-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CPAXRjoyqAundAPsEx5ABqnqbukKd38GjGWIZj6zKnWF2+zKbGPydCzsqzJDYXKq eZXZOaCIqYPDlWU6GEMHXQ== 0000912057-00-014482.txt : 20000411 0000912057-00-014482.hdr.sgml : 20000411 ACCESSION NUMBER: 0000912057-00-014482 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UTILICORP UNITED INC CENTRAL INDEX KEY: 0000066960 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 440541877 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-03562 FILM NUMBER: 583602 BUSINESS ADDRESS: STREET 1: 20 WEST NINTH STREET STREET 2: 911 MAIN STE 3000 CITY: KANSAS CITY STATE: MO ZIP: 64105-1711 BUSINESS PHONE: 8164216600 MAIL ADDRESS: STREET 1: PO BOX 13287 CITY: KANSAS CITY STATE: MO ZIP: 64199-3287 FORMER COMPANY: FORMER CONFORMED NAME: MISSOURI PUBLIC SERVICE CO DATE OF NAME CHANGE: 19850516 10-K 1 FORM 10-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- FORM 10-K (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (fee required) For the fiscal year ended December 31, 1999 or / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (no fee required) For the transition period from to COMMISSION FILE NUMBER: 1-3562 ----------- UTILICORP UNITED INC. (Exact name of registrant as specified in its charter) DELAWARE 44-0541877 State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 20 West Ninth Street, Kansas City, Missouri 64105 (Address of principal executive offices) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (816) 421-6600 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED COMMON STOCK, PAR VALUE $1.00 PER SHARE NEW YORK, PACIFIC AND TORONTO STOCK EXCHANGES CONVERTIBLE SUBORDINATED DEBENTURES, NEW YORK STOCK EXCHANGE 6-5/8 % DUE JULY 1, 2011 CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES, NEW YORK STOCK EXCHANGE 8-7/8 % SERIES A, DUE JUNE 12, 2025 9-3/4% PREMIUM EQUITY PARTICIPATING SECURITY UNITS, NEW YORK STOCK EXCHANGE DUE NOVEMBER 16, 2004
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes No The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing sale price of the Common Stock on March 15, 2000 as reported on the New York Stock Exchange, was approximately $1,518,146,577. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
TITLE OUTSTANDING (AT MARCH 15, 2000) - -------------------------------------------------------------------------------------- COMMON STOCK, PAR VALUE $1.00 PER SHARE 93,574,853 - -------------------------------------------------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE: WHERE INCORPORATED: 1999 ANNUAL REPORT TO SHAREHOLDERS PART 2 PROXY STATEMENT FOR 2000 ANNUAL SHAREHOLDERS MEETING PART 3
================================================================================ INDEX
PART 1 PAGE ------ ---- Item 1 Business ................................................................................... 3 Item 2 Properties ................................................................................. 13 Item 3 Legal Proceedings .......................................................................... 16 Item 4 Submission of Matters to a Vote of Security Holders ........................................ 16 PART 2 ------ Item 5 Market for Registrant's Common Equity and Related Stockholder Matters ...................... 16 Item 6 Selected Financial Data .................................................................... 16 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations ...... 17 Item 7a Quantitative and Qualitative Disclosures about Market Risk ................................. 17 Item 8 Financial Statements and Supplementary Data ................................................ 17 Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ....... 17 PART 3 ------ Item 10 Directors and Executive Officers of the Company ............................................ 17 Item 11 Executive Compensation ..................................................................... 17 Item 12 Security Ownership of Certain Beneficial Owners and Management ............................. 17 Item 13 Certain Relationships and Related Transactions ............................................. 17 PART 4 ------ Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K ........................... 17 INDEX TO EXHIBITS ......................................................................................... 21 SIGNATURES ................................................................................................ 23
PART 1 ITEM 1. BUSINESS. ORGANIZATION AND HISTORY UtiliCorp United Inc. (the company, which may be referred to as we, us, or our) is a multinational energy solutions provider. We conduct business through the following business segments: - - NETWORK - includes our domestic and international network generation, distribution and transmission businesses, as well as our appliance repair/servicing businesses. International operations include activities in Australia, New Zealand and Canada. - - ENERGY MERCHANT - includes our domestic and international energy marketing and trading businesses; our natural gas gathering, processing and transportation company; and our 14 independent power projects. International operations are head-quartered in London, England. Prior to 1999, activity was limited to United Kingdom gas marketing and trading. In 1999, the business commenced expansion into other energy markets both within the United Kingdom and across Europe. New offices were opened in Spain, Germany and Norway. - - SERVICES - includes our investment in Quanta Services, Inc. (Quanta). Quanta is a provider of specialized construction services to electric utilities, telecommunications and cable television companies, and governmental entities. - - CORPORATE AND OTHER -includes the retained costs of the company that are not allocated to the business units, and prior to 1998, the net losses from our investments in Energy One, L. L. C. OUR STRATEGIC OBJECTIVES Our strategy is to be a world-class manager of energy delivery networks and production assets, and to be a leading energy merchant in the markets in which we compete. We believe that our globalized energy network and merchant strategies position us to compete effectively in a deregulated energy marketplace. THE FOLLOWING OBJECTIVES ARE THE TOOLS BY WHICH WE WILL IMPLEMENT OUR STRATEGIES: OBJECTIVE #1: WORLD CLASS MANAGER OF ENERGY NETWORK AND PRODUCTION ASSETS - - ACHIEVE OPERATIONAL EXCELLENCE by providing quality customer service through the delivery of an easy to use, safe, reliable product at a reasonable price, while earning a solid return for shareholders. - - CREATE ENERGY SOLUTIONS in an evolving utility industry by providing energy related products and services through existing sales channels supporting increased customer choice. - - DEVELOP PLATFORM FOR GROWTH by creating transferable models for customer service and operations that will bring added value for partnering opportunities. - - LEVERAGE MID-CONTINENT NATURAL GAS AND ELECTRIC SUPPLY MANAGEMENT CAPABILITIES by capitalizing on the opportunities being created with the transition of the utility industry into a competitive marketplace. - - ACQUIRE AND/OR REPOSITION NETWORK AND PRODUCTION ASSETS with targeted deployment of capital to new projects and businesses. OBJECTIVE #2: LEADING ENERGY MERCHANT - - DIVERSIFY RISK by expanding the commodity portfolio. - - EXPAND CONTROL OF MID-STREAM ASSETS to facilitate longer term complex transactions, provide earnings and balance sheet growth, and diversify the asset portfolio risk. - - INCREASE PRODUCT OFFERINGS to include new commodities, financing, and retail aggregator products. - - EXPAND CUSTOMER CHANNELS to include contacts at the Chief Executive Officer, Chief Financial Officer, and Senior Vice President level. - - LEVERAGING THE INFRASTRUCTURE to: 1) provide increased physical and financial risk clearing capability at the lowest cost possible per volumetric unit; 2) leverage systems, processes, and people into new markets; and 3) leverage the operational infrastructure through consolidation and partnering with other operators. OBJECTIVE #3: GLOBALIZE ENERGY NETWORK AND MERCHANT STRATEGIES - - ACQUIRE NETWORK, PRODUCTION, AND MERCHANT ENERGY ASSETS in current foreign markets, taking advantage of growing privatization and restructuring trends. - - MANAGE TO ACHIEVE OPERATIONAL EXCELLENCE; harvesting value and capital by partial sales of high performing businesses. - - DEVELOP MERCHANT BUSINESSES in locations where an existing network operation or relationship exists and the restructured utility environment provides favorable economic returns. - - LEVERAGE AND TRANSFER INFRASTRUCTURE, knowledge and people between foreign and U.S. operations. OUR COMPETITIVE STRENGTHS. We believe we have developed substantial competitive strengths that will enable us to continue to successfully execute our strategy and grow earnings. Our strengths include: - - An experienced management team whose compensation is directly tied to shareholder value. - - Low cost, non-nuclear domestic and international network businesses focused on superior customer service. - - Successful operation of competitive non-regulated business. - - Third largest energy position on a BTU basis. - - Proven risk management policies and procedures to limit exposure to commodity market positions. - - International operations in Australia, New Zealand, Europe and Canada from which we believe we have gained valuable experience in competitive markets. - - A proven track record of quickly and successfully integrating domestic and international mergers and acquisitions. - - A demonstrated ability to identify and react to new business opportunities. MERGERS, ACQUISITIONS & DIVESTITURES ST. JOSEPH LIGHT & POWER On March 4, 1999, St. Joseph Light & Power Company (SJL&P) agreed to merge with us. Under the agreement, SJL&P shareholders will receive $23.00 in UtiliCorp common shares for each SJL&P common share held. We will account for the transaction as a purchase. This transaction was approved by SJL&P shareholders on June 16, 1999, and is also subject to approval by various state and federal regulatory agencies. We and SJL&P filed a joint application with the Missouri Public Service Commission (MPSC) on October 19, 1999, requesting approval of the plans to merge in a transaction valued at approximately $270 million. We expect to close this transaction in the second half of 2000. NATURAL GAS STORAGE FACILITY On March 29, 1999, we agreed to purchase Western Gas Resources Storage Inc. The $100 million cash transaction increased our ownership and control of strategically located natural gas storage assets. The 2,200-acre subsurface facility in Katy, Texas has a storage capacity of 20 billion cubic feet. The purchase closed on May 3, 1999. AQUILA TENDER OFFER On May 7, 1999, approximately 3.4 million shares of Aquila Gas Pipeline Corporation (AQP) were tendered to us at $8.00. The 3.4 million shares together with the 24.0 million shares already held represented 93% of AQP's total shares outstanding. All remaining shares not tendered were converted in a "short-form" merger into a right to receive $8.00 per share. Upon completion of the short-form merger on May 14, 1999, AQP ceased being a publicly traded company and became wholly-owned by Aquila Energy Corporation (AEC). EMPIRE DISTRICT ELECTRIC COMPANY On May 10, 1999, The Empire District Electric Company (Empire) agreed to merge with us. Empire's shareholders approved the merger on September 3, 1999. Upon closing, they will be entitled to receive $29.50 for each share of Empire common stock held, payable in either cash or our common stock. The value of the merger consideration per share will decrease if our common stock is trading below $22 per share at closing and will increase if our common stock is trading above $26 per share at closing. The consideration paid to Empire shareholders, estimated to be $800 million, including the assumption of debt, is subject to certain conditions, such as cash and stock maximums, as well as certain regulatory approvals. We filed a joint application with the Missouri Public Service Commission on December 15, 1999, requesting approval of the plans to merge. We expect this merger to be completed by late 2000. SALE OF WEST VIRGINIA POWER DIVISION On September 9, 1999, we agreed to sell our West Virginia Power division to Allegheny Energy, Inc. for $75 million. The sale closed on December 31, 1999 and resulted in a fourth quarter gain of $4.5 million. In addition to the sale of West Virginia Power's electric and natural gas distribution assets, we entered into a separate agreement for Allegheny to purchase Appalachian Electric Heating, our heating and air conditioning service business in West Virginia. SALE OF RETAIL MARKETING In January 2000, we sold our retail gas marketing business for $14 million. We expect to record a gain in the first quarter of 2000. As a result of our assessment of retail competition possibilities, we have now exited all domestic retail energy activities until the market more fully develops. TRANSALTA ASSETS In February 2000, we agreed to acquire TransAlta Corporation's Alberta-based electricity distribution and retail assets for $450 million. The transaction includes 350,000 customers served by about 54,000 miles of low-voltage power distribution lines, and a 24-hour customer call center in Calgary. The transaction is subject to regulatory approvals in Canada and the United States and is expected to close in 2000. INITIAL PUBLIC OFFERING-UNITED ENERGY LIMITED In May 1998, United Energy Limited (UEL) sold 42% of its common stock to the Australian public. As a result, we recorded a $45.3 million gain. The partial sale to the public reduced our effective ownership of UEL to 29%. Concurrent with UEL's stock offerings, we bought an additional 5% in UEL from another company to bring our ownership to 34%. Prior to the common stock sale, UEL repaid us approximately $101 million for debt notes. The management agreement between UEL and UtiliCorp remains in place. MULTINET/IKON On March 12, 1999, we acquired, for $224 million, a 25.5% interest in Multinet/Ikon, a natural gas network and retailer in Victoria, Australia. QUANTA SERVICES, INC. On September 23, 1999, we invested $186 million in Quanta Services, Inc. (Quanta) preferred stock. The preferred stock is convertible into $6.2 million common shares based on a strike price of $30. This investment is accounted for by the equity method of accounting. We received a $7.6 million management and advisory fee from Quanta during 1999 which is reflected as equity earnings in the accompanying consolidated statement of income. In addition, we have purchased approximately $5.2 million shares of Quanta's common stock on the open market and in privately negotiated transactions. PULSE ENERGY On March 8, 2000, United Energy announced the formation of Pulse Energy, a joint venture in collaboration with Energy Partnership (Ikon Energy Pty Ltd), Shell Australia Ltd, and Woodside Energy Ltd. Pulse Energy will initially service more than one million Victoria, Australia customers with the aim of rapidly becoming a national energy player. The transaction is subject to banking and regulatory approvals. With much of the Australian retail energy market becoming contestable after 2000, Pulse Energy will provide Australia's first large-scale combination of electric and gas services and will have access to potentially 10 million energy customers in eastern Australia and southern Australia commencing January 2001. Effective ownership of Pulse Energy will comprise Shell (40%), United Energy (25%), Energy Partnership (25%) and Woodside (10%). NEW ZEALAND GAS DISTRIBUTION NETWORK On March 22, 2000, we expanded our presence in the New Zealand energy market by purchasing the natural gas distribution network and North Island contracting business of Orion New Zealand Limited for $US 268 million. Much of the gas service territory being acquired overlaps or borders UnitedNetworks' electric distribution areas, creating synergies between our gas and electric operations. Concurrent with the closing of this transaction, we will be pursuing the sale of a portion of our interests in the New Zealand holding company to a private equity investor. This should allow us to remove about $US 450 million of existing New Zealand debt from our balance sheet because of the change in our ownership interest. The debt expected to be incurred to complete the Orion transaction also will not be shown on our balance sheet. We expect our consolidated common equity ratio to immediately improve to an estimated 43% as a result of our reduced ownership. (This estimate assumes 70% conversion of our premium equity participating securities.) This transaction is conditional on UnitedNetworks' shareholder approval and the transaction has an effective date after April, 2000. The UnitedNetworks' shareholder meeting will be held in mid-April 2000. BUSINESS GROUP SUMMARY Segment information for the three years ended December 31, 1999 is incorporated by reference to pages 54 through 56 of our 1999 Annual Report to Shareholders. I. NETWORK ELECTRIC OPERATING STATISTICS The following table summarizes sales, volumes and customers for our North American electric network generation, transmission and distribution businesses.
10 YEAR AVERAGE ANNUAL 1999 1998 1997 1996 1995 GROWTH RATE - -------------------------------------------------------------------------------------------------------- SALES (IN MILLIONS) Residential $270.5 $279.1 $268.3 $264.3 $252.4 6.5% Commercial 179.8 179.4 173.4 167.0 161.1 8.5 Industrial 84.9 83.0 82.2 79.8 77.3 8.9 Other 227.3 162.1 123.3 101.1 86.9 17.6 - -------------------------------------------------------------------------------------------------------- Total $762.5 $703.6 $647.2 $612.2 $577.7 9.6% ======================================================================================================== VOLUMES (GIGAWATT HOURS (GWH)- 000'S) Residential 4,072 4,104 3,885 3,887 3,678 6.5% Commercial 3,133 3,069 2,883 2,775 2,676 8.6 Industrial 2,101 2,041 1,993 1,973 1,927 7.5 Other 5,344 5,809 4,997 3,651 2,264 15.1 - -------------------------------------------------------------------------------------------------------- Total 14,650 15,023 13,758 12,286 10,545 9.2% ======================================================================================================== CUSTOMERS AT YEAR END Residential 377,096 396,912 388,532 381,684 374,701 5.9% Commercial 53,916 57,178 56,207 54,692 55,266 7.5 Industrial 352 339 326 323 324 7.0 Other 53,432 51,816 48,764 45,879 43,106 4.4 - -------------------------------------------------------------------------------------------------------- Total 484,796 506,245 493,829 482,578 473,397 6.0% ========================================================================================================
GAS OPERATING STATISTICS The following table summarizes sales, volumes and customers for our North American gas network businesses.
10 YEAR AVERAGE ANNUAL 1999 1998 1997 1996 1995 GROWTH RATE - -------------------------------------------------------------------------------------------------------- SALES (IN MILLIONS) Residential $398.1 $379.4 $464.4 $429.1 $362.2 4.3% Commercial 161.7 161.2 205.8 192.6 153.9 2.9 Industrial 29.3 34.1 46.8 45.8 45.8 (10.7) Other 49.1 47.8 50.4 60.4 54.9 4.9 - -------------------------------------------------------------------------------------------------------- Total $638.2 $622.5 $767.4 $727.9 $616.8 2.4% ======================================================================================================== VOLUMES - (THOUSAND CUBIC FEET (MCF)- 000'S) Residential 70,082 66,564 77,594 81,698 76,461 2.8% Commercial 33,418 33,228 39,128 40,698 37,282 1.1 Industrial 7,305 8,631 11,059 10,944 12,901 (12.7) Transportation 135,692 140,499 158,937 166,562 178,114 2.6 Other 1,334 1,088 678 1,611 1,827 (3.3) - -------------------------------------------------------------------------------------------------------- Total 247,831 250,010 287,396 301,513 306,585 1.3% ======================================================================================================== CUSTOMERS AT YEAR END Residential 749,219 761,650 744,238 728,867 713,586 4.2% Commercial 71,933 77,971 78,925 77,742 76,430 2.6 Industrial 1,354 1,982 2,491 3,725 3,790 (9.3) Other 8,665 9,986 2,491 2,573 2,815 31.3 - -------------------------------------------------------------------------------------------------------- Total 831,171 851,589 828,145 812,907 796,621 4.1% ========================================================================================================
REGULATION The following is a summary of our pending rate case activity.
RATE CASE DESIGNATION TYPE OF DATE AMOUNT (IN MILLIONS) SERVICE REQUESTED REQUESTED - ----------------------------------------------------------- KANSAS Gas 10/25/99 $6.0 MINNESOTA Gas May 2000 --* - -----------------------------------------------------------
*ESTIMATED DATE OF REQUEST, AMOUNT NOT YET DETERMINED. In January 2000, we were ordered to reduce Kansas electric rates by $8.7 million. The order is currently being reconsidered by the commission based upon a request by the Company. A final order is expected by late March or early April. The Commission staff originally recommended a rate reduction of $19.9 million. ENVIRONMENTAL We are currently named as a potentially responsible party (PRP) at three PCB disposal sites. Our combined cleanup expenditures have been less than $1 million to date at these and other PCB disposal sites for which we have been named a PRP but have settled our liability. We anticipate that future expenditures on the three sites where we are currently named as a PRP will not be significant. We also own or once operated 29 former manufactured gas plants sites (MGP's) which may require some form of environmental remediation. As of December 31, 1999 we estimate cleanup costs on these identified sites to be $14.4 million (see Note 14 to the Consolidated Financial Statements for further discussion of this topic). In October 1998, the EPA published new air quality standards to further reduce the emission of NOx. These stricter standards will require us to install new equipment on our baseload coal units in Missouri that we estimate will cost $35 million. The new standards are under debate in the courts and our ultimate cost is therefore subject to change. The new standards as written are effective in May 2003. SEASONAL VARIATIONS OF BUSINESS Our network and independent power project businesses are weather-sensitive. We have both summer and winter peaking network assets to reduce dependence on a single peak season. The table below shows peak times for our North American network businesses.
JURISDICTION PEAK - ------------------------------------------------------------- Gas network operations November through March Missouri, Kansas and Colorado July and August electric Canadian Operations November through March - -------------------------------------------------------------
INTERNATIONAL NETWORK OPERATIONS Our international network operations are managed consistent with the strategies of our domestic network business segment. We manage our international business with local management that reports separately to the company. The contribution to earnings before interest and taxes from international network businesses was 31.4%, 31.6% and 17.5% of our total for the years ended December 31, 1999, 1998 and 1997, respectively. As of December 31, 1999, approximately $1,792.1 million of our total assets relate to our international network businesses. The following discussion briefly describes our international network businesses. AUSTRALIA We acquired an effective 49.9% ownership interest in United Energy Limited (UEL), an electric distribution utility serving 546,000 customers in the state of Victoria. As part of a management agreement between us and UEL, we manage the utility for a fee as well as participate in its earnings. In May 1998, UEL sold 42% of its common stock to the Australian public and as a result, we recorded a $45.3 million gain. The partial sale to the public reduced our effective ownership percentage to 29%. Concurrent with UEL's stock offerings, we bought an additional 5% in UEL from another company to bring our ownership to 34%. Prior to the common stock sale, UEL repaid approximately $101 million in debt notes owed to us. The management agreement between us and UEL remains in place. UEL distributes and sells electricity with a majority of its sales earned from the regulated distribution network business. The regulated distribution sales and connection charges for access to its distribution system will be reviewed by the Office of the Regulator-General(OGR), with new rates becoming effective January 1, 2001. The retail electric market in which UEL operates is being progressively opened to competition, with all customers becoming contestable by January 1, 2001. The following table shows the timing of electricity markets opening to competition in Victoria:
THRESHOLD DATE OF ELIGIBILITY PERCENT OF MARKET CUSTOMER TYPE - -------------------------------------------------------------------------------------------------- GREATER THAN 5MW Dec 1994 22% Large heavy industrial GREATER THAN 1MW July 1995 7% Large commercial industrial GREATER THAN 750MWh July 1996 12% Medium commercial/light industrial GREATER THAN 160MWh July 1998 8% Small commercial All remaining Jan 2001 51% Residential customers - ----------------------------------------------------------------------------------------------------
In March 1999, we acquired a 25.5% interest in a gas distribution and retail business in Melbourne. The distribution business, Multinet, serves approximately 609,000 accounts, and the retail business, Ikon, serves approximately 520,000 customers. About 309,000 Multinet distribution customers are served by the Ikon retail business and approximately 280,000 Ikon customers are served electricity by United Energy. The gas business is managed by United Energy and pay UEL a fee for those services. Similar to electricity, retail gas customers in Victoria will all be able to select the retailer of their choice. The following table shows the timeline for the rollout of gas contestibility in Victoria:
THRESHOLD DATE OF ELIGIBILITY PERCENT OF MARKET CUSTOMER TYPE - ---------------------------------------------------------------------------------------------- GREATER THAN 500TJ Oct 1999 24% Large industrial GREATER THAN 100TJ Mar 2000 13% Med Ind/Large Com GREATER THAN 5TJ Sep 2000 12% Commercial All remaining Sep 2001 51% Residential 1 Bcf is equal to about 1,100 Tj's. - ----------------------------------------------------------------------------------------------
NEW ZEALAND Through a series of transactions in 1998, we acquired an additional 48% interest in Power New Zealand's common stock for approximately $245 million, increasing our ownership to 78.6%. Concurrent with this acquisition, we sold our 39.6% interest in WEL Energy Group, which we acquired in 1993 and bought out our 21% minority partner in our New Zealand subsidiary, UtiliCorp N.Z., Inc. In January 1999, an additional .2% interest was purchased from the Territorial Local Authorities. The Electricity Industry Reform Act of 1998 required all of New Zealand's integrated power companies have separate ownership of their lines (network) and energy (generation and retail) businesses effective April 1, 1999. Power New Zealand, with approximately 90% of its assets and earnings in the lines area, in November 1998, announced its intention to remain in the network business and to exit the energy business. It also agreed to purchase the Wellington-based lines assets of TransAlta New Zealand Ltd. and to sell to TransAlta its retail and generation businesses for net expenditure by Power New Zealand of $238 million. Because Power New Zealand's name transferred to TransAlta as part of the retail business TransAlta acquired, the network business became UnitedNetworks Limited on January 5, 1999. In November 1998, Power New Zealand agreed to purchase the electric line assets of neighboring power company TrustPower Limited for approximately $261 million. The assets became part of a greater network which includes parts of metropolitan Auckland and other areas in the central and southern regions of New Zealand's North Island. The TrustPower transaction closed January 31, 1999. Completion of the TransAlta and TrustPower transactions created the country's largest electricity distribution network, serving about 484,000 customers. CANADA We own West Kootenay Power Ltd.(WKP), a hydro-electric utility in British Columbia, Canada. WKP has four hydro-electric generation facilities with a capacity of 205 megawatts and 962 miles of transmission lines that serve approximately 135,000 direct and indirect customers in south central British Columbia. WKP generates about half of its power requirements and purchases the remaining requirements through power contracts. WKP is regulated by the British Columbia Utilities Commission. The Commission approved renewal of the incentive based rate setting mechanism for 2000. When first implemented in 1996, this mechanism was the first of its kind for electric utilities in Canada and was the result of a negotiated settlement with customers and regulators. The mechanism calls for sharing of savings between the customer and WKP if WKP performs over and above negotiated performance expectations. II. ENERGY MERCHANTS WHOLESALE ENERGY MARKETING Aquila's wholesale energy marketing business is conducted through various operating units, collectively referred to as Energy Marketing. Energy Marketing is a gas and power marketing company with a marketing, supply and transportation network consisting of relations with gas producers, local distribution companies, and end-users throughout the United States and Canada. Energy Marketing adds value for customers by leveraging its national position in financial deal structuring in gas and power marketing. It provides services such as complex fuel supply arrangements, energy management services and project development focused on control of mid-stream energy assets. For the five years ended December 31, 1999, Energy Marketing had marketing volumes of 9.9, 8.8, 5.7, 2.3, and 1.5 billion cubic feet a day (BCF/d), respectively. In 1995, Energy Marketing began selling electricity to wholesale customers, much as it markets natural gas. Aquila expects that the electricity marketing industry will continue to expand rapidly as liquidity and maturity increases. Aquila's wholesale power sales have grown from 129,000 megawatt hours (MWH) in 1995 to 236,500 million MWH in 1999, ranking it third among the nation's largest volume power marketers. Energy Marketing utilizes certain types of fixed-price contracts in connection with its natural gas and power marketing businesses. These include contracts that commit us to purchase or sell natural gas and other commodities at fixed prices in the future (i.e., fixed-price forward purchase and sales contracts), futures and options contracts traded on the NYMEX and swaps and other types of financial instruments traded in the over-the-counter financial markets. The availability and use of these types of contracts allows us to manage and hedge our contractual commitments, reduce our exposure relative to the volatility of cash market prices, take advantage of carefully selected arbitrage opportunities via open positions, protect our investment in natural gas storage inventories and provide price risk management services to our customers. We are also able to secure additional sources of energy or create additional markets for existing supply through the use of exchange for physical transactions allowed by NYMEX. We refer to our domestic and Canadian natural gas and electricity trading activities as price risk management activities. These are reflected in the accompanying financial statements using the mark-to-market method of accounting. Although we generally attempt to balance our fixed-price physical and financial purchase and sales contracts in terms of contract volumes and the timing of performance and delivery obligations, net open positions often exist or are established due to the origination of new transactions and our assessment of, and response to, changing market conditions. We will occasionally create a net open position or allow a net open position to continue when we believe, based upon competitive information gained from our energy marketing activities, that future price movements will be consistent with our net open position. When we have a net open position, we are exposed to fluctuating market prices. In addition to price risk movements, credit risk is also inherent in our risk management activities. Our trading and marketing business is also exposed to counterparty credit risk resulting from a counterparty not fulfilling its contractual obligations. Our credit policies with regard to our counterparties attempt to minimize overall credit risk. Our credit procedures include a thorough review of potential counterparties' financial condition, collateral requirements under certain circumstances, monitoring of net exposure to each counterparty and the use of standardized agreements which allow for the netting of positive and negative exposures associated with each counterparty. Our credit policy is monitored and administered by a function independent of the trading and marketing activities. GAS GATHERING AND PROCESSING Aquila Gas Pipeline (AQP) gathers and processes natural gas and natural gas liquids. AQP owns and operates a 3,133 mile intrastate gas transmission and gathering network and four processing plants that extract and sell natural gas liquids. Key operating statistics for AQP are presented in the table below.
- ----------------------------------------------------------- 1999 1998 1997 1996 1995 1994 - ----------------------------------------------------------- Natural gas throughput (million cubic feet per day) 548 475 483 493 506 371 Natural gas liquids produced (thousand 22 25 37 41 32 31 barrels per day) Pipeline miles 3,133 3,403 3,434 3,416 3,311 2,718 owned - -----------------------------------------------------------
Aquila Energy and AQP own 35% of the capital stock of Oasis Pipe Line Company (Oasis) and have 280 MMcf/d of firm intrastate transportation capacity. The 600-mile Oasis pipeline system spans the state of Texas and links Aquila's gathering systems to the Waha, Texas hub and the Katy, Texas hub. In 1998, AQP entered into a joint venture ownership and operation agreement with a third party in the Austin Chalk area in Texas to gather and transport the natural gas produced from specified wells. The sales contract accounted for approximately 18% of AQP's total natural gas sales in 1999. INDEPENDENT POWER PROJECTS Aquila Energy participates in the ownership and operation of facilities in the independent and wholesale power generation market. Consistent with the company's overall strategy to minimize risk through diversification, Aquila Energy has invested in generation facilities which are geographically diverse and use a variety of fuels and proven technologies. Additionally, each project is a producer of competitively priced wholesale power in its geographic region and has a long-term market for its output. To date, Aquila Energy has made investments in 14 projects located in five states and Jamaica, with a total net ownership of approximately 255 MW of generating capacity. A description and listing of the power projects appears on page 15 of this report. We anticipate further expansion or investment in the independent power projects business through a newly formed entity focused on mid-stream energy assets. INTERNATIONAL ENERGY MERCHANT OPERATIONS Our international energy merchant operations are managed consistently with the strategies of our domestic energy merchant business segment. We manage our international business with local management that reports separately to the company. The contribution to earnings before interest and taxes from our international energy merchant businesses was 6.6%, (2.2%), and (1.2%) of our total for the years ended December 31, 1999, 1998 and 1997, respectively. As of December 31, 1999, approximately $618.3 million of our total assets relate to our international energy merchant businesses. The following discussion briefly describes our international energy merchant businesses. UNITED KINGDOM AND EUROPE We have been involved in UK gas markets since these markets to competition in the early 1990's. The UK gas markets have been fully opened to competition since 1998 and all end users, including residential households, are now free to select their gas supplier. Many new retail gas suppliers have entered the market with the implementation of full competition. Our UK business developed a strong position in the supply of gas transportation/shipping and balancing services to these new entrants to the gas markets. In 1999, the process of rationalizing and consolidation of the new entrants commenced. Our contract with a major customer was terminated at the end of the third quarter when it was acquired by another firm. As a result, the end consumers indirectly served by Aquila as of December 31, 1999 was approximately 790,000, a net decrease of 210,000 indirect customers since December 31, 1998. We expect the process of market rationalization to continue. Similar deregulation and the opening to competition has been completed in the UK electricity market. We obtained our UK Public Electricity Supply License in 1999, and we expect to obtain approval for our data processing systems in mid-year 2000. This is a further requirement to interface with and supply electricity to end consumers on the regulated local distribution networks. We expect the capability to provide a "dual fuel" service will counter the impact of rationalization and consolidation of retail gas and power suppliers. We commenced trading in the UK wholesale electricity market in October 1999. The European Union (EU) has agreed Gas and Electricity Directives which require all the member states of the EU to open their domestic gas and electricity markets to competition over a number of years. (Some member states, including United Kingdom, have already opened their markets to competition prior to the EU adopting these Directives.) Each member state is following the mandated timetable in different fashions with some countries progressing much faster than others. We have responded to these new opportunities by expanding our energy merchant activities into selected European countries. In 1999, we opened offices in Spain, Germany and Norway. We commenced trading in the Nordic Power market in November 1999. We anticipate business growth in these countries and throughout Europe as the process of deregulation and market opening develops. In June 1998, we paid $25.6 million to a third party to cancel two take-or-pay contracts and related guarantees effective April 1, 1998, that required us to take gas at significantly above-market prices until 2005. Between 1995 and 1997, we reserved $19.0 million against the estimated future losses on these contracts, resulting in a one time net settlement loss of $6.6 million. In July 1998, we lost a long-standing dispute with one of our previous suppliers related to a take-or-pay gas supply contract. We contended that the supplier did not make proper deliveries pursuant to the supply contract and further materially breached the contract. Accordingly, we began paying the supplier the prevailing market prices, which were lower than the contract price. The difference between the two prices accumulated to approximately $38.0 million, an amount we had previously recorded as a liability. A court ruling required us to pay this $38.0 million price difference along with interest of $6.8 million that accumulated from the date the contract invoices were due. This interest payment was recorded as a one-time loss. We are appealing the court's decision and are seeking recovery of the $44.8 million. III. SERVICES The services segment, appearing for the first time in our 1999 financial statements, consists of our investment in Quanta Services, Inc. (Quanta). Quanta is a provider of specialized construction services to electric utilities, telecommunications and cable television companies, and governmental entities. The contribution to earnings before interest and taxes from the services business group was 3.2% of our total for the year ended December 31, 1999. In September 1999, we invested $186 million in Quanta Preferred Stock. The stock is convertible into 6.2 million common shares based on a strike price of $30. We received $7.6 million in management and advisory fees from Quanta during 1999, which is included, along with $5.6 million of equity earnings, in Equity in earnings of investments and partnerships in the accompanying consolidated statement of income. In addition, we have purchased approximately 5.2 million shares of Quanta Common Stock on the open market and in privately negotiated transactions bringing our equity interest to 28%. We account for this investment using the equity method. IV. CORPORATE & OTHER COMPETITION DOMESTIC UTILITY OPERATIONS. Our domestic network businesses operate in a regulated environment. Industrial and large commercial customers largely have access to energy sources so some of the competitive pricing benefits have been transferred to these customers through open access tariffs relating to transmission lines and pipelines. Without federal legislation, competition at the retail level cannot form since the rules will be different in each state. Based on our assessment of retail competition possibilities, we have now exited all domestic retail activities, until the market more fully develops. ACCOUNTING IMPLICATIONS. We currently record the economic effects of regulation in accordance with the provisions of Statement of Financial Accounting Standards No. 71 (SFAS No.71), "Accounting for the Effect of Certain Types of Regulation". Accordingly, our rates will continue to be based on historical costs for the foreseeable future. If we discontinue applying SFAS No 71, we would make adjustments to the carrying value of our regulatory assets. Total net regulatory assets at December 31, 1999 were $96.8 million. COMPETITION IN AUSTRALIA. The State of Victoria is deregulating its electricity market in stages. Currently, customers with yearly usage above 160 megawatt-hours (industrial and large commercial customers) can choose their retail electricity suppliers. After January 1, 2001, all customers of United Energy Limited (UEL) will be able to choose their retail electricity suppliers. A majority of UEL's gross margin comes from distribution lines charges that would not be materially affected by this customer choice. REGULATION IN NEW ZEALAND. A concerted effort is currently under way to gain consensus for a regulatory system that is developed and administered by the utility industry. We fully support this movement. NORTH AMERICAN ENERGY MARKETING. Our energy marketing businesses operate in a fully competitive environment that rewards participants on price, service, and execution. Our energy marketing businesses compete for customers with the largest energy companies in North America. The industry is premised on large-volume sales with relatively low margins. Companies that operate in this industry must fully understand the price sensitivity and volatility of commodities. The public became more aware of some of the risks associated with this industry when a number of companies announced sudden losses resulting from the June 1998 price spike in electricity. We expect price volatility and events like price spikes to occur and we have risk control policies in place for dealing with such events. EUROPEAN ENERGY MARKETING. Our energy marketing business in Europe continues to build its capability to offer new products in gas, electric and other energy related areas. Trading of electricity in the United Kingdom began in October 1999, and trading in the Nordic Power Market began in November 1999. In the 1999 fourth quarter, we lost a major customer when it was bought by another firm. The resulting drop in indirect customers served in the U.K. is expected to be offset by our expansion on the European Continent.
OUR EXECUTIVE TEAM NAME AGE POSITION ---- --- -------- RICHARD C. GREEN, JR. (RICK) 45 CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER ROBERT K. GREEN (BOB) 38 PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR; CHAIRMAN, AQUILA ENERGY CORPORATION JAMES G. MILLER (JIM) 51 SENIOR VICE PRESIDENT, ENERGY DELIVERY KEITH G. STAMM 39 CHIEF EXECUTIVE OFFICER, AQUILA ENERGY CORPORATION EDWARD K. MILLS (ED) 40 PRESIDENT AND CHIEF OPERATING OFFICER, AQUILA ENERGY CORPORATION JON R. EMPSON 54 SENIOR VICE PRESIDENT, REGULATORY, LEGISLATIVE AND ENVIRONMENTAL SERVICES PETER S. LOWE 47 SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER SALLY C. MCELWREATH 59 SENIOR VICE PRESIDENT, CORPORATE COMMUNICATIONS LEO E. MORTON 54 SENIOR VICE PRESIDENT AND CHIEF ADMINISTRATIVE OFFICER DALE J. WOLF 60 VICE PRESIDENT, FINANCE; TREASURER AND CORPORATE SECRETARY INTERNATIONAL ------------- DONALD G. BACON (DON) 62 CHAIRMAN AND CHIEF EXECUTIVE OFFICER, WEST KOOTENAY POWER LIMITED; CHIEF EXECUTIVE OFFICER, UNITED ENERGY LIMITED CHARLES K. DEMPSTER (CHUCK) 57 SENIOR VICE PRESIDENT, INTERNATIONAL ENERGY INITIATIVES ROBERT K. GREEN (BOB) 38 CHAIRMAN, UNITED ENERGY LIMITED; CHAIRMAN, UNITEDNETWORKS LIMITED ROBERT W. HOLZWARTH (BOB) 52 CHIEF EXECUTIVE OFFICER OF UTILICORP'S CANADIAN NETWORK OPERATIONS JEFFREY MICHNOWSKI (JEFF) 42 MANAGING DIRECTOR, AQUILA ENERGY LIMITED R. PAUL PERKINS (PAUL) 57 SENIOR VICE PRESIDENT, INTERNATIONAL DANIEL W. WARNOCK (DAN) 41 CHIEF EXECUTIVE OFFICER, UNITEDNETWORKS LIMITED
RICHARD C. GREEN, JR. (B.S., BUSINESS - SOUTHERN METHODIST UNIVERSITY) Rick joined our company in 1976 and held various financial and operating positions between 1976 and 1982. In 1982, Rick was appointed Executive Vice President at Missouri Public Service, the predecessor to UtiliCorp. Rick has served as Chairman of the Board of the company since 1989 and President and Chief Executive Officer for the period 1985 through 1996. ROBERT K. GREEN (B.S., ENGINEERING, PRINCETON UNIVERSITY; J.D. LAW, VANDERBILT UNIVERSITY) Bob joined our company in 1988 as Assistant Division Counsel and in 1989 was appointed to Division Counsel. Between 1989 and 1992, he held executive level positions at Missouri Public Service. In 1993, Bob was appointed Executive Vice President and in 1996 assumed additional duties as President. He also is the Chairman of United Energy Limited, a 34% owned foreign traded Australian company, UnitedNetworks Limited, a 78.8% owned foreign traded New Zealand company, and Aquila Energy Corporation. JAMES G. MILLER (B.S., ELECTRICAL ENGINEERING, M.B.A., MANAGEMENT, UNIVERSITY OF WISCONSIN) Jim joined our company in 1983 as President, Michigan Gas Utilities, a company acquired by us in 1989. In 1991, he was appointed President, WestPlains Energy and in 1995 was appointed Senior Vice President, Energy Delivery. Prior to joining UtiliCorp, he worked for Wisconsin Power and Light Company in various financial and operating capacities. KEITH G. STAMM (B.S., MECHANICAL ENGINEERING, UNIVERSITY OF MISSOURI AT COLUMBIA; M.B.A., FINANCE EMPHASIS, ROCKURST COLLEGE.) Keith joined our company in 1983 as a staff engineer at our Sibley Power Plant. Between 1985 and 1995, he held various operating positions. In 1995, Keith was promoted to Vice President, Energy Trading and in 1996, to Vice President and General Manager, Regulated Power. In 1997, Keith became Chief Executive Officer of United Energy Limited. In December 1999, he was named Chief Executive Officer, Aquila Energy Corporation and remains a Director of United Energy Limited. EDWARD K. MILLS (B.A., ENGLISH, UNIVERSITY OF TEXAS; M.B.A., FINANCE, RICE UNIVERSITY) Ed joined our company in 1993 as Director of Risk Management and Trading, Aquila Energy Corporation. In 1998, Ed was appointed President and Chief Operating Officer, Aquila Energy Corporation and in July 1998, was appointed Vice President of UtiliCorp. Prior to joining our company, Ed held executive and management positions at Fina Oil and Chemical Company, Texas Commerce Bank and Springer Holding Company. JON R. EMPSON (B.A., ECONOMICS, CARLETON COLLEGE, M.B.A., ECONOMICS, UNIVERSITY OF NEBRASKA AT OMAHA) Jon joined our company in 1986 as Vice President, Regulation, Finance and Administration. In 1993, he was appointed Senior Vice President, Gas Supply and Regulatory Services and in 1996 he was appointed Senior Vice President, Regulatory, Legislative and Environmental Services. Prior to joining UtiliCorp, Jon worked for a predecessor company in various executive and management positions for 7 years, held executive management positions at the Omaha Chamber of Commerce and Omaha Economic Development Council and worked as an economist with the Department of Housing and Urban Development. PETER S. LOWE (BACHELOR OF COMMERCE DEGREE AND MASTER OF BUSINESS DEGREE, UNIVERSITY OF MELBOURNE) Peter joined our company in June of 1999 as Vice President, Financial Management and Accounting Services. In January 2000, he was named Senior Vice President and Chief Financial Officer. Prior to joining our company, Peter was Chief Financial Officer/Group Manager of Business Services for United Energy Limited, a 34% owned foreign traded Australian Company. He has also served in a number of managerial and executive positions with Foster's Brewing Group Limited. SALLY C. MCELWREATH (B.A., SOCIAL SCIENCES; M.B.A., PUBLIC RELATIONS, PACE UNIVERSITY) Sally joined our company in 1994 as Senior Vice President, Corporate Communications. Previously, she was Vice President, Corporate Communications for MacMillan Inc. and for The Travel Channel; Director of Marketing Communications for Trans World Airways and Manager of Corporate Communications for United Airlines beginning in 1971. Prior to 1971, she held various positions with ARCO and Sinclair Oil Corporation. LEO E. MORTON (B.S., MECHANICAL ENGINEERING, TUSKEGEE UNIVERSITY; M.S. MANAGEMENT, MASSACHUSETTS INSTITUTE OF TECHNOLOGY) Leo joined our company in 1994 as Vice President, Performance Management. In 1996, he was appointed Senior Vice President, Human Resources and Operations Support and in March 2000, he was named Senior Vice President and Chief Administrative Officer of the company. Prior to working for us, Leo held executive and management positions in manufacturing and engineering for AT&T and Bell Laboritories beginning in 1973. DALE J. WOLF (B.S., BUSINESS ADMINISTRATION, FORT HAYS STATE UNIVERSITY; M.B.A., FINANCE, UNIVERSITY OF MISSOURI) Dale joined our company in 1962 as a staff accountant at Missouri Public Service. Between 1962 and 1972, he held various accounting and finance positions. In 1972, he was appointed Assistant Treasurer and in 1976, Treasurer. In 1984, he was promoted to Vice President and Treasurer for Missouri Public Service. When UtiliCorp was formed in 1985, Dale became its Vice President, Finance and Treasurer. In 1989, he also assumed the Corporate Secretary responsibilities. DONALD G. BACON (B.S., CIVIL ENGINEERING, UNIVERSITY OF ALBERTA) Don joined our company in 1993 as Chairman and Chief Executive Officer of West Kootenay Power. In 1997, he became Power New Zealand's Chief Executive Officer in addition to his responsibilities in Canada. In December 1999, Don was appointed Chief Executive Officer of United Energy Limited in Australia. Prior to Don's employment with us, he was Vice President, TransAlta Utilities Corporation in Canada. CHARLES K. DEMPSTER (B.S., CIVIL ENGINEERING, UNIVERSITY OF HOUSTON) Chuck joined our company in 1993 as President of Aquila Energy Corporation. In 1994, he was appointed Senior Vice President, Energy Resources. In 1995, Chuck became Chairman and Chief Executive Officer of Aquila Energy U.K., Inc. and in 1998, became Senior Vice President of our company and Chairman and Chief Executive Officer, Aquila Energy Corporation. Prior to joining us, Chuck was President, Reliance Pipeline Corporation between 1987 and 1993. Prior to 1987, Chuck held executive positions at NICOR and Enron. JEFFREY MICHNOWSKI (B.S., BUSINESS ADMINISTRATION, RUTGERS COLLEGE; M.B.A., BARUCH COLLEGE) Jeff joined our company in 1991 working in Aquila's Energy's U.S. Operations. While at Aquila, he held the positions of Risk Manager and Director and Vice President of Price-Risk Management. In 1998, Jeff was named Managing Director of Aquila Energy Limited, a London-based subsidiary of the company. ROBERT W. HOLZWARTH (B.S., TECHNICAL MANAGEMENT, DENVER TECHNICAL COLLEGE) Bob joined our company in 1993 as Vice President-Generation and Director-Power Production. In 1997, he was named Vice President and General Manager of Power Supply Services and in March 2000, Chief Executive Officer of our Canadian Network Operations. Prior to joining our company, Bob was general manager of power and water with the Ralph M. Parsons Company on assignment in Saudi Arabia. R. PAUL PERKINS (B.A., INTERNATIONAL RELATIONS, UNIVERSITY OF NORTH CAROLINA) Paul joined our company in 1994 as Vice President, Corporate Development. Paul's primary focus in Corporate Development was in international opportunities. In 1997, Paul was appointed Senior Vice President, Australasia. In June 1999, he was named Senior Vice President, International. Prior to joining UtiliCorp, he was a regional manager for WMX Technologies between 1992 and 1994 focusing on Latin America and the Caribbean. He worked for Texaco Inc. as a Division Manager, Supply and Trading for Latin America and West Africa between 1990 and 1992. Paul worked for Texaco between 1978 and 1990 in other international capacities. DANIEL W. WARNOCK (B.A., BUSINESS ADMINISTRATION, UNIVERSITY OF NEBRASKA AT OMAHA) Dan joined our company in 1988 as Manager of Regulatory Affairs at our Peoples Natural Gas Division. He then served as Senior Vice President of our Energy Supply Services in Omaha, Nebraska. In January 2000, Dan was named Chief Executive Officer at UnitedNetworks Limited, a 78.8% owned foreign traded New Zealand Company. UnitedNetworks Limited is New Zealand's largest electric distribution company. ITEM 2. PROPERTIES. We own electric production, transmission and distribution systems and gas transmission and distribution systems throughout our service territories. We also own gas gathering, processing and pipeline systems. All network assets in Michigan are mortgaged pursuant to an Indenture of Mortgage and Deed of Trust dated July 1, 1951, as supplemented. Substantially all of our Canadian network plant is mortgaged under terms of a separate indenture. UTILITY FACILITIES Our electric generation plants, as of December 31, 1999, are as follows:
NET UNIT CAPABILITY GENERATION UNIT LOCATION YEAR INSTALLED (KW NET, PER HOUR) FUEL (MW HOURS) - ---------------------------------------------------------------------------------------------------------------------------- UNITED STATES- MISSOURI: Sibley #1 - #3 Sibley 1960, 1962,1969 501,000 Coal 3,037,715 Ralph Green #3 Pleasant Hill 1981 74,000 Gas 35,439 Nevada Nevada 1974 20,000 Oil 1,480 Greenwood #1 - #4 Greenwood 1975 - 1979 247,000 Gas/Oil 142,507 KCI #1 - #2 Kansas City 1970 33,000 Gas 3,683 - ---------------------------------------------------------------------------------------------------------------------------- KANSAS: Judson Large #4 Dodge City 1969 143,000 Gas 438,538 Arthur Mullergren #3 Great Bend 1963 96,000 Gas 198,142 Cimarron River #1 - #2 Liberal 1963, 1967 72,000 Gas 85,006 Clifton #1 - #2 Clifton 1974 73,000 Gas/Oil 33,802 Jeffrey #1 - #3 St. Mary's 1978, 1980, 1983 177,000 Coal 2,333,784 - ---------------------------------------------------------------------------------------------------------------------------- COLORADO: W.N. Clark #1 - #2 Canon City 1955, 1959 40,000 Coal 228,421 Pueblo #6 Pueblo 1949 20,000 Gas 14,203 Diesel #1-#5 Pueblo 1964 10,000 Oil 1,197 Diesel #1-#5 Rocky Ford 1964 10,000 Oil 907 - ---------------------------------------------------------------------------------------------------------------------------- CANADA- BRITISH COLUMBIA: No. 1 Lower Bonnington 1925 41,000 Hydro 332,084 No. 2 Upper Bonnington 1907 59,000 Hydro 435,827 No. 3 South Slocan 1928 53,000 Hydro 426,633 No. 4 Corra Linn 1932 51,000 Hydro 344,679 - ---------------------------------------------------------------------------------------------------------------------------- TOTAL 1,720,000 8,032,047 ============================================================================================================================
The following table shows the overall fuel mix and generation capability for the past five years.
SOURCE (MW) 1999 1998 1997 1996 1995 - ---------------------------------------------------------------------------------------------------- Coal 895 888 883 885 875 Gas and oil 802 792 786 784 705 Hydro 205 205 205 205 205 - ---------------------------------------------------------------------------------------------------- Total generation capability 1,902 1,885 1,874 1,874 1,785 ====================================================================================================
At December 31, 1999, we had transmission and distribution lines as follows:
LENGTH DESCRIPTION (POLE MILES) - ----------------------------------------------------- Transmission lines 6,209 Overhead distribution lines 19,410 Underground distribution lines 4,367 - ----------------------------------------------------- TOTAL 29,986 =====================================================
At December 31, 1999, our gas utility operations had 2,170 miles of gas gathering and transmission pipelines and 17,978 miles of distribution mains and service lines located throughout its service territories. GAS PROCESSING AND GATHERING ASSETS AQP owned and/or operated 11 active natural gas pipeline systems with an aggregate length of approximately 3,133 miles. These pipelines do not form an interconnected system. Set forth below is information with respect to AQP's pipeline systems as of December 31, 1999:
GAS AVG. DAILY THROUGHPUT GAS CAPACITY THROUGHPUT MILES OF (a)(b) (a)(b)(c) GATHERING SYSTEMS LOCATION PIPELINE (a) (MMcf/d) (MMcf/d) - ------------------------------------------------------------------------------------------------------------- Southeast Texas/Katy SE Texas 2,398 732 506 Mentone W. Texas 13 60 -- Gomez W. Texas 11 40 -- Menard County C. Texas 120 30 2 Maverick County W. Texas 77 20 15 Rhoda Walker W. Texas 21 20 1 Panola County E. Texas 23 8 2 Elk City SW Oklahoma 173 120 70 Mooreland (d) NW Oklahoma -- -- -- Traders Creek (e) NW Oklahoma 28 20 10 Dorado - 40% S. Texas 58 40 6 Benedum/Wilshire - 20% W. Texas 211 130 20 - -------------------------------------------------------------------------------------------------------------- 3,133 1,220 632 Fuel and Shrinkage -- -- (89) - ------------------------------------------------------------------------------------------------------------- TOTAL 3,133 1,220 543 =============================================================================================================
a) ALL MILEAGE, CAPACITY AND VOLUME INFORMATION IS APPROXIMATE. CAPACITY FIGURES ARE MANAGEMENT'S ESTIMATES BASED ON EXISTING FACILITIES WITHOUT REGARD TO THE PRESENT AVAILABILITY OF NATURAL GAS. b) GROSS GAS THROUGHPUT CAPACITY IS INCLUDED AT 100% WHILE NET AVERAGE GAS THROUGHPUT IS PRESENTED AT THE OUR PRESENT JOINT VENTURE OWNERSHIP INTEREST. c) EXCLUDES OFF-SYSTEM MARKETING SALES WITH AVERAGE DAILY VOLUMES OF 776 Mmcf/d SOLD FROM OTHER COMPANIES' FACILITIES. d) IN JULY 1999, AQUILA GAS SYSTEM SOLD THE ASSETS IN ITS MOORELAND SYSTEM. e) IN APRIL 1999, ASSETS WERE TRANSFERRED FROM AQUILA GAS SYSTEM TO FORM TRADERS CREEK PIPELINE. At December 31, 1999, we owned 35% of the capital stock of Oasis and the right to transport 280 MMcf/d of natural gas on Oasis' pipeline, plus the opportunity to utilize excess capacity on an interruptible basis. The Oasis pipeline is a 600-mile, 36-inch diameter natural gas pipeline which connects the Waha, Texas hub to the Katy, Texas hub. The Oasis pipeline has a 1 Bcf/d of throughput capacity. We use the equity method of accounting for this investment. At December 31, 1998, AQP owned and/or operated an interest in four natural gas processing plants listed. Set forth below is information with respect to AQP's processing plants as of December 31, 1999:
GAS GAS NGLS THROUGHPUT THROUGHPUT PRODUCTION CAPACITY(a) (a), (b) (a), (b) PROCESSING PLANTS (MMcf/d) (MMcf/d) (MBbls/d)(c) - ---------------------------------------------------------------------------------------------------------------- La Grange, Texas 230 144 17.3 Somerville, Texas 28 18 .3 Benedum, Texas 20% 125 20 .9 Elk City, Oklahoma 115 70 3.7 - ---------------------------------------------------------------------------------------------------------------- Total owned plants 498 252 22.2 Katy, Texas (d)(e) -- 196 -- - ---------------------------------------------------------------------------------------------------------------- TOTAL 498 448 22.2 ================================================================================================================
a) ALL CAPACITY AND VOLUME INFORMATION IS APPROXIMATE. CAPACITY FIGURES ARE MANAGEMENT'S ESTIMATES BASED ON EXISTING FACILITIES WITHOUT REGARD TO THE PRESENT AVAILABILITY OF NATURAL GAS. b) VOLUMES FROM JOINT VENTURES HAVE BEEN INCLUDED AT THE PRESENT AQP OWNERSHIP INTEREST. c) THOUSANDS OF BARRELS PER DAY (MBbls/d). d) THIS PLANT IS OWNED AND OPERATED BY A THIRD PARTY FORM WHICH AQP RECEIVES A PORTION OF THE NGL'S PRODUCED FROM GAS AQP DELIVERS TO THE PLANT. THIS PLANT IS INCLUDED IN THIS SECTION FOR INFORMATIONAL PURPOSES TO SHOW THE GAS THROUGHPUT AND NGL'S PRODUCTION AQP RECEIVED UTILIZING THE ACCESS TO THIS PLANT. e) IN 1999, AQP ELECTED TO BYPASS THE KATY, TEXAS PLANT AND RECEIVE PAYMENT IN BTU VALUE DUE TO THE DEPRESSED NGL'S COMMODITY PRICES. The availability of natural gas reserves to AQP depends on their development in the area served by its pipelines and on AQP's ability to purchase gas currently sold to or transported through other pipelines. The development of additional gas reserves will be affected by many factors including the prices of natural gas and crude oil, exploration and development costs and the presence of natural gas reserves in the areas served by AQP's systems. INDEPENDENT POWER PROJECTS Information regarding the company's generating projects is set forth below.
