Document:

<PAGE>

                                                                    Exhibit 10.3

                           EMPLOYEE MATTERS AGREEMENT

                                     BETWEEN

                              UTILICORP UNITED INC.

                                       AND

                                  AQUILA, INC.

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                      PAGE
<S>                                                                                                     <C>
ARTICLE I  DEFINITIONS...................................................................................1

ARTICLE II  GENERAL PRINCIPLES...........................................................................7

   2.01     Assumption of Aquila Liabilities.............................................................7
   2.02     Establishment of Aquila Plans................................................................7
   2.03     Aquila's Participation in UtiliCorp Plans....................................................8
   2.04     Terms of Participation by Aquila Employees in Aquila Plans...................................9
   2.05     Union Plans..................................................................................9

ARTICLE III  DEFINED BENEFIT PLAN.......................................................................10

   3.01     Cooperation.................................................................................10

ARTICLE IV  DEFINED CONTRIBUTION PLANS..................................................................10

   4.01     ESP.........................................................................................10
   4.02     No Distribution to Aquila Employees.........................................................10
   4.03     Aquila Retired Employees....................................................................10

ARTICLE V  NON-QUALIFIED AND OTHER PLANS................................................................10

   5.01     Deferred Compensation Plan..................................................................10
   5.02     SERP Benefits...............................................................................11
   5.03     Aquila Change in Control Programs; Establishment of the Aquila Change in Control Programs...11
   5.04     Aquila Rabbi Trust..........................................................................11
   5.05     Severance Plan..............................................................................11

ARTICLE VI  HEALTH AND WELFARE PLANS....................................................................12

   6.01     Assumption of Health and Welfare Plan Liabilities...........................................12
   6.02     Claims for Health and Welfare Plans.........................................................12
   6.03     Transitional Arrangements...................................................................13
   6.04     Vendor and Insurance Arrangements...........................................................14
   6.05     COBRA.......................................................................................14
   6.06     Leave of Absence Programs...................................................................14
   6.07     UtiliCorp Workers' Compensation Program.....................................................15

ARTICLE VII  EQUITY AND OTHER COMPENSATION..............................................................16

   7.01     UtiliCorp Options...........................................................................16
   7.02     UtiliCorp Incentive Plan....................................................................17
   7.03     Stock Purchase Plan.........................................................................17
   7.04     Aquila Omnibus Incentive Compensation Plan..................................................17
   7.05     UtiliCorp Restricted Stock..................................................................17

ARTICLE VIII  FRINGE AND OTHER BENEFITS.................................................................17

   8.01     Employee Assistance Program.................................................................17
   8.02     Educational Assistance Program..............................................................17
   8.03     Executive Financial Planning................................................................17
</TABLE>

<PAGE>

<TABLE>

<S>         <C>                                                                                        <C>
   8.04     Relocation..................................................................................18
   8.05     Other Benefits..............................................................................18

ARTICLE IX ADMINISTRATIVE MATTERS.......................................................................18

   9.01     Transitional Services Agreement.............................................................18
   9.02     Payment of Liabilities, Plan Expenses and Related Matters...................................18
   9.03     Sharing of Participation Information........................................................19
   9.04     Reporting and Disclosure Communications to Participants.....................................19
   9.05     Audits Regarding Vendor Contracts...........................................................19
   9.06     Beneficiary Designations....................................................................19
   9.07     Requests for IRS and DOL Opinions...........................................................20
   9.08     Fiduciary Matters...........................................................................20
   9.09     Consent of Third Parties....................................................................20
   9.10     UtiliCorp Intranet..........................................................................20
   9.11     Tax Cooperation.............................................................................20
   9.12     Plan Returns................................................................................20

ARTICLE X  EMPLOYMENT-RELATED MATTERS...................................................................20

   10.01    Terms of Aquila Employment..................................................................20
   10.02    HR Data Support Systems.....................................................................20
   10.03    Non-Solicitation of Employees...............................................................21
   10.04    Employment of Employees with U.S. Work Visas................................................21
   10.05    Confidentiality and Property Information....................................................21
   10.06    Payroll and Withholding.....................................................................24
   10.07    Personnel Records...........................................................................24
   10.08    Non-Termination of Employment; No Third-Party Beneficiaries.................................25

ARTICLE XI  GENERAL PROVISIONS..........................................................................25

   11.01    Effect If Group Status Change Date Does Not Occur...........................................25
   11.02    Relationship of Parties.....................................................................25
   11.03    Affiliated Companies........................................................................25
   11.04    Failure or Indulgence Not Waiver; Remedies Cumulative.......................................25
   11.05    Governing Law...............................................................................26
   11.06    Severability................................................................................26
   11.07    Amendment...................................................................................26
   11.08    Termination.................................................................................26
   11.09    Counterparts................................................................................26
   11.10    Notices.....................................................................................26
   11.11    Binding Effect..............................................................................26
   11.12    Entire Agreement............................................................................26
   11.13    Interpretation..............................................................................27
   11.14    Right of Set-Off............................................................................27
   11.15    Employees Based Outside of the United States................................................27

SCHEDULE 2.01...........................................................................................29
</TABLE>

<PAGE>

     THIS EMPLOYEE MATTERS AGREEMENT (this "AGREEMENT") is entered into as of
[___________], 2001, between UtiliCorp United Inc., a Delaware corporation
("UTILICORP"), and Aquila, Inc., a Delaware corporation ("AQUILA").

     WHEREAS, UtiliCorp and Aquila have entered into the Master Separation
Agreement, pursuant to which UtiliCorp and Aquila have agreed to take certain
actions to effect the Separation; and

     WHEREAS, in furtherance of the transactions contemplated by the Master
Separation Agreement, UtiliCorp and Aquila have agreed to enter into this
Agreement to allocate between them assets, liabilities and responsibilities with
respect to certain employee compensation and benefit plans and programs and
other employment matters;

     NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

     Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Master Separation Agreement.

     In this Agreement, the following capitalized terms shall have the following
meanings:

"AQUILA" has the meaning given to it in the introductory paragraph herein. In
all instances in which Aquila is referred to in this Agreement, it shall (unless
otherwise specifically provided) also be deemed to include each member of the
Aquila Group.

"AQUILA EMPLOYEE" means (a) any individual who, at the relevant time, is: (i)
either actively employed by, or on a leave of absence from, the Aquila Group;
(ii) an Aquila Terminated Employee; or (iii) an alternate payee under a QDRO, an
alternate recipient under a QMCSO, or a beneficiary, covered dependent, or
qualified beneficiary (as such term is defined under COBRA), in each case of an
employee described in clause (i) or (ii) above, with respect to that employee's
or former employee's benefit under the applicable Plan(s), (provided, however,
that unless specified otherwise in this Agreement, such an alternate payee,
alternate recipient, beneficiary, covered dependent or qualified beneficiary
shall not otherwise be considered an Aquila Employee, unless he or she is an
Aquila Employee by virtue of subsection (i) or (ii)); or (b) any individual or
group of individuals designated by UtiliCorp and Aquila, by mutual agreement, as
Aquila Employees; provided, however, that "Aquila Employee" shall not include an
Aquila Retired Employee. An employee may be an Aquila Employee regardless of
whether such employee is, at the relevant time, alive, actively employed, on a
temporary leave of absence from active employment, on layoff, terminated from
employment, retired or on any other type of employment or post-employment status
relative to a UtiliCorp Plan, and regardless of whether, at the relevant time,
such employee is then receiving any benefits from a UtiliCorp Plan.

"AQUILA INCENTIVE PLAN" means the annual and long-term incentive plan(s) to be
established by Aquila under Section 7.02.

<PAGE>

"AQUILA RETIRED EMPLOYEE" means any Aquila Employee who retired on or before the
Group Status Change Date, or such other date as the parties may mutually agree
for a particular purpose, and who is identified as an Aquila Retired Employee by
mutual agreement between the parties on or before such date.

"AQUILA TERMINATED EMPLOYEE" means any individual who is a former employee of
the UtiliCorp Group who was terminated from the Aquila Group on or before the
Group Status Change Date, or such other date as the parties may mutually agree
for a particular purpose, but shall not include, unless otherwise expressly
provided to the contrary in this Agreement, (a) an individual who is a UtiliCorp
Employee at such date; (b) an individual who is otherwise an Aquila Terminated
Employee, but who is subsequently employed by the UtiliCorp Group on or prior to
such date; or (c) an Aquila Retired Employee.

"AQUILA WCP CLAIMS" means all claims that are, or have been, incurred by Aquila
Employees under the UtiliCorp WCP before the Insurance Transition Date or such
other date as the parties may mutually agree.

"ASO CONTRACTS" means administrative services only contracts.

"CHANGE IN CONTROL PROGRAMS," when immediately preceded by "UtiliCorp," means
the individual change in control agreements entered into by UtiliCorp with
executives of UtiliCorp or Aquila, and, when immediately preceded by "Aquila,"
"Change in Control Programs" means the individual change in control arrangements
entered into by Aquila with executives of Aquila and any change in control plans
or agreements to be established by Aquila pursuant to Sections 2.02 and 5.03.

"COBRA" means the continuation coverage requirements for "group health plans"
under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended from time to time, and as codified in Code Section 4980B and ERISA
Sections 601 through 608.

"DEFERRED COMPENSATION PLAN," when immediately preceded by "UtiliCorp," means
the UtiliCorp United Inc. Capital Accumulation Plan, and, when immediately
preceded by "Aquila," "Deferred Compensation Plan" means the Aquila deferred
compensation plan to be established by Aquila pursuant to Sections 2.02 and
5.01.

"DOL" means the United States Department of Labor.

"EMPLOYEE AGREEMENT" means the confidentiality agreement, and corresponding
agreements in foreign countries, executed by UtiliCorp or Aquila Employees in
connection with their employment.

"EMPLOYMENT LIABILITIES" means all claims, causes of action, demands,
liabilities, debts or damages (known or unknown) related to all employment
matters addressed in this Agreement, including but not limited to claims arising
under ERISA, the Code, or the Americans with Disabilities Act; claims for breach
of contract, breach of fiduciary duty, promissory estoppel, or equitable
estoppel; claims for lost or unpaid wages or other employee benefits; claims
under the FMLA; claims under Title VII of the Civil Rights Act of 1964, as
amended; and claims under state law for intentional infliction of emotional
distress, pain, suffering or anxiety, negligence, outrageous conduct, invasion
of privacy, harassment,

                                       2
<PAGE>

assault, battery, defamation, slander, libel, wrongful or constructive discharge
or any other actions arising in tort or contract or under any other federal or
state statute or regulation or local ordinance.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

"ESP," when immediately preceded by "UtiliCorp," means the UtiliCorp United Inc.
Retirement Investment Plan, a defined contribution plan including the stock
contribution portion of the UtiliCorp ESP, and, when immediately preceded by
"Aquila," "ESP" means the employee savings plan to be established by Aquila
pursuant to Sections 2.02 and 4.01 that corresponds to the UtiliCorp ESP.

"FLEXIBLE BENEFITS PLAN," when immediately preceded by "UtiliCorp," means the
UtiliCorp flexible benefits plan, and, when immediately preceded by "Aquila,"
"Flexible Benefits Plan" means the Aquila flexible benefits plan to be
established by Aquila pursuant to Sections 2.02 and Article VI.

"FMLA" means the Family and Medical Leave Act of 1993, as amended from time to
time.

"FOREIGN PLAN," when preceded by "UtiliCorp," means a Plan maintained by
UtiliCorp for the benefit of its employees outside the U.S. and when preceded by
"Aquila," "Foreign Plan" means a Plan maintained by Aquila for the benefit of
its employees outside the U.S.

"FRINGE BENEFITS," when immediately preceded by "UtiliCorp," means the UtiliCorp
employee assistance program and other fringe benefits, plans, programs and
arrangements sponsored and maintained by UtiliCorp (as set forth in Article
VIII), and, when immediately preceded by "Aquila," "Fringe Benefits" means the
fringe benefits, plans, programs and arrangements established or to be
established by Aquila pursuant to Section 2.02 and Article VIII.

"GROUP STATUS CHANGE" means the earlier to occur of (a) the Distribution or (b)
UtiliCorp ceasing to own at least 80% of (i) the combined voting power of all
shares of all classes of Aquila stock entitled to vote then outstanding and (ii)
the total value of all shares of all classes of Aquila stock then outstanding.
UtiliCorp's ownership of outstanding Aquila stock shall be determined pursuant
to Sections 414 and 1563 of the Code.

"GROUP STATUS CHANGE DATE" means the date on which the Group Status Change
occurs, or such other date as the parties shall mutually agree upon.

"HCFA" means the United States Health Care Financing Administration.

"HEALTH AND WELFARE CHANGE DATE" means the Group Status Change Date or such
other date as the parties may mutually agree. The parties may mutually agree
that the Health and Welfare Change Date shall be different for different Health
and Welfare Plans.

"HEALTH AND WELFARE PLANS," when immediately preceded by "UtiliCorp," means the
UtiliCorp Health Plans, the UtiliCorp Flexible Benefits Plan, and any other
health and welfare plans established and maintained by UtiliCorp for the benefit
of employees and

                                       3
<PAGE>

retirees of the UtiliCorp Group, and such other welfare plans or programs as may
apply to such employees and retirees as of the Health and Welfare Change Date,
and, when immediately preceded by "Aquila," "Health and Welfare Plans" means the
Aquila Health Plans, the Aquila Flexible Benefits Plan, and the health and
welfare plans to be established by Aquila pursuant to Section 2.02 and Article
VI and any similar or successor plans, programs or arrangements.

"HEALTH PLANS," when immediately preceded by "UtiliCorp," means the health
plans, programs and arrangements and any similar or successor plans, programs or
arrangements established and maintained by UtiliCorp for the benefit of
employees, and, when immediately preceded by "Aquila," "Health Plans" means the
health plans, programs and arrangements to be established by Aquila pursuant to
Section 2.02 and Article VI and any similar or successor plans, programs or
arrangements.

"HMO" means a health maintenance organization that provides benefits under the
UtiliCorp Health Plans or the Aquila Health Plans.

"INSURANCE TRANSITION DATE" means the second anniversary of the Separation Date
or, if earlier, 60 days following the Change of Control Date.

"IRS" means the United States Internal Revenue Service.

"LEAVE OF ABSENCE PROGRAMS," when immediately preceded by "UtiliCorp," means the
personal, medical, military and FMLA leave offered from time to time under the
personnel policies and practices of UtiliCorp, and, when immediately preceded by
"Aquila," "Leave of Absence Programs" means the leave of absence programs
established and maintained by Aquila pursuant to Section 6.06.

"MASTER SEPARATION AGREEMENT" means the Master Separation Agreement, dated
[___________], 2001, between UtiliCorp and Aquila.

"NON-QUALIFIED PLANS," when immediately preceded by "UtiliCorp," means the SERP
and the UtiliCorp Deferred Compensation Plan, and, when immediately preceded by
"Aquila," "Non-Qualified Plans" means the deferred compensation, supplemental
executive retirement and supplemental benefit plans, programs, or arrangements
established or to be established by Aquila pursuant to Section 2.02 and Article
V.

"OMNIBUS INCENTIVE COMPENSATION PLAN" means the Aquila, Inc. 2001 Omnibus
Incentive Compensation Plan as described in Section 7.04.

"OPTION," when immediately preceded by "UtiliCorp," means an option to purchase
UtiliCorp common stock pursuant to a UtiliCorp Stock Plan or the UtiliCorp Stock
Purchase Plan and, when immediately preceded by "Aquila," "Option" means an
option to purchase Aquila common stock pursuant to a plan providing for the
grant of such options to be established by Aquila pursuant to Section 2.02 and
Article VII.

"OUTSOURCE" means the engaging of a third party administrator, vendor, or
insurance company to administer certain human resources-related tasks described
herein.

                                       4
<PAGE>

"PARTICIPATING COMPANY" means, collectively, (a) UtiliCorp; (b) any Person
(other than an individual) that UtiliCorp has approved for participation in, has
accepted participation in, and is participating in, a Plan sponsored by
UtiliCorp; and (c) any Person (other than an individual) which, by the terms of
such Plan, participates in such Plan or any employees of which, by the terms of
such Plan, participate in or are covered by such Plan.

"PBGC" means the Pension Benefit Guaranty Corporation.

"PENSION PLAN" means the UtiliCorp United Inc. Retirement Income Plan, a defined
benefit plan.

"PLAN" means any plan, policy, program, payroll practice, arrangement, contract,
trust, insurance policy, agreement or funding vehicle providing compensation or
benefits to employees, former employees or directors of UtiliCorp or Aquila.

"PLAN RETURN" means any return, report, certificate, form or similar statement
or document required to be filed with a Governmental Authority with respect to
an employee benefit plan governed by ERISA or a program governed by Section
6039D of the Code.

"POST-EMPLOYMENT PROGRAMS," when immediately preceded by "UtiliCorp," means the
Plans that permit certain retirees and former employees of the UtiliCorp Group
and their eligible spouses and dependents to continue to receive coverage and
benefits under certain UtiliCorp Health and Welfare Plans for a designated
period of time, and, when immediately preceded by "Aquila," "Post-Employment
Programs" means such continuation programs to be established by Aquila pursuant
to Sections 2.02 and Article VI.

"QDRO" means a domestic relations order which qualifies under Code Section
414(p) and ERISA Section 206(d) and which creates or recognizes an alternate
payee's right to, or assigns to an alternate payee, all or a portion of the
benefits payable to a participant under any of the UtiliCorp Retirement Plans.

"QMCSO" means a medical child support order which qualifies under ERISA Section
609(a) and which creates or recognizes the existence of an alternate recipient's
right to, or assigns to an alternate recipient the right to, receive benefits
for which a participant or beneficiary is eligible under any of the Health
Plans.

"RABBI TRUST," when immediately preceded by "UtiliCorp," means the rabbi trust
established for purposes of holding assets under the UtiliCorp United Inc.
Executive Benefit Security Trust, and, when immediately preceded by "Aquila,"
"Rabbi Trust" means the rabbi trust to be established by Aquila pursuant to
Section 5.04 that corresponds to the UtiliCorp Rabbi Trust.

