment of
Coopers & Lybrand, L.L.P. as independent public accountants for 1996; and
6. Such other matters as may properly come before the Meeting or any
adjournment or postponement thereof.
Shareholders of record at the close of business on April 3, 1996 will be
entitled to notice of and to vote at the Meeting or at any adjournment or
postponement thereof. Approval of the Merger Agreement and the Merger requires
the affirmative vote of the holders of two-thirds of the outstanding shares of
KCPL Common Stock entitled to vote. Shareholders are entitled to vote
cumulatively for the
<PAGE>
election of directors, and the election of each director shall be decided by
plurality vote. Approval of each of the other proposals requires the affirmative
vote of a majority of the holders of the shares of KCPL Common Stock present at
the Meeting.
Approval of the Merger Agreement and the Merger is a condition to the
consummation of the Merger. The consummation of the Merger 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 Management Incentive Compensation Plan will only be
implemented if the transactions contemplated by the Merger Agreement are
consummated. Holders of KCPL Common Stock are entitled to dissenters' rights, as
described in the accompanying Joint Proxy Statement/Prospectus.
YOUR BOARD OF DIRECTORS HAS, BY A UNANIMOUS VOTE OF THOSE DIRECTORS PRESENT,
APPROVED OF THE MERGER AGREEMENT, THE MERGER AND THE TRANSACTIONS CONTEMPLATED
THEREBY AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER
AGREEMENT AND THE MERGER, FOR APPROVAL OF THE NEWCO STOCK INCENTIVE PLAN AND THE
NEWCO MANAGEMENT INCENTIVE COMPENSATION PLAN AND FOR EACH OF THE OTHER PROPOSALS
CONTAINED HEREIN.
By Order of the Board of Directors
/s/ JEANIE SELL LATZ
Jeanie Sell Latz
SECRETARY
Kansas City, Missouri
April 4, 1996
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND PROMPTLY
RETURN THE ACCOMPANYING 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>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
JOINT PROXY STATEMENT
OF
<TABLE>
<S> <C> <C>
KANSAS CITY POWER AND UTILICORP UNITED INC.
& LIGHT COMPANY
</TABLE>
------------------------
PROSPECTUS
OF
KC UNITED CORP.
---------------
This Joint Proxy Statement/Prospectus relates to (i) the proposed merger
(the "Merger") and certain related transactions contemplated by the Agreement
and Plan of Merger, dated as of January 19, 1996 (the "Merger Agreement"), by
and among Kansas City Power & Light Company, a Missouri corporation ("KCPL"),
UtiliCorp United Inc., a Delaware corporation ("UCU"), and KC United Corp., a
Delaware corporation ("Newco"), and (ii) the election of directors of each
company by their respective stockholders and certain other matters. Upon
consummation of the Merger pursuant to the Merger Agreement, the separate
corporate existence of each of KCPL and UCU will cease and Newco will be the
surviving corporation. Pursuant to the Merger Agreement, KCPL and UCU are
permitted to change the name of Newco before the effective time of the Merger
(the "Effective Time").
The Merger will be consummated on the terms and subject to the conditions
set forth in the Merger Agreement, as a result of which (i) each outstanding
share of common stock, no par value, of KCPL ("KCPL Common Stock"), other than
any shares owned by KCPL, UCU, Newco or any of their wholly-owned subsidiaries
(which shares will be cancelled), will be cancelled and converted into one fully
paid and nonassessable share of common stock, par value $0.01 per share, of
Newco ("Newco Common Stock") and (ii) each outstanding share of common stock,
par value $1.00 per share, of UCU ("UCU Common Stock"), other than any shares
owned by KCPL, UCU, Newco or any of their wholly-owned subsidiaries (which
shares will be cancelled), will be cancelled and converted into 1.096 fully paid
and nonassessable shares of Newco Common Stock. No fractional shares of Newco
Common Stock will be issued and any stockholder who would otherwise be entitled
to receive a fractional share of Newco Common Stock will instead be entitled to
receive a cash payment therefor. 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 55% and
45%, respectively (assuming no KCPL shareholders demand and perfect their
dissenters' rights), of the total number of shares of Newco Common Stock
outstanding immediately after the Effective Time. See "THE MERGER AGREEMENT --
The Merger."
In addition, if the Effective Time occurs before March 1, 1997, each
outstanding share of UCU's preference stock (cumulative), $2.05 Series ("UCU
Preferred Stock") will be cancelled and converted into one share of preferred
stock (cumulative), $2.05 Series, of Newco ("Newco Preferred Stock"). Any Newco
Preferred Stock issued in the Merger will have an equal stated dividend and like
rights, privileges, qualifications and restrictions as the UCU Preferred Stock.
In the event that the Effective Time has not occurred by March 1, 1997 (the
first date on which the UCU Preferred Stock may be redeemed pursuant to the
Certificate of Designation for the UCU Preferred Stock) or in the event that it
becomes apparent that the Effective Time will not occur by March 1, 1997, the
Merger Agreement obligates UCU to call for redemption the UCU Preferred Stock at
or prior to the Effective Time. In such event, the redemption price will be
$25.00 per share of UCU Preferred Stock plus all dividends accrued and unpaid
through the redemption date. See "COMPARISON OF STOCKHOLDER RIGHTS -- Comparison
of Rights of Holders of Preferred Stock" and "THE MERGER AGREEMENT -- The
Merger."
KCPL has agreed under the Merger Agreement to call for redemption before the
Effective Time all of its outstanding shares of preferred stock at the
applicable redemption prices therefor, together with all dividends accrued and
unpaid through the applicable redemption dates. See "THE MERGER AGREEMENT -- The
Merger."
Shares of KCPL Common Stock held by shareholders who properly demand and
perfect their dissenters' rights ("Dissenting Holders") will not be converted
into shares of Newco Common Stock in the Merger and after the Effective Time
will represent only the right to receive such consideration as is determined to
be due such Dissenting Holders pursuant to the Missouri General and Business
Corporation Law (the "MGBCL"). KCPL Common Stock outstanding immediately prior
to the Effective Time and held by a shareholder who withdraws his demand for
dissenters' rights or fails to perfect such rights will be deemed to be
converted at the Effective Time into the right to receive shares of Newco Common
Stock, without interest. Holders of UCU Common Stock and UCU Preferred Stock
will not have appraisal rights under the Delaware General Corporation Law (the
"DGCL") with respect to the Merger. See "THE MERGER -- Dissenters' Rights."
Newco was formed on January 17, 1996 in order to effect the Merger and,
subject to the receipt of applicable regulatory approvals, will be equally-owned
by KCPL and UCU immediately prior to the Effective Time.
--------------------------
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 April 4, 1996. This
Joint Proxy Statement/Prospectus is first being mailed to the stockholders of
KCPL and UCU on or about April 9, 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 the annual meeting of KCPL
common shareholders (the "KCPL Meeting") to be held at the Nelson-Atkins Museum
of Art, 4525 Oak Street, Kansas City, Missouri, on Wednesday, May 22, 1996,
commencing at 10:00 a.m., local time, and at any adjournment or postponement
thereof. At the KCPL Meeting, in addition to voting upon proposals to approve
and adopt the Merger Agreement, the Merger and the transactions contemplated
thereby, holders of KCPL Common Stock will also consider and vote upon proposals
with respect to the election of directors and the ratification of the
appointment of KCPL's independent accountants.
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 the special meeting of UCU
common stockholders (the "UCU Meeting") to be held at the Kansas City Marriott
Downtown, 200 W. 12th Street on Wednesday, May 22, 1996, commencing at 2:00
p.m., local time, and at any adjournment or postponement thereof. At the UCU
Meeting, in addition to voting upon proposals to approve and adopt the Merger
Agreement, the Merger and the transactions contemplated thereby, holders of UCU
Common Stock will also consider and vote upon proposals with respect to the
election of directors and the approval of UCU's Amended and Restated 1986 Stock
Incentive Plan (the "UCU Plan").
This Joint Proxy Statement/Prospectus also constitutes the prospectus of
Newco with respect to up to approximately 121,000,000 shares of Newco Common
Stock to be issued in the Merger to the holders of KCPL Common Stock and UCU
Common Stock and 1,000,000 shares of Newco Preferred Stock which may be issued
in the Merger to holders of UCU Preferred Stock under the circumstances further
described in "THE MERGER AGREEMENT -- The Merger."
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, UCU or Newco 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 KCPL or UCU upon consummation of
the 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, the UCU Common
Stock and the UCU Preferred 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.
Newco 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 and any Newco Preferred
Stock to be issued in connection with the 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 MAY
15, 1996.
3
<PAGE>
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. UCU's Annual Report on Form 10-K for the year ended December 31,
1995.
3. UCU's Current Report on Form 8-K/A dated April 1, 1996.
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>
PAGE
----
<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
SELECTED HISTORICAL AND PRO FORMA DATA..................................... 23
Selected Historical Financial Data....................................... 23
Selected Unaudited Pro Forma Financial Data.............................. 25
Notes to Selected Historical and Pro Forma Data.......................... 27
Comparative Per Share Data............................................... 28
Comparative Market Prices and Dividends.................................. 29
MEETINGS, VOTING AND PROXIES............................................... 30
The KCPL Meeting......................................................... 30
The UCU Meeting.......................................................... 31
THE MERGER................................................................. 33
Background of the Merger................................................. 33
Reasons for the Merger; Recommendations of the Boards of Directors....... 37
Opinion of KCPL's Financial Advisor...................................... 40
Opinion of UCU's Financial Advisor....................................... 48
Conflicts of Interest.................................................... 53
Certain Arrangements Regarding the Directors and Management of Newco..... 54
Employment Agreements.................................................... 55
Employee Plans and Severance Arrangements................................ 55
Newco Plans.............................................................. 57
Dividend Reinvestment Plan............................................... 57
Certain Federal Income Tax Consequences.................................. 58
Accounting Treatment..................................................... 59
Stock Exchange Listing of the Newco Common Stock and the Newco Preferred
Stock................................................................... 59
Federal Securities Law Consequences...................................... 59
Dissenters' Rights....................................................... 60
Regulatory Matters....................................................... 61
THE MERGER AGREEMENT....................................................... 63
The Merger............................................................... 63
Subsidiaries and Joint Ventures.......................................... 65
Representations and Warranties........................................... 65
Certain Covenants........................................................ 65
No Solicitation of Transactions.......................................... 67
Newco Board of Directors................................................. 68
Directors' and Officers' Indemnification................................. 68
Conditions to Each Party's Obligation to Effect the Merger............... 69
Benefit Plans............................................................ 69
Certain Employment Agreements and Workforce Matters...................... 70
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Termination.............................................................. 71
Termination Fees......................................................... 72
Expenses................................................................. 72
Amendment and Waiver..................................................... 73
Confidentiality Agreement................................................ 73
DESCRIPTION OF NEWCO CAPITAL STOCK......................................... 73
General.................................................................. 73
Newco Common Stock....................................................... 74
Newco Preferred Stock.................................................... 75
Certain Anti-Takeover Provisions......................................... 77
COMPARISON OF STOCKHOLDERS' RIGHTS......................................... 78
Comparison of the Rights of Holders of Common Stock...................... 78
Comparison of the Rights of Holders of Preferred Stock................... 88
APPROVAL OF NEWCO PLANS.................................................... 89
Newco Stock Incentive Plan............................................... 89
Newco Management Incentive Compensation Plan............................. 93
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION......................... 96
EXPERTS.................................................................... 103
LEGAL MATTERS.............................................................. 103
OWNERSHIP OF VOTING STOCK.................................................. 104
KCPL Voting Stock........................................................ 104
UCU Voting Stock......................................................... 105
SELECTED INFORMATION CONCERNING KCPL AND UCU............................... 106
Business of KCPL......................................................... 106
Business of UCU.......................................................... 106
Certain Business Relationships Between KCPL and UCU...................... 106
DESCRIPTION OF NEWCO....................................................... 107
Newco Before the Merger.................................................. 107
Board of Directors of Newco.............................................. 107
Management of Newco...................................................... 109
Community Support........................................................ 109
Dividends................................................................ 110
ELECTION OF KCPL DIRECTORS................................................. 110
COMMITTEES AND MEETINGS OF THE KCPL BOARD.................................. 111
COMPENSATION OF EXECUTIVE OFFICERS......................................... 112
Summary Compensation Table............................................... 112
OPTIONS AND STOCK APPRECIATION RIGHTS...................................... 113
Option/SAR Grants in Last Fiscal Year.................................... 113
Aggregated Option/SAR Exercises in the Last Fiscal Year and Fiscal
Year-End
Option/SAR Values....................................................... 114
BENEFIT PLANS.............................................................. 114
Pension Plans............................................................ 114
Severance Agreements..................................................... 115
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.................... 116
Chief Executive Officer Compensation..................................... 116
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PERFORMANCE GRAPH.......................................................... 117
INDEPENDENT PUBLIC ACCOUNTANTS............................................. 118
VOTING SECURITIES AND VOTING............................................... 118
SOLICITATION AND REVOCATION OF PROXIES..................................... 118
PROPOSALS OF SHAREHOLDERS.................................................. 119
Annex A 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 Charter of KC United Corp................................ D -1
Annex E Form of Bylaws of KC United Corp................................. E -1
Annex F Form of Newco Stock Incentive Plan............................... F -1
Annex G Form of Newco Management Incentive Compensation Plan............. G -1
Annex H Form of Employment Agreement of A. Drue Jennings................. H -1
Annex I Form of Employment Agreement of Richard C. Green................. I -1
Annex J Section 351.455 of the Missouri General and Business Corporation
Law....................................................................... J -1
</TABLE>
7
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1935 Act.................................................................................................. 20
1995 Asset Multiple....................................................................................... 44
1995 EBIT Multiple........................................................................................ 44
1995 EBITDA Multiple...................................................................................... 44
1995 EPS Multiple......................................................................................... 44
1995 PE Ratio............................................................................................. 50
1996 EBIT Multiple........................................................................................ 44
1996 EBITDA Multiple...................................................................................... 44
1996 EPS Multiple......................................................................................... 44
1996 PE Ratio............................................................................................. 50
1997 PE Ratio............................................................................................. 50
Acquisition Proposal...................................................................................... 67
AEM....................................................................................................... 43
AGP....................................................................................................... 22
Announcement Date......................................................................................... 86
Antitrust Division........................................................................................ 62
Application............................................................................................... 62
Aquila.................................................................................................... 43
Aquila Comparable Acquisition Transactions................................................................ 44
Aquila Comparables........................................................................................ 44
Aquila Power.............................................................................................. 43
Asset Multiple............................................................................................ 45
Atomic Energy Act......................................................................................... 20
Blackwell Sanders......................................................................................... 19
Book Value Multiple....................................................................................... 45
British Columbia Commission............................................................................... 61
CEO....................................................................................................... 117
Change in Control......................................................................................... 113
Closing................................................................................................... 63
Closing Date.............................................................................................. 63
Code...................................................................................................... 19
Colorado Commission....................................................................................... 61
Comparable M&A Transactions............................................................................... 50
Confidentiality Agreement................................................................................. 67
Continuation Period....................................................................................... 55
DCF....................................................................................................... 42
Determination Date........................................................................................ 86
DGCL...................................................................................................... 1
Dissenting Holders........................................................................................ 1
Dividend-Equivalent Preferred Stock....................................................................... 76
DLJ....................................................................................................... 17
DLJ Opinion............................................................................................... 48
EBIT...................................................................................................... 44
EBITDA.................................................................................................... 44
EBIT Multiple............................................................................................. 45
EBITDA Multiple........................................................................................... 45
EEI....................................................................................................... 116
Effective Time............................................................................................ 1
Employment Agreement...................................................................................... 17
EPS....................................................................................................... 44
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Equity Consideration...................................................................................... 50
ERISA..................................................................................................... 65
Exchange Act.............................................................................................. 3
Exchange Agent............................................................................................ 64
Executive................................................................................................. 55
FERC...................................................................................................... 20
FTC....................................................................................................... 62
HSR Act................................................................................................... 20
Historical Period......................................................................................... 46
IBES...................................................................................................... 44
Incentive Period.......................................................................................... 94
Indemnified Parties....................................................................................... 68
Indemnified Party......................................................................................... 68
Iowa Board................................................................................................ 61
ISO Holding Period........................................................................................ 93
ISOs...................................................................................................... 57
Joint Venture............................................................................................. 65
Kansas Commission......................................................................................... 61
KCPL...................................................................................................... 1
KCPL Board................................................................................................ 2
KCPL Bylaws............................................................................................... 13
KCPL Charter.............................................................................................. 13
KCPL Common Stock......................................................................................... 1
KCPL Compensation Committee............................................................................... 116
KCPL Exchange Ratio....................................................................................... 16
KCPL Long-Term Incentive Plan............................................................................. 111
KCPL Meeting.............................................................................................. 2
KCPL Pension Plan......................................................................................... 114
KCPL Record Date.......................................................................................... 13
KCPL Regulated Business................................................................................... 42
KCPL Regulated Business Comparables....................................................................... 42
KCPL Severance Agreement.................................................................................. 56
KCPL Stock Award.......................................................................................... 70
KCPL Stock Option......................................................................................... 70
KCPL Unregulated Businesses............................................................................... 42
KLT....................................................................................................... 42
KLT Investments........................................................................................... 42
Liquidation............................................................................................... 76
LTM....................................................................................................... 45
Merger.................................................................................................... 1
Merger Agreement.......................................................................................... 1
Merrill Lynch............................................................................................. 16
Merrill Lynch Opinion..................................................................................... 40
MGBCL..................................................................................................... 1
MGU Indenture............................................................................................. 74
MIC Plan.................................................................................................. 94
Michigan Commission....................................................................................... 61
Minnesota Commission...................................................................................... 61
Missouri Commission....................................................................................... 61
MRI....................................................................................................... 110
net debt.................................................................................................. 52
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Net Income Multiple....................................................................................... 45
New Zealand Commission.................................................................................... 61
Newco..................................................................................................... 1
Newco Board............................................................................................... 18
Newco Bylaws.............................................................................................. 64
Newco Charter............................................................................................. 64
Newco Common Stock........................................................................................ 1
Newco Compensation Committee.............................................................................. 57
Newco Plans............................................................................................... 12
Newco Preferred Stock..................................................................................... 1
NYSE...................................................................................................... 3
Old Certificate........................................................................................... 15
option price.............................................................................................. 90
Payout Ratio.............................................................................................. 51
Performance Goals......................................................................................... 91
Price/Book Ratio.......................................................................................... 50
Projected Period.......................................................................................... 46
Public Comparables........................................................................................ 49
Qualifying Termination.................................................................................... 115
Redemption Date........................................................................................... 77
Registration Statement.................................................................................... 3
Regulated Businesses...................................................................................... 51
Representatives........................................................................................... 66
ROE....................................................................................................... 51
Rule 16b-3................................................................................................ 89
SARs...................................................................................................... 57
SEC....................................................................................................... 3
Section 83(b) election.................................................................................... 93
Securities Act............................................................................................ 3
Segments.................................................................................................. 51
Skadden Arps.............................................................................................. 19
spread.................................................................................................... 92
Stockholder Approvals..................................................................................... 63
Subsidiary................................................................................................ 65
Target Incentive Award.................................................................................... 94
Target Party.............................................................................................. 72
Terminal Value............................................................................................ 51
Total Consideration....................................................................................... 50
Transaction Fee........................................................................................... 48
Treasurer of Australia.................................................................................... 61
UCU....................................................................................................... 1
UCU 1986 Plan............................................................................................. 17
UCU Board................................................................................................. 2
UCU Bylaws................................................................................................ 14
UCU Charter............................................................................................... 14
UCU Common Stock.......................................................................................... 1
UCU Exchange Ratio........................................................................................ 17
UCU Meeting............................................................................................... 2
UCU Plan.................................................................................................. 2
UCU Preferred Stock....................................................................................... 1
UCU Record Date........................................................................................... 14
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UCU Regulated Businesses.................................................................................. 43
UCU Regulated Businesses Comparables...................................................................... 43
UCU Severance Agreement................................................................................... 55
UCU Stock Award........................................................................................... 70
UCU Stock Option.......................................................................................... 70
UED....................................................................................................... 106
UPS....................................................................................................... 106
UER....................................................................................................... 106
UtilCo.................................................................................................... 43
UtilCo Comparables........................................................................................ 45
Voluntary Liquidation..................................................................................... 76
WCNOC..................................................................................................... 62
Weil Gotshal.............................................................................................. 34
West Virginia Commission.................................................................................. 61
WRI....................................................................................................... 33
</TABLE>
11
<PAGE>
SUMMARY OF JOINT PROXY STATEMENT/PROSPECTUS
THE FOLLOWING IS A SUMMARY OF CERTAIN IMPORTANT TERMS AND CONDITIONS OF THE
MERGER 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 our 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, pursues opportunities in
primarily energy-related ventures throughout the nation and world. KCPL's
commitment to KLT Inc. and its holdings reflect KCPL's plans to enhance
shareholder value by capturing growth opportunities in energy-related 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."
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."
NEWCO. Newco was formed on January 17, 1996 in order to effect the Merger
and, subject to the receipt of applicable regulatory approvals, will be
equally-owned by KCPL and UCU immediately prior to the Effective Time. Prior to
the Effective Time, Newco will have no material assets and will conduct no
operations other than those contemplated by the Merger Agreement to effect the
Merger and the transactions contemplated thereby. The principal executive
offices of Newco are presently located at 1201 Walnut, Kansas City, Missouri
64106-2124 and Newco's telephone number is (816) 556-2200. At the Effective Time
the principal executive offices of Newco will be located in Kansas City,
Missouri. See "DESCRIPTION OF NEWCO."
THE KCPL MEETING
PURPOSE. At the KCPL Meeting, the holders of KCPL Common Stock will be
asked to consider and vote upon: (i) a proposal to approve and adopt the Merger
Agreement and the Merger; (ii) a proposal to approve the Newco Stock Incentive
Plan; (iii) a proposal to approve the Newco Management Incentive Compensation
Plan (together with the Newco Stock Incentive Plan, the "Newco Plans"); (iv) a
proposal to elect nine directors to hold office for a term of one year and until
their successors have been duly elected and qualified; (v) a proposal to ratify
and approve the KCPL Board's appointment of Coopers & Lybrand, L.L.P. as
independent public accountants for 1996; and (vi) such
12
<PAGE>
other matters, if any, as may properly come before the KCPL Meeting or any
adjournment or postponement thereof. Pursuant to the Merger Agreement, the
consummation of the Merger 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, 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 of those directors present, has approved
the Merger Agreement, the Merger and the transactions contemplated thereby,
authorized the execution and delivery of the Merger Agreement, and recommends
that KCPL shareholders vote FOR approval and adoption of the Merger Agreement
and the Merger, FOR approval of each of the Newco Plans, FOR the election of the
nominated directors and FOR ratification and approval of the appointment of
Coopers & Lybrand, L.L.P. as KCPL's independent accountants for 1996.
See "MEETINGS, VOTING AND PROXIES -- The KCPL Meeting."
DATE, PLACE AND TIME; RECORD DATE. The KCPL Meeting is scheduled to be held
at the Nelson-Atkins Museum of Art, 4525 Oak Street, Kansas City, Missouri, on
Wednesday, May 22, 1996, commencing at 10:00 a.m., local time. Holders of record
of shares of KCPL Common Stock at the close of business on April 3, 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, 61,902,083 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,
with the right of cumulative voting in the election of directors. 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 MGBCL, the Restated Articles of Consolidation of KCPL (the "KCPL
Charter"), the bylaws of KCPL (the "KCPL Bylaws") and the rules of the NYSE, as
applicable, the affirmative vote of the holders of two-thirds of the outstanding
shares of KCPL Common Stock entitled to vote is required to approve the Merger
Agreement and the Merger. Shareholders are entitled to vote cumulatively for the
election of directors, and the election of each director shall be decided by
plurality vote. The affirmative vote of the holders of a majority of the shares
of KCPL Common Stock present and entitled to vote at the KCPL Meeting is
required to approve each of the Newco Plans and to ratify and approve of the
appointment of Coopers & Lybrand, L.L.P. as KCPL's independent accountants for
1996.
SINCE A TWO-THIRDS SUPERMAJORITY VOTE OF ALL OUTSTANDING SHARES OF KCPL
COMMON STOCK ENTITLED TO VOTE IS REQUIRED TO APPROVE THE MERGER AGREEMENT AND
THE MERGER, YOUR VOTE IS IMPORTANT. UNDER MISSOURI LAW, 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 MERGER.
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: (i) a proposal to approve the Merger Agreement and
the transactions contemplated thereby; (ii) a proposal to approve the Newco
Stock Incentive Plan; (iii) a proposal to approve the Newco Management Incentive
Compensation Plan; (iv) a proposal to elect three directors to hold office for a
term of three years and until their successors have been duly elected and
qualified; (v) a proposal to adopt the UCU Plan; and (vi) such other matters, if
any, as may properly come before the
13
<PAGE>
UCU Meeting or any adjournment or postponement thereof. Pursuant to the Merger
Agreement, the consummation of the Merger is conditioned upon approval of
proposal (i) above, but is not conditioned upon approval by the stockholders of
UCU of any other of the above proposals. If approved by the stockholders, each
of the Newco Plans will be implemented only if the transactions contemplated by
the Merger Agreement are consummated.
THE UCU BOARD, BY A UNANIMOUS VOTE, HAS APPROVED THE MERGER AGREEMENT AND
THE MERGER, AUTHORIZED THE EXECUTION AND DELIVERY OF THE MERGER AGREEMENT, AND
RECOMMENDS THAT UCU STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT, FOR
THE ELECTION OF THE NOMINATED DIRECTORS AND FOR EACH OF THE OTHER PROPOSALS.
See "MEETINGS, VOTING AND PROXIES -- The UCU Meeting."
DATE, PLACE AND TIME; RECORD DATE. The UCU Meeting is scheduled to be held
at the Kansas City Marriott Downtown, 200 W. 12th Street, Kansas City, Missouri
on Wednesday, May 22, 1996, commencing at 2:00 p.m., local time. Holders of
record of shares of UCU Common Stock at the close of business on April 3, 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, 46,550,642 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 each matter presented at the UCU Meeting. 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"), the bylaws of UCU (the "UCU Bylaws") and the rules
of the NYSE, as applicable, 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, with respect to the
election of directors, the election of each director shall be decided by
plurality vote. Stockholders are entitled to exercise cumulative voting rights
in the election of directors. Each of the other proposals must be approved by a
majority of the votes present at the UCU Meeting. Abstentions and broker non-
votes will have the same effect as votes cast against approval of the Merger
Agreement.
As of the UCU Record Date, the directors and executive officers of UCU,
together with their affiliates as a group, beneficially own 2.4% of the issued
and outstanding shares of UCU Common Stock entitled to vote at the UCU Meeting.
See "MEETINGS, VOTING AND PROXIES -- The UCU Meeting."
THE MERGER
The Merger will be consummated on the terms and subject to the conditions
set forth in the Merger Agreement, as a result of which, as of the Effective
Time, KCPL and UCU will be merged with and into Newco, the separate corporate
existence of each of KCPL and UCU will cease and Newco will be the surviving
corporation. In addition, as of the Effective Time (i) each outstanding share of
KCPL Common Stock, other than any shares owned by KCPL, UCU, Newco or any of
their wholly-owned subsidiaries (which shares will be cancelled), shall be
cancelled and converted into the right to receive one fully paid and
nonassessable share of Newco Common Stock and (ii) each outstanding share of UCU
Common Stock, other than any shares owned by KCPL, UCU, Newco or any of their
wholly-owned subsidiaries (which shares will be cancelled), shall be cancelled
and converted into the right to receive 1.096 fully paid and nonassessable
shares of Newco Common Stock. No fractional shares of Newco Common Stock will be
issued and any stockholder who would otherwise be entitled to receive a
fractional share of Newco Common Stock will instead be entitled to receive a
cash payment 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 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. Based on the number of shares outstanding as of the date of the Merger
Agreement, the
14
<PAGE>
holders of KCPL Common Stock and the holders of UCU Common Stock will hold in
the aggregate approximately 55% and 45%, respectively, of the total number of
shares of Newco Common Stock outstanding immediately after the Effective Time
(assuming no KCPL shareholders demand and perfect their dissenters' rights).
In addition, if the Effective Time occurs before March 1, 1997, each
outstanding share of UCU Preferred Stock shall be cancelled and converted into
the right to receive one share of Newco Preferred Stock. Any Newco Preferred
Stock issued in the Merger will have an equal stated dividend and like rights,
privileges, qualifications and restrictions as the UCU Preferred Stock. In the
event that the Effective Time has not occurred by March 1, 1997 (the first date
on which the UCU Preferred Stock may be redeemed pursuant to the Certificate of
Designation for the UCU Preferred Stock) or in the event that it becomes
apparent that the Effective Time will not occur by March 1, 1997, the Merger
Agreement obligates UCU to call for the redemption of the UCU Preferred Stock at
or prior to the Effective Time. The redemption price will be $25.00 per share of
UCU Preferred Stock plus all dividends accrued and unpaid through the redemption
date. If issued, it is intended that the Newco Preferred Stock will be redeemed
as soon as is practicable on or after March 1, 1997.
KCPL has agreed under the Merger Agreement to call for redemption before the
Effective Time all of its outstanding shares of preferred stock at the
applicable redemption prices therefor, together with all dividends accrued and
unpaid through the applicable redemption dates.
See "THE MERGER AGREEMENT -- The Merger."
EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Effective Time, the Exchange Agent (as
defined herein) will mail transmittal instructions to each holder of record of
shares of KCPL Common Stock, UCU Common Stock and UCU Preferred Stock (if such
preferred stock was not previously redeemed) outstanding at the Effective Time,
advising such holder of the procedure for surrendering such holder's
certificates (each, an "Old Certificate") which immediately prior to the
Effective Time represented certificates for shares of KCPL Common Stock, UCU
Common Stock or UCU Preferred Stock (if such preferred stock was not previously
redeemed), as the case may be, that were cancelled in the Merger and became
instead the right to receive shares of Newco Common Stock or Newco Preferred
Stock, as the case may be. Holders of Old Certificates will not be entitled to
receive any payment of dividends or other distributions on or payment for any
fractional share with respect to their Old Certificates until such certificates
have been surrendered for certificates representing shares of Newco Common Stock
or Newco Preferred Stock, as the case may be. Cash will be paid to stockholders
in lieu of fractional shares of Newco Common Stock. Holders of shares of KCPL
Common Stock, UCU Common Stock and UCU Preferred Stock (if such preferred stock
was not previously redeemed prior to the Effective Time) should not submit their
stock certificates for exchange until a letter of transmittal and instructions
therefor are received. See "THE MERGER AGREEMENT -- The Merger."
NEWCO PLANS
Pursuant to the Merger Agreement, Newco will adopt the Newco Stock Incentive
Plan and the Newco Management Incentive Compensation Plan to replace the
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
Management Incentive Compensation Plan is a short-term incentive compensation
plan providing for awards based upon the achievement of individual, group and
corporate performance goals during periods of up to 12 months. For descriptions
of the Newco Plans, see "THE MERGER -- Newco Plans" and "APPROVAL OF NEWCO
PLANS."
BACKGROUND OF THE MERGER
For a description of the background of the Merger, see "THE MERGER --
Background of the Merger."
15
<PAGE>
REASONS FOR THE MERGER
KCPL and UCU believe that the Merger offers 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 Merger; 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; and cost savings in a variety of other categories, estimated to result in
net savings of approximately $600 million over a 10-year period following the
Merger. See "THE MERGER -- Reasons for the Merger; Recommendations of the Boards
of Directors."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
In considering the recommendations of the KCPL Board and the UCU Board with
respect to the Merger, stockholders should be aware that certain members of
KCPL's and UCU's management and Boards of Directors have certain interests in
the Merger that are in addition to the interests of stockholders of KCPL and UCU
generally. See "THE MERGER -- Conflicts of Interest."
KCPL. The KCPL Board, by a unanimous vote of those directors present, has
approved and adopted the Merger Agreement, the Merger and the transactions
contemplated thereby, believes that the terms of the Merger are fair to, and in
the best interests of, KCPL's shareholders and recommends that the shareholders
of KCPL vote FOR approval of the Merger Agreement and the Merger 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 MERGER -- Reasons for the Merger; Recommendations of the Boards of
Directors." In addition, the KCPL Board recommends that the KCPL shareholders
vote FOR the election of the nominated directors and FOR ratification and
approval of the appointment of Coopers & Lybrand, L.L.P. as KCPL's independent
accountants for 1996.
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 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 transactions contemplated thereby. The UCU Board
approved and adopted the Merger Agreement after consideration of a number of
factors described under the heading "THE MERGER -- Reasons for the Merger;
Recommendations of the Boards of Directors." In addition, the UCU Board
recommends that the UCU stockholders vote FOR the election of the nominated
directors and FOR each of the other proposals referenced in the Notice of Annual
Meeting and in this Joint Proxy Statement/Prospectus.
OPINIONS OF FINANCIAL ADVISORS
KCPL. On January 19, 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 January 19, 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
KCPL Common Stock pursuant to the Merger (the "KCPL Exchange Ratio") is fair to
the holders of shares of KCPL Common Stock (other than UCU and its affiliates)
from a financial point of view. Merrill Lynch subsequently confirmed its January
19, 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
16
<PAGE>
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 MERGER -- Opinion of KCPL's Financial Advisor" and Annex B.
UCU. On January 19, 1996, Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") delivered its oral opinion, which opinion was subsequently
confirmed in a written opinion dated as of January 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
and assuming the KCPL Exchange Ratio, the exchange ratio of 1.096 shares of
Newco Common Stock for each share of UCU Common Stock pursuant to the Merger
Agreement (the "UCU 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 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 MERGER -- 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 Merger, stockholders should be aware that certain members of
KCPL's and UCU's management and Boards of Directors have certain interests in
the Merger 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, upon consummation of the Merger,
consist of 18 persons with nine persons designated by KCPL, including A. Drue
Jennings, Chairman of the Board, President and Chief Executive Officer of KCPL,
and nine persons designated by UCU, including Richard C. Green, Jr., Chairman of
the Board and Chief Executive Officer of UCU. It is currently anticipated that
the directors of KCPL and UCU immediately prior to the Effective Time will serve
as the initial directors of Newco. See "THE MERGER -- Conflicts of Interest--
Board of Directors."
EMPLOYMENT AGREEMENTS. Each of Messrs. Jennings and Green will enter into
an employment agreement with Newco to become effective upon the consummation of
the Merger (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 stockholders 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 stockholders 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 MERGER -- 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 Merger. In addition, stock options outstanding under the UCU
Plan and the UCU 1986 Stock Incentive Plan (the "UCU 1986 Plan") vested upon
execution of the Merger Agreement. Restricted stock outstanding under the UCU
1986 Plan will vest upon consummation of the Merger. The aggregate amount which
could be payable under certain circumstances upon termination of employment
after the Merger to the five most highly compensated executive officers of KCPL
who have entered into the KCPL Severance Agreements is approximately $6.1
million. In addition, an aggregate of approximately $430,000 in deferred
compensation would be payable to these individuals upon termination of
employment after the Merger. The
17
<PAGE>
aggregate amount which could be payable under certain circumstances upon
termination of employment after the Merger to the five most highly compensated
executive officers of UCU who have entered into the UCU Severance Agreements 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 Merger. See "THE MERGER --
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 Merger and shall continue in
full force and effect for a period of not less than six years from the Effective
Time. See "THE MERGER -- Conflicts of Interest -- Indemnification" and "THE
MERGER AGREEMENT -- Directors' and Officers' Indemnification."
EMPLOYEE STOCK OPTIONS
All stock options to acquire KCPL Common Stock under the existing employee
stock incentive and option plans of KCPL and all stock options to acquire UCU
Common Stock under the existing employee stock incentive plans of UCU 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, in most cases, be adjusted to reflect the KCPL Exchange Ratio and the UCU
Exchange Ratio, as the case may be. See "THE MERGER -- Newco Plans" and "THE
MERGER AGREEMENT -- Benefit Plans."