TYPE OF PERCENT CAPACITY PROJECT & LOCATION INVESTMENT OWNED (MW)(a) FUEL DATE IN SERVICE - ------------------------------------------------------------------------------------------------------------------ Mega Renewable G.P., 4 projects in General 49.75% 12.2 Hydro Spring 1987(b) California partnership Topsham Hydro Partners, Maine Leveraged lease 50.00 13.9 Hydro October 1987 Stockton CoGen Company, California General 50.00 60.0 Coal March 1988(c) partnership BAF Energy L.P., California Limited 23.10 120.0 Natural Gas May 1989 partnership Rumford Cogeneration Company L.P., Limited 24.30 85.0 Coal and May 1990 Maine partnership waste wood Koma Kulshan Associates, Washington Limited 49.75 13.7 Hydro October 1990 partnership Badger Creek Limited, California Limited 49.75 50.0 Natural Gas April 1991 partnership Live Oak Limited, California Limited 50.00 50.0 Natural Gas April 1992(d) partnership Lockport Energy Associates, L.P., New York Limited 16.58 180.0 Natural Gas December 1992 partnership Orlando Cogen Limited, L.P., Florida Limited 50.00 125.7 Natural Gas September 1993 partnership Jamaica Private Power Company, Jamaica Limited 24.09 60.0 Diesel January 1997 liability Company - ------------------------------------------------------------------------------------------------------------------
a) NOMINAL GROSS CAPACITY. b) INTEREST ACQUIRED IN JUNE 1989. c) INTEREST ACQUIRED IN DECEMBER 1988. d) INTEREST SOLD IN JANUARY 2000. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders in the fourth quarter of 1999. PART 2 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The company's common stock (par $1) is listed on the New York, Pacific and Toronto stock exchanges under the symbol UCU. At December 31, 1999, the company had 40,317 common shareholders of record. Information relating to market prices of common stock and cash dividends on common stock is set forth in the table below.
MARKET PRICE CASH HIGH (a) LOW (a) DIVIDENDS (a) - ---------------------------------------------------------------------------------------------------------- 1999 QUARTERS First $23.58 $22.44 $.30 Second $25.13 $22.63 $.30 Third $24.56 $21.00 $.30 Fourth $22.00 $19.00 $.30 1998 QUARTERS First $26.29 $23.33 $.30 Second $26.33 $23.21 $.30 Third $26.25 $22.63 $.30 Fourth $24.46 $22.87 $.30 ==========================================================================================================
ITEM 6. SELECTED FINANCIAL DATA.
In millions (except per share) 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------ Sales $18,621.5 $12,563.4 $8,926.3 $4,332.3 $2,792.6 Gross Profit 1,156.8 967.4 954.3 912.0 906.5 Net income 160.5 132.2 122.1 105.8 79.8 Earnings available for common shares 160.5 132.2 121.8 103.7 77.7 Basic earnings per common share 1.75 1.65 1.51 1.46 1.15 Diluted earnings per common share 1.75 1.63 1.51 1.46 1.14 Cash dividends per common share 1.20 1.20 1.17 1.17 1.15 Total assets 7,538.6 6,130.9 5,113.5 4,739.8 3,885.9 Short-term debt (including current maturities) 291.7 484.4 263.4 277.7 303.7 Long-term debt 2,202.3 1,376.6 1,358.6 1,470.7 1,355.4 Company-obligated mandatorily redeemable preferred securities of a partnership 100.0 100.0 100.0 100.0 100.0 Company obligated mandatorily redeemable security of trust holding solely parent company senior deferred notes 250.0 -- -- -- -- Preference and preferred stock -- -- -- 25.0 25.4 Common shareholders' equity 1,525.4 1,446.3 1,163.6 1,158.0 946.3 - ------------------------------------------------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. The information required by this item is incorporated by reference to pages 25 through 37 in the company's 1999 Annual Report to Shareholders. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The information required by this item is incorporated by reference to pages 33 and 34 in the company's 1999 Annual Report to Shareholders. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this item is incorporated by reference to pages 38 through 58 of the company's 1999 Annual Report to Shareholders. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART 3 ITEMS 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information regarding these items appear in our proxy statement and is hereby incorporated by reference in this Annual Report on Form 10-K. For information with respect to the executive officers of the company, see "Executive Officers of the Registrant" following Item 1 in Part 1 of this Form 10-K. PART 4 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. The following documents are filed as part of this report: (a)(1) FINANCIAL STATEMENTS:
PAGE NO. -------- Consolidated Statements of Income for the three years ended December 31, 1999.......................... * Consolidated Balance Sheets at December 31, 1999 and 1998.............................................. * Consolidated Statements of Common Shareholders' Equity for the three years ended December 31,1999...... * Consolidated Statements of Comprehensive Income for the three years ended December 31, 1999............ * Consolidated Statements of Cash Flows for the three years ended December 31, 1999...................... * Notes to Consolidated Financial Statements............................................................. * Report of Independent Public Accountants............................................................... *
* Incorporated by reference to pages 38 through 58 of the company's 1999 Annual Report to Shareholders. (a)(2) FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants on Financial Statement Schedule II.................................. 19 Valuation and Qualifying Accounts for the years 1999, 1998 and 1997................................... 20
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (3) LIST OF EXHIBITS * (a) The following exhibits relate to a management contract or compensatory plan or arrangement: 10(a)(1) UtiliCorp United Inc. Deferred Income Plan. 10(a)(2) UtiliCorp United Inc. Amended and Restated, 1986 Stock Incentive Plan. 10(a)(3) UtiliCorp United Inc. Amended and Restated, Annual and Long-Term Incentive Plan. 10(a)(4) UtiliCorp United Inc. 1990 Non-Employee Director Stock Plan, including all amendments. 10(a)(5) Severance Compensation Agreement. 10(a)(6) Executive Severance Payment Agreement. 10(a)(7) Split Dollar Agreement. 10(a)(8) Supplemental Retirement Agreement. 10(a)(9) UtiliCorp United Inc. Life Insurance Program for Officers. 10(a)(10) Summary of Terms and Conditions of Employment of Charles K. Dempster. 10(a)(11) Supplemental Executive Retirement Plan, Amended and Restated, including all amendments. 10(a)(12) Employment Agreement for Richard C. Green, Jr. 10(a)(13) Employment Agreement for Robert K. Green. 10(a)(14) Capital Accumulation Plan, including all amendments. 10(a)(15) Supplemental Contributory Retirement Plan, including all amendments.
* Incorporated by reference to the Index to Exhibits. REPORTS ON FORM 8-K (B) REPORTS ON FORM 8-K FOR THE QUARTER ENDED DECEMBER 31, 1999, WERE PREVIOUSLY REPORTED IN OUR FORM 10-Q FOR THE QUARTER ENDING SEPTEMBER 30, 1999. REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Shareholders of UtiliCorp United Inc.: We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements for 1999, 1998, and 1997 described on page 58 of UtiliCorp United Inc.'s Annual Report to Shareholders, which is incorporated by reference in this Form 10-K, and have issued our report thereon dated February 1, 2000. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The Financial Statement Schedule listed in Item 14(a)2 is the responsibility of the company's management and is presented for the purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements, and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP Kansas City, Missouri February 1, 2000 UTILICORP UNITED INC. SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 31, 1999 (IN MILLIONS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ---------------------------------------------------------------------------------------------------------------------------------- ADDITIONS/DEDUCTIONS ADDITIONS FROM RESERVES BEGINNING BALANCE CHARGED TO FOR PURPOSES ENDING BALANCE AT DESCRIPTION AT JANUARY 1 EXPENSE FOR WHICH CREATED DECEMBER 31 - ---------------------------------------------------------------------------------------------------------------------------------- PRICE RISK MANAGEMENT: Credit and Service Reserves: 1999 $52.5 $ -- $21.2 $31.3 1998 $60.4 $ -- $ 7.9 $52.5 1997 $57.2 $3.2 $ -- $60.4 Reserve for United Kingdom gas contracts: 1999 $ -- $ -- $ -- $ -- 1998 $19.0 $6.6 $25.6 $ -- 1997 $14.0 $5.0 $ -- $19.0 ALLOWANCE FOR DOUBTFUL ACCOUNTS: 1999 $14.9 $26.5 $(6.3) $35.1 1998 $ 9.8 $ 7.8 $(2.7) $14.9 1997 $ 8.9 $ 7.3 $(6.4) $ 9.8 OTHER RESERVES: 1999 $25.8 $ -- $(3.1) $22.7 1998 $23.3 $ -- $ 2.5 $25.8 1997 $16.7 $ -- $ 6.6 $23.3
UTILICORP UNITED INC. INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ---------------------------------------------------------------------------------------------------------------------------------- *3(a)(1) Certificate of Incorporation of the Company. (Exhibit 3(a)(1) to the Company's Annual Report on Form 10-K for the year ended December 31, 1991.) *3(a)(2) Certificate of Amendment to Certificate of Incorporation of the Company. (Exhibit 4(a)(1) to Registration Statement No. 33-16990 filed September 3, 1987.) 3(a)(3) Certificate of Designation to Certificate of Incorporation of the Company, dated December 28, 1988. 3(a)(4) Certificate of Designation to Certificate of Incorporation of the Company, dated February 19, 1992. *3(a)(5) Certificate of Amendment to Certificate of Incorporation of the Company (Exhibit 4(a)(5) to the Company's Registration Statement No. 33-50260, filed July 31, 1992.) 3(a)(6) Certificate of Designation to Certificate of Incorporation of the Company, dated December 30, 1996. *3(a)(7) Certificate of Amendment to Certificate of Incorporation of the Company (Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1998.) *3(b) By-laws of the Company as amended. (Exhibit 3.1 on Form 10-Q for the quarter ended June 30, 1998.) *4(a)(1) Indenture, dated as of November 1, 1990, between the Company and The First National Bank of Chicago, Trustee. (Exhibit 4(a) to the Company's Current Report on Form 8-K, dated November 30, 1990.) *4(a)(2) First Supplemental Indenture, dated as of November 27, 1990. (Exhibit 4(b) to the Company's Current Report on Form 8-K, dated November 30, 1990.) *4(a)(3) Second Supplemental Indenture, dated as of November 15, 1991. (Exhibit 4(a) to UtiliCorp United Inc.'s Current Report on Form 8-K dated December 19, 1991.) *4(a)(4) Third Supplemental Indenture, dated as of January 15, 1992. (Exhibit 4(c)(4) to the Company's Annual Report on Form 10-K for the year ended December 31, 1991.) *4(a)(5) Fourth Supplemental Indenture, dated as of February 24, 1993. (Exhibit 4(c)(5) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) *4(a)(6) Fifth Supplemental Indenture, dated as of April 1, 1993. (Exhibit 4(c)(6) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.) *4(a)(7) Sixth Supplemental Indenture, dated as of November 1, 1994. (Exhibit 4(d)(7) to the Company's Registration Statement on Form S-3 No. 33-57167, filed January 4, 1995.) *4(a)(8) Seventh Supplemental Indenture, dated as of June 1, 1995. (Exhibit 4 to the Company's Form 10-Q for the period ended June 30, 1995.) *4(a)(9) Eighth Supplemental Indenture, dated as of October 1, 1996 (Exhibit 4(b)(9) to the Company's Annual Report on Form 10-K for the year ended December 31, 1996). *4(a)(10) Ninth Supplemental Indenture, dated as of September 1, 1997 (Exhibit 4 to the Company's quarterly report on Form 10-Q for the period ended September 30, 1997). *4(a)(11) Tenth Supplemental Indenture, dated as March 31, 1999 (Exhibit 4(c)(11) to the Company's Registration Statement on Form S-4 No. 333-83979, filed July 29, 1999.) *4(a)(12) Eleventh Supplemental Indenture, dated as of July 20, 1999 (Exhibit 4(c)(12) to the Company's Registration Statement on Form S-4 No. 333-83979, filed July 29, 1999.) *4(a)(13) Twelfth Supplemental Indenture, dated as of September 29, 1999 (Exhibit 4(d)(14) to the Company's Form 8-K filed October 6, 1999.) 4(a)(14) Thirteenth Supplemental Indenture, dated as of November 16, 1999. *4(b) Twentieth Supplemental Indenture, dated as of May 26, 1989, Supplement to Indenture of Mortgage and Deed of Trust, dated July 1, 1951. (Exhibit 4(d) to Registration Statement No. 33-45382, filed January 30, 1992.) *4(c)(1) Indenture, dated as of June 1, 1995, Junior Subordinated Debentures. (Exhibit 4(d)(1) to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.) *4(c)(2) First Supplemental Indenture, dated as of June 1, 1995, Supplement to Indenture dated June 1, 1995. (Exhibit 4(d)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.) Long-term debt instruments of the Company in amounts not exceeding 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis will be furnished to the Commission upon request. *4(d) Form of Rights Agreement between UtiliCorp United Inc. and First Chicago Trust Company of New York, as Rights Agent. (Exhibit 4 to the Company's Form 10-Q for the period ended September 30, 1996.) *10(a)(1) UtiliCorp United Inc. Deferred Income Plan. (Exhibit 10(a)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1991.) 10(a)(2) UtiliCorp United Inc. Amended and Restated 1986 Stock Incentive Plan. 10(a)(3) UtiliCorp United Inc. Amended and Restated Annual and Long-Term Incentive Plan.
EXHIBIT NUMBER DESCRIPTION -------------- ----------- 10(a)(4) UtiliCorp United Inc. 1990 Non-Employee Director Stock Plan, including all amendments. *10(a)(5) Form of Severance Compensation Agreement between UtiliCorp United Inc., and certain Executives of the Company. (Exhibit 10 (a)(7) to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.) *10(a)(6) Executive Severance Payment Agreement (Exhibit 10 to the Company's Quarterly Report on Form 10-Q filed for the quarter ended September 30, 1993.) *10(a)(7) Split Dollar Agreement dated as of June 12, 1985, between the Company and James G. Miller. (Exhibit 10(a)(10) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.) *10(a)(8) Supplemental Retirement Agreement dated as of January 27, 1983, between the Company and James G. Miller. (Exhibit 10(a)(11) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.) *10(a)(9) UtiliCorp United Inc. Life Insurance Program for Officers. (Exhibit 10 (a)(13) to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.) *10(a)(10) Summary of Terms and Conditions of Employment of Charles K. Dempster. (Exhibit 10 to the Company's quarterly report on Form 10-Q for the period ended March 31, 1996.) 10(a)(11) Supplemental Executive Retirement Plan, Amended and Restated, including all amendments. *10(a)(12) Employment Agreement for Richard C. Green, Jr. (Exhibit 10.4 on Form 10-Q for the quarter ended June 30, 1998.) *10(a)(13) Employment Agreement for Robert K. Green (Exhibit 10.5 on Form 10-Q for the quarter ended June 30, 1998.) 10(a)(14) Capital Accumulation Plan, including all amendments. 10(a)(15) Supplemental Contributory Retirement Plan, including all amendments. 13 Annual Report to Shareholders for the year ended December 31, 1999 21 Subsidiaries of the Company. 23 Consent of Arthur Andersen LLP. 27 Financial Data Schedule.
*Exhibits marked with an asterisk are incorporated by reference as indicated pursuant to Rule 12(b)-23. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized. UTILICORP UNITED INC. BY: /s/ RICHARD C. GREEN, JR. CHAIRMAN OF THE BOARD OF DIRECTORS AND ------------------------- CHIEF EXECUTIVE OFFICER RICHARD C. GREEN, JR. DATE: MARCH 24, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. BY: /s/ RICHARD C. GREEN, JR. --------------------------- RICHARD C. GREEN, JR. CHAIRMAN OF THE BOARD OF DIRECTORS AND DATE: MARCH 24, 2000 CHIEF EXECUTIVE OFFICER /s/ ROBERT K. GREEN --------------------------- BY: ROBERT K. GREEN PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR; DATE: MARCH 24, 2000 CHAIRMAN, AQUILA ENERGY /s/ PETER S. LOWE --------------------------- BY: PETER S. LOWE SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER DATE: MARCH 24, 2000 /s/ JOHN R. BAKER --------------------------- BY: JOHN R. BAKER DIRECTOR DATE: MARCH 24, 2000 /s/ AVIS G. TUCKER --------------------------- BY: AVIS G. TUCKER DIRECTOR DATE: MARCH 24, 2000 /s/ ROBERT F. JACKSON --------------------------- BY: ROBERT F. JACKSON DIRECTOR DATE: MARCH 24, 2000 /s/ L. PATTON KLINE --------------------------- BY: L. PATTON KLINE DIRECTOR DATE: MARCH 24, 2000 /s/ HERMAN CAIN --------------------------- BY: HERMAN CAIN DIRECTOR DATE: MARCH 24, 2000 /s/ IRVINE O. HOCKADAY, JR. --------------------------- BY: IRVINE O. HOCKADAY, JR. DIRECTOR DATE: MARCH 24, 2000 /s/ DR. STANLEY O. IKENBERRY --------------------------- BY: DR. STANLEY O. IKENBERRY DIRECTOR DATE: MARCH 24, 2000 /s/ DR. SHIRLEY ANN JACKSON --------------------------- BY: DR. SHIRLEY ANN JACKSON DIRECTOR DATE: MARCH 24, 2000 /s/ RONALD T. LEMAY --------------------------- BY: RONALD T. LEMAY DIRECTOR DATE: MARCH 24, 2000
EX-3.(A)(3) 2 EXHIBIT 3(A)(3) Exhibit 3(a)(3) UTILICORP UNITD INC. CERTIFICATE OF DESIGNATION OF THE $1.775 SERIES CUMULATIVE CONVERTIBLE PREFERENCE STOCK WITHOUT PAR VALUE Pursuant to Section 151 of the General Corporation Law of the State of Delaware The following resolutions were duly adopted by the Board of Directors of UtiliCorp United Inc., a Delaware corporation (the "CORPORATION"), pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware (the "GCL"), on December 27, 1988, by unanimous written consent of the Board of Directors of the Corporation (the "BOARD OF DIRECTORS"), without a meeting, pursuant to Section 141(f) of the GCL: WHEREAS, the Board of Directors is authorized, within the limitations and restrictions stated in the Certificate of Incorporation of the Corporation, to fix by resolution or resolutions the designation of each series of the preference stock, without par value, of the Corporation and the powers, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including, without limiting the generality of the foregoing, such provisions as may be desired concerning voting, redemption, dividends, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors under the General Corporation Law of Delaware; and WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of such preference stock and the number of shares constituting such series: NOW, THEREFORE, BE IT RESOLVED: 1. DESIGNATION. The designation of this series of four million one hundred thousand (4,100,000) shares of preference stock created by this resolution is the "$1.775 Series Cumulative Convertible Preference Stock" (hereinafter, this "SERIES"). 2. DIVIDENDS. The holders of this Series shall be entitled to receive an annual cash dividend of $1.775 per share, and no more, when and as declared by the Board of Directors out of funds legally available therefor, payable quarterly on the first day of each March, June, September and December, commencing on the first such date which is more than fifteen calendar days after the date of original issuance of the first share of this Series, to holders of record on the respective dates fixed for that purpose by the Board of Directors not less than ten nor more than sixty days in advance of payment of each dividend. 2 Dividends on shares of this Series shall be cumulative from and after the date of original issuance thereof, whether or not on any scheduled dividend payment date there shall be funds legally available for the payment of dividends. So long as any shares of this Series are outstanding, the Corporation shall not pay or declare or set aside for payment any dividend payable in cash, evidences of indebtedness, assets or property other than cash, or capital stock of the Corporation ranking equally with or junior to this Series in respect of dividends, or make any other distribution on any preferred stock or common stock or any other class or series of stock of the Corporation ranking equally with or junior to this Series in respect of dividends, unless the Corporation has paid, or at the same time pays or provides for the payment of, all accrued and unpaid dividends on this Series; PROVIDED, HOWEVER, that the Corporation may pay less than all accrued and unpaid dividends on any class or series of stock ranking equally with this Series in respect of dividends if such payment is made ratably in accordance with the respective accrued and unpaid dividends on this Series and such class or series of stock ranking equally with this Series in respect of dividends. Subject to Section 10 hereof, this Series shall not rank junior as to dividends to any other class or series of stock of the Corporation. This Series shall rank equally as to dividends with all shares of the Corporation" $2.4375 Series preference stock, without par value (the "$2.4375 SERIES PREFERENCE STOCK"), its $2.6125 Series preference stock, without par value (the "$2.6125 SERIES PREFERENCE STOCK"), and any other class or series of stock of the Corporation which is by its terms expressly made equal as to dividends to this Series. This Series shall rank senior as to dividends to the Corporation's common stock, par value $1 per share (the "COMMON STOCK"), its Class A common stock, par value $1 per share (the "CLASS A COMMON STOCK"), and any other class or series of stock of the Corporation which is not by its terms expressly made equal as to dividends to this Series. The amount of dividends "accrued" on any share of stock of this Series at any scheduled dividend payment date shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including such dividend payment date, whether or not earned or declared, and the amount of dividends "accrued" on any share of stock of this Series at any date other than a scheduled dividend payment date shall be calculated as the amount of any unpaid dividends accumulated thereon to and including the last preceding dividend payment date, whether or not earned or declared, plus an amount calculated on the basis of the annual dividend rate of $1.775 for the period after such last preceding dividend payment date to and including the date as of which the calculation is made, based on the actual number of days elapsed. 3. LIQUIDATION RIGHTS. In the event of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation ("LIQUIDATION"), the holders of this Series shall be entitled to have paid to them out of the assets of the Corporation, before any distribution is made to or set apart for the holders of any shares of Common Stick or Class A Common Stock of the Corporation, or of any other class or series of stock of the Corporation ranking junior to this Series in respect of distribution of assets upon Liquidation, an amount equal to $20.00 per share, plus an amount in cash equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. After payment in cash to holders of 3 this Series of the full preferential amount as aforesaid, holders of this Series shall, as such, have no right or claim to any of the remaining assets of the Corporation. If upon any Liquidation the assets of the Corporation or proceeds thereof distributable among the holders of shares of this Series and of any class or series of stock of the Corporation ranking equally with this Series as to distribution of assets upon Liquidation shall be insufficient to pay in full the preferential amounts payable to such holders, then such assets or the proceeds thereof shall be distributed among such holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. Subject to Section 10 hereof, this Series shall not rank junior as to distribution of assets upon Liquidation to any other class or series of stock of the Corporation. This Series shall rank equally as to distribution of assets upon Liquidation with all shares of $2.4375 Series Preference Stock, $2.6125 Series Preference Stock and any other class or series of stock of the Corporation which by its terms is expressly made equal as to distribution of assets upon Liquidation to this Series. This Series shall rank senior as to distribution of assets upon Liquidation to all shares of Common Stock, Class A Common Stock and any other class or series of stock of the Corporation which is not by its terms expressly made equal as to distribution of assets upon Liquidation to this Series. For purposes of this Section 3, neither (i) the acquisition by any person of more than 50% of the Common Stock, nor (ii) the consolidation or merger of the Corporation with or into any other corporation or the consolidation or merger of any other corporation with or into the Corporation, nor (iii) the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation, shall be deemed to be a Liquidation. 4. REDEMPTION AT OPTION OF CORPORATION; SINKING FUND. Except as provided in paragraph (b) of this Section 4 and in Section 6 hereof, the shares of this Series shall not be redeemable before the fifth anniversary of the date of original issuance of the first share of this Series and thereafter will be redeemable at the option of the Corporation, by vote of the Board of Directors, in whole or in part at any time and from time to time at (x) the redemption price per share set forth below for the date fixed for redemption (for purposes of this Section 4 and Section 5 hereof, such date, together with any date upon which any redemptions are made pursuant to the sinking fund provided for in paragraph (b) of this Section 4, is hereinafter called the "REDEMPTION DATE") for such shares: Redemption Date During 12-month Period Beginning on the Fifth Anniversary of Original Redemption 4
Issuance of the Shares Price ---------------------- ----- 1994 $21.60 1995 $21.03 1996 $20.53 1997 (and thereafter) $20.00
plus (y) in each case a sum equal to all dividends on such shares accrued and unpaid thereon to the Redemption Date. (a) On the fifth anniversary of the date of original issuance of the first share of this Series and on each anniversary thereafter so long as any shares of this Series remain outstanding, the Corporation will redeem pursuant to a mandatory sinking fund at a price of $20.00 per share plus a sum equal to all dividends accrued and unpaid thereon to the Redemption Date a number of shares of this Series equal to 1/6 of the original number of shares of this Series (adjusted to give effect to any stock splits of or stock dividends on the shares of this Series) or, if fewer than 1/6 of such number of shares are then outstanding, the number of shares then outstanding. The Corporation may apply to its mandatory sinking fund obligation any shares of this Series owned by it and any shares of this Series previously redeemed by it (otherwise than through the operation of the mandatory sinking fund) which have not been previously credited against a mandatory sinking fund obligation. The Corporation's obligation to make redemptions pursuant to the mandatory sinking fund shall be cumulative. 5. PROCEDURE FOR REDEMPTION PURSUANT TO SECTION 4. (a) In the event that fewer than all of the outstanding shares of this Series are to be redeemed at any one time pursuant to Section 4 hereof, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be selected pro rata or by lot as may be determined by the Board of Directors or by such other method as may be approved by the Board of Directors to conform to any rule or regulation of the New York Stock Exchange or any other stock exchange upon which the shares of this Series may at the time be listed. (i) The Corporation shall cause a notice to be mailed, first-class postage prepaid, at least 30 days, but not more than 90 days, prior to the Redemption Date, to each holder of record of shares of this Series to redeemed; if less than all of the shares owned by such holder are then to be redeemed, the notice shall also specify the number of shares thereof which are to be redeemed and the number of certificates representing such shares. Such notice shall be mailed to such record holders at their respective addresses as they shall appear upon the books of the Corporation and shall set forth the Redemption Date, the redemption price per share and the place or places for surrender of certificates for shares to be redeemed. (ii)Any notice which is mailed by the Corporation as provided in this Section 5 shall be conclusively presumed to have been duly given, whether or not the shareholder receives such notice; and failure to give such notice by m ail, or any defect in such notice, to the holders 5 of any shares designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of this Series. On or after the Redemption Date specified in such notice, each holder of the shares called for redemption shall surrender the certificate evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the redemption price. In case fewer than all of the shares represented by any certificate are redeemed, a new certificate representing the unredeemed shares shall be issued to the surrendering holder at the expense of the Corporation. If on the Redemption Date specified in such notice there shall have been deposited with a bank or trust company (the "DEPOSITARY") designed by the Board of Directors and located in the City of Kansas City, Missouri, the City of Chicago, Illinois, or the City of New York, New York, having a combined capital and surplus of at least $50,000,000, in trust for the account of the holders of the shares of this Series so called for redemption, funds in an amount equal to the aggregate amount payable upon redemption of the shares to be redeemed, together with irrevocable written instructions and authority to the Depositary to redeem such shares on and after such Redemption Date immediately upon the endorsement and surrender of the certificates therefor, then, notwithstanding that the certificates evidencing any such shares shall not have been surrendered, the dividends with respect to the shares so called shall cease to accrue after the Redemption Date, the shares with respect to which such deposit shall have been made shall no longer be deemed to be outstanding, the holders thereof shall cease to be stockholders of the Corporation, and all rights with respect to such shares shall forthwith terminate except only the right to receive from the Depositary forthwith from and after the date of such deposit the amount payable upon redemption of the shares to be redeemed, without interest. (b) Any interest accrued on funds so deposited with the Depositary shall belong to the Corporation and shall be paid to it from time to time. All funds deposited in accordance with this Section 5 which shall remain unclaimed by the holders of shares called for redemption at the end of six years after the Redemption Date shall be, if requested by the Board of Directors, returned by the Depositary to the Corporation, after which the holders of such shares shall look only to the Corporation for the payment of such unclaimed amounts, without interest. (c) If any dividend or sinking fund payment on this Series is in arrears, no purchase or redemption shall be made of any shares of any class or series of stock of the Corporation ranking equally with or junior to this Series as to dividends or the distribution of assets upon Liquidation. 6. REDEMPTION AT OPTION OF HOLDERS. At any time (i) any person or entity becomes the beneficial owner of more than 50% of the Common Stock or (ii) the Corporation is a party to a business combination, including a merger or consolidation or the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of its property and assets, and as a result of such acquisition of shares of the Common Stock or any such business combination, shares of this Series thereafter are not convertible into common stock of the Corporation or of the ultimate parent of the Corporation which common stock is traded on the New York Stock Exchange, American Stock Exchange or the NASDAQ System of the National Association of Securities Dealers, Inc., each holder of record of shares of this Series shall have the option to require the Corporation to redeem the 6 shares of this Series owned by such holder, in whole or in part, at $20.00 per share plus accrued and unpaid dividends through the redemption date. 7. PROCEDURE FOR REDEMPTION PURSUANT TO SECTION 6. (a) In the event of any acquisition described in clause (i) of Section 6 hereof, the Corporation shall, on the date which is 45 days after the date of such acquisition, upon the written demand of any record holder of shares of this Series which so requests, redeem the shares of this Series owned by such holder at a price per share equal to $20.00 plus accrued and unpaid dividends through the redemption date. Within 5 days after the Corporation has knowledge that such acquisition has occurred, it shall mail, first-class postage prepaid, to each record holder of shares of this Series a form of written demand to be used by such holder to exercise his right of redemption (a "DEMAND FORM") and a notice which shall disclose the occurrence of the acquisition and the right of such holder to require the Corporation to redeem such shares. Such notice shall be mailed to such record holders at their respective addresses as they shall appear on the books of the Corporation and shall set forth the redemption date, the redemption price per share, the place or places for surrender of certificates for shares to be redeemed, the date by which such holder must notify the Corporation if it elects to require the Corporation to make such redemption (which shall not be less than 30 days after the date of such notice), and that each holder may elect to have his shares redeemed in whole or in part. (i) The Corporation also shall deposit in trust funds sufficient to redeem on the redemption date all of the shares of this Series outstanding on the date of delivery by the Corporation of the notice referred to in clause (a)(i) above. Each record holder of shares of this Series which elects to require the Corporation to redeem on the redemption date some or all of the shares of this Series which such holder owns shall deliver to the Corporation on or after the redemption date, a completed Demand Form and the certificate or certificates relating to the shares of this Series to be redeemed. (b) In the event of any business combination described in clause (ii) of Section 6 hereof, the Corporation shall, immediately prior to the effectiveness of such business combination, upon the written demand of any record holder of shares of this Series which so requests, redeem the shares of this Series owned by each such holder at a price per share equal to $20.00 plus accrued and unpaid dividends through such redemption date. Not less than 35 days prior to any such business combination the Corporation shall mail, first-class postage prepaid, to each record holder of shares of this Series a Demand Form, a notice of guaranteed delivery and a notice which shall disclose such business combination and the right of such holder to require the Corporation to redeem such shares. Such notice shall be mailed to such record holders at their respective addresses as they shall appear on the books of the Corporation and shall set forth the redemption date, the redemption price per share, the place or places for surrender of certificates for shares, the date by which such holder must notify the Corporation if it elects to require the Corporation to make such redemption (which shall not be less than 30 days after the date of such notice), and that each holder may elect to have his shares redeemed in whole or in part. 7 (i) Not later than the effectiveness of such business combination, the Corporation also shall deposit in trust funds sufficient to redeem on the redemption date all of the shares of this Series outstanding on the date of delivery by the Corporation of the notice referred to in clause (b)(i) above. Each record holder of shares of this Series which elects to require the Corporation to redeem on the redemption date some or all of the shares of this Series which such holder owns shall deliver to the Corporation on or after the redemption date a completed Demand Form and the certificate or certificates relating to the shares of this Series to be redeemed or a duly executed notice of guaranteed delivery (guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or by a commercial bank or trust company having an office or correspondent in the United States). Each election by a holder pursuant to this Section 7(b) shall become irrevocable upon the effectiveness of the business combination. (c) If at any time the Corporation does not pay amounts sufficient to redeem all shares of this Series required to be redeemed by the Corporation pursuant to Section 6 hereof then such funds which are paid shall be applied to redeem such shares on a pro rata basis. (d) Any notice which is mailed by the Corporation as provided in this Section 7 shall be conclusively presumed to have been duly given, whether or not the shareholder receives such notice; and failure to give such notice by mail, or any defect in such notice, to the holders of any shares designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of this Series. On or after the redemption date specified in such notice, each holder of shares which has duly notified the Corporation of its election to redeem its shares (each, a "SURRENDERING STOCKHOLDER") shall surrender the certificate evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the redemption price. In case fewer than all of the shares represented by any certificate are redeemed, a new certificate representing the unredeemed shares shall be issued to the surrendering stockholder at the expense of the Corporation. If on the date fixed for redemption under any provision of this Section 7 there shall have been deposited with any Depositary designated by the Board of Directors, in trust for the account of the surrendering stockholders, funds in an amount equal to the aggregate amount payable upon redemption of all shares to be surrendered by surrendering stockholders, together with irrevocable written instructions and authority to the Depositary to redeem such shares on or after such redemption date immediately upon the endorsement and surrender of the certificates therefor, then, notwithstanding that the certificates evidencing any such shares shall not have been surrendered, the dividends with respect to all shares to be surrendered by surrendering stockholders shall cease to accrue after the date fixed for redemption, such shares shall no longer be deemed outstanding, surrendering stockholders shall cease to be stockholders of the Corporation, and all rights whatsoever with respect to such shares to be redeemed shall terminate except only the right to receive from the Depositary forthwith from and after the date of such deposit the amount payable upon redemption of the shares to be redeemed, without interest. (b) Any interest accrued on funds so deposited with the Depositary shall belong to the Corporation and shall be paid to it from time to time. All funds deposited in accordance with this Section 7 which shall remain unclaimed by the surrendering stockholders at the end of six 8 years after the applicable redemption date shall be, if requested by the Board of Directors, returned by the Depositary to the Corporation, after which the surrendering stockholders shall look only to the Corporation for the payment of such unclaimed amounts, without interest. 8. CONVERSION RIGHTS. The holders of shares of this Series shall have the right, at their option, to convert shares of this Series into shares of Common Stock at any time on and subject to the following terms and conditions: (a) The shares of this Series shall be convertible at the office of any transfer agent for this Series, and at such other office or offices, if any, as the Board of Directors may designate, into fully paid and non-assessable shares (calculated as to each conversion to the nearest 1/100th of a share) of Common Stock, at the conversion price, determined as hereinafter provided, in effect at the time of conversion, each share of this Series being taken at $20.00 for the purpose of such conversion. The price at which shares of Common Stock shall be delivered upon conversion (the "CONVERSION PRICE") shall be initially an amount per share of Common Stock equal to (i) the average of the daily Closing Prices (as defined below) for the ten consecutive Trading Dates (as defined below) immediately preceding the Effective Date (as defined below), MULTIPLIED BY (ii) 1.15. The conversion price shall be adjusted as provided in paragraph (d) below. (b) In order to convert shares of this Series into Common Stock the holder thereof shall surrender at any office hereinabove mentioned the certificate or certificates therefor, duly endorsed to the Corporation or in blank, and give written notice to the Corporation at said office that such holder elects to convert such shares. No payment or adjustment shall be made upon any conversion on account of any dividends accrued on the shares of this Series surrendered for conversion or on account of any dividends on the Common Stock issued upon such conversion. Shares of this Series shall be deemed to have been converted immediately prior to the close of business on the day of the surrender of such shares for conversion in accordance with the foregoing provisions (the "CONVERSION DATE"), and the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the conversion date, the Corporation shall issue and shall deliver at said office a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with a cash payment in lieu of any fraction of any share, as hereinafter provided, to the person or persons entitled to receive the same. In case shares of this Series are called for redemption or required to be redeemed, the right to convert such shares shall cease and terminate at the close of business on the applicable redemption date, unless default shall be made in payment of the amount payable upon redemption of the shares to be redeemed. (c) No fractional shares of Common Stock shall be issued upon conversion of shares of this Series, but, in lieu of any fraction of a share of Common Stock which would otherwise be issuable in respect of the aggregate number of shares of this Series surrendered for conversion at one time by the same holder, the Corporation shall pay in 9 cash as an adjustment of such fraction an amount equal to the same fraction of the Closing Price on the date on which such shares of this Series were duly surrendered for conversion, or, if such date is not a Trading Date, on the next Trading Date. (d) The conversion price shall be adjusted from time to time as follows: (1) In case the Corporation shall (i) pay a dividend or make a distribution on its outstanding shares of Common Stock in Common Stock, (ii) subdivide or split its outstanding shares of Common Stock into a larger number of shares by reclassification or otherwise, (iii) combine its outstanding shares of Common Stock into a smaller number of shares by reclassification or otherwise, or (iv) issue any shares by reclassification of its shares of Common Stock or otherwise, the conversion price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted so that the holder of any shares of this Series surrendered for conversion after such time shall be entitled to receive the number of shares of Common Stock which he would have owned or been entitled to receive had such shares of this Series been converted immediately prior to such time. (2) In case the Corporation shall issue rights or warrants to holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (determined as provided in clause (4) below) on the record date mentioned below, the conversion price shall be adjusted upon the exercise of such warrants or rights (such adjustment to be computed as of the close of business on the last Trading Date of each week) so that the same shall equal the price determined by multiplying the conversion price then in effect by a fraction, of which the numerator shall be the number of shares of Common Stock then outstanding plus the number of shares of Common Stock which the aggregate exercise price of such warrants or rights exercised would purchase at such current market price and of which the denominator shall be the number of shares of Common Stock then outstanding plus the number of additional shares of Common Stock issued upon the exercise of such warrants or rights. Such adjustment shall become effective at the opening of business on the business day next following the computation thereof. (3) In case the Corporation shall distribute to holders of its Common Stock evidences of its indebtedness or assets (excluding any cash or stock dividends or distributions and dividends referred to in clause (1) above) or rights or warrants to subscribe for or purchase securities of the Corporation or any of its subsidiaries (other than shares of Common Stock referred to in clause (2) above), then in each such case the conversion price shall be adjusted so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the date of such distribution by a fraction of which the 10 numerator shall be the current market price per share (determined as provided in clause (4) below) of the Common Stock on the record date mentioned below less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness or rights or warrants so distributed applicable to one share of Common Stock, and the denominator shall be such current market price per share of the Common Stock. Such adjustment shall become effective on the opening of business on the business day next following the record date for the determination of stockholders entitled to receive such distribution. (4) For the purpose of any computation under clause (1), (2) or (3) above, the current market price per share of Common Stock on any date shall be deemed to be the average of the daily Closing Prices for the thirty consecutive Trading Dates commencing not more than forty-five Trading Dates before the day in question, such thirty consecutive Trading Date period to be specified by the Board of Directors prior to the commencement of forty-five Trading Dates before the day in question or, in the event the Board of Directors fails to specify such thirty consecutive Trading Dates, such thirty consecutive Trading Dates shall be deemed to have commenced on the fortieth Trading Date before the day in question. (5) No adjustment in the conversion price pursuant to this Section 8 shall be required unless (i) such adjustment would require an increase or decrease of at least 1% in such price; PROVIDED that any adjustment which by reason of this paragraph (d)(5) is not required to be made shall be carried forward and taken into account in any subsequent adjustment and will be made not more than three years after the time it would have been made but for the provisions of this paragraph (d)(5); PROVIDED, FURTHER, that, at the time of any adjustment, such adjustment shall include all adjustments to the date thereof then being carried forward. All calculations under this Section 8 shall be made to the nearest 1/100 of a cent or to the nearest 1/100 of a share, as the case may be. (e) In addition to the option of each holder of shares of this Series to require the Corporation to redeem such shares pursuant to Section 6 hereof, in case of any consolidation or merger of the Corporation with or into another corporation or in the case of any sale or conveyance to another corporation (in each case, other than a wholly-owned subsidiary of the Corporation) of all or substantially all of the property and assets of the Corporation, the holder of a share of this Series shall have the right thereafter, so long as the conversion right hereunder shall exist, to convert such share into the kind and amount of shares of stock and other securities and properties receivable upon such consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock into which such share of this Series might have been converted immediately prior to such consolidation, merger, sale or conveyance and shall have no other conversion rights with regard to such share of this Series. In the event of such a consolidation, merger, sale or conveyance, effective provision shall be made in the 11 certificate of incorporation of the resulting or surviving corporation or otherwise for the protection of the conversion rights of the shares of this Series which shall be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities and property deliverable upon conversion of shares of this Series. In case securities or properties other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Section 8 shall be deemed to apply, so far as appropriate and as nearly as may be, to such other securities or properties. (f) Whenever the conversion price is adjusted as herein provided: (1) the Corporation shall compute the adjusted conversion price in accordance with this Section 8 and shall prepare a certificate signed by the President or one of the Vice Presidents and the Treasurer or one of the Assistant Treasurers of the Corporation setting forth the adjusted conversion price, and such certificate shall forthwith be filed with the transfer agent or agents for this Series; and (2) a notice stating that the conversion price has been adjusted and setting forth the adjusted conversion price shall, as promptly as practicable, be mailed to the holders of record of the outstanding shares of this Series. (g) In case: (1) the Corporation shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of earned surplus; or (2) the Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or series or of any other rights; or (3) of any reclassification of the capital stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or of the sale or transfer of all or substantially all of the property and assets of the Corporation, or of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be mailed to the transfer agent or agents for this Series and to the holders of record of the outstanding shares of this Series, at least 20 days (or 10 days in any case specified in clause (1) or (2) above) prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to 12 become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. (h) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of the shares of this Series, the full number of shares of Common Stock then deliverable upon the conversion of all shares of this Series then outstanding. (i) The Corporation will pay any and all taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on conversion of shares of this Series pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of this Series so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax, or has established, to the satisfaction of the Corporation, that such tax has been paid. (j) For the purpose of this Section 8 the term "Common Stock" shall include any stock of any class of the Corporation which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and which is not subject to redemption by the Corporation. However, shares issuable on conversion of shares of this Series shall include only shares of the class defined as "Common Stock" in Section 2 hereof or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which are not subject to redemption by the Corporation, PROVIDED that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bear to the total number of shares of all such classes resulting from all such reclassifications. (k) As used in this Section 8, the term "CLOSING PRICE" on any day shall mean the reported last sales price on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices, in each case on the New York Stock Exchange Composite Tape, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose; the term "TRADING DATE" shall mean a date on which the New York Stock Exchange (or any successor to such Exchange) is open for the transaction of business; and the term "EFFECTIVE DATE" shall mean the date upon which the 13 merger of Michigan Energy Resources Company, a Michigan corporation, with and into the Corporation shall become effective. 9. VOTING RIGHTS. (a) Unless and until dividends payable on any shares of this Series shall be in arrears in an amount equivalent to one and one-half times the annual dividend, or more, per share, the holders of shares of this Series shall have no voting power or rights, except as otherwise provided herein, by the Certificate of Incorporation of the Corporation or by law. If and when dividends payable on any shares of this Series shall be in arrears in an amount equivalent to one and one-half times the annual dividend or more, per share, and thereafter until all dividends on shares of this Series in arrears shall have been paid, the holders of this Series, together with the holders of the $2.4375 Series Preference Stock, the $2.6125 Series Preference Stock, and any other class or series of stock of the Corporation which is by its terms expressly made equal as to dividends to this Series (for purposes of this Section 9, this Series, together with all such other classes and series, is hereinafter collectively referred to as the "PREFERENCE STOCK") voting as a single class separate from the holders of all other classes of capital stock, shall be entitled to elect two directors. The terms of office as directors of all persons who may be directors of the Corporation shall terminate upon the election of directors by the holders of the Preference Stock. The holders of the Common Stock shall have the right to elect the remaining directors of the Corporation. If the holders of the Preference Stock have not exercised their right to elect directors of the Corporation because of the lack of a quorum consisting of the holders of a majority of the Preference Stock, then the said directors shall be elected by the directors whose term of office is thus terminated, and in that event, such elected directors shall hold office for the interim period, pending such time as a quorum of the holders of the Preference Stock shall be present at a meeting held for the election of directors. (a) If and when all dividends then in arrears on the Preference Stock then outstanding shall be paid (and such dividends shall be declared and paid out of any funds legally available therefor as soon as reasonably practicable), the holds of shares of the Preference Stock shall be divested of any special right with respect to the election of directors and the voting power of the holders of shares of the Preference Stock and the Common Stock shall revert to the status existing before the first dividend payment date on which dividends on any shares of the Preference Stock were not paid in full, but always subject to the same provisions for vesting such special rights in the holders of shares of the Preference Stock in case of further like arrears in payment of dividends thereon. Upon the termination of any such special voting right, the terms of office of all persons who may have been elected directors of the Corporation by vote of the holders of the Preference Stock, as a class, pursuant to such special voting right shall forthwith terminate, and the resulting vacancies shall be filled by the vote of a majority of the remaining directors. (b) In case of any vacancy in the office of a director occurring among the directors elected by the holders of the Preference Stock voting as a single class separate from the holders of all other classes of capital stock, the remaining director elected by the holders of the Preference Stock may elect a successor to hold office for the unexpired term of the director whose place shall be vacant. In the event of simultaneous vacancies 14 among directors elected by the holders of the Preference Stock, pursuant to the provisions of this Section 9, will be held. (c) When ever the right shall have accrued to the holders of the Preference Stock to elect directors, voting as a single class, separate from the holders of all other classes of capital stock, then upon request in writing signed by any holder of the Preference Stock entitled to vote, delivered by registered mail or in person to the president, a vice president or secretary of the Corporation, it shall be the duty of such officer forthwith to cause notice to be given to the shareholders entitled to vote at a meeting to be held at such time as such officer may fix, not less than ten (10) nor more than sixty (60) days after the receipt of such request, for the purpose of electing directors. At all meetings of stockholders held for the purpose of electing directors during such time as the holders of the Preference Stock shall have the special right, voting as a single class, separate from the holders of all other classes of capital stock to elect directors, the presence in person or by proxy of the holders of a majority of the outstanding Preference Stock shall be required to constitute a quorum of such class for the election of directors, and the presence in person of capital stock outstanding at the time, and not entitled to such special right, shall be required to constitute a quorum of such other classes for the election of directors. 10. RESTRICTIONS ON CERTAIN CORPORATE ACTION. (a) So long as any shares of this Series are outstanding, no new class of stock shall be created or authorized which is entitled to dividends or shares in distribution of assets on a parity with or in priority to this Series, nor shall there be created or authorized any securities convertible into shares of any such stock, unless the holders of record of not less than two-thirds of the number of shares then outstanding of the preference stock, without par value, of the Corporation of which this Series forms a part (as a simple class separate from the holders of all other classes of stock) shall vote therefor in person or by proxy at the meeting of stockholders at which the creation of authorization of such new class of stock or such convertible securities is considered. (b) So long as any shares of this Series are outstanding, the Corporation shall not increase the total authorized amount of the preference stock, without par value, of the Corporation of which this Series forms a part or any class of stock which is entitled to dividends or shares in distribution of assets on a parity with or in priority to such preference stock, unless the holders of record of not less than a majority of the number of shares of such preference stock then outstanding (as a single class separate from the holders of all other classes of stock) shall vote therefor in person or by proxy at a meeting held pursuant to notice containing a statement of such purpose. 11. OTHER RIGHTS. The holders of this Series shall not have any other preferences or special rights. 15 IN WITNESS WHEREOF, the Corporation has caused this certificate to be made under the seal of the Corporation signed by its President and Secretary, respectively, this 28th day of December, 1988. /s/ Richard C. Green, Jr. -------------------------- President /s/ Roger K. Sallee -------------------------- Secretary EX-3.(A)(4) 3 EXHIBIT 3(A)(4) Exhibit 3(a)(4) UTILICORP UNITED INC. CERTIFICATE OF DESIGNATION OF THE PREFERENCE STOCK (CUMULATIVE), $2.05 SERIES WITHOUT PAR VALUE PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE UtiliCorp United Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies that the following resolutions were duly adopted by the Board of Directors of the Corporation (the "Board of Directors"), pursuant to authority conferred upon the Board of Directors by the provisions of the Certificate of Incorporation of the Corporation, as amended (the "Certificate of Incorporation"), and the provisions of Section 151 of the General Corporation Law of the State of Delaware (the "GCL"), on February 19, 1992. WHEREAS, the Board of Directors is authorized, within the limitations and restrictions stated in the Certificate of Incorporation, to fix by resolution or resolutions the designation of each series of, and issue up to 10,000,000 shares of, the preference stock, without par value, of the Corporation and the powers, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including, without limiting the generality of the foregoing, such provisions as may be desired concerning voting, redemption, dividends, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors under the GCL; and WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of such preference stock and the number of shares constituting such series: NOW, THEREFORE, BE IT RESOLVED: 1. DESIGNATION AND NUMBER. The designation of this series is the "Preference Stock (Cumulative), $2.05 Series" (hereinafter, this "SERIES") and the number of shares constituting each such Series is one million (1,000,000) shares. Shares of this Series shall have a stated value of $25.00 per share. 2. DIVIDENDS. The holders of this Series shall be entitled to receive an annual cash dividend of $2.05 per share, and no more, when, as and if declared by the Board of Directors out of funds legally available therefor, payable quarterly on the first day of each March, June, September and December, commencing on the first such date which is more than fifteen calendar days after the date of original issuance of the first share of this Series, to holders of record on the respective dates fixed for that purpose by the Board of Directors not less than ten nor more than sixty days in advance of payment of each dividend. Dividends on shares of this Series shall be cumulative from and after the date of original issuance thereof, whether or not on any scheduled dividend payment date there shall be funds legally available for the payment of dividends. So long as any shares of this Series are outstanding, the Corporation shall not pay or declare or set aside for payment any dividend payable in cash, evidences of indebtedness, assets or property other than cash, or capital stock of the Corporation ranking equally with or junior to this Series in respect of dividends, or make any other distribution on any preferred stock or common stock or any other class or series of capital stock of the Corporation ranking equally with or junior to this Series; PROVIDED, HOWEVER, that the Corporation may pay less than all accrued and unpaid dividends on any class or series of capital stock ranking equally with this Series in respect of dividends made ratably in accordance with the respective accrued and unpaid dividends on this Series and such class or series of capital stock ranking equally with this Series in respect of dividends. Subject to Section 8 hereof, this Series shall not rank junior as to dividends to any other class or series of capital stock of the Corporation, unless such class or series of capital stock of the Corporation is by its terms expressly made equal as to dividends to this Series. This Series shall rank senior as to dividends to the Corporation's common stock, par value $1 per share (the "COMMON STOCK"), its Class A common stock, par value $1 per share (the "CLASS A COMMON STOCK"), and any other class or series of capital stock of the Corporation which is not by its terms expressly made equal as to dividends to this Series. The amount of dividends "accrued" on any share of stock of this Series at any scheduled dividend payment date shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including such dividend payment date, whether or not earned or declared, and the amount of dividends "accrued" on any share of stock of this Series at any date other than a scheduled dividend payment date shall be calculated as the amount of any unpaid dividends accumulated thereon to and including the last preceding dividend payment date, whether or not earned or declared, plus an amount calculated on the basis of the annual dividend rate of $2.05 of the period after such last preceding dividend payment date to and including the date as of which the calculation is made, based on the actual number of days elapsed. 3. LIQUIDATION RIGHTS. In the event of the involuntary liquidation, dissolution or winding up of the Corporation ("LIQUIDATION"), the holders of this Series shall be entitled to have paid to them out of the assets of the Corporation, before any distribution is made to or set apart for the holders of any shares of Common Stock or Class A Common Stock of the Corporation, or of any other class or series of capital stock of the Corporation ranking junior to this Series in respect of distribution of assets upon Liquidation, an amount equal to $25.00 per share, plus an amount in cash equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. After payment in cash to the 2 holders of this Series of the full preferential amount as aforesaid, the holders of this Series shall, as such, have no right or claim to any of the remaining assets of the Corporation. If upon any Liquidation, the assets of the Corporation or proceeds thereof distributable among the holders of shares of this Series and of any class or series of capital stock of the Corporation ranking equally with this Series as to distribution of assets upon Liquidation shall be insufficient to pay in full the preferential amounts payable to such holders, then such assets or the proceeds thereof shall be distributed among such holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. Subject to Section 8 hereof, this Section shall not rank junior as to distribution of assets upon Liquidation to any other class or series of capital stock of the Corporation, unless such class or series of capital stock of the Corporation is by its terms expressly made equal as to distribution of assets upon Liquidation of this Series. This Series shall rank senior as to distribution of assets upon Liquidation, or the voluntary liquidation, dissolution or winding up of the Corporation ("VOLUNTARY LIQUIDATION"), to all shares of Common Stock, Class A Common Stock and any other class or series of capital stock of the Corporation which is not by its terms expressly made equal as to distribution of assets upon Liquidation of this Series. For purposes of this Section 3, neither (i) the acquisition by any person of more than 50% of the outstanding shares of the Common Stock, nor (ii) the consolidation or merger of the Corporation with or into any other corporation or the consolidation or merger of any other corporation with or into the Corporation, nor (iii) the sale, conveyance, exchange or transfer (for cash, shares of capital stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation, shall be deemed to be a Liquidation. 4. REDEMPTION AT OPTION OF CORPORATION; SINKING FUND. (a) The shares of this Series shall not be redeemable before March 1, 1997. On and after such date, the shares of this Series will be redeemable at the option of the Corporation, by vote of the Board of Directors, in whole or in part at any time and from time to time at a price of $25.00 per share plus a sum equal to all dividends on such shares accrued and unpaid thereon to the date fixed for redemption (for purposes of this Section 4 and Section 5 hereof, such date is hereinafter called the "REDEMPTION DATE"). (b) The shares of this Series shall not be subject to a sinking fund. 5. PROCEDURE FOR REDEMPTION PURSUANT TO SECTION 4. (a) (i) In the event that fewer than all of the outstanding shares of this Series are to be redeemed at any one time pursuant to Section 4 hereof, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be selected pro rata or by lot as may be determined by the Board of Directors or by such other method as may be approved by the Board of Directors to conform to any rule or regulation of the New York Stock Exchange or any other stock exchange upon which the shares of this Series may at the time be listed. 3 (ii) The Corporation shall cause a notice to be mailed, first-class postage prepaid, at least 30 days, but not more than 90 days, prior to the Redemption Date, to each holder of record of shares of this Series to be redeemed; if less than all the shares owned by such holder are then to be redeemed, the notice shall also specify the number of shares thereof which are to be redeemed and the number of certificates representing such shares. Such notice shall be mailed to such record holders at their respective addresses as they shall appear upon the books of the Corporation and shall set forth the Redemption date, the redemption price per share and the place or places for surrender of certificates for shares to be redeemed. (iii) Any notice which is mailed by the Corporation as provided in this Section 5 shall be conclusively presumed to have been duly given, whether or not the shareholder receives such notice; and failure to give such notice by mail, or any defect in such notice, to the holders of any shares designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of this Series. On or after the Redemption date specified in such notice, each holder of the shares called for redemption shall surrender the certificate evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the redemption price. In case fewer than all of the shares represented by any certificate are redeemed, a new certificate representing the unredeemed shares shall be issued to the surrendering holder at the expense of the Corporation. If on the Redemption Date specified in such notice there shall have been deposited with a bank or trust company (the "DEPOSITARY") designated by the Board of Directors and located in the City of Kansas City, Missouri, the City of Chicago, Illinois, or the City of New York, New York, having a combined capital and surplus of at least $50,000,000 in trust for the account of the holders of the shares of this Series so called for redemption, funds in an amount equal to the aggregate amount payable upon redemption of the shares to be redeemed, together with irrevocable written instructions and authority to the Depositary to redeem such shares on and after such Redemption Date immediately upon the endorsement and surrender of the certificates therefor, then, notwithstanding that the certificates evidencing any such shares shall not have been surrendered, the dividends with respect to the shares so called shall cease to accrue after the Redemption Date, the shares with respect to which such deposit shall have been made shall no longer be deemed to be outstanding, the holders thereof shall cease to be stockholders of the Corporation, and all rights with respect to such shares shall forthwith terminate except only the right to receive from the Depositary forthwith from and after the date of such deposit the amount payable upon redemption of the shares to be redeemed, without interest. (b) Any interest accrued on funds so deposited with the Depositary shall belong to the Corporation and shall be paid to it from time to time. All funds deposited in accordance with this Section 5 which shall remain unclaimed by the holders of shares called for redemption at the end of six years after the Redemption Date shall be, if requested by the Board of Directors, returned by the Depositary to the Corporation, after which the holders of such shares shall look only to the Corporation for the payment of such unclaimed amounts, without interest. (c) If any dividend payment on this Series is in arrears, no purchase or redemption shall be made of any shares of any class or series of capital stock of the Corporation 4 ranking equally with or junior to this Series as to dividends or the distribution of assets upon Liquidation or Voluntary Liquidation. 