SUBJECT TO COMPLETION, DATED AUGUST 1, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 21, 1997)
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Filed Pursuant to Rule 424B5
Registration No. 333-26115
$ ,000,000
Western Resources, Inc.
$ ,000,000 First Mortgage Bonds, % Convertible Series Due
Convertible at the option of the Company into
$ ,000,000 % Unsecured Senior Notes Due
(Interest payable on and )
$ ,000,000 First Mortgage Bonds, % Convertible Series Due
Convertible at the option of the Company into
$ ,000,000 % Unsecured Senior Notes Due
(Interest payable on and )
--------------------------
The First Mortgage Bonds, % Convertible Series Due (the "
Series") mature on , and will not be redeemable prior to
maturity. The First Mortgage Bonds, % Convertible Series Due (the
" Series") mature on , and will not be redeemable
prior to maturity. The Series and the Series are sometimes collectively
referred to herein as the "New Bonds." At any time after the New Bonds are
outstanding, the Company may, solely at its option, convert all but not less
than all of the New Bonds of the Series into $ ,000,000 aggregate principal
amount of the Company's % Unsecured Senior Notes Due (the " Senior
Notes"), and the New Bonds of the Series into $ ,000,000 aggregate principal
amount of the Company's % Unsecured Senior Notes Due (the " Senior
Notes"). If the Series is converted, the Senior Notes will mature on
, and will not be redeemable prior to maturity. If the Series is
converted, the Senior Notes will mature on , and will not be redeemable
prior to maturity. The Senior Notes and the Senior Notes are sometimes
collectively referred to herein as the "New Senior Notes" (the New Bonds and New
Senior Notes are referred to collectively as the "Offered Securities"). The
financial covenants and events of default pertaining to the New Senior Notes
will differ from those pertaining to the New Bonds. The New Senior Notes will be
unsecured general obligations of the Company and junior in right of payment to
the Company's First Mortgage Bonds. As of June 30, 1997, the Company had $658.9
million of First Mortgage Bonds outstanding (excluding the KGE Bonds (as defined
in the accompanying Prospectus)) and would have had $1.3 billion of First
Mortgage Bonds and other secured indebtedness outstanding on a pro forma basis
giving effect to the pending acquisition of Kansas City Power & Light Company
("KCPL"), without giving effect to the offering made hereby. See "Description of
New Bonds -- Redemption and Purchase of New Bonds" and " -- Company Conversion
Option" and "Description of New Senior Notes" herein and related information in
the accompanying Prospectus.
--------------------------
See "Risk Factors" on page S-5 for certain information relevant to an
investment in the New Bonds, including the Company's option to convert the New
Bonds into New Senior Notes.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Underwriting
Price to Discounts and Proceeds to
Public* Commissions+ Company++
Per Bond, Series............................................%%%
Total.......................................................... $ $ $
Per Bond, Series............................................%%%
Total.......................................................... $ $ $
- -------------
* The New Bonds will bear interest from the date of delivery, and no accrual
of interest will be paid on the date of delivery.
+ The Company has agreed to indemnify the Underwriters (as defined herein)
against certain civil liabilities, including liabilities under the
Securities Act of 1933. (See "Underwriting")
++ Before deduction of expenses payable by the Company, estimated at
$ .
--------------------------
The New Bonds are being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that the New Bonds will be ready for
delivery through the facilities of The Depository Trust Company, New York, New
York on or about August , 1997, against payment therefor in immediately
available funds. The Underwriters are:
Dillon, Read & Co. Inc. Salomon Brothers Inc
Prudential Securities Incorporated Smith Barney Inc.
NatWest Capital Markets Limited Oppenheimer & Co., Inc.
The date of this Prospectus Supplement is August , 1997.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NEW BONDS
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES DURING AND AFTER THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE
DETAILED INFORMATION AND FINANCIAL STATEMENTS INCORPORATED HEREIN BY REFERENCE.
THE COMPANY
The Company and its divisions and wholly owned subsidiaries include KPL, a
rate-regulated electric and gas division of the Company ("KPL"), Kansas Gas and
Electric Company ("KGE"), a rate-regulated electric utility and wholly owned
subsidiary of the Company, Westar Capital, Inc. ("Westar Capital"), Westar
Security, Inc. ("Westar Security"), Westar Energy, Inc., The Wing Group, Ltd.,
non-utility subsidiaries, and Mid Continent Market Center, Inc., a regulated gas
transmission service provider ("MCMC"). KGE owns 47% of Wolf Creek Nuclear
Operating Corporation ("WCNOC"), the operating company for the Wolf Creek
Generating Station ("Wolf Creek"). The Company's non-utility subsidiaries market
natural gas primarily to large commercial and industrial customers, provide
electronic security services, engage in international power project development
and provide other energy-related products and services.
The Company is engaged principally in the production, purchase,
transmission, distribution and sale of electricity, and the delivery and sale of
natural gas and electronic security services. The Company serves approximately
606,000 electric customers in eastern and central Kansas and approximately
650,000 natural gas customers in Kansas and northeastern Oklahoma. On December
12, 1996, the Company and ONEOK, Inc. ("ONEOK") announced a proposed strategic
alliance pursuant to which the Company will contribute its regulated local
natural gas distribution operations, MCMC and Westar Gas Marketing, Inc., and
will become the largest shareholder of ONEOK. The transaction is anticipated to
be completed during the second half of 1997.
Westar Capital is a private investment company, wholly owned by the Company,
with investments in energy and security related and technology oriented
businesses. As of July 2, 1997, Westar Capital owned approximately 18 million
shares of Tyco International Ltd., formerly ADT Limited ("Tyco"), which
represents less than 10% of the outstanding shares of Tyco. The Company has sold
approximately 5 million shares or $387 million of Tyco stock and now holds 13.5
million shares of Tyco. The Company's average basis in its Tyco common stock
approximates $35 per share. The Company will record a material gain on the sale
of these shares of Tyco stock during the third quarter of 1997. Net proceeds
from the Tyco stock sale will be used to repay short-term debt, for corporate
acquisitions and for other general corporate purposes. The closing price of Tyco
common stock as reported on the New York Stock Exchange on July 29, 1997 was
$80.19 per common share.
Westar Security is an electronic security services business with over
440,000 customer accounts. On December 31, 1996, the Company acquired all of the
assets of Westinghouse Security Systems, Inc. ("Westinghouse Security"), a
national security system monitoring company and a subsidiary of Westinghouse
Electric Corporation ("Westinghouse"). Westar Security is the third-largest
monitored security company in the United States with offices in many major U.S.
markets and direct access to customers in 48 states.
S-2
On February 7, 1997, the Company announced that it had entered into a merger
agreement with KCPL, pursuant to which the Company will acquire KCPL. KCPL is a
public utility engaged in the generation, transmission, distribution and sale of
electricity to approximately 430,000 customers in western Missouri and eastern
Kansas.
On July 30, 1997, Protection One, Inc. ("Protection One"), a publicly held
security provider, and the Company entered into an agreement to combine the
security assets of both companies. Under the agreement, the Company will
contribute its security business assets, approximately $250 million in cash and
additional funding for a special dividend to current Protection One shareholders
of $7.00 per common share in exchange for an 80.1% equity interest on a
fully-diluted basis. The aggregate amount of this dividend is expected to
approximate $117 million. Protection One will assume approximately $47 million
in debt of Westar Security. As of March 31, 1997, Protection One reported
approximately $265 million of long-term debt, all or a portion of which may be
reduced by the cash payment in the transaction. The Company will utilize
short-term borrowings, long-term borrowings and funds received from the sale of
Tyco stock to fund this transaction.
Protection One serves approximately 228,000 customers with a large
concentration of its customers in the western portion of the United States. The
Company plans to account for this acquisition using the purchase method of
accounting. The proposed transaction is subject to satisfaction of customary
conditions, including approval by Protection One shareholders. The Company
expects to consummate this transaction during the second half of 1997.
S-3
THE OFFERING
Securities Offered.................. $ ,000,000 aggregate principal amount of First
Mortgage Bonds, % Convertible Series Due
, convertible at the option of the
Company into $ ,000,000 aggregate principal amount
of % Unsecured Senior Notes Due .
$ ,000,000 aggregate principal amount of First
Mortgage Bonds, % Convertible Series Due
, convertible at the option of the Company
into $ ,000,000 aggregate principal amount of %
Unsecured Senior Notes Due .
Interest Payment Dates.............. Semiannually, on each and ,
beginning .
Redemption.......................... No redemption prior to maturity.
Company Conversion Option........... The Company, solely at its option, may at any time
convert either or both the Series or the
Series, each only in whole and not in part, into the
Senior Notes and the Senior Notes,
respectively.
Use of Proceeds..................... The net proceeds from the sale of the New Bonds will
be used to repay short-term debt, for corporate
acquisitions and for other general corporate
purposes. As of June 30, 1997, such short-term
indebtedness had a weighted average interest rate of
approximately 6.10% per annum and maturities of less
than a year from the date of issuance. In the past 12
months short-term indebtedness increased as the
result of borrowings for general corporate purposes
as well as to finance a portion of the cost of the
acquisition of Westinghouse Security and the
Company's acquisition in 1996 of shares of Tyco (see
the accompanying Prospectus and the information
incorporated by reference therein).
The Company currently intends to surrender to the
Trustee any of the New Bonds which have been
converted into Senior Notes to effect the release
from the lien of the Company's First Mortgage of
substantially all of the Company's gas properties in
connection with the ONEOK transaction. See "Use of
Proceeds" herein and "Description of New Bonds--
Release and Substitution of Property" in the
accompanying Prospectus.
S-4
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE NEW BONDS SHOULD CAREFULLY REVIEW THE
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS AND SHOULD PARTICULARLY CONSIDER THE FOLLOWING:
LOSS OF STATUS AS SECURED CREDITOR UPON CONVERSION
The Company has the right, solely at its option, to convert the New Bonds,
which are secured under the Company's Mortgage, into the New Senior Notes, which
will be unsecured obligations of the Company. The Company may exercise its
conversion right at any time and may do so if, among other things, it is
necessary or desirable in connection with a transaction which requires the
release of property from the lien of the Mortgage. By converting the New Bonds,
the Company will be able to satisfy certain requirements under the Mortgage to
retire Bonds in order to obtain the release of all or substantially all of its
gas properties, which release will be required in order to consummate the ONEOK
transaction which is anticipated to be completed during the second half of 1997.
See "The Company" in the accompanying Prospectus.
