<PAGE>
PROMPT RETURN OF THE ENCLOSED PROXY CARD WILL SAVE THE EXPENSE OF AN ADDITIONAL
MAILING.
YOUR IMMEDIATE ATTENTION IS APPRECIATED.
[LOGO]
T. M. "TOM" MATTHEWS
Chairman of the Board,
President & Chief Executive Officer
March 31, 2000
Dear Shareholder:
On behalf of the Board of Directors, it's my pleasure to invite you to the 2000
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 11, 2000 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 1999 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 3727--Spokane, Washington 99220-3727
Investor Relations--(509) 495-4203
IF YOU REQUIRE SPECIAL ACCOMMODATIONS AT THE ANNUAL MEETING DUE TO A DISABILITY,
PLEASE CALL OUR INVESTOR RELATIONS DEPARTMENT BY APRIL 21.
<PAGE>
[MAP]
<PAGE>
AVISTA CORP.
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99202
------------------------
NOTICE OF THE 2000 ANNUAL MEETING OF SHAREHOLDERS
<TABLE>
<S> <C>
DATE: Thursday, May 11, 2000
TIME: 10:00 a.m., Pacific Time
PLACE: Doubletree Hotel
322 N. Spokane Falls Court
Spokane, Washington
RECORD DATE: March 23, 2000
MEETING AGENDA: 1) Election of three 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, 2000
<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, 2000.
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 23, 2000, there were
47,176,912 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 three
individuals for the 2000 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
Three directors are to be elected to serve until the 2003 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.
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 65, is a principal of Olympic Capital Partners, a private
investment banking firm headquartered in Seattle, Washington. He is also
Chairman of NVA Holdings, LLC. Previously, and for over five years, Mr. Clack
was President of Clack and Co., a private investment firm headquartered in
Spokane, Washington.
SARAH M. R. (SALLY) JEWELL* DIRECTOR SINCE 1997 (CURRENT TERM EXPIRES 2000)
Mrs. Jewell, age 44, 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 and Washington Mutual Business Bank
Divisions. 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 Premera Blue Cross and Medical Service Corp. In
addition, she serves on advisory committees for the University of Washington's
College of Engineering and of the School of Business.
JOHN F. KELLY* DIRECTOR SINCE 1997 (CURRENT TERM EXPIRES 2000)
Mr. Kelly, age 55, has been a Board member of Alaska Air Group since 1989, and
has served as Chairman, President and Chief Executive Officer of the Company, as
well as Chairman and Chief Executive Officer of Alaska Airlines since 1995. He
also served as President of Alaska Airlines from 1995 to 1997 and Chief
Operating Officer from November 1994 to February 1995. He has served Horizon Air
as its Chairman of the Board since February 1991. Mr. Kelly is a director of the
Washington State Roundtable, and a board member of the Air Transport Association
and of the Northwestern University Transportation Center Business Advisory
Committee.
JESSIE J. KNIGHT, JR. DIRECTOR SINCE 1999 (CURRENT TERM EXPIRES 2002)
Mr. Knight, age 49, is President and Chief Executive Officer of the San Diego
Regional Chamber of Commerce and is 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 as managing commissioner over the telecommunications
and electric industries of the state. Mr. Knight was the Vice President of
Marketing for the San Francisco Chronicle and San Francisco Examiner newspapers
for seven years. He spent ten years in senior management positions in marketing
and finance for the Dole Foods Company (principally in the pineapple industry)
and as Director of Marketing for its U.S. and Canadian businesses and its Latin
American operations. Mr. Knight serves on the boards of Blue Shield of
California and DBS Industries, Inc. He is former Vice Chairman of the World
Affairs Council of Northern California and is presently a standing member of the
Council on Foreign Relations.
3
<PAGE>
THOMAS M. MATTHEWS DIRECTOR SINCE 1998 (CURRENT TERM EXPIRES 2002)
Mr. Matthews, age 56, has been Chairman of the Board, President and Chief
Executive Officer of the Company since 1998. From December 1996 through June
1998, Mr. Matthews served as President of Houston-based Dynegy. From 1989
through November 1996, Mr. Matthews held various executive positions with
Texaco, including Vice President of Texaco, Inc., President of Texaco Refinery
and Marketing, and President of Texaco Global Gas and Power. 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 2002)
Mr. Meyer, age 63, 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 59, has been President for over five years of Schmidt Trading,
Inc., a commodity trading and investment firm located in Hilton Head Island,
South Carolina. 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 71, has been Chairman and Chief Executive Officer of Empire
Bolt & Screw, Inc., since 1972. Empire Bolt is a Spokane distribution company of
which Mr. Stanley is the founder. 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 and The
Coeur d'Alenes Company, both located in Spokane, Washington, and Aresco, Inc.,
of Post Falls, Idaho. Mr. Stanley will retire from the Avista Corp. Board of
Directors at the end of his term in May 2001.
