SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
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Notes:
WESTERN RESOURCES(R)[LOGO]
April 25, 1997
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 29, 1997 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.
The vote on proposals relating to the merger of KCPL with and into
the Company will not be held at this Annual Meeting but at a Special
Meeting of Shareholders later this year.
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,
/s/ John E. Hayes, Jr.
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 29, 1997
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
Thursday, May 29, 1997, commencing at eleven o'clock in the morning, including
any adjournments, postponements, continuations or reschedulings thereof, for
the following purposes:
1. To elect four directors to Class I of the Company's Board of Directors
to serve a term of three years;
2.To transact such other business as may properly come before the meeting.
Common and Preferred Shareholders of record at the close of business on
April 18, 1997, 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,
/s/ Richard D. Terrill
Richard D. Terrill
Secretary
Topeka, Kansas
April 25, 1997
PROXY STATEMENT
GENERAL INFORMATION
MAILING ADDRESS OF PRINCIPAL APPROXIMATE MAILING DATE
EXECUTIVE OFFICES OF THE COMPANY OF PROXY MATERIAL
-------------------------------- ------------------------
818 Kansas Avenue April 25, 1997
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 Thursday, May 29,
1997, 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 $20,000 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
April 18, 1997, are entitled to vote on matters to come before the meeting. On
that date there were outstanding and entitled to vote 65,017,778 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 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 1998 Annual Meeting of Shareholders is scheduled to be held on May 5,
1998. 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 1998 proxy materials by
December 26, 1997. 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 thirteen.
Messrs. John C. Dicus, John E. Hayes, Jr., Russell W. Meyer, Jr. and Louis
W. Smith have been nominated for election as directors at the Annual Meeting
of Shareholders as Class I directors. All nominees were elected by
shareholders of the Company at the Annual Meeting of Shareholders in 1994.
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 I)--TERM EXPIRING IN 2000
DIRECTOR (AGE), YEAR FIRST BECAME A DIRECTOR
JOHN C. DICUS (63), 1990
Chairman of the Board and Chief Executive Officer,
Capitol Federal Savings and Loan Association,
Topeka, Kansas; Director, Security Benefit Life
Insurance Company; Director, Columbian National
Title Company; Trustee, The Menninger Foundation;
Trustee, Stormont-Vail Regional Medical Center;
Trustee, The Kansas University Endowment
Association.
[PHOTO]
JOHN E. HAYES, JR. (59), 1989
Chairman of the Board and Chief Executive Officer
of Western Resources, Inc.; Director, Security
Benefit Life Insurance Company; Director, CommNet
Cellular, Inc.; Director, T-NETIX, Inc.; Trustee,
Rockhurst College; Trustee, The Menninger
Foundation; Trustee, Midwest Research Institute.
[PHOTO]
RUSSELL W. MEYER, JR. (64), 1992
Chairman and Chief Executive Officer, Cessna
Aircraft Company, Wichita, Kansas; Director,
NationsBank Corporation; Trustee, Wake Forest
University.
[PHOTO]
2
DIRECTOR (AGE), YEAR FIRST BECAME A DIRECTOR
LOUIS W. SMITH (54), 1991
President and Chief Operating Officer, Ewing Marion
Kauffman Foundation (since July 1995) 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; Director, Payless
Cashways, Inc.; Trustee, University of Missouri-
Rolla; Trustee, Rockhurst College.
[PHOTO]
OTHER DIRECTORS
(CLASS II)--TERM EXPIRING IN 1998
DAVID H. HUGHES (68), 1988
Retired Vice Chairman, Hallmark Cards, Inc., Kansas
City, Missouri; Director, Hall Family Foundations;
Director, Midwest Research Institute; Director,
Yellow Corporation; Trustee, St. Luke's Hospital
Foundation; Trustee, Children's Mercy Hospital;
Trustee, Princeton Theological Seminary; Trustee,
Linda Hall Library.
