<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
The Washington Water Power Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
PROMPT RETURN OF THE ENCLOSED PROXY CARD WILL SAVE THE EXPENSE OF AN ADDITIONAL
MAILING.
YOUR IMMEDIATE ATTENTION IS GREATLY APPRECIATED.
[WASHINGTON POWER LOGO]
PAUL A. REDMOND March 31, 1997
Chairman of the Board and
Chief Executive Officer
Dear Shareholder:
On behalf of the Board of Directors, it's my pleasure to invite you to
attend the 1997 Annual Meeting of Shareholders. We'll have a reception and
refreshments beginning at 2:30 p.m. Directors, officers, and other Company
representatives will be there to visit with you and answer any questions you
might have. The Annual Meeting will begin promptly at 3:00 p.m.
<TABLE>
<S> <C> <C> <C>
Date: Tuesday Afternoon, May 20, 1997 Place: Spokane Opera House
Time: 2:15 p.m. Doors Open (See next page for map/details.)
2:30 p.m. Reception and Refreshments 334 West Spokane Falls Blvd.
3:00 p.m. Annual Meeting Convenes Spokane, Washington
</TABLE>
I mentioned in the special letter enclosed that our Company has set
aggressive growth targets and is focused on creating a strong future. At the
annual meeting, you'll hear more about our progress. We'll also present a video
dedicated to those individuals in the community and in our Company who served as
heroes during the Ice Storm natural disaster that devastated our region last
fall. The resiliency, spirit, cooperation, and dedication by the Company's
service response and restoration teams as well as the community was an
inspiration to us all.
We hope that you'll be able to attend the Annual Meeting. Whether or not
you're able to participate, please take the opportunity to review the Annual
Report, Proxy Statement, and 1996 Financial Report. Please also vote your proxy.
Your vote is important regardless of the number of shares you own. Thank you for
your continued support.
Sincerely,
Washington Water Power P.O. Box 3647 Spokane, Washington 99220
Shareholder Relations--(509)482-4203 or (1)(800)222-4931
IF YOU REQUIRE SPECIAL ACCOMMODATIONS AT THE ANNUAL MEETING DUE TO A DISABILITY,
PLEASE CALL OUR SHAREHOLDER RELATIONS DEPARTMENT BY APRIL 25.
<PAGE>
(MAP)
<PAGE>
THE WASHINGTON WATER POWER COMPANY
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99202
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY AFTERNOON, MAY 20, 1997
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of The
Washington Water Power Company will be held at the Spokane Opera House, 334 West
Spokane Falls Boulevard, Spokane, Washington 99201, at 3:00 p.m., Spokane Time,
on Tuesday, May 20, 1997, for the following purposes:
(1) To elect four directors of the Company.
(2) 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 20, 1997 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 in the enclosed postage-paid envelope as
promptly as possible.
By order of the Board of Directors,
Terry L. Syms
CORPORATE SECRETARY
Spokane, Washington
March 31, 1997
<PAGE>
THE WASHINGTON WATER POWER COMPANY
1411 EAST 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 Opera House, 334
West Spokane Falls Boulevard, Spokane, Washington 99201, at 3:00 p.m., Spokane
Time, on Tuesday, May 20, 1997, 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, 1997.
Holders of Common Stock of record at the close of business on March 20, 1997
will be entitled to vote at the Annual Meeting. On that date, there were
outstanding 55,960,360 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 such 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 four individuals for the 1997 Annual Meeting. The outcome of the vote will
be determined by reference to the number of votes cast. Withheld votes are not
considered "votes cast" and, therefore, will have no effect.
PROPOSAL 1
ELECTION OF DIRECTORS
At the meeting, four directors are to be elected, one to hold office for a
term of two years until 1999, and three to hold office for a term of three years
until 2000, 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. B.
Jean Silver, who has served as a director since 1988, is retiring. General H.
Norman Schwarzkopf, who has served as a director since 1993, is not standing for
re-election.
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.
<PAGE>
NOMINEES
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION
- ------------------------------------
<S> <C>
W. LESTER BRYAN
Director Since August 13, 1996 President & Chief Operating Officer
Age--56 of the Company
(to be elected for a term Spokane, Washington
expiring in 1999)
</TABLE>
Mr. Bryan was appointed President & Chief Operating Officer of the Company
in August 1996. He was employed by the Company in 1970. His experience includes
positions in system operations and resource planning. He was appointed Vice
President of Power Supply in 1983 and Senior Vice President of Rates and
Resources in 1992, where he was responsible for all electric and natural gas
wholesale operations. Mr. Bryan also serves on the boards of the Columbia
Storage Power Exchange and the Pacific Northwest Utilities Conference Committee.
He is also a member of the Pacific Coast Gas Association and the Eastern
Washington University Business Advisory Council.
<TABLE>
<S> <C>
SARAH M.R. (SALLY) JEWELL
Director Nominee President
Age--41 Western Bank Division of Washington
(to be elected for a term Mutual Bank
expiring in 2000) Seattle, Washington
</TABLE>
Mrs. Jewell is President of the Western Bank division of Washington Mutual.
