RULE NO. 424(b)(3)
REGISTRATION NO. 333-02711
PROSPECTUS
OFFER TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
OF
KANSAS CITY POWER & LIGHT COMPANY
FOR
$31.00 OF COMMON STOCK
(SUBJECT TO ADJUSTMENT)
OF
WESTERN RESOURCES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON SEPTEMBER 20, 1996
UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE").
SHARES WHICH ARE TENDERED PURSUANT TO THE OFFER MAY
BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION
DATE.
Western Resources, Inc., a Kansas corporation ("Western Resources"), hereby
offers, upon the terms and subject to the conditions set forth herein and in
the related Letter of Transmittal (collectively, the "Offer"), to exchange
shares of common stock, par value $5.00 per share, of Western Resources (the
"Western Resources Common Stock"), for each outstanding share of common stock,
without par value (each a "Share" and collectively, the "Shares"), of Kansas
City Power & Light Company, a Missouri corporation ("KCPL"), validly tendered
on or prior to the Expiration Date and not properly withdrawn. Each Share
validly tendered on or prior to the Expiration Date and not properly withdrawn
will be entitled to receive that number of shares of Western Resources Common
Stock equal to the Exchange Ratio. The term "Exchange Ratio" means the quotient
(rounded to the nearest 1/100,000) determined by dividing $31.00 by the average
of the high and low sales prices of Western Resources Common Stock (as reported
on the New York Stock Exchange (the "NYSE") Composite Transactions reporting
system as published in The Wall Street Journal or, if not published therein, in
another authoritative source) (the "Western Resources Average Price") on each
of the twenty consecutive trading days ending with the third trading day
immediately preceding the Expiration Date; provided, that the Exchange Ratio
shall not be less than 0.933 nor greater than 1.100. Pursuant to the Exchange
Ratio, each Share will be exchanged for $31.00 of Western Resources Common
Stock if the Western Resources Average Price is between $33.23 and $28.18. If
the Western Resources Average Price is greater than $33.23, each Share will be
exchanged for more than $31.00 of Western Resources Common Stock and,
conversely, if the Western Resources Average Price is less than $28.18, each
Share will be exchanged for less than $31.00 of Western Resources Common Stock.
See "Prospectus Summary--Comparison of the Proposals--The Exchange Ratio" and
"Background of the Offer--Comparison of the Proposals--The Exchange Ratio." On
July 2, 1996, the closing price of the Western Resources Common Stock on the
NYSE was $30.625. Based on such closing price, the Exchange Ratio would be
1.01224 and each Share would be exchanged for $31.00 of
(Continued on following page)
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The Dealer Manager for the Offer is:
-----------------------
SALOMON BROTHERS INC
-----------------------------------------------------------------------
The date of this Prospectus is July 3, 1996.
(continued from previous page)
Western Resources Common Stock. The Exchange Ratio will change as the market
price of the Western Resources Common Stock changes. KCPL Shareholders may
call (800) 621-0518 any time on or after the date hereof through the
Expiration Date for the current Exchange Ratio calculated based on the then-
current Western Resources Average Price for the twenty consecutive trading
days ending with the third trading day immediately preceding the date the call
is placed. The actual Western Resources Average Price and Exchange Ratio will
be calculated as of the third trading day immediately prior to the Expiration
Date, as described above, and a press release will be issued announcing the
actual Exchange Ratio prior to the opening of the second trading day prior to
the Expiration Date (as it may be extended from time to time).
WESTERN RESOURCES' OBLIGATION TO EXCHANGE SHARES OF WESTERN RESOURCES COMMON
STOCK FOR SHARES PURSUANT TO THE OFFER IS CONDITIONED UPON, AMONG OTHER
THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE
EXPIRATION DATE A NUMBER OF SHARES WHICH WILL CONSTITUTE AT LEAST NINETY
PERCENT OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS (AS
THOUGH ALL OPTIONS OR OTHER SECURITIES CONVERTIBLE INTO OR EXERCISABLE OR
EXCHANGEABLE FOR SHARES HAD BEEN SO CONVERTED, EXERCISED OR EXCHANGED) AS OF
THE DATE THE SHARES ARE ACCEPTED FOR EXCHANGE BY WESTERN RESOURCES PURSUANT TO
THE OFFER (THE "MINIMUM TENDER CONDITION"), (II) APPROVAL OF THE ISSUANCE OF
SHARES OF WESTERN RESOURCES COMMON STOCK PURSUANT TO THE OFFER AND THE MERGER
AND APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF
INCORPORATION OF WESTERN RESOURCES (THE "WESTERN RESOURCES ARTICLES") TO
INCREASE THE NUMBER OF SHARES OF WESTERN RESOURCES COMMON STOCK AUTHORIZED FOR
ISSUANCE, BY THE HOLDERS, VOTING AS A SINGLE CLASS, OF A MAJORITY OF THE
SHARES OF WESTERN RESOURCES COMMON STOCK AND WESTERN RESOURCES PREFERRED STOCK
OUTSTANDING ON THE APPLICABLE RECORD DATE AND APPROVAL OF THE MERGER BY THE
HOLDERS, VOTING AS A SINGLE CLASS, OF A MAJORITY OF THE WESTERN RESOURCES
PREFERRED STOCK (THE "WESTERN RESOURCES SHAREHOLDER APPROVAL CONDITION"),
(III) WESTERN RESOURCES BEING SATISFIED, IN ITS REASONABLE DISCRETION, THAT
THE PROVISIONS OF SECTION 351.407 OF THE GENERAL AND BUSINESS CORPORATION LAW
OF MISSOURI (THE "MGBCL") ARE INAPPLICABLE TO WESTERN RESOURCES AND THE
TRANSACTIONS CONTEMPLATED HEREIN OR FULL VOTING RIGHTS FOR ALL SHARES TO BE
ACQUIRED BY WESTERN RESOURCES PURSUANT TO THE OFFER HAVING BEEN APPROVED BY
THE SHAREHOLDERS OF KCPL PURSUANT TO SUCH STATUTE (THE "MISSOURI CONTROL SHARE
ACQUISITION CONDITION"), (IV) WESTERN RESOURCES BEING SATISFIED, IN ITS
REASONABLE DISCRETION, THAT THE PROVISIONS OF SECTION 351.459 OF THE MGBCL
WILL NOT PROHIBIT FOR ANY PERIOD OF TIME THE CONSUMMATION OF THE MERGER OR ANY
OTHER "BUSINESS COMBINATION" (AS DEFINED IN SUCH STATUTE) INVOLVING KCPL AND
WESTERN RESOURCES OR ANY SUBSIDIARY OF WESTERN RESOURCES (THE "MISSOURI
BUSINESS COMBINATION CONDITION"), (V) THE SHAREHOLDERS OF KCPL NOT HAVING
APPROVED THE ISSUANCE OF SHARES NECESSARY TO EFFECT THE TRANSACTIONS
CONTEMPLATED BY THE AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER BY AND
AMONG KCPL, KC MERGER SUB, INC., UTILICORP UNITED INC., A DELAWARE CORPORATION
("UTILICORP"), AND KC UNITED CORP. (THE "KCPL SHAREHOLDER VOTE CONDITION"),
(VI) ALL REGULATORY APPROVALS REQUIRED TO CONSUMMATE THE OFFER AND THE MERGER
HAVING BEEN OBTAINED AND REMAINING IN FULL FORCE AND EFFECT, ALL STATUTORY
WAITING PERIODS IN RESPECT THEREOF HAVING EXPIRED AND NO SUCH APPROVAL
CONTAINING ANY CONDITIONS OR RESTRICTIONS WHICH THE WESTERN RESOURCES BOARD OF
DIRECTORS (THE "WESTERN RESOURCES BOARD") REASONABLY DETERMINES IN GOOD FAITH
WILL HAVE OR REASONABLY COULD BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON
WESTERN RESOURCES, KCPL AND THEIR RESPECTIVE SUBSIDIARIES TAKEN AS A WHOLE
(THE "REGULATORY APPROVAL CONDITION"), (VII) THE RECEIPT BY WESTERN RESOURCES
OF A LETTER FROM ITS INDEPENDENT PUBLIC ACCOUNTANTS STATING THAT THE MERGER
WILL QUALIFY AS A POOLING OF INTERESTS TRANSACTION UNDER GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES AND APPLICABLE SECURITIES AND EXCHANGE COMMISSION
REGULATIONS (THE "POOLING CONDITION"), (VIII) WESTERN RESOURCES BEING
SATISFIED, IN ITS REASONABLE DISCRETION, THAT IT WILL BE ABLE TO CONSUMMATE
THE MERGER AS A "SHORT-FORM" MERGER PURSUANT TO THE PROVISIONS OF SECTION
351.447 OF THE MGBCL AND SECTION 17-6703 OF THE KANSAS GENERAL CORPORATION
CODE IMMEDIATELY AFTER CONSUMMATION OF THE OFFER (THE "SHORT-FORM MERGER
CONDITION"), AND (IX) ALL OUTSTANDING SHARES OF KCPL PREFERRED STOCK HAVING
BEEN REDEEMED (THE "KCPL PREFERRED STOCK REDEMPTION CONDITION"). CAPITALIZED
TERMS USED BUT NOT DEFINED ABOVE ARE DEFINED HEREINAFTER.
ii
THIS PROSPECTUS AND THE OFFER MADE HEREBY DO NOT CONSTITUTE A SOLICITATION
OF ANY PROXIES OR CONSENTS. ANY SUCH SOLICITATIONS WILL BE MADE ONLY PURSUANT
TO SEPARATE PROXY OR CONSENT SOLICITATION MATERIALS COMPLYING WITH THE
REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
THIS PROSPECTUS CONTAINS CERTAIN ANALYSES AND STATEMENTS WITH RESPECT TO THE
FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF WESTERN RESOURCES
FOLLOWING THE CONSUMMATION OF THE OFFER AND THE MERGER, INCLUDING STATEMENTS
RELATING TO THE COST SAVINGS THAT WILL BE REALIZED FROM THE MERGER (SEE
"PROSPECTUS SUMMARY--COMPARISON OF THE PROPOSALS," "PROSPECTUS SUMMARY--
SELECTED UNAUDITED FORECASTED FINANCIAL DATA," "PROSPECTUS SUMMARY--SELECTED
UNAUDITED FORECASTED FINANCIAL DATA--SUMMARY OF SELECTED SIGNIFICANT
ASSUMPTIONS," "BACKGROUND OF THE OFFER--COMPARISON OF THE PROPOSALS,"
"UNAUDITED FORECASTED FINANCIAL DATA" AND "NOTES TO UNAUDITED FORECASTED
STATEMENT OF INCOME"). SUCH ANALYSES AND STATEMENTS INCLUDE FORWARD LOOKING
STATEMENTS WITH RESPECT TO, AMONG OTHER THINGS: (1) EXPECTED COST SAVINGS FROM
THE MERGER; (2) NORMAL WEATHER CONDITIONS; (3) FUTURE NATIONAL AND REGIONAL
ECONOMIC AND COMPETITIVE CONDITIONS; (4) INFLATION RATES; (5) REGULATORY
TREATMENT; (6) FUTURE FINANCIAL MARKET CONDITIONS; (7) INTEREST RATES; (8)
FUTURE BUSINESS DECISIONS; AND (9) OTHER UNCERTAINTIES, WHICH, THOUGH
CONSIDERED REASONABLE BY WESTERN RESOURCES, ARE BEYOND WESTERN RESOURCES'
CONTROL AND DIFFICULT TO PREDICT. FURTHER INFORMATION ON OTHER FACTORS WHICH
COULD AFFECT THE FINANCIAL RESULTS OF WESTERN RESOURCES AFTER THE MERGER IS
INCLUDED IN THE COMMISSION FILINGS INCORPORATED BY REFERENCE HEREIN.
----------------
Western Resources is unable to predict the amount of time necessary to
obtain the governmental and regulatory approvals and consents required to
complete the Offer, the Merger and the transactions contemplated herein. It is
anticipated, however, that the time necessary to obtain such governmental and
regulatory approvals and consents will extend beyond the Expiration Date, and
Western Resources expects that it will extend the Offer from time to time in
its sole discretion.
----------------
IMPORTANT
Any shareholder desiring to tender all or any portion of his Shares should
either (a) complete and sign the Letter of Transmittal or a facsimile copy
thereof in accordance with the instructions in the Letter of Transmittal, and
mail or deliver the Letter of Transmittal or such facsimile and any other
required documents to Harris Trust Company of New York (the "Exchange Agent")
and either deliver the certificates for such Shares to the Exchange Agent
along with the Letter of Transmittal, deliver such Shares pursuant to the
procedures for book-entry transfer set forth herein or comply with the
guaranteed delivery procedures set forth below or (b) request his broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for him. A shareholder having Shares registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if he
desires to tender such Shares.
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Prospectus. Requests for
additional copies of this Prospectus and the Letter of Transmittal may be
directed to the Information Agent or to brokers, dealers, commercial banks or
trust companies.
iii
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION..................................................... v
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... vi
KCPL INFORMATION.......................................................... vii
PROSPECTUS SUMMARY........................................................ 1
Western Resources....................................................... 1
KCPL.................................................................... 1
Background of the Offer................................................. 1
Recent Developments..................................................... 3
Comparison of the Proposals............................................. 4
The Offer............................................................... 8
Description of Western Resources Capital Stock.......................... 11
Market Prices........................................................... 12
The Exchange Agent...................................................... 12
Request for Assistance and Additional Copies............................ 12
Comparative Per Share Data.............................................. 13
Selected Financial Data................................................. 14
Selected Historical Financial Data of Western Resources................. 14
Selected Historical Financial Data of KCPL.............................. 15
Selected Unaudited Pro Forma Combined Financial Information............. 16
Selected Unaudited Forecasted Financial Data............................ 17
BACKGROUND OF THE OFFER................................................... 19
Prior Communications with KCPL.......................................... 19
The April 14 Offer And Related Actions.................................. 19
Recent Developments..................................................... 20
Comparison of the Proposals............................................. 21
Litigation.............................................................. 30
The Amended and Restated UtiliCorp/KCPL Merger Agreement................ 31
THE OFFER................................................................. 39
General................................................................. 39
Timing of the Offer..................................................... 40
Extension, Termination and Amendment.................................... 40
Exchange of Shares; Delivery of Western Resources Common Stock.......... 41
Cash in Lieu of Fractional Shares of Western Resources Common Stock..... 42
Withdrawal Rights....................................................... 42
Procedure for Tendering................................................. 42
Certain Federal Income Tax Consequences................................. 45
Effect of Offer on Market for Shares; Registration Under the Exchange
Act.................................................................... 46
Purpose of the Offer; The Merger........................................ 47
Dissenters' Rights...................................................... 48
Conditions of the Offer................................................. 48
Control of the KCPL Board of Directors.................................. 53
Fees and Expenses....................................................... 54
Accounting Treatment.................................................... 55
Stock Exchange Listing.................................................. 55
PAGE
----
MATERIAL CONTACTS BETWEEN KCPL AND WESTERN RESOURCES..................... 55
BUSINESS OF WESTERN RESOURCES............................................ 57
WESTERN RESOURCES AND KCPL UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION............................................................. 57
UNAUDITED PRO FORMA COMBINED BALANCE SHEET............................... 58
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME......................... 61
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS............... 65
UNAUDITED FORECASTED FINANCIAL DATA...................................... 66
WESTERN RESOURCES UNAUDITED FORECASTED STATEMENT OF INCOME............... 67
NOTES TO UNAUDITED FORECASTED STATEMENT OF INCOME........................ 68
Merger Assumptions..................................................... 68
Operating Assumptions.................................................. 69
DESCRIPTION OF WESTERN RESOURCES CAPITAL STOCK........................... 73
Western Resources Common Stock......................................... 73
Western Resources Preferred Stock...................................... 74
Western Resources Preference Stock..................................... 75
DESCRIPTION OF KCPL'S CAPITAL STOCK...................................... 76
The Shares............................................................. 76
Cumulative Preferred Stock and Cumulative No Par Preferred Stock....... 76
Preference Stock....................................................... 76
COMPARISON OF THE RIGHTS OF HOLDERS OF SHARES AND WESTERN RESOURCES
COMMON STOCK............................................................ 77
Voting Rights in Connection with Mergers and Consolidations............ 82
MARKET PRICES AND DIVIDENDS.............................................. 89
VALIDITY OF WESTERN RESOURCES COMMON STOCK............................... 90
EXPERTS.................................................................. 90
SCHEDULE A............................................................... A-1
SCHEDULE B............................................................... B-1
SCHEDULE C............................................................... C-1
SCHEDULE D............................................................... D-1
iv
AVAILABLE INFORMATION
Western Resources and KCPL are subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by Western Resources and KCPL with the
Commission may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549 and at the public reference facilities in the
Commission's Regional Offices at Seven World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of information may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. The Western Resources Common Stock and the
Shares are listed and traded on the NYSE. The Shares are also listed on the
Chicago Stock Exchange (the "CSE"). Reports, proxy statements and other
information filed by Western Resources and KCPL with the Commission may be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005 and, concerning KCPL only, at the offices of the CSE, 440 South LaSalle
Street, Chicago, Illinois 60605.
This Prospectus does not contain all of the information set forth in the
Registration Statement on Form S-4, as amended (the "Registration Statement"),
covering the Western Resources Common Stock offered hereby which has been
filed with the Commission, certain portions of which have been omitted
pursuant to the rules and regulations of the Commission, and to which portions
reference is hereby made for further information with respect to Western
Resources, KCPL and the securities offered hereby. Statements contained herein
concerning any documents are not necessarily complete and, in each instance,
reference is made to the copies of such documents filed as exhibits to the
Registration Statement. Each such statement is qualified in its entirety by
such reference.
Not later than the date of commencement of the Offer, Western Resources will
file with the Commission a statement on Schedule 14D-1 pursuant to Rule 14d-3
under the Exchange Act furnishing certain information with respect to the
Offer. Such Schedule and any amendments thereto should be available for
inspection and copying as set forth above (except that such Schedules and any
amendments thereto will not be available at the regional offices of the
Commission).
Pursuant to Rule 409 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), and Rule 12b-21 promulgated under the Exchange
Act, Western Resources has requested that KCPL and its independent public
accountants, Coopers & Lybrand, L.L.P., provide to Western Resources the
information required for complete disclosure concerning the business,
operations, financial condition and management of KCPL. Neither KCPL nor
Coopers & Lybrand, L.L.P. has yet provided any information in response to such
request. Western Resources will provide any and all information which it
receives from KCPL or Coopers & Lybrand, L.L.P. prior to the expiration of the
Offer and which Western Resources deems material, reliable and appropriate in
a subsequently prepared amendment or supplement hereto.
v
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. THESE DOCUMENTS (NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS
THAT ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE
AVAILABLE WITHOUT CHARGE UPON REQUEST TO CORPORATE SECRETARY, WESTERN
RESOURCES, INC., 818 KANSAS AVENUE, TOPEKA, KANSAS 66612. TELEPHONE REQUESTS
MAY BE DIRECTED TO THE CORPORATE SECRETARY'S DEPARTMENT AT (913) 575-1950. IN
ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST FOR DOCUMENTS
SHOULD BE SUBMITTED NOT LATER THAN FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION
DATE.
The following documents filed with the Commission by Western Resources (File
No. 1-3523) are incorporated herein by reference: (a) Western Resources'
Annual Report on Form 10-K for the year ended December 31, 1995 (the "Western
Resources 1995 Form 10-K"); (b) the portions of Western Resources' Proxy
Statement for the 1996 Annual Meeting of Shareholders, dated March 27, 1996,
that have been incorporated by reference in the Western Resources 1995 Form
10-K; (c) Western Resources' Quarterly Report on Form 10-Q for the period
ending March 31, 1996; (d) Western Resources' Proxy Statement on Schedule 14A,
dated May 3, 1996; (e) Western Resources' Proxy Statement Supplement on
Schedule 14A, dated June 17, 1996; (f) Western Resources' Current Reports on
Form 8-K dated April 14, 1996, April 22, 1996, April 25, 1996, April 26, 1996,
April 29, 1996, May 3, 1996, May 6, 1996, May 10, 1996, May 24, 1996 and June
17, 1996 and (h) soliciting materials of Western Resources filed pursuant to
Rule 14a-12 and Rule 14a-6 of the Exchange Act from April 22, 1996 through the
date hereof.
The following documents filed with the Commission by KCPL (File No. 1-707)
are incorporated herein by reference: (a) KCPL's Annual Report on Form 10-K
for the year ended December 31, 1995 (the "KCPL 1995 Form 10-K"); (b) KCPL's
Registration Statement on Form S-4, dated June 10, 1996, as amended, including
the joint proxy statement of KCPL and UtiliCorp, dated June 27, 1996, filed
pursuant to Rule 424(b)(3) of the Securities Act (the "UtiliCorp/KCPL Joint
Proxy Statement"); (c) KCPL's Quarterly Report on Form 10-Q for the period
ending March 31, 1996 (the "KCPL Form 10-Q"); (d) KCPL's Proxy Statement
Supplement, dated May 1, 1996, filed pursuant to Rule 424(b)(3) of the
Securities Act; (e) KCPL's Current Reports on Form 8-K, dated January 24,
1996, May 22, 1996 and May 28, 1996 (the "KCPL May 28 Form 8-K"); and (f)
soliciting materials of KCPL filed pursuant to Rule 14a-12 and Rule 14a-6 of
the Exchange Act from April 22, 1996 through the date hereof.
All documents filed by either Western Resources or KCPL pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof
and prior to the date the Offer is terminated or Shares are accepted for
exchange shall be deemed to be incorporated herein by reference and to be a
part hereof from the date of such filing. Any statement contained herein or in
a document incorporated or deemed to be incorporated herein by reference shall
be deemed to be modified or superseded for purposes hereof to the extent that
a statement contained herein or in any other subsequently filed document which
also is, or is deemed to be, incorporated herein by reference modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part hereof, except as so modified or
superseded.
vi
KCPL INFORMATION
While Western Resources has included information concerning KCPL insofar as
it is known or reasonably available to Western Resources, KCPL is not
affiliated with Western Resources and KCPL has not to date permitted access by
Western Resources to KCPL's books and records. Therefore, information
concerning KCPL which has not been made public is not available to Western
Resources. Although Western Resources has no knowledge that would indicate
that statements relating to KCPL contained or incorporated by reference in
this Prospectus in reliance upon publicly available information are inaccurate
or incomplete, Western Resources was not involved in the preparation of such
information and statements and, for the foregoing reasons, is not in a
position to verify any such information or statements.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY WESTERN RESOURCES OR SALOMON BROTHERS INC (THE "DEALER
MANAGER"). THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. THE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR
ON BEHALF OF, HOLDERS OF SHARES IN ANY JURISDICTION IN WHICH THE MAKING OR
ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION. HOWEVER, WESTERN RESOURCES MAY, IN ITS SOLE DISCRETION, TAKE
SUCH ACTION AS IT MAY DEEM NECESSARY TO MAKE THE OFFER IN ANY SUCH
JURISDICTION AND EXTEND THE OFFER TO HOLDERS OF SHARES IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF WESTERN RESOURCES OR KCPL SINCE THE DATE AS OF WHICH INFORMATION IS
FURNISHED OR THE DATE HEREOF.
IN ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE
OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO
BE MADE ON BEHALF OF WESTERN RESOURCES BY SALOMON BROTHERS INC, AS DEALER
MANAGER, OR ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS
OF SUCH JURISDICTION.
vii
PROSPECTUS SUMMARY
The information below is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus,
including the documents incorporated in this Prospectus by reference. As used
in this Prospectus, the term "Western Resources" refers to Western Resources,
Inc. and, unless the context otherwise requires, its subsidiaries, and the term
"KCPL" refers to Kansas City Power & Light Company and, unless the context
otherwise requires, its subsidiaries.
WESTERN RESOURCES
Western Resources and its divisions and wholly owned subsidiaries include
KPL, a rate-regulated electric and gas division of Western Resources ("KPL"),
Kansas Gas and Electric Company ("KGE"), a rate-regulated utility and wholly
owned subsidiary of Western Resources, Westar Capital, Inc., Westar Consumer
Services, Inc., Westar Business Services, Inc., and The Wing Group, Inc., non-
utility subsidiaries, and Mid-Continent Market Center, Inc., a regulated gas
transmission service provider. KGE owns 47% of Wolf Creek Nuclear Operating
Corporation ("WCNOC"), the operating company for the Wolf Creek Generating
Station ("Wolf Creek").
Western Resources is engaged principally in the production, purchase,
transmission, distribution and sale of electricity and the delivery and sale of
natural gas. Western Resources serves approximately 601,000 electric customers
in eastern and central Kansas and approximately 648,000 natural gas customers
in Kansas and northeastern Oklahoma. Western Resources' non-utility
subsidiaries market natural gas primarily to large commercial and industrial
customers, provide electronic security services, engage in international large
power project development and provide other energy-related products and
services.
Western Resources was incorporated under the laws of the State of Kansas in
1924. Western Resources' corporate headquarters is located at 818 Kansas
Avenue, Topeka, Kansas 66612 and its telephone number is (913) 575-6300. See
"Business of Western Resources."
KCPL
The following information concerning KCPL is derived from the KCPL 1995 Form
10-K:
KCPL was incorporated in 1922 under the laws of Missouri and is a public
utility engaged in the generation, transmission, distribution and sale of
electricity to approximately 430,000 customers in western Missouri and eastern
Kansas. KLT Inc., a wholly owned unregulated subsidiary of KCPL, pursues
opportunities in domestic and international energy-related ventures. KCPL also
owns 47% of WCNOC. KCPL has its principal executive offices at 1201 Walnut
Street, Kansas City, Missouri 64106-2124.
BACKGROUND OF THE OFFER
Prior Communications with KCPL. KCPL and Western Resources have discussed the
possibility of a merger at various times over the last two years. In June 1994,
KCPL and Western Resources exchanged confidential information in connection
with preliminary discussions regarding a possible business combination. KCPL
declined Western Resources' request to present its analysis of the benefits of
a merger between the two companies, and the confidential information was
returned in August 1994. Discussions and correspondence between Mr. A. Drue
Jennings, Chairman of the Board, President and Chief Executive Officer of KCPL,
and Mr. John E. Hayes, Jr., Chairman of the Board and Chief Executive Officer
of Western Resources, relating to a potential merger continued over the next
several months.
In February 1995, Mr. Hayes expressed Western Resources' interest in a
combination with KCPL and the synergies and substantial benefits of such a
combination. In March 1995, Mr. Jennings wrote to Mr. Hayes that KCPL had
decided to focus on its current business plan rather than a business
combination with Western Resources. In May 1995, Mr. Hayes sent a letter to Mr.
Jennings again proposing a merger of the two companies. Mr. Hayes also
requested that KCPL outline its interest, requirements or suggestions regarding
a combination. In a letter, Mr. Hayes stressed that Western Resources strongly
preferred a negotiated transaction with KCPL. In such 1995 correspondence, Mr.
Hayes indicated that based on a cursory analysis, a preliminary estimate of
1
potential savings to be achieved in a combination of Western Resources and KCPL
would exceed $500 million over ten years. For a discussion of the comprehensive
analysis undertaken earlier this year by Western Resources with the assistance
of Deloitte & Touche Consulting Group which resulted in the estimate of over $1
billion in potential cost savings as a result of the Merger, see "Background of
the Offer--Comparison of the Proposals--Potential Cost Savings."
On December 14, 1995, Mr. Hayes sent letters to each of Mr. Jennings and Mr.
Richard C. Green, Jr., Chairman of the Board and Chief Executive Officer of
UtiliCorp, stating that Western Resources believed that KCPL and UtiliCorp were
in discussions concerning a possible combination and requesting an opportunity
to meet with Mr. Jennings and Mr. Green regarding a possible combination.
KCPL and UtiliCorp entered into an Agreement and Plan of Merger, dated as of
January 19, 1996, by and among KCPL, UtiliCorp and KC United Corp. ("KC
United") (the "Original UtiliCorp/KCPL Merger Agreement"). Pursuant to the
Original UtiliCorp/KCPL Merger Agreement, each of UtiliCorp and KCPL would have
been merged with and into KC United, with KC United being the surviving
corporation (the "Original UtiliCorp/KCPL Transaction").
On the day of announcement of the Original UtiliCorp/KCPL Transaction, Mr.
Jennings telephoned Mr. Hayes to inform him of this development. Mr. Hayes
offered to meet with Mr. Jennings and discuss the possibility of a combination
with Western Resources, but such offer was declined by Mr. Jennings.
KCPL entered into the Original UtiliCorp/KCPL Merger Agreement despite the
fact that, as of January 19, 1996, KCPL was aware of Western Resources'
continuing interest in pursuing a combination with KCPL.
The April 14 Offer and Related Actions. At an April 13, 1996 meeting,
following discussions with management, Salomon Brothers Inc (financial
advisor), the Deloitte & Touche Consulting Group (cost savings consultant),
Sullivan & Cromwell and LeBoeuf, Lamb, Greene & MacRae, L.L.P. (legal
advisors), the Western Resources Board approved the making of the April 14
Offer (as defined below). Also at the April 13, 1996 meeting, following
presentations by management of estimated cost savings from the Merger, Deloitte
& Touche Consulting Group (cost savings consultant) responded to questions
regarding the reasonableness of such estimated cost savings. On April 14, 1996,
Mr. Hayes telephoned Mr. Jennings to inform him that he was having delivered to
Mr. Jennings that afternoon a written proposal to the KCPL board of directors
to acquire all of the outstanding Shares in a transaction in which each holder
of Shares ("KCPL Shareholder") would be entitled to receive $28.00 of Western
Resources Common Stock for each Share. The exchange ratio would be subject to a
"collar" which would provide that the exchange ratio would not be less than
0.833 nor greater than 0.985 (the "April 14 Offer").
Following such telephone conversation, Western Resources delivered to Mr.
Jennings a letter setting forth such offer which, among other things, provided
a premium of 17% over the Share price of April 12, 1996 (the last trading day
before public announcement of the April 14 Offer) and an indicated annual
dividend rate of $1.98, which is 27% higher than the current KCPL annual
dividend rate. Such implied annual dividend rate is an equivalent per Share
amount calculated by multiplying Western Resources' current indicated annual
dividend rate of $2.06 by the number of shares of Western Resources Common
Stock which would have been exchanged per Share pursuant to the Exchange Ratio
under the April 14 Offer at then-current market prices. The letter also set
forth Western Resources' belief that a combination with Western Resources would
produce over $1 billion in savings during the ten years following consummation
of the Merger. On April 15, 1996, Western Resources filed an application with
the State Corporation Commission of the State of Kansas (the "KCC") seeking
approval of such combination and a Petition to Intervene in the Original
UtiliCorp/KCPL Transaction. On May 3, 1996, Western Resources filed an
application with the Missouri Public Service Commission (the "MPSC") seeking
approval of the Merger. By an order dated June 28, 1996, the MPSC denied the
MPSC staff's motion to dismiss Western Resources' application and ordered the
parties to file a proposed procedural schedule by July 9, 1996. See "--
Comparison of the Proposals--Regulatory Plan and Approvals" and "Background of
the Offer--The April 14 Offer and Related Actions."
On April 22, 1996, Mr. Jennings had delivered to Mr. Hayes a letter stating
that the KCPL board of directors had rejected the April 14 Offer. After the
delivery of the letter, Mr. Jennings telephoned Mr. Hayes to inform him of the
decision of the KCPL board of directors.
On April 22, 1996, Western Resources announced its intention to commence an
offer to exchange shares of Western Resources Common Stock for Shares. As part
of such announcement, Western Resources also stated
2
that it had filed a proxy statement with the Commission for use in soliciting
proxies from KCPL Shareholders against the approval and adoption of the
Original UtiliCorp/KCPL Merger Agreement and the Original UtiliCorp/KCPL
Transaction.
On May 6, 1996, in a letter from Mr. Jennings to KCPL Shareholders, KCPL and
UtiliCorp announced their intention to recommend an initial annualized dividend
rate of $1.85 upon completion of the Original UtiliCorp/KCPL Transaction.
Also on May 6, 1996, the Western Resources Board met and, following
discussions with management, Salomon Brothers Inc (financial advisor) and
Sullivan & Cromwell and LeBoeuf, Lamb, Greene & MacRae, L.L.P. (legal
advisors), approved a proposal to increase the value of its offer to KCPL
Shareholders. As amended on May 6, the Western Resources offer provided that
the Exchange Ratio would be not less than 0.910 nor greater than 0.985.
RECENT DEVELOPMENTS
On May 20, 1996, two days before the KCPL annual meeting at which KCPL
Shareholders were to have the opportunity to vote on the approval and adoption
of the Original UtiliCorp/KCPL Merger Agreement and the Original UtiliCorp/KCPL
Transaction, KCPL and UtiliCorp announced that they had entered into an Amended
and Restated Agreement and Plan of Merger (the "Amended and Restated
UtiliCorp/KCPL Merger Agreement") which superseded the Original UtiliCorp/KCPL
Merger Agreement. Pursuant to the terms of the Amended and Restated
UtiliCorp/KCPL Merger Agreement, a newly created KCPL subsidiary would be
merged with and into UtiliCorp and UtiliCorp would then be merged with and into
KCPL (the "Proposed UtiliCorp/KCPL Transaction"). According to the
UtiliCorp/KCPL Joint Proxy Statement, KCPL would, at the effective time of the
Proposed UtiliCorp/KCPL Transaction, change its name to Maxim Energies, Inc.
("Maxim"). As used herein, "Maxim" shall mean KCPL following consummation of
the Proposed UtiliCorp/KCPL Transaction. Pursuant to the Amended and Restated
UtiliCorp/KCPL Merger Agreement, UtiliCorp shareholders would receive one Share
in exchange for each share of UtiliCorp Common Stock held while KCPL
Shareholders would continue to hold their Shares.
Accordingly, on May 20, 1996, KCPL withdrew the Original UtiliCorp/KCPL
Merger Agreement and the Original UtiliCorp/KCPL Transaction from consideration
at the May 22, 1996 KCPL annual meeting and announced that KCPL Shareholders
would vote on the issuance of Shares necessary to effect the Proposed
UtiliCorp/KCPL Transaction at a special meeting of KCPL Shareholders to be held
at the Hyatt Regency Crown Center Hotel, 2345 McGee Street, Kansas City,
Missouri, on Wednesday, August 7, 1996, at 10:00 a.m., local time, and at any
adjournments, postponements, continuations or reschedulings thereof (the "KCPL
Special Meeting"). In such announcement, KCPL stated that, pursuant to the
Amended and Restated UtiliCorp/KCPL Merger Agreement, the affirmative vote of a
majority of the Shares present at a meeting at which a majority of the
outstanding Shares are represented is necessary to approve the issuance of
Shares required to effect the Proposed KCPL/UtiliCorp Transaction. The ability
of KCPL to effect the Proposed UtiliCorp/KCPL Transaction with such vote is the
subject of pending litigation. See "Background of the Offer--Litigation."
In addition, on May 20, 1996, KCPL instituted a legal proceeding in the
United States District Court for the Western District of Missouri against
Robert L. Rives, a KCPL Shareholder, and Western Resources seeking, among other
things, a declaration as to the validity of the Amended and Restated
UtiliCorp/KCPL Merger Agreement and the Proposed UtiliCorp/KCPL Transaction. On
June 7, 1996, Western Resources and Mr. Rives filed an answer to KCPL's
complaint as well as a counterclaim seeking, among other things, a declaration
that Missouri law requires the approval of the Amended and Restated
UtiliCorp/KCPL Merger Agreement by two-thirds of the holders of all outstanding
Shares and a declaration that the KCPL board of directors breached its
fiduciary duties to KCPL Shareholders by proceeding with a plan designed to
consummate the transactions contemplated by the Amended and Restated
UtiliCorp/KCPL Merger Agreement based on less than the required two-thirds KCPL
Shareholder vote. On June 14, 1996, the court scheduled a preliminary
injunction hearing for July 25, 1996. On June 27, 1996, KCPL filed a reply to
the counterclaims of Western Resources and Mr. Rives
3
and a counterclaim alleging that Western Resources and Mr. Rives have violated
Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder.
Western Resources and Mr. Rives will continue to pursue their claims against
KCPL and to vigorously defend against each of KCPL's allegations, which Western
Resources and Mr. Rives believe to be without merit. As of the date of this
Prospectus, no findings have been made by a court concerning any of the above-
mentioned allegations. See "Background of the Offer--Litigation."
On June 12, 1996, the Western Resources Board met and, following discussions
with management, Salomon Brothers Inc (financial advisor) and Sullivan &
Cromwell and LeBoeuf, Lamb, Greene & MacRae, L.L.P. (legal advisors), approved
management's proposal to increase the offer to KCPL Shareholders to $31.00 of
Western Resources Common Stock per Share, subject to the collar. Management
advised the Western Resources Board that, in its opinion, the KCC staff's
recommendation with respect to Western Resources' rates is not reasonably
likely to be adopted as proposed. Following such discussion, the Western
Resources Board authorized management to proceed with the improved Offer.
On June 17, 1996, in a letter to Mr. Jennings, Western Resources proposed an
offer that it believes is financially superior to the Proposed UtiliCorp/KCPL
Transaction and which would provide KCPL Shareholders with $31.00 of Western
Resources Common Stock per Share in a negotiated merger between KCPL and
Western Resources. On June 24, 1996, Mr. Jennings had delivered to Mr. Hayes a
letter stating that the KCPL board of directors had rejected Western Resources'
June 17th offer. After the delivery of the letter, Mr. Jennings telephoned Mr.
Hayes to inform him of the decision of the KCPL board of directors. On June 25,
1996, Western Resources reaffirmed its intention to make the Offer directly to
KCPL Shareholders. Pursuant to the Offer, each Share is entitled to receive
$31.00 of Western Resources Common Stock, subject to certain limitations as set
forth herein.
COMPARISON OF THE PROPOSALS
Offer Premium and Dividend Impact. Western Resources believes that the Offer
is clearly financially superior to the Proposed UtiliCorp/KCPL Transaction. The
indicated annual dividend rate for KCPL and the closing price per Share on
April 12, 1996 (the last trading day prior to the public announcement of the
April 14 Offer) were $1.56 and $23.875, respectively. For the twenty trading
days immediately preceding April 12, 1996, the average closing price per Share
was $24.956. The Offer would provide a substantial premium to KCPL Shareholders
in relation to those levels, as shown by the following table:
OFFER KCPL SHARE PERCENT
PRICE PRICE DIFFERENTIAL*
------------------ --------------- --------------
April 12, 1996 (the last
trading day before the pub-
lic
announcement of the
April 14 Offer)............ $31.000 $23.875 29.8%
July 2, 1996 (the last
trading day before the date
of this Prospectus)........ $31.000 $27.750 11.7%
- --------
* Based on the closing price of Western Resources Common Stock and the Shares
on the indicated dates.
In addition, as shown by the following table, if it were consummated today,
the Offer would provide immediate dividend accretion to KCPL Shareholders,
compared to KCPL's current dividend rate.
WESTERN RESOURCES/
KCPL MERGER
IMPLIED ANNUAL CURRENT KCPL
DIVIDEND RATE ANNUAL DIVIDEND PERCENT
PER KCPL SHARE** RATE DIFFERENTIAL**
------------------ --------------- --------------
April 12, 1996 (the last
trading day before the
public announcement of the
April 14 Offer)............ $2.19 $ 1.56 40.4%
July 2, 1996 (the last
trading day before the date
of this Prospectus)........ $2.09 $ 1.56 34.0%
- --------
** Based on the current indicated annual dividend rate of $2.06 per share of
Western Resources Common Stock and the closing price of Western Resources
Common Stock and the Shares on the indicated dates. The implied annual
dividend rate is an equivalent per Share amount calculated by multiplying
Western Resources' current indicated annual dividend rate of $2.06 per
share of Western Resources Common Stock by the applicable Exchange Ratio.
The implied annual dividend rate per Share will therefore vary depending on
the price of Western Resources Common Stock at the time the Exchange Ratio
is finally determined.
4
Based on Western Resources' current indicated annual dividend rate of $2.06
per share and the provisions of the collar, the indicated annual dividend rate
per Share would range from a minimum of $1.92 to a maximum of $2.27, or about
23% to 46% more than KCPL's current annual dividend rate. See "--The Exchange
Ratio--Current Dividends" and "Background of the Offer--Comparison of the
Proposals--The Exchange Ratio--Current Dividends."
The premium and dividend accretion to KCPL Shareholders will change as the
market price of Western Resources Common Stock changes.
Based on the projections of each of Western Resources and KCPL, the Offer
also provides greater projected 1998 post-Merger equivalent dividends to KCPL
Shareholders than does the Proposed UtiliCorp/KCPL Transaction, as shown by the
following table:
WESTERN RESOURCES/
KCPL MERGER
IMPLIED PROJECTED KCPL
1998 ANNUAL PROJECTED 1998
DIVIDEND RATE ANNUAL DIVIDEND PERCENT
PER KCPL SHARE* RATE DIFFERENTIAL*
------------------ --------------- -------------
April 12, 1996 (the last
trading day before the public
announcement of the April 14
Offer)....................... $2.28 $1.85 23.2%
July 2, 1996 (the last trading
day before the date of this
Prospectus).................. $2.17 $1.85 17.3%
- --------
* Based on the projected 1998 post-Merger annual dividend rate of $2.14 per
share of Western Resources Common Stock, the stated intention of KCPL and
UtiliCorp to recommend an annual dividend rate of $1.85 per Share following
consummation of the Proposed UtiliCorp/KCPL Transaction and the closing price
of Western Resources Common Stock and the Shares on the indicated dates. The
implied projected 1998 post-Merger annual dividend rate per Share will vary
depending on the price of Western Resources Common Stock at the time the
Exchange Ratio is finally determined. Western Resources has paid dividends
every year since its formation in 1924 and dividends have been increased
every year since 1958 (except for 1975, in which the dividend remained
unchanged). Western Resources does not anticipate any significant change with
respect to its historical dividend practice as a result of the Merger.
However, the declaration of future dividends will depend upon future
earnings, the financial condition of Western Resources and other factors.
Western Resources' projection of its 1998 post-Merger annual dividend rate
and subsequent dividends is based upon Western Resources' financial
projections, the achievement of which is subject to various factors beyond
Western Resources' control, including Western Resources' ability to achieve
over $1 billion in cost savings from the Merger, and, therefore, there is no
assurance that Western Resources will be able to pay dividends in the
projected amounts. See "Western Resources Unaudited Forecasted Statement of
Income" and "Notes to Unaudited Forecasted Statement of Income" for further
details regarding the basis for and risks of Western Resources' projected
financial results following the Merger.
Based on Western Resources' projected 1998 post-Merger annual dividend rate
of $2.14 per share of Western Resources Common Stock and the provisions of the
collar, the indicated projected 1998 post-Merger annual dividend rate per Share
would range from a minimum of $2.00 to a maximum of $2.35, or about 8% to 27%
more than the UtiliCorp/KCPL "intention to recommend" an annual dividend rate
of $1.85 per Share. See "--Exchange Ratio--Projected 1998 Dividends" and
"Background of the Offer--Comparison of the Proposals--The Exchange Ratio--
Projected 1998 Dividends."
The Exchange Ratio
Current Dividends. The chart below sets forth a range of prices of Western
Resources Common Stock and the corresponding Exchange Ratio, dollar value of
Western Resources Common Stock to be received per Share, indicated current
annual dividend rate and premiums to KCPL Shareholders over the April 12, 1996
Share price and the current KCPL annual dividend rate of $1.56 per Share.
5
CALCULATION OF STOCK PRICE AND DIVIDENDS TO KCPL
SHAREHOLDERS; CURRENT INDICATED DIVIDEND RATE
PREMIUM TO INDICATED
WESTERN KCPL CURRENT ANNUAL
RESOURCES STOCK VALUE SHAREHOLDERS DIVIDEND RATE INCREASE IN
COMMON EXCHANGE TO KCPL (APRIL 12 TO KCPL KCPL
STOCK PRICE RATIO SHAREHOLDERS CLOSING PRICE) SHAREHOLDERS/1 DIVIDEND RATE/2
----------- -------- ------------ -------------- -------------- ---------------
$27.00 1.100 $29.70 24.4% $2.27 45.5%
27.50 1.100 30.25 26.7% 2.27 45.5%
28.00 1.100 30.80 29.0% 2.27 45.5%
--------------------------------------------------------------------------------
Collar 28.18 1.100 31.00 29.8% 2.27 45.5%
28.50 1.088 31.00 29.8% 2.24 43.6%
29.00 1.069 31.00 29.8% 2.20 41.2%
29.50 1.051 31.00 29.8% 2.16 38.8%
30.00 1.033 31.00 29.8% 2.13 36.5%
30.50 1.016 31.00 29.8% 2.09 34.2%
31.00 1.000 31.00 29.8% 2.06 32.1%
31.50 0.984 31.00 29.8% 2.03 30.0%
32.00 0.969 31.00 29.8% 2.00 27.9%
32.50 0.954 31.00 29.8% 1.96 26.0%
33.00 0.939 31.00 29.8% 1.94 24.1%
Collar 33.23 0.933 31.00 29.8% 1.92 23.2%
--------------------------------------------------------------------------------
33.50 0.933 31.26 30.9% 1.92 23.2%
34.00 0.933 31.72 32.9% 1.92 23.2%
34.50 0.933 32.19 34.8% 1.92 23.2%
--------
1/ The KCPL indicated current annual dividend rate is
calculated by multiplying the Western Resources current
indicated annual dividend rate of $2.06 per share of
Western Resources Common Stock by the applicable Exchange
Ratio.
2/ Based on the current KCPL annual dividend rate of $1.56
per Share.
Projected 1998 Post-Merger Dividends. The chart below sets forth a range of
prices of Western Resources Common Stock and the corresponding Exchange Ratio,
dollar value of Western Resources Common Stock to be received per Share,
indicated projected 1998 post-Merger annual dividend rate and premiums to KCPL
Shareholders over the April 12, 1996 Share price and the projected 1998 post-
Merger annual dividend rate per Share in the Proposed UtiliCorp/KCPL
Transaction.
