<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. AN EFFECTIVE
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE
PROSPECTUS TO WHICH IT RELATES SHALL CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 3, 1996
FILED PURSUANT TO RULE 424(B)(2)
REGISTRATION NO. 33-63505
REGISTRATION NO. 333-5123
[LOGO]
4,800,000 PREFERRED SECURITIES
WESTERN RESOURCES CAPITAL II
% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES, SERIES B (QUIPS-SM-)*
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT THAT THE SERIES B ISSUER
HAS FUNDS AS SET FORTH HEREIN BY
WESTERN RESOURCES, INC.
---------
The % Cumulative Quarterly Income Preferred Securities, Series B (the
"Series B Preferred Securities") offered hereby represent undivided preferred
beneficial interests in Western Resources Capital II, a trust formed under the
laws of the State of Delaware (the "Series B Issuer" or the "Series B Trust").
The preferred interests represented by the Series B Preferred Securities will
have a preference under certain circumstances with respect to cash distributions
and amounts payable on liquidation, redemption or otherwise over the trust
interests represented by the Series B Common Securities (as defined) issued by
the Series B Issuer. See "Description of the Preferred Securities --
Subordination of Common Securities" in the accompanying Prospectus.
(CONTINUED ON NEXT PAGE)
--------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-5 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE SERIES B PREFERRED SECURITIES, INCLUDING THE
PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENT ON THE SERIES B
PREFERRED SECURITIES AND THE SERIES B DEBENTURES MAY BE DEFERRED AND THE RELATED
FEDERAL INCOME TAX CONSEQUENCES.
-------------
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 PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
<TABLE>
<CAPTION>
PROCEEDS TO THE
INITIAL PUBLIC UNDERWRITING SERIES B
OFFERING PRICE COMMISSION(1) ISSUER(2)(3)
---------------- -------------- --------------------
<S> <C> <C> <C>
Per Series B Preferred Security............................. $25.00 (2) $25.00
Total....................................................... $120,000,000 (2) $120,000,000
</TABLE>
- ------
(1) The Series B Issuer and Western Resources have agreed to indemnify the
several Underwriters (as defined herein) against certain liabilities,
including liabilities under the Securities Act of 1933.
(2) In view of the fact that the proceeds of the sale of the Series B Preferred
Securities will be used to purchase the Series B Debentures, the
Underwriting Agreement provides that Western Resources will pay to the
Underwriters, as compensation for their arranging the investment therein of
such proceeds, $ per Series B Preferred Security; or, in the case of
certain institutions, $ per Series B Preferred Security. Accordingly, the
maximum aggregate amount of underwriting commission will be $ , but
the actual amount of underwriting commission will be less than such amount
to the extent that Series B Preferred Securities are sold to such
institutions.
(3) Expenses of the offering, which are payable by Western Resources, are
estimated to be $207,000.
--------------
The Series B Preferred Securities offered hereby are offered severally by
the Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Series B Preferred Securities will be made only in
book-entry form through the facilities of DTC in New York, New York on or about
, 1996, against payment therefor in immediately available funds.
- ------
* QUIPS-SM- is a servicemark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO. SMITH BARNEY INC.
BEAR, STEARNS & CO. INC.
DILLON, READ & CO. INC.
PRUDENTIAL SECURITIES INCORPORATED
EVEREN SECURITIES, INC.
-----------
<PAGE>
The date of this Prospectus Supplement is , 1996.
<PAGE>
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Western Resources, Inc., a Kansas corporation ("Western Resources" or the
"Company"), is the owner of the trust interests represented by the common
securities (the "Series B Common Securities") issued by the Series B Issuer. The
Series B Issuer exists for the sole purpose of issuing its trust interests and
investing the proceeds thereof in the % Deferrable Interest Subordinated
Debentures, Series B Due 2036 (the "Series B Debentures") issued by Western
Resources.
Holders of the Series B Preferred Securities will be entitled to receive
cumulative cash distributions accruing from the date of original issuance and
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, commencing , 1996, at the rate of % per annum.
Western Resources has the right to defer interest payments on the Series B
Debentures by extending the interest payment period thereon at any time for up
to 20 consecutive quarters (each an "Extension Period"). If interest payments
are so deferred, distributions on the Series B Preferred Securities will also be
deferred. During an Extension Period, distributions, as well as interest thereon
to the extent permitted by law, will continue to accrue, and holders of Series B
Preferred Securities will be required to accrue interest income for United
States Federal income tax purposes. See "Certain Terms of the Series B
Debentures -- Option to Extend Interest Payment Period" and "United States
Taxation -- Potential Extension of Interest Payment Period and Original Issue
Discount."
The payment of distributions, out of moneys held by the Series B Issuer, and
payments upon liquidation of the Series B Issuer or the redemption of Series B
Preferred Securities, as set forth below, are guaranteed to the extent set forth
herein by Western Resources (the "Series B Guarantee"). See "Certain Terms of
the Series B Guarantee." If Western Resources fails to make interest payments on
the Series B Debentures held by the Series B Issuer, the Series B Issuer will
have insufficient funds to pay distributions on the Series B Preferred
Securities. The Series B Guarantee does not cover payment of distributions when
the Series B Issuer does not have sufficient funds to pay such distributions. In
such event, the remedy of a holder of Series B Preferred Securities is to
enforce the rights of the Series B Issuer under the Series B Debentures held by
the Series B Issuer. Western Resources' obligations under the Series B Guarantee
are subordinate and junior in right of payment to all other liabilities of
Western Resources except trade credit and any liabilities that may be made pari
passu with or subordinate to the Series B Guarantee expressly by their terms
("Senior Indebtedness"). Wilmington Trust Company is the Property Trustee of the
Series B Issuer and the Guarantee Trustee of the Company.
The Series B Preferred Securities are subject to mandatory redemption upon
repayment of the Series B Debentures at maturity or their earlier redemption, in
whole or in part. See "Description of the Preferred Securities -- Redemption" in
the accompanying Prospectus. Western Resources will have the option at any time
on or after , 2001 to redeem, in whole or in part, the Series B
Debentures, and will also have the right at any time, upon occurrence of a
Special Event (as defined herein), to redeem, in whole but not in part, the
Series B Debentures. See "Description of the Debentures -- Optional Redemption"
in the accompanying Prospectus.
The Series B Debentures are subordinate and junior in right of payment to
all Senior Indebtedness of Western Resources. As of March 31, 1996, Western
Resources had approximately $2.1 billion principal amount of Senior Indebtedness
outstanding. The terms of the Series B Debentures do not limit Western
Resources' ability to incur additional Senior Indebtedness. See "Description of
the Debentures -- Subordination" in the accompanying Prospectus.
In the event of the liquidation of the Series B Issuer, the holders of the
Series B Preferred Securities will be entitled to receive for each Preferred
Security a liquidation preference of $25 (the "Liquidation Amount") plus accrued
and unpaid distributions thereon to the date of payment and interest thereon, to
the extent permitted by law, subject to certain limitations. See "Description of
the Preferred Securities -- Liquidation Distribution Upon Dissolution" in the
accompanying Prospectus.
The Series B Preferred Securities have been approved for listing on the New
York Stock Exchange, subject to notice of issuance, under the symbol "WR PrB."
The Series B Preferred Securities will be represented by a global
certificate registered in the name of The Depository Trust Company ("DTC") or
its nominee. Beneficial interests in the Series B Preferred Securities will be
shown on, and transfers thereof will be effected only through, records
maintained by Participants (as defined in the accompanying Prospectus) in DTC.
Except as described herein, Series B Preferred Securities in certificated form
will not be issued in exchange for the global certificate. See "Description of
the Preferred Securities -- Book-Entry-Only Issuance -- The Depository Trust
Company" in the accompanying Prospectus.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES B
PREFERRED SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK
STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
detailed information and financial statements incorporated herein by reference.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................ % Cumulative Quarterly Income Preferred Securities,
Series B.
Distribution Payment Dates........ March 31, June 30, September 30 and December 31,
commencing , subject to deferral as
described herein.
Redemption........................ At the option of Western Resources at $25 per Preferred
Security, in whole or in part, on or after ,
2001, or, in whole but not in part, upon the occurrence
of a Special Event (as defined herein).
Use of Proceeds................... Proceeds from this offering will be used by Western
Resources for the repayment of certain of its short-term
debt and for general corporate purposes.
WESTERN RESOURCES, INC.
Principal Business................ Supplying electric and natural gas utility service
Utility Service Area.............. Kansas (electric and gas utility service) and Oklahoma
(gas utility service)
Approximate Customers during Electric: 601,000
1995.............................. Gas: 648,000
</TABLE>
S-3
<PAGE>
WESTERN RESOURCES, INC.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNAUDITED THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------------------- -------------------------
1991(1) 1992(2) 1993 1994(3) 1995 1995 1996
----------- ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues................. $1,162,178 $1,556,248 $1,909,359 $1,617,943 $1,572,071 $443,375 $555,622
Operating Income......... 129,621 239,169 292,063 269,546 275,384 69,441 75,273
Net Income............... 89,645 127,884 177,370 187,447 181,676 41,575 44,789
Earnings Applicable to
Common Stock............ 83,268 115,133 163,864 174,029 168,257 38,220 41,434
Average Common Shares
Outstanding............. 34,566,170 52,271,932 59,294,091 61,617,873 62,157,125 61,746,996 63,163,715
Earnings Per Average
Common Share............ $2.41 $2.20 $2.76 $2.82 $2.71 $0.62 $0.66
Ratios of Earnings to
Fixed Charges........... 2.98 2.02 2.36 2.65 2.41
Ratios of Earnings to
Combined Fixed Charges
and Preferred and
Preference Dividend
Requirements............ 2.61 1.84 2.14 2.37 2.18
</TABLE>
- ------------------
(1) Includes a special one-time dividend of $.18 per share paid on February 28,
1991. Includes cumulative effect to January 1, 1991 of a change in revenue
recognition resulting in a $17.36 million ($.50 per share) increase.
(2) After giving effect to the acquisition of Kansas Gas and Electric Company,
effective from March 31, 1992.
(3) After giving effect to the sales of Western Resources' Missouri gas
properties, effective from January 31, 1994 and February 28, 1994.
<TABLE>
<CAPTION>
UNAUDITED
AS OF MARCH 31, 1996
-------------------------------------------------------------------
ACTUAL AS ADJUSTED
---------------------------- ------------------------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------------- ------------ ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
SUMMARY OF CAPITALIZATION
Common Stock Equity..................... $ 1,575,188 44.8% $ $1,575,188 44.6%
Cumulative Preferred Stock Not Subject
to Mandatory Redemption................ 24,858 0.7 24,858 0.7
Preference Stock Subject to Mandatory
Redemption............................. 150,000 4.3 50,000(2) 1.4
Company-obligated Mandatorily Redeemable
Preferred Securities of Subsidiary
Trusts holding solely Company
Subordinated Debt Securities(1)........ 100,000 2.8 220,000 6.2
Long-term Debt:
First Mortgage Bonds.................. 841,000 841,000
Pollution Control Bonds............... 521,682 521,682
Revolving Credit Agreement............ 325,000 325,000
Less:
Unamortized Premium and Discount
(Net)............................ 5,490 5,490
Long-term Debt Due Within One
Year............................. 16,000 16,000
------------- -------------
Total Long-term Debt............ 1,666,192 47.4 1,666,192 47.1
------------- ----- ------------- -----
Total Capitalization.................. $ 3,516,238 100.0% $ 3,536,238 100.0%
------------- ----- ------------- -----
------------- ----- ------------- -----
Current Liabilities:
Long-term Debt........................ $ 16,000 $ 16,000
Short-term Debt....................... $ 342,300 $ 332,000(2)
</TABLE>
- ------------------
(1) As described herein, the assets of the Series B Issuer will include $120
million of % Series B Debentures of Western Resources which will
constitute approximately 97% of the total assets of the Series B Issuer.
(2) Western Resources redeemed on July 1, 1996 all $100 million of its 8.50%
Preference Stock due July 1, 2016. Short-term debt reflects $5.67 million of
premium incurred in the redemption of the 8.50% Preference Stock, as well as
the underwriting commission and expenses associated with this issuance.
S-4
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF SERIES B PREFERRED SECURITIES SHOULD CAREFULLY
REVIEW THE INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS AND SHOULD PARTICULARLY CONSIDER THE FOLLOWING MATTERS:
SUBORDINATION OF SERIES B GUARANTEE AND SERIES B DEBENTURES. Western
Resources' obligations under the Series B Guarantee and under the Series B
Debentures are subordinate and junior in right of payment to all Senior
Indebtedness other than indebtedness that may be made pari passu with or
subordinate to the Series B Guarantee and the Series B Debentures expressly by
their terms. As of March 31, 1996, Western Resources had approximately $2.1
billion principal amount of indebtedness for borrowed money and capitalized
lease obligations constituting Senior Indebtedness outstanding on a consolidated
basis. There are no terms of the Series B Preferred Securities, the Series B
Debentures or the Series B Guarantee that limit Western Resources' ability to
incur additional Senior Indebtedness. See "Description of the Guarantees --
Status of the Guarantees" and "Description of the Debentures -- Subordination,"
each as set forth in the accompanying Prospectus.
The ability of the Series B Issuer to pay amounts due on the Series B
Preferred Securities is solely dependent upon Western Resources making payments
on the Series B Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES. Western
Resources has the right under the Indenture (as defined herein) to extend, from
time to time, the interest payment period on the Series B Debentures for a
period not exceeding 20 consecutive quarters. Upon the termination of any such
extended interest payment period and the payment of all amounts then due,
Western Resources may select a new extended interest payment period, subject to
the requirements described herein. During any such extended interest payment
period, quarterly distributions on the Series B Preferred Securities would be
deferred (but would continue to accrue with additional distributions thereon to
the extent permitted by law) by the Series B Issuer. In the event that Western
Resources exercises this right, during such period it may not declare or pay
dividends or distributions (other than dividends or distributions payable in
common stock of Western Resources or other securities ranking junior in right of
payment to the Series B Debentures) on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of its capital stock or any security
ranking pari passu with or junior in right of payment to the Series B
Debentures, or make any guarantee payment with respect to the foregoing (other
than pro rata payments under the Guarantees) or repurchase, or cause any of its
subsidiaries to repurchase, any security of Western Resources ranking pari passu
with or junior in right of payment to the Series B Debentures (except for
payments made on any series of Debentures upon the stated maturity of such
Debentures); provided that Western Resources may redeem, purchase, acquire or
make a liquidation payment with respect to any of its capital stock or any
security ranking pari passu with or junior in right of payment to the Series B
Debentures, make any guarantee payment with respect to the foregoing or
repurchase, or cause any of its subsidiaries to repurchase, any security of
Western Resources ranking pari passu with or junior in right of payment to the
Series B Debentures with securities (or the proceeds from the issuance of
securities) having no higher ranking than the capital stock or the other
securities which are to be redeemed, purchased, acquired, with respect to which
a liquidation payment is to be made, to which a guarantee payment is to be made
with respect to the foregoing or which are to be repurchased. Prior to the
termination of any such extended interest payment period, Western Resources may
further extend the interest payment period, provided that such extended interest
payment period, together with all previous and further extensions thereof, may
not exceed 20 consecutive quarters and that such extended interest payment
period may not extend beyond the maturity or redemption date of the Series B
Debentures. Upon the termination of any extended interest payment period and the
payment of all amounts then due, Western Resources may select a new extended
interest payment period, subject to the foregoing requirements. If Western
Resources should determine to exercise its extension right in the future, the
market price of the Series B Preferred Securities is likely to be affected. The
Series B Issuer and Western Resources believe that such
S-5
<PAGE>
an extension of an interest payment period on the Series B Debentures is
unlikely to occur. See "Certain Terms of the Series B Preferred Securities --
Distributions" and "Certain Terms of the Series B Debentures -- Option to Extend
Interest Payment Period."
Should an interest payment period be extended, Series B Preferred Securities
holders will continue to recognize interest income for United States Federal
income tax purposes. As a result, such holders will be required to include
accruing interest in gross income for United States Federal income tax purposes
in advance of the actual receipt of such interest. Furthermore, such holders
will not receive the related actual interest payments from the Series B Issuer
if they dispose of their Series B Preferred Securities prior to the record date
for payment of distributions. See "United States Taxation -- Potential Extension
of Interest Payment Period and Original Issue Discount."
RIGHTS UNDER THE SERIES B GUARANTEE. The Series B Guarantee will be
qualified as an indenture under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). Wilmington Trust Company will act as indenture trustee
under the Series B Guarantee for the purposes of compliance with the Trust
Indenture Act (the "Guarantee Trustee"). The Guarantee Trustee will hold the
Series B Guarantee for the benefit of the holders of the Series B Preferred
Securities and will also be the trustee for the Series B Debentures and the
Property Trustee (as defined herein).
The Series B Guarantee is limited to a guarantee, on a subordinated basis,
to the holders of the Series B Preferred Securities, of the payment (but not the
collection) of (i) any accrued and unpaid distributions required to be paid on
the Series B Preferred Securities, if and only to the extent that the Series B
Issuer has funds sufficient to make payment therefor, (ii) the Redemption Price
(as defined herein), including all accrued and unpaid distributions, with
respect to Series B Preferred Securities called for redemption by the Series B
Issuer, if and only to the extent that the Series B Issuer has funds sufficient
to make payment therefor, and (iii) upon a voluntary or involuntary dissolution,
winding up or termination of the Series B Issuer (other than in connection with
a redemption of all of the Series B Preferred Securities), the lesser of (a) the
aggregate Liquidation Amount and all accrued and unpaid distributions on the
Series B Preferred Securities to the date of payment, to the extent the Series B
Issuer has funds sufficient to make such payment, and (b) the amount of assets
of the Series B Issuer remaining available for distribution to holders of the
Series B Preferred Securities in liquidation of the Series B Issuer. The holders
of a majority in aggregate Liquidation Amount of the Series B Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Series B Guarantee. If the Guarantee Trustee fails to enforce the Series B
Guarantee, any holder of Series B Preferred Securities may institute a legal
proceeding directly against Western Resources to enforce such holder's rights
under the Series B Guarantee without first instituting a legal proceeding
against the Series B Issuer, the Guarantee Trustee or any other person or
entity. If Western Resources were to default on its obligations under the Series
B Debentures, the Series B Issuer would lack available funds for the payment of
distributions or amounts payable on redemption of the Series B Preferred
Securities or otherwise, and in such event holders of the Series B Preferred
Securities would not be able to rely upon the Series B Guarantee for payment of
such amounts. In such event, if both the Debenture Trustee and the Series B
Issuer, as the holder of the Series B Debentures, fail to enforce the rights of
the Series B Issuer under the Series B Debentures, the holders of at least 25%
in aggregate Liquidation Amount of the Series B Preferred Securities then
outstanding shall have the right to enforce the rights of the Series B Issuer
under the Series B Debentures. See "Description of the Guarantees -- Status of
the Guarantees" and "Description of the Debentures -- Subordination," each as
set forth in the accompanying Prospectus.
