<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PUGET SOUND POWER AND LIGHT COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(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 14, 1996
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 14, 1996 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 three Directors to serve until the expiration of three-year terms
and until their successors are elected and qualified.
2. 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 11, 1996 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, 1996
Bellevue, Washington
By Order of the Board of Directors,
/s/ James W. Eldredge
James W. Eldredge, Corporate Secretary
<PAGE>
TABLE OF CONTENTS
<TABLE>
<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......................... 6
Stock Price Performance Graph........................................10
Summary Compensation Table...........................................11
Aggregated SAR Exercises in 1995 and Fiscal Year-End SAR Values......13
Long-Term Incentive Plan Awards in 1995..............................14
Retirement Benefits Statement........................................15
Employment Contracts, Termination of Employment
and Change-in-Control Arrangements...................................16
Independent Public Accountants.......................................18
Voting Rights and Proxy..............................................18
Shareholder Proposals................................................18
Solicitation of Proxies..............................................19
Map to Annual Meeting
</TABLE>
YOUR VOTE IS IMPORTANT
The Company has approximately 60,000 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 14, 1996 at the Meydenbauer Center located at 11100 N.E. 6th Street,
Bellevue, Washington. The approximate mailing date of the proxy material is
March 27, 1996. 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 three Directors.
ANNUAL REPORT
The Company's Annual Report for 1995, including audited financial statements, is
being mailed to shareholders on or about March 27, 1996.
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 ten. 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,
three Class II Directors will be elected to serve for a term of three years
expiring on the date of the Annual Meeting of Shareholders in 1999.
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.
<PAGE>
The names of nominees for Director of the Company are set forth below.
CLASS II NOMINEES
TERMS EXPIRE 1999
JOHN D. DURBIN
Mr. Durbin served as President and Chief Executive Officer of Hostar
International, Inc. (equipment for hotels) from 1988 until his retirement in
June 1995, and has been a General Partner of John Durbin & Associates
(industrial real estate) since 1969. His prior positions include Chairman and
President of CEC Equipment Company (construction equipment) from 1982 to 1987
and Chairman of Spokane Truck Sales, Inc. (trucks) from 1983 to 1987. Mr.
Durbin, age 60, has been a Director of the Company since 1984 and also serves as
a director of John Fluke Manufacturing Company, Inc.
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 70, has been a Director of
the Company since 1990 and also serves as a director of Attachmate, Inc.,
Burlington Northern Santa Fe Inc., Flow International Corporation, Tera Computer
Company and Washington Mutual Savings Bank.
NANCY L. JACOB
Ms. Jacob is Chairman and Chief Executive Officer of CTC Consulting, Inc.
(financial services). Her prior positions include Managing Director, Capital
Trust Company (financial advisor) from 1990 to 1994, Professor of Finance and
Business Economics at the University of Washington (educational institution)
from 1981 to 1992 and Dean of the School and Graduate School of Business
Administration from 1981 to 1988. Ms. Jacob, age 53, has been a Director of the
Company since 1980 and also serves as a trustee of College Retirement Equities
Fund in New York.
The names of the Class I 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 as follows:
CLASS I DIRECTORS
TERMS EXPIRE 1998
DOUGLAS P. BEIGHLE
Mr. Beighle has been Senior Vice President of The Boeing Company (aerospace
manufacturing and sales) since 1986. He served The Boeing Company as Vice
President from 1980 to 1986. Mr. Beighle, age 63, has been a Director of the
Company since 1981 and also serves as a director of Washington Mutual Savings
Bank.
2
<PAGE>
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 44, has been a Director of the Company since 1993 and also serves as a
director of U.S. Bank of Washington and SAFECO Corporation, and is a Regent of
Washington State University and Chairman of the Greater Seattle Chamber of
Commerce.
WILLIAM S. WEAVER
Mr. Weaver has been 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 52, 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 57, has been a Director of the
Company since 1976.