Prior to joining Washington Mutual, she spent fourteen years with Rainier Bank,
Security Pacific Bank and West One Bank, in the areas of energy banking,
national accounts, credit administration, head of business banking activities in
Washington, and finally as President and CEO of West One Bank, Washington. Mrs.
Jewell serves on the boards of Recreation Equipment, Inc., and PREMERA, parent
company of Blue Cross of Washington and Alaska and Medical Service Corporation.
She is also an active participant in community activities including leadership
positions on several non-profit boards. These include the Alliance for
Education, the Seattle-King County-Snohomish County YWCA and the Mountains to
Sound Greenway Trust. In addition, she serves on advisory committees for the
University of Washington's College of Engineering, School of Business, and Women
in Engineering Initiative.
<TABLE>
<S> <C>
JOHN F. KELLY
Director Nominee Chairman, President and
Age--52 Chief Executive Officer of Alaska Air
(to be elected for a term Group and Alaska Airlines
expiring in 2000) Seattle, Washington
</TABLE>
Since February 1995, Mr. Kelly has been Chairman, President and CEO of
Alaska Air Group and of Alaska Airlines, a wholly-owned subsidiary of Alaska Air
Group. He has been a board member of Alaska Air Group since 1989. From 1987
through 1994, Mr. Kelly was President and CEO of Horizon Air and has been
Chairman of the Board of Horizon Air since 1991. Horizon Air is also a
wholly-owned subsidiary of Alaska Air Group. Mr. Kelly began his career with
Alaska Airlines in 1976 where he held various executive positions including
Executive Vice President and Chief Operating Officer and Vice President of
Marketing. Mr. Kelly serves on the board of trustees of the Seattle Repertory
Theatre, is a member of the Northwestern University Transportation Center
Business Advisory Committee, and is a director of the Washington State
Roundtable.
2
<PAGE>
<TABLE>
<S> <C>
R. JOHN TAYLOR
Director Since May 10, 1985 Chairman and Chief Executive Officer
Age--47 AIA Services Corporation
(to be elected for a term Lewiston, Idaho
expiring in 2000)
</TABLE>
In September 1995, Mr. Taylor was appointed Chairman and Chief Executive
Officer of AIA Services Corporation, a life insurance holding company and
insurance agency with operations throughout the United States. Prior to that
time and for over five years, Mr. Taylor served as President of AIA Services and
was its Chief Operating Officer. Mr. Taylor is also a member of the boards of
directors of The Universe Life Insurance Company, Lewiston, Idaho, Woodcom,
Inc., (KATW Radio) of Lewiston, Idaho, and the Great Fidelity Life Insurance
Company of Fort Wayne, Indiana.
CONTINUING DIRECTORS
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION
- ------------------------------------
<S> <C>
DAVID A. CLACK
Director Since February 4, 1988 President
Age--62 Clack and Co.
(term expiring in 1998) Spokane, Washington
</TABLE>
For over five years, Mr. Clack has been President of Clack and Co., an
investment firm headquartered in Spokane, Washington. Previously, Mr. Clack was
Chairman of the Board and Chief Executive Officer of Old National Bancorporation
of Washington.
<TABLE>
<S> <C>
DUANE B. HAGADONE
Director Since May 13, 1966 President
Age--64 Hagadone Corporation
(term expiring in 1998) 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. Mr. Hagadone is also a director of Coeur d'Alene
Mines Corporation in Coeur d'Alene, Idaho.
<TABLE>
<S> <C>
EUGENE W. MEYER
Director Since May 11, 1990 Financial Consultant
Age--60 Hilton Head Island, South Carolina
(term expiring in 1999)
</TABLE>
For over five years, Mr. Meyer has been in the financial consulting
business. He was previously 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. Mr. Meyer is a Chartered Financial Analyst.
<TABLE>
<S> <C>
PAUL A. REDMOND
Director Since August 1, 1980 Chairman of the Board and Chief
Age--60 Executive Officer of the Company
(term expiring in 1999) Spokane, Washington
</TABLE>
Mr. Redmond was appointed Chairman of the Board and Chief Executive Officer
of the Company in 1985. He was employed by the Company in 1965. His experience
includes Construction and Maintenance Engineer, Superintendent of Contract
Construction, Manager of Construction and Maintenance, and Assistant to the
President. He was appointed a Vice President in 1978, Executive Vice President
in 1980, President and Chief Operating Officer in 1982, and President and Chief
Executive Officer in 1984. Mr. Redmond is also a director of U.S. Bancorp in
Portland, Oregon, Chairman of the Board of ITRON,
3
<PAGE>
Inc. ("ITRON"), in Spokane, Washington, and Chairman of the Board of Pentzer
Corporation (the Company's wholly-owned private investment firm) in Spokane,
Washington.
