<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
THE WASHINGTON WATER POWER COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
THE WASHINGTON WATER POWER COMPANY
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / 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:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
PROMPT RETURN OF THE ENCLOSED PROXY CARD WILL SAVE THE EXPENSE OF AN ADDITIONAL
MAILING.
YOUR IMMEDIATE ATTENTION IS GREATLY APPRECIATED.
[LOGO]
PAUL A. REDMOND
Chairman of the Board, President
and Chief Executive Officer
March 31, 1994
Dear Shareholder:
On behalf of the Board of Directors, it's my pleasure to extend to you a cordial
invitation to attend the 1994 Annual Meeting of Shareholders of The Washington
Water Power Company. A number of changes in our approach to this year's meeting
have been made, including changing the meeting day to Thursday evening and
changing the location to the Spokane Convention Center. In the last five years,
we've seen increasing numbers of shareholders join us at our Annual Meeting. We
hope that by making these changes even more shareholders will be able to attend.
<TABLE>
<S> <C>
Date: Thursday Evening, May 12, 1994
Time: 5:30 p.m. Doors Open Place: Spokane Convention Center
6:30 p.m. Annual Meeting Convenes (See map next page.)
Directors Reception Following West 334 Spokane Falls Blvd.
Meeting Spokane, Washington
</TABLE>
The utility industry is undergoing profound change, and our Company is changing
as well to meet the challenges of what is an increasingly competitive industry.
Anticipating and responding to competitive challenges is critical to our
continued viability, and will determine our success in increasing the value of
your investment. I have lots to share with you about the industry and challenges
on the horizon, as well as the many exciting changes occurring within our
Company. As we prepare for the future, we're redesigning the Company and
building an organization dedicated to providing exceptional customer service,
enrichment for our employees, and long-term profitability for our investors.
We also have two new Directors we'd like you to meet. A post-meeting reception,
hosted by Directors, will allow you the opportunity to meet with all our Board
members as well as our Officers and Managers. We want to provide an additional
forum for you to ask questions and share your views.
Convenient parking/shuttle arrangements have been made and that information is
included with the map on the next page. The doors of the Spokane Convention
Center will open at 5:30 p.m. Refreshments will be available, and our Officers
and Managers will be there to greet and visit with you. The Annual Meeting will
begin promptly at 6:30 p.m. The reception will begin immediately after the
meeting and will include a light buffet. Whether or not you're able to attend,
please take the opportunity to review the Annual Report and Proxy Statement
enclosed. Also, your vote is important regardless of the number of shares you
own, so please execute your proxy card and return it to us as promptly as
possible.
Thank you for your continued support. We look forward to seeing you at the
Annual Meeting.
Sincerely,
The Washington Water Power Company P.O. Box 3727 Spokane Washington 99220
(509)489-0500 or (1)(800)727-9170
IF YOU REQUIRE SPECIAL ACCOMMODATIONS AT OUR ANNUAL MEETING DUE TO A DISABILITY,
PLEASE CALL CHRIS BOWERS OR JULIE SHANHOLTZER IN SHAREHOLDER SERVICES BY APRIL
19.
<PAGE>
[Page with map for Annual Meeting Site]
<PAGE>
THE WASHINGTON WATER POWER COMPANY
EAST 1411 MISSION AVENUE
SPOKANE, WASHINGTON 99202
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY EVENING, MAY 12, 1994
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of The
Washington Water Power Company will be held at the Spokane Convention Center,
West 334 Spokane Falls Boulevard, Spokane, Washington 99201, at 6:30 P.M.,
Spokane Time, on Thursday, May 12, 1994 for the following purposes:
(1) To elect five directors of the Company.
(2) To consider and take action on a proposed amendment to the Restated
Articles of Incorporation to increase the authorized Common Stock of
the Company from 100,000,000 to 200,000,000 shares.
(3) To consider a shareholder proposal to establish a paid advisory
committee to the Board of Directors.
(4) To transact such other business as may come before the meeting or any
adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 17, 1994 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
Shareholders who cannot be present at the meeting are urged to sign, date,
and mail the enclosed form of proxy to the Company in the enclosed postage-paid
envelope as promptly as practicable.
By order of the Board of Directors,
TERRY L. SYMS
CORPORATE SECRETARY
Spokane, Washington
March 31, 1994
<PAGE>
THE WASHINGTON WATER POWER COMPANY
EAST 1411 MISSION AVENUE
SPOKANE, WASHINGTON 99202
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of The Washington Water Power Company of proxies for use at
the Annual Meeting of Shareholders to be held at the Spokane Convention Center,
West 334 Spokane Falls Boulevard, Spokane, Washington 99201, at 6:30 P.M.,
Spokane Time, on Thursday, May 12, 1994, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. Shares represented at the
meeting by properly executed proxies in the accompanying form will be voted at
the meeting and, where the shareholder giving the proxy specifies a choice, the
proxy will be voted in accordance with the specification so made. A proxy given
for use at the meeting may be revoked by the person giving it at any time prior
to the exercise of the powers conferred thereby. It is expected that this Proxy
Statement and accompanying form of proxy will be mailed to shareholders on or
about March 31, 1994.
Holders of Common Stock of record at the close of business on March 17, 1994
will be entitled to vote at the Annual Meeting. On that date, there were
outstanding 52,xxx,xxx shares of Common Stock.
VOTING
Holders of Common Stock, the Company's only class of securities with general
voting rights, will be entitled to one vote per share, subject to cumulative
voting rights in the election of directors as described below. Under Washington
law, action may be taken on a matter submitted to shareholders only if a quorum
exists with respect to such matter. A majority of the votes entitled to be cast
on a matter by holders of outstanding shares of the Company's Common Stock
constitutes a quorum for action on such matter. Subject to certain statutory
exceptions, once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the meeting.
Assuming a quorum exists with respect to the election of directors, each
record holder of Common Stock will be entitled to vote cumulatively and
accordingly may give one nominee for election as many votes as the number of
directors to be elected multiplied by the number of shares held by such
shareholder, or may distribute such votes among any two or more of the nominees
as such shareholder shall think fit. The nominees elected will be those
receiving the largest number of votes cast by the holders of the Common Stock,
up to five individuals.
Assuming a quorum exists with respect to the amendment to the Restated
Articles of Incorporation to increase the authorized shares of the Common Stock
of the Company, action on such matter will be approved if the affirmative vote
of a majority of the outstanding shares of Company Common Stock is received.
Assuming a quorum exists with respect to the shareholder proposal, action on
such matter will be approved if the number of votes cast favoring the action
exceed the number of votes opposing the action.
In connection with both the election of directors and the shareholder
proposal, the outcome of the vote will be determined by reference to the number
of votes cast. Withheld votes, abstentions and non-votes (i.e. shares held by
brokers, fiduciaries or other nominees which are not permitted to vote on a
particular matter) are not considered "votes cast." In connection with the
proposed amendment to the Restated Articles of Incorporation, abstentions and
non-votes have the same effect as negative votes.
1
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
At the meeting, five directors are to be elected, one to hold office for a
term of two years until 1996 and four to hold office for a term of three years
until 1997, and in each case until their respective successors shall be elected
and shall qualify. Unless authority to do so is withheld, the persons named as
proxies in the accompanying form of proxy will vote for the election of the
nominees listed below, or in the discretion of such persons will vote
cumulatively for the election of one or more of such nominees. The Board of
Directors has no reason to believe that any such nominee will be unable to serve
as a director. If, however, any such nominee shall become unavailable, the
proxies will have discretionary authority to vote for a substitute nominee.
The following tabulation, prepared from information furnished to the Company
by the nominees and the continuing directors, shows as to each nominee or
continuing director his or her principal occupation and the year in which he or
she first became a director, if applicable.
-- NOMINEES --
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION
--------------------------------------------------
<S> <C> <C>
ROBERT S. JEPSON, JR.
