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Puget Energy Inc.
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Bowne
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[PUGET LOGO] PUGET ENERGY, INC.
NOTICE OF ANNUAL MEETING
MAY 15, 2001
MEYDENBAUER CENTER
11100 N.E. 6TH STREET, BELLEVUE, WASHINGTON
To Puget Energy Shareholders:
On May 15, 2001, Puget Energy, Inc. will hold its Annual Meeting of
Shareholders at the Meydenbauer Center, located at 11100 N.E. 6th Street,
Bellevue, Washington. The meeting will begin at 10:00 a.m. At the annual
meeting, the shareholders will
1. Elect three directors.
2. Consider other matters properly presented at the meeting.
You are entitled to vote if you were a shareholder at the close of business
on March 15, 2001.
To make it easier for you to vote your proxy, we have made Internet and
telephone voting available. You will find instructions on the enclosed proxy
card. If you choose not to use the Internet or telephone voting, please sign and
date the proxy card and return it in the envelope provided.
If your shares are registered in the name of a brokerage firm or trustee
and you plan to attend the meeting in person, please bring a letter, account
statement or other evidence of your beneficial ownership to the meeting.
March 13, 2001
Bellevue, Washington
By Order of the Board of Directors
James W. Eldredge
Corporate Secretary
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CONTENTS
ANNUAL MEETING INFORMATION.............. 1
When did the company become Puget
Energy?............................ 1
Who is entitled to vote?.............. 1
What am I voting on?.................. 1
What is a quorum?..................... 1
How many votes do I have?............. 1
How many votes are required to elect a
director?.......................... 1
Can brokers vote on the election of
directors?......................... 1
How will my proxy be voted?........... 2
Who counts the votes?................. 2
ELECTION OF DIRECTORS................... 2
How many directors does Puget Energy
have?.............................. 2
How many directors are elected each
year?.............................. 2
Who are the nominees?................. 2
Who are the other directors?.......... 3
STRUCTURE AND COMPENSATION OF BOARD OF
DIRECTORS............................. 4
Board of Directors Meetings........... 4
Audit Committee....................... 4
Director Affairs Committee............ 4
Compensation and Retirement
Committee.......................... 4
Strategic Opportunities Committee..... 5
Director Compensation................. 5
AUDIT COMMITTEE REPORT.................. 5
INDEPENDENT ACCOUNTANTS' FEES........... 6
SECURITY OWNERSHIP OF DIRECTORS AND
EXECUTIVE OFFICERS.................... 7
Beneficial Ownership Table............ 7
Section 16(a) Beneficial Ownership
Reporting Compliance............... 7
EXECUTIVE COMPENSATION.................. 8
Joint Compensation and Retirement
Committee Report................... 8
Stock Price Performance Graph......... 10
Five-Year Cumulative Total Return..... 10
Summary Compensation Table............ 11
Option/SAR Exercises and Year-End
Option/SAR Values.................. 13
Long-Term Incentive Plan Awards in
2000............................... 13
Retirement Benefits Statement......... 14
EMPLOYMENT CONTRACTS, TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.......................... 14
Agreements............................ 14
1995 Long-Term Incentive Compensation
Plan............................... 16
Stock Appreciation Rights............. 16
Certain Transactions.................. 16
ADDITIONAL INFORMATION ABOUT THE MEETING
AND SHAREHOLDER PROPOSALS............. 17
Independent Public Accountants........ 17
Shareholder Proposals................. 17
Solicitation of Proxies............... 17
APPENDIX A.............................. A-1
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YOUR VOTE IS IMPORTANT
PUGET ENERGY HAS APPROXIMATELY 51,000 SHAREHOLDERS OF RECORD. REGARDLESS OF
THE NUMBER OF SHARES YOU OWN, PLEASE COMPLETE AND PROMPTLY RETURN THE ENCLOSED
PROXY FORM, USING THE ENVELOPE WE HAVE PROVIDED.
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PROXY STATEMENT
ANNUAL MEETING INFORMATION
This proxy statement relates to the Annual Meeting of Shareholders of Puget
Energy, Inc. ("Puget Energy") to be held at 10:00 a.m. on May 15, 2001 at the
Meydenbauer Center, which is located at 11100 N.E. 6th Street, Bellevue,
Washington. We will mail this proxy statement and our Annual Report for 2000 to
shareholders on March 28, 2001.
The mailing address of Puget Energy's principal executive offices is Puget
Energy, Inc., P.O. Box 97034, Bellevue, Washington 98009-9734.
When did the Company become Puget Energy?
Effective January 1, 2001, Puget Sound Energy, Inc. ("Puget Sound Energy")
reorganized into a public utility holding company structure pursuant to a plan
of exchange that was approved by Puget Sound Energy shareholders on June 23,
1999. This reorganization resulted in the creation of a new holding company,
Puget Energy. Pursuant to the reorganization, Puget Energy became the owner of
all Puget Sound Energy's outstanding common stock. Holders of Puget Sound
Energy's existing common stock exchanged their stock on a one-for-one basis for
Puget Energy common stock. All of Puget Energy's operations are conducted
through its subsidiaries. In addition to its ownership of Puget Sound Energy,
Puget Energy also owns InfrastruX Group, Inc. ("InfrastruX"). Unless otherwise
specified, all historical information in this proxy statement concerning dates
prior to January 1, 2001 refers to Puget Sound Energy rather than Puget Energy.
Who is entitled to vote?
Only holders of common stock may vote at the Annual Meeting. We had
approximately 86 million shares of common stock outstanding on March 15, 2001,
the record date for the Annual Meeting.
What am I voting on?
You are being asked to elect three directors. We are not aware of any
matter to be presented for action at the Annual Meeting other than the election
of directors.
What is a quorum?
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. There must be a quorum for the meeting to be held.
How many votes do I have?
You are entitled to one vote for each share of common stock you held on the
record date. You are not entitled to cumulate votes in the election of
directors.
How many votes are required to elect a director?
If a quorum is present at the Annual Meeting, the three nominees for
election as directors who receive the greatest number of votes cast by the
shares present in person or represented by proxy at the Annual Meeting will be
elected directors.
Can brokers vote on the election of directors?
Because brokers have discretion to vote shares they hold on behalf of
beneficial owners in the election of directors, if they do not receive
instructions, they may vote the shares as they see fit.
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How will my proxy be voted?
If we receive a proper proxy, your shares will be voted as you direct. If
you do not provide any direction on your proxy card, your shares will be voted
for all management proposals. You may revoke a proxy card at any time before it
is voted by delivering a written notice to the Corporate Secretary or by signing
and delivering another proxy card that is dated later. If you attend the Annual
Meeting in person, you may revoke the proxy by giving notice of revocation to an
inspector of election at the Annual Meeting or by voting at the Annual Meeting.
Who counts the votes?
Mellon Investor Services, LLC will tabulate the votes and will act as
inspector of election. No one will disclose the identity and vote of any
shareholder unless legally required to do so.
ELECTION OF DIRECTORS
How many directors does Puget Energy have?
The number of directors is determined by the Board of Directors, but may be
changed by the shareholders. The Board of Directors has fixed the current number
of directors at nine. The members of Puget Energy's Board of Directors and Board
Committees are the same as the members of Puget Sound Energy's Board of
Directors and Board Committees.