CALCULATION OF STOCK PRICE AND DIVIDENDS TO KCPL
SHAREHOLDERS; POST-MERGER INDICATED DIVIDEND RATE
PREMIUM TO
WESTERN KCPL INDICATED ANNUAL
RESOURCES STOCK VALUE SHAREHOLDERS DIVIDEND RATE INCREASE IN
COMMON EXCHANGE TO KCPL (APRIL 12 TO KCPL KCPL
STOCK PRICE RATIO SHAREHOLDERS CLOSING PRICE) SHAREHOLDERS/1 DIVIDEND RATE/2
----------- -------- ------------ -------------- ---------------- ---------------
$27.00 1.100 $29.70 24.4% $2.35 27.2%
27.50 1.100 30.25 26.7% 2.35 27.2%
28.00 1.100 30.80 29.0% 2.35 27.2%
----------------------------------------------------------------------------------
Collar 28.18 1.100 31.00 29.8% 2.35 27.2%
28.50 1.088 31.00 29.8% 2.33 25.8%
29.00 1.069 31.00 29.8% 2.29 23.7%
29.50 1.051 31.00 29.8% 2.25 21.6%
30.00 1.033 31.00 29.8% 2.21 19.5%
30.50 1.016 31.00 29.8% 2.18 17.6%
31.00 1.000 31.00 29.8% 2.14 15.7%
31.50 0.984 31.00 29.8% 2.11 13.8%
32.00 0.969 31.00 29.8% 2.07 12.1%
32.50 0.954 31.00 29.8% 2.04 10.3%
33.00 0.939 31.00 29.8% 2.01 8.6%
Collar 33.23 0.933 31.00 29.8% 2.00 7.9%
----------------------------------------------------------------------------------
33.50 0.933 31.26 30.9% 2.00 7.9%
34.00 0.933 31.72 32.9% 2.00 7.9%
34.50 0.933 32.19 34.8% 2.00 7.9%
--------
1/ The KCPL indicated projected 1998 post-Merger annual
dividend rate is calculated by multiplying the projected
1998 post-Merger annual dividend rate of $2.14 per share
of Western Resources Common Stock by the applicable
Exchange Ratio. See "Western Resources Unaudited
Forecasted Statement of Income."
2/ Based on KCPL's and UtiliCorp's stated intention to
recommend an annual dividend rate of $1.85 per Share
following consummation of the Proposed UtiliCorp/KCPL
Transaction.
6
For more detailed information concerning the background of the Offer, and for
a comparison of the Offer and the Proposed UtiliCorp/KCPL Transaction, see
"Background of the Offer" and "Background of the Offer--Comparison of the
Proposals" below.
Potential Cost Savings. Western Resources believes that the KCPL
Shareholders, as well as KCPL's customers, employees and the communities it
serves, would realize benefits from the Offer and the Merger that are greater
than the benefits that would be realized if KCPL either remains an independent
entity or completes the Proposed UtiliCorp/KCPL Transaction. Western Resources
believes such greater benefits would be realized through the operational and
structural synergies detailed in the comprehensive synergies analysis
undertaken earlier this year by Western Resources with the assistance of the
Deloitte & Touche Consulting Group, which analysis is summarized under
"Background of the Offer--Comparison of the Proposals--Potential Cost Savings."
Anticipated net cost savings from the Offer and the Merger are expected to
exceed $1 billion, compared to approximately $636 million (derived from the
KCPL/UtiliCorp Joint Application, Docket No. 194-141-U, filed with the KCC on
February 2, 1996 (the "KCPL/UtiliCorp Joint Application") and certain other
publicly available information) estimated for the Proposed UtiliCorp/KCPL
Transaction over a ten-year period. Because cost savings estimates are based
upon certain assumptions about the future, there can be no assurance that the
cost savings estimated by either Western Resources or UtiliCorp would be
realized in such amounts and actual cost savings may be more or less than those
estimated.
Regulatory Plan and Approvals. Western Resources has asked the state
regulatory commissions reviewing the Offer and the Proposed UtiliCorp/KCPL
Transaction to take into account what Western Resources believes to be the
greater customer benefits of the Offer when deciding between the applications
for approval. Western Resources believes that it will be able to obtain the
necessary regulatory approvals for the Offer on a timely basis and in a time
frame at least as favorable as that in which UtiliCorp/KCPL would be able to
obtain the necessary approvals for the Proposed UtiliCorp/KCPL Transaction.
With the cooperation of KCPL, Western Resources believes that the Offer and the
Merger could be completed by the second quarter of 1997; otherwise Western
Resources believes the Offer and the Merger could be completed by year-end
1997. In light of what Western Resources believes to be the superior benefits
and savings of the Offer, and the fact that such benefits and savings impact
the public interest with which regulatory bodies are concerned, Western
Resources believes that regulatory bodies will take such benefits and savings
into account when deciding whether to approve the Offer or the Proposed
UtiliCorp/KCPL Transaction and does not believe the Proposed UtiliCorp/KCPL
Transaction could be completed prior to year-end 1997. Accordingly, Western
Resources believes that the Proposed UtiliCorp/KCPL Transaction offers no
timing advantage over the Offer. On April 15, 1996, Western Resources filed an
application with the KCC seeking approval of such combination and a Petition to
Intervene in the UtiliCorp/KCPL Transaction. On May 3, 1996, Western Resources
filed an application with the MPSC seeking approval of the Merger. The MPSC
scheduled a pre-hearing conference on the matter for June 18, 1996. By an order
dated June 28, 1996, the MPSC denied the MPSC staff's motion to dismiss Western
Resources' application and ordered the parties to file a proposed procedural
schedule by July 9, 1996. In nonbinding testimony filed on May 22, 1996, the
staff of the KCC recommended annual rate reductions for Western Resources of
$105 million. Western Resources is opposing the KCC staff's recommendation and
does not anticipate that such recommendation will be adopted as proposed.
Therefore, Western Resources does not expect an adverse effect on its plans to
consummate the Offer and the Merger. However, there can be no assurance that
the KCC staff's recommendation will not be adopted, or, if adopted, will not
have an adverse effect on Western Resources' consummation of the Offer and the
Merger, on the Regulatory Plan or on Western Resources' ability to achieve its
projected post-Merger dividend rates. (See "Background of the Offer--Comparison
of the Proposals--Potential Cost Savings," "Background of the Offer--Comparison
of the Proposals--Regulatory Plan" and "Background of the Offer--Comparison of
the Proposals--Regulatory Approvals.")
The Amended and Restated UtiliCorp/KCPL Merger Agreement. On January 19,
1996, UtiliCorp and KCPL entered into the Original UtiliCorp/KCPL Merger
Agreement. The Original UtiliCorp/KCPL Merger Agreement provided that, if
approved by the shareholders of KCPL and UtiliCorp and the satisfaction or
waiver
7
of certain other conditions, including obtaining the requisite regulatory
approvals, KCPL and UtiliCorp would be merged with and into KC United Corp.
("KC United"), with KC United being the surviving corporation. On May 20, 1996,
KCPL and UtiliCorp announced that they had entered into the Amended and
Restated UtiliCorp/KCPL Merger Agreement, which supersedes the Original
UtiliCorp/KCPL Merger Agreement. The Amended and Restated UtiliCorp/KCPL Merger
Agreement provides for the Proposed UtiliCorp/KCPL Transaction. Pursuant to the
Amended and Restated UtiliCorp/KCPL Merger Agreement, UtiliCorp shareholders
would receive one Share in exchange for each share of UtiliCorp Common Stock
held while KCPL Shareholders would continue to hold their Shares. According to
the UtiliCorp/KCPL Joint Proxy Statement, at the effective time of the Proposed
UtiliCorp/KCPL Transaction, the name of the surviving corporation would be
changed to Maxim Energies, Inc. The Proposed UtiliCorp/KCPL Transaction is
subject to certain conditions customary in transactions in the utility
industry, including among others that all regulatory and shareholder approvals
be obtained. If the issuance of Shares necessary to effect the Proposed
UtiliCorp/KCPL Transaction is not approved by the requisite vote of the holders
of Shares, the Amended and Restated UtiliCorp/KCPL Merger Agreement will become
terminable at the option of either KCPL or UtiliCorp. According to the terms of
the Amended and Restated UtiliCorp/KCPL Merger Agreement, upon such
termination, KCPL may be required to pay to UtiliCorp a termination fee in the
amount of $5 million. If, within two and one-half years of such termination,
Western Resources were to acquire at least a majority of the Shares (in the
Offer or otherwise) or Western Resources and KCPL were to enter into a
definitive agreement with respect to a transaction including, without
limitation, a tender or exchange offer, merger or other business combination,
then upon the closing of such acquisition of Shares or the signing of such
agreement, KCPL may be required to pay to UtiliCorp an additional $53 million
under the terms of the Amended and Restated UtiliCorp/KCPL Merger Agreement.
For a more detailed description of the Amended and Restated UtiliCorp/KCPL
Merger Agreement, see "Background of the Offer--The Amended and Restated
UtiliCorp/KCPL Merger Agreement."
THE OFFER
General. Western Resources hereby offers, upon the terms and subject to the
conditions set forth herein and in the related Letter of Transmittal
(collectively, the "Offer"), to exchange shares of Western Resources Common
Stock for each outstanding Share validly tendered on or prior to the Expiration
Date and not withdrawn. Each Share validly tendered on or prior to the
Expiration Date and not withdrawn will be entitled to receive that number of
shares of Western Resources Common Stock equal to the Exchange Ratio. The term
"Exchange Ratio" means the quotient (rounded to the nearest 1/100,000)
determined by dividing $31.00 by the Western Resources Average Price; provided,
that the Exchange Ratio shall not be less than 0.933 nor greater than 1.100.
Pursuant to the Exchange Ratio, each Share will be exchanged for $31.00 of
Western Resources Common Stock if the Western Resources Average Price is
between $33.23 and $28.18. If the Western Resources Average Price is greater
than $33.23, each Share will be exchanged for more than $31.00 of Western
Resources Common Stock and, conversely, if the Western Resources Average Price
is less than $28.18, each Share will be exchanged for less than $31.00 of
Western Resources Common Stock. See "The Offer--General" and "Background of the
Offer--Comparison of the Proposals--The Exchange Ratio." The term "Expiration
Date" shall mean 12:00 Midnight, New York City time, on September 20, 1996
unless the Offer is extended by Western Resources. KCPL Shareholders may call
(800) 621-0518 any time on or after the date hereof through the Expiration Date
for the current Exchange Ratio calculated based on the then-current Western
Resources Average Price for the twenty consecutive trading days ending with the
third trading day immediately preceding the date the call is placed. The actual
Western Resources Average Price and Exchange Ratio will be calculated as of the
third trading day immediately prior to the Expiration Date, as described above,
and a press release will be issued announcing the actual Exchange Ratio prior
to the opening of the second trading day prior to the Expiration Date (as it
may be extended from time to time).
The purpose of the Offer is to obtain control of, and ultimately exchange the
entire common equity interest in, KCPL. Western Resources intends, as soon as
practicable after consummation of the Offer, to seek to merge
8
KCPL with and into itself pursuant to Section 351.447 of the Missouri General
and Business Corporation Law (the "MGBCL") and Section 17-6703 of the Kansas
General Corporation Code (the "KGCC"). Under Section 351.447 and Section 17-
6703, assuming the Minimum Tender Condition, the Western Resources Shareholder
Approval Condition, the Missouri Control Share Acquisition Condition, the
Missouri Business Combination Condition and the KCPL Preferred Stock Redemption
Condition are satisfied, Western Resources could merge KCPL into itself (the
"Merger") without any vote of the shareholders of either Western Resources or
KCPL. Pursuant to the Merger, each outstanding Share (except for Shares held in
the treasury of KCPL and Shares held by shareholders who properly exercise
their dissenters' rights, if any, under Missouri law) will be converted into
the right to receive a number of shares of Western Resources Common Stock equal
to the Exchange Ratio. See "The Offer--Purpose of the Offer; the Merger" and
"--Dissenters' Rights."
Western Resources' obligation to exchange shares of Western Resources Common
Stock for Shares pursuant to the Offer is conditioned upon, among other things,
satisfaction or waiver, as applicable, of the Minimum Tender Condition, the
Western Resources Shareholder Approval Condition, the Missouri Control Share
Acquisition Condition, the Missouri Business Combination Condition, the KCPL
Shareholder Vote Condition, the Regulatory Approval Condition, the Pooling
Condition, the Short Form Merger Condition, the KCPL Preferred Stock Redemption
Condition (in each case as defined on the cover page of this Prospectus) and
the other conditions set forth in "The Offer--Conditions of the Offer--Certain
Other Conditions of the Offer" (collectively, the "Offer Conditions"). See "The
Offer--Conditions of the Offer--Minimum Tender Condition," "--Western Resources
Shareholder Approval Condition," "--Missouri Control Share Acquisition
Condition," "--Missouri Business Combination Condition," "--The KCPL
Shareholder Vote Condition," "--Regulatory Approval Condition," "--Pooling
Condition," "--Short-Form Merger Condition," "--KCPL Preferred Stock Redemption
Condition" and "--Certain Other Conditions of the Offer." Waiver or amendment
of any of these conditions may require an extension of the Offer.
Timing of the Offer. The Offer is currently scheduled to expire on September
20, 1996. See "The Offer--Extension, Termination and Amendment." Consummation
of the Offer and the Merger is subject to numerous regulatory approvals. For a
discussion of the timing of such regulatory approvals, see "The Offer--
Regulatory Approval Condition." KCPL Shareholders are scheduled to vote on the
issuance of Shares necessary to effect the Proposed UtiliCorp/KCPL Transaction
pursuant to the Amended and Restated UtiliCorp/KCPL Merger Agreement at the
KCPL Special Meeting. The rules of the NYSE, on which the Shares are listed,
require shareholder approval to issue shares of common stock in any transaction
or series of related transactions if such common stock will have voting power
equal to or in excess of 20% of the voting power outstanding prior to the
issuance of such stock, or the number of shares of common stock to be issued
will be equal to or in excess of 20% of the number of shares of common stock
outstanding prior to the issuance of such stock. According to the Amended and
Restated UtiliCorp/KCPL Merger Agreement, the issuance of Shares necessary to
effect the Proposed UtiliCorp/KCPL Transaction requires the affirmative vote of
a majority of the Shares voted at the KCPL Special Meeting, provided that in
order for such approval to be effective, the total number of votes cast must
represent over 50% of all outstanding Shares entitled to vote as of the Record
Date. The ability of KCPL to effect the Proposed UtiliCorp/KCPL Transaction
with such vote is the subject of pending litigation. See "Background of the
Offer--Litigation." If KCPL Shareholders do not approve the issuance of Shares
necessary to effect the Proposed UtiliCorp/KCPL Transaction, or the KCPL board
of directors terminates the Amended and Restated UtiliCorp/KCPL Merger
Agreement, the KCPL Shareholder Vote Condition will then be satisfied. In the
event that the KCPL Shareholders do not approve the issuance of Shares
necessary to effect the Proposed UtiliCorp/KCPL Transaction, Western Resources
believes that the KCPL board of directors should at that point respect the vote
of the KCPL Shareholders and, in accordance with their fiduciary duties,
consider the Offer and the Merger in good faith in light of the circumstances
then existing.
9
Extension, Termination and Amendment. Western Resources expressly reserves
the right (but will not be obligated), in its sole discretion, at any time or
from time to time, and regardless of whether any of the events set forth in
"The Offer--Conditions of the Offer" shall have occurred or shall have been
determined by Western Resources to have occurred, (a) to extend the period of
time during which the Offer is open by giving oral or written notice of such
extension to the Exchange Agent, which extension must be announced no later
than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date, and (b) to amend the Offer in any respect
(including, without limitation, by decreasing or increasing the consideration
offered in the Offer to holders of Shares and/or by decreasing the number of
Shares being sought in the Offer) by giving oral or written notice of such
amendment to the Exchange Agent. The rights reserved by Western Resources in
this paragraph are in addition to Western Resources' right to terminate the
Offer as described in "The Offer--Extension, Termination and Amendment." There
can be no assurance that Western Resources will exercise its right to extend
the Offer. However, it is Western Resources' current intention to extend the
Offer until all conditions have been satisfied or waived. See "The Offer--
Extension, Termination and Amendment." During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer, subject
to the right of a tendering shareholder to withdraw his Shares. See "The
Offer--Withdrawal Rights."
Exchange of Shares; Delivery of Western Resources Common Stock. Upon the
terms and subject to the conditions of the Offer (including, if the Offer is
extended or amended, the terms and conditions of any such extension or
amendment), Western Resources will accept for exchange, and will exchange,
Shares validly tendered and not properly withdrawn as promptly as practicable
after the Expiration Date. See "The Offer--Exchange of Shares; Delivery of
Western Resources Common Stock."
Withdrawal Rights. Tenders of Shares made pursuant to the Offer are
irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn
at any time prior to the Expiration Date, and, unless theretofore accepted for
exchange and exchanged by Western Resources for shares of Western Resources
Common Stock pursuant to the Offer, may also be withdrawn at any time after
September 6, 1996. See "The Offer--Withdrawal Rights."
Procedure for Tendering Shares. For a KCPL Shareholder to validly tender
Shares pursuant to the Offer, (i) a properly completed and duly executed Letter
of Transmittal (or manually executed facsimile thereof), together with any
required signature guarantees, or an Agent's Message (as defined herein) in
connection with a book-entry transfer, and any other required documents, must
be transmitted to and received by the Exchange Agent at one of its addresses
set forth on the back cover of this Prospectus and either certificates for
tendered Shares must be received by the Exchange Agent at such address or such
Shares must be tendered pursuant to the procedures for book-entry tender set
forth under "The Offer--Procedure for Tendering" (and a confirmation of receipt
of such tender received), in each case, prior to the Expiration Date, or (ii)
such KPCL Shareholder must comply with the guaranteed delivery procedure set
forth under "The Offer--Procedure for Tendering."
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Certain Federal Income Tax Consequences. In the opinions of Sullivan &
Cromwell and LeBoeuf, Lamb, Greene & MacRae, L.L.P., special counsel to Western
Resources, which opinions are based upon certain assumptions made with the
consent of Western Resources, exchanges of Shares for Western Resources Common
Stock pursuant to the Offer and the Merger will be treated for federal income
tax purposes as exchanges pursuant to a plan of reorganization within the
meaning of the Code, and no gain or loss will be recognized by (i) Western
Resources or KCPL as a result of the Offer or the Merger or (ii) a holder of
Shares upon the exchange in the
10
Offer or the Merger of such Shares solely for Western Resources Common Stock,
except with respect to the receipt of cash in lieu of fractional shares of
Western Resources Common Stock.
All Shareholders should carefully read the summary of the federal income tax
consequences of the Offer and the Merger under "The Offer--Certain Federal
Income Tax Consequences" and are urged to consult with their own tax advisors
as to the federal, state, local and foreign tax consequences in their
particular circumstances.
Effect of Offer on Market for Shares; Registration Under the Exchange
Act. The exchange of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and, depending upon the number of Shares so purchased, could adversely affect
the liquidity and market value of the remaining Shares held by the public.
The Shares are listed and principally traded on the NYSE and are also listed
on the CSE. Depending upon the number of Shares acquired pursuant to the Offer,
following consummation of the Offer, the Shares may no longer meet the
requirements of such exchanges for continued listing and the Shares may no
longer constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations, in which event the Shares would be ineligible as
collateral for margin loans made by brokers. For a description of the treatment
of Shares in the Merger, see "The Offer--Purpose of the Offer; the Merger."
Dissenters' Rights. In connection with the Merger and pursuant to Sections
351.447 and 351.455 of the MGBCL, a KCPL Shareholder may, by following the
procedures set forth in "The Offer--Dissenters' Rights," demand in writing that
Western Resources pay the fair value of his Shares. Within ten days after the
effective date of the Merger, Western Resources will notify each holder of
Shares still outstanding immediately after consummation of the Offer that the
Merger has occurred. A dissenting shareholder then has twenty days after the
mailing of such notice to demand in writing the fair value of his common equity
interest immediately prior to the Merger, exclusive of any element of value
arising from the expectation or accomplishment of the Merger. For a more
detailed description, see "The Offer--Purpose of the Offer; the Merger" and
"The Offer--Dissenters' Rights."
DESCRIPTION OF WESTERN RESOURCES CAPITAL STOCK
The authorized capital stock of Western Resources consists of 85,000,000
shares of Western Resources Common Stock, par value $5.00 per share, 4,000,000
shares of preference stock, no par value, 6,000,000 shares of preferred stock,
no par value, and 600,000 shares of preferred stock, par value $100.00 per
share. As of July 3, 1996, there were 63,983,885 shares of Western Resources
Common Stock issued and outstanding, 138,576 shares of 4.5%, 60,000 shares of
4.25%, and 50,000 shares of 5% preferred stock, par value $100.00 per share
issued and outstanding. As of July 3, 1996, there were 500,000 shares of 7.58%
Series preference stock outstanding.
Holders of shares of Western Resources Common Stock are entitled to one vote
per share for each share held. Subject to the rights of holders of shares of
Western Resources' outstanding preferred and preference stocks, holders of
shares of Western Resources Common Stock have equal rights to participate in
dividends when declared and, in the event of liquidation, in the net assets of
Western Resources available for distribution to stockholders. Western Resources
may not declare any dividends on the Western Resources Common Stock unless full
preferential amounts to which holders of Western Resources' preferred and
preference stocks are entitled have been paid or declared and set apart for
payment. The Western Resources Articles also contain restrictions on the
payment of dividends.
11
For additional information concerning the capital stock of Western Resources,
see "Description of Western Resources Capital Stock."
MARKET PRICES
The following table sets forth the market price per share of Western
Resources Common Stock and per Share and the equivalent market price per Share
on (i) April 12, 1996, the last trading day before public announcement of the
April 14 Offer, (ii) June 14, 1996, the last trading day before the public
announcement of the increased Offer, and (iii) July 2, 1996, the last trading
day prior to the date of this Prospectus. The historical market prices
represent the closing prices per share on such dates on the NYSE Composite
Tape. The equivalent market prices per Share represent the closing price per
share of Western Resources Common Stock multiplied by the Exchange Ratio which
is exchangeable in the Offer for each Share. See "Market Prices and Dividends."
KCPL
WESTERN ----------------------
RESOURCES EQUIVALENT AT
ACTUAL ACTUAL EXCHANGE RATIO
--------- ------- --------------
April 12, 1996.............................. $29.125 $23.875 $31.00
June 14, 1996............................... $28.750 $25.875 $31.00
July 2, 1996................................ $30.625 $27.750 $31.00
THE EXCHANGE AGENT
Harris Trust Company of New York has been appointed exchange agent (the
"Exchange Agent") in connection with the Offer. The Letter of Transmittal (or
facsimile copies thereof) and certificates for Shares should be sent by each
tendering KCPL Shareholder or his or her broker, dealer, bank or other nominee
to the Exchange Agent at the addresses set forth on the back cover of this
Prospectus.
REQUEST FOR ASSISTANCE AND ADDITIONAL COPIES
Requests for information or assistance concerning the Offer may be directed
to the Dealer Manager or the Information Agent at their respective addresses
set forth on the back cover of this Prospectus. Requests for additional copies
of this Prospectus and the Letter of Transmittal should be directed to the
Information Agent.
12
COMPARATIVE PER SHARE DATA
The following table sets forth per share data of Western Resources and KCPL
on both historical and pro forma combined bases. This table should be read in
conjunction with the historical financial statements and notes thereto
contained in the Western Resources 1995 Form 10-K and the KCPL 1995 Form 10-K,
both of which are incorporated by reference herein, and in conjunction with the
unaudited pro forma combined financial information appearing elsewhere in this
Prospectus. See "Western Resources and KCPL Unaudited Pro Forma Combined
Financial Information."
Pro forma combined per share data reflects the historical results of Western
Resources and KCPL on a combined basis as if a merger had occurred for all
periods presented. This information has been prepared on the basis of
accounting for the Merger as a pooling of interests and is based on the
assumptions set forth in the notes thereto. This information does not reflect
the estimated cost savings Western Resources believes will result from the
Merger. Therefore, the pro forma per share data is not necessarily indicative
of actual results had the Merger occurred on such dates or of future expected
results.
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------- --------------------------
1996 1995 1995 1994 1993
------- ------- -------- -------- --------
WESTERN RESOURCES
Book value per common share........ $24.90 $24.06 $24.71 $23.93 $23.08
Earnings per common share.......... 0.66 0.62 2.71 2.82 2.76
Dividends declared per common
share............................. 0.515 0.505 2.02 1.98 1.94
KCPL
Book value per common share........ $14.49 $14.10 $14.50 $14.13 $13.99
Earnings per common share.......... 0.38 0.35 1.92 1.64 1.66
Dividends per common share......... 0.39 0.38 1.54 1.50 1.46
PRO FORMA COMBINED(1)
Book value per common share........ $19.64 $18.96 $19.53 $18.90 $18.41
Earnings per common share.......... 0.52 0.48 2.30 2.22 2.18
PRO FORMA EQUIVALENT PER KCPL SHARE
(2)
Book value per common share........ $19.88 $19.19 $19.77 $19.13 $18.64
Earnings per common share.......... 0.52 0.49 2.33 2.24 2.21
Dividends per common share......... 0.52 0.51 2.04 2.00 1.96
- --------
(1) Obtained from the Western Resources and KCPL Unaudited Pro Forma Combined
Financial Information.
(2) Calculated assuming an exchange ratio of 1.01224 based on the July 2, 1996
closing stock price (the last trading date before the date of this
Prospectus) applied to the Book value per common share and Earnings per
common share for the Pro Forma Combined and Dividends declared per common
share of Western Resources.
13
SELECTED FINANCIAL DATA
The summary below sets forth selected historical financial data, selected
unaudited pro forma financial data and selected forecasted financial data. This
financial data should be read in conjunction with the historical financial
statements and notes thereto contained in the Western Resources 1995 Form 10-K
and KCPL 1995 Form 10-K, both incorporated by reference herein, and in
conjunction with the unaudited pro forma combined financial information,
unaudited forecasted financial data and notes relating to each appearing
elsewhere in this Prospectus. See "Western Resources and KCPL Unaudited Pro
Forma Combined Financial Information" and "Unaudited Forecasted Financial
Data."
SELECTED HISTORICAL FINANCIAL DATA OF WESTERN RESOURCES
The selected historical financial data of Western Resources set forth below
has been derived from financial statements of Western Resources as they
appeared in Western Resources' Forms 10-K filed with the Commission for each of
the five fiscal years in the period ended December 31, 1995 and Western
Resources' Forms 10-Q for the periods ending March 31, 1996 and March 31, 1995.
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------------- ----------------------------------------------------------
1996 1995 1995 1994(1) 1993 1992(2) 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT RATIO AND PER SHARE DATA)
WESTERN RESOURCES
Income Statement Data:
Operating revenues.... $ 555,622 $ 443,375 $1,572,071 $1,617,943 $1,909,359 $1,556,248 $1,162,178
Operating income...... 75,273 69,441 275,384 269,546 292,063 239,169 129,621
Net income............ 44,789 41,575 181,676 187,447 177,370 127,884 89,645(4)
Earnings applicable to
common stock......... 41,434 38,220 168,257 174,029 163,864 115,133 83,268(4)
Earnings per common
share................ $ 0.66 $ 0.62 $ 2.71 $ 2.82 $ 2.76 $ 2.20 $ 2.41(4)
Dividends declared per
common share......... $ 0.515 $ 0.505 $ 2.02 $ 1.98 $ 1.94 $ 1.90 $ 2.04(3)
Ratio of earnings to
fixed charges........ 2.38x(5) 2.41x(5) 2.41x 2.65x 2.36x 2.02x 2.98x
Ratio of earnings to
fixed charges plus
preferred dividend
requirement.......... 2.16x(5) 2.16x(5) 2.18x 2.37x 2.14x 1.84x 2.61x
Balance Sheet Data (end
of period):
Total assets.......... 5,958,801 5,196,628 5,490,677 5,371,029 5,412,048 5,438,906 2,112,513
Long-term debt........ 1,666,192 1,357,069 1,391,263 1,357,028 1,523,988 1,926,026 586,579
Redeemable preference
stock................ 150,000 150,000 150,000 150,000 150,000 151,433 104,033
Preferred stock not
subject to mandatory
redemption........... 24,858 24,858 24,858 24,858 24,858 24,858 24,858
Company-obligated
mandatorily
redeemable preferred
securities........... 100,000 -- 100,000 -- -- -- --
Common stock equity... 1,575,188 1,485,673 1,553,110 1,474,455 1,422,175 1,248,367 642,449
Book value per common
share................ $ 24.90 $ 24.06 $ 24.71 $ 23.93 $ 23.08 $ 21.51 $ 18.59
- --------
(1) Information reflects the sale of the Missouri natural gas properties on
January 31, 1994.
(2) Information reflects the merger with Kansas Gas and Electric Company on
March 31, 1992.
(3) Includes special, one-time dividend of $0.18 per share paid February 28,
1991.
(4) Includes cumulative effect to January 1, 1991, of change in revenue
recognition, a $17,360,000 or $0.50 per share increase.
(5) Represents ratio for 12-month period ended March 31.
14
SELECTED HISTORICAL FINANCIAL DATA OF KCPL
The selected historical financial data of KCPL set forth below has been
derived from the financial statements of KCPL as they appeared in KCPL's Forms
10-K filed with the Commission for each of the five fiscal years in the period
ended December 31, 1995 and KCPL's Forms 10-Q for the periods ending March 31,
1996 and March 31, 1995.
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------- ------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT RATIO AND PER SHARE DATA)
KCPL
Income Statement Data:
Operating revenues.... $ 206,624 $ 198,906 $ 885,955 $ 868,272 $ 857,450 $ 802,668 $ 825,101
Operating income...... 34,944 29,443 167,048 149,691 156,302 140,574 171,308
Net income............ 24,523 22,887 122,586 104,775 105,772 86,334 103,893
Earnings applicable to
common stock......... 23,566 21,861 118,575 101,318 102,619 83,272 97,870
Earnings per common
share................ $ 0.38 $ 0.35 $ 1.92 $ 1.64 $ 1.66 $ 1.35(1) $ 1.58(1)
Dividends declared per
common share......... $ 0.39 $ 0.38 $ 1.54 $ 1.50 $ 1.46 $ 1.43(1) $ 1.37(1)
Ratio of earnings to
fixed charges........ 3.86x(2) N/A 3.94x 4.07x 3.80x 3.12x 3.22x
Ratio of earnings to
fixed charges plus
preferred dividend
requirement.......... 3.54x(2) N/A 3.59x 3.69x 3.51x 2.90x 2.85x
Balance Sheet Data (end
of period):
Total assets.......... 2,876,451 2,786,967 2,882,506 2,770,397 2,755,068 2,646,923 2,615,039
Long-term debt........ 841,040 802,633 835,713 798,470 733,664 788,209 822,680
Redeemable preferred
stock................ 1,276 1,436 1,436 1,596 1,756 1,916 2,076
Preferred stock not
subject to mandatory
redemption........... 89,000 89,000 89,000 89,000 89,000 89,000 39,000
Common stock equity... 897,360 873,052 897,938 874,699 866,151 853,924 860,229
Book value per common
share................ $ 14.49 $ 14.10 $ 14.50 $ 14.13 $ 13.99 $ 13.79(1) $ 13.90(1)
N/A--Not available.
- --------
(1) Amounts have been restated to reflect the May 1992 two-for-one common stock
split.
(2) Represents ratio for 12-month period ended March 31.
15
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following selected unaudited pro forma combined financial information
combines the consolidated balance sheets and income statements of Western
Resources and KCPL as if a merger had occurred for all periods presented. These
statements are prepared on the basis of accounting for the Merger as a pooling
of interests and are based on the assumptions set forth in the notes thereto.
These statements do not reflect the estimated cost savings Western Resources
believes will result from the Merger. Therefore, the following information is
not necessarily indicative of actual results that would have occurred had the
Merger occurred on such dates or of future expected results. See "Western
Resources and KCPL Unaudited Pro Forma Combined Financial Information."
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
--------------------- ----------------------------------
1996 1995 1995 1994 1993
-------- -------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT RATIO AND PER SHARE
PRO FORMA COMBINED AMOUNTS)
Income Statement Data:
Operating revenues.... $762,246 $642,281 $2,458,026 $2,486,215 $2,766,809
Operating income...... 110,217 98,884 442,432 419,237 448,365
Net income............ 69,312 64,462 304,262 292,222 283,142
Earnings applicable to
common stock......... 65,000 60,081 286,832 275,347 266,483
Earnings per common
share(1)............. $ 0.52 $ 0.48 $ 2.30 $ 2.22 $ 2.18
Ratio of earnings to
fixed charges........ 2.75x(2) N/A 2.80x 2.99x 2.72x
Ratio of earnings to
fixed charges plus
preferred dividend
requirements......... 2.50x(2) N/A 2.54x 2.69x 2.48x
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------------- -------------------------
1996 1995 1995 1994
---------- ---------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
PRO FORMA COMBINED AMOUNTS)
Balance Sheet Data (end of
period):
Total assets................. $8,835,252 $7,983,595 $ 8,373,183 $ 8,141,426
Long-term debt............... 2,507,232 2,159,702 2,226,976 2,155,498
Redeemable preferred and
preference stock............ 151,276 151,436 151,436 151,596
Preferred stock not subject
to redemption............... 113,858 113,858 113,858 113,858
Company-obligated mandatorily
redeemable preferred
securities.................. 100,000 -- 100,000 --
Common stock equity.......... 2,472,548 2,358,725 2,451,048 2,349,154
Book value per common
share(1).................... $ 19.64 $ 18.96 $ 19.53 $ 18.90
N/A--Not Available.
- --------
(1) Calculated assuming an exchange ratio of 1.01224 based on July 2, 1996 (the
last trading day prior to the date of this Prospectus) closing stock prices.
(2) Represents ratio for 12-month period ended March 31.
16
SELECTED UNAUDITED FORECASTED FINANCIAL DATA
The forecast was prepared to reflect the pro forma results of operations for
the pre-Merger periods of 1996 and 1997 and the combined company post-Merger
results from operations for the periods 1998 through 2000. For purposes of the
forecast, the Merger is assumed to be consummated on January 1, 1998 and to be
accounted for as a pooling of interests.
The forecast was developed solely by Western Resources from the stand-alone
forecast of Western Resources and, for KCPL, a forecast based on public
information, analysts' forecasts, knowledge of cost trends associated with
generating units jointly owned by Western Resources and KCPL, and Western
Resources' knowledge of the electric utility industry. To the best knowledge
and belief of Western Resources, the assumptions contained within the forecast
are reasonable. The assumptions disclosed herein are those which Western
Resources believes are significant to the forecast.
This forecasted financial information involves significant judgments and
assumptions which may not be realized and are inherently subject to significant
uncertainties, all of which are difficult to predict and many of which are
beyond the control of Western Resources. Accordingly, there can be no assurance
this forecast will be realized and actual results may vary materially from
those shown. Selected significant assumptions to the forecasted financial data
are described in the "Summary of Selected Significant Assumptions" below and in
further detail in "Unaudited Forecasted Financial Data."
PRO FORMA COMBINED COMPANY
PRE-MERGER POST-MERGER
--------------------- -------------------------------- -----------
1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating revenues.................................... $2,561,825 $2,605,118 $2,657,262 $2,722,600 $2,796,483
Operating expenses.................................... 2,090,217 2,139,265 2,278,639 2,239,487 2,316,846
Transaction costs..................................... -- -- 88,000 -- --
---------- ---------- ---------- ---------- ----------
Operating income...................................... 471,608 465,853 378,623 483,113 479,637
Other income and deductions........................... 38,416 67,392 61,048 79,573 85,735
---------- ---------- ---------- ---------- ----------
Income before interest charges........................ 510,024 533,245 439,671 562,686 565,372
Interest charges...................................... 195,631 199,917 212,335 205,786 200,568
---------- ---------- ---------- ---------- ----------
Net income............................................ 314,393 333,328 227,336 356,900 364,804
Preferred and preference dividends.................... 18,282 8,362 8,648 12,419 12,419
---------- ---------- ---------- ---------- ----------
Earnings applicable to common stock................... $ 296,111 $ 324,966 $ 218,688 $ 344,481 $ 352,385
========== ========== ========== ========== ==========
Average common shares outstanding(1).................. 126,310 127,347 128,136 129,618 130,762
Earnings per common share(1).......................... $ 2.34 $ 2.55 $ 1.71 $ 2.66 $ 2.69
Earnings per common share excluding costs to achieve
savings and transaction costs(1)(2).................. $ 2.34 $ 2.55 $ 2.52 $ 2.67 $ 2.69
========== ========== ========== ========== ==========
Dividends declared per common share:
Western Resources................................... $ 2.06 $ 2.10 $ 2.14 $ 2.18 $ 2.22
KCPL................................................ $ 1.58 $ 1.62
========== ==========
Equivalent Dividends per KCPL Common Share(1)....... $ 2.17 $ 2.21 $ 2.25
- --------------------------------------------------
========== ========== ==========
- --------
(1) Equivalent Dividends per KCPL Common Share are calculated by multiplying
the Dividends declared per common share of Western Resources by an exchange
ratio of 1.01224 based on July 2, 1996 (the last trading day prior to the
date of this Prospectus) closing stock prices. If the Merger had been
consummated on January 1, 1996, the equivalent dividends per Share would
have been $2.09 and $2.13 in 1996 and 1997, respectively (based on an
exchange ratio of 1.01224).
(2) Dividends declared per share of Western Resources Common Stock exceed
Earnings per common share in 1998 (the first year following the Merger) as
a result of a one-time projected charge of $88 million for transaction
costs and $27 million of expenses to achieve cost savings in the Merger.
See "Notes to Unaudited Forecasted Statement of Income--Merger
Assumptions--Transaction Costs" and "Notes to Unaudited Forecasted
Statements of Income--Merger Assumptions--Cost Savings." Absent these one-
time costs, Earnings per common share outstanding would be projected to be
$.81 higher and would exceed the projected dividend by $.48 per share.
17
SUMMARY OF SELECTED SIGNIFICANT ASSUMPTIONS
(UNAUDITED)
. Increases in dividends are assumed to be continued consistent with Western
Resources' past practice.
. The major modifications which are assumed to result from the Merger include
the estimated net cost savings and the proposed Regulatory Plan.
. The assumptions incorporate forecasts of sales and revenues for Western
Resources' gas operations and KCPL and Western Resources' electric
operations.
. The forecast assumes that increases in Western Resources' purchased gas costs
will continue to be recovered through appropriate adjustment mechanisms
within its rate structures.
. The forecast assumes annual compound rates of growth in electric and gas
operations and maintenance costs of approximately 3% before estimated cost
savings and excluding scheduled refueling of Wolf Creek, medical costs and
specific lease costs.
. The assumptions associated with depreciation are consistent with each
company's current practices with the exception of the adjustments made to
reflect the proposed Regulatory Plan.
. Income and other taxes are forecasted to increase or decrease as a direct
result of changes in revenues, capital additions and wage rates. Income taxes
were computed using the combined statutory income tax rates and the
appropriate "flow through" items for each company in accordance with current
and assumed regulatory treatment.
. The financing requirements included in the forecasts were developed from cash
requirements resulting from anticipated capital expenditures, refunding
requirements and the results of operations as adjusted for the Merger.
See "Unaudited Forecasted Financial Data" and "Notes to Unaudited Forecasted
Statement of Income" for an expanded discussion of selected significant
assumptions used in the forecast.
18
BACKGROUND OF THE OFFER
PRIOR COMMUNICATIONS WITH KCPL
KCPL and Western Resources have discussed the possibility of a merger at
various times over the last two years. In June 1994, KCPL and Western
Resources exchanged confidential information in connection with preliminary
discussions regarding a possible business combination. KCPL declined Western
Resources' request to present its analysis of the benefits of a merger between
the two companies, and the confidential information was returned in August
1994. Discussions and correspondence between Mr. Jennings and Mr. Hayes
relating to a potential merger continued over the next several months.
In February 1995, Mr. Hayes expressed Western Resources' interest in a
combination with KCPL and the synergies and substantial benefits of such a
combination. In March 1995, Mr. Jennings wrote to Mr. Hayes that KCPL had
decided to focus on its current business plan rather than a business
combination with Western Resources. In May 1995, Mr. Hayes sent a letter to
Mr. Jennings again proposing a merger of the two companies. Mr. Hayes also
requested that KCPL outline its interest, requirements or suggestions
regarding a combination. In a letter, Mr. Hayes stressed that Western
Resources strongly preferred a negotiated transaction with KCPL. In such 1995
correspondence, Mr. Hayes indicated that based on a cursory analysis, a
preliminary estimate of potential savings to be achieved in a combination of
Western Resources and KCPL would exceed $500 million over ten years. For a
discussion of the comprehensive analysis undertaken earlier this year by
Western Resources with the assistance of Deloitte & Touche Consulting Group
which resulted in the estimate of over $1 billion in potential cost savings as
a result of the Merger, see "Background of the Offer--Comparison of the
Proposals--Potential Cost Savings."
On December 14, 1995, Mr. Hayes sent letters to each of Mr. Jennings and Mr.
Green stating that Western Resources believed that KCPL and UtiliCorp were in
discussions concerning a possible combination and requesting an opportunity to
meet with Mr. Jennings and Mr. Green regarding a possible combination.
KCPL and UtiliCorp entered into the Original UtiliCorp/KCPL Merger
Agreement, dated as of January 19, 1996. Pursuant to the Original
UtiliCorp/KCPL Merger Agreement, each of UtiliCorp and KCPL would have been
merged with and into KC United, with KC United being the surviving
corporation.
On the day of announcement of the Original UtiliCorp/KCPL Transaction, Mr.
Jennings telephoned Mr. Hayes to inform him of this development. Mr. Hayes
offered to meet with Mr. Jennings and discuss the possibility of a combination
with Western Resources, but such offer was declined by Mr. Jennings.
KCPL entered into the Original UtiliCorp/KCPL Merger Agreement despite the
fact that, as of January 19, 1996, KCPL was aware of Western Resources'
continuing interest in pursuing a combination with KCPL.
THE APRIL 14 OFFER AND RELATED ACTIONS
At an April 13, 1996 meeting, following discussions with management, Salomon
Brothers Inc (financial advisor), the Deloitte & Touche Consulting Group (cost
savings consultant), Sullivan & Cromwell and LeBoeuf, Lamb, Greene & MacRae,
L.L.P. (legal advisors), the Western Resources Board approved the making of
the April 14 Offer. Also at the April 13, 1996 meeting, following
presentations by management of estimated cost savings from the Merger,
Deloitte & Touche Consulting Group (cost savings consultant) responded to
questions regarding the reasonableness of such estimated cost savings.
On April 14, 1996, Mr. Hayes telephoned Mr. Jennings to inform him that he
was having delivered to Mr. Jennings that afternoon a written proposal to the
KCPL board of directors to acquire all of the outstanding Shares in a
transaction in which each KCPL Shareholder would be entitled to receive $28.00
of Western Resources Common Stock for each Share. The exchange ratio would be
subject to a "collar" which would provide that the exchange ratio would not be
less than 0.833 nor greater than 0.985.
Following such telephone conversation, Western Resources delivered to Mr.
Jennings a letter setting forth such offer which, among other things, provided
a premium of 17% over the Share price of April 12, 1996 (the last trading day
before public announcement of the April 14 Offer) and an indicated annual
dividend rate of $1.98, which is 27% higher than the current KCPL annual
dividend rate. Such implied annual dividend rate is an equivalent per Share
amount calculated by multiplying Western Resources' current indicated annual
dividend
19
rate of $2.06 by the number of shares of Western Resources Common Stock which
would have been exchanged per Share pursuant to the Exchange Ratio under the
April 14 Offer at then-current market prices. The letter also set forth Western
Resources' belief that a combination with Western Resources would produce over
$1 billion in savings during the ten years following consummation of the
Merger. On April 15, 1996, Western Resources filed the Western Resources KCC
Application (as defined below). On May 3, 1996, Western Resources filed an
application with the MPSC seeking approval of the Merger. By an order dated
June 28, 1996, the MPSC denied the MPSC staff's motion to dismiss Western
Resources' application and ordered the parties to file a proposed procedural
schedule by July 9, 1996.
On April 22, 1996, Mr. Jennings had delivered to Mr. Hayes a letter stating
that the KCPL board of directors had rejected the April 14 Offer. After the
delivery of the letter, Mr. Jennings telephoned Mr. Hayes to inform him of the
decision of the KCPL board of directors.
On April 22, 1996, Western Resources announced its intention to commence an
offer to exchange shares of Western Resources Common Stock for Shares. As part
of such announcement, Western Resources also stated that it had filed a proxy
statement with the Commission for use in soliciting proxies from KCPL
Shareholders against the approval and adoption of the Original UtiliCorp/KCPL
Merger Agreement and the Original UtiliCorp/KCPL Transaction (the "Proxy
Solicitation").
On May 6, 1996, in a letter from Mr. Jennings to KCPL Shareholders, KCPL and
UtiliCorp announced their intention to recommend an initial annualized dividend
rate of $1.85 upon completion of the Original UtiliCorp/KCPL Transaction.
Also on May 6, 1996, the Western Resources Board met and, after discussions
with management, Salomon Brothers Inc (financial advisor) and Sullivan &
Cromwell and LeBoeuf, Lamb, Greene & MacRae, L.L.P. (legal advisors), approved
a proposal to increase the value of its offer to KCPL Shareholders. As amended
on May 6, the Western Resources offer provided that the Exchange Ratio would be
not less than 0.910 nor greater than 0.985.
RECENT DEVELOPMENTS
On May 20, 1996, two days before the KCPL annual meeting at which KCPL
Shareholders were to have the opportunity to vote on the approval and adoption
of the Original UtiliCorp/KCPL Merger Agreement and the Original UtiliCorp/KCPL
Transaction, KCPL and UtiliCorp announced that they had entered into the
Amended and Restated Agreement and Plan of Merger which superseded the Original
UtiliCorp/KCPL Merger Agreement. Pursuant to the terms of the Amended and
Restated UtiliCorp/KCPL Merger Agreement, a newly created KCPL subsidiary would
be merged with and into UtiliCorp and UtiliCorp would then be merged with and
into KCPL. According to the UtiliCorp/KCPL Joint Proxy Statement, at the
effective time of the Proposed UtiliCorp/KCPL Transaction, the name of the
surviving corporation would be changed to Maxim Energies, Inc. Pursuant to the
Amended and Restated UtiliCorp/KCPL Merger Agreement, UtiliCorp shareholders
would receive one Share in exchange for each share of UtiliCorp Common Stock
held while KCPL Shareholders would continue to hold their Shares.
