EXHIBIT 10-150
EMPLOYMENT AGREEMENT
Between
Puget Sound Energy, Inc.
And
Richard R. Sonstelie
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered
into as of the 13th day of January, 1998, (the "Effective Date"), between
PUGET SOUND ENERGY, INC., a Washington corporation (the "Company"), and
RICHARD R. SONSTELIE (the "Employee"). The term "Parties" refers to the
Company and the Employee.
RECITALS
A. The Company and Employee are parties to an Employment Agreement
dated October 18, 1995 (the " 1 995 Agreement"), pursuant to which Employee
is currently serving as Chairman and Chief Executive Officer of the
Company;
B. Employee has advised the Company that he expects to retire from
employment with the Company on March 31, 2000, and in light of Employee's
plans the Parties wish to replace the 1995 Agreement with this Agreement;
NOW, THEREFORE,, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration,
the Parties agree as follows:
1. Employment
The Company hereby agrees to employ Employee and to perform the
obligations of the Company under this Agreement. Employee hereby accepts
employment by the Company and agrees to perform the obligations of Employee
under this Agreement.
2. Term
Employee's employment under this Agreement shall commence on the date
hereof and shall terminate on March 31, 2000 (the "Term"), subject to
earlier termination as provided in Section 10 (Termination Prior to the End
of the Term). The 1995 Agreement is hereby terminated and replaced in its
entirety by this Agreement.
3. Duties
Effective January 13, 1998, Employee's position with the Company shall
become Chairman of the Board of Directors. From January 13, 1998 until the
Company's regularly scheduled Board meeting in January 2000, Employee shall
serve as the Chairman of the Company. Employee shall faithfully and
diligently perform such duties and exercise such powers as:
(i) Are set forth in the description of duties of the Chairman in the
Bylaws of the Company (which may be amended by the Company from time to
time);
(ii) Are customarily expected of the Chairman of business
organizations which are similar to the Company; and
(iii) May from time to time be properly requested of him by the Board
of Directors or the President and Chief Executive Officer of the Company.
At the request of the Board of Directors or the President and Chief
Executive Officer of the Company, Employee also shall serve as an officer
or as a member of the Board of Directors of any of the Company's
subsidiaries and affiliates, without additional compensation.
4. Extent of Services
Employee shall devote his full working time, attention and skill to
the duties and responsibilities set forth in Section 3 ("Duties").
Employee may participate in other businesses as an outside director or
investor, provided that:
(i) Employee shall not actively participate in the operation or
management of such businesses; and
(ii) Employee shall not, without the prior approval of the Board of
Directors of the Company, make or maintain any investment in any entity
with which the Company has a commercial relationship of any kind, including
that of lessor, partner, investor, vendor, supplier, consultant or
otherwise, or an entity which is in direct competition with the Company;
provided, however, that Employee shall not be prohibited from investing in
publicly traded securities.
5. Salary
In consideration for the performance of Employee's obligations under
the Agreement the Company shall pay Employee through March 31, 2000 an
annual base salary at the rate in effect on the date of this Agreement
which salary shall not be reduced during the term of this Agreement.
Employee's salary shall be paid in installments in accordance with the
Company's payroll policy for other employees.
6. Other Compensation
6.1 The Employee shall participate in the Company's annual Pay-At-
Risk plans for 1998 and 1999, with a target award of 40% of base salary,
and in the Company's Long-Term Incentive Plan, with a grant of 6580
performance units in the 1998-2001 cycle and 3660 units in the 1999-2002
cycle. Upon his retirement on March 31, 2000, the value of the awards
shall be based on the Company's relative total shareholder return based on
the quarter-end results through March 31, 2000 and modified for the value
of dividends paid during the period, all as provided in such Plan. The
performance unit grant amounts for the 1998-2001 and 1999-2002 cycles have
already been prorated to reflect the anticipated March 31, 2000 retirement
date, and shall not be further prorated upon Employee's retirement.