R. JOHN TAYLOR* DIRECTOR SINCE 1985 (CURRENT TERM EXPIRES 2000)
Mr. Taylor, age 50, has been Chairman and Chief Executive Officer since 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. 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 2002)
Mr. Zaloudek, age 54, 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 and Exxon. He
is a member of the Oklahoma State University Board of Governors and is Chairman
of their Board of Trustees. In addition, he is on the Board of Directors of the
Tulsa Area United Way, and has served on the boards of the Philbrook Museum of
Art and the Oklahoma Sinfonia.
4
<PAGE>
BOARD OF DIRECTORS OF AVISTA CORP.
CORPORATE GOVERNANCE GUIDING PRINCIPLES
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 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 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.
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
selection 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 business 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 designed 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 Audit &
Finance and Compensation & Organization Committees.
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
5
<PAGE>
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 maximize shareholder value.
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. 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.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held six Board meetings in 1999. The average attendance
during 1999 at all meetings of the Board and at all Board committee meetings was
99 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, independent auditors and legal counsel,
and reviews financial operating reports. Based upon the Committee's review and
discussions with management and independent auditors, it recommends that the
financial statements be included in the annual report on Form 10-K. The
Committee also assists the
6
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Board in ensuring that strategies, budgets, forecasts, and financial plans and
processes are in place to meet corporate goals and objectives. The Committee
reviews recommendations from management 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, Knight, Meyer, Schmidt, and
Taylor--Chairman. Five meetings were held in 1999.
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.
Four meetings were held in 1999.
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 1999.
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. Five meetings were held in 1999.
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 1999.
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 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.
7
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DIRECTOR COMPENSATION
During 1999, 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.
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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, 2000, by the directors, any nominee for director,
each of the executive officers named in the Summary Compensation Table, and
directors and executive officers as a group. No director or executive officer
owns any of the Company's Preferred Stock. Also, 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>
David A. Clack.............................................. 6,693 10,256(1) 16,949
Jon E. Eliassen(2).......................................... 7,966 13,139(3) 21,105
Gary G. Ely................................................. 7,098 36,873(4) 43,971
Robert D. Fukai............................................. 6,888 11,376(3) 18,264
Sarah M. R. (Sally) Jewell.................................. 4,657 4,657
John F. Kelly............................................... 2,817 2,817
Jessie J. Knight, Jr........................................ 1,284 1,284
Thomas M. Matthews.......................................... 93,348(5) 391(3) 93,739
David J. Meyer.............................................. 10,922(6) 1,121(3) 12,043
Eugene W. Meyer(2).......................................... 5,714 12,880(7) 18,594
Bobby Schmidt............................................... 21,274 21,274
Larry A. Stanley............................................ 7,157 7,417(8) 14,574
R. John Taylor.............................................. 10,005 8,453(9) 18,458
Daniel J. Zaloudek.......................................... 2,698 2,698
All directors and executive officers as a group, including
those listed above--21 individuals........................ 334,031
</TABLE>
- ------------------------
(1) Includes 2,000 shares held in the name of Clack & Co., 7,500 shares held in
an IRA account and 756 shares held by Mr. Clack's spouse.
(2) Holds 730 exercisable stock options of Bay Area Manufacturing, an indirect
subsidiary of the Company.
(3) Shares held in the Company's 401(k) Investment Plan.
(4) Includes 31,673 shares held in the Company's 401(k) Investment Plan and
5,200 shares held in the Executive Deferral Plan.
(5) Includes 88,398 restricted shares of Company Common Stock.
(6) Includes 8,191 restricted shares of Company Common Stock.
(7) Includes 600 shares held by Mr. Meyer as custodian for his son and 12,280
shares held in an IRA account.
(8) Shares are held in a pension/profit-sharing plan not administered by the
Company for which Mr. Stanley shares voting and investment power.
(9) Includes 4,000 shares held in an employee benefit plan not administered by
the Company for which Mr. Taylor shares voting and investment power; 432
shares held by Mr. Taylor's spouse of which shares he disclaims beneficial
ownership; and 832 shares held by Mr. Taylor as custodian for his children.
Also includes 3,189 shares for which Mr. Taylor has deferred receipt to a
later date in accordance with the provisions of the Non-Employee Director
Stock Plan.
