NOTICE OF ANNUAL MEETING
of Stockholders of
WASHINGTON ENERGY COMPANY
to Be Held February 24, 1995
TO OUR STOCKHOLDERS:
Washington Energy Company ("the Company") is pleased to announce that its
Annual Meeting will be held Friday, February 24, 1995, at the Northwest
Rooms Building of Seattle Center, at the corner of First Avenue North and
Republican Street in Seattle, Washington. (See the map on Page 17.) We will
meet at 9:30 a.m. (Pacific Time) in the Rainier Room.
The Board of Directors has called this meeting to elect two directors and
transact any other business that may properly come before the meeting.
Please read carefully the information contained in the accompanying Proxy
Statement regarding the election of directors.
Only holders of record of common stock at the close of business on December
22, 1994, are entitled to vote, by order of the Board.
Your vote is important! Please sign and mail promptly the enclosed proxy
card, whether or not you plan to attend the meeting. A postage-paid enve-
lope is enclosed for your convenience.
The prompt return of proxies will save the Company the added expense of
another mailing to ensure a quorum.
Thank you. We look forward to seeing you at the meeting.
Sincerely,
William P. Vititoe
Chairman of the Board of Directors
Timothy J. Hogan
Corporate Secretary
Seattle, Washington
January 9, 1995
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WASHINGTON ENERGY COMPANY
815 MERCER STREET
SEATTLE, WASHINGTON 98109
(206) 622-6767
PROXY STATEMENT
Annual Meeting of Stockholders to Be Held February 24, 1995
PROXY SOLICITATION BY MANAGEMENT
This Proxy statement is furnished in connection with the solicitation by
the management of Washington Energy Company ("the Company") of proxies, in
the enclosed form, to be used at the Annual Meeting of Stockholders of the
Company to be held in the Rainier Room at the Northwest Rooms Building of
Seattle Center, at the corner of First Avenue North and Republican Street,
Seattle, Washington. We will meet on February 24, 1995, at 9:30 a.m.
Pacific Time. This proxy statement and the accompanying proxy form are
being sent on or about January 9, 1995, to all security holders with voting
rights. In addition to mail solicitation, there may be incidental personal
solicitation at nominal cost made by directors, officers, employees and
agents of the Company. The Company will bear all costs of soliciting
proxies, including charges made by brokers and other persons holding stock
in their names, or in the names of nominees, for their expenses for sending
proxy material to principals and obtaining their proxies.
VOTING STOCK AND RECORD DATE
As of the December 22, 1994, record date the Company had outstanding
23,826,205 shares of $5.00 par value common stock. This is the only class of
stock entitled to vote at the meeting.
VOTING AT THE MEETING
A stockholder may vote in person or by a written proxy executed by the
stockholder or a duly authorized representative. The Bylaws also permit the
appointment and instruction of proxies by telegram, telex, facsimile (206)
224-2183, or similar transmitting device. Proxies may be revoked at any time
prior to the meeting by written or telegraphic notice delivered to the
Secretary of the Company.
All stockholders have cumulative voting rights in the election of directors
and one vote per share on all other matters. Under cumulative voting, a
stockholder may multiply the number of shares owned by the number of
directors to be elected and cast this total number of votes for any one
nominee or distribute the total number of votes, in any proportion, among as
many nominees as the stockholder desires.
Unless a stockholder directs otherwise on the accompanying proxy form, the
persons named in the proxy form intend to cumulate votes and allocate them
among the nominees for director hereafter named to the extent and in the
manner necessary to ensure the election of all the nominees. If a nominee
becomes unavailable to serve, an event which is not anticipated, the shares
may be voted for a substitute nominee designated by the Board of Directors.
Under Washington law and the Company's Restated Articles of Incorporation and
Bylaws, the two nominees for director who receive the greatest number of
votes cast in the election of directors will be elected. Shareholders may
abstain from voting for one or more of the nominees for director. Abstention
from voting for a nominee for director will make it less likely that the
nominee will be one of the two nominees for director who receive the greatest
number of votes cast.
Brokerage firms and other intermediaries holding shares of common stock in
street name for customers are generally required to vote such shares in the
manner directed by their customers. In the absence of timely directions,
brokerage firms and other intermediaries will generally have discretion to
vote their customers' shares in the election of directors. If a brokerage
firm or other intermediary does not vote for a nominee for director, this
non-vote will make it less likely that the nominee will be one of the two
nominees for director who receive the greatest number of votes cast.