How many directors are elected each year?
The directors are divided into three classes so that each year
approximately one-third of the directors are elected for a three-year term.
Directors are elected to hold office until their successors are elected and
qualified, or until resignation or removal in the manner provided in our Bylaws.
At the Annual Meeting, the shareholders will elect three Class I directors to
serve for a term of three years expiring on the date of the 2004 Annual Meeting.
Who are the nominees?
Proxies will be voted on the following nominees. If any nominee becomes
unavailable to serve as a director, the persons named in the enclosed proxy can
vote for or against any other nominee in accordance with their judgment.
CLASS I NOMINEES STANDING FOR ELECTION
TERMS EXPIRE 2004
PHYLLIS J. CAMPBELL
Ms. Campbell has been President of U.S. Bank, Washington (financial
institution) since 1993. She also served as Area President of U.S. Bank,
Washington for Seattle-King County from 1992 to 1993, Executive Vice President
and Manager from 1989 to 1992, and in various banking capacities since 1973. Ms.
Campbell, age 49, has been a Director of Puget Energy since its incorporation in
1999 and of Puget Sound Energy since 1993. Ms. Campbell also serves as a
director of SAFECO Corporation, and is a Regent of Washington State University.
JOHN D. DURBIN
Mr. Durbin has been President and Chief Executive Officer and a Director of
InfrastruX since June 2000. Prior to that, he was Executive Director of Emerge
Corporation (investment banking), and was a principal in Olympic Capital
Partners, Inc. (investment banking), Seattle, Washington, from 1996 to 1999. He
served as President and Chief Executive Officer of Hostar International, Inc.
from 1988 until his retirement in June 1995, and he has been a General Partner
of John Durbin & Associates since 1969. His prior positions include Chairman and
President of CEC Equipment Company from 1982 to 1987 and
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Chairman of Spokane Truck Sales, Inc. from 1983 to 1987. Mr. Durbin, age 65, has
been a Director of Puget Energy since its incorporation in 1999 and of Puget
Sound Energy since 1984. Mr. Durbin also serves as a director of ConneXt, Inc.
(a subsidiary of Puget Sound Energy) ("ConneXt").
WILLIAM S. WEAVER
Mr. Weaver has been President and Chief Executive Officer of Puget Energy
since 2000 and of Puget Sound Energy since January 1998. He also served as
President of Puget Sound Energy from May 1997 to January 1998, Vice Chairman and
Chairman of Unregulated Subsidiaries from February 1997 to May 1997 and
Executive Vice President and Chief Financial Officer from 1991 to 1997. Before
joining Puget Sound Energy, he was a partner in the law firm of Perkins Coie
LLP. Mr. Weaver, age 57, has been a Director of Puget Energy since its
incorporation in 1999 and of Puget Sound Energy since 1991.
Who are the other directors?
The directors who are not standing for reelection at this time are:
DOUGLAS P. BEIGHLE
Mr. Beighle served as Senior Vice President of The Boeing Company
(aerospace manufacturing and sales) from 1986 until his retirement on May 1,
1997. Mr. Beighle, age 68, has been a Director of Puget Energy since its
incorporation in 1999 and of Puget Sound Energy since 1981. He also serves as a
director of Washington Mutual, Inc., Active Voice Corporation, Simpson
Investment Company (privately held) and InfrastruX. Mr. Beighle's term expires
in 2003.
CHARLES W. BINGHAM
Mr. Bingham served as Executive Vice President of Weyerhaeuser Company
(forest products industry) from 1981 until his retirement in July 1995. Mr.
Bingham, age 67, has been a Director of Puget Energy since its incorporation in
1999 and of Puget Sound Energy since 1978. Mr. Bingham's term expires in 2002.
CRAIG W. COLE
Mr. Cole has been President and Chief Executive Officer of Brown & Cole
Stores (retail grocery) since 1989. Mr. Cole, age 51, is also a member of the
Washington Roundtable and serves on the boards of the Washington Early Learning
Foundation, the Washington Food Industry, and the Food Marketing Institute. Mr.
Cole has served as a Director of Puget Energy and Puget Sound Energy since
December 1999. Mr. Cole's term expires in 2003.
ROBERT L. DRYDEN
Mr. Dryden has been President, Chief Executive Officer and a Director of
ConneXt since 1999. He served as Executive Vice President, Airplane Production,
Boeing Commercial Airplane Group, Seattle, Washington, from 1990 until May 1998.
He has been a Director of Puget Energy since its incorporation in 1999 and of
Puget Sound Energy since 1991. Mr. Dryden, age 67, also serves as a director of
U.S. Bancorp. Mr. Dryden's term expires in 2002.
TOMIO MORIGUCHI
Mr. Moriguchi has been a Director of Puget Energy since its incorporation
in 1999 and of Puget Sound Energy since 1988. Mr. Moriguchi, age 64, 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
President and Chairman of the Board of North American Post Publishing Company,
Seattle, Washington. Mr. Moriguchi's term expires in 2003.
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SALLY G. NARODICK
Ms. Narodick is President of Narodick Consulting, which specializes in
strategic planning for the educational technology industry. She retired as Chief
Executive Officer and President of Apex Learning, Inc., a venture-backed
internet distance learning company, in October 2000. Previously, she served as a
Consultant on Strategic Planning for Educational Technology software for IBM
Corporation and was Chairman and Chief Executive Officer of Edmark Corporation
from October 1989 to September 1996. She also serves as a director of Penford
Corporation, Click2Learn.com and Solutia, Inc. Ms. Narodick, age 55, has been a
Director of Puget Energy since its incorporation in 1999 and of Puget Sound
Energy since 1989. Ms. Narodick's term expires in 2002.
STRUCTURE AND COMPENSATION OF BOARD OF DIRECTORS
The Puget Energy and Puget Sound Energy Boards of Directors have four
identical standing committees, which meet in addition to regular Board of
Directors meetings. The names of these committees, their current membership and
a brief statement of their principal responsibilities are presented below.
BOARD OF DIRECTORS MEETINGS
The Puget Energy Board of Directors met one time during 2000. Each director
attended this meeting.
The Puget Sound Energy Board of Directors met eight times during 2000. Each
director has attended at least 85% of these meetings and the meetings of
committees on which he or she served. Directors on average attended 96% of all
board and committee meetings during 2000.
AUDIT COMMITTEE
Douglas P. Beighle (Chairperson), Charles W. Bingham, Donald J. Covey, and
Tomio Moriguchi serve on the Puget Energy and Puget Sound Energy Audit
Committees. The Audit Committees meet with management, the internal auditors and
the independent auditors to review and evaluate the companies' audited Financial
Statements, the internal audit function and external audit matters. The
Committees recommend to the full Boards the retention of independent auditors.
The Puget Sound Energy Audit Committee, which in 2000 was comprised of the same
directors, met four times during 2000.
DIRECTOR AFFAIRS COMMITTEE
The Puget Energy and Puget Sound Energy Director Affairs Committees
currently include John D. Durbin (Chairperson), Phyllis J. Campbell and Donald
J. Covey. The Director Affairs Committees acts and makes recommendations
regarding selection of director candidates, director tenure, committee
assignments and director compensation. Shareholders may nominate candidates for
election to the Puget Energy Board of Directors by notifying the Corporate
Secretary prior to each annual meeting. The committees seek director candidates
with recognized achievements and skills and experience that will enhance the
Boards of Directors. The Puget Energy Director Affairs Committee, which until
May 2000 was comprised of Ms. Campbell, Mr. Covey and former director Daniel J.