CLASS III DIRECTORS
TERMS EXPIRE 1997
CHARLES W. BINGHAM
Mr. Bingham served as Executive Vice President of Weyerhaeuser Company (forest
products industry) from 1981 until his retirement in July 1995. Mr. Bingham, age
62, has been a Director of the Company since 1978.
JOHN W. ELLIS
Mr. Ellis has been Chairman of the Board 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 67, has been a Director of the Company 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 51, has been a Director of the
Company since 1987 and also serves as a director of Utech Venture Capital
Corporation and Edison Electric Institute.
3
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of February 14, 1996, 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>
John D. Durbin 2,213
Daniel J. Evans 1,000
Nancy L. Jacob 1,122
Douglas P. Beighle 2,948
Phyllis J. Campbell 1,000
William S. Weaver 2,168(1)
R. Kirk Wilson 15,093
Charles W. Bingham 4,072
John W. Ellis 24,981(1)
Richard R. Sonstelie 9,300(1)
Gary B. Swofford 4,872(1)
Sheila M. Vortman 2,393(1)
Jerry L. Henry 4,256(1)
All Directors and executive officers
as a group (18 persons) 63,962
</TABLE>
(1) Includes shares credited under the Company's Investment Plan for Employees
through February 14, 1996.
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
Nine Board of Directors meetings were held during 1995. Each Director attended
at least 82% 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 functions and recommending
to the Board of Directors the retention of independent auditors and other
auditing matters. Four Audit Committee meetings were held during 1995.
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 Company's 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 1995.
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. Seven Compensation and Retirement
Committee meetings were held during 1995.
DIRECTOR COMPENSATION
Directors who are not Company officers are paid a quarterly retainer of $3,750
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.
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.
5
<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 action for the other executive
officers. The following is the Committee's report on executive compensation for
1995.
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, including performance for customers 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 objective of enhancing shareholder value.
BASE SALARY
Generally, base salaries for Company executives are designed to be below median
salary levels 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
opportunities 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 the individual's contributions and impact on Company performance
as well as achievement of individual goals and the competitiveness of the
individual's base salary. Because of cost restraints, base salaries of the named
executives had not been increased since September 1993 unless there had been a
significant change in job responsibilities. Effective May 1, 1995,
6
<PAGE>
base salaries for the named executives were increased but continue to be below
median salaries for comparable positions within the EEI survey. Total salary
plus targeted annual and long-term incentive compensation for the named
executive officers for 1995 averaged 92% of the medians for positions of similar
responsibility and job complexity in similar-sized companies within the EEI
survey.
ANNUAL INCENTIVE COMPENSATION
All executive officers participated in the Company's annual 1995 Pay at Risk
Plan. The intent of this Plan was to provide financial incentives to executives
for achieving desired annual operating results. Awards were based on combined
performance in these areas: (1) earnings per share; (2) department and
individual goals; and (3) the Company's market Competitive-ness as measured by
its ability to maintain load. The weighting of these three performance
categories varied by executive officer. Mr. Sonstelie's award was 100% weighted
on earnings per share results; Messrs. Weaver and Swofford and Ms. Vortman's
awards were based on 80% earnings per share and 20% market competitiveness
results; and Mr. Henry's award was based on 50% earnings per share, 20% market
competitiveness and 30% department goal results.
The annual incentive awards approved by the Committee were based on an
evaluation of the specified performance areas together with a subjective
evaluation of individual performance. Individual target awards ranged from 20%
to 35% of salary for the named executives; the plan provided for funding which
could range from zero to 1.5 times target. 1995 awards to executives were
approximately 100% of target.
LONG-TERM INCENTIVE COMPENSATION
As a result of the study reported in the 1995 Proxy, a new Long-Term Incentive
Compensation Plan (the "1995 Plan") designed to implement the Committee's desire
to link compensation to the growth of shareholder value was approved by
shareholders in 1995. Under this Plan, awards of contingent grants of Puget
stock were made to executives and key employees. These awards will be payable at
the end of a four-year period based on the stock performance. The measure of
performance is 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 an additional
two-year period. 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 in
relation to the number of underlying shares earned (or at the end of the
restricted period for the portion of the grant paid in restricted stock).