As a result of such a conversion, holders of the New Bonds would become
unsecured creditors of the Company as holders of the New Senior Notes. The right
to payment on the New Senior Notes will be junior to the right of payment on any
First Mortgage Bonds outstanding on the Conversion Date. As of June 30, 1997,
the Company had $658.9 million of First Mortgage Bonds outstanding (excluding
the KGE Bonds (as defined in the accompanying Prospectus)) and would have had
$1.3 billion of First Mortgage Bonds and other secured indebtedness outstanding
on a pro forma basis giving effect to the consummation of the pending merger
with KCPL. The holders of the New Bonds will not receive any additional payments
or any increase in the rate of interest payable by the Company as the result of
the conversion of the New Bonds into New Senior Notes.
The Indenture pursuant to which the New Senior Notes would be issued does
not contain any covenant which restricts the Company's ability to incur
additional indebtedness.
STRUCTURAL SUBORDINATION OF NEW SENIOR NOTES
Portions of the Company's operations are conducted through subsidiaries.
Therefore, due to structural subordination, the New Senior Notes will be
effectively subordinated to all existing and future indebtedness and other
liabilities and commitments of the Company's subsidiaries. The Indenture
pursuant to which the New Senior Notes would be issued does not contain any
covenant which restricts the ability of the subsidiaries of the Company to incur
additional indebtedness. As of June 30, 1997, the Company's subsidiaries had
$761 million of indebtedness outstanding.
POSSIBLE EFFECTS OF BANKRUPTCY ON HOLDERS OF NEW BONDS
In the event that the Company becomes subject to bankruptcy proceedings at a
time when the New Bonds are outstanding and have not been converted for New
Senior Notes, a court in such proceedings may order or approve the conversion of
New Bonds into New Senior Notes, with the result that holders of New Bonds would
not be entitled to the rights of secured creditors of the Company in such
bankruptcy proceedings. As a further result, among other things, such holders
would not be expected to be entitled to adequate protection of their security or
to interest accruing after the date of commencement of bankruptcy proceedings.
Alternatively, a court in a bankruptcy proceeding with respect to the Company
may decide that, even if the New Bonds cannot be converted for New Senior Notes,
the claims of holders of New Bonds should nevertheless be subordinated to other
secured creditors of the Company under principles of equitable subordination.
S-5
USE OF PROCEEDS
The net proceeds from the sale of the New Bonds will be used to repay
short-term debt, for corporate acquisitions and for other general corporate
purposes. In the past 12 months short-term indebtedness increased as the result
of borrowings for general corporate purposes as well as to finance a portion of
the cost of the acquisition of Westinghouse Security and the Company's
acquisition in 1996 of shares of Tyco (see the accompanying Prospectus and the
information incorporated therein). As of June 30, 1997, such short-term
indebtedness had a weighted average interest rate of approximately 6.10% per
annum and maturities of less than a year from the date of issuance.
SUMMARY FINANCIAL INFORMATION
The summary financial information of the Company set forth below should be
read in conjunction with the financial statements and other financial
information contained or incorporated by reference herein.
TWELVE
MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------------
1997 1996 1995 1994(1) 1993 1992(2)
------------ ------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
CONSOLIDATED INCOME SUMMARY:
Operating Revenues.................... $ 2,135,276 $ 2,046,819 $ 1,743,300 $ 1,764,769 $ 2,028,411 $ 1,639,422
Operating Income...................... 307,434 303,993 278,709 275,050 292,360 239,721
Income Before Interest Charges........ 340,483 318,276 303,771 306,364 317,545 263,355
Net Income............................ 160,783 168,950 181,676 187,447 177,370 127,884
Ratio of Earnings to Fixed Charges.... 1.97 2.16 2.41 2.65 2.36 2.02
- ------------------------
(1) After giving effect to the sales of the Company's Missouri gas properties,
effective January 31, 1994 and February 28, 1994.
(2) After giving effect to the acquisition of KGE, effective March 31, 1992.
AS OF JUNE 30, 1997
--------------------
AMOUNT PERCENT
--------- ---------
(DOLLARS IN
MILLIONS)
CONSOLIDATED CAPITALIZATION SUMMARY (3):
First mortgage and pollution control bonds (net of premium/discount and amortization)......... $ 1,342 40.2%
Other long-term debt.......................................................................... 65 2.0
Preferred and preference stock................................................................ 75 2.2
Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding
solely Company subordinated debentures...................................................... 220 6.6
Common stock equity........................................................................... 1,633 49.0
--------- ---------
Total capitalization.................................................................... $ 3,335 100.0%
--------- ---------
--------- ---------
Short-term debt............................................................................... $ 1,273 --
- ------------------------
(3) Does not reflect the issuance of the New Bonds.
S-6
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following summary pro forma combined financial information summarizes
historical income statement and capitalization statement information for the
Company and KCPL on a pro forma basis as of and for the twelve month period
ended June 30, 1997.
FOR THE TWELVE MONTH PERIOD ENDED
JUNE 30, 1997
---------------------------------------
WESTERN
RESOURCES KCPL PRO FORMA
(HISTORICAL) (HISTORICAL) COMBINED
------------ ----------- ------------
(DOLLARS IN THOUSANDS)
PRO FORMA INCOME SUMMARY:
Operating Revenues.................................................. $ 2,135,276 $ 881,254 $ 3,016,530
Operating Income.................................................... 307,434 165,334 472,768
Income Before Interest Charges...................................... 340,483 128,101 468,584
Net Income.......................................................... 160,783 64,971 225,754
Ratio of Earnings to Fixed Charges.................................. 1.97 1.84(1) 1.94(1)
AS OF JUNE 30, 1997
--------------------------------------------------------
WESTERN
RESOURCES KCPL PRO FORMA PRO FORMA
(HISTORICAL)(3) (HISTORICAL) ADJUSTMENTS(4) COMBINED PERCENT
------------- ----------- --------------- ----------- -----------
(DOLLARS IN MILLIONS)
PRO FORMA CAPITALIZATION SUMMARY:
Long-term Debt......................... $ 1,407 $ 935 -- $ 2,342 44.0%
Preferred and Preference Stock......... 75 89 -- 164 3.1
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts holding solely
Company subordinated debentures...... 220 150 -- 370 6.9
Common stock equity.................... 1,633 866 (54)(2) 2,445 46.0
------ ----------- --- ----------- -----
$ 3,335 $ 2,040 $ (54) $ 5,321 100.0%
------ ----------- --- ----------- -----
------ ----------- --- ----------- -----
Short-term Debt........................ $ 1,273 $ 65 -- $ 1,338
- ------------------------
(1) The ratio includes a one-time payment during the first quarter of 1997 of
$53 million from KCPL to UtiliCorp United Inc. This payment was made as a
result of KCPL's announcement of its agreement to combine with the Company.
Excluding this one-time payment, the ratio would have been 2.56, adjusted,
KCPL only and 2.10 on a pro forma combined basis.
(2) Reflects expensing of transaction costs incurred to date to be charged to
income in the first period following consummation of a merger with KCPL.
(3) Does not reflect the issuance of the New Bonds.
(4) Does not reflect the incurrence of indebtedness in connection with the
Protection One transaction.
S-7
DESCRIPTION OF NEW BONDS
The following description of the particular terms of the New Bonds offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the New Bonds set forth in
the accompanying Prospectus under the heading "Description of the New Bonds," to
which description reference is hereby made.
INTEREST, MATURITY AND PAYMENT. The New Bonds of the Series will
mature on , , and the New Bonds of the Series will mature on , .
The New Bonds will bear interest from at the rates per annum shown in
their title, payable on and of each year, commencing .
Interest is payable to holders of record on the interest payment date. Principal
and interest are payable at the office or agency of the Company in New York
City. For so long as the New Bonds are registered in the name of The Depository
Trust Company, New York, New York ("DTC"), or its nominee, the principal and
interest due on the New Bonds will be payable by the Company or its agent to DTC
for payment to its Participants (as defined in the accompanying Prospectus) for
subsequent disbursement to the beneficial owners.
REDEMPTION OF NEW BONDS. The New Bonds will not be redeemable for any
purpose prior to their maturity dates.
MODIFICATIONS. The Company has amended the Mortgage to provide that the
Mortgage may be modified or altered and the rights of the holders of Bonds may
be affected with the consent of the holders of 60% of the Bonds or, if less than
all series of Bonds are affected, the consent also of the holders of 60% of the
Bonds of each series affected.
RESERVATION OF RIGHTS TO AMEND THE MORTGAGE. The Company has reserved the
right, subject to appropriate corporate action, but without the consent or other
action of holders of Bonds of any series created after January 1, 1997, to amend
the Mortgage to permit, unless an event of default shall have happened and be
continuing, or shall happen as a result of making or granting an application,
(1) the release of mortgaged property from the lien of the Mortgage, provided
the fair value to the Company of the mortgaged property subject to such lien
(excluding the mortgaged property to be released) equals or exceeds 10/7ths of
the aggregate principal amount of outstanding Bonds and any prior lien bonds
outstanding at the time of such release; (2) in the event the Company is unable
to obtain a release of property as described in clause (1), the release from the
lien of the Mortgage of mortgaged property if the fair value to the Company
thereof is less than 1/2 of 1% of the aggregate principal amount of Bonds and
prior lien Bonds outstanding; provided that, the property released pursuant to
clause (2) in any 12 consecutive calendar months shall not exceed 1% of such
bonds and prior lien bonds; (3) the deletion of the net earnings test which must
be met prior to the issuance of additional bonds; (4) the deletion of the
requirement to obtain an independent engineer's certificate in connection with
certain releases of property from the lien of the Mortgage; and (5) the deletion
of a financial test to be met by another corporation in the event of the
consolidation or merger of the Company into or sale by the Company of its
property as an entirety or substantially as an entirety to such other
corporation.
COMPANY CONVERSION OPTION. At any time the New Bonds are outstanding, the
Company may, solely at its option, convert either or both of the Series or
Series, each only in whole but not in part, into the Senior Notes and
the Senior Notes, respectively. See "Description of New Senior Notes" below
and "Description of Debt Securities" in the accompanying Prospectus for a
summary of the terms of the Debt Securities. Each of the Holders of New Bonds
will be entitled to receive $1,000 in principal amount of New Senior Notes for
each $1,000 of principal amount of New Bonds held by such holder as of the date
fixed for Conversion (the "Conversion Date"). In connection with any such
conversion, interest on converted New Bonds which has accrued but has not been
paid as of the Conversion Date will accrue on New Senior Notes from the date on
which interest was last paid on the New Bonds so converted, provided that
accrued interest on New Bonds converted after a record date, but before the
related interest
S-8
payment date, shall be paid to the holder of record of such New Bonds on such
interest payment date, and the New Senior Notes into which such New Bonds shall
have been converted will begin to accrue interest from such interest payment
date. The rights of the holders of the New Bonds as bondholders of the Company
with respect to the New Bonds converted will cease and the person or persons
entitled to receive the New Senior Notes issuable upon Conversion will be
treated as the registered holder or holders of such New Senior Notes from the
Conversion Date. New Senior Notes issued in conversion of New Bonds will be
issued in principal amounts of $1,000 and integral multiples thereof. The
Company may condition its obligation to convert New Bonds upon the satisfaction
of certain conditions. The Company will mail to each holder of record of New
Bonds to be converted into New Senior Notes written notice of such conversion at
least 15 and not more than 120 days prior to the Conversion Date. DTC will be
the only registered holder of the New Bonds. (See "Book-Entry" in the
accompanying Prospectus).
