PAGE 1
NOTICE OF ANNUAL MEETING
of Stockholders of
WASHINGTON ENERGY COMPANY
to Be Held February 25, 1994
TO OUR STOCKHOLDERS:
Washington Energy Company is pleased to announce that its Annual Meeting
will be held Friday, February 25, 1994, at The Westin Hotel, 1900 Fifth
Avenue in Seattle, Washington. We will meet at 9:30 a.m. (Pacific Time) in
the Grand Ballroom.
The Board of Directors has called this meeting to: (1) elect four Direc-
tors; (2) act upon a recommendation by the Board of Directors that the
Washington Energy Company Stock Option Plan be approved; and (3) transact
any other business that may properly come before the meeting.
Please read carefully the information contained in the accompanying Proxy
Statement regarding the issues to be voted upon.
Only holders of common stock of record at the close of business on December
22, 1993, are entitled to vote, by order of the Board.
Your vote is important! Please sign and mail promptly the enclosed proxy
card, whether or not you plan to attend the meeting. A postage-paid enve-
lope is enclosed for your convenience.
The prompt return of proxies will save the Company the added expense of
another mailing to ensure a quorum.
Thank you. We look forward to seeing you at the meeting.
Sincerely,
James A. Thorpe
Chairman of the Board of Directors
Timothy J. Hogan
Corporate Secretary
Seattle, Washington
January 12, 1994
(Proxy Statement is Set Forth in the Following Pages)
PAGE 2
THIS PAGE IS LEFT BLANK INTENTIONALLY
PAGE 3
WASHINGTON ENERGY COMPANY
815 MERCER STREET
SEATTLE, WASHINGTON 98109
(206) 622-6767
PROXY STATEMENT
Annual Meeting of Stockholders to Be Held February 25, 1994
PROXY SOLICITATION BY MANAGEMENT
This statement is furnished in connection with the solicitation by the manage-
ment of Washington Energy Company ("the Company") of proxies, in the enclosed
form, to be used at the Annual Meeting of Stockholders of the Company to be
held at The Westin Hotel, Grand Ballroom, 1900 Fifth Avenue, Seattle, Wash-
ington on February 25, 1994 at 9:30 o'clock a.m. Pacific Time, or at any
adjournment thereof. This proxy statement and accompanying proxy form is being
sent on or about January 12, 1994, to all security holders with voting rights.
In addition to mail solicitation, there may be incidental personal solicitation
at nominal cost made by directors, officers, employees and agents of the Com-
pany. The Company will bear all costs of soliciting proxies, including charges
made by brokers and other persons holding stock in their names or in the names
of nominees for their expenses for sending proxy material to principals and
obtaining their proxies.
If the accompanying proxy form is executed and returned, the shares represented
by the proxy will be voted as specified therein, but the shareholder, never-
theless, if he or she so desires, may revoke it by written or telegraphic
revocation at any time prior to the voting thereof. The Bylaws also permit
the appointment and instruction of proxies by telegram, telex, telecopier
(206-382-7875), or similar transmitting device.
VOTING STOCK AND RECORD DATE
As of the December 22, 1993 record date the Company had outstanding 23,312,075
shares of $5.00 par value common stock. This is the only class of stock
entitled to be voted at the meeting. The Company is unaware of any person
beneficially owning more than five percent of its common stock.
VOTING OF PROXIES
A shareholder may vote by a written proxy executed by the stockholder or a duly
authorized representative. The Bylaws also permit the appointment and instruc-
tion of proxies by telegram, telex, telecopier, or similar transmitting device.
Proxies may be revoked at any time prior to the meeting by written or tele-
graphic notice delivered to the Secretary of the Company.
All stockholders have cumulative voting rights in the election of directors and
one vote per share on all other matters. Under cumulative voting, a stock-
holder may multiply the number of shares owned by the number of directors to be
elected and cast this total number of votes for any one nominee or distribute
the total number of votes, in any proportion, among as many nominees as the
stockholder desires.
PAGE 4
Unless authority is withheld in accordance with instructions on the accompany-
ing proxy form, discretionary authority to cumulate votes may be exercised by
the persons named in the proxy form. The persons named in the accompanying
proxy form intend to vote the shares covered by the proxies received by them
equally for the election of all the nominees hereinafter named as directors of
the Company. Such shares may be voted cumulatively for less than the entire
number of nominees if any situation arises which, in the opinion of the proxy
holders, makes such action necessary or desirable. If a nominee becomes
unavailable to serve, an event which is not anticipated, the shares may be
voted for a substitute nominee designated by the Board of Directors.
ELECTION OF DIRECTORS
Nominees
At the meeting, four directors are to be elected. Three current directors,
Virginia Anderson, Tomio Moriguchi and Sally G. Narodick, are to be elected to
hold office for a period of three years or until their successors are elected
and qualified. In addition, Mr. James A. Thorpe, Chairman of the Board and
Chief Executive Officer of the Company since February 13, 1980, has announced
his intention to retire from the Company and to resign from the Board of Dir-
ectors effective at the Annual Meeting on February 25, 1994. The Board of
Directors has elected Mr. William P. Vititoe, effective February 25, 1994, to
fill the vacancy created by the resignation of Mr. Thorpe and has further
determined to nominate Mr. Vititoe for reelection by the stockholders at the
Annual Meeting to serve the remaining term of Mr. Thorpe, expiring in February
1996. If elected, Mr. Vititoe will succeed to Mr. Thorpe's board position in
Class III, which term expires in February 1996, and further, it is the inten-
tion of the Board of Directors to appoint Mr. Vititoe as Chairman of the Board
and Chief Executive Officer at their annual organizational meeting immediately
following the annual stockholders meeting. Pursuant to the Restated Articles
of Incorporation, as amended, and Bylaws, as amended, of the Company, the nine
directors serve in three classes for staggered terms whereby three directors in
one class are elected at each Annual Meeting of Stockholders. Normally the
nomination of Mr. Vititoe for reelection requires the addition of a fourth
director to the ballot. Accordingly, proxies cannot be voted for more than
four persons in the election of directors at the 1994 annual meeting of
stockholders. Unless a stockholder indicates otherwise on the accompanying
proxy form, the persons named therein intend to vote the shares covered thereby
for the election of the four nominees listed below. No circumstances are
presently known which would render any such nominee unavailable. In the event
that any nominee for director shall not be a candidate for election, it is
intended that votes will be cast, pursuant to the discretionary power granted
in the accompanying proxy form, for such substitute nominee as may be nominated
by the Board of Directors. Proxies will be voted in such a manner as to elect
all or as many of the nominees as possible.
The names of the nominees for director and of the other directors not standing
for election in 1994, and information about them are set forth below:
PAGE 5
Year First
Elected as
Name and Address Age Director
NOMINEES FOR DIRECTOR
Class I (New Term to Expire in 1997)
Virginia Anderson 46 1991
Seattle Center, City
of Seattle
Seattle, Washington
Tomio Moriguchi ........... 57 1988
Uwajimaya, Inc.