SPECIAL EVENT REDEMPTION. Upon the occurrence of a Special Event (as
defined herein), Western Resources has the right to redeem the Series B
Debentures, in whole but not in part, in which event the Series B Issuer will
redeem the Series B Preferred Securities. See "Western Resources, Inc. -- Recent
Developments," "Certain Terms of the Series B Preferred Securities --
Redemption" and "-- Special Event Redemption or Distribution."
S-6
<PAGE>
LIMITED VOTING RIGHTS. Holders of Series B Preferred Securities will have
limited voting rights, and, except upon the occurrence of an Event of Default
(as defined herein) under the Series B Trust Agreement, will not be entitled to
vote to appoint, remove or replace the Property Trustee or the Administrative
Trustees (as defined herein). Such voting rights are vested exclusively in
Western Resources, as the Depositor of the Series B Issuer, unless and until an
Event of Default has occurred and is continuing. See "Description of the
Preferred Securities -- Events of Default; Notice" in the accompanying
Prospectus.
TRADING CHARACTERISTICS OF SERIES B PREFERRED SECURITIES. The Series B
Preferred Securities have been approved for listing on the New York Stock
Exchange, subject to notice of issuance, under the symbol "WR PrB." The Series B
Preferred Securities are expected to trade at a price that takes into account
the value, if any, of accrued and unpaid distributions; thus, purchasers will
not pay and sellers will not receive any accrued and unpaid interest with
respect to their undivided interests in Series B Debentures owned through the
Series B Preferred Securities that is not included in the trading price of the
Series B Preferred Securities. However, interest on the Series B Debentures will
be included in the gross income of U.S. Holders (as defined herein) of Series B
Preferred Securities as it accrues, rather than when it is paid. See "United
States Taxation -- Income from Series B Preferred Securities" and "--
Disposition of Series B Preferred Securities."
Because the Series B Preferred Securities pay a dividend at a fixed rate
based upon the fixed interest rate payable on the Series B Debentures, the
trading price of the Series B Preferred Securities may decline if interest rates
rise.
HOLDING COMPANY STRUCTURE. A significant portion of the operations of
Western Resources are conducted through its subsidiaries, principally Kansas Gas
and Electric Company ("KG&E"). Except to the extent that Western Resources may
itself be a creditor with recognized claims against its subsidiaries, claims of
the creditors of such subsidiaries will have priority with respect to the assets
and earnings of such subsidiaries over the claims of creditors of Western
Resources, including claims under the Series B Debentures and the Series B
Guarantee, even though such subsidiary obligations do not constitute Senior
Indebtedness. The liabilities of Western Resources' subsidiaries aggregated
approximately $1.7 billion, and the assets of such subsidiaries were
approximately $4.1 billion as of March 31, 1996.
In addition, in the event of a default on Western Resources' debt or an
insolvency, liquidation or other reorganization of Western Resources, creditors
will have no right to proceed against the assets of its subsidiaries or to cause
their liquidation under Federal or state bankruptcy laws.
WESTERN RESOURCES CAPITAL II
Western Resources Capital II is a statutory business trust formed under the
Delaware Business Trust Act pursuant to (i) a Trust Agreement executed by
Western Resources, as Depositor of the Series B Issuer, and the Property Trustee
and (ii) the filing of a Certificate of Trust with the Delaware Secretary of
State on October 12, 1995. Such Trust Agreement will be amended and restated in
its entirety (as so amended and restated, the "Series B Trust Agreement")
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus Supplement is a part. The Series B Trust Agreement will be
qualified as an indenture under the Trust Indenture Act. The Series B Issuer
exists for the exclusive purposes of (i) issuing the Series B Preferred
Securities and the Series B Common Securities representing trust interests in
the Series B Issuer, (ii) purchasing the Series B Debentures with the Series B
Common Securities and the proceeds from the sale of the Series B Preferred
Securities and (iii) engaging only in those other activities necessary or
incidental thereto. All of the Series B Common Securities will be owned by
Western Resources. Western Resources will covenant not to transfer ownership of
the Series B Common Securities to any person other than an Affiliate of Western
Resources or a successor of Western Resources as permitted under the Indenture;
provided that no such transfer shall result in (x) the Series B Issuer being
considered an "investment company" that is required to be registered under the
Investment Company Act of 1940, as amended, or (y) the Series B Issuer not being
S-7
<PAGE>
taxed as a grantor trust for United States Federal income tax purposes. The
Series B Common Securities will rank pari passu, and payments will be made
thereon pro rata, with the Series B Preferred Securities, except that upon the
occurrence and continuance of an Event of Default under the Series B Trust
Agreement, the rights of the holders of the Series B Common Securities to
payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinate and junior to the rights of the holders of the
Series B Preferred Securities. Western Resources will acquire Series B Common
Securities having an aggregate Liquidation Amount equal to 3% of the total
capital of the Series B Issuer. The Series B Issuer will terminate on ,
2036 unless earlier terminated as provided in the Series B Trust Agreement. The
Series B Issuer's business and affairs will be conducted by the Property Trustee
and the Administrative Trustees. Western Resources, as Depositor of the Series B
Issuer, or, if an Event of Default has occurred and is continuing, the holders
of at least a majority in the aggregate Liquidation Amount of the then
outstanding Series B Trust Securities (as defined herein), will be entitled to
appoint, remove or replace the Trustees (as defined herein) of the Series B
Issuer.
The duties and obligations of the Trustees shall be governed by the Series B
Trust Agreement. Steven L. Kitchen, James A. Martin and John K. Rosenberg, all
officers of Western Resources, will be appointed as Administrative Trustees
pursuant to the terms of the Series B Trust Agreement. Under the Series B Trust
Agreement, the Administrative Trustees will have certain duties and powers
including, but not limited to, the delivery of certain notices to the holders of
the Series B Preferred Securities, the appointment of the Paying Agent (as
defined in the accompanying Prospectus) and the Registrar (as defined in the
accompanying Prospectus) and the registering of transfers of the Series B
Preferred Securities. Under the Series B Trust Agreement, Wilmington Trust
Company, as the Property Trustee, will have certain duties and powers including,
but not limited to, holding legal title to the Series B Debentures on behalf of
the Series B Trust, the collection of payments in respect of the Series B
Debentures, maintenance of the Payment Account (as defined in the Series B Trust
Agreement), the sending of default notices with respect to the Series B
Preferred Securities and the distribution of the assets of the Series B Trust in
the event of a winding up of the Series B Trust. See "Description of the
Preferred Securities" in the accompanying Prospectus.
Western Resources has agreed to pay all fees and expenses related to the
Series B Issuer and the offering of the Series B Preferred Securities.
WESTERN RESOURCES, INC.
GENERAL
Western Resources is a combination electric and natural gas public utility
engaged in the generation, transmission, distribution and sale of electric
energy in Kansas and the purchase, distribution, transportation and sale of
natural gas in Kansas and Oklahoma. The Company was incorporated under the laws
of the State of Kansas in 1924.
The Company conducts its non-regulated business through the Westar Companies
and Mid Continent Market Center, Inc. These businesses include natural gas
compression, transportation, storage, marketing, processing, gathering services
and electric power marketing, and investments in energy and technology related
businesses. The Company's principal executive offices are located at 818 Kansas
Avenue, Topeka, Kansas 66612 and its telephone number is (913) 575-6300.
RECENT DEVELOPMENTS
On March 19, 1996, President Clinton proposed certain tax law changes that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations issued on or after December 7,
1995 (the "Proposed Legislation") if such debt obligations have a maximum term
in excess of 20 years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. In addition, the Proposed Legislation
would deny issuers an interest deduction on any debt instrument with a weighted
average maturity of more than 40 years. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
S-8
<PAGE>
Chairman Bill Archer issued a joint statement (the "Joint Statement") indicating
their intent that certain legislative proposals initiated by the Clinton
administration, including the Proposed Legislation, that may be adopted by
either of the tax-writing committees of Congress would have an effective date
that is no earlier than the date of "appropriate Congressional action." There
can be no assurances, however, that the effective date guidance contained in the
Joint Statement will be incorporated into the Proposed Legislation, if enacted,
or that other legislation enacted after the date hereof will not otherwise
adversely affect the ability of Western Resources to deduct the interest payable
on the Series B Debentures.
If the tax law changed, as a result of the Proposed Legislation or
otherwise, so that in Western Resources' judgment it would be precluded from
deducting interest on the Series B Debentures, Western Resources could, subject
to receiving an Opinion of Counsel to the effect that a relevant tax law change
(as described in the Prospectus) had occurred, redeem the Series B Debentures in
whole, thereby causing a mandatory redemption of the Series B Preferred
Securities in whole at a price of $25 per Preferred Security, plus accrued but
unpaid distributions. Western Resources presently anticipates that, as permitted
by the terms of the Series B Debentures at the time of pricing and subject to
market and other conditions, it would cause such redemption of the Series B
Preferred Securities if the tax law changed, as a result of the Proposed
Legislation or otherwise, in a manner that would not permit the interest
deduction.
Western Resources has pending an exchange offer for all of the outstanding
shares of common stock of Kansas City Power & Light Company ("KCPL") in which
each share of KCPL common stock may be exchanged for $31 of Western Resources'
common stock subject to certain limitations. For further information, see
Western Resources' Quarterly Report on Form 10-Q for the quarter ended March 31,
1996 and its Current Report on Form 8-K dated June 17, 1996.
Western Resources owns approximately 24% of the outstanding common shares of
ADT Limited, a corporation organized under the laws of Bermuda ("ADT"), and as
such applies the equity method of accounting. Western Resources holds through
its subsidiary the common shares of ADT for investment purposes and continually
reviews its investment in ADT and, based on its evaluation of market conditions,
applicable regulatory requirements, ADT's business prospects and future
developments, it may from time to time determine to increase or decrease its
equity position in ADT. For further information, see Western Resources' Annual
Report on Form 10-K for the year ended December 31, 1995.
COVERAGE RATIOS
The following table sets forth the ratios of earnings to fixed charges of
Western Resources and its subsidiaries for each of the years 1991 through 1995
and for the twelve months ended March 31, 1996.(1)
<TABLE>
<CAPTION>
UNAUDITED
YEAR ENDED DECEMBER 31, TWELVE MONTHS
- ------------------------------------------------------------- ENDED
1991(2) 1992(3) 1993 1994(4) 1995 MARCH 31, 1996
- ----------- ----------- --------- ----------- ----------- -----------------------
<S> <C> <C> <C> <C> <C>
2.98 2.02 2.36 2.65 2.41 2.38
</TABLE>
- --------------
(1) Earnings are deemed to consist of net income to which has been added income
taxes (including net deferred investment tax credits) and fixed charges.
Fixed charges consist of all interest on indebtedness, amortization of debt
discount and expense, and the portion of rental expense which represents an
interest factor.
(2)
Includes a special one-time dividend of $.18 per share paid on February 28,
1991. Includes cumulative effect to January 1, 1991 of a change in revenue
recognition resulting in a $17.36 million ($.50 per share) increase.
(3) After giving effect to the acquisition of KG&E, effective from March 31,
1992.
(4) After giving effect to the sales of Western Resources' Missouri gas
properties, effective from January 31, 1994 and February 28, 1994.
S-9
<PAGE>
The following table sets forth the ratios of earnings to combined fixed
charges and preferred and preference stock dividends for each of the years 1991
through 1995 and for the twelve months ended March 31, 1996.(1)
<TABLE>
<CAPTION>
UNAUDITED
YEAR ENDED DECEMBER 31, TWELVE MONTHS
- ----------------------------------------------------------- ENDED
1991(2) 1992(3) 1993 1994(4) 1995 MARCH 31, 1996
- ----------- ----------- --------- ----------- --------- -----------------
<S> <C> <C> <C> <C> <C>
2.61 1.84 2.14 2.37 2.18 2.16
</TABLE>
- --------------
(1) Earnings are deemed to consist of net income to which has been added income
taxes (including net deferred investment tax credits) and fixed charges.
Fixed charges consist of all interest on indebtedness, amortization of debt
discount and expense, and the portion of rental expense which represents an
interest factor. Preferred and preference dividend requirements consist of
an amount equal to the pre-tax earnings which would be required to meet
dividend requirements on preferred and preference stock.
(2) Includes a special one-time dividend of $.18 per share paid on February 28,
1991. Includes cumulative effect to January 1, 1991 of a change in revenue
recognition resulting in a $17.36 million ($.50 per share) increase.
(3) After giving effect to the acquisition of KG&E, effective from March 31,
1992.
(4) After giving effect to the sales of Western Resources' Missouri gas
properties, effective from January 31, 1994 and February 28, 1994.
USE OF PROCEEDS
The Series B Issuer will use the proceeds from this offering of $120
million, together with the Series B Common Securities, to purchase the Series B
Debentures. Western Resources will use the cash proceeds from the sale of the
Series B Debentures, net of the Underwriters' compensation and the other
expenses of this offering, for the repayment of certain of its short-term debt
and for general corporate purposes. As of March 31, 1996, such short-term debt
had a weighted average interest rate of approximately 5.55% per annum and
maturities within six months of its date of issuance.
CERTAIN TERMS OF THE SERIES B PREFERRED SECURITIES
GENERAL
The following summary of certain terms and provisions of the Series B
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Series B Trust Agreement. The
form of the Series B Trust Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus Supplement and the accompanying
Prospectus are a part. See "Description of the Preferred Securities" in the
accompanying Prospectus.
DISTRIBUTIONS
The Series B Preferred Securities represent undivided preferred beneficial
interests in the assets of the Series B Issuer, and the distributions on each
Series B Preferred Security are payable at the rate set forth on the cover page
of this Prospectus Supplement, payable, except in the event of an extension,
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year. Distributions in arrears after the quarterly payment date therefor will
accumulate additional distributions thereon (to the extent permitted by law)
compounded quarterly at the rate per annum set forth on the cover page of this
Prospectus Supplement. The term "distributions" as used herein shall include any
such additional distributions to the extent permitted by law. Distributions will
accrue from the date of original issuance of the Series B Preferred Securities.
The amount of distributions payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months and, for any period shorter than a
full monthly period, shall be computed on the basis of the actual number of days
elapsed in such period.
S-10
<PAGE>
So long as an Event of Default under the Indenture has not occurred and is
continuing, Western Resources has the right at any time and from time to time to
extend the interest payment period on the Series B Debentures for not more than
20 consecutive quarters, provided that any such Extension Period shall not
extend beyond the maturity date or redemption date of the Series B Debentures.
During any Extension Period quarterly distributions on the Series B Preferred
Securities would be deferred by the Series B Issuer, would continue to accrue,
and holders of Series B Preferred Securities would be required to accrue
interest income for United States Federal income tax purposes. See "Certain
Terms of the Series B Debentures -- Option to Extend Interest Payment Period"
and "United States Taxation -- Potential Extension of Interest Payment Period
and Original Issue Discount." In the event that Western Resources exercises this
right, during such period it may not declare or pay any dividends or
distributions (other than dividends or distributions payable in common stock of
Western Resources or other securities ranking junior in right of payment to the
Series B Debentures) on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of its capital stock or any security ranking pari
passu with or junior in right of payment to the Series B Debentures, or make any
guarantee payment with respect to the foregoing (other than pro rata payments
under the Guarantees) or repurchase, or cause any of its subsidiaries to
repurchase, any security of Western Resources ranking pari passu with or junior
in right of payment to the Series B Debentures (except for payments made on any
series of Debentures upon the stated maturity of such Debentures); provided that
Western Resources may redeem, purchase, acquire or make a liquidation payment
with respect to any of its capital stock or any security ranking pari passu with
or junior in right of payment to the Series B Debentures, make any guarantee
payment with respect to the foregoing or repurchase, or cause any of its
subsidiaries to repurchase, any security of Western Resources ranking pari passu
with or junior in right of payment to the Series B Debentures with securities
(or the proceeds from the issuance of securities) having no higher ranking than
the capital stock or the other securities which are to be redeemed, purchased,
acquired, with respect to which a liquidation payment is to be made, to which a
guarantee payment is to be made with respect to the foregoing or which are to be
repurchased. This covenant effectively requires that an interest payment on one
series of Debentures may be extended only if the interest periods on all series
of Debentures are likewise extended. Prior to the termination of any such
extended interest payment period, Western Resources may further extend the
interest payment period, provided that such Extension Period together with all
such previous and further extensions thereof may not exceed 20 consecutive
quarters or extend beyond the maturity or redemption date of the Series B
Debentures. Upon the termination of any Extension Period and the payment of all
amounts then due, Western Resources may select a new extended interest payment
period, subject to the above requirements. See "Certain Terms of the Series B
Debentures -- Option to Extend Interest Payment Period" and "United States
Taxation -- Potential Extension of Interest Payment Period and Original Issue
Discount."
Western Resources has no current intention of exercising its right to defer
payments of distributions on the Series B Preferred Securities by extending the
interest payment period on the Series B Debentures.
REDEMPTION
Upon the payment of the Series B Debentures, whether at maturity or upon
earlier redemption as provided in the Indenture, the proceeds from such payment
will be applied by the Property Trustee to redeem a Like Amount (as defined
below) of the Series B Common Securities and the Series B Preferred Securities,
upon not less than 30 nor more than 90 days' notice, at a Redemption Price equal
to the aggregate Liquidation Amount plus accumulated and unpaid distributions,
plus additional distributions thereon to the extent permitted by law, to the
Redemption Date. See "Certain Terms of the Series B Debentures -- Redemption."
Western Resources has the right to redeem the Series B Debentures (a) on or
after , 2001, in whole or in part, or (b) at any time, in whole
but not in part, upon the occurrence of a Tax Event or an Investment Company
Event (each as defined below, a "Special Event"), subject to the conditions
described under "-- Special Event Redemption or Distribution," below.
S-11
<PAGE>
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If a Special Event shall occur and be continuing with respect to the Series
B Issuer or the Series B Preferred Securities, Western Resources has the right
to (i) redeem the Series B Debentures in whole (but not in part) and thereby
cause a mandatory redemption of the Series B Preferred Securities in whole (but
not in part) at the Redemption Price within 90 days following the occurrence of
such Special Event, or (ii) terminate the Series B Issuer and cause the Series B
Debentures to be distributed, subject to the receipt of an Opinion of Counsel
experienced in such matters to the effect that the holders of the Series B
Preferred Securities will not recognize gain or loss for United States Federal
income tax purposes as a result of such distribution, to the holders of the
Series B Preferred Securities in liquidation of the Series B Issuer. If at any
time the Series B Issuer is not or will not be taxed as a grantor trust, but a
Tax Event has not occurred, Western Resources has the right to terminate the
Series B Issuer and cause the Series B Debentures to be distributed, subject to
the receipt of an Opinion of Counsel experienced in such matters to the effect
that the holders of the Series B Preferred Securities will not recognize gain or
loss for United States Federal income tax purposes as a result of such
distribution, to the holders of the Series B Preferred Securities in liquidation
of the Series B Issuer. Under current United States Federal income tax law and
interpretations, if the Series B Trust is treated as a grantor trust at the time
of the distribution, such a distribution should not be a taxable event to
holders of the Series B Preferred Securities. Should there be a change in law, a
change in legal interpretation, a Special Event or other circumstances, however,
the termination could be a taxable event to holders of the Series B Preferred
Securities. See "United States Taxation -- Receipt of Series B Debentures Upon
Liquidation of the Series B Issuer." If Western Resources does not elect either
option (i) or (ii) above, the Series B Preferred Securities will remain
outstanding.
