Exhibit 10.1

EXECUTION COPY

 

 

 

 

LOGO [g300998ex10_1covpg01.jpg]

CREDIT AGREEMENT

dated as of

February 10, 2012

among

PUGET ENERGY, INC.

The Lenders Party Hereto

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

THE ROYAL BANK OF SCOTLAND PLC,

as Syndication Agent

and

BARCLAYS BANK PLC,

SUNTRUST BANK,

THE BANK OF NOVA SCOTIA

and

UNION BANK, N.A.,

as Co-Documentation Agents

 

 

J.P. MORGAN SECURITIES LLC,

RBS SECURITIES INC.,

BARCLAYS CAPITAL,

THE BANK OF NOVA SCOTIA,

SUNTRUST ROBINSON HUMPHREY, INC.

AND

UNION BANK, N.A.,

as Joint Lead Arrangers and Joint Bookrunners

 

 

 

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Table of Contents

(continued)

 

ARTICLE I Definitions

     1   

SECTION 1.01.

  

Defined Terms

     1   

SECTION 1.02.

  

Classification of Loans and Borrowings

     25   

SECTION 1.03.

  

Terms Generally

     25   

SECTION 1.04.

  

Accounting Terms; GAAP; Pro Forma Calculations

     26   

SECTION 1.05.

  

Status of Obligations

     26   

ARTICLE II The Credits

     27   

SECTION 2.01.

  

Commitments

     27   

SECTION 2.02.

  

Loans and Borrowings

     27   

SECTION 2.03.

  

Requests for Borrowings

     28   

SECTION 2.04.

  

Intentionally Omitted

     28   

SECTION 2.05.

  

Swingline Loans

     28   

SECTION 2.06.

  

Letters of Credit

     29   

SECTION 2.07.

  

Funding of Borrowings

     33   

SECTION 2.08.

  

Interest Elections

     33   

SECTION 2.09.

  

Termination and Reduction of Commitments

     34   

SECTION 2.10.

  

Repayment of Loans; Evidence of Debt

     35   

SECTION 2.11.

  

Prepayment of Loans

     35   

SECTION 2.12.

  

Fees

     36   

SECTION 2.13.

  

Interest

     37   

SECTION 2.14.

  

Alternate Rate of Interest

     37   

SECTION 2.15.

  

Increased Costs; Illegality

     38   

SECTION 2.16.

  

Break Funding Payments

     39   

SECTION 2.17.

  

Taxes

     40   

SECTION 2.18.

  

Payments Generally; Allocations of Proceeds; Pro Rata Treatment; Sharing of
Set-offs

     42   

SECTION 2.19.

  

Mitigation Obligations; Replacement of Lenders

     44   

SECTION 2.20.

  

Expansion Option

     45   

SECTION 2.21.

  

Defaulting Lenders

     46   

ARTICLE III Representations and Warranties

     47   

SECTION 3.01.

  

Existence, Qualification and Power; Compliance with Laws

     47   

SECTION 3.02.

  

Binding Effect

     48   

SECTION 3.03.

  

Authorization; No Contravention

     48   

SECTION 3.04.

  

Governmental Authorization; Other Consents

     48   

SECTION 3.05.

  

Taxes

     48   

SECTION 3.06.

  

No Default

     48   

SECTION 3.07.

  

Financial Statements; No Material Adverse Effect; Indebtedness

     49   

SECTION 3.08.

  

Ranking

     49   

SECTION 3.09.

  

Ownership of Assets

     49   

SECTION 3.10.

  

No Other Business

     49   

SECTION 3.11.

  

Insurance

     50   

SECTION 3.12.

  

Disclosure

     50   

 

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Table of Contents

(continued)

 

 

SECTION 3.13.

  

Subsidiaries; Equity Interests

     50   

SECTION 3.14.

  

No Dividend Restrictions

     50   

SECTION 3.15.

  

Litigation

     50   

SECTION 3.16.

  

Solvency

     50   

SECTION 3.17.

  

Margin Regulations; Investment Company Act; USA PATRIOT Act; federal Power Act

     51   

SECTION 3.18.

  

ERISA Compliance

     51   

SECTION 3.19.

  

Environmental Compliance

     51   

SECTION 3.20.

  

Labor Disputes

     52   

SECTION 3.21.

  

Affiliate Transactions

     52   

SECTION 3.22.

  

Collateral

     52   

ARTICLE IV Conditions

     52   

SECTION 4.01.

  

Effective Date

     52   

SECTION 4.02.

  

Each Credit Event

     53   

ARTICLE V Affirmative Covenants

     54   

SECTION 5.01.

  

Financial Statements

     54   

SECTION 5.02.

  

Compliance Certificate

     55   

SECTION 5.03.

  

Notices

     55   

SECTION 5.04.

  

Compliance with Laws

     56   

SECTION 5.05.

  

Preservation of Existence, Etc.

     56   

SECTION 5.06.

  

Compliance with Environmental Laws

     56   

SECTION 5.07.

  

Maintenance of Properties; Ownership of Subsidiaries

     57   

SECTION 5.08.

  

Maintenance of Insurance

     57   

SECTION 5.09.

  

Use of Proceeds

     57   

SECTION 5.10.

  

Payment of Obligations

     57   

SECTION 5.11.

  

Cooperation

     57   

SECTION 5.12.

  

Books and Records

     57   

SECTION 5.13.

  

Financing Documents; Material Documents

     58   

SECTION 5.14.

  

Maintenance of Ratings

     58   

SECTION 5.15.

  

Inspection Rights

     58   

SECTION 5.16.

  

Additional Collateral

     58   

ARTICLE VI Negative Covenants

     58   

SECTION 6.01.

  

Liens

     59   

SECTION 6.02.

  

Dispositions

     61   

SECTION 6.03.

  

Investments

     62   

SECTION 6.04.

  

Fundamental Changes

     63   

SECTION 6.05.

  

Nature of Business

     63   

SECTION 6.06.

  

Transactions with Affiliates; Management Fees

     64   

SECTION 6.07.

  

Accounting Changes

     64   

SECTION 6.08.

  

Restrictive Agreements

     64   

SECTION 6.09.

  

Certain Financial Covenants

     65   

SECTION 6.10.

  

Preservation of Rights

     65   

 

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ARTICLE VII Events of Default

     65   

ARTICLE VIII The Administrative Agent

     67   

ARTICLE IX Miscellaneous

     70   

SECTION 9.01.

  

Notices

     70   

SECTION 9.02.

  

Waivers; Amendments

     71   

SECTION 9.03.

  

Expenses; Indemnity; Damage Waiver

     73   

SECTION 9.04.

  

Successors and Assigns

     74   

SECTION 9.05.

  

Survival

     77   

SECTION 9.06.

  

Counterparts; Integration; Effectiveness

     77   

SECTION 9.07.

  

Severability

     77   

SECTION 9.08.

  

Right of Setoff

     77   

SECTION 9.09.

  

Governing Law; Jurisdiction; Consent to Service of Process

     78   

SECTION 9.10.

  

WAIVER OF JURY TRIAL

     78   

SECTION 9.11.

  

Headings

     78   

SECTION 9.12.

  

Confidentiality

     78   

SECTION 9.13.

  

USA PATRIOT Act

     79   

SECTION 9.14.

  

Appointment for Perfection

     79   

SECTION 9.15.

  

Interest Rate Limitation

     79   

SECTION 9.16.

  

No Advisory or Fiduciary Responsibility

     80   

 

SCHEDULES:      Schedule 1.01(a)     –       Existing Indebtedness Schedule
1.01(b)     –       Permitted Holders Schedule 2.01     –       Commitments
Schedule 3.04     –       Regulatory Approvals Schedule 3.13(a)     –      
Subsidiaries Schedule 3.13(b)     –       Subsidiaries Jurisdictions of
Organization Schedule 3.14     –       Existing Dividend Restrictions Schedule
3.15     –       Litigation Schedule 3.19     –       Environmental Matters
Schedule 3.21     –       Affiliate Transactions Schedule 5.07     –      
Properties and Assets Schedule 6.01(b)     –       Existing Liens Schedule
6.03(l)     –       Investments EXHIBITS:     

Exhibit A

    –       Form of Assignment and Assumption Exhibit B     –       [Reserved]
Exhibit C     –       Form of Increasing Lender Supplement Exhibit D     –      
Form of Augmenting Lender Supplement Exhibit E     –       List of Closing
Documents Exhibit F     –       Form of Revolving Loan Note Exhibit G-1     –   
   Form of U.S. Tax Certificate (Non-U.S. Lenders That Are Not Partnerships)
Exhibit G-2     –       Form of U.S. Tax Certificate (Non-U.S. Lenders That Are
Partnerships)

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Table of Contents

(continued)

 

Exhibit G-3   –    Form of U.S. Tax Certificate (Non-U.S. Participants That Are
Not Partnerships) Exhibit G-4   –    Form of U.S. Tax Certificate
(Non-U.S. Participants That Are Partnerships) Exhibit H   –    Collateral Agency
Agreement Exhibit I   –    Form of Amendment No. 1 to Amended and Restated
Collateral Agency Agreement Exhibit J   –    Form of Solvency Certificate
Exhibit K   –    Pledge Agreement Exhibit L   –    Security Agreement Exhibit M
  –    Terms of Subordination

 

v

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CREDIT AGREEMENT (this “Agreement”) dated as of February 10, 2012 among PUGET
ENERGY, INC., the LENDERS from time to time party hereto, JPMORGAN CHASE BANK,
N.A., as Administrative Agent, THE ROYAL BANK OF SCOTLAND PLC, as Syndication
Agent and BARCLAYS BANK PLC, THE BANK OF NOVA SCOTIA, SUNTRUST BANK and UNION
BANK, N.A., as Co-Documentation Agents.

The parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have
the meanings specified below:

“ABR” when used in reference to any Loan or Borrowing, refers to a Loan, or the
Loans comprising such Borrowing, bearing interest at a rate determined by
reference to the Alternate Base Rate.

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.

“Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as
administrative agent for the Lenders hereunder.

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

“Affiliate Service Agreements” means any contract or agreement between the
Borrower or any Subsidiary and an Affiliate thereof providing for accounting,
tax, treasury, intercompany services or other professional services to the
Borrower or any Subsidiary.

“AFUDC” means the cost of both the debt and equity funds used to finance utility
plant additions during the construction period for such additions, determined in
accordance with GAAP.

“Agents” means, collectively, the Administrative Agent and the Collateral Agent.

“Aggregate Commitment” means the aggregate of the Commitments of all of the
Lenders, as reduced or increased from time to time pursuant to the terms and
conditions hereof. As of the Effective Date, the Aggregate Commitment is
$1,000,000,000.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus  1/2 of 1% and (c) the Adjusted LIBO Rate for a
one month Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day) plus 1%, provided that, for the avoidance of
doubt, the Adjusted LIBO Rate for any day shall be based on the rate appearing
on Reuters Screen LIBOR01 Page (or on any successor or substitute page of such
page) at approximately 11:00 a.m. London time on such day. Any change in the
Alternate Base Rate due to a change in the Prime Rate, the Federal Funds
Effective Rate or the Adjusted LIBO Rate shall be effective from and including
the effective date of such change in the Prime Rate, the Federal Funds Effective
Rate or the Adjusted LIBO Rate, respectively.

“Annual Report” means the audited consolidated financial statements of the
Borrower and its Subsidiaries for the fiscal year ending December 31, 2010.

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“Applicable Percentage” means, with respect to any Lender, with respect to
Revolving Loans, LC Exposure or Swingline Loans, the percentage equal to a
fraction the numerator of which is such Lender’s Commitment and the denominator
of which is the Aggregate Commitment of all Lenders (or, if the Commitments have
terminated or expired, the Applicable Percentages shall be determined based upon
the Commitments most recently in effect, giving effect to any assignments);
provided that in the case of Section 2.21 when a Defaulting Lender shall exist,
any such Defaulting Lender’s Commitment shall be disregarded in the calculation.

“Applicable Rate” means, for any day, with respect to any Eurodollar Loan or any
ABR Loan or with respect to the facility fees payable hereunder, as the case may
be, the applicable rate per annum set forth below under the caption “Eurodollar
Spread for Eurodollar Loans”, “ABR Spread for ABR Loans” or “Commitment Fee
Rate”, as the case may be, based upon the Pricing Level applicable on such date:

 

Pricing Level

   Commitment
Fee Rate     Eurodollar Spread
for Eurodollar Loans     ABR Spread for
ABR Loans  

Level I

     0.175 %      1.25 %      0.25 % 

Level II

     0.225 %      1.50 %      0.50 % 

Level III

     0.30 %      1.75 %      0.75 % 

Level IV

     0.375 %      2.00 %      1.00 % 

Level V

     0.45 %      2.50 %      1.50 % 

Level VI

     0.525 %      3.00 %      2.00 % 

For purposes of the foregoing:

(i) changes in the Eurodollar Spread for Eurodollar Loans, ABR Spread for ABR
Loans and the Commitment Fee Rate resulting from a change in the Pricing Level
shall become effective on the effective date of any change in the Senior Debt
Rating from S&P or Moody’s, or on the occurrence of an Event of Default;

(ii) in the event of a split in the Senior Debt Rating from S&P and Moody’s that
would otherwise result in the application of more than one Pricing Level (had
the provisions regarding the applicability of other Pricing Levels contained in
the definitions thereof not been given effect), then the Eurodollar Spread for
Eurodollar Loans, ABR Spread for ABR Loans and the Commitment Fee Rate shall be
determined as follows:

(x) if the split in the Senior Debt Rating is one Pricing Level, then the higher
Senior Debt Rating will be the applicable Pricing Level,

(y) if the split in the Senior Debt Rating is two Pricing Levels, the midpoint
between the two will be the applicable Pricing Level, and

(z) if the split in the Senior Debt Rating is more than two Pricing Levels, the
Pricing Level will be the Pricing Level immediately below the higher Pricing
Level;

(iii) if either (but not both) Moody’s or S&P shall cease to be in the business
of rating corporate debt obligations, the Pricing Levels shall be determined on
the basis of the ratings provided by the other rating agency; and

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(iv) if at any time the long term secured senior debt of the Borrower is unrated
by Moody’s and S&P, the Pricing Level will be Pricing Level VI; provided that if
the reason that there is no such Senior Debt Rating results from Moody’s and S&P
ceasing to issue debt ratings generally, then the Borrower and the
Administrative Agent may select another nationally-recognized rating agency to
substitute for Moody’s and S&P for purposes of the foregoing pricing grid (and
all references herein to Moody’s and S&P, as applicable, shall refer to such
substitute rating agency), and until a substitute nationally-recognized rating
agency is so selected, the Pricing Level shall be determined by reference to the
Senior Debt Rating most recently in effect prior to cessation.

“Approved Bank” has the meaning specified in clause (c) of the definition of
“Cash Equivalents”

“Approved Fund” has the meaning assigned to such term in Section 9.04.

“Assignment and Assumption” means an assignment and assumption agreement entered
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.

“Attributable Receivables Indebtedness” at any time shall mean the principal
amount of Indebtedness which (a) if a Receivables Facility is structured as a
secured lending agreement, constitutes the principal amount of such Indebtedness
or (b) if a Receivables Facility is structured as a purchase agreement, would be
outstanding at such time under the Receivables Facility if the same were
structured as a secured lending agreement rather than a purchase agreement. For
purposes of this definition, “Receivables Facility” shall mean any receivables
or securitization facility or facilities made available to the Borrower or any
of its Subsidiaries pursuant to which assets and related security are sold,
pledged or otherwise transferred to one or more special purpose entities and
thereafter to certain investors or creditors.

“Augmenting Lender” has the meaning assigned to such term in Section 2.20.

“Authorized Officer” means the chief executive officer, president, chief
financial officer, chief accounting officer, vice president finance, treasurer
or assistant treasurer or other similar officer of the Borrower or any
Subsidiary and, as to any document delivered on the Effective Date, any
secretary or assistant secretary of the Borrower or any Subsidiary.

“Available Revolving Commitment” means, at any time with respect to any Lender,
the Commitment of such Lender then in effect minus the Revolving Credit Exposure
of such Lender at such time; it being understood and agreed that any Lender’s
Swingline Exposure shall not be deemed to be a component of the Revolving Credit
Exposure for purposes of calculating the commitment fee under Section 2.12(a).

“Availability Period” means the period from and including the Effective Date to
but excluding the earlier of the Maturity Date and the date of termination of
the Commitments.

“Banking Services” means each and any of the following bank services provided to
the Borrower by any Lender or any of its Affiliates: (a) credit cards for
commercial customers (including, without limitation, commercial credit cards and
purchasing cards), (b) stored value cards and (c) treasury management services
(including, without limitation, controlled disbursement, automated clearinghouse
transactions, return items, overdrafts and interstate depository network
services).

“Banking Services Agreement” means any agreement entered into by the Borrower or
any Subsidiary in connection with Banking Services.

“Banking Services Obligations” means any and all obligations of the Borrower or
any Subsidiary, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor) in connection with Banking
Services.

 

3

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“Bankruptcy Event” means, with respect to any Person, such Person becomes the
subject of a bankruptcy or insolvency proceeding, or has had a receiver,
conservator, trustee, administrator, custodian, assignee for the benefit of
creditors or similar Person charged with the reorganization or liquidation of
its business appointed for it, or, in the good faith determination of the
Administrative Agent, has taken any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any such proceeding or appointment,
provided that a Bankruptcy Event shall not result solely by virtue of any direct
or indirect ownership interest, or the acquisition of any direct or indirect
ownership interest, in such Person by a Governmental Authority or
instrumentality thereof, provided, further, that such ownership interest does
not result in or provide such Person with immunity from the jurisdiction of
courts within the United States or from the enforcement of judgments or writs of
attachment on its assets or permit such Person (or such Governmental Authority
or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or
agreements made by such Person.

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

“Borrower” means Puget Energy, Inc., a Washington corporation.

“Borrower Group” means the Borrower and the Operating Companies and “Borrower
Group Member” means any of the Borrower or any Operating Company.

“Borrowing” means (a) Revolving Loans of the same Type, made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect or (b) a Swingline Loan.

“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.03.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in Dollars in the London interbank market.

“Business Plan” has the meaning assigned to such term in Section 5.01(c).

“Capital Expenditures” means, with respect to any Person, the aggregate of
(a) all expenditures (whether paid in cash or accrued as liabilities) by such
Person that, in conformity with GAAP, are required to be included as additions
during such period to Property, plant or equipment reflected in the balance
sheet of such Person and (b) the value of all assets under Capital Lease
Obligations incurred by such Person.

“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a balance sheet
of such Person under GAAP, and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP; provided,
however, that in the event that changes in GAAP occur after the Effective Date,
the effect of which is to cause leases of the type in effect as of December 31,
2010 and treated as operating leases under GAAP as of December 31, 2010 to be
reclassified as capital leases under GAAP, the definition of Capital Lease
Obligation shall exclude any such reclassified leases.

“Cash Equivalents” means any of the following types of Investments, to the
extent owned by the Borrower or any Subsidiary:

(a) Dollars held by it from time to time in the ordinary course of business;

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(b) readily marketable obligations issued or directly and fully guaranteed or
insured by the government or any agency or instrumentality of the United States
and having maximum maturities of not more than one (1) year from the date of
acquisition thereof;

(c) investments in certificates of deposit, banker’s acceptances and time
deposits maturing within 180 days from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank organized under the laws
of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $1,000,000,000;

(d) commercial paper and variable or fixed rate notes issued by an Approved Bank
or commercial paper and variable or fixed rate notes issued by, or guaranteed
by, a corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1
(or the equivalent thereof) or better by Moody’s, in each case with maximum
maturities of not more than two hundred seventy (270) days from the date of
acquisition thereof; provided that, no more than $50,000,000 in the aggregate of
such commercial paper per issuer shall be outstanding at any time;

(e) repurchase agreements fully secured by obligations described in clause
(b) above with any Approved Bank; and

(f) Investments with maximum maturities of twelve (12) months or less from the
date of acquisition in (i) money market funds rated AAA (or the equivalent
thereof) or better by S&P or Aaa (or the equivalent thereof) or better by
Moody’s that are registered under the Investment Company Act of 1940, as
amended, and the portfolios of which are limited solely to Investments of the
character, quality and maturity described in the foregoing clauses (b), (c),
(d) and (e) or (ii) the Federal Municipal Obligations Fund (or its successors)
so long as such fund is rated AA (or the equivalent thereof) or better by S&P or
Fitch Ratings Ltd. at the time of such Investment.

“Cash Interest Expense” means, for any period, with respect to the Borrower
Group determined on a consolidated basis without duplication in accordance with
GAAP, the total interest expense (which for the avoidance of doubt, shall not
include the benefit of AFUDC) of the Borrower Group for such period, less the
sum of (a) interest on any debt that is not payable in cash during such period,
including any capitalized interest, (b) amortization of debt issuance costs,
debt discount or premium and other financing fees and expenses incurred by any
member of the Borrower Group during such period and (c) all other non-cash items
included in such calculation of interest expense during such period.

“CFO” means the chief financial officer of the Borrower or person holding a
similar position.

“Change in Control” means the Permitted Holders shall fail to (i) own and
control directly or indirectly, in the aggregate more than 50.1% of the issued
and outstanding common Equity Interests in Puget Holdings, the Parent or the
Borrower and (ii) control the board of directors (or comparable governing body)
of Puget Holdings, the Parent or the Borrower, as the case may be.

“Change in Law” means (a) the adoption of any law, rule, regulation or treaty
after the date of this Agreement, (b) any change in any law, rule, regulation or
treaty or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender or
any Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of
such Lender or by such Lender’s or such Issuing Bank’s holding company, if any)
with any request, guideline or directive (whether or not having the force of
law) of any Governmental Authority made or issued after the date of this
Agreement; provided, however, that notwithstanding anything herein to the
contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all
requests, rules, guidelines or

 

5

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directives thereunder or issued in connection therewith, and (ii) all requests,
rules, guidelines, requirements and directives promulgated by the Bank for
International Settlements, the Basel Committee on Banking Supervision (or any
successor or similar authority) or the United States or foreign regulatory
authorities, in each case pursuant to Basel III, shall in each case be deemed to
be a “Change in Law”, regardless of the date enacted, adopted or issued.

“Class”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are Revolving Loans or Swingline
Loans.

“Code” means the Internal Revenue Code of 1986.

“Co-Documentation Agent” means each of Barclays Bank PLC, The Bank of Nova
Scotia, SunTrust Bank and Union Bank in its capacity as co-documentation agent
for the credit facility evidenced by this Agreement.

“Collateral” means all the “Collateral”, as defined in the Security Agreement
and the Pledge Agreement.

“Collateral Agency Agreement” means the Amended and Restated Collateral Agency
Agreement, dated as of February 6, 2009 and amended and restated as of May 10,
2010 and further amended as of February 10, 2012, among the Collateral Agent,
the Administrative Agent, certain authorized representatives, Puget Equico LLC
and the Borrower, a copy of which is attached hereto as Exhibit H.

“Collateral Agent” means JPMorgan Chase Bank, National Association or one of its
affiliates, as successor to Barclays Bank PLC, in its capacity as collateral
agent under the Collateral Agency Agreement and the other Security Documents, or
any successor thereto in accordance with the terms of the Collateral Agency
Agreement.

“Commitment” means, with respect to each Lender, the commitment of such Lender,
to make Revolving Loans and to acquire participations in Letters of Credit and
Swingline Loans hereunder, expressed as an amount representing the maximum
aggregate amount of such Lender’s Revolving Credit Exposure hereunder, as such
commitment may be (a) reduced or terminated from time to time pursuant to
Section 2.09, (b) increased from time to time pursuant to Section 2.20 and
(c) reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.04. The initial amount of each Lender’s Commitment
is set forth on Schedule 2.01, or in the Assignment and Assumption or other
documentation contemplated hereby pursuant to which such Lender shall have
assumed its Commitment, as applicable.

