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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a 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 ENERGY, INC.
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(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] No fee required.
[_] 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:
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PUGET SOUND ENERGY, INC.
Notice of Annual Meeting of Shareholders
To Be Held May 19, 1997
To the Holders of Common Stock of
Puget Sound Energy, Inc.:
The Annual Meeting of Shareholders of Puget Sound Energy, Inc. will be held at
2:00 p.m. on May 19, 1997 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 seven Directors to serve until the expiration of their terms and
until their successors are elected and qualified.
2. To consider and vote upon a proposal to approve the Puget Sound Energy, Inc.
Employee Stock Purchase Plan.
3. To consider and vote on any and 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 17, 1997 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 28, 1997
Bellevue, Washington
By Order of the Board of Directors,
/s/ James W. Eldredge
James W. Eldredge, Corporate Secretary
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Proxy Statement............................................................................ 1
Annual Report.............................................................................. 1
Voting Rights and Proxy.................................................................... 1
Election of Directors...................................................................... 2
Security Ownership of Directors and Executive Officers..................................... 6
Board of Directors and Committee Meetings.................................................. 7
Compensation and Retirement Committee Report............................................... 9
Stock Price Performance Graph.............................................................. 12
Summary Compensation Table................................................................. 13
Aggregated SAR Exercises in 1996 and Fiscal Year-End SAR Values............................ 15
Long-Term Incentive Plan Awards in 1996.................................................... 16
Retirement Benefits Statement.............................................................. 17
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements............................................................. 18
Proposal No. 2 - Approval of Employee Stock Purchase Plan.................................. 20
Independent Public Accountants............................................................. 22
Section 16(a) Beneficial Ownership Reporting Compliance.................................... 22
Shareholder Proposals...................................................................... 22
Solicitation of Proxies.................................................................... 22
Appendix A - Employee Stock Purchase Plan.............................................. A1 - A11
</TABLE>
Map to Annual Meeting
YOUR VOTE IS IMPORTANT
The Company has approximately 70,000 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 Energy, Inc. ("Puget" or the "Company") to be held at 2:00 p.m. on May 19,
1997 at the Meydenbauer Center located at 11100 N.E. 6th Street, Bellevue,
Washington. The approximate mailing date of the proxy material is March 28,
1997. The mailing address of the Company's principal executive offices is Puget
Sound Energy, Inc., 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 seven Directors and a proposal to approve the
Employee Stock Purchase Plan.
ANNUAL REPORT
The Company's Annual Report for 1996, including audited financial statements, is
being mailed to shareholders on or about March 28, 1997.
VOTING RIGHTS AND PROXY
The Company's Common Stock is the only class of stock entitled to vote at the
Annual Meeting. Approximately 84.5 million shares of Common Stock were
outstanding on March 17, 1997, the record date for the Annual Meeting. The
holders of a majority of the shares of the 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, (a) the seven
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, and (b) the proposal to approve the Puget Sound Energy,
Inc. Employee Stock Purchase Plan (the "Plan") will be approved if the votes
cast in favor of the proposal exceed the votes cast against the proposal. In
the election of directors, any actions other than a vote for a nominee will have
the practical effect of voting against the nominee. With respect to the
proposal to approve the Plan, abstentions will have no effect as they will not
represent votes cast for or against such proposal. Because brokers have
discretion to vote shares of Common Stock held on behalf of beneficial owners,
if no instructions for voting such shares are received as to the matter to be
voted upon at the Annual Meeting, there will be no "broker non-votes."
Unless your proxy is mutilated or otherwise received in such form or at such
time as to render it not votable, 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 shareholder may
revoke a proxy card at any time before it is voted by delivering
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a written notice of revocation to the Secretary of the Company or by signing and
delivering another proxy card that is dated later. If the shareholder attends
the Annual Meeting in person, either giving notice of revocation to an inspector
of election at the Annual Meeting or voting at the Annual Meeting will revoke
the proxy. A proxy, when executed and not so revoked, will be voted and, if it
contains any specifications, will be voted in accordance with the specifications
so made. ChaseMellon Shareholder Services, L.L.C. acts as tabulator and
Inspector of Elections 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.
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 fourteen. The terms of the
Directors are classified so that generally 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, two Class II Directors will be elected to serve for a term of
two years expiring on the date of the Annual Meeting of Shareholders in 1999 and
five Class III Directors will be elected to serve for a term of three years
expiring on the date of the Annual Meeting of Shareholders in 2000.
Proxies will be voted for the following named nominees. In the event any nominee
is not available to serve as a Director at the date of the Annual Meeting (which
is not now anticipated), the persons named in the enclosed proxy shall have full
discretion and authority to vote or refrain from voting for any other nominee in
accordance with their judgment. Directors are elected to hold office until their
successors are elected and qualified, or until resignation or removal in the
manner provided in the Bylaws of the Company.
The names of nominees for Director of the Company are set forth below.
CLASS II NOMINEES
TERMS EXPIRE 1999
ROBERT L. DRYDEN
Mr. Dryden has been a Director of Puget Sound Energy since the consummation of
the merger of Washington Energy Company and Washington Natural Gas Company into
Puget Power on February 10, 1997 (the "Merger"). Mr. Dryden, age 63, previously
served as a Director of Washington Energy Company and Washington Natural Gas
Company from 1991 through February 10, 1997. He has served as Executive Vice
President, Airplane Production, Boeing Commercial Airplane Group, Seattle,
Washington, since 1990. Mr. Dryden also serves as a director of U.S. Bancorp.
SALLY G. NARODICK
Ms. Narodick has been a Director of Puget Sound Energy since the consummation of
the merger of Washington Energy Company and Washington Natural Gas Company into
Puget Power on February 10, 1997. She is currently a Consultant on Strategic
Planning for Educational Technology for Edmark Corporation (educational software
development). Ms.
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Narodick, age 51, previously served as a Director of Washington Energy Company
and Washington Natural Gas Company from 1989 through February 10, 1997 and was
Chairman and Chief Executive Officer of Edmark Corporation, Redmond, Washington,
from October 1989 to September 1996. She also serves as a director of Penwest
and Fluke Corporation.
CLASS III NOMINEES
TERMS EXPIRE 2000
CHARLES W. BINGHAM
Mr. Bingham served as Executive Vice President of Weyerhaeuser Company (forest
products industry) from 1981 until his retirement in July 1995 and Senior Vice
President from 1972 to 1981. Mr. Bingham, age 63, has been a Director of the
Company since 1978.
DONALD J. COVEY
Mr. Covey has been a Director of Puget Sound Energy since the consummation of
the merger of Washington Energy Company and Washington Natural Gas Company into
Puget Power on February 10, 1997. Mr. Covey, age 68, previously served as a
Director of Washington Energy Company and Washington Natural Gas Company from
1982 through February 10, 1997. Mr. Covey served as Chairman of the Board of
Directors of UNICO Properties, Inc. (property management), Seattle, Washington,
from 1990 until his retirement in December 1994. Prior to that he served UNICO
as Chief Executive Officer from 1983 to 1992 and President from 1975 to 1990.
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 68, 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. Mr. Ellis is
also a Regent of Washington State University, and Chairman of the Board of
Trustees of Seattle University.
TOMIO MORIGUCHI
Mr. Moriguchi has been a Director of Puget Sound Energy since the consummation
of the merger of Washington Energy Company and Washington Natural Gas Company
into Puget Power on February 10, 1997. Mr. Moriguchi, age 60, previously served
as a Director of Washington Energy Company and Washington Natural Gas Company
from 1988 through February 10, 1997 and has served as Chairman and Chief
Executive Officer of Uwajimaya, Inc. (food and merchandise distributor),
Seattle, Washington, since December 1994. Previously, he served as President
of Uwajimaya, Inc. from 1965 through December 1994. He also serves as a
director of Bank of America NW, N.A., and is President, Town and Country Travel,
Inc., Seattle, Washington, and President, North American Post Publishing
Company, Seattle, Washington.
