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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 Street
Kansas City, Missouri 64106
(Address of principal executive offices)
Registrant's telephone number, including area code: 816-556-2200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
____________________ _______________________
Cumulative Preferred Stock New York Stock Exchange
par value $100 per share - 3.80%,
4.50%, 4.35%
Common Stock without par value New York Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to the Form 10-K. X
On February 26, 2001, KCPL had 61,847,885 shares of common stock
outstanding. The aggregate market value of the common stock held by
nonaffiliates of KCPL (based upon the closing price of the Company's
common stock on the New York Stock Exchange on February 26, 2001) was
approximately $1,627,732,339.
Documents Incorporated by Reference
Portions of the 2001 Proxy Statement are incorporated by reference in
Part III of this report.
_______________________________________________________________________
TABLE OF CONTENTS
Page
Number
______
Item 1. Business 1
Organization and History 1
Strategy 1
Segment Information 1
KCPL - Regulated Electric Utility 2
Competition 2
Rates 2
Missouri 2
Kansas 2
Environmental Matters 2
Air 3
Water 4
Fuel Supply 5
Coal 5
Nuclear 5
High-Level Waste 5
Low-Level Waste 6
Nuclear Fuel Commitments 6
Unregulated Subsidiaries 7
Employees 7
Officers of the Registrant 8
Item 2. Properties 9
Generation Resources 9
Transmission and Distribution Resources 10
General 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Market for the Registrant's Common Equity and 11
Related Stockholder Matters
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial 13
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About 27
Market Risks
Item 8. Consolidated Financial Statements 29
Item 9. Changes in and Disagreements with Accountants 61
on Accounting and Financial Disclosure
Item 10. Directors and Executive Officers of the Registrant 61
Item 11. Executive Compensation 61
Item 12. Security Ownership of Certain Beneficial Owners 61
and Management
Item 13. Certain Relationships and Related Transactions 61
Item 14. Exhibits, Financial Statement Schedules, and 62
Reports on Form 8-K
i
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 statements are made. In connection with the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995, the Company is 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 additional
generating capacity
This list of factors may not be all-inclusive since it is not possible
to predict all possible factors.
ii
PART I
ITEM 1. BUSINESS
Organization and History
Kansas City Power & Light Company (KCPL) is a publicly-held, regulated
electric utility incorporated in Missouri in 1922 and headquartered in
downtown Kansas City, Missouri. KCPL engages in the generation,
transmission, distribution and sale of electricity to approximately
467,000 customers located in all or portions of 22 counties in western
Missouri and eastern Kansas. About 62% of KCPL's 2000 retail megawatt
hour sales were to Missouri customers and the remainder to Kansas
customers. Customers include approximately 413,000 residences, 51,000
commercial firms, and 3,000 industrials, municipalities and other
electric utilities. Retail electric revenues in Missouri and Kansas
accounted for approximately 94% of KCPL's total electric revenues in
2000. Wholesale firm power, bulk power sales and miscellaneous
electric revenues accounted for the remainder of utility revenues.
KCPL also owns unregulated subsidiaries (collectively the Company).
KLT Inc., formed in 1992, holds interests in telecommunications,
natural gas development and production, energy services and affordable
housing limited partnerships. Home Service Solutions Inc. (HSS),
formed in 1998, holds interests in companies providing products and
services solutions to residential customers. In February 2001, KCPL
also formed an unregulated generation company that will acquire
additional generation for sales to wholesale markets. For additional
information, see the "KLT Inc. Operations" and "HSS Operations"
sections in Management's Discussion and Analysis.
Strategy
In order to add value for its shareholders, the Company plans to
restructure by forming a holding company with three operating
subsidiaries. These subsidiaries will include:
- - A regulated utility;
- - An unregulated generation company; and
- - KLT Inc. with its non-utility growth opportunities.
In implementing this strategy, the Company is focused on:
- - Providing reliable, low-cost electricity to retail customers;
- - Acquiring and investing in generation to serve the wholesale
market;
- - Pursuing high growth, unregulated business opportunities;
- - Managing the Company as a portfolio of companies; and
- - Investing in a diverse group of people, recognizing that KCPL's
success is dependent upon the skills and expertise of its people.
Segment Information
Financial information with respect to business segments is set forth
in Note 7 - Segment and Related Information on pages 52-53 in the
Consolidated Financial Information included in this report.
1
KCPL - Regulated Electric Utility
KCPL, the electric utility, is regulated by the Public Service
Commission of the State of Missouri (MPSC), the State Corporation
Commission of the State of Kansas (KCC), the Federal Energy Regulatory
Commission (FERC), the Nuclear Regulatory Commission (NRC) and certain
other governmental regulatory bodies as to various phases of its
operations, including rates, service, safety and nuclear plant
operations, environmental matters and issuances of securities.
Competition
A number of states already have authorized retail electric
competition, but no retail competition legislation is expected to be
introduced in 2001 in either Missouri or Kansas.
KCPL believes it has developed a number of competitive strengths that
will enable it to successfully compete as more of its business becomes
competitive. These strengths include:
- - Delivered coal costs which are among the lowest in the region
- - Innovative, award-winning technology system offering expanded and
value-added services to the customer
- - Aggressive financial management
- - Strong cash flows
- - Competitive regional retail rates
- - Seasoned and experienced management team
Rates
The MPSC and KCC regulate KCPL's retail electric rates for sales
within the respective states of Missouri and Kansas. FERC approves
KCPL's rates for wholesale sales for resale and for transmission
services. Firm electric sales are made by contractual arrangements
between the entity being served and KCPL.
Missouri
Pursuant to a stipulation and agreement approved by the MPSC on April
13, 1999, a rate reduction for Missouri customers of 3.2% began on
March 1, 1999. The stipulation and agreement also provided that the
MPSC Staff or Office of Public Counsel would not request additional
changes to rates that would be effective before March 1, 2002.
Kansas
Pursuant to a rate settlement and agreement with the KCC, KCPL
implemented a 4.7% reduction in Kansas retail rates effective
January 1, 1998.
Environmental Matters
The Company'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 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
2
hazardous waste. In addition, the current owner of contaminated
property, as well as prior owners since the time of contamination, may
be liable for cleanup costs.
The Company operates in an environmentally responsible manner and uses
the latest technology available to avoid and treat contamination. The
Company continually conducts environmental audits designed to ensure
compliance with governmental regulations and to detect contamination.
Governmental bodies, however, may impose additional or more rigid
environmental regulations that could require substantial changes to
operations or facilities.
Air
Monitoring Equipment and Certain Air Toxic Substances
The Clean Air Act Amendments of 1990 required KCPL to spend about $5
million 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. In July 2000, the National Research Council
published its findings stating power plants that burn fossil fuels,
particularly coal, generate the greatest amount of mercury emissions.
In December 2000, The United States Environmental Protection Agency
(EPA) announced it will propose regulations to reduce mercury
emissions by 2003 and issue final rules by 2004. KCPL cannot predict
the likelihood or compliance costs of such regulations.
Air Particulate Matter
In July 1997, the 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. In addition, the EPA is
conducting a three-year study of fine particulate ambient air levels.
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.
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 has
been appealed, is unknown at this time, however, it is likely to delay
the implementation of new NOx regulations by the 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 remanded the EPA's more stringest ambient air quality
standard for ozone. The U.S. Supreme Court heard oral arguments
3
on the EPA's appeal of this decision on November 7, 2000. A final
decision by the U.S. Supreme Court is expected in the spring of 2001,
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.
To achieve the reductions proposed in the 1997 NOx reduction program,
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 indicates that selective
catalytic reduction technology, as well as other changes, may be
required for some of the KCPL units. Currently, KCPL estimates that
additional capital expenditures to comply with these regulations could
range from $40 million to $60 million over a period of the next few
years. Operations and maintenance expenses could also increase by
more than $2.5 million per year. These capital expenditure estimates
do not include the costs of the new air quality control equipment
being installed at Hawthorn No. 5, a unit currently being rebuilt.
The new air control equipment designed to meet current environmental
standards will also comply with the proposed requirements discussed
above.
KCPL continues to refine its preliminary estimates and explore
alternatives to comply with these new regulations in order to
minimize, to the extent possible, its capital costs and operating
expenses. The ultimate cost of these regulations could be
significantly different from the amounts estimated above.
The State of Missouri is currently developing a State Implementation
Plan (SIP) for NOx reduction. As currently proposed, KCPL would not
incur significant additional costs to comply with the State of
Missouri SIP. In May 2000, the Missouri Air Conservation Commission
approved NOx regulations requiring compliance with a rate of 0.35 lbs.
NOx / mmBtu of heat input for western Missouri where KCPL's Missouri
power plants are located. KCPL does not anticipate that it will incur
significant additional costs to comply with these new regulations.
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. This treaty has not been
submitted to the U.S. Senate. If future reductions of electric
utility CO2 emissions are eventually required, the financial impact
upon KCPL would be substantial.
Water
KCPL commissioned an environmental assessment at several of its
generating stations. The assessment at its Northeast Station revealed
contamination of the site by petroleum products, heavy metals,
volatile and semi-volatile organic compounds, asbestos, pesticides and
other regulated substances. Based upon studies and discussions with
Burns & McDonnell, the cost of the cleanup could range between $1.5
million and $6 million. The Missouri Department of Natural Resources
(MDNR) tested for arsenic in soils at the Northeast site during
December 1997. MDNR issued a report on these tests in April of 1998,
concluding that arsenic levels are not a concern.
Also, groundwater analysis has indicated that certain volatile organic
compounds are moving through the Northeast site, just above bedrock.
MDNR was notified of the possible release of petroleum
4
products from prior operations on the site and the presence of volatile
organic compounds moving under the site. Monitoring and removal of free
petroleum products continues at the site. The MDNR has concluded that
the volatile organic compounds originated from a source off site.
This site is upgrade and upstream from Northeast Station and is being
cleaned. KCPL has been advised that remediation has begun at this
site which should affect the flow of volatile organic compounds moving
through the site. At this time KCPL is under no obligation to perform
further activities at the site as MDNR has concluded KCPL did not
contribute to this contamination.
Fuel Supply
KCPL's principal sources of fuel for electric generation are coal and
nuclear fuel. These fuels are expected to satisfy about 97% of the
2001 fuel requirements with the remainder provided by other sources
including natural gas, oil and steam. The 2000 and estimated 2001
fuel mix, based on total Btu generation, are as follows:
Estimated
2000 2001
____ ___________
Coal 67% 70%
Nuclear 28% 27%
Other 5% 3%
Coal
KCPL's average cost per million Btu of coal burned, excluding fuel
handling costs, was $0.85 in 2000, $0.82 in 1999, and $0.81 in 1998.
During 2001, approximately 10.5 million tons of coal (7.2 million
tons, KCPL's share) are projected to be burned at KCPL's generating
units, including jointly-owned units. This amount reflects reduced
coal use in 2001 due to the unavailability of Hawthorn 5 during the
first five months of 2001. KCPL has entered into coal-purchase
contracts with various suppliers in Wyoming's Powder River Basin, the
nation's principal supplier of low-sulfur coal. These contracts, with
expiration dates ranging from 2001 through 2003, will satisfy
approximately 95% of the projected coal requirements for 2001, 65% for
2002 and 40% for 2003.
Nuclear
KCPL also owns 47% of Wolf Creek Nuclear Operating Corporation
(WCNOC), the operating company for the Wolf Creek Generating Station
(Wolf Creek). WCNOC has on hand, or under contract, 65% of the
uranium required to operate Wolf Creek through March 2005. The
balance is expected to be obtained through contract and spot market
purchases.
High-Level Waste
Under the Nuclear Waste Policy Act of 1982, the Department of Energy
(DOE) is responsible for the permanent disposal of spent nuclear fuel.
For the future disposal of spent nuclear fuel, KCPL pays the DOE a
quarterly fee of one-tenth of a cent for each kilowatt-hour of net
nuclear generation delivered and sold. These disposal costs are
charged to fuel expense.
A permanent disposal site may not be available for the industry until
2010 or later, although an interim facility may be available earlier.
Under current DOE policy, once a permanent site is available, the DOE
will accept spent nuclear fuel first from the owners with the oldest
spent fuel. As a result, disposal
5
services for Wolf Creek may not be available before 2016. Wolf Creek
has an on-site, temporary storage facility for spent nuclear fuel.
In early 2000, Wolf Creek completed replacement of spent fuel storage
racks to increase its on-site storage capacity for all spent fuel
expected to be generated by Wolf Creek through the end of its licensed
life in 2025.
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.
WCNOC and the owners of the other five nuclear units in the compact
provided most of the pre-construction financing for this project. As
of December 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. Shortly thereafter, the Central
Interstate Low-Level Radioactive Waste Compact Commission (responsible
for causing a new disposal facility to be developed within the Compact
region) and US Ecology (the license applicant) filed similar claims
against Nebraska. In September 1999, the U.S. District Court
partially denied and partially granted Nebraska's motions to dismiss
the utilities' and US Ecology's cases, and denied Nebraska's motion to
dismiss the Compact Commission's case. Nebraska has appealed the
denials. The parties presented oral arguments to the U.S. Court of
Appeals in October 2000 and are awaiting the court's decision.
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 April 2000, the
court of appeals affirmed the injunction granted by the U.S. District
Court's decision. The passage of time, along with the appointment of
a new state administration in Nebraska, has increased the chances for
reversal of the license denial.
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.
Nuclear Fuel Commitments
As of December 31, 2000, KCPL's portion of Wolf Creek nuclear fuel
commitments included $16 million for enrichment through 2003, $61
million for fabrication through 2025 and $8 million for uranium and
conversion through 2003.
6
Unregulated Subsidiaries
KLT Inc. has five active wholly-owned direct subsidiaries:
- - KLT Telecom Inc., an investor in communications and information
technology. KLT Telecom's major investment is an 84% ownership of DTI
Holdings, Inc., parent of Digital Teleport Inc. (DTI). At year-end
2000, DTI had about 14,000 route miles of fiber optic network in place
or under construction, with 20,000 route miles of network projected at
completion. When completed, the network will be comprised of 23
regional rings interconnecting primary, secondary and tertiary cities
in 37 states. DTI intends to focus on the completion of its
sophisticated low-cost network and to grow its products and services
with the objective of becoming a major competitor in the
telecommunications services industry.
- - KLT Gas Inc., an investor in natural gas producing properties and
companies. The focus of KLT Gas Inc. is primarily on creating value
through early stage coalbed methane property discovery, development
and divestiture. It directly owns and is developing approximately
129,500 net acres of coalbed methane properties primarily in Wyoming,
Colorado and Kansas. KLT Gas Inc. has a 50% interest in Patrick KLT
Gas, LLC, which owns and is developing approximately 100,000 acres of
coalbed methane properties in Oklahoma, and has production from over
80 wells on such properties. KLT Gas Inc. also has a 50% working
interest in natural gas producing properties in south Texas. FAR Gas
Acquisitions Corporation, a wholly-owned subsidiary of KLT Gas Inc.
holds limited partnership interests in coalbed methane gas well
properties.
- - KLT Energy Services Inc., an investor in companies which provide
products and services to commercial and industrial customers to
control the amount, cost and quality of electricity. KLT Energy
Services Inc. has a majority interest in Strategic Energy, L.L.C., an
energy services provider operating primarily in Pennsylvania, Southern
California, Ohio and New York. Strategic Energy acts as an energy
manager in deregulated markets.
- - KLT Investments Inc., a passive investor in affordable housing
investments that generate tax credits.
- - KLT Investments II Inc., a passive investor in economic and
community-development and energy-related projects.
Home Service Solutions Inc. (HSS) has made investments in two
companies:
- - R. S. Andrews Enterprise, Inc., a consumer services company in
Atlanta, Georgia (HSS holds 49% ownership interest).
- - Worry Free Service, Inc., a participant in electrical and energy-
related services to residential users (owned 100% by HSS).
Employees
At December 31, 2000, KCPL and its wholly owned subsidiaries had 2,266
employees (including temporary and part-time employees), 1,389 of
which were represented by three local unions of the International
Brotherhood of Electrical Workers (IBEW). KCPL has labor agreements
with Local 1613, representing clerical employees (which expires
March 31, 2002), with Local 1464, representing outdoor workers (which
expires January 31, 2003), and with Local 412, representing power
plant workers (which expires February 29, 2004). KCPL is also a 47%
owner of WCNOC, which employs 1,001 persons to operate Wolf Creek.
7
Officers of the Registrant
Year
Named
Name Age Positions Currently Held Officer
___________________ ___ ______________________________________ _______
Drue Jennings 54 Chairman of the Board 1980
Bernard J. Beaudoin 60 President and Chief Executive Officer 1984
William H. Downey 55 Executive Vice President-KCPL and 2000
President-KCPL Delivery (1)
Marcus Jackson 49 Executive Vice President-KCPL and 1989
President-KCPL Power
Ronald G. Wasson 56 Executive Vice President-KCPL and 1983
Chairman of the Board-KLT Inc.
Gregory J. Orman 32 President and Chief Executive 2000
Officer-KLT Inc. (2)
Andrea F. Bielsker 42 Vice President-Finance, Chief 1996
Finance Officer and Treasurer
Frank L. Branca 53 Vice President-Generation Services- 1989
KCPL Power
John J. DeStefano 51 Vice President-Finance-KCPL Power 1989
Stephen T. Easley 45 Vice President-Business Development- 2000
KCPL Power (3)
Jeanie Sell Latz 49 Senior Vice President-Corporate 1991
Services and Corporate Secretary
Nancy J. Moore 51 Vice President-Customer Services- 2000
KCPL Delivery
Douglas M. Morgan 58 Vice President-Information Technology 1994
and Support Services
Brenda Nolte 48 Vice President-Public Affairs (4) 2000
Richard A. Spring 46 Vice President-Transmission and 1994
Environmental Services-KCPL Delivery
Bailus M. Tate 54 Vice President-Human Resources- 1994
KCPL Power
William J. Riggins 42 General Counsel 2000
Neil Roadman 55 Controller 1980
All of the above individuals have been officers or employees in a
responsible position with KCPL for the past five years except as noted
in the footnotes below. The term of office of each officer commences
with his or her appointment by the Board of Directors and ends at such
time as the Board of Directors may determine.
____________
(1)Mr. Downey was President of Unicom Energy Services Company Inc. from
1997-1999; and Vice President of Commonwealth Edison Company from 1992-1999.
(2)Mr. Orman was Chief Executive Officer and President of Custom Energy LLC
from 1997-1999; and Chairman and Chief Executive Officer of Environmental
Lighting Concepts, Inc. from 1994-1997.
(3)Mr. Easley was Director, Construction at KCPL from October 1999-April 2000;
Assistant to the Chief Financial Officer at KCPL in 1999; Vice President,
Business Development Americas with KLT Power, Inc. from March 1996-
November 1998; and Director Business Development with Cinergy during 1996.
(4)Ms. Nolte was Vice President, Corporate Affairs with AMC Entertainment
from 1997-2000; Director, Center for Regional Development with Midwest
Research Institute in 1997; and Public Affairs Officer with Payless Cashways
from 1987-1997.
8
ITEM 2. PROPERTIES
Generation Resources
KCPL's generating facilities consist of the following:
Estimated
2001
Year Megawatt (mw) Primary
Unit Completed Capacity Fuel
____ _________ ________ _______
______
Existing Units
Base Load...Wolf Creek(a) 1985 550(b) Nuclear
Iatan 1980 469(b) Coal
LaCygne 2 1977 337(b) Coal
LaCygne 1 1973 344(b) Coal
Hawthorn 9(c) 2000 137 Gas
Hawthorn 6(d) 1997 132 Gas
Hawthorn 5(e) 1969 550 Coal
Montrose 3 1964 176 Coal
Montrose 2 1960 164 Coal
Montrose 1 1958 170 Coal
Peak Load...Hawthorn 8(d) 2000 77 Gas
Hawthorn 7(d) 2000 77 Gas
Northeast 13 and 14(d) 1976 114 Oil
Northeast 17 and 18(d) 1977 117 Oil
Northeast 15 and 16(d) 1975 116 Oil
Northeast 11 and 12(d) 1972 111 Oil
Northeast Black Start 1985 2 Oil
Unit
Grand Avenue (2 units) 1929 & 1948 60 Gas
_____
Total 3,703
=====
____________
(a) This unit is one of KCPL's principal generating facilities and
has the lowest fuel cost of any of its generating facilities. An
extended shutdown of the unit could have a substantial adverse effect
on the operations of KCPL and its financial condition.
(b) KCPL's share of jointly-owned unit.
(c) Heat Recovery Steam Generator portion of combined cycle.
(d) Combustion turbines.
(e) On February 17, 1999, an explosion occurred at the Hawthorn
Generating Station. The station is currently being rebuilt and is
scheduled to be on line in June 2001.
KCPL owns the Hawthorn Station (Jackson County, Missouri), Montrose
Station (Henry County, Missouri), Northeast Station (Jackson County,
Missouri) and two Grand Avenue Station turbine generators (Jackson
County, Missouri). KCPL also owns 50% of the 688-mw LaCygne 1 Unit
and 674-mw LaCygne 2 Unit in Linn County, Kansas; 70% of the 670-mw
Iatan Station in Platte County, Missouri; and 47% of the 1,170 mw Wolf
Creek in Coffey County, Kansas.
9
Transmission and Distribution Resources
KCPL's electric transmission system is interconnected with systems of
other utilities to permit bulk power transactions with other
electricity suppliers. KCPL owns approximately 1,700 miles of
transmission lines, approximately 8,900 miles of overhead distribution
lines, and approximately 3,400 miles of underground distribution
lines. KCPL has all franchises necessary to sell electricity within
the territories from which substantially all of its gross operating
revenue is derived.
General
KCPL's principal plants and properties, insofar as they constitute
real estate, are owned in fee; certain other facilities are located on
premises held under leases, permits or easements; and its electric
transmission and distribution systems are for the most part located
over or under highways, streets, other public places or property owned
by others for which permits, grants, easements or licenses (deemed
satisfactory but without examination of underlying land titles) have
been obtained.
Substantially all of the fixed property and franchises of KCPL, which
consists principally of electric generating stations, electric
transmission and distribution lines and systems, and buildings
(subject to exceptions and reservations), are subject to a General
Mortgage Indenture and Deed of Trust dated as of December 1, 1986.
ITEM 3. LEGAL PROCEEDINGS
Three law firms have joined together and filed several cases
representing a number of plaintiffs alleging race discrimination and
hostile work environment against KCPL in the United States District
Court, Western District of Missouri. In one of these cases, the
plaintiff is seeking to certify the case as a class action (see
below).
Patricia S. Lang, et al. on behalf of herself and all others
similarly situated v. Kansas City Power & Light Company. On October
8, 1999, a First Amended Class Action Complaint was filed against KCPL
in the United States District Court, Western District of Missouri by
Patricia Lang on behalf of herself and all others similarly situated.
Ten additional individuals subsequently joined the case as named
plaintiffs. The complaint alleges plaintiff seeks to bring a claim of
race discrimination as a class action on behalf of herself and all
other current and former African American employees from May 11, 1994
to the present. The complaint alleges that plaintiff and members of
the proposed class are subjected to a hostile and offensive working
environment, denied promotional opportunities, compensated less than
similarly situated or less qualified Caucasian employees, and are
disciplined and/or terminated when they complain of racially
discriminatory practices at KCPL. The complaint seeks a money award
for alleged lost wages and fringe benefits, alleged wage
differentials, as well as punitive damages, attorneys fees and costs
of the action together with an injunction prohibiting KCPL from
retaliating against anyone participating in the litigation and
continuing monitoring of KCPL's compliance with anti-discrimination
laws. Because of the vagueness of the complaint, it is not possible
at this time to evaluate the materiality of the relief sought by the
proposed class if certified. However, if no class is certified by the
court, and KCPL believes that it will be able to successfully defend
the certification of any class action, then the relief sought by the
individual plaintiffs in this action would not be material to KCPL's
financial condition or results of operations.
10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders through the
solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
KCPL's common stock is listed on the New York and Chicago stock
exchanges under the symbol KLT. At December 31, 2000, KCPL's common
stock was held by 19,110 shareholders of record. Information relating
to market prices and cash dividends on KCPL's common stock is set
forth below:
Common Stock Price Range ($)
_________________________________________
1999 2000
_________________ _________________
Quarter High Low High Low
_______ _______ _______ _______ _______
First 29.625 24.625 29 20.875
Second 28.1875 23.3125 28.75 22.50
Third 26.6875 22.1875 28.75 23.5625
Fourth 25.125 20.8125 28.1875 23.8125
Common Stock Dividends Declared
___________________________________
Quarter 1999 2000 2001
_______ ______ ______ ______
First $0.415 $0.415 $0.415
Second 0.415 0.415
Third 0.415 0.415
Fourth 0.415 0.415
KCPL's Restated Articles of Consolidation contain certain
restrictions on the payment of dividends on KCPL's Common Stock.
11
ITEM 6. SELECTED FINANCIAL DATA
Year Ended December 31
2000(a) 1999(a) 1998(b) 1997(b) 1996(b)
(dollars in millions except per share amounts)
Operating revenues $1,116 $ 921 $ 973 $ 917 $ 905
Income before cumulative
effect of changes in
accounting principles (c) $ 129 $ 82 $ 121 $ 77 $ 108
Net income $ 159 $ 82 $ 121 $ 77 $ 108
Basic and diluted earnings
per common share before
cumulative effect of
changes in accounting
principles (c) $ 2.05 $ 1.26 $ 1.89 $ 1.18 $ 1.69
Basic and diluted earnings
per common share $ 2.54 $ 1.26 $ 1.89 $ 1.18 $ 1.69
Total assets at
year end $3,294 $2,990 $3,012 $3,058 $2,915
Total mandatorily redeemable
preferred securities $ 150 $ 150 $ 150 $ 150 $ 0
Total redeemable
preferred stock and
long-term debt
(including current
maturities) $1,136 $ 815 $ 913 $1,008 $ 971
Cash dividends per
common share $ 1.66 $ 1.66 $ 1.64 $ 1.62 $ 1.59
(a) See Management's Discussion for explanation of 2000 and 1999 results.
(b) KCPL incurred significant merger-related costs of $15 million in
1998, $60 million in 1997 and $31 million in 1996. Included in 1997
merger expense is the $53 million payment to UtiliCorp United
(UtiliCorp) for terminating the merger with UtiliCorp and agreeing to
a merger with Western Resources Inc. Subsequently, the planned merger
with Western Resources Inc. was terminated.
(c) In 2000, this amount is before the $30.1 million after taxes
cumulative effect of changes in methods of accounting for pensions.
For further information concerning the changes in accounting, see Note
3 to the consolidated financial statements.
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis by management focuses on those
factors that had a material effect on the consolidated financial
condition and results of operations during the periods presented. It
should be read in conjunction with the accompanying Financial
Statements and Notes. Note 7. Segment and Related Information
summarizes the income statement by segment. The consolidated
company (referred to throughout as consolidated or the Company)
consists of Kansas City Power & Light Company (KCPL), KLT Inc., Home
Service Solutions Inc. (HSS) and the new unregulated generation
subsidiary.
Consolidated Earnings Overview
For the Years Ended December 31
2000 1999 1998
Earnings per share (EPS) summary
KCPL $ 0.91 $ 1.34 $ 1.82
KLT Inc. 1.36 (0.02) 0.07
HSS Inc. (0.22) (0.06) 0
EPS before cumulative effect of
changes in pension accounting 2.05 1.26 1.89
Cumulative effect of changes
in pension accounting 0.49 0 0
Reported Consolidated EPS $ 2.54 $ 1.26 $ 1.89
Consolidated EPS, excluding the impact of the cumulative effect of
changes in pension accounting, increased $0.79 in 2000 compared to
1999. This increase is primarily due to a $1.10 EPS increase
resulting from KLT Gas' sales of producing natural gas properties to
Evergreen Resources, Inc. and Barrett Resources Corporation offset by
a $0.21 EPS charge for a $12.7 million tax reserve recorded for a
proposed Internal Revenue Service (IRS) adjustment regarding Corporate
Owned Life Insurance (COLI). See Note 17 to the consolidated
financial statements for further information concerning COLI.
Consolidated EPS decreased $0.63 in 1999 compared to 1998 primarily
due to reduced contributions from KLT Inc. and HSS of $0.15 per share
and from KCPL of $0.48 per share. The reduced contributions from KLT
Inc. and HSS were primarily due to higher losses from equity method
investments in 1999 compared to 1998. The reduced contribution from
KCPL was primarily due to cooler summer weather in 1999, despite
intense heat in July 1999, than in 1998 and increased expenses because
of the unavailability of Hawthorn No. 5.
Effective January 1, 2000, the Company 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 the Company to record the cumulative
effect of these changes increasing common stock earnings by $0.49 per
share or $30.1 million. Additionally, the changes in pension
accounting reduced pension expense by $8.2 million for the year 2000,
increasing earnings by $0.08 per share. Adoption of the new methods
of accounting for pensions will lead to greater fluctuations in
pension expense in the future. The portions of the cumulative effect
of pension accounting changes attributable to KLT Inc. and HSS are
immaterial and therefore have not been allocated to these
subsidiaries. See Note 3 to the Consolidated Financial Statements for
further information.
For further discussion regarding each segment's contribution to
consolidated EPS, see its respective Earnings Overview section below.
13
KCPL Operations
KCPL Business Overview
KCPL, a regulated utility, consists of two business units - generation
and delivery. Dividing into two business units has provided KCPL the
opportunity to reexamine the businesses' internal processes in order
to operate more efficiently and create additional value for
shareholders.
In addition to the rebuild of Hawthorn No. 5 (projected to be on-line
in June 2001), KCPL has increased its generating capacity. In July
1999, Hawthorn No. 6, a 141-megawatt natural gas-fired unit was placed
in service. Hawthorn Nos. 7, 8 and 9 were placed into commercial use
during the summer of 2000. Hawthorn Nos. 7, 8 and 9 combined have 294
megawatts of natural gas-fired generating capacity. KCPL's generating
capacity will be over 3,700 megawatts after completion of the Hawthorn
No. 5 rebuild.
The delivery business consists of transmission and distribution that
serves over 467,000 customers and experiences annual load growth of
around 2% to 3% through increased customer usage and additional
customers. Rates charged for electricity are currently below the
national average. Additionally, there is a moratorium on changes to
Missouri retail rates until 2002.
KCPL has a regulatory obligation to join a Federal Energy Regulatory
Commission (FERC) approved Regional Transmission Organization (RTO) by
December 2001. RTOs combine regional transmission operations of
utility businesses into an organization that schedules transmission
services and monitors the energy market to ensure regional
transmission reliability and non-discriminatory access.
KCPL Earnings Overview
KCPL's contribution to consolidated EPS, excluding the cumulative
effect of changes in pension accounting, was $0.91 in 2000, $1.34 in
1999 and $1.82 in 1998. The following table and discussion highlight
significant factors affecting the changes in KCPL's EPS contribution
between the three years.
2000 1999
Factors impacting the change in compared to compared to
KCPL's EPS contribution 1999 1998
Merger impact $ (0.03) $ 0.23
Retail customers' rate reduction in
Missouri effective March 1, 1999 (0.02) (0.13)
July 1999 heat storm 0.18 (0.18)
(Increased) Decreased cost of
purchased power energy, excluding
July 1999 (0.32) 0.04
Proposed IRS adjustment regarding
COLI (see Note 17 to the
consolidated financial statements) (0.21) 0
Increased price of natural gas
and oil (0.13) 0
Replacement power insurance and
options to purchase capacity (0.08) 0
Other (see discussion below) 0.18 (0.44)
Total (0.43) (0.48)
14
Contributing to the other factors impacting KCPL's EPS contribution in
2000 compared to 1999 are the following:
- Increased retail sales primarily due to warmer summer weather and
colder winter weather in 2000 compared to 1999 and continued load
growth.
- Increased impact of the unavailability of Hawthorn No. 5 (see
discussion below).
- Increased natural gas-fired generation as a percentage of total
generation because of the addition of Hawthorn Nos. 6 through 9.
Natural gas has a significantly higher fuel cost per mmBtu of
generation than coal or nuclear fuel.
- Increased expenses because of the write-off of $4.3 million of
billings for November and December 2000 sales to one of KCPL's
larger customers because of their Chapter 11 bankruptcy filing on
February 7, 2001. Additional unpaid billings of about $2 million were
incurred after January 1, 2001, but prior to the bankruptcy and will be
written off in the first quarter of 2001. Billings subsequent to the
bankruptcy are being paid weekly. Any recoveries from this bankruptcy
proceeding will be recorded in income when received.
- Increased depreciation expenses mostly due to increased
depreciation of capitalized computer software for internal use and
normal increases in depreciation from capital additions.
- Increased interest expenses due to higher average levels of
borrowing and higher average interest rates.
Contributing to the other factors impacting KCPL's EPS contribution in
1999 compared to 1998 are the following:
- Decreased retail sales primarily due to cooler summer weather in
1999, despite intense heat in July 1999, compared to 1998 partially
offset by continued load growth.
- The impact of the unavailability of Hawthorn No. 5 (see
discussion below).
- Increased operating expenses in 1999 compared to 1998, excluding
the impact of the unavailability of Hawthorn No. 5.
Assuming normal weather and operating conditions, KCPL originally
estimated a net increase in expenses of $31 million before taxes in
2000 because of the unavailability of Hawthorn No. 5. Due to the
abnormal weather (warmer in the summer and colder in the winter) and
significantly higher prices of natural gas, oil and purchased power,
actual expenses significantly exceeded the projection. These higher
prices increased expenses by about $45 million. While the exact
impact of the unavailability of Hawthorn No. 5 with respect to these
higher prices cannot be determined, a significant portion of this
additional expense can be attributed to the Hawthorn No. 5 outage.
KCPL estimated for the year 1999, excluding the impact of the July
heat storm, a net increase in expenses of $10 million before taxes due
to the February 17, 1999, Hawthorn No. 5 explosion. Weather during
July 1999 was abnormal. Intense and prolonged heat during the last
half of July 1999 contributed to a reduction of KCPL's EPS
contribution of $0.18. A portion of this reduction in EPS can be
attributed to the unavailability of Hawthorn No. 5. However, it is
not possible to estimate the impact of the unavailability of Hawthorn
No. 5 on that portion of the reduction in EPS that resulted from the
July 1999 heat storm.
Assuming normal weather and operating conditions, KCPL estimates a net
increase in expenses of $3 million before taxes for the year 2001
because of 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.
15
KCPL Megawatt-hour (Mwh) Sales and Electric Sales Revenues
2000 compared to 1999 1999 compared to 1998
Mwh Revenues Mwh Revenues
(revenue change in millions)
Retail:
Residential 10 % $ 28 (3)% $(10)
Commercial 7 % 19 1 % (5)
Industrial 0 8 (1)% 1
Other 9 % 0 2 % 0
Total retail 6 % 55 (1)% (14)
Sales for resale:
Bulk power sales (25)% (5) (38)% (26)
Other 4 % 0 (1)% 0
Total 50 (40)
Other revenues 5 (2)
KCPL electric sales revenues $ 55 $(42)
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 in 2000
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.
The Kansas Corporation Commission (KCC) approved a rate settlement
agreement, effective January 1, 1998, authorizing a $14.2 million
annual revenue reduction and an annual increase in depreciation
expense of $2.8 million. Pending the approval of a new Kansas rate
design, KCPL accrued $14.2 million during 1998 for refund to
customers. The new rate design was approved in December 1998 and
directed KCPL to refund, starting March 1, 1999, the $14.2 million
accrued during 1998, plus the amount that KCPL accrued for January and
February 1999.
In 2000, retail revenues reached their highest level in KCPL's
history. Retail mwh sales increased in 2000 compared to 1999
primarily due to the impacts of weather and continued load growth.
Load growth consists of higher usage-per-customer and the addition of
new customers. KCPL set a record summer peak demand for the
consumption of energy of 3,374 megawatts on August 28, 2000. KCPL
also set a record winter peak of 2,382 megawatts on December 18, 2000.