“Conservation Amortization” means at any date, all amounts that would, in
conformity with GAAP, be set forth opposite the caption “conservation
amortization” (or any like caption) on a consolidated balance sheet of the
Borrower and its Subsidiaries at such date.

“Consolidated Capital Expenditures” means, without duplication, any expenditures
for any purchase or other acquisition of any asset which would be classified as
a fixed or capital asset on a consolidated balance sheet of the Borrower and its
Subsidiaries prepared in accordance with GAAP.

“Consolidated Current Assets” means, at any date, all amounts (without
duplication) that would, in conformity with GAAP, be set forth opposite the
caption “total current assets” (or any like caption) on a consolidated balance
sheet of the Borrower and its Subsidiaries at such date (other than (i) cash and
Cash Equivalents, (ii) purchased gas adjustment receivables, (iii) unrealized
gains on derivative instruments, (iv) prepaid taxes and (v) any current portion
of deferred income taxes).

“Consolidated Current Liabilities” means, at any date, all amounts (without
duplication that would, in conformity with GAAP, be set forth opposite the
caption “total current liabilities” (or any like caption) on a consolidated
balance sheet of the Borrower and its Subsidiaries at such date (other than
(i) the current portion of any funded Indebtedness, (ii) without duplication of
clause (i) above, all

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Indebtedness consisting of revolving loans to the extent otherwise included
therein, (iii) unrealized losses on derivative instruments, (iv) any current
portion of deferred taxes, (v) accrued expenses related to taxes and interest,
(vi) purchased gas adjustment payables and (vii) all amounts set forth opposite
the caption “other current liabilities” on the consolidated balance sheet of the
Borrower and its Subsidiaries for the relevant period).

“Consolidated EBITDA” means Consolidated Net Income plus, to the extent deducted
from revenues in determining Consolidated Net Income, (i) Consolidated Interest
Expense, (ii) expense for income taxes paid or accrued, (iii) depreciation,
(iv) amortization, (v) extraordinary, unusual or non-recurring expenses or
losses incurred other than in the ordinary course of business, (vi) net
unrealized losses on derivative instruments minus, to the extent included in
Consolidated Net Income, (1) interest income, (2) income tax credits and refunds
(to the extent not netted from tax expense), (3) any cash payments made during
such period in respect of items described in clause (v) above subsequent to the
fiscal quarter in which the relevant non-cash expenses or losses were incurred,
(4) net unrealized gains on derivative instruments, (5) extraordinary, unusual
or non-recurring income or gains realized other than in the ordinary course of
business and (6) AFUDC, all calculated for the Borrower and its Subsidiaries in
accordance with GAAP on a consolidated basis. For the purposes of calculating
Consolidated EBITDA for any period of four consecutive fiscal quarters (each
such period, a “Reference Period”), (i) if at any time during such Reference
Period the Borrower or any Subsidiary shall have made any Material Disposition,
the Consolidated EBITDA for such Reference Period shall be reduced by an amount
equal to the Consolidated EBITDA (if positive) attributable to the property that
is the subject of such Material Disposition for such Reference Period or
increased by an amount equal to the Consolidated EBITDA (if negative)
attributable thereto for such Reference Period, and (ii) if during such
Reference Period the Borrower or any Subsidiary shall have made a Material
Acquisition, Consolidated EBITDA for such Reference Period shall be calculated
after giving effect thereto on a pro forma basis as if such Material Acquisition
occurred on the first day of such Reference Period. “Material Acquisition” means
any acquisition of property or series of related acquisitions of property that
(a) constitutes (i) assets comprising all or substantially all or any
significant portion of a business or operating unit of a business, or (ii) all
or substantially all of the common stock or other Equity Interests of a Person,
and (b) involves the payment of consideration by the Borrower and its
Subsidiaries in excess of $150,000,000; and “Material Disposition” means any
sale, transfer or disposition of property or series of related sales, transfers,
or dispositions of property that yields gross proceeds to the Borrower or any of
its Subsidiaries in excess of $150,000,000.

“Consolidated Interest Expense” means, with reference to any period, the
interest expense (including without limitation interest expense under Capital
Lease Obligations that is treated as interest in accordance with GAAP) of the
Borrower and its Subsidiaries calculated on a consolidated basis for such period
with respect to (a) all outstanding Indebtedness of the Borrower and its
Subsidiaries allocable to such period in accordance with GAAP (including,
without limitation, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers acceptance financing and net costs
under interest rate Swap Agreements to the extent such net costs are allocable
to such period in accordance with GAAP) and (b) the interest component of all
Attributable Receivable Indebtedness of the Borrower and its Subsidiaries for
such period. In the event that the Borrower or any Subsidiary shall have
completed a Material Acquisition or a Material Disposition since the beginning
of the relevant period, Consolidated Interest Expense shall be determined for
such period on a pro forma basis as if such acquisition or disposition, and any
related incurrence or repayment of Indebtedness, had occurred at the beginning
of such period.

“Consolidated Net Income” means, with reference to any period, the net income
(or loss) of the Borrower and its Subsidiaries calculated in accordance with
GAAP on a consolidated basis (without duplication) for such period; provided
that there shall be excluded any income (or loss) of any Person other than the
Borrower or a Subsidiary, but any such income so excluded may be included in
such period or any later period to the extent of any cash dividends or
distributions actually paid in the relevant period to the Borrower or any
wholly-owned Subsidiary of the Borrower.

 

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“Consolidated Tangible Net Assets” means at any date, the total of all assets of
the Borrower Group (including revaluations thereof as a result of commercial
appraisals, price level restatement or otherwise) as set forth on the balance
sheet most recently delivered to the Lenders pursuant to Section 5.01 net of
applicable reserves and deductions but excluding goodwill, trade names,
trademarks, unamortized debt discount and all other like intangible assets
(which term shall not be construed to include such revaluations) less the
aggregate of the Consolidated Current Liabilities of the Borrower Group
appearing on such balance sheet.

“Consolidated Working Capital” means, at any date, the difference of
(a) Consolidated Current Assets on such date less (b) Consolidated Current
Liabilities on such date. Consolidated Working Capital at any date may be a
positive or negative number. Consolidated Working Capital increases when it
becomes more positive or less negative and decreases when it becomes less
positive or more negative.

“Contractual Obligation” means, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

“Credit Event” means a Borrowing, the issuance of a Letter of Credit, an LC
Disbursement or any of the foregoing.

“Credit Party” means the Administrative Agent, the Issuing Bank, the Swingline
Lender or any other Lender.

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

“Defaulting Lender” means any Lender that (a) has failed, within two
(2) Business Days of the date required to be funded or paid, to (i) fund any
portion of its Loans, (ii) fund any portion of its participations in Letters of
Credit or Swingline Loans or (iii) pay over to any Credit Party any other amount
required to be paid by it hereunder, unless, in the case of clause (i) above,
such Lender notifies the Administrative Agent in writing that such failure is
the result of such Lender’s good faith determination that a condition precedent
to funding (specifically identified and including the particular default, if
any) has not been satisfied, (b) has notified the Borrower or any Credit Party
in writing, or has made a public statement to the effect, that it does not
intend or expect to comply with any of its funding obligations under this
Agreement (unless such writing or public statement indicates that such position
is based on such Lender’s good faith determination that a condition precedent
(specifically identified and including the particular default, if any) to
funding a loan under this Agreement cannot be satisfied) or generally under
other agreements in which it commits to extend credit, (c) has failed, within
three (3) Business Days after request by a Credit Party, acting in good faith,
to provide a certification in writing from an authorized officer of such Lender
that it will comply with its obligations to fund prospective Loans and
participations in then outstanding Letters of Credit and Swingline Loans under
this Agreement, provided that such Lender shall cease to be a Defaulting Lender
pursuant to this clause (c) upon such Credit Party’s receipt of such
certification in form and substance reasonably satisfactory to it and the
Administrative Agent, or (d) has become the subject of a Bankruptcy Event.

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“Disposition” or “Dispose” means the sale, assignment, transfer or other
disposition (including any Sale and Leaseback Transaction and any termination of
business lines) of any property by the Borrower or any of its Subsidiaries to
any Person, including any sale, assignment, transfer or other disposal, with or
without recourse, of any notes or accounts receivable or any rights and claims
associated therewith.

“Dollars” or “$” refers to lawful money of the United States of America.

“Effective Date” means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).

“Environmental Laws” means any and all federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, initiatives,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution, the protection of the
environment, natural resources, or, to the extent relating to exposure to
Hazardous Materials, human health or safety or to the release of any Hazardous
Materials into the environment, including air emissions and discharges to waste
or public systems.

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.

“Environmental Permit” means any permit, approval, identification number,
license or other authorization required from any Governmental Authority under
any Environmental Law.

“Equity Interests” means, with respect to any Person, all of the shares,
membership interests, rights, participations or other equivalents (however
designated) of capital stock of (or other ownership or profit interests or units
in) such Person and all of the warrants, options or other rights for the
purchase, acquisition or exchange from such Person of any of the foregoing
(including through convertible securities).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with the Borrower, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.

“ERISA Event” means (a) any reportable event, as defined in Section 4043 of
ERISA, or the regulations issued thereunder, with respect to a Plan, that the
Administrative Agent determines in good faith constitutes (i) grounds for the
termination of any Plan by the PBGC or the appointment of a trustee to
administer or liquidate any Plan, or (ii) a failure to make required minimum
contributions (other than an event for which the 30-day notice period is waived)
shall have occurred and be continuing; (b) the existence with respect to any
Plan of an “unpaid minimum required contribution” which means, with respect to
any plan year, any minimum required contribution under Section 430 of the Code
for the plan year which is not paid on or before the due date (as determined
under section 430(j)(1) of the Code) for the plan year; (c) the filing pursuant
to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Plan; (d) the
incurrence by

 

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the Borrower or any of its ERISA Affiliates of any liability under Title IV of
ERISA with respect to the termination of any Plan; (e) the receipt by the
Borrower or any ERISA Affiliate from the PBGC or a plan administrator of notice
of the intention to terminate any Plan or Plans or to appoint a trustee to
administer any Plan; (f) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal
of the Borrower or any of its ERISA Affiliates from any Plan or Multiemployer
Plan; or (g) the receipt by the Borrower or any ERISA Affiliate from any
Multiemployer Plan of notice of (i) the imposition upon the Borrower or any of
its ERISA Affiliates of Withdrawal Liability or (ii) a determination that such
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

“Eurodollar”, when used in reference to any Loan or Borrowing, means that such
Loan, or the Loans comprising such Borrowing, bears interest at a rate
determined by reference to the Adjusted LIBO Rate.

“Event of Default” has the meaning assigned to such term in Article VII.

“Excluded Taxes” means, with respect to any payment made by the Borrower under
any Financing Document, any of the following Taxes imposed on or with respect to
a Recipient:

(a) income or franchise Taxes imposed on (or measured by) net income by the
United States of America, or by the jurisdiction under the laws of which such
Recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located,

(b) any branch profits Taxes imposed by the United States of America or any
similar Taxes imposed by any other jurisdiction in which the Borrower is
located,

(c) in the case of a Non U.S. Lender (other than an assignee pursuant to a
request by the Borrower under Section 2.19(b)), any U.S. federal withholding
Taxes resulting from any law in effect (including FATCA) on the date such Non
U.S. Lender becomes a party to this Agreement (or designates a new lending
office) or is attributable to such Non U.S. Lender’s failure to comply with
Section 2.17(f), except to the extent that such Non U.S. Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from the Borrower with
respect to such withholding Taxes pursuant to Section 2.17(a); and

(d) any Business and Occupation Taxes imposed by the State of Washington.

“Existing Credit Agreement” that certain Credit Agreement, dated as of May 16,
2008 among the Borrower, the lenders from time to time parties thereto and
Barclays Bank PLC, as facility agent, as amended, restated, supplemented or
otherwise modified prior to the date hereof.

“Existing Indebtedness” means (a) Indebtedness of the Borrower or any Subsidiary
that is outstanding on the Effective Date and listed on Schedule 1.01(a) and
(b) any Permitted Refinancing Indebtedness thereof.

“Extraordinary Taxes” means taxes paid in connection with Dispositions and other
non-recurring events.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantially comparable
and not materially more onerous to comply with), and any (current or future)
regulations or official interpretations thereof.

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
federal funds transactions with members of the federal Reserve System arranged
by federal funds brokers, as published on the next succeeding Business Day by
the federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by it.

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“Financial Officer” means the chief financial officer, principal accounting
officer, vice president finance, treasurer or assistant treasurer of the
Borrower.

“Financing Documents” means (i) this Agreement, (ii) any promissory notes issued
pursuant to Section 2.10(e) of this Agreement, (iii) Interest Hedge Agreements
with any Interest Rate Hedge Bank (iv) any Letter of Credit applications,
(v) the Security Documents, (vi) the Collateral Agency Agreement and (vii) all
other agreements, instruments, documents and certificates identified in
Section 4.01 executed and delivered to, or in favor of, the Administrative Agent
or any Lenders and including all other pledges, powers of attorney, consents,
assignments, contracts, notices, letter of credit agreements and all other
written matter whether heretofore, now or hereafter executed by or on behalf of
the Borrower, or any employee of the Borrower, and delivered to the
Administrative Agent or any Lender in connection with this Agreement or the
transactions contemplated hereby. Any reference in this Agreement or any other
Financing Document to a Financing Document shall include all appendices,
exhibits or schedules thereto, and all amendments, restatements, supplements or
other modifications thereto, and shall refer to this Agreement or such Financing
Document as the same may be in effect at any and all times such reference
becomes operative.

“GAAP” means generally accepted accounting principles in the United States of
America.

“Good Utility Practice” means any of the practices, methods, and acts engaged in
or approved by a significant portion of the electric or gas utility industry in
the State of Washington during the relevant time period, or any of the
practices, method and acts which, in the exercise of reasonable judgment in
light of the facts known at the time the decision was made, could have been
expected to accomplish the desired result at a reasonable cost consistent with
good business practices, reliability, safety, economy, and expedition and in a
manner consistent with applicable Laws. Good Utility Practices is not intended
to be limited to the optimum practice, methods, or act to the exclusion of all
others, but rather to be acceptable practices, methods, or acts generally
accepted in the region.

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

“Group FFO” means, for any period, the Consolidated EBITDA of the Borrower Group
for such period plus, without duplication, and in each case to the extent
deducted in the calculation of such Consolidated EBITDA (if such item was
included in the calculation of Consolidated EBITDA) (a) decreases in the
Consolidated Working Capital of the Borrower Group for such period, (b) interest
income, and minus and in each case to the extent included in the calculation of
such Consolidated EBITDA (if such item was included in the calculation of
Consolidated EBITDA) (c) consolidated cash income tax paid by the Borrower Group
for such period or by the Parent, Parent Holdco (to the extent such Person is
not Puget Holdings) or Puget Holdings in respect of the operations of the
Borrower Group for such period (excluding any Extraordinary Taxes),
(d) increases in the Consolidated Working Capital of the Borrower Group for such
period, in each case determined on a consolidated basis in accordance with GAAP.

“Group FFO Coverage Ratio” means, for any Test Period, the ratio of (a) Group
FFO for such Test Period to (b) Group Interest for such Test Period.

“Group Interest” means, for any period, the aggregate Cash Interest Expense of
the Borrower Group for such period, including the portion of any payments made
in respect of Capital Lease Obligations allocable to interest expense, plus the
aggregate scheduled recurring fees in respect of

 

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Indebtedness of the Borrower Group for such period, plus the net amount payable
(or minus the net amount receivable) by the Borrower Group under Interest
Hedging Agreements relating to interest during such period (other than any such
amount payable or receivable by the Borrower Group as a result of the
termination or reduction of the notional amount of any Interest Hedging
Agreements to the extent such amount payable or receivable is not already
included in Cash Interest Expense), in each case calculated on a consolidated
basis in accordance with GAAP. For the avoidance of doubt, Group Interest shall
exclude make whole payments. In the event that the Borrower Group shall have
completed a Material Acquisition or a Material Disposition since the beginning
of the relevant period, Group Interest shall be determined for such period on a
pro forma basis as if such acquisition or disposition, and any related
incurrence or repayment of Indebtedness, had occurred at the beginning of such
period.

“Guarantee” means, as to any Person, without duplication, (a) any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other monetary obligation payable or
performable by another Person (the “Primary Obligor”) in any manner, whether
directly or indirectly, and including any obligation of such Person, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other monetary obligation or to purchase (or to
advance or supply funds for the purchase of) any security for the payment
thereof, (ii) to purchase or lease property, securities or services for the
purpose of assuring the obligee in respect of such Indebtedness or other
monetary obligation of the payment or performance of such Indebtedness or other
monetary obligation, (iii) to maintain working capital, equity capital or any
other financial statement condition or liquidity or level of income or cash flow
of the Primary Obligor so as to enable the Primary Obligor to pay such
Indebtedness or other monetary obligation, (iv) as an account party in respect
of any letter of credit or letter of guaranty issued to support such
Indebtedness or monetary obligation or (v) entered into for the purpose of
assuring in any other manner the obligee in respect of such Indebtedness or
other monetary obligation of the payment or performance thereof or to protect
such obligee against loss in respect thereof (in whole or in part), or (b) any
Lien on any assets of such Person securing any Indebtedness or other monetary
obligation of any other Person, whether or not such Indebtedness or other
monetary obligation is assumed by such Person (or any right, contingent or
otherwise, of any holder of such Indebtedness to obtain any such Lien); provided
that the term “Guarantee” shall not include endorsement for a collection or
deposit in the ordinary course of business. The amount of any Guarantee shall be
deemed to be an amount equal to the stated or determinable amount of the related
primary obligation, or portion thereof, in respect of which such Guarantee is
made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the guaranteeing Person in good
faith. The term “Guarantee” as a verb has a corresponding meaning.

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or pollutants, including petroleum
or petroleum distillates, asbestos or asbestos-containing materials, toxic mold,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
such substances or wastes defined in or otherwise regulated as “hazardous” or
“toxic” wastes or substances under applicable Environmental Law.

“Hybrid Debt Securities” means (a) any securities, trust preferred securities,
or deferrable interest subordinated debt, which, in each such case, provides for
the optional or mandatory deferral of interest or distributions, issued by any
Borrower Group Member, or (b) Equity Interests of any business trusts, limited
liability companies, limited partnerships or similar entities (i) substantially
all of the Equity Interests of which are owned (either directly or indirectly
through one or more Subsidiaries) at all times by any Borrower Group Member,
(ii) that have been formed for the purpose of issuing securities, trust
preferred securities or deferrable interest subordinated debt of the type
described in clause (a) above, and (iii) substantially all the assets of which
consist of (x) subordinated debt issued by any Borrower Group Member, and
(y) payments made from time to time on such subordinated debt.

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“Immaterial Subsidiary” means any Subsidiary (a) designated on the Effective
Date on Schedule 3.13 or designated as such by the Borrower after the Effective
Date in a notice delivered to the Administrative Agent and (b) whose total
assets (excluding intercompany receivables) at the relevant time of
determination have a gross asset value of less than 1% of total assets
(excluding intercompany receivables) of the Borrower and its Subsidiaries on a
consolidated basis as set forth on the most recent financial statements
delivered pursuant to Sections 4.01(c) or 5.01(a) and whose total consolidated
revenues for the twelve (12) months ending at the relevant time of determination
are less than 1% of total consolidated revenue of the Borrower and its
Subsidiaries as set forth on the most recent financial statements delivered
pursuant to Sections 4.01(c) or 5.01(a); provided that at no time shall all
Immaterial Subsidiaries so designated pursuant to this definition have in the
aggregate (x) total assets (excluding intercompany receivables) at the relevant
time of determination having a gross asset value in excess of 5% of total assets
(excluding intercompany receivables) of the Borrower and its Subsidiaries on a
consolidated basis as set forth on the most recent financial statements
delivered pursuant to Section 4.01(c) or 5.01(a) or (y) total consolidated
revenues for the twelve (12) months ending at the relevant time of determination
in excess of 5% of total consolidated revenue of the Borrower and its
Subsidiaries on a consolidated basis as set forth on the most recent financial
statements delivered pursuant to Sections 4.01(c) and 5.01(a); provided,
further, that (1) in the event that a Subsidiary no longer qualifies as an
Immaterial Subsidiary pursuant to clause (b) above, the Borrower shall advise
the Administrative Agent thereof in a notice delivered to the Administrative
Agent and (2) in the event that the Subsidiaries designated as Immaterial
Subsidiaries pursuant to this definition at the relevant time of determination
in the aggregate do not comply with the first proviso in this definition, the
Borrower shall designate one of more of such Subsidiaries as a Subsidiary which
is not an Immaterial Subsidiary in a notice delivered to the Administrative
Agent.

“Increasing Lender” has the meaning assigned to such term in Section 2.20.

“Incremental Term Loan” has the meaning assigned to such term in Section 2.20.

“Incremental Term Loan Amendment” has the meaning assigned to such term in
Section 2.20.

“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, including, without limitation,
Hybrid Debt Securities, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all Guarantees by such Person of Indebtedness of others,
(h) all Capital Lease Obligations of such Person, (i) all obligations,
contingent or otherwise, of such Person as an account party in respect of
letters of credit and letters of guaranty, (j) all obligations, contingent or
otherwise, of such Person in respect of bankers’ acceptances, (k) net
obligations of such Person under any Interest Hedging Agreement (the amount of
any such net obligation to be the amount that is or would be payable upon
settlement, liquidation, termination or acceleration thereof at the time of
calculation), (l) all Attributable Receivables Indebtedness of such Person,
(m) all obligations of such Person under Sale and Leaseback Transactions and
(n) all obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any Redeemable Equity Interests in such
Person or any other Person or any warrants, rights or options to acquire such
Equity Interests, valued, in the case of Redeemable Preferred Interests, at the
greater of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends; The Indebtedness of any Person shall include the Indebtedness
of any other entity (including any partnership in which such Person is a general
partner) to the extent such

 

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Person is liable therefor as a result of such Person’s ownership interest in or
other relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor. For greater
certainty, “Indebtedness” shall not include Indebtedness in an amount equal to
the aggregate amount of cash held by the Borrower and its Subsidiaries and
included in the cash accounts listed on the consolidated balance sheet of the
Borrower and its Subsidiaries and deposited with the Administrative Agent for
the repayment or refinancing of outstanding Indebtedness of the Borrower and its
Subsidiaries (other than equity securities that are mandatorily redeemable 91 or
more days after the Maturity Date and that are Hybrid Debt Securities or
otherwise classified as hybrid securities by Moody’s and S&P) within 90 days of
the date of determination; provided that the use thereof is not prohibited by
law or any contract to which the Borrower or any of its Subsidiaries is a party.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by the Borrower under any Financing Document
and (b) Other Taxes.

“Information Memorandum” means the Confidential Information Memorandum dated
January 2012 relating to the Borrower and the Transactions.

“Intercompany Loans” means loans, advances or other extensions of credit by any
member of the Borrower Group to any other member of the Borrower Group.

“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.08.

“Interest Hedging Agreements” means any rate swap, cap or collar agreement or
similar arrangement between the Borrower and one or more interest rate hedge
providers designed to protect such Person against fluctuations in interest
rates. For purposes of this Agreement and the other Financing Documents, the
Indebtedness at any time of the Borrower under an Interest Hedging Agreement
shall be determined at such time in accordance with the methodology set forth in
such Interest Hedging Agreement.

