<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
Avista Corp.
- - --------------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
<PAGE>
PROMPT RETURN OF THE ENCLOSED PROXY CARD WILL SAVE THE EXPENSE OF AN ADDITIONAL
MAILING.
YOUR IMMEDIATE ATTENTION IS GREATLY APPRECIATED.
[LOGO]
T.M. "TOM" MATTHEWS
Chairman of the Board,
President & Chief Executive Officer
March 31, 1999
Dear Shareholder:
On behalf of the Board of Directors, it's my pleasure to invite you to the 1999
Annual Meeting of Shareholders. We'll have refreshments beginning at 9:30 a.m.
The Annual Meeting will begin promptly at 10:00 a.m.
<TABLE>
<S> <C> <C> <C>
Date: Thursday Morning, May 13, 1999 Place: Doubletree Hotel
Time: 9:15 a.m. Doors Open (See next page for map/details.)
9:30 a.m. Refreshments 322 N. Spokane Falls Court
10:00 a.m. Annual Meeting Convenes Spokane, Washington
</TABLE>
Please take the opportunity to review the enclosed Annual Report, Proxy
Statement, and 1998 Financial Report. WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING, YOU SHOULD COMPLETE, SIGN AND DATE YOUR PROXY CARD, AND RETURN
IT AS SOON AS POSSIBLE IN THE ENCLOSED ENVELOPE. Voting your proxy prior to the
meeting will allow for a more efficient and timely meeting. Also, your vote is
important regardless of the number of shares you own. Thank you for your
continued support.
Sincerely,
/s/ T.M. Matthews
Avista Corp.--P.O. Box 3647--Spokane, Washington 99220-3647
Shareholder Relations--(509) 495-4203 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 23.
<PAGE>
[MAP]
<PAGE>
AVISTA CORP.
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99202
------------------------
NOTICE OF THE 1999 ANNUAL MEETING OF SHAREHOLDERS
<TABLE>
<S> <C>
DATE: Thursday, May 13, 1999
TIME: 10:00 a.m., Pacific Time
PLACE: Doubletree Hotel
322 N. Spokane Falls Court
Spokane, Washington
RECORD DATE: March 18, 1999
MEETING AGENDA: 1) Election of four directors
2) To transact other business that may come before the meeting
or any adjournment(s).
</TABLE>
By order of the Board of Directors,
/s/ Terry L. Syms
Terry L. Syms
Vice President & Corporate Secretary
Spokane, Washington
March 31, 1999
<PAGE>
PROXY STATEMENT--VOTING PROCEDURES
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Avista Corp. of proxies for use at the Annual Meeting of
Shareholders. It is expected that this Proxy Statement and accompanying form of
proxy will be mailed to shareholders on or about March 31, 1999.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend our Annual Meeting of
Shareholders, please complete, sign and date your proxy card, and return it as
soon as possible in the enclosed envelope.
At the close of business on the record date, March 18, 1999, there were
40,555,765 shares of Avista Corp. Common Stock outstanding and entitled to vote
at the Annual Meeting. Shares represented at the meeting by properly executed
proxies will be voted at the meeting. Where the shareholder specifies a choice,
the shares will be voted as indicated. A proxy may be revoked at any time prior
to the Annual Meeting.
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 matters submitted to shareholders only if a quorum
is present at the meeting. The presence at the Annual Meeting in person or
represented by proxy of holders of a majority of the shares of the Company's
Common Stock outstanding on the record date will constitute a quorum. 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.
With respect to the election of directors, each record holder of Common Stock
will be entitled to vote cumulatively. The shareholder 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 that shareholder or may distribute such votes among
any two or more of such nominees. 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 1999 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.
2
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Four directors are to be elected to serve until the 2002 Annual Meeting of
Shareholders or until their successors are elected and qualified. Unless
authority to vote is withheld as to any nominee, the individuals named as
proxies on the proxy card will vote for the election of the nominees listed
below or, in the discretion of such individuals, will vote cumulatively for the
election of one or more of the nominees. The Board of Directors has no reason to
believe that any nominee will be unable to serve as a director. If any of the
nominees should become unavailable, your shares will be voted for a
Board-approved substitute, or the Board may reduce the number of directors. W.
Lester Bryan and Paul A. Redmond retired as directors and executive officers in
1998.
The following has been prepared from information furnished to the Company by the
nominees and the continuing directors.
* INDICATES NOMINEES FOR ELECTION
DAVID A. CLACK DIRECTOR SINCE 1988 (CURRENT TERM EXPIRES 2001)
Mr. Clack, age 64, is a principal of Olympic Capital Partners, a private
investment banking firm headquartered in Seattle, Washington. He is also
Chairman of Northwest Venture Associates, Inc. Prior to that time and for over
five years, Mr. Clack was President of Clack and Co., a private investment firm
headquartered in Spokane, Washington. Previously, he was Chairman of the Board
and Chief Executive Officer of Old National Bancorporation of Washington.
SARAH M. R. (SALLY) JEWELL DIRECTOR SINCE 1997 (CURRENT TERM EXPIRES 2000)
Mrs. Jewell, age 43, has been Executive Vice President of the Commercial Banking
Division of Washington Mutual Bank since January, 1996, and also serves as
President and CEO of its Western Bank Division. 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 Recreational Equipment, Inc., and Premera, parent company of Blue
Cross of Washington and Alaska and Medical Service Corporation. In addition, she
serves on advisory committees for the University of Washington's College of
Engineering, School of Business, and Women in Science and Engineering.
JOHN F. KELLY DIRECTOR SINCE 1997 (CURRENT TERM EXPIRES 2000)
Mr. Kelly, age 54, has been Chairman, President and Chief Executive Officer of
Alaska Air Group and Chairman and Chief Executive Officer of Alaska Airlines
since 1995. He also served as President of Alaska Airlines from 1995 to 1997,
Chief Operating Officer from November 1994 to February 1995, and as Vice
President of Marketing from 1981 to June 1987. He has served Horizon Air as its
Chairman since February 1991, and was President and Chief Executive Officer from
June 1987 to November 1994. He has served on the board of the Air Transport
Association and is currently a director of the Washington State Roundtable.
JESSIE J. KNIGHT, JR.* DIRECTOR NOMINEE
Mr. Knight, age 48, is currently Executive Vice President of Navillus
Associates, LLC, a real estate development partnership located in San Francisco.
From 1993 through 1998, Mr. Knight served as a Commissioner of the California
Public Utilities Commission. Prior to 1993, Mr. Knight was Executive Vice
President of the San Francisco Chamber of Commerce managing international
operations, economic and business development and public affairs. Mr. Knight was
also Vice President of Marketing for the San Francisco Chronicle and San
Francisco Examiner newspapers for several years, directing research and
strategic planning, marketing, and public relations. He has also held leadership
positions with Dole Foods, and worked in Dole's domestic and international
operations. Mr. Knight serves on the boards of Blue Shield of California and DBS
Industries, Inc. He is also a board trustee of the World Affairs Council and a
member of the Council on Foreign Relations (New York). Mr. Knight has been
recognized as one of the Bay Area's top business and African American leaders,
and received the George Fraser Portrait of Success
3
<PAGE>
Award. And, he was a co-recipient of the Eleanor Roosevelt Humanitarian Award
for lifetime achievement presented by the United Nations Association of San
Francisco.
