SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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Check the appropriate box:
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[ ] Definitive Additional Materials
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240.14a-12
The Empire District Electric Company
(Name of Registrant as Specified In Its Charter)
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Item 22(a)(2) of Schedule 14A.
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14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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THE EMPIRE DISTRICT ELECTRIC COMPANY
602 Joplin Street
Joplin, Missouri 64801
March 17, 1995
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 Wednesday, April 26, 1995
at the John Q. Hammons Convention Center, 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. Stockholders will also be
asked to approve the Company's 1996 Stock Incentive Plan. The 1996 Stock
Incentive Plan is being proposed because the 1986 Stock Incentive Plan, to which
the 1996 Stock Incentive Plan is similar, is expiring. The 1986 Stock Incentive
Plan has been an important element in the Company's compensation program and has
assisted the Company in maintaining its ability to attract, retain and reward
employees who have executive, managerial, supervisory or professional
responsibilities.
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,
R.L. Lamb
President
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 Wednesday the 26th of
April, 1995, at 10:30 A.M., Joplin time, at the John Q. Hammons Convention
Center, 3615 South Range Line, Joplin, Missouri, for the following purposes:
1. To elect three Directors for terms of three years.
2. To approve the Company's 1996 Stock Incentive Plan.
3. 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 1, 1995 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 17, 1995
G.C. Hunter
Secretary-Treasurer
THE EMPIRE DISTRICT ELECTRIC COMPANY
602 Joplin Street
Joplin, Missouri 64801
_____________________
PROXY STATEMENT
_____________________
ANNUAL MEETING OF STOCKHOLDERS
APRIL 26, 1995
This proxy statement is furnished in connection with the solicitation on
behalf of the Board of Directors of The Empire District Electric Company (the
"Company"), a Kansas corporation, of proxies to be voted at the Annual Meeting
of Stockholders of the Company to be held on Wednesday, April 26, 1995, and at
any and all adjournments of the meeting.
A form of proxy is enclosed for execution by stockholders. 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,
1994 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 17, 1995, 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 1, 1995 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 13,954,629 shares of Common Stock outstanding. Holders
of Common Stock will be entitled to one vote per share on all matters presented
to the meeting.
No person to the knowledge of the Company is the beneficial owner of 5% or
more of any class of the Company's voting securities.
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 present 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.
CLASS I DIRECTORS
(Terms expire in 1997)
R.D. Hammons, 61, President and Director of Hammons Products Company (food
processing). Director of the Company since 1983.
J.R. Herschend, 62, 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, 50, Executive Vice President of the Company since 1994. Vice
President-Customer Services of the Company from 1982 to 1994. Director of the
Company since 1991.
M.M. Posner, 56, 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 1995, nominees for election
at the Annual Meeting of Stockholders for
terms to expire in 1998)
V.E. Brill, 53, Vice President-Finance of the Company. Director of the
Company since 1989.
R.C. Hartley, 47, President of The Hartley Agency (independent insurance
agency); Chairman and Vice President of Kansas Information Consortium, Inc.
(network manager of the Information Network of Kansas). Director of the Company
since 1988.
F.E. Jeffries, 64, President, Chief Executive Officer and Director of Duff
& Phelps Corporation (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 1996)
M.F. Chubb, Jr., 61, Senior Vice President of Eagle-Picher Industries Inc.
(diversified industrial products). Director of the Company since 1991. Director
of Eagle-Picher Industries Inc., Cincinnati, Ohio. On January 7, 1991,
Eagle-Picher Industries Inc. filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code, at which time Mr. Chubb was serving as
Senior Vice President and Director.
R.L. Lamb, 62, President of the Company. Director of the Company since
1978.
R.E. Mayes, 60, Chairman, President and Chief Executive Officer of Carmar
Group (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 $10,500 per annum. In addition, a fee of $600 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 $100 for each such Committee meeting) which such Director
attends in person. During 1994, the Board of Directors held five meetings. The
Company's 1986 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 their 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 1994. 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 two meetings during 1994. The members of the Compensation
Committee are Messrs. Herschend, Jeffries 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 1994. 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.
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 1, 1995 by the
Chief Executive Officer, the four other most highly compensated executive
officers of the Company, 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.
SHARES OF COMMON
STOCK BENEFICIALLY
NAME POSITION OWNED
---------------- ----------------------------- ------------------
R.L. Lamb ........ President 15,350
M.W. McKinney .... Executive Vice President 13,606
V.E. Brill........ Vice President-Finance 5,147
D.A. Vice......... Vice President-Transmission and 13,473
Distribution
R.B. Fancher ..... Vice President-Corporate Services 927
M.F. Chubb, Jr.... Director 995
R.D. Hammons ..... Director 2,336
R.C. Hartley ..... Director 4,691*
J.R. Herschend ... Director 1,500
F.E. Jeffries .... Director 10,665
R.E. Mayes........ Director 1,000
M.M. Posner....... Director 10,800
Directors and executive officers, as a group....... 107,898
_________________
* 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.
2. EXECUTIVE COMPENSATION
Set forth below is information concerning the various forms of compensation
of each person who was at December 31, 1994 (i) the Chief Executive Officer of
the Company or (ii) one of the four most highly compensated executive officers
of the Company, other than the Chief Executive Officer.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- -------------
RESTRICTED ALL OTHER
NAME AND OTHER ANNUAL STOCK COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S)(1) SATION(2)
- ------------------- ------- ----------- ---------- -------------- ----------- ---------
R.L. Lamb ......... 1994 $208,000 $11,341 $ 91 $11,332 $4,308
President.......... 1993 200,500 4,808 835 4,816 4,455
1992 191,500 18,002 -- 18,000 3,870
M.W. McKinney...... 1994 114,500 2,691 143 2,686 3,210
Executive Vice..... 1993 107,000 1,397 930 1,385
President ......... 1992 101,000 5,344 -- 5,362 2,975
V.E. Brill......... 1994 109,000 2,612 212 2,620 3,749
Vice President-- .. 1993 104,500 1,352 -- 1,365 3,430
Finance............ 1992 100,000 5,305 180 5,296 3,268
D.A. Vice.......... 1994 102,000 2,440 184 2,456 3,918
Vice President-- .. 1993 98,000 1,280 -- 1,268 3,539
Transmission and .. 1992 93,000 4,914 82 4,940 3,104
Distribution ......
R.B. Fancher....... 1994 98,000 2,346 1,228 2,358 3,360
Vice President-- .. 1993 94,500 1,229 -- 1,229 --
Corporate.......... 1992 90,000 4,779 -- 4,762 --
Services...........