MANAGEMENT OF NEWCO
As provided in the Merger Agreement, at the Effective Time, the Newco Board
will consist of 18 directors, nine designated by KCPL and nine designated by
UCU. At the Effective Time, A. Drue Jennings will become 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 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. As
of the date of this Joint Proxy Statement/Prospectus, KCPL and UCU have not
determined which other individuals will be designated to serve as directors or
officers of Newco as of the Effective Time. However, it is currently anticipated
that the directors of KCPL and UCU immediately prior to the Effective Time will
serve as the initial directors of Newco. See "THE MERGER -- Employment
Agreements" and "DESCRIPTION OF NEWCO -- Management of Newco."
CONDITIONS TO THE MERGER
The respective obligations of KCPL and UCU to consummate the Merger are
subject to the satisfaction of certain conditions, including the approval of the
Merger Agreement and the Merger by the stockholders of each of KCPL and UCU; the
absence of any injunction that prevents the consummation of the Merger; the
effectiveness of the Registration Statement; the listing on the NYSE of the
shares of Newco Common Stock to be issued in the Merger; the receipt of all
material governmental
18
<PAGE>
approvals; the qualification of the Merger as a pooling of interests for
accounting purposes; obtaining necessary permits to operate Newco; 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 Merger will qualify as a
tax-free reorganization; the receipt of certain material third-party consents;
and the receipt of letters from affiliates of the other party with respect to
transactions in securities of KCPL, UCU or Newco. See "THE MERGER AGREEMENT --
Conditions to Each Party's Obligation to Effect the Merger."
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 Merger is 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 Merger; 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 its approval by the stockholders of KCPL and
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
Merger 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 Merger 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 Merger will
qualify as a reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and (ii) no gain or loss will be recognized by
holders of KCPL Common Stock, UCU Common Stock or UCU Preferred Stock (if such
preferred stock was not previously redeemed) upon the exchange of such stock for
Newco Common Stock or Newco Preferred
19
<PAGE>
Stock, as the case may be, in the Merger, except to the extent that cash is
received in lieu of fractional shares or pursuant to the perfection of
dissenters' rights by Dissenting Holders. See "THE MERGER -- 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 MERGER, 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 MERGER
At the Effective Time, the separate corporate existence of KCPL and UCU will
cease and Newco will be the surviving corporation in the Merger. Pursuant to the
Merger Agreement, KCPL and UCU are permitted to change the name of Newco. The
headquarters of Newco at the Effective Time 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 "DESCRIPTION OF NEWCO."
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 Merger. 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, UCU and Newco intend to request a "no-action" letter from the staff of
the SEC, confirming their view that (i) the Merger 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
Merger, 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, UCU and Newco will file an application
with the SEC for the necessary approvals and exemptions in connection with the
Merger.
KCPL and UCU possess municipal franchises and environmental permits and
licenses that require the consent of the licensor to the Merger or may need to
be renewed or replaced as a result of the Merger. 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,
20
<PAGE>
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.
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 Merger 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 Merger, 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
Merger that final orders approving the Merger 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 Merger.
See "THE MERGER -- Regulatory Matters."
ACCOUNTING TREATMENT
KCPL and UCU believe that the Merger will be treated as a pooling of
interests for accounting purposes. See "THE MERGER -- 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 Merger. See "THE MERGER
AGREEMENT -- Conditions to Each Party's Obligation to Effect the Merger."
DISSENTERS' RIGHTS
Under the MGBCL, each holder of KCPL Common Stock who dissents from the
Merger has the right to have the fair value of such holder's shares appraised by
judicial determination and paid to them in cash. In order to perfect such
dissenters' rights, holders of KCPL Common Stock must comply with the procedural
requirements of the MGBCL, including, without limitation, filing a written
objection to the Merger with KCPL prior to the KCPL Meeting, not voting in favor
of the Merger Agreement and, within 20 days after the Effective Time, making a
written demand for payment of the fair value of the shares held by such
shareholder.
Shares of KCPL Common Stock held by Dissenting Holders will not be converted
into shares of Newco Common Stock in the Merger and after the Effective Time
will represent only the right to receive such consideration as is determined to
be due such Dissenting Holders pursuant to the MGBCL. KCPL Common Stock
outstanding immediately prior to the Effective Time and held by a shareholder
who withdraws his demand for dissenters' rights or fails to perfect such rights
will be deemed to be converted at the Effective Time into the right to receive
shares of Newco Common Stock, without interest.
Holders of UCU Common Stock and UCU Preferred Stock do not have appraisal
rights under the DGCL with respect to the Merger.
See "THE MERGER -- Dissenters' Rights" and Annex J.
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
21
<PAGE>
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. The dividend policy of Newco will be determined upon evaluation from
time to time by the Newco Board of Newco's results of operations, financial
condition, capital requirements and other relevant considerations, including
regulatory considerations. Both KCPL and UCU have a history of consistent
dividend growth. Although it is premature to commit, it is the current intention
of KCPL and UCU to maintain initial Newco dividends which will be at least in
the range of those currently being paid. See "DESCRIPTION OF NEWCO -- Dividends"
and "DESCRIPTION OF NEWCO CAPITAL STOCK -- Newco Common Stock."
COMPARISON OF STOCKHOLDERS' RIGHTS
As a result of the Merger, holders of KCPL Common Stock (other than
Dissenting Holders) will become stockholders of Newco, a Delaware corporation.
Such stockholders will have certain rights as Newco stockholders that are
different than they had as shareholders of KCPL, both because of the differences
between the KCPL Charter and the KCPL Bylaws, on the one hand, and the Newco
Charter and the Newco Bylaws (forms of which are attached as Annexes D and E,
respectively, to this Joint Proxy Statement/Prospectus), on the other hand, and
because of differences between Missouri and Delaware corporation law.
As a result of the Merger, holders of UCU Common Stock will become
stockholders of Newco. As both UCU and Newco are incorporated under the laws of
Delaware, differences in the rights of such stockholders will be solely
attributable to differences in the UCU Charter and the UCU Bylaws, on the one
hand, and the Newco Charter and the Newco Bylaws, on the other hand.
Any Newco Preferred Stock issued in the Merger will have an equal stated
dividend and like rights, privileges, qualifications and restrictions as the UCU
Preferred Stock, and the Newco Preferred Stock, like the UCU Preferred Stock,
will be governed by Delaware law.
For a comparison of Missouri and Delaware law and the charter and bylaw
provisions of KCPL, UCU and Newco, see "COMPARISON OF STOCKHOLDERS' RIGHTS."
22
<PAGE>
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."
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.
KANSAS CITY POWER & LIGHT COMPANY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1995 1994 (A) 1993 1992 (B) 1991
----------- ----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues......................... $ 886.0 $ 868.3 $ 857.5 $ 802.7 $ 825.1
Operating income before income taxes....... 244.1 220.6 225.8 192.3 233.2
Preferred stock dividend requirements...... 4.0 3.5 3.2 3.1 6.0
Earnings available for common shares....... 118.6 101.3 102.6 83.3 97.9
Primary earnings per share................. 1.92 1.64 1.66 1.35 1.58
Cash dividends per share................... 1.54 1.50 1.46 1.43 1.37
Ratio of earnings to fixed charges (g)..... 3.94x 4.07x 3.80x 3.12x 3.22x
Ratio of earnings to fixed charges plus
preferred dividend requirements (h)....... 3.59x 3.69x 3.51x 2.90x 2.85x
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................... $ 2,882.5 $ 2,770.4 $ 2,755.1 $ 2,646.9 $ 2,615.0
Long-term debt, net........................ 835.7 798.5 733.7 788.2 822.7
Short-term debt (including current
maturities) (i)........................... 92.8 65.4 163.5 59.5 86.0
Cumulative preferred stock, net............ 89.0 89.0 89.0 89.0 39.0
Cumulative redeemable preferred stock...... 1.4 1.6 1.8 1.9 2.1
Common stock equity........................ 897.9 874.7 866.2 853.9 860.2
Book value per common share................ 14.50 14.13 13.99 13.79 13.90
</TABLE>
See accompanying Notes to Selected Historical and Pro Forma Data.
23
<PAGE>
UTILICORP UNITED INC.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1995 (C) 1994 1993 (D) 1992 (E) 1991
----------- ----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues......................... $ 2,798.5 $ 2,398.1 $ 2,746.1 $ 2,339.0 $ 1,726.2
Operating income before income taxes....... 225.1 228.0 144.0 165.4 192.7
Preferred stock dividend requirements...... 2.1 3.0 6.9 6.9 7.8
Earnings available for common shares....... 77.7 91.4 79.5 46.0 69.8
Primary earnings per share................. 1.72 2.08 1.95 1.32 2.37
Cash dividends per share (f)............... 1.72 1.70 1.62 1.60 1.54
Ratio of earnings to fixed charges (g)..... 1.87x 2.23x 2.00x 1.73x 2.34x
Ratio of earnings to fixed charges plus
preferred dividend requirements (h)....... 1.83x 2.14x 1.82x 1.58x 2.06x
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................... $ 3,885.9 $ 3,111.1 $ 2,850.5 $ 2,552.8 $ 2,387.3
Long-term debt, net........................ 1,355.4 976.9 1,009.7 890.8 928.1
Short-term debt (including current
maturities) (i)........................... 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
Preference stock, convertible and
mandatorily redeemable.................... -- -- 58.5 60.7 61.7
Preferred stock of subsidiary,
retractable............................... .4 .4 .4 9.4 10.4
Company-obligated mandatorily redeemable
preferred securities of partnership....... 100.0 -- -- -- --
Common stock equity........................ 946.3 906.8 851.7 661.1 660.7
Book value per common share................ 20.59 20.24 20.27 18.66 19.18
</TABLE>
See accompanying Notes to Selected Historical and Pro Forma Data.
24
<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 Merger.
The unaudited pro forma combined balance sheet data at December 31, 1995, 1994
and 1993 give effect to the Merger as if it 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 give effect
to the Merger as if it had occurred at January 1, 1993. These statements are
prepared on the basis of accounting for the Merger 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 Merger been consummated on the date as
of which, or at the beginning of the periods for which, the Merger is being
given effect nor is it necessarily indicative of future operating results or
financial position. See "UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION."
25
<PAGE>
KC UNITED CORP.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues..................................................... $ 3,684.5 $ 3,266.4 $ 3,603.6
Operating income before income taxes................................... 469.2 448.6 369.8
Preferred stock dividend requirements.................................. 6.1 6.5 10.1
Earnings available for common shares................................... 196.3 192.7 182.1
Primary earnings per share (j)......................................... 1.76 1.75 1.71
Cash dividends per share (f)(j)........................................ 1.55 1.52 1.47
Ratio of earnings to fixed charges (g)................................. 2.49x 2.82x 2.62x
Ratio of earnings to fixed charges plus preferred dividend requirements
(h)................................................................... 2.39x 2.66x 2.40x
<CAPTION>
DECEMBER 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........................................................... $ 6,768.4 $ 5,881.5 $ 5,605.6
Long-term debt, net.................................................... 2,191.1 1,775.4 1,743.4
Short-term debt (including current maturities) (i)..................... 396.5 386.6 235.3
Preference and cumulative preferred stock, not mandatorily redeemable
(k)................................................................... 114.0 114.0 114.0
Preference stock, convertible and mandatorily redeemable............... -- -- 58.5
Cumulative redeemable preferred stock (k).............................. 1.4 1.6 1.8
Preferred stock of subsidiary, retractable............................. .4 .4 .4
Company-obligated mandatorily redeemable preferred securities of
partnership........................................................... 100.0 -- --
Common stock equity.................................................... 1,844.2 1,781.5 1,717.9
Book value per common share............................................ 16.42 16.04 15.91
</TABLE>
See accompanying Notes to Selected Historical and Pro Forma Data.
26
<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, 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 Energy Corporation 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.
(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.
(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 KCPL Common Stock outstanding into one share of Newco Common
Stock and the exchange of each share of UCU Common Stock outstanding into
1.096 shares of Newco Common Stock. See "THE MERGER AGREEMENT -- The
Merger." Pro forma per common share amounts do not, however, give effect
to the synergies of the transaction or transaction costs. For a
description of the synergies, see "THE MERGER -- Reasons for the Merger;
Recommendations of the Boards of Directors."
(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 Merger.
27
<PAGE>
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 Merger 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."
<TABLE>
<CAPTION>
YEARS ENDED OR AS OF
DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
(PER SHARE)
<S> <C> <C> <C>
KCPL -- HISTORICAL
Book value per common share........................................................ $ 14.50 $ 14.13 $ 13.99
Cash dividends per common share.................................................... 1.54 1.50 1.46
Earnings per share
Primary.......................................................................... 1.92 1.64 1.66
Fully diluted.................................................................... 1.92 1.64 1.66
UCU -- HISTORICAL
Book value per common share........................................................ $ 20.59 $ 20.24 $ 20.27
Cash dividends per common share.................................................... 1.72 1.70 1.62
Earnings per share
Primary.......................................................................... 1.72 2.08 1.95
Fully diluted.................................................................... 1.71 2.06 1.92
NEWCO PRO FORMA (1)
Book value per common share........................................................ $ 16.42 $ 16.04 $ 15.91
Cash dividends per common share.................................................... 1.55 1.52 1.47
Earnings per share
Primary.......................................................................... 1.76 1.75 1.71
Fully diluted.................................................................... 1.76 1.74 1.70
</TABLE>
- ------------------------
(1) Calculated with converted shares resulting from the Merger.
28
<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 27.000 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 April 2).......... 25.500 25.000 29.125 28.625
</TABLE>
On January 19, 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) the KCPL Common Stock on the NYSE Composite Tape
was $26.250, and (ii) the UCU Common Stock on the NYSE Composite Tape was
$28.500.
On April 2, 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 $25.000 and the closing sales price per share of UCU
Common Stock on the NYSE Composite Tape was $28.625.
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.
29
<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. This Joint Proxy Statement/Prospectus is also being furnished to the
holders of KCPL Common Stock, UCU Common Stock and UCU Preferred Stock in
connection with the issuance of the Newco Common Stock and with the potential
issuance of the Newco Preferred Stock in the 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 and adopt the Merger Agreement and the
Merger; (ii) a proposal to approve the Newco Stock Incentive Plan; (iii) a
proposal to approve the Newco Management Incentive Compensation Plan; (iv) a
proposal to elect nine directors to hold office for a term of one year and until
their successors have been duly elected and qualified; (v) a proposal to ratify
and approve the KCPL Board's appointment of Coopers & Lybrand, L.L.P. as
independent public accountants for 1996; and (vi) such other matters, if any, as
may properly come before the KCPL Meeting or any adjournment or postponement
thereof. The KCPL Board does not know of, as of the date of mailing of this
Joint Proxy Statement/Prospectus, any other business to be brought before the
KCPL Meeting. The enclosed proxy card authorizes the voting of shares
represented by the proxy on all other matters that may properly come before the
KCPL Meeting, and any adjournment or postponement thereof, and it is the
intention of the proxy holders to take such action in connection therewith as
shall be in accordance with their best judgment.
The KCPL Board, by a unanimous vote of those directors present, has adopted
and approved the Merger Agreement, the Merger and the transactions contemplated
thereby, authorized the execution and delivery of the Merger Agreement, and
recommends that KCPL shareholders vote FOR approval and adoption of the Merger
Agreement and the Merger, FOR approval of the Newco Stock Incentive Plan, FOR
approval of the Newco Management Incentive Compensation Plan, FOR the election
of the nominated directors and FOR ratification and approval of the appointment
of Coopers & Lybrand, L.L.P. as KCPL's independent accountants for 1996.
In considering the recommendation of the KCPL Board with respect to the
Merger, shareholders should be aware that certain members of KCPL's management
and the KCPL Board have certain interests in the Merger that are in addition to
the interests of shareholders of KCPL generally. See "THE MERGER -- Conflicts of
Interest."
Pursuant to the Merger Agreement, the consummation of the Merger 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, each of 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 the Nelson-Atkins Museum of Art, 4525 Oak Street, Kansas
City, Missouri, on Wednesday, May 22, 1996, commencing at 10:00 a.m., local
time. Holders of record of shares of KCPL Common Stock at the close of business
on April 3, 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,
61,902,083 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, with the right of cumulative
voting in the election of directors.
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 MGBCL, the KCPL
Charter, the KCPL Bylaws and the rules of the NYSE, as applicable, the
30
<PAGE>
affirmative vote of the holders of two-thirds of the outstanding shares of KCPL
Common Stock entitled to vote is required to approve the Merger Agreement and
the Merger. Approval of the Merger Agreement is a condition to consummation of
the Merger.
BECAUSE A TWO-THIRDS SUPERMAJORITY VOTE OF ALL OUTSTANDING SHARES OF KCPL
COMMON STOCK ENTITLED TO VOTE IS REQUIRED TO APPROVE THE MERGER AGREEMENT AND
THE MERGER, YOUR VOTE IS IMPORTANT. UNDER MISSOURI LAW, 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 MERGER.
Shareholders are entitled to vote cumulatively for the election of
directors. Each shareholder is entitled to a number of votes for such election
equal to the number of votes entitled to be cast with respect to the shares held
by such shareholder multiplied by the number of directors to be elected, and may
cast all votes for one nominee or distribute the votes among the nominees. The
election of each director shall be decided by plurality vote. As a result, any
shares not voted for a director (whether by withholding authority, broker
non-vote or otherwise) will have no impact on the election of directors except
to the extent that the failure to vote for an individual results in another
individual receiving a larger number of votes.
The affirmative vote of the holders of a majority of the shares of KCPL
Common Stock present and entitled to vote at the KCPL Meeting is required to
approve each of the other proposals. Abstention and broker non-votes will have
the same effect as votes cast against such proposals.
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.
PROXIES. Holders of the KCPL Common Stock may vote either in person or by
properly executed proxy. By completing and returning the form of 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 Merger Agreement and the Merger, FOR
approval of each of the Newco Plans, FOR the election of the nominated directors
and FOR ratification of the appointment of Coopers & Lybrand, L.L.P. as KCPL's
independent accountants for 1996. 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.
KCPL will bear the cost of soliciting proxies for the KCPL Meeting, except
that KCPL and UCU shall 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, officers and employees of KCPL, without receiving additional
compensation therefor, may solicit proxies by telephone, by telecopy, by
telegram or in person. KCPL has retained D.F. King & Co., Inc., 77 Water Street,
New York, New York 10008, and Corporate Investor Communications, Inc., 111
Commerce Road, Carlstadt, New Jersey 02586, to aid in the solicitation of
proxies from the KCPL shareholders. The fee for such services will be
approximately $13,000 plus an additional fee for each shareholder contact and
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 (i) a proposal to approve the Merger Agreement and the
transactions contemplated thereby; (ii) a proposal
31
<PAGE>
to approve the Newco Stock Incentive Plan; (iii) a proposal to approve the Newco
Management Incentive Compensation Plan; (iv) a proposal to elect three directors
to hold office for a term of three years and until their successors have been
duly elected and qualified; (v) a proposal to adopt the UCU Plan; and (vi) such
other matters, if any, as may properly come before the UCU Meeting. The UCU
Board is not aware, as of the date of mailing of this Joint Proxy
Statement/Prospectus, of any other matters which may properly come before the
UCU Meeting. If any other matters properly come before the UCU Meeting, or any
adjournment or postponement thereof, it is the intention of the persons named in
the proxy to vote such proxies in accordance with their best judgment on such
matters.
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
FOR each of the other proposals set forth on the proxy.
In considering the recommendation of the UCU Board with respect to the
Merger, stockholders should be aware that certain members of UCU's management
and Board of Directors have certain interests in the Merger that are in addition
to the interests of stockholders of UCU generally. See "THE MERGER -- Conflicts
of Interest."
Pursuant to the Merger Agreement, the consummation of the Merger is
conditioned upon approval of proposal (i) above, but is not conditioned upon
approval by the stockholders of UCU of any other of the above proposals. If
approved by the stockholders, each of 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 UCU Meeting is
scheduled to be held on Wednesday, May 22, 1996 at 2:00 p.m., local time, at the
Kansas City Marriott Downtown, 200 W. 12th Street, Kansas City, Missouri.
Holders of record of shares of UCU Common Stock at the close of business on
April 3, 1996, the UCU Record Date, will be entitled to notice of and to vote at
the UCU Meeting. As of the UCU Record Date, 46,550,642 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 for
each matter presented 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 transactions contemplated thereby.
THE FAILURE TO VOTE, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT
AS VOTES CAST AGAINST APPROVAL OF THE MERGER AGREEMENT.
Each outstanding share of UCU Common Stock is entitled to one vote upon each
matter presented at the UCU Meeting, except that each stockholder is entitled to
exercise the right of cumulative voting on the vote for nominees for election of
directors. Cumulative voting entitles the stockholder to cast as many votes as
equal the number of shares owned by such stockholder multiplied by the number of
directors elected, and to cast all such votes for a single director, or to
distribute the votes among those to be voted for. The three nominees for
election as directors who receive the greatest number of votes cast shall become
directors at the conclusion of the tabulation of votes. Abstentions and broker
non-votes do not have the effect of a vote "against" the nominee, since only a
plurality of the votes cast (rather than of votes present) is necessary to elect
a director.
With respect to approval of the Newco Plans and the UCU Plan, each proposal
must be approved by a majority of the votes present at the meeting. Abstentions
and broker non-votes will have the same effect as votes cast against such
proposal.
PROXIES. Holders of the UCU Common Stock may vote either in person or by
properly executed proxy. By completing and returning the form of proxy, the UCU
stockholder authorizes the persons
32
<PAGE>
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 FOR each of the other proposals
set forth in the proxy. 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 shall 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 officers and
employees of UCU or its subsidiaries by mail, by telephone, 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 $15,000
plus reasonable out-of-pocket expenses.
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 2.4% of the issued and
outstanding shares of UCU Common Stock.
THE MERGER
BACKGROUND OF THE MERGER
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 which
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 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, Inc. ("WRI") 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 WRI that KCPL was not interested in pursuing a
business combination with WRI. Although WRI indicated a continuing
33
<PAGE>
interest in pursuing a business combination with KCPL from late 1994 through
late 1995, KCPL reaffirmed to WRI the conclusion of its analysis that a
combination with WRI was not in the best interest of KCPL's shareholders.
On May 25, 1995 and again on June 6, 1995, 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, 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, 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 ("Weil Gotshal") and also retained DLJ as its financial adviser to advise
with respect to the potential transaction involving KCPL and UCU.
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.
34
<PAGE>
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 LLP 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 Merger Agreement. 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 meeting of the KCPL Board and the January 19 meeting of the UCU Board,
Ernst & Young LLP emphasized that the estimated net cost savings of
approximately $619 million over a 10-year period were all created by or
35
<PAGE>
attributable to the proposed merger and did not include other types of savings
that might be achieved without a merger. Ernst & Young LLP 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 LLP
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, 1995, the financial advisors of KCPL and UCU
discussed the methodology for determining the appropriate exchange ratios and
negotiated with respect thereto, and late in the evening on January 18, 1995,
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 Newco Common Stock and each
share of UCU Common Stock would be converted into the right to receive 1.096
shares of Newco Common Stock.
Meetings of the KCPL Board and the UCU Board were held on January 19, 1996
to consider and approve the Merger. At each company's meeting, its senior
management and financial and legal advisors discussed material aspects of the
Merger and related transactions as detailed below. 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 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 Merger Agreement relating to
employee benefit issues and the proposed Newco Charter and Newco Bylaws. 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 Newco 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 management, the KCPL
Board approved, by a unanimous vote of those directors present, the Merger
Agreement, the Merger and the transactions contemplated thereby and authorized
the execution of the 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 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 KCPL Exchange Ratio, the 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 Merger
Agreement for the UCU Board and advised as to the fiduciary duties of the
directors.
36
<PAGE>
After considering and discussing the various presentations, the UCU Board
approved, by a unanimous vote, the Merger Agreement, the Merger and the
transactions contemplated thereby and authorized the execution of the Merger
Agreement.
The Merger Agreement and certain related documents were executed following
such approval by the Boards of Directors of both KCPL and UCU.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
In considering the recommendations of the KCPL Board and the UCU Board with
respect to the Merger, stockholders should be aware that certain members of
KCPL's and UCU's management and Boards of Directors have certain interests in
the Merger that are in addition to the interests of stockholders of KCPL and UCU
generally. See "THE MERGER -- Conflicts of Interest."
KCPL. The KCPL Board believes that the terms of the Merger are fair to, and
in the best interests of, KCPL, its shareholders and its customers. Accordingly,
the KCPL Board, by a unanimous vote of those directors present, has approved the
Merger Agreement and the Merger and recommends their adoption by the holders of
KCPL Common Stock. The KCPL Board believes that this unique opportunity for KCPL
and UCU to merge as equals 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;
domestic market diversification, leading to reduced regulatory and business
risk; international market diversification, both reducing risk and affording
unusual growth opportunities; the addition of natural gas to the products and
services offered to customers; 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 an uncertain environment.
In reaching this conclusion, the KCPL Board considered: (i) the prospective
financial strength of each company individually and the benefits of combination
discussed above; (ii) current industry, economic and market conditions which
encourage consolidation to reduce risk and create new avenues for earnings
growth as discussed under "THE MERGER -- Background of the Merger" above; (iii)
the proposed structure of the transaction as a merger of equals between KCPL and
UCU and the terms of the Merger Agreement and other documents to be executed in
connection with the Merger which provide for reciprocal representations and
warranties, conditions to closing and rights to termination, and balanced rights
and obligations; (iv) that the Merger is expected to be treated as a tax-free
reorganization to shareholders and to KCPL 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); and (v) the opinion of Merrill Lynch to the effect that the KCPL
Exchange Ratio is fair to holders of KCPL Common Stock (other than UCU and its
affiliates) from a financial point of view. In determining that the Merger is
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.
THE KCPL BOARD HAS BY A UNANIMOUS VOTE OF THOSE DIRECTORS PRESENT APPROVED
OF THE MERGER AGREEMENT, THE MERGER AND THE TRANSACTIONS CONTEMPLATED THEREBY
AND BELIEVES THAT THE TERMS OF THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS
OF, KCPL'S SHAREHOLDERS, SUPPORTS THE ELECTION OF THE NOMINATED DIRECTORS AND
SUPPORTS THE RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND, L.L.P. AS
KCPL'S INDEPENDENT PUBLIC ACCOUNTANTS FOR 1996. THE KCPL BOARD RECOMMENDS A VOTE
FOR APPROVAL OF THE MERGER AGREEMENT AND THE MERGER, FOR EACH OF THE NEWCO
PLANS, FOR THE ELECTION OF THE NOMINATED DIRECTORS AND FOR THE RATIFICATION OF
THE APPOINTMENT OF THE INDEPENDENT ACCOUNTANTS.
37
<PAGE>
UCU. The UCU Board believes that the terms of the Merger 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 its approval by the stockholders of UCU. The UCU Board
believes that the Merger 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 Merger 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. 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 MERGER --
Background of the Merger"), 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 Newco will have to the resources of
KCPL 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 January 19, 1996, that,
subject to the assumptions made, matters considered and limits of the review
undertaken as set forth in such opinion and assuming the KCPL Exchange Ratio,
the UCU Exchange Ratio is fair, from a 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 Merger discussed below. In determining that the
Merger is 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 AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND BELIEVES THAT THE TERMS OF THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, UCU'S STOCKHOLDERS AND SUPPORTS THE
ELECTION OF THE NOMINATED DIRECTORS. THE UCU BOARD RECOMMENDS A VOTE FOR
APPROVAL OF THE MERGER AGREEMENT, FOR THE ELECTION OF THE NOMINATED DIRECTORS
AND FOR EACH OF THE OTHER PROPOSALS SET FORTH IN THIS JOINT PROXY STATEMENT AND
PROSPECTUS.
EXPECTED BENEFITS OF THE MERGER. The Board of Directors of each of KCPL and
UCU believe that the expected benefits of the Merger will include:
- Diversification -- The Merger will result in the increased ability of KCPL
and UCU to diversify their existing operations through acquisitions of
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 -- The combined company will be able to rapidly 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.
38
<PAGE>
- Strategic Acquisitions -- The Merger 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 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 Merger 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
Merger 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.
- 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 company 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.
39
<PAGE>
- 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
Merger. 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.
SYNERGIES. Subject to the qualifications set forth below, KCPL and UCU
believe that certain currently identifiable synergies will generate substantial
cost savings to Newco which, absent the combination, would not be available.
KCPL and UCU have estimated the total dollar value of synergies from the Merger
to be approximately $600 million over the 10-year period following the Merger.
The quantifiable benefits yielded by the Merger can be categorized into five
groups: (i) capital expenditure savings, which lower revenue requirements; (ii)
production cost savings; (iii) labor cost savings; (iv) administrative and
general savings; and (v) cost of capital savings.
The foregoing discussion contains certain forward looking statements. The
analyses employed in order to develop estimates of areas or amounts of savings
or the expansion of revenues to be achieved as a result of the Merger were
necessarily based upon various assumptions. These assumptions involve judgments
with respect to, among other things, future national and regional economic and
competitive conditions, inflation rates, regulatory treatment, weather
conditions, financial market conditions, interest rates, future business
decisions and other uncertainties, all of which are difficult to predict and
many of which are beyond the control of KCPL, UCU and Newco. Accordingly, while
KCPL and UCU believe that such assumptions are reasonable for purposes of the
development of estimates of cost savings, there can be no assurance that such
assumptions will approximate actual experience or that all such savings will be
realized, and in such event, actual results could differ materially from the
above predictions.
The treatment of the benefits and cost savings will depend on the terms of
the regulatory approvals received in the various jurisdictions in which KCPL and
UCU operate their businesses. See "THE MERGER -- Regulatory Matters" and
"UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION."
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
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 KCPL
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 January 19,
1996. The Merrill Lynch opinion dated the date of this Joint Proxy Statement/
Prospectus is substantially the same as the January 19, 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 KCPL 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
40
<PAGE>
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 and UCU's Annual Reports, Forms 10-K and related financial
information for the five fiscal years ended December 31, 1994, and Forms 10-Q
and the related unaudited financial information for the quarterly periods ending
March 31, 1995, June 30, 1995 and September 30, 1995; (ii) 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, respectively; (iii) 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 Merger; (iv) 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; (v) compared the results of
operations of KCPL and UCU with those of certain companies deemed by Merrill
Lynch to be reasonably similar to KCPL and UCU, respectively; (vi) analyzed the
relative valuation of KCPL Common Stock and UCU Common Stock using various
valuation methodologies which Merrill Lynch deemed to be appropriate; (vii)
considered the pro forma effect of the Merger on KCPL's capitalization ratios
and earnings, dividends and net income available to common stockholders,
dividends per common share, book value per common share of KCPL Common Stock;
(viii) reviewed a draft of the Merger Agreement dated January 15, 1996; and (ix)
reviewed such other financial studies and 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 Merger will be free of
Federal tax to KCPL, UCU, Newco and the respective holders of KCPL Common Stock
and UCU Common Stock, and further assumed that the Merger 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 January 19, 1996.
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 KCPL 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.
41
<PAGE>
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 subsidiary, KLT Inc. ("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.
42
<PAGE>
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 Energy Corporation ("Aquila"), UtilCo Group ("UtilCo") and
all other businesses. For purposes of its valuation, contribution and pro forma
analyses, Merrill Lynch 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.
43
<PAGE>
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 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).
44
<PAGE>
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 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,
45
<PAGE>
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 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.
46
<PAGE>
PRO FORMA ANALYSIS
Merrill Lynch also analyzed certain pro forma effects resulting from the
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 Merger does not occur) to the earnings per share of Newco Common
Stock assuming the exchange ratios contemplated by the Merger Agreement. In
addition, Merrill Lynch considered certain estimated synergies expected to be
achieved as a result of the 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.
Assuming inclusion of the synergies as detailed above, the analysis
indicated that the 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
Newco'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 Merger Agreement with no synergies. The analysis
indicated that the 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 Newco'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 Newco'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
Newco would assume the same dividend policy as KCPL.
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. 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. 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.
47
<PAGE>
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.
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 UCU 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 January 19, 1996, DLJ delivered its oral opinion to the UCU Board, which
opinion was subsequently confirmed in a written opinion dated as of January 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 and assuming the KCPL Exchange Ratio, the UCU 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 January 19, 1996. The DLJ opinion dated the date of this Joint Proxy
Statement/Prospectus is substantially the same as the January 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
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 January 17, 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, 1994 and Quarterly Reports on Form 10-Q of UCU and KCPL
for the periods ending March 31, 1995, June 30, 1995 and September 30, 1995;
(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
48
<PAGE>
achieved as a result of the Merger, 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 and their analyses of
strategic benefits of the Merger, 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 Merger, 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 management 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 management 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 Merger will be a reorganization as described in
Section 368(a) of the Code, and the regulations thereunder, and that UCU, KCPL
and the stockholders of UCU and KCPL 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 Merger. The DLJ Opinion is necessarily based
on economic, market and other conditions, and the information made available to
it, as of January 19, 1996.
In rendering the DLJ Opinion, DLJ performed a variety of financial analyses.
All such material analyses are summarized below.
RELATIVE TRADING PRICE HISTORY. DLJ reviewed certain historical trading
prices and volumes of UCU and KCPL Common Stock over the latest one, two, three
and six months ended January 18, 1996. For each period, DLJ calculated the
average stock price weighted by the daily trading volume for each of UCU and
KCPL Common Stock. Such analysis demonstrated exchange ratios (calculated by
dividing the weighted average stock price of UCU Common Stock by the weighted
average stock price of KCPL Common Stock) for the period ended January 18, 1996
ranging from 1.109x to 1.173x. The analysis also indicated an exchange ratio of
1.091x as of January 18, 1996.
COMPARABLE PUBLIC COMPANIES. DLJ reviewed and compared certain publicly
available historical financial information, projected 1995, 1996 and 1997
financial results (based on research analysts estimates as reported by IBES) and
stock market performance relating to UCU and KCPL to corresponding information
for selected publicly-traded companies comprising 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.
49
<PAGE>
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) 1995 estimated EPS (the
"1995 PE Ratio"); (c) 1996 projected EPS (the "1996 PE Ratio"); (d) 1997
projected EPS (the "1997 PE Ratio") and (e) 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 1995 PE Ratio, 1996 PE Ratio, 1997
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) 1995 PE Ratio, 1996 PE Ratio, 1997 PE Ratio and Price/Book Ratio of the
Public Comparables was 13.7x, 13.4x, 13.0x and 1.6x, respectively. The analysis
also indicated that UCU's 1995 PE Ratio, 1996 PE Ratio, 1997 PE Ratio and
Price/Book Ratio were 13.5x, 12.7x, 12.1x and 1.4x, respectively, and KCPL's
1995 PE Ratio, 1996 PE Ratio, 1997 PE Ratio and Price/Book Ratio were 14.1x,
13.4x, 12.9x and 1.8x, respectively. Such multiples, except the Price/Book
Ratio, were based on a composite of research analyst estimates of projected
1995, 1996 and 1997 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 UCU Exchange Ratio
and the KCPL Exchange Ratio, DLJ calculated Equity Consideration multiples of
LTM net income and book value of 14.7x and 1.4x, respectively, and Total
Consideration multiples of LTM revenue, LTM EBITDA and LTM EBIT of 1.9x, 6.9x
and 10.7x, respectively, for UCU and Equity Consideration multiples of LTM net
income and book value of 14.0x and 1.8x, respectively, and Total Consideration
multiples of LTM revenue, LTM EBITDA and LTM EBIT of 2.9x, 7.1x and 10.7x,
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 Merger. DLJ
believed that an appropriate use of a comparable transaction analysis in this
instance
50
<PAGE>
would involve qualitative judgments concerning differences between the
characteristics of these transactions and the Merger 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 Merger
on the holders of shares of UCU Common Stock, based on the UCU Exchange Ratio
and the KCPL 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 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 UCU Exchange Ratio and the KCPL
Exchange Ratio). Based on such analysis and assuming no synergies, the proposed
transaction would be accretive to the holders of UCU Common Stock on an EPS
basis in the years 1997, 1998, 1999 and 2000 and marginally dilutive in 1996. In
addition, the proposed transaction would be accretive to UCU stockholders on an
EPS basis in the years 1996, 1997, 1998, 1999 and 2000 assuming $15 million and
$25 million of annual pretax synergies (amounts DLJ believed to be achievable
based on its discussions with UCU and KCPL).