THOMAS M. MATTHEWS* DIRECTOR SINCE 1998 (CURRENT TERM EXPIRES 1999)
Mr. Matthews, age 55, has been Chairman of the Board and Chief Executive Officer
of the Company since July 1998. In October 1998, he was also appointed
President. From December 1996 through June 1998, Mr. Matthews served as
President of Houston-based Dynegy (formerly NGC Corporation), a leading
gatherer, processor, generator, transporter, and marketer of energy products and
services in North America. From 1989 through November 1996, Mr. Matthews held
various executive positions with Texaco, including President and Chief Executive
Officer of Texaco Natural Gas. Prior to that time, he also held executive
positions with Tenneco and Exxon. He serves on various boards, including the
Advisory Council for Texas A&M University, Texas A&M Vision 2020 Committee, and
the Washington State Roundtable.
EUGENE W. MEYER* DIRECTOR SINCE 1990 (CURRENT TERM EXPIRES 1999)
Mr. Meyer, age 62, has been in the financial consulting business for over five
years. 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.
BOBBY SCHMIDT DIRECTOR SINCE 1997 (CURRENT TERM EXPIRES 2001)
Mr. Schmidt, age 58, has been President of Schmidt Trading, Inc., a commodity
trading and investment firm located in Hilton Head Island, South Carolina, for
over five years. Mr. Schmidt has extensive experience as a commodity trader,
working for many years as an independent trader in Chicago. He was a member of
the Chicago Board of Trade and while at the Board of Trade, he was associated
with Refco, a commodity clearing company. Previously, Mr. Schmidt was the Chief
Financial Officer of Carson Pirie Scott and also served as an advisor to the
Illinois State Legislature.
LARRY A. STANLEY DIRECTOR SINCE 1991 (CURRENT TERM EXPIRES 2001)
Mr. Stanley, age 70, has been Chief Executive Officer of Empire Bolt & Screw,
Inc., a Spokane distribution company which he founded in 1972, for over five
years. He is a past Chairman of the Association of Washington Business, past
President of the Inland Northwest Council of Boy Scouts of America, and 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, and Aresco Inc., of Post
Falls, Idaho.
R. JOHN TAYLOR DIRECTOR SINCE 1985 (CURRENT TERM EXPIRES 2000)
Mr. Taylor, age 49, was appointed Chairman and Chief Executive Officer in
September 1995 of AIA Services Corporation, an insurance holding company and
insurance agency with operations throughout the United States. Prior to that
time, Mr. Taylor served as President of AIA Services and was its Chief Operating
Officer. Mr. Taylor is also Chairman of the Board of Great Fidelity Life
Insurance Company of Fort Wayne, Indiana. In addition, he is a member of the
Board of Directors of Pacific Empire Communications Corporation of Lewiston,
Idaho, a member of the Board of Trustees of The Idaho Heritage Trust, and a
member of the State of Idaho Endowment Fund Investment Board.
DANIEL J. ZALOUDEK* DIRECTOR SINCE 1998 (CURRENT TERM EXPIRES 1999)
Mr. Zaloudek, age 53, is President and Chief Executive Officer of IMEDIA, Inc.,
an international multimedia content company located in Tulsa, Oklahoma. Mr.
Zaloudek is active on economic development and public policy issues and has
worked on political campaigns on both a local and national level. He also owns a
farming and ranching business near Enid, Oklahoma. From 1978 to 1995, Mr.
Zaloudek held various executive positions with Koch Industries of Wichita,
Kansas. Prior to that time Mr. Zaloudek was with Exxon. He is a member of the
Oklahoma State University Board of Governors and Board of Trustees and is
chairman-elect of the OSU Foundation. Mr. Zaloudek serves on the board of the
Tulsa Area United Way and is Chairman of the Planning Committee. He also served
on the boards of the Philbrook Museum of Art and the Oklahoma Sinfonia and is
active in several other community organizations.
4
<PAGE>
BOARD OF DIRECTORS OF AVISTA CORP.
CORPORATE GOVERNANCE GUIDING PRINCIPLES
"THE DIRECTORS A BOARD SEEKS ARE A REFLECTION OF THE KIND OF BOARD IT WANTS TO
BE."
DIRECTOR ACCOUNTABILITY--Directors act as advocates for the shareholders and
consider other stakeholders needs, as appropriate. Directors help executive
management define and shape the vision of the corporation, review strategic
objectives and business plans, and provide guidance and direction to executive
management. Directors ensure that strategies, budgets, forecasts, financial
plans, and adequate resources are in place to enable the corporation to meet its
objectives. Directors encourage--of themselves and management--accountability,
business excellence, a high-performance environment, and retention of
high-caliber people.
DIRECTOR COMMITMENT--Directors must commit time outside of Board meetings to
understand the business and related issues, to stay updated, and to prepare for
Board and committee meetings. Directors must also make themselves reasonably
available to executive management to provide advice and counsel outside of Board
meetings. Directors are expected to attend all meetings of the Board and all
meetings of Board committees of which they are members. Directors must sit on at
least one Board committee. The Board recognizes that occasional meetings may
need to be scheduled on short notice when the participation of a director is not
possible. A significant conflict may also arise from time to time that might
prevent a director from attending a quarterly meeting. However, it is expected
that each director will make every effort to keep such absences to a minimum.
DIRECTOR INDEPENDENCE--Directors must exercise unbiased and independent judgment
and ask probing questions of management. Directors must be diligent and prudent
in overseeing the corporation's business and performance and in monitoring
management. Directors must be free from any material direct or indirect
potential benefit other than as a shareholder. Outside directors allow time in
an executive session immediately after each quarterly Board meeting to discuss
items of interest or urgency. The Chief Executive Officer is invited to attend
as directors deem appropriate.
DIRECTOR SELECTION--The Board has established guidelines for the recruitment and
selection of directors. The guidelines include a position profile and the core
competencies required of a director. Among other things, these guidelines are to
better prepare the Board to identify corporate needs as director retirements/
vacancies occur and as the needs of the business change; to ensure that the
vision, mission, and values of the corporation are fulfilled through the
process; to encourage professional and cultural diversity and teamwork; and to
clearly convey expectations of a Board member.
BOARD COMPOSITION--The Board will, as set forth in the Articles of
Incorporation, consist of no more than eleven directors and generally only one
employee--the Chairman of the Board and Chief Executive Officer--will be a
director. Should business reasons dictate, the Board retains the flexibility to
increase the number of employee directors. But, in any event, the majority of
the Board will always consist of outside directors. The Board will consist of
individuals with the necessary business expertise and professional
specialization to allow for success in today's highly competitive arena and who
meet the criteria set forth in the above guiding principles.
BOARD COMMITTEES--Each committee of the Board meets at least quarterly. The
chair of each committee reports items discussed by the respective committee to
the full Board at each quarterly meeting or more often, if deemed necessary.
