EXHIBIT 10.1
 
EXECUTIVE EMPLOYMENT AGREEMENT
 
(AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT)
 
This Amended and Restated Executive Employment Agreement (this “Agreement”), by
and between Puget Sound Energy, Inc., a Washington corporation (the “Company”),
and [Executive Name] (the “Executive” and, together with the Company, the
“Parties”), is dated as of March [__], 2009, with employment effective as of the
Effective Date (as defined in Section 1).
 
WHEREAS, pursuant to that certain Agreement and Plan of Merger (the “Merger
Agreement”), dated as of October 25, 2007, by and among Puget Energy, Inc., a
Washington corporation (“Puget”), Padua Holdings LLC (now Puget Holdings LLC), a
Delaware limited liability company (the “Parent”), Padua Intermediate Holdings
Inc. (now Puget Intermediate Holdings Inc.), a Washington corporation and wholly
owned subsidiary of the Parent, and Padua Merger Sub Inc. (which later changed
its name to Puget Merger Sub Inc.), a Washington corporation and a wholly owned
subsidiary of Padua Intermediate Holdings Inc (“Merger Sub”), Merger Sub shall
merge with and into Puget, and Puget will become a wholly owned indirect
subsidiary of the Parent (the “Merger”);
 
WHEREAS, the Company and the Executive are parties to a Change of Control
Agreement, dated as of [__________] [, as amended and restated on [__________] ]
(the “Original Agreement”); and
 
WHEREAS, in connection with the Merger, the Company and the Executive desire to
amend and restate the Original Agreement so that the Original Agreement will be
replaced in its entirety with this Agreement;
 
WHEREAS, the Parties hereby agree to amend and restate the Original Agreement in
its entirety pursuant to the terms and conditions herein provided;-
 
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
 
1.           Certain Definitions
 
(a)           “Accrued Obligations” is defined in Section 5(a)(i)(A).
 
(b)           “Annual Base Salary” is defined in Section 3(b)(i).
 
(c)           “Annual Bonus” is defined in Section 3(b)(ii).
 
(d)           “Board” means the Board of Directors of the Company.
 
(e)           “Cause” is defined in Section 4(b)
 
(f)           “Change in Control” means, following the Effective Date, a change
in beneficial ownership or control of the Company effected through a transaction
or series of transactions (other than an offering of Common Stock to the general
public through a registration statement filed with the Securities and Exchange
Commission) whereby any “person” or related “group” of “persons” (as such terms
are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the
Company, any of its subsidiaries, an employee benefit plan maintained by the
Company or any of its subsidiaries, any Member (as defined in that certain
Amended and Restated Limited Liability Company Agreement of Puget Holdings LLC,
dated as of February 6, 2009) or a “person” that, prior to such transaction,
directly or indirectly controls, is controlled by, or is under common control
with, the Company or a Member) directly or indirectly acquires (x) beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company possessing more than 55% of the total combined voting
power of the Company’s securities outstanding immediately after such acquisition
or (y) all or substantially all of the assets of the Company.  For the avoidance
of doubt, the Merger shall not constitute a Change in Control for purposes of
this Agreement.
 
(g)           “Code” means the Internal Revenue Code of 1986, as amended.
 
(h)           “Date of Termination” is defined in Section 4(f).
 
(i)           “Disability” is defined in Section 4(a).
 
(j)           “Disability Effective Date” is defined in Section 4(a).
 
(k)           “Effective Date” means the date on which occurs the “Effective
Time” as defined in the Merger Agreement.
 
(l)           “Employment Period” is defined in Section 2.
 
(m)           “Exchange Act” means the Securities Exchange Act of 1934, as
amended.
 
(n)           “Good Reason” is defined in Section 4(d).
 
(o)           “Incentive Plan” means the Long Term Incentive Plan to be
established by the Company, or any successor plan, as defined in Section
3(b)(iii).
 
(p)           “Notice of Termination” is defined in Section 4(e).
 
(q)           “Other Benefits” is defined in Section 5(a)(iii).
 
(r)           “Retirement Plan” means the Company’s qualified pension plan or
any successor plan thereto.
 
(s)           “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.
 