Evans, met once during 2000.
COMPENSATION AND RETIREMENT COMMITTEE
The Puget Energy and Puget Sound Energy Compensation and Retirement
Committees currently include Phyllis J. Campbell (Chairperson), Douglas P.
Beighle, Donald J. Covey and Sally G. Narodick. The Compensation and Retirement
Committees act and make recommendations to the Board of Directors with respect
to executive compensation, the retirement plan and other benefit plans for
employees. The Puget Sound Energy Compensation and Retirement Committee, which
until May 2000 was comprised of Ms. Campbell, Mr. Beighle, Ms. Narodick and
Messrs. Dryden and Durbin, met seven times during 2000.
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STRATEGIC OPPORTUNITIES COMMITTEE
The Puget Energy and Puget Sound Energy Strategic Opportunities Committees
currently include Craig W. Cole (Chairperson), Douglas P. Beighle, Robert L.
Dryden, John D. Durbin, John W. Ellis and Sally G. Narodick. The Strategic
Opportunities Committees act and make recommendations to the Board of Directors
with respect to new business development matters. The Puget Sound Energy
Strategic Opportunities Committee, which until May 2000 was comprised of Messrs.
Beighle, Dryden, Durbin, Ms. Campbell and Ms. Narodick, met four times during
2000.
DIRECTOR COMPENSATION
Puget Energy and Puget Sound Energy pay all directors other than the
Company's Chief Executive Officer a quarterly retainer of $7,500 plus $1,100 for
each board and committee meeting the director attends. At least 40% of retainer
payments are made in common stock. No director who serves on both the Puget
Energy and Puget Sound Energy Boards and the corresponding committees is paid
additional compensation for concurrent service. Directors can elect to receive
100% of their retainer payments in Puget Energy common stock, or to defer
receipt of shares under the Puget Energy Directors' Stock Plan. Chairpersons of
the Audit, Director Affairs, Compensation, Retirement and Strategic
Opportunities Committees are also paid additional quarterly retainers of $500
each.
AUDIT COMMITTEE REPORT
The Audit Committee of the Puget Energy Board of Directors is composed of
four directors who are independent directors as defined under the rules of the
New York Stock Exchange. The Audit Committee operates under a written charter
adopted by the Board of Directors in 2000, a copy of which is included as
Appendix A to this proxy statement.
The Audit Committee recommends to the Puget Energy Board of Directors the
appointment of the independent auditors, reviews the scope of audits, reviews
significant changes to Puget Energy's accounting principles and practices,
reviews significant issues encountered in the course of audit work related to
the adequacy of internal controls and reviews the scope and results of Puget
Energy's procedures for internal auditing.
The Audit Committee reviewed and discussed the audited financial statements
with management of Puget Energy and representatives of PricewaterhouseCoopers
LLP. The discussions with PricewaterhouseCoopers LLP included the matters
required to be discussed by Statement on Auditing Standards No. 61. In addition,
the Audit Committee received the written disclosures and the letter regarding
independence from PricewaterhouseCoopers LLP as required by Independence
Standards Board Standard No. 1 and discussed with PricewaterhouseCoopers LLP
their independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Annual Report on Form 10-K for the fiscal year ended December
31, 2000 for filing with the Securities and Exchange Commission.
The Audit Committee of the Board of
Directors
of Puget Energy, Inc.
Douglas P. Beighle, Chairman
Charles W. Bingham
Donald J. Covey
Tomio Moriguchi
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INDEPENDENT ACCOUNTANTS' FEES
Fees billed by PricewaterhouseCoopers LLP, Puget Energy's independent
accountants, in 2000 were as follows:
Audit Fees Audit fees of PricewaterhouseCoopers LLP during 2000 for the
audit of Puget Sound Energy's annual financial statements and the review of
those financial statements included in Puget Sound Energy's quarterly
reports on Forms 10-Q are estimated to be $534,000 of which an aggregate
amount of $306,000 has been billed to Puget Sound Energy through December
31, 2000.
Financial Information Systems Design and Implementation Fees Aggregate
fees billed to Puget Sound Energy by PricewaterhouseCoopers LLP during 2000
for financial information systems design and implementation services
totaled $15,649,000.
All Other Fees Aggregate fees billed to the companies by
PricewaterhouseCoopers LLP during 2000 for all other services totaled
$1,616,000.
The fees paid for financial information systems design and implementation
relate to Puget Sound Energy's successful implementation of its ConsumerLinX
customer information system in 2000, on which PricewaterhouseCoopers' management
consulting services group provided system integration services to the companies.
Other fees relate to:
- consulting services relating to consideration of strategic alternatives
for a subsidiary of Puget Energy and for regulatory matters -- $590,000;
- due diligence reviews of InfrastruX acquisition targets -- $364,000;
- tax planning, consulting and tax return reviews -- $248,000; and
- employee benefit plan audits, fees relating to registration statements
and other -- $414,000.
The Audit Committee of Puget Energy has considered the compatibility of
these non-audit services with maintaining PricewaterhouseCoopers LLP's
independence.
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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
BENEFICIAL OWNERSHIP TABLE
The following table shows the number of shares of common stock beneficially
owned on January 31, 2001 by each director and nominee, by each executive
officer named in the Summary Compensation Table and by the directors and
executive officers of Puget Energy and Puget Sound Energy as a group. No
director or executive officer owns more than 1% of the outstanding shares of
common stock. We are not aware of any person who beneficially owns five percent
or more of the common stock.
NUMBER OF BENEFICIALLY NUMBER OF SHARE
NAME OWNED SHARES INTERESTS HELD
---- ---------------------- ---------------
Douglas P. Beighle.................................. 4,256 1,403(1)
Charles W. Bingham.................................. 4,754 435(1)
Phyllis J. Campbell................................. 1,000 1,754(1)
Craig W. Cole....................................... 200 1,239(1)
Donald J. Covey..................................... 6,231 3,687(1)
Robert L. Dryden.................................... 4,698 2,692(1)
John D. Durbin...................................... 3,115 3,419(1)(3)
John W. Ellis....................................... 34,918(2) 1,403(1)
Tomio Moriguchi..................................... 805 5,341(1)(3)
Sally G. Narodick................................... 258 3,332(1)
William S. Weaver................................... 31,328(2) 22,632(3)
Richard L. Hawley................................... 12,198(2) 7,622(3)
Timothy J. Hogan.................................... 7,733(2) 21,165(3)(4)
Stephen A. McKeon................................... 14,747(2) 9,554(3)
Gary B. Swofford.................................... 10,077(2) 12,233(3)
All Directors and Executive Officers................ 170,833 110,933
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(1) Shares represent stock units under the Puget Energy Directors' Stock Plan.
(2) Includes shares credited under the Puget Sound Energy Investment Plan for
Employees through December 31, 2000.
(3) Includes vested and non-vested stock units under the Puget Sound Energy
Deferred Compensation Plan.
