PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 21, 1997
FILED PURSUANT TO RULE 424(B)(2)
FILE NO. 333-26115
$30,000,000
WESTERN RESOURCES, INC.
6.80% SENIOR NOTES DUE 2018
(INTEREST PAYABLE ON JANUARY 15 AND JULY 15)
------------------------
The 6.80% Senior Notes Due 2018 (the "Notes") of Western Resources, Inc.
(the "Company") mature on July 15, 2018. The Notes will bear interest from the
date of initial issuance at the rate of 6.80% per annum, payable on January 15
and July 15 of each year, commencing January 15, 1999. The Notes will be
redeemable by the Company (in whole or in part), at any time and from time to
time on or after July 15, 2003, at 100% of the principal amount to be redeemed,
plus accrued and unpaid interest, if any, to the date of redemption. In
addition, at the option of any deceased Beneficial Owner's Representative (each
as defined herein), such Beneficial Owner's Notes will be redeemable at 100% of
their principal amount, plus accrued and unpaid interest, if any, to the date of
redemption, subject to certain limitations. See "Description of Notes" herein
and related information in the accompanying Prospectus.
The Notes will be unsecured and unsubordinated general obligations of the
Company ranking PARI PASSU with all other unsecured and unsubordinated
obligations of the Company. The Notes will remain the obligations of the Company
and not of any of its subsidiaries after consummation of the pending acquisition
of Kansas City Power & Light Company ("KCPL") and the transactions relating
thereto (the "KCPL Acquisition"). The Notes will be effectively subordinated to
all secured debt of the Company, including its First Mortgage Bonds aggregating
$658.9 million at March 31, 1998. The Notes will also be structurally
subordinated to all secured and unsecured indebtedness of the Company's
subsidiaries. On a pro forma basis, at March 31, 1998, and giving effect to the
KCPL Acquisition, the Notes would have been structurally subordinated to $3.5
billion of indebtedness of the Company's subsidiaries, inclusive of the
Company's First Mortgage Bonds and other indebtedness and the indebtedness of
KGE (as defined herein) and KCPL. See "Risk Factors."
The Notes initially will be represented by a global certificate or
certificates registered in the name of The Depository Trust Company ("DTC") or
its nominee. Beneficial interests in the Notes will be shown on, and transfers
thereof will be effected only through, records maintained by Participants (as
defined in the accompanying Prospectus) in DTC. Except as described herein,
Notes in certificated form will not be issued in exchange for the global
certificates. See "Book-Entry" in the accompanying Prospectus.
------------------------
SEE "RISK FACTORS" ON PAGE S-5 FOR CERTAIN INFORMATION RELEVANT TO AN INVESTMENT
IN THE NOTES.
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.
------------------------
Edward D. Jones & Co., L.P. (the "Underwriter") has agreed to purchase the
Notes from the Company at 96.75% of their principal amount ($29,025,000
aggregate proceeds to the Company, before deducting expenses payable by the
Company estimated at $105,000), subject to the terms and conditions set forth in
the Purchase Agreement.
The Underwriter proposes to offer the Notes from time to time for sale in
one or more negotiated transactions, or otherwise, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. For further information with respect to the plan of
distribution and any discounts, commissions or profits on resale that may be
deemed underwriting discounts or commissions, see "Underwriting" herein.
------------------------
The Notes are offered by the Underwriter, subject to receipt and acceptance
by it and subject to its right to reject any order in whole or in part. It is
expected that delivery of the Notes will be made in book-entry form only through
the facilities of DTC in New York, New York on or about July 17, 1998 against
payment therefor in immediately available funds.
EDWARD D. JONES & CO., L.P.
The date of this Prospectus Supplement is July 13, 1998.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE NOTES DURING
AND AFTER THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Reference is made to "Incorporation of Certain Documents by Reference" in
the accompanying Prospectus. At the date of this Prospectus Supplement, the
documents incorporated by reference herein include the Company's Annual Report
on Form 10-K/A for the year ended December 31, 1997, the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998, the Company's Current
Reports on Form 8-K filed January 5, 1998, March 23, 1998 and July 13, 1998 (the
"Company's July 13, 1998 Form 8-K") and the Company's Registration Statement on
Form S-4 (the "Form S-4"). The Form S-4 includes a proxy statement relating to
the KCPL Acquisition.
S-2
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE
DETAILED INFORMATION AND FINANCIAL STATEMENTS INCORPORATED HEREIN BY REFERENCE.
THE COMPANY
The Company's primary business activities are providing electric generation,
transmission and distribution services to approximately 614,000 customers in
Kansas; providing security alarm monitoring services to approximately 1.3
million customers located throughout the United States; providing natural gas
transmission and distribution services to approximately 1.4 million customers in
Oklahoma and Kansas through its ownership of a 45% equity interest in ONEOK Inc.
("ONEOK"); and investing in international power projects. Rate regulated
electric service is provided by KPL, a division of the Company, and Kansas Gas
and Electric Company ("KGE"), a wholly owned subsidiary. Security services are
provided by Protection One, Inc. ("Protection One"), a publicly traded,
approximately 85%-owned subsidiary. KGE owns 47% of Wolf Creek Nuclear Operating
Corporation, the operating company for Wolf Creek Generating Station.
S-3
THE OFFERING
Securities Offered.............. $30,000,000 aggregate principal amount of 6.80% Senior
Notes Due 2018.
Interest Payment Dates.......... Semiannually, on each January 15 and July 15, beginning
January 15, 1999.
Ranking......................... The Notes will be unsecured and unsubordinated
obligations of the Company ranking PARI PASSU with all
other unsecured and unsubordinated obligations of the
Company. The Notes will remain obligations of the
Company and not of any of its subsidiaries after
consummation of the KCPL Acquisition. The Notes will be
effectively subordinated to all secured debt of the
Company, including its First Mortgage Bonds aggregating
$658.9 million at March 31, 1998. The Notes will also be
structurally subordinated to all secured and unsecured
indebtedness of the Company's subsidiaries. On a pro
forma basis, at March 31, 1998, and giving effect to the
KCPL Acquisition, the Notes would have been structurally
subordinated to $3.5 billion of indebtedness of the
Company's subsidiaries, inclusive of the Company's First
Mortgage Bonds and other indebtedness and the
indebtedness of KGE and KCPL. See "Risk Factors." The
Indenture under which the Notes are being issued
contains no restrictions on the amount of additional
indebtedness that may be incurred by the Company or any
subsidiary of the Company.
Company's Optional The Notes will be redeemable by the Company (in whole or
Redemption...................... in part), at any time and from time to time on or after
July 15, 2003, at 100% of the principal amount to be
redeemed, plus accrued and unpaid interest, if any, to
the date of redemption. See "Description of
Notes--Optional Redemption" herein.
Beneficial Owner's At the option of any deceased Beneficial Owner's
Redemption Privilege............ Representative, such Beneficial Owner's Notes will be
redeemable at 100% of their principal amount, plus
accrued and unpaid interest, if any, to the date of
redemption, subject to the maximum principal amounts of
$25,000 per deceased Beneficial Owner and $600,000 in
the aggregate for all deceased Beneficial Owners during
the initial period ending July 15, 1999 and during each
twelve-month period thereafter. See "Description of
Notes--Limited Right of Redemption upon Death of
Beneficial Owner of Notes."
Use of Proceeds................. The net proceeds from the sale of the Notes will be used
for repayment of short-term indebtedness, corporate
acquisitions and other general corporate purposes.
S-4
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE NOTES SHOULD CAREFULLY REVIEW THE INFORMATION
CONTAINED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS
AND THE DOCUMENTS INCORPORATED HEREIN AND THEREIN BY REFERENCE AND SHOULD
PARTICULARLY CONSIDER THE FOLLOWING:
SUBORDINATION OF THE NOTES
The Notes will be unsecured and unsubordinated general obligations of the
Company ranking PARI PASSU with all other unsecured and unsubordinated
obligations of the Company. The Notes will be effectively subordinated to all
secured debt of the Company, including its First Mortgage Bonds aggregating
$658.9 million at March 31, 1998.
Portions of the Company's operations are currently conducted through
subsidiaries. In addition, in connection with the KCPL Acquisition, it is
expected that the electric utility operations of the Company, which constitute
substantially all of the assets of the Company, will be transferred to KGE, and
KCPL and KGE will be merged into NKC, Inc., which will be an 80.1%-owned
subsidiary of the Company and renamed Westar Energy, Inc. ("Westar Energy"). In
addition, in connection with the consummation of the KCPL Acquisition, up to
$1.9 billion of the outstanding indebtedness of the Company and KGE will be
assumed by Westar Energy as required by the debt instruments pursuant to which
such indebtedness has been issued; provided, however, that the Notes will not be
assumed by Westar Energy and will remain the obligations of the Company and not
of any of its subsidiaries upon consummation of the KCPL Acquisition. Due to
structural subordination, the Notes will be effectively subordinated to all
existing and future indebtedness and other liabilities and commitments of the
Company's subsidiaries, including, without limitation, Westar Energy. The
Indenture pursuant to which the Notes are to be issued does not contain any
covenant which restricts the ability of the Company's subsidiaries or the
Company to incur additional indebtedness. As of March 31, 1998, the Company's
subsidiaries had $1.5 billion of indebtedness outstanding. As of such date on a
pro forma basis after giving effect to the KCPL Acquisition and the assumption
of certain debt of the Company in connection therewith as described above, the
Company's subsidiaries would have had $3.5 billion of indebtedness outstanding.
For additional information concerning the KCPL Acquisition, see the Form
S-4.
S-5
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used for repayment of
short-term indebtedness, corporate acquisitions and other general corporate
purposes. As of June 30, 1998, such short-term indebtedness had a weighted
average interest rate of approximately 5.98% per annum and maturities of less
than a year from the date of issuance.
SUMMARY FINANCIAL INFORMATION
The summary financial information of the Company set forth below should be
read in conjunction with the financial statements and other financial
information incorporated by reference herein.
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
1997(1)(2)(3) 1996 1995 1994(4) 1993
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
CONSOLIDATED INCOME SUMMARY:
Sales.................................. $2,151,765 $ 2,046,827 $ 1,744,274 $ 1,764,769 $ 2,028,411
Income From Operations................. 142,925 388,553 373,721 370,672 370,338
Income Before Interest and Taxes....... 1,065,964 403,860 392,378 (6) (6)
Net Income............................. 494,094 168,950 181,676 187,447 177,370
Ratio of Earnings to Fixed
Charges(5)........................... 4.31x 2.16x 2.41x 2.65x 2.36x
- ------------------------
(1) In November 1997, the Company acquired an approximate 82.4% equity interest
in Protection One. The Company paid approximately $258 million in cash and
contributed the majority of its existing security alarm monitoring business
net assets to Protection One in connection with this acquisition.