(t)           “Welfare Benefit Continuation” is defined in Section 5(a)(ii).
 
2.           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 [Title/Position] or in
another officer-level position of the Company 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.  In the event that the Merger does not
occur, this Agreement shall be void ab initio.  Notwithstanding the foregoing,
if a Change in Control occurs at any time following the Employment Period,
during which the Executive remains employed by the Company, the Company shall
cause the purchaser of or successor to the Company to assume the provisions set
forth in Sections 3, 4 and 5, including corresponding definitions (or to
substitute substantially identical provisions), subject to the other terms and
conditions therein other than with respect to the Employment Period, and to
honor such provisions for a period of not less than two years following the date
of such Change in Control.
 
3.           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 2 and (B) the
Executive’s services shall be performed within the Seattle/Bellevue metropolitan
area, except for required travel on the Company’s business to the extent
consistent with the Executive’s duties as set forth in Section 2.
 
(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 with respect to 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 paragraph (iii), (v), (vi)
or (viii) of this Section 3(b), any reimbursement of expenses by the Company or
any affiliated company in accordance with paragraph (vii) of this Section 3(b),
or any other amounts paid under paragraph (iv), (ix) or (x) of this Section
3(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 performance-based annual bonus (the “Annual Bonus”) payable in cash
based on achievement of performance measures to be determined by the Board
consistent with past practice.  The target-level Annual Bonus for each fiscal
year ending during the Employment Period shall be 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 15th day of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is earned unless the
Executive shall have timely elected to defer the receipt of such Annual Bonus in
accordance with the terms of the Company’s then applicable deferred compensation
plan.  Notwithstanding the foregoing, except as set forth in Section 5, no such
Annual Bonus shall be payable with respect to any fiscal year unless the
Executive remains continuously employed with the Company during the period
beginning on the Effective Date and ending on the last day of such fiscal year;
provided that if the Executive voluntarily retires in good standing after having
attained age 55 with a minimum of five years of service with the Company, the
Executive shall, at the time the bonus would otherwise be payable pursuant to
this Section 3(b)(ii), be eligible to receive a bonus in an amount, if any,
equal to the product of (C) the amount of bonus the Executive would have
received for such year based on the Company’s achievement of the applicable
performance goals and (D) the ratio of (1) the number of days elapsed in the
calendar year prior to such retirement and (2) 365.
 
(iii)           Incentive, Savings and Retirement Plans.  During the Employment
Period, the Executive shall be entitled to participate in the Long Term
Incentive Plan to be established by the Company (the “Incentive Plan”) and all
other 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 (except the Company’s qualified pension plans)
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 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.
 
(iv)           Performance Bonuses.  Subject to the terms and conditions of this
Section 3(b)(iv), the Executive shall be eligible to receive performance bonuses
(the “Merger Performance Bonuses”) from the Company within 30 days following the
first and second anniversaries of the Effective Date.  Each Merger Performance
Bonus shall be an amount equal to 100% of the Executive’s then current Annual
Base Salary, and shall be payable if (A) the Company achieves specified minimum
Service Quality Index performance goals established with respect to each of 2009
and 2010 by the Compensation and Leadership Development Committee of the Board
(the “Compensation Committee”) in its sole discretion, and (B) the Executive
remains in continuous employment with the Company through the first and second
anniversaries of the Effective Date, as applicable.  Notwithstanding the
foregoing (x) if the Executive’s employment is terminated without Cause or for
Good Reason prior to the first anniversary of the Effective Date, the Executive
shall be eligible to receive any Merger Performance Bonuses that would have been
payable on the first and second anniversaries of the Effective Date based on the
Company’s actual performance had the Executive continued in employment with the
Company through such dates, and (y) if the Executive’s employment is terminated
without Cause or for Good Reason during the period beginning on the first
anniversary of the Effective Date and ending on the last day of the Employment
Period, the Executive shall be eligible to receive any Merger Performance
Bonuses that would have been payable on the second anniversary of the Effective
Date based on the Company’s actual performance had the Executive continued in
employment with the Company through such date.
 