"RESTRICTED STOCK," when immediately preceded by "UtiliCorp," means shares of
UtiliCorp common stock that are subject to employment and/or performance vesting
conditions pursuant to a UtiliCorp Stock Plan, and when immediately preceded by
"Aquila," "Restricted Stock" means shares of Aquila common stock that are
subject to employment and/or vesting conditions pursuant to the Omnibus
Incentive Compensation Plan.

                                       5
<PAGE>

"RETIREMENT PLANS," when immediately preceded by "UtiliCorp," means the
UtiliCorp Pension Plan and the UtiliCorp ESP and, when immediately preceded by
"Aquila," "Retirement Plans" means all defined contribution and defined benefit
plans established or to be established by Aquila pursuant to Section 2.02 and
Articles III and IV.

"SERP" means the UtiliCorp United Inc. Supplemental Executive Retirement Plan.

"SEVERANCE PLANS," when immediately preceded by "UtiliCorp," means the severance
pay plans and agreements established and maintained by UtiliCorp, and, when
immediately preceded by "Aquila," "Severance Plans" means the severance pay
plans and agreements established and maintained by Aquila.

"STOCK INCENTIVE PLAN" means the UtiliCorp United Inc. Amended and Restated 1986
Stock Incentive Plan, pursuant to which employees and other service providers
hold UtiliCorp Options and UtiliCorp Restricted Stock.

"STOCK OPTION PLAN" means the UtiliCorp United Inc. Employee Stock Option Plan.

"STOCK PURCHASE PLAN," when immediately preceded by "UtiliCorp," means the
UtiliCorp United Inc. Employee Stock Purchase Plan, and, when immediately
preceded by "Aquila," "Stock Purchase Plan" means the employee stock purchase
plan to be established by Aquila pursuant to Sections 2.02 and 7.03.

"UNION PLANS," when immediately preceded by "UtiliCorp," means all Plans
maintained by UtiliCorp exclusively for the benefit of certain of its bargaining
unit employees, and, when immediately preceded by "Aquila," "Union Plans" means
all Plans maintained by Aquila exclusively for the benefit of certain of its
bargaining unit employees.

"UTILICORP" has the meaning given to it in the introductory paragraph herein. In
all instances in which UtiliCorp is referred to in this Agreement, it shall
(unless otherwise specifically provided) also be deemed to include each member
of the UtiliCorp Group.

"UTILICORP DRP" means the UtiliCorp dependent care reimbursement plan.

"UTILICORP EMPLOYEE" means an individual who, at the relevant time, is or was
employed within the UtiliCorp Group and is not an Aquila Employee.

"UTILICORP INCENTIVE PLAN" means the UtiliCorp United Inc. Annual and Long Term
Incentive Plan.

"UTILICORP MRP" means the UtiliCorp Medical Reimbursement Plan.

"UTILICORP STOCK PLANS" means, collectively, the Stock Incentive Plan and the
Stock Option Plan.

"UTILICORP TERMINATED EMPLOYEE" means any individual who is a former employee of
the UtiliCorp Group and who, at the relevant time, is not an Aquila Employee or
an Aquila Terminated Employee.

                                       6
<PAGE>

"UTILICORP WCP" means the UtiliCorp Workers' Compensation Program, comprised of
the various arrangements established by a member of the UtiliCorp Group to
comply with the workers' compensation requirements of the states in which the
UtiliCorp Group conducts business.

                                   ARTICLE II

                               GENERAL PRINCIPLES

     2.01 ASSUMPTION OF AQUILA LIABILITIES. Except as specified otherwise in
this Agreement, or as mutually agreed upon by the parties from time to time,
Aquila hereby assumes and agrees to pay, perform, fulfill and discharge, in
accordance with their respective terms, all of the following, subject to Section
9.02 and to the indemnification provisions of Schedule 2.01: (a) all Liabilities
(i) to or relating to Aquila Employees, in each case relating to, arising out of
or resulting from acts, errors or omissions of the Aquila Group, whether before
or after the Group Status Change Date, (including Liabilities arising under or
relating to Aquila Plans), or (ii) to the extent relating to, arising out of or
resulting from future, present or former employment with the Aquila Group
(including Liabilities arising under or relating to Aquila Plans); (b) all
Liabilities relating to, arising out of or resulting from any other actual or
alleged employment relationship with the Aquila Group; and (c) all other
Liabilities relating to, arising out of or resulting from obligations,
liabilities and responsibilities expressly assumed or retained by the Aquila
Group or an Aquila Plan, pursuant to this Agreement. To the extent specified in
this Agreement or as otherwise mutually agreed upon by the parties from time to
time, UtiliCorp shall transfer to Aquila, when appropriate, amounts equal to
trust assets and other related assets, as consistent with the applicable Plan
transition, that arise out of or relate to Aquila's interest in each UtiliCorp
Plan. To the extent specified in this Agreement or as otherwise mutually agreed
upon by the parties from time to time, Aquila shall transfer to UtiliCorp, when
appropriate, amounts equal to trust assets and other related assets, as
consistent with the applicable UtiliCorp Plans, that arise out of or relate to
Aquila's Liabilities for or relating to Aquila Retired Employees' interests in
UtiliCorp and/or Aquila Plans or with respect to UtiliCorp Employees who
previously accrued Liabilities under either Aquila Plans or UtiliCorp Plans
while an employee of Aquila.

     2.02 ESTABLISHMENT OF AQUILA PLANS

          (a)  HEALTH AND WELFARE PLANS. Except as specified otherwise in this
Agreement, effective as of the Health and Welfare Change Date or such other
date(s) as the parties may mutually agree, Aquila shall adopt the Aquila Health
and Welfare Plans and Aquila Post-Employment Programs.

          (b)  RETIREMENT PLANS AND FRINGE BENEFITS. Except as specified
otherwise in this Agreement, effective as of the Group Status Change Date or
such other date(s) as the parties may mutually agree, Aquila shall adopt the
Aquila Retirement Plans and the Aquila Fringe Benefits.

          (c)  EQUITY AND OTHER COMPENSATION. Except as specified otherwise in
this Agreement, effective as of the Separation Date or such other date(s) as the
parties may mutually agree, Aquila shall adopt the Omnibus Incentive
Compensation Plan, and such other

                                       7
<PAGE>

Plans as may be determined to be appropriate. Except as specified otherwise in
this Agreement, effective as of the Group Status Change Date or such other
date(s) as the parties may mutually agree, Aquila shall adopt the Aquila Stock
Purchase Plan and such other Plans as may be determined to be appropriate.
Except as specified otherwise in this Agreement, effective as of the Group
Status Change Date or such other date(s) as the parties may mutually agree,
Aquila shall adopt such other equity and compensation Plans as may be determined
to be appropriate, including, without limitation, the Aquila Deferred
Compensation Plan, the Aquila Change in Control Programs and the Aquila Rabbi
Trust.

          (d)  AQUILA UNDER NO OBLIGATION TO MAINTAIN PLANS. Except as specified
otherwise in this Agreement, nothing in this Agreement shall preclude Aquila, at
any time, from amending, merging, modifying, terminating, eliminating, reducing,
or otherwise altering in any respect any Aquila Plan, any benefit under any
Aquila Plan or any trust, insurance policy or funding vehicle related to any
Aquila Plan (to the extent permitted by law).

     2.03  AQUILA'S PARTICIPATION IN UTILICORP PLANS

          (a)  PARTICIPATION IN UTILICORP PLANS

               (i)    Except as specified otherwise in this Agreement, or as the
parties may mutually agree, Aquila shall continue as a Participating Company in
the UtiliCorp Plans in effect as of the date hereof, to the extent that Aquila
has not yet established Aquila Plans of a similar type. Effective as of any date
on or after the date hereof and before the Group Status Change Date, any member
of the Aquila Group not described in the preceding sentence may, at its request
and with the consent of UtiliCorp and Aquila, become a Participating Company in
any or all of the UtiliCorp Plans, to the extent that Aquila has not yet
established an Aquila Plan of a similar type.

               (ii)   On and after the Group Status Change Date, Aquila Retired
Employees shall continue to participate in the UtiliCorp Plans for which they
are eligible as of the Group Status Change Date, including, but not limited to,
the UtiliCorp Post-Employment Programs, the UtiliCorp Pension Plan and any
UtiliCorp Plan as provided in Article V.

          (b)  UTILICORP'S GENERAL OBLIGATIONS AS PLAN SPONSOR

               (i)   To the extent that Aquila is a Participating Company in any
UtiliCorp Plan(s), UtiliCorp shall continue to administer, or cause to be
administered, in accordance with their terms and applicable law, such UtiliCorp
Plan(s), and shall have the sole and absolute discretion and authority to
interpret the UtiliCorp Plan(s), as set forth therein. UtiliCorp shall not,
without first consulting with Aquila, amend any material feature of any
UtiliCorp Plan in which Aquila is a Participating Company, except to the extent
such amendment would not materially affect any benefits of Aquila Employees
under such Plan or as may be necessary or appropriate to comply with applicable
law.

               (ii)  With regard to Aquila Retired Employees participating in
UtiliCorp Plans after the Group Status Change Date, UtiliCorp shall continue to
administer, or cause to be administered, in accordance with their terms and
applicable law, such

                                       8
<PAGE>

UtiliCorp Plans, and shall have sole and absolute discretion and authority to
interpret such Plans or amend such Plans, as set forth therein.

          (c) AQUILA'S GENERAL OBLIGATIONS AS PARTICIPATING COMPANY. Aquila
shall perform with respect to its participation in the UtiliCorp Plans, the
duties of a Participating Company as set forth in each such Plan or any
procedures adopted pursuant thereto, including, without limitation: (i)
assisting in the administration of claims, to the extent requested by the claims
administrator of the applicable UtiliCorp Plan; (ii) cooperating fully with
UtiliCorp Plan auditors, benefit personnel and benefit vendors; (iii) preserving
the confidentiality of all financial arrangements UtiliCorp has or may have with
any vendors, claims administrators, trustees or any other entity or individual
with whom UtiliCorp has entered into an agreement relating to the UtiliCorp
Plans; and (iv) preserving the confidentiality of participant information
(including, without limitation, health information to the extent not specified
otherwise in this Agreement).

          (d) TERMINATION OF PARTICIPATING COMPANY STATUS. Except as otherwise
may be mutually agreed upon by the parties, effective as of the Group Status
Change Date or such other date as Aquila establishes a Plan of a similar type
(as specified in Section 2.02 or otherwise in this Agreement), Aquila shall
cease to be a Participating Company in the corresponding UtiliCorp Plan and both
parties shall take any and all action necessary to accomplish such result.

     2.04 TERMS OF PARTICIPATION BY AQUILA EMPLOYEES IN AQUILA PLANS

          (a) NON-DUPLICATION OF BENEFITS. As of the Group Status Change Date or
such other date that applies to the particular Aquila Plan, the Aquila Plans
shall be, with respect to Aquila Employees, in all respects the successors in
interest to, and shall not provide benefits that duplicate benefits provided by,
the corresponding UtiliCorp Plans. The parties shall mutually agree, if
necessary, on methods and procedures, including amending the respective Plan
documents, to prevent Aquila Employees from receiving duplicate benefits from
the UtiliCorp Plans and the Aquila Plans.

          (b) SERVICE CREDIT. Except as specified otherwise in this Agreement or
as otherwise may be mutually agreed upon by the parties, with respect to Aquila
Employees, each Aquila Plan shall provide that all service, all compensation and
all other benefit-affecting determinations that, as of the relevant date, were
recognized under the corresponding UtiliCorp Plan shall, as of the relevant
date, receive full recognition and credit and be taken into account under such
Aquila Plan to the same extent as if such items occurred under such Aquila Plan,
except to the extent that duplication of benefits would result. The service
crediting provisions shall be subject to any respectively applicable "service
bridging," "break in service," "employment date," or "eligibility date" rules
under the Aquila Plans and the UtiliCorp Plans.

     2.05 UNION PLANS. UtiliCorp and/or Aquila shall continue to maintain all of
their respective Union Plans in existence as of the Separation Date up to and
after the Group Status Change Date in accordance with the terms of those plans
and subject to collective bargaining and applicable law.

                                       9
<PAGE>

                                   ARTICLE III

                              DEFINED BENEFIT PLAN

     3.01 COOPERATION. Effective as of the Group Status Change Date, or such
other date as the parties may mutually agree, the Aquila Employees will cease to
participate in the UtiliCorp Pension Plan. The parties will cooperate to
determine a course of action with respect to the accrued benefits of the Aquila
Employees in the UtiliCorp Pension Plan in accordance with applicable law.

                                   ARTICLE IV

                           DEFINED CONTRIBUTION PLANS

     4.01 ESP. Effective as of the Group Status Change Date, or such other date
as the parties may mutually agree, Aquila shall establish, or cause to be
established, a trust, which is intended to be qualified under Code Section
401(a), exempt from taxation under Code Section 501(a)(1), and forming the
Aquila ESP. Upon the mutual agreement of the parties, the Aquila ESP shall
accept asset transfers from the ESP. As soon as reasonably practicable after the
Group Status Change Date, Aquila shall use its commercially reasonable best
efforts to enter into agreements to accomplish such asset transfer(s), to engage
a trustee and recordkeeper and to transfer and maintain the necessary
participant records. Aquila and UtiliCorp each agree to use their commercially
reasonable best efforts to accomplish any transfer of assets.

     4.02 NO DISTRIBUTION TO AQUILA EMPLOYEES. The UtiliCorp ESP shall provide
that no distribution of account balances shall be made to any Aquila Employee as
a result of the Group Status Change or Distribution.

     4.03 AQUILA RETIRED EMPLOYEES AND AQUILA TERMINATED EMPLOYEES.
Notwithstanding the above, account balances of Aquila Retired Employees and
Aquila Terminated Employees, if any, shall remain in the UtiliCorp ESP after the
date that the Aquila ESP is established notwithstanding any asset transfers from
the UtiliCorp ESP to the Aquila ESP.

                                    ARTICLE V

                          NON-QUALIFIED AND OTHER PLANS

     5.01 DEFERRED COMPENSATION PLAN

          (a) ESTABLISHMENT OF AQUILA DEFERRED COMPENSATION PLAN. Effective as
of the Group Status Change Date or such earlier date as the parties may mutually
agree, Aquila shall establish the Aquila Deferred Compensation Plan. As of such
date, all accrued benefits of Aquila Employees other than Aquila Retired
Employees and Aquila Terminated Employees under the UtiliCorp Deferred
Compensation Plan will be transferred to the Aquila Deferred Compensation Plan,
and Aquila shall assume all Liabilities to or relating to the Aquila Employees
other than Aquila Retired Employees and Aquila Terminated Employees under the
UtiliCorp Deferred Compensation Plan. As of such date, UtiliCorp shall retain
all

                                       10
<PAGE>

Liabilities to or relating to Aquila Retired Employees and Aquila Terminated
Employees under the UtiliCorp Deferred Compensation Plan.

          (b) PARTICIPATION IN DEFERRED COMPENSATION PLAN. Effective as of the
date referred to in Section 5.01(a), eligible Aquila Employees determined in
accordance with the requirements of ERISA shall be eligible to participate in
the Aquila Deferred Compensation Plan and shall not be eligible to participate
in the UtiliCorp Deferred Compensation Plan.

     5.02 SERP BENEFITS

          (a) ASSUMPTION OF LIABILITIES. As of the Group Status Change Date, or
such other date as the parties may mutually agree, Aquila Employees shall cease
to participate in the SERP. As of such date, Aquila shall assume all Liabilities
to or relating to the Aquila Employees other than Aquila Retired Employees and
Aquila Terminated Employees under the SERP. The parties will cooperate to
determine a course of action with respect to the accrued benefits of the Aquila
Employees under the SERP.

          (b) SERP. Effective as of the date referred to in Section 5.02(a)(i),
UtiliCorp shall retain all Liabilities to or relating to Aquila Retired
Employees and Aquila Terminated Employees under the SERP. After such date,
UtiliCorp shall continue to maintain the SERP.

     5.03 AQUILA CHANGE IN CONTROL PROGRAMS; ESTABLISHMENT OF THE AQUILA CHANGE
IN CONTROL PROGRAMS. Effective as of the Group Status Change Date or such other
date as the parties may mutually agree, Aquila shall establish the Aquila Change
in Control Programs (subject to its Board of Directors' approval).

     5.04 AQUILA RABBI TRUST. Effective as of the Group Status Change Date, or
such other date as the parties may mutually agree, Aquila shall adopt the Aquila
Rabbi Trust which shall be spun off from the UtiliCorp Rabbi Trust. Trust assets
attributable to Liabilities to or relating to the Aquila Employees other than
Aquila Retired Employees and Aquila Terminated Employees under the UtiliCorp
Deferred Compensation Plan and the SERP, as reasonably determined by the
parties, shall be transferred to the Aquila Rabbi Trust. UtiliCorp shall use its
commercially reasonable efforts for and on behalf of Aquila to negotiate for
trustee and recordkeeper agreements.

     5.05 SEVERANCE PLAN. Effective as of the Group Status Change Date or such
other date as the parties may mutually agree, Aquila shall establish the Aquila
Severance Plan. The UtiliCorp Severance Plan and the Aquila Severance Plan shall
provide that no Aquila Employee shall become eligible for severance benefits on
account of any member of the Aquila Group ceasing to be a Subsidiary of the
UtiliCorp Group as of the Group Status Change Date.

                                       11
<PAGE>

                                   ARTICLE VI

                            HEALTH AND WELFARE PLANS

     6.01 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES

          (a) GENERAL - HEALTH AND WELFARE PLANS. Each UtiliCorp Health and
Welfare Plan shall retain all Liabilities incurred through the Health and
Welfare Change Date under such UtiliCorp Health and Welfare Plan, whether or not
claims are filed before the Health and Welfare Change Date, by or on behalf of
Aquila Employees or their spouses or dependents. Aquila shall indemnify such
plan against the pre-Health and Welfare Change Date Liabilities by paying the
current cost of coverage associated with such Aquila Employee or his or her
spouse or beneficiaries, to the extent not already paid.

