Document:

PSE Supplemental Executive Retirement Plan

 

Exhibit
10.55

 

 

 

 

 

PUGET
SOUND ENERGY, INC.

 

SUPPLEMENTAL
EXECUTIVE

RETIREMENT
PLAN

 

 

Amended
and Restated

Effective
October 5, 2004

 

 

CONTENTS

 

ARTICLE
I. ESTABLISHMENT AND PURPOSE

 

ARTICLE
II. DEFINITIONS AND CONSTRUCTION

 

ARTICLE
III. BENEFITS

 

ARTICLE
IV. ADMINISTRATION

 

ARTICLE
V. FUNDING OF THE PLAN

 

ARTICLE
VI. AMENDMENT AND TERMINATION

 

ARTICLE
VII. GENERAL PROVISIONS

 

 

PUGET
SOUND ENERGY, INC.

SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN

 

ARTICLE
I. ESTABLISHMENT AND PURPOSE

 

1.1 Establishment
of Plan. Puget
Sound Energy, Inc., a Washington corporation ("the Company"), established,
effective as of June 1, 1997 ("the Effective Date"), an unfunded
supplemental executive retirement plan to be known as the "Puget Sound Energy,
Inc. Supplemental Executive Retirement Plan" ("the Plan"). The Plan was most
recently amended and restated effective February 24, 1999.

 

1.2 Purpose. The Plan
is established and is intended as an unfunded plan to be maintained for the
purpose of providing supplemental retirement income to a select group of
management personnel and highly compensated employees ("the Participants"), and
as such, it is intended that the Plan be exempt from Parts 2 through 4 of
Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as
amended. The Plan is not intended to satisfy the qualification requirements of
Internal Revenue Code Section 401.

 

ARTICLE
II. DEFINITIONS AND CONSTRUCTION

 

2.1 Definitions. When
used herein, the following terms shall have the meanings set forth below, unless
their context clearly indicates to the contrary:

 

(a) "Actuarial
Equivalent" means a
benefit payable at a particular time and in a particular form and manner and
which has the same value as the benefit which it replaces. For purposes of lump
sum payment calculations, such determination shall be made using the mortality
table prescribed by the Commissioner of Internal Revenue for purposes of Code
Section 417(e)(3)(A)(ii)(I) and in effect on the date as of which the
present value is being determined and an interest rate that is equal to the
average annual interest rate on 30-year Treasury securities, as specified by the
Commissioner of Internal Revenue for purposes of Code
Section 417(e)(3)(A)(ii)(II), for the September immediately preceding the
first day of the Plan Year that contains the date as of which the Participant's
Retirement Benefit is distributed or commences to be distributed. For purposes
of annuity payment calculations, such determination shall be made using the
following actuarial assumptions: (i) interest rate at eight percent (8%)
per annum compounded annually; and (ii) participant mortality rate pursuant
to the 1984 Unisex Pensioners Mortality Table.

 

(b) "Affiliate" means
any corporation, employer, trade, business, or other entity that, together with
the Company, is treated as a single employer under Code Section 414(b), (c), (m)
or (o).

 

(c) "Beneficiary" means
the person, trust, or other entity designated by the Participant pursuant to
Section 3.4 who is or may become entitled to receive a benefit under the
Plan in the event of the Participant's death.

 

(d) "Board" means
the Board of Directors of the Company.

 

(e) "Change
in Control" means
the first to occur of any of the following events:

 

	 	
      (i)
	
      Any
      "person" (as that term is used in Section 13 and 14(d)(2) of the
      Securities Exchange Act of 1934 ("Exchange Act")) becomes the beneficial
      owner (as that term is used in Section 13(d) of the Exchange Act),
      directly or indirectly, of fifty percent (50%) or more of the Company's
      capital stock entitled to vote in the election of directors; provided,
      however, that the following acquisitions of beneficial ownership shall not
      constitute a Change of Control: (A) an acquisition by the Company or
      by any entity related to the Company within the meaning of Code Section
      414(b), (c), (m) or (o), (B) an acquisition by any employee benefit
      plan (or related trust) sponsored or maintained by the Company or by any
      such related entity, or (C) the acquisition of the Company's common
      stock by Puget Energy, Inc. pursuant to the plan of exchange effective
      January 1, 2001;

 

	 	
      (ii)
	
      During
      any period of not more than two consecutive years, not including any
      period prior to the adoption of this Plan, individuals who at the
      beginning of such period constitute the Board, and any new director (other
      than a director designated by a person who has entered into an agreement
      with the Company to effect a transaction described in clause (i), (iii),
      (iv) or (v) of this subsection (e)) whose election by the Board or
      nomination for election by the Company's stockholders was approved by a
      vote of at least three-fourths (3/4ths) of the directors then still in
      office who either were directors at the beginning of the period or whose
      election or nomination for election was previously so approved, cease for
      any reason to constitute at least a majority thereof;

 

	 	
      (iii)
	
      The
      shareholders of the Company approve any consolidation or merger of the
      Company, other than a consolidation or merger of the Company in which the
      holders of the common stock of the Company immediately prior to the
      consolidation or merger hold more than fifty percent (50%) of the common
      stock of the surviving corporation immediately after the consolidation or
      merger; 

 

	 	
      (iv)
	
      The
      shareholders of the Company approve any plan or proposal for the
      liquidation or dissolution of the Company;
or

 

	 	
      (v)
	
      The
      shareholders of the Company approve the sale or transfer of all or
      substantially all of the assets of the Company to parties that are not
      within a "controlled group of corporations" (as defined in Code
      Section 1563) in which the Company is a
member.

 

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

 

(g) "Committee" means
the Compensation and Retirement Committee of the Board or any other committee
designated by the Board to administer the Plan pursuant to Section 4.1
herein.

 

(h) "Company" means
Puget Sound Energy, Inc. or any successor thereto.

 

(i) "Date
of Termination" means
the date the Participant ceases to be employed by the Company or any of its
Affiliates.

 

(j) "Deferred
Compensation Plan" means
the nonqualified "Puget Sound Energy Deferred Compensation Plan for Key
Employees," as amended from time to time, or any successor thereto.

 

(k) "Disability" means a
physical or mental condition that entitles a Participant to benefits under the
Company's long-term disability plan.

 

(l) "Early
Commencement Date" means,
if properly elected by a Participant pursuant to Section 3.5(d), the first day
of any month commencing before the Participant attains age sixty-two (62), but
coincident with or following the later of the date the Participant attains age
fifty-five (55) or the Participant's Date of Termination.

 

(m) "Earnings" means
base salary and annual bonus paid by the Company and/or its Affiliates, before
any deferrals or reductions under a Code Section 401(k) plan, a Code
Section 125 cafeteria plan or a nonqualified deferred compensation plan,
but excluding long-term incentive compensation. A bonus will be included in
Earnings in the year in which it is paid, or in which it would have been paid
had it not been deferred. Amounts paid after the Participant ceases to be an
active Participant in the Plan shall not be taken into account, unless the
Committee specifically provides otherwise.

 

(n) "ERISA" means
the Employee Retirement Income Security Act of 1974, as amended from time to
time, or any successor thereto.

 

(o) "Highest
Average Earnings" means
the average of the highest three (3) calendar years' Earnings of the
Participant. The three years do not have to be consecutive, but they must be
among the last five (5) complete calendar years completed by the
Participant prior to his Date of Termination. If a Participant completes less
than three (3) complete calendar Years of Service prior to the date on which his
employment with the Company and its Affiliates terminates, then the average
shall be computed by adding together the Participant's monthly Earnings for all
of the calendar months during which he was employed by the Company and/or any of
its Affiliates, dividing the result by the number of months in such period and
multiplying that result by twelve (12).

 

(p) "Normal
Commencement Date" means
the first day of the month immediately following the Participant's Date of
Termination or, if later, the date on which the Participant attains age
sixty-two (62).

 

(q) "Participant" means
one of a select group of management personnel or highly compensated employees
designated by the Committee to participate in the Plan. A Participant shall
automatically cease to accrue additional benefits under the Plan at the time he
ceases to be a member of management or a highly compensated employee, as
determined by the Committee. In addition, the Committee may revoke the active
participation (and discontinue the benefit accruals) of any Participant at any
time and for any reason. Notwithstanding the foregoing, in no event shall the
revocation of a Participant's active participation in the Plan (or the cessation
of additional benefit accruals under the Plan) reduce the Retirement Benefit
previously accrued by such Participant prior to such revocation or
cessation.

 

(r) "Participant
Year of Service" means a
Year of Service performed while a Participant under this Plan or under such
other predecessor plans or agreements that the Committee shall
designate.

 

(s) "Plan" means
the "Puget Sound Energy, Inc. Supplemental Executive Retirement Plan" as set
forth in this document, together with any amendments hereto.

 

(t) "Plan
Year" means
the consecutive twelve (12) month period beginning each January 1 (or in the
case of the first Plan Year, beginning on the Effective Date) and ending the
following December 31.

 

(u) "Retirement
Benefit" means
the benefit to which the Participant is entitled under Article III herein
at the Participant's Normal Commencement Date.

 

(v) "Retirement
Plan" means
the "Retirement Plan for Employees of Puget Sound Energy, Inc."

 

(w) "Supplemental
Retirement Benefit Plans" means
the "Puget Sound Power & Light Company Supplemental Retirement Plan for
Officers" and the "Puget Sound Power & Light Company Supplemental Retirement
Plan for Director-Level Employees" effective as of October 1, 1991, and as the
same may thereafter be amended from time to time. 

 

(x) "Year
of Service" means
twelve (12) consecutive months of employment with the Company or its Affiliates,
or with Washington Energy Company or Washington Natural Gas Company. No month of
employment shall be counted in more than one Year of Service. 

 

(y) "WNG
Nonqualified Retirement Benefits" means
the nonqualified pension benefits provided under an employment agreement between
the Participant and Washington Energy Company or Washington Natural Gas Company.

 

2.2 Gender
and Number; Headings. Except
when otherwise indicated by the context, any masculine terminology when used in
this Plan shall also include the feminine gender, and the definition of any term
in the singular shall also include the plural. Headings of Articles and Sections
herein are included solely for convenience, and if there is any conflict between
such headings and the text of the Plan, the text shall control.

 

ARTICLE
III. BENEFITS

 

3.1 Eligibility
for Benefits. 

 

(a) A
Participant whose employment with the Company and its Affiliates terminates (or
is terminated) for any reason other than death after he has completed five (5)
Participant Years of Service, shall be entitled to receive a Retirement Benefit
hereunder (calculated as described in Section 3.2) as of his Normal Commencement
Date. A Participant whose employment terminates or is terminated (voluntarily or
involuntarily) by the Company prior to his completion of five (5) Participant
Years of Service shall not be entitled to any benefit under the Plan. Any
benefit payable under the Plan following a Participant's death shall be governed
by Section 3.4.

 

(b) Notwithstanding
subsection (a) above, any Participant whose employment with the Company and
its Affiliates terminates (or is terminated) after a Change of Control shall be
entitled to receive a Retirement Benefit hereunder (calculated as described in
Section 3.2) as of his Normal Commencement Date, even if he has not completed
five (5) Participant Years of Service as of his Date of
Termination.

 

3.2 Amount
of Benefit. 

 

(a) Except as
provided otherwise in Section 3.5, the Retirement Benefit shall be a monthly
amount payable for the life of the Participant commencing as of the
Participant's Normal Commencement Date equal to (i) below minus the sum of (ii),
(iii), and (iv) below.

 

	 	
      (i)
	
      One-twelfth
      (1/12) of the Participant's Highest Average Earnings times Years of
      Service (not in excess of 15) times three and one-third percent
      (3-1/3%).

 

	 	
      (ii)
	
      The
      monthly amount payable (or that would be payable) under the Retirement
      Plan to the Participant as of the Normal Commencement Date were such
      payment made in the form of a Straight-Life Annuity (as defined in the
      Retirement Plan) commencing on such date).

 

	 	
      (iii)
	
      The
      monthly amount(s) of any WNG Nonqualified Retirement Benefits payable (or
      that would be payable) to the Participant as of his Normal Commencement
      Date in the form of a single life annuity for the life of the Participant
      (or if such benefits are paid or payable as of another date and/or in
      another form, the Actuarial Equivalent monthly amount of such benefit(s)
      calculated as a single life annuity payable for the life of the
      Participant and commencing as of the Participant's Normal Commencement
      Date).

 

	 	
      (iv)
	
      The
      Actuarial Equivalent monthly amount payable (or that would be payable) as
      of the Participant's Normal Commencement Date from any pension-type
      rollover accounts (including without limitation said accounts related to
      the Supplemental Retirement Benefit Plans, or the Annual Cash Balance
      Restoration Matching Account) within the Deferred Compensation
      Plan.