<FN>
_______________
(1) As of December 31, 1994, Messrs. Lamb, McKinney, Brill, Vice and Fancher
had been awarded 2,045, 602, 595, 552 and 536 shares, respectively, of
unvested restricted stock which on such date had values of $32,720,
$9,632, $9,520, $8,832 and $8,576, respectively and of which 692, 164,
160, 150 and 144 shares, respectively, were awarded for 1994. Dividend
equivalents are paid on such shares. All of the foregoing shares were
awarded pursuant to the Company's 1986 Stock Incentive Plan.
(2) Includes: (a) Company matching contributions under the Company's 401(k)
Retirement Plan in the amounts of $1,500, $3,435, $3,270, $3,060 and
$2,940 for Messrs. Lamb, McKinney, Brill, Vice and Fancher, respectively,
and (b) Company payments of premiums for term life insurance in 1994 on
behalf of Messrs. Lamb, McKinney, Brill, Vice and Fancher in the amounts
of $2,808, $138, $479, $858 and $420, respectively.
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 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
YEARS OF CREDITED SERVICE(b)
AVERAGE ANNUAL ---------------------------------------------------------------------
EARNINGS(a) 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ---------------- ---------- ---------- ----------- ----------- ----------- -----------
$100,000........ $22,925 $30,550 $38,200 $ 45,850 $ 53,475 $ 61,600
125,000........ 29,025 38,675 48,350 58,025 67,700 77,850
150,000........ 35,100 46,800 58,500 70,200 81,925 94,100
175,000........ 41,200 54,925 68,675 82,400 96,125 110,350
200,000........ 47,300 63,050 78,825 94,575 110,350 120,000
225,000........ 53,375 71,175 88,975 106,775 120,000 120,000
250,000........ 59,475 79,300 99,125 118,950 120,000 120,000
__________________
(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.
Lamb, McKinney, Brill, Vice and Fancher covered by the plans correspond
substantially to such amounts shown for them in the Summary Compensation
Table.
(b) As of December 31, 1994, Messrs. Lamb, McKinney, Brill, Vice and Fancher
had accrued 37, 27, 32, 29 and 22 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 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 between two and
three times such participant's annual compensation, as determined by the Board
of Directors and set forth in the applicable agreement. 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. 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 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.
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. The linkage between compensation and Company 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 the Company
achieved specific, predetermined goals over a five-year period. 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. The
Committee sets this amount at the mid-point of the range of total compensation
paid to executives in comparable positions at other utilities. The resulting
amount is adjusted for each senior officer to reflect the officer's experience
and performance. The Committee uses two industry surveys, one prepared by a
national industry association and the other prepared by a management consulting
firm, to assist it in determining the mid-point amount. A greater number of
companies are included in these two surveys than are included in the S&P Utility
Index used in the Performance Chart. The companies included in the surveys are,
for the most part, either electric or electric and gas utilities.
The Company's total compensation package for senior executives, including the
President, has an incentive compensation component. Executives can earn
incentive compensation in years when the Company's performance in certain areas
over a five-year period ending at the end of the year in question meets certain
goals. In 1994, the areas in which Company 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 170 electric and gas
utilities (35%), (2) the five-year compound rate of growth in the Company's
dividends per share, adjusted to reflect the percentage of the Company's
earnings paid out in dividends (25%), (3) reduction of controllable expenses
over a five-year period (20%) and (4) reduction of fuel and purchase power
expenses over a five-year period (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 the Company's performance in an area, the
Company must achieve at least the "threshold" level of performance. Greater
incentive compensation is payable if the Company achieves the "par" or "maximum"
performance levels. If the Company were to achieve the par level objective in
each of the four performance areas, each senior executive would receive
incentive compensation which, when added to base salary, would equal the
individual's target total compensation. In 1994, the Company met the "par" level
of performance for reduction of controllable expenses and the "threshold" level
of performance for return on equity. During 1993, the Company was more dependent
than normal on purchased power and generation from higher cost units as a result
of flood-related outages at two of its plants and reduced deliveries of low-cost
western coal as a result of flooding in the Midwest. Because of the flooding and
certain other planned outages at neighboring utilities, purchased power was more
costly than had been expected. This greater than normal level of dependence on
purchased power and higher cost units in 1993 resulted in the Company failing to
meet the threshold level of performance for reduction of fuel and purchased
power expenses or for dividend growth in 1994.
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 1994, the dividends paid on each share
of the Company's Common Stock were equal to those paid in 1993.
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 11 other investor owned electric
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 1994,
Empire had the lowest retail electric rates of those 12 utilities, which
resulted in a 10% increase in 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 awarded under the Company's 1986 Stock
Incentive Plan. That stock 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.
The President's compensation is determined in the same manner as the
compensation for the other senior executives. In 1994, the President's
compensation was increased 3.7% above 1993 levels, reflecting the Company's
efforts to ensure commercial operation by mid-1995 of the first combustion
turbine unit at the Company's new Stateline Power Plant, its efforts in
determining the sources of its anticipated future capacity needs and its
implementation of a program to improve internal communications and thereby
improve service to the Company's customers. In setting the President's 1994
target total compensation, the Committee also took into account the President's
involvement in local economic development activities and his membership on the
board of directors of two industry organizations. The President's incentive
compensation is based on the same factors as the incentive compensation of the
other senior executive officers, although a greater percentage of the
President's target total compensation is comprised of incentive compensation. As
a result of the level of attainment of the Company's performance goals, the sum
of Mr. Lamb's base salary and his incentive compensation for 1994 was
approximately 89% 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 Internal Revenue Code at this time.
F.E. Jeffries, Chairman
J.R. Herschend
R.E. Mayes
M.M. Posner
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, 1989 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 Index") and the Standard & Poor's Electric
Companies Index ("S&P Electric Co's Index"). The graph assumes that dividends
were reinvested when received.
[GRAPH]
The Empire District S&P 500 S&P Electric Co's
Electric Company Index Index
------------------- ------- ------------------
1989 100.00 100.00 100.00
1990 109.97 96.89 102.61
1991 178.10 126.42 133.58
1992 167.48 136.05 141.43
1993 173.02 149.76 159.26
1994 143.62 151.74 138.44
Compliance with Section 16(a) of the Securities Exchange Act of 1934
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, 1994, all its officers and directors complied with applicable
Section 16(a) filing requirements, except that due to a misunderstanding
regarding the application of the Section 16(a) reporting rules, upon becoming a
Director of the Company, Mr. Herschend inadvertently filed his Form 3 report
late.