          (b) ASSUMPTION OF LIABILITIES. Any Health and Welfare Plan
self-insured by UtiliCorp and substantially similar to any Aquila Health and
Welfare Plan established as of the Health and Welfare Change Date, shall cease
to be responsible for Liabilities to or relating to Aquila Employees under the
UtiliCorp Health and Welfare Plans incurred on or after such date and the
corresponding Aquila Health and Welfare Plans shall assume such Liabilities as
of that date.

     6.02 CLAIMS FOR HEALTH AND WELFARE PLANS

          (a) ADMINISTRATION OF UTILICORP CLAIMS. UtiliCorp shall administer
claims incurred under the UtiliCorp Health and Welfare Plans by Aquila Employees
before the Health and Welfare Change Date, but only to the extent that Aquila
has not, before the Health and Welfare Change Date, established and assumed
administrative responsibility for a similar Plan. Any determination made or
settlements entered into by UtiliCorp with respect to such claims shall be final
and binding.

          (b) OUTSOURCING OF CLAIMS BY UTILICORP. UtiliCorp shall have the right
to Outsource claims incurred under the UtiliCorp Health and Welfare Plans,
including claims incurred by Aquila Employees before the Health and Welfare
Change Date. UtiliCorp may determine the manner and extent of such Outsourcing,
including the selection of one or more third party administrators, vendors, or
insurance companies and the ability to transfer the liability for such claims to
one or more independent insurance companies. Aquila acknowledges that UtiliCorp
has Outsourced administration of many UtiliCorp Health and Welfare Plans, as set
forth in Section 6.04. UtiliCorp shall promptly notify Aquila of its intent to
further Outsource such claims, and the material terms and conditions of the
Outsourcing, before the effective date thereof.

          (c) OUTSOURCING OF CLAIMS BY AQUILA. UtiliCorp shall use its
commercially reasonable efforts for and on behalf of Aquila to negotiate for
Outsourcing arrangements with its third party administrators, vendors, or
insurance companies with material features determined by Aquila.

                                       12
<PAGE>

     6.03 TRANSITIONAL ARRANGEMENTS

          (a)  CONTINUANCE OF ELECTIONS, CO-PAYMENTS AND MAXIMUM BENEFITS

               (i) As of the Health and Welfare Change Date, Aquila shall cause
the Aquila Health and Welfare Plans to maintain comparable coverage elections
made by Aquila Employees under the UtiliCorp Health and Welfare Plans and apply
such elections under the Aquila Health and Welfare Plans for the remainder of
the period for which such elections are applicable. The transfer or other
movement of employment between the parties at any time upon or before the Health
and Welfare Change Date shall constitute neither a "status change" under the
UtiliCorp Health and Welfare Plans or the Aquila Health and Welfare Plans nor a
"qualifying event," as defined under COBRA.

               (ii) On and after the Health and Welfare Change Date, Aquila
shall cause the Aquila Health Plans to recognize and give credit for (A) all
amounts applied to deductibles, out-of-pocket maximums, co-payments and other
applicable benefit coverage limits with respect to which such expenses have been
incurred by Aquila Employees under the UtiliCorp Health Plans for the remainder
of the calendar year in which the Health and Welfare Change Date occurs, and (B)
all benefits paid to Aquila Employees under the UtiliCorp Health Plans for
purposes of determining when such persons have reached their lifetime maximum
benefits under the Aquila Health Plans. Notwithstanding the above, Aquila's
obligations under this Subsection 6.03(a)(ii) shall be limited by the market
availability of health insurance products or other arrangements satisfying the
criteria described above. Aquila shall use its commercially reasonable best
efforts to locate and engage the services of a vendor whose policies or other
arrangements meet the requirements above.

          (b) HCFA ADMINISTRATION. As of the Health and Welfare Change Date,
Aquila shall assume all Liabilities relating to, arising out of or resulting
from claims incurred on or before such date and verified by UtiliCorp or Aquila
under the HCFA data match reports that relate to Aquila Employees.

          (c) TRANSFER OF MEDICAL REIMBURSEMENT ACCOUNTS. Effective as of or
before the Health and Welfare Change Date, Aquila shall establish or cause to be
established a medical reimbursement plan materially comparable to the UtiliCorp
MRP. As soon as reasonably practicable on or after the Health and Welfare Change
Date, UtiliCorp shall cause the account balances of Aquila Employees under the
UtiliCorp MRP, if any, to be transferred to the Aquila medical reimbursement
plan. UtiliCorp shall pay to Aquila an amount equal to any net positive balance,
or Aquila shall pay to UtiliCorp an amount equal to any net negative balance in
the account balances of the Aquila Employees in the UtiliCorp MRP as of the
Health and Welfare Change Date. The elections of Aquila Employees made under the
UtiliCorp MRP shall apply to the Aquila medical reimbursement plan for the
remainder of the period for which such elections are by their terms applicable.
Aquila agrees that the account balances so transferred will be available for
health reimbursements to the Aquila Employees pursuant to the terms of the
Aquila medical reimbursement plan.

                                       13
<PAGE>

          (d) TRANSFER OF DEPENDENT CARE REIMBURSEMENT ACCOUNTS. Effective as of
or before the Health and Welfare Change Date, Aquila shall establish or cause to
be established a dependent care reimbursement plan materially comparable to the
UtiliCorp DRP. UtiliCorp shall pay to Aquila an amount equal to any net positive
balance, or Aquila shall pay to UtiliCorp an amount equal to any net negative
balance, in the account balances of the Aquila Employees in the UtiliCorp DRP as
of the Health and Welfare Change Date. As soon as reasonably practicable on or
after the Health and Welfare Change Date, UtiliCorp shall cause the account
balances of Aquila Employees under the UtiliCorp DRP, if any, to be transferred
to the Aquila dependent care reimbursement plan. The elections of Aquila
Employees made under the UtiliCorp DRP shall apply to the Aquila dependent care
reimbursement plan for the remainder of the period for which such elections are
by their terms applicable. Aquila agrees that the account balances so
transferred will be available for dependent care reimbursements to the Aquila
Employees pursuant to the terms of the Aquila dependent care reimbursement plan.

     6.04 VENDOR AND INSURANCE ARRANGEMENTS. UtiliCorp shall use its
commercially reasonable efforts for and on behalf of Aquila to negotiate
effective as of the Health and Welfare Change Date: (a) third party ASO
Contracts with features and costs determined by Aquila; (b) group insurance
policies with features and costs determined by Aquila; (c) agreements with HMOs
with features and costs determined by Aquila, and (d) competitive premium rates
for all Aquila Health and Welfare Plans. In each case, Aquila shall, as of the
Health and Welfare Change Date, establish, adopt and/or implement acceptable
contracts, agreements or arrangements. In accordance with Section 9.03,
UtiliCorp shall, on or before the Health and Welfare Change Date, provide upon
the request of Aquila copies of such contracts or successor arrangements
thereto.

     6.05 COBRA. UtiliCorp shall be responsible, through the Health and Welfare
Change Date, for compliance with the health care continuation coverage
requirements of COBRA and the UtiliCorp Health and Welfare Plans with respect to
Aquila Employees and qualified beneficiaries (as such term is defined under
COBRA). Aquila shall be responsible for providing UtiliCorp or its agents with
all necessary employee change notices and related information for covered
dependents, spouses, qualified beneficiaries (as such term is defined under
COBRA), and alternate recipients pursuant to QMCSOs, in accordance with
applicable UtiliCorp COBRA policies and procedures. As soon as administratively
practicable after the Health and Welfare Change Date, UtiliCorp shall provide
Aquila, through hard copy, electronic format or such other mechanism as is
appropriate under the circumstances, with a list of all qualified beneficiaries
(as such term is defined under COBRA) that relate to the Aquila Group and the
relevant information pertaining to their coverage elections. Effective
immediately after the Health and Welfare Change Date, Aquila shall be solely
responsible for compliance with the health care continuation coverage
requirements of COBRA for the Aquila Health and Welfare Plans for Aquila
Employees and their qualified beneficiaries (as such term is defined under
COBRA).

     6.06 LEAVE OF ABSENCE PROGRAMS

          (a) ALLOCATION OF RESPONSIBILITIES AFTER HEALTH AND WELFARE CHANGE
DATE. Effective as of the Health and Welfare Change Date, Aquila shall establish
Leave of Absence

                                       14
<PAGE>

Programs and shall be responsible for administering leaves of absence with
respect to Aquila Employees. Aquila shall honor existing leaves granted prior to
the Health and Welfare Change Date pursuant to any UtiliCorp Leave of Absence
Program.

          (b) DISCLOSURE. As soon as administratively practicable after the
Health and Welfare Change Date, UtiliCorp shall provide to Aquila copies of all
records pertaining to the leaves of absence with respect to all Aquila Employees
to the extent such records have not been previously provided.

     6.07 UTILICORP WORKERS' COMPENSATION PROGRAM

          (a)  ADMINISTRATION OF CLAIMS

               (i) Through the earlier of (A) the Distribution Date or (B) the
Insurance Transition Date, or such other date as the parties may mutually agree,
UtiliCorp shall continue to be responsible for the administration of all Aquila
WCP Claims that have been historically administered by UtiliCorp or its third
party administrator. However, UtiliCorp will advise Aquila and secure approval
for any material changes to current policy or practice with respect to the
administration of Aquila WCP Claims.

               (ii) Effective as of the Insurance Transition Date or such other
date as the parties may mutually agree, Aquila shall be responsible for the
administration of all Aquila WCP Claims.

               (iii) Each party shall fully cooperate with the other with
respect to the administration and reporting of Aquila WCP Claims, the payment of
Aquila WCP Claims determined to be payable, and the transfer of the
administration of any Aquila WCP Claims to the other party.

          (b)  SELF-INSURANCE STATUS. UtiliCorp shall maintain and amend, as
necessary, its certificates of self-insurance or bonding arrangements with
respect to workers' compensation and any other applicable policies to include
Aquila until the Insurance Transition Date, and Aquila shall fully cooperate
with UtiliCorp in obtaining such amendments. UtiliCorp shall use its
commercially reasonable best efforts to obtain self-insurance status for
workers' compensation for Aquila effective as of the Insurance Transition Date
in those jurisdictions in which Aquila conducts business, in which UtiliCorp is
self-insured, and where the parties mutually agree that such status is
beneficial to Aquila. Aquila hereby authorizes UtiliCorp to take all actions
necessary and appropriate on its behalf in order to obtain such self-insurance
status. All costs incurred by UtiliCorp in amending such certificates, including
without limitation filing fees, adjustments of security and excess loss policies
and amendments of safety programs, or in seeking to obtain self-insurance status
for workers' compensation for Aquila, shall be shared pro rata by UtiliCorp and
Aquila.

          (c)  INSURANCE POLICY

               (i) Effective as of the Insurance Transition Date, in all states
other than those states where Aquila is to be self-insured pursuant to
Subsection 6.07(b) above, UtiliCorp shall, at Aquila's cost, use its
commercially reasonable efforts to negotiate

                                       15
<PAGE>

for workers' compensation insurance policies on behalf of Aquila from the
issuing insurance companies or different insurance companies which are
comparable to the policies previously maintained by UtiliCorp; provided that the
retention under such Aquila policies shall be as determined by Aquila.

               (ii) UtiliCorp shall use its commercially reasonable efforts to
maintain the premium rates for all workers' compensation insurance policies for
both UtiliCorp and Aquila in effect for periods through the Insurance Transition
Date to be based on the aggregate number of employees covered under the workers'
compensation insurance policies of both UtiliCorp and Aquila. Any premiums due
under the separate workers' compensation insurance issued to Aquila shall be
payable by Aquila.

                                   ARTICLE VII

                          EQUITY AND OTHER COMPENSATION

     7.01 UTILICORP OPTIONS

          (a)  OPTIONS ASSUMPTION BY AQUILA

               (i) All UtiliCorp Options held by Aquila Employees under the
UtiliCorp Stock Purchase Plan will be cancelled on the Distribution Date. Any
amounts withheld from Aquila Employees' compensation by UtiliCorp under the
UtiliCorp Stock Purchase Plan and not used to purchase UtiliCorp Stock will be
returned to the Aquila Employees within a reasonable time following the
Distribution Date. Prior to the Distribution Date, the parties will take all
action necessary or appropriate to provide that employment with the Aquila Group
shall be considered to be employment with UtiliCorp for purposes of vesting and
exercise periods for all Aquila Employees with respect to UtiliCorp Options
granted prior to the Distribution Date and that employment with the UtiliCorp
Group shall be considered to be employment with Aquila for purposes of vesting
and exercise periods for all UtiliCorp Employees with respect to Aquila Options
granted prior to the Distribution Date. The parties will agree, on or before the
Distribution Date, for the adjustment or replacement as of the Distribution
Date, of the UtiliCorp Options issued under the UtiliCorp Stock Plans in
accordance with generally accepted accounting principles and legal requirements.

               (ii) In the event that either party desires to cancel UtiliCorp
Options after the IPO but prior to the Distribution Date and replace such
canceled options with Aquila Options, the parties may amend this provision in
accordance with Section 11.07 of this Agreement.

          (b)  CERTAIN NON-U.S. OPTIONEES. Except as may otherwise be agreed
upon by the parties, this Section 7.01 shall govern the treatment of UtiliCorp
Options held by non-U.S. Aquila Employees. In the event it is determined that
the local law of any non-U.S. optionee requires a different treatment, the
parties shall take such steps as is required to comply with local law or may
cashout those UtiliCorp Options that cannot reasonably be conformed.

                                       16
<PAGE>

     7.02 UTILICORP INCENTIVE PLAN. On or before the Separation Date, or such
other date as the parties may mutually agree, Aquila shall establish the Aquila
Incentive Plan and certain Aquila Employees shall cease to participate in the
UtiliCorp Incentive Plan. On or before the Change of Control Date, all Aquila
Employees shall cease to participate in the UtiliCorp Incentive Plan. After such
termination of participation in the UtiliCorp Incentive Plan, Aquila may in its
discretion grant awards under the Aquila Incentive Plan or the Omnibus Incentive
Compensation Plan to eligible employees to take into account the lost benefit
opportunity under the UtiliCorp Incentive Plan.

     7.03 STOCK PURCHASE PLAN. Effective on or before the Distribution Date, or
such other date as the parties may mutually agree, Aquila shall establish a
Stock Purchase Plan for the benefit of Aquila Employees.

     7.04 AQUILA OMNIBUS INCENTIVE COMPENSATION PLAN. Effective on or before the
Separation Date, the parties shall establish the Omnibus Incentive Compensation
Plan for the benefit of Aquila Employees. The Omnibus Incentive Compensation
Plan is intended to comply with Code Section 162(m).

     7.05 UTILICORP RESTRICTED STOCK. The parties will take all action necessary
or appropriate to provide that (a) employment with the Aquila Group shall be
considered to be employment with UtiliCorp for purposes of vesting in UtiliCorp
Restricted Stock for Aquila Employees, (b) employment with the UtiliCorp Group
shall be considered to be employment with Aquila for purposes of vesting in
Aquila Restricted Stock for the UtiliCorp Employees, and (c) any shares of
Aquila stock issued with respect to UtiliCorp Restricted Stock in the
Distribution shall have comparable restrictions to the shares of UtiliCorp
Restricted Stock with respect to which it is distributed.

                                  ARTICLE VIII

                            FRINGE AND OTHER BENEFITS

     8.01 EMPLOYEE ASSISTANCE PROGRAM. UtiliCorp shall use its commercially
reasonable efforts for and on behalf of Aquila to negotiate, effective as of the
Group Status Change Date, or such other date as the parties may mutually agree,
contracts and/or arrangements with UtiliCorp's vendors that contain comparable
features to UtiliCorp's contracts and/or arrangements providing for an employee
assistance program. Prior to such date, Aquila shall, unless the parties
otherwise agree, remain a Participating Company in UtiliCorp's employee
assistance program.

     8.02 EDUCATIONAL ASSISTANCE PROGRAM. Prior to the Group Status Change Date,
Aquila shall, unless the parties otherwise agree, remain a Participating Company
in UtiliCorp's educational assistance program. Aquila shall be responsible for
any costs to provide educational assistance to Aquila Employees.

     8.03 EXECUTIVE FINANCIAL PLANNING. Prior to the Group Status Change Date,
Aquila shall, unless the parties otherwise agree, remain a Participating Company
in UtiliCorp's executive financial planning program. Effective as of the Group
Status Change Date, Aquila shall provide an Aquila executive financial planning
program to eligible Aquila Employees. Unless the parties otherwise agree,
UtiliCorp shall use its commercially reasonable efforts for

                                       17
<PAGE>

and on behalf of Aquila to negotiate contracts or arrangements with UtiliCorp's
vendors, effective as of the Group Status Change Date, that contain comparable
features to UtiliCorp's contracts and/or arrangements providing for an executive
financial planning program.

     8.04 RELOCATION. Prior to the Group Status Change Date, or such other date
as the parties may mutually agree, Aquila shall, unless the parties otherwise
agree, remain a Participating Company in UtiliCorp's employee relocation
program. Effective as of the Group Status Change Date or such other date as the
parties may mutually agree, Aquila shall provide an Aquila relocation program to
Aquila Employees. UtiliCorp shall use its commercially reasonable efforts for
and on behalf of Aquila to negotiate contracts or arrangements with UtiliCorp's
vendors, effective as of the Group Status Change Date, which contain comparable
features to UtiliCorp's contracts and/or arrangements providing for an employee
relocation program.

     8.05 OTHER BENEFITS. To the extent that UtiliCorp maintains, sponsors or
provides for its employees other Fringe Benefits not specifically identified in
this Article VIII, then UtiliCorp shall, to the extent permitted by law,
continue to make such benefits available to Aquila Employees on substantially
similar terms and conditions as are offered to the UtiliCorp Employees through
the Group Status Change Date. The parties agree to make commercially reasonable
efforts to mutually agree on whether, when, and on what terms any member of the
Aquila Group shall maintain, sponsor or offer similar Fringe Benefits.