"Tax Event" means the receipt by the Series B Issuer or Western Resources,
as the case may be, of an Opinion of Counsel (which may be counsel to the Series
B Issuer, Western Resources or an affiliate, and which must be reasonably
acceptable to the Property Trustee) experienced in such matters to the effect
that a relevant tax law change has occurred after , 1996. For
purposes of the preceding sentence a relevant tax law change is any amendment or
change to (or officially proposed amendment or change to) the laws (including
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof, or the publication of any judicial opinion
interpreting such laws (and regulations) or any written interpretation of such
laws (or regulations) by any governmental authority having jurisdiction to
enforce or administer such laws (or regulations) (including official and
unofficial opinions purporting to apply such laws and regulations to other
persons who have issued securities similar to the Series B Debentures), which
amendment, change, proposed amendment or change, opinion or interpretation
could, if valid and enacted or applied to the Series B Issuer or Western
Resources, result in (i) the Series B Issuer, either currently or within 90 days
of the date thereof, becoming subject to United States Federal income tax with
respect to interest received on the Series B Debentures, (ii) interest payable
by Western Resources on the Series B Debentures attributable to the Series B
Preferred Securities, either currently or within 90 days of the date thereof,
becoming nondeductible for United States Federal income tax purposes or (iii)
the Series B Issuer, either currently or within 90 days of the date thereof,
becoming subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Investment Company Event" means the occurrence of a change in law or
regulation or a change in the interpretation or application of any law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that the Series B Issuer is
or will be considered an "investment company" that is required to be registered
under the Investment Company Act of 1940, as amended, which Change in 1940 Act
Law becomes effective after , 1996.
"Like Amount" means (i) with respect to a redemption of the Series B
Preferred Securities and the Series B Common Securities (together, the "Series B
Trust Securities"), Series B Trust Securities having an aggregate Liquidation
Amount equal to the principal amount of Series B Debentures to be
contemporaneously redeemed in accordance with the Indenture and the proceeds of
which will be used to pay the Redemption Price of such Series B Trust Securities
and (ii) with respect to a distribution of Series B
S-12
<PAGE>
Debentures to holders of Series B Trust Securities in connection with a
termination or liquidation of the Series B Issuer upon the bankruptcy,
dissolution or liquidation of a holder of Series B Common Securities, the
occurrence of a Special Event or in the event that the Series B Trust is not or
will not be taxed as a grantor trust but a Tax Event has not occurred, Series B
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Series B Trust Securities in exchange for which such Series B Debentures
are distributed.
LIQUIDATION AMOUNT
The Liquidation Amount payable on the Series B Preferred Securities in the
event of any liquidation of the Series B Issuer is $25 per Series B Preferred
Security, plus accumulated and unpaid distributions unless, in connection with
such liquidation, the Series B Debentures are distributed to the holders of the
Series B Preferred Securities.
RIGHTS UNDER THE SERIES B GUARANTEE AND THE SERIES B DEBENTURES
The Series B Guarantee will be a full guarantee with respect to the Series B
Preferred Securities from the time of issuance of the Series B Preferred
Securities, but will not apply to any payment of distributions or other amounts
due to the extent the Series B Issuer does not have sufficient available funds
to pay such distributions or other amounts due (which will occur in the event
that Western Resources has failed to make a payment of principal or interest on
the Series B Debentures). There are no preconditions to a holder of Series B
Preferred Securities instituting a legal proceeding directly against Western
Resources to enforce such holder's rights under the Series B Guarantee. If the
Guarantee Trustee fails to enforce the Series B Guarantee, any holder of Series
B Preferred Securities may institute a legal proceeding directly against Western
Resources to enforce such holder's rights under the Series B Guarantee without
first instituting a legal proceeding against the Series B Issuer, the Guarantee
Trustee or any other person or entity. To the extent Western Resources was to
default on its obligation to pay amounts payable on the Series B Debentures, the
Series B Issuer would lack sufficient available funds for the payment of
distributions on or amounts payable on redemption of the Series B Trust
Securities and, in such event, holders of the Series B Preferred Securities
would not be able to rely on the Series B Guarantee for payment of such amounts.
Instead, the remedy of a holder of Series B Preferred Securities would be to
enforce the rights of the Series B Issuer under the Series B Debentures held by
the Series B Issuer. The above mechanisms and obligations relating to the Series
B Guarantee and the Series B Debentures and the obligations of Western Resources
under the Series B Trust Agreement to pay certain obligations, costs and
expenses of the Series B Issuer (the "Series B Expense Agreement"), taken
together, are a full and unconditional guarantee by Western Resources of
payments due on the Series B Preferred Securities. See "Certain Terms of the
Series B Guarantee" and "Certain Terms of the Series B Debentures."
CERTAIN TERMS OF THE SERIES B GUARANTEE
GENERAL
The following summary Description of the Series B Guarantee sets forth
certain portions of the description of the terms and provisions of the Series B
Guarantee included in the accompanying Prospectus under the heading,
"Description of the Guarantees," to which reference is hereby made. This summary
of certain terms and provisions of the Series B Guarantee does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
Series B Guarantee. The form of Series B Guarantee has been filed as an exhibit
to the Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus are a part.
Western Resources will guarantee, on a subordinated basis, the obligations
of the Series B Issuer with respect to the Series B Preferred Securities;
provided that the Series B Guarantee will not apply to any payment of
distributions if and to the extent that the Series B Issuer does not have funds
sufficient to make such payments. If Western Resources does not make interest
payments on the Series B Debentures held by the Series B Issuer, it is expected
that the Series B Issuer will not pay distributions on the Series B Preferred
Securities. The Series B Guarantee will rank subordinate and junior in right of
S-13
<PAGE>
payment to all liabilities of Western Resources (except trade credit and any
liabilities that may be made pari passu with or subordinate to the Series B
Guarantee expressly by their terms). See "Description of the Guarantees --
Status of the Guarantees" in the accompanying Prospectus.
EVENTS OF DEFAULT
An event of default under the Series B Guarantee will occur upon the failure
of Western Resources to perform any of its payment obligations thereunder.
If the Guarantee Trustee fails to enforce the Series B Guarantee, any holder
of Series B Preferred Securities may institute a legal proceeding directly
against Western Resources to enforce such holder's rights under the Series B
Guarantee without first instituting a legal proceeding against the Series B
Issuer, the Guarantee Trustee or any other person or entity. The Series B
Guarantee is a guarantee of payment, not of collection.
TERMINATION OF THE SERIES B GUARANTEE
The Series B Guarantee will terminate and be of no further force and effect
upon full payment of the Redemption Price of all Series B Preferred Securities,
the distribution of Series B Debentures to holders of Series B Preferred
Securities in exchange for all of the Series B Preferred Securities or upon
payment in full of the amounts payable upon liquidation of the Series B Issuer.
CERTAIN TERMS OF THE SERIES B DEBENTURES
GENERAL
The following summary Description of the Series B Debentures sets forth
certain portions of the description of the terms and provisions of the
Debentures included in the accompanying Prospectus under the heading,
"Description of the Debentures," to which reference is hereby made. This summary
of certain terms and provisions of the Series B Debentures does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
the Indenture, including the Series B Supplemental Indenture. The forms of
Indenture and Supplemental Indenture have been filed as exhibits to the
Registration Statement of which this Prospectus Supplement and the accompanying
Prospectus are a part.
Concurrently with the issuance of the Series B Preferred Securities, the
Series B Issuer will invest the proceeds thereof, together with the Series B
Common Securities, in the Series B Debentures issued by Western Resources to the
Series B Issuer. The Series B Debentures will bear interest at the annual rate
of %, payable quarterly in arrears, except in the event of an extension, on
March 31, June 30, September 30 and December 31 of each year commencing
, 1996. Interest which is accrued and unpaid after the quarterly
payment date therefor will bear additional interest on the amount thereof (to
the extent permitted by law) at the rate specified for the Series B Debentures.
The term "Interest" as used herein shall include quarterly interest payments,
interest on quarterly interest payments in arrears and Additional Interest (as
defined below), as applicable.
The Series B Debentures will be issued under the Indenture and the Series B
Supplemental Indenture. The Series B Debentures will mature on , 2036.
The Series B Debentures will be unsecured and will rank junior and be
subordinate in right of payment to all Senior Indebtedness of Western Resources.
See "Description of the Debentures -- Subordination" in the accompanying
Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Western Resources has the right at any time and from time to time, so long
as an Event of Default under the Indenture has not occurred and is continuing,
to extend the Interest payment period for the Series B Debentures for up to 20
consecutive quarters; provided that no Extension Period shall extend beyond the
stated maturity date or date of redemption of the Series B Debentures. At the
end of the Extension Period, Western Resources is obligated to pay all interest
then accrued and unpaid (together with interest thereon to the extent permitted
by law). During any Extension Period, Western Resources will not declare or pay
any dividends or distributions (other than dividends or distributions payable in
common stock of Western Resources or other securities ranking junior in right of
payment to the Series B
S-14
<PAGE>
Debentures) on, or redeem, purchase, acquire, or make a liquidation payment with
respect to, any of its capital stock or any security ranking pari passu with or
junior in right of payment to the Series B Debentures, or make any guarantee
payment with respect to the foregoing (other than pro rata payments under the
Guarantees) or repurchase, or cause any of its subsidiaries to repurchase, any
security of Western Resources ranking pari passu with or junior in right of
payment to the Series B Debentures (except for payments made on any series of
Debentures upon the stated maturity of such Debentures); provided that Western
Resources may redeem, purchase, acquire or make a liquidation payment with
respect to any of its capital stock or any security ranking pari passu with or
junior in right of payment to the Series B Debentures, make any guarantee
payment with respect to the foregoing or repurchase, or cause any of its
subsidiaries to repurchase, any security of Western Resources ranking pari passu
with or junior in right of payment to the Series B Debentures with securities
(or the proceeds from the issuance of securities) having no higher ranking than
the capital stock or the other securities which are to be redeemed, purchased,
acquired, with respect to which a liquidation payment is to be made, to which a
guarantee payment is to be made with respect to the foregoing or which are to be
repurchased. This covenant requires that an interest payment period on one
series of Debentures may be extended only if the interest payment periods on all
series of Debentures are likewise extended. Prior to the termination of any
Extension Period, Western Resources may further extend the interest payment
period, provided that such Extension Period, together with all such previous and
further extensions thereof, may not exceed 20 consecutive quarters or extend
beyond the maturity or redemption date of the Series B Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due,
Western Resources may select a new Extension Period subject to the above
requirements.
So long as the Property Trustee shall be the sole holder of the Series B
Debentures, Western Resources is required to give the Property Trustee and the
Debenture Trustee notice of its selection of such Extension Period at least one
Business Day prior to the date the Property Trustee or Western Resources is
required to give notice to any national securities exchange on which any of the
Series B Preferred Securities are listed or other applicable self-regulatory
organization or to holders of the Series B Preferred Securities on the record
date, but in any event not less than one Business Day prior to such record date.
The Debenture Trustee will be required to give notice of Western Resources'
selection of such Extension Period to the holders of the Series B Preferred
Securities and the Administrative Trustees.
ADDITIONAL INTEREST
If at any time the Series B Issuer is required to pay additional
distributions on distributions in arrears in respect of the Series B Preferred
Securities, Western Resources will pay to the Series B Issuer as the holder of
the Series B Debentures an amount of additional interest ("Additional Interest
Attributable to Deferral") equal to such additional distributions on
distributions in arrears. Accordingly, in such circumstances Western Resources
will, to the extent permitted by applicable law, pay interest upon interest in
order to provide for quarterly compounding on the Series B Debentures. In
addition, if the Series B Issuer is required to pay taxes, duties, assessments
or governmental charges of whatever nature (other than withholding taxes)
imposed by the United States or any other taxing authority, then, in any case,
Western Resources will also pay such amounts as shall be required so that the
net amounts received and retained by the Series B Issuer after paying such
taxes, duties, assessments or governmental charges will be not less than the
amounts the Series B Issuer would have received had no such taxes, duties,
assessments or governmental charges been imposed ("Additional Interest
Attributable to Taxes" and, together with Additional Interest Attributable to
Deferral, "Additional Interest").
REDEMPTION
The Series B Debentures are redeemable prior to maturity at the option of
Western Resources (i) at any time on or after the date set forth on page S-2 of
this Prospectus Supplement, in whole or in part, and (ii) if a Special Event
occurs and is continuing, in whole, but not in part, in each case at a
Redemption Price equal to 100% of the principal amount thereof plus accrued
interest to the Redemption Date. The Series B Debentures will be subject to
optional redemption in whole, but not in part, upon the termination and
liquidation of the Series B Issuer pursuant to an order for the dissolution,
termination or liquidation of
S-15
<PAGE>
the Series B Issuer entered by a court of competent jurisdiction. For so long as
the Series B Trust is the holder of all Series B Debentures outstanding, the
proceeds of any redemption described in this section shall be used by the Series
B Issuer to redeem the Series B Preferred Securities and the Series B Common
Securities in accordance with their terms.
Western Resources shall not redeem the Series B Debentures in part unless
all accrued and unpaid interest (including any Additional Interest) has been
paid in full on all Series B Debentures outstanding for all quarterly interest
periods on or prior to the Redemption Date.
DISTRIBUTIONS OF SERIES B DEBENTURES
Under certain circumstances involving the termination of the Series B
Issuer, Series B Debentures may be distributed to the holders of the Series B
Preferred Securities in liquidation of the Series B Issuer, after satisfaction
of all liabilities to creditors of the Series B Issuer as provided by applicable
law. If distributed to holders of Series B Preferred Securities in liquidation,
the Series B Debentures will initially be issued in the form of one or more
global securities, and DTC, or any successor depositary for the Series B
Preferred Securities, will act as depositary for the Series B Debentures. It is
anticipated that the depositary arrangements for the Series B Debentures, if
distributed, would be substantially identical to those in effect for the Series
B Preferred Securities. Neither Western Resources, the Debenture Trustee, any
Paying Agent nor any other agent of Western Resources or the Debenture Trustee
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of persons holding Series B Debentures in the
form of a global security for the Series B Debentures or for maintaining,
supervising or reviewing any records relating to such holders.
A global security shall be exchangeable for Series B Debentures registered
in the names of persons other than DTC or its nominee only if (i) DTC notifies
Western Resources that it is unwilling or unable to continue as a depositary for
such global security and no successor depositary shall have been appointed, or
if at any time DTC ceases to be a clearing agency registered under the
Securities Exchange Act of 1934, as amended, at a time when DTC is required to
be so registered to act as such depositary, (ii) Western Resources in its sole
discretion determines that such global security shall be so exchangeable, or
(iii) there shall have occurred and be continuing an Event of Default with
respect to such global security. Any global security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for definitive
certificates registered in such names as DTC shall direct. It is expected that
such instructions will be based upon directions received by DTC from its
Participants (as defined in the accompanying Prospectus) with respect to the
ownership of beneficial interests in such global security. In the event that
Series B Debentures are issued in definitive form, such Series B Debentures will
be issued in denominations of $25 and integral multiples thereof and may be
transferred or exchanged at the offices described below.
Payments on Series B Debentures represented by a global security will be
made to DTC, as the depositary for the Series B Debentures. In the event Series
B Debentures are issued in definitive form, principal and interest will be
payable, the transfer of the Series B Debentures will be registrable, and Series
B Debentures will be exchangeable for Series B Debentures of other denominations
of a like aggregate principal amount, at the corporate office of the Debenture
Trustee in Wilmington, Delaware, or at the offices of any paying or transfer
agent appointed by Western Resources, provided that payment of interest may be
made, at the option of Western Resources, by check mailed to the address of the
persons entitled thereto or by wire transfer. In addition, if the Series B
Debentures are issued in certificated form, the record dates for payment of
interest will be the 15th day preceding the end of each quarter. For a
description of DTC and the terms of the depositary arrangements relating to
payments, transfers, voting rights and other matters, see "Description of the
Preferred Securities -- Book-Entry-Only Issuance -- The Depository Trust
Company" in the accompanying Prospectus.
If the Series B Debentures are distributed to the holders of Series B
Preferred Securities upon the liquidation of the Series B Issuer, Western
Resources will use its best efforts to list the Series B Debentures on such
stock exchanges, if any, as the Series B Preferred Securities are then listed.
S-16
<PAGE>
UNITED STATES TAXATION
GENERAL
The following is a summary of certain United States Federal income tax
considerations that may be relevant to prospective purchasers of Series B
Preferred Securities and represents the opinion of Cahill Gordon & Reindel,
counsel to Western Resources, insofar as it relates to matters of law and legal
conclusions. This section is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing and proposed regulations
thereunder and current administrative rulings and court decisions, all of which
are subject to change. Subsequent changes may cause tax consequences to
investors to vary substantially from the consequences described below. Unless
otherwise stated, this summary deals only with Series B Preferred Securities
held as capital assets and not with special classes of holders, such as dealers
in securities or currencies, life insurance companies, persons holding Series B
Preferred Securities as a hedge against or which are hedged against currency
risks or as a part of a straddle, or persons whose functional currency is not
the United States dollar.
POTENTIAL INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF SERIES B PREFERRED SECURITIES IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR OTHER TAX LAWS.
While Western Resources believes, based upon the advice of its counsel, that
the Series B Debentures will be treated as indebtedness for United States
Federal income tax purposes, holders of Series B Preferred Securities should
note that the Internal Revenue Service (the "IRS") may attempt to treat the
Series B Debentures as equity rather than indebtedness for tax purposes. If the
IRS were successful in such attempt, the Series B Debentures would be subject to
redemption at the option of Western Resources as described under "Certain Terms
of the Series B Preferred Securities -- Special Event Redemption or
Distribution." The Series B Debentures would also be subject to redemption at
the option of Western Resources if the tax law changed, as a result of the
Proposed Legislation or otherwise, so that in Western Resources' judgment it
would be precluded from deducting interest on the Series B Debentures. See
"Western Resources, Inc. -- Recent Developments" and "Certain Terms of the
Series B Preferred Securities -- Special Event Redemption or Distribution."
INCOME FROM SERIES B PREFERRED SECURITIES
In connection with the issuance of the Series B Preferred Securities, Cahill
Gordon & Reindel will render its opinion generally to the effect that under then
current law, and assuming full compliance with the terms of the Series B Trust
Agreement and the Indenture (and certain other documents), the Series B Issuer
will be classified for United States Federal income tax purposes as a grantor
trust and not as an association taxable as a corporation.
As a consequence, each holder of Series B Preferred Securities will be
considered the owner of a pro rata portion of the Series B Debentures held by
the Series B Issuer. As a further consequence, each holder of Series B Preferred
Securities will be required to include in gross income his or her pro rata share
of the income accrued on the Series B Debentures held by the Series B Issuer.