 

(b) The
benefits accrued under the Supplemental Retirement Benefit Plans as of
May 31, 1997 by all participants therein who were at least fifty-one (51)
years of age on May 31, 1997 were transferred to this Plan. The Retirement
Benefit calculated under subsection (a) immediately above for any
Participant shall be paid in lieu of any benefit transferred from a Supplemental
Retirement Benefit Plan to the Plan on behalf of such Participant.
Notwithstanding the foregoing, if the accrued benefit transferred from a
Supplemental Retirement Benefit Plan to this Plan on behalf of a Participant is
greater than the benefit calculated above for such Participant, then such
Participant's Retirement Benefit shall be equal to such transferred
benefit.

 

3.3 Disability. If the
Participant suffers a Disability while he is an employee of the Company or its
Affiliates, then for purposes of Section 3.1 and Section 3.2, his Highest
Average Earnings shall be determined as of the date he incurred his Disability
and his Participant Years of Service, and Years of Service shall be determined
as if he remained employed until his Normal Commencement Date (or Early
Commencement Date, if he elects to commence his Retirement Benefit as of such
date) or the end of his Disability, whichever is earlier. If the Participant is
reemployed after his Disability ends, then for purposes of Section 3.1 and
Section 3.2, his Highest Average Earnings shall be determined as of the date of
his subsequent termination of employment and excluding the period of Disability,
and his Years of Service and Participant Years of Service shall be determined by
adding his period of employment following rehire to the period determined in
accordance with the preceding sentence.

 

3.4 Death.

 

(a) If the
Participant dies (i) while he is actively participating in the Plan or
after he has completed five (5) Participant Years of Service and (ii) such
death occurs on or before the date on which his Retirement Benefit is
distributed (or commences to be distributed), his Beneficiary shall be eligible
for a benefit under this Section 3.4(a); provided that such benefit shall be
payable only to a Beneficiary who is the spouse of the Participant on the date
of death. The spouse Beneficiary shall receive an amount that is the lump-sum
Actuarial Equivalent as of his Normal Commencement Date of the benefit that
would have been payable to the spouse Beneficiary under the fifty percent (50%)
joint and survivor form of payment described in the second sentence of
Section 3.5(a), which benefit shall be calculated by assuming that the
Participant had died the day after his Normal Commencement Date and by using the
actual Participant Years of Service and actual Years of Service completed by the
Participant. (If the Participant is not actively employed immediately prior to
the date of death on account of Disability, the actual years will include the
years of Disability). In addition, if the Participant dies before attaining age
sixty-two (62), the lump sum amount shall be reduced one-third percent (1/3%)
for each month between the date of death and the date the Participant would have
attained age sixty-two (62). Such lump sum shall be paid as soon as
administratively practicable. A benefit shall not be payable pursuant to this
Section 3.4 with respect to a Participant who dies while he is not actively
participating in the Plan and before he has completed five (5) Participant Years
of Service.

 

(b) If the
Participant dies after the date on which his Retirement Benefit is distributed
(or commences to be distributed), his Beneficiary may receive a benefit if the
form in which the Participant's Retirement Benefit is being paid provides for
such benefit.

 

(c) The
Participant shall designate his Beneficiary or Beneficiaries who, upon his
death, will receive payments that otherwise would have been paid to him under
the Plan. All Beneficiary designations shall be in writing and on a form
prescribed by the Committee for such purpose, and any such designation shall
only be effective if and when delivered to the Committee during the lifetime of
the Participant. The Participant may from time to time during his lifetime
change a designated Beneficiary or Beneficiaries by filing a new beneficiary
designation form with the Committee. If a designated Beneficiary dies after the
Participant, but before all death benefit payments relating to such Beneficiary
have been paid, the remainder of such death benefit payments shall be continued
to such Beneficiary's estate. In the event the Participant shall fail to
designate a Beneficiary or Beneficiaries with respect to any death benefit
payments, or if for any reason such designation shall be ineffective, in whole
or in part, or if no designated Beneficiary survives the Participant, any
payment that otherwise would have been paid to such Participant shall be paid to
his estate, and in such event, his estate shall be his Beneficiary with respect
to such payments.

 

3.5 Payment
of Benefits.

 

(a) Normal
Form of Payment. Except
as provided in Section 3.5(b), the Retirement Benefit of a Participant who is
not married on the date as of which such benefit is paid or commences to be paid
shall be distributed to the Participant in the form of a single life, monthly
annuity payable for the life of the Participant. Except as provided in
Section 3.5(b), the Retirement Benefit of a Participant who is married on
the date as of which such benefit is paid or commences to be paid shall be
distributed in the form of a monthly annuity (that is the Actuarial Equivalent
of the amount determined under Section 3.2) providing for monthly payments
to the Participant for the remainder of his life and, following the
Participant's death, monthly payments to the Participant's surviving spouse (if
any), for the remainder of her life, in an amount equal to fifty percent (50%)
of the monthly amount payable to the Participant. 

 

(b) Alternate
Forms of Payment. At any
time that is at least one year before the Participant's Date of Termination, the
Participant may request to receive, or to transfer, the Actuarial Equivalent
value of the Retirement Benefit in one of the methods identified below in lieu
of the normal form of payment described in Section 3.5(a):

 

(1) Lump sum,
paid at a specified date or dates following the Date of
Termination;

 

(2) Straight-life
annuity, beginning at a specified date following the Date of
Termination;

 

(3) Optional
joint and survivor annuity (100%, 50% or 25%), beginning at a specified date
following the Date of Termination; and

 

(4)
 Transfer
of Actuarial Equivalent lump-sum value of the Retirement Benefit to the Deferred
Compensation Plan (and thereafter treated as a voluntary deferral thereunder),
completed as soon as administratively reasonable following the Date of
Termination.

 

The terms
and conditions of the optional joint and survivor annuity form of payment shall
be the same as those for the corresponding annuity under Section 6.6 (or its
successor) of the Retirement Plan. No alternate form of payment shall be
approved that provides for payment of benefits prior to the month following the
month in which the Participant attains age 55. Any request to elect or change an
alternate form of payment within one (1) year of the Participant's Termination
Date shall be null and void; provided, however, that the Board may, in its sole
discretion, waive such one (1) year period with respect to any Participant if
the Board determines that such Participant's circumstances are unusual enough to
warrant such waiver.

 

(c) Early
Commencement Form of Payment. A
Participant whose Date of Termination occurs on or after attaining age 55 is
eligible for payment in accordance with this Section 3.5(c). Any benefit (other
than a benefit payable on account of death or Disability) that becomes payable
prior to the Participant's Normal Commencement Date shall equal the Retirement
Benefit set forth under Section 3.2(a), except that the payment calculated under
Section 3.2(a)(i) shall be further reduced (prior to applying the reductions of
Sections 3.2(a)(ii) through (iv)) by one-third of one percent (.33%) for each
month that benefits commence prior to the beginning of the month coincident with
or next following the date the Participant would attain age sixty-two (62). The
reductions of Section 3.2(a)(ii) through (iv) shall be similarly calculated
based on said early commencement distribution date, notwithstanding any
provision of Section 3.2(a) to the contrary. Except as provided in
Section 3.5(b), the Retirement Benefit of a Participant who is married on
the date as of which such benefit is paid or commences to be paid shall be
distributed in the form of a monthly annuity (that is the Actuarial Equivalent
of the amount determined under Section 3.2) providing for monthly payments
to the Participant for the remainder of his life and, following the
Participant's death, monthly payments to the Participant's surviving spouse (if
any), for the remainder of her life, in an amount equal to fifty percent (50%)
of the monthly amount payable to the Participant. 

 

(d) Distribution
Date. Payment
of Retirement Benefits shall commence as of the Participant's Normal
Commencement Date, except in the case of Disability or death, or if the
Committee has approved an alternate form of payment under Section 3.5(b).
If an alternate form of payment has been approved, payment of Retirement
Benefits shall commence at the time approved by the Committee. A Participant
eligible for early commencement of Retirement Benefits under Section 3.5(c), may
elect on 30 days' written notice to the Committee an Early Commencement Date,
which at the Participant's election may result in an Early Commencement Date
that is on or after the date on which the Participant attains age 55 but before
the date on which the Participant attains age 62. Any such election shall be
irrevocable. Retroactive elections are not permitted. Except in the case of
death or Disability, payment shall not commence prior to the Participant
attaining age 55.

 

The same
distribution date applies (as applicable) if a Participant timely elects, in
writing, to transfer any Retirement Benefits to the Deferred Compensation Plan
in lieu of payment; provided, however, the Participant must elect such a
transfer at least one (1) year prior to the Participant's Date of
Termination in accordance with such rules as the Committee may establish. Any
change to such an election within one (1) year of the Participant's Date of
Termination shall be null and void, unless the change consists of an irrevocable
rescission of the election. Notwithstanding the foregoing, the Committee may, in
its sole discretion, waive the one (1) year election period with respect to
a Participant whose employment is terminated involuntarily by the Company or
whose employment is terminated as a result of Disability within one (1) year
after the Participant files a proper election under this paragraph.

 

3.6 Suspension
of Benefits. If a
Participant who is receiving benefits under this Plan following an Early
Commencement Date is at any time employed directly or indirectly as an employee
or director or agent of, or as an independent contractor or consultant for, an
electric or gas utility (including any federal, state or municipal utility
authority or district) serving retail customers within Washington or Oregon, or
a person or entity supplying or seeking to supply electric power or natural gas
to retail customers within Washington or Oregon, then all benefits payable to
the Participant under this Plan shall be suspended during the period of such
employment; and any benefits received by the Participant during the period of
such employment shall be repaid to the Company. If the employment is
subsequently terminated, benefits hereunder shall resume, but they shall not be
adjusted to reflect the period of suspension. The Committee shall have authority
to waive any of the provisions of this Section 3.6, and to establish the
conditions of any such waiver.

 

ARTICLE
IV. ADMINISTRATION

 

4.1 Administration. This
Plan shall be administered by the Committee or any individuals) or committee(s)
appointed by the Committee. The Committee shall administer this Plan as an
unfunded plan which is not intended to meet the qualification requirements of
Code Section 401. The Committee shall have the full power and authority
(discretionary and otherwise) to interpret, construe, and administer this Plan
in its sole discretion and to make final and binding determinations for all
parties. The Committee shall establish and maintain such accounts or records as
the Committee may from time to time consider necessary or convenient for the
administration of the Plan.

 

4.2 Claims
Procedure. A
Participant or Beneficiary, as applicable, who feels he is entitled to greater
benefits than he is receiving (or has received) under the Plan may file a
written claim with the Company's Qualified Plans Committee (the "QPC"), which
shall consider such claim and notify the claimant in writing of it decision with
respect thereto within ninety (90) days (or within such longer period not to
exceed one hundred eighty (180) days, as the QPC determines is necessary to
review the claim, provided that the QPC notifies the claimant in writing of the
extension within the original ninety (90) day period). If the claim is denied,
in whole or in part, the claimant may appeal such denial to the Committee,
provided he does so in writing within sixty (60) days of receiving the QPC's
determination. The Committee shall consider the appeal and notify the claimant
in writing of its decision with respect thereto within sixty (60) days (or
within such longer period not to exceed one hundred twenty (120) days as the
Committee determines is necessary to review the appeal, provided that the
Committee notifies the claimant in writing of the extension within the original
sixty (60) day period).

 

4.3 Finality
of Determination. The
determination of the Committee with respect to any question arising out of or in
connection with the administration, interpretation, and application of the Plan
shall be final, binding, and conclusive upon all persons and shall be given the
greatest deference permitted by law.

 

4.4 Expenses. The
expenses of administering this Plan shall be borne by the Company.

 

4.5 Indemnification
and Exculpation. The
members of the Committee, its agents and officers, directors, and employees of
the Company or any of its Affiliates shall be indemnified and held harmless by
the Company against and from any and all loss, cost, liability, or expense that
may be imposed upon or reasonably incurred by them in connection with or
resulting from any claim, action, suit, or proceeding to which they may be a
party or in which they may be involved by reason of any action taken or failure
to act under this Plan, and against and from any and all amounts paid by them in
settlement (with the Company's written approval) or paid by them in satisfaction
of a judgment in any such action, suit, or proceeding; provided, however, that
the foregoing provision shall not be applicable to any person if the loss, cost,
liability, or expense is due to such person's gross negligence or willful
misconduct.

