2. ANTICIPATED MERGER WITH WESTAR ENERGY, INC.

On May 29, 2016, Great Plains Energy entered into an Agreement and Plan of Merger (Original Merger Agreement) by and among Great Plains Energy, Westar Energy, Inc. (Westar), and, from and after its accession to the Original Merger Agreement, GP Star, Inc., a Kansas corporation and wholly owned subsidiary of Great Plains Energy (GP Star). Pursuant to the Original Merger Agreement, Great Plains Energy would have acquired Westar for (i) $51.00 in cash and (ii) a number of shares of Great Plains Energy common stock, equal to an exchange ratio for each share of Westar common stock issued and outstanding immediately prior to the effective time of the merger, with Westar becoming a wholly owned subsidiary of Great Plains Energy. The acquisition was subject to various shareholder and regulatory approvals, including from The State Corporation Commission of the State of Kansas (KCC), the Public Service Commission of the State of Missouri (MPSC), and The Federal Energy Regulatory Commission (FERC).

On April 19, 2017, KCC issued an order denying Great Plains Energy's, KCP&L's and Westar's joint application for approval of the acquisition of Westar by Great Plains Energy citing concerns with the purchase price, Great Plains Energy's capital structure, quantifiable and demonstrable customer benefits and staffing levels in Westar's service territory, among other items.

On July 9, 2017, Great Plains Energy entered into an Amended and Restated Agreement and Plan of Merger (Amended Merger Agreement) by and among Great Plains Energy, Westar, Monarch Energy Holding, Inc., a Missouri corporation (Holdco), and King Energy, Inc., a Kansas corporation and wholly owned subsidiary of Holdco (Merger Sub). Pursuant to the Amended Merger Agreement, subject to the satisfaction or waiver of certain conditions, Great Plains Energy will merge with and into Holdco, with Holdco surviving such merger, and Merger Sub will merge with and into Westar, with Westar surviving such merger. Pursuant to the Amended Merger Agreement, at closing each outstanding share of Great Plains Energy's and Westar's common stock will be converted into the right to receive 0.5981 and 1.0, respectively, of validly issued, fully paid and nonassessable shares of common stock, no par value, of Holdco. Following the mergers, Holdco, with a new name that has yet to be established, will be the parent of Great Plains Energy's direct subsidiaries, including KCP&L, and Westar.

The anticipated merger with Westar has been structured as a merger of equals in a tax-free exchange of shares that involves no premium paid or received with respect to either Great Plains Energy or Westar. Following the completion of the anticipated merger, Westar shareholders will own approximately 52.5 percent and Great Plains Energy shareholders will own approximately 47.5 percent of the combined company.

Regulatory and Shareholder Approvals

Great Plains Energy's anticipated merger with Westar was unanimously approved by the Great Plains Energy Board and Westar's Board of Directors (Westar Board). The anticipated merger remains subject to the approval of Great Plains Energy's and Westar's shareholders; regulatory approvals from KCC, the MPSC, the Nuclear Regulatory Commission (NRC), FERC, The Federal Communications Commission (FCC); Hart-Scott-Rodino (HSR) antitrust review; as well as other customary conditions.

KCC Approval

In August 2017, Great Plains Energy, KCP&L and Westar filed a joint application with KCC for approval of the anticipated merger with Westar. Under applicable Kansas regulations, KCC has 300 days following the filing to rule on the transaction. A decision from KCC on this joint application is expected in the first half of 2018.

MPSC Approval

In August 2017, Great Plains Energy, KCP&L, GMO and Westar filed a joint application with the MPSC for approval of the anticipated merger with Westar. An evidentiary hearing in the case is expected to occur in March 2018. While there is not a statutory deadline for an MPSC ruling on the joint application, a decision from the MPSC is expected in the first half of 2018.

Other Approvals

In September 2017, Great Plains Energy and Westar filed applications with FERC and the NRC for approval of the merger. In October 2017, the Securities and Exchange Commission (SEC) declared effective a registration statement on Form S-4 of Holdco including a joint proxy statement of Great Plains Energy and Westar that will be used in connection with Great Plains Energy's and Westar's special shareholder meetings on November 21, 2017, and the registration of shares of Holdco common stock to be issued to Great Plains Energy's and Westar's shareholders at the closing of the anticipated merger.

Termination Fees

The Amended Merger Agreement provides that in connection with a termination of the agreement under specified circumstances relating to a failure to obtain regulatory approvals by July 9, 2018 (which date may be extended to January 9, 2019), a final and nonappealable order enjoining the consummation of the anticipated merger in connection with regulatory approvals or failure by Great Plains Energy to comply with its obligations under the Amended Merger Agreement to consummate the closing of the anticipated merger once all of the conditions have been satisfied, Great Plains Energy may be required to pay Westar a termination fee of $190 million. In addition, in the event that the Amended Merger Agreement is terminated by Westar under certain circumstances to enter into a definitive acquisition agreement with respect to a superior proposal or by Great Plains Energy as a result of the Westar Board changing its recommendation of the anticipated merger prior to the Westar shareholder approval having been obtained, Westar may be required to pay Great Plains Energy a termination fee of $190 million. Similarly, in the event that the Amended Merger Agreement is terminated by Great Plains Energy under certain circumstances to enter into a definitive acquisition agreement with respect to a superior proposal or by Westar as a result of the Great Plains Energy Board changing its recommendation of the anticipated merger prior to the Great Plains Energy shareholder approval having been obtained, Great Plains Energy may be required to pay Westar a termination fee of $190 million. Additionally, if the Amended Merger Agreement is terminated by either Great Plains Energy or Westar as a result of Great Plains Energy's shareholders not approving the Amended Merger Agreement, Great Plains Energy may be required to pay Westar a termination fee of $80 million.