Such income should not exceed distributions received by the holders of Series B
Preferred Securities on the Series B Preferred Securities except in the case of
an extension of the interest payment period as described under "Certain Terms of
the Series B Preferred Securities -- Distributions." No portion of such income
will be eligible for the dividends-received deduction.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Under the Indenture, Western Resources has the option to extend from time to
time the interest payment period on the Series B Debentures to a period not
exceeding 20 consecutive quarters but not beyond the maturity date or redemption
date of the Series B Debentures. Western Resources' option to extend the
interest payment period (even if not exercised) will cause the Series B
Debentures, from the date of issuance, to be treated as issued with "original
issue discount" for United States Federal income tax purposes. Accordingly, a
holder of Series B Preferred Securities will accrue interest income (i.e.,
S-17
<PAGE>
original issue discount) under a constant yield basis over the term of the
Series B Debentures (including any Extension Period), regardless of the receipt
of cash with respect to the period to which such income is attributable.
Holders of Series B Preferred Securities during an Extension Period will
include interest in gross income in advance of the receipt of cash, and any
holders of Series B Preferred Securities who dispose of Series B Preferred
Securities prior to the record date for the payment of distributions will
include such interest in gross income, but will not receive any cash related
thereto from the Series B Issuer. The tax basis of a Series B Preferred Security
will be increased by the amount of any original issue discount that is included
in income without the receipt of cash, and will be decreased when and if such
cash is subsequently received by the holder of the Series B Preferred Security.
DISPOSITION OF SERIES B PREFERRED SECURITIES
Gain or loss will be recognized on a sale, including a redemption for cash,
of Series B Preferred Securities in an amount equal to the difference between
the amount realized and the tax basis of a holder of the Series B Preferred
Securities in his or her Series B Preferred Securities. Gain or loss recognized
by a holder of Series B Preferred Securities on the sale or exchange of Series B
Preferred Securities held for more than one year generally will be taxable as
long-term capital gain or loss.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder or beneficial owner who or which is (i) a nonresident alien individual or
(ii) a foreign corporation, foreign partnership, foreign estate or foreign
trust, in any such case not subject to United States Federal income tax on a net
income basis in respect of the Series B Preferred Securities.
Under present United States Federal income tax law, subject to the
discussion below with respect to backup withholding:
(i) Payments by the Series B Issuer or any of its Paying Agents to any
United States Alien Holder will not be subject to United States withholding
tax provided that (a) the beneficial owner of the Series B Preferred
Securities does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Western Resources, (b) the
beneficial owner of the Series B Preferred Securities is not a "controlled
foreign corporation" for United States tax purposes that is related to
Western Resources through stock ownership, and (c) either (1) the beneficial
owner of the Series B Preferred Securities certifies to the Series B Issuer
or its agent, under penalties of perjury, that it is a United States Alien
Holder and provides its name and address or (2) the holder of the Series B
Preferred Securities is a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary
course of its trade or business (a "financial institution"), and such
statement has been received from the beneficial owner by such financial
institution or by a financial institution intermediary between it and the
beneficial owner, and such financial institution furnishes the Series B
Issuer with a copy thereof; and
(ii) a United States Alien Holder of the Series B Preferred Securities
will not be subject to United States Federal income or withholding tax on
any gain realized on the sale or exchange of the Series B Preferred
Securities unless (a) such person is present in the United States for 183
days or more in the taxable year of sale and (b) such person has a "tax
home" in the United States or certain other requirements are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information requirements will apply to payments to noncorporate
United States holders of the proceeds of the sale of the Series B Preferred
Securities within the United States, and "backup withholding" at a rate of 31%
will apply to such payments if the seller fails to provide a correct taxpayer
identification number.
Payments of the proceeds from the sale by a United States Alien Holder of
Series B Preferred Securities made to or through a foreign office of a broker
will not be subject to information reporting or
S-18
<PAGE>
backup withholding, except that, if the broker is a United States person, a
"controlled foreign corporation" for United States tax purposes or a foreign
person 50% or more of whose gross income is effectively connected with a United
States trade or business for a specified three-year period, information
reporting may apply to such payments. Payments of the proceeds from the sale of
Series B Preferred Securities to or through the United States office of a broker
is subject to information reporting and backup withholding unless the holder or
beneficial owner certifies as to its non-United States status or otherwise
establishes an exemption from information reporting and backup withholding.
The Internal Revenue Service has issued proposed regulations which, if
enacted in their current form, would require backup withholding on payments with
respect to the Series B Debentures that are made outside the United States if
the payor has actual knowledge that the recipient is a United States holder. The
proposed regulations are proposed to be effective for payments made after
December 31, 1997, and current law would remain in effect until then. United
States holders should consult with their tax advisors as to compliance with the
new rules so as to avoid possible backup withholding on payments after 1997.
RECEIPT OF SERIES B DEBENTURES UPON LIQUIDATION OF THE SERIES B ISSUER
Under certain circumstances as described in "Certain Terms of the Series B
Preferred Securities -- Special Event Redemption or Distribution," Western
Resources may cause the Series B Issuer to be terminated and the Series B
Debentures to be distributed to the holders of Series B Preferred Securities in
liquidation of such holders' interests in the Series B Issuer. Under current
United States Federal income tax law and interpretations, if the Series B Trust
is treated as a grantor trust at the time of the distribution, such a
distribution should not be treated as a taxable event to holders of the Series B
Preferred Securities. Such a tax-free transaction would result in a holder of
Series B Preferred Securities retaining an aggregate tax basis in the Series B
Debentures equal to such holder's aggregate tax basis in the holder's pro rata
share of the Series B Debentures prior to the distribution. A holder's holding
period for such Series B Debentures would include the period for which the
Series B Preferred Securities were held by such holder.
If the Series B Trust were not treated as a grantor trust at the time of the
distribution, the distribution could be a taxable event to holders of the Series
B Preferred Securities, in which case the principles discussed above under "--
Disposition of Series B Preferred Securities" would apply, and the holders would
have a new tax basis and holding period in the Series B Debentures.
S-19
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
Western Resources and the Series B Issuer have agreed that the Series B Issuer
will sell to each of the underwriters named below (collectively, the
"Underwriters"), and each of such Underwriters for whom Goldman, Sachs & Co.,
Smith Barney Inc., Bear, Stearns & Co. Inc., Dillon, Read & Co. Inc., Prudential
Securities Incorporated and EVEREN Securities, Inc. are acting as
representatives (the "Representatives"), has severally agreed to purchase, the
respective number of Series B Preferred Securities set forth opposite its name
below:
<TABLE>
<CAPTION>
NUMBER OF
SERIES B
PREFERRED
UNDERWRITER SECURITIES
- ----------------------------------------------------------------------------------- --------------
<S> <C>
Goldman, Sachs & Co................................................................
Smith Barney Inc...................................................................
Bear, Stearns & Co. Inc............................................................
Dillon, Read & Co. Inc.............................................................
Prudential Securities Incorporated.................................................
EVEREN Securities, Inc.............................................................
--------------
Total.......................................................................... 4,800,000
--------------
--------------
</TABLE>
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all the Series B Preferred
Securities offered hereby, if any are taken.
The Underwriters propose to offer the Series B Preferred Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement and in part to certain securities
dealers at such price less a concession of $ per Series B Preferred Security
($
per Series B Preferred Security in the case of certain institutions). The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per Series B Preferred Security to certain brokers and dealers. After the
Series B Preferred Securities are released for sale to the public, the offering
price and other selling terms may from time to time be varied by the
Representatives.
In view of the fact that the proceeds from the sale of the Series B
Preferred Securities (together with the delivery by the Series B Issuer to
Western Resources of the Series B Common Securities) will be used to purchase
the Series B Debentures issued by Western Resources, the Underwriting Agreement
provides that Western Resources will pay as Underwriters' compensation for the
Underwriters arranging the investment therein of such proceeds, an amount of
$ per Series B Preferred Security (or $ per Series B Preferred Security
sold to certain institutions) for the accounts of the several Underwriters.
Western Resources and the Series B Issuer have agreed, during the period
beginning from the date of the Underwriting Agreement and continuing to and
including the earlier of (i) the date on which the distribution of the Series B
Preferred Securities ceases, as determined by the Underwriters, or (ii) 30 days
after the issuance of the Series B Preferred Securities, not to offer, sell,
contract to sell or otherwise dispose of any securities, any other interests of
the Series B Issuer or any preferred securities or interests of any other
issuer, as the case may be, that are substantially similar to the Series B
Preferred Securities
S-20
<PAGE>
(including any guarantee of such securities or interests) or any securities
convertible into or exchangeable for, or that represent the right to receive,
any such securities or other interests, without the prior written consent of the
Representatives.
Prior to this offering, there has been no market for the Series B Preferred
Securities. The Series B Preferred Securities have been approved for listing on
the New York Stock Exchange, subject to notice of issuance, under the symbol "WR
PrB." In order to meet one of the requirements for listing the Series B
Preferred Securities on the New York Stock Exchange, the Underwriters have
undertaken to sell lots of 100 or more Series B Preferred Securities to a
minimum of 400 beneficial holders. Trading of the Series B Preferred Securities
on the New York Stock Exchange is expected to commence within a thirty-day
period after the initial delivery of the Series B Preferred Securities. The
Representatives have advised Western Resources that they intend to make a market
in the Series B Preferred Securities prior to the commencement of trading on the
New York Stock Exchange, but are not obligated to do so and may discontinue any
such market-making at any time without notice. No assurance can be given as to
the liquidity of the trading market for the Series B Preferred Securities.
Western Resources and the Series B Issuer have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.
Certain of the Underwriters engage in transactions with, and from time to
time have performed services for, Western Resources in the ordinary course of
business.
S-21
<PAGE>
[LOGO]
WESTERN RESOURCES CAPITAL I
WESTERN RESOURCES CAPITAL II
CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT THAT EACH SUCH ISSUER,
RESPECTIVELY, HAS FUNDS AS SET FORTH HEREIN BY
WESTERN RESOURCES, INC.
---------
Western Resources Capital I and Western Resources Capital II, each a
statutory business trust formed under the laws of the State of Delaware (each,
an "Issuer" and, collectively, the "Issuers") may severally offer, from time to
time, their respective cumulative quarterly income preferred securities (the
"Preferred Securities") representing preferred undivided beneficial interests in
the assets of each Issuer. Western Resources, Inc., a Kansas corporation
("Western Resources"), will be the sole owner of the beneficial interests
represented by common securities (the "Common Securities") of each Issuer.
Wilmington Trust Company is the Property Trustee of each Issuer. The payment of
periodic cash distributions ("Distributions") with respect to the Preferred
Securities and payments on liquidation or redemption with respect to such
Preferred Securities are each guaranteed by Western Resources in the case of
each Issuer (a "Guarantee"), in each case only out of funds held by such Issuer.
The obligations of Western Resources under each Guarantee will be subordinate
and junior in right of payment to all liabilities of Western Resources except
trade credit and any liabilities that may be made pari passu with or subordinate
to the Guarantees expressly by their terms ("Senior Indebtedness"). Concurrently
with the issuance by an Issuer of its Preferred Securities, such Issuer will
invest the proceeds thereof in Western Resources' deferrable interest
subordinated debentures (the "Debentures") having terms corresponding to such
Issuer's Preferred Securities. The Debentures will be unsecured and subordinate
and junior in right of payment to the Senior Indebtedness of Western Resources.
The Debentures held by each Issuer will be its sole asset, and the interest and
payments of principal on such Debentures will be its only revenues. Upon the
occurrence of certain events, Western Resources may redeem the Debentures or may
terminate either Issuer and cause the Debentures to be distributed to the
holders of the corresponding Preferred Securities in liquidation of the interest
in such Issuer represented by such Preferred Securities. See "Description of the
Preferred Securities -- Liquidation Distribution Upon Dissolution."
The Preferred Securities may be offered in amounts, at prices and on terms
to be determined at the time of offering, provided, however, that the aggregate
initial public offering price of all Preferred Securities issued pursuant to
this Prospectus shall not exceed $220,000,000. Certain specific terms of each
Issuer's Preferred Securities in respect of which this Prospectus is being
delivered will be set forth in an accompanying Prospectus Supplement, including,
where applicable and to the extent not set forth herein, the identity of the
Issuer, the specific title, the aggregate amount, the distribution rate (or the
method for determining such rate), the stated liquidation preference, redemption
provisions, other rights, the initial public offering price and any other
special terms, as well as any planned listing on a securities exchange, of such
Preferred Securities.
The Preferred Securities may be sold in a public offering to or through
underwriters or dealers designated from time to time. See "Plan of
Distribution." The names of any of the underwriters or dealers involved in the
sale of the Preferred Securities in respect of which this Prospectus is being
delivered, the number of Preferred Securities to be purchased by any such
underwriters or dealers, any applicable commissions or discounts and the net
proceeds to each Issuer will be set forth in the applicable Prospectus
Supplement.
Each Prospectus Supplement will also contain information concerning certain
United States Federal income tax considerations applicable to the Preferred
Securities offered thereby.
--------------
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 PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
The date of this Prospectus is December 1, 1995, as supplemented.
<PAGE>
AVAILABLE INFORMATION
Western Resources is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by Western Resources may be inspected and
copied at the public reference facilities maintained by the Commission in Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at 7 World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials may be obtained upon written
request from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, Western
Resources is required to file electronic versions of these documents with the
Commission through the Commission's Electronic Data Gathering, Analysis, and
Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. In addition, such material may also be inspected and copied at the
offices of the New York Stock Exchange, Inc. (the "New York Stock Exchange"), 20
Broad Street, New York, New York 10005, on which certain of Western Resources'
securities are listed.
Western Resources and the Issuers have filed with the Commission a
registration statement on Form S-3 (herein together with all amendments and
exhibits thereto, referred to as the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is hereby made to the
Registration Statement.
No separate financial statements of the Issuers are included herein. Western
Resources considers that such financial statements would not be material to
holders of the Preferred Securities because: (i) all of the Common Securities of
the Issuers are owned by Western Resources, a reporting company under the
Exchange Act; (ii) the Issuers have no independent operations, but exist for the
sole purpose of issuing the Preferred Securities and investing the proceeds
thereof (plus the Common Securities) in the Debentures; and (iii) the
obligations of the Issuers under the Preferred Securities, to the extent funds
are available therefor, are fully and unconditionally guaranteed to the extent
set forth herein by Western Resources.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Western Resources
pursuant to the Exchange Act, are incorporated herein by reference:
1. Western Resources' Annual Report on Form 10-K for the year ended
December 31, 1994. Such report includes the Annual Report on Form 10-K
for Kansas Gas and Electric Company ("KG&E") for the year ended December
31, 1994.
2. Western Resources' Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
3. Western Resources' Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995.
4. Western Resources' Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995.
5. Western Resources' Current Reports on Form 8-K dated January 31, 1995
and August 18, 1995.
6. KG&E's Current Report on Form 8-K dated August 18, 1995.
All other documents filed by Western Resources pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of this offering shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the respective
dates of the filing of such documents. Western Resources expressly excludes from
such
2
<PAGE>
incorporation the Report of the Compensation Committee and the Performance Graph
contained in any proxy statement filed by Western Resources pursuant to Section
14 of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Preferred Securities hereby.
Any statement contained herein or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this 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
Prospectus.
Western Resources will provide without charge to each person, including a
beneficial owner, to whom a copy of this Prospectus has been delivered, upon the
written or oral request of any such person, a copy of any and all of the
documents incorporated herein by reference, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to Western
Resources, Inc., 818 Kansas Avenue, Topeka, Kansas 66612, telephone (913)
575-6322, Attention: Richard D. Terrill, Esq., Secretary of Western Resources.
THE ISSUERS
GENERAL
Each of the Issuers is a statutory business trust formed under Delaware law
pursuant to (i) a trust agreement executed by Western Resources (the
"Depositor"), as the depositor of each Issuer, and the Issuer Trustees (as
defined herein) and (ii) the filing of a certificate of trust with the Delaware
Secretary of State. Each such trust agreement will be amended and restated in
its entirety (as so amended and restated, a "Trust Agreement" and, collectively,
the "Trust Agreements") substantially in the form filed as an exhibit to the
Registration Statement of which this Prospectus is a part. Each Trust Agreement
will be qualified as an indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The Issuers exist for the exclusive purpose
of (i) issuing their respective Preferred Securities and their Common
Securities, (ii) purchasing the Debentures with the Common Securities and the
proceeds from the sale of the Preferred Securities and (iii) engaging only in
those other activities necessary or incidental thereto. All of the Common
Securities will be owned by Western Resources. The Common Securities will rank
pari passu, and payments will be made thereon pro rata, with the Preferred
Securities, except that upon the occurrence and continuance of an Event of
Default (as defined herein) under a Trust Agreement, the rights of the holders
of the corresponding Common Securities to payment in respect of distributions
and payments upon liquidation, redemption or other acquisition of Common
Securities will be subordinated to the rights of the holders of Preferred
Securities. Western Resources will acquire Common Securities of each Issuer in
an aggregate liquidation amount equal to 3% of the total capital of each Issuer.
Each Issuer has a term of approximately 30 to 49 years, as specified in the
applicable Prospectus Supplement, but may terminate earlier as provided in the
Trust Agreement with respect to such Issuer. Each Issuer's business and affairs
is conducted by its trustees, each appointed by Western Resources as holder of
the Common Securities: Wilmington Trust Company (the "Property Trustee") and
three individual trustees (the "Administrative Trustees") who are employees or
officers of or affiliated with Western Resources (collectively, the "Issuer
Trustees"). Western Resources, as the Depositor of the Issuer, or, the holders
of a majority in liquidation amount of the Issuer Securities (as defined
herein), if an Event of Default has occurred and is continuing, will be entitled
to appoint, remove or replace the Issuer Trustees. Unless an Event of Default
shall have occurred and is continuing, the holders of the Issuer Securities
shall not have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in Western
Resources as the Depositor of the Issuer. The duties and obligations of each of
the Issuer Trustees are governed by the applicable Trust Agreement. Western
Resources has agreed to pay all fees and expenses related to each Issuer and the
offering of the Preferred Securities and has agreed to pay, directly or
indirectly, all ongoing costs, expenses and liabilities of each Issuer.
3
<PAGE>
ACCOUNTING TREATMENT
The Trusts are special purpose entities which are effectively controlled by
Western Resources. The financial position, operating results and cash flows of
these special purpose entities will be consolidated with Western Resources. The
Debentures issued by Western Resources to the Trusts and all other intercompany
transactions will be eliminated in consolidation. The Preferred Securities
issued by the Trusts will be reflected as a separate line item titled
"Company-obligated Mandatorily Redeemable Preferred Securities of Trusts holding
solely Company Subordinated Debt Securities" in Western Resource's Consolidated
Statement of Capitalization.
WESTERN RESOURCES, INC.
GENERAL
Western Resources is a combination electric and natural gas public utility
engaged in the generation, transmission, distribution and sale of electric
energy in Kansas and the purchase, distribution, transportation and sale of
natural gas in Kansas and Oklahoma. The Company was incorporated under the laws
of the State of Kansas in 1924. The Company's principal executive offices (as
well as its principal place of business) are located at 818 Kansas Avenue,
Topeka, Kansas 66612, and its telephone number is (913) 575-6300.