<TABLE>
<S> <C>
LARRY A. STANLEY
Director Since May 10, 1991 President and Chief Executive Officer
Age--68 Empire Bolt & Screw, Inc.
(term expiring in 1998) Spokane, Washington
</TABLE>
For over five years, Mr. Stanley has been 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 immediate past Chairman of the Spokane Area Chamber of Commerce. Mr.
Stanley also serves on the boards of Output Technology Corporation, CXT
Incorporated, and The Coeur d'Alenes Company, all located in Spokane,
Washington.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of Common Stock of the
Company held, as of March 5, 1997, 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 nor do the directors and executive
officers as a group own in excess of 1% of the outstanding Common Stock of the
Company. Also, 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............................................................... 8,297 5,114(1) 13,411
David A. Clack (2)............................................................ 3,504 2,000(3) 5,504
Jon E. Eliassen (2)(4)........................................................ 7,966 6,403(1) 14,369
Robert D. Fukai............................................................... 6,888 8,510(1) 15,398
Duane B. Hagadone (2)......................................................... 66,880 66,880
Sarah M.R. (Sally) Jewell..................................................... 1,000 1,000
John F. Kelly................................................................. 500 500
Eugene W. Meyer (2)........................................................... 12,025 12,025
Nancy J. Racicot.............................................................. 953 3,716(1) 4,669
Paul A. Redmond (2)(5)........................................................ 36,640(6) 14,531(1) 51,171
General H. Norman Schwarzkopf (2)............................................. 780 3,716 4,496
B. Jean Silver................................................................ 8,853(7) 8,853
Larry A. Stanley.............................................................. 3,270 4,705(8) 7,975
R. John Taylor................................................................ 9,475 2,300(9) 11,775
All directors and executive officers as a group, including those listed
above--19 individuals (10).................................................. 250,977
</TABLE>
- ------------------------
(1) Shares held in the Company's 401(k) Investment Plan.
(2) Mr. Eliassen and directors Clack, Hagadone, Meyer, and Redmond each own 642
shares of stock of Pentzer Financial Services Corporation and 642 shares of
stock of Pentzer Jefferson Corp., indirect subsidiaries of the Company.
Messrs. Clack, Eliassen, Hagadone, Meyer, and Schwarzkopf each own stock
options as follows: Form House--700 stock options and Graphic
Communications--696 stock options. The aforesaid persons other than General
Schwarzkopf own stock options as follows: Imfax-- 696 stock options; Pentzer
Financial Services--107 stock options and Pentzer Jefferson--107 stock
options. Mr. Redmond owns stock options as follows: Form House--12,195 stock
options; Graphic Communications--10,442 stock options; Imfax--10,442 stock
options; Pentzer Financial Services-- 10,733 stock options and Pentzer
Jefferson--11,358 stock options.
(3) These shares are held in the name of Clack & Co.
(4) Mr. Eliassen owns 14,000 stock options of ITRON (a corporation in which the
Company's subsidiary, Pentzer Corporation, owns approximately 6% of the
outstanding Common Stock).
(5) Mr. Redmond owns 2,500 shares of ITRON. Mr. Redmond also owns 17,500 stock
options of ITRON.
(6) Mr. Redmond shares investment and voting power with his spouse.
(7) Mrs. Silver shares investment and voting power with her spouse.
(8) Shares are held in a pension/profit-sharing plan not administered by the
Company for which Mr. Stanley shares voting and investment power.
5
<PAGE>
(9) Includes 1,200 shares held in an employee benefit plan not administered by
the Company for which Mr. Taylor shares voting and investment power; 376
shares held by Mr. Taylor's spouse of which shares he disclaims beneficial
ownership; and 724 shares held by Mr. Taylor as custodian for his children.
(10) The group of executive officers referred to above includes the Treasurer,
who is also a Vice President, the Controller, and the Corporate Secretary.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held eight Board meetings in 1996. The attendance
during 1996 at all meetings of the Board and at all Board committee meetings
averaged 97 percent.
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 Committee consists of directors Meyer, Silver, and
Taylor, and held four meetings in 1996.
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 directors Clack, Hagadone, Schwarzkopf, and Stanley,
and held four meetings in 1996.
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
consists of non-employee directors. 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 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 of the Company,
1411 East Mission Avenue, P.O. Box 3727, Spokane, Washington 99220. The
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 Environmental Committee assists the Board in monitoring and overseeing
the Company's environmental compliance and performance and provides policy
guidance to executive management on environmental issues. The Committee consists
of directors Silver and Stanley and an executive officer and two senior
management employees of the Company. The Committee held four meetings in 1996.
The Employee Benefits Committee 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 Committee consists of directors Silver and
Stanley and three executive officers of the Company. The Committee held six
meetings in 1996.
The Executive Committee expedites board authorizations required to take
action on certain corporate business matters when it is not practical for the
entire Board 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 directors Clack, Hagadone, Stanley, and
Redmond. There were no meetings held in 1996.
6
<PAGE>
EXECUTIVE COMPENSATION
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
TO OUR SHAREHOLDERS:
The 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 objectives and
performance with executive pay.