6. CONVERSION RIGHTS. The holders of shares of this Series shall have no right to convert such shares into shares of any other class or series of capital stock of the Corporation. 7. VOTING RIGHTS. (a) Unless and until dividends payable on any shares of this Series shall be in arrears in an amount equivalent to one and one-half times the annual dividend, or more, per share, the holders of shares of this Series shall have no voting power or rights, except as otherwise provided herein, by the Certificate of Incorporation of the Corporation or by law. If and when dividends payable on any shares of this Series shall be in arrears in an amount equivalent to one and one-half times the annual dividend or more, per share, and thereafter until all dividends on shares of this Series in arrears shall have been paid, the holders of this Series, together with any other class or series of capital stock of the Corporation which is by its terms expressly made equal as to dividends to this Series (for purposes of this Section 7, this Series, together with all such other classes and series, is hereinafter collectively referred to as the "PREFERENCE STOCK"), voting as a single class separate from the holders of all other classes of capital stock, shall be entitled to elect two directors. The terms of office as directors of all persons who may be directors of the Corporation shall terminate upon the election of directors by the holders of the Preference Stock. The holders of the Common Stock shall have the right to elect the remaining directors of the Corporation. If the holders of the Preference Stock have not exercised their right to elect directors of the Corporation because of the lack of a quorum consisting of the holders of a majority of the Preference Stock, then the said directors shall be elected by the directors whose term of office is thus terminated, and in that event, such elected directors shall hold office for the interim period, pending such time as a quorum of the holders of the Preference Stock shall be present at a meeting held for the election of directors. (b) If and when all dividends then in arrears on the Preference Stock then outstanding shall be paid (and such dividends shall be declared and paid out of any funds legally available therefor as soon as reasonably practicable), the holders of shares of the Preference Stock shall be divested of any special right with respect to the election of directors and the voting power of the holders of shares of the Preference Stock and the Common Stock shall revert to the status existing before the first dividend payment date on which dividends on any shares of the Preference Stock were not paid in full, but always subject to the same provisions for vesting such special rights in the holders of shares of the Preference Stock in case of further like arrears in payment of dividends thereon. Upon the termination of any such special voting right, the terms of office of all persons who may have been elected directors of the Corporation by vote of the holders of the Preference Stock, as a class, pursuant to such special voting right shall forthwith terminate, and the resulting vacancies shall be filled by the vote of a majority of the remaining directors. (c) In case of any vacancy in the office of a director occurring among the directors elected by the holders of the Preference Stock voting as a single class separate from the holders of all other classes of capital stock, the remaining director elected by the holders of the 5 Preference Stock may elect a successor to hold office for the unexpired term of the director whose place shall be vacant. In the event of simultaneous vacancies among directors elected by the holders of the Preference Stock, an election by the holders of the Preference Stock, pursuant to the provisions of this Section 7, will be held. (d) Whenever the right shall have accrued to the holders of the Preference Stock to elect directors, voting as a single class, separate from the holders of all other classes of capital stock, then upon request in writing signed by any holder of the Preference Stock entitled to vote, delivered by registered mail or in person to the president, a vice president or secretary of the Corporation, it shall be the duty of such officer forthwith to cause notice to be given to the shareholders entitled to vote at a meeting to be held at such time as such officer may fix, not less than 10 nor more than 60 days after the receipt of such request, for the purpose of electing directors. At all meetings of stockholders held for the purpose of electing directors during such time as the holders of the Preference Stock shall have the special right, voting as a single class, separate from the holders of all other classes of capital stock to elect directors, the presence in person or by proxy of the holders of a majority of the outstanding Preference Stock shall be required to constitute a quorum of such class for the election of directors, and the presence in person or by proxy of the holders of a majority of all other classes of capital stock outstanding at the time, and not entitled to such special right, shall be required to constitute a quorum of such other classes for the election of directors. 8. RESTRICTIONS ON CERTAIN CORPORATE ACTION. (a) So long as any shares of this Series are outstanding, no new class of capital stock shall be created or authorized which is entitled to dividends or shares in distribution of assets on a parity with or in priority to this Series, nor shall there be created or authorized any securities convertible into shares of any such stock, unless the holders of record of not less than two-thirds of the number of shares then outstanding of the preference stock, without par value, of the Corporation of which this Series forms a part (as a single class separate from the holders of all other classes of capital stock) shall vote therefor in person or by proxy at the meeting of stockholders at which the creation or authorization of such new class of capital stock or such convertible securities is considered. (b) So long as any shares of this Series are outstanding, the Corporation shall not increase the total authorized amount of the preference stock, without par value, of the Corporation of which this Series forms a part or any class of capital stock which is entitled to dividends or shares in distribution of assets on a parity with or in priority to such preference stock, unless the holders of record of not less than a majority of the number of shares of such preference stock then outstanding (as a single class separate from the holders of all other classes of capital stock) shall vote therefor in person or by proxy at a meeting held pursuant to notice containing a statement of such purpose. 9. OTHER RIGHTS. The holders of this Series shall not have any other preferences or special rights. 6 IN WITNESS WHEREOF, the Corporation has caused this certificate to be made under the seal of the Corporation signed by its Senior Vice President and Corporate Secretary, respectively, this 19th day of February, 1992. /s/ Harry L. Winn, Jr. --------------------------------------- Senior Vice President /s/ Dale J. Wolf --------------------------------------- Corporate Secretary (Seal) 7 EX-3.(A)(6) 4 EXHIBIT 3(A)(6) Exhibit 3(a)(6) CERTIFICATE OF DESIGNATION OF UTILICORP UNITED INC. SERIES A PARTICIPATING CUMULATIVE PREFERENCE STOCK Pursuant to Sections 151 of the General Corporation Law of the State of Delaware UtiliCorp United Inc., a corporation organized and existing under and by virtue of The General Corporation Law of Delaware, DOES HEREBY CERTIFY: That at a meeting of the Board of Directors of UtiliCorp United Inc. (the "Corporation") the following resolution was duly adopted creating 60,000 shares of Preference Stock, designated as Series A Participating Cumulative Preference Stock. RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation in accordance with the provisions of the Certificate of Incorporation, a series of Preference Stock of the Corporation be, and it hereby is created, and the designation and amount thereof and the relative rights, preferences and limitations thereof (in addition to the provisions set forth in the Certificate of Incorporation, of the Corporation, which are applicable to the Preference Stock of all classes and series) are as follows: 1. DESIGNATION AND NUMBER. The designation of this series is the "Series A Participating Cumulative Preference Stock" (hereinafter, this "SERIES"). The number of shares initially constituting this Series shall be sixty thousand (60,000) shares; PROVIDED, HOWEVER, that, if more than a total of 60,000 shares of this Series shall be issuable upon the exercise of Rights (the "Rights") issued pursuant to the Rights Agreement dated as of December 31, 1996, between the Corporation and First Chicago Trust Company of New York, a New York corporation, as Rights Agent (the "Rights Agreement"), the Board of Directors of the Corporation, pursuant to Section 151(g) of the General Corporation Law of the State of Delaware, shall direct by resolution or resolutions that a certificate be properly executed, acknowledged, filed and recorded, in accordance with the provisions of Section 103 thereof, providing for the total number of shares of this Series authorized to be issued to be increased (to the extent that the Articles of Incorporation then permits) to the largest number of whole shares (rounded up to the nearest whole number) issuable upon exercise of such Rights. 2. DIVIDENDS. a. Subject to the prior and superior rights of the holders of shares of any other series of Preference Stock or other class of capital stock of the Corporation ranking prior and superior to the shares of this Series with respect to dividends, the holders of shares of this Series shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the Corporation legally available therefor, (1) quarterly dividends payable on the first day of each of March, June, September and December (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or a fraction of a share of this Series, in the amount of $.01 per whole share (rounded to the nearest cent) less the amount of all cash dividends declared on this Series pursuant to the following clause (2) since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of this Series (the total of which shall not, in any event, be less than zero), and (2) dividends payable in cash on the payment date for each cash dividend declared on the Common Stock in an amount per whole share (rounded to the nearest cent) equal to the Formula Number (as hereinafter defined) then in effect times the cash dividends then to be paid on each share of Common Stock, par value $1.00, of the Corporation (the "Common Stock"). In addition, if the Corporation shall pay any dividend or make any distribution on the Common Stock payable in assets, securities or other forms of noncash consideration (other than dividends or distributions solely in shares of Common Stock), then, in each such case, the Corporation shall simultaneously pay or make on each outstanding whole share of this Series a dividend or distribution in like kind equal to the Formula Number then in effect times such dividend or distribution on each share of the Common Stock. As used herein, the "Formula Number" shall be 1,000; PROVIDED, HOWEVER, that, if at any time after December 31, 1996, the Corporation shall (i) declare or pay any dividend on the Common Stock payable in shares of Common Stock or make any distribution on the Common Stock in shares of Common Stock, (ii) subdivide (by a stock split or otherwise) the outstanding shares of Common Stock into a larger number of shares of Common Stock or (iii) combine (by a reverse stock split or otherwise) the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then in each such event the Formula Number shall be adjusted to a number determined by multiplying the Formula Number in effect immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event (and rounding the result to the nearest whole number); and PROVIDED FURTHER, that, if at any time after December 31, 1996, the Corporation shall issue any shares of its capital stock in a merger, reclassification, or change of the outstanding shares of Common Stock, then in each such event the Formula Number shall be appropriately adjusted to reflect such merger, reclassification or change so that each share of Preferred Stock continues to be the economic equivalent of a Formula Number of shares of Common Stock prior to such merger, reclassification or change. b. The Corporation shall declare a dividend or distribution on this Series as provided in Section 2(a) immediately prior to or at the same time it declares a dividend or -2- distribution on the Common Stock (other than a dividend or distribution solely in shares of Common Stock); PROVIDED, HOWEVER, that, in the event no dividend or distribution (other than a dividend or distribution in shares of Common Stock) shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on this Series shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. The Board of Directors may fix a record date for the determination of holders of shares of this Series entitled to receive a dividend or distribution declared thereon, which record date shall be the same as the record date for any corresponding dividend or distribution on the Common Stock. c. Dividends shall begin to accrue and be cumulative on outstanding shares of this Series from and after the Quarterly Dividend Payment Date next preceding the date of original issue of such shares of this Series; PROVIDED, HOWEVER, that dividends on such shares which are originally issued after the record date for the determination of holders of shares of this Series entitled to receive a quarterly dividend and on or prior to the next succeeding Quarterly Dividend Payment Date shall begin to accrue and be cumulative from and after such Quarterly Dividend Payment Date. Notwithstanding the foregoing, dividends on shares of this Series which are originally issued prior to the record date for the determination of holders of shares of this Series entitled to receive a quarterly dividend on the first Quarterly Dividend Payment Date shall be calculated as if cumulative from and after the last day of the fiscal quarter next preceding the date of original issuance of such shares. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of this Series in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. d. So long as any shares of this Series are outstanding, no dividends or other distributions shall be declared, paid or distributed, or set aside for payment or distribution, on the Common Stock unless, in each case, the dividend required by this Section 2 to be declared on this Series shall have been declared. e. The holders of the shares of this Series shall not be entitled to receive any dividends or other distributions except as provided herein. 3. LIQUIDATION RIGHTS. In the event of the liquidation, dissolution or winding up of the Corporation ("LIQUIDATION"), whether voluntary or involuntary, no distribution shall be made (1) to the holders of shares of stock ranking junior to the Series A Preference Stock unless, prior thereto, the holders of this Series shall have received an amount equal to the accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an amount equal to the greater of (x) $.01 per whole share or (y) an aggregate amount per share equal to the Formula Number then in effect times the aggregate amount to be distributed per share to holders of Common Stock, or (2) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with this Series, except distributions made ratably on this Series and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. -3- If upon any Liquidation, the assets of the Corporation or proceeds thereof distributable among the holders of shares of this Series and of any class or series of capital stock of the Corporation ranking equally with this Series as to distribution of assets upon Liquidation shall be insufficient to pay in full the preferential amounts payable to such holders, then such assets or the proceeds thereof shall be distributed among such holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. 4. VOTING RIGHTS. The holders of shares of this Series shall have the following voting rights: a. Unless and until dividends payable on any shares of this Series shall be in arrears in an amount equivalent to one and one-half times the annual dividend, or more, per share, the holders of shares of this Series shall have no voting power or rights, except as otherwise provided herein, by the Certificate of Incorporation of the Corporation or by law. If and when dividends payable on any shares of this Series shall be in arrears in an amount equivalent to one and one-half times the annual dividend or more, per share, and thereafter until all dividends on shares of this Series in arrears shall have been paid, the holders of this Series, together with any other class or series of capital stock of the Corporation which is by its terms expressly made equal as to dividends to this Series (for purposes of this Section 3, this Series, together with all such other classes and series, is hereinafter collectively referred to as the "PREFERENCE STOCK"), voting as a single class separate from the holders of all other classes of capital stock, shall be entitled to elect two directors. The terms of office as directors of all persons who may be directors of the Corporation shall terminate upon the election of directors by the holders of the Preference Stock. The holders of the Common Stock shall have the right to elect the remaining directors of the Corporation. If the holders of the Preference Stock have not exercised their right to elect directors of the Corporation because of the lack of a quorum consisting of the holders of a majority of the Preference Stock, then the said directors shall be elected by the directors whose term of office is thus terminated, and in that event, such elected directors shall hold office for the interim period, pending such time as a quorum of the holders of the Preference Stock shall be present at a meeting held for the election of directors. b. If and when all dividends then in arrears on the Preference Stock then outstanding shall be paid (and such dividends shall be declared and paid out of any funds legally available therefor as soon as reasonably practicable), the holders of shares of the Preference Stock shall be divested of any special right with respect to the election of directors and the voting power of the holders of shares of the Preference Stock and the Common Stock shall revert to the status existing before the first dividend payment date on which dividends on any shares of the Preference Stock were not paid in full, but always subject to the same provisions for vesting such special rights in the holders of shares of the Preference Stock in case of further like arrears in payment of dividends thereon. Upon the termination of any such special voting right, the terms of office of all persons who may have been elected directors of the Corporation by vote of the holders of the Preference Stock, as a class, pursuant to such special voting right shall forthwith terminate, and the resulting vacancies shall be filled by a vote of a majority of the remaining directors. -4- c. In case of any vacancy in the office of a director occurring among the directors elected by the holders of the Preference Stock voting as a single class separate from the holders of all other class of capital stock, the remaining director elected by the holders of the Preference Stock may elect a successor to hold office for the unexpired term of the director whose place shall be vacant. In the event of simultaneous vacancies among directors elected by the holders of the Preference Stock, an election by the holders of the Preference Stock, pursuant to the provisions of this Section 3, will be held. d. Whenever the right shall have accrued to the holders of the Preference Stock to elect directors, voting as a single class, separate from the holders of all other classes of capital stock, then upon request in writing signed by any holder of the Preference Stock entitled to vote, delivered by registered mail or in person to the president, a vice president or secretary of the Corporation, it shall be the duty of such officer forthwith to cause notice to be given to the shareholders entitled to vote at a meeting to be held at such time as such officer may fix, not less than ten (10) nor more than sixty (60) days after the receipt of such request, for the purpose of electing directors during such time as the holders of the Preference Stock shall have the special right, voting as a single class, separate from the holders of all other classes of capital stock to elect directors, the presence in person or by proxy of the holders of a majority of the outstanding Preference Stock shall be required to constitute a quorum of such class for the election of directors, and the presence in person or by proxy of the holders of a majority of all other classes of capital stock outstanding at the time, and not entitled to such special right, shall be required to constitute a quorum of such other classes for the election of directors. 5. RESTRICTIONS ON CERTAIN CORPORATION ACTION. a. Whenever quarterly dividends or other dividends or distributions payable on this Series as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of this Series outstanding shall have been paid in full, the Corporation shall not i. declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to this Series; ii. declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with this Series, except dividends paid ratably on this Series and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; iii. redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with this Series; PROVIDED that the Corporation may at any time redeem, -5- purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to this Series; or iv. purchase or otherwise acquire for consideration any shares of this Series, or any shares of stock ranking on a parity with this Series, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. b. The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 5, purchase or otherwise acquire such shares at such time and in such manner. 6. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash or any other property, then in any such case, the then outstanding shares of this Series shall at the same time be similarly exchanged or changed into an amount per share equal to the Formula Number then in effect times the aggregate amount of stock, securities, cash or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is exchanged or changed. In the event both this Section 6 and Section 2 appear to apply to a transaction, this Section 6 will control. 7. NO REDEMPTION; NO SINKING FUND. a. The shares of this Series shall not be subject to redemption by the Corporation or at the option of any holder of this Series; PROVIDED, HOWEVER, that the Corporation may purchase or otherwise acquire outstanding shares of this Series in the open market or by offer to any holder or holders of shares of this Series. b. The shares of this Series shall not be subject to or entitled to the operation of a retirement or sinking fund. 8. RANKING. This Series shall rank junior to all other series of Preferred Stock of the Corporation, unless the Board of Directors shall specifically determine otherwise in fixing the powers, preferences and relative, participating, optional and other special rights of the shares of such series and the qualifications, limitations and restrictions thereof. 9. FRACTIONAL SHARES. This Series shall be issuable upon exercise of the Rights issued pursuant to the Rights Agreement in whole shares or in any fraction of a share that is one one thousandths (1/1,000ths) of a share or any integral multiple of such fraction which shall entitle -6- the holder, in proportion to such holder's fractional shares, to receive dividends, exercise voting rights, participate in distributions and to have the benefit of all other rights of holders of this Series. In lieu of fractional shares, the Corporation, prior to the first issuance of a share or a fraction of a share of this Series, may elect (1) to make a cash payment as provided in the Rights Agreement for fractions of a share other than one one-thousandths (1/1,000ths) of a share or any integral multiple thereof or (2) to issue depository receipts evidencing such authorized fraction of a share of this Series pursuant to an appropriate agreement between the Corporation and a depository selected by the Corporation; PROVIDED that such agreement shall provide that the holders of such depository receipts shall have all the rights, privileges and preferences to which they are entitled as holders of this Series. 10. REACQUIRED SHARES. Any shares of this Series purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preference Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors pursuant to the provisions of Article Four of the Certificate of Incorporation. 11. AMENDMENT. None of the powers, preferences and relative, participating, optional and other special rights of this Series as provided herein or in the Certificate of Incorporation shall be amended in any manner which would alter or change the powers, preferences, rights or privileges of the holders of this Series so as to affect them adversely without the affirmative vote of the holders of at least 66-2/3% of the outstanding shares of this Series, voting as a separate class; PROVIDED, HOWEVER, that no such amendment approved by the holders of at least 66-2/3% of the outstanding shares of this Series shall be deemed to apply to the powers, preferences, rights or privileges of any holder of shares of this Series originally issued upon exercise of a Right after the time of such approval without the approval of such holder. -7- IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Corporation by its President this 30th day of December, 1996. UTILICORP UNITED INC. By: /s/ Robert Green ----------------- President STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) Before me, the undersigned Notary Public in and for said county and state, this day personally appeared ROBERT K. GREEN , personally known to me to be the President of UTILICORP UNITED INC., and who executed the foregoing instrument as President of UTILICORP UNITED INC. and being first duly sworn, acknowledged reading in full and fully understanding the foregoing, acknowledged the facts therein stated to be true and correct, and who further acknowledged the execution of the same as the voluntary act of the Corporation. Witness my hand and seal this 30th day of December, 1996. ---- -------- ---- /s/ Diana Kay Vargo ------------------- Notary Public [Notary Seal] My Commission Expires: 2-8-99 - ---------------------- -8- EX-4.(A)(14) 5 EXHIBIT 4(A)(14) Exhibit 4(a)(14) ================================================================================ UTILICORP UNITED INC. and BANK ONE TRUST COMPANY, NA (formerly The First National Bank of Chicago) as Trustee _____________________ 7 5/8% Senior Notes due 2009 _____________________ THIRTEENTH SUPPLEMENTAL INDENTURE Dated as of November 16, 1999 _____________________ ================================================================================ TABLE OF CONTENTS
PAGE ARTICLE ONE DEFINITIONS............................................................................2 ARTICLE TWO TERMS AND ISSUANCE OF THE SENIOR NOTES.................................................3 Section 201. Issue of Senior Notes.......................................................3 Section 202. Form of Senior Notes; Incorporation of Terms................................3 Section 203. Place of Payment............................................................3 Section 204. Limitation on Issuance of Mortgage Bonds....................................3 ARTICLE THREE MISCELLANEOUS........................................................................4 Section 301. Execution of Supplemental Indenture.........................................4 Section 302. Conflict With Trust Indenture Act...........................................4 Section 303. Effect of Headings..........................................................4 Section 304. Successors and Assigns......................................................4 Section 305. Separability Clause.........................................................4 Section 306. Benefits of Thirteenth Supplemental Indenture...............................4 Section 307. Governing Law...............................................................5 Section 308. Execution and Counterparts..................................................5
THIRTEENTH SUPPLEMENTAL INDENTURE, dated as of November 16,1999 (herein called the "Thirteenth Supplemental Indenture"), between UTILICORP UNITED INC., a corporation duly organized and existing under the laws of the State of Delaware (hereinafter called the "Company"), party of the first part, and BANK ONE TRUST COMPANY, NA (formerly The First National Bank of Chicago), a national banking association duly organized and existing under the laws of the United States, as Trustee under the Original Indenture referred to below (hereinafter called the "Trustee"), party of the second part. WITNESSETH: WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture, dated as of November 1, 1990 (hereinafter called the "Original Indenture"), to provide for the issuance from time to time of certain of its unsecured senior notes (hereinafter called the "Securities"), the form and terms of which are to be established as set forth in Sections 201 and 301 of the Original Indenture; and WHEREAS, Section 901 of the Original Indenture provides, among other things, that the Company and the Trustee may enter into indentures supplemental to the Original Indenture for, among other things, the purpose of establishing the form or terms of the Securities of any series as permitted in Sections 201 and 301 of the Original Indenture; and WHEREAS, the Company desires to create a series of the Securities in an aggregate principal amount of $200,000,000 to be designated the "7 5/8% Senior Notes due 2009" (the "Senior Notes"), and all action on the part of the Company necessary to authorize the issuance of the Senior Notes under the Original Indenture and this Thirteenth Supplemental Indenture has been duly taken; and -2- WHEREAS, all acts and things necessary to make the Senior Notes when executed by the Company and completed, authenticated and delivered by the Trustee as in the Original Indenture and this Thirteenth Supplemental Indenture provided, the valid and binding obligations of the Company and to constitute these presents a valid and binding supplemental indenture and agreement according to its terms, have been done and performed; and WHEREAS, Section 901 of the Original Indenture provides, among other things, that the Company and the Trustee may enter into indentures supplemental to the Original Indenture to, among other things, add to the covenants of the Company for the benefit of the Holders of all or any series of Securities; and WHEREAS, the Company desires to limit the issuance of Mortgage Bonds under its General Mortgage (as hereinafter defined) as set forth in Section 204 of this Thirteenth Supplemental Indenture for the benefit of the Holders of the Senior Notes; NOW, THEREFORE, THIS THIRTEENTH SUPPLEMENTAL INDENTURE WITNESSETH: That in consideration of the premises, the Company covenants and agrees with the Trustee, for the equal benefit of holders of the Senior Notes, as follows: ARTICLE ONE DEFINITIONS The use of the terms and expressions herein is in accordance with the definitions, uses and constructions contained in the Original Indenture and the form of Senior Note attached hereto as Exhibit A. -3- ARTICLE TWO TERMS AND ISSUANCE OF THE SENIOR NOTES Section 201. ISSUE OF SENIOR NOTES. A series of Securities which shall be designated the "7 5/8% Senior Notes due 2009" shall be executed, authenticated and delivered in accordance with the provisions of, and shall in all respects be subject to, the terms, conditions and covenants of the Original Indenture and this Thirteenth Supplemental Indenture (including the form of Senior Note set forth as Exhibit A hereto). The aggregate principal amount of Senior Notes of the series created hereby which may be authenticated and delivered under the Original Indenture shall not, except as permitted by the provisions of the Original Indenture, exceed $200,000,000. Section 202. FORM OF SENIOR NOTES; INCORPORATION OF TERMS. The form of the Senior Notes shall be substantially in the form of Exhibit A attached hereto. The terms of such Senior Notes are herein incorporated by reference and are part of this Thirteenth Supplemental Indenture. Section 203. PLACE OF PAYMENT. The Place of Payment will be initially the corporate trust offices of the Trustee which, at the date hereof, are located at Bank One Trust Company, NA, One Bank One Plaza, Suite 0126, Chicago, Illinois 60670-0126. Section 204. LIMITATION ON ISSUANCE OF MORTGAGE BONDS. The Company will not issue any Mortgage Bonds under its General Mortgage Indenture and Deed of Trust, dated September 15, 1988, between the Company and Commerce Bank of Kansas City, N.A., as Trustee (the "General Mortgage"), without making effective provision, and the Company covenants that in any such case effective provisions will be made, whereby the Senior Notes -4- shall be directly secured by the General Mortgage equally and ratably with any and all other obligations and indebtedness thereby secured. ARTICLE THREE MISCELLANEOUS Section 301. EXECUTION OF SUPPLEMENTAL INDENTURE. This Thirteenth Supplemental Indenture is executed and shall be construed as an indenture supplemental to the Original Indenture and, as provided in the Original Indenture, this Thirteenth Supplemental Indenture forms a part thereof. Section 302. CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Thirteenth Supplemental Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. Section 303. EFFECT OF HEADINGS.The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section 304. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Thirteenth Supplemental Indenture by the Company shall bind its successors and assigns, whether so expressed or not. Section 305. SEPARABILITY CLAUSE. In case any provision in this Thirteenth Supplemental Indenture or in the Senior Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. -5- Section 306. BENEFITS OF THIRTEENTH SUPPLEMENTAL INDENTURE. Nothing in this Thirteenth Supplemental Indenture or in the Senior Notes, express or implied, shall give to any person, other than the parties hereto and their successors hereunder and the holders, any benefit or any legal or equitable right, remedy or claim under this Thirteenth Supplemental Indenture. Section 307. GOVERNING LAW. This Thirteenth Supplemental Indenture and each Senior Note shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be governed by and construed in accordance with the laws of said State. Section 308. EXECUTION AND COUNTERPARTS. This Thirteenth Supplemental Indenture may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. -6- IN WITNESS WHEREOF, the parties hereto have caused this Thirteenth Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. UTILICORP UNITED INC. [Seal] By: /s/ Dale J. Wolf -------------------------------- Name: Dale J. Wolf Title: Vice President, Finance, Treasurer and Secretary Attest: /s/ Douglas P. Evanson - ------------------------------ Title: Asst. Treasurer BANK ONE TRUST COMPANY, NA as Trustee [Seal] By: /s/ Leland Hansen ------------------------------- Name: Leland Hansen Title: Asst Vice Pres. Attest: /s/ Joan E. Blume - ------------------------------ Title: Trust Officer STATE OF Missouri) -------- ) ss.: COUNTY OF Jackson) -------- On the 12th day of November, 1999, before me personally ---- -------- - came Dale J. Wolf, to me known, who, being by me duly sworn, did depose and say ------------ that he is Vice President, Treasurer and Secretary of UtiliCorp United Inc., --------------------------------------- the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. /s/ Lewisann Rosenberger ------------------------ Notary Public, State of Missouri---------- [Notary Seal] STATE OF Illinois) -------- ) ss.: COUNTY OF Cook) ------- On the 16 day of Nov., 1999, before me personally -- ---- - came Leland Hansen, to me known, who, being by me duly sworn, did depose and say ------------- that he is Joan Blume of Bank One Trust Company, NA, the national ---------- banking association described in and which executed the foregoing instrument; that he knows the seal of said association; that the seal affixed to said instrument is such association seal; that it was so affixed by authority of the Board of Directors of said association, and that he signed his name thereto by like authority. /s/ Nilda Sierra ------------------ Notary Public, State of _________ [Notary Seal] EXHIBIT A [FORM OF FACE OF SENIOR NOTE] THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS GLOBAL SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES HEREINAFTER DESCRIBED AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY NOMINEE TO A SUCCESSOR OF THE DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR. REGISTERED REGISTERED UTILICORP UNITED INC. 7 5/8% SENIOR NOTES DUE 2009 No. 918005 AW9 $ UTILICORP UNITED INC., a corporation duly organized and existing under the laws of Delaware (herein called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to __________________________________, or registered assigns, the principal sum of _________________________________________ DOLLARS on November 15, 2009, and to pay interest thereon from November 16, 1999, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on May 15 and November 15 in each year, commencing May 15, 2000, at the rate per annum provided in the title hereof, until the principal hereof is paid or made available for payment, and, subject to the terms of the Indenture, at the rate per annum provided in the title hereof on any overdue principal and premium, if any, and (to the extent that the payment of such interest shall be legally enforceable) on any overdue installment of interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Holder in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest payment, which shall be the May 1 or November 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date, and may either be paid to the Holder in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, in -2- which event notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of and premium, if any, and interest on this Security will be made at the office or agency of the Trustee maintained for that purpose in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. The Company may pay principal by check payable in such money or by wire transfer to a dollar account maintained by the holder (if the holder of the Security holds an aggregate principal amount of Securities in excess of $5,000,000). The Company may pay interest by mailing a dollar check to a holder's registered address or, upon application by the holder hereof to the Security Registrar, not later than the applicable record date, by wire transfer to a dollar account maintained by the holder (if the holder of the Security holds an aggregate principal amount of Securities in excess of $5,000,000). Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof, or an Authenticating Agent, by manual signature of one of its authorized officers, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. -3- IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. UTILICORP UNITED INC. Dated: By:__________________________________ Title: Attest: _____________________________________ [Seal] Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Senior Notes of the series designated herein referred to in the within-mentioned Indenture BANK ONE TRUST COMPANY, NA as Trustee By:________________________________ Authorized Officer [FORM OF REVERSE OF SENIOR NOTE] UTILICORP UNITED INC. 7 5/8% SENIOR NOTE DUE 2009 This Senior Note is one of a duly authorized series of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of November 1, 1990, as amended and supplemented by the Thirteenth Supplemental Indenture dated as of November 16, 1999 (as amended and supplemented, the "Indenture"), between the Company and Bank One Trust Company, NA (formerly The First National Bank of Chicago), as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $200,000,000. This Security is not subject to any sinking fund, nor may this Security be redeemed at the option of the Company prior to the Maturity Date. Interest payments for this Security will be computed and paid on the basis of a 360-day year of twelve 30-day months. If an Interest Payment Date falls on a day that is not a Business Day, such Interest Payment Date will be the following day that is a Business Day. The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein. If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than 66 2/3% in principal amount of the Securities at the time Outstanding of all series to be affected (voting as a class). The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. -2- Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed. This Security shall be exchangeable for Securities registered in the names of Persons other than the Depositary with respect to such series or its nominee only as provided in this paragraph. This Security shall be so exchangeable if (x) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such series or at any time ceases to be a clearing agency registered as such under the Securities Exchange Act of 1934, (y) the Company executes and delivers to the Trustee an Officers' Certificate providing that this Security shall be so exchangeable or (z) there shall have occurred and be continuing an Event of Default with respect to the Securities of such series. Securities so issued in exchange for this Security shall be of the same series, having the same interest rate, if any, and maturity and having the same terms as this Security, in authorized denominations and in the aggregate having the same principal amount as this Security and registered in such names as the Depositary for such Global Security shall direct. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of a Security of the series of which this Security is a part is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and premium, if any, and interest, if any, on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of the series of which this Security is a part are issuable only in registered form without coupons in denominations of $1,000 and in integral multiples thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. -3- Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Holder in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. This Security shall be governed by and construed in accordance with the laws of the State of New York. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. EX-10.(A)(2) 6 EXHIBIT 10(A)(2) Exhibit 10(a)(2) UTILICORP UNITED INC. AMENDED AND RESTATED 1986 STOCK INCENTIVE PLAN (MAY 5, 1999) 1. PURPOSE The UtiliCorp United Inc. Amended and Restated 1986 Stock Incentive Plan is designed to enable qualified executive, managerial, supervisory and professional personnel of UtiliCorp United Inc. to acquire or increase their ownership of the $1.00 par value common stock of the Company on reasonable terms. The opportunity so provided is intended to foster, in participants, a strong incentive to put forth maximum effort for the continued success and growth of the Company and its Subsidiaries, to aid in retaining individuals who put forth such efforts, and to assist in attracting the best available individuals in the future. 2. DEFINITIONS When used herein, the following terms shall have the meaning set forth below: 2.1 "Award" shall mean an Option or a Restricted Stock Award. 2.2 "Board" means the Board of Directors of UtiliCorp United Inc. 2.3 "Committee" means the members of the Board's Compensation Committee, which shall consist solely of two or more directors who are both (a) "non-employee directors" under Rule 16b-3(b)(3) promulgated under Section 16 of the Exchange Act, or any successor provision thereto and (b) "outside directors" under Section 162(m) of the Code. 2.4 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 2.5 "Company" means UtiliCorp United Inc., a Delaware corporation. 2.6 "Fair Market Value" means, with respect to the Company's Shares, the mean between the high and low prices of Shares on the New York Stock Exchange Composite Tape on, as applicable: (a) the day on which an Award is granted; (b) the day all restrictions lapse for a Restricted Stock Award; or (c) the day Shares are delivered in lieu of current cash compensation as permitted by the Plan or, if there should be no sale on that date, on the next preceding day on which there was a sale. 2.7 "Grantee" means a person to whom an Award is made. 2.8 "Incentive Stock Option" or "ISO" means an Option awarded under the Plan which meets the terms and conditions established by Section 422 of the Code and applicable regulations. 1 2.9 "Non-Qualified Stock Option" or "NQSO" means an Option awarded under the Plan other than an ISO. 2.10 "Option" means the right to purchase a number of Shares, at a price, for a term, under conditions, and for cash or other considerations fixed by the Committee and expressed in the written instrument evidencing the Option. An Option may be either an ISO or NQSO. 2.11 "Plan" means the Company's Amended and Restated 1986 Stock Incentive Plan. 2.12 "Restricted Stock Award" means the grant of a right to receive a number of Shares at a time or times fixed by the Committee in accordance with the Plan and subject to such limitations and restrictions as the Plan and the Committee impose, all as expressed in the written instrument evidencing the Restricted Stock Award. 2.13 "Right of First Refusal" means the right of the Company to be given the opportunity to purchase Shares issued pursuant to Awards under the Plan at their then Fair Market Value, in the event the holder of such Shares desires to sell the Shares to any other person. This right may apply to any Shares awarded under the Plan under terms and conditions established by the Committee at the time of Award and included in the written instrument evidencing the Award, and shall apply to sales by the Grantee or the Grantee's guardian, legal representative, joint tenant, tenant in common, heir or successors. 2.14 "Shares" means shares of the Company's $1.00 par value common stock or, if by reason of the adjustment provisions hereof any rights under an Award under the Plan pertain to any other security, such other security. 2.15 "Subsidiary" means any business, whether or not incorporated, in which the Company, at the time an Award is granted to an employee thereof, or in other cases, at the time of reference, owns directly or indirectly not less than 50 percent of the equity interest except that with respect to an ISO the term "Subsidiary" shall have the meaning set forth in Section 425(f) of the Code. 2.16 "Successor" means the legal representative of the estate of a deceased Grantee or the person or persons who shall acquire the right to exercise an Option, or to receive Shares issuable in satisfaction of a Restricted Stock Award, by bequest, inheritance or permitted transfer as provided in accordance with Section 8 hereof, or by reason of the death of the Grantee, as provided in accordance with Section 9 hereof. 2.17 "Term" means the period during which a particular Option may be exercised or the period during which the restrictions placed on a Restricted Stock Award are in effect. 3. ADMINISTRATION OF THE PLAN 3.1 The Plan shall be administered by the Committee. 2 3.2 Subject to the provisions of the Plan, the Committee shall have the sole authority to determine: (i) the employees of the Company and its Subsidiaries to whom Awards shall be granted; (ii) the number of Shares to be covered by each Award; (iii) the price to be paid for the Shares upon the exercise of each Option; (iv) the Term within which each Option may be exercised; (v) the terms and conditions of each Option, which may include provisions for payment of the option price in Shares at the Fair Market Value of such Shares on the day of their delivery for such purpose; (vi) the restrictions on transfer and forfeiture conditions with respect to the Award; and (vii) any other terms and conditions of the Award. 3.3 The Committee may construe and interpret the Plan, reconcile inconsistencies thereunder and supply omissions therefrom. Any decision or action taken by the Committee in the exercise of such powers or otherwise, arising out of or in connection with the construction, administration, interpretation and effect of the Plan and of its rules and regulations shall be conclusive and binding upon all Grantees, and any other person claiming under or through any Grantee. 3.4 The Committee shall designate one of its members as Chairman. It shall hold its meetings at such times and places as may be determined. All determinations of the Committee shall be made by a majority of its members at the time in office. Any determination reduced to writing and signed by a majority of the members of the Committee at the time in office shall be fully as effective as if it had been made at a meeting duly called and held. The Committee may appoint a Secretary, who need not be a member of the Committee, and may establish and amend such rules and regulations for the conduct of its business and the administration of the Plan as it shall deem advisable. 3.5 No member of the Committee shall be liable, in the absence of bad faith, for any act or omission with respect to his service on the Committee. Service on the Committee is hereby specifically declared to constitute service as a Director of the Company, to the end that the members of the Committee shall, in respect of their acts and omissions as such, be entitled to the limitation of liability, indemnification and reimbursement as Directors of the Company pursuant to its Certificate of Incorporation, Bylaws and to the benefits of any insurance policy maintained by the Company providing coverage with respect to acts or omission of Directors of the Company. 3 3.6 The Committee shall regularly inform the Board as to its actions under the Plan in such manner, at such times, and in such form as the Board may request. 3.7 Notwithstanding the foregoing, in the event the Committee shall not exist at any time during the term of this Plan, the Plan shall be administered by the Board of Directors. 4 4. ELIGIBILITY Awards may be made under the Plan only to the class of employees of the Company or of a Subsidiary, including officers, consisting of those employees who have executive, managerial, supervisory or professional responsibilities ("Eligible Employees"). A Director who is not an employee shall not be eligible to receive an Award. Awards may be made to Eligible Employees whether or not they have received prior Awards under the Plan or under any other plan, and whether or not they are participants in other benefit plans of the Company. 5. SHARES SUBJECT TO PLAN 2,149,479 Shares are hereby reserved for issuance in connection with Awards under the Plan and the issuance of Shares pursuant to Section 19, below. The Shares so used may be Shares held in the treasury, however acquired, or Shares which are authorized but unissued. Any Shares subject to Options which lapse unexercised, and any Shares forming part of a Restricted Stock Award which do not vest in the Grantee, shall once again be available for grant of Awards. 6. GRANTING OF OPTIONS 6.1 Subject to the terms of the Plan, the Committee may from time to time grant Options to Eligible Employees. 6.2 Pursuant to the Code and applicable regulations, the aggregate Fair Market Value (determined at the time the Option is granted) of Shares as to which ISOs are exercisable for the first time by a Grantee during any calendar year (under all Plans of the Grantee's employer corporation and its parent and subsidiary corporations) shall not exceed $100,000. No ISO shall be granted to a Grantee who, at the time the ISO is granted, owns (within the meaning of Section 422(b)(6) of the Code) stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Grantee's employer corporation or of its parent or subsidiary corporation unless, at the time the ISO is granted, the Option price is at least 110 percent of the Fair Market Value of the stock subject to the ISO, and the ISO by its terms is not exercisable after the expiration of five years from the date the ISO is granted. 6.3 The purchase price of each Share subject to an Option shall be fixed by the Committee, but shall not be less than the greater of the par value of the Share or 100 percent of the Fair Market Value of the Share on the date the Option is granted, except as otherwise provided in Section 6.2 with respect to a 10 percent stockholder. 6.4 Each Option shall expire and all rights to purchase Shares thereunder shall terminate on the date fixed by the Committee and expressed in the written instrument evidencing the Option, which date in the case of ISOs shall not be after the expiration of ten years from the date the Option is granted, except as otherwise provided in Section 6.2 with respect to a 10 percent stockholder. 6.5 Subject to the terms of the Plan each Option shall become exercisable at the time, and for the number of Shares, fixed by the Committee and expressed in the written instrument 5 evidencing the Option; provided, however, that during any fiscal year of the Company, no Grantee shall be granted Options covering more than 150,000 Shares. Except to the extent otherwise provided in or pursuant to Sections 9 and 10, no Option shall become exercisable as to any Shares prior to the first anniversary of the date on which the Option was granted. 6.6 Subject to the terms of the Plan, the Committee may at the time of the Award make all or any portion of Option Shares subject to a Right of First Refusal for any period of time designated by the Committee in the written instrument evidencing the Awards. 7. RESTRICTED STOCK AWARDS 7.1 Subject to the terms of the Plan, the Committee may also grant Eligible Employees Restricted Stock Awards. 7.2 The number of Shares covered thereby and other terms and conditions of any such Restricted Stock Award, including the period for which and the conditions on which the Shares included in the Award will be subject to forfeiture and restrictions on transfer or on the ability of the Grantee to make elections with respect to the taxation of the Award without the consent of the Committee, shall be determined by the Committee and expressed in the written instrument evidencing the Award; provided, however, that during any fiscal year of the Company, no Grantee shall receive Restricted Stock Awards covering more than 150,000 Shares. Except as provided in or pursuant to Sections 9 and 10, no such restrictions shall lapse earlier than the first, or later than the tenth, anniversary of the date on which the Award was granted. 7.3 Subject to the terms of the Plan, the Committee may at the time of the Award make all or portion of the Shares awarded under a Restricted Stock Award subject to a Right of First Refusal for any period of time designated by the Committee and expressed in the written instrument evidencing the Award. 7.4 The Committee, in its sole discretion, may impose performance restrictions on Restricted Stock Awards as it may deem advisable or appropriate in accordance with this Section 7.4. 7.4.1 The Committee may set restrictions based upon (a) the achievement of specific performance objectives (Company-wide, divisional or individual), (b) applicable Federal or state securities laws, or (c) any other basis determined by the Committee in its sole discretion. 7.4.2 For purposes of qualifying Restricted Stock Awards as "performance-based compensation" under Section 162(m) of the Code, the Committee, in its sole discretion, may set restrictions based upon the achievement of performance goals. The performance goals shall be set by the Committee on or before the latest date permissible to enable the Restricted Stock Awards to qualify as "performance-based compensation" under Section 162(m) of the Code. In granting Restricted Stock Awards that are intended to qualify under Code Section 6 162(m), the Committee shall follow any procedures determined by it in its sole discretion from time to time to be necessary, advisable or appropriate to ensure qualification of the Restricted Stock Awards under Code Section 162(m) (e.g., in determining the performance goals). 8. NON-TRANSFERABILITY OF RIGHTS Except for certain transfers of Non-Qualified Stock Options to family members, trusts and charities, or pursuant to domestic relations orders, which the Committee in its sole discretion may permit, no Option and no rights under any Restricted Stock Award shall be transferable by the Grantee otherwise than by will or the laws of descent and distribution, and, except for permitted transferees, each Option may be exercised during the lifetime of the Grantee only by him. 9. DEATH OR TERMINATION OF EMPLOYMENT 9.1 Subject to the provisions of the Plan, the Committee may make and include in the written instrument evidencing an Option such provisions concerning exercise or lapse of the Option on death or termination of employment as it shall in its discretion determine. 9.2 No ISO shall be exercisable after the date which is three months following the Grantee's termination of employment for any reason other than death or disability, unless (a) the Grantee dies during such three-month period, and (b) the written instrument evidencing the Award or the Committee permits later exercise. No ISO may be exercised more than one year after the Grantee's termination of employment on account of disability, unless (a) the Grantee dies during such one-year period and (b) the written instrument evidencing the Award or the Committee permits later exercise. 9.3 The effect of death or termination of employment on Shares issuable or deliverable pursuant to any Restricted Stock Awards shall be as stated in the written instrument evidencing the Award. 9.4 A transfer of employment between the Company and a Subsidiary, or between Subsidiaries, shall not constitute a termination of employment for purposes of the Award and the Plan. 10. PROVISIONS RELATING TO TERMINATION OF THE COMPANY'S SEPARATE EXISTENCE The Committee may provide that in the event of a Change in Control, any or all Options granted under the Plan shall be immediately exercisable in full and the restrictions relating to any or all Restricted Stock Awards made under the Plan shall immediately lapse. A "Change in Control" shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: 7 (1) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates, other than in connection with the acquisition by the Company or its affiliates of a business) representing 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities; or (2) the following individuals cease for any reason to constitute at least two-thirds (2/3) of the number of directors then serving: individuals who, on August 4, 1998, constituted the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company (as such terms are used in Rule 14A-11 of Regulation 14A under the Exchange Act)) whose appointment or election by the Board or nomination of election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on August 4, 1998, or whose appointment, election or nomination for election was previously approved; or (3) the execution of an agreement in which the Company agrees to merge or consolidate with any other entity, other than (i) a merger or consolidation which would result in (A) the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, greater than 50% of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, (B) such of Richard C. Green, Jr. and Robert K. Green continuing as members of the board of directors of the surviving entity or ultimate parent thereof as were members of the Board of the Company immediately prior to such transaction, and (C) individuals described in paragraph (2) above constitute more than one-half of the members of the board of directors of the surviving entity or ultimate parent thereof, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its affiliates, other than in connection with the acquisition by the Company or its affiliates of a business) representing 20% or more of either the then outstanding shares of common 8 stock of the Company or the combined voting power of the Company's then outstanding securities; or (4) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, greater than 50% of the combined voting power of the voting securities of which is owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale. Notwithstanding the foregoing, no "Change in Control" shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions. For purposes of this Section 10, the following definitions shall apply: (a) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. (b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (c) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act), (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company. The Committee may amend any existing Option or Restricted Stock Award to reflect this provision, provided, however, that should the Company determine that shareholder or regulatory approval of this provision is required and such shareholder or regulatory approval is not obtained by December 31, 1999, any such amendment shall be null and void. 11. WRITINGS EVIDENCING AWARDS Each Award granted under the Plan shall be evidenced by a writing which may, but need not be, in the form of an agreement to be signed by the Grantee. The writing shall set forth the nature and size of the Award, its Term, the other terms and conditions thereof, and such other matters as the Committee directs. Acceptance of any benefits of an Award by the Grantee shall 9 be an assent to the terms and conditions set forth therein, whether or not the writing is in the form of an agreement signed by the Grantee. 12. EXERCISE OF RIGHTS UNDER AWARDS 12.1 A person entitled to exercise an Option may do so only by delivery of a written notice to that effect specifying the number of Shares with respect to which the Option is being exercised and any other information which the Committee has previously prescribed and of which such person has been notified. 12.2 Such a notice shall be accompanied by payment in full of the purchase price of any Shares to be purchased thereunder, with such payment being made in cash or Shares having a Fair Market Value on the date of exercise of the Option equal to the purchase price payable under the Option, or a combination of cash and Shares, and no Shares shall be issued upon exercise of an Option until full payment has been made therefor; provided that the Committee may disapprove any payment in part or full by the transfer of Shares to the Company. 12.3 Upon exercise of an Option or after grant of a Restricted Stock Award under which a Right of First Refusal has been required with respect to some or all of the Shares subject to such Option, or included in the Restricted Stock Award, the Grantee shall be required to acknowledge, in writing, his or her understanding of such Right of First Refusal and the legend which shall be placed on the certificates for such Shares in respect thereof. 12.4 All notices or requests by a Grantee provided for herein shall be delivered to the Secretary of the Company. 13. EFFECTIVE DATE OF THE PLAN AND DURATION The Plan shall be effective as of September 1, 1995, and no Awards may be granted under the Plan after September 1, 2005, although the terms of any Award may be amended at any time prior to the expiration of the Award in accordance with the Plan. 14. DATE OF AWARD The date of an Award shall be the date on which the Committee's determination to grant the same is final, or such latter date as shall be specified by the Committee in connection with such determination. 15. STOCKHOLDER STATUS No person shall have any rights as a stockholder by virtue of the grant of an Award under the Plan except with respect to Shares actually issued to that person. 16. POSTPONEMENT OF EXERCISE The Committee may postpone any exercise of an Option or the delivery of any Shares pursuant to a Restricted Stock Award for such period as the Committee in its discretion may 10 deem necessary in order to permit the Company (i) to effect or maintain registration of the Plan or the Shares issuable upon the exercise of an Option or distributable in satisfaction of a Restricted Stock Award under the Securities Act of 1933, as amended, or the securities laws of any applicable jurisdiction, (ii) to permit any action to be taken in order to comply with restrictions or regulations incident to the maintenance of a public market for its Shares or to list the Shares thereon; or (iii) to determine that such Shares and the Plan are exempt from such registration or that no action of the kind referred to in (ii) above need be taken; and the Company shall not be obligated by virtue of any terms and conditions of any Award or any provision of the Plan to permit the exercise of an Option to sell or deliver Shares in violation of the Securities Act of 1933 or other applicable law. Any such postponement shall not extend the Term of an Option nor shorten the Term of a restriction applicable under any Restricted Stock Award; and neither the Company nor its directors or officers or any of them shall have any obligation or liability to the Grantee of an Award, to any Successor of a Grantee or to any other person with respect to any Shares as to which an Option shall lapse because of such postponement or as to which issuance under a Restricted Stock Award was thereby delayed. 17. TERMINATION, SUSPENSION OR MODIFICATION OF PLAN The Board may at any time terminate, suspend or modify the Plan, except that the Board shall not, without authorization of the stockholders of the Company, effect any change (other than through adjustment for changes in capitalization as herein provided) which increases the aggregate number of Shares for which Awards may be granted or sold, materially amends the formula for determining the purchase price of Shares on which Options may be granted, changes the class of employees eligible to receive Awards, extends the period during which Awards may be granted or removes the restrictions set forth in this sentence. No termination, suspension or modification of the Plan shall adversely affect any right acquired by any Grantee or any Successor under an Award granted before the date of such termination, suspension or modification unless such Grantee or Successor shall consent thereto. Adjustments for changes in capitalization or corporate transactions as provided for herein shall not, however, be deemed to adversely affect such right. 18. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION AND CORPORATE TRANSACTIONS Any change in the number of outstanding shares of the Company occurring through stock splits, combination of shares, recapitalization, or stock dividends after the adoption of the Plan shall be appropriately reflected in an increase or decrease in the aggregate number of Shares then available for the grant of Awards under the Plan, or to become available through the termination, surrender or lapse of Awards previously granted and in the numbers of Shares subject to Restricted Stock Awards then outstanding; and appropriate adjustments shall be made in the per Share option price and/or number of Shares subject to the Option as to any outstanding Options. No fractional Shares shall result from such adjustments. Similar adjustments shall be made in the event of distribution of other securities in respect of outstanding Shares or in the event of a 11 reorganization, merger, consolidation or any other change in the corporate structure or Shares of the Company, if and to the extent that the Committee deems such adjustments appropriate. 19. DELIVERY OF SHARES IN LIEU OF CASH INCENTIVE AWARDS OR DIRECTOR'S FEES (a) Any employee otherwise eligible for an Award under the Plan who is eligible to receive a cash bonus or incentive payment from the Company under any management bonus or incentive plan of the Company or entitled to receive a cash payment for services rendered as a Director, may make application to the Committee in such manner as may be prescribed from time to time by the Committee to receive Shares available under the Plan in lieu of all or any portion of such cash payment. Such an application may be made by, and approved with respect to, a member of the Committee. (b) The Committee may in its discretion honor such application by delivering Shares available under the Plan to such employee, equal in Fair Market Value on the delivery date to that portion of the cash payment otherwise payable to the employee under such bonus or incentive plan, or for services rendered as a Director, for which a Share delivery is to be made in lieu of cash payment. (c) Any Shares delivered to an employee under this Section shall reduce the aggregate number of Shares authorized for issuance and delivery under the Plan. (d) Such applications and such delivery of Shares shall not be permitted after the expiration of ten years from the effective date of the Plan. Delivery of such Shares shall be deemed to occur on the date certificates therefor are sent by United States mail or hand-delivered to the recipient. 20. NON-UNIFORM DETERMINATION PERMISSIBLE The Committee's determination under the Plan including, without limitation, determinations as to the persons to receive Awards, the form, amount and type of Awards (i.e., ISOs, NQSOs or Restricted Stock Awards), the terms and provisions of Awards, the written instruments evidencing such Awards, and the granting or rejecting of applications for delivery of Shares in lieu of cash bonus or incentive payments or compensation of a Director need not be uniform as among persons similarly situated and may be made selectively among otherwise eligible employees or Directors, whether or not such employees or Directors are similarly situated. 21. TAXES (a) The Company shall be entitled to withhold the amount of any withholding tax payable with respect to any Awards or Shares delivered in lieu of cash payments. The person entitled to receive Shares pursuant to the Award will be given notice as far in advance as practicable to permit such cash payment to be made to the Company. The Company may defer 12 making delivery of Shares until indemnified to its satisfaction with respect to any such withholding tax. (b) Notwithstanding the foregoing, at any time when a Grantee is required to pay to the Company an amount required to be withheld under applicable income tax laws, the Grantee may satisfy this obligation in whole or in part by electing (the "Election") to have the Company withhold Shares having a value equal to the amount required to be withheld. The value of the Shares to be withheld shall be based on the closing price of the Shares on the New York Stock Exchange on the date that the amount of tax to be withheld shall be determined ("Tax Date"). Each Election must be made on or prior to the Tax Date. The Committee may disapprove any Election or may suspend or terminate the right to make Elections. An Election is irrevocable. 