As described more fully below under "Description of New Senior Notes,"
following the Conversion Date holders of New Senior Notes will, among other
things, no longer be entitled to the security provided by the Mortgage since the
New Senior Notes will be unsecured obligations of the Company.
DESCRIPTION OF NEW SENIOR NOTES
The New Senior Notes will be identical to the New Bonds with respect to
their respective principal amounts, maturity dates, interest rates, record dates
and interest payment dates. However, holders of New Senior Notes will, among
other things, no longer be entitled to the security provided by the Mortgage,
and the financial covenants and the events of default pertaining to the New
Senior Notes will differ from those pertaining to the New Bonds. See
"Description of Debt Securities" in the accompanying Prospectus for a summary of
the other terms of the Indenture under which the New Senior Notes will be
issued. The following table sets forth certain material differences between the
financial covenants and events of default pertaining to the New Bonds and those
pertaining to the New Senior Notes:
COVENANTS: NEW BONDS NEW SENIOR NOTES
- ------------------------------------ ------------------------------------ ------------------------------------
Limits on Company's ability to issue Additional Bonds may be issued only No restrictions
additional securities of the same if the Company pledges additional
type property, deposits cash with the
Trustee or retires other Bonds and
if certain earnings coverage
requirements are met
Limits on Company's ability to issue Bonds have a first priority lien on No restrictions unless specifically
securities ranking senior all Company utility property, plant set forth in the Prospectus
and equipment, and so are the Supplement relating to an issuance
Company's most senior ranked of New Senior Notes
securities
Limits on the ability of the Company Must meet specified limits on the No special tests
to combine with other companies amount of debt owed by the combined
company and so long as prior series
of Bonds are outstanding must meet
earnings test
EVENTS OF DEFAULT:
- ------------------------------------
Failure to pay principal No grace period The Company lets five days go by
without payment of principal
Failure to pay interest The Company lets 30 days go by The Company lets 60 days go by
without paying interest without paying interest
Failure to observe other agreements The Company fails to observe certain The Company fails to observe certain
agreements made concerning the New agreements made concerning the New
Bonds (other than the promise to Senior Notes (other than the promise
pay) for more than 60 days after to pay) for 90 days after notice
notice from the Trustee from the Trustee
S-9
UNDERWRITING
Subject to the terms and conditions set forth in the Purchase Agreement, the
underwriters named below (the "Underwriters") have severally agreed to purchase
from the Company the principal amounts of New Bonds set forth opposite their
names. The nature of the Underwriters' obligation is such that they are
severally committed to purchase and pay for all of the New Bonds if any are
purchased.
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
UNDERWRITER OF SERIES OF SERIES
- -------------------------------------------------------------------------------------- ------------ ------------
Dillon, Read & Co. Inc................................................................ $ $
Salomon Brothers Inc..................................................................
Prudential Securities Incorporated....................................................
Smith Barney Inc......................................................................
NatWest Capital Markets Limited.......................................................
Oppenheimer & Co., Inc................................................................
------------ ------------
Totals............................................................................ $ $
------------ ------------
------------ ------------
The Underwriters have advised the Company that the New Bonds will initially
be offered to the public by the Underwriters at the public offering prices set
forth on the cover hereof under "Price to Public," and to certain dealers at
such prices less a concession of % and % of the principal amount of the
Series and the Series, respectively. The Underwriters may allow, and
such dealers may reallow, a concession not exceeding % and % of the
principal amount of the Series and the Series, respectively, on sales to
certain other dealers. After the initial public offering, the offering prices,
the concessions and the reallowances may be changed by the Underwriters.
The offering of the New Bonds is made for delivery when, as and if accepted
by the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offer without notice. The Underwriters reserve the right to
reject any order for the purchase of the New Bonds.
The Company has agreed in the Purchase Agreement to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, or to contribute to payments made or required to be made
by the Underwriters with respect to such liabilities.
Certain of the Underwriters have rendered certain financial advisory and
other related services to the Company for which they have received customary
fees.
The Company does not intend to apply for the listing of the New Bonds, or
the New Senior Notes into which the New Bonds may be converted, on any national
securities exchange. The Company has been advised by the Underwriters that they
intend to make a market in the New Bonds. The Underwriters are under no
obligation to do so and may discontinue, at any time and without notice, any
such market making in which they may engage. The Company cannot predict the
liquidity of any trading market for the New Bonds or the New Senior Notes into
which they may be converted.
In connection with the sale to the public of the New Bonds, certain of the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the New Bonds. Specifically, the Underwriters may bid for
and purchase the New Bonds in the open market to stabilize the price of the New
Bonds. The Underwriters may also overallot the New Bonds, creating a syndicate
short position, and may bid for and purchase the New Bonds in the open market to
cover the syndicate short position. In addition, the Underwriters may bid for
and purchase the New Bonds in market making transactions. These activities may
stabilize or maintain the market price of the New Bonds above market levels that
might otherwise prevail. The Underwriters are not required to engage in these
activities, and may end these activities at any time.
S-10
EXPERTS AND LEGALITY
The financial statements of Western Resources, Inc. included in or
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
The financial statements included in KCPL's Annual Report on Form 10-K for
the year ended December 31, 1996 incorporated by reference in this Prospectus
and in the Registration Statement as an Exhibit to the Company's April 2, 1997
Form 8-K, have been audited by Coopers & Lybrand L.L.P., independent public
accountants, as indicated in their reports with respect thereto, and are
included herein, in reliance upon the authority of said firm as experts in
giving said reports.
For further information, see "Legal Opinions" and "Experts" in the
accompanying Prospectus.
S-11
$550,000,000
Western Resources, Inc.
First Mortgage Bonds
and Debt Securities
------------------
Western Resources, Inc. (the "Company") intends from time to time to issue
up to $550,000,000 aggregate principal amount of its First Mortgage Bonds (the
"New Bonds"), senior unsecured debt securities (the "Debt Securities") or any
combination thereof (the New Bonds and Debt Securities are referred to herein,
collectively, as the "Securities"), in one or more series, on terms to be
determined at the time or times of sale. At each time that Securities (the
"Offered Securities") are offered for which this Prospectus is being delivered,
there will be an accompanying Prospectus Supplement (the "Prospectus
Supplement") that sets forth the series designation, aggregate principal amount,
maturity or maturities, rate or rates and times of payment of interest,
redemption terms, any sinking fund terms, any conversion terms, and any other
special terms of the Offered Securities. The Securities will be offered as set
forth under "Plan of Distribution." If described in a Prospectus Supplement, New
Bonds of any series may be converted, solely at the option of the Company, in
their entirety into Debt Securities with the same aggregate principal amount,
maturity date, redemption provisions, interest rate and interest payment dates
as the New Bonds so converted (the "Conversion"). The financial covenants,
events of default and certain other terms pertaining to the Debt Securities will
differ from those pertaining to the New Bonds. See "Description of New Bonds--
Company Conversion Option" and "Description of Debt Securities."
As of June 30, 1997, the Company had $658.9 million of First Mortgage Bonds
outstanding (excluding the KGE Bonds (as defined herein)) and would have had
$1.3 billion of First Mortgage Bonds and other secured indebtedness outstanding
on a pro forma basis giving effect to the consummation of the pending merger
with Kansas City Power & Light Company ("KCPL").
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 21, 1997.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy and information statements, and other
information filed by the Company, can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at certain of its Regional Offices at 7 World Trade
Center, 13th Floor, New York, N.Y. 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661-2511. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 and by accessing the
Commission's Web site, http://www.sec.gov. Certain securities of the Company are
listed on the New York Stock Exchange (the "NYSE"), and reports, proxy
statements and other information concerning the Company can be inspected at the
offices of the NYSE, 20 Broad Street, New York, N.Y. 10005. Kansas City Power &
Light Company ("KCPL") has securities listed on the NYSE and on the Chicago
Stock Exchange (the "CSE"). Because KCPL is also subject to the informational
requirements of the 1934 Act and has securities listed on the NYSE, information
concerning KCPL is available from the same sources as given above with respect
to the Company. Furthermore, information concerning KCPL is available at the
offices of the CSE, 440 South LaSalle Street, Chicago, Illinois 60605.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated herein by
reference as of their respective dates of filing and shall be deemed to be a
part hereof:
1. The Company's Annual Report on Form 10-K (File No. 1-3523) for the year
ended December 31, 1996 (the "Company's 1996 Form 10-K").
2. The Company's Quarterly Report on Form 10-Q (File No. 1-3523) for the
quarter ended March 31, 1997.
3. The Company's Current Reports on Form 8-K (File No. 1-3523) filed
February 10, 1997 and April 2, 1997 (the "Company's April 2, 1997 Form 8-K") (in
which KCPL's Annual Report on Form 10-K is included as an exhibit).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14, or
15(d) of the 1934 Act after the date of this Prospectus and prior to the
termination of this offering shall also be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all documents referred to above which have been or may be incorporated by
reference in this Prospectus (not including exhibits to such incorporated
information that are not specifically incorporated by reference into such
information). Requests for such copies should be directed to Richard D. Terrill,
Esq., Secretary of the Company, 818 Kansas Avenue, Topeka, Kansas 66612 (785)
575-6322.
2
INFORMATION ON
KANSAS CITY POWER & LIGHT COMPANY
While the Company has included or incorporated in this Prospectus by
reference information concerning KCPL insofar as it is known or reasonably
available to the Company, KCPL is not affiliated with the Company. Although the
Company has no knowledge that would indicate that statements relating to KCPL
contained or incorporated by reference in this Prospectus in reliance upon
publicly available information are inaccurate or incomplete, the Company was not
involved in the preparation of such information and statements and, for the
foregoing reasons, is not in a position to verify any such information or
statements. See "The Company."
THE COMPANY
GENERAL
The Company and its divisions and wholly owned subsidiaries include KPL, a
rate-regulated electric and gas division of the Company ("KPL"), Kansas Gas and
Electric Company ("KGE"), a rate-regulated utility and wholly owned subsidiary
of the Company, Westar Capital, Inc. ("Westar Capital"), Westar Security, Inc.