(2) In November 1997, the Company acquired a 45% ownership interest in ONEOK in
exchange for contributing substantially all of its regulated and unregulated
natural gas business to ONEOK.
(3) During the third quarter of 1997, the Company sold its investment in Tyco
International Ltd. and recorded a gain of approximately $519 million net of
tax.
(4) Information reflects the sale of the Missouri natural gas properties on
January 31, 1994.
(5) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consists of net income plus interest charges, income taxes, and the
estimated interest component of rents. "Fixed charges" consists of interest
charges and the estimated interest component of rents.
(6) Information not available due to changing financial statement presentation
from traditional "Utility Company Format" to "Commercial Enterprise Format"
for periods ending December 31, 1997, 1996 and 1995.
AS OF MARCH 31, 1998
----------------------
AMOUNT PERCENT
--------- -----------
(DOLLARS IN MILLIONS)
CONSOLIDATED CAPITALIZATION SUMMARY (1):
First mortgage and pollution control bonds (net of premium/discount and
amortization)........................................................................ $ 1,341 30.0%
Other long-term debt................................................................... 822 18.4
Preferred and preference stock......................................................... 75 1.7
Company-obligated mandatorily redeemable preferred securities of subsidiary trusts
holding solely Company subordinated debentures....................................... 220 4.9
Common stock equity.................................................................. 2,017 45.0
--------- -----
Total capitalization............................................................... $ 4,475 100.0%
--------- -----
--------- -----
Short-term debt...................................................................... $ 471 --
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(1) Does not reflect the sale of the Notes or the use of proceeds therefrom.
S-6
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following summary unaudited pro forma combined financial information
summarizes the consolidated historical income statement and capitalization
statement information for the Company and KCPL on a pro forma basis as of and
for the three month period ended March 31, 1998. For additional information
concerning the KCPL Acquisition, see the Form S-4.
FOR THE THREE MONTH PERIOD ENDED
MARCH 31, 1998
--------------------------------------------------
COMPANY KCPL PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
PRO FORMA INCOME SUMMARY:
Sales...................................... $ 382,343 $ 195,635 -- $ 577,978
Income From Operations..................... 66,586 38,167 $ (6,714) 98,039
Income Before Interest and Taxes........... 89,961 32,076 (12,464) 109,573
Net Income................................. 30,468 14,366 (14,466) 30,368
Ratio of Earnings to Fixed Charges(1)...... 4.17x(2) 2.58x(2) -- 3.54x(2)
(1) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consists of net income plus interest charges, income taxes, and the
estimated interest component of rents. "Fixed charges" consists of interest
charges and the estimated interest component of rents.
(2) Represents the ratios for the 12-month period ended March 31, 1998.
AS OF MARCH 31, 1998
----------------------------------------------------
COMPANY KCPL PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED PERCENT
----------- ----------- ------------- ----------- -----------
(DOLLARS IN MILLIONS)
PRO FORMA CAPITALIZATION
SUMMARY:
Long-term Debt (net).............................. $ 2,163 $ 941 $ 115 $ 3,219 45.7%
Preferred and Preference Stock.................... 75 89 (114) 50 0.7
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely
Company subordinated debentures................. 220 150 -- 370 5.3
Common stock equity............................... 2,017 869 523 3,409 48.3
----------- ----------- ----- ----------- -----
Total........................................... $ 4,475 $ 2,049 $ 524 $ 7,048 100.0%
----------- ----------- ----- ----------- -----
----------- ----------- ----- ----------- -----
Short-term Debt................................... $ 471 $ 27 -- $ 498 --
S-7
DESCRIPTION OF NOTES
The Notes constitute a series of Debt Securities as defined in the
accompanying Prospectus. At the date of this Prospectus Supplement, there were
$520.0 million in principal amount of the Debt Securities (exclusive of the
Notes) outstanding. The following description of the particular terms of the
Notes offered hereby supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the Debt
Securities set forth in the accompanying Prospectus under the heading
"Description of Debt Securities," to which description reference is hereby made.
INTEREST, MATURITY AND PAYMENT. The Notes will mature on July 15, 2018. The
Notes will bear interest from the date of initial issuance at the rate of 6.80%
per annum, payable on January 15 and July 15 of each year, commencing January
15, 1999. Interest is payable to holders of record on the interest payment
dates. Principal and interest are payable at the office or agency of the Company
in New York City. For so long as the Notes are registered in the name of DTC, or
its nominee, the principal and interest due on the Notes will be payable by the
Company or its agent to DTC for payment to its Participants (as defined in the
accompanying Prospectus) for subsequent disbursement to the beneficial owners.
OPTIONAL REDEMPTION. The Company shall have the right to redeem the Notes,
in whole or in part, at any time and from time to time, on or after July 15,
2003, upon not less than 30 days' notice, at a redemption price of 100% of the
principal amount to be redeemed, plus accrued and unpaid interest, if any, to
the redemption date.
OPTIONAL REDEMPTION PROCEDURES. Notice of any redemption will be mailed at
least 30 days before the redemption date to each holder of Notes to be redeemed.
The Company may condition such redemption on the happening of a stated event, in
which case the notice will describe such conditions, and such notice will be of
no effect unless all such conditions have occurred on or before the redemption
date or have been waived by the Company in its sole discretion. Unless the
Company fails to make payment of the redemption price, on and after the
redemption date interest will cease to accrue on the Notes or portions thereof
called for redemption.
Subject to the foregoing and to applicable law including, without
limitation, United States federal securities laws, the Company or its affiliates
may, at any time and from time to time, purchase outstanding Notes by tender, in
the open market or by private agreement.
LIMITED RIGHT OF REDEMPTION UPON DEATH OF BENEFICIAL OWNER OF NOTES. Unless
the Notes have been declared due and payable prior to their maturity by reason
of an Event of Default (as defined in the accompanying Prospectus), the
Representative (as defined herein) of a deceased holder of an interest in the
Notes (a "Beneficial Owner") has the right to request redemption of all or part
of such Beneficial Owner's interest in the Notes, expressed in integral
multiples of $1,000, and the Company will redeem the same subject to the
limitations that the Company will not be obligated to redeem during the period
from the initial issuance of the Notes through and including July 15, 1999 (the
"Initial Period"), and during any twelve-month period which ends on and includes
each July 15 thereafter (each such twelve-month period being hereinafter
referred to as a "Subsequent Period") (i) on behalf of any deceased Beneficial
Owner, any interest in the Notes which exceeds an aggregate principal amount of
$25,000 and (ii) interests in the Notes in an aggregate principal amount
exceeding $600,000. A request for redemption may be presented to the Indenture
Trustee by the Representative of a deceased Beneficial Owner at any time and in
any principal amount. Representatives of deceased Beneficial Owners must make
arrangements with the Participant through whom such interest is owned in order
that timely presentation of redemption requests can be made by the Participant
and, in turn, by DTC, to the Indenture Trustee. If the Company, although not
obligated to do so, chooses to redeem interests in the Notes of a deceased
Beneficial Owner during the Initial Period or in any Subsequent Period in excess
of the $25,000 limitation, such redemption, to the extent that it exceeds the
$25,000 limitation for any deceased Beneficial Owner, shall not be included in
the
S-8
computation of the $600,000 aggregate limitation for such Initial Period or such
Subsequent Period, as the case may be.
Subject to the $25,000 and the $600,000 limitations, the Company will upon
the death of any Beneficial Owner redeem the interests of such Beneficial Owner
in the Notes within 60 days following receipt by the Indenture Trustee of a
Redemption Request (as defined herein), including all supporting documentation,
from such Beneficial Owner's personal representative, or surviving joint
tenant(s), tenant(s) by the entirety or tenant(s) in common, or other persons
entitled to effect a Redemption Request (each, a "Representative"). If, during
the Initial Period or any Subsequent Period, Redemption Requests exceed the
aggregate principal amount of Notes required to be redeemed, then such excess
Redemption Requests (subject in the case of the $25,000 limitation to the
provisions of the last sentence of the preceding paragraph) will be applied to
successive Subsequent Periods in order of receipt, regardless of the number of
Subsequent Periods required to redeem such interests unless sooner withdrawn as
described below.
A request for redemption of an interest in the Notes may be made by
delivering a request to the Participant through whom the deceased Beneficial
Owner owned such Notes, in form satisfactory to the Participant, together with
evidence of the death of the Beneficial Owner and the authority of the
Representative satisfactory to the Participant and the Indenture Trustee. A
Representative of a deceased Beneficial Owner may make the request for
redemption and shall submit such other evidence of the right to such redemption
as the Participant or the Indenture Trustee shall require. The request shall
specify the principal amount of Notes to be redeemed. A request for redemption
in form satisfactory to the Participant and accompanied by the documents
relevant to the request as above provided, together with a certification by the
Participant that it holds the interest on behalf of the deceased Beneficial
Owner with respect to whom the request for redemption is being made (a
"Redemption Request"), shall be provided to DTC by a Participant, and DTC will
forward the request to the Indenture Trustee. Redemption Requests, including all
supporting documentation, shall be in the form satisfactory to the Indenture
Trustee, and no request for redemption shall be considered validly made until
the Redemption Request and all supporting documentation, in form satisfactory to
the Indenture Trustee, shall have been received by the Indenture Trustee.
The price to be paid by the Company for an interest in the Notes to be
redeemed pursuant to a request on behalf of a deceased Beneficial Owner's
Representative is 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of redemption. Subject to arrangements with DTC,
payment for interests in the Notes which are to be redeemed shall be made to DTC
within 60 days following receipt by the Indenture Trustee of the Redemption
Request, including all supporting documentation, and the Notes in the aggregate
principal amount specified in the Redemption Requests submitted to the Indenture
Trustee by DTC which are to be fulfilled in connection with such payment. Any
acquisition of Notes by the Company or its subsidiaries other than by redemption
at the option of any Representative of a deceased Beneficial Owner shall not be
included in the computation of either the $25,000 or the $600,000 limitation for
the Initial Period or for any Subsequent Period.
Interests in the Notes held in tenancy by the entirety, joint tenancy or by
tenants in common will be deemed to be held by a single Beneficial Owner, and
the death of a tenant in common, tenant by the entirety or joint tenant will be
deemed the death of a Beneficial Owner. The death of a person who, during such
person's lifetime, was entitled to substantially all of the rights of a
Beneficial Owner of the Notes will be deemed the death of the Beneficial Owner,
regardless of the recordation of such interest on the records of the
Participant, if such rights can be established to the satisfaction of the
Participant and the Indenture Trustee.
