Exhibit 10.52
 
CHANGE OF CONTROL AGREEMENT
 

AGREEMENT by and between Puget Sound Energy, Inc., a Washington corporation (the
"Company"), and ERIC M. MARKELL (the "Executive"), dated as of the 7th day of
May 2003.

The Board of Directors of the Company (the "Board") has determined that it is in
the best interests of the Company and its shareholders to ensure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined in
Section 2) of the Company. The Board believes that it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied, which are competitive with those of other
corporations and which align the Executive's interests with those of the
Company's shareholders. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
 
1.
Certain Definitions

(a) "Accrued Obligations" is defined in Section 6(a)(i).

(b) "Affiliated Company" means any company controlled by, controlling or under
common control with the Company.

(c) "Annual Base Salary" means an annual base salary at least equal to 12 times
the highest monthly base salary paid or payable to the Executive by the Company
and its affiliated companies in respect to the 12-month period immediately
preceding the month in which the Effective Date occurs.

(d) "Annual Bonus" is defined in Section 4(b)(ii).

(e) "Business Combination" means (i) a reorganization, exchange of securities,
merger or consolidation of the Company or (ii) the sale or other disposition of
all or substantially all the assets of the Company.

(f) "Change of Control" is defined in Section 2.

(g) The "Change of Control Period" means the period commencing on the date
hereof and ending on the third anniversary of the date hereof; provided,
however, that commencing on the first anniversary of the date hereof and on each
successive anniversary (each a “Renewal Date”), the Change of Control Period
shall be automatically extended so as to terminate three years from such Renewal
Date, unless at least 60 days prior to the Renewal Date the Company gives notice
to the Executive that the Change of Control Period shall not be so extended.

(h) "Code" means the Internal Revenue Code of 1986, as amended.

(i) "Date of Termination" is defined in Section 5(f).

(j) "Disability" is defined in Section 5(a).

(k) "Disability Effective Date" is defined in Section 5(a).

(l) "Effective Date" means the first date during the Change of Control Period on
which a Change of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect the Change of Control or (ii) otherwise
arose in connection with or anticipation of the Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment.

(m) "Employment Period" is defined in Section 3.

(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(o) "Good Reason" is defined in Section 5(d).
 
(p) "Incentive Plan" means the Company's 1995 Long-Term Incentive Compensation
Plan or any successor plan.

(q) "Incumbent Director" means a member of the Board who has been either
(i) nominated by a majority of the directors of the Company then in office or
(ii) appointed by directors so nominated, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board.

(r) "Notice of Termination" is defined in Section 5(e).

(s) "Other Benefits" is defined in Section 6(a)(iv).

(t) "Outstanding Company Common Stock" means the shares of Common Stock of the
Company ("Common Stock") outstanding at the time of the determination.

(u) "Outstanding Company Voting Securities" means the combined voting power of
the outstanding voting securities of the Company entitled to vote generally in
the election of directors at the time of the determination.

(v) "Person" means any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d) of the Exchange Act).

(w) "Retirement Plan" means the Company's qualified pension plan or any
successor plan thereto.

(x) "SERP" means the Company's Supplemental Executive Retirement Plan or any
other supplemental and/or excess retirement plan or agreement of the Company and
its affiliated companies providing benefits for the Executive.

(y) "Welfare Benefit Continuation" is defined in Section 6(a)(ii).
 
2.
Change of Control

For the purpose of this Agreement, a "Change of Control" means:

(a) The acquisition by any Person of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of (i) 20% or more of either
(A) the Outstanding Company Common Stock or (B) the Outstanding Company Voting
Securities; provided, however, that the following acquisitions of beneficial
ownership shall not constitute a Change of Control: (x) any acquisition by the
Company, (y) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company, or (z) any acquisition by any corporation pursuant to a Business
Combination, if, following such Business Combination, the conditions described
in clauses (i), (ii) and (iii) of subsection (c) of this Section 2 are
satisfied; or

(b) A "Board Change" which, for purposes of this Agreement, shall have occurred
if a majority of the seats (other than vacant seats) on the Board are occupied
by individuals who were neither (i) nominated by a majority of the Incumbent
Directors nor (ii) appointed by directors so nominated; or