(4) Includes 14,376 shares subject to unexercised stock options granted by
Washington Energy Company prior to the Merger, which were converted into
options to purchase common stock at the merger exchange ratio of .86 to 1.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the directors
and officers of Puget Energy and Puget Sound Energy to file reports of ownership
and changes in ownership with respect to the equity securities of the companies
with the Securities and Exchange Commission. To our knowledge, based on our
review of the reports furnished to Puget Sound Energy in 2000 and written
representations that no other reports were required, all directors and officers
of Puget Energy and Puget Sound Energy who are subject to the Section 16
reporting requirements filed the required reports on a timely basis in 2000.
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EXECUTIVE COMPENSATION
JOINT COMPENSATION AND RETIREMENT COMMITTEE REPORT
The Boards of Directors of Puget Energy and Puget Sound Energy delegate
responsibility for executive compensation to their respective Compensation and
Retirement Committees. The Committees' members are Phyllis J. Campbell
(Chairperson), Douglas P. Beighle, Donald J. Covey and Sally G. Narodick, none
of whom is an employee of Puget Energy or Puget Sound Energy or participates in
the compensation programs described here for executives. The Committees
establish compensation for the President and Chief Executive Officer and review
and approve the President and Chief Executive Officer's recommendations
regarding compensation of the other executive officers.
In determining executive compensation, the Committees consider the pay
practices in comparable companies in the electric and combination gas and
electric utility industries. The Committees believe that executive compensation
packages should do the following:
- attract and retain outstanding executives by providing compensation
opportunities consistent with those offered by the electric and
combination gas and electric utility industries 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;
- be aligned with annual operating goals that support continued emphasis on
low cost, reliable service to customers; and
- tie long-term incentive compensation to increasing value to the
shareholders.
In making compensation decisions, the Committees review appropriate market
compensation indices. The principal source of this data is a selection of
comparable companies from a comprehensive, industry-wide annual survey of
management pay prepared by a national compensation consulting firm. All are part
of the Edison Electric Institute (EEI) Investor-Owned Utilities Index and most
are gas and electric combination companies which comprise the EEI Combination
Gas & Electric Investor-Owned Utilities Index presented in the Stock Price
Performance Graph on page 10.
The Committees' compensation policies encompass a mix of base salary and
annual and long-term incentive compensation programs. The Committees design the
total package to provide participants with appropriate incentives to achieve
current performance goals as well as the long-term objective of enhancing
shareholder value. Long-term incentives are designed to comprise the largest
portion of each executive's incentive pay. Total Cash Compensation is targeted
at the 50th percentile of total compensation for the comparator group if annual
performance goals are achieved. If performance goals are achieved at the highest
level, total cash compensation will be leveraged to reach the 60th percentile or
higher.
Base Salary
Generally, base salaries for executives are administered on a subjective,
individual basis by the Committees using as a guideline, median salary levels of
a select group of electric and combination gas and electric companies from the
industry survey described above that are most similar in scope and size to Puget
Energy.
Annual Incentive Compensation
All executive officers participate in the annual Pay at Risk Plan. This
plan is designed to provide financial incentives to executives for achieving
desired annual operating results while meeting the companies' service quality
commitment to customers. For 2000, the targeted opportunity for awards from this
plan varied by executive officer: Mr. Weaver's target was 45% of base salary;
the target for Messrs. Hawley, McKeon and Swofford was 35%; and the target for
Mr. Hogan was 30%.
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The primary measure for the named executive officers was earnings per
share. For Messrs. Weaver, Hawley and McKeon, 100% of the award was based on EPS
performance. For Mr. Swofford, 50% of the award was based on EPS and 50% was
based on the weather-adjusted earnings contribution of the business units in his
area of responsibility. For Mr. Hogan, 50% of the award was based on EPS with
the remaining 50% divided among five additional goals related to his area of
responsibility. EPS results were achieved at the outstanding level. For Mr.
Swofford, the weather-adjusted earnings contribution of the business unit was
achieved at the minimum funding level. For Mr. Hogan, two of the additional
goals that comprise 50% of his award achieved funding status.
Long-Term Incentive Compensation
The 1995 Long-Term Incentive Compensation Plan, approved by shareholders in
1995, links compensation to the relative total shareholder return. Under this
plan, the committee has awarded contingent grants of common stock to executives
and key employees that generally pay in stock at the end of a four-year period,
based on Puget Energy's cumulative four-year total shareholder return relative
to the EEI Combination Gas & Electric Investor-Owned Utilities Index during that
period. The number of shares delivered at the end of the four-year cycle will
range from zero to 175% of the contingent grant. Dividend equivalents are
accrued during the performance period and paid out in cash when and to the
extent the related performance shares are paid. The Long-Term Incentive Plan
Awards in 2000 table shown on page 13 lists the awards made in 2000 to the named
executive officers for the four-year performance cycle ending December 31, 2003.
The Summary Compensation Table on page 11 shows the payout of awards for the
four-year cycle ended December 31, 2000.
As part of its Long-Term Incentive Program, the committee has also
established stock ownership guidelines to be achieved over a five-year period
commencing in 1998 for officers and key managers that range from 50% of base
salary to two times base salary for the named executive officers.
Chief Executive Officer Compensation
In February, 2000, Mr. Weaver's base salary as Chief Executive Officer was
determined to be below median for CEOs in comparable companies in the EEI
survey, and was increased from $575,000 per year to the market median salary of
$600,000.
During 2000, Mr. Weaver's leadership and focus on company-wide strategic
and operating goals resulted in continued, significant improvement in financial
results with a net increase in EPS of 4.9% over the prior year. This level of
achievement resulted in Mr. Weaver's 2000 target annual incentive payment being
paid at twice the target of 45% of base salary. As a result, Mr. Weaver's total
cash compensation for 2000, was above the 50th percentile for CEO's of
comparable companies in the EEI survey, which is in keeping with the committee's
philosophy for total cash compensation at the 60th percentile or higher when
results are achieved at this outstanding level.
Additional Information
Section 162(m) of the Internal Revenue Code of 1986 generally disallows a
tax deduction to public companies for compensation over $1 million paid to a
company's chief executive officer and four other most highly compensated
executive officers, unless that compensation is deferred or is considered
performance-based. Our policies are to structure executive officer compensation
to achieve maximum deductibility under Section 162(m) with minimal sacrifices in
flexibility and corporate objectives.
Puget Energy, Inc. and Puget Sound
Energy, Inc.
Phyllis J. Campbell, Chair
Douglas P. Beighle
Donald J. Covey
Sally G. Narodick
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STOCK PRICE PERFORMANCE GRAPH
The chart below compares the five-year cumulative total shareholder return
(share price appreciation plus reinvested dividends) on our common stock to the
cumulative total return of the Standard & Poor's 500 Stock Index and the EEI
Combination Gas & Electric Investor-Owned Utilities Index.
[PERFORMANCE GRAPH]
PUGET ENERGY S&P 500 INDEX EEI GAS & ELECTRIC INDEX
------------ ------------- ------------------------
1995 100.00 100.00 100.00
1996 111.38 122.96 99.37
1997 149.87 163.98 128.46
1998 147.83 210.85 149.25
1999 111.59 255.21 121.30
2000 172.83 231.98 180.56
FIVE-YEAR CUMULATIVE TOTAL RETURN
This comparison assumes $100 was invested on December 31, 1995, in (a) our
common stock, (b) the S&P 500 Stock Index, and (c) the EEI Combination Gas &
Electric Investor-Owned Utilities Index. The graph then observes, in each case,
stock price growth and dividends paid (assuming dividends were reinvested) over
five years.