In addition, industrial revenues increased because KCPL was able to
pass through its higher costs of fuel and purchased power to certain
industrial customers under special contracts. In December 2000, three
major customers under special contract chose to cancel their special
contract pricing and be billed under KCPL's existing tariff rate
structure. Also, one of KCPL's larger customers filed for
bankruptcy on February 7, 2001, and will close its Kansas City,
Missouri facilities. KCPL expects that the lost megawatt-hour sales
as a result of this closure will improve future earnings through a
combination of reduced purchased power costs during high load
conditions and the sale of the electricity to other customers at
higher rates during other periods. Milder than normal weather
decreased retail mwh sales in 1999 compared with 1998, but the
decrease was partially offset by continued load growth. Less than 1%
of revenues include an automatic fuel adjustment provision.
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
decreased bulk power mwh sales of 25% in 2000 and 38% in 1999. However,
the average price per
16
mwh of bulk power sales in 2000 increased 17% from 1999,
partially offsetting the effect of lower bulk power mwh sales on revenues.
KCPL Fuel and Purchased Power
Fuel costs increased by $23.8 million in 2000 compared to 1999
primarily due to the addition of gas-fired generation and higher costs
per mmBtu of natural gas and oil. In 2000, KCPL added 294 megawatts
of natural gas-fired generation with the completion of Hawthorn Nos.
7, 8 and 9. This increase in generation capacity replaced more
expensive purchased power contracts. Natural gas has a significantly
higher cost per mmBtu of generation than coal or nuclear fuel. In
addition, the cost of natural gas and oil increased considerably in
2000 resulting in about a $13 million increase in 2000 fuel costs
compared to 1999. Fuel costs decreased by $14.0 million in 1999
compared to 1998 primarily due to decreased fuel costs at Hawthorn No.
5 as a result of the February 1999 explosion.
During 2000, fossil plants represented about 72% and the nuclear plant
about 28% of total generation. During 1999, fossil plants represented
about 71% and the nuclear plant about 29% of total generation.
Nuclear fuel costs per mmBtu remain substantially less than the mmBtu
price of coal. KCPL expects the price of nuclear fuel to remain
fairly constant through the year 2003. KCPL's coal procurement
strategies continue to provide coal costs below the regional average.
Purchased power expenses increased $11.0 million in 2000 compared to
1999 primarily due to the unavailability of Hawthorn No. 5 and higher
customer demand. In addition, excluding the impact of the July 1999
heat storm, the cost per mwh of purchased power increased by 66% in
2000 from 1999 resulting in higher purchased power energy costs
primarily due to the addition of new natural gas-fired generation
throughout the country. The cost per mwh for purchased power is
significantly higher than the fuel cost per mwh of generation.
Purchased power expenses increased $31.1 million in 1999 compared to
1998 primarily due to the July 1999 heat storm and the unavailability
of Hawthorn No. 5. As a result of the intense and prolonged heat in
the Midwest during the last half of July 1999 and the unavailability
of Hawthorn No. 5, KCPL incurred purchased power costs of $35.1
million in July 1999, an increase of $25.1 million over July 1998.
KCPL Other (including other operating, maintenance and general tax
expenses)
Other expenses for 2000 increased about $30 million or 9% from 1999
primarily due to the following:
- - Production expenses increased because of the cost of replacement
power insurance incurred during the summer months of 2000, energy
costs incurred during the test runs at Hawthorn Nos. 7, 8 and 9 and
increased production training costs. Production expenses also
increased due to operating and lease expenses for Hawthorn No. 6,
which was placed into commercial operation in July 1999, and higher
operating expenses at certain generating units. Partially offsetting
this increase was a decrease in operating expenses at the Wolf Creek
Generating Station, a nuclear unit.
- - Administrative and general expenses increased primarily due to
increased salary expenses for implementation of system applications
and increased legal costs partially offset by the impact of the
changes in pension accounting.
- - Production maintenance expenses increased $6.8 million in 2000.
These expenses vary primarily due to the timing of scheduled
maintenance at KCPL's generating units.
- - Distribution expenses increased primarily due to $3.5 million of
costs incurred as a result of July and August 2000 storm damage.
17
- - Other operating expenses decreased about $4 million because of
the October 1999 sale of accounts receivable to KCPL Receivable
Corporation. Bad debt expenses associated with the receivables were
reflected as other operating expenses prior to the sale and are
reflected as other expenses subsequent to the sale.
Other expenses for 1999 declined slightly from 1998 and were impacted
by the following:
- - Hawthorn No. 5's other operation and maintenance expenses
decreased because of the February 1999 explosion.
- - Production maintenance expenses decreased $10.1 million in 1999.
These expenses vary primarily due to the timing of scheduled
maintenance at KCPL's generating units.
- - Administrative and general expenses increased primarily due to
increased salary expenses for implementation of system applications.
A portion of the 1998 salary expenses were able to be capitalized
during the development of these applications.
- - Customer accounts expenses for meter reading and customer record
keeping increased in 1999.
KCPL Other Income and Expenses
KCPL's other expenses increased in 2000 to $16.3 million from $8.8
million in 1999 primarily because of a $4 million increase in net
expenses resulting from the continued installation of streetlights for
the City of Kansas City. In addition, the October 1999 sale of
accounts receivable to KCPL Receivable Corporation increased expenses
by about $4 million in 2000. Bad debt expenses associated with the
receivables were reflected as other operating expenses prior to the
sale and are reflected as other expenses subsequent to the sale.
Other expenses also increased by $4.3 million because of the write-off
of billings to KCPL's largest customer as a result of its bankruptcy
filing. These increased expenses were partially offset by a $3.0
million decline in merger-related expenses in 2000 from 1999. KCPL's
other expenses decreased in 1999 to $8.8 million from $16.2 million in
1998 primarily due to a $11.4 million decline in merger-related
expenses in 1999 from 1998.
KCPL Interest Charges
KCPL's long-term debt interest expense increased to $48.5 million in
2000 from $40.6 million in 1999, reflecting higher average levels of
outstanding long-term debt and higher average interest rates on
variable rate debt. The higher average levels of debt primarily
reflect $200 million of unsecured, floating rate medium-term notes
issued by KCPL in March 2000 and $250 million of unsecured fixed-rate
senior notes issued in December 2000, partially offset by $52.5
million of scheduled debt repayments by KCPL.
KCPL uses interest rate swap and cap agreements to limit the
volatility in interest expense on a portion of its 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. KCPL does not use derivative financial
instruments for speculative purposes.
Short-term debt interest expense increased to $11.1 million in 2000
from $3.2 million in 1999 and $0.3 million in 1998 reflecting higher
average levels of outstanding short-term debt by KCPL. KCPL primarily
used the proceeds from the issuance of senior notes to reduce the
outstanding commercial paper to $55.6 million at December 31, 2000.
KCPL had $214.0 million of commercial paper outstanding at December
31, 1999 and no outstanding commercial paper at December 31, 1998.
18
Wolf Creek
Wolf Creek is one of KCPL's principal generating units, representing
about 17% of KCPL's 2000 generating capacity, which excludes the
Hawthorn No. 5 generating unit. The plant's operating performance has
remained strong over the last three years, contributing about 29% of
KCPL's annual mwh generation while operating at an average capacity of
93%. Furthermore, Wolf Creek has the lowest fuel cost per mmBtu of
any of KCPL's generating units.
KCPL accrues 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 incurred,
the refueling liability and related deferred tax asset are reduced.
Wolf Creek's next refueling and maintenance outage is scheduled for
the spring of 2002 and is estimated to be a 30-day outage.
Wolf Creek's assets represent about 34% of utility total assets and
its operating expenses represent about 19% of utility operating
expenses. No major equipment replacements are currently projected.
An extended shut-down of Wolf Creek could have a substantial adverse
effect on KCPL's business, financial condition and results of
operations because of higher replacement power and other costs.
Although not expected, the Nuclear Regulatory Commission could impose
an unscheduled plant shut-down, reacting to safety concerns at the
plant or other similar nuclear units. If a long-term shut-down
occurred, the state regulatory commissions could reduce rates by
excluding the Wolf Creek investment from rate base.
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. These risks are more fully discussed in
the related sections of Notes 1 and 5 to the Consolidated Financial
Statements.
KCPL Projected Construction Expenditures
Total utility capital expenditures, excluding allowance for funds used
during construction, were $401.0 million in 2000. The utility
construction expenditures, excluding expenditures by the new
unregulated generation subsidiary and the Hawthorn No. 5 rebuild, are
projected for the next five years as follows:
Projected Construction Expenditures
2001 2002 2003 2004 2005 Total
(millions)
Generating facilities $ 46 $ 31 $ 19 $ 25 $ 20 $ 141
Nuclear fuel 20 1 20 19 1 61
Distribution and
transmission facilities 80 76 75 61 62 354
General facilities 17 7 4 4 4 36
Total $ 163 $ 115 $ 118 $ 109 $ 87 $ 592
This construction expenditure plan is subject to continual review and
change.
On February 17, 1999, an explosion occurred at the 476-megawatt, coal-
fired Hawthorn No. 5 unit. The boiler, which was not operating at the
time, was destroyed, but there were no injuries. KCPL's investigation
indicates 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 December 31, 2000, KCPL has received $130
million in insurance recoveries under this coverage and has recorded
the recoveries in Utility Plant - accumulated depreciation on the
consolidated balance sheet.
19
KCPL has entered into a contract for construction of a new coal-fired
boiler to permanently replace the lost capacity of Hawthorn No. 5.
Expenditures, excluding capitalized interest, for rebuilding Hawthorn
No. 5, were $207.6 million in 2000, $35.6 million in 1999 and are
projected to be about $73 million in 2001. These amounts have not
been reduced by the insurance proceeds received to date or future
proceeds to be received. Construction on the new unit, expected to
have a capacity of 550 megawatts, is progressing and is on target to
be on-line in June 2001.
KLT Inc. Operations
KLT Inc. Business Overview
KLT Inc., an unregulated subsidiary, pursues business ventures in
higher growth businesses. Existing ventures include investments in
telecommunications, natural gas development and production, energy
services and affordable housing limited partnerships. The Company's
investment in KLT Inc. was $119 million at December 31, 2000 and
December 31, 1999 and increased to $150 million on February 6, 2001.
Telecommunications
At December 31, 2000, KLT Telecom owned 47% of DTI Holdings, Inc.
(acquired in 1997), the parent company of Digital Teleport, Inc.
(DTI), a facilities-based telecommunications company. Through
utilization of a $94 million bridge loan from KLT Telecom, DTI
successfully completed a tender offer to restructure its debt on
February 1, 2001, reducing interest costs and improving cash flow
going forward. On February 8, 2001, KLT Telecom increased its
ownership from 47 percent to 84 percent of DTI Holdings, Inc. See
Note 15 to the Consolidated Financial Statements for further
information.
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
delivery without affecting customers. DTI currently provides services
to other communication companies including Tier 1 and Tier 2 carriers.
DTI also provides private line services to targeted business and
governmental end-user customers. DTI Holdings estimates total capital
expenditures in excess of $250 million to complete its network.
Natural Gas Development and Production
KLT Gas Inc.'s business strategy is to acquire and develop early stage
coalbed methane properties and then divest properties in order to
create shareholder value. KLT Gas believes that coalbed methane
production provides an economically attractive alternative source of
supply to meet the growing demand for natural gas in North America and
has built a knowledge base in coalbed methane production and reserves
evaluation. Therefore, KLT Gas focuses on coalbed methane; a niche in
the natural gas industry where it believes its expertise gives it a
competitive advantage. Coalbed methane, with a longer, predictable
reserve life, is inherently lower risk than conventional gas
exploration. While gas prices have been volatile recently and are
unlikely to continue to increase at levels experienced over the past
year, KLT Gas continues to believe the long-term future price scenarios
for natural gas appear strong. Environmental concerns and the increased
demand for natural gas for new electric generating capacity are
contributing to this projected growth in demand.
In 2000, KLT Gas completed sales of a portion of its coalbed methane
properties for total proceeds of $237.2 million resulting in an after
tax gain of $68.0 million ($1.10 per share). The sales consisted of
20
interests in 240 wells and 81,000 acres of producing natural gas
properties. After the sales, KLT Gas' remaining properties are
located in Colorado, Texas, Wyoming, Oklahoma, Kansas, Montana and
North Dakota. The properties cover approximately 173,000 undeveloped
acres.
Energy Services
Strategic Energy LLC (SEL) is an energy services provider that
operates in the newly deregulated electricity markets of Pennsylvania,
Southern California, Ohio and New York. SEL began operations in 1987
as an energy consulting firm. In 1999, KLT Energy Services acquired a
56% ownership interest (49% of the voting interest) in SEL. In 2000,
KLT Energy Services invested an additional $6.9 million to increase
its ownership interest to 72% (69% of the voting interest). In 2001,
in exchange for its $5.6 million preferred stock ownership in an
energy services company, KLT Energy Services received additional
shares of SEL increasing its ownership and voting interests to 83%.
As a result of dramatic changes in the electricity and natural gas
markets, and on the strength of SEL's value to its customers, revenues
have grown from $7 million in 1998, to $62 million in 1999, and to
$130 million in 2000. The consolidated income statements only reflect
the year 2000 revenues because SEL was only consolidated as of January
1, 2000. It was recorded on an equity basis in 1999.
SEL acts as an energy manager in deregulated markets on behalf of over
7,000 commercial and industrial customers. SEL enters into long term
contracts (1-5 years) with customers to supply energy and manage their
energy needs. For this service they receive an ongoing management fee
plus the contracted price for the electricity and natural gas. SEL
purchases energy in the wholesale markets to meet its customers energy
needs. On occasion, SEL must purchase small blocks of power prior to
the sales contract in order to quote stable pricing to new potential
customers. SEL has deployed strong professional risk management
practices and strategies to manage this market risk.
SEL's supplier and customer base are both very diverse. Suppliers
include small and large energy generators across the country.
Customers include numerous Fortune 500 companies, school districts,
and governmental entities. Its customer base is currently
concentrated in the four previously mentioned deregulated states, with
the largest concentration being in Pennsylvania with approximately 300
megawatts of its total 485 megawatt load.
KLT Inc. Earnings Overview
The following table and discussion highlight significant factors
affecting KLT Inc.'s contribution to consolidated EPS for the years
2000, 1999 and 1998.
For the year ended December 31
2000 1999 1998
(earnings per share)
KLT Inc. normal operations $ 1.55 $ 0.30 $ 0.24
Realized loss on CellNet stock (0.05) 0 0
Sale of Nationwide Electric 0 0.20 0
Write-down of Lyco investment 0 (0.03) 0
Write-off of a note receivable 0 (0.05) 0
KLT Power transactions 0 0 (0.02)
KLT Telecom - Digital
Teleport Inc. (0.14) (0.24) (0.09)
KLT Telecom - Telemetry
Solutions 0 (0.20) (0.06)
KLT Inc. EPS contribution $ 1.36 $(0.02) $ 0.07
21
In 2000, KLT Gas recorded a gain on sales of property increasing KLT
Inc.'s normal operations earnings per share by $1.10 as a result of
KLT Gas' sale of producing natural gas properties. KLT Inc.'s normal
operations earnings per share also increased primarily due to improved
earnings from KLT Gas' investments in natural gas development and
production, and income from SEL.
In 2000, KLT Investments II wrote off its investment of $4.8 million
before taxes in CellNet Data Systems Inc. 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. Also in 2000, KLT Telecom recorded equity
losses on its investment in DTI Holdings, Inc. of $14.3 million. At
June 30, 2000, the equity investment in DTI Holdings, Inc. had been
completely written down. However, additional equity losses of $0.4
million were recorded because KLT Telecom purchased $3.2 million of
DTI bonds in 2000.
In 1999, KLT Energy Services sold all of the stock it held in
Nationwide Electric, Inc., resulting in a gain of $19.8 million. Also
in 1999, because Telemetry Solutions' subsidiaries were unable to
bring their products to market, KLT Telecom decided to cease funding
Telemetry Solutions and wrote off its investment. (Both the write off
of the investment ($0.13 per share) and the operating losses incurred
prior to the write off are included on the KLT Telecom - Telemetry
Solutions line in the earnings per share table above).
KLT Inc. Operating Income
KLT Inc.'s operating income increased $131.4 million in 2000 from 1999
primarily due to a $110.6 million before tax gain on property recorded
by KLT Gas on the sale of natural gas producing properties. Also in
2000, KLT Energy Services increased its ownership interest in SEL to
72% and began consolidating SEL's operations. In 1999, KLT Energy
Services reported SEL as an equity method investment only. The
consolidation of SEL added about $15 million to KLT Inc.'s operating
income in 2000, which after taxes and minority interests resulted in
about $6 million of net income.
KLT Inc. Other Income and Expenses
KLT Inc.'s other income and expenses decreased to $0.3 million of
expense in 2000 compared to $1.1 million of income in 1999 primarily
due to minority interests in SEL recorded in 2000 of $4.4 million
because KLT Energy Services began consolidating SEL in 2000 and
$4.8 million of realized losses on an investment in CellNet. These
decreases were partially offset by an increase in interest and
dividend income of $4.2 million and unrealized gains of $3.8 million
on trading securities acquired in 2000. KLT Inc.'s other income
decreased in 1999 compared to 1998 primarily due to decreased dividend
and interest income of $4.2 million because in 1998 KLT Power received
dividend income on an investment prior to the sale of the common stock
of KLT Power.
KLT Inc. Taxes
KLT Inc.'s income taxes increased in 2000 compared to 1999 primarily
because of $42.6 million in income tax expense incurred by KLT Gas on
the gain from the sale of natural gas producing properties. KLT Inc.
accrued tax credits of $26.7 million in 2000, $28.2 million in 1999
and $25.1 million in 1998 related to investments in affordable housing
limited partnerships and natural gas investments.
HSS Operations
HSS, an unregulated subsidiary, pursues business ventures primarily in
residential services. HSS has a 49% ownership in R.S. Andrews
Enterprises, Inc. (RSAE), a consumer services company in Atlanta,
22
Georgia. Additionally, Worry Free Service, Inc., a wholly owned
subsidiary of HSS, assists residential customers in obtaining
financing primarily for heating and air conditioning equipment.
The Company's investment in HSS was $46.3 million at December 31,
2000, and December 31, 1999. HSS' loss for 2000 totaled $13.5 million
($0.22 per share) compared to a loss of $3.7 million ($0.06 per share)
for 1999 and a loss of $0.1 million for 1998. HSS' increased loss for
2000 was primarily due to writing down its investment in RSAE and
continuing equity losses on this investment. At December 31, 2000,
the Company's accumulated losses were $18.0 million on its investment
in HSS.
New Unregulated Generation Subsidiary
A new unregulated generation subsidiary will focus on fossil fuel-
fired electric generation in the central part of the U.S. Five
combustion turbines have already been ordered by KCPL to add 385
megawatts of peaking capacity to serve the region and a sixth
combustion turbine will be ordered at a later date. The Company currently
plans to transfer these units to the new unregulated subsidiary later
this year after the holding company structure is approved. The new
subsidiary anticipates that five of the combustion turbines will be
placed in service in 2003 and one in 2005. The new subsidiary's
construction expenditures, excluding capitalized interest, are
projected for the next five years as $61 million in 2001, $62 million
in 2002, $39 million in 2003, $11 million in 2004, and $3 million in
2005. Operating leases may be used to replace some of these
expenditures. A significant portion of the output from these units
will be sold to KCPL.
Other Consolidated Discussion
Significant Consolidated Balance Sheet Changes (December 31, 2000
compared to December 31, 1999)
- Receivables increased $43.8 million primarily due to $31.5 million in
receivables recorded by KLT Energy Services due to the consolidation
of SEL and a $18.5 million increase in a receivable from KCPL Receivable
Corporation. Because of a colder than normal November and December
2000, there were higher customer accounts receivable available to sell to
KCPL Receivable Corporation. These increases were partially offset by
decreased receivables of $6.0 million from partners in jointly-owned
plants.
- Equity securities of $18.6 million include $10.0 million in
common stock received as proceeds in the sale of natural gas
properties to Evergreen Resources, Inc. by KLT Gas and $4.8 million of
a publicly-traded common stock purchased by KLT Energy Services in
September 2000 under an option agreement. These common stock holdings
increased in value by $3.8 million since acquisition.
- Gas property and investments decreased $48.5 million primarily
because of the sales of KLT Gas properties in 2000 partially offset by
additional expenditures.
- Other investments and nonutility property decreased $43.1 million
in part due to $18.8 million in losses incurred by HSS on its
investment in RSAE because of writing down its investment and
continuing equity losses on this investment. Also contributing to
this decrease was a $20.2 million decrease in KLT Inc.'s investments
including:
- $ 7.3 million decrease due to increased ownership in SEL
resulting in a change in the accounting for SEL from the equity method
to consolidation,
- $ 11.2 million decrease due to $14.3 million in equity losses
from the investment in Digital Teleport Inc., partially offset by a
purchase of DTI bonds in 2000.
- Utility plant - construction work in process increased $151.0
million primarily due to increases of $218.6 million, including $11.0
million of capitalized interest, at Hawthorn No. 5 for rebuilding the
23
boiler partially offset by amounts related to the construction of
Hawthorn Nos. 7, 8 and 9 which were placed into commercial service in
2000. Hawthorn Nos. 7, 8 and 9 had $45.1 million in construction work
in process at December 31, 1999.
- Prepaid pension costs of $68.3 million were recorded because KCPL
changed its methods of accounting for pension expenses (see Note 3 to
the Consolidated Financial Statements).
- Other deferred charges increased $8.6 million primarily due to
increased goodwill resulting from KLT Energy Services' purchase of an
additional ownership interest in SEL and the change in accounting for
SEL from the equity method to consolidation.
- Notes payable to banks decreased $24.7 million because KLT Gas
repaid its notes payable in 2000.
- Commercial paper decreased $158.4 million due to repayments with
the proceeds from the long-term debt issuances partially offset by
additional commercial paper borrowings as expenditures exceeded cash
receipts.
- Current maturities of long-term debt decreased $35.2 million
reflecting the repayment of KLT Inc.'s bank credit agreement, which
was $61.0 million at December 31, 1999, with the proceeds from the
sale of certain gas producing properties partially offset by a $27.5
million increase in the current portion of KCPL's medium-term notes.
- Accounts payable increased $89.9 million primarily due to $22.4
million in accounts payable recorded by KLT Energy Services due to the
consolidation of SEL, $23.0 million in accounts payable recorded by
KLT Gas for the current portion of the cost to reduce its hedge
position on natural gas sales and other transaction costs, and KCPL's
timing of paying December 2000 invoices.
- Accrued taxes increased $13.4 million primarily because of a
proposed IRS adjustment regarding COLI.
- Capitalization increased $412.7 million primarily due to KCPL's
issuances of $200 million of unsecured medium-term notes and $250
million of unsecured senior notes. Proceeds from these issuances were
used to repay outstanding commercial paper. Additionally, the Company
recorded net income in excess of dividends declared of $54.4 million,
including $30.1 million for the cumulative effect of changes in
pension accounting. Partially offsetting these increases in
capitalization, KLT Investments reclassified $13.6 million of
affordable housing notes to current maturities and KCPL reclassified
$80.0 million of long-term debt to current maturities.
Consolidated Capital Requirements and Liquidity
The consolidated company's liquid resources at December 31, 2000,
included cash flows from operations; $150 million of registered but
unissued debt securities; and $324 million of unused bank lines of
credit. The unused lines consisted of KCPL's short-term bank lines of
credit of $199 million and KLT Inc.'s bank credit agreement of $125
million.
The Company 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. Cash from operating
activities increased in 2000 from 1999 primarily due to changes in
certain working capital items (as detailed in Note 2 to the
Consolidated Financial Statements). In addition, the buyout of a fuel
contract; the refund of amounts accrued for the Kansas rate refunds;
and a payment of $19 million to the IRS to settle certain outstanding
issues decreased cash flows from operating activities in 1999.
Partially offsetting these changes for 2000, net income before non-
cash expenses decreased. The decrease in cash from operating
activities in 1999 from 1998 was primarily due to decreased income
before non-cash expenses, the significant 1999 cash payments as
discussed above and changes in certain working capital items.
24
Cash used for investing activities varies with the timing of utility
capital expenditures and purchases of investments and nonutility
property. Cash used for investing activities increased in 2000
compared to 1999 reflecting increased utility capital expenditures for
construction projects at the Hawthorn generating station, increased
purchases by KLT Gas of natural gas investments and KLT Energy
Services' exercise of its option to acquire common stock of a publicly-
traded company. The receipt of $50 million of partial insurance
recoveries related to Hawthorn No. 5 and proceeds from the sales of
KLT Gas properties reduced cash used for investing activities in 2000.
Cash used for investing activities increased in 1999 compared to 1998
primarily because of increased utility capital expenditures, increased
utility plant net removal costs and increased expenditures for natural
gas nonutility property. Proceeds from the sale of 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 1999.
Cash from financing activities increased in 2000 primarily because
KCPL issued $200 million of unsecured medium-term notes and $250
million of unsecured senior notes in 2000. KLT Gas borrowed $51
million on a new bank credit agreement and repaid the amount in full
in 2000. Also, KCPL's scheduled debt repayments were about $17
million lower in 2000 than in 1999. Furthermore, KCPL's short-term
borrowings increased in 2000. However, the increase was more than
offset by the repayment with proceeds from the unsecured note
issuances. Partially offsetting these increases, KLT Inc. repaid
borrowings on its bank credit agreement, which was $61.0 million at
December 31, 1999, with proceeds from the sales of KLT Gas properties.
Cash used for financing activities decreased in 1999 compared to 1998
primarily due to $214 million of commercial paper that KCPL borrowed
during 1999. Partially offsetting this decrease, KCPL redeemed $50
million of preferred stock in 1999.
On October 20, 2000, Standard and Poor's Corporation lowered its long-
term credit rating on KCPL secured debt to A- from A and lowered its
short-term credit rating to A-2 from A-1. The outlook was changed
from negative to stable. Moody's Investors Service's long-term credit
rating on KCPL is A1 and its short-term credit rating is P-1. On
December 4, 2000, Moody's put KCPL on credit watch for a possible
downgrade.
The Company's common dividend payout ratio was 81% (excluding the
cumulative effect of changes in accounting principles) in 2000, 132%
in 1999 and 87% in 1998. See KCPL and KLT Inc. Earnings Overview
sections for discussion of significant factors impacting EPS in 2000,
1999 and 1998.
The consolidated company expects to meet day-to-day operations,
utility construction requirements (excluding new generating capacity)
and dividends with internally-generated funds. But the Company 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 environmental
regulations and the availability of generating units. The funds
needed to retire $713 million of maturing debt through the year 2005
will be provided from operations, refinancings and/or short-term debt.
The Company may issue additional debt and/or additional equity to
finance growth or take advantage of new opportunities.
Environmental Matters
The Company'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
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
25
hazardous waste. In addition, the current owner of
contaminated property, as well as prior owners since the time of
contamination, may be liable for cleanup costs.
The Company continually conducts 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 5 to the Consolidated Financial Statements).
26
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The consolidated company is exposed to market risks associated with
commodity price and supply, interest rates and equity prices. Market
risks are handled in accordance with established policies, which may
include entering into various derivative transactions. In the normal
course of business, the Company also faces risks that are either non-
financial or non-quantifiable. Such risks principally include
business, legal, operational and credit risks and are not represented
in the following analysis.
Commodity Risk
KCPL and KLT Energy Services, through its majority-owned subsidiary,
Strategic Energy, L.L.C. (SEL), engage in the wholesale and retail
marketing of electricity, and accordingly, are exposed to risk
associated with the price of electricity.
KCPL's wholesale operations include the physical delivery and
marketing of power obtained through its generation capacity and long,
intermediate and short-term contracts. KCPL maintains a net positive
supply of energy and capacity, through its generation assets and power
purchase and lease agreements, to protect it from the potential
operational failure of one of its owned or contracted power generating
units. Including the proposed capacity for the rebuilt Hawthorn No.
5, KCPL's expected reserve margin will approximate 16% of its
capacity. However, as necessary, KCPL enters into power purchase
agreements with the objective of obtaining low-cost energy to meet its
physical delivery obligations to its customers. The Company
implemented price and volume risk mitigation measures to protect KCPL
in the event of a hot summer period. The Company continually
evaluates the need for risk mitigation measures in order to minimize
KCPL's financial exposure to, among other things, spikes in wholesale
power prices during periods of high demand.
KCPL's sales include the regulated sales of electricity to its retail
customers and bulk power sales of electricity in the unregulated,
wholesale market. There is a moratorium on changes to Missouri retail
rates until 2002. A hypothetical 10% increase in the cost of
purchased power would have resulted in a $8.0 million decrease in
pretax earnings for 2000. A hypothetical 10% increase in gas and oil
fuel costs for generation would have resulted in a $4.0 million
decrease in pretax earnings for 2000. Because most of KCPL's 2000
coal requirements were met through fixed price contracts, it was not
subject to material market price volatility. KCPL has approximately
95% of its forecasted coal requirements under contract for the year
2001. A portion of these contracts are subject to the market price of
coal.
SEL provides power supply coordination services purchasing electricity
and reselling it to retail end users. SEL aggregates retail customers
into economic purchasing pools, develops predictive load models for
the pools and then builds a portfolio of suppliers to provide the
pools with reliable power at the lowest possible cost. SEL has
entered into significant supply contracts with dispatchable and firm
power agreements through the year 2005 that mitigate most of the
commodity risk associated with its power supply coordination services.
KLT Gas Inc. entered into two firm gas sales agreements and three
financial hedge instruments to mitigate its exposure to market price
fluctuations on approximately 85% of its daily gas sales. After the
sales of producing natural gas properties in 2000, KLT Gas reduced its
hedge position on gas sales at a present value cost of $24.9 million.
For further discussion of these agreements see Note 13 to the
Consolidated Financial Statements.
27
The Company continues to believe that KCPL and SEL are not "trading
organizations" based on their business philosophy, performance
measurement and other management activities. If considered "trading
organizations", KCPL and SEL's accounting for purchases of electricity
would change. Commitments to purchase and sell energy and energy-
related products are currently carried at cost. The Company reports
the revenue and expense associated with all energy contracts at the
time the underlying physical transaction closes consistent with
industry practice and the business philosophy of generating/purchasing
and delivering physical power to customers.
Interest Rate Risk
KCPL and KLT Inc. have a combination of fixed rate and variable rate
debt. Interest rate swap and cap agreements may be entered into with
highly rated financial institutions to reduce interest rate exposure
on variable rate debt when deemed appropriate, based upon market
conditions. Using outstanding balances and annualized interest rates
as of December 31, 2000, a hypothetical 10% increase in the interest
rates associated with variable rate debt would have resulted in a $3.1
million decrease in pretax earnings for 2000.
Equity Price Risk
KCPL maintains trust funds, as required by the Nuclear Regulatory
Commission (NRC), to fund certain costs of decommissioning its nuclear
plant. KCPL does not expect nuclear plant decommissioning to start
before 2025. As of December 31, 2000, these funds were invested
primarily in domestic equity securities and fixed income securities
and are reflected at fair value on the Consolidated Balance Sheets.
The mix of securities is designed to provide returns to be used to
fund decommissioning and to compensate for inflationary increases in
decommissioning costs. However the equity securities in the trusts
are exposed to price fluctuations in equity markets, and the value of
fixed rate fixed income securities are exposed to changes in interest
rates. Investment performance and asset allocation are periodically
reviewed. A hypothetical increase in interest rates resulting in a
hypothetical 10% decrease in the value of the fixed income securities
would have resulted in a $3.4 million reduction in the value of the
decommissioning trust funds. A hypothetical 10% decrease in equity
prices would have resulted in a $2.3 million reduction in the fair
value of the equity securities as of December 31, 2000. KCPL's
exposure to equity price market risk associated with the
decommissioning trust funds is in large part mitigated due to the fact
that KCPL is currently allowed to recover its decommissioning costs in
its rates.
KLT Energy Services and KLT Gas own common stock of certain companies
with a cost basis of $14.8 million. These equity securities are
considered trading securities and as such have been recorded at their
fair value of $18.6 million at December 31, 2000. These equity
securities are exposed to price fluctuations in equity markets. A
hypothetical 10% decrease in equity prices would have resulted in a
$1.9 million reduction in the fair value of these equity securities as
of December 31, 2000.