(c) Approval by applicable regulatory agencies of a Business Combination unless
immediately following such Business Combination, (i) more than 60% of the then
outstanding shares of common stock of the corporation resulting from or
effecting such Business Combination and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, respectively, immediately prior to such Business Combination in
substantially the same proportion as their ownership, immediately prior to such
Business Combination, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding the
Company, any employee benefit plan (or related trust) of the Company or the
corporation resulting from or effecting such Business Combination and any Person
beneficially owning, immediately prior to such Business Combination, directly or
indirectly, 20% or more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from or effecting such Business Combination
or the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors, and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from or effecting such Business Combination were Incumbent
Directors at the time of the execution of the initial agreement or action of the
Board providing for such Business Combination.
 
3.
Employment Period

The Company hereby agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the Company, in accordance
with the terms and provisions of this Agreement, for the period commencing on
the Effective Date and ending on the second anniversary of such date (the
"Employment Period"), in the executive capacity of Senior Vice President Energy
Resources and Planning, or a substantially comparable position of the Company,
responsible for, among other things, determining near term and long term energy
resource needs and acquiring resources to meet those needs; planning,
organizing, directing and controlling the long term operations, maintenance,
protection and improvement of power production facilities and acquisition,
storage and transportation of natural gas supply; supply contract evaluation,
negotiation and performance monitoring; and, subject to the general supervision
of the Board as required by the Washington Business Corporation Act, such other
duties and responsibilities as are not inconsistent with the express terms of
this Agreement. The Company agrees that it will not take any action, or make any
demands on the Executive, that may be deemed to arbitrarily, unreasonably or
unnecessarily interfere with the performance of the services to be rendered by
the Executive hereunder.
 
4.
Terms of Employment

(a) Position and Duties.
 
(i) During the Employment Period, (A) the Executive's position (including
status, offices, titles and reporting requirements), authority, duties and
responsibilities shall be in accordance with Section 3 and (B) the Executive's
services shall be performed within the Seattle/Bellevue metropolitan area,
except for required travel in the Company's business to the extent consistent
with the Executive's duties in Section 3.
 
(ii) During the Employment Period, and excluding any periods of paid time off to
which the Executive is entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's reasonable best
efforts to perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable boards or committees,
(B) deliver lectures, fulfill speaking engagements or teach at educational
institutions, or (C) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.

(b) Compensation.
 
(i) Base Salary. During the Employment Period, the Executive shall receive an
annual base salary ("Annual Base Salary"), which shall be paid in equal
installments on a monthly basis, at least equal to 12 times the highest monthly
base salary paid or payable to the Executive by the Company and its affiliated
companies in respect of the 12-month period immediately preceding the month in
which the Effective Date occurs. For purposes of this Agreement, Annual Base
Salary shall not include any payments by the Company on the Executive's behalf
pursuant to any incentive, savings or retirement plans, any welfare benefit
plans or any fringe benefit plans, in each case, of the Company or any
affiliated company, of the type identified in paragraphs (iii) through (vii) of
this Section 4(b), or any reimbursement of expenses by the Company or any
affiliated company in accordance with paragraph (v) of this Section 4(b). During
the Employment Period, the Annual Base Salary shall be reviewed at least
annually and shall be increased at any time and from time to time as shall be
substantially consistent with increases in base salary generally awarded in the
ordinary course of business to other peer executives of the Company and its
affiliated companies. Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced after any such increase, and the term
Annual Base Salary as utilized in this Agreement shall refer to Annual Base
Salary as so increased.
 
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be
eligible to receive, for each fiscal year ending during the Employment Period, a
target annual bonus (the “Annual Bonus”) in cash at least equal to the greater
of (A) the Executive’s target annual bonus in effect on the Effective Date and
(B) the average (annualized for any fiscal year in which the Executive has been
employed by the Company for less than 12 full months) target bonus for which the
Executive was eligible in the three fiscal years immediately preceding the
fiscal year in which the Effective Date occurs. Each such Annual Bonus earned
shall be paid no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is earned unless the
Executive shall elect to defer the receipt of such Annual Bonus.
 