The grants made in 1995 to the named executives are shown on the Long-Term
Incentive Plan Awards In 1995 table.
7
<PAGE>
Under the Company's prior Long Term Incentive Program for Senior Executives (the
"Long Term Incentive Program") participants could be allocated Performance Share
Units ("PSUs") and Stock Appreciation Rights ("SARs"), both of which are payable
only in cash. While no awards have been made under the Long Term Incentive Plan
since December 31, 1994, awards previously made will continue under their
original terms which are based on Company performance. The last PSU and SAR
grants were made in 1994. PSUs were granted biannually and SARs were granted
annually.
Each PSU grant has a four-year term. A PSU's value is equal to the Company's
stock price at the end of the PSU's term plus the per share dividend paid during
the term. The number of PSUs on which values are paid can range from zero to
160% of those granted. This number is based on the Company's four-year, total
shareholder return compared to the returns reported in the EEI 100 Index of
Investor-owned Electrics. The PSUs granted in 1992 matured at year end 1995.
Because the threshold funding target was not met, payouts were not made to
executive officers under the 1992-1995 PSU grant.
Each SAR grant has a 10-year term and vests 20% per year beginning one year
after date of grant. A SARs value is equal to 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. SAR grants were last made in 1994 and are shown on the Summary
Compensation Table.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Sonstelie's base pay was increased to $400,000 per year effective May 1,
1995. In October 1995 Mr. Sonstelie entered into a four-year employment
agreement providing for a minimum annual base salary of $400,000 and certain
severance and other benefits. See "Employment Contracts, Termination of
Employment and Change-in-Control Arrangements." His base pay remains below the
median of similar-sized companies in the EEI survey. He received an annual
incentive award pursuant to the Pay at Risk Plan which was 100% of target.
Because the PSU cycle that matured in 1995 did not fund, Mr. Sonstelie did not
receive payment of PSUs in 1995. As a result, Mr. Sonstelie's total compensation
(salary plus annual and long-term incentive compensation) in 1995 fell well
below the median for chief executive officers of similar-sized companies in the
EEI survey.
Mr. Sonstelie continued to provide vision and leadership to the Company in
meeting the challenges of an increasingly competitive industry environment,
emphasizing the attainment of highly focused short- and long-term strategic
objectives. Under his leadership, these ambitious objectives resulted in several
major initiatives designed to improve the Company's competitive posture and
enhance long-term shareholder value. The most significant of these initiatives
was the approval by the Boards of Directors of Puget Power and Washington Energy
Company of a definitive agreement to merge the two organizations into one
company, subject to shareholder and regulatory approvals (the "Merger").
Mr. Sonstelie's leadership and initiative in managing the organization has
positioned it for the future while continuing to emphasize the importance of
short-term financial performance. Improved 1995 results were achieved through
focus on managing costs and revenues without increasing general rates to
customers.