RICHARD R. SONSTELIE
Mr. Sonstelie has been Chairman and Chief Executive Officer of the Company since
February 10, 1997. His prior positions with the Company include Chief Executive
Officer and President from 1992 to February 1997, Chief Operating Officer from
1991 to 1992, Chief Financial Officer from 1987 to 1991 and Executive Vice
President from 1985 to 1987. Mr. Sonstelie, age 52, has been a Director of the
Company since 1987 and also serves as a director of Utech Venture Capital
Corporation and Edison Electric Institute.
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The names of the Class I and Class II Directors of the Company who are not
standing for election and whose terms of office will continue after the Annual
Meeting are listed as follows:
CLASS I DIRECTORS
TERMS EXPIRE 1998
DOUGLAS P. BEIGHLE
Mr. Beighle has been Senior Vice President of The Boeing Company (aerospace
manufacturing and sales) since 1986. He served The Boeing Company as Vice
President from 1980 to 1986. Mr. Beighle, age 64, has been a Director of the
Company since 1981 and also serves as a director of Washington Mutual Savings
Bank.
PHYLLIS J. CAMPBELL
Ms. Campbell has been President and Chief Executive Officer of U.S. Bank of
Washington (financial institution) since 1993 and is an Executive Vice President
of U.S. Bancorp. She also served as Area President of U.S. Bank of Washington
for Seattle-King County from 1992 to 1993, Executive Vice President and Manager
from 1989 to 1992, and in various banking capacities since 1973. Ms. Campbell,
age 45, has been a Director of the Company since 1993 and also serves as a
director of U.S. Bank of Washington and SAFECO Corporation, and is a Regent of
Washington State University and Chairman of the Greater Seattle Chamber of
Commerce.
WILLIAM S. WEAVER
Mr. Weaver has been Vice Chairman and Chairman of Unregulated Subsidiaries since
February 10, 1997. Prior to that he 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 53, has been a Director of the Company since 1991.
R. KIRK WILSON
Mr. Wilson has been Chairman of the Board of Brown & Cole, Inc. (retail super
markets), Bellingham, Washington, since January 1997. He previously served as
President and Chief Executive Officer of Thrifty Foods, Inc. (retail grocery)
from 1969 to 1996. Mr. Wilson, age 58, has been a Director of the Company since
1976.
CLASS II DIRECTORS
TERMS EXPIRE 1999
JOHN D. DURBIN
Mr. Durbin has been a Principal in Olympic Capital Partners, Inc. (investment
banking), Seattle, Washington, since October 1996. He served as President and
Chief Executive Officer of Hostar International, Inc. (equipment for hotels)
from 1988 until his retirement in June 1995, and has been a General Partner of
John Durbin & Associates (industrial real estate) since 1969. His prior
positions include Chairman and President of CEC Equipment Company (construction
equipment) from 1982 to 1987 and Chairman of Spokane Truck Sales, Inc. (trucks)
from 1983 to 1987. Mr. Durbin, age 61, has been a Director of the Company since
1984 and also serves as a director of Fluke Corporation.
4
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DANIEL J. EVANS
Mr. Evans has been Chairman of Daniel J. Evans Associates (consulting) since
1989. His prior positions include United States Senator, State of Washington,
from 1983 to 1989 and Chairman, Pacific Northwest Power and Conservation
Planning Council from 1981 to 1983. Mr. Evans, age 71, has been a Director of
the Company since 1990 and also serves as a director of Attachmate, Inc.,
Burlington Northern Santa Fe Inc., Flow International Corporation, Tera Computer
Company and Washington Mutual Savings Bank.
NANCY L. JACOB
Ms. Jacob has been President and Managing Director of Windermere Investment
Associates, Inc. (financial services), Portland, Oregon, since January 1997.
Her prior positions include Chief Executive Officer of CTC Consulting, Inc. from
April 1994 to December 1996, Managing Director, Capital Trust Company (financial
advisor) from 1990 to 1994, Professor of Finance and Business Economics at the
University of Washington (educational institution) from 1981 to 1992 and Dean of
the School and Graduate School of Business Administration from 1981 to 1988. Ms.
Jacob, age 54, has been a Director of the Company since 1980 and also serves as
a trustee of College Retirement Equities Fund in New York.
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SECURITY OWNERSHIP OF DIRECTORS AND
EXECUTIVE OFFICERS
The following table sets forth information as of February 28, 1997, concerning
the shares of the Company's Common Stock beneficially owned by each Director and
nominee, the executive officers named in the Summary Compensation Table (the
"named executive officers") and Directors and executive officers of the Company
as a group. No Director or executive officer owns more than 1% of the
outstanding shares of Common Stock. The Company is not aware of any person, who
beneficially owns five percent or more of the Common Stock.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER
Number of
Number of Number of Shares that
Beneficially Share May Be
Owned Equivalents Acquired by
Nominees and Directors Shares Held Exercising Options
- ---------------------- ------------ ----------- ------------------
<S> <C> <C> <C>
Douglas P. Beighle 3,236
Charles W. Bingham 4,471
Phyllis J. Campbell 1,000
Donald J. Covey 4,310 1,720(2)
Robert L. Dryden 3,543 970(2)
John D. Durbin 2,430
John W. Ellis 27,428(1)
Daniel J. Evans 1,000
Nancy L. Jacob 1,143
Tomio Moriguchi 602 1,720(2)
Sally G. Narodick 258 1,435(2)
R. Kirk Wilson 16,313
Executive Officers
- ------------------
(*also serve as directors)
Richard R. Sonstelie* 10,430(1)
William S. Weaver* 2,549(1)
Jerry L. Henry 4,699(1)
Gary B. Swofford 5,498(1)
Sheila M. Vortman 2,769(1)
All Directors and
executive officers
as a group (25 persons) 125,166 5,845 49,650(3)
</TABLE>
(1) Includes shares credited under the Company's Investment Plan for Employees
through February 28, 1997.
(2) Shares represent grants of stock under the former Washington Energy
Company's Director Stock Bonus Plan. The shares have been converted to
Puget Sound Energy shares at an exchange ratio of .86 to 1.
(3) Unexercised options to acquire shares of common stock which were previously
awarded to former Washington Energy Company executive officers.
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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
and retirement 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 1996. Each Director attended
at least 75% of the meetings of the Board of Directors and committees of the
Board on which the Director served. Average attendance at all Board of
Directors meetings and committee meetings during 1996 was 94%.
AUDIT COMMITTEE
The Audit Committee currently includes Douglas P. Beighle (Chairperson), Charles
W. Bingham, Donald J. Covey, John D. Durbin, Daniel J. Evans, Tomio Moriguchi
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 1996.
DIRECTOR AFFAIRS COMMITTEE
The Director Affairs Committee currently includes Daniel J. Evans (Chairperson),
Phyllis J. Campbell and Donald J. Covey. 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. No Director Affairs Committee meetings were held during 1996.
COMPENSATION AND RETIREMENT COMMITTEE
The Compensation and Retirement Committee currently includes R. Kirk Wilson
(Chairperson), Douglas P. Beighle, Phyllis J. Campbell, Robert L. Dryden, John
D. Durbin, Nancy L. Jacob and Sally G. Narodick. The Compensation and Retirement
Committee acts and makes recommendations to the Board of Directors with respect
to executive compensation, the Retirement Plan for Employees and other similar
matters. Five Compensation and Retirement Committee meetings were held during
1996.
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.
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The Company and Mr. Ellis entered into a consulting agreement that commenced in
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's services performed under the consulting agreement.
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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 for 1996 were all nonemployee Directors, none of whom participate in the
compensation programs described here for executives. These members were Nancy
L. Jacob, Douglas P. Beighle, Phyllis J. Campbell and R. Kirk Wilson. The Board
of Directors on March 13, 1997 appointed as additional members of the Committee
Robert L. Dryden, John D. Durbin and Sally G. Narodick. The 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 report of the Committee as
constituted prior to March 13, 1997 on executive compensation for 1996.
