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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 Partyparty other than the Registrant [_]/X/
Check the appropriate box:
[_]/ / Preliminary Proxy Statement
[_]/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X]/X/ Definitive Proxy Statement
[_]/ / Definitive Additional Materials
[_]/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PUGET SOUND ENERGY, INC.Puget Sound Energy, Inc.
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(Name of Registrant as Specified In Its Charter)
Merrill Corporation
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]/X/ No fee required.
[_]required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)(1)
and 0-11.0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set(set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / 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:
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Notes:------------------------------------------------------------------------
PUGET SOUND ENERGY, INC.
Notice of Annual Meeting of ShareholdersNOTICE OF ANNUAL MEETING
[LOGO]
MAY 16, 2000
MEYDENBAUER CENTER, BELLEVUE, WASHINGTON
To Be Held May 19, 1997
To the Holders of Common Stock of Puget Sound Energy Inc.:
The Annual Meeting of Shareholders ofShareholders:
On May 16, 2000, Puget Sound Energy, Inc. will be held at
2:00 p.m. on May 19, 1997hold its 2000 Annual Meeting
of Shareholders at the Meydenbauer Center, located at 11100 N.E. 6th Street,
Bellevue, Washington forWashington. The meeting will begin at 10:00 a.m. At the purpose of acting uponannual
meeting, the following
matters:shareholders will
1. To elect seven Directors to serve until the expiration of their terms and
until their successors are elected and qualified.Elect three directors.
2. To consider and vote upon a proposal to approve the Puget Sound Energy, Inc.
Employee Stock Purchase Plan.
3. To consider and vote on any and allConsider other matters that may properly come
beforepresented at the meeting and any adjournment thereof.
Only shareholders of recordmeeting.
You are entitled to vote if you were a shareholder at the close of business
on March 17, 1997 will be
entitled to attend and vote at the meeting.15, 2000.
If your shares are registered in the name of a brokerage firm or trustee and
you plan to attend the meeting in person, please obtain from the firm or trusteebring a letter, account
statement or other evidence of your beneficial ownership of those shares to facilitate your admittance to the meeting. If you
are a participantparticipate in the Company's Stock Purchase and Dividend Reinvestment Plan, please note that the enclosed
proxy covers all shares in your account,shares, including any shares which may be held in suchyou hold under the plan.
March 28, 199730, 2000
Bellevue, Washington
By Order of the Board of Directors
/s/ James W. Eldredge
James W. Eldredge, Corporate SecretaryCORPORATE SECRETARY
TABLE OF-------------------
CONTENTS
Proxy Statement............................................................................ANNUAL MEETING INFORMATION............ 1
Annual Report..............................................................................WHO IS ENTITLED TO VOTE?............ 1
Voting Rights and Proxy....................................................................WHAT AM I VOTING ON?................ 1
Election of Directors......................................................................WHAT IS A QUORUM?................... 1
HOW MANY VOTES DO I HAVE?........... 1
HOW MANY VOTES ARE REQUIRED TO ELECT
A DIRECTOR?....................... 1
CAN BROKERS VOTE ON THE ELECTION OF
DIRECTORS?........................ 1
HOW WILL MY PROXY BE VOTED?......... 1
WHO COUNTS THE VOTES?............... 2
Security Ownership of Directors and Executive Officers..................................... 6WHAT IF OTHER MATTERS ARISE AT THE
MEETING AND I DO NOT ATTEND?...... 2
ELECTION OF DIRECTORS................. 2
HOW MANY DIRECTORS DOES PUGET SOUND
ENERGY HAVE?...................... 2
HOW MANY DIRECTORS ARE ELECTED EACH
YEAR?............................. 2
WHO ARE THE NOMINEES?............... 2
WHO ARE THE OTHER DIRECTORS?........ 3
STRUCTURE AND COMPENSATION OF BOARD OF
DIRECTORS........................... 4
Board of Directors Meetings......... 4
Audit Committee..................... 4
Director Affairs Committee.......... 4
Compensation and Committee Meetings..................................................Retirement
Committee......................... 5
Strategic Opportunities Committee... 5
Director Compensation............... 5
SECURITY OWNERSHIP OF DIRECTORS AND
EXECUTIVE OFFICERS.................. 6
Beneficial Ownership Table.......... 6
EXECUTIVE COMPENSATION................ 7
Compensation and Retirement
Committee Report............................................... 9Report.................. 7
Stock Price Performance Graph.............................................................. 12Graph....... 10
Summary Compensation Table................................................................. 13
Aggregated SAR Exercises in 1996 and FiscalTable.......... 11
Year-End SAR Values............................ 15Option/Stock Appreciation
Right Values...................... 14
Long-Term Incentive Plan Awards in
1996.................................................... 161999.............................. 14
Retirement Benefits Statement.............................................................. 17
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements.............................................................Statement....... 15
EMPLOYMENT CONTRACTS, TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS........................ 15
Certain Transactions................ 18
Proposal No. 2 - Approval of Employee Stock Purchase Plan.................................. 20ADDITIONAL INFORMATION ABOUT THE
MEETING AND SHAREHOLDER PROPOSALS... 18
Independent Public Accountants............................................................. 22
Section 16(a) Beneficial Ownership Reporting Compliance.................................... 22Accountants...... 18
Shareholder Proposals...................................................................... 22Proposals............... 18
Solicitation of Proxies.................................................................... 22
Appendix A - Employee Stock Purchase Plan.............................................. A1 - A11Proxies............. 18
Map to Annual Meeting-------------------
YOUR VOTE IS IMPORTANT
The Company has approximately 70,000 shareholders of record. Many
shareholders ownPUGET SOUND ENERGY HAS APPROXIMATELY 55,000 SHAREHOLDERS OF RECORD. MANY
SHAREHOLDERS OWN 100 shares or less. Each shareholder, regardless of the
number of shares owned, is requested to complete, date, sign and return
promptly the enclosed proxy form, using the accompanying addressed
envelope.SHARES OR LESS. REGARDLESS OF THE NUMBER OF SHARES YOU OWN,
PLEASE COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY FORM, USING THE ENVELOPE
WE HAVE PROVIDED.
PROXY STATEMENT
The following information is furnished in connection with the solicitation of
proxies forANNUAL MEETING INFORMATION
This proxy statement relates to the Annual Meeting of Shareholders (the "Annual Meeting") of Puget
Sound Energy, Inc. ("Puget" or the "Company") to be held at 2:10:00 p.m.a.m. on May 19,
199716, 2000 at the Meydenbauer
Center, which is located at 11100 N.E. 6th6(th) Street, Bellevue, Washington. The approximate mailing date of theWe
will mail this proxy material isstatement and our Annual Report for 1999 to shareholders on
March 28,
1997.30, 2000.
The mailing address of the Company's principal executive offices is Puget
Sound Energy, Inc., P.O. Box 97034, Bellevue, Washington 98009-9734.
Management isWHO IS ENTITLED TO VOTE?
Only holders of common stock may vote at the Annual Meeting. We had
approximately 85 million shares of common stock outstanding on March 15, 2000,
the record date for the Annual Meeting.
WHAT AM I VOTING ON?
You are being asked to elect three directors. We are not aware of any matter
to be presented for action at the Annual Meeting other than the election of
seven Directors and a proposal to approve the
Employee Stock Purchase Plan.
ANNUAL REPORT
The Company's Annual Report for 1996, including audited financial statements, is
being mailed to shareholders on or about March 28, 1997.
VOTING RIGHTS AND PROXY
The Company's Common Stock is the only class of stock entitled to vote at the
Annual Meeting. Approximately 84.5 million shares of Common Stock were
outstanding on March 17, 1997, the record date for the Annual Meeting.directors.
WHAT IS A QUORUM?
The holders of a majority of the shares of the Common Stock,common stock, present in
person or represented by proxy at the Annual Meeting, constitute a quorum for
the transaction of business. Each holder of Common Stock generally isThere must be a quorum for the meeting to be held.
HOW MANY VOTES DO I HAVE?
You are entitled to one vote for each share of common stock you held on the
record date on each item to be voted on at an Annual Meeting
of Shareholders.date. In electing Directors,directors, however, every holder of Common Stock
hasyou have the right of cumulative voting, namely, the right to cumulate your
votes. This means that you can multiply the number of votes represented by shares held of recordyou have by the
number of Directorsdirectors to be elected, and then cast all suchyour votes for one
candidate or distribute them among any two or more candidates.
Under Washington law and the Company's Articles of
Incorporation, ifHOW MANY VOTES ARE REQUIRED TO ELECT A DIRECTOR?
If a quorum is present at the Annual Meeting, (a) the seventhree nominees for
election as Directorsdirectors who receive the greatest number of votes cast
for the election of Directors at the Annual Meeting by the
shares present in person or represented by proxy at the Annual Meeting and entitled to vote shallwill be
elected Directors, and (b) the proposal to approve the Puget Sound Energy,
Inc. Employee Stock Purchase Plan (the "Plan") will be approved if the votes
cast in favor of the proposal exceed the votes cast against the proposal. In
the election of directors, any actions other than a vote for a nominee will have
the practical effect of voting against the nominee. With respect to the
proposal to approve the Plan, abstentions will have no effect as they will not
represent votes cast for or against such proposal.directors.
CAN BROKERS VOTE ON THE ELECTION OF DIRECTORS?
Because brokers have discretion to vote shares of Common Stock heldthey hold on behalf of
beneficial owners in the election of directors, if nothey do not receive
instructions, for voting such shares are received as to the matter to be
voted upon at the Annual Meeting, therethey will be no "broker non-votes."
Unless your proxy is mutilated or otherwise received in such form or at such
time as to render it not votable,vote the shares represented byas they see fit.
HOW WILL MY PROXY BE VOTED?
If we receive a proper proxy, your proxyshares will be voted as directed and, if noyou direct. If
you submit a proper proxy but do not provide any direction, is indicated,your shares will be
voted for all management proposals as set forth in this Proxy Statement. A shareholderproposals. You may revoke a proxy card at any time
before it is voted by delivering 1
a written notice of revocation to the Corporate Secretary of the Company or
by signing and delivering another proxy card that is dated later.later than the first
one but prior to the May 16, 2000 meeting. If the shareholder attendsyou attend the Annual Meeting in
person, eitheryou may revoke the proxy by giving notice of revocation to an inspector
of election at the Annual Meeting or by voting at the Annual Meeting will revoke
the proxy. A proxy, when executed and not so revoked, will be voted and, if it
contains any specifications, will be voted in accordance with the specifications
so made.Meeting.
WHO COUNTS THE VOTES?
ChaseMellon Shareholder Services, L.L.C. actswill tabulate the votes and will
act as tabulator and
Inspectorinspector of Elections forelection. No one will disclose the proxies of the shareholders of record, brokers
and banks. The identity andor vote of all shareholders shall not be disclosedany
shareholder unless legally required to any third party except as necessary to meet applicable legal requirements.do so.
WHAT IF OTHER MATTERS ARISE AT THE MEETING AND I DO NOT ATTEND?
If any other matters shouldare properly come beforepresented at the Annual Meeting, it is the
intention of the
persons named in the accompanying proxy towill vote thereon in accordance with their judgment on such matters.judgment.
ELECTION OF DIRECTORS
HOW MANY DIRECTORS DOES PUGET SOUND ENERGY HAVE?
The number of Directorsdirectors is determined by resolution of the Board of Directors, subject to revisionbut may be
changed by the shareholders. The Board of Directors has by
resolution, fixed the number of
Directorsdirectors at fourteen.eleven.
HOW MANY DIRECTORS ARE ELECTED EACH YEAR?
The terms of the
Directorsdirectors are classifieddivided into three classes so that generally each year approximately one-third
of the Directorsdirectors are elected each year for a three-year term. These three groups of Directors
are identified herein as Class I, Class II and Class III Directors. At the
Annual Meeting, two Class II Directors will be elected to serve for a term of
two years expiring on the date of the Annual Meeting of Shareholders in 1999 and
five Class III Directors will be elected to serve for a term of three years
expiring on the date of the Annual Meeting of Shareholders in 2000.
Proxies will be voted for the following named nominees. In the event any nominee
is not available to serve as a Director at the date of the Annual Meeting (which
is not now anticipated), the persons named in the enclosed proxy shall have full
discretion and authority to vote or refrain from voting for any other nominee in
accordance with their judgment. Directors are
elected to hold office until their successors are elected and qualified, or
until resignation or removal in the manner provided in our Bylaws. At the BylawsAnnual
Meeting, the shareholders will elect three Class III directors to serve for a
term of three years expiring on the date of the Company.
The names of nominees2003 Annual Meeting.
WHO ARE THE NOMINEES?
Proxies will be voted on the following nominees. If any nominee becomes
unavailable to serve as a director, the persons named in the enclosed proxy can
vote for Director of the Company are set forth below.or against any other nominee in accordance with their judgment.
CLASS IIIII NOMINEES STANDING FOR ELECTION
TERMS EXPIRE 1999
ROBERT L. DRYDEN2003
DOUGLAS P. BEIGHLE
Mr. DrydenBeighle served as Senior Vice President of The Boeing Company (aerospace
manufacturing and sales) from 1986 until his retirement on May 1, 1997.
Mr. Beighle, age 67, has been a Director of Puget Sound Energythe Company since the consummation of
the merger of Washington Energy Company1981 and Washington Natural Gas Company into
Puget Power on February 10, 1997 (the "Merger"). Mr. Dryden, age 63, previously
served as a Director of Washington Energy Company and Washington Natural Gas
Company from 1991 through February 10, 1997. He has served as Executive Vice
President, Airplane Production, Boeing Commercial Airplane Group, Seattle,
Washington, since 1990. Mr. Dryden also
serves as a director of U.S. Bancorp.
SALLY G. NARODICK
Ms. NarodickWashington Mutual, Inc., Active Voice Corporation and
Simpson Investment Company (privately held).