The Board of Directors and its Compensation and Retirement Committee
recognize that many factors influence the market price of stock, one of which is
company performance. The returns shown on the graph do not necessarily predict
future performance.
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SUMMARY COMPENSATION TABLE
The following information is furnished for the years ended December 31,
2000, 1999 and 1998 with respect to Puget Energy's and Puget Sound Energy's
Chief Executive Officer, and each of the four other most highly compensated
executive officers of Puget Energy and Puget Sound Energy during 2000, each of
whose salary and bonus exceeded $100,000. Annual compensation includes amounts
deferred at the officer's election. Unless otherwise indicated, all positions
and offices are at Puget Energy and Puget Sound Energy.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------ ALL OTHER
NAME AND PRINCIPAL -------------------- LTIP PAYOUTS COMPENSATION
POSITION IN 2000(1) YEAR SALARY($) BONUS($) ($)(5) ($)
------------------- ---- --------- -------- ------------ ------------
W. Weaver................................... 2000 594,841 540,000 211,598(2) 63,852(6)
President and 1999 570,208 517,500 38,933(3) 44,198
Chief Executive Officer 1998 532,971 0 109,933(4) 35,456
R. Hawley................................... 2000 335,079 237,300 123,807(2) 36,188(7)
Vice President and 1999 316,167 224,000 20,964(3) 53,462
Chief Financial Officer 1998 225,000 0 21,987(4) 81,985
T. Hogan.................................... 2000 210,460 90,300 77,380(2) 17,241(8)
Vice President External 1999 191,888 57,900 14,488(3) 14,546
Affairs of Puget Sound Energy 1998 184,309 0 26,384(4) 13,458
S. McKeon................................... 2000 335,079 237,300 147,443(2) 34,802(9)
Vice President and 1999 316,167 224,000 25,142(3) 22,588
General Counsel 1998 283,941 25,800 43,516(4) 21,038
G. Swofford................................. 2000 261,905 115,937 77,380(2) 22,061(10)
Vice President and Chief 1999 238,960 87,500 19,841(3) 17,300
Operating Officer -- Delivery of 1998 189,429 0 54,967(4) 13,337
Puget Sound Energy
------------
(1) Mr. Weaver became President and Chief Executive Officer of Puget Energy in
October 2000 and of Puget Sound Energy in January 1998. Mr. Hawley became
an executive officer of Puget Energy in October 2000 and of Puget Sound
Energy in March 1998. Mr. McKeon became an executive officer of Puget
Energy in October 2000.
(2) The amounts for 2000 represent payment of LTIP awards for the four-year
performance cycle ended December 31, 2000, which consist of (a)
unrestricted shares valued as of the December 31, 2000 closing price of
$27.8125, plus (b) a total dividend amount of $7.36 per share during the
four-year performance period multiplied by the total number of unrestricted
shares. The number and value of unrestricted shares for each of the named
executive officers are as follows:
UNRESTRICTED SHARES
-------------------
NAME NUMBER VALUE
---- ------- ---------
W. Weaver................................................... 6,016 $167,320
R. Hawley................................................... 3,520 97,900(a)
T. Hogan.................................................... 2,200 61,188
S. McKeon................................................... 4,192 116,590
G. Swofford................................................. 2,200 61,188
(a) Mr. Hawley received $50,000 of his share award in the form of cash and
the remainder in the form of 1,530 Puget Energy shares.
(3) The amounts for 1999 represent payment of LTIP awards for the four-year
performance cycle ended December 31, 1999, which consist of (a)
unrestricted shares and restricted shares, valued as of the December 31,
1999 closing price of $19.38, plus (b) a total dividend amount of $7.36 per
share during the four-year performance period multiplied by the total
number of restricted and unrestricted
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shares. The number and value of restricted and unrestricted shares for each
of the named executive officers is as follows:
UNRESTRICTED SHARES RESTRICTED SHARES
-------------------- ------------------
NAME NUMBER VALUE NUMBER VALUE
---- -------- --------- ------- --------
W. Weaver.............................................. 728 $14,109 728 $14,109
R. Hawley.............................................. 392 7,597 392 7,597
T. Hogan............................................... 271 5,250 271 5,250
S. McKeon.............................................. 470 9,111 470 9,111
G. Swofford............................................ 371 7,190 371 7,190
(4) The amounts for 1998 represent payment of LTIP awards for the four-year
performance cycle ended December 31, 1998, which consist of (a)
unrestricted shares and restricted shares, valued as of the December 31,
1998 closing price of $27.875, plus (b) a total dividend amount of $7.36
per share during the four-year performance period multiplied by the total
number of restricted and unrestricted shares. The number and value of
restricted and unrestricted shares for each of the named executive officers
are as follows:
UNRESTRICTED SHARES RESTRICTED SHARES
-------------------- ------------------
NAME NUMBER VALUE NUMBER VALUE
---- -------- --------- ------- --------
W. Weaver.............................................. 1,560 $43,485 1,560 $43,485
R. Hawley.............................................. 312 8,697 312 8,697
T. Hogan............................................... 374 10,425 374 10,425
S. McKeon.............................................. 617 17,199 617 17,199
G. Swofford............................................ 780 21,743 780 21,743
(5) The aggregate number and value of all outstanding restricted stock held by
each of the named executive officers as of December 31, 2000, based on the
closing price of Puget Sound Energy stock on that date of $27.8125, are as
follows: W. Weaver, 728 shares, $20,248; R. Hawley, 392 shares, $10,903; T.
Hogan, 271 shares, $7,534; S. McKeon, 470 shares, $13,075; G. Swofford, 371
shares, $10,318.
(6) Represents $8,500 match under Investment Plan for Employees; $47,117 match
under the Investment Plan make-up; and $8,235 imputed income on life
insurance.
(7) Represents $9,967 match under Investment Plan for Employees; $23,578 match
under the Investment Plan make-up; and $2,643 imputed income on life
insurance.
(8) Represents $4,316 match under Investment Plan for Employees; $11,872 match
under the Investment Plan make-up; and $1,053 imputed income on life
insurance.
(9) Represents $8,650 match under Investment Plan for Employees; $24,895 match
under the Investment Plan make-up; and $1,257 imputed income on life
insurance.
(10) Represents $6,220 match under Investment Plan for Employees; $14,744 match
under the Investment Plan make-up; and $1,097 imputed income on life
insurance.
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OPTION/SAR EXERCISES AND YEAR-END OPTION/SAR VALUES
The following table shows the number of stock options or stock appreciation
rights ("SARs") exercised in 2000 and the number and value of outstanding
unexercised options and SARs held by the participating named executive officers
at the end of 2000.