In determining executive compensation, the Committee is guided by competitive
pay practices in similar-sized companies within both the electric and
combination electric and gas utility industry and by its belief that executive
compensation should:
. Attract and retain outstanding executives by providing compensation
opportunities consistent with the electric and gas 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 Company performance, in the short term to
favorable operating results, including performance for customers 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 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 target
compensation opportunities will be competitive with the median total
compensation level for similar positions in similar-sized companies within the
EEI survey.
In making individual base salary decisions, the Committee makes a subjective
evaluation of the individual's contributions and impact on Company performance
as well as achievement of individual goals and the competitiveness of the
individual's base salary. Because of cost restraints, and because the Merger
was pending at the time, the Committee did not adjust salaries for the named
executive officers in 1996. Base salaries for the named executive officers were
last increased in May 1995. Such base salaries generally were below median
salaries for comparable positions within the EEI survey at that time and
continue to be so. Total cash compensation, defined as base salaries plus
annual incentive awards and the expected value from the 1996 long-
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term incentive grants, for the named executive officers in 1996 was
approximately at the median for positions of similar responsibility and job
complexity in similar-sized companies within the EEI survey.
ANNUAL INCENTIVE COMPENSATION
All executive officers participate in the Company's annual Pay at Risk Plan.
The intent of this Plan is to provide financial incentives to executives for
achieving desired annual operating results. For 1996, the awards were based on
combined performance in these areas: (1) earnings per share; and (2) successful
completion of the Merger. The weighting of these two performance categories
varied by executive officer. Messrs. Sonstelie, Weaver and Swofford and Ms.
Vortman's awards were based on 50% weight on earnings per share and 50% weight
on merger results; and Mr. Henry's award was based on 40% weight on earnings per
share and 60% weight on merger results.
The annual incentive awards approved by the Committee for 1996 were based on an
evaluation of the performance areas specified above, together with a subjective
evaluation of individual performance. Individual target awards ranged from 20%
to 35% of salary for the named executive officers, and funding could range from
zero to approximately 1.25 times target. The Company's earnings per share
performance in 1996 was within the funding range. Although the Merger process
was not completed by December 31, 1996, it was successfully completed on
February 7, 1997, before awards were determined, and was included in the
calculation of individual awards. 1996 awards to the named executive officers
were, on average, 1.2 times target.
LONG TERM INCENTIVE COMPENSATION
The 1995 Long-Term Incentive Compensation Plan, approved by shareholders in
1995, reflects the Committee's desire to link compensation to the growth of
shareholder value. Under this plan, awards of contingent grants of the
Company's Common Stock were made to executives and key employees. These awards
will be payable in stock at the end of a four-year period based on 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 Common Stock to the participant, one-
half of the shares will be restricted for a further period of two years. The
purpose of this further restriction is to encourage greater levels of stock
ownership by Company executives and key employees. Dividend equivalents will 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 1996 to the
named executive officers are shown on the Long-Term Incentive Plan Awards in
1996 table.
No awards have been made under the Company's Long Term Incentive Plan for Senior
Employees (the "prior Long Term Incentive Program") since 1994. Awards
previously made are outstanding, however, and will continue under their original
terms. Under that plan, participants could be allocated Performance Share Units
("PSUs") and Stock Appreciation Rights ("SARs") both of which are payable only
in cash.
Each PSU grant has a four-year term. The last grant, made in 1994, will mature
on December 31, 1997. A PSU's value is the price of the Company's Common Stock
at the end of the PSU's
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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.
Each SAR grant has a 10-year term and vests 20% per year beginning one year
after the date of grant. A SAR's value is the gain of the price of the Common
Stock over the base price, which is the closing market value of the Common Stock
on the date of grant, plus the incremental value of per share dividend increases
during the holding period. SAR grants were last made in 1994 and are described
on the Summary Compensation Table and its accompanying footnotes. The values of
SARs exercised in 1996, and of all outstanding SARs, are shown on the Aggregated
SAR Exercises in 1996 and Fiscal Year-End SAR Values Table.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Sonstelie has served as Chief Executive Officer since May 1992. His base
pay was set at $400,000 on May 1, 1995, and has not been increased since that
date. In October 1995 Mr. Sonstelie entered into a four-year employment
agreement 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". Mr. Sonstelie's base salary
remains below the median of similar-sized companies in the EEI survey. His
total compensation (salary plus annual incentive award and expected value from
the 1996 long term incentive grant) in 1996 was at the median for chief
executive officers of similar-sized companies in the EEI survey.
Mr. Sonstelie's 1996 annual incentive award pursuant to the Pay at Risk Plan was
111% of target. This award was based on an earnings per share result of $1.89
in 1996 and the successful completion of the Merger.
Mr. Sonstelie's individual performance objectives, approved by the Committee at
the beginning of 1996, emphasized the successful completion of the Merger and
the attainment of specified short- and long-term strategic objectives. These
objectives continued to focus on the importance of controlling Company costs
while improving the Company's competitive posture in an increasingly competitive
industry and enhancing long-term shareholder value. Mr. Sonstelie's leadership
and initiative in managing the Company under these challenging circumstances
have improved the Company's ability to effectively compete and grow within a
rapidly changing industry.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
generally disallows a tax deduction to public companies for compensation over $1
million paid to the Company'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 1997 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
11
<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 & 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- 1991 $100 $100 $100
FYE 1992 $108.03 $107.62 $107.59
FYE 1993 $106.00 $118.47 $119.59
FYE 1994 $ 93.85 $120.03 $105.75
FYE 1995 $117.54 $165.14 $138.55
FYE 1996 $130.92 $203.06 $140.22
</TABLE>
(1) This comparison assumes $100 was invested on December 31, 1991, in (a) the
Company's 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.
12
<PAGE>
SUMMARY COMPENSATION TABLE
The following information is furnished for the years ended December 31, 1996,
1995, and 1994 with respect to the Company's Chief Executive Officer and each of
the four other most highly compensated executive officers of the Company during
1996 each of whose salary and bonus exceeded $100,000. Annual compensation
includes amounts deferred at the officer's election.
<TABLE>
<CAPTION>
Long-Term Compensation
Awards
---------------------------
Restricted Shares
Name and Stock Underlying All Other
Principal Position Year Salary ($) Bonus($) Award ($) SARs (#) Compensation ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R. Sonstelie 1996 400,008 155,000 -- 17,604/(1)/
President and 1995 388,817 140,000 -- 15,736
Chief Executive Officer 1994 370,008 0 36,000 13,731
W. Weaver 1996 260,004 100,000 -- 13,608/(3)/
Executive Vice President 1995 256,275 80,000 199,996/(2)/ -- 12,309
and Chief Financial Officer 1994 230,006 0 9,000 10,535
G. Swofford 1996 165,000 45,000 -- 6,593/(4)/
Senior Vice President 1995 163,138 40,000 -- 44,812
Customer Operations 1994 144,005 0 6,000 4,770
S. Vortman 1996 135,000 53,500 -- 7,299/(5)/
Senior Vice President 1995 133,138 35,000 -- 6,535
Corporate and Regulatory 1994 120,537 0 3,500 5,021
Relations
J. Henry 1996 111,000 25,000 -- 4,060/(6)/
Vice President 1995 109,697 19,425 -- 41,251
Engineering and 1994 106,303 0 -- --
Operation Services
</TABLE>
13
<PAGE>
SUMMARY COMPENSATION TABLE FOOTNOTES
(1) Represents $3,135 match under the Investment Plan for Employees, $10,065
match under the Investment Plan makeup; and $4,404 of imputed income on
life insurance.
(2) On June 30, 1995, Mr. Weaver was granted 8,743 phantom shares. The
aggregate value of the phantom shares was $199,996, based on a stock price
at June 30, 1995 of $22.875. The phantom shares vest, subject to continued
employment, equally over four years beginning on July 1, 1996, and are
valued and paid out in cash as to the vested portion on each such date. The
value of each phantom share is the market price on the vesting date, plus
the aggregate dividends paid on each such share during the period the
phantom share is held. At December 31, 1996, 6,558 phantom shares were
outstanding with an aggregate value of $157,392 (based on a stock price of
$24.00 per share at December 31, 1996).