(v)           Long Term Incentive Plan.  During the Employment Period, the
Executive shall be eligible to participate in the Incentive Plan with a target
award at least equal to the target award that applied for the comparable
performance period immediately preceding the Effective Date, and pursuant to
such terms as shall be determined by the Board or the Compensation Committee.
 
(vi)           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.
 
(vii)           Expenses.  Subject to Section 5(e), 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.
 
(viii)           Fringe Benefits.  Subject to Section 5(e), during the
Employment Period, the Executive shall be entitled to fringe benefits in
accordance with the most favorable plans, practices, policies and programs 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.
 
(ix)           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.
 
(x)           Vacation.  During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
practices, policies and programs 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.
 
4.           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” means a physical or mental
condition that renders the Executive unable or incompetent to carry out the
Executive’s material job responsibilities or the material duties to which the
Executive was assigned at the time the disability was incurred, which has lasted
for at least three months and which, in the opinion of a physician mutually
agreed upon by the Company and Executive (provided that neither party shall
unreasonably withhold agreement), is expected to last for an indefinite duration
or a continuous duration in excess of 12 months.
 
(b)           Cause.  The Company may terminate the Executive’s employment
during the Employment Period for Cause.  For purposes of this Agreement, “Cause”
means (i) the willful and continued failure by the Executive to substantially
perform the Executive’s 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 the Executive by the Board, which specifically identifies the
manner in which the Board believes that the Executive has not substantially
performed the Executive’s duties, or (ii) the willful engaging by the Executive
in gross misconduct materially and demonstrably injurious to the Company, as
determined by the Board after notice to the Executive and an opportunity for a
hearing.  No act or failure to act on the Executive’s part shall be considered
“willful” unless the Executive has acted or failed to act with an absence of
good faith and without a reasonable belief that the Executive’s 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” means:
 
(i)           the assignment of the Executive to a nonofficer position with the
Company, which the Parties acknowledge and agree would constitute a material
reduction in the Executive’s authority, duties or responsibilities;
 
(ii)           a material diminution in the Executive’s total compensation
opportunities hereunder;
 
(iii)           the Company’s requiring the Executive to be based at any
location other than that described in Section 3(a)(i)(B), which represents a
material change from such location, unless the Executive consents to such
relocation; or
 
(iv)           any material breach of this Agreement by the Company, including,
without limitation, a failure of the Company to comply with and satisfy Section
11(c);
 
provided that none of the foregoing conditions or events shall constitute Good
Reason unless the Company has not remedied the alleged violation(s) within 60
days following the Company’s receipt of written notice from the Executive, in
accordance with Section 4(e), that the Executive believes in good faith that
such condition constitutes Good Reason.
 
For the avoidance of doubt, the Executive acknowledges and agrees that the
Parties’ entering into this Agreement and the Executive’s employment pursuant to
the terms hereof shall not constitute Good Reason for purposes of the Original
Agreement.
 
(e)           Notice of Termination.  Any termination by the Company for Cause
or without Cause or by the Executive for Good Reason must 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 by the Executive that (i) indicates the specific termination
provision in this Agreement relied on, (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 is other than the date of receipt of such
notice, specifies the termination date (which date shall be no later 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 that
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.  Notwithstanding anything herein to the contrary, in
the event of the Executive’s termination of employment for Good Reason, the
Executive shall provide the Notice of Termination no later than 90 days
following the initial existence of the condition or occurrence of the event
purported to constitute Good Reason, and such Notice of Termination shall
specify a Date of Termination that is no later than 15 days after the date of
such Notice of Termination (and in no event later than two years following the
initial existence of such condition or occurrence of such event).
 
(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 death of the Executive or the Disability Effective Date,
as the case may be.
 
