<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number: 1-3562
------------------------
UTILICORP UNITED INC.
(Exact name of registrant as specified in its charter)
DELAWARE 44-0541877
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3000 COMMERCE TOWER, 911 MAIN, KANSAS CITY, MISSOURI 64105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 816-421-6600
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS OCTOBER 31, 1996
- ------------------------------------------------------- -----------------
Common Stock, $1 par value............................. 47,047,376
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Information regarding the consolidated condensed financial statements is set
forth on pages 3 through 13.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations can be found on pages 14 through 21.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See page 22 for discussion of legal proceedings.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
See page 22 for the results of voting at a special meeting held on August
14, 1996.
ITEM 5. OTHER INFORMATION
See page 22 for discussion on establishment of a Rights Plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits and reports on Form 8-K can be found on page 25.
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME--UNAUDITED
<TABLE>
<CAPTION>
QUARTER
ENDED
SEPTEMBER 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
IN MILLIONS
EXCEPT PER SHARE
Sales.......................................................................................... $ 892.6 $ 607.5
Cost of sales.................................................................................. 688.2 357.5
--------- ---------
GROSS PROFIT................................................................................... 204.4 250.0
--------- ---------
Operating, administrative and maintenance expense.............................................. 127.7 129.1
Depreciation, depletion and amortization....................................................... 33.0 39.1
Write-off of deferred merger costs, net of termination fee payment............................. 11.0 --
--------- ---------
INCOME FROM OPERATIONS......................................................................... 32.7 81.8
--------- ---------
Other income:
Equity in earnings of investments and partnerships............................................. 24.4 6.1
Interest income and other...................................................................... 7.7 2.3
--------- ---------
Total other income............................................................................. 32.1 8.4
--------- ---------
Interest expense and minority interests:
Interest expense--long-term debt............................................................... 34.1 28.5
Interest expense--short-term debt and other interest........................................... 5.6 5.3
Minority interests............................................................................. 2.0 .8
--------- ---------
Total interest and minority interest expense................................................... 41.7 34.6
--------- ---------
EARNINGS BEFORE INCOME TAXES................................................................... 23.1 55.6
--------- ---------
Income taxes................................................................................... 9.0 22.7
--------- ---------
NET INCOME..................................................................................... 14.1 32.9
--------- ---------
Preference dividends........................................................................... .5 .5
--------- ---------
EARNINGS AVAILABLE FOR COMMON SHARES........................................................... $ 13.6 $ 32.4
--------- ---------
--------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary...................................................................................... 46.60 45.17
Fully diluted................................................................................ 46.91 45.52
--------- ---------
EARNINGS PER COMMON SHARE:
Primary...................................................................................... $ .29 $ .72
Fully Diluted................................................................................ .29 .71
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME--UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
IN MILLIONS
EXCEPT PER SHARE
Sales................................................................................... $ 2,742.1 $ 1,934.6
Cost of sales........................................................................... 2,085.5 1,251.8
--------- ---------
GROSS PROFIT............................................................................ 656.6 682.8
--------- ---------
Operating, administrative and maintenance expense....................................... 392.4 370.0
Depreciation, depletion and amortization................................................ 98.3 114.5
Write-off of deferred merger costs, net of termination fee payment...................... 11.0 --
--------- ---------
INCOME FROM OPERATIONS.................................................................. 154.9 198.3
--------- ---------
Other income:
Equity in earnings of investments and partnerships...................................... 84.7 14.0
Interest income and other............................................................... 12.7 6.6
--------- ---------
Total other income...................................................................... 97.4 20.6
--------- ---------
Interest expense and minority interests:
Interest expense--long-term debt........................................................ 94.6 77.7
Interest expense--short-term debt and other interest.................................... 16.6 19.3
Minority interests...................................................................... 6.2 2.2
--------- ---------
Total interest and minority interest expense............................................ 117.4 99.2
--------- ---------
EARNINGS BEFORE INCOME TAXES............................................................ 134.9 119.7
--------- ---------
Income taxes............................................................................ 57.2 47.4
--------- ---------
NET INCOME.............................................................................. 77.7 72.3
--------- ---------
Preference dividends.................................................................... 1.5 1.5
--------- ---------
EARNINGS AVAILABLE FOR COMMON SHARES.................................................... $ 76.2 $ 70.8
--------- ---------
--------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary............................................................................... 46.51 44.93
Fully diluted......................................................................... 46.84 45.35
--------- ---------
EARNINGS PER COMMON SHARE:
Primary............................................................................... $ 1.64 $ 1.57
Fully Diluted......................................................................... 1.63 1.57
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME--UNAUDITED
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
IN MILLIONS
EXCEPT PER SHARE
Sales................................................................................... $ 3,606.0 $ 2,551.6
Cost of sales........................................................................... 2,719.4 1,656.1
--------- ---------
GROSS PROFIT............................................................................ 886.6 895.5
--------- ---------
Operating, administrative and maintenance expense....................................... 530.3 476.4
Depreciation, depletion and amortization................................................ 129.1 150.0
Provision for asset impairments......................................................... 34.6 --
Write-off of deferred merger costs, net of termination fee payment...................... 11.0 --
--------- ---------
INCOME FROM OPERATIONS.................................................................. 181.6 269.1
--------- ---------
Other income:
Equity in earnings of investments and partnerships...................................... 102.4 18.6
Interest income and other............................................................... 18.4 9.1
--------- ---------
Total other income...................................................................... 120.8 27.7
--------- ---------
Interest expense and minority interests:
Interest expense--long-term debt........................................................ 127.0 101.4
Interest expense--short-term debt and other interest.................................... 20.7 22.8
Minority interests...................................................................... 7.6 3.4
--------- ---------
Total interest and minority interest expense............................................ 155.3 127.6
--------- ---------
EARNINGS BEFORE INCOME TAXES............................................................ 147.1 169.2
--------- ---------
Income taxes............................................................................ 61.8 63.2
--------- ---------
NET INCOME.............................................................................. 85.3 106.0
--------- ---------
Preference dividends.................................................................... 2.1 1.6
--------- ---------
EARNINGS AVAILABLE FOR COMMON SHARES.................................................... $ 83.2 $ 104.4
--------- ---------
--------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary............................................................................... 46.33 45.16
Fully diluted......................................................................... 46.66 45.60
--------- ---------
EARNINGS PER COMMON SHARE:
Primary............................................................................... $ 1.79 $ 2.31
Fully Diluted......................................................................... 1.79 2.29
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
30, 1996 31, 1995
----------- -----------
(UNAUDITED)
DOLLARS IN MILLIONS
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 144.3 $ 110.7
Funds on deposit.................................................. 36.8 41.2
Accounts receivable, net.......................................... 233.8 332.2
Inventories and supplies, at average cost......................... 103.5 112.5
Price risk management assets...................................... 21.9 26.4
Prepayments and other............................................. 31.8 53.0
----------- -----------
TOTAL CURRENT ASSETS................................................ 572.1 676.0
----------- -----------
Property, plant and equipment, net.................................. 2,350.0 2,279.6
----------- -----------
Investments in subsidiaries and partnerships........................ 685.8 574.4
----------- -----------
Price risk management assets........................................ 168.6 175.5
----------- -----------
Deferred charges.................................................... 185.3 180.4
----------- -----------
TOTAL ASSETS........................................................ $ 3,961.8 $ 3,885.9
----------- -----------
----------- -----------
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt.............................. $ 15.1 $ 15.1
Short-term debt................................................... 340.9 288.6
Accounts payable.................................................. 413.0 434.3
Accrued liabilities............................................... 69.5 34.8
Price risk management liabilities................................. 44.3 67.9
Other............................................................. 56.8 107.1
----------- -----------
TOTAL CURRENT LIABILITIES........................................... 939.6 947.8
----------- -----------
LONG-TERM LIABILITIES:
Long-term debt, net............................................... 1,372.9 1,355.4
Deferred income taxes and credits................................. 300.2 279.2
Price risk management liabilities................................. 89.0 94.6
Other deferred credits............................................ 151.0 137.2
----------- -----------
TOTAL LONG-TERM LIABILITIES......................................... 1,913.1 1,866.4
----------- -----------
Company-obligated mandatorily redeemable preferred securities of
partnership....................................................... 100.0 100.0
----------- -----------
Preferred and preference stock...................................... 25.4 25.4
----------- -----------
Common shareowners' equity.......................................... 983.7 946.3
----------- -----------
Commitments and contingencies
----------- -----------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY........................... $ 3,961.8 $ 3,885.9
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF PREFERRED AND PREFERENCE STOCK
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- -------------
(UNAUDITED)
DOLLARS IN MILLIONS
<S> <C> <C>
Preference Stock, not mandatorily redeemable:
$2.05 series, 1,000,000 shares.................................... $ 25.0 $ 25.0
Preferred Stock of subsidiary, retractable.......................... .4 .4
----- -----
TOTAL PREFERRED AND PREFERENCE STOCK................................ $ 25.4 $ 25.4
----- -----
----- -----
</TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF COMMON SHAREOWNERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER
1996 31, 1995
------------- -----------
(UNAUDITED)
DOLLARS IN MILLIONS
<S> <C> <C>
COMMON STOCK: authorized 100,000,000 shares, par value $1 per share,
47,047,376 shares outstanding (45,965,952 at December 31, 1995)... $ 47.0 $ 46.0
PREMIUM ON CAPITAL STOCK............................................ 830.9 800.6
RETAINED EARNINGS................................................... 120.8 106.2
------ -----------
TREASURY STOCK, AT COST (393,454 shares at September 30, 1996)...... (11.0) --
------ -----------
CURRENCY TRANSLATION ADJUSTMENT..................................... (4.0) (6.5)
------ -----------
TOTAL COMMON SHAREOWNERS' EQUITY.................................... $ 983.7 $ 946.3
------ -----------
------ -----------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
7
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS--UNAUDITED
<TABLE>
<CAPTION>
QUARTER ENDED
SEPTEMBER 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
DOLLARS IN MILLIONS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................................ $ 14.1 $ 32.9
Adjustments to reconcile net income to net cash provided:
Depreciation, depletion and amortization................................................ 33.0 38.2
Net changes in price risk management assets and liabilities............................. (16.3) (28.7)
Preferred taxes and investment tax credits.............................................. 11.8 (4.0)
Equity in earnings from investments and partnerships.................................... (24.4) (6.1)
Dividends from investments and partnerships............................................. 16.6 6.2
Write-off of deferred merger costs, net................................................. 11.0 --
Changes in certain current assets and liabilities:
Accounts receivable and accrued revenues.............................................. (1.0) (50.2)
Accounts receivable sold.............................................................. 27.4 15.9
Inventories and supplies.............................................................. (28.9) (13.2)
Accounts payable...................................................................... (8.2) 41.3
Accrued taxes......................................................................... (6.5) 37.3
Other................................................................................. 33.4 46.0
--------- ---------
CASH PROVIDED FROM OPERATING ACTIVITIES..................................................... 62.0 115.6
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant................................................................ (34.6) (34.0)
Purchase of domestic businesses........................................................... (48.3) --
Investments in international businesses................................................... (.8) (245.4)
Investments in energy related properties.................................................. (5.0) (62.5)
Proceeds on sale of oil and gas properties................................................ -- 204.5
Other..................................................................................... (19.4) 6.5
--------- ---------
CASH USED FOR INVESTING ACTIVITIES.......................................................... (108.1) (130.9)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock.................................................................. 4.2 7.6
Issuance of long-term debt................................................................ -- 161.8
Retirement of long-term debt.............................................................. (26.1) --
Treasury stock acquired................................................................... (11.0) --
Short-term borrowings (repayments), net................................................... 96.0 (39.4)
Cash dividends paid....................................................................... (21.5) (20.7)
--------- ---------
CASH PROVIDED FROM FINANCING ACTIVITIES..................................................... 41.6 109.3
--------- ---------
Increase (decrease) in cash and cash equivalents............................................ (4.5) 94.0
Cash and cash equivalents at beginning of period............................................ 148.8 62.6
--------- ---------
Cash and cash equivalents at end of period.................................................. $ 144.3 $ 156.6
--------- ---------
</TABLE>
See accompanying notes to consolidated condensed financial statements
8
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS--UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
DOLLARS IN MILLIONS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................................... $ 77.7 $ 72.3
Adjustments to reconcile net income to net cash provided:
Depreciation, depletion and amortization................................................... 98.3 111.6
Net changes in price risk management assets and liabilities................................ (17.8) (30.6)
Deferred taxes and investment tax credits.................................................. 21.0 (.5)
Equity in earnings from investments and partnerships....................................... (84.7) (14.0)
Dividends from investments and partnerships................................................ 27.1 11.4
Write-off of deferred merger costs, net.................................................... 11.0 --
Changes in certain current assets and liabilities:
Accounts receivable and accrued revenues, net............................................ 45.7 (9.4)
Accounts receivable sold................................................................. 52.7 9.3
Inventories and supplies................................................................. 9.0 22.5
Accounts payable......................................................................... (21.3) (12.7)
Accrued taxes............................................................................ 21.2 20.9
Other.................................................................................... 14.9 42.6
--------- ---------
CASH PROVIDED FROM OPERATING ACTIVITIES........................................................ 254.8 223.4
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant................................................................... (82.5) (84.4)
Purchase of domestic businesses.............................................................. (53.9) (100.9)
Investments in international businesses...................................................... (28.6) (288.6)
Investments in energy related properties..................................................... (22.0) (121.9)
Investments in non-regulated generating assets............................................... -- (59.0)
Proceeds on sale of oil and gas properties................................................... -- 204.5
Other........................................................................................ (42.5) 9.3
--------- ---------
CASH USED FOR INVESTING ACTIVITIES............................................................. (229.5) (441.0)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock..................................................................... 31.3 20.0
Treasury stock sold (purchased).............................................................. (11.0) 6.6
Issuance of long-term debt................................................................... 25.0 265.9
Issuance of company-obligated mandatorily redeemable preferred securities of partnership..... -- 100.0
Retirements of long-term debt................................................................ (26.1) (11.3)
Short-term borrowings (repayments), net...................................................... 52.3 (13.8)
Cash dividends paid.......................................................................... (63.2) (60.4)
--------- ---------
CASH PROVIDED FROM FINANCING ACTIVITIES........................................................ 8.3 307.0
--------- ---------
Increase in cash and cash equivalents.......................................................... 33.6 89.4
Cash and cash equivalents at beginning of period............................................... 110.7 67.2
--------- ---------
Cash and cash equivalents at end of period..................................................... $ 144.3 $ 156.6
--------- ---------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
9
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS--UNAUDITED
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
DOLLARS IN MILLIONS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................................ $ 85.3 $ 106.0
Adjustments to reconcile net income to net cash provided:
Depreciation, depletion and amortization................................................ 142.3 142.9
Net changes in price risk management assets and liabilities............................. (26.6) (30.6)
Deferred taxes and investment tax credits............................................... .3 60.9
Equity in earnings from investments and partnerships.................................... (102.4) (18.6)
Dividends from investments and partnerships............................................. 34.4 16.7
Write-off of deferred merger costs, net................................................. 11.0 --
Impairment charge....................................................................... 34.6 --
Changes in certain current assets and liabilities:
Accounts receivable and accrued revenues.............................................. (112.3) (102.6)
Accounts receivable sold.............................................................. 94.2 4.8
Inventories and supplies.............................................................. 8.4 7.9
Accounts payable...................................................................... 85.3 65.5
Accrued taxes......................................................................... (6.4) (16.7)
Other................................................................................. 44.5 40.1
--------- ---------
CASH PROVIDED FROM OPERATING ACTIVITIES..................................................... 292.6 276.3
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant................................................................ (107.5) (132.0)
Purchase of domestic businesses........................................................... (53.9) (107.4)
Investments in international businesses................................................... (119.3) (288.6)
Investments in non-regulated generating assets............................................ -- (72.2)
Proceeds on sale of oil and gas properties................................................ -- 204.5
Investments in energy related properties.................................................. (44.1) (175.6)
Other..................................................................................... (98.6) (12.2)
--------- ---------
CASH USED FOR INVESTING ACTIVITIES.......................................................... (423.4) (583.5)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock.................................................................. 40.8 20.5
Issuance of company-obligated mandatorily redeemable preferred securities of
partnership............................................................................. -- 100.0
Retirements of preference stock........................................................... -- (5.9)
Treasury stock acquired................................................................... (11.0) --
Issuance of long-term debt, net of premium paid........................................... 174.3 360.7
Retirements of long-term debt............................................................. (175.1) (1.7)
Short-term borrowing (repayments), net.................................................... 172.3 (13.9)
Cash dividends paid....................................................................... (82.8) (79.3)
--------- ---------
CASH PROVIDED FROM FINANCING ACTIVITIES..................................................... 118.5 380.4
--------- ---------
Increase (decrease) in cash and cash equivalents............................................ (12.3) 73.2
Cash and cash equivalents at beginning of period............................................ 156.6 83.4
--------- ---------
Cash and cash equivalents at end of period.................................................. $ 144.3 $ 156.6
--------- ---------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
10
<PAGE>
UTILICORP UNITED INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the accounting policies described in the
consolidated financial statements and related notes included in UtiliCorp's 1995
Form 10-K. It is suggested that those consolidated financial statements be read
in conjunction with this report. The year-end financial statements presented
were derived from the company's audited financial statements, but do not include
all disclosures required by generally accepted accounting principles. In the
opinion of management, the accompanying consolidated condensed financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary for a fair representation of the financial position of
UtiliCorp and the results of its operations. Certain estimates and assumptions
that affect reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of sales and expenses during the
reporting periods shown have been made in preparing the consolidated condensed
financial statements. Actual results could differ from these estimates. Certain
reclassifications have been made to prior year amounts to conform to current
year's presentation.