[PHOTO]
JOHN H. ROBINSON (70), 1991
Chairman Emeritus (since December 1992) and prior
to that Chairman, Black & Veatch, Kansas City,
Missouri; Director, St. Luke's Hospital; Director,
Automobile Club of Missouri; Director, The Greater
Kansas City Community Foundation & Affiliated
Trusts; Director, Midwest Research Institute;
Trustee, University of Missouri-Kansas City.
[PHOTO]
SUSAN M. STANTON (48), 1995
President and Chief Operating Officer (since
November 1993) and prior to that Senior Vice
President, Merchandising and Marketing, Payless
Cashways, Inc., Kansas City, Missouri; Director,
Greater Kansas City Chamber of Commerce; Director,
Payless Cashways, Inc.; Trustee, Rockhurst College.
[PHOTO]
KENNETH J. WAGNON (58), 1987
President, Capital Enterprises, Inc., Wichita,
Kansas; Director, Vanguard Airlines, Inc.;
Director, Cerebral Palsy Research Foundation;
Director, T-NETIX, Inc.; Director, University of
Kansas School of Business; Director, Greater
Wichita Community Foundation; Director, Optimed
Technologies, Inc.; Trustee, The Kansas University
Endowment Association.
[PHOTO]
3
(CLASS III)--TERM EXPIRING IN 1999
DIRECTOR (AGE), YEAR FIRST BECAME A DIRECTOR
FRANK J. BECKER (61), 1992
President, Becker Investments, Inc., Lawrence,
Kansas (since January 1993) and prior to that
personal investments; Director, Great-West Life &
Annuity Insurance Co.; Director, Douglas County
Bank; Director, OTR Express; Trustee, Kansas
University Endowment Association.
[PHOTO]
GENE A. BUDIG (57), 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.
[PHOTO]
C. Q. CHANDLER (70), 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.
[PHOTO]
THOMAS R. CLEVENGER (62), 1975
Investments, Wichita, Kansas; Director, Security
Benefit Life Insurance Company; Trustee and Vice
Chairman, The Menninger Foundation; Trustee,
Midwest Research Institute.
[PHOTO]
DAVID C. WITTIG (41), 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, Mergers and Acquisitions,
Salomon Brothers Inc; Director, OMX, Inc.
[PHOTO]
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 April 18, 1997.
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 April 18, 1997.
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1)
------------------------ --------------------------
Frank J. Becker............................. 11,333 shares(2)(3)
Gene A. Budig............................... 1,129 shares
C.Q. Chandler............................... 1,755 shares(3)
Thomas R. Clevenger......................... 1,733 shares
John C. Dicus............................... 2,333 shares(4)
John E. Hayes, Jr. ......................... 26,029 shares
David H. Hughes............................. 839 shares
Steven L. Kitchen........................... 7,441 shares
Carl M. Koupal.............................. 1,879 shares
Russell W. Meyer, Jr. ...................... 3,382 shares(3)
John H. Robinson............................ 1,833 shares
John K. Rosenberg........................... 3,259 shares
Louis W. Smith.............................. 3,333 shares
Susan M. Stanton............................ 1,633 shares(5)
Kenneth J. Wagnon........................... 2,885 shares
David C. Wittig............................. 40,860 shares
All directors and executive officers as a
group...................................... 124,675 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 800 shares of Western Resources Common Stock held in trust, of
which Ms. Stanton is a co-trustee with voting and 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, 1996, 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 1996, the Western Resources Board met twenty 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. Chandler,
Chairman, Mr. Becker, Dr. Budig and Mr. Clevenger. 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 1996.
The Human Resources Committee, currently composed of Mr. Dicus, Chairman,
Mr. Meyer, Mr. Robinson, Ms. Stanton, Mr. Smith and Mr. Wagnon, reviews the
performance of corporate officers and changes in officer compensation and
benefits. This committee held six meetings during 1996.
The Nominating Committee, currently composed of Mr. Hughes, Chairman, Dr.
Budig, Mr. Clevenger, Mr. Meyer, Mr. Smith and Mr. Wagnon, 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 one meeting in 1996.
The Corporate Public Policy Committee is currently composed of Mr. Becker,
Chairman, Mr. Robinson, Mr. Chandler, Mr. Dicus and Mr. Hughes. 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 three meetings during 1996.