Committee assignments are calculated in part to build the skills of directors
and the Board as a whole. The committees include members who have special skills
relevant to its work. Committee membership is rotated, as appropriate, to
address the changing needs of the business and to assist directors in learning
the business as a whole. The Board has established certain Board committees as
set forth in this proxy statement. Only outside directors sit on the committees
of Audit & Finance and Compensation & Organization.
5
<PAGE>
BOARD COMMUNICATIONS/ACCESS TO MANAGEMENT--Senior management regularly attends
Board meetings at the invitation of the Board, and directors have complete
access to Company management for information. The Chairman and Chief Executive
Officer provides directors with business updates and related industry
information on a monthly basis. In addition, directors receive timely and
relevant information on any emerging items of significant interest. Directors
and executives strive to ensure that there is a sharing of information between
each other that builds an effective partnership and enhances the corporation's
opportunity to "be the best."
BOARD AGENDAS/MATERIALS--The chair of each Board committee is actively engaged
in setting committee meeting agendas. In addition, a preliminary agenda is
provided to directors in advance of Board and committee meetings for their
review and input. Directors are also provided with pertinent background material
for their review in advance of meetings.
LEADERSHIP DEVELOPMENT/SUCCESSION PLANNING--The Board has charged the
Compensation & Organization Committee with the responsibility to ensure that
succession plans are in place for the Chief Executive Officer and other
executive management. The Chairman and Chief Executive Officer is expected to
update the Board at least annually with respect to leadership development and
succession plans for executives and other key positions.
EVALUATION OF THE CHIEF EXECUTIVE OFFICER/SENIOR OFFICERS--The Compensation &
Organization Committee is charged with ensuring that an evaluation of the Chief
Executive Officer takes place at least annually. The Committee facilitates the
evaluation discussion with the full Board and provides feedback to the Chief
Executive Officer with respect to said evaluation. The Chief Executive Officer
is charged with ensuring that evaluations of members of executive management
also occur on at least an annual basis and that the Board is apprised of
executive management performance.
FORMER CHAIRMAN OF THE BOARD AND/OR CHIEF EXECUTIVE OFFICER'S BOARD
MEMBERSHIP--When the Chairman and/or the Chief Executive Officer who is an
employee and who also serves as a director resigns, a resignation from the Board
is required at the same time.
DIRECTOR RETIREMENT AGE/TERM LIMITS/PERFORMANCE--The Bylaws of the Company
currently provide that a director who is seventy years of age or more shall
retire from the Board, effective at the Annual Meeting of Shareholders held in
the year in which his/her term expires. The Board has no evidence to suggest
that setting term limits has a significant potential to enhance the individual
performance/quality of directors. Nonetheless, the Board intends to further
assess the advisability of term limits. Performance expectations for directors
are set forth in the Board member position profile and core competencies. The
Corporate Governance Committee is charged with monitoring overall Board
effectiveness.
SHAREHOLDER CONFIDENTIAL VOTING--Confidential voting will be used for all
matters to be voted upon by shareholders except (1) as necessary to meet any
legal requirements, (2) when a shareholder requests disclosure of the
shareholder's vote to management, (3) in any dispute regarding authenticity of
proxies and ballots, and (4) in the event of a proxy contest, if the other party
soliciting proxies does not agree to comply with confidential voting.
OTHER CONSIDERATIONS--This year, the Corporate Governance Committee intends to
consider the issues of mandatory committee member/chair rotation, term limits,
an interlocking directorship policy, optimum Board size, and a formal Board
evaluation process. The Committee will subsequently make recommendations to the
full Board with respect to these issues.
6
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held six Board meetings in 1998. The average attendance
during 1998 at all meetings of the Board and at all Board committee meetings was
97 percent.
AUDIT & FINANCE--Assists the Board in overseeing financial reporting, corporate
risk management, 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 also assists the Board in ensuring that
strategies, budgets, forecasts, and financial plans and processes are in place
to meet corporate goals and objectives. The Committee reviews management's
recommendations on dividend policy, financing activities, capital investment,
allocation of capital to the various business units, and cash management. Only
outside directors sit on the Committee. The Committee consists of directors
Jewell, Meyer, Schmidt, and Taylor--Chairman. Five meetings were held in 1998.
CORPORATE GOVERNANCE--Advises the Board on corporate governance matters. Such
matters include recommending guidelines for the role, composition, and size of
the Board, as well as evaluating Board effectiveness and organizational
structure. The Committee also develops Board membership criteria and reviews
potential director candidates. Recommendations for director nominees are
presented to the full Board for approval. Director nominations by shareholders
may be submitted in accordance with the procedure set forth below. The Committee
consists of directors Clack, Matthews, Stanley, Taylor, and Meyer--Chairman.
Five meetings were held in 1998.
COMPENSATION & ORGANIZATION--Considers and approves compensation and benefits of
executive officers of the Company and its affiliates. The Committee is also
responsible for ensuring that the appropriate objectives and safeguards are in
place to protect the investments in the Employee Retirement Plan and the
Employee Investment and Stock Ownership Plan. The Committee also keeps itself
apprised of employee benefit plans overall. The Committee also reviews
management's proposals with respect to organizational structure and executive
personnel and makes recommendations to the full Board, as appropriate. In
addition, the Committee ensures that succession plans are in place for the Chief
Executive Officer as well as other executive officers and other key positions.
Only outside directors sit on the Committee. The Committee consists of directors
Kelly, Stanley, Zaloudek, and Clack--Chairman. Four meetings were held in 1998.
ENVIRONMENTAL & SAFETY--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 also monitors
corporate performance and activities related to employee safety. The Committee
consists of directors Clack and Stanley--Chairman, an executive officer, and
senior management employees of the Company. Three meetings were held in 1998.
EXECUTIVE--Has and may exercise, when the Board is not in session, all the
powers of said Board which may be lawfully delegated, subject to such
limitations as may be provided in the Bylaws or by resolutions of the Board.
Generally, such action would only be taken to expedite Board authorization for
certain corporate business matters when it is not timely or practical for the
entire Board to meet. The Committee consists of directors Clack, Meyer, Stanley,
Taylor, and Matthews--Chairman. No meetings were held in 1998.
DIRECTOR NOMINATIONS
The Corporate Governance Committee will consider written recommendations for the
Board of Directors that 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
7
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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 Vice President & Corporate Secretary of the Company, 1411 East Mission
Avenue, P.O. Box 3727, Spokane, Washington 99220. Shareholders may only nominate
directors for election at meetings of shareholders in accordance with the
procedures set forth in the Bylaws of the Company.
DIRECTOR COMPENSATION
During 1998, 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 serve as Board committee chairpersons and, therefore, have
additional responsibility and time requirements associated with Board membership
receive an additional $4,000 annual retainer.
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.