ELECTION OF DIRECTORS
Nominees
At the meeting, two directors are to be elected. Two current directors,
Donald J. Covey and Robert L. Dryden, have been nominated to be elected to
hold office for a period of three years or until their successors are
elected and qualified. During the fiscal year ended September 30, 1994,
the Board reduced the number of board members from nine to eight upon the
retirement of Mr. Robert R. Golliver, President and Chief Operating
Officer. Pursuant to the Restated Articles of Incorporation, as amended,
and Bylaws, as amended, of the Company, the eight directors serve in three
classes for staggered terms. All the directors in one of the classes are
elected at each Annual Meeting of Stockholders.
The names of the nominees for director and of the other directors not
standing for election in 1995, and information about them, are set forth
below:
NOMINEES FOR DIRECTOR
Class II (New Term Expires in 1998)
Year First
Elected as
Name and Address Age Director
________________ ___ __________
Donald J. Covey 66 1982
Seattle, Washington
Robert L. Dryden 61 1991
Boeing Commercial
Airplane Group
Seattle, Washington
OTHER DIRECTORS
Class I (Term Expires in 1997)
Year First
Elected as
Name and Address Age Director
________________ ___ __________
Virginia Anderson 47 1991
Seattle Center, City of Seattle
Seattle, Washington
Tomio Moriguchi 58 1988
Uwajimaya, Inc.
Seattle, Washington
Sally G. Narodick 49 1989
Edmark Corporation
Redmond, Washington
Class III (Term Expires in 1996)
Robert F. Bailey 62 1988
Trans Republic Energy, L.P.
Midland, Texas
John W. Creighton, Jr. 62 1989
Weyerhaeuser Company
Tacoma, Washington
William P. Vititoe 56 1994
Washington Energy Company
Seattle, Washington
Each of the nominees has served continuously since the date of his or her
first election as a director of the Company.
Provided below is a brief description of the business experience of the
nominees and other directors for the past five years.
Class II:
Mr. Covey was Chairman of the Board of Directors of UNICO Properties, Inc.,
Seattle, Washington, from 1992 until his retirement on December 31, 1994.
He served as Chairman and Chief Executive Officer from 1990 to 1992 and
President and Chief Executive Officer from 1985 to 1990. UNICO Properties,
Inc., manages several major office buildings in downtown Seattle.
Mr. Dryden has been Executive Vice President, Airplane Production, Boeing
Commercial Airplane Group, Seattle, Washington, since January 1990. From
November 1987 to January 1990, he served as President of Boeing Military
Airplanes in Wichita, Kansas.
Class I:
Ms. Anderson has been Director of the Seattle Center, a large civic center
in Seattle owned by the City of Seattle, since August 1988.
Mr. Moriguchi has been President of Uwajimaya, Inc., Seattle, Washington, a
food and merchandise distributor, retailer and exporter since 1965. He is
also President of Town and Country Travel, Inc., Seattle, Washington, and
President of North American Post Publishing, Seattle, Washington.
Mrs. Narodick has been Chairman and Chief Executive Officer of Edmark
Corporation, a Redmond, Washington based company which publishes print and
software educational materials, since October 1989.
Class III:
Mr. Bailey has been President of Trans Republic Energy, L.P., an oil and
gas investment company based in Midland, Texas, since January 1992. He is
also President of Mabelle, Inc., an oil and gas production company, also
based in Midland, Texas. Previously he was President of Alta Energy
Corporation, Midland, Texas, an oil and gas drilling and production company
operating primarily in the southwestern United States.
Mr. Creighton has been President of Weyerhaeuser Company, a forest products
company headquartered in Tacoma, Washington, since 1988.
Mr. Vititoe joined the Company in January 1994. From November 1990 to
November 1993, he served as President and Chief Executive Officer of
American Natural Resources Pipeline Co., a natural gas pipeline company.
From July 1989 to October 1990, he served as President of Ameritech
Enterprises Group, a diversified communications company. Prior to that he
served as President and Chief Executive Officer of Michigan Bell Telephone
Company from September 1983 to July 1989.
Certain directors and nominees are also directors of other companies that
make periodic filings with the Securities and Exchange Commission ("SEC")
as follows: Virginia Anderson - U. S. Bank of Washington, a subsidiary of
U. S. Bancorporation; Robert F. Bailey - Texas Commerce Bank-Midland and
Cabot Oil & Gas Corporation; John W. Creighton, Jr. - Weyerhaeuser Company,
Portland General Corporation, Quality Food Centers, Inc. and Mortgage In-
vestments Plus, Inc.; Robert L. Dryden - U. S. Bank of Washington, a
subsidiary of U. S. Bancorporation; Tomio Moriguchi - Seafirst Corporation,
a subsidiary of the Bank of America, N.T. & S.A.; Sally G. Narodick -
Edmark Corporation, Pacific Northwest Bank and Penwest; William P. Vititoe
- - Cabot Oil & Gas Corporation, Comerica Bank and Amerisure Michigan Mutual
Insurance Company.
