SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
<TABLE>
<CAPTION>
<S> <C>
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE EMPIRE DISTRICT ELECTRIC COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously paid:
[ ] 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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
THE EMPIRE DISTRICT ELECTRIC COMPANY
602 JOPLIN STREET
JOPLIN, MISSOURI 64801
March 18, 1998
Dear Stockholder:
You are cordially invited to attend the Company's Annual Meeting of
Stockholders to be held at 10:30 a.m., Joplin time, on Thursday, April 23, 1998
at the Holiday Inn, 3615 South Range Line, Joplin, Missouri.
At the meeting, stockholders will be asked to elect three persons to the
Company's Board of Directors for three-year terms.
Your participation in this meeting either in person or by proxy is
important. Even if you plan to attend the meeting, please sign, date and return
the enclosed proxy promptly. At the meeting, if you desire to vote in person,
you may withdraw your proxy.
Sincerely,
M.W. McKinney
President and Chief Executive Officer
<PAGE>
THE EMPIRE DISTRICT ELECTRIC COMPANY
602 JOPLIN STREET
JOPLIN, MISSOURI 64801
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------
To the Holders of Common Stock:
Notice is hereby given that the Annual Meeting of Stockholders of The
Empire District Electric Company (the "Company") will be held on Thursday the
23rd of April, 1998, at 10:30 a.m., Joplin time, at the Holiday Inn, 3615 South
Range Line, Joplin, Missouri, for the following purposes:
1. To elect three Directors for terms of three years.
2. To transact such other business as may properly come before the meeting,
or any adjournment or adjournments thereof.
Any of the foregoing may be considered or acted upon at the first session
of the meeting or at any adjournment or adjournments thereof.
Holders of Common Stock of record on the books of the Company at the close
of business on March 2, 1998 will be entitled to vote on all matters which may
come before the meeting or any adjournment or adjournments thereof. A complete
list of the stockholders entitled to vote at the meeting will be open at the
office of the Company, 602 Joplin Street, Joplin, Missouri, to examination by
any stockholder for any purpose germane to the meeting, for a period of ten days
prior to the meeting, and also at the meeting.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND IN PERSON ARE REQUESTED,
REGARDLESS OF THE NUMBER OF SHARES OF STOCK OWNED, TO SIGN AND DATE THE ENCLOSED
PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE, TO WHICH NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED STATES.
Joplin, Missouri
Dated: March 18, 1998
J.S. Watson
Secretary-Treasurer
<PAGE>
THE EMPIRE DISTRICT ELECTRIC COMPANY
602 JOPLIN STREET
JOPLIN, MISSOURI 64801
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 23, 1998
This proxy statement is furnished in connection with the solicitation on
behalf of the Board of Directors of The Empire District Electric Company, a
Kansas corporation (the "Company"), of proxies to be voted at the Annual Meeting
of Stockholders of the Company to be held on Thursday, April 23, 1998, and at
any and all adjournments of the meeting.
A form of proxy is enclosed for execution by stockholders. The Proxy
reflects the number of shares registered in a stockholder's name directly and,
for participants in the Company's Dividend Reinvestment and Stock Purchase Plan,
includes full shares credited to a participant's account. Any stockholder giving
a proxy has the right to revoke it at any time before the proxy is exercised by
written notice to the Secretary-Treasurer of the Company, or a duly executed
proxy bearing a later date or voting in person at the meeting.
A copy of the Annual Report of the Company for the year ended December 31,
1997 has been mailed to each stockholder of record on the record date for the
meeting. You are urged to read the entire Annual Report.
The entire cost of the solicitation of proxies will be borne by the
Company. Solicitation, commencing on or about March 18, 1998, will be made by
use of the mails, telephone, telegraph and by regular employees of the Company
without additional compensation therefor. The Company will request brokers or
other persons holding stock in their names, or in the names of their nominees,
to forward proxy material to the beneficial owners of such stock or request
authority for the execution of the proxies and will reimburse such brokers or
other persons for their expense in so doing.