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 $(1) COMPENSATION $(2) PAYOUTS $(3) # COMPENSATION $(4)
- ------------------ ---- -------- ---------- ----------------- ------------ ------------ -----------------
John E. Hayes, Jr....... 1996 465,000 164,870 25,036 25,177 25,000 17,449
Chairman of the Board 1995 460,833 102,481 18,230 44,169 N.A. 11,073
and Chief Executive 1994 436,667 112,684 12,990 47,563 N.A. 5,151
Officer
David C. Wittig(5)...... 1996 425,000 148,860 8,432 N.A. 25,000 867,449
President 1995 283,826 53,190 1,090 N.A. N.A. 12,830
1994 N.A. N.A. N.A. N.A. N.A. N.A.
Steven L. Kitchen....... 1996 267,084 112,407 10,027 11,748 11,500 16,933
Executive Vice President 1995 234,700 46,483 17,999 19,178 N.A. 10,548
and Chief Financial 1994 202,683 45,359 9,492 20,299 N.A. 4,941
Officer
Carl M. Koupal, Jr...... 1996 174,167 82,112 3,460 7,464 8,500 16,385
Executive Vice President 1995 152,833 29,787 4,287 13,217 N.A. 10,406
and Chief Administrative 1994 131,150 28,981 2,397 9,211 N.A. 4,842
Officer
John K. Rosenberg....... 1996 163,717 63,431 3,996 8,362 5,500 16,359
Executive Vice President 1995 159,216 26,438 12,451 15,071 N.A. 10,385
and General Counsel 1994 153,000 31,010 6,973 16,298 N.A. 4,832
- --------
(1) The amounts reported represent payments under Western Resources' Short-
Term Incentive Plan. Payments are made only if certain financial and
individual performance goals of Western Resources are achieved. Mr. Hayes
and Mr. Wittig received lump sum payments of $18,600 and $17,000,
respectively, in lieu of base salary merit increases in 1996.
(2) The amounts reported for 1996 represent dividend equivalents received
under the Long-Term Incentive Plan in the amounts of $5,909, $2,016,
$2,828, $1,812 and $2,050, respectively; payments for the benefit of each
named executive officer for federal and state taxes associated with
personal benefits in the amounts of $7,271, $4,524, $2,624, $861 and
$1,643, respectively; and interest (excess of the applicable federal long-
term interest rate) on deferred compensation for the year in the amounts
of $11,856, $1,892, $4,575, $787 and $303, respectively.
(3) The amounts reported for 1996 represent the cash equivalent for common
stock issued pursuant to the Long-Term Incentive Program for the 1994-1996
incentive period. Each individual received shares in the amount of 815, 0,
381, 242 and 271, respectively for the stated period.
(4) The amounts reported for 1996 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 $11,997, $11,997, $11,549, $11,223 and $11,223,
respectively, and premiums paid on term life insurance policies in the
amounts of $652, $652, $581, $378 and $357, respectively. With respect to
Mr. Wittig, $825,000 represents amounts paid to or on behalf of Mr. Wittig
under the Company's executive relocation plan. In addition, $25,000
represents the cost to the Company of providing supplemental benefits to
reimburse Mr. Wittig for lost benefits from Mr. Wittig's prior employer
and to attract Mr. Wittig to the Company.
(5)Mr. Wittig commenced his employment with Western Resources on May 2, 1995.
7
OPTIONS GRANTED IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------
% OF TOTAL
OPTIONS
GRANTED TO GRANT DATE
OPTIONS EMPLOYEES EXERCISE OR PRESENT
GRANTED IN FISCAL BASE PRICE EXPIRATION VALUE
NAME (#) YEAR ($/SH) DATE ($)(1)
---- ------- ---------- ----------- ------------- ----------
John E. Hayes, Jr. ..... 25,000 12.2% $29.25 July 17, 2006 81,500
David C. Wittig......... 25,000 12.2% $29.25 July 17, 2006 81,500
Steven L. Kitchen....... 11,500 5.6% $29.25 July 17, 2006 37,490
Carl M. Koupal, Jr. .... 8,500 4.1% $29.25 July 17, 2006 27,710
John K. Rosenberg....... 5,500 2.7% $29.25 July 17, 2006 17,930
- --------
(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 Long Term Incentive and Share
Award Plan.