2. MERGER TERMINATION--KANSAS CITY POWER & LIGHT COMPANY (KCPL)
On September 17, 1996, KCPL terminated the Amended and Restated Agreement
and Plan of Merger (the Agreement) among KCPL, KC Merger Sub, Inc., UtiliCorp,
and KC United Corp., which would have provided for the merger of UtiliCorp and
KCPL.
Since KCPL's shareholders' did not approve the merger under the terms of the
Agreement, KCPL was required to pay UtiliCorp $5 million. UtiliCorp received
this termination payment on September 19, 1996. In connection with the Agreement
termination, UtiliCorp expensed approximately $11.0 million (pre-tax), net of
the termination fee payment, of deferred merger costs.
Under certain conditions, UtiliCorp will be entitled to $53.0 million of
additional payments from KCPL if there is a business combination between KCPL
and Western Resources, Inc. within two-and one-half-years from the date of
termination (September 17, 1996).
3. PURCHASE OF AUSTRALIAN ELECTRIC UTILITY INTEREST
On September 6, 1995, Power Partnership Limited (PPL), of which UtiliCorp
owns 49.9%, acquired United Energy Limited (UE), an Australian electric
distribution utility, from the State of Victoria. As part of the acquisition,
the company paid approximately $257.9 million for its 49.9% ownership interest
which was primarily financed through Australian-dollar-based debt.
The acquisition was recorded as a purchase and is accounted for using the
equity method of accounting. The equity investment is included in Investments in
subsidiaries and partnerships on the
11
<PAGE>
UTILICORP UNITED INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. PURCHASE OF AUSTRALIAN ELECTRIC UTILITY INTEREST (CONTINUED)
consolidated condensed balance sheets. Pro forma unaudited results of operations
for UtiliCorp, assuming the acquisition had occurred at the beginning of the
period, are shown below.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1995
-------------
IN MILLIONS
EXCEPT PER
SHARE AMOUNTS
<S> <C>
Sales.......................................................................... $ 1,934.6
Income from operations......................................................... 198.3
Net income..................................................................... 74.2
Earnings available for common shares........................................... 72.7
-------------
Primary earnings per share..................................................... $ 1.61
Fully diluted earnings per share............................................... 1.61
-------------
</TABLE>
4. GAIN ON SALE AND CONTRACT RESTRUCTURING CHARGE
In April 1996, one of the power projects in which UtilCo Group (a subsidiary
of UtiliCorp) holds an equity ownership position, entered into a long-term lease
arrangement with a third party. This transaction was accounted for as a sale by
the partnership and resulted in the recognition of a gain. UtilCo Group recorded
its share of the gain through equity earnings during the second quarter. In
addition, UtilCo Group recorded certain restructuring reserves in connection
with changes in power project agreements and other matters. The net gain from
these items was $11.8 million after tax.
5. STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation" (SFAS 123). UtiliCorp currently provides stock options to certain
employees and has an employee stock purchase program whereby employees may
purchase company common stock at a 15% discount. Under SFAS 123, these plans
require either recording additional compensation expense or disclosing the
impact on net income and earnings per share as if the company elected to record
compensation expense. The company has elected to disclose pro forma information
required by SFAS 123 rather than record compensation expense. For nine month
periods ended September 30, 1996 and 1995, compensation expense relating to
stock-based compensation plans was $1.4 million and $3.5 million, respectively.
If the company recorded compensation expense, earnings per share would have been
reduced by $.02 and $.05 for nine month periods ended September 30, 1996 and
1995, respectively.
6. UNITED KINGDOM
In 1996, UtiliCorp realigned certain of its business relationships in the
United Kingdom (UK). Late in the first quarter UtiliCorp's UK businesses
terminated their equity relationship in the Caledonian Gas Limited and Midlands
Gas Limited (Midlands) joint ventures. As part of the termination of the equity
relationship in Midlands, UtiliCorp assumed an interest in two long-term gas
supply contracts (for
12
<PAGE>
UTILICORP UNITED INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. UNITED KINGDOM (CONTINUED)
deliveries through 2005) that it assimilated into its existing portfolio of
sales and supply contracts. Since the UK natural gas market currently does not
have a mature long-term pricing market, it is difficult to calculate future
profitability of the portfolio. Based on management's estimates and available
market data at September 30, 1996, UtiliCorp continued to carry a $14 million
reserve relating to future losses that may exist within the portfolio of
contracts. Management believes that this reserve is adequate and that no
additional material amounts will be needed.
On April 15, 1996, UtiliCorp acquired the 25% interest in UtiliCorp U.K.,
Inc., it did not already own for approximately $12 million. This transaction was
accounted for as a purchase.
7. ISSUANCE OF SENIOR NOTES
On October 23, 1996, UtiliCorp issued $100 million of 6.7% Senior Notes, due
in 2006. The net proceeds of $99.5 million were used to reduce short-term debt.
No short-term debt amounts have been reclassified to long-term debt at September
30, 1996.
8. REGISTRATION OF COMMON STOCK
On October 25, 1996, UtiliCorp filed a Registration Statement to register 6
million shares of its $1 par value common stock. UtiliCorp expects to issue the
common stock in the fourth quarter of 1996. The net proceeds from the
anticipated share issuance are expected to be used to reduce short-term debt and
for general corporate purposes.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
UTILICORP UNITED INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
UTILICORP UNITED INC. (UTILICORP) CONTAINS THREE SEGMENTS: ELECTRIC
OPERATIONS, GAS OPERATIONS AND ENERGY RELATED BUSINESSES. THE COMPANY HAS OTHER
OPERATIONS THAT AFFECT SALES AND INCOME FROM OPERATIONS WHICH ARE DISCUSSED IN
THE OTHER BUSINESSES AND EQUITY INVESTMENTS SECTION. EACH SEGMENT IS DISCUSSED
SEPARATELY IN THE RESULTS OF OPERATIONS SECTION. THE LIQUIDITY AND CAPITAL
RESOURCES SECTION IS PREPARED ON A CONSOLIDATED BASIS.
RESULTS OF OPERATIONS
The results of operations for the 1996 and 1995 periods have been impacted
by several items that do not have a continuing effect on UtiliCorp's financial
position or results from operations. The table below summarizes the impact of
the non-recurring items on an earnings available basis. The non-recurring items
are discussed in more detail in the reported segment sections below.
<TABLE>
<CAPTION>
EARNINGS AVAILABLE
QUARTER YEAR-TO-DATE TWELVE-MONTHS
FOR THE PERIODS ENDED SEPT. 30, -------------------- -------------------- --------------------
DESCRIPTION REFERENCE 1996 1995 1996 1995 1996 1995
- --------------------------------------------- ---------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE, AS REPORTED.............. $ 13.6 $ 32.4 $ 76.2 $ 70.8 $ 83.2 $ 104.4
NON-RECURRING ITEMS:
Merger termination........................... Page 11 6.8 -- 6.8 -- 6.8 --
Provision for asset impairments.............. (1) -- -- -- -- 19.6 --
Change in accounting method--
mark-to-market.............................. (2) -- (15.9) -- (15.9) (2.4) (15.9)
Sale of oil and gas reserves................. (3) -- 1.7 -- 5.0 -- 6.7
Reserve for United Kingdom gas contracts..... (4) -- -- -- -- 6.8 --
Gain on sales lease.......................... Page 12 -- -- (11.8) -- (11.8) --
--------- --------- --------- --------- --------- ---------
NORMALIZED EARNINGS (5)...................... $ 20.4 $ 18.2 $ 71.2 $ 59.9 $ 102.2 $ 95.2
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
PERCENTAGE INCREASE OVER PRIOR PERIOD........ 12% 19% 7%
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------
(1) In 1995, UtiliCorp recorded a $19.6 million after tax ($34.6 million pretax)
charge related to impaired assets.
(2) In 1995, UtiliCorp changed its method of accounting for domestic natural gas
trading operations to the mark-to-market method. This change resulted in a
$15.9 million after tax ($25.9 million pretax) increase in 1995 results. The
impact of this accounting change increased fourth quarter 1996 earnings by
$2.4 million after tax ($3.9 millon pretax).
(3) In 1995, UtiliCorp sold substantially all of its oil and gas production
assets for $204.5 million. This adjustment represents the net loss from this
business in applicable 1995 periods.
(4) In 1995, UtiliCorp recorded a $6.8 million after tax reserve ($11.0 million
pretax) for certain gas supply contracts in the United Kingdom.
14
<PAGE>
(5) Normalized earnings or income are terms used by management to describe the
recurring earnings or income of UtiliCorp. These terms are not meant to
replace net income or other measures under generally accepted accounting
principles.
ELECTRIC OPERATIONS
THE COMPANY'S ELECTRIC SEGMENT INCLUDES THE ELECTRIC OPERATIONS OF MISSOURI
PUBLIC SERVICE, WEST KOOTENAY POWER, WEST VIRGINIA POWER, AND WESTPLAINS ENERGY.
<TABLE>
<CAPTION>
QUARTER NINE MONTHS TWELVE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- --------------------
1996 1995 1996 1995 1996 1995
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
DOLLARS IN MILLIONS
SALES.................................................. $ 177.1 $ 179.5 $ 465.3 $ 442.3 $ 600.7 $ 569.4
--------- --------- --------- --------- --------- ---------
Cost of sales--fuel and purchased power................ 56.0 55.3 153.9 145.3 201.7 192.0
--------- --------- --------- --------- --------- ---------
GROSS PROFIT........................................... 121.1 124.2 311.4 297.0 399.0 377.4
--------- --------- --------- --------- --------- ---------
EXPENSES:
Other operating...................................... 32.1 32.8 87.0 88.7 115.2 115.8
Maintenance.......................................... 8.7 7.8 28.7 26.6 37.4 36.0
Taxes, other than income taxes....................... 12.8 13.4 35.8 33.2 53.9 43.1
Depreciation and amortization........................ 13.5 13.2 41.9 39.3 56.3 52.2
--------- --------- --------- --------- --------- ---------
TOTAL EXPENSES......................................... 67.1 67.2 193.4 187.8 262.8 247.1
--------- --------- --------- --------- --------- ---------
INCOME FROM OPERATIONS................................. $ 54.0 $ 57.0 $ 118.0 $ 109.2 $ 136.2 $ 130.3
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
QUARTER-TO-QUARTER
Income from operations decreased 5% in the 1996 quarter compared to the 1995
quarter. Unseasonably cool weather in 1996 reduced operating income by
approximately $5.7 million. Partially offsetting the unfavorable weather were
new rates at West Kootenay Power combined with over 5,700 average additional
customers. On August 1, 1996, UtiliCorp amended an electric supply contract with
another utility, which is expected to reduce future fuel costs by $1 million and
capacity costs by $2.9 million on an annual basis. UtiliCorp's customers will
share in the fuel cost savings through a fuel adjustment mechanism. As a result
of this amended supply contract, UtiliCorp secured 168 megawatts of supply
through 2001 at lower prices and postponed its planned construction of a
generating plant.
YEAR-TO-DATE
Income from operations increased 8% for the nine months ended September 30,
1996, compared to the same period in 1995. The four primary factors contributing
to this increase are:
- Colder winter weather, partially offset by milder summer temperatures
- Increase of 10,200 in the average number of customers over 1995 levels
- New electric rates at West Kootenay Power effective January 1, 1996
- Reduced fuel costs related to renegotiating a coal contract and improved
plant efficiencies at the Sibley generating station
Operating expenses decreased slightly from the 1995 period primarily from
the net savings from employee reductions partially offset by salary and benefit
increases.
15
<PAGE>
TWELVE MONTHS ENDED SEPTEMBER 30, 1996 TO 1995
Income from operations increased 5% in 1996 compared to 1995. The 1996
twelve-month period had increased sales and gross profit of $31.3 million and
$21.6 million, respectively, over the same 1995 period. Weather impacted 1996
about the same as in 1995, but in different seasons. The 1996 winter was much
colder than in 1995 while the 1996 summer was much milder than in 1995,
partially offsetting the weather impact between the twelve-month periods.
Operating expenses were about the same as in 1995 with payroll savings from the
employee and customer office realignments offsetting payroll and benefit
increases. Taxes other than income increased in the 1996 period compared to 1995
due primarily to increased sales.
GAS OPERATIONS
THE COMPANY'S GAS SEGMENT INCLUDES GAS OPERATIONS OF MISSOURI PUBLIC
SERVICE, KANSAS PUBLIC SERVICE, PEOPLES NATURAL GAS, NORTHERN MINNESOTA
UTILITIES, MICHIGAN GAS UTILITIES, UTILICORP PIPELINE SYSTEMS AND WEST VIRGINIA
POWER.
<TABLE>
<CAPTION>
QUARTER NINE MONTHS TWELVE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- --------------------
1996 1995 1996 1995 1996 1995
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
DOLLARS IN MILLIONS
SALES.................................................... $ 60.4 $ 67.2 $ 477.0 $ 414.3 $ 679.5 $ 585.1
Cost of sales--gas purchased for resale.................. 25.8 27.6 286.1 230.6 404.4 332.7
--------- --------- --------- --------- --------- ---------
GROSS PROFIT............................................. 34.6 39.6 190.9 183.7 275.1 252.4
--------- --------- --------- --------- --------- ---------
EXPENSES:
Other operating........................................ 29.4 31.7 95.1 96.9 128.0 126.1
Maintenance............................................ 2.4 2.5 7.2 7.2 9.1 9.2
Taxes, other than income taxes......................... 4.9 5.2 16.7 16.3 26.8 20.7
Depreciation and amortization.......................... 9.2 8.8 27.9 26.1 36.1 33.7
--------- --------- --------- --------- --------- ---------
TOTAL EXPENSES........................................... 45.9 48.2 146.9 146.5 200.0 189.7
--------- --------- --------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS............................ $ (11.3) $ (8.6) $ 44.0 $ 37.2 $ 75.1 $ 62.7
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
QUARTER-TO-QUARTER
Sales and operating income in the gas utility business are primarily derived
from the winter heating season and are seasonally low during the third quarter.
Gross profit decreased by 13% in 1996 resulting in a 31% increase in loss from
operations compared to 1995, primarily due to unfavorable weather and certain
billing adjustments made during the 1996 third quarter. Individual quarters in a
year are not always indicative of operating trends. The year-to-date and twelve
month periods discussed below reflect an entire or partial winter heating season
and thus are more reflective of the impacts of customer growth and overall
trends in this business segment.
YEAR-TO-DATE
Income from operations increased 18% in 1996 compared to the same period in
1995. This past winter was approximately 19% colder than in 1995 and 9% colder
than average winter temperatures. In addition to favorable weather, the average
customer count increased approximately 16,400 over the 1995 period. Colder
temperatures combined with additional customers resulted in sales and gross
profit increases of $62.7 million and $7.2 million, respectively, over the 1995
period.
16
<PAGE>
TWELVE MONTHS ENDED SEPTEMBER 30, 1996 TO 1995
Income from operations increased 20% in 1996 over the same period in 1995.
An extremely cold winter combined with a mild 1995 first quarter contributed to
sales and gross profit increases of $94.4 million and $22.7 million over 1995
periods. Also contributing to the increase were 16,100 additional average
customers over the 1995 period. The colder weather and additional customers
resulted in a 12% increase in tariff volumes sold for the 1996 period over 1995.
Partially offsetting the sales and gross profit increases were total expense
increases of $10.3 million compared to 1995. The increases are primarily due to
higher revenue-related franchise taxes and increased depreciation expense
stemming from utility plant additions.
ENERGY RELATED BUSINESSES
THE ENERGY RELATED BUSINESSES SEGMENT CONSISTS SOLELY OF THE CONSOLIDATED
OPERATIONS OF THE COMPANY'S AQUILA ENERGY SUBSIDIARY, INCLUDING 82%-OWNED AQUILA
GAS PIPELINE (AQP). AQUILA PROVIDES ENERGY MARKETING AND RISK MANAGEMENT
SERVICES AND IS INVOLVED IN THE GATHERING, PROCESSING AND MARKETING OF NATURAL
GAS AND THE SALE OF NATURAL GAS LIQUIDS. ITS AQUILA POWER SUBSIDIARY BEGAN
WHOLESALE MARKETING OF ELECTRICITY IN LATE 1995.
