<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14C-5(D)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
PUGET SOUND POWER AND LIGHT COMPANY
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
PUGET SOUND POWER AND LIGHT COMPANY
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 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 forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
PUGET SOUND POWER & LIGHT COMPANY
Notice of Annual Meeting of Shareholders
To Be Held May 9, 1995
To the Holders of Common Stock of
Puget Sound Power & Light Company:
The Annual Meeting of Shareholders of Puget Sound Power & Light Company will be
held at 10 a.m. on May 9, 1995 at the Meydenbauer Center located at 11100 N.E.
6th Street, Bellevue, Washington for the purpose of acting upon the following
matters:
1. To elect four Directors to serve until the expiration of three-year terms and
until their successors are elected and qualified.
2. To consider and vote upon a proposal to approve a Long-Term Incentive
Compensation Plan for officers and key employees of the Company and its
subsidiaries.
3. To consider and vote on any and all other matters that may properly come
before the meeting and any adjournment thereof.
Only shareholders of record at the close of business on March 13, 1995 will be
entitled to attend and vote at the meeting. If your shares are registered in the
name of a brokerage firm or trustee and you plan to attend the meeting, please
obtain from the firm or trustee 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 participant in the Company's Stock Purchase and Dividend
Reinvestment Plan, please note that the enclosed proxy covers all shares in your
account, including any shares which may be held in such plan.
March 27, 1995
Bellevue, Washington
By Order of the Board of Directors,
/s/ James W Eldredge
James W. Eldredge, Corporate Secretary
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Proxy Statement.........................................1
Annual Report...........................................1
Election of Directors...................................1
Security Ownership of Directors and Executive Officers..4
Board of Directors and Committee Meetings...............5
Compensation and Retirement Committee Report............7
Stock Price Performance Graph..........................10
Summary Compensation Table.............................11
SAR Grants in 1994.....................................13
Aggregated SAR Exercises in 1994 and
Year-End SAR Values.................................14
Long-Term Incentive Plan Awards in 1994................15
Retirement Benefits Table..............................16
Proposal No. 2 - Approval of 1995 Long-Term Incentive
Compensation Plan...................................17
Independent Public Accountants.........................20
Voting Rights and Proxy................................20
Shareholder Proposals..................................20
Solicitation of Proxies................................21
Appendix A - 1995 Long-Term Incentive
Compensation Plan..................................A-1
Map to Annual Meeting
</TABLE>
YOUR VOTE IS IMPORTANT
The Company has approximately 62,000 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.
<PAGE>
PROXY STATEMENT
The following information is furnished in connection with the solicitation of
proxies for the Annual Meeting of Shareholders (the "Annual Meeting") of Puget
Sound Power & Light Company ("Puget" or the "Company") to be held at 10 a.m. on
May 9, 1995 at the Meydenbauer Center located at 11100 N.E. 6th Street,
Bellevue, Washington. The approximate mailing date of the proxy material is
March 27, 1995. The mailing address of the Company's principal executive offices
is Puget Sound Power & Light Company, P.O. Box 97034, Bellevue, Washington
98009-9734 .
Management is not aware of any matter to be presented for action at the Annual
Meeting other than the election of four Directors and a proposal to approve the
1995 Long-Term Incentive Compensation Plan for officers and key employees of the
Company and its subsidiaries.
ANNUAL REPORT
The Company's Annual Report for 1994, including audited financial statements, is
being mailed to shareholders on or about March 27, 1995.
ELECTION OF DIRECTORS
The number of Directors is determined by resolution of the Board of Directors,
subject to revision by the shareholders. The Board of Directors has, by
resolution, fixed the number of Directors at eleven. The terms of the Directors
are classified so that each year approximately one-third of the Directors are
elected 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, four
Class I Directors will be elected to serve for a term of three years expiring on
the date of the Annual Meeting of Share-holders in 1998.
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 the Bylaws of the Company.
1
<PAGE>
The names of nominees for Directors of the Company are set forth below.
CLASS I NOMINEES
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 62, has been a Director of the
Company since 1981 and also serves as a director of Washington Mutual Savings
Bank and Washington State Executive Board, US West Communi-cations Group, Inc.
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 43, has been a Director of the Company since 1993. She also serves as a
Director of U.S. Bank of Washington, a Regent of Washington State University and
Chairman of the Association of Washington Business.
WILLIAM S. WEAVER
Mr. Weaver has been Executive Vice President and Chief Financial Officer of the
Company since 1991. For more than five years prior to joining the Company, he
was a partner in the law firm of Perkins Coie. Mr. Weaver, age 51, has been a
Director of the Company since 1991.
R. KIRK WILSON
Mr. Wilson has been President and Chief Executive Officer of Thrifty Foods, Inc.
(retail grocery) since 1969. Mr. Wilson, age 56, has been a Director of the
Company since 1976.
The names of the Class II and Class III Directors of the Company who are not
standing for election and whose terms of office will continue after the Annual
Meeting are listed below.
CLASS II DIRECTORS
Terms Expire 1996
JOHN D. DURBIN
Mr. Durbin has been President and Chief Executive Officer of Hostar
International, Inc. (equipment for hotels) since 1988, and 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 59, has been a Director of the Company since
1984 and also serves as a Director of John Fluke Manufacturing Company, Inc.
2
<PAGE>
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 69, has been a Director of
the Company since 1990 and also serves as a Director of Burlington Northern
Inc., Flow International Corporation, Heart Technology Inc., the Kaiser Family
Foundation, Tera Computer Company, and Washington Mutual Savings Bank.
NANCY L. JACOB
Ms. Jacob is Chairman and Chief Executive Officer of CTC Consulting, Inc.
(financial services). Her prior positions include Managing Director, Capital
Trust Company (financial advisory) 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 until 1988. Ms. Jacob, age 52, has been a Director of
the Company since 1980 and also serves as a trustee of College Retirement
Equities Fund in New York.
CLASS III DIRECTORS
TERMS EXPIRE 1997
CHARLES W. BINGHAM
Mr. Bingham has been Executive Vice President of Weyerhaeuser Company (forest
products industry) since 1981. Mr. Bingham, age 61, has been a Director of the
Company since 1978.
JOHN W. ELLIS
Mr. Ellis has been Chairman and Chief Executive Officer of the Baseball Club of
Seattle since 1992. 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 66,
has been a Director since 1969 and also serves as a Director of SAFECO
Corporation, Washington Mutual Savings Bank, UTILX Corporation and Associated
Electric & Gas Insurance Services, Ltd.
RICHARD R. SONSTELIE
Mr. Sonstelie has been Chief Executive Officer and President of the Company
since 1992. His prior positions with the Company include 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 50, has been a Director of the
Company since 1987 and also serves as a director of First Interstate Bank of
Washington, Association of Edison Illuminating Companies, Utech Venture Capital
Corporation and Edison Electric Institute.
3
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND
EXECUTIVE OFFICERS
The following table sets forth information as of February 14, 1995, 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 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.
<TABLE>
<CAPTION>
NUMBER OF
NAME OF BENEFICIAL OWNER SHARES
--------------------------------------------------------
<S> <C>
Douglas P. Beighle................................2,717
Phyllis J. Campbell...............................1,000
William S. Weaver.................................1,856/(1)/
R. Kirk Wilson....................................1,477
John D. Durbin....................................2,039
Daniel J. Evans...................................1,000
Nancy L. Jacob....................................1,104
Charles W. Bingham................................3,753
John W. Ellis....................................23,024/(1)/
Richard R. Sonstelie..............................8,431/(1)/
Robert V. Myers...................................6,195/(1)/
Gary B. Swofford..................................4,377/(1)/
Sheila M. Vortman.................................2,106/(1)/
All Directors and executive officers
as a group (20 persons)..........................89,628
</TABLE>
/(1)/ Includes shares credited under the Company's Investment Plan
for Employees through February 14, 1995.
4
<PAGE>
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Board of Directors has established three standing committees, which meet
outside of regular Board of Directors meetings, to assist in the discharge of
the Directors' responsibilities relating to audit, nominating and compensation
issues. The names of these committees, their current membership and a brief
statement of their principal responsibilities are presented below.
BOARD OF DIRECTORS MEETINGS
Seven Board of Directors meetings were held during 1994. Each Director attended
at least 75% of the meetings of the Board of Directors and committees of the
Board on which the Director served.
AUDIT COMMITTEE
The Audit Committee currently includes Douglas P. Beighle (Chairperson), Charles
W. Bingham, John D. Durbin, Daniel J. Evans and R. Kirk Wilson. The Audit
Committee is responsible for reviewing the annual report of the independent
auditors, evaluating the external and internal audit function and recommending
to the Board of Directors the retention of independent auditors and other
auditing matters. Four Audit Committee meetings were held during 1994.
DIRECTOR AFFAIRS COMMITTEE
The Director Affairs Committee currently includes Charles W. Bingham
(Chairperson), John D. Durbin and Daniel J. Evans. The Director Affairs
Committee acts and makes recommendations with respect to identification and
selection of candidates for Directors, Director tenure and committee assignments
and Director compensation matters. Shareholders may propose candidates for
consideration as nominees to the Board of Directors; such proposals should be
directed in writing to the Corporate Secretary prior to each annual meeting.