3. APPROVAL OF 1996 STOCK INCENTIVE PLAN
The Company currently maintains its 1986 Stock Incentive Plan (the "1986
Plan") which was approved by the stockholders of the Company in 1986 and which
was designed to enable qualified executive, managerial, supervisory and
professional personnel and directors of the Company to acquire or increase their
ownership of Common Stock on reasonable terms. The opportunity so provided was
intended to foster in participants a strong incentive to put forth maximum
effort for the continued success and growth of the Company, to aid in retaining
individuals who put forth such efforts and to assist in attracting the best
available individuals in the future. The 1986 Plan expires in January 1996. The
Board of Directors believes that the 1986 Plan has helped the Company achieve
these goals and accordingly has adopted the 1996 Stock Incentive Plan (the
"Plan"), which is similar to the 1986 Plan, and is submitting the Plan for
stockholder approval.
The following summary of the material features of the Plan is subject in all
respects to the complete text of the Plan. All terms used herein which are
defined in the Plan are used herein as so defined.
Administration
The Plan is to be administered by the members of the Compensation Committee
(the "Committee") of the Board of Directors who are "disinterested persons" as
defined in Rule 16b-3 adopted pursuant to the Securities Exchange Act of 1934,
except that the Secretary of the Company is to administer the portion of the
Plan under which non-employee Directors may elect to receive Common Stock in
lieu of cash remuneration for services as a Director. Subject to the provisions
of the Plan, the Committee's powers include, but are not limited to, determining
the employees of the Company and any subsidiaries to whom awards shall be
granted, and fixing the size, terms and timing of all awards.
Eligibility
The Committee may select as a participant in the Plan any qualified
executive, managerial, supervisory or professional employees, including
officers, of the Company or any subsidiary. A Director who is not an employee is
not eligible to receive awards under the Plan. Awards may be made to eligible
employees whether or not they have received prior awards under the Plan or under
any other plan, and whether or not they are participants in other benefit plans
of the Company. The persons to whom awards will be granted during the term of
the Plan and the positions they hold, or the type of award or number of shares
to be covered by any such awards if the Plan is approved by the stockholders of
the Company, have not yet been determined and it is not anticipated that any
such determination will be made prior to such approval. Therefore, it is not
possible to state in advance the number or type of awards to be made or the
identities of grantees under the Plan in the future. However, the Plan is
similar in operation to the 1986 Plan, under which Messrs. Lamb, McKinney,
Brill, Vice and Fancher received in 1994 the awards set forth in the Summary
Compensation Table. In 1994, all current executive officers as a group and all
employees, including all current officers who are not executive officers, as a
group, received in the aggregate under the 1986 Plan awards of 1,575 and 0
shares, respectively, having values of $25,791 and $0, respectively. Directors
who are not executive officers are not eligible for awards under the 1986 Plan
and accordingly such Directors received no awards under that plan in 1994.
Types of Awards
The Plan permits two types of grants: grants of stock options ("Options")
which can be either incentive stock options ("ISOs"), as defined in the Code, or
non-qualified options, which do not meet the requirements of ISOs, and grants of
restricted stock ("Restricted Stock Awards"). The Committee may provide that
grants may be transferred to immediate family members or entities for the
benefit of such persons; otherwise, grants are not transferrable except by will
or by the laws of descent and distribution.
Stock Options. A stock option is the right to purchase, in the future,
shares of Common Stock at a set price. Under the Plan, the purchase price of
shares subject to any Option must be at least 100% of the Fair Market Value
of the shares on the date of grant. Fair Market Value is defined as the mean
between the high and low prices of the Common Stock on the day the grant is
made.
The maximum term of any Option is ten years from the date the Option was
granted. The Committee can fix a shorter period, and can impose such other
terms and conditions on the grant of Options as it chooses, consistent with
applicable laws and regulations, including the Code requirements discussed
below.
Restricted Stock Awards. A Restricted Stock Award is the grant of a right
to receive Common Stock, either immediately or on a future date upon certain
conditions, which may restrict transfer of the shares received and affect the
timing of the realization of tax consequences on the transaction. The
Committee may also allow the grantee to receive a credit equal to the
dividends payable on the restricted shares awarded to the grantee but not yet
delivered to him and may provide for the payment of such amounts currently or
at the time the related shares are distributed.
Options granted under the Plan are not exercisable until one year after
they are granted, and the restrictions attached to Restricted Stock Awards
may not expire until at least one year after the award is granted. The
Committee may, however, provide for the earlier exercise of Options and the
earlier lapse of restrictions on Restricted Stock Awards in the event of a
change in control of the Company. Similar provisions may be made in the case
of death or disability and, within certain limits, on retirement or other
terminations.
Share Delivery in Lieu of Cash Incentive Awards. The Plan also provides
that an employee (other than certain senior officers) otherwise eligible for
a grant or an award under the Plan may, at the time such employee is eligible
to receive a cash payment under any other management bonus or incentive plan
of the Company (a "Cash Payment") applicable to such employee, make
application to the Committee requesting the delivery of Common Stock in lieu
of all or a portion of such Cash Payment.
Any senior officer otherwise eligible for an award under the Plan who is
eligible to receive a Cash Payment may elect to receive Common Stock
available under the Plan in lieu of all or any portion of future Cash
Payments.
The number of shares so delivered in either case will be equivalent in
dollar value to that of the Cash Payment which would otherwise have been
made, determined on the basis of the fair market value of the shares on the
date of the share delivery.
Share Delivery in Lieu of Directors Fees. The Plan also provides that a
Director may elect to receive Common Stock under the Plan in lieu of all or
any portion of future cash payments for services rendered as a Director.
Shares Available
The maximum number of shares of Common Stock which may be used in connection
with awards under the Plan or share deliveries as described above is 650,000.
The shares so used may be shares held in the treasury, however acquired, or
shares which are authorized but unissued. Any change in the number of
outstanding shares of the Company occurring through stock splits, combination of
shares, recapitalization or stock dividends after the adoption of the Plan shall
be appropriately reflected by the Committee through an increase or decrease in
the aggregate number of shares then available for the grant of awards under the
Plan or share deliveries as described above, or to become available through the
termination, surrender or lapse of awards previously granted and in the number
of shares subject to Restricted Stock Awards then outstanding; and appropriate
adjustments shall be made by the Committee in the per share option price and/or
number of shares subject to the Option as to any outstanding Options. No
fractional shares shall result from such adjustments. Similar adjustments shall
be made in the event of distribution of other securities in respect of
outstanding shares or in the event of a reorganization, merger, consolidation or
any other change in the corporate structure or shares of the Company, if and to
the extent that the Committee deems such adjustments appropriate.
Any shares subject to Options which lapse unexercised and any shares forming
part of a Restricted Stock Award which do not vest in the grantee shall once
again be available for grant of awards and share deliveries. Shares delivered in
lieu of cash payments are also considered to have been used by the Plan and are
not available for further awards or such delivery.