(iii) Incentive, Savings and Retirement Plans.
 
(A) During the Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies (including, without limitation, the plans in effect on the date of
this Agreement or any successor plans), but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities, in each case, that
are less favorable, in the aggregate, than the most favorable of those provided
by the Company and its affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other executives of the Company and its affiliated companies.
 
(B) Upon the Effective Date the Executive shall become vested under the
Company's Supplemental Executive Retirement Plan ("SERP") so that the Executive
shall be entitled to receive a Retirement Benefit (as defined in the SERP) at
age 62 or, at the election of the Executive, at any age between 55 and 62 a
Retirement Benefit reduced one-third percent (1/3%) for each month that benefits
commence prior to the beginning of the month coincident with or next following
the date the Executive would attain age 62.
 
(iv) Equity Incentive Plans.
 
(A) Any outstanding stock options or stock appreciation rights issued to the
Executive under the Company's existing plans or any successor plan shall become
fully vested and exercisable on the Effective Date. All restrictions on shares
of restricted stock issued to the Executive shall lapse.
 
(B) with respect to all performance awards granted to the Executive pursuant to
the Incentive Plan or any successor plan that are outstanding immediately prior
to the Effective Date, the Company shall issue to the Executive within 30 days
after the Effective Date:
 
    (i) if the Change of Control is not being accounted for as a pooling of
interests, cash equal to the higher of (1) the average of the last sale prices
of the Company's (or its successor's) Common Stock on the New York Stock
Exchange in each of the twenty business days preceding the Effective Date or
(2) the highest price per share actually paid for any of the Company Common
Stock in connection with the Change in Control, multiplied by an aggregate
number of shares of the Company's Common Stock (or, if the event that triggered
the Effective Date is a Business Combination, the equivalent number of shares of
the then outstanding common stock of the corporation resulting from or effecting
such Business Combination into which such shares of Common Stock have been
converted) equal to the greater of (x) the total number of the shares payable at
the target award level upon full vesting of each such performance award and (y)
such higher number of shares payable upon full vesting of each such award if the
Company achieved for each four-year award cycle the percentile ranking against
the comparable universe of EEI companies which the Company had achieved for the
applicable cycle during the period commencing upon the starting year of such
cycle and ending with the fiscal quarter immediately preceding the Effective
Date; or
 
    (ii) if the Change of Control is being accounted for as a pooling of
interests, an aggregate number of shares of the Company's Common Stock (or, if
the event that triggered the Effective Date is a Business Combination, the
equivalent number of shares of the then outstanding common stock of the
corporation resulting from or effecting such Business Combination into which
such shares of Common Stock have been converted) equal to the greater of (x) the
total number of the shares payable at the target award level upon full vesting
of each such performance award and (y) such higher number of shares payable upon
full vesting of each such award if the Company achieved for each four-year award
cycle the percentile ranking against the comparable universe of EEI companies
which the Company had achieved for the applicable cycle during the period
commencing upon the starting year of such cycle and ending with the fiscal
quarter immediately preceding the Effective Date; and
 
    (iii) cash equal to the amount of the dividend equivalents associated with
the number of shares determined under subparagraph (i) or (ii) above, in
accordance with the Incentive Plan.
 
(v) Welfare Benefit Plans. During the Employment Period, the Executive and/or
the Executive's family, as the case may be, shall be eligible for participation
in and shall receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company and its affiliated companies
(including, without limitation, medical, dental, disability, salary continuance,
life, group life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the
Company and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits that are
less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 90-day period immediately preceding the Effective Date or, if more favorable
to the Executive, those provided generally at any time after the Effective Date
to other peer executives of the Company and its affiliated companies.
 
