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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 1-707
KANSAS CITY POWER & LIGHT COMPANY
(Exact name of registrant as specified in its charter)
Missouri 44-0308720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201 Walnut, Kansas City, Missouri 64106-2124
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 556-2200
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes (X) No ( )
The number of shares outstanding of the registrant's Common stock at
May 8, 2000, was 61,898,020 shares.
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Balance Sheets
March 31 December 31
2000 1999
(thousands)
ASSETS
Utility Plant, at Original Cost
Electric $3,652,529 $3,628,120
Less-accumulated depreciation 1,541,840 1,516,255
Net utility plant in service 2,110,689 2,111,865
Construction work in progress 211,875 158,616
Nuclear fuel, net of amortization of
$112,396 and $108,077 24,933 28,414
Total 2,347,497 2,298,895
Regulatory Asset - Recoverable Taxes 106,000 106,000
Investments and Nonutility Property 402,925 376,704
Current Assets
Cash and cash equivalents 14,107 13,073
Receivables 52,395 71,548
Fuel inventories, at average cost 24,028 22,589
Materials and supplies, at average cost 47,226 46,289
Deferred income taxes 3,783 2,751
Other 5,851 6,086
Total 147,390 162,336
Deferred Charges
Regulatory assets 29,944 31,908
Prepaid pension costs 58,688 0
Other deferred charges 19,396 14,299
Total 108,028 46,207
Total $3,111,840 $2,990,142
CAPITALIZATION AND LIABILITIES
Capitalization (see statements) $1,960,822 $1,739,590
Current Liabilities
Notes payable to banks 0 24,667
Commercial paper 90,900 214,032
Current maturities of long-term debt 143,858 128,858
Accounts payable 78,157 68,309
Accrued taxes 3,623 972
Accrued interest 11,870 15,418
Accrued payroll and vacations 22,784 20,102
Accrued refueling outage costs 9,702 7,056
Other 13,521 13,569
Total 374,415 492,983
Deferred Credits and Other Liabilities
Deferred income taxes 616,770 592,227
Deferred investment tax credits 53,215 54,333
Other 106,618 111,009
Total 776,603 757,569
Commitments and Contingencies (Note 6)
Total $3,111,840 $2,990,142
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
1
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Capitalization
March 31 December 31
2000 1999
(thousands)
Common Stock Equity
Common stock-150,000,000 shares authorized
without par value 61,908,726 shares issued,
stated value $449,697 $449,697
Retained earnings (see statements) 428,688 418,952
Accumulated other comprehensive loss
Unrealized loss on securities available
for sale 0 (2,337)
Capital stock premium and expense (1,668) (1,668)
Total 876,717 864,644
Cumulative Preferred Stock
$100 Par Value
3.80% - 100,000 shares issued 10,000 10,000
4.50% - 100,000 shares issued 10,000 10,000
4.20% - 70,000 shares issued 7,000 7,000
4.35% - 120,000 shares issued 12,000 12,000
$100 Par Value - Redeemable
4.00% 62 62
Total 39,062 39,062
Company-obligated Mandatorily Redeemable Preferred
Securities of a trust holding solely KCPL
Subordinated Debentures 150,000 150,000
Long-Term Debt (excluding current maturities)
General Mortgage Bonds
Medium-Term Notes due 2000-08, 7.07% and
6.99% weighted-average rate 246,000 286,000
4.44%* Environmental Improvement Revenue
Refunding Bonds due 2012-23 158,768 158,768
Unsecured Medium-Term Notes
6.34%* due 2002 200,000 0
Environmental Improvement Revenue Refunding Bonds
4.18%* Series A & B due 2015 106,500 106,500
4.50% Series C due 2017 50,000 50,000
4.35% Series D due 2017 40,000 40,000
Subsidiary Obligations
Affordable Housing Notes due 2000-08, 8.34%
and 8.35% weighted-average rate 44,775 44,616
KLT Gas Bank Credit Agreement
7.97%* due 2003 49,000 0
Total 895,043 685,884
Total $1,960,822 $1,739,590
* Variable rate securities, weighted-average rate as of March 31, 2000.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
2
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Income
Three Months Ended March 31 2000 1999
(thousands)
Electric Operating Revenues $190,333 $190,734
Operating Expenses
Operation
Fuel 29,853 31,038
Purchased power 14,798 10,658
Other 50,122 45,082
Maintenance 20,061 17,341
Depreciation 29,283 29,659
Income taxes 4,744 9,210
General taxes 21,214 21,811
Total 170,075 164,799
Electric Operating Income 20,258 25,935
Other Income and (Deductions)
Allowance for equity funds
used during construction 36 1,063
Miscellaneous income and
(deductions) - net (16,156) (10,540)
Income taxes 14,072 12,243
Total (2,048) 2,766
Income Before Interest Charges 18,210 28,701
Interest Charges
Long-term debt 12,447 13,331
Short-term debt 3,667 69
Mandatorily redeemable Preferred
Securities 3,113 3,113
Miscellaneous 624 1,037
Allowance for borrowed funds
used during construction (2,499) (732)
Total 17,352 16,818
Income before cumulative effect of
changes in accounting principles 858 11,883
Cumulative effect to January 1, 2000,
of changes in accounting principles,
net of income taxes (Note 1) 34,978 0
Net income 35,836 11,883
Preferred stock
dividend requirements 412 947
Earnings available for
common stock $35,424 $10,936
Average number of common
shares outstanding 61,898 61,898
Basic and diluted earnings per common
share before cumulative effect of $0 $0.18
changes in accounting principles
Cumulative effect to January 1, 2000,
of changes in accounting principles 0.57 0
Basic and diluted earnings
per common share $0.57 $0.18
Cash dividends per
common share $0.415 $0.415
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
3
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Income
Twelve Months Ended March 31 2000 1999
(thousands)
Electric Operating Revenues $896,992 $934,040
Operating Expenses
Operation
Fuel 128,070 138,690
Purchased power 98,837 66,045
Other 201,966 187,070
Maintenance 65,309 72,601
Depreciation 118,052 116,480
Income taxes 54,082 79,755
General taxes 92,404 93,229
Total 758,720 753,870
Electric Operating Income 138,272 180,170
Other Income and (Deductions)
Allowance for equity funds
used during construction 1,630 3,946
Miscellaneous income and
(deductions) - net (57,341) (44,364)
Income taxes 57,197 48,478
Total 1,486 8,060
Income Before Interest Charges 139,758 188,230
Interest Charges
Long-term debt 50,443 55,404
Short-term debt 7,960 273
Mandatorily redeemable Preferred
Securities 12,450 12,450
Miscellaneous 3,160 4,417
Allowance for borrowed funds
used during construction (5,145) (2,553)
Total 68,868 69,991
Income before cumulative effect of
changes in accounting principles 70,890 118,239
Cumulative effect to January 1, 2000,
of changes in accounting principles,
net of income taxes (Note 1) 34,978 0
Net income 105,868 118,239
Preferred stock
dividend requirements 3,198 3,841
Earnings available for
common stock $102,670 $114,398
Average number of common
shares outstanding 61,898 61,890
Basic and diluted earnings per common
share before cumulative effect of
changes in accounting principles $1.09 $1.85
Cumulative effect to January 1, 2000,
of changes in accounting principles 0.57 0
Basic and diluted earnings
per common share $1.66 $1.85
Cash dividends per
common share $1.66 $1.65
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
4
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Cash Flows
Year to Date March 31 2000 1999
(thousands)
Cash Flows from Operating Activities
Income before cumulative effect of changes
in accounting principles $858 $11,883
Adjustments to reconcile income
to net cash from operating activities:
Depreciation of electric plant 29,283 29,659
Amortization of:
Nuclear fuel 4,319 4,674
Other 2,957 2,481
Deferred income taxes (net) (173) (3,271)
Investment tax credit amortization (1,118) (1,117)
Losses from equity investments 5,758 3,517
Asset impairments 6,156 1,400
Kansas rate refund accrual 0 (14,200)
Missouri rate refund accrual 0 1,100
Allowance for equity funds used
during construction (36) (1,063)
Other operating activities (Note 2) 23,788 14,293
Net cash from operating activities 71,792 49,356
Cash Flows from Investing Activities
Utility capital expenditures (79,283) (26,105)
Allowance for borrowed funds used
during construction (2,499) (732)
Purchases of investments (26,233) (11,794)
Purchases of nonutility property (6,162) (14,078)
Other investing activities (6,048) (8,976)
Net cash from investing activities (120,225) (61,685)
Cash Flows from Financing Activities
Issuance of long-term debt 268,000 5,388
Repayment of long-term debt (44,000) 0
Net change in short-term borrowings (147,799) 4,058
Dividends paid (26,100) (26,634)
Other financing activities (634) (14)
Net cash from financing activities 49,467 (17,202)
Net Change in Cash and Cash
Equivalents 1,034 (29,531)
Cash and Cash Equivalents
at Beginning of Year 13,073 43,213
Cash and Cash Equivalents
at End of Period $14,107 $13,682
Cash Paid During the Period for:
Interest (net of amount capitalized) $20,444 $18,383
Income taxes $62 $5,722
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
5
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Cash Flows
Twelve Months Ended March 31 2000 1999
(thousands)
Cash Flows from Operating Activities
Income before cumulative effect of changes
in accounting principles $70,890 $118,239
Adjustments to reconcile income
to net cash from operating activities:
Depreciation of electric plant 118,052 116,480
Amortization of:
Nuclear fuel 15,427 19,096
Other 12,739 9,280
Deferred income taxes (net) (23,686) (5,481)
Investment tax credit amortization (4,454) (4,459)
Fuel contract settlement (13,391) 0
Losses from equity investments 27,192 14,427
Asset impairments 25,834 7,428
Gain on sale of Nationwide Electric, Inc.
stock (19,835) 0
Kansas rate refund accrual 0 (3,165)
Missouri rate refund accrual (1,100) 1,100
Allowance for equity funds used
during construction (1,630) (3,946)
Other operating activities (Note 2) (23,493) 26,855
Net cash from operating activities 182,545 295,854
Cash Flows from Investing Activities
Utility capital expenditures (233,865) (123,158)
Allowance for borrowed funds used
during construction (5,145) (2,553)
Purchases of investments (49,511) (47,718)
Purchases of nonutility property (47,876) (33,895)
Sale of KLT Power 0 53,033
Sale of Nationwide Electric, Inc. stock 39,617 0
Hawthorn No. 5 partial insurance recovery 80,000 0
Other investing activities (7,388) (3,852)
Net cash from investing activities (224,168) (158,143)
Cash Flows from Financing Activities
Issuance of long-term debt 273,501 5,390
Repayment of long-term debt (153,060) (51,669)
Net change in short-term borrowings 76,842 10,563
Dividends paid (106,128) (105,969)
Redemption of preferred stock (50,000) 0
Other financing activities 893 (1,910)
Net cash from financing activities 42,048 (143,595)
Net Change in Cash and Cash
Equivalents 425 (5,884)
Cash and Cash Equivalents
at Beginning of Period 13,682 19,566
Cash and Cash Equivalents
at End of Period $14,107 $13,682
Cash Paid During the Period for:
Interest (net of amount capitalized) $76,581 $69,699
Income taxes $46,640 $30,510
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
6
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Comprehensive Income
Three Months Ended Twelve Months Ended
March 31 March 31
2000 1999 2000 1999
(thousands)
Net income $ 35,836 $ 11,883 $ 105,868 $ 118,239
Other comprehensive income (loss):
Unrealized gain (loss) on
securities available for sale 0 733 (4,511) (5,610)
Income tax benefit (expense) 0 (265) 1,632 2,030
Net unrealized gain (loss) on
securities available for sale 0 468 (2,879) (3,580)
Reclassification adjustment,
net of tax 2,337 0 2,337 0
Comprehensive Income $ 38,173 $ 12,351 $ 105,326 $ 114,659
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Consolidated Statements of Retained Earnings
Three Months Ended Twelve Months Ended
March 31 March 31
2000 1999 2000 1999
(thousands)
Beginning balance $ 418,952 $ 443,699 $ 428,948 $ 416,678
Net income 35,836 11,883 105,868 118,239
454,788 455,582 534,816 534,917
Dividends declared
Preferred stock-at required rates 413 947 3,377 3,846
Common stock 25,687 25,687 102,751 102,123
Ending balance $ 428,688 $ 428,948 $ 428,688 $ 428,948
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
7
KANSAS CITY POWER & LIGHT COMPANY
CERTAIN FORWARD-LOOKING INFORMATION
Statements made in this report which are not based on historical facts
are forward-looking and, accordingly, involve risks and uncertainties
that could cause actual results to differ materially from those
discussed. Any forward-looking statements are intended to be as of
the date on which such statement is made. In connection with the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995, we are providing a number of important factors that could cause
actual results to differ materially from provided forward-looking
information. These important factors include:
- - future economic conditions in the regional, national and
international markets
- - state, federal and foreign regulation
- - weather conditions
- - financial market conditions, including, but not limited to
changes in interest rates
- - inflation rates
- - increased competition, including, but not limited to, the
deregulation of the United States electric utility industry, and the
entry of new competitors
- - ability to carry out marketing and sales plans
- - ability to achieve generation planning goals and the occurrence
of unplanned generation outages
- - nuclear operations
- - ability to enter new markets successfully and capitalize on
growth opportunities in nonregulated businesses
- - adverse changes in applicable laws, regulations or rules
governing environmental (including air quality regulations), tax or
accounting matters
- - delays in the anticipated in service dates of new generating
capacity
This list of factors may not be all-inclusive since it is not possible
for us to predict all possible factors.
Notes to Consolidated Financial Statements
In management's opinion, the consolidated interim financial statements
reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the results of operations for
the interim periods presented. These statements and notes should be
read in connection with the financial statements and related notes
included in our 1999 annual report on Form 10-K.
1. CHANGES IN PENSION ACCOUNTING PRINCIPLES
Effective January 1, 2000, KCPL changed its methods of amortizing
unrecognized net gains and losses and determination of expected return
related to its accounting for pension expenses. This change is being
made to reflect more timely in pension expense the gains and losses
incurred by the pension funds.
At the time KCPL originally adopted the standards governing accounting
for pensions, we chose the following accounting methods that would
minimize fluctuations in pension expense:
- - Recognized gains and losses if, as of the beginning of the year,
the unrecognized net gain or loss exceeds 10 percent of the greater of
the projected benefit obligation or the market-related value of plan
assets. If amortization is required, amortization is the excess
divided by the average remaining service period, approximately 15
years, of active employees expected to receive benefits under the
plan. This method has resulted in minimal gains being amortized.
8
- - Determined the expected return by multiplying the long-term rate
of return times the market-related value. We determine market-related
value by recognizing changes in fair value of plan assets over a five-
year period.
KCPL has changed the above accounting methods to the following:
- - Recognize gains and losses by amortizing over a five-year period
the rolling five-year average of unamortized gains and losses.
- - Determine the expected return by multiplying the long-term rate
of return times the fair value of plan assets.
Adoption of the new methods of accounting for pensions will lead to
greater fluctuations in pension expense in the future and will have
the following current effects:
Changes in Method of Accounting for Pensions *
Amortization of
Gains and Losses Expected Return Total
(millions except per share)
Cumulative effect of change
in method of accounting:
Income $ 21.4 $ 13.6 $ 35.0
Basic and diluted earnings
per common share $ 0.35 $ 0.22 $ 0.57
Year 2000 earnings effect
of change in method of
accounting:
Income $ 4.1 $ 2.0 $ 6.1
Basic and diluted earnings
per common share $ 0.07 $ 0.03 $ 0.10
Prior year's earnings effect
of change in method of
accounting if the change had
been made January 1, 1998:
1999
Income $ 4.4 $ 1.1 $ 5.5
Basic and diluted earnings
per common share $ 0.07 $ 0.02 $ 0.09
1998
Income $ 2.9 $ 3.2 $ 6.1
Basic and diluted earnings
per common share $ 0.05 $ 0.05 $ 0.10
* All changes are increases to income or earnings per common share and
are after income taxes. The effect on quarterly earnings would be one-
fourth of the amounts reported except for the cumulative effect of
change in method of accounting which is a one time income increase.
9
2. CONSOLIDATED STATEMENTS OF CASH FLOWS - OTHER OPERATING ACTIVITIES
Three Months Ended Twelve Months Ended
2000 1999 2000 1999
Cash flows affected by changes in: (thousands)
Receivables $ 19,153 $ 33,031 $ (15,295) $ 15,295
Fuel inventories (1,439) (2,619) (2,660) (5,367)
Materials and supplies (937) 925 (2,788) 1,418
Accounts payable 9,848 (18,532) 34,925 2,927
Accrued taxes 2,651 6,629 (18,631) 8,628
Accrued interest (3,548) (1,233) (10,277) 1,484
Wolf Creek refueling
outage accrual 2,646 412 (3,025) 8,468
Other (4,586) (4,320) (5,742) (5,998)
Total $ 23,788 $ 14,293 $ (23,493) $ 26,855
3. SECURITIES AVAILABLE FOR SALE
On February 1, 2000, CellNet Data System Inc. (CellNet) announced that
it had agreed to sell its assets to a third party and that the third
party had agreed to assume some of CellNet's financial obligations.
As part of this transaction, CellNet plans to reorganize under Chapter
11 of the United States Bankruptcy Code. In March 2000, KLT wrote-off
its investment in CellNet of $4.8 million before taxes ($0.05 per
share). At December 31, 1999, $3.8 million before taxes ($0.04 per
share) of this loss had been reported as an unrealized loss in the
Consolidated Statement of Comprehensive Income.
Prior to the write-off, the investment in CellNet had been accounted
for as securities available for sale and adjusted to market value,
with unrealized gains or (losses) reported as a separate component of
comprehensive income.
The cost of these securities available for sale that KLT held as of
March 31, 1999 was $4.8 million. Accumulated net unrealized losses
were $0.5 million at March 31, 1999.
4. CAPITALIZATION
KCPL Financing I (Trust) has previously issued $150,000,000 of 8.3%
preferred securities. The sole asset of the Trust is the $154,640,000
principal amount of 8.3% Junior Subordinated Deferrable Interest
Debentures, due 2037, issued by KCPL.
In the first quarter of 2000, KCPL issued $200 million of unsecured
medium-term notes (see Consolidated Statement of Capitalization). As
of March 31, 2000, $100 million of unsecured medium-term notes
remained available for issuance under an indenture dated December 1,
1996.
From April 1 through May 9, 2000, KLT's borrowings under its bank
credit agreement increased $9.0 million. This total includes KLT Gas
borrowings under its bank credit agreement of $2.0 million.
5. SEGMENT AND RELATED INFORMATION
KCPL's three reportable segments are strategic business units.
Electric Operations includes the regulated electric utility,
unallocated corporate charges and wholly-owned subsidiaries on an
equity basis. KLT and HSS are holding companies for various
nonregulated business ventures.
The summary of significant accounting policies applies to all of the
segments. We evaluate
10
performance based on profit or loss from operations and return on capital
investment. We eliminate all intersegment sales and transfers. We include
KLT and HSS revenues and expenses in Other Income and (Deductions) and
Interest Charges in the Consolidated Statements of Income.
The tables below reflect summarized financial information concerning
KCPL's reportable segments.
Electric Intersegment Consolidated
Operations KLT HSS Eliminations Totals
Three Months Ended (thousands)
March 31, 2000
Electric Operating
Income (a) $ 20,258 $ 20,258
Miscellaneous
income (b) 4,180 $ 4,192 $ 360 $ 2,990 11,722
Miscellaneous
deductions(c) (11,234) (14,594) (2,050) 0 (27,878)
Income taxes on Other
Income and (Deductions) 1,400 11,956 716 0 14,072
Interest Charges (13,929) (3,423) 0 0 (17,352)
Net income(loss)(d) 35,836 (1,869) (1,121) 2,990 35,836
Three Months Ended
March 31, 1999
Electric Operating
Income (a) $ 25,935 $ 25,935
Miscellaneous
income (b) 5,790 $(1,084) $ 496 $ (170) 5,032
Miscellaneous
deductions(c) (7,888) (7,025) (659) 0 (15,572)
Income taxes on Other
Income and (Deductions) 769 11,429 45 0 12,243
Interest Charges (13,786) (3,032) 0 0 (16,818)
Net income(loss) 11,883 288 (118) (170) 11,883
Twelve Months Ended
March 31, 2000
Electric Operating
Income (a) $ 138,272 $ 138,272
Miscellaneous
income (b) 24,020 $22,449 $ (491) $ 8,106 54,084
Miscellaneous
deductions(c) (45,361) (59,355) (6,709) 0 (111,425)
Income taxes on Other
Income and (Deductions) 8,782 45,725 2,690 0 57,197
Interest Charges (56,600) (12,268) 0 0 (68,868)
Net income(loss)(d) 105,868 (3,449) (4,657) 8,106 105,868
Twelve Months Ended
March 31, 1999
Electric Operating
Income (a) $ 180,170 $ 180,170
Miscellaneous
income (b) 21,363 $13,864 $1,229 $ (508) 35,948
Miscellaneous
deductions(c) (35,634) (43,086) (1,592) 0 (80,312)
Income taxes on Other
Income and (Deductions) 5,443 42,912 123 0 48,478
Interest Charges (57,049) (12,942) 0 0 (69,991)
Net income(loss) 118,239 748 (240) (508) 118,239
(a) Refer to the Consolidated Statements of Income for detail of
Electric Operations revenues and expenses.
(b) Includes nonregulated revenues, interest and dividend income,
income and losses from equity investments and gains on sales of
property.
(c) Includes nonregulated expenses, losses on sales of property,
asset impairments and merger-related expenses.
(d) Includes $35.0 million cumulative effect to January 1, 2000, of
changes in accounting principles, net of income taxes.
11
Identifiable Assets
March 31, 2000 December 31, 1999
(thousands)
Electric Operations $ 2,940,240 $ 2,851,469
KLT 299,491 267,763
HSS 49,279 50,043
Intersegment Eliminations (177,170) (179,133)
Consolidated Totals $ 3,111,840 $ 2,990,142
6. COMMITMENTS AND CONTINGENCIES
Environmental Matters
KCPL's policy is to act in an environmentally responsible manner and
use the latest technology available to avoid and treat contamination.
We continually conduct environmental audits designed to ensure
compliance with governmental regulations and to detect contamination.
However, governmental bodies may impose additional or more rigid
environmental regulations that could require substantial changes to
operations or facilities.
Monitoring Equipment and Certain Air Toxic Substances
The Clean Air Act Amendments of 1990 required KCPL to spend about
$5 million in prior years for the installation of continuous
emission monitoring equipment to satisfy the requirements under
the acid rain provision. Also, a study under the Act could
require regulation of certain air toxic substances, including
mercury. We cannot predict the likelihood of any such
regulations or compliance costs.