28
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Income
Year Ended December 31 2000 1999 1998
(thousands)
Operating Revenues
Electric sales revenues $ 1,063,804 $ 897,393 $ 938,941
Gas sales revenues 48,297 20,814 9,063
Other revenues 3,767 3,275 24,658
Total 1,115,868 921,482 972,662
Operating Expenses
Fuel 153,144 129,255 143,349
Purchased power 190,171 94,697 63,618
Gas purchased and production expenses 30,396 11,125 5,392
Other 249,926 220,534 233,231
Maintenance 74,466 62,589 70,998
Depreciation 132,378 123,269 117,913
(Gain) Loss on property (99,118) 1,200 1,420
General taxes 92,228 93,051 93,636
Total 823,591 735,720 729,557
Operating income 292,277 185,762 243,105
Losses from equity investments (19,441) (24,951) (11,683)
Other income and expenses (15,353) (7,382) (6,160)
Interest charges 75,686 68,334 71,740
Income before income taxes and
cumulative effect of changes
in accounting principles 181,797 85,095 153,522
Income taxes 53,166 3,180 32,800
Income before cumulative effect of
changes in accounting principles 128,631 81,915 120,722
Cumulative effect to January 1, 2000,
of changes in accounting principles,
net of income taxes (Note 3) 30,073 0 0
Net income 158,704 81,915 120,722
Preferred stock
dividend requirements 1,649 3,733 3,884
Earnings available for
common stock $ 157,055 $ 78,182 $ 116,838
Average number of common
shares outstanding 61,864 61,898 61,884
Basic and diluted earnings per common
share before cumulative effect of
changes in accounting principles $ 2.05 $ 1.26 $ 1.89
Cumulative effect to January 1, 2000,
of changes in accounting principles 0.49 0 0
Basic and diluted earnings
per common share $ 2.54 $ 1.26 $ 1.89
Cash dividends per
common share $ 1.66 $ 1.66 $ 1.64
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
29
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Balance Sheets
At December 31 2000 1999
(thousands)
ASSETS
Current Assets
Cash and cash equivalents $ 34,877 $ 13,073
Receivables 115,356 71,548
Equity securities 18,597 0
Fuel inventories, at average cost 20,802 22,589
Materials and supplies, at average cost 46,402 46,289
Deferred income taxes 737 2,751
Other 14,455 6,086
Total 251,226 162,336
Investments and Nonutility Property
Affordable housing limited partnerships 98,129 104,260
Gas property and investments 47,654 96,191
Nuclear decommissioning trust fund 56,800 51,552
Other 81,624 124,701
Total 284,207 376,704
Utility Plant, at Original Cost
Electric 3,832,655 3,628,120
Less-accumulated depreciation 1,645,450 1,516,255
Net utility plant in service 2,187,205 2,111,865
Construction work in progress 309,629 158,616
Nuclear fuel, net of amortization of
$110,014 and $108,077 30,956 28,414
Total 2,527,790 2,298,895
Deferred Charges
Regulatory assets 139,456 137,908
Prepaid pension costs 68,342 0
Other deferred charges 22,870 14,299
Total 230,668 152,207
Total $ 3,293,891 $ 2,990,142
LIABILITIES AND CAPITALIZATION
Current Liabilities
Notes payable to banks $ 0 $ 24,667
Commercial paper 55,600 214,032
Current maturities of long-term debt 93,645 128,858
Accounts payable 158,242 68,309
Accrued taxes 14,402 972
Accrued interest 12,553 15,418
Accrued payroll and vacations 28,257 20,102
Accrued refueling outage costs 1,890 7,056
Other 14,877 13,569
Total 379,466 492,983
Deferred Credits and Other Liabilities
Deferred income taxes 590,220 592,227
Deferred investment tax credits 50,037 54,333
Other 121,907 111,009
Total 762,164 757,569
Capitalization (see statements) 2,152,261 1,739,590
Commitments and Contingencies (Note 5)
Total $ 3,293,891 $ 2,990,142
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
30
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Capitalization
At December 31 2000 1999
(thousands)
Long-term Debt (excluding current maturities)
General Mortgage Bonds
Medium-Term Notes due 2002-08, 7.18% and
6.99% weighted-average rate $ 206,000 $ 286,000
5.59%* Environmental Improvement Revenue
Refunding Bonds due 2012-23 158,768 158,768
Senior Notes
7.125% due 2005 250,000 0
Unamortized debt discount (550) 0
Medium-Term Notes
6.69%* due 2002 200,000 0
Environmental Improvement Revenue Refunding Bonds
5.55%* 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
Affordable Housing Notes
8.29% and 8.35% weighted-average rate due 2002-08 31,129 44,616
Total 1,041,847 685,884
Company-obligated Mandatorily Redeemable
Preferred Securities of a trust holding
solely KCPL Subordinated Debentures 150,000 150,000
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
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) 473,321 418,952
Accumulated other comprehensive loss
Unrealized loss on securities available
for sale 0 (2,337)
Capital stock premium and expense (1,666) (1,668)
Total 921,352 864,644
Total $ 2,152,261 $ 1,739,590
* Variable rate securities, weighted-average rate as of December 31, 2000
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
31
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Cash Flows
Year Ended December 31 2000 1999 1998
(thousands)
Cash Flows from Operating Activities
Net income $ 158,704 $ 81,915 $ 120,722
Adjustments to reconcile net income
to net cash from operating activities:
Cumulative effect of changes in
accounting principles,
net of income taxes (30,073) 0 0
Depreciation and depletion 132,378 123,269 117,913
Amortization of:
Nuclear fuel 15,227 15,782 19,146
Other 11,940 12,263 9,071
Deferred income taxes (net) (29,542) (26,784) (2,468)
Investment tax credit amortization (4,296) (4,453) (4,471)
Fuel contract settlement 0 (13,391) 0
Losses from equity investments 19,441 24,951 11,683
Asset impairments 17,775 21,078 6,027
Gain on sale of KLT Gas properties (110,578) 0 0
Gain on sale of Nationwide Electric, Inc.
stock 0 (19,835) 0
Kansas rate refund accrual 0 (14,200) 14,200
Allowance for equity funds used
during construction (4,001) (2,657) (3,816)
Other operating activities (Note 2) 16,898 (37,829) 14,656
Net cash from operating activities 193,873 160,109 302,663
Cash Flows from Investing Activities
Utility capital expenditures (401,041) (180,687) (119,540)
Allowance for borrowed funds used
during construction (12,184) (3,378) (2,474)
Purchases of investments (55,531) (35,072) (55,154)
Purchases of nonutility property (25,466) (55,792) (22,611)
Sale of KLT Gas properties 225,958 0 0
Sale of Nationwide Electric, Inc. stock 0 39,617 0
Sale of KLT Power 0 0 53,033
Hawthorn No. 5 partial insurance recovery 50,000 80,000 0
Other investing activities 18,967 (10,316) 8,008
Net cash from investing activities (199,297) (165,628) (138,738)
Cash Flows from Financing Activities
Issuance of long-term debt 500,445 10,889 7,406
Repayment of long-term debt (179,858) (109,060) (102,680)
Net change in short-term borrowings (183,099) 228,699 8,757
Dividends paid (104,335) (106,662) (105,475)
Redemption of preferred stock 0 (50,000) 0
Other financing activities (5,925) 1,513 (2,818)
Net cash from financing activities 27,228 (24,621) (194,810)
Net Change in Cash and Cash Equivalents 21,804 (30,140) (30,885)
Cash and Cash Equivalents
at Beginning of Year 13,073 43,213 74,098
Cash and Cash Equivalents
at End of Year $ 34,877 $ 13,073 $ 43,213
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
32
KANSAS CITY POWER & LIGHT COMPANY
Consolidated Statements of Comprehensive Income
Year Ended December 31 2000 1999 1998
(thousands)
Net income $ 158,704 $ 81,915 $ 120,722
Other comprehensive loss:
Unrealized loss on securities
available for sale 0 (3,778) (2,915)
Income tax benefit 0 1,367 1,054
Net unrealized loss on
securities available for sale 0 (2,411) (1,861)
Reclassification adjustment, net of tax 2,337 0 0
Comprehensive Income $ 161,041 $ 79,504 $ 118,861
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Consolidated Statements of Retained Earnings
Year Ended December 31 2000 1999 1998
(thousands)
Beginning Balance $ 418,952 $ 443,699 $ 428,452
Net Income 158,704 81,915 120,722
577,656 525,614 549,174
Dividends Declared
Preferred stock - at required rates 1,649 3,911 3,980
Common stock 102,686 102,751 101,495
Ending Balance $ 473,321 $ 418,952 $ 443,699
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
33
KANSAS CITY POWER & LIGHT COMPANY
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
The consolidated financial statements include the accounts of Kansas
City Power & Light Company (KCPL), KLT Inc., Home Service Solutions
Inc. (HSS) and a new unregulated generation subsidiary. The
consolidated entity is referred to throughout as consolidated or the
Company. KCPL is a medium-sized electric utility with more than
467,000 customers at year-end in western Missouri and eastern Kansas.
About 95% of KCPL's retail revenues are from the Kansas City
metropolitan area, an agribusiness center and major regional center
for wholesale, retail and service companies. About 62% of KCPL's 2000
retail megawatt-hour sales were to Missouri customers, the remainder
to Kansas customers.
KLT Inc. and HSS are wholly owned, unregulated subsidiaries. The
Company formed KLT in 1992 as a holding company for various
unregulated business ventures. Existing ventures include investments
in energy services, natural gas development and production,
telecommunications and affordable housing limited partnerships. The
Company formed HSS in 1998 and invested in R.S. Andrews Enterprises,
Inc., a consumer services company in Atlanta, Georgia. Also in 1998,
HSS acquired through its subsidiary Worry Free Service, Inc. the Worry
Free assets from KCPL. Worry Free assists residential customers in
obtaining financing primarily for heating and air conditioning
equipment. In February 2001, the Company also formed an unregulated
generation company.
Currently, the electric utility accounts for about 90% of consolidated
assets. Intercompany balances and transactions have been eliminated.
The accounting records conform to the accounting standards set by the
Federal Energy Regulatory Commission (FERC) and generally accepted
accounting principles. These standards require the use of estimates
and assumptions that affect amounts reported in the financial
statements and the disclosure of commitments and contingencies.
Reclassifications
Certain reclassifications have been made to previously issued
financial statements to conform to the current year presentation. In
2000, the Company modified its consolidated statements of income to
report the unregulated subsidiaries' operations in operating revenues
and operating expenses. Previously, the unregulated subsidiaries were
not included in operating income. The modification does not affect
net income. The consolidated balance sheets and statements of
capitalization have been reformatted and the investments and
nonutility property section of the balance sheet has been expanded.
The consolidated statements of cash flows reflect the impact of the
changes to the consolidated statements of income.
Cash and Cash Equivalents
Cash and cash equivalents consists of highly liquid investments with
original maturities of three months or less.
34
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:
Current Assets and Current Liabilities-The stated value of financial
instruments classified as current assets or liabilities approximates
fair value due to the short-term nature of the instruments. The
equity securities are considered trading securities and are recorded
at fair value based on quoted market prices. A $3.8 million net
increase in the market values of the trading securities has been
recorded in income in 2000.
Investments and Nonutility Property-The nuclear decommissioning trust
fund is recorded at fair value. Fair value is based on quoted market
prices of the investments held by the fund. The fair value of KLT
Investments' affordable housing limited partnership total portfolio,
based on the discounted cash flows generated by tax credits, tax
deductions and sale of properties approximates book value. However,
the fair value of affordable housing limited partnership cost method
investments is below book value (see discussion below). The fair
values of other various investments are not readily determinable and
the investments are therefore stated at cost.
Long-term debt-KCPL's incremental borrowing rate for similar debt was
used to determine fair value if quoted market prices were not
available. The stated values approximate fair market values.
Investments in Affordable Housing Limited Partnerships
At December 31, 2000, KLT Investments had $98.1 million in affordable
housing limited partnerships. About 70% of these investments were
recorded at cost; the equity method was used for the remainder. We
reduce tax expense in the year tax credits are generated. The
investments generate future cash flows from tax credits and tax losses
of the partnerships. The investments also generate cash flows from
the sales of the properties (estimated residual value). For most
investments, tax credits are received over ten years. A change in
accounting principle relating to investments made after May 19, 1995,
requires the use of the equity method when a company owns more than 5%
in a limited partnership investment. Of the investments recorded at
cost, $66.0 million exceed this 5% level but were made before May 19,
1995.
On a quarterly basis, KLT Investments completes a valuation study of
its cost method investments in affordable housing by comparing the
cost of those properties to the total of projected residual value of
the properties and remaining tax credits to be received. Estimated
residual values are based on studies performed by an independent firm.
Projected annual reductions of the book cost based on the latest
valuation study for the years 2001 through 2005 total $14 million, $9
million, $9 million, $12 million and $7 million, respectively. For
the years ended December 31, actual reductions recorded were $2.4
million in 2000 and $1.6 million in 1999. Even after these
reductions, earnings from affordable housing are expected to be
positive for the next five years.
These projections are based on the latest information available but
the ultimate amount and timing of actual reductions made could be
significantly different from the above estimates. Also, based on
preliminary external information, management believes the assets could
be sold at a loss significantly lower than the accumulated reductions
to be recorded during the next five years.
35
Securities Available for Sale
In 2000, CellNet Data System Inc. (CellNet) completed a sale of its
assets to a third party. Accordingly, in March 2000, KLT Inc.
realized losses on its investment in CellNet of $4.8 million before
taxes ($0.05 per share). At December 31, 1999, $3.8 million before
taxes of this loss had been reported as an unrealized loss in the
Consolidated Statement of Comprehensive Income. The above before tax
amounts were reduced by taxes of $1.7 million in 2000 and $1.4 million
in 1999.
Prior to realizing the losses, 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 Investments II held as of December 31,
1999 was $4.8 million. Accumulated net unrealized losses were $2.3
million at December 31, 1999.
Utility Plant
Utility plant is stated at historical costs of construction. These
costs include taxes, an allowance for funds used during construction
(AFDC) and payroll-related costs, including pensions and other fringe
benefits. Replacements, improvements and additions to units of
property are capitalized. Repairs of property and replacements of
items not considered to be units of property are expensed as incurred
(except as discussed under Wolf Creek Refueling Outage Costs). When
property units are retired or otherwise disposed, the original cost,
net of salvage and removal, is charged to accumulated depreciation.
Through December 31, 2000, KCPL has received $130 million in insurance
recoveries related to property destroyed in the February 17, 1999
explosion at the Hawthorn No. 5 generating unit. Recoveries received
have been recorded in Utility Plant-accumulated depreciation.
AFDC represents the cost of borrowed funds and a return on equity
funds used to finance construction projects. AFDC on borrowed funds
reduces interest charges. AFDC on equity funds is included as a
noncash item in Other income and expenses. The rates used to compute
gross AFDC are compounded semi-annually and averaged 7.5% for 2000,
7.7% for 1999, and 9.3% for 1998.
Depreciation is computed using the straight-line method over the
estimated lives of depreciable property based on rates approved by
state regulatory authorities. Annual depreciation rates average about
3%.
Wolf Creek Refueling Outage Costs
Forecasted incremental costs to be incurred during scheduled Wolf
Creek Generating Station (Wolf Creek) refueling outages are accrued
monthly over the unit's operating cycle, normally about 18 months.
Estimated incremental costs, which include operating, maintenance and
replacement power expenses, are based on budgeted outage costs and the
estimated outage duration. Changes to or variances from those
estimates are recorded when known or probable.
Nuclear Plant Decommissioning Costs
The Missouri Public Service Commission (MPSC) and the Kansas
Corporation Commission (KCC) require the owners of Wolf Creek to
submit an updated decommissioning cost study every three years. The
following table shows the decommissioning cost estimates and the
escalation rates and earnings assumptions approved by the MPSC and the
KCC in 2000. The decommissioning cost estimates are
36
based on the immediate dismantlement method and include the costs of
decontamination, dismantlement and site restoration. KCPL does not
expect plant decommissioning to start before 2025.
KCC MPSC
Future cost of decommissioning:
Total Station $1.2 billion $1.5 billion
47% share $554 million $694 million
Current cost of decommissioning
(in 1999 dollars):
Total Station $470 million $470 million
47% share $221 million $221 million
Annual escalation factor 3.60% 4.50%
Annual return on trust assets 6.93% 7.66%
KCPL contributes about $3 million annually to a tax-qualified trust
fund to be used to decommission Wolf Creek. These costs are charged
to other operating expenses and recovered in billings to customers
(rates). These funding levels assume a certain return on trust
assets. If the actual return on trust assets is below the anticipated
level, KCPL believes a rate increase will be allowed ensuring full
recovery of decommissioning costs over the remaining life of the unit.
The trust fund balance, including reinvested earnings, was $56.8
million at December 31, 2000, and $51.6 million at December 31, 1999.
The related liabilities for decommissioning are included in Deferred
Credits and Other Liabilities - Other.
In 2000, the Financial Accounting Standards Board (FASB) issued an
Exposure Draft of a proposed Statement of Financial Accounting
Standards, Accounting for Obligations Associated with the Retirement
of Long-Lived Assets, that addressed the accounting for
decommissioning costs. The FASB expects to issue a final statement
during 2001.
If current electric utility industry accounting practices for
decommissioning costs change, annual decommissioning expenses could
increase and trust fund income from the external decommissioning
trusts could be reported as investment income. KCPL cannot predict
the effect of any such changes, if any, on results of operations,
financial position, or related regulatory practices. However, KCPL
does not anticipate results of operations to be significantly affected
as long as it is regulated.
Nuclear Fuel
KCPL amortizes nuclear fuel to fuel expense based on the quantity of
heat produced during generation of electricity. Under the Nuclear
Waste Policy Act of 1982, the Department of Energy (DOE) is
responsible for the permanent disposal of spent nuclear fuel. For
the future disposal of spent nuclear fuel, KCPL pays the DOE a
quarterly fee of one-tenth of a cent for each kilowatt-hour of net
nuclear generation delivered and sold. These disposal costs are
charged to fuel expense.
A permanent disposal site may not be available for the industry until
2010 or later, although an interim facility may be available earlier.
Under current DOE policy, once a permanent site is available, the DOE
will accept spent nuclear fuel first from the owners with the oldest
spent fuel. As a result, disposal services for Wolf Creek may not be
available before 2016. Wolf Creek has an on-site, temporary storage
facility for spent nuclear fuel. In early 2000, Wolf Creek completed
replacement of spent fuel storage racks to increase its on-site
storage capacity for all spent fuel expected to be generated by Wolf
Creek through the end of its licensed life in 2025.
37
Regulatory Assets
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. Under this statement, KCPL defers on the
balance sheet items when allowed by a commission's rate order or when
it is probable, based on regulatory past practices, that future rates
will recover the amortization of the deferred costs. If FASB 71 were
not applicable, the unamortized balance of $139.5 million of KCPL's
regulatory assets, net of the related tax benefit, would be written
off.
Amortization
December 31, ending
2000 period
Regulatory Assets (millions)
Recoverable taxes $ 115.0
Coal contract termination costs 11.3 2003
1996 snowstorm costs 1.8 2001
Decommission and decontaminate federal
uranium enrichment facilities 4.5 2007
Premium on redeemed debt 5.7 2023
Other 1.2 2006
Total Regulatory Assets $ 139.5
Natural Gas Properties
KLT Gas follows the full cost method of accounting for its natural gas
properties. Under the full cost method, all costs of acquisition,
exploration and development of natural gas reserves are capitalized
regardless of success. Any excess of book value plus costs to develop
over the present value (10% discount rate) of estimated future net
revenues (at year-end prices) from the natural gas reserves would be
expensed.
Depletion, depreciation and amortization of these assets are
calculated using the units of production method. The depletion per
mmBtu was $0.63 for 2000, $0.42 for 1999 and $0.26 for 1998.
Undeveloped leaseholds were included in the depletable base in both
years. All natural gas property interests owned by KLT Gas are
located in the United States.
Revenue Recognition
The Company uses cycle billing and accrues estimated unbilled revenue
at the end of each reporting period.
Asset Impairments
The Company periodically reviews long-lived assets, including
intangibles, for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. To the extent that there is impairment, analysis is
performed based on several criteria, including but not limited to
revenue trends, discounted operating cash flows and other operating
factors, to determine the impairment amount. In addition, a
determination is made by the Company to ascertain whether goodwill has
been impaired.
38
Property Gains and Losses
The Company records net gains and losses from the sales of assets,
businesses, and asset impairments in operating expenses.
Income Taxes
The balance sheet includes deferred income taxes for all temporary
differences between the tax basis of an asset or liability and that
reported in the financial statements. These deferred tax assets and
liabilities are determined by using the tax rates scheduled by the tax
law to be in effect when the differences reverse.
Regulatory Asset - Recoverable taxes mainly reflects the future
revenue requirements necessary to recover the tax benefits of existing
temporary differences previously passed through to customers. KCPL
records operating income tax expense based on ratemaking principles.
However, if the method used for the balance sheet were reflected in
the income statement, net income would remain the same.
KCPL amortizes investment tax credits to income over the remaining
service lives of the related properties.
Environmental Matters
The Company accrues environmental costs when it is probable a
liability has been incurred and the amount of the liability can be
reasonably estimated.
Basic and Diluted Earnings per Common Share Calculation
There is no dilutive effect on earnings per share from other
securities in 2000, 1999 or 1998. To determine earnings per common
share, preferred stock dividend requirements are subtracted from both
income before cumulative effect of changes in accounting principles
and net income before dividing by average number of common shares
outstanding. The difference between these amounts equals the earning
per share impact of the cumulative effect of changes in accounting
principles.
2. SUPPLEMENTAL CASH FLOW INFORMATION AND SALES OF KLT GAS PROPERTIES
Sales of KLT Gas properties
KLT Gas sold producing natural gas properties to Evergreen Resources,
Inc. (Evergreen) and Barrett Resources Corporation (Barrett) during
2000. KLT Gas' business strategy is to acquire and develop early
stage coalbed methane properties and then divest properties in order
to create shareholder value. The transactions are summarized in the
table below.
39
2000
(thousands)
Cash proceeds $ 125,958
Preferred stock redeemed (a) 100,000
Total cash proceeds 225,958
Equity securities 10,000
Receivable 1,243
Total proceeds 237,201
Cost basis in property sold (87,785)
Accounts payable (23,168)
Other assets and liabilities (15,670)
Gain on sale before income tax 110,578
Income tax (42,606)
Gain on sale, net of income tax $ 67,972
(a) The preferred stock received in September 2000
was redeemed in December 2000.
KLT Gas received as part of the sales transactions additional
Evergreen shares valued at $4 million in December 2000 because of the
increase in natural gas futures. The Evergreen common stock is
considered a trading security and is recorded at fair value.
In the table above, accounts payable and other assets and liabilities
include the $24.9 million cost incurred by KLT Gas to reduce its hedge
position on gas sales since the producing properties were sold and
$7.9 million of incentive compensation.
Other Operating Activities
2000 1999 1998
Cash flows affected by changes in: (thousands)
Receivables $(42,565) $ (1,417) $ (7,898)
Fuel inventories 1,787 (3,840) (4,925)
Materials and supplies (113) (926) 1,216
Accounts payable 66,765 6,545 4,196
Accrued taxes 13,430 (14,653) 13,953
Accrued interest (2,865) (7,962) 1,020
Wolf Creek refueling outage accrual (5,166) (5,259) 10,651
Pension and postretirement
benefit obligations (12,653) 1,939 (114)
Other (1,722) (12,256) (3,443)
Total other operating activities $ 16,898 $(37,829) $ 14,656
Cash paid during the period:
Interest $ 76,395 $ 74,520 $ 71,696
Income taxes $ 80,445 $ 52,300 $ 24,788
3. PENSION PLANS AND OTHER EMPLOYEE BENEFITS
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 expense. These changes were
made to reflect more timely in pension expense the gains and losses
incurred by the pension funds.
40
At the time KCPL originally adopted the standards governing accounting
for pensions, it 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 exceeded 10 percent of the greater
of the projected benefit obligation or the market-related value of
plan assets. If amortization was required, amortization was the
excess divided by the average remaining service period, approximately
15 years, of active employees expected to receive benefits under the
plan. This method resulted in minimal gains being amortized.
- - Determined the expected return by multiplying the long-term rate
of return times the market-related value. KCPL determined 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. The following
table details the current effects of the adoption of the new methods
of accounting for pensions.
Changes in Method of Accounting for Pensions (a)
Amortization of
Gains and Expected Net
Losses Return Total Reductions (b) Total
(millions except per share amounts)
Cumulative effect of
change in method of
accounting:
Income $ 21.4 $ 13.6 $ 35.0 $ (4.9) $ 30.1
Basic and diluted
earnings per common
share $ 0.35 $ 0.22 $ 0.57 $(0.08) $ 0.49
Year 2000 earnings
effect of change in
method of accounting:
Income $ 4.1 $ 2.0 $ 6.1 $ (1.1) $ 5.0
Basic and diluted
earnings per common
share $ 0.07 $ 0.03 $ 0.10 $(0.02) $ 0.08
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 $ (1.0) $ 4.5
Basic and diluted
earnings per common
share $ 0.07 $ 0.02 $ 0.09 $(0.02) $ 0.07
1998
Income $ 2.9 $ 3.2 $ 6.1 $ (1.1) $ 5.0
Basic and diluted
earnings per common
share $ 0.05 $ 0.05 $ 0.10 $(0.02) $ 0.08
(a) All changes are increases to income or earnings per common share
and are after income taxes.
(b) The Reductions column reflects the effects of capitalization and
sharing with joint-owners of power plants.
41
Pension Plans and Other Employee Benefits
KCPL has four defined benefit pension plans for its employees,
including officers and Wolf Creek employees. Benefits under these
plans reflect the employees' compensation, years of service and age at
retirement. The change in the 2000 benefit obligation reflects an
increase of $42.0 million for amendments to the plans, other than Wolf
Creek, and will be amortized as prior service costs starting in 2001.
The most significant amendments added new retirement benefit options
and changed mortality tables. The new options consist of enhanced
early retirement benefits if a management employee retires after their
age plus years of service equals at least 85 and allowing lump sum
distributions. Non-management employees already had similar options.
KCPL satisfies the minimum funding requirements under the Employee
Retirement Income Security Act of 1974.
In addition to providing pension benefits, KCPL provides certain
postretirement health care and life insurance benefits for
substantially all retired employees.
KCPL accrues the cost of postretirement health care and life insurance
benefits during an employee's years of service and recovers these
accruals through rates. KCPL funds the portion of net periodic
postretirement benefit costs that are tax deductible.
Pension Benefits Other Benefits
2000 1999 2000 1999
(thousands)
Change in benefit obligation
Benefit obligation at
beginning of year $ 334,939 $ 384,588 $ 31,910 $ 36,222
Service cost 9,384 10,983 547 678
Interest cost 26,538 25,446 2,543 2,493
Contribution by
participants 243 207
Amendments 42,025 0 0 0
Actuarial (gain) loss 26,504 (56,395) 4,997 (4,191)
Benefits paid (27,116) (29,362) (2,980) (3,024)
Benefits paid by KCPL (314) (321) (402) (475)
Benefit obligation at end
of year (a) $ 411,960 $ 334,939 $ 36,858 $ 31,910
Change in plan assets
Fair value of plan assets at
beginning of year $ 453,150 $ 407,829 $ 7,100 $ 6,364
Actual return on plan assets 137,684 72,520 225 (85)
Contributions by employer
and participants 1,229 2,163 3,751 3,845
Benefits paid (27,116) (29,362) (2,980) (3,024)
Fair value of plan assets
at end of year $ 564,947 $ 453,150 $ 8,096 $ 7,100
Funded status $ 152,987 $ 118,211 $(28,762) $(24,810)
Unrecognized actuarial
(gain) loss (138,818) (130,455)(b) 1,692 (3,439)
Unrecognized prior service
cost 44,960 3,423 400 478
Unrecognized transition
obligation (2,253) (4,325) 14,093 15,267
Net prepaid (Accrued)
benefit cost $ 56,876 $ (13,146) $(12,577) $(12,504)
42
Pension Benefits Other Benefits
2000 1999 2000 1999
(thousands)
Prepaid benefit cost $ 68,342 $ 5,094(c) 0 0
Accrued benefit cost (11,466) (18,240) $(12,577) $(12,504)
Net prepaid (Accrued)
benefit cost $ 56,876 $ (13,146) $(12,577) $(12,504)
(a) Based on weighted-average discount rates of 7.9% in 2000 and
1999; and increases in future salary levels of 4% in 2000 and 1999.
(b) This balance at December 31, 1999 was reduced on January 1, 2000
by $57.3 million to reflect the changes in pension accounting
principles.
(c) Prepaid benefit cost in 1999 was reflected as a reduction to
accrued benefit cost in the 1999 consolidated balance sheet.
Pension Benefits Other Benefits
2000 1999 1998 2000 1999 1998
Components of net (thousands)
periodic Benefit cost
Service cost $ 9,384 $ 10,983 $ 9,661 $ 547 $ 678 $ 532
Interest cost 26,538 25,446 24,892 2,543 2,493 2,429
Expected return on
plan assets (39,571) (31,263) (29,806) (361) (348) (203)
Amortization of prior
service cost 488 498 547 78 77 77
Recognized net
actuarial loss (gain) (5,913) 896 (910) 2 51 8
Transition obligation (2,072) (2,072) (2,072) 1,174 1,175 1,174
Net periodic benefit
cost $(11,146) $ 4,488 $ 2,312 $ 3,983 $4,126 $4,017
Long-term rates of return on pension assets of 9.0% to 9.25% were used.
Net periodic benefit costs reflect total plan benefit costs prior to
the effects of capitalization and sharing with joint-owners of power
plants.
Actuarial assumptions include an increase in the annual health care
cost trend rate for the year 2001 and thereafter of 6%. The health
care plan requires retirees to share in the cost when premiums exceed
a certain amount. An increase or decrease in the assumed health care
cost trend rate by 1% per year would only increase or decrease the
benefit obligation as of December 31, 2000, by about $1,900,000 and
the combined service and interest costs of the net periodic
postretirement benefit cost for 2000 by about $200,000.
Employee Savings Plans
The Company has defined contribution savings plans that cover
substantially all employees. The Company matches employee
contributions, subject to limits. The annual cost of the plans was
$2.9 million in 2000 and $2.8 million in both 1999 and 1998.
Stock Options
The exercise price of stock options granted equaled the market price
of KCPL's common stock on the grant date. One-half of all options
granted vested one year after the grant date, the other half vested
two years after the grant date. An amount equal to the quarterly
dividends paid on KCPL's common
43
stock shares (dividend equivalents) accrues on the options for the
benefit of option holders. The option holders are entitled to stock
for their accumulated dividend equivalents only if the options are
exercised when the market price is above the exercise price. At
December 31, 2000, the market price of KCPL's common stock was $27.44,
which exceeded the grant price for all of the five years that options
were granted. Unexercised options expire ten years after the grant date.
KCPL follows Accounting Principles Board (APB) Opinion 25 - Accounting
for Stock Issued to Employees and related interpretations in
accounting for this plan. Because of the dividend equivalents
provision, KCPL expensed $1.1 million in 2000, $(1.1) million in 1999
and $0.1 million in 1998. The expense includes accumulated and
reinvested dividends plus the impact of the change in stock price
since the grant date.
FASB Statement No. 123 - Accounting for Stock-Based Compensation
requires certain disclosures regarding expense and value of options
granted using the fair-value method, even though KCPL follows APB
Opinion 25. KCPL has expensed approximately the same amount as
required by FASB 123. For options outstanding at December 31, 2000,
grant prices range from $20.6250 to $26.1875 and the weighted-average
remaining contractual life is 4.1 years.
Stock option activity over the last three years is summarized below:
2000 1999 1998
shares price* shares price* shares price*
Outstanding at
January 1 89,875 $23.57 97,875 $23.41 265,250 $23.12
Granted 0 0 0 0 0 0
Exercised (1,375) 23.88 0 0 (143,875) 22.68
Canceled 0 0 (8,000) 21.63 (23,500) 24.54
Outstanding at
December 31 88,500 $23.57 89,875 $23.57 97,875 $23.41
Exercisable as of
December 31 88,500 $23.57 89,875 $23.57 97,875 $23.41
*weighted-average price
4. INCOME TAXES
Income tax expense consisted of the following:
2000 1999 1998
Current income taxes: (thousands)
Federal $ 76,076 $ 31,439 $ 32,621
State 10,928 2,978 7,118
Total 87,004 34,417 39,739
Deferred income taxes:
Federal (9,846) (23,313) (2,225)
State (469) (3,471) (243)
Total (10,315) (26,784) (2,468)
Investment tax credit amortization (4,296) (4,453) (4,471)
Total income tax expense 72,393 3,180 32,800
Less: Deferred taxes on the
cumulative effect of changes
in accounting principles 19,227 0 0
Total $ 53,166 $ 3,180 $ 32,800
44
The Company's effective income tax rates differed from the statutory
federal rates mainly due to the following:
2000 1999 1998
Federal statutory income tax rate 35.0 % 35.0 % 35.0 %
Differences between book and tax
depreciation not normalized 0.7 6.9 2.1
Proposed IRS Adjustment - Note 17 4.6 0 0
Amortization of investment tax credits (1.9) (5.2) (2.9)
Federal income tax credits (9.2) (26.4) (14.6)
State income taxes 2.9 (0.4) 2.9
Merger expenses 0 (3.8) 2.1
Other (0.8) (2.4) (3.2)
Effective income tax rate 31.3 % 3.7 % 21.4 %
The tax effects of major temporary differences resulting in deferred
tax assets and liabilities in the balance sheets are as follows:
December 31 2000 1999
(thousands)
Plant related $530,600 $523,539
Recoverable taxes 45,000 41,000
Pension and postretirement benefits 10,544 (9,596)
Gas properties related (21,071) 4,134
Other 24,410 30,399
Net deferred income tax liability $589,483 $589,476
The net deferred income tax liability consisted of the following:
December 31 2000 1999
(thousands)
Gross deferred income tax assets $(97,418) $(65,491)
Gross deferred income tax liabilities 686,901 654,967
Net deferred income tax liability $589,483 $589,476
5. COMMITMENTS AND CONTINGENCIES
Nuclear Liability and Insurance
Liability Insurance
The Price-Anderson Act currently limits the combined public
liability of nuclear reactor owners to $9.5 billion for claims
that could arise from a single nuclear incident. The owners of
Wolf Creek (the Owners) carry the maximum available commercial
insurance of $0.2 billion. Secondary Financial Protection (SFP),
an assessment plan mandated by the Nuclear Regulatory Commission
(NRC), provides insurance for the $9.3 billion balance.
Under SFP, if there were a catastrophic nuclear incident
involving any of the nation's licensed reactors, the Owners would
be subject to a maximum retrospective assessment per incident of
up to $88 million ($41 million, KCPL's share). The Owners are
jointly and severally liable for
45
these charges, payable at a rate not to exceed $10 million
($5 million, KCPL's share) per incident per year, excluding
applicable premium taxes. The assessment, most recently revised
in 1998, is subject to an inflation adjustment every five years
based on the Consumer Price Index.
Property, Decontamination, Premature Decommissioning and Extra
Expense Insurance
The Owners also carry $2.8 billion ($1.3 billion, KCPL's share)
of property damage, decontamination and premature decommissioning
insurance for loss resulting from damage to the Wolf Creek
facilities. Nuclear Electric Insurance Limited (NEIL) provides
this insurance.
In the event of an accident, insurance proceeds must first be
used for reactor stabilization and NRC mandated site
decontamination. KCPL's share of any remaining proceeds can be
used for further decontamination, property damage restoration and
premature decommissioning costs. Premature decommissioning
coverage applies only if an accident at Wolf Creek exceeds $500
million in property damage and decontamination expenses, and only
after trust funds have been exhausted (see Note 1 - Nuclear Plant
Decommissioning Costs).
The Owners also carry additional insurance from NEIL to cover
costs of replacement power and other extra expenses incurred in
the event of a prolonged outage resulting from accidental
property damage at Wolf Creek.
Under all NEIL policies, KCPL is subject to retrospective
assessments if NEIL losses, for each policy year, exceed the
accumulated funds available to the insurer under that policy.
The estimated maximum amount of retrospective assessments to KCPL
under the current policies could total about $5.3 million.
In the event of a catastrophic loss at Wolf Creek, the insurance
coverage may not be adequate to cover property damage and extra
expenses incurred. Uninsured losses, to the extent not recovered
through rates, would be assumed by KCPL and could have a
material, adverse effect on the Company's financial condition,
results of operations and cash flows.
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 provided most of the pre-
construction financing for this project. As of December 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. Shortly thereafter, the Central
Interstate Low-Level Radioactive Waste Compact Commission and U.S.
Ecology filed similar claims against Nebraska. In September 1999, the
U.S. District Court partially denied and partially granted Nebraska's
motions to dismiss the utilities' and U.S. Ecology's cases and denied
Nebraska's motion to dismiss the Commission's case. Nebraska has
appealed the denials. The parties presented oral arguments to the
U.S. Court of Appeals in October 2000 and are awaiting the court's
decision.
46
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 April 2000, the
court of appeals affirmed the injunction granted by the U.S. District
Court's decision. The passage of time, along with the appointment of
a new state administration in Nebraska, has increased the chances for
reversal of the license denial.
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.
Nuclear Fuel Commitments
As of December 31, 2000, KCPL's portion of Wolf Creek nuclear fuel
commitments included $16 million for enrichment through 2003, $61
million for fabrication through 2025 and $8 million for uranium and
conversion through 2003.
Environmental Matters
The Company operates in an environmentally responsible manner and use
the latest technology available to avoid and treat contamination. The
Company continually conducts 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 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. In July 2000, the National
Research Council published its findings stating power plants that
burn fossil fuels, particularly coal, generate the greatest
amount of mercury emissions. In December 2000, The United States
Environmental Protection Agency (EPA) announced it would propose
regulations to reduce mercury emissions by 2003 and issue final
rules by 2004. KCPL cannot predict the likelihood or compliance
costs of such regulations.
Air Particulate Matter
In July 1997, the 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 conducting a three-
year study of fine particulate ambient air levels. 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.
47
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 has been appealed, is
unknown at this time, however, it is likely to delay the
implementation of new NOx regulations by the 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 remanded the EPA's more stringent ambient air
quality standard for ozone. The U.S. Supreme Court heard oral
arguments on the EPA's appeal of this decision on November 7,
2000. A final decision by the U.S. Supreme Court is expected in
the spring of 2001, 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.
To achieve the reductions proposed in the 1997 NOx reduction
program, 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 indicates that selective
catalytic reduction technology, as well as other changes, may be
required for some of the KCPL units. Currently, KCPL estimates
that additional capital expenditures to comply with these
regulations could range from $40 million to $60 million over a
period of a few years. Operations and maintenance expenses could
also increase by more than $2.5 million per year. These capital
expenditure estimates do not include the costs of the new air
quality control equipment being installed at Hawthorn No. 5, a
unit currently being rebuilt. The new air control equipment
designed to meet current environmental standards will also comply
with the proposed requirements discussed above.
KCPL continues to refine its 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.