5.           Obligations of the Company Upon Termination
 
(a)           Good Reason; Without Cause.  If, during the Employment Period, the
Company shall terminate the Executive’s employment without Cause or the
Executive shall terminate employment for Good Reason, subject to Section 4(e):
 
(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 accrued but unpaid amount of the Executive’s
Annual Base Salary through the Date of Termination, and (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 (the sum of the amounts described in clauses (1)
and (2) shall be hereinafter referred to as the “Accrued Obligations”); and
 
(B)           the amount equal to three 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
 
(C)           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 Section 3(b)(i) and Section 3(b)(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
 
(D)           any amounts payable pursuant to the third sentence of Section
3(b)(iv); and
 
(ii)           For the remainder of the Employment Period, or such longer period
as any plan, practice, policy or program may provide, the Company shall continue
group medical, dental, disability and life insurance 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, practices, policies and programs
described in Section 3(b)(vi) if the Executive’s employment had not been
terminated in accordance with the most favorable plans, practices, policies or
programs 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 group medical or dental benefits under
another employer-provided plan, the group medical or dental 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”).  During the period the Executive and/or the Executive’s
family is eligible to receive continued medical or dental continuation coverage
under the Company’s group medical and dental benefit plans in accordance with
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”), the Company shall pay the portion of the Executive’s premium payments
necessary to satisfy the requirements of the first sentence of this Section
5(a)(ii).  With respect to any period afterward in which the Executive and/or
the Executive’s family ceases to be eligible for COBRA coverage, and with
respect to disability and life insurance benefits for the remainder of the
Employment Period, the Executive and/or the Executive’s family shall pay to the
Company, on an after-tax basis, an amount equal to the full premium cost of
medical, dental, disability and life insurance benefits coverage.  Within 30
days of such payment, subject to Section 5(e), the Company shall pay to the
Executive or the Executive’s family in cash (less required withholding) an
amount equal to (A) the portion of the Executive’s premium payments necessary to
satisfy the requirements of the first sentence of this Section 5(a)(ii), less
any premium amount that would have been payable by the Executive or the
Executive’s family if the Executive or the Executive’s family were participants
in the plans, practices, policies and programs, plus (B) an additional amount
equal to the federal, state and local income and payroll taxes that the
Executive incurs on each with respect to such payment.  For purposes of
determining eligibility of the Executive for retiree benefits Pursuant to such
plans, practices, policies and programs, 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 due and not theretofore paid or provided through
the Date of Termination, 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, practice,
policy or program 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”).
 
(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 the 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 or Retirement.  If the Executive’s employment is
terminated during the Employment Period by reason of the Executive’s Disability
or the Executive’s retirement under the conditions described in Section
3(b)(ii), this Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations (which shall be paid to
the 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 (except
in the case of retirement as described above) 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 (i) for Good Reason or (ii) by reason
of the Executive’s retirement under the conditions described in Section
3(b)(ii), then 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 (which
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination) and the timely payment or provision of Other Benefits.
 
(e)           Payment Procedures.  Notwithstanding anything herein to the
contrary, (A) no amount shall be payable pursuant to this Section 5 unless the
Executive’s termination of employment constitutes a “separation from service”
within the meaning of Treasury Regulation Section 1.409A-1(h), (B) no portion of
the payments and benefits provided under Sections 5(a)(i)(B)-(C) and Section
5(a)(ii) shall be paid or provided unless, on or prior to the 60th day following
the Date of Termination, the Executive timely executes a general waiver and
release of claims agreement substantially in the form attached hereto as Annex A
(which waiver and release of claims agreement shall be provided by the Company
to the Executive on or prior to the seventh day following termination), such
release shall not have been revoked by the Executive (and the applicable
revocation period shall have expired) prior to such sixtieth (60th) day, and (C)
as of the first date on which the Executive violates any covenant contained in
Section 8, any remaining unpaid portion of the payments and benefits provided
under Sections 5(a)(i)(B)-(C) and Section 5(a)(ii) shall thereupon be
forfeited.  To the extent that any reimbursement of any expense under this
Section 5 or in-kind benefits provided under this Agreement are deemed to
constitute taxable compensation to the Executive, such amounts will be
reimbursed or provided no later than December 31 of the year following the year
in which the expense was incurred.  The amount of any such expenses reimbursed
or in-kind benefits provided in one year shall not affect the expenses or
in-kind benefits eligible for reimbursement or payment in any subsequent year,
and the Executive’s right to such reimbursement or payment of any such expenses
will not be subject to liquidation or exchange for any other benefit.
 
6.           Nonexclusively 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 except as explicitly
modified by this Agreement.
 