Seattle, Washington
Sally G. Narodick.......... 48 1989
Edmark Corporation
Redmond, Washington
Class III (New Term to Expire in 1996)
William P. Vititoe 55 *
Washington Energy Company
Seattle, Washington
OTHER DIRECTORS
Class II (Term Expires in 1995)
Donald J. Covey ........ 65 1982
UNICO Properties, Inc.
Seattle, Washington
Robert L. Dryden ........ 60 1991
Boeing Commercial
Airplane Group
Seattle, Washington
Robert R. Golliver ........ 58 1979
Washington Energy Company
Seattle, Washington
Class III (Term Expires in 1996)
Robert F. Bailey ........... 61 1988
Trans Republic Energy, L.P.
Midland, Texas
John W. Creighton, Jr...... 61 1989
Weyerhaeuser Company
Tacoma, Washington
Each of the nominees has served continuously since the date of his or her
first election as a director of the Company.
* Mr. Vititoe has not previously served on the board.
PAGE 6
Business experience of the nominees for the past five years:
Ms. Anderson has been Director of the Seattle Center, a large civic center in
Seattle owned by the City of Seattle, since August 1988. Mr. Moriguchi has
been President of Uwajimaya, Inc., Seattle, Washington, a food and merchandise
distributor, retailer and exporter since 1965, and President, Town and Country
Travel, Inc. Mrs. Narodick has been Chairman and Chief Executive Officer of
Edmark Corporation, a Redmond, Washington based company which publishes print
and software educational materials, since October 1989. From April 1987 to
October 1989, she was a founder and partner of Narodick, Ross & Associates, a
Seattle based financial and marketing consulting firm. Mr. Vititoe joined the
Company in January, 1994. From November 1990 to November 1993, he served as
President and Chief Executive Officer of American Natural Resources Pipeline
Co., a natural gas pipeline company. From July 1989 to October 1990, he served
as President of Ameritech Enterprises Group, a diversified communications
company. Prior to that he served as President and Chief Executive Officer
of Michigan Bell Telephone Company from September 1983 to July 1989.
Business experience of the other directors for the past five years:
Mr. Covey has been Chairman of the Board of Directors of UNICO Properties,
Inc., Seattle, Washington, since 1992. He was also Chairman and Chief Exec-
utive Officer from 1990 to 1992 and President and Chief Executive Officer from
1985 to 1990. UNICO Properties, Inc., manages several major office buildings
in downtown Seattle. Mr. Dryden has been Executive Vice President, Boeing
Commercial Airplane Group, Seattle, Washington, since January 1990. From
November 1987 to January 1990, he served as President of Boeing Military
Airplanes in Wichita, Kansas. Mr. Golliver has been the President and Chief
Operating Officer of the Company since 1980. Mr. Bailey has been President of
Phoenix Processing Systems, Inc., Midland, Texas, a natural gas processing and
oil and gas investment company, Mabelle, Inc., an oil and gas production com-
pany, and Trans Republic Energy, L.P., an oil and gas investment company since
January 1992; previously he was President of Alta Energy Corporation, Midland,
Texas, an oil and gas drilling and production company operating primarily
in the southwestern United States. Mr. Creighton has been President of
Weyerhaeuser Company, a Tacoma, Washington based forest products company,
since 1988.
Certain directors and nominees are also directors of other companies that make
periodic filings with the Securities and Exchange Commission as follows:
Virginia Anderson - Columbia Bank; Robert F. Bailey - Texas Commerce Bank
- - - - Midland; John W. Creighton, Jr. - Weyerhaeuser Company, Portland General
Corporation, Quality Food Centers, Inc. and Mortgage Investments Plus, Inc.;
Tomio Moriguchi - Seafirst Corporation, a subsidiary of the Bank of America,
N.T. & S.A.; Sally G. Narodick - Edmark Corporation, Pacific Northwest Bank and
Penwest; Robert L. Dryden, U.S. Bancorp; William P. Vititoe - Comerica Bank and
Amerisure Michigan Mutual Insurance Company.
There are no family relationships between the directors.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and its executive officers to file reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Directors and executive officers are also required by the
Commission regulations to furnish the Company with copies of all such reports
that they file. Based solely on its review of the copies of such forms
received by it, the Company believes that all filing requirements applicable to
PAGE 7
its Directors and executive officers were complied with during the fiscal year
ended September 30, 1993.
SECURITY OWNERSHIP OF MANAGEMENT
(stated as of December 15, 1993)
Name of Amount of Beneficial Percent
Beneficial Owner Ownership Of Class
Directors
Virginia Anderson 612 -
Robert F. Bailey 1,490 -
Donald J. Covey 2,614 -
John W. Creighton, Jr. 981 -
Robert L. Dryden 2,184 -
Tomio Moriguchi 1,440 -
Sally G. Narodick 981 -
Named Executive Officers (*also serve as directors)
James A. Thorpe * 108,125 (1) -
Robert R. Golliver * 45,550 (1) -
Donald H. Gessel 21,202 (1) -
James P. Torgerson 12,998 (1) -
James W. Gustafson 30,586 (1) -
All directors and executive officers as a group
(16 persons) 287,361 (1) 1.2%
(1) Includes unexercised options to acquire shares of common stock pursuant
to the Company's Stock Option Plan as follows: Mr. Thorpe, 47,000
shares; Mr. Golliver, 26,000 shares; Mr. Gessel, 10,400 shares;
Mr. Torgerson 10,400 shares; Mr. Gustafson, 7,800 shares; and all
directors and executive officers as a group, 134,400 shares.
Washington Energy is unaware of any person beneficially owning more than five
percent of its common stock.
With respect to each person who has options to acquire common stock, such
options are assumed to be outstanding for the purpose of computing percentage
ownership of that person, but are assumed not to be outstanding for purposes of
computing percentage ownership for any other person.
PAGE 8
COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board of Directors Compensation and Benefits Committee is composed of
outside Directors. The establishment and administration of the Company's
executive officer compensation and benefits program is the Committee's
responsibility.
Compensation Objectives
The Committee's compensation objectives are:
Total pay competitive with industry practice sufficient to attract and retain
key executives.
Balanced long and short-term variable compensation elements tied to corporate
and department goals.
Performance based incentive pay which supports the Company's business goals.
Compensation Components
Executive officer compensation is composed of four elements:
Base Salary. The Company reviews comparative company data prepared by an
independent consultant to assure that base compensation levels and annual
adjustments are moderate yet competitive with industry practices and supportive
of corporate goals. Base pay and subsequent adjustments are targeted at or
below 50th percentile values for the comparative group of companies. All exec-
utive officer pay adjustments are reviewed and approved by the Committee.
Committee approval of base pay and base pay adjustments depends on the execu-
tive's performance, changes in duties and responsibilities and market-related
factors specific to the executive's responsibility and those of others in
similar positions at comparative firms.
Annual Incentive Pay. All Vice Presidents and above qualify to receive annual
incentive pay. The purpose of such pay is to enhance the link between execu-
tive officer direct pay and the achievement of Corporate, Department, and
individual goals. The Committee approves all elements and goals of the annual
incentive pay program.
Awards vary by position and performance. The Vice President Natural Resources
can earn up to 25% of base salary and Senior Vice Presidents can earn up to 20%
of base salary. The President's potential earning is up to 30% of base salary.