The State of Missouri is currently developing a State
Implementation Plan (SIP) for NOx reduction. As currently
proposed, KCPL would not incur significant additional costs to
comply with the State of Missouri SIP. In May 2000, the Missouri
Air Conservation Commission approved NOx regulations requiring
compliance with a rate of 0.35 lbs. NOx / mmBtu of heat input for
western Missouri where KCPL's Missouri power plants are located.
KCPL does not anticipate that it will incur significant
additional costs to comply with these new regulations.
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. This treaty has not been submitted to the U.S.
Senate. If future reductions of electric utility CO2 emissions
are eventually required, the financial impact upon KCPL would be
substantial.
Coal Contracts
KCPL's share of coal purchased under existing contracts was $31.1
million in 2000, $33.3 million in 1999 and $37.1 million in 1998.
Under these coal contracts, KCPL's remaining share of purchase
48
commitments totals $86.6 million. Obligations for the years 2001
through 2003, based on estimated prices for those years, total $36.1
million, $33.8 million, and $16.7 million, respectively. The
remainder of KCPL's coal requirements will be fulfilled through spot
market purchases.
Leases
KCPL has a transmission line lease with another utility whereby, with
FERC approval, the rental payments can be increased by the lessor. If
this occurs and KCPL is able to secure an alternative transmission
path, KCPL can cancel the lease. Commitments under this lease total
$1.9 million per year and $46.7 million over the remaining life of the
lease if it is not canceled.
Consolidated expense for other leases, including railcars, computer
equipment, buildings, transmission line and other items, was about
$23 million per year for the last three years. The remaining rental
commitments under these leases total $176.7 million ending in 2028.
Obligations for the years 2001 through 2005 average $16 million per
year. Capital leases are not material and are included in these
amounts.
As the managing partner of three jointly-owned generating units, KCPL
has entered into leases for railcars to serve those units. KCPL has
reflected the entire lease commitment in the above amounts although
about $1.8 million per year ($28.1 million total) will be reimbursed
by the other owners.
KCPL has a renewable lease agreement for a combustion turbine that
expires in October 2001. The lease may be extended if both KCPL and
the lessor agree to extend it. Commitments under this lease total
approximately $2.3 million through October 2001.
Purchased Capacity Commitments
KCPL purchases capacity from other utilities and nonutility suppliers.
Purchasing capacity provides the option to purchase energy if needed
or when market prices are favorable. This can be a cost-effective
alternative to new construction. As of December 31, 2000, contracts
to purchase capacity totaled $125.7 million through 2016. KCPL
capacity purchases totaled $25.4 million in 2000 and $25.9 million
during 1999 and 1998. For the years 2001 through 2005, these
commitments average $17 million per year. Capacity sales contracts to
supply municipalities in the years 2001 through 2005 average $11
million. For the next five years, net capacity contracts average
about 5% of KCPL's 2000 total available capacity.
SEL entered into an option agreement that gives them the right to
purchase specified amounts of electricity at a fixed rate of $21.00
per mwh for 2001. The cost of the option, which has been included in
purchased power on the consolidated statements of income, totaled $7.1
million in 2000 and is projected to be $7.1 million in 2001.
SEL Purchased Power Energy Commitments
SEL has entered into agreements to purchase electricity at various
fixed prices to meet supply requirements for 2001 through 2005.
Commitments under these agreements total $73.6 million in 2001 and
average $55 million per year in 2002 through 2005.
Home Service Solutions Inc. Debt Guarantee
During 2000, R.S. Andrews Enterprises, Inc. (RSAE), 49%-owned by HSS,
entered into a bank credit agreement which as of February 22, 2001,
had an outstanding loan balance of $13.0 million. The
49
agreement is collateralized by the common stock shares of a major RSAE
shareholder. As secondary assurance to the lender, HSS guaranteed the loan;
however, HSS' wholly owned subsidiary, Worry Free Service, Inc., and
its assets are not subject to the guarantee.
Guaranteed Savings Energy Management Agreements
KCPL is contingently liable for guaranteed energy savings under
agreements with several customers. KCPL has entered agreements
guaranteeing an aggregate value of approximately $16.5 million over a
period of five to ten years. In most cases a subcontractor would
indemnify KCPL for any payments made by KCPL under these guarantees.
6. EQUITY METHOD INVESTMENTS
Equity method investments, excluding affordable housing limited
partnerships, consist of the following:
Common Goodwill included
Ownership Carrying Value (1) in Carrying Value
Percentage December 31 December 31
Name of Company 2000 1999 2000 1999 2000 1999
(thousands)
DTI Holdings, Inc. 47% 47% 0 $13,989 0 0
Strategic Energy, LLC (2) 56% 0 7,306 0 $ 5,362
Patrick KLT Gas, LLC 50% 0% $21,744 0 0 0
R.S. Andrews
Enterprises, Inc. 49% 49% 6,750 25,589 0 6,490
Other Various 1,786 4,363 0 0
Total equity method
investments $30,280 $51,247 0 $11,852
(1) In 1999, Carrying Value is net of amortization of goodwill. Such
amortization is over 15 to 40 years.
(2) KLT Energy Services held less than 50% of the voting common stock
in 1999.
The non-public, unaudited combined summarized financial information
supplied to us by companies in which the consolidated company has an
equity investment is as follows:
December 31 2000 1999
(thousands)
Current assets $ 36,368 $129,109
Non-current assets 498,133 397,418
Total Assets $534,501 $526,527
Current liabilities $ 74,616 $ 68,239
Non-current liabilities 460,786 414,846
Equity (1) (901) 43,442
Total Liabilities and Equity $534,501 $526,527
Revenues $153,211 $193,171
Costs and expenses 225,665 245,038
Net Loss $(72,454) $(51,867)
(1) Includes DTI's $45 million of convertible preferred stock held by
KLT Telecom.
50
December 31 2000 1999
(thousands)
Consolidated share of net
loss $(36,707) $(23,301)
Less: DTI losses not
recorded by KLT Telecom
after the investment was
reduced to zero (18,768) 0
Consolidated net loss
recorded (17,939) (23,301)
Affordable housing equity
losses (1,502) (1,650)
Total losses from equity
investments $(19,441) $(24,951)
7. SEGMENT AND RELATED INFORMATION
The Company's reportable segments are strategic business units. KCPL
includes the regulated electric utility and unallocated corporate
charges. KLT Inc. and HSS are holding companies for various
unregulated business ventures.
The summary of significant accounting policies applies to all of the
segments. The Company evaluates performance based on net income. The
Company eliminates all intersegment sales and transfers.
The tables below reflect summarized financial information concerning
the Company's reportable segments.
2000 1999 1998
KCPL (millions)
Operating revenues $ 952.0 $ 897.4 $ 939.9
Fuel expense (153.1) (129.3) (143.3)
Purchased power expense (105.7) (94.7) (63.6)
Other (a) (382.4) (352.5) (354.3)
Depreciation and depletion (124.3) (118.4) (115.7)
Gain (Loss) on property 3.5 0 0.8
Other income and expenses (16.3) (8.8) (16.2)
Interest charges (62.8) (56.4) (58.3)
Income taxes (52.9) (50.4) (73.1)
Cumulative effect of changes
in pension accounting 30.1 0 0
Net income $ 88.1 $ 86.9 $ 116.2
KLT Inc.
Operating revenues $ 160.1 $ 20.8 $ 32.1
Purchased power expense (84.4) 0 0
Other (a) (59.2) (31.0) (48.5)
Depreciation and depletion (6.4) (3.3) (1.8)
Gain (Loss) on property 109.0 (1.2) (2.2)
Losses from equity
investments (12.8) (21.0) (11.7)
Other income and expenses (0.4) 1.1 10.0
Interest charges (12.9) (11.9) (13.5)
Income taxes (8.9) 45.2 40.2
Net income $ 84.1 $ (1.3) $ 4.6
51
2000 1999 1998
HSS (millions)
Operating revenues $ 3.8 $ 3.3 $ 0.7
Other (a) (5.5) (3.8) (0.5)
Depreciation and depletion (1.7) (1.6) (0.4)
Gain (Loss) on property (13.4) 0 0
Losses from equity
investments (6.6) (3.9) 0
Other income and expenses 1.3 0.3 0
Income taxes 8.6 2.0 0.1
Net income $ (13.5) $ (3.7) $ (0.1)
Consolidated
Operating revenues $1,115.9 $ 921.5 $ 972.7
Fuel expense (153.1) (129.3) (143.3)
Purchased power expense (190.1) (94.7) (63.6)
Other (a) (447.1) (387.3) (403.3)
Depreciation and depletion (132.4) (123.3) (117.9)
Gain (Loss) on property 99.1 (1.2) (1.4)
Losses from equity
investments (19.4) (24.9) (11.7)
Other income and expenses (15.4) (7.4) (6.2)
Interest charges (75.7) (68.3) (71.8)
Income taxes (53.2) (3.2) (32.8)
Cumulative effect of changes
in pension accounting 30.1 0 0
Net income $ 158.7 $ 81.9 $ 120.7
(a) Other includes gas purchased and production expenses, other
operating, maintenance and general tax expenses.
KCPL KLT Inc. HSS Consolidated
2000 (millions)
Assets $2,980.9 $ 287.7 $25.3 $3,293.9
Net equity method
investments 0 23.5 6.8 30.3
Capital and investment
expenditures 406.1 75.6 0.3 482.0
1999
Assets $2,672.3 $ 267.8 $50.0 $2,990.1
Net equity method
investments 0 25.6 25.6 51.2
Capital and investment
expenditures 184.6 61.3 25.7 271.6
1998
Assets $2,677.4 $ 310.8 $24.2 $3,012.4
Net equity method
investments 0 56.7 11.1 67.8
Capital and investment
expenditures 126.2 56.9 14.2 197.3
8. NATURAL GAS PROPERTY, INTANGIBLE PROPERTY AND GOODWILL
Natural gas property and equipment included in the Gas property and
investments totaled $18.1 million, net of accumulated depreciation of
$1.1 million, in 2000 and $87.0 million, net of accumulated
depreciation of $5.1 million in 1999. Included in the natural gas
property and equipment were intangible drilling costs of $7.0 million
in 2000 and $23.6 million in 1999.
52
Electric utility plant on the consolidated balance sheets included
intangible computer software of $51.2 million, net of accumulated
depreciation of $21.7 million, in 2000 and $50.7 million, net of
accumulated depreciation of $13.1 million, in 1999.
KLT Inc. has used purchase accounting for its full or partial
acquisitions of other companies. The difference between the purchase
price and KLT Inc.'s share of the identifiable net assets acquired has
been classified as goodwill and is amortized on a straight-line basis
for 15 years. At December 31, 2000, goodwill totaled $11.5 million
net of $0.7 million of amortization.
9. RECEIVABLES
December 31
2000 1999
(thousands)
KCPL Receivable Corporation $ 48,208 $ 29,705
Other Receivables 67,148 41,843
Receivables $115,356 $ 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. Accounts receivable sold under the agreement totaled
$108.2 million at December 31, 2000 and $89.7 million at December 31,
1999.
Administrative costs associated with the sale of customer accounts
receivable of approximately $4.3 million for the year ended December
31, 2000 and approximately $3.5 million for each of the years ended
December 31, 1999 and 1998, were included in Other income and
expenses.
The other receivables consist primarily of receivables from partners
in jointly-owned electric utility plants, bulk power sales receivables
and accounts receivable held by subsidiaries.
10. SHORT-TERM BORROWINGS AND SHORT-TERM BANK LINES OF CREDIT
Short-term borrowings consist of funds borrowed from banks or through
the sale of commercial paper as needed. The weighted-average interest
rate on the $55.6 million of commercial paper outstanding as of
December 31, 2000, was 7.1%. Under minimal fee arrangements, KCPL's
unused short-term bank lines of credit totaled $199.4 million as of
December 31, 2000, and $61.0 million as of December 31, 1999.
KLT Gas' short-term revolving note payable to a bank that provided
borrowing capacity of up to $25 million for natural gas development
activities expired during 2000 and was not renewed. Under this note,
KLT Gas had borrowings at December 31, 1999 of $24.7 million at an
interest rate of 8.5%.
53
11. COMMON STOCK EQUITY, PREFERRED STOCK, REDEEMABLE PREFERRED STOCK
AND MANDATORILY REDEEMABLE PREFERRED SECURITIES
Common Stock Equity
KCPL has shares of common stock registered with the Securities and
Exchange Commission for a Dividend Reinvestment and Stock Purchase
Plan (the Plan). The Plan allows for the purchase of common shares by
reinvesting dividends or making optional cash payments. KCPL
currently purchases shares for the Plan on the open market.
KCPL held 60,841 shares as of December 31, 2000 of its common stock to
be used for future distribution and 10,706 shares as of December 31,
1999. The cost of these shares is included in other investments and
nonutility property on the consolidated balance sheets.
The Restated Articles of Consolidation contain a restriction related
to the payment of dividends in the event common equity falls to 25% of
total capitalization. If preferred stock dividends are not declared
and paid when scheduled, KCPL could not declare or pay common stock
dividends or purchase any common shares. If the unpaid preferred
stock dividends equal four or more full quarterly dividends, the
preferred shareholders, voting as a single class, could elect members
to the Board of Directors.
Preferred Stock and Redeemable Preferred Stock
Scheduled mandatory sinking fund requirements for the redeemable
4% Cumulative Preferred Stock are 1,600 shares per year. Shares
outstanding totaled 6,357 as of December 31, 2000, and 7,957 as of
December 31, 1999. Shares held by KCPL to meet future sinking fund
requirements totaled 5,734 as of December 31, 2000, and 7,334 as of
December 31, 1999. The cost of the shares held is reflected as a
reduction of the capital account.
As of December 31, 2000, 0.4 million shares of $100 par Cumulative
Preferred Stock, 1.6 million shares of Cumulative No Par Preferred
Stock and 11 million shares of no par Preference Stock were
authorized. KCPL has the option to redeem the $39.1 million of issued
Cumulative Preferred Stock at prices approximating par or stated
value.
Mandatorily Redeemable Preferred Securities
In 1997, KCPL Financing I (Trust) 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. The terms and interest payments
on these debentures correspond to the terms and dividend payments on
the preferred securities. KCPL deducts these payments for tax
purposes. KCPL may elect to defer interest payments on the debentures
for a period up to 20 consecutive quarters, causing dividend payments
on the preferred securities to be deferred as well. In case of a
deferral, interest and dividends will continue to accrue, along with
quarterly compounding interest on the deferred amounts. KCPL may
redeem all or a portion of the debentures after March 31, 2002. If
KCPL redeems all or a portion of the debentures, the Trust must redeem
an equal amount of preferred securities at face value plus accrued and
unpaid distributions. The back-up undertakings in the aggregate
provide a full and unconditional guarantee of amounts due on the
preferred securities.
54
12. LONG-TERM DEBT
General Mortgage Bonds and Unsecured Notes
KCPL is authorized to issue mortgage bonds under the General Mortgage
Indenture and Deed of Trust dated December 1, 1986, as supplemented.
The Indenture creates a mortgage lien on substantially all utility
plant. Mortgage bonds secure $444.8 million of medium-term notes and
revenue refunding bonds. KCPL is prohibited from issuing additional
general mortgage bonds while its unsecured medium-term notes are
outstanding and remain unsecured.
During 2000, KCPL issued $200 million of unsecured, floating rate
medium-term notes and $250 million of unsecured senior notes.
KCPL is authorized to issue an additional $150 million of debt
securities under its shelf registration statement dated November 21,
2000.
Subsidiary Obligations
During 2000, KLT Inc. renegotiated its existing $125 million bank
credit agreement collateralized by the capital stock of KLT Inc.'s
direct subsidiaries from short-term to a three-year revolving credit
agreement that matures in 2003. At December 31, 2000, KLT Inc. had
repaid amounts borrowed during 2000 under the new agreement. KLT Inc.
had borrowings at December 31, 1999, of $61 million under its previous
bank credit agreement with a weighted-average interest rate of 7.7%
which was classified as current maturities of long-term debt in the
consolidated balance sheet.
The affordable housing notes are collateralized by the affordable
housing investments. Most of the notes also require the greater of
15% of the outstanding note balances or the next annual installment to
be held as cash, cash equivalents or marketable securities. The
equity securities held as collateral for these notes are included in
other investments and nonutility property on the consolidated balance
sheets.
Scheduled Maturities
Consolidated long-term debt maturities for the years 2001 through 2005
are $94 million, $238 million, $29 million, $59 million and $293
million, respectively.
13. DERIVATIVE FINANCIAL INSTRUMENTS
As of December 31, 2000 and 1999, KCPL had entered into two interest
rate swap agreements to limit the interest rate on $30 million of long-
term debt. The swap agreements mature in 2001 and effectively fix the
interest rate to a weighted-average rate of 3.88%. In 2000, KCPL also
entered into three interest rate cap agreements to limit the exposure
to increases in the interest rate on the $200 million of unsecured
medium-term notes. The cap agreements mature in 2002 and limit the
interest rate to a maximum of 7.65%. As of December 31, 1998, KLT Inc.
had entered into an interest rate swap agreement to limit the interest
rate on $40 million of its variable-rate bank credit agreement. This
swap agreement matured in 1999 and was not renewed.
These swap and cap agreements are with highly rated financial
institutions and simply limit the Company's exposure to increases in
interest rates. They do not subject the Company to any material
credit or market risks. The fair value of these agreements is
immaterial and is not reflected in the
55
financial statements. Although derivatives are an integral part of
the Company's interest rate management, the effect on interest expense
for each of the last three years was not material.
Gas Market Price Hedge Instruments
KLT Gas' risk management policy is to use firm sales agreements or
financial hedge instruments to mitigate its exposure to market price
fluctuations on approximately 85% of its daily natural gas production.
Prior to the sales of producing natural gas properties in 2000 (see
Note 2 - Supplemental Cash Flow Information and Sales of KLT Gas
Properties), KLT Gas had two firm sales agreements each covering 5,000
mmBtu (equivalent to approximately 5 Million Cubic Feet) of natural
gas per day through February 2001 at rates of $2.59 and $2.61 per
mmBtu, respectively. These contracts are forward contracts settled by
physical delivery and KLT Gas records revenues on the covered sales
using the rates under the agreements. Additionally, KLT Gas had
entered financial hedge instruments covering additional mmBtu of
natural gas production through April 2002. These financial
instruments have weighted-average rates of $2.71 to $3.07 per mmBtu.
After the sales of producing natural gas properties in 2000, KLT Gas
retained production or entered into physical gas purchase agreements
to fulfill the firm commitment contracts. KLT Gas also unwound the
financial instruments to reduce its hedge position to approximately
85% of the remaining gas production. The net present value cost of
the physical gas purchase agreements to fulfill the firm commitment
contracts and to unwind the financial hedge instruments approximated
$24.9 million.
After the 2000 sales, the financial hedge instruments, covering
approximately 85% of the remaining natural gas production, total 5,000
mmBtu per day in January 2001 and decrease to 3,000 mmBtu per day by
April 2002. The weighted-average rate ranges from $2.71 to $3.07 per
mmBtu. The effect of the remaining hedge instruments is calculated by
comparing the rate per the agreements to the New York Mercantile
Exchange (NYMEX) natural gas rate as of the beginning of the month,
which for December 2000, was $6.02 per mmBtu. KLT Gas accounts for
the difference as an adjustment to the related revenues. For its
remaining gas sales not covered by these agreements, KLT Gas sells at
prevailing market prices.
Accounting for Derivative Instruments and Hedging
On January 1, 2001, the Company adopted FASB 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended. FASB 133
requires that every derivative instrument be recorded on the balance
sheet as an asset or liability measured at its fair value and that
changes in the fair value be recognized currently in earnings unless
specific hedge accounting criteria are met.
FASB 133 requires that as of the date of initial adoption, the
difference between the fair market value of derivative instruments
recorded on the balance sheet and the previous carrying amount of
those derivatives be reported in net income or other comprehensive
income, as appropriate, as a cumulative effect of a change in
accounting principle. The cumulative effect of a change in accounting
principle that is estimated to be recorded in the first quarter 2001
is an approximate $0.2 million reduction in the income statement and a
$44.2 million increase in other comprehensive income. This transition
adjustment was primarily the result of the two interest rate swaps and
the renewal option on those swaps, three interest rate caps and five
commodity swap agreements reflected in the income statement and one
commodity purchase option reflected in other comprehensive income.
The estimated impact of FASB 133 on the consolidated balance sheet is
not expected to be material.
56
KCPL has eight capacity contracts that it does not consider to be
derivatives as defined by FASB 133. A definitive interpretation from
FASB's Derivatives Implementation Group could change KCPL's current
assessment and could increase the volatility of the Company's future
earnings.
14. JOINTLY-OWNED ELECTRIC UTILITY PLANTS
KCPL's share of jointly-owned electric utility plants as of December
31, 2000, is as follows (in millions of dollars):
Wolf Creek LaCygne Iatan
Unit Units Unit
KCPL's share 47% 50% 70%
Utility plant in service $ 1,352 $ 316 $ 252
Estimated accumulated depreciation
(production plant only) $ 496 $ 204 $ 162
Nuclear fuel, net $ 31 $ 0 $ 0
KCPL's accredited capacity-megawatts 550 681 469
Each owner must fund its own portion of the plant's operating expenses
and capital expenditures. KCPL's share of direct expenses is included
in the appropriate operating expense classifications in the income
statement.
15. KLT TELECOM INC. PURCHASE OF AN ADDITIONAL OWNERSHIP INTEREST IN
DTI HOLDINGS, INC.
On February 1, 2001, KLT Telecom purchased for about $5 million
approximately 87% of DTI's outstanding warrants issued in connection
with DTI's 12 1/2% Series B Senior Discount Notes.
On September 27, 2000, KLT Telecom entered a conditional agreement to
purchase shares of the common stock of DTI Holdings, Inc. (DTI) held
by Richard Weinstein. On December 26, 2000, the agreement was amended
and restated and further amended as of January 18, 2001. Under the
amended agreement, on February 8, 2001, KLT Telecom purchased from
Weinstein approximately 67% of his outstanding shares of common stock
(Initial Shares) at an aggregate purchase price of about $34 million.
After this transaction, KLT Telecom owns 84% of DTI and will
consolidate DTI.
If, within twelve months of the Initial Shares closing, KLT Telecom or
DTI sells more than 10% of the fully diluted shares of DTI's common
stock to a financial investor or more than 15% of the fully diluted
shares to a non-financial investor at a price per share higher than
the price per share paid to Weinstein at the Initial Shares closing,
then Weinstein shall have the right to receive from KLT Telecom as
additional consideration for the Initial Shares, an amount equal to
the difference in price per share (Clawback Value) times the number of
shares sold by Weinstein at the Initial Shares closing.
Under the purchase agreement, Weinstein will resign as chairman,
president and chief executive officer and will retain just over 15% of
the fully diluted ownership and a seat on the DTI board. Also, the
parties have granted put and call options that grant Weinstein the
right to sell and KLT Telecom the right to buy Weinstein's remaining
ownership of DTI (Remaining Shares). The put option allows Weinstein
to sell his Remaining Shares to KLT Telecom during a period beginning
September 1, 2003, and ending August 31, 2005, and the call option
allows KLT Telecom to purchase his Remaining Shares during a period
beginning September 1, 2005, and ending September 1, 2007. The
Remaining Shares shall have an aggregate exercise price in an amount
equal to the fair market value of the
57
Remaining Shares as of the date of exercise of the applicable option
as determined through an appraisal process as specified in the amended
agreement. Not withstanding the appraisal process, the Remaining Shares
exercise price shall have an aggregate floor amount of $15 million plus the
amount, if any, equal to the Clawback Value times the number of
Remaining Shares provided Weinstein has not sold or disposed of any of
the Remaining Shares.
16. TERMINATION OF PLANNED MERGER WITH WESTERN RESOURCES
On January 2, 2000, the Company's Board of Directors unanimously voted
to terminate its Amended and Restated Agreement and Plan of Merger,
dated as of March 18, 1998, with Western Resources. The Board of
Directors acted pursuant to a provision of the parties' Merger
Agreement that permitted either party to terminate the Merger
Agreement if it was not consummated on or before December 31, 1999.
The termination was effective immediately.
17. PROPOSED INTERNAL REVENUE SERVICE ADJUSTMENT - CORPORATE OWNED
LIFE INSURANCE
In February 2001, KCPL received a Notice of Proposed Adjustment from
the Internal Revenue Service (IRS) disallowing interest deductions
associated with KCPL's corporate owned life insurance (COLI) program.
Based on the proposed adjustment and a district court case decided on
February 20, 2001, KCPL recorded in February 2001 a $12.7 million
charge to fourth quarter 2000 earnings. This charge includes the
Federal and states income tax impact of the disallowance of interest
deductions on COLI loans and assessed interest on the disallowance for
tax years 1994 to 1998.
This issue is an IRS Coordinated Issue, and thus has been raised and
not finalized for many of the largest companies in the country. Three
companies have lost the issue in two different U.S. District Courts
and one in U.S. Tax Court. The decisions have been appealed or will
be appealed to circuit courts of appeals. While KCPL decided to
record the above $12.7 million increase in taxes because of the
unfavorable District Court decisions, KCPL still plans to vigorously
contest the IRS's disallowance including exhausting all appeals
available. KCPL believes it has complied with all applicable tax laws
and regulations.
18. QUARTERLY OPERATING RESULTS (UNAUDITED)
Quarter
1st 2nd 3rd 4th
(millions)
2000
Operating revenues $199.3 $290.9 $378.4 $247.3
Operating income 22.0 63.3 142.2 64.8
Income before cumulative effect
of changes in accounting
principles 0.6 26.7 81.6 19.7
Net income 30.7 26.7 81.6 19.7
Basic and diluted earnings per
common share before cumulative
effect of changes in accounting
principles 0 $ 0.43 $ 1.31 $ 0.31
Basic and diluted earnings per
common share $ 0.49 $ 0.43 $ 1.31 $ 0.31
Basic and diluted earnings per common share in the third and
fourth quarter of 2000, include $0.62 and $0.48, respectively,
from the sales of gas properties.
58
Quarter
1st 2nd 3rd 4th
(millions)
1999
Operating revenues $195.4 $222.3 $305.4 $198.4
Operating income 30.5 53.9 78.3 23.1
Net income 11.9 25.1 37.5 7.4
Basic and diluted earnings per
common share $ 0.18 $ 0.39 $ 0.59 $ 0.11
The quarterly data is subject to seasonal fluctuations with peak
periods occurring during the summer months.
Certain reclassifications have been made to previously reported
amounts in the 2000 and 1999 Form 10-Q's. In 2000, the Company
modified its consolidated statements of income to report the
unregulated subsidiaries' operations in operating revenues and
operating expenses. Previously, the unregulated subsidiaries
were not included in operating income. The previously reported
operating revenue amounts for 2000 were $190.3 million, $228.0
million, and $324.4 million for the first, second, and third
quarter, respectively. In 1999, the amounts were $190.7 million,
$216.9 million, $300.7 million, and $189.1 million for the first,
second, third and fourth quarter, respectively. The previously
reported operating income amounts for 2000 were $20.0 million,
$37.2 million and $61.7 million for first, second, and third
quarter, respectively. In 1999, the amounts were $25.9 million,
$41.0 million, $54.0 million, and $23.0 million for first,
second, third, and fourth quarter, respectively. The
reclassifications do not affect income before cumulative effect
of changes in accounting principles, net income, or earnings per
common share.
59
Report of Independent Accountants
To the Shareholders and Board of Directors
Kansas City Power & Light Company
We have audited the consolidated financial statements of Kansas
City Power & Light Company and Subsidiaries listed in the index
appearing under Item 14 on page 62. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Kansas City Power & Light Company and Subsidiaries at
December 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 3 to the consolidated financial statements,
the Company changed its method of accounting for pensions in
2000.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Kansas City, Missouri
February 20, 2001
60
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
See General Note to Part III.
Executive Officers
See Part I, page 8, entitled "Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
See General Note to Part III.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See General Note to Part III.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
General Note To Part III
Pursuant to General Instruction G to Form 10-K, the other information
required by Part III (Items 10, 11, and 12) of Form 10-K not disclosed
above will be either (i) incorporated by reference from the Definitive
Proxy Statement for KCPL's 2001 Annual Meeting of Shareholders, to be
filed with the Securities and Exchange Commission not later than
March 31, 2001, or (ii) included in an amendment to this report filed
with the Commission on Form 10-K/A.
61
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page
No.
Financial Statements
a. Consolidated Statements of Income for the years ended 29
December 31, 2000, 1999 and 1998
b. Consolidated Balance Sheets - December 31, 2000 and 1999 30
c. Consolidated Statements of Capitalization - December 31, 2000 31
and 1999
d. Consolidated Statements of Cash Flows for the years ended 32
December 31, 2000, 1999 and 1998
e. Consolidated Statements of Comprehensive Income and 33
Consolidated Statements of Retained Earnings for the years
ended December 31, 2000, 1999 and 1998
f. Notes to Consolidated Financial Statements 34
g. Report of Independent Accountants 60
Exhibits
Exhibit
Number Description of Document
- ------- -----------------------
3-a *Restated Articles of Consolidation of KCPL dated as of
May 5, 1992 (Exhibit 4 to Registration Statement,
Registration No. 33-54196).
3-b By-laws of KCPL, as amended and in effect on November 7, 2000.
4-a *General Mortgage and Deed of Trust dated as of December 1, 1986,
between KCPL and UMB Bank, n.a. (formerly United Missouri Bank)
of Kansas City, N.A., Trustee (Exhibit 4-bb to Form 10-K for the
year ended December 31, 1986).
4-b *Fourth Supplemental Indenture dated as of February 15,
1992, to Indenture dated as of December 1, 1986 (Exhibit 4-y
to Form 10-K for year ended December 31, 1991).
4-c *Fifth Supplemental Indenture dated as of September 15,
1992, to Indenture dated as of December 1, 1986 (Exhibit 4-a
to Form 10-Q dated September 30, 1992).
4-d *Sixth Supplemental Indenture dated as of November 1,
1992, to Indenture dated as of December 1, 1986 (Exhibit 4-z
to Registration Statement, Registration No. 33-54196).
4-e *Seventh Supplemental Indenture dated as of October 1,
1993, to Indenture dated as of December 1, 1986 (Exhibit 4-a
to Form 10-Q dated September 30, 1993).
4-f *Eighth Supplemental Indenture dated as of December 1,
1993, to Indenture dated as of December 1, 1986 (Exhibit 4 to
Registration Statement, Registration No. 33-51799).
4-g *Ninth Supplemental Indenture dated as of February 1,
1994, to Indenture dated as of December 1, 1986 (Exhibit 4-h
to Form 10-K for year ended December 31, 1993).
4-h *Tenth Supplemental Indenture dated as of November 1,
1994, to Indenture dated as of December 1, 1986 (Exhibit 4-I
to Form 10-K for year ended December 31, 1994).
4-i *Resolution of Board of Directors Establishing 3.80%
Cumulative Preferred Stock (Exhibit 2-R to Registration
Statement, Registration No. 2-40239).
62
4-j *Resolution of Board of Directors Establishing 4%
Cumulative Preferred Stock (Exhibit 2-S to Registration
Statement, Registration No. 2-40239).
4-k *Resolution of Board of Directors Establishing 4.50%
Cumulative Preferred Stock (Exhibit 2-T to Registration
Statement, Registration No. 2-40239).
4-l *Resolution of Board of Directors Establishing 4.20%
Cumulative Preferred Stock (Exhibit 2-U to Registration
Statement, Registration No. 2-40239).
4-m *Resolution of Board of Directors Establishing 4.35%
Cumulative Preferred Stock (Exhibit 2-V to Registration
Statement, Registration No. 2-40239).
4-n *Indenture for Medium-Term Note Program dated as of
February 15, 1992, between KCPL and The Bank of New York
(Exhibit 4-bb to Registration Statement, Registration No.
33-45736).
4-o *Indenture for Medium-Term Note Program dated as of
November 15, 1992, between KCPL and The Bank of New York
(Exhibit 4-aa to Registration Statement, Registration No.
33-54196).
4-p *Indenture for Medium-Term Note Program dated as of
November 17, 1994, between KCPL and The Bank of New York
(Exhibit 4-s to Form 10-K for year ended December 31, 1994).
4-q *Indenture for Medium-Term Note Program dated as of
December 1, 1996, between KCPL and The Bank of New York
(Exhibit 4 to Registration Statement, Registration No.
333-17285).
4-r *Amended and Restated Declaration of Trust of KCPL
Financing I dated April 15, 1997 (Exhibit 4-a to Form 10-Q
for quarter ended March 31, 1997).
4-s *Indenture dated as of April 1, 1997 between the Company
and The First National Bank of Chicago, Trustee (Exhibit 4-b
to Form 10-Q for quarter ended March 31, 1997).
4-t *First Supplemental Indenture dated as of April 1, 1997
to the Indenture dated as of April 1, 1997 between the
Company and The First National Bank of Chicago, Trustee
(Exhibit 4-c to Form 10-Q for quarter ended March 31, 1997).
4-u *Preferred Securities Guarantee Agreement dated
April 15, 1997 (Exhibit 4-d to Form 10-Q for quarter ended
March 31, 1997).
4-v *Indenture dated as of December 1, 2000, between Kansas
City Power & Light Company and The Bank of New York (Exhibit
4-a to Report on Form 8-K dated December 18, 2000).
10-a *Copy of Wolf Creek Generating Station Ownership Agreement
between Kansas City Power & Light Company, Kansas Gas and
Electric Company and Kansas Electric Power Cooperative, Inc.
(Exhibit 10-d to Form 10-K for the year ended December 31,
1981).
10-b *Long-Term Incentive Plan (Exhibit 28 to Registration
Statement, Registration 33-42187).
10-c Annual Incentive Compensation Plan, dated February 2001.
10-d *Copy of Indemnification Agreement entered into by KCPL with
each of its officers and directors (Exhibit 10-f to Form 10-K
for year ended December 31, 1995).
10-e Copy of Restated Severance Agreement dated January 2000
entered into by KCPL with certain of its executive officers.
10-f Copy of Kansas City Power & Light Company Supplemental
Executive Retirement Plan Amended and Restated November 1,
2000.
10-g *Copy of Nonqualified Deferred Compensation Plan for KCPL
executives (Exhibit 10-b to form 10-Q for period ended
March 31, 2000).
10-h *Copy of Employment Agreement between KLT Inc. and Gregory J.
Orman (Exhibit 10-c to form 10-Q for period ended March 31,
2000).
10-i *Copy of KLT Inc. Incentive Compensation Plan for Employees
and Directors (Exhibit 10-d to form 10-Q for period ended
March 31, 2000).
10-j Copy of Amendment No. 1 to KLT Inc. Incentive
Compensation Plan dated as of November 16, 2000.
10-k Copy of Amendment No. 2 to KLT Inc. Incentive
Compensation Plan dated as of January 25, 2001.
10-l Copy of KLT Gas Inc. Incentive Compensation Plan
effective January 1, 2001.
10-m *Copy of Railcar Lease dated as of April 15, 1994, between
Shawmut Bank Connecticut, National Association, and KCPL
(Exhibit 10 to Form 10-Q for period ended June 30, 1994).
63
10-n *Copy of Railcar Lease dated as of January 31, 1995, between
First Security Bank of Utah, National Association, and KCPL
(Exhibit 10-o to Form 10-K for year ended December 31, 1994).
10-o *Copy of Lease Agreement dated as of October 18, 1995,
between First Security Bank of Utah, N.A., and KCPL (Exhibit
10 to Form 10-Q for period ended September 30, 1995).
10-p *Railcar Lease dated as of September 8, 1998, with CCG Trust
Corporation (Exhibit 10(b) to Form 10-Q for period ended
September 30, 1998).
10-q *Purchase and Sale Agreement dated October 29, 1999 between
KCPL and Kansas City Power & Light Receivables Company
(Exhibit 10-m to Form 10-K for year ended December 31, 1999).