6.2 The Parties agree that Employee shall be entitled on April 1,
2000 to commence receiving a Retirement Benefit under the Company's
Supplemental Executive Retirement Plan effective as of June 1, 1997 (the
"SERP"). The monthly amount of the Retirement Benefit shall be 1/12 of 50%
of Employee's Highest Average Earnings (as defined in the SERP), less the
sum of the monthly amounts that are required to be deducted pursuant to
Sections 3.2(a) (ii) and (iv) of the SERP. For purposes of the deduction
required by Sections 3.2(a) (ii) and (iv), Employee's Normal Commencement
Date shall be deemed to be April 1, 2000. Employee may, by written notice
to the Company's Compensation and Retirement Committee not later than 18
months prior to March 31, 2000, elect to receive the normal form of payment
provided in Section 3.5(a) of the SERP, or to receive the Actuarial
Equivalent (as defined in the SERP) of the normal form of payment in any
form requested by Employee, or to have the Actuarial Equivalent lump sum
value of the Retirement Benefit transferred to the Deferred Compensation
Plan and thereafter treated as a voluntary deferral thereunder. The
provisions of Section 3.5(c) shall not be applicable to determination of
the amount of the Retirement Benefit. If Employee dies on or before April
1, 2000, his Beneficiary shall receive, as promptly after the date of death
as administratively practicable, an amount that is the lump-sum Actuarial
Equivalent as of April 1, 2000 of the Retirement Benefit, based upon the
form of payment which Employee has elected. If no election has been made,
his Beneficiary shall receive an amount that is the lump-sum Actuarial
Equivalent as of April 1, 2000 of the benefit that would have been payable
to the Beneficiary under the fifty percent (50%) joint and survivor form of
payment, which benefit shall be calculated by assuming that Employee died
on April 2, 2000 and had commenced to receive the Retirement Benefit
provided for in this Section 6.2.
6.3 The Parties agree that Employee shall be entitled to an
additional severance payment equal to three times the base annual salary
provided for in Section 5 of this Agreement. Employee may, by written
notice to the Company's Compensation and Retirement Committee not later
than 18 months prior to March 31, 2000, elect to receive the this payment
in a lump sum, to receive the Actuarial Equivalent (as defined in the SERP)
of the lump sum amount paid in any form requested by Employee, or to have
the lump sum amount transferred to the Deferred Compensation Plan and
thereafter treated as a voluntary deferral thereunder.
6.4 The Company agrees for a period of three years after Employee's
retirement to provide Employee with medical, dental and life insurance
benefits substantially equivalent to those provided to Employee during the
Term of his employment under this Agreement. In the event that Employee's
participation in any such medical, dental or life insurance plan, program
or policy is not possible under its terms and conditions, the Company shall
at its option either arrange for Employee to receive benefits substantially
similar to those which Employee would have been entitled to receive under
each plan, program or policy, or pay to employee an amount equal to the
premiums that the Company would pay on Employee's behalf for participation
in such plan, program or policy, plus an amount equal to the federal income
taxes which will be payable by Employee as a result of this payment.
6.5 Notwithstanding the two-year notice period provided in Section
5.2 of the Deferred Compensation Plan, Employee may change the payment
period for benefits under that Plan by submitting a new election form to
the plan committee at least 18 months before the date of his retirement.
7. Vacation and Other Benefits
Employee shall be entitled to 35 days per year of paid time off in
accordance with Company policies, in addition to any existing banked paid
time off. Any unused paid time off balance shall be paid in accordance
with Company policies to Employee upon termination of his employment.
Employee shall be entitled to participate in the Company's Retirement Plan,
the Investment Plan, the Deferred Compensation Plan for Key Employees, and
the SERP, in accordance with their terms (as revised by this Agreement with
respect to the SERP), each of which may be amended from time to time,
provided that no amendment shall diminish the SERP benefits provided for in
this Agreement. The Company shall provide Employee with medical, life and
disability insurance benefits for Employee during the Term of his
employment with terms and provisions substantially as favorable to Employee
as those provided to other executive employees of the Company at that date.