The CEO can earn up to 40% of base salary. The CEO can recommend discretionary
award adjustments. Each award has a different mixture of corporate, subsidiary
and department performance objectives which determine the percentage of poten-
tial pay.
Corporate performance is measured by earnings per share, cash flow after divi-
dends as a percent of capital spending, and other financial measures which the
Committee may use at its discretion. Department performance goals are set
annually by the CEO and President and the individual participants with each
goal being weighted based on its relative importance in overall goal achieve-
ment. Incentive pay is determined at the end of each year by application of
the weighting factors to specific goal performance.
PAGE 9
Performance Share Units. Performance share units are long term performance-
based incentives for executive officers designed to reward overall corporate
performance as measured by average return on equity and market/book performance
ratios over a four-year period. Long-term incentives in combination with
short-term incentives provide a balanced basis for executive compensation and
achievement.
Each year a specific number of performance units are allocated to designated
company officers by the Committee for potential award. Receipt of the units is
contingent on the achievement of corporate performance objectives at the con-
clusion of a four-year period. Each unit is the equivalent of 1 share of the
Company's common stock. The performance objectives established by the Commit-
tee at the beginning of each four-year period are based on the Company's
average return on equity during the performance period and market to book
ratio at the end of the performance period. If objectives for the period are
achieved the participant will have earned 100% of the performance shares
assigned for that period.
The Committee may permit participants to earn more than 100% of the shares
assigned to them pursuant to plan provisions if actual Company results exceed
performance objectives. Conversely, the participant may earn less than 100% of
the performance units pursuant to plan provisions if the Company fails to fully
meet its performance objectives.
Incentive Stock Options. Under the proposed Stock Option Plan, incentive stock
options are intended to align management pay and thereby management motivation
with the long-term interest of the shareholders and the attainment of corporate
planning objectives. Committee approval of the issuance of options would be at
the fair market value of the Company stock on the day of the grant, thereby
assuring executives will receive a benefit only when the stock price appre-
ciates. The Committee retains the power to impose terms and conditions on the
options granted under the proposed Plan. Options and derived stock apprecia-
tion rights would not exceed 10 years and must be converted at their exercise
to a minimum of 50% stock shares.
CEO Compensation
Mr. Thorpe's 1993 compensation was largely dependent on the Company's financial
performance during 1993 consistent with the objectives of the specific pay
elements discussed above. Mr. Thorpe's base salary adjustment recommended by
the Committee and approved by the Board was $18,054 which was a 6.2% increase
effective July 1992. The Board's action was based on a Committee review of
comparative natural gas industry data, including data from natural gas distri-
bution and combination utilities operating in Washington State.
No incentive pay was awarded to Mr. Thorpe in 1993. Minimum financial measures
and objectives used by the Committee to determine Mr. Thorpe's annual incentive
payment were not attained in 1993. A performance unit award was paid to Mr.
Thorpe of $50,923 for attainment of long term corporate performance objectives
established by the Committee for the period 1990 through 1993. A Stock option
grant of 12,500 shares for Fiscal 1994 has been awarded to Mr. Thorpe contin-
gent upon stockholder approval of a new Stock Option Plan which will be pre-
sented to the stockholders for adoption in February, 1994. The previous Stock
Option Plan expired October, 1993. The purpose of the grant is to link Mr.
Thorpe's efforts in achieving corporate goals with shareholder interest over
time.
PAGE 10
Compensation and Benefits Committee: John W. Creighton, Jr., Chairman; Robert
F. Bailey; Robert L. Dryden; Sally G. Narodick.
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in the
cumulative total shareholder return on the Company's Common Stock against the
cumulative total return to the S&P Composite - 500 Stock Index and Dow Jones
Utility Index for the period of five years commencing October 31, 1988 and
ended September 30, 1993.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG WASHINGTON ENERGY COMPANY, S&P 500 INDEX
AND THE DOW JONES UTILITIES INDEX
<CAPTION>
<S> <C> <C> <C>
Dow Jones
Measurement Period WEG Corp S&P 500 Utility Index
FYE 09/30/88 $100 $100 $100
FYE 09/30/89 $136 $133 $128
FYE 09/30/90 $147 $121 $126
FYE 09/30/91 $179 $158 $144
FYE 09/30/92 $194 $176 $159
FYE 09/30/93 $175 $199 $190
</TABLE>
PAGE 11
EXECUTIVE COMPENSATION
Twelve executive officers and/or directors of Washington Energy also serve in
the identical capacity or capacities with Washington Natural Gas Company
("Washington Natural") and receive remuneration for such services from Washing-
ton Natural, with affiliates being charged for time spent by the officers and
directors on the affiliates' business affairs.
The following table shows the total annual and long-term compensation paid by
the Company to the persons who, for the year ended September 30, 1993, were the
Chief Executive Officer and the other four most highly compensated executive
officers of the Company ("named executives").
<TABLE>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
Securities Under- Other All Other
Name and Fiscal ANNUAL COMPENSATION lying Options/ Incentives Compensation
Principal Position Year Salary($) Bonus($)(1) SARs (#)(2) Payouts ($)(3) ($)(4)
<F> <C> <C> <C> <C> <C> <C>
James A. Thorpe 1993 317,208 - 12,500 50,923 8,628
Chairman of the Board 1992 308,055 - 12,500 79,982
& CEO 1991 290,001 53,772 12,500 83,039
Robert R. Golliver 1993 220,008 - 6,500 33,949 7,404
President & COO 1992 208,758 - 6,500 54,725
1991 192,252 26,918 6,500 56,816
Donald H. Gessel 1993 133,128 8,900 2,600 19,804 4,068
President - Washington 1992 129,285 7,000 2,600 29,467
Energy Services 1991 122,001 16,155 2,600 30,593
Company
James P. Torgerson 1993 133,128 8,000 2,600 19,804 4,100
Sr. Vice President 1992 129,285 8,900 2,600 29,467
Finance, Planning 1991 122,001 15,208 2,600 22,308
& Development & CFO
James W. Gustafson 1993 133,128 6,800 2,600 19,804 3,838
Sr. Vice President 1992 129,285 5,000 2,600 29,467
Operations 1991 122,001 15,154 2,600 30,593
(1) Incentive compensation is based on performance in the year shown but
determined and paid the following year. For example, bonuses for fiscal
1993 are based on performance in fiscal 1993 and are measured and paid in
the fourth quarter of calendar 1993.
(2) All options granted to executive officers were in tandem with stock
appreciation rights ("SARs").
(3) Amounts in the column relate to payouts under the Company's Second
Performance Share Plan further described in the Long-Term Incentive
Program section.
(4) A portion of the amounts in this column are the Company contribution to
individual 401(k) accounts, Mr. Thorpe $6,866; Mr. Golliver $6,600; Mr.
Gessel $3,817; Mr. Torgerson $3,994; and Mr. Gustafson $3,350. The
balance of the amounts shown in this column are the term cost for
split-dollar life insurance paid on behalf of the named executives. In
accordance with the transition provisions applicable to the revised rules
on executive compensation disclosure adopted by the Securities and
Exchange Commission, amounts are excluded for the years 1992 and 1991.