("Westar Security"), Westar Energy, Inc., The Wing Group, Ltd., non-utility
subsidiaries, and Mid Continent Market Center, Inc., a regulated gas
transmission service provider ("MCMC"). KGE owns 47% of Wolf Creek Nuclear
Operating Corporation ("WCNOC"), the operating company for the Wolf Creek
Generating Station ("Wolf Creek"). The Company's non-utility subsidiaries market
natural gas primarily to large commercial and industrial customers, provide
electronic security services, engage in international power project development
and provide other energy-related products and services.
The Company is engaged principally in the production, purchase,
transmission, distribution and sale of electricity, the delivery and sale of
natural gas and electronic security services. The Company serves approximately
606,000 electric customers in eastern and central Kansas and approximately
650,000 natural gas customers in Kansas and northeastern Oklahoma. On December
12, 1996, the Company and ONEOK, Inc. ("ONEOK") announced a proposed strategic
alliance pursuant to which the Company will contribute its regulated local
natural gas distribution operations, MCMC and Westar Gas Marketing, Inc.
("Westar Gas Marketing"), and will become the largest shareholder of ONEOK. This
transaction is scheduled to be completed during the second half of 1997.
Westar Capital is a private investment company, wholly owned by the Company,
with investments in energy and security related and technology oriented
businesses. As of July 2, 1997, Westar Capital owned approximately 18 million
shares of Tyco International Ltd., formerly ADT Limited ("Tyco"), which
represents less than 10% of the outstanding shares of Tyco. The Company's
average basis in its Tyco common stock approximates $35 per share.
Westar Security is an electronic security services business with over
440,000 customer accounts. On December 31, 1996, the Company acquired all of the
assets of Westinghouse Security Systems, Inc. ("Westinghouse Security"), a
national security system monitoring company and a subsidiary of Westinghouse
Electric Corporation ("Westinghouse"). Westar Security is the third-largest
monitored security company in the United States with offices in many major U.S.
markets and direct access to customers in 48 states.
On February 7, 1997, the Company announced that it had entered into a merger
agreement with KCPL, pursuant to which the Company will acquire KCPL. KCPL is a
public utility engaged in the generation, transmission, distribution and sale of
electricity to approximately 430,000 customers in western Missouri and eastern
Kansas.
The Company was incorporated under the laws of the State of Kansas in 1924.
The Company's principal executive offices are located at 818 Kansas Avenue,
Topeka, Kansas 66612, and its telephone number is (785) 575-6300.
3
USE OF PROCEEDS
The net proceeds from the sale of the Securities will be used to repay
short-term debt, for corporate acquisitions and for other general corporate
purposes. Information concerning the use of proceeds from the sale of each
series of the Securities will be set forth in the Prospectus Supplement relating
to such series.
DESCRIPTION OF NEW BONDS
The New Bonds are to be issued under and secured by the Mortgage and Deed of
Trust, dated July 1, 1939 (the "Original Indenture"), between the Company and
Harris Trust and Savings Bank, as Trustee (the "Trustee"), as supplemented and
amended by thirty-two supplemental indentures and as to be supplemented and
amended by a new supplemental indenture or indentures providing for the series
of New Bonds to be issued (the Original Indenture as so supplemented and amended
being herein called the "Mortgage"). The Mortgage has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part, and the bonds
of any series issued under the Mortgage are referred to herein as "Bonds" or
"First Mortgage Bonds." The following is a brief summary of certain provisions
contained in the Mortgage. Such summary does not purport to be complete and is
qualified in its entirety by express reference to the Mortgage.
If the Supplemental Indenture under which a series of New Bonds are issued
so provides, at any time such New Bonds are outstanding, the Company may, solely
at its option, convert such series of New Bonds, in whole but not in part, into
Debt Securities. Such Debt Securities will be identical to such series of New
Bonds with respect to the aggregate principal amount, maturity date, redemption
provisions, interest rate and interest payment dates; however, holders of Debt
Securities will, among other things, no longer be entitled to the security
provided by the Mortgage since the Debt Securities will be unsecured obligations
of the Company, and the financial covenants, the events of default and certain
other terms pertaining to the Debt Securities will differ from those pertaining
to the New Bonds. See "--Company Conversion Option" and "Description of Debt
Securities."
GENERAL
The New Bonds will be issued only in the form of registered bonds without
coupons in denominations of $1,000 and multiples thereof. New Bonds will be
exchangeable for other New Bonds of the same series in equal aggregate principal
amounts without charge to the holders except for any applicable tax or
governmental charge. The Company intends that the New Bonds will be issued in
the form of one or more fully registered global certificates representing the
aggregate principal amount of the New Bonds and will be deposited with The
Depository Trust Company ("DTC"). See "Book-Entry."
The Prospectus Supplement for each series of New Bonds will set forth the
issue date, maturity date, redemption provisions, interest rate, and interest
payment dates applicable to such series and whether such series of New Bonds
will be convertible at the Company's option for Debt Securities, as well as the
terms thereof. Subject to certain exceptions provided in the Mortgage, interest
is payable at either the office of the Trustee in Chicago, Illinois, or of the
Paying Agent, Harris Trust and Savings Bank, New York, New York, to the persons
in whose names the New Bonds are registered at the close of business on the
tenth day prior to the interest payment date (the "Record Date") or, at the
option of the Company, may be paid by checks mailed to such persons at their
registered addresses. Principal of the New Bonds is to be payable at either of
the agencies of the Company mentioned above.
There will be no improvement or maintenance fund for the New Bonds. The
applicable Prospectus Supplement will set forth any sinking fund provided for a
particular series of New Bonds.
The Company maintains routine banking relationships with the Bank of
Montreal, the parent of the Trustee. The Trustee is also Indenture Trustee under
the Indenture pursuant to which the Debt Securities
4
will be issued. The Bank of Montreal had a $49.5 million participation in the
Company's revolving credit facilities as of March 31, 1997.
REDEMPTION PROVISIONS
The Prospectus Supplement for each series of New Bonds will set forth the
redemption provisions, if any, of such New Bonds.
ISSUANCE OF ADDITIONAL BONDS
Additional Bonds ranking equally with the Bonds of other series then
outstanding may be issued having such dates, maturities, interest rates,
redemption prices and other terms as may be determined by the Board of
Directors. Additional Bonds may be issued in principal amounts not exceeding:
(1) 60% (so long as Bonds issued prior to January 1, 1997 remain outstanding,
and thereafter 70%) of the net bondable value of property additions not subject
to an unfunded prior lien; (2) the principal amount of Bonds retired or to be
retired (except out of trust moneys); and (3) the amount of cash deposited with
the Trustee for such purpose, which may thereafter be withdrawn upon the same
basis that additional Bonds are issuable under (1) or (2) above. Additional
Bonds may not be issued on the basis of property additions subject to an
unfunded prior lien. (Mortgage, Article III; Twenty-Sixth, Twenty-Eighth,
Twenty-Ninth, Thirtieth, Thirty-First and Thirty-Second Supplemental Indentures,
Article V)
As of December 31, 1996, the Company had approximately $1.0 billion of net
bondable property additions not subject to unfunded prior liens (the KGE
Mortgage described under "--Priority and Security" constitutes such an unfunded
prior lien in respect of certain properties of the Company) enabling it to issue
approximately $618 million principal amount of additional Bonds on such date. As
of December 31, 1996, the Company may also issue up to approximately $3 million
of additional Bonds on the basis of Bonds which have been retired. The New Bonds
may be issued against the principal amount of Bonds retired or to be retired.
So long as Bonds issued prior to January 1, 1997 remain outstanding,
additional Bonds may not be issued unless the net earnings of the Company
available for interest, depreciation and property retirements for a period of
any 12 consecutive months during the period of 15 calendar months immediately
preceding the first day of the month in which the application for authentication
and delivery of additional Bonds is made shall have been not less than the
greater of two times the annual interest charges on, or 10% of the principal
amount of, all Bonds then outstanding, all additional Bonds then applied for,
all outstanding prior lien bonds and all prior lien bonds, if any, then being
applied for. Bonds cancelled at or prior to the time application is made for the
issuance of New Bonds are not deemed to be outstanding for purposes of
calculating interest charges in determining whether the net earnings test is met
for the issuance of additional Bonds. Bonds or prior lien bonds for which moneys
sufficient for the payment thereof have been deposited are not considered
outstanding for this purpose. The net earnings test referred to need not be
satisfied to issue additional Bonds (i) on the basis of property additions
subject to an unfunded prior lien which simultaneously will become a funded
prior lien, if application for the issuance of the additional Bonds is made at
any time after a date two years prior to the date of the maturity of the Bonds
secured by the prior lien and (ii) on the basis of the payment at maturity of
Bonds theretofore issued by the Company, or the redemption, conversion or
purchase of Bonds after a date two years prior to the date on which such Bonds
mature. Based on the Company's results for the year ended December 31, 1996, the
Company could issue approximately $772 million principal amount of additional
Bonds (7.75% interest rate assumed, without giving effect to the issuance of the
New Bonds offered hereby). (Mortgage, Article III, Sections 3, 4, and 6;
Twenty-Sixth, Twenty-Eighth, Twenty-Ninth, Thirtieth, Thirty-First and
Thirty-Second Supplemental Indentures, Article V.) The Company has reserved the
right and intends to amend the Mortgage to eliminate the foregoing requirement
once all Bonds issued prior to January 1, 1997 are no longer outstanding. See
"--Modification of the Mortgage."
5
RELEASE AND SUBSTITUTION OF PROPERTY
The Mortgage provides that, subject to various limitations, property may be
released from the lien thereof upon the basis of cash deposited with the
Trustee, Bonds or purchase money obligations delivered to the Trustee, prior
lien bonds delivered to the Trustee, or unfunded net property additions
certified to the Trustee. (Mortgage, Article VII.) The Mortgage also in effect
permits the withdrawal of cash against the certification to the Trustee of gross
property additions at 100%, or the net bondable value of property additions at
60% (so long as Bonds issued prior to January 1, 1997 remain outstanding and
thereafter 70%), or the deposit with the Trustee of Bonds acquired by the
Company. (Mortgage, Article VIII; Sections 1-3; Twenty-Sixth, Twenty-Eighth,
Twenty-Ninth, Thirtieth, Thirty-First and Thirty-Second Supplemental Indentures,
Article V)
The Mortgage contains special provisions with respect to the release of all
or substantially all of the Company's gas properties or electric properties.