Air Particulate Matter
In July 1997 the United States Environmental Protection Agency
(EPA) published new air quality standards for particulate matter.
Additional regulations implementing these new particulate
standards have not been finalized. Without the implementation
regulations, the impact of the standards on KCPL cannot be
determined. However, the impact on KCPL and other utilities that
use fossil fuels could be substantial. Under the new fine
particulate regulations the EPA is in the process of implementing
a three-year study of fine particulate emissions. Until this
testing and review period has been completed, KCPL cannot
determine additional compliance costs, if any, associated with
the new particulate regulations.
Nitrogen Oxide
In 1997 the EPA also issued new proposed regulations on reducing
nitrogen oxide (NOx) emissions. The EPA announced in 1998 final
regulations implementing reductions in NOx emissions. These
regulations initially called for 22 states, including Missouri,
to submit plans for controlling NOx emissions. The regulations
require a significant reduction in NOx emissions from 1990 levels
at KCPL's Missouri coal-fired plants by the year 2003.
To achieve these proposed reductions, KCPL would need to incur
significant capital costs, purchase power or purchase
NOx emissions allowances. It is possible that purchased power or
emissions allowances may be too costly or unavailable.
Preliminary analysis of the regulations indicate that selective
catalytic reduction technology will be required for some of the
KCPL units, as well as other changes. Currently, we estimate
that additional capital expenditures to comply with these
regulations could range from $40 million to $60 million.
Operations and maintenance expenses could also increase
12
by more than $2.5 million per year. These capital expenditure estimates
do not include the costs of the new air quality control equipment
to be installed at Hawthorn No. 5. The new air control equipment
designed to meet current environmental standards will also comply
with the proposed requirements discussed above.
We continue to refine our preliminary estimates and explore
alternatives to comply with these new regulations in order to
minimize, to the extent possible, KCPL's capital costs and
operating expenses. The ultimate cost of these regulations could
be significantly different from the amounts estimated above.
In December 1998, KCPL and several other western Missouri
utilities filed suit against the EPA over the inclusion of
western Missouri in the 1997 NOx reduction program. On March 3,
2000, a three-judge panel of the D.C. Circuit of the U.S. Court
of Appeals sent the NOx rules related to Missouri back to the EPA
stating the EPA failed to prove that fossil plants in the western
part of Missouri contribute to ozone formation in downwind
states. The impact of this decision, which is likely to be
appealed in whole or part, is unknown at this time however it is
likely to delay the implementation of new NOx regulations by EPA
in Missouri for some time.
In May 1999, a three-judge panel of the D.C. Circuit of the U.S.
Court of Appeals found certain portions of the NOx control
program unconstitutional in a related case. The EPA is pursuing
review of this finding with the U.S. Supreme Court, and the
outcome cannot be predicted at this time. If the panel's
decision is upheld, the effect will be to decrease the severity
of the standards with which KCPL ultimately may need to comply.
The State of Missouri is currently developing a State
Implementation Plan (SIP) for NOx reduction. This plan will
likely result in KCPL having to comply with new standards for NOx
that are less severe than those that would result from the EPA's
1998 regulations implementing reductions in NOx emissions. As
currently proposed, KCPL would not incur significant additional
costs to comply with the State of Missouri SIP.
Carbon Dioxide
At a December 1997 meeting in Kyoto, Japan, the Clinton
Administration supported changes to the International Global
Climate Change treaty which would require a seven percent
reduction in United States carbon dioxide (CO2) emissions below
1990 levels. The Administration has not submitted this change to
the U.S. Senate where ratification is uncertain. If future
reductions of electric utility CO2 emissions are eventually
required, the financial impact upon KCPL could be substantial.
Low-Level Waste
The Low-Level Radioactive Waste Policy Amendments Act of 1985 mandated
that the various states, individually or through interstate compacts,
develop alternative low-level radioactive waste disposal facilities.
The states of Kansas, Nebraska, Arkansas, Louisiana and Oklahoma
formed the Central Interstate Low-Level Radioactive Waste Compact and
selected a site in northern Nebraska to locate a disposal facility.
Wolf Creek Nuclear Operating Corporation (WCNOC) and the owners of the
other five nuclear units in the compact have provided most of the pre-
construction financing for this project. As of March 31, 2000, KCPL's
net investment on its books was $7.4 million.
Significant opposition to the project has been raised by Nebraska
officials and residents in the area of the proposed facility, and
attempts have been made through litigation and proposed legislation in
Nebraska to slow down or stop development of the facility. On
December 18, 1998, the application for a license to construct this
project was denied. In December 1998, the utilities filed a federal
court lawsuit contending Nebraska officials acted in bad faith while
handling the license application.
13
On January 15, 1999, a request for a contested case hearing on the denial of
the license was filed. On April 16, 1999, a U.S. District Court judge in
Nebraska issued an injunction staying indefinitely any further activity on
the contested case hearing. In May 1999 the state of Nebraska appealed the
injunction. In April 2000 the court of appeals affirmed the U.S.
District Court's decision. The possibility of reversing the license
denial will be greater when the contested case hearing ultimately is
conducted than it would have been had the hearing been conducted
immediately.
In May 1999, the Nebraska legislature passed a bill withdrawing
Nebraska from the Compact. In August 1999, the Nebraska governor gave
official notice of the withdrawal to the other member states.
Withdrawal will not be effective for five years and will not, of
itself, nullify the site license proceeding.
Corporate Owned Life Insurance
On January 4, 2000, KCPL received written notification from the
Internal Revenue Service (IRS) that it intends to dispute interest
deductions associated with KCPL's corporate owned life insurance
(COLI) program. We understand this issue is an IRS Coordinated Issue
and thus has been raised and not finalized for many of the largest
companies in the country. A disallowance of KCPL's COLI interest
deductions and assessed interest on the disallowance for tax years
1994 to 1998 would reduce net income by approximately $12 million.
KCPL believes it has complied with all applicable tax laws and
regulations and will vigorously contest any adjustment or claim by the
IRS including exhausting all appeals available.
7. RECEIVABLES
March 31 December 31
2000 1999
(thousands)
KCPL Receivable Corporation $ 15,583 $ 29,705
Other Receivables 36,812 41,843
Receivables $ 52,395 $ 71,548
In 1999 KCPL entered into a revolving agreement to sell all of its
right, title and interest in the majority of its customer accounts
receivable to KCPL Receivable Corporation, a special purpose entity
established to purchase customer accounts receivable from KCPL. KCPL
Receivable Corporation has sold receivable interests to outside
investors. In consideration of the sale, KCPL received $60 million in
cash and the remaining balance in the form of a subordinated note from
KCPL Receivable Corporation. The agreement is structured as a true
sale under which the creditors of KCPL Receivable Corporation will be
entitled to be satisfied out of the assets of KCPL Receivable
Corporation prior to any value being returned to KCPL or its
creditors.
Other receivables consist primarily of receivables from partners in
jointly-owned electric utility plants, bulk power sales receivables
and accounts receivable held by subsidiaries.
8. SIGNIFICANT NONREGULATED INVESTMENTS (Subsequent to December 31, 1999)
During the first quarter of 2000, KLT Gas purchased a 50% ownership in
Patrick Energy, an Oklahoma oil and gas exploration and development
company. The investment is accounted for using the equity method and
is approximately $17 million at March 31, 2000.
14
On April 1, 2000, KLT Energy Services invested an additional $6.4
million in Strategic Energy, LLC (SEL). With this investment KLT
Energy Services economic ownership percentage increased to about 71%
(68% of the voting interest) and will require KLT to change its
accounting treatment of SEL from the equity basis to consolidation.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
REGULATION AND COMPETITION
As competition develops throughout the electric utility industry, we
are positioning Kansas City Power & Light Company (KCPL) to excel in
an open market. We are continuing to improve the efficiency of KCPL's
electric utility operations, lowering prices and offering new
services.
Competition in the electric utility industry accelerated with the
passage of the National Energy Policy Act of 1992. This Act gave the
Federal Energy Regulatory Commission (FERC) the authority to require
electric utilities to provide transmission line access to independent
power producers (IPPs) and other utilities (wholesale wheeling).
An increasing number of states have already adopted open access
requirements for utilities' retail electric service, allowing
competing suppliers access to their retail customers (retail
wheeling). Many other states, including Kansas and Missouri, have
actively considered retail competition. Several comprehensive retail
competition bills were introduced in the 2000 Missouri General
Assembly but none will pass this year. No comprehensive retail
competition bills were introduced in the 2000 Kansas Legislature.
Retail access could result in market-based rates below current cost-
based rates, providing growth opportunities for low-cost producers and
risks for higher-cost producers, especially those with large
industrial customers. Lower rates and the loss of major customers
could result in stranded costs and place an unfair burden on the
remaining customer base or shareholders. We cannot predict whether
any stranded costs would be recoverable in future rates. If an
adequate and fair provision for recovery of lost revenues is not
provided, certain generating assets may have to be evaluated for
impairment and appropriate charges recorded against earnings. In
addition to lowering profit margins, market-based rates could require
generating assets to be depreciated over shorter useful lives,
increasing operating expenses.
KCPL is positioned to compete in an open market with its diverse
customer mix and pricing strategies. Industrial customers make up
about 20% of KCPL's retail mwh sales, well below the utility industry
average. KCPL's flexible industrial rate structure is competitive
with other companies' rate structures in the region. In addition, we
have entered into long-term contracts for a significant portion of
KCPL's industrial sales. Although no direct competition for retail
electric service currently exists within KCPL's service territory; it
does exist in the bulk power market and between alternative fuel
suppliers and KCPL. Third-party energy management companies are
seeking to initiate relationships with large users in KCPL's service
territory to enhance their chances to supply electricity directly when
retail wheeling is authorized.
Increased competition could also force utilities to change accounting
methods. Financial Accounting Standards Board (FASB) Statement No. 71
- - Accounting for Certain Types of Regulation, applies to regulated
entities whose rates are designed to recover the costs of providing
service. A utility's operations could cease meeting the requirements
of FASB 71 for various reasons, including a change in regulation or a
change in the competitive environment for a company's regulated
services. For those operations no longer meeting the requirements of
regulatory accounting, regulatory assets would be written off. KCPL
can maintain its $136 million of regulatory assets at March 31, 2000,
as long as FASB 71 requirements are met.
16
Competition could eventually have a material, adverse effect on KCPL's
results of operations and financial position. Should competition
eventually result in a significant charge to equity, capital
requirements and related costs could increase significantly.
PROPOSED RESTRUCTURING
KCPL is proactively seeking to restructure the company in advance of
retail access legislation into a holding company with three separate
subsidiaries - Power Supply, Power Delivery and KLT Inc. This
proposed restructuring will be subject to approval by a number of
regulatory authorities. We cannot predict when or if these approvals
will be received. As part of this restructuring, we are requesting
that the generation assets be deregulated.
We expect this proposed restructuring to create additional value for
KCPL and its shareholders by:
- - Enabling KCPL to leverage its low-cost generation assets in an
unregulated environment.
- - Allowing management to focus on value creation within each
business unit.
- - Facilitating growth of each business unit and the expansion into
new markets.
- - Allowing the financial market to evaluate the nonregulated assets
at a share price to earnings multiple that is greater than the
multiple historically used to evaluate the regulated electric utility.
Power Supply - generation
KCPL's electric generation business is fundamentally sound and
competitive. It has a strong asset mix including baseload,
intermediate and peaking units. KCPL has historically been a low-cost
provider in its region and, with the rebuild of Hawthorn No. 5
(projected to be placed in service in June 2001), KCPL's generation
should be positioned well to compete in a deregulated market.
In addition to the rebuild of Hawthorn No. 5, KCPL has been investing
in increased capacity. In July 1999, Hawthorn No. 6, a 141-megawatt
unit was placed in service. Hawthorn Nos. 7, 8 and 9 are scheduled to
be completed and placed in service by July 2000, adding 294 megawatts
of generating capacity.
We expect that there will be a power supply agreement for a period of
time between the Power Supply and Power Delivery subsidiaries while
Power Supply's additional generating capacity and competitive cost
structure can be utilized to sell electricity in the competitive
wholesale market. We believe KCPL will realize many benefits,
including:
- - The ability to make a higher return in a deregulated or
competitive market.
- - The ability to make investment decisions and enter into strategic
partnerships without needing regulatory approval.
Power Delivery - transmission and distribution
KCPL transmission and distribution (T&D) currently serves over 461,000
customers and experiences annual load growth of around 3% through
increased customer usage and additional customers. KCPL's rates
charged for electricity are currently below the national average.
Additionally, KCPL has a moratorium on Missouri retail rates until
2002.
The creation of a separate business for T&D will isolate KCPL's
regulated assets in a separate business unit. We will pursue an
incentive-based regulatory model under the new structure for the T&D
regulated business. In addition, the T&D business currently plans to
participate in the Southwest Power Pool Independent System Operator
(ISO). This will satisfy the FERC requirement to participate in a
Regional Transmission Organization (RTO). RTOs will combine the
transmission operations of utility businesses in the region into an
organization that can schedule and deliver energy in the region to
ensure regional transmission reliability.
17
KLT INC. NONREGULATED OPPORTUNITIES
KLT Inc. (KLT), a wholly-owned subsidiary of KCPL, pursues
nonregulated business ventures. Existing ventures include investments
in telecommunications, oil and gas development and production, energy
services and affordable housing limited partnerships.
KCPL's investment in KLT was $119 million as of March 31, 2000 and
December 31, 1999. KLT's loss for the three months ended March 31,
2000, totaled $1.9 million compared to income of $0.3 million for the
three months ended March 31, 1999. (See KLT earnings per share
analysis on page 25 for significant factors impacting KLT's operations
and resulting net income for all periods.) KLT's consolidated assets
totaled $299 million at March 31, 2000 compared to $268 million at
December 31, 1999.
Telecommunications
Through our subsidiary, KLT Telecom, we own 47% of DTI Holdings
(acquired in 1997), which is the parent company of Digital Teleport,
Inc. (DTI), a facilities-based telecommunications company. DTI is
creating an approximately 20,000 route-mile, digital fiber optic
network comprised of 23 regional rings that interconnect primary,
secondary and tertiary cities in 37 states. DTI now owns or controls
over 10,000 route-miles of fiber optic capacity with local rings
located in the metropolitan areas of Kansas City, St. Louis, Memphis
and Tulsa. By the end of 2000, DTI projects it will have over 18,000
route-miles of its network completed.
The strategic design of the DTI network allows DTI to offer reliable,
high-capacity voice and data transmission services, on a region-by-
region basis, to primary carriers and end-user customers who seek a
competitive alternative to existing providers. DTI's network
infrastructure is designed to provide reliable customer service
through back-up power systems, automatic traffic re-routing and
computerized automatic network monitoring. If the network experiences
a failure of one of its links, the routing intelligence of the
equipment transfers traffic to the next choice route, thereby ensuring
call delivery without affecting customers. DTI currently provides
services to other communications companies including AT&T, Sprint, MCI
Worldcom, Ameritech Cellular and Broadwing Communications, among
others. DTI also provides private line services to targeted business
and governmental end-user customers.
In the first quarter of 2000, KLT and KCPL entered into a partnership
with Ameren Corporation and bex.com and announced the creation of a
business-to-business vertical market exchange that will allow
utilities to purchase various goods and services on-line. The
exchange is expected to commence operations in June 2000.
Oil and Gas Development and Production
KLT Gas pursues nonregulated growth primarily through the acquisition,
development and production of natural gas properties. We have built a
knowledge base in coalbed methane production and reserves evaluation.
Therefore, KLT Gas focuses on coalbed methane; a niche in the oil and
gas industry where we believe our expertise gives us a competitive
advantage. Coalbed methane, with a longer, predictable reserve life,
is inherently lower risk than conventional gas exploration. In
addition to coalbed methane projects, we seek out high quality
conventional gas production to add further value to our operations.
Conventional gas properties comprise approximately 25% of KLT Gas'
production as of March 31, 2000.
KLT Gas has properties in Colorado, Texas, Wyoming, Oklahoma, Kansas,
New Mexico and North Dakota. KLT Gas has an ownership interest in
approximately 350 wells in these states and plans to drill over 150
additional wells during 2000. These totals include KLT Gas' January
2000 acquisition
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of 80 wells with significant proven reserves. As it
pursues its growth strategy, KLT Gas develops newly acquired areas to
realize significant gas production from proven reserves. With the
January 2000 acquisition, we estimate net proven reserves at March 31,
2000, totaled approximately 300 billion cubic feet. Average gas
production at March 31, 2000, was approximately 43 million cubic feet
per day. These levels of net production and reserves in the United
States would place KLT Gas in the top 100 publicly-traded oil and gas
companies, based on the September 1999 Oil and Gas Journal.
The future price scenarios for natural gas appear strong, showing
steady growth. We believe the demand for natural gas should
strengthen into the future. Environmental concerns and the increased
demand for natural gas for new electric generating capacity are
driving this projected growth in demand. We believe that natural gas
prices will continue to be more stable than oil prices and that an
increased demand for natural gas will move natural gas prices upward
in the future. Even with the stable gas prices, we utilize gas
forward contracts to minimize the risk of gas price changes.
Energy Services
In 1999, KLT Energy Services acquired a 56% ownership interest (49% of
the voting interest) in Strategic Energy, LLC (SEL). In April 2000,
KLT Energy Services invested an additional $6.4 million to increase
its ownership interest to about 71% (68% of the voting interest). SEL
buys and manages electricity and natural gas in unregulated markets
for commercial and industrial customers. SEL also provides strategic
planning and consulting services in natural gas and electricity
markets.
SEL builds strong customer relationships by providing quality services
over extended periods of time. SEL has provided services to over 100
Fortune 500 companies and currently serves over 6,000 customers. SEL
has developed an excellent market reputation over the past fifteen
years.
SEL has developed into a major provider of services, mainly
electricity for a fee, in the newly deregulated electricity market in
Pennsylvania, capturing approximately 10% of the eligible commercial
market and 4% of the eligible industrial market in western
Pennsylvania. SEL utilizes hedges on all of its retail obligations to
eliminate any material market risk.
SEL has invested substantial dollars over the past three years in
information systems necessary to manage both retail and wholesale
energy on an integrated basis. SEL plans to continue investing in
systems to maintain and exploit their technological advantage.
HOME SERVICE SOLUTIONS INC. NONREGULATED OPPORTUNITIES
Home Service Solutions Inc. (HSS), a wholly-owned subsidiary of KCPL,
pursues nonregulated business ventures, primarily in residential
services. At March 31, 2000, HSS had a 49% ownership in R.S. Andrews
Enterprises, Inc. (RSAE), a consumer services company in Atlanta,
Georgia. RSAE has made acquisitions in key U.S. markets. RSAE
provides heating, cooling, plumbing and electrical services as well as
appliance services, pest control and home warranties. Additionally,
Worry Free Service, Inc., a wholly-owned subsidiary of HSS, assists
residential customers in obtaining financing primarily for heating and
air conditioning equipment.
KCPL's investment in HSS was $47.3 million as of March 31, 2000, and
$46.3 million as of December 31, 1999. HSS' loss for the three months
ended March 31, 2000, totaled $1.1 million compared to $0.1 million
for the three months ended March 31, 1999. HSS' increased loss for
the three months ended March 31, 2000, was primarily due to continued
losses associated with its
19
investment in RSAE. HSS' consolidated assets totaled $49 million at
March 31, 2000, compared to $50 million at December 31, 1999.
RESULTS OF OPERATIONS
Three-month period: Three months ended March 31, 2000, compared
with three months ended March 31, 1999
Twelve-month period: Twelve months ended March 31, 2000, compared
with twelve months ended March 31, 1999
EARNINGS OVERVIEW
Three-months Twelve-months
ended March 31 ended March 31
2000 1999 2000 1999
Core utility earnings per
share $0.05 $0.18 $ 1.23 $ 1.84
KLT Inc. gain (loss) 1 (0.03) 0 (0.06) 0.01
HSS Inc. loss (0.02) 0 (0.08) 0
Cumulative effect of
changes in pension
accounting 0.57 0 0.57 0
Reported earnings per share (EPS) $0.57 $0.18 $ 1.66 $ 1.85
For the Periods Ended
March 31, 2000 versus March 31, 1999
Three Months Twelve Months
Factors impacting core Increase (decrease)
utility EPS
Merger impact 0 $ 0.14
Hawthorn No. 5 explosion 2 $ (0.03) (0.12)
July 1999 heat storm 0 (0.18)
1999 write off of start up costs 0.02 0.02
Annualized rate reduction in
Missouri effective March 1,
1999 (0.02) (0.14)
Other (see discussion below) (0.10) (0.33)
Total impact of factors impacting
core utility EPS $ (0.13) $ (0.61)
1 See KLT earnings per share analysis on page 25.
2 See Hawthorn No. 5 on page 29.
Contributing to the decreases in other factors impacting core utility
EPS (reflected in the table above) are the following:
- Higher net interchange and fuel costs of approximately $4 million
or $0.04 per share in the three-month period and approximately $10
million or $0.10 per share in the twelve-month period because of
increased per unit prices.
- Higher other operating expenses in the three- and twelve-month
periods, excluding the impact of the unavailability of Hawthorn No. 5.
- Milder than normal weather during the three- and twelve-month
periods.
Effective January 1, 2000, KCPL changed its methods of amortizing
unrecognized net gains and losses and determination of expected return
related to its accounting for pension expense. Accounting principles
required KCPL to record the cumulative effect of these changes in the
three months ended March 31, 2000, increasing common stock earnings by
$0.57 per share or $35 million. Additionally, the changes in pension
accounting will reduce pension expense by $10 million
20
for the year 2000, increasing earnings per share by $0.10 per share. One-
fourth of this reduction in pension expense was allocated to the three
months ended March 31, 2000. See Note 1 to the Consolidated Financial
Statements for further information.
MEGAWATT-HOUR (MWH) SALES AND OPERATING REVENUES
Sales and revenue data:
(revenue change in millions)
For the Periods Ended
March 31, 2000 versus March 31, 1999
Three Months Twelve Months
Mwh Revenues Mwh Revenues
Increase (decrease)
Retail Sales:
Residential 0 % $ 0 (3)% $ (12)
Commercial 5 % 1 1 % (5)
Industrial 1 % 1 (1)% 0
Other 12 % 0 5 % 1
Total Retail 3 % 2 (1)% (16)
Sales for Resale:
Bulk Power Sales (30)% (2) (34)% (19)
Other 2 % 0 (1)% 0
Total (3)% 0 (7)% (35)
Other revenues 0 (2)
Total Operating Revenues $ 0 $ (37)
In 1999 the Missouri Public Service Commission (MPSC) approved a
stipulation and agreement that called for KCPL to reduce its annual
Missouri electric revenues by 3.2%, or about $15 million effective
March 1, 1999. Revenues decreased by approximately $2 million for the
three-month period and $14 million for the twelve-month period as a
result of the Missouri rate reduction. As part of the stipulation and
agreement, KCPL, MPSC Staff or the Office of Public Counsel will not
file any case with the Commission, requesting a general increase or
decrease, rate credits or rate refunds that would become effective
prior to March 1, 2002.