Duration of the Plan
No awards may be granted under the Plan after December 31, 2005, although the
terms of any award may be amended at any time prior to the expiration of the
award in accordance with the Plan.
Exercise of Options and Purchase Price
Upon the exercise of an Option the optionee must deliver to the Company the
full purchase price of the shares represented by the Option being exercised.
Such purchase price can be paid either in cash or Common Stock having a then
Fair Market Value equivalent to the purchase price, or any combination thereof.
Termination, Suspension or Modification
The Board may at any time terminate, suspend or modify the Plan, but to the
extent required by applicable law, no member of the Board who is an officer or
employee of the Company or a subsidiary may vote on any matter relating to his
or her own individual interest thereunder. Stockholder approval is required,
however, for any change which increases the aggregate number of shares for which
Options or Restricted Stock Awards may be granted and which may be the subject
of share deliveries; lowers the minimum Option price; lengthens the maximum
period during which an Option may be exercised; renders any member of the
Committee eligible to receive an award while serving thereon; changes the class
of employees eligible to receive awards; extends the period of time during which
awards may be granted; removes the restriction prohibiting any member of the
Board who is an officer or employee of the Company or any subsidiary from voting
on any proposed amendment to the Plan or on any matter relating to his own
individual interest under the Plan if applicable law so requires; or otherwise
materially increases the benefits accruing to grantees or their successors under
the Plan. No termination, suspension or modification of the Plan may adversely
affect any right acquired by any grantee under an Option or Restricted Stock
Award previously granted, without the grantee's consent. Adjustments for changes
in capitalization or corporate transactions as described above shall not be
deemed to adversely affect any such right.
Other Considerations
Certain features of the Plan, including the right to make awards immediately
exercisable in the event of a change in control of the Company and adjustments
for changes in capitalization and corporate transactions, may have the effect of
making acquisition of control of the Company more difficult.
Other Actions
Nothing in the Plan shall be construed to limit the authority of the Company
to exercise all of its corporate rights and powers, including, by way of
illustration and not by way of limitation, the right to grant options for proper
corporate purposes otherwise than under the Plan to any employee or any other
person, firm, corporation, association or other entity, or to grant options to,
or assume options of, any person in connection with the acquisition by purchase,
lease, merger, consolidation or otherwise of all or any part of the business or
assets of any person, firm, corporation, association or other entity.
Federal Tax Consequences
Awards of Options under the Plan may be either ISOs or non-qualified stock
options. An Option designated as an ISO is intended to qualify as such under
Section 422 of the Internal Revenue Code. The aggregate Fair Market Value,
determined at the time of grant, of the shares with respect to which ISOs become
exercisable for the first time by any one individual during any calendar year
may not exceed $100,000. Non-qualified stock options are not subject to the
requirements of Section 422 of the Internal Revenue Code.
A participant does not realize income for federal income tax purposes as a
result of (i) the grant of an ISO or (ii) the exercise of an ISO, if the
participant does not dispose of the acquired stock within the period ending on
the later of two years from the date of grant or one year from the date of
exercise of the Option. (However, the amount by which the fair market value of
the stock at the time of exercise exceeds the Option price constitutes an item
of adjustment for alternative minimum tax purposes.) If the optionee of an ISO
disposes of the stock acquired thereunder after the expiration of the required
holding period (later of two years from date of grant of the Option or one year
from the date of exercise), any gain or loss realized is treated as long-term
capital gain or loss. The Company is not entitled to a federal income tax
deduction upon the grant or exercise of an ISO. If the optionee of an ISO
disposes of the stock acquired thereunder prior to the expiration of the
required holding period (later of two years from the date of grant of the Option
or one year from the date of exercise) the optionee generally realizes ordinary
taxable income in the year of disposition in an amount equal to the excess of
the fair market value of the stock at the time of exercise (or, if less, the
amount realized on the sale) over the Option price, and the same amount is then
deductible by the Company; any additional gain on the sale is long-term or
short-term capital gain (depending on the holding period) and not deductible by
the Company.
Similarly, a participant realizes no income as a result of the grant of a
non-qualified stock option. However, a participant generally realizes ordinary
income upon the exercise of a non-qualified stock option, equal to the excess of
the fair market value of the stock at the time of exercise over the Option
price. Officers and Directors subject to Section 16(b) of the Securities
Exchange Act of 1934 ("Section 16(b)") are subject to different rules which are
discussed below. The Company is not entitled to a federal income tax deduction
upon the grant of a non-qualified stock option, but upon its exercise (or, if
applicable, at the later date described below in the case of an officer or
Director subject to Section 16(b)) an amount corresponding to the participant's
taxable income becomes deductible by the Company.
In the event Common Stock is delivered in lieu of cash payments, the fair
market value of the shares of Common Stock so received will be taxable to the
employee or Director as ordinary income. The tax basis of any shares so received
will be their fair market value on the date of their receipt.
The discussion above of the tax treatment of non-qualified stock options is
applicable to a participant who is subject to Section 16(b) only if the
non-qualified stock option was granted at least six months before the date of
exercise and the option is not out-of-the-money at the time of exercise. If the
non-qualified stock option was granted less than six months before the date of
exercise, then the taxable event for the participant will generally be deferred
until the date which is six months after the date of grant (with the taxable
amount based on the excess of the fair market value of the Common Stock at that
time over the Option price), unless the participant elects to be taxed at the
date of exercise pursuant to Section 83(b) of the Code. If the option is
out-of-the-money at the time of exercise, then the taxable event for the
participant will generally be deferred until the date which is six months after
the date of exercise (with the taxable amount based on the excess of the fair
market value of the Common Stock at that time over the Option price), unless the
participant elects to be taxed at the date of exercise pursuant to Section 83(b)
of the Code. The Internal Revenue Service has not issued guidance on the
interaction of the Code and the current rules under Section 16(b). Accordingly,
it is possible that future guidance from the Internal Revenue Service could
affect the timing of the taxable event for a participant subject to Section
16(b).