Director candidates are considered on the basis of recognized achievements and
their ability to bring skills and experience to the deliberations of the Board
of Directors. One Director Affairs Committee meeting was held during 1994.
COMPENSATION AND RETIREMENT COMMITTEE
The Compensation and Retirement Committee currently includes Nancy L. Jacob
(Chairperson), Douglas P. Beighle, Phyllis J. Campbell and R. Kirk Wilson. The
Compensation and Retirement Committee acts and makes recommendations to the
Board of Directors with respect to executive compensation, the Retirement Plan
for Employees and other similar matters. Ten Compensation and Retirement
Committee meetings were held during 1994.
DIRECTOR COMPENSATION
Directors who are not Company officers are paid a quarterly retainer of $3,000
plus $800 for each Board of Directors meeting and committee meeting attended.
The Chairpersons of the Audit, Director Affairs and Compensation and Retirement
Committees receive additional quarterly retainers of $500 each. Directors who
are also officers of the Company do not receive any compensation for duties
performed as Directors.
5
<PAGE>
The Company and Mr. Ellis entered into a consulting agreement that
commenced October 1993 and will end September 30, 1998. Under the terms
of this agreement, Mr. Ellis provides consulting and other services to
the Company, including representing the Company in various industry and
community related committees and activities. For these services, Mr.
Ellis is paid $2,000 per month for the term of the agreement. In
addition, the Company provides administrative support for Mr. Ellis'
services performed under the consulting agreement.
6
<PAGE>
COMPENSATION AND RETIREMENT COMMITTEE REPORT
The Board of Directors delegates responsibility for executive compensation to
the Compensation and Retirement Committee (the "Committee"). The Committee's
members are all nonemployee Directors, none of whom participate in the
compensation programs described here for executives. The Committee establishes
compensation for the Chief Executive Officer and reviews and approves the Chief
Executive Officer's recommended compensation actions for the other executive
officers. The following is the Committee's report on executive compensation for
1994.
In determining executive compensation, the Committee is guided by competitive
pay practices in similar-sized companies within the electric utility industry
and by its belief that executive compensation should:
. Attract and retain outstanding executives by providing compensation
opportunities consistent with the electric utility industry for similar
positions.
. Place a significant portion of each executive's total pay at risk to motivate
executives to achieve Company and individual performance goals.
. Tie incentive compensation to performance, in the short term to favorable
operating results of the Company and, in the long term, by aligning the
interests of executive officers with the long-term interests of the Company's
shareholders.
Overall, the Committee makes compensation decisions in the context of the
competitiveness of the entire compensation package as compared to appropriate
market indices. The Committee's principal source of total compensation market
data is the Edison Electric Institute's ("EEI") comprehensive, industry-wide
annual survey of management pay. The companies included in the EEI survey are
substantially the same as those included in the EEI 100 Index of Investor-owned
Electrics used in the Stock Price Performance Graph.
The Committee has adopted an executive compensation philosophy that encompasses
a mix of base salary and annual and long-term incentive programs. The total
package is designed to provide participants with appropriate incentives for
current performance combined with incentives for achieving the Company's long-
term objectives.
Generally, base salaries for Company executives are designed to be below median
salary for positions of similar responsibility in similar-sized companies within
the EEI survey. Lower base salaries are combined with above-median annual and
long-term incentive compensation targets so that total compensation will be
competitive with the median total compensation level for similar positions in
similar-sized companies within the EEI survey.
In making individual salary decisions, the Committee makes a subjective
evaluation of individual performance versus goals and the competitiveness of the
individual's base salary. As part of cost control initiatives implemented in
1994, base salaries of the named executives that were established in September
1993 were not increased unless there was a significant change in job
responsibilities.
During 1994, all executive officers participated in the Company's Pay at Risk
Plan, which is intended to place a portion of the executive's annual
compensation at risk, to be paid only upon accomplishment of corporate
objectives as approved by the Committee at the beginning of the year. For 1994,
the plan had a threshold funding target based on the achievement of earnings per
share of $1.84. Overall funding could range from zero, if earnings were less
than $1.84 per share, to one and one-half times the target award for
participants if earnings were realized significantly above the threshold funding
target. Individual target awards ranged from 25% to 35% of salary for the named
executives. Because the threshold funding target was not met, no awards to
executive officers or other participants were made under the Pay at Risk Plan
for 1994.
7
<PAGE>
The Company's ability to attract necessary capital at a favorable cost depends
on successful, long-term shareholder return. In 1994, the Company's Long-Term
Incentive Program for Senior Employees (the "Long-Term Incentive Program")
encouraged this return by the allocation of both Performance Share Units
("PSUs") and Stock Appreciation Rights ("SARs") in motivating executive
performance. Both PSUs and SARs are payable only in cash. In determining the
combined size of PSU and SAR grants, the Committee uses as a guideline a target
gain for each participant that ranges from 35% to 75% of salary.
PSUs have been granted biannually; each has a four-year term. A PSU's value is
the Company's stock price at the end of the PSU's term plus the per share
dividends paid during the term. The number of PSUs on which values are paid can
range from zero to 160% of those granted. In the present PSU plan, 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. The number of
PSUs granted in 1994 was determined by dividing a participant's PSU target gain
by the sum of the Common Stock price at the beginning of the year and the
anticipated total dividends paid during the term of the PSUs. The biannual PSU
grants made in 1994 are shown on the Long-Term Incentive Plan Awards in 1994
Table. No PSUs were paid out in 1994, in accordance with the biannual schedule
for PSU grants and payouts.
SARs have been granted annually; each has a 10-year term and vests 20% per year
beginning one year after the date of grant. A SAR's value is the Company's stock
price gain over the base price, which is the closing market value on the date of
grant, plus the incremental value of per share dividend increases during the
holding period. The number of SARs granted in 1994 was based on an objective
value of a SAR set for each grant at a level the Committee believed represented
a desirable result for shareholders. The amount of a participant's SAR target
gain, as described above, was then divided by the SAR's objective value to
obtain the guideline number of shares in each grant. In making each grant
decision, the Committee considered previously made grants and grants still held.
SAR grants made in 1994 are described on the SAR Grants in 1994 Table and its
accompanying footnotes.
Total salary plus annual and long-term incentive compensation for the named
executive officers for 1994 were below the medians for positions of similar
responsibility and job complexity in similar-sized companies within the EEI
survey, primarily because the Pay at Risk Plan did not fund in 1994 and base
salaries generally were not increased due to cost control measures.
Mr. Sonstelie has served as Chief Executive Officer since May 1992. As discussed
above, because of corporate cost control initiatives implemented during 1994,
executive officers who did not have a significant change in job
responsibilities, including Mr. Sonstelie, did not receive a base salary
adjustment in 1994. Mr. Sonstelie did not receive an annual incentive award in
1994 because, as discussed above, the Pay at Risk Plan did not fund in 1994. As
a result of these factors, Mr. Sonstelie's total compensation in 1994 falls
below the median for chief executive officers of similar-sized companies in the
EEI survey, and his cash compensation (salary, plus annual incentive
compensation) earned in 1994 was significantly below competitive compensation.
To provide an additional incentive to increase shareholder value during a time
of anticipated increased pressure on shareholder return, the Committee granted
Mr. Sonstelie a supplemental SAR equal in size to his annual grant for 1994.
This supplemental SAR differs from previous SAR grants both in the method of
determining the amount of the grant and in how it vests. Instead of vesting by
continued employment, the supplemental SAR becomes exercisable only when the
Company achieves a specified level of stock price, as described in the footnotes
to the SAR Grants in 1994 Table.
8
<PAGE>
Mr. Sonstelie's personal objectives, approved by the Committee at the beginning
of 1994, emphasized the attainment of specified short- and long-term strategic
objectives. These objectives focused on the importance of controlling Company
costs while maintaining the quality of customer service as industry competition
grows; the development of a successful response to the challenges posed by a
regulatory review; and the enhancement of shareholder value through the
attainment of specific short-term financial goals. Under Mr. Sonstelie's
leadership, these ambitious objectives resulted in the improvement of the
Company's future competitive posture and the strengthening of long-term
shareholder value. Due to the one-time expenses of strategic cost control
initiatives undertaken in 1994, the short-term financial objectives for the
Company were not met; the Committee believes, however, that Mr. Sonstelie made
significant overall progress toward the attainment of his short- and long-term
strategic goals.
As part of the Committee's annual review of the executive base salary plus
annual and long-term incentive compensation programs, a comprehensive study was
undertaken to address the Committee's desire to link compensation to the growth
of shareholder value by increasing Company stock ownership of executives and key
employees. As a result of this study, a new 1995 Long-Term Incentive
Compensation Plan (the "1995 Plan") has been approved by the Committee and the
Board and is being submitted for shareholder review and approval. See "Proposal
No. 2: Approval of 1995 Long-Term Incentive Compensation Plan" for a description
of the 1995 Plan. If shareholders approve the 1995 Plan, it is the Committee's
intention that no further awards will be made under the existing Long-Term
Incentive Program, but awards previously granted will be allowed to mature.