In the case of a Redemption Request which is presented on behalf of a
deceased Beneficial Owner and which has not been fulfilled at the time the
Company gives notice of its election to redeem the Notes, the Notes which are
the subject of such Redemption Request shall not be eligible for redemption
pursuant
S-9
to the Company's option to redeem but shall remain subject to redemption
pursuant to such Redemption Request. Subject to the provisions of the
immediately preceding sentence, any Redemption Request may be withdrawn upon
delivery of a written request for such withdrawal given to the Indenture Trustee
by DTC prior to payment for redemption of interests in the Notes by reason of
the death of a Beneficial Owner.
The Company is legally obligated to redeem Notes properly presented for
redemption pursuant to a Redemption Request in accordance with and subject to
the terms, conditions and limitations in the Indenture, as summarized above. The
Company's redemption obligation is not cumulative. Nothing in the Indenture
prohibits the Company from redeeming, in fulfillment of Redemption Requests made
pursuant to the Indenture, Notes in excess of the principal amount the Company
is obligated to redeem, nor does anything in the Indenture prohibit the Company
from purchasing any Notes in the open market. However, the Company may not use
any Notes redeemed or purchased as described in the immediately preceding
sentence as a credit against its redemption obligation.
Because of the limitations of the Company's requirement to redeem, no
Beneficial Owner can have any assurance that his or her Notes will be paid prior
to maturity.
SUCCESSOR OBLIGOR. It is intended that the Notes will remain the
obligations of the Company and not of any of its subsidiaries upon the
consummation of the KCPL Acquisition and the related assumption of certain
indebtedness of the Company by Westar Energy. Therefore, although the Notes are
subject to the provisions described in the accompanying Prospectus under
"Description of Debt Securities--Successor Obligor," such provisions will not
apply in the case of the consummation of the KCPL Acquisition.
AUTOMATIC EXCHANGE. The Company may, solely at its option, exchange the
Notes in whole but not in part for a new issue of notes (the "New Notes"), which
are registered under the Securities Act of 1933, as amended (the "Securities
Act"), and issued pursuant to an indenture that is qualified under the Trust
Indenture Act of 1939, as amended, and having an indenture trustee that may be
different from the Indenture Trustee (the "New Indenture"). The terms and
provisions of the New Notes would be identical to those of the Notes except for
such terms or provisions that may be required to reflect the issuance of the New
Notes under the New Indenture. Each of the holders of Notes will be entitled to
receive $1,000 in principal amount of New Notes for each $1,000 in principal
amount of Notes registered in the name of such holder as of the date fixed for
the exchange (the "Exchange Date"). The rights of the holders of the Notes as
noteholders of the Company with respect to the Notes exchanged will cease and
the person or persons entitled to receive the New Notes issuable upon the
exchange will be treated as the registered holder or holders of such New Notes
from the Exchange Date. New Notes issued in exchange for Notes will be issued in
principal amounts of $1,000 and integral multiples thereof. The Company will
mail written notice to each holder of record of Notes to be exchanged for New
Notes at least 15 days and not more than 120 days prior to the Exchange Date.
DTC, or its nominee, will be the only registered holder of the New Notes and
will receive a registered global certificate or certificates representing the
New Notes and will deliver the global certificate or certificates representing
the Notes to the Indenture Trustee for cancellation.
S-10
UNDERWRITING
Subject to the terms and conditions set forth in the Purchase Agreement,
Edward D. Jones & Co., L.P. (the "Underwriter") has agreed to purchase from the
Company all of the Notes. The nature of the Underwriter's obligation is such
that it is committed to purchase and pay for all of the Notes if any are
purchased.
The offering of the Notes is made for delivery when, as and if accepted by
the Underwriter and subject to prior sale and to withdrawal, cancellation or
modification of the offer without notice. The Underwriter reserves the right to
reject any order for the purchase of the Notes.
The Underwriter has advised the Company that it proposes to offer the Notes
from time to time for sale in one or more negotiated transactions, or otherwise,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Underwriter may effect
such transactions by selling the Notes to or through dealers, and such dealers
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Underwriter and/or the purchasers of the Notes for whom
they may act as agent. The Underwriter and any dealers that participate with the
Underwriter in the distribution of the Notes may be deemed to be underwriters,
and any discounts or commissions received by them and any profit on the resale
of the Notes by them may be deemed to be underwriting discounts or commissions,
under the Securities Act.
The Company has agreed in the Purchase Agreement to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments made or required to be made by the
Underwriter with respect to such liabilities.
The Company does not intend to apply for the listing of the Notes on any
national securities exchange. The Company has been advised by the Underwriter
that it intends to make a market in the Notes. The Underwriter is under no
obligation to do so and may discontinue, at any time and without notice, any
such market making in which it may engage. The Company cannot predict the
liquidity of any trading market for Notes.
In connection with the sale to the public of the Notes, the Underwriter may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Notes. Specifically, the Underwriter may bid for and purchase the Notes in
the open market to stabilize the price of the Notes. The Underwriter may also
overallot the Notes, creating a syndicate short position, and may bid for and
purchase the Notes in the open market to cover the syndicate short position. In
addition, the Underwriter may bid for and purchase the Notes in market making
transactions. These activities may stabilize or maintain the market price of the
Notes above the market levels that would otherwise prevail. The Underwriter is
not required to engage in these activities, and may end these activities at any
time.
EXPERTS AND LEGALITY
The consolidated financial statements of Western Resources, Inc.
incorporated by reference in this Prospectus Supplement and elsewhere in the
accompanying Prospectus and the Registration Statement 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.
The financial statements included in KCPL's Annual Report on Form 10-K for
the years ended December 31, 1996 and 1997 incorporated by reference in this
Prospectus and in the Registration Statement as an exhibit to the Company's
April 2, 1997 Form 8-K (as defined in the accompanying Prospectus) and the
Company's July 13, 1998 Form 8-K, respectively, have been audited by Coopers &
Lybrand L.L.P., independent 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.
For further information, see "Legal Opinions" and "Experts" in the
accompanying Prospectus.
S-11
$550,000,000
Western Resources, Inc.
First Mortgage Bonds
and Debt Securities
------------------
Western Resources, Inc. (the "Company") intends from time to time to issue
up to $550,000,000 aggregate principal amount of its First Mortgage Bonds (the
"New Bonds"), senior unsecured debt securities (the "Debt Securities") or any
combination thereof (the New Bonds and Debt Securities are referred to herein,
collectively, as the "Securities"), in one or more series, on terms to be
determined at the time or times of sale. At each time that Securities (the
"Offered Securities") are offered for which this Prospectus is being delivered,
there will be an accompanying Prospectus Supplement (the "Prospectus
Supplement") that sets forth the series designation, aggregate principal amount,
maturity or maturities, rate or rates and times of payment of interest,
redemption terms, any sinking fund terms, any conversion terms, and any other
special terms of the Offered Securities. The Securities will be offered as set
forth under "Plan of Distribution." If described in a Prospectus Supplement, New
Bonds of any series may be converted, solely at the option of the Company, in
their entirety into Debt Securities with the same aggregate principal amount,
maturity date, redemption provisions, interest rate and interest payment dates
as the New Bonds so converted (the "Conversion"). The financial covenants,
events of default and certain other terms pertaining to the Debt Securities will
differ from those pertaining to the New Bonds. See "Description of New
Bonds--Company Conversion Option" and "Description of Debt Securities."
As of June 30, 1997, the Company had $658.9 million of First Mortgage Bonds
outstanding (excluding the KGE Bonds (as defined herein)) and would have had
$1.3 billion of First Mortgage Bonds and other secured indebtedness outstanding
on a pro forma basis giving effect to the consummation of the pending merger
with Kansas City Power & Light Company ("KCPL").
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
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 July 21, 1997.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy and information statements, and other
information filed by the Company, can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at certain of its Regional Offices at 7 World Trade
Center, 13th Floor, New York, N.Y. 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 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 and by accessing the
Commission's Web site, http://www.sec.gov. Certain securities of the Company are
listed on the New York Stock Exchange (the "NYSE"), and reports, proxy
statements and other information concerning the Company can be inspected at the
offices of the NYSE, 20 Broad Street, New York, N.Y. 10005. Kansas City Power &
Light Company ("KCPL") has securities listed on the NYSE and on the Chicago
Stock Exchange (the "CSE"). Because KCPL is also subject to the informational
requirements of the 1934 Act and has securities listed on the NYSE, information
concerning KCPL is available from the same sources as given above with respect
to the Company. Furthermore, information concerning KCPL is available at the
offices of the CSE, 440 South LaSalle Street, Chicago, Illinois 60605.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated herein by
reference as of their respective dates of filing and shall be deemed to be a
part hereof:
1. The Company's Annual Report on Form 10-K (File No. 1-3523) for the year
ended December 31, 1996 (the "Company's 1996 Form 10-K").
2. The Company's Quarterly Report on Form 10-Q (File No. 1-3523) for the
quarter ended March 31, 1997.
3. The Company's Current Reports on Form 8-K (File No. 1-3523) filed
February 10, 1997 and April 2, 1997 (the "Company's April 2, 1997 Form 8-K") (in
which KCPL's Annual Report on Form 10-K is included as an exhibit).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14, or
15(d) of the 1934 Act after the date of this Prospectus and prior to the
termination of this offering shall also be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all documents referred to above which have been or may be incorporated by
reference in this Prospectus (not including exhibits to such incorporated
information that are not specifically incorporated by reference into such
information). Requests for such copies should be directed to Richard D. Terrill,
Esq., Secretary of the Company, 818 Kansas Avenue, Topeka, Kansas 66612 (785)
575-6322.
2
INFORMATION ON
KANSAS CITY POWER & LIGHT COMPANY
While the Company has included or incorporated in this Prospectus by
reference information concerning KCPL insofar as it is known or reasonably
available to the Company, KCPL is not affiliated with the Company. Although the
Company has no knowledge that would indicate that statements relating to KCPL
contained or incorporated by reference in this Prospectus in reliance upon
publicly available information are inaccurate or incomplete, the Company 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 "The Company."
THE COMPANY
GENERAL
The Company and its divisions and wholly owned subsidiaries include KPL, a
rate-regulated electric and gas division of the Company ("KPL"), Kansas Gas and
Electric Company ("KGE"), a rate-regulated utility and wholly owned subsidiary
of the Company, Westar Capital, Inc. ("Westar Capital"), Westar Security, Inc.
