Common use of Recent Developments Clause in Contracts

Recent Developments. Intermedia -- WorldCom Merger On September 1, 2000, Intermedia entered into a merger agreement with WorldCom, Inc. Upon consummation of the merger, a subsidiary of WorldCom will be merged with and into Intermedia and Intermedia will become a subsidiary of WorldCom (the "Intermedia -- WorldCom Merger"). As a result of the merger, WorldCom will beneficially own a majority of the capital stock of Digex and will have voting control of Digex. The Federal Communications Commission approved the merger between WorldCom and Intermedia in January 2001 on the condition it comply with an agreement reached with antitrust authorities that WorldCom divest certain Intermedia assets and operations. On February 15, 2001, WorldCom, Intermedia and Digex announced a proposed settlement (the "Litigation Settlement") of a lawsuit arising out of WorldCom's planned acquisition of a controlling interest in Digex through the Intermedia -- WorldCom Merger. Certain of our minority shareholders brought suit to enjoin the merger or to invalidate the approval of the transaction by our Board of Directors. The proposed settlement would, if approved by the Delaware Chancery Court, fully resolve all claims in the lawsuit and permit the Intermedia -- WorldCom Merger to proceed. See Item 3 Legal Proceedings to Part I of this Form 10-K for the principal terms of the proposed settlement with respect to Digex. On Marc▇ ▇, ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ered into a definitive Stipulation of Settlement with all relevant parties to settle all claims related to a consolidated class action suit. The Court has entered its order directing that notice of the settlement be sent to proposed class members and has scheduled a final hearing to be held on April 6, 2001 in the Delaware Court of Chancery in Wilmington, Delaware. The final settlement of the suit is subject to the satisfaction of certain conditions as well as final court approval. Also on Marc▇ ▇, ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ certain subsidiaries of WorldCom entered into four commercial agreements. These commercial agreements will become effective at or before the consummation of the Intermedia -- WorldCom Merger pursuant to the merger agreement. The principal terms of the four commercial agreements are generally described as follows: - Sales Channel Agreement. Under this agreement, WorldCom will resell the Digex portfolio of managed Web hosting products. If Digex satisfies certain service level commitments, WorldCom agrees to purchase up to a total of $500.0 million during the period from 2001 through 2003. Digex and WorldCom will share costs and profits generated from the WorldCom sales channel. In November 2000, WorldCom announced the immediate U.S. availability of an expanded global Web hosting product suite to include high-end managed hosting services through arrangements with Digex. Digex will also utilize WorldCom's sales force to enhance its global presence. - Funding Agreement. After the completion of the Intermedia -- WorldCom Merger, WorldCom's Board of Directors will review the Digex business plans for 2001 and 2002 approved by the Digex Board of Directors. If these business plans are approved by the WorldCom Board of Directors, WorldCom agrees to loan Digex funds for these business plans; the loan rate will be LIBOR plus 300 basis points. Repayment will be made over a four-year period commencing in 2003. However, the funding agreement would not prevent Digex from seeking replacement funding from other sources.

Recent Developments. Intermedia -- WorldCom 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 On September 1Agreement and the Original UtiliCorp/KCPL Transaction, 2000, Intermedia KCPL and UtiliCorp announced that they had entered into a merger agreement with WorldCom, Inc. Upon consummation the Amended and Restated Agreement and Plan of Merger which superseded the Original UtiliCorp/KCPL Merger Agreement. Pursuant to the terms of the mergerAmended and Restated UtiliCorp/KCPL Merger Agreement, a newly created KCPL subsidiary of WorldCom will would be merged with and into Intermedia UtiliCorp and Intermedia will become a subsidiary of WorldCom (UtiliCorp would then be merged with and into KCPL. According to the "Intermedia -- WorldCom Merger"). As a result UtiliCorp/KCPL Joint Proxy Statement, at the effective time of the mergerProposed UtiliCorp/KCPL Transaction, WorldCom will beneficially own 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 capital stock Shares present at a meeting at which a majority of Digex and will have voting control the outstanding Shares are represented is necessary to approve the issuance of DigexShares required to effect the Proposed KCPL/UtiliCorp Transaction. The Federal Communications Commission approved ability of KCPL to effect the merger between WorldCom 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 ▇▇. ▇▇▇▇▇ and Intermedia in January 2001 on Western Resources seeking, among other things, a declaration as to the condition it comply with an agreement reached with antitrust authorities that WorldCom divest certain Intermedia assets validity of the Amended and operationsRestated UtiliCorp/KCPL Merger Agreement and the Proposed UtiliCorp/KCPL Transaction. On February 15June 7, 20011996, WorldComWestern Resources and ▇▇. ▇▇▇▇▇ filed an answer to KCPL's complaint as well as a counterclaim seeking, Intermedia and Digex