The Committee intends to implement the 1995 Plan beginning in 1995 by awarding
to executives and key employees contingent grants of Puget stock that will be
paid at the end of a four-year period based on the performance of Puget stock.
The measure of performance will be Puget's cumulative four-year total
shareholder return relative to the EEI 100 Index of Investor-owned Electrics
used in the Stock Price Performance Graph. The number of shares delivered at the
end of the four-year cycle will range from zero to 160% of the contingent grant.
If total shareholder return at the end of the four-year cycle results in the
delivery of Puget 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 be paid out in cash at
the end of the performance period (or at the end of the restricted period for
the portion of the grant paid in restricted stock).
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the company's chief executive officer and four other most highly
compensated executive officers, unless that compensation is considered
performance based. The compensation disclosed in this Proxy Statement does not
exceed the $1 million limit, and executive compensation for 1995 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, Chairperson
Douglas P. Beighle
Phyllis J. Campbell
R. Kirk Wilson
9
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a comparison of the five-year cumulative total
shareholder return (share price appreciation plus reinvested dividends)
on the Company's Common Stock against the cumulative total return of
the Standard and Poor's 500 Stock Index and the EEI 100 Index of
Investor-owned Electrics.
FIVE-YEAR CUMULATIVE TOTAL RETURN COMPARISON /(1)/
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG Puget Power, S & P 500 INDEX AND EEI 100 INDEX
----------- --------- -------
<CAPTION>
Measurement period Puget Power S & P 500 EEI 100
----------- --------- -------
(Fiscal year Covered) Index Index
--------------------- ----------- --------- -------
<S> <C> <C> <C>
Measurement PT -
12/31/89 $ 100 $ 100 $ 100
-- -- -- ------ ------ ------
FYE 12/31/90 $ 101 $ 97 $ 101
-- -- -- ------ ------ ------
FYE 12/31/91 $ 143 $ 126 $ 131
-- -- -- ------ ------ ------
FYE 12/31/92 $ 154 $ 136 $ 141
-- -- -- ------ ------ ------
FYE 12/31/93 $ 151 $ 150 $ 156
-- -- -- ------ ------ ------
12/31/94 $ 134 $ 152 $ 138
</TABLE>
(1) This comparison assumes $100 is invested on December 31, 1989, in (a)
Puget Common Stock, (b) the S&P 500 Stock Index, and (c) the EEI 100 Index
of Investor-owned Electrics. The graph then observes, in each case, stock
price growth and dividends paid (assuming dividend reinvestment) over the
following five years.
The Board of Directors and its Compensation and Retirement Committee
recognize that the market price of stock is influenced by many factors,
one of which is Company performance. The stock price contribution to the
total return performance shown on the graph is not necessarily indicative
of future price performance.
10
<PAGE>
SUMMARY COMPENSATION TABLE
The following information is furnished for the years ended December 31, 1994,
1993 and 1992 with respect to the Company's Chief Executive Officer and each of
the four other most highly compensated executive officers of the Company during
1994 whose salary and bonus exceeded $100,000. Annual compensation includes
amounts deferred at the officer's election.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)/(1)/
<S> <C> <C> <C> <C>
R.Sonstelie 1994 $370,008 $ 0
President and 1993 320,419 66,000
Chief Executive Officer 1992 283,480 120,000
W. Weaver 1994 230,006 0
Executive Vice President 1993 189,352 23,000
and Chief Financial Officer 1992 177,503 50,000
R. Myers 1994 170,003 0
Senior Vice President 1993 162,905 22,500
1992 156,255 45,000
G. Swofford 1994 144,005 0
Senior Vice President 1993 116,455 16,500 $18,701
Customer Operations 1992 109,383 18,000
S. Vortman 1994 120,537/(8)/ 0
Senior Vice President 1993 94,201 10,000 $16,337
Corporate and Regulatory 1992 82,743 12,000
Relations
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
AWARDS PAYOUTS
------------- -------------
NO. OF SHARES
NAME AND UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION SARS(#) PAYOUTS($)/(2)/ COMPENSATION($)
<S> <C> <C> <C>
R.Sonstelie 36,000 -- $13,731/(3)/
President and 18,000 $193,081 11,879
Chief Executive Officer 17,800 -- 10,110
W. Weaver 9,000 -- 10,535/(5)/
Executive Vice President 7,300 --/(4)/ 6,923
and Chief Financial Officer 7,500 -- 7,691
R. Myers 6,000 -- 6,098/(6)/
Senior Vice President 6,300 99,557 5,768
6,900 -- 5,355
G. Swofford 6,000 -- 4,770/(7)/
Senior Vice President 3,200 --/(4)/ 3,867
Customer Operations -- -- --
S. Vortman 3,500 -- 5,021/(9)/
Senior Vice President -- --/(4)/ --
Corporate and Regulatory -- -- --
Relations
</TABLE>
<PAGE>
SUMMARY COMPENSATION TABLE FOOTNOTES
(1) 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). Amounts shown for Mr. Swofford and Ms. Vortman include $15,750 for
a one-time-only vehicle allowance, also received by all other executives,
associated with management's decision to no longer provide executives with
Company-purchased automobiles.
(2) A Performance Share Unit (PSU) for the four-year award cycle ended on
December 31, 1993 entitled the holder to receive a cash payment equal to (a)
the average market price of one share of the Company's 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 the Company's 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 awarded was
guided by the method described in the Compensation and Retirement
Committee's Report. That number was then subject to two adjustments at
maturity. The adjustments functioned to increase or decrease the number of
PSUs on which payment was made. First, the number of PSUs awarded was
multiplied by a fraction, determined by the Compensation and Retirement
Committee for each award, that corresponded to the average annual percentage
increase or decrease in book value per share of the Company's Common Stock
over the four-year period prior to maturity. Second, the number of PSUs, as
modified to give effect to the first adjustment, was further adjusted based
on the ratio of market value of the Company's Common Stock to its book value
as compared to that of the 100 largest electric and combination utilities in
the United States. The source for determining the Company's ranking was a
Kidder, Peabody and Co., Inc. analysis of market-to-book value for the
utility industry. This second adjustment was made by multiplying the number
of PSUs awarded by a fraction, determined by the Compensation and Retirement
Committee at the time the PSU award was made, based on the Company's average
monthly market to book percentile rank among this group of large electric
and combination utilities during the 48-month period prior to maturity. The
value of the PSU award that was paid in 1993 and reported on the Summary
Compensation Table was based on an average stock price during December 1993
of $24.55 and total dividends paid during the four-year cycle of $7.14 per
share. The book value performance during this period was very strong,
resulting in an above-target positive modification to the number of PSUs
paid. However, the average relative market-to-book ranking among electric
and combination utilities was below the award's goal, resulting in a
negative modification to the number of PSUs paid and an overall award amount
within 5% of its objective level.
(3) $2,965 match under Investment Plan for Employees; $9,161 match under
Investment Plan makeup; $1,605 imputed income on life insurance.
(4) Messrs. Weaver and Swofford and Ms. Vortman were not eligible participants
at the time PSUs were awarded for the cycle ended December 31, 1993.
(5) $5,082 match under Investment Plan for Employees; $2,508 match under
Investment Plan makeup; $2,945 imputed income on life insurance.
(6) $2,567 match under Investment Plan for Employees; $3,069 match under
Investment Plan makeup; $462 imputed income on life insurance.
(7) $2,541 match under Investment Plan for Employees; $2,179 match under
Investment Plan makeup; $50 imputed income on life insurance.
(8) Ms. Vortman became Senior Vice President Corporate and Regulatory Relations
in May, 1994.
(9) $2,837 match under Investment Plan for Employees; $1,140 match under
Investment Plan makeup; $1,044 imputed income on life insurance.
12
<PAGE>
SAR GRANTS IN 1994
The following information is furnished for the year ended December 31, 1994 with
respect to the Company's Chief Executive Officer and each of the four most
highly compensated executive officers of the Company for stock appreciation
rights (SARs) which were granted in 1994.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------------------------------------
NO. OF SHARES PERCENT OF TOTAL SARS
UNDERLYING SARS GRANTED TO EMPLOYEES BASE PRICE GRANT DATE
NAME GRANTED (#) IN 1994 ($/SH) EXPIRATION DATE PRESENT VALUE($)/(3)
<S> <C> <C> <C> <C> <C>
R. Sonstelie 18,000/(1)/ 59% $20.75 4/2004 $36,720
President and Chief Executive Officer 18,000/(2)/ 15,400
W. Weaver
Executive Vice President and 9,000/(1)/ 15 20.75 4/2004 18,360
Chief Financial Officer
R. Myers 6,000/(1)/ 10 20.75 4/2004 12,240
Senior Vice President Operations
G. Swofford 6,000/(1)/ 10 20.75 4/2004 12,240
Senior Vice President
Customer Operations
S. Vortman 3,500/(1)/ 6 20.75 4/2004 7,140
Senior Vice President
Corporate and Regulatory Relations
</TABLE>
(1) SARs have a ten-year term, and vest 20% per year beginning one year after
the date of grant. A SAR's value is the Company's stock price gain over the
base price, which is the fair market value on the date of grant, plus the
incremental value of per share dividend increases during the holding
period. In the event of certain corporate transactions, such as certain
mergers or consolidations of the Company with another corporation or a
dissolution or liquidation of the Company, a SAR terminates, but the
vesting of the SAR is accelerated and the SAR may be exercised in full
immediately prior to such corporate transactions.