DLJ also analyzed the pro forma impact of the Merger on the dividend payout
ratio (the "Payout Ratio") (defined as the common dividend per share divided by
EPS) to holders of UCU Common Stock. 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 proposed
transaction would decrease the Payout Ratio for holders of UCU Common Stock in
the years 1997, 1998, 1999 and 2000. In addition, the proposed transaction would
decrease the Payout Ratio for holders of UCU Common Stock in the years 1997,
1998, 1999 and 2000 assuming $15 million and $25 million of annual synergies.
Such reduction in the payout ratio permits greater flexibility for increased
dividend payments.
In addition, DLJ determined the pro forma impact of the Merger 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 the pro forma combined company with respect to, among other
things, market capitalization, enterprise value and net income available to
common. The analysis indicated that UCU would contribute 44.8% of the market
capitalization, 52.5% of the aggregate enterprise value and 43.4% of the net
income available to common of Newco. The analysis indicated that UCU contributed
a higher percentage of enterprise value than market capitalization and net
income available to common because of its higher debt level. DLJ compared UCU's
relative contribution to 44.9%, its pro forma ownership of Newco based on the
UCU Exchange Ratio and the KCPL 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. 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,
51
<PAGE>
DLJ reviewed the multiples of the Public Comparables. For Aquila, DLJ reviewed
the multiples for selected publicly-traded companies comprising 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 comprising AES Corp., California Energy Co. Inc., Destec Energy Inc.,
Sithe Energies Inc., Trigen Energy Corp. and Enron Global Power & Pipelines. DLJ
calculated the equity value of UCU Common Stock by taking the summation of the
present values calculated above for each of the Segments and subtracting the
estimated "net debt" (defined as the principal amount of debt plus the
liquidation value of preferred stock less cash and cash equivalents) at December
31, 1995 based on figures given to DLJ by UCU management. Included in net debt
at December 31, 1995 was a pro forma adjustment, provided to DLJ by UCU
management, to reflect the anticipated common stock offering of five million
shares (mentioned above). In performing this analysis, DLJ used discount rates
ranging from 7.0% to 9.0% 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 $2,931.0 million to $3,765.9 million.
DLJ calculated the present value of free cash flows for KCPL for the years
1996 through 2000 using discount rates ranging from 7.0% to 9.0%. 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 discount
rates ranging from 7.0% to 9.0%. 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 $2,337.0 million to $2,956.0 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 10.5% to 12.0%. 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 10.0% to 11.5%. This analysis yielded exchange
ratios ranging from 1.010x to 1.026x.
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 UCU 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
52
<PAGE>
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 UCU Exchange Ratio to holders of UCU Common Stock, the specific
UCU 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 will receive (i) a $250,000
retainer fee; (ii) a $1,750,000 advisory fee upon the announcement of the
Merger; and (iii) a $5,000,000 advisory fee upon the closing of the Merger. 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.
CONFLICTS OF INTEREST
In considering the recommendations of the KCPL Board and the UCU Board with
respect to the Merger, stockholders should be aware that certain members of
KCPL's and UCU's management and Boards of Directors have certain interests in
the Merger 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 Merger 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 Merger.
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 stockholders 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 stockholders 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 Merger. In addition, stock options outstanding under the
UCU Plan and the UCU 1986 Plan vested upon execution of the Merger Agreement.
Restricted stock outstanding under the UCU 1986 Plan will vest upon consummation
of the Merger. 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 Merger are as follows: Mr. A. Drue Jennings -- $2,275,384;
Mr. Bernard J. Beaudoin -- $1,129,949; Mr. Marcus Jackson -- $861,161;
53
<PAGE>
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 -- $270,280; Mr. Beaudoin -- $48,888; Mr. Jackson --
$0; Mr. Wasson -- $108,027; 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 Merger 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 top five 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.
BOARD OF DIRECTORS. As provided in the Merger Agreement, at the Effective
Time, the Newco Board will consist of 18 directors, comprised of nine persons
designated by KCPL, including Mr. Jennings, and nine persons designated by UCU,
including Mr. Green. It is currently anticipated that the directors of KCPL and
UCU immediately prior to the Effective Time will serve as the initial directors
of Newco. See "DESCRIPTION OF NEWCO -- Board of Directors of Newco."
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 Merger 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 Merger, the Newco Board, at the Effective Time, will
consist of 18 persons, nine of whom will be designated by KCPL and nine of whom
will be designated by UCU. To date, KCPL and UCU have not determined which
individuals, in addition to A. Drue Jennings and Richard C. Green, Jr. will be
designated to serve as directors of Newco as of the Effective Time. However, it
is currently anticipated that the directors of KCPL and 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
"DESCRIPTION OF NEWCO -- Board of Directors of Newco" 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).
54
<PAGE>
EMPLOYMENT AGREEMENTS
Forms of the Employment Agreements of Messrs. Jennings and Green are
attached hereto as Annexes H and I, 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 the Newco stockholders.
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 stockholders 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 stockholders 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), (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.
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,
(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, 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"
55
<PAGE>
(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 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 Merger
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 Merger occurs; (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.
56
<PAGE>
NEWCO PLANS
Pursuant to the terms of the Merger Agreement, Newco will implement the
Newco Plans described below, subject to stockholder approval thereof at the KCPL
Meeting and the UCU 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 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 stockholders of KCPL and UCU 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 F. 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 MANAGEMENT INCENTIVE COMPENSATION PLAN. This plan is a short-term
incentive compensation plan designed to benefit eligible employees of Newco and
its subsidiaries. The Newco Management Incentive Compensation 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 stockholders
of KCPL and UCU for approval, and is described in greater detail under "APPROVAL
OF NEWCO PLANS -- Newco Management Incentive Compensation Plan" elsewhere in
this Joint Proxy Statement/Prospectus; a copy of the plan is attached as Annex
G. Following implementation of the Newco Management Incentive Compensation 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 and all stock
options to acquire KCPL Common Stock under the KCPL Incentive Stock 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 KCPL and 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 KCPL
Common Stock and the UCU Common Stock, as the case may be. See "THE MERGER
AGREEMENT -- Benefit Plans."
DIVIDEND REINVESTMENT PLAN
At the Effective Time, each outstanding share of KCPL Common Stock held by
the KCPL Dividend Reinvestment Plan will be converted into one fully paid and
nonassessable share of Newco Common Stock and each outstanding share of UCU
Common Stock held by the UCU Dividend
57
<PAGE>
Reinvestment Plan will be converted into 1.096 fully paid and nonassessable
shares of Newco Common Stock. After the Effective Time, Newco expects to adopt a
Dividend Reinvestment and Stock Purchase Plan for its stockholders.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
CONSEQUENCES TO EXCHANGING SHAREHOLDERS. The consummation of the Merger 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 facts,
representations and assumptions set forth therein: (i) the Merger will qualify
as a reorganization under Section 368(a) of the Code; (ii) KCPL, UCU and Newco
will each qualify as a party to such reorganization within the meaning of
Section 368(b) of the Code; and (iii) no gain or loss will be recognized by
holders of KCPL Common Stock, UCU Common Stock or UCU Preferred Stock upon the
exchange of such stock for Newco Common Stock or Newco Preferred Stock, as the
case may be, in connection with the Merger, except to the extent of cash
received in lieu of fractional shares.
The aggregate tax basis of the Newco Common Stock or Newco Preferred Stock
received in the Merger (including the basis of any fractional shares for which
cash is received) will be the same as the tax basis in the KCPL Common Stock,
UCU Common Stock or UCU Preferred Stock surrendered in exchange therefor. The
holding period of the Newco Common Stock or Newco Preferred Stock received in
the Merger (including the holding period of any fractional shares for which cash
is received) will include the period during which the KCPL Common Stock, UCU
Common Stock or UCU Preferred Stock, as the case may be, surrendered in exchange
therefor was held (provided such KCPL Common Stock, UCU Common Stock or UCU
Preferred Stock was held as a capital asset at the Effective Time).
Cash received in lieu of a fractional share will be treated as received in
redemption for such fractional share, and gain or loss will be recognized in an
amount equal to the difference between the amount of cash received and the
adjusted tax basis allocated to the fractional share. Such gain or loss
generally should constitute capital gain or loss, and will be long-term capital
gain or loss if the holding period for such fractional share was greater than
one year at the Effective Time.
PERFECTION OF APPRAISAL RIGHTS. A holder of KCPL Common Stock who perfects
such holder's appraisal rights, if any, probably will recognize gain or loss at
the Effective Time (even if the fair market value of the shares of KCPL Common
Stock has not yet been judicially determined at such time), in an amount equal
to the difference between the "amount realized" and the adjusted tax basis of
such shares of KCPL Common Stock. For this purpose, although there is no
authority directly on point, the amount realized generally should equal the
trading value per share of KCPL Common Stock at the Effective Time. Ordinary
interest income and/or capital gain (or capital loss, assuming that the shares
of KCPL Common Stock were held as capital assets) should be recognized by such
holder at the time of actual receipt of payment, to the extent that such payment
exceeds (or is less than) the amount realized at the 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 MERGER. FURTHER, THE DISCUSSION MAY NOT APPLY TO PARTICULAR CATEGORIES OF
STOCKHOLDERS OF KCPL OR UCU, INCLUDING (I) STOCKHOLDERS WHO ACQUIRED SHARES OF
KCPL COMMON STOCK, UCU COMMON STOCK OR UCU PREFERRED 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 KCPL AND UCU ARE URGED TO CONSULT THEIR TAX
ADVISORS
58
<PAGE>
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, 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 Merger 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 Merger occurs; 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 Merger will qualify as a pooling of interests, is a condition
precedent to consummation of the Merger. 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 Merger" and "UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION."
STOCK EXCHANGE LISTING OF THE NEWCO COMMON STOCK AND THE NEWCO PREFERRED STOCK
Newco will apply for the listing of the Newco Common Stock and the Newco
Preferred Stock, if such preferred stock is issued in the Merger, on the NYSE.
It is a condition to the consummation of the Merger that the Newco Common Stock
be approved for listing on the NYSE, subject to official notice of issuance. So
long as KCPL and UCU continue to meet applicable requirements, KCPL Common
Stock, UCU Common Stock and UCU Preferred Stock will continue to be listed on
the NYSE and each of the other securities exchanges on which any of such
securities are listed until the Effective Time. In addition, until called for
redemption, all classes and series of preferred stock of KCPL will remain listed
on any securities exchange on which such preferred stock is a presently listed.
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of Newco Common Stock received by holders of KCPL Common Stock
and UCU Common Stock, and all shares of Newco Preferred Stock received by
holders of UCU Preferred Stock, if such preferred stock is issued, will be
freely transferable, except that shares of Newco Common Stock and Newco
Preferred Stock received by persons who are deemed to be "affiliates" (as such
term is defined under the Securities Act) of KCPL or UCU prior to the Merger 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 KCPL, 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 each of KCPL and 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
KCPL Common Stock, UCU Common Stock or 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 Newco Common Stock or Newco
Preferred Stock issued to such affiliate in or pursuant to the Merger 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 or Newco Preferred Stock received in the Merger by any person who may be
deemed to be an affiliate of KCPL, UCU or Newco.
59
<PAGE>
DISSENTERS' RIGHTS
KCPL. Section 351.455 of the MGBCL, a copy of which is attached hereto as
Annex J, entitles each holder of KCPL Common Stock who dissents from the Merger
and who follows the procedures set forth in Section 351.455 to receive the fair
value of the holder's shares in cash. Under Section 351.455, a holder of KCPL
Common Stock may dissent and Newco, as the surviving corporation, will pay to
such shareholder, upon surrender of his certificate or certificates representing
such shares, the fair value of such shareholder's shares as of the day prior to
the KCPL Meeting, if such shareholder (i) files with KCPL prior to or at the
KCPL Meeting a written objection to the Merger; (ii) does not vote in favor
thereof; and (iii) within 20 days after the Effective Time makes a written
demand to Newco for payment of the fair value of the shares held by such
shareholder as of the day prior to the date of the KCPL Meeting. Such demand
shall state the number and class of the shares owned by such dissenting
shareholder. Written objections to the Merger and demands for the payment of
fair value should be addressed to: KCPL, 1201 Walnut, Kansas City, Missouri
64106-2124, Attention: Ms. Jeanie Sell Latz, Senior Vice President, Corporate
Secretary and Chief Legal Officer. Shareholders who have not complied with all
of these requirements shall be conclusively presumed to have consented to the
Merger and shall be bound by the terms thereof. KCPL will provide written notice
of the Effective Time of the Merger to all shareholders who have timely filed
written notice of objection and not voted in favor of the Merger.
A PROXY MARKED "AGAINST" THE MERGER WILL NOT BE DEEMED TO BE A WRITTEN
NOTICE OF OBJECTION TO THE MERGER. A SHAREHOLDER WHO WISHES TO DISSENT FROM THE
MERGER MUST PROVIDE A SEPARATE WRITTEN NOTICE OF OBJECTION AT OR PRIOR TO THE
KCPL MEETING, MUST NOT VOTE "FOR" THE MERGER AND MUST MAKE WRITTEN DEMAND FOR
PAYMENT WITHIN 20 DAYS AFTER THE EFFECTIVE TIME OF THE MERGER. A PROXY MARKED
"AGAINST" OR "ABSTAIN" OR A SHAREHOLDER'S FAILURE TO VOTE WITH RESPECT TO THE
MERGER WILL SUFFICE AS NOT VOTING IN FAVOR OF THE MERGER.
A beneficial owner of shares who is not the record owner may not assert
dissenters' rights. If the stock is owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, or by a nominee, the written demand
asserting dissenters' rights must be executed by the fiduciary or nominee. If
the stock is owned of record by more than one person, as in a joint tenancy or
tenancy in common, the demand must be executed by all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the demand for a shareholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in executing the demand, he
is acting as agent for the record owner.
If within 30 days after the Effective Time the value of such shares is
agreed upon between the dissenting shareholder and Newco, payment therefor shall
be made within 90 days after the Effective Time, upon the surrender by such
shareholder of the certificate or certificates representing such shares. Upon
payment of the agreed value the dissenting shareholder shall cease to have any
interest in such shares or in Newco.
If within such 30-day period, a dissenting shareholder and Newco do not so
agree as to value, then the dissenting shareholder may, within 60 days after the
expiration of the 30-day period, file a petition in any court of competent
jurisdiction within Jackson County, Missouri, asking for a finding and
determination of the fair value of such shares, and shall be entitled to
judgment against Newco for the amount of such fair value as of the day prior to
the date of the KCPL Meeting, together with interest thereon to the date of such
judgment. The judgment shall be payable only upon, and simultaneously with, the
surrender to Newco of the certificate or certificates representing shares with
respect to which dissenters' rights have been exercised. Upon the payment of the
judgment, the dissenting shareholder shall cease to have any interest in such
shares or in Newco. Unless the dissenting
60
<PAGE>
shareholder shall file such petition within the 60-day period, such shareholder
and all persons claiming under such shareholder shall be conclusively presumed
to have approved and ratified the Merger and shall be bound by the terms
thereof.
The right of a dissenting shareholder to be paid the fair value of the
shareholder's shares shall cease if the shareholder fails to comply with the
procedures set forth in Section 351.455 and described above, or if the Merger
Agreement is terminated for any reason.
The foregoing does not purport to be a complete statement of the procedures
to be followed by shareholders desiring to exercise appraisal rights and, in
view of the fact that exercise of such rights requires strict adherence to the
relevant provisions of the MGBCL, shareholders who desire to exercise appraisal
rights are advised to review with care all applicable provisions of law and to
obtain legal counsel concerning proper compliance with applicable provisions of
MGBCL.
UCU. Holders of UCU Common Stock and UCU Preferred Stock do not have
appraisal rights under the DGCL with respect to the Merger.
REGULATORY MATTERS
As indicated below, consummation of the Merger is subject to numerous
regulatory approvals, which are presently anticipated to be received by the
second quarter of 1997. Set forth below is a summary of the material regulatory
requirements affecting the Merger.
STATE APPROVALS AND RELATED MATTERS. KCPL currently is subject to the
jurisdiction of the Missouri Public Service Commission (the "Missouri
Commission") and the Kansas State Corporation Commission (the "Kansas
Commission") with respect to its utility operations in those states.
UCU currently is subject to the jurisdiction of the Missouri Commission and
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") 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 Merger and related
transactions, including, in the case of certain commissions, the issuance of
securities in connection therewith, are being 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.
61
<PAGE>
KCPL, UCU and Newco intend to request a "no-action" letter from the staff of
the SEC, confirming their view that (i) the Merger 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 Merger, 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, UCU and
Newco will file an application with the SEC for the necessary approvals and
exemptions in connection with the Merger.
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 Merger. 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 Merger
under Section 203 of the Federal Power Act (the "Application"). 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 Merger.
Furthermore, prior to the Merger, the approval of the FERC under Section 204
of the Federal Power Act is required for Newco to assume the debt of KCPL and
UCU.
ANTITRUST CONSIDERATIONS. The HSR Act and the rules and regulations
promulgated thereunder provide that certain transactions (including the Merger)
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 Merger on antitrust grounds. Neither KCPL nor UCU believes that
the Merger will violate federal antitrust laws. If the Merger is 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 Merger could be consummated. KCPL
and UCU intend to file their 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 Merger.
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 Merger,
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 Merger or may need
to be renewed, replaced or transferred as a result of the Merger. Neither KCPL
nor UCU anticipate any difficulties at the present time in obtaining such
consents, renewals, replacements or transfers.
62
<PAGE>
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 Merger 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 Merger, 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
Merger that final orders approving the Merger 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 Merger.
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 MERGER
IN GENERAL. The Merger Agreement provides that, following the approval of
the Merger Agreement and the Merger by the stockholders of KCPL and UCU (the
"Stockholder Approvals"), and the satisfaction or waiver of the other conditions
to the Merger, including obtaining the requisite regulatory approvals, KCPL and
UCU will be merged with and into Newco, with Newco being the surviving
corporation.
If the Stockholder Approvals are obtained, and the other conditions to the
Merger are satisfied or waived, the closing of the Merger (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 Merger" 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 MERGER -- 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 Stockholder Approvals.
CONSUMMATION OF THE MERGER. As of the Effective Time (i) each outstanding
share of KCPL Common Stock, other than any shares owned by KCPL, UCU, Newco or
any of their wholly-owned subsidiaries (which shares will be cancelled), shall
be cancelled and converted into the right to receive one fully paid and
nonassessable share of Newco Common Stock and (ii) each outstanding share of UCU
Common Stock, other than any shares owned by KCPL, UCU, Newco or any of their
wholly-owned subsidiaries (which shares will be cancelled), shall be cancelled
and converted into the right to receive 1.096 fully paid and nonassessable
shares of Newco Common Stock. No fractional shares of Newco Common Stock will be
issued and any stockholder who would otherwise be entitled to receive a
fractional share of Newco Common Stock will instead be entitled to receive a
cash payment 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 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. 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
63
<PAGE>
Common Stock will hold in the aggregate approximately 55% and 45%, respectively,
of the total number of shares of Newco Common Stock outstanding immediately
after the Effective Time (assuming no KCPL shareholders demand and perfect their
dissenters' rights).
Shares of KCPL Common Stock held by Dissenting Holders will not be converted
into shares of Newco Common Stock in the Merger and after the Effective Time
will represent only the right to receive such consideration as is determined to
be due such Dissenting Holders pursuant to the MGBCL. KCPL Common Stock
outstanding immediately prior to the Effective Time and held by a shareholder
who withdraws his demand for dissenters' rights or fails to perfect such rights
will be deemed to be converted at the Effective Time into the right to receive
shares of Newco Common Stock, as provided above, without interest. See "THE
MERGER -- Dissenters' Rights."
In addition, if the Effective Time occurs before March 1, 1997, each
outstanding share of UCU Preferred Stock will be cancelled and converted into
the right to receive one share of Newco Preferred Stock. In the event that the
Effective Time has not occurred by March 1, 1997 (the first date on which the
UCU Preferred Stock may be redeemed pursuant to the Certificate of Designation
for the UCU Preferred Stock) or in the event that it becomes apparent that the
Effective Time will not occur by March 1, 1997, the Merger Agreement obligates
UCU to call for redemption the UCU Preferred Stock at or prior to the Effective
Time. The redemption price will be $25.00 per share of UCU Preferred Stock plus
all dividends accrued and unpaid to the date fixed for redemption. If issued, it
is intended that the Newco Preferred Stock will be redeemed as soon as is
practicable on or after March 1, 1997.
The Merger Agreement requires KCPL to call for redemption before the
Effective Time all of its outstanding shares of preferred stock at the
applicable redemption prices therefor, together with all dividends accrued and
unpaid through the applicable redemption dates.
Pursuant to the Merger Agreement, at the Effective Time, the certificate of
incorporation of Newco will be amended and restated to read in its entirety as
set forth in Annex D to this Joint Proxy Statement/Prospectus, provided that in
the event that the UCU Preferred Stock is redeemed prior to or as of the
Effective Time, such certificate of incorporation shall, at the option of KCPL
and UCU, be modified as appropriate to delete language contained therein which
relates specifically to the UCU Preferred Stock (as so amended and restated, the
"Newco Charter"). Also pursuant to the Merger Agreement, the bylaws of Newco
will be amended prior to or as of the Effective Time to read in their entirety
as set forth in Annex E to this Joint Proxy Statement/Prospectus (as amended,
the "Newco Bylaws").
EXCHANGE OF CERTIFICATES. As soon as practicable after the Effective Time,
an exchange agent mutually agreeable to KCPL and UCU (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 or Newco Preferred
Stock, as the case may be. 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 or Newco
Preferred Stock, as the case may be, 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 Effective Time to represent
only the right to receive upon such surrender the certificate representing Newco
Common Stock or Newco Preferred Stock, as the case may be, and cash in lieu of
any fractional share of 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 or Newco Preferred Stock, as the case may be, 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.
64
<PAGE>
No dividends or other distributions declared or made after the Effective
Time with respect to Newco Common Stock or Newco Preferred Stock with a record
date after the Effective Time will be paid to the holder of any unsurrendered
Old Certificates, and no cash payment in lieu of fractional shares will be paid
to any such holder 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, and
any cash payment in lieu of a fractional share, to which such holder is
entitled.
HOLDERS OF KCPL COMMON STOCK, UCU COMMON STOCK OR UCU PREFERRED STOCK SHOULD
NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM.
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.
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 Merger 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.
CERTAIN COVENANTS
Pursuant to the Merger Agreement, each of KCPL and UCU has agreed that
during the period from the date of the Merger Agreement until the Effective
Time, 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
65
<PAGE>
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 and UCU Common Stock 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 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 Merger as a pooling of
interests; (o) not take any action that would adversely affect the status of the
Merger 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 Merger; (s) use all commercially reasonable efforts
to obtain certain third-party consents to the Merger; (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
66
<PAGE>
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 Merger 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 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
respective parties' stockholders shall have voted to approve the Merger
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 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 Merger 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.
67
<PAGE>
NEWCO BOARD OF DIRECTORS
The Merger Agreement provides that at the Effective Time, the Newco Board
will consist of 18 persons, nine designated by KCPL and nine designated by UCU.
The initial designation of such directors among the three classes of Newco Board
will be agreed to by KCPL and UCU, the designees of each party to be divided
equally among such classes. If, prior to the Effective Time, any of such
designees declines or is unable to serve, the party which designated such person
will designate another person to serve in such person's stead. As of the date of
this Joint Proxy Statement/Prospectus, KCPL and UCU have not decided who, in
addition to Messrs. Jennings and Green, will be designated to serve on the Newco
Board after the Effective Time. It is currently anticipated that the directors
of KCPL and UCU prior to the Effective Time will serve as the initial directors
of Newco.
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 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 DGCL, (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 DGCL, the Newco Charter or the
Newco Bylaws 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
68
<PAGE>
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 Merger 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 MERGER
The respective obligations of KCPL and UCU to effect the Merger are subject
to the following conditions: (a) the approval of the Merger Agreement and the
Merger by the stockholders of KCPL and 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 Merger; (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 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 Merger 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; (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 and as of the
Closing Date (except 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 Merger 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 each of KCPL and UCU, the receipt by Newco of letter agreements
relating to trading in securities of KCPL, UCU and Newco (substantially in the
form attached as an exhibit to the Merger Agreement), duly executed by each
affiliate of the other party.
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 Effective Time, to the extent permitted by
applicable law, the conditions to KCPL's or UCU's obligations to consummate the
Merger 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 Merger, no additional obligations will be
incurred under the existing short-term incentive compensation plans of KCPL and
UCU. Subject to stockholder approval thereof at the KCPL Meeting and the UCU
Meeting, the Newco Management Incentive Compensation Plan will become effective
at the Effective Time. The Newco Management Incentive Compensation
69
<PAGE>
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 Management Incentive Compensation Plan" and Annex G.
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 stockholder approval thereof at the KCPL Meeting and the UCU
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 reserve 9,000,000 shares of
Newco Common Stock for issuance under this plan. Accordingly, the Newco Stock
Incentive Plan is being submitted to stockholders for approval. See "APPROVAL OF
NEWCO PLANS -- Newco Stock Incentive Plan" and Annex F.
At the Effective Time, (i) each outstanding option to purchase shares of
KCPL Common Stock under the existing stock incentive plans of KCPL (each, a
"KCPL Stock Option") and each 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 Merger), shares of Newco
Common Stock based on the same number of shares of Newco Common Stock as the
holder of such KCPL Stock Option or UCU Stock Option would have been entitled to
receive pursuant to the Merger 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 KCPL (each, a "KCPL Stock Award")
and 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 KCPL Stock Award or UCU Stock Award would have been
entitled to receive pursuant to the Merger had such holder been the owner,
immediately before the Effective Time, of the shares of KCPL Common Stock or UCU
Common Stock on which such KCPL Stock Award or UCU Stock Award is based, and
otherwise on the same terms and conditions as governed such KCPL Stock Award or
UCU Stock Award immediately before the Effective Time. See "THE MERGER -- 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.
70
<PAGE>
TERMINATION
The Merger Agreement may be terminated at any time prior to the Closing
Date, whether before or after the Stockholder 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 Merger, (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 Merger, or any court of
competent jurisdiction in the U.S. or any state shall have issued an order,
judgment or decree permanently restraining, enjoining or otherwise prohibiting
the Merger, 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 Stockholder
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 shall, and shall 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.
71
<PAGE>
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 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 one party's stockholders fail
to approve the Merger or the Merger Agreement, 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 their approval to the Merger, 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 Merger Agreement and the Merger to its stockholders; (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 definite 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,
72
<PAGE>
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 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.
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 CAPITAL STOCK
GENERAL
The authorized capital stock of Newco, as of the Effective Time, will
consist of 250,000,000 shares of Newco Common Stock and 25,000,000 shares of
Newco preferred stock (of which the Newco Preferred Stock forms a part), to be
issued from time to time in series by resolution of the Newco Board. It is
anticipated that approximately 121,000,000 shares of Newco Common Stock and
1,000,000 shares of Newco Preferred Stock will be issued and outstanding
immediately after the Effective Time, provided that the UCU Preferred Stock is
not redeemed prior to the Effective Time. The description of Newco capital stock
set forth herein does not purport to be complete and is qualified in its
entirety by reference to the Newco Charter and the Newco Bylaws, copies of which
are attached hereto as Annexes D and E, respectively, as well as applicable
statutory or other law.
73
<PAGE>
NEWCO COMMON STOCK
The holders of Newco Common Stock will be entitled to receive such dividends
as the Newco Board may from time to time declare, subject to any rights of
holders of outstanding shares of Newco Preferred Stock. Stockholders of KCPL and
UCU entitled to receive Newco Common Stock shall, subject to any applicable
escheat law, be entitled to dividends declared after the Effective Time
regardless of when certificates representing KCPL Common Stock or UCU Common
Stock, as the case may be, are exchanged. No dividend policy has yet been
established for Newco after the Effective Time. However, the timing and amount
of future dividends will depend on the earnings of Newco and its subsidiaries,
their financial condition, cash requirements, applicable government regulations
and policies and other factors deemed relevant by the Newco Board. Additionally,
various financing arrangements, charter provisions and regulatory requirements
may impose certain restrictions on the ability of Newco's subsidiaries to
transfer funds to Newco in the form of cash dividends, loans or advances.
Except as otherwise provided by law, each holder of Newco Common Stock will
be entitled to one vote per share on each matter submitted to a vote at a
meeting of stockholders, subject to any class or series voting rights of holders
of Newco Preferred Stock. Under the Newco Bylaws, the Newco Board shall be
classified into three classes each consisting of, as nearly as may be possible,
one-third of the total number of directors constituting the entire Board of
Directors. The holders of Newco Common Stock will not be entitled to cumulate
votes for the election of directors.
In the event of any liquidation, dissolution or winding up of Newco, whether
voluntary or involuntary, the holders of shares of Newco Common Stock, subject
to any rights of the holders of outstanding shares of Newco Preferred Stock,
will be entitled to receive the remainder, if any, of the assets of Newco after
the discharge of its liabilities.
Holders of Newco Common Stock will not be entitled to preemptive rights to
subscribe for or purchase any part of any new or additional issue of stock or
securities convertible into stock. The Newco Common Stock does not contain any
redemption provisions or conversion rights. The Newco Common Stock is not liable
to assessment or further call. The shares of Newco Common Stock to be issued
pursuant to the Merger Agreement, when so issued, will be fully paid and
nonassessable.
Cash dividends on and 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, and by the preferred
stock provisions of the Newco Charter (if any Newco Preferred Stock is issued in
the Merger). The obligations under the MGU Indenture were assumed by UCU and
will be, prior to or 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 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.
74
<PAGE>
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 its 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.
If Newco Preferred Stock is issued in the Merger, no dividends on Newco
Common Stock may be paid by Newco if there are dividends in arrears on Newco
Preferred Stock. The dividend restrictions referred to above are not expected to
impair the ability of Newco to make dividend payments. Under the 1935 Act, the
SEC will also have the power to preclude the payment of dividends by Newco. See
"THE MERGER -- Regulatory Matters."
It is a condition to consummation of the Merger that Newco Common Stock be
approved for listing on the NYSE, subject to official notification of issuance.
The Transfer Agent and the Registrar for the Newco Common Stock have not yet
been determined. Stockholders will be notified as soon as is practicable after
such determinations have been made.
NEWCO PREFERRED STOCK
The Newco Board is authorized, pursuant to the Newco Charter, to issue
preferred stock from time to time in one or more classes or series, each of
which series shall have such distinctive designation or title as shall be fixed
by the Newco Board prior to the issuance of any shares thereof. Each such class
or series of preferred stock shall have such voting powers, full or limited, or
no voting powers, and such preferences and relative, participating, optional or
other special rights and such qualifications, limitations or restrictions
thereof, as shall be stated in such resolution or resolutions providing for the
issue of such class or series of preferred stock as may be adopted from time to
time by the Newco Board prior to the issuance of any shares thereof pursuant to
the authority vested in it.
Pursuant to the Merger Agreement, Newco has agreed to issue a series of
preferred stock of Newco, the Newco Preferred Stock, in exchange for the shares
of the UCU Preferred Stock in the event such UCU Preferred Stock has not been
redeemed prior to or at the Effective Time. The number of shares constituting
the Newco Preferred Stock (if such stock is issued) will be 1,000,000. Shares of
the Newco Preferred Stock shall have a stated value of $25.00 per share. If
issued, it is intended that the Newco Preferred Stock will be redeemed as soon
as is practicable after March 1, 1997.
Holders of the Newco Preferred Stock shall be entitled to receive an annual
cash dividend of $2.05 per share when, as and if declared by the Newco Board out
of funds legally available therefor, payable quarterly on the first day of each
March, June, September and December, commencing on the first such date which is
more than fifteen calendar days after the date of original issuance of the first
share of the Newco Preferred Stock, to holders of record on the respective dates
fixed for that purpose by the Newco Board not less than ten nor more than sixty
days in advance of payment of each dividend. Dividends on shares of the Newco
Preferred Stock shall be cumulative from and after the date of original issuance
thereof, whether or not on any scheduled dividend payment date there shall be
funds legally available for the payment of dividends. The Newco Preferred Stock
does not participate in dividends declared on Newco Common Stock.
Holders of the Newco Preferred Stock shall have no voting power or rights
except those set forth below or otherwise provided by law. If and when dividends
payable on any shares of the Newco Preferred Stock shall be in arrears in an
amount equivalent to one and one-half times the annual dividend or more, per
share, and thereafter until all dividends on shares of the Newco Preferred Stock
in arrears shall have been paid, the holders of the Newco Preferred Stock,
together with any other class or series of capital stock of Newco which is by
its terms expressly made equal as to dividends to
75
<PAGE>
the Newco Preferred Stock (the Newco Preferred Stock, together with all other
such classes and series, the "Dividend-Equivalent Preferred Stock"), voting as a
single class separate from the holders of all other classes of capital stock,
shall be entitled to elect two directors.
If and when all dividends then in arrears on the Dividend-Equivalent
Preferred Stock then outstanding shall be paid (and such dividends shall be
declared and paid out of any funds legally available therefor as soon as
reasonably practicable), the holders of shares of the Dividend-Equivalent
Preferred Stock shall be divested of any special right with respect to the
election of directors and the voting power of the holders of shares of the
Dividend-Equivalent Preferred Stock shall revert to the status existing before
the first dividend payment date on which dividends on any shares of the
Dividend-Equivalent Preferred Stock were not paid in full, but always subject to
the same provisions for vesting such special rights in the holders of shares of
the Dividend-Equivalent Preferred Stock in case of further like arrears in
payment of dividends thereon. Upon the termination of any such special voting
right, the terms of office of all persons who may have been elected directors of
Newco by vote of the holders of the Dividend-Equivalent Preferred Stock, as a
class, pursuant to such special voting right shall forthwith terminate, and the
resulting vacancies shall be filled by the vote of a majority of the remaining
directors.
Dividends on the Newco Preferred Stock will be subject to restrictions
imposed by the MGU Indenture. See "-- Newco Common Stock."
So long as any shares of the Newco Preferred Stock are outstanding, no new
class of capital stock shall be created or authorized which is entitled to
dividends or shares in distribution of assets on a parity with or in priority to
the Newco Preferred Stock, nor shall there be created or authorized any
securities convertible into shares of any such stock, unless the holders of
record of not less than two-thirds of the number of shares then outstanding of
the preferred stock of Newco of which the Newco Preferred Stock forms a part (as
a single class separate from the holders of all other classes of capital stock)
shall vote therefor in person or by proxy at the meeting of stockholders at
which the creation or authorization of such new class of capital stock or such
convertible securities is considered.
So long as any shares of the Newco Preferred Stock are outstanding, Newco
shall not increase the total authorized amount of the preferred stock of Newco
of which the Newco Preferred Stock forms a part or any class of capital stock
which is entitled to dividends or shares in distribution of assets on a parity
with or in priority to such preferred stock unless the holders of record of not
less than a majority of the number of shares of such preferred stock then
outstanding (as a single class separate from the holders of all other classes of
capital stock) shall vote therefor in person or by proxy at a meeting held
pursuant to notice containing a statement of such purpose.
In the event of the involuntary liquidation, dissolution or winding up (a
"Liquidation") of Newco, the holders of the Newco Preferred Stock shall be
entitled to have paid to them out of the assets of Newco, before any
distribution is made to or set apart for the holders of any shares of Newco
Common Stock, or of any other class or series of capital stock of Newco ranking
junior to the Newco Preferred Stock in respect of distribution of assets upon
Liquidation, an amount equal to $25.00 per share, plus an amount in cash equal
to all dividends (whether or not earned or declared) on such shares accrued and
unpaid thereon to the date of final distribution. After payment in cash to the
holders of the Newco Preferred Stock of the full preferential amount as
aforesaid, the holders of the Newco Preferred Stock shall, as such, have no
right or claim to any of the remaining assets of Newco.