Even though weather was milder than normal for the three months ended
March 31, 2000, retail mwh sales increased 3% in the three-month
period primarily due to continued load growth. Milder weather in the
twelve-month period contributed to a decline in retail mwh sales but
was partially offset by continued load growth. Load growth consists
of higher usage-per-customer as well as the addition of new customers.
Bulk power sales vary with system requirements, generating unit and
purchased power availability, fuel costs and requirements of other
electric systems. The unavailability of Hawthorn No. 5 contributed to
the decreases in bulk power mwh sales of 30% for the three-month
period and 34% for the twelve-month period. Wolf Creek's tenth
maintenance and refueling outage during the second quarter of 1999
also contributed to the decrease in bulk power mwh sales for the
twelve-month period. The 1998 outage at Hawthorn No. 5, due to a
ruptured steam pipe, contributed to reduced bulk power mwh sales for
the twelve months ended March 31, 1999.
Future mwh sales and revenues per mwh could be affected by national
and local economies, weather, customer conservation efforts and
availability of generating units. Competition, including
21
alternative sources of energy, such as natural gas, co-generation, IPPs
and other electric utilities, may also affect future sales and revenue.
FUEL AND PURCHASED POWER
Combined fuel and purchased power expenses for the three-month period
increased 7% while total mwh sales (total of retail and sales for
resale) decreased 3%. Excluding the impact of the unavailability of
Hawthorn No. 5, net interchange and fuel costs increased for the three-
month period by about $4 million because of increased per unit prices.
The unavailability of Hawthorn No. 5 resulted in decreased fuel
expenses at Hawthorn No. 5 partially offset by increased purchased
power expenses. The cost per mwh for purchased power was
significantly higher than the fuel cost per mwh of generation.
Combined fuel and purchased power expenses for the twelve-month period
increased 11% while total mwh sales decreased 7%. Excluding the
impacts of the unavailability of Hawthorn No. 5 and the July 1999 heat
storm, net interchange and fuel costs increased for the twelve-month
period by about $10 million because of increased per unit prices. The
unavailability of Hawthorn No. 5 resulted in increased purchased power
expenses partially offset by decreased fuel expenses at Hawthorn No.
5. Moreover, as a result of the intense and prolonged heat in the
Midwest during the last half of July 1999, KCPL incurred approximately
$18 million in higher costs, including purchased power expenses, net
of the increased revenues.
We are implementing the following risk mitigation measures to protect
KCPL in the event of another very hot summer period:
- - Price protection: We are replacing 325 megawatts of KCPL's
purchased capacity at market-based energy prices with over 300
megawatts of generation at known prices. Hawthorn Unit Nos. 7, 8 and
9, gas-fired units located on the same site as the rebuilt Hawthorn
No. 5, are under construction and are on schedule to be completed and
placed in service by July 2000.
- - Forced outage swaps for the period June 1 to September 30, 2000:
We made arrangements to share the forced outage exposure of two of
KCPL's larger generating units with another utility's two generating
units outside of our service territory. Each utility will supply the
other with up to 50 mwh per hour of electricity per generating unit at
a set price per mwh should a forced outage occur. In the second
quarter of 2000, we intend to enter two similar 50 mwh per hour forced
outage swaps with a second utility outside of our service territory.
The agreement will cover forced outages at the same two KCPL
generating units and two generating units of the other utility. If
KCPL has to supply power under these four agreements, the maximum
exposure (which is unlikely) is from $5 million to $10 million per
agreement.
- - Forced outage insurance: We are negotiating to purchase insurance
to partially cover, above certain deductible limits, the excess costs of
replacement power that would be incurred if a forced outage occurs at any
of KCPL's generating units.
- - Delivery protection: KCPL has purchased 905 megawatts of firm
transmission capacity from neighboring systems to ensure the delivery
of power from outside sources during summer peak periods.
Nuclear fuel costs per mmBtu decreased 7% for the twelve-month period
and remained substantially less than the mmBtu price of coal. Nuclear
fuel costs per mmBtu averaged about 55% of the mmBtu price of coal for
the twelve months ended March 31, 2000, and 60% of the mmBtu price of
coal for the twelve months ended March 31, 1999. We expect the price
of nuclear fuel to remain fairly constant through the year 2001.
During the twelve months ended March 31, 2000, fossil plants
represented about 70% and the nuclear plant about 30% of total
generation. For the
22
twelve months ended March 31, 1999, fossil plants represented about 69%
and the nuclear plant about 31% of total generation.
The cost of coal per mmBtu increased 2% for the twelve-month period
partially because of the unavailability of Hawthorn No. 5. The cost
of coal per mmBtu at Hawthorn No. 5 was lower than the average cost of
coal per mmBtu at most of KCPL's other coal-fired plants. However,
KCPL's coal procurement strategies continue to provide coal costs
below the regional average and we expect coal costs to remain fairly
consistent with current levels through 2000.
OTHER OPERATION AND MAINTENANCE EXPENSES
Combined other operation and maintenance expenses increased about $8
million or 12% for the three-month period and about $8 million or 3%
for the twelve-month period primarily due to the following:
- - Customer accounts expenses increased due to higher customer
record keeping expenses.
- - Distribution expenses increased because of higher cable locating
expenses.
- - Non-fuel production operations increased due to operating and
lease expenses for Hawthorn No. 6, which was placed into commercial
operation in July 1999.
- - Hawthorn No. 5's other operation and maintenance expenses
decreased because of the boiler explosion on February 17, 1999.
- - For the three-month period, maintenance expenses increased
primarily due to higher maintenance expenses for scheduled maintenance
at KCPL's generating units.
- - For the three-month period, distribution expenses also increased
because of higher fleet expenses.
- - For the twelve-month period, administrative and general labor
expenses increased primarily due to increased salary expenses
including additional salary expenses incurred for information
technology Year 2000 preparedness and implementation of system
applications. Much of the additional salary expenses associated with
the implementation of system applications was capitalized in the
twelve months ended March 31, 1999.
- - For the twelve-month period, maintenance expenses decreased
primarily due to lower maintenance expenses during outages at KCPL's
generating units.
- - For the twelve-month period, customer accounts expenses also
increased because of higher meter reading expenses.
- - For the twelve-month period, non-fuel production operations also
increased because of higher operating expenses at certain generating
units.
We continue to emphasize new technologies, improved work methodology
and cost control. We continuously improve our work processes to
increase efficiencies and improve operations.
DEPRECIATION
The increase in depreciation expense for the twelve-month period
reflected increased depreciation of capitalized computer software for
internal use and normal increases in depreciation from capital
additions. These increases were partially offset by a $2.8 million
decrease in depreciation expense for the twelve-month period because
Hawthorn No. 5 was partially retired due to the February 1999
explosion.
23
TAXES
Operating income taxes decreased for the three- and twelve-month
periods reflecting lower taxable operating income.
Components of general taxes:
Three months ended Twelve months ended
March 31 March 31
2000 1999 2000 1999
(thousands)
Property $ 10,341 $ 10,741 $ 42,333 $ 40,781
Gross receipts 8,654 8,912 40,959 42,439
Other 2,219 2,158 9,112 10,009
Total $ 21,214 $ 21,811 $ 92,404 $ 93,229
Property taxes increased in the twelve-month period because reductions
in Kansas property taxes booked in the last half of 1998 impacted the
twelve months ended March 31, 1999. The reductions resulted primarily
from changes in Kansas tax law which reduced the mill levy rates and
lower Missouri and Kansas property tax assessed valuations in 1998.
Changes in gross receipts taxes result from changes in billed Missouri
revenues.
OTHER INCOME AND (DEDUCTIONS)
KLT summarized operations:
Three months ended Twelve months ended
March 31 March 31
2000 1999 2000 1999
(millions)
Miscellaneous income and
(deductions) - net * $ (10.4) $ (8.1) $ (36.9) $ (29.2)
Income taxes 11.9 11.4 45.7 42.9
Interest charges (3.4) (3.0) (12.3) (13.0)
Net income (loss) $ (1.9) $ 0.3 $ (3.5) $ 0.7
KLT earnings (loss)
per share $ (0.03) $ 0 $ (0.06) $ 0.01
* To table on page 25
24
KLT earnings per share analysis:
Three months ended Twelve months ended
March 31 March 31
2000 1999 2000 1999
(earnings per share)
KLT excluding items below $ 0.09 $ 0.05 $ 0.35 $ 0.24
Write-off of CellNet stock (0.05) 0 (0.05) 0
Sale of Nationwide
Electric 0 0 0.20 0
Write down of Lyco
investment 0 0 (0.03) 0
Write down of a note
receivable 0 0 (0.05) 0
KLT Power transactions
- 1998 0 0 0 (0.02)
KLT Telecom - Telemetry
Solutions 0 (0.02) (0.20) (0.07)
KLT Telecom - Digital
Teleport Inc. (0.07) (0.03) (0.28) (0.14)
KLT Earnings(Loss)
per share $(0.03) $ 0 $ (0.06) $ 0.01
In the three months ended March 31, 2000, KLT wrote off its investment
of $4.8 million before taxes in CellNet Data Systems Inc., reducing
earnings per share by $0.05. Through December 31, 1999, $3.8 million
before taxes, or $0.04 per share, of this loss had been reported as an
unrealized loss in the Consolidated Statements of Comprehensive
Income.
KLT recorded equity losses on its investment in Digital Teleport, Inc.
(DTI) of approximately $7 million for the three months ended March 31,
2000, and approximately $26 million for the twelve months ended March
31, 2000. DTI is developing a National fiber optic network. KLT's
total losses from its investment in DTI are limited to its $45 million
equity investment. At March 31, 2000, the equity investment in DTI
was approximately $7 million, limiting the magnitude of possible
future losses.
In the twelve months ended March 31, 2000, KLT Energy Services sold
100% of the stock it held in Nationwide Electric, Inc., resulting in a
gain of $20 million. Additionally, in the twelve months ended March
31, 2000, KLT Telecom wrote off its investment in Telemetry Solutions.
Both the write-off of the investment ($0.13 per share) and the
operating losses incurred in the twelve months ended March 31, 2000,
prior to the write-off, are included on the KLT Telecom - Telemetry
Solutions line in the earnings per share table above.
For the three- and twelve-month periods, earnings per share from KLT
(excluding KLT Telecom and one-time transactions) increased primarily
due to improved earnings from its investments in affordable housing,
gas production and development, and energy services.
Miscellaneous income and (deductions) - net:
Three months ended Twelve months ended
March 31 March 31
2000 1999 2000 1999
(millions)
Merger-related expenses $ (0.2) $ (0.3) $ (3.1) $ (9.6)
* From table on page 24 (10.4) (8.1) (36.9) (29.2)
Other (5.6) (2.1) (17.3) (5.6)
Total Miscellaneous
income and (deductions)
- net $ (16.2) $ (10.5) $ (57.3) $ (44.4)
25
Other Miscellaneous income and (deductions) - net for the three- and
twelve-month periods were affected by an increase of approximately $1
million primarily reflecting bad debt expense associated with the sale
of accounts receivable to KCPL Receivable Corporation. Prior to
establishing KCPL Receivable Corporation, bad debt expense on accounts
receivable was recorded as an other operating expense. A $2.8 million
reduction in electric operations interest and dividend income also
affected the twelve-month period. Further, HSS' operations resulted
in increased deductions of approximately $1.5 million for the three-
month period and $6.8 million for the twelve-month period primarily
due to equity losses from HSS' investment in R.S. Andrews Enterprises,
Inc.
Other Income and (Deductions) - Income taxes
Other Income and (Deductions) - Income taxes for the three- and twelve-
month periods reflect the tax impact on total miscellaneous income and
(deductions) - net. In addition, KLT accrued tax credits of $7
million for the three months ended March 31, 2000, and March 31, 1999.
KLT accrued tax credits of $28 million for the twelve months ended
March 31, 2000 and $26 million for the twelve months ended March 31,
1999.
INTEREST CHARGES
Long-term debt interest expense decreased for the three- and twelve-
month periods, reflecting lower average levels of outstanding long-
term debt. The lower average levels of debt primarily reflect
scheduled debt repayments by KCPL and repayments by KLT on its
affordable housing notes. The twelve-month period also reflects lower
average levels of debt by KLT on its bank credit agreement.
Short-term debt interest expense increased for the three- and twelve-
month periods, since KCPL had higher average levels of outstanding
short-term debt. In March 2000, KCPL issued $200 million of unsecured
medium-term notes and used the proceeds to repay short-term commercial
paper.
Allowance for borrowed funds used during construction increased during
the three- and twelve-month periods due to higher balances of
outstanding short-term debt during the periods. This resulted in a
higher proportion of the allowance being calculated using the short-
term borrowing rate versus the rate for equity funds. This follows
FERC guidelines for calculating the allowance which require
consideration of the level of outstanding short-term debt before long-
term debt and equity funds. Additionally, construction expenditures
increased significantly during the three- and twelve-month periods
primarily because of the construction projects at the Hawthorn
generating station.
We use interest rate swap and cap agreements to limit the volatility
in interest expense on a portion of KCPL's variable-rate, long-term
debt. Although these agreements are an integral part of interest rate
management, the incremental effect on interest expense and cash flows
is not significant. We do not use derivative financial instruments
for speculative purposes.
WOLF CREEK
Wolf Creek is one of KCPL's principal generating units, representing
about 19% of KCPL's generating capacity, excluding the Hawthorn No. 5
generating unit. The plant's operating performance has remained
strong over the last three years, contributing about 28% of the annual
mwh generation while operating at an average capacity of 91%.
Furthermore, Wolf Creek has the lowest fuel cost per mmBtu of any of
KCPL's generating units.
We accrue the incremental operating, maintenance and replacement power
costs for planned outages evenly over the unit's operating cycle,
normally 18 months. As actual outage expenses are
26
incurred, the refueling liability and related deferred tax asset are
reduced. Wolf Creek's eleventh refueling and maintenance outage is
scheduled for Fall 2000 and is estimated to be a 35-day outage.
Wolf Creek's tenth refueling and maintenance outage, estimated to be a
40-day outage, began April 3, 1999, and was completed May 9, 1999.
Actual costs of the 1999 outage were $1 million less than the
estimated and accrued costs for the outage primarily because the 36-
day outage was shorter than estimated. In fact, it was the shortest
refueling and maintenance outage in Wolf Creek's history.
Ownership and operation of a nuclear generating unit exposes KCPL to
risks regarding decommissioning costs at the end of the unit's life
and to potential retrospective assessments and property losses in
excess of insurance coverage.
ENVIRONMENTAL MATTERS
KCPL's operations must comply with federal, state and local
environmental laws and regulations. The generation and transmission
of electricity produces and requires disposal of certain products and
by-products, including polychlorinated biphenyl (PCBs), asbestos and
other potentially hazardous materials. The Federal Comprehensive
Environmental Response, Compensation and Liability Act (the Superfund
law) imposes strict joint and several liability for those who
generate, transport or deposit hazardous waste. This liability
extends to the current property owner, as well as prior owners, back
to the time of contamination.
We continually conduct environmental audits to detect contamination
and ensure compliance with governmental regulations. However,
compliance programs need to meet new and future environmental laws, as
well as regulations governing water and air quality, including carbon
dioxide emissions, nitrogen oxide emissions, hazardous waste handling
and disposal, toxic substances and the effects of electromagnetic
fields. Therefore, compliance programs could require substantial
changes to operations or facilities (see Note 6 to the Consolidated
Financial Statements).
SIGNIFICANT CONSOLIDATED BALANCE SHEET CHANGES (March 31, 2000
compared to December 31, 1999)
- Utility plant - construction work in process increased $53.3
million primarily due to increases of $31.8 million at Hawthorn No. 5
for rebuilding the boiler and $23.3 million for construction of an
additional 294 megawatts of capacity.
- Investments and nonutility property increased $26.2 million
primarily due to a $23.7 million increase in KLT's investments
including:
- $ 22.1 million increase in oil and gas property and investments,
- $ 5.3 million increase in marketable securities,
- $ 3.5 million increase in long-term notes receivable,
- $ 6.6 million decrease due to continued equity losses from the
investment in Digital Teleport Inc.
- Receivables decreased $19.2 million primarily due to a $14.1
million reduction in a receivable from KCPL Receivable Corporation.
Because of seasonally lower retail sales in March 2000 versus December
1999, there were fewer customer accounts receivable available to sell
to KCPL Receivable Corporation.
- Prepaid pension costs increased $58.7 million because KCPL
changed its methods of accounting for pension expenses (see Note 1 to
the Consolidated Financial Statements).
- Capitalization increased $221.2 million primarily due to KCPL's
issuance of $200 million of
27
unsecured medium-term notes. Proceeds from the issuance were used to
repay outstanding short-term commercial paper. Additionally, KCPL
reclassified $40.0 million of long-term debt to current maturities and
recorded net income in excess of dividend payments of $9.7 million,
including $35.0 million for the cumulative effect of changes in pension
accounting. KLT's long-term debt increased $49.2 million primarily due
to $49.0 million of borrowings on a new KLT Gas bank credit agreement.
- Notes payable to banks decreased $24.7 million because KLT Gas
repaid its notes payable to banks with proceeds from borrowings on its
new long-term bank credit agreement.
- Commercial paper decreased $123.1 million as a result of the
$200.0 million repayment. This repayment with the proceeds from the
new long-term debt was partially offset by additional commercial paper
borrowings because expenditures exceeded cash receipts.
- Current maturities of long-term debt increased $15.0 million
primarily reflecting a $17.0 million net increase in KLT Inc.'s
borrowings on its bank credit agreement partially offset by a $2.0
million decrease in the current portion of KCPL's medium-term notes.
- Accounts payable increased $9.8 million due to the timing of
payments for expenditures associated with construction projects at the
Hawthorn generating station and a scheduled maintenance outage at the
Iatan station.
- Deferred income taxes increased by $24.5 million mostly due to a
$22.3 million increase in deferred taxes associated with the
cumulative effect of changes in pension accounting.
CAPITAL REQUIREMENTS AND LIQUIDITY
KCPL's liquid resources at March 31, 2000 included cash flows from
operations; $100 million of registered but unissued, unsecured medium-
term notes; and $231 million of unused bank lines of credit. The
unused lines consisted of KCPL's short-term bank lines of credit of
$184 million and KLT's bank credit agreement of $47 million. These
amounts do not include $6 million available to KLT Gas on its new $55
million bank credit agreement as these funds are only available to KLT
Gas for oil and gas development and production. During the first
quarter of 2000, KCPL issued $200 million of unsecured medium-term
notes and used the proceeds to repay outstanding commercial paper.
KCPL had $91 million of commercial paper borrowings at March 31, 2000,
decreased from $214 million at December 31, 1999.
KCPL continues to generate positive cash flows from operating
activities. Individual components of working capital will vary with
normal business cycles and operations. Also, the timing of the Wolf
Creek outage affects the refueling outage accrual, deferred income
taxes and amortization of nuclear fuel. For the three-month period,
income before non-cash expenses (income is before the cumulative
effect of changes in accounting principles) did not change
significantly. The increase in cash from operating activities for the
three-month period was primarily due to changes in certain working
capital items (as detailed in Note 2 to the Consolidated Financial
Statements).
Cash from operating activities decreased for the twelve-month period
reflecting a decrease in income before non-cash expenses (income is
before the cumulative effect of changes in accounting principles).
The buyout of a fuel contract in 1999; a payment of $19 million in
1999 to the IRS to settle certain outstanding issues; and changes in
certain working capital items (as detailed in Note 2 to the
Consolidated Financial Statements) also contributed to the decrease
for the twelve-month period.
Cash used in investing activities varies with the timing of utility
capital expenditures and purchases of investments and nonutility
properties. Cash used for investing activities increased for the
three-month period primarily reflecting increased utility capital
expenditures for construction projects at the Hawthorn generating
station and increased purchases by KLT of oil and gas investments.
Cash
28
used for investing activities increased for the twelve-month
period primarily because of increased utility capital expenditures and
increased expenditures for oil and gas nonutility property. The
proceeds from the sale of the Nationwide Electric, Inc. stock by KLT
Energy Services and $80 million in partial insurance recoveries
related to Hawthorn No. 5 partially offset these increases in the
twelve-month period. The twelve months ended March 31, 1999,
reflected the proceeds from the sale of KLT Power Inc.
Cash from financing activities increased for the three- and twelve-
month periods primarily because KCPL issued $200 million of unsecured
medium-term notes in the first quarter of 2000 and KLT increased
borrowings on its bank credit agreements, including KLT Gas' new bank
credit agreement. Furthermore, KCPL's short-term borrowings increased
for both periods prior to the repayment with proceeds from the
unsecured medium-term note issuance. Partially offsetting these
increases, KCPL's scheduled debt repayments were higher in both
periods. In the twelve-month period, KCPL redeemed $50 million of
preferred stock.
KCPL's common dividend payout ratio was 152% (excluding the cumulative
effect of changes in accounting principles) for the twelve months
ended March 31, 2000, and 89% for the twelve months ended March 31,
1999.
We expect KCPL to meet day-to-day operations, utility construction
requirements (excluding new generating capacity) and dividends with
internally-generated funds. But KCPL might not be able to meet these
requirements with internally-generated funds because of the effect of
inflation on operating expenses, the level of mwh sales, regulatory
actions, compliance with future environment regulations and the
availability of generating units (see Hawthorn No. 5 discussion
below). The funds needed to retire $573 million of maturing debt
through the year 2004 will be provided from operations, refinancings
and/or short-term debt. KCPL might issue additional debt and/or
additional equity to finance growth or take advantage of new
opportunities.
HAWTHORN NO. 5
On February 17, 1999, an explosion occurred at the 476-megawatt, coal-
fired Hawthorn Generating Station Unit No. 5 (Hawthorn No. 5). The
boiler, which was not operating at the time, was destroyed, but there
were no injuries. Though the cause of the explosion is still under
investigation, preliminary results indicate that an explosion of
accumulated gas in the boiler's firebox caused the damage. KCPL has
property insurance coverage with limits of $300 million. Through
March 31, 2000, KCPL has received $80 million in insurance recoveries
under this coverage and has recorded the recoveries in Utility Plant -
accumulated depreciation on the consolidated balance sheet. In April
2000, KCPL received an additional $11 million in insurance recoveries.
We have entered into a contract for construction of a new coal-fired
boiler to permanently replace the lost capacity of Hawthorn No. 5.
Expenditures for rebuilding Hawthorn No. 5 were $36 million in 1999
and are projected to be $217 million in 2000 and $65 million in 2001.