- 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 corporate and
individual 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 compensation plans support the
Company's business mission and contribute to the Company's financial success.
Consummation of the merger between the Company and Sierra Pacific Resources
was expected to be finalized during 1996. Any executive officer of the Company
who would have otherwise received stock as compensation within six months prior
to the effective date of the merger could have been subject to adverse
consequences under federal securities laws. Therefore, in February 1996, when
incentive targets and potential payouts were established, it was determined that
any incentive payouts for 1996 would be made in cash to avoid any potential
adverse consequences. Subsequent to that determination, the merger was
terminated by the Board of Directors on June 28, 1996.
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
limits the deductibility to the Company of nonexcluded annual compensation in
excess of $1 million paid to the Company's chief executive officer and the other
four highest-paid executive officers. The Company's exposure under Section
162(m) is currently not material and, therefore, no provisions are currently
under consideration with respect to Section 162(m).
COMPONENTS OF COMPENSATION
In determining executive officer compensation for 1996, the Committee
considered the Company's achievements of a number of corporate and financial
goals:
- Revenues increased by 25 percent to $944 million, highest in company
history; wholesale revenues more than doubled to $230 million.
7
<PAGE>
- Despite two extraordinary events in 1996 (the ice storm and merger
termination), earnings per share of $1.35 were achieved.
- Shareholder return, as measured in market price change and cash dividends,
was 13.5 percent in 1996. For the three-year period 1994-1996, our
shareholder return was 19.2 percent, outperforming the overall utility
industry average of 17 percent.
- The Company achieved cash flow of $108.8 million--an increase of 34
percent or $3.00 per share.
- Pentzer Corporation continued to play an important role in the Company's
growth. For the fifth year in a row, Pentzer achieved record returns
contributing a substantial 38 cents per share to earnings, an increase of
11 cents over 1995.
- Washington Water Power continued to maintain its competitive edge as one
of the nation's lowest-cost providers of energy, thereby positioning the
Company to capture future opportunities.
The Committee also considered the rapid and proactive response from its
executive officers, after the Company terminated the pending merger, in focusing
on and implementing a significant corporate restructuring into three separate
lines of business: energy delivery, generation and resources, and subsidiary
operations, a structure that will allow the Company to respond more aggressively
to competition.
The Committee considered but did not target executive officer compensation
at the median of similarly situated executives at the Company's competitors as
it has in the past. Rather, the Committee believes that its total compensation
opportunities for executive officers must provide significant compensation
potential to attract and retain executive officers of exceptional talent and
skill. The rapidly changing nature and increasing competitiveness of the utility
industry demand that level of talent in order to maximize shareholder value.
Therefore, the Committee determined to reward its executive officers for
exceptional achievement during 1996 and to pay a level of compensation to keep
what it believes to be some of the finest and knowledgeable employees in the
industry.
BASE SALARY
The Committee reviews each executive officer's base salary annually. 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, including the Committee's subjective judgment as
to individual contribution. The Committee considers some or all of these factors
as it deems appropriate; there are no formal weightings given to any factor.
Effective March 1, 1996, the Committee granted all executive officers a 4%
base salary increase. In addition, in August 1996, further base salary increases
were granted to certain executive officers in amounts averaging 9%. These
increases were related to the Company's restructuring into three separate lines
of business and reflect, in part, increases in responsibility in connection with
these organizational changes, as well as the Compensation Committee's belief
that base salary levels needed to be increased in light of the increasing
competitiveness of the utility industry. Mr. Bryan was granted a 39.7% increase
to reflect his promotion to President and Chief Operating Officer of the Company
as well as his significant new responsibilities in connection with the Company's
restructuring.
With respect to the Chief Executive Officer's compensation in 1996, the
Committee determined that a 4% increase in base salary for Mr. Redmond was also
appropriate. Mr. Redmond did not receive any additional base salary increase in
August. 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, real estate development,
financial services, precision metal stamping and manufacturing of retail
advertising displays and consumer product packaging. In addition, the Company
operates in several states, thereby requiring quality relationships and
interaction with multiple regulatory
8
<PAGE>
commissions and public policy leaders. Mr. Redmond has served as CEO of the
Company since 1984 and as Chairman and CEO since 1985. Under Mr. Redmond's
leadership during 1996, the Company achieved a number of corporate and financial
goals as previously discussed. 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 continue to contribute significantly to the combined long-term
success of the Company and its many subsidiaries (direct and indirect).
EXECUTIVE INCENTIVE COMPENSATION PLAN
This plan provided the opportunity in 1996 for executive officers including
Mr. Redmond to earn annual 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 1996, such percentages ranged
from 35% to 40% for executive officers and 50% for Mr. Redmond. In the event
that various goals (as more fully described under Annual Incentives) are
achieved, an executive officer may be entitled to receive the full award and, in
the event that certain 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 fosters achievement of the Company's financial performance
goals.