There are no family relationships between the directors.
BOARD OF DIRECTORS AND COMMITTEES
The full Board of Directors met eight times during the year ended September
30, 1994. Each incumbent director attended more than 75 percent of the
aggregate number of meetings of the Board of Directors and committees on
which he or she served.
The Board has a standing Administrative Committee, Audit Committee,
Compensation and Benefits Committee, Executive Committee and Nominating
Committee. The Audit Committee and the Compensation and Benefits Committee
consist exclusively of non-employee directors.
The Administrative Committee is currently composed of Mrs. Narodick
(Chairman), Ms. Anderson, Mr. Dryden, Mr. Vititoe and the Company's Chief
Financial Officer, Mr. James P. Torgerson as a non-director committee
member. The committee is responsible for the administration of the defined
contribution and the defined benefit retirement plans of the Company. The
Committee met two times during fiscal 1994.
The Audit Committee is currently composed of Mr. Covey (Chairman), Ms.
Anderson, Mr. Bailey and Mr. Moriguchi. The committee is responsible for
oversight of the Company's and its subsidiaries' corporate accounting
practices, financial reporting process and internal accounting and other
financial control systems. The Committee is also responsible for the
review of management's recommendation of independent public accountants.
The Committee met three times during fiscal 1994.
The Compensation and Benefits Committee currently consists of Mr. Creighton
(Chairman), Mr. Bailey, Mr. Dryden and Mrs. Narodick. The Committee is
responsible for determining appropriate compensation and other benefit
measures for executive officers of the Company. The Committee met four
times during fiscal 1994.
The Executive Committee currently consists of Mr. Vititoe (Chairman), Mr.
Covey and Mr. Moriguchi. It is authorized to act in lieu of the full Board
on various matters between Board meetings. The Executive Committee met one
time during fiscal 1994.
The Nominating Committee currently consists of Mr. Bailey (Chairman), Mr.
Creighton and Mr. Vititoe. The Nominating Committee is responsible for the
identification and evaluation of candidates for election to the Board. The
Nominating Committee met one time during fiscal 1994. The Nominating
Committee will consider nominees to the Board of Directors recommended by
shareholders. Any shareholder recommendations for consideration for the
1996 Annual Meeting should be sent to Mr. Bailey, Chairman, Nominating
Committee, Washington Energy Company, P. O. Box 1869, Seattle, WA 98111,
so as to be received no later than September 15, 1995.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and its executive officers to file reports of ownership and
reports of changes in ownership of the Company's common stock with the SEC
and the New York Stock Exchange. Directors and executive officers are also
required by the SEC regulations to furnish the Company with copies of all
such reports that they file. Based solely on its review of the copies of
such forms received by it, the Company believes that all filing
requirements applicable to its Directors and executive officers were
complied with during the fiscal year ended September 30, 1994.
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
(as of December 14, 1994)
Name of Amount of Beneficial Percent
Beneficial Owner Ownership Of Class
________________ _____________________ ________
Directors
Virginia Anderson 1,041 -
Robert F. Bailey 4,132 -
Donald J. Covey 6,015 -
John W. Creighton, Jr. 2,224 -
Robert L. Dryden 2,966 -
Tomio Moriguchi 1,919 -
Sally G. Narodick 1,242 -
Named Executive Officers (*also serves as a director)
William P. Vititoe* 55,400 (1) -
James A. Thorpe 51,623 -
James P. Torgerson 19,409 (1) -
Robert J. Tomlinson 26,220 (1) -
James W. Gustafson 38,882 (1) -
Donald H. Gessel 26,564 (1) -
All directors and executive officers
as a group (15 persons) 275,007 (1) 1.2%
(1) Includes unexercised options to acquire shares of common stock
pursuant to the Company's Stock Option Plan as follows: Mr. Vititoe,
52,500 shares; Mr. Torgerson, 15,600 shares; Mr. Tomlinson, 15,600
shares; Mr. Gustafson, 13,000 shares; Mr. Gessel, 15,600 shares; and
all directors and executive officers as a group, 140,600 shares.
The Company is unaware of any person beneficially owning more than five
percent of its common stock.
With respect to each person who has options to acquire common stock, such
options are assumed to be outstanding for the purpose of computing percent-
age ownership of that person, but are assumed not to be outstanding for
purposes of computing percentage ownership for any other person.
COMPENSATION AND BENEFITS COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Benefits Committee of the Board of Directors is
composed of outside directors. The establishment and administration of the
Company's executive officer compensation and benefits program is the
Committee's responsibility. The following has been prepared by the
Committee composed of the following directors - John W. Creighton, Jr.