10-r *Copy of Second Amended and Restated Credit Agreement among
KLT Inc., Bank One, NA, as Agent, Second Amended and Restated
Credit Agreement among KLT Inc., Bank One, NA, as Agent,
Commerzbank Aktiengesellschaft, New York and Grand Cayman
Branches, as Syndication Agent, Westdeutsche Landesbank
Girozentrale, New York Branch, as Documentation Agent, and
Various Lenders, dated June 30, 2000 (Exhibit 10 to form 10-Q
for period ended June 30, 2000).
10-s Copy of Amendment No. 2 to Credit Agreement dated as of
January 23, 2001, among KLT Inc., Bank One, NA, as Agent,
Commerzbank Aktiengesellschaft, New York and Grand Cayman
Branches, as Syndication Agent, Westdeutsche Landesbank
Girozentrale, New York Branch, as Documentation Agent, and
Various Lenders
10-t Copy of Demand Promissory Note and Pledge Agreement
between DTI Holdings, Inc. and KLT Telecom Inc. dated
February 1, 2001.
10-u Copy of Credit Agreement between KLT Telecom Inc. and
Digital Teleport Inc. dated February 21, 2001.
23-a Consent of Counsel.
23-b Consent of Independent Accountants-PricewaterhouseCoopers LLP.
24 Powers of Attorney.
* Filed with the Securities and Exchange Commission as exhibits to
prior registration statements (except as otherwise noted) and are
incorporated herein by reference and made a part hereof. The exhibit
number and file number of the documents so filed, and incorporated
herein by reference, are stated in parenthesis in the description of
such exhibit.
Copies of any of the exhibits filed with the Securities and Exchange
Commission in connection with this document may be obtained from KCPL
upon written request.
Reports on Form 8-K
A report on Form 8-K was filed with the Securities and Exchange
Commission on December 18, 2000, with attached documents in connection
the issuance of $250,000,000 aggregate principal amount of 7.125%
Senior Notes.
64
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in
the City of Kansas City, and State of Missouri on the 28th day of
February, 2001.
KANSAS CITY POWER & LIGHT COMPANY
By /s/Drue Jennings
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/Drue Jennings Chairman of the Board )
(Drue Jennings) (Principal Executive Officer) )
)
/s/Bernard J. Beaudoin President and Chief Executive )
(Bernard J. Beaudoin) Officer and Director )
)
/s/Neil Roadman Controller (Principal )
(Neil Roadman) Accounting Officer) )
)
David L. Bodde* Director )
)
William H. Clark* Director )
) February 28, 2001
Mark A. Ernst* Director )
)
W. Thomas Grant II* Director )
)
William K. HalI* Director )
)
William C. Nelson* Director )
)
Linda Hood Talbott* Director )
)
Robert H. West* Director )
)
*By /s/ Drue Jennings
(Drue Jennings)
Attorney-in-Fact*
Exhibit 3-b
KANSAS CITY POWER & LIGHT COMPANY
BY-LAWS
AS AMENDED NOVEMBER 7, 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
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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
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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.
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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 ten
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
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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.
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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.
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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
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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
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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
-14-
(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.
-15-
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-c
Kansas City Power & Light Company
Annual Incentive Plan
February 2001
OBJECTIVE
The Kansas City Power & Light Company (KCPL) executive
Annual Incentive Plan (AIP) is designed to reward sustained
value creation by providing competitive incentives for the
achievement of annual financial performance goals. By
providing market-competitive target awards, the plan
supports the attraction and retention of senior executive
talent critical to achieving the Company's strategic
business objectives.
Eligible participants include Executives and other Key
Employees of the Company, as approved by the Compensation
Committee (the Committee) of the Board of Directors.
PERFORMANCE GOAL
Performance under the plan will be measured by Economic
Value Added, or EVA(R). The awards paid under the plan will
be based on the achievement of the annual EVA goal approved
by the Committee. Annual EVA goals will be set as part of a
four-year cumulative EVA goal recommended by the Chief
Executive Officer and approved by the Committee. At the
beginning of the four-year period, the committee will
approve the four-year cumulative EVA goal and the EVA goal
for the first year of the plan.
KCPL's proposed cumulative EVA goal for 2001 through 2004 is
$51.6 million. The proposed annual EVA goal for KCPL for the
2001 annual incentive plan year is $2.4 million. Details
regarding these goals are presented in Appendix I.
In addition to the overall KCPL goal, separate EVA goals
will be established for the business units. Individual
incentive awards may reflect a mix of KCPL and business unit
performance; the actual mix for each executive will be
determined based on his role and contribution to the
organization.
TARGET AWARDS
Target award levels will be approved by the Committee and
will be set as a percentage of the executive's base salary.
Target levels will vary by participant and will reflect both
his organizational responsibilities and market-competitive
bonus levels. Competitive bonus levels will be determined
using a blend of general industry and utility industry data.
In order for bonuses to be paid at target levels, the annual
EVA performance goals - both at the corporate and business
level where applicable - must be met.
EXAMPLE
Position Salary Target Bonus % Target Bonus $
Vice President $150,000 30% $45,000
______________________
EVA(R) is a registered trademark of Stern Stewart and Company
Target award levels are presented in Appendix II.
AWARD THRESHOLD AND MAXIMUM
Awards will be subject to an established performance
threshold. If EVA performance falls below the threshold
level, no award will be payable for that portion of the
individual's award(1).
For plan year 2001, the threshold level of EVA performance
for KCPL will be negative $14 .7 million. If performance
falls below this level, no award for the corporate component
will be paid.
Awards will also be subject to a maximum level equal to 200%
of the target award. For plan year 2001, the bonus amount of
200% will be awarded when EVA reaches $19.6 million.
If performance falls below target but is above threshold,
the amount of the award payable will be below the target
award level. Similarly, performance above target will result
in an award higher than target level. The amount of the
award will be determined using the performance matrix
provided in Appendix III.
EXAMPLE
Actual
Award
Target Target 2001 2001 (% of Actual
Bonus Bonus EVA Actual Target Award
% $ Goal EVA Award) ($)
______ _______ ____ ______ ______ _______
30% $45,000 $2.4 $6.7 125% $56,250
million million
Using the performance matrix, the award paid for 2001 actual
EVA performance of $6.7 million would be 125% of target, or
$56,250 in the example above.
EXCEPTIONS
The cumulative EVA target established for the plan period is
fixed for the duration of the plan, and will only be changed
upon the approval of the Committee and the Board. Changes
will only be approved as a result of an acquisition,
divestiture or other significant event that, in the judgment
of the Committee, results in a change in the character of
the Company.
Each year, the Committee will approve the annual EVA target.
In establishing this target, the Committee will consider
both prior year EVA performance and the four-year cumulative
EVA goal. Should EVA performance in any year fall below
threshold, the Committee will consider setting the following
year's goal at a level sufficient to recover all or a
portion of the shortfall.
__________________
(1)For example, if KCPL falls below the threshold EVA level
while a business unit performs above its threshold, the
corporate (KCPL) component of the award would be zero.
Exhibit 10-e
[THE FOLLOWING IS A FORM OF RESTATED SEVERANCE AGREEMENT
ENTERED INTO WITH CERTAIN KCPL EXECUTIVES]
RESTATED SEVERANCE AGREEMENT
THIS RESTATED AGREEMENT is entered into as of the _____
day of January, 2000, by and between Kansas City Power &
Light Company, a Missouri corporation (the "Company"), and
_______________ ("Executive").
W I T N E S S E T H
WHEREAS, Executive currently serves as a key employee of
the Company and the services and knowledge of Executive are
valuable to the Company in connection with the management of
the Company's business; and
WHEREAS, the Board (as defined in Section 1) has
determined that it is in the best interests of the Company
and its shareholders to secure Executive's continued services
and to ensure Executive's continued dedication and
objectivity in the event of any threat or occurrence of, or
negotiation or other action that could lead to, or create the
possibility of, a Change in Control (as defined in Section 1)
of the Company, without concern as to whether Executive might
be hindered or distracted by personal uncertainties and risks
created by any such possible Change in Control, and to
encourage Executive's full attention and dedication to the
Company, the Board has authorized the Company to enter into
this Agreement.
WHEREAS, Executive and Company entered into a Severance
Agreement dated _________________, 19___, which was
subsequently amended on ________________, and Executive and
Company wish to restate into one document such Severance
Agreement and subsequent amendments1.
NOW, THEREFORE, for and in consideration of the premises
and the mutual covenants and agreements herein contained, the
Company and Executive hereby restate as 2follows:
1. DEFINITIONS. As used in this Agreement, the
following terms shall have the respective meanings set forth
below:
(a) "BENEFICIAL OWNER" has the same meaning set
forth in Rule 13d-3 under the Exchange Act.
(b) "BOARD" means the Board of Directors of the
Company.
(c) "CAUSE" means (1) a material breach by
Executive of those duties and responsibilities of
Executive which do not differ in any material respect
from the duties and responsibilities of Executive during
the 90-day period immediately prior to a Change in
Control (or, for purposes of Section
Page 1
3(d), during the 90-day period immediately preceding a
Potential Change in Control), other than as a result of
incapacity due to physical or mental illness, which is
demonstrably willful and deliberate on Executive's part,
committed in bad faith or without reasonable belief that
such breach is in the best interests of the Company, and
is not remedied in a reasonable period of time after
receipt of written notice from the Company specifying
such breach or (2) the commission by Executive of a
felony involving moral turpitude.
(d) "CHANGE IN CONTROL" means the occurrence of
one of the following events:
(1) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the
Company (not including in the securities
beneficially owned by such Person any securities
acquired directly from the Company or its
affiliates other than in connection with the
acquisition by the Company or its affiliates of a
business) representing 20% or more of either the
then outstanding shares of common stock of the
Company or the combined voting power of the
Company's then outstanding securities; or
(2) the following individuals cease for any
reason to constitute a majority of the number of
directors then serving: individuals who, on the
date hereof, constitute the Board and any new
director (other than a director whose initial
assumption of office is in connection with an
actual or threatened election contest, including
but not limited to a consent solicitation, relating
to the election of directors of the Company, as
such terms are used in Rule 14a-11 of Regulation
14A under the Exchange Act) whose appointment or
election by the Board or nomination for election by
the Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then
still in office who either were directors on the
date hereof or whose appointment, election or
nomination for election was previously so approved;
or
(3) the stockholders of the Company approve a
merger or consolidation of the Company with any
other corporation or approve the issuance of voting
securities of the Company in connection with a
merger or consolidation of the Company (or any
direct or indirect subsidiary of the Company)
pursuant to applicable stock exchange requirements,
other than (i) a merger or consolidation which
would result in the voting securities of the
Company outstanding immediately prior to such
merger or consolidation continuing to represent
(either by remaining outstanding or by being
converted into voting securities of the surviving
entity or any parent thereof), in
Page 2
combination with the ownership of any trustee or
other fiduciary holding securities under an
employee benefit plan of the Company, at least 60%
of the combined voting power of the voting
securities of the Company or such surviving entity
or any parent thereof outstanding immediately after
such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapi
talization of the Company (or similar transaction)
in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the
Company (not including in the securities
Beneficially Owned by such Person any securities
acquired directly from the Company or its
affiliates other than in connection with the
acquisition by the Company or its affiliates of a
business) representing 20% or more of either the
then outstanding shares of common stock of the
Company or the combined voting power of the
Company's then outstanding securities; or
(4) the stockholders of the Company approve a
plan of complete liquidation or dissolution of the
Company or an agreement for the sale or disposition
by the Company of all or substantially all of the
Company's assets, other than a sale or disposition
by the Company of all or substantially all of the
Company's assets to an entity, at least 60% of the
combined voting power of the voting securities of
which are owned by Persons in substantially the
same proportions as their ownership of the Company
immediately prior to such sale.
Notwithstanding the foregoing, no "Change in
Control" shall be deemed to have occurred if there is
consummated any transaction or series of integrated
transactions immediately following which the record
holders of the common stock of the Company immediately
prior to such transaction or series of transactions
continue to have substantially the same proportionate
ownership in an entity which owns all or substantially
all of the assets of the Company immediately following
such transaction or series of transactions.
(e) "DATE OF TERMINATION" means (1) the effective
date on which Executive's employment by the Company
terminates as specified in a prior written notice by the
Company or Executive, as the case may be, to the other,
delivered pursuant to Section 11, or (2) if Executive's
employment by the Company terminates by reason of death,
the date of death of Executive.
(f) "EXCHANGE ACT" means the Securities Exchange
Act of 1934, as amended from time to time.
Page 3
(g) "GOOD REASON" means, without Executive's
express written consent, the occurrence of any of the
following events after a Change in Control (or after any
potential Change in Control under the circumstances
described in Clause (2) of Section 3 (d) hereof
(treating all references in this paragraph (g) to a
"Change in Control" as references to a "Potential Change
in Control")):
(1) any of (i) the assignment to Executive of
any duties inconsistent in any material respect
with Executive's position(s), duties,
responsibilities or status with the Company
immediately prior to such Change in Control, (ii) a
change in Executive's reporting responsibilities,
titles or offices with the Company as in effect
immediately prior to such Change in Control, or
(iii) any removal or involuntary termination of
Executive from the Company otherwise than as
expressly permitted by this Agreement or any
failure to re-elect Executive to any position with
the Company held by Executive immediately prior to
such Change in Control;
(2) a reduction by the Company in Executive's
rate of annual base salary as in effect immediately
prior to such Change in Control or as the same may
be increased from time to time thereafter;
(3) any requirement of the Company that
Executive (i) be based anywhere other than at the
offices where the Executive is located at the time
of the Change in Control, or (ii) travel on Company
business to an extent substantially more burdensome
than the travel obligations of Executive
immediately prior to such Change in Control;
(4) the failure of the Company to (i)
continue in effect any employee benefit plan or
compensation plan in which Executive is
participating immediately prior to such Change in
Control, unless Executive is permitted to
participate in other plans providing Executive with
substantially comparable benefits, or the taking of
any action by the Company which would adversely
affect Executive's participation in or materially
reduce Executive's benefits under any such plan,
(ii) provide Executive and Executive's dependents
welfare benefits (including, without limitation,
medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental
death and travel accident insurance plans and
programs) in accordance with the most favorable
plans, practices, programs and policies of the
Company and its affiliated companies in effect for
Executive immediately prior to such Change in
Control or, if more favorable to Executive, as in
effect generally at any time thereafter
Page 4
with respect to other peer executives of the
Company and its affiliated companies, (iii) provide
fringe benefits in accordance with the most
favorable plans, practices, programs and policies
of the Company and its affiliated companies in
effect for Executive immediately prior to such
Change in Control or, if more favorable to
Executive, as in effect generally at any time
thereafter with respect to other peer executives of
the Company and its affiliated companies, (iv)
provide an office or offices of a size and with
furnishings and other appointments, together with
exclusive personal secretarial and other
assistance, at least equal to the most favorable of
the foregoing provided to Executive by the Company
and its affiliated companies immediately prior to
such Change in Control or, if more favorable to
Executive, as provided generally at any time
thereafter with respect to other peer executives of
the Company and its affiliated companies, (v)
provide Executive with paid vacation in accordance
with the most favorable plans, policies, programs
and practices of the Company and its affiliated
companies as in effect for Executive immediately
prior to such Change in Control or, if more
favorable to Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated
companies, or (vi) reimburse Executive promptly for
all reasonable employment expenses incurred by
Executive in accordance with the most favorable
policies, practices and procedures of the Company
and its affiliated companies in effect for
Executive immediately prior to such Change in
Control, or if more favorable to Executive, as in
effect generally at any time thereafter with
respect to other peer executives of the Company and
its affiliated companies; or
(5) the failure of the Company to obtain the
assumption agreement from any successor as
contemplated in Section 10(b).
For purposes of this Agreement, any good faith
determination of Good Reason made by Executive shall be
conclusive; PROVIDED, HOWEVER, that an isolated,
insubstantial and inadvertent action taken in good faith
and which is remedied by the Company promptly after
receipt of notice thereof given by Executive shall not
constitute Good Reason.
(h) "NONQUALIFYING TERMINATION" means a
termination of Executive's employment (1) by the Company
for Cause, (2) by Executive for any reason other than a
Good Reason, (3) as a result of Executive's death, or
(4) by the Company due to Executive's absence from
Executive's duties with the Company on a full-time basis
for at least 180 consecutive days as a result of
Executive's incapacity due to physical or mental
illness; PROVIDED, HOWEVER, that a termination of
Executive's employment for any
Page 5
reason whatsoever during the "Window Period"
(hereinafter defined) shall not constitute a
Nonqualifying Termination.
(i) "PERSON" has the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term
shall not include (1) the Company or any of its subsid
iaries, (2) a trustee or other fiduciary holding securi
ties under an employee benefit plan of the Company or
any of its subsidiaries, (3) an underwriter temporarily
holding securities pursuant to an offering of such secu
rities, or (4) a corporation owned, directly or indirect
ly, by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the
Company.
(j) "POTENTIAL CHANGE IN CONTROL" means the
occurrence of one of the following events:
(1) the Company enters into an
agreement, the consummation of which would result
in the occurrence of a Change in Control;
(2) the Company or any Person publicly
announces an intention to take or to consider
taking actions which, if consummated, would
constitute a Change in Control;
(3) any Person becomes the Beneficial
Owner, directly or indirectly, of securities of the
Company representing 10% or more of either the then
outstanding shares of common stock of the Company
or the combined voting power of the Company's then
outstanding securities; or
(4) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
(k) "TERMINATION PERIOD" means the period of time
beginning with a Change in Control (or, if later,
beginning with the consummation of the transaction the
approval of which by the Company's stockholders
constitutes a Change in Control under Section 1(d)(3) or
(4) hereof) and ending on the earliest to occur of (1)
Executive's 70th birthday, (2) Executive's death, and
(3) three years following such Change in Control (or, if
later, three years following the consummation of the
transaction the approval of which by the Company's stock
holders constitutes a Change in Control under Section
1(d)(3) or (4) hereof).
Page 6
(l) "WINDOW PERIOD" means the 30-day period com
mencing one year after the date of a Change in Control,
or, if later, the 30-day period commencing one year
after the consummation of the transaction the approval
of which by the Company's stockholders constitutes a
Change in Control under Section 1(d)(3) or (4) hereof).
2. OBLIGATIONS OF EXECUTIVE.
(a) Executive agrees that in the event any person
or group attempts a Change in Control, he shall not
voluntarily leave the employ of the Company without Good
Reason (1) until such attempted Change in Control
terminates, or (2) if a Change in Control shall occur,
until 90 days following such Change in Control (or, if
later, until the consummation of the transaction the
approval of which by the Company's stockholders
constitutes a Change in Control under Section 1(d)(3) or
(4) hereof). For purposes of the foregoing subsection
(1), Good Reason shall be determined as if a Change in
Control had occurred when such attempted Change in
Control became known to the Board.
(b) Executive acknowledges and agrees that (1) all
records and other material not released to the general
public, and (2) all trade secrets, confidential and
proprietary information, unpublished data and
information, in each case relating to the operations,
services and business of the Company, whether reduced to
writing or not ("Confidential Material"), are
confidential and are the sole property of the Company.
Executive agrees that Executive will not disclose any
Confidential Material to any person or entity, either
during or subsequent to Executive's employment by the
Company, nor will Executive use any Confidential
Material, except in the regular course of Executive's
employment by the Company, without the Company's written
consent. Executive agrees not to make use of the
Confidential Material, except on behalf of the Company.
Upon termination of Executive's employment, Executive
agrees to surrender all Confidential Material and any
copies thereof as may be in possession or under control
of Executive.
3. PAYMENTS UPON TERMINATION OF EMPLOYMENT.
(a) If during the Termination Period the
employment of Executive shall terminate, other than by
reason of a Nonqualifying Termination, then the Company
shall pay to Executive (or Executive's beneficiary or
estate) within 30 days following the Date of
Termination, as compensation for services rendered to
the Company:
(1) a cash amount equal to the sum of (i)
Executive's full annual base salary from the
Company and its affiliated companies
Page 7
through the Date of Termination, to the extent not
theretofore paid, (ii) a bonus in an amount at
least equal to the average annualized incentive
compensation awards paid or payable pursuant to the
Kansas City Power & Light Company incentive
compensation plan, including by reason of any
deferral, to Executive by the Company and its
affiliated companies during the five fiscal years
of the Company (or if Executive shall have
performed services for the Company and its
affiliated companies for four fiscal years or less,
the years during which Executive performed
services) immediately preceding the fiscal year in
which the Change in Control occurs, multiplied by a
fraction, the numerator of which is the number of
days in the fiscal year in which the Date of
Termination occurs through the Date of Termination
and the denominator of which is 365 or 366, as
applicable, to the extent not theretofore paid,
(iii) any amount credited to Executive's CAP Excess
Benefits Account pursuant to the Capital
Accumulation Plan Excess Benefit Agreement, dated
effective as of January 1, 1989, between Executive
and the Company, and any other compensation
previously deferred by Executive (together with any
interest and earnings thereon), in each case to the
extent not theretofore paid, and (iv) any accrued
unpaid vacation pay;
(2) a lump-sum cash amount in an amount equal
to (i) ___ (__) times Executive's highest annual
base salary from the Company and its affiliated
companies in effect during the 12-month period
prior to the Date of Termination, plus (ii) ___
(__) times Executive's average annualized incentive
compensation awards, paid or payable, including by
reason of any deferral, to Executive by the Company
and its affiliated companies during the five fiscal
years of the Company (or if Executive shall have
performed services for the Company and its
affiliated companies for four fiscal years or less,
the years during which Executive performed
services) immediately preceding the fiscal year in
which the Change in Control occurs; PROVIDED,
HOWEVER, that in the event there are fewer than ___
whole months remaining from the Date of Termination
to the date of Executive's 70th birthday, the
amount calculated in accordance with this Section
3(a)(II) shall be reduced by multiplying such
amount by a fraction the numerator of which is the
number of months, including a partial month (with a
partial month being expressed as a fraction the
numerator of which is the number of days remaining
in such month and the denominator of which is the
number of days in such month), so remaining and the
denominator of which is ___ months; PROVIDED
FURTHER, that any amount paid pursuant to this
Section 3(a)(2) shall be paid in lieu of any other
amount of severance pay to be received by Executive
upon termination of employment of
Page 8
Executive under any severance plan, policy or
arrangement of the Company.
(b) (1) In addition to the payments to be made
pursuant to paragraph (a) of this Section 3, the Company
shall pay to Executive within 30 days following the Date
of Termination a lump-sum cash amount equal to the
excess of (a) the actuarial equivalent value of the
monthly accrued benefits payable to Executive at age 65
under the Kansas City Power & Light Company Management
Pension Plan (the "Pension Plan") as in effect on the
date of this Agreement and the benefits provided under
the Supplemental Executive Retirement and Deferred
Compensation Plan in respect of the Pension Plan as in
effect on the date of this Agreement, assuming that
benefits have accrued thereunder and Executive is
entitled to such benefits, each such benefit shall be
computed as if Executive had ___ (__) additional Years
of Credited Service under the Pension Plan and were
fully vested in such hypothetical benefits, over (b) the
actuarial equivalent value of Executive's vested accrued
benefits under the Pension Plan and benefits payable
under the Supplemental Retirement Agreement. Such lump-
sum cash amount shall be computed using the same
actuarial methods and assumptions then in use for
purposes of computing benefits under the Pension Plan,
except that the computation shall be made without
actuarial reduction for early retirement and provided
that the interest rate used in such computation shall be
the interest rate used on the Date of Termination by the
Pension Benefit Guaranty Corporation for purposes of
determining the present value of a lump sum distribution
pursuant to a plan termination.
(2) In addition to the payments to be made
pursuant to paragraph (a) of this Section 3, if on the
Date of Termination Executive shall not be fully vested
in the matching employer contributions made on
Executive's behalf under the Kansas City Power & Light
Company Cash or Deferred Arrangement, the Company shall
pay to Executive within 30 days following the Date of
Termination a lump sum cash amount equal to the value of
the unvested portion of such matching employer
contributions; PROVIDED, HOWEVER, that if any payment
pursuant to this Section 3(b)(2) may or would result in
such payment being deemed a transaction which is subject
to Section 16(b) of the Exchange Act, the Company shall
make such payment so as to meet the conditions for an
exemption from such Section 16(b) as set forth in the
rules (and interpretive and no-action letters relating
thereto) under Section 16. The value of any such
unvested matching employer contributions shall be
determined as of the Date of Termination; provided that
if the common stock of the Company is traded on the New
York Stock Exchange on the Date of Termination, the
value of a share of common stock of the Company shall be
the closing price on the
Page 9
New York Stock Exchange on the Date of Termination or,
if such date is not a trading day, on the immediately
preceding trading day.
(3) For a period of ___ (__) years commencing
on the Date of Termination, the Company shall continue
to keep in full force and effect all medical, accident,
disability and life insurance plans with respect to
Executive and Executive's dependents with the same level
of coverage, upon the same terms and otherwise to the
same extent as such plans shall have been in effect
immediately prior to the Date of Termination.
Notwithstanding the foregoing sentence, if any of the
medical, accident, disability or life insurance plans
then in effect generally with respect to other peer
executives of the Company and its affiliated companies
would be more favorable to Executive, such plan coverage
shall be substituted for the analogous plan coverage
provided to Executive immediately prior to the Date of
Termination, and the Company and Executive shall share
the costs of such plan coverage in the same proportion
as such costs were shared immediately prior to the Date
of Termination. The obligation of the Company to
continue coverage of Executive and Executive's
dependents under such plans shall cease at such time as
Executive and Executive's dependents obtain comparable
coverage under another plan, including a plan maintained
by a new employer. Execution of this Agreement by
Executive shall not be considered a waiver of any rights
or entitlements Executive and Executive's dependents may
have under applicable law to continuation of coverage
under the group health plan maintained by the Company or
its affiliated companies.
(c) If during the Termination Period the
employment of Executive shall terminate by reason of a
Nonqualifying Termination, then the Company shall pay to
Executive within 30 days following the Date of
Termination, a cash amount equal to the sum of (1)
Executive's full annual base salary from the Company
through the Date of Termination, to the extent not
theretofore paid, and (2) any compensation previously
deferred by Executive (together with any interest and
earnings thereon) and any accrued vacation pay, in each
case to the extent not theretofore paid.
(d) For the purposes of this Agreement, the
Executive's employment shall be deemed to have been
terminated within the Termination Period other than by
reason of a Nonqualifying Termination if:
(1) the Executive's employment is terminated
without Cause prior to a Change in Control (or, if
later, prior to the consummation of the transaction
the approval of which by the Company's stockholders
constitutes a Change in Control under
Section 1(d)(3) or (4) and such termination was at
the request or direction of a Person who has
entered into an agreement with the
Page 10
Company the consummation of which or the approval
of which by the Company's stockholders would
constitute a Change in Control;
(2) the Executive terminates his employment
with Good Reason prior to a Change of Control (or,
if later, prior to the consummation of the
transaction the approval of which by the Company's
stockholders constitutes a Change in Control under
Section 1(d)(3) or (4)) and the circumstance or
event which constitutes Good Reason occurs at the
request or direction of such Person; or
(3) the Executive's employment is terminated
without Cause prior to a Change in Control (or, if
later, prior to the consummation of the transaction
the approval of which by the Company's stockholders
constitutes a Change in Control under
Section 1(d)(3) or (4)) and such termination is
otherwise in connection with or in anticipation of
a Change in Control which actually occurs.
4. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by the Company or its affiliated
companies to or for the benefit of Executive (whether paid or
payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard
to any additional payments required under this Section 4) (a
"Payment") would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties are
incurred by Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise
Tax"), then the Company shall pay to Executive an additional
payment (a "Gross-Up Payment") in an amount such that after
payment by Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 4(c), all
determinations required to be made under this Section 4,
including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
the Company's public accounting firm (the "Accounting Firm")
which shall provide detailed supporting calculations both to
the Company and Executive within 15 business days of the
receipt of notice from Executive that there has been a
Page 11
Payment, or such earlier time as is requested by the Company.
In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group
effecting the Change in Control, Executive shall appoint
another nationally recognized public accounting firm to make
the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 4, shall be paid by the Company to
Executive within five days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that
no Excise Tax is payable by Executive, it shall furnish
Executive with a written opinion that failure to report the
Excise Tax on Executive's applicable federal income tax
return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm
shall be binding upon the Company and Executive. As a result
of the uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should
have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section
4(c) and Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the benefit of Executive.
(c) Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after
Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. Executive shall
not pay such claim prior to the expiration of the 30-day
period following the date on which Executive gives such
notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies Executive in writing prior to
the expiration of such period that it desires to contest such
claim, Executive shall:
(1) give the Company any information reasonably
requested by the Company relating to such claim;
(2) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the
Company;
Page 12
(3) cooperate with the Company in good faith in
order effectively to contest such claim; and
(4) permit the Company to participate in any
proceedings relating to such claim; PROVIDED, HOWEVER,
that the Company shall bear and pay directly all costs
and expenses (including additional interest and
penalties) incurred in connection with such contest and
shall indemnify and hold Executive harmless, on an after-
tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as
a result of such representation and payment of costs and
expenses. Without limitation on the foregoing
provisions of this Section 4(c), the Company shall
control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct
Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and
Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine;
PROVIDED FURTHER, that if the Company directs Executive
to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to Executive on
an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and PROVIDED FURTHER, that any
extension of the statute of limitations relating to
payment of taxes for the taxable year of Executive with
respect to which such contested amount is claimed to be
due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Executive shall
be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service
or any other taxing authority.
(d) If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 4(c), Executive
becomes entitled to receive, and receives, any refund with
respect to such claim, Executive shall (subject to the
Company's complying with the requirements of Section 4(c))
promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Company pursuant to
Section 4(c), a determination is made that Executive shall
not be entitled to any refund with respect to such claim and
the Company does not notify Executive in writing of its
intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the
Page 13
amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
5. WITHHOLDING TAXES. The Company may withhold from
all payments due to Executive (or Executive's beneficiary or
estate) hereunder all taxes which, by applicable federal,
state, local or other law, the Company is required to
withhold therefrom.
6. REIMBURSEMENT OF EXPENSES. If any contest or
dispute shall arise under this Agreement involving
termination of Executive's employment with the Company or
involving the failure or refusal of the Company to perform
fully in accordance with the terms hereof, the Company shall
reimburse Executive, on a current basis, for all legal fees
and expenses, if any, incurred by Executive in connection
with such contest or dispute, together with interest at a
rate equal to the rate of interest published in the Wall
Street Journal under the caption "Money Rates" as the prime
rate, but in no event higher than the maximum legal rate
permissible under applicable law, such interest to accrue
from the date the Company receives Executive's statement for
such fees and expenses through the date of payment thereof;
PROVIDED, HOWEVER, that in the event the resolution of any
such contest or dispute includes a finding denying, in total,
Executive's claims in such contest or dispute, Executive
shall be required to reimburse the Company, over a period of
12 months from the date of such resolution, for all sums
advanced to Executive pursuant to this Section 6.
7. OPERATIVE EVENT. Except as provided in Section
3(d), but notwithstanding any other provision herein to the
contrary, no amounts shall be payable hereunder unless and
until there is a Change in Control at a time when Executive
is employed by the Company.
8. TERMINATION OF AGREEMENT.
(a) This Agreement shall be effective on the date
hereof and shall continue until terminated by the
Company as provided in paragraph (b) of this Section 8;
PROVIDED, HOWEVER, that this Agreement shall terminate
in any event upon the first to occur of (1) Executive's
70th birthday, (2) Executive's death, or (3) except as
provided in Section 3(d) hereof, termination of
Executive's employment with the Company prior to a
Change in Control.
(b) The Company shall have the right, prior to a
Change in Control, in its sole discretion, pursuant to
action by the Board, to terminate this Agreement, which
termination shall not become effective until the date
fixed by the Board for such termination, which date
shall be at least 120 days after notice thereof is given
by the Company to Executive in accordance with Section
11; PROVIDED, HOWEVER, that no such action shall
Page 14
be taken by the Board during any period of time when the
Board has knowledge that any person has taken steps
reasonably calculated to effect a Change in Control
until, in the opinion of the Board, such person has
abandoned or terminated its efforts to effect a Change
in Control; and PROVIDED FURTHER, that in no event shall
this Agreement be terminated in the event of a Change in
Control.
9. SCOPE OF AGREEMENT. Nothing in this Agreement
shall be deemed to entitle Executive to continued employment
with the Company and its subsidiaries, and except as provided
in Section 3(d) hereof, if Executive's employment with the
Company shall terminate prior to a Change in Control, then
Executive shall have no further rights under this Agreement;
PROVIDED, HOWEVER, that any termination of Executive's
employment following a Change in Control (or as described in
Section 3(d)) shall be subject to all of the provisions of
this Agreement.
10. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall not be terminated by any
merger or consolidation of the Company whereby the
Company is or is not the surviving or resulting
corporation or as a result of any transfer of all or
substantially all of the assets of the Company. In the
event of any such merger, consolidation or transfer of
assets, the provisions of this Agreement shall be
binding upon the surviving or resulting corporation or
the person or entity to which such assets are
transferred.
(b) The Company agrees that concurrently with any
merger, consolidation or transfer of assets referred to
in paragraph (a) of this Section 10, it will cause any
successor or transferee unconditionally to assume, by
written instrument delivered to Executive (or
Executive's beneficiary or estate), all of the
obligations of the Company hereunder. Failure of the
Company to obtain such assumption prior to the
effectiveness of any such merger, consolidation or
transfer of assets shall be a breach of this Agreement
and shall entitle Executive to compensation and other
benefits from the Company in the same amount and on the
same terms as Executive would be entitled hereunder if
Executive's employment were terminated following a
Change in Control other than by reason of a
Nonqualifying Termination. For purposes of implementing
the foregoing, the date on which any such merger,
consolidation or transfer becomes effective shall be
deemed the Date of Termination.
(c) This Agreement shall inure to the benefit of
and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If
Executive shall die while any amounts would be payable
to Executive
Page 15
hereunder had Executive continued to live, all such
amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to such
person or persons appointed in writing by Executive to
receive such amounts or, if no person is so appointed,
to Executive's estate.
11. NOTICE.
(a) For purposes of this Agreement, all notices
and other communications required or permitted hereunder
shall be in writing and shall be deemed to have been
duly given when delivered or five days after deposit in
the United States mail, certified and return receipt
requested, postage prepaid, addressed (1) if to the
Executive, to [OFFICER'S HOME ADDRESS] and if to the
Company, to Kansas City Power & Light Company, 1201
Walnut, Kansas City, Missouri 64106-2124, attention
Corporate Secretary, or (2) to such other address as
either party may have furnished to the other in writing
in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
(b) A written notice of Executive's Date of
Termination by the Company or Executive, as the case may
be, to the other, shall (1) indicate the specific
termination provision in this Agreement relied upon, (2)
to the extent applicable, set forth in reasonable detail
the facts and circumstances claimed to provide a basis
for termination of Executive's employment under the
provision so indicated, and (3) specify the termination
date (which date shall be not less than 15 days after
the giving of such notice). The failure by Executive or
the Company to set forth in such notice any fact or
circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of Executive
or the Company hereunder or preclude Executive or the
Company from asserting such fact or circumstance in
enforcing Executive's or the Company's rights hereunder.
12. FULL SETTLEMENT; RESOLUTION OF DISPUTES.
(a) The Company's obligation to make any payments
provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have
against Executive or others. In no event shall
Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this
Agreement and, such amounts shall not be reduced whether
or not Executive obtains other employment.