Accordingly, on May 20, 1996, KCPL withdrew the Original UtiliCorp/KCPL
Merger Agreement and the Original UtiliCorp/KCPL Transaction from consideration
at the May 22, 1996 KCPL annual meeting and announced that KCPL Shareholders
would vote on the issuance of Shares necessary to effect the Proposed
UtiliCorp/KCPL Transaction at the KCPL Special Meeting. In such announcement,
KCPL stated that, pursuant to the Amended and Restated UtiliCorp/KCPL Merger
Agreement, the affirmative vote of a majority of the Shares present at a
meeting at which a majority of the outstanding Shares are represented is
necessary to approve the issuance of Shares required to effect the Proposed
KCPL/UtiliCorp Transaction. The ability of KCPL to effect the Proposed
Utilicorp/KCPL Transaction with such vote is the subject of pending litigation.
See "--Litigation."
In addition, on May 20, 1996, KCPL instituted a legal proceeding in the
United States District Court for the Western District of Missouri against Mr.
Rives and Western Resources seeking, among other things, a declaration as to
the validity of the Amended and Restated UtiliCorp/KCPL Merger Agreement and
the Proposed
20
UtiliCorp/KCPL Transaction. On June 7, 1996, Western Resources and Mr. Rives
filed an answer to KCPL's complaint as well as a counterclaim seeking, among
other things, a declaration that Missouri law requires the approval of the
Amended and Restated UtiliCorp/KCPL Merger Agreement by two-thirds of the
holders of all outstanding Shares and a declaration that the KCPL board of
directors breached its fiduciary duties to KCPL Shareholders by proceeding
with a plan designed to consummate the transactions contemplated by the
Amended and Restated UtiliCorp/KCPL Merger Agreement based on less than the
required two-thirds KCPL Shareholder vote. On June 14, 1996, the court
scheduled a preliminary injunction hearing for July 25, 1996. On June 27,
1996, KCPL filed a reply to the counterclaims of Western Resources and Mr.
Rives and a counterclaim alleging that Western Resources and Mr. Rives have
violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated
thereunder. Western Resources and Mr. Rives will continue to pursue their
claims against KCPL and to vigorously defend against each of KCPL's
allegations, which Western Resources and Mr. Rives believe to be without
merit. As of the date of this Prospectus, no findings have been made by a
court concerning any of the above-mentioned allegations. See "Background of
the Offer--Litigation."
On June 12, 1996, the Western Resources Board met and, following discussions
with management, Salomon Brothers Inc (financial advisor) and Sullivan &
Cromwell and LeBoeuf, Lamb, Greene & MacRae, L.L.P. (legal advisors), approved
management's proposal to increase the offer to KCPL Shareholders to $31.00 of
Western Resources Common Stock per Share, subject to the collar. Management
advised the Western Resources Board that, in its opinion, the KCC staff's
recommendation with respect to Western Resources' rates is not reasonably
likely to be adopted as proposed. Following such discussion, the Western
Resources Board authorized management to proceed with the improved Offer.
On June 17, 1996, in a letter to Mr. Jennings, Western Resources proposed an
offer that it believes is financially superior to the Proposed UtiliCorp/KCPL
Transaction and which would provide KCPL Shareholders with $31.00 of Western
Resources Common Stock per Share in a negotiated merger between KCPL and
Western Resources. On June 24, 1996, Mr. Jennings had delivered to Mr. Hayes a
letter stating that the KCPL board of directors had rejected Western
Resources' June 17th offer. After the delivery of the letter, Mr. Jennings
telephoned Mr. Hayes to inform him of the decision of the KCPL board of
directors. On June 25, 1996, Western Resources reaffirmed its intention to
make the Offer directly to KCPL Shareholders. Pursuant to the Offer, each
Share is entitled to receive $31.00 of Western Resources Common Stock, subject
to certain limitations as set forth herein.
COMPARISON OF THE PROPOSALS
Offer Premium and Dividend Impact. Western Resources believes that the Offer
is clearly financially superior to the Proposed UtiliCorp/KCPL Transaction.
The indicated annual dividend rate for KCPL and the closing price per Share on
April 12, 1996 (the last trading day prior to the public announcement of the
April 14 Offer) were $1.56 and $23.875, respectively. For the twenty trading
days immediately preceding April 12, 1996, the average closing price per Share
was $24.956. The Offer would provide a substantial premium to KCPL
Shareholders in relation to those levels, as shown by the following table:
OFFER KCPL SHARE PERCENT
PRICE PRICE DIFFERENTIAL*
------- ---------- -------------
April 12, 1996 (the last trading day before
the public announcement of the April 14
Offer)...................................... $31.000 $23.875 29.8%
July 2, 1996 (the last trading day before the
date of this Prospectus).................... $31.000 $27.750 11.7%
- --------
* Based on the closing price of Western Resources Common Stock and the Shares
on the indicated dates.
21
In addition, as shown by the following table, if it were consummated today,
the Offer would provide immediate dividend accretion to KCPL Shareholders,
compared to KCPL's current dividend rate.
WESTERN RESOURCES/
KCPL MERGER
IMPLIED ANNUAL CURRENT KCPL
DIVIDEND RATE ANNUAL PERCENT
PER KCPL SHARE* DIVIDEND RATE DIFFERENTIAL*
------------------ ------------- -------------
April 12, 1996 (the last
trading day before the public
announcement of the April 14
Offer)....................... $2.19 $1.56 40.4%
July 2, 1996 (the last trading
day before the date of this
Prospectus).................. $2.09 $1.56 34.0%
- --------
* Based on the current indicated annual dividend rate of $2.06 per share of
Western Resources Common Stock and the closing price of Western Resources
Common Stock and the Shares on the indicated dates. The implied annual
dividend rate is an equivalent per Share amount calculated by multiplying
Western Resources' current indicated annual dividend rate of $2.06 per share
of Western Resources Common Stock by the applicable Exchange Ratio. The
implied annual dividend rate per Share will therefore vary depending on the
price of Western Resources Common Stock at the time the Exchange Ratio is
finally determined.
Based on Western Resources' current indicated annual dividend rate of $2.06
per share and the provisions of the collar, the indicated annual dividend rate
per Share would range from a minimum of $1.92 to a maximum of $2.27, or about
23% to 46% more than KCPL's current annual dividend rate. See "--The Exchange
Ratio--Current Dividends."
The premium and dividend accretion to KCPL Shareholders will change as the
market price of Western Resources Common Stock changes.
Based on the projections of each of Western Resources and KCPL, the Offer
also provides greater projected 1998 post-Merger equivalent dividends to KCPL
Shareholders than does the Proposed UtiliCorp/KCPL Transaction, as shown by
the following table:
WESTERN RESOURCES/
KCPL MERGER
IMPLIED PROJECTED
1998 ANNUAL KCPL PROJECTED
DIVIDEND RATE 1998 ANNUAL PERCENT
PER KCPL SHARE** DIVIDEND RATE DIFFERENTIAL**
------------------ -------------- --------------
April 12, 1996 (the last
trading day before the public
announcement of the April 14
Offer)....................... $ 2.28 $1.85 23.2%
July 2, 1996 (the last trading
day before the date of this
Prospectus).................. $ 2.17 $1.85 17.3%
- --------
** Based on the projected 1998 post-Merger annual dividend rate of $2.14 per
share of Western Resources Common Stock, the stated intention of KCPL and
UtiliCorp to recommend an annual dividend rate of $1.85 per Share following
consummation of the Proposed UtiliCorp/KCPL Transaction and the closing
price of Western Resources Common Stock and the Shares on the indicated
dates. The implied projected 1998 post-Merger annual dividend rate per
Share will vary depending on the price of Western Resources Common Stock at
the time the Exchange Ratio is finally determined. Western Resources has
paid dividends every year since its formation in 1924 and dividends have
been increased every year since 1958 (except for 1975, in which the
dividend remained unchanged). Western Resources does not anticipate any
significant change with respect to its historical dividend practice as a
result of the Merger. However, the declaration of future dividends will
depend upon future earnings, the financial condition of Western Resources
and other factors. Western Resources' projection of its 1998 post-Merger
annual dividend rate and subsequent dividends is based upon Western
Resources' financial projections, the achievement of which is subject to
various factors beyond Western Resources' control, including Western
Resources' ability to achieve over $1 billion in cost savings from the
Merger, and, therefore, there is no assurance that Western Resources will
be able to pay dividends in the projected amounts. See "Western Resources
Unaudited Forecasted Statement of Income" and "Notes to Unaudited
Forecasted Statement of Income" for further details regarding the basis for
and risks of Western Resources' projected financial results following the
Merger.
22
Based on Western Resources' projected 1998 post-Merger annual dividend rate
of $2.14 per share of Western Resources Common Stock and the provisions of the
collar, the indicated projected 1998 post-Merger annual dividend rate per
Share would range from a minimum of $2.00 to a maximum of $2.35, or about 8%
to 27% more than the UtiliCorp/KCPL "intention to recommend" an annual
dividend rate of $1.85 per Share. See "--The Exchange Ratio--Projected 1998
Dividends."
The Exchange Ratio
Current Dividends
The chart below sets forth a range of prices of Western Resources Common
Stock and the corresponding Exchange Ratio, dollar value of Western Resources
Common Stock to be received per Share, indicated current annual dividend rate
and premiums to KCPL Shareholders over the April 12, 1996 Share price and the
current KCPL annual dividend rate of $1.56 per Share.
CALCULATION OF STOCK PRICE AND DIVIDENDS TO KCPL
SHAREHOLDERS
CURRENT INDICATED DIVIDEND RATE
PREMIUM TO INDICATED
WESTERN KCPL CURRENT ANNUAL
RESOURCES STOCK VALUE SHAREHOLDERS DIVIDEND RATE TO INCREASE IN
COMMON EXCHANGE TO KCPL (APRIL 12 KCPL KCPL
STOCK PRICE RATIO SHAREHOLDERS CLOSING PRICE) SHAREHOLDERS/1 DIVIDEND RATE/2
----------- -------- ------------ -------------- ---------------- ---------------
$27.00 1.100 $29.70 24.4% $2.27 45.5%
27.50 1.100 30.25 26.7% 2.27 45.5%
28.00 1.100 30.80 29.0% 2.27 45.5%
----------------------------------------------------------------------------------
Collar 28.18 1.100 31.00 29.8% 2.27 45.5%
28.50 1.088 31.00 29.8% 2.24 43.6%
29.00 1.069 31.00 29.8% 2.20 41.2%
29.50 1.051 31.00 29.8% 2.16 38.8%
30.00 1.033 31.00 29.8% 2.13 36.5%
30.50 1.016 31.00 29.8% 2.09 34.2%
31.00 1.000 31.00 29.8% 2.06 32.1%
31.50 0.984 31.00 29.8% 2.03 30.0%
32.00 0.969 31.00 29.8% 2.00 27.9%
32.50 0.954 31.00 29.8% 1.96 26.0%
33.00 0.939 31.00 29.8% 1.94 24.1%
Collar 33.23 0.933 31.00 29.8% 1.92 23.2%
----------------------------------------------------------------------------------
33.50 0.933 31.26 30.9% 1.92 23.2%
34.00 0.933 31.72 32.9% 1.92 23.2%
34.50 0.933 32.19 34.8% 1.92 23.2%
--------
1/ The KCPL indicated current annual dividend rate is
calculated by multiplying the Western Resources current
indicated annual dividend rate of $2.06 per share of Western
Resources Common Stock by the applicable Exchange Ratio.
2/ Based on the current KCPL annual dividend rate of $1.56 per
Share.
23
Projected 1998 Post-Merger Dividends
The chart below sets forth a range of prices of Western Resources Common
Stock and the corresponding Exchange Ratio, dollar value of Western Resources
Common Stock to be received per Share, indicated projected 1998 post-Merger
annual dividend rate and premiums to KCPL Shareholders over the April 12, 1996
Share price and the projected 1998 post-Merger annual dividend rate per Share
in the Proposed UtiliCorp/KCPL Transaction.
CALCULATION OF STOCK PRICE AND DIVIDENDS TO KCPL
SHAREHOLDERS
POST-MERGER INDICATED DIVIDEND RATE
PREMIUM TO
WESTERN KCPL INDICATED ANNUAL
RESOURCES STOCK VALUE SHAREHOLDERS DIVIDEND RATE TO INCREASE IN
COMMON EXCHANGE TO KCPL (APRIL 12 KCPL KCPL
STOCK PRICE RATIO SHAREHOLDERS CLOSING PRICE) SHAREHOLDERS/1 DIVIDEND RATE/2
----------- -------- ------------ -------------- ---------------- ---------------
$27.00 1.100 $29.70 24.4% $2.35 27.2%
27.50 1.100 30.25 26.7% 2.35 27.2%
28.00 1.100 30.80 29.0% 2.35 27.2%
----------------------------------------------------------------------------------
Collar 28.18 1.100 31.00 29.8% 2.35 27.2%
28.50 1.088 31.00 29.8% 2.33 25.8%
29.00 1.069 31.00 29.8% 2.29 23.7%
29.50 1.051 31.00 29.8% 2.25 21.6%
30.00 1.033 31.00 29.8% 2.21 19.5%
30.50 1.016 31.00 29.8% 2.18 17.6%
31.00 1.000 31.00 29.8% 2.14 15.7%
31.50 0.984 31.00 29.8% 2.11 13.8%
32.00 0.969 31.00 29.8% 2.07 12.1%
32.50 0.954 31.00 29.8% 2.04 10.3%
33.00 0.939 31.00 29.8% 2.01 8.6%
Collar 33.23 0.933 31.00 29.8% 2.00 7.9%
----------------------------------------------------------------------------------
33.50 0.933 31.26 30.9% 2.00 7.9%
34.00 0.933 31.72 32.9% 2.00 7.9%
34.50 0.933 32.19 34.8% 2.00 7.9%
--------
1/ The KCPL indicated projected 1998 post-Merger annual
dividend rate is calculated by multiplying the projected
1998 post-Merger annual dividend rate of $2.14 per share of
Western Resources Common Stock by the applicable Exchange
Ratio. See "Western Resources Unaudited Forecasted
Statement of Income."
2/ Based on KCPL's and UtiliCorp's stated intention to
recommend an annual dividend rate of $1.85 per Share
following consummation of the Proposed UtiliCorp/KCPL
Transaction.
Potential Cost Savings.
The analyses discussed below include forward looking statements that involve
judgments, assumptions and other uncertainties beyond the control of Western
Resources. As such, there can be no assurance that the cost savings will be
realized in the amounts referred to herein and actual cost savings may be more
or less than those projected. Such judgments, assumptions and uncertainties
are discussed more fully below.
Western Resources believes that the KCPL Shareholders, as well as KCPL's
customers, employees and the communities it serves, would realize benefits
from the Offer and the Merger that are greater than the benefits that would be
realized if KCPL either remains an independent entity or completes the
Proposed UtiliCorp/KCPL Transaction. Western Resources believes such greater
benefits would be realized through the following operational and structural
synergies:
. Operational coordination--The geographic locations of the respective
service territories of Western Resources and KCPL, which both operate in
eastern Kansas and whose headquarters are within 60 miles of one another,
provide an opportunity to efficiently integrate all aspects of their
utility operations. Western Resources, along with KGE, already has
numerous substantial electrical interconnections with KCPL. The combined
system is expected to benefit because it, unlike a combined
UtiliCorp/KCPL system, could be operated as part of a single, larger
cohesive system, with virtually no modification needed with respect to
existing generating and transmission facilities, in contrast to a
combined UtiliCorp/KCPL system which would be fragmented geographically
with utility operations in eight states and three foreign countries. At
present, Western Resources and KCPL maintain joint interests in
approximately 2,440 MW of generation capacity that is operated by either
WCNOC or KCPL and accounts for more than $2 billion in assets.
24
. Complementary businesses--Western Resources operates a natural gas
distribution business segment that adds substantial value to the combined
company because of the partial co-location of this business with KCPL's
electric operations. The nonregulated businesses of Western Resources and
KCPL, such as independent power development, also complement each other.
The combined customer bases of Western Resources and KCPL will provide
more opportunities for earnings growth from other consumer service-
oriented businesses.
. A stronger company and a more diverse service territory--The combined
company would be stronger than a combination of UtiliCorp and KCPL or
Western Resources or KCPL as independent entities. The larger size of a
Western Resources/KCPL combination and the financial strength of Western
Resources' A- credit rating compared with UtiliCorp's BBB rating would
enhance the combined company's flexibility to deal with new industry
developments. In addition, the combined company's service territory would
be more diverse than the service territory of either Western Resources or
KCPL as independent entities. Such size and diversity improve the mix of
commercial, industrial, agricultural and residential customers and reduce
the exposure to changes in economic or climatic conditions in any given
segment of the combined service territory.
. Integrated product and service portfolio--The integration of the gas and
electric business segments would enable the combined company to enhance
the portfolio of products and services available to customers. This
integration of products and services would position Western Resources and
KCPL as providers of comprehensive energy solutions.
. Economic development opportunities--The combined company would be able to
concentrate its economic development programs and activities rather than
pursue parallel paths with respect to potential customers or industry
groups, which would enhance the ability of the combined company to
attract to or retain within Kansas and Missouri such potential customers
or industry groups.
Western Resources believes that available synergies will generate cost
savings in excess of $1 billion to the combined company over a ten-year
period. Such cost savings are projected to begin in 1998 and increase each
year thereafter. See "Notes to Unaudited Forecasted Statement of Income--
Merger Assumptions--Cost Savings As Reflected in the Forecast." Such estimates
are based on a report which was prepared by Western Resources with the
assistance of the Deloitte & Touche Consulting Group, dated April 1996. KCPL
Shareholders may obtain a copy of such report from Western Resources without
charge at the address noted under "Incorporation of Certain Documents by
Reference."
The cost savings have been limited to quantifiable cost savings which have
been estimated by Western Resources to be achievable by a combination of
Western Resources and KCPL. Recognition has been given to costs to be incurred
in achieving these potential savings and to the time required to implement
plans designed to lower costs. The cost savings report has been filed by
Western Resources with the KCC and MPSC in connection with its applications
for approval of the Merger. The major components of the anticipated cost
savings are summarized below.
Generation
. Integration of dispatching and production operations--The combined
company could obtain fuel savings from joint dispatch of generating
capacity that is not available when the two companies are operated as two
separate systems. Fuel savings result from an improved ability to
schedule and commit each of the base load, intermediate and peaking
facilities of the combined company in a more economically efficient
manner.
. Avoidance or deferral of future capital expenditures--The combined
company would have the ability to reduce future expenditures for
generating capacity by coordinating and optimizing planning for future
resources. The combination of the two companies would result in system
diversity due to differences in the timing of peak demands. This system
makes available amounts of generating capacity which result in the delay
or elimination of additional capacity now planned by the two stand-alone
companies. The delay
25
or elimination of these additional facilities also reduces the operations
and maintenance expense associated with the total combined generation
capacity.
. Integration of generation and technical support functions--The combined
company would be able to eliminate redundant functions in the areas of
generation support, such as system planning and fuels management.
Field Operations
. Integration of distribution operations--The combined company would have
the ability to consolidate certain customer business offices and service
centers in the eastern Kansas area where Western Resources and KCPL have
contiguous service territories. The close proximity of these operations
also enables customer service functions such as service initiation,
service scheduling, etc. to be combined. The close proximity of the two
companies would enable work to be reconfigured and resources to be shared
in operations areas and with respect to customer calls and inquiries.
. Integration of field and technical support functions--The combined
company would be able to eliminate redundant functions in the area of
distribution support, such as engineering, construction, operation and
maintenance.
Purchasing Economies
. Streamlining of inventories and purchasing economies--The combined
company can achieve savings through the centralization of purchasing and
inventory functions related to construction, operation and maintenance at
generating plants, service centers, warehouses and headquarters. The
greater purchasing power and the relative quantity discounts that can be
obtained as a result of the combination of the two companies would
provide additional cost savings.
Corporate and Administrative
. Integration of facilities--The combined company would be able to
consolidate certain duplicative facilities such as corporate headquarters
and provide opportunities to consolidate energy control centers, service
centers and warehouses.
. Integration of corporate management and administrative functions--The
combined company would be able to eliminate redundant functions in the
areas of finance, accounting, purchasing, shareholder relations, human
resources, corporate planning, public relations and administration among
other areas. The payroll costs of such functions are relatively fixed and
do not vary directly with an increase or decrease in the number of
customers served.
. Avoidance of future operating system expenditures--The combined company
would be able to eliminate certain operational expenditures in the area
of management information systems that would be made by each company on a
stand-alone basis. These avoided expenditures relate to operating
systems, such as the customer information and geographic information
systems, that would not be wholly duplicated in the combined company.
Additional expenditures could be reduced through the more efficient
management of investment in other technology areas, such as in personal
computers, mainframe upgrades and backup facilities.
. Concentration of corporate programs and expenditures--The combined
company would integrate corporate and administrative functions, thereby
reducing certain non-labor costs, including insurance, audit and
consulting fees, professional and trade association dues, stock transfer
and other fees, vehicle expenses and various license fees, among others.
The total cost savings, net of the costs necessary to achieve these
reductions, are estimated to be approximately $43 million in 1998, $77 million
in 1999, $94 million in 2000, $101 million in 2001, $108 million in 2002, $111
million in 2003, $117 million in 2004, $124 million in 2005, $131 million in
2006, and $137 million in 2007, for a cumulative total of approximately $1.043
billion during the first ten years following the Merger. The savings in 1998
and 1999 are lower than any subsequent year's savings due to the costs to
achieve
26
and phase-in of certain cost savings. A summary of the projected cost savings
beginning January 1, 1998 is as follows:
COST SAVINGS AS REFLECTED IN THE FORECAST
(DOLLARS IN THOUSANDS)
YEARS ENDING DECEMBER 31,
---------------------------------------------
2001-
1998 1999 2000 2007 TOTAL
------- ------- ------- -------- ----------
GENERATION:
Electric Dispatch............. $ 4,313 $ 4,714 $ 5,157 $ 50,209 $ 64,393
Capacity Deferrals............ -- -- 7,168 50,176 57,344
Generation Labor.............. 8,854 9,419 10,008 88,821 117,102
------- ------- ------- -------- ----------
13,167 14,133 22,333 189,206 238,839
FIELD OPERATIONS................ 6,569 7,366 8,198 83,892 106,025
PURCHASING ECONOMIES (NON-FUEL):
Procurement................... 10,288 11,938 13,638 147,554 183,418
Inventory..................... 741 741 741 5,187 7,410
Contract Services............. 2,461 2,945 3,445 39,408 48,259
------- ------- ------- -------- ----------
13,490 15,624 17,824 192,149 239,087
CORPORATE & ADMINISTRATIVE:
Information Services.......... 10,106 12,454 13,744 96,252 132,556
Facilities.................... 1,711 1,711 1,711 11,977 17,110
Professional Services......... 1,358 1,399 1,441 11,370 15,568
Insurance..................... 1,114 1,148 1,182 9,329 12,773
Corporate & Administrative
Labor........................ 17,853 20,699 21,816 188,293 248,661
Overheads & Benefits.......... 3,426 3,616 3,816 33,065 43,923
Other Corporate &
Administrative Programs...... 1,627 1,673 1,719 13,460 18,479
------- ------- ------- -------- ----------
37,195 42,700 45,429 363,746 489,070
------- ------- ------- -------- ----------
GROSS SAVINGS................... 70,421 79,823 93,784 828,993 1,073,021
Less: Costs to Achieve........ (27,157) (3,014) -- -- (30,171)
------- ------- ------- -------- ----------
NET SAVINGS..................... $43,264 $76,809 $93,784 $828,993 $1,042,850
======= ======= ======= ======== ==========
Western Resources selected Deloitte & Touche Consulting Group to assist in
its cost savings study because Deloitte & Touche Consulting Group has a
nationally recognized utilities consulting practice and has substantial
experience in evaluating cost savings in utility mergers. Deloitte & Touche
Consulting Group assisted Western Resources in the KPL/KGE merger and has
provided cost savings advice in 13 of the last 16 announced utility mergers.
Pursuant to a letter agreement dated February 9, 1996, Deloitte & Touche
Consulting Group was engaged to assist Western Resources in the analysis of
potential merger cost savings from the Merger. Under this agreement, Western
Resources has agreed to pay Deloitte & Touche Consulting Group a fee based on
certain hourly rates for actual work performed. Fees of approximately $422,000
are to be paid to Deloitte & Touche Consulting Group for its assistance on the
cost savings analysis. Western Resources has also agreed to reimburse Deloitte
& Touche Consulting Group for its out-of-pocket expenses and has agreed to
indemnify Deloitte & Touche Consulting Group against certain liabilities and
expenses in connection with its engagement. Deloitte & Touche Consulting Group
has provided certain consulting services to Western Resources from time to
time over the past two years.
Based upon Western Resources' experience from its previous merger with KGE,
in which total payroll costs were significantly reduced without layoffs, and
its knowledge of KCPL, Western Resources believes that the cost savings
outlined above can be similarly achieved without layoffs by employing a
combination of attrition, controlled hiring, retraining, placements in growing
unregulated subsidiaries, early retirements, voluntary separation and better
management programs (such as activity standardization and technology
substitution).
27
When Western Resources merged with KGE on March 31, 1992, KGE and Western
Resources had a combined workforce of 5,571 employees (excluding employees of
WCNOC). As illustrated by the following chart, by May 1, 1992, the combined
workforce had been reduced without layoffs by a total of 598 positions
(excluding 16 new hires).
WESTERN
RESOURCES KGE TOTAL
--------- ----- -----
Employees at March 31, 1992....................... 4,407 1,156 5,563
Early retirement................................ (460) (71) (531)
Voluntary separation............................ (38) (29) (67)
Other changes................................... 16 -0- 16
Layoffs......................................... -0- -0- -0-
----- ----- -----
Employees at May 1, 1992.......................... 3,925 1,056 4,981
===== ===== =====
As of March 31, 1996, Western Resources had 4,076 employees and KCPL had
approximately 2,300 employees (again, excluding Wolf Creek employees in both
cases and taking into account the sale of Western Resources' Missouri gas
properties with 1,020 employees). Western Resources' savings estimates for the
Merger contemplate a reduction of 531 positions. Based on the larger size of
the workforces involved and Western Resources' experience with the KGE merger,
such reductions can be achieved without layoffs.
Anticipated net cost savings from the Offer and the Merger are expected to
exceed $1 billion compared to approximately $636 million (derived from the
KCPL/UtiliCorp Joint Application and other publicly available information)
estimated for the Proposed UtiliCorp/KCPL Transaction over a ten-year period.
Western Resources believes that cost savings will be greater for the Merger
than for the Proposed UtiliCorp/KCPL Transaction due to the scale differences
between the individual companies (Western Resources is 41% larger in terms of
assets than UtiliCorp), the contiguity and overlap of the KCPL and Western
Resources service territories, Western Resources' and KCPL's joint interests in
over $2 billion of generating facilities and the knowledge and experience of
Western Resources in identifying and realizing expected cost savings. The
anticipated merger cost savings for each proposed transaction are summarized
below:
ESTIMATED MERGER COST
SAVINGS OVER TEN YEARS
-----------------------------
WESTERN
RESOURCES/KCPL UTILICORP/KCPL
-------------- --------------
($ MILLIONS)
Generation.................................. $ 239 $315
Field Operations............................ 106 36
Purchasing Economies (non-fuel)............. 239 51
Corporate & Administrative (net of costs to
achieve)................................... 459 234
------ ----
Total..................................... $1,043 $636
====== ====
Although limited information is available to fully compare each category,
Western Resources believes the above table reflects a reasonable comparison.
While figures for UtiliCorp and KCPL reflect the benefits of complete access to
personnel and detailed data within those companies and the identification of
specific cost savings categories, Western Resources has not had similar access.
Nonetheless, Western Resources believes that upon inspection of similar data
and discussions with KCPL personnel, additional cost savings categories can be
identified.
Because Western Resources was unable to discuss the above analyses with KCPL
and did not have access to substantial material concerning KCPL's operations,
these analyses were necessarily limited in scope. In addition, such analyses
involve judgments and contain forward-looking statements with respect to, among
other things, normal weather conditions, future national and regional economic
and competitive conditions, inflation rates, regulatory treatment, future
financial market conditions, interest rates, future business decisions and
other uncertainties, which, though considered reasonable by Western Resources,
are beyond Western Resources' control and difficult to predict. Accordingly,
there can be no assurance that such cost savings will be realized, and actual
cost savings may vary materially from those set forth above. In light of the
uncertainties inherent in
28
such analyses, the inclusion of estimated cost savings herein should not be
regarded as a representation by Western Resources or any other person that
such cost savings will be achieved.
Regulatory Plan. The allocation of the benefits and cost savings outlined
above among the shareholders of Western Resources and KCPL and their
respective customers will depend on the extent by which the rates of Western
Resources and KCPL are adjusted to reflect such benefits. Although no
assurances can be given, Western Resources anticipates that such adjustments
will occur through approval of a regulatory plan (the "Regulatory Plan") that
Western Resources has proposed in its applications to the KCC and the MPSC
seeking approval of the Offer and the Merger. The Regulatory Plan includes the
following components:
. A rate reduction of $28 million and cumulative rate reductions of $280
million for KCPL's retail electric customers in the first 10 years
following the Merger, including $20 million in annual rate reductions
which KCPL has already agreed to for its Missouri customers.
. A rate reduction of $10 million and cumulative rate reductions of $100
million for KGE's retail electric customers in the first ten years
following the Merger.
. A five-year moratorium on electric rate increases for KCPL, KPL and KGE
retail customers.
The Regulatory Plan also includes Western Resources' current proposed rate
reduction for KGE which reduces retail electric rates by $8.7 million annually
beginning in August 1996, compounding to $60.9 million annually at the end of
seven years (the "KGE Rate Plan"). The KGE Rate Plan also provides for
acceleration of annual depreciation by $50 million for Wolf Creek for each of
the next seven years and reduces depreciation by $11 million for certain other
Western Resources electric utility assets to reflect a more appropriate useful
life for these properties. In addition, the Regulatory Plan contemplates
additional depreciation of Wolf Creek at the rate of $50 million per year for
five years after completion of the KGE Rate Plan and reduces depreciation by
$11 million for certain other KCPL electric utility assets to reflect a more
appropriate useful life for those properties. In nonbinding testimony filed on
May 22, 1996, the staff of the KCC recommended annual rate reductions for
Western Resources of $105 million. Western Resources is continuing to support
its Regulatory Plan in opposition to the KCC Staff's proposal; however, there
can be no assurance that the Regulatory Plan will be implemented as described
herein. In addition, Western Resources reserves the right to propose changes
to the Regulatory Plan, including changes resulting from additional
information about KCPL becoming available to Western Resources. Western
Resources does not anticipate that the KCC staff's rate recommendation will be
adopted as proposed. Therefore, it does not expect an adverse effect on its
plans to consummate the Offer and the Merger. However, there can be no
assurance that the KCC staff's recommendations will not be adopted, or if
adopted, will not have an adverse effect on Western Resources' consummation of
the Offer and the Merger, on the Regulatory Plan or on Western Resources'
ability to achieve its projected post-Merger dividend rates.
The above proposed rate reductions are not dependent upon the amount of
aggregate cost savings achieved by Western Resources following the Merger.
Western Resources has asked the state regulatory commissions reviewing the
Offer and the Proposed UtiliCorp/KCPL Transaction to take into account what
Western Resources believes to be the greater customer benefits of the Offer
when deciding between the applications for approval. Such rate reductions are
subject to the approval of the KCC and MPSC. Western Resources believes that
it will be able to obtain the necessary regulatory approvals for the Offer and
the proposed rate reductions on a timely basis and in a time frame at least as
favorable as that in which UtiliCorp/KCPL would be able to obtain the
necessary approvals for the Proposed UtiliCorp/KCPL Transaction. With the
cooperation of KCPL, Western Resources believes that the Offer and the Merger
could be completed by the second quarter of 1997; otherwise, Western Resources
believes the Offer and the Merger could be completed by year-end 1997. In
light of what Western Resources believes to be the superior benefits and
savings of the Offer, and the fact that such benefits and savings impact the
public interest with which regulatory bodies are concerned, Western Resources
believes that regulatory bodies will take such benefits and savings into
account when deciding whether to approve the Offer or the Proposed
UtiliCorp/KCPL Transaction and does not believe the Proposed UtiliCorp/KCPL
Transaction could be completed prior to year-end 1997. Accordingly, Western
Resources believes that the
29
Proposed UtiliCorp/KCPL Transaction offers no timing advantage over the Offer.
For a discussion of the regulatory conditions of the Offer and the Merger, see
"The Offer--Conditions of the Offer."
Regulatory Approvals. Regulatory commissions reviewing the Offer and the
Proposed UtiliCorp/KCPL Transaction will be asked to take into account what
Western Resources believes to be the greater customer benefits of the Offer
when deciding between the applications for approval.
The consummation of the Offer and the Merger and the Proposed UtiliCorp/KCPL
Transaction both would be subject to approval of the KCC, the MPSC, the
Nuclear Regulatory Commission (the "NRC") and the Federal Energy Regulatory
Commission (the "FERC") and the expiration or termination of the applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and certain other miscellaneous filings. These are the only
material regulatory approvals required to effect the Offer and the Merger. By
contrast, in addition to all of the foregoing required regulatory approvals,
the Proposed UtiliCorp/KCPL Transaction would also require approvals from
utility regulators in Colorado, Iowa, Michigan, Minnesota, West Virginia and
British Columbia and governmental approvals in Australia and New Zealand.
On February 2, 1996, KCPL and UtiliCorp jointly filed with the MPSC and the
KCC applications for approval of the Proposed UtiliCorp/KCPL Transaction. On
June 7, 1996, KCPL and UtiliCorp filed an amended application with the MPSC.
The MPSC and the KCC have scheduled hearings on the Proposed UtiliCorp/KCPL
Transaction to begin, respectively, on October 7, 1996 and November 12, 1996.
On March 29, 1996, KCPL and UtiliCorp jointly filed with the FERC an
application for approval of the Proposed UtiliCorp/KCPL Transaction. As of
July 2, 1996, the FERC had not set the application for hearing.
On April 15, 1996, Western Resources filed an application with the KCC
seeking approval of the Merger and a Petition to Intervene in the Proposed
UtiliCorp/KCPL Transaction (the "Western Resources KCC Application"). On May
3, 1996, Western Resources filed an application with the MPSC seeking approval
of the Merger. The MPSC has scheduled a pre-hearing conference on the matter
for June 18, 1996.
In light of what Western Resources believes to be the superior value of the
Offer and the benefits of the Regulatory Plan described above, Western
Resources believes that it will be able to obtain the necessary regulatory
approvals for the Offer on a timely basis and in a time frame at least as
favorable as that in which UtiliCorp would be able to obtain the necessary
regulatory approvals for the Proposed UtiliCorp/KCPL Transaction. Accordingly,
Western Resources believes that the Proposed UtiliCorp/KCPL Transaction offers
no timing advantage over the Offer.
LITIGATION
On May 20, 1996, KCPL filed a complaint in the United States District Court
for the Western District of Missouri against Mr. Rives and Western Resources.
The complaint seeks, among other things, (i) a declaration that Western
Resources lacks standing to challenge the Amended and Restated UtiliCorp/KCPL
Merger Agreement, the events leading to its adoption, or the Proposed
UtiliCorp/KCPL Transaction, (ii) a declaration that the Amended and Restated
UtiliCorp/KCPL Merger Agreement was adopted in accordance with Missouri law
and that the Proposed UtiliCorp/KCPL Transaction may be accomplished in
accordance with Missouri law, and (iii) a declaration that the directors,
officers and agents of KCPL acted lawfully and in compliance with all legal
and equitable duties in connection with the abandonment of the Original
UtiliCorp/KCPL Merger Agreement and the adoption of the Amended and Restated
UtiliCorp/KCPL Merger Agreement and that the Proposed UtiliCorp/KCPL
Transaction is not and will not be void, voidable or subject to injunction or
recission.
On June 7, 1996, Western Resources and Mr. Rives filed an answer to KCPL's
complaint as well as a counterclaim seeking, among other things, (i) a
dismissal of KCPL's complaint with prejudice, (ii) a declaration that the
Amended and Restated UtiliCorp/KCPL Merger Agreement is a plan of merger or
consolidation under the MGBCL and, thus, requires the affirmative vote of the
holders of at least two-thirds of the outstanding Shares entitled to vote,
(iii) a declaration that KCPL, through its board of directors' actions,
breached its fiduciary duties
30
to KCPL Shareholders by proceeding with a plan designed to consummate the
transactions contemplated by the Amended and Restated Utilicorp/KCPL Merger
Agreement based on less than the required two-thirds KCPL Shareholder vote,
(iv) a preliminary and permanent injunction to enjoin KCPL from proceeding
with the Special Meeting until the Court determines the number of votes
necessary for the approval of the issuance of Shares necessary to effect the
transactions contemplated by the Amended and Restated UtiliCorp/KCPL Merger
Agreement and (v) a preliminary and permanent injunction to enjoin KCPL from
consummating the Proposed UtiliCorp/KCPL Transaction unless KCPL receives the
affirmative vote of the holders of at least two-thirds of the outstanding
Shares entitled to vote. On June 14, 1996, the court scheduled a preliminary
injunction hearing for July 25, 1996. On June 27, 1996, KCPL filed a reply to
the counterclaims of Western Resources and Mr. Rives and a counterclaim
alleging that Western Resources and Mr. Rives have violated Section 14(a) of
the Exchange Act and Rule 14a-9 promulgated thereunder. Western Resources and
Mr. Rives will continue to pursue their claims against KCPL and to vigorously
defend against each of KCPL's allegations, which Western Resources and Mr.
Rives believe to be without merit. As of the date of this Prospectus, no
findings have been made by a court concerning any of the above-mentioned
allegations.
THE AMENDED AND RESTATED UTILICORP/KCPL MERGER AGREEMENT
THE FOLLOWING SUMMARY OF CERTAIN PROVISIONS OF THE AMENDED AND RESTATED
UTILICORP/KCPL MERGER AGREEMENT, WHICH IS COMPILED FROM INFORMATION CONTAINED
IN THE UTILICORP/KCPL JOINT PROXY STATEMENT, DOES NOT PURPORT TO BE COMPLETE
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE AMENDED AND RESTATED
UTILICORP/KCPL MERGER AGREEMENT, WHICH IS INCORPORATED BY REFERENCE HEREIN AND
IS INCLUDED AS EXHIBIT 2.1 TO THE KCPL MAY 28 FORM 8-K.
The Proposed UtiliCorp/KCPL Transaction. The Amended and Restated
UtiliCorp/KCPL Merger Agreement provides that, assuming the approval of the
Amended and Restated UtiliCorp/KCPL Merger Agreement and the Proposed
UtiliCorp/KCPL Transaction by the shareholders of UtiliCorp (the "UtiliCorp
Shareholder Approval"), the approval of the issuance of Shares required to
effect the Proposed UtiliCorp/KCPL Transaction by KCPL Shareholders, and the
satisfaction or waiver of the other conditions to the Proposed UtiliCorp/KCPL
Transaction, including obtaining the requisite regulatory approvals, a newly
created subsidiary of KCPL ("KCPL Merger Sub") would be merged with and into
UtiliCorp and subsequently UtiliCorp would be merged with and into KCPL with
KCPL being the surviving corporation. According to the UtiliCorp/KCPL Joint
Proxy Statement, KCPL would, at the effective time of the Proposed
UtiliCorp/KCPL Transaction, change its name to Maxim Energies, Inc.
If the UtiliCorp Shareholder Approval is obtained, the KCPL Shareholders
approve the issuance of Shares necessary to effect the Proposed UtiliCorp/KCPL
Transaction, and the other conditions to the Proposed UtiliCorp/KCPL
Transaction are satisfied or waived, the closing of the Proposed
UtiliCorp/KCPL Transaction (the "UtiliCorp/KCPL Closing") would take place on
the second business day immediately following the date on which the last of
the conditions precedent in the Amended and Restated UtiliCorp/KCPL Merger
Agreement is fulfilled or waived, or at such other time and date as KCPL and
UtiliCorp would mutually agree (the "UtiliCorp/KCPL Closing Date") provided,
however, that the UtiliCorp/KCPL Closing Date shall not occur before March 3,
1997.
Subject to the condition that the opinions of Merrill Lynch, Pierce, Fenner
& Smith, Incorporated, financial advisor to KCPL ("Merrill Lynch") and
Donaldson, Lufkin & Jenrette, financial advisor to UtiliCorp ("DLJ") shall not
have been withdrawn, KCPL and UtiliCorp have agreed to call, give notice of,
convene and hold meetings of their respective shareholders as soon as
reasonably practicable for the purpose of securing the UtiliCorp Shareholder
Approval and the approval of KCPL Shareholders for the issuance of Shares
necessary to effect the Proposed UtiliCorp/KCPL Transaction.
Consummation of the Proposed UtiliCorp/KCPL Transaction. If the Proposed
UtiliCorp/KCPL Transaction were consummated, at the effective time of the
merger of KCPL Merger Sub with and into UtiliCorp, each issued and outstanding
share of common stock, par value $1.00 per share, of UtiliCorp ("UtiliCorp
31
Common Stock"), other than any shares of UtiliCorp Common Stock owned by KCPL
or UtiliCorp either directly or through a wholly owned Subsidiary (as defined
below), would be cancelled and converted into the right to receive one fully
paid and non-assessable Share. No fractional Shares would be issued and any
UtiliCorp shareholder who would otherwise be entitled to receive a fractional
Share would instead be entitled to receive a cash payment in an amount equal
to the product of such fraction multiplied by the average of the last reported
sales price, regular way, per Share on the NYSE Composite Tape for the five
business days prior to and including the last business day on which Shares
were traded on the NYSE, without any interest thereon.
According to the Amended and Restated UtiliCorp/KCPL Merger Agreement, there
were 45,980,814 shares of UtiliCorp Common Stock outstanding on December 31,
1995 and there were 61,908,726 Shares outstanding on December 31, 1995. Based
on such figures, the holders of shares of UtiliCorp Common Stock and the
holders of Shares would hold in the aggregate approximately 43% and 57%,
respectively, of the total number of Shares outstanding if the Proposed
UtiliCorp/KCPL Transaction is consummated.
The Amended and Restated UtiliCorp/KCPL Merger Agreement requires KCPL to
call for redemption before the effectiveness of the Proposed UtiliCorp/KCPL
Transaction all of its outstanding shares of preferred stock at the applicable
redemption prices therefor, together with all dividends accrued and unpaid
through the applicable redemption dates. The Amended and Restated
UtiliCorp/KCPL Merger Agreement requires UtiliCorp to take all action
necessary to redeem all of its outstanding shares of preferred stock on March
3, 1997, or such later date as KCPL and UtiliCorp shall mutually agree, at the
applicable redemption prices therefor, together with all dividends accrued and
unpaid to the date of such redemption. UtiliCorp will pay the redemption price
from its own cash resources or line of credit, and UtiliCorp and KCPL agree
that under no circumstances will the payment of such redemption price be
financed, guaranteed or otherwise provided directly or indirectly by KCPL or
any of its Subsidiaries.
The Amended and Restated Utilicorp/KCPL Merger Agreement provides that the
Restated Articles of Consolidation of KCPL (the "KCPL Articles") and the by-
laws of KCPL (the "KCPL Bylaws") as in effect immediately prior to the
consummation of the Utilicorp/KCPL Transaction will be the initial Articles
and by-laws of KCPL following such consummation. The Amended and Restated
UtiliCorp/KCPL Merger Agreement further provides that following consummation
of the Proposed UtiliCorp/KCPL Transaction, KCPL will amend its Articles to
change its name to Maxim Energies, Inc. or such other name as KCPL and
UtiliCorp shall mutually agree.
Exchange of Certificates. Assuming the Proposed UtiliCorp/KCPL Transaction
is consummated, an exchange agent mutually agreeable to KCPL and UtiliCorp
(the "UtiliCorp/KCPL Exchange Agent") would mail to each holder of record of a
certificate evidencing shares of UtiliCorp Common Stock (an "Old
Certificate"), a letter of transmittal and instructions for use in effecting
the surrender of Old Certificates in exchange for certificates representing
Shares. Upon surrender of Old Certificates to the Exchange Agent for
cancellation, together with a duly executed letter of transmittal and such
other documents, if any, as the Exchange Agent shall require, the holder of
such Old Certificates would be entitled to receive a certificate or
certificates representing that number of whole Shares which such holder would
have the right to receive pursuant to the provisions of the Amended and
Restated UtiliCorp/KCPL Merger Agreement. Until surrendered, each Old
Certificate would be deemed at any time after the effectiveness of the
Proposed UtiliCorp/KCPL Transaction to represent only the right to receive
upon such surrender the certificate representing Shares and cash in lieu of
any fractional Share.
The letter of transmittal may, at the option of KCPL, provide for the
ability of a holder of one or more Old Certificates to elect that the Shares
to be received be issued in uncertificated form or to elect that such shares
be credited to an account established for the holder under Maxim's dividend
reinvestment and stock purchase plan.
No dividends or other distributions declared or made after the effectiveness
of the Proposed UtiliCorp/KCPL Transaction with respect to Shares with a
record date after such effectiveness would be paid to the holder of any
unsurrendered Old Certificates, and no cash payment in lieu of fractional
shares would be paid to any such holder
32
until such Old Certificates had been surrendered by such holder. Following
such surrender, subject to applicable law, there would be paid to such holder,
without interest, the unpaid dividends and distributions, and any cash payment
in lieu of a fractional share, to which such holder would be entitled.
