<PAGE>
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, INC.
- --------------------------------------------------------------------------------
(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)(4) 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 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:
-------------------------------------------------------------------------
(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:
<PAGE>
Western Resources LOGO
March [30], 1999
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 4, 1999 at the Manor 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,
Signature
David C. Wittig
Chairman of the Board, President,
and Chief Executive Officer
<PAGE>
WESTERN RESOURCES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 4, 1999
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
Monday, May 4, 1999, commencing at 1:00 o'clock in the afternoon, including
any adjournments, postponements, continuations or reschedulings thereof, for
the following purposes:
1. To elect three directors to Class III of the Company's Board of Directors
to serve a term of three years;
2. To approve an amendment to the Restated Articles of Incorporation to
increase the authorized shares of common stock;
3. To approve the adoption of an Employee Stock Purchase Plan;
4. To approve the adoption of a Short Term Incentive Plan; and
5. To approve the adoption of amendments to the 1996 Long Term Incentive and
Share Award Plan.
Common and Preferred Shareholders of record at the close of business on
March 17, 1999, 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,
Signature
Richard D. Terrill
Secretary
Topeka, Kansas
March [30], 1999
<PAGE>
PROXY STATEMENT
GENERAL INFORMATION
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 Monday, May 4, 1999,
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 mailing
address for the principal executive offices of Western Resources, Inc. (the
"Company") is 818 Kansas Avenue, Topeka, Kansas 66612. The approximate mailing
date for proxy materials is March [30], 1999.
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 $9,500 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 17, 1999, are entitled to vote on matters to come before the meeting. On
that date there were outstanding and entitled to vote shares of
Common Stock, par value $5 per share; 138,576 shares of Preferred Stock, 42%
Series, par value $100 per share; 60,000 shares of Preferred Stock, 43%
Series, par value $100 per share; and 50,000 shares of Preferred Stock, 5%
Series, par value $100 per share.
VOTING RIGHTS
Proxies solicited by the Board of Directors will be voted "for" each of the
proposals presented herein unless shareholders otherwise specify in their
proxies.
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 the event that the votes necessary to approve a proposal have not been
obtained by the date of the meeting, the chairman of the meeting may, in his
discretion, adjourn the meeting from time to time to permit the solicitation
of additional proxies by the Board of Directors.
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 2000 Annual Meeting of Shareholders is tentatively scheduled to be held
on May 2, 2000. 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 2000 proxy materials
by December 2, 1999. 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. In addition, if a shareholder intends to
present a proposal at the 1999 Annual Meeting other than
1
<PAGE>
pursuant to Rule 14-8 under the Securities Exchange Act of 1934, and if the
proposal is not received by the Company's Secretary between March 15, 1999 and
March 30, 1999, then the proxies designated by the Board of Directors of the
Company for the 1999 Annual Meeting of Shareholders may vote in their
discretion on any such proposal any shares for which they have been appointed
proxies without mention of such matter in the Proxy Statement for such meeting
or on the proxy card for such meeting.
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 eight.
Messrs. Frank J. Becker and Louis W. Smith, and Ms. Jane Dresner Sadaka have
been nominated for election as directors at the Annual Meeting of Shareholders
as Class III directors. Mr. Smith was elected at the Annual Meeting of
Shareholders in 1991. Mr. Becker was elected at the Annual Meeting of
Shareholders in 1992. Mr. John E. Hayes, Jr., Chairman of the Board of the
Company, retired his position as Chairman of the Board in January of 1999, at
which time Ms. Sadaka was appointed a director of the Company. Mr. Gene A.
Budig, a director of the Company, retired in April of 1998, at which time the
number of directors was reduced to nine. Mr. C.Q Chandler, a director of the
Company, will retire coincident with the Annual Meeting, at which time the
number of directors will be reduced to eight.
Directors to be elected at the meeting will be elected by the affirmative
vote of the holders of a plurality of the shares entitled to vote represented
at the meeting in person or 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. 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 III)--Term Expiring in 2002
Director (age), year first became a director
Frank J. Becker (63), 1992
President, Becker Investments, Inc.,Lawrence, Kansas; Chairman, [PHOTO]
Kansas Turnpike Authority; Director, Douglas County Bank;
Director, OTR Express; Director, Martin K. Eby Construction Company;
Director, IMA Insurance, Inc.; Trustee, Kansas University Endowment
Association.
2
<PAGE>
Louis W. Smith (56), 1991
President and Chief Executive Officer (since July 1997), President [PHOTO]
and Chief Operating Officer (July 1995 to July 1997), 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; Director, H & R Block, Inc.; Trustee,
University of Missouri-Rolla.
Jane Dresner Sadaka (45), 1999
Retired Special Limited Partner, Kellner, DiLeo & Co., New York, [PHOTO]
New York; Advisory Board Member, Donaldson Lufkin and Jenrette
Merchant Banking Fund II.
Other Directors
(Class I)--Term Expiring in 2000
Director (age), year first became a director
John C. Dicus (65), 1990
Chairman of the Board and Chief Executive Officer, Capitol [PHOTO]
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 Health Care; Trustee, The Kansas
University Endowment Association.
Russell W. Meyer, Jr. (66), 1992
Chairman and Chief Executive Officer, Cessna Aircraft Company, [PHOTO]
Wichita, Kansas; Director, Public Broadcasting Service; Trustee,
Wake Forest University.
(Class II)--Term Expiring in 2001
Director (age), year first became a director
David H. Hughes (70), 1988
Retired Vice Chairman, Hallmark Cards, Inc., Kansas City, [PHOTO]
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.
3
<PAGE>
Thomas R. Clevenger (64), 1975
Investments, Wichita, Kansas; Director, Security Benefit Group [Photo]
of Companies; Trustee and Vice Chairman, The Menninger
Foundation; Trustee, Midwest Research Institute.
David C. Wittig (43), 1996
Chairman of the Board (since January 1999), President (since [Photo]
March 1996) and Chief Executive Officer (since July 1998);
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.
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 17, 1999, other
than Franklin Resources, Inc., which, as reported in a 13(G) filing, holds
directly or indirectly 6.2% of Western Resources' Common Stock, Par Value
$5.00.
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 17, 1999.
