EXHIBIT 99.1
Puget Energy, Inc.
RESTRICTED STOCK AWARD AGREEMENT
PUGET ENERGY, INC.
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RESTRICTED STOCK AWARD AGREEMENT
TO: Xxxxxxx X. Xxxxxxxx
We are pleased to inform you that you have been awarded by Puget Energy,
Inc., a Washington corporation (the "Company"), a restricted stock award (the
"Restricted Stock Award").
The terms of the Restricted Stock Award are as set forth in this Restricted
Stock Award Agreement (this "Agreement"). The Restricted Stock Award is granted
outside the Company's Amended and Restated 1995 Long-Term Incentive Compensation
Plan (the "Plan") but, except as expressly provided otherwise herein, is limited
by and subject to the express terms and conditions of the Plan. Capitalized
terms that are not defined in this Agreement but defined in the Plan have the
meanings given to them in the Plan.
The basic terms of the Restricted Stock Award are summarized as follows:
1. Number of Shares: 50,000
2. Grant Date: January 8, 2002
3. Vesting Commencement Date: January 1, 2002
4. Fair Market Value Per Share: $22.74
5. Vesting
The Restricted Stock Award is subject to forfeiture upon varying
circumstances relating to your termination of employment with the Company. The
restrictions on the shares will lapse and no longer be subject to forfeiture
according to the following schedule:
Date on Which Portion of Restricted % of Restricted Stock
Stock Award Is No Longer Subject Award No Longer
to Forfeiture Subject to Forfeiture
One year from Grant Date 20%
Two years from Grant Date 40%
Three years from Grant Date 60%
Four years from Grant Date 80%
Five years from Grant Date 100%
Early lapse of the forfeiture restrictions may occur as described below in
the event of a Change of Control (as that term is defined below and in your
Agreement with the Company and Puget Sound Energy, Inc. dated as of January 7,
2002 (the "Agreement")) and in connection with your termination without Cause or
for Good Reason, as defined in the Agreement. Shares that have vested and are no
longer subject to forfeiture according to the above schedule are referred to
herein as "Vested Shares." Shares that are not vested and remain subject to
forfeiture under the preceding schedule are referred to herein as "Unvested
Shares." The Unvested Shares will vest (and to the extent so vested cease to be
Unvested Shares remaining subject to forfeiture) in accordance with the above
schedule. Collectively, the Unvested Shares and the Vested Shares are referred
to herein as the "Shares."
6. Termination of Employment; Change of Control
6.1 Termination of Employment
Except as provided in the preceding section, the portion of the Restricted
Stock Award subject to forfeiture shall be forfeited by you to the Company upon
the termination of your employment for any reason, including without limitation,
termination by the Company for Cause (as defined in the Agreement), voluntary
resignation by you or the occurrence of your death or Disability (as defined in
the Agreement).
6.2 Change of Control
Upon a Change of Control (as defined below) of the Company, the vesting of
your Restricted Stock Award will accelerate and become fully vested. A Change of
Control shall mean the occurrence of any one of the following actions or events:
(i) The acquisition by any individual, entity or group of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act) of 20% or more of either (A) the Company's
outstanding common stock or (B) the Company's outstanding voting
securities; provided, however, that the following acquisitions shall
not constitute a Change of Control: (x) any acquisition of securities
by the Company, (y) any acquisition of securities by any employee
benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (z) any acquisition
by any corporation pursuant to a business combination, if, following
such business combination, the conditions described in clauses (1),
(2) and (3) of subsection (iii) of this Section 6.2 are satisfied; or
(ii) A "Board Change" that shall have occurred if a majority of the seats
on the Board are occupied by individuals who were neither (1)
nominated by a majority of the Incumbent Directors nor (2) appointed
by directors so nominated ("Incumbent Director" means a member of the
Board who has been either (x) nominated by a majority of the directors
of the Company then in office or (y) appointed by directors so
nominated, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a
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result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Securities Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board);
or
(iii) Approval by the shareholders of the Company of a Business Combination
(which means (A) a reorganization, exchange of securities, merger,
consolidation or other business combination involving the Company or
(B) the sale or other disposition of all or substantially all the
assets of the Company or Puget Sound Energy) unless after giving
effect to such Business Combination and any equity financing completed
or contemplated in connection with or as a result of such Business
Combination, (1) more than 66-2/3% of, respectively, the then
outstanding shares of common stock of the corporation resulting from
or effecting such Business Combination and the combined voting power
of the then outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all the
individuals and entities who were the beneficial owners, respectively,
of the outstanding common stock of the Company and outstanding voting
securities of the Company immediately prior to such Business
Combination in substantially the same proportion as their ownership,
immediately prior to such Business Combination, of the outstanding
common stock of the Company and outstanding voting securities, as the
case may be, (2) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or its affiliates)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from or effecting such Business Combination or
the combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors, and (3) at least a majority of the members of the board of
directors of the Company resulting from or effecting such Business
Combination were Incumbent Directors at the time of the execution of
the initial agreement or action of the Board providing for such
Business Combination.