The Company may prospectively amend, eliminate or add to the medical, life
and disability insurance benefit programs generally applicable to all
executive employees at any time, in its sole discretion.
8. Club Dues
The Company shall pay on behalf of Employee monthly dues and other
charges in connection with membership in clubs, so as to permit Employee to
conduct Company business and represent the Company in the business
community. Upon Employee's retirement, the Company shall permit Employee
to assume without consideration other than the obligation to pay ongoing
dues the Company's membership in the Bellevue Club maintained on his
behalf.
9. Expenses
The Company shall, upon receipt of adequate supporting documentation,
reimburse Employee for reasonable expenses incurred by Employee in
promoting the business of the Company, subject to the Company's expense
reimbursement policies, which may be amended from time to time.
10. Termination Prior to the End of the Term
10.1 The Company may terminate this Agreement for cause prior to the
end of the Term. The term "for cause" shall mean (a) the willful and
continued failure by Employee to substantially perform his duties with the
Company (other than any such failure resulting from incapacity due to
physical or mental illness) for a period of 30 days after written notice of
demand for substantial performance has been delivered to Employee by the
Board of Directors which specifically identifies the manner in which the
Board believes that Employee has not substantially performed his duties, or
(b) the willful engaging by Employee in gross misconduct materially and
demonstrably injurious to the Company. The Company shall not terminate
this Agreement for cause unless a determination has been made the Board of
Directors at a lawfully called meeting at which Employee shall be entitled
to be told of the reasons for the termination and given an opportunity to
personally respond to the reasons provided by the Board of Directors. No
act, nor failure to act, on Employee's part shall be considered "willful"
unless he has acted or failed to act with an absence of good faith and
without a reasonable belief that his action or failure to act was in the
best interests of the Company. In the event of termination of this
Agreement by the Company for cause, or in the event of termination of this
Agreement by Employee, Employee shall be paid all compensation and benefits
earned through the date of termination and the additional benefit provided
for in Section 6.3, the Company shall not be obligated to provide any
further compensation or benefits to him under the Agreement, and the
Parties' obligations to each other under this Agreement shall cease, with
the exception of the Company's obligations under Section 12
(Indemnification) and Employee's obligations under Section 13
(Confidentiality) and Section 14 (Noncompetition).
10.2 The Company may, at its option and at any time, terminate this
Agreement prior to the end of the Term, without cause. In the event that
the Company exercises this right, Employee shall continue to be entitled to
receive all compensation and benefits provided for in this Agreement as if
his employment had continued through March 31, 2000 and he had retired on
that date pursuant to this Agreement. In that event, the Parties' other
obligations to each other under this Agreement shall cease, with the
exception of the Company's obligations under Section 11 (Change in Control)
and Section 12 (Indemnification) and the Employee's obligations under
Section 13 (Confidentiality) and Section 14 (Noncompetition).
10.3 This Agreement shall terminate in the event Employee dies, or is
unable to perform his duties as a result of a physical or mental disability
at any time during the term of this Agreement. In the event of a
termination under this subsection, Employee or his estate shall continue to
be entitled to receive all compensation and benefits provided for in this
Agreement as if his employment had continued through March 31, 2000 and he
had retired on that date pursuant to this Agreement, and the Parties' other
obligations to each other under this Agreement shall cease, with the
exception of the Company's obligations under Section 12 (Indemnification)
and the Employee's obligations, if he is still living, under Section 13
(Confidentiality) and Section 14 (Noncompetition). For purposes of this
Agreement, Employee shall be deemed to be disabled when each of the
following conditions are met:
(i) The Employee shall become physically or mentally incapable
(excluding infrequent and temporary absences due to ordinary illnesses) of
properly performing the services required of him by this Agreement;
(ii) Employee's disability shall exist or shall be reasonably expected
to exist for more than 90 days in the aggregate during any period of 12
consecutive calendar months; and
(iii) Such disability is independently diagnosed by a qualified medical
practitioner.