8
<PAGE>
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 1996 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.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG PUGET POWER, S&P 500 INDEX AND EEI 100 INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period PUGET S&P EEI
(Fiscal Year Covered) POWER 500 INDEX 100 INDEX
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 12/31/90 $100 $100 $100
FYE 12/31/91 $142 $130 $129
FYE 12/31/92 $153 $140 $139
FYE 12/31/93 $150 $155 $154
FYE 12/31/94 $133 $157 $136
FYE 12/31/95 $167 $215 $179
</TABLE>
(1) This comparison assumes $100 was invested on December 31, 1990, 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, 1995,
1994, and 1993 with respect to the Company's Chief Executive Officer and each of
the four other most highly compensated executive officers of the Company during
1995 whose salary and bonus exceeded $100,000. Annual compensation includes
amounts deferred at the officer's election.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------------------- ------------------------------
Awards Payouts
--------------------- --------
Restricted Shares
Name and Other Annual Stock Underlying LTIP All Other
Principal Position Year Salary ($) Bonus ($) Compensation ($)/(1)/ Award ($) SARs (#) Payouts ($) Compensation ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. Sonstelie 1995 388,817 140,000 -- 0 15,736/(2)/
President and 1994 370,008 0 36,000 -- 13,731
Chief Executive Officer 1993 320,419 66,000 18,000 193,081 11,879
W. Weaver 1995 256,275 80,000 $199,996/(3)/ -- 0 12,309/(4)/
Executive Vice President 1994 230,006 0 9,000 -- 10,535
and Chief Financial Officer 1993 189,352 23,000 7,300 --/(5)/ 6,923
G. Swofford 1995 163,138 40,000 -- --/(6)/ 44,812/(7)/
Senior Vice President 1994 144,005 0 6,000 -- 4,770
Customer Operations 1993 116,455 16,500 18,701 3,200 --/(5)/ 3,867
S. Vortman 1995 133,138 35,000 -- --/(6)/ 6,535/(8)/
Senior Vice President 1994 120,537/(9)/ 0 3,500 -- 5,021
Corporate and Regulatory 1993 94,201 10,000 16,337 -- --/(5)/ --
Relations
J. Henry 1995 109,697 19,425 -- --/(6)/ 41,251/(10)/
Vice President 1994 106,303 0 -- -- --
Engineering and 1993 97,755 8,600 15,968 -- --/(5)/ --
Operation Services
</TABLE>
11
<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 Messrs. Swofford and Henry and Ms.
Vortman include $15,750 for a one-time-only vehicle allowance, which was
also received by all other executives, associated with management's
decision to no longer provide executives with Company-purchased
automobiles.
/(2)/ Represents $3,049 match under the Investment Plan for Employees; $9,778
match under the Investment Plan makeup; and $2,909 of imputed income on
life insurance.
/(3)/ On June 30, 1995, Mr. Weaver was granted 8,743 phantom shares. The
aggregate value of the phantom shares was $199,996, based on a stock
price at June 30, 1995 of $22.875. The phantom shares vest, subject to
continued employment, equally over four years beginning on July 1, 1996,
and are valued and paid out in cash as to the vested portion on each such
date. The value of each phantom share is the market price on the vesting
date, plus the aggregate dividends paid on each such share during the
period the phantom share is held. At December 29, 1995, all 8,743 phantom
shares were outstanding with an aggregate value of $211,319 (based on a
stock price of $23.25 per share at December 29, 1995 and accumulated
dividends from June 30, 1995 to December 29, 1995 of $.92 per share).
/(4)/ Represents $5,082 match under the Investment Plan for employees; $3,375
match under the Investment Plan makeup; and $3,852 of imputed income on
life insurance.
/(5)/ Messrs. Weaver, Swofford and Henry and Ms. Vortman were not eligible
participants at the time Performance Share Units ("PSUs") were
awarded for the cycle ended December 31, 1993.
/(6)/ Messrs. Swofford and Henry and Ms. Vortman were not eligible participants
at the time PSUs were awarded for the cycle ended December 31, 1995.
/(7)/ Represents $2,541 match under the Investment Plan for Employees; $2,843
match under the Investment Plan makeup; $24 of imputed income on life
insurance; and $39,404 for a one-time payment in connection with the
restructuring of the Company's paid sick and vacation leave accrual
policy for all nonunion employees.
/(8)/ Represents $2,541 match under the Investment Plan for Employees; $1,853
match under the Investment Plan makeup; and $2,141 of imputed income on
life insurance.
/(9)/ Ms. Vortman became Senior Vice President Corporate and Regulatory
Relations in May, 1994.
/(10)/ Represents $2,432 match under the Investment Plan for Employees; $1,188
under the Investment Plan makeup; $5 of imputed income on life insurance;
and $37,626 for a one-time payment in connection with the restructuring
of the Company's paid sick and vacation leave accrual policy for all
nonunion employees.