7. Securities Law Compliance
Notwithstanding any other provision of this Letter Agreement, you may not
sell the Shares unless they are registered under the Securities Act or, if such
Shares are not then so registered, the Company has determined that such sale
would be exempt from the registration requirements of the Securities Act. The
sale of the Shares must also comply with other applicable laws and regulations
governing the Shares, and you may not sell the Shares if the Company determines
that such sale would not be in material compliance with such laws and
regulations.
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8. Transfer Restrictions
Any sale, transfer, assignment, encumbrance, pledge, hypothecation,
conveyance in trust, gift, transfer by bequest, devise or descent, or other
transfer or disposition of any kind, whether voluntary or by operation of law,
directly or indirectly, of Unvested Shares shall be strictly prohibited and
void, however, such restrictions on transfer will not apply to a gratuitous
transfer of the Shares provided that you obtain the Company's prior written
consent to such transfer.
9. Section 83(b) Election for Restricted Stock Award
You understand that under Section 83(a) of the Code, the excess of the fair
market value of the Unvested Shares on the date the forfeiture restrictions
lapse over the fair market value of such Shares on the Grant Date will be taxed,
on the date such forfeiture restrictions lapse, as ordinary income subject to
payroll and withholding tax and tax reporting, as applicable. For this purpose,
the term "forfeiture restrictions" means the right of the Company to receive
back any Unvested Shares upon termination of your employment with the Company.
You understand that you may elect under Section 83(b) of the Code to be taxed at
ordinary income rates on the fair market value of the Unvested Shares at the
time they are acquired, rather than when and as the Unvested Shares cease to be
subject to the forfeiture restrictions. Such election (an "83(b) Election") must
be filed with the Internal Revenue Service within 30 days from the Grant Date of
the Restricted Stock Award.
You understand that (a) you will not be entitled to a deduction for any
ordinary income previously recognized as a result of the 83(b) Election if the
Unvested Shares are subsequently forfeited to the Company and (b) the 83(b)
Election may cause you to recognize more compensation income than you would have
otherwise recognized if the value of the Unvested Shares subsequently declines.
THE FORM FOR MAKING AN 83(b) ELECTION IS ATTACHED TO THIS AGREEMENT AS
EXHIBIT B. YOU UNDERSTAND THAT FAILURE TO FILE SUCH AN ELECTION WITHIN THE
30-DAY PERIOD MAY RESULT IN THE RECOGNITION OF ORDINARY INCOME BY YOU AS THE
FORFEITURE RESTRICTIONS LAPSE. You further understand that an additional copy of
such election form should be filed with your federal income tax return for the
calendar year in which the date of this Agreement falls. You acknowledge that
the foregoing is only a summary of the federal income tax laws that apply to the
award of the Shares under this Agreement and does not purport to be complete.
YOU FURTHER ACKNOWLEDGE THAT THE COMPANY HAS DIRECTED YOU TO SEEK INDEPENDENT
ADVICE REGARDING THE APPLICABLE PROVISIONS OF THE CODE, THE INCOME TAX LAWS OF
ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH YOU MAY RESIDE, AND THE TAX
CONSEQUENCES OF YOUR DEATH.
You agree to execute and deliver to the Company with this Agreement a copy
of the Acknowledgment and Statement of Decision Regarding Section 83(b) Election
(the "Acknowledgment") attached hereto as Exhibit A. You further agree that you
will execute
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and deliver to the Company with this Agreement a copy of the 83(b) Election
attached hereto as Exhibit B if you choose to make such an election.
10. Assignment Separate From Certificate
As security for the faithful performance of this Agreement, you agree, upon
execution of this Agreement, to deliver a stock power in the form attached as
Exhibit C, executed by you and your spouse, if any (with the transferee,
certificate number, date and number of Shares left blank), along with any
certificate(s) evidencing shares issued to you, to the Secretary of the Company
or its designee ("Escrow Holder"), who is hereby appointed to hold such stock
power and any such certificate(s) in escrow and to take all such actions and to
effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Agreement. You and the Company agree that
Escrow Holder shall not be liable to any party to this Agreement (or to any
other party) for any actions or omissions unless Escrow Holder is grossly
negligent relative thereto. Escrow Holder may rely on any letter, notice or
other document executed by any signature purported to be genuine and may rely on
advice of counsel and obey any order of any court with respect to the
transactions contemplated in this Agreement. The Shares may be released from
escrow as they cease to be Unvested Shares.