<TABLE>
<CAPTION>
QUARTER NINE MONTHS TWELVE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- --------------------
1996 1995 1996 1995 1996 1995
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
DOLLARS IN MILLIONS
SALES............................................. $ 544.1 $ 292.1 $ 1,407.9 $ 802.8 $ 1,776.1 $ 1,039.3
--------- --------- --------- --------- --------- ---------
COST OF SALES..................................... 506.9 220.7 1,287.9 643.2 1,613.3 831.2
--------- --------- --------- --------- --------- ---------
GROSS PROFIT...................................... 37.2 71.4 120.0 159.6 162.8 208.1
--------- --------- --------- --------- --------- ---------
EXPENSES:
Operating and maintenance....................... 16.9 18.7 51.6 54.6 68.2 72.3
Depreciation, depletion and amortization........ 6.5 15.6 19.0 44.6 24.0 58.1
Provisions for asset impairments................ -- -- -- 13.2 --
--------- --------- --------- --------- --------- ---------
TOTAL EXPENSES.................................... 23.4 34.3 70.6 99.2 105.4 130.4
--------- --------- --------- --------- --------- ---------
INCOME FROM OPERATIONS, BEFORE MINORITY
INTERESTS........................................ $ 13.8 $ 37.1 $ 49.4 $ 60.4 $ 57.4 $ 77.7
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
NET INCOME........................................ $ 4.8 $ 18.3 $ 18.2 $ 21.7 $ 20.5 $ 27.8
--------- --------- --------- --------- --------- ---------
NON-RECURRING ITEMS:
Change in accounting method--mark-to-market....... -- (15.9) -- (15.9) (2.4) (15.9)
Provisions for asset impairments.................. -- -- -- -- 6.7 --
Sale of oil and gas reserves...................... -- 1.7 -- 5.0 -- 6.7
--------- --------- --------- --------- --------- ---------
NORMALIZED INCOME................................. $ 4.8 $ 4.1 $ 18.2 $ 10.8 $ 24.8 $ 18.6
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
QUARTER-TO-QUARTER
Normalized income increased 17% after excluding the impact for the
accounting change and sale of oil and gas reserves as indicated above over the
1995 quarter. The improved results stem from increased marketing volume, natural
gas liquids (NGLs) production and prices. The gas processing business' operating
income increased 52% to $13.4 million in 1996 due to a 35% increase in NGL
prices combined with a 20% increase in NGL production over the 1995 period.
These increases were partially offset by an 11% decline in throughput volumes to
465 Mmcf per day. Marketing and trading operations posted a $2.4 million
increase in operating income (excluding impact of accounting method change)
reflecting a
17
<PAGE>
favorable trading environment during a period of high natural gas price
volatility. The marketed volumes also increased 50% over the 1995 quarter.
Sales increased $252.0 million in the 1996 quarter over the 1995 quarter.
The increase in sales is primarily due to a 56% increase in natural gas prices
and a 50% increase in marketing volumes. Changes in natural gas market prices
can significantly affect sales in a period without necessarily impacting gross
profit proportionately. Sales were unfavorably impacted by an 11% decrease in
throughput relating to a decrease in well-connect activity on the Southeast
Texas Pipeline System. Gross profit from Aquila's marketing and trading
businesses and gas gathering and processing businesses increased by $16.9
million due to the marketing volume increases and NGL price increases discussed
above excluding the impact of the accounting method change. Gross profit for the
1995 quarter included $17.8 million in gross profit from Aquila's oil and gas
production business, which was sold in September 1995.
Depreciation, depletion and amortization expense decreased by $9.1 million
in 1996 primarily due to the sale of the oil and gas properties discussed above.
YEAR-TO-DATE
Normalized income increased 69% over the 1995 period. The improved results
are due to significant increases across Aquila's businesses. Gas volumes sold,
gas throughput, NGL production and NGL prices are all up over the 1995 period
and are the primary factors that resulted in improved normalized income.
Aquila's marketing and trading businesses operating income increased $7.6
million (excluding the accounting method change) and Aquila's gas gathering and
processing businesses operating income increased $19.0 million.
Sales increased $605.1 million for the nine months ended September 30, 1996,
compared to the same period in 1995 primarily due to a 29% increase in gas
volumes sold and a 60% increase in natural gas prices over the 1995 period.
Pipeline throughput increased 4% to 500 Mmcf per day while NGL production and
prices increased 32% and 18%, respectively over the 1995 period. Gross profit
from Aquila's gas marketing and gas pipeline and processing businesses increased
by $37.8 million due to the volume increases discussed above (excluding the
accounting method change). Gross profit for the 1995 period included $50.8
million in gross profit from Aquila's oil and gas production business which was
sold as discussed above.
Depreciation, depletion and amortization expense decreased by $25.6 million
in 1996 primarily due to the sale of the oil and gas properties discussed above.
TWELVE MONTHS ENDED SEPTEMBER 30, 1996 TO 1995
Normalized income increased 33% in 1996 for the twelve-month period compared
to the 1995 period. In addition to the non-recurring items mentioned in the
quarter period, the twelve-month comparison is affected by a provision from
impaired assets stemming from early adoption of Statement of Financial
Accounting Standards No. 121 ($13.2 million pre-tax, $6.7 million after tax).
The improved normalized results are due to increased earnings from both energy
marketing and gas gathering and processing segments. Sales in 1996 increased
$736.8 million over 1995 as marketing volumes increased 33% and gas prices
increased 57%. Pipeline throughput volumes rose 11% and natural gas liquids
production increased 26% over 1995 levels contributing to increased normalized
income. Gross profit in 1995 includes $66.7 million from Aquila's oil and gas
production business which was sold in September 1995.
Depreciation, depletion and amortization expense was $34.1 million lower
than last year due to the sale of the oil and gas business.
On July 1, 1996, AQP and Aquila acquired 15% of the outstanding capital
stock of Oasis Pipeline Company (Oasis) and related transportation rights for
approximately $48 million. Oasis consists of an approximately 600-mile pipeline
system and is in proximity to many of AQP's existing gathering systems.
18
<PAGE>
On November 1, 1996, AQP and Aquila acquired another 25% of Oasis' common stock
for approximately $84.0 million. The 25% stock interest is subject to a stock
option agreement whereby another company may, on or before April 1, 1997, buy
one-fifth of the 25% acquired interest for approximately $16.8 million.
OTHER BUSINESSES AND EQUITY INVESTMENTS
Other businesses and equity investments consist primarily of UtilCo Group (a
subsidiary of the company), operations in the United Kingdom, various gas
marketing and service contract businesses and equity investments in Australia
and New Zealand. The commentary that follows centers on the major items of
significance affecting these businesses and investments.
UTILCO GROUP
Net income from UtilCo Group was $1.9 million for the quarter ended
September 30, 1996 compared to $2.4 million in last year's quarter. Net income
for the nine months and twelve months ended September 30, 1996, was $18.4
million and $12.0 million compared to $6.2 million and $8.0 million in the prior
year periods. Earnings from UtilCo Group in the year-to-date and twelve-month
periods included an after tax gain of $11.8 million, primarily the result of a
long-term lease arrangement at a power project that was accounted for as a sales
type lease by the partnership. The twelve-month period in 1996 also included a
provision for asset impairment of $9.3 million (after tax). UtilCo Group's
normalized income for the quarter, year-to-date and twelve-month periods are
presented below.
<TABLE>
<CAPTION>
QUARTER YEAR-TO-DATE TWELVE-MONTHS
------------ ------------- -------------
DESCRIPTION 1996 1995 1996 1995 1996 1995
- -------------------------------------------------- ---- ---- ----- ---- ----- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
INCOME, AS REPORTED............................... $1.9 $2.4 $18.4 $6.2 $12.0 $8.0
NON-RECURRING ITEMS:
Provision for asset impairments................... -- -- -- -- 9.3 --
Gain on sales lease............................... -- -- (11.8) -- (11.8) --
---- ---- ----- ---- ----- ----
NORMALIZED INCOME................................. $1.9 $2.4 $ 6.6 $6.2 $ 9.5 $8.0
---- ---- ----- ---- ----- ----
---- ---- ----- ---- ----- ----
</TABLE>
Normalized income is higher in the nine- and twelve-month periods due to
better project performance while for the quarter income is slightly down due to
a tax expense adjustment in 1995.
INTERNATIONAL
UtiliCorp's Australian operations contributed $6.3 million and $9.8 million
in net income for the three- and nine-month periods ended September 30, 1996,
respectively. The Australian operations primarily consists of a 49.9% ownership
interest in United Energy Limited, an electric distribution utility serving
approximately 533,000 customers in metropolitan Melbourne which was purchased in
September 1995. Net income from Australian operations in the 1995 periods was
$.2 million. The results for the 1996 periods are above management's
expectations based on its original budget. The improved earnings were mainly due
to favorable results obtained from transforming its operations and marketing to
a competitive and customer-focused operation at a much faster pace than
anticipated.
UtiliCorp N.Z., Inc. (UNZ), a 79% owned subsidiary, purchased a 29.4%
ownership interest in Power New Zealand Limited (PNZ) primarily in November
1995. In addition, UNZ has a 39% ownership position in WEL Energy Group Limited
(WEL). Both PNZ and WEL are New Zealand electric distribution utilities. PNZ
serves 216,000 customers and WEL serves 65,000 customers. Earnings from these
investments contributed $1.7 million for the nine-month period ended September
30, 1996. Earnings for the three-month period in 1996 and for the three- and
nine-month periods in 1995 were zero. Increased earnings in 1996 for the
year-to-date period reflect the benefits received from additional investments in
these international businesses.
19
<PAGE>
In 1996, UtiliCorp realigned certain of its business relationships in the
United Kingdom (UK). Late in the first quarter UtiliCorp's UK businesses
terminated their equity relationship in the Caledonian Gas Limited and Midlands
Gas Limited (Midlands) joint ventures. As part of the termination of the equity
relationship in Midlands, UtiliCorp assumed an interest in two long-term gas
supply contracts (for deliveries through 2005) that it assimilated into its
existing portfolio of sales and supply contracts. Since the UK natural gas
market currently does not have a mature long-term pricing market, it is
difficult to calculate future profitability of the portfolio. Based on
management's estimates and available market data at September 30, 1996,
UtiliCorp continued to carry a $14 million reserve relating to future losses
that may exist within the portfolio of contracts. Management believes that this
reserve is adequate and that no additional material amounts will be needed.
On April 15, 1996, UtiliCorp acquired the 25% interest in UtiliCorp U.K.,
Inc., it did not already own for approximately $12 million. This transaction was
accounted for as a purchase.
INTEREST EXPENSE
Total interest expense increased $5.9 million, $14.2 million and $23.5
million for the three-, nine- and twelve-month periods ended September 30, 1996
compared to the year earlier periods. This increase is primarily due to
additional long-term borrowings issued late in the second quarter of 1995 and
new Australian and New Zealand dollar borrowings issued in the third and fourth
quarters of 1995.
NEW ACCOUNTING STANDARD
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" (SFAS 125). SFAS 125
changes the criteria for accounting for a sale of a financial asset among other
matters relating to financial assets and liabilities. UtiliCorp currently
records sales under its accounts receivable financing program as a sale.
However, under SFAS 125, given current agreement provisions, these transactions
will not meet the criteria of a sale. UtiliCorp anticipates that its accounts
receivable sales program agreement will be changed to meet the new criteria in
SFAS 125 before year end. SFAS 125 is required to be adopted in fiscal years
beginning after December 15, 1996, and cannot be adopted early or retroactively.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operating activities decreased $53.6 million for the
quarter ended September 30, 1996, compared to the same period in 1995. The
primary factors causing the decrease relate to net decreases in working capital
components stemming from timing of cash expenditures and receipts. UtiliCorp's
earnings and its related cash flows vary during the year due to seasonality.
Large cash flow swings at individual quarters are not unusual. Also contributing
to these unfavorabilities were equity earnings stemming from non-recurring
transactions at UtilCo Group discussed on page 12 and higher equity earnings
from Australia. Cash provided from operating activities for the nine months
ended September 30, 1996, was $254.8 million or 14% higher than in the same
period in 1995.
Cash provided from operating activities for the twelve months ended
September 30, 1996, was $292.6 million or 6%, higher than in 1995. The 1996
twelve-month cash flow statement reflects a provision for asset impairments and
the income effects of a change in accounting. Neither the provision for asset
impairments nor the change in accounting affect cash flow from operations;
however, certain individual components are affected.
Cash used in investing activities decreased $22.8 million for the quarter
ended September 30, 1996, compared to 1995. Cash used in investing activities
varies depending on the number and magnitude of investment and acquisition
opportunities. In the third quarter 1995, UtiliCorp acquired a 49.9% interest in
an Australian electric distribution utility partially offset by cash proceeds
from UtiliCorp's sale of certain
20
<PAGE>
oil and gas properties. UtiliCorp's investing expenditures generally fluctuate
with the timing of acquisition opportunities. UtiliCorp's capital expenditures
for core utility operations were about the same between periods.
Cash used in investing activities decreased $211.5 million for the nine
months ended September 30, 1996, primarily due to the same reason discussed in
the quarter above plus the nine month period in 1995 included additional
acquisitions related to a $78.0 million acquisition of a pipeline and two gas
marketing companies. The nine-month period in 1995 includes expenditures for the
acquisition of an interest in a power project for $59.0 million and pipeline
additions related to Aquila's Katy pipeline project.
Cash used in investing activities for the twelve months ended September 30,
1996, compared to the same period in 1995 decreased by $160.1 million. As with
the quarter period discussed above, investing activities tend to fluctuate
significantly depending on the timing of acquisition opportunities. For the
twelve-month period ended September 30, 1996, the company invested $119.3
million internationally compared to $288.6 million in 1995. The primary
difference relates to the September 1995 acquisition of a 49.9% interest in an
Australian electric distribution utility. The 1995 period cash outflows were
impacted by the cash proceeds on the sale of substantially all of the company's
oil and gas production assets for $204.5 million.
On October 23, 1996, UtiliCorp issued $100 million of 6.7% Senior Notes. The
net proceeds of approximately $99.5 million were used to reduce short-term debt
outstanding. In addition, on October 25, 1996, UtiliCorp registered 6 million
shares of its $1 par value common stock that it expects to issue in the fourth
quarter of 1996. UtiliCorp expects the net proceeds from the stock issuance to
be used to reduce short-term debt. UtiliCorp borrowed approximately $84.0
million from short-term facilities to finance Aquila's purchase of an additional
ownership interest in Oasis.
To supplement the company's internally generated cash flows, the company has
various short-term credit programs. A primary source of cash has been bank
borrowings from uncommitted bank lines. In addition the company can issue
commercial paper aggregating $150 million. To support the commercial paper
program, the company has a $250 million committed revolving credit agreement
with a consortium of banks.
The company also has two accounts receivable sale programs. The level of
funding available from these programs varies depending on the level of eligible
accounts receivable. Under these programs, the company may borrow another $9.0
million.
On June 27, 1996, the company obtained an extended grace period for a
long-term debt to capitalization ratio covenant from its creditor on its 9.21%
senior notes. The grace period extends to June 30, 1997. The company continues
to classify this debt as long-term. Management anticipates that UtiliCorp will
meet the convenant ratio after the common stock issuance mentioned above and for
foreseeable future periods.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements. Such statements are
identified as passages that contain the words "anticipated", "belief" or
"believes" within the statement. Forward-looking statements involve risks and
uncertainties and there are certain important factors that could cause actual
results to differ materially from those anticipated. Some of the important
factors which could cause actual results to differ materially from those
anticipated include, but are not limited to, future national and regional
economic and competitive conditions, inflation rates, regulatory changes,
weather conditions, financial market conditions, interest rates, future business
decisions, and other uncertainties, all of which are difficult to predict and
most of which are beyond the control of the company.
21
<PAGE>
ITEM 1. LEGAL PROCEEDINGS.
WILLIAM ALPERN VS. UTILICORP UNITED INC. On June 17, 1992, a class action
suit was filed by a stockholder against the Company in the United States
District Court for the Western District of Missouri. Plaintiff alleges that the
Company violated Section 10(b) of the Securities Exchange Act of 1934, as
amended, and Rule 10b-5 of the Securities and Exchange Commission, both by
making misrepresentations and omitting to state material facts in connection
with public disclosures. Plaintiff also alleges a claim under Section 11 of the
Securities Act of 1933, as amended. Plaintiff seeks unspecified compensatory
damages. The District Court dismissed the case by granting summary judgment to
UtiliCorp. Plaintiff appealed that decision to the United States Court of
Appeals for the Eighth Circuit. On May 17, 1996, the Court of Appeals reversed
the decision of the District Court, reinstated plaintiff's claims and remanded
the case back to the District Court. A trial is anticipated in 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
UtiliCorp held a special meeting of its shareholders on August 14, 1996 to
vote on UtiliCorp's proposed merger with Kansas City Power & Light Company.
Subsequent to the meeting, the proposed merger was terminated. The voting
results at the meeting were as follows:
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD
------------ ---------- ---------
<S> <C> <C> <C>
Proposed Merger......................................... 35,867,472 1,901,885 421,458
</TABLE>
ITEM 5. OTHER INFORMATION
On November 6, 1996, the Board of Directors of UtiliCorp United Inc., a
Delaware corporation, declared a dividend of one right (a "Right") for each
share of common stock $1.00 par value ("Common Stock"), of the Company held of
record at the close of business on December 31, 1996 (the "Record Date"), or
issued thereafter and prior to the Distribution Date (as defined in the Rights
Agreement described below). Subject to obtaining appropriate regulatory
approvals, the Rights will be issued pursuant to a Rights Agreement between the
Company and First Chicago Trust Company of New York, as rights agent.