NUMBER OF SHARES
NUMBER OF UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
UNDERLYING VALUE OF OPTIONS/SARS AT OPTIONS/SARS AT
OPTIONS/SARS OPTIONS/SARS FISCAL YEAR-END(#) FISCAL YEAR-END($)
NAME EXERCISED IN 2000 EXERCISED IN 2000 EXERCISABLE EXERCISABLE(3)
---- ----------------- ----------------- ------------------ --------------------
W. Weaver..................... 11,400 $44,047(1) 7,300 --
R. Hawley..................... -- -- -- --
T. Hogan...................... 1,290 $ 935(2) 14,376 $119,672
S. McKeon..................... -- -- -- --
G. Swofford................... -- -- 5,600 $ 16,950
Before 1995, participants in Puget Energy's Long-Term Incentive Program for
Senior Management could receive stock appreciation rights, which are payable
only in cash. No options have been granted since 1996 and no SARs have been
granted since 1994.
------------
(1) Amount represents exercise on November 30, 2000 from two SAR grants when the
market value of the common stock was $26.4375 per share: 6,000 SARs from a
February 4, 1992 grant with a base price of $24.875 per share, and 5,400
SARs from an April 26, 1994 grant with a base price of $20.750 per share.
(2) Amount represents options exercises of September 18, 2000 and October 10,
2000 totaling 1,290 options.
(3) Amounts are the number of options or SARs multiplied by the difference
between the closing price of the common stock on December 31, 2000 of
$27.8125 per share, minus the base price for that option or SAR. There is no
guarantee that these options or SARs will have this value when and if they
are exercised.
LONG-TERM INCENTIVE PLAN AWARDS IN 2000
The following table presents grants made to the named executive officers
under our 1995 Long-Term Incentive Compensation Plan during 2000.
ESTIMATED FUTURE SHARE PAYOUTS
NUMBER OF PERIOD UNTIL -------------------------------
SHARES MATURATION OR THRESHOLD TARGET MAXIMUM
NAME (#)(1) PAYOUT (#) (#) (#)
---- --------- ------------- ---------- ------- --------
W. Weaver.................................... 48,387 4 years 0 48,387 84,677
R. Hawley.................................... 19,883 4 years 0 19,883 34,795
T. Hogan..................................... 7,093 4 years 0 7,093 12,413
S. McKeon.................................... 19,883 4 years 0 19,883 34,795
G. Swofford.................................. 12,240 4 years 0 12,240 21,420
------------
(1) Awards are contingent grants of common stock. The number of shares delivered
at the end of the four-year cycle will range from zero to 175% of the
contingent grant. The actual payout depends on Puget Energy's four-year
total shareholder return compared to the returns reported in the Edison
Electric Institute's Combination Gas and Electric Investor-Owned Utilities
Index. To receive 100% of the grant, Puget Energy must perform at the 55th
percentile among Edison Electric Institute's companies. To receive 175% of
the grant, Puget Energy must perform at or above the 85th percentile
ranking. Dividend equivalents are accrued during the performance period and
paid out in cash when and to the extent the performance shares are paid.
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RETIREMENT BENEFITS STATEMENT
The table below presents estimated retirement benefits for the named
executive officers, assuming retirement on January 1, 2001 at age 62 after
selected periods of service. The table lists the estimated aggregate values
under the Puget Sound Energy, Inc. funded pension plan, Supplemental Executive
Retirement Plan, Washington Natural Gas Nonqualified Retirement Plan benefits,
the SERP pension-type rollover accounts in the Deferred Compensation Plan and
the Cash Balance Restoration Matching Account within the Deferred Compensation
Plan. Social Security benefits will not be deducted from the amounts shown in
the table.
ESTIMATED ANNUAL BENEFIT UPON RETIREMENT AT AGE 62
YEARS OF CREDITED SERVICE
FINAL AVERAGE ------------------------------
COMPENSATION 5 10 15+
------------- -------- -------- --------
$200,000...................................... $ 33,333 $ 66,667 $100,000
300,000...................................... 50,000 100,000 150,000
400,000...................................... 66,667 133,333 200,000
500,000...................................... 83,333 166,667 250,000
600,000...................................... 100,000 200,000 300,000
700,000...................................... 116,667 233,333 350,000
800,000...................................... 133,333 266,667 400,000
900,000...................................... 150,000 300,000 450,000
The named executive officers have the following years of credited service
as of December 31, 2000: W. Weaver, 32.5; R. Hawley, 2.75; T. Hogan, 24.33; S.
McKeon, 3.58; and G. Swofford, 33.42. Under their employment agreements, if
Messrs. Hawley and McKeon complete five years of service they will be treated as
if they have completed 15 years of credited service.
Estimated aggregate benefits are based on the following formula: 3 1/3%
times years of credited service times average annual compensation (salary plus
bonus) for the highest three calendar years in the last five complete calendar
years prior to retirement, except that Mr. Weaver's benefits are based on the
average of his highest 24 consecutive months of compensation and Messrs.
Hawley's and McKeon's benefits are based on the annual average of their highest
36 consecutive months of salary paid or payable plus the average of their
highest three annual bonuses paid or payable. Also, $50,000 of Mr. Hawley's
LTIP-related payouts are treated as salary. See the section called "Employment
Contracts, Termination of Employment and Change-in-Control Arrangements" below.
The three-year averages (24-consecutive-month average for Mr. Weaver;
33-consecutive-month average for Mr. Hawley as of December 31, 2000) for the
named executive officers were: $841,275 for Mr. Weaver; $436,453 for Mr. Hawley;
$219,353 for Mr. Hogan; $402,579 for Mr. McKeon; and $263,889 for Mr. Swofford.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
AGREEMENTS
In October 1996 Puget Sound Energy entered into an agreement with Mr.
Weaver under which he will receive the following payments and benefits if his
employment terminates for any reason sooner than his normal retirement date,
which, in accordance with Puget Sound Energy's policy, is when Mr. Weaver
reaches the age of 62.
a. annual base salary and accrued benefits earned through termination,
plus a pro rata share of any incentive compensation accrued through the
date of termination, regardless of whether such amounts are vested or
payable on that date;
b. an amount equal to three times annual base salary and bonus;
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c. continued participation for three years in employee benefit plans
or provision for substantially similar benefits;
d. a cash payment at normal retirement date of 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
any outstanding options or rights under similar equity plans (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-in-control;
f. a payment equal to the value of the number of shares payable upon
full vesting of all outstanding performance awards, whether or not such
awards were then fully vested or payable; and
g. a cash payment equal to any excise taxes payable by him due to
excess parachute payments, plus the tax expense to him resulting from this
payment.
In addition, Mr. Weaver's agreement provides that his benefits under the
SERP will be based on his average compensation for his highest consecutive 24
months of service. Pursuant to a November 2000 supplement to his October 1996
agreement, Mr. Weaver has agreed not to voluntarily terminate his employment
with Puget Sound Energy as its Chief Executive Officer any earlier than December
31, 2001, and Puget Sound Energy has agreed that the various payments due Mr.
Weaver under the October 1996 agreement will be calculated based on the actual
termination date or an assumed termination date of December 31, 2000, whichever
produces the higher payment under each payment provision.
Effective March 16, 1998, Puget Sound Energy entered into an employment
agreement with Mr. Hawley to secure his services as Vice President and Chief
Financial Officer. The agreement has a term of five years. Mr. Hawley will
receive a minimum annual base salary of $300,000. He also will participate in
Puget Sound Energy's Pay at Risk Plan, with a target award of at least 35% of
base salary, and in Puget Energy's 1995 Long-Term Incentive Compensation Plan,
with a target of at least 40% of base salary and grants of 1,200 performance
units for the 1995-1998 cycle, 2,800 performance units for the 1996-1999 cycle,
4,400 performance units for the 1997-2000 cycle and 6,400 performance units for
the 1998-2001 cycle, and a cash payment equal to the difference between $50,000
and any lesser settlement value for such awards.