OTHER
The following additional information is provided with respect to certain
contracts discussed under "Item 1. Business" in Western Resources' Annual Report
on Form 10-K for the year ended December 31, 1994 (the "1994 Form 10-K") which
is incorporated herein by reference. Western Resources believes that its
business is not substantially dependent on such contracts discussed below. Each
of these contracts is more fully described in the 1994 Form 10-K.
Specifically, Western Resources believes that there are plentiful sources of
coal available at reasonable prices to replace, if necessary, coal to be
supplied pursuant to Western Resources' contracts with Caballo Rojo, Inc. and
Carter Mining Company.
Transportation contracts with Southern Pacific Lines and The Atchison,
Topeka and Santa Fe Railway Company are related to only two of Western
Resources' coal-burning facilities which constitute approximately 15% of Western
Resources' total electric generating capacity.
Western Resources' business is not substantially dependent on its gas supply
contracts with Kansas Gas Supply, with Amoco Production Company ("Amoco") or its
short-term spot market agreement to supply gas for its Lawrence and Tecumseh
stations. The Kansas Gas Supply contract is a fixed rate contract expiring by
the end of December 1995. Western Resources expects to purchase readily
available gas from the spot market to replace most of this supply. Natural gas
supplied through the WNG system under its short-term spot market agreement with
various suppliers fuels gas-burning facilities that constitute less than 1% of
Western Resources' total electric generating capacity. The Amoco contract
supplies Western Resources' distribution systems served from interstate pipeline
systems. Amoco is one of various suppliers of natural gas over the WNG pipeline
system. If the Amoco contract were cancelled, Western Resources believes it
could replace gas supplied by Amoco with gas from other suppliers to the WNG
system.
In the event that Western Resources were required to replace any of the
foregoing supply or transportation contracts, it would not substantially disrupt
Western Resources' business.
DESCRIPTION OF THE PREFERRED SECURITIES
GENERAL
An original trust agreement between Western Resources, as Depositor, and
Wilmington Trust Company, as the Property Trustee, has been used to authorize
and create each Issuer. The original trust agreements are filed as exhibits to
the Registration Statement of which this Prospectus is a part. The Preferred
Securities and the Common Securities of each Issuer (together, the "Issuer
Securities") will be issued by the Administrative Trustees on behalf of each
Issuer pursuant to the terms of each Issuer's Trust Agreement (as amended and
restated from the original trust agreement). Each Issuer's Preferred
4
<PAGE>
Securities represent undivided beneficial trust interests in the assets of such
Issuer and entitle the holders thereof to a preference over the Common
Securities of such Issuer, in certain circumstances, with respect to
distributions and amounts payable on redemption or liquidation as well as to
other benefits as described in the applicable Trust Agreement. The following
summary of certain provisions of the Trust Agreements does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
provisions of such Trust Agreements and the Trust Indenture Act. Wherever
particular sections or defined terms of the Trust Agreements are referred to,
such sections or defined terms are incorporated herein by reference. Section
references used herein are references to provisions of the Trust Agreements
unless otherwise stated.
All of the Common Securities of each Issuer will be owned by Western
Resources. The Common Securities of each Issuer rank pari passu, and payments
will be made thereon pro rata, with the Preferred Securities of each such Issuer
except as described under "-- Subordination of Common Securities." (Section
4.03). Legal title to the Debentures will be held in the name of the Property
Trustee and held in trust for the benefit of the holders of the Issuer
Securities. (Section 2.09). Each Guarantee is a full and unconditional guarantee
on a subordinated basis with respect to the related Preferred Securities but
does not guarantee payment of distributions or amounts payable on redemption or
liquidation of the related Preferred Securities when the Issuer does not have
funds sufficient to make such payments.
The Preferred Securities will initially be offered in denominations of $25
(based on Liquidation Amount) and integral multiples of $25 in excess thereof.
DISTRIBUTIONS
The distributions payable on each series of Preferred Securities will be
fixed at the rate per annum set forth in the applicable Prospectus Supplement.
Distributions in arrears after the quarterly payment date therefor will
accumulate additional distributions thereon at the same rate per annum, to the
extent permitted by law. The term "distributions" as used herein includes any
such additional distributions, unless otherwise stated, and shall also include
any Additional Amounts (as defined herein) with respect to the Preferred
Securities. The amount of distributions payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months and, for any period
shorter than a full month, shall be computed on the basis of the actual number
of days elapsed in such period. (Section 4.01(b)). See "Description of the
Debentures -- Additional Interest."
Distributions on the Preferred Securities will be cumulative, will accrue
from the date of the initial issuance thereof, and will be payable quarterly in
arrears, on March 31, June 30, September 30 and December 31 of each year, except
in the event of an extension of the interest payment period by Western Resources
on the corresponding series of Debentures. In the event that any date on which
distributions are otherwise payable on Preferred Securities is not a Business
Day, payment of the distributions payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect to any such delay) except that, if such Business Day is in the next
succeeding calendar year, payment of such distribution shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date (each date on which distributions are otherwise payable
in accordance with the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than (x) a Saturday or a Sunday, (y) a day on which banks in
New York are authorized or obligated by law or executive order to remain closed
or (z) a day on which the Corporate Trust Office of the Property Trustee or the
principal office of Western Resources is closed for business. (Sections 1.01 and
4.01(a)).
Western Resources has the right under the Deferrable Interest Subordinated
Debenture Indenture (the "Indenture"), as supplemented by a Supplemental
Indenture relating to a series of Debentures (a "Supplemental Indenture"), to
extend, from time to time, the interest payment period on each series of
Debentures issued thereunder for a period not exceeding 20 consecutive quarters,
with the consequence that quarterly distributions on the corresponding Preferred
Securities would be deferred (but would continue to accrue distributions
thereon, including additional distributions payable on unpaid distributions to
the extent permitted by law at the rate per annum set forth in the applicable
Prospectus Supplement, compounded quarterly) by each Issuer during any such
extended interest payment period.
5
<PAGE>
In the event Western Resources exercises this right, during such period Western
Resources will not declare or pay any dividends or distributions (other than
dividends or distributions payable in common stock of Western Resources or other
securities ranking junior in right of payment to the Debentures) on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of its
capital stock or any security ranking pari passu with or junior in right of
payment to the Debentures, or make any guarantee payments with respect to the
foregoing (other than pro rata payments under the Guarantees) or repurchase, or
cause any of its subsidiaries to repurchase, any security of Western Resources
ranking pari passu with or junior in right of payment to the Debentures (except
for payments made on any series of Debentures upon the stated maturity of such
Debentures); provided that Western Resources may redeem, purchase, acquire or
make a liquidation payment with respect to any of its capital stock or any
security ranking pari passu with or junior in right of payment to the
Debentures, make any guarantee payment with respect to the foregoing or
repurchase, or cause any of its subsidiaries to repurchase, any security of
Western Resources ranking pari passu with or junior in right of payment to the
Debentures with securities (or the proceeds from the issuance of securities)
having no higher ranking than the capital stock or the other securities which
are to be redeemed, purchased, acquired, with respect to which a liquidation
payment is to be made, to which a guarantee payment is to be made with respect
to the foregoing or which are to be repurchased. This covenant requires that an
interest payment period on one series of Debentures may be extended only if the
interest payment periods on all series of Debentures are extended. Prior to the
termination of any such extended interest payment period, Western Resources may
further extend the interest payment period, provided that such extended interest
payment period, together with all previous and further extensions thereof, may
not exceed 20 consecutive quarters or extend beyond the maturity or the
redemption date of the series of the Debentures in question. Upon the
termination of any extended interest payment period and the payment of all
amounts then due, Western Resources may select a new extended interest payment
period subject to the foregoing requirements. See "Description of the Debentures
- -- Interest" and "-- Western Resources' Option to Extend Interest Payment
Periods."
It is anticipated that the income of each Issuer available for distribution
to the holders of the Preferred Securities of such Issuer will be limited to the
payments under the Debentures which the Issuer will purchase with the Common
Securities and the proceeds from the issuance and sale of the Preferred
Securities. See "Description of the Debentures." If Western Resources does not
make interest payments on the Debentures, the Property Trustee will not have
funds available to pay distributions on the Preferred Securities. The payment of
distributions (if and to the extent an Issuer has funds sufficient to make such
payments) is guaranteed on a subordinated basis by Western Resources to the
extent set forth herein under "Description of the Guarantees."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of the applicable Issuer on the relevant
record dates, which, as long as the Preferred Securities remain in
book-entry-only form, will be one Business Day prior to the relevant
Distribution Date. Subject to any applicable laws and regulations and the
provisions of the applicable Trust Agreement, each such payment will be made as
described under "-- Book-Entry-Only Issuance -- The Depository Trust Company"
below. In the event that the Preferred Securities do not remain in
book-entry-only form, the relevant record date shall be the date 15 days prior
to the relevant Distribution Date. (Section 4.01(d)).
REDEMPTION
Upon the repayment of any series of Debentures, whether at maturity or upon
earlier redemption as provided in the Indenture, the proceeds from such
repayment shall be applied by the Property Trustee to redeem a Like Amount (as
defined herein) of corresponding Issuer Securities, upon not less than 30 nor
more than 90 days' notice, at the Liquidation Amount plus accumulated and unpaid
distributions to the Redemption Date (the "Redemption Price"). See "Description
of the Debentures -- Optional Redemption."
Western Resources will have the right to redeem the Debentures of any
particular series (a) on or after a date to be specified in the Prospectus
Supplement with respect to such series of Debentures, in
6
<PAGE>
whole or in part, or (b) at any time, in whole but not in part, upon occurrence
of a Tax Event or an Investment Company Event (each as defined below, a "Special
Event"), subject to the conditions described under "Description of the
Debentures -- Optional Redemption."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If a Special Event shall occur and be continuing with respect to an Issuer
or the Preferred Securities of such Issuer, Western Resources has the right to
(i) redeem the corresponding Debentures in whole, but not in part, and thereby
cause a mandatory redemption of such Preferred Securities in whole, but not in
part, at the Redemption Price within 90 days following the occurrence of such
Special Event, or (ii) terminate the Issuer and cause the corresponding
Debentures to be distributed, subject to the receipt of an Opinion of Counsel
experienced in such matters to the effect that the holders of the Preferred
Securities will not recognize gain or loss for United States Federal income tax
purposes as a result of such distribution, to the holders of the Preferred
Securities of such series in liquidation of such Issuer. If at any time an
Issuer is not or will not be taxed as a grantor trust, but a Tax Event has not
occurred, the Depositor has the right to terminate such Issuer and cause the
corresponding Debentures to be distributed, subject to the receipt of an Opinion
of Counsel experienced in such matters to the effect that the holders of the
Preferred Securities will not recognize gain or loss for United States Federal
income tax purposes as a result of such distribution, to the holders of the
Preferred Securities of such Issuer. Under current United States Federal income
tax law and interpretations, if the applicable Trust is treated as a grantor
trust at the time of the distribution, such a distribution should not be a
taxable event to holders of the Preferred Securities. Should there be a change
in law, a change in legal interpretation, a Special Event or other
circumstances, however, the termination could be a taxable event to holders of
the Preferred Securities of an Issuer. See "United States Taxation -- Receipt of
Series A Debentures Upon Liquidation of the Series A Issuer," in the
accompanying Prospectus Supplement. If Western Resources does not elect either
option (i) or (ii) above, the Preferred Securities will remain outstanding.
"Tax Event" means the receipt by an Issuer or Western Resources, as the case
may be, of an Opinion of Counsel (which may be counsel to the Issuer, Western
Resources or an affiliate, and which must be reasonably acceptable to the
Property Trustee) experienced in such matters to the effect that a relevant tax
law change has occurred after a date specified in the accompanying Prospectus
Supplement. For purposes of the preceding sentence, a relevant tax law change is
any amendment or change to (or officially proposed amendment or change to) the
laws (including regulations thereunder) of the United States or any political
subdivision or taxing authority thereof, or the publication of any judicial
opinion interpreting such laws (and regulations) or any written interpretation
of such laws (or regulations) by any governmental authority having jurisdiction
to enforce or administer such laws (or regulations) (including official and
unofficial opinions purporting to apply such laws and regulations to other
persons who have issued securities similar to the Debentures), which amendment,
change, proposed amendment or change, opinion or interpretation could, if valid
and enacted or applied to an Issuer or Western Resources, result in (i) such
Issuer, either currently or within 90 days of the date thereof, becoming subject
to United States Federal income tax with respect to interest received on a
series of Debentures, (ii) interest payable by Western Resources on a series of
Debentures attributable to the Preferred Securities, either currently or within
90 days of the date thereof, becoming nondeductible for United States Federal
income tax purposes or (iii) an Issuer, either currently or within 90 days of
the date thereof, becoming subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
"Investment Company Event" means the occurrence of a change in law or
regulation or a change in the interpretation or application of any law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that an Issuer is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in
1940 Act Law becomes effective after a date specified in the accompanying
Prospectus Supplement.
"Like Amount" means (i) with respect to a redemption of Issuer Securities,
Issuer Securities having an aggregate Liquidation Amount equal to the principal
amount of corresponding Debentures to be
7
<PAGE>
contemporaneously redeemed in accordance with the Indenture and the proceeds of
which will be used to pay the Redemption Price of such Issuer Securities and
(ii) with respect to a distribution of a series of Debentures to holders of the
corresponding Preferred Securities in connection with the termination or
liquidation of the applicable Issuer upon the bankruptcy, dissolution or
liquidation of a holder of corresponding Common Securities, the occurrence of a
Special Event or in the event that the applicable Issuer is not or will not be
taxed as a grantor trust but a Tax Event has not occurred, Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Preferred
Securities of the holders to whom such series of Debentures is distributed.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each date fixed for redemption (the
"Redemption Date") shall be redeemed at the Redemption Price with the proceeds
from the contemporaneous redemption of the corresponding Debentures. Redemptions
of Preferred Securities shall be made, and the Redemption Price shall be deemed
payable, on each Redemption Date only to the extent that an Issuer has funds
sufficient for the payment of such Redemption Price. (Section 4.02(d)). See "--
Subordination of Common Securities."
If the Property Trustee gives a notice of redemption in respect of Preferred
Securities of a particular series (which notice will be conditioned upon the
redemption of the related series of Debentures), then, by 12:00 noon, New York
time, on the Redemption Date, the Property Trustee will, so long as such
Preferred Securities are in book-entry-only form, irrevocably deposit with The
Depository Trust Company ("DTC") funds sufficient to pay the applicable
Redemption Price and, at the direction of the Depositor, will give DTC
irrevocable instructions and authority to pay the Redemption Price to the
holders of such Preferred Securities. See "-- Book-Entry-Only Issuance -- The
Depository Trust Company." If such Preferred Securities are no longer in
book-entry-only form, the Property Trustee will irrevocably deposit with the
Paying Agent for such Preferred Securities funds sufficient to pay the
applicable Redemption Price and will give such Paying Agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing Preferred Securities.
Notwithstanding the foregoing, distributions payable on or prior to the
Redemption Date for any Preferred Securities called for redemption shall be
payable to the holders of such Preferred Securities on the relevant record date
for the related Distribution Date. If notice of redemption shall have been given
and funds deposited as required, then upon the date of such deposit, all rights
of holders of such Preferred Securities so called for redemption will cease,
except the right of the holders of such Preferred Securities to receive the
Redemption Price, but without interest on such Redemption Price, and such
Preferred Securities will cease to be outstanding. In the event that any date
fixed for redemption of Preferred Securities is not a Business Day, then payment
of the Redemption Price payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the Redemption Price in respect of Preferred
Securities called for redemption is not paid either by the applicable Issuer or
by Western Resources pursuant to the corresponding Guarantee described herein
under "Description of the Guarantees," distributions on such Preferred
Securities will continue to accrue at the rate set forth on the face of such
securities, from the original Redemption Date to the date of payment, in which
case the actual payment date will be considered the date fixed for redemption
for purposes of calculating the Redemption Price. (Section 4.02(e)).
Subject to applicable law (including, without limitation, United States
Federal securities law), Western Resources or its subsidiaries may at any time
and from time to time purchase outstanding Preferred Securities by tender, in
the open market or by private agreement.
Payment of the Redemption Price on Preferred Securities to holders of such
Preferred Securities shall be made to the record holders thereof as they appear
on the register for such Preferred Securities
8
<PAGE>
on the relevant record date, which shall be one Business Day prior to the
relevant Redemption Date, provided, however, that in the event that such
Preferred Securities do not remain in book-entry-only form, the relevant record
date shall be the date 15 days prior to the Redemption Date. (Section 4.02(f)).
If less than all the outstanding Issuer Securities are to be redeemed on a
Redemption Date, then the aggregate amount payable shall be allocated 3% to the
Common Securities and 97% to the Preferred Securities. The particular Preferred
Securities to be redeemed shall be selected not more than 90 days prior to the
Redemption Date by the Property Trustee from the outstanding Preferred
Securities of such series not previously called for redemption, by such method
as the Property Trustee shall deem fair and appropriate and which may provide
for the selection for redemption of portions (equal to $25 and integral
multiples in excess thereof) of the aggregate Liquidation Amount of Preferred
Securities of a denomination larger than $25. The Property Trustee shall
promptly notify the Securities Registrar in writing of the Preferred Securities
selected for partial redemption and, in the case of any such Preferred
Securities selected for partial redemption, the aggregate Liquidation Amount
thereof to be redeemed. For all purposes of each Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of a
series of Preferred Securities shall relate, in the case of any Preferred
Securities of such series redeemed or to be redeemed only in part, to the
portion of the aggregate Liquidation Amount of the Preferred Securities of such
series that has been or is to be redeemed. (Section 4.02(g)).
SUBORDINATION OF COMMON SECURITIES
Payment of distributions (including Additional Amounts, if applicable) on,
and the Redemption Price of, Issuer Securities, as applicable, shall be made pro
rata based on the aggregate Liquidation Amount of both the Preferred Securities
and the Common Securities; provided, however, that if on any Distribution Date
or Redemption Date an Event of Default (as defined herein, see "-- Events of
Default; Notice," below) under the Indenture shall have occurred and be
continuing, with respect to a series of Preferred Securities, no payment of or
any distribution (including Additional Amounts, if applicable) on, or the
Redemption Price of, any Common Security corresponding thereto, and no other
payment on account of the redemption, liquidation or other acquisition of the
corresponding Common Securities shall be made unless payment in full in cash of
all accumulated and unpaid distributions (including Additional Amounts, if
applicable) on all outstanding Preferred Securities of such series for all
distribution periods terminating on or prior thereto, or in the case of payment
of the Redemption Price the full amount of such Redemption Price on all such
outstanding Preferred Securities called for redemption, shall have been made or
provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all distributions (including
Additional Amounts, if applicable) on, or the Redemption Price of such Preferred
Securities then due and payable. (Section 4.03(a)).