Each Right entitles its registered holder to purchase from the Company,
after the Distribution Date, one one-thousandth (1/1000th) of a share of Series
A Cumulative Participating Preference Stock, no par value (the "Preference
Stock") of the Company, for $115 (the "Purchase Price"), subject to adjustment
and other specified conditions. The Rights will be evidenced by the Common Stock
certificates until the close of business on the earlier of the date (either, the
"Distribution Date") which is (i) the tenth business day (or such later date as
the Board of Directors of the Company may from time to time fix by resolution
adopted prior to the Distribution Date that would otherwise have occurred) after
the date on which any Person (as defined in the Rights Agreement) commences a
tender or exchange offer which, if consummated, would result in such Person's
becoming an Acquiring Person, as defined below, or (ii) the tenth business day
(or such earlier or later date as the Board of Directors of the Company may from
time to time fix by resolution adopted prior to such tenth business day, (the
"Flip-in Date") after the first date of public announcement by the Company that
a Person has become an Acquiring Person; PROVIDED that if a tender or exchange
offer referred to in clause (i) is cancelled, terminated or otherwise withdrawn
prior to the Distribution Date without the purchase of any shares of stock
pursuant thereto, such offer shall be deemed never to have been made. An
Acquiring Person is any Person who is the Beneficial Owner (as defined in the
Rights Agreement) of 15% or more of the outstanding shares of Common Stock,
PROVIDED, HOWEVER, such term shall not include (i) the Company, any wholly-owned
subsidiary of the Company or any employee stock ownership or other employee
benefit plan of the Company, (ii) any person who is the Beneficial Owner of 15%
or more of the outstanding Common Stock as of the date of the Rights Agreement
or who shall become the Beneficial Owner of 15% or more of the outstanding
Common Stock solely as a result of an acquisition of Common Stock by the
Company, until such time as such Person
22
<PAGE>
becomes the Beneficial Owner of additional Common Stock, other than through a
dividend or stock split, (iii) any Person who becomes an Acquiring Person
without any plan or intent to seek or affect control of the Company if such
Person agrees to divest and does promptly divest sufficient securities such that
such 15% or greater Beneficial ownership ceases or (iv) any Person who
Beneficially owns shares of Common Stock consisting solely of (A) shares
acquired pursuant to the grant or exercise of an option granted by the Company
in connection with an agreement to merge with, or acquire, the Company entered
into prior to a Flip-in Date, (B) shares owned by such Person and its Affiliates
and Associates at the time of such grant, (C) shares, amounting to less than 1%
of the outstanding Common Stock, acquired by Affiliates and Associates of such
Person after the time of such grant or (D) shares which are held by such Person
in trust accounts, managed accounts and the like or otherwise held in a
fiduciary capacity, that are beneficially owned by third persons who are not
Affiliates or Associates of such Person or acting together with such Person to
hold shares, or which are held by such Person in respect of a debt previously
contracted. The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Stock. Common Stock
certificates issued prior to the Distribution Date shall evidence one Right for
each share of Common Stock represented thereby and shall contain a legend
incorporating by reference the terms of the Rights Agreement (as such may be
amended from time to time). Notwithstanding the absence of the aforementioned
legend, certificates evidencing shares of Common Stock outstanding on the Record
Date shall also evidence one Right for each share of Common Stock evidenced
thereby. Promptly following the Distribution Date, separate certificates
evidencing the Rights ("Rights Certificates") will be mailed to holders of
record of Common Stock at the Distribution Date.
The Rights will not be exercisable until the Business Day (as defined in the
Rights Agreement) following the Distribution Date. The Rights will expire on the
earliest of (i) the Exchange Time (as defined below), (ii) the close of business
on the tenth anniversary of the Rights Agreement, (iii) the date on which the
Rights are redeemed as described below and (iv) upon certain mergers of the
Company with or into another corporation pursuant to an agreement entered into
prior to a Flip-in Date (in any such case, the "Expiration Time").
The Purchase Price and the number of Rights outstanding, or in certain
circumstances the securities purchasable upon exercise of the Rights, are
subject to adjustment from time to time to prevent dilution in the event of a
Common Stock dividend on, or a subdivision or a combination into a smaller
number of shares of, Common Stock, or the issuance or distribution of any
securities or assets in respect of, in lieu of or in exchange for Common Stock.
In the event that prior to the Expiration Time a Flip-in Date occurs, each
Right (other than Rights Beneficially Owned by the Acquiring Person or any
Affiliate or Associate thereof, which Rights shall become void) shall constitute
the right to purchase from the Company, upon the exercise thereof in accordance
with the terms of the Rights Agreement, that number of shares of Common Stock of
the Company having an aggregate Market Price (as defined in the Rights
Agreement), on the date of the public announcement of an Acquiring Person's
becoming such that gave rise to the Flip-in Date, equal to twice the Purchase
Price for an amount in cash equal to the then current Purchase Price. In
addition, the Board of Directors of the Company may, at its option, at any time
after a Flip-in Date and prior to the time an Acquiring Person becomes the
Beneficial Owner of more than 50% of the outstanding shares of Common Stock,
elect to exchange all (but not less than all) the then outstanding Rights (other
than Rights Beneficially Owned by the Acquiring Person or any Affiliate or
Associate thereof, which Rights have become void) for shares of Common Stock at
an exchange ratio of one share of Common Stock per Right, appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date of the Distribution Date (the "Exchange Ratio"). Immediately upon
such action by the Board of Directors (the "Exchange Time"), the right to
exercise the Rights will terminate and each Right (other than Rights
Beneficially Owned by the Acquiring Person or any Affiliate or Associate
thereof, which Rights have become void) will thereafter represent only the right
to receive a number of shares of Common Stock equal to the Exchange Ratio.
23
<PAGE>
Whenever the Company shall become obligated under the preceding paragraph to
issue shares of Common Stock upon exercise of or in exchange for Rights, the
Company, at its option, may substitute therefor shares of Preference Stock, at a
ratio of one one-thousandth of a share of Preference Stock for each share of
Common Stock so issuable.
In the event that prior to the Expiration Time the Company enters into,
consummates or permits to occur a transaction or series of transactions after a
Flip-in Date in which, directly or indirectly, (i) the Company shall consolidate
or merge or participate in a share exchange with any other Person if, at the
time of the consolidation, merger or share exchange or at the time the Company
enters into an agreement with respect to such consolidation, merger or share
exchange, the Acquiring Person controls the Board of Directors of the Company
and either (A) any term of or arrangement concerning the treatment of shares of
capital stock in such merger, consolidation or share exchange relating to the
Acquiring Person is not identical to the terms and arrangements relating to
other holders of Common Stock or (B) the Person with whom the transaction or
series of transactions occurs is the Acquiring Person or an Affiliate or
Associate of the Acquiring Person or (ii) the Company shall sell or otherwise
transfer (or one or more of its subsidiaries shall sell or otherwise transfer)
assets (A) aggregating more than 50% of the assets (measured by either book
value or fair market value) or (B) generating more than 50% of the operating
income or cash flow, of the Company and its subsidiaries (taken as a whole) to
any other Person (other than the Company or one or more of its wholly-owned
subsidiaries) or to two or more such Persons which are affiliated or otherwise
acting in concert, if, at the time the Company (or any such subsidiary) enters
into an agreement with respect to such sale or transfer the Acquiring Person
controls the Board of Directors of the Company (a "Flip-over Transaction or
Event"), the Company shall take such action as shall be necessary to ensure, and
shall not enter into, consummate or permit to occur such Flip-over Transaction
or Event until it shall have entered into a supplemental agreement with the
Person engaging in such Flip-over Transaction or Event or the parent corporation
thereof (the "Flip-over Entity"), for the benefit of the holders of the Rights,
providing, that upon consummation or occurrence of the Flip-over Transaction or
Event, (i) each Right shall thereafter constitute the right to purchase from the
Flip-over Entity, upon exercise thereof in accordance with the terms of the
Rights Agreement, that number of shares of capital stock of the Flip-over Entity
having an aggregate Market Price on the date of consummation or occurrence of
such Flip-over Transaction or Event equal to twice the Purchase Price for an
amount in cash equal to the then current Purchase Price and (ii) the Flip-over
Entity shall thereafter be liable for, and shall assume, by virtue of such
Flip-over Transaction or Event and such supplemental agreement, all the
obligations and duties of the Company pursuant to the Rights Agreement. For
purposes of the foregoing description, the term "Acquiring Person" shall include
any Acquiring Person and its Affiliates and Associates counted together as a
single Person.
The Board of Directors of the Company may, at its option, at any time prior
to the close of business on the Flip-in Date, redeem all (but not less than all)
the then outstanding Rights at a price of $.01 per Right) (the "Redemption
Price"), as provided in the Rights Agreement. Immediately upon the action of the
Board of Directors of the Company electing to redeem the Rights, without any
further action and without any notice, the right to exercise the Rights will
terminate and each Right will thereafter represent only the right to receive the
Redemption Price in cash for each Right so held.
The holders of Rights will, solely by reason of their ownership of Rights,
have no rights as stockholders of the Company, including, without limitation,
the right to vote or to receive dividends.
The Form of Rights Agreement (which includes as Exhibit A the forms of
Rights Certificate and Election to Exercise) is attached hereto as an exhibit
and is incorporated herein by reference. The foregoing description of the Rights
is qualified in its entirety by reference to the Rights Agreement and such
exhibit thereto.
24
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
4 Form of Rights Agreement Between UtiliCorp United Inc. and First
Chicago Trust Company of New York, as Rights Agent.
11 Statement regarding Computation of Per Share Earnings.
27 Financial Data Schedule--For the nine months ended September 30,
1996.
(b) Reports on Form 8-K
A current report on Form 8-K dated September 30, 1996, with respect to Item
5 was filed with the Securities and Exchange Commission by the Registrant.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UTILICORP UNITED INC.
By: /s/ RICHARD C. GREEN, JR.
-----------------------------------------
Richard C. Green, Jr.
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Date: November 7, 1996
By: /s/ TERRY G. WESTBROOK
-----------------------------------------
Terry G. Westbrook
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
(PRINCIPAL FINANCIAL OFFICER AND
CHIEF ACCOUNTING OFFICER)
Date: November 7, 1996
26
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RIGHTS AGREEMENT
dated as of
,
between
UTILICORP UNITED INC.
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK,
as Rights Agent
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
RIGHTS AGREEMENT
Table of Contents
Page
----
ARTICLE I
CERTAIN DEFINITIONS..................................................1
1.1 CERTAIN DEFINITIONS......................................................1
ARTICLE II
THE RIGHTS...........................................................6
2.1 LEGEND ON COMMON STOCK CERTIFICATES......................................6
2.2 EXERCISE OF RIGHTS; SEPARATION OF RIGHTS.................................7
2.3 ADJUSTMENTS TO PURCHASE PRICE; NUMBER OF RIGHTS..........................9
2.4 DATE ON WHICH EXERCISE IS EFFECTIVE.....................................10
2.5 EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS CERTIFICATES...10
2.6 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.....................10
2.7 MUTILATED, DESTROYED, LOST AND STOLEN RIGHTS CERTIFICATES...............11
2.8 PERSONS DEEMED OWNERS...................................................12
2.9 DELIVERY AND CANCELLATION OF CERTIFICATES...............................12
2.10 AGREEMENT OF RIGHTS HOLDERS.............................................12
ARTICLE III
ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS.....13
3.1 FLIP-IN.................................................................13
3.2 FLIP-OVER...............................................................15
i
<PAGE>
ARTICLE IV
THE RIGHTS AGENT....................................................16
4.1 GENERAL.................................................................16
4.2 MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT...............16
4.3 DUTIES OF RIGHTS AGENT..................................................17
4.4 CHANGE OF RIGHTS AGENT..................................................18
ARTICLE V
MISCELLANEOUS.......................................................19
5.1 REDEMPTION..............................................................19
5.2 EXPIRATION..............................................................20
5.3 ISSUANCE OF NEW RIGHTS CERTIFICATES.....................................20
5.4 SUPPLEMENTS AND AMENDMENTS..............................................20
5.5 FRACTIONAL SHARES.......................................................21
5.6 RIGHTS OF ACTION........................................................21
5.7 HOLDER OF RIGHTS NOT DEEMED A STOCKHOLDER...............................21
5.8 NOTICE OF PROPOSED ACTIONS..............................................22
5.9 NOTICES.................................................................22
5.10 SUSPENSION OF EXERCISABILITY............................................22
5.11 COSTS OF ENFORCEMENT....................................................23
5.12 SUCCESSORS..............................................................23
5.13 BENEFITS OF THIS AGREEMENT..............................................23
5.14 DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC................23
ii
<PAGE>
5.15 DESCRIPTIVE HEADINGS....................................................23
5.16 GOVERNING LAW...........................................................23
5.17 COUNTERPARTS............................................................24
5.18 SEVERABILITY............................................................24
EXHIBIT A
Form of Rights Certificate
(Together with Form of
Election to Exercise)
EXHIBIT B
Form of Certificate of Designation
of Series A Participating Cumulative Preference Stock
iii
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT dated as of , 199__ between UtiliCorp United Inc., a
Delaware corporation (the "Company"), and First Chicago Trust Company of New
York, a New York corporation, as Rights Agent (the "Rights Agent", which term
shall include any successor Rights Agent hereunder).
WITNESSETH:
The Board of Directors of the Company has authorized and declared a
dividend of one Right (as hereinafter defined) for each share of Common Stock,
par value $1.00 per share, of the Company (the "Common Stock") outstanding at
the Close of Business (as hereinafter defined) on December 31, 1996 (the
"Record Date"), and has authorized the issuance of one Right (as such number may
hereafter be adjusted pursuant to the provisions of this Rights Agreement) with
respect to each share of Common Stock that shall become outstanding between the
Record Date and the earliest of the Distribution Date, the Redemption Date or
the Expiration Date (as such terms are hereinafter defined). Each Right shall
initially represent the right to purchase one one-thousandths (1/1000ths) of a
share of Series A Participating Cumulative Preference Stock, no par value, of
the Company (the "Preference Stock"), having the powers, rights and preferences
set forth in the Certificate of Designations attached as Exhibit A.
NOW THEREFORE, in consideration of the premises and the respective
agreements set forth herein, the parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings indicated:
"Acquiring Person" shall mean any Person who is a Beneficial Owner of
15% or more of the outstanding shares of Common Stock; PROVIDED, HOWEVER,
that the term "Acquiring Person" shall not include any Person (i) who is
the Beneficial Owner of 15% or more of the outstanding shares of Common
Stock on the date of this Agreement or who shall become the Beneficial
Owner of 15% or more of the outstanding shares of Common Stock solely as a
result of an acquisition by the Company of shares of Common Stock, until
such time hereafter or thereafter as any of such Persons shall become the
Beneficial Owner (other than by means of a stock dividend or stock split)
of any additional shares of Common Stock, (ii) who is the Beneficial Owner
of 15% or more of the outstanding shares of Common Stock but who acquired
Beneficial Ownership of shares of Common Stock without any plan or
intention to seek or affect control of the Company, if such Person
<PAGE>
promptly enters into an irrevocable commitment promptly to divest, and
thereafter promptly divests (without exercising or retaining any power,
including voting, with respect to such shares), sufficient shares of Common
Stock (or securities convertible into, exchangeable into or exercisable for
Common Stock) so that such Person ceases to be the Beneficial Owner of 15%
or more of the outstanding shares of Common Stock or (iii) who Beneficially
Owns shares of Common Stock consisting solely of one or more of (A) shares
of Common Stock Beneficially Owned pursuant to the grant or exercise of an
option granted to such Person by the Company in connection with an
agreement to merge with, or acquire, the Company entered into prior to a
Flip-in Date, (B) shares of Common Stock (or securities convertible into,
exchangeable into or exercisable for Common Stock) Beneficially Owned by
such Person or its Affiliates or Associates at the time of grant of such
option, (C) shares of Common Stock (or securities convertible into,
exchangeable into or exercisable for Common Stock) acquired by Affiliates
or Associates of such Person after the time of such grant which, in the
aggregate, amount to less than 1% of the outstanding shares of Common Stock
or (D) Common Stock (or securities convertible into, exchangeable into or
exercisable for Common Stock) which are held by such Person in trust
accounts, managed accounts and the like or otherwise held in a fiduciary
capacity, that are beneficially owned by third persons who are not
Affiliates or Associates of such Person or acting together with such Person
to hold such shares, or which are held by such Person in respect of a debt
previously contracted. In addition, the Company, any wholly-owned
Subsidiary of the Company and any employee stock ownership or other
employee benefit plan of the Company or a wholly-owned Subsidiary of the
Company shall not be an Acquiring Person.
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of
1934, as such Rule is in effect on the date of this Agreement.