Subject to the above, the Newco Preferred Stock shall not rank junior as to
distribution of assets upon Liquidation to any other class or series of capital
stock of Newco, unless such class or series of capital stock of Newco is by its
terms expressly made equal as to distribution of assets upon Liquidation of the
Newco Preferred Stock. The Newco Preferred Stock shall rank senior as to
distribution of assets upon Liquidation, or the voluntary liquidation,
dissolution or winding up of Newco ("Voluntary Liquidation") to all shares of
Newco Common Stock and any other class or series of capital stock of Newco which
is not by its terms expressly made equal as to distribution of assets upon
Liquidation of the Newco Preferred Stock.
76
<PAGE>
The shares of the Newco Preferred Stock shall not be redeemable before March
1, 1997. On and after such date, the shares of the Newco Preferred Stock will be
redeemable at the option of Newco, by a vote of the Newco Board, in whole or in
part at any time and from time to time at a price of $25.00 per share plus a sum
equal to all dividends on such shares accrued and unpaid thereon to the date
fixed for redemption (the "Redemption Date"). The shares of the Newco Preferred
Stock shall not be subject to a sinking fund.
In the event that fewer than all of the outstanding shares of the Newco
Preferred Stock are to be redeemed at any one time, the number of shares to be
redeemed shall be determined by the Newco Board and the shares to be redeemed
shall be selected pro rata or by lot or by such other method as may be
determined by the Newco Board to conform to any rule or regulation of the NYSE
or any other stock exchange upon which the shares of the Newco Preferred Stock
may at the time be listed. It is currently intended that if the Newco Preferred
Stock is issued, it will be redeemed on or promptly after March 1, 1997.
Newco shall cause a notice of redemption to be mailed at least 30 days, but
not more than 90 days, prior to the Redemption Date, to each holder of record of
shares of Newco Preferred Stock to be redeemed; if less than all the shares
owned by such holder are then to be redeemed, the notice shall also specify the
number of shares thereof which are to be redeemed and the number of certificates
representing such shares. Such notice shall be mailed to such record holders at
their respective addresses as they shall appear upon the books of Newco and
shall set forth the Redemption Date, the redemption price per share and the
place or places for surrender of certificates for shares to be redeemed.
If any dividend payment on the Newco Preferred Stock is in arrears, no
purchase or redemption shall be made of any shares of any class or series of
capital stock of Newco ranking equally with or junior to the Newco Preferred
Stock as to dividends or the distribution of assets upon Liquidation or
Voluntary Liquidation.
The holders of shares of Newco Preferred Stock shall have no right to
convert such shares into shares of any other class or series of capital stock of
Newco. The holders of the Newco Preferred Stock shall not have any other
preferences or special rights.
The Newco Preferred Stock will, when issued, be fully paid and nonassessable
and will have no preemptive rights. The Newco Preferred Stock will rank on a
parity as to receipt of dividends and liquidating distributions with each other
series of the presently authorized preferred stock of Newco. The rights of the
holders of the Newco Preferred Stock will be subordinate to those of Newco's
general creditors.
The Transfer Agent and the Registrar for the Newco Preferred Stock have not
yet been determined. Stockholders will be notified as soon as is practicable
after such determinations have been made.
CERTAIN ANTI-TAKEOVER PROVISIONS
The Newco Charter and the Newco Bylaws will contain provisions that may have
the effect of discouraging persons from acquiring large blocks of Newco stock or
delaying or preventing a change in control of Newco. The material provisions
which may have such an effect are (i) a "fair price" provision requiring an
affirmative vote of the holders of 80% of the outstanding shares of Newco Common
Stock entitled to vote before Newco can engage in certain business combinations
(as defined in the Newco Charter) with an interested stockholder or affiliate or
associate thereof (generally a 15% stockholder of Newco), unless a majority of
Newco's disinterested directors approve the business combination or certain
"fair price" criteria are satisfied; (ii) classification of the Newco Board into
three classes with the term of only one class expiring each year; (iii) a
provision permitting removal of a director only for cause and only by at least
an affirmative vote of the holders of 80% of the outstanding shares of Newco
Common Stock entitled to vote; (iv) a provision providing that stockholders may
take action only at an annual or special meeting and not by written consent in
lieu of a
77
<PAGE>
meeting; (v) a provision providing that special meetings of Newco stockholders
may only be called by a majority of the Newco Board or by specified senior
executive officers (such as the Chairman, Chief Executive Officer, President or
Chief Operating Officer) and not by stockholders; (vi) a provision permitting
the Newco Board to adopt, amend or repeal the Newco Bylaws; (vii) authorization
for the Newco Board (subject to any required regulatory approval) to issue
preferred stock of Newco in series and to fix rights and preferences of the
series (including, among other things, whether, and to what extent, the shares
of any series will have voting rights and the extent of the preferences of the
shares of any series with respect to dividends and other matters); (viii)
advance notice procedures with respect to nominations of directors or proposals
other than those adopted or recommended by the Newco Board; and (ix) provisions
permitting amendment of certain of these and related provisions only by at least
an affirmative vote of the holders of 80% of the outstanding shares of Newco
Common Stock entitled to vote.
Newco is subject to Section 203 of the DGCL, which imposes restrictions on
business combinations (as defined therein) with interested persons (being any
person who acquired 15% or more of Newco's outstanding voting stock). In
general, Newco is prohibited from engaging in business combinations with an
interested person for a period of three years from the date a person becomes an
interested person, subject to certain exceptions. By restricting the ability of
Newco to engage in business combinations with an interested person, the
application of Section 203 to Newco may provide a barrier to hostile or unwanted
takeovers that could deny Newco stockholders the benefit of any premium on their
shares of Newco Common Stock often associated with such takeover bids. The DGCL
permits stockholders to adopt an amendment to the Newco Charter or the Newco
Bylaws opting out of Section 203 by, in addition to any other vote required by
law, the affirmative vote of a majority of the outstanding shares entitled to
vote.
Certain acquisitions of outstanding voting shares of Newco would also
require approval of the SEC under the 1935 Act and of various state and foreign
regulatory authorities.
See "COMPARISON OF STOCKHOLDERS' RIGHTS -- Comparison of Rights of Holders
of Common Stock" and "The MERGER -- Regulatory Matters."
COMPARISON OF STOCKHOLDERS' RIGHTS
KCPL is incorporated in the State of Missouri, and UCU and Newco are
incorporated in the State of Delaware. KCPL shareholders, whose rights are
currently governed by Missouri law (including the MGBCL), the KCPL Charter and
the KCPL Bylaws, and 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 Merger, become stockholders of Newco. After such time,
their rights will then be governed by Delaware law, including the DGCL, the
Newco Charter and the Newco Bylaws.
Certain differences, including all material differences, that may affect the
rights and interests of stockholders of KCPL 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 DGCL,
MGBCL, the KCPL Charter, the KCPL Bylaws, the UCU Charter, the UCU Bylaws, the
Newco Charter and the Newco Bylaws. All references herein to the Newco Charter
and the Newco Bylaws are to such charter and bylaws as will be in effect at the
Effective Time. The Newco Charter and the Newco Bylaws are attached to this
Joint Proxy Statement/Prospectus as Annexes D and E, respectively.
COMPARISON OF THE RIGHTS OF HOLDERS OF COMMON STOCK
NUMBER OF DIRECTORS. The Newco Charter and the Newco Bylaws provide that
the Newco Board will consist of between 10 and 18 members, the exact number to
be fixed by the Newco Board from time to time. KCPL and UCU have 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 KCPL Charter and the KCPL Bylaws, the KCPL Board must be comprised of
at
78
<PAGE>
least three directors, the exact number to be fixed by the KCPL Bylaws. The KCPL
Bylaws presently provide that the exact number of directors will be nine, but
the KCPL Bylaws may be amended to change such number. See "-- Amendment of
Bylaws." 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 Charter and the Newco Bylaws
provide that the Newco Board will be divided into three classes of directors,
with each class being as nearly equal in size as is possible. At each annual
meeting, one class is to be elected to a three-year term. The KCPL Board is not
classified, and the KCPL 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 classified in the same manner as the
Newco Board.
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 KCPL Board and the UCU Board
are filled in the same manner.
REMOVAL OF DIRECTORS. The Newco Charter provides that directors may be
removed at any time, but only for cause and only by an affirmative vote of the
holders of not less than 80% of the shares of Newco Common Stock then
outstanding. The KCPL Charter and the KCPL Bylaws are silent as to the removal
of any director, but, under the MGBCL, one or more directors or the entire KCPL
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 KCPL 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
KCPL 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 then 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.
VOTING/CUMULATIVE VOTING. Under the Newco Bylaws, each stockholder
represented at a meeting of stockholders will be entitled to cast one vote on
each matter submitted to a vote for each share of capital stock entitled to vote
held by such stockholder; cumulative voting rights do not exist in connection
with the election of Newco directors. The KCPL Bylaws provide for cumulative
voting in connection with the election of directors and otherwise provide that
each outstanding share entitled to vote under the KCPL 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 the law, the Newco
Charter or the Newco Bylaws, issues brought before a meeting of stockholders
will be decided by a vote of the holders of a majority of the stock represented
and entitled to vote. The KCPL Bylaws and UCU Bylaws have similar provisions,
except with respect to the election of directors.
79
<PAGE>
SPECIAL MEETINGS; STOCKHOLDER ACTION BY WRITTEN CONSENT. The Newco Charter
provides that special meetings of Newco stockholders may be called for any
reason, but only by a majority of the Newco Board, the Chairman, the Vice
Chairman, the Chief Executive Officer, the President or the Chief Operating
Officer of Newco. No action permitted or required to be taken at a special or
annual meeting of the holders of Newco Common Stock may be taken by the written
consent of such stockholders in lieu of such a meeting. The KCPL Bylaws state
that, in general, special shareholders meetings may only be called by the
Chairman of the KCPL Board, by the President of KCPL or at the written request
of a majority of the KCPL Board. The KCPL Bylaws also state that unless
otherwise provided by law or in the KCPL 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 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 DGCL and the MGBCL 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 Newco shall indemnify, to the full extent
permitted by law, any person who was or is a party or is threatened to be made a
party to any legal proceeding by reason of the fact that he is or was a director
or officer of Newco, or is or was a director or officer of Newco serving at its
request as a director, officer, trustee, employee or agent of another
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement in connection with such proceeding. Under the Newco
Bylaws, such person may only be indemnified if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
Newco, and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The foregoing notwithstanding, no
indemnification will be made in respect of any claim, issue or matter brought by
or in the name of Newco as to which such person will have been adjudged to be
liable to Newco unless and only to the extent that the Delaware Court of
Chancery or the court in which such action or suit was brought determines that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court deems proper. The Newco Charter also contains a
provision which eliminates the personal liability of Newco's directors to Newco
or its stockholders for monetary damages, except for liability for any breach of
a director's duty of loyalty, for acts or omissions not in good faith which
involve intentional misconduct, for unlawful payments of dividends or unlawful
stock purchases, and for any transaction in which the director derived an
improper personal benefit.
The KCPL 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
80
<PAGE>
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 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.
AMENDMENTS OF CHARTERS. The Newco Charter provides that certain provisions
of the Newco Charter (Articles Fifth, Sixth, Seventh and Eighth) relating to (i)
the classified Board of Directors, (ii) the removal of directors only for cause,
(iii) the ability of directors to adopt and amend the Newco Bylaws, (iv) the
elimination of stockholders' ability to act by written consent, (v) the
elimination of stockholders' ability to call special meetings, and (vi)
supermajority votes on certain business combinations, may not be amended or
repealed without the affirmative vote of the holders of not less than 80% of the
outstanding shares of Newco Common Stock entitled to vote. Otherwise, the Newco
Charter provides that Newco may amend, alter, change or repeal any provision in
the Newco Charter, as the DGCL provides. The DGCL provides that, unless a higher
percentage is specified in a corporation's charter, such charter may be amended
by the affirmative vote of the holders of a majority of the outstanding shares
of the corporation entitled to vote thereon.
The KCPL Charter may, in general, be amended only by an affirmative vote of
holders of a majority of the outstanding shares of KCPL Common Stock entitled to
vote. However, the provisions in the KCPL 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
KCPL Common Stock entitled to vote. Notwithstanding any of the foregoing to the
contrary, no amendment to the KCPL 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.
81
<PAGE>
AMENDMENT OF BYLAWS. The Newco Charter provides that the Newco Bylaws can
be altered, amended, changed or repealed either by the Newco Board or by an
affirmative vote by the holders of at least 80% of outstanding Newco Common
Stock. The KCPL Charter and the KCPL Bylaws provide that the KCPL Board may
make, alter, amend or repeal the KCPL Bylaws by a majority vote of the entire
KCPL Board. This provision does not limit shareholders' power to make, alter,
amend or replace the KCPL 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 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.
NOTICE OF STOCKHOLDER PROPOSALS/NOMINATIONS OF DIRECTORS. The Newco Bylaws
and the KCPL Bylaws have substantially the same requirements for providing
advance notice of the introduction by stockholders of business to be transacted
at annual stockholders' meetings. For any such proposal properly to be brought
before an annual meeting, a stockholder of record, on the date both of giving
such notice and of determining stockholders 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 their respective bylaws. To be
timely, a stockholder's notice to the Secretary must be delivered to or mailed
and received at a corporation's principal executive offices not less than 60 nor
more than 90 days prior to the date of the annual meeting of stockholders,
provided, however, that if less than 70 days' notice or prior public disclosure
of the date of the meeting is given to stockholders, notice by the stockholder
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 and the KCPL Bylaws both require that a stockholder'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 stockholder,
(iii) the class and number of shares that are owned beneficially or of record by
such stockholder, (iv) a description of any financial or other interest of each
such stockholder in the proposal, and (v) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
The Newco Bylaws and the KCPL Bylaws permit stockholders to nominate persons
for election to the Newco Board or the KCPL Board, as the case may be, at any
annual stockholders' meeting if they are stockholders of record as of both the
date of giving such notice and the date of determining stockholders entitled to
vote at the annual meeting. A stockholder must give timely notice thereof in a
proper written form to the corporate Secretary, as provided in the bylaws. To be
timely, a stockholder's notice must meet the same timeliness requirements as
described above for providing advance notice of business to be transacted at a
stockholders' meeting.
To be in proper written form, a stockholder's notice to the Secretary must
set forth (a) as to each person whom the stockholder 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
stockholder giving the notice (i) the
82
<PAGE>
name and record address of such stockholder, (ii) the class or series and number
of shares of capital stock of the company that are owned beneficially or of
record by such stockholder, (iii) a description of all arrangements or
understandings between such stockholder 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 stockholder, (iv) a representation that such stockholder
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 stockholder
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 will 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 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.
83
<PAGE>
The Newco Bylaws provide that a complete list of stockholders entitled to
vote at a meeting will be available for examination by any stockholder, for any
purpose germane to the meeting, during ordinary business hours, for at least ten
days prior to the meeting. The list will also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected by
any Newco stockholder who is present.
The KCPL Bylaws provide that a shareholder has the right to inspect KCPL's
books only to the extent that the right is conferred by law, the KCPL Charter,
the KCPL Bylaws, or a resolution of the KCPL Board. The list of shareholders
entitled to vote at any meeting will be kept on file at KCPL's registered office
for ten days before the meeting and will be subject to KCPL 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 (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.
APPRAISAL RIGHTS. Both the DGCL and the MGBCL provide appraisal rights to
stockholders 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 contains 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
84
<PAGE>
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 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 KCPL Charter and the KCPL 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
KCPL Charter and the KCPL Bylaws do not "opt out" of the Control Share
Acquisition Statute.
The DGCL sections applicable to Newco and 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
85
<PAGE>
which resulted in the stockholder becoming an Interested Stockholder. The MGBCL
imposes a longer prohibition period on transactions with Interested Stockholders
than 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 at least 80% of the outstanding voting stock not beneficially owned by any
"Interested Stockholder" (as defined below and such term including any
"Affiliate" or "Associate" thereof as defined in the Newco Charter) is needed to
approve a "Business Combination," unless certain exceptions are satisfied. A
"Business Combination" is defined to include certain transactions by Newco or
any of its Subsidiaries, including, without limitation, (i) any merger or
consolidation with an Interested Stockholder; (ii) any sale or other disposition
of assets of Newco or the Interested Stockholder (in one transaction or a series
of transactions) having a fair market value of at least $5 million or
constituting more than 5% of Newco's book value or of its equity with an
Interested Stockholder; (iii) the adoption of a plan for liquidation or
dissolution or any amendment to the Newco Bylaws; (iv) any reclassification,
recapitalization, merger or consolidation or other transaction directly or
indirectly increasing the proportion of outstanding shares that an Interested
Stockholder beneficially owns of any class or series of Newco capital stock or
securities convertible into capital stock of Newco or a subsidiary thereof; and
(v) any agreement, contract or other arrangement providing for an action
specified in (i)-(iv). An "Interested Stockholder" is defined as any person who
(i) is or has announced or publicly disclosed an intent to become the beneficial
owner of voting stock of Newco representing 15% or more of the votes entitled to
be cast by holders of voting stock, or (ii) an Affiliate or Associate of Newco
which at any time in the two years prior to the date in question was the
beneficial owner of voting stock representing at least 15% of the votes entitled
to be cast by holders of outstanding voting stock.
The 80% voting requirement referred to above does not apply to a Business
Combination meeting the following conditions (i) or (ii) (or, where the Business
Combination does not involve the payment of consideration to holders of Newco's
outstanding capital stock, meeting condition (i)): (i) a majority of the
Continuing Directors (as defined in the Newco Charter) approves such Business
Combination, or (ii) (a) the aggregate amount of cash and fair market value of
consideration other than cash received per share by holders of Newco Common
Stock equals the greatest of (1) the highest share price per share that the
Interested Stockholder paid to beneficially own stock during the two years prior
to announcing publicly the Business Combination (the "Announcement Date") to
acquire beneficial ownership of shares, or in the transaction in which he became
an Interested Stockholder, whichever is higher; (2) the fair market value per
share of Newco Common Stock on the Announcement Date or the date when the
Interested Stockholder became an Interested Stockholder (the "Determination
Date"), whichever is higher; (3) the fair market value per share multiplied by
the ratio of (x) the highest per share price that the Interested Stockholder
paid during the two-year period prior to the Announcement Date to acquire
beneficial ownership of shares to (y) the fair market value per share on the
first day in that two-year period in which the Interested Stockholder acquired
beneficial ownership; and (4) Newco's net income per share of Newco Common Stock
for the four quarters preceding the Announcement Date, multiplied by the higher
of the then price-earnings multiple of the Interested Stockholder or Newco's
highest price-earnings multiple in the two years preceding the Announcement
Date; (b) on the date the Business Combination is consummated, the aggregate
amount of cash and the fair market value of consideration other than cash
received per share by holders of any class or series of outstanding capital
stock, other than Newco Common Stock, equals at least the greatest of (1) the
highest per share price that the Interested Stockholder paid for beneficial
ownership of such
86
<PAGE>
stock (x) during the two years preceding the Announcement Date, or (y) in the
transaction in which it became an Interested Stockholder, whichever is higher;
(2) the fair market value per share of such class or series on the Announcement
Date or Determination Date, whichever is higher; (3) the per share price
determined in the immediately preceding clause (2) multiplied by the ratio of
(x) the highest per share price that the Interested Stockholder paid for any
share of such class or series to acquire beneficial ownership of such shares
within the two years immediately preceding the Announcement Date to (y) the fair
market value per share of such class or series on the first day in such two-year
period on which the Interested Stockholder acquired beneficial ownership of any
such class or series; and (4) the highest preferential amount per share to which
holders of such class or series would be entitled if Newco liquidated, dissolved
or wound up its affairs; (provisions (a) and (b) must be met with respect to
every class of series of outstanding capital stock of Newco, whether or not the
Interested Stockholder has beneficially owned any shares of a particular class
or series); (c) the consideration received by holders of a particular class or
series of outstanding capital stock of Newco is cash, or if the Interested
Stockholder acquired beneficial ownership of shares of such class or series for
consideration in a form other than cash, in that form; (d) after the
Determination Date and before the Business Combination is consummated, except as
approved by a majority of Continuing Directors for provisions (1) and (2), (1)
there will have been no failure to declare and pay at the regular date any full
quarterly dividends (whether or not cumulative) on any outstanding class of
capital stock of Newco; (2) the annual rate of dividends on Newco Common Stock
will not have been reduced (after appropriate adjustment for stock splits, stock
dividends or subdivision of the Newco Common Stock), and such annual rate will
have been increased to reflect any reclassification, recapitalization,
reorganization or similar transaction reducing the number of outstanding shares;
and (3) the Interested Stockholder will not beneficially own any additional
Newco Common Stock except as part of the transaction in which such Interested
Stockholder becomes an Interested Stockholder and except where the transaction
would not increase the Interested Stockholder's percentage beneficial ownership
of any class or series of beneficial stock; (e) a proxy statement in compliance
with the requirements of the Exchange Act describing the proposed Business
Combination will have been mailed to Newco stockholders at least 30 days before
the Business Combination is consummated, noting prominently on the first page
any statements as to the advisability or inadvisability of the Business
Combination that the Continuing Directors or any of them may choose to make,
and, if deemed advisable by a majority of Continuing Directors, the opinion of
the investment banking firm they select as to the fairness (or not) of the terms
of the Business Combination from a financial point of view to the holders of the
outstanding shares of capital stock of Newco other than the Interested
Stockholder; and (f) such Interested Stockholder will not have significantly
changed Newco's business or equity capital structure with the approval of a
majority of the Continuing Directors. However, the fact that a Business
Combination complies with these provisions will not impose a fiduciary duty on
the Newco Board or on any director to approve the Business Combination or
recommend it to stockholders. Such compliance also restricts in any manner the
Newco Board's evaluations of or actions and responses taken in response to such
Business Combination.
A majority of Newco's Continuing Directors has the power and duty to
determine for the purposes of such Business Combinations, on the basis of
information known to them after reasonable inquiry, all relevant questions,
including, without limitation, (i) whether a person is an Interested
Stockholder; (ii) the number of shares of capital stock of Newco that a person
beneficially owns; (iii) whether a person is an Affiliate or Associate of
another; (iv) whether a Proposed Action (as defined in the Newco Charter) is
with, proposed by, or on behalf of an Interested Stockholder; (v) whether the
assets that are the subject of any Business Combination have, or the
consideration that Newco is to receive for issuing or transferring securities in
any Business Combination has, an aggregate fair market value of $5 million or
more; and (vi) whether the assets that are the subject of any Business
Combination constitute a substantial part of the assets of Newco.
The KCPL Charter provides that the affirmative vote of the holders of at
least 80% of voting power of KCPL 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
87
<PAGE>
certain transactions by KCPL 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 KCPL 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 KCPL 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 KCPL 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 KCPL Charter)
approved the Business Combination, or (b) the cash or fair market value of other
consideration received per share by the holders of KCPL Common Stock in the
Business Combination equals or exceeds the highest share price that the
Interested Shareholder paid for KCPL 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.
COMPARISON OF THE RIGHTS OF HOLDERS OF PREFERRED STOCK
Since both Newco and UCU are both organized under the laws of the State of
Delaware, there would be no differences in the rights of holders of Newco
Preferred Stock and UCU Preferred Stock under state law. In addition, any Newco
Preferred Stock issued in the Merger will have an equal stated
88
<PAGE>
dividend and like rights, privileges, qualifications and restrictions as the UCU
Preferred Stock. For a description of the rights of holders of Newco Preferred
Stock, see "DESCRIPTION OF NEWCO CAPITAL STOCK -- Newco Preferred Stock."
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 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 stockholders of
KCPL and UCU 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
and 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 and UCU for approval
at the KCPL Meeting and the UCU Meeting, respectively. KCPL and UCU believe
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 and by the
holders of shares of UCU Common Stock, respectively, represented at the KCPL
Meeting and the UCU Meeting, respectively, 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 BOARDS OF DIRECTORS OF
EACH OF KCPL AND UCU, BY A UNANIMOUS VOTE OF THOSE DIRECTORS PRESENT, RECOMMEND
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
89
<PAGE>
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 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 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 "-- 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
90
<PAGE>
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 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
Newco's MIC Plan (see "-- Newco 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 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.
91
<PAGE>
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 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
92
<PAGE>
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.
- 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 the Incentive 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 Incentive Plan had been in
effect. These determinations will be made by the Newco Compensation Committee.
NEWCO MANAGEMENT INCENTIVE COMPENSATION PLAN
Pursuant to the Merger Agreement, it was agreed that Newco would adopt,
subject to stockholder 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
93
<PAGE>
the Effective Time), effective as of the Effective Time. The Newco Management
Incentive Compensation Plan (the "MIC Plan") will not become effective with
respect to individuals who are subject to Section 162(m) of the Code unless the
stockholder approval described below is obtained.
The purpose of the 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 MIC Plan) in an effort to reward their
individual and group contributions to Newco and to more closely link the
financial interests of management, stockholders and customers.
The 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 types of compensation,
including performance-based compensation, are excluded from this deduction
limit. In an effort to ensure that compensation payable under the MIC Plan to
certain executives will qualify as performance-based compensation that is
generally tax-deductible, the MIC Plan is being submitted to stockholders of
KCPL and UCU for approval at the KCPL Meeting and the UCU Meeting, respectively.
Newco believes compensation payable pursuant to the 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 MIC Plan), compensation not qualified under Section 162(m) of the Code may
be payable. By approving the MIC Plan, the stockholders 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,
on the one hand, and UCU Common Stock, on the other hand, represented at the
KCPL Meeting and the UCU Meeting, respectively, and entitled to vote thereon is
required to approve the MIC Plan. THE BOARDS OF DIRECTORS OF KCPL AND UCU EACH,
BY A UNANIMOUS VOTE OF THOSE DIRECTORS PRESENT, RECOMMEND A VOTE FOR APPROVAL OF
THE MIC PLAN.
Set forth below is a summary of certain material features of the 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 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 MIC Plan, and any interpretations and
decisions of the Newco Compensation Committee with respect to the 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 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 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 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 MIC Plan.
PLAN FEATURES. The 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
94
<PAGE>
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 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.
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 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 MIC Plan if the 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 MIC Plan had been in effect.
95
<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 Merger. The
unaudited pro forma combined balance sheet at December 31, 1995 gives effect to
the Merger as if it had occurred at December 31, 1995. The unaudited pro forma
combined statements of income for each of the three years in the period ended
December 31, 1995 give effect to the Merger as if it had occurred at January 1,
1993. These statements are prepared on the basis of accounting for the Merger 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 by reference
herein. The following information is not necessarily indicative of the financial
position or operating results that would have occurred had the Merger been
consummated on the date, or at the beginning of the periods, for which the
Merger is being given effect nor is it necessarily indicative of future
operating results or financial position. See "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE."
96
<PAGE>
KC UNITED CORP.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1995
(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............................. $ 1,645,040 $ 3,388,538 $ 5,033,578 -- $ 5,033,578
Gas.................................. 1,064,820 -- 1,064,820 -- 1,064,820
------------- ------------- ------------- --- -------------
2,709,860 3,388,538 6,098,398 -- 6,098,398
Less -- accumulated depreciation..... 1,007,945 1,156,115 2,164,060 -- 2,164,060
------------- ------------- ------------- --- -------------
Net utility plant in service........... 1,701,915 2,232,423 3,934,338 -- 3,934,338
Construction work in progress.......... 47,559 72,365 119,924 -- 119,924
Nuclear fuel, net...................... -- 54,673 54,673 -- 54,673
------------- ------------- ------------- --- -------------
Total utility plant, net............... 1,749,474 2,359,461 4,108,935 -- 4,108,935
------------- ------------- ------------- --- -------------
Aquila Energy plant assets............. 424,214 -- 424,214 -- 424,214
------------- ------------- ------------- --- -------------
Investments and other.................. 680,325 166,751 847,076 -- 847,076
------------- ------------- ------------- --- -------------
Current assets:
Cash and cash equivalents............ 110,652 28,390 139,042 -- 139,042
Funds on deposit..................... 41,190 -- 41,190 -- 41,190
Accounts receivable, net............. 332,154 64,668 396,822 -- 396,822
Fuel inventories, at average cost.... 74,895 22,103 96,998 -- 96,998
Materials and supplies, at average
cost................................ 37,585 47,175 84,760 -- 84,760
Price risk management assets......... 26,422 -- 26,422 -- 26,422
Prepayments and other................ 53,078 11,126 64,204 -- 64,204
------------- ------------- ------------- --- -------------
Total current assets................... 675,976 173,462 849,438 -- 849,438
------------- ------------- ------------- --- -------------
Deferred charges and other assets:
Regulatory assets.................... 146,400 170,222 316,622 -- 316,622
Price risk management assets......... 175,513 -- 175,513 -- 175,513
Other................................ 33,970 12,610 46,580 -- 46,580
------------- ------------- ------------- --- -------------
Total deferred charges and other
assets................................ 355,883 182,832 538,715 -- 538,715
------------- ------------- ------------- --- -------------
Total.............................. $ 3,885,872 $ 2,882,506 $ 6,768,378 -- $ 6,768,378
------------- ------------- ------------- --- -------------
------------- ------------- ------------- --- -------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
97
<PAGE>
KC UNITED CORP.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1995
(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)...................... $ 846,531 $ 449,697 $ 1,296,228 -- $ 1,296,228
Retained earnings.................... 106,195 449,966 556,161 -- 556,161
Other stockholders' equity........... (6,422) (1,725) (8,147) -- (8,147)
------------- ------------- ------------- --- -------------
Total common equity.................. 946,304 897,938 1,844,242 -- 1,844,242
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 1,436 1,792 -- 1,792
Company-obligated mandatorily
redeemable preferred securities of
partnership......................... 100,000 -- 100,000 -- 100,000
Long-term debt, net.................. 1,355,427 835,713 2,191,140 -- 2,191,140
------------- ------------- ------------- --- -------------
Total capitalization................... 2,427,087 1,824,087 4,251,174 -- 4,251,174
------------- ------------- ------------- --- -------------
Current liabilities:
Current maturities of long-term
debt................................ 15,090 73,803 88,893 -- 88,893
Short-term debt...................... 288,577 19,000 307,577 -- 307,577
Accounts payable..................... 434,275 52,506 486,781 -- 486,781
Accrued taxes........................ 14,326 39,726 54,052 -- 54,052
Accrued interest..................... 20,450 16,906 37,356 -- 37,356
Price risk management liabilities.... 67,891 -- 67,891 -- 67,891
Other................................ 107,175 48,114 155,289 -- 155,289
------------- ------------- ------------- --- -------------
Total current liabilities.............. 947,784 250,055 1,197,839 -- 1,197,839
------------- ------------- ------------- --- -------------
Deferred credits:
Deferred income taxes................ 259,339 648,374 907,713 -- 907,713
Investment tax credits............... 19,855 71,270 91,125 -- 91,125
Price risk management liabilities.... 94,601 -- 94,601 -- 94,601
Other................................ 137,206 88,720 225,926 -- 225,926
------------- ------------- ------------- --- -------------
Total deferred credits................. 511,001 808,364 1,319,365 -- 1,319,365
------------- ------------- ------------- --- -------------
Total.............................. $ 3,885,872 $ 2,882,506 $ 6,768,378 -- $ 6,768,378
------------- ------------- ------------- --- -------------
------------- ------------- ------------- --- -------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
98
<PAGE>
KC UNITED CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
KCPL PRO FORMA
UCU (AS --------------------------
(AS REPORTED) 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 4,327 111,306
-- Fully diluted (Note 5)......... 45,474 61,902 4,366 111,742
Earnings per share
-- Primary........................ $ 1.72 $ 1.92 $ 1.76
-- Fully diluted (Note 5)......... $ 1.71 $ 1.92 $ 1.76
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
99
<PAGE>
KC UNITED CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
KCPL PRO FORMA
UCU (AS --------------------------
(AS REPORTED) 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 4,221 110,089
-- Fully diluted (Note 5)......... 45,178 61,903 4,337 111,418
Earnings per share
-- Primary........................ $ 2.08 $ 1.64 $ 1.75
-- Fully diluted (Note 5)......... $ 2.06 $ 1.64 $ 1.74
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
100
<PAGE>
KC UNITED CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
KCPL PRO FORMA
UCU (AS --------------------------
(AS REPORTED) 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 3,911 106,557
-- Fully diluted (Note 5)......... 44,273 61,909 4,250 110,432
Primary earnings per share
-- Primary........................ $ 1.95 $ 1.66 $ 1.71
-- Fully diluted (Note 5)......... $ 1.92 $ 1.66 $ 1.70
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
101
<PAGE>
KC UNITED CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. The pro forma combined financial statements reflect the conversion of each
outstanding share of KCPL Common Stock into one share of Newco Common Stock
outstanding and the conversion of each outstanding share of UCU Common Stock
into 1.096 shares 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 ten-year period
following the Merger, less transaction costs, will be subject to regulatory
review and approval. Transaction costs, currently estimated to be
approximately $30 million (including fees for financial advisors, attorneys,
accountants, consultants, filings and printing), are being deferred for
post-Merger amortization in accordance with future regulatory approval.
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 MERGER -- Employment Agreements," "-- Employee Plans
and Severance Arrangements," "-- Newco Plans" and "APPROVAL OF NEWCO PLANS."
The net estimated cost 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 Merger, KCPL must redeem its cumulative
preferred stock outstanding as provided in the Merger Agreement. Under the
Merger Agreement, UCU must also redeem the UCU Preferred Stock outstanding
if the Effective Time occurs on or after March 1, 1997. Because the basis of
accounting for the Merger 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 is $755,000 applicable to
the KCPL preferred stock. The continuing 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, 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.
102
<PAGE>
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 auditors, 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
Skadden Arps will pass upon the legality of the shares of Newco Common Stock
and Newco Preferred Stock to be issued in connection with the Merger.
103
<PAGE>
OWNERSHIP OF VOTING STOCK
KCPL VOTING STOCK
Management of KCPL has no knowledge of any person (as that term is defined
by the SEC) who owns beneficially more than 5% of the KCPL Common Stock. Neither
UCU nor any of its affiliates owns any shares of KCPL Common Stock.
The number of shares of KCPL Common Stock beneficially owned by directors on
the KCPL Board, the named executive officers, and all directors and officers as
a group are set forth below:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL
TITLE OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP (1)
- ------------------ ----------------------------------------------------------- ----------------------
<S> <C> <C>
Common Stock Bernard J. Beaudoin 22,926(2)
Common Stock David L. Bodde 1,593
Common Stock William H. Clark 1,271
Common Stock Robert J. Dineen 1,849
Common Stock Arthur J. Doyle 17,819(3)
Common Stock W. Thomas Grant II 849
Common Stock Marcus Jackson 19,178(2)
Common Stock A. Drue Jennings 59,534(2)(4)
Common Stock George E. Nettels, Jr. 8,733(5)
Common Stock Linda Hood Talbott 4,131
Common Stock Ronald G. Wasson 23,999(2)
Common Stock Robert H. West 2,741(6)
Common Stock J. Turner White 11,093(2)
Common Stock All officers and directors as a group (23 persons) 257,084(2)
</TABLE>
- ------------------------
(1) Shares of the KCPL Common Stock owned by any director or officer and by the
directors and officers as a group is less than 1% of such stock. Unless
otherwise specified, each director and named executive officer has sole
voting and sole investment power with respect to the shares indicated.
(2) Includes shares held pursuant to KCPL's Employee Savings Plus Plan. Also
includes exercisable non-qualified stock options granted under the KCPL
Long-Term Incentive Plan in the following amounts: Jennings, 40,625;
Beaudoin, 20,313; Jackson, 16,500; Wasson, 20,313; and White, 9,750.
(3) The nominee disclaims beneficial ownership of 200 shares reported which are
owned by nominee's wife.
(4) The nominee disclaims beneficial ownership of 150 shares reported which are
owned by nominee's son.
(5) The nominee disclaims beneficial ownership of 3,400 shares reported which
are owned by nominee's wife.