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner BeneficialOwnership(1)
------------------------------------------------ ----------------------
<S> <C>
Frank J. Becker................................. 13,478 shares(2)
Charles Q. Chandler............................. 2,647 shares
Thomas R. Clevenger............................. 5,418 shares
John C. Dicus................................... 3,443 shares(3)
Thomas L. Grennan............................... 11,846 shares(4)
John E. Hayes, Jr............................... 163,638 shares(4)(5)(6)
David H. Hughes................................. 1,596 shares
Steven L. Kitchen............................... 56,441 shares(4)(5)
Carl M. Koupal.................................. 56,245 shares(4)(5)
Russell W. Meyer, Jr............................ 4,127 shares
William B. Moore................................ 16,155 shares(4)(7)
Jane Dresner Sadaka............................. 407 shares
Louis W. Smith.................................. 6,078 shares
Richard D. Terrill.............................. 8,125 shares(4)
David C. Wittig................................. 305,650 shares(4)(5)(8)
All directors and executive officers as a
group.......................................... 700,850 shares(9)
</TABLE>
- --------
(1) Each individual owns less than one percent of the outstanding shares of
Western Resources Common Stock. The group owns 1.06% 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.
4
<PAGE>
(2) Includes 2,400 shares of Western Resources Common Stock held in trusts, of
which Mr. Becker is a co-trustee with voting and investment power and
excludes stock held in trust by Douglas County Bank, of which Mr. Becker
is a director.
(3) Includes 500 shares of Western Resources Common Stock held by Mr. Dicus'
spouse, not subject to his voting or investment power.
(4) Includes stock options exercisable currently or within sixty days granted
to executive officers as follows: Mr. Grennan, 7,750 shares; Mr. Hayes,
87,667 shares; Mr. Kitchen, 33,333 shares; Mr. Koupal, 26,333 shares; Mr.
Moore, 11,290 shares; Mr. Terrill, 6,000 shares; and Mr. Wittig, 87,667
shares.
(5) Includes Restricted Stock granted to executive officers as follows: Mr.
Hayes, 42,000 shares; Mr. Kitchen, 14,000 shares; Mr. Koupal, 26,000
shares; Mr. Wittig, 84,000 shares; and 27,000 shares to other executives
in the group.
(6) Includes 4,695 shares of Western Resources Common Stock held by Mr. Hayes'
spouse, not subject to his voting or investment power.
(7) Includes 644 shares of Western Resources Common Stock held in trust of
which Mr. Moore is a co-trustee with shared voting and investment power.
(8) Includes 25,619 shares of Western Resources Common Stock held by Mr.
Wittig's spouse, not subject to his voting or investment power.
(9) Includes shares referred to in (2) through (8) above.
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, 1998, all required filings applicable to its
executive officers, directors and owners of more than ten percent of Western
Resources Common Stock were made and that such persons were in compliance with
the Exchange Act requirements.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 1998, the Western Resources Board met twelve 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 six meetings during 1998.
The Human Resources Committee, currently composed of Mr. Becker, Chairman,
Mr. Dicus and Mr. Hughes, reviews the performance of corporate officers and
changes in officer compensation and benefits. This committee held five
meetings during 1998.
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 1998.
The Nominating Committee, currently composed of Mr. Meyer, Chairman, Mr.
Clevenger, and Mr. Smith, reviews and recommends nominees for election to the
Western Resources Board including nominees recommended by shareowners if
submitted in writing to this committee in accordance with the Company's
Restated Articles of Incorporation, Bylaws, and SEC and NYSE rules and
regulations, in care of Western Resources. This committee held four meetings
in 1998.
5
<PAGE>
Outside Directors' Compensation. Each director who is not also an employee
of Western Resources receives an annual retainer fee of $25,000, paid
quarterly, and an annual stock award equal to $12,000. The fee paid for
attendance at each board meeting is $1,200 and $600 for each meeting held by
telephone conference. The fee paid for attendance at each committee meeting is
$1,000.
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.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets for the compensation of the named executive
officers for the last three completed fiscal years of Western Resources:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------- -----------------------------
Awards Payouts
--------------------- -------
Other Restricted Securities All
Annual Stock Underlying LTCP Other
Name and Salary Base Compensation Awards Options Payouts Compensation
Principal Position Year $ $ $(1) $(2) SARs # $ $(3)
- ------------------------ ---- ------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John E. Hayes, Jr. 1998 689,608 114,400 127,095 1,622,250 113,000 -- 132,788
Retired Chairman of the
Board 1997 546,375 387,103 34,733 -- 50,000 76,069 18,096
and Chief Executive
Officer 1996 465,000 164,870 25,036 -- 25,000 25,177 17,449
David C. Wittig 1998 635,542 114,400 31,312 1,622,250 113,000 -- 79,217
Chairman of the Board,
President 1997 503,094 376,431 12,339 -- 50,000 46,141 43,096
and Chief Executive
Officer 1996 425,000 148,860 8,432 -- 25,000 -- 867,449
Steven L. Kitchen 1998 274,467 -- 68,423 540,750 31,000 -- 1,766,408
Retired Executive Vice
President 1997 317,833 356,430 12,782 -- 23,000 36,799 18,084
and Chief Financial
Officer 1996 267,084 112,407 10,027 -- 11,500 11,748 16,933
Carl M. Koupal, Jr. 1998 250,125 36,720 4,258 502,125 28,000 -- 31,610
Executive Vice President 1997 206,833 349,107 2,418 -- 17,000 23,533 17,063
and Chief Administrative
Officer 1996 174,167 82,112 3,460 -- 8,500 7,464 16,385
William B. Moore 1998 165,167 71,410 11,041 -- 12,000 -- 17,766
Acting Executive Vice
President, 1997 159,617 385,368 4,146 -- 7,290 21,116 22,376
Chief Financial Officer 1996 151,917 27,228 23,575 -- 3,645 6,989 38,683
and Treasurer
Thomas L. Grennan 1998 163,000 47,481 31,840 -- 12,000 -- 17,761
Executive Vice
President, 1997 141,850 355,436 6,650 -- 3,750 19,213 12,991
Electric Operations 1996 125,583 16,078 8,602 -- 1,875 6,504 10,302
Richard D. Terrill 1998 130,667 17,160 3,910 -- 9,000 -- 17,177
Vice President, Law 1997 118,633 181,411 1,873 -- 3,000 17,564 11,434
and Corporate Secretary 1996 111,217 14,255 2,752 -- 1,500 5,834 10,550
</TABLE>
- --------
(1) The amounts reported for 1998 represent 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
$88,017, $7,567, $52,526, $1,719, $1,040, $4,503 and $1,810, respectively;
and interest (excess of the applicable federal long term interest rate) on
deferred compensation for the year in the amounts of $37,578, $23,228,
$15,179, $2,078, $10,474, $26,938 and $1,758, respectively.