(Twenty-Sixth, Twenty-Eighth, Twenty-Ninth, Thirtieth, Thirty-First and
Thirty-Second Supplemental Indentures, Article IV, Sections 2 and 3.) The
Company currently intends to tender the converted New Bonds to the Trustee to
effect the release of substantially all of its gas properties in connection with
the closing of the ONEOK Transaction. See "The Company." To the extent not so
used, converted New Bonds may be used by the Company to provide for the issuance
of additional Bonds in substitution of such New Bonds. (Mortgage, Article III,
Section 6). The Company has reserved the right and intends to amend the Mortgage
to change the release and substitution provisions. See "--Modification of the
Mortgage."
PRIORITY AND SECURITY
In the opinion of Richard D. Terrill, Esq., Corporate Secretary and
Associate General Counsel of the Company, the New Bonds, with the qualifications
described in the fifth paragraph under this "--Priority and Security" caption
relating to the lien of the KGE Mortgage (as defined below), will be secured,
equally and ratably with all of the Bonds now outstanding or hereafter issued
under the Mortgage, by the lien on substantially all of the Company's fixed
property and franchises purported to be conveyed by the Mortgage, subject to the
exceptions referred to below, to certain minor leases and easements, permitted
liens and to the exceptions and reservations in the instruments by which the
Company acquired title to its property and to the prior lien of the Trustee for
compensation, expenses and liability.
In the opinion of Mr. Terrill, the Mortgage constitutes a lien on
after-acquired property of the character intended to be mortgaged property.
Excepted from the lien of the Mortgage are: cash and accounts receivable;
contracts or operating agreements; securities not pledged under the Mortgage;
electric energy, gas, water, materials and supplies held for consumption in
operation or held in advance of use for fixed capital purposes; and merchandise,
appliances and supplies held for resale or lease to customers. There is further
expressly excepted any property of any other corporation, all the securities of
which may be owned or later acquired by the Company. (Granting Clauses of the
Mortgage.) The lien of the Mortgage does not apply to property of KGE or the
Company's other subsidiaries so long as they remain subsidiaries of the Company,
or to securities owned by the Company.
The Mortgage permits the consolidation or merger of the Company with or the
conveyance of its property to any other corporation, provided that the successor
corporation assumes the due and punctual payment of the principal and interest
on the Bonds of all series then outstanding under the Mortgage and assumes the
due and punctual performance of all the covenants and conditions of the
Mortgage. (Mortgage, Article XII, Section 1)
KGE has outstanding first mortgage bonds (the "KGE Bonds") which are secured
by a lien on substantially all of KGE's fixed property and franchises purported
to be conveyed by the Mortgage and Deed of Trust and the various Supplemental
Indentures creating the KGE Bonds (collectively, the "KGE
6
Mortgage"). In the event that KGE combines with the Company, the after-acquired
property clauses of the Mortgage would cause the lien of the Mortgage to attach
(but in a subordinate position to the prior lien of the KGE Mortgage) to
property owned by KGE at the date of combination. All property subject to the
after-acquired property clause of the Mortgage acquired by the Company after the
effective date of combination of KGE with the Company would be subject to the
first lien of the Mortgage, with the exception of (a) betterments, extensions,
improvements and additions to the property formerly owned by KGE, (b) property
made the basis for the issuance of new KGE Bonds or property acquired with
insurance or eminent domain proceeds relating to the former KGE property or (c)
property acquired to comply with the covenants contained in the KGE Mortgage, on
all of which property the KGE Mortgage would continue to constitute a first, and
the Mortgage a subordinate, lien. The Company may not issue additional Bonds on
the basis of property additions subject to the prior lien of the KGE Mortgage.
There is no certainty as to whether or when such a combination would occur or as
to the terms and conditions thereof.
KCPL has outstanding first mortgage bonds (the "KCPL Bonds") which are
secured by a lien on substantially all of KCPL's fixed property and franchises
purported to be conveyed by the General Mortgage Indenture and Deed of Trust and
the various Supplemental Indentures creating the KCPL Bonds (collectively, the
"KCPL Mortgage"). If the Company merges with KCPL, the Company, as the successor
corporation to such a merger, would be required pursuant to the terms of the
KCPL Mortgage to confirm the liens thereunder and to keep the mortgaged property
with respect thereto as far as practicable identifiable. In the absence of an
express grant, however, the KCPL Mortgage will not constitute or become a lien
on any property or franchises owned by the Company prior to such a merger or on
any property or franchises which may be purchased, constructed or otherwise
acquired by the Company except for such as form an integral part of the
mortgaged property under the KCPL Mortgage. Upon consummation of a merger with
KCPL, the after-acquired property clauses of the Company's Mortgage would cause
the lien of the Mortgage to attach (but in a subordinate position to the prior
lien of the KCPL Mortgage) to the property of KCPL at the date of combination.
MODIFICATION OF THE MORTGAGE
The Mortgage may be modified or altered, subject to the rights and
obligations of the Company and the rights of Bondholders thereunder, by the
affirmative vote of the holders of at least 80% in principal amount of the
Bonds; provided, that no action may be taken which would affect less than all
series of Bonds without, in addition, the affirmative vote of the holders of at
least 80% in principal amount of the Bonds of each series so affected. The
Company intends upon the next issuance of Bonds under the Mortgage to exercise
the right it has reserved to amend the Mortgage to provide that the Mortgage may
be modified or altered and the rights of the holders of Bonds may be affected
with the consent of the holders of 60% of the Bonds and, if less than all series
of Bonds are affected, the consent also of the holders of 60% of the Bonds of
each series affected. No modification or alteration may be made which will
permit the extension of the time or times of payment of the principal of or
interest on any Bond or a reduction in the rate of interest thereon, or
otherwise affect the terms of payment of the principal of or interest on any
Bond or a reduction in the rate of interest thereon or reduce the percentages
required for the taking of any action thereunder. Bonds owned by the Company or
any affiliated corporation are excluded for the purpose of any vote,
determination of a quorum or consent. (Mortgage, Article XV; Section 6; Twenty-
Sixth, Twenty-Eighth, Twenty-Ninth, Thirtieth, Thirty-First and Thirty-Second
Supplemental Indentures, Article V, Sections 3 and 4)
The Mortgage also provides that no modification or alteration of the
Mortgage may be made, without the consent of the holder of any Bond issued
thereunder, which would impair or affect the right of such holder to receive
payment of the principal of, and interest on, such Bond, on or after the
respective due dates expressed in such Bond, or to institute suit for the
enforcement of any such payment on or after such respective dates. (Mortgage,
Article XXII, Section 2)
7
The Company intends upon the next issuance of Bonds under the Mortgage to
reserve the right, subject to appropriate corporate action but without the
consent or other action of holders of Bonds of any series created after January
1, 1997, to amend the Mortgage to permit, unless an event of default shall have
happened and be continuing, or shall happen as a result of making or granting an
application, (1) the release of mortgaged property from the lien of the Mortgage
provided the fair value to the Company of the mortgaged property subject to such
lien (excluding the mortgaged property to be released) equals or exceeds 10/7ths
of the aggregate principal amount of outstanding Bonds and any prior lien bonds
outstanding at the time of such release; (2) in the event the Company is unable
to obtain a release of property as described in clause (1), the release from the
lien of the Mortgage of mortgaged property if the fair value to the Company
thereof is less than 1/2 of 1% of the aggregate principal amount of Bonds and
prior lien bonds outstanding; provided that, the property released pursuant to
clause (2) in any 12 consecutive calendar months shall not exceed 1% of such
Bonds and prior lien bonds; (3) the deletion of the net earnings test which must
be met prior to the issuance of additional bonds; (4) the deletion of the
requirement to obtain an independent engineer's certificate in connection with
certain releases of property from the lien of the Mortgage; and (5) the deletion
of a financial test to be met by another corporation in the event of the
consolidation or merger of the Company into or the sale by the Company of its
property as an entirety or substantially as an entirety to such other
corporation.
EVENTS OF DEFAULT
An event of default under the Mortgage includes: (a) default in the payment
of the principal of any Bond when the same shall become due and payable, whether
at maturity or otherwise; (b) default continuing for 30 days in the payment of
any installment of interest on any Bond or in the payment or satisfaction of any
sinking fund obligation; (c) default in performance or observance of any other
covenant, agreement or condition in the Mortgage continuing for a period of 60
days after written notice to the Company thereof by the Trustee or by the
holders of not less than 15% of the aggregate principal amount of all Bonds then
outstanding; (d) failure to discharge or stay within 30 days a final judgment
against the Company for the payment of money in excess of $100,000; and (e)
certain events in bankruptcy, insolvency or reorganization. (Mortgage, Article
IX, Section 1)
The Trustee is required, within 90 days after the occurrence thereof, to
give to the holders of the Bonds notice of all defaults known to the Trustee
unless such defaults shall have been cured before the giving of such notice (the
term "defaults" for such purposes being defined to be the events specified
above, not including any periods of grace); provided, however, that except in
the case of default in the payment of the principal of or interest on any of the
Bonds, or in the payment or satisfaction of any sinking or purchase fund
installment, the Trustee shall be protected in withholding such notice if and so
long as the Trustee in good faith determines that the withholding of such notice
is in the interests of the holders of the Bonds and, in the case of any default
specified in (c) above, no notice shall be given until at least 60 days after
the occurrence thereof. (Mortgage, Article XIX, Section 3) The Trustee is under
no obligation to defend or initiate any action under the Mortgage which would
result in the incurring of non-reimbursable expenses unless one or more of the
holders of Bonds issued under the Mortgage, including the New Bonds, furnishes
the Trustee with reasonable indemnity against such expenses. In the event of
default, the Trustee is not required to act unless requested to act by holders
of at least 25% in aggregate principal amount of the Bonds then outstanding.
(Mortgage, Article IX, Sections 1 and 4, Article XIII, Section 2 and Article
XXI, Section 6) In addition, a majority of the Bondholders have the right to
direct all proceedings under the Mortgage, provided the Trustee is indemnified
to its satisfaction. (Mortgage, Article IX, Section 11)
COMPANY CONVERSION OPTION
If the Supplemental Indenture under which a series of New Bonds is issued so
provides, the Company may, solely at its option, convert such series of New
Bonds, in whole but not in part, into Debt Securities.
8
The Debt Securities would be identical to such series of New Bonds with respect
to the maturity date, redemption provisions, interest rate and interest payment
dates; however, holders of Debt Securities will, among other things, no longer
be entitled to the security provided by the Mortgage since the Debt Securities
will be unsecured obligations of the Company and the financial covenants, the
events of default and certain other terms pertaining to the Debt Securities will
differ from those pertaining to such series of New Bonds. See "Description of
the Debt Securities" below for a summary of the terms of the Debt Securities.