(Chairman), Robert F. Bailey, Robert L. Dryden and Sally G. Narodick.
Compensation Objectives
The Committee's compensation objectives are:
1) Total pay competitive with industry practice sufficient to
attract and retain key executives.
2) Balanced long- and short-term variable compensation elements
tied to corporate and department goals.
3) Performance-based incentive pay which supports the Company's
business goals.
Compensation Components
Executive officer compensation is composed of four elements:
Base Salary. The Company reviews comparative company data prepared by an
independent consultant to assure that base compensation levels and annual
adjustments are competitive with industry practices and supportive of
corporate goals. Base pay and subsequent adjustments are targeted at the
50th percentile values for the comparative group of companies. All exec-
utive officer pay adjustments are reviewed and approved by the Committee.
Committee approval of base pay and base pay adjustments depends on the
executive's performance, changes in duties and responsibilities and
market-related factors specific to the executive's responsibilities and
those of others in similar positions at comparative firms.
Annual Incentive Pay. All Vice Presidents and above qualify to receive
annual incentive pay. The purpose of such pay is to enhance the link
between executive officer direct pay and the achievement of corporate,
department and individual goals. The Committee approves all elements and
goals of the annual incentive pay program.
Awards vary by position and performance. The Chief Executive Officer
("CEO"), Senior Vice Presidents and Vice Presidents can earn annual
incentive awards up to 40 percent, 20 percent and 15 percent respectively.
The CEO can recommend discretionary award adjustments. Each award has a
different mixture of corporate, subsidiary and department performance
objectives which determine the percentage of potential pay.
Corporate performance is measured by earnings per share, cash flow after
dividends as a percent of capital spending, earnings of subsidiaries and
other financial measures which the Committee may use at its discretion.
Department performance goals are set annually by the CEO and the individual
participants, with each goal being weighted based on its relative
importance in overall goal achievement. Incentive pay is determined at the
end of each year by application of the weighting factors to specific goal
performance.
Performance Share Units. Performance share units are long-term
performance-based incentives for executive officers designed to reward
overall corporate performance as measured by average return on equity and
market-to-book performance ratios over a four-year period. Long-term
incentives in combination with short-term incentives provide a balanced
basis for executive compensation and achievement.
Each year a specific number of performance units are allocated to
designated company officers by the Committee for potential award. Receipt
of the units is contingent on the achievement of corporate performance
objectives at the conclusion of a four-year period. Each unit is the
equivalent of one share of the Company's common stock. The performance
objectives established by the Committee at the beginning of each four-year
period are based on the Company's average return on equity during the
performance period and market-to-book ratio at the end of the performance
period. If objectives for the period are achieved the participant will
have earned 100% of the performance shares assigned for that period.
The Committee may permit participants to earn more than 100% of the shares
assigned to them pursuant to plan provisions if actual Company results
exceed performance objectives. Conversely, the participants may earn less
than 100% of the performance units pursuant to plan provisions if the
Company fails to fully meet its performance objectives.
Incentive Stock Options. Under the Washington Energy Company Stock Option
Plan, incentive stock options, qualified under Internal Revenue Code
section 422, are intended to align management pay and thereby management
motivation with the long-term interest of the shareholders and the attain-
ment of corporate planning objectives. The Committee grants options at the
fair market value of the Company stock on the day of the grant, thereby
assuring executives receive a benefit only when the stock price appre-
ciates. The Committee retains the power to impose terms and conditions on
the options granted under the Plan. Options and derived stock appreciation
rights are for a period not to exceed 10 years. Under current Committee
policy, unless otherwise authorized by the Committee, at least fifty
percent of any payments made pursuant to the plan are to be paid in common
stock of the Company and the balance of the payments are to be paid in cash
or shares of common stock.
CEO Compensation
James A. Thorpe stepped down as CEO on February 25, 1994, and retired from
the Company on May 1, 1994. His 1994 compensation consisted primarily of
base salary. No incentive pay was awarded to Mr. Thorpe in 1994. A
performance unit award was paid to Mr. Thorpe of $50,923 for attainment of
long-term corporate performance objectives established by the Committee for
the period October 1, 1989, through September 30, 1993. A stock option for
12,500 shares, with an exercise price of $18.375, was granted to Mr. Thorpe
on December 15, 1993, which lapsed unexercised on July 31, 1994, following
Mr. Thorpe's retirement.
The Company, Washington Natural Gas Company and William P. Vititoe entered
into an employment agreement effective January 15, 1994. Mr. Vititoe was
appointed Chairman and Chief Executive Officer of the Company and
Washington Natural on February 25, 1994. Mr. Vititoe was appointed
President of the Company and Washington Natural, in addition to his current
role as Chairman and Chief Executive Officer, following the retirement of
Robert R. Golliver, President and Chief Operating Officer, on March 1,
1994.