22. TENURE An employee's right, if any, to continue in the employ of the Company or a Subsidiary shall not be affected by the fact that he is a participant under this Plan; and the Company or Subsidiary shall retain the right to terminate his employment without regard to the effect such termination may have on any rights he may have under the Plan. 13 23. APPLICATION OF PROCEEDS The proceeds received by the Company from sale of its Shares pursuant to Options granted under the Plan shall be used for general corporate purposes. 24. OTHER ACTIONS Nothing in the Plan shall be construed to limit the authority of the Company to exercise all of its corporate rights and powers, including, by way of illustration and not by way of limitation, the right to grant Options for proper corporate purposes otherwise than under the Plan to any employee or any other person, firm, corporation, association or other entity, or to grant Options to, or assume Options of, any person in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of all or any part of the business or assets of any person, firm, corporation, association or other entity. 14 EX-10.(A)(3) 7 EXHIBIT 10(A)(3) Exhibit 10(a)(3) AMENDED AND RESTATED (August 4, 1998) UTILICORP UNITED INC. ANNUAL AND LONG-TERM INCENTIVE PLAN INTRODUCTION: The following sets forth the Annual and Long-Term Incentive Plan for UtiliCorp United Inc. which amends and restates the Annual Incentive Plan effective January 1, 1986 and expands it to include the Long-Term Incentive Plan, effective as of January 1, 1994. This Plan has been further amended effective February 3, 1998, and August 4, 1998. (A) PLAN PURPOSES The key purposes of the Plan are as set forth below. 1. To encourage and reward both annual and long-term sustained performance above the level of performance that would be expected at a fully competent level, thereby enabling the Company to continue to provide outstanding service to its ratepayers and other customers while enhancing the value of the Company for its stockholders. 2. Further, to provide competitive levels of cash compensation for key employees to assure the Company of the necessary talent for future success, and to directly link a significant portion of such compensation to those performance results most directly impacted by such key employees. 3. Further, to permit the payment of a significant portion of the Plan awards on a deferred basis with appropriate vesting requirements to assist the Company in retaining the services of key employees and, by using Restricted Stock for such deferral, to enhance the ownership interest of key employees for the benefit of Company stockholders. (B) DEFINITIONS 1. "Annual Award" shall mean the payment received annually by a Plan Participant whether paid in cash or shares of Restricted Stock as described in Section (F) below. 2. "Award" shall mean the payment of an Annual Award or Long-Term Award. 3. "Board" shall mean the Board of Directors of the Company. 4. "Committee" shall mean the Compensation Committee of the Board. 5. "Company" shall mean UtiliCorp United Inc., and its divisions, subsidiaries and affiliated organizations approved for participation. 6. "Designated Beneficiary" shall mean the person, or persons as elected by the Participant (or designated by the Company in the absence of such election) to receive any payments, whether in cash or shares of Restricted Stock due from the Plan in the event of a Participant's death. 7. "Discretionary Annual Award" shall have the meaning described in Section (F), below. 8. "Discretionary Annual Award Pools" shall have the meaning set out in Section (F), below. 9. "Long-Term Award" shall mean the payment received hereunder, either in cash and/or shares of Restricted Stock following completion of a Long-Term Award Cycle. 10. "Long-Term Award Cycle" shall mean a period of three or more consecutive calendar years during which cumulative Performance Awards are set. 11. "Effective Date" shall mean January 1, 1994. 12. "Participant" or "Plan Participant" shall mean a key managerial, professional or technical employee approved for Plan membership by the Board (or the Committee) with respect to any Plan Year. 13. "Performance Goals" shall have the meaning set forth in Paragraphs (F) and (H) below. 14. "Plan" shall mean the UtiliCorp United Inc. Annual and Long-Term Incentive Plan as described herein or amended hereafter. 15. "Plan Year" shall mean January 1 through December 31, the calendar year, which corresponds with the Company's fiscal year. 16. "Restricted Stock" shall mean shares of the Company's common stock awarded to Participants under the UtiliCorp United Inc. 1986 Stock Incentive Plan or any successor plan providing for the grant of Restricted Stock. (C) PLAN ADMINISTRATION 1. The Company shall be responsible for the general administration of the Plan. 2. The Board or, at the Board's direction, the Committee shall be responsible for monitoring the ongoing use of the Plan and shall: (a) review Company recommendations with respect to all necessary actions; (b) review Company recommendations for any amendments to the Plan; and (c) approve all Annual Awards and Long-Term Awards under the Plan and monitor the use of Discretionary Annual Award Pools. (D) BOARD (OR COMMITTEE) POWERS 1. The Board, acting upon the advice and counsel of the Committee, or the Committee itself if so empowered by the Board, shall have the following powers with respect to the Plan. (a) Annual approval of: Participants; opportunity levels; the basis of Awards; and the method of payment for such Awards including the use and content of written agreements for Restricted Stock Awards. (b) The right to review, amend, and authorize any Performance Goals or other factors used to determine Annual Awards, Long-Term Awards and the Discretionary Annual Award Pools for any division or unit of the Company as described in Section (F) below. (c) The right to retroactively adjust any aspect of the Plan for an already completed or ongoing Plan Year if in the Board's (or Committee's) judgment significant events outside of the control of Plan Participants have occurred which require such adjustment if the Plan is to effectively serve its purposes. (d) The right to receive an annual summary of all Awards paid for each Plan Year and pertinent information with respect to all Restricted Stock Awards, plus such other information as it may reasonably request. (e) The right to amend or discontinue the Plan at any time if such action is deemed to be in the best interests of the Company, its ratepayers and its stockholders. In such event an appropriate and equitable resolution of Awards in the process of being earned during a Plan Year shall be made. (E) PLAN PARTICIPATION 1. Each Plan Year all full-time employees shall be eligible to participate in the Plan with respect to the receipt of Discretionary Annual Awards pursuant to Section (F) below. 2. With respect to Annual Awards and Long-Term Awards pursuant to Section (F) below, participation shall be limited to those managerial, professional, or technical employees who are key employees approved for participation by the Committee. 3. To the extent separate incentive arrangements are established for various divisions or units of the Company, participation may include the eligibility for an Annual Award or Long-Term Award from one or more of such separate arrangements as the Board (or Committee) may determine. 4. Participation for an Annual Award or Long-Term Award in one Plan Year does not automatically qualify an employee for participation in subsequent years nor does participation in a separate incentive arrangement for one division or unit automatically qualify an employee for participation in any other such arrangements. 5. Subject to special action by the Board (or Committee) pursuant to subsection (6) below, participation for otherwise eligible employees whose status changes during a Plan Year shall be determined by the Chief Executive Officer of the Company, in accordance with the following. (a) VOLUNTARY TERMINATION OF EMPLOYMENT, OR TERMINATION AT THE REQUEST OF THE COMPANY. In such event a Participant shall forfeit all rights to any Award from the Plan for the Plan Year in which such termination occurs. (b) DEATH, RETIREMENT, OR TOTAL DISABILITY. In such event a Participant (or his or her estate) shall be entitled to a pro-rata Award, if any, for the Plan Year in which such event occurs. (i) Such Awards shall be determined when all other Awards are determined for the applicable Plan Year. (ii) "Pro-rata" shall mean the Award for the entire Plan Year multiplied by a fraction the numerator of which is the Participant's days of full-time active employment (counting any days on short-term disability or salary continuation) during the Plan Year and denominator of which is 365. (iii) "Total Disability" shall mean the date of commencement of payments under the Company's long-term disability plan applicable to the Participant. (iv) "Retirement" shall mean the cessation of active employment and the effective date of normal, later, or early Retirement under the Company's retirement or pension plan applicable to the Participant but not a termination of employment with vested rights under any such plan. (c) HIRE OR PROMOTION DURING A PLAN YEAR. Provided such event occurs within the first nine months of any Plan Year participation may be authorized for a pro-rata Annual Award or Long-Term Award subject to Board (or Committee) approval with respect to the opportunity levels and Performance Goals. Actions taken by the Chief Executive Officer of the Company in accordance with the above do not require Board (or Committee) approval. 6. Based upon the recommendation of the Company the Board (or Committee) may authorize actions other than those set forth in subsection (5) above to address unusual circumstances. 7. Regardless of any other provision of the Plan a Participant whose personal, individual, performance for any Plan Year is determined to be unsatisfactory shall forfeit all rights to an Award for such Plan Year. This determination shall be made by the Chief Executive Officer of the Company with respect to employees not assigned to a specific unit or division and by the chief executive officer of the Participant's division or unit in all other cases, subject to the approval of the Chief Executive Officer of the Company. (F) TYPES OF AWARDS 1. There are three types of Awards payable under the Plan: a Annual Award, a Long- Term Award and a Discretionary Annual Award. 2. Annual Awards and Long-Term Awards are available only to key employees specifically approved as eligible for such Awards and payment with respect thereto shall be based on the achievement of specific Performance Goals established for each Participant. (a) Performance Goals may be set for the Company as a whole, for each division or unit, or for individual performance criteria. (b) Such Performance Goals can be established on the basis of specific numeric standards (e.g. return on net assets) or as one or more objectives or results for which performance achievements shall be determined on a discretionary, subjective basis by an appropriate individual, subject to Section (H), below. (c) For any Plan Year the Annual Award or Long-Term Award for any Participant shall have a set maximum amount, expressed as a percentage of annual salary and/or a dollar amount, as approved by the Board (or Committee); and set Award amounts may also be established at other performance levels such as threshold and par with or without provision for pro-ration. (d) Specific Board (or Committee) approval is required annually for the payment of Awards. (e) As approved by the Board (or Committee) for any Plan Year the Annual Award or Long-Term Award payable MAY be subject to either or both of the criteria set forth below. (i) A "STOCKHOLDER (OR CORPORATE) PROTECTION TRIGGER" which establishes a minimum level of performance, or other action (e.g. the distribution of a level of dividends), which must be achieved before any Awards are payable for a Plan Year. (ii) A "RATEPAYER PROTECTION FEATURE" which establishes a schedule of absolute or relative performance relating to the quality or cost of service provided by the Company (or division or unit) against which actual results will be compared for the Plan Year with the resulting comparison used to modify, or eliminate, Total Awards otherwise payable for such Plan Year. (f) Each Participant approved for an Award shall receive a written description of his or her opportunity and applicable Performance Goals. 3. "Discretionary Awards" are available to any full-time employee of the Company except the Chief Executive Officer of the Company. (a) Such Discretionary Awards shall be payable from a Discretionary Award Pool established annually for each division or unit and the sum of such Awards for the employees in any unit or division for any Plan Year cannot exceed the pool approved by the Board (or Committee) for such division or unit. The pool established for employees not assigned to a division or unit shall be used for any Discretionary Award payable to the respective chief executive officers of the Company's participating divisions or units. The minimum Discretionary Award, if any, is $500 and the maximum Discretionary Award is ten percent of the employee's then existing annual base salary rate. (b) Discretionary Awards shall be determined subjectively by the chief executive officer or each division or unit, subject to the approval of the Chief Executive Officer of the Company and shall be used to recognize outstanding individual performance, the accomplishment of a specific task in an exemplary manner, or for individuals who made an inordinately significant contribution to overall divisional, unit or Company-wide results. (c) The total Discretionary Award Pool authorized for any division or unit need not be spent for any Plan Year. Unallocated Pool funds are not carried forward for subsequent Plan Years. (G) PAYMENT OF AWARDS 1. Discretionary Awards shall be payable in cash. 2. Annual Awards and Long-Term Awards shall be payable in cash, Restricted Stock, or any combination thereof as approved by the Board (or Committee) for any individual Participant in any Plan Year; provided that payment in the form of Restricted Stock shall be approved by the Committee. (H) COMPLIANCE WITH SECTION 162(M) REQUIREMENTS. Subject to the discretion of the Board (or the Committee) to determine that it would be in the best interests of the shareholders to do otherwise, the Plan shall at all times be administered to ensure that any Award under the Plan to the Company's Chief Executive Officer and the four highest compensated officers (determined pursuant to the executive compensation disclosure rules under the Securities Exchange Act of 1934) (each a "Covered Employee") will be tax deductible. In furtherance of this goal, with respect to Awards payable under the Plan for Covered Employees, the Performance Goals established by the Committee may vary from one Covered Employee to another, and will be limited to certain business criteria measured by one or more of the following: revenues, units sold, operating income, operating company contribution, cash flow, income before taxes, net income, earnings available per share, return on equity, return on assets, Economic Value Added (EVA) or total return to stockholders, whether applicable to the Company or any relevant subsidiary or business unit, or combination thereof, as the Committee may deem appropriate, or any of the above goals as compared to the performance of a published or special index deemed appropriate by the Committee, including, but not limited to, the Standard & Poor's 500 Stock Index or a group of comparator companies. The criteria selected by the Committee shall include a minimum performance standard below which no payments will be made and a maximum performance level above which no increased payment will be made. Notwithstanding the foregoing, in no event may any Performance Goals be established which would permit a Covered Employee to receive a single Annual Award or a Long-Term Award of more than 400% of such Covered Employee's base annual compensation as of January 1 for the year in which an Award is paid. No payment of any Award may be made to any Covered Employee unless the material terms of the Performance Goal under which the compensation is to be paid have been approved by shareholders of the Company and the Committee has certified in writing that the Performance Goals and any other material terms of the Award were in fact satisfied. (I) MISCELLANEOUS AND ADMINISTRATIVE PROVISIONS 1. All Participants shall be entitled to receive a copy of the Plan and any amendments made subsequent to its Effective Date. 2. The Plan shall be binding upon and inure to the benefit of the Participants (and their personal representatives), the Company and any successor organization or organizations which shall succeed to substantially all of the business and property of the Company, whether by means of merger, consolidation, acquisition of substantially all of the assets of the Company or otherwise, including by operation of law. 3. All amounts used for Plan purposes shall be rounded to the nearest whole dollar. 4. Awards whether in cash or Restricted Stock shall not be subject to assignment, pledge, lien, or encumbrances of any kind. 5. Participation in the Plan does not guarantee employment by the Company. 6. Awards shall not be used for any purposes for any employee benefit plan of the Company. 7. The Plan shall be interpreted under the laws of the State of Missouri. EX-10.(A)(4) 8 EXHIBIT 10(A)(4) Exhibit 10(a)(4) 1990 NON-EMPLOYEE DIRECTOR STOCK PLAN 1. PURPOSE AND EFFECTIVE DATE The purpose of this Plan is to aid the Company in attracting and retaining Non-Employee Directors by encouraging and enabling the acquisition of a financial interest in the Company by Non-Employee Directors through the issuance of Shares with respect to his or her services as a Director of the Company. This Plan shall become effective upon its approval by the stockholders of the Company, but issuance of Shares shall not be made until following the receipt of required regulatory approvals. 2. DEFINITIONS As used in this Plan: 2.1 The term "Board" means the Board of Directors of the Company. 2.2 The term "Company" means UtiliCorp United Inc., a Delaware Corporation. 2.3 The term "Fair Market Value Per Share" means (a) the average of the highest and lowest sale prices per Share as reported on the New York Stock Exchange on the date as of which such determination is to be made, or (b) in the absence of reported sales on that date, the average of such reported highest and lowest sale prices per Share on the next preceding date on which reported sales occurred. 2.4 The term "Non-Employee Director" means any person who is elected or appointed to the Board and who is not, as of the date eligibility for this Plan is determined, an employee of the Company or any of its subsidiaries. 2.5 The term "Payment Date" means March 31, June 30, September 30 and December 31 of each Year. 2.6 The term "Plan" means this 1990 Non-Employee Director Stock Plan, as it may be amended from time to time. 2.7 The term "Quarter" means the three (3) month period preceding a Payment Date. 2.8 The term "Share" means a share of common stock, $1.00 par value, of the Company. 2.9 The term "Year" means the calendar year. 3. ELIGIBILITY Participation in this Plan is limited to Non-Employee Directors. 4. SHARE PAYMENT 4.1 On each Payment Date, the Company shall issue to each Non-Employee Director that number of Shares equal to $2,500 divided by the Fair Market Value Per Share on the Payment Date for services performed as a Non-Employee Director during the preceding Quarter (the "Share Payment"). Any fractional share shall be paid to the Non-Employee Director in cash. 4.2 With respect to the Year in which this Plan is approved by stockholders of the Company, or in the event a person is elected or otherwise become a Non-Employee Director at any time other than the first day of a Quarter, such person shall commence participation in this Plan as of the first day of the quarter next following the date of such stockholder approval or becoming a Non-Employee Director, as the case may be. 4.3 As soon as practicable after a Payment Date, the Company shall cause to be issued and delivered to each Non-Employee Director a stock certificate, registered in the name of such Non-Employee Director, evidencing the Share Payment pursuant to this Plan and shall deliver to such Non-Employee Director the cash representing any fractional Share. 4.4 Non-Employee Directors shall not be deemed for any purpose to be, or have any rights as, shareholders of the Company with respect to any Shares awarded under this Plan except if, as and when Shares are issued and then only from the date of the certificates therefor. No adjustment shall be made for dividends or distributions or other rights for which the record date is prior to the date of such stock certificate. 5. SHARES SUBJECT TO THE PLAN Subject to adjustment as provided below, an aggregate of 100,000 Shares shall be available for issuance under the Plan. The Shares to be issued under the Plan may be made available from authorized but unissued Shares or Shares held in the treasury. Any change in the number of outstanding Shares of the Company occurring through stock splits, combination of Shares, recapitalization or stock dividends after the adoption of Plan shall be appropriately reflected in an increase or decrease in the aggregate number of Shares available for issuance under the Plan. 6. AMENDMENT AND DISCONTINUANCE 6.1 The Board may, without further action by the stockholders, amend this Plan or condition or modify Shares issued under this Plan (a) to conform this Plan to securities or other laws, or rules, regulations or regulatory interpretations thereof, applicable to this Plan, or (b) to comply with stock exchange rules or requirements. 6.2 The Board may from time to time amend this Plan, or any provision thereof, without further action of the Company's stockholders, except that: (a) No amendment may affect a Non-Employee Director's rights under any Shares issued under this Plan made prior to such amendment without such Non-Employee Director's consent. (b) No amendment may change the manner of calculating a Share Payment on the number of Shares available for issuance under the Plan. (c) This Section 6.2 may not be amended. 6.3 The Board may suspend or discontinue this Plan in whole or in part, but any such suspension or discontinuance shall not affect Share Payments under this Plan prior thereto. 7. COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS No Share Payments shall be made unless such Share Payments comply with all applicable legal requirements including without limitation, compliance with the provisions of the Securities Act of 1933, as amended, the requirements of the exchanges on which Shares may, at the time, be listed, and any requirements of other governmental or regulatory authorities. 8. DEFERRAL ELECTION 8.1 Notwithstanding section 4 or any other provision in this Plan to the contrary, each Non-Employee Director shall have the right to elect to defer the entire amount of the Share Payments otherwise payable to him pursuant to section 4 ("Deferral Election"). Any Deferral Election under this section shall be irrevocable and must be made in writing on or before December 31 of the year prior to the year in which such Share Payments are to be earned. Unless revoked prior to the first day of any subsequent calendar year, a Non-Employee Director's Deferral Election shall continue in effect with respect to all Share Payments payable to such Director in accordance with this Plan. 8.2 As of each Payment Date, a number equal to the Non-Employee Director's Share Payment that is subject to a Deferral Election shall be credited to an unfunded "Stock Account" maintained on his or her behalf. Any fractional shares that would otherwise be payable to a Non-Employee Director pursuant to section 4 shall be ignored. 8.3 A separate, unfunded "Cash Account" shall be established on behalf of each Non-Employee Director who has made a Deferral Election. Such Cash Account shall be credited from time to time with an amount equal to any dividends that would have been paid by the Company to the Non-Employee Director with respect to the shares credited to his or her Stock Account. No interest shall accrue on the amounts credited to a Non-Employee Director's Cash Account. 8.4 The Stock Account of each Non-Employee Director shall be paid to the Non-Employee Director in whole shares of stock as soon as reasonably practicable following the earlier of: (i) the date such Non-Employee Director retires or otherwise ceases to be a Director of the Company; or (ii) any future date specified by the Non-Employee Director on his or her deferral election form. The Cash Account of each Non-Employee Director shall be paid in cash at the same time the Non-Employee Director's Stock Account is paid, or if such Non-Employee Director elects on his or her deferral election form, as soon as reasonably practicable following the last day of each calendar year. 8.5 A Non-Employee Director may designate, at any time and from time to time, a beneficiary to receive his or her Stock Account and Cash Account in the event of his or her death. Any such beneficiary designation must be signed in writing and received by the Company prior to the Non-Employee Director's death. 8.6 The deferral of any Share Payments by a Non-Employee Director pursuant to the provisions of this section 8, shall confer no rights upon such Director, as a shareholder of the Company or otherwise, with respect to the shares credited to his or her Stock Account. The amount credited to a Non-Employee Director's Stock Account and Cash Account shall at all times remain an unfunded and unsecured obligation of the Company. EX-10.(A)(11) 9 EXHIBIT 10(A)(11) Exhibit 10(a)(11) UTILICORP UNITED INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998
TABLE OF CONTENTS PAGE ARTICLE I - DEFINITIONS......................................................1 1.01 BOARD................................................................1 1.02 CHANGE IN CONTROL....................................................1 1.03 CLAIMANT.............................................................3 1.04 CODE.................................................................3 1.05 COMMITTEE............................................................3 1.06 COMPANY..............................................................3 1.07 EMPLOYER(S)..........................................................3 1.08 PARTICIPANT..........................................................3 1.09 PLAN.................................................................3 1.10 SERP BENEFIT.........................................................3 ARTICLE II - ELIGIBILITY.....................................................3 2.01 SELECTION BY COMMITTEE...............................................3 ARTICLE III - VESTING........................................................4 3.01 VESTING IN BENEFITS..................................................4 3.02 CHANGE IN CONTROL....................................................4 ARTICLE IV - BENEFITS........................................................4 4.01 BENEFITS.............................................................4 4.02 PAYMENT OF BENEFITS..................................................4 4.03 COMMITTEE DISCRETION.................................................4 4.04 WITHHOLDING AND PAYROLL TAXES........................................5 4.05 BENEFITS ON DEATH....................................................5 ARTICLE V - TERMINATION AND AMENDMENT........................................5 5.01 TERMINATION..........................................................5 5.02 AMENDMENT............................................................6 ARTICLE VI - OTHER BENEFITS AND AGREEMENTS...................................6 6.01 COORDINATION WITH OTHER BENEFITS.....................................6 6.02 REDUCTION IN SERP BENEFITS...........................................6 - i - ARTICLE VII - ADMINISTRATION OF THE PLAN.....................................7 7.01 COMMITTEE DUTIES.....................................................7 7.02 AGENTS...............................................................7 7.03 BINDING EFFECT OF DECISIONS..........................................7 7.04 INDEMNITY OF COMMITTEE...............................................7 7.05 EMPLOYER INFORMATION.................................................7 ARTICLE VIII - CLAIMS PROCEDURES.............................................7 8.01 PRESENTATION OF CLAIM................................................7 8.02 NOTIFICATION OF DECISION.............................................8 8.03 REVIEW OF A DENIED CLAIM.............................................8 8.04 DECISION ON REVIEW...................................................8 8.05 LEGAL ACTION.........................................................9 ARTICLE IX - MISCELLANEOUS...................................................9 9.01 UNSECURED GENERAL CREDITOR...........................................9 9.02 EMPLOYER'S LIABILITY.................................................9 9.03 NONASSIGNABILITY.....................................................9 9.04 NOT A CONTRACT OF EMPLOYMENT.........................................9 9.05 FURNISHING INFORMATION...............................................9 9.06 TERMS...............................................................10 9.07 CAPTIONS............................................................10 9.08 GOVERNING LAW.......................................................10 9.09 VALIDITY............................................................10 9.10 NOTICE..............................................................10 9.11 SUCCESSORS..........................................................10 9.12 SPOUSE'S INTEREST...................................................10 9.13 INCOMPETENT.........................................................11 9.14 COURT ORDER.........................................................11 9.15 DISTRIBUTION IN THE EVENT OF TAXATION...............................11
ii UTILICORP UNITED INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998 PURPOSE The purpose of this Plan (formerly known as the "UtiliCorp United Inc. Excess Benefit Plan") is to provide specified benefits to a select group of management and highly compensated employees of UtiliCorp United Inc., a Delaware corporation, and its subsidiaries, if any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. ARTICLE I - DEFINITIONS Except as specifically provided herein, all capitalized terms used in this Plan shall have the definitions assigned to them under the UtiliCorp United Inc. Restated Retirement Income Plan (the "Retirement Income Plan"), as amended from time to time. 1.01 "Board" shall mean the board of directors of the Company. 1.02 "Change in Control" shall mean the first to occur of any of the following events: (1) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates, other than in connection with the acquisition by the Company or its affiliates of a business) representing 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities; or (2) the following individuals cease for any reason to constitute at least two-thirds (2/3) of the number of directors then serving: individuals who, on August 4, 1998, constituted the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company (as such terms are used in Rule 14A-11 of Regulation 14A under the Exchange Act)) whose appointment or election by the Board or nomination of election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on August 4, 1998, or whose appointment, election or nomination for election was previously approved; or -1- (3) the consummation of a merger or consolidation of the Company with any other entity, other than (i) a merger or consolidation which would result in (A) the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, greater than 50% of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, (B) such of Richard C. Green, Jr. and Robert K. Green continuing as members of the board of directors of the surviving entity or ultimate parent thereof as were members of the Board of the Company immediately prior to such transaction, and (C) individuals described in paragraph (2) above constitute more than one-half of the members of the board of directors of the surviving entity or ultimate parent thereof, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its affiliates, other than in connection with the acquisition by the Company or its affiliates of a business) representing 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities; or (4) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, greater than 50% of the combined voting power of the voting securities of which is owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale. Notwithstanding the foregoing, no "Change in Control" shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions. For purposes of this Section 1.02, the following definitions shall apply: -2- (a) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. (b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (c) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act), (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company. 1.03 "Claimant" shall have the meaning set forth in Section 8.1. 1.04 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 1.05 "Committee" shall mean the Committee described in Article 7. 1.06 "Company" shall mean UtiliCorp United Inc., a Delaware corporation. 1.07 "Employer(s)" shall mean the Company and any subsidiaries of the Company that have been selected by the Board to participate in the Plan. 1.08 "Participant" shall mean any employee who is a participant in the Retirement Income Plan and who is selected to participate in the Plan by the Committee. 1.09 "Plan" shall mean this restated Supplemental Executive Retirement Plan (formerly known as the "UtiliCorp United Inc. Excess Benefit Plan"). The Plan was originally adopted effective as of July 1, 1986, and was thereafter amended and restated in its entirety effective as of May 1, 1991. This restatement is effective as of January 1, 1998. 1.10 "SERP Benefit" shall mean the benefit payable to a Participant determined under Section 4.01. ARTICLE II - ELIGIBILITY 2.01 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to a select group of management and highly compensated employees of the Employers. From that group, the Committee shall select, in its sole discretion, employees to participate in the Plan. -3- ARTICLE III - VESTING 3.01 VESTING IN BENEFITS. Each Participant shall be 100% vested in his SERP Benefit upon the completion of five (5) years of service, or the termination of employment after attaining age 55. If a Participant terminates employment prior to completing five (5) years of service or prior to attaining age 55, he shall be 0% vested in his SERP Benefit. 3.02 CHANGE IN CONTROL3.02 CHANGE IN CONTROL. Notwithstanding Section 3.1 or any other provision in this Plan that could interpreted to the contrary, in the event of a Change in Control, a Participant's SERP Benefit shall immediately become 100% vested (if it is not already vested in accordance Section 3.01 above). ARTICLE IV - BENEFITS 4.01 BENEFITS. The benefit payable to a Participant under this Plan shall be equal to (A) minus (B), where: (A) = the benefit that would be payable to the Participant under the Retirement Income Plan, determined in accordance with the elections made by the Participant thereunder and in accordance with the applicable assumptions and actuarial adjustments set forth in that plan, if (i) the maximum benefit limit under Section 415(b)(1)(A) of the Code and the annual compensation limit under Section 401(a)(17) of the Code were not applicable, and (ii) for Plan Years beginning after December 31, 1997, Monthly Earnings included the Participant's annual base compensation deferred during a Plan Year under any nonqualified deferred compensation plan maintained by the Participant's Employer; and (B) = the benefit actually payable to or on behalf of such Participant under the Retirement Income Plan. 4.02 PAYMENT OF BENEFITS. Payments of vested SERP Benefits shall be made in the same manner and at the same time that benefits under the Retirement Income Plan are payable, determined in accordance with the elections made by the Participant and in accordance with the applicable assumptions and actuarial adjustments set forth in the Retirement Income Plan; provided that if a Participant elects to receive his benefits in a form of payment under the Retirement Income Plan which provides death benefits to a non-spouse beneficiary, the Participant's SERP Benefit shall be paid in monthly installments for the life of the Participant only and shall terminate upon his death. -4- 4.03 COMMITTEE DISCRETION. Upon the request of a Participant, the Committee, in its sole discretion and consistent with its established procedures and rules, may consider other forms of vested SERP Benefit payments, or the timing of vested SERP Benefit payments, as it deems necessary and prudent under the circumstances. 4.04 WITHHOLDING AND PAYROLL TAXES. The Employers, to the extent required by applicable law, shall withhold from any and all benefits made under this Article 4, all federal, state and local income, employment and other taxes required to be withheld by the Employer in connection with the benefits hereunder, in amounts to be determined in the sole discretion of the Employer. 4.05 BENEFITS ON DEATH. If a spousal death benefit is payable under the Retirement Income Plan with respect to a Participant, a spousal death benefit shall also be payable under this Plan. The spousal death benefit under this Plan shall be equal to (A) minus (B), where: (A) = the benefit that would be payable to the Participant's spouse under the Retirement Income Plan, determined in accordance with the elections made by the Participant or spouse thereunder and in accordance with the applicable assumptions and actuarial adjustments set forth in that plan, if (i) the maximum benefit limit under Section 415(b)(1)(A) of the Code and the annual compensation limit under Section 401(a)(17) of the Code were not applicable, and (ii) for Plan Years beginning after December 31, 1997, Monthly Earnings included the Participant's annual base compensation deferred during a Plan Year under any nonqualified deferred compensation plan maintained by the Participant's Employer; and (B) = the benefit actually payable to the Participant's spouse under the Retirement Income Plan. Any spousal death benefits payable under this Plan shall be paid in the same manner and at the same time that death benefits are paid to the Participant's spouse under the Retirement Income Plan. If a Participant has no surviving spouse, the benefits remaining under the Plan shall be forfeited. ARTICLE V - TERMINATION AND AMENDMENT 5.01 TERMINATION. Each Employer reserves the right to terminate the Plan at any time with respect to its participating employees by the actions of its board of directors. The termination of the Plan shall not adversely affect any Participant or his or her Beneficiary who has become entitled to the payment of any benefits under the Plan as of the date of termination, provided, however, that the Employer shall -5- have the right to accelerate payments by paying the Actuarial Value of such payments. For all other Participants, upon the termination of the Plan, all Plan Agreements shall terminate and the Actuarial Value of a Participant's vested SERP Benefit shall be paid out in a lump sum. 5.02 AMENDMENT. Any Employer may, at any time, amend or modify the Plan in whole or in part with respect to its participating employees by the actions of its board of directors; provided, however, that no amendment or modification shall be effective to decrease or restrict a Participant's then vested SERP Benefit, determined on an Actuarial Equivalent basis. The amendment or modification of the Plan shall not affect any Participant or his or her Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification; provided, however, that the Employer shall have the right to accelerate installment payments by paying the Actuarial Value of such payments in a lump sum or the Actuarial Equivalent in some other accelerated form of payment. ARTICLE VI - OTHER BENEFITS AND AGREEMENTS 6.01 COORDINATION WITH OTHER BENEFITS. Except as provided in Section 6.02 and except as otherwise expressly provided under any other plan or program for employees of the Employers, the benefits provided under this Plan to a Participant are in addition to the benefits available to such Participant under any other such plan or program. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as my otherwise be expressly provided. 6.02 REDUCTION IN SERP BENEFITS. Notwithstanding any provision in this Plan that may be interpreted to the contrary, the SERP Benefit payable to any Participant hereunder shall be reduced by the equivalent monthly lifetime benefit payable to such Participant under any other supplemental retirement agreement or plan with his Employer. If the benefit under such other retirement plan or agreement is payable in the form of a lump sum, such benefit shall be converted to a monthly lifetime benefit in accordance with the applicable Actuarial Value assumptions set forth in the Retirement Income Plan, for purposes of determining the benefit offset under this Section 6.02. -6- ARTICLE VII - ADMINISTRATION OF THE PLAN 7.01 COMMITTEE DUTIES. This Plan shall be administered by a Committee which shall consist of the Board, or such committee as the Board shall appoint. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Plan and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. 7.02 AGENTS. In the administration of this Plan, the Committee may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer. 7.03 BINDING EFFECT OF DECISIONS. The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 7.04 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless the members of the Committee against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee or any of its members. 7.05 EMPLOYER INFORMATION. To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of its Participants, the date and circumstances of the retirement, disability, death or termination of employment of its Participants, and such other pertinent information as the Committee may reasonably require. ARTICLE VIII - CLAIMS PROCEDURES 8.01 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant. the claim must be made within 60 days after such notice was received by the Claimant. The claim must state with particularity the determination desired by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. -7- 8.02 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim within 90 days (unless special circumstances require additional time), and shall notify the Claimant in writing: (i) that the Claimant's requested determination has been made, and that the claim has been allowed in full; or (ii) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination. and such notice must set forth in a manner calculated to be understood by the Claimant: (1) the specific reason(s) for the denial of the claim, or any part of it; (2) specific reference(s) to pertinent provisions of the Plan upon which such denial was based; (3) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and (4) an explanation of the claim review procedure set forth in Section 8.03) below. 8.03 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than 30 days after the review procedure began, the Claimant (or the Claimant's duly authorized representative): (i) may review pertinent documents; (ii) may submit written comments or other documents; and/or (iii) may request a hearing, which the Committee, in its sole discretion, may grant. 8.04 DECISION ON REVIEW. The Committee shall render its decision on review promptly, and not later than 60 days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee's decision must be rendered within 120 days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (i) specific reasons for the decision; -8- (ii) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and (iii) such other matters as the Committee deems relevant. 8.05 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of this Article 8 is a mandatory prerequisite to a Claimant's right to commence any legal action with respect to any claim for benefits under this Plan. ARTICLE IX - MISCELLANEOUS 9.01 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer. Any and all of an Employer's assets shall be, and remain, the general, unpledged, unrestricted assets of the Employer. An Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. 9.02 EMPLOYER'S LIABILITY. An Employer's liability for the payment of benefits shall be defined only by the Plan. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan. 9.03 NONASSIGNABILITY. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. 9.04 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an "at will" employment relationship that can be terminated at any time for any reason, with or without cause, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the night to be retained in the service of any Employer or to interfere with the right of any Employer to discipline or discharge the Participant at any time. 9.05 FURNISHING INFORMATION. A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including -9- but not limited to taking such physical examinations as the Committee may deem necessary. 9.06 TERMS. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply: and wherever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 9.07 CAPTIONS. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 9.08 GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of Missouri without regard to its conflict of laws principles. 9.09 VALIDITY. In case any provision of this Plan shall be illegal or invalid for any reason, said illegally or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein. 9.10 NOTICE. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: Phil Beyer Director of Benefits UtiliCorp United Inc. 20 West Ninth Street Kansas City, MO 64105-1711 Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant. 9.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the benefit of the Participant's Employer and its successors and assigns and the Participant and the Participant's Beneficiary. 9.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the -10- Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse's will, nor shall such interest pass under the laws of intestate succession. 9.13 INCOMPETENT. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetency, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount. 9.14 COURT ORDER. The Committee is authorized to make any payments directed by court order in any action in which the Plan or Committee has been named as a party. 9.15 DISTRIBUTION IN THE EVENT OF TAXATION. If, for any reason, all or any portion of a Participant's benefit under this Plan becomes taxable to the Participant prior to receipt, a Participant may petition the Committee for a distribution of that portion of his or her benefit that has become taxable. Upon the grant of such a petition, which grant shall not be unreasonably withheld, a Participant's Employer shall distribute to the Participant immediately available funds in an amount equal to the taxable portion of his or her benefit (which amount shall not exceed a Participant's unpaid vested benefit under the Plan). If the petition is granted, the tax liability distribution shall be made within 90 days of the date when the Participant's petition is granted. Such a distribution shall affect and reduce the benefits to be paid under this Plan. -11- EX-10.(A)(14) 10 EXHIBIT 10(A)(14) Exhibit 10(a)(14) UTILICORP UNITED INC. CAPITAL ACCUMULATION PLAN EFFECTIVE AS OF JANUARY 1, 1998
TABLE OF CONTENTS PURPOSE.......................................................................1 ARTICLE 1 DEFINITIONS.........................................................1 ARTICLE 2 SELECTION, ENROLLMENT, ELIGIBILITY..................................6 2.1 SELECTION BY COMMITTEE.................................................6 2.2 ENROLLMENT REQUIREMENTS................................................7 2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION.............................7 2.4 TERMINATION OF PARTICIPATION AND/OR DEFERRALS..........................7 ARTICLE 3 DEFERRAL COMMITMENTS/CREDITING/TAXES................................7 3.1 DEFERRALS..............................................................7 3.2 ELECTION TO DEFER; EFFECT OF ELECTION FORM.............................8 3.3 WITHHOLDING OF ANNUAL DEFERRAL AMOUNTS.................................8 3.3A DISCRETIONARY CONTRIBUTIONS..........................................8 3.4 INVESTMENT OF TRUST ASSETS.............................................9 3.5 VESTING................................................................9 3.6 CREDITING/DEBITING OF ACCOUNT BALANCES.................................9 3.7 FICA AND OTHER TAXES..................................................11 3.8 DISTRIBUTIONS.........................................................11 ARTICLE 4 SHORT-TERM PAYOUT; UNFORESEEABLE FINANCIAL EMERGENCIES; WITHDRAWAL ELECTION.............................................11 4.1 SHORT-TERM PAYOUT.....................................................11 4.2 ELECTION TO DEFER SHORT-TERM PAYOUT...................................12 4.3 OTHER BENEFITS TAKE PRECEDENCE OVER SHORT-TERM........................12 4.4 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES.12 4.5 WITHDRAWAL ELECTION...................................................12 ARTICLE 5 RETIREMENT BENEFIT.................................................12 5.1 RETIREMENT BENEFIT....................................................13 5.2 PAYMENT OF RETIREMENT BENEFIT.........................................13 5.3 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFIT.......................13 i ARTICLE 6 PRE-RETIREMENT SURVIVOR BENEFIT....................................13 6.1 PRE-RETIREMENT SURVIVOR BENEFIT.......................................13 6.2 PAYMENT OF PRE-RETIREMENT SURVIVOR BENEFIT............................13 ARTICLE 7 TERMINATION BENEFIT................................................14 7.1 TERMINATION BENEFIT...................................................14 7.2 PAYMENT OF TERMINATION BENEFIT........................................14 ARTICLE 8 DISABILITY VAIVER AND BENEFIT......................................14 8.1 DISABILITY WAIVER.....................................................14 8.2 CONTINUED ELIGIBILITY; DISABILITY BENEFIT.............................15 ARTICLE 9 BENEFICIARY DESIGNATION............................................15 9.1 BENEFICIARY...........................................................15 9.2 BENEFICIARY DESIGNATION; CHANGE.......................................15 9.3 ACKNOWLEDGMENT........................................................15 9.4 NO BENEFICIARY DESIGNATION............................................15 9.5 DOUBT AS TO BENEFICIARY...............................................16 9.6 DISCHARGE OF OBLIGATIONS..............................................16 ARTICLE 10 LEAVE OF ABSENCE..................................................17 10.1 PAID LEAVE OF ABSENCE................................................17 10.2 UNPAID LEAVE OF ABSENCE..............................................17 ARTICLE 11 TERMINATION, AMENDMENT OR MODIFICATION............................17 11.1 TERMINATION..........................................................17 11.2 AMENDMENT............................................................18 11.3 PLAN AGREEMENT.......................................................18 11.4 EFFECT OF PAYMENT....................................................18 ARTICLE 12 ADMINISTRATION....................................................18 12.1 COMMITTEE DUTIES.....................................................18 12.2 AGENTS...............................................................19 12.3 BINDING EFFECT OF DECISIONS..........................................19 12.4 INDEMNITY OF COMMITTEE...............................................19 12.5 EMPLOYER INFORMATION.................................................19 ii ARTICLE 13 OTHER BENEFITS AND AGREEMENTS.....................................19 13.1 COORDINATION WITH OTHER BENEFITS.....................................19 ARTICLE 14 CLAIMS PROCEDURES.................................................19 14.1 PRESENTATION OF CLAIM................................................19 14.2 NOTIFICATION OF DECISION.............................................20 14.3 REVIEW OF A DENIED CLAIM.............................................20 14.4 DECISION ON REVIEW...................................................20 14.5 LEGAL ACTION.........................................................21 ARTICLE 15 TRUST.............................................................21 15.1 ESTABLISHMENT OF THE TRUST...........................................21 15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST..........................21 15.3 DISTRIBUTIONS FROM THE TRUST.........................................21 ARTICLE 16 MISCELLANEOUS.....................................................21 16.1 STATUS OF PLAN.......................................................21 16.2 UNSECURED GENERAL CREDITOR...........................................21 16.3 EMPLOYER'S LIABILITY.................................................22 16.4 NONASSIGNABILITY.....................................................22 16.5 NOT A CONTRACT OF EMPLOYMENT.........................................22 16.6 FURNISHING INFORMATION...............................................22 16.7 TERMS................................................................22 16.8 CAPTIONS.............................................................22 16.9 GOVERNING LAW........................................................22 16.10 NOTICE..............................................................23 16.11 SUCCESSORS..........................................................23 16.12 SPOUSE'S INTEREST...................................................23 16.13 VALIDITY............................................................23 16.14 INCOMPETENT.........................................................23 16.15 COURT ORDER.........................................................23 16.16 DISTRIBUTION IN THE EVENT OF TAXATION...............................23 16.17 INSURANCE...........................................................24 16.18 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL................24
iii ARTICLE 17 TRANSFER OF ACCOUNTS FROM OTHER DEFERRED INCOME ARRANGEMENTS......24 iv UTILICORP UNITED INC. CAPITAL ACCUMULATION PLAN EFFECTIVE AS OF JANUARY 1, 1998 PURPOSE The purpose of this Plan is to provide specified benefits to (i) a select group of management and highly compensated Employees who contribute materially to the continued growth, development and future business success of UtiliCorp United Inc., a Delaware corporation, and its subsidiaries, if any, that sponsor this Plan, and (ii) Directors of UtiliCorp United Inc. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. ARTICLE 1 DEFINITIONS For purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 1.1 "Account Balance" shall mean, with respect to each Participant, a credit on the records of the Employer equal to the sum of his (i) Deferral Account balance and (ii) Discretionary Contribution Account balance. The Account Balance, and each other specified account balance, shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan. 1.2 "Annual Bonus" shall mean, with respect to each Participant who is an Employee, any cash compensation payable to such Participant during a Plan Year in excess of Base Annual Salary under any Employer's bonus, long-term or annual cash incentive plans, excluding stock options. 1.3 "Annual Deferral Amount" shall mean that portion of a Participant's Base Annual Salary and Annual Bonus, if any, that a Participant elects to have, and is deferred, in accordance with Article 3, for any one Plan Year. In the event of a Participant's Retirement, Disability (if deferrals cease in accordance with Section 8.1), death or a Termination of Employment prior to the end of a Plan Year, such year's Annual Deferral Amount shall be the actual amount withheld prior to such event. 1.4 "Base Annual Pay" shall mean the (i) with respect to any Participant who is a Director, any annual retainer, meeting fees, and committee fees payable in cash to the Director for serving on the Board or any committee thereof, but does not include reimbursable expenses or any bonuses or incentive awards, and (ii) with respect to any Participant who is an Employee, annual cash compensation relating to services performed during any calendar year, whether or not paid in such calendar year or included on the Federal Income Tax Form W-2 for such calendar year, excluding bonuses, commissions, overtime, fringe benefits, stock options, relocation expenses, incentive payments, non-monetary awards, directors fees and other fees, automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Employee's gross income). Except as otherwise provided in this sentence, Base Annual Pay shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or non-qualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant's gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant 1 to plans established by any Employer; provided, however, that (i) all such amounts will be included in compensation only to the extent that, had there been no such plan, the amount would have been payable in cash to the Participant; and (ii) Base Annual Pay shall be calculated after reduction for amounts voluntarily deferred by the Participant pursuant to the UtiliCorp United Inc. Supplemental Contributory Retirement Plan. 1.5 "Beneficiary" shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 9, that are entitled to receive benefits under this Plan upon the death of a Participant. 1.6 "Beneficiary Designation Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries. 1.7 "Board" shall mean the board of directors of the Company. 1.8 [RESERVED] 1.9 "Change in Control" shall mean the first to occur of any of the following events: (1) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates, other than in connection with the acquisition by the Company or its affiliates of a business) representing 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities; or (2) the following individuals cease for any reason to constitute at least two-thirds (2/3) of the number of directors then serving: individuals who, on August 4, 1998, constituted the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company (as such terms are used in Rule 14A-11 of Regulation 14A under the Exchange Act)) whose appointment or election by the Board or nomination of election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on August 4, 1998, or whose appointment, election or nomination for election was previously approved; or (3) the consummation of a merger or consolidation of the Company with any other entity, other than (i) a merger or consolidation which would result in (A) the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, greater than 50% of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, (B) such of Richard C. Green, Jr. and Robert K. Green continuing as members of the board of directors of the surviving entity or ultimate parent thereof as 2 were members of the Board of the Company immediately prior to such transaction, and (C) individuals described in paragraph (2) above constitute more than one-half of the members of the board of directors of the surviving entity or ultimate parent thereof, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its affiliates, other than in connection with the acquisition by the Company or its affiliates of a business) representing 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities; or (4) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, greater than 50% of the combined voting power of the voting securities of which is owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale. Notwithstanding the foregoing, no "Change in Control" shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions. For purposes of this Section 1.9, the following definitions shall apply: (a) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. (b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (c) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act), (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company. 1.10 "Claimant" shall have the meaning set forth in Section 14.1. 1.11 "Code" shall mean the Internal Revenue Code of 1986, as it may be amended from time to time. 3 1.12 "Committee" shall mean the committee described in Article 12. 1.13 "Company" shall mean UtiliCorp United Inc., a Delaware corporation, and any successor to all or substantially all of the Company's assets or business. 1.14 "Crediting Rate" shall mean, for amounts deemed invested in each Measurement Fund for each Plan Year, a crediting or debiting rate, equal to the performance of such Measurement Fund, in accordance with Section 3.6. 1.15 "Deduction Limitation" shall mean the following described limitation on a benefit that may otherwise be distributable pursuant to the provisions of this Plan. Except as otherwise provided, this limitation shall be applied to all distributions that are "subject to the Deduction Limitation" under this Plan. If an Employer determines in good faith prior to a Change in Control that there is a reasonable likelihood that any compensation paid to a Participant for a taxable year of the Employer would not be deductible by the Employer solely by reason of the limitation under Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution to the Participant pursuant to this Plan prior to the Change in Control is deductible, the Employer may defer all or any portion of a distribution under this Plan. Any amounts deferred pursuant to this limitation shall continue to be credited/debited with additional amounts in accordance with Section 3.6 below, even if such amount is being paid out in installments. The amounts so deferred and amounts credited thereon shall be distributed to the Participant or his or her Beneficiary (in the event of the Participant's death) at the earliest possible date, as determined by the Employer in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Employer during which the distribution is made will not be limited by Section 162(m), or if earlier, the effective date of a Change in Control. Notwithstanding anything to the contrary in this Plan, the Deduction Limitation shall not apply to any distributions made after a Change in Control. 1.16 "Deferral Account" shall mean with respect to each Participant, (i) the amount credited to the Participant's "deferred benefit account" as of December 31, 1997, under the terms of the Plan in effect immediately prior to the effective date of this restatement, plus (ii) the Participant's Annual Deferral Amounts deferred under this restatement, plus (iii) amounts credited or debited in accordance with all the applicable crediting/debiting provisions of this Plan that relate to the Participant's Deferral Account, less (iv) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account. 1.17 "Director" means a member of the Board who is neither an officer nor an Employee of any Employer. 1.18 "Disability" shall mean a period of disability during which a Participant qualifies for permanent disability benefits under the Participant's Employer's long-term disability plan, or, if a Participant does not participate in such a plan, a period of disability during which the Participant would have qualified for permanent disability benefits under such a plan had the Participant been a participant in such a plan, as determined in the sole discretion of the Committee. If the Participant's Employer does not sponsor such a plan, or discontinues to sponsor such a plan, Disability shall be determined by the Committee in its sole discretion. 1.19 "Disability Benefit" shall mean the benefit set forth in Article 8. 4 1.19A "Discretionary Contribution Account" shall mean with respect to each Participant, (i) the Participant's Discretionary Contribution Amounts (if any) credited under this restatement, plus (ii) amounts credited or debited in accordance with the applicable crediting/debiting provisions of this Plan that relate to the Participant's Discretionary Contribution Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to the Plan that relate to his or her Discretionary Contribution Account. 1.19B "Discretionary Contribution Amount" for any one Plan Year shall be the amount determined in accordance with Section 3.3A. 1.20 "Election Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan. 1.21 "Employee" shall mean a person who is an employee of any Employer. 1.22 "Employer(s)" shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor. 1.23 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time. 1.23A "401(k) Plan" shall be that certain UtiliCorp United Inc. Retirement Investment Plan, formerly known as the UtiliCorp United Inc. Restated Savings Plan, adopted by the Company. 1.24 [RESERVED] 1.25 [RESERVED] 1.26 "Participant" shall mean any Employee or Director (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Plan Agreement, an Election Form and a Beneficiary Designation Form, (iv) whose signed Plan Agreement, Election Form and Beneficiary Designation Form are accepted by the Committee, (v) who commences participation in the Plan, and (vi) whose Plan Agreement has not terminated. A spouse or former spouse of a Participant shall not be treated as a Participant in the Plan or have an account balance under the Plan, even if he or she has an interest in the Participant's benefits under the Plan as a result of applicable law or property settlements resulting from legal separation or divorce. 1.27 "Plan" shall mean the Company's Capital Accumulation Plan, which shall be evidenced by this instrument and by each Plan Agreement, as they may be amended from time to time. 1.28 "Plan Agreement" shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant and the Participant's Employer shall provide for the entire benefit to which such Participant is entitled under the Plan; should there be more than one Plan Agreement, the Plan Agreement bearing the latest date of acceptance by the Employer shall supersede all previous Plan Agreements in their entirety and shall govern such entitlement. The terms of any Plan Agreement may be different for any Participant, and any Plan Agreement may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan; provided, however, that any such 5 additional benefits or benefit limitations must be agreed to by both the Employer and the Participant. 1.29 "Plan Year" shall mean a period beginning on January 1 of each calendar year and continuing through December 31 of such calendar year. 1.30 [RESERVED] 1.31 "Pre-Retirement Survivor Benefit" shall mean the benefit set forth in Article 6. 1.32 "Quarterly Installment Method" shall be a quarterly installment payment over the number of calendar quarters selected by the Participant in accordance with this Plan. The amount of such installments shall be redetermined on a quarterly basis by dividing the Participant's remaining Account Balance by the remaining number of installment payments. In no event shall any quarterly installment exceed the Participant's Account Balance at the time of distribution. 1.33 "Retirement", "Retire(s)" or "Retired" shall mean (i) with respect to any Participant who is an Employee, severance from employment from all Employers for any reason other than a leave of absence, death or Disability on or after the attainment of age fifty-five (55); and (ii) with respect to any Participant who is a Director, the date on which such Participant ceases to be a director of the Board for any reason other than death. 1.34 "Retirement Benefit" shall mean the benefit set forth in Article 5. 1.35 "Short-Term Payout" shall mean the payout set forth in Section 4.1. 1.36 "Termination Benefit" shall mean the benefit set forth in Article 7. 1.37 "Termination of Employment" shall mean the severing of employment with all Employers, voluntarily or involuntarily, for any reason other than Retirement, Disability, death or an authorized leave of absence. Despite the foregoing, a Director who ceases to be a director of the Board for any reason other than death shall be deemed to have Retired. 1.38 "Trust" shall mean one or more trusts established pursuant to that certain Executive Benefit Security Trust Agreement, dated as of January 1, 1997 between the Company and the trustee named therein, as amended from time to time. 1.39 "Unforeseeable Financial Emergency" shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, (ii) a loss of the Participant's property due to casualty, or (iii) such other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee. ARTICLE 2 SELECTION, ENROLLMENT, ELIGIBILITY 2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to (i) a select group of management and highly compensated Employees of the Employers, as determined by the Committee in its sole discretion and (ii) Directors of the Company. From that group, the 6 Committee shall select, in its sole discretion, Employees and Directors to participate in the Plan. 2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each selected Employee or Director shall complete, execute and return to the Committee a Plan Agreement, an Election Form and a Beneficiary Designation Form, all within 30 days after he or she is selected to participate in the Plan. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary. 2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an Employee or Director selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period, that Employee or Director shall commence participation in the Plan on the first day of the month following the month in which he completes all enrollment requirements. If an Employee or Director fails to meet all such requirements within the period required, in accordance with Section 2.2, he shall not be eligible to participate in the Plan until the first day of the Plan Year following the delivery to and acceptance by the Committee of the required documents. 2.4 TERMINATION OF PARTICIPATION AND/OR DEFERRALS. If the Committee determines in good faith that a Participant no longer qualifies as a member of a select group of management or highly compensated employees, as membership in such group is determined in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, the Committee shall have the right, in its sole discretion, to (i) terminate any deferral election the Participant has made for the remainder of the Plan Year in which the Participant's membership status changes, (ii) prevent the Participant from making future deferral elections and/or (iii) immediately distribute the Participant's then Account Balance as a Termination Benefit and terminate the Participant's participation in the Plan. ARTICLE 3 DEFERRAL COMMITMENTS/CREDITING/TAXES 3.1 DEFERRALS. (A) BASE ANNUAL PAY AND ANNUAL BONUS. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, between 0% and 100% (in 1% increments) of his or her Base Annual Pay and Annual Bonus, in the following minimum dollar amounts for each deferral elected:
------------------------------------------------------------------- DEFERRAL MINIMUM AMOUNT ------------------------------------------------------------------- Base Annual Pay $5,000 ------------------------------------------------------------------- Annual Bonus $5,000 -------------------------------------------------------------------
If an election is made for less than stated minimum amounts, or if no election is made, the amount deferred shall be zero. (B) SHORT PLAN YEAR. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, or in the case of the first Plan Year of the Plan itself, (i) the minimum Base Annual Pay deferral shall be an amount equal to the minimum set forth above, multiplied by a fraction, the numerator of which is the number of complete 7 months remaining in the Plan Year and the denominator of which is 12; and (ii) the maximum Annual Deferral Amount, with respect to Base Annual Pay and Annual Bonus shall be limited to the amount of compensation not yet earned by the Participant as of the date the Participant submits a Plan Agreement and Election Form to the Committee for acceptance. 3.2 ELECTION TO DEFER; EFFECT OF ELECTION FORM. (A) FIRST PLAN YEAR. In connection with a Participant's commencement of participation in the Plan, the Participant shall make an irrevocable deferral election for the Plan Year in which the Participant commences participation in the Plan, along with such other elections as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form must be completed and signed by the Participant, timely delivered to the Committee (in accordance with Section 2.2 above) and accepted by the Committee. (B) SUBSEQUENT PLAN YEARS. For each succeeding Plan Year, an irrevocable deferral election for that Plan Year, and such other elections as the Committee deems necessary or desirable under the Plan, shall be made by timely delivering to the Committee, in accordance with its rules and procedures, before the end of the Plan Year preceding the Plan Year for which the election is made, a new Election Form. If no such Election Form is timely delivered for a Plan Year, the Annual Deferral Amount shall be zero for that Plan Year. 3.3 WITHHOLDING OF ANNUAL DEFERRAL AMOUNTS. For each Plan Year, the Base Annual Pay portion of the Annual Deferral Amount shall be withheld from each regularly scheduled payment date in approximately equal amounts, as adjusted from time to time for increases and decreases in Base Annual Pay. The Annual Bonus portion of the Annual Deferral Amount shall be withheld at the time the Annual Bonus is or otherwise would be paid to the Participant. 3.3A DISCRETIONARY CONTRIBUTIONS. Effective with respect to Plan Years beginning on or after January 1, 1997, a Participant shall be credited with an annual amount (the "Discretionary Contribution Amount") equal to difference between: (a) the aggregate amount of Employer discretionary contributions which would have been allocated to the Participant's account under the 401(k) Plan if the Participant had elected not to defer all or any portion of his Base Annual Pay and/or Annual Bonus under this Plan for the applicable Plan Year, and (b) the sum of the aggregate amount of Employer discretionary contributions allocated to the Participant's account under the 401(k) Plan and credited to the Participant's account under the UtiliCorp United Inc. Supplemental Contributory Retirement Plan for such Plan Year. 8 The purpose of the contributions under this Section is to make the Participant whole for the loss of the Employer discretionary contributions that such Participant would have received under the 401(k) Plan if the Participant had not elected to defer a portion of his or her Annual Base Pay and/or Annual Bonus under this Plan. 3.4 INVESTMENT OF TRUST ASSETS. The Trustee of the Trust shall be authorized, upon written instructions received from the Committee or investment manager appointed by the Committee, to invest and reinvest the assets of the Trust in accordance with the applicable Trust Agreement, including the disposition of stock and reinvestment of the proceeds in one or more investment vehicles designated by the Committee. 3.5 VESTING. A Participant shall at all times be 100% vested in his or her Account Balance. 3.6 CREDITING/DEBITING OF ACCOUNT BALANCES. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be credited or debited to a Participant's Account Balance in accordance with the following rules: (A) ELECTION OF MEASUREMENT FUNDS FOR DEFERRAL ACCOUNTS. A Participant, in connection with his or her initial deferral election in accordance with Section 3.2(a) above, shall elect, in a manner designated by and acceptable to the Committee, one or more Measurement Fund(s) (as described in Section 3.6(c) below) to be used to determine the additional amounts to be credited to his or her Deferral Account balance for the first regularly scheduled payroll period in which the Participant commences participation in the Plan and continuing thereafter for each subsequent payroll period in which the Participant participates in the Plan, unless changed in accordance with the next sentence. Each Participant may elect in the manner and at the time(s) designated by and acceptable to the Committee, to add or delete one or more Measurement Fund(s) to be used to determine the additional amounts to be credited to his or her Deferral Account balance, or to change the portion of his or her Deferral Account balance allocated to each previously or newly elected Measurement Fund. Any election that is made in accordance with the previous sentence shall be effective as soon as administratively practicable following the acceptance of such election by the Committee. (B) PROPORTIONATE ALLOCATION. In making any election described in Section 3.6(a) above, the Participant shall specify, in increments of one percentage point (1%), the percentage of his or her Deferral Account balance to be allocated to a Measurement Fund (as if the Participant was making an investment in that Measurement Fund with that portion of his or her Deferral Account balance). (C) MEASUREMENT FUNDS. The "Measurement Funds" to be used to determine the additional amounts to be credited to a Participant's Deferral Account balance shall be designated by the Committee in its sole discretion. The Committee may from time to time discontinue, substitute or add a Measurement Fund, provided that any such action to discontinue or substitute any Measurement Fund may only take 9 effect following at least thirty (30) days advance written notice of such change to the Participants. (D) CREDITING OR DEBITING METHOD. The performance of each Measurement Fund (either positive or negative) will be determined by the Committee, in its sole discretion, based on the Crediting Rate of the Measurement Funds themselves (except as otherwise provided in this Section). A Participant's Account Balance shall be credited or debited on a daily basis based on the Crediting Rate of each Measurement Fund, AS DETERMINED BY THE COMMITTEE IN ITS SOLE DISCRETION, as though (i) such Participant's Account Balance was invested in the applicable Measurement Fund(s); (ii) the portion of the Participant's Annual Deferral Amount that was actually deferred on any regularly scheduled payment date was invested in the applicable Measurement Fund(s) selected by the Participant, no later than the close of business on the second business day immediately following such regularly scheduled payment date; (iii) the Discretionary Contribution Amount (if any) attributable to a Participant for any Plan Year was invested in UtiliCorp United Inc. Common Stock as of the same date(s) such Amount would have been credited under the 401(k) Plan had such Amount been credited as a discretionary contribution to the 401(k) Plan; and (iv) any distribution made to a Participant that decreases such Participant's Account Balance ceased being invested in the applicable Measurement Fund(s), no earlier than the fifth business day preceding the date the Company pays such Participant his or her benefit in accordance with the other provisions of this Plan. (E) NO ACTUAL INVESTMENT. Notwithstanding any other provision of this Plan or any notice, statement, summary or other communication provided to a Participant that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participant's election of any such Measurement Fund, the allocation to his or her Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant's Account Balance SHALL NOT be considered or construed in any manner as an actual investment of his or her Account Balance in any such Measurement Fund. In the event that the Company or the trustee of the Trust, in its own discretion, decides to invest funds in any or all of the Measurement Funds, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant's Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by the Company or the Trust; the Participant shall at all times remain an unsecured creditor of the Company. (F) SPECIAL CREDITING RATE FOR MOODY'S BOND INDEX MEASUREMENT FUND. Notwithstanding any provision in this Plan to the contrary, the Crediting Rate for each Plan Year for the Moody's Bond Index Measurement Fund (to the extent such fund is designated by the Committee as a Measurement Fund) shall be determined by the Committee prior to the beginning of such Plan Year and shall be equal to 10 130% of the average corporate bond yield published in Moody's Bond Record under the heading of "Moody's Corporate Bond Yield Averages -- Av. Corp" for the month of December that immediately precedes the Plan Year for which the Crediting Rate is being determined. (G) INVESTMENT OF DISCRETIONARY CONTRIBUTION ACCOUNT. Notwithstanding any other provisions in this Plan that may be interpreted to the contrary, a Participant's Discretionary Contribution Amounts shall be deemed invested in UtiliCorp United Inc. Common Stock at all times such amounts are credited to his or her Account Balance. 3.7 FICA AND OTHER TAXES. For each Plan Year in which an Annual Deferral Amount is being withheld from a Participant, the Participant's Employer(s), to the extent required by applicable law shall withhold from that portion of the Participant's Base Annual Pay and Bonus that is not being deferred, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes on such Annual Deferral Amount. If necessary, the Committee may reduce the Annual Deferral Amount in order to comply with this Section 3.7. 3.8 DISTRIBUTIONS. The Participant's Employer(s), or the trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Employer(s), or the trustee of the Trust, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Employer(s) and the trustee of the Trust. ARTICLE 4 SHORT-TERM PAYOUT; UNFORESEEABLE FINANCIAL EMERGENCIES; WITHDRAWAL ELECTION 4.1 SHORT-TERM PAYOUT. In connection with each election to defer an Annual Deferral Amount, a Participant may irrevocably elect to receive a future "Short-Term Payout" from the Plan with respect to such Annual Deferral Amount. Subject to the Deduction Limitation, the Short-Term Payout shall be a lump sum payment in an amount that is equal to the Annual Deferral Amount plus amounts credited or debited in the manner provided in Section 3.6 above. Subject to the Deduction Limitation and the other terms and conditions of this Plan, each Short-Term Payout elected shall be paid out as soon as reasonably practicable (which will normally be within 60 days) after the last day of any Plan Year designated by the Participant that is at least five Plan Years after the Plan Year in which the Annual Deferral Amount is actually deferred. By way of example, if a five year Short-Term Payout is elected for Annual Deferral Amounts that are deferred in the Plan Year commencing January 1, 1998, the five year Short-Term Payout would become payable as soon as reasonably practicable on or after January 1, 2004. 4.2 ELECTION TO DEFER SHORT-TERM PAYOUT. At any time after Short-Term Payout is elected and not less than one (1) year before the first possible date of the Short-Term Payout, the Participant may irrevocably elect to have the Short-Term Payout paid as soon as 11 reasonably practicable (which will normally be within 60 days) after the last day of any Plan Year designated by the Participant that is at least five Plan Years after the first possible date of the Short-Term Payout. 4.3 OTHER BENEFITS TAKE PRECEDENCE OVER SHORT-TERM. Should an event occur that triggers a benefit under Article 5, 6, 7 or 8, any Annual Deferral Amount, plus amounts credited or debited thereon, that is subject to a Short-Term Payout election under Section 4.1 shall not be paid in accordance with Section 4.1 but shall be paid in accordance with the other applicable Article. 4.4 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES. If a Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to (i) suspend any deferrals required to be made by the Participant and/or (ii) receive a partial or full payout from the Plan. The payout shall not exceed the lesser of the Participant's Account Balance, calculated as if such Participant were receiving a Termination Benefit, or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency. If, subject to the sole discretion of the Committee, the petition for a suspension and/or payout is approved, suspension shall take effect upon the date of approval and any payout shall be made within 60 days of the date of approval. The payment of any amount under this Section 4.4 shall not be subject to the Deduction Limitation. 4.5 WITHDRAWAL ELECTION. A Participant (or, after a Participant's death, his or her Beneficiary) may elect, at any time, to withdraw all of his or her Account Balance, calculated as if there had occurred a Termination of Employment as of the day of the election, less a withdrawal penalty equal to 10% of such amount (the net amount shall be referred to as the "Withdrawal Amount"). This election can be made at any time, before or after Retirement, Disability, death or Termination of Employment, and whether or not the Participant (or Beneficiary) is in the process of being paid pursuant to an installment payment schedule. If made before Retirement, Disability or death, a Participant's Withdrawal Amount shall be his or her Account Balance calculated as if there had occurred a Termination of Employment as of the day of the election. No partial withdrawals of the Withdrawal Amount shall be allowed. The Participant (or his or her Beneficiary) shall make this election by giving the Committee advance written notice of the election in a form determined from time to time by the Committee. The Participant (or his or her Beneficiary) shall be paid the Withdrawal Amount within 60 days of his or her election. Once the Withdrawal Amount is paid, the Participant's participation in the Plan shall terminate and the Participant shall not be eligible to participate in the Plan for eighteen (18) months in the future. The payment of this Withdrawal Amount shall not be subject to the Deduction Limitation. ARTICLE 5 RETIREMENT BENEFIT 12 5.1 RETIREMENT BENEFIT. Subject to the Deduction Limitation, a Participant who Retires shall receive, as a Retirement Benefit, his or her Account Balance. 5.2 PAYMENT OF RETIREMENT BENEFIT. A Participant in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to receive his or her Retirement Benefit in a lump sum or pursuant to a Quarterly Installment Method over 2 to 15 years. The Participant may annually change his or her election to an alternative payout method by submitting a new Election Form to the Committee, provided, however, the Committee will only honor a Participant's new election if it is submitted to the Committee at least 13 months prior to the Participant's Retirement date. In the event that a Participant Retires before his or her attainment of age 62, the Participant may file a written request with the Committee requesting that the lump sum payment not be made, or installment payments not commence, until after the Participant reaches age sixty-five (65), provided that any such Election Form is submitted at least 13 months prior to the Participant's Retirement date and is accepted by the Committee in its sole discretion. If a Participant does not make any election with respect to the payment of the Retirement Benefit, then such benefit shall be payable in a lump sum. The lump sum payment shall be made, or installment payments shall commence, no later than 60 days after the date the Participant Retires. Any payment made shall be subject to the Deduction Limitation. 5.3 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFIT. If a Participant dies after Retirement but before his or her Retirement Benefit is paid in full, the Participant's unpaid Retirement Benefit shall be paid to his or her Beneficiary as follows: (i) if the Participant elected to receive his or her Retirement Benefit pursuant to the Quarterly Installment Method, then the Beneficiary shall receive such benefits over the remaining number of quarters and in the same amounts as such benefits would have been paid to the Participant had the Participant survived; or (ii) if the Participant elected to receive his or her Retirement Benefit in the form of a lump sum payment, then the Beneficiary shall receive such benefits in a lump sum payment at the same time that the Participant would have received such payment had the Participant survived. Notwithstanding the foregoing, a Beneficiary may elect, prior to the time that benefits would otherwise be paid pursuant to the preceding sentence, a complete withdrawal of the benefits to which he or she is entitled in accordance with Section 4.5. ARTICLE 6 PRE-RETIREMENT SURVIVOR BENEFIT 6.1 PRE-RETIREMENT SURVIVOR BENEFIT. Subject to the Deduction Limitation, the Participant's Beneficiary shall receive a Pre-Retirement Survivor Benefit equal to the Participant's Account Balance if the Participant dies before he or she Retires, experiences a Termination of Employment or suffers a Disability. 6.2 PAYMENT OF PRE-RETIREMENT SURVIVOR BENEFIT. A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form whether 13 the Pre-Retirement Survivor Benefit shall be received by his or her Beneficiary in a lump sum or pursuant to a Quarterly Installment Method over 2 to 15 years. The Participant may annually change this election to an allowable alternative payout period by submitting a new Election Form to the Committee, which form must be accepted by the Committee in its sole discretion. The Election Form most recently accepted by the Committee prior to the Participant's death shall govern the payout of the Participant's Pre-Retirement Survivor Benefit. If a Participant does not make any election with respect to the payment of the Pre-Retirement Survivor Benefit, then such benefit shall be paid in a lump sum. Despite the foregoing, if the Participant's Account Balance at the time of his or her death is less than $25,000, payment of the Pre-Retirement Survivor Benefit may be made, in the sole discretion of the Committee, in a lump sum or pursuant to a Quarterly Installment Method of not more than 5 years. The lump sum payment shall be made, or installment payments shall commence, no later than 60 days after the date the Committee is provided with proof that is satisfactory to the Committee of the Participant's death. Any payment made shall be subject to the Deduction Limitation. ARTICLE 7 TERMINATION BENEFIT 7.1 TERMINATION BENEFIT. Subject to the Deduction Limitation, the Participant who experiences a Termination of Employment shall receive a Termination Benefit, which shall be equal to the Participant's Account Balance, with earnings credited in the manner provided in Section 3.6 above. 7.2 PAYMENT OF TERMINATION BENEFIT. The Termination Benefit shall be paid in a lump sum. The lump sum payment shall be made no later than 60 days after the date of the Participant's Termination of Employment. Any payment made shall be subject to the Deduction Limitation. ARTICLE 8 DISABILITY WAIVER AND BENEFIT 8.1 DISABILITY WAIVER (A) WAIVER OF DEFERRAL. A Participant who is determined by the Committee to be suffering from a Disability shall be excused from fulfilling that portion of the Annual Deferral Amount commitment that would otherwise have been withheld from a Participant's Base Annual Pay and Annual Bonus for the Plan Year during which the Participant first suffers a Disability. During the period of Disability, the Participant shall not be allowed to make any additional deferral elections, but will continue to be considered a Participant for all other purposes of this Plan. (B) RETURN TO WORK. If a Participant returns to employment with an Employer, after a Disability ceases, the Participant may elect to defer an Annual Deferral Amount for the Plan Year following his or her return to employment or service and for every Plan Year thereafter while a Participant in the Plan; provided such deferral elections are otherwise 14 allowed and an Election Form is delivered to and accepted by the Committee for each such election in accordance with Section 3.2 above. 8.2 CONTINUED ELIGIBILITY; DISABILITY BENEFIT. A Participant suffering a Disability shall, for benefit purposes under this Plan, continue to be considered to be employed and shall be eligible for the benefits provided for in Article 4, 5, 6 or 7 in accordance with the provisions of those Articles. Notwithstanding the above, the Committee shall have the right to, in its sole and absolute discretion and for purposes of this Plan only, and must in the case of a Participant who is otherwise eligible to Retire, deem the Participant to have experienced a Termination of Employment, or in the case of a Participant who is eligible to Retire, to have Retired, at any time (or in the case of a Participant who is eligible to Retire, as soon as practicable) after such Participant is determined to be suffering a Disability, in which case the Participant shall receive a Disability Benefit equal to his or her Account Balance at the time of the Committee's determination; provided, however, that should the Participant otherwise have been eligible to Retire, he or she shall be paid in accordance with Article 5. The Disability Benefit shall be paid in a lump sum within 60 days of the Committee's exercise of such right. Any payment made shall be subject to the Deduction Limitation. ARTICLE 9 BENEFICIARY DESIGNATION 9.1 BENEFICIARY. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates. 9.2 BENEFICIARY DESIGNATION; CHANGE. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time. 9.3 ACKNOWLEDGMENT. No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee or its designated agent. 9.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid 15 to a Beneficiary shall be payable to the executor or personal representative of the Participant's estate. 9.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Participant's Employer to withhold such payments until this matter is resolved to the Committee's satisfaction. 9.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant's Plan Agreement shall terminate upon such full payment of benefits. 16 ARTICLE 10 LEAVE OF ABSENCE 10.1 PAID LEAVE OF ABSENCE. If a Participant is authorized by the Participant's Employer for any reason to take a paid leave of absence from the employment of the Employer, the Participant shall continue to be considered employed by the Employer and the Annual Deferral Amount shall continue to be withheld during such paid leave of absence in accordance with Section 3.3. 10.2 UNPAID LEAVE OF ABSENCE. If a Participant is authorized by the Participant's Employer for any reason to take an unpaid leave of absence from the employment of the Employer, the Participant shall continue to be considered employed by the Employer and the Participant shall be excused from making deferrals until the earlier of the date the leave of absence expires or the Participant returns to a paid employment status. Upon such expiration or return, deferrals shall resume for the remaining portion of the Plan Year in which the expiration or return occurs, based on the deferral election, if any, made for that Plan Year. If no election was made for that Plan Year, no deferral shall be withheld. ARTICLE 11 TERMINATION, AMENDMENT OR MODIFICATION 11.1 TERMINATION. Although each Employer anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that any Employer will continue the Plan or will not terminate the Plan at any time in the future. Accordingly, each Employer reserves the right to discontinue its sponsorship of the Plan and/or to terminate the Plan at any time with respect to any or all of its participating Employees by action of its board of directors. Upon the termination of the Plan with respect to any Employer, the Plan Agreements of the affected Participants who are employed by that Employer shall terminate and their Account Balances, determined as if they had experienced a Termination of Employment on the date of Plan termination or, if Plan termination occurs after the date upon which a Participant was eligible to Retire, then with respect to that Participant as if he or she had Retired on the date of Plan termination, shall be paid to the Participants as follows: Prior to a Change in Control, if the Plan is terminated with respect to all of its Participants, an Employer shall have the right, in its sole discretion, and notwithstanding any elections made by the Participant, to pay such benefits in a lump sum or pursuant to a Quarterly Installment Method of up to 15 years, with amounts credited and debited during the installment period as provided herein. If the Plan is terminated with respect to less than all of its Participants, an Employer shall be required to pay such benefits in a lump sum. After a Change in Control, the Employer shall be required to pay such benefits in a lump sum. The termination of the Plan shall not adversely affect any Participant or Beneficiary who has become entitled to the payment of any benefits under the Plan as of the date of termination; provided however, that the Employer shall have the right to accelerate installment payments without a premium or prepayment penalty by paying the Account Balance in a lump sum or pursuant to a 17 Quarterly Installment Method using fewer quarters (provided that the present value of all payments that will have been received by a Participant at any given point of time under the different payment schedule shall equal or exceed the present value of all payments that would have been received at that point in time under the original payment schedule). 11.2 AMENDMENT. Any Employer may, at any time, amend or modify the Plan in whole or in part with respect to that Employer by the action of its board of directors; provided, however, that no amendment or modification shall be effective to decrease or restrict the value of a Participant's Account Balance in existence at the time the amendment or modification is made, calculated as if the Participant had experienced a Termination of Employment as of the effective date of the amendment or modification or, if the amendment or modification occurs after the date upon which the Participant was eligible to Retire, the Participant had Retired as of the effective date of the amendment or modification. The amendment or modification of the Plan shall not affect any Participant or Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification; provided, however, that the Employer shall have the right to accelerate installment payments by paying the Account Balance in a lump sum or pursuant to a Quarterly Installment Method using fewer quarters (provided that the present value of all payments that will have been received by a Participant at any given point of time under the different payment schedule shall equal or exceed the present value of all payments that would have been received at that point in time under the original payment schedule). 11.3 PLAN AGREEMENT. Despite the provisions of Sections 11.1 and 11.2 above, if a Participant's Plan Agreement contains benefits or limitations that are not in this Plan document, the Employer may only amend or terminate such provisions with the consent of the Participant. 11.4 EFFECT OF PAYMENT. The full payment of the applicable benefit under Article 4, 5, 6, 7 or 8 of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under this Plan and the Participant's Plan Agreement shall terminate. ARTICLE 12 ADMINISTRATION 12.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee which shall consist of the Board, or such committee as the Board shall appoint. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to (i) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, 18 the Committee shall be entitled to rely on information furnished by a Participant or the Company. 12.2 AGENTS. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer. 12.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 12.4 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless the members of the Committee, and any Employee to whom the duties of the Committee may be delegated, against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee or any of its members or any such Employee. 12.5 EMPLOYER INFORMATION. To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of its Participants, the date and circumstances of the Retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Committee may reasonably require. ARTICLE 13 OTHER BENEFITS AND AGREEMENTS 13.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a Participant and Participant's Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Participant's Employer. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided. ARTICLE 14 CLAIMS PROCEDURES 14.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. 19 14.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim within 90 days (unless special circumstances require additional time) and shall notify the Claimant in writing: (a) that the Claimant's requested determination has been made, and that the claim has been allowed in full; or (b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: (i) the specific reason(s) for the denial of the claim, or any part of it; (ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and (iv) an explanation of the claim review procedure set forth in Section 14.3 below. 14.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than 30 days after the review procedure began, the Claimant (or the Claimant's duly authorized representative): (a) may review pertinent documents; (b) may submit written comments or other documents; and/or (c) may request a hearing, which the Committee, in its sole discretion, may grant. 14.4 DECISION ON REVIEW. The Committee shall render its decision on review promptly, and not later than 60 days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee's decision must be rendered within 120 days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (a) specific reasons for the decision; (b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and 20 (c) such other matters as the Committee deems relevant. 14.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of this Article 14 is a mandatory prerequisite to a Claimant's right to commence any legal action with respect to any claim for benefits under this Plan. ARTICLE 15 TRUST 15.1 ESTABLISHMENT OF THE TRUST. The Company shall establish the Trust, and each Employer shall at least annually transfer over to the Trust such assets as the Employer determines, in its sole discretion, are necessary to provide, on a present value basis, for its respective future liabilities created with respect to the Annual Deferral Amounts for such Employer's Participants for all periods prior to the transfer, as well as any debits and credits to the Participants' Account Balances for all periods prior to the transfer, taking into consideration the value of the assets in the trust at the time of the transfer. 15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under the Plan. 15.3 DISTRIBUTIONS FROM THE TRUST. Each Employer's obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employer's obligations under this Plan. ARTICLE 16 MISCELLANEOUS 16.1 STATUS OF PLAN. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that "is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employee" within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan shall be administered and interpreted to the extent possible in a manner consistent with that intent. 16.2 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer. For purposes of the payment of benefits under this Plan, any and all of an Employer's assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. An Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. 21 16.3 EMPLOYER'S LIABILITY. An Employer's liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer and a Participant. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan and his or her Plan Agreement. 16.4 NONASSIGNABILITY. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise. 16.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an "at will" employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer as an Employee, or to interfere with the right of any Employer to discipline or discharge the Participant at any time. 16.6 FURNISHING INFORMATION. A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary. 16.7 TERMS. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 16.8 CAPTIONS. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 16.9 GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of Missouri without regard to its conflicts of laws principles. 22 16.10 NOTICE. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: ----------------------------------------- Mr. Phil Beyer ----------------------------------------- Director of Benefits ----------------------------------------- UtiliCorp United Inc. ----------------------------------------- 20 West Ninth Street ----------------------------------------- Kansas City, MO 64105-1711 ----------------------------------------- Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant. 16.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the benefit of the Participant's Employer and its successors and assigns and the Participant and the Participant's designated Beneficiaries. 16.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse's will, nor shall such interest pass under the laws of intestate succession. 16.13 VALIDITY. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. 16.14 INCOMPETENT. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount. 16.15 COURT ORDER. The Committee is authorized to make any payments directed by court order in any action in which the Plan or the Committee has been named as a party. In addition, if a court determines that a spouse or former spouse of a Participant has an interest in the Participant's benefits under the Plan in connection with a property settlement or otherwise, the Committee, in its sole discretion, shall have the right, notwithstanding any election made by a Participant, to immediately distribute the spouse's or former spouse's interest in the Participant's benefits under the Plan to that spouse or former spouse. 16.16 DISTRIBUTION IN THE EVENT OF TAXATION. 23 (A) IN GENERAL. If, for any reason, all or any portion of a Participant's benefits under this Plan becomes taxable to the Participant prior to receipt, a Participant may petition the Committee before a Change in Control, or the trustee of the Trust after a Change in Control, for a distribution of that portion of his or her benefit that has become taxable. Upon the grant of such a petition, which grant shall not be unreasonably withheld (and, after a Change in Control, shall be granted), a Participant's Employer shall distribute to the Participant immediately available funds in an amount equal to the taxable portion of his or her benefit (which amount shall not exceed a Participant's unpaid Account Balance under the Plan). If the petition is granted, the tax liability distribution shall be made within 90 days of the date when the Participant's petition is granted. Such a distribution shall affect and reduce the benefits to be paid under this Plan. (B) TRUST. If the Trust terminates in accordance with its terms and benefits are distributed from the Trust to a Participant in accordance with that Section, the Participant's benefits under this Plan shall be reduced to the extent of such distributions. 16.17 INSURANCE. The Employers, on their own behalf or on behalf of the trustee of the Trust, and, in their sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Trust may choose. The Employers or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Employers shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Employers have applied for insurance. 16.18 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL. The Company and each Employer is aware that upon the occurrence of a Change in Control, the Board or the board of directors of a Participant's Employer (which might then be composed of new members) or a shareholder of the Company or the Participant's Employer, or of any successor corporation might then cause or attempt to cause the Company, the Participant's Employer or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause the Company or the Participant's Employer to institute, or may institute, litigation seeking to deny Participants the benefits intended under the Plan. In these circumstances, the purpose of the Plan could be frustrated. Accordingly, if, following a Change in Control, it should appear to any Participant that the Company, the Participant's Employer or any successor corporation has failed to comply with any of its obligations under the Plan or any agreement thereunder or, if the Company, such Employer or any other person takes any action to declare the Plan void or unenforceable or institutes any litigation or other legal action designed to deny, diminish or to recover from any Participant the benefits intended to be provided, then the Company and the Participant's Employer irrevocably authorize such Participant to retain counsel of his or her choice at the expense of the Company and the Participant's Employer (who shall be jointly and severally liable) to represent such Participant in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company, the Participant's Employer or any director, officer, shareholder or other person affiliated with the Company, the Participant's Employer or any successor thereto in any jurisdiction. ARTICLE 17 TRANSFER OF ACCOUNTS FROM OTHER DEFERRED INCOME ARRANGEMENTS The provisions of this Article 17 shall apply exclusively to those Participants under this Plan who have an unfunded deferred account balance or other deferred benefit entitlement under any other deferred compensation plan, agreement or arrangement with 24 UtiliCorp United Inc. or any of its affiliates which UtiliCorp has designated as eligible for transfer to this Plan ("Other Plan"). Each such Participant may elect, in the form and manner and at the time designated by the Committee, to relinquish all past, present and future benefits, rights and entitlements that he may have under the Other Plan, in which case, an amount equal to his deferred benefit under such Other Plan, determined as of the date (the "transfer date") and in the manner set forth in a separate agreement between UtiliCorp (or its affiliate) and such Participant, shall be credited to a "Deferred Benefit Transfer Account" established on his behalf under this Plan. Separate sub-accounts may be established under a Participant's Deferred Benefit Transfer Account to reflect amounts transferred from different deferred compensation plans, agreements or arrangements. Except as provided in the following sentence, the Deferred Benefit Transfer Account established on behalf of a Participant shall treated for all purposes under this Plan as though such Account was a part of the Participant's Deferral Account. 25 IN WITNESS WHEREOF, the Company has signed this Plan document as of March 23, 1998. "Company" UtiliCorp United Inc., a Delaware corporation By:/s/Leo E. Morton Title: Senior Vice President 26 EX-10.(A)(15) 11 EXHIBIT 10(A)(15) Exhibit 10(a)(15) UTILICORP UNITED INC. SUPPLEMENTAL CONTRIBUTORY RETIREMENT PLAN EFFECTIVE AS OF JANUARY 1, 1998 -i- TABLE OF CONTENTS
PAGE PURPOSE ARTICLE 1 DEFINITIONS..............................................................2 ARTICLE 2 SELECTION, ENROLLMENT, ELIGIBILITY.......................................7 2.1 Selection by Committee..................................................7 2.2 Enrollment Requirements.................................................7 2.3 Eligibility; Commencement of Participation..............................7 2.4 Termination of Participation and/or Deferrals...........................8 ARTICLE 3 DEFERRAL COMMITMENTS/COMPANY MATCHING/CREDITING/TAXES....................8 3.1 Annual Deferral Amounts.................................................8 3.2 Election to Defer; Effect of Election Form..............................8 3.3 Withholding of Annual Deferral Amounts..................................9 3.4 Company Matching Amount.................................................9 3.4A Discretionary Contributions............................................9 3.5 Investment of Trust Assets..............................................9 3.6 Vesting.................................................................9 3.7 Crediting/Debiting of Account Balances..................................10 3.8 FICA and Other Taxes....................................................12 3.9 Distributions...........................................................12 ARTICLE 4 UNFORESEEABLE FINANCIAL EMERGENCIES; WITHDRAWAL ELECTION.................12 4.1 Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies...12 4.2 Withdrawal Election.....................................................12 ARTICLE 5 RETIREMENT BENEFIT.......................................................13 5.1 Retirement Benefit......................................................13 5.2 Payment of Retirement Benefit...........................................13 5.3 Death Prior to Completion of Retirement Benefit.........................13 ARTICLE 6 PRE-RETIREMENT SURVIVOR BENEFIT..........................................14 6.1 Pre-Retirement Survivor Benefit.........................................14 6.2 Payment of Pre-Retirement Survivor Benefit..............................14 ARTICLE 7 TERMINATION BENEFIT......................................................14 7.1 Termination Benefit.....................................................14 7.2 Payment of Termination Benefit..........................................14 -ii- ARTICLE 8 DISABILITY WAIVER AND BENEFIT............................................14 8.1 Disability Waiver.......................................................14 8.2 Continued Eligibility; Disability Benefit...............................15 ARTICLE 9 BENEFICIARY DESIGNATION..................................................15 9.1 Beneficiary.............................................................15 9.2 Beneficiary Designation; Change.........................................15 9.3 Acknowledgement.........................................................15 9.4 No Beneficiary Designation..............................................15 9.5 Doubt as to Beneficiary.................................................16 9.6 Discharge of Obligations................................................16 ARTICLE 10 LEAVE OF ABSENCE........................................................16 10.1 Paid Leave of Absence..................................................16 10.2 Unpaid Leave of Absence................................................16 ARTICLE 11 TERMINATION, AMENDMENT OR MODIFICATION..................................16 11.1 Termination............................................................16 11.2 Amendment..............................................................17 11.3 Plan Agreement.........................................................17 11.4 Effect of Payment......................................................17 ARTICLE 12 ADMINISTRATION..........................................................17 12.1 Committee Duties.......................................................17 12.2 Agents.................................................................18 12.3 Binding Effect of Decisions............................................18 12.4 Indemnity of Committee.................................................18 12.5 Employer Information...................................................18 ARTICLE 13 OTHER BENEFITS AND AGREEMENTS...........................................18 13.1 Coordination with Other Benefits.......................................18 ARTICLE 14 CLAIMS PROCEDURES.......................................................18 14.1 Presentation of Claim..................................................18 14.2 Notification of Decision...............................................18 14.3 Review of a Denied Claim...............................................19 14.4 Decision on Review.....................................................19 14.5 Legal Action...........................................................19 ARTICLE 15 TRUST 20 15.1 Establishment of the Trust.............................................20 15.2 Interrelationship of the Plan and the Trust............................20 -iii- 15.3 Distributions From the Trust...........................................20 ARTICLE 16 MISCELLANEOUS...........................................................20 16.1 Status of Plan.........................................................20 16.2 Unsecured General Creditor.............................................20 16.3 Employer's Liability...................................................20 16.4 Nonassignability.......................................................20 16.5 Not a Contract of Employment...........................................21 16.6 Furnishing Information.................................................21 16.7 Terms..................................................................21 16.8 Captions...............................................................21 16.9 Governing Law..........................................................21 16.10 Notice................................................................21 16.11 Successors............................................................21 16.12 Spouse's Interest.....................................................22 16.13 Validity..............................................................22 16.14 Incompetent...........................................................22 16.15 Court Order...........................................................22 16.16 Distribution in the Event of Taxation.................................22 16.17 Insurance.............................................................22 16.18 Legal Fees To Enforce Rights After Change in Control..................23
-iv- UTILICORP UNITED INC. SUPPLEMENTAL CONTRIBUTORY RETIREMENT PLAN EFFECTIVE JANUARY 1, 1998 PURPOSE The purpose of this Plan is to provide specified benefits to a select group of management and highly compensated Employees who contribute materially to the continued growth, development and future business success of UtiliCorp United Inc., a Delaware corporation, and its subsidiaries, if any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. ARTICLE 1 DEFINITIONS For purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 1.1 "Account Balance" shall mean, with respect to each Participant, a credit on the records of the Employer equal to the sum of his (i) Deferral Account balance, (ii) the vested Company Matching Account balance, and (iii) the vested Discretionary Contribution Account balance. The Account Balance, and each other specified account balance, shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan. 1.2 "Annual Company Matching Amount" for any one Plan Year shall be the amount determined in accordance with Section 3.4. 1.3 "Annual Deferral Amount" shall mean that portion of a Participant's Base Annual Salary that a Participant elects to have, and is deferred, in accordance with Article 3, for any one Plan Year. In the event of a Participant's Retirement, Disability (if deferrals cease in accordance with Section 8.1), death or a Termination of Employment prior to the end of a Plan Year, such year's Annual Deferral Amount shall be the actual amount withheld prior to such event. 1.4 "Base Annual Salary" shall mean the annual cash compensation relating to services performed during any calendar year, whether or not paid in such calendar year or included on the Federal Income Tax Form W-2 for such calendar year, excluding bonuses, commissions, overtime, fringe benefits, stock options, relocation expenses, incentive payments, non-monetary awards, directors fees and other fees, automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Employee's gross income). Base Annual Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or non-qualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant's gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any Employer; provided, however, that all such amounts will be included in compensation only to the extent that, had there been no such plan, the amount would have been payable in cash to the Participant. -2- 1.5 "Beneficiary" shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 9, that are entitled to receive benefits under this Plan upon the death of a Participant. 1.6 "Beneficiary Designation Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries. 1.7 "Board" shall mean the board of directors of the Company. 1.8 "Change in Control" shall mean the first to occur of any of the following events: (a) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates, other than in connection with the acquisition by the Company or its affiliates of a business) representing 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities; or (b) the following individuals cease for any reason to constitute at least two-thirds (2/3) of the number of directors then serving: individuals who, on August 4, 1998, constituted the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company (as such terms are used in Rule 14A-11 of Regulation 14A under the Exchange Act)) whose appointment or election by the Board or nomination of election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on August 4, 1998, or whose appointment, election or nomination for election was previously approved; or (c) the consummation of a merger or consolidation of the Company with any other entity, other than (i) a merger or consolidation which would result in (A) the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, greater than 50% of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, (B) such of Richard C. Green, Jr. and Robert K. Green continuing as members of the board of directors of the surviving entity or ultimate parent thereof as were members of the Board of the Company immediately prior to such transaction, and (C) individuals described in paragraph (2) above constitute more than one-half of the members of the board of directors of the surviving entity or ultimate parent thereof, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its affiliates, other than in connection with the acquisition by the Company or its affiliates of a business) representing -3- 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities; or (d) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, greater than 50% of the combined voting power of the voting securities of which is owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale. Notwithstanding the foregoing, no "Change in Control" shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions. For purposes of this Section 1.8, the following definitions shall apply: (1) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. (2) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (3) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act), (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company. 1.9 "Claimant" shall have the meaning set forth in Section 14.1. 1.10 "Code" shall mean the Internal Revenue Code of 1986, as it may be amended from time to time. 1.11 "Committee" shall mean the committee described in Article 12. 1.12 "Company" shall mean UtiliCorp United Inc., a Delaware corporation, and any successor to all or substantially all of the Company's assets or business. 1.13 "Company Matching Account" shall mean with respect to each Participant, (i) the amount credited to the Participant's "deferred benefit account(s)" as of December 31, 1997, under the terms of the Plan in effect immediately prior to the effective date of this restatement, plus (ii) the sum of all of a Participant's Company Matching Amounts attributable to amounts deferred under this restatement, plus (iii) amounts credited in accordance with all the applicable crediting provisions of this Plan that relate to the Participant's Company Matching Account, less (iv) all distributions made to the -4- Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant's Company Matching Account. 1.14 "Deduction Limitation" shall mean the following described limitation on a benefit that may otherwise be distributable pursuant to the provisions of this Plan. Except as otherwise provided, this limitation shall be applied to all distributions that are "subject to the Deduction Limitation" under this Plan. If an Employer determines in good faith prior to a Change in Control that there is a reasonable likelihood that any compensation paid to a Participant for a taxable year of the Employer would not be deductible by the Employer solely by reason of the limitation under Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution to the Participant pursuant to this Plan prior to the Change in Control is deductible, the Employer may defer all or any portion of a distribution under this Plan. Any amounts deferred pursuant to this limitation shall continue to be credited/debited with additional amounts in accordance with Section 3.7 below, even if such amount is being paid out in installments. The amounts so deferred and amounts credited thereon shall be distributed to the Participant or his or her Beneficiary (in the event of the Participant's death) at the earliest possible date, as determined by the Employer in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Employer during which the distribution is made will not be limited by Section 162(m), or if earlier, the effective date of a Change in Control. Notwithstanding anything to the contrary in this Plan, the Deduction Limitation shall not apply to any distributions made after a Change in Control. 1.15 "Deferral Account" shall mean with respect to each Participant, (i) the amount credited to the Participant's "deferred benefit account(s)" as of December 31, 1997, under the terms of the Plan in effect immediately prior to the effective date of this restatement, plus (ii) the sum of all of a Participant's Annual Deferral Amounts attributable to amounts deferred under this restatement, plus (iii) amounts credited in accordance with all the applicable crediting provisions of this Plan that relate to the Participant's Deferral Account, less (iv) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account. 1.16 "Disability" shall mean a period of disability during which a Participant qualifies for permanent disability benefits under the Participant's Employer's long-term disability plan, or, if a Participant does not participate in such a plan, a period of disability during which the Participant would have qualified for permanent disability benefits under such a plan had the Participant been a participant in such a plan, as determined in the sole discretion of the Committee. If the Participant's Employer does not sponsor such a plan, or discontinues to sponsor such a plan, Disability shall be determined by the Committee in its sole discretion. 1.17 "Disability Benefit" shall mean the benefit set forth in Article 8. 1.17A "Discretionary Contribution Account" shall mean with respect to each Participant, (i) the Participant's Discretionary Contribution Amounts (if any) credited under this restatement, plus (ii) amounts credited or debited in accordance with the applicable crediting/debiting provisions of this Plan that relate to the Participant's Discretionary Contribution Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to the Plan that relate to his or her Discretionary Contribution Account. 1.17B "Discretionary Contribution Amount" for any one Plan Year shall be the amount determined in accordance with Section 3.4A. -5- 1.18 "Election Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan. 1.19 "Employee" shall mean a person who is an employee of any Employer. 1.20 "Employer(s)" shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor. 1.21 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time. 1.22 "401(k) Plan" shall be that certain UtiliCorp United Inc. Retirement Investment Plan, formerly known as the UtiliCorp Restated Savings Plan, adopted by the Company. 1.23 "Maximum 401(k) Amount" with respect to a Participant, shall be the maximum amount of elective contributions that can be made by such Participant, consistent with Code Section 402(g) and the limitations of Code Section 401(k)(3), for a given plan year under the 401(k) Plan. 1.24 "Participant" shall mean any Employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Plan Agreement, an Election Form and a Beneficiary Designation Form, (iv) whose signed Plan Agreement, Election Form and Beneficiary Designation Form are accepted by the Committee, (v) who commences participation in the Plan, and (vi) whose Plan Agreement has not terminated. A spouse or former spouse of a Participant shall not be treated as a Participant in the Plan or have an account balance under the Plan, even if he or she has an interest in the Participant's benefits under the Plan as a result of applicable law or property settlements resulting from legal separation or divorce. 1.25 "Plan" shall mean the Company's Supplemental Contributory Retirement Plan, which shall be evidenced by this instrument and by each Plan Agreement, as they may be amended from time to time. 1.26 "Plan Agreement" shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant and the Participant's Employer shall provide for the entire benefit to which such Participant is entitled under the Plan; should there be more than one Plan Agreement, the Plan Agreement bearing the latest date of acceptance by the Employer shall supersede all previous Plan Agreements in their entirety and shall govern such entitlement. The terms of any Plan Agreement may be different for any Participant, and any Plan Agreement may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan; provided, however, that any such additional benefits or benefit limitations must be agreed to by both the Employer and the Participant. 1.27 "Plan Year" shall mean a period beginning on January 1 of each calendar year and continuing through December 31 of such calendar year. 1.28 "Pre-Retirement Survivor Benefit" shall mean the benefit set forth in Article 6. 1.29 "Quarterly Installment Method" shall be a quarterly installment payment over the number of calendar quarters selected by the Participant in accordance with this Plan. The amount of such -6- installments shall be redetermined on a quarterly basis by dividing the Participant's remaining Account Balance by the remaining number of installment payments. In no event shall any quarterly installment exceed the Participant's Account Balance at the time of distribution. 1.30 "Retirement", "Retire(s)" or "Retired" shall mean, with respect to an Employee, severance from employment from all Employers for any reason other than a leave of absence, death or Disability on or after the attainment of age fifty-five (55). 1.31 "Retirement Benefit" shall mean the benefit set forth in Article 5. 1.32 "Termination Benefit" shall mean the benefit set forth in Article 7. 1.33 "Termination of Employment" shall mean the severing of employment with all Employers, voluntarily or involuntarily, for any reason other than Retirement, Disability, death or an authorized leave of absence. 1.34 "Trust" shall mean one or more trusts established pursuant to that certain Executive Benefit Security Trust Agreement, dated as of January 1, 1997 between the Company and the trustee named therein, as amended from time to time. 1.35 "Unforeseeable Financial Emergency" shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, (ii) a loss of the Participant's property due to casualty, or (iii) such other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee. 1.36 "Years of Service" for a Participant shall mean the total number of full years of "Vesting Service" a Participant has earned under the terms of the 401(k) Plan. ARTICLE 2 SELECTION, ENROLLMENT, ELIGIBILITY 2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to a select group of management and highly compensated Employees of the Employers, as determined by the Committee in its sole discretion. From that group, the Committee shall select, in its sole discretion, Employees to participate in the Plan. 2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each selected Employee shall complete, execute and return to the Committee a Plan Agreement, an Election Form and a Beneficiary Designation Form, all within 30 days after he or she is selected to participate in the Plan. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary. 2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an Employee selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period, that Employee shall commence participation in the Plan on the first day of the month following the month in which the Employee completes all enrollment requirements. If an Employee fails to meet -7- all such requirements within the period required, in accordance with Section 2.2, that Employee shall not be eligible to participate in the Plan until the first day of the Plan Year following the delivery to and acceptance by the Committee of the required documents. 2.4 TERMINATION OF PARTICIPATION AND/OR DEFERRALS. If the Committee determines in good faith that a Participant no longer qualifies as a member of a select group of management or highly compensated employees, as membership in such group is determined in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, the Committee shall have the right, in its sole discretion, to (i) terminate any deferral election the Participant has made for the remainder of the Plan Year in which the Participant's membership status changes, (ii) prevent the Participant from making future deferral elections and/or (iii) immediately distribute the Participant's then Account Balance as a Termination Benefit and terminate the Participant's participation in the Plan. ARTICLE 3 DEFERRAL COMMITMENTS/COMPANY MATCHING/CREDITING/TAXES 3.1 ANNUAL DEFERRAL AMOUNTS. For each Plan Year, the Annual Deferral Amount for a Participant shall be equal to: (A x B) - C, where: A = the Participant's Base Annual Salary for the Plan Year B = the contribution percentage elected by the Participant under the 401(k) Plan in effect as of the first day of the deferral period C = the Participant's Maximum 401(k) Amount for the Plan Year. Notwithstanding the foregoing, the minimum deferral for any Plan Year shall be $1,000 and no amount shall be credited to a Participant's Deferral Account under this Plan for a Plan Year until such Participant has contributed the Maximum 401(k) Amount to the 401(k) Plan. 3.2 ELECTION TO DEFER; EFFECT OF ELECTION FORM. (a) FIRST PLAN YEAR. In connection with a Participant's commencement of participation in the Plan, the Participant shall make an irrevocable deferral election for the Plan Year in which the Participant commences participation in the Plan, along with such other elections as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form must be completed and signed by the Participant, timely delivered to the Committee (in accordance with Section 2.2 above) and accepted by the Committee. (b) SUBSEQUENT PLAN YEARS. For each succeeding Plan Year, an irrevocable deferral election for that Plan Year, and such other elections as the Committee deems necessary or desirable under the Plan, shall be made before the end of the Plan Year preceding the Plan Year for which such elections are made, in accordance with the Committee's rules and procedures. -8- 3.3 WITHHOLDING OF ANNUAL DEFERRAL AMOUNTS For each Plan Year, the Annual Deferral Amount for a Participant shall be withheld from each regularly scheduled Base Annual Salary payroll in equal amounts, as adjusted from time to time for increases and decreases in Base Annual Salary; provided, however, that no such amount shall be withheld until the Participant has contributed the Maximum 401(k) Amount to the 401(k) Plan for such Plan Year. 3.4 COMPANY MATCHING AMOUNT. A Participant's Company Matching Amount for any Plan Year shall be equal to one hundred percent (100%) of the Participant's Annual Deferral Amount for such Plan Year, up to an amount that does not exceed six percent (6%) of the Participant's Base Annual Salary, reduced by the amount of any matching contributions made to the 401(k) Plan on his or her behalf for the plan year of the 401(k) Plan that corresponds to the Plan Year. Company Matching Contributions shall be credited to Participant's Company Matching Accounts at the same time Company Matching Contributions would have been made under the 401(k) Plan. 3.4A DISCRETIONARY CONTRIBUTIONS. Effective with respect to Plan Years beginning on or after January 1, 1997, a Participant shall be credited with an annual amount (the "Discretionary Contribution Amount") equal to difference between: (a) the aggregate amount of Employer discretionary contributions which would have been allocated to the Participant's account under the 401(k) Plan if the Participant had elected not to defer all or any portion of his Base Annual Salary under this Plan for the applicable Plan Year, and (b) the aggregate amount of Employer discretionary contributions actually allocated to the Participant's account under the 401(k) Plan for such Plan Year. The purpose of the contributions under this Section is to make the Participant whole for the loss of the Employer discretionary contributions that such Participant would have received under the 401(k) Plan if the Participant had not elected to defer a portion of his or her Annual Base Salary under this Plan. 3.5 INVESTMENT OF TRUST ASSETS. The Trustee of the Trust shall be authorized, upon written instructions received from the Committee or investment manager appointed by the Committee, to invest and reinvest the assets of the Trust in accordance with the applicable Trust Agreement, including the disposition of stock and reinvestment of the proceeds in one or more investment vehicles designated by the Committee. 3.6 VESTING. (a) A Participant shall at all times be 100% vested in his or her Deferral Account. (b) A Participant shall be vested in his or her Company Matching and Discretionary Contribution Accounts as follows: (i) with respect to all benefits under this Plan other than the Termination Benefit, a Participant's vested Company Matching and Discretionary Contribution Accounts shall equal 100% of such Participant's Company Matching and Discretionary Contribution Accounts; and (ii) with respect to the Termination Benefit, a Participant's Company Matching and Discretionary Contribution Accounts shall vest on the basis of the Participant's Years of Service at the time the Participant experiences a Termination of Employment, in accordance with the following schedule: -9-
---------------------------------------- --------------------------------------- YEARS OF SERVICE VESTED PERCENTAGE OF AT DATE OF COMPANY MATCHING AND DISCRETIONARY TERMINATION OF EMPLOYMENT CONTRIBUTION ACCOUNTS ---------------------------------------- --------------------------------------- Less than 1 year 0% ---------------------------------------- --------------------------------------- 1 year or more, but less than 2 20% ---------------------------------------- --------------------------------------- 2 years or more, but less than 3 40% ---------------------------------------- --------------------------------------- 3 years or more, but less than 4 60% ---------------------------------------- --------------------------------------- 4 years or more, but less than 5 80% ---------------------------------------- --------------------------------------- 5 years or more 100% --------------------------------------------------------------------------------
