SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[x] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
WESTERN RESOURCES
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
LOGO
April [8], 1998
Dear Shareholder:
I am pleased to present to you this year's Notice of Annual Meeting
and Proxy Statement detailed on the following pages. The Annual
Meeting will be held on May [11], 1998 at the Maner Conference Center
in Topeka, Kansas. I want to extend my thanks for your continued
interest in the Company and urge you to participate through your vote.
Please read the material in this Proxy Statement carefully before
voting. It is important that your shares be represented at the meeting
whether or not you are able to attend. By promptly filling out and
returning the enclosed proxy, you will ensure that your votes are
counted. Your cooperation is appreciated.
Sincerely,
LOGO
John E. Hayes, Jr.
Chairman of the Board
and Chief Executive Officer
WESTERN RESOURCES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY [11], 1998
You are invited, as a shareholder of Western Resources, Inc. (the Company),
to be present either in person or by proxy at the Annual Shareholders'
Meeting, which will be held in the Maner Conference Centre (Kansas Expocentre)
located at the southeast corner of Seventeenth and Western, Topeka, Kansas, on
Tuesday, May [11], 1998, commencing at eleven o'clock in the morning,
including any adjournments, postponements, continuations or reschedulings
thereof, for the following purposes:
1. To elect three directors to Class II of the Company's Board of Directors
to serve a term of three years;
2.To amend the Restated Articles of Incorporation to eliminate cumulative
voting.
Common and Preferred Shareholders of record at the close of business on
March 30, 1998, will be entitled to vote at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING. WE URGE YOU
TO EXERCISE YOUR RIGHT TO VOTE BY PROMPTLY MARKING, DATING, SIGNING AND
RETURNING THE ENCLOSED PROXY CARD. NO POSTAGE IS NECESSARY IF MAILED IN THE
UNITED STATES. THE PROMPT RETURN OF YOUR PROXY WILL SAVE THE COMPANY THE
ADDITIONAL EXPENSE OF FURTHER REQUESTS TO ENSURE THE PRESENCE OF A QUORUM.
By Order of the Board of Directors,
LOGO
Richard D. Terrill
Secretary
Topeka, Kansas
April [8], 1998
PROXY STATEMENT
GENERAL INFORMATION
MAILING ADDRESS OF PRINCIPAL APPROXIMATE MAILING DATE
EXECUTIVE OFFICES OF THE COMPANY OF PROXY MATERIAL
-------------------------------- ------------------------
818 Kansas Avenue April [8], 1998
Topeka, Kansas 66612
The enclosed proxy is solicited by the Board of Directors of the Company for
use at the Annual Meeting of Shareholders to be held on Tuesday, May [11],
1998, including any adjournments, postponements, continuations or
reschedulings thereof, for the purposes set forth in the above notice of
meeting. Proxies are revocable at any time before voted. Such right of
revocation is not limited or subject to compliance with any formal procedure.
The cost of the solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited personally, or by
telephone or electronic media by regular employees of the Company. The Company
has engaged the services of Georgeson & Company, Inc., a proxy solicitation
firm, to aid in the solicitation of proxies for which the Company will pay an
estimated fee up to $11,500 for its services, plus reimbursement of reasonable
out-of-pocket expenses. In addition, the Company will reimburse brokers and
other custodians, nominees or fiduciaries for their expenses in forwarding
proxy material to security owners and obtaining their proxies.
Common and Preferred Shareholders of record at the close of business on
March [30], 1998, are entitled to vote on matters to come before the meeting.
On that date there were outstanding and entitled to vote 65,409,603 shares of
Common Stock, par value $5 per share; 138,576 shares of Preferred Stock, 4
1/2% Series, par value $100 per share; 60,000 shares of Preferred Stock, 4
1/4% Series, par value $100 per share; and 50,000 shares of Preferred Stock,
5% Series, par value $100 per share.
CUMULATIVE VOTING RIGHTS
Each share of Common and Preferred Stock entitles the holder of record at
the close of business on the record date of the meeting to one vote. In voting
for the election of directors, cumulative voting is permitted and record
holders are entitled to as many votes as shall equal the number of shares of
stock held, multiplied by the number of directors to be elected. Such votes
may be cast all for a single candidate or the votes may be distributed among
the candidates, as the shareholder may see fit if present to vote in person,
or as the proxyholder elects, if voting by proxy. Any shares not voted
(whether by abstention, broker non-votes or otherwise) have no impact in the
election of directors except to the extent the failure to vote for an
individual results in another individual receiving a larger proportion of the
total votes.
Instructions to holders of Common Stock who are participants in the
Company's Direct Stock Purchase Plan. All shares of Common Stock credited to a
shareholder's account in the Plan as of the record date will be voted in
accordance with the specifications indicated on the form of proxy sent to the
shareholder if the form of proxy is returned in a timely manner.
SHAREHOLDER PROPOSALS
The 1999 Annual Meeting of Shareholders is scheduled to be held on May 4,
1999. Specific proposals of shareholders intended to be presented at that
meeting must comply with the requirements of the Securities Exchange Act of
1934, the Company's Articles of Incorporation, as amended, and be received by
the Company's Corporate Secretary for inclusion in its 1999 proxy materials by
December [8], 1998. If the date of the Annual Meeting is changed by more than
30 days, shareholders will be advised promptly of such change and of the new
date for submission of proposals.