6
<PAGE>
(2) The aggregate restricted stock awards for each of the named executives at
year end were as follows: Mr. Hayes, 42,000 shares; Mr. Wittig, 42,000
shares; Mr. Kitchen, 14,000 shares, and Mr. Koupal, 13,000 shares. Based
on the closing price of the Company's Common Stock on December 31, 1998,
the shares had an aggregate value of $1,396,500, $1,396,500, $465,000 and
$432,250, respectively. This value may not represent the ultimate value of
such shares to the employee or the Company. Grants in excess of 15,000
shares are subject to approval by the shareholders of amendments to the
Long Term Incentive Plan. The restrictions on the shares lapse on the
earlier of the ninth anniversary of date of grant and the date on which
the Company Common Stock remains at or above 120% of the grant date market
price for 30 consecutive trading days. If the employee leaves the Company,
other than as a result of death, disability or retirement, prior to the
fourth anniversary of the grant date the shares are forfeited. Dividends
are paid on the restricted shares from the date of grant.
(3) The amounts reported for 1998 represent Western Resources' contributions
for each of the named individuals under Western Resources' savings plan, a
defined contribution plan, in the amount of $4,800 each; a car allowance
in the amounts of $13,400, $13,400, $9,964, $12,981, $12,540, $12,540 and
$12,040, respectively; premiums paid on term life insurance policies in
the amounts of $774, $774, $581, $627, $426, $421 and $337, respectively;
and imputed income on split dollar life insurance policies of $113,814 for
Mr. Hayes, $35,243 for Mr, Wittig, $32,763 for Mr. Kitchen, and $13,202
for Mr. Koupal. $1,718,301 for Mr. Kitchen represents severance amounts
paid or payable to Mr. Kitchen in connection with his early retirement
from the Company following approximately 35 years of service to the
Company. With respect to Mr. Wittig, $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. In addition, $825,000 in 1996 represents amounts paid to
or on behalf of Mr. Wittig under the Company's executive relocation plan.
With respect to Mr. Moore, $5,629 in 1997 and $23,325 in 1996 represent
amounts paid to or on behalf of Mr. Moore under the Company's executive
relocation policy.
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total
Options Exercise Grant
Options Granted to or Date
Granted Employees Base Present
(#) in Fiscal Price Expiration Value
(1) Year ($/sh) Date ($) (2)
Name ------- ---------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
John E. Hayes, Jr. 50,000 $43.125 March 18, 2008 $210,500
63,000 14.33% $38.625 May 5, 2008 237,510
David C. Wittig 50,000 $43.125 March 18, 2008 210,500
63,000 14.33% $38.628 May 5, 2008 237,510
Steven L. Kitchen 23,000 $43.125 March 18, 2008 96,830
8,000 3.93% $38.625 May 5, 2008 30,160
Carl M. Koupal, Jr. 17,000 $43.125 March 18, 2008 71,570
11,000 3.55% $38.625 May 5, 2008 41,470
William B. Moore 7,290 $43.125 March 18, 2008 30,691
4,710 1.52% $38.625 May 5, 2008 17,757
Thomas L. Grennan 7,290 $43.125 March 18, 2008 30,691
4,710 1.52% $38.625 May 5, 2008 17,757
Richard D. Terrill 3,500 $43.125 March 18, 2008 14,735
5,500 1.14% $38.625 May 5, 2008 20,735
</TABLE>
7
<PAGE>
- --------
(1) Grants in excess of 75,000 shares in a fiscal year are subject to approval
by shareholders of the amendment to the 1996 Long Term Incentive and Share
Award Plan presented in Item 6.
(2) 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.
<TABLE>
<CAPTION>
<S> <C>
Annualized stock volatility: 17.82%
Time of exercise (option term): 8 Years
Risk-Free interest rate: 4.87%
Stock price at grant date and exercise price: $43.125 March 18, 2008
$38.625 May 5, 2008
Average dividend yield: 6.16%
Vesting restrictions: 3.0 Years*
</TABLE>
* One third of options become exercisable at each anniversary date for three
years.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Securities
Acquired Underlying Unexercised Value of Unexercised
on Value Options at In-the-Money Options
Name Exercise Realized Fiscal Year-End (#) at Fiscal Year-End ($)
- ------------------- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
(#) ($) Exercisable Unexercisable Exercisable Unexercisable
John E. Hayes, Jr. 0 0 33,333 154,667 $108,333 $116,667
David C. Wittig 0 0 33,333 154,667 $108,333 $116,667
Steven L. Kitchen 0 0 15,333 50,167 $49,833 $53,667
Carl M. Koupal, Jr. 0 0 11,333 42,167 $37,333 $39,667
William B. Moore 0 0 4,860 18,075 $15,795 $17,010
Thomas L. Grennan 0 0 2,500 15,125 $8,125 $8,750
Richard D. Terrill 0 0 2,000 11,500 $6,500 $7,000
</TABLE>
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.
8
<PAGE>
The following table sets forth the estimated annual benefits payable upon
specified remuneration based on age 65 as of January 1, 1999 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
<TABLE>
<CAPTION>
Average Average
Applicable Pension Applicable Pension
Compensation Benefit Compensation Benefit
------------ -------- ------------ -------
<S> <C> <C> <C>
$150,000 $ 52,330 700,000 451,900
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
</TABLE>
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% of the employee's previous 36 month average cash
compensation (or the vested retirement benefit percentage, whichever is
higher) 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, as amended (the "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, 1999 for the persons named in the cash
compensation table are as follows: Mr. Hayes, 9 years; Mr. Wittig, 4 years;
Mr. Kitchen, 35 years; Mr. Koupal, 7 years; Mr. Moore, 21 years; Mr. Grennan,
25 years; and Mr. Terrill, 19 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. In accordance with an
agreement with Mr. Kitchen, Mr. Kitchen was fully vested in the supplemental
retirement plan and will receive a retirement benefit of 61.7% of final three
year average compensation.
9
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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.
Split Dollar Life Insurance Program
The Company established a split dollar life insurance program for the benefit
of the Company and certain of its officers, including executive officers. Under
the split dollar life insurance program, the Company has purchased a life
insurance policy on the insured's life and, upon termination of the policy or
the insured's death, the insured's beneficiary is entitled to a death benefit
in an amount equal to the face amount of the policy reduced by the greater of
(i) all premiums paid by the Company and, (ii) the cash surrender value of the
policy, which amount, at the death of the employee or termination of the
policy, as the case may be, will be returned to the Company. The Company
retains an equity interest in the death benefit and cash value of the policy to
secure this repayment obligation.
Subject to certain conditions, beginning on the earlier of (i) 3 years from
the date of the policy or (ii) the first day of the calendar year next
following the date of the insured's retirement, the insured is allowed to
transfer to the Company from time to time, in whole or in part, his interest in
the death benefit under the policy at a discount equal to $1 for each $1.50 of
the portion of the death benefit for which the insured may designate the
beneficiary, subject to adjustment based on the total return to shareowners
from the date of the policy. Any adjustment would result in an exchange of no
more than one dollar for each dollar of death benefit nor less than one dollar
for each two dollars of death benefit. At December 31, 1998, the Company had
accrued $57 million under this program. The program has been designed such that
upon the insured's death the Company will recover its premium payments from the
policy and any amounts paid by the Company to the insured for the transfer of
his interest in the death benefit.