(2) 6,000 SARs to vest the end of the calendar month when the average daily
closing stock price for that month for Puget Common Stock is at least
$24.00 per share; an additional 6,000 to vest at $25.00 per share; and the
remaining 6,000 to vest at $26.00 per share.
(3) Present value is computed using the binomial method, a variation of the
Black-Scholes method. The EEI uses the binomial method in its annual
comparative survey of industry pay practices. The estimated values under
the binomial model are based on the following assumptions: an option term
of 10 years, representing the period of time the named executive officers
may hold their SARs from date of grant; a risk-free rate of return of 7.3%
determined by the interest rate on a 10-year Zero Coupon U.S. Treasury
Bond, and a volatility and average annual dividend yield calculated using
three years of historical monthly stock price and dividend data. The
binomial value was adjusted by a discount of 3% for each year the SAR has
to be held, reflecting its vesting restrictions. To value Mr. Sonstelie's
additional grant, as described in Footnote 2 above, the binomial model
includes an additional factor to reflect the probability of meeting the
price hurdles. The actual value that an executive may realize, if any, will
depend on the amount by which the stock price exceeds the base price plus
the incremental value of per share dividend increases during the holding
period. There is no assurance any executive will receive the amounts
estimated by the binomial method.
13
<PAGE>
AGGREGATED SAR EXERCISES IN 1994 AND YEAR-END SAR VALUES
The following information is furnished for the year ended December 31, 1994 with
respect to the Company's Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company for unexercised SARs
outstanding at year-end. No SARs were exercised in 1994.
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-The-Money SARs
SARs at Fiscal Year-End (#) at Fiscal Year-End ($)
--------------------------- -------------------------------
Name Exercisable/Unexercisable Exerciseable/Unexercisable/(1)/
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
R. Sonstelie 11,680 / 65,720 $3,127 / $0
President and Chief Executive Officer
W. Weaver
Executive Vice President and 2,960 / 19,340 $0 / $0
Chief Financial Officer
R. Myers 4,680 / 17,500 $1,119 / $0
Senior Vice President
G. Swofford 640 / 8,560 $0 / $0
Senior Vice President
Customer Operations
S. Vortman 0 / 3,500 $0 / $0
Senior Vice President
Corporate and Regulatory Relations
</TABLE>
(1) The amount is the aggregrate of the number of SARs multiplied by the
difference between the closing price of the Common Stock on the New York
Stock Exchange on December 31, 1994 of $20.125 per share minus the base
price for that SAR, plus the incremental value of per share dividend
increases up to December 31, 1994.
14
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS IN 1994
The following information is furnished for the year ended December 31, 1994 with
respect to the Company's Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company with respect to grants
under the Company's Long-Term Incentive Program during 1994.
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS
NUMBER OF SHARES PERIOD UNTIL --------------------------------------------
NAME UNITS (#) MATURATION OR PAYOUT THRESHOLD TARGET MAXIMUM
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
R. Sonstelie 13,000 4 years $84,786 $423,930 $678,288
President and Chief Executive Officer
W. Weaver 5,800 4 years 37,828 189,138 302,621
Executive Vice President and
Chief Financial Officer
R. Myers 4,000 4 years 26,088 130,440 208,704
Senior Vice President
G. Swofford 3,700 4 years 24,131 120,657 193,051
Senior Vice President
Customer Operations
S. Vortman 2,200 4 years 14,348 71,742 114,787
Senior Vice President
Corporate and Regulatory Relations
</TABLE>
NOTE: Awards are of Performance Share Units (PSUs). Each has a four-year term. A
PSU's value is the Company's stock price at the end of its term plus the
per-share dividends paid during the term. The number of PSUs on which
values are paid can range from zero to 160% of those awarded. This number
depends on the Company's four-year, total shareholder return compared to
the returns reported in the EEI 100 Index of Investor-owned Electrics. In
the event of certain corporate transactions, such as certain mergers or
consolidations of the Company with another corporation or dissolution or
liquidation of the Company, a PSU will be deemed to have matured on the
December 31 preceding such corporate transaction.
15
<PAGE>
RETIREMENT BENEFITS TABLE
Estimated retirement benefits for the named executive officers are shown in the
table below, assuming retirement on January 1, 1995 at age 65 after selected
periods of service. The benefit levels shown are the estimated aggregate value
resulting from the Company's funded pension plan, its Supplemental Executive
Retirement Plan for Officers (the "SERP"), Deferred Compensa-tion Plan make-up
and Social Security benefits.
ESTIMATED ANNUAL BENEFIT UPON
RETIREMENT AT AGE 65
<TABLE>
<CAPTION>
FINAL AVERAGE YEARS OF CREDITED SERVICE
COMPENSATION 10 15+*
---------------------------------------------------------
<S> <C> <C>
$ 100,000 $ 40,000 $ 60,000
200,000 80,000 120,000
300,000 120,000 180,000
400,000 160,000 240,000
500,000 200,000 300,000
</TABLE>
* All persons with fifteen or more years of credited service receive the
maximum benefits payable under the plan for their salary level.
The named executive officers have the following years of credited service as of
December 31, 1994: R. Sonstelie, 20.5; W. Weaver, 3.5; R. Myers, 21.67; G.
Swofford, 27.42; S. Vortman, 13.67. Estimated aggregate benefits are based on
60% of average annual compensation (salary plus bonus) for the highest
consecutive five years preceding the retirement date. The five-year averages as
of December 31, 1994 are as follows for the named executive officers: R.
Sonstelie, $360,217; W. Weaver, $223,089; R. Myers, $195,365; G. Swofford,
$127,089; S. Vortman, $92,629.
The Company has entered into an agreement with Mr. Weaver regarding certain
benefits payable upon retirement. If Mr. Weaver continues in employment with the
Company until age 65, it is estimated that the special agreement will not
provide him any additional benefits beyond those set out in the Retirement
Benefits table. However, if Mr. Weaver continues in employment with the Company
through July 1, 1996, then terminates employment at any time thereafter, but
before becoming SERP eligible (in general, age 65, or age 62 with 15 years of
credited service), he would, commencing at age 62, receive his normal retirement
benefit under the Company's funded pension plan, plus, under the agreement, an
additional annual benefit of approximately 29% of his final average annual
earnings. Earnings used in calculating his benefit under the Company's funded
pension plan and under the special agreement will be limited to the amount
established by Section 401(a)(17) of the Internal Revenue Code, which is
currently $150,000 per year. If Mr. Weaver terminates employment prior to July
1, 1996, he would not receive any benefit under the Company's funded pension
plan, but would, commencing at age 62, receive an annual benefit of
approximately $16,875 if service terminates prior to July 1, 1995 or $22,500 if
service terminates after July 1, 1995 but prior to July 1, 1996.
16
<PAGE>
PROPOSAL NO. 2
APPROVAL OF 1995 LONG-TERM INCENTIVE COMPENSATION PLAN
In the Board of Directors' opinion, the Company's future success will depend, in
large measure, on its ability to attract, retain and motivate executives with
outstanding training, experience and ability. To this end, and because the
Company wants to more closely align executive compensa-tion with shareholder
interests, the Board of Directors and the Committee have determined that the
adoption of a new long-term incentive plan that permits awards payable in stock
is neces-sary to give the Company the flexibility and advantages needed to
attract, retain and motivate key employees and to enhance the link of executive
pay to the growth of shareholder value. Accordingly, the Board of Directors has
adopted the 1995 Plan and recommends its approval by the Company's shareholders.
The 1995 Plan replaces the existing Long-Term Incentive Program, which provides
for the grant of SARs and PSUs, both payable only in cash. Upon approval of the
1995 Plan by shareholders, no further grants will be made under the Incentive
Program. A summary description of the 1995 Plan follows. This description is
qualified in its entirety by reference to the text of the 1995 Plan, which is
attached to this Proxy Statement as Appendix A.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1995 PLAN.
INTRODUCTION
The purpose of the 1995 Plan is to enhance the long-term profitability and
shareholder value of the Company by offering incentives and rewards to those
employees of the Company and its subsidiaries who are key to the Company's
growth and success, and to encourage them to remain in the service of the
Company and its subsidiaries and to acquire and maintain stock ownership in the
Company.
AWARDS
The 1995 Plan generally provides for grants of stock awards (including
restricted stock), performance awards, other stock-based awards and dividend
equivalent rights. Although the Committee intends to implement the 1995 Plan
beginning in 1995 as described in the Compensation and Retirement Committee
Report, on page 7, the 1995 Plan is broad enough to provide the Committee some
flexibility, as described in this section, in structuring awards for future
years. Awards may be granted singly, or in tandem with or in replacement or as
alternatives for other awards, including awards made under other plans.