1
1. ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes (Class I,
Class II, and Class III). At each Annual Meeting of Shareholders, the directors
constituting one class are elected for a three-year term. The Company's By-Laws
provide for the classification of directors into three classes, which shall be
as nearly equal in number as possible, and no class shall include fewer than
two directors. In accordance with the Restated Articles of Incorporation of the
Company, the Board of Directors has set the number of directors at eleven.
Messrs. Thomas R. Clevenger, David H. Hughes and David C. Wittig have been
nominated for election as directors at the Annual Meeting of Shareholders as
Class II directors. Mr. Hughes was elected by shareholders of the Company at
the Annual Meeting of Shareholders in 1995, and Messrs. Clevenger and Wittig
were elected at the Annual Meeting of Stockholders in 1996. Mr. John Robinson,
a director of the Company, will retire coincident with the Annual Meeting.
Unless otherwise instructed, proxies received in response to this
solicitation will be voted in favor of the election of the persons nominated by
the Board of Directors and named in the following tabulation to be directors of
the Company until their successors are elected and qualify. To be elected, each
nominee must be approved by a majority of the votes cast for such nominee.
While it is not expected that any of the nominees will be unable to qualify or
accept office, if for any reason one or more are unable to do so, the proxies
will be voted for substitute nominees selected by the Board of Directors of the
Company. The nominees for directors are as follows:
NOMINEES (CLASS II)--TERM EXPIRING IN 2001
DAVID H. HUGHES (69), 1988
Retired Vice Chairman, Hallmark Cards, Inc.,
Kansas City, Missouri; Director, Hall Family
Foundations; Director, Midwest Research Institute;
Director, Yellow Corporation; Trustee, Children's
Mercy Hospital; Trustee, Princeton Theological
Seminary; Trustee, Linda Hall Library.
LOGO
THOMAS R. CLEVENGER (62), 1975
Investments, Wichita, Kansas; Director, Security
Benefit Group of Companies; Trustee and Vice
Chairman, The Menninger Foundation; Trustee,
Midwest Research Institute.
LOGO
DAVID C. WITTIG (42), 1996
President (since March 1996), Executive Vice
President, Corporate Development (May 1995 to
March 1996) of Western Resources, Inc.; and prior
to that Managing Director, Co-head of Mergers and
Acquisitions, Salomon Brothers Inc; Director, OMX,
Inc.; Trustee, The Kansas University Endowment
Association.
LOGO
2
OTHER DIRECTORS
(CLASS III)--TERM EXPIRING IN 1999
DIRECTOR (AGE), YEAR FIRST BECAME A DIRECTOR
FRANK J. BECKER (61), 1992
President, Becker Investments, Inc., Lawrence,
Kansas; Chairman, Kansas Turnpike Authourity;
Director, Douglas County Bank; Director, OTR
Express; Trustee, Kansas University Endowment
Association.
LOGO
GENE A. BUDIG (58), 1987
President, The American League of Professional
Baseball Clubs, New York, New York (since July
1994) and prior to that Chancellor, University of
Kansas; Director, Harry S. Truman Library
Institute; Director, Ewing Marion Kauffman
Foundation; Director, American College Testing;
Director, Major League Baseball Hall of Fame.
LOGO
C. Q. CHANDLER (71), 1992
Chairman of the Board, INTRUST Financial
Corporation, Wichita, Kansas; Director, Fidelity
State Bank & Trust Co.; Director, First Newton
Bankshares; Director, Kansas Crippled Children's
Society; Vice President and Director, First Bank of
Newton; Trustee, Kansas State University
Foundation.
LOGO
3
(CLASS I)--TERM EXPIRING IN 2000
DIRECTOR (AGE), YEAR FIRST BECAME A DIRECTOR
JOHN C. DICUS (64), 1990
Chairman of the Board and Chief Executive Officer,
Capitol Federal Savings and Loan Association,
Topeka, Kansas; Director, Security Benefit Group
of Companies; Director, Columbian National Title
Company; Trustee, The Menninger Foundation;
Trustee, Stormont-Vail HealthCare; Trustee, The
Kansas University Endowment Association.
LOGO
JOHN E. HAYES, JR. (60), 1989
Chairman of the Board and Chief Executive Officer
of Western Resources, Inc.; Director, Security
Benefit Group of Companies; Trustee, Rockhurst
College; Trustee, The Menninger Foundation;
Trustee, Midwest Research Institute.
LOGO
RUSSELL W. MEYER, JR. (65), 1992
Chairman and Chief Executive Officer, Cessna
Aircraft Company, Wichita, Kansas; Director,
NationsBank Corporation; Director, Public
Broadcasting Service; Trustee, Wake Forest
University.
LOGO
LOUIS W. SMITH (54), 1991
President and Chief Executive Officer, Ewing
Marion Kauffman Foundation and prior to that
President, Allied Signal Aerospace Company, Kansas
City Division, Kansas City, Missouri; Director,
Commerce Bank of Kansas City; Director, Ewing
Marion Kauffman Foundation; Director, Kansas City
Royals Baseball Corporation; Trustee, University
of Missouri-Rolla.
LOGO
4
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
Western Resources knows of no beneficial owner of more than 5% of any class
of the outstanding Western Resources Voting Stock as of March [30], 1998.
The following information is furnished with respect to each of the director
nominees, each of the other current directors, each of the named executive
officers, and all current directors and executive officers of Western
Resources as a group as to ownership of shares of Western Resources Common
Stock as of March [30], 1998.