8
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SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of Common Stock of the
Company held, as of March 1, 1999, 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, with the exception of Mari Clack
(spouse of director Dave Clack), who owns 1,000 depositary shares of Preferred
Stock Series L. Also, directors and executive officers as a group do not 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
---------------------------------------
NAME DIRECT INDIRECT TOTAL
- - ---------------------------------------- ---------- ----------- --------
<S> <C> <C> <C>
W. Lester Bryan (Retired)............... 8,297 2,043(1) 10,340
David A. Clack.......................... 5,471 9,500(4) 14,971
Jon E. Eliassen(3)...................... 7,966 9,143(1) 17,109
Gary G. Ely............................. 7,098 21,925(1) 29,023
Robert D. Fukai......................... 6,888 10,549(1) 17,437
Sarah M. R. (Sally) Jewell.............. 2,725 2,725
John F. Kelly........................... 1,595 1,595
Jessie J. Knight, Jr.................... 200 200
Thomas M. Matthews...................... 88,398(5) 88,398
Eugene W. Meyer(2)(3)................... 4,492 12,880(6) 17,372
Paul A. Redmond (Retired)(3)............ 40,953 17,248(1) 58,201
Bobby Schmidt........................... 15,884 15,884
Larry A. Stanley........................ 5,741 7,259(7) 13,000
R. John Taylor.......................... 9,925 7,195(8) 17,120
Daniel J. Zaloudek...................... 176 176
All directors and executive officers as
a group, including those listed
above--21 individuals................. 346,898
</TABLE>
- - ------------------------
(1) Shares held in the Company's 401(k) Investment Plan.
(2) Mr. Meyer owns restricted stock as follows: 700 shares of Form House, 696
shares of Graphic Communications, and 857 shares of Decker Company, all
indirect subsidiaries of the Company.
(3) The following stock options of certain indirect subsidiaries of the Company
are exercisable or will become exercisable within 60 days of the date of
this proxy statement:
<TABLE>
<CAPTION>
ELIASSEN MEYER REDMOND
----------- ----------- -----------
<S> <C> <C> <C>
Bay Area Manufacturing..................................................... 730 730 12,784
Decker Company............................................................. 857 0 15,000
Form House................................................................. 700 0 12,195
Graphic Communications..................................................... 696 0 10,442
Imfax...................................................................... 696 696 10,442
F.O. Phoenix............................................................... 857 857 15,000
Proco Holdings............................................................. 0 0 15,000
Target Woodworks........................................................... 0 0 11,905
Triangle Systems........................................................... 0 0 14,803
Universal Showcase......................................................... 0 0 15,000
White Plus................................................................. 0 0 15,000
</TABLE>
9
<PAGE>
(4) Includes 2,000 shares held in the name of Clack & Co. and 7,500 shares held
in an IRA account.
(5) Restricted shares of Company Common Stock.
(6) Includes 600 shares held by Mr. Meyer as custodian for his son and 12,280
shares held in an IRA account.
(7) Shares are held in a pension/profit-sharing plan not administered by the
Company for which Mr. Stanley shares voting and investment power.
(8) Includes 4,000 shares held in an employee benefit plan not administered by
the Company for which Mr. Taylor shares voting and investment power; 420
shares held by Mr. Taylor's spouse of which shares he disclaims beneficial
ownership; and 808 shares held by Mr. Taylor as custodian for his children.
Also includes 1,967 shares for which Mr. Taylor has deferred receipt to a
later date in accordance with the provisions of the Non-Employee Director
Stock Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE REPORTING
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 (SEC). Based solely on a review of Forms 3, 4 and 5
furnished to the Company during 1998, 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 for the following: A purchase of
1,280 shares by Eugene W. Meyer in 1996 and a purchase of 2,000 shares by Bobby
Schmidt in 1998 were inadvertently not reported on a timely basis. Both of these
transactions were subsequently reported to the SEC in accordance with the rules.
EXECUTIVE COMPENSATION
BOARD COMPENSATION & ORGANIZATION COMMITTEE REPORT
TO OUR SHAREHOLDERS:
The Compensation & Organization Committee of the Board of Directors (the
"Committee") reviews and approves compensation and benefit 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 of Board
members who are not employees of the Company.
The 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
by providing compensation opportunities which are competitive in the
marketplace.
- Tie a significant portion of pay to performance so that rewards vary with
the achievement of annual and longer-term results.
- Promote a close identity of interest between management and shareholders
and encourage decision-making that enhances shareholder value. The
Committee believes that this objective is best achieved by tying incentive
opportunities to the attainment of corporate and individual goals and
through regular grants of stock options and other performance-based stock
opportunities.
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
limits the deductibility of non-performance-based compensation in excess of $1
million paid in any one year to the chief executive officer and the other four
highest-paid executive officers. The Long-Term Incentive Plan, approved by
shareholders in 1998, was designed to meet the requirements of performance-based
compensation under
10
<PAGE>
Section 162(m). And, when consistent with its compensation philosophy and
objectives, the Committee intends to structure compensation plans so that all
compensation expense is deductible for tax purposes.
COMPONENTS OF COMPENSATION
The Committee believes that executive officer compensation should be closely
aligned with the performance of the Company, and that such compensation should
assist in attracting and retaining key executives critical to long-term success.
To that end, the Committee's philosophy is that the total compensation program
should consist of an annual base salary, an annual incentive (the amount of
which is dependent on corporate and individual performance) and long-term
incentives (i.e., stock options, restricted stock, and performance-based stock
opportunities).
The Committee considers but does not target executive officer compensation at
the median of similarly situated executives at the Company's competitors.
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 to further the
Company's success as a diversified national energy business.
BASE SALARY
The Committee reviews each executive officer's base salary at least annually.
The factors that influence Committee decisions regarding base salary include:
levels of pay among executives in the utility and diversified energy industry,
internal pay-equity considerations, level of responsibilities and job
complexity, 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 appropriate; there are no
formal weightings given to any factor. Effective March 1, 1998, based on these
factors, the Committee granted executive officers base salary increases that
ranged from 3% to 11%.
CEO COMPENSATION
Former Chairman and CEO Paul A. Redmond also received a base salary increase of
3% effective March 1, 1998. Mr. Redmond retired on June 30, 1998. During 1998,
he did not receive any corporate incentive awards or stock options in Company
Common Stock. He did receive certain compensation from indirect subsidiaries of
the Company as reflected in the Summary Compensation Table and in the Indirect
Subsidiaries Options Table.
Mr. Matthews became Chairman of the Board and Chief Executive Officer on July 1,
1998. With the retirement of Mr. Bryan, Mr. Matthews also assumed the
responsibilities of President. His compensation and benefits were negotiated
prior to his joining the Company, and reflect his thirty years of significant
experience and leadership in the diversified energy industry, including serving
as president of a large energy concern with worldwide operations. Having
conducted an exhaustive nine-month search for a new CEO, the Board was confident
that Mr. Matthews had the background, skills, global and national experience,
and senior leadership ability critical to the future success of the Company.