(c) Notwithstanding anything to the contrary contained in this Section 3.6, in the event of a Change in Control, a Participant's Company Matching and Discretionary Contribution Accounts shall immediately become 100% vested (if it is not already vested in accordance with the above vesting schedules). (d) Notwithstanding subsection (c), the vesting schedule for a Participant's Company Matching and Discretionary Contribution Accounts shall not be accelerated to the extent that the Committee determines that such acceleration would cause the deduction limitations of Section 280G of the Code to become effective. In the event that all of a Participant's Company Matching and Discretionary Contribution Accounts is not vested pursuant to such a determination, the Participant may request independent verification of the Committee's calculations with respect to the application of Section 280G. In such case, the Committee must provide to the Participant within 15 business days of such a request an opinion from a nationally recognized accounting firm selected by the Participant (the "Accounting Firm"). The opinion shall state the Accounting Firm's opinion that any limitation in the vested percentage hereunder is necessary to avoid the limits of Section 280G and contain supporting calculations. The cost of such opinion shall be paid for by the Company. 3.7 CREDITING/DEBITING OF ACCOUNT BALANCES. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be credited or debited to a Participant's Account Balance in accordance with the following rules: (a) ELECTION OF MEASUREMENT FUNDS FOR DEFERRAL ACCOUNTS. Each Participant, in connection with his or her initial deferral election in accordance with Section 3.2 above, shall elect, in a manner designated by and acceptable to the Committee, one or more Measurement Fund(s) (as described in Section 3.7(c) below) to be used to determine the additional amounts to be credited to his or her Deferral Account balance for the first regularly scheduled payroll period in which the Participant commences participation in the Plan and continuing thereafter for each subsequent payroll period in which the Participant participates in the Plan, unless changed in accordance with the next sentence. Each Participant may elect in the manner and at the time(s) designated by and acceptable to the Committee, to add or delete one or more Measurement Fund(s) to be used to determine the additional amounts to be credited to his or her Deferral Account balance, or to change the portion of his or her Deferral Account balance allocated to each previously or newly elected Measurement Fund. Any election that is made in accordance with the previous sentence shall be effective as soon as administratively practicable following the acceptance of such election by the Committee. -10- (b) PROPORTIONATE ALLOCATION. In making any election described in Section 3.7(a) above, the Participant shall specify, in increments of one percentage point (1%), the percentage of his or her Deferral Account balance to be allocated to a Measurement Fund (as if the Participant was making an investment in that Measurement Fund with that portion of his or her Deferral Account balance). (c) MEASUREMENT FUNDS FOR DEFERRAL ACCOUNTS. The "Measurement Funds" to be used to determine the additional amounts to be credited to a Participant's Deferral Account balance shall be determined by the Committee in its sole discretion. The Committee may from time to time discontinue, substitute or add a Measurement Fund, provided that any such action to discontinue or substitute any Measurement Fund may only take effect following at least thirty (30) days advance written notice of such change to the Participants. (d) CREDITING OR DEBITING METHOD. The performance of each Measurement Fund (either positive or negative) will be determined by the Committee, in its sole discretion, based on the investment performance of the Measurement Funds themselves. A Participant's Account Balance shall be credited or debited on a daily basis based on the investment performance of each Measurement Fund, AS DETERMINED BY THE COMMITTEE IN ITS SOLE DISCRETION, as though (i) such Participant's Deferral Account balance was invested in the applicable Measurement Fund(s) selected by the Participant; (ii) such Participant's Company Matching Account and Discretionary Contribution Account balances were invested in UtiliCorp United Inc. Common Stock; (iii) the portion of the Participant's Annual Deferral Amount that was actually deferred on any regularly scheduled payment date was invested in the applicable Measurement Fund(s) selected by the Participant, no later than the close of business on the second business day immediately following such regularly scheduled payment date; (iv) the Annual Company Matching and Discretionary Contribution Amounts (if any) attributable to a Participant for any Plan Year were invested in UtiliCorp United Inc. Common Stock as of the same date(s) such Amounts would have been credited under the 401(k) Plan had such Amounts been credited as a matching or discretionary contribution to the 401(k) Plan; and (v) any distribution made to a Participant that decreases such Participant's Account Balance ceased being invested in the applicable Measurement Fund(s), no earlier than the fifth business day preceding the date the Company pays such Participant his or her benefit in accordance with the other provisions of this Plan. (e) NO ACTUAL INVESTMENT. Notwithstanding any other provision of this Plan or any notice, statement, summary or other communication provided to a Participant that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participant's election of any such Measurement Fund, the allocation to his or her Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant's Account Balance SHALL NOT be considered or construed in any manner as an actual investment of his or her Account Balance in any such Measurement Fund. In the event that the Company or the trustee of the Trust, in its own discretion, decides to invest funds in any or all of the Measurement Funds, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant's Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by the Company or the Trust; the Participant shall at all times remain an unsecured creditor of the Company. -11- (f) INVESTMENT OF COMPANY MATCHING AND DISCRETIONARY CONTRIBUTION AMOUNTS. Notwithstanding any other provisions in this Plan that may be interpreted to the contrary, a Participant's Annual Company Matching and Discretionary Contribution Amounts shall be deemed invested in UtiliCorp United Inc. Common Stock at all times such amounts are credited to his or her Account Balance. 3.8 FICA AND OTHER TAXES. (a) ANNUAL DEFERRAL AMOUNTS. For each Plan Year in which an Annual Deferral Amount is being withheld from a Participant, the Participant's Employer(s) shall withhold from that portion of the Participant's Base Annual Salary that is not being deferred, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes on such Annual Deferral Amount and Plan earnings, as applicable. If necessary, the Committee may reduce the Annual Deferral Amount in order to comply with this Section 3.8. (b) COMPANY MATCHING AND DISCRETIONARY CONTRIBUTION AMOUNTS. When a Participant becomes vested in a portion of his or her Company Matching and Discretionary Contribution Accounts, the Participant's Employer(s), to the extent required by applicable law, shall withhold from the Participant's Base Annual Salary that is not deferred, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes. If necessary, the Committee may reduce the vested portion of the Participant's accounts in order to comply with this Section 3.8, which reduction may subject the Participant to additional taxes. 3.9 DISTRIBUTIONS. The Participant's Employer(s), or the trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Employer(s), or the trustee of the Trust, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Employer(s) and the trustee of the Trust. ARTICLE 4 UNFORESEEABLE FINANCIAL EMERGENCIES; WITHDRAWAL ELECTION 4.1 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES. If a Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to (i) suspend any deferrals required to be made by the Participant and/or (ii) receive a partial or full payout from the Plan. The payout shall not exceed the lesser of the Participant's Account Balance, calculated as if such Participant were receiving Termination Benefit, or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency. If, subject to the sole discretion of the Committee, the petition for a suspension and/or payout is approved, suspension shall take effect upon the date of approval and any payout shall be made within 60 days of the date of approval. The payment of any amount under this Section 4.1 shall not be subject to the Deduction Limitation. 4.2 WITHDRAWAL ELECTION. A Participant (or, after a Participant's death, his or her Beneficiary) may elect, at any time, to withdraw all of his or her Account Balance, calculated as if there had occurred a Termination of Employment as of the day of the election, less a withdrawal penalty equal to 10% -12- of such amount (the net amount shall be referred to as the "Withdrawal Amount"). This election can be made at any time, before or after Retirement, Disability, death or Termination of Employment, and whether or not the Participant (or Beneficiary) is in the process of being paid pursuant to an installment payment schedule. If made before Retirement, Disability or death, a Participant's Withdrawal Amount shall be his or her Account Balance calculated as if there had occurred a Termination of Employment as of the day of the election. No partial withdrawals of the Withdrawal Amount shall be allowed. The Participant (or his or her Beneficiary) shall make this election by giving the Committee advance written notice of the election in a form determined from time to time by the Committee. The Participant (or his or her Beneficiary) shall be paid the Withdrawal Amount within 60 days of his or her election. Once the Withdrawal Amount is paid, the Participant's participation in the Plan shall terminate and the Participant shall not be eligible to participate in the Plan for eighteen (18) months in the future. The payment of this Withdrawal Amount shall not be subject to the Deduction Limitation. ARTICLE 5 RETIREMENT BENEFIT 5.1 RETIREMENT BENEFIT. Subject to the Deduction Limitation, a Participant who Retires shall receive, as a Retirement Benefit, his or her Account Balance. 5.2 PAYMENT OF RETIREMENT BENEFIT. A Participant in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to receive his or her Retirement Benefit in a lump sum or pursuant to a Quarterly Installment Method over 2 to 15 years. The Participant may annually change his or her election to an alternative payout method by submitting a new Election Form to the Committee, provided, however, the Committee will only honor a Participant's new election if it is submitted to the Committee at least 13 months prior to the Participant's Retirement date. In the event that a Participant Retires before his or her attainment of age 62, the Participant may file a written request with the Committee requesting that the lump sum payment not be made, or installment payments not commence, until after the Participant reaches age sixty-five (65), provided that any such Election Form is submitted at least 13 months prior to the Participant's Retirement date and is accepted by the Committee in its sole discretion. If a Participant does not make any election with respect to the payment of the Retirement Benefit, then such benefit shall be payable in a lump sum. The lump sum payment shall be made, or installment payments shall commence, no later than 60 days after the date the Participant Retires. Any payment made shall be subject to the Deduction Limitation. 5.3 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFIT. If a Participant dies after Retirement but before his or her Retirement Benefit is paid in full, the Participant's unpaid Retirement Benefit shall be paid to his or her Beneficiary as follows: (i) if the Participant elected to receive his or her Retirement Benefit pursuant to the Quarterly Installment Method, then the Beneficiary shall receive such benefits over the remaining number of quarters and in the same amounts as such benefits would have been paid to the Participant had the Participant survived; or (ii) if the Participant elected to receive his or her Retirement Benefit in the form of a lump sum payment, then the Beneficiary shall receive such benefits in a lump sum payment at the same time that the Participant would have received such payment had the Participant survived. Notwithstanding the foregoing, a Beneficiary may elect, prior to the time that benefits would otherwise be paid pursuant -13- to the preceding sentence, a complete withdrawal of the benefits to which he or she is entitled in accordance with Section 4.2. ARTICLE 6 PRE-RETIREMENT SURVIVOR BENEFIT 6.1 PRE-RETIREMENT SURVIVOR BENEFIT. Subject to the Deduction Limitation, the Participant's Beneficiary shall receive a Pre-Retirement Survivor Benefit equal to the Participant's Account Balance if the Participant dies before he or she Retires, experiences a Termination of Employment or suffers a Disability. 6.2 PAYMENT OF PRE-RETIREMENT SURVIVOR BENEFIT. A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form whether the Pre-Retirement Survivor Benefit shall be received by his or her Beneficiary in a lump sum or pursuant to a Quarterly Installment Method over 2 to 15 years. The Participant may annually change this election to an allowable alternative payout period by submitting a new Election Form to the Committee, which form must be accepted by the Committee in its sole discretion. The Election Form most recently accepted by the Committee prior to the Participant's death shall govern the payout of the Participant's Pre-Retirement Survivor Benefit. If a Participant does not make any election with respect to the payment of the Pre-Retirement Survivor Benefit, then such benefit shall be paid in a lump sum. Despite the foregoing, if the Participant's Account Balance at the time of his or her death is less than $25,000, payment of the Pre-Retirement Survivor Benefit may be made, in the sole discretion of the Committee, in a lump sum or pursuant to a Quarterly Installment Method over not more than 5 years. The lump sum payment shall be made, or installment payments shall commence, no later than 60 days after the date the Committee is provided with proof that is satisfactory to the Committee of the Participant's death. Any payment made shall be subject to the Deduction Limitation. ARTICLE 7 TERMINATION BENEFIT 7.1 TERMINATION BENEFIT. Subject to the Deduction Limitation, the Participant shall receive a Termination Benefit, which shall be equal to the Participant's Account Balance if a Participant experiences a Termination of Employment prior to his or her Retirement, death or Disability. 7.2 PAYMENT OF TERMINATION BENEFIT. The Termination Benefit shall be paid in a lump sum. The lump sum payment shall be made, or installment payments shall commence, no later than 60 days after the date of the Participant's Termination of Employment. Any payment made shall be subject to the Deduction Limitation. ARTICLE 8 DISABILITY WAIVER AND BENEFIT 8.1 DISABILITY WAIVER. (a) WAIVER OF DEFERRAL. A Participant who is determined by the Committee to be suffering from a Disability shall be excused from fulfilling that portion of the Annual Deferral Amount commitment that would otherwise have been withheld from a Participant's Base -14- Annual Salary for the Plan Year during which the Participant first suffers a Disability. During the period of Disability, the Participant shall not be allowed to make any additional deferral elections, but will continue to be considered a Participant for all other purposes of this Plan. (b) RETURN TO WORK. If a Participant returns to employment with an Employer, after a Disability ceases, the Participant may elect to defer an Annual Deferral Amount for the Plan Year following his or her return to employment or service and for every Plan Year thereafter while a Participant in the Plan; provided such deferral elections are otherwise allowed and an Election Form is delivered to and accepted by the Committee for each such election in accordance with Section 3.2 above. 8.2 CONTINUED ELIGIBILITY; DISABILITY BENEFIT. A Participant suffering a Disability shall, for benefit purposes under this Plan, continue to be considered to be employed, or in the service of an Employer and shall be eligible for the benefits provided for in Article 4, 5, 6 or 7 in accordance with the provisions of those Articles. Notwithstanding the above, the Committee shall have the right to, in its sole and absolute discretion and for purposes of this Plan only, and must in the case of a Participant who is otherwise eligible to Retire, deem the Participant to have experienced a Termination of Employment, or in the case of a Participant who is eligible to Retire, to have Retired, at any time (or in the case of a Participant who is eligible to Retire, as soon as practicable) after such Participant is determined to be suffering a Disability, in which case the Participant shall receive a Disability Benefit equal to his or her Account Balance at the time of the Committee's determination; provided, however, that should the Participant otherwise have been eligible to Retire, he or she shall be paid in accordance with Article 5. The Disability Benefit shall be paid in a lump sum within 60 days of the Committee's exercise of such right. Any payment made shall be subject to the Deduction Limitation. ARTICLE 9 BENEFICIARY DESIGNATION 9.1 BENEFICIARY. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates. 9.2 BENEFICIARY DESIGNATION; CHANGE. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time. 9.3 ACKNOWLEDGMENT. No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee or its designated agent. 9.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated -15- Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant's estate. 9.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Participant's Employer to withhold such payments until this matter is resolved to the Committee's satisfaction. 9.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant's Plan Agreement shall terminate upon such full payment of benefits. ARTICLE 10 LEAVE OF ABSENCE 10.1 PAID LEAVE OF ABSENCE. If a Participant is authorized by the Participant's Employer for any reason to take a paid leave of absence from the employment of the Employer, the Participant shall continue to be considered employed by the Employer and the Annual Deferral Amount shall continue to be withheld during such paid leave of absence in accordance with Section 3.3. 10.2 UNPAID LEAVE OF ABSENCE. If a Participant is authorized by the Participant's Employer for any reason to take an unpaid leave of absence from the employment of the Employer, the Participant shall continue to be considered employed by the Employer and the Participant shall be excused from making deferrals until the earlier of the date the leave of absence expires or the Participant returns to a paid employment status. Upon such expiration or return, deferrals shall resume for the remaining portion of the Plan Year in which the expiration or return occurs, based on the deferral election, if any, made for that Plan Year. If no election was made for that Plan Year, no deferral shall be withheld. ARTICLE 11 TERMINATION, AMENDMENT OR MODIFICATION 11.1 TERMINATION. Although each Employer anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that any Employer will continue the Plan or will not terminate the Plan at any time in the future. Accordingly, each Employer reserves the right to discontinue its sponsorship of the Plan and/or to terminate the Plan at any time with respect to any or all of its participating Employees by action of its board of directors. Upon the termination of the Plan with respect to any Employer, the Plan Agreements of the affected Participants who are employed by that Employer shall terminate and their Account Balances, determined as if they had experienced a Termination of Employment on the date of Plan termination or, if Plan termination occurs after the date upon which a Participant was eligible to Retire, then with respect to that Participant as if he or she had Retired on the date of Plan termination, shall be paid to the Participants as follows: Prior to a Change in Control, if the Plan is terminated with respect to all of its Participants, an Employer shall have the right, in its sole discretion, and notwithstanding any elections made by the Participant, to pay such benefits in a lump sum or pursuant to a Quarterly Installment Method of up to 15 years, with amounts credited and debited during the installment period as provided herein. If -16- the Plan is terminated with respect to less than all of its Participants, an Employer shall be required to pay such benefits in a lump sum. After a Change in Control, the Employer shall be required to pay such benefits in a lump sum. The termination of the Plan shall not adversely affect any Participant or Beneficiary who has become entitled to the payment of any benefits under the Plan as of the date of termination; provided however, that the Employer shall have the right to accelerate installment payments without a premium or prepayment penalty by paying the Account Balance in a lump sum or pursuant to a Quarterly Installment Method using fewer quarters (provided that the present value of all payments that will have been received by a Participant at any given point of time under the different payment schedule shall equal or exceed the present value of all payments that would have been received at that point in time under the original payment schedule). 11.2 AMENDMENT. Any Employer may, at any time, amend or modify the Plan in whole or in part with respect to that Employer by the action of its board of directors; provided, however, that no amendment or modification shall be effective to decrease or restrict the value of a Participant's Account Balance in existence at the time the amendment or modification is made, calculated as if the Participant had experienced a Termination of Employment as of the effective date of the amendment or modification or, if the amendment or modification occurs after the date upon which the Participant was eligible to Retire, the Participant had Retired as of the effective date of the amendment or modification. The amendment or modification of the Plan shall not affect any Participant or Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification; provided, however, that the Employer shall have the right to accelerate installment payments by paying the Account Balance in a lump sum or pursuant to a Quarterly Installment Method using fewer quarters (provided that the present value of all payments that will have been received by a Participant at any given point of time under the different payment schedule shall equal or exceed the present value of all payments that would have been received at that point in time under the original payment schedule). 11.3 PLAN AGREEMENT. Despite the provisions of Sections 11.1 and 11.2 above, if a Participant's Plan Agreement contains benefits or limitations that are not in this Plan document, the Employer may only amend or terminate such provisions with the consent of the Participant. 11.4 EFFECT OF PAYMENT. The full payment of the applicable benefit under Article 4, 5, 6, 7 or 8 of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under this Plan and the Participant's Plan Agreement shall terminate. ARTICLE 12 ADMINISTRATION 12.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee which shall consist of the Board, or such committee as the Board shall appoint. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to (i) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or the Company. -17- 12.2 AGENTS. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer. 12.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 12.4 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless the members of the Committee, and any Employee to whom the duties of the Committee may be delegated, against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee or any of its members or any such Employee. 12.5 EMPLOYER INFORMATION. To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of its Participants, the date and circumstances of the Retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Committee may reasonably require. ARTICLE 13 OTHER BENEFITS AND AGREEMENTS 13.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a Participant and Participant's Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Participant's Employer. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided. ARTICLE 14 CLAIMS PROCEDURES 14.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. 14.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim within 90 days (unless special circumstances require additional time) a reasonable time, and shall notify the Claimant in writing: -18- (a) that the Claimant's requested determination has been made, and that the claim has been allowed in full; or (b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: (i) the specific reason(s) for the denial of the claim, or any part of it; (ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and (iv) an explanation of the claim review procedure set forth in Section 14.3 below. 14.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than 30 days after the review procedure began, the Claimant (or the Claimant's duly authorized representative): (a) may review pertinent documents; (b) may submit written comments or other documents; and/or (c) may request a hearing, which the Committee, in its sole discretion, may grant. 14.4 DECISION ON REVIEW. The Committee shall render its decision on review promptly, and not later than 60 days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee's decision must be rendered within 120 days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (a) specific reasons for the decision; (b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and (c) such other matters as the Committee deems relevant. 14.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of this Article 14 is a mandatory prerequisite to a Claimant's right to commence any legal action with respect to any claim for benefits under this Plan. -19- ARTICLE 15 TRUST 15.1 ESTABLISHMENT OF THE TRUST. The Company shall establish the Trust, and each Employer shall at least annually transfer over to the Trust such assets as the Employer determines, in its sole discretion, are necessary to provide, on a present value basis, for its respective future liabilities created with respect to the Annual Deferral Amounts and Company Matching Amounts for such Employer's Participants for all periods prior to the transfer, as well as any debits and credits to the Participants' Account Balances for all periods prior to the transfer, taking into consideration the value of the assets in the trust at the time of the transfer. 15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under the Plan. 15.3 DISTRIBUTIONS FROM THE TRUST. Each Employer's obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employer's obligations under this Plan. ARTICLE 16 MISCELLANEOUS 16.1 STATUS OF PLAN. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that "is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employee" within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan shall be administered and interpreted to the extent possible in a manner consistent with that intent. 16.2 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer. For purposes of the payment of benefits under this Plan, any and all of an Employer's assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. An Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. 16.3 EMPLOYER'S LIABILITY. An Employer's liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer and a Participant. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan and his or her Plan Agreement. 16.4 NONASSIGNABILITY. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or -20- separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise. 16.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an "at will" employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer as an Employee or to interfere with the right of any Employer to discipline or discharge the Participant at any time. 16.6 FURNISHING INFORMATION. A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary. 16.7 TERMS. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 16.8 CAPTIONS. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 16.9 GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of Missouri without regard to its conflicts of laws principles. 16.10 NOTICE. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: Mr. Phil Beyer Director of Benefits UtiliCorp United Inc. 20 West Ninth Street Kansas City, MO 64105-1711 Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant. 16.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the benefit of the Participant's Employer and its successors and assigns and the Participant and the Participant's designated Beneficiaries. -21- 16.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse's will, nor shall such interest pass under the laws of intestate succession. 16.13 VALIDITY. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. 16.14 INCOMPETENT. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount. 16.15 COURT ORDER. The Committee is authorized to make any payments directed by court order in any action in which the Plan or the Committee has been named as a party. In addition, if a court determines that a spouse or former spouse of a Participant has an interest in the Participant's benefits under the Plan in connection with a property settlement or otherwise, the Committee, in its sole discretion, shall have the right, notwithstanding any election made by a Participant, to immediately distribute the spouse's or former spouse's interest in the Participant's benefits under the Plan to that spouse or former spouse. 16.16 DISTRIBUTION IN THE EVENT OF TAXATION. (a) IN GENERAL. If, for any reason, all or any portion of a Participant's benefits under this Plan becomes taxable to the Participant prior to receipt, a Participant may petition the Committee before a Change in Control, or the trustee of the Trust after a Change in Control, for a distribution of that portion of his or her benefit that has become taxable. Upon the grant of such a petition, which grant shall not be unreasonably withheld (and, after a Change in Control, shall be granted), a Participant's Employer shall distribute to the Participant immediately available funds in an amount equal to the taxable portion of his or her benefit (which amount shall not exceed a Participant's unpaid Account Balance under the Plan). If the petition is granted, the tax liability distribution shall be made within 90 days of the date when the Participant's petition is granted. Such a distribution shall affect and reduce the benefits to be paid under this Plan. (b) TRUST. If the Trust terminates in accordance with its terms and benefits are distributed from the Trust to a Participant in accordance with that Section, the Participant's benefits under this Plan shall be reduced to the extent of such distributions. 16.17 INSURANCE. The Employers, on their own behalf or on behalf of the trustee of the Trust, and, in their sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Trust may choose. The Employers or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the -22- Employers shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Employers have applied for insurance. 16.18 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL. The Company and each Employer is aware that upon the occurrence of a Change in Control, the Board or the board of directors of a Participant's Employer (which might then be composed of new members) or a shareholder of the Company or the Participant's Employer, or of any successor corporation might then cause or attempt to cause the Company, the Participant's Employer or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause the Company or the Participant's Employer to institute, or may institute, litigation seeking to deny Participants the benefits intended under the Plan. In these circumstances, the purpose of the Plan could be frustrated. Accordingly, if, following a Change in Control, it should appear to any Participant that the Company, the Participant's Employer or any successor corporation has failed to comply with any of its obligations under the Plan or any agreement thereunder or, if the Company, such Employer or any other person takes any action to declare the Plan void or unenforceable or institutes any litigation or other legal action designed to deny, diminish or to recover from any Participant the benefits intended to be provided, then the Company and the Participant's Employer irrevocably authorize such Participant to retain counsel of his or her choice at the expense of the Company and the Participant's Employer (who shall be jointly and severally liable) to represent such Participant in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company, the Participant's Employer or any director, officer, shareholder or other person affiliated with the Company, the Participant's Employer or any successor thereto in any jurisdiction. -23- EX-13 12 EXHIBIT 13 Common Stock Performance [GRAPHIC: PERFORMANCE GRAPH] Investment Research Analysts at the following investment firms currently follow UtiliCorp and have issued research reports on our performance:
EQUITY RESEARCH: DEBT RESEARCH: ABN Amro, Inc. J. P. Morgan Securities Inc. ABN Amro, Inc. BT Alex. Brown, Incorporated Merrill Lynch & Co. Donaldson, Lufkin & Jenrette Donaldson, Lufkin & Jenrette Morgan Stanley Dean Witter Securities Corporation Securities Corporation PaineWebber Incorporated Merrill Lynch & Co. Edward Jones Robert W. Baird & Co. PaineWebber Incorporated Fidelity Capital Markets Salomon Smith Barney Prudential Fixed Income Goldman Sachs & Co. Value Line Publishing, Inc. Warburg Dillon Read Jefferies & Company, Inc.
Dividend Dates for 2000
First Second Third Fourth Quarter Quarter Quarter Quarter - -------------------------------------------------------------------------------------------------------------- DIVIDENDS (a) Dividends are declared by the board of directors on: Feb. 2 May 3 Aug. 2 Nov. 8 - -------------------------------------------------------------------------------------------------------------- The record dates to qualify for a dividend are: Feb. 22 May 22 Aug. 22 Nov. 22 - -------------------------------------------------------------------------------------------------------------- Dividend checks should be received on (b): March 13 June 12 Sept. 12 Dec. 12 - -------------------------------------------------------------------------------------------------------------- DIVIDEND REINVESTMENT (c) Dividends for Plan participants are reinvested by the company with a 5% discount on: March 13 June 12 Sept. 12 Dec. 12 - -------------------------------------------------------------------------------------------------------------- For the purchase made each month, Jan. 11 April 11 July 11 Oct. 11 First Chicago Trust Company of New York Feb. 11 May 11 Aug. 11 Nov. 10 must receive OPTIONAL CASH PAYMENTS (c) by: March 10 June 9 Sept. 11 Dec. 11 - -------------------------------------------------------------------------------------------------------------- QUARTERLY STATEMENTS for Plan participants are mailed: Late March Late June Late Sept. Late Dec. - --------------------------------------------------------------------------------------------------------------
(a) DECLARATION OF DIVIDENDS, DIVIDEND RATES AND THE DATES SHOWN ARE SUBJECT TO THE DISCRETION OF DIRECTORS OF UTILICORP UNITED. THE DATES SHOWN ASSUME PAST PATTERNS WILL CONTINUE. HOWEVER, WE DO NOT AND CANNOT MAKE ANY ASSURANCES THAT ANY OR ALL OF THE LISTED EVENTS WILL OCCUR ON THE DATES SHOWN, IF AT ALL. UTILICORP RESERVES THE RIGHT TO AMEND, SUSPEND OR TERMINATE THE DIVIDEND REINVESTMENT AND COMMON STOCK PURCHASE PLAN AT ANY TIME. PLAN PARTICIPANTS WILL BE NOTIFIED OF ANY CHANGES IN WRITING. (b) IF YOU DON'T RECEIVE YOUR DIVIDEND CHECK ON THE PAYMENT DATE, PLEASE ALLOW REASONABLE TIME FOR POSTAL DELAYS BEFORE INQUIRING. (c) PLEASE REFER TO THE LATEST PROSPECTUS OF THE DIVIDEND REINVESTMENT AND COMMON STOCK PURCHASE PLAN DATED JUNE 30, 1997. TO REQUEST A PROSPECTUS AND AN ENROLLMENT FORM, CALL TOLL-FREE IN THE U.S. AND CANADA: 1-800-884-5426; OR DOWNLOAD THESE DOCUMENTS FROM THE INVESTOR INFORMATION SECTION OF UTILICORP'S WEB SITE AT WWW.UTILICORP.COM. FINANCIAL REVIEW Consolidated Operations This review of 1999 performance is organized by business segment, reflecting the way we manage our businesses. Each business unit leader is responsible for operating results, expressed as earnings before interest and taxes (EBIT) . Therefore, each segment discussion focuses on the factors affecting EBIT. We make all decisions on finance, dividends and taxes at the corporate level. We discuss those topics separately on a consolidated basis. Our main financial performance objectives are:
1999 ------------------------------- Objective RESULT - ----------------------------------------------------------- Earnings per share growth 8% 8% Total 3-year return Exceed peer to shareholders group average* 27.59% - -----------------------------------------------------------
* WE COMPARE OUR TOTAL RETURN TO THAT OF 12 TOP-TIER COMPETITORS THAT ARE SIMILAR IN TERMS OF CUSTOMERS, EMPLOYEES AND MARKETS. IN 1999 THE PEER GROUP HAD AN AVERAGE 3-YEAR RETURN OF 25.4%. NORMALIZED EBIT* A summary of our normalized EBIT by business segment is shown below.
Long-Term Future Dollars in millions 1999 1998 1997 Growth Rate(a) - --------------------------------------------------------------------------------------------------- Networks: United States $ 195.1 47.1% $ 220.3 $ 197.5 3% Canada 20.9 5.0 22.0 26.2 6% Australia 28.1 6.8 22.3 27.0 5% New Zealand 80.9 19.6 21.4 9.9 6% - --------------------------------------------------------------------------------------------------- Total Networks 325.0 78.5 286.0 260.6 3-4% - --------------------------------------------------------------------------------------------------- Energy Merchant: Marketing and Trading 14.2 3.4 11.1 18.4 20% Energy Assets 67.2 16.3 50.1 79.5 30% Europe 8.3 2.0 6.2 (5.6) 15% - --------------------------------------------------------------------------------------------------- Total Energy Merchant 89.7 21.7 67.4 92.3 20-30% Services 13.2 3.2 -- -- 25% Corporate and other (13.9) (3.4) (6.2) (13.8) -- - --------------------------------------------------------------------------------------------------- TOTAL EBIT $ 414.0 100.0% $ 347.2 $ 339.1 20-25% - --------------------------------------------------------------------------------------------------- EARNINGS PER SHARE-DILUTED $ 1.75 $ 1.62 $ 1.50 8-10% - ---------------------------------------------------------------------------------------------------
* THE TERM NORMALIZED IS USED TO DESCRIBE OUR RECURRING EARNINGS BEFORE INTEREST AND TAXES. THE TERM IS NOT MEANT TO REPLACE OTHER PERFORMANCE MEASURES USED UNDER GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. (a) MANAGEMENT INFORMATION USED TO DRIVE OUR BUSINESS PLAN.
Earnings Per Growth 97 98 99 Diluted and Normalized-Dollars 1.50 1.62 1.75
We met our goal for 8% growth in earnings per share for three consecutive years. Our 2000 target is a range of 8% to 10%.
Capital Employed 97 98 99 Dollars in Millions 2,885.6 3,407.3 4,369.4
We invested about $900 million in 1999, mostly in international networks and U.S. energy merchant assets. 25 [GRAPHIC] JIM MILLER Responsible for UtiliCorp's U. S. network operations, Jim Miller is senior vice president, energy delivery. He oversees our electric and natural gas networks in seven states, all in the nation's Mid-continent region. These systems distribute energy to 349,000 electric customers and 831,000 natural gas customers. THE MAIN FACTORS SHAPING 1999 RESULTS Comparison of 1999 Normalized Diluted Earnings Per Share to 1998: - -------------------------------------------------------------------------------- NEGATIVE FACTORS: POSITIVE FACTORS: Missouri rate case (a) $(.04) International results (d) $.48 Increased purchased power costs Quanta investment .10 and fewer off-system opportunities (.04) Strong natural gas liquids Retail shutdown and bad debts (.17) prices and volumes (e) .08 Additional shares (b) (.23) Improved trading results, net .18 Additional interest (c) (.37) Gain on asset sales, net .10 Other .04 - -------------------------------------------------------------------------------- TOTAL NEGATIVE FACTORS $(.85) TOTAL POSITIVE FACTORS $.98 - -------------------------------------------------------------------------------- NET CHANGE FROM 1998 $.13 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
(a) IN APRIL 1998, WE WERE ORDERED BY THE MISSOURI PUBLIC SERVICE COMMISSION TO REDUCE RATES BY $22.7 MILLION ANNUALLY. A FULL YEAR'S EFFECT IS INCLUDED IN 1999. (b) ABOUT 13 MILLION SHARES WERE ISSUED IN LATE 1998. (c) ADDITIONAL DEBT WAS ISSUED IN 1999 TO FUND ACQUISITIONS. (d) OUR INTERNATIONAL GROWTH CAME FROM NEW ZEALAND AND AUSTRALIA. (e) NATURAL GAS LIQUIDS PRICES AND PIPELINE THROUGHPUT INCREASED 24% AND 15%, RESPECTIVELY. Comparison of 1998 Normalized Diluted Earnings Per Share to 1997: - -------------------------------------------------------------------------------- NEGATIVE FACTORS: POSITIVE FACTORS: Missouri rate case (a) $(.12) International growth (d) $.17 Depressed natural gas liquids Regulated businesses (e) .35 prices (b) (.23) Merchant term business .05 Mild weather (c) (.12) Corporate and other .02 - -------------------------------------------------------------------------------- TOTAL NEGATIVE FACTORS $(.47) TOTAL POSITIVE FACTORS $.59 - -------------------------------------------------------------------------------- NET CHANGE FROM 1998 $.12 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
(a) IN APRIL 1998, WE WERE ORDERED BY THE MISSOURI PUBLIC SERVICE COMMISSION TO REDUCE RATES BY $22.7 MILLION ANNUALLY, OR $16.3 MILLION PRORATED IN 1998. (b) NATURAL GAS LIQUIDS PRICES AND PRODUCTION DECLINED 26% AND 32%, RESPECTIVELY. (c) WINTER TEMPERATURES AS MEASURED BY HEATING DEGREE-DAYS WERE OFF 15%, PARTIALLY OFFSET BY WARMER SUMMER TEMPERATURES. (d) OUR INTERNATIONAL GROWTH CAME FROM NEW ZEALAND AND THE UNITED KINGDOM. (e) OFF-SYSTEM VOLUME GROWTH, CUSTOMER ADDITIONS AND THE WEATHER RECOVERY PLAN WERE ALL CONTRIBUTORS. Networks The Networks segment includes our electric and natural gas network businesses in the United States, Canada, Australia and New Zealand. Prior to October 1998, we accounted for our investment in New Zealand using the equity method of accounting. As the result of our additional investments in New Zealand in late 1998 and early 1999, we began to consolidate our New Zealand operations and discontinued equity accounting. This change resulted in significant increases in substantially all 1999 operational categories and a reduction in equity earnings. The following table summarizes the operations of our Networks segment for the three years ended December 31, 1999. THREE-YEAR REVIEW-NETWORKS
Year Ended December 31, -------------------------------------------------- Dollars in millions 1999 1998 1997 - ------------------------------------------------------------------------------------------------------- SALES: Electric $ 983.8 $ 760.2 $ 647.2 Gas 638.2 622.5 767.4 Other 266.0 254.0 260.1 - ------------------------------------------------------------------------------------------------------- Total sales 1,888.0 1,636.7 1,674.7 - ------------------------------------------------------------------------------------------------------- COST OF SALES: Electric 411.7 298.5 227.8 Gas 380.9 404.2 500.3 Other 215.5 172.7 215.9 - ------------------------------------------------------------------------------------------------------- Total cost of sales 1,008.1 875.4 944.0 - ------------------------------------------------------------------------------------------------------- Gross profit 879.9 761.3 730.7 - ------------------------------------------------------------------------------------------------------- OPERATING EXPENSES: Operation 314.6 284.5 296.5 Depreciation 157.5 120.0 93.9 Maintenance 53.3 53.2 57.7 Taxes, other than income taxes 69.2 66.0 72.5 Provision for asset impairments -- 2.5 -- - ------------------------------------------------------------------------------------------------------- Total operating expenses 594.6 526.2 520.6 - ------------------------------------------------------------------------------------------------------- Equity in earnings of investments and partnerships 39.4 90.8 43.6 Other income (expense) .3 2.9 6.9 - ------------------------------------------------------------------------------------------------------- EARNINGS BEFORE INTEREST AND TAXES (EBIT) $ 325.0 $ 328.8 $ 260.6 - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Non-recurring items: Provision for asset impairments -- 2.5 -- United Energy initial public offering -- (45.3) -- - ------------------------------------------------------------------------------------------------------- NORMALIZED EBIT $ 325.0 $ 286.0 $ 260.6 - ------------------------------------------------------------------------------------------------------- NORMALIZED EBIT CONTRIBUTION TO UTILICORP 78.5% 82.4% 76.9% - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Identifiable assets $ 3,834.4 $ 3,338.1 $ 2,790.4 Electric sales and transportation (MWH 000's) 21,066 15,768 13,758 Gas sales and transportation (MCF 000's) 246,547 248,184 287,396 - ------------------------------------------------------------------------------------------------------- Electric customers 1,514,000 1,519,000 1,318,000 Gas customers 1,418,000 848,000 828,000 Appliance service contract customers 170,000 171,000 170,000 - ------------------------------------------------------------------------------------------------------- Total customers 3,102,000 2,538,000 2,316,000 - ------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------
1999 VERSUS 1998 GROSS PROFIT Gross profit for our global network businesses increased $118.6 in 1999 compared to 1998. The consolidated operations of our New Zealand business provided an increase in gross profit of $123.0 million. The 1999 gross profit of our U.S. networks business decreased $3.3 million compared to 1998. Unfavorable weather and the full year impact of the 19 98 Missouri rate case was offset by an effective weather hedging strategy and continued customer growth in our service territories. One of our peaking turbines was out of commission during periods of record demand in July 1999. As a result, there were fewer opportunities in 1999 to sell power off-system and we had to purchase additional power at higher costs. 27 OPERATING EXPENSES Operating expenses increased $68.4 million in 1999 compared to 1998. Our New Zealand operations provided $40.9 million of that increase. The remaining $27.5 million came from increased depreciation and other costs resulting from an upgrade of information technology, telecommunications, inflationary trends and allocation of additional corporate costs. EQUITY EARNINGS Equity earnings in 1999 decreased by $51.4 million compared to 1998. We completed a successful initial public offering of the United Energy business in Australia in 1998 which resulted in a gain of $45.3 million and reduced our ownership to 34%. The effect of our reduced ownership in this business and the full consolidation of our New Zealand operation reduced our equity earnings and was offset by our acquisition of the Multinet/Ikon gas distribution and retail properties and the continued improvement in the regulated and non-regulated operations of United Energy. 1998 VERSUS 1997 GROSS PROFIT Gross profit from the Networks business in 1998 was $30.6 million more than in 1997. Of this increase, $23.8 million is the result of the consolidation of the New Zealand business. The remaining increase is due to an $11.9 million rise in the U.S. offset by a $5.2 million reduction in Canada. The increase in the U.S. networks is due to 2.3% growth in utility customers, higher customer usage and energy sales that together increased gross profit by $29.2 million. Partially offsetting this increase were the impact of mild weather, which reduced gross profit by $16.6 million, and the effects of a rate reduction in Missouri. The rate reduction became effective in April 1998 and reduced gross profit by $12.0 million. The Missouri rate order also increased depreciation expense by $4.3 million. Winter weather in 1998 was 15% warmer than normal. Gross profit from Canada was down due to milder winter weather and higher power costs. OPERATING EXPENSES Operating expenses increased $5.6 million in 1998 compared with 1997. The consolidation of the New Zealand operations increased operating expenses by $15.8 million. This increase was offset by a decrease of $8.3 million in the U.S. networks when comparing 1998 to 1997. To recover from the effects of mild winter weather in the first quarter, we beg an a cost reduction program that cut expenses by $15.7 million. This savings was partially offset by higher transmission fees and payroll and benefit increases. EQUITY IN EARNINGS Equity in earnings increased $47.2 million in 1998 due to the gain from United Energy's initial public offering in Australia. BUSINESS EXPANSION Since December 31, 1998, we have completed or initiated several transactions designed to focus the growth of our global network platform. These transactions, along with those completed in the previous two years, are discussed more fully in the Notes to the Consolidated Financial Statements. The following table summarizes these transactions.
Closing Value* Transaction Description Date ($ millions) - --------------------------------------------------------------------------------------------------------- TrustPower Purchased New Zealand electric network 1999 $261 Multinet/Ikon Purchased Australian gas network 1999 224 Horizon Energy Distribution Sold New Zealand electric network 1999 17 West Virginia Power Sold electric and gas network 1999 75 St. Joseph Light & Power Company Purchase electric and gas network 2000* 270 Empire District Electric Company Purchase electric network 2000* 800 TransAlta Purchase Canadian electric network 2000* 450 - ---------------------------------------------------------------------------------------------------------
* Estimated.
Sales-Networks Dollars in Millions 97 98 99 1,674.7 1,636.7 1,880.0
New Zealand electric operations and U.S. natural gas rate increases contributed to the 1999 increase in network sales.
EBIT-Networks Dollars in Millions 97 98 99 260.6 328.8 325.0
Strong international results were offset by higher U.S. purchased power costs and fewer off-system power sales. Energy Merchant Our Energy Merchant segment currently consists of two subunits, Marketing and Trading, including both our North American and European trading operations, and Energy Assets which primarily consists of our natural gas storage, gathering and processing operations, our investments in independent power projects and a new initiative which provides structured financing to small firms in the oil and gas industry. The following table summarizes the Energy Merchant segment for the three years ending December 31, 1999. THREE-YEAR REVIEW-ENERGY MERCHANT
Year Ended December 31, ---------------------------------------------- Dollars in millions 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------- SALES $ 16,730.0 $ 10,925.8 $ 7,245.2 Cost of sales 16,456.6 10,718.3 7,020.9 - ----------------------------------------------------------------------------------------------------------- Gross profit 273.4 207.5 224.3 - ----------------------------------------------------------------------------------------------------------- OPERATING EXPENSES: Operating and maintenance 197.3 144.5 128.5 Depreciation 39.1 29.8 29.8 Provision for asset impairments -- 17.2 15.5 - ----------------------------------------------------------------------------------------------------------- Total operating expenses 236.4 191.5 173.8 - ----------------------------------------------------------------------------------------------------------- Equity earnings in subsidiaries and partnerships 34.6 34.5 30.6 Other income (expense) 18.1 (13.7) (9.3) - ----------------------------------------------------------------------------------------------------------- EARNINGS BEFORE INTEREST AND TAXES (EBIT) 89.7 36.8 71.8 - ----------------------------------------------------------------------------------------------------------- NON-RECURRING ITEMS: Provision for asset impairments -- 17.2 15.5 Gas supply settlement and reserves -- 13.4 5.0 - ----------------------------------------------------------------------------------------------------------- NORMALIZED EBIT $ 89.7 $ 67.4 $ 92.3 - ----------------------------------------------------------------------------------------------------------- NORMALIZED EBIT CONTRIBUTION TO UTILICORP 21.7% 19.4% 27.2% - ----------------------------------------------------------------------------------------------------------- Identifiable assets $ 3,089.1 $ 2,570.2 $ 2,429.6 Physical gas volumes marketed (BILLION CUBIC FEET PER DAY) 9.2 9.9 7.0 Gas throughput volumes (MILLION CUBIC FEET PER DAY) 548 475 483 Natural gas liquids-price per gallon $ .31 $ .25 .34 Natural gas liquids produced (THOUSAND BARRELS PER DAY) 22 25 37 Electricity marketing volumes (MWH 000's) 236,515 121,194 65,258 - -----------------------------------------------------------------------------------------------------------
Sales-Energy Merchant 97 98 99 Dollars in Billions 7.2 10.9 16.7
In 1999 Aquila Energy had strong results from gas marketing and trading, and its electricity volumes nearly doubled.
EBIT-Energy Merchant 97 98 99 Dollars in Millions 92.3 67.4 89.7
The performance of gas marketing and trading and a rebound in prices of natural gas liquids helped boost 1999 EBIT. [GRAPHIC] KEITH STAMM AND ED MILLS The pair responsible for guiding Aquila Energy's continuing expansion in both new and established markets is Keith Stamm (left) and Ed Mills. Stamm returned to Kansas City in January to assume the role of chief executive officer of Aquila after three years as the CEO of United Energy in Melbourne. Mills became president and chief operating officer of Aquila in 1998. 1999 VERSUS 1998 GROSS PROFIT Gross profit for our merchant operations increased $65.9 million in 1999 compared to 1998. This is the result of a $43.4 million increase in gross profit from Marketing and Trading and a $22.5 million increase in gross profit from Energy Assets. The increase in Marketing and Trading was primarily due to the following: - - Strong results in gas marketing, including our largest term contract to date, offset lower gross profit from power and carbon trading operations and final results in our retail marketing business. The favorable pricing environment that affected power trading in 1998 did not occur in 1999, which lowered EBIT from this product line in 1999. In addition, carbon, a new product line, incurred some initial setbacks during startup. - - In January 2000, we sold our retail gas marketing business. This business lost approximately $19.8 million in 1999, or $13.4 million more than in 1998. We expect to record a gain from the sale in the first quarter of 2000. - - Our gas portfolio was positively affected by favorable changes in the regulatory risks and interest rates associated with certain long-term contracts. The increase in Energy Assets gross profit resulted from the following: - - A 24% increase in the average price of natural gas liquids (NGLs) and a 15% increase in throughput volumes increased gross profit by about $11 million. - - The operations of the Katy gas storage facility, purchased in early 1999, contributed $8.7 million in gross margin. - - Offsetting these two items were losses on various startup businesses and a $1.5 million loss on the sale of a small pipeline system. OPERATING EXPENSES Operating expenses increased $44.9 million in 1999 compared to 1998, excluding non-recurring charges incurred in 1998. This increase resulted from the following: - - An increase in Marketing and Trading operating expenses was due, in part, to additional uncollectible amounts from our retail business, approximately $4.9 million in costs associated with the move to Kansas City and additional support costs resulting from business growth. - - Additional expenses were incurred related to our European trading business as we began expanding our trading presence. In 1999 we opened offices in Spain, Norway and Germany. - - Depreciation expense increased in 1999 due to additional plant stemming from the Katy Storage acquisition and additional costs from system infrastructure expenditures. EQUITY EARNINGS Equity earnings increased $.1 million due to a gain on the sale of an independent power project, partially offset by the impact of lower project income resulting from the 1998 sale of a project interest and the full-year impact of one project's lower power sales. OTHER INCOME (EXPENSE) Other income (expense) increased $31.8 million in 1999 compared to 1998. The main factors causing this increase are: - - About $166 million of net new capital loaned to energy customers. This is a relatively new business for Aquila that has grown dramatically in 1999. - - Elimination of minority interest expense resulting from our purchase of the 18% of Aquila Gas Pipeline that we did not already own. - - Interest income related to prepaid gas contracts. In 1999 and 1998, certain customers prepaid $252.0 million and $185.2 million, respectively, for future gas supplies. We used this cash to reduce short-term debt. In the future we will incur short-term debt to buy gas over the contract period. 1998 VERSUS 1997 GROSS PROFIT Gross profit in 1998 declined $16.8 million compared to 1997. The decrease reflects a $38.4 million drop in gross profit from Energy Assets that was partially offset by a $21.6 million increase from Marketing and Trading. Energy Assets results in 1998 were lower due to a 26% decrease in NGL prices and a 32% decrease in NGL production. This combination reduced Energy Assets 1998 gross profit by $25 million. NGL prices are closely tied to crude oil prices, which declined significantly in 1998. As oil prices declined, drilling activity in the Austin Chalk region of Texas, our main gathering area, was limited to deep gas wells which produce less liquid. NGL production also declined because we voluntarily bypassed certain volumes due to low prices. The NGL price declines were largely shared with producers as a majority of our contracts are structured as a percent of production. Gross profit from Marketing and Trading increased 21% in 1998 compared to 1997, primarily due to the following: - - Increased gross margin from North American electricity and increased margin from gas trading and transportation in Europe. Partially offsetting this was lower gas marketing margins in our North American operation. - - An 86% increase in electricity marketing volumes as this market segment continued to expand. - - A 131% increase in gross margin from longer-term contracts (generally those of more than a year). In June 1998, the price of electricity in North America varied widely as the market reacted to a power shortage caused by several power plant outages and low reserve margins. During the month, electricity prices fluctuated between $30 and $7,500 per megawatt-hour. This caused many market participants to panic as they covered open short positions with high-priced electricity. In addition, some firms did not honor their contract obligations, causing others to replace the lost electricity with higher-priced supply. We did not incur net losses from the unusual pricing patterns. Assessing credit and counterparty risk is a cornerstone principle of our risk management system of internal control. Our credit policy is administered by a function that is independent from the day-to-day trading and sales operations. OPERATING EXPENSES Operating expenses in 1998 were $17.7 million higher than in 1997 primarily as a result of additional staffing needed to support the growth of the business. EQUITY IN EARNINGS Equity in earnings increased $3.9 million in 1998 compared to 1997, primarily because we sold part of our ownership in an independent power project for a $3.6 million gain. BUSINESS EXPANSION During 1999, we established a marketing and trading presence in Spain, Norway and Germany. Within each region, these new locations will allow us to offer energy-related and risk management services to industrial and commercial end users and to segments of the energy industry. Since December 31, 1998, we have completed or initiated several transactions that were designed to grow our merchant operations or were the result of contractual arrangements with partners. These transactions, along with those completed in the previous two years, are discussed more fully in the Notes to the Consolidated Financial Statements. The following table summarizes these most recent transactions.
Closing Value (a) Transaction Description Date ($ millions) - -------------------------------------------------------------------------------------------- Katy Storage Purchased gas storage facility 1999 $100 Aquila Gas Pipeline Purchased 18% minority interest 1999 44 Naheola Cogeneration Project (b) Partner exercised option to buy our 1999 84 equity interest UtiliCorp Energy Services, Inc. Sold retail gas business 2000 14 Aries Power Plant, a joint venture Developing 600-MW combined-cycle with Calpine Corporation plant in Missouri 2001(a) 277 - --------------------------------------------------------------------------------------------
(a) ESTIMATED. (b) THIS PROJECT PROVIDED ABOUT $10 MILLION IN ANNUAL EBIT.
Gas Marketing Volumes 97 98 99 Billion Cubic Feet Per Day 7.0 9.9 9.2
Natural gas marketing volumes declined in 1999 as Aquila increased its focus on the profitability of its contracts.
Electricity Marketing Volumes 97 98 99 Gigawatt-hours (000) 65.3 121.2 236.5
Aquila's electricity marketing volumes increased 95 percent in 1999 as that market continued to expand rapidly. 31 SERVICES The Services segment appears for the first time in our 1999 financial statements and consists of our investment in Quanta Services, Inc. (Quanta). Quanta is the premier provider of specialized construction services to electric utilities, telecommunications and cable television companies, and governmental entities. The following table summarizes the Services contribution to EBIT for the three years ended December 31, 1999.
In millions 1999 1998 1997 - --------------------------------------- EBIT $13.2 $- $- - ---------------------------------------
In September 1999, we invested $186 million in Quanta Preferred Stock. The stock is convertible into 6.2 million common shares based on a strike price of $30. We received $7.6 million in management and advisory fees from Quanta during 1999 which is included, along with $5.6 million of equity earnings, in Equity in earnings of investments and partnerships in the accompanying consolidated statement of income. In addition, we have purchased approximately 5.2 million shares of Quanta Common Stock on the open market and in privately negotiated transactions, bringing our total equity interest in Quanta to 28%. We account for this investment using the equity method. Corporate Matters CORPORATE AND OTHER The table below summarizes corporate and other EBIT for the three years ended December 31, 1999. Corporate primarily contains the retained costs of the company that are not allocated to the business units and, prior to 1998, the net losses from our investment in EnergyOne, L.L.C.
In millions 1999 1998 1997 - -------------------------------------------------------------------------- EBIT, as reported $(13.9) $(14.2) $ 26.7 Non-recurring items: Merger termination - - (53.0) Asset impairment provision - 8.0 11.0 Other - - 1.5 - -------------------------------------------------------------------------- NORMALIZED EBIT $(13.9) $ (6.2) $(13.8) - --------------------------------------------------------------------------
1999 versus 1998 Corporate and other EBIT decreased $7.7 million as the result of additional costs incurred that were not allocated to the business units. 1998 versus 1997 Corporate and other EBIT increased by $7.6 million due to the elimination of losses from our EnergyOne partnership with PECO Energy Company. The partnership was terminated in April 1998. Effective Income Tax Rates The effective income tax rate decreased 9.8% in 1999 compared to 1998. The decrease was primarily due to a larger contribution to pretax income by international operations and lower overall state income tax rates in our domestic businesses. Competition DOMESTIC UTILITY OPERATIONS. Our domestic network businesses operate in a regulated environment. Industrial and large commercial customers largely have access to energy sources, so some of the competitive pricing benefits have been transferred to these customers through open access tariffs relating to transmission lines and pipelines. Without federal legislation, competition at the retail level cannot form since the rules will be different in each state. As a result of our assessment of retail competition possibilities, we have now exited all domestic retail energy activities until the market more fully develops. ACCOUNTING IMPLICATIONS. We currently record the economic effects of regulation in accordance with the provisions of Statement of Financial Accounting Standards No. 71 (SFAS No. 71), "Accounting for the Effects of Certain Types of Regulation." Accordingly, our balance sheet reflects certain costs as regulatory assets. We expect our rates will continue to be based on historical costs for the foreseeable future. If we discontinued applying SFAS No. 71, we would make adjustments to the carrying value of our regulatory assets. Total net regulatory assets at December 31, 1999 were $96.8 million. COMPETITION IN AUSTRALIA. The State of Victoria is deregulating its electricity market in stages. Currently, customers with yearly usage above 160 megawatt-hours (industrial and large commercial customers) can choose their retail electricity suppliers. After January 1, 2001, all customers of United Energy Limited (UEL) will be able to choose their retail electricity suppliers. A majority of UEL's gross margin comes from distribution line charges that would not be affected by this customer choice. REGULATION IN NEW ZEALAND. A concerted effort is currently under way to gain consensus for a regulatory system that is developed and administered by the utility industry. We fully support this movement. NORTH AMERICAN ENERGY MARKETING. Our energy marketing businesses operate in a fully competitive environment that rewards participants on price, service and execution. Our energy marketing businesses compete for customers with the largest energy companies in North America. The industry is premised on large-volume sales with relatively low margins. Companies that operate in this industry must fully understand the price sensitivity and volatility of commodities. The public became more aware of some of the risks associated with this industry when a number of companies announced sudden losses resulting from the June 1998 price spike in electricity. We expect price volatility to occur and we have risk control policies in place for dealing with such events. 32 [GRAPHIC: PHOTO] PETER LOWE UtiliCorp's chief financial officer since January 2000, Senior Vice President Peter Lowe joined the company in 1999 as vice president, financial management and accounting services. He was previously chief financial officer of United Energy, the Australian network company 34 percent-owned by UtiliCorp. EUROPEAN ENERGY MARKETING. Our energy marketing business in Europe continues to build its capability to offer new products in gas, electricity and other energy related areas. Trading in the United Kingdom electricity market began in October 1999 and trading in the Nordic power market began in November 1999. In the 1999 fourth quarter, we lost a major customer when it was bought by another firm. The resulting drop in indirect customers served in the U.K. is expected to be offset by our expansion on the European Continent. ENVIRONMENTAL MATTERS We are currently named as a potentially responsible party (PRP) at two PCB disposal sites. Our combined cleanup expenditures have been less than $1 million to date at these and other PCB disposal sites for which we had been named a PRP but have settled our liability. We anticipate that future expenditures on the two sites where we are currently named as a PRP will not be significant. We also own or once operated 29 former manufactured gas plant sites which may require some form of environmental remediation. As of December 31, 1999, we estimate cleanup costs on these identified sites to be $14.4 million. See Note 14 to the Consolidated Financial Statements for further discussion of this topic. In October 1998, the EPA published new air quality standards to further reduce the emission of NOx. These more strict standards will require us to install new equipment on our baseload coal units in Missouri that we estimate will cost $35 million. The new standards are under debate in the courts and our ultimate cost is therefore subject to change . The new standards as written are effective in May 2003. YEAR 2000 (Y2K) ISSUES Over the past two years we have been modifying our critical systems in anticipation of Y2K. As of December 31, 1999, we have incurred about $2.3 million in incremental expenses addressing Y2K issues. To date, we have not experienced any major issues in our critical systems, nor have any of our major customers or vendors reported issues. While cer tain Y2K-related contingencies still may exist, we do not anticipate spending additional material amounts to address Y2K issues. MARKET RISK-TRADING We are exposed to market risk, including changes in commodity prices, interest rates and currency exchange rates. To manage the volatility relating to these exposures, we enter into various derivative transactions in accordance with our policy approved by the Board of Directors. Our trading portfolios consist of physical and financial natural gas, electricity, coal and interest rate contracts. These contracts take many forms, including futures, forwards, swaps and options. We measure the risk in our trading portfolio using value-at-risk methodologies, to simulate forward price curves in the energy markets and estimate the size of future potential losses. The quantification of market risk using value-at-risk methodologies provides a consistent measure of risk across diverse energy markets and products. The use of this method requires a number of key assumptions, such as: - - Selection of a confidence level (we use 95%). - - Estimated holding period (we use three days). - - Use of historical estimates of volatility and correlation with recent activity more heavily weighted. At December 31, 1999, our value at risk was: In millions - --------------------------- Electricity $.6 Natural gas 1.7 - --------------------------- The average value at risk for all commodities during 1999 was $4.6 million. We also use additional risk control mechanisms such as stress testing, daily loss limits and commodity position limits, as well as daily monitoring of the trading activities by an independent function. All interest and foreign currency risks are monitored within the commodity portfolios and value-at-risk calculation. The value of our commodity portfolios are impacted by interest rates as the portfolio is valued using an estimated interest discount factor to December 31, 1999. We often sell Canadian sourced natural gas into the U.S. markets accepting U.S. dollars from customers, but paying Canadian dollars to suppliers. This exposes our portfolio to currency risk and we hedge this exposure. The table on the following page shows the expected cash flows associated with the interest rate financial instruments at December 31, 1999. 33
Dollars in millions 2000 2001 2002 2003 2004 Thereafter Total - -------------------------------------------------------------------------------------------------- Variable to fixed rate $1.3 $(1.9) $(3.3) $(3.6) $(2.8) $(5.1) $(15.4) Average rate paid -----------------------------6.94%--------------------------------- Average rate received -----------------------------6.74%--------------------------------- - -------------------------------------------------------------------------------------------------- Fixed to variable rate - $(2.5) - $(.5) - $.3 $(2.7) Average rate paid - 7.46% - 6.80% - 6.71% Average rate received - 6.49% - 6.73% - 6.99% - --------------------------------------------------------------------------------------------------
MARKET RISK-NON-TRADING We are also exposed to commodity price changes outside of price risk management activities. The following table summarizes these exposures on an EBIT basis.