Director Since November 1, 1993 Chairman of the Board, President and
Age -- 51 Chief Executive Officer
(to be elected for a term expiring in 1996) Kuhlman Corporation
Savannah, Georgia
</TABLE>
Mr. Jepson has been Chairman of the Board, President and Chief Executive Officer
of Kuhlman Corporation, in Savannah, Georgia, since 1993. Kuhlman Corporation
manufactures distribution power and instrument transformers marketed to the
electric utility industry, and springs and metal products, primarily for the
automotive industry. Also, since 1989, he has served as Chairman of the Board
and Chief Executive Officer of Jepson Associates, Inc., a private investment
firm, in Savannah, Georgia. He is also Chairman of the Board of Coburn Optical
Industries, Inc., in Tulsa, Oklahoma, and Chairman of the Board and Chief
Executive Officer of Jepson Vineyards, Ltd., in Ukiah, California. In addition,
he is a Director of First Union Bank in Savannah, Georgia, and a former Director
of Hecla Mining Company in Coeur d'Alene, Idaho.
<TABLE>
<S> <C> <C>
GENERAL H. NORMAN SCHWARZKOPF
Director Since November 1, 1993 U.S. Army Retired
Age -- 59 Author and Speaker
(to be elected for a term expiring in Tampa, Florida
1997)
</TABLE>
General Schwarzkopf was a career officer in the United States Army, served as
Commander in Chief, United States Central Command and Commander of Operations
Desert Shield and Desert Storm. He is active with the Florida Conservation
Association and the Nature Conservancy, and is the National Spokesperson for the
Recovery of the Grizzly Bear. In addition, he is an author and a much sought
after speaker on a number of issues and topics. The General is a member of the
University of Richmond Board of Trustees and a Director of Borg-Warner Security
Corporation in Chicago, Illinois.
2
<PAGE>
<TABLE>
<S> <C> <C>
B. JEAN SILVER
Director Since May 13, 1988 Certified Public Accountant
Age -- 67 Washington State Legislator
(to be elected for a term expiring in Spokane and Olympia, Washington
1997)
</TABLE>
Mrs. Silver was a consultant to the City of Spokane in economic development
financing from 1981 to 1987. Prior to the consulting work, she was in public
accounting. Mrs. Silver has been a Washington State Legislator in Olympia for
over ten years.
<TABLE>
<S> <C> <C>
LARRY A. STANLEY
Director Since May 10, 1991 President and
Age -- 65 Chief Executive Officer
(to be elected for a term expiring in Empire Bolt & Screw, Inc.
1997) Spokane, Washington
</TABLE>
For over five years, Mr. Stanley has been President and Chief Executive Officer
of Empire Bolt & Screw, Inc., a Spokane distribution company which he founded in
1972. He is a past Chairman of the Association of Washington Business and past
President of the Inland Northwest Council of Boy Scouts of America. Mr. Stanley
is also a board member of the Washington State Governor's Small Business
Improvement Council and Vice Chairman of the Spokane Area Chamber of Commerce.
<TABLE>
<S> <C> <C>
R. JOHN TAYLOR
Director Since May 10, 1985 Chairman of the Board and
Age -- 44 Chief Executive Officer
(to be elected for a term expiring in The Universe Life Insurance Company
1997) Lewiston, Idaho
</TABLE>
Since 1989, Mr. Taylor has been Chairman of the Board and Chief Executive
Officer of The Universe Life Insurance Company. Universe Life is a subsidiary of
AIA Services Corporation, a life insurance holding company. Mr. Taylor also
serves as President of AIA Services and has been its Chief Operating Officer for
over five years. He is also Chairman of the Board of Great Fidelity Life
Insurance Company, Fort Wayne, Indiana, and a Director of Valley Commercial
Bank, Clarkston, Washington.
-- CONTINUING DIRECTORS --
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION
--------------------------------------------------
<S> <C> <C>
DAVID A. CLACK
Director Since February 4, 1988 President
Age -- 59 Clack and Co., Investments
(term expiring in 1995) Spokane, Washington
</TABLE>
Since July 1987, Mr. Clack has been President of Clack and Co., Investments, an
investment firm with its headquarters in Spokane, Washington. For over five
years, Mr. Clack was Chairman of the Board and Chief Executive Officer of Old
National Bancorporation of Washington.
3
<PAGE>
<TABLE>
<S> <C> <C>
DUANE B. HAGADONE
Director Since May 13, 1966 President
Age -- 61 Hagadone Corporation
(term expiring in 1995) Coeur d'Alene, Idaho
</TABLE>
For over five years, Mr. Hagadone has been owner of the Hagadone Corporation
which has its headquarters in Coeur d'Alene, Idaho, and operates three major
divisions: Hagadone Communications Company, Hagadone Hospitality Company, and
Hagadone Investment Company.
<TABLE>
<S> <C> <C>
EUGENE W. MEYER
Director Since May 11, 1990 Financial Consultant
Age -- 57 Hilton Head Island
(term expiring in 1996) South Carolina
</TABLE>
For over five years, Mr. Meyer was a Managing Director of Kidder, Peabody & Co.,
Incorporated, an investment banking and brokerage firm. His experience with that
firm included serving as a board member and managing its utility finance
department. He retired from Kidder, Peabody in 1989 and is presently in the
financial consulting business. Mr. Meyer is a Chartered Financial Analyst. He is
currently Vice Chairman of the Heisman Trophy Committee and a Trustee of the
Heisman Foundation.
<TABLE>
<S> <C> <C>
PAUL A. REDMOND
Director Since August 1, 1980 Chairman of the Board, President
Age -- 57 and Chief Executive Officer
(term expiring in 1996) of the Company
Spokane, Washington
</TABLE>
Mr. Redmond was appointed Chairman of the Board and Chief Executive Officer of
the Company in 1988, and reappointed as President in February 1994. He was
employed by the Company in 1965 as an Assistant Electrical Engineer. His
experience includes Construction and Maintenance Engineer, Superintendent of
Contract Construction, Manager of Construction and Maintenance, and Assistant to
the President. He was appointed Assistant Vice President in May 1978, Vice
President in November 1978, Executive Vice President in August 1980, President
and Chief Operating Officer in May 1982, President and Chief Executive Officer
in November 1984, and Chairman of the Board, President and Chief Executive
Officer in May 1985. Mr. Redmond is also a director of the Hecla Mining Company
in Coeur d'Alene, Idaho, and the U.S. Bank of Washington, N.A., in Seattle,
Washington.
<TABLE>
<S> <C> <C>
EUGENE THOMPSON
Director Since February 11, 1972 Agriculture and Real Estate
Age -- 71 Moscow, Idaho
(term expiring in 1995)
</TABLE>
For over five years, Mr. Thompson has been actively engaged in farming, in the
market development of agricultural products and services on an international
scale, and in real estate development.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of Common Stock of the
Company held, as of March 1, 1994, by the directors, any nominee for director,
each of the executive officers named in the Summary Compensation Table, and
directors and executive officers as a group. No director or executive officer
owns any of the Company's preferred stock. Also, no director or executive
officer owns, nor do the directors and executive officers as a group own, in
excess of 1% of the outstanding Common Stock of the Company, and no director or
executive officer owns, nor do the directors and executive officers as a group
own, in excess of 1% of the stock of any indirect subsidiaries of the Company.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP
-------------------------------------
DIRECT INDIRECT TOTAL
------------ ------------ ---------
<S> <C> <C> <C>
W. Lester Bryan........................................................ 8,296 5,887(l) 14,183
David A. Clack(2)...................................................... 2,000 -- 2,000
Jon E. Eliassen(3)..................................................... 7,966 8,261(l) 16,227
Robert D. Fukai........................................................ 6,888 5,729(l) 12,617
Duane B. Hagadone(4)................................................... 44,284 -- 44,284
James R. Harvey(5)..................................................... 13,274(6) 8,571(l) 21,845
Robert S. Jepson, Jr.(7)............................................... 2,000 -- 2,000
Eugene W. Meyer(8)..................................................... 8,000 -- 8,000
Paul A. Redmond(9)..................................................... 24,733(10) 10,526(l) 35,259
General H. Norman Schwarzkopf.......................................... 2,000 -- 2,000
B. Jean Silver......................................................... 3,035(11) -- 3,035
Larry A. Stanley....................................................... -- 3,764(12) 3,764
R. John Taylor......................................................... 4,713 2,078(13) 6,791
Eugene Thompson(14).................................................... 12,463 -- 12,463
All directors and executive officers as a group, including those listed
above -- 20 individuals(15)........................................... 208,459
<FN>
- ---------
(1) Shares held in the Company's 401(k) Investment Plan.
(2) Mr. Clack also owns 642 shares of restricted stock of Pentzer Financial
Services Corporation and 642 shares of restricted stock of Pentzer
Jefferson Corporation, indirect subsidiaries of the Company.