Based on those factors, as well as Mr. Matthews' total compensation and benefits
package with his previous firm, the Committee determined (and the full Board
concurred) that a comparable compensation package was necessary and appropriate
to recruit Mr. Matthews to the Company. Mr. Matthews' annual base salary
effective July 1, 1998 was set at $750,000. Under the terms of an employment
agreement executed by the Company and Mr. Matthews, he also received certain
other cash, non-cash, and stock-based compensation, as set forth in the Summary
Compensation Table and as described in this Proxy Statement under "Employment
Agreement--T. M. Matthews."
11
<PAGE>
ANNUAL INCENTIVE COMPENSATION
The 1998 Executive Incentive Compensation Plan provided the opportunity for
executive officers to earn an annual incentive based on corporate and individual
performance. The Committee established the target amount as a specified
percentage of each executive officer's salary. The percentages ranged from 35%
to 50% depending on position. In the event that certain corporate and individual
performance goals were achieved, an executive officer would have been entitled
to receive the full award. In the event that certain performance goals were
exceeded, an executive officer would have been entitled to receive up to 150% of
such targeted amount.
The Committee establishes performance measures annually. In February 1998, the
Committee approved a plan based 50% upon achieving an earnings per share target
and 50% upon achieving a relative total shareholder return target which, if met,
would fund a pool for executive officer incentives. Actual awards to executives,
however, were to be based on achievement of predetermined initiatives and
individual performance. Awards, if made, were designated to be in the form of
Company Common Stock consistent with the Committee's philosophy that payment in
Common Stock helps strike the balance between focus of executives on short-term
and long-term corporate results. As a result of various factors, including a
significant shift in corporate strategy, as discussed below, the targets
established in early 1998 were not met and, therefore, no awards were made to
executive officers under the 1998 Executive Incentive Plan.
Subsequent to February 1998, the Board of Directors made certain significant and
historical decisions. As mentioned, Mr. Matthews was appointed Chairman and CEO
to succeed Mr. Redmond who had led the Company as Chairman and CEO for 13 years.
Mr. Matthews is only the fourth person to serve as the Company's Chairman. In
August 1998, the Board approved a Common Stock dividend restructuring (dividend
reduction and Common Stock exchange offer), a broad corporate refocus, and a
company name change. These actions were taken to better position the Company to
pursue aggressive growth strategies, strengthen its long-term financial position
and, ultimately, provide greater shareholder value. In order to carry forth the
Board's strategic vision and implementation of specific initiatives, the total
support and focused attention of the executive officers was required. Therefore,
in February 1999, the Committee determined (and the full Board concurred) that
current executive officers (other than Mr. Matthews) should receive a cash award
in recognition of their contributions to those specific efforts. The cash awards
to certain of the named executive officers are reflected in the Summary
Compensation Table.
LONG-TERM INCENTIVE COMPENSATION
In May 1998, shareholders approved the Company's Long-Term Incentive
Compensation Plan. The primary objective of the Long-Term Incentive Plan is to
link management compensation with the long-term interests of shareholders. The
Committee establishes a target level of stock options for each executive officer
position. The target level is based on competitive data reflecting the estimated
median value of the annual long-term compensation opportunity for similar
positions in the utility industry. In determining actual stock option grants,
the Committee also considers individual performance and the potential
contribution to the Company's success. Stock options granted under this plan in
1998 to the named executive officers (other than Mr. Redmond and Mr. Bryan who
did not receive grants under the plan) are reflected in the Summary Compensation
Table. The stock options were granted at 100% of fair market value, which
assures that executives receive a benefit only when the stock price increases.
MEMBERS OF THE COMPENSATION & ORGANIZATION COMMITTEE
OF THE BOARD OF DIRECTORS
David A. Clack--Chairman Larry A. Stanley
John F. Kelly Daniel J. Zaloudek
12
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-----------------------------------------------------------------------------------
SALARY($) BONUS($)
------------------------- TOTAL ---------------------------- TOTAL
NAME AND PRINCIPAL POSITION YEAR UTILITY(2) NONUTILITY SALARY($) UTILITY(2) NONUTILITY BONUS($)
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
T. M. MATTHEWS..................... 1998 $ 219,736 $ 135,072 $354,808 $ 150,000 $150,000(3)
Chairman of the Board, President &
Chief Executive Officer
P. A. REDMOND...................... 1998 $ 277,746 $ 86,869 $364,615
Retired Chairman of the Board & 1997 $ 386,281 $ 165,595 $551,876
Chief Executive Officer 1996 $ 382,545 $ 137,702 $520,247 $ 294,813 $ 106,129 $400,942(5)
W. L. BRYAN........................ 1998 $ 206,716 $ 88,592 $295,308
Retired President & Chief Operating 1997 $ 224,536 $ 49,025 $273,561
Officer 1996 $ 193,104 $ 18,709 $211,813 $ 136,031 $ 13,175 $149,206(5)
J. E. ELIASSEN..................... 1998 $ 135,892 $ 79,800 $215,692 $ 40,000 $ 40,000(4)
Senior Vice President & Chief 1997 $ 139,704 $ 56,434 $196,138
Financial Officer 1996 $ 150,999 $ 33,698 $184,697 $ 93,120 $ 20,774 $113,894(5)
G. G. ELY.......................... 1998 $ 119,103 $ 92,551 $211,654 $ 40,000 $ 40,000(4)
Executive Vice President 1997 $ 108,913 $ 87,224 $196,137
1996 $ 169,932 $169,932 $ 98,200 $ 98,200(5)
R. D. FUKAI........................ 1998 $ 191,741 $191,741 $ 30,000 $ 30,000(4)
Vice President-- External Relations 1997 $ 185,815 $185,815
1996 $ 170,537 $170,537 $ 92,188 $ 92,188(5)
<CAPTION>
LONG-TERM COMPENSATION(1)
------------------------------------------------------------------------
PAYOUTS
-----------------------------
AWARDS
--------------------------- LONG-TERM INCENTIVE TOTAL
RESTRICTED SECURITIES PAYOUTS($) LONG-TERM
STOCK UNDERLYING ----------------------------- INCENTIVE ALL OTHER
NAME AND PRINCIPAL POSITION AWARDS(7) OPTIONS(#) UTILITY(2) NONUTILITY PAYOUTS($) COMP.($)
- - ----------------------------------- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
T. M. MATTHEWS..................... $2,000,000(6) 150,000(8) $1,000,000(16)
Chairman of the Board, President &
Chief Executive Officer
P. A. REDMOND...................... 29,803(9) $ 31,480(13) $ 31,480 $ 268,375(15)
Retired Chairman of the Board & 41,905(10) $ 266,898(13) $266,898 $ 67,864
Chief Executive Officer 29,784(11) $ 448,847(14) $448,847 $ 41,837
W. L. BRYAN........................ $ 379,100(15)(17)
Retired President & Chief Operating $ 14,831
Officer $ 10,897
J. E. ELIASSEN..................... 12,500(12) $ 48,941(15)
Senior Vice President & Chief 2,287(10) $ 37,772
Financial Officer 3,587(11) $ 38,618
G. G. ELY.......................... 12,500(12) $ 13,320(15)
Executive Vice President $ 11,783
$ 7,823
R. D. FUKAI........................ 8,100(12) $ 49,990(15)
Vice President-- External Relations $ 20,034
$ 20,984
</TABLE>
13
<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% incentive/bonus cash payments.