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<PAGE>
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 three 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 term and short term incentive
programs to certain key employees in addition to executive officers based on
the potential to contribute to increasing shareholder value.
The Committee in structuring the Company's compensation plans takes into
consideration Section 162(m) (which disallows the deduction of compensation in
excess of $1,000,000 except for certain payments based upon performance goals)
of the Code and other factors the Committee deems appropriate. As a result
some but not all of the Company's compensation plans comply with Section
162(m). Consistent with the Company's philosophy regarding Section 162(m), the
Board is presenting for shareholder approval the proposals set forth in Items
4 and 5 below so as to enable certain short term and long term awards to be
deductible by the Company notwithstanding the limitation of Section 162(m).
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
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.
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.
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<PAGE>
In reviewing the annual achievement of each executive and setting the new
base annual salary levels for 1998, 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 individual's 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.
Messrs. Hayes and Wittig were eligible for an annual short term incentive
target of 80% of base salary. Other participants are eligible for annual short
term incentive targets ranging from 15% to 60% of base salary. For executive
officers 20% of the annual incentive is tied to the attainment of individual
goals and 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 1998
compared to 1997 resulted from an individual's relative attainment of his or
her goals and the Company failing to meet its earnings per share and
shareholder value goals.
The Board is recommending in Item 4 below the approval by the Company's
shareholders of a new 1999 Short Term Incentive Plan to serve as a vehicle for
making annual incentive compensation awards to employees who are or are
expected to become covered by Section 162(m) of the Code. If such approval is
obtained, certain annual incentive compensation awards will be made to such
employees pursuant to the new plan. Annual incentive compensation awards to
other employees (and other awards not intended to comply with Section 162(m)
will continue to be made under the existing Short Term Incentive Plan.
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 currently takes the form of stock options, dividend
equivalents and restricted stock grants. The purposes of long term incentive
compensation are to: (1) focus key employees' efforts on performance 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 non-union employees are eligible for grants under the Long Term Incentive
and Share Award Plan. Under the Plan, at the beginning of each incentive
period, stock based awards are provided to such participants and in such
amounts as the Committee deems appropriate. The number and form of
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<PAGE>
awards vary on the basis of position and pay grade. The level of total
compensation for similar executive positions in comparable companies was used
as a reference in establishing the level of stock options, dividend
equivalents and restricted stock 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 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 compensation creates a strong and direct linkage between the
financial outcomes of the employees and the shareholders.
Current options vest and become exercisable ratably over a three year
period. Dividend equivalents are also 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 date of grant through the date of
exercise, not to exceed ten years. The restrictions on the restricted shares
lapse on the earlier of the ninth anniversary of date of grant and the date on
which the Company's Common Stock remains at or above 120% of the grant date
market price for 30 consecutive trading days. If the employee leaves the
Company, other than as a result of death, disability or retirement, prior to
the fourth anniversary of the grant date the restricted shares are forfeited.
In the event of a change of control, stock options, dividend equivalents and
restricted shares may accelerate and vest.
Chief Executive Officer
Mr. Wittig has been the Chief Executive Officer of the Company since July
1998. Mr. Wittig's base salary and his annual short term incentive
compensation are established annually. In recommending the base salary to be
effective July 1, 1998, 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. Wittig's overall management
effectiveness in his position as President of the Company and his achievement
of individual goals. Factors considered included his continuing leadership as
President of the Company and his contribution to strategic direction,
management of change in an increasingly competitive environment, control of
expenses, management of operations, and the overall productivity of the
Company. The Committee also took into account the recommendations made by an
independent compensation consultant following a review of the Company's
compensation plans. Mr. Wittig's base salary, prior to becoming Chief
Executive Officer, was increased in 1998 by $62,750 or 12%. Upon becoming
Chief Executive Officer on July 1, 1998, Mr. Wittig's base salary was
increased by $138,000 or 24%.
With respect to Mr. Wittig's 1998 short term incentive compensation, the
Committee took into account the above performance achievements, and the
Company failing to meet its earnings per share and shareholder value goals.
Under the Long Term Incentive and Share Award Plan, Mr. Wittig was granted
113,000 stock options and dividend equivalents and 42,000 restricted shares.
Mr. Hayes was the Chief Executive Officer of the Company from October 1989
until June 1998. Mr. Hayes' base salary and his annual short term incentive
compensation was established annually. In recommending the base salary to be
effective March 1, 1998, 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.
13
<PAGE>
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. The Committee also took into account the
recommendations made by an independent compensation consultant following a
review of the Company's compensation plans. Mr. Hayes' base salary increased in
1998 by $152,350 or 27%.
With respect to Mr. Hayes' 1998 short term incentive compensation, the
Committee took into account the above performance achievements, and the Company
failing to meet its earnings per share and shareholder value goals. Under the
Long Term Incentive and Share Award Plan, Mr. Hayes was granted 113,000 stock
options and dividend equivalents and 42,000 restricted shares.
Western Resources, Inc. Human Resources
Committee
Frank J. Becker David H. Hughes
Chairman John C. Dicus
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]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Western Resources 100.00 87.85 109.23 108.12 160.31 131.02
S&P 500 100.00 101.32 139.40 171.41 228.59 293.92
S&P Electric Companies 100.0 86.93 113.96 113.77 143.62 165.85
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
</TABLE>
* Assumes $100 invested on December 31, 1993. Total return assumes reinvestment
of dividends.
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE RESTATED ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors of the Company has unanimously adopted a proposal to
amend the Company's Restated Articles of Incorporation and has directed that
this proposed amendment be submitted to the shareholders of the Company at the
Annual Meeting of the Shareholders. As described below, the proposed amendment
would increase the authorized shares of the Company's common stock (the "Common
Stock") from 85,000,000 shares to 150,000,000 shares of Common Stock. This
amendment will not affect the number of authorized shares of preferred stock of
the Company.
Proposed Amendment.
If this proposal is adopted, the first sentence of Article VI of the Restated
Articles of Incorporation will be amended to read as follows:
"The amount of capital stock of this Corporation shall be 160,600,000
shares of which 150,000,000 shares is Common Stock of the par value of Five
Dollars ($5.00) each, 4,000,000 shares is Preference Stock without par
value, 600,000 shares is preferred stock of the par value of One Hundred
Dollars ($100) each and 6,000,000 shares is preferred stock without par
value, all such preferred stock being termed "Preferred Stock."