(3) Mr. Eliassen also owns 3,500 presently exercisable stock options of ITRON,
Inc. (a corporation in which the Company's subsidiary, Pentzer
Corporation, owns approximately 25% of the outstanding Common Stock.) Mr.
Eliassen also owns 642 shares of restricted stock of Pentzer Financial
Services and 642 shares of restricted stock of Pentzer Jefferson
Corporation.
(4) Mr. Hagadone owns 642 shares of restricted stock of Pentzer Financial
Services Corporation and 642 shares of restricted stock of Pentzer
Jefferson Corporation.
(5) Mr. Harvey owns 5,000 shares (less than 1% of the outstanding shares) of
ITRON, Inc.
(6) Shares held by Mr. Harvey's spouse.
(7) Mr. Jepson owns 642 shares of restricted stock of Pentzer Financial
Services Corporation and 642 shares of restricted stock of Pentzer
Jefferson Corporation.
(8) Mr. Meyer owns 642 shares of restricted stock of Pentzer Financial
Services Corporation and 642 shares of restricted stock of Pentzer
Jefferson Corporation.
(9) Mr. Redmond owns 2,500 shares (less than 1% of the outstanding shares) of
ITRON, Inc., and 3,500 presently exercisable stock options of ITRON, Inc.
Mr. Redmond also owns 642 shares of restricted stock of Pentzer Financial
Services Corporation and 642 shares of restricted stock of Pentzer
Jefferson Corporation.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
(10) Shares for which Mr. Redmond shares investment and voting power with his
spouse.
(11) Mrs. Silver shares investment and voting power with her spouse.
(12) Shares are held in a pension/profit-sharing plan not administered by the
Company for which Mr. Stanley shares voting and investment power.
(13) Includes 1,200 shares held in an employee benefit plan not administered by
the Company for which Mr. Taylor shares voting and investment power; 300
shares held by Mr. Taylor's spouse of which shares he disclaims beneficial
ownership; and 578 shares held by Mr. Taylor as custodian for his
children.
(14) Mr. Thompson owns 642 shares of restricted stock of Pentzer Financial
Services Corporation and 642 shares of restricted stock of Pentzer
Jefferson Corporation.
(15) The group of executive officers referred to above includes the Treasurer,
Controller, and Corporate Secretary.
</TABLE>
Section 16 of the Securities Exchange Act of 1934, as amended, requires that
officers, directors, and holders of more than 10% of the Common Stock file
reports of their trading in Company equity securities with the Securities and
Exchange Commission. Based solely on a review of Forms 3, 4 and 5 furnished to
the Company during 1993, the Company believes that during the last fiscal year,
all Section 16 filing requirements applicable to the Company's reporting persons
were complied with except that R. John Taylor inadvertently failed to report on
a timely basis on SEC Form 4 a purchase of Company common stock in 1993, and
Eugene Thompson inadvertently failed to report on SEC Form 5 shares purchased
with reinvested dividends for the years 1991/1992. Both Mr. Taylor and Mr.
Thompson did report these transactions on the 1993 year-end Form 5.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held five Board meetings in 1993. The Board of
Directors has an Audit Committee, a Compensation Committee, an Executive
Committee and a Nominating Committee.
The Audit Committee assists the Board in overseeing financial reporting,
corporate governance and corporate control. The Committee recommends for Board
appointment the independent accounting firm that audits the Company's financial
statements, and considers the scope and results of audit services provided by
the independent auditors and the Company's internal auditors. The Committee
discusses accounting and reporting matters and other conditions affecting the
Company's operations with management and legal counsel, and reviews financial
and operating reports. The Audit Committee consists of Mrs. Silver, General
Schwarzkopf, and Messrs. Jepson, Meyer, Stanley, Taylor and Thompson. The Audit
Committee held four meetings in 1993.
The Compensation Committee considers and makes recommendations to the Board
with respect to compensation and benefits of executive officers of the Company.
The Committee consists of Messrs. Clack, Hagadone, Meyer and Taylor. The
Compensation Committee held three meetings in 1993.
The Executive Committee expedites board authorizations required to take
action on certain corporate business matters when it is not practical for the
entire Board of Directors to meet. Specifically, the Committee is called upon
for finance matters such as the issuance of securities through public or private
offerings. The Executive Committee consists of Messrs. Clack, Hagadone, Redmond
and Stanley. The Executive Committee did not meet in 1993.
The Nominating Committee proposes candidates to be nominated by the Board to
fill vacancies in the Board that may occur from time to time. The Committee will
consider written recommendations for the Board of Directors which are made by
shareholders. Recommendations must include detailed biographical material
indicating the qualifications the candidate would bring to the Board and must
include a written statement from the candidate of willingness and availability
to serve. While recommendations may be
6
<PAGE>
considered at any time, recommendations for a specific annual meeting must be
received by December 1 of the preceding year. Recommendations should be directed
to the Corporate Secretary, The Washington Water Power Company, East 1411
Mission Avenue, P.O. Box 3727, Spokane, Washington 99220. The Committee is made
up of all members of the Board. The Nominating Committee generally holds
discussions of Board candidates in conjunction with regular Board meetings.
Shareholders may only nominate directors for election at meetings of
shareholders in accordance with the procedures set forth in the Bylaws of the
Company.
The attendance during 1993 at all meetings of the Board and at all committee
meetings of the Board was 97 percent.
The Company has an Employee Benefits Committee which considers and makes
recommendations to the Board with respect to employee benefits. Specifically,
the Committee addresses such items as the Investment and Employee Stock
Ownership Plan and the Employees' Retirement Plan. The Employee Benefits
Committee consists of Mrs. Silver and Mr. Stanley and three executive officers
of the Company. The Employee Benefits Committee held one meeting in 1993.
EXECUTIVE COMPENSATION
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
TO OUR SHAREHOLDERS,
The Company's Compensation Committee of the Board of Directors (the
"Committee") annually reviews and recommends to the full Board compensation
levels for executive officers. The Committee also establishes specific strategic
corporate performance goals which correspond to short-term and long-term
compensation opportunities for executive officers. The Committee is comprised
entirely of Board members who are not employees of the Company.
The Committee's primary objective in establishing compensation opportunities
for executive officers is to support the Company's goal of maximizing the value
of shareholders' interests. To achieve this objective, the Committee believes it
is critical to:
- Hire, develop, reward, and retain the most competent executives possible,
and to provide compensation opportunities which are competitive in the
marketplace.
- Encourage decision-making that enhances shareholder value. The Committee
believes that this objective is promoted by providing short-term and
long-term incentives which include payment in the form of Company Common
Stock.
- Provide incentive opportunities which link corporate performance and
executive pay. The Committee believes in paying competitive levels of
incentive compensation when corporate financial performance expectations are
achieved.
- Promote a close identity of interest between management and the Company's
shareholders. The Committee believes that this objective is best achieved by
tying incentive opportunities to the attainment of financial goals, and by
rewarding positive results through the payment of Company Common Stock.
The Committee makes recommendations to the Board of Directors pertaining to
the Company's executive compensation plans which promote the objectives detailed
above. The Committee believes that the Company's current compensation plans
support the Company's business mission and contribute to the Company's financial
success.
Although the Committee currently has no policy with respect to qualifying
compensation paid to executive officers for deductibility under Section 162(m)
of the Internal Revenue Code of 1986, it will be studying the matter.
7
<PAGE>
COMPONENTS OF COMPENSATION
BASE SALARY
The Committee annually reviews each executive officer's base salary. The
factors which influence Committee recommendations regarding base salary include:
levels of pay among executives at other utilities, internal pay equity
considerations, level of responsibilities, prior experience, breadth of
knowledge and job performance. The Committee considers some or all of these
factors as it deems appropriate; there are no formal weightings given to any
factor.
The median increase to executive officers, other than Mr. Redmond, was 2% in
1993. The 1993 base salaries for executive officers of the Company are slightly
below the average paid to similarly positioned executive officers of about 100
companies of diverse size, comprised of electric or electric and gas utility
companies, utility parent companies, or diversified parent companies
participating in the 1992 Edison Electric Institute (EEI) Executive Compensation
Survey. This survey includes nearly all companies appearing in the published EEI
Index in the Performance Graph. The EEI Compensation Survey is commonly used in
the utility industry, and the Compensation Committee believes that it is an
appropriate reference for executive salaries.