7.           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
5(a)(ii), such amounts shall not be reduced whether or not the Executive obtains
other employment.  Subject to Section 5(e) of this Agreement, 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 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 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 (other than, to the extent the
payment is a disputed payment within the meaning of Treasury Regulation Section
1.409A-2(g), the amounts provided under Section 5(a)(i)(A)), 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 5(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 Section 7(b)
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.
 
8.           Restrictive Covenants
 
(a)           The Executive shall not, at any time during the Employment Period
or during the 12-month period immediately following the Date of Termination (the
“Restricted Period”), directly or indirectly engage in, have any equity interest
in, or manage or operate any person, firm, corporation, partnership, business or
entity (whether as director, officer, employee, agent, representative, partner,
security holder, consultant or otherwise) that engages in (either directly or
through any subsidiary or affiliate thereof) any business or activity relating
to selling or distributing electric power or natural gas in the state of
Washington in competition with the Company.  Notwithstanding the foregoing, the
Executive shall be permitted to acquire a passive stock or equity interest in
such a business; provided that such stock or other equity interest acquired is
not more than 5% of the outstanding interest in such business.
 
(b)           The Executive shall not, at any time during the Employment Period
or the Restricted Period, (i) directly or indirectly, either for himself or on
behalf of any other entity, recruit or otherwise solicit or induce any employee,
customer, subscriber or supplier of the Company to terminate his, her or its
employment or arrangement with the Company, or otherwise change his, her or its
relationship with the Company, or (ii) either for himself or on behalf of any
other entity, hire, or cause to be hired, any person who was employed by the
Company at any time during the 12-month period immediately prior to the Date of
Termination or who thereafter becomes employed by the Company.
 
(c)           The provisions contained in Section 8(a) and Section 8(b) may be
altered and/or waived with the prior written consent of the Board.
 
(d)           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.
 
(e)           Upon termination of the Executive’s employment with the Company
for any reason, the Executive will promptly deliver to the Company all
correspondence, electronic data, drawings, manuals, letters, notes, notebooks,
reports, programs, plans, proposals, financial documents or any other documents
concerning the Company’s customers, business plans, marketing strategies,
products or processes.
 
(f)           The Executive may respond to a lawful and valid subpoena or other
legal process but shall give the Company the earliest possible notice thereof,
and shall, as much in advance of the return date as possible, make available to
the Company and its counsel the documents and other information sought, and
shall assist such counsel in resisting or otherwise responding to such process.
 
(g)           The Executive agrees not to disparage the Company, any of its
products or practices, or any of its directors, officers, agents,
representatives, shareholders or affiliates, either orally or in writing, at any
time; provided that the Executive may confer in confidence with the Executive’s
legal representatives and make truthful statements as required by law.
 
(h)           In the event the terms of this Section 8 shall be determined by
any court of competent jurisdiction to be unenforceable by reason of its
extending for too great a period of time or over too great a geographical area
or by reason of its being too extensive in any other respect, it will be
interpreted to extend only over the maximum period of time for which it may be
enforceable, over the maximum geographical area as to which it may be
enforceable, or to the maximum extent in all other respects as to which it may
be enforceable, all as determined by such court in such action.
 
(i)           As used in this Section 8, the term “Company” shall include the
Company, its parents, related entities, and any of its direct or indirect
subsidiaries.
 
(j)           The Executive recognizes and acknowledges that a breach of the
covenants contained in this Section 8 will cause irreparable damage to the
Company and its goodwill, the exact amount of which will be difficult or
impossible to ascertain, and that the remedies at law for any such breach will
be inadequate.  Accordingly, the Executive agrees that in the event of a breach
of any of the covenants contained in this Section 8, in addition to any other
remedy which may be available at law or in equity, the Company will be entitled
to specific performance and injunctive relief.  In addition, in the event that
the Executive violates any of the covenants set forth in this Section 8, (i) the
Executive shall be required to pay to the Company in a single lump sum an amount
equal to the aggregate total of the amounts the Executive has received pursuant
to Sections 5(a)(i)(A)-(C) within 30 days following the date of such violation,
and (ii) the Company shall no longer be required to continue benefits to the
Executive and/or the Executive’s family pursuant to Section 5(a)(ii).
 