Annualized stock
volatility: 0.1412
Time of exercise (option
term): 9.7 Years
Risk-Free interest rate: 6.45%
Stock price at grant: $29.25
Exercise price: Market at Vesting
Average dividend yield: 6.33%
Vesting restrictions: 8.7 Years
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)
EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
John E. Hayes, Jr. ..... 0 0 0 25,000 0 0
David C. Wittig......... 0 0 0 25,000 0 0
Steven L. Kitchen....... 0 0 0 11,500 0 0
Carl M. Koupal, Jr. .... 0 0 0 8,500 0 0
John K. Rosenberg....... 0 0 0 5,500 0 0
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, 1997 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
PAY PENSION BENEFIT
---------- ---------------
$150,000 $ 92,550
200,000 123,400
250,000 154,250
300,000 185,100
350,000 215,950
400,000 246,800
450,000 277,650
500,000 308,500
550,000 339,350
600,000 370,200
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, 1997 for the persons named in the cash
compensation table are as follows: Mr. Hayes, 7 years; Mr. Wittig, 2 years;
Mr. Kitchen, 33 years; Mr. Koupal, 4 years; and Mr. Rosenberg, 17 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 six 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 energy companies, with
emphasis on natural gas and electric utilities 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 information. The mid-point for each base
salary range is intended to approximate the average base salary for the
relevant position
10
in the national market. Industry surveys by national industry associations are
the primary source of this market information. The Committee has also utilized
the 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 budgeted
earnings-per-share goals 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 1996, the Committee considered each individual's
contribution toward meeting the Board-approved budgeted financial plan for the
previous year, total return to shareholders and earnings per share, compliance
with the Company's capital financial plan, the construction budget, and the
operation and maintenance budgets and the individual's management
effectiveness.
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 43% of
base salary with a maximum of up to 51% of base salary. Other executive
officers are eligible for annual short-term incentive targets ranging from 33%
to 43% of base salary with a maximum of 46% to 51% of base salary. 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.
Changes in annual incentive compensation to the named individuals in 1996
compared to 1995 resulted from increased incentive targets, an individual's
relative attainment of his or her goals, and the Company's partial achievement
of its financial goals in 1996. In addition, special one time payments were
made to Messrs. Kitchen, Koupal and Rosenberg in connection with the Company's
efforts to acquire Kansas City Power & Light Company.
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 1996 Long-Term Incentive and Share Award Plan replaced an earlier Long-
Term Incentive Program. Existing awards under this earlier plan remain in
effect. Under that Plan, at the beginning of each incentive period performance
shares were added to each participant's account. The number of performance
shares equaled the number of shares of common stock having a market value at
the date credited to each participant's account equal to 10% of the
participant's base annual compensation for the first year of the incentive
period. The level of performance shares, 10% of base annual compensation, is
established by the Plan. Based upon an individual's and the Company's
performance the ultimate grant of shares by the Committee may not exceed 110%
of the performance shares for the relevant period. Participants also receive
cash equivalent to dividends for comparable shares of common stock for each
quarter of the three-year incentive period, whether or not the performance
shares are ultimately earned by the participant.
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 January. In recommending the base salary to be
effective March 1, 1996, 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 industry, control of operation and
maintenance
12
expenses, management of unregulated operations, the overall profitability of
the Company and increased Company productivity. Mr. Hayes' base salary did not
change in 1996. Mr. Hayes received a lump sum payment of $18,600 in lieu of a
base salary merit increase.
With respect to Mr. Hayes' 1996 short-term incentive compensation, the
Committee took into account the above performance achievements, the Company's
relative achievement of its financial goals, and Mr. Hayes' total compensation
as compared to the national market.