With respect to the Chief Executive Officer's compensation in 1993, the
Committee determined that a 2.1% increase in base salary for Mr. Redmond was
appropriate. This modest increase keeps Mr. Redmond's base salary slightly above
the median compared with that of other chief executive officers with similar
responsibilities and broad leadership experience. Compensation data used in
making decisions includes the EEI Compensation Survey and specific data for
certain Northwest utilities. In addition, the Committee uses general industry
data to provide a broad base of information from which to determine the Chief
Executive Officer's compensation in light of the diversity of the Company's
subsidiaries. Mr. Redmond's responsibilities not only include both electric and
gas utility operations but also include subsidiary operations of a diverse
nature, such as manufacturing of electronic data collection and automated meter
reading equipment, real estate development, financial services, and
manufacturing of retail advertising displays. In addition, the Company operates
in several states, thereby requiring quality relationships and interaction with
multiple regulatory commissions and public policy leaders. Mr. Redmond has
served as CEO of the Company since 1984 and as Chairman and CEO since 1985. In
addition, he was reappointed President in February, 1994. The Committee and the
entire Board of Directors recognize and highly value Mr. Redmond's visionary
leadership, breadth of knowledge, complex business and utility experience and
outstanding performance, all of which have contributed significantly to the
combined long-term success of the Company and its many subsidiaries (direct and
indirect) of which he is also Chairman.
Under Mr. Redmond's leadership, the Company achieved a number of corporate
and financial goals in 1993:
- Overall earnings increased to $1.44 per share, an increase of 7 cents over
1992.
- A number of subsidiary activities resulted in enhanced subsidiary results
which contributed significantly to earnings. Such activities included the
initial public offering of ITRON common stock, the sale of Northwest
Telecommunications, Inc., and Pentzer Energy Services, Inc., and the
acquisition of Systran Financial Services, Graphic Communications, Inc., and
Imfax, Inc.
- Strong customer growth was again achieved in 1993 -- 7,000 new electric
customers and 17,500 new gas customers were added.
- In the first half of 1993, the Company's Common Stock price reached a
level of $40.50 per share, thus allowing for a two-for-one stock split,
which returned the stock price to a level more attractive to a broad range
of investors.
8
<PAGE>
- Bond and preferred stock ratings raised by Duff & Phelps to A and A-,
respectively.
- One of only 24 investor-owned utilities in the nation ranked above average
by Standard & Poor's.
- Mr. Redmond continued to play a key leadership role in regional economic
development and job retention.
- WWP's recognized expertise in hydroelectric operations resulted in being
invited to explore investment opportunities abroad, and the signing of an
information exchange agreement with the North China Power Group.
- Water Power continued to maintain its competitive edge and remains one of
the nation's lowest-cost energy providers, positioning the Company for the
future.
EXECUTIVE INCENTIVE COMPENSATION PLAN
This plan provides the opportunity for executive officers (other than Mr.
Redmond who is covered by the CEO Incentive Stock Plan) to earn both annual and
long-term incentives in addition to their salaries. The Compensation Committee
each year establishes the target amounts as a specified percentage of the
executive officer's salary. For 1993, such percentages ranged from 35% to 50%.
In the event that individual and corporate goals (as more fully described under
Annual Incentives and Long-Term Incentives) are achieved, an executive officer
may be entitled to receive the full award and, in the event that individual
performance goals have been exceeded, an executive officer may be entitled to
receive up to 150% of such targeted percentage. The Committee believes that
having as much as 50% of an executive officer's total compensation at risk also
fosters achievement of the Company's short-term and long-term financial
performance goals as set forth below.
ANNUAL INCENTIVES. Each year, the Committee establishes short-term
financial goals which relate to one or more indicators of corporate financial
performance. Incentive awards are paid to participating executives under the
Executive Incentive Compensation Plan only when the pre-designated financial
goals are achieved. For 1993, the short-term incentive award opportunity was
contingent upon attaining a pre-specified level of earnings per share. In
addition, a portion of the executives' incentive opportunities was contingent
upon meeting individual performance goals established for each executive.
Payouts under the Executive Incentive Compensation Plan are made 50% in cash
and 50% in Company Common Stock. The Committee believes that payment of a
portion of the short-term incentive opportunity in the form of Company Common
Stock helps strike a balance between the focus of executives on short-term and
long-term corporate financial results.
Short-term incentive payments, if any, are reflected in the Summary
Compensation Table under the column entitled "Bonus." No short-term incentives
were paid under the plan in 1993 since the earnings per share goal was not
achieved.
LONG-TERM INCENTIVES. Each year, the Committee establishes a long-term
financial performance goal which must be achieved in order for executives to
receive the targeted payout. This long-term financial goal is based upon
increases in the value of shareholders' interests in the Company's Common Stock,
measured against the median performance of the stocks of a peer group of
electric and combination (electric and natural gas) utilities approved by the
Board of Directors. For 1993, this peer group consisted of about 100 utilities
all of which are included in the EEI Index used in the Performance Graph. The
Committee has utilized this group of publicly traded utilities since 1987 for
purposes of comparison in establishing and measuring results for the long-term
incentive plan. Shareholder value is measured over a three-year period and is
calculated by adding cash dividends and stock price appreciation over the
performance period. For the three-year period ended 1993, the goal was to exceed
the median performance of the peer group.
The long-term performance focus is further encouraged through the payout of
50% of the awards under the Executive Incentive Compensation Plan in the form of
Company Common Stock. Also, a portion of the executives' incentive opportunities
are contingent upon meeting individual performance goals established for each
executive.
9
<PAGE>
Long-term incentive payments, if any, are reflected in the Summary
Compensation Table under the column entitled "Long-Term Incentive Payouts." No
long-term incentives were paid to executive officers under the plan in 1993
since the shareholder value goal was not achieved.
CEO INCENTIVE STOCK PLAN
Mr. Redmond's incentive award under the CEO Incentive Stock Plan is based
upon the degree of achievement of specific strategic corporate performance goals
established by the Board of Directors. Mr. Redmond's award opportunity was
established in 1992 and was based upon the attainment of pre-specified levels of
annual earnings per share. The award opportunity as well as the targeted
earnings per share were adjusted in 1993 to reflect the two-for-one stock split.
Under the plan, as adjusted, Mr. Redmond would be granted 2,000 shares of
Company Common Stock when annual earnings per share first equals or exceeds
$1.38. For each additional 5 cents of annual earnings per share attained for the
first time, Mr. Redmond would be granted an additional 2,000 shares of Company
Common Stock. When annual earnings per share of $1.65 or greater are attained
for the first time, Mr. Redmond would receive an additional grant of 22,000
shares of Company Common Stock. Because earnings per share in 1993 exceeded the
target, Mr. Redmond received 4,000 shares of Company Common Stock, which is
reflected in the Summary Compensation Table under "Long-Term Incentive Payouts."
The Committee believes that the CEO Incentive Stock Plan provides an
appropriate link between the achievement of challenging financial goals and a
competitive incentive opportunity. The Committee further believes that the CEO
Incentive Stock Plan provides a proper balance between short-term financial
goals and long-term corporate goals by providing for payout of awards to Mr.
Redmond entirely in the form of Company Common Stock.
COMPENSATION FROM SUBSIDIARIES
Mr. Redmond, who serves as Chairman of the Board of each of the Company's
subsidiaries, received cash awards from Pentzer Corporation, the holding company
for the majority of the Company's indirect subsidiaries. These awards, which are
shown in the Summary Compensation Table, reflect the decision by the board of
directors of Pentzer Corporation to reward Mr. Redmond for his extraordinary
efforts and the enhancement of shareholder value through the development and
performance of Northwest Telecommunications and Pentzer Energy Services, Inc.,
and the subsequent successful sale of both. Mr. Redmond also received option
grants from various subsidiaries of the Company during 1993, which are also
shown in the Summary Compensation Table and the Option Tables. These grants were
made by the boards of directors of the subsidiaries pursuant to various
incentive plans of the subsidiaries. The awards were not made, or subject to
approval, by the Compensation Committee of the Company.
SUMMARY
Each year, the Committee reviews all elements of cash and non-cash
compensation paid to all executive officers of the Company. The Committee
manages all elements of executive pay in order to ensure that overall pay levels
are consistent with those provided to similarly situated executives at the
Company's competitors; however, depending on variables, such as meeting
performance objectives for incentive plans, the Company's executive officers'
total compensation could be equal to the median total pay for other executive
officers one year, below another year, and above another year. Finally, the
Committee administers the Company's executive compensation plans to foster the
Company's objectives of linking executive pay to improved Company financial
performance and increased shareholder value.