ANNUAL INCENTIVES. Each year, the Committee establishes short-term
financial goals which relate to one or more indicators of corporate financial
performance. Generally, incentive awards are paid to participating executives
under the Executive Incentive Compensation Plan only when the pre-designated
financial goals and the individual performance goals are achieved. Because the
merger was expected to be consummated during 1996, the Committee did not
establish formal corporate financial goals for a performance period which was
expected to be less than one year, but instead based the annual incentive award
upon the overall financial performance of the Company and the individual
performance of each executive. In reviewing the Company's overall financial
performance, the Committee considered such corporate performance measures as
earnings per share growth, internal cash generation, share price appreciation,
return on common equity, book value, dividend payout ratio, and cost management.
The evaluation of each executive included a determination of factors including
sustained performance of each executive's individual accountabilities, the
impact of such individual performance on the business results of the Company,
effective leadership, the level of the executive's responsibility, business
judgment, technical expertise, management skills, and strategic direction. The
relative importance of each of these factors was discretionary on the part of
the Committee, and no particular formulas or weights were applied. Based on this
assessment process, the executive officers and Mr. Redmond received the maximum
award.
Payouts under the Executive Incentive Compensation Plan are normally made
50% in cash and 50% in Company Common Stock, consistent with the philosophy of
the Committee 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.
Nevertheless, because executive officers who would have otherwise received stock
as compensation within six months prior to the effective date of the merger
could have been subject to adverse consequences under the federal securities
laws, stock could not be granted for 1996 performance and all incentive awards
for 1996 were paid in cash. The amounts are reflected in the Summary
Compensation Table under the column entitled "Bonus."
LONG-TERM INCENTIVES. No long-term goals were established for 1996 because
it was assumed the merger would close before year-end.
COMPENSATION FROM SUBSIDIARIES
Mr. Redmond serves as Chairman of the Board of Pentzer Corporation, the
Company's wholly owned private investment firm. Since 1984, Mr. Redmond has also
been Chairman of the Board of ITRON, in
9
<PAGE>
which Pentzer has a 6 percent investment. As reflected in the Summary
Compensation Table, the Board of Directors of Pentzer Corporation, in 1996,
unanimously approved long-term incentive payouts to reward Mr. Redmond for his
significant long-term contribution to the development and success of ITRON and,
specifically, in connection with the sale and performance of ITRON Common Stock
and the development and ultimate sale of Spokane Industrial Park.
Mr. Redmond also received option grants from certain subsidiaries of the
Company during 1996, 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 subsidiary incentive plans.
None of the awards mentioned above were made by or subject to approval of
the Compensation Committee of the Board of Directors of the Company.
Members of the Compensation Committee
David A. Clack Duane B. Hagadone
General H. Norman Schwarzkopf Larry A. Stanley
10
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1)
---------------------------------------------------------------------------
SALARY ($) BONUS ($)
----------------------- -----------------------
NAME AND UTILITY TOTAL UTILITY TOTAL
PRINCIPAL POSITION YEAR (2) NONUTILITY SALARY ($) (2) NONUTILITY BONUS ($)
- ----------------------------------- ---- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
P.A. Redmond....................... 1996 $ 382,545 $ 137,702 $ 520,247 $ 294,813 $ 106,129 $ 400,942(3)
Chairman of the 1995 $ 376,590 $ 135,352 $ 511,942 $ 283,589 $ 101,931 $ 385,520(3)
Board & Chief Executive Officer 1994 $ 338,767 $ 159,975 $ 498,742
W.L. Bryan......................... 1996 $ 193,104 $ 18,709 $ 211,813 $ 136,031 $ 13,175 $ 149,206(3)
President & Chief 1995 $ 181,659 $ 181,659 $ 109,440 $ 109,440(3)
Operating Officer 1994 $ 176,976 $ 176,976
J.E. Eliassen...................... 1996 $ 150,999 $ 33,698 $ 184,697 $ 93,120 $ 20,774 $ 113,894(3)
Senior Vice President & 1995 $ 147,407 $ 34,252 $ 181,659 $ 88,800 $ 20,640 $ 109,440(3)
Chief Financial Officer 1994 $ 144,462 $ 32,514 $ 176,976
N.J. Racicot....................... 1996 $ 174,151 $ 174,151 $ 100,313 $ 100,313(3)
Senior Vice President & 1995 $ 165,142 $ 165,142 $ 87,053 $ 87,053(3)
General Manager Energy Delivery 1994 $ 157,752 $ 157,752
R.D. Fukai......................... 1996 $ 170,537 $ 170,537 $ 92,188 $ 92,188(3)
Vice President 1995 $ 165,142 $ 165,142 $ 87,053 $ 87,053(3)
External Relations 1994 $ 160,886 $ 160,886
<CAPTION>
LONG-TERM COMPENSATION (1)
---------------------------------------------------------------
PAYOUTS
AWARDS ------------------------
----------------------- TOTAL
SECURITIES LONG-TERM LONG-TERM
RESTRICTED UNDERLYING INCENTIVE PAYOUTS ($) INCENTIVE ALL OTHER
NAME AND STOCK OPTIONS/ ------------------------ PAYOUTS COMP.