March 2, 1998 has been fixed as the record date for the determination of
stockholders entitled to vote at the meeting and at any adjournment or
adjournments thereof. The stock transfer books will not be closed. As of the
record date, there were 16,786,409 shares of Common Stock outstanding. Holders
of Common Stock will be entitled to one vote per share on all matters presented
to the meeting.
1. ELECTION OF DIRECTORS
The Board of Directors is divided into three classes with the directors in
each class serving for a term of three years. The term of office of one class
of directors expires each year in rotation so that one class is elected at each
Annual Meeting for a full three-year term. Unless otherwise specified, the
persons named in the accompanying proxy intend to vote the shares represented
by such proxies for the election of Mr. V.E. Brill, Mr. R.C. Hartley and Mr.
F.E. Jeffries as Class II Directors, all of whom are members of the current
Board of Directors. Directors will be elected by a plurality of the votes of
the stockholders present in person or represented by proxy at the meeting with
any abstentions being treated as shares not voted.
While it is not expected that any of the nominees will be unable to qualify
for or accept office, if for any reason one or more shall be unable to do so,
proxies will be voted for nominees selected by the Board of Directors.
The name, age, principal occupation for the last five years, period of
service as a Director of the Company and certain other directorships of each
Director of the Company are set forth below.
<PAGE>
CLASS I DIRECTORS
(TERMS EXPIRE IN 2000)
R.D. Hammons, 64, Chief Executive Officer, Chairman and Director of
Hammons Products Company (food processing). Director of the Company since 1983.
J.R. Herschend, 65, Co-owner, co-founder and Chairman of the Board of
Directors of Silver Dollar City, Inc. (entertainment attractions). Director of
the Company since January 1994. Director of Ozark Mountain Bank, Branson,
Missouri; Director of Central Bancompany, Jefferson City, Missouri.
M.W. McKinney, 53, President and Chief Executive Officer since April 1,
1997. Executive Vice President-Commercial Operations of the Company from 1995 to
1997. Executive Vice President of the Company from 1994 to 1995. Vice
President-Customer Services of the Company from 1982 to 1994. Director of the
Company since 1991.
M.M. Posner, 57, President and Principal of Posner McCleary Inc., an
international advertising, marketing and communications firm. Director of the
Company since 1991. Director of United Missouri Bank of Jefferson City,
Jefferson City, Missouri.
CLASS II DIRECTORS
(TERMS EXPIRE IN 1998, NOMINEES FOR ELECTION
AT THE ANNUAL MEETING OF STOCKHOLDERS FOR
TERMS TO EXPIRE IN 2001)
V.E. Brill, 56, Vice President-Energy Supply of the Company since 1995.
Vice President-Finance of the Company from 1983 to 1995. Director of the
Company since 1989.
R.C. Hartley, 50, President of The Hartley Agency (independent insurance
agency). Director and Vice President of International Information Consortium
(electronic commerce). Director of the Company since 1988.
F.E. Jeffries, 67, Chairman and Director of Phoenix Duff & Phelps
Corporation until 1997 (retired) (financial services firm). Director of the
Company since 1984. Director of Duff & Phelps Utilities Income Inc., Chicago,
Illinois; Duff & Phelps Utilities Tax-Free Income Inc., Chicago, Illinois; Duff
& Phelps Utility and Corporate Bond Trust Inc., Chicago, Illinois.
CLASS III DIRECTORS
(TERMS EXPIRE IN 1999)
M.F. Chubb, Jr., 64, Senior Vice President of Eagle-Picher Industries Inc.
(diversified industrial products) until 1996 (retired). Director of the Company
since 1991. Director of Eagle-Picher Industries Inc., Cincinnati, Ohio until
1996 (retired).