 

ARTICLE
V. FUNDING OF THE PLAN

 

All
amounts paid under this Plan shall be paid from the general assets of the
Company. Benefits shall be reflected on the accounting records of the Company,
but neither this Plan nor the maintenance of such accounting records shall be
construed to affect, require, or prohibit the creation of a trust, custodial
account, or escrow account with respect to the Participant. The Participant
shall not have any right, title, or interest whatsoever in or to any investment
reserves, accounts, or funds that the Company may purchase, establish, or
accumulate to aid in providing the unfunded benefit payments described in the
Plan. Nothing contained in this Plan, and no action taken pursuant to its
provisions, shall create, or be construed to create, a trust or fiduciary
relationship of any kind between the Company, the Board, the Committee or the
QPC and any Participant or any other person. Participants and Beneficiaries
shall have the status of general unsecured creditors of the
Company.

 

ARTICLE
VI. AMENDMENT AND TERMINATION

 

The Board
or such person or persons, including the Committee, as may be designated by the
Board may amend, modify, or terminate this Plan at any time and in any manner;
provided, however, that no amendment, modification, or termination shall reduce
benefits accrued prior to such action. In the event of a termination of the Plan
pursuant to this Article VI, no further benefits shall accrue under this
Plan, but amounts which are then payable shall continue to be an obligation of
the Company and shall be paid as scheduled.

 

ARTICLE
VII. GENERAL PROVISIONS

 

7.1 Nonalienation. No
benefit payable at any time under the Plan shall be subject in any manner to
voluntary or involuntary alienation, sale, transfer, assignment, pledge,
attachment, garnishment, or encumbrance of any kind, and shall not be subject to
or reached by any legal or equitable process (including execution, garnishment,
attachment, pledge, or bankruptcy) in satisfaction of any debt, liability, or
obligation, prior to receipt. Any attempt to alienate, sell, transfer, assign,
pledge, or otherwise encumber any such benefit, whether presently or thereafter
payable, shall be void. Notwithstanding the foregoing provisions of this Section
7.1, the Company shall have the right to offset the benefit amount payable under
the Plan by any and all amounts representing debts or other obligations owed to
the Company or any of its Affiliates by the Participant.

 

7.2 Severability. In the
event any provision of this Plan shall be held invalid or illegal for any
reason, such illegality or invalidity shall not affect the remaining parts of
this Plan, but this Plan shall be construed and enforced as if the illegal or
invalid provision had never been inserted, and the Board and any other person
authorized to amend the Plan in accordance with Section 6.1 shall have the
privilege and opportunity to correct and remedy such questions of illegality or
invalidity, in whatever manner they deem appropriate in their discretion, by
amendment as provided in this Plan.

 

7.3 Employer-Employee
Relationship. The
establishment of this Plan shall not be construed as conferring any legal or
other rights upon the Participant for a continuation of employment, nor shall it
interfere with the rights of the Company and its Affiliates to discharge the
Participant or otherwise act with relation to him. The Company and its
Affiliates may take any action (including discharge) with respect to the
Participant and may treat such person without regard to the effect which such
action or treatment might have upon such person as the Participant under this
Plan.

 

7.4 Incompetence. Every
person receiving or claiming benefits under the Plan shall be conclusively
presumed to be mentally competent until the date on which the Committee receives
a written notice, in a form and manner acceptable to the Committee, that such
person is incompetent, and that a guardian, conservator, or other person legally
vested with the care of such person's person or estate has been appointed;
provided, however, that if the Committee shall find that any person to whom a
benefit is payable under the Plan is unable to care for such person's affairs
because of incompetency, any payment due (unless a prior claim therefor shall
have been made by a duly appointed legal representative) may be paid to a third
party as the Committee deems appropriate. Any such payment so made shall be a
complete discharge of liability therefor under the Plan.

 

7.5 Binding
on Company, Participant, and Their Successors. This
Plan shall be binding upon and inure to the benefit of the Company, its
successors, and assigns and the Participant, his heirs, executors,
administrators, and legal representatives.

 

7.6 Withholdings
and Deductions. The
Company may withhold from any payment of benefits hereunder any taxes required
to be withheld and such sum as the Company may reasonably estimate to be
necessary to cover any taxes which may be assessed with regard to benefits
provided under the Plan. In addition, the Company may deduct from any payment of
benefits hereunder any amounts owed by the Participant to the Company or any of
its Affiliates.

 

7.7 Applicable
Law. This
Plan shall be governed and construed in accordance with the laws of the State of
Washington to the extent not preempted by federal law.PSE Deferred Comp. Plan for Key Employees

 

Exhibit
10.56

 

 

PUGET
SOUND ENERGY

 

 

DEFERRED
COMPENSATION PLAN

FOR
KEY EMPLOYEES

 

 

As
Amended and Restated

Effective
January 1, 2003

 

 

 

 

 

TABLE
OF CONTENTS

 

PURPOSE

1.   Definitions

2.   Selection;
Enrollment; Participation

2.1    Selection
by Committee

2.2    Enrollment
Requirements

2.3    Eligibility;
Commencement of Participation

2.4    Termination
of Participation and/or Deferrals

3.   Deferral
Elections; Company Contributions

3.1    Annual
Elections to Defer

3.2    Special
Elections to Defer

 
 (a)    Election
to Defer Qualifying Gain

 
 (b)    Election
to Defer Restricted Stock Awards

3.3    Withholding
of Annual Deferral Amounts

3.4    Annual
Company Contribution Amount

3.5    Annual
Investment Plan Restoration Amount

3.6    Annual
Cash Balance Restoration Amount

3.7    SERP
Rollover Amount

3.8    Performance-Based
Retirement Equivalent Amount

3.9    Deduction
Limitation Amounts

4.   Vesting;
Crediting; Taxes

4.1    Vesting

4.2    Crediting
or Debiting of Account Balances

  
(a)    Selection
of Measurement Funds

  
(b)    Crediting
of Measurement Funds

  
(c)    Form of
Payment

  
(d)    No Actual
Investment

4.3    FICA and
Other Taxes

4.4    Withholding
on Payments

5.   Interim
Payments; Unforeseeable Financial Emergencies; Withdrawal Election

5.1    Interim
Payments

5.2    Other
Benefits Take Precedence Over Interim Payments

5.3    Payments
and Suspensions for Unforeseeable Financial Emergencies

5.4    Withdrawal
Election

6.   Retirement
Benefit

6.1    Retirement
Benefit

6.2    Payment
of Retirement Benefit

6.3    Death
Prior to Completion of Retirement Benefit

7.   Death
Prior to Retirement

7.1    Pre-Retirement
Survivor Benefit

7.2    Payment
of Pre-Retirement Survivor Benefit

8.   Termination

8.1    Termination
Benefit

8.2    Payment
of Termination Benefit

9.   Disability;
Leave of Absence

9.1    Disability
Waiver

9.2    Continued
Eligibility; Disability Benefit

9.3    Paid
Leave of Absence

9.4    Unpaid
Leave of Absence

10.      
Beneficiary
Designation

10.1    Beneficiary

10.2    Change;
Spousal Consent

10.3    No
Beneficiary Designation

10.4    Doubt as
to Beneficiary

10.5    Discharge
of Obligations

11.      
Termination;
Amendment or Modification

11.1    Termination

11.2    Amendment

11.3    Effect of
Payment

12.      
Administration

12.1    Committee
Duties

12.2    Administrative
Committee; Agents

12.3    Binding
Effect of Decisions

12.4    Indemnity
of Committee and Administrative Committee

13.      
Other
Benefits and Agreements

14.      
Claims
Procedures

14.1    Filing
Claim

14.2    Claim
Review

14.3    Appeal

14.4    Standard
of Review

14.5    Legal
Action

15.      
Trust

15.1    Establishment
of the Trust

15.2    Relationship
of This Plan and the Trust

15.3    Distributions
From the Trust

16.      
Miscellaneous

16.1         
Status of
Plan

16.2         
Unsecured
General Creditor

16.3         
Employer's
Liability

16.4         
Nonassignability

16.5         
Not a
Contract of Employment

16.6         
Furnishing
Information

16.7         
Captions

16.8         
Governing
Law

16.9         
Notice

16.10       
Successors

16.11       
Validity

16.12       
Incompetence

16.13       
Court
Order

16.14       
Distribution
in the Event of Taxation

     (a)    In
General

     (b)    Trust

16.15        Insurance

 

 

 

PUGET
SOUND ENERGY

DEFERRED
COMPENSATION PLAN

FOR
KEY EMPLOYEES

 

As
Amended and Restated Effective January 1, 2003

 

PURPOSE

 

The
growth and success of Puget Sound Energy, Inc. (the "Company") depends on its
ability to attract, motivate and retain key employees of the highest competence,
initiative, and ability. The purpose of this Plan is to advance the interests of
the Company and its shareholders through a deferred compensation program for a
select group of management and highly compensated executive officers. This Plan
shall be unfunded for tax purposes and for purposes of Title I of ERISA.
This Plan was originally effective June 16, 1997. This Plan was most
recently amended and restated effective January 1, 2002 and is now amended and
restated effective January 1, 2003.

 

	
      1.
	
      Definitions

 

For
purposes of this Plan, the following words and phrases shall have the meanings
indicated, unless a different meaning is clearly indicated by the
context:

 

	 	
      1.1
	
      Account
      Balance

 

"Account
Balance" shall mean a credit on the records of the Employer equal to the sum of
the balances in a Participant's (i) Deferral Account, (ii) Company
Contribution Account, (iii) Investment Plan Restoration Matching Account,
(iv) Cash Balance Restoration Matching Account, and
(v) Performance-Based Retirement Equivalent Account. The Account Balance,
and each other specified account balance, shall be a bookkeeping entry only and
shall be utilized solely for the determination of amounts due to a Participant
or Beneficiary under this Plan.

 

	 	
      1.2
	
      Annual
      Bonus

 

"Annual
Bonus" shall mean compensation under an Employer's annual bonus or cash
incentive plans for services performed during any calendar year, excluding stock
options and any Long-Term Incentive Awards, whether or not paid in such year or
included on the federal income tax Form W-2 for such year.

 

	 	
      1.3
	
      Annual
      Cash Balance Restoration Amount

 

"Annual
Cash Balance Restoration Amount" shall mean, for any Plan Year, the amount
determined in accordance with Section 3.6.

 

	 	
      1.4
	
      Annual
      Company Contribution Amount

 

"Annual
Company Contribution Amount" shall mean, for any Plan Year, the amount
determined in accordance with Section 3.4.

 

	 	
      1.5
	
      Annual
      Deferral Amount

 

"Annual
Deferral Amount" shall mean that portion of Base Salary, Annual Bonus and
Long-Term Incentive Awards that a Participant defers in accordance with
Section 3 for any Plan Year. If a Participant dies, Retires, suffers a
Disability (if deferrals cease in accordance with Section 9.1) or undergoes
a Termination of Employment during a Plan Year, the Annual Deferral Amount for
the year shall be the amount deferred prior to such event.

 

	 	
      1.6
	
      Annual
      Installment Method

 

"Annual
Installment Method" shall mean yearly installments payable in substantially
equal number of shares as described in Sections 6 and 7. Each annual
installment shall be paid on or as soon as practicable after the last business
day of the applicable year.

 

	 	
      1.7
	
      Annual
      Investment Plan Restoration Amount

 

"Annual
Investment Plan Restoration Amount" for any Plan Year shall mean the amount
determined in accordance with Section 3.5.

 

	 	
      1.8
	
      Base
      Salary

 

"Base
Salary" shall mean cash compensation for services, excluding any Annual Bonus,
any Long-Term Incentive Award and any other bonuses, commissions, overtime pay,
fringe benefits, stock options, relocation expenses, incentive payments,
nonmonetary awards, directors fees and other fees, and automobile and other
allowances. Base Salary shall be calculated before reduction for compensation
voluntarily deferred or contributed by the Participant pursuant to this Plan or
other qualified or nonqualified plans of any Employer and shall include amounts
excluded from compensation pursuant to Code Sections 125, 402(e)(3),
402(h), and 403(b).

 

	 	
      1.9
	
      Beneficiary

 

"Beneficiary"
shall mean one or more individuals, trusts, estates or other entities,
designated in accordance with Article 10 to receive benefits under this
Plan upon the death of a Participant.

 

	 	
      1.10
	
      Board

 

"Board"
shall mean the board of directors of the Company.

 

	 	
      1.11
	
      Cash
      Balance Plan

 

"Cash
Balance Plan" shall mean the Retirement Plan for Employees of Puget Sound
Energy, Inc., originally known as the Retirement Plan for Employees of Puget
Sound Power & Light Company, established by Puget Sound
Power & Light Company in 1958, as amended and restated effective
March 1, 1997.