PAGE 12
1993 STOCK OPTION GRANTS
The following table sets forth the number of stock options which were granted
to each of the named executives during fiscal year 1993. In addition, the
table provides the present value of the stock options as of the grant date.
</TABLE>
<TABLE>
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
Securities Under-
lying Options Exercise or Grant Date
/SARs Granted % of Total Options Base Price Expiration Present Value
Name (#)(1) Granted to Employees ($/Sh) Date ($) (2)
<F> <C> <C> <C> <C>
James A. Thorpe 12,500 11% 21.1875 10/12/02 20,250
Robert R. Golliver 6,500 6% 21.1875 10/12/02 10,530
Donald H. Gessel 2,600 2% 21.1875 10/12/02 4,212
James P. Torgerson 2,600 2% 21.1875 10/12/02 4,212
James W. Gustafson 2,600 2% 21.1875 10/12/02 4,212
(1) The exercise price of the options was the fair market value of the Com-
pany's stock on the date of the grant. All options were immediately
exercisable. Each option was granted in tandem with SAR covering the
same number of shares. If any optionee exercises their stock option,
they lose their corresponding SARs as to those shares and vice versa.
(2) The values shown were calculated using the Black-Scholes option pricing
model. That model is based on arbitrary assumptions regarding variables
such as stock price volatility, future dividend yield, and interest
rates. The actual value that an executive may realize, if any, will
depend on the amount by which the stock price at the time of exercise
exceeds the exercise price, which is the fair market value of the stock
at the time of grant. There is no assurance that any executive will
receive the amounts estimated by the Black-Scholes model.
</TABLE>
The following table sets forth information concerning each stock option (or
tandem SAR) which was exercised during the fiscal year 1993 by each of the
named executives and the fiscal year-end value of the unexercised stock options
(and tandem SARs), provided on an aggregated basis.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
Number of Value of Unexercised
Securities Underlying
Shares Acquired Value Unexercised Options/ In-the-Money Options/
Name on Exercise(#)(1) Realized(2)($) SARs at FY End (#)(3) SARs at FY End ($)(4)
<F> <C> <C> <C>
James A. Thorpe 1,564 45,430 47,000 -
Robert R. Golliver - - 26,000 -
Donald H. Gessel - - 10,400 -
James P. Torgerson - - 10,400 -
James W. Gustafson - - 7,800 -
(1) This number represents the number of shares with respect to which SARs
were exercised.
(2) The figures presented in this column have been calculated based upon the
difference between the fair market value of each stock option/SAR on the
date of exercise and its exercise price.
(3) All unexercised options at fiscal year end were exercisable.
(4) The exercise price of all unexercised options at year end were less than
the closing price of the Company's common stock at fiscal year end.
PAGE 13
LONG-TERM INCENTIVE PROGRAM - AWARDS
LAST FISCAL YEAR
Estimated Future Payouts
No. of Units Period Until Under Non-Stock Price-Based Plans (2)(3)
Name (#)(1) Payout Threshold (#) Target(#) Maximum
James A. Thorpe 3,500 4 years 560 3,500 6,125
Robert R. Golliver 2,500 4 years 400 2,500 4,375
Donald H. Gessel 1,500 4 years 240 1,500 2,625
James P. Torgerson 1,500 4 years 240 1,500 2,625
James W. Gustafson 1,500 4 years 240 1,500 2,625
(1) This represents the number of performance units assigned under the Second
Washington Energy Company Performance Share Plan. Dependent upon satis-
faction of future performance objectives of the Company, each unit can
represent the right to receive up to 1-3/4 shares of common stock.
(2) This represents the number of shares of common stock that may be awarded
with respect to the units granted under the plan. The actual number of
shares awarded will depend on (a) the number of contingent performance
units assigned, (b) the Company's financial performance for the four-year
period following the assignment compared with pre-established goals, and
(c) the market value of the Company's common stock at the time of any
award payment. The plan requires that at least fifty percent of any
payments made pursuant to the plan be paid in common stock of the Company
and the balance of the payments be paid in cash or shares of common
stock. The Compensation and Benefits Committee determines what portion
of the payout is to be satisfied in shares of common stock and what
portion is to be satisfied in cash.
(3) Under the plan, named executives will, after a change in control, gener-
ally receive at least one share of common stock per unit, or more depend-
ing on the Company's performance through the date of the change in
control.
</TABLE>
FUTURE BENEFITS - PENSION PLAN
Washington Natural Gas Company has a plan to provide officers, including the
named executives, with retirement, death and disability benefits supplementing
the coverage payable from the Company's defined benefit plan for salaried
employees and an offset for Social Security and benefits payable under other
plans of prior employers.
The supplemental plan is designed so that each participant will receive retire-
ment plan payments, primary social security benefits and supplemental plan
payments equal, in the aggregate, to 70% of the participant's average salary
during the highest three years in the eight years preceding the participant's
retirement. The remuneration covered by this plan includes base salary and
PAGE 14
commissions. It provides payments of annual benefits for life upon retirement
from the Company upon reaching age 65 or at the election of the officer, with
the Company's consent, at or after age 62 at appropriately reduced benefit
levels.
Based on the computation through September 30, 1993, the average annual pension
benefit (calculated on the basis of a joint and 50% survivor annuity with
ten-year term certain) payable upon retirement at age 65 to the named execu-
tives would be: Mr. Thorpe $213,562; Mr. Golliver, $145,604; Mr. Gessel,
$89,697; Mr. Torgerson, $89,697; and Mr. Gustafson, $89,697. The portion of
the benefit payable under the supplemental retirement plan will be paid net of
amounts received from social security, the Company's defined benefit plan for
salaried employees and any benefits received from retirement plans of prior
employers.
EMPLOYMENT AGREEMENTS
The Company has conditional employment agreements with four of its key execu-
tive officers: Messrs. James A. Thorpe, Robert R. Golliver, Robert J. Tomlinson
and James P. Torgerson. The employment agreements offer additional security to
these key management personnel to better enable them to function effectively
without distraction in the event that uncertainties as to the future control of
the Company should arise. These agreements provide certain benefits should
employment be terminated other than for cause, or by death, disability or
normal retirement within three years subsequent to a change in control of the
Company. Change in control of the Company includes the acquisition by any
person of: (1) power to exercise a controlling influence over management or
policies; (2) ownership or power to vote 25% or more of the outstanding voting
securities of the Company; or (3) change in the majority of the Board of
Directors during the six-year period subsequent to the acquisition by any
person of ownership or power to vote 10% or more of the outstanding voting
securities of the Company without the approval of the majority of the Board of
Directors in office prior to such acquisition. The benefits to be provided by
the Company include: (1) a cash payment equal to three years annual base
salary, or annual salary until normal retirement date if sooner; (2) lump sum
payment for amounts calculated under dissolution of the performance share plan;
(3) maintenance of participation in all current employee benefit plans or pro-
vision for substantially similar benefits for a three-year period or until
normal retirement date if sooner; (4) a cash payment at retirement date equal
to the additional retirement compensation to which the executive would have
been entitled had the executive continued in the employ of the Company for an
additional three years or until normal retirement date if sooner; (5) a cash
payment equal to the difference between the exercise prices of all stock
options and the higher of: (a) the average of the high and low sales prices on
the date of termination, or (b) the highest price actually paid in connection
with the change in control of the Company; and (6) a cash payment equal to the
excise taxes imposed by the Internal Revenue Code Section 4999, if any, on all
payments enumerated in this sentence, plus the tax expense to the executive
resulting from this additional payment. If the executive voluntarily termi-
nates without good reason, as defined in the agreement, no additional or
special benefits accrue to the executive. Since the conditions specified in
the contracts have not occurred, no amounts were charged to expense by the
Company under these agreements in fiscal 1993.