“Interest Payment Date” means (a) with respect to any ABR Loan (other than a
Swingline Loan), the last day of each March, June, September and December and
the Maturity Date, (b) with respect to any Eurodollar Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and, in
the case of a Eurodollar Borrowing with an Interest Period of more than three
months’ duration, each day prior to the last day of such Interest Period that
occurs at intervals of three months’ duration after the first day of such
Interest Period and the Maturity Date and (c) with respect to any Swingline
Loan, the day that such Loan is required to be repaid pursuant to Section 2.10
and the Maturity Date.

“Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (b) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and, in
the case of a Borrowing, thereafter shall be the effective date of the most
recent conversion or continuation of such Borrowing.

“Interest Rate Hedge Bank” means (a) any Person that is a Lender or an Affiliate
of a Lender at the time it enters into an Interest Hedging Agreement or
(b) Macquarie Bank Limited to the extent it enters into an Interest Hedging
Agreement, in each case in its capacity as a party thereto.

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“Investment” means, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of Equity Interests, Indebtedness or other securities of another
Person, (b) a loan, advance or capital contribution to, Guarantee or assumption
of Indebtedness of, or purchase or other acquisition of any other debt or Equity
Interest in, another Person, including any partnership or joint venture interest
in such other Person or (c) the purchase or other acquisition (in one
transaction or a series of transactions) of all or substantially all of the
property and assets or business of another Person or assets constituting a
business unit, line of business or division of such Person. For purposes of
covenant compliance, the amount of any Investment shall be the amount actually
invested, without adjustment for subsequent increases or decreases in the value
of such Investment.

“IRS” means the United States Internal Revenue Service.

“Issuing Bank” means any Lender or financial institution reasonably acceptable
to the Borrower and the Administrative Agent that agrees to issue Letters of
Credit hereunder, and its successors in such capacity as provided in
Section 2.06(i). Each Issuing Bank may, in its discretion, arrange for one or
more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which
case the term “Issuing Bank” shall include any such Affiliate with respect to
Letters of Credit issued by such Affiliate.

“Laws” means, collectively, all international, foreign, federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.

“LC Collateral Account” has the meaning assigned to such term in
Section 2.06(i).

“LC Disbursement” means a payment made by an Issuing Bank pursuant to a Letter
of Credit.

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrower at such time. The LC Exposure of any Lender at any time shall be its
Applicable Percentage of the total LC Exposure at such time.

“Lender Parent” means, with respect to any Lender, any Person as to which such
Lender is, directly or indirectly, a subsidiary.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that
shall have become a Lender hereunder pursuant to Section 2.20 or pursuant to an
Assignment and Assumption, other than any such Person that ceases to be a party
hereto pursuant to an Assignment and Assumption. Unless the context otherwise
requires, the term “Lenders” includes the Swingline Lender.

“Letter of Credit” means any letter of credit issued pursuant to this Agreement.

“Leverage Ratio” means, as of any date of determination, the ratio of (a) Total
Funded Indebtedness at such date, to (b) Total Capitalization at such date.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Reuters Screen LIBOR01 Page (or on any successor
or substitute page of such service, or any successor to or substitute for such
service, providing rate quotations comparable to those currently provided on
such page of such service, as determined by the Administrative Agent from time
to time for purposes of providing quotations of interest rates applicable to
deposits in Dollars in the London interbank market) at approximately 11:00 a.m.,
London time, two (2) Business Days prior to the commencement of such Interest
Period, as the rate for deposits in Dollars with a maturity comparable to such
Interest Period. In the event that such rate is not available at such time for
any reason, then the

 

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“LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period
shall be the rate at which deposits in Dollars in an amount equal to $5,000,000
and for a maturity comparable to such Interest Period are offered by the
principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two (2) Business Days prior to the commencement of such Interest Period.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement, of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any easement, right of way or other encumbrance on title to real
property, and any Capital Lease Obligation having substantially the same
economic effect as any of the foregoing).

“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.

“Macquarie” means The Macquarie Capital Group, which includes Macquarie Capital
Group Limited, its direct or indirect subsidiaries, and the funds (or similar
vehicles) they manage.

“Management Fees” means, for any period, the aggregate amount of all payments
(including all fees, salaries and other compensation, but excluding amounts
payable under Affiliate Service Agreements) paid or incurred by the Borrower and
its Subsidiaries during such period to any of their Affiliates (including
Macquarie) and not otherwise a Restricted Payment; provided that Management Fees
shall not include amounts payable to an Affiliate (i) in its capacity as a
Lender pursuant to this Agreement or any Financing Document, (ii) in its
capacity as an interest rate hedge provider pursuant to an Interest Hedging
Agreement to the extent such Interest Hedging Agreement complies with
Section 6.06(a)(i) or (iii) in its capacity as a lender pursuant to other
Indebtedness permitted under this Agreement to the extent such arrangements
comply with Section 6.06(a)(i) and such Affiliate is not an arranger, agent or
underwriter of such Indebtedness.

“Material Adverse Effect” means a material adverse effect on (a) the business,
assets, operations, condition (financial or otherwise) of the Borrower and the
Subsidiaries taken as a whole, (b) the validity or enforceability of this
Agreement or any and all other Financing Documents or the rights or remedies of
the Administrative Agent and the Lenders thereunder, (c) the ability of the
Borrower to perform any of its obligations under this Agreement or any Financing
Document, or (d) the material rights or remedies of the Administrative Agent and
the Lenders under this Agreement or any Financing Document.

“Material Communications” means, with respect to any Contractual Obligation, any
communication by the Borrower or any of its Subsidiaries with any Governmental
Authority or any party to such Contractual Obligation regarding an event or
circumstance that could reasonably be expected to result in a Material Adverse
Effect.

“Material Indebtedness/Material Swap Obligations” means (a) Indebtedness (other
than the Loans and Letters of Credit), or (b) obligations in respect of one or
more Swap Agreements, of any one or more of the Borrower and its Subsidiaries,
in the case of (a) or (b), in an aggregate principal amount exceeding
$50,000,000. For purposes of determining Material Indebtedness/Material Swap
Obligation, the “principal amount” of the obligations of the Borrower or any
Subsidiary in respect of any Swap Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that the Borrower or
such Subsidiary would be required to pay if such Swap Agreement were terminated
at such time.

“Material Notices” means, with respect to any material Contractual Obligation,
any notice sent or received by the Borrower or any of its Subsidiaries regarding
a material event or circumstance, including the occurrence of any default under
such Contractual Obligation or termination of such Contractual Obligation or any
other development that could reasonably be expected to result in a Material
Adverse Effect.

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“Maturity Date” means February 10, 2017.

“Moody’s” means Moody’s Investors Service, Inc.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA.

“Net Cash Proceeds” means with respect to any Disposition by any member of the
Borrower Group or any issuance of Indebtedness by any member of the Borrower
Group, the gross proceeds of all cash actually received by such Borrower Group
Member in connection with such Disposition or Issuance; provided that (i) Net
Cash Proceeds shall be net of: (a) the amount of any legal, advisory, title,
transfer and recording tax expenses, commissions and other fees and expenses
paid by the Borrower or the applicable Subsidiary in connection with such
transaction and (b) any federal, state and local income or other taxes estimated
to be payable by Puget Holdings, the Borrower or the applicable Subsidiary as a
result of such transaction (but only to the extent that such estimated taxes are
in fact paid to the relevant federal, state or local Governmental Authority when
due; provided that at the time such taxes are paid, an amount equal to the
amount, if any, by which such estimated taxes exceed the amount of taxes
actually paid shall constitute “Net Cash Proceeds” for all purposes hereunder),
(ii) with respect to any Disposition, Net Cash Proceeds shall be net of any
repayments by the Borrower or the applicable Subsidiary of Indebtedness to the
extent that (x) such Indebtedness is secured by a Lien permitted by Section 6.01
on the Property that is the subject of such Disposition and (y) the transferee
of (or holder of a Lien on) such Property requires that such Indebtedness be
repaid, (iii) for all Dispositions, Net Cash Proceeds shall be net of any earn
out or other similar obligation owed by the Borrower or applicable Subsidiary in
connection with the acquisition thereof, (iv) Net Cash Proceeds shall be net of
any reserve for adjustment in respect of (x) the sale price of such asset or
assets established in accordance with GAAP and (y) any liabilities (other than
taxes deducted pursuant to clause (b) above) associated with such asset or
assets and retained by any Borrower Group Member after such sale or other
disposition thereof, including pension and other postemployment benefit
liabilities and liabilities related to environmental matters or with respect to
any indemnification obligations associated with such transaction, and it being
understood that “Net Cash Proceeds” shall include (A) any cash or Cash
Equivalents received upon the Disposition of any non-cash consideration by any
Borrower Group Member in any such Disposition and (B) upon the reversal (without
the satisfaction of any applicable liabilities in cash in a corresponding
amount) of any reserve described in this clause (iv) or if such liabilities have
not been satisfied in cash and the remaining amount of such reserve is not
reversed within 365 days after such Disposition, the remaining amount of such
reserve and (v) if the applicable cash payments are in the first instance
received by a Subsidiary that is not a wholly-owned Subsidiary, the related Net
Cash Proceeds shall be net of the proportionate share of the common Equity
Interests of such Subsidiary (and of any intermediate Subsidiary) owned by
Persons that are not wholly-owned Subsidiaries of the Borrower.

“Non-U.S. Lender” means a Lender that is not a U.S. Person.

“Obligations” means all unpaid principal of and accrued and unpaid interest on
the Loans, all LC Exposure, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations and indebtedness (including
interest and fees accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), obligations and liabilities of the Borrower to
any of the Lenders, the Administrative Agent, any Issuing Bank or any
indemnified party, individually or collectively, existing on the Effective Date
or arising thereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, arising or
incurred under this Agreement or any of the other Financing Documents or to the
Lenders or any of their Affiliates under any Swap Agreement or any Banking
Services Agreement or in respect of any of the Loans made or reimbursement or
other obligations incurred or any of the Letters of Credit or other instruments
at any time evidencing any thereof.

 

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“Operating Company” means PSE and each other Subsidiary of the Borrower other
than any Immaterial Subsidiary and, for the avoidance of doubt, the term
Operating Company shall include Puget Western, Inc.

“Operating Company Credit Agreement” means any credit agreement, loan agreement,
reimbursement agreement, indenture, supplemental indenture or other agreement
evidencing Indebtedness that is entered into by PSE or any other Operating
Company.

“Organizational Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement or limited liability
company agreement; and (c) with respect to any partnership, joint venture, trust
or other form of business entity, the partnership, joint venture or other
applicable agreement of formation or organization and any agreement, instrument,
filing or notice with respect thereto filed in connection with its formation or
organization with the applicable Governmental Authority in the jurisdiction of
its formation or organization and, if applicable, any certificate or articles of
formation or organization of such entity.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as
a result of a present or former connection between such Recipient and the
jurisdiction imposing such Taxes (other than a connection arising from such
Recipient having executed, delivered, enforced, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, or engaged in any other transaction pursuant to, any Financing
Document, or sold or assigned an interest in any Financing Document).

“Other Hedging Agreements” means any swap, cap or collar agreement or similar
arrangement entered into by any Borrower Group Member designed to protect any
Borrower Group Member against fluctuations in currency exchange rates or
commodity prices.

“Other Taxes” means any present or future stamp, court, documentary, intangible,
recording, filing or similar excise or property Taxes that arise from any
payment made under, from the execution, delivery, performance, enforcement or
registration of, or from the registration, receipt or perfection of a security
interest under, or otherwise with respect to, any Financing Document, except any
such Taxes that are Other Connection Taxes imposed with respect to an assignment
(other than an assignment under Section 2.19(b)).

“Parent” means the Person that is the direct owner of 100% of the Equity
Interests of the Borrower, which as of the Effective Date, is Puget Equico LLC,
a Washington limited liability company; provided that the Parent shall be a
direct or indirect wholly-owned Subsidiary of Puget Holdings.

“Parent Holdco” means the Person that is the direct owner of 100% of the Equity
Interests of the Parent.

“Participant” has the meaning assigned to such term in Section 9.04.

“Participant Register” has the meaning assigned to such term in Section 9.04(c).

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

“Permitted Acquisition” means an acquisition consummated by or through PSE
(including any newly formed wholly-owned Subsidiary of PSE (a “Newco”)), of all
or substantially all, of the assets of or shares or other Equity Interests in a
Person, or division or line of business of a Person (other than inventory,
leases, materials and equipment in the ordinary course of business), in each
case

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that is engaged in substantially the same general line of business or businesses
as those in which PSE (not including any of its Subsidiaries for this purpose)
is engaged or businesses reasonably related, complementary or ancillary thereto;
provided that:

(i) such acquisition shall be consensual and shall have been approved by the
board of directors (or similar governing body) of the Person whose Equity
Interests or assets are proposed to be acquired and shall not have been preceded
by an unsolicited tender offer for such Equity Interests by, or proxy contest
initiated by, Borrower or any of its Subsidiaries;

(ii) the aggregate purchase price paid by the Borrower Group for any such
acquisition shall not exceed $750,000,000;

(iii) an Authorized Officer of the Borrower shall have delivered a certificate
substantially in the form of Exhibit J, attesting to the Solvency of the
Borrower and its Subsidiaries (taken as a whole, including the acquired Person
or assets, after giving effect to such acquisition);

(iv) any Liens assumed in connection with such acquisition are otherwise
permitted under Section 6.01;

(v) [reserved];

(vi) [reserved];

(vii) no Default or Event of Default shall exist immediately prior to such
acquisition or, after giving effect to such acquisition, shall have occurred and
be continuing, or would result from the consummation of the proposed
acquisition; and

(viii) the Borrower and the Subsidiaries are in compliance, on a pro forma basis
reasonably acceptable to the Administrative Agent after giving effect to such
acquisition (but without giving effect to any synergies or cost savings), with
the covenants contained in Section 6.09 recomputed as of the last day of the
most recently ended fiscal quarter of the Borrower for which financial
statements are available, as if such acquisition (and any related incurrence or
repayment of Indebtedness, with any new Indebtedness being deemed to be
amortized over the applicable testing period in accordance with its terms) had
occurred on the first day of each relevant period for testing such compliance
and, if the aggregate consideration paid in respect of such acquisition exceeds
$500,000,000, the Borrower shall have delivered to the Administrative Agent a
certificate of a Financial Officer of the Borrower to such effect, together with
all relevant financial information, statements and projections requested by the
Administrative Agent.

“Permitted Collateral Liens” means Liens of the type specified in
Section 6.01(e), (m), (n), (p), and (u).

“Permitted Holders” means the Persons listed on Schedule 1.01(b) hereto.

“Permitted Refinancing Indebtedness” means any Indebtedness of any Borrower
Group Member, as applicable, issued in exchange for, or the Net Cash Proceeds of
which are used to refund, refinance, replace, defease or discharge Existing
Indebtedness; provided, that:

(i) The principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of and any unfunded commitment under the Indebtedness
extended, refinanced, renewed, replaced, defeased or refunded (plus (x) all
refinancing fees and expenses incurred in connection therewith including,
without limitation, underwriting fees, closing fees, agency fees, premiums,
make-whole amounts or original issue discount and LIBOR breakage costs due in
accordance with Section 2.16 of this Agreement and other reasonable
out-of-pocket expenses incurred by the Borrower and (y) an amount equal to any
termination payment paid pursuant to an Interest Hedging Agreement which has
been terminated by the Borrower in connection with the incurrence of any
Permitted Refinancing Indebtedness);

 

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(ii) Such Permitted Refinancing Indebtedness has weighted average life to
maturity equal to or greater than the weighted average life to maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;

(iii) If the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to this Agreement, such
Permitted Refinancing Indebtedness is subordinated in right of payment to this
Agreement on terms, taken as whole, at least as favorable to the Lenders as the
subordination terms contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; provided
that a certificate of an Authorized Officer of the Borrower is delivered to the
Administrative Agent at least five (5) Business Days (or such shorter period as
the Administrative Agent may reasonably agree) prior to the incurrence of such
Indebtedness, together with a reasonably detailed description of the material
terms and conditions of such subordination terms or drafts of the documentation
relating thereto, stating that the Borrower has determined in good faith that
such terms and conditions satisfy the foregoing requirement shall be conclusive
evidence that such terms and conditions satisfy the foregoing requirement unless
the Administrative Agent notifies the Borrower within such period that it
disagrees with such determination (including a reasonable description of the
basis upon which it disagrees);

(iv) Such Indebtedness is incurred by the Person who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;

(v) The Permitted Refinancing Indebtedness is not secured by any Collateral not
granted to the holders of the Indebtedness being financed, renewed, replaced,
defeased or refunded; and

(vi) Such Permitted Refinancing Indebtedness shall have terms which shall be no
more restrictive taken as a whole, and shall not, taken as a whole, be
materially less favorable, in any respect on the Borrower or the Operating
Companies than the provisions of the Indebtedness being refinanced, renewed,
replaced, defeased or refunded; provided, however, the pricing terms may be less
favorable where such Indebtedness has matured or is scheduled to mature within
six (6) months and is being refinanced at then-prevailing market price.

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Pledge Agreement” means the Amended and Restated Pledge Agreement, dated as of
February 6, 2009 and amended and restated as of May 10, 2010, from Puget Equico
LLC, as pledgor to Collateral Agent (as amended, restated, supplemented or
otherwise modified from time to time), a copy of which is attached hereto as
Exhibit K.

“Preferred Interests” means, with respect to any Person, Equity Interests issued
by such Person that are entitled to a preference or priority over any other
Equity Interests issued by such Person upon any distribution of such Person’s
property and assets, whether by dividend or upon liquidation.

“Pricing Level” means Pricing Level I, Pricing Level II, Pricing Level III,
Pricing Level IV, Pricing Level V or Pricing Level VI, as the context may
require.

“Pricing Level I” means any time when (a) no Event of Default has occurred and
is continuing, and (b) the Senior Debt Rating is BBB+ or higher by S&P or Baa1
or higher by Moody’s.

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“Pricing Level II” means any time when (a) no Event of Default has occurred and
is continuing, (b) the Senior Debt Rating is BBB or higher by S&P or Baa2 or
higher by Moody’s and (c) Pricing Level I does not apply.

“Pricing Level III” means any time when (a) no Event of Default has occurred and
is continuing, (b) the Senior Debt Rating is BBB- or higher by S&P or Baa3 or
higher by Moody’s and (c) none of Pricing Levels I or II is applicable.

“Pricing Level IV” means any time when (a) no Event of Default has occurred and
is continuing, (b) the Senior Debt Rating is BB+ or higher by S&P or Ba1 or
higher by Moody’s and (c) none of Pricing Levels I, II or III is applicable.

“Pricing Level V” means any time when (a) no Event of Default has occurred and
is continuing, (b) the Senior Debt Rating is BB or higher by S&P or Ba2 or
higher by Moody’s and (c) none of Pricing Levels I, II, III or IV is applicable.

“Pricing Level VI” means any time when none of Pricing Levels I, II, III, IV and
V is applicable.

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.

“Pro Forma Basis” means, with respect to any event, that the Borrower is in
compliance on a pro forma basis with the applicable covenant, calculation or
requirement herein recomputed as if the event with respect to which compliance
on a Pro Forma Basis is being tested had occurred on the first day of the four
fiscal quarter period most recently ended on or prior to such date for which
financial statements have been delivered pursuant to Section 5.01.

“Projections” has the meaning assigned to such term in Section 5.01(c).

“Property” means any right or interest in or to property of any kind whatsoever,
whether real or personal, or mixed and whether tangible or intangible, and
including, for the avoidance of doubt, revenues and contractual rights.

“PSE” means Puget Sound Energy, Inc., a Washington corporation.

“Puget Holdings” means Puget Holdings LLC, a Delaware limited liability company.

“Quarter End Date” means March 31, June 30, September 30 and December 31 of each
year.

“Recipient” means, as applicable, (a) the Administrative Agent, (b) any Lender
(and, in the case of a Lender that is classified as a partnership for
U.S. federal tax purposes, a Person treated as the beneficial owner thereof for
U.S. federal tax purposes) and (c) any Issuing Bank.

“Redeemable” means, with respect to any Equity Interest, any such Equity
Interest that (a) the issuer has undertaken to redeem at a fixed or determinable
date or dates, whether by operation of a sinking fund or otherwise, or upon the
occurrence of a condition not solely within the control of the issuer or (b) is
redeemable at the option of the holder.

“Register” has the meaning assigned to such term in Section 9.04.

“Regulatory Approval” means (a) any authorization, consent, approval, license,
ruling, permit, tariff, certification, waiver, exemption, filing required by
chapter 80.08 or 80.12 RCW, variance, order, judgment or decree of, by, or by
any Borrower Group Member, the Parent, Parent Holdco (to the extent such Person
is not Puget Holdings) or Puget Holdings with, (b) any required notice by any
Borrower Group Member, (c) any declaration containing material obligations of
any Borrower Group Member made by or filed with, or (d) any Borrower Group
Member registration by or with, any Governmental Authority.

 

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“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.

“Required Lenders” means at any time, subject to Section 2.21(b), Lenders having
Revolving Credit Exposures and unused Commitments representing more than 50% of
the sum of the total Revolving Credit Exposures and Available Revolving
Commitments at such time.

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property, other than common Equity Interests in the
Borrower) on account of any Equity Interest of any Borrower Group Member, or any
payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement,
defeasance, acquisition, cancellation or termination of any such Equity
Interest, or on account of any return of capital to the Borrower’s stockholders,
partners or members (or the equivalent Persons thereof); provided that payments
made to Affiliates pursuant to transactions permitted by Section 6.06(a) shall
not constitute Restricted Payments.

“Revolving Credit Exposure” means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender’s Revolving Loans and its
LC Exposure and Swingline Exposure at such time.

“Revolving Loan” means a Loan made pursuant to Section 2.01.

“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial
Services LLC business.

“Sale and Leaseback Transaction” means any sale or other transfer of any
property or asset by any Person with the intent to lease such property or asset
as lessee.

“SEC” means the United States Securities and Exchange Commission.

“Secured Obligations” has the meaning assigned thereto in the Collateral Agency
Agreement.

“Secured Parties” means, collectively, the Agents, the Lenders, the Interest
Rate Hedge Banks and each co-agent or sub-agent appointed by the Administrative
Agent from time to time pursuant to this Agreement.

“Security Agreement” means the Amended and Restated Borrower Security Agreement,
dated as of February 6, 2009 and as amended and restated as of May 10, 2010 and
as further amended as of February 10, 2012, between the Borrower and the
Collateral Agent (as amended, restated, supplemented or otherwise modified from
time to time), a copy of which is attached hereto as Exhibit L.

“Security Documents” means, collectively, the Security Agreement, the Pledge
Agreement and any other security agreements, pledge agreements or other similar
agreements delivered to the Agents, the Lenders and the Interest Rate Hedge
Banks, and any other agreements, instruments or documents that create or purport
to create a Lien in favor of the Collateral Agent for the benefit of the Secured
Parties.

“Senior Debt Rating” means at any date, the credit rating identified by S&P or
Moody’s as the credit rating which (a) it has assigned to long term secured
senior debt of the Borrower or (b) it would assign to long term secured senior
debt of the Borrower were the Borrower to issue or have outstanding any long
term secured senior debt on such date.

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“Solvent” means, in reference to the Borrower, (a) the fair value of the assets
of the Borrower, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of the Borrower will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) the Borrower will be able to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) the Borrower will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted after
the Effective Date.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D of the Board. Eurodollar Loans shall be deemed to
constitute eurocurrency funding and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D of the Board
or any comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.

“Subordinated Indebtedness” means any Indebtedness of the Borrower or any
Subsidiary the payment of which is subordinated to payment of the obligations
under the Financing Documents.

“Subordinated Indebtedness Documents” means any document, agreement or
instrument evidencing any Subordinated Indebtedness or entered into in
connection with any Subordinated Indebtedness.

“subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, Controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.

“Subsidiary” means any subsidiary of the Borrower.

“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement involving, or settled
by reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or the
Subsidiaries shall be a Swap Agreement.

“Swingline Exposure” means, at any time, the aggregate principal amount of all
Swingline Loans outstanding at such time. The Swingline Exposure of any Lender
at any time shall be its Applicable Percentage of the total Swingline Exposure
at such time.

“Swingline Lender” means JPMorgan Chase Bank, N.A., in its capacity as lender of
Swingline Loans hereunder.

 

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“Swingline Loan” means a Loan made pursuant to Section 2.05.

“Syndication Agent” means The Royal Bank of Scotland plc in its capacity as
syndication agent for the credit facility evidenced by this Agreement.

“Tax-Free Debt” means Indebtedness of PSE to a state, territory or possession of
the United States or any political subdivision thereof issued in a transaction
in which such state, territory, possession or political subdivision issued
obligations the interest on which is excludable from gross income pursuant to
the provisions of Section 103 of the Code (or similar provisions), as in effect
at the time of issuance of such obligations, and debt to a bank issuing a Letter
of Credit with respect to the principal of or interest on such obligations.

“Taxes” or “Tax” means any present or future taxes, levies, imposts, duties,
deductions, withholdings, assessments, fees or other charges imposed by any
Governmental Authority, including any interest, additions to tax or penalties
applicable thereto.

“Test Period” means the period commencing twelve (12) months prior to and
including each Quarter End Date. Any financial ratio or compliance with any
covenant in respect of any Test Period shall be determined, as of the Quarter
End Date on which such Test Period ends, on the date on which the financial
statements pursuant to Section 5.01(a) or Section 5.01(b) have been, or should
have been, delivered for the applicable fiscal period ending on such Quarter End
Date.

“Total Capitalization” means, at any time, the sum, without duplication, of
(a) Total Shareholders’ Equity at such time and (b) Total Funded Indebtedness at
such time.

“Total Funded Indebtedness” means, for the Borrower and its Subsidiaries,
without duplication, on a consolidated basis, the sum of (a) all Indebtedness of
such Person for borrowed money, except to the extent such Indebtedness is
“non-recourse” to such Person or recourse for payment of such Indebtedness is
limited to specific assets of such Person (whether or not included on a
consolidated balance sheet of such Person), (b) the principal portion of all
obligations of such Person under Capital Lease Obligations, (c) all unreimbursed
obligations relative to the face amount of all letters of credit issued to
support Indebtedness of the kinds referred to in clauses (a) and (b) above,
(d) all Guarantees of such Person with respect to Indebtedness and obligations
of the type described in clauses (a) through (c) hereof of another Person;
provided that such Guarantees are required to be reported as liabilities on a
balance sheet of such Person prepared in accordance with GAAP (and without
duplication of any liability already appearing as a liability on such balance
sheet); and provided, further that, in the event a Guarantee is limited as to
dollar amount, such Guarantee shall not exceed such limitation and (e) all
Indebtedness and obligations of the type described in clauses (a), (b), and
(c) hereof of another Person, secured by a Lien on any property of such Person
whether or not such Indebtedness or obligations has been assumed by such Person.
Notwithstanding the foregoing, Total Funded Indebtedness (i) shall not include
(x) trust preferred securities, if any, (y) interest on Indebtedness that is
accrued in the ordinary course of business and (z) any intercompany Indebtedness
between the Borrower and any of its Subsidiaries or among any of its
Subsidiaries and (ii) shall include intercompany Indebtedness (or Equity
Interests having the characteristics of Indebtedness) owing to any direct or
indirect parent of the Borrower.

“Total Shareholders’ Equity” means, at any time, the amount of total common
shareholders’ equity of the Borrower and its Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP) plus (a) the
cumulative non-cash mark-to-market charges (net of taxes) recognized by the
Borrower and its Subsidiaries in all periods; minus (b) the cumulative non-cash
mark-to-market gains (net of taxes) recognized by the Borrower and its
Subsidiaries in all periods in each case calculated exclusive of the effect on
the Borrower’s accumulated other comprehensive income/loss of the ongoing
application of Accounting Standards Codification Topic 815.

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“Transactions” means the execution, delivery and performance by the Borrower of
this Agreement and the other Financing Documents, the borrowing of Loans and
other credit extensions, the use of the proceeds thereof and the issuance of
Letters of Credit hereunder.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

“Unliquidated Obligations” means, at any time, any Secured Obligations (or
portion thereof) that are contingent in nature or unliquidated at such time,
including any Secured Obligation that is: (a) an obligation to reimburse a bank
for drawings not yet made under a letter of credit issued by it; (b) any other
obligation (including any guarantee) that is contingent in nature at such time;
or (c) an obligation to provide collateral to secure any of the foregoing types
of obligations.

“U.S. Person” means a “United States person” within the meaning of
Section 7701(a)(30) of the Code.

“U.S. Tax Certificate” has the meaning assigned to such term in
Section 2.17(f)(ii)(D)(2).

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.

“Withholding Agent” means the Borrower and the Administrative Agent.

SECTION 1.02. Classification of Loans and Borrowings. For purposes of this
Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving
Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a
“Eurodollar Revolving Loan”). Borrowings also may be classified and referred to
by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar
Borrowing”) or by Class and Type (e.g., a “Eurodollar Borrowing”).

SECTION 1.03. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”. The
word “law” shall be construed as referring to all statutes, rules, regulations,
codes and other laws (including official rulings and interpretations thereunder
having the force of law or with which affected Persons customarily comply), and
all judgments, orders and decrees, of all Governmental Authorities. Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended, restated,
supplemented or otherwise modified (subject to any restrictions on such
amendments, restatements, supplements or modifications set forth herein),
(b) any definition of or reference to any statute, rule or regulation shall be
construed as referring thereto as from time to time amended, supplemented or
otherwise modified (including by succession of comparable successor laws),
(c) any reference herein to any Person shall be construed to include such
Person’s successors and assigns (subject to any restrictions on assignment set
forth herein) and, in the case of any Governmental Authority, any other
Governmental Authority that shall have succeeded to any or all functions
thereof, (d) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (e) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement, (f) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights, and (g) all actions by
specified officers of a Person shall be deemed to be taken by such specified
officer solely in such specified officer’s capacity as such officer.

 

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SECTION 1.04. Accounting Terms; GAAP; Pro Forma Calculations. (a) Except as
otherwise expressly provided herein, all terms of an accounting or financial
nature shall be construed in accordance with GAAP, as in effect from time to
time; provided that, if the Borrower notifies the Administrative Agent that the
Borrower requests an amendment to any provision hereof to eliminate the effect
of any change occurring after the date hereof in GAAP or in the application
thereof on the operation of such provision (or if the Administrative Agent
notifies the Borrower that the Required Lenders request an amendment to any
provision hereof for such purpose) (including, without limitation, any change in
GAAP resulting in any operating lease being reclassified as a capital lease),
regardless of whether any such notice is given before or after such change in
GAAP or in the application thereof, then such provision shall be interpreted on
the basis of GAAP as in effect and applied immediately before such change shall
have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith. Notwithstanding any other provision
contained herein, all terms of an accounting or financial nature used herein
shall be construed, and all computations of amounts and ratios referred to
herein shall be made (i) except with respect to the revaluation of Indebtedness
or liabilities to the extent reflected on the Borrower’s audited consolidated
balance sheet for the fiscal year ending December 31, 2010, without giving
effect to any election under Accounting Standards Codification 825-10-25
(previously referred to as Statement of Financial Accounting Standards (“ASC”)
159) (or any other Accounting Standards Codification or Financial Accounting
Standard having a similar result or effect) to value any Indebtedness or other
liabilities of the Borrower or any Subsidiary at “fair value”, as defined
therein and (ii) without giving effect to any treatment of Indebtedness in
respect of convertible debt instruments under ASC 470-20-15 (previously referred
to as Financial Accounting Standards Board Staff Position APB 14-1) to value any
such Indebtedness in a reduced or bifurcated manner as described therein, and
such Indebtedness shall at all times be valued at the full stated principal
amount thereof.

(b) All pro forma computations required to be made hereunder giving effect to
any acquisition or disposition, or issuance, incurrence or assumption of
Indebtedness, or other transaction shall in each case be calculated giving pro
forma effect thereto (and, in the case of any pro forma computation made
hereunder to determine whether such acquisition or disposition, or issuance,
incurrence or assumption of Indebtedness, or other transaction is permitted to
be consummated hereunder, to any other such transaction consummated since the
first day of the period covered by any component of such pro forma computation
and on or prior to the date of such computation) as if such transaction had
occurred on the first day of the period of four consecutive fiscal quarters
ending with the most recent fiscal quarter for which financial statements shall
have been delivered pursuant to Section 5.01(a) or 5.01(b) (or, prior to the
delivery of any such financial statements, ending with the last fiscal quarter
included in the financial statements referred to in Section 3.07(a)), and, to
the extent applicable, to the historical earnings and cash flows associated with
the assets acquired or disposed of (but without giving effect to any synergies
or cost savings) and any related incurrence or reduction of Indebtedness, all in
accordance with Article 11 of Regulation S-X under the Securities Act. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest on such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Swap Agreement applicable to such Indebtedness).

SECTION 1.05. Status of Obligations. In the event that the Borrower shall at any
time issue or have outstanding any Subordinated Indebtedness, the Borrower shall
take all such actions as shall be necessary to cause the Secured Obligations to
constitute senior indebtedness (however denominated) in respect of such
Subordinated Indebtedness and to enable the Administrative Agent and the Lenders
to have and exercise any payment blockage or other remedies available or
potentially available to holders of senior indebtedness under the terms of such
Subordinated Indebtedness. Without limiting the foregoing,

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the Obligations are hereby designated as “senior indebtedness” and as
“designated senior indebtedness” and words of similar import under and in
respect of any indenture or other agreement or instrument under which such
Subordinated Indebtedness is outstanding and are further given all such other
designations as shall be required under the terms of any such Subordinated
Indebtedness in order that the Lenders may have and exercise any payment
blockage or other remedies available or potentially available to holders of
senior indebtedness under the terms of such Subordinated Indebtedness.

ARTICLE II

The Credits

SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein,
each Lender agrees to make Revolving Loans to the Borrower in Dollars from time
to time during the Availability Period in an aggregate principal amount that
will not result in (i) the amount of such Lender’s Revolving Credit Exposure
exceeding such Lender’s Commitment or (ii) the sum of the total Revolving Credit
Exposures exceeding the Aggregate Commitment. Within the foregoing limits and
subject to the terms and conditions set forth herein, the Borrower may borrow,
prepay and reborrow Revolving Loans.

SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than a Swingline Loan)
shall be made as part of a Borrowing consisting of Loans of the same Class and
Type made by the Lenders ratably in accordance with their respective
Commitments. The failure of any Lender to make any Loan required to be made by
it shall not relieve any other Lender of its obligations hereunder; provided
that the Commitments of the Lenders are several and no Lender shall be
responsible for any other Lender’s failure to make Loans as required. Any
Swingline Loan shall be made in accordance with the procedures set forth in
Section 2.05.

(b) Subject to Section 2.14, each Borrowing shall be comprised entirely of ABR
Loans or Eurodollar Loans as the Borrower may request in accordance herewith;
provided that, except to the extent the Administrative Agent shall have received
an indemnification substantially consistent with the terms of Section 2.16 not
less than three (3) Business Days prior to the Effective Date, all Borrowings
made on the Effective Date must be made as ABR Borrowings but may be converted
into Eurodollar Borrowings in accordance with Section 2.08. Each Swingline Loan
shall be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan (and in the case of an Affiliate, the provisions of Sections 2.14, 2.15,
2.16 and 2.17 shall apply to such Affiliate to the same extent as to such
Lender); provided that any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement.

(c) At the commencement of each Interest Period for any Eurodollar Borrowing,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$100,000 and not less than $5,000,000. At the time that each ABR Revolving
Borrowing is made, such Borrowing shall be in an aggregate amount that is an
integral multiple of $100,000 and not less than $1,000,000; provided that an ABR
Revolving Borrowing may be in an aggregate amount that is equal to the entire
unused balance of the Aggregate Commitment or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.06(e). Each
Swingline Loan shall be in an amount that is an integral multiple of $100,000
and not less than $1,000,000. Borrowings of more than one Type and Class may be
outstanding at the same time; provided that there shall not at any time be more
than a total of eight (8) Eurodollar Borrowings outstanding.

(d) Notwithstanding any other provision of this Agreement, the Borrower shall
not be entitled to request, or to elect to convert or continue, any Borrowing if
the Interest Period requested with respect thereto would end after the Maturity
Date.

 

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SECTION 2.03. Requests for Borrowings. To request a Borrowing, the Borrower
shall notify the Administrative Agent of such request by telephone (a) in the
case of a Eurodollar Borrowing, not later than 1:00 p.m., New York City time,
three (3) Business Days before the date of the proposed Borrowing or (b) in the
case of an ABR Borrowing, not later than 1:00 p.m., New York City time, one
(1) Business Day before the date of the proposed Borrowing; provided that any
such notice of an ABR Revolving Borrowing to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.06(e) may be given not later than
1:00 p.m., New York City time, on the date of the proposed Borrowing. Each such
telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery, telecopy or electronic transmission to the
Administrative Agent of a written Borrowing Request in a form approved by the
Administrative Agent and signed by the Borrower. Each such telephonic and
written Borrowing Request shall specify the following information in compliance
with Section 2.02:

(i) the aggregate amount of the requested Borrowing;

(ii) the date of such Borrowing, which shall be a Business Day;

(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;

(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”; and

(v) the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.07.

If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month’s duration. Promptly following
receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender’s Loan to be made as part of the requested Borrowing.

SECTION 2.04. Intentionally Omitted.

SECTION 2.05. Swingline Loans. (a) Subject to the terms and conditions set forth
herein, the Swingline Lender agrees to make Swingline Loans in Dollars to the
Borrower from time to time during the Availability Period, in an aggregate
principal amount at any time outstanding that will not result in (i) the
aggregate principal amount of outstanding Swingline Loans exceeding $50,000,000
or (ii) the sum of the total Revolving Credit Exposures exceeding the Aggregate
Commitment; provided that the Swingline Lender shall not be required to make a
Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, prepay and reborrow Swingline Loans.

(b) To request a Swingline Loan, the Borrower shall notify the Administrative
Agent of such request by telephone (confirmed by telecopy or electronic
transmission), not later than 1:00 p.m., New York City time, on the day of a
proposed Swingline Loan. Each such notice shall be irrevocable and shall specify
the requested date (which shall be a Business Day), the amount of the requested
Swingline Loan and identify the account, including routing information, where
such Swingline Loan shall be deposited. The Administrative Agent will promptly
advise the Swingline Lender of any such notice received from the Borrower. The
Swingline Lender shall make each Swingline Loan available to the Borrower by
means of a credit to a general deposit account of the Borrower as directed by
the Borrower (or, in the case of a Swingline Loan made to finance the
reimbursement of an LC Disbursement as provided in Section 2.06(e), by
remittance to the Issuing Bank) by 3:00 p.m., New York City time, on the
requested date of such Swingline Loan.

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(c) The Swingline Lender may by written notice given to the Administrative Agent
not later than 10:00 a.m., New York City time, on any Business Day require the
Lenders to acquire participations on such Business Day in all or a portion of
the Swingline Loans outstanding. Such notice shall specify the aggregate amount
of Swingline Loans in which Lenders will participate. Promptly upon receipt of
such notice, the Administrative Agent will give notice thereof to each Lender,
specifying in such notice such Lender’s Applicable Percentage of such Swingline
Loan or Loans. Each Lender hereby absolutely and unconditionally agrees, upon
receipt of notice as provided above, to pay to the Administrative Agent, for the
account of the Swingline Lender, such Lender’s Applicable Percentage of such
Swingline Loan or Loans. Each Lender acknowledges and agrees that its obligation
to acquire participations in Swingline Loans pursuant to this paragraph is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including the occurrence and continuance of a Default or reduction
or termination of the Commitments, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever. Each Lender
shall comply with its obligation under this paragraph by wire transfer of
immediately available funds, in the same manner as provided in Section 2.07 with
respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis
mutandis, to the payment obligations of the Lenders), and the Administrative
Agent shall promptly pay to the Swingline Lender the amounts so received by it
from the Lenders. The Administrative Agent shall notify the Borrower of any
participations in any Swingline Loan acquired pursuant to this paragraph, and
thereafter payments in respect of such Swingline Loan shall be made to the
Administrative Agent and not to the Swingline Lender. Any amounts received by
the Swingline Lender from the Borrower (or other party on behalf of the
Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender
of the proceeds of a sale of participations therein shall be promptly remitted
to the Administrative Agent; any such amounts received by the Administrative
Agent shall be promptly remitted by the Administrative Agent to the Lenders that
shall have made their payments pursuant to this paragraph and to the Swingline
Lender, as their interests may appear; provided that any such payment so
remitted shall be repaid to the Swingline Lender or to the Administrative Agent,
as applicable, if and to the extent such payment is required to be refunded to
the Borrower for any reason. The purchase of participations in a Swingline Loan
pursuant to this paragraph shall not relieve the Borrower of any default in the
payment thereof.

SECTION 2.06. Letters of Credit. (a) General. Subject to the terms and
conditions set forth herein, the Borrower may request the issuance of Letters of
Credit denominated in Dollars for its own account, in a form reasonably
acceptable to the Administrative Agent and the applicable Issuing Bank, at any
time and from time to time during the Availability Period. In the event of any
inconsistency between the terms and conditions of this Agreement and the terms
and conditions of any form of letter of credit application or other agreement
submitted by the Borrower to, or entered into by the Borrower with, the Issuing
Bank relating to any Letter of Credit, the terms and conditions of this
Agreement shall control. Subject to the terms and conditions set forth herein,
no Issuing Bank shall be obligated to issue, amend or increase any Letter of
Credit if:

(i) any order, judgment or decree of any Governmental Authority or arbitrator
shall by its terms purport to enjoin or restrain such Issuing Bank from issuing
such Letter of Credit, or any law applicable to such Issuing Bank or any request
or directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over such Issuing Bank shall prohibit, or request
that such Issuing Bank refrain from, such issuance of letters of credit
generally, or such Letter of Credit in particular, or shall impose upon such
Issuing Bank with respect to such Letter of Credit any restriction, reserve or
capital requirement (for which such Issuing Bank is not otherwise compensated
hereunder) not in effect on the Effective Date, or shall impose upon such
Issuing Bank any unreimbursed loss, cost or expense which was not applicable on
the Effective Date and which such Issuing Bank in good faith deems material to
it; or

 

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(ii) the issuance of such Letter of Credit would violate one or more policies of
such Issuing Bank applicable to letters of credit generally.

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower shall hand deliver
or telecopy (or transmit by electronic communication, if arrangements for doing
so have been approved by the applicable Issuing Bank) to the Issuing Bank and
the Administrative Agent (reasonably in advance of the requested date of
issuance, amendment, renewal or extension) a notice requesting the issuance of a
Letter of Credit, or identifying the Letter of Credit to be amended, renewed or
extended, and specifying the date of issuance, amendment, renewal or extension
(which shall be a Business Day), the date on which such Letter of Credit is to
expire (which shall comply with paragraph (c) of this Section), the amount of
such Letter of Credit, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such
Letter of Credit. If requested by the applicable Issuing Bank, the Borrower also
shall submit a letter of credit application in a form acceptable to the Issuing
Bank. A Letter of Credit shall be issued, amended, renewed or extended only if
(and upon issuance, amendment, renewal or extension of each Letter of Credit the
Borrower shall be deemed to represent and warrant that), after giving effect to
such issuance, amendment, renewal or extension (i) the aggregate LC Exposure
would not exceed $100,000,000 and (ii) the sum of the total Revolving Credit
Exposures shall not exceed the Aggregate Commitment.

(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close
of business on the earlier of (i) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, one year after such renewal or extension) and (ii) the date that is
five (5) Business Days prior to the Maturity Date provided that any Letter of
Credit with a one-year tenor may provide for the renewal thereof for additional
one-year periods (which shall in no event extend beyond the date referred to in
clause (ii) above).

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action
on the part of the applicable Issuing Bank or the Lenders, the applicable
Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from
such Issuing Bank, a participation in such Letter of Credit equal to such
Lender’s Applicable Percentage of the aggregate amount available to be drawn
under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Lender hereby absolutely and unconditionally agrees to pay to
the Administrative Agent, for the account of the applicable Issuing Bank, such
Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank
and not reimbursed by the Borrower on the date due as provided in paragraph (e)
of this Section, or of any reimbursement payment required to be refunded to the
Borrower for any reason. Each Lender acknowledges and agrees that its obligation
to acquire participations pursuant to this paragraph in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.

(e) Reimbursement. If any Issuing Bank shall make any LC Disbursement in respect
of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by
paying to the Administrative Agent in Dollars the amount equal to such LC
Disbursement, calculated as of the date the Issuing Bank made such LC
Disbursement not later than 12:00 noon, New York City time, on the date that
such LC Disbursement is made, if the Borrower shall have received notice of such
LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if
such notice has not been received by the Borrower prior to such time on such
date, then not later than 12:00 noon, New York City time, on the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; provided that,
if such LC Disbursement is not less than $1,000,000, the

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Borrower may, subject to the conditions to borrowing set forth herein, request
in accordance with Section 2.03 or 2.05 that such payment be financed with an
ABR Revolving Borrowing or Swingline Loan in an equivalent amount of such LC
Disbursement and, to the extent so financed, the Borrower’s obligation to make
such payment shall be discharged and replaced by the resulting ABR Revolving
Borrowing or Swingline Loan. If the Borrower fails to make such payment when
due, the Administrative Agent shall notify each Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and such
Lender’s Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender shall pay to the Administrative Agent its Applicable
Percentage of the payment then due from the Borrower, in the same manner as
provided in Section 2.07 with respect to Loans made by such Lender (and
Section 2.07 shall apply, mutatis mutandis, to the payment obligations of the
Lenders), and the Administrative Agent shall promptly pay to the applicable
Issuing Bank the amounts so received by it from the Lenders. Promptly following
receipt by the Administrative Agent of any payment from the Borrower pursuant to
this paragraph, the Administrative Agent shall distribute such payment to the
applicable Issuing Bank or, to the extent that Lenders have made payments
pursuant to this paragraph to reimburse such Issuing Bank, then to such Lenders
and such Issuing Bank as their interests may appear. Any payment made by a
Lender pursuant to this paragraph to reimburse the applicable Issuing Bank for
any LC Disbursement (other than the funding of ABR Revolving Loans or a
Swingline Loan as contemplated above) shall not constitute a Loan and shall not
relieve the Borrower of its obligation to reimburse such LC Disbursement.

(f) Obligations Absolute. The Borrower’s obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the applicable Issuing Bank under a
Letter of Credit against presentation of a draft or other document that does not
comply with the terms of such Letter of Credit, or (iv) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this Section, constitute a legal or equitable
discharge of, or provide a right of setoff against, the Borrower’s obligations
hereunder. Neither the Administrative Agent, the Lenders nor the applicable
Issuing Bank, nor any of their Related Parties, shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to any
Letter of Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence arising from
causes beyond the control of such Issuing Bank; provided that the foregoing
shall not be construed to excuse such Issuing Bank from liability to the
Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
such Issuing Bank’s failure to exercise care when determining whether drafts and
other documents presented under a Letter of Credit comply with the terms
thereof. The parties hereto expressly agree that, in the absence of gross
negligence or willful misconduct on the part of any Issuing Bank (as finally
determined by a court of competent jurisdiction), such Issuing Bank shall be
deemed to have exercised care in each such determination. In furtherance of the
foregoing and without limiting the generality thereof, the parties agree that,
with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the Issuing Bank
may, in their respective sole discretion, either accept and make payment upon
such documents without responsibility for further investigation, regardless of
any notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.