R.L. Lamb, 65, President of the Company from 1982 to March 31, 1997
(retired). Executive Vice President of the Company from 1978 to 1982. Vice
President-Customer Services of the Company from 1974 to 1978. Director of the
Company since 1978.
R.E. Mayes, 63, Chairman and Chief Executive Officer of Carmar Group Inc.
(underground storage). Director of the Company since 1991. Director of United
Missouri Bancshares, Kansas City, Missouri.
Director Compensation
Each Director of the Company who is not an officer or full-time employee of
the Company is paid a monthly retainer for his or her services as a Director at
a rate of $12,000 per annum. In addition, a fee of $750 is paid to each such
Director for each regular meeting or any special meeting of Directors and for
each meeting of a Committee of the Board (the chairman of each Committee
receives an additional $250 for each such Committee meeting) which such Director
attends in person or by telephone. During
2
<PAGE>
1997, the Board of Directors held five meetings. The Company's 1996 Stock
Incentive Plan permits Directors of the Company to receive shares of Common
Stock in lieu of all or a portion of any cash payment for services rendered as a
Director. In addition, a Director may defer all or part of any compensation
payable for his or her services as such under the terms of the Company's
Deferred Compensation Plan for Directors. Amounts so deferred are credited to an
account for the benefit of the Director and accrue an interest equivalent at a
rate equal to the prime rate. A Director is entitled to receive all amounts
deferred in a number of annual installments following retirement, as elected by
him or her.
Committees of the Board of Directors
The Company has an Audit Committee of the Board of Directors. The Audit
Committee reviews with the Company's independent auditors the scope and results
of its auditing procedures, meets with the Company's internal auditors regarding
internal auditing procedures and establishes procedures to assure the adequacy
of the accounting practices and internal controls of the Company. The Audit
Committee held two meetings during 1997. The members of the Audit Committee are
Messrs. Chubb, Hartley and Jeffries and Mrs. Posner.
The Company has a Compensation Committee of the Board of Directors. The
Compensation Committee fixes the compensation of each of the senior officers of
the Company and administers certain of the Company's employee benefit plans.
The Committee held one meeting during 1997. The members of the Compensation
Committee are Messrs. Herschend, Jeffries, Lamb and Mayes and Mrs. Posner.
The Company has a Nominating Committee of the Board of Directors which
meets to suggest to the Board nominees to fill vacancies on the Board of
Directors when they occur. The Committee met two times in 1997. The members of
the Nominating Committee are Messrs. Chubb, Hammons, Herschend and Mayes. The
Nominating Committee will consider nominees recommended by stockholders for
election to the Board of Directors. Recommendations of nominees for election
should be submitted in writing to the Secretary-Treasurer of the Company.
3
<PAGE>
Stock Ownership of Directors and Officers
The following table shows information with respect to the number of shares
of Common Stock of the Company beneficially owned as of March 2, 1998 by each
officer of the Company named in the Summary Compensation Table, each Director
and the Directors and executive officers of the Company, as a group. The shares
reported as beneficially owned include (a) shares owned by certain relatives
with whom the Directors or officers are presumed for proxy statement reporting
purposes to share voting or investment power and (b) shares accrued for the
benefit of certain officers under certain employee benefit plans of the Company.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY
NAME POSITION OWNED
- ----------------------------- --------------------------------------- -------------------
<S> <C> <C>
M.W. McKinney .......... President and Chief Executive Officer 18,557
V.E. Brill ............. Vice President-Energy Supply 7,213
R.B. Fancher ........... Vice President-Finance 2,035
C.A. Stark ............. Vice President-General Services 4,856
W.L. Gipson ............ Vice President-Commercial Operations 7,821
M.F. Chubb, Jr ......... Director 4,035
R.D. Hammons ........... Director 2,883
R.C. Hartley ........... Director 3,803*
J.R. Herschend ......... Director 1,500
F.E. Jeffries .......... Director 17,404
R.L. Lamb .............. Director 20,493
R.E. Mayes ............. Director 800
M.M. Posner ............ Director 10,800
Directors and executive officers, as a group ................. 102,200
</TABLE>
- ----------
* Mr. Hartley also beneficially owns 2,000 shares of the Company's 8 1/8%
Cumulative Preferred Stock.