PAGE 15
COMPENSATION OF DIRECTORS
Remuneration of Directors: Each Director who is not an officer of the Company
and its subsidiaries is paid a retainer of $8,000 per year and an additional
$1,500 per year for serving on the Executive Committee or as Chairman of
another Committee of the Board. In addition, each such Director is paid a fee
of $600 for attending a regular, special or annual meeting of the Board or for
a committee meeting not held on the same day as a Board meeting. None of such
directors is eligible to participate in any of the compensation plans described
above. The Company also has a Directors Stock Bonus Plan which was approved by
the stockholders in February 1991. Under this Plan, an outside Director is
awarded 200 shares of Company common stock in January of each year for service
on the Board of Directors for the prior fiscal year. During fiscal 1993, 1,800
shares of common stock were awarded under the Plan. The Company pays no addi-
tional remuneration to employees of the Company who are directors. During
fiscal 1993, there were six meetings of the Board of Directors.
During fiscal 1993 each incumbent Director attended more than 75% of the aggre-
gate number of meetings of the Board of Directors and committees on which he or
she served.
PROPOSAL FOR APPROVAL OF
WASHINGTON ENERGY COMPANY STOCK OPTION PLAN
The Board of Directors, by resolution at its meeting on December 15, 1993,
recommended for shareholder approval the Washington Energy Company Stock Option
Plan. In order for grants of stock options under the plan to become effective,
the plan must be approved by the affirmative vote of the holders of a majority
of the shares of common stock of the Company present in person or by proxy at
the annual meeting.
The following is a short summary of the plan. For more precise information,
see the Washington Energy Company Stock Option Plan, which is included as an
addendum to this Proxy Statement.
The purpose of this Stock Option Plan (the "Plan") is to promote the interest
of the Company, by providing a method whereby executives and other key
employees of the Company or its subsidiary corporations may be encouraged to
invest in the Company's Common Stock and thereby increase their proprietary
interest in the Company's business, encourage them to remain in the employ of
the Company or a subsidiary corporation of the Company, and increase their
personal interest in the continued success and progress of the Company and its
subsidiary corporations.
This Plan shall be administered by the Compensation and Benefits Committee (the
"Committee") of the Company's Board of Directors.
Options shall be granted only to executives and other key employees of the
Company or its subsidiary corporations who, in the judgment of the Committee,
are capable and desirous of influencing the growth and profits of the Company
through their efforts. Approximately 75 individuals would potentially be
eligible for grants under the plan based on the Company's past practice.
PAGE 16
Options covering up to 800,000 shares may be granted under the plan. The
exercise price of each option shall be determined by the Committee but shall
not be less than the Fair Market Value of the Common Stock on the date of
grant.
The term of each option shall be not more than ten (10) years from the date the
option is granted, subject to earlier termination or other limitations as
provided in the Plan. Subject to any vesting provisions an option granted
under the plan may be exercised at any time prior to its termination.
The exercise price under an option shall be paid in full, in cash, at the time
of exercise, and a certificate representing shares so purchased shall be
delivered to the person entitled thereto. Alternatively, the Committee in its
sole discretion may permit the exercise price to be paid in full or in part
with Common Stock previously acquired by the employee, but only if and to the
extent permitted by applicable regulations and rulings of the Internal Revenue
Service.
At the discretion of the Committee, any option granted under this Plan may, at
the time of such grant, include a stock appreciation right. A "stock apprecia-
tion right" is the right of an optionee, without payment to the Company (except
for applicable withholding taxes, if any), to receive the excess of the Fair
Market Value per share on the date on which a stock appreciation right is exer-
cised over the exercise price per share as provided in the related underlying
option. Generally, upon exercise of a stock appreciation right the holder will
receive shares of Common Stock having a fair market value equal to this excess,
although all or a portion of this value may, with the consent of the committee
be paid in cash. A stock appreciation right shall pertain to, and be granted
only in conjunction with, a related underlying option granted under this Plan
and shall be exercisable only to the extent that the related option is exer-
cisable.
The Board of Directors may at any time discontinue the plan as to future grants
of shares and may also generally amend the plan in any respect, subject to
certain limitations.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. The Company intends that certain of the options
granted under the plan will qualify as incentive stock options under Section
422 of the Internal Revenue code. Assuming that the options are so qualified,
the tax consequences of the plan will vary depending on whether certain holding
period requirements are met.
If an optionee acquiring stock pursuant to an incentive stock option does not
dispose of the stock until at least one year after the transfer of the stock to
the optionee and at least two years from the date of grant of the option, then,
subject to the alternative minimum tax rules discussed below, there will be no
tax consequences to the optionee or the Company when the incentive stock option
is granted or when it is exercised.
If stock acquired upon exercise of an option is sold by the optionee and, at
the time of the sale, the holding period requirements described in the pre-
ceding paragraph have not been met, the federal income tax consequences to the
optionee and the Company will be as follows: first, the optionee will be
required to report, on his or her federal income tax return for the year in
which the sale occurs, additional compensation income equal to the difference
between the fair market value of the stock at the time of exercise of the
option and the purchase price at which the stock was acquired (the Company will
PAGE 17
generally be entitled to a compensation deduction in an equivalent amount).
Next, for purposes of determining gain or loss upon sale of the stock an amount
equal to this compensation income will be added to the purchase price at which
the stock was acquired, and the total will be the optionee's adjusted cost of
the stock. Gain or loss will be determined, based upon the difference between
the optionee's adjusted cost of the stock and the net proceeds of the sale, and
the optionee will be required to report such gain or loss as long-term or
short-term (depending on how long the optionee held the stock) capital gain or
loss on his or her federal income tax return for the year in which the sale
occurs.
Although an optionee who receives an incentive stock option under the plan
realizes no taxable income when the optionee receives or exercises the incen-
tive stock option, the difference between the fair market value of the stock on
the date of exercise and the purchase price paid results in an adjustment in
computing alternative minimum taxable income for purposes of Sections 55 et
seq. of the Internal Revenue Code, which may trigger alternative minimum tax
consequences for optionees. Any alternative minimum tax that is payable may
ultimately be credited against taxes owed upon disposition of the stock.
Non-qualified Options. The Company may also grant non-qualified options under
the plan. In general, there will be no tax consequences to the optionee or the
Company when the option is granted. Upon exercise of the option, the optionee
will be required to report, on his or her federal income tax return for the
year in which the exercise occurs, additional compensation income equal to the
difference between the fair market value of the stock at the time of exercise
of the option and the purchase price at which the stock was acquired (the Com-
pany will generally be entitled to a compensation deduction in an equivalent
amount).