(6) The nominee disclaims beneficial ownership of 1,200 shares reported which
are held by nominee's wife as custodian for minor children.
104
<PAGE>
UCU VOTING STOCK
Furnished below is information as to the beneficial ownership of UCU Common
Stock, as of January 12, 1996, for (a) each Director of UCU, (b) the five named
UCU Executive Officers and (c) the UCU Executive Officers as a group. The
beneficial owner has sole voting and investment power over the shares shown,
unless otherwise indicated.
<TABLE>
<CAPTION>
NUMBER OF
NAME OF INDIVIDUAL OR GROUP SHARES PERCENT OF CLASS (1)
- ------------------------------------------------------------ ----------- ----------------------------
<S> <C> <C>
Richard C. Green, Jr........................................ 592,999 1.3%(2)(3)(4)(9)
Avis G. Tucker.............................................. 351,578 (2)(5)(6)
L. Patton Kline............................................. 4,754 --
John R. Baker............................................... 160,984 (4)
Dr. Stanley O. Ikenberry.................................... 3,040 --
Irvine O. Hockaday, Jr...................................... 1,358 --
Robert F. Jackson, Jr....................................... 18,651 --
Herman Cain................................................. 2,419 --
Robert K. Green............................................. 61,267 (7)(9)
B. C. Burgess............................................... 3,294 --
Charles K. Dempster......................................... 27,212 (9)
James G. Miller............................................. 54,642 (9)
Directors and Executive Officers -- as a group (15 2.4%(2)(3)(4)(5)(7)(8)(9)
persons)................................................... 1,112,739
</TABLE>
- ------------------------
(1) Percentages are omitted for Directors and Executive Officers who own less
than 1% of the UCU Common Stock.
(2) Includes 88,287 shares held in trust under the will of Mr. Richard C. Green,
of which Mr. Richard C. Green, Jr. and Mrs. Tucker are trustees with shared
voting and investment power.
(3) Includes 73,221 shares held in trust for the benefit of Mrs. Ann G. Green,
mother of Mr. Richard C. Green, Jr. and Mr. Robert K. Green, of which Mr.
Richard C. Green, Jr. is a co-trustee with shared voting and investment
power. Excludes 116,348 shares held in trust for the benefit of Mr. Richard
C. Green, Jr. as to which Mr. Richard C. Green, Jr. has power to replace the
trustees.
(4) Includes 128,726 shares held in trust for the benefit of Mrs. Tucker, of
which Mr. Richard C. Green, Jr. and Mr. Baker are trustees with voting and
investment power.
(5) Includes 5,751 shares held in various trusts of which Mrs. Tucker is trustee
with voting and investment power.
(6) Excludes 128,726 shares held in trust for the benefit of Mrs. Tucker, of
which Mr. Richard C. Green, Jr. and Mr. Baker are trustees with voting and
investment power and 376,035 shares held in trust for the benefit of Mrs.
Tucker of which a bank is sole trustee.
(7) Excludes 217,836 shares held in trust for the benefit of Mr. Robert K. Green
as to which he has power to replace the trustees.
(8) Excludes 376,035 share held in trust for the benefit of Mrs. Tucker of which
a bank is sole trustee.
(9) Includes shares which may be acquired through the exercise of vested
employee stock options as follows: Mr. Richard C. Green, Jr, 90,300 shares;
Mr. Robert K. Green, 8,450 shares; Mr. Dempster, 19,850 shares; Mr. Miller
22,450 shares; and Directors and Executive Officers as a group, 170,350
shares.
Richard C. Green, Jr., Kansas City, Missouri, Robert K. Green, Shawnee
Mission, Kansas, Avis G. Tucker, Warrensburg, Missouri, members of their family
and trusts for the benefit of members of the Green family owned, as of January
12, 1995, 1,886,678 shares or 4.1% of the outstanding shares of UCU Common
Stock. This number includes shares shown in the preceding table as being owned
beneficially by Mr. Richard C. Green, Jr., Mr. Robert K. Green and Mrs. Avis G.
Tucker, and those specifically excluded in Notes (3), (6), (7) and (8),
preceding.
Neither KCPL nor any of its affiliates owns any shares of UCU Common Stock.
105
<PAGE>
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 Inc., a
wholly-owned, unregulated subsidiary of KCPL, pursues opportunities in primarily
energy-related ventures throughout the nation and world. KCPL's commitment to
KLT Inc. and its holdings reflects KCPL's plans to enhance shareholder value by
capturing growth opportunities in energy-related markets outside KCPL 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."
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 WRI, operate a
Wichita-Topeka-Kansas City-Sibley interconnection, (ii) the Southwest Power Pool
and NERC Regional Reliability Council, pursuant to which 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.
106
<PAGE>
DESCRIPTION OF NEWCO
NEWCO BEFORE THE MERGER
Newco was formed on January 17, 1996 in order to effect the Merger and,
subject to the receipt of applicable regulatory approvals, will be equally-owned
by KCPL and UCU immediately prior to the Effective Time. Prior to the Effective
Time, Newco will have no material assets and will conduct no operations other
than those contemplated by the Merger Agreement to effect the Merger and the
transactions contemplated thereby. The principal executive offices of Newco are
presently located at 1201 Walnut, Kansas City, Missouri 64106-2124 and Newco's
telephone number is (816) 556-2200. At the Effective Time the principal
executive offices of Newco will be located in Kansas City, Missouri.
There will be no established public trading market for Newco Common Stock
prior to the Effective Time. Newco currently has no employees and is not
expected to incur liabilities except in connection with the consummation of the
Merger.
With regard to outstanding legal matters and compliance with federal, state
or local requirements relating to the general protection of the environment,
reference is made to the description of the business of KCPL and UCU contained
in "SELECTED INFORMATION CONCERNING KCPL AND UCU -- Business of KCPL" and
"SELECTED INFORMATION CONCERNING KCPL AND UCU -- Business of UCU," the KCPL and
UCU financial information contained herein and the information contained in the
documents incorporated by reference herein, including KCPL's Annual Report on
Form 10-K for the year ended December 31, 1995, UCU's Annual Report on Form 10-K
for the year ended December 31, 1995 and UCU's Current Report on Form 8-K/A
dated April 1, 1996.
As of December 31, 1995, if the Merger had been effected by such date, on a
consolidated pro forma basis, Newco would have had total assets of
$6,768,378,000 and total common equity of $1,844,242,000. See "UNAUDITED PRO
FORMA COMBINED FINANCIAL INFORMATION."
At the Effective Time, the separate corporate existence of KCPL and UCU
shall cease and Newco shall be the surviving corporation in the Merger. Pursuant
to the Merger Agreement, KCPL and UCU are permitted to change the name of Newco.
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 and West Virginia, in addition to British
Columbia. Certain joint ventures 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.
BOARD OF DIRECTORS OF NEWCO
Pursuant to the Merger Agreement, at the Effective Time, the Newco Board
will consist of 18 members, nine designated by KCPL and nine designated by UCU.
As of the date of this Joint Proxy Statement/Prospectus, KCPL and UCU have not
determined which individuals, other than A. Drue Jennings and Richard C. Green,
Jr., will be designated to serve as the initial directors of Newco as of the
Effective Time. However, it is anticipated that the directors of KCPL and UCU
immediately prior to the Effective Time will be the initial directors of Newco.
The initial designation of directors among the three classes of the Newco Board
shall be agreed to by KCPL and UCU, and the designees of each party will be
divided equally among such classes. Each designee shall serve for a term equal
to the remaining balance of the three-year term of the class of directors in
which such designee shall serve. At each annual stockholders' meeting after the
Effective Time, the number of directors equal to the number of the class whose
term expires at the time of the meeting shall be elected for a term of three
years. 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
107
<PAGE>
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.
For a description of the present composition of the KCPL Board, see
"ELECTION OF KCPL DIRECTORS." A description of the present composition of the
UCU Board is provided below.
UCU DIRECTORS
<TABLE>
<CAPTION>
YEAR FIRST
YEAR TERM PRINCIPAL OCCUPATION OR ELECTED OR
NAME EXPIRES EMPLOYMENT AND POSITION WITH UCU APPOINTED AGE
- ---------------------------------- ----------- ------------------------------------------------ --------------- ---
<S> <C> <C> <C> <C>
Richard C. Green, Jr............. 1997 Chairman of the Board and Chief Executive 1982 41
Officer of UCU
Avis G. Tucker................... 1997 Editor and Publisher, The Daily Star-Journal, 1973 80
Warrensburg, Missouri
L. Patton Kline.................. 1997 Retired Vice Chairman of Marsh & McLennan, Inc., 1986 67
New York, New York
John R. Baker.................... 1998 Retired Vice Chairman of the Board of UCU 1971 69
Dr. Stanley O. Ikenberry......... 1998 President Emeritus, University of Illinois, 1993 60
Urbana, Illinois
Irvine O. Hockaday, Jr........... 1998 President and Chief Executive Officer Hallmark 1995 59
Cards, Inc. Kansas City, Missouri
*Robert F. Jackson, Jr............ 1996 Retired President, CharterCorp, Kansas City, 1981 70
Missouri
*Herman Cain...................... 1996 Chairman and Chief Executive Officer, 1992 50
Godfather's Pizza Inc., Omaha, Nebraska
*Robert K. Green.................. 1996 President of UCU 1993 34
</TABLE>
- ------------------------
*Nominee for election as Director at the UCU Meeting.
Richard C. Green, Jr. has served as Chairman of the Board since February
1989 and Chief Executive Officer of UCU since May 1985 and served as President
from May 1985 through February 1996. Mr. Green is a director of Commerce Bank of
Kansas City, N.A. and Midwest Research Institute, Kansas City, Missouri. He also
serves as a trustee for the Center for Strategic and International Studies,
Washington, D.C. and for the Urban Institute, Washington, D.C.
Avis G. Tucker served as Chairman of the Board of UCU from May 1982 through
February 1989 and has been editor and publisher of The Daily Star-Journal in
Warrensburg, Missouri during the past five years. Mrs. Tucker previously served
as a director of United Telecommunications, Inc.
L. Patton Kline retired as Vice Chairman of Marsh & McLennan, Incorporated
(an international insurance brokerage company), a subsidiary of Marsh & McLennan
Companies, Inc., in 1988, a position he held for four years. He was President of
Marsh & McLennan Companies, Inc. from 1980 to 1984. Mr. Kline served as a
director of Marsh & McLennan Companies, Inc. from 1975 to 1988. He is also a
director of PHH Group, Inc.
John R. Baker served as Vice Chairman of the Board since May 1991 and served
as Senior Vice President of UCU from May 1985 through December 1992.
108
<PAGE>
Stanley O. Ikenberry, Ph.D., University of Illinois Regent Professor and
President Emeritus, served as President of the University from 1979 to 1995. Dr.
Ikenberry serves as a director for Harris Bankcorp and Pfizer, Inc. Dr.
Ikenberry also serves as Chairman of the Board for the Carnegie Foundation for
Advancement of Teaching.
Irvine O. Hockaday, Jr. served as Executive Vice President of Hallmark
Cards, Inc. from 1983 through December 1985. Since January 1986, Mr. Hockaday
has served as President and Chief Executive Officer of Hallmark Cards, Inc. Mr.
Hockaday serves as Trustee of the Hall Foundation and the Aspen Institute and is
a director of the Ford Motor Company and Dow Jones, Inc.
Robert F. Jackson, Jr. retired as president of CharterCorp (a bank holding
company merged with Boatmen's Bancshares Inc.) in 1985. Mr. Jackson has served
as a director on the boards of various Missouri banks.
Herman Cain is Chairman and Chief Executive Officer of Godfather's Pizza,
Inc. in Omaha, Nebraska. He has been with Godfather's Pizza, Inc. for the past
eight years. Mr. Cain also serves as Chairman of the Federal Reserve Bank of
Kansas City and as director of Nabisco Holdings Corp., SuperValu, Inc. and the
Whirlpool Corporation.
Robert K. Green has served as President of UCU since February 6, 1996 and
served as Executive Vice President and later Managing Executive Vice President
of UCU from January 1993 through February 6, 1996. Mr. Green became President of
UCU in February 1996. He has held several executive positions at UCU's Missouri
Public Service division since 1988, including two years as President. Mr. Green
is Chairman of the Kansas City Metropolitan YMCA, Vice President of the Heart of
America Council, Boy Scouts of America and a director of UMB Bank, n.a., and the
Learning Exchange.
Richard C. Green, Jr. and Robert K. Green are brothers, and nephews of Avis
G. Tucker.
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 MERGER -- 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. As of the date of this Joint Proxy
Statement/Prospectus, no final determinations have been made as to any other
executive officer of Newco.
Newco does not now pay any compensation to any officer or employee. It is
not anticipated that Newco will pay any compensation to any officer or employee
before the Effective Time. For a description of certain compensation
arrangements after the Effective Time concerning Messrs. Jennings and Green, see
"THE MERGER -- Employment Agreements." Subject to the approval of the
stockholders of KCPL and UCU, Newco will adopt at the Effective Time the Newco
Stock Incentive Plan and the Newco Management Incentive Compensation 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.
109
<PAGE>
DIVIDENDS
The dividend policy of Newco will be determined upon evaluation from time to
time by the Newco Board of Newco's results of operations, financial condition,
capital requirements and such other considerations as the Newco Board considers
relevant in accordance with applicable laws. Both KCPL and UCU have a history of
consistent dividend growth. Although it is premature to commit, it is the
current intention of KCPL and UCU to maintain initial Newco dividends which will
be at least in the range of those currently being paid. For a description of
certain restrictions on Newco's ability to pay dividends on the Newco Common
Stock, see "DESCRIPTION OF NEWCO CAPITAL STOCK -- Newco Common Stock."
ELECTION OF KCPL DIRECTORS
A board of nine directors will be elected at the KCPL Meeting to hold office
until their successors shall be elected and qualified. All of the nominees are
present directors of KCPL.
It is intended that proxies given pursuant to this solicitation will be
voted for the nominees for directors whose names are hereinafter set forth, but
if any other candidate for director is proposed at the meeting, such proxies may
be voted cumulatively for less than all of the nominees named herein. In case
any of the nominees named herein should become unavailable for election to the
KCPL Board for any reason, such proxies may be voted for the election of a
nominee to be designated by the KCPL Board. Each of the nominees named herein
has consented to being named as a nominee and to serve as a director if elected,
and the KCPL Board has no reason to believe that any of the nominees named
herein will be unavailable for election.
NOMINEES FOR DIRECTORS
DAVID L. BODDE Director since 1994
Dr. Bodde, 53, is Vice President of the Midwest Research Institute ("MRI") and
President of its for-profit subsidiary, MRI-Ventures. MRI is a not-for-profit
research laboratory with special strengths in renewable energy and environmental
technologies. He serves on the Board of Trustees of The Commerce Funds, a
publicly-traded group of mutual funds. Dr. Bodde is a member of the Nuclear
Affairs and Strategic Planning Committees.
WILLIAM H. CLARK Director since 1983
Mr. Clark, 64, is President of the Urban League of Greater Kansas City, a
community service agency which has a major focus on intergroup relations and
human services. Mr. Clark is a member of the Executive and Community Development
Committees.
ROBERT J. DINEEN Director since 1987
Mr. Dineen, 66, is Chairman of the Board of Layne Inc., provider of the nation's
largest drilling services for the water supply, environmental and minerals
exploration markets. He was President and Chief Executive Officer of the Marley
Company from May 1986 through August 1993. He is also a director of
Owens-Illinois Inc. Mr. Dineen is a member of the Executive, Nominating &
Compensation and Nuclear Affairs Committees.
ARTHUR J. DOYLE Director since 1976
Mr. Doyle, 72, is a retired Chairman of the Board, former President and Chief
Executive Officer of KCPL. Mr. Doyle is a member of the Executive, Audit, and
Nuclear Affairs Committees.
W. THOMAS GRANT II Director since 1989
Mr. Grant, 45, is Chairman of the Board and Chief Executive Officer of Seafield
Capital Corporation, a holding company with a focus on health care and insurance
services, and Chairman and Chief Executive Officer of LabOne, a centralized
laboratory that markets clinical, substance abuse and insurance laboratory
services. He is a director of Response Oncology, Inc. and Commerce Bancshares,
Inc. Mr. Grant is a member of the Audit and Community Development Committees.
110
<PAGE>
A. DRUE JENNINGS Director since 1987
Mr. Jennings, 49, is Chairman of the Board, President and Chief Executive
Officer of KCPL. He was named Chairman of the Board in 1991 and Chief Executive
Officer in 1988. He is also a director of the Federal Reserve Bank of Kansas
City. Mr. Jennings is a member of the Executive and Strategic Planning
Committees.
GEORGE E. NETTELS, JR. Director since 1980
Mr. Nettels, 68, is Chairman of the Board of Midwest Minerals, Inc., a
Kansas-based company involved in construction mineral processing and quarry
operations. He is also President of Yampa Resource Associates, Inc., a mined
land reclamation operation. Mr. Nettels is a member of the Nominating &
Compensation, Nuclear Affairs, and Strategic Planning Committees.
LINDA HOOD TALBOTT Director since 1983
Dr. Talbott, 55, is President of Talbott & Associates, consultants in strategic
planning, philanthropic management and development to foundations, corporations
and the nonprofit sector. From 1975 through 1993, she was also President of the
Clearinghouse for Midcontinent Foundations. Dr. Talbott is a member of the Audit
and Community Development Committees.
ROBERT H. WEST Director since 1980
Mr. West, 57, is Chairman of the Board and Chief Executive Officer of Butler
Manufacturing Company, a supplier of non-residential building systems, specialty
components and construction services. He is also a director of Burlington
Northern Santa Fe Corporation and Commerce Bancshares, Inc. Mr. West is a member
of the Executive, Nominating & Compensation and Strategic Planning Committees.
COMMITTEES AND MEETINGS OF THE KCPL BOARD
During 1995, the KCPL Board had six standing committees: an Executive
Committee, an Audit Committee, a Nominating & Compensation Committee, a Nuclear
Affairs Committee, a Community Development Committee and a Strategic Planning
Committee. Committee work was accomplished by members informally as well as at
meetings formally called.
The Executive Committee serves during the intervals between meetings of the
KCPL Board and exercises any and all of the powers of the KCPL Board in the
management of the business of KCPL. The Executive Committee, which presently
consists of Messrs. Clark, Dineen, Doyle, Jennings, and West, met once in 1995.
The primary functions of the Audit Committee, which met twice during 1995,
are to (i) make recommendations to the KCPL Board concerning the selection of
auditors, (ii) review the results and scope of the audits and (iii) examine
other matters relating to the internal and external audit of KCPL's accounts and
the financial affairs of KCPL. Messrs. Doyle and Grant and Dr. Talbott presently
serve as members of the Audit Committee.
The Nominating & Compensation Committee makes recommendations to the KCPL
Board for the nomination of persons to serve as (i) members of the KCPL Board,
(ii) Chairman of the Board, (iii) President, and (iv) Chief Executive Officer;
administers KCPL's Long-Term Incentive Plan (the "KCPL Long-Term Incentive
Plan"); and makes recommendations with respect to the compensation to be paid to
members of the KCPL Board and KCPL's officers. The Nominating & Compensation
Committee, which met three times during 1995, presently consists of Messrs.
Dineen, Nettels and West. Shareholders wishing to submit the name of a candidate
for the KCPL Board for consideration by the Nominating & Compensation Committee
should submit their recommendations, along with biographical information, to the
Secretary of KCPL.
The Nuclear Affairs Committee monitors, reviews, evaluates and makes
recommendations with respect to nuclear matters and affairs. The Nuclear Affairs
Committee, which met once during 1995, presently consists of Messrs. Bodde,
Dineen, Doyle and Nettels.
111
<PAGE>
The functions of the Community Development Committee, which met twice during
1995, are to (i) establish guidelines for execution of the policy dimensions on
community development, (ii) recommend an annual community development budget to
the KCPL Board, (iii) approve community development expenditures and (iv)
receive and transmit to the KCPL Board the annual report of community
development activities and expenditures. Messrs. Clark and Grant and Dr. Talbott
presently serve on the Community Development Committee.
The Strategic Planning Committee of the KCPL Board (i) analyzes, reviews and
evaluates evolving policy and business matters, (ii) analyzes special projects
and opportunities and (iii) develops strategic options and recommendations for
the KCPL Board. The Strategic Planning Committee, which met once during 1995,
presently consists of Messrs. Bodde, Jennings, Nettels and West.
Eight meetings of the KCPL Board were held during 1995. Work of KCPL's
directors is performed not only at meetings of the KCPL Board and its
committees, but also in the research and study of KCPL matters and documents and
in numerous communications with the Chairman of the Board and others. During
1995, each of the directors attended 75% or more of the meetings of the KCPL
Board and committees on which they served.
In 1995, non-employee members of the KCPL Board were paid an annual retainer
of $18,000 ($3,000 of which was used to buy shares of KCPL Common Stock) and
attendance fees of $750 for each KCPL Board meeting and $500 for each committee
meeting attended. Beginning in 1996, committee meeting attendance fees were
increased to $750.
COMPENSATION OF EXECUTIVE OFFICERS
The following KCPL Summary Compensation Table sets forth the compensation of
the five highest-paid executive officers of KCPL for the last three fiscal
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
----------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
SALARY BONUS OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) (#) ($)(2)
- ------------------------------------------------ --------- --------- --------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
A. Drue Jennings................................ 1995 403,000 132,062 13,750 shares 57,307
Chairman of the Board, 1994 390,000 120,710 13,750 shares 36,657
President and Chief 1993 375,000 113,750 13,750 shares 26,151
Executive Officer
Bernard J. Beaudoin............................. 1995 200,000 45,800 6,875 shares 19,221
President, KLT Inc. 1994 185,000 57,965 6,875 shares 17,023
1993 178,000 57,380 6,875 shares 15,793
Marcus Jackson.................................. 1995 155,000 38,870 6,000 shares 10,458
Senior Vice President- 1994 145,000 49,405 6,000 shares 9,612
Power Supply 1993 130,000 47,300 5,500 shares 8,808
Ronald G. Wasson................................ 1995 190,000 29,260 6,875 shares 21,321
Executive Vice 1994 185,000 57,965 6,875 shares 17,182
President, KLT Inc. 1993 178,000 57,380 6,875 shares 15,305
J. Turner White................................. 1995 139,000 46,406 6,000 shares 5,543
Senior Vice President- 1994 127,500 26,098 6,000 shares 5,308
Retail Services 1993 115,000 34,150 2,750 shares 4,103
</TABLE>
112
<PAGE>
- ------------------------
(1) These amounts were paid under the KCPL Incentive Compensation Plan.
(2) For 1995, amounts include: Flex dollars under the Flexible Benefits Plan:
Jennings -- $14,961, Beaudoin -- $10,596, Jackson -- $5,958, Wasson --
$10,458, White -- $2,763. Deferred Flex dollars: Jennings -- $18,417,
Beaudoin -- $1,142, Wasson -- $1,280. Above-market interest paid on deferred
compensation: Jennings -- $11,839, Beaudoin -- $1,483, Wasson -- $3,883.
KCPL contribution under the KCPL Employee Savings Plus Plan: Jennings --
$4,500, Beaudoin -- $4,500, Jackson -- $4,500, Wasson -- $4,500, White --
$2,780. KCPL contribution to the KCPL Deferred Compensation and Supplemental
Retirement Plan: Jennings -- $7,590, Beaudoin -- $1,500, Wasson -- $1,200.
OPTIONS AND STOCK APPRECIATION RIGHTS
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE GRANT DATE
OPTIONS/SARS GRANTED TO OR BASE PRESENT
INDIVIDUAL GRANTS GRANTED EMPLOYEES IN PRICE EXPIRATION VALUE
NAME (#)(1) FISCAL YEAR ($/SH) DATE ($)(2)
- ----------------------------------------------- ------------- ----------------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
A. Drue Jennings............................... 13,750 20% 23.0625 6/7/05 38,638
Bernard J. Beaudoin............................ 6,875 10% 23.0625 6/7/05 19,319
Marcus Jackson................................. 6,000 9% 23.0625 6/7/05 16,860
Ronald G. Wasson............................... 6,875 10% 23.0625 6/7/05 19,319
J. Turner White................................ 6,000 9% 23.0625 6/7/05 16,860
</TABLE>
- ------------------------
(1) One-half of the options granted in 1995 are exercisable on or after June 8,
1996, and the remaining one-half are exercisable on or after June 8, 1997.
Each option is granted in tandem with a limited stock appreciation right
exercisable automatically in the event of a Change in Control, as defined
below. Options may be exercised with cash or previously-owned shares of KCPL
Common Stock. Dividends accrue on the options as though reinvested at the
regular dividend rate. Such accrued dividends will be paid if the options
are exercised and if the exercise price is equal to or above the grant
price.
A "Change in Control" shall be deemed to have occurred if (i) any person
other than a trustee or other fiduciary holding securities under an employee
benefit plan of KCPL, and other than KCPL or a corporation owned, directly
or indirectly, by the shareholders of KCPL in substantially the same
proportions as their ownership of stock of KCPL, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of KCPL representing 20% or more of
the KCPL Common Stock then outstanding; or (ii) during any period of two
consecutive years, individuals who at the beginning of such period
constitute the KCPL Board and any new director (other than a director
designated by a person who has entered into an agreement with KCPL to effect
a transaction described in (i) above) whose election by the KCPL Board or
nomination for election by KCPL's shareholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof.
113
<PAGE>
(2) The grant date valuation was calculated by using the binomial option pricing
formula, a derivative of the Black-Scholes model. The underlying assumptions
used to determine the present value of the options were as follows:
<TABLE>
<S> <C>
Annualized stock volatility: 0.154
Time of exercise (option term): 10 years
Risk free interest rate: 6.5%
Stock price at grant: $23.0625
Exercise price: $23.0625
Average dividend yield: 6.5%
Vesting restrictions discount: 3% per year
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
IN-THE-MONEY
OPTIONS/SARS
NUMBER OF UNEXERCISED AT FISCAL
OPTIONS/SARS AT FISCAL YEAR-END
YEAR-END (#) ($)
SHARES ACQUIRED VALUE -------------------------- -----------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE
- ---------------------------------------------- --------------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
A. Drue Jennings.............................. 0 0 40,625 20,625 163,997
Bernard J. Beaudoin........................... 0 0 20,313 10,312 81,999
Marcus Jackson................................ 0 0 16,500 9,000 67,005
Ronald G. Wasson.............................. 0 0 20,313 10,312 81,999
J. Turner White............................... 0 0 9,750 9,000 41,940
<CAPTION>
NAME UNEXERCISABLE
- ---------------------------------------------- -------------
<S> <C>
A. Drue Jennings.............................. 82,500
Bernard J. Beaudoin........................... 41,250
Marcus Jackson................................ 36,000
Ronald G. Wasson.............................. 41,250
J. Turner White............................... 36,000
</TABLE>
BENEFIT PLANS
PENSION PLANS
KCPL has a non-contributory pension plan (the "KCPL Pension Plan") for its
management employees, including executive officers, providing for benefits upon
retirement, normally at age 65. In addition, an unfunded deferred compensation
plan provides a supplemental retirement benefit for executive officers. The
following table shows examples of single life option pension benefits (including
unfunded supplemental retirement benefits) payable upon retirement at age 65 to
the named executive officers:
<TABLE>
<CAPTION>
ANNUAL PENSION FOR YEARS OF SERVICE
AVERAGE ANNUAL BASE INDICATED
SALARY FOR HIGHEST --------------------------------------------
36 MONTHS 15 20 25 30 OR MORE
- ------------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C>
150,000 45,000 60,000 75,000 90,000
200,000 60,000 80,000 100,000 120,000
250,000 75,000 100,000 125,000 150,000
300,000 90,000 120,000 150,000 180,000
350,000 105,000 140,000 175,000 210,000
400,000 120,000 160,000 200,000 240,000
450,000 135,000 180,000 225,000 270,000
500,000 150,000 200,000 250,000 300,000
</TABLE>
Each eligible employee with 30 or more years of credited service in the KCPL
Pension Plan is entitled to a total monthly annuity at his normal retirement
date equal to 50% of his average base monthly salary for the period of 36
consecutive months in which his earnings were highest. The monthly annuity will
be proportionately reduced if his years of credited service are less than 30.
The compensation covered by the KCPL Pension Plan -- base monthly salary --
excludes any bonuses and other compensation. The KCPL Pension Plan provides that
pension amounts are not reduced by Social Security benefits. The estimated
credited years of service for each of the named executive officers in the
Summary Compensation Table are as follows: Jennings, 21; Beaudoin, 15; Jackson,
18; Wasson, 28; White, 13.
114
<PAGE>
Eligibility for supplemental retirement benefits is limited to officers
selected by the Nominating & Compensation Committee of the KCPL Board; all the
named executive officers are participants. The annual target retirement benefit
payable at the normal retirement date is equal to 2% of highest average
earnings, as defined, for each year of credited service up to 30 (maximum of 60%
of highest average earnings). The actual retirement benefit paid equals the
target retirement benefit less retirement benefits payable under the management
pension plan. A liability accrues each year to cover the estimated cost of
future supplemental benefits.
Section 415 of the Code imposes certain limitations on pensions which may be
paid under tax qualified pension plans. In addition to the supplemental
retirement benefits, the amount by which pension benefits under the Pension Plan
computed without regard to Section 415 of the Code exceed such limitations will
be paid outside the qualified plan and accounted for by KCPL as an operating
expense.
SEVERANCE AGREEMENTS
KCPL has entered into Severance Agreements with certain of its senior
executive officers, including the named executives, to ensure their continued
service and dedication to KCPL and their objectivity in considering on behalf of
KCPL any transaction which would change the control of KCPL. Under the KCPL
Severance Agreements, during the three-year period after a Change in Control
(or, if later, the three-year period following the consummation of the
transaction which, if approved by KCPL's shareholders, constitutes a Change in
Control), the named executive officers would be entitled to receive a lump-sum
cash payment and certain insurance benefits if such officer's employment were
terminated (i) by KCPL other than for cause or upon death or disability, (ii) by
such executive officer for "Good Reason" (as defined therein), or (iii) by such
senior executive officer for any reason during a 30-day period commencing one
year after such Change in Control (a "Qualifying Termination"). A Change in
Control is defined as (i) an acquisition by a person or group of 20% or more of
the KCPL Common Stock (other than an acquisition from or by KCPL or by a KCPL
benefit plan), (ii) a change in a majority of the KCPL Board, or (iii) approval
by the shareholders of a reorganization, merger, consolidation (unless
shareholders receive 60% or more of the stock of the surviving company),
liquidation, dissolution or sale of substantially all of KCPL's assets.
Upon a Qualifying Termination, KCPL must make a lump-sum cash payment to the
senior executive officers of (i) such senior executive officer's base salary
through the date of termination, (ii) a pro-rated bonus based upon the average
of the bonuses paid to such senior executive officer for the last five fiscal
years, (iii) any accrued vacation pay, (iv) three times such senior executive
officer's highest base salary during the prior 12 months, (v) three times the
average of the bonuses paid to such senior executive officer for the last five
fiscal years, (vi) the actuarial equivalent of the excess of the senior
executive officer's accrued pension benefits, computed as if the senior
executive officer had three additional years of benefit accrual service, over
the senior executive officer's vested accrued pension benefits, and (vii) the
value of any unvested KCPL contributions for the benefit of the senior executive
officer under the KCPL Employee Savings Plus Plan. In addition, KCPL must offer
health, disability and life insurance plan coverage to the senior executive
officer and his dependents on the same terms and conditions that existed
immediately prior to the Qualifying Termination for three years, or, if earlier,
until such senior executive officer is covered by equivalent plan benefits. KCPL
is also obligated to make certain "gross-up" payments in connection with tax
obligations arising pursuant to payments under the KCPL Severance Agreements as
well as to provide reimbursement of certain expenses relating to disputes
arising thereunder.
Payments and other benefits under the KCPL Severance Agreements are in
addition to benefits accruing under the KCPL Long-Term Incentive Plan. Upon a
Change in Control (as defined in the KCPL Long-Term Incentive Plan), all stock
options granted in tandem with limited stock appreciation rights will be
automatically exercised.
115
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Nominating & Compensation Committee of KCPL (the "KCPL Compensation
Committee") is composed of independent outside directors. All decisions by the
Compensation Committee relating to executive compensation are reviewed by the
full KCPL Board, except decisions about awards under the KCPL Long-Term
Incentive Plan which must be made solely by the Compensation Committee in order
for the grants or awards to satisfy Exchange Act Rule 16b-3. Given KCPL's
current level of executive compensation, the KCPL Compensation Committee has not
yet adopted a policy with respect to Section 162(m) of the Code pertaining to
the deduction of compensation in excess of $1,000,000.
Executive compensation for KCPL's executive officers consists of base
salary, incentive pay, and
long-term compensation. The package is designed to attract and retain talented,
key executives critical to the long-term success of KCPL and to support a
performance-oriented environment. Base salaries for individual executives are
established on the basis of (i) job responsibilities and complexity, (ii)
individual performance under established criteria and (iii) competitiveness with
similar jobs in comparable companies. The base salaries are targeted at the
median level for comparable positions in companies of similar size in the
industry. The base salaries and complete compensation packages for the
executives are compared annually with national compensation survey data
collected by the Edison Electric Institute ("EEI").
Annual executive incentive pay consists of both formula and discretionary
awards. The formula awards are linked to the achievement of specific performance
objectives set by the KCPL Board each year. In 1995 the performance objective
designated by the KCPL Board was a minimum and maximum EPS subject to the
modification described below. Awards were determined on a scale beginning with
0% for the minimum EPS increasing to 20% of annual executive salaries at the
maximum EPS. Actual EPS for 1995 resulted in incentive awards equal to 14.7% of
base salary, which was further modified by an additional 0.7% to reflect a
decline in the real price of electricity within KCPL's service territory. The
resulting 1995 formula awards equalled 15.4% of base salaries.
Discretionary awards under the incentive pay program are possible for
outstanding individual contributions as determined by the KCPL Compensation
Committee. The sum of such discretionary awards, other than to the Chief
Executive Officer, cannot exceed 10% of the total participating salaries. No
discretionary awards are paid unless the performance objective set by the KCPL
Board for the formula award is reached. Discretionary awards were paid for 1995
to four of the named executive officers based on their significant and direct
contributions to the profits of KCPL, and/or extraordinary division leadership.
To further link total compensation to corporate performance, the executive
officers received in 1995 non-qualified stock options granted at fair market
value under the KCPL Long-Term Incentive Plan. The amounts of the grants were
influenced by the following: (i) executive's influence and contribution to
KCPL's financial condition, (ii) amount of the total compensation package for
each executive which the Compensation Committee believed should be tied to the
performance of KCPL's stock price, and (iii) amount of options previously
granted to participants. The KCPL Compensation Committee did not apply any
specific formula to determine the weight of each factor.
CHIEF EXECUTIVE OFFICER COMPENSATION
In setting the base salary for the Chief Executive Officer ("CEO"), the
Compensation Committee considers primarily KCPL's financial performance and the
low cost and quality service provided by KCPL as compared with other utilities.
As shown in the Performance Graph, KCPL's financial performance substantially
exceeded that of the EEI Index for 1995. The Committee also took into account
relevant salary information from the EEI survey data. The formula portion of Mr.
Jennings' annual incentive pay was determined in the same manner discussed above
for the other executive
116
<PAGE>
officers. His discretionary award of $70,000 under the incentive pay program was
granted in recognition of his extraordinary leadership during a critical period
in the utility industry. Mr. Jennings also received stock option grants under
the KCPL Long-Term Incentive Plan based on the same criteria as the other
executive officers.
COMPENSATION COMMITTEE
Robert H. West
George E. Nettels, Jr.
Robert J. Dineen
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS*
KCPL, S&P 500 INDEX, AND EEI INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KCPL S&P 500 EEI INDEX
<S> <C> <C> <C>
1990 100 100 100
1991 143 130 129
1992 147 140 139
1993 158 155 154
1994 172 157 136
1995 206 215 179
</TABLE>
* Total return assumes reinvestment of dividends.