14
<PAGE>
Purpose and Effect of the Proposed Amendment.
The Board of Directors believes that this amendment is in the best interest
of the Company and its shareholders because it would provide greater
flexibility to the Board of Directors to issue additional equity securities,
for example, to raise additional capital, to provide stock related employee
benefits, to effect stock splits of the outstanding Common Stock, and to effect
acquisitions of other businesses if favorable opportunities become available.
Although there are no present arrangements, agreements or understandings for
issuance of such additional shares, the Board of Directors believes that the
availability of the additional authorized shares for issuance upon approval of
the Board of Directors without the necessity for, or the delay inherent in, a
meeting of the Company's shareholders will be beneficial to the Company and its
shareholders by providing the Company with the flexibility required to consider
promptly and respond to future business needs and opportunities as they arise.
As of the Record Date, after giving effect to approximately 11,959,272 shares
of Common Stock reserved for issuance under the Company's direct stock purchase
plan and employee benefit plans, the Company had approximately 6,937,554 shares
of Common Stock available for issuance.
Previous Approval of Increase in Authorized Shares.
At the July 30, 1998 Special Meeting of Shareholders of the Company, the
shareholders of the Company voted in favor of a proposal with respect to an
amendment of the Company's Restated Articles of Incorporation to increase,
immediately prior to the Western Resources Share Issuance in connection with
the proposed acquisition of Kansas City Power & Light Company ("KCPL") by the
Company, the authorized number of shares of the Company's Common Stock from
85,000,000 shares to 300,000,000 shares. The approval of the amendment by the
shareholders at the July 30, 1998 meeting was made, and remains, contingent
upon the consummation of the proposed acquisition. If the presently proposed
amendment to increase the authorized shares of Common Stock from 85,000,000
shares to 150,000,000 shares is approved, upon the consummation of the KCPL
acquisition, the authorized shares of Common Stock of the Company will be
increased to 300,000,000 shares, consistent with the prior approval by the
Company's shareholders.
Anti-Takeover Effect.
The additional shares of Common Stock for which authorization is sought would
be identical to the shares of Common Stock of the Company currently authorized.
Although the Board will authorize the issuance of additional shares of Common
Stock based on its judgment as to the best interests of the Company and its
shareholders, the issuance of shares of Common Stock could have a dilutive
effect on the earnings per share, book value per share and the equity and
voting power of existing holders of Common Stock. Holders of Common Stock are
not now and will not be entitled to preemptive rights to purchase shares of any
authorized capital stock of the Company. In addition, the issuance of
additional shares of Common Stock could, in certain instances, render more
difficult or discourage a merger, tender offer or proxy contest and thus
potentially have an "anti-takeover" effect, especially if shares of Common
Stock were issued in response to a potential takeover. Such an issuance could
deter the types of transactions that may be proposed, could discourage or limit
the participation of the Company's shareholders in certain types of
transactions that might be proposed (such as a tender offer) regardless of
whether such transaction were favored by the majority of the shareholders and
could enhance the ability of the Company's officers and directors to retain
their positions. For example, without further shareholder approval, the Board
could sell shares of Common Stock in a private transaction to purchasers who
would oppose a takeover or favor the current Board. Although this proposal to
increase the authorized shares of Common Stock has been prompted by business
and
15
<PAGE>
financial considerations and not by any known or threatened hostile takeover
attempt, shareholders should be aware that the approval of this proposal could
facilitate future efforts by the Company to deter or prevent changes in
control of the Company, including transactions in which the shareholders might
otherwise receive a premium for their shares over then current market prices.
If the proposed amendment is approved by the Company's shareholders, the
Board does not presently intend to seek further shareholder approval with
respect to any particular issuance of shares of Common Stock, unless required
by applicable law, by regulatory authorities, or by the policies, rules and
regulations of the NYSE.
VOTE REQUIRED FOR APPROVAL
As provided under the Kansas General Corporation Code, the Restated Articles
of Incorporation, the By-Laws of the Company and the rules of the NYSE, as
applicable, approval of the proposed amendment requires the affirmative vote
of a majority of the outstanding shares of the Company's Common Stock entitled
to vote at the Annual Meeting. Abstentions and broker non-votes will have the
same effect as votes cast against approval of the proposed amendment.
The Board of Directors of the Company, by a unanimous vote, recommends a
vote FOR this amendment.
3. PROPOSAL TO APPROVE THE ADOPTION OF THE EMPLOYEE STOCK PURCHASE PLAN
On July 16, 1997, the Company's Board of Directors adopted the Western
Resources, Inc. Employee Stock Purchase Plan (the "ESPP"), subject to
shareholder approval. The Company intends to implement the ESPP on April 1,
1999, subject to shareholder approval. The ESPP will provide a means for
eligible employees of the Company and designated subsidiaries to purchase
shares of the Company's Common Stock under favorable terms through payroll
deductions or cash payments. The Board believes that adoption of the ESPP will
promote the interests of the Company and its shareholders by assisting the
Company in attracting, retaining and stimulating the performance of employees
and by aligning employees' interests through their purchases of Common Stock
with the interests of shareholders. Shareholder approval of the ESPP is
required in order for options granted under the ESPP to qualify for favorable
tax treatment under the Code.
Shares Subject to the Plan.
The Company's shareholders are being asked to authorize the issuance of up
to 1,250,000 shares of Common Stock under the ESPP, subject to adjustment from
time to time for stock dividends, recapitalization, merger, spin-off, and
certain other changes in capitalization as provided in the ESPP.
Administration.
The ESPP will be administered by the Human Resources Committee of the Board
of Directors or such other committee as may be appointed by the Board of
Directors to administer the applicable Company share-based plans (the
"Committee"). The Committee is authorized to administer and interpret the ESPP
and to make such rules and regulations as it deems necessary to administer the
ESPP.
Eligibility.
The ESPP is an employee benefit program that enables qualified employees of
the Company and its subsidiaries designated by the Committee to purchase
shares of Common Stock at a discount through payroll deductions or cash
payments without incurring broker commissions. To participate, an
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<PAGE>
employee must have been employed for at least one year at the beginning of the
offering period and the employee's customary employment must be for more than
20 hours each week and five months in any calendar year (unless the Committee
determines otherwise on a uniform and nondiscriminatory basis). An employee is
not eligible to continue participation in the ESPP in the event his or her
employment is voluntarily or involuntarily terminated, or if such employee
owns or will own, as a result of such participation, shares possessing 5% or
more of the total combined voting power or value of all classes of stock of
the Company or any related corporation. Employees represented by bargaining
units do not currently participate in the ESPP. Currently, approximately 918
of the Company's employees are eligible to participate in the ESPP, including
each of the named executive officers. Non-employee directors of the Company
are not eligible to participate in the ESPP.