Page 16
(b) If there shall be any dispute between the
Company and Executive in the event of any termination of
Executive's employment, then, unless and until there is
a final, nonappealable judgment by a court of competent
jurisdiction declaring that such termination was for
Cause, that the determination by Executive of the
existence of Good Reason was not made in good faith, or
that the Company is not otherwise obligated to pay any
amount or provide any benefit to Executive and
Executive's dependents or other beneficiaries, as the
case may be, under paragraphs (a) and (b) of Section 3,
the Company shall pay all amounts, and provide all
benefits, to Executive and Executive's dependents or
other beneficiaries, as the case may be, that the
Company would be required to pay or provide pursuant to
paragraphs (a) and (b) of Section 3 as though such
termination were by the Company without Cause or by
Executive with Good Reason; PROVIDED, HOWEVER, that the
Company shall not be required to pay any disputed
amounts pursuant to this paragraph except upon receipt
of an undertaking by or on behalf of Executive to repay
all such amounts to which Executive is ultimately
adjudged by such court not to be entitled.
13. EMPLOYMENT WITH SUBSIDIARIES. Employment with the
Company for purposes of this Agreement shall include
employment with any corporation or other entity in which the
Company has a direct or indirect ownership interest of 50% or
more of the total combined voting power of the then
outstanding securities of such corporation or other entity
entitled to vote generally in the election of directors.
14. GOVERNING LAW; VALIDITY. The interpretation,
construction and performance of this Agreement shall be
governed by and construed and enforced in accordance with the
internal laws of the State of Missouri without regard to the
principle of conflicts of laws. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision
of this Agreement, which other provisions shall remain in
full force and effect.
15. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be
an original and all of which together shall constitute one
and the same instrument.
16. MISCELLANEOUS. No provision of this Agreement may
be modified or waived unless such modification or waiver is
agreed to in writing and signed by Executive and by a duly
authorized officer of the Company. No waiver by either party
hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. Failure by
Executive or the Company to insist upon strict compliance
with any provision of this Agreement or to assert any right
Executive or the Company may have hereunder, including,
Page 17
without limitation, the right of Executive to terminate
employment for Good Reason, shall not be deemed to be a
waiver of such provision or right or any other provision or
right of this Agreement. The rights and benefits payable
hereunder are in addition to any rights of, or benefits
payable to, Executive, Executive's estate or Executive's
beneficiaries under any other employee benefit plan or
compensation program of the Company, excluding any other
severance plan, policy or arrangement of the Company.
IN WITNESS WHEREOF, the Company has caused this Restated
Severance Agreement to be executed by a duly authorized
officer of the Company and Executive has executed this
Agreement as of the day and year first above written.
KANSAS CITY POWER & LIGHT COMPANY
By: _________________________________
_____________________________________
[officer name]
[title]
Subscribed and Sworn to before me
this _____ day of January, 2000.
__________________________________
Notary Public
Page 18
Exhibit 10-f
KANSAS CITY POWER & LIGHT COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EFFECTIVE APRIL 1, 2000
AMENDED AND RESTATED NOVEMBER 1, 2000
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 8
VI MISCELLANEOUS 8
-i-
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.
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,
(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), and
(iii) any forfeiture of benefits under the
Basic Plan due to lack of vesting, but only to the
extent the forfeiture reduces the amount to be paid
under Subparagraph (b)(1) of Section 3 of the Restated
Severance Agreement entered into by the Company and the
Active Participant.
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 (c), 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
-4-
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 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. Payment
shall be made, in the case of a lump sum payment, or shall begin,
in the case of a pension, in accordance with the Participant's
election made as provided in Section 3.5.
(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.
(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
-5-
Participant lives. If the Participant dies before receiving
60 monthly payments, the 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, and 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
-6-
the Company, the 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.
3.6 CHIEF EXECUTIVE OFFICER. In the case of a person who
has served at least ten (10) years in the position of Chief
Executive Officer of the Company, the two percent (2%) accrual
rate referred to in Paragraph 3.1(a) shall be three percent (3%),
and no early retirement reduction factor shall be applied. In no
event shall the sum of the accrual rates used to determine a
Participant's retirement benefits under the Basic Plan and this
Plan exceed sixty percent (60%), so for a participant who is
eligible for the special benefit for Chief Executive Officers
described in the first sentence of this paragraph, the maximum
number of Years of Benefit Service taken into account shall be
twenty (20).
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.
-7-
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.
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.
-8-
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
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.
-9-
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 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-
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.
-12-
Exhibit 10-j
Amendment 1 to
Incentive Compensation Plan
This Amendment 1 to Incentive Compensation Plan is made and
adopted by the Board of Directors of KLT Inc. (the "Corporation")
as of November 16, 2000, but shall be effective as of March 14,
2000 upon the obtaining of written consent of the Participants
holding, in aggregate, a majority of the percentage of the Pool
heretofore allocated under the Plan.
Whereas, the Board of Directors of the Corporation
established and adopted a certain Incentive Compensation Plan as
of March 14, 2000 (the "Plan"), and
Whereas, the scope of the Plan included KLT Investments Inc.
("Investments"), a wholly-owned subsidiary of the Corporation as
a defined Affiliate, and
Whereas, the nature and circumstances of, and the
limitations on, Investments' holdings and business substantially
prevents any increase in value of Investments, and
Whereas, it is in the interest of the Corporation and
consistent with the overall purpose of the Plan to remove
Investments as a defined Affiliate under the Plan, and
WHEREAS, it has been brought to the attention of the Board
that Exhibit A to the Plan does not correctly identify all of the
Affiliates of the Corporation, in that certain Affiliates were
omitted or subsumed into other listed Affiliates, and
WHEREAS, it was and is the Board's intent that all
Affiliates of the Corporation, as defined in this Amendment 1,
whether or not listed on Exhibit A, be within the terms and
conditions of the Plan, and
Therefore, the Plan is amended as follows:
1. Section 3.a. of the Plan is amended by inserting the
following at the end of said Section:
Notwithstanding anything to the contrary in this Plan, KLT
Investments Inc. ("Investments") shall not be deemed an
Affiliate of the Corporation.
2. Exhibits A and B of the Plan are amended and replaced in
their entirety by First Amended Exhibit A and First Amended
Exhibit B, attached hereto and made a part hereof.
3. Section 3 of the Plan is amended by inserting a new Section
3.h., as follows:
h. In the event of a Realization Event respecting the
Corporation's equity, or a Realization Event respecting the
equity or assets of one or more Affiliates and Investments,
the Board, acting through its disinterested members, shall
allocate to Investments an appropriate amount of the
consideration received, and such allocated amount shall not
be considered in determining the Amount Realized, or any
annual adjustments thereto. The allocation referenced in
the preceding sentence shall be subject
to the written consent of the Participants holding, in
aggregate, a majority of the percentage of the Pool then
allocated under this Plan. It is the intent and purpose of
the Corporation to eliminate any impact on Amounts Realized
and Awards arising from the Corporation's ownership or
disposition, in whole or in part, of Investments.
4. Except as expressly amended above, the terms and conditions
of the Plan remain in full force and effect. All capitalized
terms not defined herein shall have the meaning ascribed to them
in the Plan.
5. This Amendment 1 shall be effective for all purposes from and
after March 14, 2000, upon the obtaining of written consent of
the Participants holding, in aggregate, a majority of the
percentage of the Pool heretofore allocated under the Plan.
In witness whereof, the Corporation has executed this
Amendment 1 as of the date first above written.
KLT Inc., a Missouri corporation
By: /s/Gregory J. Orman
Gregory J. Orman, Chief Executive
Officer and President
Attest:
/s/Mark G. English
Corporate Secretary
Consented and agreed to by the Participants holding, in aggregate, a
majority of the percentage of the Pool heretofore allocated under the Plan.
/s/Gregory J. Orman /s/Christopher J. Pfeiffer
Gregory J. Orman Christopher J. Pfeiffer
/s/P. J. Schliesman /s/Mark R. Schroeder
P. J. Schliesman Mark R. Schroeder
/s/Frank R. Clark /s/Mark G. English
Frank R. Clark Mark G. English
Exhibit 10-k
Amendment 2 to
Incentive Compensation Plan
This Amendment 2 to Incentive Compensation Plan is made and
adopted by the Board of Directors of KLT Inc. (the
"Corporation"), acting by and through its disinterested
directors, as of January 25, 2001, but shall be effective upon
the obtaining of written consent of the Participants holding, in
aggregate, a majority of the percentage of the Pool heretofore
allocated under the Plan.
Whereas, the Board of Directors of the Corporation
established and adopted a certain Incentive Compensation Plan
dated as of March 14, 2000, as amended by Amendment 1 dated as of
November 16, 2000 (as so amended, the "Plan"), and
Whereas, it is in the interest of the Corporation, and
consistent with the overall purpose of the Plan to induce
participants to continue employment with the Corporation, to
further amend the Plan, as set forth below.
Therefore, the Plan is amended as follows:
1. Section 5.b. of the Plan is amended by deleting paragraph
(i), inserting the following paragraphs (i) and (ii), and
renumbering existing paragraph (iii) as paragraph (iv):
(i) 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 15 days of the end of
the year in which such termination occurred, a
lump sum, net of all applicable withholding taxes,
equal to 50% of the Award remaining in the
Participant's Incentive Account at the time of
such termination, as adjusted to reflect the
proportionate effects of all reductions (but not
increases) to the Pool, pursuant to Sections 3.c.
and 3.g., occurring between said time of
termination and the end of the year in which such
termination occurred. The Participant shall not be
entitled to any other portion of the Award
remaining in the Participant's Incentive Account.
(ii) If the Participant terminates employment, or
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. The Corporation may, in its
sole discretion, elect to waive the forfeiture
requirement of this paragraph respecting a portion
(but not more than 50%) of such Award if a
Participant terminates employment; in such event,
payment of such portion shall be made in
accordance with the preceding paragraph.
2. Except as expressly amended above, the terms and conditions
of the Plan remain in full force and effect. All capitalized
terms not defined herein shall have the meaning ascribed to them
in the Plan.
3. This Amendment 2 shall be effective for all purposes from and
after January 25, 2001, upon the obtaining of written consent of
the Participants holding, in aggregate, a majority of the
percentage of the Pool heretofore allocated under the Plan.
In witness whereof, the Corporation has executed this
Amendment 2 as of the date first above written.
KLT Inc., a Missouri corporation
By: /s/Gregory J. Orman
Gregory J. Orman, Chief Executive
Officer and President
Attest:
/s/Mark G. English
Corporate Secretary
Consented and agreed to by the Participants holding, in
aggregate, a
majority of the percentage of the Pool heretofore allocated under
the Plan.
/s/Gregory J. Orman _________________________
Gregory J. Orman Christopher J. Pfeiffer
____________________________ /s/Mark R. Schroeder
P. J. Schliesman Mark R. Schroeder
____________________________ /s/Mark G. English
Frank R. Clark Mark G. English
/s/Bruce B. Selkirk /s/Andrew V. Johnson
Bruce B. Selkirk, III Andrew V. Johnson
/s/James A. Mitchell /s/Charles W. Schellhorn
James A. Mitchell Charles W. Schellhorn
Exhibit 10-l
KLT Gas Inc.
Compensation Program
Effective January 1, 2001
1. PURPOSE
The Compensation Program (the "Program") of KLT Gas Inc. (the
"Company") is designed to fairly compensate employees for
individual and Company performance, and to align employee
compensation with the goal of increased shareholder value.
2. ADMINISTRATION
The Program shall be administered by KLT Inc., as sole
shareholder and designated director of the Company (the
"Director"), acting through its President. The Director may
establish such rules and regulations, and take such actions and
determinations, as it deems necessary or advisable for the
administration of the Program. Such rules, regulations, actions
and determinations shall be final, binding and conclusive for all
purposes and on all affected persons.
3. ELEMENTS OF COMPENSATION
The compensation of employees of the Company is comprised of four
elements: (a) base salary; (b) fringe benefits; (c) discretionary
bonuses; and (d) incentive compensation based on a Value Creation
Plan. These three elements are described below.
4. BASE SALARY, BENEFITS AND DISCRETIONARY BONUSES
An employee's base salary is set by the Director from time to
time in its sole discretion. Employees shall be entitled to
participate in all benefit programs that the Company establishes
and makes available to its employees, if any, to the extent that
such employee's position, tenure, salary, age, health and other
qualifications make him or her eligible to participate.
Employees are also eligible for bonuses, in the sole discretion
of the Director, based upon the achievement of Company
operational and financial goals and objectives and mutually-
agreed individual goals. However, employees are not guaranteed,
and have no right to, such bonuses.
5. VALUE CREATION PLAN
a. The Value Creation Plan (the "Plan") described in this
Section 5 is part of the Program. The Plan is designed to
provide incentive compensation to employees only with respect to
the increase in value of the Company's investments in direct and
indirect affiliates, as that term is defined in Rule 12b-2 under
the Securities Exchange Act of 1934, in which the Company's
employees have a management or director role (each an "Affiliate"
and collective the "Affiliates"). The Affiliates of the Company
as of January 1, 2001, are listed on EXHIBIT A. The Director
shall have the discretion of amending EXHIBIT A from time to time
to reflect
additions and deletions of the Company's Affiliates included in
the Plan. The Director may, in its sole discretion, determine
that disposition of certain properties or other assets of the
Company should be treated, for purposes only of this Plan, as
dispositions of Affiliates. Such properties or other assets, if
any, shall be reflected on EXHIBIT A, as it may be amended from
time to time.
b. The Director, after taking into account the
recommendations of the Company management, shall establish a
baseline value (the ABaseline@) for the equity ownership by the
Company 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 Director in its sole good faith
opinion, and is set forth on EXHIBIT A. The Baseline for
Affiliates included subsequent to the Plan=s initial adoption
shall be the amount of the Company'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 in such Affiliate by the Company and decreased by the
amount of distributions from such Affiliate to the Company.
c. The aggregate amount available to be distributed to
employees (the APool@) shall be 2.625% percent of the difference
between (i) the Amount Realized (as defined below) on each
Affiliate or Company, as the case may be, and (ii) the sum of the
Baseline for such Affiliate or Company, 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 Company shall be the sum of the Baselines of
its Affiliates). If the amount calculated pursuant to clause
5.c.(i) is less than the amount calculated pursuant to clause
5.c.(ii), then the Pool shall be reduced by an amount equal to
2.625% percent of such difference and the amounts in the
employees' Incentive Accounts shall be accordingly adjusted to
reflect this reduction in the Pool.
d. Except as otherwise provided herein, no distributions
shall be due or payable under the Plan until and unless the
aggregate Amount Realized on the Affiliates or Company is, at the
time of such distributions, at least $30 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 Company 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 AIPO@) of common
stock of the Company or an Affiliate;
(ii) the sale of twenty percent (20%) or more of
the fully diluted capital stock or other equity
securities in the Company or an Affiliate;
(iii) a merger or consolidation of the Company or
an Affiliate in which the Company 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 Company or an Affiliate; and
(v) a liquidation or dissolution of the Company
or an Affiliate.
f. The Amount Realized in events (i) through (v), above,
shall be the fair market value on a pre-tax basis (the AFMV@) of
the Company or the Company's investment in the affected
Affiliate, as applicable, based upon the IPO price or the
consideration received in the Realization Event, less all
applicable costs and expenses associated with the event
(including but not limited to engineering, accounting and
auditing, legal, broker and hedge costs) as determined in the
sole judgment of the Director.
g. If, after a Realization Event occurs with respect to a
particular Affiliate, the Company 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 Company in such Affiliate. Nothing in paragraphs
5.c. or 5.g. shall be deemed to require employees to repay to the
Company any distributions previously received on account of such
Realization Event.
h. The Director, acting in its sole discretion after taking
into account the recommendations of the Company's President shall
determine the allocation of the Pool (including but not limited
to specific allocations of Amounts Realized) among the employees
of the Company (the "Awards", and each employee receiving an
Award is a "Participant") and any reallocation of any amounts in
any employee's Incentive Account that are not paid as a result of
the termination of such employee's employment with the Company
(or other applicable events) pursuant to the provisions hereof.
An Award shall be subject to all terms and conditions of this
Plan, and shall, if the employee 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 Director's option, in
substantially the form attached hereto as EXHIBIT B.
i. A notional account ("Incentive Account") shall be
established and maintained for each employee receiving Awards
under the Plan, showing the Awards granted, the portion of the
value or Amounts Realized as allocated to the employee (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
employee. It is specifically contemplated that adjustments to
the Pool, and the corresponding amounts allocated to employee's
Incentive Accounts, may be either positive or negative, as
calculated pursuant to Section 5.c. for each Realization Event,
and that as a result the Pool and the employees' Incentive
Accounts may be either positive or negative.
j. Except as otherwise provided herein, payments shall be
made to each employee so long as the employee 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.
k. 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 C attached hereto.
6. EFFECT OF TERMINATION OF EMPLOYMENT.
a. Nothing in this Program (including but not limited to
the Plan) shall be construed to:
(i) Give any employee any right to be awarded a
discretionary bonus or an Award, other than in the
sole discretion of the Director;
(ii) Give an employee any right whatsoever with
respect to any equity interest in the Company or
any of its Affiliates;
(iii) Limit in any way the right of the Company to
terminate an employee's employment with the
Company at any time (subject, however, to any
separate written employment agreement between the
employee and the Company); or
(iv) Be evidence of any agreement or
understanding, express or implied, that the
Company will employ an employee 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 employee and the Company).
b. Except as may otherwise be provided in a separate
written employment agreement between the employee and the
Company, termination of an employee's employment with the Company
shall have the following effect on the employee's Award:
(i) If the Company terminates the employee's
employment for any reason (including but not
limited to death or disability) other than Cause
(as defined below), the employee will be entitled
to receive, within 30 days of termination of
employment, a lump sum equal to 50% of the Award
remaining in the employee's Incentive Account at
the time of such termination, net of all
applicable withholding taxes. The employee shall
not be entitled to any other portion of the Award
remaining in the employee's Incentive Account.
(ii) If the employee terminates employment, or is
terminated for Cause, the employee shall forfeit
all of the Award remaining in the employee's
Incentive Account at the time of such termination.
(iii) ACause@ is defined as:
(a) Dishonesty of the employee with respect
to the Company;
(b) Willful misfeasance or nonfeasance of
duty intended to injure or having the effect
of injuring the reputation, business or
business relationships of the Company or its
respective officers, directors or employees;
(c) Upon a charge by a governmental entity
against the employee of any crime involving
moral turpitude or which could reflect
unfavorably upon the Company 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 employee (other than by reason of
disability due to physical or mental illness)
or failure, neglect or refusal by the
employee to perform his duties and
responsibilities without the same being
corrected upon ten (10) days prior written
notice;
(e) Breach by the employee of any of the
covenants contained in EXHIBIT B, or
termination by the Company of the employee
for Acause@ under an applicable separate
written employment agreement; or
(f) Failure by the employee to materially
meet agreed-upon performance standards.
7. GENERAL TERMS AND CONDITIONS
a. NON-ALIENATION. No Award or any other rights under this
Program 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 employee 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 Director, cease.
b. TERMINATION OR AMENDMENT OF PROGRAM. Unless otherwise
amended or terminated as provided in this paragraph, this
Program, including but not limited to the 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
Director may terminate or amend this Program, including but not
limited to the Plan, in whole or in part, at any time in its sole
discretion, subject to the limitations contained in the next
sentence. Notwithstanding the preceding sentence, (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 the Plan (however, no Realization
Events occurring after such termination shall be recognized for
determining the amount of such Award), and (ii) any Awards
payable (that is, the Threshold had been reached) at the time the
Director amends the Plan shall nevertheless be
payable accordance with the terms of the Plan in effect prior to
such amendment.
c. CAPTIONS. The captions of any section or subsection of
this Program 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 Program 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
Program or any of its elements or 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
Company=s employment records and to the Company 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 Program and all documents
associated therewith shall be construed, interpreted and enforced
in accordance with the laws of the State of Kansas, without
giving effect to that State=s conflict of laws provisions.
g. VENUE. All actions or proceedings with respect to this
Program or any documents associated therewith shall be instituted
only in any state or federal court sitting in Johnson County,
Kansas, and by execution of this Program and the acceptance of
discretionary bonuses or Awards, the Company and the affected
employee 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 Company in
exercising any right under this Program 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.
i. EFFECT OF INVALIDITY. In case any provision of this
Program 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.
j. TERMINATION OF ALL OTHER INCENTIVE PLANS. This Program
supersedes and replaces all other existing compensation, bonus
and incentive plans or programs of the Company as of January 1,
2001. All such plans or programs, including but not limited to
that certain Annual Incentive Plan adopted by the Director on or
about April 12,2000, are hereby terminated and of no further
effect. Notwithstanding the foregoing, nothing herein shall
affect the incentive awards made to certain employees as
reflected in certain letters issued by the Company to such
employees on or about October 24, 2000.
k. APPLICATION TO EMPLOYEES OF AFFILIATES. From time to
time, employees of KLT Inc. or other affiliates of the Company
("Affiliate Employees") may, as officers or agents of the
Company, provide services to the Company. The Director, in its
sole discretion, may grant Awards to such Affiliate Employees
pursuant to the terms of the Plan; provided that in such
situation, references to the "Company" (i) in Sections 6.a.(iii),
6.a.(iv), 6.b., 6.b.(i) and 6.b.(iii)(e) shall refer to the
Company affiliate employing the Affiliate Employee, and (ii) in
Sections 6.b.(iii)(a) through (c) shall refer to either the
Company or the Company affiliate employing the Affiliate
Employee, or both.
In witness whereof, the Company has executed this Program as
of the date first above written.
KLT GAS INC., a Missouri corporation
By: /s/Bruce B. Selkirk
Exhibit 10-s
AMENDMENT NO. 2 TO CREDIT AGREEMENT
This Amendment No. 2 (this "Amendment") dated as of
January 23, 2001 is among KLT Inc. (the "Borrower"), the
undersigned Lenders and Bank One, NA, as agent for the
Lenders (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders and the Agent are
parties to a Second Amended and Restated Credit Agreement
dated as of June 30, 2000 (as previously amended, the
"Credit Agreement"); and
WHEREAS, the Borrower, the Lenders and the Agent desire
to amend the Credit Agreement in certain respects more fully
described below;
NOW, THEREFORE, for good and valuable consideration,
the receipt of which is hereby acknowledged, the parties
agree as follows:
SECTION 1 DEFINED TERMS. Capitalized terms used herein
and not otherwise defined shall have the meanings attributed
to such terms in the Credit Agreement.
SECTION 2 AMENDMENTS TO THE CREDIT AGREEMENT. Effective
upon the satisfaction of the conditions precedent set forth
in Section 4, the Credit Agreement shall be amended as
follows:
(a) Article I is amended by adding the following new
definitions in proper alphabetical sequence:
"Exchange Notes" means notes issued from time to
time by DTI in
exchange for DTI Notes, which notes shall have interest
rates and maturity dates not greater than those of the
DTI Notes as in effect on January 2, 2001.
"Tender Line Facility" means a credit facility
entered into by DTI
providing for loans to DTI, in an aggregate amount not
exceeding $95,000,000, to finance the purchase of DTI
Notes.
"Working Capital Facility" means a working capital
facility entered into by DTI or a Subsidiary thereof
providing for loans to DTI or such Subsidiary, in an
aggregate amount not exceeding $100,000,000, to be used
for operations and capital expenditures.
(b) Article I is further amended by (i) deleting the
definitions of "Bridge Loan Effective Date" and "Bridge Loan
Facility"; (ii) deleting the proviso at the end of
"Facility Termination Date"; and (iii) deleting the existing
definition of "Floating Rate" and substituting the following
therefor:
"Floating Rate" means, for any day, a rate per annum
equal to the Alternate Base Rate as in effect on such day.
(c) Section 6.11 is amended by deleting the existing
clauses (ix), (x) and (xi) and inserting the following new
clauses (ix) and (x) in proper order:
(ix) Indebtedness of DTI and its Subsidiaries
under the DTI Notes, the Exchange Notes, the
Working Capital Facility and the Tender Line
Facility in an aggregate principal amount not
at any time exceeding $480,000,000 (plus any
increase in the accreted value after January
1, 2001).
(x) One or more costless collars or similar
derivative transactions which effectively fix
the downside market risk of the value of the
shares of the Evergreen Resources, Inc. common
stock received pursuant to the sales of certain
properties of a Subsidiary of KLT Gas Inc. as
set forth on Schedule 1 to Amendment No. 1 to
this Agreement.
(d) Section 6.16 is amended by (i) deleting the proviso
in clause (ix) and substituting "provided that the aggregate cash
amount paid for the purchase or redemption of DTI Notes shall not
exceed $95,000,000 and the aggregate amount paid to purchase or
redeem all of the DTI Warrants shall not exceed $6,000,000"
therefor, and (ii) deleting the amount "$125,000,000" in
clause (x) and substituting "$60,000,000" therefor.
(e) Section 6.18 is amended by adding the following
clause (xvi) and (xvii):
(xvi) Liens on the capital stock of the
Subsidiaries of DTI owned by DTI to secure
the obligations of DTI under the Tender Line
Facility and the Exchange Notes.
(xvii) Liens on the assets of the Subsidiaries
of DTI to secure the obligations of such
Subsidiaries under the Working Capital Facility.
SECTION 3 REPRESENTATIONS AND WARRANTIES. To induce the
Agent and the Lenders to enter into this Amendment, the
Borrower represents and warrants that:
(a) The representations and warranties set forth in Article
V of the Credit
2
Agreement are true, correct and complete on the date hereof
as if made on and as of the date hereof.
(b) No Default or Unmatured Default exists on the date
hereof.
SECTION 4 EFFECTIVE DATE. This Amendment shall become effective as
of the date first written above upon receipt by the Agent of each of the
following:
(a) Counterparts of this Amendment duly executed by the
Borrower and the Required Lenders.
(b) The Third Restated and Amended Support Agreement in
the form of Exhibit A hereto signed by Kansas City Power & Light Company
and the Borrower.
(c) An amendment fee for each Lender which, on or
before 5:00 p.m. (Chicago time) on January 23, 2001, executes and
delivers to the Agent (by facsimile or otherwise) a counterpart hereof,
such fee to be in an amount equal to 0.075% of such Lender's Commitment.
SECTION 6 RATIFICATION. The Credit Agreement, as
amended hereby, is hereby ratified, approved and confirmed in all respects.
SECTION 7 REFERENCES TO CREDIT AGREEMENT. From and after the effective
date hereof, each reference in the Credit Agreement to "this Agreement",
"hereof", or "hereunder" or words of like import, and all references to
the Credit Agreement in any and all other agreements, instruments,
documents, notes, certificates and other writings of every kind and
nature, shall be deemed to mean the Credit Agreement as amended by
this Amendment.
SECTION 8 COSTS AND EXPENSES. The Borrower agrees to
pay all costs, fees and out of pocket expenses (including
attorneys' fees and time charges of attorneys for the Agent,
which attorneys may be employees of the Agent) incurred by
the Agent in connection with the preparation, execution and
enforcement of this Amendment.
SECTION 9 CHOICE OF LAW. THIS AMENDMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE
LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.
SECTION 10 EXECUTION IN COUNTERPARTS. This Amendment
may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the
same agreement.
3
IN WITNESS WHEREOF, the Borrower, the undersigned
Lenders and the Agent have executed this Amendment as of the
date first above written.
KLT INC.
By: /s/Frank R. Clark
Name: Frank R. Clark
Title: Vice President and Chief Financial
Officer
BANK ONE, NA, individually as a Lender and as
Agent
By: /s/William N. Banks
Name: William N. Banks
Title: First Vice President
ABN AMRO BANK N.V.
By: /s/Kris A. Grosshans
Name: Kris A. Grosshans
Title: Group Vice President
By: /s/Jeffrey Dodd
Name: Jeffrey Dodd
Title: Group Vice President
W E S T D E U T S C H E LA N D ES B A NK
GIROZENTRALE, NEW YORK BRANCH,
individually as a Lender and as
Documentation Agent
By: /s/Duncan M. Robertson /s/Monika K. Kump
Name: Duncan M. Robertson Monika K. Kump
Title: Director Manager
S-1
By: _______________________
Name:_______________________
Title:______________________
COMMERZBANK AKTIENGESELLSCHAFT, NEW
YORK AND GRAND CAYMAN BRANCHES,
individually as a Lender and as
Syndication Agent
By: _______________________
Name:_______________________
Title:______________________
By:_________________________
Name:_______________________
Title:______________________
THE DAI-ICHI KANGYO BANK, LTD., CHICAGO
BRANCH
By: /s/John S. Sneed, Jr.
Name: John S. Sneed, Jr.
Title: Senior Vice President
S-2
Exhibit 10-t
DEMAND PROMISSORY NOTE
Date: February 1, 2001 Principal Amount: $94,000,000.00
DTI Holdings, Inc., a Missouri corporation (herein referred
to as "Borrower"), promises to pay to the order of KLT Telecom
Inc., a Missouri corporation (herein referred to as "Lender"), at
its offices located at 10740 Nall, Suite 230, Overland Park, KS
66211 or at such other place as Lender may designate, the
principal sum of Ninety Four Million Dollars ($94,000,000.00)
together with interest on the outstanding principal balance at a
rate of 10% per annum. The entire unpaid principal balance of
this Note shall be immediately due and payable UPON DEMAND by
Lender, and Borrower acknowledges that any condition or
requirement set forth in any other agreement between Borrower and
Lender is not the only basis upon which demand can be made
hereunder. Interest on the unpaid principal of this Note will be
due and payable when demand is made for payment of the principal
of this Note.
Borrower may prepay this Note, in whole or in part, at any
time and from time to time, without premium or penalty. Any
prepayments made by Borrower shall be applied as follows: first,
to accrued and unpaid interest; second, to any other amounts
payable hereunder at the time a payment is made; and finally, to
the unpaid balance remaining on the Note. Interest shall be
computed on the basis of a 360-day year consisting of twelve (12)
months with thirty (30) days each.
Except as otherwise provided in this Note, all notices
required or permitted hereunder (including a notice by Lender
demanding payment hereunder) shall be in writing. A written
notice shall be deemed to have been given hereunder (i) if
delivered by hand, when the notifying party delivers such notice
or other communication to the other party; (ii) if delivered by
facsimile or overnight delivery service, on the first business
day following the date such notice or other communication is
transmitted by facsimile or timely delivered by overnight
courier, or (iii) if delivered by mail, on the third business day
following the date such notice or other communication is
deposited in the U.S. mail by certified or registered mail
properly addressed to the other party. Notices mailed or
transmitted via facsimile shall be directed as follows unless
written notice of a change of address or facsimile number has
been given in writing in accordance with this Section: (x) if to
Lender, at 10740 Nall, Suite 230, Overland Park, KS 66211,
facsimile number (913) 967-4340, attn. President; and (y) if to
Borrower, at 8112 Maryland Avenue, Suite 400, St. Louis, MO
63105, facsimile number (314) 880-1999 attn. President
In no event shall interest (including any charge or fee
held to be interest by a court of competent jurisdiction) accrue
to be payable hereon in excess of the highest contract rate
allowable by law at the time such indebtedness shall be
outstanding and unpaid, and if, for any reason, interest in
excess of the highest legal rate shall be due or paid, any such
excess shall constitute and be treated as a payment on the
principal hereof and shall operate to reduce such principal by
the amount of such
excess, or if in excess of the principal indebtedness, such ex
cess shall be waived or refunded to the Borrower.
This Note shall be construed in accordance with the laws of
Missouri. Any dispute or cause of action under this Note shall
be resolved by a court of competent subject matter jurisdiction
only in Jackson County, Missouri. If any provisions hereof are
judicially determined to be invalid, then that portion thereof
which is declared invalid shall not affect the remaining
provisions hereof.
Borrower hereby expressly acknowledges that Borrower shall
have no right to set-off against any amounts due to Lender under
this Note against any amounts which Lender may owe to Borrower.
The obligations of Borrower under this Note are independent, and
Borrower agrees that any claim for sums due and owing to Borrower
from Lender shall be the subject of a separate legal action by
Borrower against Lender.
The obligations of the Borrower under this Note are secured
pursuant to that certain Pledge Agreement of even date hereof.
Reference is hereby made to such Pledge Agreement for a
description of the security interests granted under this Note, a
description of Defaults under the Pledge Agreement and Lender's
remedies upon a Default under the Pledge Agreement. Capitalized
terms used herein and not otherwise defined herein are used with
the meanings attributed to them in the Pledge Agreement.
The Borrower shall reimburse the Lender for any costs,
internal charges and out-of-pocket expenses (including attorneys'
fees and time charges of attorneys for the Lender, which
attorneys may be employees of the Lender) paid or incurred by the
Lender in connection with the preparation, negotiation,
execution, delivery, review, amendment, modification, and
administration of the Loan Documents. The Borrower also agrees
to reimburse the Lender for any costs, internal charges and
out-of-pocket expenses (including attorneys' fees and time
charges of attorneys for the Lender, which attorneys may be
employees of the Lender) paid or incurred by the Lender in
connection with the collection and enforcement of the Note. The
Borrower further agrees to indemnify the Lender, its directors,
officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including,
without limitation, all expenses of litigation or preparation
therefor whether or not the Lender is a party thereto) which any
of them may pay or incur arising out of or relating to this Note,
the other Loan Documents, the transactions contemplated hereby or
the direct or indirect application or proposed application of the
proceeds of the Note except to the extent such obligations arise
from the gross negligence or willful misconduct of the Lender.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF MISSOURI.
2
THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR MISSOURI STATE COURT
SITTING IN KANSAS CITY, MISSOURI IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER
AGAINST THE LENDER OR ANY AFFILIATE OF THE LENDER INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT
ONLY IN A COURT IN KANSAS CITY, MISSOURI.
THE BORROWER AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
In this Note, the singular shall include the plural; the
masculine shall include the feminine and the neuter genders; and
"borrower", "maker" or "undersigned" shall include the Borrower.
All persons liable, either now or hereafter, for the payment of
this Note shall be jointly and severally liable, and waive pre
sentment, demand (other than demand for payment as provided
above), protest, and notice of non-payment and of protest, and
agrees that any modifications of the terms of payment or exten
sion of time or payment shall in no way impair its joint and sev
eral liability.
THE BORROWER AND ANY ENDORSERS OR CO-MAKERS, ALL HEREBY
EXPRESSLY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY CLAIM,
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PERSON AGAINST
ANY PERSON ON ANY MATTER ARISING OUT OF OR IN ANY WAY CONNECTED
WITH THIS NOTE OR THE RELATIONSHIP OF THE PARTIES CREATED
THEREUNDER.
3
IN WITNESS WHEREOF, the duly authorized representatives of
Borrower have executed this Agreement on the date first above
written.
BORROWER:
DTI Holdings, Inc.
ATTEST: a Missouri corporation
By: /s/Daniel A. Davis By: /s/Gary W. Douglass
Name: Daniel A. Davis Name: Gary W. Douglass
Title: Vice President & Title: Sr. Vice President &
General Counsel Chief Financial Officer
4
DTI HOLDINGS, INC.
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement") is entered
into as of February 1, 2001 by and between DTI HOLDINGS, INC., a
Missouri corporation (the "Borrower"), and KLT TELECOM INC., a
Missouri corporation (the "Lender"). The parties hereto agree as
follows:
WHEREAS, the Borrower has executed and delivered to Lender a
certain Demand Promissory Note in the principal amount of Ninety
Four Million Dollars ($94,000,000.00) of even date herewith (the
"Note"); and
WHEREAS, it is a condition precedent, among others, to any
borrowing under the Note that the Borrower execute and deliver
this Pledge Agreement to the Lender;
WHEREAS, the Borrower expects to realize direct and indirect
benefits as a result of the borrowing under the Note and such
other financial accommodations as the Lender may provide from
time to time, and therefore desires to enter into this Pledge
Agreement to satisfy such condition precedent;
NOW, THEREFORE, in consideration of the undertakings set
forth herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, the Borrower and the
Lender hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS OF CERTAIN TERMS USED HEREIN. As used in
this Pledge Agreement, the following terms shall have the
following meanings:
"Article" means a numbered article of this Pledge Agreement,
unless another document is specifically referenced.