Commodity EBIT Price Change Impact (a) - -------------------------------------------------------------------- NGL price per gallon (b) $.01 $1.5 million Natural gas price per MCF $.10 .4 million United Kingdom natural gas prices $.01 .7 million - --------------------------------------------------------------------
(a) ASSUMES THE PRICE CHANGE OCCURS FOR AN ENTIRE YEAR. FOR THE UNITED KINGDOM, THE PRICE CHANGE ASSUMES THAT IT OCCURS OVER THE ENTIRE FORWARD CONTRACT PERIOD. (b) WE HEDGE OUR FORWARD NGL PRODUCTION TO MINIMIZE THE EFFECT OF PRICE CHANGES. Currency Rate Exposure We do not currently hedge our net investment in foreign operations. As a result, the foreign denominated assets and liabilities fluctuate in value. Historically, our net exposure to changes in foreign currency has been limited as the company's foreign investments were financed through foreign debt. The table below summarizes the average value of foreign currencies used to value sales and expenses along with the related sensitivity.
Unit Value in U.S. Dollars Impact of --------------------------- 10% change (a) 1999 1998 1997 - ----------------------------------------------------------------- Australian dollar $2.8 million $ .65 $ .63 $ .74 Canadian dollar 2.1 million .67 .67 .72 New Zealand dollar 8.1 million .53 .54 .66 British pound .8 million 1.62 1.66 1.65 - ----------------------------------------------------------------- TOTAL $13.8 million - -----------------------------------------------------------------
(a) ASSUMING A 10% CHANGE IN LOCAL CURRENCY VALUE RELATIVE TO THE U.S. DOLLAR IF THE CHANGE OCCURRED UNIFORMLY OVER THE ENTIRE YEAR, BASED ON 1999 FINANCIAL RESULTS. INTEREST RATE EXPOSURE After hedging with various financial instruments, we have about $722 million in variable rate debt. A 100-basis-point change in the variable rate financial instrument would affect net income by about $4.3 million. We hedged our $250 million 7% Senior Note issue with an interest rate swap that converted the 7% fixed rate to a floating rate equal to LIBOR plus 50 basis points. Vote Your 2000 Proxy Over The Telephone 34 LIQUIDITY AND CAPITAL RESOURCES Our cash requirements arise primarily from continued growth, network construction programs, non-regulated investment opportunities and merchant working capital requirements. Our ability to attract the necessary financial capital at reasonable terms is critical to our overall plan. Historically, we have financed acquisitions and investments initially with short-term debt and later funded them with an appropriate mix of common equity and long-term debt securities, depending on prevailing market conditions. A primary source of short-term cash has been bank loans which aggregated $248.9 million, $235.6 million and $113.8 million at December 31, 1999, 1998 and 1997, respectively. We can also issue up to $150 million of commercial paper supported by a $250 million committed revolving credit agreement. We intend to renew the current credit agreement that expires in December 2000 and allows for the issuance of notes at interest rates based on various money market rates. We had no commercial paper borrowings at December 31, 1999 and 1998. To maintain flexibility in our capital structure and to take advantage of favorable short-term rates, we sell our accounts receivable under two programs to fund a portion of our short-term cash requirements. The level of funding available from these programs is limited to $405 million and the amount fluctuates seasonally. We had sold approximately $365.8 million under these programs at December 31, 1999. In 1998, we sold 12.98 million shares of our common stock at $23.41 per share, net of underwriting costs. The $304 million in net proceeds was used to reduce domestic short-term debt. Our capital structure consisted of the following components at December 31, 1999 and 1998.
1999 1998 - ----------------------------------------------------- Common stock equity 34.9% 42.5% Monthly income preferred stocks and participating equity securities 8.0 2.9 Short-term debt 5.7 6.9 Long-term debt 51.4 47.7 - ----------------------------------------------------- Total Capitalization 100.0% 100.0% - -----------------------------------------------------
We have approximately .3 million treasury shares as of December 31, 1999, that we expect to issue to our stock plans in 2000. Our dividend payout ratio was 68.6% in 1999 (annualized dividends of $1.20 divided by basic EPS of $1.75). We expect our EPS growth to be at a higher rate than the rate of growth in our dividend. This should reduce our payout ratio to about 50-60% over the next four years. We are committed to maintaining a strong balance sheet. Over the next 12 months we anticipate taking steps that will support that commitment. CASH REQUIREMENTS Future cash requirements include utility plant additions and required redemptions of long-term securities. We estimate expenditures over the next three years for these activities, excluding acquisitions, will be as follows:
ACTUAL Future Cash Requirements ------ ---------------------------- In millions 1999 2000 2001 2002 - ------------------------------------------------------------------------ Capital expenditures: Networks $153.2 $223.9 $242.6 $210.2 Energy Merchant 61.3 27.8 21.8 13.0 Corporate and other 39.0 41.8 23.4 26.3 Maturing long-term debt 248.8 42.8 144.1 604.3 - ------------------------------------------------------------------------ TOTAL $502.3 $336.3 $431.9 $853.8 - ------------------------------------------------------------------------
Vote Your 2000 Proxy Over The Internet 35 [GRAPHIC] We Work For You When Other Things Don't Aquila Energy, our energy merchant business, is participating in the building of a 600-megawatt combined-cycle generation plant, initially to serve the capacity needs of our U.S. networks beginning in June 2001. We expect the new plant to cost approximately $277 million. In January 2000, we sold a 50% interest in this project to Calpine Corporation (Calpine), a premier builder and operator of this type of plant. Calpine will manage the construction and operations of the plant and Aquila will manage the facility's gas supply. We believe that our available cash resources from both operating cash flows and borrowing capacity will be adequate to meet our anticipated future cash requirements. SIGNIFICANT BALANCE SHEET MOVEMENTS Total assets increased $1.4 billion in 1999 compared to 1998. This increase is primarily due to the following: - - Increased accounts receivable, net of $169.6 million that resulted from strong gas trading results near the end of 1999. - - An increase in property, plant and equipment, net resulting from our continued investment in the network business and the purchase of the Katy gas storage facility in early 1999. - - A $544.1 million increase in our investments in subsidiaries and partnerships. We invested $224 million in the Multinet/Ikon gas distribution business in Australia and about $314 million in Quanta Services, Inc. preferred and common stock. - - We began a structured financing business and committed about $166 million of capital. In 1999 total liabilities increased by $1.1 billion and shareholders' equity increased by $329.1 million. The increase was due to our issuing long-term debt and participating equity securities to finance investments we made in late 1998 and early 1999 in New Zealand, the purchase of the gas storage facility and our investments in Multinet/Ikon and Quanta. NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). In June 1999, the FASB issued Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133,"SFAS 133 established accounting and reporting standards for derivative instruments and hedging activities requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires 36 that the company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS 133 must be adopted for fiscal years beginning after June 15, 2000. A significant portion of the derivatives we use are a component of our price risk management activities described in Note 2, Price Risk Management. These derivatives, along with energy commodity contracts included in our trading activities, are currently reflected on our balance sheet as assets and liabilities at their fair value. We have not yet quantified the other effects of adopting SFAS 133 on our financial statements. However, the new standards could increase volatility in earnings and other comprehensive income. EFFECTS OF INFLATION In the next few years, we anticipate that the level of inflation, if moderate, will not have a significant effect on operations or acquisition activity. FORWARD-LOOKING INFORMATION This report contains forward-looking information. Such statements involve risks and uncertainties and there are certain important factors that could cause actual results to differ materially from those anticipated. Some of the important factors which could cause actual results to differ materially from those anticipated include: - - Weather, which can affect results significantly to the extent that temperatures differ from normal. Both our Networks and Energy Merchant businesses are weather-sensitive. - - The timing and extent of changes in energy commodity prices and interest rates. - - Prices and volumes of natural gas, natural gas liquids and electricity, which are volatile and difficult to predict. - - The successful completion of a 600-megawatt power plant currently under construction. - - Successful completion of pending acquisitions. - - The continued development of product offerings to expand services to customers and provide new revenue sources. - - The pace and degree of regulatory changes in the U.S. and abroad. - - The pace of well connections to our gas gathering system. - - The value of the U.S. dollar versus the British pound and the Canadian, Australian and New Zealand dollars. - - The successful expansion of our Energy Merchant business in the United Kingdom and Europe. - - The outcome of pending rate proceedings for our U.S. networks. - - Our ability to continue accessing the U.S. equity and debt capital markets to support our growth strategy.
Capital Expenditures-Networks 97 98 99 Dollars in Millions 133.2 114.3 153.2
Network capital expenditures rose in 1999, reflecting the enhancements made in information systems and technology.
Capital Expenditures-Energy Merchant 97 98 99 Dollars in Millions 28.4 33.8 61.3
Aquila Energy's capital expenditures increased in 1999 as construction began on a new generating plant in Missouri. 37 Consolidated Statements of Income
Year Ended December 31, ----------------------------------------- In millions, except per share 1999 1998 1997 - --------------------------------------------------------------------------------------------------- SALES $18,621.5 $12,563.4 $8,926.3 Cost of sales 17,464.7 11,596.0 7,972.0 - --------------------------------------------------------------------------------------------------- GROSS PROFIT 1,156.8 967.4 954.3 - --------------------------------------------------------------------------------------------------- Operating and maintenance expense 635.3 548.9 554.9 Depreciation expense 193.7 150.0 129.6 Provision for asset impairments - 27.7 26.5 Equity in earnings of investments and partnerships (69.5) (125.1) (68.8) Other (income) expense (16.7) 14.5 (47.0) - --------------------------------------------------------------------------------------------------- EARNINGS BEFORE INTEREST AND TAXES 414.0 351.4 359.1 - --------------------------------------------------------------------------------------------------- INTEREST EXPENSE: Interest expense-long-term debt 160.9 111.4 115.5 Interest expense-short-term debt 9.3 12.3 10.9 Minority interest in income of partnership and trust 15.1 8.9 8.9 - --------------------------------------------------------------------------------------------------- TOTAL INTEREST EXPENSE 185.3 132.6 135.3 - --------------------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES 228.7 218.8 223.8 Income taxes 68.2 86.6 89.7 - --------------------------------------------------------------------------------------------------- Earnings before extraordinary item and cumulative effect of software accounting change 160.5 132.2 134.1 - --------------------------------------------------------------------------------------------------- Loss on retirement of debt (net of income tax of $4.5 million) -- -- 7.2 Cumulative effect of software accounting change (net of income tax of $3.2 million) -- -- 4.8 - --------------------------------------------------------------------------------------------------- Net income 160.5 132.2 122.1 Preference dividends -- -- .3 - --------------------------------------------------------------------------------------------------- EARNINGS AVAILABLE FOR COMMON SHARES $ 160.5 $ 132.2 $- 121.8 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 91.47 80.07 80.42 Diluted 92.11 81.18 81.00 - --------------------------------------------------------------------------------------------------- EARNINGS PER COMMON SHARE: Basic $1.75 $1.65 $1.51 Diluted 1.75 1.63 1.51 - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Sources of EBIT - 1999* - ---------------------- Networks 76% Energy Merchant 21% Services 3%
- ----------------- * Excluding EBIT from Corporate and other of $(13.9) million
Sales-Energy Merchant vs. Total 97 98 99 Dollars in Billions 99 16.7 18.6 90 10.9 12.6 97 7.2 8.9 0 5 10 15 20
Dollars in Billions The main factor behind a 48% increase in our total sales was the 53% rise in sales of Aquila Energy. 38 Consolidated Balance Sheets
December 31, ------------------------- Dollars in millions 1999 1998 - ------------------------------------------------------------------------------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 224.9 $ 120.6 Funds on deposit 47.3 13.4 Accounts receivable, net 1,446.5 1,276.9 Inventories and supplies 266.0 235.1 Price risk management assets 198.2 173.1 Prepayments and other 89.3 85.7 - ------------------------------------------------------------------------------------ TOTAL CURRENT ASSETS 2,272.2 1,904.8 - ------------------------------------------------------------------------------------ Property, plant and equipment, net 3,665.1 3,313.9 Investments in subsidiaries and partnerships 1,063.9 519.8 Price risk management assets 206.5 215.5 Merchant notes receivable 179.3 20.1 Deferred charges 151.6 156.8 - ------------------------------------------------------------------------------------ TOTAL ASSETS $ 7,538.6 $ 6,130.9 - ------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 42.8 $ 248.8 Short-term debt 248.9 235.6 Accounts payable 1,713.1 1,415.3 Accrued liabilities 59.2 49.7 Price risk management liabilities 181.7 192.2 Other 99.0 89.7 - ------------------------------------------------------------------------------------ TOTAL CURRENT LIABILITIES 2,344.7 2,231.3 - ------------------------------------------------------------------------------------ LONG-TERM LIABILITIES: Long-term debt, net 2,202.3 1,376.6 Income taxes and credits 434.2 429.5 Price risk management liabilities 520.7 308.4 Minority interests 76.8 151.6 Deferred credits 84.5 87.2 - ------------------------------------------------------------------------------------ TOTAL LONG-TERM LIABILITIES 3,318.5 2,353.3 - ------------------------------------------------------------------------------------ Company-obligated mandatorily redeemable preferred securities of partnership 100.0 100.0 Company-obligated mandatorily redeemable security of trust holding solely parent company senior deferrable notes 250.0 -- Common shareholders' equity 1,525.4 1,446.3 - ------------------------------------------------------------------------------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,538.6 $ 6,130.9 - ------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Equity Ratio* 99 38.9 98 42.5 97 40.3 0 15 30 45
Percent Our equity ratio has declined due to financing acquisitions with debt. We intend to keep the equity ratio above 40%. * Assumes 70% conversion of premium equity participating securities (PEPS).
Foreign Assets at Year End 99 2,410.4 98 1,654.1 97 907.9 0 500 1,000 1,500 2,000 2,500
Dollars in Million The 1999 acquisitions of TrustPower in New Zealand and Multinet/Ikon in Australia increased our foreign investment. 39 Consolidated Statements of Common Shareholders' Equity
Year Ended December 31, -------------------------------------------------------- Dollars in millions, except per share 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------- Common Stock: authorized 200,000,000 shares, par value $1 per share, 93,605,700 shares outstanding (93,574,853 at December 31, 1998 and 80,630,700 at December 31, 1997); authorized 20,000,000 shares of Class A common stock par value $1 per share, none issued Balance beginning of year $ 93.6 $ 80.6 $ 79.9 Issuance of common stock -- 13.0 .7 - --------------------------------------------------------------------------------------------------------------------- BALANCE END OF YEAR 93.6 93.6 80.6 - --------------------------------------------------------------------------------------------------------------------- PREMIUM ON CAPITAL STOCK: Balance beginning of year 1,253.5 972.3 965.1 Issuance of common stock -- 290.7 7.2 Other (27.0) (9.5) -- - --------------------------------------------------------------------------------------------------------------------- BALANCE END OF YEAR 1,226.5 1,253.5 972.3 - --------------------------------------------------------------------------------------------------------------------- RETAINED EARNINGS: Balance beginning of year 190.0 152.8 125.3 Net income 160.5 132.2 122.1 Dividends on preference stock -- -- (.3) Dividends on common stock, $1.20 per share in 1999, $1.20 in 1998, and $1.17 in 1997 (111.2) (95.0) (94.3) - --------------------------------------------------------------------------------------------------------------------- BALANCE END OF YEAR 239.3 190.0 152.8 - --------------------------------------------------------------------------------------------------------------------- Treasury stock, at cost (282,233 shares at December 31, 1999, 2,159,330 shares at December 31, 1998 and 352,613 shares at December 31, 1997) (5.4) (53.2) (10.8) Accumulated other comprehensive income (28.6) (37.6) (31.3) - --------------------------------------------------------------------------------------------------------------------- TOTAL COMMON SHAREHOLDERS' EQUITY $ 1,525.4 $1,446.3 $ 1,163.6 - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Consolidated Statements of Comprehensive Income
Year Ended December 31, ------------------------------------- Dollars in millions 1999 1998 1997 - ----------------------------------------------------------------------------------- Net income $160.5 $132.2 $122.1 Unrealized translation adjustments, net 9.0 (6.3) (25.4) - ----------------------------------------------------------------------------------- COMPREHENSIVE INCOME $169.5 $125.9 $96.7 - ----------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Weighted Average Shares Outstanding 99 92.1 98 81.2 97 81.0 0 25 50 75 100
Diluted Common Shares-Millions The weighted average number of diluted common shares outstanding rose in 1999 due to our public offering of 13 million shares in December 1998.
Cash Provided from Operations 99 475.1 98 276.9 97 349.0 0 100 200 300 400 500
Dollars in Million Cash from operations increased $198.2 million, primarily due to a $250 million prepaid gas contract and a better working capital position derived from gas and electricity trading. 40 Consolidated Statements of Cash Flows
Year Ended December 31, --------------------------------------------------- Dollars in millions 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 160.5 $ 132.2 $ 122.1 Adjustments to reconcile net income to net cash provided: Depreciation expense 193.7 150.0 129.6 Provision for asset impairments -- 27.7 26.5 Net changes in price risk management assets and liabilities 185.7 100.8 84.3 Income taxes and investment tax credits 4.7 61.7 49.0 Equity in earnings from investments and partnerships (69.5) (125.1) (68.8) Dividends from investments and partnerships 33.9 48.9 36.0 Merchant notes receivable (159.2) (20.1) -- Minority interests 11.4 5.6 6.5 Loss on retirement of debt, net -- -- 7.2 Cumulative effect of software accounting change, net -- -- 4.8 Changes in certain assets and liabilities, net of effects of acquisitions and restructuring: Accounts receivable/payable, net 128.2 (69.2) 72.9 Inventories and supplies (30.9) (100.5) (.7) Prepayments and other (3.6) (13.6) (27.4) Accrued liabilities, net 9.5 36.8 (28.5) Other 10.7 41.7 (64.5) - ---------------------------------------------------------------------------------------------------------------- CASH PROVIDED FROM OPERATING ACTIVITIES 475.1 276.9 349.0 - ---------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant (129.3) (121.8) (133.2) Repayment of debt securities -- 101.1 -- Investments in international businesses (485.0) (520.0) (2.8) Investments in non-regulated generating assets (65.1) -- -- Investments in Quanta Services, Inc. (313.9) -- -- Investments in energy related properties (107.5) (33.8) (28.4) Sale of assets and partnership investment 159.0 -- -- Purchase of minority interest (44.0) -- -- Other (159.3) (.6) (38.2) - ---------------------------------------------------------------------------------------------------------------- CASH USED FOR INVESTING ACTIVITIES (1,145.1) (575.1) (202.6) - ---------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock -- 303.7 7.9 Issuance of company-obligated mandatorily redeemable preferred securities of trust holding solely parent company senior deferrable notes 250.0 -- -- Retirement of preference stock -- -- (25.0) Treasury stock sold (acquired) 44.0 (42.3) (4.4) Issuance of long-term debt 986.0 267.0 169.0 Retirement of long-term debt (384.5) (216.4) (108.7) Short-term borrowings (repayments), net 13.2 121.8 (138.2) Cash dividends paid (111.2) (95.0) (94.6) Other (23.2) (9.5) -- - ---------------------------------------------------------------------------------------------------------------- CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES 774.3 329.3 (194.0) - ---------------------------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 104.3 31.1 (47.6) Cash and cash equivalents at beginning of year 120.6 89.5 137.1 - ---------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 224.9 $ 120.6 $ 89.5 - ---------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 41 NOTE 1: Summary of Significant Accounting Policies NATURE OF OPERATIONS UtiliCorp United Inc. is an international energy and energy solutions provider headquartered in Kansas City, Missouri. We operate lines of business in three financial reporting segments: Networks, Energy Merchant and Services. The main activity of Networks is operating domestic and foreign businesses that distribute and transmit electricity and natural gas to retail and wholesale customers. Our electric generation facilities supply electricity, primarily for our own distribution systems. However, we also sell to outside service areas. We also maintain and service appliances and market natural gas. Our networks operated in eight states through the end of the year, one Canadian province, New Zealand and Australia. Our Energy Merchant business operates as Aquila Energy (Aquila), which markets wholesale energy, gathers, transports and processes natural gas and gas liquids, and holds interests in independent power projects. Aquila Energy Corporation is a wholly-owned subsidiary of UtiliCorp. Aquila Gas Pipeline Corporation (AQP), wholly owned by Aquila, operates the gas gathering and processing businesses, located in Texas and Oklahoma. Aquila's European operations are based in the United Kingdom (U.K.). Aquila markets natural gas and electricity throughout the U.S. and in parts of Canada, and markets natural gas in the U.K. In 1999, it also began marketing and trading energy in Spain, Germany and Scandinavia. The Services segment consists of our investment in Quanta Services, Inc. (Quanta), a specialty services firm based in Houston. Quanta provides specialized construction and maintenance services to the utility, telecommunications and cable television industries. USE OF ESTIMATES We prepared these financial statements in conformity with generally accepted accounting principles and made certain estimates and assumptions that affect the reported amounts of assets and liabilities. Our estimates and assumptions affect the disclosure of contingent assets and liabilities in this report and reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates. Our accounting policies conform to generally accepted accounting principles. PRINCIPLES OF CONSOLIDATION Our consolidated financial statements include all of UtiliCorp's operating divisions and majority-owned subsidiaries. Generally, we use equity accounting for investments of which we own between 20% and 50%. We eliminate any significant inter-company accounts and transactions. PROPERTY, PLANT AND EQUIPMENT We show property, plant and equipment at cost. We expense repair and maintenance costs as incurred. Depreciation is provided on a straight-line basis over the estimated lives for utility plant by applying composite average annual rates. These range from 2.5% to 4.1%, as approved by regulatory authorities. When property is replaced, removed or abandoned, its cost, together with the costs of removal less salvage, is charged to accumulated depreciation. We depreciate gathering, processing and other energy-related property using a composite average annual rate of 4.0%. We depreciate remaining non-regulated property, plant and equipment on a straight-line basis over their estimated lives, ranging from three to 50 years. SALES RECOGNITION We recognize sales as products and services are delivered, except for trading and energy marketing activities. For those, we use the mark-to-market method of accounting. Under that method, trading and energy marketing activities are recorded at fair value, net of future servicing costs and reserves. When the portfolio's market value changes (primarily due to newly originated transactions and the effect of price changes) the change is recognized as gains or losses in the period of change within the sales caption. We record the resulting unrealized gains and losses as price risk management assets and liabilities. INCOME TAXES Our financial statements use the liability method to reflect income taxes. To estimate deferred tax assets and liabilities, we apply current tax regulations at the end of a reporting period to the cumulative temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. We amortize deferred investment tax credits over the lives of the related properties. CASH EQUIVALENTS AND CASH FLOW INFORMATION Cash includes cash in banks and temporary investments with an original maturity of three months or less. As of December 31, 1999, 1998 and 1997, our cash held in foreign countries was $42.1 million, $41.7 million and $74.5 million, respectively. Cash payments for interest, taxes and supplemental disclosures relating to acquisition activities are presented below:
In millions 1999 1998 1997 - ------------------------------------------------------------------------ CASH PAID DURING THE YEAR FOR: Interest, net of amount capitalized $ 167.7 $ 132.4 $ 131.4 Income taxes 76.8 50.1 61.9 - ------------------------------------------------------------------------ LIABILITIES ASSUMED IN ACQUISITIONS: Fair value of assets acquired $ 898.9 $ 609.7 -- Cash paid for acquisitions 898.9 520.0 -- Liabilities assumed -- 89.7 -- - ------------------------------------------------------------------------
42 EARNINGS PER COMMON SHARE The table below shows how we calculated diluted earnings per share and diluted shares outstanding. Basic earnings per share and basic weighted average shares are the starting point in calculating the dilutive measures. To calculate basic earnings per share, divide earnings available into weighted average shares without adjusting for dilutive items .
In millions except per share 1999 1998 1997 - ------------------------------------------------------------------------------------------ Earnings available for common shares $ 160.5 $ 132.2 $ 121.8 Convertible bonds .2 .2 .3 - ------------------------------------------------------------------------------------------ Earnings available for common shares after assumed conversion of dilutive securities $ 160.7 $ 132.4 $ 122.1 - ------------------------------------------------------------------------------------------ EARNINGS PER SHARE: BASIC- Earnings before extraordinary item and cumulative effect of software accounting change $ 1.75 $ 1.65 $ 1.66 Loss on retirement of debt -- -- (.09) Cumulative effect of software accounting change -- -- (.06) - ------------------------------------------------------------------------------------------ BASIC EARNINGS PER SHARE $ 1.75 $ 1.65 $ 1.51 - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ DILUTED- Earnings before extraordinary item and cumulative effect of software accounting change $ 1.75 $ 1.63 $ 1.66 Loss on retirement of debt -- -- (.09) Cumulative effect of software accounting change -- -- (.06) - ------------------------------------------------------------------------------------------ DILUTED EARNINGS PER SHARE $ 1.75 $ 1.63 $ 1.51 - ------------------------------------------------------------------------------------------ Weighted average number of common shares used in basic earnings per share 91.47 80.07 80.42 Per share effect of dilutive securities: Stock options .32 .77 .18 Convertible bonds .32 .34 .40 - ------------------------------------------------------------------------------------------ Weighted number of common shares and dilutive potential common stock used in diluted earnings per share 92.11 81.18 81.00 - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------
Currency Adjustments We translate the financial statements of our foreign subsidiaries and operations into U.S. dollars using the average monthly exchange rate during the period for income statement items. We use the year-end exchange rate for balance sheet items. When translating foreign currency-based assets and liabilities to U.S. dollars, we show any differences between accounts as translation adjustments in common shareholders' equity. For income statement accounts, we show all changes in foreign currency relative to the U.S. dollar within the consolidated statements of income. RECLASSIFICATIONS Certain prior year amounts in the consolidated financial statements have been reclassified where necessary to conform to 1999 presentation. NOTE 2: Price Risk Management A. TRADING ACTIVITIES: PRICE RISK MANAGEMENT ACTIVITIES We trade energy commodity contracts daily. Our trading activities attempt to match our portfolio of physical and financial contracts to current or anticipated market conditions. Within the trading portfolio, we take certain positions to hedge physical sale or purchase contracts and we take certain positions to take advantage of market trends and conditions. We record most energy contracts-both physical and financial-at fair market value. Changes in value are reflected in the consolidated statement of income. We use all forms of financial instruments including futures, forwards, swaps and options. Each type of financial instrument involves different risks. We believe financial instruments help us manage our exposure to changes in market prices and take advantage of selected arbitrage opportunities. We refer to these transactions as price risk management activities. 43 MARKET RISK The company's price risk management activities involve offering fixed price commitments into the future. The contractual amounts and terms of these financial instruments at December 31, 1999 and 1998, are shown below:
DECEMBER 31, 1999 -------------------------------------------------------------------- Dollars in millions FIXED PRICE PAYOR FIXED PRICE RECEIVER MAXIMUM TERM IN YEARS - --------------------------------------------------------------------------------------------------- ENERGY COMMODITIES: Natural gas (TRILLION BTUS) 5,418.8 4,958.6 12 Electricity (MEGAWATT-HOURS) 1,788,096 1,775,280 1 - ------------------------------------------------------------------------------------------------- FINANCIAL PRODUCTS: Interest rate instruments $ 1,998 $ 612 12 - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
December 31, 1999 -------------------------------------------------------------------- Dollars in millions Fixed Price Payor Fixed Price Receiver Maximum Term In Years - --------------------------------------------------------------------------------------------------- ENERGY COMMODITIES: Natural gas (TRILLION BTUS) 4,454.8 4,201.9 12 Electricity (MEGAWATT-HOURS) 2,421,440 2,238.176 1 - ------------------------------------------------------------------------------------------------- FINANCIAL PRODUCTS: Interest rate instruments $ 2,507 $ 631 12 - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
Although we attempt to balance our physical and financial contracts in terms of quantities and contract performance, net open positions typically exist. We will at times create a net open position or allow a net open position to continue when we believe that future price movements will increase the portfolio's value. To the extent we have an open position, we are exposed to fluctuating market prices that may adversely impact our financial position or results from operations. MARKET VALUATION The market prices used to value price risk management activities reflect our best estimate of market prices considering various factors, including closing exchange and over-the-counter quotations, time value of money and price volatility factors underlying the commitments. We adjust market prices to reflect the potential impact of liquidating our position in an orderly manner over a reasonable period of time under present market conditions. We consider a number of risks and costs associated with the future contractual commitments included in our energy portfolio, including credit risks associated with the financial condition of counterparties, product location (basis) differentials and other risks which our policy dictates. The value of all forward contracts is discounted to December 31, 1999, using an estimated rate. We continuously monitor the portfolio and value it daily based on present market conditions. The following table displays the market values of energy transactions at December 31, 1999 and 1998, and the average value for the years ended December 31, 1999 and 1998:
PRICE RISK MANAGEMENT ASSETS PRICE RISK MANAGEMENT LIABILITIES -------------------------------- --------------------------------- Dollars in millions AVERAGE VALUE DECEMBER 31, 1999 AVERAGE VALUE DECEMBER 31, 1999 - ---------------------------------------------------------------------------------------------------------------------- Independent power producers $ 146.7 $ 146.6 $ 4.1 $ 3.4 Financial institutions 25.5 20.1 22.9 34.0 Oil and gas producers 32.1 25.7 18.5 11.4 Municipalities and other gas transmission 32.6 37.2 361.3 548.0 Energy marketers 100.8 105.3 55.7 54.7 Interest rate swaps 1.7 27.9 .2 1.2 Other 39.1 41.9 19.1 18.4 - ---------------------------------------------------------------------------------------------------------------------- Gross value 378.5 404.7 481.8 671.1 Reserves -- -- 39.8 31.3 - ---------------------------------------------------------------------------------------------------------------------- TOTAL $ 378.5 $ 404.7 $ 521.6 $ 702.4 - ---------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------
44
Price Risk Management Assets Price Risk Management Liabilities ------------------------------- --------------------------------- Dollars in millions Average Value December 31, 1998 Average Value December 31, 1998 - ------------------------------------------------------------------------------------------------------------------- Independent power producers $ 147.6 $ 165.4 $ -- $ -- Financial institutions 14.1 2.8 37.6 42.5 Oil and gas producers 31.4 38.4 24.9 34.1 Municipalities and other gas transmission 44.3 41.3 149.7 310.3 Energy marketers 116.5 90.4 83.6 46.6 Other 34.1 50.3 14.9 14.6 - ------------------------------------------------------------------------------------------------------------------- Gross value 388.0 388.6 310.7 448.1 Reserves -- -- 53.1 52.5 - ------------------------------------------------------------------------------------------------------------------- TOTAL $ 388.0 $ 388.6 $ 363.8 $500.6 - ------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
Future changes in the creditworthiness of our counterparties change the value of our portfolio. We adjust the value of contracts and set dollar limits with counterparties based on our assessment of their credit quality. As of December 31, 1999, the future cash flow requirements, net of margin deposits, related to these financial instruments were $72.7 million. Margin deposits are required on certain financial instruments to address significant fluctuations in market prices. The value of price risk management assets is concentrated into three contracts representing 30% of total asset value of the portfolio. This concentration of customers may impact the company's overall exposure to credit risk, either positively or negatively, in that the counterparties may be similarly affected by changes in economic, regulatory or other conditions. B. NON-TRADING ACTIVITIES-HEDGING INSTRUMENTS We enter into forwards, futures and other contracts related to our commodity businesses solely to hedge future production. The estimated fair value and cash flow requirements for these financial instruments are based on the market prices in effect at the financial statement date and do not necessarily reflect our entire trading portfolio. NOTE 3: Accounts and Merchant Notes Receivable Our accounts receivable on the Consolidated Balance Sheets are comprised as follows:
December 31, ----------------------------- In millions 1999 1998 - ---------------------------------------------------------------- Accounts receivable, net of allowance for bad debt $ 1,733.4 $ 1,442.0 Unbilled revenue 78.9 82.9 Accounts receivable sale program (365.8) (248.0) - ---------------------------------------------------------------- TOTAL $ 1,446.5 $ 1,276.9 - ---------------------------------------------------------------- - ----------------------------------------------------------------
We sell, on a continuing basis, up to $405 million of eligible accounts receivable on a limited recourse basis. The financial institutions that buy our receivables charge a fee based on the dollar amount sold, which is reflected as an expense in the consolidated statements of income. Our consolidated statements of income reflect fees associated wi th these sales of (in millions) $15.7 in 1999, $16.0 in 1998, and $15.2 in 1997. Merchant notes receivable consists of notes with terms ranging from three to eight years and interest rates ranging from 10.0% to 13.5%. At December 31, 1999, the carrying value approximated fair market value. NOTE 4: Property, Plant and Equipment The components of property, plant and equipment are as follows:
December 31, ---------------------- In millions 1999 1998 - ----------------------------------------------------------- Electric utility $ 2,809.7 $ 2,612.7 Gas utility 1,158.2 1,164.1 Gas gathering and pipeline systems 669.0 587.8 Other 388.1 340.4 Construction in process 184.9 57.0 - ----------------------------------------------------------- 5,209.9 4,762.0 Less--depreciation, depletion and amortization 1,544.8 1,448.1 - ----------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT, NET $ 3,665.1 $ 3,313.9 - ----------------------------------------------------------- - -----------------------------------------------------------
Our property, plant and equipment includes acquisition-related intangibles that are being amortized over useful lives not exceeding 40 years. 45 NOTE 5: Asset Impairments During 1998 and 1997, we adjusted the reported value of certain assets in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." In 1998, we recognized $13.2 million reflecting a plan to curtail our retail activities, $8.0 million with respect to our decision to dissolve the EnergyOne, L.L.C. partnership, and $6.5 million related to our investment in a power plant project. During 1997, we recognized impairments of $15.5 million related to the value of a royalty interest and $11.0 million stemming from the abandonment of a technology-related venture. NOTE 6: Investments in Subsidiaries and Partnerships Our consolidated balance sheet contains various equity investments as shown in the table below. Our New Zealand investment is now fully consolidated within the 1999 and 1998 balance sheets, but before 1998 our New Zealand operations were equity investments. The table below summarizes our investments and related equity earnings.
Investment Equity Earnings at December 31, Year Ended December 31, Ownership --------------- ------------------------------ Dollars in millions at 12/31/99 Country 1999 1998 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------------- UAHL investment 34.0% Australia $ 234.2 $ 221.9 $ 28.0 $ 69.1 $ 28.6 Multinet/Ikon (a) 25.5% Australia 245.3 -- (6.9) -- -- UNZ investment: (b) WEL Energy Group Ltd. (WEL) -- New Zealand -- -- -- 11.3 4.5 Power New Zealand (PNZ) -- New Zealand -- -- -- 8.1 9.2 Pacific Energy 29.5% New Zealand 1.2 -- .6 -- -- UtilCo Group partnerships (c) 17%-50% U.S. & Jamaica 136.6 193.7 34.0 33.4 29.6 Oasis Pipe Line Company (Oasis) (d) 35% United States 97.7 97.1 .6 1.1 .9 Quanta Services, Inc. (e) 28% United States 319.5 -- 13.2 -- -- Other Various 29.4 7.1 -- 2.1 (4.0) - -------------------------------------------------------------------------------------------------------------------------- TOTAL $ 1,063.9 $ 519.8 $ 69.5 $ 125.1 $ 68.8 - -------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------
(a) ON MARCH 12, 1999, WE ACQUIRED, FOR $224 MILLION, A 25.5% INTEREST IN MULTINET/IKON, A NATURAL GAS NETWORK AND RETAILER IN VICTORIA, AUSTRALIA. (b) WE ACQUIRED A CONTROLLING INTEREST IN 1998 AND AS A RESULT OUR NEW ZEALAND INVESTMENTS, NOW OPERATING AS UNITEDNETWORKS LIMITED, ARE REFLECTED ON A CONSOLIDATED BASIS. (c) WE OWN INTERESTS IN 16 INDEPENDENT POWER PROJECTS LOCATED IN FIVE STATES AND JAMAICA. OF THESE, 15 ARE CURRENTLY IN COMMERCIAL OPERATION. THESE INVESTMENTS ARE AGGREGATED BECAUSE INDIVIDUAL INVESTMENTS ARE NOT SIGNIFICANT. IN 1999, OUR PARTNER IN A POWER PROJECT EXERCISED AN OPTION TO PURCHASE OUR INTEREST IN THE PROJECT. WE RECEIVED $83.8 MILLION AND RECOGNIZED A GAIN OF $7.1 MILLION. (d) IN 1997, AQP SOLD 5% OF ITS INTEREST IN OASIS TO ANOTHER PARTNER. (e) ON SEPTEMBER 23, 1999, WE INVESTED $186 MILLION IN QUANTA SERVICES, INC. (QUANTA) PREFERRED STOCK. THE PREFERRED STOCK IS CONVERTIBLE INTO 6.2 MILLION COMMON SHARES BASED ON A STRIKE PRICE OF $30. THIS INVESTMENT IS ACCOUNTED FOR BY THE EQUITY METHOD OF ACCOUNTING. WE RECEIVED A $7.6 MILLION ADVISORY FEE FROM QUANTA DURING 1999 WHICH IS REFLECTED AS EQUITY EARNINGS IN THE ACCOMPANYING CONSOLIDATED STATEMENT OF INCOME. IN ADDITION, WE HAVE PURCHASED APPROXIMATELY 5.2 MILLION SHARES OF QUANTA'S COMMON STOCK ON THE OPEN MARKET AND IN PRIVATELY NEGOTIATED TRANSACTIONS. The summarized combined financial information of unconsolidated material equity investments is presented below:
December 31, ------------------------ In millions 1999 1998(a) - -------------------------------------------------------- ASSETS: Current assets $ 660.0 $ 322.7 Non-current assets 4,024.2 2,084.8 - -------------------------------------------------------- TOTAL ASSETS $ 4,684.2 $ 2,407.5 - -------------------------------------------------------- LIABILITIES AND EQUITY Current liabilities $ 422.3 $ 335.9 Non-current liabilities 2,267.6 1,344.2 Equity 1,994.3 727.4 - -------------------------------------------------------- TOTAL LIABILITIES AND EQUITY $ 4,684.2 $ 2,407.5 - -------------------------------------------------------- - --------------------------------------------------------
Year Ended December 31, ------------------------------ In millions 1999 1998(a) 1997 - -------------------------------------------------------- OPERATING RESULTS: Revenues $ 1,986.0 $ 850.3 $ 1,294.7 Costs and expenses 1,801.1 752.4 1,140.7 - -------------------------------------------------------- NET INCOME $ 184.9 $ 97.9 $ 154.0 - -------------------------------------------------------- - --------------------------------------------------------
(a) EXCLUDES UNITEDNETWORKS SINCE THIS SUBSIDIARY IS REFLECTED IN THE CONSOLIDATED STATEMENTS. 46 NOTE 7: Regulatory Assets Our domestic utility operations are regulated by state or local authorities. Our financial statements therefore include the economic effects of rate regulation. This means our consolidated balance sheet shows some assets and liabilities that would not be found on the balance sheet of a non-regulated company. There is a risk that if the domestic utility industry deregulates, we may have to remove the effects of regulation from our financial statements. The following table lists the regulatory assets and liabilities recorded at December 31, 1999 and 1998. These are primarily shown as deferred charges and credits on the consolidated balance sheets.
In millions 1999 1998 - ------------------------------------------------------ Income taxes $ 55.6 $ 59.0 Environmental 24.1 11.5 Debt-related costs 22.9 17.8 Regulatory accounting orders 5.9 6.4 Demand-side management programs 5.5 10.3 Other 10.4 9.2 - ------------------------------------------------------ TOTAL REGULATORY ASSETS $ 124.4 $ 114.2 - ------------------------------------------------------ REGULATORY LIABILITIES 27.6 17.7 - ------------------------------------------------------ Net Regulatory Assets $ 96.8 $ 96.5 - ------------------------------------------------------ - ------------------------------------------------------
NOTE 8: Short-Term Debt Short-term debt includes the following components:
December 31, -------------------------- Dollars in millions 1999 1998 - ------------------------------------------------------- Bank borrowing and other $ 248.9 $ 235.6 Commercial paper -- -- - ------------------------------------------------------- TOTAL $ 248.9 $ 235.6 - ------------------------------------------------------- Weighted average interest rate at year end 5.95% 4.31% - ------------------------------------------------------- - -------------------------------------------------------
We have a $150 million commercial paper program supported by a $250 million revolving credit agreement. The credit agreement allows us to issue commercial paper at a favorable interest rate. Our credit agreement contains restrictive covenants and charges an annual commitment fee of .17% on the unused portion. During 1998, we put in place two New Zealand credit facilities that we used to acquire additional shares in UnitedNetworks. One of these credit facilities matured in December 1999 and was not renewed. At December 31, 1999, the remaining facility had the following terms:
Dollars in millions December 31, 1999 - ------------------------------------------------------------- Maximum Amount Interest Maturity Amount Outstanding Rate Date - ------------------------------------------------------------- $NZ 425 $NZ 420.8 5.96% July 2000 - ------------------------------------------------------------- Dollars in millions December 31, 1998 - ------------------------------------------------------------- $NZ 425 $NZ 403.9 4.30% October 1999 $NZ 45 $NZ 42.4 4.47% December 1999 - ------------------------------------------------------------- - -------------------------------------------------------------
The outstanding balances from these credit facilities comprised the total short-term debt balance at December 31, 1998. The interest rates may vary with changes in the New Zealand bank bill rate and carry a commitment fee of .20% on unused amounts. NOTE 9: Company-Obligated Preferred Securities In June 1995, UtiliCorp Capital L.P. (UC), a limited partnership of which we are the general partner, issued 4 million shares of 8.875% Cumulative Monthly Income Preferred Securities, Series A, for $100 million. The limited partnership interests represented by the preferred securities are redeemable at the option of UC, after June 12, 2000, at $25 per preferred security plus accrued interest and unpaid dividends. At December 31, 1999, the fair market value of these securities was $90.5 million. Holders of the securities are entitled to receive dividends at an annual rate of 8.875% of the liquidation preference value of $25. Dividends are payable monthly and in substance are tax-deductible by the company. The securities are shown as company-obligated mandatorily redeemable preferred securities of partnership on the consolidated balance sheets. The dividends are shown as minority interest in income of partnership in the consolidated statements of income. In September 1999, UtiliCorp Capital Trust I (UCT), a limited partnership of which we are the general partner, issued 10 million shares of 9.75% Premium Equity Participating Security Units ("PEPS Units") for $250 million. Each PEPS Unit had an issue price of $25 and consists of a contract to purchase shares of our common stock on or prior to November 16, 2002 and a preferred security of UCT. The sole asset of UCT consists of $257.7 million of 7.35% senior deferrable notes due November 16, 2004 of UtiliCorp. Each purchase contract yields 2.40% per year, paid quarterly, on the $25 stated amount of the PEPS Unit. Each trust preferred security yields 7.35% per year, paid quarterly on the $25 stated amount of the PEPS Unit, until November 16, 2002. Following a remarketing of the trust preferred securities, the yields will be reset at a rate that will be equal to or greater than 7.35%. The fair market value of these securities at December 31, 1999, was about $226.9 million. 47 NOTE 10: Long-Term Debt This table summarizes the company's long-term debt:
December 31, -------------------------- In millions 1999 1998 - ---------------------------------------------------------------------------------------------------------- FIRST MORTGAGE BONDS: Various, 9.96%*, due 2000 - 2008 $ 17.3 $ 19.5 SENIOR NOTES: 9.21% Series, retired October 11, 1999 -- 50.0 8.45% Series, retired November 15, 1999 -- 100.0 Aquila Southwest Energy 8.29% Series, due September 15, 2002 37.5 50.0 7.0% Series, due July 15, 2004 (a) 250.0 -- 6.875% Series, due October 1, 2004 150.0 150.0 6.375% Series, due June 1, 2005 100.0 100.0 9.03% Series, due December 1, 2005 20.2 -- 6.70% Series, due October 15, 2006 100.0 100.0 8.2% Series, due January 15, 2007 130.0 130.0 7.625% Series, due November 15, 2009 200.0 -- 10.5% Series, due December 1, 2020 35.7 55.9 8.27% Series, due November 15, 2021 131.8 -- 9.0% Series, due November 15, 2021 18.2 150.0 8.0% Series, due March 1, 2023 125.0 125.0 SECURED DEBENTURES OF WEST KOOTENAY POWER: 8.90%*, due 2001 - 2023 69.6 66.2 CONVERTIBLE SUBORDINATED DEBENTURES: 6.625%, due July 1, 2011 (convertible into 308,234 common shares) 4.9 5.3 SENIOR NOTES OF AUSTRALIA: 7.04%*, due October 15, 2002 98.4 -- New Zealand Denominated Credit Facilities, due January 15, 2002 456.6 379.2 Australian Denominated Credit Facility, due January 2001 and March 2002 187.0 101.0 Canadian Denominated Credit Facility, due May 29, 2004 48.5 -- Capital Leases 23.4 3.9 Other notes and obligations 41.0 39.4 - ---------------------------------------------------------------------------------------------------------- TOTAL LONG-TERM DEBT 2,245.1 1,625.4 Less current maturities 42.8 248.8 - ---------------------------------------------------------------------------------------------------------- LONG-TERM DEBT, NET $2,202.3 $1,376.6 - ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- Fair value of long-term debt, including current maturities (b) $2,211.6 $1,752.8 - ---------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------
* Weighted average interest rate. (a) HEDGED WITH AN INTEREST RATE SWAP MOVING THE FIXED RATE TO A FLOATING RATE EQUAL TO LIBOR PLUS 50 BASIS POINTS. (b) THE FAIR VALUE OF LONG-TERM DEBT IS BASED ON CURRENT RATES AT WHICH THE COMPANY COULD BORROW FUNDS WITH SIMILAR REMAINING MATURITIES. All of our Michigan network assets are subject to the lien of a mortgage indenture. We cannot issue mortgage bonds under our General Mortgage Indenture without directly securing certain Senior Notes equally as any mortgage bond issue. Currently we have no plans to issue mortgage bonds. The amounts of long-term debt maturing in each of the next five years and thereafter are shown below:
In millions Maturing Amounts - ----------------------------------------------------- 2000 $ 42.8 2001 144.1 2002 604.3 2003 3.9 2004 452.1 Thereafter 997.9 - ----------------------------------------------------- Total $2,245.1 - ----------------------------------------------------- - -----------------------------------------------------
DEBT REFINANCING EXCHANGE OFFER In March 1999, approximately $131.8 million of our 9% senior notes were exchanged for 8.27% senior notes and $20.2 million of our 10.5% senior notes were exchanged for 9.03% senior notes. NEW ZEALAND DENOMINATED CREDIT FACILITIES UnitedNetworks has a three-year term loan facility to finance the acquisitions of TransAlta's (December 1998) and TrustPower's (January 1999) lines businesses. The maximum amount of the facility is $NZ1 billion. The interest rate is fixed through a series of swaps at 7.20%. A commitment fee of .50% applies to the unused portion of the credit facility. AUSTRALIAN DENOMINATED CREDIT FACILITIES We maintain a $A155 million credit facility with a bank that matures in January 2001. The interest rate for this 48 facility is fixed at 7.19%. At December 31, 1999, $A155 million was outstanding. We also have a $A130 million credit facility with a consortium of banks that matures in March 2002. The interest rate on this facility fluctuates with changes in the Australian bank bill rate. At December 31, 1999, $A130 million was outstanding at a rate of 6.65%. A commitment fee of .50% applies to the unused portion of the credit facility. CANADIAN DENOMINATED CREDIT FACILITIES UtiliCorp Canada Finance Corporation (UCFC) maintains a $C70 million credit facility with a bank that matures in May 2004. The interest rate for this facility is fixed at 6.52%. NOTE 11: Capital Stock COMMON STOCK We have two types of authorized common stock-- unclassified common stock and Class A common stock. No Class A common stock is issued or outstanding. As of December 31, 1999, we had no restrictions on our ability to pay cash dividends. COMMON STOCK SPLIT In November 1998, our Board of Directors approved a 3-for-2 common stock split. The stock split was effective March 12, 1999, and all share amounts, share prices, and per share figures have been restated. STOCKHOLDER RIGHTS PLAN Our Board adopted a rights plan and declared a dividend distribution of one right for each outstanding common share. The rights are not currently exercisable. Each right, when exercisable, would entitle each right holder to purchase one one-thousandth of a share of Series A Participating Cumulative Preference Stock at a price of $77. The rights become exercisable if a person has acquired 15% of the outstanding common stock. Once the rights become exercisable, each rights holder can purchase common stock in the company at a market value twice the exercise price of the right. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN We offer to current and potential shareholders a Dividend Reinvestment and Common Stock Purchase Plan (the Stock Plan). The Stock Plan allows participants to purchase up to $10,000 per month of common stock at a five-day average market price, without sales commissions. The Stock Plan also allows members to reinvest dividends into additional common shares at a 5% discount. For the year ended December 31, 1999, 1,432,919 shares were issued under the Stock Plan. As of December 31, 1999, 4,773,618 shares were available to issue under this plan. EMPLOYEE STOCK PURCHASE PLAN Participants in our Employee Stock Purchase Plan have the opportunity to buy shares of common stock at a reduced price through regular payroll deductions and/or lump sum deposits of up to 20% of the employee's base salary. Contributions are credited to the participant's account throughout an option period. At the end of the option period, the participant's total account balance is applied to the purchase of common stock. The shares are purchased at 85% of the lower of the market price on the first day or the last day of the option period. Participants must be enrolled in the Plan as of the first day of an option period in order to participate in that option period. RESTATED RETIREMENT INVESTMENT PLAN A defined contribution plan, the Restated Retirement Investment Plan (Savings Plan), covers all of our full-time and eligible part-time employees. Participants may generally elect to contribute up to 15% of their annual pay on a before- or after-tax basis subject to certain limitations. The company generally matches contributions up to 6%. Participants may direct their contributions into various investment options. All company matching contributions are in UtiliCorp common stock. The Savings Plan also includes a stock contribution fund to which the company can contribute an additional amount of company common stock for participants. STOCK INCENTIVE PLAN Our Stock Incentive Plan enables the company to grant common shares to certain employees as restricted stock awards and as stock options. Shares issued as restricted stock awards are held by the company until certain restrictions lapse, generally on the third award anniversary. The market value of the stock, when awarded, is amortized to compensation expense over the three-year period. Stock options granted under the Plan allow the purchase of common shares at a price not less than fair market value at the date of grant. Options are generally exercisable commencing with the first anniversary of the grant. They expire 10 years after the date of grant. EMPLOYEE STOCK OPTION PLAN The Board approved the establishment of an Employee Stock Option Plan in 1991. This Plan provides for the granting of up to 2.4 million stock options to eligible employees other than those eligible to receive options under the Stock Incentive Plan. Stock options granted under the Employee Stock Option Plan carry the same provisions as those issued under the Stock Incentive Plan. During 1998 and 1992, respectively, options for 1,278,713 and 1,114,350 shares were granted to employees. The exercise prices of these options are $24.02 and $18.21, respectively. 49 This table summarizes stock options as of December 31, 1999 and 1998:
Shares 1999 1998 - -------------------------------------------------------- BEGINNING BALANCE 5,440,403 3,764,441 Granted 2,640,401 2,706,526 Exercised (214,724) (803,565) Cancelled (518,119) (226,999) - -------------------------------------------------------- ENDING BALANCE 7,347,961 5,440,403 - -------------------------------------------------------- - -------------------------------------------------------- WEIGHTED AVERAGE PRICES: Beginning balance $21.15 $18.65 Granted price 23.19 23.94 Exercised price 24.30 18.79 Cancelled price 22.51 20.47 Ending balance 21.80 21.15 - -------------------------------------------------------- - --------------------------------------------------------
At December 31, 1999, total exercisable stock options were 2,900,211 shares. Total restricted stock awards outstanding were 1,048,842 shares (at prices ranging between $14.59 and $25.00). STOCK BASED COMPENSATION We issue stock options to employees from time to time and account for these options under Accounting Principles Board Opinion No. 25 (APB 25). All stock options issued are granted at the common stock's current market price. This means we record no compensation expense related to stock options. We also offer employees a 15% discount from the market price of common stock. Since we record options and discounts under APB 25, we must disclose the pro forma compensation expense and earnings per share (dilutive method) as if we reflected the estimated fair value of options and discounts as compensation at the date of grant or issue. For the years ended December 31, 1999, 1998 and 1997, our pro forma net income and diluted earnings per share would have been as follows:
In millions except per share 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------- NET INCOME: As reported $160.5 $132.2 $122.1 Pro forma 155.5 126.2 119.2 - --------------------------------------------------------------------------------------------------------------------- DILUTED EARNINGS PER SHARE: As reported $1.75 $1.63 $1.51 Pro forma 1.70 1.56 1.47 - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
The fair value of stock options granted in 1999, 1998 and 1997 was estimated on the date of grant using the Black-Scholes option-pricing model. The weighted average fair values and related assumptions were as follows:
1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------- Weighted average fair value per share $3.23 $3.54 $2.33 Expected volatility 17.25% 16.52% 17.36% Risk-free interest rate 5.45% 5.76% 6.58% Expected lives 10 YEARS 10 years 10 years Dividend yield 5.10% 4.97% 6.28% - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
NOTE 12: Income Taxes Income tax expense consists of the following components:
Year Ended December 31, - ---------------------------------------------------------- In millions 1999 1998 1997 - ---------------------------------------------------------- CURRENTLY PAYABLE: Federal $91.1 $33.9 $27.1 Foreign 7.5 1.7 7.1 State 15.6 6.5 6.5 DEFERRED: Federal (38.7) 41.5 42.1 State (6.2) 4.2 8.2 Investment tax credit amortization (1.1) (1.2) (1.3) - ---------------------------------------------------------- TOTAL INCOME TAX EXPENSE $68.2 $86.6 $89.7 - ---------------------------------------------------------- - ----------------------------------------------------------
The principal components of deferred income taxes consist of the following:
December 31, - --------------------------------------------------------- In millions 1999 1998 - --------------------------------------------------------- DEFERRED TAX ASSETS: Alternative minimum carryforward $ 70.5 $ 93.4 - --------------------------------------------------------- DEFERRED TAX LIABILITIES AND CREDITS: Accelerated depreciation and other plant differences: Regulated 229.6 180.5 Non-regulated 175.0 186.7 Regulatory asset--SFAS 109 32.2 42.4 Mark-to-market reserve 39.8 50.4 Other, net 28.1 62.9 - --------------------------------------------------------- TOTAL DEFERRED TAX LIABILITIES AND CREDITS 504.7 522.9 - --------------------------------------------------------- DEFERRED INCOME TAXES AND CREDITS, NET $434.2 $429.5 - --------------------------------------------------------- - ---------------------------------------------------------
50 Our effective income tax rates differed from the statutory federal income tax rates primarily due to the following:
December 31, ------------------------- Percent 1999 1998 1997 - ----------------------------------------------------------- Statutory Federal Income Tax Rate 35.0% 35.0% 35.0% TAX EFFECT OF: Investment tax credit amortization (.5) (.5) (.6) State income taxes, net of federal benefit 2.7 4.9 5.8 Difference in tax rate of foreign subsidiaries (3.8) (3.1) (1.9) Other (3.6) 3.3 1.8 - --------------------------------------------------------- EFFECTIVE INCOME TAX RATE 29.8% 39.6% 40.1% - --------------------------------------------------------- - ---------------------------------------------------------
We had alternative minimum tax credit carryforwards of approximately $70.5 million at December 31, 1999. Alternative minimum tax credits can be carried forward indefinitely. The company has not recorded a valuation allowance against its tax credit carryforwards. We have made no provision for U.S. income taxes on undistributed earnings from our international businesses ($198.4 million at December 31, 1999) because it is our intention to reinvest those earnings. If we distribute those earnings in the form of dividends, we may be subject to both foreign withholding taxes and U.S. income taxes net of allowable foreign tax credits. Consolidated income before income taxes for the years ended December 31, 1999, 1998, and 1997 included (in millions) $70.7, $70.5, and $13.6, respectively, from international operations. NOTE 13. Employee Benefits PENSIONS The following table shows the funded status of our pension plans and the amounts included in the consolidated balance sheets and statements of income:
Pension Benefits Other Benefits ------------------------------------------------------------------- Dollars in millions 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------- CHANGE IN BENEFIT OBLIGATION: Benefit obligation at start of year $221.4 $205.5 $185.9 $ 42.2 $ 42.6 $ 39.0 Service cost 7.7 7.7 6.3 1.0 .7 .7 Interest cost 14.8 14.4 13.8 3.2 2.7 2.8 Plan participants' contribution .7 .6 .6 .9 .8 .8 Amendments .3 8.9 .5 -- .3 (.1) Actuarial (gain) loss (16.0) (1.2) 8.5 7.5 1.6 .6 Benefits paid (12.5) (12.1) (8.5) (3.6) (6.3) (1.1) Foreign Currency Exchange changes 2.2 (2.4) (1.6) .2 (.2) (.1) - --------------------------------------------------------------------------------------------------------------------- Benefit obligation at end of year $218.6 $221.4 $205.5 $ 51.4 $ 42.2 $ 42.6 - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- CHANGE IN PLAN ASSETS: Fair value of plan assets at start of year $227.0 $239.6 $208.7 $ 4.5 $ 4.8 $ .5 Actual return on plan assets 40.6 (.5) 38.9 .3 .2 .1 Employer contribution 1.9 1.5 1.3 5.5 5.0 4.5 Plan participants' obligation .7 .6 .6 .9 .8 .8 Benefits paid (12.5) (12.1) (8.5) (3.6) (6.3) (1.1) Foreign Currency Exchange changes 1.9 (2.1) (1.4) -- -- -- - --------------------------------------------------------------------------------------------------------------------- Fair value of plan assets at end of year $259.6 $227.0 $239.6 $ 7.6 $ 4.5 $ 4.8 - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- Funded status $ 41.0 $5.6 $ 34.1 $(43.8) $ (37.7) $(37.8) Unrecognized transition amount (7.7) (8.9) (10.1) 26.3 28.3 30.4 Unrecognized net actuarial (gain) loss (13.6) 19.5 (2.3) 3.8 (8.8) (7.7) Unrecognized prior service cost 10.9 10.6 1.6 .3 3.2 -- - --------------------------------------------------------------------------------------------------------------------- Prepaid (accrued) benefit cost $ 30.6 $ 26.8 $ 23.3 $(13.4) $ (15.0) $(15.1) - --------------------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE ASSUMPTIONS AS OF SEPTEMBER 30: Discount rate 7.61% 6.75% 7.17% 7.75% 6.75% 7.00% Expected return on plan assets 9.70% 9.73% 9.73% 7.00% 7.00% 10.00% Rate of compensation increase 5.04% 5.09% 5.36% 5.40% 5.40% 5.40% - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
51 For measurement purposes, we assumed a 6.00% annual rate of increase in the per capita cost of covered health benefits for each future fiscal year.