TOMIO MORIGUCHI
Mr. Moriguchi has been a Director of Puget Sound Energythe Company since the consummation of
the merger of Washington Energy Company and Washington Natural Gas Company into
Puget Power on February 10, 1997. She is currently a Consultant on Strategic
Planning for Educational Technology for Edmark Corporation (educational software
development). Ms.
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Narodick,1988. Mr. Moriguchi,
age 51, previously63, has served as a Director of Washington Energy Company
and Washington Natural Gas Company from 1989 through February 10, 1997 and was Chairman and Chief Executive Officer of Edmark Corporation, Redmond,Uwajimaya, Inc.
(food and merchandise distributor), Seattle, Washington, since December 1994.
Previously, he served as President of Uwajimaya, Inc. from October 1989 to September 1996. She1965 through
December 1994. He also serves as President, Town and Country Travel, Inc.,
Seattle, Washington and President and Chairman of the Board of North American
Post Publishing Company, Seattle, Washington.
CRAIG W. COLE
Mr. Cole has been President and Chief Executive Officer of Brown & Cole
Stores (retail grocery) in Bellingham, Washington since 1989. Mr. Cole, age 50,
is also Chairman of the Board of Associated
2
Grocers, Inc. and serves on the boards of the Washington Food Industry and the
Food Marketing Institute. Mr. Cole has served as a directorDirector of Penwest
and Fluke Corporation.
CLASS III NOMINEES
TERMS EXPIRE 2000the Company since
December 1999.
WHO ARE THE OTHER DIRECTORS?
The directors who are not standing for reelection at this time are
CHARLES W. BINGHAM
Mr. Bingham served as Executive Vice President of Weyerhaeuser Company
(forest products industry) from 1981 until his retirement in July 1995 and
Senior Vice President from 1972 to 1981. Mr. Bingham, age 63,66, has been a
director of the Company since 1978. Mr. Bingham's term expires in 2002.
PHYLLIS J. CAMPBELL
Ms. Campbell has been President of U.S. Bank, Washington (financial
institution) since 1993. She also served as Area President of U.S. Bank,
Washington for Seattle-King County from 1992 to 1993, Executive Vice President
and Manager from 1989 to 1992, and in various banking capacities since 1973.
Ms. Campbell, age 48, has been a Director of the Company since 1978.1993 and also
serves as a director of SAFECO Corporation, and is a Regent of Washington State
University. Ms. Campbell's term expires in 2001.
DONALD J. COVEY
Mr. Covey has been a Director of Puget Sound Energythe Company since the consummation of
the merger of Washington Energy Company and Washington Natural Gas Company into
Puget Power on February 10, 1997.1982. Mr. Covey, age 68, previously served as a
Director of Washington Energy Company and Washington Natural Gas Company from
1982 through February 10, 1997. Mr. Covey71,
served as Chairman of the Board of Directors of UNICO Properties, Inc. (property
management), Seattle, Washington, from 1990 until his retirement in
December 1994. Prior to that he served UNICO as Chief Executive Officer from
1983 to 1992 and President from 1975 to 1990. Mr. Covey's term expires in 2001.
ROBERT L. DRYDEN
Mr. Dryden has been President, Chief Executive Officer and a director of
ConneXt, Inc.(a wholly-owned subsidiary of PSE) since April 1999. He also served
as Executive Vice President, Airplane Production, Boeing Commercial Airplane
Group, Seattle, Washington, from 1990 until May 1998. He has been a Director of
the Company since 1991. Mr. Dryden, age 66, also serves as a director of U.S.
Bancorp. Mr. Dryden's term expires in 2002.
JOHN D. DURBIN
Mr. Durbin has been President and Chief Executive Officer of a newly formed
unregulated subsidiary of PSE since February 2000. Prior to that, he was
Executive Director of Emerge Corporation and was a principal in Olympic Capital
Partners, Inc. (investment banking), Seattle, Washington, from 1996 to 1999. He
served as President and Chief Executive Officer of Hostar International, Inc.
from 1988 until his retirement in June 1995, and has been a General Partner of
John Durbin & Associates since 1969. Mr. Durbin, age 64, has been a Director of
the Company since 1984 and also serves as a director of ConneXt, Inc. (a
subsidiary of the Company) and UTILX Corporation. Mr. Durbin's term expires in
2002.
3
JOHN W. ELLIS
Mr. Ellis has been Chairman Emeritus of The Baseball Club of Seattle since
1999. Previously, he was Chairman of the Board and Chief Executive Officer of
The Baseball Club of Seattle since 1992.from 1992 to 1999. He served as Chairman of the
Board of the Company from 1987 to 1993 and as Chief Executive Officer from 1976
to 1992. Mr. Ellis, age 68,71, has been a Director of the Company since 1969 and
also serves as a director of SAFECO Corporation, Washington Mutual, Savings Bank,Inc., UTILX
Corporation and Associated Electric & Gas Insurance Services, Ltd. Mr. Ellis is
also a Regent of Washington State University, and Chairman of the Board of Trustees of Seattle University. TOMIO MORIGUCHI
Mr. MoriguchiEllis will be
appointed to fill a vacancy for a term that expires in 2001.
SALLY G. NARODICK
Ms. Narodick, age 54, has been Chief Executive Officer and President of Apex
Learning, Inc., a Director of Puget Sound Energyventure-backed internet learning company, since the consummation
of the merger of Washington Energy Company and Washington Natural Gas Company
into Puget Power on February 10, 1997. Mr. Moriguchi, age 60, previously1998.
Previously she served as a Director of Washington Energy CompanyConsultant on Strategic Planning for Educational
Technology software for IBM Corporation and Washington Natural Gas Company
from 1988 through February 10, 1997 and has served aswas Chairman and Chief Executive
Officer of Uwajimaya, Inc. (food and merchandise distributor),
Seattle, Washington, since December 1994. Previously, he served as President
of Uwajimaya, Inc.Edmark Corporation from 1965 through December 1994. HeOctober 1989 to September 1996. She also
serves as a director of Bank of America NW, N.A.,Penford Corporation, Click2Learn.com and is President, Town and Country Travel,Apex
Learning, Inc., Seattle, Washington, and President, North American Post Publishing
Company, Seattle, Washington.
RICHARD R. SONSTELIE
Mr. Sonstelie Ms. Narodick has been Chairmana Director of the Company since 1989.
Ms. Narodick's term expires in 2002.
WILLIAM S. WEAVER
Mr. Weaver has been President and Chief Executive Officer of the Company
since February 10, 1997. His prior positions with the Company include Chief Executive
Officer and President from 1992 to February 1997, Chief Operating Officer from
1991 to 1992, Chief Financial Officer from 1987 to 1991 and Executive Vice
President from 1985 to 1987. Mr. Sonstelie, age 52,January 13, 1998. He has been a Director of the
Company since 1987 and also serves as a director of Utech Venture Capital
Corporation and Edison Electric Institute.
3
The names of the Class I and Class II Directors of the Company who are not
standing for election and whose terms of office will continue after the Annual
Meeting are listed as follows:
CLASS I DIRECTORS
TERMS EXPIRE 1998
DOUGLAS P. BEIGHLE
Mr. Beighle has been Senior Vice President of The Boeing Company (aerospace
manufacturing and sales) since 1986. He served The Boeing Company as Vice
President from 1980 to 1986. Mr. Beighle, age 64, has been a Director of the
Company since 1981 and also serves as a director of Washington Mutual Savings
Bank.
PHYLLIS J. CAMPBELL
Ms. Campbell has been President and Chief Executive Officer of U.S. Bank of
Washington (financial institution) since 1993 and is an Executive Vice President
of U.S. Bancorp. She also served as Area President of U.S. Bank of Washington
for Seattle-King County from 1992 to 1993, Executive Vice President and Manager
from 1989 to 1992, and in various banking capacities since 1973. Ms. Campbell,
age 45, has been a Director of the Company since 1993 and also serves as a
director of U.S. Bank of Washington and SAFECO Corporation, and is a Regent of
Washington State University and Chairman of the Greater Seattle Chamber of
Commerce.
WILLIAM S. WEAVER
Mr. Weaver has been Vice Chairman and Chairman of
Unregulated Subsidiaries sincefrom February 10, 1997.1997 to January 13, 1998. Prior to
that he has beenserved as Executive Vice President and Chief Financial Officer of the Company sincePSE
beginning in 1991. For more than five years prior toBefore joining the Company,PSE, he was a partner in the law firm of
Perkins Coie.Coie LLP. Mr. Weaver, age 53,56, has been a Directordirector of the Company since
1991. R. KIRK WILSON
Mr. Wilson has been Chairman of the Board of Brown & Cole, Inc. (retail super
markets), Bellingham, Washington, since January 1997. He previously served as
President and Chief Executive Officer of Thrifty Foods, Inc. (retail grocery)
from 1969 to 1996. Mr. Wilson, age 58, has been a Director of the Company since
1976.
CLASS II DIRECTORS
TERMS EXPIRE 1999
JOHN D. DURBIN
Mr. Durbin has been a PrincipalWeaver's term expires in Olympic Capital Partners, Inc. (investment
banking), Seattle, Washington, since October 1996. He served as President and
Chief Executive Officer of Hostar International, Inc. (equipment for hotels)
from 1988 until his retirement in June 1995, and has been a General Partner of
John Durbin & Associates (industrial real estate) since 1969. His prior
positions include Chairman and President of CEC Equipment Company (construction
equipment) from 1982 to 1987 and Chairman of Spokane Truck Sales, Inc. (trucks)
from 1983 to 1987. Mr. Durbin, age 61, has been a Director of the Company since
1984 and also serves as a director of Fluke Corporation.
4
DANIEL J. EVANS
Mr. Evans has been Chairman of Daniel J. Evans Associates (consulting) since
1989. His prior positions include United States Senator, State of Washington,
from 1983 to 1989 and Chairman, Pacific Northwest Power and Conservation
Planning Council from 1981 to 1983. Mr. Evans, age 71, has been a Director of
the Company since 1990 and also serves as a director of Attachmate, Inc.,
Burlington Northern Santa Fe Inc., Flow International Corporation, Tera Computer
Company and Washington Mutual Savings Bank.
NANCY L. JACOB
Ms. Jacob has been President and Managing Director of Windermere Investment
Associates, Inc. (financial services), Portland, Oregon, since January 1997.
Her prior positions include Chief Executive Officer of CTC Consulting, Inc. from
April 1994 to December 1996, Managing Director, Capital Trust Company (financial
advisor) from 1990 to 1994, Professor of Finance and Business Economics at the
University of Washington (educational institution) from 1981 to 1992 and Dean of
the School and Graduate School of Business Administration from 1981 to 1988. Ms.
Jacob, age 54, has been a Director of the Company since 1980 and also serves as
a trustee of College Retirement Equities Fund in New York.
5
SECURITY OWNERSHIP2001.
STRUCTURE AND COMPENSATION OF DIRECTORS AND
EXECUTIVE OFFICERS
The following table sets forth information as of February 28, 1997, concerning
the shares of the Company's Common Stock beneficially owned by each Director and
nominee, the executive officers named in the Summary Compensation Table (the
"named executive officers") and Directors and executive officers of the Company
as a group. No Director or executive officer owns more than 1% of the
outstanding shares of Common Stock. The Company is not aware of any person, who
beneficially owns five percent or more of the Common Stock.
NAME OF BENEFICIAL OWNER
Number of
Number of Number of Shares that
Beneficially Share May Be
Owned Equivalents Acquired by
Nominees and Directors Shares Held Exercising Options
- ---------------------- ------------ ----------- ------------------
Douglas P. Beighle 3,236
Charles W. Bingham 4,471
Phyllis J. Campbell 1,000
Donald J. Covey 4,310 1,720(2)
Robert L. Dryden 3,543 970(2)
John D. Durbin 2,430
John W. Ellis 27,428(1)
Daniel J. Evans 1,000
Nancy L. Jacob 1,143
Tomio Moriguchi 602 1,720(2)
Sally G. Narodick 258 1,435(2)
R. Kirk Wilson 16,313
Executive Officers
- ------------------
(*also serve as directors)
Richard R. Sonstelie* 10,430(1)
William S. Weaver* 2,549(1)
Jerry L. Henry 4,699(1)
Gary B. Swofford 5,498(1)
Sheila M. Vortman 2,769(1)
All Directors and
executive officers
as a group (25 persons) 125,166 5,845 49,650(3)
(1) Includes shares credited under the Company's Investment Plan for Employees
through February 28, 1997.
(2) Shares represent grants of stock under the former Washington Energy
Company's Director Stock Bonus Plan. The shares have been converted to
Puget Sound Energy shares at an exchange ratio of .86 to 1.
(3) Unexercised options to acquire shares of common stock which were previously
awarded to former Washington Energy Company executive officers.
6
BOARD OF DIRECTORS
AND COMMITTEE MEETINGS
The BoardPSE board of Directorsdirectors has established threefour standing committees, which meet outsidein
addition to regular board of regular Board of Directors meetings, to assist in the discharge of
the Directors' responsibilities relating to audit, nominating and compensation
and retirement issues.directors meetings. The names of these committees,
their current membershipmemberships and a brief statement of their principal
responsibilities are presented below.
BOARD OF DIRECTORS MEETINGS
Seven BoardThe board of Directors meetings were helddirectors met eight times during 1996.1999. Each Directordirector attended
at least 75%78% of these meetings and the meetings of the Board of Directors and committees of the
Board on which the Directorhe or she
served. Average attendance atDirectors attended, on average, 96% of all Board of
Directors meetingsboard and committee meetings
during 1996 was 94%.1999.
AUDIT COMMITTEE
The Audit Committee currently includes
Douglas P. Beighle (Chairperson), Charles W. Bingham, Donald J. Covey,
John D. Durbin, Daniel J. Evans and Tomio Moriguchi and R. Kirk Wilson.currently serve on the audit committee. The
Audit Committee is responsible for reviewingaudit committee reviews the annual report of the independent auditors, evaluating theevaluates
our external and internal audit functions, and recommendingrecommends to the Boardfull board of
Directorsdirectors the retention of independent auditors and oversees other auditing
matters. Four Audit Committee meetings
were heldThe audit committee met five times during 1996.1999.