("Westar Security"), Westar Energy, Inc., The Wing Group, Ltd., non-utility
subsidiaries, and Mid Continent Market Center, Inc., a regulated gas
transmission service provider ("MCMC"). KGE owns 47% of Wolf Creek Nuclear
Operating Corporation ("WCNOC"), the operating company for the Wolf Creek
Generating Station ("Wolf Creek"). The Company's non-utility subsidiaries market
natural gas primarily to large commercial and industrial customers, provide
electronic security services, engage in international power project development
and provide other energy-related products and services.
The Company is engaged principally in the production, purchase,
transmission, distribution and sale of electricity, the delivery and sale of
natural gas and electronic security services. The Company serves approximately
606,000 electric customers in eastern and central Kansas and approximately
650,000 natural gas customers in Kansas and northeastern Oklahoma. On December
12, 1996, the Company and ONEOK, Inc. ("ONEOK") announced a proposed strategic
alliance pursuant to which the Company will contribute its regulated local
natural gas distribution operations, MCMC and Westar Gas Marketing, Inc.
("Westar Gas Marketing"), and will become the largest shareholder of ONEOK. This
transaction is scheduled to be completed during the second half of 1997.
Westar Capital is a private investment company, wholly owned by the Company,
with investments in energy and security related and technology oriented
businesses. As of July 2, 1997, Westar Capital owned approximately 18 million
shares of Tyco International Ltd., formerly ADT Limited ("Tyco"), which
represents less than 10% of the outstanding shares of Tyco. The Company's
average basis in its Tyco common stock approximates $35 per share.
Westar Security is an electronic security services business with over
440,000 customer accounts. On December 31, 1996, the Company acquired all of the
assets of Westinghouse Security Systems, Inc. ("Westinghouse Security"), a
national security system monitoring company and a subsidiary of Westinghouse
Electric Corporation ("Westinghouse"). Westar Security is the third-largest
monitored security company in the United States with offices in many major U.S.
markets and direct access to customers in 48 states.
On February 7, 1997, the Company announced that it had entered into a merger
agreement with KCPL, pursuant to which the Company will acquire KCPL. KCPL is a
public utility engaged in the generation, transmission, distribution and sale of
electricity to approximately 430,000 customers in western Missouri and eastern
Kansas.
The Company was incorporated under the laws of the State of Kansas in 1924.
The Company's principal executive offices are located at 818 Kansas Avenue,
Topeka, Kansas 66612, and its telephone number is (785) 575-6300.
3
USE OF PROCEEDS
The net proceeds from the sale of the Securities will be used to repay
short-term debt, for corporate acquisitions and for other general corporate
purposes. Information concerning the use of proceeds from the sale of each
series of the Securities will be set forth in the Prospectus Supplement relating
to such series.
DESCRIPTION OF NEW BONDS
The New Bonds are to be issued under and secured by the Mortgage and Deed of
Trust, dated July 1, 1939 (the "Original Indenture"), between the Company and
Harris Trust and Savings Bank, as Trustee (the "Trustee"), as supplemented and
amended by thirty-two supplemental indentures and as to be supplemented and
amended by a new supplemental indenture or indentures providing for the series
of New Bonds to be issued (the Original Indenture as so supplemented and amended
being herein called the "Mortgage"). The Mortgage has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part, and the bonds
of any series issued under the Mortgage are referred to herein as "Bonds" or
"First Mortgage Bonds." The following is a brief summary of certain provisions
contained in the Mortgage. Such summary does not purport to be complete and is
qualified in its entirety by express reference to the Mortgage.
If the Supplemental Indenture under which a series of New Bonds are issued
so provides, at any time such New Bonds are outstanding, the Company may, solely
at its option, convert such series of New Bonds, in whole but not in part, into
Debt Securities. Such Debt Securities will be identical to such series of New
Bonds with respect to aggregate principal amount, maturity date, redemption
provisions, interest rate and interest payment dates; however, holders of Debt
Securities will, among other things, no longer be entitled to the security
provided by the Mortgage since the Debt Securities will be unsecured obligations
of the Company, and the financial covenants, the events of default and certain
other terms pertaining to the Debt Securities will differ from those pertaining
to the New Bonds. See "--Company Conversion Option" and "Description of Debt
Securities."
GENERAL
The New Bonds will be issued only in the form of registered bonds without
coupons in denominations of $1,000 and multiples thereof. New Bonds will be
exchangeable for other New Bonds of the same series in equal aggregate principal
amounts without charge to the holders except for any applicable tax or
governmental charge. The Company intends that the New Bonds will be issued in
the form of one or more fully registered global certificates representing the
aggregate principal amount of the New Bonds and will be deposited with The
Depository Trust Company ("DTC"). See "Book-Entry."
The Prospectus Supplement for each series of New Bonds will set forth the
issue date, maturity date, redemption provisions, interest rate, and interest
payment dates applicable to such series and whether such series of New Bonds
will be convertible at the Company's option for Debt Securities, as well as the
terms thereof. Subject to certain exceptions provided in the Mortgage, interest
is payable at either the office of the Trustee in Chicago, Illinois, or of the
Paying Agent, Harris Trust and Savings Bank, New York, New York, to the persons
in whose names the New Bonds are registered at the close of business on the
tenth day prior to the interest payment date (the "Record Date") or, at the
option of the Company, may be paid by checks mailed to such persons at their
registered addresses. Principal of the New Bonds is to be payable at either of
the agencies of the Company mentioned above.
There will be no improvement or maintenance fund for the New Bonds. The
applicable Prospectus Supplement will set forth any sinking fund provided for a
particular series of New Bonds.
The Company maintains routine banking relationships with the Bank of
Montreal, the parent of the Trustee. The Trustee is also Indenture Trustee under
the Indenture pursuant to which the Debt Securities
4
will be issued. The Bank of Montreal had a $49.5 million participation in the
Company's revolving credit facilities as of March 31, 1997.
REDEMPTION PROVISIONS
The Prospectus Supplement for each series of New Bonds will set forth the
redemption provisions, if any, of such New Bonds.
ISSUANCE OF ADDITIONAL BONDS
Additional Bonds ranking equally with the Bonds of other series then
outstanding may be issued having such dates, maturities, interest rates,
redemption prices and other terms as may be determined by the Board of
Directors. Additional Bonds may be issued in principal amounts not exceeding:
(1) 60% (so long as Bonds issued prior to January 1, 1997 remain outstanding,
and thereafter 70%) of the net bondable value of property additions not subject
to an unfunded prior lien; (2) the principal amount of Bonds retired or to be
retired (except out of trust moneys); and (3) the amount of cash deposited with
the Trustee for such purpose, which may thereafter be withdrawn upon the same
basis that additional Bonds are issuable under (1) or (2) above. Additional
Bonds may not be issued on the basis of property additions subject to an
unfunded prior lien. (Mortgage, Article III; Twenty-Sixth, Twenty-Eighth,
Twenty-Ninth, Thirtieth, Thirty-First and Thirty-Second Supplemental Indentures,
Article V)
As of December 31, 1996, the Company had approximately $1.0 billion of net
bondable property additions not subject to unfunded prior liens (the KGE
Mortgage described under "--Priority and Security" constitutes such an unfunded
prior lien in respect of certain properties of the Company) enabling it to issue
approximately $618 million principal amount of additional Bonds on such date. As
of December 31, 1996, the Company may also issue up to approximately $3 million
of additional Bonds on the basis of Bonds which have been retired. The New Bonds
may be issued against the principal amount of Bonds retired or to be retired.
So long as Bonds issued prior to January 1, 1997 remain outstanding,
additional Bonds may not be issued unless the net earnings of the Company
available for interest, depreciation and property retirements for a period of
any 12 consecutive months during the period of 15 calendar months immediately
preceding the first day of the month in which the application for authentication
and delivery of additional Bonds is made shall have been not less than the
greater of two times the annual interest charges on, or 10% of the principal
amount of, all Bonds then outstanding, all additional Bonds then applied for,
all outstanding prior lien bonds and all prior lien bonds, if any, then being
applied for. Bonds cancelled at or prior to the time application is made for the
issuance of New Bonds are not deemed to be outstanding for purposes of
calculating interest charges in determining whether the net earnings test is met
for the issuance of additional Bonds. Bonds or prior lien bonds for which moneys
sufficient for the payment thereof have been deposited are not considered
outstanding for this purpose. The net earnings test referred to need not be
satisfied to issue additional Bonds (i) on the basis of property additions
subject to an unfunded prior lien which simultaneously will become a funded
prior lien, if application for the issuance of the additional Bonds is made at
any time after a date two years prior to the date of the maturity of the Bonds
secured by the prior lien and (ii) on the basis of the payment at maturity of
Bonds theretofore issued by the Company, or the redemption, conversion or
purchase of Bonds after a date two years prior to the date on which such Bonds
mature. Based on the Company's results for the year ended December 31, 1996, the
Company could issue approximately $772 million principal amount of additional
Bonds (7.75% interest rate assumed, without giving effect to the issuance of the
New Bonds offered hereby). (Mortgage, Article III, Sections 3, 4, and 6;
Twenty-Sixth, Twenty-Eighth, Twenty-Ninth, Thirtieth, Thirty-First and
Thirty-Second Supplemental Indentures, Article V.) The Company has reserved the
right and intends to amend the Mortgage to eliminate the foregoing requirement
once all Bonds issued prior to January 1, 1997 are no longer outstanding. See
"--Modification of the Mortgage."
5
RELEASE AND SUBSTITUTION OF PROPERTY
The Mortgage provides that, subject to various limitations, property may be
released from the lien thereof upon the basis of cash deposited with the
Trustee, Bonds or purchase money obligations delivered to the Trustee, prior
lien bonds delivered to the Trustee, or unfunded net property additions
certified to the Trustee. (Mortgage, Article VII.) The Mortgage also in effect
permits the withdrawal of cash against the certification to the Trustee of gross
property additions at 100%, or the net bondable value of property additions at
60% (so long as Bonds issued prior to January 1, 1997 remain outstanding and
thereafter 70%), or the deposit with the Trustee of Bonds acquired by the
Company. (Mortgage, Article VIII; Sections 1-3; Twenty-Sixth, Twenty-Eighth,
Twenty-Ninth, Thirtieth, Thirty-First and Thirty-Second Supplemental Indentures,
Article V)
The Mortgage contains special provisions with respect to the release of all
or substantially all of the Company's gas properties or electric properties.