                                   ARTICLE IX

                             ADMINISTRATIVE MATTERS

     9.01 TRANSITIONAL SERVICES AGREEMENT. On or about the date hereof, the
parties shall enter into the Transitional Services Agreement covering the
provisions of various services to be provided by UtiliCorp to Aquila. The
provisions of this Agreement shall be subject to the provisions of the
Transitional Services Agreement. Furthermore, if (a) the terms of this Agreement
require UtiliCorp to provide any services to Aquila or take any actions on
Aquila's behalf and (b) such services or actions are not covered by the
Transition Services Agreement, then Aquila shall reimburse UtiliCorp for all
direct and indirect costs, including out-of-pocket expenses, incurred by
UtiliCorp in providing such services or taking such actions.

     9.02 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED MATTERS

          (a) SHARED COSTS. Aquila shall pay its share, as determined by
UtiliCorp in good faith, of any contributions made to any trust maintained in
connection with a UtiliCorp Plan while Aquila is a Participating Company in that
UtiliCorp Plan.

          (b) CONTRIBUTIONS TO TRUSTS. With respect to UtiliCorp Plans to which
Aquila Employees make contributions, UtiliCorp shall use reasonable procedures
to determine Aquila Liabilities associated with such Plans, taking into account
such contributions, settlements, refunds and similar payments.

                                       18
<PAGE>

          (c) ADMINISTRATIVE EXPENSES NOT CHARGEABLE TO A TRUST. To the extent
not charged pursuant to the Transitional Services Agreement or the Master
Separation Agreement, and to the extent not otherwise agreed to by the parties,
and to the extent not chargeable to a trust established in connection with a
UtiliCorp Plan, Aquila shall be responsible, through either direct payment or
reimbursement to UtiliCorp, for its allocable share, as reasonably determined by
the parties, of all costs and expenses incurred by UtiliCorp in the
administration of (i) the UtiliCorp Plans while Aquila participates in such
Plans, and (ii) the Aquila Plans, to the extent UtiliCorp administers such
Plans.

     9.03 SHARING OF PARTICIPATION INFORMATION. The parties shall share, or
cause to be shared, all participant information that is necessary or appropriate
for the efficient and accurate administration of each of the UtiliCorp Plans and
the Aquila Plans during the respective periods applicable to such Plans as the
parties may mutually agree. UtiliCorp and Aquila and their respective authorized
agents shall, subject to applicable laws of confidentiality and data protection,
be given reasonable and timely access to, and may make copies of, all
information relating to the subjects of this Agreement in the custody of the
other party or its agents, to the extent necessary or appropriate for such
administration.

     9.04 REPORTING AND DISCLOSURE COMMUNICATIONS TO PARTICIPANTS. While Aquila
is a Participating Company in the UtiliCorp Plans, UtiliCorp shall take, or
cause to be taken, all actions necessary or appropriate to facilitate the
distribution of all UtiliCorp Plan-related communications and materials to
employees, participants and beneficiaries, including summary plan descriptions
and related summaries of material modification(s), summary annual reports,
investment information, prospectuses, notices and enrollment material for the
UtiliCorp Plans. Aquila shall provide all information needed by UtiliCorp to
facilitate such UtiliCorp Plan-related communications. Aquila shall take, or
cause to be taken, all actions necessary or appropriate to facilitate the
distribution of all Aquila Plan-related communications and materials to
employees, participants and beneficiaries. Aquila shall assist, and Aquila shall
cause each other applicable member of the Aquila Group to assist, UtiliCorp in
complying with all reporting and disclosure requirements of ERISA, including the
preparation of Form Series 5500 annual reports, for the UtiliCorp Plans, where
applicable.

     9.05 AUDITS REGARDING VENDOR CONTRACTS. From the period beginning as of the
Group Status Change Date and ending on such date as the parties may mutually
agree, UtiliCorp and Aquila and their duly authorized representatives shall have
the right to conduct joint audits with respect to any vendor contracts that
relate to both the UtiliCorp Health and Welfare Plans and the Aquila Health and
Welfare Plans. The scope of such audits shall remain consistent with current
practices and all documents and other information currently made available for
review shall continue to be made available. UtiliCorp and Aquila shall agree on
the performance standards, audit methodology, auditing policy and quality
measures, reporting requirements, and the manner in which costs incurred in
connection with such audits will be shared.

     9.06 BENEFICIARY DESIGNATIONS. Subject to Section 9.09, all beneficiary
designations made by Aquila Employees for the UtiliCorp Plans shall be
transferred to and be in full force and effect under the corresponding Aquila
Plans until such beneficiary designations are replaced or revoked by the Aquila
Employees who made the beneficiary designations. All beneficiary designations
made by Aquila Retired Employees for the Aquila

                                       19
<PAGE>

Plans shall be transferred to and be in full force and effect under the
corresponding UtiliCorp Plans until such beneficiary designations are replaced
or revoked by the Aquila Retired Employees who made the beneficiary
designations.

     9.07 REQUESTS FOR IRS AND DOL OPINIONS. UtiliCorp and Aquila shall make
such applications to regulatory agencies, including the IRS and DOL, as may be
necessary or appropriate. The parties shall cooperate fully with one another on
any issue relating to the transactions contemplated by this Agreement for which
UtiliCorp and/or Aquila elects to seek a determination letter or private letter
ruling from the IRS or an advisory opinion from the DOL.

     9.08 FIDUCIARY MATTERS. UtiliCorp and Aquila each acknowledge that actions
contemplated to be taken pursuant to this Agreement may be subject to fiduciary
duties or standards of conduct under ERISA or other applicable law, and no party
shall be deemed to be in violation of this Agreement if such party fails to
comply with any provisions hereof based upon such party's good faith
determination that to do so would violate such a fiduciary duty or standard.

     9.09 CONSENT OF THIRD PARTIES. If any provision of this Agreement is
dependent on the consent of any third party (such as a vendor) and such consent
is withheld, the parties shall use their commercially reasonable efforts to
implement the intent of such provision.

     9.10 UTILICORP INTRANET. Through the Change of Control Date or such other
date as the parties may mutually agree, (a) UtiliCorp shall make its intranet
site available to Aquila Employees on substantially the same terms as such
intranet site is made available to UtiliCorp Employees except as limited by
licenses or applicable law, and (b) Aquila shall make its intranet site
available to UtiliCorp Employees on substantially the same terms as such
intranet site is made available to Aquila Employees except as limited by
licenses or applicable law.

     9.11 TAX COOPERATION. In connection with the interpretation and
administration of this Agreement, UtiliCorp and Aquila shall take into account
the agreements and policies established pursuant to the Master Separation
Agreement and the Tax Matters Agreement.

     9.12 PLAN RETURNS. Plan Returns shall be filed or caused to be filed by
UtiliCorp or Aquila (as the case may be) in accordance with the principles
established in the Tax Matters Agreement.

                                    ARTICLE X

                           EMPLOYMENT-RELATED MATTERS

     10.01 TERMS OF AQUILA EMPLOYMENT. Nothing in the Master Separation
Agreement, this Agreement, or any Ancillary Agreement should be construed to
change the at-will status of any of the employees of the UtiliCorp Group or the
Aquila Group.

     10.02 HR DATA SUPPORT SYSTEMS. Subject to the terms of applicable licenses,
UtiliCorp shall provide human resources data support for Aquila Employees
through the Change of Control Date or such other date as the parties may
mutually agree.

                                       20
<PAGE>

     10.03 NON-SOLICITATION OF EMPLOYEES. From the Separation Date until the
date on which UtiliCorp first owns less than 50% of the combined voting power
of all shares of all classes of Aquila stock entitled to vote then
outstanding, Aquila will not, without UtiliCorp's prior written consent,
directly or indirectly solicit for employment any UtiliCorp Employee (other
than pursuant to general help-wanted advertising or other general
solicitations not targeted at UtiliCorp Employees). Moreover, during such
time, no UtiliCorp Employee may transfer from UtiliCorp to Aquila without the
prior written approval of UtiliCorp. Notwithstanding the foregoing, until the
Change of Control Date, Aquila may post job openings on UtiliCorp's intranet
site, and UtiliCorp may post job openings on Aquila's intranet site.

     10.04 EMPLOYMENT OF EMPLOYEES WITH U.S. WORK VISAS. Aquila Employees who,
on the Group Status Change Date, are employed in the U.S. pursuant to a work or
training visa which authorizes employment only by the UtiliCorp Group shall
remain employed by the UtiliCorp Group until the visa is amended or a new visa
is granted to authorize employment by the Aquila Group and, at that time, shall
become an employee of the Aquila Group with substantially similar rights as all
other Aquila Employees. During the period from the Group Status Change Date
until the amended or new visa is issued, such employee shall continue to
participate in UtiliCorp Plans.

     10.05 CONFIDENTIALITY AND PROPERTY INFORMATION

           (a) RELEASE. No provision of this Agreement, the Master Separation
Agreement or any Ancillary Agreement shall be deemed to release any
individual for any violation of the UtiliCorp non-competition guideline or
any agreement or policy pertaining to confidential or proprietary information
of any member of the UtiliCorp Group or the Aquila Group, or otherwise
relieve any individual of his or her obligations under such non-competition
guideline, agreement, or policy.

           (b) EMPLOYEE AGREEMENTS. For purposes of this Section 10.05, nothing
in this Agreement, the Master Separation Agreement or any other Ancillary
Agreement shall be deemed to supersede any provision regarding the conduct of
employees mandated by the FERC or any other applicable regulatory authority.

               (i) SURVIVAL OF UTILICORP EMPLOYEE AGREEMENT OBLIGATIONS AND
UTILICORP'S COMMON LAW RIGHTS. The UtiliCorp Employee Agreements of all
Aquila Employees and all former UtiliCorp employees transferred to Aquila on
or before the Group Status Change Date shall remain in full force and effect
according to their terms; provided, however, that none of the following acts
committed by former UtiliCorp or Aquila employees within the scope of their
Aquila employment shall constitute a breach of such UtiliCorp Employee
Agreements: (A) the use or disclosure of Confidential Information (as that
term is defined in the UtiliCorp Employee Agreement) for or on behalf of
Aquila, if such disclosure is consistent with the rights granted to Aquila
and the restrictions imposed on Aquila under this Agreement, the Master
Separation Agreement, any other Ancillary Agreement or any other agreement
between the parties, and (B) the rendering of any services, directly or
indirectly, to Aquila to the extent such services are consistent with the
rights granted to Aquila and the restrictions imposed on Aquila under this
Agreement, the Master Separation Agreement, any other Ancillary Agreement or
any other agreement between the parties. Further, UtiliCorp retains any
rights it has under statute or common law with respect to actions by its
former employees to the extent such actions are

                                       21
<PAGE>

inconsistent with the rights granted to Aquila and the restrictions imposed
on Aquila under this Agreement, the Master Separation Agreement, any other
Ancillary Agreement or any other agreement between the parties.

          (ii) SURVIVAL OF AQUILA'S EMPLOYEE AGREEMENT OBLIGATIONS AND AQUILA'S
COMMON LAW RIGHTS. The Aquila Employee Agreements of all UtiliCorp Employees and
all former Aquila employees transferred to UtiliCorp on or before the Group
Status Change Date shall remain in full force and effect according to their
terms; provided, however, that none of the following acts committed by former
Aquila or UtiliCorp employees within the scope of their UtiliCorp employment
shall constitute a breach of such Aquila Employee Agreements: (A) the use or
disclosure of Confidential Information (as that term is defined in the Aquila
Employee Agreement) for or on behalf of UtiliCorp, if such disclosure is
consistent with the rights granted to UtiliCorp and the restrictions imposed on
UtiliCorp under this Agreement, the Master Separation Agreement, any other
Ancillary Agreement or any other agreement between the parties, and (B) the
rendering of any services, directly or indirectly, to UtiliCorp to the extent
such services are consistent with the rights granted to UtiliCorp and the
restrictions imposed on UtiliCorp under this Agreement, the Master Separation
Agreement, any other Ancillary Agreement or any other agreement between the
parties. Further, Aquila retains any rights it has under statute or common law
with respect to actions by its former employees to the extent such actions are
inconsistent with the rights granted to UtiliCorp and the restrictions imposed
on UtiliCorp under this Agreement, the Master Separation Agreement, any other
Ancillary Agreement or any other agreement between the parties.

          (iii) ASSIGNMENT; COOPERATION FOR COMPLIANCE AND ENFORCEMENT

                (A)(1) UtiliCorp retains all rights under the UtiliCorp Employee
Agreements of all former UtiliCorp employees necessary to permit UtiliCorp
to protect the rights and interests of UtiliCorp, but hereby transfers and
assigns to Aquila its rights under the UtiliCorp Employee Agreements of all
former UtiliCorp employees to the extent required to permit Aquila to enjoin,
restrain, recover damages from or obtain specific performance of the
UtiliCorp Employee Agreements or obtain other remedies against any employee
who breaches his or her UtiliCorp Employee Agreement, and to the extent
necessary to permit Aquila to protect its rights and interests.

                (2) UtiliCorp and Aquila agree, at their own respective cost and
expense, to use their reasonable efforts to cooperate as follows: (x) Aquila
shall advise UtiliCorp of any violation(s) of any UtiliCorp Employee Agreement
by Aquila Employees or former UtiliCorp employees, and any violation(s) of any
Aquila Employee Agreement which affect UtiliCorp's rights; and (y) UtiliCorp
shall advise Aquila of any violations of the UtiliCorp Employee Agreement by
current or former UtiliCorp employees which affect Aquila's rights; provided,
however, that the foregoing obligations shall only apply to violations which
become known to an attorney within the legal department of the party obligated
to provide notice thereof.

                (3) UtiliCorp and Aquila each may separately enforce the Aquila
Employee Agreements of Aquila Employees and former UtiliCorp employees to the
extent necessary to reasonably protect their respective interests, provided,
however, that (x) Aquila shall not commence any litigation relating thereto
without first consulting with

                                       22
<PAGE>

UtiliCorp's General Counsel or his or her designee and (y) UtiliCorp shall
not commence any litigation relating thereto against any former UtiliCorp
employee who is at the time an Aquila Employee without first consulting with
Aquila's General Counsel or his or her designee. If either party, in seeking
to enforce any UtiliCorp Employee Agreement, notifies the other party that it
requires, or desires, the other party to join in such action, then the other
party shall do so. In addition, if either party commences or becomes a party
to any action to enforce a UtiliCorp Employee Agreement of an Aquila Employee
or former UtiliCorp employee, the other party shall, whether or not it
becomes a party to the action, cooperate with the other party by making
available its files and employees who have information or knowledge relevant
to the dispute, subject to appropriate measures to protect the
confidentiality of any proprietary or confidential information that may be
disclosed in the course of such cooperation or action and subject to any
relevant privacy laws and regulations. Any such action shall be conducted at
the expense of the party bringing the action and the parties shall agree on a
case by case basis on compensation, if any, of the other party for the value
of the time of such other party's employees as reasonably required in
connection with the action.

               (B)(1) Aquila retains all rights under the Aquila Employee
Agreements of all former Aquila employees necessary to permit Aquila to protect
the rights and interests of Aquila, but hereby transfers and assigns to
UtiliCorp its rights under the Aquila Employee Agreements of all former Aquila
employees to the extent required to permit UtiliCorp to enjoin, restrain,
recover damages from or obtain specific performance of the Aquila Employee
Agreements or obtain other remedies against any employee who breaches his or her
Aquila Employee Agreement, and to the extent necessary to permit UtiliCorp to
protect its rights and interests.

               (2) UtiliCorp and Aquila agree, at their own respective cost and
expense, to use their reasonable efforts to cooperate as follows: (x) UtiliCorp
shall advise Aquila of any violation(s) of any Aquila Employee Agreement by
UtiliCorp Employees or former Aquila employees, and any violation(s) of any
UtiliCorp Employee Agreement which affect Aquila's rights; and (y) Aquila shall
advise UtiliCorp of any violations of the Aquila Employee Agreement by current
or former Aquila Employees which affect UtiliCorp's rights; provided, however,
that the foregoing obligations shall only apply to violations which become known
to an attorney within the legal department of the party obligated to provide
notice thereof.

               (3) UtiliCorp and Aquila each may separately enforce the
UtiliCorp Employee Agreements of UtiliCorp Employees and former Aquila employees
to the extent necessary to reasonably protect their respective interests,
provided, however, that (x) UtiliCorp shall not commence any litigation relating
thereto without first consulting with Aquila's General Counsel or his or her
designee and (y) Aquila shall not commence any litigation relating thereto
against any former Aquila employee who is at the time a UtiliCorp Employee
without first consulting with UtiliCorp's General Counsel or his or her
designee. If either party, in seeking to enforce any Aquila Employee Agreement,
notifies the other party that it requires, or desires, the other party to join
in such action, then the other party shall do so. In addition, if either party
commences or becomes a party to any action to enforce an Aquila Employee
Agreement of a UtiliCorp Employee or former Aquila employee, the other party
shall, whether or not it becomes a party to the action, cooperate with the other
party by making available its files and employees who have information or

                                       23
<PAGE>

knowledge relevant to the dispute, subject to appropriate measures to protect
the confidentiality of any proprietary or confidential information that may
be disclosed in the course of such cooperation or action and subject to any
relevant privacy laws and regulations. Any such action shall be conducted at
the expense of the party bringing the action and the parties shall agree on a
case by case basis on compensation, if any, of the other party for the value
of the time of such other party's employees as reasonably required in
connection with the action.

          (c) UtiliCorp and Aquila understand and acknowledge that matters
relating to the making, performance, enforcement, assignment and termination of
employee agreements are typically governed by the laws and regulations of the
national, federal, state or local governmental unit where an employee resides,
or where an employee's services are rendered, and that such laws and regulations
may supersede or limit the applicability or enforceability of this Section
10.05. In such circumstances, the parties agree to take action with respect to
the Employee Agreements that best accomplishes the parties' objectives as set
forth in this Section 10.05 and that is consistent with applicable law.