DIRECTOR AFFAIRS COMMITTEE
The Director Affairs Committee currently includes Daniel J. Evans (Chairperson)(Chairperson, until the expiration of his term on May 16,
2000), Phyllis J. Campbell and Donald J. Covey.Covey currently serve on the director
affairs committee. The Director Affairs Committeedirector affairs committee makes recommendations to the
Board regarding selection of director candidates, director
4
tenure, committee assignments and director compensation. Shareholders may
nominate candidates for election to the board of directors by notifying the
corporate secretary. The committee seeks director candidates with recognized
achievements, skills and experience that will enhance the board of directors.
The director affairs committee met twice during 1999.
COMPENSATION AND RETIREMENT COMMITTEE
Sally G. Narodick (Chairperson), Douglas P. Beighle, Phyllis J. Campbell,
Robert L. Dryden and John D. Durbin currently serve on the compensation and
retirement committee, which acts and makes recommendations to the board of
directors with respect to identification and selection of
candidates for Directors, Director tenure and committee assignments and Directorexecutive compensation, matters. Shareholders may propose candidates for consideration as
nominees to the Board of Directors; such proposals should be directed in writing
to the Company's Corporate Secretary prior to each annual meeting. Director
candidates are considered on the basis of recognized achievementsretirement plans
and their
ability to bring skillsother benefit plans for employees. The compensation and experience to the deliberations of the Board of
Directors. No Director Affairs Committee meetings were heldretirement committee
met five times during 1996.
COMPENSATION AND RETIREMENT1999.
STRATEGIC OPPORTUNITIES COMMITTEE
The Compensation and Retirement Committee currently includes R. Kirk Wilson
(Chairperson),
Douglas P. Beighle, Phyllis J. Campbell, Robert L. Dryden, John D. Durbin
Nancy L. Jacob and Sally G. Narodick. The Compensation and Retirement
CommitteeNarodick currently serve on the strategic opportunities committee,
which acts and makes recommendations to the Boardboard of Directorsdirectors with respect to
executive compensation, the Retirement Plan for Employees and other similarnew business development matters. Five Compensation and Retirement Committee meetings were heldThe strategic opportunities committee met two
times during 1996.1999.
DIRECTOR COMPENSATION
DirectorsPSE pays directors who are not Company officers are paidPSE employees a quarterly retainer of $3,750$6,250
plus $800 for each Board of Directors meetingboard and committee meeting attended.
The Chairpersonsthe director attends. At least
40% of quarterly retainer payments are made in common stock. Directors can elect
to receive 100% of their retainer payments in common stock, or to defer receipt
of shares under the PSE Directors' Stock Plan. Directors can also elect to defer
cash compensation under the PSE Deferred Compensation Plan for Non-Employee
Directors. We also pay the chairpersons of the Audit, Director Affairs and Compensation and Retirement
Committees receiveboard committees additional
quarterly retainers of $500 each. Directors who
are alsoWe do not pay any compensation to Mr. Weaver
for his services on the Board.
5
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
BENEFICIAL OWNERSHIP TABLE
The following table shows the number of shares of common stock beneficially
owned on March 15, 2000 by each director and nominee, by each executive officer
named in the Summary Compensation Table and by the directors and executive
officers as a group. No director or executive officer owns more than 1% of the
Company dooutstanding shares of common stock. We are not receiveaware of any compensationperson who
beneficially owns 5% or more of the common stock.
NUMBER OF NUMBER OF
BENEFICIALLY SHARE INTERESTS
NAME OWNED SHARES HELD
- ---- ------------ ---------------
Douglas P. Beighle........................................ 4,022 855(1)
Charles W. Bingham........................................ 4,052 411(1)
Phyllis J. Campbell....................................... 1,000 1,106(1)
Craig W. Cole............................................. 200 69(1)
Donald J. Covey........................................... 5,898 3,044(1)
Robert L. Dryden.......................................... 4,440 2,103(1)
John D. Durbin............................................ 2,999 2,680(1)(3)
John W. Ellis............................................. 34,081(2) 885(1)
Daniel J. Evans........................................... 1,000 1,596(1)
Tomio Moriguchi........................................... 775 3,883(1)(3)
Sally G. Narodick......................................... 258 2,709(1)
William S. Weaver......................................... 30,079(2) 13,459(3)
Richard L. Hawley......................................... 11,544(2) 4,146(3)
Timothy J. Hogan.......................................... 7,567(2) 19,553(3)(4)
Stephen A. McKeon......................................... 13,937(2) 4,722(3)
Joseph Quintana........................................... 458 0
Gary B. Swofford.......................................... 9,523(2) 9,030(3)
All Directors and executive officers...................... 152,871 75,296
- ---------
(1) Shares represent stock units under the Puget Sound Energy Directors' Stock
Plan.
(2) Includes shares owned in the Puget Sound Energy Investment Plan for
duties
performed as Directors.
7
The CompanyEmployees through March 15, 2000.
(3) Represents vested and Mr. Ellis entered into a consulting agreement that commenced in
October 1993 and will end September 30, 1998. Underunvested stock units under the terms of this agreement,
Mr. Ellis provides consulting and other servicesPSE Deferred
Compensation Plan.
(4) Includes 15,667 shares subject to unexercised stock options granted by WECo
prior to the Company, including
representingMerger, which were converted into options to purchase common
stock at the Merger exchange ratio of .86 to 1.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and officers and holders of more than 10% of the common stock to
report their stock holdings and transactions to the Securities and Exchange
Commission. Based on a review of Section 16 forms filed by its reporting persons
during 1999, the Company believes that its reporting persons complied with all
applicable Section 16 requirements, except Mr. McKeon. Mr. McKeon did not report
shares purchased in various industry- and community-related committees
and activities. For these services, Mr. Ellis is paid $2,000 per monththe Investment Plan for Employees on a Form 4 for
August 1999; the term ofpurchase was subsequently reported on the agreement. In addition, the Company provides administrative support
for Mr. Ellis's services performed under the consulting agreement.
8Form 4 in
November 1999 which was timely filed.
6
EXECUTIVE COMPENSATION
COMPENSATION AND RETIREMENT COMMITTEE REPORT
The Boardboard of Directorsdirectors delegates responsibility for executive compensation
to the Compensationcompensation and Retirement Committee (the "Committee").retirement committee. The Committee'scommittee's members for 1996 were all nonemployee Directors,are Sally
G. Narodick (Chairperson), Douglas P. Beighle, Phyllis J. Campbell, Robert L.
Dryden and John D. Durbin, none of whom participateis an employee of PSE or participates in
the compensation programs described here for executives. These members were Nancy
L. Jacob, Douglas P. Beighle, Phyllis J. CampbellMr. Dryden has served
as an executive officer of ConneXt, Inc., a wholly owned subsidiary of PSE,
since April 1999, and R. Kirk Wilson.Mr. Durbin has served as an executive officer of a newly
formed non-regulated subsidiary of PSE since February 2000. The Board
of Directors on March 13, 1997 appointed as additional members of the Committee
Robert L. Dryden, John D. Durbin and Sally G. Narodick. The Committeecommittee
establishes compensation for the President and Chief Executive Officer and
reviews and approves the President and Chief Executive Officer's recommendedrecommendations
regarding compensation action forof the other executive officers. The following is the report of the Committee as
constituted prior to March 13, 1997 on executive compensation for 1996.
In determining executive compensation, the Committee is guided by competitivecommittee considers the pay
practices in similar-sizedcomparable companies within bothin the electric and combination gas and
electric and gas utility industry and by its beliefindustries. The committee believes that executive compensation
should:
. Attractpackages should do the following:
- attract and retain outstanding executives by providing compensation
opportunities consistent with those offered by the electric and
combination gas and electric utility industryindustries for similar positions.
. Placepositions;
- place a significant portion of each executive's total pay at risk to
motivate executives to achieve Company and individual performance goals.
. Tiegoals;
and
- tie incentive compensation to Company performance, in the short term to favorable operating results including performance for customers and in
the long term, by aligningalign the
interests of executive officers with the long-term interests of the
Company's shareholders.
Overall, the Committee makesIn making compensation decisions, in the context of the
competitiveness of the entire compensation package as compared tocommittee reviews appropriate market
compensation indices. The Committee's principal source of total compensation marketthis data is a selection of
comparable companies from the Edison Electric Institute's ("EEI") comprehensive,
industry-wide annual survey of management pay. TheMany of these companies included inare part
of the EEI survey are
substantially the same as those included in the EEI 100Edison Electric Institute's ("EEI") Combination Gas & Electric
Investor-Owned Utilities Index of Investor-owned
Electrics, usedpresented in the Stock Price Performance Graph.Graph on
page 10.
The Committee has adopted an executivecommittee's compensation philosophy that encompassespolicies encompass a mix of base salaryBASE SALARY and
annualANNUAL and long-term incentiveLONG-TERM INCENTIVE COMPENSATION programs. The committee designs the
total package is designed to provide participants with appropriate incentives forto achieve
current performance combined with incentives for achievinggoals as well as the Company's long-
term objectiveslong-term objective of enhancing
shareholder value. Long-term incentives are designed to comprise the largest
portion of each executive's incentive pay. Total Cash Compensation is targeted
at the 50(th) percentile of total compensation for the comparator group if
annual performance goals are achieved. If performance goals are achieved at the
highest level, total cash compensation will be leveraged to reach the 60(th)
percentile or higher.
BASE SALARY
Generally, base salaries for Company executives are designed to be belowadministered on a subjective
individual basis by the committee using as a guideline median salary levels for positions of a
select group of electric and combination gas and electric companies that are
most similar responsibility in similar-sizedscope and size to PSE. The select group of comparator companies
within the EEI survey. Lower base salaries are combined with above-median
annual and long-term incentive compensation targets so that total target
compensation opportunities will be competitive with the median total
compensation level for similar positions in similar-sized companies within the
EEI survey.
In making individual base salary decisions, the Committee makes a subjective
evaluation of the individual's contributions and impact on Company performance
as well as achievement of individual goals and the competitiveness of the
individual's base salary. Because of cost restraints, and because the Merger
was pending at the time, the Committee did not adjust salaries for the named
executive officers in 1996. Base salaries for the named executive officers were
last increased in May 1995. Such base salaries generally were below median
salaries for comparable positions within the EEI survey at that time and
continue to be so. Total cash compensation, defined as base salaries plus
annual incentive awards and the expected valueis chosen from the 1996 long-
9
term incentive grants, for the named executive officers in 1996 was
approximately at the median for positions of similar responsibility and job
complexity in similar-sized companies within the EEI survey.
ANNUAL INCENTIVE COMPENSATION
All executive officers participate in the Company's annual Pay at Risk Plan. The intent of this PlanThis plan
is designed to provide financial incentives to executives for achieving desired
annual operating results. For 1996,1999, the targeted
7
opportunity for awards were based on
combined performance in these areas: (1) earnings per share; and (2) successful
completion of the Merger. The weighting of these two performance categoriesfrom this plan varied by executive officer.officer: Mr. Weaver's
target was 45% of base salary; Messrs. Sonstelie, WeaverHawley, McKeon and Swofford were 35% and
Ms.
Vortman's awardsMessrs. Hogan and Quintana were based on 50% weight on earnings per share and 50% weight
on merger results; and Mr. Henry's award was based on 40% weight on earnings per
share and 60% weight on merger results.30%.
The annual incentive awards approved by the Committee for 1996 were based on an
evaluation of the performance areas specified above, together with a subjective
evaluation of individual performance. Individual target awards ranged from 20%
to 35% of salaryprimary measure for the named executive officers and funding could range from
zero to approximately 1.25 times target. The Company'swas earnings per share
performance in 1996share.
For Messrs. Weaver, Hawley and McKeon, 100% of the award was withinbased on EPS
performance. For Messrs. Hogan and Swofford, 50% of the award was based on EPS
and 50% was based on the weather-adjusted earnings contribution of the business
units they each lead. For Mr. Quintana, 50% of the award was based on EPS, with
the remaining 50% divided among five other specific goals. EPS results were
achieved at the outstanding funding range. Althoughlevel. For Messrs. Hogan and Swofford the
Merger process
wasapplicable weather-adjusted business unit earnings contribution did not completed by December 31, 1996, it was successfully completed on
February 7, 1997, before awards were determined, and was included inachieve
minimum funding levels. Two of the calculationfive additional goals that comprise 50% of
individual awards. 1996 awards to the named executive officers
were, on average, 1.2 times target.
LONG TERMMr. Quintana's award did achieve funding status.
LONG-TERM INCENTIVE COMPENSATION
The 1995 Long-Term Incentive Compensation Plan, approved by shareholders in
1995, reflects the Committee's desire to linklinks compensation to the growth ofrelative total shareholder value.return. Under this
plan, awards ofthe committee awarded contingent grants of the
Company's Common Stock were madecommon stock to executives and
key employees. ThesePSE will pay 1999 awards
will be payable in stock at the end of a four-year
period ending December 31, 2002, based on Puget'sPSE's cumulative four-year total
shareholder return relative to the EEI 100 Index of
Investor-owned Electrics used in the Stock Price Performance Graph.Combination Gas & Electric Investor-Owned
Utilities Index. The number of shares delivered at the end of the four-year
cycle will range from zero to 160%175% of the contingent grant. If total shareholder return at the end of the
four-year cycle results in the delivery of Common Stock to the participant, one-
half of the shares will be restricted for a further period of two years. The
purpose of this further restriction is to encourage greater levels of stock
ownership by Company executives and key employees. Dividend equivalents
will beare accrued during the performance period and paid out in cash at the end of the performance period in relationwhen and to the
number
of underlyingextent the related performance shares earned (or atare paid. The Long-Term Incentive Plan
Awards in 1999 table on page 14 shows the end of the restricted period for the
portion of the grant paid in restricted stock). The grantsawards made in 19961999 to the named
executive officers are shownfor the four-year performance cycle ending December 31, 2002.