 

	 	
      1.12
	
      Cash
      Balance Restoration Account

 

"Cash
Balance Restoration Account" shall mean an account on the books of the Employer
that reflects (i) the sum of the Participant's Annual Cash Balance
Restoration Amounts, plus (ii) amounts credited to the Participant's Cash
Balance Restoration Account in accordance with the crediting provisions of this
Plan, less (iii) all distributions made to the Participant or the
Participant's Beneficiary from the Participant's Cash Balance Restoration
Account.

 

	 	
      1.13
	
      Change
      in Control

 

"Change
in Control" shall mean the first occurrence of any of the following
events:

 

(a) Any
"person" (as that term is used in Sections 13 and 14(d)(2) of the
Securities Exchange Act of 1934 ("Exchange Act")) becomes the beneficial owner
(as that term is used in Section 13(d) of the Exchange Act), directly or
indirectly, of 50% or more of the Company's capital stock entitled to vote in
the election of directors; provided, however, that the following acquisitions of
beneficial ownership shall not constitute a Change in Control: (i) an
acquisition by the Company or by any entity related to the Company within the
meaning of Code Section 414(b), (c), (m) or (o); or (ii) an
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or by any such related entity;

 

(b) During
any period of not more than two consecutive years, not including any period
prior to the adoption of this Plan, individuals who at the beginning of such
period constitute the board of directors of the Company, and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (a), (c), (d)
or (e) of this Section 1.13) whose election by the board of directors or
nomination for election by the Company's shareholders was approved by a vote of
at least three-fourths (3/4ths) of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute at
least a majority thereof;

 

(c) The
shareholders of the Company approve any consolidation or merger of the Company,
other than a consolidation or merger of the Company in which the holders of the
common stock of the Company immediately prior to the consolidation or merger
hold more than 50% of the common stock of the surviving corporation immediately
after the consolidation or merger;

 

(d) The
shareholders of the Company approve any plan or proposal for the liquidation or
dissolution of the Company; or

 

(e) The
shareholders of the Company approve the sale or transfer of all or substantially
all of the assets of the Company to parties that are not within a "controlled
group of corporations" (as defined in Code Section 1563) in which the
Company is a member.

 

	 	
      1.14
	
      Claimant

 

"Claimant"
shall have the meaning set forth in Section 14.1.

 

	 	
      1.15
	
      Code

 

"Code"
shall mean the Internal Revenue Code of 1986, as it may be amended from time to
time.

 

	 	
      1.16
	
      Committee

 

"Committee"
shall mean the committee described in Article 12, and, if an Administrative
Committee has been appointed pursuant to Section 12.2 shall include such
Administrative Committee.

 

	 	
      1.17
	
      Company

 

"Company"
shall mean Puget Sound Energy, Inc., a Washington corporation, and any successor
to all or substantially all of the Company's assets or business.

 

	 	
      1.18
	
      Company
      Contribution Account

 

"Company
Contribution Account" shall mean an account on the books of the Company that
reflects (i) the sum of the Participant's Annual Company Contribution
Amounts, plus (ii) amounts credited to the Participant's Company
Contribution Account in accordance with the crediting provisions of this Plan,
less (iii) all distributions made to the Participant or the Participant's
Beneficiary from the Participant's Company Contribution Account.

 

	 	
      1.19
	
      Deduction
      Limitation

 

"Deduction
Limitation" shall mean the limitation on deductible compensation that is
described in Section 162(m) of the Code.

 

	 	
      1.20
	
      Deferral
      Account

 

"Deferral
Account" shall mean an account on the books of the Company that reflects
(i) the sum of a Participant's Annual Deferral Amounts and the amount of
deferral of Qualifying Gain and deferral of Restricted Stock Awards, plus
(ii) amounts credited to the Participant's Deferral Account in accordance
with the applicable crediting provisions of this Plan, less (iii) all
distributions made to the Participant or the Participant's Beneficiary from the
Participant's Deferral Account.

 

	 	
      1.21
	
      Disability

 

"Disability"
shall mean a period of disability during which a Participant qualifies for
long-term disability benefits under an Employer's long-term disability plan, or,
if the Participant does not participate in such a plan, a period of disability
during which the Participant would have qualified for long-term disability
benefits under such a plan had the Participant been a participant in such a
plan, as determined in the sole discretion of the Committee. If the
Participant's Employer does not sponsor such a plan, or discontinues sponsorship
of such a plan, the Committee in its sole discretion shall determine Disability.
Disability does not include any period of short-term disability under any plan
of an Employer providing for short-term disability benefits.

 

	 	
      1.22
	
      Disability
      Benefit

 

"Disability
Benefit" shall mean the benefit set forth in Section 9.2.

 

	 	
      1.23
	
      Employee

 

"Employee"
shall mean an individual who is an employee of any Employer.

 

	 	
      1.24
	
      Employer

 

"Employer"
shall mean the Company and shall include any of its subsidiaries (now in
existence or hereafter formed or acquired) that have been selected by the Board
to participate in this Plan and that have adopted this Plan.

 

	 	
      1.25
	
      ERISA

 

"ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as it may be
amended from time to time.

 

	 	
      1.26
	
      Exchange
      Act

 

"Exchange
Act" shall mean the Securities Exchange Act of 1934, as amended.

 

	 	
      1.27
	
      Exercised
      Options

 

"Exercised
Options" shall have the meaning set forth in
Section 3.2(a)(ii).

 

	 	
      1.28
	
      Fair
      Market Value

 

"Fair
Market Value" shall mean the average of the daily high and low per share trading
prices for the Stock as reported daily by the New York Stock Exchange in
The
Wall Street Journal or
similar readily available source, for a single trading day.

 

	 	
      1.29
	
      Fixed
      Amount Installment Method

 

"Fixed
Amount Installment Method" shall mean installment payments of a fixed amount
selected by the Participant as prescribed in Sections 6 and 7. The fixed
payments shall be paid until the Participant's Account Balance reaches zero.
Each fixed installment shall be paid on or as soon as practicable after the due
date for the installment.

 

	 	
      1.30
	
      Interim
      Payment

 

"Interim
Payment" shall mean the payment described in Section 5.1.

 

	 	
      1.31
	
      Investment
      Plan

 

"Investment
Plan" shall mean the Investment Plan for Employees of Puget Sound Energy, Inc.,
formerly known as the Investment Plan for Employees of Puget Sound
Power & Light Company, originally adopted effective August 1, 1970, as
amended and restated, as adopted by the Company effective March 1,
1997.

 

	 	
      1.32
	
      Investment
      Plan Restoration Account

 

"Investment
Plan Restoration Account" shall mean (i) the sum of a Participant's Annual
Investment Plan Restoration Amounts, plus (ii) amounts credited to the
Participant's Investment Plan Restoration Account in accordance with the
applicable crediting provisions of this Plan, less (iii) all distributions
made to the Participant or the Participant's Beneficiary from the Participant's
Investment Plan Restoration Account.

 

	 	
      1.33
	
      Long-Term
      Incentive Award

 

"Long-Term
Incentive Award" shall mean amounts paid or payable to a Participant under the
Company's Long-Term Incentive Award Plan, originally established by Puget Sound
Power & Light Company in 1995 and amended effective May 19,
1997.

 

	 	
      1.34
	
      Measurement
      Funds

 

"Measurement
Funds" shall mean the funds described in Section 4.2.

 

	 	
      1.35
	
      Monthly
      Installment Method

 

"Monthly
Installment Method" shall mean a monthly installment payment over the number of
months selected by the Participant in accordance with Articles 6 and 7,
calculated as provided in this Section 1.35. The Account Balance of the
Participant shall be calculated as of the close of business not more than 10
business days prior to the last business day of the month. The monthly
installment shall be calculated by multiplying this balance by a fraction, the
numerator of which is one and the denominator of which is the remaining number
of monthly payments due the Participant. By way of example, if the Participant
elects a 120-month Monthly Installment Method, the first payment shall be 1/120
of the Account Balance, calculated as described in this definition. The
following month, the payment shall be 1/119 of the Account Balance, calculated
as described in this definition. Each monthly installment shall be paid on or as
soon as practicable after the last business day of the applicable
month.

 

	 	
      1.36
	
      Nonqualified
      Stock Options

 

"Nonqualified
Stock Options" means those nonqualified stock options of the Company awarded to
a Participant in the form of a Long-Term Incentive Award or
otherwise.

 

	 	
      1.37
	
      Participant

 

"Participant"
shall mean an Employee who is selected to participate in this Plan and who
elects to participate in this Plan. Status as a Participant shall continue for
as long as the individual has an Account Balance under this Plan, even if the
Participant is no longer an Employee. A spouse or former spouse of a Participant
shall not be treated as a Participant even if such spouse has an interest in the
Participant's benefits under this Plan. Notwithstanding this Section 1.37
to the contrary, an Employee shall be treated as a Participant for all purposes
under this Plan to the extent that amounts have been deferred into this Plan
pursuant to Section 3.9 on behalf of the Employee.

 

	 	
      1.38
	
      Performance-Based
      Retirement Equivalent Account

 

"Performance-Based
Retirement Equivalent Account" shall mean an account on the books of the Company
that reflects (i) the sum of a Participant's Performance-Based Retirement
Equivalent Amount, plus (ii) amounts credited in accordance with the
applicable crediting provisions of this Plan, less (iii) all distributions
made to the Participant or the Participant's Beneficiary from such
account.

 

	 	
      1.39
	
      Performance-Based
      Retirement Equivalent Amount

 

"Performance-Based
Retirement Equivalent Amount" shall mean, for any Plan Year, the amount
determined in accordance with Section 3.8.

 

	 	
      1.40
	
      Plan

 

"Plan"
shall mean this Deferred Compensation Plan for Key Employees, as it may be
amended from time to time.

 

	 	
      1.41
	
      Plan
      Year

 

"Plan
Year" shall mean, except for the first Plan Year, a period beginning on
January 1 of each year and continuing through December 31 of such
year.

 

	 	
      1.42
	
      Pre-Retirement
      Survivor Benefit

 

"Pre-Retirement
Survivor Benefit" shall mean the benefit set forth in
Article 7.

 

	 	
      1.43
	
      Qualifying
      Gain

 

"Qualifying
Gain" means the shares, net of any shares withheld pursuant to Section 4.3,
accrued on behalf of a Participant upon his or her exercise of Nonqualified
Stock Options using the stock-for-stock cashless payment method set forth in
Section 3.2(a).

 

	 	
      1.44
	
      Restricted
      Stock Awards

 

"Restricted
Stock Awards" shall mean amounts paid or payable to a Participant in the form of
restricted stock or restricted stock units, other than Long-Term Incentive
Awards.

 

	 	
      1.45
	
      Retirement,
      Retire(s), Retired

 

"Retirement,"
"Retire(s)" or "Retired" shall mean, with respect to an Employee, Termination of
Employment as an Employee for any reason other than Disability, death or an
authorized leave of absence on or after the earlier of the attainment of
(a) age 62 or (b) age 55 with 5 Years of Service.

 

	 	
      1.46
	
      Retirement
      Benefit

 

"Retirement
Benefit" shall mean the benefit set forth in Article 6.

 

	 	
      1.47
	
      Section 16
      Insider

 

"Section 16
Insider" shall mean any participant who is, with respect to the Company, subject
to Section 16 of the Exchange Act.

 

	 	
      1.48
	
      SERP
      Rollover Account

 

"SERP
Rollover Account" shall mean an account on the books of the Company that
reflects (i) a Participant's SERP Rollover Amounts, plus (ii) amounts
credited to the Participant's SERP Rollover Account in accordance with the
applicable crediting provisions of this Plan, less (iii) all distributions
made to the Participant or the Participant's Beneficiary from the Participant's
SERP Rollover Account.

 

	 	
      1.49
	
      SERP
      Rollover Amount

 

"SERP
Rollover Amount" for any Plan Year shall mean the amount determined in
accordance with Section 3.7.

 

	 	
      1.50
	
      Specified
      Amount Installment Method

 

"Specified
Amount Installment Method" means installment payments according to a schedule
prepared by the Participant and in a form and amount acceptable to the Company's
Executive Plans Committee. The amounts of each installment payment need not be
equal. Installment payments shall continue until the earlier of (a) the
exhaustion of the Participant's Account Balance, and (b) the period elected
by the Participant. The installment payments shall be made monthly for cash
amounts and annually for stock amounts.