Mr. Hayes' long-term incentive compensation for 1996 represents the cash
equivalent of performance shares earned under the program. Based upon meeting
the financial goals of the Company and the relative achievement of individual
goals for 1994-1996 incentive period, Mr. Hayes received 815 shares of the
Company's common stock, representing 64% of the performance shares granted to
him in 1994. Under the 1996 Long-Term Incentive and Share Award Plan, Mr. Hayes
was granted 25,000 stock options and dividend equivalents.
Western Resources, Inc. Human Resources
Committee
John C. Dicus, Louis W. Smith
Chairman Susan M. Stanton
Russell W. Meyer, Jr. Kenneth J. Wagnon
John H. Robinson
PERFORMANCE GRAPH
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.
[GRAPH]
Western Resources, Inc. S & P 500 S & P Electric Companies
12/91 100 100 100
12/92 119 108 105
12/93 139 118 119
12/94 122 120 104
12/95 152 165 136
12/96 150 203 136
* Assumes $100 invested on December 31, 1991. Total return assumes reinvestment
of dividends.
13
2. 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.
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 1997.
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, 1996, was
mailed to shareholders on March 11, 1997. The Report contains financial
statements audited by Arthur Andersen LLP, independent public accountants.
Whether or not you expect to be present at the 1997 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,
/s/ Richard D. Terrill
Richard D. Terrill
Secretary
Topeka, Kansas
April 25, 1997
14
WESTERN RESOURCES, INC.
SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING OF
SHAREHOLDERS OF WESTERN RESOURCES, INC. MAY 29, 1997 AT 11:00 A.M. IN THE MANER
CONFERENCE CENTRE (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
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,
postponements, continuations or reschedulings thereof, all shares of Common and
Preferred Stock of Western Resources, Inc. that the undersigned would be
entitled to vote at such meeting. The undersigned acknowledges receipt of the
Notice and Proxy Statement dated April 25, 1997.
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 CORPORATE ELECTION SERVICES:
P. O. BOX 2400, PITTSBURGH, PA 15230
- --------------------------------------------------------------------------------
FOLD AND TEAR ALONG PERFORATION
Common and Reinvestment Preferred Savings Plan
---------- ---------- ---------
PROXY AND VOTING INSTRUCTION CARD
The Board of Directors recommends a vote FOR all nominees.
Will Attend Annual Meeting [_]
Please mark your choice as in this example. [_]
1. Election of Directors: John C. Dicus, John E. Hayes, Jr., Russell W. Meyer,
Jr., Louis W. Smith
[_] FOR all Nominees [_] WITHHELD for all nominees
WITHHELD for the following nominee(s) only: write name(s):
--------------------- --------
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)
- --------------------------------------------------------------------------------
FOLD AND TEAR ALONG PERFORATION
[LOGO] WESTERN RESOURCES
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 29, 1997.
Common and Preferred Shareholders of record on April 18, 1997, are entitled
to vote, in person or by proxy, at the meeting. The proxy card attached to the
top 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 nominees.
Please indicate your voting preferences on the proxy card, sign, date, and
return it in the enclosed envelope.
WESTERN RESOURCES, INC.
SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING OF SHAREOWNERS
OF WESTERN RESOURCES, INC. - MAY 29, 1997, 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,
postponements, continuations or reschedulings thereof, all shares of Common and
Preferred Stock of Western Resources, Inc. that the undersigned would be
entitled to vote at such meeting. The undersigned acknowledges receipt of the
Notice and Proxy Statement dated April 25, 1997.
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.
Common and Preferred Western Resources, Inc.
Annual Meeting of Shareowners
PROXY AND VOTING INSTRUCTION CARD May 29, 1997
The Board of Directors recommends a vote FOR all nominees.
Please mark your votes as in this example. [X]
1. Election of Directors: John C. Dicus, John E. Hayes, Jr., Russell W. Meyer,
Jr., Louis W. Smith
[ ] FOR all Nominees [ ] WITHHELD for all Nominees
WITHHELD for the following nominee(s) only: write name(s):
--------------------------------
------------------- ---------
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.
- --------------------------------------------------------------------------------