     10.06 PAYROLL AND WITHHOLDING

           (a) ACCRUED PAYROLL, BONUSES, PROFIT SHARING AND COMMISSIONS.
UtiliCorp and Aquila shall agree on the manner and method of payment for all
accrued payroll, bonuses, profit sharing and commissions agreed to on behalf of
employees who have been employed by Aquila on or before the Group Status Change
Date.

          (b) DELIVERY OF, AND ACCESS TO, DOCUMENTS AND OTHER INFORMATION.
Concurrently with the Group Status Change Date, UtiliCorp shall develop and
implement a plan to cause to be delivered to Aquila, the employee information
set forth on all Forms W-4 executed by Aquila Employees as of the Group Status
Change Date. UtiliCorp shall make reasonably available to Aquila all forms,
documents or information, no matter in what format stored, relating to
compensation or payments made to any employee or service provider of Aquila.
Such information may include, but is not limited to, information concerning
employee payroll deductions, payroll adjustments, records of time worked, tax
records (e.g., Forms W-2, W-4, 940 and 941), and information concerning
garnishment of wages or other payments. The intended result of this plan will be
that all forms relating to Aquila Employees other than Aquila Retired Employees
or Aquila Terminated Employees will reside at Aquila following the Group Status
Change Date or the assumption of payroll processing responsibilities by Aquila.

          (c) CONSISTENCY OF TAX POSITIONS; DUPLICATION. UtiliCorp and Aquila
shall individually and collectively make commercially reasonable efforts to
avoid unnecessarily duplicated federal, state or local payroll taxes, insurance
or workers' compensation contributions, or unemployment contributions arising on
or after the Group Status Change Date. UtiliCorp and Aquila shall take
consistent reporting and withholding positions with respect to any such taxes or
contributions.

     10.07 PERSONNEL RECORDS. As of the Group Status Change Date, UtiliCorp
shall transfer to Aquila, subject to applicable laws on confidentiality and data
protection, all current and historic forms, documents or information, no matter
in what format stored, relating to personnel and medical records processed by
UtiliCorp and relating to Aquila

                                       24
<PAGE>

Employees. Such forms, documents or information may include, but are not
limited to: (a) information regarding a Aquila Employee's ranking or
promotions; (b) the existence and nature of garnishment orders or other
judicial or administrative actions or orders affecting an employee's or
service provider's compensation; and (c) performance evaluations. Aquila
shall make reasonably available to UtiliCorp, subject to applicable laws on
confidentiality and data protection, any forms, documents or information
relating to Aquila Employees as UtiliCorp may reasonably request.

     10.08 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES. No
provision of this Agreement, the Master Separation Agreement, or any other
Ancillary Agreement shall be construed to create any right, or accelerate
entitlement, to any compensation or benefit whatsoever on the part of any Aquila
Employee or other future, present or former employee of UtiliCorp or Aquila
under any UtiliCorp Plan or Aquila Plan or otherwise. Without limiting the
generality of the foregoing: (a) none of the Distribution, the Group Status
Change Date, and the termination of the Participating Company status of Aquila
or any member of the Aquila Group shall cause any employee to be deemed to have
incurred a termination of employment; and (b) no transfer of employment between
UtiliCorp and Aquila before the Group Status Change Date shall be deemed a
termination of employment for any purpose hereunder.

                                   ARTICLE XI

                               GENERAL PROVISIONS

     11.01 EFFECT IF GROUP STATUS CHANGE DATE DOES NOT OCCUR. Subject to Section
11.08, if the Group Status Change Date does not occur, then all actions and
events that are, under this Agreement, to be taken or occur effective as of the
Group Status Change Date, or otherwise in connection with the Group Status
Change Date, shall not be taken or occur except to the extent specifically
agreed by the parties.

     11.02 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed or
construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, the
understanding and agreement being that no provision contained herein, and no act
of the parties, shall be deemed to create any relationship between the parties
other than the relationship set forth herein. Nothing in this Agreement, express
or implied, is intended to or shall confer upon any other person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.

     11.03 AFFILIATED COMPANIES. Each of UtiliCorp and Aquila shall cause to be
performed, and hereby guarantees the performance of, any and all obligations of
the UtiliCorp Group or the Aquila Group, respectively, hereunder.

     11.04 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or
delay on the part of either party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or of any other right. All rights and remedies existing under
this Agreement or the Schedules or Exhibits attached hereto are cumulative to,
and not exclusive of, any rights or remedies otherwise available.

                                       25
<PAGE>

     11.05 GOVERNING LAW. This Agreement shall be governed and construed and
enforced in accordance with the laws of the State of Missouri as to all matters,
regardless of the laws that might otherwise govern under the principles of
conflicts of laws applicable thereto.

     11.06 SEVERABILITY. If any term or other provision of this Agreement is
determined by a nonappealable decision by a court, administrative agency or
arbitrator to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to either party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, this
Agreement shall be deemed to be amended, and each party agrees to execute and
deliver such documents and instruments as are reasonably requested by the other
party to evidence such amendment, so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest extent possible.

     11.07 AMENDMENT. Subject to the last sentence of Section 11.08, no change
or amendment will be made to this Agreement except by an instrument in writing
signed on behalf of UtiliCorp and Aquila.

     11.08 TERMINATION. This Agreement may be terminated at any time prior to
the Separation Date by and in the sole discretion of UtiliCorp without approval
of Aquila. This Agreement may be terminated at any time after the Separation
Date by mutual consent of the parties. In this regard, Aquila acknowledges that
at any time prior to the Change of Control Date, UtiliCorp may, by virtue of its
controlling ownership interest in Aquila, cause Aquila to terminate or amend
this Agreement at UtiliCorp's direction.

     11.09 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same agreement. This Agreement may be executed by facsimile signature.

     11.10 NOTICES. Any notice, demand, offer, request or other communication
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be deemed effectively given the earlier of (a) when received, (b) when
delivered personally, (c) one Business Day after being delivered by facsimile
(with receipt of appropriate confirmation), (d) one Business Day after being
deposited with a nationally recognized overnight courier service, or (e) four
Business Days after being deposited in the U.S. mail, First Class with postage
prepaid, and addressed to the attention of such party's General Counsel at the
address of its principal executive office or such other address as a party may
request by notifying the other party in writing.

     11.11 BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal representatives,
successors, and permitted assigns and transferees.

     11.12 ENTIRE AGREEMENT. This Agreement, together with the Master Separation
Agreement, the other Ancillary Agreements, and the Exhibits and Schedules
attached hereto and thereto, constitutes the entire agreement between the
parties with respect to the subject

                                       26
<PAGE>

matter hereof and thereof and shall supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof and thereof.

     11.13 INTERPRETATION. The headings contained in this Agreement, in any
Exhibit or Schedule hereto and in the table of contents of this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When a reference is made in this Agreement to
an Article or Section, or an Exhibit or Schedule, such reference shall be to an
Article or Section, or an Exhibit or Schedule, of this Agreement unless
otherwise indicated. Any capitalized term used in any Schedule or Exhibit but
not otherwise defined therein, shall have the meaning ascribed to such term in
this Agreement.

     11.14 RIGHT OF SET-OFF. UtiliCorp shall have the right at any time and from
time to time to set off and apply any and all deposits or amounts of any member
of the Aquila Group at any time held, and any and all indebtedness at any time
owing, by any member of the UtiliCorp Group to or for the credit or account of
any member of the Aquila Group against any and all obligations of Aquila now or
hereafter arising under this Agreement, whether or not UtiliCorp shall have made
any demand therefor.

     11.15 EMPLOYEES BASED OUTSIDE OF THE UNITED STATES. Notwithstanding any
provision of this Agreement to the contrary, in order to comply with the
provisions of laws in other countries which UtiliCorp or its Subsidiaries or
Aquila or its Subsidiaries operate or have employees, the parties, in their
discretion, shall have the power and authority to (a) determine which
individuals employed outside the United States are eligible to participate in
any Plan; (b) modify the terms of this Agreement or any Plan as it applies to
any person employed outside the United States; and (c) establish other Plans and
other terms and procedures to the extent such actions may be necessary or
advisable.

                                REMAINDER OF PAGE
                            INTENTIONALLY LEFT BLANK

                                       27
<PAGE>

     IN WITNESS WHEREOF, the parties have signed this Employee Matters Agreement
effective as of the date first set forth above.

                                     UTILICORP UNITED INC.

                                     ---------------------------------------
                                     Robert K. Green
                                     President and Chief Operating Officer

                                     AQUILA, INC.

                                     ---------------------------------------
                                     Keith G. Stamm
                                     Chief Executive Officer

                                SIGNATURE PAGE TO
                           EMPLOYEE MATTERS AGREEMENT

                                       28
<PAGE>

                                  SCHEDULE 2.01
                     EMPLOYMENT LIABILITIES INDEMNIFICATION

     Section 1. INDEMNIFICATION BY AQUILA. Except as otherwise provided in this
Agreement or Section 3 of this Schedule, Aquila shall, for itself and as agent
for each member of the Aquila Group, indemnify, defend (or, where applicable,
pay the defense costs for) and hold harmless the UtiliCorp Indemnitees from and
against any and all Employment Liabilities that any third party seeks to impose
upon the UtiliCorp Indemnitees, or which are imposed upon the UtiliCorp
Indemnitees, if and to the extent such Employment Liabilities relate to, arise
out of or result from any of the following items (without duplication): (i) any
acts, errors or omissions or alleged acts, errors or omissions by or on behalf
of any member or person employed in the conduct of the Aquila Business; and (ii)
any breach by Aquila or any member or person employed by a member of the Aquila
Group of this Agreement, the Master Separation Agreement or any other Ancillary
Agreement.

     In the event that any member of the Aquila Group makes a payment to the
UtiliCorp Indemnitees hereunder, and any of the UtiliCorp Indemnitees
subsequently diminishes the Employment Liability on account of which such
payment was made, either directly or through a third-party recovery, UtiliCorp
will promptly repay (or will procure a UtiliCorp Indemnitee to promptly repay)
such member of the Aquila Group the amount by which the payment made by such
member of the Aquila Group exceeds the actual cost of the associated indemnified
Employment Liability.

     Section 2. INDEMNIFICATION BY UTILICORP. Except as otherwise provided in
this Agreement or Section 3 of this Schedule, UtiliCorp shall, for itself and as
agent for each member of the UtiliCorp Group, indemnify, defend (or, where
applicable, pay the defense costs for) and hold harmless the Aquila Indemnitees
from and against any and all Employment Liabilities that any third party seeks
to impose upon the Aquila Indemnitees, or which are imposed upon the Aquila
Indemnitees, if and to the extent such Employment Liabilities relate to, arise
out of or result from any of the following items (without duplication): (i) any
acts, errors or omissions or alleged acts, errors or omissions by or on behalf
of any member or person employed in the conduct of the UtiliCorp Business; and
(ii) any breach by UtiliCorp or any member or person employed by a member of the
UtiliCorp Group of this Agreement, the Master Separation Agreement or any other
Ancillary Agreement.

     In the event that any member of the UtiliCorp Group makes a payment to the
Aquila Indemnitees hereunder, and any of the Aquila Indemnitees subsequently
diminishes the Employment Liability on account of which such payment was made,
either directly or through a third-party recovery, Aquila will promptly repay
(or will procure a Aquila Indemnitee to promptly repay) such member of the
UtiliCorp Group the amount by which the payment made by such member of the
UtiliCorp Group exceeds the actual cost of the indemnified Employment Liability.

     Section 3. EXCEPTIONS. In accordance with the current practice in effect as
of the execution of the Agreement, with respect to claims for benefits or
compensation, if an underlying act or omission as contemplated in Section 1 or 2
of this Schedule occurs and such act or omission constitutes the principal basis
for such a claim, then Section 1 or 2 shall apply, as applicable, to establish
indemnification obligations. If, however, no specific act or

                                       29
<PAGE>

omission occurs that is attributable to UtiliCorp or Aquila or any member of
their respective Groups and the principal underlying basis for a claim for
benefits or compensation involves plan administration or other similar systemic
type activities related to maintenance of plans, notwithstanding Sections 1 and
2, in accordance with the current practice in effect as of the execution of the
Agreement, Aquila and UtiliCorp shall be responsible for their pro rata
allocated share of costs to defend such claim.

     Section 4. RELATIONSHIP TO MASTER SEPARATION AGREEMENT. Unless expressly
modified in this Schedule, all other provisions of Article VI of the Master
Separation Agreement will apply to an indemnifiable claim. Any claim which is
not an Employment Liability will only be subject to the provisions of the Master
Separation Agreement (or the appropriate Ancillary Agreement).

                                       30<PAGE>

                                                                    Exhibit 10.4

                              TAX MATTERS AGREEMENT

                                     BETWEEN

                              UTILICORP UNITED INC.

                                       AND

                                  AQUILA, INC.

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                           <C>
RECITALS ...................................................................   1

ARTICLE I DEFINITIONS ......................................................   1

ARTICLE II PREPARATION AND FILING OF TAX RETURNS ...........................   5

     2.1 In General ........................................................   5

     2.2 Payment of Taxes ..................................................   5

     2.3 Information and Cooperation .......................................   5

     2.4 Manner of Filing Tax Returns ......................................   6

     2.5 Agent .............................................................   7

ARTICLE III REPRESENTATIONS AND COVENANTS ..................................   7

     3.1 Aquila Representations and Covenants ..............................   7

     3.2 UtiliCorp Representations and Covenants ...........................   7

ARTICLE IV FEDERAL INCOME TAX SHARING AND PAYMENTS .........................   7

     4.1 Calculation of Tax Sharing Payments ...............................   7

     4.2 Federal Income Tax Sharing Payments Between the Parties ...........   8

ARTICLE V SEPARATE TAX SHARING AND PAYMENT .................................   9

     5.1 Allocation of Separate Taxes ......................................   9

     5.2 Reimbursement for Separate Taxes ..................................   9

ARTICLE VI ALLOCATION OF CERTAIN TAX ITEMS .................................   9

     6.1 Liability for Restructuring and Deconsolidation Taxes .............   9

     6.2 Carryovers and Carrybacks .........................................  10

     6.3 Refunds ...........................................................  10

     6.4 Allocation of Tax Items ...........................................  10

ARTICLE VII INDEMNIFICATION PROVISIONS .....................................  11

     7.1 General Indemnification ...........................................  11

     7.2 Spin-Off Indemnification ..........................................  12

     7.3 Injunctive Relief .................................................  13

     7.4 Payments ..........................................................  13

     7.5 Prompt Performance ................................................  13

     7.6 Interest ..........................................................  14

     7.7 Tax Records .......................................................  14

                                       i
<PAGE>

     7.8 Additional Matters ................................................  14

     7.9 Survival of Indemnities ...........................................  14

ARTICLE VIII AUDITS AND CONTEST RIGHTS .....................................  14

     8.1 In General ........................................................  14

     8.2 Notice ............................................................  14

     8.3 Contests ..........................................................  15

     8.4 Limitations .......................................................  15

     8.5 Failure to Notify .................................................  17

     8.6 Remedies ..........................................................  17

ARTICLE IX EQUITY BASED COMPENSATION .......................................  17

     9.1 In General ........................................................  17

     9.2 Notices, Withholding, Reporting ...................................  17

     9.3 Adjustments .......................................................  18

ARTICLE X MISCELLANEOUS ....................................................  18

     10.1 Entire Agreement .................................................  18

     10.2 Governing Law ....................................................  18

     10.3 Termination ......................................................  18

     10.4 Trustee Relationship .............................................  18

     10.5 Interest on Late Payments ........................................  18

     10.6 Prior Tax Sharing Agreements .....................................  18

     10.7 Notices ..........................................................  18

     10.8 Counterparts .....................................................  19

     10.9 Binding Effect; Assignment .......................................  19

     10.10 Severability ....................................................  19

     10.11 Failure or Indulgence Not Waiver; Remedies Cumulative ...........  19

     10.12 Amendment .......................................................  19

     10.13 Authority .......................................................  19

     10.14 Interpretation ..................................................  19

     10.15 Right of Set-Off ................................................  19

     10.16 Changes in Law ..................................................  20

     10.17 Effectiveness ...................................................  20
</TABLE>

                                       ii
<PAGE>

     THIS TAX MATTERS AGREEMENT (this "AGREEMENT"), dated as of _______, 2001,
is entered into by and between UtiliCorp United Inc., a Delaware corporation
("UTILICORP"), and Aquila, Inc., a Delaware corporation ("AQUILA").

                                    RECITALS

     WHEREAS, UtiliCorp and Aquila have entered into the Master Separation
Agreement, pursuant to which UtiliCorp and Aquila have agreed to take certain
actions to effect the Separation; and

     WHEREAS, in furtherance of the transactions contemplated by the Master
Separation Agreement, and in contemplation of a Deconsolidation Event, the
parties hereto have determined to enter into this Agreement, setting forth their
agreement with respect to certain tax matters;

     NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

     Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Master Separation Agreement. In this Agreement, the
following capitalized terms shall have the following meanings:

     "AQUILA AFFILIATED GROUP" means Aquila and any entity that would be in the
Aquila Consolidated Group if Aquila were the parent entity in a Consolidated
Group, and shall exclude any other entity in the UtiliCorp Affiliated Group.

     "AQUILA INDEMNITEES" means Aquila, each member of the Aquila Group, each of
their respective directors, officers, employees and agents and each of Aquila's
shareholders.

     "AUDIT" means any audit, assessment of Taxes, or other examination by any
Tax Authority, or any proceeding or appeal of a proceeding relating to Taxes,
whether administrative or judicial, including proceedings relating to competent
authority determinations.

     "CODE" means the Internal Revenue Code of 1986, as amended.

     "CONSOLIDATED GROUP" means a group of entities that files a Consolidated
Return.

     "CONSOLIDATED RETURN" means any Tax Return with respect to Federal Income
Taxes filed on a consolidated basis, including a tax return in which Aquila or
any member of the Aquila Affiliated Group joins in the filing of such Tax Return
(for any taxable period) with UtiliCorp or one or more members of the UtiliCorp
Affiliated Group.