In addition, Mr. Hawley's agreement provides that if he completes five
years of service to Puget Sound Energy, then his benefits under the SERP will be
calculated as if he had completed 15 years of service to Puget Sound Energy. His
agreement also provides that his benefits under the SERP will be based on the
sum of (a) the annual average of his highest 36 consecutive months of salary
paid or payable and (b) the average of his highest three annual bonuses paid or
payable. Under his agreement, the $50,000 minimum annual award to which Mr.
Hawley is entitled with respect to the 1995 Long-Term Incentive Compensation
Plan will be treated as salary for purposes of calculating his SERP benefits.
If Puget Sound Energy terminates Mr. Hawley's employment without cause
prior to the end of the term of the agreement, Mr. Hawley will receive:
a. annual base salary and accrued benefits earned through termination,
plus a pro rata share of any incentive compensation accrued through the
date of termination, regardless of whether such amounts are vested or
payable on that date and;
b. continuation of his base salary for two years, plus $50,000 per
year.
If Mr. Hawley's employment terminates for any reason within three years
after a change-in-control, Mr. Hawley will receive, in lieu of the benefits
described above, substantially the same type of payments and benefits as
described above for Mr. Weaver.
Mr. Hogan entered into an agreement effective as of August 17, 1995 with
the Washington Energy Company that Puget Sound Energy has assumed. Under that
agreement, as amended on June 30, 1999, if prior to the earlier of June 30, 2002
or a change-in-control of Puget Sound Energy, Mr. Hogan terminates
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his employment for good reason or Puget Sound Energy terminates his employment
without cause, he will receive the same type of payments and benefits as
described above for Mr. Weaver.
In October 1996, Puget Sound Energy entered into an agreement with Mr.
Swofford under which he will be paid a retention incentive benefit based on
continued employment following the merger of Puget Sound Energy and the
Washington Energy Company in February 1997, equal to three times his annual base
salary in 1996, plus the bonus paid in 1996. The incentive benefit vests 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 his employment terminates.
In 1999 Puget Sound Energy entered into change-in-control agreements with
Mr. Swofford and Mr. Hogan that provided for the same type of payments and
benefits described above for Mr. Weaver in the event that their employment is
terminated by Puget Sound Energy without cause or by the employee for good
reason within two years following a change-in-control of Puget Sound Energy,
except that the payments in sections (c) and (d) are based on two rather than
three years.
Effective June 2, 1997, Puget Sound Energy entered into an employment
agreement with Mr. McKeon to secure his services as Vice President and General
Counsel. The agreement has an initial term of three years and will be extended
for two more one-year periods unless Mr. McKeon or Puget Sound Energy gives
written notice of termination not less than six months before the applicable
anniversary date. No such notice has been given. Mr. McKeon will receive a
minimum annual base salary of $260,000. He also will participate in Puget Sound
Energy's Pay at Risk Plan, with a target award of at least 35% of base salary,
and in Puget Energy's 1995 Long-Term Incentive Compensation Plan, with a target
of at least 35% of base salary and grants of 2,375 performance units for the
1995-1998 cycle, 3,358 performance units for the 1996-1999 cycle and 5,240
performance units for the 1997-2000 cycle.
Mr. McKeon's agreement provides that if he completes five years of service
to Puget Sound Energy, then his benefits under the SERP will be calculated as if
he had completed 15 years of service to Puget Sound Energy. His agreement also
provides that his benefits under the SERP will be based on the sum of (a) the
annual average of his highest 36 consecutive months of salary paid or payable
and (b) the average of his highest three annual bonuses paid or payable. If
Puget Sound Energy terminates his employment without cause prior to the end of
the term of the agreement, Mr. McKeon will receive his annual base salary and
accrued benefits earned through termination, plus a pro rata share of any
incentive compensation accrued through the date of termination, regardless of
whether such amounts are vested or payable on that date, and continuation of his
base salary for two years. If Mr. McKeon's employment terminates for any reason
within three years after a change-in-control, he would receive substantially the
same type of payments and benefits as described above for Mr. Weaver.
1995 LONG-TERM INCENTIVE COMPENSATION PLAN
Under the Puget Energy 1995 Long-Term Incentive Compensation Plan, in the
event of a change-in-control of Puget Energy, each stock award that is at the
time outstanding will automatically accelerate and become 100% vested. The plan
administrator may, at any time before a corporate transaction, take further
action to ensure fair and equitable treatment of awards.
STOCK APPRECIATION RIGHTS
Upon a change-in-control of Puget Energy, all SARs will terminate. Each
holder may exercise his or her SARs immediately prior to the transaction,
whether or not the SARs have vested.
CERTAIN TRANSACTIONS
Mr. Dryden, a Director of Puget Energy and Puget Sound Energy, has served
as President and Chief Executive Officer of ConneXt since 1999. His aggregate
compensation for such service in 2000 was $583,000.
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Mr. Durbin, a Director of Puget Energy and Puget Sound Energy, has served
as President and Chief Executive Officer of InfrastruX since 2000. His aggregate
compensation for such service in 2000 was $254,545.
ADDITIONAL INFORMATION ABOUT THE MEETING AND SHAREHOLDER PROPOSALS
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP has audited our financial statements
since 1933. Representatives of the firm will attend the Annual Meeting, with the
opportunity to make a statement and answer appropriate shareholder questions.
SHAREHOLDER PROPOSALS
Shareholders who intend to have a proposal considered for inclusion in our
proxy materials for the 2002 Annual Meeting of Shareholders must submit the
proposal at our principal executive office no later than November 30, 2001. In
accordance with Puget Energy's Bylaws, shareholders who intend to present a
proposal at the 2002 Annual Meeting without inclusion of the proposal in our
proxy materials must provide written notice of such proposal, in the manner
required by Puget Energy's Bylaws, no earlier than January 15, 2002 and no later
than February 14, 2002.
SOLICITATION OF PROXIES
The Puget Energy Board of Directors is soliciting the proxies in the form
enclosed. William S. Weaver and James W. Eldredge, and each or either of them,
are named as proxies. We may solicit your proxy by mail, personal interview,
telephone and fax. We will request that banks, brokerage houses and other
custodians, nominees or fiduciaries forward soliciting materials to their
principals and obtain authorization for the execution of proxies. We will
reimburse them for their expenses in forwarding and collecting proxies. Our
officers, directors, employees and other agents may solicit proxies without
compensation, except for reimbursement of expenses. Puget Energy will pay all
costs of solicitation of proxies.
March 13, 2001
Bellevue, Washington
By Order of the Board of Directors
William S. Weaver
President and Chief Executive Officer
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APPENDIX A
PUGET ENERGY, INC.
AUDIT COMMITTEE CHARTER
PURPOSE:
The primary purpose of the Audit Committee (the "Committee") shall be to
monitor the integrity of the Company's financial reporting by overseeing the
participation of management and the independent auditors in the financial
reporting process.