No Director or officer owns more than 0.5% of the outstanding shares of the
Company's Common Stock or 8 1/8% Cumulative Preferred Stock. No Director or
officer owns any shares of the Company's 5% Cumulative Preferred Stock or 4 3/4%
Cumulative Preferred Stock. The Directors and executive officers as a group own
less than 1% of the outstanding shares of the Company's Common Stock and of its
8 1/8% Cumulative Preferred Stock.
Other Stock Ownership
The following table reflects the holdings of the only person known to the
Company to own beneficially more than 5% of Common Stock of the Company.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF CLASS ON
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP MARCH 2, 1998
- ------------------------------------------------------------ ---------------------- --------------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated ......... 1,180,700(1) 7.06%
World Financial Center
250 Vesey Street
New York, NY 10281
</TABLE>
- ----------
(1) Based on a Schedule 13G dated February 17, 1998, filed with the Securities
and Exchange Commission by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, which has sole voting power and sole dispositive power with
respect to all of such shares. Merrill Lynch, Pierce, Fenner & Smith
Incorporated has expressly disclaimed ownership of said shares.
4
<PAGE>
2. EXECUTIVE COMPENSATION
Set forth below is information concerning the various forms of compensation
of each person who was (i) at any time during 1997 the Chief Executive Officer
(or an officer of similar capacity) of the Company or (ii) at December 31, 1997
one of the four most highly compensated executive officers of the Company, other
than the Chief Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ATION AWARDS
ANNUAL COMPENS----------------- RESTRICTED ALL OTHER
NAME AND ---------------------------OTHER ANNUAL STOCK COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARD(S)(2) SATION(3)
- ------------------------ ------ ----------- ---------- ----------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
M.W. McKinney(4) 1997 $173,500 $21,312 $1,264 $11,306 $5,174
President and Chief 1996 140,000 10,806 222 5,814 4,470
Executive Officer 1995 127,000 9,019 930 9,016 3,365
R.L. Lamb(4) 1997 60,000 6,690 1,726 - 2,394
President 1996 230,000 15,124 125 10,116 5,910
1995 220,000 21,788 21,772 4,410
V.E. Brill 1997 124,800 9,800 - 4,781 4,453
Vice President - 1996 123,000 7,879 - 3,870 4,327
Energy Supply 1995 114,500 6,185 - 6,187 3,763
R.B. Fancher 1997 114,600 8,183 3,582 4,163 4,097
Vice President- 1996 113,000 5,942 - 2,934 4,055
Finance 1995 103,667 4,788 180 4,800 3,685
C.A. Stark 1997 96,500 9,414 2,317 4,338 3,184
Vice President- 1996 92,000 5,710 136 2,718 3,658
General Services 1995 72,763 - 2,000 - 2,140
W.L. Gipson 1997 93,784 9,177 8,338 4,144 2,557
Vice President- 1996 67,905 - - - 2,584
Commercial Operations 1995 64,081 1,000 5,659 - 2,112
</TABLE>
- ----------
(1) Includes for 1997: (a) payment of $1,726 for payroll taxes on behalf of Mr.
Lamb and (b) payment to Mr. Gipson of $8,275 for relocation expenses.
(2) As of December 31, 1997, Messrs. McKinney, Brill, Fancher and Stark had been
awarded 981, 714, 222, and 151 shares, respectively, of unvested restricted
stock which on such date had values of $19,252, $14,012, $11,186 and $2,963,
respectively. Messrs. McKinney, Brill, Fancher, Stark and Gipson were
awarded 603, 255, 222, 234 and 221 shares, respectively, of unvested
restricted stock on January 22, 1998 with respect to their 1997 employment.