announced among other things, a proposed settlement (the "Litigation Settlement") of a lawsuit arising out of WorldCom's planned acquisition of a controlling interest in Digex through the Intermedia -- WorldCom Merger. Certain of our minority shareholders brought suit to enjoin the merger or to invalidate declaration that Missouri law requires the approval of the transaction Amended and Restated UtiliCorp/KCPL Merger Agreement by our Board two-thirds of Directors. The proposed settlement would, if approved 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 Delaware Chancery CourtAmended and Restated UtiliCorp/KCPL Merger Agreement based on less than the required two-thirds KCPL Shareholder vote. On June 14, fully resolve all 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 ▇▇. ▇▇▇▇▇ and a counterclaim alleging that Western Resources and ▇▇. ▇▇▇▇▇ have violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. Western Resources and ▇▇. ▇▇▇▇▇ will continue to pursue their claims in against KCPL and to vigorously defend against each of KCPL's allegations, which Western Resources and ▇▇. ▇▇▇▇▇ believe to be without merit. As of the lawsuit and permit date of this Prospectus, no findings have been made by a court concerning any of the Intermedia -- WorldCom Merger to proceedabove-mentioned allegations. See Item 3 Legal Proceedings to Part I of this Form 10-K for the principal terms "Background of the proposed settlement Offer--Litigation." On June 12, 1996, the Western Resources Board met and, following discussions with respect to Digex. On Marcmanagement, Salomon Brothers Inc (financial advisor) and ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ and LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, 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 ▇▇. ▇▇▇▇▇▇▇▇, 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, ▇▇. ▇▇▇▇▇▇▇▇ had delivered to ▇▇▇ered into a definitive Stipulation of Settlement with all relevant parties to settle all claims related to a consolidated class action suit. The Court has entered its order directing that notice of the settlement be sent to proposed class members and has scheduled a final hearing to be held on April 6, 2001 in the Delaware Court of Chancery in Wilmington, Delaware. The final settlement of the suit is subject to the satisfaction of certain conditions as well as final court approval. Also on Marc▇ ▇, ▇▇▇▇, ▇▇▇▇▇ a letter stating that the KCPL board of directors had rejected Western Resources' June 17th offer. After the delivery of the letter, ▇▇. ▇▇▇▇▇▇▇▇ telephoned ▇▇. ▇▇▇▇▇ 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 subsidiaries 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 WorldCom entered into four commercial agreementsthe April 14 Offer) were $1.56 and $23.875, respectively. These commercial agreements will become effective at or 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. 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 Intermedia -- WorldCom Merger pursuant to Proposed UtiliCorp/KCPL Transaction and the merger agreementclosing price of Western Resources Common Stock and the Shares on the indicated dates. The principal terms 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 four commercial agreements are generally described as follows: - Sales Channel Agreement. Under this agreement, WorldCom will resell the Digex portfolio of managed Web hosting products. If Digex satisfies certain service level commitments, WorldCom agrees to purchase up to a total of $500.0 million during the period from 2001 through 2003. Digex and WorldCom will share costs and profits generated from the WorldCom sales channel. In November 2000, WorldCom announced the immediate U.S. availability of an expanded global Web hosting product suite to include high-end managed hosting services through arrangements with Digex. Digex will also utilize WorldCom's sales force to enhance its global presence. - Funding Agreement. After the completion of the Intermedia -- WorldCom Merger, WorldCom's Board of Directors will review the Digex business plans for 2001 and 2002 approved by the Digex Board of Directors. If these business plans are approved by the WorldCom Board of Directors, WorldCom agrees to loan Digex funds for these business plans; the loan rate will be LIBOR plus 300 basis points. Repayment will be made over a four-year period commencing in 2003. However, the funding agreement 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 not prevent Digex range from seeking replacement funding 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. 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 other sources.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 combin