The Summary Compensation Table on page 11 shows the payout of awards for the
four-year cycle ended December 31, 1999. During their service as executive
officers of subsidiaries of the Company, Mr. Dryden and Mr. Durbin will not
participate in any decisions regarding awards under the 1995 Long-Term Incentive
Plan AwardsCompensation Plan.
As part of its long-term incentive program, the committee has also
established stock ownership guidelines to be achieved over a five-year period
commencing in 1996 table.
No awards have been made under1998 for officers and key managers that range from 50% of base
salary to two times base salary for the Company'snamed executive officers.
Before 1995, participants in PSE's Long Term Incentive PlanProgram for Senior
Employees (the "prior Long Term Incentive Program") since 1994. Awards
previously made are outstanding, however, and will continue under their original
terms. Under that plan, participantsManagement could be allocatedreceive Performance Share Units ("PSUs") and Stock Appreciation Rights, ("SARs")
both of which are payable only in cash. Each PSU grant has aThe Summary Compensation Table shows the
last payout of PSUs for the participating named executives, which was for the
four-year term. The last grant, made in 1994, will matureperformance period ended on December 31, 1997. A PSU's value isThe Year-End Option/SAR
Values table shows the price of the Company's Common Stock
at the end of the PSU's
10
term plus the per share dividend paid during the term. The number of PSUs on
whichyear-end values are paid can range from zero to 160% of those granted. This number
is based on the Company's four year, total shareholder return compared to the
returns reported in the EEI 100 Index of Investor-owned Electrics.
Each SAR grant has a 10-year term and vests 20% per year beginning one year
after the date of grant. A SAR's value is the gain of the price of the Common
Stock over the base price, which is the closing market value of the Common Stock
on the date of grant, plus the incremental value of per share dividend increases
during the holding period. SAR grants were last made in 1994 and are described
on the Summary Compensation Table and its accompanying footnotes. The values of
SARs exercised in 1996, and of all outstanding SARs are shown onheld by the
Aggregated
SAR Exercises in 1996 and Fiscal Year-End SAR Values Table.participating named executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
In February 1999, Mr. Sonstelie has servedWeaver's base salary as Chief Executive Officer since May 1992. His base
pay was
set at $400,000 on May 1, 1995, and has not been increased since that
date. In October 1995 Mr. Sonstelie entered into a four-year employment
agreement providingdetermined to be below median for a minimum annual base salary of $400,000 and certain
severance and other benefits. See "Employment Contracts, Termination of
Employment and Change-in-Control Arrangements". Mr. Sonstelie's base salary
remains below the median of similar-sizedCEOs in comparable companies in the EEI
survey. His
total compensation (salary plussurvey, and was increased from $550,000 per year to the market median salary of
$575,000.
During 1999, Mr. Weaver's leadership and focus on company wide strategic and
operating goals resulted in continued, significant improvement in financial
results with a net increase in EPS of 11% over the prior year. This level of
achievement resulted in Mr. Weaver's 1999 target annual incentive award and expected value frompayment being
paid at twice the 1996 long term incentive grant) in 1996target of 45% of base salary. As a result, Mr. Weaver's total
cash compensation for 1999 was atabove the median50(th) percentile for chief executive
officers of similar-sizedcomparable companies in the EEI survey.
Mr. Sonstelie's 1996 annual incentive award pursuant tosurvey, which is in keeping with the
Pay at Risk Plan was
111% of target. This award was based on an earnings per share result of $1.89
in 1996 and the successful completion of the Merger.
Mr. Sonstelie's individual performance objectives, approved by the Committeecommittee's philosophy for total cash compensation at the beginning of 1996, emphasized the successful completion of the Merger and
the attainment of specified short- and long-term strategic objectives. These
objectives continued to focus on the importance of controlling Company costs
while improving the Company's competitive posture in an increasingly competitive
industry and enhancing long-term shareholder value. Mr. Sonstelie's leadership
and initiative in managing the Company under these challenging circumstances
have improved the Company's ability to effectively compete and grow within a
rapidly changing industry.60(th) percentile or
higher when results are achieved at this outstanding level.
8
ADDITIONAL INFORMATION
Section 162(m) of the Internal Revenue Code of 1986 as amended (the "Code"), generally disallows a
tax deduction to public companies for compensation over $1 million paid to the Company'sa
company's chief executive officer and four other most highly compensated
executive officers, unless that compensation is deferred or is considered
performance based. The compensation disclosed in this Proxy Statement does not
exceed the $1 million limit, and executive compensation for 1997performance-based. Our policy is also
expected to qualify for deductibility. The Company currently intends to structure the performance-based portion of its executive officer compensation to
achieve maximum deductibility under Section 162(m) with minimal sacrifices in
flexibility and corporate objectives.
COMPENSATION AND RETIREMENT COMMITTEE
Nancy L. Jacob,Sally G. Narodick, Chairperson
Douglas P. Beighle
Phyllis J. Campbell
R. Kirk Wilson
11Robert L. Dryden
John D. Durbin
9
STOCK PRICE PERFORMANCE GRAPH
Set forthThe chart below is a comparison ofcompares the five-year cumulative total shareholder return
(share price appreciation plus reinvested dividends) on the Company's
Common Stock againstour common stock to the
cumulative total return of the Standard & Poor's 500 Stock Index and the EEI
100 Index ofCombination Gas & Electric Investor-owned Electrics.
COMPARISON OFUtilities Index.
FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG PUGET POWER, S&P 500 INDEX AND EEI 100 INDEX
[PERFORMANCE GRAPH APPEARS HERE]EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Measurement Period PUGET SOUND ENERGY S&P EEI
(Fiscal Year Covered) POWER 500 INDEX 100EEI GAS & ELECTRIC INDEX
- --------------------- ---------- --------- ----------
Measurement Pt- 1991 $100 $100 $100
FYE 1992 $108.03 $107.62 $107.59
FYE 1993 $106.00 $118.47 $119.59
FYE 1994 $ 93.85 $120.03 $105.75
FYE100.00 100.00 100.00
1995 $117.54 $165.14 $138.55
FYE125.30 137.60 127.40
1996 $130.92 $203.06 $140.22139.50 169.20 126.60
1997 187.70 225.60 163.60
1998 185.20 290.10 190.10
1999 139.80 351.10 154.50
(1)FIVE-YEAR CUMULATIVE TOTAL RETURN
This comparison assumes $100 was invested on December 31, 1991,1994 in (a) the
Company's Common Stock,our
common stock, (b) the S&P 500 Stock Index, and (c) the EEI 100
Index ofCombination Gas &
Electric Investor-owned Electrics.Utilities Index. The graph then observes, in each case,
stock price growth and dividends paid (assuming dividend reinvestment)dividends were reinvested) over
the following
five years.
The Board of Directors and its Compensationcompensation and Retirement Committeeretirement committee
recognize that many factors influence the market price of stock, is influenced by many factors, one of which is
Companycompany performance. The stock price contribution to the total
return performancereturns shown on the graph isdo not necessarily indicative ofpredict
future price performance.
1210
SUMMARY COMPENSATION TABLE
The following information is furnished for the years ended December 31,
1996,
1995,1999, 1998 and 19941997 with respect to the Company's President and Chief Executive
Officer and each of the four otherfive most highly compensated executive officers of the
Company during 19961999, each of whose salary and bonus exceeded $100,000. Annual
compensation includes amounts deferred at the officer's election.
Long-Term Compensation
Awards
---------------------------
Restricted Shares
Name and Stock Underlying All Other
Principal Position Year SalaryANNUAL COMPENSATION LONG-TERM
------------------------------------- COMPENSATION
OTHER ANNUAL ------------ ALL OTHER
NAME AND PRINCIPAL COMPENSATION LTIP PAYOUTS COMPENSATION
POSITION IN 1999(1) YEAR SALARY ($) Bonus($) AwardBONUS ($) SARs (#) Compensation($)(2) ($)(6) ($)
- ------------------------------------------------------------------------------------------------------------------------------------ -------- ---------- --------- ------------ ------------ ------------
R. Sonstelie 1996 400,008 155,000 -- 17,604/(1)/W. Weaver........................... 1999 $570,208 $517,500 $ 38,933(3) $ 44,198(8)
President and 1995 388,817 140,000 -- 15,7361998 532,971 0 109,933(4) 35,456
Chief Executive Officer 1994 370,0081997 299,598 0 36,000 13,731
W. Weaver 1996 260,004 100,000 -- 13,608/(3)/
Executive208,046(5) 128,549
R. Hawley........................... 1999 316,167 224,000 20,964(3) 53,462(9)
Vice President 1995 256,275 80,000 199,996/(2)/ -- 12,309
and 1998 225,000 0 21,987(4) 81,985
Chief Financial Officer
1994 230,006 0 9,000 10,535
G. Swofford 1996 165,000 45,000 -- 6,593/(4)/
SeniorT. Hogan............................ 1999 191,888 57,900 14,488(3) 14,546(10)
Vice President 1995 163,138 40,000 -- 44,812
Customer1998 184,309 0 26,384(4) 13,458
System Operations 1994 144,005 0 6,000 4,7701997 161,144 27,100 $31,360 84,329(7) 24,249
S. Vortman 1996 135,000 53,500 -- 7,299/(5)/
SeniorMcKeon........................... 1999 316,167 224,000 25,142(3) 22,588(11)
Vice President 1995 133,138 35,000 -- 6,535
Corporate and Regulatory 1994 120,537 0 3,500 5,021
Relations
J. Henry 1996 111,000 25,000 -- 4,060/(6)/1998 283,941 25,800 43,516(4) 21,038
General Counsel 1997 140,320 22,750 29,154
G. Swofford......................... 1999 238,960 87,500 19,841(3) 17,300(12)
Vice President 1995 109,697 19,425 -- 41,251
Engineering and 1994 106,303Chief 1998 189,429 0 -- --
Operation Services54,967(4) 13,337
Operating Officer--Delivery 1997 181,333 13,875 132,719(5) 130,851
J. Quintana......................... 1999 192,125 70,200 45,432(3) 16,812(13)
Vice President 1998 121,957 27,000 9,894(4) 9,415
External Relations
13- ---------
(1) Mr. Weaver became President and Chief Executive Officer of PSE in
January 1998. Mr. McKeon became an executive officer of the Company in
June 1997. Mr. Hawley became an executive officer of PSE in March 1998.
Mr. Hogan became an executive officer of PSE in February 1997. The table
includes the following amounts paid to Mr. Hogan in 1997 by the Washington
Energy Company prior to its merger with PSE: Salary $11,334; Bonus,
$13,600, and LTIP payouts, $84,329. Mr. Quintana was an executive officer
of the Company from March 1998 until December 1999.
(2) Except as noted in the table, the aggregate amount of perquisites or
personal benefits was less than the required reporting threshold (the
lesser of $50,000 and 10% of annual salary and bonus for the named
executive officer). The amount shown for Mr. Hogan includes $27,200 for a
one-time-only vehicle allowance associated with the Company's policy of not
providing executives with Company-purchased automobiles.
(3) The amounts for 1999 represent payment of LTIP awards for the four-year
performance cycle ended on December 31, 1999, which consist of
(a) unrestricted shares and restricted shares, valued as of the
December 31, 1999 closing price of $19.38, plus (b) a total dividend amount
of $7.36 per share during the four-year performance period multiplied by
the total number of restricted and unrestricted shares, except that the
amount for Mr. Quintana represents a cash payment for the pro-rata portion
of Mr. Quintana's four outstanding target LTIP awards (based on the portion
of each award cycle elapsed as of December 31, 1999) in connection with the
11
SUMMARY COMPENSATION TABLE FOOTNOTES
(1)termination of his employment. The number and value of restricted and
unrestricted shares for each of the named executive officers, other than
Mr. Quintana, are as follows:
UNRESTRICTED SHARES RESTRICTED SHARES
------------------- -------------------
NAME NUMBER VALUE NUMBER VALUE
---- -------- -------- -------- --------
W. Weaver............................................ 728 $14,109 728 $14,109
R. Hawley............................................ 392 7,597 392 7,597
T. Hogan............................................. 271 5,250 271 5,250
S. McKeon............................................ 470 9,111 470 9,111
G. Swofford.......................................... 371 7,190 371 7,190
(4) The amounts for 1998 represent payment of LTIP awards for the four-year
performance cycle ended on December 31, 1998, which consist of
(a) unrestricted shares and restricted shares, valued as of the
December 31, 1998 closing price of $27.875, plus (b) a total dividend
amount of $7.36 per share during the four-year performance period
multiplied by the total number of restricted and unrestricted shares. The
number and value of restricted and unrestricted shares for each of the
named executive officers are as follows:
UNRESTRICTED SHARES RESTRICTED SHARES
------------------- -------------------
NAME NUMBER VALUE NUMBER VALUE
---- -------- -------- -------- --------
W. Weaver............................................ 1,560 $43,485 1,560 $43,485
R. Hawley............................................ 312 8,697 312 8,697
T. Hogan............................................. 374 10,425 374 10,425
S. McKeon............................................ 617 17,199 617 17,199
J. Quintana.......................................... 140 3,914 140 3,914
G. Swofford.......................................... 780 21,743 780 21,743
(5) The amounts for 1997 represent payment of a performance share unit award
for the four-year cycle ended on December 31, 1997. The PSU award entitled
the holder to receive a cash payment equal to (a) the average market price
of one share of common stock during the month of December of the last year
of the four-year cycle, plus (b) the aggregate dividends with respect to
one share of common stock from January 1 of the year in which the PSU award
is made until the last day of the last month of the four-year cycle. The
number of PSUs on which values were paid was based on PSE's four-year
average total shareholder return relative to the companies in the EEI 100
Index of Investor-Owned Electrics.
(6) The aggregate number and value of all outstanding restricted stock held by
each of the named executive officers as of December 31, 1999, based on the
closing price of the PSE stock on that date of $19.38, are as follows: W.
