Exhibit 10.3
 
PUGET SOUND ENERGY, INC.
 
PUGET ENERGY, INC.
 
FIRST AMENDMENT TO AGREEMENT
 
FIRST AMENDMENT TO AGREEMENT (this "Amendment"), effective as of May 12, 2005,
amends the agreement (the "Agreement"), dated as of January 1, 2002, between
Puget Sound Energy, Inc. ("PSE") and Puget Energy, Inc. ("Puget Energy"), both
Washington corporations (PSE and Puget Energy, collectively, the "Company"), and
Stephen P. Reynolds ("Executive").
 
WHEREAS, since January 1, 2002, Executive has been employed by the Company as
its President and Chief Executive Officer pursuant to the Agreement; and
 
WHEREAS, the Agreement provides, among other things, for certain equity-based
awards to Executive; and
 
WHEREAS, the Company desires to be assured of Executive's experience, skills,
knowledge and background for the benefit of the Company, and the efficient
achievement of the long-term strategy of the Company; and
 
WHEREAS, the Company therefore wishes to (i) grant to Executive a
performance-based restricted stock award that will vest on the date of the 2008
Annual Shareholders Meeting contingent on the achievement of specified
performance goals and Executive's continued employment with the Company as Chief
Executive Officer until at least that date; (ii) extend the post-termination
exercise period of Executive's outstanding stock options contingent on
Executive's continued employment with the Company as Chief Executive Officer
until at least the date of the 2008 Annual Shareholders Meeting; (iii)
accelerate the vesting of the last vested installment of certain of Executive's
outstanding restricted stock awards to the date of the 2008 Annual Shareholders
Meeting; (iv) accelerate the vesting of the last vested installment of certain
of Executive's outstanding restricted stock unit awards to the date of the 2008
Annual Shareholders Meeting; and (v) accelerate the vesting of the last vested
installment of Executive's performance-based retirement stock equivalent account
to the date of the 2008 Annual Shareholders Meeting;
 
NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein, the Company and Executive agree as follows:
 
1.  AWARD OF PERFORMANCE-BASED RESTRICTED STOCK. The Company will grant to
Executive a performance-based restricted stock award for 40,000 shares of Puget
Energy common stock. The award granted under this Section 1 will vest in one
installment on the date of the 2008 Annual Shareholders Meeting, subject to the
certification by the Company's Compensation and Leadership Development Committee
on or prior to the date of the 2008 Annual Shareholders Meeting that the
performance goals specified in the award agreement, in the form attached to this
Amendment as Exhibit A, have been satisfied and Executive's continued employment
with the Company as Chief Executive Officer until at least that date.
 
2. EXTENSION OF STOCK OPTION POST-TERMINATION EXERCISE PERIOD. The Company will
amend Executive's outstanding stock options granted January 7, 2002 (the "Stock
Options") to extend the post-termination exercise period of the Stock Options to
January 7, 2012, provided Executive remains employed by the Company as Chief
Executive Officer at least until the date of the 2008 Annual Shareholders
Meeting.
 
3. ACCELERATION OF VESTING OF RESTRICTED STOCK AWARD. The Company will amend
Executive's outstanding restricted stock award granted January 8, 2004 (the
"Restricted Stock Award") to accelerate the vesting of the installment of the
Restricted Stock Award that would have vested on January 8, 2009, so that such
installment will vest on the date of the 2008 Annual Shareholders Meeting,
provided Executive remains employed by the Company as Chief Executive Officer at
least until that date.
 
4. ACCELERATION OF VESTING OF RESTRICTED STOCK UNIT AWARD. The Company will
amend Executive's outstanding restricted stock unit award granted January 8,
2004 (the "Restricted Stock Unit Award") to accelerate the vesting of the
installment of the Restricted Stock Unit Award that would have vested on January
8, 2009, so that such installment will vest on the date of the 2008 Annual
Shareholders Meeting, provided Executive remains employed by the Company as
Chief Executive Officer at least until that date.
 
5. ACCELERATION OF VESTING OF PERFORMANCE-BASED RETIREMENT STOCK EQUIVALENT
ACCOUNT. Section 4(d) of the Agreement with respect to Executive's
Performance-Based Retirement Equivalent Stock Account is hereby amended to
accelerate the vesting of the installment of such account that would have vested
on January 1, 2009, so that such installment will vest on the date of the 2008
Annual Shareholders Meeting, provided Executive remains employed by the Company
as Chief Executive Officer at least until that date.
 
6. EFFECTIVENESS. Except as expressly modified by this Amendment, all provisions
of the Agreement, the Stock Options, the Restricted Stock Award and the
Restricted Stock Unit Award shall continue in full force and effect. This
Amendment shall be effective as of the date first set forth above.
 
7. CONFLICTS. In the event of any conflict between the terms of this Amendment
and the provisions of the Agreement, the Stock Options, the Restricted Stock
Award, the Restricted Stock Unit Award or any other plan, program, policy,
contract, arrangement or agreement between Executive and the Company, the terms
of this Amendment will be controlling.
 
8. COUNTERPARTS. This Amendment may be executed in counterparts, each of which
shall be deemed to be an original.
 
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
 

   
PUGET SOUND ENERGY, INC.
 
 
By: /s/ Phyllis J. Campbell
 
Phyllis J. Campbell
 
Title: Chair, Compensation and Leadership Development Committee, Puget Sound
Energy, Inc. Board of Directors

   
PUGET ENERGY, INC.
 
 
By: /s/ Phyllis J. Campbell
 
Phyllis J. Campbell
 
Title: Chair, Compensation and Leadership Development Committee, Puget Energy,
Inc. Board of Directors
 

   
EXECUTIVE
 
/s/ Stephen P. Reynolds
 
Stephen P. Reynolds