PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 3, 1997)
6,000,000 PREFERRED SECURITIES
8.3% TRUST ORIGINATED PREFERRED SECURITIES-SM- ("TOPRS-SM-")
KCPL FINANCING I
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED BY
KANSAS CITY POWER & LIGHT COMPANY
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The 8.3% Trust Originated Preferred Securities (the "Preferred Securities")
offered hereby represent undivided preferred beneficial interests in the assets
of KCPL Financing I, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"). Kansas City Power & Light Company, a Missouri
corporation ("KCPL"), will own all of the common securities (the "Common
Securities", and together with the Preferred Securities, the "Trust Securities")
representing undivided beneficial interests in the assets of the Trust. The
Trust exists for the sole purpose of issuing the Trust Securities and investing
the proceeds thereof in an equivalent amount of 8.3% Junior Subordinated
Deferrable Interest Debentures due 2037 (the "Subordinated Debentures") of KCPL.
The Subordinated Debentures will mature on March 31, 2037, which date may be
shortened to a date not earlier than March 31, 2002, (such date, the "Stated
Maturity"), in each case subject to satisfying certain conditions. The
Subordinated Debentures when issued will be unsecured obligations of KCPL
(CONTINUED ON NEXT PAGE)
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SEE "RISK FACTORS" BEGINNING ON PAGE S-4 OF THIS PROSPECTUS SUPPLEMENT FOR
CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES,
INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF
DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
Application has been made to list the Preferred Securities on the New York
Stock Exchange, Inc. (the "New York Stock Exchange"). If so approved, trading of
the Preferred Securities on the New York Stock Exchange is expected to commence
within a 30-day period after the initial delivery of the Preferred Securities.
See "Underwriting."
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) TRUST(3)(4)
Per Preferred Security.......................... $25.00 $ (3) $25.00
Total........................................... $150,000,000 $ (3) $150,000,000
(1) Plus accrued distributions, if any, from April 15, 1997.
(2) The Trust and KCPL have agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(3) In view of the fact that the entire proceeds of the sale of the Preferred
Securities will be invested in the Subordinated Debentures, KCPL has agreed
to pay to the Underwriters as compensation (the "Underwriters'
Compensation") for their arranging the investment therein of such proceeds
$.7875 per Preferred Security (or $4,725,000 in the aggregate); provided,
that such compensation for sales of 10,000 or more Preferred Securities to a
single purchaser will be $.50 per Preferred Security. Therefore, to the
extent of such sales, the actual amount of Underwriters' Compensation will
be less than the aggregate amount specified in the preceding sentence. See
"Underwriting."
(4) Before deducting expenses of the offering which are payable by KCPL
estimated at $275,000.
------------------------------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the Preferred Securities will be made only in book-entry form
through the facilities of The Depository Trust Company, on or about April 15,
1997.
--------------------------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
MORGAN STANLEY & CO. INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
--------------------------
The date of this Prospectus Supplement is April 9, 1997.
- -SM- "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF PREFERRED
SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
- ------------------------
(CONTINUED FROM PREVIOUS PAGE)
and will be subordinate and junior in right of payment to certain other
indebtedness of KCPL, as described herein. Upon an event of default under the
Declaration (as defined below), the holders of Preferred Securities will have a
preference over the holders of the Common Securities with respect to payments of
distributions and payments upon redemption, liquidation and otherwise.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of 8.3% of the liquidation amount of $25 per
Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year, commencing June 30, 1997 ("distributions"). The payment of distributions
out of moneys held by the Trust and payments on liquidation of the Trust or the
redemption of Preferred Securities, as set forth below, are guaranteed by KCPL
(the "Preferred Securities Guarantee") to the extent described herein and under
"Description of Preferred Securities Guarantees" in the accompanying Prospectus.
The Preferred Securities Guarantee covers payments of distributions and other
payments on the Preferred Securities if and to the extent that the Trust has
funds available therefor, which will not be the case unless KCPL has made
payments of interest or principal or other payments on the Subordinated
Debentures held by the Trust as its sole asset. The Preferred Securities
Guarantee, when taken together with KCPL's obligations under the Subordinated
Debentures and the Indenture (as defined below) and its obligations under the
Declaration, including its liabilities to pay costs, expenses, debts and
obligations of the Trust (other than with respect to the Trust Securities),
provide a full and unconditional guarantee of amounts due on the Preferred
Securities. See "Risk Factors--Rights Under the Preferred Securities Guarantee"
herein. The obligations of KCPL under the Preferred Securities Guarantee are
subordinate and junior in right of payment to all other liabilities of KCPL and
rank PARI PASSU with the most senior preferred stock issued from time to time by
KCPL. The obligations of KCPL under the Subordinated Debentures are subordinate
and junior in right of payment to all present and future Senior Indebtedness (as
defined herein) of KCPL, which aggregated approximately $920 million at February
28, 1997, and rank PARI PASSU with KCPL's other general unsecured creditors. The
Subordinated Debentures purchased by the Trust may be subsequently distributed
PRO RATA to holders of the Preferred Securities and Common Securities in
connection with the dissolution of the Trust.
The distribution rate and the distribution payment date and other payment
dates for the Preferred Securities will correspond to the interest rate and
interest payment date and other payment dates on the Subordinated Debentures,
which will be the sole assets of the Trust. As a result, if principal or
interest is not paid on the Subordinated Debentures, no amounts will be paid on
the Preferred Securities. If KCPL does not make principal or interest payments
on the Subordinated Debentures, the Trust will not have sufficient funds to make
distributions on the Preferred Securities. In such event, the Preferred
Securities Guarantee will not apply to such distributions until the Trust has
funds available therefor.
So long as KCPL is not in default in the payment of interest on the
Subordinated Debentures, KCPL has the right to defer payments of interest on the
Subordinated Debentures by extending the interest payment period on the
Subordinated Debentures at any time for up to 20 consecutive quarters (each, an
"Extension Period"), provided that an Extension Period may not extend beyond the
Stated Maturity of the Subordinated Debentures. If interest payments are so
deferred, distributions on the Preferred Securities will also be deferred.
During such Extension Period, distributions will continue to accrue with
interest thereon (to the extent permitted by applicable law) at an annual rate
of 8.3% per annum compounded quarterly, and during any Extension Period holders
of Preferred Securities will be required to include
S-2
deferred interest income in their gross income for United States federal income
tax purposes in advance of receipt of the cash distributions with respect to
such deferred interest payments. There could be multiple Extension Periods of
varying lengths throughout the term of the Subordinated Debentures. See
"Description of the Subordinated Debentures--Option to Extend Interest Payment
Period," "Risk Factors-- Option to Extend Interest Payment Period" and "United
States Federal Income Taxation--Interest Income and Original Issue Discount."
The Subordinated Debentures are redeemable by KCPL, in whole or in part,
from time to time, on or after March 31, 2002, or, in whole but not in part, at
any time upon the occurrence of a Tax Event (as defined herein). If KCPL redeems
Subordinated Debentures, the Trust must redeem Trust Securities on a PRO RATA
basis having an aggregate liquidation amount equal to the aggregate principal
amount of the Subordinated Debentures so redeemed at $25 per Preferred Security
plus accrued and unpaid distributions thereon (the "Redemption Price") to the
date fixed for redemption. See "Description of the Preferred Securities--Tax
Event Redemption." The Preferred Securities will be redeemed upon maturity of
the Subordinated Debentures.
KCPL will have the right at any time to liquidate the Trust and cause the
Subordinated Debentures to be distributed to the holders of the Trust
Securities. If the Subordinated Debentures are distributed to the holders of the
Preferred Securities, KCPL will use its best efforts to have the Subordinated
Debentures listed on the New York Stock Exchange or on such other exchange as
the Preferred Securities are then listed. See "Description of the Preferred
Securities--Termination of the Trust and Distribution of Subordinated
Debentures" and "Description of the Subordinated Debentures."
In the event of the involuntary or voluntary dissolution, winding-up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive for each Preferred Security a liquidation amount of $25 plus
accrued and unpaid distributions thereon (including interest thereon) to the
date of payment, unless, in connection with such dissolution, the Subordinated
Debentures are distributed to the holders of the Preferred Securities.
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RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following matters.
RATINGS
The Preferred Securities are currently rated "a2" by Moody's Investors
Service, Inc. ("Moody's") and A- by Standard & Poor's Corporation ("S&P").
Moody's and S&P have announced that they have under surveillance or review, with
possible negative implications as a result of the proposed merger of KCPL with
Western Resources, Inc. ("Western Resources"), their ratings on securities
issued or guaranteed by KCPL, which would include the Preferred Securities.
Preferred securities issued by a trust formed by Western Resources are currently
rated "a3" by Moody's and BBB by S&P. Moody's and S&P have announced that they
have under surveillance or review, with possible negative implications as a
result of the pending offer of Western Resources to acquire all of the
outstanding shares of ADT Limited, their ratings on securities issued or
guaranteed by Western Resources, which would include such preferred securities.
See "Proposed Merger with Western Resources, Inc."
ABSENCE OF PRIOR PUBLIC MARKET
Prior to this offering, there has been no public market for the Preferred
Securities. Although application has been made to list the Preferred Securities
on the New York Stock Exchange, there can be no assurance that, once listed, an
active trading market will develop for the Preferred Securities or that, if such
market develops, the market price will equal or exceed the public offering price
set forth on the cover page of this Prospectus Supplement.
RANKING OF PREFERRED SECURITIES GUARANTEE AND SUBORDINATED DEBENTURES
KCPL's obligations under the Preferred Securities Guarantee are subordinate
and junior in right of payment to all other liabilities of KCPL, including the
Subordinated Debentures, and rank PARI PASSU with the most senior preferred
stock issued from time to time by KCPL. The obligations of KCPL under the
Subordinated Debentures are subordinate and junior in right of payment to all
present and future Senior Indebtedness of KCPL and rank PARI PASSU with
obligations to or rights of KCPL's other general unsecured creditors. No payment
may be made of the principal of, premium, if any, or interest on the
Subordinated Debentures, or in respect of any redemption, retirement, purchase
or other acquisition of any of the Subordinated Debentures, at any time when (i)
there is a default in the payment of principal, premium, interest or any other
payment due on any Senior Indebtedness, or (ii) the maturity of any Senior
Indebtedness has been accelerated because of a default. As of February 28, 1997,
Senior Indebtedness of KCPL aggregated approximately $920 million. There are no
terms in the Preferred Securities, the Subordinated Debentures or the Preferred
Securities Guarantee that limit KCPL's ability to incur additional indebtedness,
including indebtedness which ranks senior to the Subordinated Debentures and the
Preferred Securities Guarantee. See "Description of the Preferred Securities
Guarantees--Status of the Preferred Securities Guarantees" and "Description of
the Subordinated Debentures" in the accompanying Prospectus, and "Description of
the Subordinated Debentures--Subordination" herein.
RIGHTS UNDER THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will be qualified as an indenture under
the Trust Indenture Act. The First National Bank of Chicago will act as
indenture trustee under the Preferred Securities Guarantee for the purposes of
compliance with the provisions of the Trust Indenture Act (the "Guarantee
Trustee"). The Guarantee Trustee will hold the Preferred Securities Guarantee
for the benefit of the holders of the Preferred Securities.
S-4
The Preferred Securities Guarantee guarantees to the holders of the
Preferred Securities the payment of (i) any accrued and unpaid distributions
that are required to be paid on the Preferred Securities, to the extent the
Trust has funds available therefor, (ii) the Redemption Price, including all
accrued and unpaid distributions with respect to Preferred Securities called for
redemption by the Trust, to the extent the Trust has funds available therefor,
and (iii) upon a voluntary or involuntary dissolution, winding-up or termination
of the Trust (other than in connection with the distribution of Subordinated
Debentures to the holders of Preferred Securities or a redemption of all the
Preferred Securities), the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid distributions on the Preferred Securities to the date
of the payment to the extent the Trust has funds available therefor or (b) the
amount of assets of the Trust remaining available for distribution to holders of
the Preferred Securities in liquidation of the Trust.
The holders of a majority in liquidation amount of the Preferred Securities
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee or to direct the exercise of
any trust or power conferred upon the Guarantee Trustee under the Preferred
Securities Guarantee. Notwithstanding the foregoing, any holder of Preferred
Securities may institute a legal proceeding directly against KCPL to enforce
such holder's rights under the Preferred Securities Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity. If KCPL were to default on its obligation to pay amounts
payable on the Subordinated Debentures or otherwise, the Trust would lack
available funds for the payment of distributions or amounts payable on
redemption of the Preferred Securities or otherwise, and, in such event, holders
of the Preferred Securities would not be able to rely upon the Preferred
Securities Guarantee for payment of such amounts. Instead, holders of the
Preferred Securities would rely on the enforcement (1) by the Property Trustee
(as defined herein) of its rights as registered holder of the Subordinated
Debentures against KCPL pursuant to the terms of the Subordinated Debentures or
(2) by such holders of their right against KCPL to enforce payments on the
Subordinated Debentures. See "Description of the Preferred Securities
Guarantees" and "Description of the Subordinated Debentures" in the accompanying
Prospectus. The Declaration provides that each holder of Preferred Securities,
by acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee, including the subordination provisions thereof, and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as a holder of the
Subordinated Debentures against KCPL. In addition, the holders of a majority in
liquidation amount of the Preferred Securities will have the right to direct the
time, method, and place of conducting any proceeding for any remedy available to
the Property Trustee or to direct the exercise of any trust or power conferred
upon the Property Trustee under the Declaration, including the right to direct
the Property Trustee to exercise the remedies available to it as a holder of the
Subordinated Debentures. If the Property Trustee fails to enforce its rights
under the Subordinated Debentures, a holder of Preferred Securities may
institute a legal proceeding directly against KCPL to enforce the Property
Trustee's rights under the Subordinated Debentures without first instituting any
legal proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, if a Declaration Event of Default has occurred
and is continuing, and such event is attributable to the failure of KCPL to pay
interest or principal on the Subordinated Debentures on the date such interest
or principal is otherwise payable (or in the case of redemption, on the
redemption date), then a holder of Preferred Securities may directly institute a
proceeding for enforcement of payment to such holder of the principal of or
interest on the Subordinated Debentures having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such holder (a
"Direct Action") on or after the respective due date specified in the
Subordinated Debentures. In connection with such Direct Action, KCPL will be
subrogated to the rights of such holder of Preferred Securities under the
Declaration to the extent of any payment made by KCPL to such holder of
Preferred Securities in such Direct Action. The holders of Preferred Securities
will not be
S-5
able to exercise directly any other remedy available to the holders of the
Subordinated Debentures. See "Description of the Preferred
Securities--Declaration Events of Default."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
KCPL has the right under the Indenture to defer payments of interest on the
Subordinated Debentures by extending the interest payment period at any time,
and from time to time, on the Subordinated Debentures. As a consequence of such
an extension, quarterly distributions on the Preferred Securities would be
deferred (but would continue to accrue, despite such deferral, with interest
thereon compounded quarterly) by the Trust during any such Extension Period.
Such right to extend the interest payment period for the Subordinated Debentures
is limited to a period not exceeding 20 consecutive quarters, but no such
Extension Period may extend beyond the Stated Maturity of the Subordinated
Debentures. During any Extension Period, (a) KCPL may not declare or pay
dividends on, or make a distribution with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
(other than (i) purchases or acquisitions of shares of KCPL common stock in
connection with the satisfaction by KCPL of its obligations under any employee
benefit plans or any other contractual obligation of KCPL (other than a
contractual obligation ranking PARI PASSU with or junior to the Subordinated
Debentures), (ii) as a result of a reclassification of KCPL capital stock or the
exchange or conversion of one class or series of KCPL capital stock for another
class or series of KCPL capital stock or (iii) the purchase of fractional
interests in shares of KCPL capital stock pursuant to the conversion or exchange
provisions of such KCPL capital stock or the security being converted or
exchanged), (b) KCPL may not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities (including
guarantees) issued by KCPL that rank PARI PASSU with or junior to the
Subordinated Debentures, and (c) KCPL may not make any guarantee payments with
respect to the foregoing (other than pursuant to the Preferred Securities
Guarantee). Prior to the termination of any such Extension Period, KCPL may
further extend the interest payment period; provided, that such Extension
Period, together with all such previous and further extensions thereof, may not
exceed 20 consecutive quarters or extend beyond the Stated Maturity of the
Subordinated Debentures. Upon the termination of any Extension Period and the
payment of all amounts then due, KCPL may commence a new Extension Period,
subject to the above requirements. See "Description of the Preferred
Securities--Distributions" and "Description of the Subordinated
Debentures--Option to Extend Interest Payment Period."
Should KCPL exercise its right to defer payments of interest by extending
the interest payment period, each holder of Preferred Securities would be
required to accrue income (as original issue discount ("OID")) in respect of the
interest payable thereafter allocable to its Preferred Securities for United
States federal income tax purposes, which would be allocated but not distributed
to holders of record of Preferred Securities. As a result, each such holder of
Preferred Securities would recognize income for United States federal income tax
purposes in advance of the receipt of cash and would not receive the cash from
the Trust related to such income if such holder disposed of its Preferred
Securities prior to the record date for the date on which distributions of such
amounts were made. See United States Federal Income Taxation-- Interest Income
and Original Issue Discount. KCPL has no current intention of exercising its
right to defer payments of interest by extending the interest payment period on
the Subordinated Debentures. However, should KCPL determine to exercise such
right in the future, the market price of the Preferred Securities is likely to
be affected. A holder that disposes of its Preferred Securities during an
Extension Period, therefore, might not receive the same return on its investment
as a holder that continues to hold its Preferred Securities. In addition, as a
result of the existence of KCPL's right to defer interest payments, the market
price of the Preferred Securities (which represent an undivided beneficial
interest in the Subordinated Debentures) may be more volatile than other
securities that do not have such rights. See "United States Federal Income
Taxation--Sales of Preferred Securities."
S-6
POSSIBLE TAX LAW CHANGES
On February 6, 1997, President Clinton's budget proposal (the "Budget
Proposal") for fiscal year 1998 was released. Included in the Budget Proposal is
a provision which, if enacted, would generally deny interest deductions for
United States federal income tax purposes for interest on instruments, issued by
a corporation, that have a maximum weighted average maturity of more than 40
years. The Budget Proposal would also treat instruments such as the Subordinated
Debentures as equity for United States federal income tax purposes if the
instruments (i) have a maximum term of more than 15 years and (ii) are not shown
as indebtedness on the separate balance sheet of the issuer. These provisions
are proposed to be effective generally for instruments issued on or after the
date of first committee action by Congress. As of the date hereof, no such
action has been taken. If either provision applied to the Subordinated
Debentures, among other things, KCPL would be unable to deduct interest on the
Subordinated Debentures for United States federal income tax purposes. Similar
provisions were included in President Clinton's budget proposal for fiscal year
1997, but the 104th Congress adjourned without taking action on such provisions.
There can be no assurance that the Budget Proposal or future legislative
proposals, future regulations or official administrative pronouncements or
future judicial decisions will not affect the ability of KCPL to deduct interest
on the Subordinated Debentures. Such a change could give rise to a Tax Event,
which may permit KCPL to cause a redemption of the Preferred Securities. See
"Description of the Preferred Securities--Tax Event Redemption" and "United
States Federal Income Taxation--Possible Tax Law Changes."
REDEMPTION OR DISTRIBUTION OF THE SUBORDINATED DEBENTURES
KCPL will have the right at any time to terminate the Trust and, after
satisfaction of claims of creditors as provided by applicable law, to cause the
Subordinated Debentures to be distributed to the holders of the Trust
Securities. In certain circumstances, KCPL will have the right to redeem the
Subordinated Debentures, in whole or in part, in which event the Trust will
redeem the Trust Securities on a PRO RATA basis to the same extent as the
Subordinated Debentures are redeemed by KCPL. See "Description of the Preferred
Securities--Tax Event Redemption" and "United States Federal Income Taxation."