     "CONTROL" means the direct or indirect ownership of stock (or corresponding
units of ownership interest) representing 50% or more of the total combined
voting power of all classes of stock (or such units) entitled to vote or at
least 50% of the total value of shares of all classes of stock (or such units)
then outstanding.

                                       1
<PAGE>

     "DECONSOLIDATION EVENT" means any event whereby the Aquila Affiliated Group
ceases to be included in the UtiliCorp Consolidated Group.

     "EQUITY-BASED COMPENSATION" means stock that is substantially nonvested as
defined in Section 1.83-3(b) of the Treasury Regulations, an option to acquire
common stock, or other equity-based incentive that may produce income to an
employee and a corresponding deduction to his or her employer after the date of
this Agreement. Such term shall include restricted stock, non-qualified stock
options, discounted non-qualified stock options, cliff options to the extent
stock is issued or issuable (as opposed to cash compensation), and tandem stock
options to the extent stock is issued or issuable (as opposed to cash
compensation).

     "ESTIMATED TAX SHARING PAYMENTS" means the payments described in Section
4.2(a) of this Agreement.

     "FEDERAL INCOME TAX" means any Tax imposed under Subtitle A of the Code
(including the Taxes imposed by Sections 11, 55, and 1201(a) of the Code), and
any interest, additions to Tax or penalties applicable or related thereto, and
any other income-based United States federal Tax which is hereinafter imposed
upon corporations.

     "FILING PARTY" means the party that is required to file or cause to be
filed a return under Section 2.1 of this Agreement.

     "FINAL DETERMINATION" means with respect to any issue (a) a decision,
judgment, decree or other order by any court of competent jurisdiction, which
decision, judgment, decree or other order has become final and not subject to
further appeal, (b) a closing agreement (whether or not entered into under
Section 7121 of the Code) or any other binding settlement agreement (whether or
not with the Service) entered into in connection with or in contemplation of an
administrative or judicial proceeding, or (c) the completion of the highest
level of administrative proceedings if a judicial contest is not or is no longer
available.

     "INCOME TAXES" means (a) any tax based upon, measured by, or calculated
with respect to (i) net income or profits (including any capital gains tax,
minimum tax and any tax on items of tax preference, including the Michigan
Single Business Tax but not including sales, use, real or personal property,
gross or net receipts, transfer or similar taxes) or (ii) multiple bases if one
or more of the bases upon which such tax may be based, measured by, or
calculated with respect to, is described in clause (i) above, or (b) any U.S.,
state or local franchise tax calculated with respect to income.

     "INDEMNIFIED LIABILITY" means any and all Taxes imposed upon or incurred by
an Indemnitee as a result of the failure of the Spin-Off to qualify under
Section 355 of the Code, including the imposition of any Tax upon any Indemnitee
under Section 355(e) of the Code. The amount of an Indemnified Liability for a
federal or state Tax incurred by an Indemnitee based on or determined with
reference to income shall be computed as set forth in Section 7.2(e) of this
Agreement.

     "INDEMNITEE" means a UtiliCorp Indemnitee or an Aquila Indemnitee, as the
case may be.

     "INDEMNIFYING PARTY" means either UtiliCorp or Aquila, as the case may be,
in its capacity as the party from which indemnification may be sought in
accordance with Article VII of this Agreement.

                                     2

<PAGE>

     "INDEMNITY AMOUNT" means the sum of (a) the amount of any Indemnified
Liability, as determined under Section 7.2(e), (b) any penalties and interest
imposed with respect to such Indemnified Liability and (c) an amount such that
when the sum of the amounts set forth in clauses (a), (b) and this clause (c)
are reduced by all Taxes imposed as a result of the receipt of such sum, (taking
into account any related current credits or deductions payable by the Indemnitee
or any member of its Affiliated Group under any law or Governmental Authority)
the reduced amount is equal to the sum of the amounts set forth in clauses (a)
and (b).

     "INITIAL PRIVATE LETTER RULING" means the first private letter ruling
issued by the Service to UtiliCorp in connection with the Spin-Off.

     "MASTER SEPARATION AGREEMENT" means the Master Separation Agreement, dated
_______, 2001, between UtiliCorp and Aquila.

     "NON-FILING PARTY" means UtiliCorp, if Aquila is the Filing Party, and
Aquila, if UtiliCorp is the Filing Party.

     "POST-DECONSOLIDATION PERIOD" means any taxable period or portion thereof
beginning after the date on which a Deconsolidation Event becomes effective.

     "PRE-DECONSOLIDATION PERIOD" means any taxable period or portion thereof
beginning on or prior to the date on which a Deconsolidation Event becomes
effective.

     "PROHIBITED ACT" means, collectively, the actions and transactions
described in section 7.2(c) (i) - (v).

     "RESTRICTED PERIOD" means the period beginning two years before the
Distribution Date and ending two years after the Distribution Date.

     "RESTRUCTURING" means the transactions undertaken or to be undertaken by or
at the direction of UtiliCorp and Aquila in connection with or in preparation
for the Separation, the IPO or the Distribution, including the Alignment
Transactions.

     "RESTRUCTURING TAXES" means any Taxes imposed upon any member of the
UtiliCorp Group or the Aquila Group as a result of the Restructuring.

     "RULING DOCUMENTS" means (a) the request for a ruling under Section 355 and
various other Sections of the Code, filed with the Service in connection with
the Spin-Off, together with any supplemental filings or ruling requests or other
materials subsequently submitted on behalf of UtiliCorp, any member of the
UtiliCorp Group or any UtiliCorp stockholder to the Service, the appendices and
exhibits thereto, and any rulings issued by the Service in connection with the
Spin-Off or (b) any similar filings submitted to, or rulings issued by, any
other Tax Authority in connection with the Spin-Off.

     "SEPARATE TAX" means any Tax incurred by an entity that is not a Federal
Income Tax arising from the filing of a Consolidated Return.

     "SEPARATE RETURN" means any Tax Return filed by any entity that is not part
of a Consolidated Return.

                                       3
<PAGE>

     "SERVICE" means the Internal Revenue Service.

     "SPIN-OFF" means the separation of the Aquila Group from the UtiliCorp
Group by means of the Distribution.

     "TAX" means any charges, fees, levies, imposts, duties, or other
assessments of a similar nature, including income, alternative or add-on
minimum, gross receipts, profits, lease, service, service use, wage, wage
withholding, employment, workers compensation, business occupation, occupation,
premiums, environmental, estimated, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall profits,
withholding, social security, unemployment, disability, ad valorem, estimated,
highway use, commercial rent, capital stock, paid up capital, recording,
registration, property, real property gains, value added, business license,
custom duties, or other tax or governmental fee of any kind whatsoever, imposed
or required to be withheld by any Tax Authority, including any interest,
additions to tax, or penalties applicable or related thereto.

     "TAX AUTHORITY" means any Governmental Authority or any subdivision,
agency, commission or authority thereof or any quasi-governmental or private
body having jurisdiction over the assessment, determination, collection or
imposition of any Tax (including the Service).

     "TAX BENEFIT" means a reduction in the Tax liability of a taxpayer (or of
the Consolidated Group of which it is a member) for any taxable period. Except
as otherwise provided in this Agreement, a Tax Benefit shall be deemed to have
been realized or received from a Tax Item in a taxable period only if, and to
the extent that, the Tax liability of the taxpayer (or of the Consolidated Group
of which it is a member) for such period, after taking into account the effect
of the Tax Item on the Tax liability of such taxpayer in the current period and
all prior periods, is less than it would have been if such Tax liability were
determined without regard to such Tax Item.

     "TAX DETRIMENT" means an increase in the Tax liability of a taxpayer (or of
the Consolidated Group of which it is a member) for any taxable period. Except
as otherwise provided in this Agreement, a Tax Detriment shall be deemed to have
been realized or received from a Tax Item in a taxable period only if, and to
the extent that, the Tax liability of the taxpayer (or of the Consolidated Group
of which it is a member) for such period, after taking into account the effect
of the Tax Item on the Tax liability of such taxpayer in the current period and
all prior periods, is more than it would have been if such Tax liability were
determined without regard to such Tax Item.

     "TAX ITEM" means any item of income, gain, loss, deduction, credit, or
other attribute that may have the effect of increasing or decreasing any Tax.

     "TAX LAW" means any federal, state, local or foreign law with respect to
Taxes, including the Code and Treasury Regulations.

     "TAX RETURN" means any return, report, certificate, form or similar
statement or document (including, any related or supporting information or
schedule attached thereto and any information return, amended Tax return, claim
for refund or declaration of estimated Tax) required to be supplied to, or filed
with, a Tax Authority in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.

                                       4
<PAGE>

     "TREASURY REGULATIONS" means the final, temporary and proposed regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).

     "UTILICORP AFFILIATED GROUP" means UtiliCorp and any entity in the
UtiliCorp Consolidated Group other than those entities included in the Aquila
Affiliated Group.

     "UTILICORP INDEMNITEES" means UtiliCorp, each member of the UtiliCorp
Group, each of their respective directors, officers, employees, and agents, and
each of UtiliCorp's stockholders.

                                   ARTICLE II

                      PREPARATION AND FILING OF TAX RETURNS

     2.1  IN GENERAL

          (a)  PRE-DECONSOLIDATION PERIOD. For any Pre-Deconsolidation Period,
     (i) UtiliCorp shall timely file or cause to be filed all Tax Returns that
     are filed on a consolidated, combined or unitary basis and that include any
     member of the Aquila Group, (ii) UtiliCorp shall timely file or cause to be
     filed all other Tax Returns required to be filed by a member of the
     UtiliCorp Group and (iii) Aquila shall timely file or cause to be filed all
     other Tax Returns required to be filed by a member of the Aquila Group.

          (b)  POST-DECONSOLIDATION PERIOD. UtiliCorp shall timely file or cause
     to be filed any Tax Return required to be filed by any member of the
     UtiliCorp Group for any Post-Deconsolidation Period. Aquila shall timely
     file or cause to be filed any Tax Return required to be filed by any member
     of the Aquila Group for any Post-Deconsolidation Period.

     2.2  PAYMENT OF TAXES. The Filing Party with respect to any Tax Return
shall pay (or cause to be paid) to the appropriate Tax Authorities all Taxes,
including estimated payments due with respect to the Tax Return.

     2.3  INFORMATION AND COOPERATION

          (a)  IN GENERAL. UtiliCorp and Aquila shall provide each other all
     documents and information, and make available employees and officers, as
     reasonably requested by the other party, on a mutually convenient basis
     during normal business hours, to aid the other party in preparing any Tax
     Return described in Section 2.1 of this Agreement, to the extent that such
     Tax Return relates to any Pre-Deconsolidation Period or to contest any
     Audit of any such Tax Return.

          (b)  PRE-DECONSOLIDATION. In the case of any Tax Return for a
     Pre-Deconsolidation Period described in Section 2.1 of this Agreement,
     UtiliCorp will provide Aquila with a copy of that portion of each such Tax
     Return to the extent it relates to Aquila or any member of the Aquila
     Group, together with all related tax accounting work papers, not later than
     five days after the receipt of a written request therefor. In addition,
     UtiliCorp will provide to employees of Aquila responsible for preparing its
     Tax Returns with access to any private letter rulings, together with any
     requests therefor and related documents and any other relevant information,
     relating to Aquila or a member of the Aquila Group for any
     Pre-Deconsolidation Periods and will provide Aquila with a copy of such
     rulings or documents to

                                       5
<PAGE>

     the extent that the issues discussed therein are relevant to Aquila or a
     member of the Aquila Group, not later than five days after the receipt of a
     written request therefor.

          (c)  EXCLUSIONS. Notwithstanding any other provision of this
     Agreement, neither UtiliCorp nor any member of the UtiliCorp Group shall be
     required to provide Aquila or any member of the Aquila Group access to or
     copies of any information that relates to UtiliCorp or any member of the
     UtiliCorp Group unless it also relates to Aquila or a member of the Aquila
     Group. In addition, in the event that UtiliCorp determines that the
     provision of any information to Aquila or any member of the Aquila Group
     could be commercially detrimental, violate any law or agreement or waive
     any privilege that may be asserted under applicable law, including any
     privilege arising under or relating to the attorney-client relationship
     (including the attorney-client and work product privileges), the
     accountant-client privilege, and any privilege relating to internal
     evaluation processes, the parties shall take all reasonable measures to
     avoid or minimize any such harm or consequence. In the event that Aquila
     determines that the provision of any information to UtiliCorp or any member
     of the UtiliCorp Group could be commercially detrimental, violate any law
     or agreement or waive any privilege that may be asserted under applicable
     law, including any privilege arising under or relating to the
     attorney-client relationship (including the attorney-client and work
     product privileges), the accountant-client privilege, and any privilege
     relating to internal evaluation processes, the parties shall take all
     reasonable measures to avoid or minimize any such harm or consequence.

     2.4  MANNER OF FILING TAX RETURNS

          (a)  PRE-DECONSOLIDATION. UtiliCorp (for itself and the UtiliCorp
     Group) and Aquila (for itself and the Aquila Group) agree to file all Tax
     Returns for any Pre-Deconsolidation Period, and to take all other actions
     relating to Taxes, in a manner consistent with the position that Aquila and
     the Aquila Affiliated Group are part of the UtiliCorp Consolidated Group
     for all periods through and including the date upon which the
     Deconsolidation Event is effective.

          (b)  FILING PARTY'S RIGHTS. Except as otherwise provided in this
     Section 2.4, the Filing Party shall have the exclusive right to determine
     (i) the manner in which each Tax Return for which it is the Filing Party
     shall be prepared and filed, including the elections, methods of
     accounting, positions, conventions and principles of taxation to be used
     and the manner in which any Tax Item shall be reported, (ii) whether any
     extensions may be requested, (iii) the elections that will be made in such
     Tax Return, (iv) whether any amended Tax Returns shall be filed, (v)
     whether any claims for refund shall be made, (vi) whether any refunds shall
     be paid by way of refund or credited against any liability for the related
     Tax, and (vii) whether to retain outside specialists to prepare such Tax
     Return, whom to retain for such purpose and the scope of any such retainer.

          (c)  PREPARATION OF TAX RETURN. Except as otherwise provided herein,
     any Tax Return described in Section 2.1(a) of this Agreement (but only with
     respect to Tax Items of Aquila or a member of the Aquila Group), which Tax
     Return is filed after the date of this Agreement, shall be prepared on a
     basis consistent with the elections, methods of accounting, positions,
     conventions and principles of taxation and the manner in which any Tax Item
     or other information is reported as reflected on the most recently filed
     prior Tax Returns involving similar matters. The preceding sentence shall
     not apply if the Filing Party obtains

                                       6
<PAGE>

     the prior written consent (which consent shall not be unreasonably
     withheld) of the Non-Filing Party.

     2.5  AGENT. Aquila hereby irrevocably designates, and agrees to cause each
member of the Aquila Affiliated Group to so designate, UtiliCorp as its sole and
exclusive agent and attorney-in-fact to take such action (including execution of
documents) as UtiliCorp, in its sole discretion, may deem appropriate in any and
all matters (including Audits) relating to any Tax Return (including any
Consolidated Return) described in Section 2.1(a)(i) of this Agreement; provided,
however, that UtiliCorp shall not exercise its rights as agent and
attorney-in-fact in any manner that is inconsistent with the rights granted to
Aquila under this Agreement, and nothing in this Section 2.5 shall limit the
rights granted to Aquila under this Agreement.

                                   ARTICLE III

                          REPRESENTATIONS AND COVENANTS

     3.1  AQUILA REPRESENTATIONS AND COVENANTS. Aquila, for itself and each
member of the Aquila Group, hereby represents, warrants and covenants that:

          (a)  Aquila will review the information and representations made in
     the Ruling Documents to be submitted to the Service and will notify
     UtiliCorp whether, to its knowledge, all of such information or
     representations that relate to Aquila or any member of the Aquila Group, or
     the Aquila Business, are true, correct and complete.

          (b)  Aquila will not, and will cause each member of the Aquila Group
     not to, take any action, or fail or omit to take any action, that would
     cause any of the information or representations made in the Ruling
     Documents to be untrue, regardless of whether such information or
     representations were included in the Initial Private Letter Ruling (or any
     supplemental ruling).

     3.2  UTILICORP REPRESENTATIONS AND COVENANTS. UtiliCorp, for itself and
each member of the UtiliCorp Group, hereby represents, warrants and covenants
that:

          (a)  UtiliCorp will review the information and representations made in
     the Ruling Documents to be submitted to the Service and will notify Aquila
     whether, to its knowledge, all of such information or representations that
     relate to UtiliCorp or any member of the UtiliCorp Group, or the UtiliCorp
     Business, are true, correct and complete.

          (b)  UtiliCorp will not, and will cause each member of the UtiliCorp
     Group not to, take any action, or fail or omit to take any action, that
     would cause any of the information or representations made in the Ruling
     Documents to be untrue, regardless of whether such information or
     representations were included in the Initial Private Letter Ruling (or any
     supplemental ruling).

                                   ARTICLE IV

                     FEDERAL INCOME TAX SHARING AND PAYMENTS

     4.1  CALCULATION OF TAX SHARING PAYMENTS. For each taxable year for which
UtiliCorp files a Consolidated Return that includes Aquila and any member of the
Aquila Affiliated Group,

                                       7
<PAGE>

Aquila shall prepare a pro forma consolidated federal income tax return for the
Aquila Affiliated Group (the "AQUILA PRO FORMA RETURN") taking into account
elections, methods of accounting, and positions with respect to specific items
that are consistent with those made or used by UtiliCorp for purposes of its
Consolidated Return. The Aquila Pro Forma Return shall reflect any carryovers of
net operating losses, net capital losses, excess tax credits or other tax
attributes from prior years which could have been utilized by the Aquila
Affiliated Group if the Aquila Affiliated Group had never been included in
UtiliCorp's Consolidated Return. The Aquila Pro Forma Return shall not, however,
reflect carryovers of any attributes from the UtiliCorp Affiliated Group. Any
provision of the Code that requires consolidated computations, such as Section
861 and 1231, shall be applied separately to the Aquila Affiliated Group for
purposes of preparing the Aquila Pro Forma Return. Section 1.1502-13 of the
Treasury Regulations shall be applied as if the Aquila Affiliated Group and the
UtiliCorp Affiliated Group were separate affiliated groups, except that the
Aquila Pro Forma Return shall include all gains or losses recognized by the
Aquila Affiliated Group on transactions between members of the Aquila Affiliated
Group which are accelerated pursuant to Section 1.1502-13(d) of the Treasury
Regulations and actually reflected on the Consolidated Return filed by UtiliCorp
for the tax year as a result of the Aquila Affiliated Group ceasing to be
included in the UtiliCorp Consolidated Group.