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1)
------------------------ --------------------------
Frank J. Becker............................. 11,455 shares(2)(3)
Gene A. Budig............................... 1,267 shares
C.Q. Chandler............................... 1,940 shares(3)
Thomas R. Clevenger......................... 4,455 shares
John C. Dicus............................... 2,455 shares(4)
John E. Hayes, Jr. ......................... 32,728 shares(5)
David H. Hughes............................. 975 shares
Norman E. Jackson........................... 8,661 shares
Steven L. Kitchen........................... 8,400 shares
Carl M. Koupal.............................. 2,614 shares
Russell W. Meyer, Jr. ...................... 3,504 shares(3)
Louis W. Smith.............................. 5,455 shares
David C. Wittig............................. 114,143 shares
All directors and executive officers as a
group...................................... 206,882 shares
- --------
(1) Each individual and the group owns less than one percent of the
outstanding shares of Western Resources Common Stock. No director or
executive officer owns any equity securities of Western Resources other
than Western Resources Common Stock. Includes beneficially owned shares
held in employee savings plans and shares deferred under the Long Term
Incentive and Share Award Plan.
(2) Includes 1,000 shares of Western Resources Common Stock held in trust, of
which Mr. Becker is a co-trustee with voting and investment power.
(3) Does not include stock held in trust by NationsBank Corporation, of which
Mr. Meyer is a director; INTRUST Financial Corporation, of which Mr.
Chandler is a director; and Douglas County Bank, of which Mr. Becker is a
director.
(4) Includes 500 shares of Western Resources Common Stock held by Mr. Dicus'
spouse, not subject to his voting or investment power.
(5) Includes 4,695 shares of Western Resources Common Stock held by Mr. Hayes'
spouse, not subject to his voting or investment power.
Based solely on Western Resources' review of the copies of reports filed
under Section 16(a) of the Exchange Act and written representations that no
other reports were required, Western Resources believes that, during the
fiscal year ended December 31, 1997, all filing requirements applicable to its
executive officers, directors and owners of more than ten percent of Western
Resources Common Stock were complied with.
5
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 1997, the Western Resources Board met sixteen times. Each director
attended at least 75% of the total number of board and committee meetings held
while he or she served as a director or member of a committee. Members of the
Western Resources Board serve on the Audit and Finance, Human Resources,
Nominating and Corporate Public Policy Committees.
The Audit and Finance Committee is currently composed of Mr. Clevenger,
Chairman, Mr. Chandler, and Mr. Meyer. This committee reviews internal and
independent audits and strategic financial programs. It also recommends the
independent auditor for approval by the Western Resources Board. This
Committee held four meetings during 1997.
The Human Resources Committee, currently composed of Mr. Robinson, Chairman,
Mr. Becker, Dr. Budig, Mr. Dicus and Mr. Hughes, reviews the performance of
corporate officers and changes in officer compensation and benefits. This
committee held six meetings during 1997.
The Corporate Public Policy Committee is currently composed of Mr. Dicus,
Chairman, Mr. Hughes, and Mr. Smith. This committee reviews major strategic
programs of Western Resources relating to community relations, marketing,
customer relations, corporate contributions and other public affairs issues.
This committee held four meetings during 1997.
The Nominating Committee, currently composed of Mr. Budig, Chairman, Mr.
Clevenger, Mr. Meyer, and Mr. Smith, recommends nominees for election to the
Western Resources Board, including nominees recommended by shareowners if
submitted in writing to this committee, in care of Western Resources. This
committee held two meetings in 1997.
Outside Directors' Compensation. Each director who is not also an employee
of Western Resources receives $5,000 quarterly ($5,000 of which is paid in
Western Resources Common Stock annually) in retainer fees. The fee paid for
attendance at each board meeting is $850 and $500 for each meeting held by
telephone conference. The fee paid for attendance at each committee meeting
other than a meeting of the Audit and Finance Committee is $750, unless the
committee meeting is held on the same day as a regular board meeting, in which
case the committee meeting attendance fee is $500. The fee paid for attendance
at each Audit and Finance Committee meeting is $850, unless the committee
meeting is held on the same day as a regular board meeting, in which case the
committee meeting attendance fee is $600.
Pursuant to Western Resources' Outside Directors' Deferred Compensation Plan
(the "Plan"), an outside director of Western Resources may elect to defer all,
part or none of his or her retainer and/or meeting fees. The Plan is a
voluntary participation plan. The Plan is administered by the Human Resources
Committee of the Western Resources Board or by such other committee as may be
appointed by the Western Resources Board from time to time.