Holders of New Bonds so converted will be entitled to receive an equal principal
amount of Debt Securities for the principal amount of New Bonds held by such
holder as of the date fixed for conversion (the "Conversion Date"). In
connection with any such conversion, interest on converted New Bonds which has
accrued but has not been paid as of the Conversion Date will accrue on Debt
Securities from the date on which interest was last paid on the New Bonds so
converted, provided that accrued interest on New Bonds converted after a record
date, but before the related interest payment date, shall be paid to the holder
of record of such New Bonds on such interest payment date, and the Debt
Securities into which such New Bonds shall have been converted will begin to
accrue interest from such interest payment date. The rights of the holders of
the New Bonds as Bondholders of the Company with respect to the Bonds converted
will cease, and the person or persons entitled to receive the Debt Securities
issuable upon Conversion will be treated as the registered holder or holders of
such Debt Securities from the Conversion Date. Debt Securities issued in
conversion of New Bonds will be issued in principal amounts of $1,000 and
integral multiples thereof. The Company may condition its obligation to convert
New Bonds upon the satisfaction of certain conditions. The Company will mail to
each holder of record of New Bonds to be converted into Debt Securities written
notice thereof at least 15 and not more than 120 days prior to the Conversion
Date. The notice must state (i) the Conversion Date, (ii) the place or places
where certificates for New Bonds may be surrendered for conversion into Debt
Securities, (iii) that interest on the Debt Securities will accrue from the date
on which interest on the New Bonds was last paid (except in the case of a
Conversion Date after a record date, but before the related interest payment
date, in which case interest will accrue from the interest payment date next
following such record date), (iv) the conditions to conversion, if any, required
to be satisfied concurrent with or prior to the Conversion Date; and (v) that
whether or not certificates for New Bonds are surrendered for conversion on such
Conversion Date, holders of the New Bonds will be treated as holders of Debt
Securities from and after the Conversion Date, which each holder of the New
Bonds by its acceptance of the issue thereof agrees to. It is anticipated that
the only holder of record of the New Bonds will be DTC. See "Book-Entry."
In the event that the Company becomes subject to bankruptcy proceedings at a
time when the New Bonds are outstanding and have not been converted for Debt
Securities, a court in such proceedings may order or approve the conversion of
New Bonds into Debt Securities, with the result that holders of New Bonds would
not be entitled to the rights of secured creditors of the Company in such
bankruptcy proceedings. As a further result, among other things, such holders
would not be expected to be entitled to adequate protection of their security or
to interest accruing after the date of commencement of bankruptcy proceedings.
Alternatively, a court in a bankruptcy proceeding with respect to the Company
may decide that, even if the New Bonds cannot be converted for Debt Securities,
the claims of holders of New Bonds should nevertheless be subordinated to other
secured creditors of the Company under principles of equitable subordination.
If, by reason of the Company's merger with KCPL, or for any other reason,
properties of KCPL become subject to the Mortgage, and within the applicable
preference period thereafter the Company becomes the subject of federal
bankruptcy proceedings, the security interests of holders of New Bonds in such
newly acquired properties may be voidable as preferences. The applicable
preference period, generally, is 90 days for holders of New Bonds who are not
"insiders" of the Company and one year for holders of New Bonds who are
"insiders" of the Company, as that term is defined in the federal bankruptcy
code.
9
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued in one or more series under an Indenture
(the "Indenture") between the Company and Harris Trust and Savings Bank, as
Indenture Trustee, the form of which is filed as an exhibit to the Registration
Statement. The following summaries of certain provisions of the Indenture do not
purport to be complete and are qualified in their entirety by express reference
to the Indenture and the Securities Resolutions or the indentures supplemental
thereto (copies of which have been or will be filed with the Commission).
Capitalized terms used in this section without definition have the meanings
given such terms in the Indenture.
GENERAL
The Indenture does not limit the amount of Debt Securities that can be
issued thereunder and provides that the Debt Securities may be issued from time
to time in one or more series pursuant to the terms of one or more Securities
Resolutions or supplemental indentures creating such series. As of the date of
this Prospectus, there were no Debt Securities outstanding under the Indenture.
The Debt Securities will be unsecured and will rank on a parity with all other
unsecured and unsubordinated debt of the Company, but will rank junior to the
Company's First Mortgage Bonds. The Debt Securities will be senior to all
indebtedness of the Company which by its terms is made subordinate to the Debt
Securities. Although the Indenture provides for the possible issuance of Debt
Securities in other forms or currencies, the only Debt Securities covered by
this Prospectus will be Debt Securities denominated in U.S. dollars in
registered form without coupons.
Substantially all of the fixed properties and franchises of the Company are
subject to the lien of the Mortgage under which the Company's Bonds are
outstanding. See "Description of New Bonds."
TERMS
Reference is made to the Prospectus Supplement for the following terms, if
applicable, of the Debt Securities offered thereby: (1) the designation,
aggregate principal amount, currency or composite currency and denominations;
(2) the price at which such Debt Securities will be issued and, if an index
formula or other method is used, the method for determining amounts of principal
or interest; (3) the maturity date and other dates, if any, on which principal
will be payable; (4) the interest rate (which may be fixed or variable), if any;
(5) the date or dates from which interest will accrue and on which interest will
be payable, and the record dates for the payment of interest (see "Description
of New Bonds--Company Conversion Option"); (6) the manner of paying principal
and interest; (7) the place or places where principal and interest will be
payable; (8) the terms of any mandatory or optional redemption by the Company
including any sinking fund; (9) the terms of any conversion or exchange right;
(10) the terms of any redemption at the option of Holders; (11) any tax
indemnity provisions; (12) if the Debt Securities provide that payments of
principal or interest may be made in a currency other than that in which Debt
Securities are denominated, the manner for determining such payments; (13) the
portion of principal payable upon acceleration of a Discounted Debt Security (as
defined below); (14) whether and upon what terms Debt Securities may be
defeased; (15) whether the covenant referred to below under "Certain
Covenants--Limitations on Liens" applies, and any events of default or
restrictive covenants in addition to or in lieu of those set forth in the
Indenture; (16) provisions for electronic issuance of Debt Securities or for
Debt Securities in uncertificated form; and (17) any additional provisions or
other special terms not inconsistent with the provisions of the Indenture,
including any terms that may be required or advisable under United States or
other applicable laws or regulations, or advisable in connection with the
marketing of the Debt Securities. (Section 2.01)
Debt Securities of any series may be issued as registered Debt Securities,
bearer Debt Securities or uncertificated Debt Securities, and in such
denominations as specified in the terms of the series. (Section 2.01)
10
In connection with its original issuance, no bearer Security will be
offered, sold or delivered to any location in the United States, and a bearer
Security in definitive form may be delivered in connection with its original
issuance only upon presentation of a certificate in a form prescribed by the
Company to comply with United States laws and regulations. (Section 2.04)
Registration of transfer of registered Debt Securities may be requested upon
surrender thereof at any agency of the Company maintained for that purpose and
upon fulfillment of all other requirements of the agent. (Sections 2.03 and
2.07)
Securities may be issued under the Indenture as Discounted Debt Securities
to be offered and sold at a substantial discount from the principal amount
thereof. Special United States federal income tax and other considerations
applicable thereto will be described in the Prospectus Supplement relating to
such Discounted Debt Securities. "Discounted Debt Security" means a Security
where the amount of principal due upon acceleration is less than the stated
principal amount. (Section 2.10)
CERTAIN COVENANTS
The Debt Securities will not be secured by any properties or assets and will
represent unsecured debt of the Company. As indicated under "General" above,
substantially all of the fixed properties and franchises of the Company are
subject to the lien of the Mortgage securing the First Mortgage Bonds.
As discussed below, the Indenture includes certain limitations on the
Company's ability to create liens which will apply only if the Securities
Resolution establishing the terms of a series of Debt Securities so provides (in
which event the Prospectus Supplement will so state). If applicable, the
limitations are subject to a number of qualifications and exceptions. The
Indenture does not limit the Company's ability to issue additional First
Mortgage Bonds or to enter into sale and leaseback transactions. In addition,
the Indenture does not limit the ability of the Company's subsidiaries to issue
debt, and the Debt Securities will be effectively subordinated to all existing
and future indebtedness and other liabilities and commitments of the Company's
subsidiaries.
Unless otherwise indicated in a Prospectus Supplement, such covenants, if
applicable, do not afford holders of the Debt Securities protection in the event
of a highly leveraged or other transaction involving the Company that may
adversely affect holders of the Debt Securities.
ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS
If the Securities Resolution establishing the terms of a series of Debt
Securities so provides (in which event the Prospectus Supplement will so state),
the following provision of the Indenture will be applicable so long as there
remain outstanding any Debt Securities of any series to which this covenant
applies, and subject to termination upon defeasance as referred to above. The
Company will not (i) issue any additional First Mortgage Bonds under the
Mortgage, or any mortgage bonds (such additional First Mortgage Bonds and
mortgage bonds being hereafter referred to as "Mortgage Bonds") under any
additional mortgage which it may enter into or the obligations of which it may
assume (collectively, the "Restricted Mortgages") except (A) to replace any
mutilated, lost, destroyed or stolen Mortgage Bonds or to effect exchanges and
transfers of Mortgage Bonds or (B) to issue Mortgage Bonds in connection with
any refinancing of Mortgage Bonds, or any security for which Mortgage Bonds
provide collateral, having the same or lesser aggregate principal amount at
maturity and the same or earlier maturity date, but with such other terms as the
Company may determine or (ii) subject to the lien of any Restricted Mortgage any
property which is excepted and excluded under such Restricted Mortgage and the
lien and operation thereof by the terms of such Restricted Mortgage, unless
concurrently with the issuance of such Mortgage Bonds or subjection of any such
property to such lien, the Company issues to the Trustee under the Indenture a
Mortgage Bond or Bonds in the same aggregate principal amount and having the
same interest rate or rates, maturity date or dates, redemption provisions and
other terms as the Debt Securities then outstanding and thereby gives to the
holders of all outstanding Debt Securities the benefit of the
11
security of such First Mortgage Bond or Bonds, provided, that the obligation of
the Company to make payments with respect to the principal of and interest on
any such Mortgage Bond or Bonds issued under a Restricted Mortgage to the
Trustee shall be fully or partially, as the case may be, satisfied or discharged
to the extent that, at the time that any such payment shall be due, the then due
principal of and interest on the Debt Securities shall have been fully or
partially paid. For purposes of this provision the merger or combination of the
Company with another entity having Mortgage Bonds outstanding under a Restricted
Mortgage on the date such a transaction is consummated shall not constitute an
issuance of additional Mortgage Bonds and therefore, Mortgage Bonds shall not be
required to be issued under such Restricted Mortgage in connection with the
consummation of such a transaction.