Mr. Vititoe's employment agreement provides a base salary of $325,000. Mr.
Vititoe was also provided a one-time $100,000 bonus for his services for
the fiscal year ending September 30, 1994. His employment agreement also
provides for the granting of certain options to purchase stock of the
Company in accordance with the Washington Energy Stock Option Plan. Mr.
Vititoe was granted the right and option to purchase 40,000 shares of the
Company's Common Stock, par value $5 per share at an exercise price of
$18.25 per share. These shares were granted in accordance with a vesting
schedule which began on January 15, 1994, slated to conclude with all
shares vested as of January 15, 1997.
Additionally, Mr. Vititoe's agreement provided for a vacation and other
benefits. Perquisites provided for in the agreement included Company
provision of the use of an automobile to conduct Company business and a
reasonable number of initial club membership fees in furtherance of Company
business. A secured, interest-free housing loan for $1,000,000, the term
of which ends at the latest on January 14, 1998, was provided in the
agreement and is now in place. Mr. Vititoe was reimbursed for reasonable
moving expenses in relocating from Michigan to Washington.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code of 1986 contains potential
limitations on the deductibility of compensation in excess of $1 million
paid in any fiscal year to any of the Company's five highest-paid executive
officers. Compensation that is "performance-based" and meets certain other
requirements is not subject to these limitations. Based on proposed
regulations issued by the Internal Revenue Service, the Company believes it
has taken the necessary actions to ensure the deductibility of any
compensation that executive officers might realize in connection with
options granted under the Company's Stock Option Plan. Upon issuance of
final regulations, the Company intends to take actions to the extent
necessary and possible to maintain the deductibility of compensation under
the Company's Stock Option Plan. The Company does not expect payments to
any executive officer under the Company's annual incentive plan and
Performance Share Plan, when added to the base salary of the officer, to
exceed $1 million in any single fiscal year. Therefore, the Company does
not intend to take any actions to qualify the payments under the annual
incentive plan and the Performance Share Plan as "performance-based."
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in the
cumulative total shareholder return on the Company's Common Stock against the
cumulative total return to the S&P Composite - 500 Stock Index and Dow Jones
Utility Index for the period of five years commencing October 1, 1989 and
ended September 30, 1994.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG WASHINGTON ENERGY COMPANY, S&P 500 INDEX
AND THE DOW JONES UTILITIES INDEX
Washington
Energy Dow
Company's S&P 500 Jones
Measurement Period Common Stock Index Utility Index
- ------------------ ------------ ----------- -------------
FYE 09/30/89 $ 100 $ 100 $ 100
FYE 09/30/90 $ 108 $ 91 $ 98
FYE 09/30/91 $ 132 $ 119 $ 112
FYE 09/30/92 $ 136 $ 132 $ 124
FYE 09/30/93 $ 129 $ 149 $ 149
FYE 09/30/94 $ 109 $ 155 $ 115
EXECUTIVE COMPENSATION
Some of the executive officers and/or directors of the Company also serve in
the identical capacity or capacities with Washington Natural and receive
remuneration for such services from Washington Natural, with affiliates being
charged for time spent by the officers and directors on the affiliates'
business affairs.
The following table shows the total annual and long-term compensation paid by
the Company and its affiliates to the persons who, for the year ended
September 30, 1994, were the Chief Executive Officer and the other four most
highly compensated executive officers of the Company and its affiliates
("named executives").
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
___________________________________ _____________________________________
Other
Annual Securities Other
Compen- Underlying Incentive All Other
Name and Salary Bonus sation Options/SARs Payments Compensation
Principal Position Year ($)(5) ($)(1) ($)(6) (#)(2) ($)(3) ($)(4)
__________________ ____ ________ ________ ________ ____________ _________ ____________
William P. Vititoe 1994 $230,423 $100,000 $ 78,664 40,000 $ - $ 2,437
Chairman, Chief 1993 - - - - - -
Executive Officer 1992 - - - - - -
and President
James A. Thorpe 1994 185,038 - - 12,500 - 4,758
Chairman of the 1993 317,208 - - 12,500 50,923 6,866
Board and CEO 1992 308,055 - - 12,500 79,982 -
(Retired May 1, 1994)
James P. Torgerson 1994 137,346 23,200 - 2,600 - 4,119
Sr. Vice President- 1993 133,128 8,000 - 2,600 19,804 3,994
Finance, Planning 1992 129,285 8,000 - 2,600 29,467 -
and Development
and CFO
Robert J. Tomlinson 1994 136,098 8,000 - 2,600 - 3,960
Sr. Vice President- 1993 134,532 6,800 - 2,600 19,804 3,992
Legal and Admin- 1992 129,285 6,200 - 2,600 29,467 -
istration
James W. Gustafson 1994 137,346 7,200 - 2,600 - 4,119
Sr. Vice President- 1993 133,128 6,800 - 2,600 19,804 3,350
Operations, 1992 129,285 5,000 - 2,600 29,467 -
Washington Natural
Gas Company
Donald H. Gessel 1994 136,596 6,313 - 2,600 - 4,098
President- Washington 1993 133,128 8,900 - 2,600 19,804 3,817
Energy Services 1992 129,285 7,000 - 2,600 29,467 -
Company
(1) Incentive compensation is based on performance in the year shown
but determined and paid the following year. For example, bonuses
for fiscal 1994 are based on performance in fiscal 1994 and are
measured and paid in the first quarter of fiscal 1995.