(3) Represents $4,950 match under the Investment Plan for Employees; $2,915
match under the Investment Plan makeup; and $5,743 of imputed income on
life insurance.
(4) Represents $2,613 match under the Investment Plan for Employees; $2,833
match under the Investment Plan makeup; and $1,147 of imputed income on
life insurance.
(5) Represents $2,613 match under the Investment Plan for Employees; $1,842
match under the Investment Plan makeup; and $2,844 of imputed income on
life insurance.
(6) Represents $2,475 match under the Investment Plan for Employees; $1,188
match under the Investment Plan makeup; and $397 of imputed income on life
insurance.
14
<PAGE>
AGGREGATED SAR EXERCISES IN 1996 AND FISCAL YEAR-END SAR VALUES
The following information is furnished for the year ended December 31, 1996 with
respect to the Company's Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company for SAR exercises which
occurred during 1996 and for unexercised SARs outstanding at fiscal year end. No
SARs were granted in 1996.
<TABLE>
<CAPTION>
Number of Number of Shares Value of Unexercised
Shares Underlying Unexercised In-The-Money SARs
Underlying Value SARs at Fiscal Year-End (#) at Fiscal Year-End ($)
Exercised Realized ----------------------------------------------------------
Name SARs (#) ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R. Sonstelie -- -- 49,840 / 27,560 94,782 / 54,600
W. Weaver 3,600 13,050 8,880 / 9,820 0 / 17,550
G. Swofford -- -- 4,960 / 4,240 7,800 / 11,700
S. Vortman -- -- 1,400 / 2,100 4,550 / 6,825
J. Henry -- -- -- --
</TABLE>
(1) This amount is the aggregate of the market value of the Common Stock at
the time the SAR was exercised minus the base price for the SAR.
(2) Amounts are the aggregate of the number of SARs multiplied by the difference
between the closing price of the Common Stock on the New York Stock Exchange
on December 31, 1996 of $24.00 per share minus the base price for that SAR.
There is no guarantee that if and when these SARs are exercised they will
have this value.
15
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS IN 1996
The following information is furnished for the year ended December 31, 1996 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 1995 Long-Term Incentive Compensation Plan during 1996.
<TABLE>
<CAPTION>
Estimated Future Share Payouts
Number of Period Until -------------------------------
Shares Maturation or Threshold Target Maximum
Name (#)(1) Payout (#) (#) (#)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
R. Sonstelie 12,000 4 years 0 12,000 19,200
W. Weaver 5,200 4 years 0 5,200 8,320
G. Swofford 2,650 4 years 0 2,650 4,240
S. Vortman 2,150 4 years 0 2,150 3,440
J. Henry 1,050 4 years 0 1,050 1,680
</TABLE>
(1) Awards are contingent grants of the Company's 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 Common Stock to the
participant, one-half of the shares will be restricted for an additional
two-year period. Dividend equivalents will be paid 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).
16
<PAGE>
RETIREMENT BENEFITS STATEMENT
Estimated retirement benefits for the named executive officers are shown in the
table below, assuming retirement on January 1, 1997 at age 65 after selected
periods of service. The benefit levels shown are the estimated aggregate values
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>
The named executive officers have the following years of credited service as of
December 31, 1996: R. Sonstelie, 22.5; W. Weaver, 28.5; G. Swofford, 29.42; S.
Vortman, 15.67; and J. Henry, 28.25. 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, 1996 are as follows for the named executive officers: R.
Sonstelie, $440,746; W. Weaver, $322,519; G. Swofford, $159,495; S. Vortman,
$126,623; and J. Henry, $114,907.
17
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
EMPLOYMENT AGREEMENTS
Mr. Sonstelie entered into an employment agreement with the Company effective as
of October 18, 1995. The agreement provides that Mr. Sonstelie will serve as
Chairman of the Company's Board of Directors (assuming his election to the Board
by the Company's shareholders) and Chief Executive Officer of the Company. The
agreement terminates on the fourth anniversary of the consummation of the Merger
(subject to earlier termination in certain circumstances).
During his term of employment, Mr. Sonstelie will receive a minimum annual base
salary of $400,000. If the Company terminates Mr. Sonstelie's employment
(except termination "for cause" as defined in the agreement or termination upon
death or disability) prior to the end of the four-year term, Mr. Sonstelie will
be entitled to receive (a) all compensation and 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 in the agreement), except termination for cause or termination due to
death or incapacity, Mr. Sonstelie will be entitled to receive (a) his annual
base salary earned through termination and accrued benefits; (b) an amount equal
to three times his annual base salary at the rate applicable on the date of
termination plus any additional compensation awarded for the year most recently
ended; (c) continued participation for three years in the Company's employee
benefit plans or provision for substantially similar benefits; (d) a cash
payment at age 65 equal to the actuarial equivalent of the additional retirement
compensation he would have earned had employment continued for three more years;
(e) a payment equal to the difference between the exercise prices of all
options, if any, held by Mr. Sonstelie (whether or not then fully exercisable)
and the higher of (i) the market price of the Common Stock on the date of
termination and (ii) the highest price per share actually paid in connection
with any change of control of the Company; and (f) a cash payment equal to any
excise taxes payable by Mr. Sonstelie in connection with excess parachute
payments plus the tax expense to him resulting from this payment.
Messrs. Weaver and Swofford and Ms. Vortman entered into agreements with the
Company effective as of October 18, 1996 under which they generally will be
entitled to receive the same type of payments and benefits as described in
sections (a) through (f) of the immediately preceding paragraph if (1) they did
not terminate their employment prior to consummation of the Merger and (2) Mr.
Weaver's employment thereafter terminates for any reason other than at the
normal retirement date as defined in the SERP or (3) Mr. Swofford or Ms. Vortman
thereafter terminate their employment for "good reason" or the Company
terminates their employment "without cause" (as those terms are defined in the
agreements) within three years following the Merger or their employment is
terminated upon death or disability.
In addition, Mr. Weaver's agreement provides that the benefits payable to him
under the SERP will be based upon his average compensation for his highest
consecutive 24 months of service rather than 60 months as provided in the SERP,
provided he does not voluntarily terminate his employment within six months
after the Merger. The agreements for Mr.
18
<PAGE>
Swofford and Ms. Vortman provide that they will be paid a retention incentive
benefit based on continued employment for an extended period following the
Merger equal to three times their annual base salary in 1996 plus the bonus paid
in 1996. The incentive benefit will vest in three equal installments after one
year, three years and five years of continued employment after the Merger. The
vested portion of the incentive benefit will be paid in equal monthly
installments over a three-year period beginning on the date their employment
terminates. If their employment is terminated for cause, only current base
salary plus accrued vacation and any other compensation actually accrued through
the date of termination, and the vested portion of the incentive benefit, will
be payable.
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 plan administrator
has 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 under the Plan.
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,
securities or other property in exchange for their shares of Common Stock, all
SARs will terminate, but each holder will have the right immediately prior to
such transaction to exercise his or her SARs, whether or not the SARs have
vested. All performance share units will be deemed to have matured on the
preceding December 31. The number of performance share units will be
proportionately reduced to reflect the reduction in the period from the grant of
performance share units until their maturity.
19
<PAGE>
PROPOSAL NO. 2 - APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN
On March 13, 1997, the Company's Board of Directors unanimously adopted, subject
to shareholder approval, the Puget Sound Energy, Inc. Employee Stock Purchase
Plan (the "Plan"). The Plan will provide a means for eligible employees of the
Company and designated subsidiaries to purchase shares of the Company's Common
Stock under favorable terms through payroll deductions or cash payments. The
Board believes that adoption of the Plan will promote the interests of the
Company and its shareholders by assisting the Company in attracting, retaining
and stimulating the performance of employees and by aligning employees'
interests through their purchases of Common Stock with the interests of
shareholders.