(Twenty-Sixth, Twenty-Eighth, Twenty-Ninth, Thirtieth, Thirty-First and
Thirty-Second Supplemental Indentures, Article IV, Sections 2 and 3.) The
Company currently intends to tender the converted New Bonds to the Trustee to
effect the release of substantially all of its gas properties in connection with
the closing of the ONEOK Transaction. See "The Company." To the extent not so
used, converted New Bonds may be used by the Company to provide for the issuance
of additional Bonds in substitution of such New Bonds. (Mortgage, Article III,
Section 6). The Company has reserved the right and intends to amend the Mortgage
to change the release and substitution provisions. See "--Modification of the
Mortgage."
PRIORITY AND SECURITY
In the opinion of Richard D. Terrill, Esq., Corporate Secretary and
Associate General Counsel of the Company, the New Bonds, with the qualifications
described in the fifth paragraph under this "--Priority and Security" caption
relating to the lien of the KGE Mortgage (as defined below), will be secured,
equally and ratably with all of the Bonds now outstanding or hereafter issued
under the Mortgage, by the lien on substantially all of the Company's fixed
property and franchises purported to be conveyed by the Mortgage, subject to the
exceptions referred to below, to certain minor leases and easements, permitted
liens and to the exceptions and reservations in the instruments by which the
Company acquired title to its property and to the prior lien of the Trustee for
compensation, expenses and liability.
In the opinion of Mr. Terrill, the Mortgage constitutes a lien on
after-acquired property of the character intended to be mortgaged property.
Excepted from the lien of the Mortgage are: cash and accounts receivable;
contracts or operating agreements; securities not pledged under the Mortgage;
electric energy, gas, water, materials and supplies held for consumption in
operation or held in advance of use for fixed capital purposes; and merchandise,
appliances and supplies held for resale or lease to customers. There is further
expressly excepted any property of any other corporation, all the securities of
which may be owned or later acquired by the Company. (Granting Clauses of the
Mortgage.) The lien of the Mortgage does not apply to property of KGE or the
Company's other subsidiaries so long as they remain subsidiaries of the Company,
or to securities owned by the Company.
The Mortgage permits the consolidation or merger of the Company with or the
conveyance of its property to any other corporation, provided that the successor
corporation assumes the due and punctual payment of the principal and interest
on the Bonds of all series then outstanding under the Mortgage and assumes the
due and punctual performance of all the covenants and conditions of the
Mortgage. (Mortgage, Article XII, Section 1)
KGE has outstanding first mortgage bonds (the "KGE Bonds") which are secured
by a lien on substantially all of KGE's fixed property and franchises purported
to be conveyed by the Mortgage and Deed of Trust and the various Supplemental
Indentures creating the KGE Bonds (collectively, the "KGE
6
Mortgage"). In the event that KGE combines with the Company, the after-acquired
property clauses of the Mortgage would cause the lien of the Mortgage to attach
(but in a subordinate position to the prior lien of the KGE Mortgage) to
property owned by KGE at the date of combination. All property subject to the
after-acquired property clause of the Mortgage acquired by the Company after the
effective date of combination of KGE with the Company would be subject to the
first lien of the Mortgage, with the exception of (a) betterments, extensions,
improvements and additions to the property formerly owned by KGE, (b) property
made the basis for the issuance of new KGE Bonds or property acquired with
insurance or eminent domain proceeds relating to the former KGE property or (c)
property acquired to comply with the covenants contained in the KGE Mortgage, on
all of which property the KGE Mortgage would continue to constitute a first, and
the Mortgage a subordinate, lien. The Company may not issue additional Bonds on
the basis of property additions subject to the prior lien of the KGE Mortgage.
There is no certainty as to whether or when such a combination would occur or as
to the terms and conditions thereof.
KCPL has outstanding first mortgage bonds (the "KCPL Bonds") which are
secured by a lien on substantially all of KCPL's fixed property and franchises
purported to be conveyed by the General Mortgage Indenture and Deed of Trust and
the various Supplemental Indentures creating the KCPL Bonds (collectively, the
"KCPL Mortgage"). If the Company merges with KCPL, the Company, as the successor
corporation to such a merger, would be required pursuant to the terms of the
KCPL Mortgage to confirm the liens thereunder and to keep the mortgaged property
with respect thereto as far as practicable identifiable. In the absence of an
express grant, however, the KCPL Mortgage will not constitute or become a lien
on any property or franchises owned by the Company prior to such a merger or on
any property or franchises which may be purchased, constructed or otherwise
acquired by the Company except for such as form an integral part of the
mortgaged property under the KCPL Mortgage. Upon consummation of a merger with
KCPL, the after-acquired property clauses of the Company's Mortgage would cause
the lien of the Mortgage to attach (but in a subordinate position to the prior
lien of the KCPL Mortgage) to the property of KCPL at the date of combination.
MODIFICATION OF THE MORTGAGE
The Mortgage may be modified or altered, subject to the rights and
obligations of the Company and the rights of Bondholders thereunder, by the
affirmative vote of the holders of at least 80% in principal amount of the
Bonds; provided, that no action may be taken which would affect less than all
series of Bonds without, in addition, the affirmative vote of the holders of at
least 80% in principal amount of the Bonds of each series so affected. The
Company intends upon the next issuance of Bonds under the Mortgage to exercise
the right it has reserved to amend the Mortgage to provide that the Mortgage may
be modified or altered and the rights of the holders of Bonds may be affected
with the consent of the holders of 60% of the Bonds and, if less than all series
of Bonds are affected, the consent also of the holders of 60% of the Bonds of
each series affected. No modification or alteration may be made which will
permit the extension of the time or times of payment of the principal of or
interest on any Bond or a reduction in the rate of interest thereon, or
otherwise affect the terms of payment of the principal of or interest on any
Bond or a reduction in the rate of interest thereon or reduce the percentages
required for the taking of any action thereunder. Bonds owned by the Company or
any affiliated corporation are excluded for the purpose of any vote,
determination of a quorum or consent. (Mortgage, Article XV; Section 6; Twenty-
Sixth, Twenty-Eighth, Twenty-Ninth, Thirtieth, Thirty-First and Thirty-Second
Supplemental Indentures, Article V, Sections 3 and 4)
The Mortgage also provides that no modification or alteration of the
Mortgage may be made, without the consent of the holder of any Bond issued
thereunder, which would impair or affect the right of such holder to receive
payment of the principal of, and interest on, such Bond, on or after the
respective due dates expressed in such Bond, or to institute suit for the
enforcement of any such payment on or after such respective dates. (Mortgage,
Article XXII, Section 2)
7
The Company intends upon the next issuance of Bonds under the Mortgage to
reserve the right, subject to appropriate corporate action but without the
consent or other action of holders of Bonds of any series created after January
1, 1997, to amend the Mortgage to permit, unless an event of default shall have
happened and be continuing, or shall happen as a result of making or granting an
application, (1) the release of mortgaged property from the lien of the Mortgage
provided the fair value to the Company of the mortgaged property subject to such
lien (excluding the mortgaged property to be released) equals or exceeds 10/7ths
of the aggregate principal amount of outstanding Bonds and any prior lien bonds
outstanding at the time of such release; (2) in the event the Company is unable
to obtain a release of property as described in clause (1), the release from the
lien of the Mortgage of mortgaged property if the fair value to the Company
thereof is less than 1/2 of 1% of the aggregate principal amount of Bonds and
prior lien bonds outstanding; provided that, the property released pursuant to
clause (2) in any 12 consecutive calendar months shall not exceed 1% of such
Bonds and prior lien bonds; (3) the deletion of the net earnings test which must
be met prior to the issuance of additional bonds; (4) the deletion of the
requirement to obtain an independent engineer's certificate in connection with
certain releases of property from the lien of the Mortgage; and (5) the deletion
of a financial test to be met by another corporation in the event of the
consolidation or merger of the Company into or the sale by the Company of its
property as an entirety or substantially as an entirety to such other
corporation.
EVENTS OF DEFAULT
An event of default under the Mortgage includes: (a) default in the payment
of the principal of any Bond when the same shall become due and payable, whether
at maturity or otherwise; (b) default continuing for 30 days in the payment of
any installment of interest on any Bond or in the payment or satisfaction of any
sinking fund obligation; (c) default in performance or observance of any other
covenant, agreement or condition in the Mortgage continuing for a period of 60
days after written notice to the Company thereof by the Trustee or by the
holders of not less than 15% of the aggregate principal amount of all Bonds then
outstanding; (d) failure to discharge or stay within 30 days a final judgment
against the Company for the payment of money in excess of $100,000; and (e)
certain events in bankruptcy, insolvency or reorganization. (Mortgage, Article
IX, Section 1)
The Trustee is required, within 90 days after the occurrence thereof, to
give to the holders of the Bonds notice of all defaults known to the Trustee
unless such defaults shall have been cured before the giving of such notice (the
term "defaults" for such purposes being defined to be the events specified
above, not including any periods of grace); provided, however, that except in
the case of default in the payment of the principal of or interest on any of the
Bonds, or in the payment or satisfaction of any sinking or purchase fund
installment, the Trustee shall be protected in withholding such notice if and so
long as the Trustee in good faith determines that the withholding of such notice
is in the interests of the holders of the Bonds and, in the case of any default
specified in (c) above, no notice shall be given until at least 60 days after
the occurrence thereof. (Mortgage, Article XIX, Section 3) The Trustee is under
no obligation to defend or initiate any action under the Mortgage which would
result in the incurring of non-reimbursable expenses unless one or more of the
holders of Bonds issued under the Mortgage, including the New Bonds, furnishes
the Trustee with reasonable indemnity against such expenses. In the event of
default, the Trustee is not required to act unless requested to act by holders
of at least 25% in aggregate principal amount of the Bonds then outstanding.
(Mortgage, Article IX, Sections 1 and 4, Article XIII, Section 2 and Article
XXI, Section 6) In addition, a majority of the Bondholders have the right to
direct all proceedings under the Mortgage, provided the Trustee is indemnified
to its satisfaction. (Mortgage, Article IX, Section 11)
COMPANY CONVERSION OPTION
If the Supplemental Indenture under which a series of New Bonds is issued so
provides, the Company may, solely at its option, convert such series of New
Bonds, in whole but not in part, into Debt Securities.