These amounts have not been reduced by the insurance proceeds received
to date or future proceeds to be received. The new unit, expected to
have a capacity of 550 megawatts, is estimated to be complete and
placed in service by June 2001. However, we are continuing to
evaluate alternatives to replace the power generated by Hawthorn No. 5
before the new coal-fired boiler comes on line (in addition to the
risk mitigation measures discussed on page 22). We believe that we
can secure sufficient power to meet the energy needs of KCPL's
customers. Hawthorn No. 6, a 141-megawatt, gas-fired combustion
turbine was accepted under a lease arrangement and placed into
commercial operation in July 1999. An additional 294 megawatts of
capacity, represented by two new combustion
29
turbines and a re-powered existing unit, are under construction and on
schedule to be completed and placed in service by July 2000.
Assuming normal weather and operating conditions, we estimate
additional expenses (before tax) of $31 million for the year 2000 and
$3 million for the year 2001 due to the unavailability of Hawthorn No.
5. This estimate mainly includes the effect of increased net
replacement power costs, reduced bulk power sales and reduced fuel
expense at Hawthorn No. 5.
30
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
Exhibits
- --------
Exhibit 3 By-laws of KCPL, as amended and in effect on May 2, 2000
Exhibit 10-a Supplemental Executive Retirement Plan for KCPL executives
Exhibit 10-b Nonqualified Deferred Compensation Plan for KCPL executives
Exhibit 10-c Employment Agreement between KLT Inc. and Gregory J.
Orman, President of KLT Inc.
Exhibit 10-d KLT Inc. Incentive Compensation Plan for Employees and Directors
Exhibit 18 Letter regarding Change in Accounting Principles
Exhibit 27 Financial Data Schedule (for the three months ended
Mach 31, 1999).
Reports on Form 8-K
A report on Form 8-K was filed with the Securities and
Exchange Commission on January 3, 2000, with attached press
release announcing the termination of the Amended and
Restated Agreement and Plan of Merger with Western Resources,
Inc., and certain affiliated companies.
A report on Form 8-K was filed with the Securities and
Exchange Commission on February 15, 2000, with attached
presentation materials prepared for the financial community.
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
KANSAS CITY POWER & LIGHT COMPANY
Dated: May 9, 2000 By: /s/Drue Jennings
(Drue Jennings)
(Chief Executive Officer)
Dated: May 9, 2000 By: /s/Neil Roadman
(Neil Roadman)
(Principal Accounting Officer)
Exhibit 3
KANSAS CITY POWER & LIGHT COMPANY
BY-LAWS
AS AMENDED MAY 2, 2000
KANSAS CITY POWER & LIGHT COMPANY
BY-LAWS
ARTICLE I
Offices
Section 1. The registered office of the Company in the
State of Missouri shall be at 1201 Walnut, in Kansas City,
Jackson County, Missouri.
Section 2. The Company also may have offices at such other
places either within or without the State of Missouri as the
Board of Directors may from time to time determine or the
business of the Company may require.
ARTICLE II
Shareholders
Section 1. All meetings of the shareholders shall be held
at such place within or without the State of Missouri as may be
selected by the Board of Directors or Executive Committee, but if
the Board of Directors or Executive Committee shall fail to
designate a place for said meeting to be held, then the same
shall be held at the principal place of business of the Company.
Section 2. An annual meeting of the shareholders shall be
held on the first Tuesday of May in each year, if not a legal
holiday, and if a legal holiday, then on the first succeeding day
which is not a legal holiday, at ten o'clock in the forenoon, for
the purpose of electing directors of the Company and transacting
such other business as may properly be brought before the
meeting.
Section 3. Unless otherwise expressly provided in the
Restated Articles of Consolidation of the Company with respect to
the Cumulative Preferred Stock, Cumulative No Par Preferred Stock
or Preference Stock, special meetings of the shareholders may
only be called by the Chairman of the Board, by the President or
at the request in writing of a majority of the Board of
Directors. Special meetings of shareholders of the Company may
not be called by any other person or persons.
Section 4. Written or printed notice of each meeting of the
shareholders, annual or special, shall be given in the manner
provided in the corporation laws of the State of
-1-
Missouri. In case of a call for any special meeting, the notice
shall state the time, place and purpose of such meeting.
Any notice of a shareholders' meeting sent by mail shall be
deemed to be delivered when deposited in the United States mail
with postage thereon prepaid addressed to the shareholder at his
address as it appears on the records of the Company.
In addition to the written or printed notice provided for in
the first paragraph of this Section, published notice of each
meeting of shareholders shall be given in such manner and for
such period of time as may be required by the laws of the State
of Missouri at the time such notice is required to be given.
Section 5. Attendance of a shareholder at any meeting shall
constitute a waiver of notice of such meeting except where a
shareholder attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting
is not lawfully called or convened.
Section 6. At least ten days before each meeting of the
shareholders, a complete list of the shareholders entitled to
vote at such meeting, arranged in alphabetical order with the
address of and the number of shares held by each, shall be
prepared by the officer having charge of the transfer book for
shares of the Company. Such list, for a period of ten days prior
to such meeting, shall be kept on file at the registered office
of the Company and shall be subject to inspection by any
shareholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting. The original share ledger
or transfer book, or a duplicate thereof kept in the State of
Missouri, shall be prima facie evidence as to who are the
shareholders entitled to examine such list or share ledger or
transfer book or to vote at any meeting of shareholders.
Failure to comply with the requirements of this Section
shall not affect the validity of any action taken at any such
meeting.
Section 7. Each outstanding share entitled to vote under
the provisions of the articles of consolidation of the Company
shall be entitled to one vote on each matter submitted at a
meeting of the shareholders. A shareholder may vote either in
person or by proxy executed in writing by the shareholder or by
his duly authorized attorney-in-fact. No proxy shall be valid
after eleven months from the date of its execution, unless
otherwise provided in the proxy.
At any election of directors of the Company, each holder of
outstanding shares of any class entitled to vote thereat shall
have the right to cast as many votes in the aggregate as shall
equal the number of shares of such class held, multiplied by the
-2-
number of directors to be elected by holders of shares of such
class, and may cast the whole number of votes, either in person
or by proxy, for one candidate, or distribute them among two or
more candidates as such holder shall elect.
Section 8. At any meeting of shareholders, a majority of
the outstanding shares entitled to vote represented in person or
by proxy shall constitute a quorum for the transaction of
business, except as otherwise provided by statute or by the
articles of consolidation or by these By-laws. The holders of a
majority of the shares represented in person or by proxy and
entitled to vote at any meeting of the shareholders shall have
the right successively to adjourn the meeting to a specified date
not longer than ninety days after any such adjournment, whether
or not a quorum be present. The time and place to which any such
adjournment is taken shall be publicly announced at the meeting,
and no notice need be given of any such adjournment to
shareholders not present at the meeting. At any such adjourned
meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as
originally called.
Section 9. The vote for directors and the vote on any other
question that has been properly brought before the meeting in
accordance with these By-laws shall be by ballot. Each ballot
cast by a shareholder must state the name of the shareholder
voting and the number of shares voted by him and if such ballot
be cast by a proxy, it must also state the name of such proxy.
All elections and all other questions shall be decided by
plurality vote, unless the question is one on which by express
provision of the statutes or of the articles of consolidation or
of these By-laws a different vote is required, in which case such
express provision shall govern and control the decision of such
question.
Section 10. The Chairman of the Board, or in his absence
the President of the Company, shall convene all meetings of the
shareholders and shall act as chairman thereof. The Board of
Directors may appoint any shareholder to act as chairman of any
meeting of the shareholders in the absence of the Chairman of the
Board and the President, and in the case of the failure of the
Board so to appoint a chairman, the shareholders present at the
meeting shall elect a chairman who shall be either a shareholder
or a proxy of a shareholder.
The Secretary of the Company shall act as secretary of all
meetings of shareholders. In the absence of the Secretary at any
meeting of shareholders, the presiding officer may appoint any
person to act as secretary of the meeting.
Section 11. At any meeting of shareholders where a vote by
ballot is taken for the election of directors or on any
proposition, the person presiding at such meeting shall appoint
not less than two persons, who are not directors, as inspectors
to receive and canvass the votes given at such meeting and
certify the result to him. Subject to any statutory requirements
which may be applicable, all questions touching upon the
qualification of voters, the validity of proxies, and the
acceptance or rejection of votes
-3-
shall be decided by the inspectors. In case of a tie vote
by the inspectors on any question, the presiding officer shall
decide the issue.
Section 12. Unless otherwise provided by statute or by the
articles of consolidation, any action required to be taken by
shareholders may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by
all of the shareholders entitled to vote with respect to the
subject matter thereof.
Section 13. No business may be transacted at an annual
meeting of shareholders, other than business that is either
(a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors
(or any duly authorized committee thereof), (b) otherwise
properly brought before the annual meeting by or at the direction
of the Board of Directors (or any duly authorized committee
thereof) or (c) otherwise properly brought before the annual
meeting by any shareholder of the Company (i) who is a
shareholder of record on the date of the giving of the notice
provided for in this Section 13 and on the record date for the
determination of shareholders entitled to vote at such annual
meeting and (ii) who complies with the notice procedure set forth
in this Section 13.
In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a
shareholder, such shareholder must have given timely notice
thereof in proper written form to the Secretary of the Company.
To be timely, a shareholder's notice to the Secretary must
be delivered to or mailed and received at the principal executive
offices of the Company not less than sixty (60) days nor more
than ninety (90) days prior to the date of the annual meeting of
shareholders; provided, however, that in the event that less than
seventy (70) days' notice or prior public disclosure of the date
of the meeting is given to shareholders, notice by the
shareholder to be timely must be so received not later than the
close of business on the tenth (10th) day following the day on
which such notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting was
made, whichever first occurs.
To be in proper written form, a shareholder's notice to the
Secretary must set forth as to each matter such shareholder
proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at
the annual meeting, (ii) the name and record address of such
shareholder, (iii) the class or series and number of shares of
capital stock of the Company that are owned beneficially or of
record by such shareholder, (iv) a description of all
arrangements or understandings between such shareholder and any
other person or persons (including their names) in connection
with the proposal of such business by such shareholder and any
material interest of such shareholder in such business and (v) a
representation that such shareholder intends to appear in person
or by proxy at the annual meeting to bring such business before
the meeting.
-4-
No business shall be conducted at the annual meeting of
shareholders except business brought before the annual meeting in
accordance with the procedures set forth in this Section 13,
provided, however, that, once business has been properly brought
before the annual meeting in accordance with such procedures,
nothing in this Section 13 shall be deemed to preclude discussion
by any shareholder of any such business. If the Chairman of an
annual meeting determines that business was not properly brought
before the annual meeting in accordance with the foregoing
procedures, the Chairman shall declare to the meeting that the
business was not properly brought before the meeting and such
business shall not be transacted.
ARTICLE III
Board of Directors
Section 1. The property, business and affairs of the
Company shall be managed and controlled by a Board of Directors
which may exercise all such powers of the Company and do all such
lawful acts and things as are not by statute or by the articles
of consolidation or by these By-laws directed or required to be
exercised or done by the shareholders.
Section 2. The Board of Directors shall consist of eight
directors who shall be elected at the annual meeting of the
shareholders. Each director shall be elected to serve until the
next annual meeting of the shareholders and until his successor
shall be elected and qualified. Directors need not be
shareholders.
Section 3. In case of the death or resignation of one or
more of the directors of the Company, a majority of the remaining
directors, though less than a quorum, may fill the vacancy or
vacancies until the successor or successors are elected at a
meeting of the shareholders. A director may resign at any time
and the acceptance of his resignation shall not be required in
order to make it effective.
Section 4. The Board of Directors may hold its meetings
either within or without the State of Missouri at such place as
shall be specified in the notice of such meeting.
Section 5. Regular meetings of the Board of Directors shall
be held as the Board of Directors by resolution shall from time
to time determine. The Secretary or an Assistant Secretary shall
give at least five days' notice of the time and place of each
such meeting to each director in the manner provided in Section 9
of this Article III. The notice need not specify the business to
be transacted.
Section 6. Special meetings of the Board of Directors shall
be held whenever called by the Chairman of the Board, the
President or three members of the Board and
-5-
shall be held at such place as shall be specified in the notice
of such meeting. Notice of such special meeting stating the
place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours
before the date of the meeting, or personally or by telephone,
telecopy, telegram, telex or similar means of communication on
twenty-four (24) hours' notice, or on such shorter notice as the
person or persons calling such meeting may deem necessary or
appropriate in the circumstances.
Section 7. A majority of the full Board of Directors as
prescribed in these By-laws shall constitute a quorum for the
transaction of business. The act of the majority of the
directors present at a meeting at which a quorum is present shall
be the act of the Board of Directors. If a quorum shall not be
present at any meeting of the directors, the directors present
may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be
present. Members of the Board of Directors or of any committee
designated by the Board of Directors may participate in a meeting
of the Board or committee by means of conference telephone or
similar communications equipment whereby all persons
participating in the meeting can hear each other, and
participation in a meeting in this manner shall constitute
presence in person at the meeting.
Section 8. The Board of Directors, by the affirmative vote
of a majority of the directors then in office, and irrespective
of any personal interest of any of its members, shall have
authority to establish reasonable compensation for directors.
Compensation for nonemployee directors may include both a stated
annual retainer and a fixed fee for attendance at each regular or
special meeting of the Board. Nonemployee members of special or
standing committees of the Board may be allowed a fixed fee for
attending committee meetings. Any director may serve the Company
in any other capacity and receive compensation therefor. Each
director may be reimbursed for his expenses, if any, in attending
regular and special meetings of the Board and committee meetings.
Section 9. Whenever under the provisions of the statutes or
of the articles of consolidation or of these By-laws, notice is
required to be given to any director, it shall not be construed
to require personal notice, but such notice may be given by
telephone, telecopy, telegram, telex or similar means of
communication addressed to such director at such address as
appears on the books of the Company, or by mail by depositing the
same in a post office or letter box in a postpaid, sealed wrapper
addressed to such director at such address as appears on the
books of the Company. Such notice shall be deemed to be given at
the time when the same shall be thus telephoned, telecopied,
telegraphed or mailed.
Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting except where a director attends
a meeting for the express purpose of objecting to the transaction
of any business because the meeting is not lawfully called or
convened.
-6-
Section 10. The Board of Directors may by resolution provide
for an Executive Committee of said Board, which shall serve at
the pleasure of the Board of Directors and, during the intervals
between the meetings of said Board, shall possess and may
exercise any or all of the powers of the Board of Directors in
the management of the business and affairs of the corporation,
except with respect to any matters which, by resolution of the
Board of Directors, may from time to time be reserved for action
by said Board.
Section 11. The Executive Committee, if established by the
Board, shall consist of the Chief Executive Officer of the
Company and two or more additional directors, who shall be
elected by the Board of Directors to serve at the pleasure of
said Board until the first meeting of the Board of Directors
following the next annual meeting of shareholders and until their
successors shall have been elected. Vacancies in the Committee
shall be filled by the Board of Directors.
Section 12. Meetings of the Executive Committee shall be
held whenever called by the chairman or by a majority of the
members of the committee, and shall be held at such time and
place as shall be specified in the notice of such meeting. The
Secretary or an Assistant Secretary shall give at least one day's
notice of the time, place and purpose of each such meeting to
each committee member in the manner provided in Section 9 of this
Article III, provided, that if the meeting is to be held outside
of Kansas City, Missouri, at least three days' notice thereof
shall be given.
Section 13. At all meetings of the Executive Committee, a
majority of the committee members shall constitute a quorum and
the unanimous act of all the members of the committee present at
a meeting where a quorum is present shall be the act of the
Executive Committee. All action by the Executive Committee shall
be reported to the Board of Directors at its meeting next
succeeding such action.
Section 14. In addition to the Executive Committee provided
for by these By-laws, the Board of Directors, by resolution
adopted by a majority of the whole Board of Directors, (i) shall
designate, as standing committees, an Audit Committee, a
Compensation Committee and a Governance Committee, and (ii) may
designate one or more special committees, each consisting of two
or more directors. Each standing or special committee shall have
and may exercise so far as may be permitted by law and to the
extent provided in such resolution or resolutions or in these
By-laws, the responsibilities of the business and affairs of the
corporation. The Board of Directors may, at its discretion,
appoint qualified directors as alternate members of a standing or
special committee to serve in the temporary absence or disability
of any member of a committee. Except where the context requires
otherwise, references in these By-laws to the Board of Directors
shall be deemed to include the Executive Committee, a standing
committee or a special committee of the Board of Directors duly
authorized and empowered to act in the premises.
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Section 15. Each standing or special committee shall record
and keep a record of all its acts and proceedings and report the
same from time to time to the Board of Directors.
Section 16. Regular meetings of any standing or special
committee, of which no notice shall be necessary, shall be held
at such times and in such places as shall be fixed by majority of
the committee. Special meetings of a committee shall be held at
the request of any member of the committee. Notice of each
special meeting of a committee shall be given not later than one
day prior to the date on which the special meeting is to be held.
Notice of any special meeting need not be given to any member of
a committee, if waived by him in writing or by telegraph before
or after the meeting; and any meeting of a committee shall be a
legal meeting without notice thereof having been given, if all
the members of the committee shall be present.
Section 17. A majority of any committee shall constitute a
quorum for the transaction of business, and the act of a majority
of those present, by telephone conference call or otherwise, at
any meeting at which a quorum is present shall be the act of the
committee. Members of any committee shall act only as a
committee and the individual members shall have no power as such.
Section 18. The members or alternates of any standing or
special committee shall serve at the pleasure of the Board of
Directors.
Section 19. If all the directors severally or collectively
shall consent in writing to any action which is required to be or
may be taken by the directors, such consents shall have the same
force and effect as a unanimous vote of the directors at a
meeting duly held. The Secretary shall file such consents with
the minutes of the meetings of the Board of Directors.
Section 20. Only persons who are nominated in accordance
with the following procedures shall be eligible for election as
directors of the Company, except as may be otherwise provided in
the Restated Articles of Consolidation of the Company with
respect to the right of holders of Preferred Stock to nominate
and elect a specified number of directors in certain
circumstances. Nominations of persons for election to the Board
of Directors may be made at any annual meeting of shareholders
(a) by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (b) by any shareholder of the
Company (i) who is a shareholder of record on the date of the
giving of the notice provided for in this Section 20 and on the
record date for the determination of shareholders entitled to
vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 20.
In addition to any other applicable requirements, for a
nomination to be made by a shareholder, such shareholder must
have given timely notice thereof in proper written form to the
Secretary of the Company.
-8-
To be timely, a shareholder's notice to the Secretary must
be delivered to or mailed and received at the principal executive
offices of the Company not less than sixty (60) days nor more
than ninety (90) days prior to the date of the annual meeting of
shareholders; provided, however, that in the event that less than
seventy (70) days' notice or prior public disclosure of the date
of the meeting is given to shareholders, notice by the
shareholder in order to be timely must be so received not later
than the close of business on the tenth (10) day following the
day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual
meeting was made, whichever first occurs.
To be in proper written form, a shareholder's notice to the
Secretary must set forth (a) as to each person whom the
shareholder proposes to nominate for election as a director
(i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital
stock of the Company that are owned beneficially or of record by
the person and (iv) any other information relating to the person
that would be required to be disclosed in a proxy statement or
other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations promulgated
thereunder; and (b) as to the shareholder giving the notice
(i) the name and record of such shareholder, (ii) the class or
series and number of shares of capital stock of the Company that
are owned beneficially or of record by such shareholder, (iii) a
description of all arrangements or understandings between such
shareholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the
nomination(s) are to be made by such shareholder, (iv) a
representation that such shareholder intends to appear in person
or by proxy at the meeting to nominate the persons named in the
notice and (v) any other information relating to such shareholder
that would be required to be disclosed in a proxy statement or
other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to being name as a
nominee and to serve as a director if elected.
No person shall be eligible for election as a director of
the Company unless nominated in accordance with the procedures
set forth in this Section 20. If the Chairman of the annual
meeting determines that a nomination was not made in accordance
with the foregoing procedures, the Chairman shall declare to the
meeting that the nomination was defective and such defective
nomination shall be disregarded.
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ARTICLE IV
Officers
Section 1. The officers of the Company shall include a
Chairman of the Board, a President, one or more Vice Presidents,
a Secretary, one or more Assistant Secretaries, a Treasurer and
one or more Assistant Treasurers, all of whom shall be appointed
by the Board of Directors. Any one person may hold two or more
offices except that the offices of President and Secretary may
not be held by the same person.
Section 2. The officers of the Company shall be appointed
annually by the Board of Directors. The office of Chairman of
the Board may or may not be filled, as may be deemed advisable by
the Board of Directors.
Section 3. The Board of Directors may from time to time
appoint such other officers as it shall deem necessary or
expedient, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as the Board of
Directors or the Chief Executive Officer may from time to time
determine.
Section 4. The officers of the Company shall hold office
until their successors shall be chosen and shall qualify. Any
officer appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the whole board.
If the office of any officer becomes vacant for any reason, or if
any new office shall be created, the vacancy may be filled by the
Board of Directors.
Section 5. The salaries of all officers of the Company
shall be fixed by the Board of Directors.
ARTICLE V
Powers and Duties of Officers
Section 1. The Board of Directors shall designate the Chief
Executive Officer of the Company, who may be either the Chairman
of the Board or the President. The Chief Executive Officer shall
have general and active management of and exercise general
supervision of the business and affairs of the Company, subject,
however, to the right of the Board of Directors, or the Executive
Committee acting in its stead, to delegate any specific power to
any other officer or officers of the Company, and the Chief
Executive Officer shall see that all orders and resolutions of
the Board of Directors and the Executive Committee are carried
into effect. During such times when neither the Board of
Directors nor the Executive Committee is in session, the Chief
Executive Officer of the Company shall have and exercise full
corporate authority and power to manage the business and affairs
of the Company (except for matters required by law, the By-laws or
-10-
the articles of consolidation to be exercised by the
shareholders or Board itself or as may otherwise be specified by
orders or resolutions of the Board) and the Chief Executive
Officer shall take such actions, including executing contracts or
other documents, as he deems necessary or appropriate in the
ordinary course of the business and affairs of the Company. The
Vice Presidents and other authorized persons are authorized to
take actions which are (i) routinely required in the conduct of
the Company's business or affairs, including execution of
contracts and other documents incidental thereto, which are
within their respective areas of assigned responsibility, and
(ii) within the ordinary course of the Company's business or
affairs as may be delegated to them respectively by the Chief
Executive Officer.
Section 2. The Chairman of the Board shall preside at all
meetings of the shareholders and at all meetings of the Board of
Directors, and shall perform such other duties as the Board of
Directors shall from time to time prescribe, including, if so
designated by the Board of Directors, the duties of Chief
Executive Officer.