Subsidiaries and Joint Ventures. The Amended and Restated UtiliCorp/KCPL
Merger Agreement defines "Subsidiary" to mean any corporation or other entity
of which at least a majority of the voting power will at the time be held,
directly or indirectly, by KCPL and UtiliCorp. The Amended and Restated
UtiliCorp/KCPL Merger Agreement defines "Joint Venture" to mean specified
joint ventures of KCPL or UtiliCorp. The covenants of KCPL and UtiliCorp in
the Amended and Restated UtiliCorp/KCPL Merger Agreement apply to the parties
themselves and their Subsidiaries. Certain of the representations and
warranties of KCPL and UtiliCorp in the Amended and Restated UtiliCorp/KCPL
Merger Agreement apply to the parties, their Subsidiaries and their Joint
Ventures.
Representations and Warranties. The Amended and Restated UtiliCorp/KCPL
Merger Agreement contains customary representations and warranties by each of
KCPL and UtiliCorp relating to, among other things and subject to certain
qualifications, (a) their respective organizations, the organization of their
respective Subsidiaries and Joint Ventures and similar corporate matters; (b)
their respective capital structures; (c) the authorization, execution,
delivery, performance and enforceability of the Amended and Restated
UtiliCorp/KCPL Merger Agreement and related matters; (d) required regulatory
approvals; (e) their compliance with applicable laws and agreements; (f)
reports and financial statements filed with the Commission or other regulatory
authorities and the accuracy of information contained therein; (g) the absence
of any material adverse effect on their business, assets, financial condition,
results of operations or prospects; (h) the absence of adverse material
claims, suits, actions or proceedings, and other litigation issues; (i) the
accuracy of information supplied by each of KCPL and UtiliCorp for use in the
KCPL Registration Statement and the UtiliCorp/KCPL Joint Proxy Statement; (j)
tax matters; (k) retirement and other employee benefit plans and matters
relating to the Employee Retirement Income Security Act of 1974, as amended;
(l) agreements relating to certain employment and benefits matters; (m) labor
matters; (n) compliance with all applicable material environmental laws,
possession of all material environmental, health, and safety permits and other
environmental issues; (o) the regulation of KCPL and UtiliCorp and their
subsidiaries as public utilities in specified states; (p) the shareholder vote
required in connection with the Amended and Restated UtiliCorp/KCPL Merger
Agreement and the transactions contemplated thereby, as set forth in the
Amended and Restated UtiliCorp/KCPL Merger Agreement, being the only vote
required; (q) that neither KCPL nor UtiliCorp nor any of their respective
affiliates has taken or agreed to take any action that would prevent Maxim
from accounting for the Proposed UtiliCorp/KCPL Transaction as a pooling of
interests; (r) the delivery of fairness opinions by Merrill Lynch, in the case
of KCPL, and DLJ, in the case of UtiliCorp; (s) the adequacy of insurance; (t)
the applicability of certain provisions in the KCPL Articles and the
Certificate of Incorporation of UtiliCorp, as amended, relating to certain
changes in control; and (u) in the case of UtiliCorp, the financial capacity
to redeem its preferred stock.
Certain Covenants. Pursuant to the Amended and Restated UtiliCorp/KCPL
Merger Agreement, each of KCPL and UtiliCorp has agreed that during the period
from the date of the Original UtiliCorp/KCPL Merger Agreement until the
effectiveness of the Proposed UtiliCorp/KCPL Transaction, except as permitted
by the Amended and Restated UtiliCorp/KCPL Merger Agreement (including the
disclosure schedules thereto) or as the other party otherwise consents in
writing, it will (and each of its Subsidiaries will), subject to certain
exceptions specified therein, among other things: (a) carry on its business in
the ordinary course consistent with prior practice; (b) not declare or pay any
dividends on or make other distributions in respect of any of its capital
stock, other than (i) to such party or its wholly owned Subsidiaries, (ii)
dividends required to be paid on any UtiliCorp preferred stock or KCPL
preferred stock, (iii) regular quarterly dividends to be paid on Shares and
UtiliCorp Common Stock not to exceed 105% of the dividends for the comparable
period of the prior fiscal year, and (iv) dividends by AGP, UtiliCorp U.K.,
Inc., UtiliCorp U.K. Limited, WKP Ltd., UtiliCorp N.Z., Inc., and any
Subsidiaries of such entities; (c) not effect certain other changes in its
capitalization other than redeeming all series and classes of KCPL preferred
stock and the UtiliCorp preferred stock, or funding employee stock ownership
plans in accordance with past practice; (d) not issue, sell or dispose of any
capital stock or securities
33
convertible into capital stock other than (i) intercompany issuances of
capital stock and (ii) up to 2,000,000 Shares and shares of UtiliCorp Common
Stock to be issued during any fiscal year pursuant to employee benefit plans,
stock option and other incentive compensation plans, directors' plans and
stock purchase and dividend reinvestment plans, except that, as set forth in
the disclosure schedules, UtiliCorp may issue approximately 5.3 million
additional shares of UtiliCorp Common Stock; (e) not incur indebtedness (or
guarantees thereof), other than (i) indebtedness or guarantees or "keep well"
or other agreements either in the ordinary course of business consistent with
past practice, or not aggregating more than $250 million, (ii) arrangements
between such party and its Subsidiaries or among its Subsidiaries, (iii) in
connection with the refunding of existing indebtedness, (iv) in connection
with any permitted redemption of any series or class of KCPL preferred stock
or of UtiliCorp preferred stock, or (v) as may be necessary in connection with
certain permitted acquisitions or capital expenditures; (f) not engage in
material acquisitions, except individual acquisitions not exceeding $25
million in equity invested and not requiring board of directors' approval,
provided that the total amount invested in any fiscal year does not exceed
$150 million; (g) not make any capital expenditures during any fiscal year
exceeding 125% of the amounts budgeted; (h) not sell or dispose of assets
during any fiscal year singularly or in an aggregate amount equalling or
exceeding $25 million, other than dispositions in the ordinary course of
business consistent with past practice; (i) not enter into, adopt or amend or
increase the amount or accelerate the payment or vesting of any benefit or
amount payable under, any employee benefit plan or other contract, agreement,
commitment, arrangement, plan, trust, fund or policy, except for normal
increases in the ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase in benefits or
compensatory expenses; (j) not enter into or amend any employee severance
agreement other than in the ordinary course of business consistent with past
practice; (k) not deposit into any trust (including any "rabbi trust") amounts
in respect of any employee benefit obligations or obligations to directors,
provided that transfers into any trust, other than a rabbi or other trust with
respect to any non-qualified deferred compensation, may be made in accordance
with past practice; (l) not engage in any activity which would cause a change
in its status under the 1935 Act; (m) not make any changes in its accounting
methods other than as required by law or in accordance with generally accepted
accounting principles; (n) not take any action to prevent Maxim from
accounting for the Proposed UtiliCorp/KCPL Transaction as a pooling of
interests; (o) not take any action that would adversely affect the status of
the Proposed UtiliCorp/KCPL Transaction as a tax-free reorganization under the
Code; (p) not enter into any material agreements with affiliates (other than
wholly owned subsidiaries) or the parties' respective Joint Ventures, other
than on an arm's-length basis; (q) cooperate with the other party, provide
reasonable access to its books and records and notify the other party of any
significant changes; (r) subject to applicable law, discuss with the other
party any proposed changes in its rates or charges (other than pass-through
fuel and gas rates or charges) or standards of service or accounting; consult
with the other prior to making any filing (or any amendment thereto), or
effecting any agreement, commitment, arrangement or consent with governmental
regulators; and not make any filing to change its rates on file with the FERC
that would have a material adverse effect on the benefits associated with the
Proposed UtiliCorp/KCPL Transaction; (s) use all commercially reasonable
efforts to obtain certain third-party consents to the Proposed UtiliCorp/KCPL
Transaction; (t) not take any action reasonably likely to materially breach
the Amended and Restated UtiliCorp/KCPL Merger Agreement or any of its
representations and warranties; (u) not take any action that is likely to
jeopardize the qualification of KCPL's or UtiliCorp's outstanding revenue
bonds as "exempt facility bonds" or as tax-exempt industrial development
bonds; (v) create a joint transition management task force to examine
alternatives to effect the integration of the parties after the Proposed
UtiliCorp/KCPL Transaction; (w) refrain from taking specified actions relating
to tax matters; (x) maintain customary and adequate insurance and existing
governmental permits; and (y) not discharge or satisfy any material claims,
liabilities or obligations, other than discharges (in the ordinary course of
business or in accordance with their terms) of liabilities reflected in the
most recent consolidated financial statements.
The Amended and Restated UtiliCorp/KCPL Merger Agreement provides that the
parties will execute such further documents and instruments and take such
actions as are necessary and reasonably requested by the other party to
consummate the Proposed UtiliCorp/KCPL Transaction in accordance with the
terms of the Amended and Restated UtiliCorp/KCPL Merger Agreement.
34
No Solicitation of Transactions. The Amended and Restated UtiliCorp/KCPL
Merger Agreement provides that neither KCPL nor UtiliCorp will, and that
neither will authorize or permit any of its officers, directors, employees,
accountants, counsel, investment bankers, financial advisors and other
representatives (collectively, "Representatives") to, directly or indirectly,
initiate, solicit or encourage (including by way of furnishing information) or
take any other action to facilitate knowingly any inquiries or the making of
any proposal which constitutes or may reasonably be expected to lead to an
Acquisition Proposal (as defined below) from any person, or engage in any
discussion or negotiations relating thereto or accept any Acquisition
Proposal; provided, however, that notwithstanding any other provision of the
Amended and Restated UtiliCorp/KCPL Merger Agreement, a respective party may
(i) at any time prior to the time the respective parties' shareholders shall
have voted to approve the Amended and Restated UtiliCorp/KCPL Merger
Agreement, engage in discussions or negotiations with a third party who
(without any solicitation, initiation, encouragement, discussion or
negotiation, directly or indirectly, by or with the party or its
Representatives after January 19, 1996) seeks to initiate such discussions or
negotiations and may furnish such third-party information concerning the party
and its business, properties and assets if, and only to the extent that,
(A)(x) the third party has first made an Acquisition Proposal that is
financially superior to the Proposed UtiliCorp/KCPL Transaction and has
demonstrated that financing for the Acquisition Proposal is reasonably likely
to be obtained (as determined in good faith in each case by the party's board
of directors after consultation with its financial advisors) and (y) the
party's board of directors concludes in good faith, after considering
applicable provisions of state law, on the basis of oral or written advice of
outside counsel that such action is necessary for the board of directors to
act in a manner consistent with its fiduciary duties under applicable law and
(B) prior to furnishing such information to or entering into discussions or
negotiations with such person or entity, such party (x) provides prompt notice
to the other party to the effect that it is furnishing information to or
entering into discussions or negotiations with such person or entity and (y)
receives from such person or entity an executed confidentiality agreement in
reasonably customary form on terms not in the aggregate materially more
favorable to such person or entity than the terms contained in the
UtiliCorp/KCPL confidentiality agreement, dated November 28, 1995 (as amended
from time to time, the "Confidentiality Agreement"), (ii) comply with Rule
14e-2 promulgated under the Exchange Act with regard to a tender or exchange
offer, and/or (iii) accept an Acquisition Proposal from a third party,
provided such respective party terminates the Amended and Restated
UtiliCorp/KCPL Merger Agreement pursuant to the provisions of Section 9.1(e)
or 9.1(f) thereof, as applicable. Each party has agreed to cease and terminate
any existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted previously by the party or its
Representatives with respect to the foregoing. Each party has agreed to notify
the other party orally and in writing of any such inquiries, offers or
proposals (including, without limitation, the terms and conditions of any such
proposal and the identity of the person making it), within 24 hours of the
receipt thereof, shall keep the other party informed of the status and details
of any such inquiry, offer or proposal, and shall give the other party five
days advance notice of any agreement to be entered into with or any
information to be supplied to any person making such inquiry, offer or
proposal. As used herein, "Acquisition Proposal" means any tender or exchange
offer, proposal for a merger, consolidation or other business combination
involving the party or any material Subsidiary of the party, or any proposal
to acquire in any manner a substantial equity interest in or a substantial
portion of the assets of the party or any material Subsidiary.
Maxim Board of Directors. The Amended and Restated UtiliCorp/KCPL Merger
Agreement provides that if the Proposed UtiliCorp/KCPL Transaction is
consummated, the board of directors of Maxim will consist of 18 persons, nine
designated by KCPL and nine designated by UtiliCorp. If, prior to the time the
Proposed UtiliCorp/KCPL Transaction is consummated, any of such designees
declines or is unable to serve, the party which designated such person will
designate another person to serve in such person's stead. According to
publicly available information, as of June 10, 1996, UtiliCorp has not decided
who, in addition to Mr. Green, will be designated to serve on the Maxim board
of directors following the consummation of the Proposed UtiliCorp/KCPL
Transaction.
Directors' and Officers' Indemnification. The Amended and Restated
UtiliCorp/KCPL Merger Agreement provides that, to the extent, if any, not
provided by an existing right of indemnification or other agreement or policy,
from and after the Proposed UtiliCorp/KCPL Transaction, Maxim would, to the
fullest extent permitted by applicable
35
law, indemnify, defend and hold harmless each person who is on, or who has
been at any time prior to, January 19, 1996, or who becomes prior to the
Proposed UtiliCorp/KCPL Transaction, an officer, director or employee of any
of the parties thereto or any Subsidiary (each an "Indemnified Party," and
collectively, "Indemnified Parties") against all losses, expenses (including
reasonable attorney's fees and expenses), claims, damages or liabilities or,
subject to the proviso of the next succeeding sentence, amounts paid in
settlement, arising out of actions or omissions occurring at or prior to the
effectiveness of the Proposed UtiliCorp/KCPL Transaction (and whether asserted
or claimed prior to, at or after the effectiveness of the Proposed
UtiliCorp/KCPL Transaction) that are, in whole or in part, based on or arising
out of the fact that such person is or was a director, officer or employee of
such party, and all such indemnified liabilities to the extent they are based
on or arise out of or pertain to the transactions contemplated by the Amended
and Restated UtiliCorp/KCPL Merger Agreement. In the event of any such loss,
expense, claim, damage or liability (whether or not arising before the
effectiveness of the Proposed UtiliCorp/KCPL Transaction), (i) Maxim would pay
the reasonable fees and expenses of counsel selected by the Indemnified
Parties, which counsel must be reasonably satisfactory to Maxim, promptly
after statements therefor are received and otherwise advance to such
Indemnified Party upon request reimbursement of documented expenses reasonably
incurred, in either case to the extent not prohibited by the MGBCL, (ii) Maxim
would cooperate in the defense of any such matter and (iii) any determination
required to be made with respect to whether an Indemnified Party's conduct
complies with the standards set forth under the MGBCL, Maxim's articles of
incorporation or Maxim's by-laws would be made by independent counsel mutually
acceptable to Maxim and the Indemnified Party; provided, however, that Maxim
will not be liable for any settlement effected without its written consent
(which consent must not be unreasonably withheld). The Amended and Restated
UtiliCorp/KCPL Merger Agreement further provides that the Indemnified Parties
as a group may retain only one law firm with respect to each related matter
except to the extent there is, in the opinion of counsel to an Indemnified
Party, under applicable standards of professional conduct, a conflict on any
significant issue between positions of such Indemnified Party and any other
Indemnified Party or Indemnified Parties. In addition, the Amended and
Restated UtiliCorp/KCPL Merger Agreement requires that for a period of six
years after the Proposed UtiliCorp/KCPL Transaction, Maxim will cause to be
maintained in effect policies of directors and officers' liability insurance
maintained by KCPL and UtiliCorp for the benefit of those persons who were
covered by such policies on January 19, 1996, on terms no less favorable than
the terms of such insurance coverage, provided that Maxim will not be required
to expend in any year an amount exceeding 200% of the annual aggregate
premiums currently paid by KCPL and UtiliCorp for such insurance. If the
annual premiums of such insurance coverage exceed such amount, Maxim will be
obligated to obtain a policy with the best coverage available, in the
reasonable judgment of the Maxim board of directors, for a cost not exceeding
such amount. The Amended and Restated UtiliCorp/KCPL Merger Agreement also
provides that to the fullest extent permitted by law, from and after the
effectiveness of the Proposed UtiliCorp/KCPL Transaction, all rights to
indemnification existing in favor of the employees, agents, directors and
officers of KCPL, UtiliCorp and their respective subsidiaries with respect to
their activities as such prior to the effectiveness of the Proposed
UtiliCorp/KCPL Transaction, as provided in their respective articles of
incorporation and bylaws in effect on January 19, 1996, or otherwise in effect
on January 19, 1996, will survive the Proposed UtiliCorp/KCPL Transaction and
will continue in full force and effect for a period of not less than six years
from the effectiveness of the Proposed UtiliCorp/KCPL Transaction.
Termination. If the issuance of Shares necessary to effect the Proposed
UtiliCorp/KCPL Transaction is not approved by the requisite vote of the
holders of Shares, the Amended and Restated UtiliCorp/KCPL Merger Agreement
will become terminable at the option of either KCPL or UtiliCorp. According to
the terms of the Amended and Restated UtiliCorp/KCPL Merger Agreement, upon
such termination, KCPL may be required to pay to UtiliCorp a termination fee
in the amount of $5 million. If, within two and one-half years of such
termination, Western Resources were to acquire at least a majority of the
Shares (in the Offer or otherwise) or Western Resources and KCPL were to enter
into a definitive agreement with respect to a transaction including, without
limitation, a tender or exchange offer, merger or other business combination,
then upon the closing of such acquisition of Shares or the signing of such
agreement, KCPL may be required to pay to UtiliCorp an additional $53 million
under the terms of the Amended and Restated UtiliCorp/KCPL Merger Agreement.
36
Conditions to Each Party's Obligation to Effect the Proposed UtiliCorp/KCPL
Transaction. The respective obligations of KCPL and UtiliCorp to effect the
Proposed UtiliCorp/KCPL Transaction are subject to the following conditions:
(a) the necessary approvals by the shareholders of KCPL and of UtiliCorp shall
have been obtained; (b) no temporary restraining order, preliminary or
permanent injunction or other order shall be in effect that prevents
consummation of the Proposed UtiliCorp/KCPL Transaction; (c) the KCPL
Registration Statement shall have become effective and shall not be the
subject of a stop order; (d) the Shares issuable in connection with the
Proposed UtiliCorp/KCPL Transaction shall have been authorized for listing on
the NYSE, upon official notice of issuance; (e) the receipt of all material
governmental authorizations, permits, consents, orders or approvals which do
not impose terms or conditions that could reasonably be expected to have a
material adverse effect; (f) the receipt by each of KCPL and UtiliCorp of
letters from their independent public accountants stating that the Proposed
UtiliCorp/KCPL Transaction will qualify as a pooling of interests transaction
under generally accepted accounting principles and applicable Commission
regulations; (g) with respect to each of KCPL and UtiliCorp, the performance
in all material respects of all obligations of the other party required to be
performed under the Amended and Restated UtiliCorp/KCPL Merger Agreement; (h)
with respect to each of KCPL and UtiliCorp, the accuracy of the
representations and warranties of the other party set forth in the Amended and
Restated UtiliCorp/KCPL Merger Agreement as of January 19, 1996 (or in certain
cases as of May 20, 1996) and as of the UtiliCorp/KCPL Closing Date (except as
would not reasonably be likely to result in a material adverse effect); (i)
KCPL's and UtiliCorp's having received officers' certificates from each other
stating that certain conditions set forth in the Amended and Restated
UtiliCorp/KCPL Merger Agreement have been satisfied; (j) with respect to each
of KCPL and UtiliCorp, there having been no material adverse effect on the
business, assets, financial condition, results of operations or prospects of
the other party and its subsidiaries taken as a whole; (k) receipt of tax
opinions from counsel to each party to the effect that the Proposed
UtiliCorp/KCPL Transaction will be treated as a tax-free reorganization under
Section 368(a) of the Code; (l) with respect to each of KCPL and UtiliCorp,
the receipt by the other party of certain material third-party consents; and
(m) with respect to UtiliCorp, the receipt by KCPL of letter agreements
relating to trading in securities of KCPL and UtiliCorp (substantially in the
form attached as an exhibit to the KCPL/UtiliCorp Merger Agreement), duly
executed by each affiliate of the other party.
In addition, the Amended and Restated UtiliCorp/KCPL Merger Agreement
provides that it is a condition to the obligation of KCPL to hold the KCPL
Special Meeting that the opinion of Merrill Lynch shall not have been
withdrawn, and it is a condition to the obligation of UtiliCorp to hold the
UtiliCorp shareholders meeting that the opinion of DLJ shall not have been
withdrawn.
At any time prior to the effective time of the Proposed UtiliCorp/KCPL
Transaction to the extent permitted by applicable law, the conditions to
KCPL's or UtiliCorp's obligations to consummate the Proposed UtiliCorp/KCPL
Transaction may be waived by the other party. Either party's agreement to such
a waiver is valid if set forth in a written instrument signed on behalf of
such party.
Benefit Plans. The Amended and Restated UtiliCorp/KCPL Merger Agreement
provides that KCPL and UtiliCorp have agreed to cooperate and agree upon the
employee benefit plans and programs to be provided by Maxim after the
consummation of the Proposed KCPL/UtiliCorp Transaction, and that each
participant of any KCPL benefit plan or UtiliCorp benefit plan would receive
credit for purposes of eligibility to participate, vesting and eligibility to
receive benefits under any benefit plan of Maxim or any of its subsidiaries or
affiliates that replaces a KCPL benefit plan or UtiliCorp benefit plan;
provided, however, that such crediting of service would not operate to
duplicate any benefit to any such participant or the funding for any such
benefit. In addition, the UtiliCorp Supplemental Contributory Retirement Plan
(as referenced in section 7.9(c) of the Amended and Restated UtiliCorp/KCPL
Merger Agreement) would be revised to provide that references to UtiliCorp
Common Stock shall instead refer to Shares.
If the Proposed UtiliCorp/KCPL Transaction is consummated, no additional
obligations would be incurred under the existing short-term incentive
compensation plans of KCPL and UtiliCorp. Subject to shareholder approval
thereof at the KCPL Special Meeting and the UtiliCorp shareholders meeting,
the Maxim Management Income Compensation Plan (as defined in the
Utilicorp/KCPL Joint Proxy Statement) will become effective at
37
the effective time of the Proposed UtiliCorp/KCPL Transaction. The Maxim
Management Income Compensation Plan provides for annual bonuses, based on
percentages of base salaries, to be awarded based upon the achievement of
performance goals determined in advance by the compensation committee of the
Maxim board of directors (the "Committee"). With respect to those participants
in the new plan who are, or who the Committee determines are likely to be,
"covered individuals" within the meaning of Section 162(m) of the Code with
compensation in excess of the limitations set forth in Section 162(m), the
performance goals are to be objective standards that are approved by
shareholders in accordance with the requirements for exclusion from the limits
of Section 162(m) of the Code as performance-based compensation. Following the
implementation of the Maxim Stock Incentive Plan (as defined in the
Utilicorp/KCPL Joint Proxy Statement), no additional awards would be made
under the existing stock incentive plans of KCPL and UtiliCorp. Subject to
shareholder approval thereof at the KCPL Special Meeting and the UtiliCorp
shareholders meeting, the Maxim Stock Incentive Plan would become effective at
the effective time of the Proposed KCPL/UtiliCorp Transaction. (The Maxim
Stock Incentive Plan provides for the grant of stock options, stock
appreciation rights, restricted stock and such other awards based upon the
Shares as the Committee may determine, subject to shareholder approval of the
Maxim Stock Incentive Plan. Maxim intends to reserve 9,000,000 Shares for
issuance under this plan. Accordingly, the Maxim Stock Incentive Plan is being
submitted to shareholders for approval.)
If the Proposed UtiliCorp/KCPL Transaction is consummated, (i) each option
to purchase shares of UtiliCorp Common Stock under the existing stock
incentive plans of UtiliCorp (each, a "UtiliCorp Stock Option") would
constitute an option to acquire, on the same terms and conditions (subject to
the adjustments necessary to give effect to the Proposed UtiliCorp/KCPL
Transaction), Shares based on the same number of Shares of Maxim as the holder
of such UtiliCorp Stock Option would have been entitled to receive pursuant to
the Proposed UtiliCorp/KCPL Transaction had such holder exercised such option
in full immediately prior to the effectiveness of the Proposed UtiliCorp/KCPL
Transaction and (ii) each other outstanding award under the existing stock
incentive plans of UtiliCorp (each, a "UtiliCorp Stock Award") would
constitute an award based upon the same number of Shares as the holder of such
UtiliCorp Stock Award would have been entitled to receive pursuant to the
Proposed UtiliCorp/KCPL Transaction had such holder been the owner,
immediately before the effectiveness of the Proposed UtiliCorp/KCPL
Transaction, of the shares of UtiliCorp Common Stock on which such UtiliCorp
Stock Award is based, and otherwise on the same terms and conditions as
governed such UtiliCorp Stock Award immediately before the effectiveness of
the Proposed UtiliCorp/KCPL Transaction. The Amended and Restated
UtiliCorp/KCPL Merger Agreement provides that the consummation of the Proposed
UtiliCorp/KCPL Transaction shall not be treated as an event which shall cause
the acceleration of vesting and exerciseability of KCPL stock options or
affect the period for exercising KCPL stock options.
38
THE OFFER
GENERAL
Western Resources hereby offers, upon the terms and subject to the
conditions of the Offer, to exchange that number of shares of Western
Resources Common Stock equal to the Exchange Ratio for each outstanding Share
validly tendered on or prior to the Expiration Date and not withdrawn. The
term "Expiration Date" shall mean 12:00 midnight, New York City time, on
September 20, 1996, unless and until Western Resources extends the period of
time for which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by
Western Resources, shall expire.
Tendering shareholders will not be obligated to pay any charges or expenses
of the Exchange Agent or any brokerage commissions. Except as set forth in the
Instructions to the Letter of Transmittal, transfer taxes on the exchange of
Shares pursuant to the Offer will be paid by or on behalf of Western
Resources.
The purpose of the Offer is for Western Resources to obtain control of, and
ultimately the entire common equity interest in, KCPL. Western Resources
intends, as soon as practicable after consummation of the Offer, to seek to
have KCPL consummate the Merger with Western Resources in which each
outstanding Share (except for treasury shares of KCPL) would be converted into
the right to receive that number of shares of Western Resources Common Stock
equal to the Exchange Ratio. Pursuant to the Exchange Ratio, each Share will
be exchanged for $31.00 of Western Resources Common Stock if the Western
Resources Average Price is between $33.23 and $28.18. If the Western Resources
Average Price is greater than $33.23, each Share will be exchanged for more
than $31.00 of Western Resources Common Stock and, conversely, if the Western
Resources Average Price is less than $28.18, each Share will be exchanged for
less than $31.00 of Western Resources Common Stock. See "--Purpose of the
Offer; the Merger," "Background of the Offer--Comparison of the Proposals--The
Exchange Ratio."
KCPL Shareholders may call (800) 621-0518 any time on or after the date
hereof through the Expiration Date for the current Exchange Ratio calculated
based on the then-current Western Resources Average Price for the twenty
consecutive trading days ending with the third trading day immediately
preceding the date the call is placed. The actual Western Resources Average
Price and Exchange Ratio will be calculated as of the third trading day
immediately prior to the Expiration Date, as described above, and a press
release will be issued announcing the actual Exchange Ratio prior to the
opening of the second trading day prior to the Expiration Date (as it may be
extended from time to time).
In the event that Western Resources obtains all of the Shares pursuant to
the Offer and/or the Merger, former KCPL Shareholders would own approximately
49% of the outstanding shares of Western Resources Common Stock, based on the
number of Shares outstanding on July 3, 1996 and stock prices as of July 3,
1996 (the last trading day prior to the date of this Prospectus). If ninety
percent of the Shares are exchanged, such ownership percentage would be
approximately 47%.
Western Resources' obligation to exchange shares of Western Resources Common
Stock for Shares pursuant to the Offer is conditioned upon satisfaction of the
Offer Conditions. See "--Conditions of the Offer."
According to publicly available information, as of May 3, 1996, there were
61,092,083 Shares outstanding and, together with outstanding options,
approximately 62,061,588 Shares are expected to be outstanding immediately
prior to the consummation of the Proposed UtiliCorp/KCPL Transaction. As of
the date of this Prospectus, Western Resources did not own any Shares.
Requests have been made to KCPL for use of a KCPL Shareholder list and
security position listings for the purpose of communications with KCPL
Shareholders and disseminating the Offer to holders of Shares. The Prospectus
and the related Letter of Transmittal and other relevant materials will be
mailed to record holders of Shares and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the shareholder list or, if applicable, who
are listed as
39
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares by Western Resources following
receipt of such list or listings from KCPL.
TIMING OF THE OFFER
The Offer is currently scheduled to expire on September 20, 1996; however,
it is Western Resources' current intention to extend the Offer from time to
time as necessary until all conditions to the Offer have been satisfied or
waived. See "--Extension, Termination and Amendment." Consummation of the
Offer and the Merger is subject to numerous regulatory approvals, which are
presently anticipated to be received by the second quarter of 1997 if the
management of KCPL cooperates; otherwise, such approvals are anticipated to be
received by year-end 1997. See "--Conditions of the Offer--Regulatory Approval
Condition."
KCPL Shareholders are scheduled to vote on the issuance of Shares necessary
to effect the Proposed UtiliCorp/KCPL Transaction pursuant to the Amended and
Restated UtiliCorp/KCPL Merger Agreement at the KCPL Special Meeting. The
rules of the NYSE, on which the Shares are listed, require shareholder
approval to issue shares of common stock in any transaction or series of
related transactions if such common stock will have voting power equal to or
in excess of 20% of the voting power outstanding prior to the issuance of such
stock, or the number of shares of common stock to be issued will be equal to
or in excess of 20% of the number of shares of common stock outstanding prior
to the issuance of such stock. According to the Amended and Restated
UtiliCorp/KCPL Merger Agreement, the issuance of Shares necessary to effect
the Proposed UtiliCorp/KCPL Transaction requires the affirmative vote of a
majority of the Shares voted at the KCPL Special Meeting, provided that in
order for such approval to be effective, the total number of votes cast must
represent over 50% of all outstanding Shares entitled to vote as of the Record
Date. The ability of KCPL to effect the Proposed UtiliCorp/KCPL Transaction
with such vote is the subject of pending litigation. See "Background of the
Offer--Litigation." If KCPL Shareholders do not approve the issuance of Shares
necessary to effect the Proposed UtiliCorp/KCPL Transaction, or the KCPL board
of directors terminates the Amended and Restated UtiliCorp/KCPL Merger
Agreement, the KCPL Shareholder Vote Condition will then be satisfied. In the
event that the KCPL Shareholders do not approve the issuance of Shares
necessary to effect the Proposed UtiliCorp/KCPL Transaction, Western Resources
believes that the KCPL board of directors should at that point respect the
vote of the KCPL Shareholders and, in accordance with their fiduciary duties,
consider the Offer and the Merger in good faith in light of the circumstances
then existing.
EXTENSION, TERMINATION AND AMENDMENT
Western Resources expressly reserves the right (but will not be obligated),
in its sole discretion, at any time or from time to time, to extend the period
of time during which the Offer is to remain open by giving oral or written
notice of such extension to the Exchange Agent, which extension must be
announced no later than 9:00 A.M., New York City time, on the next business
day after the previously scheduled Expiration Date. There can be no assurance
that Western Resources will exercise its right to extend the Offer. However,
it is Western Resources' current intention to extend the Offer until all
conditions have been satisfied or waived. See "--Extension, Termination and
Amendment." During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer, subject to the right of a
tendering shareholder to withdraw his or her Shares. See "--Withdrawal
Rights."
Subject to the applicable rules and regulations of the Commission, Western
Resources also reserves the right, in its sole discretion, at any time or from
time to time, (i) to delay acceptance for, exchange of, or, regardless of
whether such Shares were theretofore accepted for exchange, exchange of any
Shares pursuant to the Offer, or to terminate the Offer and not accept for
exchange or exchange any Shares not theretofore accepted for exchange, or
exchanged, upon the failure of any of the conditions of the Offer to be
satisfied and (ii) to waive any condition (other than the Western Resources
Shareholder Approval Condition, the Regulatory Approval Condition and the
condition relating to the effectiveness of the Registration Statement) or
otherwise amend the Offer in any respect, by giving oral or written notice of
such delay, termination or amendment to the Exchange Agent and by making a
public announcement thereof. Any such extension, termination, amendment or
delay will
40
be followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be issued no later than 9:00 A.M.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c) and 14d-
6(d) under the Exchange Act, which requires that any material change in the
information published, sent or given to KCPL Shareholders in connection with
the Offer be promptly disseminated to KCPL Shareholders in a manner reasonably
designed to inform KCPL Shareholders of such change) and without limiting the
manner in which Western Resources may choose to make any public announcement,
Western Resources shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by making a release to the
Dow Jones News Service.
Western Resources confirms that if it makes a material change in the terms
of the Offer or the information concerning the Offer, or if it waives a
material condition of the Offer, Western Resources will extend the Offer to
the extent required under the Exchange Act. If, prior to the Expiration Date,
Western Resources shall increase or decrease the percentage of Shares being
sought or the consideration offered to holders of Shares, such increase or
decrease shall be applicable to all holders whose Shares are accepted for
exchange pursuant to the Offer, and, if at the time notice of any such
increase or decrease is first published, sent or given to holders of Shares,
the Offer is scheduled to expire at any time earlier than the tenth business
day from and including the date that such notice is first so published, sent
or given, the Offer will be extended until the expiration of such ten
business-day period. For purposes of the Offer, a "business day" means any day
other than a Saturday, Sunday or a Federal holiday and consists of the time
period from 12:01 A.M. through 12:00 midnight, New York City time.
EXCHANGE OF SHARES; DELIVERY OF WESTERN RESOURCES COMMON STOCK
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Western Resources will accept for exchange, and will exchange,
Shares validly tendered and not properly withdrawn as promptly as practicable
after the Expiration Date. In addition, subject to applicable rules of the
Commission, Western Resources expressly reserves the right to delay acceptance
of or the exchange of Shares in order to comply with any applicable law. In
all cases, exchange of Shares tendered and accepted for exchange pursuant to
the Offer will be made only after receipt by the Exchange Agent of
certificates for such Shares (or a confirmation of a book-entry transfer of
such Shares in the Exchange Agent's account at The Depository Trust Company or
the Philadelphia Depository Trust Company (collectively, the "Book-Entry
Transfer Facilities")), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and any other required documents.
For purposes of the Offer, Western Resources will be deemed to have accepted
for exchange Shares validly tendered and not withdrawn as, if and when Western
Resources gives oral or written notice to the Exchange Agent of its acceptance
of the tenders of such Shares pursuant to the Offer. Delivery of Western
Resources Common Stock in exchange for Shares pursuant to the Offer and cash
in lieu of fractional shares of Western Resources Common Stock will be made by
the Exchange Agent as soon as practicable after receipt of such notice. The
Exchange Agent will act as agent for tendering KCPL Shareholders for the
purpose of receiving Western Resources Common Stock and cash to be paid in
lieu of fractional shares of Western Resources Common Stock from Western
Resources and transmitting such Western Resources Common Stock and cash to
tendering KCPL Shareholders. Under no circumstances will interest with respect
to fractional shares be paid by Western Resources by reason of any delay in
making such exchange.
If any tendered Shares are not accepted for exchange pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted
for more Shares than are tendered, certificates for such unexchanged Shares
will be returned without expense to the tendering KCPL Shareholder or, in the
case of Shares tendered by book-entry transfer of such Shares into the
Exchange Agent's account at a Book-Entry Transfer Facility pursuant to the
procedures set forth below under "--Procedure for Tendering," such Shares will
be credited to an account maintained within such Book-Entry Transfer Facility
as soon as practicable following expiration or termination of the Offer.
41
CASH IN LIEU OF FRACTIONAL SHARES OF WESTERN RESOURCES COMMON STOCK
No certificates representing fractional shares of Western Resources Common
Stock will be issued pursuant to the Offer. In lieu thereof, each tendering
shareholder who would otherwise be entitled to a fractional share of Western
Resources Common Stock will receive cash in an amount equal to such fraction
(expressed as a decimal and rounded to the nearest 0.01 of a share) times the
closing price for shares of Western Resources Common Stock on the NYSE
Composite Tape on the date such KCPL Shareholder's Shares are accepted for
exchange by Western Resources.
WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date, and, unless theretofore accepted for exchange and
exchanged by Western Resources for shares of Western Resources Common Stock
pursuant to the Offer, may also be withdrawn at any time after September 6,
1996.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Exchange
Agent at one of its addresses set forth on the back cover of this Prospectus,
and must specify the name of the person having tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder if different from that of the person who tendered such Shares.
The signature(s) on the notice of withdrawal must be guaranteed by a
financial institution (including most banks, savings and loan associations and
brokerage houses) which is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program (an "Eligible Institution") unless such
Shares have been tendered for the account of any Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry tender as
set forth below under "--Procedure for Tendering," any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares and must otherwise comply
with such Book-Entry Transfer Facility's procedures. If certificates have been
delivered or otherwise identified to the Exchange Agent, the name of the
registered holder and the serial numbers of the particular certificates
evidencing the Shares withdrawn must also be furnished to the Exchange Agent
as aforesaid prior to the physical release of such certificates.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Western Resources, in its sole
discretion, which determination shall be final and binding. Neither Western
Resources, the Exchange Agent, the Information Agent, the Dealer Manager nor
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or will incur any liability for
failure to give any such notification. Any Shares properly withdrawn will be
deemed not to have been validly tendered for purposes of the Offer. However,
withdrawn Shares may be retendered by following one of the procedures
described under "--Procedure for Tendering" at any time prior to the
Expiration Date.
PROCEDURE FOR TENDERING
For a KCPL Shareholder to validly tender Shares pursuant to the Offer, (i) a
properly completed and duly executed Letter of Transmittal (or manually
executed facsimile thereof), together with any required signature guarantees,
or an Agent's Message (as defined below) in connection with a book-entry
transfer, and any other required documents, must be transmitted to and
received by the Exchange Agent at one of its addresses set forth on the back
cover of this Prospectus and either certificates for tendered Shares must be
received by the Exchange Agent at such address or such Shares must be tendered
pursuant to the procedures for book-entry tender set forth below (and a
confirmation of receipt of such tender received (such confirmation, a "Book-
Entry Confirmation")), in each case prior to the Expiration Date, or (ii) such
KCPL Shareholder must comply with the guaranteed delivery procedure set forth
below.
42
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Exchange Agent, and forming a part
of a Book-Entry Confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering the Shares that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that Western Resources may enforce such agreement against such participant.
The Exchange Agent will establish accounts with respect to the Shares at the
Book-Entry Transfer Facilities for purposes of the Offer within two business
days after the date of this Prospectus, and any financial institution that is
a participant in any of the Book-Entry Transfer Facilities' systems may make
book-entry delivery of the Shares by causing such Book-Entry Transfer Facility
to transfer such Shares into the Exchange Agent's account in accordance with
such Book-Entry Transfer Facility's procedure for such transfer. However,
although delivery of Shares may be effected through book-entry at the Book-
Entry Transfer Facilities, the Letter of Transmittal (or facsimile thereof),
with any required signature guarantees, or an Agent's Message in connection
with a book-entry transfer, and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at one or more of
its addresses set forth on the back cover of this Prospectus prior to the
Expiration Date, or the guaranteed delivery procedure described below must be
complied with.
No signature guarantee is required on the Letter of Transmittal in cases
where (a) the Letter of Transmittal is signed by the registered holder(s) of
the Shares (including any participant in one of the Book-Entry Transfer
Facilities whose name appears on a security position listing as the owner of
Shares) tendered therewith and such holder(s) have not completed the
instruction entitled "Special Issuance Instructions" on the Letter of
Transmittal or (b) such Shares are tendered for the account of an Eligible
Institution. Otherwise, all signatures on the Letter of Transmittal must be
guaranteed by an Eligible Institution. If the certificates for Shares are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if certificates for unexchanged Shares are to be issued to a
person other than the registered holder(s), the certificates must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as
the name or names of the registered owner or owners appear on the
certificates, with the signature(s) on the certificates or stock powers
guaranteed as aforesaid.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO CASH
RECEIVED IN LIEU OF FRACTIONAL SHARES OF WESTERN RESOURCES COMMON STOCK, A
SHAREHOLDER MUST PROVIDE THE EXCHANGE AGENT WITH HIS OR HER CORRECT TAXPAYER
IDENTIFICATION NUMBER AND CERTIFY WHETHER SUCH SHAREHOLDER IS SUBJECT TO
BACKUP WITHHOLDING OF FEDERAL INCOME TAX BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF TRANSMITTAL. CERTAIN SHAREHOLDERS (INCLUDING, AMONG
OTHERS, ALL CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS) ARE NOT SUBJECT TO
THESE BACKUP WITHHOLDING AND REPORTING REQUIREMENTS. IN ORDER FOR A FOREIGN
INDIVIDUAL TO QUALIFY AS AN EXEMPT RECIPIENT, THE SHAREHOLDER MUST SUBMIT A
FORM W-8, SIGNED UNDER PENALTIES OF PERJURY, ATTESTING TO THAT INDIVIDUAL'S
EXEMPT STATUS.
If a KCPL Shareholder desires to tender Shares pursuant to the Offer and
such shareholder's certificates are not immediately available or such
shareholder cannot deliver the certificates and all other required documents
to the Exchange Agent prior to the Expiration Date or such shareholder cannot
complete the procedure for book-entry transfer on a timely basis, such Shares
may nevertheless be tendered, provided that all of the following conditions
are satisfied:
43
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by Western Resources, is received
by the Exchange Agent as provided below on or prior to the Expiration Date;
and
(c) the certificates for all tendered Shares (or a confirmation of a
book-entry transfer of such securities into the Exchange Agent's account at
a Book-Entry Transfer Facility as described above), in proper form for
transfer, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message) and all
other documents required by the Letter of Transmittal are received by the
Exchange Agent within three NYSE trading days after the date of execution
of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Exchange Agent and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice.
In all cases, exchanges of Shares tendered and accepted for exchange
pursuant to the Offer will be made only after timely receipt by the Exchange
Agent of certificates for Shares (or timely confirmation of a book-entry
transfer of such securities into the Exchange Agent's account at a Book-Entry
Transfer Facility as described above), properly completed and duly executed
Letter(s) of Transmittal (or facsimile(s) thereof), or an Agent's Message in
connection with a book-entry transfer, and any other required documents.
Accordingly, tendering KCPL Shareholders may be paid at different times
depending upon when certificates for Shares or confirmations of book-entry
transfers of such Shares are actually received by the Exchange Agent.
By executing a Letter of Transmittal as set forth above, the tendering KCPL
Shareholder irrevocably appoints designees of Western Resources as such
shareholder's attorneys-in-fact and proxies, each with full power of
substitution, to the full extent of such shareholder's rights with respect to
the Shares tendered by such shareholder and accepted for exchange by Western
Resources and with respect to any and all other Shares and other securities
issued or issuable in respect of the Shares on or after July 8, 1996. Such
appointment is effective, and voting rights will be affected, when and only to
the extent that Western Resources deposits the shares of Western Resources
Common Stock for Shares tendered by such shareholder with the Exchange Agent.
All such proxies shall be considered coupled with an interest in the tendered
Shares and therefore shall not be revocable. Upon the effectiveness of such
appointment, all prior proxies given by such shareholder will be revoked, and
no subsequent proxies may be given (and, if given, will not be deemed
effective). Western Resources' designees will, with respect to the Shares for
which the appointment is effective, be empowered, among other things, to
exercise all voting and other rights of such shareholder as they, in their
sole discretion, deem proper at any annual, special or adjourned meeting of
KCPL Shareholders, by written consent in lieu of any such meeting or
otherwise. Western Resources reserves the right to require that, in order for
Shares to be deemed validly tendered, immediately upon Western Resources'
exchange of such Shares, Western Resources must be able to exercise full
voting rights with respect to such Shares.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Shares will be
determined by Western Resources, in its sole discretion, which determination
shall be final and binding. Western Resources reserves the absolute right to
reject any and all tenders of Shares determined by it not to be in proper form
or the acceptance of or exchange for which may, in the opinion of Western
Resources' counsel, be unlawful. Western Resources also reserves the absolute
right to waive any of the conditions of the Offer (other than the Western
Resources Shareholder Approval Condition, the Regulatory Approval Condition
and the condition relating to the effectiveness of the Registration
Statement), or any defect or irregularity in the tender of any Shares. No
tender of Shares will be deemed to have been validly made until all defects
and irregularities in tenders of Shares have been cured or waived. Neither
Western Resources, the Exchange Agent, the Information Agent, the Dealer
Manager nor any other person will be under any duty to give notification of
any defects or irregularities in the tender of any Shares or will incur any
liability for failure to give any such notification. Western Resources'
interpretation of the terms and conditions of the Offer (including the Letter
of Transmittal and instructions thereto) will be final and binding.
44
The tender of Shares pursuant to any of the procedures described above will
constitute a binding agreement between the tendering KCPL Shareholder and
Western Resources upon the terms and subject to the conditions of the Offer.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of the
Offer and the Merger. It does not address any tax consequences of the Offer
and the Merger to persons who exercise dissenters' rights, if any, to the
Merger. This summary may not apply to certain classes of persons, including,
without limitation, foreign persons, insurance companies, tax-exempt
organizations, financial institutions, dealers in securities, persons who
acquired Shares pursuant to the exercise of employee stock options or rights
or otherwise as compensation and persons who hold Shares as part of a straddle
or conversion transaction. This summary is based upon laws, regulations,
rulings and decisions, all of which are subject to change (possibly with
retroactive effect), and no ruling has been or will be requested from the
Internal Revenue Service (the "Service") on the tax consequences of the Offer
and the Merger.