Weaver, 2,288 shares, $44,341; R. Hawley, 704 shares, $13,644; T. Hogan,
644.9 shares, $12,498; S. McKeon, 1,087.12 shares, $21,068; G. Swofford,
1,151 shares, $22,306; and J. Quintana, 0.
(7) The amount for 1997 represents payment of performance shares granted by the
Washington Energy Company prior to its merger with PSE, whose vesting was
accelerated upon consummation of the merger.
(8) Represents $3,135$9,600 match under Investment Plan for Employees; $20,510 match
under the Investment Plan make-up; and $14,088 imputed income on life
insurance.
(9) Represents $9,208 match under Investment Plan for Employees, $10,065Employees; $11,443 match
under the Investment Plan makeup;make-up; $3,775 imputed income on life insurance;
and $4,404 of$29,036 pursuant to Mr. Hawley's employment agreement to compensate for
LTIP payouts below $50,000.
12
(10) Represents $5,699 match under Investment Plan for Employees; $7,423 match
under the Investment Plan make-up; and $1,424 imputed income on life
insurance.
(2) On June 30, 1995, Mr. Weaver was granted 8,743 phantom shares. The
aggregate value of the phantom shares was $199,996, based on a stock price
at June 30, 1995 of $22.875. The phantom shares vest, subject to continued
employment, equally over four years beginning on July 1, 1996, and are
valued and paid out in cash as to the vested portion on each such date. The
value of each phantom share is the market price on the vesting date, plus
the aggregate dividends paid on each such share during the period the
phantom share is held. At December 31, 1996, 6,558 phantom shares were
outstanding with an aggregate value of $157,392 (based on a stock price of
$24.00 per share at December 31, 1996).
(3)(11) Represents $4,950$9,167 match under Investment Plan for Employees; $11,351 match
under the Investment Plan make-up; and $2,070 imputed income on life
insurance.
(12) Represents $5,930 match under Investment Plan for Employees; $2,915$10,007 match
under the Investment Plan makeup;make-up; and $5,743 of$1,363 imputed income on life
insurance.
(4)(13) Represents $2,613$5,367 match under Investment Plan for Employees; $8,048 match
under the Investment Plan for Employees; $2,833
match under the Investment Plan makeup;make-up; and $1,147 of$3,397 imputed income on life
insurance.
(5) Represents $2,613 match under the Investment Plan for Employees; $1,842
match under the Investment Plan makeup; and $2,844 of imputed income on
life insurance.
(6) Represents $2,475 match under the Investment Plan for Employees; $1,188
match under the Investment Plan makeup; and $397 of imputed income on life
insurance.
1413
AGGREGATED SAR EXERCISES IN 1996 AND FISCAL YEAR-END SAROPTION/STOCK APPRECIATION RIGHTS VALUES
The following information is furnished fortable shows the year ended December 31, 1996 with
respect tonumber of outstanding unexercised options and
SARs held by the Company's Chief Executive Officer and each of the four other most
highly compensatedparticipating named executive officers at the end of the Company for SAR exercises which
occurred during 1996 and for unexercised SARs outstanding at fiscal year end.1999. No
options or SARs were granted or exercised in 1996.1999.
Number of Number of Shares Value of Unexercised
Shares Underlying Unexercised In-The-Money SARs
Underlying Value SARs at Fiscal Year-EndNUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS/SARS AT FISCAL OPTIONS/SARS AT
NAME YEAR-END (#) at Fiscal Year-EndEXERCISABLE FISCAL YEAR-END ($) Exercised Realized ----------------------------------------------------------
Name SARs (#) ($)EXERCISABLE (1)
Exercisable/Unexercisable Exercisable/Unexercisable(2)
- ------------------------------------------------------------------------------------------------------------------ ---------------------------------- -----------------------------------
W. Weaver............................ 18,700 $ 0
R. SonstelieHawley............................ -- --
49,840 / 27,560 94,782 / 54,600
W. Weaver 3,600 13,050 8,880 / 9,820 0 / 17,550
G. SwoffordT. Hogan............................. 15,667 $25,807
S. McKeon............................ -- --
4,960 / 4,240 7,800 / 11,700
S. Vortman -- -- 1,400 / 2,100 4,550 / 6,825G. Swofford.......................... 5,600 $ 0
J. Henry -- --Quintana.......................... -- --
- ---------
(1) This amount is the aggregate of the market value of the Common Stock at
the time the SAR was exercised minus the base price for the SAR.
(2) Amounts are the aggregate of the number of options/SARs multiplied by the difference between
the closing price of the Common Stock on the New York Stock Exchangecommon stock on December 31, 19961999 of $24.00$19.38 per
share, minus the exercise or base price for that option/SAR. There is no
guarantee that if and when these options/SARs are exercised they will have this value.
15
value when and if they are
exercised.
LONG-TERM INCENTIVE PLAN AWARDS IN 19961999
The following information is furnished for the year ended December 31, 1996 with
respecttable presents grants we made to the Company's Chief Executive Officer and each of the four other most
highly compensatednamed executive officers
of the Company with respect to grants
under the Company'sour 1995 Long-Term Incentive Compensation Plan during 1996.1999.
Estimated Future Share Payouts
Number of Period UntilESTIMATED FUTURE SHARE PAYOUTS
NUMBER OF PERIOD UNTIL -------------------------------
Shares Maturation or Threshold Target Maximum
NameSHARES MATURATION OR THRESHOLD TARGET MAXIMUM
NAME (#)(1) PayoutPAYOUT (#) (#) (#)
- -------------------------------------------------------------------------------------- --------- ------------- --------- -------- --------
R. Sonstelie 12,000W. Weaver................................. 35,080 4 years 0 12,000 19,200
W. Weaver 5,20035,080 61,390
R. Hawley................................. 14,190 4 years 0 5,200 8,320
G. Swofford 2,65014,190 24,833
T. Hogan.................................. 4,820 4 years 0 2,650 4,2404,820 8,435
S. Vortman 2,150McKeon................................. 14,190 4 years 0 2,150 3,440
J. Henry 1,05014,190 24,833
G. Swofford............................... 8,680 4 years 0 1,050 1,6808,680 15,190
J. Quintana(2)............................ 4,880 4 years 0 4,880 8,540
- ---------
(1) Awards are contingent grants of the Company's Common Stock.common stock. The number of shares delivered
at the end of the four-year cycle will range from zero to 160%175% of the
contingent grant. This numberThe actual payout depends on the Company's four-
yearour four-year total
shareholder return compared to the returns reported in the EEI 100 IndexCombination
Gas & Electric Investor-owned Utilities Index. To receive 100% of Investor-owned Electrics. If total shareholder returnthe grant,
we must perform at the end55(th) percentile among EEI's Gas & Electric
companies. To receive 175% of the four-year cycle results ingrant, we must perform at or above the
delivery of Common Stock to the
participant, one-half of the shares will be restricted for an additional
two-year period.85(th) percentile ranking. Dividend equivalents will be paid in cash at the end ofare accrued during the
performance period and paid out in relationcash when and to the numberextent the
performance shares are paid.
(2) Mr. Quintana's 1999 LTIP award was cancelled in exchange for the payment of
underlying shares
earned (or at the end of the restricted period for thea prorata portion of the grant
paidaward in restricted stock).
16connection with the termination of his
employment. See footnote (3) to the Summary Compensation Table.
14
RETIREMENT BENEFITS STATEMENT
EstimatedThe table below presents estimated retirement benefits for the named
executive officers, are shown in the
table below, assuming retirement on January 1, 19972000 at age 6562 after
selected periods of service. The benefit levels shown aretable lists the estimated aggregate values
resulting from the Company'sunder our funded pension plan, its Supplemental Executive Retirement Plan,
for Officers (the "SERP"),Washington Natural Gas Nonqualified Retirement Plan benefits, the SERP
pension-type rollover accounts in the Deferred Compensation Plan make-
up and the Cash
Balance Restoration Matching Account within the Deferred Compensation Plan.
Social Security benefits.
Estimated Annual Benefit Upon Retirement at Age 65benefits will not be deducted from the amounts shown in the
table.
ESTIMATED ANNUAL BENEFIT UPON RETIREMENT AT AGE 62
YEARS OF CREDITED SERVICE
FINAL AVERAGE -------------------------------------------------------------------
COMPENSATION 5 10 15+
-------------- ------------ -------- -------- --------
$100,000 $ 20,000 $ 40,000 $ 60,000$100,000....................................... $16,667 $33,333 $50,000
200,000....................................... 33,333 66,667 100,000
300,000....................................... 50,000 100,000 150,000
400,000....................................... 66,667 133,333 200,000
40,000 80,000 120,000
300,000 60,000 120,000 180,000
400,000 80,000 160,000 240,000
500,000500,000....................................... 83,333 166,667 250,000
600,000....................................... 100,000 200,000 300,000
The named executive officers have the following years of credited service as
of December 31, 1996: R. Sonstelie, 22.5;1999: W. Weaver, 28.5;31.5; R. Hawley, 1.75; T. Hogan, 23.33; S.
McKeon, 2.58; G. Swofford, 29.42; S.
Vortman, 15.67;32.42; and J. Henry, 28.25.Quintana, 1.7. Under their employment
agreements, if Mr. Hawley and Mr. McKeon complete five years of service they
will be treated as if they have completed 15 years of credited service. Under
Mr. Quintana's termination agreement, he will be treated as if he has
5.25 years of credited service.
Estimated aggregate benefits are based on 60%the following formula: 3 1/3%
times years of credited service times average annual compensation (salary plus
bonus) for the highest three calendar years in the last five complete calendar
years prior to retirement, except that Mr. Weaver's benefits are based on the
average of his highest 24 consecutive five years precedingmonths of compensation and Mr. Hawley's
and Mr. McKeon's benefits are based on the retirement date.annual average of their highest 36
consecutive months of salary paid or payable plus the average of their highest
three annual bonuses paid or payable. Also, $50,000 of Mr. Hawley's LTIP-related
payouts are treated as salary. See the section called "Employment Contracts,
Termination of Employment and Change-in-Control Arrangements" below.
The five-yearthree-year averages (24-consecutive-month average for Mr. Weaver;
21-consecutive-month average for Mr. Hawley; 31-consecutive-month average for
Mr. McKeon; and 20.8-month average for Mr. Quintana as of December 31, 1996 are as follows1999) for
the named executive officers: R.
Sonstelie, $440,746; W. Weaver, $322,519; G. Swofford, $159,495; S. Vortman,
$126,623;officers were: $551,589 for Mr. Weaver; $333,238 for
Mr. Hawley; $190,487 for Mr. Hogan; $305,410 for Mr. McKeon; $222,865 for
Mr. Swofford; and J. Henry, $114,907.
17
$199,657 for Mr. Quintana.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
EMPLOYMENT AGREEMENTS
Mr. SonstelieIn October 1996 PSE entered into an employment agreement with the Company effective as
of October 18, 1995. The agreement provides that Mr. Sonstelie will serve as
Chairman of the Company's Board of Directors (assuming his election to the Board
by the Company's shareholders) and Chief Executive Officer of the Company. The
agreement terminates on the fourth anniversary of the consummation of the Merger
(subject to earlier termination in certain circumstances).
During his term of employment, Mr. SonstelieWeaver under which he
will receive a minimumthe following payments and benefits if his employment terminates
for any reason sooner than his normal retirement date, which, in accordance with
PSE's policy, is when Mr. Weaver reaches the age of 62.
a. annual base salary of $400,000. If the Company terminates Mr. Sonstelie's employment
(except termination "for cause" as defined in the agreement or termination upon
death or disability) prior to the end of the four-year term, Mr. Sonstelie will
be entitled to receive (a) all compensation and accrued benefits earned through termination,
plus a pro rata share of any incentive compensation accrued through the date
of termination, and (b) a continuationregardless of his salary for the balance ofwhether such four-year term.
In addition, if Mr. Sonstelie's employment terminates due to a material adverse
change in the terms of his employment following a "change in control" (as
defined in the agreement), except termination for causeamounts are vested or termination due to
death or incapacity, Mr. Sonstelie will be entitled to receive (a) his annual
base salary earned through termination and accrued benefits; (b)payable on
that date;
15
b. an amount equal to three times his annual base salary at the rate applicable on the date of
termination plus any additional compensation awarded for the year most recently
ended; (c)and bonus;
c. continued participation for three years in the Company's employee benefit plans or
provision for substantially similar benefits;
(d)d. a cash payment at age 65 equal tonormal retirement date of the actuarial equivalent
of the additional retirement compensation he would have earned had
employment continued for three more years;
(e)e. a payment equal to the difference between the exercise prices of allany
outstanding options if any, held by Mr. Sonstelieor similar rights (whether or not then fully
exercisable) and the higher of (i)(a) the market price of the Common Stockcommon stock on
the date of termination and (ii)(b) the highest price per share actually paid in
connection with any change of controlin control;
f. a payment equal to the value of the Company;target number of shares payable
upon full vesting of all outstanding performance awards, whether or not such
awards were then fully vested or payable; and
(f)g. a cash payment equal to any excise taxes payable by Mr. Sonstelie in connection withhim due to
excess parachute payments, plus the tax expense to him resulting from this
payment.
Messrs. Weaver and Swofford and Ms. VortmanIn addition, Mr. Weaver's agreement provides that his benefits under the
SERP will be based on his average compensation for his highest consecutive
24 months of service.
Effective March 16, 1998, PSE entered into agreementsan employment agreement with
Mr. Hawley to secure his services as Vice President and Chief Financial Officer.
The agreement has a term of five years. Mr. Hawley will receive a minimum annual
base salary of $300,000. He also will participate in PSE's Pay at Risk Plan,
with a target award of at least 35% of base salary, and in PSE's 1995 Long-Term
Incentive Compensation Plan, with a target of at least 40% of base salary and
grants of 1,200 performance units for the 1995-1998 cycle, 2,800 performance
units for the 1996-1999 cycle, 4,400 performance units for the 1997-2000 cycle
and 6,400 performance units for the 1998-2001 cycle, and a cash payment equal to
the difference between $50,000 and any lesser settlement value for such awards.