A copy of the Plan is attached to this Proxy Statement as Appendix A and is
incorporated herein by reference. The following description of the Plan is a
summary and does not purport to be a complete description. See Appendix A for
more detailed information.
DESCRIPTION OF THE PLAN
SHARES SUBJECT TO THE PLAN. An aggregate of up to 500,000 shares of Common
Stock is authorized for issuance under the Plan, subject to adjustment from time
to time for stock dividends and certain other changes in capitalization as
provided in the Plan.
ELIGIBILITY. The Plan is an employee benefit program that enables qualified
employees to purchase shares of Common Stock at a discount through payroll
deductions or cash payments without incurring broker commissions. To
participate, an employee's customary employment must be for more than 20 hours
each week and five months in any calendar year. An employee is not eligible to
continue participation in the Plan in the event his or her employment is
voluntarily or involuntarily terminated, or if such employee owns or will own,
as a result of such participation, shares possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or any
related corporation. As of March 13, 1997, approximately 2,850 of the Company's
employees would be eligible to participate in the Plan, including each of the
named executive officers. Non-employee directors of the Company are not
eligible to participate in the Plan.
STOCK PURCHASES. The Plan is divided into offering periods, which initially
will be consecutive six-month periods beginning on July 1 and January 1 of each
year. The Board of Directors or the Compensation and Retirement Committee can
establish different offering periods, subject to the limitations set forth in
the Plan. During these offering periods, participating employees accumulate
funds in an account used to buy Common Stock through payroll deductions or cash
payments at a rate of not less than $10 or more than 10% of such participant's
regular cash compensation during each payroll period in each purchase period
within an offering period. The length of each purchase period will be as
established by the Board of Directors or the Committee and may be the same as
the offering period, or may be shorter consecutive periods within the offering
period. The Plan will initially be implemented with purchase periods of six
months that will be coextensive with the offering periods.
At the end of each purchase period, the market price is determined and the
participating employees' accumulated funds are used to purchase the appropriate
number of shares of Common Stock. No participant may purchase more than $25,000
fair market value of Common Stock for any calendar year under the Plan. The
purchase price per share of Common Stock under the Plan will be as established
by the Board of Directors or the
20
<PAGE>
Committee, but may not be less than the lower of 85% of the per share fair
market value of the Common Stock on either the first day of the offering period
or the last day of the purchase period. The Plan will initially be implemented
with a purchase price equal to 90% of the lesser of the fair market value of the
Common Stock on the first day of the offering period and the last day of the
purchase period. The closing price of a share of Common Stock on March 13, 1997
was $25-3/4 as reported on the New York Stock Exchange.
Shares purchased under the Plan may not be transferred or otherwise disposed of
for a period of three months after the purchase date, except upon termination of
employment because of retirement, disability or death.
ADMINISTRATION. The Plan will be administered by the Committee except to the
extent administration is delegated to an executive officer of the Company (the
"Plan Administrator"). The Plan Administrator is authorized to administer and
interpret the Plan and to make such rules and regulations as it deems necessary
to administer the Plan, so long as such interpretation, administration or
application with respect to purchases under the Plan corresponds to the
requirements of Section 423 of the Code.
AMENDMENT AND TERMINATION. The Board of Directors has the power to amend,
suspend or terminate the Plan, provided that the Board may not amend the Plan
without shareholder approval if such approval is required by Section 423 of the
Code. The Committee may also amend the Plan so long as such amendment does not
require shareholder approval.
TERM OF THE PLAN. The Plan will continue in effect until May 19, 2007.
FEDERAL INCOME TAX CONSEQUENCES
The Company intends that the Plan qualify as an "employee stock purchase plan"
under Section 423 of the Code. Section 423 allows an employer to grant options
to its employees to purchase company stock at a stipulated price without having
the employees realize taxable income at the time the option is granted or when
exercised. The basis of the stock received on exercise of an option under the
Plan is the exercise price paid for the stock. The Code imposes a holding
period for favorable tax treatment upon disposition of Common Stock acquired
under the Plan equal to the later of two years after the grant date or one year
after the purchase date. When the Common Stock is sold after this holding
period, the employee will realize ordinary income up to the amount of any
discount (up to a maximum of 15%) from the fair market value of Common Stock as
of the grant date. Any further gain is taxed at capital gain rates. If the
stock is sold before the holding period expires, the employee will realize
ordinary income to the extent of the difference between the price actually paid
for the stock and the fair market value of the stock at the purchase date,
regardless of the price at which the stock is sold. If the sale price is less
than the fair market value of the stock on the purchase date, the employee will
realize a capital loss equal to such difference. The Company may not take a
deduction for the difference between the fair market value of the Common Stock
and the purchase price paid for the Common Stock by the employee unless the
employee disposes of the stock before the statutory holding periods expire.
The Board of Directors recommends that shareholders vote FOR approval of the
adoption of the Puget Sound Energy, Inc. Employee Stock Purchase Plan.
21
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P. has examined the financial statements of
the Company since 1933. Representatives of the firm will be present at the
Annual Meeting, with the opportunity to make a statement and to answer
appropriate shareholder questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16 of the Securities Exchange Act of 1934, as amended, directors
and officers of the Company are required to report their holdings of and
transactions in the Company's Common Stock to the Securities and Exchange
Commission. To the Company's knowledge, based solely on a review of the copies
of such reports furnished to the Company and written representations that no
other reports were required, during 1996 all persons subject to the Section 16
reporting requirements with regard to the Company filed the required reports on
a timely basis.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended for inclusion in the Company proxy material
for the 1998 Annual Meeting of Shareholders must be received at the principal
executive office of the Company not later than November 28, 1997.
SOLICITATION OF PROXIES
Proxies in the form enclosed are solicited by and on behalf of the Company.
Richard R. Sonstelie, Chairman 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 28, 1997
Bellevue, Washington
By Order of the Board of Directors
/s/ Richard R. Sonstelie
Richard R. Sonstelie
Chairman and Chief Executive Officer
22
<PAGE>
APPENDIX A
EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE
The purposes of the Puget Sound Energy, Inc. Employee Stock Purchase Plan (the
"Plan") are to (a) assist employees of Puget Sound Energy, Inc., a Washington
corporation (the "Company"), and its subsidiary corporations in acquiring a
stock ownership interest in the Company pursuant to a plan that is intended to
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"), and (b) help employees provide
for their future security and encourage them to remain in the employ of the
Company and its subsidiary corporations. Stock purchased under the Plan may be
paid for either in cash or by regular payroll deductions. Only employees of the
Company and its subsidiary corporations are eligible to participate in the Plan,
and participation is voluntary.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Company's Compensation and Retirement Committee or another
committee appointed by the Board and given authority by the Board to administer
the Plan.
"Company" means Puget Sound Energy, Inc., a Washington corporation.
"Eligible Compensation" means all regular cash compensation, including overtime;
provided that in the case of commissions and cash bonuses, cash compensation
will also include an amount equal to the average of a Participant's commissions
and cash bonuses in the Participant's payroll period during the six months
preceding the current Offering Period. Regular cash compensation does not
include severance pay, hiring and relocation bonuses, pay in lieu of vacations,
sick leave or any other special payments.
"Eligible Employee" means any employee of the Company or any Subsidiary
Corporation designated by the Board or the Committee (a "Designated Subsidiary")
who is in the employ of the Company (or any Designated Subsidiary) on one or
more Offering Dates and who meets the following criteria:
(a) the employee does not, immediately after the Option is granted, own stock
(as defined by the Code) possessing 5% or more of the total combined voting
power or value of all classes of stock of the Company or of a Designated
Subsidiary of the Company;
(b) the employee's customary employment is for more than 20 hours per week; and
(c) the employee's customary employment is for more than five months in any
calendar year.
A-1
<PAGE>
If the Company permits any employee of a Designated Subsidiary to participate in
the Plan, then all employees of that Designated Subsidiary who meet the
requirements of this paragraph shall also be considered Eligible Employees.