STOCK SUBJECT TO THE 1995 PLAN. Shares issued pursuant to the 1995 Plan will be
purchased on the open market by the trustee (the "Trustee") of the 1995 Long-
Term Incentive Compensation Plan Trust (the "Trust"). The Company will not issue
any Common Stock under the Plan to the Trust, or purchase any shares from the
Trust. Subject to adjustment from time to time as provided in the 1995 Plan, a
maximum of 500,000 shares of Common Stock may be purchased by the Trustee for
purposes of the 1995 Plan.
Subject to adjustment from time to time as provided in the 1995 Plan, and to the
extent required for compliance with the exclusion from the limitation on
deductibility of compensation under Section 162(m) of the Internal Revenue Code,
no more than 40,000 shares of Common Stock may be subject to awards payable to
any individual participant in any one fiscal year of the Company, and no awards
denominated solely in cash that have an aggregate maximum dollar value in excess
of $400,000 may be payable to any individual participant in any one fiscal year
of the Company.
17
<PAGE>
Any shares of Common Stock that have been made subject to an award that cease to
be subject to the award (other than by reason of exercise or payment of the
award to the extent it is exercised for or settled in shares), including,
without limitation, in connection with the cancellation of an award and the
grant of a replacement award, will again be available for issuance in connection
with future grants of awards under the 1995 Plan.
ELIGIBILITY TO RECEIVE AWARDS. Awards may be granted under the 1995
Plan to those officers and key employees (including directors who are
also employees) of the Company and its subsidiaries (as that term is
defined in the 1995 Plan) as the plan administrator from time to time
selects.
STOCK AWARDS. The plan administrator is authorized to make awards of Common
Stock to participants on such terms and conditions, and subject to such
restrictions, if any (whether based on performance standards, periods of service
or otherwise), as the plan administrator may determine.
PERFORMANCE AWARDS. Performance awards may be denominated in cash, shares of
Common Stock or any combination thereof. The plan administrator is authorized to
determine the nature, length and starting date of the performance period for
each performance award and the performance objectives to be used in valuing
performance awards and determining the extent to which such performance awards
have been earned. Performance objectives will be based on profits, profit
growth, profit-related return ratios, cash flow or total shareholder return,
whether applicable to the Company or any relevant subsidiary or business unit,
comparisons with competitor companies or groups and with stock market indices,
or any combination thereof, as the plan administrator deems appropriate.
Additional performance measures may be used to the extent their use would comply
with the exclusion from the limitation on deductibility of compensation under
Section 162(m) of the Internal Revenue Code. The plan administrator will
determine the circumstances under which a performance award will be payable if a
holder ceases to provide services to the Company.
OTHER STOCK-BASED AWARDS. The plan administrator may grant other stock-based
awards under the 1995 Plan pursuant to which shares of Common Stock are or may
in the future be acquired, or awards denominated in stock units, including
awards valued using measures other than market value. Such other stock-based
awards may be granted alone or in addition to or in tandem with any award of any
type granted under the 1995 Plan and must be consistent with the 1995 Plan's
purpose.
DIVIDEND EQUIVALENT RIGHTS. Any awards under the 1995 Plan may, in the plan
administrator's discretion, earn dividend equivalent rights that entitle the
holder to be credited with an amount equal to the cash or stock dividends or
other distributions that would have been paid on the shares of Common Stock
covered by such award had such covered shares been issued and outstanding on
such dividend record date. The plan administrator may establish such rules and
procedures governing the crediting of dividend equivalent rights, including the
timing, form of payment and payment contingencies, as it deems are appropriate
or necessary.
TRANSFERABILITY. No performance award, other stock-based award or dividend
equivalent right will be assignable or otherwise transferable by the holder
other than by will or the laws of descent and distribution and, during the
holder's lifetime, may be exercised only by the holder, except, in the plan
administrator's sole discretion, to the extent permitted by Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
ADJUSTMENT OF AWARDS. In the event of certain mergers or consolidations or a
sale of substantially all the assets or a liquidation of the Company, each stock
award that is at the time outstanding will automatically accelerate so that each
such award shall, immediately prior to such corporate transaction, become 100%
vested, except that such award will not so accelerate except under certain
circumstances where such award is assumed or replaced in connection
18
<PAGE>
with the corporate transaction. The plan administrator shall have the
discretion, exercisable at any time before a sale, merger, consolidation,
reorganization, liquidation or change in control of the Company, as defined by
the plan administrator, to take such further action as it determines to be
necessary or advisable, and fair and equitable to holders, with respect to
awards.
ADMINISTRATION. The 1995 Plan will be administered by a committee or committees
appointed by, and consisting of one or more members of, the Company's Board of
Directors.
AMENDMENT AND TERMINATION. The 1995 Plan may be suspended, terminated or amended
by the shareholders of the Company. The Company's Board of Directors may also
suspend or terminate the 1995 Plan, or amend it, subject to shareholder approval
in certain instances, as set forth in the 1995 Plan.
NEW PLAN BENEFITS. Since awards under the 1995 Plan will be discretionary,
awards there-under for the current fiscal year are not presently determinable.
For purposes of comparison, the Summary Compensation Table contains information
about awards made and benefits received during 1994 under the Incentive Program
to the named executive officers. No other officers or employees and no
nonofficer Directors or nonofficer nominees for election as a Director received
awards under the Incentive Program in 1994. It is anticipated that the total
number of persons receiving awards in 1995 under the 1995 Plan will be increased
to include key employees as well as executive officers. On February 28, 1995,
the closing price of the Common Stock in New York Stock Exchange consolidated
trading was $21.50 per share.
19
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P. has examined the financial statements of
the Company since 1933, and the Company intends to continue the service of this
firm for the fiscal year ending December 31, 1995. Representatives of the firm
will be present at the Annual Meeting, with the opportunity to make a statement
and to answer shareholder questions.
VOTING RIGHTS AND PROXY
Common Stock is the only class of stock entitled to vote at the Annual Meeting
for the election of Directors. Approximately 63.6 million shares of Common Stock
were outstanding on March 13, 1995, the record date for the Annual Meeting. The
holders of a majority of the shares of the Company's Common Stock, present in
person or by proxy at the Annual Meeting, constitute a quorum for the
transaction of business. Each holder of Common Stock will be entitled to one
vote for each share held on the record date on each item listed in the Notice of
Annual Meeting of Shareholders. In electing Directors, every holder of Common
Stock has the right of cumulative voting, namely, the right to multiply the
number of votes represented by shares held of record by the number of Directors
to be elected, and then cast all such votes for one candidate or distribute them
among any two or more candidates. Under Washington law and the Company's
Articles of Incorporation, if a quorum is present at the meeting: (i) the four
nominees for election as Directors who receive the greatest number of votes cast
for the election of Directors at the meeting by the shares present in person or
represented by proxy at the meeting and entitled to vote shall be elected
Directors and (ii) matter two listed in the accompanying Notice of Annual
Meeting of Shareholders will be approved if a majority of the shares of Common
Stock, present in person or represented by proxy and entitled to vote, vote in
favor of the matter. In the election of directors, any actions other than a vote
for a nominee will have the practical effect of voting against the nominee. An
abstention from voting will have the practical effect of voting against matter 2
since it is one less vote for approval. Broker nonvotes will have no impact on
matter 2 other than to reduce the number of votes "for" necessary to approve the
proposal since they are not considered shares entitled to vote for matter 2.
Unless your proxy is mutilated or otherwise received in such form or at such
time as to render it not votable, the shares represented by your proxy will be
voted as directed, and if no direction is indicated, it will be voted for all
management proposals as set forth in this Proxy Statement. A proxy may be
revoked by the shareholder at any time before it is voted. 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. The
Company acts as tabulator for the proxies of the shareholders of record, brokers
and banks. The identity and vote of all shareholders shall not be disclosed to
any third party except as necessary to meet applicable legal requirements. If
any other matters should properly come before the Annual Meeting, it is the
intention of the persons named in the accompanying form of proxy to vote thereon
in accordance with their judgment on such matters.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended for inclusion in the Company proxy material
for the 1996 Annual Meeting of Shareholders must be received at the principal
executive office of the Company not later than November 28, 1995.
20
<PAGE>
SOLICITATION OF PROXIES
Proxies in the form enclosed are solicited by and on behalf of the Company.
Richard R. Sonstelie, President and Chief Executive Officer, and James W.
Eldredge, Corporate Secretary, and each or either of them, are named as proxies.
Proxies may be solicited by mail, personal interview, telephone and fax. It is
anticipated 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 and will be
reimbursed for their expenses incurred in connection therewith. Proxies may also
be solicited by officers, Directors, employees and other agents of the Company
without compensation therefor, except for reimbursement of expenses. All costs
of solicitation of proxies will be borne by the Company.
March 27, 1995
Bellevue, Washington
By Order of the Board of Directors
/s/ R.R. Sonstelie
Richard R. Sonstelie
President and Chief Executive Officer
21
<PAGE>
APPENDIX A
PUGET SOUND POWER & LIGHT COMPANY
1995 LONG-TERM INCENTIVE
COMPENSATION PLAN
SECTION 1. PURPOSE
The purpose of the Puget Sound Power & Light Company 1995 Long-Term Incentive
Compensation Plan (the "Plan") is to enhance the long-term profitability and
shareholder value of Puget Sound Power & Light Company, a Washington corporation
(the "Company"), by offering incentives and rewards to those employees of the
Company and its Subsidiaries (as defined in Section 5 of the Plan) who are key
to the Company's growth and success, and to encourage them to remain in the
service of the Company and its Subsidiaries and to acquire and maintain stock
ownership in the Company.
