PUGET ENERGY, INC. FORM OF RESTRICTED STOCK AWARD AGREEMENT

 

 

 

 

 

TO: __________________

 

We are pleased to inform you that you have been awarded by Puget Energy, Inc., a Washington corporation (the "Company" or "Puget Energy"), a performance-based 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 under the Company's 2005 Long-Term Incentive Plan (the "Plan") and, 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 of Puget Energy Common Stock: __________

 

2.	Grant Date: ____________

 

3.	Fair Market Value Per Share (for tax purposes): $___________

 

4.

Vesting

 

The shares of common stock subject to your award (the "Shares") are subject to vesting as described in Exhibit A to this Agreement.  

 

Shares that have vested are referred to herein as "Vested Shares." Shares that have not vested and with respect to which there has not been a forfeiture 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). Collectively, the Unvested Shares and the Vested Shares are referred to herein as the "Shares." All Vested Shares, including Unvested Shares that are accelerated in accordance with Section 5, will be paid in shares of Puget Energy common stock.

 

5.	Change of Control

 

Upon a Change of Control of the Company, any Unvested Shares will accelerate in vesting and no longer be subject to forfeiture.

 

6.	Termination of Employment

 

Unless otherwise determined by the Committee in its sole discretion, if you terminate employment, all Unvested Shares will be forfeited by you to the Company effective as of the date of termination of your employment with the Company for any reason, including, without limitation, termination by the Company for Cause, voluntary resignation by you or the occurrence of your death or Disability.

 

7.	Securities Law Compliance

 

Notwithstanding any other provision of this 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.

 

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 will 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 amount paid for such Shares, if any, 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 as described in Section 6 or if the vesting requirements applicable to the Shares are not satisfied. 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.

 

 

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 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 B. You further agree that you will execute and deliver to the Company with this Agreement a copy of the 83(b) Election attached hereto as Exhibit C if you choose to make such an election.

 

10.	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 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.

 

11.	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 as a means to pay any applicable tax withholding obligations due hereunder or you may transfer to the Company shares of common stock of the Company you already own having a value equal to the tax withholding obligations. The value of any Shares withheld may not exceed the employer's minimum required tax withholding rate, and the value of shares transferred to the Company may not exceed that rate to the extent you have owned the transferred shares for less than six months, if such limitations are necessary to avoid adverse accounting consequences to the Company.

 

12.	Issuance of Shares

 

The Company will issue the Shares by registering the Shares in book entry form with the Company's transfer agent in your name and the applicable restrictions will be noted in the records of the Company's transfer agent and in the book entry system. No certificate(s) representing all or a portion of the Shares will be issued until the Shares become Vested Shares.

 

13.	General Provisions

 

13.1

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 13.1 to all other parties to this Agreement.

 

13.2

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.

 

13.3	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.

 

13.4	Entire Contract

 

This Agreement and the Plan 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.

 

13.5	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.

 

13.6	Shareholder of Record

 

You will be recorded as a shareholder of the Company with respect to the Shares and will be entitled to receive any cash dividends paid with respect to them, regardless of whether such Shares have become Vested Shares. All stock dividends paid with respect to Unvested Shares will be added to the Restricted Stock Award and will be subject to all the terms and conditions of this Agreement and the Plan.

 

You may exercise all voting rights with respect to the Unvested Shares as if you were the owner of such Shares.

 

13.7	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.

 

13.8	Governing Law

 

This Agreement will be governed by and construed in accordance with the laws of the State of Washington.

 

IN WITNESS WHEREOF, the parties have executed this Agreement dated as of __________________, 20___.

 

 

By: ___________________________________________________

 

Title: __________________________________________________

 

Printed Name: ___________________________________________

 

 

 

Subject to the terms of the attached Performance-Based Restricted Stock Award Agreement, shares subject to the performance-based restricted stock award (the "Shares") vest upon satisfaction of performance goals as of the end of each of 2006, 2007 and 2008 according to the terms below.

 

 

A portion of the Shares will vest at the end of each year as described below if Puget Sound Energy, Inc. achieves SQI results that average at least 8 out of 11. For 2006, achievement of SQI results will be based only on year 2006 results; for 2007, achievement of SQI results will be based on the average results for years 2006 and 2007; and for 2008, achievement of SQI results will be based on the average results for years 2006, 2007 and 2008.

Calendar Year	Percentage of Total Shares Granted That  Are Vested and No Longer Subject to Forfeiture Upon Achievement of SQI Performance Goals
2006	15%
2007	25%
2008	60%

 

To the extent that the performance goals stated above are not satisfied by the end of a given year (with the result that no Shares have been earned for that particular year), then the applicable percentage of Shares indicated above will be forfeited to the Company, effective as of the last day of the applicable year. The Compensation and Leadership Development Committee of the Board of Directors has final authority to determine whether performance goals have been met and whether any Shares have vested for a particular year.

 

 

 

 

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 under the terms of the Company's 2005 Long-Term Incentive Plan (the "Plan"), hereby states as follows:

 

1. The undersigned acknowledges receipt of a copy of the Performance-Based Restricted Stock Award Agreement and Plan relating to the offering of such shares. The undersigned has carefully reviewed the Plan and the Performance-Based 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: _______________	_____________________________________ Recipient
	_____________________________________ Print Name

 

 

 

 

 

 

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: __________________________________________________________

NAME OF SPOUSE: _____________________________________________________________

ADDRESS: ____________________________________________________________________

____________________________________________________________

 

IDENTIFICATION NO. OF TAXPAYER: ____________________

IDENTIFICATION NO. OF SPOUSE: _______________________

TAXABLE YEAR: ___________

 

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 over three years from the date of transfer (or earlier if the taxpayer terminates employment at the Company) if certain performance measures are not satisfied.

 

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: $0.00

 

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.

 

 

Dated: _______________	___________________________________ Taxpayer
Dated: _______________	___________________________________ Spouse of Taxpayer

 

 

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 of grant.

 

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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