"Enrollment Period" has the meaning set forth in Section 6.1.
"ESPP Broker" has the meaning set forth in Section 10.
"Offering" has the meaning set forth in Section 5.1.
"Offering Date" means the first day of an Offering.
"Offering Period" has the meaning set forth in Section 5.1.
"Option" means an option granted under the Plan to an Eligible Employee to
purchase shares of Stock.
"Participant" means any Eligible Employee who has elected to participate in an
Offering in accordance with the procedures set forth in Section 6.1 and who has
not withdrawn from the Offering or whose participation in the Offering is not
terminated.
"Plan" means the Puget Sound Energy, Inc. Employee Stock Purchase Plan.
"Plan Administrator" means the Company's Treasurer or another Company officer
designated by the Board or the Committee to administer the Plan under Section
3.1.
"Purchase Date" means the last day of each Purchase Period.
"Purchase Period" has the meaning set forth in Section 5.2.
"Purchase Price" has the meaning set forth in Section 8.
"Stock" means the Common Stock, no par value, of the Company.
"Subscription" has the meaning set forth in Section 6.1.
"Subscription Date" has the meaning set forth in Section 6.1.
"Subsidiary Corporation" means any corporation, other than the Company, in an
unbroken chain of corporations beginning with the Company if, at the time of the
granting of the Option, each of the corporations, other than the last
corporation in the unbroken chain, owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"Trust" and "Trustee" have the meanings set forth in Section 9.4.
A-2
<PAGE>
SECTION 3. ADMINISTRATION
3.1 Plan Administrator
The Plan shall be administered by the Board or the Committee and, if and to the
extent the Board or the Committee designates an executive officer of the Company
to administer the Plan, by such executive officer.
3.2 Administration and Interpretation by the Plan Administrator
Subject to the provisions of the Plan, the Plan Administrator shall have
exclusive authority, in its discretion, to determine all matters relating to
Options granted under the Plan, including all terms, conditions, restrictions
and limitations of Options; provided, however, that all Participants granted
Options pursuant to the Plan shall have the same rights and privileges within
the meaning of the Code. The Plan Administrator shall also have exclusive
authority to interpret the Plan and may from time to time adopt, and change,
rules and regulations of general application for the Plan's administration. The
Plan Administrator's interpretation of the Plan and its rules and regulations,
and all actions taken and determinations made by the Plan Administrator pursuant
to the Plan, unless revised by the Board or the Committee, shall be conclusive
and binding on all parties involved or affected. The Plan Administrator may
delegate administrative duties to such of the Company's other officers or
employees as the Plan Administrator so determines.
SECTION 4. STOCK SUBJECT TO PLAN
Subject to adjustment from time to time as provided in Section 19, a maximum of
500,000 shares of Stock may be sold under the Plan. Shares sold under the Plan
shall be drawn from authorized and unissued shares or shall be shares acquired
by the Company or the Trustee of the Trust. Any shares of Stock that have been
made subject to an Option that cease to be subject to the Option (other than by
reason of exercise of the Option), including, without limitation, in connection
with the cancellation or termination of the Option, shall again be available for
sale in connection with future grants of Options under the Plan.
SECTION 5. OFFERING DATES
5.1 Offering Periods
The Plan shall be implemented by a series of offerings (each, an "Offering").
Except as otherwise set forth below, Offerings shall commence on July 1 and
January 1 of each year and end on the next December 31 and June 30,
respectively, occurring thereafter. Notwithstanding the foregoing, the Board or
the Committee may establish (a) a different term for one or more Offerings and
(b) different commencing and ending dates for such Offerings; provided, however,
that an Offering Period (the "Offering Period") may not exceed five years; and
provided further that if the Purchase Price may be less than 85% of the fair
market value of the Stock on the Purchase Date, the Offering Period may not
exceed 27 months. An employee who becomes eligible to participate in the Plan
after an Offering Period has commenced shall not be eligible to participate in
such Offering but may participate in any subsequent Offering, provided that such
employee is still an Eligible Employee as of the commencement of any such
subsequent Offering. Eligible Employees may not participate in more than one
Offering at a time. In the event the first or the last day of an Offering
Period is
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not a regular business day, then the first day of the Offering Period
shall be deemed to be the next regular business day and the last day of the
Offering Period shall be deemed to be the last preceding regular business day.
5.2 Purchase Periods
Each Offering Period shall consist of one or more consecutive purchase periods
(each, a "Purchase Period"). Except as otherwise set forth below, Purchase
Periods shall commence on July 1 and January 1 of each year and end on the next
December 31 and June 30, respectively, occurring thereafter. Notwithstanding the
foregoing, the Board or the Committee may establish (a) different terms for one
or more Purchase Periods within an Offering Period and (b) different commencing
dates and Purchase Dates for any such Purchase Period. The last day of each
Purchase Period shall be the Purchase Date for such Purchase Period. In the
event the first or last day of a Purchase Period is not a regular business day,
then the first day of the Purchase Period shall be deemed to be the next regular
business day and the last day of the Purchase Period shall be deemed to be the
last preceding regular business day.
SECTION 6. PARTICIPATION IN THE PLAN
6.1 Initial Participation
An Eligible Employee shall become a Participant on the first Offering Date after
satisfying the eligibility requirements and delivering to the Plan Administrator
during the enrollment period established by the Plan Administrator (the
"Enrollment Period") and not later than ten days before such Offering Date (the
"Subscription Date") a subscription (the "Subscription"):
(a) indicating the Eligible Employee's election to participate in the Plan;
(b) authorizing payroll deductions and stating the amount to be deducted
regularly from the Participant's pay, or accompanied by a cash payment or
both; and
(c) authorizing the purchase of Stock for the Participant in each Purchase
Period.
An Eligible Employee who does not deliver a Subscription to the Plan
Administrator during the Enrollment Period and on or before the Subscription
Date shall not participate in the Plan for that Offering Period or for any
subsequent Offering Period, unless such Eligible Employee subsequently enrolls
in the Plan by delivering a Subscription to the Plan Administrator during the
Enrollment Period and on or before the Subscription Date for such subsequent
Offering Period. The Plan Administrator may, from time to time, change the
Subscription Date as deemed advisable by the Plan Administrator in its, his or
her sole discretion for the proper administration of the Plan.
6.2 CONTINUED PARTICIPATION
Unless the Plan Administrator determines otherwise, a Participant shall
participate in the next Offering Period only if the Participant delivers a
Subscription to the Plan Administrator as provided in Section 6.1 during the
Enrollment Period and on or before the Subscription Date for such next Offering
Period.
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SECTION 7. LIMITATIONS ON RIGHT TO PURCHASE SHARES
7.1 $25,000 Limitation
No Participant shall be entitled to purchase Stock under the Plan (or any other
employee stock purchase plan that is intended to meet the requirements of Code
Section 423 sponsored by the Company, any parent corporation or a Subsidiary
Corporation) at a rate that exceeds $25,000 in fair market value, determined as
of the Offering Date for each Offering Period (or such other limit as may be
imposed by the Code), for each calendar year in which a Participant participates
in the Plan (or any other employee stock purchase plan described in this Section
7.1).
7.2 Pro Rata Allocation
In the event the number of shares of Stock that might be purchased by all
Participants in the Plan exceeds the number of shares of Stock available in the
Plan, the Plan Administrator shall make a pro rata allocation of the remaining
shares of Stock in as uniform a manner as shall be practicable and as the Plan
Administrator shall determine to be equitable. Fractional shares may be issued
under the Plan only to the extent permitted by the Board or the Committee.