Under current United States federal income tax law, a distribution of
Subordinated Debentures upon the dissolution of the Trust would not be a taxable
event to holders of the Preferred Securities. If, however, the Trust is
characterized for United States federal income tax purposes as an association
taxable as a corporation at the time of dissolution of the Trust, the
distribution of the Subordinated Debentures would be a taxable event to holders
of Preferred Securities. Moreover, the redemption of the Subordinated Debentures
upon occurrence of a Tax Event, or a dissolution of the Trust in which holders
of the Preferred Securities receive cash would be a taxable event to such
holders. See "United States Federal Income Taxation--Receipt of Subordinated
Debentures or Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities if a dissolution or liquidation of the Trust were to
occur. Accordingly, the Preferred Securities or the Subordinated Debentures may
trade at a discount to the price that the investor paid to purchase the
Preferred Securities offered hereby. Because holders of Preferred Securities may
receive Subordinated Debentures, prospective purchasers of Preferred Securities
are also making an investment decision with regard to the Subordinated
Debentures and should carefully review all the information regarding the
Subordinated Debentures and KCPL contained herein and in the accompanying
Prospectus. See "Description of the Preferred Securities--Tax Event Redemption"
and "Description of the Subordinated Debentures--General."
S-7
SHORTENING THE STATED MATURITY OF THE SUBORDINATED DEBENTURES
KCPL will have the right at any time to shorten the maturity of the
Subordinated Debentures to a date not earlier than March 31, 2002.
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, KCPL Trustees, which voting rights are vested exclusively in the
holder of the Common Securities. See "Description of Preferred Securities--
Voting Rights."
TRADING PRICE OF PREFERRED SECURITIES
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder of Preferred Securities who uses the accrual
method of accounting for tax purposes (and a cash method holder, if the
Subordinated Debentures are deemed to have been issued with OID) and who
disposes of such Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest on
the Subordinated Debentures through the date of disposition in income as
ordinary income (i.e., interest or possibly OID), and to add such amount to the
adjusted tax basis in its PRO RATA share of the underlying Subordinated
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include all accrued but unpaid
interest), a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes. See United States Federal Income
Taxation--Interest Income and Original Issue Discount" and "--Sales of Preferred
Securities."
CONSEQUENCES OF HIGHLY LEVERAGED TRANSACTION
The Indenture does not contain provisions that afford holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction, including a change of control, or other similar transactions
involving KCPL that may adversely affect such holders. See "Description of the
Subordinated Debentures."
KANSAS CITY POWER & LIGHT COMPANY
KCPL, a Missouri corporation, is a medium-size electric utility,
headquartered in downtown Kansas City, which generates and distributes
electricity to over 435,000 customers in and around the metropolitan Kansas City
area. Customers include 381,000 residences, 51,000 commercial firms, and over
3,000 industries, municipalities and other electric utilities. About two-thirds
of total retail kilowatt-hour sales and revenue are from Missouri customers and
the remainder from Kansas customers. The address of the principal executive
office is 1201 Walnut, Kansas City, Missouri 64106-2124 (Telephone: (816)
556-2200).
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PROPOSED MERGER WITH WESTERN RESOURCES, INC.
On February 7, 1997, KCPL and Western Resources entered into an Agreement
and Plan of Merger to form a strategic business combination. The effective time
of the merger is expected to occur in 1998 subject to all conditions of the
Agreement and Plan of Merger being met or waived, including receipt of all
regulatory and shareholder approvals. At the effective time, KCPL will merge
with and into Western Resources, with Western Resources being the surviving
corporation and thereby becoming liable for all obligations of KCPL, including
the Subordinated Debentures and the Preferred Securities Guarantee.
Western Resources is engaged principally in the production, purchase,
transmission, distribution and sale of electricity in eastern and central Kansas
and the delivery and sale of natural gas in Kansas and northeastern Oklahoma. A
Western Resources subsidiary operates an electronic security services business.
Western Resources also owns approximately 25% of the outstanding common
shares of ADT Limited ("ADT"), which operates electronic security services and
auto auction businesses. Western Resources is seeking to acquire the remaining
outstanding common shares of ADT, which has announced that it has entered into
an agreement to combine its business with Tyco International Ltd. Accordingly,
no assurances can be given that Western Resources will succeed in acquiring the
remaining outstanding common shares of ADT.
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to the filing of a certificate of trust with the Delaware Secretary of State on
December 11, 1996. The business of the Trust is defined in a declaration of
trust executed by KCPL, as sponsor (the "Sponsor"), and the Trustees (as defined
herein). Such declaration will be amended and restated in its entirety (as so
amended and restated, the "Declaration") substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus Supplement and
the accompanying Prospectus form a part. The Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the Preferred Securities, the purchasers
thereof will own all of the Preferred Securities. See "Description of the
Preferred Securities--Book-Entry Only Issuance--The Depository Trust Company."
KCPL will acquire Common Securities in an aggregate liquidation amount equal to
approximately 3 percent of the total capital of the Trust. The Trust exists for
the exclusive purposes of (i) issuing the Trust Securities representing
undivided beneficial interests in the assets of the Trust, (ii) investing the
gross proceeds of the Trust Securities in the Subordinated Debentures and (iii)
engaging in only those other activities necessary or incidental thereto. The
Trust has a term of 45 years, but may terminate earlier as provided in the
Declaration.
Pursuant to the Declaration, the number of the Trustees of the Trust will
initially be four. Two of the Trustees (the "Regular Trustees") will be persons
who are employees or officers of, or who are affiliated with, KCPL. A third
trustee will be a financial institution that is unaffiliated with KCPL, which
trustee will serve as property trustee under the Declaration and as indenture
trustee for the purposes of compliance with the provisions of the Trust
Indenture Act (the "Property Trustee"). The fourth Trustee will be either a
legal entity with its principal place of business in Delaware or an individual
resident in Delaware, which will serve for the limited purpose of satisfying
certain Delaware laws (the "Delaware Trustee"). Initially, The First National
Bank of Chicago will be the Property Trustee and First Chicago Delaware Inc.
will be the Delaware Trustee until removed or replaced by the holder of the
Common Securities. For purposes of compliance with the provisions of the Trust
Indenture Act, The First National Bank of Chicago will act as trustee (the
"Guarantee Trustee") under the Preferred Securities Guarantee. The First
National Bank of Chicago will act as Debt Trustee (as defined herein) under the
Indenture. See "Description of the Preferred Securities Guarantees" in the
accompanying Prospectus and "Description of the Preferred Securities--Voting
Rights" herein.
S-9
The Property Trustee will hold title to the Subordinated Debentures for the
benefit of the holders of the Trust Securities and will have the power to
exercise all rights, powers and privileges under the Indenture as the holder of
the Subordinated Debentures. In addition, the Property Trustee will maintain
exclusive control of a segregated non-interest bearing bank account (the
"Property Account") to hold all payments made in respect of the Subordinated
Debentures for the benefit of the holders of the Trust Securities. The Property
Trustee will make payments of distributions and payments on liquidation,
redemption and otherwise to the holders of the Trust Securities out of funds
from the Property Account. The Guarantee Trustee will hold the Preferred
Securities Guarantee for the benefit of the holders of the Preferred Securities.
KCPL, as the direct or indirect holder of all the Common Securities, will have
the right to appoint, remove or replace any Trustee and to increase or decrease
the number of Trustees. KCPL will pay all fees and expenses related to the Trust
and the offering of the Trust Securities. See "Description of the Subordinated
Debentures--Miscellaneous."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities."
S-10
SELECTED HISTORICAL FINANCIAL DATA OF KCPL
Income Statement Information
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(THOUSANDS)
Operating revenues................................................. $ 903,919 $ 885,955 $ 868,272
---------- ---------- ----------
Operating income................................................... 177,813 167,048 149,691
Operating income taxes............................................. 68,155 77,062 70,949
---------- ---------- ----------
Operating income excluding income taxes............................ 245,968 244,110 220,640
---------- ---------- ----------
Net income......................................................... $ 108,171 $ 122,586 $ 104,775
CAPITALIZATION OF KCPL
The following table sets forth the capitalization of KCPL at December 31,
1996, and KCPL's capitalization as of such date as adjusted to reflect the sale
of the Preferred Securities but does not reflect any portion of the $300 million
principal amount of Medium-Term Notes which may be offered by KCPL for sale from
time to time through agents pursuant to a separate prospectus. The table should
be read in conjunction with KCPL's consolidated financial statements and notes
thereto included in the documents incorporated by reference herein. See
"Incorporation of Certain Documents by Reference" in the accompanying
Prospectus.
DECEMBER 31, 1996
----------------------
(MILLIONS)
ACTUAL ADJUSTED
--------- -----------
Long-term debt(1):
Bonds................................................................ $ 840 $ 840
Subsidiary obligations............................................... 131 131
--------- -----------
Total Long-term debt............................................... 971 971
Preferred stock........................................................ 89 89
Company obligated mandatorily redeemable Preferred Securities of
subsidiary trust(2)................................................... 150
Common stock equity.................................................... 910 910
--------- -----------
Total.............................................................. $ 1,970 $ 2,120
--------- -----------
--------- -----------
- ------------------------
(1) Includes long-term debt included in current liabilities.
(2) The sole assets of the Trust will be $154,640,000 of 8.3% Subordinated
Debentures due 2037 of KCPL, including $150,000,000 of such Subordinated
Debentures attributable to such Preferred Securities and $4,640,000 of such
Subordinated Debentures attributable to the Common Securities of the Trust;
KCPL will own all of such Common Securities.
S-11
KCPL AND WESTERN RESOURCES
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following selected unaudited pro forma combined financial information
combines the consolidated balance sheets and income statements of, Western
Resources and KCPL as if their merger had occurred for all periods presented.
These statements are prepared on the basis of accounting for such merger as a
pooling of interests and are based on the assumptions set forth in the notes
thereto. These statements do not reflect any cost savings which may result from
such merger. Therefore, the following information is not necessarily indicative
of actual results that would have occurred had such merger occurred on such
dates or of future expected results. See "WESTERN RESOURCES AND KCPL UNAUDITED
PRO FORMA COMBINED BALANCE SHEET" and "WESTERN RESOURCES AND KCPL UNAUDITED PRO
FORMA COMBINED STATEMENT OF INCOME" in the Western Resources Current Report on
Form 8-K dated April 1, 1997, which is included in the KCPL Current Report on
Form 8-K filed with the Commission on April 3, 1997, and incorporated by
reference in the accompanying Prospectus.
YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS)
PRO FORMA COMBINED (UNAUDITED)
Income Statement Data:
Operating revenues:
Electric............................................................... $ 2,101,352 $ 2,031,850 $ 1,990,053
Natural gas............................................................ 849,386 597,405 642,988
----------- ----------- -----------
Total operating revenues............................................. $ 2,950,738 $ 2,629,255 $ 2,633,041
Operating income(1)...................................................... 639,053 614,016 591,312
Net income............................................................... 277,121 304,262 292,222
Earnings applicable to common stock...................................... 258,492 286,832 275,347
Ratio of earnings to fixed charges(2).................................... 2.37x 2.80x 2.99x
Ratio of earnings to combined fixed charges and preferred dividend
requirements(2)........................................................ 2.17x 2.54x 2.69x
AS OF DECEMBER 31,
------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
PRO FORMA COMBINED (UNAUDITED)
Balance Sheet Data:
Total assets.......................................................................... $ 9,532,293 $ 8,373,183
Long-term debt, net................................................................... 2,625,719 2,226,976
Preferred and preference stock........................................................ 163,920 265,294
Company-obligated mandatorily redeemable preferred securities......................... 220,000 100,000
Common stock equity................................................................... 2,475,129 2,451,048
- --------------------------
(1) Operating income excludes income tax expense which has historically been
included as a component of operating expenses.
(2) Earnings are deemed to consist of net income to which has been added income
taxes (including net deferred investment tax credit) and fixed charges.
Fixed charges consist of all interest on indebtedness, amortization of debt
discount and expense, and the portion of rental expense which represents an
interest factor. Preferred and preference dividend requirements consist of
an amount equal to the pre-tax earnings which would be required to meet
dividend requirements on preferred and preference stock.
S-12
KCPL, WESTERN RESOURCES AND ADT
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following selected unaudited pro forma combined financial information
combines the consolidated balance sheets and income statements of KCPL, Western
Resources and ADT as if Western Resources had acquired all of the outstanding
common shares of ADT as of the beginning of the period and the merger of KCPL
and Western Resources had occurred for all periods presented. These statements
are prepared on the basis of accounting for such acquisition of common shares as
a purchase and such merger as a pooling of interests and are based on the
assumptions set forth in the notes thereto. These statements do not reflect any
cost savings or revenue enhancements which may result from such merger and such
acquisition of common shares. Therefore, the following information is not
necessarily indicative of actual results that would have occurred had such
acquisition of common shares and such merger occurred as of such dates or of
future expected results. See "WESTERN RESOURCES, KCPL AND ADT UNAUDITED PRO
FORMA COMBINED BALANCE SHEET" and "WESTERN RESOURCES, KCPL AND ADT UNAUDITED
COMBINED STATEMENT OF INCOME" in the Western Resources Current Report on Form
8-K dated April 1, 1997, which is included in the KCPL Current Report on Form
8-K filed with the Commission on April 3, 1997, and incorporated by reference in
the accompanying Prospectus.
YEAR ENDED
DECEMBER 31, 1996
-----------------
(DOLLARS IN
THOUSANDS)
PRO FORMA COMBINED (UNAUDITED)(1)
Income Statement Data:
Operating revenues:
Electric................................................................................... $ 2,101,352
Natural gas................................................................................ 849,386
Security and other......................................................................... 1,406,200
-----------------
Total operating revenues................................................................. 4,356,938
Operating income............................................................................. (195,047)
Net income (loss) before extraordinary item.................................................. (643,890)
Earnings (loss) applicable to common stock before extraordinary item......................... (662,519)
AS OF DECEMBER 31,
1996
--------------------
(DOLLARS IN
THOUSANDS)
PRO FORMA COMBINED (UNAUDITED)
Balance Sheet Data:
Total assets.............................................................................. $ 14,188,615
Long-term debt, net....................................................................... 5,273,019
Preferred and preference stock............................................................ 163,920
Company-obligated mandatorily redeemable preferred securities............................. 220,000
Common stock equity....................................................................... 4,029,918
- ------------------------
(1) Information necessary to compute the ratio of earnings to fixed charges is
not available as it relates to ADT.
S-13
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated into KCPL's
consolidated financial statements, with the Preferred Securities treated as
minority interest and shown in KCPL's balance sheet as "Company-obligated
mandatorily redeemable preferred securities of subsidiary trust." The financial
statement footnotes of KCPL will reflect that the sole asset of the Trust will
be the Subordinated Debentures. See "Capitalization."
USE OF PROCEEDS
The Trust will use the proceeds of the sale of the Trust Securities to
acquire Subordinated Debentures from KCPL. KCPL intends to add the net proceeds
from the sale of the Subordinated Debentures to the general funds of KCPL for
use for corporate purposes, which may include capital expenditures,
acquisitions, refinancing or repurchase of outstanding long-term debt, preferred
and common securities, investments in subsidiaries, and repayment of short-term
debt and other business opportunities.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee will act as the indenture trustee for
purposes of compliance with the provisions of the Trust Indenture Act. The terms
of the Preferred Securities will include those stated in the Declaration and
those made part of the Declaration by the Trust Indenture Act. The following
summary of the principal terms and provisions of the Preferred Securities, which
supplements and to the extent inconsistent, replaces, the description set forth
under the caption "Description of the Preferred Securities" in the accompanying
Prospectus, does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the Declaration, a copy of the form of which is
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part, the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees, on behalf of the Trust, to
issue the Preferred Securities, which represent preferred undivided beneficial
interests in the assets of the Trust, and the Common Securities, which represent
common undivided beneficial interests in the assets of the Trust. All of the
Common Securities will be owned by KCPL. The Common Securities rank PARI PASSU,
and payments will be made thereon on a PRO RATA basis, with the Preferred
Securities, except that upon the occurrence and during the continuation of a
Declaration Event of Default, the rights of the holders of the Common Securities
to receive payment of periodic distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights to payment of the
holders of the Preferred Securities. The Declaration does not permit the
issuance by the Trust of any securities other than the Trust Securities or the
incurrence of any indebtedness by the Trust. Pursuant to the Declaration, the
Property Trustee will own and hold the Subordinated Debentures for the benefit
of the holders of the Trust Securities. The payment of distributions out of
money held by the Trust, and payments upon redemption of the Preferred
Securities or liquidation of the Trust, are guaranteed by KCPL to the extent
described under "Description of the Preferred Securities Guarantees" in the
accompanying Prospectus. The Guarantee Trustee will hold the Preferred
Securities Guarantee for the benefit of the holders of the Preferred Securities.
The Preferred Securities Guarantee does not cover payment of distributions on
the Preferred Securities when the Trust does not have sufficient available funds
in the Property Account to make such distributions. In such event, the remedy of
a holder of Preferred Securities is to vote to direct the Property Trustee to
enforce the Property Trustee's rights under the Subordinated Debentures except
in the limited circumstances in which the holder may take Direct Action. See
"Voting Rights" and "Declaration Events of Default."
S-14
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 8.3% of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears will bear interest at the same per annum rate (to the
extent permitted by applicable law). The term "distributions" as used herein
includes any such interest payable unless otherwise stated. Distributions on the
Preferred Securities will be cumulative, will accrue from the date of the
initial issuance of the Preferred Securities and will be payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year
commencing June 30, 1997, when, as and if available for payment by the Property
Trustee, except as otherwise described below. The first distribution will be
$.43806 per Preferred Security and will be payable on June 30, 1997. The amount
of distributions payable for any full quarterly period will be computed on the
basis of a 360-day year of twelve 30 day months, and for any period shorter than
a full quarter, on the basis of the actual number of days elapsed in such a
90-day quarter.
KCPL has the right under the Indenture to defer payments of interest on the
Subordinated Debentures by extending the interest payment period from time to
time on the Subordinated Debentures issued thereunder which, if exercised, would
defer quarterly distributions on the Preferred Securities (though such
distributions would continue to accrue interest since interest would continue to
accrue on the Subordinated Debentures) during any such extended interest payment
period. In the event that KCPL exercises this right, then (a) KCPL may not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase or make a liquidation payment with respect to, any of its
capital stock, other than (i) purchases or acquisitions of shares of KCPL common
stock in connection with the satisfaction by KCPL of its obligations under any
employee benefit plans or any other contractual obligation of KCPL (other than a
contractual obligation ranking PARI PASSU with or junior to the Subordinated
Debentures), (ii) as a result of a reclassification of KCPL capital stock or the
exchange or conversion of one class or series of KCPL capital stock for another
class or series of KCPL capital stock or (iii) the purchase of fractional
interests in shares of KCPL capital stock pursuant to the conversion or exchange
provisions of such KCPL capital stock or the security being converted or
exchanged), (b) KCPL may not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities (including
guarantees) issued by KCPL which rank PARI PASSU with or junior to the
Subordinated Debentures, and (c) KCPL may not make any guarantee payments with
respect to the foregoing (other than pursuant to the Preferred Securities
Guarantee). This prohibition effectively requires that any Extension Period with
respect to any series of Subordinated Debentures will also apply to each other
series of subordinated debentures issued under the Indenture to other trusts
similar to the Trust. Prior to the termination of any such Extension Period,
KCPL may further extend the interest payment period, provided that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity of
the Subordinated Debentures. Upon the termination of any Extension Period and
the payment of all amounts then due, KCPL may select a new Extension Period as
if no Extension Period had previously been declared, subject to the above
requirements. See "--Voting Rights" and "Description of the Subordinated
Debentures--Interest" and "--Option to Extend Interest Payment Period." If
distributions are deferred, the deferred distributions and accrued interest
thereon shall be paid to holders of record of the Preferred Securities, if funds
are available therefor, as they appear on the books and records of the Trust on
the record date next following the termination of such Extension Period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received under the Subordinated Debentures. See "Description of the
Subordinated Debentures." The payment of distributions out of moneys held by the
Trust is guaranteed by KCPL to the extent set forth under "Description of the
Preferred Securities Guarantee."