6
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation of the named executive
officers for the last three completed fiscal years of Western Resources:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- -------------------------
SECURITIES
OTHER UNDERLYING ALL
NAME AND ANNUAL LTIP OPTIONS/SARS OTHER
PRICIPAL POSITIONN YEAR SALARY $ BONUS $ COMPENSATION $(1) PAYOUTS $(2) # COMPENSATION $(3)
- ------------------ ---- -------- ------- ----------------- ------------ ------------ -----------------
John E. Hayes, Jr....... 1997 546,375 387,103 34,723 76,059 50,000 18,096
Chairman of the Board 1996 465,000 164,870 25,036 25,177 25,000 17,449
and Chief Executive 1995 460,833 102,481 18,230 44,169 N.A. 11,073
Officer
David C. Wittig(4)...... 1997 503,094 376,431 12,339 46,141 50,000 18,096
President 1996 425,000 148,860 8,432 N.A. 25,000 867,449
1995 283,826 53,190 1,090 N.A. N.A. 12,830
Steven L. Kitchen....... 1997 317,833 356,430 12,782 36,799 23,000 18,084
Executive Vice President 1996 267,084 112,407 10,027 11,748 11,500 16,933
and Chief Financial 1995 234,700 46,483 17,999 19,178 N.A. 10,548
Officer
Carl M. Koupal, Jr...... 1997 206,833 349,107 2,418 23,533 17,000 17,063
Executive Vice President 1996 174,167 82,112 3,460 7,464 8,500 16,385
and Chief Administrative 1995 152,833 29,787 4,287 13,217 N.A. 10,406
Officer
Norman E. Jackson....... 1997 204,833 348,257 12,875 21,782 11,000 17,060
Executive Vice Presi-
dent, 1996 167,548 46,892 3,315 7,392 5,500 16,321
Electric Operations 1995 147,680 17,750 5,181 12,977 N.A. 4,827
- --------
(1) The amounts reported for 1997 represent dividend equivalents received
under the Long-Term Incentive Plan in the amounts of $3,373, $2,055,
$1,638, $1,052 and $986, respectively; payments for the benefit of each
named executive officer for federal and state taxes associated with
personal benefits and financial and tax planning in the amounts of
$23,143, $7,654, $7,709, $1,107 and $10,845, respectively; and interest
(excess of the applicable federal long-term interest rate) on deferred
compensation for the year in the amounts of $8,207, $2,630, $3,435, $349
and $1,044, respectively.
(2) The amounts reported for 1997 represent the cash equivalent for common
stock issued pursuant to the Long-Term Incentive Program for the 1995-1997
incentive period. Each individual received shares in the amount of 1,769,
1,073, 856, 548 and 507, respectively for the stated period.
(3) The amounts reported for 1997 represent Western Resources' contributions
for each of the named individuals under Western Resources' savings plan, a
defined contribution plan, in the amount of $4,750 each, a car allowance
in the amounts of $12,635, $12,635, $12,635, $11,824 and $11,824,
respectively, and premiums paid on term life insurance policies in the
amounts of $711, $711, $699, $489 and $486, respectively. With respect to
Mr. Wittig, $825,000 in 1996 represents amounts paid to or on behalf of
Mr. Wittig under the Company's executive relocation plan in 1996. In
addition, $25,000 represents the cost to the Company of providing
supplemental benefits to reimburse Mr. Wittig for lost benefits from Mr.
Wittig's prior employer and to attract Mr. Wittig to the Company.
(4)Mr. Wittig commenced his employment with Western Resources on May 2, 1995.
7
OPTIONS GRANTED IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------------------------------------
% OF TOTAL
OPTIONS
GRANTED TO GRANT DATE
OPTIONS EMPLOYEES EXERCISE OR PRESENT
GRANTED IN FISCAL BASE PRICE EXPIRATION VALUE
NAME (#) YEAR ($/SH) DATE ($)(1)
---- ------- ---------- ----------- ---------------- ----------
John E. Hayes, Jr. ..... 50,000 11.8% $30.75 January 24, 2007 144,000
David C. Wittig......... 50,000 11.8% $30.75 January 24, 2007 144,000
Steven L. Kitchen....... 23,000 5.4% $30.75 January 24, 2007 66,240
Carl M. Koupal, Jr. .... 17,000 4.0% $30.75 January 24, 2007 48,960
Norman E. Jackson....... 11,000 2.6% $30.75 January 24, 2007 31,680
- --------
(1) The grant date valuation was calculated using the Black-Scholes option
pricing model, and assumptions called for by paragraph 19 and Appendix B
of FAS 123. This calculation does not necessarily follow the same method
and assumptions that Western Resources uses in valuing long-term
incentives for other purposes. Please refer to the Human Resource
Committee Report for a description of the 1996 Long Term Incentive and
Share Award Plan.
Annualized stock
volatility: 0.1356
Time of exercise (option
term): 10 Years
Risk-Free interest rate: 6.72%
Stock price at grant: $30.75
Exercise price: Market at Vesting
Average dividend yield: 6.50%
Vesting restrictions: 9.0 Years
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)
EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
John E. Hayes, Jr. ..... 0 0 0 75,000 0 956,250
David C. Wittig......... 0 0 0 75,000 0 956,250
Steven L. Kitchen....... 0 0 0 34,500 0 439,875
Carl M. Koupal, Jr. .... 0 0 0 25,500 0 325,125
Norman E. Jackson....... 0 0 0 16,500 0 210,075
8
COMPENSATION PLANS
RETIREMENT PLANS
The Company maintains a qualified non-contributory defined benefit pension
plan and a non-qualified supplemental retirement plan for certain management
employees of the Company, including executive officers, selected by the
Board's Human Resources Committee.
The following table sets forth the estimated annual benefits payable upon
specified remuneration based on age 65 as of January 1, 1998 to the named
executive officers. The amounts presented do not take into account any
reduction for joint and survivorship payments.