11. Change in Control
11.1 The provisions of this Section shall survive the expiration of
the term of this Agreement, but shall not be effective in the event of a
termination of this Agreement prior to the end of the term for cause, in
accordance with subsection 10.1, or as a result of the death or incapacity
of Employee in accordance with subsection 10.3. The provisions of this
Section shall remain in effect for the period (the "Extended Benefit
Period") between the date either the Company or Employee provides written
notice to the other of its/his intent to terminate Employee's employment
and March 31, 2000. The Extended Benefit Period shall terminate on March
31, 2000.
11.2 The Board of Directors, in the exercise of its responsibility to
serve the best interests of the shareholders of the Company, may at any
time consider a merger or acquisition proposal that could result in a
Change of Control of the Company. In order to avoid any adverse affect on
Employee's performance under this Agreement that might be caused by
uncertainties concerning his tenure and treatment by the Company in the
event of such a Change in Control, the Company has agreed to provide
certain benefits to Employee in certain circumstances involving a Change of
Control of the Company in accordance with the provisions of this Section.
For purposes of this Agreement, a Change in Control shall mean the
occurrence of any one of the following actions or events:
(i) The acquisition of any person (which, for purposes of this
Agreement, shall include a natural person, corporation, partnership,
association, joint stock company, trust fund or organized group of persons)
of the power, directly or indirectly, to exercise a controlling influence
over the management or policies of the Company (either alone or pursuant to
an arrangement or understanding with one or more other persons), whether
through the ownership of voting securities through one or more intermediary
persons, by contract or otherwise; or
(ii) The acquisition by a person (whether alone or pursuant to
an arrangement or understanding with one or more other persons) of the
ownership or power to vote 25% or more of the outstanding voting securities
of the Company; or
(iii) During a period of six years after the acquisition by any
person, directly or indirectly, of the ownership or power to vote 10% or
more of the outstanding voting securities of the Company, the ceasing of
the individuals who prior to such acquisition were directors of the Company
(the "Prior Directors") to constitute a majority of the Board of Directors,
unless the nomination of each new director was approved by a vote of a
majority of the Prior Directors.
11.3 In the event of a Change in Control during the Terms of this
Agreement, which is followed by a Material Adverse Change in the terms of
Employee's employment, as that term is defined in Section 1 1.4, which
results in the termination, by Employee or the Company, of Employee's
employment by the Company, Employee shall be entitled to receive the
benefits described in Subsection 11.5.
11.4 For purposes of this Section, any of the following shall constitute a
Material Adverse Change in the terms of Employee's employment: ,
(i) A material change in Employee's Duties, without Employee's
express consent;
(ii) Failure by the Company to perform its obligations under
this Agreement, which failure is not cured within 30 days after written
notice from Employee;
(iii) The requirement by the Company that Employee relocate his
residence or office anywhere outside of the Seattle/Bellevue metropolitan
area, except for required travel on the Company's business to the extent
consistent with Employee's duties;
(iv) Any purported termination of employment by the Company other than
for cause as defined in Section 10.1, or death or disability as defined in
Section 10.3.
11.5 In the event of a termination of Employee's employment as described
in Subsection 11.4, the Company shall provide to Employee the following
benefits through March 31, 2000, in addition to the benefits provided for
in Section 6:
(i) Employee's full base salary earned through the termination date,
plus payment for all accrued vacation and any deferred compensation to
which Employee is entitled for the fiscal year most recently ended prior to
Employee's termination, and Employee's pro rata share of any compensation
under any Company plan which has accrued through the date of termination,
regardless of whether such amounts are vested or are payable in the year of
termination; plus
(ii) Within 30 days following the date of termination, an amount
equal to the sum of Employee's annual base salary at the rate in effect as
of the date of termination, plus the amount of any additional compensation
awarded to Employee for the year most recently ended, multiplied by number
of years (prorated for any partial years) remaining between the date of
termination and March 31, 2000.