S-15
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
only form, will be one Business Day (as defined herein) prior to the relevant
payment dates, which payment dates correspond to the interest payment dates on
the Subordinated Debentures. Such distributions will be paid through the
Property Trustee, which will hold amounts received in respect of the
Subordinated Debentures in the Property Account for the benefit of the holders
of the Trust Securities. Subject to any applicable laws and regulations and the
provisions of the Declaration, each such payment will be made as described under
"--Book-Entry Only Issuance--The Depository Trust Company" below. In the event
the Preferred Securities do not continue to remain in book-entry only form, the
Regular Trustees will have the right to select relevant record dates which will
be at least one Business Day, but less than 60 Business Days, prior to the
relevant payment dates. In the event that any date on which distributions are to
be made on the Preferred Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date. A "Business
Day" means any day other than a day on which banking institutions in Chicago,
Illinois or New York, New York are authorized or required by law to close.
REDEMPTION
The Subordinated Debentures will mature on March 31, 2037 and may be
redeemed, in whole or in part, at any time on or after March 31, 2002, or in
whole but not in part at any time in certain circumstances upon the occurrence
of a Tax Event. Upon the repayment of the Subordinated Debentures, whether at
maturity or upon acceleration, redemption or otherwise, the proceeds from such
repayment or payment will simultaneously be applied to redeem Trust Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Subordinated Debentures so repaid or redeemed at the Redemption Price;
provided that, except in the case of payments upon maturity, holders of Trust
Securities will be given not less than 30 nor more than 60 days notice of such
redemption. See "Description of the Subordinated Debentures." In the event that
fewer than all of the outstanding Preferred Securities are to be redeemed, the
Preferred Securities will be redeemed PRO RATA as described under "--Book-Entry
Only Issuance--The Depository Trust Company" below.
TAX EVENT REDEMPTION
"Tax Event" means that the Regular Trustees shall have received an opinion
from independent tax counsel experienced in such matters (a "Redemption Tax
Opinion") to the effect that, on or after the date of this Prospectus
Supplement, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein or (b) any amendment to, or change in, an interpretation or application
of any such laws or regulations by any legislative body, court, governmental
agency or regulatory authority, which amendment or change is enacted,
promulgated, issued or announced or which interpretation or pronouncement is
issued or announced or which action is taken, in each case on or after the date
of this Prospectus Supplement, there is more than an insubstantial risk that
interest payable by KCPL to the Trust on the Subordinated Debentures is not, or
within 90 days of the date thereof will not be, deductible, in whole or in part
by KCPL for United States federal income tax purposes.
If at any time a Tax Event has occured and is continuing with respect to the
Trust or the Preferred Securities, the Trust may, upon not less than 30 nor more
than 60 days notice, redeem the Subordinated Debentures in whole but not in part
for cash within 90 days following the occurrence of such Tax Event; provided,
however, that, if at the time there is available to KCPL or the Trust the
opportunity to eliminate, within such 90-day period, the Tax Event by taking
some ministerial action, such as filing a form or making
S-16
an election, or pursuing some other similar reasonable measure which has no
adverse effect on the Trust, KCPL or the holders of the Trust Securities, KCPL
or the Trust will pursue such measure in lieu of redemption.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities of the Trust unless all accrued and unpaid distributions have been
paid on all Trust Securities for all quarterly distribution periods terminating
on or prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred Securities
of the Trust (which notice will be irrevocable), then by 12:00 noon, New York
City time, on the redemption date, provided that KCPL has paid to the Property
Trustee a sufficient amount of cash in connection with the related redemption or
maturity of the Subordinated Debentures, the Trust will irrevocably deposit with
the Depositary funds sufficient to pay the applicable Redemption Price and will
give the Depositary irrecovable instructions and authority to pay the Redemption
Price to the holders of the Preferred Securities. See "--Book-Entry Only
Issuance--The Depository Trust Company." If notice of redemption has been given
and funds deposited as required, then immediately prior to the close of business
on the date of such deposit, distributions will cease to accrue and all rights
of holders of such Preferred Securities so called for redemption will cease,
except the right of the holders of such Preferred Securities to receive the
Redemption Price, but without interest on such Redemption Price. In the event
that any date fixed for redemption of Preferred Securities is not a Business
Day, then payment of the Redemption Price payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the Redemption Price in
respect of Preferred Securities is improperly withheld or refused and not paid
either by the Trust or by KCPL pursuant to the Preferred Securities Guarantee,
distributions on such Preferred Securities will continue to accrue, from the
original redemption date to the actual date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed PRO RATA as described
under "--Book-Entry Only Issuance--The Depository Trust Company" below.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), KCPL or its affiliates may,
at any time and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
DISSOLUTION; DISTRIBUTION OF SUBORDINATED DEBENTURES
In the event of any voluntary dissolution, winding-up or termination of the
Trust, the holders of the Preferred Securities at that time will be entitled to
receive out of the assets of the Trust, after satisfaction of liabilities to
creditors of the Trust, distributions in an amount equal to the aggregate of the
stated liquidation amount of $25 per Preferred Security plus accrued and unpaid
distributions thereon to the date of payment (the "Liquidation Distribution"),
unless, in connection with such dissolution, winding-up or termination,
Subordinated Debentures in an aggregate principal amount equal to the aggregate
stated liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accrued and
unpaid distributions on, the Preferred Securities have been distributed on a PRO
RATA basis to the holders of Preferred Securities in exchange for such Preferred
Securities.
If upon any such dissolution the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities will be paid on a PRO RATA basis. The holders
of the Common Securities will be entitled to receive distributions upon any such
dissolution PRO RATA with the
S-17
holders of the Preferred Securities, except that if a Declaration Event of
Default has occurred and is continuing, the Preferred Securities will have a
preference over the Common Securities.
Pursuant to the Declaration, the Trust will terminate (i) on April 15, 2042,
the expiration of the term of the Trust, (ii) upon the bankruptcy of KCPL, (iii)
upon the filing of a certificate of dissolution or its equivalent with respect
to KCPL, the filing of a certificate of cancellation with respect to the Trust,
or the revocation of the charter of KCPL and the expiration of 90 days after the
date of revocation without a reinstatement thereof, (iv) upon the entry of a
decree of judicial dissolution of KCPL or the Trust, (v) upon the redemption of
all of the Trust Securities, (vi) upon the dissolution of the Trust in
accordance with the terms of the Trust Securities pursuant to which all
Subordinated Debentures shall have been distributed to the holders of the Trust
Securities, or (vii) at any time at the option of KCPL upon its written
direction to the Property Trustee to dissolve the Trust and distribute the
Subordinated Debentures to the holders of the Trust Securities.
If Subordinated Debentures are distributed to the holders of the Preferred
Securities, KCPL will use its best efforts to have the Subordinated Debentures
listed on the New York Stock Exchange or on such other exchange as the Preferred
Securities are then listed.
After the date for any distribution of Subordinated Debentures upon
dissolution of the Trust, (i) the Preferred Securities and Preferred Securities
Guarantees will no longer be deemed to be outstanding, (ii) the depositary or
its nominee, as the record holder of the Preferred Securities, will receive a
registered global certificate or certificates representing the Subordinated
Debentures to be delivered upon such distribution and (iii) any certificates
representing Preferred Securities and Preferred Securities Guarantees not held
by the depositary or its nominee will be deemed to represent Subordinated
Debentures having an aggregate principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the distribution rate
of, and accrued and unpaid interest equal to accrued and unpaid distributions
on, such Preferred Securities, until such certificates are presented to KCPL or
its agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for the Preferred Securities if a dissolution and liquidation of the Trust were
to occur. Accordingly, the Preferred Securities that an investor may purchase,
or the Subordinated Debentures that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the investor
paid to purchase the Preferred Securities offered hereby.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
(see "Description of the Subordinated Debentures--Indenture Events of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"), provided that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities or its
consequences until all Declaration Events of Default with respect to the
Preferred Securities have been cured, waived or otherwise eliminated. Until such
Declaration Events of Default with respect to the Preferred Securities have been
so cured, waived or otherwise eliminated, the Property Trustee will be deemed to
be acting solely on behalf of the holders of the Preferred Securities and only
the holders of the Preferred Securities will have the right to direct the
Property Trustee with respect to certain matters under the Declaration, and
therefore under the Indenture.
If the Property Trustee fails to enforce its rights under the Subordinated
Debentures after a holder of Preferred Securities has made a written request,
such holder may institute a legal proceeding against KCPL to enforce the
Property Trustee's rights under the Subordinated Debentures without first
instituting any legal proceeding against the Trustee or any other person or
entity. Notwithstanding the foregoing, if a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of KCPL
to pay interest or principal on the Subordinated Debentures on the date such
interest or principal is
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otherwise payable (or in the case of redemption, the redemption date), then a
holder of Preferred Securities may institute a Direct Action for enforcement of
payment to such holder directly of the principal of, or interest on,
Subordinated Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder on or after the
respective due date specified in the Subordinated Debentures. In connection with
such Direct Action, KCPL will be subrogated to the rights of such holder of
Preferred Securities under the Declaration to the extent of any payment made by
KCPL to such holder of Preferred Securities in such Direct Action. The holders
of Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Subordinated Debentures.
Upon the occurrence of a Declaration Event of Default, the Property Trustee,
as the sole holder of the Subordinated Debentures, will have the right under the
Indenture to declare the principal of, and interest on, the Subordinated
Debentures to be immediately due and payable. KCPL and the Trust are each
required to file annually with the Property Trustee an officers' certificate as
to its compliance with all conditions and covenants under the Declaration.
VOTING RIGHTS
Except as provided below, under the Trust Act, the Trust Indenture Act and
under "Description of the Preferred Securities Guarantee--Amendments and
Assignment" in the accompanying Prospectus and as otherwise required by law and
the Declaration, the holders of the Preferred Securities will have no voting
rights. In the event that KCPL elects to defer payments of interest on the
Subordinated Debentures as described above under "--Distributions," the holders
of the Preferred Securities do not have the right to appoint a special
representative or trustee or otherwise act to protect their interests.
The holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee, or to direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration, including the right to direct the Property Trustee, as the holder
of the Subordinated Debentures, to (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debt Trustee under the
Indenture with respect to the Subordinated Debentures, (ii) waive any past
Indenture Event of Default which is waivable under the Indenture, (iii) exercise
any right to rescind or annul a declaration that the principal of all the
Subordinated Debentures shall be due and payable, or (iv) consent to any
amendment, modification or termination of the Indenture or the Subordinated
Debentures, where such consent shall be required; provided, however, that where
a consent under the Indenture would require the consent of the holders of more
than a majority in principal amount of Subordinated Debentures affected thereby
(a "Super-Majority"), only the holders of at least the proportion in liquidation
amount of the Preferred Securities which the relevant Super-Majority represents
of the aggregate principal amount of the Subordinated Debentures may direct the
Property Trustee to give such consent. If the Property Trustee fails to enforce
its rights under the Declaration, a holder of Preferred Securities may institute
a legal proceeding directly against any person to enforce the Property Trustee's
rights under the Declaration without first instituting any legal proceeding
against the Property Trustee or any other person or entity. The Property Trustee
will notify all holders of the Preferred Securities of any notice of default
received from the Debt Trustee with respect to the Subordinated Debentures. Such
notice will state that such Indenture Event of Default also constitutes a
Declaration Event of Default. The Property Trustee will not take any action
described in clauses (i), (ii), (iii) or (iv) above unless the Property Trustee
has obtained an opinion of independent tax counsel to the effect that, as a
result of such action, the Trust will not be classified as other than a grantor
trust for United States federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Debentures, is required under the Indenture for any amendment,
modification or termination of the Indenture, the Property Trustee will request,
and act only in accordance with, the direction of the holders of a majority in
liquidation amount of the Preferred Securities and, if no Declaration Event of
Default has occurred and is continuing, the holders of a majority in liquidation
amount of the Common Securities, voting together as
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separate classes, provided that where a consent under the Indenture would
require the consent of a Super-Majority, the Property Trustee may only give such
consent at the direction of the holders of at least the proportion in
liquidation amount of the Preferred Securities and Common Securities,
respectively, which the relevant Super-Majority represents of the aggregate
principal amount of the Subordinated Debentures outstanding. The Property
Trustee will not take any such action in accordance with the directions of the
holders of the Trust Securities unless the Property Trustee has obtained an
opinion of independent tax counsel to the effect that, as a result of such
action, the Trust will not be classified as other than a grantor trust for
United States federal income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for such
purpose, at a meeting of all of the holders of the Trust Securities or pursuant
to written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents. No vote or consent of the holder of Preferred
Securities will be required for the Trust to redeem and cancel Preferred
Securities or distribute Subordinated Debentures in accordance with the
Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, neither KCPL nor any
entity directly or indirectly controlling or controlled by, or under direct or
indirect common control with, KCPL, will be entitled to vote or consent with
respect to any Preferred Securities which at such time are owned by KCPL or any
such entity, and such Preferred Securities will, for purposes of such vote or
consent, be treated as if they were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "--Book-entry only Issuance--The
Depository Trust Company."
Holders of the Preferred Securities will have no rights to appoint or remove
the Trustees, who may be appointed, removed or replaced solely by KCPL, as the
direct or indirect holder of all the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be amended or modified if approved and executed by a
majority of the Regular Trustees, provided that if any proposed amendment
provides for, or the Regular Trustees otherwise propose to effect, (i) any
action that would adversely affect the powers, preferences or special rights of
the Trust Securities, whether by way of amendment to the Declaration or
otherwise or (ii) the dissolution, winding up or termination of the Trust other
than pursuant to the terms of the Declaration, then the holders of the Trust
Securities as a single class will be entitled to vote on such amendment or
proposal and such amendment or proposal will not be effective except with the
approval of the holders of at least 66 2/3 per cent in liquidation amount of the
Trust Securities affected thereby, provided that if any amendment or proposal
referred to in clause (i) above would adversely affect only the Preferred
Securities or the Common Securities, then only the affected class will be
entitled to vote on such amendment or proposal and such amendment or proposal
will not be effective except with the approval of the holders of 66 2/3 per cent
in liquidation amount of such class of Trust Securities.
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Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified as other than a grantor trust, for purposes of United States
federal income tax purposes, (ii) reduce or otherwise adversely affect the
powers of the Property Trustee or (iii) cause the Trust to be deemed to be an
"investment company" which is required to be registered under the Investment
Company Act of 1940, as amended (the "1940 Act").
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below. The Trust may, with the consent of a majority of the Regular
Trustees and without the consent of the holders of the Trust Securities, the
Delaware Trustee or the Property Trustee, consolidate, amalgamate, merge with or
into, or be replaced by a trust organized as such under the laws of any State;
provided, that (i) such successor entity either (x) expressly assumes all of the
obligations of the Trust with respect to the Trust Securities or (y) substitutes
for the Trust Securities other securities having substantially the same terms as
the Trust Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Trust Securities rank with respect to
distributions and payments upon liquidation, redemption, maturity and otherwise,
(ii) KCPL expressly acknowledges a trustee of such successor entity which
possesses the same powers and duties as the Property Trustee as the holder of
the Subordinated Debentures, (iii) the Preferred Securities or any Successor
Securities are listed, or any Successor Securities will be listed upon
notification of issuance, or any national securities exchange or other
organization on which the Preferred Securities are then listed, (iv) such
merger, consolidation, amalgamation or replacement does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the rights,
preferences and privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect (other than with respect to any
dilution of the holders' interest in the new entity), (vi) such successor entity
has a purpose identical to that of the Trust, (vii) prior to such merger,
consolidation, amalgamation or replacement, KCPL has received an opinion from
independent counsel to the Trust experienced in such matters to the effect that
(A) such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Securities (including any Successor Securities) in any material respect (other
than with respect to any dilution of the holders' interest in the new entity),
and (B) following such merger, consolidation, amalgamation or replacement,
neither the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (viii) KCPL guarantees the obligations
of such successor entity under the Successor Securities at least to the extent
provided by the Preferred Securities Guarantee. Notwithstanding the foregoing,
the Trust will not, except with the consent of the holders of 100% in
liquidation amount of the Trust Securities, consolidate, amalgamate, merge with
or into, or be replaced by any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger or replacement would cause the Trust or the
successor entity to be classified for United States federal income tax purposes
as other than a grantor trust and each holder of Trust Securities not to be
treated as owning an undivided beneficial interest in the Subordinated
Debentures.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as fully
registered securities registered in the name of Cede & Co. (DTC's nominee). One
or more fully registered global Preferred Securities certificates will be
issued, representing in the aggregate the total number of Preferred Securities,
and will be deposited with DTC ("Global Certificates").
S-21
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in a global Preferred Security.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "Clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange,
the American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
Preferred Securities ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Preferred Securities, except in the event that use
of the book-entry system for the Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Preferred Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Preferred Securities. DTC's records reflect
only the identity of the Direct Participants to whose accounts such Preferred
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Preferred Securities represented thereby for all
purposes under the Declaration and the Preferred Securities. No beneficial owner
of an interest in a Global Certificate will be able to transfer that interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the Declaration.
DTC has advised KCPL that it will take any action permitted to be taken by a
holder of Preferred Securities (including the presentation of Preferred
Securities for exchange as described below) only at the direction of one or more
Participants to whose account the DTC interests in the Global Certificates are
credited and only in respect of such portion of the aggregate liquidation amount
of Preferred Securities as to which such Participant or Participants has or have
given such direction. However, if there is a Declaration Event of Default under
the Preferred Securities, DTC will exchange the Global Certificates for
certificated Preferred Securities, which it will distribute to its Participants.
S-22
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce PRO RATA the amount of
the interest of each Direct Participant in the Preferred Securities to be
redeemed; provided that if, as a result of such PRO RATA redemption, Direct
Participants would hold fractional interests in the Preferred Securities, DTC
will adjust the amount of the interest of each Direct Participant to be redeemed
to avoid such fractional interests.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Distribution payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by participants to Beneficial Owners will be governed by standing
instructions and customary practices, as in the case with securities held for
the account of customers in bearer form or registered in "street name," and will
be the responsibility of such Participant and not of DTC, the Trust, any trustee
or KCPL, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of distributions to DTC is the responsibility of the
Trust, disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
will not be entitled to receive physical delivery of Preferred Securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Preferred Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC, DTC
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither KCPL, the Trust nor any
Trustee will have any responsibility for the performance by DTC or its Direct
Participants or Indirect Participants under the rules and procedures governing
DTC. DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates are required to be
printed and delivered. Additionally, the Regular Trustees (with the consent of
KCPL) may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary) with respect to the Preferred
Securities. In that event, certificates for the Preferred Securities of such
Trust will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that KCPL and the Trust believe to be reliable,
but KCPL and the Trust assume no responsibility for the accuracy thereof.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities and after the curing of all such defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care as
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the
S-23
Property Trustee is under no obligation to exercise any of the powers vested in
it by the Declaration at the request of any holder of Preferred Securities
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby; but the foregoing shall not
relieve the Property Trustee, upon the occurrence of a Declaration Event of
Default, from exercising the rights and powers vested in it by the Declaration.
The Property Trustee also serves as trustee under the Preferred Securities
Guarantee. KCPL and its officers and directors have no material relationship
with the Property Trustee except that (a) the Property Trustee is a dealer in
commercial paper issued by KCPL, (b) the Property Trustee is trustee and
remarketing agent for certain governmental revenue bonds which are payable with
amounts paid by KCPL to the issuer of such bonds, and (c) KCPL and its principal
subsidiary maintain lines of credit with the Property Trustee.
REGISTRAR AND TRANSFER AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the Property Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time. Registration of transfers of
Preferred Securities will be effected without charge by or on behalf of the
Trust, but upon payment (with the giving of such indemnity as the Regular
Trustees may require) in respect of any tax or other governmental charges which
may be imposed in relation to it. The Trust will not be required to register or
cause to be registered the transfer of Preferred Securities after such Preferred
Securities have been called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act or characterized for United States
Federal income tax purposes as other than a grantor trust. KCPL is authorized
and directed to conduct its affairs so that the Subordinated Debentures will be
treated as indebtedness of KCPL for United States federal income tax purposes.
In this connection, the Regular Trustees and KCPL are authorized to take any
action, not inconsistent with applicable law, or the corporate charter of KCPL,
that each of the Regular Trustees and KCPL determines in their discretion to be
necessary or desirable for such purposes, as long as such action does not
materially and adversely affect the interests of the holders of the Preferred
Securities.