Section 3. The President, if not designated Chief Executive
Officer, shall perform such duties and exercise such powers as
shall be assigned to him from time to time by the Board of
Directors or the Chief Executive Officer. In the absence of the
Chairman of the Board, or if the position of Chairman of the
Board be vacant, the President shall preside at all meetings of
the shareholders and at all meetings of the Board of Directors.
Section 4. The Vice Presidents shall perform such duties
and exercise such powers as shall be assigned to them from time
to time by the Board of Directors or the Chief Executive Officer.
Section 5. The Secretary shall attend all meetings of the
shareholders, the Board of Directors and the Executive Committee,
and shall keep the minutes of such meetings. He shall give, or
cause to be given, notice of all meetings of the shareholders,
the Board of Directors and the Executive Committee, and shall
perform such other duties as may be prescribed by the Board of
Directors or the Chief Executive Officer. He shall be the
custodian of the seal of the Company and shall affix the same to
any instrument requiring it and, when so affixed, shall attest it
by his signature. He shall, in general, perform all duties
incident to the office of secretary.
Section 6. The Assistant Secretaries shall perform such of
the duties and exercise such of the powers of the Secretary as
shall be assigned to them from time to time by the Board of
Directors or the Chief Executive Officer or the Secretary, and
shall perform such other duties as the Board of Directors or the
Chief Executive Officer shall from time to time prescribe.
Section 7. The Treasurer shall have the custody of all
moneys and securities of the Company. He is authorized to
collect and receive all moneys due the Company and to receipt
therefor, and to endorse in the name of the Company and on its
behalf when
-11-
necessary or proper all checks, drafts, vouchers or
other instruments for the payment of money to the Company and to
deposit the same to the credit of the Company in such
depositaries as may be designated by the Board of Directors. He
is authorized to pay interest on obligations and dividends on
stocks of the Company when due and payable. He shall, when
necessary or proper, disburse the funds of the Company, taking
proper vouchers for such disbursements. He shall render to the
Board of Directors and the Chief Executive Officer, whenever they
may require it, an account of all his transactions as Treasurer
and of the financial condition of the Company. He shall perform
such other duties as may be prescribed by the Board of Directors
or the Chief Executive Officer. He shall, in general, perform
all duties incident to the office of treasurer.
Section 8. The Assistant Treasurers shall perform such of
the duties and exercise such of the powers of the Treasurer as
shall be assigned to them from time to time by the Board of
Directors or the Chief Executive Officer or the Treasurer, and
shall perform such other duties as the Board of Directors or the
Chief Executive Officer shall from time to time prescribe.
Section 9. The Board of Directors may, by resolution,
require any officer to give the Company a bond (which shall be
renewed every six years) in such sum and with such surety or
sureties as shall be satisfactory to the Board for the faithful
performance of the duties of his office and for the restoration
to the Company, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his
control and belonging to the Company.
Section 10. In the case of absence or disability or refusal
to act of any officer of the Company, other than the Chairman of
the Board, the Chief Executive Officer may delegate the powers
and duties of such officer to any other officer or other person
unless otherwise ordered by the Board of Directors.
Section 11. The Chairman of the Board, the President, the
Vice Presidents and any other person duly authorized by
resolution of the Board of Directors shall severally have power
to execute on behalf of the Company any deed, bond, indenture,
certificate, note, contract or other instrument authorized or
approved by the Board of Directors.
Section 12. Unless otherwise ordered by the Board of
Directors, the Chairman of the Board, the President or any Vice
President of the Company (a) shall have full power and authority
to attend and to act and vote, in the name and on behalf of this
Company, at any meeting of shareholders of any corporation in
which this Company may hold stock, and at any such meeting shall
possess and may exercise any and all of the rights and powers
incident to the ownership of such stock, and (b) shall have full
power and authority to execute, in the name and on behalf of this
Company, proxies authorizing any suitable person or persons to
act and to vote at any meeting of shareholders of any corporation
in which this Company may hold stock, and at any such meeting the
person
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or persons so designated shall possess and may exercise
any and all of the rights and powers incident to the ownership of
such stock.
ARTICLE VI
Certificates of Stock
Section 1. The Board of Directors shall provide for the
issue, transfer and registration of the certificates representing
the shares of capital stock of the Company, and shall appoint the
necessary officers, transfer agents and registrars for that
purpose.
Section 2. Until otherwise ordered by the Board of
Directors, stock certificates shall be signed by the President or
a Vice President and by the Secretary or an Assistant Secretary
or the Treasurer or an Assistant Treasurer, and sealed with the
seal of the Company. Such seal may be facsimile, engraved or
printed. In case any officer or officers who shall have signed,
or whose facsimile signature or signatures shall have been used
on, any stock certificate or certificates shall cease to be such
officer or officers of the Company, whether because of death,
resignation or otherwise, before such certificate or certificates
shall have been delivered by the Company, such certificate or
certificates may nevertheless be issued by the Company with the
same effect as if the person or persons who signed such
certificate or certificates or whose facsimile signature or
signatures shall have been used thereon had not ceased to be such
officer or officers of the Company.
Section 3. Transfers of stock shall be made on the books of
the Company only by the person in whose name such stock is
registered or by his attorney lawfully constituted in writing,
and unless otherwise authorized by the Board of Directors only on
surrender and cancellation of the certificate transferred. No
stock certificate shall be issued to a transferee until the
transfer has been made on the books of the Company.
Section 4. The Company shall be entitled to treat the
person in whose name any share of stock is registered as the
owner thereof, for all purposes, and shall not be bound to
recognize any equitable or other claim to or interest in such
share on the part of any other person, whether or not it shall
have notice thereof, except as otherwise expressly provided by
the laws of Missouri.
Section 5. In case of the loss or destruction of any
certificate for shares of the Company, a new certificate may be
issued in lieu thereof under such regulations and conditions as
the Board of Directors may from time to time prescribe.
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ARTICLE VII
Closing of Transfer Books
The Board of Directors shall have power to close the stock
transfer books of the Company for a period not exceeding seventy
days preceding the date of any meeting of shareholders or the
date for payment of any dividend or the date for the allotment of
rights or the date when any change or conversion or exchange of
shares shall go into effect; provided, however, that in lieu of
closing the stock transfer books as aforesaid, the Board of
Directors may fix in advance a date, not exceeding seventy days
preceding the date of any meeting of shareholders, or the date
for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of
shares shall go into effect, as a record date for the
determination of the shareholders entitled to notice of, and to
vote at, any such meeting, and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of shares, and in such case
such shareholders and only such shareholders as shall be
shareholders of record on the date of closing the transfer books
or on the record date so fixed shall be entitled to notice of,
and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the
Company after such date of closing of the transfer books or such
record date fixed as aforesaid.
ARTICLE VIII
Inspection of Books
Section 1. A shareholder shall have the right to inspect
books of the Company only to the extent such right may be
conferred by law, by the articles of consolidation, by the
By-laws or by resolution of the Board of Directors.
Section 2. Any shareholder desiring to examine books of the
Company shall present a demand to that effect in writing to the
President or the Secretary or the Treasurer of the Company. Such
demand shall state:
(a) the particular books which he desires to examine;
(b) the purpose for which he desires to make the
examination;
(c) the date on which the examination is desired;
(d) the probable duration of time the examination will
require; and
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(e) the names of the persons who will be present at the
examination.
Within three days after receipt of such demand, the President or
the Secretary or the Treasurer shall, if the shareholder's
purpose be lawful, notify the shareholder making the demand of
the time and place the examination may be made.
Section 3. The right to inspect books of the Company may be
exercised only at such times as the Company's registered office
is normally open for business and may be limited to four hours on
any one day.
Section 4. The Company shall not be liable for expenses
incurred in connection with any inspection of its books.
ARTICLE IX
Corporate Seal
The corporate seal of the Company shall have inscribed
thereon the name of the Company and the words "Corporate Seal",
"Missouri" and "1922".
ARTICLE X
Fiscal Year
Section 1. The fiscal year of the Company shall be the
calendar year.
Section 2. As soon as practicable after the close of each
fiscal year, the Board of Directors shall cause a report of the
business and affairs of the Company to be made to the
shareholders.
ARTICLE XI
Waiver of Notice
Whenever by statute or by the articles of consolidation or
by these By-laws any notice whatever is required to be given, a
waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
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ARTICLE XII
Indemnification by the Company
[Deleted].
ARTICLE XIII
Amendments
The Board of Directors may make, alter, amend or repeal
By-laws of the Company by a majority vote of the whole Board of
Directors at any regular meeting of the Board or at any special
meeting of the Board if notice thereof has been given in the
notice of such special meeting. Nothing in this Article shall be
construed to limit the power of the shareholders to make, alter,
amend or repeal By-laws of the Company at any annual or special
meeting of shareholders by a majority vote of the shareholders
present and entitled to vote at such meeting, provided a quorum
is present.
-16-
Exhibit 10-a
KANSAS CITY POWER & LIGHT COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective April 1, 2000
KANSAS CITY POWER & LIGHT COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PREAMBLE
The principal objective of this Supplemental Executive Retirement
Plan is to ensure the payment of a competitive level of
retirement income in order to attract, retain, and motivate
selected executives, and to restore benefits which cannot be paid
under the Company's Qualified Pension Plan due to restrictions on
benefits, contributions, compensation, or the like imposed under
that plan. The Company may, but is not required to, set aside
funds from time to time to provide such benefits, and such funds
may be held in a separate trust established for such purpose.
This Plan is a successor to the supplemental executive retirement
component of the Company's former Supplemental Executive
Retirement and Deferred Compensation Plan (the "Prior Plan"),
which was effective on November 2, 1993. It shall be effective
as to each Participant on the date he or she becomes a
Participant hereunder; provided, however, that the benefits of
those individuals whose employment with the Company or any of its
affiliates terminated prior to April 1, 2000, shall continue to
be governed by the terms of the Prior Plan, and not the terms of
this Plan. This Plan supersedes the supplemental executive
retirement component of the Prior Plan and all similar non-
qualified supplemental executive retirement plans that may be in
existence.
TABLE OF CONTENTS
ARTICLE PAGE
I DEFINITIONS 1
II ELIGIBILITY FOR BENEFITS 2
III AMOUNT AND FORM OF RETIREMENT BENEFITS 3
IV PAYMENT OF RETIREMENT BENEFITS 7
V DEATH BENEFITS 7
VI MISCELLANEOUS 8
-i-
ARTICLE I
DEFINITIONS
1.1 "Active Participant" means, with respect to a Plan
Year, any employee of the Company (i) who is an officer appointed
by the Board of Directors, or (ii) whose annualized Base
Compensation exceeds the limitation imposed by Internal Revenue
Code Section 401(a)(17) and regulations promulgated thereunder,
as adjusted from time to time. For purposes of determining Years
of Benefit Service pursuant to Section 1.10 of this Plan, an
employee shall be deemed to have been an Active Participant with
respect to any Plan Year in which he or she was a Participant for
purposes of Sections II, III, IV, and V of the Prior Plan.
1.3 "Basic Plan" means the Kansas City Power & Light
Company Management Pension Plan. The following terms shall have
the same meaning as set forth in the Basic Plan, as amended from
time-to-time:
- Actuarial Equivalent
- Base Compensation
- Early Retirement Date
- Normal Retirement Date
- Plan Year
- Single Life Pension
- Years of Credited Service
1.4 "Board of Directors" means the Board of Directors of
Kansas City Power & Light Company.
1.5 "Committee" means the Nominating & Compensation
Committee (or successor to such Committee) of the Board of
Directors.
1.6 "Company" means Kansas City Power & Light Company or
its successor and any wholly-owned subsidiary that has adopted,
and whose employees participate in, the Basic Plan.
1.7 "Participant" means an individual who has become an
Active Participant and who has not received his or her entire
benefit under this Plan; provided, however, that individuals who
were Participants for purposes of Sections II, III, IV, and V of
the Prior Plan as of April 1, 2000, and whose employment with the
Company had not terminated as of that date, shall be Participants
in this Plan on that date.
1.8 "Plan" means this Kansas City Power & Light Company
Supplemental Executive Retirement Plan.
1.9 "Surviving Spouse" means a Participant's surviving
spouse who is eligible to receive a surviving spouse's benefit
under the Basic Plan.
1.10 "Years of Benefit Service" means Years of Credited
Service (including fractions thereof) during which an employee is
an Active Participant.
ARTICLE II
ELIGIBILITY FOR BENEFITS
2.1 Except as provided in Sections 2.2 and 3.4, below, each
Participant shall be eligible to receive a supplemental
retirement benefit under this Plan beginning as soon as is
practicable after the Participant terminates employment with the
Company.
-2-
2.2 Notwithstanding any provision of this Plan to the
contrary, the terms of this Plan and all subsequent amendments
hereto shall not affect the rights and benefits of any person who
is not an employee of the Company on or after April 1, 2000. The
rights and benefits, if any, of such former employees (or spouses
or beneficiaries of said former employees) shall continue to be
governed by the terms of the Prior Plan as in effect on their
date of termination, death, total disability, or retirement,
whichever first shall have occurred.
ARTICLE III
AMOUNT AND FORM OF RETIREMENT BENEFITS
3.1 Normal Retirement. A Participant's monthly
supplemental retirement benefit payable under the Plan as a
Single Life Pension at the Participant's Normal Retirement Date
shall be made up of the sum of two portions, the first of which
is described in Paragraph (a) and the second of which is
described in Paragraph (b) of this Section.
(a) The first of those portions shall make up for the
difference between an accrual rate of two percent (2%) and
an accrual rate of one and two-thirds percent (1 2/3%) for each
of an Active Participant's Years of Benefit Service.
(b) The second portion shall make up for the benefit
otherwise lost to an Active Participant under the Basic Plan
due to:
(i) compensation deferred under the Kansas City
Power and Light Company Nonqualified Deferred
Compensation Plan, or under Section VI of the Prior
Plan, and
(ii) any amounts disregarded under the Basic Plan
pursuant to the provisions of Internal Revenue Code
Sections 401(a)(17), 415, or similar
-3-
provisions restricting the amount of compensation or
benefits that may be considered under plans qualified
pursuant to Internal Revenue Code Section 401(a).
3.2 Benefits Payable Prior to Normal Retirement Date. In
the event a Participant terminates employment with the Company
before he or she reaches Normal Retirement Date, the monthly
supplemental retirement benefit payable under the Plan shall be
determined by computing the monthly retirement benefit necessary
to make up for the difference in accrual rates described in
Section 3.1(a), for the benefit otherwise lost to the Participant
due to the factors described in Paragraph 3.1(b), and for the
difference between computations of monthly salary using
computation periods of more than thirty-six (36) consecutive
months rather than of thirty-six (36) consecutive months, reduced
to reflect the early payment of the benefit and the Participant's
younger age in the same circumstances and to the same extent as
the Single Life Pension under the Basic Plan is reduced to
reflect these factors. The result is that:
(a) There shall be no early retirement reduction
factor applied to the retirement benefit of a Participant
who has satisfied all of the requirements set forth in the
Basic Plan for the Rule of 85 early retirement benefit,
(b) The Basic Plan's early retirement reduction factor
of one quarter of one-percent (.25%) per month shall apply
to the retirement benefit of a Participant who does not
satisfy all of the requirements set forth in the Basic Plan
for the Rule of 85 early retirement benefit, and whose
employment with the Company terminates on or after his or
her Early Retirement Date, and
(c) For the retirement benefit of a Participant who
terminates employment with the Company before his or her
Early Retirement Date, and without satisfying all
-4-
of the requirements set forth in the Basic Plan for the Rule
of 85 early retirement benefit, no early retirement subsidy
of any kind shall apply.
3.3 Disability Retirement. A Participant whose employment
with the Company terminates due to a total disability for which
the Participant is eligible to receive benefits under the
Company's Long-Term Disability Plan shall then be eligible for a
supplemental retirement benefit. The supplemental retirement
benefit shall be determined in accordance with Sections 3.1 and
3.2, except that his or her Years of Benefit Service shall
include the period from the date of disability to the
Participant's Normal Retirement Date. In no event shall Years of
Credited Service or Benefit Service in excess of 30 be
considered.
3.4 Form of Payment. The Participant may elect the form in
which benefits under the Plan are to be paid from the forms set
forth in this Section, the value of each of which shall be the
Actuarial Equivalent of the value of each of the others. Under
each form other than the Lump Sum Payment, payment shall begin as
soon as practicable after the Participant terminates employment
with the Company.
(a) Lump Sum Payment. This form provides the
Participant with a one-time, single sum payment of the
Participant's entire benefit under the Plan. Payment shall
be made as soon as practicable after the Participant
terminates employment with the Company, or at such later
anniversary of the Participant's termination as is elected
by the Participant.
(b) Single Life Pension. A Single Life Pension pays
the Participant a monthly pension only for as long as the
Participant lives.
(c) Single Life Pension with 60 Months Guaranteed.
A Single Life Pension with 60 Months Guaranteed pays a
monthly benefit for as long as the Participant lives. If
the Participant dies before receiving 60 monthly payments, the
-5-
Participant's beneficiary receives them for the
remainder of the 60 months that were guaranteed.
(d) Single Life Pension with 120 Months Guaranteed. A
Single Life Pension with 120 Months Guaranteed pays the
Participant a monthly benefit for as long as the Participant
lives. If the Participant dies before receiving 120 monthly
payments, the Participant's beneficiary receives them for
the remainder of the 120 months that were guaranteed.
(e) 100%, 75%, 66 2/3%, 50%, 33 1/3% and 25% Joint Pensions.
A 100%, 75%, 66 2/3%, 50%, 33 1/3% or 25% Joint Pension pays the
Participant a monthly benefit for as long as the Participant
lives. If the Participant's spouse is living when the
Participant dies, he or she receives a monthly pension equal
to 100%, 75%, 66 2/3%, 50%, 33 1/3% or 25%, respectively, of the
monthly pension the Participant received, for as long as he
or she lives. If the Participant is not married as of the
date the Participant's pension commences, it will be paid to
the Participant as a Single Life Pension. The term
"spouse," as used in this form, means the person to whom the
Participant is married on the date the Participant's pension
commences.
3.5 Election of Form and Timing. A new Active Participant
in the Plan shall, within sixty (60) days of the date he or she
becomes a Participant, elect the form in which he or she wishes
the benefit under the Plan to be paid. In the case of a Lump Sum
Payment, the Participant shall also elect whether payment is to
be made as soon as is practicable after termination of employment
with the Company and, if not, the anniversary of termination when
payment is to be made. A Participant in the Plan as of April 1,
2000, shall make these elections no later than April 15, 2000.
If such a Participant terminates employment with the Company
within one (1) year of the date the election form is filed with
the Company, the
-6-
election shall have no effect, and the Participant's benefit
under the Plan will be paid in the form of a Single Life Pension,
if the Participant is then single, or in the form of a 50% Joint
Pension, with the Participant's spouse as the survivor, if the
Participant is then married.
ARTICLE IV
PAYMENT OF RETIREMENT BENEFITS
4.1 Supplemental retirement benefits payable in accordance
with Article III shall commence as provided in Section 2.1, and
shall continue to be paid as required by the form in which the
Participant's benefit is paid.
ARTICLE V
DEATH BENEFITS
5.1 If a Participant dies before supplemental retirement
benefit payments commence under this Plan, the Participant's
Surviving Spouse shall receive a pre-retirement survivor annuity
under the Plan. The amount of the pre-retirement survivor
annuity payable under this Plan shall be equal to the amount of
the qualified pre-retirement survivor annuity determined under
the Basic Plan, but calculated by substituting the amount of the
Participant's supplemental retirement benefit determined under
Article III for the amount of the Participant's benefit under the
Basic Plan.
5.2 A Surviving Spouse's benefit under Section 5.1 shall be
payable monthly; its duration shall be the same as that of the
qualified pre-retirement survivor annuity payable under the Basic
Plan.
-7-
ARTICLE VI
MISCELLANEOUS
6.1 The Board of Directors may, in its sole discretion,
terminate, suspend, or amend this Plan at any time or from time-
to-time, in whole or in part. However, no amendment or
suspension of the Plan shall affect a Participant's right or the
right of a Surviving Spouse to benefits accrued up to the date of
any amendment or termination, payable at least as quickly as is
consistent with the Participant's election made as provided in
Section 3.5. In the event the Plan is terminated, the Committee
will continue to administer the Plan until all amounts accrued
have been paid.
6.2 Nothing contained herein shall confer upon any
Participant the right to be retained in the service of the
Company, nor shall it interfere with the right of the Company to
discharge or otherwise deal with Participants without regard to
the existence of this Plan.
6.3 Neither the Committee nor any member of the Board of
Directors nor any officer or employee of the Company shall be
liable to any person for any action taken or omitted in
connection with the administration of the Plan unless
attributable to his or her own fraud or willful misconduct; nor
shall the Company be liable to any person for any such action
unless attributable to fraud or willful misconduct on the part of
a director, officer or employee of the Company.
6.4 This Plan is unfunded, and constitutes a mere promise
by the Company to make benefit payments in the future. The right
of any Participant or Surviving Spouse to receive a distribution
under this Plan shall be an unsecured claim against the general
assets of the Company. The Company may choose to establish a
separate trust (the "Trust"), and to contribute to the Trust from
time to time assets that shall be held therein, subject to the
-8-
claims of the Company's creditors in the event of the Company's
insolvency, until paid to Plan Participants and Surviving Spouses
in such manner and at such times as specified in the Plan. It is
the intention of the Company that such Trust, if established,
shall constitute an unfunded arrangement, and shall not affect
the status of the Plan as an unfunded Plan for purposes of Title
I of the Employee Retirement Income Security Act of 1974, as
amended. The Trustee of the Trust shall invest the Trust assets,
unless the Committee, in its sole discretion, chooses either to
instruct the Trustee as to the investment of Trust assets or to
appoint one or more investment managers to do so.
6.5 To the maximum extent permitted by law, no benefit
under the Plan shall be assignable or subject in any manner to
alienation, sale, transfer, claims of creditors, pledge,
attachment, or encumbrances of any kind.
6.6 Any amounts payable hereunder to any person under legal
disability or who, in the judgment of the Committee, is unable
properly to manage his or her financial affairs, may be paid to
the legal representative of such person or may be applied for the
benefit of such person in any manner which the Committee may
select.
6.7 The Plan shall be administered by the Committee or its
designee, which may adopt rules and regulations to assist it in
the administration of the Plan.
6.8 A request for a Plan benefit shall be filed with the
Chairperson of the Committee or his or her designee, on a form
prescribed by the Committee. Such a request, hereinafter
referred to as a "claim," shall be deemed filed when the executed
claim form is received by the Chairperson of the Committee or his
or her designee.