 

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(g) Disbursement Procedures. Each Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. Each Issuing Bank shall promptly notify the
Administrative Agent and the Borrower by telephone (confirmed by telecopy or
electronic transmission) of such demand for payment and whether such Issuing
Bank has made or will make an LC Disbursement thereunder; provided that any
failure to give or delay in giving such notice shall not relieve the Borrower of
its obligation to reimburse such Issuing Bank and the Lenders with respect to
any such LC Disbursement.

(h) Interim Interest. If any Issuing Bank shall make any LC Disbursement, then,
unless the Borrower shall reimburse such LC Disbursement in full on the date
such LC Disbursement is made, the unpaid amount thereof shall bear interest, for
each day from and including the date such LC Disbursement is made to but
excluding the date that the Borrower reimburses such LC Disbursement, at the
rate per annum then applicable to ABR Loans; provided that, if the Borrower
fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of
this Section, then Section 2.13(c) shall apply. Interest accrued pursuant to
this paragraph shall be for the account of the applicable Issuing Bank, except
that interest accrued on and after the date of payment by any Lender pursuant to
paragraph (e) of this Section to reimburse the applicable Issuing Bank shall be
for the account of such Lender to the extent of such payment.

(i) Replacement of Issuing Bank. Any Issuing Bank may be replaced at any time by
written agreement among the Borrower, the Administrative Agent, the replaced
Issuing Bank and the successor Issuing Bank. The Administrative Agent shall
notify the Lenders of any such replacement of an Issuing Bank. At the time any
such replacement shall become effective, the Borrower shall pay all unpaid fees
accrued for the account of the replaced Issuing Bank pursuant to
Section 2.12(b). From and after the effective date of any such replacement,
(i) the successor Issuing Bank shall have all the rights and obligations of the
applicable Issuing Bank under this Agreement with respect to Letters of Credit
to be issued thereafter and (ii) references herein to the term “Issuing Bank”
shall be deemed to refer to such successor or to any previous related Issuing
Bank, or to such successor and all previous related Issuing Banks, as the
context shall require. After the replacement of an Issuing Bank hereunder, the
replaced Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of an Issuing Bank under this Agreement with respect
to Letters of Credit then outstanding and issued by it prior to such
replacement, but shall not be required to issue additional Letters of Credit.

(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with LC Exposure representing greater than 50% of
the total LC Exposure) demanding the deposit of cash collateral pursuant to this
paragraph, the Borrower shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the benefit of the
Lenders (the “LC Collateral Account”), an amount in cash equal to 105% of the
amount of the LC Exposure as of such date plus any accrued and unpaid interest
thereon; provided that the obligation to deposit such cash collateral shall
become effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrower described in clause (h) or (i) of
Article VII. Such deposit shall be held by the Administrative Agent as
collateral for the payment and performance of the Obligations. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account (and the Borrower hereby grants
the Administrative Agent a security interest in the LC Collateral Account. Other
than any interest earned on the investment of such deposits, which investments
shall be made at the option and sole discretion of the Administrative Agent and
at the Borrower’s risk and expense, such deposits shall not bear interest.
Interest or profits, if any, on such investments shall accumulate in such
account. Moneys in such account shall be applied by the Administrative Agent to
reimburse the applicable Issuing Bank for LC Disbursements for which it has not
been reimbursed and, to the extent not so applied, shall be held for the

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satisfaction of the reimbursement obligations of the Borrower for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated (but
subject to the consent of applicable Lenders with LC Exposure representing
greater than 50% of the total LC Exposure), be applied to satisfy other
Obligations. If the Borrower is required to provide an amount of cash collateral
hereunder as a result of the occurrence of an Event of Default, such amount (to
the extent not applied as aforesaid) shall be returned to the Borrower within
three (3) Business Days after all Events of Default have been cured or waived.

SECTION 2.07. Funding of Borrowings. (a) Each Lender shall make each Loan to be
made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 12:00 noon, New York City time, to the account of
the Administrative Agent most recently designated by it for such purpose by
notice to the Lenders in an amount equal to such Lender’s Applicable Percentage;
provided that Swingline Loans shall be made as provided in Section 2.05. The
Administrative Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received, in like funds, to an account of the Borrower
designated by the Borrower in the applicable Borrowing Request; provided that
ABR Revolving Loans made to finance the reimbursement of an LC Disbursement as
provided in Section 2.06(e) shall be remitted by the Administrative Agent to the
Issuing Bank.

(b) Unless the Administrative Agent shall have received notice from a Lender
prior to the proposed date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender’s share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available
on such date in accordance with paragraph (a) of this Section and may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable
Lender and the Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower to
but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrower, the interest rate
applicable to ABR Loans. If such Lender pays such amount to the Administrative
Agent, then such amount shall constitute such Lender’s Loan included in such
Borrowing.

SECTION 2.08. Interest Elections. (a) Each Borrowing initially shall be of the
Type specified in the applicable Borrowing Request and, in the case of a
Eurodollar Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing
to a different Type or to continue such Borrowing and, in the case of a
Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in
this Section. The Borrower may elect different options with respect to different
portions of the affected Borrowing, in which case each such portion shall be
allocated ratably among the Lenders holding the Loans comprising such Borrowing,
and the Loans comprising each such portion shall be considered a separate
Borrowing. This Section shall not apply to Swingline Borrowings, which may not
be converted or continued.

(b) To make an election pursuant to this Section, the Borrower shall notify the
Administrative Agent of such election by telephone by the time that a Borrowing
Request would be required under Section 2.03 if the Borrower were requesting a
Revolving Borrowing of the Type resulting from such election to be made on the
effective date of such election. Each such telephonic Interest Election Request
shall be irrevocable and shall be confirmed promptly by hand delivery, telecopy
or electronic transmission to the Administrative Agent of a written Interest
Election Request in a form

 

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approved by the Administrative Agent and signed by the Borrower. Notwithstanding
any contrary provision herein, this Section shall not be construed to permit the
Borrower to (i) elect an Interest Period for Eurodollar Loans that does not
comply with Section 2.02(d) or (ii) convert any Borrowing to a Borrowing of a
Type not available under the Class of Commitments pursuant to which such
Borrowing was made.

(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii) and (iv) below shall
be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period
to be applicable thereto after giving effect to such election, which Interest
Period shall be a period contemplated by the definition of the term “Interest
Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender’s portion of each resulting Borrowing.

(e) If the Borrower fails to deliver a timely Interest Election Request with
respect to a Eurodollar Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein, at
the end of such Interest Period such Borrowing shall be converted to an ABR
Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default
has occurred and is continuing and the Administrative Agent, at the request of
the Required Lenders, so notifies the Borrower, then, so long as an Event of
Default is continuing (i) no outstanding Revolving Borrowing may be converted to
or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.

SECTION 2.09. Termination and Reduction of Commitments. (a) Unless previously
terminated, the Commitments shall terminate on the Maturity Date.

(b) The Borrower may at any time terminate, or from time to time reduce, the
Commitments; provided that (i) each reduction of the Commitments shall be in an
amount that is an integral multiple of $1,000,000 and not less than $10,000,000
and (ii) the Borrower shall not terminate or reduce the Commitments if, after
giving effect to any concurrent prepayment of the Loans in accordance with
Section 2.11, the sum of the Revolving Credit Exposures would exceed the
Aggregate Commitment.

(c) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Commitments under paragraph (b) of this Section at least
three (3) Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this Section shall be irrevocable; provided that a notice of termination of
the Commitments delivered by the Borrower may state that such notice is
conditioned upon the effectiveness of other credit facilities, in which case
such notice may be

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revoked by the Borrower (by notice to the Administrative Agent on or prior to
the specified effective date) if such condition is not satisfied. Any
termination or reduction of the Commitments shall be permanent. Each reduction
of the Commitments shall be made ratably among the Lenders in accordance with
their respective Commitments.

SECTION 2.10. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay (i) to the Administrative Agent for the account
of each Lender the then unpaid principal amount of each Revolving Loan on the
Maturity Date and (ii) to the Swingline Lender the then unpaid principal amount
of each Swingline Loan on the earlier of the Maturity Date and the first date
after such Swingline Loan is made that is the 15th or last day of a calendar
month and is at least two (2) Business Days after such Swingline Loan is made;
provided that on each date that a Revolving Borrowing is made, the Borrower
shall repay all Swingline Loans then outstanding.

(b) Each Lender shall maintain in accordance with its usual practice an account
or accounts evidencing the indebtedness of the Borrower to such Lender resulting
from each Loan made by such Lender, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder.

(c) The Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Class and Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender’s share thereof.

(d) The entries made in the accounts maintained pursuant to paragraph (b) or
(c) of this Section shall be prima facie evidence of the existence and amounts
of the obligations recorded therein; provided that the failure of any Lender or
the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.

(e) Any Lender may request that Loans made by it be evidenced by a promissory
note in substantially the form of Exhibit F. In such event, the Borrower shall
prepare, execute and deliver to such Lender a promissory note payable to the
order of such Lender (or, if requested by such Lender, to such Lender and its
registered assigns) and in a form approved by the Administrative Agent.
Thereafter, the Loans evidenced by such promissory note and interest thereon
shall at all times (including after assignment pursuant to Section 9.04) be
represented by one or more promissory notes in such form payable to the order of
the payee named therein (or, if such promissory note is a registered note, to
such payee and its registered assigns).

SECTION 2.11. Prepayment of Loans. (a) The Borrower shall have the right at any
time and from time to time to prepay any Borrowing in whole or in part, subject
to prior notice in accordance with the provisions of this Section 2.11. The
Borrower shall notify the Administrative Agent (and, in the case of prepayment
of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy
or electronic transmission) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 1:00 p.m., New York City
time, three (3) Business Days before the date of prepayment, (ii) in the case of
prepayment of an ABR Borrowing, not later than 1:00 p.m., New York City time,
one (1) Business Day before the date of prepayment or (iii) in the case of
prepayment of a Swingline Loan, not later than 1:00 p.m., New York City time, on
the date of prepayment. Each such notice shall be irrevocable and shall specify
the prepayment date and the principal amount of each Borrowing or portion
thereof to be prepaid; provided that, if a notice of prepayment is given in
connection with a conditional notice of termination of the Commitments as
contemplated by Section 2.09, then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with

 

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Section 2.09. Promptly following receipt of any such notice relating to a
Borrowing, the Administrative Agent shall advise the Lenders of the contents
thereof. Each partial prepayment of any Borrowing shall be in an amount that
would be permitted in the case of an advance of a Borrowing of the same Type as
provided in Section 2.02. Each prepayment of a Borrowing shall be applied
ratably to the Loans included in the prepaid Borrowing. Prepayments shall be
payable without penalty or premium and shall be accompanied by (i) accrued
interest to the extent required by Section 2.13 and (ii) break funding payments
pursuant to Section 2.16.

(b) If at any time the sum of the aggregate principal amount of all of the
Revolving Credit Exposures exceeds the Aggregate Commitment, the Borrower shall
immediately repay Borrowings or cash collateralize LC Exposure in an account
with the Administrative Agent pursuant to Section 2.06(j), as applicable, in an
aggregate principal amount sufficient to cause the aggregate principal amount of
all Revolving Credit Exposures to be less than or equal to the Aggregate
Commitment.

SECTION 2.12. Fees. (a) The Borrower agrees to pay to the Administrative Agent
for the account of each Lender a commitment fee, which shall accrue at the
“Commitment Fee Rate”, as set forth in the definition of Applicable Rate, on the
average daily amount of the Available Revolving Commitment of such Lender during
the period from and including the Effective Date to but excluding the date on
which such Commitment terminates; provided that for purposes of calculating the
Available Revolving Commitment of each such Lender, the Swingline Exposure of
such Lender shall not be included in the Revolving Credit Exposure for such
Lender. Accrued fees shall be payable in arrears on the last day of March, June,
September and December of each year and on the date on which the Commitments
terminate, commencing on the first such date to occur after the date hereof;
provided that any commitment fees accruing after the date on which the
Commitments terminate shall be payable on demand. All commitment fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).

(b) The Borrower agrees to pay (i) to the Administrative Agent for the account
of each Lender a participation fee with respect to its participations in Letters
of Credit, which shall accrue at the same Applicable Rate used to determine the
interest rate applicable to Eurodollar Loans on the average daily amount of such
Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed
LC Disbursements) during the period from and including the Effective Date to but
excluding the later of the date on which such Lender’s Commitment terminates and
the date on which such Lender ceases to have any LC Exposure and (ii) to the
Issuing Bank for its own account a fronting fee, which shall accrue at a rate
per annum mutually agreed upon between the Borrower and the Issuing Bank on the
average daily amount of the LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) attributable to Letters of Credit
issued by the Issuing Bank during the period from and including the Effective
Date to but excluding the later of the date of termination of the Commitments
and the date on which there ceases to be any LC Exposure, as well as the Issuing
Bank’s standard fees and commissions with respect to the issuance, amendment,
cancellation, negotiation, transfer, presentment, renewal or extension of any
Letter of Credit or processing of drawings thereunder. Unless otherwise
specified above, participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year shall
be payable on the third (3rd) Business Day following such last day, commencing
on the first such date to occur after the Effective Date; provided that all such
fees shall be payable on the date on which the Commitments terminate and any
such fees accruing after the date on which the Commitments terminate shall be
payable on demand. Any other fees payable to an Issuing Bank pursuant to this
paragraph shall be payable within ten (10) days after demand. All participation
fees and fronting fees shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).

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(c) The Borrower agrees to pay to the Administrative Agent, for its own account,
fees payable in the amounts and at the times separately agreed upon between the
Borrower and the Administrative Agent.

(d) All fees payable hereunder shall be paid on the dates due, in immediately
available funds, to the Administrative Agent (or to the Issuing Bank, in the
case of fees payable to it) for distribution, in the case of commitment fees and
participation fees, to the applicable Lenders. Fees paid shall not be refundable
under any circumstances.

SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing (including
each Swingline Loan) shall bear interest at the Alternate Base Rate plus the
Applicable Rate.

(b) The Loans comprising each Eurodollar Borrowing shall bear interest at the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Rate.

(c) Notwithstanding the foregoing, if any principal of or interest on any Loan
or any fee or other amount payable by the Borrower hereunder is not paid when
due, whether at stated maturity, upon acceleration or otherwise, such overdue
amount shall bear interest, after as well as before judgment, at a rate per
annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, 2% plus the rate
applicable to ABR Loans as provided in paragraph (a) of this Section.

(d) Accrued interest on each Loan shall be payable in arrears on each Interest
Payment Date for such Loan and, in the case of Revolving Loans, upon termination
of the Commitments; provided that (i) interest accrued pursuant to paragraph (c)
of this Section shall be payable on demand, (ii) in the event of any repayment
or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan
prior to the end of the Availability Period), accrued interest on the principal
amount repaid or prepaid shall be payable on the date of such repayment or
prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior
to the end of the current Interest Period therefor, accrued interest on such
Loan shall be payable on the effective date of such conversion.

(e) All interest hereunder shall be computed on the basis of a year of 360 days,
except that interest computed by reference to the Alternate Base Rate at times
when the Alternate Base Rate is based on the Prime Rate shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and in each case shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate
or LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.

SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:

(a) the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such
Interest Period; or

(b) the Administrative Agent is advised by the Required Lenders that the
Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (or Lender) of
making or maintaining their Loans (or its Loan) included in such Borrowing for
such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy or electronic transmission as promptly as
practicable thereafter and, until the Administrative Agent notifies the Borrower
and the Lenders that the circumstances giving rise to such notice no longer
exist (and the Administrative Agent shall use commercially reasonable efforts to
provide such notice

 

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promptly following such circumstances no longer existing as determined by the
Administrative Agent in its sole discretion (or, in the case of clause
(b) above, promptly following the Administrative Agent being advised thereof by
the Required Lenders)), (i) any Interest Election Request that requests the
conversion of any Borrowing to, or continuation of any Borrowing as, a
Eurodollar Borrowing shall be ineffective and any such Eurodollar Borrowing
shall be repaid on the last day of the then current Interest Period applicable
thereto and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.

SECTION 2.15. Increased Costs; Illegality. (a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory
loan, insurance charge or similar requirement against assets of, deposits with
or for the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Bank;

(ii) impose on any Lender or any Issuing Bank or the London interbank market any
other condition, cost or expense affecting this Agreement or Eurodollar Loans
made by such Lender or any Letter of Credit or participation therein; or

(iii) subject any Recipient to any Taxes on its loans, loan principal, letters
of credit, commitments, or other obligations, or its deposits, reserves, other
liabilities or capital attributable thereto (other than (A) Indemnified Taxes,
(B) Excluded Taxes and (C) Other Connection Taxes on gross or net income,
profits, or revenue (including value-added or similar Taxes));

and the result of any of the foregoing shall be to increase the cost to such
Lender or such other Recipient of making or maintaining any Loan (or of
maintaining its obligation to make any such Loan) or to increase the cost to
such Lender, the Issuing Bank or such other Recipient of participating in,
issuing or maintaining any Letter of Credit or to reduce the amount of any sum
received or receivable by such Lender, the Issuing Bank or such other Recipient
hereunder (whether of principal, interest or otherwise), then the Borrower will
pay to such Lender, the Issuing Bank or such other Recipient, as the case may
be, such additional amount or amounts as will compensate such Lender, the
Issuing Bank or such other Recipient, as the case may be, for such additional
costs incurred or reduction suffered.

(b) If any Lender or any Issuing Bank determines that any Change in Law
regarding capital or liquidity requirements has or would have the effect of
reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on
the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a
consequence of this Agreement or the Loans made by, or participations in Letters
of Credit held by, such Lender, or the Letters of Credit issued by the Issuing
Bank, to a level below that which such Lender or the Issuing Bank or such
Lender’s or the Issuing Bank’s holding company could have achieved but for such
Change in Law (taking into consideration such Lender’s or the Issuing Bank’s
policies and the policies of such Lender’s or the Issuing Bank’s holding company
with respect to capital adequacy and liquidity), then from time to time the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank
or such Lender’s or the Issuing Bank’s holding company for any such reduction
suffered.

(c) A certificate of a Lender or an Issuing Bank setting forth the amount or
amounts necessary to compensate such Lender or the Issuing Bank or its holding
company, as the case may be, as specified in paragraph (a) or (b) of this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the
case may be, the amount shown as due on any such certificate within ten
(10) days after receipt thereof.

(d) Failure or delay on the part of any Lender or any Issuing Bank to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s or the Issuing Bank’s right to demand such compensation; provided that
the Borrower shall not be required to compensate a

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Lender or an Issuing Bank pursuant to this Section for any increased costs or
reductions incurred more than 270 days prior to the date that such Lender or the
Issuing Bank, as the case may be, notifies the Borrower of the Change in Law
giving rise to such increased costs or reductions and of such Lender’s or the
Issuing Bank’s intention to claim compensation therefor; provided further that,
if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 270-day period referred to above shall be extended to
include the period of retroactive effect thereof.

(e) If any Lender determines that any Law has made it unlawful, or that any
Governmental Authority has asserted that it is unlawful, for any Lender or its
lending office to make, maintain or fund Loans whose interest is determined by
reference to the LIBO Rate, or to determine or charge interest rates based upon
the LIBO Rate, or any Governmental Authority has imposed material restrictions
on the authority of such Lender to purchase or sell, or to take deposits of,
Dollars in the London interbank market, then, on notice thereof by such Lender
to the Borrower through the Administrative Agent, (i) any obligation of such
Lender to make or continue Eurodollar Loans or to convert ABR Loans to
Eurodollar Loans shall be suspended, and (ii) if such notice asserts the
illegality of such Lender making or maintaining ABR Loans the interest rate on
which is determined by reference to the LIBO Rate component of the Alternate
Base Rate, the interest rate on which ABR Loans of such Lender shall, if
necessary to avoid such illegality, be determined by the Administrative Agent
without reference to the LIBO Rate component of the Alternate Base Rate, in each
case until such Lender notifies the Administrative Agent and the Borrower that
the circumstances giving rise to such determination no longer exist. Upon
receipt of such notice, (x) the Borrower shall, upon demand from such Lender
(with a copy to the Administrative Agent), prepay or, if applicable, convert all
Eurodollar Loans of such Lender to ABR Loans (the interest rate on which ABR
Loans of such Lender shall, if necessary to avoid such illegality, be determined
by the Administrative Agent without reference to the LIBO Rate component of the
Alternate Base Rate), either on the last day of the Interest Period therefor, if
such Lender may lawfully continue to maintain such Eurodollar Loans to such day,
or immediately, if such Lender may not lawfully continue to maintain such
Eurodollar Loans and (y) if such notice asserts the illegality of such Lender
determining or charging interest rates based upon the LIBO Rate, the
Administrative Agent shall during the period of such suspension compute the
Alternate Base Rate applicable to such Lender without reference to the LIBO Rate
component thereof until the Administrative Agent is advised in writing by such
Lender that it is no longer illegal for such Lender to determine or charge
interest rates based upon the LIBO Rate (and such Lender shall use commercially
reasonable efforts to provide such notice promptly following such circumstances
no longer existing as determined by such Lender in its sole discretion). Upon
any such prepayment or conversion, the Borrower shall also pay accrued interest
on the amount so prepaid or converted.

SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default or as a
result of any prepayment pursuant to Section 2.11), (b) the conversion of any
Eurodollar Loan other than on the last day of the Interest Period applicable
thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar
Loan on the date specified in any notice delivered pursuant hereto (regardless
of whether such notice may be revoked under Section 2.11 and is revoked in
accordance therewith) or (d) the assignment of any Eurodollar Loan other than on
the last day of the Interest Period applicable thereto as a result of a request
by the Borrower pursuant to Section 2.19, then, in any such event, the Borrower
shall compensate each Lender for the loss, cost and expense attributable to such
event. Such loss, cost or expense to any Lender shall be deemed to include an
amount determined by such Lender to be the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBO Rate that would have been applicable to
such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such

 

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Lender would bid were it to bid, at the commencement of such period, for
deposits in Dollars of a comparable amount and period from other banks in the
eurodollar market. A certificate of any Lender setting forth any amount or
amounts that such Lender is entitled to receive pursuant to this Section shall
be delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such certificate
within ten (10) days after receipt thereof.

SECTION 2.17. Taxes. (a) Withholding of Taxes; Gross-Up. Each payment by the
Borrower under any Financing Document shall be made without withholding for any
Taxes, unless such withholding is required by any law. If any Withholding Agent
determines, in its sole discretion exercised in good faith, that it is so
required to withhold Taxes, then such Withholding Agent may so withhold and
shall timely pay the full amount of withheld Taxes to the relevant Governmental
Authority in accordance with applicable law. If such Taxes are Indemnified
Taxes, then the amount payable by the Borrower shall be increased as necessary
so that, net of such withholding (including such withholding applicable to
additional amounts payable under this Section), the applicable Recipient
receives the amount it would have received had no such withholding been made.

(b) Payment of Other Taxes by the Borrower. The Borrower shall timely pay any
Other Taxes to the relevant Governmental Authority in accordance with applicable
law.

(c) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.

(d) Indemnification by the Borrower. The Borrower shall indemnify each Recipient
for any Indemnified Taxes that are paid or payable by such Recipient in
connection with any Financing Document (including amounts paid or payable under
this Section 2.17(d)) and any reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. The indemnity under
this Section 2.17(d) shall be paid within ten (10) days after the Recipient
delivers to the Borrower a certificate stating the amount of any Indemnified
Taxes so paid or payable by such Recipient and describing the basis of the
indemnity claim. Such certificate shall be conclusive of the amount so payable
absent manifest error. Such Recipient shall deliver a copy of such certificate
to the Administrative Agent.