Dividend equivalents are paid on such shares. All of the foregoing shares
were awarded pursuant to either the Company's 1986 or 1996 Stock Incentive
Plan.
(3) Included for 1997: (a) Company matching contributions under the Company's
401(k) Retirement Plan in the amounts of $4,826, $1,662, $3,722, $3,424,
$2,855 and $2,523 for Messrs. McKinney, Lamb, Brill, Fancher, Stark and
Gipson, respectively, and (b) Company payments of premiums for term life
insurance on behalf of Messrs. McKinney, Lamb, Brill, Fancher, Stark and
Gipson in the amount of $348, $732, $730, $673, $329 and $34, respectively.
(4) R.L. Lamb retired as President of the Company effective March 31, 1997. M.W.
McKinney became President and Chief Executive Officer of the Company
effective April 1, 1997.
Retirement Plans
The Company maintains a Retirement Plan covering substantially all
employees. The Retirement Plan is a noncontributory, trusteed pension plan
designed to meet the requirements of Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code"). Each covered employee is eligible for
retirement at normal retirement date (age 65), with early retirement permitted
under certain conditions. The Company also maintains a Supplemental Executive
Retirement Plan (the "SERP") which covers
5
<PAGE>
officers of the Company who are participants in the Retirement Plan. The SERP is
intended to provide benefits which, except for the application of the limits of
Section 415 and Section 401(a)(17) of the Code, would have been payable under
the Retirement Plan. The SERP is not qualified under the Code and benefits
payable thereunder are paid out of the general funds of the Company.
The following table shows estimated maximum annual benefits payable
following retirement (assuming payments on a normal life annuity basis and not
including any survivor benefit) to an employee in specified remuneration and
Years of Credited Service classifications. These amounts are based on an assumed
final rate of compensation and retirement at normal retirement age of 65 and are
approximated without consideration of any reduction which would result from
various options which may be elected prior to actual retirement.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE(B)
AVERAGE ANNUAL --------------------------------------------------------------------------
EARNINGS(A) 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ----------------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
75,000 ......... 16,538 22,050 27,563 33,075 38,588 44,682
100,000 ......... 22,632 30,175 37,719 45,263 52,807 60,932
125,000 ......... 28,726 38,300 47,876 57,450 67,026 77,182
150,000 ......... 34,819 46,425 58,032 69,638 81,244 93,432
175,000 ......... 40,913 54,550 68,188 81,825 95,463 109,682
200,000 ......... 47,007 62,675 78,344 94,013 109,682 125,932
225,000 ......... 53,101 70,800 88,501 106,200 123,901 130,000
250,000 ......... 59,194 78,925 98,657 118,388 130,000 130,000
</TABLE>
- ----------
(a) "Average Annual Earnings" is the average annual compensation over the five
consecutive years within the ten-year period prior to termination of
employment which produces the highest average. The compensation used to
calculate such average for a salaried employee is the aggregate of the
employee's annual compensation which generally corresponds with the
employee's salary and incentive compensation. The earnings of Messrs.
McKinney, Lamb, Brill, Fancher, Stark and Gipson covered by the plans
correspond substantially to such amounts shown for them in the Summary
Compensation Table.
(b) As of December 31, 1997, Messrs. McKinney, Lamb, Brill, Fancher, Stark and
Gipson, had accrued 30, 40, 35, 26, 17 and 16 Years of Credited Service,
respectively, under the Retirement Plans.
Severance Pay Plan
The Company has a severance pay plan (the "Severance Plan") which provides
certain key employees with severance benefits following a change in control of
the Company. A change in control generally includes: (i) certain events relating
to the continued existence of the Company in its current form; (ii) an
acquisition by any person of 10% or more of the securities entitled to vote in
the election of directors or (iii) the current Directors, or their approved
successors, no longer constitute a majority of the Board of Directors. Certain
executive officers and senior managers of the Company have been selected by the
Compensation Committee of the Board of Directors to enter into one-year
agreements pursuant to the Severance Plan which are automatically extended for
one-year terms unless the Company has given prior notice of termination.