Assumes $100 invested on December 31, 1990 in KCPL Common Stock, S&P 500 Index,
and EEI Index.
117
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand, L.L.P. which acted as KCPL's independent auditors in 1995
has, upon recommendation of the KCPL Board's Audit Committee, been selected and
appointed by the KCPL Board to audit and certify KCPL's financial statements for
1996, subject to ratification and approval by the shareholders of KCPL.
Representatives from Coopers & Lybrand, L.L.P. are expected to be present at
the KCPL Meeting, will be given the opportunity to make statements if they
desire to do so, and are expected to be available to respond to appropriate
questions.
The affirmative vote of the holders of a majority of the shares of KCPL
Common Stock present and entitled to vote at the meeting is required for the
approval of this proposal to ratify and approve the appointment. If the
shareholders do not ratify the appointment of Coopers & Lybrand, L.L.P. the
selection of independent public accountants will be reconsidered by the KCPL
Board.
THIS PROPOSAL HAS BEEN UNANIMOUSLY APPROVED BY THE KCPL BOARD, WHICH
RECOMMENDS THAT SHAREHOLDERS VOTE FOR ITS APPROVAL.
VOTING SECURITIES AND VOTING
There were 61,902,083 shares of KCPL Common Stock outstanding and entitled
to vote at the close of business on April 3, 1996, the record date fixed for the
determination of shareholders entitled to notice of and to vote at the meeting.
Each share of outstanding KCPL Common Stock is entitled to one vote with
respect to each matter to be voted upon, with the right of cumulative voting in
the election of directors, which means that each shareholder has a total vote
equal to the number of shares owned by him multiplied by the number of directors
to be elected. These votes may be divided among all nominees equally or may be
voted for one or more of the nominees, either in equal or unequal amounts, as
the shareholder may elect. In the event the votes for certain director nominees
are withheld, those votes will be distributed among the remaining director
nominees. Withholding authority to vote for all director nominees has the effect
of abstaining from voting for any director nominees. If no instructions are
given, the shares will be voted equally for the election of all directors.
All shares of KCPL Common Stock credited to a shareholder's Dividend
Reinvestment and Stock Purchase Plan account will be included in the number of
shares indicated on the form of proxy sent to the shareholder and will be voted
in accordance with the instructions thereon when properly returned.
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation by the
KCPL Board of proxies for use at the above-mentioned KCPL Meeting and at any
adjournment or adjournments thereof. All valid proxies delivered pursuant to
this solicitation, if received in time, will be voted. A shareholder who
executes a proxy may revoke it by written revocation delivered to the Secretary
of KCPL at any time before it is voted.
The expense of solicitation of proxies will be borne by KCPL. Such
solicitation will be made by mail, telephone, telegraph or personally by
officers and other regular employees of KCPL, and also by representatives of D.
F. King & Co., Inc., 77 Water Street, New York, New York 10008 and Corporate
Investor Communications, Inc., 111 Commerce Road, Carlstadt, New Jersey 02586,
at an estimated cost of $13,000 plus an additional fee for each shareholder
contact. KCPL will, in addition, reimburse banks, brokers, and other custodians,
nominees or fiduciaries for reasonable expenses incurred in forwarding proxy
material to beneficial owners.
118
<PAGE>
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the KCPL Annual
Meeting 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.
By Order of the Board of Directors,
/s/ JEANIE SELL LATZ
JEANIE SELL LATZ
SECRETARY
119
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
KANSAS CITY POWER & LIGHT COMPANY
AND
UTILICORP UNITED INC.
AND
KC UNITED CORP.
DATED AS OF JANUARY 19, 1996
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I THE MERGER................................................................. A-7
Section 1.1 Effects of the Merger................................................ A-7
Section 1.2 Effective Time of the Merger......................................... A-7
ARTICLE II TREATMENT OF SHARES....................................................... A-8
Section 2.1 Effect on Capital Stock of KCPL, UCU and the Company................. A-8
Section 2.2 KCPL Dissenting Shares............................................... A-9
Section 2.3 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..................................... A-11
Section 4.1 Organization and Qualification....................................... A-11
Section 4.2 Subsidiaries......................................................... A-11
Section 4.3 Capitalization....................................................... A-11
Section 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance........ A-12
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-14
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 Consolidation......... A-20
Section 4.16 Opinion of Financial Advisor......................................... A-20
Section 4.17 Insurance............................................................ A-20
Section 4.18 KCPL Not a Related Person............................................ A-20
ARTICLE V REPRESENTATIONS AND WARRANTIES OF UCU....................................... A-21
Section 5.1 Organization and Qualification....................................... A-21
Section 5.2 Subsidiaries......................................................... A-21
Section 5.3 Capitalization....................................................... A-21
Section 5.4 Authority; Non-Contravention; Statutory Approvals; Compliance........ A-22
Section 5.5 Reports and Financial Statements..................................... A-23
Section 5.6 Absence of Certain Changes or Events................................. A-23
Section 5.7 Litigation........................................................... A-24
Section 5.8 Registration Statement and Proxy Statement........................... A-24
Section 5.9 Tax Matters.......................................................... A-24
Section 5.10 Employee Matters; ERISA.............................................. A-25
Section 5.11 Environmental Protection............................................. A-27
Section 5.12 Regulation as a Utility.............................................. A-28
Section 5.13 Vote Required........................................................ A-28
Section 5.14 Accounting Matters................................................... A-28
Section 5.15 Article Eight of UCU's Certificate of Incorporation.................. A-28
Section 5.16 Opinion of Financial Advisor......................................... A-28
Section 5.17 Insurance............................................................ A-28
Section 5.18 UCU Not an Interested Shareholder.................................... A-29
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER..................................... A-29
Section 6.1 Covenants of the Parties............................................. A-29
ARTICLE VII ADDITIONAL AGREEMENTS..................................................... A-33
Section 7.1 Access to Information................................................ A-33
Section 7.2 Joint Proxy Statement and Registration Statement..................... A-34
Section 7.3 Regulatory Matters................................................... A-35
Section 7.4 Shareholder Approval................................................. A-35
Section 7.5 Directors' and Officers' Indemnification............................. A-35
Section 7.6 Public Announcements................................................. A-37
Section 7.7 Rule 145 Affiliates.................................................. A-37
Section 7.8 Employee Agreements and Workforce Matters............................ A-37
Section 7.9 Employee Benefit Plans............................................... A-37
Section 7.10 Stock Option and Other Stock Plans................................... A-38
Section 7.11 No Solicitations..................................................... A-40
Section 7.12 Company Board of Directors........................................... A-41
Section 7.13 Company Officers..................................................... A-41
Section 7.14 Employment Contracts................................................. A-41
Section 7.15 Post-Merger Operations............................................... A-41
Section 7.16 Expenses............................................................. A-41
Section 7.17 Further Assurances................................................... A-41
ARTICLE VIII CONDITIONS............................................................... A-42
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger........... A-42
Section 8.2 Conditions to Obligation of UCU to Effect the Merger................. A-43
Section 8.3 Conditions to Obligation of KCPL to Effect the Merger................ A-43
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.......................................... A-44
Section 9.1 Termination.......................................................... A-44
Section 9.2 Effect of Termination................................................ A-45
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-47
Section 10.1 Non-Survival; Effect of Representations and Warranties............... A-47
Section 10.2 Brokers.............................................................. A-47
Section 10.3 Notices.............................................................. A-47
Section 10.4 Miscellaneous........................................................ A-48
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-49
Section 10.9 Enforcement.......................................................... A-49
</TABLE>
A-3
<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ----------------------------------------------------------------------------------------------------------- -----
<S> <C>
1935 Act................................................................................................... A-11
Acquisition Proposal....................................................................................... A-40
Affiliate.................................................................................................. A-20
Affiliate Agreement........................................................................................ A-37
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-38
Company.................................................................................................... A-7
Company Common Stock....................................................................................... A-8
Company Incentive Plan..................................................................................... A-38
Company Preferred Stock.................................................................................... A-8
Company Replacement Plans.................................................................................. A-38
Company Shares............................................................................................. A-9
Company Stock Awards....................................................................................... A-39
Company Stock Benefits..................................................................................... A-39
Company Stock Plan......................................................................................... A-38
Confidentiality Agreement.................................................................................. A-36
Constituent Corporations................................................................................... A-7
date hereof................................................................................................ A-7
DGCL....................................................................................................... A-7
Dissenting Holder.......................................................................................... A-8
DLJ........................................................................................................ A-28
Effective Time............................................................................................. A-7
Environmental Claim........................................................................................ A-19
Environmental Laws......................................................................................... A-19
Environmental Permits...................................................................................... A-18
ERISA...................................................................................................... A-16
Exchange Act............................................................................................... A-14
Exchange Agent............................................................................................. A-9
FERC....................................................................................................... A-16
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-34
KCPL....................................................................................................... A-7
KCPL and UCU Stock Benefits................................................................................ A-39
KCPL Benefit Plans......................................................................................... A-16
KCPL Common Stock.......................................................................................... A-8
</TABLE>
A-4
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ----------------------------------------------------------------------------------------------------------- -----
KCPL Conversion Ratio...................................................................................... A-8
<S> <C>
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
KCPL Material Adverse Effect............................................................................... A-14
KCPL Meeting............................................................................................... A-35
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 Stock Awards.......................................................................................... A-39
KCPL Stock Plans........................................................................................... A-12
KCPL Subsidiary............................................................................................ A-11
Merger..................................................................................................... A-7
Merrill Lynch.............................................................................................. A-20
MGCL....................................................................................................... A-7
NRC........................................................................................................ A-14
NYSE....................................................................................................... A-10
PBGC....................................................................................................... A-17
PCBs....................................................................................................... A-19
person..................................................................................................... A-9
Power Act.................................................................................................. A-14
Proxy Statement............................................................................................ A-15
Registration Statement..................................................................................... A-15
Release.................................................................................................... A-20
Representatives............................................................................................ A-43
SEC........................................................................................................ A-14
Securities Act............................................................................................. A-14
Subsidiary................................................................................................. A-11
Surviving Corporation...................................................................................... A-7
Target Party............................................................................................... A-46
Task Force................................................................................................. A-32
Tax Return................................................................................................. A-15
Tax Ruling................................................................................................. A-16
Taxes...................................................................................................... A-15
Three Year Period.......................................................................................... A-49
UCU........................................................................................................ A-7
UCU Benefit Plans.......................................................................................... A-25
UCU Class A Common Stock................................................................................... A-21
UCU Common Stock........................................................................................... A-8
UCU Conversion Ratio....................................................................................... A-8
UCU Disclosure Schedule.................................................................................... A-21
UCU Financial Statements................................................................................... A-23
UCU Incentive Plan......................................................................................... A-38
UCU Incentive Stock Plan................................................................................... A-38
UCU Joint Venture.......................................................................................... A-21
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ----------------------------------------------------------------------------------------------------------- -----
UCU Material Adverse Effect................................................................................ A-24
<S> <C>
UCU Meeting................................................................................................ A-35
UCU Preferred Stock........................................................................................ A-21
UCU Required Consents...................................................................................... A-22
UCU Required Statutory Approvals........................................................................... A-22
UCU SEC Reports............................................................................................ A-23
UCU Shareholders' Approval................................................................................. A-28
UCU Stock Awards........................................................................................... A-39
UCU Stock Plan............................................................................................. A-21
UCU Subsidiary............................................................................................. A-21
Violation.................................................................................................. A-12
Voting Debt................................................................................................ A-12
</TABLE>
A-6
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of January 19, 1996 (referred to
herein as the "DATE HEREOF"), by and among Kansas City Power & Light Company, a
Missouri corporation ("KCPL"), UtiliCorp United Inc., a Delaware corporation
("UCU"), and KC United Corp., a Delaware corporation (the "COMPANY").
WHEREAS, KCPL and UCU have determined to engage in a business combination as
peer firms in a merger of equals;
WHEREAS, in furtherance thereof, the respective Boards of Directors of KCPL,
UCU and the Company have approved this Agreement and the merger of KCPL and UCU
with and into the Company (the "MERGER");
WHEREAS, it is intended that the Merger 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 Merger shall qualify as a reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended, and in effect
(the "CODE"), and this Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368 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 MERGER
Section 1.1 EFFECTS OF THE MERGER. At the Effective Time (as defined in
Section 1.2), (a) the separate existence of each of KCPL and UCU shall cease and
each of KCPL and UCU shall be merged with and into the Company (KCPL, UCU and
the Company are sometimes referred to herein as the "CONSTITUENT CORPORATIONS"
and the Company immediately after the Effective Time is sometimes referred to
herein as the "SURVIVING CORPORATION"), (b) the separate corporate existence of
the Surviving Corporation, with all of its rights, privileges, immunities,
powers and franchises, shall continue unaffected by the Merger and the Surviving
Corporation shall continue as a Delaware corporation, (c) the Certificate of
Incorporation of the Surviving Corporation shall, as of the Effective Time, read
in its entirety as set forth in EXHIBIT 1.1(C), subject to modification as set
forth in Section 2.1(e), and shall be the Certificate of Incorporation of the
Surviving Corporation until duly amended, (d) the by-laws of the Surviving
Corporation shall be amended prior to or as of the Effective Time to read in
their entirety as set forth in EXHIBIT 1.1(D), and shall be the by-laws of the
Surviving Corporation after the Effective Time until duly amended, (e) the name
of the Company shall continue to be the name of the Surviving Corporation or
shall be such other name as KCPL and UCU shall mutually agree and (f) the Merger
shall have all the effects provided by applicable law.
Section 1.2 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement, on the Closing Date (as defined in Section 3.1), articles of
merger shall be executed and filed by KCPL, UCU and the Company with the
Secretary of State of the State of Missouri pursuant to The General and Business
Corporation Law of Missouri (the "MGCL") and a certificate of merger shall be
executed and filed by KCPL, UCU and the Company with the Secretary of State of
the State of Delaware pursuant to the Delaware General Corporation Law (the
"DGCL"). The Merger shall become effective at such time as such certificate of
merger has been so filed with the Secretary of State of the State of Delaware
and the Secretary of State of the State of Missouri has issued a certificate of
merger (the "EFFECTIVE TIME").
A-7
<PAGE>
ARTICLE II
TREATMENT OF SHARES
Section 2.1 EFFECT ON CAPITAL STOCK OF KCPL, UCU AND THE COMPANY. As of
the Effective Time, by virtue of the Merger and without any action on the part
of any holder of any capital stock of KCPL, UCU or the Company:
(a) CAPITAL STOCK OF KCPL AND UCU. Subject to Section 2.1(b) and
Section 2.2, (i) each issued and outstanding share of Common Stock, no par
value, of KCPL ("KCPL COMMON STOCK"), in each case not owned directly or
through a wholly owned Subsidiary (as defined in Section 4.1) by KCPL, UCU
or the Company, shall be converted into and become 1.0 (the "KCPL CONVERSION
RATIO") fully paid and nonassessable shares of Common Stock, $0.01 par value
per share of the Company ("COMPANY COMMON STOCK") and (ii) each issued and
outstanding share of Common Stock, $1.00 par value per share, of UCU ("UCU
COMMON STOCK"), in each case not owned directly or through a wholly owned
Subsidiary by KCPL, UCU or the Company, shall be converted into and become
1.096 (the "UCU CONVERSION RATIO") fully paid and nonassessable shares of
Company Common Stock. All such shares of KCPL Common Stock and 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 2.3(b)), formerly representing any such shares shall
cease to have any rights with respect to such shares, except the right to
receive shares of Company Common Stock to be issued in consideration
therefor upon the surrender of such Certificate in accordance with Section
2.3.
(b) CANCELLATION OF TREASURY STOCK AND CERTAIN KCPL, UCU AND COMPANY
COMMON STOCK. Any shares of (i) KCPL Common Stock that are owned by KCPL as
treasury stock or by UCU or by any wholly owned Subsidiary of KCPL or UCU,
(ii) UCU Common Stock that are owned by UCU as treasury stock or by KCPL or
by any wholly owned Subsidiary of UCU or KCPL and (iii) Company Common Stock
that are owned by KCPL, UCU or any wholly owned Subsidiary of KCPL or UCU,
in each case, shall be cancelled and retired and shall cease to exist and no
stock of the Company or other consideration shall be issued or delivered in
exchange therefor. All such shares of KCPL, UCU and Company 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 formerly
representing any such shares shall cease to have any rights with respect
thereto.
(c) REDEMPTION OF KCPL PREFERRED STOCK. Prior to the 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
Effective Time or entitled to vote on the approval of this Agreement and the
transactions contemplated hereby.
(d) CONVERSION OF UCU PREFERRED STOCK. Each issued and outstanding
share of each series of UCU Preferred Stock (as defined in Section 5.3)
shall be converted into the right to receive one fully paid and
nonassessable share of a substantially identical corresponding series of
preferred stock of the Company with such designations as set forth in
EXHIBIT 1.1(C) attached hereto (such shares of preferred stock of the
Company being referred to as "COMPANY PREFERRED STOCK"). All such shares of
UCU Preferred Stock shall no longer be outstanding and shall automatically
be cancelled and retired and shall cease to exist, and each holder of a
certificate formerly representing any such shares shall cease to have any
rights with respect to such Certificates, except the right to receive shares
of Company Preferred Stock to be issued in consideration therefor upon the
surrender of such Certificate in accordance with Section 2.3.
(e) REDEMPTION OF UCU PREFERRED STOCK. Notwithstanding the provisions
of Section 2.1(d), in the event that the Effective Time has not occurred by
March 1, 1997 or in the event it becomes
A-8
<PAGE>
apparent that the Effective Time will not occur by March 1, 1997, then the
Board of Directors of UCU shall call for all outstanding shares of UCU
Preferred Stock to be redeemed prior to or as of the Effective Time 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. In the event that the UCU Preferred Stock is
redeemed prior to or as of the Effective Time, the Certificate of
Incorporation of the Surviving Corporation shall, at the option of KCPL and
UCU, be modified as appropriate to delete language contained therein which
relates specifically to the UCU Preferred Stock.
Section 2.2 KCPL DISSENTING SHARES. Any issued and outstanding shares of
KCPL Common Stock held by a person (as defined below) who objects to the Merger
and complies with all provisions of the MGCL concerning the right of such person
to dissent from the Merger and demands appraisal of such shares ("DISSENTING
HOLDER") shall not be converted as described in Section 2.1(a) but shall, from
and after the Effective Time, represent only the right to receive such
consideration as may be determined to be due to such Dissenting Holder pursuant
to the MGCL; PROVIDED, HOWEVER, that shares of KCPL Common Stock outstanding
immediately prior to the Effective Time and held by a Dissenting Holder who
shall, after the Effective Time, withdraw the demand for appraisal or lose the
right of appraisal of such shares, in either case pursuant to the MGCL, shall be
deemed to be converted, as of the Effective Time, into the right to receive
shares of Company Common Stock in accordance with Section 2.1(a), without
interest. 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.
Section 2.3 ISSUANCE OF NEW CERTIFICATES.
(a) DEPOSIT WITH EXCHANGE AGENT. As soon as practicable after the
Effective Time, the Company 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 Company Common
Stock and Company Preferred Stock required to effect the issuances referred to
in Section 2.1, together with cash payable in respect of fractional shares
pursuant to Section 2.3(d).
(b) ISSUANCE PROCEDURES. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates (the "CERTIFICATES") which immediately prior to the Effective Time
represented outstanding shares of KCPL Common Stock, UCU Common Stock or UCU
Preferred Stock (the "CANCELLED SHARES") that were cancelled and became instead
the right to receive shares of Company Common Stock or Company Preferred Stock
(the "COMPANY SHARES") pursuant to Section 2.1 (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 Company 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 Company 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 KCPL or UCU,
a certificate representing the proper number of Company 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 Exchange Agent that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.3, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the certificate representing Company Shares and cash in lieu of any
fractional shares of Company Common Stock or Company Preferred Stock as
contemplated by this Section 2.3.
A-9
<PAGE>
(c) DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED SHARES. No dividends or
other distributions declared or made after the Effective Time with respect to
Company Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Company Shares
represented thereby and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.3(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 Company 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 Company Common Stock to which such
holder is entitled pursuant to Section 2.3(d) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole Company Shares and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole Company Shares.
(d) NO FRACTIONAL SECURITIES. No certificates or scrip representing
fractional shares of Company 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 Company Common Stock. A
holder of KCPL Common Stock or UCU Common Stock who would otherwise have been
entitled to a fractional share of Company 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 2.3(b) may, at the option of the
Company, provide for the ability of a holder of one or more Certificates to
elect that the Company 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 Company Shares be credited to an
account established for the holder under the dividend reinvestment and stock
purchase plan of the Company.
(f) CLOSING OF TRANSFER BOOKS. From and after the Effective Time, the
stock transfer books of KCPL and UCU shall be closed and no registration of any
transfer of any capital stock of KCPL or UCU shall thereafter be made on the
records of KCPL or UCU. If, after the Effective Time, Certificates are presented
to the Company, they shall be cancelled and exchanged for certificates
representing the appropriate number of Company Shares, as provided in this
Section 2.3.
(g) TERMINATION OF EXCHANGE AGENT. Any certificates representing Company
Shares deposited with the Exchange Agent pursuant to Section 2.3(a) and not
exchanged within one year after the Effective Time pursuant to this Section 2.3
shall be returned by the Exchange Agent to the Company, 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 Effective Time shall be returned to the Company; after which time any holder
of unsurrendered Certificates shall look as a general creditor only to the
Company for payment of such funds to which such holder may be due, subject to
applicable law. The Company 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.
A-10
<PAGE>
ARTICLE III
THE CLOSING
Section 3.1 CLOSING. The closing of the Merger (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").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF KCPL
KCPL represents and warrants to UCU as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION. Except as set forth in Section
4.1 of the schedule delivered by KCPL on the date hereof (the "KCPL DISCLOSURE
SCHEDULE"), KCPL and each of the 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, and (b) the term "KCPL SUBSIDIARY" shall
mean a Subsidiary of KCPL, 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 date hereof 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 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 date hereof, the authorized capital
stock of KCPL consists of 150,000,000 shares of KCPL Common Stock, without par
value, 404,357 shares of Cumulative
A-11
<PAGE>
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 date of this
Agreement, 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 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 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 its terms.
(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)
A-12
<PAGE>
pursuant to any provisions of (i) the articles of incorporation, 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 date hereof,
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 Disclosure
Schedule, KCPL and each of the KCPL Subsidiaries and, to the knowledge of KCPL,
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.
A-13
<PAGE>
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 date hereof, 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 date hereof 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 date hereof 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 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 to be
filed with the SEC by the Company in connection with the issuance
A-14
<PAGE>
of shares of Company Common Stock and Company Preferred Stock in the 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
Merger (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
Merger, 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.
(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.
A-15
<PAGE>
(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 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
A-16
<PAGE>
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 MERGER. 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, 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 date hereof, 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 date hereof, 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 date hereof or except to the extent such would not have a KCPL Material
A-17
<PAGE>
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 date hereof:
(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 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
A-18
<PAGE>
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 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).
A-19
<PAGE>
(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(c), the approval of the Merger by the
holders of two-thirds of the voting power entitled to be cast by all holders of
KCPL Common Stock (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 required to approve this Agreement, the Merger and the other
transactions contemplated hereby.
Section 4.14 ACCOUNTING MATTERS. Neither KCPL nor, to KCPL's best
knowledge, any of its Affiliates has taken or agreed to take any action that
would prevent the Company 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 Merger 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
the date hereof, to the effect that, as of the date thereof, the KCPL 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 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 date hereof, neither
KCPL nor, to its reasonable knowledge, any of its Affiliates, is a "Related
Person" as such term is defined in Article Eight of UCU's Certificate of
Incorporation.
A-20
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF UCU
UCU represents and warrants to KCPL as follows:
Section 5.1 ORGANIZATION AND QUALIFICATION. Except as set forth in Section
5.1 of the schedule delivered by UCU on the date hereof (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 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 date hereof 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 date hereof, 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) 4,252
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, and (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 date of this Agreement, except as set forth in
A-21
<PAGE>
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 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.
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).
A-22
<PAGE>
(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 date
hereof, 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 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 date hereof, 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 date hereof 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
A-23
<PAGE>
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 date hereof 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,
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 Merger, 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.
A-24
<PAGE>
(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.
(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").
A-25
<PAGE>
(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.
(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 MERGER. 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 date hereof, neither UCU nor any of the
UCU Subsidiaries is a party to any collective bargaining agreement or other
labor agreement with any union or
A-26
<PAGE>
labor organization. To the best knowledge of UCU, as of the date hereof,
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 date hereof 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.
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 date hereof:
(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
A-27
<PAGE>
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 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 KCPL Preferred Stock has
been redeemed pursuant to Section 2.1(c), the approval of the 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 Merger 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 Company 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 Merger 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 date
hereof, to the effect that, as of the date thereof, the UCU 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.
A-28
<PAGE>
Section 5.18 UCU NOT AN INTERESTED SHAREHOLDER. As of the date hereof,
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.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 COVENANTS OF THE PARTIES. After the date hereof and prior to
the Effective Time or earlier termination of this Agreement, KCPL and UCU each
agree as follows, each as to itself and to each of the KCPL Subsidiaries and the
UCU Subsidiaries, as the case may be, except as 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 practical:
(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(c), and UCU may
redeem the UCU Preferred Stock pursuant to the provisions of Section 2.1(e).
The last record date of each of KCPL and UCU on or
A-29
<PAGE>
prior to the 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 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 (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.
A-30
<PAGE>
(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 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(c), (vii) in connection with the redemption of the UCU
Preferred Stock as set forth in Section 2.1(e) 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 Company 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).
A-31
<PAGE>
(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 status of the Merger as a reorganization
under Section 368(a) of the Code, 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 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 date hereof
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 date hereof 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 date
hereof, the parties shall create a special transition management task
force (the "TASK FORCE"), which shall be jointly
A-32
<PAGE>
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 Company 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, 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)
A-33
<PAGE>
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 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 date hereof 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 Company Common Stock and Company Preferred Stock issuable in
connection with the 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 Company will not be, following the
Merger, 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 Company Common Stock issuable in the 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 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 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 KCPL Conversion Ratio is fair from a financial point
of view
A-34
<PAGE>
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 UCU 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 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 date hereof (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 joint 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 Merger, 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 date hereof (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 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 Merger, this Agreement and the transactions
contemplated hereby 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 Company shall, to the fullest extent permitted by
applicable law, indemnify, defend and hold harmless each person who
A-35
<PAGE>
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
before the Effective Time), (i) the Company shall pay the reasonable fees
and expenses of counsel selected by the Indemnified Parties, which counsel
shall be reasonably satisfactory to the Company, 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 DGCL, (ii) the Company 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 DGCL and the Certificate of
Incorporation or by-laws of the Company shall be made by independent counsel
mutually acceptable to the Company and the Indemnified Party; PROVIDED,
HOWEVER, that the Company 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
Company 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 Company 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 Company shall be
obligated to obtain a policy with the best coverage available, in the
reasonable judgment of the Board of Directors of the Company, for a cost not
exceeding such amount.
(c) SUCCESSORS. In the event the Company 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
Company 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 Merger
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.
A-36
<PAGE>
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. Within 30 days after the date of this
Agreement, KCPL shall identify in a letter to UCU, and UCU shall identify in a
letter to KCPL, all persons who are, and to such person's best knowledge who
will be at the Closing Date, "affiliates" of KCPL and UCU, respectively, 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). Each of KCPL and UCU shall use all reasonable efforts to cause such
respective 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 the Company 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 Company 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 Company 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 Company 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 Company
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 Company or any of its
Subsidiaries. Any workforce reductions carried out following the Effective
Time by the Company 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 Company.
(b) EFFECT OF THE MERGERS. The consummation of the Merger 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" with respect
to the "Company Stock Units," which are one of the deemed investment funds
used to measure UCU's obligations under the plan shall instead refer to
"Company Common Shares."
A-37
<PAGE>
(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 Company 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 COMPANY 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 Company and its subsidiaries
shall adopt replacement plans as set forth in this Section 7.9(e)
(collectively, the "COMPANY REPLACEMENT PLANS"). Subject to shareholder
approval thereof by the KCPL shareholders and the UCU shareholders, the
Company Replacement Plans shall go into effect at the Effective Time. Upon
the consummation of the Merger, 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 "COMPANY INCENTIVE PLAN")
under which bonuses, based on percentages of base salaries and payable in
cash, shares of Company Common Stock or such form as shall be determined by
the Compensation Committee of the Board of Directors of the Company (the
"COMMITTEE"), are awarded based upon the achievement of performance goals
determined in advance by the Committee. With respect to those participants
in the Company 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)(i), 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 "COMPANY STOCK PLAN"). The Company Stock Plan
shall provide for the grant of stock options, stock appreciation rights,
restricted stock and such other awards based upon the Company Common Stock
as the Committee may determine, subject to shareholder approval of the
Company Stock Plan. The Company shall reserve an appropriate number of
shares for issuance under the Company Stock Plan.
(f) KCPL AND UCU ACTION. With respect to each of the Company
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 Effective Time shall be assumed by
the Company and converted into an option (or a new substitute option shall
be granted) to purchase the number of shares of Company 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 UCU Conversion Ratio,
at an exercise price per share of Company 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 Effective Time divided by
the UCU 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
A-38
<PAGE>
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 Effective Time, except that the
acceleration of vesting and exercisability as a result of the Merger shall
not be given effect. For purposes of such terms and conditions, the Merger
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 Effective Time solely due to the fact that UCU shall
cease to exist as of the Effective Time.
(b) KCPL STOCK OPTIONS. As of the Effective Time, each of the KCPL
Stock Options which is outstanding as of the Effective Time shall be
assumed by the Company and converted into an option (or a new substitute
option shall be granted) to purchase the number of shares of Company Common
Stock (rounded up to the nearest whole share) equal to the number of shares
of KCPL Common Stock subject to such option multiplied by the KCPL
Conversion Ratio, at an exercise price per share of Company Common Stock
(rounded down to the nearest penny) equal to the former exercise price per
share of KCPL Common Stock under such option immediately prior to the
Effective Time divided by the KCPL Conversion Ratio; PROVIDED, HOWEVER, that
in the case of any KCPL 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
KCPL Stock Options shall be subject to the same terms and conditions
(including, without limitation, expiration date, vesting and exercise
provisions) as were applicable to KCPL Stock Options immediately prior to
the Effective Time, except that the acceleration of vesting and
exercisability as a result of the Merger shall not be given effect. For
purposes of such terms and conditions, the Merger shall not be treated as an
event which shall affect the period for exercising KCPL Stock Options. KCPL
Stock Options shall not be treated as expiring as of the Effective Time
solely due to the fact that KCPL shall cease to exist as of the Effective
Time. Any KCPL Stock Option that shall expire as of the Effective Time due
to the automatic exercise of a Limited Stock Appreciation Right related to
it shall not be assumed by the Company and shall not be converted to a
Company option.
(c) OTHER STOCK AWARDS. Each outstanding award under the KCPL Incentive
Stock Plan other than the KCPL Stock Options but including any dividend
or dividend equivalent rights granted pursuant to Paragraph 15.A of the KCPL
Incentive Stock Plan relating to KCPL Stock Options (the "KCPL STOCK
AWARDS"), and 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 Company Common Stock as the
holder of such KCPL Stock Award or UCU Stock Award would have been entitled
to receive pursuant to the Merger in accordance with Article II hereof had
such holder been the absolute owner, immediately before the Effective Time,
of the shares of KCPL Common Stock or UCU Common Stock on which such KCPL
Stock Award or UCU Stock Award is based, and otherwise on the same terms and
conditions as governed such KCPL Stock Award or UCU Stock Award immediately
before the Effective Time (the "COMPANY STOCK AWARDS"). At the Effective
Time, the Company shall assume each agreement relating to the KCPL Stock
Awards and 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) COMPANY ACTION. As soon as practicable after the Effective Time,
the Company shall deliver to the holders of KCPL Stock Options, UCU Stock
Options, KCPL Stock Awards and UCU Stock Awards appropriate notices setting
forth such holders' rights pursuant to the Company Stock Plan and Company
Stock Awards (the "COMPANY STOCK BENEFITS") and each underlying stock award
agreement, each as assumed by the Company. As soon as practicable after the
Effective Time the Company will cause to be filed one or more registration
statements on Form
A-39
<PAGE>
S-3 or Form S-8 under the Securities Act (or any successor or other
appropriate forms), in order to register the shares of Company Common Stock
issuable in connection with the Company Stock Benefits, and the Company
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 Effective Time, the
Company shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of Company Common Stock for delivery in
connection with the Company Stock Benefits. The Company shall take all
corporate action necessary or appropriate to (i) obtain shareholder approval
with respect to the Company 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 Merger will be subject to the reporting requirements
under Section 16(a) of the Exchange Act with respect to equity securities of
the Company, the Company shall administer such Company 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
Merger 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
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
A-40
<PAGE>
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 COMPANY BOARD OF DIRECTORS. KCPL's and UCU's respective
Boards of Directors will take such action as may be necessary to cause the
number of directors comprising the full Board of Directors of the Company at the
Effective Time to be 18 persons, 9 of whom shall be designated by KCPL prior to
the Effective Time and 9 of whom shall be designated by UCU prior to the
Effective Time. The initial designation of such directors among the three
classes of the Board of Directors of the Company shall be agreed to by KCPL and
UCU, the designees of each party to be divided equally among such classes;
PROVIDED, HOWEVER, that 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 COMPANY 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 Company
and shall be entitled to serve in such capacity until the annual meeting of
stockholders of the Company that occurs in 2002, at which time he shall be
entitled to serve in the position of Vice Chairman of the Board of the Company
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 Company and shall be entitled to serve
in such capacities until the earlier of (i) the date of the annual meeting of
stockholders 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, at which time he
shall be entitled to serve in the positions of Chairman of the Board and Chief
Executive Officer of the Company and to serve in all such capacities until his
successor is elected or appointed and shall have qualified in accordance with
the Certificate of Incorporation and By-laws of the Company. 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 Company 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 Company 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 Company 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 Company's
principal corporate offices shall be in Kansas City, Missouri.
(b) CHARITIES. After the Effective Time, the Company 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 Merger in accordance with the terms hereof.
A-41
<PAGE>
ARTICLE VIII
CONDITIONS
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger 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 Merger shall have been issued and be continuing in
effect, and the Merger 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 Company Common Stock issuable in
the 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
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 Company 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.
(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 Merger require that any license, permit or other governmental approval
be transferred to the Company or issued to the Company, such licenses,
permits or other authorizations shall have been transferred or reissued to
the Company 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 Company and its Subsidiaries taken
as a whole immediately after the Effective Time.
A-42
<PAGE>
Section 8.2 CONDITIONS TO OBLIGATION OF UCU TO EFFECT THE MERGER. The
obligation of UCU to effect the Merger 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/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 Effective Time.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of KCPL set forth in this Agreement shall be true and correct (i) on and as
of the date hereof 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.
(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) the Merger will constitute a
reorganization for United States federal income tax purposes within the
meaning of Section 368(a) of the Code, (ii) KCPL, UCU and the Company 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 the
Company pursuant to the Merger, and (iv) no gain or loss will be recognized
by stockholders of UCU 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 & 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.
(g) AFFILIATE AGREEMENTS. The Company shall have received Affiliate
Agreements, duly executed by each "Affiliate" of KCPL, substantially in the
form of EXHIBIT 7.7, as provided in Section 7.7.
Section 8.3 CONDITIONS TO OBLIGATION OF KCPL TO EFFECT THE MERGER. The
obligation of KCPL to effect the Merger 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 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 Effective Time.
(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 date hereof 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
A-43
<PAGE>
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) the Merger will constitute a
reorganization for United States federal income tax purposes within the
meaning of Section 368(a) of the Code, (ii) KCPL, UCU and the Company 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 the
Company pursuant to the Merger, and (iv) no gain or loss will be recognized
by stockholders of KCPL as a result of the Merger (except to the extent that
cash is received in lieu of fractional share interests or pursuant to the
perfection of appraisal rights by a Dissenting Holder). 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. The Company 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.