SECTION 2. ADMINISTRATION
2.1 PLAN ADMINISTRATOR
The Plan shall be administered by a committee or committees (the "Plan
Administrator") (which term includes subcommittees) appointed by, and consisting
of one or more members of, the Company's Board of Directors (the "Board"). The
Board may delegate the responsibility for administering the Plan with respect to
designated classes of eligible Participants (as defined in Section 3 of the
Plan) to different committees, subject to such limitations as the Board deems
appropriate. Committee members shall serve for such term as the Board may
determine, subject to removal by the Board at any time. The composition of any
committee responsible for administering the Plan with respect to officers and
directors of the Company who are subject to Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), with respect to
securities of the Company shall comply with the requirements of Rule 16b-3 under
Section 16(b) of the Exchange Act.
2.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR
Except for the terms and conditions explicitly set forth in the Plan, the Plan
Administrator shall have exclusive authority, in its discretion, to determine
all matters relating to Awards (as defined in Section 3 of the Plan) under the
Plan, including the selection of individuals to be granted Awards, the type of
Awards, the number of shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), subject to an Award, all terms, conditions,
restrictions and limitations, if any, of an Award and the terms of any
instrument that evidences the Award, and to authorize the Trustee (the
"Trustee") of the 1995 Long-Term Incentive Compensation Plan Trust, a trust
established under the laws of the State of Washington (the "Trust"), to grant
Awards. 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, shall be
conclusive and binding on all parties involved or affected. The Plan
Administrator may delegate administrative duties to such of the Company's
officers as it so determines.
A-1
<PAGE>
SECTION 3. AWARDS
3.1 FORM AND GRANT OF AWARDS
The Plan Administrator shall have the authority, in its sole discretion, to
determine the type or types of awards (an "Award") to be made under the Plan,
which may include, but are not limited to, Stock Awards, Performance Awards,
Other Stock-Based Awards (including any Dividend Equivalent Rights granted in
connection with such Awards) as those terms are defined in Sections 6, 7, 8 and
9, respectively, of the Plan. Awards may be granted singly, in combination or in
tandem so that the settlement or payment of one automatically reduces or cancels
the other. Awards may also be made in combination or in tandem with, in
replacement of, as alternatives to, or as the payment form for, grants or rights
under any other employee or compensation plan of the Company. For purposes of
the Plan, a "Participant" means an individual who is a Holder of an Award or, as
the context may require, any employee of the Company or a Subsidiary who has
been designated by the Plan Administrator as eligible to participate in the
Plan, and a "Holder" means the Participant to whom an Award is granted, or the
personal representative of a Holder who has died.
3.2 ACQUIRED COMPANY AWARDS
Notwithstanding anything in the Plan to the contrary, the Plan Administrator may
grant Awards under the Plan in substitution for awards issued under other plans,
or assume under the Plan awards issued under other plans, if the other plans are
or were plans of other entities ("Acquired Entities") (or the parent of the
Acquired Entity) and the new Award is substituted, or the old award is assumed,
by reason of a merger, consolidation, acquisition of property or of stock,
reorganization or liquidation (the "Acquisition Transaction"). In the event that
a written agreement pursuant to which the Acquisition Transaction is completed
is approved by the Board and said agreement sets forth the terms and conditions
of the substitution for or assumption of outstanding awards of the Acquired
Entity, said terms and conditions shall be deemed to be the action of the Plan
Administrator without any further action by the Plan Administrator, except as
may be required for compliance with Rule 16b-3 under the Exchange Act, and the
persons holding such Awards shall be deemed to be Participants and Holders.
3.3 1995 LONG-TERM INCENTIVE COMPENSATION PLAN TRUST
Awards may be, but need not be, paid to the Trustee, such payments to be used by
the Trustee to purchase shares of the Common Stock. Shares purchased by the
Trustee pursuant to the terms of the Trust ("Trustee Shares") shall be held for
the benefit of Participants, and shall be distributed to Participants or their
beneficiaries by the Trustee at the direction of the Plan Administrator in
accordance with the terms and conditions of the Awards. Awards may also be made
in units that are redeemable (in whole or part) in Trustee Shares.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 AUTHORIZED NUMBER OF SHARES
Subject to adjustment from time to time as provided in Section 11.1 of the Plan,
the maximum number of shares of Common Stock that may be purchased by the
Trustee as Trustee Shares for purposes of the Plan shall be 500,000. Common
Stock shall be purchased by the Trustee on the open market. The Company shall
not issue any Common Stock under the Plan to the Trust or to any Participant,
nor shall the Company purchase any Trustee Shares from the Trust.
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4.2 LIMITATIONS
Subject to adjustment from time to time as provided in Section 11.1 of the Plan,
no Awards denominated in stock that constitute more than 40,000 shares of Common
Stock shall be payable to any individual Participant in any one fiscal year of
the Company, and no Awards denominated in cash that have an aggregate maximum
dollar value in excess of $400,000 shall be payable to any individual
Participant in any one fiscal year of the Company, such limitations to be
applied in a manner consistent with the requirements of, and only to the extent
required for compliance with, the exclusion from the limitation on deductibility
of compensation under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").
4.3 REUSE OF SHARES
Any shares of Common Stock that have been made subject to an Award that cease to
be subject to the Award (other than by reason of exercise or payment of the
Award to the extent it is exercised for or settled in shares), including,
without limitation, in connection with the cancellation of an Award and the
grant of a replacement Award, shall again be available for issuance in
connection with future grants of Awards under the Plan. Shares that are subject
to tandem Awards shall be counted only once.
SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to those officers and key employees
(including directors who are also employees) of the Company and its Subsidiaries
as the Plan Administrator from time to time selects. For purposes of the Plan,
"Subsidiary," except as expressly provided otherwise, means any entity that is
directly or indirectly controlled by the Company or in which the Company has a
significant ownership interest, as determined by the Plan Administrator, and any
entity that may become a direct or indirect parent of the Company.
SECTION 6. STOCK AWARDS
6.1 GRANT OF STOCK AWARDS
The Plan Administrator is authorized to grant Awards of Common Stock ("Stock
Awards") to Participants on such terms and conditions, and subject to such
restrictions, if any (whether based on performance standards, periods of service
or otherwise), as the Plan Administrator shall determine, which terms,
conditions and restrictions shall be set forth in the instrument evidencing the
Award (shares subject to such restrictions are referred to herein as "Restricted
Stock"). The terms, conditions and restrictions that the Plan Administrator
shall have the power to determine shall include, without limitation, the manner
in which shares subject to Stock Awards are held during the periods they are
subject to restrictions and the circumstances under which forfeiture of
Restricted Stock shall occur by reason of termination of the Holder's
employment.
6.2 ISSUANCE OF SHARES
Upon the satisfaction of any terms, conditions and restrictions prescribed in
respect to a Stock Award, or upon the Holder's release from any terms,
conditions and restrictions of a Stock Award, as determined by the Plan
Administrator, the Company shall deliver, as soon as practicable, to the Holder
or, in the case of the Holder's death, to the personal representative of the
Holder's estate or as the appropriate court directs, a stock certificate for the
appropriate number of shares of Common Stock.
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6.3 WAIVER OF RESTRICTIONS
Notwithstanding any other provisions of the Plan, the Plan Administrator may, in
its sole discretion, waive the forfeiture period and any other terms, conditions
and restrictions on any Restricted Stock under such circumstances and subject to
such terms and conditions as the Plan Administrator shall deem appropriate.
SECTION 7. PERFORMANCE AWARDS
7.1 PLAN ADMINISTRATOR AUTHORITY
Awards made under this Section 7 ("Performance Awards") may be denominated in
cash, shares of Common Stock or any combination thereof. The Plan Administrator
is authorized to grant Performance Awards and shall determine the nature, length
and starting date of the performance period for each Performance Award and the
performance objectives to be used in valuing Performance Awards and determining
the extent to which such Performance Awards have been earned. Performance
objectives and other terms may vary from Participant to Participant and between
groups of Participants. Performance objectives shall be based on profits, profit
growth, profit-related return ratios, cash flow or total shareholder return,
whether applicable to the Company or any relevant Subsidiary or business unit,
comparisons with competitor companies or groups and with stock market indices,
or any combination thereof, as the Plan Administrator deems appropriate.
Additional performance measures may be used to the extent their use would comply
with the exclusion from the limitation on deductibility of compensation under
Section 162(m) of the Code. Performance periods may overlap and Participants may
participate simultaneously with respect to Performance Awards that are subject
to different performance periods and different performance factors and criteria.