At such time as the Trustee under the Indenture is the only holder of
Mortgage Bonds outstanding under a Restricted Mortgage, the Trustee will
surrender such Mortgage Bonds to the Company for cancellation and such
Restricted Mortgage will be discharged and defeased. (Section 4.08)
LIMITATION ON LIENS
If the Securities Resolution establishing the terms of a series of Debt
Securities so provides (in which event the Prospectus Supplement will so state),
the following provisions of the Indenture will be applicable so long as there
remain outstanding any Debt Securities of any series to which this limitation
applies, and, subject to termination of this limitation upon defeasance as
referred to above, the Company will not create or suffer to be created or to
exist any mortgage, pledge, security interest or other lien (collectively,
"Lien") on any of its properties or assets, owned as of the date such series is
issued or thereafter acquired to secure any indebtedness, without making
effective provision whereby the Debt Securities of such series shall be equally
and ratably secured with any and all such indebtedness and with any other
indebtedness similarly entitled to be equally and ratably secured. This
restriction does not apply to, or prevent the creation or existence of: (1) the
Mortgage securing the Company's First Mortgage Bonds or any indenture
supplemental thereto subjecting any property to the Lien thereof or confirming
the Lien thereof upon any property, whether owned before or acquired after the
date of the Indenture; (2) the Lien of any Restricted Mortgage; (3) Liens on
property existing at the time of the acquisition or construction of such
property (or created within two years after completion of such acquisition or
construction), whether by purchase, merger, construction or otherwise, or to
secure the payment of all or any part of the purchase price or construction cost
thereof, including the extension of any such Liens to repairs, renewals,
replacements, substitutions, betterments, additions, extensions and improvements
then or thereafter made on the property subject thereto; (4) any Lien securing
bank indebtedness now or hereafter incurred or assumed by the Company; (5) any
extensions, renewals or replacements (or successive extensions, renewals or
replacements), in whole or in part, of Liens (including, without limitation, the
Restricted Mortgages) permitted by the foregoing clauses (1), (2), (3) and (4);
(6) the pledge of any bonds or other securities at any time issued under any of
the Liens permitted by clause (1), (2), (3), (4) or (5) above; or (7) Permitted
Encumbrances. (Section 4.07)
"Permitted Encumbrances" includes, among other items: (a) the pledge or
assignment in the ordinary course of business of electricity, gas (either
natural or artificial), steam, fuel (including nuclear fuel) whether or not
consumable in the operation of the mortgaged property, accounts receivable or
customers' installment paper; (b) Liens affixing to property of the Company at
the time a person consolidates with or merges into, or transfers all or
substantially all of its assets to, the Company, provided that in the opinion of
the Board of Directors of the Company or Company management (evidenced by a
certified Board resolution or an Officers' Certificate delivered to the Trustee)
the property acquired pursuant to the consolidation, merger or asset transfer is
adequate security for such Lien; (c) Liens or encumbrances not otherwise
permitted if, at the time of incurrence thereof and after giving effect thereto,
the aggregate of all obligations of the Company secured thereby does not exceed
10% of Tangible Net Worth (as defined below); (d) Liens on securities held by
the Company; and (e) Liens or encumbrances affixing to the property of a
Subsidiary.
12
"Tangible Net Worth" means (i) common stockholders' equity appearing on the
most recent balance sheet of the Company (or consolidated balance sheet of the
Company and its Subsidiaries if the Company then has one or more consolidated
Subsidiaries) prepared in accordance with generally accepted accounting
principles, less (ii) intangible assets (excluding intangible assets recoverable
through rates as prescribed by applicable regulatory authorities).
"Subsidiary" of any person means (i) a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by such
person or by one or more other Subsidiaries of such person or by such person and
one or more Subsidiaries thereof; or (ii) any other person (other than a
corporation) in which such person, or one or more Subsidiaries of such person or
such person and one or more Subsidiaries thereof, directly or indirectly, has at
least a majority ownership and power to direct the policy, management and
affairs thereof. (Section 4.06)
Further, this restriction will not apply to or prevent the creation or
existence of leases made, or existing on property acquired, in the ordinary
course of business. (Section 4.07)
OTHER COVENANTS
Any other restrictive covenants which may apply to a particular series of
Debt Securities will be described in the Prospectus Supplement relating thereto.
SUCCESSOR OBLIGOR
The Indenture provides that, unless otherwise specified in the Securities
Resolution establishing a series of Debt Securities, the Company shall not
consolidate with or merge into, or transfer all or substantially all of its
assets to, any person in any transaction in which the Company is not the
survivor, unless: (1) the person is organized under the laws of the United
States or a State thereof or is organized under the laws of a foreign
jurisdiction and consents to the jurisdiction of the courts of the United States
or a State thereof; (2) the person assumes by supplemental indenture all the
obligations of the Company under the Indenture, the Debt Securities and any
coupons; (3) all required approvals of any regulatory body having jurisdiction
over the transaction shall have been obtained; and (4) immediately after the
transaction no Default (as defined below) exists. The successor shall be
substituted for the Company, and thereafter all obligations of the Company under
the Indenture, the Debt Securities and any coupons shall terminate. (Section
5.01)
EXCHANGE OF DEBT SECURITIES
Registered Debt Securities may be exchanged for an equal aggregate principal
amount of registered Debt Securities of the same series and date of maturity in
such authorized denominations as may be requested upon surrender of the
registered Debt Securities at an agency of the Company maintained for such
purpose and upon fulfillment of all other requirements of such agent. (Section
2.07)
DEFAULT AND REMEDIES
Unless the Securities Resolution establishing the series otherwise provides
(in which event the Prospectus Supplement will so state), an "Event of Default"
with respect to a series of Debt Securities will occur if:
(1) the Company defaults in any payment of interest on any Debt
Securities of such series when the same becomes due and payable and the
Default continues for a period of 60 days;
(2) the Company defaults in the payment of the principal and premium, if
any, of any Debt Securities of the series when the same becomes due and
payable at maturity or upon redemption, acceleration or otherwise and such
default shall continue for five or more days;
13
(3) the Company defaults in the payment or satisfaction of any sinking
fund obligation with respect to any Debt Securities of the series as
required by the Securities Resolution establishing such series and the
Default continues for a period of 60 days;
(4) the Company defaults in the performance of any of its other
agreements applicable to the series and the Default continues for 90 days
after the notice specified below;
(5) the Company pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian for it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case,
(B) appoints a Custodian for the Company or for all or substantially
all of its property, or
(C) orders the liquidation of the Company, and the order or decree
remains unstayed and in effect for 60 days; or
(7) there occurs any other Event of Default provided for in such series.
(Section 6.01)
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal
or State law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or a similar official under any Bankruptcy Law.
(Section 6.01)
"Default" means any event which is, or after notice or passage of time would
be, an Event of Default. A Default under subparagraph (4) above is not an Event
of Default until the Trustee or the Holders of at least 33 1/3% in principal
amount of the series notify the Company of the Default and the Company does not
cure the Default within the time specified after receipt of the notice. (Section
6.01) The Trustee may require indemnity satisfactory to it before it enforces
the Indenture or the Debt Securities of the series. (Section 7.01) Subject to
certain limitations, Holders of a majority in principal amount of the Debt
Securities of the series may direct the Trustee in its exercise of any trust or
power with respect to such series. (Section 6.05) Except in the case of Default
in payment on a series, the Trustee may withhold from Securityholders of such
series notice of any continuing Default if it determines that withholding notice
is in their interest. (Section 7.04) The Company is required to furnish the
Trustee annually a brief certificate as to the Company's compliance with all
conditions and covenants under the Indenture. (Section 4.04)
The failure to redeem any Debt Securities subject to a Conditional
Redemption (as defined) is not an Event of Default if any event on which such
redemption is so conditioned does not occur and is not waived before the
scheduled redemption date. (Section 6.01)
The Indenture does not have a cross-default provision. Thus, a default by
the Company on any other debt, including any other series of Debt Securities,
would not constitute an Event of Default.
AMENDMENTS AND WAIVERS
The Indenture and the Debt Securities of the series may be amended, and any
Default may be waived as follows: Unless the Securities Resolution otherwise
provides (in which event the Prospectus Supplement will so state), the Debt
Securities and the Indenture may be amended with the written consent of the
Holders of a majority in principal amount of the Debt Securities of all series
affected voting as one class. (Section 10.02) Unless the Securities Resolution
otherwise provides (in which event the Prospectus
14
Supplement will so state), a Default on a particular series may be waived with
the consent of the Holders of a majority in principal amount of the Debt
Securities of the series, except under certain circumstances. (Section 6.04)
However, without the consent of each Securityholder affected, no amendment or
waiver may (1) reduce the amount of Debt Securities whose Holders must consent
to an amendment or waiver, (2) reduce the interest on or change the time for
payment of interest on any Security, (3) change the fixed maturity of any
Security, (4) reduce the principal of any non-Discounted Debt Security or reduce
the amount of the principal of any Discounted Debt Security that would be due on
acceleration thereof, (5) change the currency in which the principal or interest
on a Security is payable, (6) make any change that materially adversely affects
the right to convert any Security, or (7) waive any Default in payment of
interest on or principal of a Security, except under certain circumstances.
(Sections 6.04 and 10.02) Without the consent of any Securityholder, the
Indenture or the Debt Securities may be amended: to cure any ambiguity,
omission, defect or inconsistency; to provide for assumption of Company
obligations to Securityholders in the event of a merger or consolidation
requiring such assumption; to provide that specific provisions of the Indenture
shall not apply to a series of Debt Securities not previously issued; to create
a series and establish its terms; to provide for a separate Trustee for one or
more series; or to make any change that does not materially adversely affect the
rights of any Securityholder. (Section 10.01)
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Debt Securities of a series may be defeased in accordance with their terms
and, unless the Securities Resolution establishing the terms of the series
otherwise provides, as set forth below. The Company at any time may terminate as
to a series all of its obligations (except for certain obligations, including
obligations with respect to the defeasance trust and obligations to register the
transfer or exchange of a Debt Security, to replace destroyed, lost or stolen
Debt Securities and coupons and to maintain paying agencies in respect of the
Debt Securities) with respect to the Debt Securities of the series and any
related coupons and the Indenture ("legal defeasance"). The Company at any time
may terminate as to a series its obligations with respect to the Debt Securities
and coupons of the series under the covenant described under "Certain
Covenants--Limitations on Liens" and any other restrictive covenants which may
be applicable to a particular series ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, a series may not be accelerated because of an Event of
Default. If the Company exercises its covenant defeasance option, a series may
not be accelerated by reference to the covenant described under "Certain
Covenants-- Limitations on Liens" or any other restrictive covenants which may
be applicable to a particular series. (Section 8.01)
To exercise either defeasance option as to a series, the Company must (i)
irrevocably deposit in trust (the "defeasance trust") with the Trustee or
another trustee money or U.S. Government Obligations, deliver a certificate from
a nationally recognized firm of independent accountants expressing their opinion
that the payments of principal and interest when due on the deposited U.S.