Holders of Preferred Securities will have no preemptive or similar rights.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
Pursuant to the Preferred Securities Guarantee, KCPL will irrevocably and
unconditionally agree, to the extent set forth therein, to pay in full to the
holders of the Preferred Securities issued by the Trust, the Guarantee Payments
(as defined in the accompanying Prospectus) except to the extent paid by the
Trust, as and when due, regardless of any defense, right of setoff or
counterclaim which the Trust may have or assert. KCPL's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
KCPL to the holders of Preferred Securities or by causing the Trust to pay such
amounts to such holders. The Preferred Securities Guarantee will be qualified as
an indenture under the Trust Indenture Act. The First National Bank of Chicago
will act as Guarantee Trustee. The terms of the Preferred Securities Guarantee
will be those set forth in such Guarantee and those made part of such Preferred
Securities Guarantee by the Trust Indenture Act. The Preferred Securities
Guarantee will be held by the Guarantee Trustee for the benefit of the holders
of the Preferred Securities. A summary
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description of the Preferred Securities Guarantee appears in the accompanying
Prospectus under the caption "Description of the Preferred Securities
Guarantees."
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Set forth below is a description of the specific terms of the Subordinated
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Trust Securities. This description supplements the description of
the general terms and provisions of the Subordinated Debentures set forth in the
accompanying Prospectus under the caption "Description of the Subordinated
Debentures". The following description does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the description in
the accompanying Prospectus and the Indenture, dated as of April 1, 1997,
between KCPL and The First National Bank of Chicago, as Trustee (the "Debt
Trustee"), as supplemented by a Supplemental Indenture dated as of April 1,
1997, (said Indenture, as so supplemented, is hereinafter referred to as the
"Indenture"), the forms of which are filed as Exhibits to the Registration
Statement of which this Prospectus Supplement and the accompanying Prospectus
form a part. Certain capitalized terms used herein are defined in the Indenture.
KCPL will have the right at any time to liquidate the Trust and cause the
Subordinated Debentures to be distributed to the holders of the Trust
Securities. If the Subordinated Debentures are distributed to the holders of the
Preferred Securities, KCPL will use its best efforts to have the Subordinated
Debentures listed on the New York Stock Exchange or on such other national
securities exchange or similar organization on which the Preferred Securities
are then listed or quoted.
GENERAL
The Subordinated Debentures will be issued as unsecured indebtedness of KCPL
under the Indenture. The Subordinated Debentures will be limited in aggregate
principal amount to approximately $154,640,000, such amount being the sum of the
aggregate stated liquidation amount of the Trust Securities.
The Subordinated Debentures are not subject to a sinking fund provision. The
entire principal amount of the Subordinated Debentures will mature and become
due and payable, together with any accrued and unpaid interest thereon including
Compound Interest (as defined herein) and Additional Interest (as defined
herein), if any, on March 31, 2037, subject to the right of KCPL to shorten the
maturity date to a date no earlier than March 31, 2002.
If Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, such
Subordinated Debentures will initially be issued as a Global Security (as
defined herein). As described herein, Subordinated Debentures may be issued in
certificated form in exchange for a Global Security. See "Book-Entry and
Settlement" and "The Depositary" below. In the event that Subordinated
Debentures are issued in certificated form, such Subordinated Debentures will be
in denominations of $25 and integral multiples thereof and may be transferred or
exchanged at the offices described below. Payments on Subordinated Debentures
issued as a Global Security will be made to DTC, a successor depositary or, in
the event that no depositary is used, to a Paying Agent for the Subordinated
Debentures. In the event Subordinated Debentures are issued in certificated
form, principal and interest will be payable, the transfer of the Subordinated
Debentures will be registrable and Subordinated Debentures will be exchangeable
for Subordinated Debentures of other denominations of a like aggregate principal
amount, at the corporate trust office of the Debt Trustee in New York, New York;
provided, that payment of interest may be made at the option of KCPL by check
mailed to the address of the holder entitled thereto or by wire transfer to an
account appropriately designated by the holder entitled thereto. Notwithstanding
the foregoing, so long as the holder of any Subordinated Debentures is the
Property Trustee, the payment of principal and interest on the Subordinated
Debentures held by the Property Trustee will be made at such place and to such
account as may be designated by the Property Trustee.
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The Indenture does not contain provisions that afford holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction or other similar transaction involving KCPL that may adversely
affect such holders.
SUBORDINATION
The Indenture provides that the Subordinated Debentures are subordinated and
junior in right of payment to all Senior Indebtedness of KCPL, whether now
existing or hereafter incurred. Senior Indebtedness may include indebtedness of
KCPL which is subordinated to other indebtedness of KCPL but nevertheless senior
to the Subordinated Debentures. No payment of principal of (including redemption
and sinking fund payments, if any), premium, if any, or interest on, the
Subordinated Debentures may be made if (a) there is a default in the payment of
principal, premium, interest or any other payment due on any Senior
Indebtedness, or (b) the maturity of any Senior Indebtedness has been
accelerated because of a default. Upon any distribution of assets of KCPL to
creditors upon any dissolution, winding-up, liquidation or reorganization of
KCPL, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all principal of, premium, if any, and
interest due or to become due on, all Senior Indebtedness must be paid in full
before the holders of the Subordinated Debentures are entitled to receive or
retain any payment. The rights of the holders of the Subordinated Debentures
will be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions applicable to such Senior Indebtedness until
all amounts owing on the Subordinated Debentures are paid in full.
The term "Senior Indebtedness" means (i) any payment in respect of (a)
indebtedness of KCPL for money borrowed and (b) indebtedness evidenced by
securities, debentures, bonds, notes or other similar instruments issued by KCPL
including, without limitation, indebtedness evidenced by securities issued
pursuant to the General Mortgage Indenture and Deed of Trust dated as of
December 1, 1986, between KCPL and UMB Bank, N.A., as supplemented, and pursuant
to other indentures with various trustees (other than the Indenture); (ii) all
capital lease obligations of KCPL; (iii) all obligations of KCPL issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of KCPL and all of its obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business); (iv) all obligations of KCPL for the reimbursement on any letter
of credit, banker's acceptance, security purchase facility or similar credit
transaction; (v) all obligations of the type referred to in clauses (i) through
(iv) above of other Persons for the payment of which KCPL is responsible or
liable as obligor, guarantor or otherwise; and (vi) all obligations of the type
referred to in clauses (i) through (v) above of other Persons secured by any
lien on any property or asset of KCPL (whether or not such obligation is assumed
by KCPL), except for (1) any such indebtedness that is by its terms subordinated
to or PARI PASSU with the Subordinated Debentures, as the case may be, including
all other debt securities and guarantees in respect of those debt securities,
issued to any other trusts, partnerships or any other entity affiliated with
KCPL which is a financing vehicle of KCPL in connection with the issuance of
preferred securities by such entity or other securities which rank PARI PASSU
with, or junior to, the Preferred Securities, and (2) any indebtedness between
or among KCPL and its affiliates. Such Senior Indebtedness will continue to be
Senior Indebtedness and be entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term of
such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
which may be issued by KCPL. As of February 28, 1997, Senior Indebtedness of
KCPL aggregated approximately $920 million.
OPTIONAL REDEMPTION
KCPL will have the right to redeem the Subordinated Debentures, in whole or
in part, from time to time, on or after March 31, 2002, or at any time in whole
but not in part in certain circumstances upon the occurrence of a Tax Event as
described under "Description of the Preferred Securities--Tax Event Redemption"
herein, upon not less than 30 nor more than 60 days' notice, at a Redemption
Price equal to 100% of the principal amount to be redeemed plus any accrued and
unpaid interest, including Additional
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Interest, if any, to the redemption date. If a partial redemption of the
Preferred Securities resulting from a partial redemption of the Subordinated
Debentures would result in the delisting of the Preferred Securities, KCPL may
only redeem the Subordinated Debentures in whole.
OPTION TO CHANGE MATURITY DATE
KCPL will have the right at any time to shorten the maturity of the
Subordinated Debentures to a date not earlier than March 31, 2002.
INTEREST
Each Subordinated Debenture will bear interest at the rate of 8.3% per annum
from the original date of issuance, payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year (each, an "Interest Payment
Date"), commencing June 30, 1997, to the person in whose name such Subordinated
Debenture is registered, subject to certain exceptions, at the close of business
on the Business Day next preceding such Interest Payment Date. If the
Subordinated Debentures do not continue to remain in book-entry only form, KCPL
will have the right to select record dates which may not be less than fifteen
days prior to each Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period will be computed on the basis of
the actual number of days elapsed in such 90-day quarter. In the event that any
date on which interest is payable on the Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
KCPL will have the right at any time, and from time to time, during the term
of the Subordinated Debentures, to defer payments of interest by extending the
interest payment period for a period not exceeding 20 consecutive quarters, at
the end of which Extension Period KCPL will pay all interest then accrued and
unpaid (including any Additional Interest, together with the interest thereon
compounded quarterly at the rate specified for the Subordinated Debentures to
the extent permitted by applicable law); provided, that, during any such
Extension Period, (a) KCPL may not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of KCPL common stock in connection with the
satisfaction by KCPL of its obligations under any employee benefit plans or any
other contractual obligation of KCPL (other than a contractual obligation
ranking PARI PASSU with or junior to the Subordinated Debentures), (ii) as a
result of a reclassification of KCPL capital stock or the exchange or conversion
of one class or series of KCPL capital stock for another class or series of KCPL
capital stock or (iii) the purchase of fractional interests in shares of KCPL
capital stock pursuant to the conversion or exchange provisions of such KCPL
capital stock or the security being converted or exchanged), (b) KCPL may not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by KCPL
which rank PARI PASSU with or junior to the Subordinated Debentures to which
such Extension Period applies and (c) KCPL may not make any guarantee payments
with respect to the foregoing (other than pursuant to the Preferred Securities
Guarantee).
This covenant effectively requires that any Extension Period with respect to
payment of interest on any series of Subordinated Debentures will also apply to
each other series of subordinated debentures issued under the Indenture to other
trusts similar to the Trust.
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Prior to the termination of any such Extension Period, KCPL may further
defer payments of interest by extending the interest payment period, provided
that such Extension Period together with all such previous and further
extensions thereof may not exceed 20 consecutive quarters or extend beyond the
maturity of the Subordinated Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, KCPL may select a new Extension
Period, as if no Extension Period had previously been declared, subject to the
above requirements. No interest during an Extension Period, except at the end
thereof, will be due and payable. KCPL has no present intention of exercising
its rights to defer payments of interest by extending the interest payment
period on the Subordinated Debentures.
If the Property Trustee is the sole holder of the Subordinated Debentures,
KCPL will give the Regular Trustees and the Property Trustee notice of its
selection of such Extension Period one Business Day prior to the earlier of (i)
the next succeeding date on which distributions on the Preferred Securities are
payable or (ii) the date the Trust is required to give notice to the New York
Stock Exchange or other applicable self-regulatory organization or to holders of
the Preferred Securities on the record date or the date such distribution is
payable, but in any event not less than one Business Day prior to such record
date. The Regular Trustees will give notice of KCPL's selection of such
Extension Period to the holders of the Preferred Securities. If the Property
Trustee is not the sole holder of the Subordinated Debentures, KCPL will give
the holders of the Subordinated Debentures notice of its selection of such
Extension Period ten Business Days prior to the earlier of (i) the next Interest
Payment Date or (ii) the date KCPL is required to give notice to the New York
Stock Exchange or other applicable self-regulatory organization or to holders of
the Subordinated Debentures affected thereby on the record or payment date of
such related interest payment, but in any event at least two Business Days
before such record date.
ADDITIONAL INTEREST
If at any time the Trust is required to pay any taxes, duties, assessments
or governmental charges of whatever nature (other than withholding taxes)
imposed by the United States, or any other taxing authority, then, in any such
case, KCPL will pay as additional interest ("Additional Interest") such
additional amounts as shall be required so that the net amounts received and
retained by the Trust after paying any such taxes, duties, assessments or other
governmental charges will be equal to the amounts the Trust would have received
had no such taxes, duties, assessments or other governmental charges been
imposed.
POSSIBLE TAX LAW CHANGES
On February 6, 1997, the Budget Proposal was released. Included in the
Budget Proposal is a provision which, if enacted, would generally deny interest
deductions for United States federal income tax purposes for interest on
instruments, issued by a corporation, that have a maximum weighted average
maturity of more than 40 years. The Budget Proposal would also treat instruments
such as the Subordinated Debentures as equity for United States federal income
tax purposes if the instruments (i) have a maximum term of more than 15 years
and (ii) are not shown as indebtedness on the separate balance sheet of the
issuer. These provisions are proposed to be effective generally for instruments
issued on or after the date of first committee action by Congress. As of the
date hereof, no such action has been taken. If either provision applied to the
Subordinated Debentures, among other things, KCPL would be unable to deduct
interest on the Subordinated Debentures for United States federal income tax
purposes. Similar provisions were included in President Clinton's budget
proposal for fiscal year 1997, but the 104th Congress adjourned without taking
action on such provisions. There can be no assurance that the Budget Proposal or
future legislative proposals, future regulations or official administrative
pronouncements or future judicial decisions will not affect the ability of KCPL
to deduct interest on the Subordinated Debentures. Such a change could give rise
to a Tax Event, which may permit KCPL to cause a redemption of the Preferred
Securities. See "Description of the Preferred Securities--Tax Event Redemption
or Distribution" in the accompanying Prospectus.
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INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default has occured and is continuing, the
Property Trustee, as the holder of the Subordinated Debentures, will have the
right to declare the principal of and the interest on the Subordinated
Debentures (including any Compound Interest and Additional Interest, if any) and
any other amounts payable under the Indenture to be forthwith due and payable
and to enforce its other rights as a creditor with respect to the Subordinated
Debentures. See "Description of Subordinated Debentures-- Indenture Events of
Default" in the accompanying Prospectus for a description of Indenture Events of
Default. An Indenture Event of Default also constitutes a Declaration Event of
Default. The holders of Preferred Securities in certain circumstances have the
right to direct the Property Trustee to exercise its rights as a holder of
Subordinated Debentures. See "Description of the Preferred
Securities--Declaration Events of Default" and "Voting Rights." Notwithstanding
the foregoing, if an Indenture Event of Default has occurred and is continuing
and is attributable to the failure of KCPL to pay interest on or principal of
the Subordinated Debentures on the date such interest or principal is otherwise
payable, KCPL acknowledges that a holder of Preferred Securities may then
institute a Direct Action for payment on or after the respective due date
specified in the Subordinated Debentures. Notwithstanding any payments made to
such holder of Preferred Securities by KCPL in connection with a Direct Action,
KCPL will remain obligated to pay the principal of or interest on the
Subordinated Debentures held by the Trust or the Property Trustee, and KCPL will
be subrogated to the rights of the holder of such Preferred Securities with
respect to payments on the Preferred Securities to the extent of any payments
made by KCPL to such holder in any Direct Action. The holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of Subordinated Debentures.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust,
the Subordinated Debentures will be issued in the form of one or more global
certificates (each a "Global Security") registered in the name of the Depositary
or its nominee. Except under the limited circumstances described below,
Subordinated Debentures represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Subordinated Debentures
in definitive form. The Global Securities described above may not be transferred
except by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the depositary or another nominee of the Depositary or to a
successor Depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated
Debentures in definitive form and will not be considered the holders (as defined
in the Indenture) thereof for any purpose under the Indenture, and no Global
Security representing Subordinated Debentures will be exchangeable, except for
another Global Security of like denomination and tenor to be registered in the
name of the Depositary or its nominee or to a successor Depositary or its
nominee. Accordingly, each beneficial owner must rely on the procedures of the
Depositary or, if such person is not a Participant on the procedures of the
Participant through which such person owns its interest, to exercise any rights
of a holder of Subordinated Debentures under the Indenture.
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THE DEPOSITARY
If Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, DTC will act
as securities Depositary for the Subordinated Debentures. For a description of
DTC and the specific terms of the depositary arrangements, see "Description of
the Preferred Securities--Book-Entry Only Issuance--the Depository Trust
Company" As of the date of this Prospectus Supplement, the description therein
of DTC's book-entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the Preferred Securities apply
in all material respects to any Subordinated Debentures represented by one or
more Global Securities. KCPL may appoint a successor to DTC or any successor
Depositary in the event DTC or such successor Depositary is unable or unwilling
to continue as a Depositary for the Global Securities.
None of KCPL, the Trust, the Property Trustee, any paying agent or any other
agent of KCPL or the Debt Trustee will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in a Global Security for Subordinated Debentures or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
A Global Security will be exchangeable for Subordinated Debentures
registered in the names of persons other than the Depositary or its nominee only
if (i) the Depositary notifies KCPL that it is unwilling or unable to continue
as a depositary for such Global Security and no successor Depositary shall have
been appointed, (ii) the Depositary, at any time, ceases to be a clearing agency
registered under the Exchange Act at which time the Depositary is required to be
so registered to act as such Depositary and no successor Depositary shall have
been appointed, (iii) KCPL, in its sole discretion, determines that such Global
Security will be so exchangeable or (iv) there has occurred an Indenture Event
of Default with respect to such Subordinated Debentures. Any Global Security
that is exchangeable pursuant to the preceding sentence will be exchangeable for
Subordinated Debentures registered in such names as the Depositary shall direct.
It is expected that such instructions will be based upon directions received by
the Depositary from its Participants with respect to ownership of beneficial
interests in such Global Security.
If the Subordinated Debentures are not represented by one or more Global
Securities, certificates evidencing the Subordinated Debentures may be presented
for registration of transfer (with the form of transfer endorsed thereon duly
executed) or exchange, at the office of the Debenture Registrar or at the office
of any transfer agent designated by KCPL for such purpose with respect to the
Subordinated Debentures, without service charge and upon payment of any taxes
and other governmental charges as described in the Indenture. Such transfer or
exchange will be effected upon the Debenture Registrar or such transfer agent,
as the case may be, being satisfied with the documents of title and identity of
the person making the request. KCPL has appointed the Debt Trustee as Debenture
Registrar with respect to the Subordinated Debentures. KCPL may at any time
rescind the designation of any such transfer agent or approve a change in the
location through which any such transfer agent acts, except that KCPL will be
required to maintain a transfer agent at the place of payment. KCPL may at any
time designate additional transfer agents with respect to the Subordinated
Debentures.
In the event of any redemption of only a part of the Subordinated
Debentures, KCPL will not be required to (i) issue, exchange or register the
transfer of Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of less
than all of the Subordinated Debentures and ending at the close of business on
the date of such mailing and (ii) register the transfer of or exchange any
Subordinated Debentures so selected for redemption, in whole or in part, except
the unredeemed portion of any Subordinated Debentures being redeemed in part.
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by, and
construed in accordance with, the internal laws of the State of New York.
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MISCELLANEOUS
The Indenture will provide that KCPL will pay all fees and expenses related
to (i) the offering of the Trust Securities and the Subordinated Debentures,
(ii) the organization, maintenance and dissolution of the Trust, (iii) the
retention of the Trustees and (iv) the enforcement by the Property Trustee of
the rights of the holders of the Preferred Securities. The payment of such fees
and expenses will be fully and unconditionally guaranteed by KCPL.
KCPL will have the right at all times to assign any of its respective rights
or obligations under the Indenture to a direct or indirectly wholly-owned
subsidiary of KCPL; provided that, in the event of any such assignment, KCPL
will remain liable for all of such obligations. Subject to the foregoing, the
Indenture will be binding upon and inure to the benefit of the parties thereto
and their respective successors and assigns. The Indenture provides that it may
not otherwise be assigned by the parties thereto.
EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED DEBENTURES
AND THE PREFERRED SECURITIES GUARANTEE
As set forth in the Declaration, the sole purposes of the Trust are to (i)
issue Trust Securities, (ii) invest the proceeds thereof in the Subordinated
Debentures and (iii) engage in only those other activities necessary or
incidental thereto.