In the opinions of Sullivan & Cromwell and LeBoeuf, Lamb, Greene & MacRae,
L.L.P., special counsel to Western Resources, which opinions are based upon
certain assumptions made with the consent of Western Resources, exchanges of
Shares for Western Resources Common Stock pursuant to the Offer and the Merger
will be treated for federal income tax purposes as exchanges pursuant to a
plan of reorganization within the meaning of the Code, and:
(i) no gain or loss will be recognized by Western Resources or KCPL as a
result of the Offer or the Merger;
(ii) no gain or loss will be recognized by a holder of Shares upon the
exchange in the Offer or the Merger of such Shares solely for Western
Resources Common Stock, except with respect to the receipt of cash in lieu
of fractional shares of Western Resources Common Stock;
(iii) the aggregate adjusted tax basis of shares of Western Resources
Common Stock received in the Offer or the Merger by a holder of Shares
(including fractional shares of Western Resources Common Stock deemed
received and redeemed as described below) will be the same as the aggregate
adjusted tax basis of the Shares exchanged therefor;
(iv) the holding period of shares of Western Resources Common Stock
received in the Offer or the Merger by a holder of Shares (including
fractional shares of Western Resources Common Stock deemed received and
redeemed as described below) will include the holding period of the Shares
exchanged therefor, provided such Shares were held as capital assets; and
(v) a holder of Shares who receives cash in lieu of fractional shares of
Western Resources Common Stock will be treated as having received such
fractional shares and then as having received such cash in redemption of
such fractional shares. Under Section 302 of the Code, provided such
fractional shares would have constituted a capital asset in the hands of
such holder and provided such deemed redemption is "substantially
disproportionate" with respect to such holder or is "not essentially
equivalent to a dividend" after giving effect to the constructive ownership
rules of the Code, the holder will generally recognize capital gain or loss
equal to the difference between the amount of cash received and the
holder's adjusted tax basis in such fractional shares. Such capital gain or
loss will be long-term capital gain or loss if the holder's holding period
in the fractional shares is more than one year.
Unlike a ruling from the Service, an opinion of counsel is not binding on
the Service, and there can be no assurance that the Service will not take a
position contrary to one or more positions reflected herein or that the
positions reflected herein will be upheld if challenged by the Service.
45
This summary does not address state, local or foreign tax consequences of
the Offer and the Merger. Consequently, each holder should consult such
holder's own tax advisor as to the specific tax consequences of the Offer and
the Merger to such holder.
EFFECT OF OFFER ON MARKET FOR SHARES; REGISTRATION UNDER THE EXCHANGE ACT
The exchange of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and, depending upon the number of Shares so purchased, could adversely affect
the liquidity and market value of the remaining Shares held by the public.
The Shares are listed and principally traded on the NYSE and are also listed
on the CSE. Depending upon the number of Shares acquired pursuant to the
Offer, following consummation of the Offer, the Shares may no longer meet the
requirements of such exchanges for continued listing. For example, published
guidelines of the NYSE indicate that the NYSE would consider delisting the
outstanding Shares if, among other things, (i) the number of publicly held
Shares (exclusive of holdings of officers, directors and members of their
immediate families and other concentrated holdings of 10 percent or more)
should fall below 600,000, (ii) the number of record holders of 100 or more
Shares should fall below 1,200 or (iii) the aggregate market value of publicly
held Shares should fall below $5 million.
According to publicly available information, there were, as of May 3, 1996,
61,902,083 Shares outstanding and approximately 62,061,588 Shares are expected
to be outstanding immediately prior to the closing of the Proposed
UtiliCorp/KCPL Transaction. According to the KCPL 1995 Form 10-K, there were,
as of December 31, 1995, 29,657 holders of record of Shares.
If such exchanges were to delist the Shares, the market therefor could be
adversely affected. It is possible that the Shares would be traded on other
securities exchanges or in the over-the-counter market, and that price
quotations would be reported by such exchanges, or through the National
Association of Securities Dealers, Inc., Automated Quotations System
("Nasdaq") or by other sources. The extent of the public market for the Shares
and the availability of such quotations would, however, depend upon the number
of holders and/or the aggregate market value of the Shares remaining at such
time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of Shares under the
Exchange Act, as described below, and other factors.
The Shares are presently "margin securities" under the regulations of the
Federal Reserve Board, which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares. Depending on
factors similar to those described above with respect to listing and market
quotations, following consummation of the Offer the Shares may no longer
constitute "margin securities" for the purposes of the Federal Reserve Board's
margin regulations, in which event the Shares would be ineligible as
collateral for margin loans made by brokers. For a description of the
treatment of Shares in the Merger, see "--Purpose of the Offer; the Merger."
The Shares are currently registered under the Exchange Act. Such
registration may be terminated by KCPL upon application to the Commission if
the outstanding Shares are not listed on a national securities exchange and if
there are fewer than 300 holders of record of Shares. Termination of
registration of the Shares under the Exchange Act would reduce the information
required to be furnished by KCPL to its shareholders and to the Commission and
would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b) and the requirement of furnishing
a proxy statement in connection with shareholders' meetings pursuant to
Section 14(a) and the related requirement of furnishing an annual report to
shareholders, no longer applicable with respect to the Shares. Furthermore,
the ability of "affiliates" of KCPL and persons holding "restricted
securities" of KCPL to dispose of such securities pursuant to Rule 144 under
the Securities Act may be impaired or eliminated. If registration of the
Shares under the Exchange Act were terminated, the Shares would no longer be
eligible for Nasdaq reporting or for continued inclusion on the Federal
Reserve Board's list of "margin securities."
46
PURPOSE OF THE OFFER; THE MERGER
The purpose of the Offer is to obtain control of, and ultimately the entire
common equity interest in, KCPL. Western Resources intends, as soon as
practicable after consummation of the Offer, to seek to merge KCPL with and
into Western Resources pursuant to Section 351.447 of the MGBCL and Section
17-6703 of the KCC. Under Section 351.447 and Section 17-6703, assuming the
Minimum Tender Condition, the Western Resources Shareholder Approval
Condition, the Missouri Control Share Acquisition Condition, the Missouri
Business Combination Condition, the KCPL Shareholder Vote Condition, the
Regulatory Approval Condition and the KCPL Preferred Stock Redemption
Condition are satisfied, Western Resources could consummate the Merger without
any additional vote of the holders of Western Resources Common Stock or any
vote of KCPL Shareholders. See "--Conditions of the Offer--Short-Form Merger
Condition." Pursuant to the Merger, each outstanding Share (except for Shares
held in the treasury of KCPL and Shares held by shareholders who properly
exercise their dissenters' rights, if any, under Missouri law) would be
converted into the right to receive a number of shares of Western Resources
Common Stock equal to the Exchange Ratio. See "The Offer--Dissenters' Rights."
Pursuant to Section 351.447 of the MGBCL, a parent corporation that owns 90%
of the outstanding shares of each class of a corporation may merge such
corporation with and into itself (a "short-form merger") without a vote of the
subsidiary's shareholders. Pursuant to Sections 351.447 and 351.455 of the
MGBCL, if the subsidiary in a short-form merger is a Missouri corporation, a
shareholder of such subsidiary corporation other than the parent may, by
following the procedures summarized below in "--Dissenters' Rights," demand
that the surviving corporation pay him the fair value of his shares (exclusive
of any element of value arising from the expectation or accomplishment of the
short-form merger).
Rule 13e-3 of the General Rules and Regulations under the Exchange Act,
which Western Resources does not believe would be applicable to the Merger if
the Merger occurred within one year of consummation of the Offer, would
require, among other things, that certain financial information concerning
KCPL, and certain information relating to the fairness of the proposed
transaction and the consideration offered to KCPL Shareholders therein, be
filed with the Commission and disclosed to KCPL Shareholders prior to
consummation of the Merger.
In addition, Western Resources reserves the right to acquire, following the
consummation or termination of the Offer, additional Shares through open-
market purchases, privately negotiated transactions, a tender offer or
exchange offer, or otherwise, upon such terms and at such prices as it shall
determine, which may be more or less favorable than those of the Offer.
Western Resources and its affiliates also reserve the right to (i) dispose of
any or all Shares acquired by them pursuant to the Offer or otherwise, upon
such terms and at such prices as they shall determine and (ii) purchase shares
of any class of preferred stock of KCPL ("KCPL Preferred Stock").
In connection with the Offer, Western Resources has reviewed, and will
continue to review, on the basis of available information, various possible
business strategies that it might consider in the event that it acquires all
or substantially all of the common equity interest in KCPL. Western Resources
also intends to conduct a detailed review of KCPL and its assets, corporate
structure, capitalization, operations, properties, policies, management and
personnel and consider which changes, if any, would be desirable in light of
the circumstances which then exist. Such strategies could include, among other
things, changes in KCPL's business, corporate structure, certificate of
incorporation, bylaws, capitalization, the KCPL board of directors or
management, and consideration of disposition of certain assets or lines of
business of KCPL.
Except as noted herein, Western Resources does not have any present plans or
proposals that would result in an extraordinary corporate transaction, such as
a merger, reorganization or liquidation, or sale or transfer of a material
amount of assets, involving KCPL or any of its subsidiaries, or any material
changes in KCPL's corporate structure or business or any change in its
management. However, because Western Resources has not had access to KCPL's
books and records, additional changes may be made after a full review of
KCPL's operations is completed.
47
DISSENTERS' RIGHTS
In connection with the Merger and pursuant to Sections 351.447 and 351.455
of the MGBCL, a KCPL Shareholder may, by following the procedures summarized
below, demand in writing that Western Resources pay him the fair value of his
common equity interest. Within ten days after the effective date of the
Merger, Western Resources will notify each holder of Shares still outstanding
immediately after consummation of the Offer by registered or certified mail
(return receipt requested) delivered to the address of such shareholder
appearing in the records of KCPL that the Merger has occurred. A dissenting
shareholder then has twenty days after the mailing of such notice to demand in
writing the fair value of his common equity interest immediately prior to the
Merger, exclusive of any element of value arising from the expectation or
accomplishment of the Merger. Demands for the payment of fair value should be
addressed to: Western Resources, Inc., Attention: Corporate Secretary, 818
Kansas Avenue, Topeka, Kansas 66612.
A beneficial owner of Shares who is not the record owner may not assert
dissenters' rights. If the stock is owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, or by a nominee, the written
demand asserting dissenters' rights must be executed by the fiduciary or
nominee. If the Shares are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand must be executed by all joint
owners. An authorized agent, including an agent for two or more joint owners,
may execute the demand for a shareholder of record; however, the agent must
identify the record owner, disclose the fact that, in executing the demand, he
is acting as agent for the record owner and provide evidence of his authority.
If Western Resources and the dissenting shareholder do not agree on the fair
value of the Shares within thirty days after the end of such twenty-day
period, then the shareholder has an additional sixty days after the end of the
thirty-day period to file a petition asking for a determination of such fair
value in a court of competent jurisdiction in the county where Western
Resources maintains its registered Missouri office. The shareholder is
entitled to judgment against Western Resources for the fair value of its
Shares, excluding any element of value arising from the expectation or
accomplishment of the Merger, together with interest thereon to the date of
such judgment. The judgment shall be payable only upon, and simultaneously
with, the surrender to Western Resources of the certificate or certificates
representing shares with respect to which dissenters' rights have been
exercised. Upon the payment of the judgment, the dissenting shareholder shall
cease to have any interest in such Shares or in Western Resources. Such Shares
may be held and disposed of by Western Resources as it may see fit. Unless the
dissenting shareholder shall file such petition within such sixty-day period,
such shareholder and all persons claiming under such shareholder shall be
conclusively presumed to have approved and ratified the Merger and shall be
bound by the terms thereof.
The right of a dissenting shareholder to be paid the fair value of the
shareholder's common equity interest shall cease if the shareholder fails to
comply with the procedures set forth in Sections 351.447 and 351.455 and
described above, or if the Merger is abandoned for any reason.
The foregoing does not purport to be a complete statement of the procedures
to be followed by shareholders desiring to exercise dissenters' rights and, in
view of the fact that exercise of such rights requires strict adherence to the
relevant provisions of the MGBCL, shareholders who desire to exercise
appraisal rights are advised to review with care all applicable provisions of
law and to obtain legal counsel concerning proper compliance with applicable
provisions of the MGBCL. HOLDERS OF SHARES ARE URGED TO, AND SHOULD, READ
SECTIONS 351.447 AND 351.455 OF THE MGBCL, A COPY OF WHICH IS ATTACHED HERETO
AS SCHEDULE B IN ITS ENTIRETY AND INCORPORATED HEREIN BY REFERENCE.
CONDITIONS OF THE OFFER
Minimum Tender Condition. The Offer is conditioned upon, among other things,
there being validly tendered and not withdrawn prior to the Expiration Date a
number of Shares which will constitute at least ninety percent (90%) of the
total number of outstanding Shares on a fully diluted basis (as though all
options or other securities convertible into or exercisable or exchangeable
for Shares had been so converted, exercised or
48
exchanged) as of the date the Shares are accepted for exchange by Western
Resources pursuant to the Offer. Based upon information set forth in publicly
available information, as of May 3, 1996, there were 61,902,083 Shares
outstanding and approximately 62,061,588 Shares are expected to be outstanding
immediately prior to the consummation of the Offer and the Merger. Based on
the foregoing, Western Resources believes that the Minimum Tender Condition
would be satisfied if at least an aggregate of 55,855,430 Shares (or ninety
percent (90%) of the Shares expected to be outstanding immediately prior to
the consummation of the Offer and the Merger) had been validly tendered
pursuant to the Offer and not withdrawn. Western Resources reserves the right
(but shall not be obligated), subject to the rules and regulations of the
Commission, to waive or amend the Minimum Tender Condition and to purchase
fewer than such number of Shares as would satisfy the Minimum Tender Condition
pursuant to the Offer; provided, however, that, in the event of such waiver or
amendment, the Offer shall expire no sooner than ten business days from the
date of such waiver or amendment.
Western Resources Shareholder Approval Condition. Pursuant to the rules of
the NYSE (on which the Western Resources Common Stock is listed), the issuance
of Western Resources Common Stock pursuant to the Offer and the Merger must be
approved by the holders of a majority of the shares of Western Resources
Voting Stock, voting as a single class, voted at a meeting of such holders at
which the total number of votes cast represents over 50% in interest of all
shares of Western Resources Voting Stock outstanding on the applicable record
date. In addition, pursuant to the Western Resources Articles, approval of (i)
the holders of a majority of the shares of Western Resources Voting Stock,
voting as a single class, to amend the Western Resources Articles to increase
the number of shares of Western Resources Common Stock authorized for issuance
taking into account the terms of the Offer and (ii) a majority of the Western
Resources preferred stock, par value $100 per share, 4 1/4% series, 4 1/2%
series and 5% series (the "Western Resources Preferred Stock") and together
with the Western Resources Common Stock, the "Western Resources Voting Stock")
voting as a single class, is required to approve the Merger. Western Resources
intends to seek such approvals at a special meeting of Western Resources'
shareholders (the "Western Resources Special Meeting").
Missouri Control Share Acquisition Condition. The Missouri Control Share
Acquisition Condition may be satisfied by (i) the affirmative vote of (a) a
majority of all outstanding shares entitled to vote at a special meeting of
KCPL Shareholders voting by class if required by the terms of such shares, and
(b) a majority of all outstanding shares entitled to vote at such meeting
voting by class if required by the terms of such shares, excluding all
interested shares, in both cases approving the voting rights of the Shares to
be purchased pursuant to the Offer, (ii) the KCPL board of directors amending
the KCPL Bylaws to provide that the Missouri Control Share Acquisition Statute
(as defined below) does not apply to the acquisition of Shares pursuant to the
Offer or (iii) Western Resources being satisfied, in its reasonable
discretion, that the provisions of the Control Share Acquisition Statute do
not in any way restrict Western Resources' ability to consummate the Merger.
For a summary of the Missouri Control Share Acquisition Statute, see
"Comparison of the Rights of Holders of Shares and Western Resources Common
Stock--Voting Rights in Connection with Mergers and Consolidations--Missouri
Control Share Acquisition Statute."
Missouri Business Combination Condition. The Missouri Business Combination
Condition may be satisfied by the KCPL board of directors approving the Offer
for purposes of Section 351.459 prior to the consummation of the Offer. For a
summary of the Missouri Business Combination Statute, see "Comparison of the
Rights of Holders of Shares and Western Resources Common Stock--Voting Rights
in Connection with Mergers and Consolidations--Missouri Business Combination
Statute."
The KCPL Shareholder Vote Condition. One condition of the Offer is that
either (i) the KCPL Shareholders have voted on the approval of the issuance of
Shares necessary to effect the Proposed UtiliCorp/KCPL Transaction pursuant to
the Amended and Restated UtiliCorp/KCPL Merger Agreement at a duly held
meeting, and such approval has not been granted by all requisite votes, (ii) a
KCPL Shareholder vote on such approval has not occurred and either a record
date for such a vote is not in effect or, if such a record date is in effect,
Western Resources is satisfied, in its sole discretion, that it will have full
voting rights as of
49
such record date with respect to all Shares purchased by it pursuant to the
Offer or (iii) prior to such approval by the KCPL Shareholders, the KCPL board
of directors shall have terminated the Amended and Restated UtiliCorp/KCPL
Merger Agreement in accordance with its terms and without having breached such
agreement. If the issuance of Shares necessary to effect the Proposed
UtiliCorp/KCPL Transaction is rejected by KCPL Shareholders at the KCPL
Special Meeting, or if the Amended and Restated UtiliCorp/KCPL Merger
Agreement is terminated by the KCPL board of directors, this condition will be
satisfied.
Regulatory Approval Condition. Western Resources is subject as an operating
electric utility to the jurisdiction of the KCC and as a natural gas utility
to the jurisdiction of the KCC and the Corporation Commission of the State of
Oklahoma (the "OCC"), which have general regulatory authority over Western
Resources' rates, extensions and abandonments of service and facilities,
valuation of property, the classification of accounts, the acquisition of
securities of a competing utility and various other matters. Western Resources
is also subject to the jurisdiction of the KCC with respect to the issuance of
securities. There is no state regulatory body in Oklahoma having jurisdiction
over the issuance of Western Resources' securities.
State and Local Public Utility Regulation. KCPL's 1995 Form 10-K indicates
that KCPL is subject, as a public utility company, to the jurisdiction of the
MPSC and the KCC with respect to, among other things, service and facilities,
rates and charges, classification of accounts, valuations of property and
various other matters.
After the acquisition of Shares of KCPL and the Merger, Western Resources
will be subject to the jurisdiction of the FERC, NRC, KCC, OCC and MPSC (the
"Regulatory Commissions").
Applications for approval, or waiver of approval, of the consummation of the
Offer and the Merger and related transactions, including, in the case of
certain commissions, the issuance of securities in connection therewith, have
been or will be filed with the KCC, the MPSC and the OCC. On April 15, 1996,
Western Resources filed its application for such approvals with the KCC. On
May 3, 1996, Western Resources filed an application with the MPSC seeking
approval of the Merger. By an order dated July 28, 1996, the MPSC denied the
MPSC staff's recommendation to dismiss Western Resources' application and
required the parties to file a proposed procedural schedule by July 9, 1996.
Western Resources intends to make applications after the date hereof to seek
the required approvals of the remaining Regulatory Commissions. See
"Background of the Offer--Comparison of the Proposals--Regulatory Plan" and
"--Regulatory Approvals."
Public Utility Holding Company Act. Western Resources is a "holding company"
for purposes of the Public Utility Holding Company Act of 1935 (the "1935
Act") and is currently exempt from all provisions of the 1935 Act except
Section 9(a)(2), which generally requires approval of the Commission prior to
the direct or indirect acquisition of 5% or more of the voting securities of
an electric or gas utility company by any person that already owns, directly
or indirectly, 5% or more of the securities of a gas or electric utility
company. KCPL is an electric utility company within the meaning of the 1935
Act, and exempt from all provisions of the 1935 Act except Section 9(a)(2).
Western Resources anticipates that the Offer and the Merger will be
consummated contemporaneously and that, consequently, no approval of the
Commission under Section 9(a)(2) of the 1935 Act will be required for either
the Offer or the Merger. Western Resources anticipates that, following
consummation of the Offer and the Merger, it will continue to be exempt from
all provisions of the 1935 Act except Section 9(a)(2).
Federal Power Act. Section 203 of the Federal Power Act (the "FPA") provides
that no public utility shall sell or otherwise dispose of its jurisdictional
facilities or directly or indirectly merge or consolidate such facilities with
those of any other person or acquire any security of any other public utility,
without first having obtained authorization from the FERC. Thus, the approval
of the FERC is required prior to consummation of the Offer and the Merger.
Accordingly, Western Resources intends to file a FERC application requesting
that FERC approve the acquisition of the Shares pursuant to the Offer and the
Merger and the disposition of KCPL's jurisdictional facilities under (S) 203
of the FPA.
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act") and the rules (the "Rules") that have been
promulgated thereunder, certain acquisition transactions may
50
not be consummated unless certain information has been furnished to the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares pursuant to the Offer is subject to the HSR Act.
Western Resources intends to file with the Antitrust Division and the
Federal Trade Commission (the "FTC") a Hart-Scott-Rodino Notification and
Report Form with respect to the Offer. Under the applicable provisions of the
HSR Act, the purchase of Shares under the Offer could not be consummated until
the expiration of a 30-day waiting period following the filing of such Form by
Western Resources.
Federal and state antitrust enforcement agencies frequently scrutinize under
the antitrust laws transactions such as Western Resources' acquisition of
Shares pursuant to the Offer. At any time before or after Western Resources'
acquisition of Shares, any such agency could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the acquisition of Shares pursuant to the Offer or
otherwise or seeking divestiture of Shares acquired by Western Resources or
divestiture of substantial assets of Western Resources and/or KCPL. Private
parties may also bring legal action under the antitrust laws under certain
circumstances.
Based upon an examination of publicly available information relating to the
businesses in which both Western Resources and KCPL are engaged, Western
Resources believes that the Offer will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or that, if such a challenge is made,
Western Resources will prevail. See "The Offer--Conditions of the Offer."
Atomic Energy Act. Section 184 of the Atomic Energy Act of 1954, as amended
(the "AEA"), provides that no person may transfer or assign a license or any
rights thereunder, either directly or indirectly, without first having
obtained authorization from the NRC. Based upon publicly available
information, KCPL holds an interest in an NRC license (the "NRC Possession
License") in connection with the ownership of an interest in Wolf Creek. KCPL
is also a partial owner of WCNOC, which holds an NRC license (the "NRC
Operating License") in connection with the operation of Wolf Creek. KGE also
holds interests in the same licenses in connection with KGE's ownership of an
interest in Wolf Creek and WCNOC. The approval of the NRC will be required
prior to consummation of the Offer and the Merger. Accordingly, Western
Resources has notified the NRC of the Offer and will request the approval of
the Offer and the Merger and the transfer of the NRC Possession License and
NRC Operating License under (S) 184 of the AEA.
Other. Based upon publicly available information, Western Resources is aware
that KCPL possesses municipal franchises and environmental permits and
licenses that may require the consent of the licensor to the consummation of
the Offer and the Merger or may need to be renewed, replaced or transferred as
a result of the Offer and Merger. Western Resources does not anticipate any
difficulties at the present time in obtaining such consents, renewals,
replacements or transfers.
General. Except as set forth above, based upon an examination of publicly
available information filed by KCPL with the Commission and other publicly
available information with respect to KCPL, Western Resources is not aware of
(a) any license or regulatory permit which appears to be material to the
business of KCPL and its subsidiaries, taken as a whole, and which is likely
to be adversely affected by Western Resources' acquisition of Shares pursuant
to the Offer or the Merger or (b) any approval or other action by any state,
federal or foreign governmental administrative or regulatory agency or
authority that would be required prior to the acquisition of Shares pursuant
to the Offer or the Merger. Western Resources presently intends to take such
actions with respect to any approvals as will enable it to acquire the Shares
and consummate the Merger. In this regard, Western Resources expressly
reserves the right to challenge the validity and applicability of any state,
foreign or other statutes or regulations purporting to require approval of the
commencement or consummation of the Offer and the Merger.
There can be no assurance that any license, permit, approval or other
action, if needed, would be obtained, or would be obtained without substantial
conditions, or, if so obtained, when it would be obtained, or that adverse
51
consequences might not result to KCPL, Western Resources or to their
respective businesses in the event of adverse regulatory action or inaction.
Western Resources' obligation under the Offer to accept for exchange and to
exchange Shares is subject to the obtaining of all requisite regulatory
approvals as well as the satisfaction of other conditions which could be
triggered by an adverse regulatory development. See "The Offer--Conditions of
the Offer."
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, WESTERN RESOURCES HAVING
RECEIVED ALL NECESSARY OR DESIRABLE GOVERNMENTAL AND REGULATORY APPROVALS AND
CONSENTS FOR THE ACQUISITION OF SHARES PURSUANT TO THE OFFER AND FOR
CONSUMMATION OF THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED HEREIN,
INCLUDING APPROVALS AND CONSENTS FROM THE REGULATORY COMMISSIONS AND SUCH
APPROVALS AND CONSENTS HAVING BECOME FINAL ORDERS AND SUCH FINAL ORDERS NOT
HAVING IMPOSED TERMS OR CONDITIONS WHICH, IN THE AGGREGATE, WOULD HAVE OR,
INSOFAR AS REASONABLY CAN BE FORESEEN, COULD HAVE A MATERIAL ADVERSE EFFECT ON
THE BUSINESS, ASSETS, FINANCIAL CONDITION, OR RESULTS OF OPERATIONS OF WESTERN
RESOURCES, KCPL AND THEIR RESPECTIVE SUBSIDIARIES TAKEN AS A WHOLE.
Pooling Condition. The consummation of the Offer and the Merger is
conditioned upon, among other things, the receipt by Western Resources of a
letter from its independent accountants stating that the Merger will qualify
as a pooling of interests transaction under generally accepted accounting
principles and applicable Commission regulations. Based upon the information
currently available to it, Western Resources believes that the combination of
Western Resources and KCPL pursuant to the Offer and the Merger will qualify
for pooling of interests treatment under applicable accounting rules and
regulations.
Short-Form Merger Condition. The consummation of the Offer is conditioned
upon, among other things, Western Resources being satisfied, in its reasonable
discretion, that the provisions of Section 351.447 of the MGBCL and Section
17-6703 of the KGCC do not require the vote of any shareholder of either
Western Resources or KCPL unless such vote has been obtained prior to the
consummation of the Offer. Pursuant to the terms of each statute, Western
Resources must own 90% of each class of stock of KCPL to consummate a short-
form merger under Section 17-6703. It is a condition to the Offer that all
outstanding shares of KCPL Preferred Stock be redeemed. In addition to the
foregoing, under the Western Resources Articles, the holders of Western
Resources Preferred Stock, voting as a single class is required to approve a
merger consummated under Section 351.447 and Section 17-6703. Western
Resources intends to seek such approval at a special meeting of Western
Resources shareholders.
KCPL Preferred Stock Redemption Condition. The Offer is conditioned upon,
among other things, all outstanding Shares of KCPL Preferred Stock having been
redeemed prior to consummation of the Offer. This condition is substantially
the same as that provided for in the Amended and Restated UtiliCorp/KCPL
Merger Agreement. The satisfaction of this condition will require the
cooperation of the KCPL board of directors.
Certain Other Conditions of the Offer. Notwithstanding any other provision
of the Offer and subject to any applicable rules and regulations of the
Commission, including Rule 14e-1(c) under the Exchange Act (relating to
Western Resources' obligation to pay for or return tendered Shares promptly
after the termination or withdrawal of the Offer), Western Resources shall not
be required to accept for exchange or exchange any Shares, may postpone the
acceptance for exchange of or exchange for tendered Shares, and may, in its
sole discretion, terminate or amend the Offer as to any Shares not then
exchanged for tender if at the Expiration Date, any of the Offer Conditions
have not been satisfied or waived or if on or after the date of this
Prospectus and at or prior to the time of exchange of any such Shares (whether
or not any Shares have theretofore been accepted for exchange or exchanged
pursuant to the Offer), any of the following events shall not have occurred:
(a) The shares of Western Resources Common Stock which shall be issued to
the KCPL Shareholders in the Offer and the Merger shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
(b) The Registration Statement shall have become effective under the
Securities Act, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the Commission.
52
(c) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Offer and/or the Merger or any of the other
transactions contemplated by this Prospectus shall be in effect. No
statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any court, administrative
agency or commission or other governmental authority or instrumentality
which prohibits, restricts or makes illegal the consummation of the Offer
and/or the Merger.
(d) All required material governmental authorizations, permits, consents,
orders or approvals which do not impose terms or conditions that could
reasonably be expected to have a material adverse effect on Western
Resources and/or KCPL have been received.
(e) (i) The representations and warranties of KCPL in the Amended and
Restated UtiliCorp/KCPL Merger Agreement with respect to capitalization,
authority, financial statements, and absence of certain changes or events
shall be true and correct in all material respects as of the date of this
Prospectus and (except to the extent such representations and warranties
speak as of an earlier date) as of the Expiration Date as though made on
and as of the Expiration Date and (ii) the representations and warranties
of KCPL set forth in the Amended and Restated UtiliCorp/KCPL Merger
Agreement other than those specifically enumerated in clause (i) hereof
shall be true and correct in all respects as of the date of this Prospectus
and (except to the extent such representations and warranties speak as of
an earlier date) as of the Expiration Date as though made on and as of the
Expiration Date; provided, however, that for purposes of determining the
satisfaction of the condition contained in this clause (ii), no effect
shall be given to any exception in such representations and warranties
relating to materiality or a Material Adverse Effect (as defined in the
Amended and Restated UtiliCorp/KCPL Merger Agreement), and provided,
further, however, that, for purposes of this clause (ii), such
representations and warranties shall be deemed to be true and correct in
all respects unless the failure or failures of such representations and
warranties to be so true and correct, individually or in the aggregate,
results or would reasonably be expected to result in a material adverse
effect on KCPL and its subsidiaries taken as a whole.
The foregoing conditions are for the sole benefit of Western Resources and
may be asserted by Western Resources regardless of the circumstances giving
rise to any such conditions (including any action or inaction by Western
Resources) or may be waived by Western Resources in whole or in part (other
than the Western Resources Shareholder Approval Condition, the Regulatory
Approval Condition and the condition relating to effectiveness of the
Registration Statement). Although Western Resources reserves the right to do
so, Western Resources does not currently intend to waive any Offer Condition
unless it determines that doing so would not prevent it from consummating the
Merger promptly after consummating the Offer. The determination as to whether
any condition has been satisfied shall be in the sole judgment of Western
Resources and will be final and binding on all parties. The failure by Western
Resources at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed a
continuing right which may be asserted at any time and from time to time.
Notwithstanding the fact that Western Resources reserves the right to assert
the failure of a condition following acceptance for payment but prior to
payment in order to delay payment or cancel its obligation to exchange
properly tendered Shares, Western Resources will either promptly exchange such
Shares or promptly return such Shares.
CONTROL OF THE KCPL BOARD OF DIRECTORS
To the extent that the current KCPL board of directors determines not to
cooperate with Western Resources in satisfying the conditions of the Offer and
such conditions cannot be satisfied without action by the KCPL board of
directors, Western Resources may, at the 1997 annual meeting of KCPL
Shareholders, nominate individuals to serve as directors of KCPL who support
the Offer.
The KCPL Articles provide for the KCPL board of directors to consist of nine
directors elected at each annual meeting of KCPL Shareholders. Each director
is elected to serve until the next annual meeting of KCPL Shareholders. Under
the KCPL Bylaws, directors are elected by cumulative voting, in which each
holder of
53
outstanding shares of any class entitled to vote in an election of directors
has the right to cast as many votes in the aggregate as equals the number of
shares of such class held, multiplied by the total number of directors to be
elected by holders of shares of such class. A shareholder may cast his whole
number of votes for one candidate, or may distribute them among two or more
candidates as such shareholder may choose.
Under the KCPL Bylaws, when a vacancy or vacancies occur in the KCPL board
of directors, a majority of the remaining directors, even if less than a
quorum, may fill the vacancy or vacancies until the successor or successors
are elected at a meeting of KCPL Shareholders. A director may resign at any
time and the acceptance of his resignation is not required to make it
effective. Based upon the KCPL Bylaws and Missouri law, Western Resources
believes it is unlikely that it could convene a meeting for the purpose of
removing and replacing directors prior to KCPL's 1997 annual meeting.
If Western Resources were successful in having nominees elected to a
majority of the seats on KCPL's board of directors, Western Resources believes
that such nominees would, subject to applicable fiduciary duties and any other
applicable law, cause the KCPL board of directors to take actions to satisfy
conditions to the Offer that require such action and to approve and consummate
the Merger.
FEES AND EXPENSES
Western Resources has retained Georgeson & Company, Inc. ("Georgeson") to
act as Information Agent in connection with the Offer. The Information Agent
may contact holders of Shares by mail, telephone, telex, telegraph and
personal interviews and may request brokers, dealers and other nominee
stockholders to forward the Offer materials to beneficial owners of Shares.
The Information Agent will be paid a customary fee of $250,000 for such
services, plus reimbursement of out-of-pocket expenses, and Western Resources
will indemnify the Information Agent against certain liabilities and expenses
in connection with the Offer, including liabilities under federal securities
laws.
Pursuant to a letter agreement dated September 5, 1995, as amended (the
"Letter Agreement"), Salomon Brothers Inc ("Salomon") is providing certain
financial advisory services to Western Resources in connection with the Offer.
Under the Letter Agreement, Western Resources has agreed to pay Salomon for
its financial advisory services (including services as Dealer Manager) in
connection with the Offer, a financial advisory fee of (i) $400,000 upon
execution of the Letter Agreement, (ii) $500,000 upon public announcement of
the Offer, and (iii) up to an additional $6,000,000 (less amounts paid or
payable described in (ii) above) upon Western Resources' acquisition of more
than 20% of the outstanding Shares of KCPL or upon the consummation of the
Merger. Western Resources has also agreed to reimburse Salomon for its
reasonable out-of-pocket expenses, including the fees and expenses of its
legal counsel incurred in connection with its engagement, and has agreed to
indemnify each of Salomon and certain related persons and entities against
certain liabilities and expenses in connection with Salomon's engagement,
including certain liabilities under the federal securities laws. In connection
with Salomon's engagement as financial advisor, Western Resources anticipates
that certain employees of Salomon may communicate in person, by telephone or
otherwise with a limited number of institutions, brokers or other persons who
are KCPL Shareholders for the purpose of assisting in the Proxy Solicitation.
Salomon will not receive any fee for or in connection with such solicitation
activities by its employees apart from the fees it is otherwise entitled to
receive as described above.
In addition to the fees to be received by Salomon in connection with its
engagement as financial advisor to Western Resources, Salomon has in the past
rendered various investment banking and financial advisory services for
Western Resources for which it has received customary compensation.
Western Resources will pay the Exchange Agent reasonable and customary
compensation for its services in connection with the Offer, plus reimbursement
for out-of-pocket expenses, and will indemnify the Exchange Agent against
certain liabilities and expenses in connection therewith, including
liabilities under the federal securities laws. Western Resources will not pay
any fees or commissions to any broker or dealer or other person (other than
the Dealer Manager and the Information Agent) for soliciting tenders of Shares
pursuant to the Offer.
54
Brokers, dealers, commercial banks and trust companies will be reimbursed by
Western Resources for customary mailing and handling expenses incurred by them
in forwarding material to their customers.
ACCOUNTING TREATMENT
Western Resources believes that the Merger will qualify as a "pooling of
interests" for accounting and financial reporting purposes, based upon their
review and the advice of Arthur Andersen LLP, their independent public
accountants. Under this method of accounting, Western Resources will restate
its consolidated financial statements to include the assets, liabilities,
shareholders' equity and results of operations of KCPL. It is anticipated that
upon consummation of the Merger, the fiscal year of the combined company will
be the calendar year.
STOCK EXCHANGE LISTING
The Western Resources Common Stock is listed on the NYSE. Application will
be made to list the Western Resources Common Stock to be issued pursuant to
the Offer and the Merger on the NYSE. As described above under "The Offer--
Conditions of the Offer--Western Resources Shareholder Approval Condition,"
pursuant to the rules of the NYSE, the issuance of Western Resources Common
Stock in the Offer and the Merger must be approved by the holders of a
majority of the shares of Western Resources Voting Stock, voting as a single
class, voted at a meeting of such holders at which the total number of votes
cast represents over 50% in interest of all shares of Western Resources Voting
Stock outstanding on the applicable record date.
MATERIAL CONTACTS BETWEEN KCPL AND WESTERN RESOURCES
KGE, a wholly-owned subsidiary of Western Resources, and KCPL have joint
interests in the LaCygne Station (a coal-fired station consisting of two
generating units aggregating approximately 1,344 MW capacity) and Wolf Creek
(a nuclear powered generating station of approximately 1,166 MW capacity).
Western Resources, KGE and KCPL are members of the MOKAN and Southwest Power
Pools and in the normal course of business make purchases and sales of power
to each other and enter into other agreements or arrangements with respect to
their business operations.
KCPL has been and is the operator of LaCygne Station and has billed KGE for
its share of capital additions, fuel costs and other operating expenses. KGE
and KCPL are parties to a variety of contracts relating to the operations and
maintenance of LaCygne Station. Since 1992 such expenses have been as follows:
Three Months Ended March 31, 1996 $20,771,000
Year Ended December 31:
1995 67,196,000
1994 74,696,000
1993 82,543,000
55
In 1981 KCPL, KGE and Kansas Electric Power Cooperative, Inc., a group of
approximately 25 electric cooperatives, signed an Ownership Agreement with
respect to Wolf Creek providing for undivided ownership shares of 47%, 47% and
6%, respectively. Wolf Creek was completed in 1985. In 1986, the joint owners
organized WCNOC and entered into an Operating Agreement with WCNOC, which
operates, maintains, repairs, decontaminates and decommissions Wolf Creek as
provided in the Operating Agreement. The license to operate Wolf Creek was
transferred to WCNOC effective January 1, 1987. WCNOC invoices each of the
joint owners for their respective shares of all expenses for operating and
maintaining, and for capital addition to Wolf Creek. Total operating expenses
related to WCNOC for its share of capital additions, fuel costs and other
operating and maintenance expenses since 1992 are as follows:
Three Months Ended March 31, 1996 $30,907,000
Year Ended December 31:
1995 97,506,000
1994 85,969,000
1993 93,522,000
From time to time WCNOC may generate an "owner work order" pursuant to which
one of the three owners contracts to provide a specific service to WCNOC for
which that owner is paid by WCNOC; the amount of such billing is then
reallocated to the joint owners in accordance with their ownership shares.
Pursuant to an October 1, 1984 lease agreement, as amended, KCPL leases
KGE's 345 kv transmission line from Wolf Creek to LaCygne Station. The rent
paid by KCPL to KGE since 1992 for the use of the transmission line is as
follows:
Three Months Ended March 31, 1996 $ 498,000
Year Ended December 31:
1995 1,991,000
1994 1,984,000
1993 1,980,000
In the normal course of their operations, Western Resources and KGE purchase
and interchange power with a number of electric utilities, including KCPL. The
following table sets forth the total cost of purchased and interchanged power
and energy purchased by Western Resources and KGE from KCPL and sold to KCPL
by Western Resources and KGE:
PURCHASED SOLD
--------- ----------
Three Months Ended March 31,
1996 $128,000 $ 98,000
Year Ended December 31:
1995 734,000 1,259,000
1994 725,000 1,178,000
1993 665,000 7,076,000
56
BUSINESS OF WESTERN RESOURCES
Western Resources and its divisions and wholly owned subsidiaries include
KPL, a rate-regulated electric and gas division of Western Resources, KGE, a
rate-regulated utility and wholly owned subsidiary of Western Resources,
Westar Capital, Inc., Westar Consumer Services, Inc., Westar Business
Services, Inc., and The Wing Group, Inc., non-utility subsidiaries, and Mid
Continent Market Center, Inc., a regulated gas transmission service provider.
KGE owns 47% of WCNOC, the operating company for Wolf Creek.
Western Resources is engaged principally in the production, purchase,
transmission, distribution and sale of electricity and the delivery and sale
of natural gas. Western Resources serves approximately 601,000 electric
customers in eastern and central Kansas and approximately 648,000 natural gas
customers in Kansas and northeastern Oklahoma. Western Resources' non-utility
subsidiaries market natural gas primarily to large commercial and industrial
customers, provide electronic security services, engage in international large
power project development and provide other energy-related products and
services.
Western Resources owns 30,800,000 common shares, par value $.10 per share
(the "ADT Shares"), of ADT Limited, a corporation organized under the laws of
Bermuda ("ADT") representing 23.9% of the ADT Shares and as such applies the
equity method of accounting. Western Resources holds through its subsidiary
the ADT Shares for investment purposes and continually reviews its investment
in ADT and, based on its evaluation of market conditions, applicable
regulatory requirements, ADT's business prospects and future developments, it
may from time to time determine to increase or decrease its equity position in
ADT.
WESTERN RESOURCES AND KCPL
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information combines
the historical consolidated balance sheets and statements of income of Western
Resources and KCPL, including their respective subsidiaries, after giving
effect to the Merger. The unaudited pro forma combined balance sheet data at
March 31, 1996 and December 31, 1995 and 1994 gives effect to the Merger as if
it had occurred on either March 31 or December 31. The unaudited pro forma
combined statements of income for the quarter ended March 31, 1996 and each of
the years in the three-year period ended December 31, 1995 give effect to the
Merger as if it had occurred on January 1. These statements are prepared on
the basis of accounting for the Merger as a pooling of interests and are based
on the assumptions set forth in the notes thereto.
The following unaudited pro forma combined financial information has been
prepared from, and should be read in conjunction with, the consolidated
financial statements and related notes thereto of Western Resources and KCPL
and the unaudited forecasted financial data for 1996-2000 which is presented
elsewhere in this registration statement. See "Unaudited Forecasted Financial
Data." The following information is not necessarily indicative of the
financial position or operating results that would have occurred had the
Merger been consummated on the date as of which, or at the beginning of the
periods for which, the Merger is being given effect, nor is it necessarily
indicative of future operating results or financial position. See
"Incorporation Of Certain Documents By Reference."
57
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
FOR THE THREE MONTHS ENDED MARCH 31, 1996
WESTERN
RESOURCES KCPL PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
ASSETS
Utility Plant
Electric plant in
service................... $5,372,781 $3,399,478 $ $8,772,259
Natural gas plant in
service................... 798,010 -- 798,010
---------- ---------- ---------- ----------
6,170,791 3,399,478 9,570,269
Less--Accumulated
depreciation.............. 1,964,761 1,177,540 3,142,301
---------- ---------- ---------- ----------
4,206,030 2,221,938 6,427,968
Construction work in
progress.................. 87,095 86,138 173,233
Nuclear fuel (net)......... 53,674 54,422 108,096
---------- ---------- ---------- ----------
Net utility plant........ 4,346,799 2,362,498 6,709,297
---------- ---------- ---------- ----------
Other Property and
Investments:
Net non-utility
investments............... 550,971 -- 550,971
Decommissioning trust...... 27,044 -- 27,044
Other...................... 8,361 188,059 196,420
---------- ---------- ---------- ----------
Total.................... 586,376 188,059 774,435
---------- ---------- ---------- ----------
Current Assets:
Cash and cash
equivalents............... 2,950 28,749 31,699
Accounts receivable and
unbilled revenues (net)... 270,936 46,858 317,794
Fossil fuel, at average
cost...................... 47,377 17,020 64,397
Gas stored underground, at
average cost.............. 3,989 -- 3,989
Materials and supplies, at
average cost.............. 56,150 45,672 101,822
Prepayments and other
current assets............ 38,748 4,264 43,012
---------- ---------- ---------- ----------
Total.................... 420,150 142,563 562,713
---------- ---------- ---------- ----------
Deferred Charges and Other
Assets
Deferred future income
taxes..................... 282,476 123,000 405,476
Deferred fuel contract
settlement costs.......... 25,717 12,197 37,914
Phase-in revenues.......... 39,475 -- 39,475
Corporate-owned life
insurance (net)........... 84,043 -- 84,043
Other deferred costs....... 31,473 30,796 62,269
Unamortized debt expense... 55,389 -- 55,389
Other...................... 86,903 17,338 104,241
---------- ---------- ---------- ----------
Total.................... 605,476 183,331 788,807
---------- ---------- ---------- ----------
Total Assets................ $5,958,801 $2,876,451 $ $8,835,252
========== ========== ========== ==========
CAPITALIZATION AND
LIABILITIES
Capitalization
Common stock equity........ $1,575,188 $ 897,360 $ $2,472,548
Redeemable preferred and
preference stock.......... 150,000 1,276 151,276
Preferred stock not
subject to mandatory
redemption................ 24,858 89,000 113,858
Company-obligated
mandatorily redeemable
preferred securities...... 100,000 -- 100,000
Long-term debt, net........ 1,666,192 841,040 2,507,232
---------- ---------- ---------- ----------
Total Capitalization..... 3,516,238 1,828,676 5,344,914
---------- ---------- ---------- ----------
Current Liabilities:
Short-term debt............ 342,300 10,000 352,300
Long-term debt due within
one year.................. 16,000 80,303 96,303
Accounts payable........... 123,614 52,041 175,655
Accrued taxes.............. 118,255 41,269 159,524
Accrued interest and
dividends................. 63,825 21,791 85,616
Other...................... 37,770 31,736 69,506
---------- ---------- ---------- ----------
Total current
liabilities............. 701,764 237,140 938,904
---------- ---------- ---------- ----------
Deferred Credits and Other
Liabilities:
Deferred income taxes...... 1,155,279 649,042 1,804,321
Deferred investment tax
credits................... 130,583 70,246 200,829
Deferred gain from sale-
leaseback................. 240,290 -- 240,290
Other...................... 214,647 91,347 305,994
---------- ---------- ---------- ----------
Total deferred credits
and other liabilities... 1,740,799 810,635 2,551,434
---------- ---------- ---------- ----------
Total Capitalization and
Liabilities................ $5,958,801 $2,876,451 $ $8,835,252
========== ========== ========== ==========
The accompanying Notes to Unaudited Pro Forma Combined Financial Information
are an integral part of this statement and should be read in their entirety.