11. Legends
You understand and agree that the Unvested Shares are subject to forfeiture
and that the certificate(s) representing the Unvested Shares will bear a legend
in substantially the following form:
"The securities represented by this certificate are subject to certain
restrictions on transfer and forfeiture restrictions and may not be sold,
assigned, transferred, encumbered or in any way disposed of except as set forth
in a restricted stock award agreement between the issuer and the original
recipient of these shares, a copy of which may be obtained at the principal
office of the issuer. Such transfer restrictions and forfeiture restrictions are
binding on transferees of these shares."
12. Stop-Transfer Notices
You understand and agree that, in order to ensure compliance with the
restrictions referred to in this Agreement, the Company may issue appropriate
"stop-transfer" instructions to its transfer agent, if any, and that, if the
Company transfers its own securities, it may make appropriate notations to the
same effect in its own records. The Company will not be required to (a) transfer
on its books any Shares that have been sold or transferred in violation of the
provisions of this Agreement or (b) treat as the owner of the Shares, or
otherwise accord voting, dividend or liquidation rights to, any transferee to
whom the Shares have been transferred in contravention of this Agreement.
13. Independent Tax Advice
You acknowledge that determining the actual tax consequences to you of
receiving or disposing of the Shares may be complicated. These tax consequences
will depend, in part, on
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your specific situation and may also depend on the resolution of currently
uncertain tax law and other variables not within the control of the Company. You
are aware that you should consult a competent and independent tax advisor for a
full understanding of the specific tax consequences to you of receiving or
disposing of the Shares. Prior to executing this Agreement, you either have
consulted with a competent tax advisor independent of the Company to obtain tax
advice concerning the Shares in light of your specific situation or have had the
opportunity to consult with such a tax advisor but have chosen not to do so.
14. Withholding and Disposition of Shares
You agree to make arrangements satisfactory to the Company for the payment
of any federal, state, local or foreign withholding tax obligations that arise
either upon receipt of the Shares or as the forfeiture restrictions on any
Shares lapse. In accordance with the Plan, you may use vested shares to pay any
applicable tax withholding obligations due hereunder, provided, however, such
tendered shares must have been held for the period required to avoid a charge to
the Company's reported earnings. In addition, such tendered shares must be owned
free and clear of any liens, claims, encumbrances or securities interests and
must be valued at their fair market value on the date preceding the date of
tender.
15. General Provisions
15.1 Notices
Any notice required in connection with (a) the Company's forfeiture rights
or (b) the disposition of any Shares covered thereby will be given in writing
and will be deemed effective upon personal delivery or upon deposit in the U.S.
mail, registered or certified, postage prepaid and addressed to the party
entitled to such notice at the address indicated in this Agreement or at such
other address as such party may designate by ten days' advance written notice
under this Section 15.1 to all other parties to this Agreement.
15.2 No Waiver
No waiver of any provision of this Agreement will be valid unless in
writing and signed by the person against whom such waiver is sought to be
enforced, nor will failure to enforce any right hereunder constitute a
continuing waiver of the same or a waiver of any other right hereunder.
15.3 Undertaking
You hereby agree to take whatever additional action and execute whatever
additional documents the Company may deem necessary or advisable in order to
carry out or effect one or more of the obligations or restrictions imposed on
either you or the Shares pursuant to the express provisions of this Agreement.
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15.4 Entire Contract
This Agreement, the Plan and the Agreement constitute the entire contract
between the parties hereto with regard to the subject matter hereof. This
Agreement is made pursuant to the provisions of the Plan and will in all
respects be construed in conformity with the express terms and provisions of the
Plan.
15.5 Successors and Assigns
The provisions of this Agreement will inure to the benefit of, and be
binding on, the Company and its successors and assigns and you and your legal
representatives, heirs, legatees, distributees, assigns and transferees by
operation of law, whether or not any such person will have become a party to
this Agreement and agreed in writing to join herein and be bound by the terms
and conditions hereof.
15.6 Shareholder of Record
You will be recorded as a shareholder of the Company and will have, subject
to the provisions of this Agreement and the Plan, all the rights of a
shareholder with respect to the Shares. 15.7 Counterparts This Agreement may be
executed in two or more counterparts, each of which will be deemed an original,
but which, upon execution, will constitute one and the same instrument.
15.7 Counterparts
This Agreement may be executed in two or more counterparts, each of which
will be deemed an original, but which, upon execution, will constitute one and
the same instrument.
15.8 Governing Law
This Agreement will be governed by and construed in accordance with the
laws of the State of Washington.