ANNUAL PENSION BENEFIT FROM QUALIFIED AND NON-QUALIFIED PLANS
AVERAGE APPLICABLE AVERAGE APPLICABLE
COMPENSATION PENSION BENEFIT COMPENSATION PENSION BENEFIT
------------------ --------------- ------------------ ---------------
$150,000 $ 92,550 700,000 431,900
200,000 123,400 750,000 462,750
250,000 154,250 800,000 493,600
300,000 185,100 850,000 524,450
350,000 215,950 900,000 555,300
400,000 246,800 950,000 586,150
450,000 277,650 1,000,000 617,000
500,000 308,500 1,050,000 647,850
550,000 339,350 1,100,000 678,700
600,000 370,200 1,150,000 709,550
650,000 401,050 1,200,000 740,400
The supplemental retirement plan provides a retirement benefit at or after
age 65, or upon disability prior to age 65, in an amount equal to 61.7% of
final three-year average cash compensation, reduced by existing Company
pension benefits (but not social security benefits), such amount to be paid to
the employee or his designated beneficiaries for the employee's life with a
15-year term certain. The percentage of final three-year average compensation
to be paid, before reduction for Company pension benefits, is 50% for a 50
year old, increasing to 61.7% for a 65 year old. An employee retiring at or
after age 50, but before age 65, may receive a reduced benefit, payable in the
same form. The supplemental plan vests 10% per year after five years of
service until fully vested with 15 years of service or at age 65. Payments are
reduced by 5% per year if commenced prior to age 60, but no earlier than age
50. The supplemental plan also pays a death benefit if death occurs before
retirement, equal to 50% (or the vested retirement benefit percentage,
whichever is higher) of the employee's previous 36 month average cash
compensation to his or her beneficiary for 180 months following his death. All
of the individuals listed in the compensation table are covered by the
qualified and supplemental retirement plans. In the event of a change in
control of the Company, participants may be deemed to be 65 years of age as of
the date of such change in control for purposes of vesting and benefits.
Benefits payable from the qualified pension plan are limited by provisions
of the Internal Revenue Code. The non-qualified supplemental retirement plan
provides for the payment of retirement benefits calculated in accordance with
the qualified pension plan which would otherwise be limited.
The years of service as of January 1, 1998 for the persons named in the cash
compensation table are as follows: Mr. Hayes, 8 years; Mr. Wittig, 3 years;
Mr. Kitchen, 34 years; Mr. Koupal, 5 years; Mr. Jackson, 38 years.
In accordance with the supplemental retirement plan, Mr. Hayes will receive
a retirement benefit equal to 60% of his average annual compensation during
the 36 months immediately preceding his retirement if he remains an employee
of the Company until age 61.
9
CHANGE IN CONTROL AGREEMENTS
The Company has entered into change in control agreements with its executive
officers to ensure their continued service and dedication to the Company and
their objectivity in considering on behalf of the Company any transaction
which would result in a change in control of the Company. Under the
agreements, during the twelve-month period after a change in control, the
executive officer would be entitled to receive a lump-sum cash payment and
certain insurance benefits if such officer's employment were terminated by the
Company other than for cause or upon death, disability, or retirement; or by
such executive officer for good reason (as defined therein).
Upon such termination, the Company must make a lump-sum cash payment to the
executive officer, in addition to any other compensation to which the officer
is entitled, of (i) two (three in the case of certain executive officers)
times such officer's base salary, (ii) two (three in the case of certain
executive officers) times the average of the bonuses paid to such executive
officer for the last three fiscal years, and (iii) the actuarial equivalent of
the excess of the executive officer's accrued pension benefits, computed as if
the executive officer had two (three in the case of certain executive
officers) additional years of benefit accrual service, over the executive
officer's vested accrued pension benefits. In addition, the Company must offer
health, disability and life insurance coverage to the executive officer and
his or her dependents on the same terms and conditions that existed
immediately prior to the termination for two (three in the case of certain
executive officers) years, or, if earlier, until such executive officer is
covered by equivalent benefits.
HUMAN RESOURCES COMMITTEE REPORT
The Company's executive compensation programs are administered by the Human
Resources Committee of the Board of Directors (Committee), which is composed
of five non-employee directors. The Committee reviews and approves all issues
pertaining to executive compensation. The objective of the Company's three
compensation programs (base salary, short-term incentive, and long-term
incentive) is to provide compensation which enables the Company to attract,
motivate and retain talented and dedicated executives, foster a team
orientation toward the achievement of business objectives, and directly link
the success of the Company's executives with that of the Company's
shareholders.
The Company extends participation in its long- and short-term incentive
programs to certain key employees in addition to executive officers based on
the potential to contribute to increasing shareholder value.
BASE SALARY COMPENSATION
A base salary range is established for each executive position to reflect
the potential contribution of each position to the achievement of the
Company's business objectives and to be competitive with the base salaries
paid for comparable positions in the national market by diversified consumer
services companies, with emphasis on electric energy and monitored security
services with annual total revenues comparable to those of the Company. Some,
but not all, of such companies are included in the Standard & Poor's Electric
Companies Index. The Company utilizes industry information for compensation
purposes. Not all companies comprising such index participate in making
available such industry information. In addition, the Company considers
information of other companies with which the Committee believes it competes
for executives, and is therefore relevant, but is not part of such industry
information. The mid-point for each base salary range is intended to
approximate the average base salary for the relevant position in the national
market. Industry surveys by national industry associations are the primary
source of this market information. The Committee has also utilized the
10
services of an independent compensation consultant to provide national market
data for executive positions and to evaluate the appropriateness of the
Company's executive compensation and benefit programs. The Committee intends
to structure the Company's compensation plans such that they comply with and
will be deductible under Section 162(m) (which disallows the deduction of
compensation in excess of $1,000,000 except for incentive payments based upon
performance goals) of the Internal Revenue Code.
Within the established base salary ranges, actual base salary is determined
by the Company's financial performance in relation to attainment of specific
goals, such as earnings-per-share and total return to shareholders, and a
subjective assessment of each executive's achievement of individual objectives
and managerial effectiveness. The Committee annually reviews the performance
of the Chairman and Executive Officers. The Committee, after consideration of
the financial performance of the Company, and such other subjective factors as
the Committee deems appropriate for the period being reviewed, establishes the
base compensation of such officers.