12
<PAGE>
AGGREGATED SAR EXERCISES IN 1995 AND FISCAL YEAR-END SAR VALUES
The following information is furnished for the year ended December 31, 1995 with
respect to the Company's Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company with respect to unexercised
SARs outstanding at year-end. No SARs were granted or exercised in 1995.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXCERCISED
Underlying Unexercised In-The-Money SARs
SARs at Fiscal Year-End (#) at Fiscal Year-End ($)
--------------------------- -----------------------------
Name Exercisable/Unexercisable Exerciseable/Unexercisable(1)
- ---- --------------------------- -----------------------------
<S> <C> <C>
R. SONSTELIE 25,340 / 34,060 $30,420 / $38,993
PRESIDENT AND CHIEF EXECUTIVE OFFICER
W. WEAVER
EXECUTIVE VICE PRESIDENT AND 7,720 / 14,580 $ 4,500 / $18,000
CHIEF FINANCIAL OFFICER
G. SWOFFORD 3,120 / 6,080 $ 3,000 / $12,000
SENIOR VICE PRESIDENT
CUSTOMER OPERATIONS
S. VORTMAN 700 / 2,800 $ 1,750 / $7,000
SENIOR VICE PRESIDENT
CORPORATE AND REGULATORY RELATIONS
J. HENRY -- --
VICE PRESIDENT
ENGINEERING AND OPERATION SERVICES
</TABLE>
(1) The amount is the aggregate 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 29, 1995 of $23.25 per share minus the base
price for that SAR, plus the incremental value of per share dividend
increases up to December 31, 1995.
13
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS IN 1995
The following information is furnished for the year ended December 31, 1995 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 1995.
<TABLE>
<CAPTION>
Number Estimated Future Share Payouts
of Period Until -------------------------------
Shares Maturation or Threshold Target Maximum
Name (#)(1) Payout (#) (#) (#)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
R. SONSTELIE 13,200 4 YEARS 0 13,200 21,120
PRESIDENT AND CHIEF EXECUTIVE OFFICER
W. WEAVER 6,000 4 YEARS 0 6,000 9,600
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
G. SWOFFORD 3,000 4 YEARS 0 3,000 4,800
SENIOR VICE PRESIDENT
CUSTOMER OPERATIONS
S. VORTMAN 2,500 4 YEARS 0 2,500 4,000
SENIOR VICE PRESIDENT
CORPORATE AND REGULATORY RELATIONS
J. HENRY 1,200 4 YEARS 0 1,200 1,920
VICE PRESIDENT
ENGINEERING AND OPERATION SERVICES
</TABLE>
(1) Awards are contingent grants of Puget Common Stock. The number of shares
delivered at the end of the four-year cycle will range from zero to 160% of
the contingent grant. 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. If total shareholder return at the end of the
four-year cycle results in the delivery of Puget Common Stock to the
participant, one-half of the shares will be restricted for an additional
two-year period.
14
<PAGE>
RETIREMENT BENEFITS STATEMENT
Estimated retirement benefits for the named executive officers are shown in the
table below, assuming retirement on January 1, 1996 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"), the Deferred Compensation Plan make-
up and Social Security benefits.
Estimated Annual Benefit Upon Retirement at Age 65
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
FINAL AVERAGE ---------------------------------------
COMPENSATION 5 10 15+*
------------ -------- ---------- ----------
<S> <C> <C> <C>
$100,000 $ 20,000 $ 40,000 $ 60,000
200,000 40,000 80,000 120,000
300,000 60,000 120,000 180,000
400,000 80,000 160,000 240,000
500,000 100,000 200,000 300,000
</TABLE>
* All persons with 15 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, 1995: R. Sonstelie, 21.5; W. Weaver, 4.5; G. Swofford, 28.42; S.
Vortman, 14.67; and J. Henry, 27.25. 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, 1995 are as follows for the named executive officers: R.