(2) All options granted to executive officers were in tandem with
stock appreciation rights ("SARs").
(3) Amounts in the column relate to payouts under the Company's
Second Performance Share Plan further described in the Long-Term
Incentive Program section.
(4) The amounts in the "All Other Compensation" column are the
Company contribution to individual 401(k) accounts.
(5) Mr. Vititoe's salary reflects service from January 15, 1994. His
annual base salary is $325,000.
(6) Mr. Vititoe's "Other Annual Compensation" includes moving
expenses and temporary housing of $75,640. The balance of the
amount shown in this column is the car allowance.
1994 STOCK OPTION GRANTS
The following table sets forth the number of stock options which were
granted to each of the named executives during fiscal year 1994. In
addition, the table provides the present value of the stock options as of
the grant date.
Option/SAR Grants In Fiscal 1994
Number of Percents
Securities of Total
Underlying Options/SARs
Options/SARs Granted to Exercise Grant Date
Granted Employees in or Base Expiration Present Value
Name (#)(1) Fiscal Year Price ($/Sh) Date ($)(2)
__________________ ____________ ____________ ____________ __________ _____________
William P. Vititoe 40,000 26% $18.25 01/14/04 $70,400
James A. Thorpe 12,500 8% 18.375 12/14/03 24,000
James P. Torgerson 2,600 2% 18.375 12/14/03 4,992
Robert J. Tomlinson 2,600 2% 18.375 12/14/03 4,992
James W. Gustafson 2,600 2% 18.375 12/14/03 4,992
Donald H. Gessel 2,600 2% 18.375 12/14/03 4,992
(1) The exercise price of the options was the fair market value of
the Company's stock on the date of the grant. Each option was
granted in tandem with an SAR covering the same number of shares.
Any optionee exercising his stock options loses the corresponding
SARs for those shares, and vice versa. All vested options were
immediately exercisable. The options were vested upon grant
except for 30,000 of Mr. Vititoe's options. Of Mr. Vititoe's
unvested options, 10,000 shares will vest in January 1995, and
an additional 10,000 shares will vest on each of the next two
anniversaries.
(2) The values shown were calculated using the Black-Scholes option
pricing model. That model is based on arbitrary assumptions
regarding variables such as stock price volatility, future
dividend yield and interest rates. The actual value that an
executive may realize, if any, will depend on the amount by which
the stock price at the time of exercise exceeds the exercise
price, which is the fair market value of the stock at the time of
grant. There is no assurance that any executive will receive the
amounts estimated by the Black-Scholes model.
The following table sets forth information concerning each stock option (or
tandem SAR) which was exercised during the fiscal year 1994 by each of the
named executives and the fiscal year-end value of the unexercised stock
options (and tandem SARs), provided on an aggregated basis.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1994
AND FISCAL YEAR END OPTION/SAR VALUES
Number of Securities Underlying
Unexercised Options/SARs
Fiscal Year End Value of Unexercised
____________________________________ In-the -Money
Shares Options/SARs
Acquired on Value at Fiscal
Exercise Realized Exercisable Unexercisable Year End(1)
Name (#) ($) (#) (#) ($)
_________________ ___________ ________ ___________ _____________ ____________________
William P. Vititoe - - 10,000 30,000 -
James A. Thorpe - - - - -
James P. Torgerson - - 13,000 - -
Robert J. Tomlinson - - 13,000 - -
James W. Gustafson - - 13,000 - -
Donald H. Gessel - - 13,000 - -
(1) The exercise prices of all unexercised options at year end were
higher than the closing price of the Company's common stock at
fiscal year end.