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover distributions
and payments due on the Trust Securities primarily because (i) the aggregate
principal amount of Subordinated Debentures will be equal to the sum of the
aggregate stated liquidation amount of the Trust Securities; (ii) the interest
rate and interest and other payment dates on the Subordinated Debentures will
match the distribution rate and distribution and other payment dates for the
Trust Securities; (iii) KCPL will pay for all costs and expenses of the Trust;
and (iv) the Declaration provides that the Trustees may not cause or permit the
Trust to, among other things, engage in any activity that is not consistent with
the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by KCPL as and to the extent set forth under
"Description of the Preferred Securities Guarantees" in the accompanying
Prospectus. If KCPL does not make interest payments on the Subordinated
Debentures purchased by the Trust, it is expected that the Trust will not have
sufficient funds to pay distributions on the Preferred Securities. The Preferred
Securities Guarantee is a full and unconditional guarantee from the time of its
issuance, but does not apply to any payment of distributions unless and until
the Trust has sufficient funds for the payment of such distributions.
If KCPL fails to make interest or other payments on the Subordinated
Debentures when due (taking into account any Extension Period), the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using the
procedures described in "Description of the Preferred Securities--Voting Rights"
in this Prospectus Supplement, may direct the Property Trustee to enforce its
rights under the Subordinated Debentures, including proceeding directly against
KCPL to enforce the Subordinated Debentures. If the Property Trustee fails to
enforce its rights under the Subordinated Debentures, a holder of Preferred
Securities may, after a period of 30 days has elapsed from such holder's written
request to the Property Trustee to enforce such rights, institute a legal
proceeding directly against KCPL to enforce the Property Trustee's rights under
the Subordinated Debentures without first instituting any legal proceeding
against the Property Trustee or any other person or entity, including the Trust.
If KCPL fails to make payments under the Preferred Securities Guarantee, the
Preferred Securities Guarantee provides a mechanism whereby the holders of the
Preferred Securities may direct the Guarantee Trustee to enforce its rights
thereunder. If the Guarantee Trustee fails to enforce the Preferred Securities
Guarantee, any holder of Preferred Securities affected thereby may institute a
legal proceeding
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directly against KCPL to enforce the Guarantee Trustee's rights under the
Preferred Securities Guarantee, without first instituting a legal proceeding
against the Trust, the Guarantee Trustee or any other person or entity.
The above mechanisms and obligations, taken together, are equivalent to a
full and unconditional guarantee by KCPL of payments due on the Preferred
Securities. See "Description of the Preferred Securities Guarantees--General" in
the accompanying Prospectus.
UNITED STATES FEDERAL INCOME TAXATION
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership and disposition of Preferred
Securities. Unless otherwise stated, this summary deals only with Preferred
Securities held as capital assets by holders that purchase the Preferred
Securities upon original issuance. This summary does not address all the tax
consequences that may be relevant to holders that may be subject to special tax
treatment such as, for example, banks, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
tax-exempt investors, persons whose functional currency is other than the United
States dollar, persons who hold Preferred Securities as part of a straddle,
hedging or conversion transaction or, except as specifically described herein,
foreign taxpayers. In addition, this summary does not address any aspects of
state, local, or foreign laws. This summary is based on the Internal Revenue
Code of 1986, as amended, Treasury regulations promulgated thereunder and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change, possibly on a retroactive basis. Each holder
should consult its tax advisor as to its particular tax consequences of
acquiring, holding, and disposing of the Preferred Securities, including the tax
consequences under state, local, and foreign laws.
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
It is a condition to the issuance of the Preferred Securities that Sidley &
Austin render its opinion generally to the effect that, under then current
United States federal income tax law and assuming full compliance with the terms
of the Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Subordinated Debentures held by the
Trust will be classified for United States federal income tax purposes as
indebtedness of KCPL. Accordingly, corporate holders of Preferred Securities
will not be entitled to a dividends-received deduction with respect to any
income recognized with respect to the Preferred Securities.
CLASSIFICATION OF THE TRUST
It is a condition to the issuance of the Preferred Securities that Sidley &
Austin render its opinion generally to the effect that, under then current
United States federal income tax law and assuming full compliance with the terms
of the Declaration and the Indenture (and certain other documents), and based on
certain facts and assumptions contained in such opinion, the Trust will be
classified for United States federal income tax purposes as a grantor trust and
not as an association taxable as a corporation. Accordingly, for United States
federal income tax purposes, each holder of Preferred Securities will generally
be considered the owner of an undivided interest in the Subordinated Debentures,
and each holder will be required to include in its gross income any interest or
original issue discount ("OID") accrued with respect to its allocable share of
those Subordinated Debentures. Investors should be aware that the foregoing
opinions of Sidley & Austin have not been confirmed by the Internal Revenue
Service (the "Service"), by private ruling or otherwise, and are not binding on
the Service or the courts.
KCPL, the Trust, and, by its acceptance of a Preferred Security or a
beneficial interest therein, the holder of, and any person that acquires a
beneficial interest in, such Preferred Security agree to treat such Preferred
Security and the Subordinated Debentures consistently with the foregoing
opinions.
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INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Unless the Subordinated Debentures are issued with OID, stated interest on
the Subordinated Debentures will be taxable to a holder as ordinary income at
the time such interest is paid (if the holder uses the cash method of accounting
for tax purposes) or accrued (if the holder uses the accrual method of
accounting for tax purposes). Under regulations of the U.S. Treasury Department,
the Subordinated Debentures will not be considered issued with OID if the
likelihood of KCPL exercising its right to defer interest (as described under
"Description of the Subordinated Debentures--Option to Extend Interest Payment
Period") is considered a "remote" contingency at the time the Subordinated
Debentures are issued. KCPL believes that such likelihood is remote, because
exercise of its right to defer interest would prevent KCPL from declaring
dividends on its capital stock. Accordingly, KCPL intends to take the position
that the Subordinated Debentures will not be issued with OID. However, the
definition of the term "remote" in the regulations has not yet been addressed in
any rulings or other interpretations by the Service, and it is possible that the
Service would assert that the Subordinated Debentures were issued with OID.
Assuming the Subordinated Debentures continue to remain in book-entry only form,
a determination that the Subordinated Debentures were issued with OID would not
result in substantially different United States federal income tax consequences
to accrual method taxpayers or to cash-method taxpayers whose taxable year is
the calendar year. Holders not described in the preceding sentence, if any,
would recognize the acceleration of up to three months' interest income.
If, notwithstanding KCPL's current belief, it does exercise its right to
defer interest payments, the Subordinated Debentures would be treated as if they
were retired and then reissued with OID at such time. In such case, the amount
of OID would generally be equal to the interest payable thereafter.
If the Subordinated Debentures are treated as having been issued or reissued
with OID (either because KCPL exercises its right to defer interest payments or
because the likelihood of exercise of such right is not considered a remote
contingency at the time of issuance), holders would include that interest in
income on an economic accrual basis, regardless of their method of tax
accounting. The amount of OID that accrued in any quarter would approximately
equal the amount of interest that accrued on the Subordinated Debentures in that
quarter at the stated interest rate. If interest payments were received later
than the taxable year in which the interest accrued, OID treatment would have
the effect of accelerating the reporting of income for holders who otherwise use
a cash method of tax reporting.
MARKET DISCOUNT AND PREMIUM
Holders of Preferred Securities other than holders that purchased the
Preferred Securities upon original issuance may be considered to have acquired
their undivided interest in the Subordinated Debentures with market discount,
amortizable bond premium or acquisition premium as such terms are defined for
United States federal income tax purposes. Such holders are advised to consult
their tax advisors as to the income tax consequences of the acquisition,
ownership and disposition of the Preferred Securities.
RECEIPT OF SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities--Dissolution; Distribution of Subordinated Debentures,"
Subordinated Debentures may be distributed to holders in exchange for Preferred
Securities and in liquidation of the Trust. Under current United States federal
income tax law, such a redemption would be treated as a non-taxable event to
each holder, and each holder would have an aggregate tax basis in the
Subordinated Debentures equal to such holder's aggregate tax basis in its
Preferred Securities. A holder's holding period in the Subordinated Debentures
so received in liquidation of the Trust would include the period during which
the Preferred Securities were held by such holder.
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Under certain circumstances, as described under the captions "Description of
the Preferred Securities--Redemption," "Description of the Preferred
Securities--Tax Event Redemption," and "Description of the Subordinated
Debentures--Optional Redemption," the Subordinated Debentures may be redeemed
for cash and the proceeds of such redemption distributed to holders in
redemption of their Preferred Securities. Under current United States federal
income tax law, such a redemption would be a taxable event, and a holder would
recognize gain or loss as if such holder sold such redeemed Preferred Securities
for cash. See "Sales of Preferred Securities" below.
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between such holder's adjusted tax basis in the Preferred
Securities and the amount realized on the sale of such Preferred Securities
(other than with respect to accrued and unpaid interest which has not yet been
included in income, which will be treated as ordinary income). A holder's
adjusted tax basis in the Preferred Securities will generally be the initial
purchase price increased by OID (if any) previously includible in such holder's
gross income to the date of disposition and decreased by payments received on
the Preferred Securities (other than payments of qualified stated interest).
Such gain or loss will generally be a capital gain or loss and will generally be
a long-term capital gain or loss if the Preferred Securities have been held for
more than one year.
The Preferred Securities may trade at prices that do not accurately reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder who uses the accrual method of accounting for
tax purposes (and a cash method holder if the Subordinated Debentures are deemed
to have been issued with OID) and that disposes of Preferred Securities between
record dates for payments of distributions thereon will be required to include
accrued but unpaid interest on the Subordinated Debentures through the date of
disposition in income as ordinary income, and to add such amount to such
holder's adjusted tax basis in the PRO RATA share of the underlying Subordinated
Debentures deemed disposed of. To the extent that the selling price is less than
the holder's adjusted tax basis (so determined) a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a nonresident alien individual, a foreign
partnership, or a foreign estate or trust. This discussion assumes that income
with respect to the Preferred Securities is not effectively connected with a
trade or business in the United States in which the United States Alien Holder
is engaged.
Under current United States federal income tax law, and subject to the
discussion of backup withholding in the following section: (1) payments with
respect to principal and interest (including any OID) by the Trust or any of its
paying agents to any holder of a Preferred Security that is a United States
Alien Holder will not be subject to withholding of United States federal income
tax; provided that, in the case of interest, (a) the beneficial owner of the
Preferred Security does not actually or constructively own 10% of more of the
total combined voting power of all classes of stock of KCPL entitled to vote,
(b) the beneficial owner of the Preferred Security is not a controlled foreign
corporation that is related, directly or indirectly, to KCPL through stock
ownership, and (c) either (A) the beneficial owner of the Preferred Security
certifies to the Trust or its agent, under penalties of perjury, that it is a
United States Alien Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Preferred Securities in such capacity, certifies to
the Trust or its agent, under penalties of perjury, that such statement has been
received from the beneficial owner by it or by a Financial Institution between
it and the beneficial owner and furnishes the Trust or its agent with a copy
thereof, and
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(2) a United States Alien Holder of a Preferred Security will generally not be
subject to withholding of United States federal income tax on any gain realized
upon the sale or other disposition of a Preferred Security.
On April 15, 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
United States taxation of United States Alien Holders. The 1996 Proposed
Regulations are generally proposed to be effective for payments after December
31, 1997, regardless of the issue date of the instrument with respect to which
such payments are made, subject to certain transition rules. It cannot be
predicted at this time whether the 1996 Proposed Regulations will become
effective as proposed or what, if any, modifications may be made to them.
Prospective investors are urged to consult their tax advisors with respect to
the effect the 1996 Proposed Regulations may have if adopted.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Under current United States federal income tax law, information reporting
requirements apply to interest (including OID) and principal payments made to,
and to the proceeds of sales before maturity by, certain non-corporate persons.
In addition, a 31% backup withholding tax applies if a non-corporate person (i)
fails to furnish such person's Taxpayer Identification Number ("TIN") (which,
for an individual, would be his or her Social Security Number) to the payor in
the manner required, (ii) furnishes an incorrect TIN and the payor is so
notified by the Service, (iii) is notified by the Service that such person has
failed properly to report payments of interest and dividends or (iv) in certain
circumstances, fails to certify, under penalties of perjury, that such person
has not been notified by the Service that such person is subject to backup
withholding for failure properly to report interest and dividend payments.
Backup withholding does not apply with respect to payments made to certain
exempt recipients, such as corporations and tax-exempt organizations.
In the case of a United States Alien Holder, backup withholding and
information reporting do not apply to payments of principal and interest with
respect to a Preferred Security with respect to which such Holder has provided
the required certification under penalties of perjury that such Holder is a
United States Alien Holder or has otherwise established an exemption, provided
that certain conditions are satisfied.
In general, (i) principal or interest payments with respect to a Preferred
Security collected outside the United States by a foreign office of a custodian,
nominee or other agent acting on behalf of a beneficial owner of a Preferred
Security and (ii) payments on the sale, exchange or retirement of a Preferred
Security to or through a foreign office of a broker are not subject to backup
withholding or information reporting. However, if such custodian, nominee, agent
or broker is a United States person, a controlled foreign corporation for United
States tax purposes, or a foreign person 50% of more of whose gross income is
effectively connected with the conduct of a United States trade or business for
a specified three-year period, such custodian, nominee, agent or broker may be
subject to certain information reporting (but not backup withholding)
requirements with respect to such payments.
Backup withholding tax is not an additional tax. Rather, any amounts
withheld from a payment to a person under the backup withholding rules are
allowed as a refund or a credit against such person's United States federal
income tax, provided that the required information is furnished to the Service.
POSSIBLE TAX LAW CHANGES
On February 6, 1997, the Budget Proposal was released. Included in the
Budget Proposal is a provision which, if enacted, would generally deny interest
deductions for United States federal income tax purposes for interest on
instruments, issued by a corporation, that have a maximum weighted average
maturity of more than 40 years. The Budget Proposal would also treat instruments
such as the Subordinated Debentures as equity for United States federal income
tax purposes if the instruments (i) have a
S-35
maximum term of more than 15 years and (ii) are not shown as indebtedness on the
separate balance sheet of the issuer. These provisions are proposed to be
effective generally for instruments issued on or after the date of first
committee action by Congress. As of the date hereof, no such action has been
taken. If either provision applied to the Subordinated Debentures, among other
things, KCPL would be unable to deduct interest on the Subordinated Debentures
for United States federal income tax purposes. Similar provisions were included
in President Clinton's budget proposal for fiscal year 1997, but the 104th
Congress adjourned without taking action on such provisions. There can be no
assurance that the Budget Proposal or future legislative proposals, future
regulations or official administrative pronouncements or future judicial
decisions will not affect the ability of KCPL to deduct interest on the
Subordinated Debentures.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
S-36
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Trust has agreed to sell to each of the Underwriters
named below, and each of the Underwriters, for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Dean Witter Reynolds Inc., A.G. Edwards & Sons,
Inc., Morgan Stanley & Co. Incorporated, PaineWebber Incorporated and Prudential
Securities Incorporated, are acting as representatives (the "Representatives"),
has severally agreed to purchase the number of Preferred Securities set forth
opposite its name below. In the Purchase Agreement, the several Underwriters
have agreed, subject to the terms and conditions set forth therein, to purchase
all the Preferred Securities offered hereby if any of the Preferred Securities
are purchased. In the event of default by an Underwriter, the Purchase Agreement
provides that, in certain circumstances, the purchase commitments of the
non-defaulting Underwriters may be increased or the Purchase Agreement may be
terminated.
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
- --------------------------------------------------------------------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................................... 1,020,000
Dean Witter Reynolds Inc......................................................... 510,000
A.G. Edwards & Sons, Inc......................................................... 1,020,000
Morgan Stanley & Co. Incorporated................................................ 510,000
PaineWebber Incorporated......................................................... 1,020,000
Prudential Securities Incorporated............................................... 1,020,000
Alex. Brown & Sons Incorporated.................................................. 75,000
Cowen & Company.................................................................. 75,000
Dain Bosworth Incorporated....................................................... 75,000
Dillon, Read & Co. Inc........................................................... 75,000
Donaldson, Lufkin & Jenrette Securities Corporation.............................. 75,000
EVEREN Securities, Inc........................................................... 75,000
The Ohio Company................................................................. 75,000
Oppenheimer & Co., Inc........................................................... 75,000
Piper Jaffray Inc................................................................ 75,000
Raymond James & Associates, Inc.................................................. 75,000
Tucker Anthony Incorporated...................................................... 75,000
Wheat, First Securities, Inc..................................................... 75,000
----------
Total.................................................................. 6,000,000
----------
----------
The Underwriters propose to offer the Preferred Securities, in part,
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and, in part, to certain securities
dealers at such price less a concession of $.50 per Preferred Security. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $.45 per Preferred Security to certain brokers and dealers. After the
Preferred Securities are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Representative.
In view of the fact that the proceeds of the sale of the Preferred
Securities will ultimately be used to purchase the Subordinated Debentures of
KCPL, the Purchase Agreement provides that KCPL will pay as compensation
("Underwriters' Compensation") to the Underwriters arranging the investment
therein of such proceeds, an amount in immediately available funds of $.7875 per
Preferred Security (or $4,725,000 in the aggregate) for the accounts of the
several Underwriters; provided that, such compensation for sales of 10,000 or
more Preferred Securities to any single purchaser will be $.50 per Preferred
Security. Therefore,
S-37
to the extent of such sales, the actual amount of Underwriters' Compensation
will be less than the aggregate amount specified in the preceding sentence.
During a period of 30 days from the date of this Prospectus Supplement,
neither the Trust nor KCPL will, without the prior written consent of the
Representatives, directly or indirectly, sell, offer to sell, grant any option
for sale of, or otherwise dispose of, any Preferred Securities, any security
convertible into or exchangeable into or exercisable for Preferred Securities or
Subordinated Debentures or any debt securities substantially similar to the
Subordinated Debentures or equity securities substantially similar to the
Preferred Securities (except for the Subordinated Debentures and the Preferred
Securities offered hereby).
Application has been made to list the Preferred Securities on the New York
Stock Exchange. If so approved, trading of the Preferred Securities on the New
York Stock Exchange is expected to commence within a 30-day period after the
initial delivery of the Preferred Securities. The Representatives have advised
the Trust that they intend to make a market in the Preferred Securities prior to
the commencement of trading on the New York Stock Exchange. The Representatives
will have no obligation to make a market in the Preferred Securities, however,
and may cease market making activities, if commenced, at any time.
Prior to this offering there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the New York Stock Exchange, the Underwriters will undertake to
sell lots of 100 or more Preferred Securities to a minimum of 400 beneficial
holders.
In connection with this offering and in compliance with applicable law and
industry practice, the Underwriters may overallot or effect transactions which
stabilize, maintain or otherwise affect the market price of the Preferred
Securities at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids. A stabilizing bid means the
placing of any bid, or the effecting of any purchase, for the purpose of
pegging, fixing or maintaining the price of a security.
In general, purchases of a security for the purpose of stabilization could
cause the price of the security to be higher than it might be in the absence of
such purchases.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Preferred Securities. In addition,
neither the Company nor any of the Underwriters makes any representation that
the Underwriters will engage in such transactions or that such transactions once
commenced, will not be discontinued without notice.
The Trust and KCPL have agreed to indemnify the Underwriters against, or
contribute to payments that the Underwriters may be required to make in respect
of, certain liabilities, including liabilities under the Securities Act of 1933,
as amended.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, KCPL and its subsidiaries in the ordinary
course of business.
S-38
KCPL FINANCING I
KCPL FINANCING II
KCPL FINANCING III
PREFERRED SECURITIES
(LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
KANSAS CITY POWER & LIGHT COMPANY
----------------
KCPL Financing I, KCPL Financing II, and KCPL Financing III, each a
statutory business trust formed under the laws of the State of Delaware (each, a
"Trust" and, collectively, the "Trusts") may severally offer, from time to time,
their respective preferred securities (the "Preferred Securities") representing
preferred undivided beneficial interests in the assets of each Trust. Kansas
City Power & Light Company, a Missouri corporation ("KCPL"), will be the sole
owner of the undivided common beneficial interests in such assets represented by
common securities (the "Common Securities", together with the Preferred
Securities herein referred to as the "Trust Securities") of each Trust. The
payment of periodic cash distributions ("distributions") with respect to the
Preferred Securities and payments on liquidation or redemption with respect to
such Preferred Securities will be each guaranteed by KCPL in the case of each
Trust (a "Preferred Securities Guarantee"), in each case only out of funds held
by such Trust. KCPL's obligations under the Preferred Securities Guarantee will
be subordinate and junior in right of payment to all other liabilities of KCPL
and will rank PARI PASSU with the most senior preferred stock issued by KCPL.