PRINCIPAL POSITION AWARDS ($) SARS (#) UTILITY (2) NONUTILITY ($) ($)(9)
- ----------------------------------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
P.A. Redmond....................... 29,784(4) $ 448,847(7) $ 448,847 $ 41,837
Chairman of the 25,000(5) $ 236,805(8) $ 236,805 $ 41,063
Board & Chief Executive Officer 26,695(6) $ 828,661(8) $ 828,661 $ 36,992
W.L. Bryan......................... $ 10,897
President & Chief $ 6,053
Operating Officer $ 7,127
J.E. Eliassen...................... 3,587(4) $ 38,618
Senior Vice President & 10,857(5) $ 56,054
Chief Financial Officer 3,414(6) $ 29,643
N.J. Racicot....................... $ 15,540
Senior Vice President & $ 13,683
General Manager Energy Delivery $ 12,460
R.D. Fukai......................... $ 20,984
Vice President $ 13,963
External Relations $ 19,647
</TABLE>
11
<PAGE>
Notes to Summary Compensation Table:
(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. Accumulated
deferred compensation is credited with earnings at a non-preferential rate.
(2) Only compensation charged to utility operations is recovered as an expense
for ratemaking purposes.
(3) Amounts received under the Executive Incentive Compensation Plan for 1995
and 1996 performance.
(4) Option grants to Mr. Redmond received as a director of certain of the
Company's indirect subsidiaries: ITRON--2,000; F.O. Phoenix, Inc.--15,000;
Bay Area Manufacturing Co., Inc.--12,784.
Option grants to Mr. Eliassen received as a director of certain of the
Company's indirect subsidiaries: ITRON--2,000; F.O. Phoenix, Inc.--857; Bay
Area Manufacturing Co., Inc.--730.
(5) Option grants to Mr. Redmond received as a director of certain of the
Company's indirect subsidiaries: ITRON--10,000; and The Decker Co.
Inc.--15,000.
Option grants to Mr. Eliassen received as a director of certain of the
Company's indirect subsidiaries: ITRON--10,000; and The Decker Co.
Inc.--857.
(6) Option grants to Mr. Redmond received as a director of certain of the
Company's indirect subsidiaries: The Form House, Inc.--12,195; Safety Speed
Cut Mfg. Co., Inc.--12,500; and ITRON--2,000.
Option grants to Mr. Eliassen received as a director of certain of the
Company's indirect subsidiaries: The Form House--700; Safety Speed Cut--714;
and ITRON--2,000.
(7) Amount received from Pentzer Corporation as long-term incentive compensation
in connection with the performance and sale of Itron common stock and the
development and ultimate sale of Spokane Industrial Park.
(8) Amount received from Pentzer Corporation as long-term incentive compensation
in connection with the performance and sale of Itron common stock.
(9) Includes 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 for 1996 under the Deferral Plan
were: Redmond--$16,287; Bryan--$4,147; Eliassen $2,648; Racicot--$2,157;
Fukai--$968. Amounts for 1996 under the 401(k) plan were: Redmond $6,750;
Bryan--$6,750; Eliassen--$6,750; Racicot-- $6,750; Fukai--$6,750. Amounts
for 1996 under the One-Leave Program were: Redmond--$0; Bryan--$0;
Eliassen--$9,120 (100 hrs.); Racicot--$6,633 (80 hrs.); Fukai--$13,266 (160
hrs.). Includes 1996 ITRON director fees for Redmond of $18,800 and Eliassen
of $20,100.
12
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- -------------------------------------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---------------------------------- ------------- --------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
P.A. Redmond
ITRON........................... 2,000(2) .19% $ 58.75 04/30/06 $ 73,895 $ 187,265
Bay Area........................ 12,784(3) 31.25% $ 36.55 10/31/05 $ 293,904 $ 744,668
F.O. Phoenix.................... 15,000(4) 20.0% $ 39.45 05/24/06 $ 372,150 $ 943,050
J.E. Eliassen
ITRON........................... 2,000(2) .19% $ 58.75 04/30/06 $ 73,895 $ 187,265
Bay Area........................ 730(3) 1.8% $ 36.55 10/31/05 $ 16,783 $ 42,523
F.O. Phoenix.................... 857(4) 1.1% $ 39.45 05/24/06 $ 21,262 $ 53,880
</TABLE>
- ------------------------
(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 Restated Stock Option Plan for Non-Employee
Directors on April 30, 1996. All options were exercisable immediately upon
grant.
(3) Granted pursuant to Bay Area Manufacturing Co., Inc., Stock Incentive Plan.
Vests in whole on November 2, 1998 but may be accelerated due to death,
disability or change in control. The value of the options is based on book
value per share.
(4) Granted pursuant to F.O. Phoenix, Inc., Stock Incentive Plan. Vests in whole
on May 24, 1999 subject to the right of F.O. Phoenix board to accelerate at
any time. The value of the options is based on book value per share.