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 Merger, (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
A-44
<PAGE>
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 Merger, 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 Merger, 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
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.
A-45
<PAGE>
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 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,
A-46
<PAGE>
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 Company, 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.
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 date hereof, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger 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 date hereof, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger 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):
<TABLE>
<S> <C>
(i) If to KCPL, to
Kansas City Power & Light Company
1201 Walnut
Kansas City, Missouri 64106
Attn: Chief Executive Officer
Telecopy: (816) 556-2418
Telephone: (816) 556-2200
</TABLE>
A-47
<PAGE>
<TABLE>
<S> <C>
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
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.
</TABLE>
Section 10.4 MISCELLANEOUS. This Agreement (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
A-48
<PAGE>
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 DGCL.
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 Company
(a) a majority of the directors (or their successors) serving on the Board of
Directors of the Company who are designated by KCPL pursuant to Section 7.12
shall be entitled during the three year period commencing at the Effective Time
(the "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 Company 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 Company 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.
A-49
<PAGE>
IN WITNESS WHEREOF, KCPL, 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.
Kansas City Power & Light Company
<TABLE>
<S> <C>
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
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>
A-50
<PAGE>
ANNEX B
[LOGO]
April 4, 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"), UtiliCorp United Inc.
(the "Merger Partner") and KC United Corp. ("Newco") have entered into an
Agreement and Plan of Merger dated as of January 19, 1996 (the "Agreement")
pursuant to which the Company and the Merger Partner will be merged with and
into Newco in a transaction (the "Merger") in which each share of the Company's
common stock, without par value (the "Company Shares"), (other than any Company
Shares owned by the Company as treasury stock, or by the Merger Partner or by
any wholly-owned subsidiary of the Company or the Merger Partner, all of which
will be cancelled and retired, and other than Company Shares held by persons who
object to the Merger and comply with all of the provisions of the General and
Business Corporation Law of Missouri concerning the rights of such persons to
dissent from the Merger and demand appraisal of such shares) will be converted
into the right to receive 1.000 share (the "Exchange Ratio") of the common stock
of Newco, par value $0.01 per share (the "Newco Shares") and each share of the
Merger Partner's common stock, par value $1.00 per share (the "Merger Partner
Shares") will be converted into the right to receive 1.096 Newco Shares. The
Merger is expected to be considered by the shareholders of the Company and the
Merger Partner at separate shareholder's meetings in May 1996.
You have asked us whether, in our opinion, the proposed Exchange Ratio
pursuant to the Merger 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;
(2) Reviewed the Merger Partner's Annual Reports, Forms 10-K and related
financial information for the five fiscal years ended December 31, 1995;
(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 Merger;
B-1
<PAGE>
[LOGO]
(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;
(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 Merger on the Company's
capitalization ratios and earnings, dividends and book value per share;
(9) Reviewed the Agreement dated as of January 19, 1996; 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 Merger will be free of Federal tax
to the Company, the Merger Partner and Newco and the respective holders of
Company Shares and Merger Partner Shares, and we further assume that the Merger
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.
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 Merger 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>
ANNEX C
[LOGO]
April 4, 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, among the Company, Kansas City Power &
Light Company ("KCPL"), and KC United Corp., the surviving entity ("KC United"),
(the "Agreement"). It is our understanding that the transaction described in the
Agreement (the "Merger") is intended to qualify as a pooling of interests for
financial reporting purposes and as a tax-free reorganization for United States
income tax purposes and that none of the Company, KCPL or KC United will
recognize any gain or loss for United States income tax purposes as a result of
the Merger. We further understand that consummation of the Merger is subject to
the terms and conditions set forth in the Agreement.
Pursuant to the Agreement, each share of common stock of the Company will be
converted into the right to receive 1.096 shares of common stock, $0.01 par
value per share of KC United and each share of KCPL will be converted into the
right to receive 1.000 share of common stock, $0.01 par value of KC United.
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 the
calendar years beginning with 1995 and ending in 2000 prepared by the management
of the Company and certain financial 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 KC United 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 whose
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 achievable as a result of the Merger and upon
our discussion of such synergies with the management of KCPL. With respect to
the financial projections supplied to us, we have
C-1
<PAGE>
assumed that they have been reasonably prepared on the basis reflecting the best
currently available estimates and judgments of the management 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 making any independent
verification of any of the information reviewed by us. We have relied as to all
legal matters relating to the Merger, including without limitation, the tax
treatment of the Merger, 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 KC United will trade. Our opinion does not constitute
a recommendation to any shareholder 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 deem 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
C-2
<PAGE>
ANNEX D
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
KC UNITED CORP.1
FIRST: The name of the Corporation is KC United Corp. (hereinafter the
"Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the
"GCL").
FOURTH: (A) The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 275,000,000 shares of
capital stock ("Capital Stock"), consisting of 250,000,000 shares of Common
Stock, par value $0.01 per share ("Common Stock"), and 25,000,000 shares of
preferred stock, par value $0.01 per share ("Preferred Stock").
(B) Shares of the Preferred Stock of the Corporation may be issued from time
to time in one or more classes or series, each of which class or series shall
have such distinctive designation or title as shall be fixed by the
Corporation's Board of Directors (the "Board of Directors") prior to the
issuance of any shares thereof. Each such class or series of Preferred Stock
shall have such voting powers, full or limited, or no voting powers, and such
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof, as shall be stated in
such resolution or resolutions providing for the issue of such class or series
of Preferred Stock as may be adopted from time to time by the Board of Directors
prior to the issuance of any shares thereof pursuant to the authority hereby
expressly vested in it, all in accordance with the GCL. Except as set forth in
such resolutions, or as otherwise may be required by law, the holders of shares
of Preferred Stock shall not have any voting rights.
(C) The following series of Preferred Stock shall be issued in exchange for
the shares of the Preferred Stock (Cumulative), $2.05 Series of UtiliCorp United
Inc., a Delaware corporation, pursuant to the provisions of that certain
Agreement and Plan of Merger, dated as of January 19, 1996, among the
Corporation, UtiliCorp United Inc. and Kansas City Power & Light Company, a
Missouri corporation.2
(i) DESIGNATION AND NUMBER. The designation of this series is the
"Preferred Stock (Cumulative), $2.05 Series" (hereinafter, this "Series")
and the number of shares constituting such Series is 1,000,000 shares.
Shares of this Series shall have a stated value of $25.00 per share.
(ii) DIVIDENDS. The holders of this Series shall be entitled to
receive an annual cash dividend of $2.05 per share, and no more, when, as
and if declared by the Board of Directors out of funds legally available
therefor, payable quarterly on the first day of each March, June, September
and December, commencing on the first such date which is more than fifteen
calendar days after the date of original issuance of the first share of this
Series, to holders of record on the respective dates fixed for that purpose
by the Board of Directors not less than ten nor more than sixty days in
advance of payment of each dividend.
- ------------------
1 Pursuant to Section 1.1 of the Agreement and Plan of Merger (the "Merger
Agreement"), the name of the Surviving Corporation may be changed to such other
name as KCPL and UCU shall mutually agree upon.
2 Pursuant to the Merger Agreement, this paragraph (C) of Article Fourth shall
be deleted in the event that such UCU Preferred Stock is redeemed prior to or at
the Effective Time.
D-1
<PAGE>
Dividends on shares of this Series shall be cumulative from and after
the date of original issuance thereof, whether or not on any scheduled
dividend payment date there shall be funds legally available for the payment
of dividends.
So long as any shares of this Series are outstanding, the Corporation
shall not pay or declare or set aside for payment any dividend payable in
cash, evidences of indebtedness, assets or property other than cash, or
capital stock of the Corporation ranking equally with or junior to this
Series in respect of dividends, or make any other distribution on any
Preferred Stock or Common Stock or any other class or series of Capital
Stock of the Corporation ranking equally with or junior to this Series in
respect of dividends, unless the Corporation has paid, or at the same time
pays or provides for the payment of, all accrued and unpaid dividends on
this Series; PROVIDED, HOWEVER, that the Corporation may pay less than all
accrued and unpaid dividends on any class or series of Capital Stock ranking
equally with this Series in respect of dividends made ratably in accordance
with the respective accrued and unpaid dividends on this Series and such
class or series of Capital Stock ranking equally with this Series in respect
of dividends.
Subject to Paragraph (viii) hereof, this Series shall not rank junior as
to dividends to any other class or series of Capital Stock of the
Corporation, unless such class or series of Capital Stock of the Corporation
is by its terms expressly made equal as to dividends to this Series. This
Series shall rank senior as to dividends to the Corporation's Common Stock,
and any other class or series of Capital Stock of the Corporation which is
not by its terms expressly made equal as to dividends to this Series.
The amount of dividends "accrued" on any share of stock of this Series
at any scheduled dividend payment date shall be deemed to be the amount of
any unpaid dividends accumulated thereon to and including such dividend
payment date, whether or not earned or declared, and the amount of dividends
"accrued" on any share of stock of this Series at any date other than a
scheduled dividend payment date shall be calculated as the amount of any
unpaid dividends accumulated thereon to and including the last preceding
dividend payment date, whether or not earned or declared, plus an amount
calculated on the basis of the annual dividend rate of $2.05 for the period
after such last preceding dividend payment date to and including the date as
of which the calculation is made, based on the actual number of days
elapsed.
(iii) LIQUIDATION RIGHTS. In the event of the involuntary
liquidation, dissolution or winding up of the Corporation ("Liquidation"),
the holders of this Series shall be entitled to have paid to them out of the
assets of the Corporation, before any distribution is made to or set apart
for the holders of any shares of Common Stock of the Corporation, or of any
other class or series of Capital Stock of the Corporation ranking junior to
this Series in respect of distribution of assets upon Liquidation, an amount
equal to $25.00 per share, plus an amount in cash equal to all dividends
(whether or not earned or declared) on such shares accrued and unpaid
thereon to the date of final distribution. After payment in cash to the
holders of this Series of the full preferential amount as aforesaid, the
holders of this Series shall, as such, have no right or claim to any of the
remaining assets of the Corporation.
If, upon any Liquidation, the assets of the Corporation or proceeds
thereof distributable among the holders of shares of this Series and of any
class or series of Capital Stock of the Corporation ranking equally with
this Series as to distribution of assets upon Liquidation shall be
insufficient to pay in full the preferential amounts payable to such
holders, then such assets or the proceeds thereof shall be distributed among
such holders ratably in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereof were paid in full.
Subject to Paragraph (viii) hereof, this Series shall not rank junior as
to distribution of assets upon Liquidation to any other class or series of
Capital Stock of the Corporation, unless such class or series of Capital
Stock of the Corporation is by its terms expressly made equal as to
distribution of assets upon Liquidation of this Series. This Series shall
rank senior as to distribution of assets
D-2
<PAGE>
upon Liquidation, or the voluntary liquidation, dissolution or winding up of
the Corporation ("Voluntary Liquidation") to all shares of Common Stock and
any other class or series of Capital Stock of the Corporation which is not
by its terms expressly made equal as to distribution of assets upon
Liquidation of this Series.
For purposes of this Paragraph (iii), neither (a) the acquisition by any
person of more than 50% of the outstanding shares of the Common Stock, nor
(b) the consolidation or merger of the Corporation with or into any other
corporation or the consolidation or merger of any other corporation with or
into the Corporation, nor (c) the sale, conveyance, exchange or transfer
(for cash, shares of Capital Stock, securities or other consideration) of
all or substantially all of the property and assets of the Corporation,
shall be deemed to be a Liquidation.
(iv) REDEMPTION AT OPTION OF CORPORATION; SINKING FUND. (a) The
shares of this Series shall not be redeemable before March 1, 1997. On and
after such date, the shares of this Series will be redeemable at the option
of the Corporation, by vote of the Board of Directors, in whole or in part
at any time and from time to time at a price of $25.00 per share plus a sum
equal to all dividends on such shares accrued and unpaid thereon to the date
fixed for redemption (for purposes of this Paragraph (iv) and Paragraph (v)
hereof, such date is hereinafter called the "Redemption Date").
(b) The shares of this Series shall not be subject to a sinking fund.
(v) PROCEDURE FOR REDEMPTION PURSUANT TO PARAGRAPH (IV). (a) (1) In
the event that fewer than all of the outstanding shares of this
Series are to be redeemed at any one time pursuant to Paragraph (iv)
hereof, the number of shares to be redeemed shall be determined by
the Board of Directors and the shares to be redeemed shall be
selected pro rata or by lot as may be determined by the Board of
Directors or by such other method as may be approved by the Board of
Directors to conform to any rule or regulation of the New York Stock
Exchange or any other stock exchange upon which the shares of this
Series may at the time be listed.
(2) The Corporation shall cause a notice to be mailed,
first-class postage prepaid, at least thirty days, but not more than
ninety days, prior to the Redemption Date, to each holder of record
of shares of this Series to be redeemed; if less than all the shares
owned by such holder are then to be redeemed, the notice shall also
specify the number of shares thereof which are to be redeemed and the
number of certificates representing such shares. Such notice shall be
mailed to such record holders at their respective addresses as they
shall appear upon the books of the Corporation and shall set forth
the Redemption Date, the redemption price per share and the place or
places for surrender of certificates for shares to be redeemed.
(3) Any notice which is mailed by the Corporation as provided in
this Paragraph (v) shall be conclusively presumed to have been duly
given, whether or not the shareholder receives such notice; and
failure to give such notice by mail, or any defect in such notice, to
the holders of any shares designated for redemption shall not affect
the validity of the proceedings for the redemption of any other
shares of this Series. On or after the Redemption Date specified in
such notice, each holder of the shares called for redemption shall
surrender the certificate evidencing such shares to the Corporation
at the place designated in such notice and shall thereupon be
entitled to receive payment of the redemption price. In case fewer
than all of the shares represented by any certificate are redeemed, a
new certificate representing the unredeemed shares shall be issued to
the surrendering holder at the expense of the Corporation. If on the
Redemption Date specified in such notice there shall have been
deposited with a bank or trust company (the "Depositary") designated
by the Board of Directors and located in the City of Kansas City,
Missouri, the City of Chicago, Illinois, or the City of New York, New
York, funds having a combined capital and surplus of at least
$50,000,000, in trust for the
D-3
<PAGE>
account of the holders of the shares of this Series so called for
redemption, in an amount equal to the aggregate amount payable upon
redemption of the shares to be redeemed, together with irrevocable
written instructions and authority to the Depositary to redeem such
shares on and after such Redemption Date immediately upon the
endorsement and surrender of the certificates therefor, then,
notwithstanding that the certificates evidencing any such shares
shall not have been surrendered, the dividends with respect to the
shares so called shall cease to accrue after the Redemption Date, the
shares with respect to which such deposit shall have been made shall
no longer be deemed to be outstanding, the holders thereof shall
cease to be stockholders of the Corporation, and all rights with
respect to such shares shall forthwith terminate except only the
right to receive from the Depositary forthwith from and after the
date of such deposit the amount payable upon redemption of the shares
to be redeemed without interest.
(b) Any interest accrued on funds so deposited with the Depositary
shall belong to the Corporation and shall be paid to it from time to
time. All funds deposited in accordance with this Paragraph (v) which
shall remain unclaimed by the holders of shares called for redemption at
the end of six years after the Redemption Date shall be, if requested by
the Board of Directors, returned by the Depositary to the Corporation,
after which the holders of such shares shall look only to the Corporation
for the payment of such unclaimed amounts, without interest.
(c) If any dividend payment on this Series is in arrears, no purchase
or redemption shall be made of any shares of any class or series of
Capital Stock of the Corporation ranking equally with or junior to this
Series as to dividends or the distribution of assets upon Liquidation or
Voluntary Liquidation.
(vi) CONVERSION RIGHTS. The holders of shares of this Series shall
have no right to convert such shares into shares of any other class or
series of Capital Stock of the Corporation.
(vii) VOTING RIGHTS. (a) Unless and until dividends payable on any
shares of this Series shall be in arrears in an amount equivalent to
one and one-half times the annual dividend, or more, per share, the
holders of shares of this Series shall have no voting power or rights,
except as otherwise provided herein, by the Certificate of
Incorporation of the Corporation or by law. If and when dividends
payable on any shares of this Series shall be in arrears in an amount
equivalent to one and one-half times the annual dividend or more, per
share, and thereafter until all dividends on shares of this Series in
arrears shall have been paid, the holders of this Series, together with
any other class or series of Capital Stock of the Corporation which is
by its terms expressly made equal as to dividends to this Series (for
purposes of this Paragraph (vii), this Series, together with all such
other classes and series, is hereinafter collectively referred to as
the "Dividend-Equivalent Preferred Stock"), voting as a single class
separate from the holders of all other classes of Capital Stock, shall
be entitled to elect two directors. The terms of office as directors of
all persons who may be directors of the Corporation shall terminate
upon the election of directors by the holders of the
Dividend-Equivalent Preferred Stock. The holders of the Common Stock
shall have the right to elect the remaining directors of the
Corporation. If the holders of the Dividend-Equivalent Preferred Stock
have not exercised their right to elect directors of the Corporation
because of the lack of a quorum consisting of the holders of a majority
of the Dividend-Equivalent Preferred Stock, then the said directors
shall be elected by the directors whose term of office is thus
terminated, and in that event, such elected directors shall hold office
for the interim period, pending such time as a quorum of the holders of
the Dividend-Equivalent Preferred Stock shall be present at a meeting
held for the election of directors.
(b) If and when all dividends then in arrears on the
Dividend-Equivalent Preferred Stock then outstanding shall be paid (and
such dividends shall be declared and paid out of any funds legally
available therefor as soon as reasonably practicable), the holders of
shares
D-4
<PAGE>
of the Dividend-Equivalent Preferred Stock shall be divested of any
special right with respect to the election of directors and the voting
power of the holders of shares of the Dividend-Equivalent Preferred Stock
and the Common Stock shall revert to the status existing before the first
dividend payment date on which dividends on any shares of the
Dividend-Equivalent Preferred Stock were not paid in full, but always
subject to the same provisions for vesting such special rights in the
holders of shares of the Dividend-Equivalent Preferred Stock in case of
further like arrears in payment of dividends thereon. Upon the
termination of any such special voting right, the terms of office of all
persons who may have been elected directors of the Corporation by vote of
the holders of the Dividend-Equivalent Preferred Stock, as a class,
pursuant to such special voting right shall forthwith terminate, and the
resulting vacancies shall be filled by the vote of a majority of the
remaining directors.
(c) In case of any vacancy in the office of a director occurring
among the directors elected by the holders of the Dividend-Equivalent
Preferred Stock voting as a single class separate from the holders of all
other classes of Capital Stock, the remaining director elected by the
holders of the Dividend-Equivalent Preferred Stock may elect a successor
to hold office for the unexpired term of the director whose place shall
be vacant. In the event of simultaneous vacancies among directors elected
by the holders of the Dividend-Equivalent Preferred Stock, an election by
the holders of the Dividend-Equivalent Preferred Stock, pursuant to the
provisions of this Paragraph (vii), will be held.
(d) Whenever the right shall have accrued to the holders of the
Dividend-Equivalent Preferred Stock to elect directors, voting as a
single class separate from the holders of all other classes of Capital
Stock, then upon request in writing signed by any holder of the
Dividend-Equivalent Preferred Stock entitled to vote, delivered by
registered mail or in person, to the President, a Vice President or
Secretary of the Corporation, it shall be the duty of such officer
forthwith to cause notice to be given to the shareholders entitled to
vote at a meeting to be held at such time as such officer may fix, not
less than 10 nor more than 60 days after the receipt of such request, for
the purpose of electing directors. At all meetings of stockholders held
for the purpose of electing directors during such time as the holders of
the Dividend-Equivalent Preferred Stock shall have the special right,
voting as a single class, separate from the holders of all other classes
of Capital Stock to elect directors, the presence in person or by proxy
of the holders of a majority of the outstanding Dividend-Equivalent
Preferred Stock shall be required to constitute a quorum of such class
for the election of directors, and the presence in person or by proxy of
the holders of a majority of all other classes of Capital Stock
outstanding at the time, and not entitled to such special right, shall be
required to constitute a quorum of such other classes for the election of
directors.
(viii) RESTRICTIONS ON CERTAIN CORPORATE ACTION. (a) So long as any
shares of this Series are outstanding no new class of Capital Stock
shall be created or authorized which is entitled to dividends or shares
in distribution of assets on a parity with or in priority to this
Series, nor shall there be created or authorized any securities
convertible into shares of any such stock, unless the holders of record
of not less than two-thirds of the number of shares then outstanding of
the Preferred Stock of the Corporation of which this Series forms a part
(as a single class separate from the holders of all other classes of
Capital Stock) shall vote therefor in person or by proxy at the meeting
of stockholders at which the creation or authorization of such new class
of Capital Stock or such convertible securities is considered.
(b) So long as any shares of this Series are outstanding, the
Corporation shall not increase the total authorized amount of the
Preferred Stock of the Corporation of which this Series forms a part or
any class of Capital Stock which is entitled to dividends or shares in
distribution of assets on a parity with or in priority to such Preferred
Stock unless the holders of record of not less than a majority of the
number of shares of such Preferred Stock
D-5
<PAGE>
then outstanding (as a single class separate from the holders of all
other classes of Capital Stock) shall vote therefor in person or by proxy
at a meeting held pursuant to notice containing a statement of such
purpose.
(ix) OTHER RIGHTS. The holders of this Series shall not have any
other preferences or special rights.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation, and of
its directors and stockholders:
(A) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. The Board of Directors shall
consist of not less than 10 nor more than 18 members, the exact number of
which shall be fixed from time to time by the Board of Directors. The
directors shall be divided into three classes, designated Class I, Class II
and Class III. Each class shall consist, as nearly as may be possible, of
one-third of the total number of directors constituting the entire Board of
Directors. The term of the initial Class I directors shall terminate on the
date of the 199 annual meeting of stockholders;3 the term of the initial
Class II directors shall terminate on the date of the 199 annual meeting of
stockholders;4 and the term of the initial Class III directors shall
terminate on the date of the 199 annual meeting of stockholders.5 At each
annual meeting of stockholders beginning in 199 , successors to the class of
directors whose term expires at that annual meeting shall be elected for a
three-year term.6 If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number
of directors in each class as nearly equal as possible, and any additional
directors of any class elected to fill a vacancy resulting from an increase
in such class shall hold office for a term that shall coincide with the
remaining term of that class, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. Each director shall
hold office until the annual meeting for the year in which his term expires
and until his successor shall be elected and shall qualify, subject,
however, to prior death, resignation, retirement, disqualification or
removal from office. Any vacancy on the Board of Directors in a Class I, II
or III directorship, howsoever resulting, shall be filled by a majority of
the directors then in office, even if less than a quorum, or by a sole
remaining director. Any director elected to fill such a vacancy shall hold
office for a term that shall coincide with the term of the class to which
such director shall have been elected. Elections of directors at an annual
or special meeting of stockholders shall be by written ballot.
(B) Each of the directors of the Corporation may be removed from office
at any time, but only for cause and only by affirmative vote of the holders
of not less than eighty percent of the outstanding shares of Common Stock.
(C) Notwithstanding the foregoing,whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation shall
have the right, voting separately by class or series, to elect directors at
an annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be
governed by the terms of this Certificate of Incorporation or the resolution
or resolutions adopted by the Board of Directors pursuant to Article FOURTH
applicable thereto, and such directors so elected shall not be divided
pursuant to this Article FIFTH into classes with the directors elected by
the holders of Common Stock unless expressly provided by such terms.
(D) In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, adopt,
alter, amend, change or repeal the Bylaws of the
- ------------------
3 Insert year of first annual meeting following the Effective Time of the
Merger.
4 Insert year of second annual meeting following the Effective Time of the
Merger.
5 Insert year of third annual meeting following the Effective Time of the
Merger.
6 Insert year of fourth annual meeting following the Effective Time of the
Merger.
D-6
<PAGE>
Corporation. Stockholders may not make, adopt, alter, amend, change or
repeal the Bylaws of the Corporation, except upon the affirmative vote of
the holders of not less than eighty percent of the outstanding shares of
Common Stock.
(E) Any action required or permitted to be taken at any annual or
special meeting of the holders of Common Stock may be taken only upon the
vote of such holders at an annual or special meeting duly noticed and
called, as provided in the Certificate of Incorporation or the Bylaws of the
Corporation, and may not be taken by a written consent of such holders in
lieu of such meeting.
(F) No director shall be personally liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for any
transaction from which the director derived an improper personal benefit.
Any repeal or modification of this Section (F) by the stockholders of the
Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or modification.
(G) Special meetings of the stockholders of the Corporation for any
purpose or purposes may be called at any time by a majority of the Board of
Directors, the Chairman of the Board of Directors, the Vice Chairman, the
Chief Executive Officer, the President or the Chief Operating Officer of the
Corporation. Special meetings of the stockholders of the Corporation may not
be called by any other person or persons.
(H) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation, subject, nevertheless, to the provisions of the
GCL, this Certificate of Incorporation, and any Bylaws adopted by the Board
of Directors or the holders of Common Stock in accordance with the
provisions of this Certificate of Incorporation; PROVIDED, HOWEVER, that no
Bylaws hereafter adopted by the holders of Common Stock shall invalidate any
prior act of the directors which would have been valid if such Bylaws had
not been adopted.
SIXTH: Subject to Article VIII of the Corporations's Bylaws, the
Corporation shall indemnify to the full extent permitted by law (as now or
hereafter in effect), 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,
whether civil, criminal, administrative or investigative by reason of the fact
that he is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation serving at the request of the Corporation
as a director, officer, trustee, employee or agent of, or in any other capacity
with respect to, another corporation, partnership, limited liability company,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding. Nothing contained herein shall affect any rights to
indemnification to which employees other than directors and officers may be
entitled by law. No amendment to or repeal of this Article SIXTH shall apply to
or have any effect on any right to indemnification provided hereunder with
respect to any acts or omissions occurring prior to such amendment or repeal.
SEVENTH: (A) In addition to any affirmative vote required by law, this
Certificate of Incorporation or the Bylaws of the Corporation, and except as
otherwise expressly provided in Section (B) of this Article SEVENTH, a Business
Combination (as hereinafter defined) with, or proposed by or on behalf of, any
Interested Stockholder (as hereinafter defined) or any Affiliate or Associate
(as hereinafter defined) of any Interested Stockholder or any person who
thereafter would be an Affiliate or Associate of such Interested Stockholder
shall require the affirmative vote of not less than eighty percent of the votes
entitled to be cast by the holders of all the then outstanding shares of Voting
Stock
D-7
<PAGE>
(as hereinafter defined), voting together as a single class, excluding Voting
Stock beneficially owned by any Interested Stockholder or any Affiliate or
Associate of such Interested Stockholder. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a lesser
percentage or separate class vote may be specified, by law or in any agreement
with any national securities exchange or otherwise.
(B) The provisions of Section (A) of this Article SEVENTH shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote, if any, as is required by law or by
any other provision of this Certificate of Incorporation or the Bylaws of the
Corporation, or any agreement with any national securities exchange, if all of
the conditions specified in either of the following Paragraphs (i) or (ii) are
met or, in the case of a Business Combination not involving the payment of
consideration to the holders of the Corporation's outstanding Capital Stock, if
the condition specified in the following Paragraph (i) is met:
(i) The Business Combination shall have been approved, either
specifically or as a transaction which is within an approved category of
transactions, by a majority (whether such approval is made prior to or
subsequent to the acquisition of, or announcement or public disclosure of
the intention to acquire, beneficial ownership of the Voting Stock that
caused the Interested Stockholder to become an Interested Stockholder) of
the Continuing Directors (as hereinafter defined).
(ii) All of the following conditions shall have been met:
(a) The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the Business
Combination, of consideration other than cash to be received per share by
holders of Common Stock in such Business Combination shall be at least
equal to the highest amount determined under Clauses (1), (2), (3) and
(4) below:
(1) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by or on behalf of the Interested Stockholder for any share of
Common Stock in connection with the acquisition by the Interested
Stockholder of beneficial ownership of shares of Common Stock (x)
within the two-year period immediately prior to the first public
announcement of the proposed Business Combination (the "Announcement
Date") or (y) in the transaction in which it became an Interested
Stockholder, whichever is higher, in either case as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to the Common Stock;
(2) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder (the "Determination Date"),
whichever is higher, as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to the
Common Stock;
(3) (if applicable) the price per share equal to the Fair Market
Value per share of Common Stock determined pursuant to the
immediately preceding Clause (2), multiplied by the ratio of (x) the
highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by or on behalf of
the Interested Stockholder for any share of Common Stock in
connection with the acquisition by the Interested Stockholder of
beneficial ownership of shares of Common Stock within the two-year
period immediately prior to the Announcement Date, as adjusted for
any subsequent stock split, stock dividend, subdivision or
reclassification with respect to the Common Stock to (y) the Fair
Market Value per share of the Common Stock on the first day in such
two-year period on which the Interested Stockholder acquired
beneficial ownership of any share of Common Stock, as adjusted for
any subsequent stock split, stock dividend, subdivision or
reclassification with respect to Common Stock; and
D-8
<PAGE>
(4) the Corporation's net income per share of Common Stock for
the four full consecutive fiscal quarters immediately preceding the
Announcement Date, multiplied by the higher of the then
price-earnings multiple (if any) of such Interested Stockholder or
the highest price-earnings multiple of the Corporation within the
two-year period immediately preceding the Announcement Date (such
price-earnings multiples being determined as customarily computed and
reported in the financial community).
(b) The aggregate amount of cash and the Fair Market Value, as of the
date of the consummation of the Business Combination, of consideration
other than cash to be received per share by holders of shares of any
class or series of outstanding Capital Stock, other than Common Stock,
shall be at least equal to the highest amount determined under Clauses
(1), (2), (3) and (4) below:
(1) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by or on behalf of the Interested Stockholder for any share of
such class or series of Capital Stock in connection with the
acquisition by the Interested Stockholder of beneficial ownership of
shares of such class or series of Capital Stock (x) within the
two-year period immediately prior to the Announcement Date or (y) in
the transaction in which it became an Interested Stockholder,
whichever is higher, in either case as adjusted for any subsequent
stock split, stock dividend, subdivision or reclassification with
respect to such class or series of Capital Stock;
(2) the Fair Market Value per share of such class or series of
Capital Stock on the Announcement Date or on the Determination Date,
whichever is higher, as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to such
class or series of Capital Stock;
(3) (if applicable) the price per share equal to the Fair Market
Value per share of such class or series of Capital Stock determined
pursuant to the immediately preceding Clause (2) multiplied by the
ratio of (x) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by or
on behalf of the Interested Stockholder for any share of such class
or series of Capital Stock in connection with the acquisition by the
Interested Stockholder of beneficial ownership of shares of such
class or series of Capital Stock within the two-year period
immediately prior to the Announcement Date, as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of Capital
Stock to (y) the Fair Market Value per share of such class or series
of Capital Stock on the first day in such two-year period on which
the Interested Stockholder acquired beneficial ownership of any share
of such class or series of Capital Stock, as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of Capital
Stock; and
(4) (if applicable) the highest preferential amount per share to
which the holders of shares of such class or series of Capital Stock
would be entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation regardless of whether the Business Combination to be
consummated constitutes such an event.
The provisions of Sections (a) and (b) of this Paragraph (B)(ii)
shall be required to be met with respect to every class or series of
outstanding Capital Stock, whether or not the Interested Stockholder
has previously acquired beneficial ownership of any shares of a
particular class or series of Capital Stock.
(c) The consideration to be received by holders of a particular class
or series of outstanding Capital Stock shall be in cash or in the same
form as previously has been paid by or
D-9
<PAGE>
on behalf of the Interested Stockholder in connection with its direct or
indirect acquisition of beneficial ownership of shares of such class or
series of Capital Stock. If the consideration so paid for shares of any
class or series of Capital Stock varied as to form, the form of
consideration for such class or series of Capital Stock shall be either
cash or the form used to acquire beneficial ownership of the largest
number of shares of such class or series of Capital Stock previously
acquired by the Interested Stockholder.
(d) After the Determination Date and prior to the consummation of
such Business Combination: (i) except as approved by a majority of the
Continuing Directors, there shall have been no failure to declare and pay
at the regular date therefor any full quarterly dividends (whether or not
cumulative) payable in accordance with the terms of any outstanding
Capital Stock; (ii) except as approved by a majority of the Continuing
Directors, there shall have been no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect any
stock split, stock dividend or subdivision of the Common Stock); (iii)
there shall have been an increase in the annual rate of dividends paid on
the Common Stock as necessary to reflect any reclassification (including
any reverse stock split), recapitalization, reorganization or any similar
transaction that has the effect of reducing the number of outstanding
shares of Common Stock unless the failure so to increase such annual rate
is approved by a majority of the Continuing Directors; and (iv) such
Interested Stockholder shall not have become the beneficial owner of any
additional shares of Capital Stock except as part of the transaction that
results in such Interested Stockholder becoming an Interested Stockholder
and except in a transaction that, after giving effect thereto, would not
result in any increase in the Interested Stockholder's percentage
beneficial ownership of any class or series of Capital Stock.
(e) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended (including the rules and regulations
promulgated thereunder, the "Exchange Act") (or any subsequent provisions
replacing such Exchange Act) shall be mailed to all stockholders of the
Corporation at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is
required to be mailed pursuant to the Exchange Act or subsequent
provisions). The proxy or information statement shall contain on the
first page thereof, in a prominent place, any statement as to the
advisability or inadvisability of the Business Combination that the
Continuing Directors, or any of them, may choose to make and, if deemed
advisable by a majority of the Continuing Directors, the opinion of an
investment banking firm selected by a majority of the Continuing
Directors as to the fairness (or not) of the terms of the Business
Combination from a financial point of view to the holders of the
outstanding shares of Capital Stock other than the Interested Stockholder
and its Affiliates or Associates, such investment banking firm to be paid
a reasonable fee for its services by the Corporation.
(f) Such Interested Stockholder shall not have made any major change
in the Corporation's business or equity capital structure without the
approval of a majority of the Continuing Directors.
(C) The following definitions shall apply with respect to this Article
SEVENTH:
(i) The term "Business Combination" shall mean:
(a) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (1) any Interested Stockholder or (2) any
other person (whether or not itself an Interested Stockholder) which is
or after such merger or consolidation would be an Affiliate or Associate
of an Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition or security arrangement, investment, loan, advance,
guarantee, agreement to purchase, agreement to
D-10
<PAGE>
pay, extension of credit, joint venture participation or other
arrangement (in one transaction or a series of transactions) with or for
the benefit of any Interested Stockholder or any Affiliate or Associate
of any Interested Stockholder involving any assets, securities or
commitments of the Corporation, any Subsidiary or any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder
which (except for any arrangement, whether as employee, consultant or
otherwise, other than as a director, pursuant to which any Interested
Stockholder or any Affiliate or Associate thereof shall, directly or
indirectly, have any control over or responsibility for the management of
any aspect of the business or affairs of the Corporation, with respect to
which arrangements the value tests set forth below shall not apply),
together with all such other arrangements (including all contemplated
future events), has an aggregate Fair Market Value and/or involves
aggregate commitments of $5,000,000 or more or constitutes more than five
percent of the book value of the total assets (in the case of
transactions involving assets or commitments other than capital stock) or
five percent of the stockholders' equity (in the case of transactions in
capital stock) of the entity in question (the "Substantial Part"), as
reflected in the most recent fiscal year-end consolidated balance sheet
of such entity existing at the time the stockholders of the Corporation
would be required to approve or authorize the Business Combination
involving the assets, securities and/or commitments constituting any
Substantial Part, except for transactions made in the ordinary course of
the Corporation's business, consistent with past practices; or
(c) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation or for any amendment to the Corporation's
Bylaws; or
(d) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or otherwise involving an
Interested Stockholder) that has the effect, directly or indirectly, of
increasing the proportionate share of any class or series of Capital
Stock, or any securities convertible into Capital Stock or into equity
securities of any Subsidiary, that is beneficially owned by an Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder;
or
(e) any agreement, contract or other arrangement providing for any
one or more of the actions specified in the foregoing Sections (a) to
(d).