COMPOSITION:
The Committee shall be composed of three or more directors, as determined
by the Board, each of whom shall meet the independence requirements of the New
York Stock Exchange. The Board shall determine in its business judgment that
each Committee member is financially literate and that at least one Committee
member has accounting or related financial management expertise. In the absence
of a member designated by the Board to serve as chair, the members of the
Committee may appoint from among their number a person to preside at their
meetings.
RESPONSIBILITIES:
The Committee shall have the following responsibilities:
- Recommend to the Board the selection of the independent auditor, evaluate
the independent auditor and, where appropriate, recommend the replacement
of the independent auditor, with the understanding that the independent
auditor shall be ultimately accountable to the Committee and to the
Board.
- Obtain and evaluate an annual written statement from the independent
auditor regarding the auditor's independence in accordance with
Independence Standards Board Standard No. 1, discuss with the auditor any
independence issues raised by the matters disclosed in such statement
and, if so determined by the Committee, take or recommend that the Board
take appropriate action to satisfy itself as to the independence of the
auditor.
- Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards ("SAS") No. 61, Communications with
Audit Committee, SAS No. 89, Audit Adjustments, and SAS No. 90, Audit
Committee Communications, all as amended from time to time.
- Meet with management and the independent auditor to review and discuss
the annual financial statements and the report of the independent auditor
thereon and to discuss any significant issues encountered in the course
of the audit work, including restrictions on the scope of activities,
access to required information or the adequacy of internal controls.
- Review the management letter delivered by the independent auditor in
connection with the audit and management's responses to the letter.
- Following such reviews and discussions, if so determined by the
Committee, recommend to the Board that the audited financial statements
be included in the Company's annual report on Form 10-K.
- Meet quarterly with management and the independent auditor to review and
discuss the quarterly financial statements.
- Meet at least once each year in separate executive sessions with the
internal auditor and the independent auditor to discuss matters that the
Committee or either of these groups believes could significantly affect
the financial statements and should be discussed privately.
A-1
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- Review significant changes to the Company's accounting principles and
practices proposed by the internal auditor or management. Discuss these
changes with the independent auditor.
- Review changes in promulgated accounting and auditing standards that may
materially affect the Company's financial reporting practices.
- Review the responsibilities, functions and performance of the Company's
internal audit department, including internal audit plans, budget, and
the scope and results of internal audits.
- Conduct or authorize such inquiries into matters within the Committee's
scope of responsibility as the Committee deems appropriate.
- As the Committee deems appropriate, retain independent counsel and other
professionals to assist the Committee.
- Provide minutes of Committee meetings to the Board and report to the
Board on any significant matters arising from the Committee's work.
- At least annually, review and reassess this charter and, if appropriate,
recommend proposed changes to the Board.
- Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
It is not the responsibility of the Committee to plan or conduct audits, or
to determine whether the Company's financial statements are complete and
accurate or in accordance with generally accepted accounting principles.
A-2
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MAP TO MEYDENBAUER CENTER
11100 NE 6th Street Bellevue, WA 98004
[MAP]
PARKING
Complimentary parking is available in the Meydenbauer Center parking garage.
The garage entrance is located on 112th Ave. NE. Please tell the attendant you
are attending the Puget Energy Annual Meeting.
[PUGET ENERGY LOGO]
24
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints WILLIAM S. WEAVER and JAMES W. ELDREDGE, and
each or either of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
below, all the shares of Common Stock of PUGET ENERGY, INC. held of record by
the undersigned on March 15, 2001, at the Annual Meeting of Shareholders to be
held on May 15, 2001, or any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
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- Detach here from proxy voting card. -
YOU CAN NOW ACCESS YOUR PUGET ENERGY ACCOUNT ONLINE.
Access your Puget Energy shareholder/stockholder account online via Investor
ServiceDirect(SM) (ISD).
Mellon Investor Services LLC agent for Puget Energy Investor Services, now makes
it easy and convenient to get current information on your shareholder account.
After a simple, and secure process of establishing a Personal Identification
Number (PIN), you are ready to log in and access your account to:
- View account status
- View certificate history
- View book-entry information
- View payment history for dividends
- Make address changes
- Obtain a duplicate 1099 tax form
- Establish/change your PIN
VISIT US ON THE WEB AT http://www.mellon-investor.com
AND FOLLOW THE INSTRUCTIONS SHOWN ON THIS PAGE.
STEP 1: FIRST TIME USERS - ESTABLISH A PIN
You must first establish a Personal Identification Number (PIN) online by
following the directions provided in the upper right portion of the web screen
as follows. You will also need your Social Security Number (SSN) available to
establish a PIN.
INVESTOR SERVICEDIRECT(SM) IS CURRENTLY ONLY AVAILABLE FOR DOMESTIC INDIVIDUAL
AND JOINT ACCOUNTS.
- SSN
- PIN
- Then click on the ESTABLISH PIN button
Please be sure to remember your PIN, or maintain it in a secure place for future
reference.
STEP 2: LOG IN FOR ACCOUNT ACCESS
You are now ready to log in. To access your account please enter your:
- SSN
- PIN
- Then click on the SUBMIT button
If you have more than one account, you will now be asked to select the
appropriate account.
STEP 3: ACCOUNT STATUS SCREEN
You are now ready to access your account information. Click on the appropriate
button to view or initiate transactions.
- Certificate History
- Book-Entry Information
- Issue Certificate
- Payment History
- Address Change
- Duplicate 1099
FOR TECHNICAL ASSISTANCE CALL 1-877-978-7778 BETWEEN
9AM-7PM MONDAY-FRIDAY EASTERN TIME
25
Please mark
your votes [X]
as this.
FOR ALL NOMINEES LISTED BELOW WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE TO VOTE FOR ALL
CONTRARY BELOW) NOMINEES LISTED BELOW
[ ] [ ]
1. Election of Directors
01 PHYLLIS J. CAMPBELL
02 JOHN D. DURBIN
03 WILLIAM S. WEAVER
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in this space).
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. PROXY CARDS PROPERLY EXECUTED AND RETURNED WITHOUT
DIRECTION WILL BE VOTED FOR PROPOSAL 1. In their discretion, the Proxies are
authorized to vote upon such other business as may properly come before the
meeting and any adjournment thereof. Please sign exactly as name appears below.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
Please disregard if you have previously provided your consent decision.
By checking the box to the right, I consent to future delivery of [ ]
annual reports, proxy statements, prospectuses and other materials and
shareholder communications electronically via the Internet at a webpage
which will be disclosed to me. I understand that the Company may no
longer distribute printed materials to me from any future shareholder
meeting until such consent is revoked. I understand that I may revoke
my consent at any time by contacting the Company's transfer agent,
Mellon Investor Services LLC, Ridgefield Park, NJ and that costs
normally associated with electronic delivery, such as usage and
telephone charges as well as any costs I may incur in printing
documents, will be my responsibility.
Signature(s) _______________________________________ Dated _____________ , 2001
PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
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VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET
http://www.proxyvoting.com/PSD
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site. You will be prompted to enter your control number, located
in the box below, to create and submit an electronic ballot.
OR
TELEPHONE
1-800-840-1208
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below, and then follow the directions given.
OR
MAIL
Mark, sign and date your proxy card and return it in the enclosed postage-paid
envelope.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.