Under the Code, the federal income tax consequences with respect to a
Restricted Stock Award depend on the facts and circumstances of the Restricted
Stock Award; and, in particular, the nature of the restrictions imposed with
respect to the shares which are the subject of the Restricted Stock Award. In
general, if the shares which are the subject of the Restricted Stock Award are
subject to a "substantial risk of forfeiture" (including the existence of the
six-month restriction imposed by Section 16(b) in the case of an officer or
director or if rights to ownership of the shares are conditioned upon the future
performance of substantial services by the grantee) a taxable event occurs only
when the risk of forfeiture ceases and not before. At such time, the grantee
will realize ordinary income to the extent of the excess of the fair market
value of the shares on the date the risk of forfeiture terminates over the
grantee's cost for such shares (if any), and the same amount is then deductible
by the Company. Under certain circumstances, the grantee, by making an election
under Code Section 83(b), can accelerate the taxable event with respect to the
shares, in which event the ordinary income amount and the Company's deduction
will be measured and timed as of the date the shares is deemed for Section 83(b)
purposes to have been transferred to the grantee. If the restrictions with
respect to shares which are the subject of a Restricted Stock Award, by their
nature, do not subject the grantee to a "substantial risk of forfeiture" of the
shares, then the grantee will realize ordinary income with respect to the shares
to the extent of the excess at the time of the grant of the fair market value of
the shares over the grantee's cost therefor, if any, and the same amount is then
deductible by the Company. The Company's deductions for compensation paid under
the Plan are in all cases subject to the requirement of reasonableness.
The foregoing is only a summary of the principal tax consequences to the
Company and grantees from the grant of awards under the Plan.
The Board of Directors recommends that you vote FOR this proposal. The
affirmative vote of the holders of a majority of the Common Stock present, or
represented, and entitled to vote at the annual meeting is required for approval
of the Plan. Shares which abstain will have the same effect as votes against the
Plan.
4. 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.
5. STOCKHOLDER PROPOSALS
The Company will not consider including a stockholder's proposal for action
at its 1996 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 18, 1995.
Dated: March 17, 1995
_________________________
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.
APPENDIX A
THE EMPIRE DISTRICT ELECTRIC COMPANY
1996 STOCK INCENTIVE PLAN
1. Purpose
The Empire District Electric Company 1996 Stock Incentive Plan is designed
to enable qualified executive, managerial, supervisory and professional
personnel and directors of The Empire District Electric Company to acquire or
increase their ownership of the common stock of the Company on reasonable terms.
The opportunity so provided is intended to foster in participants a strong
incentive to put forth maximum effort for the continued success and growth of
the Company, to aid in retaining individuals who put forth such efforts, and to
assist in attracting the best available individuals in the future.
2. Definitions
When used herein, the following terms shall have the meaning set forth
below:
2.1. "Award" shall mean an Option or a Restricted Stock Award.
2.2. "Board" means the Board of Directors of The Empire District Electric
Company.
2.3. "Committee" means the members of the Board's Compensation Committee
who are "disinterested persons" as defined in Rule 16b-3 adopted pursuant to the
Securities Exchange Act of 1934.
2.4. "Code" means the Internal Revenue Code of 1986, as amended.
2.5. "Company" means The Empire District Electric Company, a Kansas
corporation.
2.6. "Fair Market Value" means with respect to the Company's Shares the
mean between the high and low prices of Shares on the New York Stock Exchange
Composite Tape on the day on which an Award is granted (or Shares are delivered
in lieu of current cash compensation as permitted by the Plan) or, if there
should be no sale on that date, on the next preceding day on which there was a
sale.
2.7. "Grantee" means a person to whom an Award is made.
2.8. "Incentive Stock Option" or "ISO" means an Option awarded under the
Plan which meets the terms and conditions established by Section 422 of the Code
and applicable regulations.
2.9. "Non-Qualified Stock Option" or "NQSO" means an Option awarded under
the Plan other than an ISO.
2.10. "Option" means the right to purchase a number of Shares, at a price,
for a term, under conditions, and for cash or other consideration fixed by the
Committee and expressed in the written instrument evidencing the Option. An
Option may be either an ISO or NQSO.
2.11. "Plan" means the Company's 1996 Stock Incentive Plan.
2.12. "Restricted Stock Award" means the grant of a right to receive a
number of Shares at a time or times fixed by the Committee in accordance with
the Plan and subject to such limitations and restrictions as the Plan and the
Committee (as expressed in the written instrument evidencing the Restricted
Stock Award) impose.
2.13. "Right of First Refusal" means the right which may be given to the
Company pursuant to Section 7.4 hereof to purchase Shares received pursuant to
Awards under the Plan at their then Fair Market Value, in the event the holder
of such Shares desires to sell the Shares to any other person. This right, if so
given, shall apply under terms and conditions established by the Committee at
the time of the Award and included in the written instrument evidencing the
Award, and shall apply to sales by the Grantee or the Grantee's guardian, legal
representative, joint tenant, tenant in common, heirs or Successors.
2.14. "Shares" means shares of the Company's common stock, par value $1.00
per share, or, if by reason of the adjustment provisions hereof any rights under
an Award under the Plan pertain to any other security, such other security.
2.15. "Subsidiary" means any business, whether or not incorporated, in
which the Company, at the time an Award is granted to an employee thereof, or in
other cases, at the time of reference, owns directly or indirectly not less than
50% of the equity interest except that with respect to an ISO the term
"Subsidiary" shall have the meaning set forth in Section 424(f) of the Code.
2.16. "Successor" means the legal representative of the estate of a
deceased Grantee or the person or persons who shall acquire the right to
exercise an Option, or to receive Shares issuable in satisfaction of a
Restricted Stock Award, by bequest or inheritance or by reason of the death of
the Grantee,as provided in accordance with Section 9 hereof, or by reason of a
transfer permitted pursuant to Section 8 hereof.
2.17. "Term" means the period during which a particular Option may be
exercised or the period during which the restrictions placed on a Restricted
Stock Award are in effect.
3. Administration of the Plan
3.1. The Plan (other than the portion thereof described in Section 3.7)
shall be administered by the Committee.
3.2. Subject to the provisions of the Plan, the Committee shall have the
sole authority to determine:
(i) the employees of the Company and its Subsidiaries to whom Awards
shall be granted;
(ii) the number of Shares to be covered by each Award;
(iii) the price to be paid for the Shares upon the exercise of each
Option;
(iv) the Term within which each Option may be exercised;
(v) the terms and conditions of each Option, which may include
provisions for payment of the option price in Shares at the Fair Market
Value of such Shares on the day of their delivery for such purpose;
(vi) the restrictions on transfer and forfeiture conditions with
respect to a Restricted Stock Award; and
(vii) any other terms and conditions of the Award.
Awards shall be made by the Committee.
3.3. The Committee may construe and interpret the Plan, reconcile
inconsistencies thereunder and supply omissions therefrom. Any decision or
action taken by the Committee in the exercise of such powers or otherwise,
arising out of or in connection with the construction, administration,
interpretation and effect of the Plan and of its rules and regulations, shall be
conclusive and binding upon all Grantees, and any other person claiming under or
through any Grantee.
3.4. The Committee shall designate one of its members as Chairman. It shall
hold its meetings at such times and places as it may determine. All
determinations of the Committee shall be made by a majority of its members at
the time in office. Any determination reduced to writing and signed by a
majority of the members of the Committee at the time in office shall be fully as
effective as if it has been made at a meeting duly called and held. The
Committee may appoint a Secretary, who need not be a member of the Committee,
and may establish and amend such rules and regulations for the conduct of its
business and the administration of the Plan as it shall deem advisable.