58
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1995
WESTERN
RESOURCES KCPL PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(DOLLARS IN THOUSANDS)
ASSETS
Utility Plant:
Electric plant in service.. $5,341,074 $3,388,538 $ $8,729,612
Natural gas plant in
service................... 787,453 -- 787,453
---------- ---------- ---- ----------
6,128,527 3,388,538 9,517,065
Less--Accumulated
depreciation.............. 1,926,520 1,156,115 3,082,635
---------- ---------- ---- ----------
4,202,007 2,232,423 6,434,430
Construction work in
progress.................. 100,401 72,365 172,766
Nuclear fuel (net)......... 53,942 54,673 108,615
---------- ---------- ---- ----------
Net utility plant.......... 4,356,350 2,359,461 6,715,811
---------- ---------- ---- ----------
Other Property and
Investments:
Net non-utility
investments............... 90,044 -- 90,044
Decommissioning trust...... 25,070 -- 25,070
Other...................... 9,225 166,751 175,976
---------- ---------- ---- ----------
Total...................... 124,339 166,751 291,090
---------- ---------- ---- ----------
Current Assets:
Cash and cash equivalents.. 2,414 28,390 30,804
Accounts receivable and
unbilled revenues (net)... 257,292 64,668 321,960
Fossil fuel, at average
cost...................... 54,742 22,103 76,845
Gas stored underground, at
average cost.............. 28,106 -- 28,106
Materials and supplies, at
average cost.............. 57,996 47,175 105,171
Prepayments and other
current assets............ 20,973 11,126 32,099
---------- ---------- ---- ----------
Total...................... 421,523 173,462 594,985
---------- ---------- ---- ----------
Deferred Charges and Other
Assets:
Deferred future income
taxes..................... 282,476 123,000 405,476
Deferred fuel contract
settlement costs.......... 27,274 13,007 40,281
Phase-in revenues.......... 43,861 -- 43,861
Corporate-owned life
insurance (net)........... 44,143 -- 44,143
Other deferred costs....... 31,539 34,215 65,754
Unamortized debt expense... 56,681 -- 56,681
Other...................... 102,491 12,610 115,101
---------- ---------- ---- ----------
Total...................... 588,465 182,832 771,297
---------- ---------- ---- ----------
Total Assets................ $5,490,677 $2,882,506 $ $8,373,183
========== ========== ==== ==========
CAPITALIZATION AND
LIABILITIES
Capitalization:
Common stock equity........ $1,553,110 $ 897,938 $ $2,451,048
Redeemable preferred and
preference stock.......... 150,000 1,436 151,436
Preferred stock not subject
to mandatory redemption... 24,858 89,000 113,858
Company-obligated
mandatorily redeemable
preferred securities...... 100,000 -- 100,000
Long-term debt, net........ 1,391,263 835,713 2,226,976
---------- ---------- ---- ----------
Total Capitalization....... 3,219,231 1,824,087 5,043,318
---------- ---------- ---- ----------
Current Liabilities:
Short-term debt............ 203,450 19,000 222,450
Long-term debt due within
one year.................. 16,000 73,803 89,803
Accounts payable........... 149,194 52,506 201,700
Accrued taxes.............. 68,569 39,726 108,295
Accrued interest and
dividends................. 62,157 16,906 79,063
Other...................... 40,266 48,114 88,380
---------- ---------- ---- ----------
Total current liabilities.. 539,636 250,055 789,691
---------- ---------- ---- ----------
Deferred Credits and Other
Liabilities:
Deferred income taxes...... 1,167,470 648,374 1,815,844
Deferred investment tax
credits................... 132,286 71,270 203,556
Deferred gain from sale-
leaseback................. 242,700 -- 242,700
Other...................... 189,354 88,720 278,074
---------- ---------- ---- ----------
Total deferred credits and
other liabilities......... 1,731,810 808,364 2,540,174
---------- ---------- ---- ----------
Total Capitalization and
Liabilities................ $5,490,677 $2,882,506 $ $8,373,183
========== ========== ==== ==========
The accompanying Notes to Unaudited Pro Forma Combined Financial Information
are an integral part of this statement and should be read in their entirety.
59
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1994
WESTERN
RESOURCES KCPL PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(DOLLARS IN THOUSANDS)
ASSETS
Utility Plant:
Electric plant in service.. $5,226,175 $3,330,478 $ $8,556,653
Natural gas plant in
service................... 737,191 -- 737,191
---------- ---------- ---- ----------
5,963,366 3,330,478 9,293,844
Less--accumulated
depreciation.............. 1,790,266 1,092,436 2,882,702
---------- ---------- ---- ----------
4,173,100 2,238,042 6,411,142
Construction work in
progress.................. 85,290 57,294 142,584
Nuclear fuel (net)......... 39,890 40,806 80,696
---------- ---------- ---- ----------
Net utility plant.......... 4,298,280 2,336,142 6,634,422
---------- ---------- ---- ----------
Other Property and
Investments:
Net non-utility
investments............... 74,017 -- 74,017
Decommissioning trust...... 16,944 -- 16,944
Other...................... 13,556 98,429 111,985
---------- ---------- ---- ----------
Total...................... 104,517 98,429 202,946
---------- ---------- ---- ----------
Current Assets:
Cash and cash equivalents.. 2,715 20,217 22,932
Accounts receivable and
unbilled revenues (net)... 219,760 47,117 266,877
Fossil fuel, at average
cost...................... 38,762 16,570 55,332
Gas stored underground, at
average cost.............. 45,222 -- 45,222
Materials and supplies, at
average cost.............. 56,145 44,953 101,098
Prepayments and other
current assets............ 27,932 6,582 34,514
---------- ---------- ---- ----------
Total...................... 390,536 135,439 525,975
---------- ---------- ---- ----------
Deferred Charges and Other
Assets:
Deferred future income
taxes..................... 283,297 120,000 403,297
Deferred fuel contract
settlement costs.......... 33,606 16,625 50,231
Phase-in revenues.......... 61,406 -- 61,406
Corporate-owned life
insurance (net)........... 16,967 -- 16,967
Other deferred costs....... 31,784 53,500 85,284
Unamortized debt expense... 58,237 -- 58,237
Other...................... 92,399 10,262 102,661
---------- ---------- ---- ----------
Total...................... 577,696 200,387 778,083
---------- ---------- ---- ----------
Total Assets................ $5,371,029 $2,770,397 $ $8,141,426
========== ========== ==== ==========
CAPITALIZATION AND
LIABILITIES
Capitalization:
Common stock equity........ $1,474,455 $ 874,699 $ $2,349,154
Redeemable preferred and
preference stock.......... 150,000 1,596 151,596
Preferred stock not subject
to mandatory redemption... 24,858 89,000 113,858
Long-term debt, net........ 1,357,028 798,470 2,155,498
---------- ---------- ---- ----------
Total capitalization....... 3,006,341 1,763,765 4,770,106
---------- ---------- ---- ----------
Current Liabilities:
Short-term debt............ 308,200 32,000 340,200
Long-term debt due within
one year.................. 80 33,419 33,499
Accounts payable........... 130,616 73,486 204,102
Accrued taxes.............. 86,966 24,684 111,650
Accrued interest and
dividends................. 61,069 12,209 73,278
Other...................... 69,025 29,358 98,383
---------- ---------- ---- ----------
Total current liabilities.. 655,956 205,156 861,112
---------- ---------- ---- ----------
Deferred Credits and Other
Liabilities:
Deferred income taxes...... 1,152,425 644,139 1,796,564
Deferred investment tax
credits................... 137,651 82,840 220,491
Deferred gain from sale-
leaseback................. 252,341 -- 252,341
Other...................... 166,315 74,497 240,812
---------- ---------- ---- ----------
Total deferred credits and
other liabilities......... 1,708,732 801,476 2,510,208
---------- ---------- ---- ----------
Total Capitalization and
Liabilities................ $5,371,029 $2,770,397 $ $8,141,426
========== ========== ==== ==========
The accompanying Notes to Unaudited Pro Forma Combined Financial Information
are an integral part of this statement and should be read in their entirety.
60
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
WESTERN
RESOURCES KCPL PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------ ----------- ---------
Operating Revenues:
Electric.................. $268,985 $206,624 $ $475,609
Natural gas............... 286,637 -- 286,637
-------- -------- -------- --------
Total operating
revenues............... 555,622 206,624 762,246
-------- -------- -------- --------
Operating expenses
Fuel...................... 62,747 30,773 93,520
Power purchased........... 8,045 13,985 22,030
Natural gas purchases..... 150,523 -- 150,523
Operations and
maintenance.............. 167,598 61,528 229,126
Depreciation and
amortization............. 42,313 27,620 69,933
Amortization of phase-in
revenues................. 4,386 -- 4,386
Income taxes.............. 19,605 13,413 33,018
General taxes............. 25,132 24,361 49,493
-------- -------- -------- --------
Total operating
expenses............... 480,349 171,680 652,029
-------- -------- -------- --------
Operating Income............ 75,273 34,944 110,217
Other Income and Deductions
(net of taxes)............. 2,242 3,837 6,079
-------- -------- -------- --------
Income Before Interest
Charges.................... 77,515 38,781 116,296
Interest Charges:
Long-term debt............ 26,499 13,424 39,923
Other..................... 7,160 1,224 8,384
Allowance for borrowed
funds used during
construction (credit).... (933) (390) (1,323)
-------- -------- -------- --------
Total interest charges.. 32,726 14,258 46,984
-------- -------- -------- --------
Net Income.................. 44,789 24,523 69,312
Preferred and Preference
Dividends.................. 3,355 957 4,312
-------- -------- -------- --------
Earnings Applicable to
Common Stock............... $ 41,434 $ 23,566 $ $ 65,000
======== ======== ======== ========
Average Common Shares
Outstanding................ 63,164 61,902 758 125,824
Earnings per Average Common
Share Outstanding.......... $ 0.66 $ 0.38 $ 0.52
Dividends Declared per
Common Share............... $ 0.515 $ 0.39 $ 0.52
The accompanying Notes to Unaudited Pro Forma Combined Financial Information
are an integral part of this statement and should be read in their entirety.
61
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
WESTERN
RESOURCES KCPL PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating Revenues:
Electric................. $1,145,895 $885,955 $ $2,031,850
Natural gas.............. 426,176 -- 426,176
---------- -------- ---- ----------
Total operating
revenues............ 1,572,071 885,955 2,458,026
---------- -------- ---- ----------
Operating Expenses:
Fuel..................... 231,419 139,371 370,790
Power purchased.......... 15,739 38,783 54,522
Natural gas purchases.... 263,790 -- 263,790
Operations and
maintenance............. 425,920 257,038 682,958
Depreciation and
amortization............ 156,915 109,832 266,747
Amortization of phase-in
revenues................ 17,545 -- 17,545
Income taxes............. 88,520 77,062 165,582
General taxes............ 96,839 96,821 193,660
---------- -------- ---- ----------
Total operating
expenses............ 1,296,687 718,907 2,015,594
---------- -------- ---- ----------
Operating Income........... 275,384 167,048 442,432
Other Income and Deductions
(net of taxes)............ 25,907 10,060 35,967
---------- -------- ---- ----------
Income Before Interest
Charges................... 301,291 177,108 478,399
Interest Charges:
Long-term debt........... 95,962 52,184 148,146
Other.................... 27,859 4,301 32,160
Allowance for borrowed
funds used during
construction (credit)... (4,206) (1,963) (6,169)
---------- -------- ---- ----------
Total interest
charges............. 119,615 54,522 174,137
---------- -------- ---- ----------
Net Income................. 181,676 122,586 304,262
Preferred and Preference
Dividends................. 13,419 4,011 17,430
---------- -------- ---- ----------
Earnings Applicable to
Common Stock.............. $ 168,257 $118,575 $ $ 286,832
========== ======== ==== ==========
Average Common Shares
Outstanding............... 62,157 61,902 758 124,817
Earnings per Average Common
Share Outstanding......... $ 2.71 $ 1.92 $ 2.30
Dividends Declared per
Common Share.............. $ 2.02 $ 1.54 $ 2.04
The accompanying Notes to Unaudited Pro Forma Combined Financial Information
are an integral part of this statement and should be read in their entirety.
62
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
WESTERN
RESOURCES KCPL PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating Revenues:
Electric................. $1,121,781 $868,272 $ $1,990,053
Natural gas.............. 496,162 -- 496,162
---------- -------- ---- ----------
Total operating
revenues............ 1,617,943 868,272 2,486,215
---------- -------- ---- ----------
Operating Expenses:
Fuel..................... 234,328 135,106 369,434
Power purchased.......... 15,438 33,929 49,367
Natural gas purchases.... 312,576 -- 312,576
Operations and
maintenance............. 416,577 274,772 691,349
Depreciation and
amortization............ 151,630 107,463 259,093
Amortization of phase-in
revenues................ 17,544 -- 17,544
Income taxes............. 95,622 70,949 166,571
General taxes............ 104,682 96,362 201,044
---------- -------- ---- ----------
Total operating
expenses............ 1,348,397 718,581 2,066,978
---------- -------- ---- ----------
Operating Income........... 269,546 149,691 419,237
Other Income and Deductions
(net of taxes)............ 33,856 2,500 36,356
---------- -------- ---- ----------
Income Before Interest
Charges................... 303,402 152,191 455,593
Interest Charges:
Long-term debt........... 98,483 43,962 142,445
Other.................... 20,139 5,298 25,437
Allowance for borrowed
funds used during
construction (credit)... (2,667) (1,844) (4,511)
---------- -------- ---- ----------
Total interest
charges............. 115,955 47,416 163,371
---------- -------- ---- ----------
Net Income................. 187,447 104,775 292,222
Preferred and Preference
Dividends................. 13,418 3,457 16,875
---------- -------- ---- ----------
Earnings Applicable to
Common Stock.............. $ 174,029 $101,318 $ $ 275,347
========== ======== ==== ==========
Average Common Shares
Outstanding............... 61,618 61,903 758 124,279
Earnings per Average Common
Share Outstanding......... $ 2.82 $ 1.64 $ 2.22
Dividends Declared per
Common Share.............. $ 1.98 $ 1.50 $ 2.00
The accompanying Notes to Unaudited Pro Forma Combined Financial Information
are an integral part of this statement and should be read in their entirety.
63
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
WESTERN
RESOURCES KCPL PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating Revenues:
Electric................. $1,104,537 $857,450 $ $1,961,987
Natural gas.............. 804,822 -- 804,822
---------- -------- --- ----------
Total operating
revenues............ 1,909,359 857,450 2,766,809
---------- -------- --- ----------
Operating Expenses:
Fuel..................... 250,328 130,117 380,445
Power purchased.......... 16,396 31,403 47,799
Natural gas purchases.... 500,189 -- 500,189
Operations and
maintenance............. 467,003 263,183 730,186
Depreciation and
amortization............ 164,364 111,284 275,648
Amortization of phase-in
revenues................ 17,545 -- 17,545
Income taxes............. 77,978 69,502 147,480
General taxes............ 123,493 95,659 219,152
---------- -------- --- ----------
Total operating
expenses............ 1,617,296 701,148 2,318,444
---------- -------- --- ----------
Operating Income........... 292,063 156,302 448,365
Other income and deductions
(net of taxes)............ 25,482 1,909 27,391
---------- -------- --- ----------
Income Before Interest
Charges................... 317,545 158,211 475,756
Interest Charges:
Long-term debt........... 123,551 50,118 173,669
Other.................... 19,255 4,863 24,118
Allowance for borrowed
funds used during
construction (credit)... (2,631) (2,542) (5,173)
---------- -------- --- ----------
Total interest
charges............. 140,175 52,439 192,614
---------- -------- --- ----------
Net Income................. 177,370 105,772 283,142
Preferred and Preference
Dividends................. 13,506 3,153 16,659
---------- -------- --- ----------
Earnings Applicable to
Common Stock.............. $ 163,864 $102,619 $ $ 266,483
========== ======== === ==========
Average Common Shares
Outstanding............... 59,294 61,909 758 121,961
Earnings Per Average Common
Share Outstanding......... $ 2.76 $ 1.66 $ 2.18
Dividends Declared Per
Common Share.............. $ 1.94 $ 1.46 $ 1.96
The accompanying Notes to Unaudited Pro Forma Combined Financial Information
are an integral part of this statement and should be read in their entirety.
64
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The unaudited pro forma combined balance sheet and combined statement of
income are presented as if the Merger had been effective for all periods
presented. Terms of the Offer allow holders of Shares to exchange each Share
held for $31.00 of Western Resources Common Stock, subject to certain
limitations as set forth herein. Pro Forma shares and related earnings and
dividends per share information have been calculated assuming an exchange
ratio of 1.01224 based on July 2, 1996 (the last trading day prior to the date
of this Prospectus) closing stock prices.
The Merger is assumed to generate substantial cost savings. The assumed cost
savings, effects of the Regulatory Plan and transaction costs have not been
reflected in the pro forma combined balance sheets and combined statements of
income. Transaction costs including fees for advisors, attorneys and other
consultants and incremental direct costs of completing the Merger are
estimated to approximate $88 million (which amount includes the $58 million
termination fee that may be payable under the terms of the Amended and
Restated UtiliCorp/KCPL Merger Agreement).
There are no anticipated changes in either Western Resources' or KCPL's
accounting policies as a result of the Merger. Both companies accrue unbilled
revenue for energy delivered at the end of each reporting period, use
composite depreciation methods at group rates specified pursuant to regulation
and have certain other accounting policies which differ due to the nature of
how regulators have allowed certain costs to be recovered from customers.
KGE is the joint owner with KCPL or lessee under an operating lease with a
third party of the LaCygne Station and Wolf Creek. These generating facilities
represent approximately 23% of Western Resources' total generating capacity,
39% of KCPL's total generating capacity, and 29% of the combined company's
total generating capacity. See "Material Contracts Between KCPL and Western
Resources."
65
UNAUDITED FORECASTED FINANCIAL DATA
The forecast was prepared to reflect the pro forma results of operations for
the pre-Merger periods of 1996 and 1997 and the combined company post-Merger
results of operations for the periods 1998 through 2000. The Merger is assumed
to be consummated on January 1, 1998 and to be accounted for as a pooling of
interests.
The forecast was developed solely by Western Resources from the stand-alone
forecast of Western Resources and, for KCPL, a forecast based on public
information, analysts' forecasts, knowledge of cost trends associated with
generating units jointly owned by Western Resources and KCPL, and Western
Resources' knowledge of the electric utility industry. To the best knowledge
and belief of Western Resources, the assumptions contained within the forecast
are reasonable. The assumptions disclosed herein are those which are
significant to the forecast.
This forecasted financial information involves significant judgments and
assumptions which may not be realized and are inherently subject to
significant uncertainties, all of which are difficult to predict and many of
which are beyond the control of Western Resources. Accordingly, there can be
no assurance this forecast will be realized and actual results may vary
materially from those shown. Selected significant assumptions to the
forecasted financial data are described in "Prospectus Summary--Selected
Unaudited Forecasted Financial Data--Summary of Selected Significant
Assumptions" and in "Notes to Unaudited Forecasted Statement of Income."
Western Resources as a matter of course does not publicly disclose
forecasted financial statements. The principal assumptions underlying the
forecast are the terms of the Offer and the Regulatory Plan. See "Background
of the Offer--Comparison of the Proposals--Regulatory Approvals" and "The
Offer." The assumptions underlying the forecast also involve judgments with
respect to, among other things, expected cost savings from the Merger, normal
weather conditions, future national and regional economic and competitive
conditions, inflation rates, regulatory treatment, future financial market
conditions, interest rates and future business decisions, which, though
considered reasonable by Western Resources, may not be realized. Additionally,
the forecast is inherently subject to significant weather, regulatory,
business, economic and competitive uncertainties, all of which are difficult
to predict and many of which are beyond the control of Western Resources;
accordingly, there can be no assurance that the forecast will be realized, and
actual results and subsequent forecasts, if any, may vary materially from
those shown. In light of the uncertainties inherent in forecasts of any kind,
the inclusion of the forecast herein should not be regarded as a
representation by Western Resources or any other person that the forecast will
be achieved. Shareholders and other investors are cautioned not to place undue
reliance on the forecast.
Accordingly, the forecast reflects management's judgment as of July 3, 1996,
the date of this forecast, of the expected conditions and its expected course
of action. There will be differences between forecasted and actual results,
because events and circumstances frequently do not occur as expected, and
those differences may be material.
The forecasted financial data has not been audited, compiled or otherwise
examined by any independent certified public accountant. The forecasted data
for KCPL has not been obtained from or reviewed by the management of KCPL. The
forecast was not prepared with a view to compliance with the published
guidelines established by the American Institute of Certified Public
Accountants for preparation and presentation of financial forecast.
Western Resources does not intend to update or otherwise revise the forecast
to reflect circumstances existing after the date of the forecast or to reflect
the occurrence of unanticipated events. The forecast should be read together
with the information contained in "Prospectus Summary" and "Western Resources
and KCPL Unaudited Pro Forma Combined Financial Information" included
elsewhere in this Prospectus and in conjunction with the historical financial
statements and notes thereto contained in the Western Resources' 1995 Form 10-
K and KCPL 1995 Form 10-K, both incorporated by reference herein.
66
WESTERN RESOURCES
UNAUDITED FORECASTED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA COMBINED COMPANY
PRE MERGER POST MERGER
---------------------- ----------------------------------
1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
Operating revenues:
Electric............... $2,082,346 $2,108,664 $2,132,746 $2,178,297 $2,236,725
Natural gas............ 479,479 496,454 524,516 544,303 559,758
---------- ---------- ---------- ---------- ----------
Total operating
revenues............ 2,561,825 2,605,118 2,657,262 2,722,600 2,796,483
---------- ---------- ---------- ---------- ----------
Operating expenses:
Fuel................... 388,279 404,922 423,104 449,400 473,017
Power purchased........ 50,536 54,601 55,393 63,682 74,014
Natural gas purchases.. 291,883 288,418 298,420 302,701 316,343
Operations and
maintenance........... 685,038 713,113 704,027 700,329 719,445
Depreciation and
amortization.......... 289,430 289,858 323,685 328,027 334,144
Amortization of phase-
in revenues........... 17,545 17,545 8,773 -- --
Income taxes........... 160,302 155,270 157,837 172,124 172,179
General taxes.......... 207,204 215,538 219,400 223,224 227,704
Transaction costs...... -- -- 88,000 -- --
---------- ---------- ---------- ---------- ----------
Total operating
expenses............ 2,090,217 2,139,265 2,278,639 2,239,487 2,316,846
---------- ---------- ---------- ---------- ----------
Operating income........ 471,608 465,853 378,623 483,113 479,637
Other income and
deductions (net of
taxes):................ 38,416 67,392 61,048 79,573 85,735
---------- ---------- ---------- ---------- ----------
Income before interest
charges................ 510,024 533,245 439,671 562,686 565,372
Interest charges:
Long-term debt......... 139,064 136,140 155,863 167,558 157,482
Dividends/interest on
quarterly income
securities............ 12,798 17,775 21,775 25,775 25,775
Other.................. 50,764 52,296 39,926 17,685 22,680
Allowance for borrowed
funds used during
construction
(credit).............. (6,995) (6,294) (5,229) (5,232) (5,369)
---------- ---------- ---------- ---------- ----------
Total interest
charges:............ 195,631 199,917 212,335 205,786 200,568
---------- ---------- ---------- ---------- ----------
Net income.............. 314,393 333,328 227,336 356,900 364,804
Preferred and preference
dividends.............. 18,282 8,362 8,648 12,419 12,419
---------- ---------- ---------- ---------- ----------
Earnings applicable to
common stock.......... $ 296,111 $ 324,966 $ 218,688 $ 344,481 $ 352,385
========== ========== ========== ========== ==========
Average common shares
outstanding(1)......... 126,310 127,347 128,136 129,618 130,762
========== ========== ========== ========== ==========
Earnings per common
share(1)............... $ 2.34 $ 2.55 $ 1.71 $ 2.66 $ 2.69
Earnings per common
share excluding costs
to achieve savings and
transaction
costs(1)(2)............ $ 2.34 $ 2.55 $ 2.52 $ 2.67 $ 2.69
========== ========== ========== ========== ==========
Dividends declared per
common share:
Western Resources...... $ 2.06 $ 2.10 $ 2.14 $ 2.18 $ 2.22
KCPL................... $ 1.58 $ 1.62
========== ==========
Equivalent Dividends
per KCPL Common
Share(1).............. $ 2.17 $ 2.21 $ 2.25
========== ========== ==========
- --------
(1) Equivalent Dividends per KCPL Common Share are calculated by multiplying
the Dividends declared per common share of Western Resources by an
exchange ratio of 1.01224 based on July 2, 1996 (the last trading day
prior to the date of this Prospectus) closing stock prices. If the Merger
had been consummated on January 1, 1996, the equivalent dividends per
Share would have been $2.09 and $2.13, in 1996 and 1997, respectively
(based on an exchange ratio of 1.01224).
(2) Dividends declared per share of Western Resources Common Stock exceed
Earnings per common share in 1998 (the first year following the Merger) as
a result of a one-time projected charge of $88 million for transaction
costs and $27 million of expenses to achieve cost savings in the Merger.
See "Notes to Unaudited Forecasted Statement of Income--Merger
Assumptions--Transaction Costs" and "Notes to Unaudited Forecasted
Statements of Income--Merger Assumptions--Cost Savings." Absent these one-
time costs, Earnings per common share outstanding would be projected to be
$.81 higher and would exceed the projected dividend by $.48 per share.
The accompanying Notes to Unaudited Forecasted Statement of Income are an
integral part of this statement and should be read in their entirety.
67
NOTES TO UNAUDITED FORECASTED STATEMENT OF INCOME
The discussion which follows summarizes significant assumptions used in the
development of the forecasted Statements of Income for 1996 through 2000.
These assumptions were developed solely by Western Resources. The information
used by Western Resources to forecast amounts for KCPL is limited to publicly
available information, analyst's forecasts, knowledge of cost trends
associated with jointly owned generating facilities Western Resources has with
KCPL and Western Resources' knowledge of the electric utility industry. KCPL
has not participated in the development of the forecasted Statements of Income
for 1996 through 2000 or reviewed this information. The significant
assumptions are set forth below.
MERGER ASSUMPTIONS
General. Pursuant to the Offer, each Share is entitled to $31.00 of Western
Resources Common Stock, subject to certain limitations. See "The Offer." The
Merger is assumed to result in lower operating costs due to the achievement of
cost savings resulting from the Merger and Regulatory Plan. See "Background of
the Offer--Comparison of the Proposals."
Stock Exchange. The forecast assumes each Share is exchanged for 1.01224
shares of Western Resources Common Stock assuming common stock closing prices
as of July 2, 1996 (the last trading day prior to the date of this
Prospectus). The forecast assumes the Merger is accounted for as a pooling of
interests. Under this method, the recorded account balances of Western
Resources and KCPL are carried forward to a combined total at their recorded
amounts. The income includes the combined income of Western Resources and KCPL
as though the Merger occurred at the beginning of the accounting period. Prior
periods are restated to present the combined operating results and financial
position.
Dividends. The forecasted dividends are consistent with Western Resources'
past practice. This practice is assumed for purposes of the forecast to be
continued subsequent to the Merger.
Merger-Related Regulatory Assumptions. The forecast assumes all regulatory
approvals required to consummate the Merger will be obtained by December 31,
1997. As proposed in the application of Western Resources to the KCC, the
forecast assumes retail rates for KGE and KCPL customers will be reduced in
accordance with the Regulatory Plan. See "Background of the Offer--Comparison
of the Proposals--Regulatory Plan."
Transaction Costs. Transaction costs associated with the Merger are
estimated to be approximately $88 million (which amount includes the $58
million termination fee that may be payable under the terms of the Amended and
Restated UtiliCorp/KCPL Merger Agreement) and are expensed upon consummating
the Merger in 1998. This nonrecurring expense is estimated to reduce earnings
by approximately $0.69 per share in 1998. The transaction costs represent
professional fees for attorneys, investment bankers, accountants and other
advisors and other direct incremental costs.
Cost Savings. Cost savings assumed in development of the forecast for the
combined company have been limited to quantifiable cost savings which are
estimated upon the combination of Western Resources and KCPL. Recognition has
been given to the costs to be incurred in achieving these potential savings
and to the time required to implement plans designed to lower costs. See
"Background of the Offer--Comparison of the Proposals."
68
The total cost savings, net of the costs necessary to achieve these
reductions, are estimated to be approximately $43 million in 1998, $77 million
in 1999, $94 million in 2000, $101 million in 2001, $108 million in 2002, $111
million in 2003, $117 million in 2004, $124 million in 2005, $131 million in
2006, and $138 million in 2007, for a cumulative total of approximately $1.043
billion during the first ten years following the Merger. The savings in 1998
and 1999 are lower than any subsequent year's savings due to the costs to
achieve and phase-in of certain cost savings. A summary of the cost savings
beginning January 1, 1998 is as follows:
COST SAVINGS AS REFLECTED IN THE FORECAST
(DOLLARS IN THOUSANDS)
YEARS ENDING DECEMBER 31,
---------------------------------------------
2001-
1998 1999 2000 2007 TOTAL
------- ------- ------- -------- ----------
GENERATION:
Electric Dispatch............. $ 4,313 $ 4,714 $ 5,157 $ 50,209 $ 64,393
Capacity Deferrals............ -- -- 7,168 50,176 57,344
Generation Labor.............. 8,854 9,419 10,008 88,821 117,102
------- ------- ------- -------- ----------
13,167 14,133 22,333 189,206 238,839
FIELD OPERATIONS................ 6,569 7,366 8,198 83,892 106,025
PURCHASING ECONOMIES (NON-FUEL):
Procurement................... 10,288 11,938 13,638 147,554 183,418
Inventory..................... 741 741 741 5,187 7,410
Contract Services............. 2,461 2,945 3,445 39,408 48,259
------- ------- ------- -------- ----------
13,490 15,624 17,824 192,149 239,087
CORPORATE & ADMINISTRATIVE:
Information Services.......... 10,106 12,454 13,744 96,252 132,556
Facilities.................... 1,711 1,711 1,711 11,977 17,110
Professional Services......... 1,358 1,399 1,441 11,370 15,568
Insurance..................... 1,114 1,148 1,182 9,329 12,773
Corporate & Administrative
Labor........................ 17,853 20,699 21,816 188,293 248,661
Overheads & Benefits.......... 3,426 3,616 3,816 33,065 43,923
Other Corporate &
Administrative Programs...... 1,627 1,673 1,719 13,460 18,479
------- ------- ------- -------- ----------
37,195 42,700 45,429 363,746 489,070
------- ------- ------- -------- ----------
GROSS SAVINGS................... 70,421 79,823 93,784 828,993 1,073,021
Less: Costs to Achieve........ (27,157) (3,014) -- -- (30,171)
------- ------- ------- -------- ----------
NET SAVINGS..................... $43,264 $76,809 $93,784 $828,993 $1,042,850
======= ======= ======= ======== ==========
The forecasted amounts have been adjusted to consider the effect on
operating results from savings of capital costs such as capacity deferrals and
purchasing economies.
OPERATING ASSUMPTIONS
Electric Revenues. Electric rates for the merged company will continue to be
subject to approval by the KCC at the retail level for Kansas jurisdictional
customers and the MPSC for Missouri jurisdictional customers and the FERC at
the wholesale level. Although both the wholesale and retail markets are
becoming increasingly competitive and subject to deregulation, these forecasts
do not assume any significant change to the structure of electric utility
regulation.
KPL Electric. The forecast assumes KPL electric service territory will
sustain continued growth in sales from electric operations at a compound
annual growth rate of 2.7% over the forecast period.
69
KGE Electric. The forecast assumes KGE's electric service territory will
sustain continued growth in electric sales at a compound annual growth rate
of 2.3% over the forecast period.
KCPL Electric. The forecast assumes KCPL's electric service territory
will sustain continued growth in electric sales at a compound annual growth
rate of 2.5% over the forecast period.
The forecast also assumes normal weather conditions. Sales distribution by
customer class is expected to remain relatively constant and reflect the
existing mix of customers within the service territories of each KPL, KGE and
KCPL. Forecasted revenues reflect the rate reductions in Regulatory Plan.
Natural Gas Revenues. Natural gas rates are assumed to continue to be
subject to approval by the KCC and the OCC at the retail level. Although
recent FERC decisions and market conditions have created substantial change
within the natural gas business, this forecast does not assume any significant
changes in the current structure of natural gas regulation.
The forecast assumes the natural gas service territory will experience
modest growth in natural gas sales. Revenue from continuing gas operations is
assumed to increase at a compound annual growth rate of approximately 5.6%
during the forecast periods taking into consideration increased purchased gas
costs passed on to customers through a purchased gas adjustment clause
("PGA"). The forecasted revenues also include increases to the rates charged
reflecting the gas rate increase authorized by the KCC in April 1996 and an
additional increase in 1998 which is assumed to be needed to recover revenue
requirements associated with the additional capital investment and operating
expenses related to Western Resources' gas service line replacement program.
The distribution of gas sales among customer classes remains relatively
constant over the forecast periods, with each class maintaining its relative
proportion of total sales, including transportation customers.
Western Resources has been authorized in Kansas and Oklahoma to maintain a
PGA provision in its rates. The PGA allows Western Resources to pass on to its
customers the actual costs associated with purchases of natural gas, thereby
removing Western Resources' potential exposure associated with fluctuations in
the natural gas market. During the forecast period, a significant portion of
the anticipated revenue increase is associated with increased gas purchase
costs and has no impact on forecasted earnings.
Regulatory Assumptions. The forecast assumes the accounting for regulated
enterprises prescribed by Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulations" ("SFAS 71"),
continues to be applicable for all periods presented. SFAS 71 requires
deferral of certain costs and obligations based upon approvals received from
regulators to permit recovery or require refund of these costs and revenues in
future periods. Consequently, the recorded net book value of certain assets
and liabilities may be different than would otherwise be recorded by
unregulated enterprises. Although recent developments suggest the electric
generation industry may become more competitive, the degree to which
regulatory oversight will be lifted and competition permitted is uncertain.
Fuel. KPL, KGE and KCPL rates do not provide for fuel adjustment clauses
within their respective retail rate structures.
KPL. In 1996, predominantly all of KPL's electric energy was generated
using low-sulfur coal, with the remainder generated using natural gas or
fuel oil. This fuel mix pattern is expected to continue throughout the
forecast periods.
KGE. KGE generates electricity using a variety of fuels, including
uranium, coal, natural gas and fuel oil. Currently, KGE has on hand or
under contract 75% of the uranium required through the year 2003 for Wolf
Creek. The balance is expected to be obtained through spot market or
contract purchases. Unlike the cost of coal or other conventional fuels,
the cost of uranium is recorded as a plant asset at the time of purchase,
enrichment and fabrication, and is amortized to expense when used based
upon the quantity of heat produced for the generation of electricity. Most
of KGE's coal requirements are low-sulfur Wyoming coal purchased under
long-term contracts.
70
KCPL. Forecasted fuel costs have been estimated based upon historical
trends. KCPL generates electricity primarily using coal and uranium as fuel
sources.
Natural Gas Purchases. Western Resources purchases natural gas from a
combination of interstate pipelines and direct wellhead production on both the
spot market and under long-term contracts. Approximately 80% of Western
Resources' gas purchases are from nonaffiliated interstate pipeline companies.
These contracts vary in length from one to twenty years.
Operations and Maintenance. The cost savings estimated with the Merger are
assumed to be realized beginning in 1998. The forecasted savings are estimated
to reduce amounts classified as operations and maintenance expenses by $35
million in 1998, $64 million in 1999 and $70 million in 2000. See additional
details regarding cost savings listed under the Merger assumptions section of
this forecast.
The forecast assumes an annual increase for operations and maintenance
expense of approximately 3.4%, based on economic projections for inflation.
The costs increased by this factor, however, do not include nuclear refueling
or La Cygne operating lease expenses. Nuclear refueling costs have been
included approximately every 18 months and are forecasted to occur in
accordance with Wolf Creek's normal refueling cycle. The operating lease
expense for the La Cygne Unit 2 is the result of KGE's sale-leaseback of that
plant. The operating lease expense, net of the amortization of the gain on the
sale, increases in 1997 from $22.5 million annually to $28.9 million annually
under provisions of the operating lease agreement.
Depreciation. For financial reporting purposes, Western Resources and KCPL
both use the straight-line method to depreciate the original cost of property
over the estimated remaining service life. The depreciation rates used during
the forecast periods are consistent with those currently in effect and
approximate 3%, except as modified by the Regulatory Plan. In accordance with
this Regulatory Plan, depreciation of Wolf Creek has been accelerated by $50
million annually.
Decommissioning. Decommissioning costs are assumed to be recovered from
customers over the life of Wolf Creek. These costs are based on estimated
unrecovered decommissioning costs, which consider inflation over the remaining
estimated life of Wolf Creek and are net of earnings on amounts recovered from
customers and deposited in an external trust fund.
General Taxes. General taxes include such items as ad valorem taxes, payroll
taxes, and other miscellaneous taxes. The forecast assumes these taxes
increase as a direct result of items such as property additions, increased
wages and revenues.
Income Taxes. The following income tax assumptions have been made in
developing the forecast:
. Income tax expense includes provisions for income taxes currently payable
and deferred income taxes. Income taxes include both federal and state
income taxes, and are developed based upon each year's level of
forecasted taxable income.
. Forecasted income tax provisions have been adjusted for permanent and
"flow-through" items to account for differences between the forecasted
effective income tax rate and the applied statutory income tax rate. The
principal differences between the statutory federal income tax rate and
the effective income tax rate are state income taxes, non-taxable income,
net tax benefits flowed through pursuant to regulatory orders and
amortization of investment tax credits.
. The combined effective income tax rate is forecasted to be approximately
36%, 36%, 43%, 35% and 35% in 1996, 1997, 1998, 1999 and 2000,
respectively.
71
Financing Assumptions. The forecast considers the following assumptions for
financing for 1996 through 2000:
Short-Term Debt. Short-term debt is used to initially finance capital
expenditures and meet other working capital requirements. The financing
provided by short-term debt is assumed to bear an interest rate of 6%.
During the forecast period, short-term debt is refinanced to long-term debt
in the amount of $500 million in 1998.
Common Stock. During the forecast period, common stock is only issued to
meet normal operational financing requirements. This includes shares issued
under Western Resources' dividend reinvestment plan, providing
approximately $27 million in 1996, $29 million in 1997 and $31 million in
1998. In addition, the forecast assumes Western Resources issues
approximately $23 million to finance investments in international energy
projects.
Preferred and Preference Stock. The forecast assumes Western Resources
redeems $150 million of preference stock in 1996 and 1997. In addition, the
forecast assumes the redemption of KCPL's preferred stock.
Quarterly Income Debt Securities (QUIDS). The forecast assumes Western
Resources issues $120 million of QUIDS in 1996 and $50 million in 1997 at
interest rates of 8.25% and 8.07%, respectively.
Long-Term Debt. The forecast assumes long-term debt is issued only to
refinance short-term debt used to meet operational financing requirements.
Long-term debt retirements are made only to meet scheduled maturities of
long-term debt.
Securities Covenants. All covenants of debt and preferred stock are
maintained in the forecast period.
Other Income and Deductions. The following assumptions have been made in
developing forecasts for other income and deductions:
. Western Resources owns 100% of several non-regulated subsidiaries. These
include Westar Capital, Westar Business Services, Westar Consumer
Services and The Wing Group. In addition, Western Resources owns a 23.9%
interest in ADT and an equity interest in a gas compression company.
Increases in other income during the forecast period are largely
comprised of earnings from investments in electronic security services
and the development of certain international independent power projects.
See "Business of Western Resources."
. KCPL's non-regulated business units have not been forecasted to generate
any material amounts of earnings during the forecast period.
. The forecast includes projected borrowings against the cash value and the
costs associated with premium and interest payments on corporate owned
life insurance ("COLI") policies, net of income due to increases in cash
surrender value.
. The forecast assumes Western Resources will continue its program of
deferring post-retirement and post-employment costs determined on the
accrual basis in accordance with SFAS 106 and SFAS 112, and netting those
costs against an income stream generated by investments in COLI under
provisions of current regulatory practices. In the event that the income
stream of COLI is reduced or eliminated by pending national tax
legislation, the forecast assumes incremental SFAS 106 and SFAS 112
expense will be recovered in rates approved by the KCC.
. Forecasted amounts for other income and deductions also include other
smaller items of income and deductions, net of income tax effects, not
included in the rate regulated revenues. A pre-tax gain of approximately
$20 million in 1997 is assumed from selling certain immaterial non-
strategic assets.
72
DESCRIPTION OF WESTERN RESOURCES CAPITAL STOCK
The authorized capital stock of Western Resources consists of 85,000,000
shares of Western Resources Common Stock, par value $5.00 per share, 4,000,000
shares of Western Resources preference stock without par value (the "Western
Resources Preference Stock"), 600,000 shares of Western Resources Preferred
Stock, par value $100.00 per share (the "Par Value Preferred Stock") and
6,000,000 shares of preferred stock without par value (the "No Par Value
Preferred Stock"). The Par Value Preferred Stock and the No Par Value
Preferred Stock are referred to herein together as the "Western Resources
Preferred Stock".
WESTERN RESOURCES COMMON STOCK
As of July 3, 1996, Western Resources had 63,983,885 shares of Western
Resources Common Stock issued and outstanding. The holders of Western
Resources Common Stock and the Preferred Stock, voting as one class, are
entitled to one vote per share on all matters requiring stockholder action
(except for the election of directors) subject to the special voting rights of
holders of Western Resources Preferred Stock and Western Resources Preference
Stock described below. In all elections for directors, each holder of Western
Resources Preferred Stock or Western Resources Common Stock has the right to
cast as many votes in the aggregate as equals the number of shares held by him
multiplied by the number of directors to be elected; provided, however, that
if the holders of the Western Resources Preferred Stock are entitled to vote
separately as a class for the election of certain directors or the Western
Resources Preferred Stock and the Western Resources Preference Stock are each
entitled to vote separately as a class for the election of certain directors,
the holders of the Common Stock shall be entitled to vote separately as a
class for the remaining directors. The holders of Western Resources Preferred
Stock are entitled to elect a majority of the board of directors if, and so
long as, dividends payable on outstanding Western Resources Preferred Stock
are in default in an amount equal to four or more quarterly dividends, whether
or not consecutive. The holders of Western Resources Preference Stock are
entitled to elect two directors if, and so long as, dividends payable on
outstanding Western Resources Preference Stock are in default in an amount
equal to six or more quarterly dividends, whether or not consecutive. The
holders of the Western Resources Common Stock participate ratably in
liquidation, subject to the payment to the holders of the Western Resources
Preferred Stock and Western Resources Preference Stock of the preferential
amounts to which they are respectively entitled.
Dividends on the Western Resources Common Stock may be declared and paid
only out of surplus or net profits legally available for the payment of
dividends and only when the full dividends on the Western Resources Preferred
Stock and the Western Resources Preference Stock have been paid or declared
and a sum sufficient for the payment thereof shall have been set apart. In
addition, the Western Resources Articles contain further restrictions on the
dividends which may be paid to holders of the Western Resources Common Stock.
In the event the Capitalization Ratio (as defined below) is less than 20%,
dividends (including the proposed payment) on the Western Resources Common
Stock and the Western Resources Preference Stock during the twelve month
period ending with and including the date of the proposed payment of such
dividends may not exceed 50% of the net income available for dividends during
the twelve calendar month period ending with and including the second calendar
month immediately preceding the date of the proposed payment of dividends on
such shares of capital stock. Similarly, if the Capitalization Ratio is 20% or
more, but less than 25%, then the payment of dividends on the Western
Resources Common Stock and the Western Resources Preference Stock (including
the proposed payment) during the twelve month period ending with and including
the date of the proposed payment of such dividends may not exceed 75% of the
net income of Western Resources available for dividends for the twelve
calendar months ending with and including the second calendar month
immediately preceding the date of the proposed payment of dividends on such
shares of capital stock. Except as permitted by the provisions of the Western
Resources Articles summarized in this paragraph, Western Resources may not pay
dividends on the Western Resources Common Stock and the Western Resources
Preference Stock which would reduce the Capitalization Ratio to less than 25%.
"Capitalization Ratio" is defined to mean the ratio of the capital represented
by the Western Resources Common Stock and the Western Resources Preference
Stock, including
73
premiums on the capital stock of Western Resources, plus the surplus accounts
of Western Resources, to the total capital of Western Resources, plus the
surplus accounts of Western Resources, at the end of the second calendar month
immediately preceding the date of the proposed payment of dividends, adjusted
to reflect the proposed payment of dividends.
WESTERN RESOURCES PREFERRED STOCK
Western Resources is authorized to issue 6,600,000 shares of Western
Resources Preferred Stock, which may be issued from time to time in one or
more series, each such series to have such distinctive designation or title as
may be fixed by the Western Resources board of directors prior to the issuance
of any shares thereof. Each series may differ from each other series already
outstanding as may be declared from time to time by the Western Resources
board of directors in the following respects: (i) the rate of dividend; (ii)
the amount per share, if any, which the Western Resources Preferred Stock
shall be entitled to receive upon redemption, liquidation, distribution or
sale of assets, dissolution or winding up of Western Resources; (iii) terms
and conditions of conversions, if any; and (iv) terms of sinking fund,
redemption or purchase account, if any. As of July 3, 1996, Western Resources
had three series of Par Value Preferred Stock outstanding; the 4 1/2% Series
(138,576 shares outstanding); the 4 1/4% Series (60,000 shares outstanding);
and the 5% Series (50,000 shares outstanding), and no shares of No Par Value
Preferred Stock were outstanding.
The Western Resources Preferred Stock has special voting rights which are
triggered when dividends on the stock are in default in an amount equal to
four or more quarterly dividends, whether or not consecutive. If dividends are
not paid for four or more dividend periods on all series of Western Resources
Preferred Stock then outstanding, the holders of the Western Resources
Preferred Stock are entitled to elect the smallest number of directors
necessary to constitute a majority of the full Western Resources board of
directors until such unpaid dividends shall be paid. In addition, Western
Resources may not, without the consent of the holders of at least two-thirds
of the Western Resources Preferred Stock then outstanding, voting as a class,
(i) define or specify preferences, qualifications, limitations or other rights
for authorized but unissued shares of Western Resources Preferred Stock
superior to those of outstanding shares of such stock (except for differences
described in items (i) through (iv) in the previous paragraph) or amend,
alter, change or repeal any of the express terms or provisions of the then
outstanding Western Resources Preferred Stock in a manner substantially
prejudicial to the holders thereof, or (ii) issue or sell any Western
Resources Preferred Stock or any class of stock ranking prior to or on a
parity with the Western Resources Preferred Stock other than in exchange for
or for the purpose of effecting the retirement of not less than a like number
of shares of Western Resources Preferred Stock or shares of stock ranking
prior to or on a parity therewith or securities convertible into not less than
a like number of such shares unless (a) aggregate capital applicable to
Western Resources Common Stock and Western Resources Preference Stock plus
surplus equals the involuntary liquidation preference of all Western Resources
Preferred Stock and any such other stock ranking prior thereto or on a parity
therewith and (b) Western Resources' net earnings (as defined) for a period of
twelve consecutive calendar months within the fifteen calendar months
preceding the date of issuance, available for the payment of dividends, shall
be at least two times the annual dividend requirements on the Western
Resources Preferred Stock and on any such other stock ranking prior thereto or
on a parity therewith after giving effect to the proposed issuance, and the
net earnings (as defined), for the same period, available for payment of
interest shall be at least one and one-half times the sum of annual interest
requirements and dividend requirements on Western Resources Preferred Stock
and such other stock ranking prior thereto or on a parity therewith after
giving effect to the proposed issuance.