In addition, Mr. Hawley's agreement provides that if he completes five years
of service to the Company, then his benefits under the SERP will be calculated
as if he had completed 15 years of service to the Company. His agreement also
provides that his benefits under the SERP will be based on the sum of (a) the
annual average of his highest 36 consecutive months of salary paid or payable
and (b) the average of his highest three annual bonuses paid or payable. Under
his agreement, the $50,000 minimum annual award to which Mr. Hawley is entitled
with respect to the 1995 Long-Term Incentive Compensation Plan will be treated
as salary for purposes of calculating his SERP benefits.
If PSE terminates Mr. Hawley's employment without cause prior to the end of
the term of the agreement, Mr. Hawley will receive:
a. annual base salary and accrued benefits earned through termination,
plus a pro rata share of any incentive compensation accrued through the date
of termination, regardless of whether such amounts are vested or payable on
that date, and
b. continuation of his base salary for two years, plus $50,000 per
year.
If Mr. Hawley's employment terminates for any reason within three years
after a change in control, Mr. Hawley will receive, in lieu of the benefits
described above, substantially the same type of payments and benefits as
described above for Mr. Weaver.
Mr. Hogan entered into an agreement effective as of October 18, 1996 under which they generally will be
entitledAugust 17, 1995 with the
Washington Energy Company that PSE has assumed. Under that agreement, as amended
on June 30, 1999, if prior to the
16
earlier of June 30, 2002 or a change of control of PSE Mr. Hogan terminates his
employment for good reason or PSE terminates his employment without cause, he
would receive the same type of payments and benefits as described in
sections (a) through (f) of the immediately preceding paragraph if (1) they did
not terminate their employment prior to consummation of the Merger and (2)above for
Mr. Weaver's employment thereafter terminates for any reason other than at the
normal retirement date as defined in the SERP or (3)Weaver.
In October 1996 PSE entered into an agreement with Mr. Swofford or Ms. Vortman
thereafter terminate their employment for "good reason" or the Company
terminates their employment "without cause" (as those terms are defined in the
agreements) within three years following the Merger or their employment is
terminated upon death or disability.
In addition, Mr. Weaver's agreement provides that the benefits payable to him
under the SERP will be based upon his average compensation for his highest
consecutive 24 months of service rather than 60 months as provided in the SERP,
providedwhich
he does not voluntarily terminate his employment within six months
after the Merger. The agreements for Mr.
18
Swofford and Ms. Vortman provide that they will be paid a retention incentive benefit based on continued employment for
an extended period following the Mergermerger of PSE and the Washington Energy Company
in February 1997, equal to three times theirhis annual base salary in 1996, plus the
bonus paid in 1996. The incentive benefit will vestvests in three equal installments
after one year, three years and five years of continued employment after the
Merger.merger. The vested portion of the incentive benefit will be paid in equal
monthly installments over a three-year period beginning on the date theirhis
employment terminates.
IfIn 1999 PSE entered into-change of control agreements with Mr. Swofford and
Mr. Hogan that provided for the same type of payments and benefits described
above for Mr. Weaver in the event that their employment is terminated by the
Company without cause or by the employee for cause, only currentgood reason within two years
following a change of control of PSE, except that the payments in sections
(c) and (d) are based on two rather than three years.
Effective June 2, 1997, PSE entered into an employment agreement with
Mr. McKeon to secure his services as Vice President and General Counsel. The
agreement has an initial term of three years and will be extended for two more
one-year periods unless Mr. McKeon or we give written notice of termination not
less than six months before the applicable anniversary date. Mr. McKeon will
receive a minimum annual base salary of $260,000. He also will participate in
PSE's Pay at Risk Plan, with a target award of at least 35% of base salary, and
in PSE's 1995 Long-Term Incentive Compensation Plan, with a target of at least
35% of base salary and grants of 2,375 performance units for the 1995-1998
cycle, 3,358 performance units for the 1996-1999 cycle and 5,240 performance
units for the 1997-2000 cycle.
Mr. McKeon's agreement provides that if he completes five years of service
to the Company, then his benefits under the SERP will be calculated as if he had
completed 15 years of service to the Company. His agreement also provides that
his benefits under the SERP will be based on the sum of (a) the annual average
of his highest 36 consecutive months of salary paid or payable and (b) the
average of his highest three annual bonuses paid or payable. If PSE terminates
his employment without cause prior to the end of the term of the agreement,
Mr. McKeon would receive his annual base salary and accrued benefits earned
through termination, plus accrued vacation anda pro rata share of any otherincentive compensation actually accrued
through the date of termination, regardless of whether such amounts are vested
or payable on that date, and continuation of his base salary for two years. If
Mr. McKeon's employment terminates for any reason within three years after a
change in control, he would receive substantially the vestedsame type of payments and
benefits as described above for Mr. Weaver.
PSE entered into a severance agreement with Mr. Quintana as of December 31,
1999. The agreement supersedes an employment agreement between Mr. Quintana and
PSE dated as of March 20, 1998. The severance agreement provides that
Mr. Quintana will receive a lump-sum severance payment of $151,685 and a payment
of $45,432 in settlement of the pro rata portion of his four outstanding LTIP
awards. The agreement also provides that Mr. Quintana's benefits under the incentive benefit,SERP
will be payable.calculated as if he had completed 5.25 years of service to the Company.
1995 LONG-TERM INCENTIVE COMPENSATION PLAN
Under the Company'sPSE 1995 Long-Term Incentive Compensation Plan, in the event of a
salechange of substantially all the assets or a liquidationcontrol of the Company or a
merger or consolidation of the Company as a result of which shareholders of the
Company receive cash, securities or other property in exchange for their shares
of Common Stock,PSE, each stock award that is at the time outstanding will
automatically accelerate so that each such award shall, immediately prior to
such corporate transaction,and become
17
100% vested, except that such award will not
so accelerate except under certain circumstances where such award is assumed or
replaced in connection with the corporate transaction.vested. The plan administrator has the discretion, exercisablemay, at any time before a sale, merger,
consolidation, reorganization, liquidation or change in control of the Company,
as defined by the plan administrator, tocorporate
transaction, take such further action as it
determines to be necessary or advisable, andensure fair and equitable to holders, with
respect to awards under the Plan.
LONG TERM INCENTIVE PROGRAM FOR SENIOR MANAGEMENT
Under the Company's Long-Term Incentive Program for Senior Management, upon
dissolution or liquidationtreatment of
the Company, or merger or consolidationawards.
STOCK APPRECIATION RIGHTS
Upon a change of the
Company as a resultcontrol of which shareholders of the Company receive cash,
securities or other property in exchange for their shares of Common Stock,PSE, all SARs will terminate, but eachterminate. Each holder will have the right immediately prior to
such transaction tomay
exercise his or her SARs immediately prior to the transaction, whether or not
the SARs have vested.
All performance share units will be deemed to have matured on the
preceding December 31. The number of performance share units will be
proportionately reduced to reflect the reduction in the period from the grant of
performance share units until their maturity.
19
PROPOSAL NO. 2 - APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN
On March 13, 1997, the Company's Board of Directors unanimously adopted, subject
to shareholder approval, the Puget Sound Energy, Inc. Employee Stock Purchase
Plan (the "Plan"). The Plan will provideCERTAIN TRANSACTIONS
Mr. Dryden, a means for eligible employeesdirector of the Company, and designated subsidiaries to purchase shareshas served as Chief Executive Officer
of the Company's Common
Stock under favorable terms through payroll deductions or cash payments. The
Board believes that adoptionConneXt, Inc., a wholly owned subsidiary of the Plan will promote the interests of the
Company and its shareholders by assisting the CompanyPSE, since April 1999. His
aggregate compensation for such service in attracting, retaining
and stimulating the performance of employees and by aligning employees'
interests through their purchases of Common Stock with the interests of
shareholders.
A copy of the Plan is attached to this Proxy Statement as Appendix A and is
incorporated herein by reference. The following description of the Plan is a
summary and does not purport to be a complete description. See Appendix A for
more detailed information.
DESCRIPTION OF1999 was $294,776.
ADDITIONAL INFORMATION ABOUT THE PLAN
SHARES SUBJECT TO THE PLAN. An aggregate of up to 500,000 shares of Common
Stock is authorized for issuance under the Plan, subject to adjustment from time
to time for stock dividends and certain other changes in capitalization as
provided in the Plan.
ELIGIBILITY. The Plan is an employee benefit program that enables qualified
employees to purchase shares of Common Stock at a discount through payroll
deductions or cash payments without incurring broker commissions. To
participate, an employee's customary employment must be for more than 20 hours
each week and five months in any calendar year. An employee is not eligible to
continue participation in the Plan in the event his or her employment is
voluntarily or involuntarily terminated, or if such employee owns or will own,
as a result of such participation, shares possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or any
related corporation. As of March 13, 1997, approximately 2,850 of the Company's
employees would be eligible to participate in the Plan, including each of the
named executive officers. Non-employee directors of the Company are not
eligible to participate in the Plan.
STOCK PURCHASES. The Plan is divided into offering periods, which initially
will be consecutive six-month periods beginning on July 1 and January 1 of each
year. The Board of Directors or the Compensation and Retirement Committee can
establish different offering periods, subject to the limitations set forth in
the Plan. During these offering periods, participating employees accumulate
funds in an account used to buy Common Stock through payroll deductions or cash
payments at a rate of not less than $10 or more than 10% of such participant's
regular cash compensation during each payroll period in each purchase period
within an offering period. The length of each purchase period will be as
established by the Board of Directors or the Committee and may be the same as
the offering period, or may be shorter consecutive periods within the offering
period. The Plan will initially be implemented with purchase periods of six
months that will be coextensive with the offering periods.
At the end of each purchase period, the market price is determined and the
participating employees' accumulated funds are used to purchase the appropriate
number of shares of Common Stock. No participant may purchase more than $25,000
fair market value of Common Stock for any calendar year under the Plan. The
purchase price per share of Common Stock under the Plan will be as established
by the Board of Directors or the
20
Committee, but may not be less than the lower of 85% of the per share fair
market value of the Common Stock on either the first day of the offering period
or the last day of the purchase period. The Plan will initially be implemented
with a purchase price equal to 90% of the lesser of the fair market value of the
Common Stock on the first day of the offering period and the last day of the
purchase period. The closing price of a share of Common Stock on March 13, 1997
was $25-3/4 as reported on the New York Stock Exchange.
Shares purchased under the Plan may not be transferred or otherwise disposed of
for a period of three months after the purchase date, except upon termination of
employment because of retirement, disability or death.
ADMINISTRATION. The Plan will be administered by the Committee except to the
extent administration is delegated to an executive officer of the Company (the
"Plan Administrator"). The Plan Administrator is authorized to administer and
interpret the Plan and to make such rules and regulations as it deems necessary
to administer the Plan, so long as such interpretation, administration or
application with respect to purchases under the Plan corresponds to the
requirements of Section 423 of the Code.
AMENDMENTMEETING AND TERMINATION. The Board of Directors has the power to amend,
suspend or terminate the Plan, provided that the Board may not amend the Plan
without shareholder approval if such approval is required by Section 423 of the
Code. The Committee may also amend the Plan so long as such amendment does not
require shareholder approval.
TERM OF THE PLAN. The Plan will continue in effect until May 19, 2007.
FEDERAL INCOME TAX CONSEQUENCES
The Company intends that the Plan qualify as an "employee stock purchase plan"
under Section 423 of the Code. Section 423 allows an employer to grant options
to its employees to purchase company stock at a stipulated price without having
the employees realize taxable income at the time the option is granted or when
exercised. The basis of the stock received on exercise of an option under the
Plan is the exercise price paid for the stock. The Code imposes a holding
period for favorable tax treatment upon disposition of Common Stock acquired
under the Plan equal to the later of two years after the grant date or one year
after the purchase date. When the Common Stock is sold after this holding
period, the employee will realize ordinary income up to the amount of any
discount (up to a maximum of 15%) from the fair market value of Common Stock as
of the grant date. Any further gain is taxed at capital gain rates. If the
stock is sold before the holding period expires, the employee will realize
ordinary income to the extent of the difference between the price actually paid
for the stock and the fair market value of the stock at the purchase date,
regardless of the price at which the stock is sold. If the sale price is less
than the fair market value of the stock on the purchase date, the employee will
realize a capital loss equal to such difference. The Company may not take a
deduction for the difference between the fair market value of the Common Stock
and the purchase price paid for the Common Stock by the employee unless the
employee disposes of the stock before the statutory holding periods expire.
The Board of Directors recommends that shareholders vote FOR approval of the
adoption of the Puget Sound Energy, Inc. Employee Stock Purchase Plan.
21
SHAREHOLDER PROPOSALS
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P.PricewaterhouseCoopers LLP has examinedaudited the financial statements
of the Company since 1933. Representatives of the firm will be present atattend the Annual
Meeting, with the opportunity to make a statement and to answer appropriate
shareholder questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16 of the Securities Exchange Act of 1934, as amended, directors
and officers of the Company are required to report their holdings of and
transactions in the Company's Common Stock to the Securities and Exchange
Commission. To the Company's knowledge, based solely on a review of the copies
of such reports furnished to the Company and written representations that no
other reports were required, during 1996 all persons subject to the Section 16
reporting requirements with regard to the Company filed the required reports on
a timely basis.
SHAREHOLDER PROPOSALS
Any shareholderShareholders who intend to have a proposal intendedconsidered for inclusion in the Companyour
proxy materialmaterials for the 19982001 Annual Meeting of Shareholders must be receivedsubmit the
proposal at theour principal executive office of the Company notno later than November 28, 1997.30, 2000. In
accordance with the Company's Bylaws, shareholders who intend to present a
proposal at the 2001 Annual Meeting without inclusion of the proposal in our
proxy materials must provide written notice of such proposal, in the manner
required by the Company's Bylaws, no later than January 8, 2001.
SOLICITATION OF PROXIES
ProxiesThe Board of Directors is soliciting the proxies in the form enclosed are solicited by and on behalf of the Company.