Government Obligations, without reinvestment, plus any deposited money, without
investment, will provide cash at such times and in such amounts as will be
sufficient to pay the principal and interest when due on all Debt Securities of
such series to maturity or redemption, as the case may be, and (ii) comply with
certain other conditions. In particular, the Company must obtain an opinion of
tax counsel that the defeasance will not result in recognition of any income,
gain or loss to holders for federal income tax purposes. "U.S. Government
Obligations" means direct obligations of the United States or an instrumentality
of the United States, the payment of which is unconditionally guaranteed by the
United States, which, in either case, have the full faith and credit of the
United States pledged for payment and which are not callable at the issuer's
option, or certificates representing an ownership interest in such obligations.
(Section 8.02)
15
REGARDING THE TRUSTEE
Harris Trust and Savings Bank will act as Indenture Trustee and Registrar
for Debt Securities issued under the Indenture and, unless otherwise indicated
in a Prospectus Supplement, the Indenture Trustee will also act as Transfer
Agent and Paying Agent with respect to the Debt Securities. (Section 2.03) The
Company may remove the Indenture Trustee with or without cause if the Company so
notifies the Indenture Trustee three months in advance and if no Default occurs
during the three-month period. (Section 7.07) The Indenture Trustee is also
Trustee under the Mortgage for the Company's First Mortgage Bonds, including the
New Bonds, and provides services for the Company and certain affiliates, as a
depository of funds, registrar, trustee under other indentures and similar
services.
BOOK-ENTRY
DTC will act as securities depository for the Securities. The Securities
will be issued only as fully registered securities registered in the name of
Cede & Co. (DTC's partnership nominee). One or more fully registered global
certificates will be issued for the Securities representing the aggregate
principal amount of the Securities and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the 1934 Act, DTC holds
securities that its participants (the "Direct Participants") deposit with DTC.
DTC also facilitates the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Direct Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly (the "Indirect Participants," and together with the Direct
Participants, the "Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of the Securities within the DTC system must be made by or through
Direct Participants which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of each Security (a
"Beneficial Owner") will in turn be recorded on the Direct and Indirect
Participants' respective records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interest in the Securities will be effected by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interest in
Securities except in the event that use of the book-entry system for the
Securities is discontinued.
The deposit of the Securities with DTC and their registration in the name of
Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the Securities; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Securities are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other direct communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial
16
Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Securities of an issue are being redeemed, DTC's practice will determine by lot
the amount of the interest of each Direct Participant in such series to be
redeemed.
In the event of a Conversion of New Bonds into Debt Securities, notice
thereof shall be sent to Cede & Co. After the Conversion Date, DTC or its
nominee, as the record holder of the New Bonds, will receive a registered global
certificate or certificates representing the Debt Securities and will deliver
the global certificate or certificates representing the New Bonds to the Trustee
for cancellation.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Securities. Under its usual procedures. DTC mails an omnibus proxy (an "Omnibus
Proxy") to the Participants as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest on the Securities will be paid to
DTC. DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payment on such
payment date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in
"street-name," and will be the responsibility of such Participant and not of
DTC, any underwriters, or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
premium, if any, and interest to DTC is the responsibility of the Company or the
Trustee. Disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Securities at any time by giving reasonable notice to the
Company. Under such circumstances and in the event that a successor securities
depository is not obtained, certificates for the Securities are required to be
printed and delivered. In addition, the Company may decide to discontinue use of
the system of book-entry transfers through DTC (or any successor securities
depository). In that event, certificates for the Securities will be printed and
delivered.
The Company will not have any responsibility or obligation to Participants
or to the persons for whom they act as nominees with respect to the accuracy of
the records of DTC, its nominees or any Direct or Indirect Participant with
respect to any ownership interest in the Securities, or with respect to payments
or providing of notice to the Direct Participants, the Indirect Participants or
the Beneficial Owners.
So long as Cede & Co. is the registered owner of the Securities, as nominee
of DTC, references herein to holders of the Securities shall mean Cede & Co. or
DTC and shall not mean the Beneficial Owners of the Securities.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from DTC. None of the Company, the Trustees or any
underwriters take any responsibility for the accuracy or completeness thereof.
PLAN OF DISTRIBUTION
The Company may sell Securities in any of the following ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers; or (iii)
through agents. The applicable Prospectus Supplement will set forth the terms of
the offering of any Securities, including the names of any underwriters or
agents, the
17
purchase price of such Securities and the proceeds to the Company from such
sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price, any discounts or concessions
allowed or reallowed or paid to dealers and any securities exchanges on which
such Securities may be listed.
If underwriters are used in the sale, Securities will be acquired by any
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. Such Securities may
be offered to the public either through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. Unless otherwise
set forth in the applicable Prospectus Supplement, the obligations of any
underwriters to purchase such Securities will be subject to certain conditions
precedent, and any underwriters will be obligated to purchase all of such
Securities if any of such Securities are purchased. Any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time. Only underwriters named in a Prospectus
Supplement are deemed to be underwriters in connection with the Securities
offered thereby.
Securities may also be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of Securities will be named, and any commissions payable by the Company to
such agent will be set forth in the applicable Prospectus Supplement. Unless
otherwise indicated in the applicable Prospectus Supplement, any such agent will
act on a best efforts basis for the period of its appointment.
If so indicated in a Prospectus Supplement with respect to Securities, the
Company will authorize agents, underwriters or dealers to solicit offers by
certain institutions to purchase such Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in the Prospectus Supplement. Each Contract will be for an
amount not less than, and the aggregate principal amount of the Securities sold
pursuant to the Contracts shall be not less nor more than, the respective
amounts stated in the Prospectus Supplement. Institutions with whom the
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions, but will in all cases be
subject to the approval of the Company. The Contracts will not be subject to any
conditions except (i) the purchase by an institution of the Securities covered
by its Contract shall not at the time of delivery be prohibited under the laws
of any jurisdiction in the United States to which such institution is subject,
and (ii) if the Securities are being sold to underwriters, the Company shall
have sold to such underwriters the total principal amount of the Securities less
the principal amount thereof covered by the Contracts. Any underwriters will not
have any responsibility in respect of the validity or performance of the
Contracts.
If dealers are utilized in the sale of any Securities, the Company will sell
such Securities to the dealers, as principal. Any dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. The name of any dealer and the terms of the transaction will
be set forth in the Prospectus Supplement with respect to such Securities being
offered thereby.
It has not been determined whether any series of Securities will be listed
on a securities exchange. Underwriters will not be obligated to make a market in
any series of Securities. The Company cannot predict the level of trading
activity in, or the liquidity of, any series of Securities.
Any underwriters, dealers or agents participating in the distribution of
Securities may be deemed to be underwriters, and any discounts or commissions
received by them on the sale or resale of Securities may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933. Agents
and underwriters may be entitled under agreements entered into with the Company
to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act of 1933, or to contribution with respect to
payments that the agents or underwriters may be required to make in respect
thereof.
18
Agents and underwriters may be customers of, engaged in transactions with, or
perform services for, the Company or its affiliates in the ordinary course of
business.
LEGAL OPINIONS
The statements as to matters of law and legal conclusions set forth in this
Prospectus and in the Company's documents incorporated by reference herein have
been reviewed by Richard D. Terrill, Esq., Corporate Secretary and Associate
General Counsel of the Company, and are set forth or incorporated herein in
reliance upon the opinion of Mr. Terrill. At April 24, 1997, Mr. Terrill owned
directly and/or beneficially, 1190 shares of Common Stock and had been granted,
pursuant to and subject to the terms of the Company's long-term incentive
programs, 376 performance shares and stock options exercisable for 4500 shares
of Common Stock.
Certain legal matters in connection with the Securities will be passed upon
by Richard D. Terrill, Esq., Corporate Secretary and Associate General Counsel
of the Company, by Cahill Gordon & Reindel, a partnership including a
professional corporation, counsel for the Company, and by Sidley & Austin,
counsel for the Underwriters, dealers, purchasers or agents. Cahill Gordon &
Reindel and Sidley & Austin will not pass upon the incorporation of the Company
and will rely upon the opinion of Richard D. Terrill, Esq. as to matters of
Kansas law.
EXPERTS
The financial statements of Western Resources, Inc. included in or
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
The financial statements included in KCPL's Annual Report on Form 10-K for
the year ended December 31, 1996 incorporated by reference in this Prospectus
and in the Registration Statement as an Exhibit to the Company's April 2, 1997
Form 8-K, have been audited by Coopers & Lybrand L.L.P., independent public
accountants, as indicated in their reports with respect thereto, and are
included herein, in reliance upon the authority of said firm as experts in
giving said reports.
19
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No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus Supplement and the accompanying Prospectus in connection with the
offer contained in this Prospectus Supplement and the accompanying Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company or the Underwriters. This
Prospectus Supplement and the accompanying Prospectus do not constitute an offer
by the Company or by any Underwriter to sell securities in any state to any
person to whom it is unlawful for the Company or such Underwriter to make such
offer in such state. Neither the delivery of this Prospectus Supplement and the
accompanying Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof.
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TABLE OF CONTENTS
Page
---------
Prospectus Supplement
Prospectus Supplement Summary......................... S-2
Risk Factors.......................................... S-5
Use of Proceeds....................................... S-6
Summary Financial Information......................... S-6
Summary Unaudited Pro Forma Combined
Financial Information............................... S-7
Description of New Bonds.............................. S-8
Description of New Senior Notes....................... S-9
Underwriting.......................................... S-10
Experts and Legality.................................. S-11
Prospectus
Available Information................................. 2
Incorporation of Certain Documents
by Reference........................................ 2
Information on Kansas City Power &
Light Company....................................... 3
The Company........................................... 3
Use of Proceeds....................................... 4
Description of New Bonds.............................. 4
Description of Debt Securities........................ 10
Book-Entry............................................ 16
Plan of Distribution.................................. 17
Legal Opinions........................................ 19
Experts............................................... 19
Western Resources, Inc.
---------------
$ ,000,000
$ ,000,000
First Mortgage Bonds,
% Convertible Series Due
Convertible at the option of
the Company into
% Unsecured Senior Notes Due
$ ,000,000
First Mortgage Bonds,
% Convertible Series Due
Convertible at the option of
the Company into
% Unsecured Senior Notes Due
August , 1997
Dillon, Read & Co. Inc.
Salomon Brothers Inc
Prudential Securities Incorporated
Smith Barney Inc.
NatWest Capital Markets Limited
Oppenheimer & Co., Inc.
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