 

	 	
      1.51
	
      Stock

 

"Stock"
shall mean the common stock of the Company's patent, Puget Energy, Inc., that is
traded on the New York Stock Exchange or the common stock of any successor to
Puget Energy, Inc. that is publicly traded. All references in this Plan to
"Puget Energy, Inc." shall be deemed to include its successor. To the extent
such successor's stock is traded on an exchange other than the New York Stock
Exchange, all references in the Plan to "New York Stock Exchange" shall be
deemed to include such other exchange.

 

	 	
      1.52
	
      Stock
      Fund

 

"Stock
Fund" shall mean the Measurement Fund that corresponds to the fair market value
of Stock.

 

	 	
      1.53
	
      Termination
      Benefit

 

"Termination
Benefit" shall mean the benefit set forth in Article 8.

 

	 	
      1.54
	
      Termination
      of Employment

 

"Termination
of Employment" shall mean severance of employment as an Employee, voluntarily or
involuntarily, for any reason other than Disability, death or an authorized
leave of absence.

 

	 	
      1.55
	
      Trust

 

"Trust"
shall mean one or more trusts established pursuant to that certain Master Trust
Agreement, dated as of June 16, 1997, between the Company and The Bank of
New York as trustee, as amended from time to time.

 

	 	
      1.56
	
      Trustee

 

"Trustee"
shall mean the financial institution acting at the time as trustee of the
Trust.

 

	 	
      1.57
	
      Unforeseeable
      Financial Emergency

 

"Unforeseeable
Financial Emergency" shall mean an unanticipated severe financial hardship to
the Participant resulting from (i) a sudden and unexpected illness of or
accident to the Participant or a dependent of the Participant, (ii) a loss
of the Participant's residence or other property due to casualty, or
(iii) other extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant, all as determined in the
sole discretion of the Committee.

 

	 	
      1.58
	
      Years
      of Service

 

"Years of
Service" shall mean the total number of years in which one or more Employers
have employed a Participant. For purposes of this definition, an "Employer"
includes the Company, Puget Sound Power & Light Company, Washington
Energy Company, Washington Natural Gas Company and any subsidiary of any of
them. Also for purposes of this definition, a year of employment shall be a
365-day period (or 366-day period in the case of a leap year) that, for the
first year of employment, commences on the Employee's date of hiring and that,
for any subsequent year, commences on the anniversary of that hiring date. Any
partial year of employment shall not be counted.

 

	
      2.
	
      Selection;
      Enrollment; Participation

 

	 	
      2.1
	
      Selection
      by Committee

 

Participation
in this Plan shall be limited to a select group of management and highly
compensated Employees chosen for participation by the Committee in its sole
discretion.

 

	 	
      2.2
	
      Enrollment
      Requirements

 

Each
Employee selected for participation in this Plan shall complete and return to
the Committee an election form, a beneficiary designation form and such other
material as the Committee may request, within 30 days after selection to
participate.

 

	 	
      2.3
	
      Eligibility;
      Commencement of Participation

 

An
Employee selected to participate in this Plan shall commence participation on
the first day of the month following the month in which the Employee completes
all enrollment requirements. An Employee who does not complete the requirements
within the time required in Section 2.2 shall not be eligible to
participate in this Plan until the first day of the Plan Year following delivery
to and acceptance by the Committee of the required forms, except to the extent
participation is required by Section 3.9.

 

	 	
      2.4
	
      Termination
      of Participation and/or Deferrals

 

If the
Committee determines that a Participant no longer qualifies for participation in
this Plan, it shall have the right, in its sole discretion, to take all or any
of the following steps: (i) terminate any deferral election the Participant
has made for the remainder of the Plan Year, (ii) disallow future deferral
elections by the Participant, and (iii) distribute the Participant's
Account Balance as a Termination Benefit and terminate the Participant's
participation in this Plan. Notwithstanding the foregoing, an individual shall
remain a Participant for as long as he or she has an Account Balance in this
Plan.

 

	
      3.
	
      Deferral
      Elections; Company Contributions

 

	 	
      3.1
	
      Annual
      Elections to Defer

 

An
Employee first selected to participate in this Plan may make an irrevocable
election to defer all or a designated portion of Base Salary, Annual Bonus and
any Long-Term Incentive Award that may be payable for such Plan Year. The
election shall not be effective with respect to amounts already paid during such
Plan Year. The Participant must deliver a completed election form to the
Committee within 30 days after selection, in order to participate for such
Plan Year.

 

For each
succeeding Plan Year, the Participant may make an irrevocable election to defer
all or a designated portion of Base Salary, Annual Bonus and any Long-Term
Incentive Award that may be payable for such Plan Year by delivering to the
Committee a new election form by December 31 of the preceding Plan Year. If
no election form is timely delivered to the Committee for any Plan Year, the
Participant's Annual Deferral Amount for that Plan Year shall be
zero.

 

	 	
      3.2
	
      Special
      Elections to Defer

 

	 	
      (a)
	
      Election
      to Defer Qualifying Gain

 

A
Participant may make an election to defer all or a designed portion of
Qualifying Gain derived from a specific grant of Nonqualified Stock Options in
exchange for a credit to the Participant's Deferral Account upon satisfaction of
the following conditions:

 

	 	
      (i)
	
      such
      deferral election is irrevocable, in a form acceptable to the Committee,
      and completed and signed by the
Participant;

 

	 	
      (ii)
	
      such
      deferral election is delivered to and accepted by the Committee at least
      six months before the date on which the Participant elects to exercise
      Nonqualified Stock Options ("Exercised Options"), or such earlier date
      required by the Committee;

 

	 	
      (iii)
	
      the
      Participant pays, through an attestation acceptable to the Committee, the
      exercise price in shares of Stock that the Participant owns and has
      continuously owned for the six-month period ending on the date of
      exercise; and

 

	 	
      (iv)
	
      the
      Participant complies with all other rules the Committee may establish from
      time to time with respect to such deferral
elections.

 

A
deferral election under this Section 3.2(a) shall expire at any time
elected by a Participant therein and shall automatically be revoked upon a
Participant's Termination of Employment or Disability, in the event of a Change
in Control, or at any other time determined by the Committee.

 

This Plan
governs the deferral of Qualifying Gain. The underlying Nonqualified Stock
Options are governed by the stock option plan or program under which they were
granted. No stock options or shares of Stock are authorized to be issued under
this Plan.

 

	 	
      (b)
	
      Election
      to Defer Restricted Stock Awards

 

Subject
to the conditions set forth in this Section 3.2(b), a Participant may
irrevocably elect within the first 30 days after the Participant has been
granted a Restricted Stock Award, or pursuant to such other procedures as the
Committee may adopt, to defer all or any portion of such Restricted Stock Award.
A Participant's election to defer a Restricted Stock Award shall be effective
only for the restricted stock or restricted stock units to which the election
relates and shall not carry over from award to award. The portion of a
Participant's Deferral Account shall be subject to the same risk of forfeiture
as the restricted shares to which such deferrals relate.

 

A
Participant's election to defer restricted stock must be in a form acceptable to
the Committee, and completed and signed by the Participant. The Participant must
comply with all other rules the Committee may establish from time to time with
respect to such deferral elections. 

 

	 	
      3.3
	
      Withholding
      of Annual Deferral Amounts

 

Base
Salary, Annual Bonus and Long-Term Incentive Awards deferred under this Plan
shall be withheld at the time they otherwise would be paid to the Participant,
whether or not this occurs during the Plan Year itself.

 

	 	
      3.4
	
      Annual
      Company Contribution Amount

 

For each
Plan Year, an Employer in its sole discretion may credit any amount it
determines to a Participant's Company Contribution Account under this Plan. Such
amount shall be the Annual Company Contribution Amount for the Participant for
that Plan Year. The Employer may credit different amounts for different
Participants. A credit awarded to one Participant shall not bind the Employer to
credit any amount to any other Participant. An Annual Company Contribution
Amount shall be credited as of the last day of the Plan Year. If a Participant
is not an Employee as of the last day of a Plan Year other than by reason of
Retirement or death, the Annual Company Contribution Amount for that Plan Year
shall be zero.

 

	 	
      3.5
	
      Annual
      Investment Plan Restoration Amount

 

A
Participant's Annual Investment Plan Restoration Amount for any Plan Year shall
be equal to the reduction in Employee contributions to the Investment Plan that
are attributable to the Participant's election to defer Base Salary or Annual
Bonus under this Plan, credited monthly, plus an amount equal to the sum of
(i) Employer matching contributions that would have been credited to the
Participant's account under the Investment Plan but for the reduction in
Employee contributions to that Plan, credited monthly, (ii) Employer
required contributions that would have been credited to the Participant's
account under the Investment Plan but for the reduction in Employee compensation
due to deferrals hereunder, and (iii) Employer required contributions that
would have been credited to the Participant's account under the Investment Plan
but for the limitations in Section 401(k)(3) of the Code and may have been
credited monthly. If a Participant is not an Employee as of the last day of a
Plan Year for any reason other than Retirement or death, any Annual Investment
Plan Restoration Amount for such Plan Year and not previously credited monthly
shall be zero. If a Participant Retires or dies during a Plan Year, any Annual
Investment Plan Restoration Amount not previously credited monthly shall be
credited with a prorated amount, based on the Participant's contributions
through the date of Retirement or death.

 

	 	
      3.6
	
      Annual
      Cash Balance Restoration Amount

 

If a
Participant is eligible to participate in the Cash Balance Plan and
contributions to his or her account under such Plan, or his or her accrued
benefit under such Plan, are reduced for any Plan Year in order to satisfy the
limitations in Code Section 415(e), or if contributions to the
Participant's account under the Cash Balance Plan are reduced in any Plan Year
as a result of the Participant's election to defer Base Salary or Annual Bonus
under this Plan, then in any such case the Participant's Cash Balance
Restoration Account shall be credited with an amount that is equal to or (as
determined by the Committee in its discretion) is the actuarial equivalent of
such reductions. The amount so credited shall be the Annual Cash Balance
Restoration Amount for that Participant. If a Participant is not employed by an
Employer as of the last day of a Plan Year other than by reason of Retirement or
death, the Annual Cash Balance Restoration Amount for such Plan Year shall be
zero. If a Participant Retires or dies during a Plan Year, the Annual Cash
Balance Restoration Amount shall be credited with a prorated amount based on the
Participant's deferred Base Salary or Annual Bonus for such Plan Year through
the date of Retirement or death.

 

	 	
      3.7
	
      SERP
      Rollover Amount

 

If
elected by the participant according to the terms of the Company's Supplemental
Executive Retirement Plan, the SERP Rollover Amount, if any, shall be credited
to the Participant's SERP Rollover Account as of the date of
retirement.

 

	 	
      3.8
	
      Performance-Based
      Retirement Equivalent Amount

 

For each
Plan Year, a Participant's Performance-Based Retirement Equivalent Amount shall
be calculated and credited to the Participant's Performance-Based Retirement
Equivalent Account in accordance with the Participant's employment agreement or
other agreement with the Employer, as applicable. The Employer may credit
different amounts for different Participants. A credit awarded to one
Participant shall not bind the Employer to credit any amount to any other
Participant. The Participant's Performance-Based Retirement Equivalent Account
shall vest over a period and in such manner as provided under the Participant's
employment agreement or other agreement with the Employer, as applicable. To the
extent a Participant is not fully vested in his or her Performance-Based
Retirement Equivalent Account at the time of his or her Termination of
Employment, death or Disability, or upon the termination of this Plan, all
unvested amounts therein shall be forfeited and neither the Participant nor his
or her Beneficiary shall have any further interest in such amounts.

 

	 	
      3.9
	
      Deduction
      Limitation Amounts

 

If prior
to a Change in Control an Employer determines that some of the compensation
payable to an Employee in a Plan Year (including but not limited to benefits
under this Plan) will exceed the Deduction Limitation, then to the extent deemed
necessary by the Employer to ensure that all such compensation is deductible,
the Employer may defer under this Plan all or part of any compensation payable
to the Employee. Any compensation deferred pursuant to this Section 3.9
shall continue to be credited or debited with additional earnings in accordance
with Section 4.2, including any such amounts being paid in installments.
Any compensation deferred pursuant to this Section 3.9 (together with
earnings thereon) shall be distributed to the affected Employee as soon as, and
to the extent that, such distributions will not cause the deduction of
compensation paid or payable to the Employee for that year to be limited by Code
Section 162(m). Compensation deferrals pursuant to this Section 3.9
shall not apply after the effective date of a Change in Control, and any
compensation previously deferred under this Section 3.9 and not previously
distributed (together with earnings thereon) shall be distributed on the
effective date of the Change in Control.

 

	
      4.
	