In reviewing the annual achievement of each executive and setting the new
base annual salary levels for 1997, the Committee considered each individual's
contribution toward meeting the Board-approved budgeted financial plan for the
previous year, total return to shareholders, earnings per share, customer
satisfaction, compliance with the Company's capital financial plan, the
construction budget, and the operation and maintenance budgets, the
individual's management effectiveness and the individuals base compensation
compared to the national market.
ANNUAL INCENTIVE COMPENSATION
All executive officers are eligible for annual incentive compensation.
The primary form of short-term incentive compensation is the Company's
Short-Term Incentive Plan for employees, selected by the Committee, including
the executive officers listed in the table, who have an opportunity to
directly and substantially contribute to the Company's achievement of short-
term objectives. Short-term incentives are structured so that potential
compensation is comparable with short-term compensation granted to comparable
positions in the national market. Short-term incentives are targeted to
approximate the median in the national market. Some, but not all, of such
companies are included in the Standard and Poor's Electric Companies Index.
Mr. Hayes is eligible for an annual short-term incentive target of 60% of
base salary. Other participants are eligible for annual short-term incentive
targets ranging from 15% to 60% of base salary. For Executive Officers thirty
percent of the annual incentive is tied to the attainment of individual goals
and 20% is based on management skill. The balance is based upon the Company's
achievement of financial goals established annually by the Committee. Awards
in excess of the targets may be payable if the financial goals set by the
Committee are exceeded.
Changes in annual incentive compensation to the named individuals in 1997
compared to 1996 resulted from increased incentive targets, an individual's
relative attainment of his or her goals, and the Company substantially
exceeding its earnings per share and shareholder value goals.
LONG-TERM INCENTIVES
Long-term incentive compensation is offered to employees who are in
positions which can affect the long-term success of the Company, through the
formation and execution of the Company's business strategies. The Long-Term
Incentive and Share Award Plan is the principal method for long-term incentive
compensation, and compensation thereunder takes the form of stock options. The
purposes of long-term incentive compensation are to: (1) focus key employees'
efforts on performance
11
which will increase the value of the Company to its shareholders; (2) align
the interests of management with those of the shareholders; (3) provide a
competitive long-term incentive opportunity; and (4) provide a retention
incentive for key employees.
All executive officers and other key employees are eligible for stock
options under the Long-Term Incentive and Share Award Plan. Under the Plan, at
the beginning of each incentive period, stock option grants are provided to
such participants and in such amounts as the Committee deems appropriate. The
number of options varies on the basis of pay grade. The level of total
compensation for similar executive positions in comparable companies was used
as a reference in establishing the level of incentive stock options for
Company executives.
The Long Term Incentive and Share Award Plan has been established to advance
the interests of the Company and its shareholders by providing a means to
attract, retain, and motivate key employees and directors upon whose judgment,
initiative and effort the continued success, growth and development of the
Company is dependent. The use of a stock option approach as a significant
component of executive compensation creates a strong and direct linkage
between the financial outcomes of the executive and the shareholders.
Current options vest and become exercisable on the earlier of the ninth
anniversary of the grant or the date the share price remains at or above 120%
of the exercise price for 30 consecutive trading days (but not earlier than
three years from the date of grant). Current awards also provide a grant of
dividend equivalents for each option granted. The value of a single dividend
equivalent is equal to a percentage of accumulated dividends that would have
been paid or payable on a share from the earlier of the fifth anniversary of
the grant date or the first day of the calendar quarter that coincides or
immediately precedes the vesting date discussed above. The percentage
distribution is based on the Company's total shareholder return relative to a
comparitor group of companies selected by the Human Resources Committee at the
time of grant. In the event of a change of control, stock options and dividend
equivalents may accelerate and vest.
The Long-Term Incentive and Share Award Plan replaced an earlier Long-Term
Incentive Program. Existing awards under this earlier plan remain in effect.
1995 was the last year for grants and 1997 was the last year for awards under
this former plan.
CHIEF EXECUTIVE OFFICER
Mr. Hayes has been the Chief Executive Officer of the Company since October
1989. Mr. Hayes' base salary and his annual short-term incentive compensation
are established annually. In recommending the base salary to be effective
March 1, 1997, while not utilizing any specific performance formula and
without ranking the relative importance of each factor, the Committee took
into account relevant salary information in the national market and the
Committee's subjective evaluation of Mr. Hayes' overall management
effectiveness and achievement of individual goals. Factors considered included
his continuing leadership and contribution to strategic direction, management
of change in an increasingly competitive environment, control of expenses,
management of operations, and the overall profitability of the Company. Mr.
Hayes' base salary increased in 1997 by $81,375 or 17.5%.
With respect to Mr. Hayes' 1997 short-term incentive compensation, the
Committee took into account the above performance achievements, and the
Company substantially exceeding its earnings
12
per share and shareholder value goals. In 1997 earnings per share increased
212% over 1996 and shareholder value, as measured by change in market value,
increased 49% over 1996.
Mr. Hayes' long-term incentive compensation for 1997 represents the cash
equivalent of performance shares earned under the Long-Term Incentive Program.
Based upon substantially exceeding the financial goals of the Company and the
relative achievement of individual goals for the 1995-1997 incentive period,
Mr. Hayes received 1,769 shares of the Company's common stock, representing
109.60% of the performance shares granted to him in 1995. Under the Long-Term
Incentive and Share Award Plan, Mr. Hayes was granted 50,000 stock options and
dividend equivalents.