8
The Debt Securities would be identical to such series of New Bonds with respect
to principal amount, maturity date, redemption provisions, interest rate and
interest payment dates; however, holders of Debt Securities will, among other
things, no longer be entitled to the security provided by the Mortgage since the
Debt Securities will be unsecured obligations of the Company and the financial
covenants, the events of default and certain other terms pertaining to the Debt
Securities will differ from those pertaining to such series of New Bonds. See
"Description of the Debt Securities" below for a summary of the terms of the
Debt Securities. Holders of New Bonds so converted will be entitled to receive
an equal principal amount of Debt Securities for the principal amount of New
Bonds held by such holder as of the date fixed for Conversion (the "Conversion
Date"). In connection with any such Conversion, interest on converted New Bonds
which has accrued but has not been paid as of the Conversion Date will accrue on
Debt Securities from the date on which interest was last paid on the New Bonds
so converted, provided that accrued interest on New Bonds converted after a
record date, but before the related interest payment date, shall be paid to the
holder of record of such New Bonds on such interest payment date, and the Debt
Securities into which such New Bonds shall have been converted will begin to
accrue interest from such interest payment date. The rights of the holders of
the New Bonds as Bondholders of the Company with respect to the New Bonds
converted will cease, and the person or persons entitled to receive the Debt
Securities issuable upon Conversion will be treated as the registered holder or
holders of such Debt Securities from the Conversion Date. Debt Securities issued
in Conversion of New Bonds will be issued in principal amounts of $1,000 and
integral multiples thereof. The Company may condition its obligation to convert
New Bonds upon the satisfaction of certain conditions. The Company will mail to
each holder of record of New Bonds to be converted into Debt Securities written
notice thereof at least 15 and not more than 120 days prior to the Conversion
Date. The notice must state (i) the Conversion Date, (ii) the place or places
where certificates for New Bonds may be surrendered for Conversion into Debt
Securities, (iii) that interest on the Debt Securities will accrue from the date
on which interest on the New Bonds was last paid (except in the case of a
Conversion Date after a record date, but before the related interest payment
date, in which case interest will accrue from the interest payment date next
following such record date), (iv) the conditions to Conversion, if any, required
to be satisfied concurrent with or prior to the Conversion Date; and (v) that
whether or not certificates for New Bonds are surrendered for Conversion on such
Conversion Date, holders of the New Bonds will be treated as holders of Debt
Securities from and after the Conversion Date, which each holder of the New
Bonds by its acceptance of the issue thereof agrees to. It is anticipated that
the only holder of record of the New Bonds will be DTC. See "Book-Entry."
In the event that the Company becomes subject to bankruptcy proceedings at a
time when the New Bonds are outstanding and have not been converted for Debt
Securities, a court in such proceedings may order or approve the Conversion of
New Bonds into Debt Securities, with the result that holders of New Bonds would
not be entitled to the rights of secured creditors of the Company in such
bankruptcy proceedings. As a further result, among other things, such holders
would not be expected to be entitled to adequate protection of their security or
to interest accruing after the date of commencement of bankruptcy proceedings.
Alternatively, a court in a bankruptcy proceeding with respect to the Company
may decide that, even if the New Bonds cannot be converted for Debt Securities,
the claims of holders of New Bonds should nevertheless be subordinated to other
secured creditors of the Company under principles of equitable subordination.
If, by reason of the Company's merger with KCPL, or for any other reason,
properties of KCPL become subject to the Mortgage, and within the applicable
preference period thereafter the Company becomes the subject of federal
bankruptcy proceedings, the security interests of holders of New Bonds in such
newly acquired properties may be voidable as preferences. The applicable
preference period, generally, is 90 days for holders of New Bonds who are not
"insiders" of the Company and one year for holders of New Bonds who are
"insiders" of the Company, as that term is defined in the federal bankruptcy
code.
9
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued in one or more series under an Indenture
(the "Indenture") between the Company and Harris Trust and Savings Bank, as
Indenture Trustee, the form of which is filed as an exhibit to the Registration
Statement. The following summaries of certain provisions of the Indenture do not
purport to be complete and are qualified in their entirety by express reference
to the Indenture and the Securities Resolutions or the indentures supplemental
thereto (copies of which have been or will be filed with the Commission).
Capitalized terms used in this section without definition have the meanings
given such terms in the Indenture.
GENERAL
The Indenture does not limit the amount of Debt Securities that can be
issued thereunder and provides that the Debt Securities may be issued from time
to time in one or more series pursuant to the terms of one or more Securities
Resolutions creating such series. As of the date of this Prospectus, there were
no Debt Securities outstanding under the Indenture. The Debt Securities will be
unsecured and will rank on a parity with all other unsecured and unsubordinated
debt of the Company, but will rank junior to the Company's First Mortgage Bonds.
The Debt Securities will be senior to all indebtedness of the Company which by
its terms is made subordinate to the Debt Securities. Although the Indenture
provides for the possible issuance of Debt Securities in other forms or
currencies, the only Debt Securities covered by this Prospectus will be Debt
Securities denominated in U.S. dollars in registered form without coupons.
Substantially all of the fixed properties and franchises of the Company are
subject to the lien of the Mortgage under which the Company's Bonds are
outstanding. See "Description of New Bonds."
TERMS
Reference is made to the Prospectus Supplement for the following terms, if
applicable, of the Debt Securities offered thereby: (1) the designation,
aggregate principal amount, currency or composite currency and denominations;
(2) the price at which such Debt Securities will be issued and, if an index
formula or other method is used, the method for determining amounts of principal
or interest; (3) the maturity date and other dates, if any, on which principal
will be payable; (4) the interest rate (which may be fixed or variable), if any;
(5) the date or dates from which interest will accrue and on which interest will
be payable, and the record dates for the payment of interest (see "Description
of New Bonds--Company Conversion Option"); (6) the manner of paying principal
and interest; (7) the place or places where principal and interest will be
payable; (8) the terms of any mandatory or optional redemption by the Company
including any sinking fund; (9) the terms of any conversion or exchange right;
(10) the terms of any redemption at the option of Holders; (11) any tax
indemnity provisions; (12) if the Debt Securities provide that payments of
principal or interest may be made in a currency other than that in which Debt
Securities are denominated, the manner for determining such payments; (13) the
portion of principal payable upon acceleration of a Discounted Debt Security (as
defined below); (14) whether and upon what terms Debt Securities may be
defeased; (15) whether the covenant referred to below under "Certain
Covenants--Limitations on Liens" applies, and any events of default or
restrictive covenants in addition to or in lieu of those set forth in the
Indenture; (16) provisions for electronic issuance of Debt Securities or for
Debt Securities in uncertificated form; and (17) any additional provisions or
other special terms not inconsistent with the provisions of the Indenture,
including any terms that may be required or advisable under United States or
other applicable laws or regulations, or advisable in connection with the
marketing of the Debt Securities. (Section 2.01)
Debt Securities of any series may be issued as registered Debt Securities,
bearer Debt Securities or uncertificated Debt Securities, and in such
denominations as specified in the terms of the series. (Section 2.01)
10
In connection with its original issuance, no bearer Security will be
offered, sold or delivered to any location in the United States, and a bearer
Security in definitive form may be delivered in connection with its original
issuance only upon presentation of a certificate in a form prescribed by the
Company to comply with United States laws and regulations. (Section 2.04)
Registration of transfer of registered Debt Securities may be requested upon
surrender thereof at any agency of the Company maintained for that purpose and
upon fulfillment of all other requirements of the agent. (Sections 2.03 and
2.07)
Securities may be issued under the Indenture as Discounted Debt Securities
to be offered and sold at a substantial discount from the principal amount
thereof. Special United States federal income tax and other considerations
applicable thereto will be described in the Prospectus Supplement relating to
such Discounted Debt Securities. "Discounted Debt Security" means a Security
where the amount of principal due upon acceleration is less than the stated
principal amount. (Section 2.10)
CERTAIN COVENANTS
The Debt Securities will not be secured by any properties or assets and will
represent unsecured debt of the Company. As indicated under "General" above,
substantially all of the fixed properties and franchises of the Company are
subject to the lien of the Mortgage securing the First Mortgage Bonds.
As discussed below, the Indenture includes certain limitations on the
Company's ability to create liens which will apply only if the Securities
Resolution establishing the terms of a series of Debt Securities so provides (in
which event the Prospectus Supplement will so state). If applicable, the
limitations are subject to a number of qualifications and exceptions. The
Indenture does not limit the Company's ability to issue additional First
Mortgage Bonds or to enter into sale and leaseback transactions. In addition,
the Indenture does not limit the ability of the Company's subsidiaries to issue
debt, and the Debt Securities will be effectively subordinated to all existing
and future indebtedness and other liabilities and commitments of the Company's
subsidiaries.
Unless otherwise indicated in a Prospectus Supplement, such covenants, if
applicable, do not afford holders of the Debt Securities protection in the event
of a highly leveraged or other transaction involving the Company that may
adversely affect holders of the Debt Securities.
ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS
If the Securities Resolution establishing the terms of a series of Debt
Securities so provides (in which event the Prospectus Supplement will so state),
the following provision of the Indenture will be applicable so long as there
remain outstanding any Debt Securities of any series to which this covenant
applies, and subject to termination upon defeasance as referred to above. The
Company will not (i) issue any additional First Mortgage Bonds under the
Mortgage, or any mortgage bonds (such additional First Mortgage Bonds and
mortgage bonds being hereafter referred to as "Mortgage Bonds") under any
additional mortgage which it may enter into or the obligations of which it may
assume (collectively, the "Restricted Mortgages") except (A) to replace any
mutilated, lost, destroyed or stolen Mortgage Bonds or to effect exchanges and
transfers of Mortgage Bonds or (B) to issue Mortgage Bonds in connection with
any refinancing of Mortgage Bonds, or any security for which Mortgage Bonds
provide collateral, having the same or lesser aggregate principal amount at
maturity and the same or earlier maturity date, but with such other terms as the
Company may determine or (ii) subject to the lien of any Restricted Mortgage any
property which is excepted and excluded under such Restricted Mortgage and the
lien and operation thereof by the terms of such Restricted Mortgage, unless
concurrently with the issuance of such Mortgage Bonds or subjection of any such
property to such lien, the Company issues to the Trustee under the Indenture a
Mortgage Bond or Bonds in the same aggregate principal amount and having the
same interest rate or rates, maturity date or dates, redemption provisions and
other terms as the Debt Securities then outstanding and thereby gives to the
holders of all outstanding Debt Securities the benefit of the
11
security of such First Mortgage Bond or Bonds, provided, that the obligation of
the Company to make payments with respect to the principal of and interest on
any such Mortgage Bond or Bonds issued under a Restricted Mortgage to the
Trustee shall be fully or partially, as the case may be, satisfied or discharged
to the extent that, at the time that any such payment shall be due, the then due
principal of and interest on the Debt Securities shall have been fully or
partially paid. For purposes of this provision the merger or combination of the
Company with another entity having Mortgage Bonds outstanding under a Restricted
Mortgage on the date such a transaction is consummated shall not constitute an
issuance of additional Mortgage Bonds and therefore, Mortgage Bonds shall not be
required to be issued under such Restricted Mortgage in connection with the
consummation of such a transaction.