3.5. No member of the Committee shall be liable, in the absence of bad
faith, for any act or omission with respect to his service on the Committee.
Service on the Committee is hereby specifically declared to constitute service
as a Director of the Company, to the end that the members of the Committee
shall, in respect of their acts and omissions as such, be entitled to
indemnification and reimbursement as Directors of the Company pursuant to its
Bylaws and to the benefits of any insurance policy maintained by the Company
providing coverage with respect to acts or omissions of Directors of the
Company.
3.6. The Committee shall regularly inform the Board as to its actions under
the Plan in such manner, at such times, and in such form as the Board may
request.
3.7. Anything in the Plan to the contrary notwithstanding, the foregoing
provisions of this Section 3 shall not apply to the portion of the Plan relating
to Directors who are not employees of the Company or any of its Subsidiaries and
who have the right to elect to receive Shares in lieu of cash Remuneration
pursuant to Section 19.3. Such portion of the Plan shall instead be administered
by the Secretary of the Company. Since the receipt of Shares by any such
non-employee Director of the Company is based on elections by such Director,
this administrative function shall be limited to matters of interpretation and
administrative oversight.
4. Eligibility
Awards may be made under the Plan only to the class of employees of the
Company or of a Subsidiary, including officers, consisting of those employees
who have executive, managerial, supervisory or professional responsibilities. A
Director who is not an employee shall not be eligible to receive an Award.
Awards may be made to eligible employees whether or not they have received prior
Awards under the Plan or under any other plan, and whether or not they are
participants in other benefit plans of the Company.
5. Shares Subject to Plan
The maximum number of Shares which may be used in connection with Awards or
Share deliveries under the Plan is 650,000. The Shares so used may be Shares
held in the treasury, however acquired, or Shares which are authorized but
unissued. Any Shares subject to Options which lapse unexercised and any Shares
forming part of a Restricted Stock Award which do not vest in the Grantee shall
once again be available for grant of Awards or delivery under Section 19.
6. Granting of Options
6.1. Subject to the terms of the Plan, the Committee may from time to time
grant Options to eligible employees.
6.2. No individual may be granted Options intended to qualify as ISOs under
the Plan and all other incentive stock option plans of the Company (and its
parent or subsidiary corporation, if any, within the meaning of Section 424 of
the Code) which are exercisable for the first time during any calendar year with
respect to Shares having an aggregate Fair Market Value (determined as of the
time the Option is granted) greater than $100,000. To the extent that Options
granted to an individual exceed the limitation set forth in the preceding
sentence, the later-granted of such Options shall be treated as NQSOs. No ISO
shall be granted to an individual who, at the time the ISO is granted, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing more than
10 percent of the total combined voting power of all classes of stock of the
employee's employer corporation or of its parent or subsidiary corporation
unless, at the time the ISO is granted, the option price is at least 110 percent
of the Fair Market Value of the stock subject to the ISO, and the ISO by its
terms is not exercisable after the expiration of five years from the date the
ISO is granted.
6.3. The purchase price of each Share subject to an Option shall be fixed
by the Committee, but shall not be less than the greater of the par value of the
Share or 100% of the Fair Market Value of the Share on the date the Option is
granted.
6.4. Each Option shall expire and all rights to purchase Shares thereunder
shall terminate on the date fixed by the Committee and expressed in the written
instrument evidencing the Option, which date shall not be after the expiration
of ten years from the date the Option is granted.
6.5. Subject to the terms of the Plan, each Option shall become exercisable
at the time, and for the number of Shares, fixed by the Committee and expressed
in the written instrument evidencing the Option. Except to the extent otherwise
provided in or pursuant to Sections 9 and 10, no Option shall become exercisable
as to any Shares prior to the first anniversary of the date on which the Option
was granted.
6.6. Subject to the terms of the Plan, the Committee may at the time of the
Award make all or any portion of the Shares issuable upon exercise of the Option
subject to a Right of First Refusal for any period of time designated by the
Committee in the written instrument evidencing the Award.
7. Restricted Stock Awards
7.1. Subject to the terms of the Plan, the Committee may also grant
eligible employees Restricted Stock Awards.
7.2. The number of Shares covered thereby and other terms and conditions of
any such Restricted Stock Award, including the period for which and the
conditions on which the Shares included in the Award will be subject to
forfeiture and restrictions on transfer or on the ability of the Grantee to make
elections with respect to the taxation of the Award without the consent of the
Committee, shall be determined by the Committee and expressed in the written
instrument evidencing the Award. Except as provided in or pursuant to Sections 9
and 10, no such restrictions shall lapse earlier than the first, or later than
the tenth, anniversary of the date on which the Award was granted.
7.3. The Committee may establish and express in the written instrument
evidencing the Award terms and conditions under which the Grantee of a
Restricted Stock Award shall be entitled to receive a payment equivalent to any
dividend payable with respect to the number of Shares which, as of the record
date for which dividends are payable, has been awarded to him but not delivered
to him. Any such dividend equivalents shall be paid to the Grantee of the
Restricted Stock Award at such time or times during the period when the Shares
are as yet undelivered pursuant to the terms of the Restricted Stock Award, or
at the time the Shares to which the dividend equivalents apply are delivered to
the Grantee, all as the Committee shall determine and express in the written
instrument evidencing the Award. Any arrangement for the payment of dividend
equivalents shall be terminated if, and to the extent that, under the terms and
conditions so established by the Committee, the right to receive Shares being
held pursuant to the terms of the Restricted Stock Award shall lapse.
7.4. Subject to the terms of the Plan, the Committee may at the time of the
Award make all or any portion of the Shares awarded under a Restricted Stock
Award subject to a Right of First Refusal for any period of time designated by
the Committee and expressed in the written instrument evidencing the Award.
8. Non-Transferability of Rights
Except as otherwise provided in the next sentence of this Section 8, no
Option and no rights under any Restricted Stock Award shall be transferable by
the Grantee otherwise than by will or the laws of descent and distribution, and
each Option may be exercised during the lifetime of the Grantee only by him; and
the written instrument evidencing each Option and each Restricted Stock Award
shall so state. The Committee may in its discretion, on such terms and
conditions as it shall establish, permit an Option or Restricted Stock Award to
be transferred to a member or members of the Grantee's immediate family, or to a
trust for the benefit of such immediate family members or a partnership in which
such immediate family members are the only partners. For purposes of this
provision, a Grantee's immediate family shall mean the Grantee's spouse,
children and grandchildren.