A participant in the Severance Plan is entitled to receive certain benefits
in the event of certain involuntary terminations of employment occurring
(including terminations by the employee following certain changes in duties,
benefits, etc. that are treated as involuntary terminations) within three years
after a change in control, or a voluntary termination of employment occurring
between twelve and eighteen months after a change in control. A senior officer
participant would be entitled to receive benefits of three times such
participant's annual compensation. A participant who is not a senior officer
would receive approximately two weeks of severance compensation for each full
year of employment with the Company with a minimum of 17 weeks. Payments to
participants resulting from involuntary terminations are to be paid in a lump
sum within 30 days following termination, while payments resulting from
voluntary termination are paid in monthly installments and cease if the
participant becomes otherwise employed. In addition, participants who qualify
for payments under the Severance Plan will
6
<PAGE>
continue to receive benefits for a specified period of time under health,
insurance and other employee benefit plans of the Company in existence at the
time of the change in control. If any payments are subject to the excise tax on
"excess parachute payments" under Section 4999 of the Code, senior officer
participants are also entitled to an additional amount essentially designed to
put them in the same after-tax position as if this excise tax had not been
imposed.
Compensation Committee Report on Executive Compensation
The Company's executive compensation policies are designed to enable the
Company to attract and retain high caliber individuals for key positions while
at the same time linking their compensation to the Company's financial
performance and their own performance. The linkage between compensation and
performance is accomplished by dividing executive compensation into two
components: a base salary that is set at the beginning of the year and incentive
compensation that is determined at the end of the year based on the extent to
which specific, predetermined goals were achieved. Depending on the extent to
which these goals are met, the Company's senior executives can earn total
compensation which is above, at or below the level of senior executive
compensation at comparable electric utilities.
At the beginning of each year, the Committee determines a target total
compensation amount for each senior executive, including the President and Chief
Executive Officer. To determine this amount, the Committee first takes the
mid-point of the range of total compensation paid to executives in positions
comparable to that of the Company's President and Chief Executive Officer at
other utilities. The Committee then determines a corresponding amount for each
other senior officer based on a comparison of the officer's responsibilities
with those of the President and Chief Executive Officer. The resulting amount is
adjusted for each senior officer to reflect the officer's experience and
performance. In determining the appropriate mid-point amounts in 1997, the
Committee used an industry compensation study prepared by a management
consulting firm and took into account increases in compensation for businesses
generally in 1997 predicted by various consulting firms and recent compensation
increases received by the Company's employees. A greater number of companies
were included in the management consulting firm's study than are included in the
Standard & Poors Electric Companies Index used in the Performance Chart. The
companies included in that study are, for the most part, either electric or
electric and gas utilities.
The Company's total compensation package for senior executives, including
the President and Chief Executive Officer, has an incentive compensation
component. Executives can earn incentive compensation based on the extent to
which Company and personal performance goals are met. In 1997, the areas in
which performance was measured in determining incentive compensation and the
relative weighting of each area were: (1) the Company's return on common equity
compared to that of all other electric utilities reported in an industry survey
of approximately 165 electric and gas utilities over a five-year period (40%),
(2) reduction of controllable expenses over a five-year period (20%), (3)
control of fuel and purchase power expenses (20%) and (4) for each senior
officer, the achievement of predetermined personal goals for the year (20%).
In each of these four areas, three performance levels, "threshold," "par"
and "maximum," are set at the beginning of the year. For executives to receive
any incentive compensation based on any particular performance measure, at least
the "threshold" level of performance must have been achieved. Greater incentive
compensation is payable if the "par" or "maximum" performance level is achieved.