13
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED ON VALUE FY-END (#) FY-END ($)
EXERCISE REALIZED ------------------------------ ------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- ----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
P.A. Redmond................... -- -- 60,475(1) 67,479(2) $ 485,540(1) $ 317,449(3)
J.E. Eliassen.................. 1,000(4) $ 21,125 15,606(5) 3,858(6) $ 19,155(5) $ 18,171(3)
</TABLE>
- ------------------------
(1) 2,500 ITRON stock options valued at $14.84 per share ($2.91 exercise price);
1,000 ITRON stock options valued at $4.25 per share ($13.50 exercise price);
and 2,000 ITRON stock options valued at $0 per share ($17.75 exercise
price); 10,000 ITRON stock options valued at $0 per share ($24.50 exercise
price); 2,000 ITRON stock options valued at $0 ($58.75 exercise price); and
11,358 Pentzer Jefferson stock options valued at $0 per share ($0.002
exercise price); 10,733 Pentzer Financial Services stock options valued at
$17.18 per share ($1.40 exercise price); 10,442 Graphic Communications stock
options valued at $24.88 per share ($20.00 exercise price); and 10,442 Imfax
stock options valued at $0 per share ($18.67 exercise price); all as of
December 31, 1996.
(2) 12,195 Form House stock options; 12,500 Safety Speed Cut stock options;
15,000 Decker stock options; 12,784 Bay Area Manufacturing stock options;
and 15,000 F.O. Phoenix stock options.
(3) Form House stock options valued at $11.16 per share; Safety Speed Cut stock
options valued at $7.43 per share; Decker stock options valued at $2.89 per
share; Bay Area Manufacturing stock options valued at $3.53 per share; and
F.O. Phoenix stock options valued at $0 per share; all as of December 31,
1996.
(4) ITRON stock options ($13.50 exercise price).
(5) 2,000 ITRON stock options valued at $0 per share ($17.75 exercise price);
2,000 ITRON stock options valued at $0 per share ($58.75 exercise price);
and 10,000 ITRON stock options valued at $0 per share ($24.50 exercise
price); 107 Pentzer Jefferson stock options valued at $0 per share ($0.002
exercise price); 107 Pentzer Financial Services stock options valued at
$17.18 per share ($1.40 exercise price); 696 Graphic Communications stock
options valued at $24.88 per share ($20.00 exercise price); and 696 Imfax
stock options valued at $0 per share ($18.67 exercise price); all as of
December 31, 1996.
(6) 700 Form House stock options; 714 Safety Speed Cut stock options; 857 Decker
stock options; 730 Bay Area Manufacturing stock options; and 857 F.O.
Phoenix stock options.
14
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------
REMUNERATION 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
$600,000............................................. $ 225,000 $ 300,000 $ 375,000 $ 450,000 $ 450,000
$650,000............................................. $ 243,750 $ 325,000 $ 406,250 $ 487,500 $ 487,500
</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 Retirement Plan, the plan will
provide benefits to executive officers, other than the Chief Executive Officer,
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
who retires 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
NAME CREDITED SERVICE
- --------------------------------------------------------- -------------------
<S> <C>
P. A. Redmond............................................ 31
W. L. Bryan.............................................. 26
J. E. Eliassen........................................... 26
N. J. Racicot............................................ 27
R. D. Fukai.............................................. 24
</TABLE>
15
<PAGE>
DIRECTORS COMPENSATION
During calendar year 1996, directors who were not employees of the Company
received an annual retainer of $30,000. Of that amount, two-thirds was paid
automatically in Company Common Stock, pursuant to provisions of the
Non-Employee Director Stock Plan. Directors are also paid $1,200 for each
meeting of the Board of Directors or any committee meeting of the Board of
Directors and a per diem travel fee of $1,200. Directors who served as Board
committee chairpersons and who therefore have additional responsibility and time
requirements associated with Board membership receive an additional $4,000
retainer.
In February 1996, the Board unanimously voted that any directors
newly-elected at the 1996 Annual Meeting or thereafter would not be entitled to
any benefits under the Outside Director Retirement Plan. On February 14, 1997,
the Board of Directors unanimously approved the termination of the Retirement
Plan. Therefore, current directors as well as any new directors will not
participate in nor further accrue any benefits under this plan. In lieu of any
benefit accrued under this plan, current directors received Company Common Stock
as follows: Clack--1,621 shares; Hagadone--4,323 shares; Meyer--1,142 shares;
Schwarzkopf--613 shares; Silver--1,879 shares; Stanley--1,172 shares; and
Taylor--1,621 shares.
The Board of Directors has set a stock ownership expectation for all members
of the Board. Directors are expected to own $100,000 of Company Common Stock
within five years of their becoming a board member and must maintain at least
that amount during their tenure as a board member. This guideline and the
Non-Employee Director Stock Plan both illustrate the Board's philosophy of
increased stock ownership for all members of the Board in order to further
strengthen the commonality of interest between the Board of Directors and
shareholders.