Members of the Compensation Committee
David A. Clack Duane B. Hagadone Eugene W. Meyer R. John Taylor
10
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-------------------------------------------------------------------------------------
SALARY($) BONUS($)
NAME AND PRINCIPAL ---------------------- TOTAL ------------------------- TOTAL
POSITION YEAR UTILITY(2) NONUTILITY SALARY($) UTILITY(2) NONUTILITY BONUS($)
- ----------------------- ---- -------- ----------- --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
P.A. Redmond........... 1993 $213,518 $270,649 $484,167 $286,815(3) $286,815
Chairman of the 1992 $311,294 $149,123 $460,417
Board & Chief 1991 $274,815 $23,373 $298,188 $64,762 $ 64,762(10)
Executive Officer
J.R. Harvey............ 1993 $282,917 $282,917
President & Chief 1992 $255,863 $255,863
Operating Officer 1991 $194,160 $15,362 $209,522 $45,410 $ 45,410(10)
(Retired 2/94)
W.L. Bryan............. 1993 $171,819 $171,819 $ 20,699(9) $ 20,699
Senior Vice President 1992 $161,725 $161,725
Rates & Resources 1991 $145,501 $145,501 $25,564 $ 25,564(10)
J.E. Eliassen.......... 1993 $142,564 $29,255 $171,819
Vice President, 1992 $160,232 7,823 $168,055
Finance & Chief 1991 $153,541 $ 7,215 $160,756 $27,752 $ 27,752(10)
Financial Officer
R. D. Fukai............ 1993 $156,197 $156,197
Vice President 1992 $152,776 $152,776
Corporate Services, 1991 $145,501 $145,501 $25,564 $ 25,564(10)
Human Resources
& Marketing
<CAPTION>
LONG-TERM COMPENSATION(1)
---------------------------------------------------------------------
PAYOUTS
------------------------
AWARDS
----------------------------- LONG-TERM INCENTIVE TOTAL LONG-
RESTRICTED SECURITIES PAYOUTS($) TERM
NAME AND PRINCIPAL STOCK UNDERLYING ------------------------ INCENTIVE ALL OTHER
POSITION AWARDS($) OPTIONS/SARS# UTILITY(2) NONUTILITY PAYOUTS($) COMP.($)(8)
- ---------------------------------- -------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
P.A. Redmond........... $1,952(4) 43,975(5) $ 71,110(6) $ 385,161(7) $ 461,161 $ 28,375
Chairman of the $ 17,959
Board & Chief $ 13,510
Executive Officer
J.R. Harvey............ $ 12,735
President & Chief $ 12,811
Operating Officer $ 10,523
(Retired 2/94)
W.L. Bryan............. $ 7,349
Senior Vice President $ 8,483
Rates & Resources $ 7,254
J.E. Eliassen.......... $1,952(4) 2,606(5) $ 14,940
Vice President, $ 35,398
Finance & Chief $ 14,409
Financial Officer
R. D. Fukai............ $ 29,175
Vice President $ 18,891
Corporate Services, $ 35,175
Human Resources
& Marketing
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
<FN>
- ---------
Note: Effective 2/94, Mr. Redmond also holds the position of President.
(1) Includes any amounts deferred pursuant to the Executive Deferral Plan. This
plan allows executive officers the opportunity to defer until their
retirement or until their earlier termination, disability or death, up to
75% of their base salary and/or up to 100% of any cash awarded under the
provisions of the Executive Incentive Compensation Plan. Deferred
compensation is credited with interest at a non-preferential rate.
(2) Only compensation charged to utility operations is recovered as an expense
for ratemaking purposes.
(3) Amount received from Pentzer Corporation, the holding company for the
majority of the Company's indirect subsidiaries, as a bonus in connection
with the sale of Northwest Telecommunications, Inc.
(4) Mr. Redmond and Mr. Eliassen, as outside directors of Pentzer Corporation,
were each granted (i) on December 31, 1992, 642 shares of restricted stock
of Pentzer Jefferson Corporation and (ii) on February 26, 1993, 642 shares
of restricted stock of Pentzer Financial Services Corporation. The
restricted stock vests at the end of three years; vesting can be accelerated
upon death, disability or change in control. No dividends are payable. Under
certain circumstances, Mr. Redmond and Mr. Eliassen can require the issuers
to repurchase the stock at adjusted book value at the time of such
repurchase. The Pentzer Jefferson stock had no value at year end. The
Pentzer Financial Services stock was valued at $3.04 per share at year end.
No other named executive officers own any restricted stock.
(5) Option grants to Mr. Redmond received as a director of certain of the
Company's indirect subsidiaries: Imfax--10,442; Pentzer Financial
Services--10,733; Pentzer Jefferson Corporation--11,358; ITRON-- 1,000 and
Graphic Communications, Inc.--10,442.
Option grants to Mr. Eliassen received as a director of certain of the
Company's indirect subsidiaries; Imfax--696; Pentzer Jefferson
Corporation--107; Pentzer Financial Services--107; ITRON--1,000; and Graphic
Communications, Inc.--696.
(6) The dollar value of 4,000 shares of Company Common Stock received as a
long-term incentive payout under the CEO Incentive Stock Plan.
(7) Amount received from Pentzer Corporation as long-term incentive compensation
in connection with the performance and subsequent sale of Pentzer Energy
Services, Inc..
(8) Includes total employer contributions under both the Executive Deferral Plan
and the Investment and Employee Stock Ownership Plan (401(k) plan), pursuant
to which the Company matches 75% of each executive officer's deferral up to
6% of salary. Also includes payments for unused, paid time-off accrued under
the Company's One-Leave Program. Amounts under the deferral plan for 1993
were: Redmond--$15,629; Harvey--$5,989; Bryan--$1,306; Eliassen--$2,794;
Fukai--$1,368.
The amount under the 401(k) plan for 1993 for each of the above-named
persons was $6,746, except for Mr. Bryan, which was $6,043. The amount under
the One-Leave Program for 1993 was: Fukai $21,061 (280 hours); other named
executive officers--$0. Also includes ITRON director fees of $6,000 for Mr.
Redmond and ITRON director fees of $5,400 for Mr. Eliassen.
(9) From Pentzer Energy Services, Inc.
(10) Distributed 50% in the form of Company Common Stock and 50% in cash
pursuant to the annual incentive component of the Executive Incentive
Compensation Plan. In the case of Mr. Redmond, any distributions made are
pursuant to the CEO Incentive Stock Plan effective January 1992.
</TABLE>
12
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ALTERNATIVE
ANNUAL RATES OF STOCK TO (F) AND
PRICE APPRECIATION FOR (G): GRANT
OPTION TERM DATE VALUE
INDIVIDUAL GRANTS ---------------------- -----------
- ------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F) (G) (F)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($) VALUE$
- ------------------------ -------------- ---------------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
P.A. Redmond
ITRON................. 1,000(2) .28% $ 13.50 06/29/03 $ 8,490 $ 21,520
Imfax................. 10,442(3) 31.3% $ 18.67 08/13/03 $ 122,589 $ 309,814
PFS................... 10,733(4) 94.4% $ 1.40 08/04/03 $ 9,445 $ 23,935
PJC................... 11,358(5) 94.7% $ 0.002 08/04/03 $ 14 $ 36
GC.................... 10,442(6) 30.6% $ 20.00 01/01/04 $ 131,360 $ 332,787
J.E. Eliassen
ITRON................. 1,000(2) .28% $ 13.50 06/29/03 $ 8,490 $ 21,520
Imfax................. 696(3) 2.1% $ 18.67 08/13/03 $ 8,171 $ 20,650
PFS................... 107(4) 0.9% $ 1.40 08/04/03 $ 94 $ 239
PJC................... 107(5) 0.9% $ 0.002 08/04/03 Nil $ 1
GC.................... 696(6) 2.0% $ 20.00 01/01/04 $ 8,756 $ 22,182
<FN>
- ---------
(1) No option grants were made by the Company. All grants referred to are
options granted by indirect subsidiaries of the Company. The exercise
price is at fair market value on the date of grant.