Richard R. Sonstelie, Chairman and Chief Executive Officer,enclosed.
William S. Weaver and James W. Eldredge, Corporate Secretary, and each or either of them, are named
as proxies. ProxiesWe may be solicitedsolicit your proxy by mail, personal interview, telephone and
fax. It is
anticipatedWe will request that banks, brokerage houses and other custodians, nominees
or fiduciaries will be requested to forward soliciting materials to their principals and to obtain
authorization for the execution of proxies andproxies. We will be
reimbursedreimburse them for their
expenses incurred in connection therewith. Proxies may also
be solicited byforwarding and collecting proxies. Our officers, Directors,directors,
employees and other agents of the Companymay solicit proxies without compensation, therefor, except for
reimbursement of expenses. AllPuget Sound Energy will pay all costs of solicitation
of proxies will be borne by the Company.proxies.
March 28, 199730, 2000
Bellevue, Washington
By Order of the Board of Directors
/s/ Richard R. Sonstelie
Richard R. Sonstelie
Chairman and Chief Executive Officer
22William S. Weaver
PRESIDENT AND CHIEF EXECUTIVE OFFICER
18
APPENDIX A
EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE
The purposes of the Puget Sound Energy, Inc. Employee Stock Purchase Plan (the
"Plan") are to (a) assist employees of Puget Sound Energy, Inc., a Washington
corporation (the "Company"), and its subsidiary corporations in acquiring a
stock ownership interest in the Company pursuant to a plan that is intended to
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"), and (b) help employees provide
for their future security and encourage them to remain in the employ of the
Company and its subsidiary corporations. Stock purchased under the Plan may be
paid for either in cash or by regular payroll deductions. Only employees of the
Company and its subsidiary corporations are eligible to participate in the Plan,
and participation is voluntary.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Company's Compensation and Retirement Committee or another
committee appointed by the Board and given authority by the Board to administer
the Plan.
"Company" means Puget Sound Energy, Inc., a Washington corporation.
"Eligible Compensation" means all regular cash compensation, including overtime;
provided that in the case of commissions and cash bonuses, cash compensation
will also include an amount equal to the average of a Participant's commissions
and cash bonuses in the Participant's payroll period during the six months
preceding the current Offering Period. Regular cash compensation does not
include severance pay, hiring and relocation bonuses, pay in lieu of vacations,
sick leave or any other special payments.
"Eligible Employee" means any employee of the Company or any Subsidiary
Corporation designated by the Board or the Committee (a "Designated Subsidiary")
who is in the employ of the Company (or any Designated Subsidiary) on one or
more Offering Dates and who meets the following criteria:
(a) the employee does not, immediately after the Option is granted, own stock
(as defined by the Code) possessing 5% or more of the total combined voting
power or value of all classes of stock of the Company or of a Designated
Subsidiary of the Company;
(b) the employee's customary employment is for more than 20 hours per week; and
(c) the employee's customary employment is for more than five months in any
calendar year.
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If the Company permits any employee of a Designated Subsidiary to participate in
the Plan, then all employees of that Designated Subsidiary who meet the
requirements of this paragraph shall also be considered Eligible Employees.
"Enrollment Period" has the meaning set forth in Section 6.1.
"ESPP Broker" has the meaning set forth in Section 10.
"Offering" has the meaning set forth in Section 5.1.
"Offering Date" means the first day of an Offering.
"Offering Period" has the meaning set forth in Section 5.1.
"Option" means an option granted under the Plan to an Eligible Employee to
purchase shares of Stock.
"Participant" means any Eligible Employee who has elected to participate in an
Offering in accordance with the procedures set forth in Section 6.1 and who has
not withdrawn from the Offering or whose participation in the Offering is not
terminated.
"Plan" means the Puget Sound Energy, Inc. Employee Stock Purchase Plan.
"Plan Administrator" means the Company's Treasurer or another Company officer
designated by the Board or the Committee to administer the Plan under Section
3.1.
"Purchase Date" means the last day of each Purchase Period.
"Purchase Period" has the meaning set forth in Section 5.2.
"Purchase Price" has the meaning set forth in Section 8.
"Stock" means the Common Stock, no par value, of the Company.
"Subscription" has the meaning set forth in Section 6.1.
"Subscription Date" has the meaning set forth in Section 6.1.
"Subsidiary Corporation" means any corporation, other than the Company, in an
unbroken chain of corporations beginning with the Company if, at the time of the
granting of the Option, each of the corporations, other than the last
corporation in the unbroken chain, owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"Trust" and "Trustee" have the meanings set forth in Section 9.4.
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SECTION 3. ADMINISTRATION
3.1 Plan Administrator
The Plan shall be administered by the Board or the Committee and, if and to the
extent the Board or the Committee designates an executive officer of the Company
to administer the Plan, by such executive officer.
3.2 Administration and Interpretation by the Plan Administrator
Subject to the provisions of the Plan, the Plan Administrator shall have
exclusive authority, in its discretion, to determine all matters relating to
Options granted under the Plan, including all terms, conditions, restrictions
and limitations of Options; provided, however, that all Participants granted
Options pursuant to the Plan shall have the same rights and privileges within
the meaning of the Code. The Plan Administrator shall also have exclusive
authority to interpret the Plan and may from time to time adopt, and change,
rules and regulations of general application for the Plan's administration. The
Plan Administrator's interpretation of the Plan and its rules and regulations,
and all actions taken and determinations made by the Plan Administrator pursuant
to the Plan, unless revised by the Board or the Committee, shall be conclusive
and binding on all parties involved or affected. The Plan Administrator may
delegate administrative duties to such of the Company's other officers or
employees as the Plan Administrator so determines.
SECTION 4. STOCK SUBJECT TO PLAN
Subject to adjustment from time to time as provided in Section 19, a maximum of
500,000 shares of Stock may be sold under the Plan. Shares sold under the Plan
shall be drawn from authorized and unissued shares or shall be shares acquired
by the Company or the Trustee of the Trust. Any shares of Stock that have been
made subject to an Option that cease to be subject to the Option (other than by
reason of exercise of the Option), including, without limitation, in connection
with the cancellation or termination of the Option, shall again be available for
sale in connection with future grants of Options under the Plan.
SECTION 5. OFFERING DATES
5.1 Offering Periods
The Plan shall be implemented by a series of offerings (each, an "Offering").
Except as otherwise set forth below, Offerings shall commence on July 1 and
January 1 of each year and end on the next December 31 and June 30,
respectively, occurring thereafter. Notwithstanding the foregoing, the Board or
the Committee may establish (a) a different term for one or more Offerings and
(b) different commencing and ending dates for such Offerings; provided, however,
that an Offering Period (the "Offering Period") may not exceed five years; and
provided further that if the Purchase Price may be less than 85% of the fair
market value of the Stock on the Purchase Date, the Offering Period may not
exceed 27 months. An employee who becomes eligible to participate in the Plan
after an Offering Period has commenced shall not be eligible to participate in
such Offering but may participate in any subsequent Offering, provided that such
employee is still an Eligible Employee as of the commencement of any such
subsequent Offering. Eligible Employees may not participate in more than one
Offering at a time. In the event the first or the last day of an Offering
Period is
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not a regular business day, then the first day of the Offering Period
shall be deemed to be the next regular business day and the last day of the
Offering Period shall be deemed to be the last preceding regular business day.
5.2 Purchase Periods
Each Offering Period shall consist of one or more consecutive purchase periods
(each, a "Purchase Period"). Except as otherwise set forth below, Purchase
Periods shall commence on July 1 and January 1 of each year and end on the next
December 31 and June 30, respectively, occurring thereafter. Notwithstanding the
foregoing, the Board or the Committee may establish (a) different terms for one
or more Purchase Periods within an Offering Period and (b) different commencing
dates and Purchase Dates for any such Purchase Period. The last day of each
Purchase Period shall be the Purchase Date for such Purchase Period. In the
event the first or last day of a Purchase Period is not a regular business day,
then the first day of the Purchase Period shall be deemed to be the next regular
business day and the last day of the Purchase Period shall be deemed to be the
last preceding regular business day.
SECTION 6. PARTICIPATION IN THE PLAN
6.1 Initial Participation
An Eligible Employee shall become a Participant on the first Offering Date after
satisfying the eligibility requirements and delivering to the Plan Administrator
during the enrollment period established by the Plan Administrator (the
"Enrollment Period") and not later than ten days before such Offering Date (the
"Subscription Date") a subscription (the "Subscription"):
(a) indicating the Eligible Employee's election to participate in the Plan;
(b) authorizing payroll deductions and stating the amount to be deducted
regularly from the Participant's pay, or accompanied by a cash payment or
both; and
(c) authorizing the purchase of Stock for the Participant in each Purchase
Period.
An Eligible Employee who does not deliver a Subscription to the Plan
Administrator during the Enrollment Period and on or before the Subscription
Date shall not participate in the Plan for that Offering Period or for any
subsequent Offering Period, unless such Eligible Employee subsequently enrolls
in the Plan by delivering a Subscription to the Plan Administrator during the
Enrollment Period and on or before the Subscription Date for such subsequent
Offering Period. The Plan Administrator may, from time to time, change the
Subscription Date as deemed advisable by the Plan Administrator in its, his or
her sole discretion for the proper administration of the Plan.
6.2 CONTINUED PARTICIPATION
Unless the Plan Administrator determines otherwise, a Participant shall
participate in the next Offering Period only if the Participant delivers a
Subscription to the Plan Administrator as provided in Section 6.1 during the
Enrollment Period and on or before the Subscription Date for such next Offering
Period.
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SECTION 7. LIMITATIONS ON RIGHT TO PURCHASE SHARES
7.1 $25,000 Limitation
No Participant shall be entitled to purchase Stock under the Plan (or any other
employee stock purchase plan that is intended to meet the requirements of Code
Section 423 sponsored by the Company, any parent corporation or a Subsidiary
Corporation) at a rate that exceeds $25,000 in fair market value, determined as
of the Offering Date for each Offering Period (or such other limit as may be
imposed by the Code), for each calendar year in which a Participant participates
in the Plan (or any other employee stock purchase plan described in this Section
7.1).
7.2 Pro Rata Allocation
In the event the number of shares of Stock that might be purchased by all
Participants in the Plan exceeds the number of shares of Stock available in the
Plan, the Plan Administrator shall make a pro rata allocation of the remaining
shares of Stock in as uniform a manner as shall be practicable and as the Plan
Administrator shall determine to be equitable. Fractional shares may be issued
under the Plan only to the extent permitted by the Board or the Committee.
SECTION 8. PURCHASE PRICE
The purchase price (the "Purchase Price") at which Stock may be acquired in an
Offering pursuant to the exercise of all or any portion of an Option granted
under the Plan shall be 90% of the lesser of (a) the fair market value of the
Stock on the Offering Date of such Offering and (b) the fair market value of the
Stock on the Purchase Date. Notwithstanding the foregoing, the Board or the
Committee may establish a different Purchase Price for any Offering, which shall
not be less than 85% of the lesser of (a) the fair market value of the Stock on
the Offering Date of such Offering and (b) the fair market value of the Stock on
the Purchase Date. The fair market value of the Stock on the Offering Date or
on the Purchase Date shall be the average of the high and low per share trading
prices for the Stock as reported for such day by the New York Stock Exchange in
The Wall Street Journal or in such other source as the Plan Administrator deems
reliable. If no sales of the Stock were made on the New York Stock Exchange on
the transaction date, fair market value shall mean the average of the high and
low per share trading prices for the Stock as reported for the next preceding
day on which sales of the Stock were made on the New York Stock Exchange.
SECTION 9. PAYMENT OF PURCHASE PRICE
9.1 General Rules
Stock that is acquired pursuant to the exercise of all or any portion of an
Option may be paid for only by means of a cash payment or payroll deductions
from the Participant's Eligible Compensation or both. Except as set forth in
this Section 9, the amount of compensation to be withheld from a Participant's
Eligible Compensation during each pay period shall be determined by the
Participant's Subscription.
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9.2 Percent Withheld
The amount of payroll withholding with respect to the Plan for any Participant
during any pay period shall be at least $10, but shall not exceed 15% of the
Participant's Eligible Compensation for such pay period. Amounts shall be
withheld only in increments of $10.
9.3 Payroll Deductions
Payroll deductions shall commence on the first payday following the Offering
Date and shall continue through the last payday of the Offering Period unless
sooner altered or terminated as provided in the Plan.
9.4 Participant Accounts; Trust
Individual accounts shall be maintained for each Participant for memorandum
purposes only. All cash payments and payroll deductions from a Participant's
compensation shall be credited to such account, but shall be deposited with the
general funds of the Company. Such cash payments and payroll deductions may
also be paid by the Company to the Trustee (the "Trustee") of the 1997 Employee
Stock Purchase Plan Trust (the "Trust"), such payments to be used by the Trustee
to purchase shares of Stock pursuant to the terms of the Trust. Shares of Stock
acquired by the Trust shall be held for the benefit of the Participants and
shall be delivered to the Participants or their beneficiaries by the Trustee at
the direction of the Plan Administrator in accordance with the terms and
conditions of the Plan.
All cash payments and payroll deductions received or held by the Company may be
used by the Company for any corporate purpose. No interest shall be paid on
cash payments or payroll deductions received or held by the Company or the
Trust.
9.5 Acquisition of Stock
On each Purchase Date of an Offering Period, each Participant shall
automatically acquire, pursuant to the exercise of the Participant's Option, the
number of shares of Stock arrived at by dividing the total amount of the
Participant's cash payment and accumulated payroll deductions for the Purchase
Period by the Purchase Price; provided, however, that in no event shall the
number of shares of Stock purchased by the Participant exceed the number of
whole shares of Stock so determined, except to the extent that the Board or the
Committee has determined that fractional shares may be issued under the Plan.