Concurrently with the issuance by a Trust of its Preferred Securities, such
Trust will invest the proceeds thereof in KCPL's junior subordinated deferrable
interest debentures (the "Subordinated Debentures") having terms corresponding
to such Trust's Preferred Securities. The Subordinated Debentures will be
unsecured and subordinated indebtedness of KCPL issued under an indenture dated
as of April 1, 1997 between the Company and The First National Bank of Chicago,
as Trustee (such indenture, as the same may be supplemented or amended from time
to time, herein referred to as the "Indenture"). The Subordinated Debentures
held by each Trust will be its sole assets, and the payments of principal of and
interest on such Subordinated Debentures will be its only revenues. The
Subordinated Debentures purchased by a Trust may be subsequently distributed PRO
RATA to holders of Preferred Securities and Common Securities in connection with
the dissolution of such Trust. In addition, upon the occurrence of certain
events, KCPL may redeem the Subordinated Debentures and cause the redemption of
the Preferred Securities.
The Preferred Securities may be offered in amounts, at prices and on terms
to be determined at the time of offering, provided, however, that the aggregate
initial public offering price of all Preferred Securities issued pursuant to the
Registration Statement of which this Prospectus forms a part will not exceed
$300,000,000. Certain specific terms of each Trust's Preferred Securities in
respect of which this Prospectus is being delivered will be set forth in an
accompanying Prospectus Supplement, including, where applicable and to the
extent not set forth herein, the identity of the Trust, the specific title, the
aggregate amount, the distribution rate (or the method for determining such
rate), the stated liquidation amount, redemption provisions, other rights, the
initial public offering price and any other special terms, as well as any
planned listing on a securities exchange, of such Preferred Securities.
The Preferred Securities may be sold in a public offering to or through
underwriters or dealers designated from time to time. See "Plan of
Distribution." The names of any of the underwriters or dealers involved in the
sale of the Preferred Securities in respect of which this Prospectus is being
delivered, the number of Preferred Securities to be purchased by any such
underwriters or dealers, any applicable commissions or discounts and the net
proceeds to each Trust will be set forth in the applicable Prospectus
Supplement.
Each Prospectus Supplement will also contain information concerning certain
United States federal income tax considerations applicable to the Preferred
Securities offered thereby.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIESCOMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
The date of this Prospectus is April 3, 1997.
AVAILABLE INFORMATION
KCPL is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). KCPL and the Trusts have filed with the
Commission a registration statement on Form S-3 (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act") with respect
to the Preferred Securities offered hereby and certain related securities. This
Prospectus does not contain all of the information set forth in the Registration
Statement and reference is hereby made to the Registration Statement and the
exhibits thereto for further information with respect to KCPL and the Preferred
Securities offered hereby. Such reports, proxy statements, Registration
Statement and exhibits and other information can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at its Northeast Regional Office
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Midwest Regional Office located at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. KCPL is subject to
the electronic filing requirements of the Commission. Accordingly, pursuant to
the rules and regulations of the Commission, certain documents, including annual
and quarterly reports and proxy statements, filed by KCPL with the Commission
have been filed electronically. The Commission also maintains a World Wide Web
site that contains reports, proxy and information statements and other
information regarding registrants (including KCPL) that file electronically with
the Commission at (http:// www.sec.gov). Certain of KCPL's securities are listed
on the New York Stock Exchange and such reports, proxy statements and other
information may also be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005.
No separate financial statements of the Trusts are included herein. KCPL
considers that such financial statements would not be material to holders of the
Preferred Securities because: (i) all of the Common Securities of the Trusts are
owned by KCPL, a reporting company under the Exchange Act; (ii) the Trusts have
no independent operations; but exist for the sole purpose of issuing the Trust
Securities and holding the Subordinated Debentures as trust assets; and (iii)
the obligations of the Trusts under the Preferred Securities, to the extent
funds are available therefor, are fully and unconditionally guaranteed to the
extent set forth herein by KCPL.
The Trusts are currently subject to the information reporting requirements
of the Exchange Act, although they intend to seek and expect to receive
exemptions therefrom.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed with the Commission pursuant to
the Exchange Act, are hereby incorporated by reference:
1. The KCPL Annual Report on Form 10-K (File No. 1-707) for the year ended
December 31, 1996.
2. The KCPL Current Report on Form 8-K (File No. 1-707) dated April 3,
1997, including the exhibits thereto, which include:
(a) The Western Resources, Inc. ("Western Resources") Annual Report on
Form 10-K for the year ended December 31, 1996 (File No. 1-3523).
(b) Western Resources Current Report on Form 8-K dated April 1, 1997
(File No. 1-3523).
(c) Western Resources Proxy Statement dated March 27, 1996 for the 1996
Annual Meeting of Shareholders held on May 7, 1996.
All documents filed by KCPL pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Preferred
2
Securities contemplated hereby shall be deemed to be incorporated by reference
into this Prospectus and to be made a part hereof from the respective dates of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent that a statement contained herein, in the applicable Prospectus
Supplement or in any subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of the Registration Statement or
this Prospectus.
KCPL hereby undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, including any beneficial owner, upon
the written or oral request of any such person, a copy of any or all of the
documents referred to above which have been or may be incorporated in this
Prospectus by reference, other than certain exhibits to such documents. Requests
should be directed to Corporate Secretary, Kansas City Power & Light Company,
1201 Walnut, Kansas City, Missouri 64106-2124 (Telephone: (816) 556-2053).
INFORMATION CONCERNING
WESTERN RESOURCES, INC. AND ADT LIMITED
KCPL has included or incorporated in this Prospectus information insofar as
it is known or reasonably available to KCPL concerning Western Resources; such
information includes or incorporates information concerning ADT Limited ("ADT")
and is included in documents filed with the Commission by Western Resources
pursuant to the Exchange Act. However, neither Western Resources nor ADT is
affiliated with KCPL and Western Resources has informed KCPL that ADT has not to
date permitted access by Western Resources to ADT's books and records for the
purpose of preparing documents filed with the Commission by Western Resources.
Therefore, information concerning ADT which has not been included in documents
filed with the Commission by Western Resources was unavailable to KCPL for the
purpose of preparing this Prospectus. Although KCPL has no knowledge that would
indicate that statements relating to Western Resources or ADT contained or
incorporated by reference in this Prospectus and included in documents filed
with the Commission by Western Resources are inaccurate or incomplete, KCPL was
not involved in the preparation of such information and statements and, for the
foregoing reasons, is not in a position to verify any such information or
statements. See "Proposed Merger with Western Resources, Inc."
Pursuant to Rule 409 promulgated under the Securities Act of 1933, KCPL has
been informed by Western Resources that (i) Western Resources has requested that
Coopers & Lybrand L.L.P., provide to Western Resources the information required
for complete disclosure concerning the business, operations, financial condition
and management of ADT and (ii) neither ADT nor Coopers & Lybrand L.L.P. has yet
provided any information to Western Resources in response to such request. KCPL
will include or incorporate by reference any and all information which concerns
Western Resources or ADT and is included in documents filed with the Commission
by Western Resources prior to the termination of this offering, and which the
Company deems material, reliable and appropriate, in a subsequently prepared
amendment or supplement hereto or in a document filed with the Commission and
incorporated by reference in this Prospectus.
KANSAS CITY POWER & LIGHT COMPANY
KCPL, a Missouri corporation, is a medium-size electric utility,
headquartered in downtown Kansas City, which generates and distributes
electricity to over 435,000 customers in and around the metropolitan Kansas City
area. Customers include 381,000 residences, 51,000 commercial firms, and over
3,000 industries, municipalities and other electric utilities. About two-thirds
of total retail kilowatt-hour sales and revenue are from Missouri customers and
the remainder from Kansas customers. The address of its principal executive
office is 1201 Walnut, Kansas City, Missouri 64106-2124 (Telephone: (816)
556-2200).
3
PROPOSED MERGER WITH WESTERN RESOURCES, INC.
On February 7, 1997, KCPL and Western Resources entered into an Agreement
and Plan of Merger to form a strategic business combination. The effective time
of the merger is expected to occur in 1998, subject to all conditions of the
Agreement and Plan of Merger being met or waived, including receipt of all
governmental and shareholder approvals. At the effective time, KCPL will merge
with and into Western Resources, with Western Resources being the surviving
corporation and thereby becoming liable for all obligations of KCPL, including
the Subordinated Debentures and the Preferred Securities Guarantees.
Western Resources is engaged principally in the production, purchase,
transmission, distribution and sale of electricity in eastern and central Kansas
and the delivery and sale of natural gas in Kansas and northeastern Oklahoma. A
Western Resources subsidiary operates an electronic security services business.
Western Resources also owns approximately 25% of the outstanding common
shares of ADT, which operates electronic security services and auto auction
businesses. Western Resources is seeking to acquire the remaining outstanding
common shares of ADT, which has announced that it has entered into an agreement
to combine its business with Tyco International Ltd. Accordingly, no assurances
can be given that Western Resources will succeed in acquiring the remaining
outstanding common shares of ADT.
THE TRUSTS
Each of the Trusts is a statutory business trust formed under Delaware law
pursuant to the filing of a certificate of trust with the Delaware Secretary of
State on December 11, 1996. The business of each Trust is defined in a
Declaration of Trust, executed by KCPL as sponsor (the "Sponsor"), and the
Trustees (as defined herein). The Declaration of Trust of each Trust will be
amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The Declaration will be
qualified as an indenture under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). Upon issuance of the Preferred Securities, the
purchasers thereof will own all of the Preferred Securities. KCPL will acquire
all of the Common Securities in an aggregate liquidation amount equal to
approximately 3% of the total capital of each Trust. Each Trust exists for the
exclusive purposes of (i) issuing the Trust Securities representing undivided
beneficial interests in the assets of the Trust, (ii) investing the gross
proceeds of the Trust Securities in the Subordinated Debentures and (iii)
engaging in only those other activities necessary or incidental thereto. Each
Trust has a term of approximately 45 years, but may terminate earlier as
provided in the applicable Declaration.
Each Trust's business and affairs will be conducted by the trustees (the
"Trustees") appointed by KCPL, as holder of the Common Securities. The duties
and obligations of the Trustees will be governed by the Declaration. Pursuant to
the Declaration, the number of Trustees will initially be four. Two of the
Trustees (the "Regular Trustees") will be persons who are employees or officers
of or affiliated with, KCPL. The third Trustee will be a corporation which
maintains a principal place of business in the State of Delaware that will serve
for the sole purpose of complying with certain Delaware laws (the "Delaware
Trustee"). The fourth Trustee will be a financial institution unaffiliated with
KCPL which will serve as property trustee under the Declaration and as indenture
trustee for purposes of the Trust Indenture Act (the "Property Trustee"). First
Chicago Delaware Inc. ("First Chicago Delaware") will act as the Delaware
Trustee and The First National Bank of Chicago will act as the Property Trustee,
in each case until removed or replaced by the holder of the Common Securities.
The First National Bank of Chicago will also act as indenture trustee under the
Preferred Securities Guarantee (the "Guarantee Trustee"). See "Description of
the Preferred Securities Guarantee."
The Property Trustee will hold title to the Subordinated Debentures held by
each Trust for the benefit of the holders of the Trust Securities issued by such
Trust and will have the power to exercise all rights, powers and privileges
under the Indenture (as defined herein) as the holder of such Subordinated
Debentures. In addition, the Property Trustee will maintain exclusive control of
a segregated non-interest
4
bearing bank account for each Trust (the "Property Account") to hold all
payments made in respect of the Subordinated Debentures held by such Trust for
the benefit of the holders of the Trust Securities issued by such Trust. The
Property Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities
issued by each Trust out of funds from the Property Account of such Trust. The
Guarantee Trustee will hold each Preferred Securities Guarantee for the benefit
of the holders of the Preferred Securities. KCPL, as the holder of all the
Common Securities, will have the right to appoint, remove or replace any Trustee
and to increase the number of Trustees, provided that the number of Trustees
will be at least four, two of which will be Regular Trustees. KCPL will pay all
fees and expenses related to the Trust, the offering of the Preferred Securities
and the issuance of the Subordinated Debentures. See "Description of the
Subordinated Debentures--Miscellaneous."
The rights of the holders of the Preferred Securities of each Trust,
including economic rights, rights to information and voting rights, are as set
forth in the Declaration for such Trust, the Delaware Business Trust Act, as
amended (the "Trust Act"), and the Trust Indenture Act. See "Description of the
Preferred Securities."
The Property Trustee for each Trust is The First National Bank of Chicago,
One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126. The
principal place of business of each Trust shall be c/o Kansas City Power & Light
Company, 1201 Walnut, Kansas City, Missouri 64106-2124 (telephone number
816/556-2200).
Copies of the above documents (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents)
may be obtained upon written or oral request without charge from KCPL, 1201
Walnut, Kansas City, Missouri 64106-2124 (telephone number 816/556-2200).
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
FIXED CHARGES AND PREFERRED DIVIDEND REQUIREMENTS
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994 1993
--------- --------- --------- ---------
(THOUSANDS)
Ratio of earnings to fixed charges............................................ 3.06 3.94 4.07 3.80
Ratio of earnings to combined fixed charges and preferred dividend
requirements................................................................. 2.85 3.59 3.69 3.51
--- --- --- ---
1992
---------
Ratio of earnings to fixed charges............................................ 3.12
Ratio of earnings to combined fixed charges and preferred dividend
requirements................................................................. 2.90
---
- ------------------------
(1) For the purpose of computing the ratio of earnings to fixed charges,
"earnings" consists of net income plus interest charges, income taxes and
the estimated interest component of rents. "Fixed charges" consists of
interest charges and the estimated interest component of rents.
(2) For the purpose of computing the ratio of earnings to combined fixed charges
and preferred dividend requirements, "earnings" consists of net income plus
interest charges, income taxes and the estimated interest component of
rents. "Fixed charges" consists of interest charges and the estimated
interest component of rents. "Preferred dividend requirements" consists of
the calculated pre-tax preferred dividend requirements.
USE OF PROCEEDS
Each Trust will use the proceeds of the sale of the Trust Securities to
acquire Subordinated Debentures from KCPL. Unless otherwise indicated in the
applicable Prospectus Supplement, KCPL intends to add the net proceeds from the
sale of the Subordinated Debentures to the general funds of KCPL for use for
corporate purposes, which may include capital expenditures, acquisitions,
refinancing or
5
repurchase of outstanding long-term debt, preferred and common securities,
investments in subsidiaries, and repayment of short-term debt and other business
opportunities.
DESCRIPTION OF THE PREFERRED SECURITIES
The Declaration of each Trust authorizes the Regular Trustees of such Trust
to issue on behalf of such Trust only one series of Preferred Securities having
terms described in the Prospectus Supplement relating thereto. The Declaration
will be qualified as an indenture under the Trust Indenture Act. The Property
Trustee will act as Indenture Trustee for purposes of the Trust Indenture Act.
The Preferred Securities will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferred or
other special rights or such restrictions as will be set forth in the
Declaration or made part of the Declaration by the Trust Indenture Act and which
will mirror the terms of the Subordinated Debentures held by the Trust and
described in the Prospectus Supplement relating thereto. Reference is made to
the Prospectus Supplement relating to the Preferred Securities of each Trust for
specific terms, including (i) the distinctive designation of such Preferred
Securities; (ii) the number of Preferred Securities issuable by such Trust;
(iii) the annual distribution rate (or method of determining such rate) for
Preferred Securities issued by such Trust and the date or dates upon which such
distributions will be payable; (iv) whether distributions on Preferred
Securities issued by such Trust will be cumulative, and, in the case of
Preferred Securities having such cumulative distribution rights, the date or
dates or method of determining the date or dates from which distributions on
Preferred Securities issued by such Trust will be cumulative; (v) the amount or
amounts which will be paid out of the assets of such Trust to the holders of
Preferred Securities of such Trust upon voluntary or involuntary dissolution,
winding-up or termination of such Trust; (vi) the obligation, if any, of such
Trust to purchase or redeem Preferred Securities issued by such Trust and the
price or prices at which, the period or periods within which, and the terms and
conditions upon which Preferred Securities issued by such Trust will be
purchased or redeemed, in whole or in part, pursuant to such obligation; (vii)
the voting rights, if any, of holders of Preferred Securities issued by such
Trust in addition to those required by law, including the number of votes per
Preferred Security and any requirement for the approval by the holders of such
Preferred Securities, or of Preferred Securities issued by one or more Trusts,
or of both, as a condition to specified action or amendments to the Declaration
of such Trust; (viii) the terms and conditions, if any, upon which the
Subordinated Debentures owned by such Trust may be distributed to holders of
Preferred Securities of such Trust; (ix) if applicable, any securities exchange
upon which the Preferred Securities of such Trust will be listed; and (x) any
other relevant rights, preferences, privileges, limitations or restrictions of
Preferred Securities issued by such Trust not inconsistent with the Declaration
of such Trust or with applicable law. All Preferred Securities offered hereby
will be guaranteed by KCPL to the extent set forth below under "Description of
the Preferred Securities Guarantees." Certain United States federal income tax
considerations applicable to any offering of Preferred Securities will be
described in the Prospectus Supplement relating thereto.
Each Trust will issue one series of Common Securities in connection with the
issuance of Preferred Securities. The Declaration of each Trust authorizes the
Regular Trustees of such Trust to issue on behalf of such Trust one series of
Common Securities having such terms including distributions, redemption, voting,
liquidation rights or such restrictions as will be set forth therein. Except for
voting rights, the terms of the Common Securities issued by a Trust will be
substantially identical to the terms of the Preferred Securities issued by such
Trust and such Common Securities will rank PARI PASSU, and payments will be made
thereon PRO RATA, with such Preferred Securities except that, upon an event of
default under the Declaration, the rights of the holders of such Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Preferred Securities. Except in certain limited circumstances, the Common
Securities of a Trust will also carry the right to vote to appoint, remove or
replace any of the Trustees of such Trust. All of the Common Securities of each
Trust will be directly or indirectly owned by KCPL.
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ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED SECURITIES
If an Event of Default under a Declaration of a Trust occurs and is
continuing, then the holders of Preferred Securities of such Trust would rely on
the enforcement by the Property Trustee of its rights as a holder of the
applicable series of Subordinated Debentures against KCPL. In addition, the
holders of a majority in liquidation amount of Preferred Securities of such
Trust will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee or to direct the
exercise of any trust or power conferred upon the Property Trustee under the
applicable Declaration, including the right to direct such Property Trustee to
exercise the remedies available to it as a holder of Subordinated Debentures. If
the Property Trustee fails to enforce its right under the Subordinated
Debentures held by a Trust, a holder of Preferred Securities of such Trust may
institute a legal proceeding directly against KCPL to enforce the Property
Trustee's rights under the Subordinated Debentures without first instituting any
legal proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, if an Event of Default under the Declaration of a
Trust has occurred and is continuing and such event is attributable to the
failure of KCPL to pay interest or principal on the applicable series of
Subordinated Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, on the redemption date), then a holder of
Preferred Securities of such Trust may directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on such
Subordinated Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder (a "Direct
Action") on or after the respective due date specified in such Subordinated
Debentures. In connection with such Direct Action, KCPL will be subrogated to
the rights of such holder of Preferred Securities under the applicable
Declaration to the extent of any payment made by KCPL to such holder of
Preferred Securities in such Direct Action.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees which will be executed and delivered by KCPL for the
benefit of the holders from time to time of the Preferred Securities under each
Trust. Each Preferred Securities Guarantee will be qualified as an indenture
under the Trust Indenture Act. The Guarantee Trustee will act as the Guarantee
Trustee. The terms of each Preferred Securities Guarantee will be those set
forth therein and those made a part thereof by the Trust Indenture Act. The
following summary of the material terms of the Preferred Securities Guarantees
does not purport to be complete and is subject in all respects to the provisions
of, and is qualified in its entirety by reference to, the form of the Preferred
Securities Guarantees, which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and the Trust Indenture Act.