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 in connection with the Merger or any other transaction
contemplated under the Merger Agreement, 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), that are characterized as “excess parachute payments” (as defined in
Section 280G(b)(1) of the Code or any successor provision), then the Company
shall pay to the Executive an additional amount (the “Gross-Up Payment”) equal
to the excise taxes imposed by Section 4999 of the Code, or any successor
provision, on the Executive’s excess parachute payments (the “Parachute Tax”)
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
that will be payable by the Executive as a result of this additional
payment.  Notwithstanding anything to the contrary in this Agreement, the
Company shall pay the Gross-Up Payment to the Executive no later than the end of
the calendar year following the calendar year in which the related Parachute Tax
is remitted to the relevant taxing authorities.  In the event a Change in
Control occurs after the Effective Date and no stock of the Company is tradable
on an established securities market or otherwise immediately before such Change
in Control (within the meaning of Section 280G(b)(5)(A)(ii) of the Code), then
to the extent that the Executive would otherwise be eligible to receive any
excess parachute payment that would be subject to the Parachute Tax in
connection with such Change in Control, the Executive shall agree to execute a
waiver of a portion of the excess parachute payments such that all nonwaived
payments would not be subject to the Parachute Tax; provided that the Company
agrees to seek, but shall not be required to obtain, approval from its
shareholders in a manner that complies with Section 280G(b)(5)(B) of the Code
and Treasury Regulation Section 1.280G-1 such that if such shareholder approval
is obtained the waived payments shall be restored.
 
10.           Section 409A
 
(a)           The Parties hereto acknowledge and agree that, to the extent
applicable, this Agreement shall be interpreted in accordance with, and
incorporate the terms and conditions required by, Section 409A of the Code and
the Department of Treasury regulations and other interpretive guidance issued
thereunder, including, without limitation, any such regulations or other
guidance that may be issued after the Effective Date.  Notwithstanding any
provision of this Agreement to the contrary, in the event that the Company
determines that any amounts payable hereunder will be immediately taxable to the
Executive under Section 409A of the Code and related Department of Treasury
guidance, the Company reserves the right (without any obligation to do so or to
indemnify the Executive for failure to do so) to adopt such limited amendments
to this Agreement and appropriate policies and procedures, including amendments
and policies with retroactive effect, that the Company reasonably determines are
necessary or appropriate to (i) exempt the compensation and benefits payable
under this Agreement from Section 409A of the Code and/or preserve the intended
tax treatment of the compensation and benefits provided with respect to this
Agreement or (ii) comply with the requirements of Section 409A of the Code, and
to the maximum extent possible payments and benefits made hereunder shall be
considered short-term deferrals within the meaning of Treasury Regulation
Section 1.409A-1(b)(4) or subject to the exception from Section 409A of the Code
set forth in Treasury Regulation Section 1.409A-1(b)(9)(iii).  Notwithstanding
the foregoing, no provision of this Agreement shall be interpreted or construed
to transfer any liability for failure to comply with the requirements of Section
409A of the Code from the Executive or any other individual to the Company or
any of its affiliates, employees or agents.
 
(b)           Notwithstanding any provision to the contrary in this Agreement,
if the Executive is deemed at the time of the Executive’s separation from
service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of
the Code, to the extent delayed commencement of any portion of the termination
benefits to which the Executive is entitled under this Agreement is required in
order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the
Code, such portion of the Executive’s termination benefits shall not be provided
to the Executive prior to the earlier of (i) the expiration of the six-month
period measured from the date of the Executive’s “separation from service” with
the Company (as such term is defined in the Treasury Regulations issued under
Section 409A of the Code) or (ii) the date of the Executive’s death.  Upon the
earlier of such dates, all payments deferred pursuant to this Section 10(b)
shall be paid in a lump sum to the Executive, and any remaining payments due
under this Agreement shall be paid as otherwise provided herein.
 