The foregoing is only a summary of the federal income tax rules applicable to
options granted under the plan and is not intended to be complete. In
addition, this summary does not discuss the effect of the income or other tax
laws of any state or foreign country in which a participant may reside.
INDEPENDENT ACCOUNTANTS AND AUDITORS
The firm of Arthur Andersen & Co. has audited the accounts of the Company and
its predecessor, Washington Natural Gas Company, for a number of years and has
been selected to audit the accounts of the Company for the fiscal year ending
September 30, 1994. Representatives of Arthur Andersen & Co. are expected to
be present at the Annual Meeting, with the opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions
submitted in writing to the Secretary of the Company in advance of the meeting.
DATE FOR RECEIPT OF 1995 STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1995 Annual Meeting must
be received by the Company no later than September 11, 1994 to be considered
for inclusion in the proxy statement and proxy for the 1995 meeting.
PAGE 18
OTHER MATTERS
The management knows of no other matters to be brought before the meeting.
However, if any other matters come before the meeting, it is the intention of
the persons named in the accompanying proxy form to vote in accordance with
their best judgment on such matters under the discretionary power granted by
said proxy.
WASHINGTON ENERGY COMPANY
(TIMOTHY J. HOGAN, Corporate Secretary)
January 12, 1994
PAGE 19
WASHINGTON ENERGY COMPANY STOCK OPTION PLAN
1. Purpose
The purpose of this Stock Option Plan (the "Plan") is to promote the
interest of WASHINGTON ENERGY COMPANY, a Washington corporation (the
"Company"), by providing a method whereby executives and other key
employees of the Company or its subsidiary corporations may be encouraged
to invest in the Company's Common Stock and thereby increase their pro-
prietary interest in the Company's business, encourage them to remain in
the employ of the Company or a subsidiary corporation of the Company, and
increase their personal interest in the continued success and progress of
the Company and its subsidiary corporations. Options issued under the
Plan shall either be options designated as incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended ("IRC"), or options designated
as nonqualified stock options ("Nonqualified Stock Options"). For pur-
poses of this Plan, the terms "parent corporation" and "subsidiary
corporation" shall be as defined in IRC Section 424(e) and Sec-
tion 424(f), respectively.
2. Administration
(a) This Plan shall be administered by the Compensation and Benefits
Committee (the "Committee") of the Company's Board of Directors (the
"Board of Directors"). All persons designated as members of the
Committee shall be "disinterested persons" within the meaning of
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Board of Directors shall appoint
the members of the Committee from time to time, and the Committee or
any member thereof may be removed by the Board of Directors with or
without cause.
(b) Any member of the Committee may resign at any time by written notice
to the Board of Directors. Any action of the Committee with respect
to the Plan shall be taken by majority vote at a meeting of the Com-
mittee or by written consent of a majority of the members of the
Committee without a meeting.
(c) Subject to the provisions of the Plan and to resolutions adopted by
the Board of Directors, the Committee shall have authority in its
discretion:
(i) to construe and interpret the Plan and all options granted
thereunder;
(ii) to prescribe, amend and rescind rules and regulations relating
to the Plan;
(iii) to determine the individuals to whom options shall be granted,
the time or times at which the options shall be granted, and
the number of shares to be subject to the options so granted;
(iv) to determine the terms and provisions of the options granted
under the Plan (which need not be identical), including but not
limited to the exercise prices and any vesting provisions that
the Committee deems advisable; and
PAGE 20
(v) to make all other determinations necessary or advisable for the
administration of the Plan.
All determinations and interpretations made by the Committee shall
be binding and conclusive on all participants in the Plan and on
their legal representatives and beneficiaries.
(d) Each option shall be evidenced by a written agreement, which shall
contain such terms and conditions (consistent with the terms of this
Plan) as may be approved by the Committee and shall be signed by an
officer of the Company and the employee receiving such option. In
case of any inconsistency between any provision of an option agree-
ment and the Plan, the provisions of the Plan in effect at the date
of grant of the option shall be controlling.
(e) Exercise by the Committee of its authority under the Plan shall be
consistent with the intent that (i) all Incentive Stock Options
issued under the Plan be qualified under the terms of IRC Sec-
tion 422, and (ii) with respect to all persons who are "officers" of
the Company within the meaning of Section 16(b) of the Exchange Act,
the Plan be administered in a manner that satisfies the conditions
of Rule 16b-3(c)(2)(i) under the Exchange Act so that the grant of
options and stock appreciation rights under this Plan, as well as
all other transactions with respect to the Plan, to options and
stock appreciation rights granted hereunder and to any Common Stock
acquired upon exercise of options and stock appreciation rights
shall, to the extent possible, be exempt from the operation of
Section 16(b) of the Exchange Act.
3. Eligibility
Options shall be granted only to executives and other key employees of
the Company or its subsidiary corporations who, in the judgment of the
Committee, are capable and desirous of influencing the growth and profits
of the Company through their efforts. For purposes of this Plan, an
optionee's employment shall not be considered interrupted in the case of
sick leave, military leave or any other leave of absence approved by the
Company.
4. Special Limitation for Ten Percent (10%) Shareholders
Incentive Stock Options shall not be granted hereunder to any individual
who, at the time such option is granted, owns (directly or indirectly as
specified in IRC Section 424(d)) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company or of its parent or subsidiary corporations unless, in addition
to the other terms and restrictions for Incentive Stock Options specified
herein, the exercise price is at least one hundred ten percent (110%) of
the Fair Market Value (as defined below) of the Common Stock on the date
of grant, and such option by its terms will terminate within five (5)
years from the date such option is granted.
5. Shares Subject to the Plan
(a) The Committee may, from time to time, provide for the option and
sale under this Plan of up to 800,000 shares of the Company's $5.00
par value Common Stock in the aggregate (subject to adjustments
required by Section 13 of this Plan). Such shares may be authorized
and unissued shares or shares previously acquired or to be acquired
PAGE 21
by the Company and held in treasury. If an option ceases to be
exercisable, in whole or in part, the shares as to which the option
may no longer be exercised shall thereafter be available for
additional options under this Plan.
(b) The Company shall not be required, upon the exercise of any option,
to issue or deliver a stock certificate for any shares of stock
prior to the completion of such registration or other qualification
of such shares under any state or federal law, rule or regulation,
and such listing with such stock exchanges, as the Company shall
determine to be necessary or desirable.
6. Exercise Price
(a) The exercise price of the Common Stock under each option shall be
determined by the Committee but shall not be less than the Fair
Market Value of the Common Stock on the date of grant (as determined
in accordance with Section 17). The "Fair Market Value" of the
Common Stock on any day shall mean the last sales price of a share
of Common Stock as reported for that day (or, if that day is not a
trading day, for the next preceding trading day) by the principal
exchange on which the Common Stock is listed. If the Fair Market
Value of the Common Stock is not determinable by this means, the
Fair Market Value shall be determined in good faith by the Committee
on the basis of such considerations as the Committee deems appro-
priate. The exercise price for any option is subject to adjustment
as provided in Section 13 hereof, and subject to the special
requirements described in Section 4.