If the par level objective in each of the four performance areas is achieved,
each senior executive would receive incentive compensation which, when added to
base salary, would equal the individual's target total compensation. In 1997,
the Company did not meet the threshold level of performance for return on
equity. However, the Company did meet the "threshold" level of performance for
control of fuel and purchase power expenses and the "maximum" level of
performance for reduction of controllable expenses.
Regardless of the extent to which the four performance criteria are met in
any year, no incentive compensation is payable in any year in which the Company
does not pay dividends per share of Common Stock at least equal to the dividends
per share paid in the preceding year. In 1997, the dividends paid on each share
of the Company's Common Stock were equal to those paid in 1996.
7
<PAGE>
The Company's incentive compensation policy also seeks to encourage senior
executives to hold down the Company's electric rates so that the Company can
remain competitive with alternate energy suppliers by adjusting incentive
compensation otherwise payable to reflect the level of the Company's residential
electric rates compared to those of the 12 other utilities in the Company's
geographic area. The adjustment ranges from a 10% increase in incentive
compensation if the Company has the lowest rates in the comparison group to
elimination of incentive compensation if the Company is one of the four
companies in the comparison group with the highest rates. In 1997, Empire had
the third lowest retail electric rates of the 13 utilities, which resulted in no
adjustment to incentive compensation.
Incentive compensation is typically paid one-half in cash at the end of the
year and one-half in Common Stock. The Common Stock portion of incentive
compensation is restricted stock that generally is not issued unless the
recipient continues to be employed by the Company for three years after the
stock is awarded. The three-year vesting period is intended to encourage
continuity among the Company's senior executives. In addition, by increasing the
stock ownership of senior management, it is hoped that these individuals will
have an even greater incentive to advance the interests of the Company's
stockholders.
In 1997, the President and Chief Executive Officer's base salary was
increased 4.4% above its 1996 level reflecting his leadership in preparing the
Company to meet future capacity and energy requirements in a competitive
environment and his involvement in local economic development activities. Mr.
Lamb retired as President of the Company effective March 31, 1997, after 40
years of service with the Company. Mr. McKinney became President and Chief
Executive Officer upon Mr. Lamb's retirement and received compensation at 80% of
the salary value established for the office of the President. Mr. McKinney's
incentive compensation is based on the same factors as the incentive
compensation of the other senior executive officers, although a greater
percentage of his target total compensation is comprised of incentive
compensation. As a result of the level of attainment of performance goals, the
sum of Mr. McKinney's base salary and his incentive compensation for 1997 was
approximately 93.6% of his target total compensation.
Based on the Company's current level of executive compensation, the
Committee does not believe it necessary to adopt a policy with respect to
Section 162(m) of the Code at this time.
F.E. Jeffries, Chairman
J.R. Herschend
R.E. Mayes
M.M. Posner
8
<PAGE>
Comparison of Stockholder Returns
Set forth below is a graph indicating the value at the end of the specified
years of a $100 investment made on December 31, 1992 in Company Common Stock and
similar investments made in the securities of the companies in the Standard &
Poor's 500 Composite Index ("S&P 500 Composite") and the Standard & Poor's
Electric Companies Index ("Electric Companies"). The graph assumes that
dividends were reinvested when received.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
THE EMPIRE DISTRICT ELECTRIC S&P 500
ELECTRIC COMPANY COMPANIES COMPOSITE
<S> <C> <C> <C>
1992 $ 100.00 $ 100.00 $ 100.00
1993 103.31 112.60 110.08
1994 85.75 97.89 111.53
1995 102.87 128.32 153.45
1996 115.67 128.11 188.68
1997 129.95 161.74 251.63
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors and executive officers to file with the Securities and
Exchange Commission and the New York Stock Exchange reports of changes in
ownership of the Company's equity securities. Securities and Exchange Commission
regulations require that Directors and executive officers furnish to the Company
copies of all Section 16(a) forms they file. To the Company's knowledge, based
solely on review of the copies of such reports furnished to the Company and
written representations that no other reports were required, during the fiscal
year ended December 31, 1997, all its officers and directors complied with
applicable Section 16(a) filing requirements except for R.E. Mayes, who was late
in filing a Form 4 relating to a sale of 1,000 shares of Common Stock as part of
a liquidation of his individual retirement account.