(vi) Expenses. During the Employment Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable business expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
 
(vii) Fringe Benefits. During the Employment Period, the Executive shall be
entitled to fringe benefits in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
 
(viii) Office and Support Staff. During the Employment Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to personal secretarial and other assistance, at least
equal to the most favorable of the foregoing provided to the Executive by the
Company and its affiliated companies at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
 
      (ix) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as in effect
for the Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
 
5.
Termination of Employment

(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12(b) of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Executive (the "Disability
Effective Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean the absence of
the Executive from the Executive's duties with the Company on a full-time basis
for 120 consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative (such agreement as to acceptability not to be
unreasonably withheld).

(b) Cause. The Company may terminate the Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean
(i) 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 (ii) the
willful engaging by Employee in gross misconduct materially and demonstrably
injurious to the Company, as determined by the Board of Directors after notice
to Employee and an opportunity for a hearing. 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.

(c) Without Cause. The Company may terminate the Executive's employment at any
time during the Employment Period without Cause.

      (d) Good Reason. The Executive's employment may be terminated during the
Employment Period by the Executive for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean
 
     (i) the assignment to the Executive of any duties inconsistent with the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties or responsibility as contemplated by Sections 3
and 4(a) or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice thereof given
by the Executive;
 
    (ii) any failure by the Company to comply with any of the provisions of
Section 4(b), other than an isolated, insubstantial and inadvertent failure not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
 
    (iii) the Company's requiring to be based at any location other than that
described in Section 4(a)(i)(B);
 
    (iv) any purported termination by the Company of the Executive's employment
otherwise than as expressly permitted by this Agreement; or
 
    (v) any failure by the Company to comply with and satisfy Section 11(c),
provided that such successor has received at least ten days' prior written
notice from the Company or the Executive of the requirements of Section 11(c).

For purposes of this Section 5(c), any good faith determination of Good Reason
made by the Executive shall be conclusive.
 
(e) Notice of Termination. Any termination by the Company for Cause or without
Cause or by the Employee for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b).
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than 15 days after the giving
of such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Company
hereunder or preclude the Executive or the Company from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.

(f) Date of Termination. "Date of Termination" means (i) if the Executive's
employment is terminated by the Company, whether for Cause or without Cause, or
by the Executive for Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein, as the case may be, and (ii) if
the Executive's employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.
 
6.
Obligations of the Company Upon Termination

 
(a) Good Reason; Without Cause; Death or Disability. If, during the Employment
Period, the Company shall terminate the Executive's employment without Cause or
for Death or Disability or the Executive shall terminate employment for Good
Reason:

(i) the Company shall pay to the Executive in a lump sum in cash within 30 days
after the Date of Termination the aggregate of the following amounts:
 
(A) the sum of (1) the Executive's Annual Base Salary through the Date of
Termination, (2) a pro rata portion of the Executive’s Annual Bonus for the year
in which the Date of Termination occurs, based on the number of days of
employment that year up to the Date of Termination divided by 365 days,) and (3)
any accrued paid time off pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2) and (3) shall be
hereinafter referred to as the "Accrued Obligations"); and
 
(B) the amount equal to the sum of (x) Annual Base Salary and (y) the Annual
Bonus for which the Executive was eligible for the year in which the Date of
Termination occurs; and
 
(C) if Executive executes a release of in the form set forth in Exhibit I
attached hereto, and said release of claims becomes effective by its terms, the
additional amount equal to two times the sum of (x) Annual Base Salary and (y)
the Annual Bonus for which the Executive was eligible for the year in which the
Date of Termination occurs; and
 
(D) a separate lump-sum supplemental retirement benefit equal to the difference
between (1) the actuarial equivalent (utilizing for this purpose the actuarial
assumptions utilized with respect to the Retirement Plan during the 90-day
period immediately preceding the Effective Date) of the benefit payable under
the Retirement Plan and any SERP providing benefits for the Executive that the
Executive would receive if the Executive's employment continued at the
compensation level provided for in Sections 4(b)(i) and (ii) for the remainder
of the Employment Period, assuming for this purpose that all accrued normal and
early retirement benefits are fully vested and that benefit accrual formulas are
no less advantageous to the Executive than those in effect during the 90-day
period immediately preceding the Effective Date, and (2) the actuarial
equivalent (utilizing for this purpose the actuarial assumptions utilized with
respect to the Retirement Plan during the 90-day period immediately preceding
the Effective Date) of the Executive's actual benefit (paid or payable), if any,
under the Retirement Plan and the SERP; and
 