     4.2  FEDERAL INCOME TAX SHARING PAYMENTS BETWEEN THE PARTIES

          (a)  ESTIMATED TAX SHARING PAYMENTS. For each taxable year for which
     UtiliCorp files a Consolidated Return that includes Aquila and any member
     of the Aquila Affiliated Group, Aquila shall make periodic payments
     ("ESTIMATED TAX SHARING PAYMENTS") to UtiliCorp in such amounts as, and no
     later than the dates on which, payments of estimated tax would be due from
     the Aquila Affiliated Group under Section 6655 of the Code if it were not
     included in the UtiliCorp Consolidated Group.

          (b)  TAX SHARING PAYMENTS. Aquila shall pay to UtiliCorp no later than
     60 days after the date on which a UtiliCorp Consolidated Return for any
     taxable year is filed, an amount equal to the sum of (i) the Federal Income
     Tax liability shown on the Aquila Pro Forma Return prepared for that
     taxable year and (ii) consistent with the additions to tax asserted with
     respect to the UtiliCorp Consolidated Return, the additions to tax, if any
     under Section 6655 of the Code that would have been imposed upon Aquila
     (treating the amount due to UtiliCorp under (i) above as Aquila's federal
     income tax liability and treating any Estimated Tax Sharing Payments as
     estimated tax payments with respect to such liability), reduced by the sum
     of the Estimated Tax Sharing Payments. If the Estimated Tax Sharing
     Payments paid to UtiliCorp for any taxable year exceed the amount of the
     liability under the preceding sentence, UtiliCorp shall refund such excess
     to Aquila within 45 days after completion of the Aquila Pro Forma Return.

          (c)  REFUND PAYMENTS. UtiliCorp shall pay to Aquila within 90 days
     after the due date (including extensions) for the UtiliCorp Consolidated
     Return for any year the refund which the Aquila Affiliated Group would have
     received as a result of the carryback of any tax attribute to an Aquila Pro
     Forma Return for any taxable year or years in which the Aquila Affiliated
     Group is included in the UtiliCorp Consolidated Group. The amount of refund
     will be determined as if the Aquila Affiliated Group had never been
     included in the UtiliCorp Consolidated Group and the Aquila Pro Forma
     Returns had been actual returns. All calculations of actual and deemed
     refunds pursuant to this Section shall include interest computed as if
     Aquila had filed a claim for refund or an application for a tentative
     carryback

                                       8
<PAGE>

     adjustment pursuant to Section 6411(a) of the Code on the date on which the
     consolidated federal income tax return of the UtiliCorp Consolidated Group
     is due, without regard to extensions.

          (d)  PAYMENTS WITH RESPECT TO AUDITS. To the extent that any Audit or
     amendment of a prior year's tax return with respect to a UtiliCorp
     Consolidated Return results in an increase or decrease in taxable income
     relating to the treatment of any Tax Item attributable to the Aquila
     Affiliated Group (including adjustments related to the ongoing
     controversies regarding the depreciable life of selected gas gathering
     assets for tax years 1990 through 1995), an adjustment shall be made to
     such Tax Item and to Aquila's tax liability reflected on the Aquila Pro
     Forma Return for any effected tax year. Within 10 days after any such
     adjustment is finally determined, as the case may be:

               (i)  Aquila shall make additional tax sharing payments in the
          amount of Aquila's additional tax liability reflected on the adjusted
          Aquila Pro Forma Tax Returns, including any interest or penalties
          consistent with the interest and penalties asserted with respect to
          the Audit, to UtiliCorp, except to the extent that Aquila has advanced
          to UtiliCorp the amount of such Tax related to the adjustment under
          Section 8.4(a)(iv) of this Agreement or has otherwise paid UtiliCorp
          any part of such Tax; or

               (ii) UtiliCorp shall refund to Aquila any amounts received by
          UtiliCorp in connection with such Audit to the extent that such refund
          constitutes a refund of Taxes previously paid by Aquila to UtiliCorp
          or advanced to UtiliCorp by Aquila under Section 8.4(a)(iv) or
          interest thereon.

                                    ARTICLE V

                        SEPARATE TAX SHARING AND PAYMENT

     5.1  ALLOCATION OF SEPARATE TAXES. The principles expressed in Article IV
of this Agreement shall apply in the same general manner with respect to the
allocation and payment of any Separate Tax where unitary, combined, consolidated
or similar returns that include Aquila or any member of the Aquila Group are
filed. When principles expressed in Article IV cannot be applied to an
allocation of any such Separate Tax, UtiliCorp is authorized to apply, in good
faith, such principles as would result in an equitable allocation of the
Separate Tax at issue.

     5.2  REIMBURSEMENT FOR SEPARATE TAXES. Aquila will, as soon as practicable,
reimburse UtiliCorp for any payments made by any member of the UtiliCorp Group
to any Tax Authority in respect of Separate Taxes for which Aquila is
responsible under Section 5.1 above and for which Aquila has not previously made
a tax sharing payment to UtiliCorp under Section 5.1 above.

                                   ARTICLE VI

                         ALLOCATION OF CERTAIN TAX ITEMS

     6.1  LIABILITY FOR RESTRUCTURING AND DECONSOLIDATION TAXES

          (a)  RESTRUCTURING TAXES. Aquila shall be responsible for, and shall
     indemnify and hold harmless UtiliCorp against, any and all Restructuring
     Taxes. Notwithstanding this

                                       9
<PAGE>

     Section 6.1(a), however, UtiliCorp and Aquila shall each bear
     responsibility for half of any Tax resulting from the Restructuring
     transactions undertaken in respect of ACC.

          (b)  DECONSOLIDATION. Except as otherwise provided in this Agreement,
     Aquila shall be responsible for, and shall indemnify and hold harmless
     UtiliCorp against, any and all Taxes arising from any Deconsolidation
     Event. Notwithstanding this Section 6.1(b), however, Aquila shall not be
     responsible for any Tax for which UtiliCorp or any member of the UtiliCorp
     Affiliated Group would otherwise be responsible that arises from or is
     related to an excess loss account as defined in Section 1.1502-19 of the
     Treasury Regulations or an intercompany transaction between a member of the
     UtiliCorp Affiliated Group and a member of the Aquila Affiliated Group as
     defined in Section 1.1502-13 of the Treasury Regulations. UtiliCorp shall
     not be responsible in any event for any Tax that arises from or is related
     to an excess loss account that results from a transaction only between
     members of the Aquila Affiliated Group or an intercompany transaction only
     between members of the Aquila Affliated Group or that results in a taxable
     gain to a member of the Aquila Affiliated Group.

     6.2  CARRYOVERS AND CARRYBACKS

          (a)  CARRYOVERS. UtiliCorp shall notify Aquila after the
     Deconsolidation Event of any consolidated carryover item that may be
     partially or totally attributed to and carried over by a member of the
     Aquila Affiliated Group and will notify Aquila of subsequent adjustments
     that may affect such carryover item.

          (b)  CARRYBACKS. Promptly following the Deconsolidation Event, Aquila
     shall make an election under Section 172(b)(3) of the Code (and any
     corresponding provision of any state or local Tax Law) to relinquish any
     right to carry back net operating losses generated by any member of the
     Aquila Affiliated Group in any Post-Deconsolidation Period to any
     Pre-Deconsolidation Period.

     6.3  REFUNDS. Except as provided in Section 4.2 of this Agreement,
UtiliCorp shall be entitled to any refund of Taxes under any of its Consolidated
Returns, irrespective of when or by whom received, and irrespective of whether
attributable to the UtiliCorp Group or the Aquila Group.

     6.4  ALLOCATION OF TAX ITEMS

          (a)  IN GENERAL. All Tax computations (i) in respect of the Tax period
     of the UtiliCorp Consolidated Group which includes the date the
     Deconsolidation Event is effective and (ii) in respect of the immediately
     following Tax period of Aquila or any member of the Aquila Affiliated
     Group, shall be made pursuant to the principles of Section 1.1502-76(b) of
     the Treasury Regulations or of a corresponding provision under the Tax Laws
     of other jurisdictions, as determined by UtiliCorp, taking into account all
     reasonable suggestions made by Aquila with respect thereto.

          (b)  CONTINUING COVENANTS. UtiliCorp (for itself and each member of
     the UtiliCorp Affiliated Group) and Aquila (for itself and each member of
     the Aquila Affiliated Group) agree (i) not to take any action reasonably
     expected to result in a Tax Detriment to the other party or the failure to
     occur of, or a reduction in, a Tax Benefit of the other party, and (ii) to
     take any action reasonably requested by the other party that would
     reasonably be expected to result in a Tax Benefit or avoid or reduce a Tax
     Detriment to the other party,

                                       10
<PAGE>

     provided that such action does not result in any additional cost not fully
     compensated for by the requesting party. The parties hereby acknowledge
     that the preceding sentence is not intended to limit, and therefore shall
     not apply to, the rights of the parties with respect to matters otherwise
     covered by this Agreement.

          (c)  ADJUSTMENT OF TAX RESERVES. The deferred tax assets and
     liabilities of the members of the UtiliCorp Group and the Aquila Group
     shall be adjusted to reflect the Separation, if necessary, in accordance
     with generally accepted accounting principles. UtiliCorp shall, in good
     faith, determine the amount of any adjustments to any other tax reserves to
     reflect the allocation of liability for Taxes under this Agreement as it
     deems appropriate and in accordance with generally accepted accounting
     principles.

                                   ARTICLE VII

                           INDEMNIFICATION PROVISIONS

     7.1  GENERAL INDEMNIFICATION

          (a)  IN GENERAL. Aquila agrees (for itself and each member of the
     Aquila Group) to indemnify and hold harmless the UtiliCorp Indemnitees from
     and against any and all Taxes for which Aquila or any member of the Aquila
     Group is liable under this Agreement and any loss, cost, damage, fine,
     penalty or expense, including reasonable attorneys' fees and costs,
     attributable to or resulting from any breach by Aquila of this Agreement or
     the failure of Aquila, any such member of the Aquila Group or any of their
     respective directors, officers, or employees to make any payment required
     to be made under this Agreement. UtiliCorp agrees (for itself and each
     member of the UtiliCorp Group) to indemnify and hold harmless the Aquila
     Indemnitees from and against any and all Taxes for which UtiliCorp or any
     member of the UtiliCorp Group is liable under this Agreement and any loss,
     cost, damage or expense, including reasonable attorneys' fees and costs,
     attributable to or resulting from any breach by UtiliCorp of this Agreement
     or the failure of UtiliCorp, any such member of the UtiliCorp Group, or any
     of their respective directors, officers, or employees to make any payment
     required to be made under this Agreement.

          (b)  INACCURATE OR INCOMPLETE INFORMATION. Aquila agrees (for itself
     and each member of the Aquila Group) to indemnify and hold harmless the
     UtiliCorp Indemnitees from and against any loss, cost, damage, fine,
     penalty or expense, including reasonable attorneys' fees and costs,
     attributable to or resulting from the negligence of Aquila or any member of
     the Aquila Group in supplying UtiliCorp or any member of the UtiliCorp
     Group with inaccurate or incomplete information in connection with the
     preparation of any Tax Return. UtiliCorp agrees (for itself and each member
     of the UtiliCorp Group) to hold harmless the Aquila Indemnitees from and
     against any loss, cost, damage, fine, penalty or expense, including
     reasonable attorneys' fees and costs, attributable to or resulting from the
     negligence of UtiliCorp or any member of the UtiliCorp Group in supplying
     Aquila or any member of the Aquila Group with inaccurate or incomplete
     information in connection with the preparation of any Tax Return.

                                       11
<PAGE>

     7.2  SPIN-OFF INDEMNIFICATION

          (a)  IN GENERAL. Notwithstanding anything herein to the contrary, the
     provisions of this Section 7.2 shall govern all matters among the parties
     hereto related to an Indemnified Liability and an Indemnity Amount.

          (b)  CONTINUED CONDUCT OF BUSINESS. During the Restricted Period, each
     of UtiliCorp and Aquila agrees that it will not cease the active conduct of
     a trade or business within the meaning of Section 355(b) of the Code nor
     cause or permit to be caused a change in its Control (other than the
     Distribution).

          (c)  RULING REQUIREMENT. During the Restricted Period, UtiliCorp and
     Aquila will not enter into any transaction which, by itself or together
     with any other transaction or series of transactions, may cause the
     Distribution to be treated as part of a plan within the meaning of Code
     Section 355(e) pursuant to which one or more Persons acquire, directly or
     indirectly, Control of UtiliCorp or Aquila, as the case may be, including
     but not limited to:

               (i)  A merger or consolidation with or into any other Person;

               (ii) A liquidation or partial liquidation (within the meaning of
          such terms as defined in Section 346 and Section 302, respectively, of
          the Code);

               (iii) A sale or transfer of all or substantially all its assets
          (within the meaning of Rev. Proc. 77-37, 1977 - 2 C.B. 568) in a
          single transaction or series of related transactions;

               (iv) A redemption or other repurchase of any of its capital
          stock; or

               (v)  A change in its equity structure (including by issuing stock
          (pursuant to the exercise of stock options, the consummation of any
          acquisition, or otherwise), granting options, adopting (or authorizing
          the issuance of shares or stock under) a stock option plan or making
          capital contributions) other than pursuant to the Distribution.

     Notwithstanding, the previous sentence, each of UtiliCorp and Aquila may
     enter into any transaction if it first obtains, and permits the other party
     to review, a supplemental ruling from the Service that such transaction,
     and any transaction or series of transactions related thereto, will not
     affect the qualification of the Spin-Off under Section 355 of the Code.

          (d)  INDEMNIFICATION. If the Indemnifying Party breaches any
     representation or covenant set forth in Article III of this Agreement or
     takes any action or enters into any agreement to take any action,
     including, without limitation, any breach of Sections 7.2(b) and (c), and
     the Spin-Off shall fail to qualify under Section 355 of the Code or the
     Spin-Off becomes taxable to UtiliCorp as a result of such breach, action or
     actions, then the Indemnifying Party shall indemnify and hold harmless the
     applicable Indemnitee against any Indemnified Liability. With respect to
     any Indemnified Liability, the amount that the Indemnifying Party shall pay
     to Indemnitee as indemnification under this Section 7.2 shall be the
     Indemnity Amount.

                                       12
<PAGE>

          (e)  AMOUNT OF INDEMNIFIED LIABILITY FOR INCOME TAXES. The amount of
     an Indemnified Liability for a federal or state Tax incurred by an
     Indemnitee based on or determined with reference to income shall be deemed
     to be the amount of Tax computed by multiplying (i) the taxing
     jurisdiction's highest effective Tax rate applicable to Indemnitee for the
     taxable period in which the Spin-Off occurs, times (ii) the gain or income
     of Indemnitee which is subject to Tax in the taxing jurisdiction as a
     result of the failure of the Spin-Off to qualify under Section 355 of the
     Code or as a result of the Spin-Off becoming taxable to UtiliCorp, and
     (iii) in the case of a state, times the percentage representing the extent
     to which such gain or income is apportioned or allocated to such state;
     provided, however, that in the case of a state Tax determined as a
     percentage of Federal Income Tax liability, the amount of Indemnified
     Liability shall be deemed to be the amount of Tax computed by multiplying
     (x) that state's highest effective rate applicable to Indemnitee for the
     taxable period in which the Spin-Off occurs, times (y) the amount of deemed
     Federal Income Tax (whether or not incurred) imposed upon Indemnitee from
     failure of the Spin-Off to qualify under Section 355 of the Code or as a
     result of the Spin-Off becoming taxable to UtiliCorp computed in accordance
     with this Section 7.2, times (z) the percentage representing the extent to
     which the gain or income required to be recognized on the Spin-Off is
     apportioned or allocated to such state.

     7.3  INJUNCTIVE RELIEF. Each of UtiliCorp and Aquila recognizes that any
failure by it to comply with its obligations under this Agreement may result in
additional Taxes which could cause irreparable harm to the Aquila Indemnitees or
the UtiliCorp Indemnitees, as the case may be, and that such Indemnitees may be
inadequately compensated by monetary damages for such failure. Accordingly, if
(a) either party shall fail (or threaten to fail) to comply with any obligation
under this Agreement, and that failure (or threatened failure) would be
reasonably foreseeable to result in any additional or increased Taxes, and (b)
such party shall fail (i) to provide the other party with a written opinion of a
tax attorney or tax accountant that is a member of a nationally recognized law
firm or accounting firm that the failure to comply with such obligation will not
result in any such additional or increased Taxes of any UtiliCorp Indemnitee or
Aquila Indemnitee, as the case may be, in form and substance reasonably
acceptable to the other party, or (ii) to provide adequate assurances to (and
reasonably determined by) the other party of its ability to pay the additional
or increased Taxes or the Indemnity Amount, as the case may be, under this
Agreement, then the other party shall be entitled to injunctive relief in
addition to all other remedies.

     7.4  PAYMENTS. Except as otherwise provided under this Agreement, to the
extent that any party has an indemnification obligation pursuant to this
Agreement, the Indemnitee shall provide the Indemnifying Party with its
calculation of the amount of such indemnification payment. Such calculation
shall provide sufficient detail to permit the Indemnifying Party to reasonably
understand the calculations. All indemnification payments shall be made to such
Indemnitee or to the appropriate Tax Authority as specified by the Indemnitee
within the time prescribed for payment in this Agreement, or if no period is
prescribed, within 30 days after delivery by the Indemnitee to the Indemnifying
Party of such calculation, or if such payment relates to any Tax or Tax Item
being contested pursuant to Section 8.3 of this Agreement, within 30 days of the
corresponding Final Determination.