The Western Resources Articles also provide that without the consent of the
holders of at least a majority of the Western Resources Preferred Stock then
outstanding, voting as a class, or if more than one-third shall vote
negatively, Western Resources shall not: (i) merge or consolidate with or into
any other corporation; (ii) sell, lease or exchange all or substantially all
of its property or assets unless the fair value of the net assets of Western
Resources after completion of such transaction shall at least equal the
liquidation value of all outstanding shares of Western Resources Preferred
Stock; or (iii) reacquire or pay any dividends or make any other distribution
upon shares of the Western Resources Preference Stock or the Western Resources
Common Stock or any other class of the stock of Western Resources over which
the Western Resources Preferred Stock
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has preference with respect to the payment of dividends or the distribution of
assets, unless after any such action the sum of (a) the capital of Western
Resources represented by the outstanding Western Resources Preference Stock,
Western Resources Common Stock or other stock over which the Western Resources
Preferred Stock has preference, (b) Western Resources' earned surplus, and (c)
any capital surplus of Western Resources, shall not be less than the sum of
$10,500,000 plus an amount equal to twice the annual dividend requirement on
all outstanding shares of the Western Resources Preferred Stock and on any
such other stock ranking prior thereto or on a parity therewith.
At Western Resources' 1996 Annual Shareholders Meeting, a proposal was
approved to amend the Western Resources Articles by removing the voting rights
of the holders of Western Resources Preferred Stock relating to the issuance
of unsecured indebtedness.
WESTERN RESOURCES PREFERENCE STOCK
Western Resources is authorized to issue 4,000,000 shares of Western
Resources Preference Stock, which may be issued from time to time in one or
more series, each such series to have such distinctive designation or title as
may be fixed by the board prior to the issuance of any shares thereof. Each
series may differ from each other series already outstanding, as may be
declared from time to time by the Western Resources board of directors, in the
following respects: (i) the rate of dividend; (ii) whether shares of Western
Resources Preference Stock are subject to redemption, and if so, the amount or
amounts per share which the shares of such series would be entitled to receive
in case of redemption, and the terms on which such shares may be redeemed;
(iii) the amounts payable in the case of the liquidation, distribution or sale
of assets, dissolution or winding up of Western Resources; (iv) terms and
conditions of conversion, if any; (v) terms of sinking fund, redemption or
purchase account, if any; and (vi) any designations, preferences and relative
participating, optional or other special rights and qualifications,
limitations or restrictions thereof. As of July 3, 1996, Western Resources had
500,000 shares of 7.58% Series Preference Stock outstanding.
The Western Resources Preference Stock has voting rights which are triggered
when dividends on the stock are in default in an amount equal to six or more
quarterly dividends, whether or not consecutive. If dividends are not paid for
six or more dividend periods, the holders of the Western Resources Preference
Stock are entitled to elect two directors to the Western Resources board of
directors until such unpaid dividends shall be paid. In addition, Western
Resources may not, without the consent of the holders of at least two-thirds
of the Western Resources Preference Stock then outstanding, voting as a class,
(i) amend, alter, change or repeal any of the express terms and conditions of
the then outstanding Western Resources Preference Stock in a manner
substantially prejudicial to the holders thereof, or (ii) create any class of
stock ranking prior to the Western Resources Preference Stock as to dividends
or upon liquidation, or securities convertible into shares ranking prior to
the Western Resources Preferred Stock in such respects; provided, no such
consent shall be required with respect to the taking of any such action
relating to the Western Resources Preferred Stock.
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DESCRIPTION OF KCPL'S CAPITAL STOCK
THE SHARES
The KCPL Articles provide that KCPL has authority to issue 150,000,000
Shares. According to publicly available information, as of May 3, 1996, there
were 61,902,083 Shares issued and outstanding.
Holders of Shares are entitled to one vote per Share held, with the right of
cumulative voting in the election of directors. Holders of Shares are entitled
to receive dividends from funds legally available therefor, when and as
declared by the KCPL board of directors, and are entitled upon liquidation to
receive pro rata the net assets of KCPL after satisfaction in full of the
prior rights of creditors of KCPL and holders of the Cumulative Preferred
Stock, Cumulative No Par Preferred Stock and the KCPL Preference Stock (as
defined below).
UMB Bank, N.A., is the Transfer Agent and Registrar for the Shares.
CUMULATIVE PREFERRED STOCK AND CUMULATIVE NO PAR PREFERRED STOCK
The KCPL Articles authorize the issuance of 409,157 shares of Cumulative
Preferred Stock, par value $100 per share and 1,572,000 shares of Cumulative
No Par Preferred Stock, without par value (the Cumulative Preferred Stock and
the Cumulative No Par Preferred Stock are referred to collectively as the
"KCPL Preferred Stock"). On December 31, 1995, KCPL had 404,357 shares of
Cumulative Preferred Stock outstanding and 500,000 shares of Cumulative No Par
Preferred Stock outstanding. The KCPL Preferred Stock may be issued from time
to time in one or more series and the KCPL board of directors is authorized to
determine or alter the powers, preferences and rights, and the qualifications,
limitations or restrictions to be granted or imposed upon the KCPL Preferred
Stock. Thus, the KCPL board of directors is authorized to designate and fix
with respect to each series of KCPL Preferred Stock the specific designation
of such series, the dividend rate, the terms of redemption, the terms and
amount of any sinking fund and conversion rights, all without further action
by the holders of the Shares.
The holders of each series of KCPL Preferred Stock are entitled to receive
dividends from funds legally available therefor when, as and if declared by
the KCPL board of directors and are entitled upon liquidation to receive an
amount per share equal to that which such holders would have been entitled to
receive had shares held by them been redeemed. The shares of KCPL Preferred
Stock now outstanding have preference over the Shares with respect to the
payment of dividends and distribution of assets in the event of the
liquidation, winding up or dissolution of Western Resources.
Generally, the holders of each series of KCPL Preferred Stock have no voting
rights. However, the holders of KCPL Preferred Stock are entitled to vote as a
single class for the approval of a merger or consolidation, except that no
consent of the holders of KCPL Preferred Stock is required with respect to any
merger or consolidation approved by the Commission under the 1935 Act, unless
such stock is to be redeemed prior to the effective time of the merger or
consolidation. Furthermore, if the equivalent of four quarterly dividends
payable on a series of KCPL Preferred Stock are in default, the holders of
KCPL Preferred Stock, voting as a single class, may elect the smallest number
of directors necessary to constitute a majority of the full KCPL board of
directors.
PREFERENCE STOCK
The KCPL Articles provide that KCPL has the authority to issue 11,000,000
shares of preference stock with no par value (the "KCPL Preference Stock"). On
December 31, 1995, no shares of Preference Stock were outstanding. The KCPL
Preference Stock may be issued from time to time in one or more series with
such rights, preferences and limitations as are specified by the KCPL board of
directors. The KCPL board of directors is authorized to establish, designate
and fix, with respect to each series of KCPL preference shares, the
designation of such series, the dividend rate, right of redemption and the
price, sinking fund provisions and voting rights, all without further action
by the holders of the Shares.
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COMPARISON OF THE RIGHTS OF HOLDERS OF
SHARES AND WESTERN RESOURCES COMMON STOCK
As a consequence of the Merger, shareholders of KCPL, a Missouri
corporation, will become shareholders of Western Resources, a Kansas
corporation. The rights of KCPL shareholders are currently governed by
Missouri law (including the MGBCL), the KCPL Articles and the KCPL Bylaws.
Upon consummation of the Merger, the rights of KCPL shareholders will be
governed by Kansas law (including the Kansas General Corporation Code (the
"KGCC")), the Western Resources Articles and the by-laws of Western Resources,
as amended May 5, 1992 (the "Western Resources Bylaws"). The following is a
summary of certain similarities and material differences between the rights of
holders of KCPL Common Stock and the rights of holders of Western Resources
Common Stock.
The following summary does not purport to be a complete statement of the
rights of KCPL shareholders under Missouri law, the KCPL Articles and the KCPL
Bylaws as compared with the rights of Western Resources shareholders under
Kansas law, the Western Resources Articles and the Western Resources Bylaws,
or a complete description of the specific provisions referred to herein. The
summary discusses all material aspects of the above-mentioned corporate laws
and instruments but is qualified in its entirety by reference to such laws and
instruments, including the aforementioned instruments of KCPL and Western
Resources. Complete copies of all such laws and instruments may be obtained in
the manner set forth above under "Available Information."
Special Meetings of Shareholders. Section 351.225.3 of the MGBCL permits the
board of directors or such other person or persons as may be authorized in the
articles of incorporation or bylaws to call a special meeting of shareholders.
The KCPL Bylaws provide that a special meeting of shareholders may be called
only by the Chairman of the KCPL board of directors, by the President, or at
the written request of a majority of the KCPL board of directors.
Section 17-6501(e) of the KGCC provides that special meetings of
shareholders may be called by the board of directors or by such person or
persons as may be authorized by the articles of incorporation or bylaws. The
Western Resources Bylaws provide that a special meeting of shareholders may be
called by the Western Resources Board, the Chairman or the President.
Number of Directors. Section 351.315.1 of the MGBCL provides that a
corporation shall have three or more directors, except that a corporation may
have one or two directors if stated in the articles of incorporation. The KCPL
Bylaws fix the number of directors to be elected at the annual meeting of
shareholders at nine (9). The number of directors may be increased at a
special meeting called for such purpose by a majority of the shareholders
present and entitled to vote at such meeting.
Section 17-6301(b) of the KGCC provides that the board of directors of a
corporation shall consist of one or more members. The number of directors
shall be fixed by, or in the manner provided in, the bylaws, unless the
articles of incorporation establish the number of directors, in which case a
change in the number of directors shall be made only by amendment of the
articles of incorporation. Directors need not be shareholders unless so
required by the articles of incorporation or the bylaws. The articles of
incorporation or bylaws may prescribe other qualifications for directors. The
Western Resources Articles provide that the number of directors shall not be
less than seven nor more than fifteen, the precise number to be set by the
Western Resources board of directors, provided that unless approved by a
majority of shareholders entitled to vote, the number of directors shall not
be reduced if such reduction will shorten the term of an existing director.
Advance Notice of Shareholder Nominations of Directors. Under the KCPL
Bylaws, nominations of persons for election to the KCPL board of directors may
be made at a meeting of shareholders by any shareholder who is a shareholder
of record on both the date notice of the meeting is given and on the record
date for the meeting, provided that the Secretary of KCPL receives proper
written notice of such nomination not less than sixty days nor more than
ninety days prior to the meeting. If less than seventy days' notice or prior
public disclosure of the date of the meeting is given or made by KCPL to
shareholders, the notice of nomination must
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be received not later than the close of business on the tenth day following
the day on which such notice of the date of the meeting was mailed or public
disclosure was made, whichever occurs first.
The Western Resources Articles provide a similar advance notice provision.
Nominations of persons for election to the Western Resources board of
directors may be made at a meeting of shareholders by any shareholder,
provided that the Secretary of Western Resources receives written notice not
less than thirty-five days nor more than fifty days prior to the meeting. In
the event that less than forty-five days' notice or prior public disclosure of
the date of the meeting is given or made by Western Resources to shareholders,
the notice of nomination must be received not later than the close of business
on the tenth day following the day on which such notice of the date of the
meeting was mailed or public disclosure was made. For notice by the
shareholder to be timely, it must be received in any event not later than the
close of business on the seventh day preceding the day on which the meeting is
to be held. Such notice shall contain (i) the names of the nominees and all
other information required to be disclosed in a proxy statement, (ii) the name
and address of the shareholder making the nomination, (iii) a representation
that the shareholder is a holder of record of the stock entitled to vote at
the meeting on the date of the notice and intends to appear in person or by
proxy at the meeting to nominate the person specified in the notice and (iv) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person on whose behalf such nominations are being
made.
Shareholder Proposal Procedures. Pursuant to the KCPL Bylaws, business is
properly brought before an annual meeting if any shareholder of KCPL who is a
shareholder of record on both the date notice of the meeting is given and on
the record date for the meeting provides the Secretary of KCPL with proper
written notice not less than sixty days nor more than ninety days prior to the
meeting. If less than seventy days' notice or prior public disclosure of the
date of the meeting is given or made by KCPL to shareholders, the notice must
be received not later than the close of business on the tenth day following
the day on which such notice of the date of the meeting was mailed or public
disclosure was made, whichever occurs first.
The Western Resources Articles permit any shareholder who is a holder of
record at the time of giving the required notice and who is entitled to vote
at the shareholders meeting, to bring business before such shareholders
meeting. Required notice must be received by the Secretary of Western
Resources not less than thirty-five days nor more than fifty days prior to the
meeting. In the event that less than forty-five days' notice or prior public
disclosure of the date of the meeting is given or made by Western Resources to
shareholders, the notice must be received not later than the close of business
on the tenth day following the day on which such notice of the date of the
meeting was mailed or public disclosure was made. For notice by the
shareholder to be timely, it must be received in any event not later than the
close of business on the seventh day preceding the day on which the meeting is
to be held. The notice shall contain (i) a brief description of the business
desired to be brought forth and the reasons for considering the business, (ii)
the name and address of the shareholder as they appear on the books of Western
Resources, (iii) a representation that such shareholder is a holder of record
of the stock entitled to vote at the meeting on the date of the notice and
intends to appear in person or by proxy to present the business specified in
the notice and (iv) disclosure of any material interest of the shareholder in
such proposal.
Classification of Board of Directors. Section 351.315.1 of the MGBCL
provides that any Missouri corporation may elect its directors for one or more
years, not to exceed three years, the time of service and mode of
classification to be provided for by the articles of incorporation or the
bylaws of the corporation; provided, that there shall be an annual election
for such number of directors as may be found upon dividing the entire number
of directors by the number of years composing a term. The KCPL board of
directors is not classified and the KCPL Bylaws provide that each director
will be elected annually to a one-year term.
Section 17-6301(d) of the KGCC provides that the directors of any
corporation may be divided into one, two or three classes by the articles of
incorporation or by the corporation's initial bylaws, or by bylaws adopted by
a vote of the shareholders; the term of office of those of the first class to
expire at the annual meeting next ensuing; of the second class one year
thereafter; of the third class two years thereafter; and at each annual
election held after such classification and election, directors shall be
chosen for a full term, as the case may be,
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to succeed those whose terms expire. The Western Resources Bylaws provide for
three classes of directors as nearly equal as possible with no class
containing fewer than two directors and with each holding office for a term of
three years.
Cumulative Voting. Both the MGBCL and the KGCC allow, but do not require,
cumulative voting for the election of directors. Under the KCPL Bylaws, KCPL
shareholders have cumulative voting rights for the election of directors.
Accordingly, each holder of shares eligible to vote for the election of
directors may cast a number of votes in the aggregate equal to the number of
shares held by that holder multiplied by the number of directors to be
elected, and such votes may be cast for one candidate or distributed among two
or more candidates at the shareholder's discretion. The Western Resources
Bylaws also provide for cumulative voting of all shares entitled to vote for
the election of directors.
Removal of Directors: Filling Vacancies on the Board of Directors. The KCPL
Bylaws are silent on the issue of removal of directors. The MGBCL provides,
however, that one or more directors may be removed at a duly called special
meeting, with or without cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of directors. Under the MGBCL, in
the case of a corporation having cumulative voting for the election of
directors, such as KCPL, if less than the entire board is to be removed, no
director may be removed if the votes cast against such removal would be
sufficient to elect the director by cumulative voting at a duly convened
meeting to elect directors. Additionally, a majority of the entire KCPL board
of directors may remove a director if, at the time of removal, such director
fails to meet the qualifications for election stated in the KCPL Articles or
KCPL Bylaws or if he is in breach of any agreement between such director and
KCPL relating to his services to such corporation as a director or employee.
Prior notice of such proposed removal must be given to all directors.
The KCPL Bylaws provide that vacancies on the KCPL board of directors may be
filled by a majority of the remaining directors, though less than a quorum,
until the successor or successors are elected at a meeting of the
shareholders.
The KGCC provides that any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares then
entitled to vote at an election of directors, except that in the case of a
corporation having a classified board of directors, such as Western Resources,
shareholders may remove a director only for cause, unless the articles of
incorporation otherwise provide. Under the Western Resources Bylaws, no
director may be removed except for cause. Pursuant to the KGCC, in the case of
a corporation with cumulative voting, if less than the entire board is to be
removed, no director may be removed without cause if the votes cast against
such director's removal would be sufficient to elect such director if then
cumulatively voted at an election of the entire board of directors or, in the
case of a corporation having classes of directors, such as Western Resources,
at an election of the class of directors of which such director is a part.
Pursuant to the Western Resources Bylaws, vacancies in the Western Resources
board of directors, caused by death, resignation or otherwise, may be filled
at any meeting of the Western Resources board of directors and such
replacement directors shall serve until the next annual meeting of
shareholders and until their successors are elected and qualified.
Shareholder Action by Written Consent. Under both Section 351.273 of the
MGBCL and Section 17-6518 of the KGCC (except as otherwise provided in the
articles of incorporation of a Kansas corporation), any action which may be
taken by shareholders at any annual or special meeting may be taken without a
meeting by written consent, provided that such consent is unanimous.
Preemptive Rights. No shareholder of KCPL or Western Resources has
preemptive rights with regard to shares of common or preferred stock.
Amendment of KCPL Articles and Western Resources Articles. The KCPL Articles
may be amended in accordance with Missouri law. Section 351.090 of the MGBCL
provides that the board of directors may adopt a
79
resolution setting forth the proposed amendment and directing that it be
submitted to a vote at a meeting of shareholders, which may be either an
annual or a special meeting, except that the proposed amendment need not be
adopted by the board of directors and may be directly submitted to any annual
or special meeting of shareholders. Missouri law further provides that written
notice setting forth the proposed amendment or a summary of the changes to be
effected shall be given to each shareholder of record entitled to vote within
the time and in the manner for the giving of notice of meetings of
shareholders. If the meeting is an annual meeting, the proposed amendment or
summary shall be included in the notice of the annual meeting. At the meeting,
a vote of the shareholders entitled to vote shall be taken on the proposed
amendment. The proposed amendment shall be adopted upon receiving the
affirmative vote of a majority of the outstanding shares entitled to vote,
unless any class of shares is entitled to vote as a class, in which event the
proposed amendment shall be adopted upon receiving the affirmative vote of a
majority of the outstanding shares of each class of shares entitled to vote as
a class and of the total shares entitled to vote.
The Western Resources Articles provide that until and unless a specific
provision for amending the Western Resources Articles is specially adopted,
Western Resources reserves the right, except as otherwise provided, to amend,
alter, change, or repeal any provision contained in the Western Resources
Articles in the manner now or hereafter prescribed by the applicable
provisions of the laws of the State of Kansas for amending the articles of
incorporation of a Kansas corporation, and all rights conferred upon
shareholders are granted subject to such reservation.
The KGCC provides that in connection with every amendment authorized by
Section 17-6602 of KGCC, the board of directors shall adopt a resolution
setting forth the amendment proposed, declaring its advisability, and either
calling a special meeting of the shareholders entitled to vote for the
consideration of such amendment or directing that the amendment proposed be
considered at the next annual meeting of the shareholders. Kansas law further
provides that written notice shall be given to each shareholder entitled to
vote at the meeting within the time and in the manner for the giving of notice
of meetings of shareholders. The notice shall set forth such amendment in full
or a brief summary of the changes to be effected. If a majority of the
outstanding stock entitled to vote and a majority of the outstanding stock of
each class entitled to vote thereon as a class have been voted in favor of the
amendment, a certificate setting forth the amendment and certifying that such
amendment has been duly adopted shall be executed, acknowledged, filed and
recorded.
Amendment of Bylaws. The KCPL board of directors may make, alter, amend or
repeal the KCPL Bylaws by a majority vote of the whole KCPL board of directors
at any regular or special meeting of the KCPL board of directors, provided
notice thereof has been given in the notice of such special meeting. The
shareholders may also amend the KCPL Bylaws at any shareholder meeting at
which a quorum is present by a majority vote of the shareholders present and
entitled to vote.
The Western Resources board of directors may make and from time to time
alter, amend or repeal any Western Resources Bylaw, subject to the power of
the shareholders to amend, alter or repeal such Western Resources Bylaws. The
provisions of the Western Resources Bylaws regarding the classification of the
Western Resources board of directors, the filling of vacancies by directors
and the removal of directors may not be amended without the affirmative vote
of at least 80% of the outstanding shares of Western Resources entitled to
vote.
Business Combinations. Article XII of the KCPL Articles provide that an
affirmative vote of at least 80% of the outstanding Shares entitled to vote
shall be required for the approval or authorization of any Business
Combination with an Interested Shareholder; provided that such 80% voting
requirement shall not be applicable if: (a) the Business Combination shall
have been approved by a majority of the Continuing Directors; or (b) the cash
or the Fair Market Value of the property, securities or other consideration to
be received in such Business Combination is not less than the highest per
share price paid by or on behalf of the Interested Shareholder for any Shares
during the five-year period preceding the commencement of such Business
Combination. For purposes of the foregoing provisions, an "Interested
Shareholder" is defined as (i) any individual, corporation,
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partnership or other person or entity, which together with its "Affiliates" or
"Associates" as such terms are defined in Rule 12b-2 under the Exchange Act
beneficially owns, as such term is defined in Rule 13d-3 under the Exchange
Act, in the aggregate 5% or more of the outstanding Common Stock and (ii) any
Affiliate or Associate of such Interested Shareholder; "Continuing Directors"
is defined as any director who is unaffiliated with the Interested Shareholder
and was a director prior to the Interested Shareholder becoming an Interested
Shareholder, and any successor of a Continuing Director if unaffiliated with
the Interested Shareholder and recommended to succeed the Continuing Director
by a majority of Continuing Directors; "Substantial Part" means 10% or more of
the Fair Market Value of KCPL's total assets as reflected in the most recent
balance sheet; and "Fair Market Value" is defined as (i) in the case of stock,
the highest closing sale price during the 30-day period immediately prior to
the date in question of a share of such stock on the NYSE; and (ii) in the
case of property other than cash, or stock, the Fair Market Value of such
property on the date in question as determined by a majority of the Continuing
Directors.
Business Combinations requiring such a vote include: (i) any merger or
consolidation of KCPL or any of its subsidiaries with any Interested
Shareholders; (ii) any sale, lease, exchange, transfer or other disposition of
any Substantial Part of the assets of KCPL or a subsidiary to an Interested
Shareholder; (iii) the issuance of any securities of KCPL to an Interested
Shareholder other than an issuance on a pro rata basis to all holders of
shares pursuant to a stock split or dividend; (iv) any recapitalization or
reclassification that would increase the proportionate voting power of an
Interested Shareholder; (v) any liquidation, spinoff, split-up or other
dissolution of KCPL proposed on behalf of an Interested Shareholder; or (vi)
any agreement, contract, arrangement or understanding providing for any of the
above transactions.
Article XII of the KCPL Articles may not be amended or repealed except by
the affirmative vote of at least 80% of the outstanding Shares entitled to
vote.
Article XVII of the Western Resources Articles provides that an affirmative
vote of at least 80% of the voting stock of Western Resources and the
affirmative vote of at least a majority of the voting stock held by
shareholders other than an Interested Shareholder shall be required for the
approval or authorization of any Business Combination with an Interested
Shareholder; provided that such 80% voting requirement not be applicable if:
(a) the Business Combination shall have been approved by a majority of the
Continuing Directors; or (b) the cash or the Fair Market Value (as determined
by a majority of the Continuing Directors) of the property, securities or
other consideration to be received in such Business Combination is not less
than the highest per share price paid on behalf of the Interested Shareholder
for any shares of the Western Resources stock.
"Business Combinations" requiring such a vote include: (i) any merger or
consolidation of Western Resources or any of its subsidiaries with any
Interested Shareholder; (ii) any sale, lease, exchange, transfer or other
disposition of any Substantial Part of the assets of Western Resources or a
subsidiary to an Interested Shareholder; (iii) the issuance of any securities
of Western Resources or a subsidiary to an Interested Shareholder other than
an issuance on a pro rata basis to all holders of shares pursuant to a stock
split or dividend; (iv) any recapitalization or reclassification that would
increase the proportionate voting power of an Interested Shareholder; (v) any
liquidation or dissolution of Western Resources proposed on behalf of an
Interested Shareholder; or (vi) any agreement, contract, arrangement or
understanding providing for any of the above transactions. "Fair Market Value"
is defined as (i) in the case of stock, the highest closing sale price during
the 30-day period immediately prior to the date in question of a share of such
stock on the NYSE or such other exchange or quotation system; and (ii) in the
case of property other than cash or stock, the Fair Market Value of such
property on the date in question as determined by a majority of the Continuing
Directors.
The affirmative vote of 80% of the voting stock of Western Resources and the
affirmative vote of a majority of the voting stock, other than the stock held
by an Interested Shareholder, shall be required to amend, repeal or adopt any
provision inconsistent with Article XVII of the Western Resources Articles.
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VOTING RIGHTS IN CONNECTION WITH MERGERS AND CONSOLIDATIONS
Generally. A plan of merger or consolidation must be approved by the KCPL
board of directors, submitted to the shareholders of KCPL for approval at a
shareholder meeting, and must obtain the approval of the holders of at least
two-thirds of the outstanding shares entitled to vote at such meeting (MGBCL
Sections 351.410, 415, 420, 425, 458).
Preferred Shares. The KCPL Articles provide that the approval of a merger or
consolidation shall require the vote of a majority of the outstanding shares
of KCPL Preferred Stock (as defined herein), voting as a single class, except
that such vote is not required (i) with respect to any merger or consolidation
ordered, approved or permitted by the Commission under the 1935 Act or (ii) if
provision for redemption of the KCPL Preferred Stock is made prior to the
effective time of the merger or consolidation.
Section 351.093 of the MGBCL provides that the holders of the outstanding
shares of a class of stock shall be entitled to vote as a class upon a
proposed amendment, even if that stock confers no or limited voting rights
under the corporate charter, if such amendment would impair the relative
rights or preferences of that stock. The MGBCL does not specify whether a
class of stock would be entitled to vote on a merger whose effect would be the
same as an amendment to the articles of incorporation, but the possibility of
such an interpretation should be considered.
Section 17-6701 of the KGCC provides that an agreement of merger or
consolidation shall be approved by resolution adopted by the board of
directors of the corporation and approved by a majority of the outstanding
stock entitled to vote thereon, subject to certain exceptions.
The Western Resources Articles provide that so long as Western Resources
Preferred Stock (as defined herein) is outstanding, Western Resources may not
merge or consolidate with any other corporation without (i) the consent of the
holders of at least a majority of the shares of Western Resources Preferred
Stock then outstanding voting separately as a class and (ii) if more than one-
third of such holders of the Western Resources Preferred Stock shall vote
negatively, the vote of the percentage or number of shares of any and all
classes required by the law or the Western Resources Articles; provided,
however, that no consent of the Western Resources Preferred Stock shall be
required, except as otherwise required by law, with respect to (i) any merger
approved by the Commission under the 1935 Act or (ii) if provision for
redemption of the Western Resources Preferred Stock is made prior to the
effective time of the merger or consolidation.
Dissenters' Rights. Pursuant to Section 351.455 of the MGBCL, if a
shareholder of a corporation which is a party to a merger files with the
corporation a written objection to such merger before the meeting at which the
merger is submitted to a shareholder vote, does not vote in favor of the
merger and, within twenty days after the merger is consummated (or, pursuant
to Section 351.447, within twenty days after being notified of a short-form
merger), makes written demand for the payment of the fair value of his common
equity interest (determined as of the day prior to the date on which the vote
approving the merger was taken), the new or surviving corporation must pay
such fair value. Any shareholder who fails to make such a demand within twenty
days after the merger is conclusively presumed to have consented thereto and
is bound by the terms thereof.
Section 17-6712 of the KGCC provides that a shareholder has the right to
dissent from and receive payment of the value of such shares in the event of
the consummation of a plan of merger or consolidation in which the shareholder
has a right to vote or which is a short-form merger. The KGCC further
provides, however, that unless otherwise provided in the articles of
incorporation of the Kansas corporation, this section does not apply to the
holders of any class or series which, on the record date, were either
registered on a national securities exchange or were held of record by at
least 2,000 shareholders.
Missouri Control Share Acquisition Statute. Section 351.407 of the MGBCL
(the "Missouri Control Share Acquisition Statute"), a copy of which is
attached hereto as Schedule C and is incorporated by reference herein, may
have the effect of eliminating all voting rights attached to Shares acquired
by Western Resources in the Offer.
82
In summary terms, a "control share acquisition" is the direct or indirect
acquisition (other than acquisitions permitted by the Missouri Control Share
Acquisition Statute as discussed below) by any person of ownership of, or the
power to direct the exercise of voting power with respect to, issued and
outstanding shares of a Missouri "issuing public corporation" that, except for
the Missouri Control Share Acquisition Statute, would have voting power with
respect to shares of such corporation that, when added to all other shares of
such corporation owned by such person or in respect to which such person may
exercise or direct the exercise of voting power, would entitle such person,
immediately after acquisition of such shares, to exercise or direct the
exercise of the voting power of such corporation in the election of directors
within any of the following ranges of voting power: (i) one-fifth or more but
less than one-third of all voting power; (ii) one-third or more but less than
a majority of all voting power; or (iii) a majority or more of all voting
power.
This provision applies to issuing public corporations which are corporations
with 100 or more shareholders, a principal place of business, principal office
or substantial assets in Missouri and either more than 10% of their
shareholders resident in Missouri, at least 10% of their shares owned by
Missouri residents or at least 10,000 shareholders resident in Missouri. KCPL
meets these tests and is thus an issuing public corporation in Missouri.
Pursuant to the Missouri Control Share Acquisition Statute, shares acquired
in a control share acquisition have no voting rights unless voting rights are
granted by resolution of the shareholders of such corporation. For such a
resolution to be adopted, it must be approved by the affirmative vote of: (i)
a majority of all outstanding shares entitled to vote at a special meeting of
shareholders voting by class if required by the terms of such shares; and (ii)
a majority of all outstanding shares entitled to vote at such meeting voting
by class if required by the terms of such shares, excluding all interested
shares. "Interested shares" means the shares of such corporation in respect of
which any of the following persons may exercise or direct the exercise of the
voting power of the corporation in the election of directors: (a) an acquiring
person or member of a group with respect to a control share acquisition; (b)
any officer of such corporation elected or appointed by the directors of such
corporation; or (c) any employee of such corporation who is also a director of
such corporation.
Any person who proposes to make or has made a control share acquisition may
at the person's election deliver an acquiring person statement to such
corporation at the corporation's principal office. The acquiring person
statement must set forth, among other things, certain information regarding
the acquiring person, its holdings of shares of such corporation and details
of such person's control share acquisition or proposed control share
acquisition. If the acquiring person so requests at the time of delivery of a
control share acquisition statement and gives an undertaking to pay the
corporation's expenses of a special meeting, the directors of the corporation
shall within ten days thereafter call a special meeting of shareholders of
such corporation for the purpose of considering the voting rights to be
accorded the shares acquired or to be acquired in the control share
acquisition. Unless the acquiring person agrees to a later date, such a
special meeting shall be held within fifty days after receipt by the
corporation of such request.
Under the Missouri Control Share Acquisition Statute, several acquisitions
of shares are deemed not to constitute control share acquisitions, including
among others, acquisitions of shares (i) pursuant to a will or other
testamentary disposition, or by gift where such gift is made in good faith and
not for the purpose of circumventing the Missouri Control Share Acquisition
Statute, (ii) pursuant to a public offering, a private placement, or any other
issuance of shares by such corporation, (iii) by, on behalf of, or pursuant to
any benefit or other compensation plan or arrangement of such corporation,
(iv) pursuant to the conversion of debt securities into shares of such
corporation under the terms of such debt securities, (v) pursuant to a binding
contract, other than any contract created by, pursuant to, or in connection
with a tender offer, whereby the holders of shares representing at least two-
thirds of the voting power of such corporation, such holders acting
simultaneously, agreed to sell such shares to any person, (vi) pursuant to a
merger or consolidation effected in compliance with Sections 351.410 to
351.458 of the MGBCL if such corporation is a party to the agreement of merger
or consolidation, (vii) pursuant to a binding contract with any person which,
at any time within one year prior to the acquisition in question, owned shares
representing more than fifty percent of the voting power of such corporation
and (viii) by or from any person whose shares have been previously accorded
voting rights pursuant
83
to the Missouri Control Share Acquisition Statute; provided, such acquisition
entitles the person making the acquisition to exercise or direct the exercise
of voting power of such corporation in the election of directors within a
range of the voting power not in excess of the range of voting power
associated with the shares to which voting rights have been previously
accorded.
In addition, a corporation may exempt itself from application of the
Missouri Control Share Acquisition Statute by inserting a provision in its
articles of incorporation or bylaws expressly electing not to be covered by
the statute. The KCPL Articles and the KCPL Bylaws do not "opt out" of the
Missouri Control Share Acquisition Statute.
The foregoing does not purport to be a complete description of the Missouri
Control Share Acquisition Statute. HOLDERS OF SHARES ARE URGED TO, AND SHOULD,
READ SECTION 351.407 OF THE MGBCL (AND THE RELATED DEFINITIONS INCLUDED
THEREIN), A COPY OF WHICH IS ATTACHED HERETO IN ITS ENTIRETY AS SCHEDULE C.
Kansas Control Share Transaction Provision. Pursuant to Section 17-1286 of
the Kansas Statutes Annotated (the "Kansas Control Share Acquisition
Provision"), control shares are shares of an issuing public corporation that
would, except for application of the statute, entitle their holder to exercise
or direct the exercise of voting power in the election of directors within
certain specified ranges (one-fifth or more but less than one-third, one-third
or more but less than a majority, a majority or more). A control share
acquisition is an acquisition, directly or indirectly, by any person of
ownership of, or power to direct the voting of control shares, either pursuant
to a single transaction or various transactions within a 120-day period, or
pursuant to a plan to make a control share acquisition.
This provision applies to shares of an issuing public corporation which has
100 or more shareholders, a principal place of business, principal office or
substantial assets in Kansas and either more than 10% of its shareholders
resident in Kansas or at least 10% of its shares owned by Kansas residents or
at least 2,500 shareholders resident in Kansas. Western Resources meets these
tests and is thus an issuing public corporation in Kansas.
Control shares acquired in a control share acquisition shall have the same
voting rights as before the acquisition only to the extent approved by a
majority of all shares entitled to vote in the election of directors and a
majority of all shares entitled to vote in the election of directors,
excluding all interested shares. An acquiring person can request a special
meeting of shareholders to consider the voting rights that will attach to his
or her control shares.
Interested shares are those over which (i) a person or group that makes or
proposes to make a control share acquisition, (ii) an officer of the issuing
public corporation, or (iii) an employee of the issuing public corporation who
is also a director, exercises voting power.
An issuing public corporation can opt out of the Kansas Control Share
Acquisition Provision with a provision in either its articles of incorporation
or its bylaws stating that it does not apply. The opt-out is effective only
with regard to control share acquisitions which occur after the opt-out has
been adopted by the bylaws or articles of incorporation. The Western Resources
Articles and the Western Resources Bylaws do not contain an opt-out at this
time.
Unless otherwise provided in the corporation's bylaws or articles of
incorporation, control shares may be redeemed if an acquiring person statement
has not been delivered to the corporation by the tenth day after the control
share acquisition, or if a statement has been filed but the shareholders have
voted not to accord voting rights to the control shares. A call for redemption
must occur within 30 days after the event that gives the corporation the
option to redeem the shares and the shares must be redeemed within 60 days of
such call.
The definition of "control share acquisition" sets forth certain exceptions,
including, without limitation, the acquisition of shares in certain statutory
mergers or consolidations to which the issuing public corporation is a party.
84
Missouri Business Combination Statute. Section 351.459 of the MGBCL (the
"Missouri Business Combination Statute"), a copy of which is attached hereto
as Schedule D and is incorporated by reference herein, protects Missouri
corporations from certain transactions.
The Missouri Business Combination Statute prevents a Missouri corporation
from engaging in any "business combination" with any "interested shareholder"
of such corporation for a period of five years following such interested
shareholder's stock acquisition date unless such business combination or the
purchase of stock made by such interested shareholder on such interested
shareholder's stock acquisition date is approved by the board of directors of
such corporation on or prior to such stock acquisition date. A "business
combination" includes, among other things, a merger or consolidation, certain
sales, leases, exchanges, mortgages, transfers, pledges and similar
dispositions of corporate assets or stock and any reclassifications,
recapitalizations and reorganizations that increase the proportionate voting
power of the interested shareholder. An "interested shareholder" is defined
generally as the "beneficial owner" (as such term is defined in the Missouri
Business Combination Statute) of twenty percent (20%) or more of the
outstanding voting stock of such corporation or an "affiliate" or "associate"
(as such terms are defined in the Missouri Business Combination Statute) who
at any time within the preceding five years was the beneficial owner of twenty
percent (20%) or more of the outstanding voting stock of such corporation. The
"stock acquisition date", with respect to any person and any Missouri
corporation, means the date that such person first becomes an interested
shareholder of such corporation.
In addition, the Missouri Business Combination Statute provides that a
Missouri corporation may not engage at any time in a business combination with
an interested shareholder other than any of the following business
combinations: (i) a business combination approved by the board of directors of
such corporation prior to such interested shareholder's stock acquisition
date, or where the purchase of stock made by such interested shareholder on
such interested shareholder's stock acquisition date had been approved by the
board of directors of such corporation prior to such interested shareholder's
stock acquisition date; (ii) a business combination approved by the
affirmative vote of the holders of a majority of the outstanding voting stock
not beneficially owned by such interested shareholder or any affiliate or
associate of such interested shareholder at a meeting called for such purpose
no earlier than five years after such interested shareholder's stock
acquisition date; (iii) a business combination that meets certain detailed
fairness and procedural requirements. Notwithstanding the foregoing, unless
the board of directors of the corporation approved such business combination
prior to the date on which the interested shareholder acquired such status, no
such business combination may be engaged in for a period of five years after
such date.
Thus, the Missouri Business Combination Condition may be satisfied by the
approval of the Offer or the Merger by the KCPL board of directors prior to
the consummation of the Offer.
The Missouri Business Combination Statute does not apply to: (i)
corporations that do not have a class of voting stock registered under Section
12 of the Exchange Act, unless the certificate of incorporation provides
otherwise; (ii) any business combination of a Missouri corporation whose
certificate of incorporation has been amended to provide that such corporation
shall be subject to the provisions of such statute, which did not have a class
of voting stock registered with the Commission pursuant to Section 12 of the
Exchange Act on the effective date of such amendment, and which is a business
combination with an interested shareholder whose stock acquisition date is
prior to the effective date of such amendment; (iii) any business combination
of a Missouri corporation the original certificate of incorporation of which
contains a provision expressly electing not to be governed by this section, or
which adopts an amendment to such corporation's bylaws prior to August 1,
1986, expressly electing not to be governed by such statute, or which adopts
an amendment to such corporation's bylaws, approved by the affirmative vote of
the holders, other than interested shareholders and their affiliates and
associates, expressly electing not to be governed by such statute, provided
that such amendment to the bylaws shall not be effective until eighteen months
after such vote of such corporation's shareholders and shall not apply to any
business combination of such corporation with an interested shareholder whose
stock acquisition date is on or prior to the effective date of such amendment;
(iv) any business combination of a Missouri
85
corporation with an interested shareholder of a domestic corporation which
became an interested shareholder inadvertently, if such interested
shareholder, as soon as practicable, divests itself of a sufficient amount of
the voting stock of such corporation so that it no longer is the beneficial
owner, directly or indirectly, of twenty percent or more of the outstanding
voting stock of such corporation, and would not at any time within the five-
year period preceding the announcement date with respect to such business
combination have been an interested shareholder but for such inadvertent
acquisition; or (v) any business combination with an interested shareholder
who was the beneficial owner, directly or indirectly, of five percent or more
of the outstanding voting stock of such corporation on December 1, 1985, and
remained so to such interested shareholder's stock acquisition date.
The foregoing does not purport to be a complete description of the Missouri
Business Combination Statute. HOLDERS OF SHARES ARE URGED TO, AND SHOULD, READ
SECTION 351.459 OF THE MGBCL, A COPY OF WHICH IS ATTACHED HERETO AS SCHEDULE D
IN ITS ENTIRETY.
Kansas Business Combination Statute. The KGCC prohibits, subject to certain
exceptions set forth therein, various business combinations with "interested
stockholders" (as hereafter described) including mergers or consolidations of
the corporation, or of any direct or indirect majority-owned subsidiary of the
corporation, for a period of three years following the date such stockholder
became an interested stockholder unless (a) prior to such date the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; (b) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (determined in accordance with the KGCC); or
(c) on or subsequent to such date the business combination is approved by the
board of directors and authorized at an annual or special meeting of the
shareholders of the corporation (but not by written consent of the
shareholders), by the affirmative vote of at least 66 2/3% of the outstanding
voting shares of the corporation which are not owned by the interested
stockholder. "Interested stockholder" means, subject to certain exceptions,
any person, other than the corporation or any direct or indirect majority-
owned subsidiary of the corporation, that is (i) the owner of 15% or more of
the outstanding voting stock of the corporation; or (ii) an affiliate or
associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder, and the affiliates and
associates of such person.
Other Constituency Statute
Section 351.347 of the MGBCL expressly authorizes directors to consider
"non-monetary factors" when analyzing takeover bids. The factors that the
board of directors is authorized to consider include the adequacy of the
consideration offered, compared not only to the board's estimate of the value
of the corporation in a freely negotiated sale on the liquidation value of the
corporation, but also the future value of the corporation over a period of
years as an independent entity, discounted to current value; current
political, economic and other factors bearing on security prices; whether the
bid might violate federal, state or local laws; social, legal and economic
effects on employees, suppliers, customers and others with the corporation and
the communities in which the corporation conducts its business; the financial
conditions and earnings prospects of the bidder; and the competence,
experience and integrity of the bidder.
Kansas does not have a similar statute.
Directors' Standard of Care and Indemnification. The KCPL Articles provide
for indemnification of KCPL's officers, directors, employees and agents, to
the fullest extent permitted under the MGBCL.
The MGBCL does not provide a standard of care or otherwise fix the fiduciary
duties of corporate directors and officers. Under MGBCL (S) 351.355, a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, other
than an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation,
or is or was serving at the
86
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise if
such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. A corporation may indemnify any
such person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation (except in certain circumstances
where such person has been adjudged to be liable for negligence or misconduct
in the performance of his duty to the corporation). The indemnification
described above may cover not only expenses but also amounts paid in
settlements, and is not exclusive of any other rights to which such person
seeking indemnification may be otherwise entitled. In addition to the
indemnification described above, the MGBCL permits a corporation to grant
further indemnity to such person if authorized or provided for in the articles
of incorporation (or amendment thereof) or in any bylaw that has been adopted
by vote of the shareholders, except to the extent that such person's conduct
was finally adjudged to have been knowingly fraudulent, deliberately dishonest
or willful misconduct.
The Western Resources Articles provide that each person who was or is made a
party or is threatened to be made a party to or is involved in any action,
administrative or investigative, by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a director or
officer, of Western Resources or is or was serving at the request of Western
Resources as a director, including service with respect to employee benefit
plans, whether the basis of such proceeding is an alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by Western Resources to the fullest extent
authorized by the KGCC.
The KGCC does not provide for a standard of care or affix fiduciary duties
to corporate directors but does permit indemnification of directors. Pursuant
to KGCC (S) 17-6305, a corporation shall have power to indemnify any person
who was or is a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, other than an action by or in the right of
the corporation, by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of
the corporation; and, with respect to any criminal action or proceeding, had
no reasonable cause to believe such person's conduct was unlawful. A
corporation may indemnify any such person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation (except in certain circumstances where such person has been
adjudged to be liable to the corporation). The indemnification described above
may cover expenses, judgments and amounts paid in settlement, and is not
exclusive of any other rights to which such person seeking indemnification may
be otherwise entitled.
Dividends; Declarations and Payments. Under MGBCL (S) 351.220, the board of
directors of a corporation may declare and the corporation may pay dividends
on its outstanding shares in cash, property, or its own shares, subject to the
following limitations and provisions, among others:
(1) No dividend shall be declared or paid at a time when the net assets
of the corporation are less than its stated capital or when the payment
thereof would reduce the net assets of the corporation below its stated
capital;
(2) No dividend shall be declared or paid contrary to any restrictions
contained in the articles of incorporation.
87
Under KGCC (S) 17-6420, the directors of every corporation, subject to any
restrictions contained in its articles of incorporation, may declare and pay
dividends upon the shares of its capital stock either (1) out of its surplus,
as defined in and computed in accordance with K.S.A. (S)(S) 17-6404 and 17-
6604, or (2) in case there shall be no such surplus, out of its net profits
for the fiscal year in which the dividend is declared or the preceding fiscal
year. If the capital of the corporation shall have been diminished by
depreciation in the value of its property, or by losses, or otherwise, to an
amount less than the aggregate amount of the capital represented by the issued
and outstanding stock of all classes having a preference upon the distribution
of assets, the directors of such corporation shall not declare and pay out of
such net profits any dividends until the deficiency in the amount of capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets shall have been repaired.