Each Preferred Securities Guarantee will be held by the Guarantee Trustee for
the benefit of the holders of the Preferred Securities of the applicable Trust.
GENERAL
Pursuant to each Preferred Securities Guarantee with respect to a Trust,
KCPL will irrevocably and unconditionally agree, to the extent set forth
therein, to pay in full, to the holders of the Preferred Securities issued by
such Trust, the Guarantee Payments (as defined herein) (without duplication of
amounts theretofore paid by such Trust), as and when due regardless of any
defense, right of set-off or counterclaim which such Trust may have or assert.
The following payments or distributions with respect to the Preferred Securities
of a Trust, to the extent not paid or made by such Trust, (the "Guarantee
Payments") will be subject to the Preferred Securities Guarantee with respect to
such Trust (without duplication): (i) any accrued and unpaid distributions which
are required to be paid on the Preferred Securities, to the extent such Trust
has funds available therefor, (ii) the redemption price, including all accrued
and unpaid distributions to the date of the redemption (the "Redemption Price"),
to the extent such Trust has funds available therefor, with respect to any
Preferred Securities called for redemption by such Trust and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of such Trust
(other than in connection with the distribution of Subordinated Debentures held
by such Trust to the
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holders of Preferred Securities issued by such Trust in exchange for such
Preferred Securities or redemption of all such Preferred Securities), the lesser
of (a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on such Preferred Securities to the date of payment to the extent
such Trust has funds available therefor and (b) the amount of assets of such
Trust remaining available for distribution to holders of such Preferred
Securities in liquidation of such Trust. The redemption price and liquidation
amount will be fixed at the time the Preferred Securities are issued. KCPL's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by KCPL to the holders of Preferred Securities issued by a
Trust or by causing such Trust to pay such amounts to such holders.
The Preferred Securities Guarantee for a Trust will not apply to any payment
of distributions except to the extent such Trust has funds available therefor.
If KCPL does not make interest payments on the Subordinated Debentures purchased
by a Trust, such Trust will not pay distributions on the Preferred Securities
issued by such Trust and will not have funds available therefor.
The Preferred Securities Guarantee for a Trust, when taken together with
KCPL's obligations under the applicable Subordinated Debentures, the Indenture
and the applicable Declaration, including its obligation to pay costs, expenses,
debt, and liabilities of such Trust (other than with respect to its Trust
Securities), will be a full and unconditional guarantee, on a subordinated
basis, by KCPL of payments due on the Preferred Securities issued by such Trust
from the time of issuance of such Preferred Securities, but will not apply to
the payment of distributions and other payments on such Preferred Securities
when the Property Trustee does not have sufficient funds in the Property Account
of such Trust to make such distributions or other payments. If KCPL does not
make interest payments on the Subordinated Debentures held by the Property
Trustee for a Trust, such Trust will not make distributions on the Preferred
Securities issued by such Trust and will not have funds available therefor. See
"Description of the Subordinated Debentures--Certain Covenants."
CERTAIN COVENANTS OF KCPL
In the Preferred Securities Guarantee for a Trust, KCPL will covenant that,
so long as any Preferred Securities issued by such Trust remain outstanding, if
there shall have occurred and be continuing any event that would constitute an
event of default under such Preferred Securities Guarantee or the Declaration of
such Trust, then (a) KCPL may not declare or pay any dividend on, or make any
distribution of such Trust with respect to, or redeem, purchase, acquire or make
a liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of KCPL common stock in connection with the
satisfaction by KCPL of its obligations under any employee benefit plans or any
other contractual obligation of KCPL (other than a contractual obligation
ranking PARI PASSU with or junior to the Subordinated Debentures), (ii) as a
result of a reclassification of KCPL capital stock or the exchange or conversion
of one class or series of KCPL capital stock for another class or series of KCPL
capital stock or (iii) the purchase of fractional interests in shares of KCPL
capital stock pursuant to the conversion or exchange provisions of such KCPL
capital stock or the security being converted or exchanged), (b) KCPL may not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by KCPL
which rank PARI PASSU with or junior to the Subordinated Debentures and (c) KCPL
may not make any guarantee payments with respect to the foregoing (other than
pursuant to the Preferred Securities Guarantees).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of Preferred Securities issued by a Trust (in which case
no vote will be required), the Preferred Securities Guarantee for such Trust may
be amended only with the prior approval of the holders of not less than 66 2/3%
in liquidation amount of the outstanding Preferred Securities issued by such
Trust. The manner of obtaining any such approval of holders of Preferred
Securities will be set forth in the applicable Prospectus Supplement. All
guarantees and agreements contained in each Preferred Securities Guarantee will
bind the successors, assigns, receivers, trustees and representatives of KCPL
and will inure to the benefit of the Guarantee Trustee and the holders of the
Preferred Securities of the applicable Trust then outstanding.
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TERMINATION OF THE PREFERRED SECURITIES GUARANTEES
Each Preferred Securities Guarantee for a Trust will terminate and be of no
further force and effect as to the Preferred Securities issued by such Trust
upon full payment of the Redemption Price of all such Preferred Securities, or
upon distribution of the Subordinated Debentures held by such Trust to the
holders of the Trust Securities of such Trust, and will terminate completely
upon full payment of the amounts payable upon liquidation of such Trust. See
"Description of the Subordinated Debentures-- Indenture Events of Default" for a
description of the events of default and enforcement rights of the holders of
Subordinated Debentures. Each Preferred Securities Guarantee for a Trust will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Preferred Securities issued by such Trust must repay to such
Trust or KCPL, or their successors, any sums paid to them under such Preferred
Securities or Preferred Securities Guarantee.
EVENTS OF DEFAULT
An event of default under each Preferred Securities Guarantee will occur
upon the failure of KCPL to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
issued by a Trust will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Preferred Securities Guarantee for such Trust or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under such
Preferred Securities Guarantee. If the Guarantee Trustee fails to enforce the
Preferred Securities Guarantee for a Trust, any holder of related Preferred
Securities may institute a legal proceeding directly against KCPL to enforce the
Guarantee Trustee's rights under such Preferred Securities Guarantee, without
first instituting a legal proceeding against such Trust, the Guarantee Trustee
or any other person or entity.
STATUS OF THE PREFERRED SECURITIES GUARANTEES
KCPL's obligations under each Preferred Securities Guarantee to make the
Guarantee Payments will constitute unsecured obligations of KCPL and will rank
(i) subordinate and junior in right of payment to all other liabilities of KCPL,
including the Subordinated Debentures, except those liabilities of KCPL made
PARI PASSU or subordinate by their terms, (ii) PARI PASSU with the most senior
preferred stock now or hereafter issued by KCPL and with any guarantee now or
hereafter entered into by KCPL in respect of any preferred or preference stock
of any affiliate of KCPL, and (iii) senior to KCPL common stock. The terms of
the Preferred Securities provide that each holder of Preferred Securities issued
by the a Trust, by acceptance thereof, agrees to the subordination provisions
and other terms of the Preferred Securities Guarantee relating thereto.
Each Preferred Securities Guarantee will constitute guarantee of payment and
not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under such
Preferred Securities Guarantee without instituting a legal proceeding against
any other person or entity). Each Preferred Securities Guarantee will be
deposited with the Guarantee Trustee to be held for the benefit of the holders
of the related Preferred Securities. Except as otherwise noted herein, the
Guarantee Trustee has the right to enforce each Preferred Securities Guarantee
on behalf of the holders of the related Preferred Securities. The Preferred
Securities Guarantee for a Trust will not be discharged except by payment of the
Guarantee Payments in full (without duplication of amounts theretofore paid by
such Trust).
CONSOLIDATION, MERGER AND SALE
The Preferred Securities Guarantees do not contain any covenant which
restricts the ability of any Trust or KCPL to merge or consolidate with or into
any other corporation, sell or convey all or substantially all of its assets to
any person, firm or corporation or otherwise engage in restructuring
9
transactions so long as the corporation with or into which KCPL merges or
consolidates, or the person, firm or corporation to which KCPL sells or conveys
such assets, assumes all of KCPL's obligations under the Preferred Securities
Guarantees.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
a Preferred Securities Guarantee and after the curing of all such defaults that
may have occurred, undertakes to perform only such duties as are specifically
set forth in each Preferred Securities Guarantee and, after default, will
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provisions, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Preferred Securities Guarantee for a Trust at the request of any holder of
Preferred Securities issued by such Trust, unless offered reasonable indemnity
against the costs, expenses and liabilities which might be incurred thereby; but
the foregoing shall not relieve the Guarantee Trustee, upon the occurrence of an
event of default under such Preferred Securities Guarantee, from exercising the
rights and powers vested in it by such Preferred Securities Guarantee. The
Guarantee Trustee also serves as Property Trustee.
KCPL and its officers and directors have no material relationship with the
Guarantee Trustee except that (a) the Guarantee Trustee is a dealer in
commercial paper issued by KCPL, (b) the Guarantee Trustee is trustee and
remarketing agent for certain governmental revenue bonds which are payable with
amounts paid by KCPL to the issuer of such bonds, and (c) KCPL and its principal
subsidiary maintain lines of credit with the Guarantee Trustee.
GOVERNING LAW
The Preferred Securities Guarantees will be governed by, and construed in
accordance with, the internal laws of the State of New York.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Set forth below is a description of the terms of the Subordinated Debentures
which each of the Trusts will hold as trust assets. The following description
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the indenture ("Indenture"), dated as of April 1,
1997, between KCPL and The First National Bank of Chicago, as Trustee (the "Debt
Trustee"), as supplemented by the Supplemental Indenture creating each series of
Subordinated Debentures. The Indenture and the form of Supplemental Indenture
are filed as exhibits to the Registration Statement of which this Prospectus
forms a part. The terms each series of Subordinated Debentures will include
those stated in the Indenture and the related Supplemental Indenture and those
made a part of the Indenture by reference to the Trust Indenture Act. Certain
capitalized terms used herein are defined in the Indenture and the related
Supplemental Indenture.
Upon the dissolution of a Trust, Subordinated Debentures held by a Trust may
be distributed to the holders of Trust Securities issued by such Trust in
liquidation of such Trust. See "Description of the Preferred
Securities--Dissolution; Distribution of Subordinated Debentures" in the
applicable Prospectus Supplement.
If any Subordinated Debentures are distributed to the holders of Trust
Securities, KCPL will use its best efforts to have such Subordinated Debentures
listed on the New York Stock Exchange or on such other exchange as the related
Preferred Securities are then listed.
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GENERAL
The Indenture provides for the issuance of Subordinated Debentures in an
unlimited amount from time to time. Each series of Subordinated Debentures will
constitute a separate series under the Indenture, will be in a principal amount
equal to the aggregate stated Liquidation Amount of the Preferred Securities
issued by the Trust which will hold such Subordinated Debentures plus KCPL's
concurrent investment in the Common Securities of such Trust and will rank PARI
PASSU with all other series of Subordinated Debentures.
The entire principal amount of the Subordinated Debentures held by a Trust
will mature and become due and payable, together with any accrued and unpaid
interest thereon, including Additional Interest (as defined), if any, on the
date set forth in the applicable Prospectus Supplement.
Reference is made to the Prospectus Supplement relating to the particular
Subordinated Debentures being offered thereby for the following terms: (1) the
designation of such Subordinated Debentures; (2) the aggregate principal amount
of such Subordinated Debentures; (3) the date or dates on which such
Subordinated Debentures will mature and the right, if any, to shorten such date
or dates; (4) the rate or rates; if any, per annum, at which such Subordinated
Debentures will bear interest, or the method of determination of such rate or
rates; (5) the date or dates from which such interest will accrue, the interest
payment dates on which such interest will be payable or the manner of
determination of such interest payment dates and the record dates for the
determination of holders to whom interest is payable on any such interest
payment dates; (6) the right, if any, to extend the interest payment periods and
the duration of such extensions; (7) provisions for a sinking, purchase or other
analogous fund; (8) the period or periods, if any, within which, the price or
prices of which, and the terms and conditions upon which such Subordinated
Debentures may be redeemed, in whole or in part, at the option of KCPL or the
holder; (9) the form of such Subordinated Debentures; and (10) any other
specific terms of such Subordinated Debentures. Principal, premium, if any, and
interest, if any, will be payable, and the Subordinated Debentures offered
hereby will be transferable, at the corporate trust office of the Debt Trustee
in New York, New York, provided that payment of interest, if any, may be made at
the option of KCPL by check mailed to the address of the person entitled thereto
as it appears in the Security Register.
If a Prospectus Supplement specifies that a series of Subordinated
Debentures is denominated in a currency or currency unit other than United
States dollars, such Prospectus Supplement will also specify the denomination in
which such Subordinated Debentures will be issued and the coin or currency in
which the principal, premium, if any, and interest, if any, on such Subordinated
Debentures will be payable, which may be United States dollars based upon the
exchange rate for such other currency or currency unit existing on or about the
time a payment is due.
The covenants contained in the Indenture would not necessarily afford
protection to holders of the Subordinated Debentures in the event of a decline
in credit quality resulting from takeovers, recapitalizations or similar
restructurings of KCPL.
If Subordinated Debentures held by a Trust are distributed to holders of its
Preferred Securities in liquidation of such holders' interests in such Trust,
such Subordinated Debentures will initially be issued as a Global Security (as
defined below). As described herein, under certain limited circumstances,
Subordinated Debentures may be issued in certificated form in exchange for a
Global Security. See "--Book Entry and Settlement." In the event Subordinated
Debentures are issued in certificated form, such Subordinated Debentures will be
in denominations as specified in the applicable Prospectus Supplement and
integral multiples thereof and may be transferred or exchanged at the offices
described therein. Payments on Subordinated Debentures issued as a Global
Security will be made to the Depositary for the Subordinated Debentures. In the
event Subordinated Debentures are issued in certificated form, principal and
interest will be payable, the transfer of the Subordinated Debentures will be
registrable and Subordinated Debentures will be exchangeable for Subordinated
Debentures of other denominations of a like aggregate principal amount at the
corporate trust office of the Debt Trustee in New York, New York; provided, that
11
payment of interest may be made at the option of KCPL by check mailed to the
address of the persons entitled thereto.
The Indenture does not contain provisions that afford holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction involving KCPL.
SUBORDINATION
The Indenture provides that the Subordinated Debentures are subordinated and
junior in right of payment to all Senior Indebtedness of KCPL, whether now
existing or hereafter incurred. Senior Indebtedness may include indebtedness of
KCPL which is subordinated to other indebtedness of KCPL but nevertheless senior
to the Subordinated Debentures. No payment of principal of (including redemption
and sinking fund payments, if any), premium, if any, or interest on, the
Subordinated Debentures may be made if (a) there is any default in the payment
of principal, premium, interest or any other payment due on any Senior
Indebtedness, or (b) the maturity of any Senior Indebtedness has been
accelerated because of a default. Upon any distribution of assets of KCPL to
creditors upon any dissolution, winding-up, liquidation or reorganization of
KCPL, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all principal of, premium, if any, and
interest due or to become due on, all Senior Indebtedness must be paid in full
before the holders of the Subordinated Debentures are entitled to receive or
retain any payment. The rights of the holders of the Subordinated Debentures
will be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions applicable to such Senior Indebtedness until
all amounts owing on the Subordinated Debentures are paid in full.
The term "Senior Indebtedness" means (i) any payment in respect of (a)
indebtedness of KCPL for money borrowed and (b) indebtedness evidenced by
securities, debentures, bonds, notes or other similar instruments issued by KCPL
including, without limitation, indebtedness evidenced by securities issued
pursuant to the General Mortgage Indenture and Deed of Trust dated as of
December 1, 1986, between KCPL and UMB Bank, N.A., as supplemented, and pursuant
to indentures with various trustees (other than the Indenture); (ii) all capital
lease obligations of KCPL; (iii) all obligations of KCPL issued or assumed as
the deferred purchase price of property, all conditional sale obligations of
KCPL and all of its obligations under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business);
(iv) all obligations of KCPL for reimbursement on any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction; (v) all
obligations of the type referred to in clauses (i) through (iv) above of other
Persons for the payment of which KCPL is responsible or liable as obligor,
guarantor or otherwise; and (vi) all obligations of the type referred to in
clauses (i) through (v) above of other Persons secured by any lien on any
property or asset of KCPL (whether or not such obligation is assumed by KCPL),
except for (1) any such indebtedness that is by its terms subordinated to or
PARI PASSU with the Subordinated Debentures, as the case may be, including all
other debt securities and guarantees in respect of those debt securities, issued
to any other trusts, partnerships or any other entity affiliated with KCPL which
is a financing vehicle of KCPL in connection with the issuance of preferred
securities by such entity or other securities which rank PARI PASSU with, or
junior to, the Preferred Securities, and (2) any indebtedness between or among
KCPL and its affiliates. Such Senior Indebtedness will continue to be Senior
Indebtedness and be entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term of such Senior
Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
which may be issued by KCPL.
CERTAIN COVENANTS
If (i) there has occurred any event that would constitute an Indenture Event
of Default or (ii) KCPL is in default with respect to its payment of any
obligations under any Preferred Securities, then (a) KCPL
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may not declare or pay any dividend on, make any distributions with respect to,
or redeem, purchase or make a liquidation payment with respect to, any of its
capital stock, (other than (i) purchases or acquisitions of shares of KCPL
common stock in connection with the satisfaction by KCPL of its obligations
under any employee benefit plans or any other contractual obligation of KCPL
(other than a contractual obligation ranking PARI PASSU with or junior to the
Subordinated Debentures), (ii) as a result of a reclassification of KCPL capital
stock or the exchange or conversion of one class or series of KCPL capital stock
for another class or series of KCPL capital stock or, (iii) the purchase of
fractional interests in shares of KCPL capital stock pursuant to the conversion
or exchange provisions of such KCPL capital stock or the security being
converted or exchanged), (b) KCPL may not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by KCPL which rank PARI PASSU with or
junior to the Subordinated Debentures and (c) KCPL may not make any guarantee
payments with respect to the foregoing (other than pursuant to the Preferred
Securities Guarantees).
For so long as the Trust Securities under a Trust remain outstanding, KCPL
will covenant (i) to directly or indirectly maintain 100% direct or indirect
ownership of the Common Securities of such Trust; provided, however, that any
permitted successor of KCPL under the Indenture may succeed to KCPL's ownership
of such Common Securities, (ii) not to cause, as sponsor of such Trust, or to
permit, as holder of such Common Securities, the dissolution or winding-up of
such Trust, except in connection with a distribution of the Subordinated
Debentures held by such Trust as provided in the Declaration for such Trust and
in connection with certain mergers, consolidations or amalgamations and (iii) to
use its reasonable efforts to cause such Trust (a) to remain a statutory
business trust, except in connection with the distribution of Subordinated
Debentures to the holders of Trust Securities of such Trust in liquidation of
such Trust, the redemption of all such Trust Securities, or certain mergers,
consolidations or amalgamations, each as permitted by such Declaration, and (b)
to otherwise continue to be classified as a grantor trust for United States
federal income tax purposes.
OPTIONAL REDEMPTION
KCPL will have the right to redeem the Subordinated Debentures of each
series, in whole or in part, from time to time, on or after the date set forth
in the applicable Prospectus Supplement or in whole but not in part at any time
in certain circumstances upon the occurrence of a Tax Event as described under
"Description of the Preferred Securities--Tax Event Redemption" in the
applicable Prospectus Supplement, upon not less than 30 nor more than 60 days'
notice, at a Redemption Price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest, including Additional Interest, if
any, to the redemption date. If a partial redemption of the Preferred Securities
of a Trust resulting from a partial redemption of the Subordinated Debentures
held by such Trust would result in the delisting of such Preferred Securities,
KCPL may only redeem such Subordinated Debentures in whole.