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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 1999, the Company believes that all Section 16
filing requirements applicable to the Company's reporting persons were complied
with except that a Form 5 was inadvertently not filed on a timely basis with
respect to Avista Corp. stock options granted in 1998 to the named executive
officers and other executive officers as follows: JoAnn G. Matthiesen,
Ronald R. Peterson, Terry L. Syms, Edward H. Turner and Roger D. Woodworth. And,
a Form 5 was inadvertently not filed on a timely basis with respect to shares
awarded in 1998 under the Non-Employee Director Stock Plan to the outside
directors named in this proxy statement. These transactions were subsequently
reported to the SEC in accordance with the rules.
EXECUTIVE COMPENSATION
BOARD COMPENSATION & ORGANIZATION COMMITTEE REPORT
TO 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.
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 was designed
to meet the requirements of performance-based compensation under 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
As indicated, 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 the Company's 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).
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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 an energy, information, and technology company.
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. Based on these factors, the Committee
granted executive officers base salary increases, effective March 1, 1999 that
ranged from 0% to 8%.
CEO COMPENSATION
Mr. Matthews has been Chairman of the Board, President and Chief Executive
Officer since 1998. His compensation and benefits were negotiated prior to his
joining the Company, and reflect his over thirty years of significant experience
and leadership in the diversified energy industry, including serving as
president of a large energy concern with worldwide operations. Mr. Matthews has
the background, skills, global and national experience, and senior leadership
ability critical to the future success of the Company. Mr. Matthews' annual base
salary effective July 1, 1998 was set at $750,000, and it has not been adjusted
since that time. Under his employment agreement, he received a guaranteed cash
payment (referred to as a "bonus") of $300,000, as set forth in the Summary
Compensation Table.
ANNUAL INCENTIVE COMPENSATION
The 1999 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 target bonus percentages
ranged from 35% to 50% of salary depending on position, with the exception of
Mr. Matthews whose target bonus percentage was 100% of salary. In the event that
certain corporate and individual performance goals were achieved, executive
officers would have been entitled to receive the full award. In the event that
certain performance goals were exceeded, executive officers would have been
entitled to receive up to two times their target bonus percentage.
The Committee establishes performance measures annually. In February 1999, the
Committee approved a plan based on achieving specified earnings per share
levels. Above a minimum threshold earnings per share level, the Company would
allocate amounts to an incentive pool. At or below this threshold level, no
awards would be paid. If the minimum threshold earnings per share level was
achieved, 100% of the bonus amounts would be allocated to the pool. Additional
amounts would be allocated to the pool at incremental higher levels of earnings
per share performance, up to 200% of the bonus amounts. Out of the incentive
pool, actual awards to executives would be based on achievement of predetermined
initiatives and individual performance. As a result of various factors,
including a shift in corporate strategy relating to the downsizing of the
Company's national energy trading business, the threshold target established in
early 1999 was not met. Therefore, no awards were made to executive officers
under the 1999 Executive Incentive Plan.
11
<PAGE>
LONG-TERM INCENTIVE COMPENSATION
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 annual 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 1999 to the
named executive officers 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
<TABLE>
<S> <C>
David A. Clack--Chairman Larry A. Stanley
John F. Kelly Daniel J. Zaloudek
</TABLE>
12
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1) LONG-TERM COMPENSATION(1)
---------------------- ---------------------------------------------
AWARDS PAYOUTS
------------------------------- -----------
RESTRICTED SECURITIES LONG-TERM
STOCK UNDERLYING INCENTIVE ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) AWARDS(2) OPTIONS (#)(3) PAYOUTS ($) COMP. ($)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
T. M. MATTHEWS ............ 1999 $750,000 80,000(4) $ 319,464(5)(13)
Chairman of the Board, 1998 $354,808 $2,000,000(6) 150,000(7) $1,150,000(8)
President & Chief Executive
Officer
EMPLOYED 7/98
G. G. ELY ................. 1999 $268,077 35,000(4) $ 9,524(13)
Executive Vice President 1998 $211,654 $40,000(9) 12,500(4) $ 13,320
1997 $196,137 $ 11,783
D. J. MEYER ............... 1999 $240,000 20,000(4) $ 21,678(13)
Senior Vice President & 1998 $ 62,769 $10,000(9) $ 200,000(10) 32,500(11) $ 200,000(14)
General Counsel
EMPLOYED 9/98
J. E. ELIASSEN ............ 1999 $234,215 20,000(4) $ 22,652(13)
Senior Vice President & 1998 $215,692 $40,000(9) 12,500(4) $ 48,941
Chief Financial Officer 1997 $196,138 2,287(12) $ 37,772
R. D. FUKAI ............... 1999 $192,820 15,000(4) $ 37,459(13)
Vice President 1998 $191,741 $30,000(9) 8,100(4) $ 49,990
External Relations 1997 $185,815 $ 20,034
</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) As of December 31, 1999, the number and value of total shares of restricted
stock held by the named executive officers are: T. M. Matthews--88,398
shares; $1,364,865 and D. J. Meyer--8,191 shares; $126,469. Dividends are
paid on all restricted Common Stock at the same rate as paid on the
Company's Common Stock.