(e) Indemnification by the Lenders. Each Lender shall severally indemnify the
Administrative Agent for any Taxes (but, in the case of any Indemnified Taxes,
only to the extent that the Borrower has not already indemnified the
Administrative Agent for such Indemnified Taxes and without limiting the
obligation of the Borrower to do so) attributable to such Lender that are paid
or payable by the Administrative Agent or the Borrower (as applicable) in
connection with any Financing Document and any reasonable expenses arising
therefrom or with respect thereto, whether or not such Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. The
indemnity under this Section 2.17(e) shall be paid within ten (10) days after
the Administrative Agent delivers to the applicable Lender a certificate stating
the amount of Taxes so paid or payable by the Administrative Agent. Such
certificate shall be conclusive of the amount so paid or payable absent manifest
error.

(f) Status of Lenders. (i) Any Lender that is entitled to an exemption from, or
reduction of, any applicable withholding Tax with respect to any payments under
any Financing Document shall deliver to the Borrower and the Administrative
Agent, at the time or times reasonably requested by the Borrower or the
Administrative Agent, such properly completed and executed documentation
prescribed by law or reasonably requested by the Borrower or the Administrative
Agent as will permit such payments to be made without, or at a reduced rate of,
withholding. In addition, any Lender, if requested by the Borrower or the
Administrative Agent, shall deliver such other documentation prescribed by law
or

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reasonably requested by the Borrower or the Administrative Agent as will enable
the Borrower or the Administrative Agent to determine whether or not such Lender
is subject to any withholding (including backup withholding) or information
reporting requirements. Notwithstanding anything to the contrary in the
preceding two sentences, the completion, execution and submission of such
documentation (other than such documentation set forth in Section 2.17(f)(ii)
(A) through (E) below) shall not be required if in the Lender’s judgment such
completion, execution or submission would subject such Lender to any material
unreimbursed cost or expense or would materially prejudice the legal or
commercial position of such Lender. Upon the reasonable request of the Borrower
or the Administrative Agent, any Lender shall update any form or certification
previously delivered pursuant to this Section 2.17(f). If any form or
certification previously delivered pursuant to this Section expires or becomes
obsolete or inaccurate in any respect with respect to a Lender, such Lender
shall promptly (and in any event within ten (10) days after such expiration,
obsolescence or inaccuracy) notify the Borrower and the Administrative Agent in
writing of such expiration, obsolescence or inaccuracy and update the form or
certification if it is legally eligible to do so.

(ii) Without limiting the generality of the foregoing, if the Borrower is a
U.S. Person, any Lender with respect to the Borrower shall, if it is legally
eligible to do so, deliver to the Borrower and the Administrative Agent (in such
number of copies reasonably requested by the Borrower and the Administrative
Agent) on or prior to the date on which such Lender becomes a party hereto, duly
completed and executed copies of whichever of the following is applicable:

(A) in the case of a Lender that is a U.S. Person, IRS Form W-9 certifying that
such Lender is exempt from U.S. federal backup withholding tax;

(B) in the case of a Non-U.S. Lender claiming the benefits of an income tax
treaty to which the United States is a party (1) with respect to payments of
interest under any Financing Document, IRS Form W-8BEN establishing an exemption
from, or reduction of, U.S. federal withholding Tax pursuant to the “interest”
article of such tax treaty and (2) with respect to any other applicable payments
under any Financing Document, IRS Form W-8BEN establishing an exemption from, or
reduction of, U.S. federal withholding Tax pursuant to the “business profits” or
“other income” article of such tax treaty;

(C) in the case of a Non-U.S. Lender for whom payments under any Financing
Document constitute income that is effectively connected with such Lender’s
conduct of a trade or business in the United States, IRS Form W-8ECI;

(D) in the case of a Non-U.S. Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Code both (1) IRS Form W-8BEN and
(2) a certificate substantially in the form of Exhibit G (a “U.S. Tax
Certificate”) to the effect that such Lender is not (a) a “bank” within the
meaning of Section 881(c)(3)(A) of the Code, (b) a “10 percent shareholder” of
the Borrower within the meaning of Section 881(c)(3)(B) of the Code, (c) a
“controlled foreign corporation” described in Section 881(c)(3)(C) of the Code
and (d) conducting a trade or business in the United States with which the
relevant interest payments are effectively connected;

(E) in the case of a Non-U.S. Lender that is not the beneficial owner of
payments made under this Agreement (including a partnership or a participating
Lender) (1) an IRS Form W-8IMY on behalf of itself and (2) the relevant forms
prescribed in clauses (A), (B), (C), (D) and (F) of this paragraph (f)(ii) that
would be required of each such beneficial owner or partner of such partnership
if such beneficial owner or partner were a Lender; provided, however, that if
the Lender is a partnership and one or more of its partners are claiming the
exemption for portfolio interest under Section 881(c) of the Code, such Lender
may provide a U.S. Tax Certificate on behalf of such partners; or

 

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(F) any other form prescribed by law as a basis for claiming exemption from, or
a reduction of, U.S. federal withholding Tax together with such supplementary
documentation necessary to enable the Borrower or the Administrative Agent to
determine the amount of Tax (if any) required by law to be withheld.

(iii) If a payment made to a Lender under any Financing Document would be
subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to
fail to comply with the applicable reporting requirements of FATCA (including
those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such
Lender shall deliver to the Withholding Agent, at the time or times prescribed
by law and at such time or times reasonably requested by the Withholding Agent,
such documentation prescribed by applicable law (including as prescribed by
Section 1471(b)(3)(C)(i) of the Code) and such additional documentation
reasonably requested by the Withholding Agent as may be necessary for the
Withholding Agent to comply with its obligations under FATCA, to determine
whether such Lender is in compliance with such Lender’s obligations under FATCA
and, as necessary, to determine the amount to deduct and withhold from such
payment. Solely for purposes of this Section 2.17(f)(iii), “FATCA” shall include
any amendments made to FATCA after the date of this Agreement.

(g) Treatment of Certain Refunds. If any party determines, in its sole
discretion exercised in good faith, that it has received a refund of any Taxes
as to which it has been indemnified pursuant to this Section 2.17 (including
additional amounts paid pursuant to this Section 2.17), it shall pay to the
indemnifying party an amount equal to such refund (but only to the extent of
indemnity payments made under this Section with respect to the Taxes giving rise
to such refund), net of all out-of-pocket expenses (including any Taxes) of such
indemnified party and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund). Such indemnifying
party, upon the request of such indemnified party, shall repay to such
indemnified party the amount paid to such indemnified party pursuant to the
previous sentence (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) in the event such indemnified party is required
to repay such refund to such Governmental Authority. Notwithstanding anything to
the contrary in this Section 2.17(g), in no event will any indemnified party be
required to pay any amount to any indemnifying party pursuant to this
Section 2.17(g) if such payment would place such indemnified party in a less
favorable position (on a net after-Tax basis) than such indemnified party would
have been in if the indemnification payments or additional amounts giving rise
to such refund had never been paid. This Section 2.17(g) shall not be construed
to require any indemnified party to make available its Tax returns (or any other
information relating to its Taxes which it deems confidential) to the
indemnifying party or any other Person.

(h) Issuing Bank. For purposes of Sections 2.17(e) and (f), the term “Lender”
includes the Issuing Banks.

SECTION 2.18. Payments Generally; Allocations of Proceeds; Pro Rata Treatment;
Sharing of Set-offs.

(a) The Borrower shall make each payment required to be made by it hereunder
(whether of principal, interest, fees or reimbursement of LC Disbursements, or
of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to
12:00 noon, New York City time on the date when due, in immediately available
funds, without set-off or counterclaim. Any amounts received after such time on
any date may, in the discretion of the Administrative Agent, be deemed to have
been received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made to the Administrative Agent at
its offices at 10 South Dearborn Street, 7th Floor, Chicago, Illinois 60603,
except payments to be made directly to an Issuing Bank or Swingline Lender as
expressly provided herein and except that payments pursuant to Sections 2.15,
2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any

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payment hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments hereunder shall be made in Dollars.

(b) Subject to the terms of the Collateral Agency Agreement, any proceeds of
Collateral received by the Administrative Agent (i) not constituting a specific
payment of principal, interest, fees or other sum payable under the Financing
Documents (which shall be applied as specified by the Borrower) or (ii) after an
Event of Default has occurred and is continuing and the Administrative Agent so
elects or the Required Lenders so direct, such funds shall be applied ratably
first, to pay any fees, indemnities, or expense reimbursements including amounts
then due to the Administrative Agent and any Issuing Bank from the Borrower,
second, to pay any fees or expense reimbursements then due to the Lenders from
the Borrower, third, to pay interest then due and payable on the Loans ratably,
fourth, to prepay principal on the Loans and unreimbursed LC Disbursements and
any other amounts owing with respect to Banking Services Obligations ratably,
fifth, to pay an amount to the Administrative Agent equal to one hundred five
percent (105%) of the aggregate undrawn face amount of all outstanding Letters
of Credit and the aggregate amount of any unpaid LC Disbursements, to be held as
cash collateral for such Obligations, and sixth, to the payment of any other
Secured Obligation due to the Administrative Agent or any Lender by the
Borrower. Notwithstanding anything to the contrary contained in this Agreement,
unless so directed by the Borrower, or unless a Default is in existence, none of
the Administrative Agent or any Lender shall apply any payment which it receives
to any Eurodollar Loan of a Class, except (a) on the expiration date of the
Interest Period applicable to any such Eurodollar Loan or (b) in the event, and
only to the extent, that there are no outstanding ABR Loans of the same Class
and, in any event, the Borrower shall pay the break funding payment required in
accordance with Section 2.16. The Administrative Agent and the Lenders shall
have the continuing and exclusive right to apply and reverse and reapply any and
all such proceeds and payments to any portion of the Secured Obligations.

(c) At the election of the Administrative Agent, all payments of principal,
interest, LC Disbursements, fees, premiums, reimbursable expenses (including,
without limitation, all reimbursement for fees and expenses pursuant to
Section 9.03), and other sums payable under the Financing Documents, may be paid
from the proceeds of Borrowings made hereunder whether made following a request
by the Borrower pursuant to Section 2.03 or a deemed request as provided in this
Section. The Borrower hereby irrevocably authorizes the Administrative Agent to
make a Borrowing for the purpose of paying each payment of principal, interest
and fees as it becomes due hereunder or any other amount due under the Financing
Documents and agrees that all such amounts charged shall constitute Loans
(including Swingline Loans) and that all such Borrowings shall be deemed to have
been requested pursuant to Section 2.03, 2.04 or 2.05, as applicable.

(d) If any Lender shall, by exercising any right of set-off or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of
its Loans or participations in LC Disbursements or Swingline Loans resulting in
such Lender receiving payment of a greater proportion of the aggregate amount of
its Loans and participations in LC Disbursements and Swingline Loans and accrued
interest thereon than the proportion received by any other Lender, then the
Lender receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans and participations in LC Disbursements and Swingline
Loans of other Lenders to the extent necessary so that the benefit of all such
payments shall be shared by the Lenders ratably in accordance with the aggregate
amount of principal of and accrued interest on their respective Revolving Loans
and participations in LC Disbursements and Swingline Loans; provided that (i) if
any such participations are purchased and all or any portion of the payment
giving rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as

 

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consideration for the assignment of or sale of a participation in any of its
Loans or participations in LC Disbursements and Swingline Loans to any assignee
or participant, other than to the Borrower or any Subsidiary or Affiliate
thereof (as to which the provisions of this paragraph shall apply). The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.

(e) Unless the Administrative Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Administrative Agent for
the account of the applicable Lenders or the Issuing Bank hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the applicable Lenders or the
Issuing Bank, as the case may be, the amount due. In such event, if the Borrower
has not in fact made such payment, then each of the applicable Lenders or the
Issuing Bank, as the case may be, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.

(f) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.05(c), 2.06(d) or (e), 2.07(b), 2.18(e) or 9.03(c), then
the Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), (i) apply any amounts thereafter received by the
Administrative Agent for the account of such Lender and for the benefit of the
Administrative Agent, the Swingline Lender or the Issuing Bank to satisfy such
Lender’s obligations to it under such Section until all such unsatisfied
obligations are fully paid and/or (ii) hold any such amounts in a segregated
account as cash collateral for, and application to, any future funding
obligations of such Lender under any such Section; in the case of each of
clauses (i) and (ii) above, in any order as determined by the Administrative
Agent in its discretion.

SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender
requests compensation under Section 2.15, or the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 2.17, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

(b) If (i) any Lender requests compensation under Section 2.15, (ii) the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17 or
(iii) any Lender becomes a Defaulting Lender, then the Borrower may, at its sole
expense and effort, upon notice to such Lender and the Administrative Agent,
require such Lender to assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in Section 9.04), all its interests,
rights and obligations under the Financing Documents to an assignee that shall
assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (i) the Borrower shall have received the
prior written consent of the Administrative Agent (and if a Revolving Commitment
is being assigned, the Issuing Banks), which consent shall not unreasonably be
withheld, (ii) such Lender shall have received payment of an amount

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equal to the outstanding principal of its Loans and participations in LC
Disbursements and Swingline Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.15 or payments required
to be made pursuant to Section 2.17, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.

SECTION 2.20. Expansion Option. The Borrower may from time to time elect to
increase the Commitments or enter into one or more tranches of term loans (each
an “Incremental Term Loan”), in each case in minimum increments of $100,000,000
so long as, after giving effect thereto, the aggregate amount of such increases
and all such Incremental Term Loans does not exceed $500,000,000. The Borrower
may arrange for any such increase or tranche to be provided by one or more
Lenders (each Lender so agreeing to an increase in its Commitment, or to
participate in such Incremental Term Loans, an “Increasing Lender”), or by one
or more new banks, financial institutions or other entities (each such new bank,
financial institution or other entity, an “Augmenting Lender”), to increase
their existing Commitments, or to participate in such Incremental Term Loans, or
extend Commitments, as the case may be; provided that (i) each Increasing Lender
and Augmenting Lender shall be subject to the approval of the Borrower, the
Administrative Agent and each Issuing Bank and (ii) (x) in the case of an
Increasing Lender, the Borrower and such Increasing Lender execute an agreement
substantially in the form of Exhibit C hereto, and (y) in the case of an
Augmenting Lender, the Borrower and such Augmenting Lender execute an agreement
substantially in the form of Exhibit D hereto. No consent of any Lender (other
than the Lenders participating in the increase or any Incremental Term Loan)
shall be required for any increase in Commitments or Incremental Term Loan
pursuant to this Section 2.20. Increases and new Commitments and Incremental
Term Loans created pursuant to this Section 2.20 shall become effective on the
date agreed by the Borrower, the Administrative Agent and the relevant
Increasing Lenders or Augmenting Lenders, and the Administrative Agent shall
notify each Lender thereof. Notwithstanding the foregoing, no increase in the
Commitments (or in the Commitment of any Lender) or tranche of Incremental Term
Loans shall become effective under this paragraph unless, (i) on the proposed
date of the effectiveness of such increase or Incremental Term Loans, (A) the
conditions set forth in paragraphs (a) and (b) of Section 4.02 shall be
satisfied or waived by the Required Lenders and the Administrative Agent shall
have received a certificate to that effect dated such date and executed by a
Financial Officer of the Borrower and (B) the Borrower shall be in compliance
(on a Pro Forma Basis reasonably acceptable to the Administrative Agent) with
the covenants contained in Section 6.09 and (ii) the Administrative Agent shall
have received documents consistent with those delivered on the Effective Date as
to the corporate power and authority of the Borrower to borrow hereunder after
giving effect to such increase. On the effective date of any increase in the
Commitments or any Incremental Term Loans being made, (i) each relevant
Increasing Lender and Augmenting Lender shall make available to the
Administrative Agent such amounts in immediately available funds as the
Administrative Agent shall determine, for the benefit of the other Lenders, as
being required in order to cause, after giving effect to such increase and the
use of such amounts to make payments to such other Lenders, each Lender’s
portion of the outstanding Revolving Loans of all the Lenders to equal its
Applicable Percentage of such outstanding Revolving Loans, and (ii) except in
the case of any Incremental Term Loans, the Borrower shall be deemed to have
repaid and reborrowed all outstanding Revolving Loans as of the date of any
increase in the Commitments (with such reborrowing to consist of the Types of
Revolving Loans, with related Interest Periods if applicable, specified in a
notice delivered by the Borrower, in accordance with the requirements of
Section 2.03). The deemed payments made pursuant to clause (ii) of the
immediately preceding sentence shall be accompanied by payment of all accrued
interest on the amount prepaid and, in respect of each Eurodollar Loan, shall be
subject to indemnification by the Borrower

 

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pursuant to the provisions of Section 2.16 if the deemed payment occurs other
than on the last day of the related Interest Periods. The Incremental Term Loans
(a) shall rank pari passu in right of payment with the Revolving Loans,
(b) shall not mature earlier than the Maturity Date (but may have amortization
prior to such date) and (c) shall be treated substantially the same as (and in
any event no more favorably than) the Revolving Loans; provided that (i) the
terms and conditions applicable to any tranche of Incremental Term Loans
maturing after the Maturity Date may provide for material additional or
different financial or other covenants or prepayment requirements applicable
only during periods after the Maturity Date and (ii) the Incremental Term Loans
may be priced differently than the Revolving Loans. Incremental Term Loans may
be made hereunder pursuant to an amendment or restatement (an “Incremental Term
Loan Amendment”) of this Agreement and, as appropriate, the other Financing
Documents, executed by the Borrower, each Increasing Lender participating in
such tranche, each Augmenting Lender participating in such tranche, if any, and
the Administrative Agent. The Incremental Term Loan Amendment may, without the
consent of any other Lenders, effect such amendments to this Agreement and the
other Financing Documents as may be necessary or appropriate, in the reasonable
opinion of the Administrative Agent, to effect the provisions of this
Section 2.20. Nothing contained in this Section 2.20 shall constitute, or
otherwise be deemed to be, a commitment on the part of any Lender to increase
its Commitment hereunder, or provide Incremental Term Loans, at any time.

SECTION 2.21. Defaulting Lenders. Notwithstanding any provision of this
Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the
following provisions shall apply for so long as such Lender is a Defaulting
Lender:

(a) fees shall cease to accrue on the Available Revolving Commitment of such
Defaulting Lender pursuant to Section 2.12(a);

(b) the Commitment and Revolving Credit Exposure of such Defaulting Lender shall
not be included in determining whether the Required Lenders have taken or may
take any action hereunder (including any consent to any amendment, waiver or
other modification pursuant to Section 9.02); provided, that this clause (b)
shall not apply to the vote of a Defaulting Lender in the case of an amendment,
waiver or other modification requiring the consent of such Lender or each Lender
affected thereby;

(c) if any Swingline Exposure or LC Exposure exists at the time such Lender
becomes a Defaulting Lender then:

(i) so long as no Default shall be continuing, all or any part of the Swingline
Exposure and LC Exposure of such Defaulting Lender shall be reallocated among
the non-Defaulting Lenders in accordance with their respective Applicable
Percentages but only to the extent the sum of all non-Defaulting Lenders’
Revolving Credit Exposures plus such Defaulting Lender’s Swingline Exposure and
LC Exposure does not exceed the total of all non-Defaulting Lenders’
Commitments;

(ii) if the reallocation described in clause (i) above cannot, or can only
partially, be effected, the Borrower shall within one (1) Business Day following
notice by the Administrative Agent (x) first, prepay such Swingline Exposure and
(y) second, cash collateralize for the benefit of the Issuing Bank only the
Borrower’s obligations corresponding to such Defaulting Lender’s LC Exposure
(after giving effect to any partial reallocation pursuant to clause (i) above)
in accordance with the procedures set forth in Section 2.06(j) for so long as
such LC Exposure is outstanding;

(iii) if the Borrower cash collateralizes any portion of such Defaulting
Lender’s LC Exposure pursuant to clause (ii) above, the Borrower shall not be
required to pay any fees to such Defaulting Lender pursuant to Section 2.12(b)
with respect to such Defaulting Lender’s LC Exposure during the period such
Defaulting Lender’s LC Exposure is cash collateralized;

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(iv) if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to
clause (i) above, then the fees payable to the Lenders pursuant to
Sections 2.12(a) and Section 2.12(b) shall be adjusted in accordance with such
non-Defaulting Lenders’ Applicable Percentages; and

(v) if all or any portion of such Defaulting Lender’s LC Exposure is neither
reallocated nor cash collateralized pursuant to clause (i) or (ii) above, then,
without prejudice to any rights or remedies of any Issuing Bank or any other
Lender hereunder, all letter of credit fees payable under Section 2.12(b) with
respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing
Bank until and to the extent that such LC Exposure is reallocated and/or cash
collateralized; and

(d) so long as such Lender is a Defaulting Lender, the Swingline Lender shall
not be required to fund any Swingline Loan and the Issuing Banks shall not be
required to issue, amend or increase any Letter of Credit, unless it is
satisfied that the related exposure and the Defaulting Lender’s then outstanding
LC Exposure will be 100% covered by the Commitments of the non-Defaulting
Lenders and/or cash collateral will be provided by the Borrower in accordance
with Section 2.21(c), and participating interests in any such newly made
Swingline Loan or any newly issued or increased Letter of Credit shall be
allocated among non-Defaulting Lenders in a manner consistent with
Section 2.21(c)(i) (and such Defaulting Lender shall not participate therein).

If (i) a Bankruptcy Event with respect to a Lender Parent of any Lender shall
occur following the date hereof and for so long as such event shall continue or
(ii) the Swingline Lender or the Issuing Banks have a good faith belief that any
Lender has defaulted in fulfilling its obligations under one or more other
agreements in which such Lender commits to extend credit, the Swingline Lender
shall not be required to fund any Swingline Loan and the Issuing Banks shall not
be required to issue, amend or increase any Letter of Credit, unless the
Swingline Lender or the Issuing Bank, as the case may be, shall have entered
into arrangements with the Borrower or such Lender, satisfactory to the
Swingline Lender or the Issuing Bank, as the case may be, to defease any risk to
it in respect of such Lender hereunder.

In the event that the Administrative Agent, the Borrower, the Swingline Lender
and the Issuing Banks each agrees that a Defaulting Lender has adequately
remedied all matters that caused such Lender to be a Defaulting Lender, then the
Swingline Exposure and LC Exposure of the Lenders shall be readjusted to reflect
the inclusion of such Lender’s Revolving Commitment and on such date such Lender
shall purchase at par such of the Loans of the other Lenders (other than
Swingline Loans) as the Administrative Agent shall determine may be necessary in
order for such Lender to hold such Loans in accordance with its Applicable
Percentage.

ARTICLE III

Representations and Warranties

The Borrower hereby represents and warrants to the Lenders that.

SECTION 3.01. Existence, Qualification and Power; Compliance with Laws. The
Borrower, and each of the Operating Companies and, in the case of clause
(e) only, each of the other Subsidiaries, of the Borrower, (a) is a Person duly
organized or formed, validly existing under the Laws of the jurisdiction of its
incorporation or organization, (b) has all requisite power and authority to
(i) own or lease its material assets and carry on its business and (ii) in the
case of the Borrower, execute, deliver and perform its obligations under the
Financing Documents to which it is a party, (c) is duly organized and validly
existing under the Laws of the jurisdiction of its incorporation or organization
and of each other jurisdiction where its ownership, lease or operation of
material Properties or the conduct of its

 

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business as now conducted requires such qualification, (d) is in compliance in
all material respects with all Laws, orders, writs, injunctions and orders and
(e) has all requisite Regulatory Approvals to own its material Properties and
operate its business as currently conducted, in the case of the foregoing
clauses (c) through (e), except for such matters that could not reasonably be
expected to result in a Material Adverse Effect.

