The black and green wires are the wires that carry electricity from the points to the coils. The black wire comes off the left set of points as you sit looking at the points with the points cover removed. The green comes off the right hand points assembly. The black wire is the 1&4 wire and the green the 2&3. Power to the coils comes off a yellow/red wire that comes out of the right hand switch gear. Turn the ignition key on and see if there is 12VDC present on the yellow/red. On some KZs, this wire may be red or pink. Go to my website and read the tech article called Coil Repowering under wg's Tech Stuff Index and it will give you a good idea of flow. If you are getting no spark, either the condensors associated with the points are shot or you have no power at the coils.
What I do when I redo an old bike is to remove the points plate (and points/condensors), remove the wiring, remove the coils and remove the spark plug wires. I order a Dyna S electronic ignition, Dyna green 3 Ohm coils and new Dyna plug wires. I also perform the coil repowering modification from my website. I install this stuff and never mess with it again. Dyna products are very inexpensive when you buy them from
www.z1enterprises.com - one of the fine bike parts sellers who supports this site through advertising. Call them and tell them I sent you. If you dump the points and go with new coils/wires, your bike will be maintenance free for years and you will not only save time (no tune up needed) but money as the points/condensers are expensive.