Pension Benefits Other Benefits -------------------------------------------------------------------- Dollars in millions 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------- COMPONENTS OF NET PERIODIC BENEFIT COST Service cost $ 7.7 $ 7.7 $ 6.3 $1.0 $ .7 $ .7 Interest cost 14.8 14.4 13.8 3.2 2.7 2.8 Expected return on plan assets (23.4) (22.8) (19.9) (.4) (.3) (.2) Amortization of transition amount (1.2) (1.2) (1.2) 2.0 2.0 2.0 Amortization of prior service cost .5 -- -- .1 -- -- Recognized net actuarial (gain) loss -- -- -- -- (.2) (.3) Regulatory adjustment .1 (.1) .8 -- -- -- - --------------------------------------------------------------------------------------------------------------------- NET PERIODIC BENEFIT COST $ (1.5) $ (2.0) $ (.2) $5.9 $4.9 $5.0 - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
The U.S. pension plan was amended effective December 1, 1999 to provide the same pension benefits for almost all participants. We maintain defined benefit pension plans in the United States and Canada. The actuarial assumptions used to calculate the benefit obligation and periodic pension costs for those plans are fundamentally identical. For the United States plan, plan assets exceed benefit obligations in the years ended December 31, 1999, 1998 and 1997 by (in millions) $47.1, $12.2 and $37.8, respectively. For the Canadian plan, benefit obligation exceeds plan assets by (in millions of U.S. dollars) $6.1, $6.6 and $3.6 respectively. The prepaid benefit correlating to the United States and Canada for the years ended December 31, 1999, 1998 and 1997 are (in millions) $27.3 and $3.2, $24.4 and $2.4, and $20.8 and $2.6, respectively. Our health care plans are contributory, with participants' contributions adjusted annually. The life insurance plans are non-contributory. We have assumed in estimating future health care costs future cost-sharing changes. The expense recognition for health care costs does not necessarily match the cost estimates due to certain differences in regulatory accounting at domestic utility operations. The assumed health care cost trends significantly affect the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects for Fiscal Year 1999.
1 Percentage-Point - ------------------------------------------------------- In millions Increase Decrease - ------------------------------------------------------- Effect on total of service and interest cost components $ .5 $ (.4) Effect on post-retirement benefit obligation 3.9 (3.3) - -------------------------------------------------------
In addition to the defined benefit retirement plans and health care plans, we contribute to a defined contribution savings plan. Company contributions were $9.3 million and $8.4 million during the plan years ending December 1999 and 1998, respectively. [GRAPHIC] 52 NOTE 14: Commitments and Contingencies COMMITMENTS We have various commitments for the next five years relating to power and gas supply commitments, fixed price sales obligations, and lease and rental commitments. A summary is below. As with any estimates, the actual amounts paid or received could differ materially.
Dollars in millions except per unit 2000 2001 2002 2003 2004 - ----------------------------------------------------------------------------------------------------------------------- Capital expenditures $293.5 $287.8 $249.5 $250.0 $250.0 Future minimum lease payments $36.6 $41.1 $39.9 $38.3 $36.4 Purchased power obligations $66.8 $67.6 $95.4 $96.1 $96.1 Purchased power obligations (GIGAWATTS) 959 997 1,076 1,099 1,099 Cash flow obligation on prepaid gas sales $62.7 $65.5 $67.3 $72.9 $77.6 - ----------------------------------------------------------------------------------------------------------------------- Coal contracts $44.0 $33.7 $32.6 $33.5 $33.5 Price ranges -------------------------------$13.23 to $24.41 per ton------------------------ - ----------------------------------------------------------------------------------------------------------------------- Fixed price sales physical obligations (TRILLION BTUS) 550.5 111.1 56.3 47.9 46.0 Price ranges ---------------------------------$1.56 to $4.02 per MCF------------------------ - ----------------------------------------------------------------------------------------------------------------------- Fixed price purchase physical obligations (TRILLION BTUS) 524.6 96.5 10.8 3.3 1.1 Price ranges ---------------------------------$1.08 to $4.02 per MCF------------------------ - ----------------------------------------------------------------------------------------------------------------------- Fixed price sales obligations (GIGAWATTS) 29,759 70 -- -- -- Price ranges -------------------------------$8.50 to $141.50 per MWH----------------------- - ----------------------------------------------------------------------------------------------------------------------- Fixed price purchase obligations (GIGAWATTS) 29,908 173 67 -- -- Price ranges -------------------------------$8.00 to $135.00 per MWH---------------------- - -----------------------------------------------------------------------------------------------------------------------
Future minimum lease payments primarily relate to our interest in the Jeffrey Energy Center, peaking turbines, coal cars, and office space. Rent expense for the years 1999, 1998, and 1997 was (in millions) $26.9, $24.8 and $25.5, respectively. A 1998 court ruling required United Gas to pay the gas cost amount in accordance with a contract that was subject to a legal dispute. In addition, United Gas is required to pay interest to the supplier on the $38 million. We estimate this will cost $6.8 million. In 1998 we entered into a 15-year agreement to obtain the rights to dispatch 267 megawatts of power from facilities currently being built by a third party. As part of the agreement we will provide the natural gas to the power plant and will be able to dispatch the power. The plant is expected to be available in June 2000. We are developing a $277 million, 600-megawatt, combined-cycle power plant in Missouri which we expect will begin operating in June 2001. In January, we sold a 50% interest in the plant to Calpine Corporation. We will manage the plant's fuel supply and all of the produced power. Calpine will oversee construction and operate and maintain the plant. ENVIRONMENTAL We are subject to various environmental laws. These include regulations governing air and water quality and the storage and disposal of hazardous or toxic wastes. We continually assess ways to ensure we comply with laws and regulations on hazardous materials and hazardous waste and remediation activities. We own or previously operated 29 former manufactured gas plant (MGP) sites which may, or may not, require some form of environmental remediation. We have contacted appropriate federal and state agencies and are working to determine what, if any, specific cleanup activities these sites may require. As of December 31, 1999, we estimate probable cleanup costs on our identified MGP sites to be $14.4 million. This amount is our best estimate of the costs of investigating and remediating our identified MGP sites, and is the amount we consider to be probable for future investigation and remediation of these sites. This estimate is based upon a comprehensive review of the potential costs associated with conducting investigative and remedial actions at our identified MGP sites, as well as the likelihood of whether such actions will be necessary. There are also additional costs that we consider to be less likely but still "reasonably possible" to be incurred at these sites. Based upon the results of studies at these sites and our knowledge and review of potential remedial action options, it is reasonably possible that these additional costs could exceed our best estimate by approximately $36 million. This estimate could change materially when we have investigated further. It could also be affected by the actions of environmental agencies and the financial viability of other responsible parties. Ultimate liability also may be affected significantly if we are held responsible for parties unable to contribute financially to the cleanup effort. We have received favorable rate orders that enable us to recover environmental cleanup costs in certain juris- 53 dictions. In other jurisdictions, there are favorable regulatory precedents for recovery of these costs. We are also pursuing recovery from insurance carriers and other potentially responsible parties. In October 1998, the EPA published new air quality standards to further reduce the emission of NOx. These more strict standards will require us to install new equipment on our baseload coal units in Missouri that we estimate will cost $35 million. The new standards are under debate in the courts and our ultimate cost is therefore subject to change. The new standards as written are effective in May 2003. We do not expect final resolution of these environmental matters to have a material adverse affect on our financial position or results of operations. RATE PROCEEDINGS We filed a $6.0 million gas case in Kansas which will go to hearing this summer. In a Kansas electric show-cause case, the Commission staff recommended a rate reduction of $19.9 million. The Commission decision to reduce rates by $8.7 million is pending. We filed a $9.0 million Minnesota gas case which is scheduled to go to hearing in early May 2000. OTHER The company is subject to various legal proceedings and claims that arise in the ordinary course of business operations. We do not expect the amount of liability, if any, from these actions to materially affect our consolidated financial position or results of operations. NOTE 15: Segment Information A. BUSINESS LINES
Year Ended December 31, --------------------------------------------------------------------------------- Dollars in millions 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Sales: Networks-- United States $1,578.8 8.5% $ 1,492.2 $1,583.6 Canada 87.9 .4 87.9 91.1 New Zealand 221.3 1.2 56.6 -- Australia -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total Networks 1,888.0 10.1 1,636.7 1,674.7 - ------------------------------------------------------------------------------------------------------------------------------------ Energy Merchant 16,730.0 89.8 10,925.8 7,245.2 Services -- -- -- -- Corporate and other 3.5 .1 .9 6.4 - ------------------------------------------------------------------------------------------------------------------------------------ Total $18,621.5 100.0% $12,563.4 $8,926.3 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, --------------------------------------------------------------------------------- Dollars in millions 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS BEFORE INTEREST AND TAXES: Networks-- United States $195.1 47.1% $217.8 $197.6 Canada 20.9 5.0 22.0 26.2 New Zealand 80.9 19.6 21.4 9.8 Australia 28.1 6.8 67.6 27.0 - ------------------------------------------------------------------------------------------------------------------------------------ Total Networks (a) 325.0 78.5 328.8 260.6 - ------------------------------------------------------------------------------------------------------------------------------------ Energy Merchant (b) 89.7 21.7 36.8 71.8 Services 13.2 3.2 -- -- Corporate and other (13.9) (3.4) (14.2) 26.7 - ------------------------------------------------------------------------------------------------------------------------------------ Total $414.0 100.0% $351.4 $359.1 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
(a) THE NETWORKS SEGMENT INCLUDES OPERATING ACTIVITIES IN AUSTRALIA, NEW ZEALAND AND CANADA, WHICH HAD TOTAL EQUITY EARNINGS OF $39.4, $90.8, AND $43.6 MILLION IN 1999, 1998 AND 1997, RESPECTIVELY. (b) THE ENERGY MERCHANT SEGMENT INCLUDES EQUITY EARNINGS OF $34.6, $34.5 AND $30.6 MILLION IN 1999, 1998 AND 1997, RESPECTIVELY. 54
Year Ended December 31, ----------------------------------------------------------------------------------- Dollars in millions 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ DEPRECIATION EXPENSE: Networks-- United States $115.3 59.5% $109.3 $85.0 Canada 9.3 4.8 8.8 8.0 New Zealand 32.9 17.0 1.6 -- Australia -- -- .3 .9 - ------------------------------------------------------------------------------------------------------------------------------------ Total Networks 157.5 81.3% 120.0 93.9 - ------------------------------------------------------------------------------------------------------------------------------------ Energy Merchant 39.1 20.2 29.8 29.8 Services -- -- -- -- Corporate and other (2.9) (1.5) .2 5.9 - ------------------------------------------------------------------------------------------------------------------------------------ Total $193.7 100.0% $150.0 $129.6 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
December 31, ----------------------------------------------------------------------------------- Dollars in millions 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ IDENTIFIABLE ASSETS: Networks-- United States $2,042.3 27.1% $2,045.9 Canada 282.3 3.7 221.8 New Zealand 1,009.4 13.4 839.4 Australia 500.4 6.6 231.0 - ------------------------------------------------------------------------------------------------------------------------------------ Total Networks $3,834.4 50.8% $3,338.1 - ------------------------------------------------------------------------------------------------------------------------------------ Energy Merchant 3,089.1 41.0 2,570.2 Services 320.6 4.3 -- Corporate and other 294.5 3.9 222.6 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL $7,538.6 100.0% $6,130.9 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, ----------------------------------------------------------------------------------- Dollars in millions 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL EXPENDITURES: Networks-- United States $130.2 51.4% $101.8 $116.6 Canada 23.0 9.1 12.5 16.6 New Zealand -- -- -- -- Australia -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total Networks 153.2 60.5 114.3 133.2 - ------------------------------------------------------------------------------------------------------------------------------------ Energy Merchant 61.3 24.2 33.8 28.4 Services -- -- -- -- Corporate and other 39.0 15.3 48.8 38.2 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL $253.5 100.0% $196.9 $199.8 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
B. GEOGRAPHICAL INFORMATION
Year Ended December 31, ----------------------------------------------------------------------------------- Dollars in millions 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ SALES: United States $15,348.5 82.4% $10,924.8 $8,054.6 Canada (a) 2,381.8 12.8 1,222.4 657.6 Australia (b) -- -- -- -- United Kingdom 669.9 3.6 359.6 214.1 New Zealand 221.3 1.2 56.6 -- - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL $18,621.5 100.0% $12,563.4 $8,926.3 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
(a) CANADIAN SALES, EARNINGS AVAILABLE FOR COMMON SHARES AND IDENTIFIABLE ASSETS INCLUDE AQUILA ENERGY'S CANADIAN OPERATIONS AND VARIOUS SMALL CANADIAN GAS MARKETING COMPANIES. (b) RESULTS OF AUSTRALIAN OPERATIONS ARE REPORTED ON THE INCOME STATEMENTS AS EQUITY IN EARNINGS OF INVESTMENTS AND PARTNERSHIPS. AUSTRALIAN EARNINGS AVAILABLE AND A MAJORITY OF THE IDENTIFIABLE ASSETS RELATE TO EQUITY INVESTMENTS. 55
Year Ended December 31, ----------------------------------------------------------------------------------- Dollars in millions 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS AVAILABLE FOR COMMON SHARES: United States $96.1 59.9% $ 83.3 $102.8 Canada (a) 20.2 12.6 7.6 13.2 Australia (b) 16.5 10.3 40.3 11.3 New Zealand 25.0 15.6 6.5 1.9 United Kingdom 2.7 1.6 (5.5) (7.4) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAl $160.5 100.0% $132.2 $121.8 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
December 31, ----------------------------------------------------------------------------------- Dollars in millions 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ IDENTIFIABLE ASSETS: United States $5,128.2 68.1% $4,476.8 Canada (a) 771.5 10.2 438.9 Australia (b) 500.4 6.6 231.0 New Zealand 1,009.4 13.4 839.4 United Kingdom 129.1 1.7 144.8 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL $7,538.6 100.0% $6,130.9 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
(a) CANADIAN SALES, EARNINGS AVAILABLE FOR COMMON SHARES AND IDENTIFIABLE ASSETS INCLUDE AQUILA ENERGY'S CANADIAN OPERATIONS AND VARIOUS SMALL CANADIAN GAS MARKETING COMPANIES. (b) RESULTS OF AUSTRALIAN OPERATIONS ARE REPORTED ON THE INCOME STATEMENTS AS EQUITY IN EARNINGS OF INVESTMENTS AND PARTNERSHIPS. AUSTRALIAN EARNINGS AVAILABLE AND A MAJORITY OF THE IDENTIFIABLE ASSETS RELATE TO EQUITY INVESTMENTS. NOTE 16: Mergers, Acquisitions and Divestitures INTEREST IN NEW ZEALAND ELECTRIC UTILITIES Through a series of transactions in 1998, we acquired an additional 48% of Power New Zealand's common stock for approximately $245 million, increasing our ownership to 78.6%. Concurrent with this acquisition, we sold our 39.6% interest in New Zealand's WEL Energy Group, which we acquired throughout 1995, 1996 and 1997, and bought out the 21% minority shareholder in our New Zealand subsidiary, UtiliCorp N.Z., Inc. New Zealand's Electricity Industry Reform Act of 1998 required all the country's utilities to separate ownership of their lines (network) and supply (generation and retail) businesses. Power New Zealand, with approximately 90% of its assets and earnings in the lines area, in November 1998 announced its intention to remain in the network business and to exit the supply business. It also agreed to purchase the Wellington-based lines assets of TransAlta New Zealand Ltd. and to sell to TransAlta its retail electricity business serving the Auckland area for a net expenditure by Power New Zealand of $238 million. Because Power New Zealand's name transferred to TransAlta as part of the retail business TransAlta acquired, the network business became UnitedNetworks Limited on January 1, 1999. In November 1998, Power New Zealand agreed to purchase the electric line assets of neighboring power company TrustPower Limited for approximately $261 million. The assets became part of a greater network, which includes parts of metropolitan Auckland and other areas in the central and southern regions of New Zealand's North Island. The TrustPower transaction closed in January 1999. Completion of the TransAlta and TrustPower transactions created the country's largest electricity distribution network, now serving about 484,000 customers. ST. JOSEPH LIGHT & POWER COMPANY On March 4, 1999, St. Joseph Light & Power Company (SJL&P) agreed to merge with us. Under the agreement, SJL&P shareholders will receive $23.00 in UtiliCorp common shares for each SJL&P common share held. We will account for the transaction as a purchase. This transaction was approved by SJL&P shareholders on June 16, 1999, and is also subject to approval by various state and federal regulatory agencies. We and SJL&P filed a joint application with the Missouri Public Service Commission (MPSC) on October 19, 1999, requesting approval of the plans to merge in a transaction valued at approximately $270 million. We expect to close this transaction in the second half of 2000. NATURAL GAS STORAGE FACILITY On March 29, 1999, we agreed to purchase Western Gas Resources Storage Inc. The $100 million cash transaction increased our ownership and control of strategically located natural gas storage assets. The 2,200-acre subsurface facility in Katy, Texas has a storage capacity of 20 billion cubic feet. The purchase closed on May 3, 1999. AQUILA TENDER OFFER On May 7, 1999, approximately 3.4 million shares of Aquila Gas Pipeline Corporation (AQP) were tendered 56 to us at $8.00. The 3.4 million shares together with the 24.0 million shares already held represented 93% of AQP's total shares outstanding. All remaining shares not tendered were converted in a "short-form" merger into a right to receive $8.00 per share. Upon completion of the short-form merger on May 14, 1999, AQP ceased being a publicly traded company and became wholly-owned by Aquila Energy. EMPIRE DISTRICT ELECTRIC COMPANY On May 10, 1999, The Empire District Electric Company (Empire) agreed to merge with us. Empire's shareholders approved the merger on September 3, 1999. Upon closing, they will be entitled to receive $29.50 for each share of Empire common stock held, payable in either cash or our common stock. The value of the merger consideration per share will decrease if our common stock is trading below $22 per share at closing and will increase if our common stock is trading above $26 per share at closing. The consideration paid to Empire shareholders, estimated to be $800 million, including the assumption of debt, is subject to certain conditions, such as cash and stock maximums, as well as certain regulatory approvals. We filed a joint application with the Missouri Public Service Commission on December 15, 1999, requesting approval of the plans to merge. We expect this merger to be completed by late 2000. SALE OF WEST VIRGINIA POWER DIVISION On September 9, 1999, we agreed to sell our West Virginia Power division to Allegheny Energy, Inc. for $75 million. The sale closed on December 31, 1999 and resulted in a fourth quarter gain of $4.5 million. In addition to the sale of West Virginia Power's electric and natural gas distribution assets, we entered into a separate agreement for Allegheny to purchase Appalachian Electric Heating, our heating and air conditioning service business in West Virginia. SALE OF RETAIL MARKETING In January 2000, we sold our retail gas marketing business for $14 million. We expect to record a gain in the first quarter of 2000. TRANSALTA ASSETS In February 2000, we agreed to acquire TransAlta Corporation's Alberta-based electricity distribution and retail assets for $450 million. The transaction includes 350,000 customers served by about 54,000 miles of low-voltage power distribution lines, and a 24-hour customer call center in Calgary. The transaction is subject to regulatory approvals in Canada and the United States and is expected to close in 2000. INITIAL PUBLIC OFFERING--UNITED ENERGY LIMITED In May 1998, United Energy Limited (UEL) sold 42% of its common stock to the Australian public. As a result, we recorded a $45.3 million gain. The partial sale to the public reduced our effective ownership of UEL to 29%. Concurrent with UEL's stock offering, we bought an additional 5% in UEL from another company to bring our ownership to 34%. Prior to the common stock sale, UEL repaid us approximately $101 million for debt notes. The management agreement between UEL and UtiliCorp remains in place. KANSAS CITY POWER & LIGHT COMPANY (KCPL) In September 1996, KCPL terminated the Amended and Restated Agreement and Plan of Merger (the Agreement) among KCPL, KC Merger Sub, Inc., UtiliCorp United Inc. and KC United Corp., which would have provided for the merger of UtiliCorp and KCPL. In February 1997, Western Resources Inc. and KCPL signed a definitive agreement to merge. As a result, KCPL paid us a $53.0 million breakup fee. We recorded this merger termination fee in the first quarter of 1997. NOTE 17: Quarterly Financial Data (Unaudited) Financial results for interim periods do not necessarily indicate trends for any 12-month period. Quarterly results can be affected by the timing of acquisitions, the effect of weather on sales, and other factors typical of utility operations and energy related businesses.
1999 QUARTERS 1998 Quarters ----------------------------------------------------------------------------------------- In millions, except per share FIRST SECOND THIRD FOURTH First Second Third Fourth - ---------------------------------------------------------------------------------------------------------------------------------- Sales $3,801.0 $3,970.1 $6,464.2 $4,386.2 $2,895.9 $2,564.7 $3,808.8 $3,294.0 Gross profit 282.9 273.0 289.1 311.8 253.6 210.3 247.9 255.6 Net income 51.9 24.8 42.5 41.3 43.3 23.4 28.5 37.0 - ---------------------------------------------------------------------------------------------------------------------------------- Earnings per common share: Basic* $.57 $.27 $.46 $.45 $.54 $.29 $.36 $.46 Diluted .57 .27 .46 .45 .53 .29 .36 .45 - ---------------------------------------------------------------------------------------------------------------------------------- Cash dividend per common share $.30 $.30 $.30 $.30 $.30 $.30 $.30 $.30 Market price per common share: High $23.58 $25.13 $24.56 $22.00 $26.29 $26.33 $26.25 $24.46 Low 22.44 22.63 21.00 19.00 23.33 23.21 22.63 22.87 - ----------------------------------------------------------------------------------------------------------------------------------
* THE SUM OF THE QUARTERLY EARNINGS PER SHARE AMOUNTS MAY DIFFER FROM THAT REFLECTED IN NOTE 1 DUE TO THE WEIGHTING OF COMMON SHARES OUTSTANDING DURING EACH OF THE RESPECTIVE PERIODS. 57 Report of Management The management of UtiliCorp United Inc. is responsible for the information that appears in this annual report, including its accuracy. We prepared the accompanying consolidated financial statements in accordance with generally accepted accounting principles. In addition to selecting appropriate accounting principles, we are responsible for the way information is presented and for its reliability. To report financial results we must often make estimates based on currently available information and judgments of current conditions and circumstances. We have set up well-developed systems of internal control to ensure the integrity and objectivity of the consolidated financial information in this report. These systems are designed to provide reasonable assurance that UtiliCorp's assets are safeguarded and that the transactions are properly authorized and recorded in accordance with the appropriate accounting principles. Through its Audit Committee, the Board of Directors participates in the process of reporting financial information. The Audit Committee selects our independent accountants. It also reviews, along with management, our financial reporting and internal accounting controls, policies and practices. /s/ ROBERT F. JACKSON, JR. /s/ PETER LOWE Robert F. Jackson, Jr. Peter Lowe Audit Committee Chairman Senior Vice President and Chief Financial Officer Report of Independent Public Accountants TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF UTILICORP UNITED INC.: We have audited the accompanying consolidated balance sheets of UtiliCorp United Inc. and subsidiaries at December 31, 1999 and 1998 and the related consolidated statements of income, common shareholders' equity, comprehensive income, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of UtiliCorp United Inc. and subsidiaries at December 31, 1999 and 1998 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with accounting principles generally accepted in the United States. /s/ Arthur Andersen LLP Arthur Andersen LLP Kansas City, Missouri February 1, 2000 58 Network Statistics-North America
10-YEAR AVERAGE ANNUAL Dollars in millions GROWTH RATE 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ ELECTRIC OPERATIONS* SALES: Residential 6.5% $270.5 35.5% $279.1 $268.3 Commercial 8.5% 179.8 23.6 179.4 173.4 Industrial 8.9% 84.9 11.1 83.0 82.2 Other 17.6% 227.3 29.8 162.1 123.3 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL SALES 9.6% $762.5 100.0% $703.6 $647.2 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ MWH SALES (000's): Residential 5.5% 4,072 27.8% 4,104 3,885 Commercial 8.6% 3,133 21.4 3,069 2,883 Industrial 7.5% 2,101 14.3 2,041 1,993 Other 15.1% 5,344 36.5 5,809 4,997 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL MWH SALES 9.2% 14,650 100.0% 15,023 13,758 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ CUSTOMERS AT YEAR END: Residential 5.9% 400,128 86.5% 396,912 388,532 Commercial 7.5% 57,442 12.4 57,178 56,207 Industrial 7.0% 354 .1 339 326 Other 4.4% 4,655 1.0 4,614 4,650 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL CUSTOMERS 6.0% 462,579 100.0% 459,043 449,715 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ GENERATION MIX: Coal 74.4% 73.6% 70.4% Natural gas and oil 12.7 14.5 9.9 Hydro 12.9 11.9 19.7 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL 100.0% 100.0% 100.0% - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ GENERATING CAPABILITY (MW): Coal 895 47.0% 888 883 Natural gas and oil 802 42.2 792 786 Hydro 205 10.8 205 205 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL GENERATING CAPABILITY 1,902 100.0% 1,885 1,874 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
* ELECTRIC STATISTICS INCLUDE THE OPERATIONS OF WEST KOOTENAY POWER IN CANADA.
- ------------------------------------------------------------------------------------------------------------------------------------ GAS OPERATIONS SALES: Residential 4.3% $398.1 62.4% $379.4 $464.4 Commercial 2.9% 161.7 25.3 161.2 205.8 Industrial (10.7%) 29.3 4.6 34.1 46.8 Other 4.9% 49.1 7.7 47.8 50.4 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL SALES 2.4% $638.2 100.0% $622.5 $767.4 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ MCF SALES (000's): Residential 2.8% 70,082 28.3% 66,564 77,594 Commercial 1.1% 33,418 13.5 33,228 39,128 Industrial (12.7%) 7,305 2.9 8,631 11,059 Other (3.3%) 1,334 .5 1,088 678 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL MCF SALES (.1%) 112,139 45.2 109,511 128,459 Gas transportation 2.6% 135,692 54.8 140,499 158,937 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL SALES AND TRANSPORTATION 1.3% 247,831 100.0% 250,010 287,396 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ CUSTOMERS AT YEAR END: Residential 4.2% 771,266 90.2% 761,650 744,238 Commercial 2.6% 74,200 8.7 77,971 78,925 Industrial (9.3%) 1,376 .1 1,982 2,491 Other 31.3% 8,665 1.0 9,986 2,491 - ------------------------------------------------------------------------------------------------------------------------------------ Total Customers 4.1% 855,507 100.0% 851,589 828,145 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
59 Selected 11 - Year Financial Data (a)
10-YEAR AVERAGE ANNUAL Dollars in millions except per share GROWTH RATE 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ STATEMENT OF INCOME TOTAL SALES 37.47% $18,621.5 $12,563.4 $8,926.3 $4,332.3 Total cost of sales 44.66% 17,464.7 11,596.0 7,972.0 3,420.3 - ------------------------------------------------------------------------------------------------------------------------------------ GROSS PROFIT 13.12% 1,156.8 967.4 954.3 912.0 Total expenses 12.86% 742.8 616.0 595.2 585.8 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS BEFORE INTEREST AND TAXES 13.60% 414.0 351.4 359.1 326.2 Total interest expense 13.86% 185.3 132.6 135.3 139.7 Income taxes 12.50% 68.2 86.6 89.7 80.7 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS BEFORE EXTRAORDINARY ITEMS AND EFFECTS OF ACCOUNTING CHANGES 13.79% 160.5 132.2 134.1 105.8 Extraordinary items and effects of accounting changes -- -- 12.0 -- - ------------------------------------------------------------------------------------------------------------------------------------ Net income 13.79% 160.5 132.2 122.1 105.8 Preference and preferred dividends -- -- .3 2.1 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS AVAILABLE FOR COMMON SHARES 15.38% $ 160.5 $ 132.2 $ 121.8 $ 103.7 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK DATA Diluted earnings per common share 4.02% $ 1.75 $ 1.63 $ 1.51 $ 1.46 Return on average common equity (.77)% 10.80% 11.43% 10.27% 10.31% Cash dividends paid per common share 2.40% $ 1.20 $ 1.20 $ 1.17 $ 1.17 Book value per common share at year end 4.24% 16.34 15.83 14.43 14.50 Market price of common stock at year end 2.86% 19.44 24.46 25.87 18.00 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ CAPITALIZATION Common shareholders' equity $ 1,525.4 $ 1,446.3 $1,163.6 $1,158.0 Preference and preferred stock -- -- -- 25.0 Company-obligated mandatorily redeemable preferred securities of partnership 100.0 100.0 100.0 100.0 Company-obligated mandatorily redeemable security of trust holding solely parent company senior deferrable notes 250.0 -- -- -- Short-term debt 248.9 235.6 113.8 252.0 Long-term debt (b) 2,245.1 1,625.4 1,508.9 1,496.4 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL CAPITALIZATION $4,369.4 $3,407.3 $2,886.3 $3,031.4 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ CAPITALIZATION RATIOS: Common shareholders' equity 34.9% 42.5% 40.3% 38.2% Preference and preferred stock -- -- -- .8 Company-obligated mandatorily redeemable preferred securities of partnership 2.3 2.9 3.5 3.3 Company-obligated mandatorily redeemable security of trust holding solely parent company senior deferrable notes 5.7 -- -- -- Short-term debt 5.7 6.9 3.9 8.3 Long-term debt (b) 51.4 47.7 52.3 49.4 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL 100.0% 100.0% 100.0% 100.0% - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ DEBT RATINGS Duff & Phelps Corporation BBB BBB BBB BBB Moody's Investors Service Baaa3 Baaa3 Baaa3 Baaa3 Standard and Poor's Corporation BBB BBB BBB BBB - ------------------------------------------------------------------------------------------------------------------------------------
(a) AMOUNTS PRIOR TO 1997 MAY NOT REFLECT RECLASSIFICATIONS TO CONFORM TO 1999 PRESENTATION, AND MAY NOT CONSISTENTLY REFLECT CHANGES IN ACCOUNTING POLICIES THAT MAY HAVE OCCURRED DURING THE EIGHT YEARS PRIOR TO 1997. (b) INCLUDES CURRENT MATURITIES. 60
1995 1994 1993 1992 1991 1990 1989 - ------------------------------------------------------------------------------------------------------------------------------------ $2,792.6 $2,398.1 $2,746.1 $1,298.9 $1,075.2 $ 883.5 $772.4 1,886.1 1,575.8 1,960.6 707.5 549.9 488.4 435.1 - ------------------------------------------------------------------------------------------------------------------------------------ 906.5 822.3 785.5 591.4 525.3 395.1 337.3 652.9 582.3 578.6 407.8 321.6 258.2 221.6 - ------------------------------------------------------------------------------------------------------------------------------------ 253.6 240.0 206.9 183.6 203.7 136.9 115.7 121.8 93.5 90.5 99.1 82.5 61.8 50.6 52.0 52.1 30.0 31.6 43.6 24.7 21.0 - ------------------------------------------------------------------------------------------------------------------------------------ 79.8 94.4 86.4 52.9 77.6 50.4 44.1 -- -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 79.8 94.4 86.4 52.9 77.6 50.4 44.1 2.1 3.0 6.9 6.9 7.8 7.9 5.7 - ------------------------------------------------------------------------------------------------------------------------------------ $ 77.7 $ 91.4 $ 79.5 $ 46.0 $ 69.8 $ 42.5 $ 38.4 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ $ 1.14 $ 1.37 $ 1.28 $ .87 $ 1.51 $ 1.15 $ 1.18 8.40% 10.24% 9.84% 6.93% 13.32% 10.69% 11.62% $ 1.15 $ 1.13 $ 1.08 $ 1.07 $ 1.03 $ .97 $ .95 13.73 13.49 13.51 12.44 12.79 11.33 10.91 19.59 17.67 21.17 18.42 19.00 13.59 14.67 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ $ 946.3 $ 906.8 $ 851.7 $ 661.1 $ 660.7 $ 477.5 $372.3 25.4 25.4 83.9 95.1 97.1 97.2 97.4 100.0 -- -- -- -- -- -- -- -- -- -- -- -- -- 288.6 182.4 70.0 230.9 111.0 48.7 86.2 1,370.5 1,115.7 1,011.5 896.7 931.6 679.3 442.6 - ------------------------------------------------------------------------------------------------------------------------------------ $2,730.8 $2,230.3 $2,017.1 $1,883.8 $1,800.4 $1,302.7 $998.5 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ 34.7% 40.7% 42.2% 35.1% 36.7% 36.7% 37.3% .9 1.1 4.2 5.0 5.4 7.5 9.8 3.7 -- -- -- -- -- -- -- -- -- -- -- -- -- 10.6 8.2 3.5 12.3 6.2 3.7 8.6 50.1 50.0 50.1 47.6 51.7 52.1 44.3 - ------------------------------------------------------------------------------------------------------------------------------------ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ BBB BBB BBB BBB BBB BBB BBB Baaa3 Baaa3 Baaa3 Baaa2 Baaa2 Baaa2 Baaa2 BBB BBB BBB BBB BBB- BBB- BBB- - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
61 Investor Information WWW.UTILICORP.COM Information you'll find on our web site includes our news releases, annual and quarterly reports, live stock quotes, audio and video of management presentations, documents filed with the Securities and Exchange Commission such as Forms 10-K and 10-Q, and information about our products and services. Links make it easy to visit the home pages of our business units. From time to time we also provide live webcasts of presentations to the investment community. For the quickest way to stay informed, sign up through the web site to receive dividend information, press releases, meeting notices and other types of information by e-mail as soon as they are released. ANNUAL MEETING We will hold our 2000 annual meeting of UtiliCorp shareholders in Kansas City, Missouri at 2:00 p.m. on Wednesday, May 3 at the Hyatt Regency Crown Center, 2345 McGee Street. We will host a reception with light refreshments before the meeting, beginning at 1:00 p.m. You can file your proxy for the annual meeting electronically. See page 63 for details on this easy process. We also encourage you to sign up to receive your future annual reports electronically instead of by mail. STOCK LISTINGS The common shares of UtiliCorp United Inc. are listed on the New York, Pacific and Toronto stock exchanges. The company's trading symbol is UCU. At the end of 1999, UtiliCorp had approximately 99,000 common shareholders and about 94 million shares outstanding. Sources of current investment research on UtiliCorp securities are shown on page 24. Shares of UnitedNetworks Limited, which is 79 percent owned by UtiliCorp, are traded on the New Zealand Stock Exchange under the symbol UNL.NZ. Shares of United Energy Limited, 34 percent owned by UtiliCorp, are traded on the Australian Stock Exchange under the symbol UEL.AX. The common shares of Aquila Gas Pipeline Corporation (NYSE: AQP) ceased public trading on May 14, 1999, when the company became wholly owned by our Aquila Energy subsidiary. 3-FOR-2 STOCK SPLIT We split our common stock 3-for-2 on March 12, 1999, based on shares of record held on February 22, 1999. For every two shares held as of the record date, after the split shareholders held one additional share. The financial results we reported at year end 1998 and for all later periods have reflected the split. DIVIDEND REINVESTMENT AND DIRECT PURCHASE OF SHARES UtiliCorp's Dividend Reinvestment and Common Stock Purchase Plan combines dividend reinvestment and optional cash purchase with a direct purchase provision. This enables investors to acquire their first shares of our common stock directly from the company without brokerage fees. (The minimum initial purchase for first-time buyers is $250.) - You may purchase from $50 to $10,000 in additional shares per month at market price. - Direct shareholders can buy more shares automatically with all or some of their dividends. - We purchase reinvestment shares for you under the plan at 5% less than the market price. - You pay no commissions on plan purchases. - Other options include partial reinvestment of dividends, electronic payment for cash purchases, and safekeeping of share certificates. - The plan prospectus explains all of these points in full detail. You may download the prospectus and an enrollment form from WWW.UTILICORP.COM; or call 1-800-884-5426 toll-free to have them come by mail. SHAREHOLDER INQUIRIES Our transfer agent is First Chicago Trust Company, a division of EquiServe. Call them for answers to questions about your account, including dividend payments, the Dividend Reinvestment and Common Stock Purchase Plan, direct deposit service or the transfer of shares. To reach them:
- -------------------------------------------------------------------------------- Toll-free 1-800-UTILICO (884-5426) From outside the United States 201-324-0498 Hearing-impaired 201-222-4955 Internet www.equiserve.com - --------------------------------------------------------------------------------
You may contact UtiliCorp Shareholder Relations toll-free at 1-800-487-6661, or at 816-421-6600. However, we usually refer to the transfer agent any calls about the transfer of shares, dividend reinvestment, cash purchases or direct deposit service. You may also contact Shareholder Relations by e-mail through the Investor Relations section of UtiliCorp's web site: WWW.UTILICORP.COM. MAILING ADDRESSES Shareholder Relations UtiliCorp United P.O. Box 13287 Kansas City, MO 64199-3287 Mail regarding the transfer of shares should be addressed to the transfer agent: EquiServe Stock Transfer Department P.O. Box 2506 Jersey City, NJ 07303-2506 Documents may also be delivered to Transfer Department, 525 Washington Blvd., Jersey City, NJ 07310. FORM 10-K Contact Shareholder Relations if you want to receive a printed copy of the Annual Report on Form 10-K as filed with the Securities and Exchange Commission. 62 ELECTRONIC PROXY VOTING There are several ways to cast your proxy vote. Each proxy card contains instructions and a personal security number to allow you to vote over the telephone or via the Internet. You may vote by telephone using a toll-free number. Just follow the voice prompts to vote on each issue shown on the proxy card. This takes only minutes. You may also vote online by accessing our secure UtiliCorp shareholder voting site. The web address and instructions are shown on your 2000 proxy card. When you vote online, you can also sign up to receive all future proxy materials, annual meeting notices and annual reports electronically. When doing this, you will be prompted to supply your e-mail address. ONLINE ACCOUNT ACCESS You can review your UtiliCorp stock account over the Internet. To use this feature, check your June statement or dividend check stub for your personal identification number. To access your account, log on to www.equiserve.com and choose the Account Access menu. Then use the account number shown on your statement. This service allows you to check the current share price and total value of your account, obtain certificates for your shares, enter requests to sell shares, or request investment plan information. It is available 24 hours a day. NEW SHAREHOLDER INFORMATION LINE Since January 2000, our current stock price, news releases and other UtiliCorp information have been accessible by dialing a new toll-free number--1-888-UCU-2000. By following the voice prompts, you can also get information about our shareholder services and transfer agent. With your 2000 proxy materials we have enclosed an easy-reference card with more details on how to use this new service. Corporate Leadership
Age / Year Joined Company - ------------------------------------------------------------------------------------------------------------------------------------ RICHARD C. GREEN, JR. Chairman of the Board and Chief Executive Officer 45 / 1976 ROBERT K. GREEN President and Chief Operating Officer; Chairman, Aquila Energy Corporation 38 / 1988 JAMES G. MILLER Senior Vice President, Energy Delivery 51 / 1983 KEITH STAMM Chief Executive Officer, Aquila Energy Corporation 39 / 1983 ED MILLS President and Chief Operating Officer, Aquila Energy Corporation 40 / 1993 JON R. EMPSON Senior Vice President, Regulatory, Legislative and 54 / 1978 Environmental Services PETER LOWE Senior Vice President and Chief Financial Officer 47 / 1999 SALLY C. MCELWREATH Senior Vice President, Corporate Communications 59 / 1994 LEO E. MORTON Senior Vice President and Chief Administrative Officer 54 / 1994 DALE J. WOLF Vice President, Finance and Corporate Secretary 60 / 1962 - ------------------------------------------------------------------------------------------------------------------------------------ INTERNATIONAL DONALD G. BACON Chairman and Chief Executive Officer, West Kootenay Power; 62 / 1993 Chief Executive Officer, United Energy Limited CHARLES K. DEMPSTER Senior Vice President, International Energy Initiatives 57 / 1993 ROBERT K. GREEN Chairman, United Energy Limited; Chairman, 38 / 1988 UnitedNetworks Limited ROBERT W. HOLZWARTH Chief Executive Officer, Canadian Network Operations 52 / 1993 JEFFREY MICHNOWSKI Managing Director, Aquila Energy Limited 41 / 1991 R. PAUL PERKINS Senior Vice President, International 57 / 1994 DAN W. WARNOCK Chief Executive Officer, UnitedNetworks Limited 40 / 1988
63 BOARD OF DIRECTORS UTILICORP'S BOARD OF DIRECTORS DRAWS ON DIVERSE STRENGTHS TO GUIDE STRATEGY. A key function of any corporate board is to provide company leaders with objective counsel that is seasoned by a broad range of experience. The depth and diversity of UtiliCorp's outside directors helps our senior management make sound business decisions. The input they provide reflects a variety of backgrounds and professional experience, including retail products and services, telecommunications, higher education, banking and finance, risk management and utility regulation. Recently we welcomed two new directors, bringing the number of board members to 11. Ronald T. LeMay, president and chief operating officer of Sprint Corporation, joined the Board in October 1999. Dr. Shirley Ann Jackson, a distinguished physicist and president of Rensselaer Polytechnic Institute, became a director in January 2000. [PHOTO] Richard C. Green, Jr. 45; a director since 1982. Chief executive officer since 1985 and chairman of the board since 1989. Joined the company in 1976 and held various positions in network operations, legal affairs, treasury and finance prior to becoming executive vice president in 1982. Launched the company's growth strategy in 1985 and formed UtiliCorp United from Missouri Public Service Company. [PHOTO] John R. Baker 73; a director since 1971. Retired as UtiliCorp vice chairman of the board in 1995; 43 years as an employee included many different positions in accounting, finance and corporate development. Played a key role in UtiliCorp's successful merger and acquisition program during his tenure as senior vice president, corporate development, 1985-91. [PHOTO] Herman Cain 54; a director since 1992. President and CEO of Digital Restaurant Solutions, Stamford, CT, a software technology company. Also chairman of Godfather's Pizza, Inc., Omaha, NE, and CEO of T.H.E. Inc., a leadership consulting company. Former CEO and president of the National Restaurant Association, and a former director of the Federal Reserve Bank, Kansas City. [PHOTO] Robert K. Green 38; a director since 1993. President and chief operating officer since 1996. Currently also chairman of Aquila Energy, United Energy Limited, and UnitedNetworks Limited. Served as UtiliCorp executive vice president, 1993-96; president of the Missouri Public Service division, 1991-96; other executive positions, 1988-91. Practiced law, 1987-88. Committees of the Board COMMITTEE CHAIRMEN ARE UNDERLINED. EXECUTIVE COMMITTEE: R.C. GREEN, R.K. GREEN, HOCKADAY AND IKENBERRY. When the Board is not in session, exercises the Board's authority to the extent delegated by the Board. AUDIT COMMITTEE: R.F. JACKSON, IKENBERRY AND KLINE. Reviews management's selection of independent accountants and makes recommendation to the Board; reviews and approves audit plans, accounting policies, financial statements and reporting, and internal audit reports and controls. COMPENSATION COMMITTEE: HOCKADAY, CAIN AND KLINE. Reviews policies, practices and procedures covering compensation of key employees; establishes and administers compensation programs and plans. NOMINATING COMMITTEE: IKENBERRY, BAKER, CAIN, HOCKADAY AND TUCKER. Considers and recommends nominees for director, including those nominated by shareholders. PENSION COMMITTEE: TUCKER, BAKER AND R.K. GREEN. Establishes and administers the retirement plan and certain other employee benefit plans. 64 [PHOTO] Irvine O. Hockaday, Jr. 63; a director since 1995. President and CEO of Hallmark Cards, Inc., Kansas City, MO; joined Hallmark in 1983. Previously president and CEO of Kansas City Southern Industries, Inc. (rail transportation and financial services). Practiced law prior to joining KCSI in 1968. A former chairman of the Federal Reserve Bank, Kansas City. [PHOTO] Dr. Stanley O. Ikenberry 65; a director since 1993. President, American Council on Education, Washington, DC (association of American institutions of higher learning) since 1996. Previously president, the University of Illinois, Urbana, IL, 1979-95. Prior posts include senior vice president, The Pennsylvania State University and administrative and research positions at West Virginia University and Michigan State University. [PHOTO] Robert F. Jackson, Jr. 74; a director since 1981. Retired in 1985 as president of CharterCorp of Kansas City, MO, a bank holding company then with 23 affiliate banks in Missouri (through mergers, now Bank of America Corporation); long career in banking included a number of executive positions and service as a director of banks and banking associations. [PHOTO] Dr. Shirley Ann Jackson 53; joined board in January 2000. President of Rensselaer Polytechnic Institute, Troy, NY. Chairman of the Nuclear Regulatory Commission, 1995-99. Professor of theoretical physics, Rutgers University, 1991-95. Prior positions include theoretical physics at AT&T Bell Laboratories and research at Fermi National Accelerator Laboratory. Fellow of the American Academy of Arts and Sciences and the American Physical Society. [PHOTO] L. Patton Kline 71; a director since 1986. Retired as vice chairman of Marsh & McLennan, Incorporated, an international insurance brokerage company, New York, NY; held several other senior executive positions before becoming vice chairman. Previously president of Mann-Kline, an insurance brokerage firm which merged with Marsh & McLennan in 1969. [PHOTO] Ronald T. LeMay 54; joined board in October 1999. President, chief operating officer and a director of Sprint Corporation, Overland Park, KS. Various executive positions at Sprint since 1985, including president and COO of Sprint Long Distance and CEO of Sprint PCS. Previously with AT&T Communications in Kansas City, 1983-85, and Southwestern Bell, 1972-83. [PHOTO] Avis Green Tucker 84; a director since 1973. Editor and publisher of THE DAILY STAR-JOURNAL (a daily newspaper), Warrensburg, Missouri. Became chairman of the board of directors of UtiliCorp's predecessor, Missouri Public Service Company, in 1982. Retired as UtiliCorp's chairman in 1989. 65 [GRAPHIC] EX-21 13 EXHIBIT 21 EXHIBIT 21 UTILICORP UNITED, INC. SUBSIDIARIES 1999 ANNUAL REPORT ON FORM 10-K SUBSIDIARY JURISDICTION OF INCORPORATION West Kootenay Power, Limited Province of British Columbia Aquila Energy Corporation Delaware UtiliCorp Asia Pacific, Inc. Delaware UtiliCorp South Pacific Inc. Delaware EX-23 14 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS As Independent Public Accountants, we hereby consent to the incorporation by reference of our report dated February 1, 2000, appearing on page 58 of the 1999 Annual Report to Shareholders, which is incorporated in the Form 10-K, into the Company's previously filed Registration Statements on Form S-3 (Nos. 333-67067, 33-60406, 33-57167, 33-39466, 333-86299, 333-34609, 333-29657, 333-14869, 033-59235, and 033-59237) and on Form S-8 (Nos. 333-66233, 33-45525, 33-50260, 33-45074, 33-52094, 333-19671, 333-91305, 333-94955, 333-30742, 333-29819 and 033-36694). We also consent to the incorporation of our report dated February 1, 2000, on the Financial Statement Schedule, appearing on page 19 of the Form 10-K. It should be noted that we have not audited any financial statements of UtiliCorp United, Inc. subsequent to December 31, 1999, or performed any audit procedures subsequent to the date of our reports. /s/ ARTHUR ANDERSEN LLP Kansas City, Missouri March 24, 2000 EX-27.1 15 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ENDING DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 225 0 1,447 0 266 2,272 5,210 1,545 7,539 2,345 2,202 350 0 94 1,431 7,539 18,622 18,622 17,465 829 (86) 0 185 229 68 161 0 0 0 161 1.75 1.75
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