Western Resources, Inc. Human Resources
Committee
John F. Robinson, Chairman
Dr. Gene A. Budig
Frank J. Becker John C. Dicus
David H. Hughes
Shown below is a line-graph presentation comparing the Company's cumulative,
five-year total returns on an indexed basis* with the Standard & Poor's 500
stock index and Standard & Poor's Electric Companies Index.
[PERFORMANCE GRAPH APPEARS HERE]
Western S&P Electric
DOLLARS Resources S&P 500 Companies
- ------------------- --------- ------- ------------
12/31/92 $100 $100 $100
12/31/93 $117 $110 $112
12/31/94 $102 $111 $ 97
12/31/95 $128 $153 $127
12/31/96 $126 $188 $128
12/31/97 $187 $251 $161
* Assumes $100 invested on December 31, 1992. Total return assumes reinvestment
of dividends.
13
2. PROPOSAL TO AMEND THE RESTATED ARTICLES OF
INCORPORATION TO ELIMINATE CUMULATIVE VOTING
The Board of Directors has approved the proposal to amend the Company's
Restated Articles of Incorporation ("Articles") which eliminates the provision
for cumulative voting in the election of directors. The provision is currently
found in Article Six, Section (D) of the Articles.
Cumulative voting permits the holder of each share of stock entitled to vote
in the election of directors to cast for each such share a number of votes
equal to the number of directors to be elected and to allocate those votes to
one or more of the nominees for director. Therefore, even a shareholder with a
minority percentage of the outstanding shares, by aggregating (i.e.,
"cumulating") all votes such shareholder is entitled to cast, may be able to
elect one or more directors. In contrast, without cumulative voting, each
shareholder has only one vote per share for each nominee. Also, without
cumulative voting, the holder or holders of a majority of the shares entitled
to vote in an election of directors would be able to elect all the directors.
The Board of Directors believes that the elimination of cumulative voting
reduces the risk that one or more persons would seek to acquire a minority
ownership in the Company with a view toward obtaining a seat on the Board of
Directors to represent specific interests. The Board of Directors believes
that such an effort, if successful, could negatively affect the Board of
Directors' ability to effectively conduct the affairs of the Company's
business. Additionally, the Board of Directors believes that the elimination
of cumulative voting is advantageous to the Company and its shareholders
because each director of a publicly held corporation has the duty to represent
the interests of all shareholders, rather than any specific shareholder or
group of shareholders. It is conceivable, however, that the absence of
cumulative voting might deter efforts by one or more investors to seek control
of the Company on a basis which some Shareholders might deem favorable or
impede the ability of shareholders to implement changes to the governance and
management of the Company, whether or not such changes would be beneficial to
shareholders generally.
The proposal to eliminate cumulative voting may be characterized in the view
of the Securities and Exchange Commission as an "anti-takeover" provision. The
Articles and By-laws (the "By-laws") currently contain certain other
provisions which could have an anti-takeover effect, including (i) a
classified Board of Directors, (ii) limitations on actions by written consent
of the shareholders, (iii) limitations on the ability to call special meetings
of the shareholders and procedural requirements of business properly brought
before such meetings, (iv) supermajority approval of certain business
combinations not approved by the Board of Directors or not meeting certain
fair price protections, and (v) a supermajority approval requirement to amend
certain of the aforementioned provisions of the Articles and By-laws (such
provisions collectively referred to hereafter as the "Anti-Takeover
Provisions").
Existing federal and state laws provide some protection to shareholders in
connection with attempts to acquire control of a corporation. Federal
securities laws and regulations generally govern disclosure required to be
made to shareholders in the process of a solicitation for proxies in a proxy
contest as well as in connection with business combinations. The Company is
incorporated under the General Corporation Code of, and subject to the other
laws of, the State of Kansas (the "Kansas law"), which contain certain
"business combination" provisions, including Sections 17-12, 100 et seq. of
the Kansas law. Sections 17-12, 100 et seq. limit stock acquisitions and
business combinations
14
with certain parties for a period of three years after such party has acquired
greater than 15% of the outstanding common stock of the corporation, unless
(i) the transaction has been approved in advance by the Board of Directors,
(ii) the affected party acquires greater than 85% of the outstanding common
stock, or (iii) at or after the time at which the proposed business
combination is approved by the Board of Directors, the transaction is approved
by 66 2/3% of the remaining shareholders other than the party proposing the
transaction. Sections 17-1286 et seq. of the Kansas law limit the manner in
which a person is allowed to acquire controlling shares of a corporation
("controlling shares" means shares which control the voting power of a
corporation). Sections 17-1286 et seq. provide that shares acquired in a
control share acquisition may have the same voting rights as the shares held
before the acquisition, but only to the extent allowed by a resolution of a
majority of the shares entitled to vote. Sections 17-1286 et seq. also allow a
person who makes a control share acquisition to require the calling of special
meetings for purposes of determining the voting rights of the acquired shares.
The proposed amendment is not recommended in response to any specific effort
of which the Company is aware to accumulate the Company's stock or to obtain
control of the Company or its Board of Directors by means of a solicitation in
opposition to management or otherwise. In addition, the Board of Directors'
recommendation of the amendment is not part of a plan by management to adopt a
series of such amendments. The Board of Directors is proposing the amendment
at this time in order to structure and position the Company to address future
transactions, if any, in a manner that the Board of Directors believes best
serves the interests of Shareholders. Although the Board of Directors may
review other possible anti-takeover programs in the future, the Board of
Directors has no present intention of proposing additional amendments to the
Articles or the By-laws that would affect the ability of a third party to
effect a change of control of the Company.