LONG-TERM INCENTIVE PLAN - AWARDS
IN FISCAL 1994
Estimated Future Payouts
Under Non-Stock Price-Based Plans (2)(3)
______________________________________________
No. of
Units Period Until
Name (#)(1) Payout Threshold (#) Target (#) Maximum (#)
________________ _________ ____________ ___________ ________ ___________
William P. Vititoe - - - - -
James P. Thorpe 3,800 4 years 608 3,800 6,650
James P. Torgerson 1,500 4 years 240 1,500 2,625
Robert J. Tomlinson 1,500 4 years 240 1,500 2,625
James W. Gustafson 1,500 4 years 240 1,500 2,625
Donald H. Gessel 1,500 4 years 240 1,500 2,625
(1) This represents the number of performance units
assigned under the Second Washington Energy Company
Performance Share Plan. Dependent upon satisfaction of
future performance objectives of the Company, each unit
can represent the right to receive up to 1 3/4 shares
of common stock.
(2) This represents the number of shares of common stock
that may be awarded with respect to the units granted
under the plan. The actual number of shares awarded
will depend on (a) the number of contingent performance
units assigned, (b) the Company's financial performance
for the four-year period following the assignment
compared with pre-established goals, and (c) the market
value of the Company's common stock at the time of any
award payment. Under current Committee policy, unless
otherwise authorized by the Committee, at least fifty
percent of any payments made pursuant to the plan must
be paid in common stock of the Company and the balance
of the payments paid in cash or shares of common stock.
The Compensation and Benefits Committee determines what
portion of the payout is to be satisfied in shares of
common stock and what portion is to be satisfied in
cash.
(3) Under the plan, named executives will, after a change
in control, generally receive at least one share of
common stock per unit, or more, depending on the
Company's performance through the date of the change in
control.
FUTURE BENEFITS - PENSION PLAN
Washington Natural maintains a qualified defined benefit retirement
plan (the "Retirement Plan") that covers the named executive
officers and all other employees who satisfy certain eligibility
requirements relating to age, length of service and hours worked.
In addition, the Company has entered into individual agreements
with certain of its executive officers, including all of its named
executive officers, that provide these officers with certain
retirement, death and disability benefits supplementing the
benefits available to them under the Retirement Plan.
The following table sets forth the aggregate annual pension
benefits payable upon retirement at age 65 to the named executive
officers, based on specified years of service and levels of
remuneration, under the Retirement Plan and the individual
agreements for supplemental retirement benefits.
RETIREMENT PLAN AND
SUPPLEMENTAL RETIREMENT BENEFITS TABLE
Years of Service
________________________________________________________________________________
Annual
Compensation 5 10 15 20 25
____________ _________ _________ _________ _________ __________
$100,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000
125,000 72,500 72,500 72,500 72,500 72,500
150,000 90,000 90,000 90,000 90,000 90,000
200,000 125,000 125,000 125,000 125,000 125,000
300,000 195,000 195,000 195,000 195,000 195,000
325,000 212,500 212,500 212,500 212,500 212,500
350,000 230,000 230,000 230,000 230,000 230,000
Remuneration covered by the Retirement Plan and the individual
agreements for supplemental retirement benefits is based on the
officer's average salary for the three consecutive years where the
officer's salary was the highest during the last eight years
preceding the officer's retirement. The pension benefits shown in
the table are based on a single-life annuity (with ten-year term
certain) and have been reduced by an offset for estimated Social
Security benefits. In certain cases, a reduced level of benefits
may be available to an officer's surviving spouse following the
death of the officer. Under the individual agreements for
supplemental retirement benefits, pension benefits are available to
the named executive officers without regard to years of service
with the Company. Based on compensation through September 30,
1994, the remuneration of the named executive officers upon which
retirement benefits will be based is as follows: Mr. Thorpe,
$314,157; Mr. Vititoe, $325,000; Mr. Tomlinson, $133,305: Mr.
Torgerson, $133,253; Mr. Gustafson, $133,253; and Mr. Gessel,
$133,003.