"Capital Stock" means, with respect to any Person, any and
all shares, interests, partnership interests, participations,
rights in or other equivalents (however designated and whether
voting or non-voting) of such Person's capital stock, and any
rights (other than debt securities convertible into capital
stock), warrants or options exchangeable for or convertible into
such capital stock, whether now outstanding or issued after the
date of this Pledge Agreement.
"Collateral" means the Pledged Stock and the Stock Rights,
and the proceeds and products thereof, together with all books
and records, computer files, programs, printouts and other
computer materials and records related thereto provided, however,
that Collateral shall not
5
include any dividends paid, in cash or otherwise, by an issuer of
Pledged Stock, or any other distributions by an issuer of Pledged
Stock on or in respect of its Capital Stock.
"Default" means an event described in Section 5.1.
"Lien" means any mortgage, charge, pledge, lien (statutory
or otherwise), privilege, security interest, hypothecation,
assignment for security, claim, or preference or priority or
other encumbrance upon or with respect to the Collateral.
"Loan Documents" mean the Note, the Pledge Agreement and all
associated financing statements.
"Person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint-
stock company, trust, business trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Pledged Stock" means the shares of Capital Stock listed on
Schedule A attached hereto and any other Capital Stock of
Restricted Subsidiaries owned or controlled directly by the
Borrower from time to time.
"Restricted Subsidiary" has the meaning ascribed to that
term in that certain Indenture dated as of February 23, 1998,
between DTI Holdings, Inc., as Issuer and The Bank of New York,
Trustee, as amended and supplemented by that certain First
Supplement and Amendment to Trust Indenture dated as of January
31, 2001.
"Section" means a numbered section of this Pledge Agreement,
unless another document is specifically referenced.
"Secured Obligations" means all unpaid principal of and
accrued and unpaid interest on the Note, and all accrued and
unpaid fees and all expenses, reimbursements, indemnities and
other obligations of the Borrower to the Lender under the Note or
the Pledge Agreement.
"Stock Rights" means any securities which the Borrower shall
receive or shall become entitled to receive for any reason
whatsoever in substitution for or in exchange for any shares of
the Pledged Stock and any securities in which the Borrower now
has or hereafter acquires any right, issued by an issuer of
Pledged Stock; provided, however, that Stock Rights shall not
include any dividends paid, in cash or otherwise, by an issuer of
Pledged Stock, or any other distributions by an issuer of Pledged
Stock on or in respect of its Capital Stock.
The foregoing definitions shall be equally applicable to
both the singular and plural forms of the defined terms.
6
ARTICLE II
GRANT OF SECURITY INTEREST
The Borrower hereby pledges, assigns and grants to the
Lender, a security interest in all of the Borrower's right, title
and interest in and to the Collateral to secure the prompt and
complete payment and performance of the Secured Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender that:
3.1. TITLE, AUTHORIZATION, VALIDITY AND ENFORCEABILITY.
Schedule A hereto sets forth a complete and accurate list of the
Pledged Stock and other instruments delivered to the Lender. The
Borrower is the direct and beneficial owner of each share of the
Pledged Stock and has full power and authority to grant to the
Lender the security interest in the Collateral pursuant hereto.
Each share of the Pledged Stock has been duly and validly issued,
is fully paid and non-assessable and is owned by the Borrower
free and clear of any Lien, other than the security interest
created by this Pledge Agreement. The execution and delivery by
the Borrower of this Pledge Agreement has been duly authorized by
proper corporate proceedings, and this Pledge Agreement
constitutes a legal, valid and binding obligation of the Borrower
and creates a security interest which is enforceable against the
Borrower in all now owned and hereafter acquired Collateral
(except with respect to Pledged Stock, wherein the security
interest is created on delivery to the Lender).
3.2. CONFLICTING LAWS AND CONTRACTS. Neither the execution
and delivery by the Borrower of this Pledge Agreement, the
creation and perfection of the security interest in the
Collateral granted hereunder, nor compliance with the terms and
provisions hereof will violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on the
Borrower or the Borrower's articles or certificate of
incorporation or by-laws, the provisions of any indenture,
instrument or agreement to which the Borrower is a party or is
subject, or by which it, or its property, is bound, or conflict
with or constitute a default thereunder, or result in the
creation or imposition of any Lien pursuant to the terms of any
such indenture, instrument or agreement (other than the Lien of
the Lender). No order, consent, approval, license,
authorization, or validation of, or filing (except the filing of
financing statements covering the Collateral), recording or
registration with, or exemption by, any governmental or public
body or authority, or any subdivision thereof, is required to
authorize, or is required in connection with the execution,
delivery and performance of, or the legality, validity, binding
effect or enforceability of, this Pledge Agreement.
7
3.3. NO DEFAULT. No Default exists.
3.4. NO FINANCING STATEMENTS. No financing statement
describing all or any portion of the Collateral which has not
lapsed or been terminated naming the Borrower as debtor has been
filed in any jurisdiction except financing statements naming the
Lender as the secured party.
3.5. FEDERAL EMPLOYER IDENTIFICATION NUMBER. The Borrower's
Federal employer identification number is 43-1828147.
ARTICLE IV
COVENANTS
From the date of this Pledge Agreement, and thereafter until
this Pledge Agreement is terminated:
4.1. DELIVERY OF CERTAIN ITEMS. The Borrower will (i)
deliver to the Lender immediately upon execution of this Pledge
Agreement all certificates or other securities representing
Pledged Stock together with appropriate stock powers endorsed in
blank, marked with such legends and assigned as the Lender shall
specify, and (ii) hold in trust for the Lender upon receipt and
immediately thereafter deliver to the Lender any stock
certificate, instrument or other document evidencing or
constituting Collateral (except, prior to the occurrence of a
Default, ordinary cash dividends paid with respect to the Pledged
Stock and the Stock Rights).
4.2. RECORDS AND REPORTS. The Borrower will maintain
complete and accurate books and records with respect to the
Collateral, and furnish to the Lender such reports relating to
the Collateral as the Lender shall from time to time request.
4.3. FINANCING STATEMENTS AND OTHER ACTIONS; DEFENSE OF
TITLE. The Borrower will execute and deliver to the Lender all
financing statements and other documents and take such other
actions as may from time to time be requested by the Lender in
order to maintain a first perfected security interest in the
Collateral. The Borrower will take any and all actions necessary
to defend title to the Collateral against all persons and to
defend the security interest of the Lender in the Collateral and
the priority thereof against any Lien not expressly permitted
hereunder.
4.4. LIENS. The Borrower will not create, incur, or suffer
to exist any Lien on the Collateral except the security interest
created by this Pledge Agreement.
4.5. STOCK.
4.5.1. CHANGES IN CAPITAL STRUCTURE OF ISSUERS. The
Borrower will not (i) permit or suffer any issuer of Pledged
Stock to dissolve, liquidate, retire any of its capital
stock, reduce its capital or merge or consolidate with any
other entity or (ii) vote any of the
8
Pledged Stock in favor of any of the foregoing, in either
case, except as permitted under the Loan Documents.
4.5.2. EXERCISE OF RIGHTS IN PLEDGED STOCK. The
Borrower will permit the Lender or its nominee at any time
after the occurrence of a Default, without notice, to
exercise all voting and corporate rights relating to the
Collateral, including, without limitation, exchange,
subscription or any other rights, privileges, or options
pertaining to any shares of the stock pledged as Collateral
and the Stock Rights as if it were the absolute owner
thereof.
4.6. DISPOSITION. The Borrower will not sell or otherwise
dispose of all or any part of the Collateral.
ARTICLE V
DEFAULT
5.1. The occurrence of any one or more of the following
events shall constitute a Default:
5.1.1. Any representation or warranty made by or on
behalf of the Borrower under or in connection with this
Pledge Agreement shall be materially false as of the date on
which made.
5.1.2. The breach by the Borrower of any of the terms
or provisions of Article IV or Section 8.7.
5.1.3. The breach by the Borrower (other than a breach
which constitutes a Default under Section 5.1.1 or 5.1.2) of
any of the terms or provisions of this Pledge Agreement
which is not remedied within five days after the giving of
written notice to the Borrower by the Agent.
5.1.4. Any Secured Obligation shall not be paid when
due, whether upon demand or otherwise.
5.2. REMEDIES. Upon Default, the Lender may exercise any
or all of the following rights and remedies:
5.2.1. Those rights and remedies provided in this
Pledge Agreement or the Note, provided that this clause
5.2.1 shall not be understood to limit any rights or
remedies available to the Lender prior to a Default.
9
5.2.2. Those rights and remedies available to a
secured party under the Missouri Uniform Commercial Code
(whether or not the Missouri Uniform Commercial Code applies
to the affected Collateral) or under any other applicable
law when a debtor is in default under a security agreement
and any other applicable law.
5.2.3. Without notice except as specifically provided
in Section 8.3 or elsewhere herein, sell, lease, assign,
grant an option or options to purchase or otherwise dispose
of the Collateral or any part thereof in one or more parcels
at public or private sale, for cash, on credit or for future
delivery, and upon such other terms as the Lender may deem
commercially reasonable.
ARTICLE VI
WAIVERS, AMENDMENTS AND REMEDIES
No delay or omission of the Lender to exercise any right or
remedy granted under this Pledge Agreement shall impair such
right or remedy or be construed to be a waiver of any Default or
an acquiescence therein, and any single or partial exercise of
any such right or remedy shall not preclude any other or further
exercise thereof or the exercise of any other right or remedy.
No waiver, amendment or other variation of the terms, conditions
or provisions of this Pledge Agreement whatsoever shall be valid
unless in writing signed by the Lender and then only to the
extent in such writing specifically set forth. All rights and
remedies contained in this Pledge Agreement or by law afforded
shall be cumulative and all shall be available to the Lender
until the Secured Obligations have been paid in full.
ARTICLE VII
PROCEEDS
7.1. APPLICATION OF PROCEEDS. The proceeds of any sale of
or other realization upon the Collateral shall be applied by the
Lender to payment of the Secured Obligations in the following
order unless a court of competent jurisdiction shall otherwise
direct:
(a) FIRST, to payment of all costs and expenses of the
Lender incurred in connection with the collection and
enforcement of the Secured Obligations or of the security
interest granted to the Lender pursuant to this Pledge
Agreement;
(b) SECOND, to payment of that portion of the Secured
Obligations constituting accrued and unpaid interest and
fees:
(c) THIRD, to payment of the principal of the Secured
Obligations;
10
(d) FOURTH, to payment of any Secured Obligations
(other than those listed above); and
(e) FIFTH, the balance, if any, after all of the
Secured Obligations have been satisfied, shall be paid over
to the Borrower.
ARTICLE VIII
GENERAL PROVISIONS
8.1. REGISTRATION OF PLEDGED STOCK. At the option of the
Lender, any registerable Collateral may at any time be registered
in the name of the Lender or its nominee.
8.2. EXERCISE OF RIGHTS IN PLEDGED STOCK. After the
occurrence and during the continuance of a Default, the Lender or
its nominee may at any time and from time to time, without
notice, exercise all voting and corporate rights relating to the
Collateral, including, without limitation, exchange, subscription
or any other rights, privileges, or options pertaining to any
shares of the Pledged Stock and the Stock Rights as if it were
the absolute owner thereof.
8.3. NOTICE OF DISPOSITION OF COLLATERAL. The Borrower
hereby waives notice of the time and place of any public sale or
the time after which any private sale or other disposition of all
or any part of the Collateral may be made. To the extent such
notice may not be waived under applicable law, any notice made
shall be deemed reasonable if sent to the Borrower, addressed as
set forth in Article IX, at least ten days prior to (i) the date
of any such public sale or (ii) the time after which any such
private sale or other disposition may be made.
8.4. SECURED PARTY PERFORMANCE OF DEBTOR OBLIGATIONS.
Without having any obligation to do so, the Lender may perform or
pay any obligation which the Borrower has agreed to perform or
pay in this Pledge Agreement and the Borrower shall reimburse the
Lender for any amounts paid by the Lender pursuant to this
Section 8.4. The Borrower's obligation to reimburse the Lender
pursuant to the preceding sentence shall be a Secured Obligation
payable on demand.
8.5. AUTHORIZATION FOR SECURED PARTY TO TAKE CERTAIN
ACTION. The Borrower irrevocably authorizes the Lender at any
time and from time to time in the sole discretion of the Lender
and appoints the Lender as its attorney in fact (i) to execute on
behalf of the Borrower as debtor and to file financing statements
necessary or desirable in the Lender's sole discretion to perfect
and to maintain the perfection and priority of the Lender's
security interest in the Collateral, (ii) to indorse and collect
any cash proceeds arising from the sale of or other realization
upon the Collateral, (iii) to file a carbon, photographic or
other reproduction of this Pledge Agreement or any financing
statement with respect to the Collateral as a financing statement
in such offices as the Lender in its sole discretion deems
necessary or desirable to perfect and to maintain the perfection
and priority of the Lender's security interest in the Collateral,
(iv) to apply the proceeds arising from the sale of or other
realization upon any
11
Collateral received by the Lender to the Secured Obligations as
provided in Article VII and (v) to discharge past due taxes,
assessments, charges, fees or Liens on the Collateral (except for
such Liens as are specifically permitted hereunder), and the
Borrower agrees to reimburse the Lender on demand for any payment
made or any expense incurred by the Lender in connection
therewith, PROVIDED that this authorization shall not relieve the
Borrower of any of its obligations under this Pledge Agreement.
8.6. SPECIFIC PERFORMANCE OF CERTAIN COVENANTS. The
Borrower acknowledges and agrees that a breach of any of the
covenants contained in Sections 4.2, 4.4, 4.5, 4.6, 7 and 8.7
will cause irreparable injury to the Lender, that the Lender has
no adequate remedy at law in respect of such breaches and
therefore agrees, without limiting the right of the Lender to
seek and obtain specific performance of other obligations of the
Borrower contained in this Pledge Agreement, that the covenants
of the Borrower contained in the Sections referred to in this
Section 8.6 shall be specifically enforceable against the
Borrower.
8.7. DISPOSITIONS NOT AUTHORIZED. The Borrower is not
authorized to sell or otherwise dispose of the Collateral, and
notwithstanding any course of dealing between the Borrower and
the Lender or other conduct of the Lender, no authorization to
sell or otherwise dispose of the Collateral shall be binding upon
the Lender unless such authorization is in writing signed by the
Lender.
8.8. BENEFIT OF AGREEMENT. The terms and provisions of this
Pledge Agreement shall be binding upon and inure to the benefit
of the Borrower and the Lender and their respective successors
and assigns, except that the Borrower shall not have the right to
assign its rights or delegate its obligations under this Pledge
Agreement or any interest herein, without the prior written
consent of the Agent.
8.9. SURVIVAL OF REPRESENTATIONS. All representations and
warranties of the Borrower contained in this Pledge Agreement
shall survive the execution and delivery of this Pledge
Agreement.
8.10. TAXES AND EXPENSES. Any taxes (including income
taxes) payable or ruled payable by Federal or State authority in
respect of this Pledge Agreement shall be paid by the Borrower,
together with interest and penalties, if any. The Borrower shall
reimburse the Lender for any and all out-of-pocket expenses and
internal charges (including reasonable attorneys', auditors' and
accountants' fees and reasonable time charges of attorneys,
paralegals, auditors and accountants who may be employees of the
Lender) paid or incurred by the Lender in connection with the
preparation, execution, delivery, administration, collection and
enforcement of this Pledge Agreement and in the audit, analysis,
administration, collection, preservation or sale of the
Collateral (including the expenses and charges associated with
any periodic or special audit of the Collateral). Any and all
costs and expenses incurred by the Borrower in the performance of
actions required pursuant to the terms hereof shall be borne
solely by the Borrower.
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8.11. HEADINGS. The title of and section headings in
this Pledge Agreement are for convenience of reference only, and
shall not govern the interpretation of any of the terms and
provisions of this Pledge Agreement.
8.12. TERMINATION. This Pledge Agreement shall continue
in effect (notwithstanding the fact that from time to time there
may be no Secured Obligations outstanding) until all of the
Secured Obligations have been indefeasibly paid and performed in
full.
8.13. ENTIRE AGREEMENT. This Pledge Agreement embodies
the entire agreement and understanding between the Borrower and
the Lender relating to the Collateral and supersedes all prior
agreements and understandings between the Borrower and the Lender
relating to the Collateral.
8.14. CHOICE OF LAW. THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS
(AND NOT THE LAW OF CONFLICTS) OF THE STATE OF MISSOURI.
8.15 JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
MISSOURI STATE COURT SITTING IN KANSAS CITY, MISSOURI IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN
DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT
OF THE LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE
COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE
BORROWER AGAINST THE LENDER OR ANY AFFILIATE OF THE LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE
BROUGHT ONLY IN A COURT IN KANSAS CITY, MISSOURI.
8.16 WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED
THEREUNDER.
8.17. INDEMNITY. The Borrower hereby agrees to
indemnify the Lender, and its successors, assigns, agents and
employees, from and against any and all liabilities, damages,
penalties, suits, costs, and expenses of any kind and nature
(including, without limitation, all
13
expenses of litigation or preparation therefor whether or not the
Lender is a party thereto) imposed on, incurred by or asserted
against the Lender, or its successors, assigns, agents and
employees, in any way relating to or arising out of this Pledge
Agreement, or the manufacture, purchase, acceptance, rejection,
ownership, delivery, lease, possession, use, operation,
condition, sale, return or other disposition of any Collateral
(including, without limitation, latent and other defects, whether
or not discoverable by the Lender or the Borrower, and any claim
for patent, trademark or copyright infringement), except to the
extent the accrual of such damages, liabilities, penalties,
suits, costs and expenses is attributable to the gross negligence
or willful misconduct of the Lender or its successors, assigns,
agents and employees.
ARTICLE IX
NOTICES
9.1. GIVING NOTICE. All notices and other communications
provided to any party hereto under this Pledge Agreement shall be
sent (and deemed received in the manner set forth in Article XIII
of the Loan Agreement.
9.2. CHANGE OF ADDRESS. The Borrower and the Lender may
each change the address for service of notice upon it by a notice
in writing to the other party hereto.
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IN WITNESS WHEREOF, the Borrower and the Lender have
executed this Pledge Agreement as of the date first above
written.
DTI HOLDINGS, INC.
By: /s/Gary W. Douglass
Name: Gary W. Douglass
Title: Senior Vice President & Chief
Financial Officer
KLT TELECOM INC.
By: /s/Mark R. Schroeder
Mark R. Schroeder, Vice President
15
Exhibit 10-u
CREDIT AGREEMENT
BETWEEN
KLT TELECOM INC.,
AS LENDER,
AND
DIGITAL TELEPORT, INC.,
AS BORROWER
DATED AS OF FEBRUARY 21, 2001
DIGITAL TELEPORT, INC.
CREDIT AGREEMENT
This CREDIT AGREEMENT, dated as of February 21, 2001, is
AMONG DIGITAL TELEPORT, INC. (the "Borrower") and KLT TELECOM
INC. (the "Lender"). The parties hereto agree as follows:
WHEREAS, the Borrower wishes to obtain, and the Lender is
willing to make, certain revolving credit loans on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the undertakings set
forth herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Acquisition" means any transaction, or any series of
related transactions, consummated on or after the date of this
Agreement, by which the Borrower or any of its Subsidiaries (i)
acquires any going business or all or substantially all of the
assets of any firm, corporation or division thereof, whether
through purchase of assets, merger or otherwise or (ii) directly
or indirectly acquires (in one transaction or as the most recent
transaction in a series of transactions) at least a majority (in
number of votes) of the securities of a corporation which have
ordinary voting power for the election of directors (other than
securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the
outstanding partnership interests of a partnership.
"Advance" means a borrowing hereunder by the Borrower.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control
with such Person. A Person shall be deemed to control another
Person if the controlling Person owns 10% or more of any class of
voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power
to direct or cause the direction of the management or policies of
the controlled Person, whether through ownership of stock, by
contract or otherwise.
"Agreement" means this Credit Agreement, as it may be
amended or modified and in effect from time to time.
"Article" means an article of this Agreement unless another
document is specifically referenced.
"Authorized Officer" means any officer of the Borrower,
acting singly.
"Borrower" means Digital Teleport, Inc., a Missouri
corporation, and its successors and assigns.
"Borrowing Date" means a date on which an Advance is made
hereunder.
"Borrowing Notice" is defined in Section 2.8.
"Business Day" means (i) with respect to any borrowing,
payment or rate selection of Eurodollar Advances, a day (other
than a Saturday or Sunday) on which banks generally are open in
Kansas City, Missouri, for the conduct of substantially all of
their commercial lending activities and on which dealings in
United States dollars are carried on in the London interbank
market and (ii) for all other purposes, a day (other than a
Saturday or Sunday) on which banks generally are open in Kansas
City, Missouri, for the conduct of substantially all of their
commercial lending activities.
"Capitalized Lease" of a Person means any lease of Property
by such Person as lessee which would be capitalized on a balance
sheet of such Person prepared in accordance with Agreement
Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount
of the obligations of such Person under Capitalized Leases which
would be shown as a liability on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Code" means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.
"Commitment" means the obligation of the Lender to make
Loans not exceeding Twenty Five Million Dollars ($25,000,000.00)
in aggregate principal amount at any time outstanding.
"Condemnation" is defined in Section 7.8.
"Contingent Obligation" of a Person means any agreement,
undertaking or arrangement by which such Person assumes,
guarantees, endorses, contingently agrees to purchase or provide
funds for the payment of, or otherwise becomes or is contingently
liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other
financial condition of any other Person, or otherwise assures any
creditor of such other Person
2
against loss, including, without limitation, any comfort letter,
operating agreement or take-or-pay contract, or application for a
letter of credit or similar instrument by such Person or upon
which such Person is an account party or for which such Person is
in any way liable.
"Controlled Group" means all members of a controlled group
of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414 of
the Code. For purposes of this definition, Controlled Group
shall be determined immediately prior to the time Borrower became
a member of the Kansas City Power & Light Company controlled
group.
"Default" means an event described in Article VII.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any rule or regulation
issued thereunder.
"Facility Termination Date" means the earlier of June 30,
2002, or the date on which Lender makes demand for payment
pursuant to the Note.
"Indebtedness" of a Person means such Person's (i)
obligations for borrowed money, (ii) obligations representing the
deferred purchase price of Property or services (other than
accounts payable arising in the ordinary course of such Person's
business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by Liens or payable
out of the proceeds or production from property now or hereafter
owned or acquired by such Person, (iv) obligations which are
evidenced by notes, acceptances, or other instruments, (v)
Capitalized Lease Obligations, (vi) Rate Hedging Obligations, and
(vii) Contingent Obligations.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees
made in the ordinary course of business), extension of credit
(other than accounts receivable arising in the ordinary course of
business on terms customary in the trade), deposit account or
contribution of capital by such Person to any other Person or any
investment in, or purchase or other acquisition of, the stock,
partnership interests, notes, debentures or other securities or
other indebtedness of any other Person made by such Person.
"Lender" means KLT Telecom Inc., a Missouri corporation, and
its successors and assigns.
"Lien" means any lien (statutory or other), security
interest, mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance or preference, priority or other
security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of
a vendor or lessor under any conditional sale, Capitalized Lease
or other title retention agreement).
"Loan Documents" means this Agreement and the Note.
3
"Material Adverse Effect" means a material adverse effect on
(i) the business, Property, condition (financial or otherwise),
results of operations, or prospects of the Borrower takenas a
whole, (ii) the ability of the Borrower to perform its
obligations under the Loan Documents, or (iii) the validity or
enforceability of any of the Loan Documents or the rights or
remedies of the Lender thereunder.
"Multiemployer Plan" means a Plan maintained pursuant to a
collective bargaining agreement or any other arrangement to which
the Borrower or any member of the Controlled Group is a party to
which more than one employer is obligated to make contributions.
"Non-Recourse Debt" means Indebtedness which is incurred in
connection with the financing by the Borrower of the acquisition
or construction of an asset and (a) is collateralized by the
grant by the Borrower of a security interest in such asset and
(b) for which recourse for non-payment of any such Indebtedness
is limited solely to recourse to such asset (and other Property
specifically related thereto, such as permits, books, records,
and contracts) and not to any other assets of the Borrower.
"Note" means a demand promissory note, in substantially the
form of Exhibit "A" hereto, duly executed by the Borrower and
payable to the order of the Lender in the amount of the
Commitment, including any amendment, modification, renewal or
replacement of such demand promissory note.
"Obligations" means all unpaid principal of and accrued and
unpaid interest on the Note, and all accrued and unpaid fees and
all expenses, reimbursements, indemnities and other obligations
of the Borrower to the Lender arising under the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation, or
any successor thereto.
"Person" means any natural person, corporation, firm, joint
venture, partnership, association, enterprise, trust or other
entity or organization, or any government or political
subdivision or any agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code as to which the Borrower
or any member of the Controlled Group may have any liability.
"Property" of a Person means any and all property, whether
real, personal, tangible, intangible, or mixed, of such Person,
or other assets owned, leased or operated by such Person.
"Rate Hedging Obligations" of a Person means any and all
obligations of such Person, whether absolute or contingent and
howsoever and whensoever created, arising, evidenced or acquired
(including all renewals, extensions and modifications thereof and
substitutions therefor), under (i) any and all agreements,
devices or arrangements designed to protect at least
4
one of the parties thereto from the fluctuations of interest
rates, exchange rates or forward rates applicable to such party's
assets, liabilities or exchange transactions, including, but not
limited to, dollar-denominated or cross-currency interest rate
exchange agreements, forward currency exchange agreements,
interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii)
any and all cancellations, buy backs, reversals, terminations or
assignments of any of the foregoing.
"Reportable Event" means a reportable event as defined in
Section 4043 of ERISA and the regulations issued under such
section, with respect to a Plan, excluding, however, such events
as to which the PBGC by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure
to meet the minimum funding standard of Section 412 of the Code
and of Section 302 of ERISA shall be a Reportable Event
regardless of the issuance of any such waiver of the notice
requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.
"Section" means a numbered section of this Agreement, unless
another document is specifically referenced.
"Single Employer Plan" means a Plan maintained by the
Borrower or any member of the Controlled Group for employees of
the Borrower or any member of the Controlled Group.
"Subsidiary" of a Person means (i) any corporation more than
50% of the outstanding securities having ordinary voting power of
which shall at the time be owned or controlled, directly or
indirectly, by such Person or by one or more of its Subsidiaries
or by such Person and one or more of its Subsidiaries, or (ii)
any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or
controlled. Unless otherwise expressly provided, all references
herein to a "Subsidiary" shall mean a Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of
the Borrower, Property which (i) represents more than 10% of the
consolidated assets of the Borrower as would be shown in the
consolidated financial statements of the Borrower as at the
beginning of the twelve-month period ending with the month in
which such determination is made, or (ii) is responsible for more
than 10% of the consolidated net sales or of the consolidated net
income of the Borrower as reflected in the financial statements
referred to in clause (i) above.
"Unfunded Liabilities" means the amount (if any) by which
the present value of all vested nonforfeitable benefits under all
Single Employer Plans exceeds the fair market value of all such
Plan assets allocable to such benefits, all determined as of the
then most recent valuation date for such Plans.
"Unmatured Default" means an event which but for the lapse
of time or the giving of notice, or both, would constitute a
Default.
5
"Wholly-Owned Subsidiary" of a Person means (i) any
Subsidiary all of the outstanding voting securities of which
shall at the time be owned or controlled, directly or indirectly,
by such Person or one or more Wholly-Owned Subsidiaries of such
Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership,
association, joint venture or similar business organization 100%
of the ownership interests having ordinary voting power of which
shall at the time be so owned or controlled.
The foregoing definitions shall be equally applicable to
both the singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1. COMMITMENT. From and including the date of this
Agreement and prior to the Facility Termination Date, the Lender
agrees, on the terms and conditions set forth in this Agreement,
to make Advances to the Borrower from time to time in amounts not
to exceed in the aggregate at any one time outstanding the amount
of the Commitment, at the request of and for the account of the
Borrower from time to time before the Facility Termination Date.
Subject to the terms of this Agreement, the Borrower may borrow,
repay and reborrow at any time prior to the Facility Termination
Date. The Commitment shall expire on the Facility Termination
Date.
2.2. REQUIRED PAYMENTS; TERMINATION. The entire unpaid
principal balance of the Note shall be immediately due and
payable UPON DEMAND by Lender, and Borrower acknowledges that any
condition or requirement set forth in the Agreement or in any
other agreement between Borrower and Lender is not the only basis
upon which demand can be made hereunder.
2.3. MINIMUM AMOUNT OF EACH ADVANCE. Each Advance shall be
in the minimum amount of $1,000,000 (and in multiples of $500,000
if in excess thereof) or, if less, the amount of the unused
Commitment.
2.4. OPTIONAL PRINCIPAL PAYMENTS. The Borrower may from
time to time pay, without penalty or premium, all outstanding
Advances, or, in a minimum aggregate amount of $1,000,000 or any
integral multiple of $500,000 in excess thereof, any portion of
the outstanding Advances upon two Business Days' prior notice to
the Lender.
2.5. INTEREST RATE. Each Advance shall bear interest on the
outstanding principal amount thereof, for each day from and
including the date such Advance is made at a rate per annum equal
to 9.5%, calculated on the basis of a 360 day year. Interest
shall be payable for the day an Advance is made but not for the
day of any payment on the amount paid if payment is received
prior to noon (local time) at the place of payment. If any
payment of principal of or
6
interest on an Advance shall become due on a day which is not a
Business Day, such payment shall be made on the next succeeding
Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in
connection with such payment.
2.6. RATE APPLICABLE AFTER DEFAULT. Notwithstanding
anything to the contrary contained in Section 2.5, during the
continuance of a Default or Unmatured Default all outstanding
Advances shall bear interest on the outstanding principal amounts
thereof for each day from and including the date such Default or
Unmatured Default occurred at a rate per annum equal to 12.5%,
calculated on the basis of a 360 day year.
2.7. METHOD OF PAYMENT. All payments of the Obligations
hereunder shall be made, without setoff, deduction, counterclaim,
or withholding, in immediately available funds to the Lender at
the Lender's address specified pursuant to Article VIII, by noon
(local time) on the date when due.
2.8. NOTES; TELEPHONIC NOTICES. The Lender is hereby
authorized to record the principal amount of each of its Advances
and each repayment on the schedule attached to the Note,
provided, however, that the failure to so record shall not affect
the Borrower's obligations under such Note. The Borrower hereby
authorizes the Lender to extend Advances and to transfer funds
based on telephonic notices made by any person or persons the
Lender in good faith believes to be acting on behalf of the
Borrower. The Borrower agrees to deliver promptly to the Lender
a written confirmation, if such confirmation is requested by the
Lender, of each telephonic notice signed by an Authorized
Officer. If the written confirmation differs in any material
respect from the action taken by the Lender, the records of the
Lender shall govern absent manifest error.
ARTICLE III
CONDITIONS PRECEDENT
3.1. CONDITIONS PRECEDENT TO EFFECTIVENESS. This
Agreement shall become effective on the date on which the
Borrower has paid to the Lenders all fees, costs and expenses due
and payable pursuant to Section 8.7 (to the extent then billed)
and the Borrower has furnished to the Lender:
(i) Copies of the articles of incorporation of the
Borrower, together with all amendments, and a
certificate of good standing, both certified by the
appropriate governmental officer in its jurisdiction of
incorporation.
(ii) Copies, certified by the Secretary or Assistant
Secretary of the Borrower, of its by-laws and of its
Board of Directors' resolutions (and resolutions of
other bodies, if any are deemed necessary by counsel
for any Lender) authorizing the execution of the Loan
Documents.
7
(iii) An incumbency certificate, executed by the
Secretary or Assistant Secretary of the Borrower, which
shall identify by name and title and bear the signature
of the officers of the Borrower authorized to sign the
Loan Documents and to make borrowings hereunder, upon
which certificate the Agent and the Lenders shall be
entitled to rely until informed of any change in
writing by the Borrower.
(iv) A certificate, signed by the President, or Vice
President and Chief Financial Officer of the Borrower,
stating that on the effective date no Default or
Unmatured Default has occurred and is continuing.
(v) The Note duly executed by the Borrower.
(vi) Written money transfer instructions addressed to the
Lender and signed by an Authorized Officer, together
with such other related money transfer authorizations
as the Lender may have reasonably requested.
(vii) The insurance certificate described in Section
4.15.
(viii) Such other documents as any Lender or its counsel may
have reasonably requested, including without limitation, legal
opinions, applicable governmental and other approvals,
certificates of existence, lien/bankruptcy/judgment searches, all
in acceptable form and substance to Lender.
(ix) The most current financial statements regarding Borrower
available prior to the effective date, and certified financial
statements annually thereafter. The financial statements
provided shall be audited if available, but in any event shall be
prepared in accordance with generally accepted accounting
principles.
3.2. EACH ADVANCE. The Lender shall not be required to
make any Advance (other than an Advance that, after giving effect
thereto and to the application of the proceeds thereof, does not
increase the aggregate amount of outstanding Advances), unless on
the applicable Borrowing Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article
IV are true and correct as of such Borrowing Date,
except to the extent any such representation or
warranty is stated to relate solely to an earlier date,
in which case such representation or warranty shall be
true and correct on and as of such earlier date.
(iii) All legal matters incident to the making of such
Advance shall be satisfactory to the Lenders and their
counsel.
8
Each Borrowing Notice with respect to each such Advance
shall constitute a representation and warranty by the Borrower
that the conditions contained in Sections 3.2(i) and (ii) have
been satisfied. The Lender may require a duly completed
compliance certificate in substantially the form of Exhibit 3.2
hereto as a condition to making an Advance.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
4.1. CORPORATE EXISTENCE AND STANDING. The Borrower is
a corporation duly incorporated or organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation or organization and has all requisite authority to
conduct its business in each jurisdiction in which its business
is conducted.
4.2. AUTHORIZATION AND VALIDITY. The Borrower has the
corporate power and authority and legal right to execute and
deliver the Loan Documents and to perform its obligations
thereunder. The execution and delivery by the Borrower of the
Loan Documents and the performance of its obligations thereunder
have been duly authorized by proper corporate proceedings, and
the Loan Documents constitute legal, valid and binding
obligations of the Borrower enforceable against the Borrower in
accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally.
4.3. NO CONFLICT; GOVERNMENT CONSENT. Neither the
execution and delivery by the Borrower of the Loan Documents, nor
the consummation of the transactions therein contemplated, nor
compliance with the provisions thereof will violate any law,
rule, regulation, order, writ, judgment, injunction, decree or
award binding on the Borrower or the Borrower's articles of
incorporation or by-laws or the provisions of any indenture,
instrument or agreement to which the Borrower is a party or is
subject, or by which it, or its Property, is bound, or conflict
with or constitute a default thereunder, or result in the
creation or imposition of any Lien in, of or on the Property of
the Borrower pursuant to the terms of any such indenture,
instrument or agreement. No order, consent, approval, license,
authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public
body or authority, or any subdivision thereof, is required to
authorize, or is required in connection with the execution,
delivery and performance of, or the legality, validity, binding
effect or enforceability of, any of the Loan Documents.
4.4. FINANCIAL STATEMENTS. The December 31, 2000
financial statements of the Borrower heretofore delivered to the
Lender were prepared in accordance with generally accepted
accounting principles and fairly present the consolidated
financial condition and operations of the Borrower at such date
and the consolidated results of their operations for the period
then ended.
9
4.5. MATERIAL ADVERSE CHANGE. Since February 1, 2001,
there has been no change in the business, Property, prospects,
condition (financial or otherwise) or results of operations of
the Borrower which could reasonably be expected to have a
Material Adverse Effect.
4.6. TAXES. The Borrower has filed all United States
federal tax returns and all other tax returns which are required
to be filed and have paid all taxes due pursuant to said returns
or pursuant to any assessment received by the Borrower, except
such taxes, if any, as are being contested in good faith and as
to which adequate reserves have been provided. No tax liens have
been filed and no claims are being asserted with respect to any
such taxes. The charges, accruals and reserves on the books of
the Borrower in respect of any taxes or other governmental
charges are adequate.