88
MARKET PRICES AND DIVIDENDS
The Western Resources Common Stock is listed and principally traded on the
NYSE. The Shares are listed and traded principally on the NYSE and the CSE.
The following table sets forth the range of high and low sales prices as
reported on the NYSE Composite Tape, together with the per share dividends
paid by Western Resources and KCPL during the periods indicated.
WESTERN RESOURCES KCPL
------------------------- -------------------------
PRICE RANGE PRICE RANGE
--------------- ---------------
QUARTER HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
- ------- ------- ------- --------- ------- ------- ---------
1994
First Quarter............ $34.875 $28.250 $0.495 $23.250 $20.625 $0.370
Second Quarter........... 29.750 26.125 0.495 23.000 18.625 0.370
Third Quarter............ 29.625 26.750 0.495 22.500 19.250 0.380
Fourth Quarter........... 29.250 27.375 0.495 23.875 21.125 0.380
1995
First Quarter............ $33.375 $28.625 $0.505 $24.500 $22.125 $0.380
Second Quarter........... 32.500 30.250 0.505 24.125 22.125 0.380
Third Quarter............ 32.875 29.750 0.505 24.375 21.500 0.390
Fourth Quarter........... 34.000 31.000 0.505 26.625 23.500 0.390
1996
First Quarter............ $34.875 $29.250 $0.515 $27.250 $24.000 $0.390
Second Quarter........... 30.750 28.000 0.515 27.750 23.625 0.390
Third Quarter (through
July 2, 1996)........... 30.750 29.875 N/A 28.000 27.500 N/A
- --------
N/A--Not available.
On April 12, 1996 (the last trading day before public announcement of the
April 14 Offer) the closing sales price per share of Western Resources Common
Stock was $29.125, and on July 2, 1996 (the last trading day prior to the date
of this Prospectus) such price was $30.625. Past price performance is not
necessarily indicative of likely future price performance. Holders of Shares
are urged to obtain current market quotations for shares of Western Resources
Common Stock.
On January 19, 1996, the last trading day prior to announcement of the
Original UtiliCorp/KCPL Transaction, the closing sales price per Share was
$26.250. Past price performance is not necessarily indicative of likely future
price performance. Holders of Shares are urged to obtain current market
quotations for the Shares.
Holders of Western Resources Common Stock are entitled to receive dividends
from funds legally available therefor when, as and if declared by the Western
Resources board of directors. The Western Resources board of directors
presently intends to continue the policy of paying quarterly cash dividends.
Future dividends of Western Resources will depend upon the earnings of Western
Resources and its subsidiaries, their financial condition and other factors
including applicable government regulations and policies. See "Description of
Western Resources Capital Stock."
89
VALIDITY OF WESTERN RESOURCES COMMON STOCK
The validity of the shares of Western Resources Common Stock offered hereby
will be passed upon for Western Resources by Sullivan & Cromwell, 125 Broad
Street, New York, New York 10004 and LeBoeuf, Lamb, Greene & MacRae, L.L.P., a
limited liability partnership including professional corporations, 125 West
55th Street, New York, New York 10019, in each case in reliance on the opinion
of John K. Rosenberg, General Counsel to Western Resources, with respect to
Kansas law. As of July 3, 1996, Mr. Rosenberg owned directly and/or
beneficially 3,015 shares of Western Resources Common Stock and had been
granted pursuant to and subject to the terms of Western Resources' Long Term
Incentive Program 999 performance shares.
EXPERTS
The audited consolidated financial statements of Western Resources
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving such reports.
90
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF WESTERN RESOURCES
Directors and Executive Officers of Western Resources. The name, business
address, present principal occupation or employment and five-year employment
history of each of the directors and executive officers of Western Resources
are set forth below. Unless otherwise indicated, each occupation set forth
opposite an individual's name refers to employment with Western Resources.
Each director and executive officer listed below is a citizen of the United
States.
POSITION WITH WESTERN RESOURCES;
PRINCIPAL OCCUPATION
OR EMPLOYMENT; 5-YEAR EMPLOYMENT
NAME AND BUSINESS ADDRESS HISTORY
------------------------- --------------------------------
Frank J. Becker............................ Director of Western Resources.
Becker Investments, Inc. President, Becker Investments,
4840 W. 15th, Suite 1011 Inc., an investment company,
Lawrence, KS 66049-3862 Lawrence, Kansas, since January
1993; and prior to that personal
investments; Director, Bank IV
Butler County, N.A.; Director,
Great-West Life & Annuity
Insurance Co.; Director, Douglas
County Bank; Trustee, the Kansas
University Endowment Association.
Gene A. Budig.............................. Director of Western Resources.
American League of President, The American League of
Professional Baseball Clubs Professional Baseball Clubs, New
350 Park Avenue York, New York, since July 1994;
New York, NY 10022 and prior to that Chancellor,
University of Kansas; Director,
Harry S. Truman Library
Institute; Director, Ewing Marion
Kauffman Foundation; Director,
Major League Baseball Hall of
Fame.
C.Q. Chandler.............................. Director of Western Resources.
INTRUST Bank Chairman of the Board, INTRUST
105 N. Main Street Financial Corporation, Wichita,
Wichita, KS 67202 Kansas; Director, Fidelity State
Bank & Trust Co.; Director, First
Newton Bankshares; Director,
Kansas Crippled Children's
Society; Trustee, Kansas State
University Foundation.
Thomas R. Clevenger........................ Director of Western Resources.
Western Resources Inc. Investments, Wichita, Kansas;
818 Kansas Avenue Director, Security Benefit Life
Topeka, KS 66612 Insurance Company; Trustee and
Vice Chairman, the Menninger
Foundation; Trustee, Midwest
Research Institute.
John C. Dicus.............................. Director of Western Resources.
Capitol Federal Savings Chairman of the Board and
700 S. Kansas Avenue President, Capitol Federal
Topeka, KS 66603 Savings and Loan Association,
Topeka, Kansas; Director,
Security Benefit Life Insurance
Company; Director, Columbian
National Title Company; Trustee,
The Menninger Foundation;
Trustee, Stormont-Vail Regional
Medical Center; Trustee, The
Kansas University Endowment
Association.
John E. Hayes, Jr. ........................ Chairman of the Board and Chief
Western Resources, Inc. Executive Officer, and previously
818 Kansas Avenue President, of Western Resources;
Topeka, KS 66612 Director, Boatmen's Bancshares,
Inc.; Director, Security Benefit
Life Insurance Company; Director,
CommNet Cellular Inc.; Director,
T-Netix, Inc.; Trustee, Rockhurst
College; Trustee, The Menninger
Foundation; Trustee, Midwest
Research Institute.
A-1
POSITION WITH WESTERN RESOURCES;
PRINCIPAL OCCUPATION OR
EMPLOYMENT; 5-YEAR EMPLOYMENT
NAME AND BUSINESS ADDRESS HISTORY
------------------------- --------------------------------
David H. Hughes............................ Director of Western Resources.
Western Resources, Inc. Retired Vice Chairman, Hallmark
818 Kansas Avenue Cards, Inc., Kansas City,
Topeka, KS 66612 Missouri; Director, Hall Family
Foundations; Director, Midwest
Research Institute; Director,
Yellow Corporation; Trustee, St.
Luke's Hospital Foundation;
Trustee, Children's Mercy
Hospital; Trustee, Princeton
Theological Seminary; Trustee,
Linda Hall Library.
Russell W. Meyer, Jr. ..................... Director of Western Resources.
Cessna Aircraft Company Chairman and Chief Executive
One Cessna Blvd. Officer, Cessna Aircraft Company,
Wichita, KS 67215 Wichita, Kansas; Director,
Boatmen's Bancshares Inc.;
Director, Vanguard Airlines,
Inc.; Trustee, Wake Forest
University.
John H. Robinson........................... Director of Western Resources.
Black & Veatch Chairman Emeritus, since December
8400 Ward Parkway 1992, and prior to that Chairman,
Kansas City, MO 64114 Black & Veatch, an architectural
engineering firm, Kansas City,
Missouri; Director, St. Luke's
Hospital; Director, Automobile
Club of Missouri; Director,
CompuSpeak Laboratories, Inc.;
Director, The Greater Kansas City
Community Foundation & Affiliated
Trusts; Trustee, Midwest Research
Institute; Trustee, University of
Missouri-Kansas City.
Louis W. Smith............................. Director of Western Resources.
Ewing Marion Kauffman Foundation President and Chief Operating
4900 Oak Officer, Ewing Marion Kauffman
Kansas City, MO 64112-2776 Foundation, a charitable
foundation, since July 1995; and
prior to that President,
AlliedSignal Aerospace Company,
Kansas City Division, Kansas
City, Missouri; Director,
Commerce Bank of Kansas City;
Director, Ewing Marion Kauffman
Foundation; Director, Kansas City
Royals Baseball Club; Director,
Payless Cashways, Inc.; Trustee,
University of Missouri-Rolla;
Trustee, Rockhurst College.
Susan M. Stanton........................... Director of Western Resources.
Payless Cashways, Inc. President and Chief Operating
2300 Main Street Officer since November 1993; and
Kansas City, MO 64108 prior to that Senior Vice
President, Merchandising and
Marketing, Payless Cashways,
Inc., a retail chain, Kansas
City, Missouri; Director,
Commerce Bank of Kansas City;
Director, Greater Kansas City
Chamber of Commerce; Trustee,
Rockhurst College.
Kenneth J. Wagnon.......................... Director of Western Resources.
Capital Enterprises, Inc. President, Capital Enterprises,
300 N. Main, Suite 201 Inc., a franchise and investment
Wichita, KS 67202 company, Wichita, Kansas;
Director, Vanguard Airlines,
Inc.; Director, Cerebral Palsy
Research Foundation; Director, T-
Netix, Inc.; Director, University
of Kansas School of Business;
Trustee, The Kansas University
Endowment Association.
A-2
POSITION WITH WESTERN RESOURCES;
PRINCIPAL OCCUPATION OR
EMPLOYMENT; 5-YEAR EMPLOYMENT
NAME AND BUSINESS ADDRESS HISTORY
------------------------- --------------------------------
David C. Wittig............................ Director of Western Resources.
Western Resources, Inc. President, since March 1996, and
818 Kansas Avenue previously, Executive Vice
Topeka, KS 66612 President, Corporate Development,
of Western Resources; and prior
to that Managing Director and Co-
Head of Mergers and Acquisitions,
Salomon Brothers Inc.
Steven L. Kitchen.......................... Executive Vice President and
Western Resources, Inc. Chief Financial Officer of
818 Kansas Avenue Western Resources during the last
Topeka, KS 66612 5 years.
Carl M. Koupal, Jr. ....................... Executive Vice President and
Western Resources, Inc. Chief Administrative Officer of
818 Kansas Avenue Western Resources since July 1995
Topeka, KS 66612 and Executive Vice President,
Corporate Communications,
Marketing, and Economic
Development of Western Resources
since January 1994; Vice
President, Corporate Marketing,
and Economic Development of
Western Resources 1992 to 1994;
Director, Economic Development,
Jefferson City, Missouri, from
1985 to 1992.
John K. Rosenberg.......................... Executive Vice President and
Western Resources, Inc. General Counsel of Western
818 Kansas Avenue Resources during the last 5
Topeka, KS 66612 years.
Jerry D. Courington........................ Controller of Western Resources
Western Resources, Inc. during the last 5 years.
818 Kansas Avenue
Topeka, KS 66612
A-3
SCHEDULE B
SECTION 351.447 OF THE MISSOURI GENERAL AND BUSINESS CORPORATION LAW
SECTION 351.447. CORPORATION HOLDING NINETY PERCENT OF THE SHARES OF ANOTHER MAY
MERGE.
1. In any case in which at least ninety percent of the outstanding shares of
each class of a corporation or corporations is owned by another corporation
and one of the corporations is a domestic corporation and the other or others
are domestic corporations, or foreign corporations if the laws of the
jurisdictions of their incorporation permit a corporation of that jurisdiction
to merge with a corporation of another jurisdiction, the corporation having
such share ownership may either merge the other corporation or corporations
into itself and assume all of its or their obligations, or merge itself, or
itself and one or more of the other corporations, into one of the other
corporations without any vote of the shareholders of any domestic corporation
in which event the articles of merger shall state that the plan of merger has
been adopted pursuant to this section and shall set forth the resolution of
the board of directors of the parent corporation approving the plan of merger
and the date of adoption of the resolution and shall state that the parent
corporation is in compliance with the ninety percent ownership requirement of
this section and will maintain at least ninety percent ownership until the
issuance of the certificate of merger by the secretary of state; provided,
however, that if the parent corporation shall not own all of the outstanding
shares of all the subsidiary corporations, parties to a merger as aforesaid,
the plan of merger shall set forth the securities, cash, property, or rights
to be issued, paid, delivered or granted by the surviving corporation upon
surrender of each share of the subsidiary corporation or corporations not
owned by the parent corporation; and provided further, that if the parent
corporation is not the surviving corporation, the plan of merger shall include
provision for the pro rata issuance of shares of the surviving corporation to
the holders of the shares of the parent corporation on surrender of the
certificates therefor, and the articles of merger shall state that the
proposed merger has been approved by receiving the affirmative vote of holders
of at least two-thirds of the outstanding shares of the parent corporation
entitled to vote thereon at a meeting thereof duly called and held, or the
articles of merger shall state that in lieu of such required voting, the
proposed merger has been approved by the directors of each of the
corporations, that the rights and benefits of the shareholders as set forth in
section 351.093 are the same, and that the surviving corporation is solvent
and will retain the name of the parent. If the surviving corporation is a
foreign corporation, the provisions of section 351.458 shall also apply to a
merger under this section.
2. If the surviving corporation is a domestic corporation, it may change its
corporate name by the inclusion of a provision to that effect in the plan of
merger adopted by the directors of the parent corporation, and upon the
effective date of the merger the name of the corporation shall be so changed
if the name is available.
3. In the event all of the shares of a subsidiary domestic corporation party
to a merger effected under this section are not owned by the parent
corporation immediately prior to the merger, the surviving corporation shall,
within ten days after the effective date of the merger, notify each
shareholder of the subsidiary domestic corporation that the merger has become
effective. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the shareholder at his address as it appears
on the records of the corporation. Any shareholder of the subsidiary domestic
corporation may, within twenty days after the date of mailing of the notice,
demand in writing from the surviving corporation payment of the value of his
shares immediately prior to the merger exclusive of any element of value
arising from the expectation or accomplishment of the merger. If during a
period of thirty days after the period of twenty days the surviving
corporation and any objecting shareholder fail to agree as to the value of the
shares, then the provisions of subsection 3 of section 351.455 shall apply,
except that the judgment shall be for the value of the shares immediately
prior to the merger as provided in the preceding sentence.
4. The provisions of section 351.455 shall apply to a merger effected under
this section only to the limited extent provided in subsection 3 of this
section.
B-1
SECTION 351.455 OF THE MISSOURI GENERAL AND BUSINESS CORPORATION LAW
SECTION 351.455. SHAREHOLDER WHO OBJECTS TO MERGER MAY DEMAND VALUE OF SHARES,
WHEN
1. If a shareholder of a corporation which is a party to a merger or
consolidation shall file with such corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to such plan of merger or consolidation, and shall
not vote in favor thereof, and such shareholder, within twenty days after the
merger or consolidation is effected, shall make written demand on the
surviving or new corporation for payment of the fair value of his shares as of
the day prior to the date on which the vote was taken approving the merger or
consolidation, the surviving or new corporation shall pay to such shareholder,
upon surrender of his certificate or certificates representing said shares,
the fair value thereof. Such demand shall state the number and class of the
shares owned by such dissenting shareholder. Any shareholder failing to make
demand within the twenty day period shall be conclusively presumed to have
consented to the merger or consolidation and shall be bound by the terms
thereof.
2. If within thirty days after the date on which such merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment therefor
shall be made within ninety days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing said shares. Upon payment of the agreed value the
dissenting shareholder shall cease to have any interest in such shares or in
the corporation.
3. If within such period of thirty days the shareholder and the surviving or
new corporation do not so agree, then the dissenting shareholder may, within
sixty days after the expiration of the thirty day period, file a petition in
any court of competent jurisdiction within the county in which the registered
office of the surviving or new corporation is situated, asking for a finding
and determination of the fair value of such shares, and shall be entitled to
judgment against the surviving or new corporation for the amount of such fair
value as of the day prior to the date on which such vote was taken approving
such merger or consolidation, together with interest thereon to the date of
such judgment. The judgment shall be payable only upon and simultaneously with
the surrender to the surviving or new corporations of the certificate or
certificates representing said shares. Upon the payment of the judgment, the
dissenting shareholder shall cease to have any interest in such shares, or in
the surviving or new corporation. Such shares may be held and disposed of by
the surviving or new corporation as it may see fit. Unless the dissenting
shareholder shall file such petition within the time herein limited, such
shareholder and all persons claiming under him shall be conclusively presumed
to have approved and ratified the merger or consolidation, and shall be bound
by the terms thereof.
4. The right of a dissenting shareholder to be paid the fair value of his
shares as herein provided shall cease if and when the corporation shall
abandon the merger or consolidation.
B-2
SCHEDULE C
SECTION 351.407 OF THE MISSOURI GENERAL AND BUSINESS CORPORATION LAW
SECTION 351.407. CONTROL SHARES ACQUISITION PROCEDURES--EXCEPTION.
1. Unless, before the control share acquisition, the corporation's articles
of incorporation or bylaws provide that this section does not apply to control
share acquisitions of shares of the corporation, control shares of an issuing
public corporation acquired in a control share acquisition have only such
voting rights as are conferred by subsection 5 of this section.
2. Any person who proposes to make or has made a control share acquisition
may at the person's election deliver an acquiring person statement to the
issuing public corporation at the issuing public corporation's principal
office. The acquiring person statement must set forth all of the following:
(1) The identity of the acquiring person and each other member of any
group of which the person is a part for purposes of determining control
shares;
(2) A statement that the acquiring person statement is given pursuant to
this section;
(3) The number of shares of the issuing public corporation owned,
directly or indirectly, by the acquiring person and each other member of
the group;
(4) The range of voting power under which the control share acquisition
falls or would, if consummated, fall;
(5) If the control share acquisition has not taken place:
(a) A description in reasonable detail of the terms of the proposed
control share acquisition; and
(b) Representations of the acquiring person, together with a
statement in reasonable detail of the facts upon which they are based,
that the proposed control share acquisition, if consummated, will not
be contrary to law, and that the acquiring person has the financial
capacity to make the proposed control share acquisition.
3. (1) If the acquiring person so requests at the time of delivery of an
acquiring person statement and gives an undertaking to pay the corporation's
expenses of a special meeting, the directors of the issuing public corporation
shall within ten days thereafter call a special meeting of shareholders of the
issuing public corporation for the purpose of considering the voting rights to
be accorded the shares acquired or to be acquired in the control share
acquisition.
(2) Unless the acquiring person agrees in writing to another date, the
special meeting of shareholders shall be held within fifty days after
receipt of the request by the issuing public corporation.
(3) If no request is made, the voting rights to be accorded the shares
acquired in the control share acquisition shall be presented to the next
special or annual meeting of shareholders.
(4) If the acquiring person so requests in writing at the time of delivery
of its acquiring statement pursuant to this subsection, the special meeting
must not be held sooner than thirty days after receipt by the issuing
public corporation of the acquiring person statement.
4. (1) If a special meeting is requested, notice of the special meeting of
shareholders shall be given as promptly as reasonably practicable by the
issuing public corporation to all shareholders of record as of the record date
set for the meeting, whether or not entitled to vote at the meeting.
(2) Notice of the special or annual shareholder meeting at which the
voting rights are to be considered must include or be accompanied by both
of the following:
C-1
(a) A copy of the acquiring person statement delivered to the issuing
public corporation pursuant to this section; and
(b) A statement by the board of directors of the corporation of its
position or recommendation, or that it is taking no position or making
no recommendation, with respect to the proposed control share
acquisition.
5. (1) Control shares acquired in a control share acquisition have the same
voting rights as were accorded the shares before the control share acquisition
only to the extent granted by resolution approved by the shareholders of the
issuing public corporation.
(2) To be approved under this section, the resolution must be approved by:
(a) The affirmative vote of a majority of all outstanding shares
entitled to vote at such meeting voting by class if required by the
terms of such shares; and
(b) Also by the affirmative vote of a majority of all outstanding
shares entitled to vote at such meeting voting by class if required by
the terms of such shares, excluding all interested shares.
6. If a shareholder shall file with the corporation, prior to or at the
meeting of shareholders at which the voting rights to be accorded any control
shares are submitted to a vote, a written objection to such voting rights
being accorded any control shares, and shall not vote in favor thereof, and
such shareholder, within twenty days after approval of voting rights being
accorded any control shares, shall make written demand on the corporation for
payment of the fair value of his shares as of the day prior to the date on
which the vote was taken approving voting rights being accorded any control
shares, the corporation shall pay to such shareholder, upon surrender of his
certificate or certificates representing such shares, the fair value of his
shares. Such demand shall state the number and class of the shares owned by
such dissenting shareholder. Any shareholder failing to make demand within the
twenty-day period provided in this subsection shall be conclusively presumed
to have consented to the control share acquisition.
7. If within thirty days after the date of approval of voting rights being
accorded any control shares the value of such shares is agreed upon between
the dissenting shareholder and the corporation, payment for the shares shall
be made within ninety days after approval of voting rights being accorded any
control shares, upon the surrender of his certificate for the shares or
certificates representing such shares. Upon payment of the agreed value, the
dissenting shareholder shall cease to have any interest in such shares or in
the corporation.
8. If, within the thirty-day period provided in subsection 7 of this
section, the shareholder and the corporation do not so agree, then the
dissenting shareholder may, within sixty days after the expiration of such
thirty-day period, file a petition in any court of competent jurisdiction
within the county in which the registered office of the corporation is
situated, asking for a finding and determination of the fair value of such
shares, and shall be entitled to judgment against the corporation for the
amount of such fair value as of the day prior to the date on which such vote
was taken approving such control share acquisition, together with interest
thereon to the date of such judgment. The judgment shall be payable only upon
and simultaneously with the surrender to the corporation of the certificate or
certificates representing such shares. Upon the payment of the judgment, the
dissenting shareholder shall cease to have any interest in such shares, or in
the corporation. Such shares may be held and disposed of by the corporation as
it may see fit. Unless the dissenting shareholder shall file such petition
within the time provided in this subsection, such shareholder and all persons
claiming under him shall be conclusively presumed to have consented to the
control share acquisition.
9. Except as expressly provided in this section, nothing in this section
shall be construed to affect or impair any right, remedy, obligation, duty,
power, or authority of any acquiring person, any issuing public corporation,
the board of directors of any acquiring person or issuing public corporation,
or any other person under the laws of this state or any other state of the
United States of America. The requirements of this section shall be in
addition to, and shall in no way limit, the validly adopted provisions of the
articles of incorporation of any issuing public corporation.
C-2
SECTION 351.015. DEFINITIONS.*
(1) "Control share acquisition" means the acquisition, directly or
indirectly, by any person of ownership of, or the power to direct the exercise
of voting power with respect to, issued and outstanding control shares. For
the purposes of this chapter, shares acquired within ninety days of any
acquisition of shares or shares acquired pursuant to a plan to make a control
share acquisition are considered to have been acquired in the same
acquisition. For the purposes of this chapter, a person who acquires shares in
the ordinary course of business for the benefit of others in good faith and
not for the purpose of circumventing this chapter has voting power only of
shares in respect of which that person would be able to exercise or direct the
exercise of votes without further instruction from others. The acquisition of
any shares of an issuing public corporation does not constitute a control
share acquisition if the acquisition is consummated in any of the following
circumstances:
(a) Prior to June 13, 1984;
(b) Pursuant to a contract in existence prior to June 13, 1984;
(c) Pursuant to a will or other testamentary disposition, the laws of
descent and distribution or by intervivos gift where such gift is made in
good faith and not for the purpose of circumventing section 351.407;
(d) Pursuant to a public offering, a private placement, or any other
issuance of shares by an issuing public corporation;
(e) By, on behalf of, or pursuant to any benefit or other compensation
plan or arrangement of an issuing public corporation;
(f) Pursuant to the conversion of debt securities into shares of an
issuing public corporation under the terms of such debt securities;
(g) Pursuant to a binding contract, other than any contract created by,
pursuant to, or in connection with a tender offer, whereby the holders of
shares representing at least two-thirds of the voting power of an issuing
public corporation, such holders acting simultaneously, agreed to sell such
shares to any person;
(h) Pursuant to the satisfaction of a pledge or other security interest
created in good faith and not for the purpose of circumventing section
351.407;
(i) Pursuant to a merger or consolidation effected in compliance with
sections 351.410 to 351.458 if the issuing public corporation is a party to
the agreement of merger or consolidation;
(j) Pursuant to a binding contract or other arrangement with any
individual, foreign or domestic corporation (whether or not for profit),
partnership, limited liability company, unincorporated society or
association, or other entity which, at any time within one year prior to
the acquisition in question, owned shares representing more than fifty
percent of the voting power of the issuing public corporation;
(k) By or from any person whose shares have been previously accorded
voting rights pursuant to section 351.407; provided, the acquisition
entitles the person making the acquisition, directly or indirectly, alone
or as a part of a group, to exercise or direct the exercise of voting power
of the corporation in the election of directors within a range of the
voting power not in excess of the range of voting power associated with the
shares to which voting rights have been previously accorded;
(2) "Control shares" means shares that, except for this chapter, would have
voting power with respect to shares of an issuing public corporation that,
when added to all other shares of the issuing public corporation owned by a
person or in respect to which that person may exercise or direct the exercise
of voting power, would entitle that person, immediately after acquisition of
the shares, directly or indirectly, alone or as part of a group, to exercise
or direct the exercise of the voting power of the issuing public corporation
in the election of directors within any of the following ranges of voting
power:
(a) One-fifth or more but less than one-third of all voting power;
(b) One-third or more but less than a majority of all voting power;
- --------
* Only includes certain definitions used in Section 351.407.
C-3
(c) A majority or more of all voting power; provided, however, that
shares which the person or the group have owned or of which the person or
the group could have exercised or directed the voting for more than ten
years shall not be deemed to be "control shares" and shall not be
aggregated for the purpose of determining inclusion within the above-stated
ranges;
(3) "Interested shares" means the shares of an issuing public corporation in
respect of which any of the following persons may exercise or direct the
exercise of the voting power of the corporation in the election of directors:
(a) An acquiring person or member of a group with respect to a control
share acquisition;
(b) Any officer of the issuing public corporation elected or appointed by
the directors of the issuing public corporation;
(c) Any employee of the issuing public corporation who is also a director
of such corporation;
(4) "Issuing public corporation" means either a corporation incorporated
under the laws of the state of Missouri, or, subdivision (2) of section
351.690 notwithstanding, any insurance company organized pursuant to the laws
of Missouri and doing business under the provisions of chapter 376, RSMo,
provided that the bylaws of such insurance company expressly state that such
insurance company shall, for the purposes of this chapter, be included within
the definition of "issuing public corporation", that has:
(a) One hundred or more shareholders;
(b) Its principal place of business, its principal office, or substantial
assets within Missouri; and
(c) One of the following:
a. More than ten percent of its shareholders resident in Missouri;
b. More than ten percent of its shares owned by Missouri residents;
or
c. Ten thousand shareholders resident in Missouri.
The residence of a shareholder is presumed to be the address appearing in the
records of the corporation. Shares held by banks (except as trustee or
guardian), brokers or nominees shall be disregarded for purposes of
calculating the percentages or numbers described above.
C-4
SCHEDULE D
SECTION 351.459 OF THE MISSOURI GENERAL AND BUSINESS CORPORATION LAW
Section 351.459. [INTERESTED SHAREHOLDER TRANSACTION]
1. For the purposes of this section, the following terms mean:
(1) "Affiliate", a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common
control with, a specified person;
(2) "Announcement date", when used in reference to any business
combination, means the date of the first public announcement of the final,
definitive proposal for such business combination;
(3) "Associate", when used to indicate a relationship with any person,
means any corporation or organization of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of ten percent
or more of any class of voting stock, any trust or other estate in which
such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity, and any
relative or spouse of such person, or any relative of such spouse, who has
the same home as such person;
(4) "Beneficial owner", when used with respect to any stock, means a
person that:
(a) Individually or with or through any of its affiliates or
associates, beneficially owns such stock, directly or indirectly; or
(b) Individually or with or through any of its affiliates or
associates, has the right to acquire such stock, whether such right is
exercisable immediately or only after the passage of time, pursuant to
any agreement, arrangement or understanding, whether or not in writing,
or upon the exercise of conversion rights, exchange rights, warrants or
options, or otherwise; provided, however, that a person shall not be
deemed the beneficial owner of stock tendered pursuant to a tender or
exchange offer made by such person or any of such person's affiliates
or associates until such tendered stock is accepted for purchase or
exchange; or the right to vote such stock pursuant to any agreement,
arrangement or understanding, whether or not in writing; provided,
however, that a person shall not be deemed the beneficial owner of any
stock under this item if the agreement, arrangement or understanding to
vote such stock arises solely from a revocable proxy or consent given
in response to a proxy or consent solicitation made in accordance with
the applicable rules and regulations under the Exchange Act and is not
then reportable on a Schedule 13D under the Exchange Act, or any
comparable or successor report; or
(c) Has any agreement, arrangement or understanding, whether or not
in writing, for the purpose of acquiring, holding, voting, except
voting pursuant to a revocable proxy or consent as described in
paragraph (b) of this subdivision, or disposing of such stock with any
other person that beneficially owns, or whose affiliates or associates
beneficially own, directly or indirectly, such stock;
(5) "Business combination", when used in reference to any resident
domestic corporation and any interested shareholder of such resident
domestic corporation, means:
(a) Any merger or consolidation of such resident domestic corporation
or any subsidiary of such resident domestic corporation with such
interested shareholder or any other corporation, whether or not itself
an interested shareholder of such resident domestic corporation, which
is, or after such merger or consolidation would be, an affiliate or
associate of such interested shareholder;
(b) Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition, in one transaction or a series of transactions to or with
such interested shareholder or any affiliate or associate of such
interested shareholder of assets of such resident domestic corporation
or any subsidiary of such resident domestic corporation having an
aggregate market value equal to ten percent or more of the aggregate
market value of all the assets, determined on a consolidated basis, of
such resident domestic corporation, having an aggregate market value
equal to ten percent or more of the aggregate market value of all the
outstanding stock of such resident domestic corporation, or
representing ten percent or
D-1
more of the earning power or net income, determined on a consolidated
basis, of such resident domestic corporation;
(c) The issuance or transfer by such resident domestic corporation or
any subsidiary of such resident domestic corporation, in one
transaction or a series of transactions, of any stock of such resident
domestic corporation or any subsidiary of such resident domestic
corporation which has an aggregate market value equal to five percent
or more of the aggregate market value of all the outstanding stock of
such resident domestic corporation to such interested shareholder or
any affiliate or associate of such interested shareholder except
pursuant to the exercise of warrants or rights to purchase stock
offered, or a dividend or distribution paid or made, pro rata to all
shareholders of such resident domestic corporation;
(d) The adoption of any plan or proposal for the liquidation or
dissolution of such resident domestic corporation proposed by, or
pursuant to any agreement, arrangement or understanding, whether or not
in writing, with such interested shareholder or any affiliate or
associate of such interested shareholder;
(e) Any reclassification of securities, including, without
limitation, any stock split, stock dividend, or other distributions of
stock in respect of stock, or any reverse stock split, or
recapitalization of such resident domestic corporation, or any merger
or consolidation of such resident domestic corporation with any
subsidiary of such resident domestic corporation, or any other
transaction, whether or not with or into or otherwise involving such
interested shareholder, proposed by, or pursuant to any agreement,
arrangement or understanding, whether or not in writing, with such
interested shareholder or any affiliate or associate of such interested
shareholder, which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any
class or series of voting stock or securities convertible into voting
stock of such resident domestic corporation or any subsidiary of such
resident domestic corporation which is directly or indirectly owned by
such interested shareholder or any affiliate or associate of such
interested shareholder, except as a result of immaterial changes due to
fractional share adjustments; or
(f) Any receipt by such interested shareholder or any affiliate or
associate of such interested shareholder of the benefit, directly or
indirectly, except proportionately as a shareholder of such resident
domestic corporation, of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax advantages
provided by or through such resident domestic corporation;
(6) "Common stock", any stock other than preferred stock;
(7) "Consummation date", with respect to any business combination, means
the date of consummation of such business combination, or, in the case of a
business combination as to which a shareholder vote is taken, the later of
the business day prior to the vote or twenty days prior to the date of
consummation of such business combination;
(8) "Control", including the terms "controlling", "controlled by" and
"under common control with", the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting stock, by contract, or
otherwise. A person's beneficial ownership of ten percent or more of a
corporation's outstanding voting stock shall create a presumption that such
person has control of such corporation. Notwithstanding the foregoing, a
person shall not be deemed to have control of a corporation if such person
holds voting stock, in good faith and not for the purpose of circumventing
this section, as an agent, bank, broker, nominee, custodian or trustee for
one or more beneficial owners who do not individually or as a group have
control of such corporation;
(9) "Exchange Act", the act of Congress known as the "Securities Exchange
Act of 1934", as the same has been or hereafter may be amended from time to
time;
(10) "Interested shareholder", when used in reference to any resident
domestic corporation, any person, other than such resident domestic
corporation or any subsidiary of such resident domestic corporation, that:
D-2
(a) Is the beneficial owner, directly or indirectly, of twenty
percent or more of the outstanding voting stock of such resident
domestic corporation; or
(b) Is an affiliate or associate of such resident domestic
corporation and at any time within the five-year period immediately
prior to the date in question was the beneficial owner, directly or
indirectly, of twenty percent or more of the then outstanding voting
stock of such resident domestic corporation; provided that, for the
purpose of determining whether a person is an interested shareholder,
the number of shares of voting stock of such resident domestic
corporation deemed to be outstanding shall include shares deemed to be
beneficially owned by the person through application of subdivision (4)
of this subsection but shall not include any other unissued shares of
voting stock of such resident domestic corporation which may be
issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise;
(11) "Market value", when used in reference to stock or property of any
resident domestic corporation, means:
(a) In the case of stock, the highest closing sale price during the
thirty-day period immediately preceding the date in question of a share
of such stock on the composite tape for New York stock exchange listed
stocks, or, if such stock is not quoted on such composite tape or if
such stock is not listed on such exchange, on the principal United
States securities exchange registered under the Exchange Act on which
such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of
such stock during the thirty-day period preceding the date in question
on the National Association of Securities Dealers, Inc., Automated
Quotations System or any system then in use, or if no such quotations
are available, the fair market value on the date in question of a share
of such stock as determined by the board of directors of such resident
domestic corporation in good faith; and
(b) In the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by the
board of directors of such resident domestic corporation in good faith;
(12) "Preferred stock", any class or series of stock of a resident
domestic corporation which under the bylaws or certificate of incorporation
of such resident domestic corporation is entitled to receive payment of
dividends prior to any payment of dividends on some other class or series
of stock, or is entitled in the event of any voluntary liquidation,
dissolution or winding up of the resident domestic corporation to receive
payment or distribution of a preferential amount before any payments or
distributions are received by some other class or series of stock;
(13) "Resident domestic corporation", a corporation incorporated under
the laws of the state of Missouri that has:
(a) One hundred or more shareholders;
(b) Its principal place of business, its principal office, or
substantial assets within Missouri; and
(c) One of the following:
a. More than ten percent of its shareholders resident in Missouri;
b. More than ten percent of its shares owned by Missouri
residents; or
c. Ten thousand shareholders resident in Missouri.
For purposes of this section, reference to shareholders or ownership of
shares shall refer to ownership of voting stock; the residence of a
partnership, unincorporated association, trust or similar organization
shall be the principal office of such organization; the residence of a
shareholder shall otherwise be presumed to be the address appearing in the
records of the corporation; and shares held by banks (except as trustee or
guardian), brokers or nominees shall be disregarded for purposes of
calculating the percentages or numbers described above. No resident
domestic corporation, which is organized under the laws of this state,
shall cease to be a resident domestic corporation by reason of events
occurring or actions taken while such resident domestic corporation is
subject to the provisions of this section;
D-3
(14) "Stock" means:
(a) Any stock or similar security, any certificate of interest, any
participation in any profit sharing agreement, any voting trust
certificate, or any certificate of deposit for stock; and
(b) Any security convertible, with or without consideration, into
stock, or any warrant, call or other option or privilege of buying
stock without being bound to do so, or any other security carrying any
right to acquire, subscribe to or purchase stock;
(15) "Stock acquisition date", with respect to any person and any
resident domestic corporation, means the date that such person first
becomes an interested shareholder of such resident domestic corporation;
(16) "Subsidiary" of any resident domestic corporation, means any other
corporation of which voting stock, having a majority of the outstanding
voting stock of such other corporation, is owned, directly or indirectly,
by such resident domestic corporation;
(17) "Voting stock", shares of capital stock of a corporation entitled to
vote generally in the election of directors.
2. Notwithstanding anything to the contrary contained in this section,
except the provisions of subsection 4 of this section, no resident domestic
corporation shall engage in any business combination with any interested
shareholder of such resident domestic corporation for a period of five years
following such interested shareholder's stock acquisition date unless such
business combination or the purchase of stock made by such interested
shareholder on such interested shareholder's stock acquisition date is
approved by the board of directors of such resident domestic corporation on or
prior to such stock acquisition date. If a good faith proposal is made in
writing to the board of directors of such resident domestic corporation
regarding a business combination, the board of directors shall respond, in
writing, within sixty days or such shorter period, if any, as may be required
by the Exchange Act, setting forth its reasons for its decision regarding such
proposal. If a good faith proposal to purchase stock is made in writing to the
board of directors of such resident domestic corporation, the board of
directors, unless it responds affirmatively in writing within sixty days or
such shorter period, if any, as may be required by the Exchange Act, shall be
deemed to have disapproved such stock purchase.
3. Notwithstanding anything to the contrary contained in this section,
except the provisions of subsections 2 and 4 of this section, no resident
domestic corporation shall engage at any time in any business combination with
any interested shareholder of such resident domestic corporation other than
any of the following business combinations:
(1) A business combination approved by the board of directors of such
resident domestic corporation prior to such interested shareholder's stock
acquisition date, or where the purchase of stock made by such interested
shareholder on such interested shareholder's stock acquisition date had
been approved by the board of directors of such resident domestic
corporation prior to such interested shareholder's stock acquisition date;
(2) A business combination approved by the affirmative vote of the
holders of a majority of the outstanding voting stock not beneficially
owned by such interested shareholder or any affiliate or associate of such
interested shareholder at a meeting called for such purpose no earlier than
five years after such interested shareholder's stock acquisition date;
(3) A business combination that meets all of the following conditions:
(a) The aggregate amount of the cash and the market value as of the
consummation date of consideration other than cash to be received per
share by holders of outstanding shares of common stock of such resident
domestic corporation in such business combination is at least equal to
the higher of the following:
a. The highest per share price paid by such interested shareholder
at a time when he was the beneficial owner, directly or indirectly,
of five percent or more of the outstanding voting stock of
D-4
such resident domestic corporation, for any shares of common stock
of the same class or series acquired by it within the five-year
period immediately prior to the announcement date with respect to
such business combination, or within the five-year period
immediately prior to, or in, the transaction in which such
interested shareholder became an interested shareholder, whichever
is higher; plus, in either case, interest compounded annually from
the earliest date on which such highest per share acquisition price
was paid through the consummation date at the rate for one-year
United States treasury obligations from time to time in effect; less
the aggregate amount of any cash dividends paid, and the market
value of any dividends paid other than in cash, per share of common
stock since such earliest date, up to the amount of such interest;
and
b. The market value per share of common stock on the announcement
date with respect to such business combination or on such interested
shareholder's stock acquisition date, whichever is higher; plus
interest compounded annually from such date through the consummation
date at the rate for one-year United States treasury obligations
from time to time in effect; less the aggregate amount of any cash
dividends paid, and the market value of any dividends paid other
than in cash, per share of common stock since such date, up to the
amount of such interest;
(b) The aggregate amount of the cash and the market value as of the
consummation date of consideration other than cash to be received per
share by holders of outstanding shares of any class or series of stock,
other than common stock, of such resident domestic corporation is at
least equal to the highest of the following, whether or not such
interested shareholder has previously acquired any shares of such class
or series of stock:
a. The highest per share price paid by such interested shareholder
at a time when he was the beneficial owner, directly or indirectly,
of five percent or more of the outstanding voting stock of such
resident domestic corporation, for any shares of such class or
series of stock acquired by him within the five-year period
immediately prior to the announcement date with respect to such
business combination, or within the five-year period immediately
prior to, or in, the transaction in which such interested
shareholder became an interested shareholder, whichever is higher;
plus, in either case, interest compounded annually from the earliest
date on which such highest per share acquisition price was paid
through the consummation date at the rate for one-year United States
treasury obligations from time to time in effect; less the aggregate
amount of any cash dividends paid, and the market value of any
dividends paid other than in cash, per share of such class or series
of stock since such earliest date, up to the amount of such
interest;
b. The highest preferential amount per share to which the holders
of shares of such class or series of stock are entitled in the event
of any voluntary liquidation, dissolution or winding up of such
resident domestic corporation, plus the aggregate amount of any
dividends declared or due as to which such holders are entitled
prior to payment of dividends on some other class or series of
stock, unless the aggregate amount of such dividends is included in
such preferential amount; and
c. The market value per share of such class or series of stock on
the announcement date with respect to such business combination or
on such interested shareholder's stock acquisition date, whichever
is higher; plus interest compounded annually from such date through
the consummation date at the rate for one-year United States
treasury obligations from time to time in effect; less the aggregate
amount of any cash dividends paid, and the market value of any
dividends paid other than in cash, per share of such class or series
of stock since such date, up to the amount of such interest;
(c) The consideration to be received by holders of a particular class
or series of outstanding stock, including common stock, of such
resident domestic corporation in such business combination is in cash
or in the same form as the interested shareholder has used to acquire
the largest number of shares of such class or series of stock
previously acquired by it, and such consideration shall be distributed
promptly;
D-5
(d) The holders of all outstanding shares of stock of such resident
domestic corporation not beneficially owned by such interested
shareholder immediately prior to the consummation of such business
combination are entitled to receive in such business combination cash
or other consideration for such shares in compliance with paragraphs
(a), (b) and (c) of this subdivision;
(e) After such interested shareholder's stock acquisition date and
prior to the consummation date with respect to such business
combination, such interested shareholder has not become the beneficial
owner of any additional shares of voting stock of such resident
domestic corporation except:
a. As part of the transaction which resulted in such interested
shareholder becoming an interested shareholder;
b. By virtue of proportionate stock splits, stock dividends or
other distributions of stock in respect of stock not constituting a
business combination under paragraph (e) of subdivision (5) of
subsection 1 of this section;
c. Through a business combination meeting all of the conditions of
subsection 2 of this section and this subsection; or
d. Through purchase by such interested shareholder at any price
which, if such price had been paid in an otherwise permissible
business combination the announcement date and consummation date of
which were the date of such purchase, would have satisfied the
requirements of paragraphs (a), (b) and (c) of this subdivision.
4. The provisions of this section shall not apply to:
(1) Any business combination of a resident domestic corporation that does
not have a class of voting stock registered with the Securities and
Exchange Commission pursuant to Section 12 of the Exchange Act, unless the
certificate of incorporation provides otherwise; or
(2) Any business combination of a resident domestic corporation whose
certificate of incorporation has been amended to provide that such resident
domestic corporation shall be subject to the provisions of this section,
which did not have a class of voting stock registered with the Securities
and Exchange Commission pursuant to Section 12 of the Exchange Act on the
effective date of such amendment, and which is a business combination with
an interested shareholder whose stock acquisition date is prior to the
effective date of such amendment; or
(3) Any business combination of a resident domestic corporation the
original certificate of incorporation of which contains a provision
expressly electing not to be governed by this section, or which adopts an
amendment to such resident domestic corporation's bylaws prior to August 1,
1986, expressly electing not to be governed by this section, or which
adopts an amendment to such resident domestic corporation's bylaws,
approved by the affirmative vote of the holders, other than interested
shareholders and their affiliates and associates, expressly electing not to
be governed by this section, provided that such amendment to the bylaws
shall not be effective until eighteen months after such vote of such
resident domestic corporation's shareholders and shall not apply to any
business combination of such resident domestic corporation with an
interested shareholder whose stock acquisition date is on or prior to the
effective date of such amendment; or
(4) Any business combination of a resident domestic corporation with an
interested shareholder of such resident domestic corporation which became
an interested shareholder inadvertently, if such interested shareholder as
soon as practicable, divests itself of a sufficient amount of the voting
stock of such resident domestic corporation so that it no longer is the
beneficial owner, directly or indirectly, of twenty percent or more of the
outstanding voting stock of such resident domestic corporation, and would
not at any time within the five-year period preceding the announcement date
with respect to such business combination have been an interested
shareholder but for such inadvertent acquisition;
(5) Any business combination with an interested shareholder who was the
beneficial owner, directly or indirectly, of five percent or more of the
outstanding voting stock of such resident domestic corporation on December
1, 1985, and remained so to such interested shareholder's stock acquisition
date.
D-6
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each KCPL Shareholder or his
or her broker, dealer, commercial bank, trust company or other nominee to the
Exchange Agent at one of its addresses set forth below.
THE EXCHANGE AGENT:
HARRIS TRUST COMPANY OF NEW YORK
By Hand By Overnight Courier By Mail
Receive Window 77 Water Street, 4th Floor Wall Street Station
77 Water Street, 5th New York NY 10005 P.O. Box 1023
Floor New York, NY 10268-1023
New York, NY 10005
By Facsimile Transmission Telephone Number
(for Eligible Institutions only)
For information call collect
(212) 701-7636 (212) 701-7663
(212) 701-7640
Confirm by telephone
(212) 701-7663
Any questions or requests for assistance or additional copies of the
Prospectus, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective telephone numbers and locations listed below. You may also contact
your local broker, commercial bank, trust company or nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
[LOGO] GEORGESON
& COMPANY INC.
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
1-800-223-2064
The Dealer Manager for the Offer is:
SALOMON BROTHERS INC
SEVEN WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 783-6593 (collect)