At such time as the Trustee under the Indenture is the only holder of
Mortgage Bonds outstanding under a Restricted Mortgage, the Trustee will
surrender such Mortgage Bonds to the Company for cancellation and such
Restricted Mortgage will be discharged and defeased. (Section 4.08)
LIMITATION ON LIENS
If the Securities Resolution establishing the terms of a series of Debt
Securities so provides (in which event the Prospectus Supplement will so state),
the following provisions of the Indenture will be applicable so long as there
remain outstanding any Debt Securities of any series to which this limitation
applies, and, subject to termination of this limitation upon defeasance as
referred to above, the Company will not create or suffer to be created or to
exist any mortgage, pledge, security interest or other lien (collectively,
"Lien") on any of its properties or assets, owned as of the date such series is
issued or thereafter acquired to secure any indebtedness, without making
effective provision whereby the Debt Securities of such series shall be equally
and ratably secured with any and all such indebtedness and with any other
indebtedness similarly entitled to be equally and ratably secured. This
restriction does not apply to, or prevent the creation or existence of: (1) the
Mortgage securing the Company's First Mortgage Bonds or any indenture
supplemental thereto subjecting any property to the Lien thereof or confirming
the Lien thereof upon any property, whether owned before or acquired after the
date of the Indenture; (2) the Lien of any Restricted Mortgage; (3) Liens on
property existing at the time of the acquisition or construction of such
property (or created within two years after completion of such acquisition or
construction), whether by purchase, merger, construction or otherwise, or to
secure the payment of all or any part of the purchase price or construction cost
thereof, including the extension of any such Liens to repairs, renewals,
replacements, substitutions, betterments, additions, extensions and improvements
then or thereafter made on the property subject thereto; (4) any Lien securing
bank indebtedness now or hereafter incurred or assumed by the Company; (5) any
extensions, renewals or replacements (or successive extensions, renewals or
replacements), in whole or in part, of Liens (including, without limitation, the
Restricted Mortgages) permitted by the foregoing clauses (1), (2), (3) and (4);
(6) the pledge of any bonds or other securities at any time issued under any of
the Liens permitted by clause (1), (2), (3), (4) or (5) above; or (7) Permitted
Encumbrances. (Section 4.07)
"Permitted Encumbrances" includes, among other items: (a) the pledge or
assignment in the ordinary course of business of electricity, gas (either
natural or artificial), steam, fuel (including nuclear fuel) whether or not
consumable in the operation of the mortgaged property, accounts receivable or
customers' installment paper; (b) Liens affixing to property of the Company at
the time a person consolidates with or merges into, or transfers all or
substantially all of its assets to, the Company, provided that in the opinion of
the Board of Directors of the Company or Company management (evidenced by a
certified Board resolution or an Officers' Certificate delivered to the Trustee)
the property acquired pursuant to the consolidation, merger or asset transfer is
adequate security for such Lien; (c) Liens or encumbrances not otherwise
permitted if, at the time of incurrence thereof and after giving effect thereto,
the aggregate of all obligations of the Company secured thereby does not exceed
10% of Tangible Net Worth (as defined below); (d) Liens on securities held by
the Company; and (e) Liens or encumbrances affixing to the property of a
Subsidiary.
12
"Tangible Net Worth" means (i) common stockholders' equity appearing on the
most recent balance sheet of the Company (or consolidated balance sheet of the
Company and its Subsidiaries if the Company then has one or more consolidated
Subsidiaries) prepared in accordance with generally accepted accounting
principles, less (ii) intangible assets (excluding intangible assets recoverable
through rates as prescribed by applicable regulatory authorities).
"Subsidiary" of any person means (i) a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by such
person or by one or more other Subsidiaries of such person or by such person and
one or more Subsidiaries thereof; or (ii) any other person (other than a
corporation) in which such person, or one or more Subsidiaries of such person or
such person and one or more Subsidiaries thereof, directly or indirectly, has at
least a majority ownership and power to direct the policy, management and
affairs thereof. (Section 4.06)
Further, this restriction will not apply to or prevent the creation or
existence of leases made, or existing on property acquired, in the ordinary
course of business. (Section 4.07)
OTHER COVENANTS
Any other restrictive covenants which may apply to a particular series of
Debt Securities will be described in the Prospectus Supplement relating thereto.
SUCCESSOR OBLIGOR
The Indenture provides that, unless otherwise specified in the Securities
Resolution establishing a series of Debt Securities (in which event the
Prospectus Supplement will so state), the Company shall not consolidate with or
merge into, or transfer all or substantially all of its assets to, any person in
any transaction in which the Company is not the survivor, unless: (1) the person
is organized under the laws of the United States or a State thereof or is
organized under the laws of a foreign jurisdiction and consents to the
jurisdiction of the courts of the United States or a State thereof; (2) the
person assumes by supplemental indenture all the obligations of the Company
under the Indenture, the Debt Securities and any coupons; (3) all required
approvals of any regulatory body having jurisdiction over the transaction shall
have been obtained; and (4) immediately after the transaction no Default (as
defined below) exists. The successor shall be substituted for the Company, and
thereafter all obligations of the Company under the Indenture, the Debt
Securities and any coupons shall terminate. (Section 5.01)
EXCHANGE OF DEBT SECURITIES
Registered Debt Securities may be exchanged for an equal aggregate principal
amount of registered Debt Securities of the same series and date of maturity in
such authorized denominations as may be requested upon surrender of the
registered Debt Securities at an agency of the Company maintained for such
purpose and upon fulfillment of all other requirements of such agent. (Section
2.07)
DEFAULT AND REMEDIES
Unless the Securities Resolution establishing the series otherwise provides
(in which event the Prospectus Supplement will so state), an "Event of Default"
with respect to a series of Debt Securities will occur if:
(1) the Company defaults in any payment of interest on any Debt
Securities of such series when the same becomes due and payable and the
Default continues for a period of 60 days;
(2) the Company defaults in the payment of the principal and premium, if
any, of any Debt Securities of the series when the same becomes due and
payable at maturity or upon redemption, acceleration or otherwise and such
default shall continue for five or more days;
13
(3) the Company defaults in the payment or satisfaction of any sinking
fund obligation with respect to any Debt Securities of the series as
required by the Securities Resolution establishing such series and the
Default continues for a period of 60 days;
(4) the Company defaults in the performance of any of its other
agreements applicable to the series and the Default continues for 90 days
after the notice specified below;
(5) the Company pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian for it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case,
(B) appoints a Custodian for the Company or for all or substantially
all of its property, or
(C) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for 60 days; or
(7) there occurs any other Event of Default provided for in such series.
(Section 6.01)
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal
or State law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or a similar official under any Bankruptcy Law.
(Section 6.01)
"Default" means any event which is, or after notice or passage of time would
be, an Event of Default. A Default under subparagraph (4) above is not an Event
of Default until the Trustee or the Holders of at least 33 1/3% in principal
amount of the series notify the Company of the Default and the Company does not
cure the Default within the time specified after receipt of the notice. (Section
6.01) The Trustee may require indemnity satisfactory to it before it enforces
the Indenture or the Debt Securities of the series. (Section 7.01) Subject to
certain limitations, Holders of a majority in principal amount of the Debt
Securities of the series may direct the Trustee in its exercise of any trust or
power with respect to such series. (Section 6.05) Except in the case of Default
in payment on a series, the Trustee may withhold from the Holders of such series
notice of any continuing Default if it determines that withholding notice is in
their interest. (Section 7.04) The Company is required to furnish the Trustee
annually a brief certificate as to the Company's compliance with all conditions
and covenants under the Indenture. (Section 4.04)
The failure to redeem any Debt Securities subject to a Conditional
Redemption (as defined) is not an Event of Default if any event on which such
redemption is so conditioned does not occur and is not waived before the
scheduled redemption date. (Section 6.01)
The Indenture does not have a cross-default provision. Thus, a default by
the Company on any other debt, including any other series of Debt Securities,
would not constitute an Event of Default.
AMENDMENTS AND WAIVERS
The Indenture and the Debt Securities of the series may be amended, and any
Default may be waived as follows: unless the Securities Resolution otherwise
provides (in which event the Prospectus Supplement will so state), the Debt
Securities and the Indenture may be amended with the written consent of the
Holders of a majority in principal amount of the Debt Securities of all series
affected voting as one class.
14
(Section 10.02) Unless the Securities Resolution otherwise provides (in which
event the Prospectus Supplement will so state), a Default on a particular series
may be waived with the consent of the Holders of a majority in principal amount
of the Debt Securities of the series, except under certain circumstances.
(Section 6.04) However, without the consent of each Holder affected, no
amendment or waiver may (1) reduce the amount of Debt Securities whose Holders
must consent to an amendment or waiver, (2) reduce the interest on or change the
time for payment of interest on any Debt Security, (3) change the fixed maturity
of any Debt Security, (4) reduce the principal of any non-Discounted Debt
Security or reduce the amount of the principal of any Discounted Debt Security
that would be due on acceleration thereof, (5) change the currency in which the
principal or interest on a Security is payable, (6) make any change that
materially adversely affects the right to convert any Debt Security, or (7)
waive any Default in payment of interest on or principal of a Debt Security,
except under certain circumstances. (Sections 6.04 and 10.02) Without the
consent of any Holder, the Indenture or the Debt Securities may be amended: to
cure any ambiguity, omission, defect or inconsistency; to provide for assumption
of Company obligations to Holders of Debt Securities in the event of a merger or
consolidation requiring such assumption; to provide that specific provisions of
the Indenture shall not apply to a series of Debt Securities not previously
issued; to create a series and establish its terms; to provide for a separate
Trustee for one or more series; or to make any change that does not materially
adversely affect the rights of any Holder. (Section 10.01)
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Debt Securities of a series may be defeased in accordance with their terms
and, unless the Securities Resolution establishing the terms of the series
otherwise provides (in which event the Prospectus Supplement will so state), as
set forth below. The Company at any time may terminate as to a series all of its
obligations (except for certain obligations, including obligations with respect
to the defeasance trust and obligations to register the transfer or exchange of
a Debt Security, to replace destroyed, lost or stolen Debt Securities and
coupons and to maintain paying agencies in respect of the Debt Securities) with
respect to the Debt Securities of the series and any related coupons and the
Indenture ("legal defeasance"). The Company at any time may terminate as to a
series its obligations with respect to the Debt Securities and coupons of the
series under the covenant described under "Certain Covenants--Limitations on
Liens" and any other restrictive covenants which may be applicable to a
particular series ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, a series may not be accelerated because of an Event of
Default. If the Company exercises its covenant defeasance option, a series may
not be accelerated by reference to the covenant described under "Certain
Covenants-- Limitations on Liens" or any other restrictive covenants which may
be applicable to a particular series. (Section 8.01)
To exercise either defeasance option as to a series, the Company must (i)
irrevocably deposit in trust (the "defeasance trust") with the Trustee or
another trustee money or U.S. Government Obligations, deliver a certificate from
a nationally recognized firm of independent accountants expressing their opinion
that the payments of principal and interest when due on the deposited U.S.