The Chairperson of the Committee or his or her designee
shall decide such a claim within a reasonable time after it is
received. If a claim is wholly or partially denied, the
-9-
claimant shall be furnished a written notice setting forth, in a
manner calculated to be understood by the claimant:
(a) The specific reason or reasons for the denial;
(b) A specific reference to pertinent Plan provisions
on which the denial is based;
(c) A description of any additional material or
information necessary for the claimant to perfect the claim,
along with an explanation of why such material or
information is necessary; and
(d) Appropriate information as to the steps to be
taken if the claimant wishes to appeal his or her claim,
including the period in which the appeal must be filed and
the period in which it will be decided.
The notice shall be furnished to the claimant within 90 days
after receipt of the claim by the Chairperson of the Committee or
his or her designee, unless special circumstances require an
extension of time for processing the claim. No extension shall
be for more than 90 days after the end of the initial 90-day
period. If an extension of time for processing is required,
written notice of the extension shall be furnished to the
claimant before the end of the initial 90-day period. The
extension notice shall indicate the special circumstances
requiring an extension of time and the date by which a final
decision will be rendered.
If a claim is denied, in whole or in part, the claimant may
appeal the denial to the full Committee, upon written notice to
the Chairperson thereof. The claimant may review documents
pertinent to the appeal and may submit issues and comments in
writing to the Committee. No appeal shall be considered unless
it is received by the Committee within 90 days after receipt by
the claimant of written notification of denial of the claim. The
Committee shall decide the appeal within 60 days after it is
received. However, if special
-10-
circumstances require an extension of time for processing, a decision
shall be rendered as soon as possible, but not later than 120 days
after the appeal is received. If such an extension of time for deciding
the appeal is required, written notice of the extension shall be
furnished to the claimant prior to the commencement of the extension.
The Committee's decision shall be in writing and shall include
specific reasons for the decision, written in a manner calculated
to be understood by the claimant, and specific references to the
pertinent Plan provisions upon which the decision is based.
6.9 Each Participant shall receive a copy of the Plan and,
if a Trust is established pursuant to Section 6.4, the Trust, and
the Company shall make available for inspection by any
Participant a copy of any rules and regulations used in
administering the Plan.
6.10 If any contest or dispute shall arise as to amounts due
to a Participant under this Plan, the Company shall reimburse the
Participant, on a current basis, all legal fees and expenses
incurred by the Participant in connection with such contest or
dispute; provided, however, that in the event the resolution of
any such contest or dispute includes a finding denying the
Participant's claims, the Participant shall be required
immediately to reimburse the Company for all sums advanced to the
Participant hereunder.
6.11 This Plan is binding on the Company and will bind with
equal force any successor of the Company, whether by way of
purchase, merger, consolidation or otherwise.
6.12 If a court of competent jurisdiction holds any
provision of this Plan to be invalid or unenforceable, the
remaining provisions of the Plan shall continue to be fully
effective.
6.13 To the extent not superseded by the laws of the United
States, this Plan shall be construed according to the laws of the
State of Missouri.
-11-
Exhibit 10-b.asc
KANSAS CITY POWER & LIGHT COMPANY
NONQUALIFIED DEFERRED COMPENSATION PLAN
Effective April 1, 2000
KANSAS CITY POWER & LIGHT COMPANY
NONQUALIFIED DEFERRED COMPENSATION PLAN
PREAMBLE
The principal objective of this Nonqualified Deferred
Compensation Plan is to provide opportunities for selected
employees and members of the Board of Directors to defer the
receipt of compensation. The Company may, but is not required
to, set aside funds from time to time to provide such benefits,
and such funds may be held in a separate trust established for
such purpose. This Plan is a successor to the deferred
compensation component of the Company's former Supplemental
Executive Retirement and Deferred Compensation Plan (the "Prior
Plan"), which was effective on November 2, 1993. It shall be
effective as to each Participant on the date he or she becomes as
a Participant hereunder. This Plan supersedes the deferred
compensation component of the Prior Plan and all similar
nonqualified deferred compensation plans that may be in
existence.
TABLE OF CONTENTS
ARTICLE PAGE
I DEFINITIONS 1
II DEFERRED COMPENSATION 2
III CAPITAL ACCUMULATION PLAN EXCESS BENEFIT 7
IV MISCELLANEOUS 8
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ARTICLE I
DEFINITIONS
1.1 "Basic Plan" means the Kansas City Power & Light
Company Management Pension Plan, as it may be amended from time
to time.
1.2 "Base Salary" means the annual salary, excluding
Incentive Awards, paid by the Company to the Participant. A
Participant's Base Salary for any year shall not be limited by
the provisions of Internal Revenue Code Sections 401(a)(17),
401(k)(3)(A)(ii), 401(m)(2), 402(g)(1), 415, or similar
provisions restricting the amount of compensation that may be
considered, deferred, or matched under plans qualified pursuant
to Internal Revenue Code Section 401(a).
1.3 "Board of Directors" means the Board of Directors of
the Company.
1.4 "Capital Accumulation Plan" means the Kansas City Power
& Light Company Capital Accumulation Plan, as it may be amended
from time to time.
1.5 "Committee" means the Nominating & Compensation
Committee (or successor to such Committee) of the Company's Board
of Directors.
1.6 "Company" means Kansas City Power & Light Company or
its successor.
1.7 "Employee Savings Plus Plan" means the Kansas City
Power & Light Company Cash or Deferred Arrangement ("Employee
Savings Plus"), as it may be amended from time to time.
1.8 "Flexible Benefits Program" means the flexible benefits
arrangement agreed to and promulgated by the Board of Directors
by resolutions adopted September 14, 1982, as it may be amended
from time to time.
1.9 "Incentive Award" means any award under any bonus
or incentive plan sponsored or maintained by the Company.
1.10 "Participant" means any employee selected for
participation by the Chief Executive Officer of the Company. For
purposes of Sections 2.1 to 2.7, the term "Participant" shall
also include members of the Board of Directors. Individuals
shall become Participants in the Plan as of the date they are so
designated; provided, however, that individuals who were
Participants for purposes of Sections VI, VII, and VIII of the
Prior Plan as of April 1, 2000, shall continue to be Participants
in this Plan.
1.11 "Plan" means this Nonqualified Deferred
Compensation Plan.
ARTICLE II
DEFERRED COMPENSATION
2.1 Prior to the beginning of any calendar year, a
Participant may elect to defer the receipt of:
(a) a specified dollar amount or percentage of his or
her anticipated Base Salary (or director's fees) as in
effect on January 1 of the year in which such salary or
fees are to be deferred; and/or
(b) a specified dollar amount or percentage of any
anticipated Incentive Awards to be paid to the Participant
for performance in the following calendar year.
If the Participant desires to make such an election, the election
shall be in writing on a form provided by the Company, and shall
indicate an election to defer a fixed percentage of up to 50
percent of Base Salary, and/or 100 percent of director's fees or
any Incentive Awards. Alternatively, the Participant may elect
to defer a fixed dollar amount of Base Salary and/or
-2-
any Incentive Awards in increments of one thousand dollars, with a
minimum deferral of $2,000 and a maximum deferral of an amount
equal to 50 percent of Base Salary and 100 percent of director's
fees or any Incentive Awards. Base Salary may be deferred in a
given year only if the Participant participates in the Company's
Employee Savings Plus Plan to the maximum extent allowed for that
year. An individual who first becomes a Participant during a
year may make a deferral election for the balance of the year in
which he or she becomes a Participant, provided the election is
made on or before the 30th day after the day on which he or she
becomes a Participant.
An election to defer compensation under this Article II
shall apply only to compensation earned subsequent to the date
the election is made. An election to defer compensation shall be
effective only for the year, or portion of the year, for which
the election was made, and may not be terminated or changed
during such year or portion of such year. If the Participant
desires to continue the same election from year to year, he or
she must nevertheless make an affirmative election each year to
defer compensation.
2.2 A separate account shall be established for each
Participant who defers compensation under this Article II. Such
account shall be credited with that portion of the Participant's
compensation being deferred.
Deferred Base Salary shall be credited to the Participant's
account each month at the time nondeferred Base Salary is paid to
the Participant. A deferred Incentive Award shall be credited to
the Participant's account annually at the time the award is
payable. Neither the Participant nor his or her designated
beneficiary or beneficiaries shall have any property interest
whatsoever in any specific assets as a result of this Plan.
-3-
2.3 The Committee shall establish a means by which gains or
losses on a Participant's account (hereinafter, "Earnings") are
credited to each Participant's account. The method and manner of
establishing such Earnings may be set forth in a separate trust
which the Company may establish with respect to this Plan, and
shall be reviewed from time to time by the Committee. Such
Earnings shall be credited or debited to a Participant's account
on a monthly basis, or at such other time or times as the
Committee may determine.
2.4 A Participant's deferral election shall indicate, with
respect to amounts deferred pursuant to the election, a deferral
period in accordance with Section 2.5 and a distribution
alternative in accordance with Section 2.6.
2.5 A Participant may elect to defer receipt of amounts
deferred pursuant to a deferral election until one of the
following:
(a) A stated date;
(b) A stated attained age; or
(c) A stated event (e.g., death) or events, or the
earlier of two or more stated events (e.g., the earlier of
death or attainment of age 65).
In the event a Participant fails to designate a deferral period
hereunder, payment of amounts deferred pursuant to the
Participant's deferral election shall commence within 90 days
after the Participant's termination of employment.
Earnings shall continue to be credited to the balance of a
Participant's account during the payout period elected pursuant
to this Article II. The Earnings attributable to compensation
deferred pursuant to a particular deferral election shall be
payable according to the same terms, conditions, limitations, and
restrictions applicable to the compensation deferred pursuant to
the deferral election. Any remaining payments shall be re-
computed annually to reflect the additional Earnings.
-4-
2.6 A Participant's deferral election shall indicate the
manner in which the amounts deferred pursuant to the election are
to be paid. The Participant may choose to have such amounts
paid:
(a) in a single lump-sum payment; or
(b) in substantially equal monthly installments (of
principal plus Earnings) over a period of 60 months certain,
120 months certain, or 180 months certain.
If a Participant fails to make an election concerning the form of
payment, payment shall be made in a single lump sum.
Any amounts paid to the Participant shall be subject to
income tax withholding or other deductions as may from time to
time be required by federal, state, or local law. Payments under
this Article on account of deferral shall be paid in full if the
lump-sum option is chosen, or shall begin to be paid in monthly
installments if a monthly payment option is chosen, within 30
days of the date elected by the Participant, or as soon
thereafter as practicable.
Following the close of each year, or as soon thereafter as
practicable, the Participant or the Participant's designated
beneficiary or beneficiaries shall receive a statement of the
Participant's deferred compensation account as of the end of such
year.
2.7 At the time a Participant elects to defer compensation
under this Plan, the Participant shall have the right to
designate a death beneficiary or beneficiaries, and to amend or
revoke such designation at any time. If the Participant dies
before beginning to receive payment of amounts deferred pursuant
to a given deferral election, the full amount due the Participant
under said election shall be paid to the Participant's designated
beneficiary or beneficiaries, in a single lump-sum payment, as
soon as practicable after the Participant's death.
-5-
If a Participant dies after beginning to receive payment of
amounts deferred pursuant to a given deferral election, the
balance of the amounts which would have been paid under the
deferral election to the Participant, but for his or her death,
shall continue to be paid to the Participant's beneficiary or
beneficiaries at the same times and in the same form as the
amounts would have been paid to the Participant, but for his or
her death. If a Participant is not survived by a designated
beneficiary, the balance of the amounts due the Participant under
the deferral election for which no surviving beneficiary exists
shall be paid in a single lump-sum payment to the Participant's
estate as soon as practicable following his or her death. If,
with respect to a particular deferral election, a Participant's
last surviving designated beneficiary dies after the Participant,
but before the balance of the amounts due the beneficiary under
the deferral election have been paid, the balance shall be paid
in a single lump-sum payment to the estate of the last surviving
designated beneficiary as soon as practicable after the
beneficiary's death.
2.8 The Company shall credit to a Participant's account a
matching contribution in an amount equal to 50% of the first 6%
of the Base Salary deferred by the Participant under Section
2.1(a), but such amount shall be reduced by the matching
contribution made for the year to the Participant's account in
the Employee Savings Plus Plan. In no event shall the total
matching contributions in the Employee Savings Plus Plan and this
Plan exceed 3% of the Participant's Base Salary in any given
year. Any matching contributions under this Plan shall be
credited to the Participant's account on a monthly basis. The
matching contributions and earnings thereon shall be subject to
the following vesting schedule:
-6-
Years of Service Vested Percentage
Less Than Two Years 0%
Two Years 20%
Three Years 40%
Four Years 60%
Five Years 80%
Six Years 100%
ARTICLE III
CAPITAL ACCUMULATION PLAN EXCESS BENEFIT
3.1 At the beginning of each calendar year or as soon
thereafter as practicable, an amount will be credited to each
Participant's CAP Excess Benefits Account under this Plan. Such
amount shall be equal to the Participant's total number of flex
dollars for the year under the Flexible Benefits Program, minus:
(a) the maximum permissible contribution to the
Capital Accumulation Plan for the year on behalf of the
Participant; and
(b) the number of flex dollars used by the Participant
during such year to purchase the benefits available to the
Participant under the Flexible Benefits Program.
3.2 Benefits will be paid to the Participant as follows:
(a) When the Participant's employment is terminated
(whether due to death, disability, retirement or other
termination), a single lump-sum payment will be made. The
payment shall be equal to the amount credited to the CAP
Excess Benefits Account, plus the additional amount credited
to the CAP Excess Benefits Account under Section 3.2(b),
below. Payment will be made no later than the 60th day
after the
-7-
close of the calendar year in which the
Participant's employment terminates. If the Participant
dies before payment is made, payment shall be made to the
Participant's beneficiary as promptly as possible after the
Participant's death. The Participant's beneficiary for the
purposes of this Article III shall be the Participant's
beneficiary under the Capital Accumulation Plan.
(b) The Participant's CAP Excess Benefits Account
shall be credited and debited with the same Earnings and in
the same manner as provided for in Section 2.3 herein.
3.3 The CAP Excess Benefits provided in Section VIII of the
Prior Plan superseded those provided in the Capital Accumulation
Plan Excess Benefit Agreement, and any amounts accrued under such
Agreement are now subject to the provisions herein.
ARTICLE IV
MISCELLANEOUS
4.1 The Board of Directors may, in its sole discretion,
terminate, suspend, or amend this Plan at any time or from time-
to-time, in whole or in part. However, no amendment or
suspension of the Plan shall affect a Participant's right or the
right of a beneficiary to vested benefits accrued up to the date
of any amendment or termination. In the event the Plan is
terminated, the Committee will continue to administer the Plan
until all amounts accrued and vested have been paid.
4.2 Nothing contained herein shall confer upon any
Participant the right to be retained in the service of the
Company, nor shall it interfere with the right of the Company to
discharge or otherwise deal with Participants without regard to
the existence of this Plan.
-8-
4.3 Neither the Committee nor any member of the Board of
Directors nor any officer or employee of the Company shall be
liable to any person for any action taken or omitted in
connection with the administration of the Plan unless
attributable to his or her own fraud or willful misconduct; nor
shall the Company be liable to any person for any such action
unless attributable to fraud or willful misconduct on the part of
a director, officer or employee of the Company.
4.4 This Plan is unfunded, and constitutes a mere promise
by the Company to make benefit payments in the future. The right
of any Participant, spouse, or beneficiary to receive a
distribution under this Plan shall be an unsecured claim against
the general assets of the Company. The Company may choose to
establish a separate trust (the "Trust"), and to contribute to
the Trust from time to time assets that shall be held therein,
subject to the claims of the Company's creditors in the event of
the Company's insolvency, until paid to Plan Participants and
beneficiaries in such manner and at such times as specified in
the Plan. It is the intention of the Company that such Trust, if
established, shall constitute an unfunded arrangement, and shall
not affect the status of the Plan as an unfunded Plan maintained
for the purpose of providing deferred compensation for a select
group of management or highly compensated employees for purposes
of Title I of the Employee Retirement Income Security Act of
1974, as amended. The Trustee of the Trust shall invest the
Trust assets, unless the Committee, in its sole discretion,
chooses either to instruct the Trustee as to the investment of
Trust assets or to appoint one or more investment managers to do
so. The Committee may consult with Participants concerning the
investment of Trust assets, but shall reserve the right to invest
and reinvest such assets in the manner it deems best.
-9-
4.5 To the maximum extent permitted by law, no benefit
under the Plan shall be assignable or subject in any manner to
alienation, sale, transfer, claims of creditors, pledge,
attachment, or encumbrances of any kind.
4.6 Any amounts payable hereunder to any person under legal
disability or who, in the judgment of the Committee, is unable
properly to manage his or her financial affairs, may be paid to
the legal representative of such person or may be applied for the
benefit of such person in any manner which the Committee may
select.
4.7 The Plan shall be administered by the Committee or its
designee, which may adopt rules and regulations to assist it in
the administration of the Plan.
4.8 A request for a Plan benefit shall be filed with the
Chairperson of the Committee or his or her designee, on a form
prescribed by the Committee. Such a request, hereinafter
referred to as a "claim," shall be deemed filed when the executed
claim form is received by the Chairperson of the Committee or his
or her designee.
The Chairperson of the Committee or his or her designee
shall decide such a claim within a reasonable time after it is
received. If a claim is wholly or partially denied, the claimant
shall be furnished a written notice setting forth, in a manner
calculated to be understood by the claimant:
(a) The specific reason or reasons for the denial;
(b) A specific reference to pertinent Plan provisions
on which the denial is based;
(c) A description of any additional material or
information necessary for the claimant to perfect the claim,
along with an explanation of why such material or
information is necessary; and
-10-
(d) Appropriate information as to the steps to be
taken if the claimant wishes to appeal his or her claim,
including the period in which the appeal must be filed and
the period in which it will be decided.
The notice shall be furnished to the claimant within 90 days
after receipt of the claim by the Chairperson of the Committee or
his or her designee, unless special circumstances require an
extension of time for processing the claim. No extension shall
be for more than 90 days after the end of the initial 90-day
period. If an extension of time for processing is required,
written notice of the extension shall be furnished to the
claimant before the end of the initial 90-day period. The
extension notice shall indicate the special circumstances
requiring an extension of time and the date by which a final
decision will be rendered.
If a claim is denied, in whole or in part, the claimant may
appeal the denial to the full Committee, upon written notice to
the Chairperson thereof. The claimant may review documents
pertinent to the appeal and may submit issues and comments in
writing to the Committee. No appeal shall be considered unless
it is received by the Committee within 90 days after receipt by
the claimant of written notification of denial of the claim. The
Committee shall decide the appeal within 60 days after it is
received. However, if special circumstances require an extension
of time for processing, a decision shall be rendered as soon as
possible, but not later than 120 days after the appeal is
received. If such an extension of time for deciding the appeal
is required, written notice of the extension shall be furnished
to the claimant prior to the commencement of the extension. The
Committee's decision shall be in writing and shall include
specific reasons for the decision, written in a manner calculated
to be understood by the claimant, and specific references to the
pertinent Plan provisions upon which the decision is based.
-11-
4.9 Each Participant shall receive a copy of the Plan and,
if a Trust is established pursuant to Section 4.4, the Trust, and
the Company shall make available for inspection by any
Participant a copy of any rules and regulations used in
administering the Plan.
4.10 If any contest or dispute shall arise as to amounts due
to a Participant under this Plan, the Company shall reimburse the
Participant, on a current basis, all legal fees and expenses
incurred by the Participant in connection with such contest or
dispute; provided, however, that in the event the resolution of
any such contest or dispute includes a finding denying the
Participant's claims, the Participant shall be required
immediately to reimburse the Company for all sums advanced to the
Participant hereunder.
4.11 This Plan is binding on the Company and will bind with
equal force any successor of the Company, whether by way of
purchase, merger, consolidation or otherwise.
4.12 If a court of competent jurisdiction holds any
provision of this Plan to be invalid or unenforceable, the
remaining provisions of the Plan shall continue to be fully
effective.
4.13 To the extent not superseded by the laws of the United
States, this Plan shall be construed according to the laws of the
State of Missouri.
Exhibit 10-c
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made
effective as of January 17, 2000, by and between KLT Inc., a
Missouri corporation with its principal place of business at 1201
Walnut, Kansas City, MO 64106 (the "Company"), and Gregory J.
Orman, an individual residing at 12707 Cedar, Leawood, KS 66209
(the "Employee"). Each of Company and Employee is a "Party", and
collectively they are the "Parties".
RECITALS
The Company desires to employ the Employee, and the Employee
desires to be employed by the Company. In consideration of the
mutual covenants and promises contained herein, and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties agree
as follows:
1. Term of Employment. The Term (the "Initial Term") of
this Agreement shall commence on the date hereof (the
"Commencement Date") and, subject to the further provisions of
this Agreement, shall end on December 31, 2002; provided,
however, this Agreement shall be automatically renewed for
successive one (1) year periods ("Renewal Term") unless, at least
ninety (90) days prior to the expiration of the Initial Term or
any Renewal Term, either party gives written notice to the other
party specifically electing to terminate this Agreement at the
end of the Initial Term or any such Renewal Term. The Initial
Term and any Renewal Terms are sometimes collectively referred to
herein as the "Employment Period."
2. Title; Capacity. The Employee shall serve as President
and Chief Executive Officer of the Company. The Employee shall
be subject to the supervision of, and shall have such authority
as is delegated to him by, the Company's Board of Directors (the
"Board").
The Employee hereby accepts such employment and agrees to
undertake the duties and responsibilities inherent in such
position and such other duties and responsibilities as the Board
shall from time to time reasonably assign to him in such
position. The Employee shall have such general executive powers
and authority of supervision and management as are usually vested
in the office of the chief executive officer of a corporation.
The Employee agrees to devote such amount of his business time,
attention and energies to the business and interests of the
Company (and its affiliates as required by the Company's
investments and the Employee's positions therein) during the
Employment Period as may be reasonably required to perform his
duties and responsibilities hereunder. The Employee may pursue
personal investments and other business interests so long as such
activity does not materially interfere with his duties hereunder.
The Employee agrees to abide by reasonable rules, regulations,
instructions, personnel practices and policies of the Company,
and any reasonable changes therein which may be adopted from time
to time, to the extent that the foregoing are not inconsistent
with the provisions of this Agreement. The Employee acknowledges
receipt of copies of all such rules and policies committed to
writing as of the date of this Agreement.
In no event shall the Employee be required to perform any
duties or responsibilities, or otherwise take any actions that
would violate any restrictive covenants to which the Employee is
bound under the Agreement and Plan of Merger of Bracknell
Corporation dated as of September 30, 1999, or the Employment
Agreement between Custom Energy LLC and the Employee dated as of
January 1, 1997.
3. Compensation and Benefits.
a. Salary. The Company shall pay the employee, in
semi-monthly installments, an annual base salary of $125,000.00
for the one-year period commencing on the Commencement Date.