      Vesting;
      Crediting; Taxes

 

	 	
      4.1
	
      Vesting

 

Except as
set forth in Sections 3.2(b) and 3.8, a Participant's Account Balance shall
at all times be fully vested; provided, however, that any portion of the
Participant's Account Balance attributable to a deferral of benefits from a
Company benefit plan other than this Plan (such as the Long-Term Incentive Award
Plan) shall be nonforfeitable to the same extent, and under the same terms and
conditions, as set forth in the vesting provisions of such other Company benefit
plan.

 

	 	
      4.2
	
      Crediting
      or Debiting of Account Balances

 

Amounts
shall be credited or debited to a Participant's Account Balance in accordance
with the following rules and such other rules and procedures as the Committee
may establish in its discretion:

 

	 	
      (a)
	
      Selection
      of Measurement Funds

 

In
connection with an initial deferral election a Participant shall select one or
more Measurement Funds to be used to determine the amounts to be credited to the
Account Balance; provided, however, that deferrals of Qualifying Gain, deferrals
of Restricted Stock Awards and the Performance-Based Retirement Equivalent
Amount shall be credited only to the Company Stock Fund and may not thereafter
be reallocated to any other Measurement Fund. A Participant may change a
selection by submitting a new election to the Committee on a form approved by
the Committee. Any such selection shall take effect in the calendar quarter next
succeeding the quarter in which the election form is received by the Committee,
and shall continue in effect thereafter until changed in accordance with this
Section 4.2(a). The Participant shall specify, in increments of 10%, the
percentage of the Account Balance to be allocated to any Measurement Fund.
However, if a Participant is in payment status under the Monthly Installment
Method or the Annual Installment Method, he or she shall only be allowed to
reallocate funds to or from his or her Company Stock Fund account by
December 31 of any Plan Year, to be effective the following January 1.
Participants who are Section 16 Insiders may reallocate funds to or from
their Company Stock Fund account only in accordance with the foregoing
provisions of this Section 4.2(a), Company policies on insider trading and
in compliance with the rules for "Discretionary Transactions" as defined in
Rule 16b-3 (or any successor provision) under the Exchange
Act.

 

	 	
      (b)
	
      Crediting
      of Measurement Funds

 

The
Committee may, in its sole discretion, discontinue, substitute or add any
Measurement Funds, but at least two Measurement Funds will always be available.
Deferrals of Long-Term Incentive Awards, Restricted Stock Awards and Qualifying
Gain shall be credited to Company Stock Fund accounts in the form of stock units
equal in number to (i) the number of shares of Stock payable and
(ii) the number of shares that could be purchased with any cash amount so
allocated, based on the Fair Market Value of the Stock on the date the account
is so credited. Performance-Based Retirement Equivalent Amounts shall be
credited to Company Stock Fund accounts in the form of stock units equal in
number to that which is determined under the terms of a Participant's employment
agreement or other agreement with the Employer, as applicable.

 

A
Participant's Account Balance, other than amounts allocated to the Company Stock
Fund, shall be credited or debited on a daily basis based on the performance of
each Measurement Fund selected by the Participant. Performance shall be
determined by the Committee in its sole discretion as if (i) the
Participant's Account Balance were invested in the Measurement Funds selected by
the Participant, in the percentages applicable during such calendar quarter, as
of the close of business on the first business day of such calendar quarter, at
the closing price on such date, (ii) the portion of the Annual Deferral
Amount that was actually deferred during any calendar quarter was invested in
the Measurement Funds selected by the Participant, in the percentages applicable
to such calendar quarter, no later than the close of business on the tenth
business day after the day on which such amounts are actually deferred through
reductions in payroll, at the closing price on such date, and (iii) any
distribution made to a Participant that decreases such Participant's Account
Balance was withdrawn from the Measurement Funds, in the percentages applicable
to such calendar quarter, no earlier than ten business days prior to the
distribution, at the closing price on such date. The Annual Investment Plan
Restoration Amount, and Annual Cash Balance Restoration Amount shall be credited
to a Participant's Account Balances for purposes of this Section 4.2(b) as
of the close of business on the first business day in February of the Plan Year
following the Plan Year to which they relate.

 

A
Participant's Account Balance that is allocated to the Company Stock Fund shall
be credited with stock units at the time they would have been paid if the shares
would have been held by the Participant, with additional stock units equal in
number to the number of shares of Stock that could be purchased with the amount
of any cash dividends or other distributions that would be payable on the number
of shares of Stock that equals the number of stock units in such account. The
number of stock units credited to a Participant's Account Balance shall be
appropriately adjusted to reflect (i) Stock splits, Stock dividends and
other like adjustments in such Account Balance that were allocated to the
Company Stock Fund, and (ii) any distributions made to a Participant that
decrease the portion of such Account Balance allocated to the Company Stock
Fund.

 

	 	
      (c)
	
      Form
      of Payment

 

A
Participant's Account Balance that is allocated to the Company Stock Fund shall
be payable only in Stock, plus cash for any fractional shares. The remainder of
the Participant's Account Balance shall be paid in cash.

 

Lump sum
payments are valued (i) as of the Participant's date of Termination, date
of Retirement, death or Disability, (ii) as of the first business day for
the appropriate Plan Year for deferrals designated as Interim Payments, or
(iii) when approved by the Committee for payments due to Unforeseeable
Financial Emergencies as defined in Section 5.

 

	 	
      (d)
	
      No
      Actual Investment

 

The
Measurement Funds are to be used for measurement purposes only. A Participant's
selection of a Measurement Fund and the crediting or debiting of amounts to a
Participant's Account Balance based on such selection shall not be considered or
construed as an actual investment in any such Measurement Fund. If the Company
or the Trustee, in its discretion, invests assets in any or all of the
Measurement Funds, no Participant shall have any rights in or to such
investments. Without limiting the foregoing, a Participant's Account Balance
shall at all times be a bookkeeping entry only and shall not represent any
investment made on his or her behalf by the Company or the Trust. With respect
to Account Balances and other rights under this Plan, the Participant shall at
all times be and remain an unsecured general creditor of the
Company.

 

	 	
      4.3
	
      FICA
      and Other Taxes

 

The
Employer shall withhold from all forms of compensation related to deferrals
under this Plan, in any reasonable manner determined by the Employer, the
Participant's share of FICA and other employment or self-employment taxes that
may be required to be withheld. If necessary, the Committee may reduce the
Annual Deferral Amount in order to comply with this
Section 4.3.

 

	 	
      4.4
	
      Withholding
      on Payments

 

The
Employer or the Trustee shall withhold from any payments made to a Participant
or Beneficiary all federal, state and local income, employment and other taxes
required to be withheld from such payments, in amounts and in a manner
determined in the discretion of the Employer and the Trust. In accordance with
applicable law, the Employer may withhold from any distribution under this Plan
any amount owed by the Participant to any Employer.

 

	
      5.
	
      Interim
      Payments; Unforeseeable Financial Emergencies; Withdrawal
      Election

 

	 	
      5.1
	
      Interim
      Payments

 

A
Participant may irrevocably elect to receive an Interim Payment from this Plan
with respect to any Annual Deferral Amount. Subject to the Deduction Limitation,
the Interim Payment shall be an amount that is equal to the Annual Deferral
Amount plus amounts credited or debited in the manner provided in
Section 4.2 on that amount, determined at the time that the Interim Payment
becomes payable. Subject to the Deduction Limitation, each Interim Payment shall
be paid in a lump sum within 60 days after the last day of any Plan Year
designated by the Participant that is at least two Plan Years after the Plan
Year in which the Annual Deferral Amount is deferred. For example, if a two-year
Interim Payment is elected for Annual Deferral Amounts that are deferred in the
Plan Year commencing January 1, 2002, the two-year Interim Payment would
become payable during a 60-day period commencing January 1,
2005.

 

	 	
      5.2
	
      Other
      Benefits Take Precedence Over Interim
Payments

 

Payments
under Sections 5.3 and 5.4, and under Articles 6, 7, 8 and 9 take precedence
over Interim Payments. Payments under those Sections and Articles may be made
from Annual Deferral Amounts that otherwise would be payable as Interim
Payments.

 

	 	
      5.3
	
      Payments
      and Suspensions for Unforeseeable Financial
      Emergencies

 

If a
Participant experiences an Unforeseeable Financial Emergency, the Participant
may request either or both of (i) suspension of any deferrals then in
effect and (ii) a partial or full payment from this Plan. The payment shall
not exceed the lesser of the Participant's vested Account Balance, calculated as
if such Participant were receiving a Termination Benefit, or the amount
reasonably needed to satisfy the Unforeseeable Financial Emergency. If the
Committee approves such a request, suspension shall take effect upon the date of
approval and any payment shall be made within 60 days of the date of
approval. The payment of any amount under this Section 5.3 shall not be
subject to the Deduction Limitation.

 

	 	
      5.4
	
      Withdrawal
      Election

 

A
Participant (or, after the Participant's death, his or her Beneficiary) may
elect, at any time before or after his or her Retirement or Termination of
Employment and regardless of whether benefit payments have commenced under
Section 6, 7 or 8, to withdraw part or all of his or her Account Balance
calculated as of the day of the election. Any such withdrawal shall be subject
to a penalty equal to 10% of the amount elected. The amount of the penalty shall
be forfeited to the Company. The election may be made at any time and whether or
not the Participant or Beneficiary is being paid pursuant to an installment
payment schedule. If made before Retirement, Disability or death, a
Participant's withdrawal amount shall be his or her Account Balance calculated
as if a Termination of Employment had occurred as of the day of the election. No
partial withdrawals of less than $25,000 shall be allowed. The Participant or
Beneficiary shall make this election by giving the Committee written notice in a
form determined from time to time by the Committee. The Participant or
Beneficiary shall be paid the withdrawal amount within 60 days of the
election. Once a withdrawal amount is paid, any deferral election under this
Plan shall terminate and the Participant shall not be eligible to make any
deferrals for the remainder of the Plan Year in which the withdrawal amount is
paid. The payment of a withdrawal amount is not subject to the Deduction
Limitation.

 

	
      6.
	
      Retirement
      Benefit

 

	 	
      6.1
	
      Retirement
      Benefit

 

Subject
to the Deduction Limitation, a Participant who Retires shall receive his or her
vested Account Balance as a Retirement Benefit.

 

	 	
      6.2
	
      Payment
      of Retirement Benefit

 

A
Participant may elect, in a manner determined by the Committee, to receive
Retirement Benefits in a lump sum, under the Fixed Amount Installment Method,
Monthly Installment Method or Specified Amount Installment Method of not more
than 240 months; provided, however, that to the extent a Participant receives
Retirement Benefits in Stock from the Company Stock Fund, a Participant may
elect to receive such Retirement Benefits only in a lump sum or under the Annual
Installment Method or Specified Amount Installment Method for the same period
that benefits from the other Measurement Funds are elected and paid. The
election may be changed to an allowable alternative payment period by submitting
a new election to the Committee, in a form approved by the Committee, provided
that any such election is submitted at least one year before the Participant's
Retirement. The election most recently accepted by the Committee shall govern
the payment of the Retirement Benefit. If a Participant does not make any
election with respect to the payment of the Retirement Benefit, then such
benefit shall be payable in a lump sum. The lump sum payment shall be made no
later than 60 days after the date the Participant Retires. Installment
payments shall commence no later than 60 days after the Participant
Retires; however, any annual distributions from the Company Stock Fund shall be
distributed in the subsequent year in January. Any payment shall be subject to
the Deduction Limitation.

 

	 	
      6.3
	
      Death
      Prior to Completion of Retirement
Benefit

 

If a
Participant dies after Retirement but before the Retirement Benefit is paid in
full, the unpaid Retirement Benefit payments shall be paid to the Participant's
Beneficiary. Payment shall be made in the same manner and in the same amounts as
the benefit would have been paid to the Participant had the Participant
survived. If requested by the Beneficiary and allowed in the sole discretion of
the Committee, payment may be made in a lump sum equal to the Participant's
unpaid remaining Account Balance at the time of payment.

 

	
      7.
	
      Death
      Prior to Retirement

 

	 	
      7.1
	
      Pre-Retirement
      Survivor Benefit

 

Subject
to the Deduction Limitation, the Participant's Beneficiary shall receive a
Pre-Retirement Survivor Benefit equal to the Participant's vested Account
Balance, if the Participant dies before Retirement.