(c)           For purposes of Section 409A of the Code, the Executive’s right to
receive installment payments pursuant to Sections 5(a)(i)(A)-(C) shall be
treated as a right to receive a series of separate and distinct payments.  The
determination of whether the Executive is a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code as of the time of the Executive’s
separation from service shall be made by the Company in accordance with the
terms of Section 409A of the Code and applicable guidance thereunder (including,
without limitation, Treasury Regulation Section 1.409A-1(i) and any successor
provision thereto).
 
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.  The Company shall provide such successor with at least ten days’ prior
written notice of the requirements of this Section 11(c).  As used in this
Agreement, the term “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 contains the entire
understanding of the Parties with regard to the subject matter of this Agreement
and fully supersedes any and all prior discussions, negotiations, commitments
and understandings related thereto (including the Original Agreement).  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:
 
[Executive Name]
 
[Title/Position]
 
Puget Sound Energy, Inc., PSE-12
 
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 4(d)(i)-(iv), 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
may be terminated by either the Executive or the Company at any time.
 
(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.
 
[Signature Page Follows]
 
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.
 
 
 
/s/                                                               
By:  Stephen P. Reynolds
Its President and Chief Executive Officer
   
 
 
 
/s/                                                               
By: [Executive Name]
[Title/Position]

ANNEX A
 
Form of Release
 
______________________ (the “Executive”) represents that the Executive has not
filed any complaints, charges or lawsuits against Puget Sound Energy, Inc.
(“PSE”) or any of its parents, affiliates or related and subsidiary entities
(collectively, the “Company”), with any governmental agency or any court.  The
Executive expressly waives all claims against the Company and releases the
Company, and any of its past, present or future parents, and affiliated, related
and/or subsidiary entities, and all of the past and present directors,
shareholders, officers, general or limited partners, employees, agents and
attorneys, and agents and representatives of such entities, and employee benefit
plans in which the Executive is or has been a participant by virtue of the
Executive’s employment with the Company (collectively, the “Releasees”), from
any claims that the Executive may have against the Company, or the former Puget
Sound Power & Light Company, Washington Natural Gas Company or Washington Energy
Company.  It is understood that this release includes, but is not limited to,
any claims arising directly or indirectly out of, relating to, or in any other
way involving in any manner whatsoever, (a) the Executive’s employment with the
Company or its subsidiaries or the termination thereof or (b) the Executive’s
status at any time as a holder of any securities of the Company, including any
claims for wages, employment benefits or damages of any kind whatsoever arising
out of any contract, express or implied, any covenant of good faith and fair
dealing, express or implied, any legal restriction on the Company’s right to
terminate employment, or any federal, state or other governmental statute or
ordinance, including, without limitation, Title VII of the Civil Rights Act of
1964, the federal Age Discrimination in Employment Act, the Americans with
Disabilities Act, the Family and Medical Leave Act, the Employee Retirement
Income Security Act of 1974, the Washington Law Against Discrimination, the
Washington Family and Parental Leave Acts, or any other legal limitation on the
employment relationship (this “Release”);provided, however, notwithstanding
anything to the contrary set forth herein, that this general release shall not
extend (x) to benefit claims under employee pension benefit plans in which the
Executive is a participant by virtue of the Executive’s employment with the
Company or its subsidiaries or to benefit claims under employee welfare benefit
plans for occurrences (e.g., medical care, death or onset of disability) arising
after the execution of this Release by the Executive, and (y) to any executory
obligations assumed by the Company under that certain Executive Employment
Agreement (Amended and Restated Change of Control Agreement), dated as of
January [__], 2009, by and between the Company and the Executive.
 
The Executive understands that this Release includes a release of claims arising
under the Age Discrimination in Employment Act (ADEA).  The Executive
understands and warrants that he/she has been given a period of [21 + 7][45 + 7]
days to review and consider this Release.  The Executive further warrants that
the Executive understands that, with respect to the release of age
discrimination claims only, the Executive has a period of seven (7) days after
execution of this Release to revoke the release of age discrimination claims by
notice in writing to the Company.
 
The Executive is hereby advised to consult with an attorney prior to executing
this Release.  By the Executive’s signature below, the Executive warrants that
the Executive has had the opportunity to do so and to be fully and fairly
advised by that legal counsel as to the terms of this Release.