Sonstelie, $393,245; W. Weaver, $230,464; G. Swofford, $141,468; S. Vortman,
$106,405; and J. Henry, $107,906.
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 55 with 5 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 of 1986, as
amended, 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 $22,500 if service terminates prior to July 1,
1996.
15
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
EMPLOYMENT AGREEMENT
The Company entered into a four-year employment agreement (the "Employment
Agreement") with Richard R. Sonstelie on October 18, 1995. The Employment
Agreement provides that Mr. Sonstelie will continue to serve as the Company's
President and Chief Executive Officer until consummation of the proposed Merger,
and thereafter will serve as the Company's Chairman of the Board (assuming his
election to the Company's Board of Directors by the Company's shareholders) and
Chief Executive Officer of the Company.
During his term of employment, Mr. Sonstelie will receive a minimum annual base
salary of $400,000. He will also be eligible to participate in the Company's
annual and long-term incentive compensation programs (which may include a pay-
at-risk plan, stock-based awards, stock options, stock appreciation rights and
other forms of compensation), and its retirement, investment and deferred
compensation plans, and will also be entitled to paid vacation, medical, life
and disability insurance benefits, and other perquisites.
If the Company terminates Mr. Sonstelie's employment (except termination "for
cause," as defined in the Employment Agreement) or if Mr. Sonstelie dies or is
unable to perform his duties as a result of a physical or mental disability
prior to the end of the Employment Agreement's four-year term, Mr. Sonstelie
will be entitled to receive (a) all compensation and benefits earned through the
date of termination and (b) a continuation of his salary for the balance of such
four-year term. In addition, if Mr. Sonstelie's employment terminates due to a
material adverse change in the terms of his employment following a Change in
Control (as defined below) of the Company during the Employment Agreement's
four-year term or within the three-year period (the "Extended Benefit Period")
following a notice of termination of the Employment Agreement (except notices of
termination for cause or of termination due to death or incapacity), Mr.
Sonstelie will be entitled to receive, during the Extended Benefit Period, (a)
his annual base salary earned through termination and accrued benefits; (b)
within 30 days of termination, an amount equal to the sum of his annual base
salary at the rate applicable on the date of termination plus any additional
compensation awarded for the year most recently ended, multiplied by the number
of years (pro-rated for partial years) remaining between the date of termination
and the end of the Extended Benefit Period; (c) full benefits under the
Company's employee benefit plans, programs and policies; (d) in addition to the
regular payment of benefits under the Company's retirement plans or programs
(which shall not be affected by termination), the actuarial equivalent of the
additional retirement compensation Mr. Sonstelie would have earned had
employment continued through the Extended Benefit Period; (e) in return for a
waiver of the right to exercise any option, a payment equal to the difference
between the exercise price of all options, if any, held by Mr. Sonstelie
(whether or not then fully exercisable) and the higher of (i) the average of the
high and low sales prices of the Company Common Stock on the NYSE for the 20
days preceding termination and (ii) the price paid for Common Stock in
connection with any Change in Control of the Company; and (f) any additional
taxes payable by Mr. Sonstelie in connection with excess parachute payments.
16
<PAGE>
"Change in Control" includes (a) the acquisition by any person of (i) power to
exercise a controlling influence over the Company's management or policies or
(ii) ownership or power to vote 25% or more of the Company's outstanding voting
securities or (b) a change in the majority of the Company Board during the six-
year period subsequent to the acquisition by any person of ownership or power to
vote 10% or more of the outstanding voting securities of the Company without the
approval of the majority of the Company's directors in office prior to such
acquisition. The Merger does not constitute a Change in Control for purposes of
Mr. Sonstelie's Employment Agreement.
Pursuant to the Employment Agreement, the Company agrees to indemnify Mr.