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IN WITNESS WHEREOF, the parties have executed this Agreement dated of
January 8, 2002.
PUGET ENERGY, INC.
By: /s/ Xxxxxxx Xxxxxx
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XXXXXXX X. XXXXXXXX
/s/ Xxxxxxx X. Xxxxxxxx
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Printed Name: Xxxxxxx X. Xxxxxxxx
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By his signature below, the spouse of the recipient of the Restricted Stock
Award, if he is legally married as of the date of execution of this Agreement,
acknowledges that she has read this Agreement and the Plan and is familiar with
the terms and provisions of this Agreement and the Plan, and agrees to be bound
by all the terms and conditions of this Agreement and the Plan.
Dated:
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Spouse's Signature
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Printed Name
By his signature below, recipient represents that he is not legally married
as of the date of executing this Agreement.
Dated:
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Recipient's Signature
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EXHIBIT A
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ACKNOWLEDGMENT AND STATEMENT OF DECISION
REGARDING SECTION 83(b) ELECTION
The undersigned, a recipient of _______ shares of Common Stock of Puget
Energy, Inc., a Washington corporation (the "Company"), pursuant to a restricted
stock award granted outside of, but pursuant to the terms of the Company's
Amended and Restated Long-Term Incentive Compensation Plan (the "Plan"), hereby
states as follows:
1. The undersigned acknowledges receipt of a copy of the Restricted Stock
Award Agreement and Plan relating to the offering of such shares. The
undersigned has carefully reviewed the Plan and the Restricted Stock Award
Agreement pursuant to which the award was granted.
2. The undersigned either (check and complete as applicable)
(a)__has consulted, and has been fully advised by, the undersigned's
own tax advisor, ________________________, whose business address
is _________________________, regarding the federal, state and
local tax consequences of receiving shares under the Plan, and
particularly regarding the advisability of making an election
pursuant to Section 83(b) of the Internal Revenue Code of 1986,
as amended (the "Code"), and pursuant to the corresponding
provisions, if any, of applicable state law, or
(b)__has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided (check as
applicable)
(a)__to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned's
executed Restricted Stock Award Agreement, an executed form
entitled "Election Under Section 83(b) of the Internal Revenue
Code of 1986", or
(b)__not to make an election pursuant to Section 83(b) of the Code.
4. Neither the Company nor any subsidiary or representative of the Company
has made any warranty or representation to the undersigned with respect to the
tax consequences of the undersigned's acquisition of shares under the Plan or of
the making or failure to make an election pursuant to Section 83(b) of the Code
or the corresponding provisions, if any, of applicable state law.
Dated:
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Recipient
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Print Name
Dated:
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Spouse of Recipient
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Print Name
EXHIBIT B
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ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER:
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NAME OF SPOUSE:
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ADDRESS:
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IDENTIFICATION NO. OF TAXPAYER:
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IDENTIFICATION NO. OF SPOUSE:
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TAXABLE YEAR:
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2. The property with respect to which the election is made is described as
follows: _______________ shares of the Common Stock of Puget Energy, Inc.,
a Washington corporation (the "Company").
3. The date on which the property was transferred is: _______________________
4. The property is subject to the following restrictions:
The property is subject to a forfeiture right pursuant to which the Company
can reacquire the Shares if for any reason taxpayer's services with the
Company are terminated. The Company's right to receive back the shares
lapses in a series of installments over a ___-year period ending on
______________________.
5. The aggregate fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms will
never lapse, of such property is: $____________
6. The amount (if any) paid for such property is: $___________
The undersigned has submitted a copy of this statement to the person for
whom the services were performed in connection with the undersigned's receipt of
the above-described property. The undersigned is the person performing the
services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner of Internal Revenue.
Dated:
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Taxpayer
Dated:
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Spouse of Taxpayer
DISTRIBUTION OF COPIES
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1. File original with the Internal Revenue Service Center where the taxpayer's
income tax return will be filed. Filing must be made by no later than 30
days after the date the property was transferred.
2. Attach one copy to the taxpayer's income tax return for the taxable year in
which the property was transferred.
3. Mail one copy to the Company at the following address:
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EXHIBIT C
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STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _____________________, _________ shares of the Common Stock of Puget
Energy, Inc., a Washington corporation, standing in the undersigned's name on
the books of said corporation represented by Certificate No.___ delivered
herewith, and does hereby irrevocably constitute the Secretary of said
corporation as attorney-in-fact, with full power of substitution, to transfer
said stock on the books of said corporation.
Dated:
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Signature:
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Please print name:
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Spouse's signature, if any:
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Please print name:
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Please see Section 11 of the Restricted Stock Award Agreement for
information on completing this form.