SECTION 3.02. Binding Effect. This Agreement and each other Financing Document
has been duly executed and delivered by the Borrower. This Agreement and each
other Financing Document constitute the legal, valid and binding obligation of
Borrower enforceable against the Borrower in accordance with its terms, except
as such enforceability may be limited by Debtor Relief Laws and by general
principles of equity.

SECTION 3.03. Authorization; No Contravention. The execution, delivery and
performance by the Borrower of this Agreement and each other Financing Document
are within the Borrower’s corporate or other powers, have been duly authorized
by all necessary corporate or other organizational action, and do not and will
not (a) contravene the terms of any of the Borrower’s Organizational Documents,
(b) conflict with or result in any breach or contravention of, or the creation
of any Lien under (other than as permitted by Section 6.01), or require any
payment to be made under (i) any Contractual Obligation to which the Borrower or
any of its Subsidiaries is a party or affecting the Borrower or any of its
Subsidiaries or the properties of the Borrower or any of its Subsidiaries or
(ii) any material order, injunction, writ or decree of any Governmental
Authority or any arbitral award to which the Borrower or any of its Subsidiaries
or any of their property is subject or (c) violate any applicable Law, in the
case of the foregoing clauses (b) and (c), except for such matters that could
not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.04. Governmental Authorization; Other Consents. Other than as
specified in Schedule 3.04, there is no Regulatory Approval and there is no
approval, consent, exemption, authorization, or other action by, or notice to,
or filing with any other Person that is necessary or required in connection with
(a) the execution, delivery or performance by, or enforcement against, the
Borrower of this Agreement or any other Financing Document to which it is a
party and the consummation of the transactions contemplated hereby and thereby
or (b) the ability of the Operating Companies to operate their businesses as
currently operated, except for the Regulatory Approvals and the other approvals,
consents, exemptions, authorizations, actions, notices and filings which have
been duly obtained, taken, given or made and are in full force and effect.

SECTION 3.05. Taxes. The income tax of the Borrower and its Subsidiaries is
included in a consolidated tax return for U.S. federal income tax purposes, of
which Puget Holdings is the “common parent” (within the meaning of Section 1504
of the Code) of such group.

Each Borrower Group Member has filed all tax returns and reports required to be
filed, and has paid all income taxes and other material taxes, assessments, fees
and other governmental charges levied or imposed upon it or its properties,
income or assets otherwise due and payable, except in each case those (a) which
are not yet due and payable, or (b) which are being contested in good faith by
appropriate proceedings diligently conducted and for which adequate reserves
have been provided in accordance with GAAP.

SECTION 3.06. No Default. Neither the Borrower nor any Subsidiary is in default
under or with respect to, any material Contractual Obligation, except for any
such default which could not reasonably be expected to result in a Material
Adverse Effect. No Default has occurred and is continuing.

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SECTION 3.07. Financial Statements; No Material Adverse Effect; Indebtedness.
(a) The financial statements furnished pursuant to Section 4.01(c) fairly
present in all material respects the financial condition of the Borrower and its
Subsidiaries as of the dates thereof and their results of operations for the
period covered thereby in accordance with GAAP, consistently applied throughout
the periods covered thereby. As of the date of such financial statements,
(i) there has been no sale, transfer or other disposition by the Borrower or any
of its Subsidiaries of any material part of the business or Property of the
Borrower and its Subsidiaries, taken as a whole, (ii) there has been no purchase
or other acquisition by the Borrower or any of its Subsidiaries of any business
or Property (including any Equity Interests of any other Person) material in
relation to the consolidated financial condition of the Borrower and its
consolidated Subsidiaries (taken as a whole) and (iii) the Borrower and the
Operating Companies did not have any material contingent liabilities, material
liabilities for Taxes, material and unusual forward or long-term commitments or
material and unrealized or anticipated losses from any unfavorable commitments,
except as referred to or reflected or provided for in such financial statements
or as arising solely from the execution and delivery of the Financing Documents,
in each case, which is not reflected in the foregoing financial statements or in
the notes thereto or has not otherwise been disclosed in writing to the Lenders
prior to the Effective Date.

(b) The forecasts of consolidated balance sheets, income statements and cash
flow statements of the Borrower and its Subsidiaries for each fiscal year ending
after the Effective Date until the Maturity Date, copies of which have been
furnished to the Administrative Agent prior to the Effective Date in a form
reasonably satisfactory to it, have been prepared in good faith on the basis of
the assumptions stated therein, which assumptions were believed to be reasonable
at the time of preparation of such forecasts and no representation or warranty
is made as to the actual attainability of any such forecasts.

(c) Since December 31, 2010, there has been no event or circumstance, either
individually or in the aggregate, that has resulted in or could reasonably be
expected to result in, on or after the Effective Date, a Material Adverse
Effect.

SECTION 3.08. Ranking. The Financing Documents and the Secured Obligations
evidenced thereby rank and will at all times rank at least pari passu with all
other senior, secured Indebtedness of the Borrower, whether now existing or
hereafter outstanding.

SECTION 3.09. Ownership of Assets. (a) (i) Each Borrower Group Member owns and
(to the extent applicable) has good and defensible title to its material
Properties and assets, in each case free and clear of all Liens other than Liens
permitted pursuant to Section 6.01 and (ii) each Borrower Group Member has good
and defensible title in fee simple to, or valid leasehold or license interests
in, or easements or other limited property interests in, all material real
property necessary in the ordinary conduct of its business, free and clear of
all Liens except for Liens permitted pursuant to Section 6.01, and, in each
case, subject to such exceptions, defects and qualifications as do not
(x) affect the value of any such properties of such Borrower Group Member in any
material respect or (y) affect the use made or proposed to be made of such
properties by the Borrower or any such Operating Company in any material
respect.

(b) Other than the security interests, if any, granted to the Collateral Agent
for the ratable benefit of the Secured Parties pursuant to the Security
Documents, no Borrower Group Member has pledged, assigned, sold, granted a Lien
on or security interest in, or otherwise conveyed any of its Properties, assets
or revenues, other than Liens permitted pursuant to Section 6.01 or Dispositions
not precluded by this Agreement.

SECTION 3.10. No Other Business. The Borrower has not engaged in any business
and has not incurred any liabilities other than (a) directly relating to its
direct ownership of PSE and its direct or indirect ownership of the other
Operating Companies and Immaterial Subsidiaries and (b) as otherwise not
prohibited under the Financing Documents.

 

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SECTION 3.11. Insurance. All insurance required to be obtained by the Borrower
Group Members pursuant to Section 5.08 has been obtained and is in full force
and effect, and all premiums then due and payable on all such insurance have
been paid.

SECTION 3.12. Disclosure. No report, financial statement, certificate or other
written information (including the Information Memorandum) furnished by or on
behalf of the Borrower or any of its Subsidiaries to the Administrative Agent or
any Lender in connection with the transactions contemplated hereby and the
negotiation of this Agreement or delivered hereunder or any other Financing
Documents (as modified or supplemented by other information so furnished) at the
time so furnished when taken as a whole contains any material misstatement of
fact or omits to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
materially misleading, except as could not reasonably be expected to result in a
Material Adverse Effect; provided that with respect to the Projections and any
other projected financial information, forecasts, estimates or forward-looking
information, the Borrower represents only that such information and materials
have been prepared in good faith on the basis of the assumptions stated therein,
which assumptions were believed to be reasonable at the time of preparation of
such forecasts, and no representation or warranty is made as to the actual
attainability of any such Projections or forecasts.

SECTION 3.13. Subsidiaries; Equity Interests. (a) As of the Effective Date, the
Borrower has no other Subsidiaries other than those listed in Schedule 3.13(a).
All of the outstanding Equity Interests in such Subsidiaries have been validly
issued, are fully paid and non-assessable and all Equity Interests owned by the
Borrower are owned free and clear of all Liens except those, if any, created
under the Security Documents and Liens permitted by Section 6.01. As of the
Effective Date, Schedule 3.13(b) (a) sets forth the name and jurisdiction of
each such Subsidiary and (b) sets forth the ownership interest of the Borrower
and any other Subsidiary in each such Subsidiary, including the percentage of
such ownership; provided that the Borrower hereby represents that it owns,
directly, 100% of the Equity Interests of PSE.

SECTION 3.14. No Dividend Restrictions. Except as set forth in Schedule 3.14 or
as permitted by this Agreement, there are no contractual or regulatory
restrictions limiting the ability of any Operating Company from making
distributions, dividends or other return on capital to the Borrower in an amount
sufficient to satisfy the Obligations under the Financing Documents.

SECTION 3.15. Litigation. There are no actions, suits, proceedings, disputes or
known claims pending or, to the knowledge of the Borrower, threatened in writing
or contemplated, at law, in equity, in arbitration or before any Governmental
Authority, by or against the Borrower or any of its Subsidiaries or against any
of their properties or revenues, except as set forth in Schedule 3.15, or which
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

SECTION 3.16. Solvency. Prior to and after giving effect to the transactions
contemplated by the Financing Documents, the Borrower, on a consolidated basis
with its Subsidiaries, is Solvent.

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SECTION 3.17. Margin Regulations; Investment Company Act; USA PATRIOT Act;
federal Power Act.

(a) The Borrower is not engaged nor will it engage, principally or as one of its
important activities, in the business of purchasing or carrying margin stock
(within the meaning of Regulation T, U and X issued by the FRB), or extending
credit for the purpose of purchasing or carrying margin stock.

(b) No Borrower Group Member is or, after giving effect to the transactions
contemplated hereby, will be an “investment company” as defined in and subject
to regulation under the Investment Company Act of 1940.

(c) The making of the Loans and the use of the proceeds thereof shall not
violate the Trading With the Enemy Act, as amended, or any of the foreign assets
control regulations of the U.S. Treasury Department (31 C.F.R., Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto and each Borrower Group Member is in compliance with the U.S. Executive
Order 13224 of September 24, 2001 Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit or Support Terrorism (66 Fed. Reg.
49, 079 (2001)) (the “Anti-Terrorism Order”) and the provisions of Public Law
107-56 (the “USA PATRIOT Act”).

(d) On and after the Effective Date, the Borrower is a “holding company” within
the meaning of Section 1262(8) of the Public Utility Holding Company Act of 2005
(“PUHCA”) by reason of its direct or indirect ownership of one or more
“public-utility companies” within the meaning of Section 1262(14) of PUHCA. The
Borrower has filed with the federal Energy Regulatory Commission a notification
of its “holding company” status pursuant to 18 C.F.R. § 366.4(a) (2005). On and
after the Effective Date, the Borrower and certain of its subsidiaries qualifies
for waiver, pursuant to 18 C.F.R. § 366.3(c), of the PUHCA accounting,
record-retention, and filing requirements at 18 C.F.R. §§ 366.21, 366.22, and
366.23, or are otherwise exempt from such requirements pursuant to 18 C.F.R. §
366.3(a).

SECTION 3.18. ERISA Compliance. (a) Except as could not, either individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect,
each Plan is in compliance with the applicable provisions of ERISA, the Code and
other federal or state Laws.

(b) (i) No ERISA Event has occurred during the five-year period prior to the
date on which this representation is made or deemed made with respect to any
Plan; (ii) the Borrower, neither the Borrower nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Sections 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (iii) neither the Borrower nor any ERISA Affiliate has
engaged in a transaction that could reasonably be subject to Sections 4069 or
4212(c) of ERISA, except, with respect to each of the foregoing clauses
(i) through (iii) of this Section 3.18(b), as could not reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect.

SECTION 3.19. Environmental Compliance. Except as expressly set forth in the
Annual Report:

(a) Except as specified in Schedule 3.19, there are no claims, actions, suits,
or proceedings in respect of or affecting the Borrower or any of its
Subsidiaries (or any of their respective Properties) alleging potential
liability or responsibility for violation of, or otherwise relating to, any
Environmental Law that could, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

(b) Except as specified in Schedule 3.19, the properties owned, leased or
operated by the Operating Companies do not contain any Hazardous Materials in
amounts or concentrations which (i) constitute, or constituted a violation of,
(ii) require remedial action under, or (iii) could give rise to liability under,
Environmental Laws, which violations, remedial actions and liabilities,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.

 

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(c) Except as specified in Schedule 3.19, none of the Operating Companies is
undertaking, and has not completed, either individually or together with other
potentially responsible parties, any investigation or assessment or remedial or
response action relating to any actual or threatened release, discharge or
disposal of Hazardous Materials at any site, location or operation, either
voluntarily or pursuant to the order of any Governmental Authority or the
requirements of any Environmental Law except for such investigation or
assessment or remedial or response action that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

(d) Except as specified in Schedule 3.19, all Hazardous Materials generated,
used, treated, handled or stored at, or transported to or from, any property
currently or formerly owned or operated by any of the Operating Companies have
been disposed of in a manner not reasonably expected to result, individually or
in the aggregate, in a Material Adverse Effect.

(e) Except as set forth in Schedule 3.19, and except as could not reasonably be
expected to result, individually or in the aggregate, in a Material Adverse
Effect, none of the Operating Companies has contractually assumed, with a
Governmental Authority or otherwise, any liability or obligation under or
relating to any Environmental Law.

SECTION 3.20. Labor Disputes. No labor dispute with the Borrower or any of its
Subsidiaries exists or is imminent that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.

SECTION 3.21. Affiliate Transactions. Except as specified on Schedule 3.21 or
permitted by Section 6.09, no Borrower Group Member has, directly or indirectly,
entered into any transaction since September 30, 2011 or that is in effect on
September 30, 2011 and that is otherwise permitted hereunder with or for the
benefit of any Affiliate.

SECTION 3.22. Collateral. All filings and other actions necessary to perfect the
security interest in the Collateral created under the Security Documents have
been duly made or taken and are in full force and effect, and the Security
Documents create in favor of the Collateral Agent for the benefit of the Secured
Parties are valid and, together with such filings and other actions, perfected
first priority security interest in the Collateral (subject to Permitted
Collateral Liens), securing the payment of the Secured Obligations, and all
filings and other actions necessary to perfect such security interest have been
duly taken. Puget Equico and the Borrower are the legal and beneficial owners of
the Collateral free and clear of any Lien, except for Liens permitted under
Section 6.01.

ARTICLE IV

Conditions

SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and
of any Issuing Bank to issue Letters of Credit hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 9.02):

(a) The Administrative Agent (or its counsel) shall have received from each
party hereto either (i) a counterpart of this Agreement signed on behalf of such
party or (ii) written evidence satisfactory to the Administrative Agent (which
may include telecopy or electronic transmission of a signed signature page of
this Agreement) that such party has signed a counterpart of this Agreement.

(b) The Administrative Agent shall have received a favorable written opinion
(addressed to the Administrative Agent and the Lenders and dated the Effective
Date) of Perkins Coie LLP, counsel

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for the Borrower, in form and substance reasonably acceptable to the
Administrative Agent, and covering such other matters relating to the Borrower,
the Financing Documents or the Transactions as the Administrative Agent shall
reasonably request. The Borrower hereby requests such counsel to deliver such
opinion.

(c) The Lenders shall have received (i) satisfactory audited consolidated
financial statements of the Borrower for the two most recent fiscal years ended
prior to the Effective Date as to which such financial statements are available,
(ii) satisfactory unaudited interim consolidated financial statements of the
Borrower for each quarterly period ended subsequent to the date of the latest
financial statements delivered pursuant to clause (i) of this paragraph as to
which such financial statements are publicly available and (iii) satisfactory
financial statement projections through and including the Borrower’s 2016 fiscal
year, together with such information as the Administrative Agent and the Lenders
shall reasonably request (including, without limitation, a detailed description
of the assumptions used in preparing such projections).

(d) The Administrative Agent shall have received (i) such documents and
certificates as the Administrative Agent or its counsel may reasonably request
relating to the organization, existence and good standing of the Borrower, the
authorization of the Transactions and any other legal matters relating to the
Borrower, the Financing Documents or the Transactions, all in form and substance
satisfactory to the Administrative Agent and its counsel and as further
described in the list of closing documents attached as Exhibit E and (ii) to the
extent requested by any of the Lenders, all documentation and other information
required by bank regulatory authorities under applicable “know-your-customer”
and anti-money laundering rules and regulations, including the USA PATRIOT Act.

(e) The Administrative Agent shall have received a certificate, dated the
Effective Date and signed by the President, a Vice President or a Financial
Officer of the Borrower, confirming compliance with the conditions set forth in
paragraphs (a) and (b) of Section 4.02.

(f) The Administrative Agent shall have received evidence satisfactory to it
that the Existing Credit Agreement shall have been terminated and cancelled and
all indebtedness thereunder shall have been fully repaid (except to the extent
being so repaid with the initial Loans) and any and all liens thereunder shall
have been terminated and released (except to the extent supporting the Secured
Obligations under the Security Documents).

(g) The Administrative Agent shall have received evidence reasonably
satisfactory to it that all governmental and third party approvals necessary or,
in the discretion of the Administrative Agent, advisable in connection with the
Transactions and the continuing operations of the Borrower and its Subsidiaries
have been obtained and are in full force and effect.

(h) The Administrative Agent and the Lenders shall have received all fees and
other amounts due and payable on or prior to the Effective Date, including, to
the extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder.

(i) Liens creating a first priority security interest in the collateral shall
have been perfected to the reasonable satisfaction of the Administrative Agent.

(j) The Administrative Agent (or its counsel) shall have received from each
party thereto such other documents listed on Exhibit E hereto.

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.

 

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SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on
the occasion of any Borrowing, and of any Issuing Bank to issue, amend, renew or
extend any Letter of Credit, is subject to the satisfaction of the following
conditions:

(a) The representations and warranties of the Borrower set forth in this
Agreement shall be true and correct in all material respects (other than to the
extent qualified by materiality or “Material Adverse Effect”, in which case,
such representations and warranties shall be true and correct) on and as of the
date of such Borrowing or the date of issuance, amendment, renewal or extension
of such Letter of Credit, as applicable (or to the extent that such
representations and warranties specifically refer to an earlier date, as of such
earlier date).

(b) At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default or Event of Default shall have occurred and be
continuing.

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.

ARTICLE V

Affirmative Covenants

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with
the Lenders that the Borrower will, and will cause its Subsidiaries to:

SECTION 5.01. Financial Statements. Deliver to the Administrative Agent (for
prompt further distribution to the Collateral Agent, if applicable, and each
Lender):

(a) as soon as available, but in any event within ninety (90) days after the end
of each fiscal year of the Borrower or as otherwise earlier required by the SEC,
from and after the Effective Date, a consolidated balance sheet of the Borrower
and its consolidated Subsidiaries as at the end of such fiscal year, and the
related consolidated statements of income or operations, stockholders’ equity
and cash flows for such fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail and
prepared in accordance with GAAP, audited and accompanied by (i) a report and
opinion by any firm of independent registered public accounting of nationally
recognized standing (or any other independent registered public accounting firm
acceptable to the Administrative Agent in its sole discretion), which report and
opinion shall be prepared in accordance with GAAP, shall not be subject to any
“going concern” or like qualification or exception or any qualification or
exception as to the scope of such audit and shall state that said consolidated
financial statements fairly present the consolidated financial condition and
results of operations of the Borrower and its consolidated Subsidiaries as at
the end of, and for, such fiscal year in accordance with GAAP;

(b) as soon as available, but in any event within forty-five (45) days after the
end of each of the first three (3) fiscal quarters of each fiscal year of the
Borrower or as otherwise earlier required by the SEC, from and after the
Effective Date, an unaudited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of each such fiscal quarter, and the
related (i) consolidated statements of income or operations for such fiscal
quarter and for the portion of the fiscal year then ended and (ii) consolidated
statements of cash flows for the portion of the fiscal year then ended, setting
forth in each case in comparative form the figures for the corresponding fiscal
quarter of the previous fiscal year and the corresponding portion of the
previous fiscal year, all in reasonable detail and certified by an Authorized
Officer as fairly presenting in all material respects the financial condition,
results of operations, stockholders’ equity and cash flows of the Borrower and
its consolidated Subsidiaries in accordance with GAAP, subject only to normal
year-end audit adjustments and the absence of footnotes;

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(c) as soon as available, and in any event no less than ninety (90) days after
the commencement of each fiscal year of the Borrower from and after the
Effective Date, (i) a detailed consolidated budget by fiscal quarter for the
following fiscal year (which may be updated as required and including a
projected consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as of the end of the following fiscal year, the related
consolidated statements of projected cash flow and projected income and a
summary of the material underlying assumptions applicable thereto)
(collectively, the “Projections”) and (ii) a schedule setting forth the
projected Capital Expenditure requirements of the Borrower Group and a
comprehensive business plan of the Borrower Group for such period (the “Business
Plan”), which Projections, schedule of Capital Expenditures and Business Plan
shall in each case be accompanied by a certificate of an Authorized Officer
stating that (x) such Projections are based on estimates, information and
assumptions believed to be reasonable at the time of preparation of the
Projections (but no representation shall be made as to the actual attainability
of such Projections) and (y) such schedule and Business Plan have been prepared
in good faith and have been delivered (without variance or modification) to the
senior management and board of directors of the Borrower;

(d) promptly after the same become publicly available, notice of all
registration statements, regular periodic reports and press releases filed by
the Borrower or any Subsidiary with the SEC, or any Governmental Authority
succeeding to any or all of the functions of the SEC, or with any national
securities exchange;

(e) such other information regarding the Borrower Group Members as the
Administrative Agent or any Lender may reasonably request for the Administrative
Agent or such Lender to carry out and be satisfied with the “know your customer”
and anti-money laundering rules and regulations, including, without limitation,
the USA PATRIOT Act or other checks required to be carried out by local
regulatory authorities; and

(f) such other information regarding the Borrower and its Subsidiaries as the
Administrative Agent or any Lender may reasonably request and which is
reasonably available to the Borrower and its Subsidiaries.

SECTION 5.02. Compliance Certificate. Deliver to the Administrative Agent (for
prompt further distribution to the Collateral Agent), if applicable, and each
Lender, (a) concurrently with any delivery of financial statements under
Section 5.01(a) or Section 5.01(b), a certificate of an Authorized Officer
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 6.09, and (iii) stating whether any change
in GAAP applicable to the financial statements or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 4.01(c) or, if more recent, Section 5.01(a), (and except as described in
the financial statements provided pursuant to Section 4.01(c), or
Section 5.01(a) or Section 5.01(b)) and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate, and (b) concurrently with any delivery of financial statements
under Section 5.01(a), a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during the
course of their examination of such financial statements of any Default under
Section 6.09 (which certificate may be limited to the extent required by
accounting rules or guidelines and in any event shall be limited to Defaults
insofar as they may relate to accounting matters).

 

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SECTION 5.03. Notices. Promptly, but in any event within five (5) Business Days,
after the Borrower has obtained knowledge thereof and in the case of clauses
(a) through (d), unless prohibited by applicable Law, notify or deliver to the
Administrative Agent (for prompt notification or delivery to the Collateral
Agent and each Lender):

(a) copies of any written notice received by the Borrower regarding any actual
or threatened dispute, litigation, investigation, proceeding or suspension with
respect to the Borrower or any of its Subsidiaries by or before any court or any
Governmental Authority which could reasonably be expected to result in a
Material Adverse Effect;

(b) copies of all Material Notices and Material Communications received by the
Borrower or any of its Subsidiaries in connection with any material Contractual
Obligation or from any Governmental Authority which could reasonably be expected
to result in a Material Adverse Effect;

(c) details of (i) the transfer of more than 5% of any Equity Interests of the
Borrower or any Borrower Group Member except for any such transfers between
Operating Companies or (ii) changes in the composition of the board of directors
or executive management of the Borrower or any Borrower Group Member; provided,
the board of directors of PSE shall have at least one independent director;

(d) details of any other events or circumstances that results in or would
reasonably be expected to result in a Material Adverse Effect;

(e) details of any Default or Event of Default; and

(f) details of each change to the Senior Debt Rating.