(iii) The Company shall maintain in full force and effect through
March 31, 2000 all employee benefit plans, programs and policies, including
any life or health insurance plans in which Employee was entitled to
participate immediately prior to termination, provided that Employee is
qualified to participate under the general terms and provisions of such
plans, programs and policies. In the event that Employee's participation
in any such plan, program or policy is not possible under its terms and
conditions, the Company shall at its option either arrange for Employee to
receive benefits substantially similar to those which Employee would have
been entitled to receive under each plan, program or policy, or pay to
employee an amount equal to the premiums that the Company would pay on
Employee's behalf for participation in such plan, program or policy. At
the end of the period of coverage, Employee will have the option to receive
an assignment at no cost, and with no apportionment of prepaid premiums, of
any assignable insurance policies owned by the Company and relating to
Employee, and to take advantage of any conversion privileges pertinent to
the benefits available under Company policies.
(iv) Employee shall waive all rights to receive shares of common
stock of the Company issuable upon exercise of options, if any, granted to
Employee under the Company's long-range incentive compensation plans. In
return for that waiver, Employee shall be entitled to receive, within 30
days following the date of termination, a payment equal to the difference
between the exercise of all options held by Employee, whether or not then
fully exercisable, and the higher of (1) the average of the high and low
sale prices of the Company's stock on the New York Stock Exchange in each
of the twenty business days preceding the date of termination or (2) the
highest price per share actually paid for any of the Company's common stock
in connection with the Change of Control of the Company.
(v) Notwithstanding any other provisions of this Agreement, if any
severance benefits under Section 1 1 of this Agreement, together with any
other Parachute Payments (as defined under Internal Revenue Code Section
280(G)(b)(2)) made by the Company to Employee, if any, are characterized as
Excess Parachute Payments (as defined in Internal Revenue Code, Section
280(G)(b)(1)), then the Company shall pay to Employee, in addition to the
payments to be received under this Section, an amount equal to the excise
taxes imposed by Section 4999 of the Code on Employee's Excess Parachute
Payments, plus an amount equal to the federal and, if applicable, state
income taxes which will be payable by Employee as a result of this
additional payment.
Employee shall not be required to mitigate the amount of any payment
due hereunder by seeking other employment and the payments due hereunder
shall not be affected by any other employment which Employee may obtain.
12. Indemnification
The Company shall defend, indemnify and hold Employee harmless from
any and all liabilities, obligations, claims or expenses which arise in
connection with or as a result of Employee's service as an officer,
employee and director of the Company and/or any of its affiliates and
subsidiaries to the fullest extent allowed by law. The Company shall
assure that Employee remains covered by the Company's policies of
directors' and officers' liability insurance for six years following the
date of termination of his employment.
13. Confidentiality
Employee shall not, during the term of this Agreement or thereafter,
use for his own purposes or disclose to any other person or entity any
confidential information concerning the Company, its affiliates or
subsidiaries, or any of their business operations, except as may be
consistent with his duties hereunder or as may be required by order of a
court of competent jurisdiction. Confidential information shall include,
without limitation, any information, formula, pattern, compilation,
program, device, method, technique or process that derives independent
economic value, actual or potential, from not being generally known to, and
not being readily ascertainable by proper means by, other persons or
entities.
14. Noncompetition
14.1 During the term of his employment with the Company, Employee
shall comply with his fiduciary obligations as an officer of the Company,
and shall comply with the restrictions contained in Section 4.
14.2 During the term of his employment with the Company and for a
period of two years thereafter, Employee shall not, without the prior
written consent of the Company which shall not be unreasonably withheld,
participate in or perform Competitive Services, whether directly or
indirectly, as a director, officer, employee, owner, partner, agent,
consultant or otherwise, for any person or entity. Competitive Services
shall mean services which assist a person or entity in competing with the
Company in the business of selling or distributing electric power or
natural gas in the states of Washington, Oregon or Idaho.