SECTION 8. PURCHASE PRICE
The purchase price (the "Purchase Price") at which Stock may be acquired in an
Offering pursuant to the exercise of all or any portion of an Option granted
under the Plan shall be 90% of the lesser of (a) the fair market value of the
Stock on the Offering Date of such Offering and (b) the fair market value of the
Stock on the Purchase Date. Notwithstanding the foregoing, the Board or the
Committee may establish a different Purchase Price for any Offering, which shall
not be less than 85% of the lesser of (a) the fair market value of the Stock on
the Offering Date of such Offering and (b) the fair market value of the Stock on
the Purchase Date. The fair market value of the Stock on the Offering Date or
on the Purchase Date shall be the average of the high and low per share trading
prices for the Stock as reported for such day by the New York Stock Exchange in
The Wall Street Journal or in such other source as the Plan Administrator deems
reliable. If no sales of the Stock were made on the New York Stock Exchange on
the transaction date, fair market value shall mean the average of the high and
low per share trading prices for the Stock as reported for the next preceding
day on which sales of the Stock were made on the New York Stock Exchange.
SECTION 9. PAYMENT OF PURCHASE PRICE
9.1 General Rules
Stock that is acquired pursuant to the exercise of all or any portion of an
Option may be paid for only by means of a cash payment or payroll deductions
from the Participant's Eligible Compensation or both. Except as set forth in
this Section 9, the amount of compensation to be withheld from a Participant's
Eligible Compensation during each pay period shall be determined by the
Participant's Subscription.
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9.2 Percent Withheld
The amount of payroll withholding with respect to the Plan for any Participant
during any pay period shall be at least $10, but shall not exceed 15% of the
Participant's Eligible Compensation for such pay period. Amounts shall be
withheld only in increments of $10.
9.3 Payroll Deductions
Payroll deductions shall commence on the first payday following the Offering
Date and shall continue through the last payday of the Offering Period unless
sooner altered or terminated as provided in the Plan.
9.4 Participant Accounts; Trust
Individual accounts shall be maintained for each Participant for memorandum
purposes only. All cash payments and payroll deductions from a Participant's
compensation shall be credited to such account, but shall be deposited with the
general funds of the Company. Such cash payments and payroll deductions may
also be paid by the Company to the Trustee (the "Trustee") of the 1997 Employee
Stock Purchase Plan Trust (the "Trust"), such payments to be used by the Trustee
to purchase shares of Stock pursuant to the terms of the Trust. Shares of Stock
acquired by the Trust shall be held for the benefit of the Participants and
shall be delivered to the Participants or their beneficiaries by the Trustee at
the direction of the Plan Administrator in accordance with the terms and
conditions of the Plan.
All cash payments and payroll deductions received or held by the Company may be
used by the Company for any corporate purpose. No interest shall be paid on
cash payments or payroll deductions received or held by the Company or the
Trust.
9.5 Acquisition of Stock
On each Purchase Date of an Offering Period, each Participant shall
automatically acquire, pursuant to the exercise of the Participant's Option, the
number of shares of Stock arrived at by dividing the total amount of the
Participant's cash payment and accumulated payroll deductions for the Purchase
Period by the Purchase Price; provided, however, that in no event shall the
number of shares of Stock purchased by the Participant exceed the number of
whole shares of Stock so determined, except to the extent that the Board or the
Committee has determined that fractional shares may be issued under the Plan.
9.6 Refund of Excess Amounts
Any cash balance remaining in the Participant's account shall be refunded to the
Participant as soon as practical after the Purchase Date. In the event the cash
to be returned to a Participant pursuant to the preceding sentence is in an
amount less than the amount necessary to purchase a whole share of Stock, and
the Committee has determined that fractional shares may not be issued, the Plan
Administrator may establish procedures whereby such cash is maintained in the
Participant's account and applied to the purchase of Stock in the subsequent
Purchase Period or Offering Period.
9.7 Withholding Obligations
At the time the Option is exercised, in whole or in part, or at the time some or
all of the Stock is disposed of, the Participant shall make adequate provision
for federal and state withholding obligations of the Company, if any, that arise
upon exercise of the Option or upon disposition of the Stock. The Company may,
but shall not be obligated to, withhold from the Participant's compensation the
amount necessary to meet such withholding obligations.
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9.8 Termination of Participation
No Stock shall be purchased on behalf of a Participant on a Purchase Date if his
or her participation in the Offering or the Plan has terminated prior to such
Purchase Date.
9.9 Procedural Matters
The Plan Administrator may, from time to time, establish (a) an exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars, (b)
payroll withholding in excess of the amount designated by a Participant in order
to adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, and (c) such other limitations or procedures as
deemed advisable by the Plan Administrator in its sole discretion that are
consistent with the Plan and in accordance with the requirements of Code Section
423.
9.10 Leaves of Absence
During leaves of absence approved by the Company and meeting the requirements of
the applicable Treasury Regulations, a Participant may continue participation in
the Plan by delivering cash payments to the Plan Administrator on the
Participant's normal paydays equal to the amount of his or her payroll deduction
under the Plan had the Participant not taken a leave of absence.
SECTION 10. STOCK PURCHASED UNDER THE PLAN
10.1 Restrictions on Transfer of Stock
(a) Shares of Stock purchased under the Plan may be registered in the name of a
nominee or held in such other manner as the Plan Administrator determines to
be appropriate. Each Participant will be the beneficial owner of the Stock
purchased under the Plan and will have all rights of beneficial ownership in
such Stock, except that the Participant may not transfer or otherwise
dispose of such Stock for a period of three months following the Purchase
Date for such Stock.
(b) Cash dividends paid on shares of Stock that are subject to the three-month
restriction set forth in subparagraph (a) above will be paid to the
Participant. Dividends paid in the form of shares of Stock with respect to
Stock that has been purchased under the Plan but which is subject to the
three-month restriction set forth in subparagraph (a) above shall be
credited to the Participant's account and shall be restricted for the same
period as the Stock with respect to which the stock dividend was paid.
(c) Upon termination of the Participant's employment because of retirement,
disability or death, the three-month restriction set forth in subparagraph
(a) above will be deemed to be satisfied as of the date of such termination.
(d) The Company or a brokerage firm or other entity selected by the Company will
retain custody of the certificates representing the Stock purchased under
the Plan for a period of time ending no earlier than the expiration of the
three-month restriction set forth in subparagraph (a) above.
10.2 ESPP Broker
If the Plan Administrator designates or approves a stock brokerage or other
financial services firm to hold shares purchased under the Plan for the accounts
of Participants (the "ESPP Broker"), the following procedures shall apply.
Promptly following each Purchase Date, the number of shares of Stock purchased
by each Participant shall be deposited into an account
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established in the Participant's name with the ESPP Broker. A Participant shall
be free to undertake a disposition of the shares of Stock in his or her account
at any time after expiration of the three-month restriction set forth in Section
10.1(a), but, in the absence of such a disposition, the shares of Stock must
remain in the Participant's account at the ESPP Broker until the holding period
set forth in Code Section 423(a) has been satisfied. With respect to shares of
Stock for which the Code Section 423(a) holding periods have been satisfied, the
Participant may move those shares of Stock to another brokerage account of the
Participant's choosing or request that a stock certificate be issued and
delivered to him or her. A Participant who is not subject to payment of U.S.
income taxes may move his or her shares of Stock to another brokerage account of
his or her choosing or request that a stock certificate be delivered to him or
her at any time, without regard to the Code Section 423(a) holding period.
10.3 Notice of Disposition
Each Participant agrees by entering the Plan, promptly to give the Company
notice of any Stock disposed of within 18 months of the Purchase Date for such
Stock, showing the number of such shares disposed of and the Purchase Date for
such Stock. This notice shall not be required if and so long as the Company has
a designated ESPP Broker.
SECTION 11. VOLUNTARY WITHDRAWAL
11.1 Withdrawal From an Offering
A Participant may withdraw from an Offering by delivering to the Plan
Administrator a notice of withdrawal in the form required by the Plan
Administrator for such purpose. Such withdrawal must be elected at least nine
days prior to the end of the Purchase Period for which such withdrawal is to be
effective. If a Participant withdraws after the Purchase Date for a Purchase
Period of an Offering, the withdrawal shall not affect Stock acquired by the
Participant in that Purchase Period and any earlier Purchase Periods. Unless
the Plan Administrator establishes a different rule, withdrawal from an Offering
shall result in a withdrawal from the Plan and any succeeding Offering therein.