In the case of any Event of Default under a Trust Agreement, the holder of
the corresponding Common Securities will be deemed to have waived any right to
act with respect to any such Event of Default under such Trust Agreement until
the effect of all such Events of Default with respect to corresponding Preferred
Securities have been cured, waived or otherwise eliminated. Until all such
Events of Default under such Trust Agreement have been so cured, waived or
otherwise eliminated, the Property Trustee shall act solely on behalf of the
holders of such Preferred Securities and not the holder of the corresponding
Common Securities, and only the holders of such Preferred Securities will have
the right to direct the Property Trustee to act on their behalf. (Section
4.03(b)).
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to either Trust Agreement, an Issuer shall be liquidated on the
first to occur of: (i) the expiration of the term of the relevant Trust; (ii)
the bankruptcy, dissolution or liquidation of a holder of Common Securities;
(iii) the Depositor has elected to cause the Trust to be dissolved after the
occurrence of a Special Event or in the event that the Trust is not or will not
be taxed as a grantor trust but a Tax Event has not occurred; (iv) the
redemption of all of the Preferred Securities of such series; and (v) an order
for dissolution of the Trust issued by a court of competent jurisdiction.
(Sections 9.01 and 9.02).
If an early termination occurs as described in clause (iii) of the
immediately preceding paragraph, the Issuer in question shall be liquidated as
expeditiously as practicable by having the Property Trustee
9
<PAGE>
distribute, subject to the receipt of an Opinion of Counsel experienced in such
matters to the effect that the holders of the Preferred Securities will not
recognize gain or loss for United States Federal income tax purposes as a result
of such distribution, to each holder of Preferred Securities of such Issuer and
the corresponding Common Securities a Like Amount of Debentures held by such
Issuer (a "Final Distribution"). However, in the event that the Property Trustee
determines that such Final Distribution is impractical, the holders of such
Issuer Securities will be entitled to receive, out of the assets of such Issuer
available for distribution to holders after satisfaction of all liabilities of
creditors, an amount equal to, in the case of holders of Issuer Securities, the
aggregate of the stated Liquidation Amount of $25 per Issuer Security plus
accrued and unpaid distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"). If such Liquidation Distribution can be
paid only in part because an Issuer has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by such Issuer on the Issuer Securities shall be paid on a pro rata basis.
However, if an Event of Default has occurred and is continuing, the holders of
the Common Securities will be entitled to receive distributions upon any such
dissolution only after the holders of the corresponding Preferred Securities. If
the Debentures of a particular series are distributed to the holders of the
corresponding Preferred Securities, Western Resources will use reasonable
efforts to have such Debentures listed on the New York Stock Exchange or such
other exchange on which the corresponding Preferred Securities are then listed.
If an early termination occurs as described in clause (ii) of the immediately
preceding paragraph, a liquidating trustee (the "Liquidating Trustee") may be
appointed by a majority of the aggregate Liquidation Amount of the Issuer
Securities or by a court of competent jurisdiction. Any such Liquidating Trustee
shall (unless otherwise instructed by a court of competent jurisdiction) make a
Final Distribution or, if deemed appropriate by such Liquidating Trustee, make a
Liquidation Distribution, in substantially the same manner as described above.
(Section 9.04).
EVENTS OF DEFAULT; NOTICE
The occurrence of an "Event of Default" as defined in Section 501 of the
Indenture (see "Description of the Debentures -- Events of Default") constitutes
an "Event of Default" under the affected Trust Agreement.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the affected Preferred
Securities, the Administrative Trustees and the Depositor, unless such Event of
Default shall have been cured or waived. (Section 8.02).
Unless an Event of Default shall have occurred and be continuing, any
Trustee with respect to a particular series of Issuer Securities may be removed
at any time by act of Western Resources, as Depositor of the Issuer. If an Event
of Default has occurred and is continuing, any Trustee with respect to a
particular series of Issuer Securities may be removed at such time by act of the
holders of a majority in aggregate Liquidation Amount of the outstanding Issuer
Securities of such series, delivered to such Trustee (in its individual capacity
and on behalf of the relevant Issuer). No resignation or removal of a Trustee
and no appointment of a successor Trustee shall be effective until the
acceptance of appointment by the successor Trustee in accordance with the
provisions of the applicable Trust Agreement. (Section 8.10).
If an Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the corresponding Common Securities upon
dissolution of the relevant Issuer as described above. See "-- Liquidation
Distribution Upon Dissolution."
MERGER OR CONSOLIDATION OF A TRUSTEE
Any corporation into which either the Property Trustee or any Administrative
Trustee that is not a natural person may be merged or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which any such Trustee shall be a party shall be the successor
to such Trustee under the Trust Agreements, provided such corporation is
otherwise qualified and eligible. (Section 8.12).
10
<PAGE>
VOTING RIGHTS
Except as provided below and under "Description of the Guarantees --
Amendments and Assignments" and as otherwise required by law, the holders of the
Preferred Securities will have no voting rights. (Section 6.01(a)).
So long as any Debentures of a particular series are held by an Issuer, the
Property Trustee shall not (i) direct the time, method and place of conducting
any proceeding for any remedy available to the Debenture Trustee, or executing
any trust or power conferred on the Debenture Trustee with respect to the
Debentures of such series, (ii) waive any past default which is waivable under
Section 513 of the Indenture, (iii) exercise any right to rescind or annul any
declaration that the principal of all the Debentures of such series shall be due
and payable or (iv) consent to any amendment, modification or termination of the
Indenture or the Debentures of such series, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
at least a majority in aggregate Liquidation Amount of the outstanding Issuer
Securities of such series; provided, however, that where a consent under the
Indenture would require the consent of each holder of Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior consent of each holder of the Issuer Securities of such series. The
Property Trustee shall not revoke any action previously authorized or approved
by a vote of the holders of the Issuer Securities of a particular series, except
pursuant to a subsequent vote of the outstanding Issuer Securities. The Property
Trustee shall notify all holders of an affected series of Issuer Securities of
any notice of default received from the Debenture Trustee. In addition to
obtaining the foregoing approvals of the holders of the Issuer Securities of a
particular series, prior to taking any of the foregoing actions, the Property
Trustee shall obtain an Opinion of Counsel experienced in such matters to the
effect that the applicable Issuer will not be classified as an association
taxable as a corporation for United States Federal income tax purposes on
account of such action. (Section 6.01(b)).
If any proposed amendment to a Trust Agreement relating to a particular
series of Issuer Securities provides for, or the Trustees otherwise propose to
effect, (i) any action that would adversely affect the powers, preferences or
special rights of the holders of such Issuer Securities, whether by way of
amendment to the Trust Agreement relating to such Issuer Securities or
otherwise, or (ii) the dissolution, winding up or termination of the Issuer of
such Issuer Securities, other than pursuant to the Trust Agreement relating to
such series of Issuer Securities, then the holders of the outstanding Issuer
Securities of such series will be entitled to vote on such amendment or
proposal, and such amendment or proposal shall not be effective except with the
approval of the holders of at least a majority in aggregate Liquidation Amount
of such outstanding Issuer Securities. (Section 6.01(c)).
No amendment to a Trust Agreement may be made if, as a result of such
amendment, the applicable Issuer would be classified as an association taxable
as a corporation for United States Federal income tax purposes. (Section
6.01(c)).
Any required approval of the holders of Issuer Securities of a particular
series may be given at a separate meeting of the holders of Issuer Securities of
such series convened for such purpose or pursuant to the written consent of such
holders. The Administrative Trustees will cause a notice of any meeting at which
holders of such Issuer Securities are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to be given to
each holder of record of such Issuer Securities in the manner set forth in the
applicable Trust Agreement. (Section 6.02).
No vote or consent of the holders of Issuer Securities of a particular
series will be required for the applicable Issuer to redeem and cancel Issuer
Securities of such series in accordance with the applicable Trust Agreement.
Notwithstanding that holders of Issuer Securities are entitled to vote or
consent under any of the circumstances described above, any of the Issuer
Securities that are owned by Western Resources, any Trustee or any affiliate of
Western Resources or any Trustee, shall, for purposes of such vote or consent,
be treated as if they were not outstanding.
11
<PAGE>
CO-PROPERTY TRUSTEES AND SEPARATE PROPERTY TRUSTEES
Unless an Event of Default under a Trust Agreement shall have occurred and
be continuing, at any time or times, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in which any part
of the Trust Property (as defined in the applicable Trust Agreement) may at the
time be located, the Depositor and the Administrative Trustees shall have power
to appoint, and upon the written request of the Administrative Trustees, Western
Resources, as Depositor, shall for such purpose join with the Administrative
Trustees in the execution, delivery and performance of all instruments and
agreements necessary or proper to appoint one or more persons approved by the
Property Trustee either to act as co-property trustee, jointly with the Property
Trustee, of all or any part of such Trust Property, or to act as separate
trustee of any such Trust Property, in either case with such powers as may be
provided in the instrument of appointment, and to vest in such person or persons
in such capacity, any property, title, right or power deemed necessary or
desirable, subject to the provisions of the applicable Trust Agreement. If
Western Resources, as Depositor, does not join in such appointment within 15
days after the receipt by it of a request to do so, or in case an Event of
Default under the Indenture has occurred and is continuing, the Administrative
Trustees and the Property Trustee shall have power to make such appointment.
(Section 8.09).
PAYMENT AND PAYING AGENTS
Payments in respect of the Preferred Securities shall be made to DTC, which
shall credit the relevant accounts at DTC on the applicable Distribution Dates
or, if the Preferred Securities are not held by DTC, such payments shall be made
by check mailed to the address of the holder entitled thereto as such address
shall appear on the securities register. The Paying Agent shall initially be
Wilmington Trust Company. The Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustees, the
Property Trustee and the Depositor. In the event that Wilmington Trust Company
chooses no longer to be the Paying Agent, the Administrative Trustees shall
appoint a successor acceptable to the Property Trustee and Western Resources to
act as Paying Agent (which shall be a bank or trust company or Western
Resources). (Sections 4.04 and 5.08).
BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
DTC will act as securities depositary for the Preferred Securities. The
Preferred Securities will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered global Preferred Security certificates will be issued,
representing in the aggregate the total number of Preferred Securities, and will
be deposited with Wilmington Trust Company, as custodian for DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds the securities that its participants ("Participants") deposit with it. DTC
facilitates the settlement of securities transactions among Participants through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers, securities dealers, banks, trust
companies, clearing corporations and certain other organizations ("Direct
Participants"). DTC is owned by a number of its Direct Participants, as well as
by the New York Stock Exchange, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers, securities dealers, banks
and trust companies that clear through or maintain a custodial relationship with
a Direct Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to DTC and its Participants are on file with the
Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is, in turn, recorded on a Direct
or Indirect Participant's records, as the case may be. Beneficial Owners will
not receive written
12
<PAGE>
confirmation from DTC of their purchases, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the respective Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are also effected
by entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Preferred Securities, except in the event that use of the
book-entry system for the Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants are responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
the arrangements made among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices, if any, will be sent to DTC. If less than all of the
Preferred Securities of a particular series are being redeemed, DTC's practice
is to determine by lot the amount of the Preferred Securities held by each
Direct Participant in such series to be redeemed.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those cases where a vote is
required neither DTC nor Cede & Co. will itself consent or vote with respect to
any Preferred Securities. Under its usual procedures, DTC would mail an Omnibus
Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
(identified in a listing attached to the Omnibus Proxy) to whose accounts the
Preferred Securities are credited on the record date.
Distribution payments on the Preferred Securities will be made by the Issuer
to DTC. DTC's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings as shown on
DTC's records, unless DTC has reason to believe that it will not receive
payments on such payment date. Payments by Participants to Beneficial Owners
will be governed by standing instructions and customary practices and will be
the responsibility of such Participants and not of DTC, the applicable Issuer or
Western Resources, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of distributions to DTC is the
responsibility of the Issuer in question, disbursement of such payments to
Direct Participants is the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners is the responsibility of the Direct or
Indirect Participants in whose accounts the Preferred Securities are held,
respectively.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Issuer in question. If DTC stops providing such services and a successor
securities depositary is not obtained, Preferred Security certificates for the
affected series must be printed and delivered. Additionally, the Administrative
Trustees (with the consent of Western Resources) could decide to discontinue use
of the system of book-entry transfers through DTC (or a successor depositary).
In that event, definitive certificates for the Preferred Securities would be
printed and delivered.
The information in this Section concerning DTC and DTC's book-entry system
has been obtained from sources that Western Resources and the Issuers believe to
be reliable. None of Western Resources or the Issuers have responsibility for
the performance by DTC or its Participants of their respective obligations as
described herein or under the rules and procedures governing their respective
operations.
13
<PAGE>
REGISTRAR AND TRANSFER AGENT
Wilmington Trust Company will act as Securities Registrar and transfer agent
for the Issuer Securities. (Section 5.04).
Registration of transfers of Issuer Securities will be effected without
charge by or on behalf of either Issuer, but upon payment (with the giving of
such indemnity as the Issuer or Western Resources may require) in respect of any
tax or other governmental charges which may be imposed in connection therewith.
(Section 5.04).
The Securities Registrar will not be required to register or cause to be
registered any transfer of Issuer Securities of a particular series after they
have been called for redemption. (Section 5.04).
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee undertakes to perform only such duties as are
specifically set forth in such Trust Agreement and, after an Event of Default
under the Indenture, must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the Property Trustee is under no obligation to
exercise any of the powers vested in it by the Indenture at the request of any
holder of Preferred Securities or Debentures of a particular series unless the
Property Trustee is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby. (Section 8.01).
Western Resources conducts other banking transactions with the Property
Trustee in the ordinary course of its business.
MODIFICATION OF THE TRUST AGREEMENTS
From time to time, Western Resources and the Trustees may, without the
consent of any holders of the Preferred Securities, amend either Trust Agreement
for specified purposes, including, among other things, (i) to cure ambiguities,
correct or supplement any provision of either Trust Agreement which may be
inconsistent with any other provision thereof or to make any other provisions
with respect to matters or questions arising under such Trust Agreement which
shall not be inconsistent with the other provisions of such Trust Agreement, or
(ii) to ensure that a Trust will not be classified for United States Federal
income tax purposes as an association taxable as a corporation and will not be
required to register as an "investment company" under the 1940 Act; provided,
however, that such amendment or action shall not adversely affect the rights of
any holder of the Issuer Securities. Each Trust Agreement contains provisions
permitting Western Resources and the Trustees, with the consent of the holders
of not less than a majority in aggregate Liquidation Amount of the outstanding
Issuer Securities related thereto and upon receipt of an appropriate opinion of
counsel, to modify such Trust Agreement in a manner affecting the rights of the
holders of such Issuer Securities; provided that no such modification may,
without the consent of the holder of each such outstanding Issuer Security
affected by the proposed modification (i) change the amount or timing of any
distribution on such Issuer Securities or otherwise adversely affect the amount
of any distribution required to be made in respect of such Issuer Securities as
of a specified date, or (ii) restrict the right of any holder of such Issuer
Securities to institute suit for the enforcement of any payment under such Trust
Agreement. (Section 10.02).
GOVERNING LAW
Each Trust Agreement will be governed by, and construed in accordance with,
the laws of the State of Delaware. (Section 10.05).
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of each Issuer and to operate each Issuer so that neither Issuer will be
deemed to be an "investment company" required to be registered under the 1940
Act or be taxed as a corporation for United States Federal income tax purposes
and so that the Debentures will be treated as indebtedness of Western Resources
for United States Federal income tax purposes. In this connection, the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of either Issuer or the Trust
14
<PAGE>
Agreements, that the Administrative Trustees determine in their discretion to be
necessary or desirable for such purposes, as long as such action does not
adversely affect the interest of the holders of the Preferred Securities.
(Section 2.07).
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE GUARANTEES
GENERAL
Set forth below is certain information concerning the Guarantees that will
be executed and delivered by Western Resources for the benefit of the holders
from time to time of Preferred Securities of each particular series. Each
Guarantee will be qualified as an indenture under the Trust Indenture Act.
Wilmington Trust Company will act as indenture trustee (the "Guarantee Trustee")
under each Guarantee for purposes of compliance with the Trust Indenture Act.
The terms of each Guarantee will be those set forth in such Guarantee and those
made part of such Guarantee by the Trust Indenture Act. This summary does not
purport to be complete and is subject in all respects to the provisions of, and
is qualified in its entirety by reference to, the Guarantees, a form of which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part, and of the Trust Indenture Act. The Guarantee Trustee will hold each
Guarantee for the benefit of the holders of the corresponding Preferred
Securities. Whenever particular provisions of or defined terms in the Guarantees
are referred to, such sections or defined terms are incorporated herein by
reference. Section references used herein are references to provisions of the
Guarantees unless otherwise stated.
Western Resources will agree, on a subordinated basis, to the extent set
forth below, to make the Guarantee Payments (as defined below) in full to the
holders of the Preferred Securities of a particular series (without duplication
of amounts theretofore paid by the applicable Issuer with respect thereto), as
and when due, regardless of any defense, right of set-off or counterclaim that
such Issuer may have or assert other than the defense of payment. (Section 5.1).
The following payments with respect to the Preferred Securities of a particular
series, to the extent not paid by or on behalf of the applicable Issuer (the
"Guarantee Payments"), will be subject to the related Guarantee (without
duplication): (i) any accrued and unpaid distributions required to be paid on
the Preferred Securities of such series, if and only to the extent that the
applicable Issuer has funds sufficient to make such payment; (ii) the Redemption
Price with respect to any such Preferred Securities called for redemption by the
applicable Issuer, if and only to the extent that the applicable Issuer has
funds sufficient to make such payment; and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of such Issuer (other than in connection
with a redemption of all of the corresponding Preferred Securities), the lesser
of (a) the aggregate Liquidation Amount and all accrued and unpaid distributions
on such Preferred Securities to the date of payment, to the extent the Issuer
has funds sufficient to make such payment, and (b) such amount of assets of such
Issuer remaining available for distribution to holders of such Preferred
Securities in liquidation of such Issuer. (Section 1.1). Western Resources'
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by Western Resources to the holders of such Preferred
Securities or by causing the applicable Issuer to pay such amounts to such
holders. (Section 5.1).
Each Guarantee will be a guarantee on a subordinated basis with respect to
the Preferred Securities of the corresponding series from the time of the
issuance of such Preferred Securities, but will not apply (i) to any payment of
distributions if and to the extent that the Issuer with respect thereto does not
have funds sufficient to make such payments or (ii) to the collection of
payment. If Western Resources does not make interest payments on a series of
Debentures held by an Issuer, it is expected that such Issuer will not pay
distributions on such Preferred Securities. The Guarantees will rank subordinate
and junior in right of payment to all liabilities of Western Resources (except
trade credit and any liabilities that may be made pari passu with or subordinate
to the Guarantees expressly by their terms, i.e., another Guarantee). See "--
Status of the Guarantees."
15
<PAGE>
With respect to a particular series of Preferred Securities, the mechanisms
and obligations relating to the corresponding Guarantee and the corresponding
series of Debentures and the obligations of Western Resources under the
applicable Trust Agreement to pay certain obligations, costs and expenses of the
Issuer (the "Expense Agreement," and, with respect to such obligations of
Western Resources under each Trust Agreement, the "Expense Agreements"), taken
together, are a full and unconditional subordinated guarantee by Western
Resources of payments due on such series of Preferred Securities. See
"Description of the Debentures" and "Relationship Among the Preferred
Securities, the Debentures and the Guarantees."