Shareholder Lawsuits

Following the announcement of the Original Merger Agreement in May 2016, two putative class action complaints (which were consolidated and superseded by a consolidated complaint) were filed in the District Court of Shawnee County, Kansas. On October 20, 2017, the lead plaintiff in that consolidated putative class action filed an amended class action petition. The amended petition names as defendants Westar, the Westar Board, Great Plains Energy, Holdco and Merger Sub. The amended petition challenges the proposed merger and alleges breaches of fiduciary duties against the Westar Board in connection with the proposed merger, including the duty of candor, and that Westar, Great Plains Energy, Holdco and Merger Sub aided and abetted such breaches of fiduciary duties.

On September 21, 2017, a putative class action lawsuit was filed in the United States District Court for the District of Kansas. The federal class action complaint names as defendants Westar, the Westar Board, Great Plains Energy, Holdco and Merger Sub. The complaint challenges the merger and alleges violations of section 14(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) against all of the defendants and violations of section 20(a) of the Exchange Act against the Westar Board.

On October 6, 2017, a putative class action lawsuit was filed in the United States District Court for the District of Kansas. The federal class action complaint names as defendants Westar, the Westar Board, Great Plains Energy, Holdco and Merger Sub. The complaint challenges the proposed merger and alleges violations of section 14(a) of the Exchange Act against Westar and the Westar Board and violations of section 20(a) of the Exchange Act against the Westar Board, Great Plains Energy, Holdco and Merger Sub.

On October 13, 2017, a putative class action lawsuit was filed in the United States District Court for the Western District of Missouri, Western Division. The federal class action complaint names as defendants Great Plains Energy and the Great Plains Energy Board. The complaint challenges the proposed merger and alleges violations of section 14(a) of the Exchange Act against all of the defendants and violations of section 20(a) of the Exchange Act against the Great Plains Energy Board.

On October 18, 2017, a putative derivative complaint was filed in Shawnee County, Kansas. This putative derivative action names as defendants the Westar Board, Great Plains Energy, Holdco and Merger Sub, with Westar named as a nominal defendant. The complaint challenges the proposed merger and alleges that the Westar Board determined to forego a $380 million break-up fee allegedly payable to Westar associated with the Original Merger Agreement, breached their fiduciary duties to Westar shareholders in connection with the proposed merger, and that Great Plains Energy, Holdco and Merger Sub aided and abetted such breaches of fiduciary duties.

Great Plains Energy does not believe these suits will impact the completion of the anticipated merger with Westar and they are not expected to have a material impact on Great Plains Energy's consolidated financial statements. While Great Plains Energy believes that dismissal of these lawsuits is warranted, the outcome of any litigation is inherently uncertain.

Redemption of Acquisition Financing

In order to fund the cash portion of the acquisition under the Original Merger Agreement, Great Plains Energy completed registered public offerings of 60.5 million shares of common stock for total net proceeds of $1.55 billion and 17.3 million depositary shares each representing a 1/20th interest in a share of 7.00% Series B Mandatory Convertible Preferred Stock (Series B Preferred Stock) for total net proceeds of $836.2 million in October 2016 and issued, at a discount, $4.3 billion of unsecured senior notes in March 2017. Great Plains Energy also entered into a stock purchase agreement with OCM Credit Portfolio LP (OMERS), pursuant to which Great Plains Energy would issue and sell to OMERS 750,000 shares of preferred stock of Great Plains Energy designated as 7.25% Mandatory Convertible Preferred Stock, Series A (Series A Preferred Stock), without par value, for an aggregate purchase price equal to $750 million at the closing of the acquisition.

In addition to the financings discussed above, Great Plains Energy also entered into a senior unsecured bridge term loan facility in connection with the Original Merger Agreement in an aggregate principal amount of $8.017 billion (which was subsequently reduced to $864.5 million as a result of the completed financings noted above) to support the anticipated transaction and provide flexibility for the timing of long-term financing.

As a result of the Amended Merger Agreement, the following occurred with regards to Great Plains Energy's acquisition financing arrangements:


•	In July 2017, Great Plains Energy redeemed its $4.3 billion of unsecured senior notes at a redemption price of 101% of the aggregate principle amount, plus accrued and unpaid interest. See Note 11 for additional information;


•	In August 2017, Great Plains Energy redeemed its Series B Preferred Stock at a redemption price that was equal to a make-whole formula set forth in the terms of the Series B Preferred Stock. See Note 12 for additional information;


•	In July 2017, Great Plains Energy and OMERS terminated their stock purchase agreement for $750 million of Series A Preferred Stock. As a result of this termination, Great Plains Energy recorded $15 million of previously deferred offering fees to non-operating expenses in the third quarter of 2017; and


•	In July 2017, Great Plains Energy terminated its $864.5 million unsecured bridge term loan facility.

Under the Amended Merger Agreement, Great Plains Energy is required to have not less than $1.25 billion in cash and cash equivalents on its balance sheet at the closing of the anticipated merger with Westar. It is expected that this excess cash will be returned to shareholders of the combined company through the repurchase of common stock in a series of transactions over time after the closing of the anticipated merger.