EMPLOYMENT AGREEMENTS AND OTHER COMPENSATORY PLANS
EMPLOYMENT AGREEMENTS
On June 24, 1994, the Company entered into a three-year employment contract
with Mr. Redmond. The employment agreement provides that if Mr. Redmond's
employment is terminated (except a termination for Cause as defined in the
agreement) or if Mr. Redmond terminates employment for Good Reason (as defined
in the agreement), the Company, or its successor, (a) will pay Mr. Redmond a
cash amount equal to three times his annual base salary, (b) will pay the value
of benefits to which he would have been entitled had he remained in employment
until the end of the term of employment under the Company's pension plan(s),
supplemental executive retirement plan(s), disability plan(s), and such other
benefit plan(s) as may be adopted from time to time, (c) will continue medical
and welfare benefits for the life of Mr. Redmond and his spouse and (d) with
respect to any incentive or similar plan awards, all options shall vest in full
and become immediately exercisable, all restrictions shall lapse with respect to
any restricted stock, and any other types of awards shall vest in full and
become immediately exercisable or payable, subject to proration of any awards
that are subject to performance criteria. In no case will termination benefits
payable subject to Section 280(G) of the Internal Revenue Code exceed three
times base salary less $1.
In addition, on June 24, 1994, the Company entered into three-year
employment contracts with Messrs. Bryan, Eliassen, and Fukai, and Ms. Racicot.
If the employment of any of these executive officers is terminated by the
Company (except a termination for Cause or Disability as defined in the
agreements) or the executive officer terminates employment for Good Reason (as
defined in the agreements), the Company, or its successor, (a) will pay the
executive officer a cash amount equal to the sum of (i) the annual base salary
through the end of the employment period and (ii) one month's salary for each
year of service with the Company (with a minimum of 12 months' salary payable),
(b) will continue medical and welfare benefits for the executive officer for 18
months, and (c) will pay whatever benefits the executive officer may be entitled
to under various benefit plans to the extent unpaid, in accordance with the
terms of
16
<PAGE>
the plans. In no case will termination benefits payable subject to Section
280(G) of the Internal Revenue Code exceed three times base salary less $1.
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 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.
17
<PAGE>
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
WWP..................................... $ 100.00 $ 114.45 $ 129.81 $ 103.78 $ 141.45 $ 160.55
EEI..................................... $ 100.00 $ 107.60 $ 119.63 $ 105.79 $ 138.58 $ 140.30
S&P 500................................. $ 100.00 $ 107.62 $ 118.48 $ 120.04 $ 165.12 $ 203.06
</TABLE>
- ------------------------
(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 100 of the largest publicly-traded electric
and combination (electric and natural gas) utilities.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors appoints the independent accountants that audit the
financial statements of the Company. The Board of Directors formally appointed
Deloitte & Touche LLP as independent accountants for continuing audit work in
1997 at the February 1997 board meeting. Deloitte & Touche 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
18
<PAGE>
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 and the Financial
Report for the year 1996 accompanies this Proxy Statement.
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 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
1998 Annual Meeting of Shareholders must be received by the Company, no later
than December 1, 1997. Such proposals should be directed to the Corporate
Secretary of the Company, 1411 East 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 1996 Annual Report to Shareholders and the Financial Report 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, 1997
19
<PAGE>
THE WASHINGTON WATER POWER COMPANY
PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE WASHINGTON
WATER POWER COMPANY FOR THE ANNUAL MEETING OF SHAREHOLDERS ON TUESDAY,
MAY 20, 1997.
The undersigned appoints P.A. Redmond and T.L. Syms, and each of them,
with full power of substitution, the Proxies of the undersigned, to represent
the undersigned and vote all shares of The Washington Water Power Company
Common Stock which the undersigned may be entitled to vote at the Annual
Meeting of Shareholders to be held on May 20, 1997, and at any adjournments
thereof, as indicated on the reverse side.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR ITEM 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1
(Continued, and to be dated and
signed, on the reverse side.)
THE WASHINGTON WATER POWER COMPANY
P.O. BOX 11204
NEW YORK, N.Y. 10203-0204
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Election of Directors FOR all nominees WITHHOLD AUTHORITY - *EXCEPTIONS
listed below to vote for all
nominees listed below
</TABLE>
NOMINEES: W. LESTER BRYAN, SARAH M. R. (SALLY) JEWELL, JOHN F. KELLY AND R.
JOHN TAYLOR
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, MARK THE
"EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE BELOW.)
- - Exceptions
------------------------------------------------------------
In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments thereof.
MARK HERE IF CHANGE OF
ADDRESS OR COMMENTS
The signature on this Proxy
should correspond exactly
with the shareholders name
as printed to the left. In
the case of joint tenants,
co-executors, or co-trustees,
both should sign. Persons
signing as attorney,
executor, administrator,
trustee or guardian should
give their full title.
Dated: 1997
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----------------------------
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