(3) No stock option granted under the Long-Term Incentive Plan may be assigned
or transferred by the holder other than by will or by the applicable laws
of descent and distribution.
(4) Avista Corp. Common Stock options granted under the Long-Term Incentive
Plan.
(5) Includes a $300,000 guaranteed cash payment awarded in accordance with
Matthews' employment agreement.
(6) Restricted stock award granted under the Long-Term Incentive Plan in
accordance with Matthews' employment agreement.
(7) Avista Corp. Common Stock options granted under the Long-Term Incentive
Plan in accordance with Matthews' employment agreement.
(8) Includes a $1 million signing bonus and a $150,000 guaranteed cash payment
awarded in accordance with Matthews' employment agreement.
(9) Cash awards made to certain executive officers for 1998 performance.
13
<PAGE>
(10) Restricted stock award granted under the Long-Term Incentive Plan in
accordance with Meyer's employment agreement.
(11) Includes 20,000 Avista Corp. Common Stock options granted under the
Long-Term Incentive Plan in accordance with Meyer's employment agreement
and 12,500 Avista Corp. Common Stock options granted under the Long-Term
Incentive Plan.
(12) Options to Eliassen received as a director of certain indirect
subsidiaries: Proco Holdings Corp.--750; Target Woodworks, Inc.--680;
White Plus, Inc.--857. These options were exercised in 1999.
(13) 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 1999 under the Deferral
Plan were: Matthews--$15,966; Eliassen--$4,029; Ely--$2,324;
Fukai--$3,097; Meyer--$0. Amounts for 1999 under the 401(k) plan were:
Matthews--$3,498; Eliassen--$7,200; Ely--$7,200; Fukai--$7,200;
Meyer--$3,216. Amounts for 1999 under the One-Leave Program were:
Matthews--$0; Eliassen--$11,423 (100 hrs.); Ely--$0; Fukai--$27,162 (293
hrs.); Meyer--$18,462 (160 hrs).
(14) A signing bonus awarded in accordance with Meyer's employment agreement.
OPTION GRANTS IN 1999 OF AVISTA CORP.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED (#)(1) FISCAL YEAR (PER SHARE) DATE VALUE(2)
- ---- -------------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
T. M. Matthews...................... 80,000 10.45% $17.31 11/11/09 $483,849
G. G. Ely........................... 35,000 4.57% $17.31 11/11/09 $211,684
J. E. Eliassen...................... 20,000 2.61% $17.31 11/11/09 $120,962
R. D. Fukai......................... 15,000 1.96% $17.31 11/11/09 $ 90,722
D. J. Meyer......................... 20,000 2.61% $17.31 11/11/09 $120,962
</TABLE>
- ------------------------
(1) Options granted in 1999 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. No options granted
under the Long-Term Incentive Plan may be assigned or transferred by the
holder other than by will or by the applicable laws of descent and
distribution.
(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 $17.31,
the exercise price being equal to the fair market value of the underlying
stock on the grant date. Volatility of 26.98 percent calculated using
month-end stock prices for the 36-month period prior to the grant date. An
interest rate of 6.3 percent representing 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 $0.48 per share representing the annualized
dividend paid with respect to a share of Common Stock at the date of grant.
The options were granted for a term of 10 years. The ultimate value of the
options will depend on the future market price of the Company's Common
Stock. The actual value an optionee will realize, if any, upon exercise of
an option will depend on the excess of the market value of the Company's
Common Stock over the exercise price on the date the option is exercised.
14
<PAGE>
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION VALUES
OF AVISTA CORP.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END (#) FY-END ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
T. M. Matthews........... 0 0 37,500 192,500 $219,375 $807,725
G. G. Ely................ 0 0 3,125 44,375 $ 9,969 $ 95,356
J. E. Eliassen........... 0 0 3,125 29,375 $ 9,969 $ 67,306
R. D. Fukai.............. 0 0 2,025 21,075 $ 6,460 $ 47,429
D. J. Meyer.............. 0 0 8,125 44,375 $ 24,319 $110,356
</TABLE>
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION VALUES
OF INDIRECT SUBSIDIARIES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END (#) FY-END ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. E. Eliassen........... 6,093(2) $220,586(2) 730(3) 0 $0 $0
</TABLE>
- ------------------------
(1) No option grants of any of the Company's indirect subsidiaries were made to
any executive officers of the Company in 1999.