Such salary shall be subject to increase thereafter as determined
by the Board, after taking into account the recommendations of
the Compensation Committee of the Board.
b. Fringe Benefits. The Employee shall be entitled
to participate in all bonus and benefit programs that the Company
establishes and makes available to its employees, if any, to the
extent that Employee's position, tenure, salary, age, health and
other qualifications make him eligible to participate, provided,
however, that the Employee shall in any event be entitled to such
fringe benefits as are provided from time to time by the Company
to similarly situated senior executive officers, including health
and welfare benefits, disability insurance benefits, life
insurance benefits, vacation benefits, sick leave, automobile
usage or allowances, and club privileges.
c. Reimbursement of Expenses. The Company shall
reimburse the Employee for all reasonable travel, entertainment
and other expenses incurred or paid by the Employee in connection
with, or related to, the performance of his duties,
responsibilities or services under this Agreement, upon
presentation by the Employee of documentation, expense
statements, vouchers and/or such other supporting information as
the Company may request, provided, however, that the amount
available for such travel, entertainment and other expenses may
be fixed in advance by the Board. Upon prior approval by the
Board, the Company shall reimburse Employee, or directly pay for,
dues and membership fees for industry organizations relevant to
Employee's duties.
d. Incentive Compensation Plan. The Employee shall
be entitled to participate in the Company's Incentive
Compensation Plan (the "Incentive Plan") as the same may be in
effect from time to time. Initially, the Incentive Plan shall be
as set forth in Exhibit A attached hereto. The Employee's
account (the "Incentive Account") under the Incentive Plan shall
equal 30% of the Pool established pursuant to the Incentive Plan
(or such greater percentage of the Pool as may be approved by the
Compensation Committee of the Board). The Employee's rights with
respect to the Incentive Account upon or following any
termination of the Employee's employment shall be governed by
Section 5 hereof. In the event of any conflict between the
provisions of this Agreement and the Incentive Plan, with respect
to the Incentive Account or otherwise, the provisions of this
Agreement shall control. Unless otherwise defined herein or
inconsistent with this Agreement, capitalized terms used herein
with respect to the Incentive Plan shall have the meaning
ascribed to such terms in the Incentive Plan.
4. Employment Termination. The employment of the Employee
by the Company pursuant to this Agreement shall terminate upon
the occurrence of any of the following:
a. Expiration of the Employment Period in accordance
with Section 1.
2
b. At the election of the Company, for "Cause", upon
the later of (x) receipt by the Employee of a written Notice of
Termination as contemplated by the last paragraph of this Section
4, or (y) compliance with the requirements of subsection iv of
this Section 4.b. "Cause" for such termination shall include,
and be limited to, the following:
i. Dishonesty of the Employee having the effect
of injuring the Company in a material respect;
ii. Willful misfeasance or nonfeasance of duty
intended to injure in a material respect or having the effect of
injuring in a material respect, the reputation, business or
business relationships of the Company or its respective officers,
directors or employees;
iii. Upon the Employee's conviction in a court of
competent jurisdiction, or the Employee's guilty plea or plea of
nolo contendere of any felony crime involving moral turpitude; or
iv. Upon the reasonable good faith determination
by the Board (after having given the Employee reasonably detailed
written notice of the claimed deficiency, and, in the case of a
deficiency which is susceptible to cure, an opportunity to cure
the deficiency within 30 days, and, in any event, the opportunity
within 15 days following such notice for the Employee (and/or, at
the Employee's option, Employee's counsel or other
representative) to make an oral and/or written presentation to
the Board responding to any such notice) that the Employee has
willfully failed to perform, in a material respect, his duties to
the Company under this Agreement (other than a failure resulting
from the Employee's illness, disability, or other incapacity).
c. Immediately upon the death of the Employee, or on
thirty (30) days notice from the Company following any disability
as a result of which Employee has been unable to regularly
perform a majority of his duties hereunder for a period in excess
of ninety (90) consecutive days ("Disability"). If the Employee
shall disagree with any determination by the Company regarding
Disability, then the question of such Disability shall be
submitted to an impartial and reputable physician for
determination, selected by mutual agreement of Employee and the
Company or, failing such agreement, selected by two physicians
(one of which shall be selected by the Company and the other by
the Employee), and such determination of the question of such
Disability by such physician or physicians shall be final and
binding on the Company and the Employee. The Company shall pay
the reasonable fees and expenses of such physician or physicians.
d. At any time, by written notice from the Employee
to the Company, for good reason. For purposes of this Section
4.d., "good reason" is defined as, and limited to (i) a Change of
Control (as defined below) of the Company or any Affiliate(s) in
direct or indirect control of the Company as of the date hereof
or at any time during the Employment Period; (ii) a failure of
the Company to comply with any material provision of this
Agreement which has not been cured within fifteen (15) days after
notice of such noncompliance has been given by the Employee to
the Company; (iii) a material adverse change by the Company of
any of the Employee's titles, offices, management functions,
duties or responsibilities, compensation or benefits; (iv) any
amendment or termination of the Incentive Plan without the
consent of the Employee that adversely affects, with respect to
the Employee or any other members of the
3
Company's senior management team (which is defined to comprise
all officers of the Company), eligibility to participate,
computation of the Pool, baselines, thresholds, Realization Events,
valuation methodologies, allocations, payment provisions, effect of
termination of employment, or other restrictions, terms or
conditions relating to entitlement, measurement, or realization
of benefits under or with respect to the Incentive Plan, except
in connection with the termination of the Employee's employment
pursuant to Sections 4.a, 4.b., or 4.c. of this Agreement; or (v)
without the Employee's prior written consent, the Company
requiring the Employee to be based anywhere other than a major
metropolitan area within the continental United States, except
for required travel on the Company's business to an extent
substantially consistent with the Employee's present travel
obligations. A "Change of Control" for purposes of this
Agreement shall mean a change of control of the Company (for
purposes of this definition, the term "Company" shall be deemed
to include any Affiliate(s) in direct or indirect control of the
Company as of the date hereof or at any time during the
Employment Period) of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation
14A (as in effect on the date hereof) promulgated under the
Securities Exchange Act of 1934, as in effect on the date hereof
(the "Exchange Act") assuming that the Company were then subject
to Regulation 14A; provided, however, that, without limitation,
such a change of control shall be deemed to have occurred if (A)
any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act; other than any underwriter or member of an
underwriting syndicate or group with respect to a public offering
of securities of the Company registered under the Securities Act
of 1933, the Company or any "person" who on the date hereof is a
director or officer of the Company or whose shares of Company
stock are treated as "beneficially owned" (as defined in Rule 13d-
3 under the Exchange Act, as in effect on the date hereof) by any
such director or officer) is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of the Company's then-
outstanding securities, (B) less than a majority of the members
of the Board are persons who were either nominated for election
by the current directors of the Board or successors to such
directors selected by current directors of the Board, (C) the
stockholders of the Company approve a merger or consolidation of
the Company with any other entity, other than a merger or
consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into Voting Securities of the Company or such surviving entity)
at least 80 percent of the total voting power represented by the
Voting Securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or
(D) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets. For purposes hereof, a Change of Control shall
not be deemed to have occurred as a result of the consummation of
any reorganization of Kansas City Power & Light Company ("KCPL")
solely for purposes of establishing a holding company structure
wherein the stockholders of the entity owning all or
substantially all of the assets of KCPL immediately following
such reorganization are predominantly the same as the
stockholders of KCPL immediately prior to such reorganization.
As used in this Agreement, "Voting Securities" shall mean any
securities of the Company which vote generally in the election of
directors.
e. At the election of the Company or the Employee,
with or without cause upon 90 days written notice by one party to
the other.
4
Any termination of the Employee's employment by the Company
or by the Employee shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide the basis for
termination under the provision so indicated. A Notice of
Termination shall not be given by the Company during any vacation
periods. Any purported termination of Employee's employment
which is not effected pursuant to a Notice of Termination that
complies with such requirements shall not be effective.
5. Effect of Termination.
a. Termination Arising From Expiration of the
Employment Period. In the event that the Employment Period
expires in accordance with Section 1 due to the giving of notice
by the Company of its election to terminate the Agreement, the
Company shall pay to the Employee the compensation and benefits
otherwise payable to him under Section 3 through the last day of
his actual employment by the Company. In addition, the Employee
shall be paid, within 30 days of such date, cash in an amount
equal to the amount remaining in the Employee's Incentive
Account, net of all applicable withholding taxes, as of the last
day of his actual employment by the Company.
b. Termination for Cause or at Election of Employee.
In the event the Employee's employment is terminated for Cause
pursuant to Section 4.b., or at the election of the Employee
pursuant to Section 4.e., the Company shall pay to the Employee
the compensation and benefits otherwise payable to him under
Section 3 through the last day of his actual employment by the
Company. In the event the Employee's employment is terminated
for Cause pursuant to Section 4.b, the Employee shall forfeit all
amounts remaining in his Incentive Account as of the date of
termination. If the Employee's employment is terminated at the
election of the Employee pursuant to Section 4.e., the Employee
shall be paid, within 30 days of such date, in addition to the
amounts set forth in the first sentence of this Section 5.b.,
cash in an amount equal to 50% of the amount remaining in the
Employee's Incentive Account, net of all applicable withholding
taxes, as of the last day of his actual employment by the
Company.
c. Termination at the Election of Company or for Good
Reason. In the event the Employee's employment is terminated at
the election of the Company pursuant to Section 4.e., or by the
Employee for good reason pursuant to Section 4.d., the Company
shall pay to the Employee the compensation and benefits otherwise
payable to him under Section 3 through the last day of his actual
employment by the Company and, if Employee's employment is
terminated within one year of the Commencement Date, then also
for the remainder of the Employment Period as if the Employee had
continued his employment for the remainder of the Employment
Period. In addition, the Employee shall be paid, within 30 days
of such date, cash in an amount equal to the amount remaining in
the Employee's Incentive Account, net of all applicable
withholding taxes, as of the last day of his actual employment by
the Company; provided, further, that if Employee's employment is
terminated within one year of the Commencement Date, then the
Employee shall be deemed, for purposes only of participation in
the Incentive Plan, to have continued participation in the
Incentive Plan through the last day of the Initial Term and shall
be entitled to all payments as due and payable pursuant to the
terms of the Incentive Plan, with any amount remaining in
Employee's Incentive Plan as of the last day of the Initial
5
Term being due and payable within 30 days of such date, net of all
applicable withholding taxes. For purposes of this Agreement and
notwithstanding any contrary provision in the Incentive Plan, in
the event that Employee's employment is terminated at the
election of the Company pursuant to Section 4.e. or by the
Employee for good reason pursuant to Section 4.d. prior to the
expiration of the Employment Period, then the amount remaining in
the Employee's Incentive Account as of the applicable time
prescribed by this Section 5.c., and which has not been the
subject of a Realization Event as of such time, shall be
determined by the appraisal procedure set forth in Section 5.h.
rather than by the methodology listed in Exhibit B to the
Incentive Plan.
d. Termination for Death or Disability. If the
Employee's employment is terminated by death or because of
disability pursuant to Section 4.c., the Company shall pay to the
estate of the Employee or to the Employee, as the case may be,
the compensation which would otherwise be payable to the Employee
up to the end of the month in which the termination of his
employment because of death or disability occurs. In addition,
the Employee shall be paid, within 90 days following such month
end, cash in an amount equal to the amount remaining in the
Employee's Incentive Account, net of all applicable withholding
taxes, as of 60 days following such month end. Further, the
Employee shall be paid, as promptly as practicable, all amounts
payable under the provisions of Section 5.g, below.
e. Survival. The provisions of Sections 6 and 7, and
any rights of the Employee with respect to compensation or
benefits, including the Employee's Incentive Account, as herein
provided, shall survive the termination of this Agreement.
f. No Mitigation. The Employee shall not be required
to mitigate the amount of any payment or benefit provided to the
Employee under this Agreement or the Incentive Plan by seeking
other employment or otherwise, nor shall the amount of any
payment or benefit provided to the Employee under this Agreement
or the Incentive Plan be reduced or offset by any compensation
earned or received by the Employee from another employer after
the termination of the Employee's employment under this
Agreement.
g. Realization Events. For purposes of this
Agreement and notwithstanding any contrary provision in the
Incentive Plan (i) any Realization Event that occurs within 120
days after the Employee's employment is terminated (a) at the
election of the Company pursuant to Section 4.e., or (b) by the
Employee for good reason pursuant to Section 4.d., or (c)
pursuant to Section 4.c., shall be deemed to have occurred as of
the last day of such actual employment and Amounts Realized in
connection with such Realization Event shall be allocated to the
Employee's Incentive Account, and the Employee shall be entitled
to an Award and payment based thereupon pursuant to the terms of
the Incentive Plan as modified by the terms of this Agreement,
and (ii) in the event that the Corporation has, prior to
termination of the Employee's employment under Sections 4.c.,
4.d. or 4.e. this Agreement, entered into a definitive agreement
that contemplates an event that would constitute a Realization
Event under the Incentive Plan and such Realization Event occurs
within one year following any termination of the Employee's
employment under this Agreement, then such Realization Event
shall be deemed to occur during the Employment Period and Amounts
Realized in connection with such Realization Event shall be
allocated to the Employee's Incentive Account, and the Employee
shall be entitled to an Award and payment based thereupon
pursuant to the terms of the Incentive Plan as modified by the
terms of this Agreement.
6
h. Appraisal Procedure. The appraisal procedure
contemplated by Sections 5.c. and 5.d. shall consist of the
following: (i) the Employee shall select a nationally recognized
investment banking firm ("Employee Appraiser") to determine the
fair market value of the assets in the Investment Account of the
Employee, as of the applicable time period (the "Initial
Appraisal"), within 30 days of such Employee's termination of
actual employment by the Company, (ii) if the Company does not
object to the Initial Appraisal within 15 days after receipt
thereof, such appraisal shall be final and binding upon the
Employee and the Company, (iii) if the Company objects to the
Initial Appraisal with respect to an amount equal to 10% or more
of the Initial Appraisal, then the Company shall promptly so
notify the Employee and select a different nationally recognized
investment banking firm (the "Company Appraiser") who shall
review the Initial Appraisal and issue its own appraisal of the
fair market value of the assets in the Employee's Investment
Account as of the applicable time period (the "Company
Appraisal"), and shall deliver the Company Appraisal to the
Employee within 30 days of such notification to the Employee,
(iv) within 10 days after the delivery of the Company Appraisal
to the Employee, the Employee Appraiser and the Company Appraiser
shall meet in an effort to resolve any questions or differences
between their respective appraisals, (v) if the Employee
Appraiser and Company Appraiser agree on the fair market value of
the assets in the Employee's Incentive Account as of the
applicable time period, such agreed upon value shall be final and
binding upon the Employee and the Company, (vi) if no agreement
as to such fair market value is reached between the Employee
Appraiser and the Company Appraiser, such appraisers shall select
a mutually acceptable appraiser (the "Third Appraiser") within
ten days after their initial meeting and such fair market value
shall be determined by the Third Appraiser within 30 days of its
selection and such appraisal shall be final and binding upon the
Employee and the Company, and (vii) the appraisal performed by
the Employee Appraiser, the Company Appraiser or the Third
Appraiser shall not take into account discounts arising from the
number of shares or amount of securities of any Affiliate held in
the Employee's Investment Account (sometimes referred to as
minority discounts or illiquidity discounts.).
6. Non-Compete.
a. During the period of the Employee's actual
employment by the Company and for the Applicable Non-Compete
Period (as defined below), the Employee will not directly or
indirectly, in the territory comprised by the continental United
States:
(1) as an individual proprietor, partner,
stockholder, officer, employee, director, joint venturer,
investor, lender, or in any other capacity whatsoever (other than
as the record holder or beneficial owner of not more than five
percent (5%) of the total outstanding stock of, a publicly held
company), engage in the business of developing, producing,
marketing or selling products or services that are of the kind or
type developed, produced, marketed or sold by the Company or its
Affiliates (as defined in the Incentive Plan), while the Employee
was employed by the Company or that are of the kind or type
described in reasonable detail in the written business plan of
the Company for the year during which the Employee's employment
is actually terminated, provided that such products or services
are reasonably expected to be developed, produced, marketed and
sold on a commercially significant basis during that year or the
immediately succeeding year (provided further, however, that the
Employee may hold stock in, and otherwise hold or act in any
capacity with respect to, Bracknell Corporation); or
7
(2) recruit, solicit or induce, or attempt to
induce employee or employees of the Company to terminate their
employment with, or otherwise cease their relationship with, the
Company (other than by means of general advertisements); or
(3) solicit, divert or take away, or attempt to
divert or to take away, the business or patronage of any of the
clients, customers or accounts of the Company which were
contacted, solicited or served by the Employee while employed by
the Company.
With respect to Section 6.a.(1) above, the Applicable Non-
Compete Period shall be twelve months, provided, however, that
such period shall be reduced to six months in the event that the
Employee's employment is terminated at the election of the
Company pursuant to Section 4.a or 4.e. or if the Employee's
employment is terminated for good reason pursuant to Section 4.d.
With respect to Section 6.a.(2) and (3) above, the Applicable Non-
Compete Period shall be eighteen months, provided, however, that
such period shall be reduced to six months in the event that the
Employee's employment is terminated at the election of the
Company pursuant to Section 4.a. or 4.e. or if the Employee's
employment is terminated for good reason pursuant to Section 4.d.
b. If any restriction set forth in this Section 6 is
found by any court of competent jurisdiction to be unenforceable
because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it
shall be interpreted to extend only over the maximum period of
time, range of activities or geographic area as to which it may
be enforceable.
c. The restrictions contained in this Section 6 are
necessary for the protection of the business and goodwill of the
Company and are considered by the Employee to be reasonable for
such purpose. The Employee agrees that any breach of this
Section 6 will cause the Company substantial and irrevocable
damage and therefore, in the event of any such breach, in
addition to such other remedies which may be available, the
Company shall have the right to seek specific performance and
injunctive relief. The prevailing party in a legal proceeding to
remedy a breach under this Agreement shall be entitled to receive
its reasonable attorney's fees, reasonable expert witness fees,
and reasonable out-of-pocket costs incurred in connection with
such proceeding, in addition to any other relief it may be
granted.
d. In the event the Company terminates this Agreement
without cause pursuant to Section 4.c., the restrictions
contained in Section 6.a.(1) shall not apply.
8
7. Proprietary Information and Developments
a. Proprietary Information.
i. Employee agrees that all information and know-
how, whether or not in writing, of a private, secret or
confidential nature concerning the Company's business or
financial affairs (collectively, "Proprietary Information") is
and shall be the exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information may
include inventions, products, processes, methods, techniques,
formulas, compositions, compounds, projects, developments, plans,
research data, clinical data, financial data, personnel data,
computer programs, and customer and supplier lists, provided that
the foregoing reasonably relate to the Company's business or
financial affairs. Employee will not disclose any Proprietary
Information to others outside the Company or use the same for any
unauthorized purposes without written approval by an officer of
the Company, either during or after his employment, unless and
until such Proprietary Information has become public knowledge
without fault by the Employee.
ii. Employee agrees that all files, letters,
memoranda, reports, records, data, sketches, drawings, laboratory
notebooks, program listings, or other written, photographic, or
other tangible material containing Proprietary Information,
whether created by the Employee or others, which shall come into
his custody or possession, shall be and are the exclusive
property of the Company to be used by the Employee only in the
performance of his duties for the Company.
iii. Employee agrees that his obligation not to
disclose or use Proprietary Information of the types set forth in
paragraphs (i) and (ii) above, also extends to such types of
information, know-how, records and tangible property of customers
of the Company or suppliers to the Company or other third parties
who may have disclosed or entrusted the same to the Company or to
the Employee in the course of the Company's business
(collectively, "Third Party Proprietary Information").
iv. The Company agrees that Proprietary
Information and Third Party Proprietary Information does not
include information or know-how which (A) was known to the
Employee prior to the time of disclosure of such Proprietary
Information or Third Party Proprietary Information to the
Employee; (B) is available from a public source through no breach
by the Employee of a confidentiality agreement relating to
Proprietary Information or Third Party Proprietary Information;
(C) is obtained by the Employee lawfully from a third party
through no breach by Employee or such third party of a
confidentiality agreement relating to Proprietary Information or
Third Party Proprietary Information; (D) is independently
developed or derived by the Employee without the necessity of use
of any Proprietary Information or Third Party Proprietary
Information disclosed to the Employee in connection with the
Employee's employment hereunder; or (E) is required to be
disclosed by law, regulation, rule, act, or order of any
governmental or judicial authority or agency.
9
b. Developments.
i. Employee will make full and prompt disclosure
to the Company of all inventions, improvements, discoveries,
methods, developments, software, and works of authorship, whether
patentable or not, which are created, made, conceived or reduced
to practice by the Employee or under his direction or jointly
with others and which relate to the present active business,
research, or development of the Company and are made and
conceived by the Employee in the performance of his duties and
responsibilities hereunder or using the Company's tools, devices,
equipment or Proprietary Information (all of which are
collectively referred to in this Agreement as "Developments").
In no event shall Developments be deemed to include inventions,
improvements, discoveries, methods, developments, software, works
of authorship, techniques, tools, know-how, or information which
the Employee had prior to the Commencement Date.
ii. Employee agrees to assign and does hereby
assign to the Company (or any person or entity designated by the
Company) all his right, title and interest in and to all
Developments and all related patents, patent applications,
copyrights and copyright applications.
iii. Employee agrees to cooperate fully with the
Company, both during and after his employment with the Company,
with respect to the procurement, maintenance and enforcement of
copyrights and patents (both in the United States and foreign
countries) relating to Developments. Employee shall sign all
papers, including, without limitation, copyright applications,
patent applications, declarations, oaths, formal assignments,
assignment of proprietary rights, and powers of attorney, which
the Company may reasonably deem necessary in order to protect its
rights and interests in any Development.
c. Other Agreements. Employee hereby represents that
he is not bound by the terms of any agreement with any previous
employer or other party to refrain from using or disclosing any
trade secret or confidential or proprietary information in the
course of his employment with the Company or to refrain from
competing, directly or indirectly, with the business of such
previous employer or any other party, except for the Employee's
agreements with Bracknell Corporation and Custom Energy.
Employee further represents that his performance of all the terms
of this Agreement and as an employee of the Company does not and
will not breach any agreement to keep in confidence proprietary
information, knowledge or data acquired by him in confidence or
in trust prior to his employment with the Company, provided that
the Company agrees that the Employee shall have no obligation to
disclose or utilize any such proprietary information, knowledge
or data in the performance of any terms of this Agreement or
otherwise as an employee of the Company.
d. Company's Right to Notify Subsequent Employers.