9. Death or Termination of Employment
9.1. Subject to the provisions of the Plan, the Committee may make and
include in the written instrument evidencing an Option such provisions
concerning exercise or lapse of the Option on death or termination of employment
as it shall in its discretion determine. No such provision shall permit an
Option to be exercised later than the expiration date of the Option determined
pursuant to Section 6.4.
9.2. No ISO shall be exercisable after the date which is three months
following the Grantee's termination of employment for any reason other than
death or disability, or after twelve months following the Grantee's termination
of employment by reason of disability.
9.3. The effect of death or termination of employment on Shares issuable or
deliverable pursuant to any Restricted Stock Awards shall be as stated in the
written instrument evidencing the Award.
9.4. A transfer of employment between the Company and a Subsidiary, or
between Subsidiaries, shall not constitute a termination of employment for
purposes of any Award. The Committee may specify in the written instrument
evidencing the Award whether or not, and if at all to what extent, any
authorized leave of absence or absence for military or governmental service or
for any other reason shall constitute a termination of employment for purposes
of the Award and the Plan.
10. Provisions Relating to Change in Control
The Committee may provide in the written instrument evidencing an Award
that in the event of a "Change in Control" of the Company (as defined by the
Committee in such written instrument), the Option so evidenced shall be
immediately exercisable in full and the Restricted Stock Award so evidenced
shall be immediately payable in full. The Committee may also include in such
written instrument additional conditions for such immediate exercisability of an
Option or immediate payment in full of a Restricted Stock Award, including
without limitation conditions relating to the timing and/or circumstances of the
Grantee's termination of employment following the "Change in Control."
11. Writing Evidencing Awards
Each Award granted under the Plan shall be evidenced by a writing which
may, but need not, be in the form of an agreement to be signed by the Grantee.
The writing shall set forth the nature and size of the Award, its Term, the
other terms and conditions thereof, and such other matters as the Committee
directs. Acceptance of any benefits of an Award by the Grantee shall be an
assent to the terms and conditions set forth therein, whether or not the writing
is in the form of an agreement signed by the Grantee.
12. Exercise of Rights Under Awards
12.1. A person entitled to exercise an Option may do so only by delivery of
a written notice to that effect specifying the number of Shares with respect to
which the Option is being exercised and any other information which the
Committee has previously prescribed and of which such person has been notified.
12.2. Such a notice shall be accompanied by payment in full for the
purchase price of any Shares to be purchased thereunder, with such payment being
made in cash or Shares having a Fair Market Value on the date of exercise of the
Option equal to the purchase price payable under the Option or a combination of
cash and Shares, and no Shares shall be issued upon exercise of an Option until
full payment has been made therefor.
12.3. Upon exercise of an Option, or after grant of a Restricted Stock
Award but before delivery of Shares in satisfaction thereof, the Grantee may
request in writing that the Shares to be issued or delivered be in the name of
the Grantee and another person as joint tenants with right of survivorship or,
in the case of a Restricted Stock Award or NQSO, as tenants in common.
12.4. Upon exercise of an Option or after grant of a Restricted Stock Award
under which a Right of First Refusal has been required with respect to some or
all of the Shares subject to such Option, or included in the Restricted Stock
Award, the Grantee shall be required to acknowledge, in writing, his or her
understanding of such Right of First Refusal and the legend which shall be
placed on the certificates for such Shares in respect thereof.
12.5. All notices or requests by a Grantee provided for herein shall be
delivered to the Secretary of the Company.
13. Effective Date of the Plan and Duration
13.1. The Plan shall become effective on January 1, 1996, subject to
approval within twelve months before or after that date by the shareholders of
the Company at a meeting duly held in accordance with applicable law; and
subject to approval within applicable time limits by any governmental body, the
approval of the Plan by which body is required under applicable law. No Option
shall be exercisable nor shall any Shares be deliverable under a Restricted
Stock Award prior to receipt of all required approvals.
13.2. No Awards may be granted under the Plan after December 31, 2005,
although the terms of any Award may be amended at any time prior to the
expiration of the Award in accordance with the Plan.
14. Date of Award
The date of an Award shall be the date on which the Committee's
determination to grant the same is final, or such later date as shall be
specified by the Committee in connection with such determination.
15. Stockholder Status
No person shall have any rights as a stockholder by virtue of the grant of
an Award under the Plan except with respect to Shares actually issued to that
person.
16. Postponement of Exercise
The Committee may postpone any exercise of an Option or the delivery of any
Shares pursuant to a Restricted Stock Award for such period as the Committee in
its discretion may deem necessary in order to permit the Company (i) to effect
or maintain registration of the Plan or the Shares issuable upon the exercise of
an Option or distributable in satisfaction of a Restricted Stock Award or both
under the Securities Act of 1933, as amended, or the securities laws of any
applicable jurisdiction, (ii) to permit any action to be taken in order to
comply with restrictions or regulations incident to the maintenance of a public
market for its Shares or to list the Shares thereon, or (iii) to determine that
such Shares and the Plan are exempt from such registration or that no action of
the kind referred to in (ii) above shall or need be taken; and the Company shall
not be obligated by virtue of any terms and conditions of any Award or any
provision of the Plan to permit the exercise of an Option or to sell or deliver
Shares in violation of the Securities Act of 1933 or other applicable law. Any
such postponement shall not extend the Term of an Option nor shorten the Term of
any restriction applicable under any Restricted Stock Award; and neither the
Company nor its directors or officers or any of them shall have any obligation
or liability to the Grantee of an Award, to any Successor of a Grantee or to any
other person with respect to any Shares as to which an Option shall lapse
because of such postponement or as to which issuance under a Restricted Stock
Award was thereby delayed.
17. Termination, Suspension or Modification of Plan
The Board may at any time terminate, suspend or modify the Plan, except
that the Board shall not, without authorization of the shareholders of the
Company, effect any change (other than through adjustment for changes in
capitalization or corporate transactions as herein provided) which:
(a) increases the aggregate number of Shares for which Awards may be
granted and which may be the subject of Share deliveries under Section 19;
(b) lowers the minimum Option price;
(c) lengthens the maximum period during which an Option may be
exercised;
(d) renders any member of the Committee eligible to receive an Award while
serving thereon;
(e) changes the class of employees eligible to receive Awards;
(f) extends the period of time during which Awards may be granted;
(g) removes the restrictions set forth in the last sentence of this
Section; or
(h) otherwise materially increases the benefits accruing to Grantees
or their Successors under the Plan.