4.7. LITIGATION AND CONTINGENT OBLIGATIONS. There is
no litigation, arbitration, governmental investigation,
proceeding or inquiry pending or, to the knowledge of any of
their officers, threatened against or affecting the Borrower
which could reasonably be expected to have a Material Adverse
Effect. As of the date of each Advance, the Borrower has no
Contingent Obligations other than those allowed under Section
5.10.
4.8. ERISA. The Unfunded Liabilities of all Single
Employer Plans do not in the aggregate exceed $100,000. Neither
the Borrower nor any other member of the Controlled Group has
incurred, or is reasonably expected to incur, any withdrawal
liability to Multiemployer Plans in excess of $100,000 in the
aggregate. Each Plan complies in all material respects with all
applicable requirements of law and regulations, no Reportable
Event has occurred with respect to any Plan, neither the Borrower
nor any other members of the Controlled Group has withdrawn from
any Plan or initiated steps to do so, and no steps have been
taken to reorganize or terminate any Plan.
4.9. ACCURACY OF INFORMATION. No information, exhibit or
report furnished by the Borrower to the Lender in connection with
the negotiation of, or compliance with, the Loan Documents
contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements
contained therein not misleading.
4.10. MATERIAL AGREEMENTS. The Borrower is not in
default in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any
agreement or instrument evidencing or governing Indebtedness,
which default could reasonably be expected to have a Material
Adverse Effect.
4.11. COMPLIANCE WITH LAWS. The Borrower has complied
with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any
instrumentality or agency thereof, having jurisdiction over the
conduct of its business or the ownership of its Property, the
failure to comply with which could reasonably be expected to have
a Material Adverse Effect. The Borrower has not received any
notice to the effect that its operations are not in material
compliance with any of the requirements of applicable federal,
10
state and local environmental, health and safety statutes and
regulations or the subject of any federal or state investigation
evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action could
reasonably be expected to have a Material Adverse Effect.
4.12. OWNERSHIP OF PROPERTIES. On the date of this
Agreement, the Borrower will have good title, free of all Liens
other than those permitted by Section 5.16, to all of the
Property and assets reflected in the financial statements as
owned by it.
4.13. INVESTMENT COMPANY ACT. The Borrower is not an
"investment company" within the meaning of the Investment Company
Act of 1940, as amended.
4.15. INSURANCE. The certificate signed by the
President or Chief Financial Officer of the Borrower, that
attests to the existence and adequacy of, and summarizes, the
property and casualty insurance program carried by the Borrower
and that has been furnished by the Borrower to the Lender, is
complete and accurate. This summary includes the insurer's or
insurers' name(s), policy number(s), expiration date(s),
amount(s) of coverage, type(s) of coverage, exclusion(s), and
deductibles. This summary also includes similar information, and
describes any reserves, relating to any self-insurance program
that is in effect.
ARTICLE V
COVENANTS
During the term of this Agreement, unless the Lender shall
otherwise consent in writing:
5.1. FINANCIAL REPORTING. The Borrower will maintain
for itself a system of accounting established and administered in
accordance with generally accepted accounting principles, and
furnish to the Lender:
(i) Within 90 days after the close of each of its fiscal
years, an audit report certified by independent
certified public accountants, acceptable to the Lender,
prepared in accordance with generally accepted
accounting principles for itself, including balance
sheets as of the end of such period, related profit and
loss and reconciliation of surplus statements, and a
statement of cash flows, accompanied by (a) any
management letter prepared by said accountants, and (b)
a certificate of said accountants that, in the course
of their examination necessary for their certification
of the foregoing, they have obtained no knowledge of
any Default or Unmatured Default, or if, in the opinion
of such accountants, any Default or Unmatured Default
shall exist, stating the nature and status thereof.
11
(ii) Within 45 days after the close of the first three
quarterly periods of each of its fiscal years,
unaudited balance sheets as at the close of each such
period and profit and loss and reconciliation of
surplus statements and a statement of cash flows for
the period from the beginning of such fiscal year to
the end of such quarter, all certified by its President
or the Chief Financial Officer.
(iii) As soon as available, but in any event within 60
days after the beginning of each fiscal year of the
Borrower, a copy of the plan and forecast (including a
projected consolidated and consolidating balance sheet,
income statement and funds flow statement and updated
projections) of the Borrower for such fiscal year.
(iv) Together with the financial statements required
hereunder, a compliance certificate in substantially
the form of Exhibit 3.2 hereto signed by its President
or the Chief Financial Officer stating that no Default
or Unmatured Default exists, or if any Default or
Unmatured Default exists, stating the nature and status
thereof.
(v) Within 270 days after the close of each fiscal year, a
statement of the Unfunded Liabilities of each Single
Employer Plan, certified as correct by an actuary
enrolled under ERISA.
(vi) As soon as possible and in any event within 10 days
after the Borrower knows that any Reportable Event has
occurred with respect to any Plan, a statement, signed
by the President or the Chief Financial Officer of the
Borrower, describing said Reportable Event and the
action which the Borrower proposes to take with respect
thereto.
(vii) As soon as possible and in any event within 10
days after receipt by the Borrower, a copy of (a) any
notice or claim to the effect that the Borrower is or
may be liable to any Person as a result of the release
by the Borrower or any other Person of any toxic or
hazardous waste or substance into the environment, and
(b) any notice alleging any violation of any federal,
state or local environmental, health or safety law or
regulation by the Borrower, which, in either case,
could reasonably be expected to have a Material Adverse
Effect.
(viii) Promptly upon the filing thereof, copies of all
registration statements and annual, quarterly, monthly
or other regular reports which the Borrower files with
the Securities and Exchange Commission.
(ix) Such other information (including non-financial
information) as the Lender may from time to time
reasonably request.
5.2. USE OF PROCEEDS. The Borrower will, and will cause
each Subsidiary to, use the proceeds of the Advances for working
capital and general corporate purposes. The Borrower will
12
not use any identifiable portion of the proceeds of the Advances
to purchase or carry any "margin stock" (as defined in Regulation
U) or to make any other Acquisition.
5.3. NOTICE OF DEFAULT. The Borrower will give prompt
notice in writing to the Lenders of the occurrence of any Default
or Unmatured Default and of any other development, financial or
otherwise, which could reasonably be expected to have a Material
Adverse Effect.
5.4. CONDUCT OF BUSINESS. The Borrower will carry on
and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently
conducted and to do all things necessary to remain duly
incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all
requisite authority to conduct its business in each jurisdiction
in which its business is conducted.
5.5. TAXES. The Borrower will pay when due all taxes,
assessments and governmental charges and levies upon it or its
income, profits or Property, except those which are being
contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been set aside.
5.6. INSURANCE. The Borrower will maintain with
financially sound and reputable insurance companies insurance on
all their Property in such amounts and covering such risks as is
consistent with sound business practice, and the Borrower will
furnish to Lender upon request full information as to the
insurance carried.
5.7. COMPLIANCE WITH LAWS. The Borrower will comply
with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject, the
failure to comply with which could reasonably be expected to have
a Material Adverse Effect.
5.8. MAINTENANCE OF PROPERTIES. The Borrower will do
all things necessary to maintain, preserve, protect and keep its
Property in good repair, working order and condition, and make
all necessary and proper repairs, renewals and replacements so
that its business carried on in connection therewith may be
properly conducted at all times.
5.9. INSPECTION. The Borrower will permit the Lender,
by its representatives and agents, to inspect any of the
Property, corporate books and financial records of the Borrower,
to examine and make copies of the books of accounts and other
financial records of the Borrower, and to discuss the affairs,
finances and accounts of the Borrower with, and to be advised as
to the same by, their respective officers at such reasonable
times and intervals as the Lender may designate.
5.10. INDEBTEDNESS. The Borrower will not create, incur
or suffer to exist any Indebtedness, except:
(i) The Advances.
13
(ii) Indebtedness existing on the date hereof.
(iii) Non-Recourse Debt.
(iv) Other Indebtedness as approved in advance by the
Lender.
5.11. MERGER. The Borrower will not merge or consolidate
with or into any other Person.
5.12. SALE OF ASSETS. The Borrower will not lease, sell
or otherwise dispose of its Property, to any other Person except
for (i) sales of inventory in the ordinary course of business,
(ii) at all times that no Default or Unmatured Default has
occurred and is continuing, leases, sales or other dispositions
of its Property that, together with all other Property of the
Borrower previously leased, sold or disposed of (other than
inventory in the ordinary course of business) as permitted by
this clause (ii) during the twelve-month period ending with the
month in which any such lease, sale or other disposition occurs,
do not constitute a Substantial Portion of the Property of the
Borrower.
5.13. SALE OF ACCOUNTS. The Borrower will not sell or
otherwise dispose of any notes receivable or accounts receivable,
with or without recourse.
5.14. SALE AND LEASEBACK. The Borrower will not sell or
transfer any of its Property in order to concurrently or
subsequently lease as lessee such or similar Property.
5.15. INVESTMENTS AND ACQUISITIONS. The Borrower will
not make or suffer to exist any Investments (other than loans and
advances to, and other Investments in, Subsidiaries), or
commitments therefor, or to make any Acquisition of any Person,
except:
(i) Short-term obligations of, or fully guaranteed by, the
United States of America or any agency or
instrumentality thereof, or any money market mutual
fund that invests substantially all of its assets in
such short-term obligations.
(ii) Commercial paper rated A-l or better by Standard and
Poor's Ratings Group or P-l or better by Moody's
Investors Service, Inc.
(iii) Demand deposit accounts maintained in the ordinary
course of business.
(iv) Certificates of deposit issued by and time deposits
with commercial banks (whether domestic or foreign)
having capital and surplus in excess of $100,000,000
and a long-term debt rating of A or better by Standard
and Poor's Ratings Group or Moody's Investors Service,
Inc.
(v) Investments in existence on the date hereof.
14
5.16. LIENS. The Borrower will not create, incur, or
suffer to exist any Lien in, of or on the Property of the
Borrower, except:
(i) Liens for taxes, assessments or governmental charges or
levies on its Property if the same shall not at the
time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by
appropriate proceedings and for which adequate reserves
in accordance with generally accepted principles of
accounting shall have been set aside on its books.
(ii) Liens imposed by law, such as carriers', warehousemen's
and mechanics' liens and other similar liens arising in
the ordinary course of business which secure payment of
obligations not more than 60 days past due or which are
being contested in good faith by appropriate
proceedings and for which adequate reserves in
accordance with generally accepted principles of
accounting shall have been set aside on its books.
(iii) Liens arising out of pledges or deposits under
worker's compensation laws, unemployment insurance, old
age pensions, or other social security or retirement
benefits, or similar legislation.
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of
a nature generally existing with respect to properties
of a similar character and which do not in any material
way affect the marketability of the same or interfere
with the use thereof in the business of the Borrower or
the Subsidiaries.
(v) Liens existing on the date hereof.
(vi) Judgment Liens which secure payment of legal
obligations that would not otherwise constitute a
Default under Section 6.9.
(vii) Liens securing Non-Recourse Debt otherwise
permitted under the terms of this Agreement.
(viii) Liens on Property in existence at the time of
acquisition of such Property by the Borrower.
(ix) Deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds,
performance bonds, and other obligations of a like
nature incurred in the ordinary course of business by
the Borrower or any Subsidiary.
(x) Liens created by the Loan Documents.
15
5.17. AFFILIATES. The Borrower will not enter into any
transaction (including, without limitation, the purchase or sale
of any Property or service) with, or make any payment or transfer
to, any Affiliate except in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower's
business and upon fair and reasonable terms no less favorable to
the Borrower than the Borrower would obtain in a comparable
arms-length transaction.
ARTICLE VI
DEFAULTS
The occurrence of any one or more of the following events
shall constitute a Default:
6.1. Any representation or warranty made or deemed made
by or on behalf of the Borrower to the Lender under or in
connection with this Agreement, any Advance, or any certificate
or information delivered in connection with this Agreement or any
other Loan Document shall be materially false on the date as of
which made.
6.2. Nonpayment of principal of the Note when due, or
nonpayment of interest on the Note or other obligations under any
of the Loan Documents within five days after the same becomes
due.
6.3. The breach by the Borrower of any of the terms or
provisions of Section 5.2, 5.10, 5.11, 5.12, 5.14, 5.15, 5.16 or
5.17.
6.4. The breach by the Borrower (other than a breach
which constitutes a Default under Section 5.1, 5.2 or 5.3) of any
of the terms or provisions of this Agreement which is not
remedied within five days after written notice from the Lender.
6.5. Failure of the Borrower to pay any Indebtedness
when due; or the default by the Borrower in the performance of
any term, provision or condition contained in any agreement under
which any Indebtedness was created or is governed, or any other
event shall occur or condition exist, the effect of which is to
cause, or to permit the holder or holders of such Indebtedness to
cause, such Indebtedness to become due prior to its stated
maturity; or any Indebtedness of the Borrower shall be declared
to be due and payable or required to be prepaid (other than by a
regularly scheduled payment) prior to the stated maturity
thereof; or the Borrower shall not pay, or admit in writing its
inability to pay, its debts generally as they become due.
6.6. The Borrower shall (i) have an order for relief
entered with respect to it under the Federal bankruptcy laws as
now or hereafter in effect, (ii) make an assignment for the
benefit of creditors, (iii) apply for, seek, consent to, or
acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any
Substantial Portion of its
16
Property, (iv) institute any proceeding seeking an order for
relief under the Federal bankruptcy laws as now or hereafter in
effect or seeking to adjudicate it a bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed
against it, (v) take any corporate action to authorize or effect
any of the foregoing actions set forth in this Section 6.6 or
(vi) fail to contest in good faith any appointment or proceeding
described in Section 6.7.
6.7. Without the application, approval or consent of
the Borrower, a receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Borrower or any
Substantial Portion of its respective Property, or a proceeding
described in Section 6.6(iv) shall be instituted against the
Borrower and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of 30
consecutive days.
6.8. Any court, government or governmental agency shall
condemn, seize or otherwise appropriate, or take custody or
control of (each a "Condemnation"), all or any portion of the
Property of the Borrower which, when taken together with all
other Property of the Borrower seized, appropriated, or taken
custody or control of, during the twelve-month period ending with
the month in which any such Condemnation occurs, constitutes a
Substantial Portion.
6.9. The Borrower shall fail within 30 days to pay,
bond or otherwise discharge any judgment or order for the payment
of money in excess of $100,000, which is not stayed on appeal or
otherwise being appropriately contested in good faith.
6.10. The Unfunded Liabilities of all Single Employer
Plans shall exceed in the aggregate $100,000 or any Reportable
Event shall occur in connection with any Plan.
6.11. The Borrower or any other member of the Controlled
Group shall have been notified by the sponsor of a Multiemployer
Plan that it has incurred withdrawal liability to such
Multiemployer Plan in an amount which, when aggregated with all
other amounts required to be paid to Multiemployer Plans by the
Borrower or any other member of the Controlled Group as
withdrawal liability (determined as of the date of such
notification), exceeds $100,000.
6.12. The Borrower or any other member of the Controlled
Group shall have been notified by the sponsor of a Multiemployer
Plan that such Multiemployer Plan is in reorganization or is
being terminated, within the meaning of Title IV of ERISA, if as
a result of such reorganization or termination the aggregate
annual contributions of the Borrower and the other members of the
Controlled Group (taken as a whole) to all Multiemployer Plans
which are then in reorganization or being terminated have been or
will be increased over the amounts contributed to such
Multiemployer Plans for the respective plan years of each such
Multiemployer Plan immediately preceding the plan year in which
the reorganization or termination occurs by an amount exceeding
$100,000.
17
6.13. The Borrower shall be the subject of any
proceeding or investigation pertaining to the release by the
Borrower or any other Person of any toxic or hazardous waste or
substance into the environment, or any violation of any federal,
state or local environmental, health or safety law or regulation,
which, in either case, could reasonably be expected to have a
Material Adverse Effect.
ARTICLE VII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
7.1. ACCELERATION. If any Default described in Section
6.6 or 6.7 occurs with respect to the Borrower, the obligations
of the Lender to make Advances hereunder shall automatically
terminate and the Obligations shall immediately become due and
payable without any election or action on the part of the Lender.
If any other Default occurs, the Lender may terminate or suspend
the obligations of the Lender to make Advances hereunder, or
declare the Obligations to be due and payable, or both, whereupon
the Obligations shall become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which
the Borrower hereby expressly waives. Notwithstanding the
foregoing, Borrower may make demand for payment of the
Obligations at any time and for any or no reason.
7.2. AMENDMENTS. Subject to the provisions of this
Article VII, the Lender and the Borrower may enter into
agreements supplemental hereto for the purpose of adding or
modifying any provisions to the Loan Documents or changing in any
manner the rights of the Lender or the Borrower hereunder or
waiving any Default hereunder.
7.3. PRESERVATION OF RIGHTS. No delay or omission of
the Lender to exercise any right under the Loan Documents shall
impair such right or be construed to be a waiver of any Default
or an acquiescence therein, and the making of an Advance
notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Advance
shall not constitute any waiver or acquiescence. Any single or
partial exercise of any such right shall not preclude other or
further exercise thereof or the exercise of any other right, and
no waiver, amendment or other variation of the terms, conditions
or provisions of the Loan Documents whatsoever shall be valid
unless in contained in a writing signed by the Lender, and then
only to the extent set forth in such writing. All remedies
contained in the Loan Documents or afforded by law shall be
cumulative and all shall be available to the Lender until the
Obligations have been paid in full.
18
ARTICLE VIII
GENERAL PROVISIONS
8.1. SURVIVAL OF REPRESENTATIONS. All representations
and warranties of the Borrower contained in this Agreement shall
survive delivery of the Note and the making of the Advances
herein contemplated.
8.2. GOVERNMENTAL REGULATION. Anything contained in this
Agreement to the contrary notwithstanding, the Lender shall not
be obligated to extend credit to the Borrower in violation of any
limitation or prohibition provided by any applicable statute or
regulation.
8.3. TAXES. Any taxes (excluding federal income taxes
on the overall net income of the Lender) or other similar
assessments or charges made by any governmental or revenue
authority in respect of the Loan Documents shall be paid by the
Borrower, together with interest and penalties, if any, other
than interest and penalties to the extent the accrual of which is
attributable to the gross negligence or willful misconduct of the
Lender.
8.4. HEADINGS. Section headings in the Loan Documents
are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of the Loan Documents.
8.5. ENTIRE AGREEMENT. The Loan Documents embody the
entire agreement and understanding among the Borrower and the
Lender and supersede all prior agreements and understandings
among the Borrower and the Lenders relating to the subject matter
thereof.
8.6. BENEFITS OF THIS AGREEMENT. This Agreement shall
not be construed so as to confer any right or benefit upon any
Person other than the parties to this Agreement and their
respective successors and assigns.
8.7. EXPENSES; INDEMNIFICATION. The Borrower shall
reimburse the Lender for any costs, internal charges and
out-of-pocket expenses (including attorneys' fees and time
charges of attorneys for the Lender, which attorneys may be
employees of the Lender) paid or incurred by the Lender in
connection with the preparation, negotiation, execution,
delivery, review, amendment, modification, and administration of
the Loan Documents. The Borrower also agrees to reimburse the
Lender for any costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the
Lender, which attorneys may be employees of the Lender) paid or
incurred by the Lender in connection with the collection and
enforcement of the Loan Documents. The Borrower further agrees
to indemnify the Lender, its directors, officers and employees
against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all
expenses of litigation or preparation therefor whether or not the
Lender is a party thereto) which any of them may pay or incur
arising out of or relating to this Agreement, the other Loan
Documents, the transactions contemplated hereby or the direct or
indirect application or proposed application of the proceeds of
any Advance hereunder except to the extent such obligations arise
from the gross negligence or willful misconduct of the
19
Lender. The obligations of the Borrower under this Section shall
survive the termination of this Agreement.
8.8. ACCOUNTING. Except as provided to the contrary
herein, all accounting terms used herein shall be interpreted and
all accounting determinations hereunder shall be made in
accordance with generally accepted accounting principles.
20
8.9. SEVERABILITY OF PROVISIONS. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or
invalid in any jurisdiction shall, as to that jurisdiction, be
inoperative, unenforceable, or invalid without affecting the
remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan
Documents are declared to be severable.
8.10. CHOICE OF LAW. THE TRANSACTION DOCUMENTS (OTHER
THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION)
SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT
THE LAW OF CONFLICTS) OF THE STATE OF MISSOURI.
8.11. CONSENT TO JURISDICTION. THE BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL OR MISSOURI STATE COURT SITTING IN KANSAS
CITY, MISSOURI, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY TRANSACTION DOCUMENTS AND THE BORROWER HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS
TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE LENDER TO BRING
PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST
THE LENDER OR ANY AFFILIATE OF THE LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT
IN KANSAS CITY, MISSOURI.
8.12. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS.
THE BORROWER AND LENDER HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT
OR THE RELATIONSHIP ESTABLISHED THEREUNDER. THE BORROWER AND
LENDER HEREBY WAIVE ALL RIGHT TO CLAIM OR RECOVER IN ANY ACTION
OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES.
8.13. SUCCESSORS AND ASSIGNS. The terms and provisions
of the Loan Documents shall be binding upon and inure to the
benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower shall not have
the right to assign its rights or obligations under the Loan
Documents.
21
8.14. GIVING NOTICE. Except as otherwise permitted by
Section 2.8 with respect to borrowing notices, all notices and
other communications provided to any party hereto under this
Agreement or any other Loan Document shall be in writing or by
telex or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other
address as may be designated by such party in a notice to the
other parties. Any notice, if mailed and properly addressed with
postage prepaid, shall be deemed given when received; any notice,
if transmitted by telex or facsimile, shall be deemed given when
transmitted (answerback confirmed in the case of telexes).
8.15. CHANGE OF ADDRESS. The Borrower and Lender may
each change the address for service of notice upon it by a notice
in writing to the other parties hereto.
22
8.16 COUNTERPARTS; EFFECTIVENESS. This Agreement may be
executed in any number of counterparts, all of which taken
together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been
executed by the Borrower and the Lender and each party has
notified the other by facsimile or telephone, that it has taken
such action.
8.17 ACKNOWLEDGMENTS. THE BORROWER HEREBY REPRESENTS,
WARRANTS, ACKNOWLEDGES AND ADMITS THAT (A) IT HAS BEEN ADVISED BY
COUNSEL ON THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE LOAN DOCUMENTS AND ANY OTHER INSTRUMENT OR
DOCUMENT ENTERED INTO IN CONNECTION HEREWITH, (B) IT HAS MADE AN
INDEPENDENT DECISION TO ENTER INTO THIS AGREEMENT, THE LOAN
DOCUMENTS AND SUCH OTHER INSTRUMENTS AND DOCUMENTS, WITHOUT
RELIANCE ON ANY REPRESENTATION, WARRANTY, COVENANT OR UNDERTAKING
BY THE LENDER, WHETHER WRITTEN, ORAL OR IMPLICIT, OTHER THAN AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, (C) THE LENDER HAS NOT
MADE ANY REPRESENTATION, COVENANT OR UNDERTAKING TO THE BORROWER
IN CONNECTION WITH THE RIGHTS AND OBLIGATIONS OF THE BORROWER
PURSUANT TO THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY SUCH
INSTRUMENTS AND DOCUMENTS, (D) THERE ARE NO REPRESENTATIONS,
WARRANTIES, COVENANTS OR UNDERTAKINGS OR AGREEMENTS BY THE LENDER
AS TO THIS AGREEMENT, THE LOAN DOCUMENTS OR SUCH INSTRUMENTS AND
DOCUMENTS EXCEPT AS EXPRESSLY SET FORTH IN WRITING HEREIN OR
THEREIN, (E) THE RELATIONSHIP BETWEEN THE BORROWER AND THE LENDER
, PURSUANT TO THIS AGREEMENT, THE LOAN DOCUMENTS AND SUCH
INSTRUMENTS AND DOCUMENTS, IS AND SHALL BE SOLELY THAT OF DEBTOR
AND CREDITOR, RESPECTIVELY, (F) NO JOINT VENTURE EXISTS BETWEEN
THE LENDER AND THE BORROWER, (G) WITHOUT LIMITING ANY OF THE
FOREGOING, THE BORROWER IS NOT RELYING UPON ANY REPRESENTATION BY
THE LENDER, OR ANY REPRESENTATIVE THEREOF, AND NO SUCH
REPRESENTATION HAS BEEN MADE, THAT THE LENDER WILL AT THE TIME OF
A DEFAULT OR UNMATURED DEFAULT OR AT ANY OTHER TIME, WAIVE,
NEGOTIATE, DISCUSS OR REFRAIN FROM TAKING ANY ACTION WITH RESPECT
TO ANY SUCH DEFAULT OR UNMATURED DEFAULT OR ANY OTHER TERM OF
THIS AGREEMENT OR SUCH INSTRUMENTS OR DOCUMENTS, AND (H) THE
LENDER HAS RELIED UPON THE TRUTHFULNESS OF THE FOREGOING
ACKNOWLEDGMENTS AND OF THE STATEMENTS CONTAINED IN THE DOCUMENTS
DELIVERED BY BORROWER REFERRED TO IN SECTION 3.1 IN DECIDING TO
EXECUTE AND DELIVER THIS AGREEMENT AND TO ACCEPT THE NOTE.
8.18 NO ORAL AGREEMENTS; ENTIRE AGREEMENT. ORAL AGREEMENTS
OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT YOU (THE
BORROWER,) AND US (THE LENDER) FROM MISUNDERSTANDING OR
DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE
CONTAINED IN THIS WRITING (AND THE LOAN DOCUMENTS), WHICH IS THE
COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US,
EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
ARTICLE IX
23
SECURITY
9.1 GRANT OF SECURITY INTEREST. To the extent permitted by
law, regulation or the provisions of any relevant agreement,
Borrower hereby grants to Lender (i) a security interest in and
to the collateral identified on EXHIBIT 9.1, attached hereto and
made a part hereof (the "Collateral"), and (ii) a lien upon all
of the Borrower's real property interests, as security for the
full and timely payment and performance by Borrower of the
Obligations. Upon request by the Lender, Borrower shall take
commercially reasonable efforts to seek all necessary consents,
authorizations or waivers required by law, regulation or
agreement to permit Lender's security interest to attach to any
and all portions of the Collateral. Nothing in this Article IX
shall be construed as creating a security interest in any portion
of the Collateral which is prohibited by law or regulation, or
which would constitute a breach of any agreement between the
Lender and a third party.
9.2 PERFECTION. Borrower shall execute and deliver to
Lender, or file or cause to be filed, such documents and
instruments as Lender shall request from time to time to further
evidence, perfect, protect or preserve Lender's rights hereunder
and with respect to the Collateral and real property interests,
including without limitation mortgages, deeds of trust or
financing statements under the Uniform Commercial Code.
[signature page follows]
24
IN WITNESS WHEREOF, the Borrower and the Lender have
executed this Agreement as of the date first above written.
DIGITAL TELEPORT, INC.
By: /s/Gary W. Douglass
Name: Gary W. Douglass
Title: Interim CEO
8112 Maryland Avenue, Suite 400
St. Louis, MO 63105
Telecopier:
KLT TELECOM INC.
By: /s/Mark R. Schroeder
Name: Mark R. Schroeder
Title: VP
10740 Nall, Suite 230
Overland Park, KS 66211
Telecopier: (913) 967-4340
25
Exhibit 23-a
CONSENT OF COUNSEL
As Senior Vice President-Corporate Services and
Corporate Secretary of Kansas City Power & Light
Company, I have reviewed the statements as to matters
of law and legal conclusions in the Annual Report on
Form 10-K for the fiscal year ended December 31, 2000,
and consent to the incorporation by reference of such
statements in the Company's previously-filed Form S-3
Registration Statements (Registration No. 33-51799,
Registration No. 333-50396, and Registration No. 333-
18139) and Form S-8 Registration Statements
(Registration No. 33-45618 and Registration No. 333-
32636).
/s/Jeanie Sell Latz
Jeanie Sell Latz
Kansas City, Missouri
February 28, 2001
Exhibit 23-b
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-3 (File Nos. 33-51799, 333-
18139 and 333-50396) and Form S-8 (File Nos. 33-45618 and 333-
32636) of Kansas City Power & Light Company of our report
dated February 20, 2001 relating to the financial statements,
which appears in this Form 10-K.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Kansas City, Missouri
February 28, 2001
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City
Power & Light Company, a Missouri corporation, does
hereby constitute and appoint Drue Jennings or Jeanie
Sell Latz, his true and lawful attorney and agent, with
full power and authority to execute in the name and on
behalf of the undersigned as such director an Annual
Report on Form 10-K; hereby granting unto such attorney
and agent full power of substitution and revocation in
the premises; and hereby ratifying and confirming all
that such attorney and agent may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand
and seal this 6th day of February 2001.
/s/Bernard J. Beaudoin
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 6th day of February 2001, before me the
undersigned, a Notary Public, personally appeared
Bernard J. Beaudoin, to be known to be the person
described in and who executed the foregoing instrument,
and who, being by me first duly sworn, acknowledged
that he executed the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year last
above written.
/s/Jacquetta L. Hartman
Notary Public
(Notary Seal)
My Commission Expires:
April 8, 2004
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City
Power & Light Company, a Missouri corporation, does
hereby constitute and appoint Drue Jennings or Jeanie
Sell Latz, his true and lawful attorney and agent, with
full power and authority to execute in the name and on
behalf of the undersigned as such director an Annual
Report on Form 10-K; hereby granting unto such attorney
and agent full power of substitution and revocation in
the premises; and hereby ratifying and confirming all
that such attorney and agent may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand
and seal this 6th day of February 2001.
/s/David L. Bodde
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 6th day of February 2001, before me the
undersigned, a Notary Public, personally appeared David
L. Bodde, to be known to be the person described in and
who executed the foregoing instrument, and who, being
by me first duly sworn, acknowledged that he executed
the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year last
above written.
/s/Jacquetta L. Hartman
Notary Public
(Notary Seal)
My Commission Expires:
April 8, 2004
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City
Power & Light Company, a Missouri corporation, does
hereby constitute and appoint Drue Jennings or Jeanie
Sell Latz, his true and lawful attorney and agent, with
full power and authority to execute in the name and on
behalf of the undersigned as such director an Annual
Report on Form 10-K; hereby granting unto such attorney
and agent full power of substitution and revocation in
the premises; and hereby ratifying and confirming all
that such attorney and agent may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand
and seal this 6th day of February 2001.
/s/William H. Clark
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 6th day of February 2001, before me the
undersigned, a Notary Public, personally appeared
William H. Clark, to be known to be the person
described in and who executed the foregoing instrument,
and who, being by me first duly sworn, acknowledged
that he executed the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year last
above written.
/s/Jacquetta L. Hartman
Notary Public
(Notary Seal)
My Commission Expires:
April 8, 2004
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City
Power & Light Company, a Missouri corporation, does
hereby constitute and appoint Drue Jennings or Jeanie
Sell Latz, his true and lawful attorney and agent, with
full power and authority to execute in the name and on
behalf of the undersigned as such director an Annual
Report on Form 10-K; hereby granting unto such attorney
and agent full power of substitution and revocation in
the premises; and hereby ratifying and confirming all
that such attorney and agent may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand
and seal this 6th day of February 2001.
/s/Mark A. Ernst
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 6th day of February 2001, before me the
undersigned, a Notary Public, personally appeared Mark
A. Ernst, to be known to be the person described in and
who executed the foregoing instrument, and who, being
by me first duly sworn, acknowledged that he executed
the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year last
above written.
/s/Jacquetta L. Hartman
Notary Public
(Notary Seal)
My Commission Expires:
April 8, 2004
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City
Power & Light Company, a Missouri corporation, does
hereby constitute and appoint Drue Jennings or Jeanie
Sell Latz, his true and lawful attorney and agent, with
full power and authority to execute in the name and on
behalf of the undersigned as such director an Annual
Report on Form 10-K; hereby granting unto such attorney
and agent full power of substitution and revocation in
the premises; and hereby ratifying and confirming all
that such attorney and agent may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand
and seal this 6th day of February 2001.
/s/W. Thomas Grant II
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 6th day of February 2001, before me the
undersigned, a Notary Public, personally appeared W.
Thomas Grant II, to be known to be the person described
in and who executed the foregoing instrument, and who,
being by me first duly sworn, acknowledged that he
executed the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year last
above written.
/s/Jacquetta L. Hartman
Notary Public
(Notary Seal)
My Commission Expires:
April 8, 2004
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City
Power & Light Company, a Missouri corporation, does
hereby constitute and appoint Drue Jennings or Jeanie
Sell Latz, his true and lawful attorney and agent, with
full power and authority to execute in the name and on
behalf of the undersigned as such director an Annual
Report on Form 10-K; hereby granting unto such attorney
and agent full power of substitution and revocation in
the premises; and hereby ratifying and confirming all
that such attorney and agent may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand
and seal this 6th day of February 2001.
/s/William K. Hall
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 6th day of February 2001, before me the
undersigned, a Notary Public, personally appeared
William K. Hall, to be known to be the person described
in and who executed the foregoing instrument, and who,
being by me first duly sworn, acknowledged that he
executed the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year last
above written.
/s/Jacquetta L. Hartman
Notary Public
(Notary Seal)
My Commission Expires:
April 8, 2004
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City
Power & Light Company, a Missouri corporation, does
hereby constitute and appoint Drue Jennings or Jeanie
Sell Latz, his true and lawful attorney and agent, with
full power and authority to execute in the name and on
behalf of the undersigned as such director an Annual
Report on Form 10-K; hereby granting unto such attorney
and agent full power of substitution and revocation in
the premises; and hereby ratifying and confirming all
that such attorney and agent may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand
and seal this 6th day of February 2001.
/s/William C. Nelson
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 6th day of February 2001, before me the
undersigned, a Notary Public, personally appeared
William C. Nelson, to be known to be the person
described in and who executed the foregoing instrument,
and who, being by me first duly sworn, acknowledged
that he executed the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year last
above written.
/s/Jacquetta L. Hartman
Notary Public
(Notary Seal)
My Commission Expires:
April 8, 2004
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City
Power & Light Company, a Missouri corporation, does
hereby constitute and appoint Drue Jennings or Jeanie
Sell Latz, her true and lawful attorney and agent, with
full power and authority to execute in the name and on
behalf of the undersigned as such director an Annual
Report on Form 10-K; hereby granting unto such attorney
and agent full power of substitution and revocation in
the premises; and hereby ratifying and confirming all
that such attorney and agent may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand
and seal this 6th day of February 2001.
/s/Linda H. Talbott
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 6th day of February 2001, before me the
undersigned, a Notary Public, personally appeared Linda
H. Talbott, to be known to be the person described in
and who executed the foregoing instrument, and who,
being by me first duly sworn, acknowledged that she
executed the same as her free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year last
above written.
/s/Jacquetta L. Hartman
Notary Public
(Notary Seal)
My Commission Expires:
April 8, 2004
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Kansas City
Power & Light Company, a Missouri corporation, does
hereby constitute and appoint Drue Jennings or Jeanie
Sell Latz, his true and lawful attorney and agent, with
full power and authority to execute in the name and on
behalf of the undersigned as such director an Annual
Report on Form 10-K; hereby granting unto such attorney
and agent full power of substitution and revocation in
the premises; and hereby ratifying and confirming all
that such attorney and agent may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand
and seal this 6th day of February 2001.
/s/Robert H. West
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 6th day of February 2001, before me the
undersigned, a Notary Public, personally appeared
Robert H. West, to be known to be the person described
in and who executed the foregoing instrument, and who,
being by me first duly sworn, acknowledged that he
executed the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year last
above written.
/s/Jacquetta L. Hartman
Notary Public
(Notary Seal)
My Commission Expires:
April 8, 2004