(2) Granted pursuant to the ITRON 1992 Stock Option Plan for Non-Employee
Directors and exercisable immediately upon grant. The exercise price was
automatically adjusted from $13.00 to $13.50 when Itron went public in
November 1993.
(3) Granted pursuant to the Imfax Stock Incentive Plan. Vests in whole on
August 13, 1996 and shall be accelerated upon change in control, death or
permanent disability. The value of the stock options is based on book
value per share.
(4) Granted pursuant to the Pentzer Financial Services Corporation Stock
Incentive Plan. Vests in whole on February 27, 1996 and shall be
accelerated upon change in control, death or permanent disability. The
value of the stock options is based on book value per share.
(5) Granted pursuant to the Pentzer Jefferson Corporation Stock Incentive
Plan. Vests in whole on January 1, 1995 and shall be accelerated upon a
change in control, death or permanent disability. The value of the stock
options is based on book value per share.
(6) Granted pursuant to the Graphic Communications, Inc., Stock Incentive
Plan. Vests in whole on December 31, 1996 and shall be accelerated upon a
change in control, death or permanent disability. The value of the stock
options is based on book value per share.
</TABLE>
13
<PAGE>
1993 FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE
OPTIONS AT 1993 FISCAL YEAR MONEY OPTIONS AT 1993
END (#) FISCAL YEAR END ($)
----------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------- ------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
P.A. Redmond............................................. 3,500(1) 42,975(2) $ 42,225(1) $ 25,538(3)
J.E. Eliassen............................................ 3,500(1) 1,606(4) $ 42,225(1) $ 704(3)
<FN>
- ---------
The table above sets forth information with respect to unexercised stock
options of the Company's indirect subsidiaries held by each of the named
executive officers as of December 31, 1993.
(1) 1,000 ITRON, Inc., stock options valued at $4.50 per share and 2,500
ITRON, Inc., stock options valued at $15.09 per share at December 31,
1993.
(2) 10,442 Imfax, Inc., stock options; 10,733 Pentzer Financial Services stock
options; 11,358 Pentzer Jefferson stock options; and 10,442 Graphic
Communications stock options.
(3) Pentzer Financial Services stock options valued at $1.64 per share; Imfax
stock options valued at $0.31 per share; and Graphic Communications stock
options valued at $0.45 per share, all at December 31, 1993 and based on
book value per share.
(4) 696 Imfax, Inc., stock options; 107 Pentzer Financial Services stock
options; 107 Pentzer Jefferson stock options; and 696 Graphic
Communications stock options.
</TABLE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ----------------------------------------------------------
BASE SALARY 15 20 25 30 35
- ----------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$125,000................................. $ 46,875 $ 62,500 $ 78,125 $ 93,750 $ 93,750
$150,000................................. $ 56,250 $ 75,000 $ 93,750 $ 112,500 $ 112,500
$175,000................................. $ 65,625 $ 87,500 $ 109,375 $ 131,050 $ 131,050
$200,000................................. $ 75,000 $ 100,000 $ 125,000 $ 150,000 $ 150,000
$225,000................................. $ 84,375 $ 112,500 $ 140,625 $ 168,750 $ 168,750
$250,000................................. $ 93,750 $ 125,000 $ 156,250 $ 187,500 $ 187,500
$300,000................................. $ 112,500 $ 150,000 $ 187,500 $ 225,000 $ 225,000
$400,000................................. $ 150,000 $ 200,000 $ 250,000 $ 300,000 $ 300,000
$450,000................................. $ 168,750 $ 225,000 $ 281,250 $ 337,500 $ 337,500
$500,000................................. $ 187,500 $ 250,000 $ 312,500 $ 375,000 $ 375,000
$550,000................................. $ 206,250 $ 275,000 $ 343,750 $ 412,500 $ 412,500
</TABLE>
The table above reflects benefits pursuant to the Retirement Plan for
Employees and the Supplemental Executive Retirement Plan. The Company's
Retirement Plan for Employees provides a retirement benefit based upon
employees' compensation and years of service. Earnings credited for retirement
purposes represent the final average annual base salary earnings of the employee
for the highest 36 consecutive months during the last 120 months of service with
the Company. Base salary for the named executive officers is the amount under
"Total Salary" in the Summary Compensation Table.
The Supplemental Executive Retirement Plan provides additional pension
benefits to executive officers of the Company who have attained the age of 55
and a minimum of 15 years of benefit service with the Company. The plan is
intended to provide benefits to executive officers whose pension benefits under
the Company's Retirement Plan are reduced due to the application of Section 415
of the Internal Revenue Code of 1986 and the deferral of salary pursuant to the
Executive Deferral Plan. When combined with the
14
<PAGE>
Retirement Plan, the plan will provide benefits to executive officers, who
retire at age 62 or older, of 2.5 percent of the final average annual base
earnings during the highest 60 consecutive months during the last 120 months of
service, for each year of service up to 30 years. When combined with the
Retirement Plan, the plan will provide benefits to the Chief Executive Officer
and the President and Chief Operating Officer, who retire at age 65, of 3.0% of
final average base earnings during the highest 36 consecutive months during the
last 120 months of service, for each year of service up to 30 years. Benefits
will be reduced for executives who retire before age 62.
Benefits for both plans are calculated based on a straight-life annuity,
paid on a monthly basis and are not subject to reduction for offset amounts.
Years of credited service for listed executive officers are as follows:
<TABLE>
<CAPTION>
YEARS OF
CREDITED
NAME SERVICE
- -------------------------------------------------------- -------------
<S> <C>
P.A. Redmond............................................ 28
J.R. Harvey............................................. 27
W.L. Bryan.............................................. 23
J.E. Eliassen........................................... 23
R.D. Fukai.............................................. 21
</TABLE>
DIRECTORS COMPENSATION
Directors who are not employees of the Company are paid an annual retainer
of $12,000 plus $800 for each day or part of a day that they are participating
in meetings of the Board of Directors or any committee of the Board of
Directors. Directors who serve as Board committee chairpersons are paid an
additional annual retainer of $2,000. Directors who are also employees of the
Company are not separately reimbursed as directors.
Directors who are not employees of the Company are also afforded the
opportunity to participate in the Executive Deferral Plan. The plan allows
directors to defer not less than $2,000 of their annual compensation until their
retirement or until their earlier termination, disability or death. Directors
may defer up to 100 percent of all compensation and/or fees received. Deferred
compensation is credited with interest semiannually at a non-preferential rate.
Directors who are not employees of the Company also have available to them
an Outside Director Retirement Plan. Outside directors with at least five years
of service become eligible for normal retirement benefits upon the attainment of
age 70. The normal retirement benefit equals 5 percent of the director's annual
retainer fee for the calendar year in which the director resigns or otherwise
terminates service multiplied by each full year of service not to exceed 20
years. A director with at least five years of service can elect to choose early
retirement but, in such case, the normal retirement benefit is reduced by 4
percent for each year that the retirement precedes age 70. Benefits under the
plan continue for the life of the director. The plan also provides for
post-retirement and pre-retirement survivor benefits at the rate of 50 percent
of the retirement benefit which would have otherwise been paid at the date of
the eligible director's death. In addition, should disability occur prior to age
70, an eligible director is entitled to a disability benefit equal to the early
retirement benefit. In the event of a change of control, an eligible outside
director shall become immediately entitled to a normal retirement benefit and,
upon any change in control, any outside director with at least one year of
service shall become eligible for such benefit and will be credited with a
minimum of five years of service. Further, all benefits being paid at the date
of any change in control shall continue for the life of the outside director or
his/her survivor.
15
<PAGE>
EMPLOYMENT AGREEMENTS AND OTHER COMPENSATORY PLANS
EMPLOYMENT AGREEMENTS. On August 5, 1988, the Company entered into
employment agreements with Messrs. Redmond, Bryan, Eliassen, and Fukai to
provide for benefits under certain circumstances after a change in control of
the Company resulting from a Business Combination (as defined in the Company's
Restated Articles of Incorporation) or for termination without cause by the
Company. The agreements provide that each executive shall be employed by the
Company in a position comparable to his current position, with compensation and
benefits which, as set forth in each agreement, are at least equal to such
executive's then current compensation, for an initial employment period of three
years (subject to earlier termination due to voluntary termination without cause
by the executive or termination by the Company for cause.)