No termination, suspension or modification of the Plan shall adversely
affect any right acquired by any Grantee or any Successor of a Grantee under an
Award granted before the date of such termination, suspension or modification
unless such Grantee or Successor shall consent thereto. Adjustments for changes
in capitalization or corporate transactions as provided for herein shall not,
however, be deemed to adversely affect any such right. To the extent required by
applicable law, no member of the Board who is an officer or employee of the
Company or a Subsidiary shall vote (in his or her capacity as such a Board
member) on any proposed amendment to the Plan, or on any other matter or
question arising under the Plan, relating to his or her own individual interest
thereunder.
18. Adjustment for Changes in Capitalization
and Corporate Transactions
Any change in the number of outstanding shares of the Company occurring
through stock splits, combination of shares, recapitalization, or stock
dividends after the adoption of the Plan shall be appropriately reflected by the
Committee through an increase or decrease in the aggregate number of Shares then
available for the grant of Awards or Share deliveries under the Plan, or to
become available through the termination, surrender or lapse of Awards
previously granted and in the number of Shares subject to Restricted Stock
Awards then outstanding; and appropriate adjustments shall be made by the
Committee in the per Share option price and/or number of Shares subject to the
Option as to any outstanding Options. No fractional shares shall result from
such adjustments. Similar adjustments shall be made in the event of distribution
of other securities in respect of outstanding shares or in the event of a
reorganization, merger, consolidation or any other change in the corporate
structure or shares of the Company, if and to the extent that the Committee
deems such adjustments appropriate.
19. Delivery of Shares in Lieu of Cash
Incentive Awards or Directors Fees
19.1. Any employee (other than an officer as defined in Rule 16a-1(f)
adopted pursuant to the Securities Exchange Act of 1934 [each such officer, an
"Officer"]) otherwise eligible for an Award under the Plan who is eligible to
receive a cash bonus or incentive payment from the Company under any management
bonus or incentive plan of the Company (any such bonus or payment, a "Cash
Payment") may make application to the Committee in such manner as may be
prescribed from time to time by the Committee to receive Shares available under
the Plan in lieu of all or any portion of such Cash Payment.
The Committee may in its discretion honor an employee's application made
pursuant to this Section 19.1 by delivering Shares available under the Plan to
such employee equal in Fair Market Value at the delivery date to that portion of
the Cash Payment for which a Share delivery is to be made in lieu of cash
payment.
19.2. Any Officer otherwise eligible for an Award under the Plan who is
eligible to receive a Cash Payment may make application to the Committee in such
manner as may be prescribed from time to time by the Committee to receive Shares
available under the Plan in lieu of all or any portion of future Cash Payments.
Any such application shall be in writing and delivered to the Secretary of the
Company. Each such application shall state that it is irrevocable and shall
indicate that all or a specified portion of any Cash Payment which becomes
payable after a date specified in such notice is requested to be paid in Shares,
such date to be at least six months from the date such application is so
delivered. Any such application may be changed or terminated only by an
application meeting the requirements of the preceding sentence.
The Committee may in its discretion honor an Officer's application made
pursuant to this Section 19.2 by delivering Shares available under the Plan to
such Officer equal in Fair Market Value at the delivery date to that portion of
the Cash Payment for which a Share delivery is to be made in lieu of cash
payment.
19.3. Any non-employee Director who is entitled to a cash payment for
services rendered as a non-employee Director ("Remuneration") may elect to
receive Shares available under the Plan in lieu of all or any portion of his or
her Remuneration or to change or terminate any such election previously made.
Any such election shall be in writing and delivered to the Secretary of the
Company. Such election shall state that it is irrevocable and shall indicate the
date after which Remuneration shall be paid as set forth in such election, which
date shall be at least six months from the date such election is so delivered.
Shares which are available under the Plan shall be delivered to a Director
who makes an election in compliance with this Section 19.3 equal in Fair Market
Value at the delivery date to that portion of the Remuneration for which a Share
delivery is to be made in lieu of cash payment.
19.4. Any Shares delivered to an employee under Section 19.1, to an Officer
under Section 19.2 or to a Director under Section 19.3 shall reduce the
aggregate number of Shares available for Awards or Share deliveries under the
Plan.
19.5. Delivery of Shares pursuant to this Section 19 shall not be permitted
under the Plan after December 31, 2005. Delivery of Shares pursuant to this
Section 19 shall be deemed to occur on the date certificates therefor are sent
by United States mail or hand delivered to the recipient.
19.6. The Company shall issue cash in lieu of fractional Shares which would
otherwise be issuable under this Section 19.
20. Non-Uniform Determination Permissible
The Committee's determinations under the Plan including, without
limitation, determinations as to the persons to receive Awards, the form, amount
and type of Awards (i.e., ISOs, NQSOs or Restricted Stock Awards), the terms and
provisions of Awards, the written instruments evidencing such Awards, and the
granting or rejecting of applications for delivery of Shares in lieu of cash
bonus or incentive payments need not be uniform as among persons similarly
situated and may be made selectively among otherwise eligible employees or
Directors, whether or not such employees or Directors are similarly situated.
21. Taxes
The Company shall be entitled to withhold the amount of any withholding tax
payable with respect to any Awards and Share deliveries in lieu of cash payments
and to sell such number of Shares as may be necessary to produce the amount so
required to be withheld, unless the recipient supplies to the Company cash in
the amount requested by the Company for the purpose. The person entitled to
receive Shares pursuant to the Award will be given notice as far in advance as
practicable to permit such cash payment to be made to the Company. The Company
may, in lieu of sale of Shares, defer making delivery of Shares until
indemnified to its satisfaction with respect to any such withholding tax. The
Committee may adopt rules allowing the recipient of any Award payable in Shares,
or any person electing to receive Shares under Section 19, to satisfy any
applicable tax withholding requirements in whole or in part by delivering to the
Company Shares or by instructing the Company to withhold Shares otherwise
deliverable to such person as part of such Award, in either case with a Fair
Market Value not in excess of the amount of the applicable withholding
requirements.
22. Tenure
An employee's right, if any, to continue in the employ of the Company or a
Subsidiary shall not be affected by the fact that he is a participant under the
Plan; and the Company or Subsidiary shall retain the right to terminate his
employment without regard to the effect such termination may have on any rights
he may have under the Plan.
23. Application of Proceeds
The proceeds received by the Company from sale of its Shares pursuant to
Options granted under the Plan shall be used for general corporate purposes.
24. Other Actions
Nothing in the Plan shall be construed to limit the authority of the
Company to exercise all of its corporate rights and powers, including, by way of
illustration and not by way of limitation, the right to grant options for proper
corporate purposes otherwise than under the Plan to any employee or any other
person, firm, corporation, association or other entity, or to grant options to,
or assume options of, any person in connection with the acquisition by purchase,
lease, merger, consolidation or otherwise of all or any part of the business or
assets of any person, firm, corporation, association or other entity.