Recent Developments. Intermedia -- WorldCom 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 On September 1Agreement and the Original UtiliCorp/KCPL Transaction, 2000, Intermedia KCPL and UtiliCorp announced that they had entered into a merger agreement with WorldCom, Inc. Upon consummation 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 mergerAmended and Restated UtiliCorp/KCPL Merger Agreement, a newly created KCPL subsidiary of WorldCom will would be merged with and into Intermedia UtiliCorp and Intermedia will become a subsidiary of WorldCom UtiliCorp would then be merged with and into KCPL (the "Intermedia -- WorldCom MergerProposed 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 a result used herein, "Maxim" shall mean KCPL following consummation of the mergerProposed UtiliCorp/KCPL Transaction. Pursuant to the Amended and Restated UtiliCorp/KCPL Merger Agreement, WorldCom will beneficially own a majority 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 capital stock of Digex Original UtiliCorp/KCPL Merger Agreement and will have voting control of Digex. The Federal Communications Commission approved the merger between WorldCom Original UtiliCorp/KCPL Transaction from consideration at the May 22, 1996 KCPL annual meeting and Intermedia in January 2001 announced that KCPL Shareholders would vote on the condition it comply with an agreement reached with antitrust authorities that WorldCom divest certain Intermedia assets and operations. On February 15, 2001, WorldCom, Intermedia and Digex announced issuance of Shares necessary to effect the Proposed UtiliCorp/KCPL Transaction at a proposed settlement (special meeting of KCPL Shareholders to be held at the "Litigation Settlement") of a lawsuit arising out of WorldCom's planned acquisition of a controlling interest in Digex through the Intermedia -- WorldCom Merger. Certain of our minority shareholders brought suit to enjoin the merger or to invalidate the approval of the transaction by our Board of Directors. The proposed settlement would, if approved by the Delaware Chancery Court, fully resolve all claims in the lawsuit and permit the Intermedia -- WorldCom Merger to proceed. See Item 3 Legal Proceedings to Part I of this Form 10-K for the principal terms of the proposed settlement with respect to Digex. On Marc▇ ▇Hyatt Regency Crown Center Hotel, ▇▇▇▇, ▇ ▇▇▇▇▇ ▇▇▇ered into a definitive Stipulation of Settlement with all relevant parties to settle all claims related to a consolidated class action suit. The Court has entered its order directing that notice of the settlement be sent to proposed class members and has scheduled a final hearing to be held on April 6, 2001 in the Delaware Court of Chancery in Wilmington, Delaware. The final settlement of the suit is subject to the satisfaction of certain conditions as well as final court approval. Also on Marc▇ ▇, ▇▇▇▇, 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 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, 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 ▇▇. ▇▇▇▇▇ 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 ▇▇. ▇▇▇▇▇ and a counterclaim alleging that Western Resources and ▇▇. ▇▇▇▇▇ have violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. Western Resources and ▇▇. ▇▇▇▇▇ will continue to pursue their claims against KCPL and to vigorously defend against each of KCPL's allegations, which Western Resources and ▇▇. ▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ and LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, 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 ▇▇. ▇▇▇▇▇▇▇▇, 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, ▇▇. ▇▇▇▇▇▇▇▇ had delivered to ▇▇. ▇▇▇▇▇ a letter stating that the KCPL board of directors had rejected Western Resources' June 17th offer. After the delivery of the letter, ▇▇. ▇▇▇▇▇▇▇▇ telephoned ▇▇. ▇▇▇▇▇ 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 subsidiaries 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 WorldCom entered into four commercial agreementsthe April 14 Offer) were $1.56 and $23.875, respectively. These commercial agreements will become effective at or 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. 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 ------------------ --------------- ------------- $2.28 $1.85 23.2% $2.17 $1.85 17.3% 1998 ANNUAL PROJECTED 1998 April 12, 1996 (the last trading day before the public announcement of the April 14 Offer)....................... July 2, 1996 (the last trading day before the date of this Prospectus).................. - -------- * 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 Intermedia -- WorldCom Merger pursuant to Proposed UtiliCorp/KCPL Transaction and the merger agreementclosing price of Western Resources Common Stock and the Shares on the indicated dates. The principal terms 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 four commercial agreements are generally described as follows: - Sales Channel Agreement. Under this agreement, WorldCom will resell the Digex portfolio of managed Web hosting products. If Digex satisfies certain service level commitments, WorldCom agrees to purchase up to a total of $500.0 million during the period from 2001 through 2003. Digex and WorldCom will share costs and profits generated from the WorldCom sales channel. In November 2000, WorldCom announced the immediate U.S. availability of an expanded global Web hosting product suite to include high-end managed hosting services through arrangements with Digex. Digex will also utilize WorldCom's sales force to enhance its global presence. - Funding Agreement. After the completion of the Intermedia -- WorldCom Merger, WorldCom's Board of Directors will review the Digex business plans for 2001 and 2002 approved by the Digex Board of Directors. If these business plans are approved by the WorldCom Board of Directors, WorldCom agrees to loan Digex funds for these business plans; the loan rate will be LIBOR plus 300 basis points. Repayment will be made over a four-year period commencing in 2003. However, the funding agreement 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 not prevent Digex range from seeking replacement funding from other sourcesa 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.