A Person shall be deemed the "Beneficial Owner", and to have
"Beneficial Ownership" of, and to "Beneficially Own", any securities as to
which such Person or any of such Person's Affiliates or Associates is or
may be deemed to be the beneficial owner of pursuant to Rules 13d-3 and
13d-5 under the Securities Exchange Act, as such Rules are in effect on the
date of this Agreement, as well as any securities as to which such Person
or any of such Person's Affiliates or Associates has the right to become
Beneficial owner (whether such right is exercisable immediately or only
after the passage of time or the occurrence of conditions) pursuant to any
agreement, arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, rights (other than the Rights), warrants or
options, or otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed
the "Beneficial Owner", or to have "Beneficial Ownership" of, or to
"Beneficially Own", any security (i) solely because such security has been
tendered pursuant to a tender or exchange offer made by such Person or any
of such Person's Affiliates or Associates until such tendered security is
accepted for payment or exchange or (ii) solely because such Person or any
of such Person's Affiliates or Associates has or shares the power to vote
or
2
<PAGE>
direct the voting of such security pursuant to a revocable proxy given in
response to a public proxy or consent solicitation made to more than ten
holders of shares of a class of stock of the Company registered under
Section 12 of the Securities Exchange Act of 1934 and pursuant to, and in
accordance with, the applicable rules and regulations under the Securities
Exchange Act of 1934, except if such power (or the arrangements relating
thereto) is then reportable under Item 6 of Schedule 13D under the
Securities Exchange Act of 1934 (or any similar provision of a comparable
or successor report). Notwithstanding the foregoing, no officer or
director of the Company shall be deemed to Beneficially Own any securities
of any other Person (i) by virtue of any actions such officer or director
takes in such capacity as an officer or director, or (ii) by virtue of
holding such position of officer or director. For purposes of this
Agreement, in determining the percentage of the outstanding shares of
Common Stock with respect to which a Person is the Beneficial owner, all
shares as to which such Person is deemed the Beneficial owner shall be
deemed outstanding.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in New York, New York or in Kansas City,
Missouri are generally authorized or obligated by law or executive order to
close.
"Close of Business" on any given date shall mean 5:00 p.m., New York
City time on such date (or, if such date is not a Business Day, 5:00 p.m.,
New York City time on the next succeeding Business Day).
"Common Stock" shall mean the shares of Common Stock of the Company.
"Distribution Date" shall mean the close of business on the earlier of
(i) the tenth business day (or such later date as the Board of Directors of
the Company may from time to time fix by resolution adopted prior to the
Distribution Date that would otherwise have occurred) after the date on
which any Person commences a tender or exchange offer which, if
consummated, would result in such Person's becoming an Acquiring Person and
(ii) the Flip-in Date; PROVIDED, that if any tender or exchange offer
referred to in clause (i) of this paragraph is cancelled, terminated or
otherwise withdrawn prior to the Distribution Date without the purchase of
any shares of Common Stock pursuant thereto, such offer shall be deemed,
for purposes of this paragraph, never to have been made.
"Exchange Time" shall mean the time at which the right to exercise the
Rights shall terminate pursuant to Section 3.1(c) hereof.
3
<PAGE>
"Expiration Time" shall mean the earliest of (i) the Exchange Time,
(ii) the Redemption Time, (iii) the Close of Business on the 10th
anniversary of the date of this Rights Agreement, and (iv) pursuant to an
agreement entered into prior to a Flip-in Date, upon the merger of the
Company into another corporation or with another corporation in which all
shares of Common Stock are either converted into cash and/or securities of
another corporation or, with respect to treasury shares and shares owned by
the other party to the merger or its affiliates, cancelled.
"Flip-in Date" shall mean the tenth business day after any Shares
Acquisition Date or such earlier or later date as the Board of Directors of
the Company may from time to time fix by resolution adopted prior to the
Flip-in Date that would otherwise have occurred.
"Flip-over Entity," for purposes of Section 3.2, shall mean (i) in the
case of a Flip-over Transaction or Event described in clause (i) of the
definition thereof, the Person issuing any securities into which shares of
Common Stock are being converted or exchanged and, if no such securities
are being issued, the other party to such Flip-over Transaction or Event
and (ii) in the case of a Flip-over Transaction or Event referred to in
clause (ii) of the definition thereof, the Person receiving the greatest
portion of the assets or earning power being transferred in such Flip-over
Transaction or Event, provided in all cases if such Person is a subsidiary
of a corporation, the parent corporation shall be the Flip-over Entity.
"Flip-over Stock" shall mean the capital stock (or similar equity
interest) with the greatest voting power in respect of the election of
directors (or other persons similarly responsible for direction of the
business and affairs) of the Flip-over Entity.
"Flip-over Transaction or Event" shall mean a transaction or series of
transactions after a Flip-in Date in which, directly or indirectly, (i) the
Company shall consolidate or merge or participate in a share exchange with
any other Person if, at the time of the consolidation, merger or share
exchange or at the time the Company enters into any agreement with respect
to any such consolidation, merger or share exchange, the Acquiring Person
"controls" the Board of Directors of the Company and either (A) any term of
or arrangement concerning the treatment of shares of capital stock in such
consolidation, merger or share exchange relating to the Acquiring Person is
not identical to the terms and arrangements relating to other holders of
the Common Stock or (B) the Person with whom the transaction or series of
transactions occurs is the Acquiring Person or an Affiliate or Associate of
the Acquiring Person or (ii) the Company shall sell or otherwise transfer
(or one or more of its Subsidiaries shall sell or otherwise transfer)
assets (A) aggregating more than 50% of the assets (measured by either book
value or fair market value) or (B) generating more than 50% of the
operating income or cash flow of the Company and its Subsidiaries (taken as
a whole) to any Person (other than the Company or one or more of its wholly
owned Subsidiaries) or to two or more such
4
<PAGE>
Persons which are Affiliates or Associates or otherwise acting in concert,
if, at the time of the entry by the Company (or any such Subsidiary) into
an agreement with respect to such sale or transfer of assets, the Acquiring
Person "controls" the Board of Directors of the Company. An Acquiring
Person shall be deemed to "control" the Company's Board of Directors when,
following a Flip-in Date, the persons who were directors of the Company
before the Flip-in Date shall cease to constitute a majority of the
Company's Board of Directors.
"Market Price" per share of any securities on any date shall mean the
average of the daily closing prices per share of such securities
(determined as described below) on each of the 20 consecutive Trading Days
through and including the Trading Day immediately preceding such date;
PROVIDED, HOWEVER, that if an event of a type analogous to any of the
events described in Section 2.3 hereof shall have caused the closing prices
used to determine the Market Price on any Trading Days during such period
of 20 Trading Days not to be fully comparable with the closing price on
such date, each such closing price so used shall be appropriately adjusted
in order to make it fully comparable with the closing price on such date.
The closing price per share of any securities on any date shall be the last
reported sale price, regular way, or, in case no such sale takes place or
is quoted on such date, the average of the closing bid and asked prices,
regular way, for each share of such securities, in either case as reported
in the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange,
Inc. or, if the securities are not listed or admitted to trading on the New
York Stock Exchange, Inc., as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the securities are listed
or admitted to trading or, if the securities are not listed or admitted to
trading on any national securities exchange, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such
other system then in use, or, if on any such date the securities are not
listed or admitted to trading on any national securities exchange or quoted
by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the
securities selected by the Board of Directors of the Company; PROVIDED,
HOWEVER, that if on any such date the securities are not listed or admitted
to trading on a national securities exchange or traded in the over-the-
counter market, the closing price per share of such securities on such date
shall mean the fair value per share of securities on such date as determined
in good faith by the Board of Directors of the Company, after consultation
with a nationally recognized investment banking firm, and set forth in a
certificate delivered to the Rights Agent.
"Person" shall mean any individual, firm, partnership, association,
group (as such term is used in Rule 13d-5 under the Securities Exchange Act
of 1934, as such Rule is in effect on the date of this Agreement),
corporation or other entity.
5
<PAGE>
"Preference Stock" shall mean the Series A Participating Cumulative
Preference Stock of the Company having the rights, powers and preferences
set forth in the Certificate of Designation attached as Exhibit B hereto.
"Purchase Price" shall mean, as of any date, the price at which a
holder may purchase the securities issuable upon exercise of one whole
Right. Until adjustment thereof in accordance with the terms hereof, the
Purchase Price shall equal $115.00.
"Redemption Price" shall mean an amount equal to $0.01.
"Redemption Time" shall mean the time at which the right to exercise
the Rights shall terminate pursuant to Section 5.1 hereof.
"Shares Acquisition Date" shall mean the first date of public
announcement by the Company (by any means) that an Acquiring Person has
become such.
"Subsidiary" of any specified Person shall mean any corporation or
other entity of which a majority of the voting power of the equity
securities or a majority of the equity interest is Beneficially Owned,
directly or indirectly, by such Person.
"Trading Day," when used with respect to any securities, shall mean a
day on which the New York Stock Exchange, Inc. is open for the transaction
of business or, if such securities are not listed or admitted to trading on
the New York Stock Exchange, Inc., a day on which the principal national
securities exchange on which such securities are listed or admitted to
trading is open for the transaction of business or, if such securities are
not listed or admitted to trading on any national securities exchange, a
Business Day.
ARTICLE II
THE RIGHTS
2.1 LEGEND ON COMMON STOCK CERTIFICATES. Certificates for the Common
Stock issued after the date hereof but prior to the Distribution Date shall
evidence one Right for each share of Common Stock represented thereby and shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between UtiliCorp
United Inc. (the "Company") and First Chicago Trust Company of New
York, as Rights Agent, dated as of __________, ____________ (the
"Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal
executive offices of the Company. Under certain circumstances, as
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set forth in the Rights Agreement, such Rights may be redeemed, may
expire, or may be evidenced by separate certificates and will no
longer be evidenced by this certificate. The Company will mail to
the holder of this certificate a copy of the Rights Agreement
without charge within five days after receipt of a written request
therefor. Under certain circumstances, Rights issued to, or which
are or were Beneficially Owned by, Acquiring Persons or their
Affiliates or Associates (as such terms are defined in the Rights
Agreement) and any subsequent holder of such Rights may become null
and void.
Certificates representing shares of Common Stock that are issued and
outstanding at the Record Date shall evidence one Right for each share of
Common Stock evidenced thereby notwithstanding the absence of the foregoing
legend and the transfer of any of such certificates representing shares of
Common Stock shall also constitute the transfer of the Rights associated
with the Common Stock represented by such certificates.
2.2 EXERCISE OF RIGHTS; SEPARATION OF RIGHTS.
(1) Subject to Sections 3.1, 5.1 and 5.10 and subject to
adjustment as herein set forth, each Right will entitle the holder thereof,
after the Distribution Date and prior to the Expiration Time, to purchase,
for the Purchase Price, one one-thousandth of a share of Preference Stock.
(a) Until the Distribution Date, (i) no Right may be exercised
and (ii) each Right will be evidenced by the certificate for the associated
share of Common Stock and will be transferable only together with, and will
be transferred by a transfer of, such associated share.
(b) Subject to this Section 2.2 and to Sections 3.1, 5.1 and
5.10, after the Distribution Date and prior to the Expiration Time, the
Rights (i) may be exercised and (ii) may be transferred independent of
shares of Common Stock. Promptly following the Distribution Date, the
Rights Agent will mail to each holder of record of Common Stock as of the
Distribution Date (other than any Person whose Rights have become void
pursuant to Section 3.1(b)), at such holder's address as shown by the
records of the Company (the Company hereby agreeing to furnish copies of
such records to the Rights Agent for this purpose), (x) a certificate (a
"Rights Certificate") in substantially the form of Exhibit A hereto
appropriately completed, representing the number of Rights held by such
holder at the Distribution Date and having such marks of identification or
designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law
or with any rule or regulation made pursuant thereto or with any rule or
regulation of any national securities exchange or quotation system on which
the Rights may from time to time be listed or traded, or to conform to
usage, and (y) a disclosure statement describing the Rights.
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(c) Subject to Sections 3.1, 5.1 and 5.10, Rights may be
exercised on any Business Day after the Distribution Date and prior to the
Expiration Time by submitting to the Rights Agent the Rights Certificate
evidencing such Rights with an Election to Exercise (an "Election to
Exercise") substantially in the form attached to the Rights Certificate
duly completed, accompanied by payment in cash, or by certified or official
bank check or money order payable to the order of the Company, of a sum
equal to the Purchase Price multiplied by the number of Rights being
exercised and a sum sufficient to cover any transfer tax or charge which
may be payable in respect of any transfer involved in the transfer or
delivery of Rights Certificates or the issuance or delivery of certificates
for shares or depositary receipts (or both) in a name other than that of
the holder of the Rights being exercised.
(d) Upon receipt of a Rights Certificate, with an Election to
Exercise accompanied by payment as set forth in Section 2.2(d), and subject
to Sections 3.1, 5.1 and 5.10, the Rights Agent will thereupon promptly (i)
(A) requisition from a transfer agent stock certificates evidencing such
number of shares or other securities to be purchased (the Company hereby
irrevocably authorizing its transfer agents to comply with all such
requisitions) and (B) if the Company elects pursuant to Section 5.5 not to
issue certificates representing fractional shares, requisition from the
depositary selected by the Company depositary receipts representing the
fractional shares to be purchased or requisition from the Company the
amount of cash to be paid in lieu of fractional shares in accordance with
Section 5.5 and (ii) after receipt of such certificates, depositary
receipts and/or cash, deliver the same to or upon the order of the
registered holder of such Rights Certificate, registered (in the case of
certificates or depositary receipts) in such name or names as may be
designated by such holder.
(e) In case the holder of any Rights shall exercise less than
all the Rights evidenced by such holder's Rights Certificate, a new Rights
Certificate evidencing the Rights remaining unexercised will be issued by
the Rights Agent to such holder or to such holder's duly authorized
assigns.
(f) The Company covenants and agrees that it will (i) take all
such action as may be necessary to ensure that all shares delivered upon
exercise of Rights shall, at the time of delivery of the certificates for
such shares (subject to payment of the Purchase Price), be duly and validly
authorized, executed, issued and delivered and fully paid and
nonassessable; (ii) take all such action as may be necessary to comply with
any applicable requirements of the Securities Act of 1933 or the Securities
Exchange Act of 1934, and the rules and regulations thereunder, and any
other applicable law, rule or regulation, in connection with the issuance
of any shares upon exercise of Rights; and (iii) pay when due and payable
any and all federal and state transfer taxes and charges which may be
payable in respect of the original issuance or delivery of the Rights
Certificates or of any shares issued upon the exercise of Rights, provided
that the Company shall not be required to pay any transfer tax or charge
which may be payable in respect of any transfer involved in the transfer or
delivery of Rights Certificates or the issuance or delivery of certificates
for shares in a name other than that of the holder of the Rights being
transferred or exercised.
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2.3 ADJUSTMENTS TO PURCHASE PRICE; NUMBER OF RIGHTS.
(a) In the event the Company shall at any time after the date
hereof and prior to the Distribution Date (i) declare or pay a dividend on
Common Stock payable in Common Stock, (ii) subdivide the outstanding Common
Stock or (iii) combine the outstanding Common Stock into a smaller number
of shares of Common Stock, (x) the Purchase Price in effect after such
adjustment will be equal to the Purchase Price in effect immediately prior
to such adjustment divided by the number of shares of Common Stock (the
"Expansion Factor") that a holder of one share of Common Stock immediately
prior to such dividend, subdivision or combination would hold thereafter as
a result thereof and (y) each Right held prior to such adjustment will
become that number of Rights equal to the Expansion Factor, and the
adjusted number of Rights will be deemed to be distributed among the shares
of Common Stock with respect to which the original Rights were associated
(if they remain outstanding) and the shares issued in respect of such
dividend, subdivision or combination, so that each such share of Common
Stock will have exactly one Right associated with it. Each adjustment made
pursuant to this paragraph shall be made as of the payment or effective
date for the applicable dividend, subdivision or combination.
In the event the Company shall at any time after the date hereof
and prior to the Distribution Date issue any shares of Common Stock
otherwise than in a transaction referred to in the preceding paragraph,
each such share of Common Stock so issued shall automatically have one new
Right associated with it, which Right shall be evidenced by the certificate
representing such share. To the extent provided in Section 5.3, Rights
shall be issued by the Company in respect of shares of Common Stock that
are issued or sold by the Company after the Distribution Date.
(b) In the event the Company shall at any time after the date
hereof and prior to the Distribution Date issue or distribute any
securities or assets in respect of, in lieu of or in exchange for Common
Stock (other than pursuant to a regular periodic cash dividend or a
dividend paid solely in Common Stock) whether by dividend, in a
reclassification or recapitalization (including any such transaction
involving a merger, consolidation or share exchange), or otherwise, the
Company shall make such adjustments, if any, in the Purchase Price, number
of Rights and/or securities or other property purchasable upon exercise of
Rights as the Board of Directors of the Company, in its sole discretion,
may deem to be appropriate under the circumstances in order to adequately
protect the interests of the holders of Rights generally, and the Company
and the Rights Agent shall amend this Agreement as necessary to provide for
such adjustments.
(c) Each adjustment to the Purchase Price made pursuant to this
Section 2.3 shall be calculated to the nearest cent. Whenever an
adjustment to the Purchase Price is made pursuant to this Section 2.3, the
Company shall (i) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such
adjustment and (ii) promptly file with the Rights Agent and with each
transfer agent for the Common Stock a copy of such certificate.