Stock Purchases.
The ESPP will be implemented through a series of offerings. The length of
each offering period will be established by the Committee. During these
offering periods, participating employees accumulate funds in an account used
to buy Common Stock through payroll deductions or cash payments at a rate
selected by the employee (subject to such maximums and minimums as the
Committee may prescribe). No participating employee may be granted an option
to purchase Common Stock that permits the employee to purchase in any calendar
year under the ESPP shares of Common Stock with an aggregate fair market value
(determined at the time such option is granted) in excess of $25,000.
At the end of each offering period, the market price of the Company's Common
Stock is determined and the participating employees' accumulated funds
(including any interest that may be credited under rules prescribed by the
Committee) are used to purchase the appropriate number of shares of Common
Stock. The purchase price per share of Common Stock under the ESPP will be
established by the Committee, but may not be less than the lower of 85% of the
per share fair market value of the Common Stock on either the first day of the
offering period or the last day of the offering period. The average of the
high and low prices of a share of Common Stock on March 2, 1999 was $28.0625
as reported on the NYSE.
Amendment and Termination.
The Board of Directors has the power to amend, suspend or terminate the
ESPP, provided that the Board may not amend the ESPP without shareholder
approval if such approval is required by Section 423 of the Internal Revenue
Code of 1986, as amended.
Effective Date; Term of the Plan.
The ESPP shall become effective April 1, 1999, subject to shareholder
approval. The ESPP will continue in effect until March 31, 2009, unless sooner
terminated by the Board of Directors.
Federal Income Tax Consequences.
The Company intends that the ESPP qualify as an "employee stock purchase
plan" under Section 423 of the Code. Section 423 allows an employer to grant
options to its employees to purchase company stock at a stipulated price
without having the employees realize taxable income at the time the option is
granted or when exercised. The basis of the stock received on exercise of an
option under the ESPP is the exercise price paid for the stock. The Code
imposes a holding period for favorable tax
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<PAGE>
treatment upon disposition of Common Stock acquired under the ESPP equal to the
later of two years after the grant date or one year after the purchase date.
When the Common Stock is sold after this holding period, the employee will
realize ordinary income up to the amount of any discount (up to a maximum of
15%) from the fair market value of Common Stock as of the grant date. Any
further gain is taxed at long term capital gain rates. If the stock is sold
before the holding period expires, the employee will realize ordinary income to
the extent of the difference between the price actually paid for the stock and
the fair market value of the stock at the purchase date, regardless of the
price at which the stock is sold; and any further gain would be capital gain
(short term or long term, depending on the holding period). If the sale price
is less than the fair market value of the stock on the purchase date, the
employee will realize a capital loss equal to such difference.
The Company may not take a deduction for the difference between the fair
market value of the Common Stock on the date of purchase by the employee and
the purchase price paid for the Common Stock by the employee unless the
employee disposes of the stock before the statutory holding periods expire.
VOTE REQUIRED FOR APPROVAL
As provided under the Kansas General Corporation Code, the Restated Articles
of Incorporation, the By-Laws of the Company and the rules of the NYSE, as
applicable, approval of the ESPP requires the affirmative vote of a majority of
the shareholders voting at the Annual Meeting. Abstentions and broker non-votes
will have no effect on the approval of the ESPP.
The Board of Directors recommends that shareholders vote FOR approval of the
adoption of the Western Resources, Inc. Employee Stock Purchase Plan.
4. PROPOSAL TO APPROVE THE ADOPTION OF THE WESTERN RESOURCES, INC. 1999 SHORT
TERM INCENTIVE PLAN
The Board of Directors adopted the Western Resources, Inc. 1999 Short Term
Incentive Plan (the "Short Term Plan") on January 27, 1999, subject to
shareholder approval. The Company is seeking shareholder approval of the Short
Term Plan to qualify compensation paid under the Plan as "performance-based"
compensation not subject to the limitation on deductibility for federal income
tax purposes of certain executive compensation in excess of $1 million under
Section 162(m) of the Code. The new Short Term Incentive Plan is intended to
serve as a vehicle for making certain annual incentive compensation awards to
employees who are or are expected to become subject to Section 162(m). Annual
incentive compensation awards to other employees (as well as other awards not
intended to qualify under Section 162(m)) will continue to be made under the
Company's existing short term incentive compensation plan.
Purpose.
The purpose of the Short Term Plan is to motivate key executives, managers,
and select exempt employees to achieve the highest level of performance to
further the achievement of the Company's goals, objectives, and strategies. The
Short Term Plan is designed to reward exceptional performance using financial
incentives to supplement base compensation. Also, the Short Term Plan will
enhance the ability of the Company to attract new executive talent when needed.
In addition, the Short Term Plan is intended to benefit the Company in the
pursuit of its goals and objectives by stimulating and
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<PAGE>
motivating officers and select employees, which will in turn enhance
productivity and promote the retention of experienced and qualified executive
talent in a cost effective and efficient manner. A further purpose of the Plan
is to serve as a qualified "performance-based" compensation program under
Section 162(m) of the Code.
Administration.
The Short Term Plan is administered by the Committee. The Committee will have
full and complete discretion (subject to the terms of the Plan) to determine
the persons to whom awards shall be granted, to grant awards under the Short
Term Plan, to determine the terms, conditions, restrictions and performance
goals relating to each award, and to interpret and apply the terms of the Plan.
Eligibility.
The Committee may grant awards under the Short Term Plan to the Chief
Executive Officer of the Company and the other four most highly compensated
officers of the Company and its subsidiaries who are subject to Section 162(m)
of the Code as well as to any other salaried employees or groups of salaried
employees as the Committee may designate. Currently, approximately six of the
Company's employees would be eligible to participate in the Short Term Plan,
including each of the named executive officers. Non-employee directors of the
Company are not eligible to participate in the Short Term Plan.
Awards.
Not later than 90 days after the beginning of each calendar year (or such
other date as may be required or permitted by Section 162(m) of the Code), the
Committee will determine the persons to whom awards will be made for that
calendar year (the "Participants"), select one or more performance measures,
establish objective written performance goals with respect to each selected
performance measure, and establish in writing the award opportunities and other
terms of the awards to be made to each Participant. The performance measures
which may serve as determinants of a Participant's award opportunities are
limited to: total shareholder return, earnings per share, operating income, net
income, pro forma net income, return on shareholders' equity, return on
designated assets, shareholder value added, revenues, capital gains, expenses,
operating profit margin, operating cash flow, net profit margin, and
achievement of operational strategies in terms of control of accidents, lost
time and customer satisfaction. The performance goals may be determined by
reference to the performance of the Company or of a division or unit of the
Company. The selected goals may be different for different Participants.