A Participant is prohibited from again participating in the same Offering at any
time upon withdrawal from such Offering, but may participate in any subsequent
Offering under the Plan by again satisfying the definition of Participant.
11.2 Withdrawal From the Plan
A Participant may withdraw from the Plan by delivering to the Plan Administrator
a notice of withdrawal in the form required by the Plan Administrator for such
purpose. Such notice must be delivered at least nine days prior to the end of
the Purchase Period for which such withdrawal is to be effective. If a
Participant withdraws after the Purchase Date for a Purchase Period of an
Offering, the withdrawal shall not affect Stock acquired by the Participant in
that Purchase Period and any earlier Purchase Periods. In the event a
Participant voluntarily elects to withdraw from the Plan, the withdrawing
Participant may not resume participation in the Plan during the same Offering
Period, but may participate in any subsequent Offering under the Plan by again
satisfying the definition of Participant.
11.3 Return of Cash Payments and Payroll Deductions
Upon withdrawal from an Offering pursuant to Section 11.1 or from the Plan
pursuant to Section 11.2, the withdrawing Participant's cash payments and
accumulated payroll deductions that have not been applied to the purchase of
Stock shall be returned as soon as practical after the withdrawal, without the
payment of any interest, to the Participant, and
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the Participant's interest in the Offering shall terminate. Such cash payments
and accumulated payroll deductions may not be applied to any other Offering
under the Plan.
SECTION 12. TERMINATION OF EMPLOYMENT
Termination of a Participant's employment with the Company for any reason,
including retirement, disability or death, or the failure of a Participant to
remain an Eligible Employee, shall immediately terminate the Participant's
participation in the Plan. The payroll deductions credited to the Participant's
account since the last Purchase Date shall, as soon as practical, be returned to
the Participant or, in the case of a Participant's death, to the Participant's
legal representative, and all the Participant's rights under the Plan shall
terminate. Interest shall not be paid on sums returned to a Participant
pursuant to this Section 12.
SECTION 13. RESTRICTIONS UPON ASSIGNMENT
An Option granted under the Plan shall not be transferable otherwise than by
will or by the applicable laws of descent and distribution, and shall be
exercisable during the Participant's lifetime only by the Participant. The Plan
Administrator will not recognize, and shall be under no duty to recognize, any
assignment or purported assignment by a Participant, other than by will or by
the applicable laws of descent and distribution, of the Participant's interest
in the Plan, of his or her Option or of any rights under his or her Option.
SECTION 14. NO RIGHTS OF SHAREHOLDER UNTIL SHARES ISSUED
With respect to shares of Stock subject to an Option, a Participant shall not be
deemed to be a shareholder of the Company, and he or she shall not have any of
the rights or privileges of a shareholder. A Participant shall have the rights
and privileges of a shareholder of the Company when, but not until, the shares
have been issued following exercise of the Participant's Option.
SECTION 15. AMENDMENT OF THE PLAN
The Board or the Committee may amend the Plan in such respects as it shall deem
advisable; provided, however, that to the extent required for compliance with
Code Section 423 or any applicable law or regulation, shareholder approval will
be required for any amendment that will (a) increase the total number of shares
as to which Options may be granted under the Plan, (b) modify the class of
employees eligible to receive Options, or (c) otherwise require shareholder
approval under any applicable law or regulation.
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SECTION 16. TERMINATION OF THE PLAN
The Board may suspend or terminate the Plan at any time. Unless the Plan shall
theretofore have been terminated by the Board, the Plan shall terminate on, and
no Options shall be granted after, May 19, 2007, except that such termination
shall have no effect on Options granted prior thereto. No Options shall be
granted during any period of suspension of the Plan.
SECTION 17. NO RIGHTS AS AN EMPLOYEE
Nothing in the Plan shall be construed to give any person (including any
Eligible Employee or Participant) the right to remain in the employ of the
Company or a Subsidiary Corporation or to affect the right of the Company and
the Subsidiary Corporations to terminate the employment of any person (including
any Eligible Employee or Participant) at any time with or without cause.
SECTION 18. EFFECT UPON OTHER PLANS
The adoption of the Plan shall not affect any other compensation or incentive
plans in effect for the Company or any Subsidiary Corporation. Nothing in the
Plan shall be construed to limit the right of the Company or any Subsidiary
Corporation to (a) establish any other forms of incentives or compensation for
employees of the Company or any Subsidiary Corporation or (b) grant or assume
options otherwise than under the Plan in connection with any proper corporate
purpose, including, but not by way of limitation, the grant or assumption of
options in connection with the acquisition, by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
firm or association.
SECTION 19. ADJUSTMENTS
19.1 Adjustment of Shares
In the event that, at any time or from time to time, a stock dividend, stock
split, spin-off, combination or exchange of shares, recapitalization, merger,
consolidation, distribution to shareholders other than a normal cash dividend,
or other change in the Company's corporate or capital structure results in (a)
the outstanding shares, or any securities exchanged therefor or received in
their place, being exchanged for a different number or class of securities of
the Company or of any other corporation or (b) new, different or additional
securities of the Company or of any other corporation being received by the
holders of shares of Stock, then (subject to any required action by the
Company's shareholders), the Board or the Committee, in its sole discretion,
shall make such equitable adjustments as it shall deem appropriate in the
circumstances (i) in the maximum number and kind of securities subject to the
Plan as set forth in Section 4 and (ii) the number and kind of securities that
are subject to any outstanding Option and the per share price of such
securities. The determination by the Board or the Committee as to the terms of
any of the foregoing adjustments shall be conclusive and binding.
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19.2 Merger, Acquisition or Liquidation of the Company
In the event of the merger or consolidation of the Company into another
corporation, the acquisition by another corporation of all or substantially all
of the Company's assets, or the liquidation or dissolution of the Company, the
Purchase Date with respect to outstanding Options shall be the business day
immediately preceding the effective date of such merger, consolidation,
liquidation or dissolution unless the Board or the Committee shall, in its sole
discretion, provide for the assumption or substitution of such Options in a
manner complying with Code Section 424(a).
19.3 Limitations
The grant of Options will in no way affect the Company's right to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
SECTION 20. REGISTRATION
The Company shall be under no obligation to any Participant to register for
offering or resale under the Securities Act of 1933, as amended, or register or
qualify under state securities laws, any shares of Stock. The Company may issue
certificates for shares with such legends and subject to such restrictions on
transfer and stop-transfer instructions as counsel for the Company deems
necessary or desirable for compliance by the Company with federal and state
securities laws.
SECTION 21. EFFECTIVE DATE
The Plan's effective date is the date on which it is approved by the Company's
shareholders.
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MAP TO ANNUAL MEETING
24
<PAGE>
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 ENERGY, INC. held of
record by the undersigned on March 17, 1997, at the Annual Meeting of
Shareholders to be held on May 19, 1997, or any adjournment thereof.
<TABLE>
<S> <C> <C>
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
</TABLE>
<TABLE>
<S> <C> <C> <C>
CHARLES W. BINGHAM DONALD J. COVEY ROBERT L. DRYDEN JOHN W. ELLIS
TOMIO MORIGUCHI SALLY G. NARODICK RICHARD R. SONSTELIE
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided right). _______________________________________________________________
</TABLE>
2. APPROVE THE EMPLOYEE STOCK PURCHASE PLAN.
[_] FOR [_] AGAINST [_] ABSTAIN
(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 PROPOSALS 1 AND 2. In
their discretion, the proxies are authorized to vote upon such other business as
may properly come before the meeting and any adjournment thereof. Please sign
exactly as name appears below. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
SIGNATURE/DATE SIGNATURE IF HELD JOINTLY/DATE
- ----------------------------------- ---------------------------------------
PLEASE COMPLETE, SIGN, DATE AND
RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED
ENVELOPE