EMPLOYMENT AGREEMENTS
The Company has conditional employment agreements with three of
its key executive officers: Messrs. Vititoe, Tomlinson and
Torgerson. The employment agreements offer additional security
to these key management personnel to better enable them to
function effectively without distraction in the event that
uncertainties as to the future control of the Company should
arise. These agreements provide certain benefits should
employment be terminated other than for cause, or by death,
disability or normal retirement within three years subsequent to
a change in control of the Company. Change in control of the
Company includes the acquisition by any person of: (1) power to
exercise a controlling influence over management or policies;
(2) ownership or power to vote 25% or more of the outstanding
voting securities of the Company; or (3) change in the majority
of the Board of Directors during the six-year period subsequent
to the acquisition by any person of ownership or power to vote
10% or more of the outstanding voting securities of the Company
without the approval of the majority of the Board of Directors in
office prior to such acquisition. The benefits to be provided by
the Company include: (1) a cash payment equal to three times
the most recent year's annual compensation, or a cash payment
equal to annual compensation until normal retirement date if less
than three years; (2) lump sum payment for amounts calculated
under dissolution of the performance share plan;
(3) maintenance of participation in all current employee benefit
plans or provision for substantially similar benefits for a
three-year period or until normal retirement date if sooner;
(4) a cash payment at retirement date equal to the additional
retirement compensation to which the executive would have been
entitled had the executive continued in the employ of the Company
for an additional three years or until normal retirement date if
sooner; (5) a cash payment equal to the difference between the
exercise prices of all stock options and the higher of: (a) the
average of the high and low sales prices on the date of termina-
tion, or (b) the highest price actually paid in connection with
the change in control of the Company; and (6) a cash payment
equal to the excise taxes imposed by the Internal Revenue Code
Section 4999, if any, on all payments enumerated in this sen-
tence, plus the tax expense to the executive resulting from this
additional payment. If the executive voluntarily terminates
without good reason, as defined in the agreement, no additional
or special benefits accrue to the executive. Since the condi-
tions specified in the contracts have not occurred, no amounts
were charged to expense by the Company under these agreements in
fiscal 1994.
COMPENSATION OF DIRECTORS
Remuneration of Directors: Each Director who is not an officer of
the Company and its subsidiaries is paid a retainer of $8,000 per
year and an additional $1,500 per year for serving on the Executive
Committee or as Chairman of another committee of the Board. In
addition, each such Director is paid a fee of $600 for attending a
regular, special or annual meeting of the Board or for a committee
meeting not held on the same day as a Board meeting. None of such
directors is eligible to participate in any of the compensation
plans described above. The Company also has a Directors Stock
Bonus Plan which was approved by the stockholders in February 1991.
Under this Plan, an outside Director is awarded 200 shares of
Company common stock in January of each year for service on the
Board of Directors for the prior fiscal year. During fiscal 1994,
1,400 shares of common stock were awarded under the Plan. The
Company pays no additional remuneration to employees of the Company
who are directors.
INDEPENDENT ACCOUNTANTS AND AUDITORS
The firm of Arthur Andersen LLP has audited the accounts of the
Company and Washington Natural for a number of years and has been
selected to audit the accounts of the Company for the fiscal year
ending September 30, 1995. Representatives of Arthur Andersen LLP
are expected to be present at the Annual Meeting, with the
opportunity to make a statement if they desire to do so, and will
be available to respond to questions submitted in writing to the
Secretary of the Company in advance of the meeting.
DATE FOR RECEIPT OF 1996 STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1996 Annual
Meeting must be received by the Company no later than September
15, 1995 to be considered for inclusion in the proxy statement
and proxy for the 1996 meeting.
OTHER MATTERS
The management knows of no other matters to be brought before the
meeting. However, if any other matters come before the meeting,
it is the intention of the persons named in the accompanying
proxy form to vote in accordance with their best judgment on such
matters under the discretionary power granted by said proxy.
WASHINGTON ENERGY COMPANY
(TIMOTHY J. HOGAN, Corporate Secretary)
January 9, 1995
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Map to Location of the Annual Meeting
of
Washington Energy Company
February 24, 1995
(front)
WASHINGTON ENERGY COMPANY PROXY FOR 1995 ANNUAL MEETING
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT
The undersigned hereby appoints William P. Vititoe, Tomio Moriguchi and Timothy
J. Hogan, and each or any of them, proxy for the undersigned, with power of
substitution, to represent and vote all the shares of common stock held of
record by the undersigned as of the close of business on December 22, 1994,
at the Annual Meeting of Stockholders of Washington Energy Company to be held
on Friday, February 24, 1995, or any adjournment thereof, upon all matters
properly coming before the meeting.
1. ELECTION OF TWO DIRECTORS
[ ] FOR all nominees listed below [ ] AUTHORITY WITHHELD
(except as marked to the contrary to vote for all nominees
below). listed.
Class II: Donald J. Covey and Robert L. Dryden
(To withhold authority to vote for any individual nominee, strike out
that nominee's name above. To cumulate votes for any nominee(s), write
your instructions as to the number of votes cast for each in the space
provided below. The total must not exceed two times the number of
shares you hold.)
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
Please Do Not Fold (Please Date and Sign on Reverse Side)
(back)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ELECTION OF THE TWO NOMINEES FOR DIRECTOR.
IMPORTANT: THIS IS YOUR PROXY
Please mark, sign and return this Proxy
promptly in the enclosed envelope.
I hereby revoke any proxy to vote said shares heretofore given.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREIN.
When signing as attorney, corporate officer, etc., give full title as such.
Date____________________________, 1995
______________________________________
Signature
______________________________________
Signature
(See Over)