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(d) Rights Certificates shall represent the securities
purchasable under the terms of this Agreement, including any adjustment or
change in the securities purchasable upon exercise of the Rights, even
though such certificates may continue to express the securities purchasable
at the time of issuance of the initial Rights Certificates.
2.4 DATE ON WHICH EXERCISE IS EFFECTIVE. Each person in whose name
any certificate for shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the shares
represented thereby on the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase
Price for such Rights (and any applicable taxes and other governmental
charges payable by the exercising holder hereunder) was made; provided,
however, that if the date of such surrender and payment is a date upon
which the stock transfer books of the Company are closed, such person shall
be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
stock transfer books of the Company are open.
2.5 EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS
CERTIFICATES.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive officer, its
President, any of its Vice Presidents or its Treasurer, under its corporate
seal reproduced thereon attested by its Secretary or any of its Assistant
Secretaries. The signature of any of these officers on the Rights
Certificates may be manual or facsimile.
Rights Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the countersignature and delivery of
such Rights Certificates.
Promptly after the Distribution Date, the Company will notify the
Rights Agent of such Distribution Date and will deliver Rights Certificates
executed by the Company to the Rights Agent for countersignature, and,
subject to Section 3.1(b), the Rights Agent shall manually countersign and
deliver such Rights Certificates to the holders of the Rights pursuant to
Section 2.3(c) hereof. No Rights Certificate shall be valid for any
purpose unless manually countersigned by the Rights Agent.
(b) Each Rights Certificate shall be dated the date of
countersignature thereof.
2.6 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
(a) After the Distribution Date, the Company will cause to be
kept a register (the "Rights Register") in which, subject to such
reasonable regulations as it may prescribe, the Company will provide for
the registration and transfer of Rights. The Rights Agent is hereby
appointed "Rights Registrar" for the purpose of maintaining the Rights
Register for the Company
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and registering Rights and transfers of Rights after the Distribution Date
as herein provided. In the event that the Rights Agent shall cease to be
the Rights Registrar, the Rights Agent will have the right to examine the
Rights Register at all reasonable times after the Distribution Date.
After the Distribution Date and prior to the Expiration Time,
upon surrender for registration of transfer or exchange of any Rights
Certificate, and subject to the provisions of Sections 2.6(c) and (d), the
Company will execute, and the Rights Agent will countersign and deliver, in
the name of the holder or the designated transferee or transferees, as
required pursuant to the holder's instructions, one or more new Rights
Certificates evidencing the same aggregate number of Rights as did the
Rights Certificate so surrendered.
(b) Except as otherwise provided in Section 3.1(b), all Rights
issued upon any registration of transfer or exchange of Rights Certificates
shall be the valid obligations of the Company, and such Rights shall be
entitled to the same benefits under this Agreement as the Rights
surrendered upon such registration of transfer or exchange.
(c) Every Rights Certificate surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company or the Rights
Agent, as the case may be, duly executed by the holder thereof or such
holder's attorney duly authorized in writing. As a condition to the
issuance of any new Rights Certificate under this Section 2.6, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto.
(d) The Company shall not be required to register the transfer
or exchange of any Rights after such Rights have become void under Section
3.1(b), been exchanged under Section 3.1(c) or been redeemed or terminated
under Section 5.1.
2.7 MUTILATED, DESTROYED, LOST AND STOLEN RIGHTS CERTIFICATES.
(a) If any mutilated Rights Certificate is surrendered to the
Rights Agent prior to the Expiration Time, then, subject to Sections
3.1(b), 3.1(c) and 5.1, the Company shall execute and the Rights Agent
shall countersign and deliver in exchange therefor a new Rights Certificate
evidencing the same number of Rights as did the Rights Certificate so
surrendered.
(b) If there shall be delivered to the Company and the Rights
Agent prior to the Expiration Time (i) evidence to their satisfaction of
the destruction, loss or theft of any Rights Certificate and (ii) such
security or indemnity as may be required by them to save each of them and
any of their agents harmless, then, subject to Sections 3.1(b), 3.1(c) and
5.1 and in the absence of notice to the Company or the Rights Agent that
such Rights Certificate has been acquired by a BONA FIDE purchaser, the
Company shall execute and upon its request the Rights Agent shall
countersign and deliver, in lieu of any such destroyed, lost or stolen
Rights Certificate, a new Rights Certificate evidencing the same number of
Rights as did the Rights Certificate so destroyed, lost or stolen.
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(c) As a condition to the issuance of any new Rights Certificate
under this Section 2.7, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Rights Agent) connected therewith.
(d) Every new Rights Certificate issued pursuant to this Section
2.7 in lieu of any destroyed, lost or stolen Rights Certificate shall
evidence an original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Rights Certificate shall be at
any time enforceable by anyone, and, subject to Section 3.1(b), shall be
entitled to all the benefits of this Agreement equally and proportionately
with any and all other Rights duly issued hereunder.
2.8 PERSONS DEEMED OWNERS. Prior to due presentment of a Rights
Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) for registration of transfer, the Company, the Rights
Agent and any agent of the Company or the Rights Agent may deem and treat
the person in whose name such Rights Certificate (or, prior to the
Distribution Date, such Common Stock certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby for all purposes
whatsoever, including the payment of the Redemption Price and neither the
Company nor the Rights Agent shall be affected by any notice to the
contrary. As used in this Agreement, unless the context otherwise
requires, the term "holder" of any Rights shall mean the registered holder
of such Rights (or, prior to the Distribution Date, the associated shares
of Common Stock).
2.9 DELIVERY AND CANCELLATION OF CERTIFICATES. All Rights
Certificates surrendered upon exercise or for registration of transfer or
exchange shall, if surrendered to any person other than the Rights Agent,
be delivered to the Rights Agent and, in any case, shall be promptly
cancelled by the Rights Agent. The Company may at any time deliver to the
Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Company may have acquired
in any manner whatsoever, and all Rights Certificates so delivered shall be
promptly cancelled by the Rights Agent. No Rights Certificates shall be
countersigned in lieu of or in exchange for any Rights Certificates
cancelled as provided in this Section 2.9, except as expressly permitted by
this Agreement. The Rights Agent shall return all cancelled Rights
Certificates to the Company.
2.10 AGREEMENT OF RIGHTS HOLDERS. Every holder of Rights by accepting
the same consents and agrees with the Company and the Rights Agent and with
every other holder of Rights that:
(a) prior to the Distribution Date, each Right will be
transferable only together with, and will be transferred by a transfer of,
the associated share of Common Stock;
(b) after the Distribution Date, the Rights Certificates will be
transferable only on the Rights Register as provided herein;
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(c) prior to due presentment of a Rights Certificate (or, prior
to the Distribution Date, the associated Common Stock certificate) for
registration of transfer, the Company, the Rights Agent and any agent of
the Company or the Rights Agent may deem and treat the person in whose name
the Rights Certificate (or, prior to the Distribution Date, the associated
Common Stock certificate) is registered as the absolute owner thereof and
of the Rights evidenced thereby for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary;
(d) Rights beneficially owned by certain Persons will, under the
circumstances set forth in Section 3.1(b), become void; and
(e) this Agreement may be supplemented or amended from time to
time pursuant to Section 2.3(b) or 5.4 hereof.
ARTICLE III
ADJUSTMENTS TO THE RIGHTS IN
THE EVENT OF CERTAIN TRANSACTIONS
3.1 FLIP-IN.
(a) In the event that prior to the Expiration Time a Flip-in
Date shall occur, except as provided in this Section 3.1, each Right shall
constitute the right to purchase from the Company, upon exercise thereof in
accordance with the terms hereof (but subject to Section 5.10), that number
of shares of Common Stock having an aggregate Market Price on the Shares
Acquisition Date equal to twice the Purchase Price for an amount in cash
equal to the Purchase Price (such right to be appropriately adjusted in
order to protect the interests of the holders of Rights generally in the
event that on or after such Shares Acquisition Date an event of a type
analogous to any of the events described in Section 2.3(a) or (b) shall
have occurred with respect to the Common Stock).
(b) Notwithstanding the foregoing, any Rights that are or were
Beneficially Owned on or after the Shares Acquisition Date by an Acquiring
Person or an Affiliate or Associate thereof or by any transferee, direct or
indirect, of any of the foregoing shall become void and any holder of such
Rights (including transferees) shall thereafter have no right to exercise
or transfer such Rights under any provision of this Agreement. If any
Rights Certificate is presented for assignment or exercise and the Person
presenting the same will not complete the certification set forth at the
end of the form of assignment or notice of election to exercise and provide
such additional evidence of the identity of the Beneficial owner and its
Affiliates and Associates (or former Beneficial Owners and their Affiliates
and Associates) as the Company shall reasonably request, then the Company
shall be entitled conclusively to deem the Beneficial owner thereof to be
an Acquiring Person or an Affiliate or Associate thereof or a transferee of
any of the
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foregoing and accordingly will deem the Rights evidenced thereby to be void
and not transferable or exercisable.
(c) The Board of Directors of the Company may, at its option, at
any time after a Flip-in Date and prior to the time that an Acquiring
Person becomes the Beneficial Owner of more than 50% of the outstanding
shares of Common Stock, elect to exchange all (but not less than all) the
then outstanding Rights (which shall not include Rights that have become
void pursuant to the provisions of Section 3.1(b)) for shares of Common
Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted in order to protect the interests of holders of
Rights generally in the event that after the Distribution Date an event of
a type analogous to any of the events described in Section 2.3(a) or (b)
shall have occurred with respect to the Common Stock (such exchange ratio,
as adjusted from time to time, being hereinafter referred to as the
"Exchange Ratio").
Immediately upon the action of the Board of Directors of the
Company electing to exchange the Rights, without any further action and
without any notice, the right to exercise the Rights will terminate and
each Right (other than Rights that have become void pursuant to Section
3.1(b)) will thereafter represent only the right to receive a number of
shares of Common Stock equal to the Exchange Ratio. Promptly after the
action of the Board of Directors electing to exchange the Rights, the
Company shall give notice thereof (specifying the steps to be taken to
receive shares of Common Stock in exchange for Rights) to the Rights Agent
and the holders of the Rights (other than Rights that have become void
pursuant to Section 3.1(b)) outstanding immediately prior thereto by
mailing such notice in accordance with Section 5.9.
Each Person in whose name any certificate for shares is issued
upon the exchange of Rights pursuant to this Section 3.1(c) or Section
3.1(d) shall for all purposes be deemed to have become the holder of record
of the shares represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of any applicable taxes and other governmental
charges payable by the holder was made; PROVIDED, HOWEVER, that if the date
of such surrender and payment is a date upon which the stock transfer books
of the Company are closed, such Person shall be deemed to have become the
record holder of such shares on, and such certificate shall be dated, the
next succeeding Business Day on which the stock transfer books of the
Company are open.
(d) Whenever the Company shall become obligated under Section
3.1(a) or (c) to issue shares of Common Stock upon exercise of or in
exchange for Rights, the Company, at its option, may substitute therefor
shares of Preference Stock, at a ratio of one one-thousandth of a share of
Preference Stock for each share of Common Stock so issuable.
(e) In the event that there shall not be sufficient treasury
shares or authorized but unissued shares of Common Stock or Preference
Stock of the Company to permit the exercise or exchange in full of the
Rights in accordance with Section 3.1(a) or (c), the Company shall either
(i) call a meeting of stockholders seeking approval to cause sufficient
additional shares to
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be authorized (provided that if such approval is not obtained the Company
will take the action specified in clause (ii) of this sentence) or (ii)
take such action as shall be necessary to ensure and provide, to the extent
permitted by applicable law and any agreements or instruments in effect on
the Shares Acquisition Date to which it is a party, that each Right shall
thereafter constitute the right to receive, (x) at the Company's option,
either (A) in return for the Purchase Price, debt or equity securities or
other assets (or a combination thereof) having a fair value equal to twice
the Purchase Price, or (B) without payment of consideration (except as
otherwise required by applicable law), debt or equity securities or other
assets (or a combination thereof) having a fair value equal to the Purchase
Price, or (y) if the Board of Directors of the Company elects to exchange
the Rights in accordance with Section 3.1(c), debt or equity securities or
other assets (or a combination thereof) having a fair value equal to the
product of the Market Price of a share of Common Stock on the Flip-in Date
times the Exchange Ratio in effect on the Flip-in Date, where in any case
set forth in (x) or (y) above the fair value of such debt or equity
securities or other assets shall be as determined in good faith by the
Board of Directors of the Company, after consultation with a nationally
recognized investment banking firm.
3.2 FLIP-OVER.
(a) Prior to the Expiration Time, the Company shall not enter
into any agreement with respect to, consummate or permit to occur any
Flip-over Transaction or Event unless and until it shall have entered into
a supplemental agreement with the Flip-over Entity, for the benefit of the
holders of the Rights, providing that, upon consummation or occurrence of
the Flip-over Transaction or Event (i) each Right shall thereafter
constitute the right to purchase from the Flip-over Entity, upon exercise
thereof in accordance with the terms hereof, that number of shares of
Flip-over Stock of the Flip-over Entity having an aggregate Market Price on
the date of consummation or occurrence of such Flip-over Transaction or
Event equal to twice the Purchase Price for an amount in cash equal to the
Purchase Price (such right to be appropriately adjusted in order to protect
the interests of the holders of Rights generally in the event that after
such date of consummation or occurrence an event of a type analogous to any
of the events described in Section 2.3(a) or (b) shall have occurred with
respect to the Flip-over Stock) and (ii) the Flip-over Entity shall
thereafter be liable for, and shall assume, by virtue of such Flip-over
Transaction or Event and such supplemental agreement, all the obligations
and duties of the Company pursuant to this Agreement. The provisions of
this Section 3.2 shall apply to successive Flip-over Transactions or
Events.
(b) Prior to the Expiration Time, unless the Rights will be
redeemed pursuant to Section 5.1 hereof in connection therewith, the
Company shall not enter into any agreement with respect to, consummate or
permit to occur any Flip-over Transaction or Event if at the time thereof
there are any rights, warrants or securities outstanding or any other
arrangements, agreements or instruments that would eliminate or otherwise
diminish in any material respect the benefits intended to be afforded by
this Rights Agreement to the holders of Rights upon consummation of such
transaction.
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ARTICLE IV
THE RIGHTS AGENT
4.1 GENERAL.
(a) The Company hereby appoints the Rights Agent to act as agent
for the Company in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements incurred in
the administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability,
or expense, incurred without negligence, bad faith or willful misconduct on
the part of the Rights Agent, for anything done or omitted to be done by
the Rights Agent in connection with the acceptance and administration of
this Agreement, including the costs and expenses of defending against any
claim of liability.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it
in connection with its administration of this Agreement in reliance upon
any certificate for securities purchasable upon exercise of Rights, Rights
Certificate, certificate for other securities of the Company, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons.
4.2 MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent is a party, or any corporation
succeeding to the stockholder services business of the Rights Agent or any
successor Rights Agent, will be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent
under the provisions of Section 4.4 hereof. In case at the time such
successor Rights Agent succeeds to the agency created by this Agreement any
of the Rights Certificates have been countersigned but not delivered, any
such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates have
not been countersigned, any successor Rights Agent may countersign such
Rights Certificates either in the name of the predecessor Rights Agent or
in the name of the successor Rights Agent; and in all such cases such
Rights Certificates will have the full force provided in the Rights
Certificates and in this Agreement.
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(b) In case at any time the name of the Rights Agent is changed
and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, the Rights Agent may countersign such
Rights Certificates either in its prior name or in its changed name; and in
all such cases such Rights Certificates shall have the full force provided
in the Rights Certificates and in this Agreement.
4.3 DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel will be
full and complete authorization and protection to the Rights Agent as to
any action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent deems it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by a person believed by the
Rights Agent to be the Chairman of the Board, the Chief Executive Officer,
the President or any Vice President and by the Treasurer or the Secretary
or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate will be full authorization to the Rights Agent
for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Rights Agent will be liable hereunder only for its own
gross negligence, bad faith or willful misconduct.
(d) The Rights Agent will not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
certificates for securities purchasable upon exercise of Rights or the
Rights Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and will be
deemed to have been made by the Company only.