(b) The exercise price under an option shall be paid in full, in cash,
at the time of exercise, and a certificate representing shares so
purchased shall be delivered to the person entitled thereto subject
to the provisions of Section 5 hereof. Alternatively, the Committee
in its sole discretion may permit the exercise price to be paid
in full or in part with Common Stock previously acquired by the
employee, but only if and to the extent permitted by applicable
regulations and rulings of the Internal Revenue Service. No frac-
tional share shall be issued upon the exercise of options and any
amounts remaining after issuance of the nearest number of whole
shares approved for issuance will be paid in cash.
7. Stock Appreciation Rights
(a) At the discretion of the Committee, any option granted under this
Plan may, at the time of such grant, include a stock appreciation
right. The effectiveness of any such rights granted with an Incen-
tive Stock Option shall be conditioned upon their validity under IRC
Section 422. If such rights are ultimately determined by the Inter-
nal Revenue Service to be inconsistent with Section 422, any such
rights shall terminate but Incentive Stock Options with respect to
which such rights were granted shall otherwise continue in effect
hereunder. The validity or invalidity of any such rights shall have
no effect on the validity of the other provisions of any option or
of this Plan. The Committee may impose conditions upon the grant or
exercise of the stock appreciation right which conditions may
include a condition that the stock appreciation right may only be
exercised in accordance with rules and regulations adopted by the
Committee from time to time. Such rules and regulations may govern
the right to exercise a stock appreciation right granted prior to
PAGE 22
the adoption or amendment of such rules and regulations as well as
stock appreciation rights granted thereafter.
(b) A "stock appreciation right" is the right of an optionee, without
payment to the Company (except for applicable withholding taxes, if
any), to receive the excess of the Fair Market Value per share on
the date on which a stock appreciation right is exercised over the
exercise price per share as provided in the related underlying
option.
A stock appreciation right shall pertain to, and be granted only in
conjunction with, a related underlying option granted under this
Plan and shall be exercisable only to the extent that the related
option is exercisable. The number of shares of Common Stock subject
to the stock appreciation right shall be all or part of the shares
subject to the related option, as determined by the Committee. The
stock appreciation right shall either become all or partially non-
exercisable and shall be all or partially forfeited if the exercis-
able portion, or any part thereof, of the related option is exer-
cised and vice versa.
(c) Subject to any restrictions or conditions imposed by the Committee,
a stock appreciation right may be exercised by the optionee as to a
number of shares of Common Stock under its related option upon the
surrender of a like number of shares of Common Stock available under
the exercisable portion of the related option, but only if the Fair
Market Value of the stock subject to the option exceeds the option's
exercise price. Subject to Section 7(d), upon the exercise of a
stock appreciation right and the surrender of the exercisable por-
tion of the related option, the optionee shall be awarded whole
shares of Common Stock. The award shall have a total value equal to
the product obtained by multiplying (i) the excess of the Fair
Market Value per share on the date on which the stock appreciation
right is exercised over the exercise price per share, by (ii) the
number of shares subject to the exercisable portion of the related
option so surrendered. No fractional share shall be issued upon the
exercise of a stock appreciation rights and any amounts remaining
after issuance of the nearest number of whole shares approved for
issuance will be paid in cash.
(d) An optionee may elect to receive cash in lieu of all or part of the
shares that would otherwise be issued under Section 7(c) upon exer-
cise of a stock appreciation right provided (i) such election is
accepted and approved by the Committee in its sole discretion, and
(ii) with respect to an election by a person who is an "officer" of
the Company within the meaning of Section 16(b) of the Exchange Act,
such election is made in the time and manner required under Rule
16b-3 of the Exchange Act so that the election is exempt from
Section 16(b) of the Exchange Act.
8. Duration of the Option and Stock Appreciation Rights
The term of each option shall be not more than ten (10) years from the
date the option is granted, subject to earlier termination or limitations
as provided in Sections 4, 9, 14 and 15 hereof.
PAGE 23
9. Exercise of Options and Stock Appreciation Rights
(a) Except as provided in Sections 10, 14 and 15 hereof and subject to
any vesting provisions specified by the Committee, each optionee
holding an option under this Plan who has remained in the continu-
ous, full-time employment of the Company since the grant of the
option may exercise the option to purchase any or all of the shares
covered by the option at any time within the term of such option.
(b) The exercise of an option for fewer than the total number of shares
covered by the option shall not affect the optionee's right to
exercise the option as to any remaining shares available for
purchase at any time prior to the option's termination.
10. Nontransferability of Option and Stock Appreciation Rights
Each option (including any related stock appreciation right) granted
under this Plan shall, by its terms, be nontransferable by the optionee
other than by will or the laws of descent and distribution and shall be
exercisable during the optionee's lifetime only by the optionee. The
option (including any related stock appreciation right) and any and all
rights granted thereunder and not theretofore effectively and completely
exercised shall automatically terminate and expire upon any sale, trans-
fer or pledge or any attempted sale, transfer or pledge of such rights or
upon the bankruptcy or insolvency of the optionee, or of any person who
shall become entitled thereto under the will of, or the laws of descent
and distribution applicable to, the optionee.
11. Limitation on Amounts of Incentive Stock Options Granted to Employees
The aggregate Fair Market Value of the Common Stock with respect to
which, during any calendar year, one or more Incentive Stock Options
under this Plan (and/or one or more options under any other plan main-
tained by the Company or any of its parent and subsidiary corporations
for the granting of options intended to qualify under IRC Section 422)
are exercisable for the first time by an optionee shall not exceed
$100,000 (said value to be determined as of the respective dates on which
such options are granted to the optionee). If an option that would
otherwise qualify as an Incentive Stock Option becomes exercisable for
the first time in any calendar year for shares of Common Stock that would
cause such aggregate Fair Market Value to exceed $100,000, then the
portion of the option in respect of such shares shall be deemed to be a
Nonqualified Stock Option.
12. Other Terms and Conditions
The Committee shall have power, subject to the limitations contained
herein, to fix any terms and conditions for the grant or exercise of any
option under this Plan. Nothing contained in this Plan, nor in any
option granted pursuant to this Plan, shall confer upon any optionee any
right to continue in the employ of the Company or any of its subsidiary
corporations, nor limit in any way the right of the Company or of any of
its subsidiary corporations by which the optionee is employed, to termi-
nate the optionee's employment at any time.
PAGE 24
13. Adjustment of Shares Subject to Option
If the Company subdivides its outstanding shares of Common Stock into a
greater number of shares of Common Stock (by stock dividend, stock split,
reclassification or otherwise) or combines its outstanding shares of
Common Stock into a smaller number of shares of Common Stock (by reverse
stock split, reclassification or otherwise), or if the Committee deter-
mines, in its sole discretion, that any stock dividend, extraordinary
cash dividend, reclassification, recapitalization, reorganization,
split-up, spin-off, combination, exchange of shares, warrants or rights
offering to purchase Common Stock, or other similar corporate event
(including mergers or consolidations) affects the Common Stock such that
an adjustment is required in order to preserve the benefits or potential
benefits intended to be made available under this Plan, then the Commit-
tee shall, in its sole discretion and in such manner as the Committee may
deem equitable and appropriate, make adjustments to (a) the number and
kind of shares with respect to which options may thereafter be granted
under this Plan; (b) the number and kind of shares subject to outstanding
options, and (c) the exercise price under outstanding options; provided,
however, that the number of shares subject to an option shall be always a
whole number. The Committee may, if deemed appropriate, provide for a
cash payment to any optionee in connection with any adjustment made
pursuant to this Section 13.