Performance goals will include a threshold level below which no payment will be
made, a level of performance at which the target payment will be made and a
maximum level of performance above which no additional amount will be paid.
Unless the Committee determines otherwise, a Participant's award opportunity
will be expressed in terms of a percentage of the Participant's eligible
compensation. The Committee may adjust performance goals, to the extent
consistent with Section 162(m) of the Code, to account for extraordinary events
affecting the determination of performance. The maximum amount payable to any
Participant in respect of all awards (other than Insurance-Related Awards
described below) under the Short Term Plan in respect of any calendar year is
$2.8 million.
Payment of Awards.
Payments in respect of awards (other than Insurance-Related Awards described
below) earned under the Plan will be made in cash following the calendar year
for which the award was granted. Before payment is made the Committee must
certify in writing the extent to which the Participant has
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satisfied the performance goals, and payment will be made only to the extent
the award has been earned on account of attainment of such performance goals.
The Committee may not increase the amount payable under an award above the
amount actually earned by the Participant.
If a Participant ceases to be continually employed by the Company (other than
as a result of a Company-approved leave of absence or the Participant's death,
disability or retirement under the Company pension plan's early or normal
retirement provisions), the Participant shall forfeit all rights to the award
for the calendar year not then ended. If the Participant dies, becomes disabled
or retires under the Company pension plan's early or normal retirement
provisions during a calendar year, his or her award for that year will be
prorated to reflect the period of participation prior to termination.
Insurance-Related Awards
In addition to the awards described above, the Committee may make awards
("Insurance-Related Awards") to such eligible employees as the Committee may
select pursuant to which amounts earned by the Participant shall be applied to
the purchase of life insurance policies on the Participant's life in which the
Participant will have an interest as discussed below. Such Insurance-Related
Awards shall be made within the same time periods as other incentive awards
under the Short Term Plan, and the Participant's entitlements under such
Insurance-Related Awards shall be conditioned on such objective written
performance goals as the Committee shall establish. The maximum amount of
compensation that may be earned by any Participant in respect of all Insurance-
Related Awards for any calendar year shall be $10 milllion. The Committee shall
select the applicable performance measure or measures from the same list of
available measures described above.
Following the calendar year for which the Insurance-Related Award was
granted, the Committee will determine the amount earned by the Participant that
is to be applied toward the purchase of a life insurance policy on the life of
the Participant. Before a policy is so purchased, the Committee must certify in
writing the extent to which the Participant has satisfied the performance
goals, and the purchase will be made only to the extent the award has been
earned on account of attainment of such performance goals.
As a condition to the purchase of a life insurance policy on the life of a
Participant, the Participant must enter into an agreement with the Company in
such form as the Committee determines in its sole discretion. Unless the
Committee determines otherwise, such agreement shall include the following:
(i) The Company will be the owner of the policy and will be entitled, upon the
death of the Participant, to the portion of the death benefit equal to the
sum of (A) the greater of the total amount of the premiums paid by the
Company under the policy (as adjusted for interest at a rate determined by
the Committee) or the cash surrender value of the policy, reduced in either
case by any indebtedness against the policy existing at the time of the
Participant's death (including any interest due on such indebtedness)
together with (B) the amount of any death benefit sold to the Company by
the Participant. The balance of the death benefit shall be payable to the
beneficiary or beneficiaries designated by the Participant.
(ii) The Participant will have the right to sell to the Company at a price
determined under a formula established in the agreement all or a portion
of his interest in the death benefit under the Policy, subject to such
terms and conditions as the Committee may determine.
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Amendment and Termination.
The Board of Directors may from time to time and at any time alter, amend,
suspend, discontinue, or terminate the Short Term Plan; provided, however,
that any amendment which requires shareholder approval in order to comply with
Code Section 162(m) shall not be effective unless approved by the
shareholders. The Board of Directors may not modify or terminate the Short
Term Plan to the extent doing so would adversely affect the rights of a
Participant to an outstanding award.
Effective Date.
The Short Term Plan is effective January 1, 1999, subject to shareholder
approval. Any awards granted under the Short Term Plan prior to such
shareholder approval shall be of no effect if such shareholder approval is not
obtained.
Federal Income Tax Consequences.
In respect of awards (other than Insurance-Related Awards) under the Short
Term Plan, a Participant will recognize ordinary income for federal income tax
purposes in an amount equal to the amount paid to the Participant under the
Short Term Plan. The Company generally will be entitled to a corresponding
federal income tax deduction at the time of the payment. The Short Term Plan
has been drafted and is intended to be administered to enable payments under
the Short Term Plan to qualify as "performance-based" compensation for
purposes of Section 162(m) of the Code. Section 162(m) of the Code disallows a
public company's deductions for employee remuneration exceeding $ 1,000,000
per year for the chief executive officer and the four other most highly
compensated executive officers, but contains an exception for "performance-
based" compensation.
The federal income tax treatment of the Insurance-Related Awards will depend
on the specific terms of the applicable arrangements. It is expected that a
Participant will not realize taxable income upon the purchase of a life
insurance policy by the Company but would have taxable income each year equal
to the term life insurance value of the current life insurance protection. In
addition, a Participant would have ordinary compensation income in an amount
equal to the amounts received under the Insurance-Related Awards upon the sale
of any portion of the death benefit to the Company. The Company could not
deduct its premium payments to purchase the life insurance policy or the term
life insurance value, but could deduct the amounts paid to the Participant
upon the sale of any portion of the death benefit to the Company. Neither the
Company nor the beneficiary of the Participant would realize taxable income on
the death benefit payable upon the death of the Participant.
VOTE REQUIRED FOR APPROVAL
As provided under the Kansas General Corporation Code, the Restated Articles
of Incorporation, the By-Laws of the Company and the rules of the NYSE, as
applicable, approval of the Short Term Plan requires the affirmative vote of a
majority of the shareholders voting at the Annual Meeting. Abstentions and
broker non-votes will have no effect on the approval of the Short Term Plan.
The Board of Directors recommends the shareholders vote FOR approval of the
adoption of the Western Resources, Inc. 1999 Short Term Incentive Plan.
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5. PROPOSAL TO APPROVE THE ADOPTION OF AMENDMENTS TO THE 1996 LONG TERM
INCENTIVE AND SHARE AWARD PLAN
The 1996 Long Term Incentive and Share Award Plan (the "Long Term Plan") was
approved by the Company's shareholders at their annual meeting held on May 7,
1996. The purposes of the Long Term Plan are to advance the interests of the
Company and its shareholders by providing a means to attract, retain and
motivate employees and directors of the Company and certain of its subsidiaries
and affiliates upon whose judgment, initiative and efforts the continued
success, growth and development of the Company is dependent.