(ii) The term "Voting Stock" shall mean all Capital Stock which by its
terms may be voted on all matters submitted to stockholders of the
Corporation generally.
(iii) The term "person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust or other entity
or enterprise and shall include any group comprised of any person and any
other person with whom such person or any Affiliate or Associate of such
person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing of
Capital Stock.
(iv) The term "Interested Stockholder" shall mean any person who (a) is
or has announced or publicly disclosed a plan or intention to become the
beneficial owner of Voting Stock representing fifteen percent or more of the
votes entitled to be cast by the holders of all then outstanding shares of
Voting Stock; or (b) is an Affiliate or Associate of the Corporation and at
any time within the two-year period immediately prior to the date in
question was the beneficial owner of Voting Stock representing fifteen
percent or more of the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock; PROVIDED, HOWEVER, that "Interested
Stockholders" shall not include the Corporation, any Subsidiary, any
profit-sharing, employee stock ownership or other employee benefit plan of
the Corporation or any Subsidiary or any trustee of or fiduciary with
respect to any such plan when acting in such capacity.
(v) A person shall be a "beneficial owner" of any Capital Stock (a)
which such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (b) which such person or any
D-11
<PAGE>
of its Affiliates or Associates has, directly or indirectly, (1) the right
to acquire (whether such right is exercisable immediately or subject only to
the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (2) the right to vote pursuant to any
agreement, arrangement or understanding; or (c) which is beneficially owned,
directly or indirectly, by any other person with which such person or any of
its Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
Capital Stock. For the purposes of determining whether a person is an
Interested Stockholder pursuant to Paragraph (iv) of this Section (C), the
number of shares of Capital Stock deemed to be outstanding shall include
shares deemed beneficially owned by such person through application of this
Paragraph (v) of Section (C), but shall not include any other shares of
Capital Stock that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options,
or otherwise.
(vi) The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Exchange Act as in
effect on , 199 (the term "registrant" in said Rule 12b-2
meaning in this case the Corporation).7
(vii) The term "Subsidiary" means any corporation, partnership, limited
liability company, joint venture, trust or other entity or enterprise of
which a majority of any class of equity security is beneficially owned by
the Corporation; PROVIDED, HOWEVER, that for the purposes of the definition
of Interested Stockholder set forth in Paragraph (iv) of this Section (C),
the term "Subsidiary" shall mean only a corporation, partnership, limited
liability company, joint venture, trust or other entity or enterprise of
which a majority of each class of equity security is beneficially owned by
the Corporation.
(viii) The term "Continuing Director" means any member of the Board of
Directors (while such person is a member of the Board of Directors) who is
not an Affiliate or Associate or representative of the Interested
Stockholder and was a member of the Board of Directors prior to the time
that the Interested Stockholder became an Interested Stockholder, and any
successor of a Continuing Director while such successor is a member of the
Board of Directors, who is not an Affiliate or Associate or representative
of the Interested Stockholder and is recommended or elected to succeed the
Continuing Director by a majority of Continuing Directors.
(ix) The term "Fair Market Value" means (a) in the case of cash, the
amount of such cash; (b) in the case of stock, the highest closing sale
price during the thirty-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange Listed Stocks, or, if such stock is not quoted on the Composite
Tape, on the New York Stock Exchange, or if such stock is not listed on such
exchange, on the principal United States securities exchange registered
under the Exchange Act on which such stock is listed, or, if such stock is
not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the thirty-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any similar system then in use, or if no such
quotations are available, the fair market value on the date in question of a
share of such stock as determined by a nationally recognized investment
banking firm selected by a majority of the Continuing Directors; and (c) in
the case of property other than cash or stock, the fair market value of such
property on the date in question as determined by a nationally recognized
investment banking firm selected by a majority of the Continuing Directors.
(x) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used
in Paragraphs (ii)(a) and (ii)(b) of Section (B) of this Article SEVENTH
shall include the shares of Common Stock and/or the shares of any other
class or series of Capital Stock retained by the holders of such shares.
- ------------------
7 Insert Effective Date of the Merger.
D-12
<PAGE>
(D) A majority of the Continuing Directors shall have the power and duty to
determine for the purposes of this Article SEVENTH, on the basis of information
known to them after reasonable inquiry, all questions arising under this Article
SEVENTH, including, without limitation, (i) whether a person is an Interested
Stockholder, (ii) the number of shares of Capital Stock or other securities
beneficially owned by any person, (iii) whether a person is an Affiliate or
Associate of another, (iv) whether a Proposed Action (as hereinafter defined) is
with, or proposed by, or on behalf of, an Interested Stockholder or an Affiliate
or an Associate of an Interested Stockholder, (v) whether the assets that are
the subject of any Business Combination have, or the consideration to be
received for the issuance or transfer of securities by the Corporation or any
Subsidiary in any Business Combination has, an aggregate Fair Market Value of
$5,000,000 or more, and (vi) whether the assets or securities that are the
subject of any Business Combination constitute a Substantial Part. Any such
determination made in good faith shall be binding and conclusive on all parties.
(E) Nothing contained in this Article SEVENTH shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
(F) The fact that any Business Combination complies with the provisions of
Section (B) of this Article SEVENTH shall not be construed to impose any
fiduciary duty, obligation or responsibility on the Board of Directors, or any
member thereof, to approve such Business Combination or recommend its adoption
or approval to the stockholders of the Corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
(G) For the purposes of this Article SEVENTH, a Business Combination or any
proposal to amend, repeal or adopt any provisions of this Certificate of
Incorporation inconsistent with this Article SEVENTH (collectively "Proposed
Action") is presumed to have been proposed by, or on behalf of, an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder or a
person who thereafter would become such if (i) after the Interested Stockholder
became such, the Proposed Action is proposed following the election of any
director of the Corporation who, with respect to such Interested Stockholder,
would not qualify to serve as a Continuing Director or (ii) such Interested
Stockholder, Affiliate, Associate or person votes for or consents to the
adoption of any such Proposed Action, unless as to such Interested Stockholder,
Affiliate, Associate or person a majority of the Continuing Directors makes a
good faith determination that such Proposed Action is not proposed by or on
behalf of such Interested Stockholder, Affiliate, Associate or persons, based on
information known to them after reasonable inquiry.
(H) Notwithstanding any other provision of this Certificate of Incorporation
or the Bylaws of the Corporation (and notwithstanding the fact that a lesser
percentage or separate class vote may be specified by law, this Certificate of
Incorporation or the Bylaws of the Corporation), any proposal to amend, repeal
or adopt any provision of this Certificate of Incorporation inconsistent with
this Article SEVENTH which is proposed by or on behalf of an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder shall
require the affirmative vote of the holders of not less than eighty percent of
the votes entitled to be cast by the holders of all the then outstanding shares
of Voting Stock, voting together as a single class, excluding Voting Stock
beneficially owned by any Interested Stockholder; PROVIDED, HOWEVER, that this
Section (H) shall not apply to, and such eighty percent vote shall not be
required for, any amendment, repeal or adoption unanimously recommended by the
Board of Directors if all such directors are persons who would be eligible to
serve as Continuing Directors within the meaning of Section (C), Paragraph
(viii) of this Article SEVENTH.
EIGHTH: Notwithstanding anything in this Certificate of Incorporation to
the contrary, and in addition to any vote of the Board of Directors required by
this Certificate of Incorporation or the Bylaws of the Corporation, the
affirmative vote of the holders of not less than eighty percent of the
outstanding shares of Common Stock shall be required to alter, amend or repeal,
or adopt any
D-13
<PAGE>
provision inconsistent with, any provision of Article FIFTH, Article SIXTH,
Article SEVENTH (unless a vote pursuant to Section (H) of Article SEVENTH is
required and taken in accordance with such Section (H)), or this Article EIGHTH.
NINTH: Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the GCL) outside the State of Delaware at
such place or places as may be designated from time to time by the Board of
Directors or in the Bylaws of the Corporation.
TENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly
executed in its name this day of , 199 .
KC UNITED CORP.
By:
--------------------------------------
Name:
Title:
D-14
<PAGE>
ANNEX E
BYLAWS
OF
KC UNITED CORP1
(HEREINAFTER CALLED THE "CORPORATION")
ARTICLE I.
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such place, date
and hour, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. ANNUAL MEETINGS. The Annual Meetings of stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Written notice of the Annual Meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
Section 3. SPECIAL MEETINGS. Unless otherwise prescribed by law or by the
Certificate of Incorporation, Special Meetings of stockholders, for any purpose
or purposes, may be called at any time by a majority of the Board of Directors,
the Chairman of the Board of Directors, the Vice Chairman, the Chief Executive
Officer, the President, the Executive Vice President or the Chief Operating
Officer of the Corporation. Such request shall state the purpose or purposes of
the proposed meeting. Written notice of a Special Meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 4. ADVANCE NOTIFICATION OF BUSINESS TO BE TRANSACTED AT ANNUAL
MEETINGS. No business may be transacted at an Annual Meeting of stockholders,
other than business that is either (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of Directors
(or any duly authorized committee thereof), (b) otherwise properly brought
before the Annual Meeting by or at the direction of the Board of Directors (or
any duly authorized committee thereof), or (c) otherwise properly brought before
the Annual Meeting by any stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 4 and on the record date for the determination of stockholders
entitled to vote at such Annual Meeting and (ii) who complies with the notice
procedures set forth in this Section 4.
- ------------------
1 Pursuant to Section 1.1 of the Agreement and Plan of Merger, the name of the
Surviving Corporation may be changed to such other name as KCPL and UCU shall
mutually agree upon.
E-1
<PAGE>
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than sixty days nor more than ninety days prior to the date of the Annual
Meeting; PROVIDED, HOWEVER, that in the event that less than seventy days'
notice or prior public disclosure of the date of the Annual Meeting is given or
made to stockholders, notice by the stockholder in order 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 first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth as to each matter such stockholder proposes to bring before the Annual
Meeting (i) a brief description of the business desired to be brought before the
Annual Meeting and the reasons for conducting such business at the Annual
Meeting, (ii) the name and record address of such stockholder, (iii) the class
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business and (v) a representation that such stockholder intends to appear in
person or by proxy at the Annual Meeting to bring such business before the
meeting.
No business shall be conducted at the Annual Meeting of stockholders, except
business brought before the Annual Meeting in accordance with the procedures set
forth in this Section 4; PROVIDED, HOWEVER, that, once business has been
properly brought before the Annual Meeting in accordance with such procedures,
nothing in this Section 4 shall be deemed to preclude discussion by any
stockholder of any such business. If the chairman of an Annual Meeting
determines that business was not properly brought before the Annual Meeting in
accordance with the foregoing procedures, the chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
Section 5. QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
the power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at
the meeting.
Section 6. VOTING. Unless otherwise required by law, the Certificate of
Incorporation or these Bylaws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented at
a meeting of stockholders shall be entitled to cast one vote for each share of
the capital stock entitled to vote thereat held by such stockholder. Such votes
may be cast in person or by proxy but no proxy shall be voted on or after three
years from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot; provided, however, that the vote
for the election of directors, and upon the direction of the presiding officer
of the meeting, the vote on any other question before the meeting,
E-2
<PAGE>
shall be by written ballot. Any action required or permitted to be taken at any
Annual Meeting or Special Meeting of stockholders may be taken only upon the
vote of such holders at an Annual Meeting or a Special Meeting duly noticed or
called and may not be taken by a written consent of stockholders in lieu of such
meeting.
Section 7. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 8. STOCK LEDGER. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III.
DIRECTORS
Section 1. NUMBER AND ELECTION OF DIRECTORS. The Board of Directors shall
consist of not less than 10 nor more than 18 members, the exact number of which
shall be fixed from time to time by the Board of Directors. The directors shall
be divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. The term of the
initial Class I directors shall terminate on the date of the 199 Annual Meeting
of stockholders;2 the term of the initial Class II directors shall terminate on
the date of the 199 Annual Meeting of stockholders;3 and the term of the
initial Class III directors shall terminate on the date of the 199 Annual
Meeting of stockholders.4 At each Annual Meeting of stockholders beginning in
199 ,5 successors to the class of directors whose term expires at that Annual
Meeting shall be elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible,
and any additional directors of any class elected to fill a vacancy resulting
from an increase in such class shall hold office for a term that shall coincide
with the remaining term of that class, but in no case will a decrease in the
number of directors shorten the term of any incumbent director. Each director
shall hold office until the Annual Meeting for the year in which his term
expires and until his successor shall be elected and shall qualify, subject,
however, to prior death, resignation, retirement, disqualification or removal
from office. Directors need not be stockholders.
Section 2. NOMINATION OF DIRECTORS. Nominations of persons for election to
the Board of Directors may be made at any Annual Meeting of stockholders (a) by
or at the direction of the Board of Directors (or any duly authorized committee
thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder
of record on the date of the giving of the notice provided for in this Section 2
and on the record date for the determination of stockholders entitled to vote at
such Annual Meeting
- ------------------
2 Insert year of first Annual Meeting following the Effective Time of the
Merger.
3 Insert year of second Annual Meeting following the Effective Time of the
Merger.
4 Insert year of third Annual Meeting following the Effective Time of the
Merger.
5 Insert year of fourth Annual Meeting following the Effective Time of the
Merger.
E-3
<PAGE>
and (ii) who complies with the notice procedures set forth in this Section 2.
Persons nominated by a stockholder of the Corporation shall only be eligible for
election as directors of the Corporation if such persons are nominated in
accordance with the following procedures.
In addition to any other applicable requirements, for a nomination to be
made by a stockholder, such stockholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than sixty days nor more than ninety days prior to the date of the Annual
Meeting; PROVIDED, HOWEVER, that in the event that less than seventy days'
notice or prior public disclosure of the date of the Annual Meeting is given or
made to stockholders, notice by the stockholder in order 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 first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth (a) as to each person whom the stockholder 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 Corporation
which 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
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"); and (b) as to the stockholder
giving the notice (i) the name and record address of such stockholder, (ii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such stockholder, (iii) a description of
all arrangements or understandings between such stockholder 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 stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the Annual Meeting to nominate the persons named in its notice and (v) any other
information relating to such stockholder 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. 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.
No person nominated by a stockholder of the Corporation shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the procedures set forth in this Section 2. If the Chairman of the Annual
Meeting determines that a nomination was not made in accordance with the
foregoing procedures, the Chairman shall declare to the meeting that the
nomination was defective and such defective nomination shall be disregarded.
Section 3. VACANCIES. Any vacancy on the Board of Directors in a Class I,
II or III directorship, howsoever resulting, shall be filled by a majority of
the directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill such a vacancy shall hold office for a
term that shall coincide with the term of the class to which such director shall
have been elected.
Section 4. DUTIES AND POWERS. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the stockholders.
Section 5. MEETINGS. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be
E-4
<PAGE>
determined by the Board of Directors. Special Meetings of the Board of Directors
may be called by the Chairman of the Board of Directors, the Vice Chairman, the
Chief Executive Officer, the President, the Executive Vice President, the Chief
Operating Officer, or a majority of the Board of Directors. Notice thereof
stating the place, date and hour of the meeting shall be given to each director
either by mail not less than forty-eight hours before the date of the meeting,
by telephone, telecopy or telegram on twenty-four hours' notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
Section 6. QUORUM. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these Bylaws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 7. ACTIONS OF BOARD. Unless otherwise provided by the Certificate
of Incorporation or these Bylaws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 8. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless otherwise
provided by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 8 shall constitute
presence in person at such meeting.
Section 9. COMMITTEES. The Board of Directors may, by resolution passed by
a majority of the entire Board of Directors, designate one or more committees,
including an Executive Committee, a Nominating and Compensation Committee, an
Audit Committee and a Nuclear Oversight Committee, each such committee to
consist of one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
any such committee. In the absence or disqualification of a member of a
committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any absent or
disqualified member. Any committee, to the extent allowed by law and provided in
the resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation. Each committee shall report to the Board of
Directors, and shall keep complete and accurate minutes and records and shall
promptly distribute such minutes and records to each member of the Board of
Directors when requested.
Section 10. COMPENSATION. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 11. INTERESTED DIRECTORS. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, limited liability company,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this
E-5
<PAGE>
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of Directors or committee thereof which authorizes
the contract or transaction, or solely because his or their votes are counted
for such purpose if (i) the material facts as to his or their relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV.
OFFICERS
Section 1. GENERAL. The following officers of the Corporation shall be
chosen by a majority of the entire Board of Directors: Chairman of the Board of
Directors (who must be a director), Vice Chairman (who must be a director),
Chief Executive Officer (who must be a director), President, Executive Vice
President, Chief Operating Officer, Chief Financial Officer, Secretary and
Treasurer. The Board of Directors or the Nominating and Compensation Committee
of the Board of Directors, in its respective discretion as it may deem proper,
may also choose a Chief Legal Officer and one or more Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other officers. Any number of offices may
be held by the same person, unless otherwise prohibited by law, the Certificate
of Incorporation or these Bylaws. The officers of the Corporation need not be
stockholders of the Corporation nor, except in the case of the Chairman of the
Board of Directors, the Vice Chairman and the Chief Executive Officer, need such
officers be directors of the Corporation.
Section 2. ELECTION. The Board of Directors at its first meeting held
after the commencement of each fiscal year shall elect officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the President or any Vice President and any such
officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and powers incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
Section 4. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board
of Directors shall be a director and shall preside at meetings of the Board of
Directors and meetings of stockholders. The Chairman shall be responsible for
(a) board and stockholder governance, (b) external relations with industry,
cities and communities, (c) economic development initiatives, (d) oversight of
issues relating
E-6
<PAGE>
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 merger between Kansas City Power &
Light Company and UtiliCorp United Inc. (the "Merger"), (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 of Directors shall be a member of the
Executive Committee and an ex officio member of all standing committees.
Section 5. VICE CHAIRMAN. The Vice Chairman shall be a director and shall
preside at meetings of the Board of Directors and meetings of stockholders 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.
Section 6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be a
director, shall submit a report of the operations of the Corporation for the
fiscal year to the stockholders at their annual meeting and from time to time
shall report to the Board of Directors all matters within his knowledge which
the interests of the Corporation may require be brought to their notice. The
Chief Executive Officer shall be responsible for (a) the strategic direction,
development and oversight of the Corporation, (b) the international growth of
the Corporation and (c) the deployment of strategic assets of the Corporation
(including executive management). The Chief Executive Officer shall share with
the Chairman of the Board responsibility for (a) implementation of the Merger,
(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.
Section 7. PRESIDENT, EXECUTIVE VICE PRESIDENT, CHIEF OPERATING OFFICER AND
CHIEF FINANCIAL OFFICER. The President, Executive Vice President, Chief
Operating Officer and Chief Financial Officer shall perform such duties and have
other powers as a majority of the entire Board of Directors from time to time
may prescribe. Such officers, as well as the Chairman of the Board of Directors,
the Vice Chairman and the Chief Executive Officer, shall also severally have
such power to execute on behalf of the Corporation any deed, bond, indenture,
certificate, note, contract or other instrument authorized or approved by the
Board of Directors.
Section 8. CHIEF LEGAL OFFICER AND VICE PRESIDENTS. The Chief Legal
Officer and each Vice President shall perform such duties and have such other
powers as a majority of the entire Board of Directors or the Nominating and
Compensation Committee of the Board of Directors from time to time may
prescribe.
Section 9. SECRETARY. The Secretary shall attend all meetings of the Board
of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall also
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
Special Meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President. If the Secretary
shall be unable or shall refuse to cause to be given notice of all meetings of
the stockholders and Special Meetings of the Board of Directors, and if there be
no Assistant Secretary, then either the Board of Directors or the President may
choose another officer to cause such notice to be given. The Secretary shall
have custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his signature. The Secretary
shall see that all books, reports, statements, certificates and other documents
and records required by law to be kept or filed are properly kept or filed, as
the case may be.
E-7
<PAGE>
Section 10. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 11. ASSISTANT SECRETARIES. Except as may be otherwise provided in
these Bylaws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the President, any Vice President, if there be one, or the
Secretary, and in the absence of the Secretary or in the event of his disability
or refusal to act, shall perform the duties of the Secretary, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the Secretary.
Section 12. ASSISTANT TREASURERS. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President or any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 13. OTHER OFFICERS. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
ARTICLE V.
STOCK
Section 1. FORM OF CERTIFICATES. Every holder of stock in the Corporation
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the Vice Chairman of
the Board of Directors, the President or a Vice President and (ii) by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation, certifying the number of shares owned by him in the
Corporation.
Section 2. SIGNATURES. Any or all of the signatures on a certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
Section 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or
E-8
<PAGE>
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate, the Board of Directors may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal representative, to advertise the
same in such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 4. UNCERTIFICATED SHARES. The Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares; PROVIDED,
HOWEVER, that any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the Corporation.
Section 5. TRANSFERS. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these Bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall be
issued.
Section 6. RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 7. BENEFICIAL OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI.
NOTICES
Section 1. NOTICES. Whenever written notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telecopy, or reliable overnight courier.
Section 2. WAIVERS OF NOTICE. Whenever any notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
E-9
<PAGE>
ARTICLE VII.
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or Special Meeting, and may be
paid in cash, in property, or in shares of capital stock. Before payment of any
dividend, there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors from time to time, in
its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
Section 2. DISBURSEMENTS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 4. CORPORATE SEAL. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII.
INDEMNIFICATION
Section 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN
THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 4 of this
Article VIII, the Corporation shall 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, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director, officer, trustee, employee or agent of, or in any
other capacity with respect to, another corporation, partnership, limited
liability company, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), 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. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which 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
reasonable cause to believe that his conduct was unlawful.
Section 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE
RIGHT OF THE CORPORATION. Subject to Section 4 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation serving at the request of the Corporation
as a director, officer, trustee, employee or agent of, or in any other capacity
with respect to, another corporation, partnership, limited liability company,
joint venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best
E-10
<PAGE>
interests of the Corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 3. NO SPECIFIC AUTHORIZATION REQUIRED IN CERTAIN CASES. To the
extent that a director or officer of the Corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith, without the necessity of authorization
in the specific case.
Section 4. SPECIFIC AUTHORIZATION REQUIRED IN CERTAIN CASES. Any
indemnification under this Article VIII (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 1 or 2 of this Article VIII, as the case may be. Such determination
shall be made (a) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (c) by the stockholders; PROVIDED, HOWEVER, that if a Change in
Control has occurred, such determination shall be made by independent legal
counsel, in a written opinion, chosen by the parties seeking indemnification and
paid for by the Corporation. To the extent, however, that a director or officer
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding described above, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith, without the necessity of authorization in the specific case.
Section 5. GOOD FAITH DEFINED. For purposes of any determination under
Section 4 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 5 shall mean
any other corporation or any partnership, limited liability company, joint
venture, trust, employee benefit plan or other enterprise of which such person
is or was serving at the request of the Corporation as a director, officer,
trustee, employee or agent or in any other capacity. The provisions of this
Section 5 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Section 1 or 2 of this Article VIII, as the
case may be.
Section 6. INDEMNIFICATION BY A COURT. Notwithstanding any contrary
determination in the specific case under Section 5 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VIII. The basis of such indemnification by a court shall
be a determination by such court that indemnification of the director or officer
is proper in the circumstances because he has met the applicable standards of
conduct set forth in Section 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 4 of this
Article VIII nor the
E-11
<PAGE>
absence of any determination thereunder shall be a defense to such application
or create a presumption that the director or officer seeking indemnification has
not met any applicable standard of conduct. Notice of any application for
indemnification pursuant to this Section 6 shall be given to the Corporation
promptly upon the filing of such application. If successful, in whole or in
part, the director or officer seeking indemnification shall also be entitled to
be paid the expense of prosecuting such application.
Section 7. EXPENSES PAYABLE IN ADVANCE. Expenses incurred by a director or
officer in defending or investigating a threatened or pending action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VIII.
Section 8. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any Bylaw, agreement (such agreements being specifically
authorized herein), contract, vote of stockholders or disinterested directors or
pursuant to the direction (however embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in Sections 1 and 2 of
this Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Section 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the General Corporation Law of the State of Delaware, or
otherwise.
Section 9. INSURANCE. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, trustee, employee or agent of, or in any other capacity with
respect to, another corporation, partnership, limited liability company, joint
venture, trust, employee benefit plan or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power or the
obligation to indemnify him against such liability under the provisions of this
Article VIII.
Section 10. CERTAIN DEFINITIONS. For purposes of this Article VIII
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, trustee, employee or agent of, or in any other capacity
with respect to, another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, shall stand in the same position
under the provisions of this Article VIII with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued. For purposes of this
Article VIII, references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving at
the request of the Corporation" shall include any service as a director or
officer of the Corporation which imposes duties on, or involves services by,
such director or officer with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VIII.
For purposes of this Article VIII a "Change in Control" shall mean a change
in control of the Corporation of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A
E-12
<PAGE>
of Regulation 14A promulgated under the Exchange Act, whether or not the
Corporation is then subject to such reporting requirement; PROVIDED that,
without limitation, such a Change in Control shall be deemed to have occurred if
(a) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13(d)-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing fifteen percent or more of the Corporation's then
outstanding Common Stock without the prior approval of at least two-thirds of
the members of the Board of Directors in office immediately prior to such
acquisition, or (b) the Corporation is a party to a merger, consolidation, sale
of assets or other reorganization, or proxy contest, as a consequence of which
members of the Board of Directors in office immediately prior to such
transaction or event constitute less than a majority of the Board of Directors
thereafter, or (c) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors (including
for this purpose any new director whose election or nomination for election by
the Corporation's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who were directors at the beginning of the
period) cease for any reason to constitute at least a majority of the Board of
Directors.
Section 11. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VIII shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 12. LIMITATION ON INDEMNIFICATION. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 6 of this
Article VIII), the Corporation shall not be obligated to indemnify any director
or officer in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
Section 13. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation may,
to the extent authorized from time to time by the Board of Directors, provide
rights to indemnification and to the advancement of expenses to employees and
agents of the Corporation similar to those conferred in this Article VIII to
directors and officers of the Corporation.
Section 14. AMENDMENT OF THIS ARTICLE VIII. No amendment or repeal of this
Article VIII shall apply to or have any effect on any right to indemnification
provided hereunder with respect to any acts or omissions occurring prior to such
amendment or repeal.
ARTICLE IX.
AMENDMENTS
Section 1. Subject to the provisions of the Company's Certificate of
Incorporation, these Bylaws may be altered, amended or repealed, in whole or in
part, or new Bylaws may be adopted by the stockholders or by the Board of
Directors, provided, however, that notice of such alteration, amendment, repeal
or adoption of new Bylaws be contained in the notice of any Special Meeting of
stockholders at which such alteration, amendment, repeal or adoption is to be
voted upon. Subject to the provisions of the Company's Certificate of
Incorporation, as amended, all such amendments must be approved by either a
majority of the entire Board of Directors then in office or the affirmative vote
of the holders of not less than eighty percent of the outstanding shares of
Common Stock of the Corporation.
Section 2. ENTIRE BOARD OF DIRECTORS. As used in this Article IX and in
these Bylaws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
E-13
<PAGE>
ANNEX F
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 Corporation, a Delaware 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.
F-1
<PAGE>
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 Agreement and Plan of Merger by and
among Kansas City Light & Power Company, UtiliCorp United Inc. and Newco,
dated as of January 19, 1996.
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.
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.
F-2
<PAGE>
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.
F-3
<PAGE>
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.
F-4
<PAGE>
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).
F-5
<PAGE>
(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
F-6
<PAGE>
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.
F-7
<PAGE>
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
F-8
<PAGE>
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 Corporation 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.
F-9
<PAGE>
(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
F-10
<PAGE>
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
F-11
<PAGE>
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.
F-12
<PAGE>
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, 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.
F-13
<PAGE>
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 APB
F-14
<PAGE>
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 a majority of the votes entitled
to be cast by the holders of the shares of common stock of Kansas City Power &
Light Company represented at a meeting and entitled to vote thereon and by the
affirmative vote of a majority of the votes entitled to be cast by the holders
of the shares of common stock of Utilicorp United Inc. represented at a meeting
and entitled to vote thereon. This plan shall also be approved by Kansas City
Power & Light Company and by Utilicorp United Inc.
F-15
<PAGE>
ANNEX G
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
G-1
<PAGE>
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
(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 Corporation, a Delaware 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 Agreement and Plan of Merger by and among
Kansas City Power & Light Company, UtiliCorp United Inc. and Newco dated as of
January 19, 1996.
"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.
"Special Incentive Award" shall have the meaning set forth in Article IX
hereof.
G-2
<PAGE>
"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.
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
G-3
<PAGE>
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.
(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
G-4
<PAGE>
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
a majority of the votes entitled to be cast by the holders of the shares of
common stock of Kansas City Power & Light Company represented at a meeting and
entitled to vote thereon and by the affirmative vote of a majority of the votes
entitled to be cast by the holders of the shares of common stock represented at
a meeting of UtiliCorp United Inc. and entitled to vote thereon. This Plan shall
also be approved by Kansas City Power & Light Company and by UtiliCorp United
Inc.
G-5
<PAGE>
ANNEX H
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made and entered into as of the day of , 199 ,
by and between (the "Company"), a Delaware corporation, and A. Drue
Jennings (the "Executive");
WHEREAS, the Executive is currently serving as Chairman, President and Chief
Executive Officer of Kansas City Power & Light Company, a Missouri corporation
("KCPL"), and the Company desires to secure the continued employment of the
Executive in accordance herewith;
WHEREAS, KCPL 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 Agreement and Plan of Merger (the "Merger
Agreement"), dated as of January 19, 1996, among KCPL, UtiliCorp United Inc., a
Delaware corporation ("UCU") and the Company, 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 merger (the "Merger") contemplated by 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 Merger,
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
stockholders 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.
(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.
H-1
<PAGE>
(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 KCPL 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 KCPL 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 KCPL, 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
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
H-2
<PAGE>
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;
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
H-3
<PAGE>
"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
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
H-4
<PAGE>
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 KCPL and the Company or any of their
affiliated 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
H-5
<PAGE>
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 instrument contains
the entire agreement of the Executive, the Company or any
H-6
<PAGE>
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
H-7
<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 stockholders. The Chairman shall be responsible for
(a) board and stockholder 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 Merger, (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 stockholders 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 stockholders 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 Merger, (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.
H-8
<PAGE>
ANNEX I
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made and entered into as of the day of ,
199 , by and between (the "Company"), a Delaware corporation, 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 Agreement and Plan of Merger (the "Merger
Agreement"), dated as of January 19, 1996 among Kansas City Power & Light
Company, a Missouri corporation ("KCPL"), UCU and the Company, 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 merger (the "Merger") contemplated by 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 Merger,
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 stockholders of the Company that occurs in 2002, and (ii)
the date on which 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.
I-1
<PAGE>
(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
I-2
<PAGE>
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;
I-3
<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
I-4
<PAGE>
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 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.
I-5
<PAGE>
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 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
I-6
<PAGE>
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 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.
I-7
<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 stockholders. The Chairman shall be responsible for
(a) board and stockholder 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 Merger, (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 stockholders 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 stockholders 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 Merger, (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.
I-8
<PAGE>
ANNEX J
SECTION 351.455 OF THE MISSOURI GENERAL
AND BUSINESS CORPORATION LAW
351.455 SHAREHOLDER WHO OBJECTS TO MERGER MAY DEMAND VALUE OF SHARES, WHEN.
- -- 1. If a shareholder of a corporation which is a party to a merger or
consolidation shall file with such corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to such plan of merger or consolidation, and shall not
vote in favor thereof, and such shareholder, within twenty days after the merger
or consolidation is effected, shall make written demand on the surviving or new
corporation for payment of the fair value of his shares as of the day prior to
the date on which the vote was taken approving the merger or consolidation, the
surviving or new corporation shall pay to such shareholder, upon surrender of
his certificate or certificates representing said shares, the fair value
thereof. Such demand shall state the number and class of the shares owned by
such dissenting shareholder. Any shareholder failing to make demand within the
twenty day period shall be conclusively presumed to have consented to the merger
or consolidation and shall be bound by the terms thereof.
2. If within thirty days after the date on which such merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment therefor
shall be made within ninety days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing said shares. Upon payment of the agreed value the
dissenting shareholder shall cease to have any interest in such shares or in the
corporation.
3. If within such period of thirty days the shareholder and the surviving
or new corporation do not so agree, then the dissenting shareholder may, within
sixty days after the expiration of the thirty day period, file a petition in any
court of competent jurisdiction within the county in which the registered office
of the surviving or new corporation is situated, asking for a finding and
determination of the fair value of such shares, and shall be entitled to
judgment against the surviving or new corporation for the amount of such fair
value as of the day prior to the date on which such vote was taken approving
such merger or consolidation, together with interest thereon to the date of such
judgment. The judgment shall be payable only upon and simultaneously with the
surrender to the surviving or new corporation of the certificate or certificates
representing said shares. Upon the payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares, or in the surviving
or new corporation. Such shares may be held and disposed of by the surviving or
new corporation as it may see fit. Unless the dissenting shareholder shall file
such petition within the time herein limited, such shareholder and all persons
claiming under him shall be conclusively presumed to have approved and ratified
the merger or consolidation, and shall be bound by the terms thereof.
4. The right of a dissenting shareholder to be paid the fair value of his
shares as herein provided shall cease if and when the corporation shall abandon
the merger or consolidation.
J-1
<PAGE>
KANSAS CITY POWER & LIGHT COMPANY
Proxy for Annual Meeting of Shareholders, May 22, 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 Annual Meeting of
Shareholders on May 22, 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.
- - - - - - - - - -
TRIANGLE fold and tear along perforation TRIANGLE
KANSAS CITY POWER & LIGHT COMPANY
ANNUAL
MEETING OF
SHAREHOLDERS
MAY 22, 1996, 10:00 A.M.
NELSON-ATKINS MUSEUM OF ART
4525 OAK STREET
KANSAS CITY, MISSOURI
<PAGE>
KANSAS CITY POWER & LIGHT COMPANY
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. / /
<TABLE>
<S> <C> <C> <C> <C>
1. Approval of Merger with / / FOR / / AGAINST / / ABSTAIN
Utilicorp United, Inc.
2. Approval of Newco Stock / / FOR / / AGAINST / / ABSTAIN
Incentive Plan.
3. Approval of Newco Management / / FOR / / AGAINST / / ABSTAIN
Incentive Plan.
</TABLE>
<TABLE>
<S> <C> <C> <C>
4. Election of Directors: FOR all Nominees WITHHOLD AUTHORITY to
D.L. Bodde, W.H. Clark, (except as marked vote for all nominees
R.J. Dineen to the contrary
A.J. Doyle, W.T. Grant II, below) / /
A.D. Jennings / /
G.E. Nettels, Jr., L.H.
Talbott, R.H. West
WITHHELD for the following nominee(s) only: write name(s):
</TABLE>
<TABLE>
<S> <C><C> <C> <C> <C>
--------------------------------------------------------------------------
5. Appointment of Coopers & / / FOR / / AGAINST / / ABSTAIN
Lybrand as Independent
Public Accountants for
1996.
---------------------------------------------------------- ---------------
Signature Date
---------------------------------------------------------- ---------------
Signature Date
Please sign exactly as name(s) is(are) printed hereon. When signing as attorney, administrator,
executor, guardian or trustee, please add your title as such. If stock is held jointly, each party
should sign. If signature is for a corporation, please sign full corporate name by authorized officer.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
</TABLE>
- - - - - - - - - -
(Instructions on Reverse Side)
TRIANGLE fold and tear along perforation TRIANGLE
YOUR VOTE IS IMPORTANT TO US!
To ensure that your proxy is properly executed and counted, be sure to MARK YOUR
VOTE, DATE, AND SIGN IN THE SPACE PROVIDED ABOVE (exactly as your name(s)
appears on this form). Tear off at perforation and mail the completed card with
signature(s) in the enclosed reply envelope to:
UMB BANK NA
P.O. BOX 419882
KANSAS CITY, MO 64179-0578