     7.5  PROMPT PERFORMANCE. All actions required to be taken by any party
under this Agreement shall be performed within the period prescribed for
performance in this Agreement, or if no period is prescribed, such actions shall
be performed promptly.

                                       13
<PAGE>

     7.6  INTEREST. Payments pursuant to this Article VII that are not made
within the period prescribed in Section 7.4 shall bear interest from and
including the date immediately following the last date of such period through
and including the date of payment at a per annum rate equal to the prime rate as
published in The Wall Street Journal on the date on which the interest begins to
accrue, plus two percent. Such interest will be payable at the same time as the
payment to which it relates and shall be calculated on the basis of a year of
365 days.

     7.7  TAX RECORDS. The parties to this Agreement hereby agree to retain and
provide on proper demand by any Taxing Authority (subject to any applicable
privileges) the books, records, documentation and other information relating to
any Tax Return until the later of (a) the expiration of the applicable statute
of limitations (giving effect to any extension, waiver or mitigation thereof)
and (b) in the event any claim is made for which such information is relevant,
until a Final Determination with respect to such claim.

     7.8  ADDITIONAL MATTERS. Each party agrees to execute and deliver, or cause
to be executed and delivered, all such further agreements, documents, and
instruments, and to do, or cause to be done, all other acts and things, as the
other party or any of its Indemnitees may reasonably request, either before or
after the Separation Date or the Distribution Date, to more effectively evidence
such party's agreement that the indemnification obligations of the other party
set forth in this Article VII inure to the benefit of such Indemnitees.

     7.9  SURVIVAL OF INDEMNITIES. Subject to Section 10.9, the rights and
obligations of the members of the UtiliCorp Group and the Aquila Group under
this Article VII shall survive any sale or other Transfer by any party of any
assets or businesses, any assignment by it of any Liabilities or any sale by any
member of the UtiliCorp Group or the Aquila Group of the capital stock or other
equity interests of any Subsidiary.

                                  ARTICLE VIII

                            AUDITS AND CONTEST RIGHTS

     8.1  IN GENERAL. Except as otherwise provided in this Agreement, the Filing
Party shall have the right to control, contest, and represent the interests of
the UtiliCorp Group and the Aquila Group in any Audit relating to any Tax Return
that the Filing Party is responsible for filing under Section 2.1 of this
Agreement and to settle or otherwise resolve any deficiency, claim or adjustment
proposed, asserted or assessed in connection with or as a result of any such
Audit. The Filing Party's rights shall extend to any matter pertaining to the
management and control of an Audit, including execution of waivers, choice of
forum, scheduling of conferences and the settlement or resolution of any Tax
Item.

     8.2  NOTICE. If, after the date of this Agreement, UtiliCorp (or any member
of the UtiliCorp Group) or Aquila (or any member of the Aquila Group) receives
written notice of, or relating to, an Audit from a Tax Authority that asserts,
proposes or recommends a deficiency, claim or adjustment that, if sustained,
could result in Taxes for which the other party is responsible under this
Agreement, then the party receiving such notice shall provide a copy of such
notice to the other party within 10 days of receipt thereof.

                                       14
<PAGE>

     8.3  CONTESTS

          (a)  If any Tax Authority asserts, proposes or recommends a
     deficiency, claim or adjustment that, if sustained, could result in Taxes
     for which the Non-Filing Party is responsible under this Agreement, then
     upon request by the Non-Filing Party, the Filing Party shall contest, or
     continue to contest, any such deficiency, claim or adjustment and the
     Filing Party shall keep the Non-Filing Party informed in a timely manner
     reasonably in advance of all actions taken or proposed to be taken by the
     Filing Party in connection with such deficiency, claim or adjustment.

          (b)  In the case of an Audit with respect to any Tax Item:

               (i)  The Filing Party shall, in the case of any material
          correspondence or filing submitted to the Tax Authority or any
          judicial authority that relates to the merits of any deficiency, claim
          or adjustment that, if sustained, would result in Taxes for which the
          Non-Filing Party is responsible under this Agreement, (A) reasonably
          in advance of such submission, but subject to applicable time
          constraints imposed by such Tax Authority or judicial authority,
          provide the Non-Filing Party with a draft copy of the portion of such
          correspondence or filing that relates to such deficiency, claim or
          adjustment, (B) incorporate, subject to applicable time constraints
          imposed by such Tax Authority or judicial authority, the Non-Filing
          Party's reasonable comments and changes on such draft copy of such
          correspondence or filing, and (C) provide the Non-Filing Party with a
          final copy of the portion of such correspondence or filing that
          relates to such deficiency, claim or adjustment;

               (ii) The Filing Party shall provide the Non-Filing Party with
          notice reasonably in advance of, and the Non-Filing Party shall have
          the right to attend, any meetings with the Tax Authority (including
          meetings with examiners) or hearings or proceedings before any
          judicial authority to the extent they relate to such deficiency, claim
          or adjustment; and

               (iii) At the Filing Party's reasonable request (or upon the
          Filing Party's consent to a request by the Non-Filing Party, which
          consent shall not be unreasonably withheld), the Non-Filing Party
          shall assume responsibility for (A) contesting and presenting the
          merits with respect to any such deficiency, claim or adjustment, or
          (B) resolving, settling or agreeing to any such deficiency, claim or
          adjustment. Any such request (or consent) by the Filing Party shall be
          subject to the Non-Filing Party's continued compliance with the
          conditions of Section 8.4 of this Agreement and to such other
          conditions as the Filing Party and Non-Filing Party reasonably agree.

     8.4  LIMITATIONS

          (a)  IN GENERAL. The Filing Party shall have no obligation to contest,
     or to continue to contest, any deficiency, claim or adjustment in
     accordance with Section 8.3, and the Non-Filing Party shall have no right
     to assume responsibility for any Audit under Section 8.3(b)(iii) of this
     Agreement unless:

               (i)  Within 30 days of a reasonable request by the Filing Party,
          the Non-Filing Party shall deliver to the Filing Party a written
          opinion of a tax attorney or tax

                                       15
<PAGE>

          accountant that is a member of a recognized law firm or accounting
          firm, to the effect that the Non-Filing Party's position with
          respect to such deficiency, claim or adjustment is supported by a
          reasonable basis (within the meaning of Treasury Regulations
          Section 1.6662-3(b)(3));

               (ii) The Non-Filing Party shall have agreed to be bound by a
          Final Determination of such deficiency, claim or adjustment;

               (iii) The Non-Filing Party shall have agreed to pay, and shall be
          currently paying, all reasonable out-of-pocket costs and expenses
          incurred by the Filing Party to contest such deficiency, claim or
          assessment, including reasonable outside attorneys', accountants' and
          investigatory fees and disbursements;

               (iv) The Non-Filing Party shall have advanced to the Filing
          Party, on an interest-free basis (and with no additional net after-tax
          cost to the Filing Party), the amount of Tax in controversy and for
          which the Non-Filing Party may be responsible;

               (v)  The Non-Filing Party shall have provided to the Filing Party
          all documents and information, and shall have made available to the
          Filing Party the employees and officers of the Non-Filing Party, as
          may be necessary or useful by the Filing Party (as reasonably
          determined by it) in contesting such deficiency, claim or adjustment;
          and

               (vi) The contest of such deficiency, claim or adjustment shall
          involve no material danger of the sale, forfeiture or loss of, or the
          creation of any lien on, any asset of the Filing Party (unless the
          Non-Filing Party shall have adequately bonded such lien or otherwise
          made provision to protect the interests of the Filing Party in a
          manner reasonably satisfactory to the Filing Party).

          (b)  SETTLEMENT. Notwithstanding Section 8.4(a), the Filing Party may
     settle or otherwise resolve any deficiency, claim or adjustment proposed,
     asserted or assessed in connection with any Tax Return that it is
     responsible for filing under Section 2.1 of this Agreement if the Filing
     Party has provided the Non-Filing Party with a reasonable opportunity to
     review a copy of that portion of the settlement or resolution proposal that
     relates to the deficiency, claim or adjustment for which the Filing Party
     is seeking indemnification hereunder; provided, that if the Non-Filing
     Party in writing reasonably withholds its consent to all or part of such
     portion of such proposal, then, unless the Filing Party was not required to
     continue the applicable contest under the terms of Section 8.4(a), the
     Non-Filing Party shall not be obligated to indemnify the Filing Party
     hereunder for the otherwise indemnifiable amounts to which such settlement
     or other resolution relates, or with respect to any other indemnifiable
     amounts for which a successful contest is foreclosed because of such
     settlement or other resolution. If the Filing Party effects a settlement or
     other resolution of such deficiency, claim or adjustment, notwithstanding
     that the Non-Filing Party has reasonably withheld its consent thereto, the
     Filing Party shall repay to the Non-Filing Party such amounts that the
     Non-Filing Party advanced pursuant to clause (a)(iv) of this Section 8.4 as
     relate to such deficiency, claim or adjustment (together with interest at
     the prime rate as published in The Wall Street Journal on any such amount
     paid by the Non-Filing Party from the date paid by the Non-Filing Party to
     the date repaid by the Filing Party).

                                       16
<PAGE>

          (c)  WAIVER. Notwithstanding any other provision of this Section 8.4,
     the Filing Party may settle or otherwise resolve any deficiency, claim or
     adjustment for any taxable period if the Filing Party waives its right to
     indemnity with respect thereto. In such event, the Filing Party shall
     promptly reimburse the Non-Filing Party for all amounts previously advanced
     by the Non-Filing Party to the Filing Party in connection with such
     deficiency, claim or adjustment under Section 8.4(a)(iv) of this Agreement.
     In addition, the Filing Party shall reimburse the Non-Filing Party for any
     Tax Detriment suffered by the Non-Filing Party or any member of its
     Affiliated Group that directly results from the settlement of such
     deficiency, claim or adjustment. No waiver by the Filing Party under this
     Section 8.4(c) with respect to any deficiency, claim or adjustment relating
     to any single Tax Item, position, issue or transaction or relating to any
     single Tax for any one taxable period shall operate as a waiver with
     respect to any other deficiency, claim or adjustment.

     8.5  FAILURE TO NOTIFY. The failure of the Filing Party to promptly notify
the Non-Filing Party of any matter relating to a particular Tax for a taxable
period or to take any action specified in Section 8.3 of this Agreement shall
not relieve the Non-Filing Party of any liability and/or obligation which it may
have to the Filing Party under this Agreement with respect to such Tax for such
taxable period except to the extent that the Non-Filing Party's rights hereunder
are materially prejudiced by such failure and in no event shall such failure
relieve the Non-Filing Party of any other liability and/or obligation which it
may have to the Filing Party.

     8.6  REMEDIES. Except as otherwise provided in this Agreement, the parties
hereby agree that the sole and exclusive remedy for a breach by the Filing Party
of the Filing Party's obligations to the Non-Filing Party under this Article
VIII shall first be a reduction in the amount that would otherwise be payable by
the Non-Filing Party to the Filing Party for the applicable taxable period, and
then an increase in the amount that would otherwise be payable by the Filing
Party for such taxable period, in either case because of the breach. The parties
further agree that no claim against the Filing Party and no defense to the
Non-Filing Party's liabilities to the Filing Party under this Agreement shall
arise from the settlement or other resolution by the Filing Party of any
deficiency, claim or adjustment relating to the redetermination of any Tax Item
of the Filing Party.

                                   ARTICLE IX

                            EQUITY BASED COMPENSATION

     9.1  IN GENERAL. The parties hereto agree that UtiliCorp shall be entitled
to any Tax Benefit arising with respect to Equity Based Compensation which
consists of or involves the purchase or grant of shares of UtiliCorp stock, and
that Aquila shall be entitled to any Tax Benefit arising with respect to Equity
Based Compensation which consists of or involves the purchase or grant of shares
of Aquila stock. The parties hereto agree to report all Tax deductions with
respect to Equity Based Compensation issued to their employees consistently with
this Section 9.1, to the extent permitted by applicable Tax Law.

     9.2  NOTICES, WITHHOLDING, REPORTING. UtiliCorp shall promptly notify
Aquila of any event, following the Separation Date, giving rise to income to any
Aquila Group employees or former employees with respect to Equity Based
Compensation which consists of or involves the purchase or grant of shares of
UtiliCorp stock. If required by applicable Tax Law, Aquila shall withhold
applicable Taxes and satisfy applicable Tax reporting obligations in connection
therewith.

                                       17
<PAGE>

     9.3  ADJUSTMENTS. If Aquila or any member of the Aquila Affiliated Group
receives any Tax Benefit to which UtiliCorp is entitled under Section 9.1 of
this Agreement, Aquila shall pay the amount of such Tax Benefit to UtiliCorp. If
UtiliCorp or any member of the UtiliCorp Affiliated Group receives any Tax
Benefit to which Aquila is entitled under Section 9.1 of this Agreement,
UtiliCorp shall pay the amount of such Tax Benefit to Aquila.

                                    ARTICLE X

                                  MISCELLANEOUS

     10.1 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof.

     10.2 GOVERNING LAW. This Agreement shall be governed and construed and
enforced in accordance with the laws of the State of Missouri as to all matters,
regardless of the laws that might otherwise govern under the principles of
conflicts of laws applicable thereto.

     10.3 TERMINATION. This Agreement may be terminated at any time prior to the
Separation Date by and in the sole discretion of UtiliCorp without the approval
of Aquila. This Agreement may be terminated at any time after the Separation
Date by mutual consent of UtiliCorp and Aquila. In this regard, Aquila
acknowledges that at any time prior to the Change of Control Date, UtiliCorp
may, by virtue of its controlling ownership interest in Aquila, cause Aquila to
terminate or amend this Agreement at UtiliCorp's direction.

     10.4 TRUSTEE RELATIONSHIP. With respect to any refund of Taxes from any
Taxing Authority received by UtiliCorp or Aquila relating to any Tax Item for
which the recipient would otherwise owe a payment to the other party under
Articles IV or V, the parties hereto intend that their relationship shall be
that of trustee and beneficiary and not debtor and creditor.

     10.5 INTEREST ON LATE PAYMENTS. Except as otherwise provided in Section
7.6, whenever a party fails to make a payment to the other party within the time
prescribed by this Agreement, interest shall accrue and become part of the
payment due. Such interest shall be computed at the rate and in the manner
provided in the Code for interest on underpayments of Federal Income Tax for the
relevant period.

     10.6 PRIOR TAX SHARING AGREEMENTS. The provisions of this Agreement shall
supersede the provisions of any previous conflicting tax sharing agreements,
including the Tax Sharing Agreement between UtiliCorp and Aquila Gas Pipeline
Corporation dated August 27, 1993, as amended.

     10.7 NOTICES. Any notice, demand, offer, request or other communication
required or permitted to be given by either party pursuant to the terms of this
Agreement shall be in writing and shall be deemed effectively given the earlier
of (a) when received, (b) when delivered personally, (c) one Business Day after
being delivered by facsimile (with receipt of appropriate confirmation), (d) one
Business Day after being deposited with a nationally recognized overnight
courier service or (e) four Business Days after being deposited in the U.S.
mail, First Class with postage prepaid, and in each case addressed to the
attention of the other party's General Counsel at the address of its principal
executive office or such other address as a party may request by notifying the
other in writing.

                                       18
<PAGE>

     10.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original but all of which shall constitute one
and the same agreement. This Agreement may be executed by facsimile signatures.

     10.9 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person (other than the Indemnitees
under Article VII above) any rights or remedies of any nature whatsoever under
or by reason of this Agreement. This Agreement may not be assigned by either
party.

     10.10 SEVERABILITY. If any term or other provision of this Agreement is
determined by a nonappealable decision by a court, administrative agency or
arbitrator to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to either party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, this
Agreement shall be deemed to be amended, and each party agrees to execute and
deliver such documents and instruments as are reasonably requested by the other
party to evidence such amendment, so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest extent possible.

     10.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or
delay on the part of either party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or of any other right. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

     10.12 AMENDMENT. Subject to the last sentence of Section 10.3, no change or
amendment will be made to this Agreement except by an instrument in writing
signed on behalf of UtiliCorp and Aquila.

     10.13 AUTHORITY. Each party hereto represents to the other that (a) it has
the corporate or other requisite power and authority to execute, deliver and
perform this Agreement, (b) the execution, delivery and performance of this
Agreement by it have been duly authorized by all necessary corporate or other
actions, (c) it has duly and validly executed and delivered this Agreement, and
(d) this Agreement is a legal, valid and binding obligation, enforceable against
it in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and general equity principles.

     10.14 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When a reference is made in this Agreement to
an Article or a Section, such reference shall be to an Article or Section of
this Agreement unless otherwise indicated.

     10.15 RIGHT OF SET-OFF. UtiliCorp shall have the right at any time and from
time to time to set off and apply any and all deposits or amounts of any member
of the Aquila Group at any time held, and any and all indebtedness at any time
owing, by any member of the UtiliCorp Group to or

                                       19
<PAGE>

for the credit or account of any member of the Aquila Group against any and all
obligations of Aquila now or hereafter arising under this Agreement, whether or
not UtiliCorp shall have made any demand therefor.

     10.16 CHANGES IN LAW. Any reference to a provision of the Code or any other
Tax Law shall include a reference to any applicable successor provision or law.

     10.17 EFFECTIVENESS. This Agreement shall become effective as of the date
hereof.

                   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

                                       20
<PAGE>

     IN WITNESS WHEREOF, the parties have signed this Tax Matters Agreement
effective as of the date first set forth above.

                                   UTILICORP UNITED INC.

                                   ---------------------------------------------
                                   Robert K. Green
                                   President and Chief Operating Officer

                                   AQUILA, INC.

                                   ---------------------------------------------
                                   Keith G. Stamm
                                   Chief Executive Officer

                              SIGNATURE PAGE TO THE
                              TAX MATTERS AGREEMENT

                                       21

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00021-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00021-of-00352.parquet"}]]