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) Cash bonus awarded in accordance with the terms of Matthews' employment
agreement.
(4) Cash awards made to certain executive officers as described in the
Compensation & Organization Committee Report.
(5) Amounts received under the Executive Incentive Compensation Plan for 1996
performance.
(6) Restricted stock award received in accordance with the terms of Matthews'
employment agreement.
(7) As of December 31, 1998, the number and value of total shares of restricted
stock held by the named executive officers are: T. M. Matthews (88,398
shares; $1,706,965). Dividends are paid on all restricted Common Stock at
the same rate as paid on the Company's Common Stock.
(8) Avista Corp. Common Stock options granted to Matthews in accordance with
his employment agreement.
(9) Options to Redmond received as a director of certain indirect subsidiaries:
Triangle Systems--14,803; Universal Showcase--15,000.
(10) Options to Redmond received as a director of certain indirect subsidiaries:
Proco Holdings Corp.-- 15,000; Target Woodworks, Inc.--11,905; White Plus,
Inc.--15,000.
Options to Eliassen received as a director of certain indirect subsidiaries:
Proco Holdings Corp.-- 750; Target Woodworks, Inc.--680; White Plus,
Inc.--857.
(11) Options to Redmond received as a director of certain indirect subsidiaries:
ITRON--2,000; F.O. Phoenix, Inc.--15,000; Bay Area Manufacturing Co.,
Inc.--12,784.
Options to Eliassen received as a director of certain indirect subsidiaries:
ITRON--2,000; F.O. Phoenix, Inc.--857; Bay Area Manufacturing Co.,
Inc.--730.
(12) Avista Corp. Common Stock options.
(13) Amounts received from Pentzer Corporation (a wholly owned subsidiary) as a
long-term incentive in connection with the sale of ITRON, Inc., Common
Stock and the return Pentzer realized on that investment. Redmond was
previously Pentzer Chairman. Pentzer had a previous ownership interest in
ITRON, Inc.
(14) Amount received from Pentzer Corporation as a long-term incentive in
connection with the sale of ITRON Common Stock and the development and
ultimate sale of Spokane Industrial Park.
(15) 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 1998 under the Deferral Plan
were: Matthews--$0; Redmond--$36,955; Bryan--$11,900; Eliassen--$7,895;
Ely--$6,120; Fukai--$5,709. Amounts for 1998 under the 401(k) plan were:
Matthews--$0; Redmond--$5,426; Bryan--$7,200; Eliassen--$7,200;
Ely--$7,200; Fukai--$7,200. Amounts for 1998 under the One-Leave Program
were: Matthews--$0; Redmond--$225,994 (821 hrs.); Bryan--$0;
Eliassen--$33,846 (320 hrs.); Ely $0; Fukai--$37,081 (400 hrs.).
14
<PAGE>
(16) A signing bonus in accordance with the terms of Matthews' employment
agreement.
(17) In connection with Mr. Bryan's retirement and a certain non-compete
arrangement for the period October 1998 to December 2002 agreed to between
the Company and Mr. Bryan, the Board of Directors approved a one-time
payment of $360,000, of which half was payable in January 1999 and half is
payable in January 2000.
OPTION GRANTS IN 1998 OF AVISTA CORP.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANT DATE
OPTIONS GRANTED TO EXERCISE OR PRESENT
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION VALUE
NAME (#)(1) FISCAL YEAR ($/SH) DATE ($)(2)
- - ------------------------------------ ------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
T. M. Matthews...................... 100,000 17.00% $ 22.625 07/01/08 $ 583,046
50,000 8.49% $ 18.63 11/12/08 $ 281,499
P. A. Redmond....................... 0 N/A N/A N/A N/A
W. L. Bryan......................... 0 N/A N/A N/A N/A
J. E. Eliassen...................... 12,500 2.12% $ 18.63 11/12/08 $ 70,375
G. G. Ely........................... 12,500 2.12% $ 18.63 11/12/08 $ 70,375
R. D. Fukai......................... 8,100 1.38% $ 18.63 11/12/08 $ 45,603
</TABLE>
- - ------------------------
(1) Options granted in 1998 are exercisable starting one year after the grant
date, with 25 percent of the shares becoming exercisable at that time, and
with an additional 25 percent of the options becoming exercisable on each
successive anniversary date. Options will generally vest and become
exercisable in full immediately prior to the effective date of a change of
control. The options were granted for a term of 10 years.
(2) The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions
incorporated in the Black-Scholes model in estimating the value of the
options include the following: An exercise price on the option of $22.625
for the grant with a July 1, 2008 expiration date and $18.63 for the grants
with a November 12, 2008 expiration date, the exercise price being equal to
the fair market value of the underlying stock on the grant date. Volatility
of 16.26 percent for the grant with a July 1, 2008 expiration date and 22.21
percent for the grants with a November 12, 2008 expiration date, calculated
using month-end stock prices for the 36-month period prior to the grant
date. An interest rate of 5.6 percent for the grant with a July 1, 2008
expiration date and 5.06 percent for the grants with a November 12, 2008
expiration date that represents the interest rate on a U.S. Treasury strip
with a maturity date corresponding to that of the option term. Dividends at
the rate of $0.48 per share represent the annualized dividend paid with
respect to a share of Common Stock at the date of grant. The options were
granted for a term of 10 years. The ultimate value of the options will
depend on the future market price of the Company's Common Stock. The actual
value an optionee will realize, if any, upon exercise of an option will
depend on the excess of the market value of the Company's Common Stock over
the exercise price on the date the option is exercised.
15
<PAGE>
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION VALUES
OF AVISTA CORP.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END (#) FY-END ($)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------------------------------- --------------- --------------- --------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
T. M. Matthews.................. 0 0 0 150,000 0 $ 34,000(1)
P. A. Redmond................... 0 0 0 0 0 0
W. L. Bryan..................... 0 0 0 0 0 0
J. E. Eliassen.................. 0 0 0 12,500 0 $ 8,500(2)
G. G. Ely....................... 0 0 0 12,500 0 $ 8,500(2)
R. D. Fukai..................... 0 0 0 8,100 0 $ 5,508(2)
</TABLE>
- - ------------------------
(1) 100,000 Avista Corp. stock options valued at $0 per share ($22.625 exercise
price); 50,000 Avista Corp. stock options valued at $0.68 per share ($18.63
exercise price).
(2) Avista Corp. stock options valued at $0.68 per share ($18.63 exercise
price).
OPTION GRANTS IN 1998 OF INDIRECT SUBSIDIARIES
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- - ---------------------------------- ----------- ------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
P. A. Redmond
Triangle Systems................ 14,803(1) 21.28% $ 18.07 4/01/08 $ 168,162 $ 426,326
Universal Showcase.............. 15,000(2) 20.41% $ 12.72 3/31/08 $ 120,000 $ 304,050
</TABLE>
- - ------------------------
(1) Granted pursuant to Triangle Systems Incorporated (Trihoc Acquisition Corp.)