The agreements with Messrs. Redmond and Harvey provide that if the
executive's employment is terminated by the Company without cause, or if the
executive terminates his employment after a change in control and following a
reduction in position, responsibility or salary or a failure to receive
increases in compensation comparable to those received in prior years or to
increases received by other executives, the executive is entitled to continued
compensation in the form of (i) 75 percent of the average of the last five
years' total annual compensation, such amount to be paid annually in monthly
installments for four years, (ii) medical coverage for the executive and his
dependents equal to that provided at the time the Agreement was implemented and
before a change in control occurred for the lifetime of the executive or until
such time as the executive receives medical coverage from a subsequent employer,
and (iii) other benefits as described in any defined benefit plans in effect at
the time of termination.
The agreements with Messrs. Bryan, Eliassen, and Fukai provide that if the
executive's employment is terminated by the Company without cause or if the
executive terminates his employment after a change in control and following a
reduction in position, responsibility or salary or a failure to receive
increases in compensation comparable to those received in prior years or to
increases received by other executives, the executive is entitled to termination
compensation in the form of (i) the average monthly compensation for the last
five years paid at a rate of one month's pay for each year, or partial year of
company service, (ii) medical coverage for the executive and his dependents
equal to that provided at the time the Agreement was implemented and before a
change in control occurred not to exceed eighteen (18) months or until such time
as the executive receives medical coverage from a subsequent employer, and (iii)
other benefits as described in any defined benefit plans in effect at the time
of termination.
The Internal Revenue Code of 1986, as amended, contains certain rules which
disallow the payor's deduction and subject the payee to an excise tax for
certain compensatory payments due as a result of a change in control of the
payor or its assets. Notwithstanding the provisions of the employment agreements
described above, any payment which is determined to be subject to such rules
shall be limited to the maximum amount permitted to be paid without the
imposition of an excise tax (and if it shall be determined that the Company has
made a payment in excess of this limitation, such excess liability would be paid
by the Company).
SUPPLEMENTAL EXECUTIVE DISABILITY PLAN. The Supplemental Executive
Disability Plan provides specified benefits to executive officers of the Company
who become disabled so as to be unable to perform any and every duty of his or
her occupation. The plan provides a benefit equal to 60 percent of the executive
officer's base annual wage at the date of disability reduced by the aggregate
amount, if any, of disability benefits provided for under the Company's
Long-Term Disability Plan for employees, worker's compensation benefits, and any
benefit payable under provisions of the Federal Social Security Act. Benefits
will be payable for a period of time not to exceed the earlier of the executive
officer's date of retirement or age 65.
EXECUTIVE INCOME CONTINUATION PLAN. In order to provide benefits to the
beneficiaries of executive officers who die during their term of office or after
retirement, the Company has adopted an Executive Income Continuation Plan. Under
the plan, an executive officer's designated beneficiary will receive, as
16
<PAGE>
elected by the executive officer, either (a) a lump sum equal to twice the
executive officer's annual base salary at the time of death (or if death occurs
after retirement, a lump sum equal to twice the executive officer's annual
pension benefit) or (b) one quarter of such sum paid in each year over a
ten-year period commencing within thirty days of the executive's death.
<TABLE>
<CAPTION>
Comparison of Five Year Cumulative Total Returns -- Washington Water Power vs. Industry Indexes
Assumes $100 was invested in WWP and in each Index on December 31, 1988 and that all dividends
were reinvested.
Standard & Poor's Edison Electric Washington Water
500 Index (1) Institute Index (2) Power (WWP) Index
------------------ ------------------- -----------------
<S> <C> <C> <C>
1989 $131.69 $129.92 $120.49
1990 $127.61 $131.52 $126.80
1991 $166.49 $169.39 $151.23
1992 $179.18 $182.09 $173.08
1993 $197.26 $202.82 $196.31
<FN>
(1) A composite stock price index of 500 key companies in 90 industry groups
divided into four major industry categories (industrials, utilities,
financials, and transportations).
(2) A composite stock price index of 102 of the largest publicly-traded electric
and combination (electric and natural gas) utilities.
</TABLE>
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PROPOSAL 2
PROPOSED AMENDMENT TO RESTATED ARTICLES OF INCORPORATION, AS
AMENDED, INCREASING NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
Subdivision (b) of Article THIRD of the Restated Articles of Incorporation
("Restated Articles") now provides that the authorized capital stock of the
Company consists of 110,000,000 shares, divided into 10,000,000 shares of
Preferred Stock without nominal or par value, issuable in series as authorized
by the Board of Directors, and 100,000,000 shares of Common Stock without
nominal or par value. There were 52,851,889 shares of Common Stock outstanding
as of February 15, 1994. Proposal 2, if adopted, would increase the number of
shares of capital stock which the Company has the authority to issue to
210,000,000 shares, divided into 10,000,000 shares of Preferred Stock without
nominal or par value, issuable in series as authorized by the Board of
Directors, and 200,000,000 shares of Common Stock without nominal or par value.
The text of subdivision (b) Article THIRD of the Restated Articles as it will
read if this Proposal 2 is adopted is set forth below as Exhibit A to this Proxy
Statement.
On November 9, 1993, a two-for-one stock distribution was made to
shareholders. This reduced the number of authorized shares of common stock
available for issuance by 26,203,283 shares. The split also resulted in a
reduction in the market price per share of the Company's outstanding Common
Stock and, hence, a reduction in the price per share which can be received by
the Company for newly issued shares of Common Stock. The Board of Directors
deems it in the best interests of the Company to have an additional amount of
Common Stock of the Company authorized and available for issuance without
further action by the shareholders, unless such action is required by applicable
law or the rules of any exchange on which the Company's securities may be
listed. The Board of Directors believes that the additional authorized shares of
Common Stock are needed to enable the Company to raise additional capital funds
expeditiously and economically for its ongoing operations, for capital projects,
for issuance under the dividend reinvestment plan and employee benefit plans and
in connection with stock dividends or stock splits, for possible acquisitions or
stock distributions and for other corporate purposes. The Board of Directors
believes it advisable to authorize additional shares of Common Stock now, so
that if an issuance is determined to be appropriate in the future, it could be
accomplished without the delay and expense involved in obtaining shareholder
approval. The Company would be required to obtain the approval of the regulatory
commissions for those states in which the Company operates prior to the issuance
of any shares of Common Stock other than those shares of Common Stock for which
approval has already been obtained from said commissions.
The proposed amendment provides for authorization of 100,000,000 additional
shares of Common Stock. Shareholders will have no pre-emptive rights with
respect to the additional shares of Common Stock. The shares would be issued on
such terms, at such times and on such conditions as the Board of Directors may
determine.
The amendment is not being proposed as an "anti-takeover" device. However,
shares of authorized but unissued Common Stock could be used to dilute the stock
ownership of a hostile takeover party or could be sold to purchasers who might
assist the Board of Directors in opposing a hostile takeover bid. The
availability of such additional shares by itself might have the effect of
discouraging an attempt to acquire control of the Company other than through
negotiations with the Board of Directors. The Board has no knowledge of any
effort to accumulate the Company's securities or to obtain control of the
Company. The proposed amendment is not part of a plan by management to adopt a
series of anti-takeover provisions.
The Restated Articles presently contain certain provisions which may have
the effect of discouraging attempts to acquire control of the Company including
(1) the classification of the Board of Directors into three classes of directors
serving staggered three-year terms, (2) removal of directors for cause only and
then only by the affirmative vote of the holders of at least a majority of the
voting power of the shares of the Company entitled generally to vote in the
election of directors and (3) a "fair price provision" requiring that, unless
approved by the Board of Directors or unless certain "fair price" and other
provisions are met, certain
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mergers and other business combinations must be approved by an 80% vote of the
shareholders. In addition, the Company currently has in effect a Rights Plan
which provides for the issuance of preferred share purchase rights ("Rights")
which trade with, and are appurtenant to, shares of outstanding Common Stock.
The Rights have certain anti-takeover effects. The Rights may cause substantial
dilution to any person or group that attempts to acquire the Company on terms
not approved by the Company's Board of Directors, except pursuant to an offer
conditioned on a substantial number of Rights being acquired. The Rights become
exercisable (other than by the person or group attempting to acquire the
Company) upon the happening of certain events which result in or have the
potential to result in certain mergers or other business combinations.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock of the Company is required to adopt the amendment to the
Restated Articles contained in Proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 2.