Sonstelie to the fullest extent allowed by law; provided, however, that he shall
not be entitled to indemnification for liabilities, obligations, claims or
expenses resulting from his acts of dishonesty, the receipt of benefits to which
he was not entitled, the refusal to comply with a lawful directive of the
Company Board or any willful misconduct. Mr. Sonstelie is bound by
confidentiality, noncompetition and nonsolicitation provisions.
1995 LONG-TERM INCENTIVE COMPENSATION PLAN
Under the Company's 1995 Long-Term Incentive Compensation Plan, in the event of
a sale of substantially all the assets or a liquidation of the Company or a
merger or consolidation of the Company as a result of which shareholders of the
Company receive cash, securities or other property in exchange for their shares
of common stock, 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 with the corporate transaction. The Merger will not cause
an acceleration of vesting under this 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 holders, with respect to
awards.
LONG TERM INCENTIVE PROGRAM FOR SENIOR MANAGEMENT
Under the Company's Long Term Incentive Program for Senior Management, upon
dissolution or liquidation of the Company, or merger or consolidation of the
Company as a result of which shareholders of the Company receive cash, stock or
other property in exchange for their shares of Common Stock, all stock
appreciation rights will terminate, but each holder will have the right
immediately prior to such transaction to exercise his or her stock appreciation
rights, whether or not the stock appreciation rights have vested. All
performance share units will be deemed to have matured on the preceding December
31. The number of performance share units will be proportionately reduced to
reflect the reduction in the period from the grant of performance share units
until their maturity. The Merger will not cause an acceleration of vesting under
this plan.
17
<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, 1996. 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 11, 1996, 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 generally is entitled to
one vote for each share held on the record date on each item to be voted on at
an Annual Meeting of Shareholders. In electing Directors, however, 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 Annual
Meeting, the three nominees for election as Directors who receive the greatest
number of votes cast for the election of Directors at the Annual Meeting by the
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote shall be elected Directors. In the election of directors, any
actions other than a vote for a nominee will have the practical effect of voting
against the nominee.
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, 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 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 1997 Annual Meeting of Shareholders must be received at the principal
executive office of the Company not later than November 27, 1996.
18
<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, 1996
Bellevue, Washington
By Order of the Board of Directors
/s/ Richard R. Sonstelie
Richard R. Sonstelie
President and Chief Executive Officer
19
<PAGE>
MAP TO MEYDENBAUER CENTER
11100 NE 6th Street Bellevue, WA 98004
[MAP 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.
[RECYCLED LOGO]
Printed on recycled paper.
PUGET
POWER
<PAGE>
[LOGO OF PUGET POWER]
P.O. Box 96010
Bellevue, WA 98009-9610
BELOW IS YOUR PROXY FORM. PLEASE READ THE ENCLOSED INFORMATION CAREFULLY. VOTE,
SIGN AND DATE YOUR PROXY FORM AND RETURN IT IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
- --------------------------------------------------------------------------------
[LOGO OF PUGET POWER]
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 11, 1996, at the Annual Meeting of
Shareholders to be held on May 14, 1996, or any adjournment thereof.
1. ELECTION OF DIRECTORS [_] FOR all nominees listed [_] WITHHOLD AUTHORITY
below (except as marked to to vote for all
the contrary below) nominees listed below
JOHN D. DURBIN DANIEL J. EVANS NANCY L. JACOB
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided.)
- -------------------------------------------------------------------------------
(This Proxy Card continues and MUST be signed on the reverse side)
<PAGE>
- --------------------------------------------------------------------------------
(Continued from the reverse)
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. PROXY CARDS PROPERLY EXECUTED AND RETURNED WITHOUT
DIRECTION WILL BE VOTED FOR PROPOSAL 1. In their discretion, the Proxies are
authorized to vote upon such other business as may properly come before the
meeting and any adjournment thereof. Please sign exactly as name appears below.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
SIGNATURE/DATE SIGNATURE IF HELD JOINTLY/DATE
- ------------------------------ --------------------------------------------
PLEASE COMPLETE, SIGN,
DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