AMENDMENTS AND ASSIGNMENTS
Except with respect to any changes that do not adversely affect the rights
of the holders of Preferred Securities of a particular series (in which case no
consent of such holders will be required), the terms of a Guarantee may be
changed only with the prior approval of the holders of not less than a majority
in aggregate Liquidation Amount of such outstanding Preferred Securities. All
guarantees and agreements contained in any Guarantee will be binding upon the
successors, assigns, receivers, trustees and representatives of Western
Resources, and shall inure to the benefit of the holders of the corresponding
Preferred Securities then outstanding. (Sections 8.1 and 8.2).
EVENTS OF DEFAULT
An event of default under a Guarantee will occur upon the failure of Western
Resources to perform any of its payment obligations thereunder. (Section 1.1).
The holders of a majority in aggregate Liquidation Amount of the Preferred
Securities of the affected series have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of such Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under such Guarantee. (Section 5.4).
If the Guarantee Trustee fails to enforce a Guarantee, any holder of the
corresponding series of Preferred Securities may institute a legal proceeding
directly against Western Resources to enforce such Holder's rights under such
Guarantee without first instituting a legal proceeding against the applicable
Issuer, the Guarantee Trustee or any other person or entity. (Section 5.4).
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by Western Resources in the performance of a Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantees and,
after default with respect to any Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by a Guarantee at the
request of any holder of Preferred Securities of a particular series unless the
Guarantee Trustee is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. (Sections 3.1 and 3.2).
TERMINATION OF THE GUARANTEES
A Guarantee will terminate and be of no further force and effect upon full
payment of the Redemption Price of all Preferred Securities of the corresponding
series, the distribution of Debentures of the applicable series to the holders
of such Preferred Securities in exchange for all of such Preferred Securities or
upon payment in full of the amounts payable upon liquidation of the related
Issuer. Notwithstanding the foregoing, each Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of Preferred Securities must restore payment of any sums paid under such
Preferred Securities or the related Guarantee. (Section 7.1).
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of Western Resources
and will rank subordinate and junior in right of payment to all Senior
Indebtedness (as defined above) of Western
16
<PAGE>
Resources. (Section 6.1). Each Trust Agreement provides that each holder of
Preferred Securities of a particular series by acceptance thereof agrees to the
subordination provisions and other terms of the related Guarantee.
Each Guarantee will rank pari passu with each other Guarantee and with any
similar guarantees issued by the Guarantor on behalf of the holders of Preferred
Securities issued by any other Issuer holding Debentures issued under the
Indenture. (Section 6.2).
Each Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Guarantor to enforce its rights under the applicable Guarantee without first
instituting a legal proceeding against any other person or entity). (Section
5.5).
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the laws
of the State of New York. (Section 8.5).
DESCRIPTION OF THE DEBENTURES
GENERAL
Set forth below is a description of certain terms of the Debentures which
each Issuer will purchase with its Common Securities and the proceeds of the
issuance and sale of such Issuer's Preferred Securities. The following summary
does not purport to be complete and is subject in all respects to, and is
qualified in its entirety by reference to, the Indenture, as supplemented by the
Supplemental Indenture creating each series of Debentures, from Western
Resources to Wilmington Trust Company, as trustee with respect to the Debentures
(the "Debenture Trustee"), the forms of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part, and the Trust
Indenture Act. Whenever particular provisions of or defined terms in the
Indenture or the Supplemental Indenture are referred to, such sections or
defined terms are incorporated herein by reference. Section references used
herein are references to provisions of the Indenture unless otherwise stated.
Concurrently with the issuance of each Issuer's Preferred Securities, the
Issuer will invest the proceeds thereof in a corresponding series of Debentures
newly issued by Western Resources. The Debentures will be unsecured subordinated
obligations of Western Resources issued under the Indenture. Each series of
Debentures will be in a principal amount equal to the aggregate stated
Liquidation Amount of the corresponding Preferred Securities plus Western
Resources' concurrent investment in the Common Securities and will rank pari
passu with all other series of Debentures. The Indenture does not limit the
aggregate principal amount of Debentures which may be issued thereunder.
OPTIONAL REDEMPTION
Western Resources will have the right, at any time and from time to time, as
set forth in an applicable Supplemental Indenture, to redeem any series of
Debentures, in whole or in part, at a redemption price as set forth in such
Supplemental Indenture, together with any accrued but unpaid interest thereon,
including any Additional Interest (as defined below) to the redemption date.
If a Special Event shall occur and be continuing, Western Resources shall
have the right to redeem any series of Debentures in whole but not in part, at
the Redemption Price plus any accrued and unpaid interest on such series of
Debentures, including any Additional Interest, if any, to the redemption date
fixed for redemption for such series (the "Redemption Date"). (Section 102 of
the Supplemental Indenture).
For so long as an Issuer is the holder of all the outstanding Debentures of
a particular series, the proceeds of any such redemption will be used by such
Issuer to redeem Preferred Securities of such series and the corresponding
Common Securities in accordance with their terms. Western Resources may not
redeem any series of Debentures in part unless all accrued and unpaid interest
thereon
17
<PAGE>
(including any Additional Interest) has been paid in full on all outstanding
Debentures of such series for all quarterly interest periods terminating on or
prior to the Redemption Date. (Section 102 of the Supplemental Indenture).
Any optional redemption of any series of Debentures shall be made upon not
less than 30 nor more than 90 days' notice to the holders thereof. If at the
time of mailing of any notice of redemption Western Resources shall not have
deposited with the Debenture Trustee (and/or irrevocably directed the Debenture
Trustee to apply, from money held by it available to be used for the redemption
of Debentures) an amount in cash sufficient to redeem all of the Debentures to
be redeemed, including accrued interest to such Redemption Date, such notice
shall state that the proposed redemption to which such notice relates is subject
to the deposit of such amount with the Trustee on or before the Redemption Date.
(Section 1204).
After notice of redemption is given and Western Resources having on or
before the Redemption Date deposited with the Debenture Trustee (and/or having
irrevocably directed the Debenture Trustee to apply, from money held by it
available to be used for the redemption of Debentures) an amount in cash
sufficient to redeem all of the Debentures to be redeemed, the Debentures so to
be redeemed will, on the Redemption Date, become due and payable and from and
after such date, such Debentures will cease to bear interest. (Section 1206).
INTEREST
The Debentures of a particular series shall bear interest at the rate per
annum set forth in the applicable Supplemental Indenture and from the date
specified therein. Such interest shall be payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year (each, an "Interest
Payment Date"), subject to certain exceptions, to the person in whose name such
Debentures are registered, at the close of business on the Business Day next
preceding such Interest Payment Date. (Section 307 of the Indenture and Section
101 of the Supplemental Indenture). It is anticipated that the Debentures will
be held in the name of the Property Trustee in trust for the benefit of the
holders of the corresponding Issuer Securities.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months and, for any period shorter than a
full monthly period, shall be computed on the basis of the actual number of days
elapsed in such period. (Section 310). In the event that any date on which
interest is payable on the Debentures is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date the payment was
originally payable. (Section 101 of the Supplemental Indenture).
WESTERN RESOURCES' OPTION TO EXTEND INTEREST PAYMENT PERIODS
Western Resources shall have the right, at any time and from time to time
while the Debentures of any particular series are outstanding, so long as an
Event of Default has not occurred or is continuing, to extend the interest
payment period on such Debentures for a period not exceeding 20 consecutive
quarters (the "Extension Period") during which period interest will compound
quarterly. At the end of any such Extension Period, Western Resources must pay
all interest then accrued and unpaid (together with interest thereon at the rate
specified for such Debentures to the extent permitted by applicable law). During
any such Extension Period, Western Resources may not declare or pay any
dividends or distributions (other than dividends or distributions payable in
common stock of Western Resources or other securities ranking junior in right of
payment to the Debentures of such series) on, or redeem, purchase, acquire, or
make a liquidation payment with respect to, any of its capital stock or any
security ranking pari passu with or junior in right of payment to the Debentures
of such series, or make any guarantee payment with respect to the foregoing
(other than pro rata payments under the Guarantees) or repurchase, or cause any
of its subsidiaries to repurchase, any security of Western Resources ranking
pari passu with or junior in right of payment to the Debentures of such series
(except for payments made
18
<PAGE>
on any series of Debentures upon the stated maturity of such Debentures);
provided that Western Resources may redeem, purchase, acquire or make a
liquidation payment with respect to any of its capital stock or any security
ranking pari passu with or junior in right of payment to the Debentures of such
series, make any guarantee payment with respect to the foregoing or repurchase,
or cause any of its subsidiaries to repurchase, any security of Western
Resources ranking pari passu with or junior in right of payment to the
Debentures of such series with securities (or the proceeds from the issuance of
securities) having no higher ranking than the capital stock or the other
securities which are to be redeemed, purchased, acquired, with respect to which
a liquidation payment is to be made, to which a guarantee payment is to be made
with respect to the foregoing or which are to be repurchased. Such Extension
Period together with all such previous and further extensions thereof may not
exceed 20 consecutive quarters or extend beyond the maturity date or Redemption
Date of such Debentures. Upon the termination of any such Extension Period and
the payment of all amounts then due, Western Resources may select a new
Extension Period, subject to the foregoing requirements. No interest shall be
due and payable during an Extension Period, except at the end thereof. So long
as the Property Trustee shall be the sole holder of the Debentures, Western
Resources must give the Property Trustee, the Administrative Trustees and the
Debenture Trustee notice of its selection of such Extension Period at least one
Business Day prior to the earlier of (i) the date that the distribution on the
corresponding Preferred Securities is payable or (ii) the date the
Administrative Trustees are required to give notice to the New York Stock
Exchange or other applicable self-regulatory organization or to holders of the
Preferred Securities of such series of the record date for the payment of such
distribution or the date such distribution is payable, but in any event not less
than one Business Day prior to such record date. The Debenture Trustee will be
required to give prompt notice of Western Resources' selection of such Extension
Period to the holders of the Preferred Securities and the Administrative
Trustees. (Section 101 of the Supplemental Indenture).
ADDITIONAL INTEREST
If at any time an Issuer shall be required to pay any additional
distributions on distributions in arrears in respect of the Preferred Securities
of a particular series pursuant to the terms thereof, Western Resources will pay
as interest to such Issuer, as the holder of the Debentures of the corresponding
series, an amount of additional interest ("Additional Interest Attributable to
Deferral") equal to such additional distributions. Accordingly, in such
circumstances Western Resources will, to the fullest extent permitted by
applicable law, pay interest upon interest in order to provide for quarterly
compounding on such Debentures. In addition, if an Issuer is required to pay any
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States or any other taxing
authority, then, in each case, Western Resources will also pay such amounts as
shall be required so that the net amounts received and retained by such Issuer
after paying such taxes, duties, assessments or governmental charges will be not
less than the amounts such Issuer would have received had no such taxes, duties,
assessments or governmental charges been imposed ("Additional Interest
Attributable to Taxes," and, together with Additional Interest Attributable to
Deferral, "Additional Interest"). (Section 101 of the Indenture and Section 101
of the Supplemental Indenture).
RIGHT OF SET-OFF
Notwithstanding anything to the contrary in the Indenture, Western Resources
shall have the right to set-off any payment it is otherwise required to make
thereunder to the extent Western Resources has theretofore made, or is
concurrently on the date of such payment, making a payment under the related
Guarantee. (Section 311).
SUBORDINATION
The Debentures will be subordinate and junior in right of payment to the
prior payment, in full in cash or cash equivalents, of all Senior Indebtedness
(as defined below). (Sections 101 and 1101). In the event of (a) any insolvency
or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case or proceeding in connection therewith,
relating to Western Resources or to its creditors, as such, or to its assets, or
(b) any liquidation, dissolution or other winding up of Western Resources,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or
19
<PAGE>
(c) any assignment for the benefit of creditors or any other marshalling of
assets and liabilities of Western Resources (except a distribution in connection
with a consolidation of Western Resources with, or the merger of Western
Resources into, another corporation or the liquidation or dissolution of Western
Resources following conveyance, transfer or lease of its properties and assets
substantially as an entirety to another corporation upon the terms and
conditions described below under "-- Consolidation, Merger and Sale"), the
holders of all Senior Indebtedness will be entitled to receive payment in full
in cash or cash equivalents of all amounts due or to become due thereon, before
the holders of Debentures are entitled to receive any payment on account of the
principal of or interest on the Debentures; and any payment or distribution of
assets of Western Resources of any kind or character, whether in cash, property
or securities, by set-off or otherwise, to which the holders of the Debentures
or the Debenture Trustee would be entitled but for the provisions of the
Indenture relating to subordination shall be paid by the liquidating trustee or
agent or other person making such payment or distribution directly to the
holders of Senior Indebtedness ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness to the extent necessary
to make payment in full in cash or cash equivalents of all Senior Indebtedness
remaining unpaid. In the event that, notwithstanding the foregoing, the
Debenture Trustee or any holder of the Debentures shall have received payment or
distribution of assets of Western Resources of any kind or character (excluding
certain permitted subordinated securities) before all Senior Indebtedness is
paid in full or payment thereof provided for, then such payment or distribution
will be paid over or delivered to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other person making payment
or distribution of the assets of Western Resources for application to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in cash or cash equivalents. (Section 1102).
Western Resources is prohibited from making payments on account of the
principal of or interest on the Debentures or on account of the purchase or
redemption or other acquisition of the Debentures if there shall have occurred
and be continuing: (a) a default in any payment with respect to any Senior
Indebtedness (as defined herein) or (b) any other event of default with respect
to any Senior Indebtedness resulting in the acceleration of the maturity
thereof. (Section 1103). In the event that Western Resources makes any payment
to the Debenture Trustee or any holder of any series of Debentures, which
payment is prohibited by the foregoing, then such payment is required to be paid
over to the representative of the holders of the Senior Indebtedness then
outstanding to the extent necessary to pay in full, in cash or cash equivalents,
all Senior Indebtedness. (Section 1103).
Subject to the payment in full of all Senior Indebtedness, the holders of
the Debentures shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments and distributions of assets of Western
Resources applicable to the Senior Indebtedness until the Debentures are paid in
full. (Section 1105).
If Western Resources fails to make any payment on a series of Debentures
when due or within any applicable grace period, such failure will constitute an
Event of Default under the related Indenture. See "Events of Default."
As of September 30, 1995, the Senior Indebtedness of Western Resources was
approximately $1.8 billion. As a holding company, certain of Western Resources'
assets consist of the stock of its subsidiaries. Except to the extent that
Western Resources may itself be a creditor with recognized claims against
Western Resources' subsidiaries, the claims of the holders of the Debentures to
the assets of the subsidiaries of Western Resources effectively are subordinated
to the claims of direct creditors of such subsidiaries. See "Risk Factors --
Holding Company Structure" in the accompanying Prospectus Supplement.
20
<PAGE>
The term "Senior Indebtedness" shall mean the principal of, interest on and
any other payment due pursuant to any of the following, whether outstanding at
the date of execution of any Supplemental Indenture or thereafter incurred,
created or assumed:
(a) all indebtedness of Western Resources on a consolidated basis (other
than any obligations to trade creditors) evidenced by notes, debentures,
bonds or other securities sold by Western Resources for money borrowed and
capitalized lease obligations;
(b) all indebtedness of others of the kinds described in the preceding
clause (a) assumed by or guaranteed in any manner by Western Resources or in
effect guaranteed by Western Resources;
(c) all obligations of Western Resources issued or assumed as the
deferred purchase price of property, all conditional sale obligations of
Western Resources and all obligations of Western Resources under any title
retention agreement (but excluding trade accounts payable);
(d) certain obligations of Western Resources for the reimbursement of
any obligor on any letter of credit, banker's acceptance, security purchase
facility, surety bond or similar credit transaction entered into in the
ordinary course of business of Western Resources; and
(e) all renewals, extensions or refundings of indebtedness of the kinds
described in either of the preceding clauses (a) through (d);
unless, in the case of any particular indebtedness, capitalized lease
obligation, guarantee, renewal, extension or refunding, the instrument creating
or evidencing the same or the assumption or guarantee of the same expressly
provides that such indebtedness, renewal, extension or refunding is made pari
passu with or subordinate to the Debentures. (Section 101).
Notwithstanding the foregoing, each series of Debentures will rank pari
passu with each other series of Debentures.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued.
CERTAIN COVENANTS OF WESTERN RESOURCES
In the Indenture, Western Resources covenants that it will not declare or
pay any dividends or distributions (other than dividends or distributions
payable in common stock of Western Resources or other securities ranking junior
in right of payment to the Debentures of a particular series) on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock or any security ranking pari passu with or junior in right of
payment to the Debentures of such series, or make any guarantee payments with
respect to the foregoing (other than pro rata payments under the Guarantees) or
repurchase, or cause any of its subsidiaries to repurchase, any security of
Western Resources ranking pari passu with or junior in right of payment to the
Debentures of such series (except for payments made on any series of Debentures
upon the stated maturity of such Debentures); provided that Western Resources
may redeem, purchase, acquire or make a liquidation payment with respect to any
of its capital stock or any security ranking pari passu with or junior in right
of payment to the Debentures of such series, make any guarantee payment with
respect to the foregoing or repurchase, or cause any of its subsidiaries to
repurchase, any security of Western Resources ranking pari passu with or junior
in right of payment to the Debentures of such series with securities (or the
proceeds from the issuance of securities) having no higher ranking than the
capital stock or the other securities which are to be redeemed, purchased,
acquired, with respect to which a liquidation payment is to be made, to which a
guarantee payment is to be made with respect to the foregoing or which are to be
repurchased; if at such time (i) there shall have occurred any event of which
Western Resources has actual knowledge that (a) with the giving of notice or the
lapse of time, or both, would constitute an Event of Default with respect to
such series of Debentures under the Indenture and (b) which Western Resources
shall not have taken reasonable steps to cure, (ii) Western Resources shall be
in default with respect to its payment of any obligations under the Guarantee or
(iii) Western Resources shall have given notice of its selection of an Extension
Period as provided in the Indenture, and such Extension Period, or any extension
thereof, shall have commenced and be continuing. (Section 1005). Western
Resources also covenants (i) not to
21
<PAGE>
transfer ownership of Common Securities of the Issuer to which Debentures have
been issued to any person other than an Affiliate of Western Resources as
permitted under the Indenture; provided that no such transfer will result in (x)
such Issuer being considered an "investment company" that is required to be
registered under the Investment Company Act of 1940, as amended, or (y) the
Issuer not being taxed as a grantor trust for United States Federal income tax
purposes, (ii) not to voluntarily dissolve, wind up or terminate each Issuer,
except in connection with the distribution of the corresponding Debentures to
the holders of the Preferred Securities of such Issuer in liquidation of such
Issuer or in connection with certain mergers, consolidations or amalgamations
permitted by the corresponding Trust Agreement and (iii) to use its reasonable
efforts, consistent with the terms and provisions of the corresponding Trust
Agreement, to cause such Issuer to remain a grantor trust and otherwise not to
be classified as an association taxable as a corporation for United States
Federal income tax purposes. (Section 1005).