INTEREST
Each Subordinated Debenture will bear interest at the rate set forth in the
applicable Prospectus Supplement from the original date of issuance, payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year (each, an "Interest Payment Date"), to the person in whose name such
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the Business Day next preceding such Interest Payment Date.
In the event the Subordinated Debentures do not continue to remain in book-entry
only form, KCPL will have the right to select record dates which may be not less
than fifteen days prior to each Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period will be computed on the basis of
the actual number of days elapsed in such 90-day quarter. In the event that any
date on which interest is payable on the Subordinated Debentures is not a
Business Day, then
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payment of the interest payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Except to the extent set forth in the applicable Prospectus Supplement, KCPL
will have the right at any time, and from time to time, during the term of any
series of Subordinated Debentures, to defer payments of interest by extending
the interest payment period for a period not exceeding 20 consecutive quarters,
at the end of which Extension Period, KCPL will pay all interest then accrued
and unpaid (including any Additional Interest, together with interest thereon at
the rate specified for such Subordinated Debentures to the extent permitted by
applicable law); provided, that, during any such Extension Period, (a) KCPL may
not declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to, any
of its capital stock, (other than (i) purchases or acquisitions of shares of
KCPL common stock in connection with the satisfaction by KCPL of its obligations
under any employee benefit plans or any other contractual obligation of KCPL
(other than a contractual obligation ranking PARI PASSU with or junior to the
Subordinated Debentures), (ii) as a result of a reclassification of KCPL capital
stock or the exchange or conversion of one class or series of KCPL capital stock
for another class or series of KCPL capital stock or, (iii) the purchase of
fractional interests in shares of KCPL capital stock pursuant to the conversion
or exchange provisions of such KCPL capital stock or the security being
converted or exchanged) (b) KCPL may not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by KCPL which rank PARI PASSU with or junior to
the Subordinated Debentures to which such Extension Period applies and (c) KCPL
will not make any guarantee payments with respect to the foregoing (other than
pursuant to the Preferred Securities Guarantees). This covenant effectively
requires that any Extension Period with respect to payment of interest on a
series of Subordinated Debentures will also apply to each other series of
Subordinated Debentures issued under the Indenture to other trusts similar to
the Trust. Prior to the termination of any such Extension Period for a series of
Subordinated Debentures, KCPL may further defer payments of interest on such
Subordinated Debentures, by extending the interest payment period, provided that
such Extension Period together with all such previous and further extensions
thereof for such series of Subordinated Debentures may not exceed 20 consecutive
quarters or extend beyond the maturity of such series of Subordinated
Debentures.
Upon the termination of any Extension Period for a series of Subordinated
Debentures, and the payment of all amounts then due, KCPL may select a new
Extension Period for such series of Subordinated Debentures, as if no Extension
Period had previously been declared, subject to the above requirements. No
interest on a series of Subordinated Debentures during an Extension Period,
except at the end thereof, will be due and payable on such series of
Subordinated Debentures.
KCPL has no present intention of exercising its rights to defer payments of
interest by extending the interest payment period on any Subordinated
Debentures.
If the Property Trustee is the sole holder of a series of Subordinated
Debentures, KCPL will give the Regular Trustees and the Property Trustee notice
of its selection of such Extension Period for such series of Subordinated
Debentures one Business Day prior to the earlier of (i) the next succeeding date
on which distributions on the related Preferred Securities are payable or (ii)
the date the applicable Trust is required to give notice to the New York Stock
Exchange or other applicable self-regulatory organization or to holders of such
Preferred Securities on the record date or the date such distribution is
payable, but in any event not less than one Business Day prior to such record
date. The Regular Trustees shall give notice of KCPL's selection of such
Extension Period to the holders of such Preferred Securities. If the Property
Trustee is not the sole holder of a series of Subordinated Debentures, KCPL will
give the holders of such Subordinated Debentures notice of its selection of such
Extension Period ten Business Days prior to the
14
earlier of (i) the Interest Payment Date or (ii) the date KCPL is required to
give notice to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of such Subordinated Debentures on the record or
payment date of such related interest payment, but in any event at least two
Business Days before such record date.
ADDITIONAL INTEREST
If at any time a Trust is required to pay any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) imposed
by the United States, or any other taxing authority, then, in any such case,
KCPL will pay as additional interest ("Additional Interest") such additional
amounts as shall be required so that the net amounts received and retained by
such Trust after paying any such taxes, duties, assessments or other
governmental charges will be equal to the amounts such Trust would have received
had no such taxes, duties, assessments or other governmental charges been
imposed.
INDENTURE EVENTS OF DEFAULT
In case any Indenture Event of Default occurs and is continuing with respect
to a series of Subordinated Debentures, the Property Trustee, as the holder of
such Subordinated Debentures, will have the right to declare the principal of
and the interest on such Subordinated Debentures (including Additional Interest,
if any) and any other amounts payable under the Indenture to be forthwith due
and payable and to enforce its other rights as a creditor with respect to such
Subordinated Debentures.
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of Default"
with respect to any series of the Subordinated Debentures:
(a) failure for 30 days to pay interest on the Subordinated Debentures
of such series, including any Additional Interest in respect thereof, when
due; provided, however, that a valid extension of the interest payment
period by KCPL will not constitute a default in the payment of interest for
this purpose; or
(b) failure to pay principal of or premium, if any, on the Subordinated
Debentures of such series when due whether at maturity, upon redemption or
otherwise; or
(c) failure to observe or perform any other covenant (other than those
specifically relating solely to one or more other series of Subordinated
Debentures) contained in the Indenture for 90 days after written notice to
KCPL from the Debt Trustee or the holders of at least 25% in principal
amount of the outstanding Subordinated Debentures; or
(d) certain events of bankruptcy, insolvency or reorganization of KCPL;
or
(e) the voluntary or involuntary dissolution, winding-up or termination
of the applicable Trust, except in connection with the distribution of
Subordinated Debentures to the holders of Trust Securities of such Trust in
liquidation of such Trust, the redemption of all outstanding Trust
Securities of such Trust and certain mergers, consolidations or
amalgamations permitted by the Declaration.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures of such series have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Debt
Trustee. Either the Debt Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Subordinated Debentures of such
series may declare the principal of such series due and payable immediately on
default, but the holders of a majority in aggregate outstanding principal amount
of such series may annul such declaration and waive such default if such default
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration and any applicable premium has
been deposited with the Debt Trustee.
15
The holders of a majority in aggregate outstanding principal amount of a
series of Subordinated Debentures affected thereby may, on behalf of the holders
of all such Subordinated Debentures, waive any past default, except (i) a
default in the payment of principal, premium, if any, or interest (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest and principal due otherwise than by acceleration and any applicable
premium has been deposited with the Debt Trustee) or (ii) a default in the
covenant of KCPL not to declare or pay dividends on, or make distributions with
respect to, or redeem, purchase or acquire any of its capital stock during an
Extension Period. An Indenture Event of Default also constitutes a Declaration
Event of Default. The holders of Preferred Securities in certain circumstances
described in the applicable Prospectus Supplement may have the right to direct
the Property Trustee to exercise its rights as the holder of the Subordinated
Debentures.
PAYMENT AND PAYING AGENTS
Payment of principal of and premium (if any) on Subordinated Debentures will
be made only against surrender to the Paying Agent of the Subordinated
Debentures. Principal of and any premium and interest, if any, on Subordinated
Debentures will be payable, subject to any applicable laws and regulations, at
the office of such Paying Agent or Paying Agents as KCPL may designate from time
to time, except that at the option of KCPL payment of any interest may be made
by check mailed to the address of the person entitled thereto as such address
appears in the Debenture Register with respect to the Subordinated Debentures.
Payment of interest on the Subordinated Debentures on any Interest Payment Date
will be made to the person in whose name the Subordinated Debenture (or
predecessor security) is registered at the close of business on the Regular
Record Date for such interest payment.
The Debt Trustee will act as Paying Agent with respect to the Subordinated
Debentures. KCPL may at any time designate additional Paying Agents or rescind
the designation of any Paying Agent or approve a change in the office through
which any Paving Agent acts, except that KCPL will be required to maintain a
Paying Agent at the place of payment.
All moneys paid by KCPL to a Paying Agent for the payment of the principal
of or premium or interest, if any, on any Subordinated Debentures which remain
unclaimed at the end of two years after such principal, premium, if any, or
interest shall have become due and payable will be repaid to KCPL and the holder
of such Subordinated Debentures will thereafter look only to KCPL for payment
thereof.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting KCPL and the Debt Trustee, with
the consent of the holders of not less than a majority in principal amount of
the Subordinated Debentures, to modify the Indenture or the rights of the
holders of the Subordinated Debentures, and the holders of not less than a
majority in principal amount of the Subordinated Debentures of a particular
series to modify the supplemental indenture affecting that series; provided that
no such modification may, without the consent of the holder of each outstanding
Subordinated Debenture affected thereby, (i) extend the fixed maturity of such
Subordinated Debentures, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon, or reduce any premium
payable upon the redemption thereof, without the consent of the holder of the
Subordinated Debentures so affected or (ii) reduce the percentage of
Subordinated Debentures, the holders of which are required for such consent,
without the consent of the holder of each Subordinated Debenture then
outstanding and affected thereby.
In addition, KCPL and the Debt Trustee may execute, without the consent of
holders of the Subordinated Debentures, any supplemental indenture for certain
other usual purposes including the creation of any new series of Subordinated
Debentures.
16
CONSOLIDATION, MERGER AND SALE
The Indenture does not contain any covenant which restricts the ability of
any Trust or KCPL to merge or consolidate with or into any other corporation,
sell or convey all or substantially all of its assets to any person, firm or
corporation or otherwise engage in restructuring transactions so long as the
corporation with or into which KCPL merges or consolidates, or the person, firm
or corporation to which KCPL sells or conveys such assets, assumes all of KCPL's
obligations under the Indenture.
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, KCPL will be discharged from any and all
obligations in respect of any series of Subordinated Debentures (except in each
case for certain obligations with respect to denominations and provisions for
payment of such Subordinated Debentures and obligations to register the transfer
or exchange of such Subordinated Debentures, replace stolen, lost or mutilated
Subordinated Debentures, maintain paying agencies and hold moneys for payment in
trust) if KCPL (i) deposits with the Debt Trustee, in trust, moneys or
Governmental Obligations, in an amount sufficient to pay all the principal of,
and interest on, such Subordinated Debentures on the dates such payments are due
in accordance with the terms of such Subordinated Debentures and (ii) delivers
to the Debt Trustee an opinion of counsel to the effect that, based upon KCPL's
receipt from, or the publication by, the Internal Revenue Service of a ruling,
or a change in law, the holders of the Subordinated Debentures of such series
will not recognize income, gain or loss for United States Federal income tax
purposes as a result of the deposit, defeasance and discharge and will be
subject to United States Federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such deposit,
defeasance or discharge had not occurred.
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by, and
construed in accordance with, the internal laws of the State of New York.
INFORMATION CONCERNING THE DEBT TRUSTEE
The Debt Trustee, prior to default, undertakes to perform only such duties
as are specifically set forth in the Indenture and, after default, will exercise
the same degree of care as a prudent individual would exercise in the conduct of
his or her own affairs. Subject to such provision, the Debt Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Subordinated Debentures, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby; but the foregoing will not relieve the Debt Trustee, upon
the occurrence of an Indenture Event of Default, from exercising the rights and
powers vested in it by the Indenture. The Debt Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debt Trustee reasonably believes that repayment
or adequate indemnity is not reasonably assured to it.
MISCELLANEOUS
KCPL will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned subsidiary
of KCPL; provided that, in the event of any such assignment, KCPL will remain
liable for all of such obligations. Subject to the foregoing, the Indenture will
be binding upon and inure to the benefit of the parties thereto and their
respective successors and assigns. The Indenture provides that it may not
otherwise be assigned by the parties thereto.
The Indenture will provide that KCPL will pay all fees and expenses related
to (i) the offering and sale of the Trust Securities and the Subordinated
Debentures, (ii) the organization, maintenance and dissolution of each Trust,
(iii) the retention of the Trustees and (iv) the enforcement by the Property
Trustee of the rights of holders of Preferred Securities.
17
EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED DEBENTURES
AND THE PREFERRED SECURITIES GUARANTEES
As set forth in the Declaration for each Trust, the sole purposes of each
Trust are to (i) issue Trust Securities, (ii) invest the proceeds thereof in the
Subordinated Debentures and (iii) engage in only those other activities
necessary or incidental thereto.
As long as payments of interest and other payments are made when due on a
series of Subordinated Debentures, such payments will be sufficient to cover
distributions and payments due on the related Trust Securities primarily because
(i) the aggregate principal amount of such Subordinated Debentures will be equal
to the sum of the aggregate stated liquidation amount of such Trust Securities;
(ii) the interest rate and interest and other payment dates on such Subordinated
Debentures will match the distribution rate and distribution and other payment
dates for such Trust Securities; (iii) KCPL will pay for all costs and expenses
of each Trust; and (iv) the Declaration provides that the Trustees may not cause
or permit a Trust to, among other things, engage in any activity that is not
consistent with the purposes of such Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by KCPL as and to the extent set forth under
"Description of the Preferred Securities Guarantees". If KCPL does not make
interest payments on the Subordinated Debentures purchased by a Trust, it is
expected that such Trust will not have sufficient funds to pay distributions on
its Preferred Securities. The Preferred Securities Guarantee for a Trust is a
full and unconditional guarantee from the time of its issuance, but does not
apply to any payment of distributions unless and until such Trust has sufficient
funds for the payment of such distributions.
If KCPL fails to make interest or other payments on the Subordinated
Debentures held by a Trust when due (taking into account any Extension Period),
the Declaration for such Trust provides a mechanism whereby the holders of the
Preferred Securities of such Trust, using the procedures described in
"Description of the Preferred Securities--Voting Rights" in the applicable
Prospectus Supplement may direct the Property Trustee to enforce its rights
under such Subordinated Debentures, including proceeding directly against KCPL
to enforce the Subordinated Debentures. If the Property Trustee fails to enforce
its rights under such Subordinated Debentures, a holder of such Preferred
Securities may, after a period of 30 days has elapsed from such holder's written
request to the Property Trustee to enforce such rights, institute a legal
proceeding directly against KCPL to enforce the Property Trustee's rights under
such Subordinated Debentures without first instituting any legal proceeding
against the Property Trustee or any other person or entity, including such
Trust.
If KCPL fails to make payments under a Preferred Securities Guarantee for a
Trust, such Preferred Securities Guarantee provides a mechanism whereby the
holders of the Preferred Securities of such Trust may direct the Guarantee
Trustee to enforce its rights thereunder. If the Guarantee Trustee fails to
enforce such Preferred Securities Guarantee, any holder of such Preferred
Securities may institute a legal proceeding directly against KCPL to enforce the
Guarantee Trustee's rights under such Preferred Securities Guarantee, without
first instituting a legal proceeding against such Trust, the Guarantee Trustee
or any other person or entity.
The above mechanisms and obligations, taken together, are equivalent to a
full and unconditional guarantee by KCPL of payments due on the Preferred
Securities. See "Description of the Preferred Securities Guarantees--General."
PLAN OF DISTRIBUTION
KCPL and the Trusts may offer and sell the Preferred Securities in any of
three ways: (i) through agents; (ii) through underwriters or dealers; or (iii)
directly to one or more purchasers. The Prospectus Supplement with respect to
any of the Preferred Securities will set forth the terms of the offering of such
Preferred Securities, including the name or names of any underwriters or agents,
the purchase price of
18
such Preferred Securities, the proceeds to the applicable Trust from such sale,
any underwriting discounts or agency fees and other items constituting
underwriters' or agents' compensation, the initial public offering price, any
discounts or concessions allowed or reallowed or paid to dealers, and any
securities exchanges on which such Preferred Securities may be listed.
The distribution of the Preferred Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, at a market price prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices.
Underwriters, dealers and agents may be entitled, under agreements entered
into with KCPL to indemnification by KCPL against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which the underwriters, dealers or agents may be required to make in
respect thereof. Such underwriters, dealers and agents, and affiliates thereof,
may be customers of, engage in transactions with, or perform services for KCPL
and its affiliates in the ordinary course of business.
All Preferred Securities will be new issues of securities with no
established trading market. Any underwriters to whom Preferred Securities are
sold by a Trust for public offering and sale may make a market in such Preferred
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given concerning the liquidity of the trading market for any Preferred
Securities.
EXPERTS
The financial statements included in KCPL's Annual Report on Form 10-K for
the year ended December 31, 1996, incorporated by reference in this Prospectus
and in the Registration Statement, have been audited by Coopers & Lybrand
L.L.P., independent public accountants, as indicated in their reports with
respect thereto, and are included herein, in reliance upon the authority of said
firm as experts in giving said reports.
The financial statements of Western Resources included in its Annual Report
on Form 10-K for the year ended December 31, 1996, and included in KCPL's
Current Report on Form 8-K dated April 3, 1997, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said reports.
LEGAL OPINIONS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of each Trust by Pepper, Hamilton &
Scheetz LLP, special Delaware counsel to each Trust. Legal matters with respect
to the Subordinated Debentures offered hereby and the Preferred Securities
Guarantees will be passed upon for KCPL by Jeanie Sell Latz, Senior Vice
President and Chief Legal Officer, and for the Underwriters by Sidley & Austin,
One First National Plaza, Chicago, Illinois 60603. Certain United States federal
income taxation matters will be passed upon by Sidley & Austin. Sidley & Austin
will rely for purposes of their opinions upon the opinion of Ms. Latz as to
matters of Missouri law. At December 31, 1996, Ms. Latz owned beneficially 2,003
shares of KCPL's Common Stock; she also has options to purchase 15,375 shares of
KCPL's Common Stock at the fair market value on the dates of the grants. Sidley
& Austin occasionally performs legal services for KCPL.
The statements herein under "Description of Subordinated Debentures" and
"Description of Preferred Securities Guarantees," as to the matters of law and
legal conclusions, have been prepared under the supervision of and reviewed by,
and are made on the authority of Ms. Latz, who has given her opinion that such
statements as to such matters and conclusions are correct.
19
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS,
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED HEREIN,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY KCPL, THE TRUST OR THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF KCPL SINCE THE DATE AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
------------------------------
TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Risk Factors................................... S-4
Kansas City Power & Light Company.............. S-8
Proposed Merger with Western Resources, Inc.... S-9
The Trust...................................... S-9
Selected Historical Financial Data of KCPL..... S-11
Capitalization of KCPL......................... S-11
KCPL and Western Resources Selected Unaudited
Pro Forma Combined Financial Information...... S-12
KCPL, Western Resources and ADT Limited
Selected Unaudited Pro Forma Combined
Financial Information......................... S-13
Accounting Treatment........................... S-14
Use of Proceeds................................ S-14
Description of the Preferred Securities........ S-14
Description of the Preferred Securities
Guarantee..................................... S-24
Description of the Subordinated Debentures..... S-25
Effect of Obligations under the Subordinated
Debentures and the Preferred Securities
Guarantee..................................... S-31
United States Federal Income Taxation.......... S-32
Underwriting................................... S-37
PROSPECTUS
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Information Concerning Western Resources, Inc.
and ADT Limited............................... 3
Kansas City Power & Light Company.............. 3
Proposed Merger With Western Resources, Inc.... 4
The Trusts..................................... 4
Ratios of Earnings to Fixed Charges and
Earnings to Fixed Charges and Preferred
Dividend Requirements......................... 5
Use of Proceeds................................ 5
Description of the Preferred Securities........ 6
Description of the Preferred Securities
Guarantees.................................... 7
Description of the Subordinated Debentures..... 10
Effect of Obligations Under the Subordinated
Debentures and the Preferred Securities
Guarantees.................................... 18
Plan of Distribution........................... 18
Experts........................................ 19
Legal Opinions................................. 19
6,000,000
PREFERRED SECURITIES
KCPL FINANCING I
8.3% TRUST ORIGINATED
PREFERRED SECURITIES-SM-
("TOPRS-SM-")
FULLY AND UNCONDITIONALLY
GUARANTEED BY
KANSAS CITY
POWER & LIGHT
COMPANY
---------------------
PROSPECTUS SUPPLEMENT
---------------------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
MORGANSTANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
April 9, 1997
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