 

	 	
      7.2
	
      Payment
      of Pre-Retirement Survivor Benefit

 

A
Participant may elect, in a manner determined by the Committee, whether the
Pre-Retirement Survivor Benefit shall be paid to his or her Beneficiary in a
lump sum or pursuant to the Fixed Amount Installment Method, Annual Installment
Method, Monthly Installment Method or Specified Amount Installment Method of not
more than 20 years; provided, however, that to the extent a Participant receives
Retirement Benefits in Stock from the Company Stock Fund, a Participant may
elect to receive such Retirement Benefits only in a lump sum or under the Annual
Installment Method or Specified Amount Installment Method for the same period
that benefits from other Measurement Funds are elected and paid. The Participant
may change this election to any allowable alternative payment period by
submitting a new election to the Committee, in a form approved by the Committee.
The election most recently accepted by the Committee prior to the Participant's
death shall govern the payment of the Participant's Pre-Retirement Survivor
Benefit. If a Participant does not make any election with respect to the payment
of the Pre-Retirement Survivor Benefit, then such benefit shall be paid in a
lump sum unless the Committee in its sole discretion decides that payment shall
be made in such installments as the Committee determines. A lump sum payment
shall be made, or installment payments shall commence, no later than
60 days after the Participant's death. Any payment shall be subject to the
Deduction Limitation.

 

	
      8.
	
      Termination

 

	 	
      8.1
	
      Termination
      Benefit

 

Subject
to the Deduction Limitation, the Participant shall receive a Termination
Benefit, which shall be equal to the Participant's vested Account Balance. Any
nonvested balances or restricted shares in the Company Stock Fund shall be
forfeited.

 

	 	
      8.2
	
      Payment
      of Termination Benefit

 

If the
Participant's Account Balance at the time of Termination of Employment is less
than $25,000, the Termination Benefit shall be paid in a lump sum. If the
Account Balance at such time is equal to or greater than that amount, the
Committee, in its sole discretion, may cause the Termination Benefit to be paid
in a lump sum or in substantially equal installments over no more than five
years unless the Committee and the Participant shall have agreed otherwise. The
lump sum payment shall be made, or installment payments shall commence, no later
than 60 days after the date of Termination of Employment unless the
Committee and the Participant shall have agreed to a different commencement
date. Any Termination Benefit shall be subject to the Deduction
Limitation.

 

	
      9.
	
      Disability;
      Leave of Absence

 

	 	
      9.1
	
      Disability
      Waiver

 

A
Participant suffering from a Disability shall be excused from deferrals that
would otherwise have been made during the period of Disability and shall not
make deferral elections for as long as the Disability continues. For all other
purposes, the Participant will continue to participate in this Plan. A
Participant who returns to employment after the Disability ceases may elect an
Annual Deferral Amount for the Plan Year following his or her return to
employment in accordance with Section 3.1. The Disability waiver provided
in this Section 9.1 does not apply to any short-term
disability.

 

	 	
      9.2
	
      Continued
      Eligibility; Disability Benefit

 

A
Participant suffering from a Disability shall continue to be eligible for the
benefits provided for in Articles 5, 6, 7 and 8. Notwithstanding the above,
the Committee may in its discretion deem such Participant to have experienced a
Termination of Employment. In that event, the Participant shall receive a
Disability Benefit equal to his or her vested Account Balance at the time of the
Committee's determination. The Disability Benefit shall be paid in a lump sum
within 60 days of the Committee's exercise of its discretion. If the
Participant is eligible to Retire at the time a Disability occurs, he or she
shall be paid in accordance with Article 6. Any payment shall be subject to
the Deduction Limitation.

 

	 	
      9.3
	
      Paid
      Leave of Absence

 

A
Participant authorized to take a paid leave of absence shall continue to be
considered employed by the Employer, and deferrals shall continue to be withheld
during such paid leave of absence in accordance with
Section 3.3.

 

	 	
      9.4
	
      Unpaid
      Leave of Absence

 

A
Participant authorized to take an unpaid leave of absence shall continue to be
considered employed by the Employer but shall be excused from making deferrals
until the earlier of the date the leave of absence expires or the Participant
returns to paid status. Upon such expiration or return, deferrals shall resume
for the remaining portion of the Plan Year in which the expiration or return
occurs, based on the deferral election, if any, made for that Plan
Year.

 

	
      10.
	
      Beneficiary
      Designation

 

	 	
      10.1
	
      Beneficiary

 

Each
Participant shall have the right to designate one or more Beneficiaries
(including primary and contingent Beneficiaries) to receive any benefits payable
under this Plan. The Beneficiary may be the same as or different from the
Beneficiary designated under any other plan in which the Participant
participates.

 

	 	
      10.2
	
      Change;
      Spousal Consent

 

A
Participant shall have the right to change a Beneficiary by completing a new
beneficiary designation on a form approved by the Committee. If the Participant
designates someone other than his or her spouse as a Beneficiary, the spouse
must consent to the designation in writing on a form approved by the Committee,
and the signed consent form must be returned to the Committee. The Committee
shall be entitled to rely on the last Beneficiary designation filed by the
Participant and accepted by the Committee prior to the Participant's
death.

 

	 	
      10.3
	
      No
      Beneficiary Designation

 

If a
Participant fails to designate a Beneficiary or if all designated Beneficiaries
predecease the Participant or die prior to complete distribution of the
Participant's benefits, then the Participant's designated Beneficiary shall be
deemed to be his or her surviving spouse. If the Participant has no surviving
spouse, the benefits remaining under this Plan to be paid to a Beneficiary shall
be payable to the executor or personal representative of the Participant's
estate.

 

	 	
      10.4
	
      Doubt
      as to Beneficiary

 

If the
Committee has any doubt as to the proper Beneficiary to receive payments
pursuant to this Plan, it shall have the right to withhold payments until the
matter is resolved to the Committee's satisfaction.

 

	 	
      10.5
	
      Discharge
      of Obligations

 

The
payment of benefits under this Plan to a Beneficiary shall fully and completely
discharge all Employers and the Committee from all further obligations under
this Plan with respect to the Participant and any other
Beneficiary.

 

	
      11.
	
      Termination;
      Amendment or Modification

 

	 	
      11.1
	
      Termination

 

Although
each Employer anticipates that it will continue this Plan for an indefinite
period of time, it reserves the right to terminate this Plan at any time with
respect to any or all of its participating Employees. Upon termination, the
vested Account Balances of the affected Participants shall be paid as provided
in this Section 11.1. Such Account Balances will be determined as if the
affected Participants had experienced a Termination of Employment on the date of
Plan termination or, if Plan termination occurs after the date upon which a
Participant was eligible to Retire, then as if that Participant had Retired on
such date.

 

Prior to
a Change in Control, if this Plan is terminated with respect to all
Participants, an Employer shall have the right, in its sole discretion, and
notwithstanding any elections made by the Participant, to pay such benefits in a
lump sum, or pursuant to a Monthly Installment Method or Specified Amount
Installment Method of up to 240 months, with amounts credited and debited during
the installment period as provided in Article 4. If this Plan is terminated
with respect to less than all Participants, an Employer shall be required to pay
such benefits in a lump sum. After a Change in Control, the Employer shall be
required to pay such benefits in a lump sum.

 

Termination
of this Plan shall not adversely affect any Participant or Beneficiary who has
become entitled to the payment of any benefits under this Plan as of the date of
termination; provided, that the Employer shall have the right to accelerate
installment payments without a premium or prepayment penalty by paying the
Account Balance in a lump sum, or pursuant to a Monthly Installment Method or
Specified Amount Installment Method using fewer months or larger payments, as
applicable (provided that the present value of all payments that will have been
received by a Participant at any given point of time under the different payment
schedule shall equal or exceed the present value of all payments that would have
been received at that point in time under the original payment schedule). For
these purposes, the present value shall be determined prior to a Change in
Control by the Committee in its discretion; after a Change in Control, the
present value shall be determined by the Trustee in its discretion.

 

	 	
      11.2
	
      Amendment

 

The
Company may, at any time, amend or modify this Plan in whole or in part;
provided, that no amendment or modification shall decrease or restrict the value
of a Participant's Account Balance in existence at the time the amendment or
modification is made, calculated as if the Participant had experienced a
Termination of Employment as of the effective date of the amendment or
modification or, if the amendment or modification occurs after the date upon
which the Participant was eligible to Retire. The amendment or modification of
this Plan shall not affect any Participant or Beneficiary who has become
entitled to the payment of benefits under this Plan as of the date of the
amendment or modification; provided, that the Employer shall have the right to
accelerate installment payments by paying the Account Balance in a lump sum, or
a Monthly Installment Method using fewer months, or an Annual Installment Method
using fewer years, or a Fixed Amount Installment Method or Specified Amount
Installment Method using larger payments, than elected by the Participant and
that the present value of all payments that will have been received by a
Participant at any given point of time shall equal or exceed the present value
of all payments that would have been received at that point in time under the
original payment schedule. For these purposes, the present value shall be
determined prior to a Change in Control by the Committee in its discretion;
after a Change in Control, the present value shall be determined by the Trustee
in its discretion.

 

	 	
      11.3
	
      Effect
      of Payment

 

The full
payment of the applicable benefit under Article 5, 6, 7 or 8 shall
completely discharge all obligations of the Employers and the Committee to a
Participant and his or her designated Beneficiaries under this
Plan.

 

	
      12.
	
      Administration

 

	 	
      12.1
	
      Committee
      Duties

 

This Plan
shall be administered by a Committee, which shall consist of the Board, or such
committee as the Board may appoint. Members of the Committee may be
Participants. The Committee shall have the discretion and authority, subject to
Section 11.2, to make amendments to this Plan, or in its discretion it may
recommend amendments to the Board for its action. The Committee shall have the
discretion and authority to make, amend, interpret and enforce appropriate rules
and regulations for the administration of this Plan and to decide or resolve, in
its discretion, any and all questions involving interpretation of this Plan. Any
individual serving on the Committee who is a Participant shall not vote or act
on any matter relating solely to himself or herself. When making a determination
or calculation, the Committee shall be entitled to rely on information furnished
by a Participant or the Company.

 

	 	
      12.2
	
      Administrative
      Committee; Agents

 

The
Committee may, from time to time, appoint an Administrative Committee and
delegate to the Administrative Committee such duties and responsibilities (but
not the authority to amend this Plan) with respect to this Plan as the Committee
may determine. The Committee, and the Administrative Committee, may employ
agents and delegate to them such duties as either Committee sees fit (including
acting through a duly appointed representative) and may from time to time
consult with counsel who may be counsel to the Company.

 

	 	
      12.3
	
      Binding
      Effect of Decisions

 

The
decisions or actions of the Committee, and of the Administrative Committee, with
respect to the administration, interpretation and application of this Plan and
the rules and regulations hereunder shall be final and conclusive and shall be
binding on all persons having any interest in this Plan.

 

	 	
      12.4
	
      Indemnity
      of Committee and Administrative
Committee

 

The
Company shall indemnify and hold harmless the members of the Committee and the
Administrative Committee, and any agent or employee to whom the duties of the
Committee or the Administrative Committee may be delegated, against any and all
claims, losses, damages, expenses or liabilities arising from any action or
failure to act with respect to this Plan, except in the case of willful
misconduct by the Committee, the Administrative Committee or any of their
members or any such agent or employee.

 

	
      13.
	
      Other
      Benefits and Agreements

 

The
benefits provided for a Participant and Participant's Beneficiary under this
Plan are in addition to any other benefits available to such Participant under
any other plan or program of the Participant's Employer. This Plan shall not
supersede, modify or amend any other such plan or program except as may
otherwise be expressly provided.

 

	
      14.
	
      Claims
      Procedures

 

	 	
      14.1
	
      Filing
      Claim

 

A
Participant or a Beneficiary, or the authorized representative of either (the
"Claimant"), who believes that he or she is then entitled to benefits hereunder
may file a written claim for such benefits with the Vice President of Human
Resources. The Vice President of Human Resources may prescribe a form for filing
such claims, and, if it does so, a claim will not be deemed properly filed
unless such form is used, but the Secretary of the Vice President of Human
Resources shall provide a copy of such form to any person whose claim for
benefits is improper solely for this reason.