9.6 Refund of Excess Amounts
Any cash balance remaining in the Participant's account shall be refunded to the
Participant as soon as practical after the Purchase Date. In the event the cash
to be returned to a Participant pursuant to the preceding sentence is in an
amount less than the amount necessary to purchase a whole share of Stock, and
the Committee has determined that fractional shares may not be issued, the Plan
Administrator may establish procedures whereby such cash is maintained in the
Participant's account and applied to the purchase of Stock in the subsequent
Purchase Period or Offering Period.
9.7 Withholding Obligations
At the time the Option is exercised, in whole or in part, or at the time some or
all of the Stock is disposed of, the Participant shall make adequate provision
for federal and state withholding obligations of the Company, if any, that arise
upon exercise of the Option or upon disposition of the Stock. The Company may,
but shall not be obligated to, withhold from the Participant's compensation the
amount necessary to meet such withholding obligations.
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9.8 Termination of Participation
No Stock shall be purchased on behalf of a Participant on a Purchase Date if his
or her participation in the Offering or the Plan has terminated prior to such
Purchase Date.
9.9 Procedural Matters
The Plan Administrator may, from time to time, establish (a) an exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars, (b)
payroll withholding in excess of the amount designated by a Participant in order
to adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, and (c) such other limitations or procedures as
deemed advisable by the Plan Administrator in its sole discretion that are
consistent with the Plan and in accordance with the requirements of Code Section
423.
9.10 Leaves of Absence
During leaves of absence approved by the Company and meeting the requirements of
the applicable Treasury Regulations, a Participant may continue participation in
the Plan by delivering cash payments to the Plan Administrator on the
Participant's normal paydays equal to the amount of his or her payroll deduction
under the Plan had the Participant not taken a leave of absence.
SECTION 10. STOCK PURCHASED UNDER THE PLAN
10.1 Restrictions on Transfer of Stock
(a) Shares of Stock purchased under the Plan may be registered in the name of a
nominee or held in such other manner as the Plan Administrator determines to
be appropriate. Each Participant will be the beneficial owner of the Stock
purchased under the Plan and will have all rights of beneficial ownership in
such Stock, except that the Participant may not transfer or otherwise
dispose of such Stock for a period of three months following the Purchase
Date for such Stock.
(b) Cash dividends paid on shares of Stock that are subject to the three-month
restriction set forth in subparagraph (a) above will be paid to the
Participant. Dividends paid in the form of shares of Stock with respect to
Stock that has been purchased under the Plan but which is subject to the
three-month restriction set forth in subparagraph (a) above shall be
credited to the Participant's account and shall be restricted for the same
period as the Stock with respect to which the stock dividend was paid.
(c) Upon termination of the Participant's employment because of retirement,
disability or death, the three-month restriction set forth in subparagraph
(a) above will be deemed to be satisfied as of the date of such termination.
(d) The Company or a brokerage firm or other entity selected by the Company will
retain custody of the certificates representing the Stock purchased under
the Plan for a period of time ending no earlier than the expiration of the
three-month restriction set forth in subparagraph (a) above.
10.2 ESPP Broker
If the Plan Administrator designates or approves a stock brokerage or other
financial services firm to hold shares purchased under the Plan for the accounts
of Participants (the "ESPP Broker"), the following procedures shall apply.
Promptly following each Purchase Date, the number of shares of Stock purchased
by each Participant shall be deposited into an account
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established in the Participant's name with the ESPP Broker. A Participant shall
be free to undertake a disposition of the shares of Stock in his or her account
at any time after expiration of the three-month restriction set forth in Section
10.1(a), but, in the absence of such a disposition, the shares of Stock must
remain in the Participant's account at the ESPP Broker until the holding period
set forth in Code Section 423(a) has been satisfied. With respect to shares of
Stock for which the Code Section 423(a) holding periods have been satisfied, the
Participant may move those shares of Stock to another brokerage account of the
Participant's choosing or request that a stock certificate be issued and
delivered to him or her. A Participant who is not subject to payment of U.S.
income taxes may move his or her shares of Stock to another brokerage account of
his or her choosing or request that a stock certificate be delivered to him or
her at any time, without regard to the Code Section 423(a) holding period.
10.3 Notice of Disposition
Each Participant agrees by entering the Plan, promptly to give the Company
notice of any Stock disposed of within 18 months of the Purchase Date for such
Stock, showing the number of such shares disposed of and the Purchase Date for
such Stock. This notice shall not be required if and so long as the Company has
a designated ESPP Broker.
SECTION 11. VOLUNTARY WITHDRAWAL
11.1 Withdrawal From an Offering
A Participant may withdraw from an Offering by delivering to the Plan
Administrator a notice of withdrawal in the form required by the Plan
Administrator for such purpose. Such withdrawal must be elected at least nine
days prior to the end of the Purchase Period for which such withdrawal is to be
effective. If a Participant withdraws after the Purchase Date for a Purchase
Period of an Offering, the withdrawal shall not affect Stock acquired by the
Participant in that Purchase Period and any earlier Purchase Periods. Unless
the Plan Administrator establishes a different rule, withdrawal from an Offering
shall result in a withdrawal from the Plan and any succeeding Offering therein.
A Participant is prohibited from again participating in the same Offering at any
time upon withdrawal from such Offering, but may participate in any subsequent
Offering under the Plan by again satisfying the definition of Participant.
11.2 Withdrawal From the Plan
A Participant may withdraw from the Plan by delivering to the Plan Administrator
a notice of withdrawal in the form required by the Plan Administrator for such
purpose. Such notice must be delivered at least nine days prior to the end of
the Purchase Period for which such withdrawal is to be effective. If a
Participant withdraws after the Purchase Date for a Purchase Period of an
Offering, the withdrawal shall not affect Stock acquired by the Participant in
that Purchase Period and any earlier Purchase Periods. In the event a
Participant voluntarily elects to withdraw from the Plan, the withdrawing
Participant may not resume participation in the Plan during the same Offering
Period, but may participate in any subsequent Offering under the Plan by again
satisfying the definition of Participant.
11.3 Return of Cash Payments and Payroll Deductions
Upon withdrawal from an Offering pursuant to Section 11.1 or from the Plan
pursuant to Section 11.2, the withdrawing Participant's cash payments and
accumulated payroll deductions that have not been applied to the purchase of
Stock shall be returned as soon as practical after the withdrawal, without the
payment of any interest, to the Participant, and
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the Participant's interest in the Offering shall terminate. Such cash payments
and accumulated payroll deductions may not be applied to any other Offering
under the Plan.
SECTION 12. TERMINATION OF EMPLOYMENT
Termination of a Participant's employment with the Company for any reason,
including retirement, disability or death, or the failure of a Participant to
remain an Eligible Employee, shall immediately terminate the Participant's
participation in the Plan. The payroll deductions credited to the Participant's
account since the last Purchase Date shall, as soon as practical, be returned to
the Participant or, in the case of a Participant's death, to the Participant's
legal representative, and all the Participant's rights under the Plan shall
terminate. Interest shall not be paid on sums returned to a Participant
pursuant to this Section 12.
SECTION 13. RESTRICTIONS UPON ASSIGNMENT
An Option granted under the Plan shall not be transferable otherwise than by
will or by the applicable laws of descent and distribution, and shall be
exercisable during the Participant's lifetime only by the Participant. The Plan
Administrator will not recognize, and shall be under no duty to recognize, any
assignment or purported assignment by a Participant, other than by will or by
the applicable laws of descent and distribution, of the Participant's interest
in the Plan, of his or her Option or of any rights under his or her Option.
SECTION 14. NO RIGHTS OF SHAREHOLDER UNTIL SHARES ISSUED
With respect to shares of Stock subject to an Option, a Participant shall not be
deemed to be a shareholder of the Company, and he or she shall not have any of
the rights or privileges of a shareholder. A Participant shall have the rights
and privileges of a shareholder of the Company when, but not until, the shares
have been issued following exercise of the Participant's Option.
SECTION 15. AMENDMENT OF THE PLAN
The Board or the Committee may amend the Plan in such respects as it shall deem
advisable; provided, however, that to the extent required for compliance with
Code Section 423 or any applicable law or regulation, shareholder approval will
be required for any amendment that will (a) increase the total number of shares
as to which Options may be granted under the Plan, (b) modify the class of
employees eligible to receive Options, or (c) otherwise require shareholder
approval under any applicable law or regulation.
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SECTION 16. TERMINATION OF THE PLAN
The Board may suspend or terminate the Plan at any time. Unless the Plan shall
theretofore have been terminated by the Board, the Plan shall terminate on, and
no Options shall be granted after, May 19, 2007, except that such termination
shall have no effect on Options granted prior thereto. No Options shall be
granted during any period of suspension of the Plan.
SECTION 17. NO RIGHTS AS AN EMPLOYEE
Nothing in the Plan shall be construed to give any person (including any
Eligible Employee or Participant) the right to remain in the employ of the
Company or a Subsidiary Corporation or to affect the right of the Company and
the Subsidiary Corporations to terminate the employment of any person (including
any Eligible Employee or Participant) at any time with or without cause.
SECTION 18. EFFECT UPON OTHER PLANS
The adoption of the Plan shall not affect any other compensation or incentive
plans in effect for the Company or any Subsidiary Corporation. Nothing in the
Plan shall be construed to limit the right of the Company or any Subsidiary
Corporation to (a) establish any other forms of incentives or compensation for
employees of the Company or any Subsidiary Corporation or (b) grant or assume
options otherwise than under the Plan in connection with any proper corporate
purpose, including, but not by way of limitation, the grant or assumption of
options in connection with the acquisition, by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
firm or association.
SECTION 19. ADJUSTMENTS
19.1 Adjustment of Shares
In the event that, at any time or from time to time, a stock dividend, stock
split, spin-off, combination or exchange of shares, recapitalization, merger,
consolidation, distribution to shareholders other than a normal cash dividend,
or other change in the Company's corporate or capital structure results in (a)
the outstanding shares, or any securities exchanged therefor or received in
their place, being exchanged for a different number or class of securities of
the Company or of any other corporation or (b) new, different or additional
securities of the Company or of any other corporation being received by the
holders of shares of Stock, then (subject to any required action by the
Company's shareholders), the Board or the Committee, in its sole discretion,
shall make such equitable adjustments as it shall deem appropriate in the
circumstances (i) in the maximum number and kind of securities subject to the
Plan as set forth in Section 4 and (ii) the number and kind of securities that
are subject to any outstanding Option and the per share price of such
securities. The determination by the Board or the Committee as to the terms of
any of the foregoing adjustments shall be conclusive and binding.
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19.2 Merger, Acquisition or Liquidation of the Company
In the event of the merger or consolidation of the Company into another
corporation, the acquisition by another corporation of all or substantially all
of the Company's assets, or the liquidation or dissolution of the Company, the
Purchase Date with respect to outstanding Options shall be the business day
immediately preceding the effective date of such merger, consolidation,
liquidation or dissolution unless the Board or the Committee shall, in its sole
discretion, provide for the assumption or substitution of such Options in a
manner complying with Code Section 424(a).
19.3 Limitations
The grant of Options will in no way affect the Company's right to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
SECTION 20. REGISTRATION
The Company shall be under no obligation to any Participant to register for
offering or resale under the Securities Act of 1933, as amended, or register or
qualify under state securities laws, any shares of Stock. The Company may issue
certificates for shares with such legends and subject to such restrictions on
transfer and stop-transfer instructions as counsel for the Company deems
necessary or desirable for compliance by the Company with federal and state
securities laws.
SECTION 21. EFFECTIVE DATE
The Plan's effective date is the date on which it is approved by the Company's
shareholders.
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MAP TO ANNUAL MEETING
24[LOGO]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TheThis undersigned hereby appoints RICHARD R. SONSTELIEWILLIAM S. WEAVER and JAMES W.
ELDREDGE, and each or either of them, as Proxies, each with the power to
appoint his substitute, and hereby authorizes them to represent and to vote,
as designated below, all the shares of Common Stock of PUGET SOUND ENERGY, INC.
held of record by the undersigned on March 17, 1997,15, 2000, at the Annual Meeting of
Shareholders to be held on May 19, 1997,16, 2000, or any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
- ---------------------------------------------------------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED "FOR" THE PROPOSALS Please mark
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. your votes as /X/
indicated in
this example
1. ELECTION OF DIRECTORS [_]
FOR ALL NOMINEES LISTED BELOW [_]all nominees
listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all
nominees listed below
CHARLES W. BINGHAM DONALD J. COVEY ROBERT L. DRYDEN JOHN W. ELLISthe contrary below) nominees listed below
1. Election of Directors / / / /
DOUGLAS P. BEIGHLE TOMIO MORIGUCHI SALLY G. NARODICK RICHARD R. SONSTELIECRAIG W. COLE
(INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name in this
space).
- ------------------------------------------------------ This proxy when properly executed will be voted in
the space provided right). _______________________________________________________________manner directed herein by the undersigned
shareholder. PROXY CARDS PROPERLY EXECUTED AND
RETURNED WITHOUT DIRECTION WILL BE VOTED FOR PROPOSAL
1. In their discretion, the Proxies are authorized to
vote upon such other business as may properly come
before the meeting and any adjournment thereof.
Please sign exactly as name appears below. When
shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name
by President or other authorized officer. If a
partnership, please sign in partnership name by
authorized person.
Signature(s) Dated , 2000
----------------------------------------------- ------------------
PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE
- ---------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
2. APPROVE THE EMPLOYEE STOCK PURCHASE PLAN.
[_] FOR [_] AGAINST [_] ABSTAIN
(This Proxy Card continues and MUST be signed on the reverse side)
(Continued from the reverse) This proxy when properly executed will be voted in
the manner directed herein by the undersigned shareholder. PROXY CARDS PROPERLY
EXECUTED AND RETURNED WITHOUT DIRECTION WILL BE VOTED FOR PROPOSALS 1 AND 2. In
their discretion, the proxies are authorized to vote upon such other business as
may properly come before the meeting and any adjournment thereof. Please sign
exactly as name appears below. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
SIGNATURE/DATE SIGNATURE IF HELD JOINTLY/DATE
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PLEASE COMPLETE, SIGN, DATE AND
RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED
ENVELOPE