PROPOSAL 3
SHAREHOLDER PROPOSAL
Mr. William D. White, a shareholder of the Company, submitted the following
proposal. Mr. White owns jointly with others 541 shares of the Company's Common
Stock. Mr. White's address is 520 North Elm Street, Colville, Washington.
ELECTION OF SHAREHOLDERS TO ADVISE COMPENSATION COMMITTEE
Beginning in 1994, the Board of Directors is requested to take the steps
necessary to provide shareholders, at their annual meeting, the opportunity to
elect three of their members to serve as advisors to the Compensation Committee.
The elected advisors shall serve as a liaison between the Shareholders and the
Compensation Committee. The Advisors shall attend Compensation Committee
meetings, and they shall advise and make recommendations regarding salaries,
benefits, incentive compensation, and retirement compensation of executive
officers, directors, and key employees of the Company. They will provide written
recommendations to the Board of Directors regarding management compensation, and
they shall report to shareholders at the Annual Meeting.
Their term of advisement shall be for one year, from annual meeting to
annual meeting, They shall receive the same compensation for meetings attended
as committee members.
SUPPORTING STATEMENT FOR ELECTING ADVISORS
It is important to shareholders that the Directors and Executive Officers of
our Company be compensated fairly for their leadership and service. Providing
incentives and a "just right" amount of compensation for executives is a very
difficult task for the Compensation Committee. Shareholder Advisors would assist
the Committee by providing objective input and a shareholder perspective.
SEVERAL REASONS SEEM TO WARRANT THE ELECTION OF ADVISORS TO ASSIST WITH
COMPENSATION AND BENEFIT RECOMMENDATIONS.
1. Bonuses and incentive compensation for executive officers are often
skewed beyond reasonable and appropriate incentives for outstanding job
performance. In 1990 the five, chief executive officers as a group received more
than $414,000.00 dollars in incentives and bonuses beyond their basic
compensation. That would average more than $82,000.00 per executive in EXTRA
compensation.
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2. Currently special agreements and other compensatory plans for executive
managers are committing hundreds of thousands of UNFUNDED dollars to future
executive benefits regarding layoffs, retirement, and disability plans. More
reasonable plans and funded arrangements are needed. Future costs may be
extremely high unless we begin funding necessary benefits.
3. Shareholder value and Executive compensation are not in balance.
Executive pay is growing much faster than dividend payout and stock value. We
need a better compensation and value balance.
4. Currently executive management recommends retainer fees, meeting
compensation and retirement benefits for Directors. Directors approve and fix
salaries for executive officers. Advisors could provide objective input into
compensation and benefit recommendations for Directors and for Executive
Officers. The recommendations of Advisors for compensation and benefits of
Directors and Executive Officers would be from a Shareholder perspective.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS SHAREHOLDER PROPOSAL FOR
THE FOLLOWING REASONS:
The Board of Directors believes that the Compensation Committee, which is
made up of four non-employee ("outside") directors, is the best group to make
recommendation on compensation for the executive officers of the Company. As
stated in the "Board Compensation Committee Report on Executive Compensation",
the Committee's primary purpose in setting compensation for executive officers
is to support the Company's goal of maximizing the value of shareholder
interests. The Committee uses data from various independent outside sources in
making recommendations with respect to compensation and executive benefit plans
to the full Board of Directors. In addition, these directors are also
shareholders of the Company, with holdings ranging from 43,746 shares to 2,000
shares of Common Stock of the Company.
As to the total compensation awarded for 1990 under the Executive Incentive
Compensation Plan to the named executive officers, the award included 12,297
shares of Company Common Stock in addition to $298,936 in cash.
With respect to the funding of benefit plans, the reference in previous
proxy statements that certain executive officer and/or director benefit plans
were unfunded related to a technical Internal Revenue Service determination
concerning the tax consequences of participation in non-qualified benefit plans.
In fact, the Company, beginning in 1985, has purchased corporate-owned life
insurance policies which, assuming actuarial assumptions are accurate, will
substantially, if not wholly, offset benefit plan obligations. The Compensation
Committee reviews these benefit plans, including associated potential liability,
and reports and makes recommendations related thereto, when appropriate, to the
full Board of Directors.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Deloitte & Touche as independent
accountants to audit the financial statements of the Company for the 1994
calendar year. This firm has conducted consolidated annual audits of the Company
for many years and is one of the world's largest firms of independent certified
public accountants. A representative of Deloitte & Touche is expected to be
present at the meeting with the opportunity to make a statement if he/she
desires to do so, and such representative is expected to be available to respond
to appropriate questions.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company's Annual Report to Shareholders for the year 1993,
including financial statements, accompanies this Proxy Statement.
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OTHER BUSINESS
The Board of Directors does not intend to present any business at the
meeting other than as set forth in the accompanying Notice of Annual Meeting of
Shareholders, and has no present knowledge that any others intend to present
business at the meeting. If, however, other matters requiring the vote of the
shareholders properly come before the meeting or any adjournment or adjournments
thereof, the persons named in the accompanying form of proxy will have
discretionary authority to vote the proxies held by them in accordance with
their judgment as to such matters.
SHAREHOLDER PROPOSALS
Shareholder proposals intended for inclusion in the proxy materials for the
1995 Annual Meeting of Shareholders of The Washington Water Power Company must
be received by the Company not later than November 30, 1994.
Such proposals should be directed to the Corporate Secretary, The Washington
Water Power Company, East 1411 Mission Avenue, P.O. Box 3727, Spokane,
Washington 99220.
EXPENSE OF SOLICITATION
The expense of soliciting proxies will be borne by the Company. Proxies will
be solicited by the Company primarily by mail, but may also be solicited
personally and by telephone at nominal expense to the Company by directors,
officers, and regular employees of the Company. In addition, the Company has
engaged Beacon Hill Partners, Inc., at a cost of $3,500 plus out-of-pocket
expenses, to solicit proxies in the same manner. The Company will also request
banks, brokerage houses, custodians, nominees and other record holders of the
Company's Common Stock to forward copies of the proxy soliciting material and
the Company's 1993 Annual Report to Shareholders to the beneficial owners of
such stock, and the Company will reimburse such record holders for their
expenses in connection therewith.
By order of the Board of Directors,
TERRY L. SYMS
CORPORATE SECRETARY
Spokane, Washington
March 31, 1994
EXHIBIT A
Proposed Amendment to Article THIRD of the Restated Articles of
Incorporation Subdivision (b) as proposed to be amended:
(b) the aggregate number of shares of capital stock which the Corporation
shall have authority to issue is 210,000,000 shares, divided into 10,000,000
shares of Preferred Stock without nominal or par value, issuable in series as
hereinafter provided, and 200,000,000 shares of Common Stock without nominal or
par value.
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Front Side
This proxy when properly executed will be voted in the manner directed by the
undersigned shareholder. If no direction is made, this proxy will be voted FOR
Proposal 1 (election of directors), FOR Proposal 2 and AGAINST Proposal 3. Sign
exactly as name appears below. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee, or
guardian, give full title as such. If a corporation, sign in full corporate
name by president or other authorized officer. If a partnership, sign in
partnership name by authorized person. PLEASE MARK, SIGN, DATE, AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
Back Side
THE WASHINGTON WATER POWER COMPANY COMMON STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints P.A. Redmond and T.L. Syms, and each of them,
Proxies, with power of substitution to vote, as designated below, all the shares
of Common Stock of the Washington Water Power Company held of record by the
undersigned on March 17, 1994, at the Annual Meeting of Shareholders to be held
on Thursday, May 12, 1994, or any adjournments thereof.
(1) Election of Directors: Robert S. Jepson, Jr., General H. Norman
Schwarzkopf, B. Jean Silver, Larry A. Stanley and R. John Taylor.
/ / VOTE FOR all nominees listed above, except as indicated below. If a
vote is to be withheld from any nominees(s), write the name(s) in the
space provided below.
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/ /VOTE WITHHELD from all nominees.
(2) Approve increase in Authorized Common Stock.
/ /For / /Against / /Abstain
(3) Shareholder proposal to establish a paid advisory committee.
/ /For / /Against / /Abstain
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 3.
(4) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.
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Signature Date Signature if held jointly Date
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APPENDIX TO THE ELECTRONIC FORMAT DOCUMENT
A map which describes the location and street directions to the Annual
Meeting Site will be displayed on the page following the Chairman's
letter to shareholders.