Government Obligations, without reinvestment, plus any deposited money, without
investment, will provide cash at such times and in such amounts as will be
sufficient to pay the principal and interest when due on all Debt Securities of
such series to maturity or redemption, as the case may be, and (ii) comply with
certain other conditions. In particular, the Company must obtain an opinion of
tax counsel that the defeasance will not result in recognition of any income,
gain or loss to holders for federal income tax purposes. "U.S. Government
Obligations" means direct obligations of the United States or an agency or
instrumentality of the United States, the payment of which is unconditionally
guaranteed by the United States, which, in either case, have the full faith and
credit of the United States pledged for payment and which are not callable at
the issuer's option, or certificates representing an ownership interest in such
obligations. (Section 8.02)
15
REGARDING THE TRUSTEE
Harris Trust and Savings Bank will act as Indenture Trustee and Registrar
for Debt Securities issued under the Indenture and, unless otherwise indicated
in a Prospectus Supplement, the Indenture Trustee will also act as Transfer
Agent and Paying Agent with respect to the Debt Securities. (Section 2.03) The
Company may remove the Indenture Trustee with or without cause if the Company so
notifies the Indenture Trustee three months in advance and if no Default occurs
during the three-month period. (Section 7.07) The Indenture Trustee is also
Trustee under the Mortgage for the Company's First Mortgage Bonds, including the
New Bonds, and provides services for the Company and certain affiliates, as a
depository of funds, registrar, trustee under other indentures and similar
services.
BOOK-ENTRY
DTC will act as securities depository for the Securities. The Securities
will be issued only as fully registered securities registered in the name of
Cede & Co. (DTC's partnership nominee). One or more fully registered global
certificates will be issued for the Securities representing the aggregate
principal amount of the Securities and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the 1934 Act. DTC holds
securities that its participants (the "Direct Participants") deposit with DTC.
DTC also facilitates the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Direct 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. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange, Inc.,
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 (the "Indirect Participants," and together with the Direct
Participants, the "Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of the Securities within the DTC system must be made by or through
Direct Participants which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of each Security (a
"Beneficial Owner") will in turn be recorded on the Direct and Indirect
Participants' respective records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interest in the Securities will be effected by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interest in
Securities except in the event that use of the book-entry system for the
Securities is discontinued.
The deposit of the 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 Securities; DTC's records reflect only the
identity of the Direct Participants to whose accounts such 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.
Conveyance of notices and other direct communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial
16
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 shall be sent to Cede & Co. If less than all of the
Securities of an issue are being redeemed, DTC's practice will determine by lot
the amount of the interest of each Direct Participant in such series to be
redeemed.
In the event of a Conversion of New Bonds into Debt Securities, notice
thereof shall be sent to Cede & Co. After the Conversion Date, DTC or its
nominee, as the record holder of the New Bonds, will receive a registered global
certificate or certificates representing the Debt Securities and will deliver
the global certificate or certificates representing the New Bonds to the Trustee
for cancellation.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Securities. Under its usual procedures. DTC mails an omnibus proxy (an "Omnibus
Proxy") to the Participants 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 Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest on the Securities will be paid 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 payment on such
payment date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in
"street-name," and will be the responsibility of such Participant and not of
DTC, any underwriters, or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
premium, if any, and interest to DTC is the responsibility of the Company or the
Trustee. 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.
DTC may discontinue providing its services as securities depository with
respect to the Securities at any time by giving reasonable notice to the
Company. Under such circumstances and in the event that a successor securities
depository is not obtained, certificates for the Securities are required to be
printed and delivered. In addition, the Company may decide to discontinue use of
the system of book-entry transfers through DTC (or any successor securities
depository). In that event, certificates for the Securities will be printed and
delivered.
The Company will not have any responsibility or obligation to Participants
or to the persons for whom they act as nominees with respect to the accuracy of
the records of DTC, its nominees or any Direct or Indirect Participant with
respect to any ownership interest in the Securities, or with respect to payments
or providing of notice to the Direct Participants, the Indirect Participants or
the Beneficial Owners.
So long as Cede & Co. is the registered owner of the Securities, as nominee
of DTC, references herein to holders of the Securities shall mean Cede & Co. or
DTC and shall not mean the Beneficial Owners of the Securities.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from DTC. None of the Company, the Trustees or any
underwriters take any responsibility for the accuracy or completeness thereof.
PLAN OF DISTRIBUTION
The Company may sell Securities in any of the following ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers; or (iii)
through agents. The applicable Prospectus Supplement will set forth the terms of
the offering of any Securities, including the names of any underwriters or
agents, the
17
purchase price of such Securities and the proceeds to the Company from such
sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price, any discounts or concessions
allowed or reallowed or paid to dealers and any securities exchanges on which
such Securities may be listed.
If underwriters are used in the sale, Securities will be acquired by any
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. Such Securities may
be offered to the public either through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. Unless otherwise
set forth in the applicable Prospectus Supplement, the obligations of any
underwriters to purchase such Securities will be subject to certain conditions
precedent, and any underwriters will be obligated to purchase all of such
Securities if any of such Securities are purchased. Any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time. Only underwriters named in a Prospectus
Supplement are deemed to be underwriters in connection with the Securities
offered thereby.
Securities may also be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of Securities will be named, and any commissions payable by the Company to
such agent will be set forth in the applicable Prospectus Supplement. Unless
otherwise indicated in the applicable Prospectus Supplement, any such agent will
act on a best efforts basis for the period of its appointment.
If so indicated in a Prospectus Supplement with respect to Securities, the
Company will authorize agents, underwriters or dealers to solicit offers by
certain institutions to purchase such Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in the Prospectus Supplement. Each Contract will be for an
amount not less than, and the aggregate principal amount of the Securities sold
pursuant to the Contracts shall be not less nor more than, the respective
amounts stated in the Prospectus Supplement. Institutions with whom the
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions, but will in all cases be
subject to the approval of the Company. The Contracts will not be subject to any
conditions except (i) the purchase by an institution of the Securities covered
by its Contract shall not at the time of delivery be prohibited under the laws
of any jurisdiction in the United States to which such institution is subject,
and (ii) if the Securities are being sold to underwriters, the Company shall
have sold to such underwriters the total principal amount of the Securities less
the principal amount thereof covered by the Contracts. Any underwriters will not
have any responsibility in respect of the validity or performance of the
Contracts.
If dealers are utilized in the sale of any Securities, the Company will sell
such Securities to the dealers, as principal. Any dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. The name of any dealer and the terms of the transaction will
be set forth in the Prospectus Supplement with respect to such Securities being
offered thereby.
It has not been determined whether any series of Securities will be listed
on a securities exchange. Underwriters will not be obligated to make a market in
any series of Securities. The Company cannot predict the level of trading
activity in, or the liquidity of, any series of Securities.
Any underwriters, dealers or agents participating in the distribution of
Securities may be deemed to be underwriters, and any discounts or commissions
received by them on the sale or resale of Securities may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933. Agents
and underwriters may be entitled under agreements entered into with the Company
to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act of 1933, or to contribution with respect to
payments that the agents or underwriters may be required to make in respect
thereof.
18
Agents and underwriters may be customers of, engaged in transactions with, or
perform services for, the Company or its affiliates in the ordinary course of
business.
LEGAL OPINIONS
The statements as to matters of law and legal conclusions set forth in this
Prospectus and in the Company's documents incorporated by reference herein have
been reviewed by Richard D. Terrill, Esq., Corporate Secretary and Associate
General Counsel of the Company, and are set forth or incorporated herein in
reliance upon the opinion of Mr. Terrill. At April 24, 1997, Mr. Terrill owned
directly and/or beneficially, 1190 shares of Common Stock and had been granted,
pursuant to and subject to the terms of the Company's long-term incentive
programs, 376 performance shares and stock options exercisable for 4500 shares
of Common Stock.
Certain legal matters in connection with the Securities will be passed upon
by Richard D. Terrill, Esq., Corporate Secretary and Associate General Counsel
of the Company, by Cahill Gordon & Reindel, a partnership including a
professional corporation, counsel for the Company, and by Sidley & Austin,
counsel for the Underwriters, dealers, purchasers or agents. Cahill Gordon &
Reindel and Sidley & Austin will not pass upon the incorporation of the Company
and will rely upon the opinion of Richard D. Terrill, Esq. as to matters of
Kansas law.
EXPERTS
The financial statements of Western Resources, Inc. included in or
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement have been audited by Arthur Andersen LLP, 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 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 as an Exhibit to the Company's April 2, 1997
Form 8-K, 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.
19
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE
OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER
BY THE COMPANY OR BY THE UNDERWRITER TO SELL SECURITIES IN ANY STATE TO ANY
PERSON TO WHOM IT IS UNLAWFUL FOR THE COMPANY OR THE UNDERWRITER TO MAKE SUCH
OFFER IN SUCH STATE. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
PAGE
---------
PROSPECTUS SUPPLEMENT
Incorporation of Certain Documents by
Reference..................................... S-2
Prospectus Supplement Summary................... S-3
Risk Factors.................................... S-5
Use of Proceeds................................. S-6
Summary Financial Information................... S-6
Summary Unaudited Pro Forma Combined Financial
Information................................... S-7
Description of Notes............................ S-8
Underwriting.................................... S-11
Experts and Legality............................ S-11
PROSPECTUS
Available Information........................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Information on Kansas City Power & Light
Company....................................... 3
The Company..................................... 3
Use of Proceeds................................. 4
Description of New Bonds........................ 4
Description of Debt Securities.................. 10
Book-Entry...................................... 16
Plan of Distribution............................ 17
Legal Opinions.................................. 19
Experts......................................... 19
WESTERN RESOURCES, INC.
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$30,000,000
6.80% SENIOR NOTES DUE 2018
(INTEREST PAYABLE ON JANUARY 15 AND JULY 15)
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
EDWARD D. JONES & CO., L.P.
JULY 13, 1998
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