9
<PAGE>
3. OTHER MATTERS
Price Waterhouse LLP has been the Company's independent auditors since
1992. Representatives of Price Waterhouse LLP are expected to be present at the
meeting for the purpose of answering questions which any stockholder may wish to
ask and such representatives will have an opportunity to make a statement at the
meeting.
The Company knows of no other matter to come before the meeting. If,
however, any other matters properly come before the meeting, it is the intention
of the persons named in the enclosed proxy to vote the same in accordance with
their judgment on such other matters.
4. STOCKHOLDER PROPOSALS
The Company will not consider including a stockholder's proposal for action
at its 1999 Annual Meeting in the proxy material to be mailed to its
stockholders in connection with such meeting unless such proposal is received at
the principal office of the Company no later than November 20, 1998.
Dated: March 18, 1998
---------------------
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
WHO DO NOT EXPECT TO ATTEND IN PERSON ARE URGED TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, TO WHICH NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES.
10
<PAGE>
PROXY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS OF
THE EMPIRE DISTRICT ELECTRIC COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints M.W. McKINNEY, R.B. FANCHER and J.S. WATSON, or any one of them, with
power of substitution, as attorneys and proxies to appear and vote all shares of
Common Stock standing in the name of the undersigned, with all the powers the
undersigned would possess if personally present, at the Annual Meeting of
Stockholders of The Empire District Electric Company to be held at the Holiday
Inn, 3615 South Range Line, in the City of Joplin, State of Missouri, on the
23rd day of April, 1998 at 10:30 a.m., Joplin time, and at any and all
adjournments and postponements thereof, in the manner indicated on the reverse
thereof.
(Continued on the reverse side)
[GRAPHIC OMITTED]
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF THE COMPANY, THE Board of Directors recommends
a vote FOR Item(1).
- --------------------------------------------------------------------------------------------------------------
(1) The election of directors
<S> <C>
FOR the election of Directors in accordance WITHHOLD AUTHORITY to vote for all nominees
with the provisions of the accompanying proxy listed below
statement (except as marked to the contary
below).
[ ] [ ]
INSTRUCTION: You may withhold authority to vote for any individual nominee by striking a line through the
nominee's name below:)
Class II (to serve until the 2001 Annual Meeting): V.E. Brill, R.C. Hartley and F.E. Jeffries
- --------------------------------------------------------------------------------------------------------------
(2) Upon any other matter which may properly come befor the meeting in their discretion.
- --------------------------------------------------------------------------------------------------------------
Every properly signed proxy will be
voted in thhe manner specified hereon
and, in the absence of specification,
will be voted FOR Item (1).
The undersigned hereby acknowledges
receipts of the Notice of Annual Meeting
of Stockholders and Proxy Statement
annexed thereto and of the Company's
Annual Report for 1997.
Signature________________________________________Signature___________________________________Date_____________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, pleasee give full title as such.
</TABLE>
*FOLD AND DETACH HERE*
[GRAPHIC OMITTED]
Dear Shareholder:
We will hold the 1998 Annual Meeting of Shareholders of The Empire District
Electric Company on Thursday, April 23, 1998, at 10:30 a.m., at the Holiday Inn,
3615 South Range Line (Intersection of Highway 71 and Interstate 44), Joplin
Missouri. I cordially invite you to attend.
Whether or not you plan to attend the meeting, please detach the proxy card
above, complete it and return it in the envelope provided. Your vote is
important to us.
Sincerely,
/s/ Myron W. McKinney
---------------------
Myron W. McKinney
President and Chief Executive Officer