(e) The Rights Agent will not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due authorization, execution and delivery hereof by the
Rights Agent) or in respect of the validity or execution of any certificate
for securities purchasable upon exercise of Rights or Rights Certificate
(except its countersignature thereof), nor will it be responsible for any
breach by the Company of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor will it be
17
<PAGE>
responsible for any change in the exercisability of the Rights (including
the Rights becoming void pursuant to Section 3.1(b) hereof) or any
adjustment required under the provisions of Section 2.3, 3.1 or 3.2 hereof
or responsible for the manner, method or amount of any such adjustment or
the ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights after receipt of
the certificate contemplated by Section 2.3 describing any such
adjustment); nor will it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
securities purchasable upon exercise of Rights or any Rights or as to
whether any securities purchasable upon exercise of Rights will, when
issued, be duly and validly authorized, executed, issued and delivered and
fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged
and delivered all such further and other acts, instruments and assurances
as may reasonably be required by the Rights Agent for the carrying out or
performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any person believed by the Rights Agent to be the Chairman of the Board,
the Chief Executive Officer, the President or any Vice President or the
Secretary or any Assistant Secretary or the Treasurer of the Company, and
to apply to such persons for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered by it
in good faith in accordance with instructions of any such person.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in Common Stock, Rights
or other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for
any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent will not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
4.4 CHANGE OF RIGHTS AGENT. The Rights Agent may resign and be
discharged from its duties under this Agreement upon 90 days' notice (or
such lesser notice as is acceptable to the Company) in writing mailed to
the Company and to each transfer agent of Common Stock by registered or
certified mail. The Company may remove the Rights Agent upon 30 days'
notice in writing, mailed to the Rights Agent and to each transfer agent of
the Common Stock by
18
<PAGE>
registered or certified mail. If the Rights Agent should resign or be
removed or otherwise become incapable of acting, the Company will appoint a
successor to the Rights Agent. If the Company fails to make such
appointment within a period of 30 days after such removal or after it has
been notified in writing of such resignation or incapacity by the resigning
or incapacitated Rights Agent or by the holder of any Rights (which holder
shall, with such notice, submit such holder's Rights Certificate for
inspection by the Company), then the holder of any Rights may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be a corporation organized and doing business under the laws
of the United States or of any other State of the United States, in good
standing, which is authorized under such laws to exercise the powers of the
Rights Agent contemplated by this Agreement and is subject to supervision
or examination by federal or state authority and which has at the time of
its appointment as Rights Agent a combined capital and surplus of at least
$50,000,000. After appointment, the successor Rights Agent will be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment, the
Company will file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Stock. Failure to give any
notice provided for in this Section 4.4, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of
the Rights Agent or the appointment of the successor Rights Agent, as the
case may be.
ARTICLE V
MISCELLANEOUS
5.1 REDEMPTION.
(a) The Board of Directors of the Company may, at its option, at
any time prior to the Close of Business on the Flip-in Date, elect to
redeem all (but not less than all) the then outstanding Rights at the
Redemption Price and the Company, at its option, may pay the Redemption
Price either in cash or shares of Common Stock or other securities of the
Company deemed by the Board of Directors, in the exercise of its sole
discretion, to be at least equivalent in value to the Redemption Price.
19
<PAGE>
(b) Immediately upon the action of the Board of Directors of the
Company electing to redeem the Rights (or, if the resolution of the Board
of Directors electing to redeem the Rights states that the redemption will
not be effective until the occurrence of a specified future time or event,
upon the occurrence of such future time or event), without any further
action and without any notice, the right to exercise the Rights will
terminate and each Right will thereafter represent only the right to
receive the Redemption Price in cash or securities, as determined by the
Board of Directors. Promptly after the Rights are redeemed, the Company
shall give notice of such redemption to the Rights Agent and the holders of
the then outstanding Rights by mailing such notice in accordance with
Section 5.9.
5.2 EXPIRATION. The Rights and this Agreement shall expire at the
Expiration Time and no Person shall have any rights pursuant to this
Agreement or any Right after the Expiration Time, except, if the Rights are
exchanged or redeemed, as provided in Section 3.1 or 5.1 hereof.
5.3 ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such
form as may be approved by its Board of Directors to reflect any adjustment
or change in the number or kind or class of shares of stock purchasable
upon exercise of Rights made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale of shares
of Common Stock by the Company following the Distribution Date and prior to
the Expiration Time pursuant to the terms of securities convertible or
redeemable into shares of Common Stock or to options, in each case issued
or granted prior to, and outstanding at, the Distribution Date, the Company
shall issue to the holders of such shares of Common Stock, Rights
Certificates representing the appropriate number of Rights in connection
with the issuance or sale of such shares of Common Stock; PROVIDED,
HOWEVER, in each case, (i) no such Rights Certificate shall be issued, if,
and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax
consequences to the Company or to the Person to whom such Rights
Certificates would be issued, (ii) no such Rights Certificates shall be
issued if, and to the extent that, appropriate adjustment shall have
otherwise been made in lieu of the issuance thereof, and (iii) the Company
shall have no obligation to distribute Rights Certificates to any Acquiring
Person or Affiliate or Associate of an Acquiring Person or any transferee
of any of the foregoing.
5.4 SUPPLEMENTS AND AMENDMENTS. The Company and the Rights Agent may
from time to time supplement or amend this Agreement without the approval
of any holders of Rights Certificates in order (i) to cure any ambiguity,
(ii) to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, (iii) prior to
the Distribution Date, to change or supplement the provisions hereunder
which the
20
<PAGE>
Company may deem necessary or desirable, or (iv) following the Distribution
Date, to change or supplement the provisions hereunder in any manner which
the Company may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Rights Certificates. Upon the
delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the
terms of this Section 5.4, the Rights Agent shall execute such supplement
or amendment unless the Rights Agent shall have determined in good faith
that such supplement or amendment would adversely affect its interests
under this Agreement. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the
holders of Common Stock.
5.5 FRACTIONAL SHARES. If the Company elects not to issue
certificates representing fractional shares upon exercise or redemption of
Rights, the Company shall, in lieu thereof, in the sole discretion of the
Board of Directors, either (a) evidence such fractional shares by
depositary receipts issued pursuant to an appropriate agreement between the
Company and a depositary selected by it, providing that each holder of a
depositary receipt shall have all of the rights, privileges and preferences
to which such holder would be entitled as a beneficial owner of such
fractional share, or (b) sell such shares on behalf of the holders of
Rights and pay to the registered holder of such Rights the appropriate
fraction of the price per share received upon such sale.
5.6 RIGHTS OF ACTION. Subject to the terms of this Agreement
(including Section 3.1(b)), rights of action in respect of this Agreement,
other than rights of action vested solely in the Rights Agent, are vested
in the respective holders of the Rights; and any holder of any Rights,
without the consent of the Rights Agent or of the holder of any other
Rights, may, on such holder's own behalf and for such holder's own benefit
and the benefit of other holders of Rights, enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, such holder's right to exercise such holder's
Rights in the manner provided in such holder's Rights Certificate and in
this Agreement. Without limiting the foregoing or any remedies available
to the holders of Rights, it is specifically acknowledged that the holders
of Rights would not have an adequate remedy at law for any breach of this
Agreement and will be entitled to specific performance of the obligations
under, and injunctive relief against actual or threatened violations of,
the obligations of any Person subject to this Agreement.
5.7 HOLDER OF RIGHTS NOT DEEMED A STOCKHOLDER. No holder, as such,
of any Rights shall be entitled to vote, receive dividends or be deemed for
any purpose the holder of shares or any other securities which may at any
time be issuable on the exercise of such Rights, nor shall anything
contained herein or in any Rights Certificate be construed to confer upon
the holder of any Rights, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in Section 5.8
hereof), or to receive dividends or subscription rights, or otherwise,
until such Rights shall have been exercised or exchanged in accordance with
the provisions hereof.
21
<PAGE>
5.8 NOTICE OF PROPOSED ACTIONS. In case the Company shall propose
after the Distribution Date and prior to the Expiration Time (i) to effect
or permit occurrence of any Flip-over Transaction or Event or (ii) to
effect the liquidation, dissolution or winding up of the Company, then, in
each such case, the Company shall give to each holder of a Right, in
accordance with Section 5.9 hereof, a notice of such proposed action, which
shall specify the date on which such Flip-over Transaction or Event,
liquidation, dissolution, or winding up is to take place, and such notice
shall be so given at least 20 Business Days prior to the date of the taking
of such proposed action.
5.9 NOTICES. Notices or demands authorized or required by this
Agreement to be given or made by the Rights Agent or by the holder of any
Rights to or on the Company shall be sufficiently given or made if
delivered or sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Rights Agent) as follows:
UtiliCorp United Inc.
911 Main Street, Suite 2900
Kansas City, MO 64105
Attention: Secretary
Any notice or demand authorized or required by this Agreement to be given
or made by the Company or by the holder of any Rights to or on the Rights
Agent shall be sufficiently given or made if delivered or sent by
first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
First Chicago Trust Company of New York
14 Wall Street
New York, NY 10005
Attention: _____________
Notices or demands authorized or required by this Agreement to be given or
made by the Company or the Rights Agent to or on the holder of any Rights
shall be sufficiently given or made if delivered or sent by first-class
mail, postage prepaid, addressed to such holder at the address of such
holder as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for
the Common Stock. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice.
5.10 SUSPENSION OF EXERCISABILITY. To the extent that the Company
determines in good faith that some action will or need be taken pursuant to
Section 3.1 or to comply with federal or state securities laws, the Company
may suspend the exercisability of the Rights for a reasonable
22
<PAGE>
period in order to take such action or comply with such laws. In the event
of any such suspension, the Company shall issue as promptly as practicable
a public announcement stating that the exercisability or exchangeability of
the Rights has been temporarily suspended. Notice thereof pursuant to
Section 5.9 shall not be required.
Failure to give a notice pursuant to the provisions of this
Agreement shall not affect the validity of any action taken hereunder.
5.11 COSTS OF ENFORCEMENT. The Company agrees that if the Company or
any other Person the securities of which are purchasable upon exercise of
Rights fails to fulfill any of its obligations pursuant to this Agreement,
then the Company or such Person will reimburse the holder of any Rights for
the costs and expenses (including legal fees) incurred by such holder in
actions to enforce such holder's rights pursuant to any Rights or this
Agreement.
5.12 SUCCESSORS. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and
inure to the benefit of their respective successors and assigns hereunder.
5.13 BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent
and the holders of the Rights any legal or equitable right, remedy or claim
under this Agreement and this Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the holders of the Rights.
5.14 DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. The
Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of
this Agreement and (ii) make all determinations deemed necessary or
advisable for the administration of this Agreement. All such actions,
calculations, interpretations and determinations (including, for purposes
of clause (y) below, all omissions with respect to the foregoing) which are
done or made by the Board in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board of Directors of the Company to
any liability to the holders of the Rights.
5.15 DESCRIPTIVE HEADINGS. Descriptive headings appear herein for
convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
5.16 GOVERNING LAW. THIS AGREEMENT AND EACH RIGHT ISSUED HEREUNDER
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF
DELAWARE AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE
AND PERFORMED ENTIRELY WITHIN SUCH STATE.
23
<PAGE>
5.17 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but
one and the same instrument.
5.18 SEVERABILITY. If any term or provision hereof or the application
thereof to any circumstance shall, in any jurisdiction and to any extent,
be invalid or unenforceable, such term or provision shall be ineffective as
to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable the remaining terms and
provisions hereof or the application of such term or provision to
circumstances other than those as to which it is held invalid or
unenforceable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
UTILICORP UNITED INC.
By:
-------------------------------------
Name:
Title:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By:
-------------------------------------
Name:
Title:
24
<PAGE>
EXHIBIT A
[Form of Rights Certificate]
Certificate No. W- ________ Rights
THE RIGHTS ARE SUBJECT TO REDEMPTION OR MANDATORY EXCHANGE, AT THE OPTION
OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS
BENEFICIALLY OWNED BY ACQUIRING PERSONS OR AFFILIATES OR ASSOCIATES THEREOF
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR TRANSFEREES OF ANY
OF THE FOREGOING WILL BE VOID.
Rights Certificate
UTILICORP UNITED INC.
This certifies that ________________________________, or registered
assigns, is the registered holder of the number of Rights set forth above, each
of which entitles the registered holder thereof, subject to the terms,
provisions and conditions of the Rights Agreement, dated as of_________, 1996
(as amended from time to time, the "Rights Agreement"), between UtiliCorp United
Inc., a Delaware corporation (the "Company"), and First Chicago Trust Company of
New York, a New York corporation, as Rights Agent (the "Rights Agent", which
term shall include any successor Rights Agent under the Rights Agreement), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to the Close of Business (as such
term is defined in the Rights Agreement) on_________________________________,
one one-thousandth of a fully paid share of Series A Participating Cumulative
Preference Stock, no par value (the "Preference Stock"), of the Company (subject
to adjustment as provided in the Rights Agreement) at the Purchase Price
referred to below, upon presentation and surrender of this Rights Certificate
with the Form of Election to Exercise duly executed at the principal office
<PAGE>
of the Rights Agent in New York, New York. The Purchase Price shall initially
be $115.00 per Right and shall be subject to adjustment in certain events as
provided in the Rights Agreement.
In certain circumstances described in the Rights Agreement, the Rights
evidenced hereby may entitle the registered holder thereof to purchase
securities of an entity other than the Company or securities or assets of the
Company other than Preference Stock, all as provided in the Rights Agreement.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal office of the Company and are
available without cost upon written request.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor evidencing an aggregate number of Rights equal to the aggregate number of
Rights evidenced by the Rights Certificate or Rights Certificates surrendered.
If this Rights Certificate shall be exercised in part, the registered holder
shall be entitled to receive, upon surrender hereof, another Rights Certificate
or Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, each Right
evidenced by this Certificate may be (a) redeemed by the Company under certain
circumstances, at its option, at a
<PAGE>
redemption price of $0.01 per Right or (b) exchanged by the Company under
certain circumstances, at its option, for one share of Common Stock or one
one-thousandth of a share of Preference Stock per Right (or, in certain cases,
other securities or assets of the Company), subject in each case to adjustment
in certain events as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of any
securities which may at any time be issuable on the exercise hereof, nor shall
anything contained in the Rights Agreement or herein be construed to confer upon
the holder hereof, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Rights evidenced by
this Rights Certificate shall have been exercised or exchanged as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Date:_________
ATTEST: UTILICORP UNITED INC.
______________________________ By_______________________________
Secretary
Countersigned:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By:___________________________
Authorized Signature
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer this Rights Certificate.)
FOR VALUE RECEIVED______________________ hereby sells, assigns and
transfers unto ______________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint_____________________Attorney,
to transfer the within-named Rights Certificate on the books of the within-named
Company, with full power of substitution.
Date:_______________
Signature Guaranteed: ___________________________
Signature
(Signature must correspond to name as written upon
the face of this Rights Certificate in every
particular, without alteration or enlargement or
any change whatsoever)
Signatures must be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee Medallion program), pursuant to
SEC Rule 17Ad-15.
_______________________________________________________________________________
<PAGE>
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights and
shares of Common Stock, that the Rights evidenced by this Rights Certificate are
not, and, to the knowledge of the undersigned, have never been, Beneficially
owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in
the Rights Agreement).
_______________________________
Signature
________________________________________________________________________________
NOTICE
In the event the certification set forth above is not completed in
connection with a purported assignment, the Company will deem the Beneficial
owner of the Rights evidenced by the enclosed Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) or a transferee of any of the foregoing and accordingly will deem the
Rights evidenced by such Rights Certificate to be void and not transferable or
exercisable.
[To be attached to each Rights Certificate]
<PAGE>
FORM OF ELECTION TO EXERCISE
(To be executed if holder desires to
exercise the Rights Certificate.)
TO: UTILICORP UNITED INC.
The undersigned hereby irrevocably elects to exercise _____________________
whole Rights represented by the attached Rights Certificate to purchase the
shares of Preference Stock issuable upon the exercise of such Rights and
requests that certificates for such shares be issued in the name of:
_______________________________________________
Address:_______________________________________
Social Security or Other Taxpayer
Identification Number_:________________________
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
_______________________________________________
Address:_______________________________________
Social Security or Other Taxpayer
Identification Number:_________________________
Dated:____________
<PAGE>
Signature Guaranteed: _______________________________
Signature
(Signature must correspond to name as written upon
the face of this Rights Certificate in every
particular, without alteration or enlargement or
any change whatsoever)
Signatures must be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee Medallion program), pursuant to
SEC Rule 17Ad-15.
________________________________________________________________________________
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of
Rights and shares of Common Stock, that the Rights evidenced by the attached
Rights Certificate are not, and, to the knowledge of the undersigned, have never
been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement).
____________________________
Signature
________________________________________________________________________________
NOTICE
In the event the certification set forth above is not completed in
connection with a purported exercise, the Company will deem the Beneficial owner
of the Rights, evidenced by the attached Rights Certificate to be an Acquiring
Person or an Affiliate or Associate thereof (as defined in the Rights Agreement)
or a transferee of any of the foregoing and accordingly will deem the Rights
evidenced by such Rights Certificate to be void and not transferable or
exercisable.
<PAGE>
<PAGE>
EXHIBIT B
FORM OF
CERTIFICATE OF DESIGNATION
OF
UTILICORP UNITED INC.
SERIES A
PARTICIPATING CUMULATIVE
PREFERENCE STOCK
Pursuant to Sections 151 of the General
Corporation Law of the State of Delaware
UtiliCorp United Inc., a corporation organized and existing under and by
virtue of The General Corporation Law of Delaware, DOES HEREBY CERTIFY:
That at a meeting of the Board of Directors of UtiliCorp United Inc. (the
"Corporation") the following resolution was duly adopted creating 60,000 shares
of Preference Stock, designated as Series A Participating Cumulative Preference
Stock.
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation in accordance with the provisions of
the Certificate of Incorporation, a series of Preference Stock of the
Corporation be, and it hereby is created, and the designation and amount
thereof and the relative rights, preferences and limitations thereof (in
addition to the provisions set forth in the Certificate of Incorporation,
of the Corporation, which are applicable to the Preference Stock of all
classes and series) are as follows:
1. DESIGNATION AND NUMBER. The designation of this series is the "Series
A Participating Cumulative Preference Stock" (hereinafter, this "SERIES").