Stock Incentive Plan. The exercise price is the fair market value on the
grant date.
(2) Granted pursuant to Universal Showcase (Pentzer Acquisition, Inc.) Stock
Incentive Plan. The exercise price is the fair market value on the grant
date.
16
<PAGE>
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION VALUES
OF INDIRECT SUBSIDIARIES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END (#) FY-END ($)
ACQUIRED ON VALUE ---------------------------------- ----------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------- ------------- ------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
P. A. Redmond............ 10,733(1) $ 696,239(1) 147,571(2) 0 $ 1,112,609(2) $ 0
J. E. Eliassen........... 107(1) $ 6,941(1) 3,679(3) 3,144(4) $ 46,331(3) $ 9,810(4)
</TABLE>
- - ------------------------
(1) Stock options exercised in 1998 in connection with the sale of Systran.
(2) 12,784 Bay Area Manufacturing stock options valued at $0 per share ($36.55
exercise price); 15,000 Decker Company stock options valued at $4.06 per
share ($3.83 exercise price); 12,195 Form House stock options valued at
$23.99 per share ($21.32 exercise price); 10,442 Graphic Communications
Holdings stock options valued at $37.44 per share ($20.00 exercise price);
and 10,442 Imfax stock options valued at $0 per share ($18.67 exercise
price); 15,000 F.O. Phoenix stock options valued at $0 per share ($39.45
exercise price); 15,000 Proco Holdings stock options valued at $3.04 per
share ($17.33 exercise price); 11,905 Target Woodworks stock options valued
at $8.88 per share ($22.83 exercise price); 14,803 Triangle Systems stock
options valued at $9.21 per share ($18.07 exercise price); 15,000 Universal
Showcase stock options valued at $3.63 per share ($12.72 exercise price);
and 15,000 White Plus stock options valued at $1.74 per share ($7.17
exercise price); all as of December 31, 1998. In August 1998, the Board of
Directors of Pentzer Corporation approved the immediate vesting of these
options effective with Mr. Redmond's resignation as Pentzer Chairman.
(3) 730 Bay Area Manufacturing stock options valued at $0 per share ($36.55
exercise price); 857 Decker Company stock options valued at $4.06 per share
($3.83 exercise price); 700 Form House stock options valued at $23.99 per
share ($21.32 exercise price); 696 Graphic Communications Holdings stock
options valued at $37.44 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, 1998.
(4) 857 F.O. Phoenix stock options valued at $0 per share; 750 Proco Holdings
stock options valued at $3.04 per share; 680 Target Woodworks stock options
valued at $8.88 per share; and 857 White Plus stock options valued at $1.74
per share; all as of December 31, 1998.
17
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
------------------------------------------
REMUNERATION 15 20 25 30
- - ------------------------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$175,000............................ $ 65,625 $ 87,500 $ 109,375 $ 131,250
$200,000............................ $ 75,000 $ 100,000 $ 125,000 $ 150,000
$225,000............................ $ 84,375 $ 112,500 $ 140,625 $ 168,750
$250,000............................ $ 93,750 $ 125,000 $ 156,250 $ 187,500
$300,000............................ $ 112,500 $ 150,000 $ 187,500 $ 225,000
$400,000............................ $ 150,000 $ 200,000 $ 250,000 $ 300,000
$450,000............................ $ 168,750 $ 225,000 $ 281,250 $ 337,500
$500,000............................ $ 187,500 $ 250,000 $ 312,500 $ 375,000
$550,000............................ $ 206,250 $ 275,000 $ 343,750 $ 412,500
$600,000............................ $ 225,000 $ 300,000 $ 375,000 $ 450,000
$650,000............................ $ 243,750 $ 325,000 $ 406,250 $ 487,500
$700,000............................ $ 262,500 $ 350,000 $ 437,500 $ 525,000
$750,000............................ $ 281,250 $ 375,000 $ 468,750 $ 562,500
$800,000............................ $ 300,000 $ 400,000 $ 500,000 $ 600,000
$850,000............................ $ 318,750 $ 425,000 $ 531,250 $ 637,500
$900,000............................ $ 337,500 $ 450,000 $ 562,500 $ 675,000
</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 credited 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 credited 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 percent of final average base earnings
during the highest 36 consecutive months during the last 120 months of service,
for each credited 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 shown below:
<TABLE>
<CAPTION>
NAME YEARS OF CREDITED SERVICE
- - --------------------------------------------------------------------- ---------------------------
<S> <C>
T. M. Matthews....................................................... 0
P. A. Redmond........................................................ 34
W. L. Bryan.......................................................... 29
J. E. Eliassen....................................................... 28
G. G. Ely............................................................ 32
R. D. Fukai.......................................................... 26
</TABLE>
18
<PAGE>
In August 1997, the Board of Directors of the Company approved an annual pension
benefit of $485,000 for Mr. Redmond in lieu of any pension benefit that would
have otherwise been calculated under the Company's Retirement Plan for Employees
and/or under the Supplemental Executive Retirement Plan. In August 1998, the
Board of Directors of the Company approved an annual pension benefit of $135,000
for Mr. Bryan in lieu of any pension benefit that would have otherwise been
calculated under the Company's Retirement Plan for Employees and/or under the
Supplemental Executive Retirement Plan.
CHANGE OF CONTROL AGREEMENTS AND OTHER COMPENSATORY PLANS
CHANGE OF CONTROL AGREEMENTS
The Company has entered into Change of Control Agreements with the Company's
executive officers, including all of the named executive officers, excluding Mr.
Redmond and Mr. Bryan whose agreements terminated with their retirements. The
agreements will provide compensation and benefits to the executive officers in
the event of a change of control of the Company. Pursuant to the terms of the
agreements, the executives agree to remain in the employ of the Company for
three years following a change of control of the Company and will receive an
annual base salary equal to at least 12 times the highest monthly base salary
paid to such executive in the 12 months preceding the change of control. In
addition to the annual base salary, each executive will receive an annual bonus
at least equal to such executive's highest bonus paid by the Company for the
three fiscal years preceding the change of control (the "Recent Annual Bonus").
If employment is terminated by the Company for other than cause or by the
executive officer for good reason during the first three years after a change of
control, the executive will receive the base salary due to such executive
officer. In addition, the executive officer will receive a proportionate bonus
based upon the higher of the Recent Annual Bonus and the executive's annual
bonus for the last fiscal year (the "Highest Annual Bonus"), together with an
amount equal to three times the sum of the executive's base salary and the
Highest Annual Bonus. The executive will also receive all unpaid deferred
compensation and vacation pay, may continue to receive employee welfare benefits
for three years from the date of termination, and may be entitled to certain
additional payments based on tax liabilities incurred by the executive as a
result of payments under the agreements. The executive will also be entitled to
a lump sum payment equal to the actuarial value of the benefit under the
Company's retirement plans that the executive officer would have received if he
or she would have remained in the employ of the Company for three years after
the date of termination. If any payments to the executive would be subject to
the excise tax on excess parachute payments imposed by section 4999 of the
Internal Revenue Code, the agreements also provide that the executive may be
entitled to a gross-up payment from the Company to cover the excise tax and any
additional taxes on the gross-up payment. If payments (other than the gross-up
payment) to the executive do not exceed 110% of the maximum amount the executive
could receive without triggering the excise tax, the payments to the executive
will be reduced to that maximum amount and the executive will not receive a
gross-up payment.