14.3 During the term of his employment with the Company and for a
period of two years thereafter, Employee shall not, directly or indirectly:
solicit for employment any employee of the Company; attempt to persuade or
entice any employee of the Company to terminate his or her employment; or
persuade or attempt to persuade, any person or company to terminate,
cancel, rescind or revoke its business or contractual relationships with
the Company.
14.4 Employee agrees that damages for breach of the covenants
contained in this Section would be difficult to determine and therefore
agrees that these provisions may be enforced by temporary or permanent
injunction. The right to such injunctive relief shall be in addition to
and not in place of any other remedies to which the Company may be
entitled. Employee agrees that any profits made or benefits obtained by
Employee in violation of his obligations under this Section shall be held
by Employee in constructive trust for, and shall be promptly paid to, the
Company.
14.5 Employee agrees that the provisions of this Section are
reasonable. However, if any court of competent jurisdiction determines
that any provision within this Section is unreasonable in any respect, the
Parties intend that this Section should be enforced to the fullest extent
allowed by such court.
15. Arbitration
Any dispute between the Parties hereto with respect to any of the
matters set forth herein shall be submitted to binding arbitration in King
County, state of Washington. Either Party may commence the arbitration by
delivery of a written notice to the other, describing the issue in dispute
and its position with regard to the issue. Except as otherwise provided
herein, the arbitration shall be conducted in accordance with the
Employment Dispute Resolution Rules of the American Arbitration Association
then in effect. The award of the arbitrator shall be final and binding,
and judgment upon an award may be entered in any court of competent
jurisdiction. In any such arbitration, the prevailing Party shall be
entitled to recover its costs, including without limitation reasonable
attorneys' fees, and the nonprevailing Party shall pay all costs of
arbitration, but if neither Party is determined to be the prevailing Party,
each Party shall bear its own costs and attorneys' fees and one-half of the
costs of arbitration. Nothing contained in this Section shall prevent
either Party from seeking a temporary restraining order, preliminary
injunction or similar injunctive relief from a court of competent
jurisdiction to enforce the provisions of this Agreement. In the event
that either Party institutes an action in court for such relief or to
compel arbitration to, or enforce an award of arbitration, the prevailing
Party shall be entitled to recover its costs, including without limitation
reasonable attorneys' fees.
16. Notices
All notices or other communications required or permitted by this
Agreement shall be in writing and shall be sufficiently given if sent by
certified mail, postage prepaid, addressed as follows:
If to Employee, to:
Richard R. Sonstelie
5 Brook Bay
Mercer Island, Washington 98040
If to Company:
Puget Sound Energy, Inc.
P.O. Box 97034
Bellevue, Washington 98009-9734
Attention: General Counsel
Facsimile: (206) 462-3300
Any such notice or communication shall be deemed to have been given as
of the date mailed. Any address may be changed by giving written notice of
such change in the manner provided herein for giving notice.
17. Waiver of Breach
The waiver by a Party of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach.
18. Assignment
This Agreement is for personal services. Neither Party may assign its
rights or delegate its duties hereunder without the prior written consent
of the other Party.
19. Entire Agreement
This Agreement contains the entire understanding of the Parties with
regard to the subject matter of this Agreement and may only be changed by
written agreement signed by both Parties. Any and all prior discussions,
negotiations, commitments and understandings related thereto are merged
herein.
20. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
respective Parties, and their legal representatives, successors, permitted
assigns and heirs.
21. Law
This Agreement shall be governed by, construed and enforced in
accordance with the laws of the state of Washington, without giving effect
to principles and provisions thereof relating to conflict or choice of laws
and irrespective of the fact that any one of the Parties is now or may
become a resident of a different state.
22. Validity
In case any term of this Agreement shall be invalid, illegal or
unenforceable, in whole or in part, the validity of any of the other terms
of this Agreement shall not in any way be affected thereby.
In witness whereof, the Parties have signed this Agreement as of the date
first above written.
"Company"
Puget Sound Energy, Inc.
/s/ Steve McKeon
______________________________________
Its Vice President and General Counsel
"Employee"
/s/ Richard R. Sonstelie
_________________________
Richard R.Sonstelie