The Plan Administrator shall determine for each Performance Award the range of
dollar values or number of shares of Common Stock (which may, but need not, be
shares of Restricted Stock pursuant to Section 6 of the Plan), or a combination
thereof, to be received by the Participant at the end of the performance period
if and to the extent that the relevant measures of performance for such
Performance Awards are met. The performance measures must include a minimum
performance standard below which no payment will be made and a maximum
performance level above which no increased payment will be made, such limitation
to be applied in a manner consistent with the requirements of, and to the extent
required for compliance with, the exclusion from the limitation on deductibility
of compensation under Section 162(m) of the Code. The earned portion of a
Performance Award may be paid currently or on a deferred basis with such
interest or earnings equivalent as may be determined by the Plan Administrator.
Payment shall be made in the form of cash, whole shares of Common Stock (which
may, but need not, be shares of Restricted Stock pursuant to Section 6 of the
Plan), or any combination thereof, either in a single payment or in annual
installments, all as the Plan Administrator shall determine.
7.2 ADJUSTMENT OF AWARDS
The Plan Administrator may adjust the performance goals and measurements
applicable to Performance Awards to take into account changes in law and
accounting and tax rules and to make such adjustments as the Plan Administrator
deems necessary or appropriate to reflect the inclusion or exclusion of the
impact of extraordinary or unusual items, events or circumstances, except that,
to the extent required for compliance with the exclusion from the limitation on
deductibility of compensation under Section 162(m) of the Code, no adjustment
shall be made that would result in an increase in the compensation of any
Participant whose compensation is subject to such limitation for the applicable
year. The Plan Administrator also may adjust the performance goals and
measurements applicable to Performance Awards and thereby reduce
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the amount to be received by any Participant pursuant to such Awards if and to
the extent that the Plan Administrator deems it appropriate.
7.3 PAYOUT UPON TERMINATION
The Plan Administrator shall establish and set forth in each instrument that
evidences a Performance Award whether the Award will be payable, and the terms
and conditions of such payment, if a Holder ceases to be employed by the Company
or its Subsidiaries, which provisions may be waived or modified by the Plan
Administrator at any time. If not so established in the instrument evidencing
the Performance Award, the Award will be payable according to the following
terms and conditions, which may be waived or modified by the Plan Administrator
at any time. If during a performance period a Participant's employment with the
Company terminates by reason of the Participant's Retirement, Early Retirement
at the Company's request, Disability, position elimination or death, such
Participant shall be entitled to a payment with respect to each outstanding
Performance Award at the end of the applicable performance period (a) based, to
the extent relevant under the terms of the Performance Award, on the
Participant's performance for the portion of such performance period ending on
the date of termination and (b) prorated for the portion of the performance
period during which the Participant was employed by the Company, all as
determined by the Plan Administrator. For purposes of the Plan, "Retirement" and
"Disability" mean "retirement" and "disability" as those terms are defined in
the Company's Investment Plan for Employees or other similar successor plan
applicable to salaried employees, and "Early Retirement" means "early
retirement" as that term is defined by the Plan Administrator from time to time
for purposes of the Plan. The Plan Administrator may provide for an earlier
payment in settlement of such Performance Award discounted at a reasonable
interest rate and otherwise in such amount and under such terms and conditions
as the Plan Administrator deems appropriate. Except as otherwise provided in
Section 11 of the Plan or in the instrument evidencing the Performance Award, if
during a performance period a Participant's employment with the Company
terminates other than by reason of the Participant's Retirement, Early
Retirement at the Company's request, Disability, position elimination or death,
then such Participant shall not be entitled to any payment with respect to the
Performance Awards relating to such performance period, unless the Plan
Administrator shall otherwise determine. In case of termination of the Holder's
employment for Cause, the Performance Award shall automatically terminate upon
first notification to the Holder of such termination, unless the Plan
Administrator determines otherwise. For purposes of the Plan, "Cause" means
dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential
information or trade secrets, or conviction or confession of a crime punishable
by law (except minor violations), in each case as determined by the Plan
Administrator, whose determination shall be conclusive and binding. If a
Holder's employment with the Company is suspended pending an investigation of
whether the Holder shall be terminated for Cause, all of the Holder's rights
under any Performance Award likewise shall be suspended during the period of
investigation. A transfer of employment between or among the Company and its
Subsidiaries shall not be considered a termination of employment. Unless the
Plan Administrator determines otherwise, a leave of absence approved in
accordance with Company procedures shall not be considered a termination of
employment.
SECTION 8. OTHER STOCK-BASED AWARDS
The Plan Administrator may grant other Awards under the Plan ("Other Stock-Based
Awards") pursuant to which shares of Common Stock (which may, but need not, be
shares of Restricted Stock pursuant to Section 6 of the Plan) are or may in the
future be acquired, or Awards denominated in stock units, including Awards
valued using measures other than market value. Such Other Stock-Based Awards may
be granted alone or in addition to or in tandem with any Award of any type
granted under the Plan and must be consistent with the Plan's purpose.
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SECTION 9. DIVIDEND EQUIVALENT RIGHTS
Any Awards under the Plan may, in the Plan Administrator's discretion, earn
Dividend Equivalent Rights ("Dividend Equivalent Rights"). In respect of any
Award that is outstanding on the dividend record date for Common Stock, the
Participant may be credited with an amount equal to the cash or stock dividends
or other distributions that would have been paid on the shares of Common Stock
covered by such Award had such covered shares been issued and outstanding on
such dividend record date. The Plan Administrator shall establish such rules and
procedures governing the crediting of Dividend Equivalent Rights, including the
timing, form of payment and payment contingencies of such Dividend Equivalent
Rights, as it deems are appropriate or necessary.
SECTION 10. ASSIGNABILITY
No Performance Award, Other Stock-Based Award or Dividend Equivalent Right
granted under the Plan may be assigned or transferred by the Holder other than
by will or by the laws of descent and distribution and, during the Holder's
lifetime, such Awards may be exercised only by the Holder. Notwithstanding the
foregoing, and to the extent permitted by Rule 16b-3 under the Exchange Act, the
Plan Administrator, in its sole discretion, may permit such assignment, transfer
and exercisability and may permit a Holder of such Awards to designate a
beneficiary who may exercise the Award or receive compensation under the Award
after the Holder's death.
SECTION 11. ADJUSTMENTS
11.1 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 Common Stock, then the Plan Administrator, in its sole
discretion, shall make such equitable adjustments as it shall deem appropriate
under the circumstances in (i) the maximum number of and class of securities
subject to the Plan as set forth in Section 4.1 of the Plan, (ii) the maximum
number and class of securities and dollar amount subject to Awards that may be
paid to any individual Participant as set forth in Section 4.2 of the Plan, and
(iii) the number and class of securities that are subject to any outstanding
Award and the per share price of such securities, without any change in the
aggregate price to be paid therefor. The determination by the Plan Administrator
as to the terms of any of the foregoing adjustments shall be conclusive and
binding.
11.2 CORPORATE TRANSACTION
Except as otherwise provided in the instrument that evidences an Award, in the
event of any Corporate Transaction (as defined below), each Stock Award that is
at the time outstanding shall automatically accelerate so that each such Award
shall, immediately prior to the specified effective date for the Corporate
Transaction, become 100% vested, except that such acceleration will not occur if
in the opinion of the Company's accountants it would render unavailable "pooling
of interest" accounting for a Corporate Transaction that would otherwise qualify
for such accounting treatment. Such Award shall not so accelerate, however, if
and to the extent: (a) such Award is, in connection with the Corporate
Transaction, either to be assumed by the
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successor corporation or parent thereof or to be replaced with a comparable
award for the purchase of shares of the capital stock of the successor
corporation or its parent corporation, (b) such Award is to be replaced with a
cash incentive program of the successor corporation that preserves the value
existing at the time of the Corporate Transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such Award, or
(c) the acceleration of such Award is subject to other limitations imposed by
the instrument evidencing the Award. The determination of Award comparability
under clause (a) above shall be made by the Plan Administrator, and its
determination shall be conclusive and binding. All such Awards shall terminate
and cease to remain outstanding immediately following the consummation of the
Corporate Transaction, except to the extent assumed by the successor corporation
or its parent corporation. Any such Awards that are assumed or replaced in the
Corporate Transaction and do not otherwise accelerate at that time shall be
accelerated in the event the Holder's employment should subsequently terminate
within two years following such Corporate Transaction, unless such employment is
terminated by the Company for Cause or by the Holder voluntarily without Good
Reason (as defined below).
For purposes of the Plan, "Corporate Transaction" means any of the following
events:
(a) Approval by the holders of Common Stock of any merger or consolidation of
the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Common Stock are converted into
cash, securities or other property, other than a merger of the Company in
which the holders of Common Stock immediately prior to the merger have
substantially the same proportionate ownership of common stock of the
surviving corporation immediately after the merger;
(b) Approval by the holders of Common Stock of any sale, lease, exchange or
other transfer in one transaction or a series of related transactions of all
or substantially all of the Company's assets other than a transfer of the
Company's assets to a majority-owned subsidiary (as the term "subsidiary" is
defined for purposes of Section 422 of the Code) of the Company; or
(c) Approval by the holders of Common Stock of any plan or proposal for the
liquidation or dissolution of the Company.