The proposed amendment is permitted by Kansas law and is consistent with the
rules of the New York Stock Exchange on which the Company's Common Stock is
traded.
The Board of Directors has carefully considered both the potential benefits
and the potential adverse effects of the proposed amendment and has
unanimously concluded that any potential adverse effect is substantially
outweighed by the benefits the amendments would afford the Company and its
Shareholders.
The affirmative vote of a majority of the outstanding common and preferred
stock, voting together as a single class, is required for approval of this
proposal. In the event that this proposal is not approved by the requisite
vote of Shareholders, the Articles will continue to provide for cumulative
voting in the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERS VOTE FOR THE PROPOSED
AMENDMENT. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
SHAREHOLDERS OTHERWISE SPECIFY IN THEIR PROXIES.
3. OTHER BUSINESS
The Board of Directors does not know of any other matters to come before the
meeting. If, however, any other matters properly come before the meeting, it
is the intentions of the persons named in the enclosed proxy to vote the same
in accordance with their judgment on such other matters.
15
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has acted as the Company's independent auditors since
1958, and has been recommended by the Audit and Finance Committee, approved by
the Board of Directors and engaged by the Company as the Company's and its
wholly-owned subsidiaries' independent public accountants for 1998.
Representatives of Arthur Andersen LLP will be in attendance at the
Shareholders' meeting, will be available to respond to appropriate questions
from Shareholders and will be permitted to make a statement at the meeting if
they desire to do so.
ANNUAL REPORT TO THE SHAREHOLDERS
The Annual Report of the Company for the year ended December 31, 1997, was
mailed to shareholders on March [27], 1998. The Report contains financial
statements audited by Arthur Andersen LLP, independent public accountants.
Whether or not you expect to be present at the 1998 Annual Meeting, you are
requested to date, sign, and return the enclosed proxy card. Your prompt
response will be much appreciated.
By Order of the Board of Directors,
LOGO
Richard D. Terrill
Secretary
Topeka, Kansas
April [8,] 1998
16
LOGO
Dear Shareholder:
The Western Resources, Inc. Annual Meeting of Shareholders will
be held in the Maner Conference Center (Kansas Expocentre) located
at the southeast corner of Seventeenth and Western, Topeka,
Kansas, at 11:00 a.m., on May 11, 1998.
Common and Preferred Shareholders of record on March 30, 1998,
are entitled to vote, in person or by proxy, at the meeting. The
proxy card attached to the bottom of this page is for your use in
designating proxies and providing voting instructions. The
attached proxy card serves both as a proxy designation for
Shareholders of record, including those holding shares through the
Direct Stock Purchase Plan and as voting instructions for the
participants in the Western Resources, Inc. 401(k) Employees'
Savings Plan.
Participants in the employee savings plan are entitled to direct
the Trustee how to vote their shares.
The Board of Directors recommends a vote FOR all proposals.
Please indicate your voting preferences on the proxy card, sign,
date, and return it in the enclosed envelope.
tFOLD AND TEAR ALONG PERFORATIONt
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - -
The Board of Directors recommends a vote FOR all proposals
Please mark your choice as in this example.n Will Attend Annual
Meeting[_]
1. Election of Directors: Thomas R. Clevenger, David H. Hughes, David C.
Wittig
[_] FOR all Nominees[_] WITHHELD for all nominees
WITHHELD for the following nominees(s) only: write names(s): ________
2. Amend the Articles of Incorporation to eliminate cumulative voting.
[_] FOR[_] AGAINST[_] ABSTAIN
Common & Reinvestment Preferred Savings Plan
Signature _________________________ Date
Signature _________________________ Date
Please mark, date, and sign as your names appear hereon and return in
the enclosed envelope. Give full title if signing for a corporation or as
attorney, executor, administrator, guardian or in any other capacity
(Instructions on Reverse Side).
t FOLD AND TEAR ALONG PERFORATION t
7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7
7 7 7 7 7 7 7 7 7 7 7
WESTERN RESOURCES, INC.
SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING OF
SHAREOWNERS OF WESTERN RESOURCES, INC.--MAY 11, 1998, AT 11:00 A.M., IN THE
MANER CONFERENCE CENTER (KANSAS EXPOCENTRE) LOCATED AT THE SOUTHEAST CORNER OF
SEVENTEENTH AND WESTERN, TOPEKA, KANSAS.
The undersigned hereby appoints John E. Hayes, Jr., John K. Rosenberg, and
Richard D. Terrill and any one or more of them, attorneys and proxies, with the
full power of substitution and revocation in each, for and on behalf of the
undersigned, and with all the powers the undersigned would possess if
personally present, including discretionary power upon other matters properly
coming before the meeting, to vote at the above Annual Meeting and any
Adjournment(s) thereof all shares of Common and Preferred Stock of Western
Resources, Inc. that the undersigned would be entitled to vote at such meeting.
This proxy also provides voting instructions for Shares held by the undersigned
in the employee savings plan. The undersigned acknowledges receipt of the
Notice and Proxy Statement dated April [8], 1998.
The shares represented by this proxy will be voted as directed by the
shareholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted FOR all proposals.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
Forward this card to Western Resources: P.O. Box 750320, Topeka, KS 66675-0320