The number of shares initially constituting this Series shall be sixty thousand
(60,000) shares; PROVIDED, HOWEVER, that, if more than a total of 60,000 shares
of this Series shall be issuable upon the exercise of Rights (the "Rights")
issued pursuant to the Rights Agreement dated as of ____________________, 199__,
between the Corporation and First Chicago Trust Company of New York, a New York
<PAGE>
corporation, as Rights Agent (the"Rights Agreement"), the Board of Directors of
the Corporation, pursuant to Section 151(g) of the General Corporation Law of
the State of Delaware, shall direct by resolution or resolutions that a
certificate be properly executed, acknowledged, filed and recorded, in
accordance with the provisions of Section 103 thereof, providing for the total
number of shares of this Series authorized to be issued to be increased (to the
extent that the Articles of Incorporation then permits) to the largest number of
whole shares (rounded up to the nearest whole number) issuable upon exercise of
such Rights.
2. DIVIDENDS.
a. Subject to the prior and superior rights of the holders of shares
of any other series of Preference Stock or other class of capital stock of the
Corporation ranking prior and superior to the shares of this Series with respect
to dividends, the holders of shares of this Series shall be entitled to receive,
when, as and if declared by the Board of Directors, out of the assets of the
Corporation legally available therefor, (1) quarterly dividends payable on the
first day of each of March, June, September and December (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or a
fraction of a share of this Series, in the amount of $.01 per whole share
(rounded to the nearest cent) less the amount of all cash dividends declared on
this Series pursuant to the following clause (2) since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
this Series (the total of which shall not, in any event, be less than zero), and
(2) dividends payable in cash on the payment date for each cash dividend
declared on the Common Stock in an amount per whole share (rounded to the
nearest cent) equal to the Formula Number (as hereinafter defined) then in
effect times the cash dividends then to be paid on each share of Common Stock,
par value $1.00, of the Corporation (the "Common Stock"). In addition, if the
Corporation shall pay any dividend or make any distribution on the Common Stock
payable in assets, securities or other forms of noncash consideration (other
than dividends or distributions solely in shares of Common Stock), then, in each
such case, the Corporation shall simultaneously pay or make on each outstanding
whole share of this Series a dividend or distribution in like kind equal to the
Formula Number then in effect times such dividend or distribution on each share
of the Common Stock. As used herein, the "Formula Number" shall be 1,000;
PROVIDED, HOWEVER, that, if at any time after ______________________, 199___,
the Corporation shall (i) declare or pay any dividend on the Common Stock
payable in shares of Common Stock or make any distribution on the Common Stock
in shares of Common Stock, (ii) subdivide (by a stock split or otherwise) the
outstanding shares of Common Stock into a larger number of shares of Common
Stock or (iii) combine (by a reverse stock split or otherwise) the outstanding
shares of Common Stock into a smaller number of shares of Common Stock, then in
each such event the Formula Number shall be adjusted to a number determined by
multiplying the Formula Number in effect immediately prior to such event by a
fraction, the numerator of which is the number of shares of Common Stock that
are outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that are outstanding immediately prior to such
event (and rounding the result to the nearest whole
2
<PAGE>
number); and PROVIDED FURTHER, that, if at any time after
__________________________, 199__, the Corporation shall issue any shares of its
capital stock in a merger, reclassification, or change of the outstanding shares
of Common Stock, then in each such event the Formula Number shall be
appropriately adjusted to reflect such merger, reclassification or change so
that each share of Preferred Stock continues to be the economic equivalent of a
Formula Number of shares of Common Stock prior to such merger, reclassification
or change.
b. The Corporation shall declare a dividend or distribution on this
Series as provided in Section 2(a) immediately prior to or at the same time it
declares a dividend or distribution on the Common Stock (other than a dividend
or distribution solely in shares of Common Stock); PROVIDED, HOWEVER, that, in
the event no dividend or distribution (other than a dividend or distribution in
shares of Common Stock) shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $0.01 per share on this Series
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date. The Board of Directors may fix a record date for the determination of
holders of shares of this Series entitled to receive a dividend or distribution
declared thereon, which record date shall be the same as the record date for any
corresponding dividend or distribution on the Common Stock.
c. Dividends shall begin to accrue and be cumulative on outstanding
shares of this Series from and after the Quarterly Dividend Payment Date next
preceding the date of original issue of such shares of this Series; PROVIDED,
HOWEVER, that dividends on such shares which are originally issued after the
record date for the determination of holders of shares of this Series entitled
to receive a quarterly dividend and on or prior to the next succeeding Quarterly
Dividend Payment Date shall begin to accrue and be cumulative from and after
such Quarterly Dividend Payment Date. Notwithstanding the foregoing, dividends
on shares of this Series which are originally issued prior to the record date
for the determination of holders of shares of this Series entitled to receive a
quarterly dividend on the first Quarterly Dividend Payment Date shall be
calculated as if cumulative from and after the last day of the fiscal quarter
next preceding the date of original issuance of such shares. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of this Series
in an amount less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
d. So long as any shares of this Series are outstanding, no
dividends or other distributions shall be declared, paid or distributed, or set
aside for payment or distribution, on the Common Stock unless, in each case, the
dividend required by this Section 2 to be declared on this Series shall have
been declared.
e. The holders of the shares of this Series shall not be entitled to
receive any dividends or other distributions except as provided herein.
3
<PAGE>
3. LIQUIDATION RIGHTS. In the event of the liquidation, dissolution or
winding up of the Corporation ("LIQUIDATION"), whether voluntary or involuntary,
the holders of this Series shall be entitled to have paid to them out of the
assets of the Corporation, before any distribution is made to or set apart for
the holders of any shares of Common Stock of the Corporation, or of any other
class or series of capital stock of the Corporation ranking junior to this
Series in respect of distribution of assets upon Liquidation, an amount equal to
the accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, plus an amount equal to the greater of
(x) $.01 per whole share or (y) an aggregate amount per share equal to the
Formula Number then in effect times the aggregate amount to be distributed per
share to holders of Common Stock or (2) to the holders of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with this Series, except distributions made ratably on this Series and all other
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up.
If upon any Liquidation, the assets of the Corporation or proceeds thereof
distributable among the holders of shares of this Series and of any class or
series of capital stock of the Corporation ranking equally with this Series as
to distribution of assets upon Liquidation shall be insufficient to pay in full
the preferential amounts payable to such holders, then such assets or the
proceeds thereof shall be distributed among such holders ratably in accordance
with the respective amounts that would be payable on such shares if all amounts
payable thereon were paid in full.
4. VOTING RIGHTS. The holders of shares of this Series shall have the
following voting rights:
a. Unless and until dividends payable on any shares of this Series
shall be in arrears in an amount equivalent to one and one-half times the annual
dividend, or more, per share, the holders of shares of this Series shall have no
voting power or rights, except as otherwise provided herein, by the Certificate
of Incorporation of the Corporation or by law. If and when dividends payable on
any shares of this Series shall be in arrears in an amount equivalent to one and
one-half times the annual dividend or more, per share, and thereafter until all
dividends on shares of this Series in arrears shall have been paid, the holders
of this Series, together with any other class or series of capital stock of the
Corporation which is by its terms expressly made equal as to dividends to this
Series (for purposes of this Section 3, this Series, together with all such
other classes and series, is hereinafter collectively referred to as the
"PREFERENCE STOCK"), voting as a single class separate from the holders of all
other classes of capital stock, shall be entitled to elect two directors. The
terms of office as directors of all persons who may be directors of the
Corporation shall terminate upon the election of directors by the holders of the
Preference Stock. The holders of the Common Stock shall have the right to elect
the remaining directors of the Corporation. If the holders of the Preference
Stock have not exercised their right to elect directors of the Corporation
because of the lack of a quorum consisting of the holders of a majority of the
Preference Stock, then the said directors shall be elected by the directors
whose
4
<PAGE>
term of office is thus terminated, and in that event, such elected directors
shall hold office for the interim period, pending such time as a quorum of the
holders of the Preference Stock shall be present at a meeting held for the
election of directors.
b. If and when all dividends then in arrears on the Preference Stock
then outstanding shall be paid (and such dividends shall be declared and paid
out of any funds legally available therefor as soon as reasonably practicable),
the holders of shares of the Preference Stock shall be divested of any special
right with respect to the election of directors and the voting power of the
holders of shares of the Preference Stock and the Common Stock shall revert to
the status existing before the first dividend payment date on which dividends on
any shares of the Preference Stock were not paid in full, but always subject to
the same provisions for vesting such special rights in the holders of shares of
the Preference Stock in case of further like arrears in payment of dividends
thereon. Upon the termination of any such special voting right, the terms of
office of all persons who may have been elected directors of the Corporation by
vote of the holders of the Preference Stock, as a class, pursuant to such
special voting right shall forthwith terminate, and the resulting vacancies
shall be filled by a vote of a majority of the remaining directors.
c. In case of any vacancy in the office of a director occurring
among the directors elected by the holders of the Preference Stock voting as a
single class separate from the holders of all other class of capital stock, the
remaining director elected by the holders of the Preference Stock may elect a
successor to hold office for the unexpired term of the director whose place
shall be vacant. In the event of simultaneous vacancies among directors elected
by the holders of the Preference Stock, an election by the holders of the
Preference Stock, pursuant to the provisions of this Section 3, will be held.
d. Whenever the right shall have accrued to the holders of the
Preference Stock to elect directors, voting as a single class, separate from the
holders of all other classes of capital stock, then upon request in writing
signed by any holder of the Preference Stock entitled to vote, delivered by
registered mail or in person to the president, a vice president or secretary of
the Corporation, it shall be the duty of such officer forthwith to cause notice
to be given to the shareholders entitled to vote at a meeting to be held at such
time as such officer may fix, not less than ten (10) nor more than sixty (60)
days after the receipt of such request, for the purpose of electing directors
during such time as the holders of the Preference Stock shall have the special
right, voting as a single class, separate from the holders of all other classes
of capital stock to elect directors, the presence in person or by proxy of the
holders of a majority of the outstanding Preference Stock shall be required to
constitute a quorum of such class for the election of directors, and the
presence in person or by proxy of the holders of a majority of all other classes
of capital stock outstanding at the time, and not entitled to such special
right, shall be required to constitute a quorum of such other classes for the
election of directors.
5
<PAGE>
5. RESTRICTIONS ON CERTAIN CORPORATION ACTION.
a. Whenever quarterly dividends or other dividends or distributions
payable on this Series as provided in Section 2 are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether or not
declared, on shares of this Series outstanding shall have been paid in full, the
Corporation shall not
i. declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to this Series;
ii. declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with this Series, except dividends
paid ratably on this Series and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
iii. redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with this Series; PROVIDED that the
Corporation may at any time redeem, purchase or otherwise acquire shares of
any such parity stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to this Series; or
iv. purchase or otherwise acquire for consideration any shares
of this Series, or any shares of stock ranking on a parity with this
Series, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
b. The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 5, purchase or otherwise acquire such shares at such time and in
such manner.
6. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash or any other property, then in any such case, the then outstanding shares
of this Series shall at the same time be similarly exchanged or changed into an
amount per share equal to the Formula Number then in effect times the aggregate
amount of stock, securities, cash or any other property (payable in kind), as
the case
6
<PAGE>
may be, into which or for which each share of Common Stock is exchanged or
changed. In the event both this Section 6 and Section 2 appear to apply to a
transaction, this Section 6 will control.
7. NO REDEMPTION; NO SINKING FUND.
a. The shares of this Series shall not be subject to redemption by
the Corporation or at the option of any holder of this Series; PROVIDED,
HOWEVER, that the Corporation may purchase or otherwise acquire outstanding
shares of this Series in the open market or by offer to any holder or holders of
shares of this Series.
b. The shares of this Series shall not be subject to or entitled to
the operation of a retirement or sinking fund.
8. RANKING. This Series shall rank junior to all other series of
Preferred Stock of the Corporation, unless the Board of Directors shall
specifically determine otherwise in fixing the powers, preferences and relative,
participating, optional and other special rights of the shares of such series
and the qualifications, limitations and restrictions thereof.
9. FRACTIONAL SHARES. This Series shall be issuable upon exercise of the
Rights issued pursuant to the Rights Agreement in whole shares or in any
fraction of a share that is one one thousandths (1/1,000ths) of a share or any
integral multiple of such fraction which shall entitle the holder, in proportion
to such holder's fractional shares, to receive dividends, exercise voting
rights, participate in distributions and to have the benefit of all other rights
of holders of this Series. In lieu of fractional shares, the Corporation, prior
to the first issuance of a share or a fraction of a share of this Series, may
elect (1) to make a cash payment as provided in the Rights Agreement for
fractions of a share other than one one-thousandths (1/1,000ths) of a share or
any integral multiple thereof or (2) to issue depository receipts evidencing
such authorized fraction of a share of this Series pursuant to an appropriate
agreement between the Corporation and a depository selected by the Corporation;
PROVIDED that such agreement shall provide that the holders of such depository
receipts shall have all the rights, privileges and preferences to which they are
entitled as holders of this Series.
10. REACQUIRED SHARES. Any shares of this Series purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preference Stock,
without designation as to series until such shares are once more designated as
part of a particular series by the Board of Directors pursuant to the provisions
of Article Four of the Certificate of Incorporation.
11. AMENDMENT. None of the powers, preferences and relative,
participating, optional and other special rights of this Series as provided
herein or in the Certificate of Incorporation shall be amended in any manner
which would alter or change the powers, preferences, rights or privileges of the
holders of this Series so as to affect them adversely without the affirmative
vote
7
<PAGE>
of the holders of at least 66-2/3% of the outstanding shares of this Series,
voting as a separate class; PROVIDED, HOWEVER, that no such amendment approved
by the holders of at least 66-2/3% of the outstanding shares of this Series
shall be deemed to apply to the powers, preferences, rights or privileges of any
holder of shares of this Series originally issued upon exercise of a Right after
the time of such approval without the approval of such holder.
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation by its President and attested by its Secretary this
_______________ day of ______________________, ______.
UTILICORP UNITED INC.
By: ______________________________________
President
ATTEST:
_________________________
Secretary
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
Before me, the undersigned Notary Public in and for said county and state,
this day personally appeared _________________________, personally known to me
to be the President of UTILICORP UNITED INC., and who executed the foregoing
instrument as President of UTILICORP UNITED INC. and being first duly sworn,
acknowledged reading in full and fully understanding the foregoing, acknowledged
the facts therein stated to be true and correct, and who further acknowledged
the execution of the same as the voluntary act of the Corporation.
Witness my hand and seal this _____ day of ____________, ____.
_______________________________________
Notary Public
My Commission Expires:
___________________________________
8
<PAGE>
UTILICORP UNITED INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Exhibit 11
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS TWELVE MONTHS
ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30,
(In thousands except per share amounts) 1996 1995 1996 1995 1996 1995
-------------------------------------------------------------
Line No.
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings Available for Common Shares:
(a) Earnings available for common shares as reported $13,576 $32,365 $76,184 $70,751 $83,150 $104,401
(b) Elimination of interest on convertible subordinated
debenture, net of tax 80 89 245 313 333 437
(c) Elimination of dividends on cumulative
convertible preference stock -- -- -- -- -- (426)
-------------------------------------------------------------
(d) Fully Diluted Earnings Available $13,656 $32,454 $76,429 $71,064 $83,483 $104,412
-------------------------------------------------------------
-------------------------------------------------------------
Weighted Average Common Shares Outstanding:
(e) Primary weighted average shares outstanding
as reported 46,595 45,171 46,510 44,931 46,327 45,159
(f) Assumed conversion of convertible subordinated
debenture 315 351 325 415 329 442
(g) Assumed conversion of cumulative convertible
preference shares -- -- -- -- -- --
-------------------------------------------------------------
(h) Fully Diluted Weighted Average Shares
Outstanding 46,910 45,522 46,835 45,346 46,656 45,601
-------------------------------------------------------------
-------------------------------------------------------------
Earnings Per Common Share:
Primary (a/e) $.29 $.72 $1.64 $1.57 $1.79 $2.31
Fully Diluted (d/h) .29 .71 1.63 1.57 1.79 2.29
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDING SEPTEMBER 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 144
<SECURITIES> 0
<RECEIVABLES> 234
<ALLOWANCES> 0
<INVENTORY> 104
<CURRENT-ASSETS> 572
<PP&E> 2350
<DEPRECIATION> 0
<TOTAL-ASSETS> 3962
<CURRENT-LIABILITIES> 940
<BONDS> 0
0
25
<COMMON> 47
<OTHER-SE> 937
<TOTAL-LIABILITY-AND-EQUITY> 3962
<SALES> 2742
<TOTAL-REVENUES> 2742
<CGS> 2086
<TOTAL-COSTS> 2086
<OTHER-EXPENSES> 502
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 111
<INCOME-PRETAX> 135
<INCOME-TAX> 57
<INCOME-CONTINUING> 78
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 1.63
</TABLE>