The Company may do all permissible things, and take all
permissible action, reasonably necessary to protect its rights
under this Section 7, including without limitation notifying any
subsequent employer of the Employee of the existence of (and
furnishing to any such employer) the provisions of this
Agreement.
8. Indemnification. The Company shall defend and indemnify
Employee from and against, and to exculpate Employee from, any
and all claims, actions, suits, proceedings, fines, damages,
judgments, costs and expenses, or other liabilities arising from
or relating to the
10
performance by the Employee of his duties
hereunder, or otherwise with respect to his status, as an
employee, officer, or director of the Company, on a basis that is
at least as favorable to the Employee as the broadest
indemnification available or provided by the Company to any of
its employees, officers, or directors, whether pursuant to
applicable corporate documents or separate written agreement, or
if more extensive, on as broad a scope of indemnification and
exculpation from liability as permitted by law.
9. Legal Expenses. The Company shall promptly pay, or
promptly reimburse the Employee for, all reasonable legal fees
and expenses of Employee's personal legal counsel incurred by the
Employee in connection with the drafting, negotiation and advice
rendered with respect to this Agreement, the Incentive Plan, and
matters reasonably related thereto, in an aggregate amount not to
exceed $15,000. In addition, the Company shall promptly pay, or
promptly reimburse the Employee for all reasonable legal fees and
expenses incurred by the Employee in connection with any
litigation between the Company and the Employee (a) contesting
the validity of this Agreement or the Incentive Plan, or (ii)
enforcing the Employee's rights under this Agreement or the
Incentive Plan, in either case if the Employee prevails on the
merits.
10. Notices. All notices required or permitted under this
Agreement shall be in writing and shall be deemed effective upon
personal delivery or upon deposit in the United States Post
Office, by registered or certified mail, postage prepaid,
addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate
to the other in accordance with this Section 10.
11. Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular forms of
nouns and pronouns shall include the plural, and vice versa.
12. Entire Agreement. This Agreement constitutes the
entire agreement between the Parties and supersedes all prior
agreements and understandings, whether written or oral, relating
to the subject matter of this Agreement.
13. Amendment. This Agreement may be amended or modified
only by a written instrument executed by both the Company and the
Employee.
14. Governing Law. This Agreement shall be construed,
interpreted and enforced in accordance with the laws of the State
of Missouri, without giving effect to that State's conflict of
laws provisions.
15. Choice of Venue. All actions or proceedings with
respect to this Agreement shall be instituted only in any state
or federal court sitting in Jackson County, Missouri, and by
execution and delivery of this Agreement, the parties irrevocably
and unconditionally subject to the jurisdiction (both subject
matter and personal) of each such court and irrevocably and
unconditionally waive: (a) any objection that the parties might
now or hereafter have to the venue of any of such court; and (b)
any claim that any action or proceeding brought in any such court
has been brought in an inconvenient forum.
11
16. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of both Parties and their
respective successors and assigns, including any corporation with
which or into which the Company may be merged or consolidated, or
which may succeed to its assets or business, subject to the
Employee's rights under Section 4.d., and provided, however, that
the obligations of the Employee are personal and shall not be
assigned by him.
17. Waiver. No delay or omission by the Company in
exercising any right under this Agreement shall operate as a
waiver of that or any other right. A waiver or consent given by
the Company on any one occasion shall be effective only in that
instance and shall not be construed as a bar or waiver of any
right on any other occasion.
18. Captions and Headings. The captions of the sections of
this Agreement are for convenience of reference only and in no
way define, limit or affect the scope or substance of any section
of this Agreement.
19. Severability. In case any provision of this Agreement
shall be invalid, illegal or otherwise unenforceable, the
validity, legality and enforceability of the remaining provisions
shall in no way be affected or impaired thereby.
20. Counterparts. This Agreement may be executed in a
number of counterparts and all of such counterparts executed by
the Company or the Employee, shall constitute one and the same
agreement, and it shall not be necessary for all parties to
execute the same counterpart hereof.
21. Facsimile Signatures. The parties hereby agree that,
for purposes of the execution of this Agreement, facsimile
signatures shall constitute original signatures.
22. Incorporation by Reference. The preamble and recitals
to this Agreement are hereby incorporated by reference and made a
part hereof.
[Signature page follows]
12
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year set forth above.
KLT Inc.
/s/R. G. Wasson
Name: R. G. Wasson
Title: Chairman of the Board
EMPLOYEE:
/s/Gregory J. Orman
Gregory J. Orman
13
Exhibit 10-d
KLT INC.
INCENTIVE COMPENSATION PLAN
This Incentive Compensation Plan (the "Plan") of KLT Inc. (the
"Corporation") is established and adopted by the Board of
Directors of the Corporation (the "Board") as of March 14, 2000.
1. Purpose. The purpose of the Plan is to provide certain
benefits in the form of additional compensation for designated
employees and directors (the "Participants") of the Corporation
for services rendered or hereafter rendered, to induce
Participants to remain as employees.
2. Eligibility. Employees and directors of the Corporation are
eligible to participate in the Plan if and as approved by the
disinterested members of the Compensation Committee of the Board
(the "Compensation Committee"). Notwithstanding any other
provision of this Plan, any provisions in a separate employment
contract or other contract between the Corporation and a
Participant (a "Participant Contract") relating to participation
in, or rights or obligations under, this Plan shall supersede the
terms contained in this Plan.
3. Computation of Pool.
a. The Plan is designed to provide incentive compensation
to Participants only with respect to the increase in value of the
Corporation's investments in direct and indirect affiliates, as
that term is defined in Rule 12b-2 under the Securities Exchange
Act of 1934 (each an "Affiliate" and collectively the
"Affiliates") in which the Corporation's employees have a
management or director role. The Affiliates as of the adoption
of the Plan are listed on Exhibit A. The disinterested members
of the Board shall have the discretion of amending Exhibit A from
time to time to reflect additions and deletions of the
Corporation's Affiliates included in the Plan.
b. The disinterested members of the Board, after taking
into account the recommendations of the Compensation Committee,
shall establish a baseline value (the "Baseline") for the equity
ownership by the Corporation with respect to each Affiliate
included in the Plan. The Baseline for Affiliates existing at
the time of initial adoption of the Plan shall be based on the
current fair market value, on a pre-tax basis, established by the
Compensation Committee in its sole good faith opinion, and is set
forth opposite each Affiliate's name on Exhibit A. The Baseline
for Affiliates included subsequent to the Plan's initial adoption
shall be the amount of the Corporation's capital investment in
such Affiliates (for purposes of this Plan, capital investment
means and shall be limited to equity investment). The Baseline
of each Affiliate shall be increased by the amount of additional
capital investments to such Affiliate and decreased by the amount
of distributions from such Affiliate to the Corporation.
c. The aggregate amount available to be distributed to
Participants (the "Pool") shall be twenty percent of the
difference between (i) the Amount Realized (as defined below) on
each Affiliate or Corporation, as the case may be, and (ii) the
sum of the Baseline for such Affiliate or
Corporation, as the
case may be, and an amount equal to a 10% annual pre-tax return
on such Baseline (such Baseline shall be computed, as to
Affiliates existing as of the date of initial adoption of the
Plan, from the date of such adoption, and, as to Affiliates
included subsequent to the Plan's initial adoption, from the date
of such subsequent inclusion. The Baseline for the Corporation
shall be the sum of the Baselines of its Affiliates). If the
amount calculated pursuant to clause 3.c.(i) is less than the
amount calculated pursuant to clause 3.c.(ii), then the Pool
shall be reduced by an amount equal to twenty percent of such
difference and the amounts in the Participant's Incentive
Accounts shall be accordingly adjusted to reflect this reduction
in the Pool. If the annual return on investment from an
Affiliate or Corporation, as the case may be, exceeds 100%, the
Pool shall be increased by an amount equal to 10% of the
difference between the annual return and 100%.
d. Except as otherwise provided herein or in any
Participant Contract, no distributions shall be due or payable
under the Plan until and unless the aggregate Amount Realized on
the Affiliates or Corporation is, at the time of such
distributions, at least $200 million (the "Threshold"). The
Threshold only determines when and if distributions are payable;
distributions shall be otherwise payable on all Amounts Realized.
e. The Amount Realized for each Affiliate or Corporation
will be determined upon the occurrence of a Realization Event. A
Realization Event shall be deemed to occur upon the earliest to
occur of the following events:
(i) an initial public offering (an "IPO") of common
stock of the Corporation or an Affiliate;
(ii) the sale of twenty percent (20%) or more of the
fully diluted capital stock or other equity
securities in the Corporation or an Affiliate;
(iii) a merger or consolidation of the Corporation an
Affiliate in which the Corporation is not the
survivor or the controlling shareholder of the
resulting entity;
(iv) a sale, disposition or other transfer of all
or substantially all of the assets of the
Corporation or an Affiliate;
(v) a liquidation or dissolution of the Corporation or
an Affiliate; and
(vi) the expiration of three years after
implementation of the Plan, in the case of
Affiliates initially included in Exhibit A, and
three years after the Corporation's initial
capital investment in an Affiliate which is
subsequently included in Exhibit A.
f. The Amount Realized in events (i) through (v), above,
shall be the fair market value on a pre-tax basis (the "FMV") of
the Corporation's investment in the affected Affiliate, based
upon the IPO price or the consideration received in the
Realization Event. Except as otherwise provided herein or in any
Participant Contract, the Amount Realized in event (vi) above
shall be based upon an appropriate methodology that has been
established by the Board, after taking into account the
recommendations of the Compensation Committee and the
Corporation's President, which (i) with respect to the Affiliates
initially listed in Exhibit A, is listed in Exhibit B as to
each such Affiliate; and (ii) with respect to the Affiliates
subsequently listed in Exhibit A, will be listed in Exhibit B as
to each such Affiliate prior to the time the initial capital
investment is made in such Affiliate.
g. If, after a Realization Event occurs with respect to a
particular Affiliate, the Corporation retains a direct or
indirect ownership interest in such Affiliate and all
distributions relating to the Realization Event have not been
paid due to distribution payment limitations set forth below,
then the Amount Realized with respect to such Realization Event
shall be annually adjusted to reflect any further accretion or
dilution to the FMV realized by the Corporation in such
Affiliate. Nothing in paragraphs 3.c. or 3.g. shall be deemed to
require Participants to repay to the Corporation any
distributions previously received on account of such Realization
Event.
4. Allocation of the Pool.
a. The Board, acting through its disinterested members and
in its sole discretion after taking into account the
recommendations of the Compensation Committee and the
Corporation's President and obligations of the Corporation, if
any, under Participant Contracts, shall determine the allocation
of the Pool (including but not limited to specific allocations of
Amounts Realized) among the Participants (the "Awards") and any
reallocation of any amounts in any Participant's Incentive
Account that are not paid as a result of the termination of such
Participant's employment with the Corporation (or other
applicable events) pursuant to the provisions hereof or a
separate written employment agreement or other arrangement
between such Participant and the Corporation. An Award shall be
subject to all terms and conditions of this Plan, and shall, if
the Participant is not a party to a separate written employment
agreement or other agreement containing a noncompetition or
nondisclosure covenant, be conditioned upon the Participant
executing and delivering a noncompetition or nondisclosure
agreement, at the Board's option, in substantially the form
attached hereto as Exhibit C.
b. A notional account ("Incentive Account") shall be
established and maintained for each Participant receiving Awards
under the Plan, showing the Awards granted, the portion of the
value or Amounts Realized as allocated to the Participant
(whether specified as a specific determinable dollar amount or as
a percentage of the Pool), any adjustments thereto pursuant to
the terms of the Plan, and the payments made under the Plan to
such Participant. It is specifically contemplated that
adjustments to the Pool, and the corresponding amounts allocated
to Participants' Incentive Accounts, may be either positive or
negative, as calculated pursuant to Section 3.c. for each
Realization Event, and that as a result the Pool and the
Participants' Incentive Accounts may be either positive or
negative.
c. Except as otherwise provided herein, payments shall be
made to each Participant so long as the Participant has a
positive amount in his or her respective Incentive Account and
the Threshold has been satisfied, both as of the end of a
calendar year. In such event, a sum equal to 50% of the positive
year-end amount in each Participant's Incentive Account shall be
paid within 15 days of the end of such year, net of all
applicable withholding taxes.
d. Allocations and payments under the Plan and related
determinations shall be made in the same manner as contemplated
in the examples set forth in Exhibit D attached hereto.
5. Effect of Termination of Employment.
a. Nothing in this Plan shall be construed to:
(i) Give any employee of the Corporation or any
Participant any right to be awarded an Award,
other than in the sole discretion of the
Compensation Committee or as otherwise set forth
in a separate written employment agreement between
the Participant and the Corporation;
(ii) Give a Participant any right whatsoever with
respect to any equity interest in the Corporation
or any of its Affiliates (subject, however, to any
separate written employment agreement between the
Participant and the Corporation);
(iii) Limit in any way the right of the Corporation
to terminate a Participant's employment with the
Corporation at any time (subject, however, to any
separate written employment agreement between the
Participant and the Corporation); or
(iv) Be evidence of any agreement or
understanding, express or implied, that the
Corporation will employ a Participant in any
particular position or at any particular rate of
remuneration or for any particular period of time
(subject, however, to any separate written
employment agreement between the Participant and
the Corporation).
b. Except as may otherwise be provided in a Participant
Contract, termination of a Participant's employment with the
Corporation shall have the following effect on the Participant's
Award:
(i) If the Participant terminates employment, or
if the Corporation terminates the Participant's
employment for any reason (including but not
limited to death or disability) other than Cause
(as defined below), the Participant will be
entitled to receive, within 30 days of termination
of employment, a lump sum equal to 50% of the
Award remaining in the Participant's Incentive
Account at the time of such termination, net of
all applicable withholding taxes. The Participant
shall not be entitled to any other portion of the
Award remaining in the Participant's Incentive
Account.
(ii) If the Participant is terminated for Cause,
the Participant shall forfeit all of the Award
remaining in the Participant's Incentive Account
at the time of such termination.
(iii) "Cause" is defined as:
(a) Dishonesty of the Participant with
respect to the Corporation;
(b) Willful misfeasance or nonfeasance of
duty intended to injure or having the effect
of injuring the reputation, business or
business relationships of the Corporation or
its respective officers, directors or
employees;
(c) Upon a charge by a governmental entity
against the Participant of any crime
involving moral turpitude or which could
reflect unfavorably upon the Corporation or
upon the filing of any civil action involving
a charge of embezzlement, theft, fraud, or
other similar act;
(d) Willful or prolonged absence from work
by the Participant (other than by reason of
disability due to physical or mental illness)
or failure, neglect or refusal by the
Participant to perform his duties and
responsibilities without the same being
corrected upon ten (10) days prior written
notice;
(e) Breach by the Participant of any of the
covenants contained in Exhibit C, or
termination by the Corporation of the
Participant for "cause" under an applicable
separate written employment agreement; or
(f) Failure by the Participant to materially
meet agreed-upon performance standards.
6. General Terms and Conditions
a. Non-alienation. No Award or any other rights under this
Plan shall be subject to alienation, sale, assignment, pledge,
encumbrance, or charge, and any attempt to alienate, sell,
assign, pledge, encumber, or charge the same shall be void. No
Award hereunder shall in any manner be liable for or subject to
the debts, contracts, liabilities, or torts of the person awarded
such Award. If any Participant hereunder should become bankrupt
or attempt to alienate, sell, assign, pledge, encumber, or charge
any Award hereunder, then such Award shall, in the discretion of
the Compensation Committee, cease.
b. Termination or Amendment of Plan. Unless otherwise
amended or terminated as provided in this paragraph, this Plan
shall terminate as of December 31, 2004, and all amounts then
remaining in Incentive Accounts shall be paid within 15 days of
such termination, net of all applicable withholding taxes. The
Board may not otherwise terminate or amend this Plan, in whole or
in part, without first obtaining the written consent of the
Participants holding, in aggregate, a majority of the percentage
of the Pool then allocated under this Plan. In the event of a
Change of Control, as defined below, only those Participants
holding percentages of the Pool
allocated as of the Change of
Control shall be deemed to have the power to consent to any
termination or amendment of the Plan occurring on or after the
Change of Control. Notwithstanding the above, (i) any Award
which is payable (that is, the Threshold had been reached) upon
the termination of the Plan shall nevertheless be paid in
accordance with the terms of this Plan (however, no Realization
Events occurring after such termination shall be recognized for
determining the amount of such Award), (ii) any Awards payable
(that is, the Threshold had been reached) at the time the
Compensation Committee amends the Plan shall nevertheless be
payable accordance with the terms of this Plan in effect prior to
such amendment, and (iii) the Plan shall not be amended or
terminated with respect to any Participant except in accordance
with any applicable Participant Contract. A Change of Control is
a change of control of the Corporation (for purposes of this
definition, the term "Corporation" shall be deemed to include any
Affiliate(s) in direct or indirect control of the Corporation as
of the date hereof or at any time during the Employment Period)
of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A (as in effect on the
date hereof) promulgated under the Securities Exchange Act of
1934, as in effect on the date hereof (the "Exchange Act")
assuming that the Corporation were then subject to Regulation
14A; provided, however, that, without limitation, such a change
of control shall be deemed to have occurred if (A) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange
Act; other than any underwriter or member of an underwriting
syndicate or group with respect to a public offering of
securities of the Corporation registered under the Securities Act
of 1933, the Corporation or any "person" who on the date hereof
is a director or officer of the Corporation or whose shares of
Corporation stock are treated as "beneficially owned" (as defined
in Rule 13d-3 under the Exchange Act, as in effect on the date
hereof) by any such director or officer) is or becomes the
beneficial owner, directly or indirectly, of securities of the
Corporation representing 25% or more of the combined voting power
of the Corporation's then-outstanding securities, (B) less than a
majority of the members of the Board are persons who were either
nominated for election by the current directors of the Board or
successors to such directors selected by current directors of the
Board, (C) the stockholders of the Corporation approve a merger
or consolidation of the Corporation with any other entity, other
than a merger or consolidation which would result in the Voting
Securities of the Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding
or by being converted into Voting Securities of the Corporation
or such surviving entity) at least 80 percent of the total voting
power represented by the Voting Securities of the Corporation or
such surviving entity outstanding immediately after such merger
or consolidation, or (D) the stockholders of the Corporation
approve a plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the Corporation of all
or substantially all of the Corporation's assets. For purposes
hereof, a Change of Control shall not be deemed to have occurred
as a result of the consummation of any reorganization of Kansas
City Power & Light Company ("KCPL") solely for purposes of
establishing a holding company structure wherein the stockholders
of the entity owning all or substantially all of the assets of
KCPL immediately following such reorganization are predominantly
the same as the stockholders of KCPL immediately prior to such
reorganization. As used in this Agreement, "Voting Securities"
shall mean any securities of the Corporation which vote generally
in the election of directors.
c. Captions. The captions of any section or subsection of
this Plan have been inserted for convenience and reference only
and are to be ignored in the construction of the provisions
hereof.
d. Execution of Necessary Documents. All persons claiming
any interest whatsoever under this Plan agree to perform any and
all acts and execute any and all documents and papers which may
be necessary or desirable for the carrying out of this Plan or
any of its provisions.
e. Notice. Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given
upon personal delivery or upon deposit in the United States Post
Office, by registered or certified mail with postage and fees
prepaid, addressed to Participant at his address shown on the
Corporation's employment records and to the Corporation at the
address of its principal corporate offices (attention: President)
or at such other address as such party may designate by ten days'
advance written notice to the other party hereto.
f. Choice of Law. This Plan and all documents associated
therewith shall be construed, interpreted and enforced in
accordance with the laws of the State of Missouri, without giving
effect to that State's conflict of laws provisions.
g. Venue. All actions or proceedings with respect to this
Plan or any documents associated therewith shall be instituted
only in any state or federal court sitting in Jackson County,
Missouri, and by execution of this Plan and the acceptance of
Awards, the Corporation and the Participants irrevocably and
unconditionally subject to the jurisdiction (both subject matter
and personal) of each such court and irrevocably and
unconditionally waive: (a) any objection that the parties might
now or hereafter have to the venue of any of such court; and (b)
any claim that any action or proceeding brought in any such court
has been brought in an inconvenient forum.
h. No Waiver. No delay or omission by the Corporation in
exercising any right under this Pan shall operate as a waiver of
that or any other right. A waiver or consent given by the
Corporation on any one occasion shall be effective only in that
instance and shall not be construed as a bar or waiver of any
right on any other occasion.
i. Captions. The captions of the sections of this
Agreement are for convenience of reference only and in no way
define, limit or affect the scope or substance of any section of
this Agreement.
j. Effect of Invalidity. In case any provision of this
Plan shall be invalid, illegal or otherwise unenforceable, the
validity, legality and enforceability of the remaining provisions
shall in no way be affected or impaired thereby.
In witness whereof, the Corporation has executed this Plan
as of the date first above written.
KLT INC., a Missouri corporation
By: /s/Gregory J. Orman
Attest:
/s/Mark G. English
Secretary
EXHIBIT 18
May 9, 2000
Board of Directors
Kansas City Power & Light Company
1201 Walnut
Kansas City, Missouri 64106
Dear Directors:
We are providing this letter to you for inclusion as an
exhibit to your Form 10-Q filing pursuant to Item 601 of
Regulation S-K.
We have been provided a copy of the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 2000.
Note 1. therein describes changes in accounting principles in
pension accounting from recognizing limited pension gains and
losses and determining expected return on plan assets on a
basis other than fair market value to 1) recognizing gains
and losses by amortizing over a five year period, the rolling
five year average of unamortized gains and losses and 2)
determining the expected return by multiplying the long-term
rate of return times the fair value of plan assets. It
should be understood that the preferability of one acceptable
method of accounting over another for pensions has not been
addressed in any authoritative accounting literature, and in
expressing our concurrence below we have relied on
management's determination that these changes in accounting
principles are preferable. Based on our reading of
management's stated reasons and justification for these
changes in accounting principles in the Form 10-Q, and our
discussions with management as to their judgment about the
relevant business planning factors relating to the changes,
we concur with management that such changes represent, in the
Company's circumstances, the adoption of preferable
accounting principles in conformity with Accounting
Principles Board Opinion No. 20.
We have not audited any financial statements of the Company
as of any date or for any period subsequent to December 31,
1999. Accordingly, our comments are subject to change upon
completion of an audit of the financial statements covering
the period of the accounting changes.
Very truly yours,
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
UT 1,000 3-MOS Dec-31-2000 Mar-31-2000 PER-BOOK 2,347,497 402,925 147,390 214,028 0 3,111,840 449,697 (1,668) 428,688 876,717 62 39,000 895,043 0 0 90,900 143,858 0 0 0 1,066,260 3,111,840 190,333 4,744 165,331 170,075 20,258 (2,048) 18,210 17,352 35,836 412 35,424 25,687 12,447 71,792 0.57 0.57