14. Effect of Termination of Employment
If an optionee under this Plan shall cease to be regularly and continu-
ously employed by the Company or by any of its subsidiary corporations
for any reason other than retirement (as defined in the Company's Retire-
ment Plan), death, or disability (as defined in IRC Section 22(e)(3)),
then, upon the termination of the optionee's employment, all rights under
all options held by the optionee under the Plan shall lapse and ter-
minate. If termination of employment is caused by the optionee's
disability (as defined in IRC Section 22(e)(3)), the optionee may, but
only within the one (1) year period immediately following such termina-
tion of employment (subject to the earlier expiration of the options by
their terms), exercise the options to the extent they were exercisable at
the date of such termination. If termination of such employment is
caused by the optionee's retirement pursuant to the Company's Retirement
Plan or any other retirement or pension plan of the Company which may
then be in effect, then, subject to Section 15, the optionee may, but
only within three (3) months immediately following such termination of
employment (subject to the earlier expiration of the options by their
terms), exercise the options to the extent they were exercisable at the
date of such termination. For purposes of this Plan, if an optionee is
employed by a subsidiary of the Company that ceases to be a "subsidiary
corporation" of the Company within the meaning of IRC Section 424(f),
such event shall be deemed to constitute a termination of the employment
of the optionee for a reason other than retirement (as defined in the
Company's Retirement Plan), death, or disability (as defined in IRC
Section 22(e)(3)).
15. Death of Optionee
If an optionee dies while regularly and continuously employed by the Com-
pany or by any of its subsidiary corporations, or within three (3) months
after the termination of such employment by retirement pursuant to the
Company's Retirement Plan or any other retirement or pension plan of the
Company which may then be in effect, any options held by the optionee
PAGE 25
may, to the extent they were exercisable at the date of such death, be
exercised within one (1) year after the date of death (subject to the
earlier expiration of the options by their terms) by the optionee's
executor or administrator or by the person or persons to whom the
optionee's rights under the options shall pass by will or by the
applicable laws of descent and distribution.
16. Amendment of Plan
The Board of Directors may from time to time amend the Plan in such
respects as it shall deem advisable, so long as such amendment complies
with all applicable laws, applicable stock exchange listing requirements,
and applicable requirements for exemption (to the extent necessary) under
Rule 16b-3 of the Exchange Act. Notwithstanding the foregoing, without
further shareholder approval no amendment to this Plan shall increase the
number of shares of Common Stock subject to the Plan (except as autho-
rized by Section 13), change the class of persons eligible to receive
options under the Plan, or otherwise materially increase the benefits
accruing to participants under the Plan. No amendment of the Plan may,
without the consent of the optionee of any option theretofore granted,
adversely affect the rights of the optionee with respect to the option.
17. Time of Granting Options
Unless otherwise specified by the Committee, the date of grant of an
option under the Plan shall, for all purposes, be the date on which the
Committee makes the determination of granting such option. Notice of the
determination shall be given to each employee to whom an option is so
granted within a reason-able time after the date of such grant.
18. Withholding
The Company's obligation to deliver shares of Common Stock upon exercise
of an option shall be subject to any applicable federal, state and local
tax withholding requirements. Federal, state and local withholding tax
due at the time an option is exercised may, in the discretion of the
Committee, be paid in shares of Common Stock already owned by the
optionee or through the withholding of shares otherwise issuable to
the optionee, upon such terms and conditions as the Committee shall
determine. If the optionee shall fail to pay, or make arrangements
satisfactory to the Committee for the payment of, all such federal, state
and local taxes, then the Company shall, to the extent permitted by law,
have the right to deduct from any payment of any kind otherwise due to
the optionee an amount equal to any federal, state or local taxes of any
kind required to be withheld by the Company with respect to the option.
19. Effective Date and Termination of Plan
This Plan is adopted effective as of December 15, 1993; provided, how-
ever, that the Plan shall be ratified and approved within twelve (12)
months thereafter by the favorable vote of the holders of a majority of
the Common Stock of the Company present, in person or by proxy, and
entitled to vote at a meeting of such shareholders. If the Plan shall
not be so ratified by the Company's shareholders, the Plan and any
options granted thereunder shall be void.
The Plan may be terminated at any time by the Board of Directors and, if
not so terminated at an earlier date, the Plan in any event shall termi-
nate once all the shares reserved under the Plan have been sold or on
PAGE 26
December 14, 2003, whichever is earlier. Options may be granted under
this Plan at any time, and from time to time, prior to its termination.
Any option outstanding under the Plan at the time of its termination
shall remain in effect until the option shall have been exercised in full
or shall have expired or been otherwise terminated.
20. Statutory References
Each reference in this Plan to a statute or a regulation promulgated
thereunder shall be construed to refer to such statute or regulation as
it may from time to time be amended and to any similar successor
provisions thereto.
PAGE 27
(front)
WASHINGTON ENERGY COMPANY PROXY FOR 1994 ANNUAL MEETING
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT
The undersigned hereby appoints Robert R. Golliver, Donald J. Covey and
Timothy J. Hogan, and each or any of them, proxy for the undersigned, with
power of substitution, to represent and vote all the shares of common stock
held of record by the undersigned as of the close of business on December 22,
1993, at the Annual Meeting of Stockholders of Washington Energy Company to be
held on Friday, February 25, 1994, or any adjournment thereof, upon all matters
properly coming before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
1. ELECTION OF FOUR DIRECTORS
___ FOR all nominees listed below ___ AUTHORITY WITHHELD
(except as marked to the contrary to vote for all
below). nominees listed
Class I: Virginia Anderson; Tomio Moriguchi; Sally G. Narodick.
Class III: William P. Vititoe
(To withhold authority to vote for any individual nominee, strike out
that nominee's name above. To cumulate votes for any nominee(s), write
your instructions as to the number of votes cast for each in the space
provided below. The total must not exceed four times the number of
shares you hold.)
2. APPROVAL OF THE WASHINGTON ENERGY COMPANY STOCK OPTION PLAN
___ FOR ___ AGAINST ___ ABSTAIN
_____________________________________________________________
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
Please Do Not Fold (Please Date and Sign on Reverse Side)
PAGE 27
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ELECTION OF THE FOUR NOMINEES FOR DIRECTOR AND
FOR APPROVAL OF THE WASHINGTON ENERGY COMPANY STOCK OPTION PLAN.
IMPORTANT: THIS IS YOUR PROXY
Please mark, sign and return this Proxy
promptly in the enclosed envelope.
I hereby revoke any proxy to vote said
shares heretofore given. PLEASE SIGN
EXACTLY AS NAME APPEARS HEREIN. When
signing as attorney, corporate officer,
etc., give full title as such.
Date____________________________, 1994
______________________________________
Signature
______________________________________
Signature
(See Over)