Also for purposes of the Plan, "Good Reason" means the occurrence of any of the
following events or conditions:
(a) a change in the Holder's status, title, position or responsibilities
(including reporting responsibilities) that, in the Holder's reasonable
judgment, represents a substantial reduction of the status, title, position
or responsibilities as in effect immediately prior thereto; the assignment
to the Holder of any duties or responsibilities that, in the Holder's
reasonable judgment, are inconsistent with such status, title, position or
responsibilities; or any removal of the Holder from or failure to reappoint
or reelect the Holder to any of such positions, except in connection with
the termination of the Holder's employment for Cause, for Disability or as a
result of his or her death, or by the Holder other than for Good Reason;
(b) a reduction in the Holder's annual base salary;
(c) the Company's requiring the Holder (without the Holder's consent) to be
based at any place outside a 35-mile radius of his or her place of
employment prior to a Corporate Transaction, except for reasonably required
travel on the Company's business that is not materially greater than such
travel requirements prior to the Corporate Transaction;
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(d) the Company's failure to (i) continue in effect any material compensation or
benefit plan (or the substantial equivalent thereof) in which the Holder was
participating at the time of a Corporate Transaction, including, but not
limited to, the Plan, or (ii) provide the Holder with compensation and
benefits at least equal (in terms of benefit levels and/or reward
opportunities) to those provided for under each employee benefit plan,
program and practice as in effect immediately prior to the Corporate
Transaction (or as in effect following the Corporate Transaction, if
greater);
(e) any material breach by the Company of any provision of the Plan; or
(f) any purported termination of the Holder's employment for Cause by the
Company that does not comply with the terms of the Plan.
11.3 FURTHER ADJUSTING OF AWARDS
Without limiting the preceding Section 11.2 of the Plan, and subject to the
limitations set forth in Section 7 of the Plan, the Plan Administrator shall
have the discretion, exercisable at any time before a sale, merger,
consolidation, reorganization, liquidation or change in control of the Company,
as defined by the Plan Administrator, to take such further action as it
determines to be necessary or advisable, and fair and equitable to Participants,
with respect to Awards. Such authorized action may include (but shall not be
limited to) establishing, amending or waiving the type, terms, conditions or
duration of, or restrictions on, Awards so as to provide for earlier, later,
extended or additional time for exercise, payment or settlement or lifting
restrictions, differing methods for calculating payments or settlements,
alternate forms and amounts of payments and settlements and other modifications,
and the Plan Administrator may take such actions with respect to all
Participants, to certain categories of Participants or only to individual
Participants. The Plan Administrator may take such actions before or after
granting Awards to which the action relates and before or after any public
announcement with respect to such sale, merger, consolidation, reorganization,
liquidation or change in control that is the reason for such action.
11.4 LIMITATIONS
The grant of Awards 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 12. WITHHOLDING OF TAXES
The Company may require the Holder to pay to the Company the amount of any
withholding taxes that the Company is required to withhold with respect to the
grant, exercise, payment or settlement of any Award. In such instances, the Plan
Administrator may, in its discretion and subject to the Plan and applicable law,
permit the Holder to satisfy withholding obligations, in whole or in part, by
paying cash, by electing to have the Company withhold shares of Common Stock or
by transferring shares of Common Stock to the Company, in such amounts as are
equivalent to the Fair Market Value of the withholding obligation. For purposes
of the Plan, "Fair Market Value" means the mean of the high and low per share
trading prices for the Common Stock as reported in The Wall Street Journal for
the New York Stock Exchange--Composite Transactions (or similar successor
consolidated transactions reports) for a single trading day.
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SECTION 13. AMENDMENT AND TERMINATION OF PLAN
13.1 AMENDMENT OF PLAN
The Plan may be amended by the shareholders of the Company. The Board may also
amend the Plan in such respects as it shall deem advisable; however, to the
extent required for compliance with Rule 16b-3 under the Exchange Act or any
applicable law or regulation, shareholder approval will be required for any
amendment that will (a) increase the total number of shares that may be used in
payment of Awards under the Plan, (b) materially modify the class of persons
eligible to receive Awards, (c) materially increase the benefits accruing to
Participants under the Plan, or (d) otherwise require shareholder approval under
any applicable law or regulation.
13.2 TERMINATION OF PLAN
The Company's shareholders or the Board may suspend or terminate the Plan at any
time. The Plan will have no fixed expiration date.
13.3 CONSENT OF HOLDER
The amendment or termination of the Plan shall not, without the consent of the
Holder of any Award under the Plan, alter or impair any rights or obligations
under any Award theretofore granted under the Plan.
SECTION 14. GENERAL
14.1 NOTIFICATION
The Plan Administrator shall promptly notify a Participant of an Award, and a
written grant shall promptly be executed and delivered by or on behalf of the
Company.
14.2 CONTINUED EMPLOYMENT:RIGHTS IN AWARDS
Neither the Plan, participation in the Plan as a Participant nor any action of
the Plan Administrator taken under the Plan shall be construed as giving any
Participant or employee of the Company any right to be retained in the employ of
the Company or limit the Company's right to terminate the employment of the
Participant.
14.3 REGISTRATION; CERTIFICATES FOR SHARES
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 Common Stock, security or
interest in a security paid or issued under, or created by, the Plan. 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.
14.4 NO RIGHTS AS A SHAREHOLDER
No Performance Award, Other Stock-Based Award or Dividend Equivalent Right shall
entitle the Holder to any dividend (except to the extent provided in an Award of
Dividend Equivalent Rights), voting or other right of a shareholder unless and
until the date of issuance under the Plan of the shares that are the subject of
such Award, free of all applicable restrictions.
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14.5 COMPLIANCE WITH LAWS AND REGULATIONS
It is the Company's intention that, so long as any of the Company's equity
securities are registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, the Plan shall comply in all respects with Rule 16b-3 under the Exchange
Act and, if any Plan provision is later found not to be in compliance with Rule
16b-3, the provision shall be deemed null and void, and in all events the Plan
shall be construed in favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in the Plan to the contrary, the Board, in its sole
discretion, may bifurcate the Plan so as to restrict, limit or condition the use
of any provision of the Plan to Participants who are officers or directors
subject to Section 16 of the Exchange Act without so restricting, limiting or
conditioning the Plan with respect to other Participants.
14.6 UNFUNDED PLAN
The Plan is intended to constitute an "unfunded" plan. Nothing contained herein
shall require the Company to segregate any monies or other property, or shares
of Common Stock, or to create any trusts, or to make any special deposits for
any immediate or deferred amounts payable to any Participant, and no Participant
shall have any rights that are greater than those of a general unsecured
creditor of the Company.
14.7 GOVERNING LAW
The Plan and all interpretations of its provisions shall be governed by the laws
of the state of Washington and applicable federal laws.
14.8 SEVERABILITY
If any provision of the Plan or any Award is determined to be invalid, illegal
or unenforceable in any jurisdiction, or as to any person, or would disqualify
the Plan or any Award under any law deemed applicable by the Plan Administrator,
such provision shall be construed or deemed amended to conform to applicable
laws, or, if it cannot be so construed or deemed amended without, in the Plan
Administrator's determination, materially altering the intent of the Plan or
the Award, such provision shall be stricken as to such jurisdiction, person or
Award, and the remainder of the Plan and any such Award shall remain in full
force and effect.
SECTION 15. EFFECTIVE DATE
The Plan's effective date is the date on which it is adopted by the Board, so
long as it is approved by the Company's shareholders, to the extent required for
compliance with Rule 16b-3 under the Exchange Act and Section 162(m) of the
Code, at the next annual meeting of the Company's shareholders after adoption of
the Plan by the Board.
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MAP TO MEYDENBAUER CENTER
11100 NE 6th Street Bellevue, WA 98004
[MAP TO MEYDENBAUER CENTER APPEARS HERE]
PARKING
Complimentary parking is available in the Meydenbauer Center parking garage.
The garage entrance is located on 112th Ave. NE. Please tell the attendant you
are attending the Puget Power Annual Meeting.
[LOGO OF RECYCLED PAPER APPEARS HERE]
[LOGO TO PUGET POWER APPEARS HERE]
<PAGE>
[LOGO OF PUGET POWER APPEARS HERE] P.O. Box 96010, Bellevue, WA 98009-9610
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints RICHARD R. SONSTELIE 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 POWER & LIGHT COMPANY held
of record by the undersigned on March 13, 1995, at the Annual Meeting of
Shareholders to be held on May 9, 1995, or any adjournment thereof.
1. ELECTION OF DIRECTORS
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
DOUGLAS P. BELGHIE PHYLLIS J. CAMPBELL WILLIAM S. WEAVER R. KIRK WILSON
(INSTRUCTION: To withhold authority
to vote for any individual
nominee, write that nominee's name
in the space provided.)
---------------------------------
2. APPROVE A LONG-TERM INCENTIVE COMPENSATION PLAN FOR OFFICERS AND KEY
EMPLOYEES OF THE COMPANY AND ITS SUBSIDIARIES.
[_] FOR [_] AGAINST [_] ABSTAIN
(This Proxy Card continues and MUST be signed on the reverse side)
(Continued from the reverse) This proxy when executed will be voted in the
manner directed herein by the undersigned shareholder. PROXIES 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. 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
--------------------------------- ----------------------------------------
PLEASE COMPLETE, SIGN, DATE
AND RETURN THE PROXY
CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