(ii) for the remainder of the Employment Period, or such longer period as any
plan, program, practice or policy may provide, the Company shall continue
benefits to the Executive and/or the Executive's family at least equal to those
that would have been provided to them in accordance with the plans, programs,
practices and policies described in Sections 4(b)(v) and 4(b)(vii) if the
Executive's employment had not been terminated in accordance with the most
favorable plans, practices, programs or policies of the Company and its
affiliated companies as in effect and applicable generally to other executives
and their families during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families; provided, however, that if the
Executive becomes re-employed with another employer and is eligible to receive
medical or other welfare benefits under another employer-provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility
(such continuation of such benefits for the applicable period herein set forth
shall be hereinafter referred to as "Welfare Benefit Continuation") and the
Executive shall no longer be entitled to receive fringe benefits from the
Company. For purposes of determining eligibility of the Executive for retiree
benefits pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until the end of the Employment
Period and to have retired on the last day of such period; provided, however,
that the Executive shall be entitled to the more favorable of the retiree
benefits in effect on the Date of Termination or the retiree benefits in effect
on the date that would have been the last date of the Employment Period if the
Executive had remained employed; and

(iii) to the extent not theretofore paid or provided, the Company shall timely
pay or provide to the Executive and/or the Executive's family any other amounts
or benefits required to be paid or provided or which the Executive and/or the
Executive's family is eligible to receive pursuant to this Agreement and under
any plan, program, policy or practice or contract or agreement of the Company
and its affiliated companies as in effect and applicable generally to other peer
executives and their families during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families (such other amounts and benefits shall
be hereinafter referred to as the "Other Benefits"); and

(iv) if the Executive is age 55 or older, in lieu of receiving monthly benefits
under the SERP the Executive may elect, by giving at least 120 days written
notice to the Company, to receive the Actuarial Equivalent (as defined in the
SERP) lump sum value of the normal form of payment of SERP benefits based upon
the retirement benefit payable under the SERP at Executive's age upon the Date
of Termination, or to have such Actuarial Equivalent lump sum value transferred
to the Company's Deferred Compensation Plan or any successor deferred
compensation plan. If the Executive is younger than the minimum age for
eligibility for payment of SERP benefits, the Executive may elect to receive the
discounted present value, using a seven percent discount rate, of the Actuarial
Equivalent lump sum value of the SERP benefits to which the Executive would be
entitled at the minimum age.

(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations (which shall be paid to
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination) and the timely payment or provision of the
Welfare Benefit Continuation and Other Benefits.

(c) Disability. If the Executive's employment is terminated by reason of the
Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations (which shall be paid to Executive in a lump sum in cash
within 30 days of the Date of Termination) and the timely payment or provision
of the Welfare Benefit Continuation and Other Benefits.

(d) Cause; Other Than for Good Reason. If the Executive's employment shall be
terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay the Executive's Annual Base Salary through the Date of Termination, plus
the amount of any compensation previously deferred by the Executive, in each
case to the extent theretofore unpaid. If the Executive terminates employment
during the Employment Period other than for Good Reason, this Agreement shall
terminate without further obligations to the Executive other than for Accrued
Obligations and the timely payment or provision of Other Benefits. In such case
all Accrued Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination.
 
7.
Nonexclusivity of Rights

 
Nothing in this Agreement shall prevent or limit the Executive's continuing or
future participation in any written plan provided by the Company or any of its
affiliated companies for executives generally and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any written contract with the Company or any of its
affiliated companies. Amounts that are vested benefits or that the Executive is
otherwise entitled to receive under any such plan or contract with the Company
or any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan or contract or agreement except as
explicitly modified by this Agreement.
 
8.
Full Settlement; Resolution of Disputes

(a) The Company's obligation to make the payments provided for in this Agreement
and otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action that
the Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement, and, except as provided in Section 6(b), such
amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay promptly upon invoice, to the full extent
permitted by law, all legal fees and expenses that the Executive may incur as a
result of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement).