EMPLOYMENT AGREEMENT--T. M. MATTHEWS
The Company has entered into a five-year employment agreement with Mr. Matthews,
effective July 1, 1998, pursuant to which the Company agreed to employ Mr.
Matthews as Chairman of the Board and Chief Executive Officer of the Company.
The employment agreement entitles Mr. Matthews to receive an annual base salary
of $750,000, subject to increases, if any, as determined by the Board or a
Committee of the Board. The agreement also provides that Mr. Matthews shall be
entitled to participate in the Company's employee benefit plans generally
available to executive officers and is also entitled to not less than 30 days
paid leave pursuant to the Company's One-Leave Program. In addition, Mr.
Matthews is entitled to participate in the Supplemental Executive Retirement
Plan ("SERP"). Under the SERP, Mr. Matthews will be awarded one year of past
service credit for each year of future service with the Company. Under the
agreement, Mr. Matthews was also afforded the following: (1) A signing bonus of
$1 million of which $300,000 was payable on July 1 and the balance deferred
pursuant to the Executive
19
<PAGE>
Deferral Plan. In the event that Mr. Matthews terminates his employment with the
Company, other than for good reason as defined in the employment agreement, Mr.
Matthews would be required to repay that amount of the signing bonus
proportionate to the period of time remaining prior to the expiration of the
agreement. (2) An award of restricted shares of the Company's Common Stock
having a fair market value on July 1 equal to $2 million. One-third of this
award vests on each of the third, fourth, and fifth anniversaries of his
employment. (3) An option to purchase 100,000 shares of Company Common Stock,
with an exercise price equal to the fair market value on July 1, 1998. (4) A
minimum guaranteed bonus of $150,000 for 1998 and a minimum guaranteed bonus of
$300,000 for 1999. (5) During the five-year agreement, an annual award of
equity-based incentive compensation (e.g., stock options, performance shares,
restricted stock) the form of which may vary annually, with each grant having a
five-year projected pre-tax value of $1 million (assumes a 15% compound annual
growth rate of the market value of Company Common Stock). The initial annual
equity award granted to Mr. Matthews under this provision was a Company Common
Stock option of 50,000 shares, based on the fair market value on the grant date
of November 12, 1998. (6) Reasonable relocation expenses.
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 salary 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,
workers' compensation benefits, and any benefit payable under provisions of the
Federal Social Security Act. Benefits will be payable until 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.
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<PAGE>
PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS--AVISTA CORP. VS. INDUSTRY
INDEXES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ASSUMES $100 WAS INVESTED IN AVA AND EACH INDEX ON
DECEMBER 31, 1993 AND THAT ALL DIVIDENDS WERE REINVESTED WHEN
PAID.
Avista Corp. Standard & Poor's S & P Electric
<S> <C> <C> <C>
(AVA) 500 Index (1) Co-MidCap(2)
1993 $100.00 $100.00 $100.00
1994 $79.95 $101.32 $91.84
1995 $108.96 $139.37 $121.34
1996 $123.68 $171.39 $125.36
1997 $169.70 $228.64 $159.40
1998 $141.70 $293.98 $184.05
</TABLE>
<TABLE>
<CAPTION>
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Avista Corp............................ $ 79.95 $ 108.96 $ 123.68 $ 169.70 $ 141.70
S & P 500.............................. $ 101.32 $ 139.37 $ 171.39 $ 228.64 $ 293.98
S & P Electric Co-MidCap............... $ 91.84 $ 121.34 $ 125.36 $ 159.40 $ 184.05
</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) The Standard & Poor's MidCap 400 Electric Companies Index. The Index
currently includes 32 MidCap electric utility companies.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors appoints the independent accountants that audit the
financial statements of the Company. It's anticipated that the Board of
Directors will formally appoint the independent accountants for continuing audit
work in 1999 at their next Board meeting. Deloitte & Touche LLP currently serves
as such independent accountants, 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 attend the meeting with the opportunity to make a statement if he/she desires
to do so, and is expected to be available to respond to appropriate questions.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company's 1998 Annual Report to Shareholders and the 1998
Financial Report accompanies this Proxy Statement.
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<PAGE>
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(s) thereof, the
individuals named in the proxy card will have discretionary authority to vote
the proxies held by them in accordance with their judgment as to such matters.
2000 ANNUAL MEETING OF SHAREHOLDERS
The 2000 Annual Meeting of Shareholders is tentatively scheduled for May 11,
2000 in Spokane. (This date is subject to change.) Matters to be brought before
that meeting by shareholders are subject to the following rules of the
Securities and Exchange Commission ("SEC").
PROPOSALS TO BE INCLUDED IN MANAGEMENT'S PROXY MATERIALS
Shareholder proposals to be included in management's proxy soliciting materials
must generally comply with SEC rules and must be received by the Company on or
before December 1, 1999.
OTHER PROPOSALS
Proxies solicited by the Board of Directors will confer discretionary authority
to vote on any matter brought before the meeting by a shareholder (and not
included in management's proxy materials) if the shareholder does not give the
Company notice of the matter on or before February 15, 2000. In addition, even
if the shareholder does give the Company notice on or before February 15, 2000,
management's proxies generally will have discretionary authority to vote on the
matter if its proxy materials include advice on the nature of the matter and how
the proxies intend to exercise their discretion to vote on the matter.
Shareholders should direct any such proposals and notices to the Vice President
and Corporate Secretary of the Company at 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 1998
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,
/s/ Terry L. Syms
Terry L. Syms
Vice President & Corporate Secretary
Spokane, Washington
March 31, 1999
22
<PAGE>
AVISTA CORPORATION
PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AVISTA
CORPORATION FOR THE ANNUAL MEETING OF SHAREHOLDERS ON THURSDAY, MAY 13, 1999.
The undersigned appoints T.M. Matthews 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 Avista Corporation Common Stock which
the undersigned may be entitled to vote at the Annual Meeting of Shareholders
to be held on May 13, 1999, 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.)
AVISTA CORPORATION
P.O. BOX 11204
NEW YORK, NY 10203-0204
<PAGE>
/ /
1. Election of Directors
FOR all nominees listed below
WITHHOLD AUTHORITY to vote
for all nominees listed below
*EXCEPTIONS
NOMINEES: Jessie J. Knight, Jr., Thomas M. Matthews, Eugene W. Meyer, Daniel
J. Zaloudek
(INSTRUCTIONS: To withhold authority to vote for any nominee, mark the
"Exceptions" box and write that nominee's name in the space provided 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
The signature on this Proxy should correspond exactly with
the shareholder's 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:
------------------------------------, 1999
- - ------------------------------------------------
Signature
- - ------------------------------------------------
Signature
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK. X
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PREPAID
ENVELOPE.