 

	 	
      14.2
	
      Claim
      Review

 

Claims
that are properly filed will be reviewed by the Vice President of Human
Resources, which will make its decision with respect to such claim and notify
the Claimant in writing of such decision within 90 days (45 days in the
case of a claim related to a Participant's Disability) after its receipt of the
written claim; provided that the 90-day period (45-day period in the case of a
claim related to a Participant's Disability) can be extended for up to an
additional 90 days (30 days in the case of a claim related to a Participant's
Disability) if the Vice President of Human Resources determines that special
circumstances require an extension of time to process the claim and the Claimant
is notified of the extension, and the reasons therefor, prior to the
commencement of the extension. If the claim is wholly or partially denied, the
written response to the Claimant shall include:

 

	 	
      (a)
	
      the
      specific reason or reasons for the denial;

 

	 	
      (b)
	
      reference
      to the specific Plan provisions on which the denial is
    based;

 

	 	
      (c)
	
      a
      description of any additional information necessary for the Claimant to
      perfect his or her claim and an explanation why such information is
      necessary;

 

	 	
      (d)
	
      a
      description of this Plan's claim appeal procedure (and the time limits
      applicable thereto), as set forth in
Section 14.3;

 

	 	
      (e)
	
      a
      statement of the Claimant's right to bring a civil action under ERISA
      following an adverse determination on appeal;
and

 

	 	
      (f)
	
      in
      the case of an adverse benefit determination related to the Participant's
      Disability:

 

	 	
      (i)
	
      if
      an internal rule, guideline, protocol or other similar criterion was
      relied upon in making the adverse determination, either the specific rule,
      guideline, protocol or other similar criterion; or a statement that such a
      rule, guideline, protocol or similar criterion was relied upon in making
      the adverse determination and that a copy of such rule, guideline,
      protocol or other criterion will be provided free of charge to the
      Claimant upon request; or

 

	 	
      (ii)
	
      if
      the adverse benefit determination is based on a medical necessity or
      experimental treatment or similar exclusion or limit, either an
      explanation of the scientific or clinical judgment for the determination,
      applying the terms of this Plan to the Claimant's medical circumstances,
      or a statement that such explanation will be provided free of charge upon
      request. 

 

	 	
      14.3
	
      Appeal

 

If the
claim is denied in whole or in part, the Claimant may appeal such denial by
filing a written request for appeal with the Administrative Committee within
60 days (180 days in the case of a claim related to the Participant's
Disability) of receiving written notice that the claim has been denied. Such
written request for appeal should include:

 

	 	
      (a)
	
      a
      statement of the grounds on which the appeal is
based;

 

	 	
      (b)
	
      reference
      to the specific Plan provisions that support the
claim;

 

	 	
      (c)
	
      the
      reason or argument why the Claimant believes the claim should be granted
      and evidence supporting each reason or argument;
and

 

	 	
      (d)
	
      any
      other comments, documents, records or other information relating to the
      claim that the Claimant wishes to include. 

 

Appeals
will be considered by the Administrative Committee, which will take into account
all comments, documents, records and other information submitted by the Claimant
relating to the claim, without regard to whether such information was submitted
or considered by the Vice President of Human Resources in making its initial
determination. The Administrative Committee will make its decision with respect
to any appeal, and notify the Claimant in writing of such decision, within
60 days (45 days in the case of a claim related to the Participant's
Disability) after the its receipt of the written request for appeal; provided
that the 60-day period (45-day period in the case of a claim related to the
Participant's Disability) can be extended for up to an additional 60 days
(45 days in the case of a claim related to the Participant's Disability) if
the Administrative Committee determines that special circumstances require an
extension of time to process the appeal and the Claimant is notified of the
extension, and the reasons therefor, prior to the commencement of the extension.
During the appeal period, the Claimant will be provided, upon request and free
of charge, reasonable access to, and copies of, documents, records and other
information relevant to his or her claim.

 

In the
event the claim is denied on appeal, the written denial will
include:

 

	 	
      (a)
	
      the
      specific reason or reasons for the denial;

 

	 	
      (b)
	
      reference
      to the specific Plan provisions on which the denial is based;
    

 

	 	
      (c)
	
      a
      statement that the Claimant is entitled to receive, upon request and free
      of charge, reasonable access to, and copies of, all documents, records and
      other information relevant to his or her
claim;

 

	 	
      (d)
	
      a
      statement of the Claimant's right to bring a civil action under ERISA;
      and

 

	 	
      (e)
	
      in
      the case of an adverse benefit determination related to the Participant's
      Disability:

 

	 	
      (i)
	
      if
      an internal rule, guideline, protocol or other similar criterion was
      relied upon in making the adverse determination, either the specific rule,
      guideline, protocol or other similar criterion; or a statement that such a
      rule, guideline, protocol or similar criterion was relied upon in making
      the adverse determination and that a copy of such rule, guideline,
      protocol or other criterion will be provided free of charge to the
      Claimant upon request; or

 

	 	
      (ii)
	
      if
      the adverse benefit determination is based on a medical necessity or
      experimental treatment or similar exclusion or limit, either an
      explanation of the scientific or clinical judgment for the determination,
      applying the terms of this Plan to the Claimant's medical circumstances,
      or a statement that such explanation will be provided free of charge upon
      request.

 

	 	
      14.4
	
      Standard
      of Review

 

Any
further review, judicial or otherwise, of the Administrative Committee's
decision on the Claimant's claim will be limited to whether, in the particular
circumstances, the Administrative Committee abused its discretion. In no event
will such further review, judicial or otherwise, be on a de novo basis, because
the Administrative Committee has discretionary authority to determine
eligibility for benefits and to construe and interpret the terms and provisions
of this Plan.

 

	 	
      14.5
	
      Legal
      Action

 

Compliance
with the foregoing provisions of this Article 14 is a mandatory
prerequisite to a Claimant's right to commence any legal action with respect to
any claim for benefits under this Plan.

 

	
      15.
	
      Trust

 

	 	
      15.1
	
      Establishment
      of the Trust

 

Each
Employer shall at least annually transfer to the Trust such assets as it
determines, in its sole discretion, are necessary to provide, on a present value
basis, for its liabilities under this Plan.

 

	 	
      15.2
	
      Relationship
      of This Plan and the Trust

 

The
provisions of this Plan shall govern the rights of a Participant to receive
distributions pursuant to this Plan. The provisions of the Trust shall govern
the rights of the Employers, Participants and the creditors of the Employers to
the assets transferred to the Trust. Each Employer shall remain liable to carry
out its obligations under this Plan.

 

	 	
      15.3
	
      Distributions
      From the Trust

 

Each
Employer's obligations under this Plan may be satisfied with Trust assets
distributed pursuant to the terms of the Trust, and any such distribution shall
reduce pro tanto the Employer's obligations under this Plan.

 

	
      16.
	
      Miscellaneous

 

	 	
      16.1
	
      Status
      of Plan

 

This Plan
is intended to be a plan that is not qualified within the meaning of Code
Section 401(a) and that "is unfunded and is maintained by an employer
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees" within the meaning of ERISA
Sections 201(2), 301(a)(3) and 401(a)(1). This Plan shall be administered and
interpreted in a manner consistent with that intent.

 

	 	
      16.2
	
      Unsecured
      General Creditor

 

Participants
and their Beneficiaries, heirs, successors and assigns shall have no legal or
equitable rights, interests or claims in any property or assets of any Employer
or of the Trust. For purposes of the payment of benefits under this Plan, any
and all of an Employer's assets including any assets of the Trust shall be, and
remain, the general, unpledged unrestricted assets of the Employer. An
Employer's obligation under this Plan shall consist solely of an unfunded and
unsecured promise to pay money in the future.

 

	 	
      16.3
	
      Employer's
      Liability

 

An
Employer's liability for the payment of benefits shall be defined only by this
Plan. No Employer shall have any obligation to a Participant under this Plan
except as expressly provided in this Plan.

 

	 	
      16.4
	
      Nonassignability

 

Neither a
Participant nor a Beneficiary nor any other person shall have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise
encumber, transfer, hypothecate, alienate or convey in advance of actual receipt
the amounts, if any, payable hereunder, or any part thereof. All of such rights
are expressly declared to be unassignable and nontransferable. None of the
amounts payable under this Plan shall, prior to actual payment, be subject to
seizure, attachment, garnishment or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant or any other
person, be transferable by operation of law in the event of a Participant's or
any other person's bankruptcy or insolvency or be transferable to a spouse as a
result of a property settlement or otherwise.

 

	 	
      16.5
	
      Not
      a Contract of Employment

 

The terms
and conditions of this Plan shall not be deemed to constitute a contract of
employment between any Employer and the Participant. Such employment is an "at
will" employment relationship that can be terminated at any time for any reason,
or for no reason, with or without cause, and with or without notice, unless
expressly provided otherwise in a written employment agreement. Nothing in this
Plan shall be deemed to give a Participant the right to be retained in the
service of any Employer or to interfere with the right of any Employer to
discipline or discharge the Participant at any time.

 

	 	
      16.6
	
      Furnishing
      Information

 

A
Participant or Beneficiary shall cooperate with the Committee by furnishing any
and all information requested by the Committee and shall take such other actions
as may be requested in order to facilitate the administration of this Plan and
the payments of benefits hereunder, including, but not limited to, taking such
physical examinations as the Committee may deem necessary.

 

	 	
      16.7
	
      Captions

 

The
captions of the articles, sections and paragraphs of this Plan are for
convenience only and shall not control or affect the meaning or construction of
any of its provisions.

 

	 	
      16.8
	
      Governing
      Law

 

Subject
to ERISA, the provisions of this Plan shall be construed and interpreted
according to the internal laws of the State of Washington without regard to its
conflicts of laws principles.

 

	 	
      16.9
	
      Notice

 

Any
notice or filing required or permitted to be given to the Committee under this
Plan shall be sufficient if in writing and hand-delivered, or sent by registered
or certified mail or by facsimile, to the address below:

 

Vice
President, Human Resources

Puget
Sound Energy, Inc.

10608
N.E. 4th Street

Bellevue,
WA 98004

 

Such
notice shall be deemed given as of the date of delivery or, if delivery is made
by mail, as of the date shown on the postmark on the receipt for registration or
certification.

 

Any
notice or filing required or permitted to be given to a Participant under this
Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to
the last known address of the Participant.

 

	 	
      16.10
	
      Successors

 

The
provisions of this Plan shall bind and inure to the benefit of the Company, the
Employers and their successors and assigns and the Participant and the
Participant's designated Beneficiaries.

 

	 	
      16.11
	
      Validity

 

If any
provision of this Plan shall be found to be illegal or invalid for any reason,
such illegality or invalidity shall not affect the remaining parts hereof, but
this Plan shall be construed and enforced as if such illegal or invalid
provision had never been inserted herein.

 

	 	
      16.12
	
      Incompetence

 

If the
Committee determines in its discretion that a benefit under this Plan is to be
paid to a minor, a person declared incompetent or to a person incapable of
handling the disposition of that person's property, the Committee may direct
payment of such benefit to the guardian, legal representative or person having
the care and custody of such minor, incompetent or incapable person. The
Committee may require proof of minority, incompetence, incapacity or
guardianship, as it may deem appropriate, prior to distribution of the benefit.
Any payment of a benefit shall be a payment for the account of the Participant
and the Participant's Beneficiary, as the case may be, and shall be a complete
discharge of any liability under this Plan for such payment amount.

 

	 	
      16.13
	
      Court
      Order

 

The
Committee is authorized to make any payments directed by court order. If a court
determines that a spouse or former spouse of a Participant has an interest in
the Participant's benefits under this Plan in connection with a property
settlement or otherwise, the Committee, in its sole discretion, shall have the
right, notwithstanding any election made by a Participant, to immediately
distribute the spouse's or former spouse's interest in the Participant's
benefits under this Plan to that spouse or former spouse.

 

	 	
      16.14
	
      Distribution
      in the Event of Taxation

 

	 	
      (a)
	
      In
      General

 

A
Participant may request the Committee before a Change in Control, or the trustee
of the Trust after a Change in Control, to distribute that portion of any
benefit under this Plan that has become taxable prior to its receipt. The
Committee shall not unreasonably withhold its consent to any such request. After
a Change in Control, the Trustee shall consent to any such request upon a proper
showing that the benefits are indeed taxable. Once consent to such a request is
granted, this Plan shall distribute to the Participant an amount equal to the
taxable portion of the benefit, but not more than the Participant's unpaid
Account Balance. Distribution shall be made within 90 days of the date when the
request is granted. Such a distribution shall reduce the Account Balance and the
benefits to be paid under this Plan.

 

	 	
      (b)
	
      Trust

 

If the
Trust terminates and benefits are distributed from the Trust to a Participant,
the Participant's benefits under this Plan shall be reduced to the extent of
such distributions.

 

	 	
      16.15
	
      Insurance

 

The
Employers, on their own behalf or on behalf of the Trustee, and, in their sole
discretion, may apply for and procure insurance on the life of any Participant,
in such amounts and in such forms as the Trust may choose. The Employers or the
Trustee, as the case may be, shall be the sole owner and beneficiary of any such
insurance. The Participant shall have no interest whatsoever in any such policy
or policies, and at the request of the Employers shall submit to medical
examinations and supply such information and execute such documents as may be
required by the insurance company or companies to whom the Employers have
applied for insurance.

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