(b) If there shall be any dispute between the Company and the Executive (i) in
the event of any termination of the Executive's employment by the Company,
whether such termination was (A) in connection with or in anticipation of a
Change of Control under clauses (i) or (ii) of Section 1(l), or (B) for Cause,
or (ii) in the event of any termination of employment by the Executive, whether
Good Reason existed, then, unless and until there is a final, nonappealable
judgment by a court of competent jurisdiction declaring that such termination
was not in connection with or in anticipation of a Change of Control or for
Cause or that the determination by the Executive of the existence of Good Reason
was not made in good faith, the Company shall pay all amounts, and provide all
benefits, to the Executive and/or the Executive's family or other beneficiaries,
as the case may be, that the Company would be required to pay or provide
pursuant to Section 6(a) as though such termination were by the Company without
Cause or by the Executive with Good Reason; provided, however, that the Company
shall not be required to pay any disputed amounts pursuant to this paragraph
except upon receipt of an undertaking by or on behalf of the Executive to repay
all such amounts to which the Executive is ultimately adjudged by such court not
to be entitled.
 
9.
Excise Taxes

Notwithstanding any other provisions of this Agreement, if any payments or
distributions in the nature of compensation are made to or for the benefit of
the Executive, whether paid or payable pursuant to this Agreement or otherwise
(including the vesting of stock options, the lapse of restrictions on restricted
stock and any other events that result in a "payment in the nature of
compensation" within the meaning of Section 280G of the Code) are characterized
as Excess Parachute Payments within the meaning of Section 280G of the Code or
any successor provision, then the Company shall pay to the Executive an
additional amount equal to the excise taxes imposed by Section 4999 of the Code
or any successor provision on the Executive's Excess Parachute Payments, plus an
amount equal to the federal and (if applicable) state income and excise taxes,
including without limitation FICA and Medicare taxes or other taxes which will
be payable by Employee as a result of this additional payment.
 
10.
Confidential Information

The Executive shall hold in a fiduciary capacity for the benefit of the Company
all secret or confidential information, knowledge or data relating to the
Company or any of its affiliated companies, and their respective businesses,
that shall have been obtained by the Executive during the Executive's employment
by the Company or any of its affiliated companies and that shall not be or
become public knowledge (other than by acts by the Executive or representatives
of the Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section 10 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
 
11.
Successors

(a) This Agreement is personal to the Executive and without the prior written
consent of the Company shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.

(b) This Agreement shall inure to the benefit of and be binding on the Company
and its successors and assigns.

(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, Company shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law, or otherwise.
 
12.
Miscellaneous

(a) This Agreement shall be governed by and construed in accordance with the
laws of the state of Washington, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.

(b) All notices and other communications hereunder shall be in writing and shall
be given by hand delivered to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:

Eric M. Markell
Senior Vice President Energy Resources and Planning
Puget Sound Energy, Inc.
P. O. Box 97034
Bellevue, WA 98009-9734

If to the Company:
 
Puget Sound Energy, Inc.
P. O. Box 97034,
Bellevue, WA 98009-9734
 
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement.

(d) The Company may withhold from any amounts payable under this Agreement such
federal, state or local taxes as shall be required to be withheld pursuant to
any applicable law or regulation.

(e) The Executive's or the Company's failure to insist on strict compliance with
any provision hereof or any other provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including
without limitation the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(v), shall not be deemed to be a waiver of
such provision or right or any other provision or right of this Agreement.

(f) The Executive and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company is "at will" and, prior
to the Effective Date, may be terminated by either the Executive or the Company
at any time. Moreover, if prior to the Effective Date, the Executive's
employment with the Company terminates, then the Executive shall have no further
rights under this Agreement.

(g) This Agreement may be executed in counterparts, each of which counterparts
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to authorization from the Board, the Company has caused this Agreement
to be executed in its name and on its behalf, all as of the day and year first
above written.
 
 
 

 
PUGET SOUND ENERGY, INC.
             
By: Stephen P. Reynolds
Its President and Chief Executive Officer
             
Eric M. Markell