(2) Stock options exercised in 1999 in connection with the sale of certain
indirect subsidiaries of the Company as follows: 857 Decker Company stock
options; 857 F.O. Phoenix stock options; 700 Form House stock options; 696
Graphic Communications Holdings stock options; 696 Imfax stock options; 750
Proco Wood Products stock options; 680 Target Woodworks stock options; 857
White Plus stock options.
(3) Bay Area Manufacturing stock options valued at $0 per share ($36.55 exercise
price).
15
<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 "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.......................................... 2
G. G. Ely............................................... 33
J. E. Eliassen.......................................... 29
R. D. Fukai............................................. 27
D. J. Meyer............................................. 20
</TABLE>
16
<PAGE>
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. 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 AGREEMENTS
T. M. MATTHEWS--The Company 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. 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, 1998 and the balance deferred pursuant to the
Executive Deferral Plan. In the event 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, 1998 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 cash payment (referred to as a "bonus") of $150,000 for 1998
payable in 1999 and a minimum guaranteed cash payment (referred to as a
17
<PAGE>
"bonus") of $300,000 for 1999 payable in 2000. (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. Prior to a change of control, the Company may terminate
Mr. Matthews' agreement without cause at any time upon 20 days' notice and
payment of severance.
D. J. MEYER--The Company entered into an employment agreement with Mr. Meyer,
effective September 16, 1998, pursuant to which the Company agreed to employ
Mr. Meyer as Senior Vice President and General Counsel for a period of five
years and continuing thereafter on a year-to-year basis, unless terminated by
written notice delivered to Mr. Meyer not less than twelve months prior to any
anniversary date following the initial five-year term. Alternatively, the
Company may terminate the agreement without cause at any time upon 20 days'
notice and payment of severance. The employment agreement entitles Mr. Meyer to
receive an annual base salary of $240,000 subject to increases, if any, as
determined by the Board. The agreement also provides that Mr. Meyer 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. Meyer
will be entitled to a supplemental retirement pension benefit calculated on the
basis of not less than twenty years of credited benefit service and also
calculated at 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. Under the agreement, Mr. Meyer was also afforded the
following: (1) A signing bonus of $200,000. In the event that Mr. Meyer
terminates his employment with the Company, other than for good reason as
defined in the employment agreement, Mr. Meyer 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 September 16, 1998, equal
to $200,000, which award vests at the rate of 25 percent on each of the first
four anniversaries of the agreement. (3) An option to purchase 20,000 shares of
Company Common Stock, with an exercise price equal to the fair market value on
September 16, 1998.
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.
18
<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 AVISTA CORP. STANDARD & POOR'S S & P ELECTRIC
DECEMBER 31, 1994 AND THAT ALL DIVIDENDS WERE REINVESTED WHEN PAID. (AVA) 500 INDEX (1) CO-MIDCAP(2)
<S> <C> <C> <C>
1994 $100.00 $100.00 $100.00
1995 $137.53 $137.58 $132.12
1996 $156.38 $169.17 $136.50
1997 $217.61 $225.60 $173.58
1998 $181.51 $290.08 $200.41
1999 $149.73 $351.12 $169.79
</TABLE>
<TABLE>
<CAPTION>
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Avista Corp.................... $137.53 $156.38 $217.61 $181.51 $149.73
Standard & Poor's 500 Index.... $137.58 $169.17 $225.60 $290.08 $351.12
S & P Electric Co-MidCap....... $132.12 $136.50 $173.58 $200.41 $169.79
</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 30 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 2000 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 1999 Annual Report to Shareholders and the 1999
Financial Report accompanies this Proxy Statement.
19
<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.
2001 ANNUAL MEETING OF SHAREHOLDERS
The 2001 Annual Meeting of Shareholders is tentatively scheduled for May 10,
2001 in Spokane. (This date and location are 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, 2000.
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, 2001. In addition, even
if the shareholder does give the Company notice on or before February 15, 2001,
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 1999
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, 2000
20
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/ /
1. Election of Directors FOR all nominees / / WITHHOLD AUTHORITY to vote / / *EXCEPTIONS / /
listed below for all nominees listed below
NOMINEES: Sarah M.R. (Sally) Jewell, John F. Kelly, 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 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: _____________________________, 2000
__________________________________________
Signature
__________________________________________
Signature
VOTES MUST BE INDICATED
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE (X) IN BLACK OR BLUE INK. /X/
PREPAID ENVELOPE.
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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 11, 2000.
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 11, 2000, 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
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