EVENTS OF DEFAULT
The Indenture will provide that any one or more of the following described
events with respect to a series of Debentures that has occurred and is
continuing constitutes an "Event of Default" with respect to such series of
Debentures:
(a) failure for 30 days to pay any interest on such series of
Debentures, including any Additional Interest in respect thereof, when due
(subject to the deferral of any due date in the case of an Extension
Period);
(b) failure to pay any principal on such series of Debentures when due
whether at maturity, upon redemption by declaration of acceleration or
otherwise; except that, in the case of an optional redemption, the failure
to redeem any Debenture which is the result of Western Resources' failure to
deposit on or before the Redemption Date with the Debenture Trustee (and/or
having irrevocably directed the Debenture Trustee to apply, from money held
by it available to be used for the redemption of Debentures) an amount in
cash sufficient to redeem all of the Debentures to be redeemed, shall not be
an Event of Default, but shall be deemed a rescission of the call for
redemption;
(c) failure to observe or perform in any material respect any other
covenant relating to such series of Debentures contained in the Indenture
for 90 days after written notice to Western Resources from the Debenture
Trustee or the holders of at least 25% in principal amount of the
outstanding Debentures of such series; or
(d) certain events in bankruptcy, insolvency or reorganization of
Western Resources. (Section 501).
If an Event of Default has occurred and is continuing, the holders of a
majority in outstanding principal amount of each affected series of Debentures
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Debenture Trustee. (Section 512). The Debenture
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of such series of Debentures may declare the principal and interest due
and payable immediately upon an Event of Default, and should the Debenture
Trustee or such holders of such Debentures fail to make such declaration the
holders of at least 25% in aggregate Liquidation Amount of Preferred Securities
of such series shall have such right. The holders of a majority in aggregate
outstanding principal amount of such series of Debentures may annul such
declaration and waive the default if the default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration and any Additional Interest has been deposited
with the Debenture Trustee. (Section 502).
The holders of a majority in outstanding principal amount of each series of
Debentures may, on behalf of the holders of all the Debentures of such series,
waive any past default, except a default in the payment of principal or interest
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee) or a default in respect of a covenant
or provision which under the Indenture cannot be modified or amended without the
consent of the holder of each outstanding Debenture of
22
<PAGE>
such series. (Section 513). Western Resources is required to file annually with
the Debenture Trustee a certificate as to whether or not Western Resources is in
compliance with all the material terms, conditions and covenants applicable to
it under the Indenture. (Section 1004).
A voluntary or involuntary dissolution of any Issuer prior to the redemption
or maturity of the Debentures held by such Issuer will not constitute an Event
of Default with respect to such Debentures. If any Issuer is dissolved, an event
the possibility of which Western Resources and the Issuers consider to be
remote, any of the following, among other things, could occur: (i) a
distribution of the Debentures held by such Issuer to the holders of the
corresponding Preferred Securities, (ii) a cash distribution to the holders of
such Preferred Securities out of the sale of assets of such Issuer, after
satisfaction of all liabilities to creditors, (iii) a permitted redemption at
par of the Debentures, and a consequent redemption of a Like Amount of such
Preferred Securities, at the option of Western Resources under the circumstances
described under "-- Optional Redemption" or (iv) the rollover of the Trust
Property (as defined in the Trust Agreement) into another entity with similar
characteristics.
FORM, EXCHANGE AND TRANSFER
The Debentures, if issued in certificated form, will be issuable only in
registered form, without coupons and only in denominations of $25 and integral
multiples thereof. (Section 302).
Subject to the terms of the Indenture, Debentures may be presented for
registration of transfer or exchange (duly endorsed or accompanied by
satisfactory instruments of transfer) at the office of the Securities Registrar
or at the office of any transfer agent designated by Western Resources for such
purpose. No service charge will be made for any registration of transfer or
exchange of Debentures, but Western Resources may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. Such transfer or exchange will be effected upon the Securities
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of transfer, title and identity of the person making the request.
Western Resources has appointed the Debenture Trustee as the initial Securities
Registrar. (Section 305). Western Resources may at any time designate additional
transfer agents, rescind the designation of any transfer agent or approve a
change in the office through which any transfer agent acts. (Section 1002).
If a series of Debentures is to be redeemed in part, Western Resources will
not be required to issue, register the transfer of or exchange any Debentures of
such series during a period beginning at the opening of business 15 days before
the day of mailing of the notice of redemption for such Debentures that may be
selected for redemption and ending at the close of business on the day of such
mailing. (Section 305).
PAYMENT AND PAYING AGENTS
Payment of interest on a Debenture on any Interest Payment Date will be made
to the Person in whose name such Debenture (or one or more predecessor
Debentures) is registered at the close of business on the Regular Record Date
for such interest. (Section 307).
Principal of and any interest on the Debentures will be payable at the
office of such Paying Agent or Paying Agents as Western Resources may designate
for such purpose from time to time, except that at the option of Western
Resources, payment of any interest may be made by check mailed to the address of
the person entitled thereto as such address appears in the Securities Register
or by wire transfer. (Section 101 of the Supplemental Indenture). The corporate
trust office of the Debenture Trustee in the City of Wilmington, Delaware is
designated as Western Resources' initial sole Paying Agent for payments with
respect to the Debentures. Western Resources may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts. (Section
1002).
SUPPLEMENTAL INDENTURES, MODIFICATION OF THE INDENTURE
From time to time Western Resources and the Debenture Trustee may, without
the consent of the holders of any series of Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies, qualifying, or maintaining the
qualification of, the Indenture under the Trust Indenture Act, or making any
other change that does not
23
<PAGE>
adversely affect the rights of any holder of Debentures. (Section 901). The
Indenture will contain provisions permitting Western Resources and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of any outstanding series of Debentures affected, to modify the
Indenture in a manner affecting the rights of the holders of such series of
Debentures; provided that no such modification may, without the consent of the
holder of each outstanding Debenture so affected, (i) change the fixed maturity
of any series of Debentures, reduce the principal amount thereof, or reduce the
rate or extend the time for payment of interest thereon (otherwise than as
permitted under the Indenture), (ii) reduce the percentage of the principal
amount of Debentures of any series, the holders of which are required to consent
to any such modification of the Indenture or (iii) modify certain provisions of
the Indenture relating to the waiver of past defaults or compliance by Western
Resources with certain covenants set forth therein. The Indenture also requires
the consent of the holders of the affected Preferred Securities in respect of
certain amendments to or termination of the Indenture and in respect to
compliance by Western Resources with certain covenants in the Indenture.
(Section 902). In addition, Western Resources and the Debenture Trustee may
execute, without the consent of any holders of Debentures, Supplemental
Indentures for the purpose of creating new series of Debentures. (Section 901).
CONSOLIDATION, MERGER AND SALE
Western Resources may not consolidate with, merge into, or convey, transfer
or lease its properties and assets substantially as an entirety to, any Person
(a "Successor Person"), and may not permit any Person to merge into, or convey,
transfer or lease its properties and assets substantially as an entirety to
Western Resources, unless: (i) the Successor Person (if any), is a corporation,
partnership, trust or other entity organized and validly existing under the laws
of any United States jurisdiction and assumes Western Resources' obligations on
the Debentures, the Indenture, the Guarantees and the Expense Agreements (as
defined below); (ii) immediately after giving effect to the transaction and
treating any indebtedness which becomes an obligation of Western Resources or
any subsidiary as a result of the transaction as having been incurred by it at
the time of the transaction, no Event of Default, and no event which, after
notice or lapse of time, would become an Event of Default, shall have occurred
and be continuing; (iii) such transaction does not give rise to any breach or
violation of the Trust Agreement or the Guarantee; and (iv) Western Resources
has delivered to the Debenture Trustee an Officers' Certificate and an Opinion
of Counsel as to certain matters. (Section 801).
SATISFACTION AND DISCHARGE
Under the terms of the Indenture, Western Resources will be discharged from
any and all obligations in respect of a particular series of Debentures (except,
in each case, for certain obligations to register the transfer or exchange of
such Debentures, replace stolen, lost or mutilated Debentures and hold moneys or
U.S. Government Obligations (as defined in the Indenture) for payment in trust)
if Western Resources deposits with the Debenture Trustee, in trust, moneys or
U.S. Government Obligations in an amount sufficient to pay all the principal of,
and interest on, such series of Debentures on the dates such payments are due in
accordance with the terms of such Debentures. (Section 401).
GOVERNING LAW
The Indenture, the Supplemental Indentures and the Debentures will be
governed by, and construed in accordance with, the laws of the State of New
York. (Section 112).
MISCELLANEOUS
Western Resources will have the right at all times to assign any of its
rights or obligations under the Indenture to a direct or indirect wholly owned
subsidiary of Western Resources, provided that, in the event of any such
assignment, Western Resources will remain liable for such obligations. Subject
to the foregoing, the Indenture will be binding upon and inure to the benefit of
the parties thereto and their respective successors and assigns. (Section 109).
24
<PAGE>
RELATIONSHIP AMONG THE PREFERRED
SECURITIES, THE DEBENTURES AND THE GUARANTEES
As long as payments of interest and other payments are made when due on each
series of Debentures, such payments will be sufficient to cover distributions
and other payments due on the Preferred Securities of the corresponding series,
because: (i) the aggregate principal amount of each series of Debentures will be
equal to the sum of the aggregate stated Liquidation Amount of the corresponding
Issuer Securities; (ii) the interest rate and interest and other payment dates
on each series of Debentures will correspond to the distribution rate and
distribution and other payment dates on the Preferred Securities of such series;
(iii) the Expense Agreements entered into by Western Resources pursuant to the
Trust Agreements provide that Western Resources shall pay for all, and an Issuer
shall not be obligated to pay, directly or indirectly, for any, costs, expenses
or liabilities of such Issuer, including any income taxes, duties and other
governmental charges, and all costs and expenses with respect thereto, to which
such Issuer may become subject, except for United States withholding taxes and
such Issuer's payment obligations to holders of the Preferred Securities of a
particular series under such Preferred Securities; and (iv) each Trust Agreement
further provides that the Trustees shall not cause or permit an Issuer to, among
other things, engage in any activity that is not consistent with the limited
purposes of each Issuer.
Payments of distributions and other amounts due on Preferred Securities of
each series (to the extent an Issuer has funds sufficient for the payment of
such distributions) are guaranteed by Western Resources as and to the extent set
forth under "Description of the Guarantees." If and to the extent that Western
Resources does not make payments on any series of Debentures, such Issuer will
not pay distributions or other amounts due on the Preferred Securities of the
corresponding series.
If the Guarantee Trustee fails to enforce any Guarantee, a holder of a
Preferred Security to which such Guarantee applies may institute a legal
proceeding directly against Western Resources to enforce such holder's rights
under such Guarantee without first instituting a legal proceeding against the
Issuer of such Preferred Security or any other person or entity.
Each Issuer's Preferred Securities will evidence the rights of the holders
thereof to the benefits of such Issuer, a trust that exists for the sole purpose
of issuing its Issuer Securities and investing the proceeds of its Preferred
Securities in a corresponding series of Debentures of Western Resources, while
each series of Debentures represents indebtedness of Western Resources. A
principal difference between the rights of a holder of a Preferred Security and
a holder of a Debenture is that a holder of a Debenture will accrue, and
(subject to the permissible extensions of the interest payment period) is
entitled to receive, interest on the principal amount of Debentures held, while
a holder of Preferred Securities is only entitled to receive distributions if
and to the extent the Issuer has funds sufficient for the payment of such
distributions.
Upon any voluntary or involuntary dissolution, winding up or termination of
any Issuer involving the distribution of a series of Debentures, the holders of
Issuer Securities of the corresponding series will be entitled to receive, out
of assets legally available for distribution to such holders, a Final
Distribution or a Liquidation Distribution; provided, however that if an Event
of Default under an applicable Trust Agreement shall have occurred and be
continuing, the holders of the Common Securities shall be entitled to receive,
out of assets legally available for distribution to such holders, distributions
only after the holders of the corresponding Preferred Securities. See
"Description of the Preferred Securities -- Liquidation Distribution Upon
Dissolution." Upon any voluntary or involuntary liquidation or bankruptcy of
Western Resources, each Issuer, as a holder of Debentures, would be a
subordinated creditor of Western Resources, junior in right of payment to all
Senior Indebtedness, but entitled to receive payment in full of principal and
interest before any stockholders of Western Resources receive any payments or
distributions. Since Western Resources has agreed to pay for all costs, expenses
and liabilities of the Issuers (other than United States withholding taxes and
other than the Issuers' obligations to the holders of Preferred Securities under
the Preferred Securities, which obligations are independently covered by the
25
<PAGE>
Guarantees), the positions of a holder of Preferred Securities and a holder of
Debentures relative to other creditors and to stockholders of Western Resources
in the event of a liquidation or bankruptcy of Western Resources would be
substantially the same.
A default or event of default under any Senior Indebtedness will not
constitute a default or Event of Default under the Debentures. However, in the
event of payment defaults under, or acceleration of, Senior Indebtedness, the
subordination provisions of the Debentures provide that no payments may be made
in respect of the Debentures until such Senior Indebtedness has been paid in
full or any payment default thereunder has been cured or waived.
Failure to make required payments on any series of Debentures would
constitute an Event of Default under the Indenture.
PLAN OF DISTRIBUTION
The Preferred Securities may be sold in a public offering to or through
underwriters or dealers designated from time to time. An Issuer may sell its
Preferred Securities as soon as practicable after the effectiveness of the
Registration Statement of which this Prospectus is a part. The names of any
underwriters or dealers involved in the sale of the Preferred Securities of a
particular series in respect of which this Prospectus is delivered, the number
of Preferred Securities to be purchased by any such underwriters or dealers and
the applicable commissions or discounts will be set forth in the applicable
Prospectus Supplement.
Underwriters may offer and sell Preferred Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. In connection with the sale of Preferred Securities,
underwriters will be deemed to have received compensation from Western Resources
and/or an Issuer in the form of underwriting discounts or commissions.
Underwriters may sell Preferred Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters.
Any underwriting compensation paid by Western Resources to underwriters in
connection with the offering of the Preferred Securities, and any discounts,
concessions or commissions allowed by such underwriters to participating
dealers, will be set forth in the applicable Prospectus Supplement. Underwriters
and dealers participating in the distribution of Preferred Securities may be
deemed to be underwriters, and any discounts and commissions received by them,
and any profit realized by them on resale of such Preferred Securities, may be
deemed to constitute underwriting discounts and commissions under the Securities
Act. Underwriters and dealers may be entitled, pursuant to their agreement with
Western Resources and an Issuer, to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities
Act, and to reimbursement by Western Resources for certain expenses.
In connection with the offering of the Preferred Securities of a particular
series, the Issuer thereof may grant to the underwriters an option to purchase
additional Preferred Securities to cover over-allotments, if any, at the initial
public offering price (with an additional underwriting commission), as set forth
in the applicable Prospectus Supplement.
Underwriters and dealers may engage in transactions with, or perform
services for, Western Resources, an Issuer and any of their respective
affiliates.
An Issuer's Preferred Securities will be a new issue of securities and will
have no established trading market. Any underwriters to whom an Issuer's
Preferred Securities are sold by such Issuer for public offering and sale may
make a market in such Preferred Securities, but such underwriters will not be
obligated to do so and may discontinue any market-making at any time without
notice. Such Preferred Securities may or may not be listed on a national
securities exchange. No assurance can be given as to the liquidity of or the
existence of meaningful trading markets for any Preferred Securities.
26
<PAGE>
EXPERTS
The consolidated financial statements and schedules included in or
incorporated by reference in Western Resources' 1994 Annual Report on Form 10-K
have been audited by Arthur Andersen LLP, independent public accountants, as set
forth in its report. In that report, that firm states that with respect to
Kansas Gas and Electric Company (a wholly owned subsidiary of Western
Resources), its opinion is based on the report of other public accountants for
the year ended December 31, 1992, namely Deloitte & Touche LLP. Since 1993,
Arthur Andersen LLP has audited both Western Resources and Kansas Gas and
Electric Company. The consolidated financial statements and supporting schedules
referred to above have been incorporated herein in reliance upon the authority
of Arthur Andersen LLP as experts in giving said reports.
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from Kansas Gas and Electric
Company's Annual Report on Form 10-K for the year ended December 31, 1992 have
been audited by Deloitte & Touche LLP, 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.
LEGAL MATTERS
Certain legal matters will be passed upon for Western Resources by John K.
Rosenberg, Esq., Executive Vice President and General Counsel of Western
Resources, by Cahill Gordon & Reindel, a partnership including a professional
corporation, counsel for Western Resources, and by Richards, Layton & Finger,
special Delaware counsel to Western Resources and the Issuers. The validity of
the Preferred Securities will be passed upon for the underwriters by Sidley &
Austin. Cahill Gordon & Reindel and Sidley & Austin will not pass upon the
incorporation of Western Resources and will rely upon the opinion of John K.
Rosenberg, Esq. as to matters of Kansas law and the Public Utility Holding
Company Act of 1935. At September 30, 1995, Mr. Rosenberg owned directly and/or
beneficially 2,631 shares of Common Stock of Western Resources and had been
granted, pursuant to and subject to the terms of Western Resources' Long-Term
Incentive Program, 1,466 performance shares.
27
<PAGE>
- ----------------------------------------------
----------------------------------------------
- ----------------------------------------------
----------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF WESTERN RESOURCES
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
--------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary................................... S-3
Risk Factors......................................... S-5
Western Resources Capital II......................... S-7
Western Resources, Inc............................... S-8
Coverage Ratios...................................... S-9
Use of Proceeds...................................... S-10
Certain Terms of the Series B Preferred Securities... S-10
Certain Terms of the Series B Guarantee.............. S-13
Certain Terms of the Series B Debentures............. S-14
United States Taxation............................... S-17
Underwriting......................................... S-20
PROSPECTUS
Available Information................................ 2
Incorporation of Certain Documents by Reference...... 2
The Issuers.......................................... 3
Western Resources, Inc............................... 4
Description of the Preferred Securities.............. 4
Description of the Guarantees........................ 15
Description of the Debentures........................ 17
Relationship Among the Preferred Securities, the
Debentures and the Guarantees....................... 25
Plan of Distribution................................. 26
Experts.............................................. 27
Legal Matters........................................ 27
</TABLE>
4,800,000
PREFERRED SECURITIES
WESTERN RESOURCES
CAPITAL II
(LIQUIDATION AMOUNT $25
PER PREFERRED SECURITY)
% CUMULATIVE QUARTERLY
INCOME PREFERRED
SECURITIES, SERIES B
GUARANTEED TO THE EXTENT
THAT THE ISSUER HAS FUNDS
AS SET FORTH HEREIN BY
WESTERN RESOURCES, INC.
-----------
[LOGO]
-----------
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
BEAR, STEARNS & CO. INC.
DILLON, READ & CO. INC.
PRUDENTIAL SECURITIES
INCORPORATED
EVEREN SECURITIES, INC.
REPRESENTATIVES OF THE UNDERWRITERS
- ----------------------------------------------
----------------------------------------------
- ----------------------------------------------
----------------------------------------------