As a part of this proposal, the Company's shareholders are being asked to
approve an increase in the number of shares of the Company's common stock
reserved for issuance under the Long Term Plan and in certain other
limitations. Such increases are desirable due to the significant expansion in
the class of employees receiving awards under the Long Term Plan and the
developing practice of paying a significant portion of the base compensation of
certain employees in the form of stock and stock equivalents under the Long
Term Plan. In 1998, all non-union employees of the Company received awards of
stock options under the Long Term Plan. In addition, in 1999, the Human
Resources Committee of the Board of Directors approved the recommendations of
management that a significant percentage of officers' and key employees' base
compensation be paid in stock or stock equivalents under the Long Term Plan.
The Company currently anticipates that the practice of paying a portion of base
compensation in the form of stock or stock equivalents will in the future be
expanded to a broad range of employees.
The Long Term Plan permits the grant of a number of types of awards to
participants, including stock options, stock appreciation rights, restricted
shares, restricted share units, performance shares, performance units, dividend
equivalents, and other stock-based awards. The Long Term Plan as currently in
effect places certain limitations on the awards that may be granted under the
Long Term Plan: (i) the total number of shares of the Company's stock reserved
for issuance (the "Overall Limitation") is limited to 3,000,000 shares, (ii)
the maximum number of shares of the Company's stock with respect to which stock
options and stock appreciation rights may be granted during any calendar year
to any eligible employee (the "Option/SAR Limitation") is limited to 75,000
shares, and (iii) the maximum number of shares of the Company's stock (or the
equivalent in value) with respect to which restricted shares and performance
shares may be granted during any calendar year to any eligible employee (the
"Performance/Restricted Share Limitation") is limited to 15,000 shares. These
limitations are subject to adjustment in the event of stock dividends,
recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off or certain other corporate transactions or events. The
Board of Directors believes that (A) the Overall Limitation and the Option/SAR
Limitation should be increased, and (B) the Performance/Restricted Share
Limitation should both be increased and applied only to performance shares,
performance units, restricted shares and restricted share units intended to
qualify for the "performance-based" compensation exception under Section 162(m)
of the Code. Qualifying "performance-based" compensation is not subject to the
$1 million limitation on the deductibility of certain compensation payable to
any of the named executive officers under Section 162(m) of the Code.
Shareholder approval of the Overall Limitation is required in order to qualify
certain stock options as incentive stock options for federal income tax
purposes. Shareholder approval of the Option/SAR Limitation and the
Performance/Restricted Share Limitation is required in order to qualify awards
of stock options, stock appreciation rights, performance shares, performance
units and performance-based restricted shares and restricted share units as
"performance-based" compensation for purposes of Section 162(m) of the Code.
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A further condition for qualifying performance shares and performance units,
and performance-based restricted shares and restricted shares units, as
"performance based" compensation for purposes of Section 162(m) of the Code is
that the shareholders must approve the possible performance criteria for such
awards. Accordingly, the Board of Directors is proposing to add to the Long
Term Plan a list of performance criteria from which the Committee may select
in making performance-based awards. Under the proposed amendment, the list of
performance criteria would be the same as those under the Short Term Plan.
The proposed amendment to the Long Term Plan amends the Long Term Plan in
the following respects:
(i) The Overall Limitation is increased from 3,000,000 shares to 5,000,000
shares;
(ii) The Option/SAR Limitation is increased from 75,000 shares to 350,000
shares;
(iii) The Performance/Restricted Share Limitation is increased from 15,000
shares to 60,000 shares (or the equivalent in value) and is to be
applied only to performance shares, performance units, restricted
shares, and restricted share units intended to qualify as
"performance-based" compensation under Section 162(m) of the Code;
and
(iv) A list of performance criteria is added to the Plan, from which list
the Committee is to select the criterion or criteria to be used in
setting the performance goals for performance shares and performance
units as well as for performance-based restricted shares and
restricted share units. The following is the list of criteria set
forth in the proposed amendment: total shareholder return, earnings
per share, operating income, net income, pro forma net income, return
on shareholders' equity, return on designated assets, shareholder
value added, revenues, capital gains, expenses, operating profit
margin, operating cash flow, net profit margin, and achievement of
operational strategies in terms of control of accidents, lost time and
customer satisfaction. These criteria may be determined by reference
to the Company or a subsidiary or affiliate of the Company or of a
division or unit of any of the foregoing.
VOTE REQUIRED FOR APPROVAL
As provided under the Kansas General Corporation Code, the Restated Articles
of Incorporation, the By-Laws of the Company and the rules of the NYSE, as
applicable, approval of the proposed amendment requires the affirmative vote
of a majority of the shareholders voting at the Annual Meeting. Abstentions
and broker non-votes will have no effect on the approval of the proposed
amendment.
The Board of Directors recommends that the shareholders vote FOR approval of
the amendment.
7. 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.
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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 1999.
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, 1998, was
mailed to shareholders on March [30], 1999. The Report contains financial
statements audited by Arthur Andersen LLP, independent public accountants.
Whether or not you expect to be present at the 1999 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,
Signature
Richard D. Terrill
Secretary
Topeka, Kansas
March [30], 1999
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FORM OF PROXY CARD
[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 1:00 p.m. on May 4,
1999.
Common and Preferred Shareholders of record on March 17, 1999, 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.
t FOLD AND TEAR ALONG PERFORATION t
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Board of Directs recommends a vote FOR all proposals.
Please mark your choice as in this example. n
Will Attend Annual Meeting [_]
1. To elect three directors to class III of the Company's Board of Directors
to serve a term of three years;
2. To approve an amendment to the Restated Articles of Incorporation to
increase the authorized shares of common stock;
3. To approve the adoption of an Employee Stock Purchase Plan;
4. To approve the adoption of Short Term Incentive Plan; and
5. To approve the adoption of amendments to the 1996 Long Term Incentive and
Share Award 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)
<PAGE>
t FOLD AND TEAR ALONG PERFORATION t
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
WESTERN RESOURCES, INC.
Solicited by the Board of Directors for use at the Annual Meeting of
Shareholders of Western Resources, Inc.--May 4, 1999, at 1:00 p.m. in the
Maner Conference Center (Kansas Expocentre) located at the southeast corner of
Seventeenth and Western, Topeka, Kansas.
The undersigned hereby appoints David C. Wittig, William B. Moore, 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 State dated March [30], 1999.
The shares represented by this proxy will be voted as directed by the
shareholder. If no direction is given when the duly executed prosy 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 3230, Pittsburgh,
PA 15230.