Each notice pursuant to this Section shall be accompanied by a written statement
of an Authorized Officer of the Borrower (x) that such notice is being delivered
pursuant to Section 5.03(a), (b), (c), (d) or (e) (as applicable) and
(y) setting forth details of the occurrence referred to therein and stating what
action the Borrower has taken and proposes to take with respect thereto.

SECTION 5.04. Compliance with Laws.

(a) The Borrower will, and will cause each of its Subsidiaries to, comply with
all applicable laws, including, without limitation, ERISA and all other employee
benefit laws and shall from time to time obtain and renew, and shall comply
with, each Regulatory Approval as is or in the future shall be necessary for the
operation of its business under applicable Laws (except for any non-compliance
which could not reasonably be expected to result in a Material Adverse Effect).

(b) The Borrower and each Subsidiary of the Borrower shall not petition, request
or take any legal or administrative action that seeks to amend, supplement or
modify any Regulatory Approval in any material respect unless such amendment,
supplement or modification could not reasonably be expected to result in a
Material Adverse Effect. The Borrower shall promptly upon receipt by it or any
of its Subsidiaries or upon publication furnish to the Administrative Agent and
each Lender a copy (certified by an Authorized Officer of the Borrower) of each
amendment, supplement or modification to any such Regulatory Approval.

SECTION 5.05. Preservation of Existence, Etc. Preserve, renew and maintain in
full force and effect its legal existence under the Laws of the jurisdiction of
its organization, except as expressly permitted by Section 6.04; and (b) take
all reasonable action to maintain all rights, privileges (including its status
as validly existing), permits, licenses and franchises necessary in the normal
conduct of its business, except such rights, privileges, permits, licenses or
franchise which, if not maintained, could not reasonably be expected to result
in a Material Adverse Effect.

SECTION 5.06. Compliance with Environmental Laws. Except as specified in
Schedule 3.19 and except, and in each case, to the extent that the failure to do
so could not reasonably be expected to result in, individually or in the
aggregate, a Material Adverse Effect: (i) comply, and take all reasonable
actions to cause all lessees and other Persons operating or occupying its
properties to comply, with all applicable Environmental Laws and Environmental
Permits; (ii) obtain and renew all Environmental Permits reasonably necessary
for its operations and properties; and (iii) in each case to the extent required
by Environmental Laws, conduct any investigation, study, sampling and testing,
and undertake any cleanup, removal, remedial or other action reasonably
necessary to remove and clean up all Hazardous Materials from any of its
properties, to the extent required by the requirements of all Environmental
Laws.

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SECTION 5.07. Maintenance of Properties; Ownership of Subsidiaries.

(a) Except as contemplated by Schedule 5.07, and except to the extent that the
failure to do so could not reasonably be expected to result in a Material
Adverse Effect, (i) maintain, preserve and protect all of its material
Properties and equipment necessary in the operation of its business in good
working order, repair and condition, ordinary wear and tear excepted and
casualty or condemnation excepted, and (ii) make all necessary renewals,
replacements, modifications, improvements, upgrades, extensions and additions
thereof or thereto in accordance with prudent industry practice; and

(b) The Borrower shall at all times from and after the Effective Date own,
directly, 100% of the Equity Interests of PSE.

SECTION 5.08. Maintenance of Insurance. Maintain insurance with financially
sound and reputable insurance companies with respect to all of its Properties
and assets, as is usually carried by companies engaged in similar business and
as is consistent with the prudent operation of its business; provided, however,
neither the Borrower nor any Borrower Group Member shall be prohibited from self
insuring to the extent that such self-insurance is consistent with the prudent
operation of its business and companies engaged in similar businesses.

SECTION 5.09. Use of Proceeds. The Borrower shall use the proceeds of the Loans
(a) for general corporate purposes in the ordinary course of the Borrower’s
business; provided, that special or one-time dividends shall not be deemed to be
in the ordinary course of the Borrower’s business and (b) to refinance
outstanding Indebtedness under the Existing Credit Agreement.

SECTION 5.10. Payment of Obligations. Pay, discharge or otherwise satisfy as the
same shall become due and payable, all its obligations and liabilities in
respect of material Taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its Property,
except to the extent that the failure to do so could not reasonably be expected
to result in a Material Adverse Effect.

SECTION 5.11. Cooperation. Perform such acts as are reasonably requested by the
Administrative Agent to carry out the intent of, and transactions contemplated
by, this Agreement and the other Financing Documents. Promptly upon the
reasonable request by any Agent, or any Lender through the Administrative Agent,
do, execute, acknowledge, deliver, record, rerecord, file, re-file, register and
re-register any and all such further acts, deeds, conveyances, pledge
agreements, mortgages, deeds of trust, trust deeds, assignments, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments as any
Agent, or any Lender through the Administrative Agent, may reasonably require
from time to time in order to (a) subject the Borrower’s properties, assets,
rights or interests to the Liens now or hereafter intended to be covered by any
of the Security Documents, and (b) perfect and maintain the validity,
effectiveness and priority of any of the Security Documents and any of the Liens
intended to be created thereunder.

SECTION 5.12. Books and Records. Maintain proper books of record and account, in
which entries that are full, true and correct in all material respects and are
in conformity with GAAP consistently applied shall be made of all material
transactions and matters involving the assets and business of the Borrower or
such Subsidiary, as the case may be.

 

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SECTION 5.13. Financing Documents; Material Documents.

(a) Perform and observe all of its covenants and obligations pursuant to any
material Contractual Obligation to which it is a party or pursuant to which it
has any obligations, except to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect;

(b) Take all reasonable and necessary action to prevent the termination or
cancellation of any Financing Document or other material Contractual Obligation
in accordance with the terms of such Financing Document or other material
Contractual Obligation or otherwise, except to the extent, in the case of any
material Contractual Obligation, that the failure to do so could not reasonably
be expected to result in a Material Adverse Effect; and

(c) enforce against the relevant party to a material Contractual Obligation
(other than the Lenders or Agents) such covenants of such material Contractual
Obligation in accordance with its terms, except to the extent that the failure
to do so could not reasonably be expected to result in a Material Adverse
Effect.

SECTION 5.14. Maintenance of Ratings. From and after the Effective Date, the
Borrower will maintain monitored public ratings on its senior unsecured debt
from S&P and Moody’s.

SECTION 5.15. Inspection Rights. At any reasonable time and from time to time
upon reasonable notice (but no more than once at the Borrower’s expense in any
fiscal year so long as no Event of Default has occurred and is continuing),
permit or arrange for the Administrative Agent (and permit any Lender to
accompany the Administrative Agent), to examine and make copies of and abstracts
from the records and books of account of, and the properties of, the Borrower
and each of its Subsidiaries, and to discuss the affairs, finances and accounts
of the Borrower and its Subsidiaries with the Borrower and its Subsidiaries and
their respective officers, directors and accountants (provided that (i) so long
as no Event of Default has occurred and is continuing, a representative of the
Borrower may be present for any communication with the independent public
accountants and (ii) the Borrower reserves the right to restrict access to any
generating facilities in accordance with reasonably adopted procedures relating
to safety and security, and to the extent reasonably requested to maintain
normal operations of the Borrower or any of its Subsidiaries).

SECTION 5.16. Additional Collateral. The Borrower will cause all of its owned
property (whether real, personal, tangible, intangible, or mixed) to be subject
at all times to first priority, perfected Liens in favor of the Collateral Agent
for the benefit of the Secured Parties to secure the Secured Obligations in
accordance with the terms and conditions of the Security Documents, subject in
any case to Liens permitted by Section 6.01. Without limiting the generality of
the foregoing, the Borrower will cause the issued and outstanding Equity
Interests directly owned by the Borrower to be subject at all times to a first
priority, perfected Lien in favor of the Collateral Agent to secure the Secured
Obligations in accordance with the terms and conditions of the Security
Documents or such other pledge and security documents as the Collateral Agent
shall reasonably request. In the event of the addition of any real property
collateral, the Borrower will use commercially reasonable efforts to cause to be
delivered to the Collateral Agent “life of loan” flood zone determination and,
if applicable, flood insurance certificates and borrower notices, as well as
other documentation customarily delivered relative to real estate collateral as
reasonably requested by the Collateral Agent.

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ARTICLE VI

Negative Covenants

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder have been paid in full and
all Letters of Credit have expired or terminated and all LC Disbursements shall
have been reimbursed, the Borrower covenants and agrees with the Lenders that
the Borrower shall not, nor shall it permit any of the Operating Companies, to:

SECTION 6.01. Liens. Create, incur, assume or suffer to exist any Lien upon any
of its material Property, assets or revenues, whether now owned or hereafter
acquired, other than the following:

(a) Liens for the benefit of the Secured Parties pursuant to any Financing
Document and, with respect to PSE only, Liens in respect of cash collateral
arrangements for letters of credit issued under the Operating Company Credit
Agreement;

(b) (i) Liens existing on the Effective Date and listed on Schedule 6.01(b) or
(ii) Liens securing any Existing Indebtedness contemplated by clause (b) of the
definition thereof; provided, in the case of this clause (ii), that such Lien
shall apply only to Property (whether now owned or after-acquired) of a type
that is subject to a Lien securing the corresponding Existing Indebtedness
referred to in clause (a) of the definition thereof (including the proceeds
thereof) and shall not extend to any other Property;

(c) Liens for taxes, assessments or governmental charges imposed on the Borrower
or any Subsidiary or any of their property by any Governmental Authority which
are not yet due and payable or which are being contested in good faith and by
appropriate proceedings diligently conducted, if adequate reserves with respect
thereto are maintained on the books of the Borrower or such Subsidiary, to the
extent required by and in accordance with GAAP;

(d) Liens of carriers, warehousemen, mechanics, materialmen, repairmen,
construction contractors, statutory liens of landlords or other like liens
arising in the ordinary course of business which secure amounts not yet due and
payable or which are being contested in good faith and by appropriate
proceedings diligently conducted, if Person to the extent required by and in
accordance with GAAP;

(e) pledges or deposits in the ordinary course of business (i) in connection
with workers’ compensation, unemployment insurance and other social security
legislation or (ii) required to secure performance bids, tenders, trade
contracts, performance bonds, statutory obligations, leases, government
contracts, surety and appeals bonds, indemnity, performance or other similar
bonds in connection with judicial or administrative proceedings and other
obligations of a like nature (exclusive of obligations for borrowed money);

(f) easements, rights-of-way, licenses, restrictions, encroachments, protrusions
and other similar encumbrances and minor title defects affecting real property
which, in the aggregate, do not in any case materially interfere with the
ordinary conduct of the business of any Borrower Group Member;

(g) Liens securing judgments that do not involve any material risk of forfeiture
of any assets of any of the Operating Companies or any Financing Document that
do not exceed $50,000,000 in the aggregate and that within ten (10) days are
being contested in good faith and by appropriate proceedings diligently
conducted, if adequate reserves with respect thereto are maintained on the books
of the applicable Person in accordance with GAAP for the payment of money not
constituting an Event of Default under Section 7.01(k);

(h) Liens securing payment of Tax-Free Debt and credit enhancement obligations
related to such Tax-Free Debt; provided that (i) any claims in respect of the
principal balance of the obligations being secured thereby shall not exceed
$250,000,000 at any time, and (ii) each such Lien shall extend only to the
property, and proceeds thereof, being financed by the Tax-Free Debt secured
thereby;

(i) Liens for purchase money security interests or Capital Lease Obligations
which are secured solely by the assets acquired (and proceeds and products
thereof), up to $150,000,000 in the aggregate; provided that such Lien arises
prior to or within 60 days after such acquisition or the incurrence of such
Capital Lease Obligation;

 

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(j) zoning, building and other generally applicable land use restrictions,
which, in the aggregate, do not in any case materially interfere with the
ordinary conduct of the business of the Borrower and the Operating Companies
taken as a whole;

(k) licenses of intellectual property entered into in the ordinary course of
business;

(l) Liens that have been placed by a third party on the fee title of leased real
property or property over which any Borrower Group Member has easement, license
or similar rights, and subordination or similar agreements relating thereto;

(m) bankers’ liens, rights of setoff and other similar liens existing solely
with respect to cash and Cash Equivalents on deposit in one or more accounts
maintained by any Borrower Group Member arising in the ordinary course of
business from netting services, overdraft protection, Banking Services
Obligations and otherwise in connection with the maintenance of deposit,
securities and commodities accounts;

(n) Liens solely on any cash earnest money or other deposits made by Borrower or
any of its Subsidiaries in connection with any Permitted Acquisition, letter of
intent or purchase agreement permitted hereunder;

(o) purported Liens evidenced by the filing of precautionary UCC financing
statements relating solely to operating leases of personal property or
consignments or similar arrangements entered into in the ordinary course of
business;

(p) Liens on (i) insurance policies and the proceeds thereof securing the
financing of the premiums with respect thereto to the extent securing
Indebtedness owed to any Person providing property, casualty, business
interruption or liability insurance to the Borrower or any Operating Company of
the Borrower so long as such Indebtedness shall not be in excess of the unpaid
costs of, and shall be incurred only to defer the cost of, such insurance for
the annual period in which such Indebtedness is incurred and in any event, not
in excess of $5,000,000 at any time (“Permitted Premium Financing
Indebtedness”), (ii) dividends and rebates and other identifiable proceeds
therefrom which may become payable under insurance policies and loss payments
which reduce the incurred premiums on such insurance policies, (iii) rights
which may arise under state insurance guarantee funds relating to any such
insurance policy, in each case securing Permitted Premium Financing Indebtedness
and (iv) pledges or deposits of cash and Cash Equivalents securing deductibles,
self-insurance, co-payment, co-insurance, retentions or similar obligations to
providers of property, casualty or liability insurance in the ordinary course of
business; provided, however, that claims in respect of such Liens shall not
exceed $5,000,000 at any time;

(q) Liens in favor of customs and revenue authorities arising as a matter of law
to secure payment of customs duties in connection with the importation of goods
in the ordinary course of business;

(r) Liens on conservation investment assets as security for obligations incurred
in financing or refinancing bondable conservation investments in accordance with
the laws of the State of Washington;

(s) any Lien existing on any property or asset prior to the acquisition thereof
by the Borrower or any Subsidiary or existing on any property or asset of any
Person that becomes a Subsidiary after the date hereof pursuant to a Permitted
Acquisition (or on such Person’s assets) prior to the time such Person becomes a
Subsidiary; provided that (i) such Lien is not created in contemplation of or in
connection with such acquisition or such Person becoming a Subsidiary, as the
case may be, (ii) such Lien shall not apply to any other property or assets of
the Borrower or any other Subsidiary (other than the proceeds of such property
or assets), (iii) such Lien shall secure only those obligations which it secures
on the date of such acquisition or the date such Person becomes a Subsidiary, as
the case may be, and extensions, renewals and replacements thereof that do not
increase the outstanding principal amount thereof and (iv) such Lien, together
with any other Liens incurred pursuant to this paragraph (s) shall not secure
Indebtedness or other obligations in excess of $250,000,000 in the aggregate;

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(t) other Liens securing Indebtedness and other obligations in an aggregate
amount not to exceed $100,000,000 at any time;

(u) Liens securing Permitted Refinancing Indebtedness of the Borrower (but not
of any other Borrower Group Member); provided that such Liens and any rights in
respect thereof are subject to the terms of the Collateral Agency Agreement and
all net cash proceeds in respect thereof are applied to prepay the Loans; and

(v) Liens pursuant to (i) PSE’s First and Refunding Mortgage, dated as of
June 2, 1924 (as supplemented and amended, the “Existing 1924 Mortgage”), as
described therein, (ii) PSE’s Indenture of First Mortgage, dated as of April 1,
1957 (as supplemented and amended, the “Existing 1957 Mortgage”), as described
therein, (iii) PSE’s Indenture, dated as of December 1, 1997 (as supplemented
and amended, the “Existing 1997 Indenture”), as described therein, and (iv) any
replacement indenture in respect of the Existing 1924 Mortgage, the Existing
1957 Mortgage or the Existing 1997 Indenture, and any supplements thereto, so
long as (1) any such Liens under any such replacement indenture apply to the
property or assets of PSE in a manner substantially consistent with the terms of
the Existing 1924 Mortgage, the Existing 1957 Mortgage or the Existing 1997
Indenture, as applicable, and (2) the borrowing capacity and other restrictions
on PSE’s ability to incur any obligations under any such replacement indenture
are substantially the same as those set forth in the Existing 1924 Mortgage, the
Existing 1957 Mortgage or the Existing 1997 Indenture, as applicable;

provided that notwithstanding any of the foregoing to the contrary, other than
pursuant to paragraphs (a), (d), (e), (m), (n), (p) and (u) above, the Borrower
shall not agree to the imposition of any Lien upon the Collateral.

SECTION 6.02. Dispositions. Make any Disposition or enter into any agreement to
make any Disposition, except:

(a) Dispositions (other than Collateral constituting Equity Interests in PSE) in
the ordinary course of business (including Dispositions of obsolete or worn out
or surplus property no longer required or useful in the business or operations
of the Borrower or any of its Subsidiaries);

(b) Dispositions of assets and businesses specified on Schedule 5.07 or expected
to be sold or terminated under the Business Plan most recently delivered to the
Administrative Agent prior to the Effective Date;

(c) Dispositions of Investments in Cash Equivalents in the ordinary course of
business;

(d) Dispositions of assets which individually or in the aggregate are less than
15% of the Consolidated Tangible Net Assets as of the Effective Date and for
which no less than 80% of the proceeds received therefor are in cash or Cash
Equivalents;

(e) Dispositions constituting a Lien permitted pursuant to Section 6.01;

(f) the sale or issuance of any Subsidiary’s Equity Interests to the Borrower;

(g) Dispositions of assets in connection with any transaction permitted by
Section 6.04;

(h) assignments and licenses of intellectual property or other intangibles of
the Borrower Group Members in the ordinary course of business;

(i) any Disposition of any asset or interest therein in exchange for utility
plant, equipment or other utility assets (other than notes or other obligations)
in each case equal to the fair market value (as determined in good faith by the
Borrower) of such asset or interest therein; provided, however, that the fair
market value of any such assets or interests Disposed of under this paragraph
(i) shall not exceed $5,000,000 in the aggregate in any fiscal year;

 

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(j) other Dispositions, in one transaction or a series of related transactions,
resulting in Net Cash Proceeds not exceeding (i) $100,000,000 in the aggregate
in any fiscal year and (ii) $250,000,000 in the aggregate at any time after the
Effective Date; provided, that any Disposition of any property pursuant to this
Section 6.02 shall be for no less than the fair market value of such property at
the time of execution of the relevant agreement with respect to such Disposition
and taxes due with respect to such Dispositions shall be substantially
contemporaneously paid (or reserved for future payment) out of the proceeds from
such Disposition; and

(k) the Disposition of substantially all of the electric distribution assets of
PSE located in Jefferson County, Washington, pursuant to that certain Asset Sale
Agreement, dated as of June 11, 2010, by and between Public Utility District
No.1 of Jefferson County, a public utility district organized under the laws of
the state of Washington and PSE, as in effect as of the Effective Date;
provided, that PSE shall receive net cash proceeds of not less than the fair
market value of the assets subject to such Disposition as reasonably determined
by the board of directors of the Borrower in good faith in net cash proceeds.

In the case of any of the foregoing Dispositions, the Borrower and the
Subsidiaries are in compliance, on a pro forma basis after giving effect to such
Disposition with the covenants contained in Section 6.09 recomputed as of the
last day of the most recently ended fiscal quarter of the Borrower for which
financial statements are available, as if such Disposition (and any related
repayment of Indebtedness) had occurred on the first day of each relevant period
for testing such compliance and, if the Net Cash Proceeds in respect of such
Disposition under clause (b), (d) or (j) of this Section 6.02 exceeds 5% of
total assets of the Borrower and its Subsidiaries on a consolidated basis as set
forth on the most recent financial statements delivered pursuant to
Section 4.01(c) and 5.01(a), the Borrower shall have delivered to the
Administrative Agent a certificate of a Financial Officer of the Borrower to
such effect, together with all relevant financial information, statements and
projections requested by the Administrative Agent.

SECTION 6.03. Investments. Make or hold any Investments, except:

(a) Investments by the Borrower or an Operating Company in cash and Cash
Equivalents;

(b) Investments in Interest Hedging Agreements;

(c) Investments by PSE or any other Operating Companies in Other Hedging
Agreements entered into in the ordinary course of business and not for
speculative purposes;

(d) Intercompany Loans from the Borrower to any Operating Company or from PSE to
its Subsidiaries which are Operating Companies;

(e) Equity Interests in (x) Subsidiaries in existence on the date hereof,
(y) Operating Companies acquired or created after the Effective Date in
connection with Permitted Acquisitions, and (z) Subsidiaries consisting of
Immaterial Subsidiaries;

(f) Permitted Acquisitions;

(g) Investments received in connection with the bankruptcy or reorganization of,
or settlement of delinquent accounts and disputes with, customers and supplies,
in each case in the ordinary course of business;

(h) extensions of trade credit in the ordinary course of business;

(i) Investments made as a result of the receipt of non-cash consideration from a
Disposition in compliance with Section 6.02;

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(j) Investments made by any Person that becomes a Subsidiary after the date
hereof; provided that such Investment exists at the time such Person becomes a
Subsidiary and are not made in contemplation of or in connection with such
Person becoming a Subsidiary;

(k) loans and advances made in the ordinary course of business to their
respective employees, officers and directors so long as the aggregate principal
amount thereof at any time outstanding (excluding temporary advances in the
ordinary course of business) shall not exceed $3,000,000;

(l) Investments existing on the date hereof and identified on Schedule 6.03(l);
and

(m) in addition to Investments permitted by clauses (a) through (l) above so
long as no Default or Event of Default shall exist immediately prior thereto or
after giving effect thereto, additional Investments so long as the aggregate
amount invested, loaned or advanced pursuant to this clause (m) does not exceed
$100,000,000 in the aggregate at any time outstanding.

SECTION 6.04. Fundamental Changes. Merge, dissolve, liquidate, consolidate with
or into another Person, or Dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to or in favor of any Person, except for (a) Permitted
Acquisitions, (b) Dispositions permitted under Section 6.02, (c) the liquidation
or dissolution of any Immaterial Subsidiary and (d) if at the time thereof and
immediately after giving effect thereto no Event of Default or Default shall
have occurred and be continuing, (i) the merger, amalgamation or consolidation
of any Operating Company into or with the Borrower in a transaction in which the
Borrower is the surviving corporation, and (ii) the merger, amalgamation or
consolidation of any Operating Company into or with any other Operating Company
or the liquidation or dissolution of any Operating Company (other than PSE) into
any other Operating Company; provided, however, that in any merger or
amalgamation or consolidation involving PSE or any liquidation or dissolution of
any Operating Company into PSE, PSE shall be the surviving corporation.

SECTION 6.05. Nature of Business. (a) Engage in any line of business
substantially different from those lines of business conducted by the Borrower
Group Members on the Effective Date or in connection with any Permitted
Acquisition or any business reasonably related, complimentary or ancillary
thereto.

(b) In the case of the Borrower from and after the Effective Date, conduct,
transact or otherwise engage in any business or operations other than those
reasonably related to (A) its ownership of the Equity Interests of its
Subsidiaries, (B) the maintenance of its legal existence, (C) the performance of
this Agreement and the other Financing Documents, and (D) any transaction that
the Borrower is expressly permitted to enter into or consummate under this
Agreement.

(c) Terminate or amend, waive, modify or supplement any of the provisions of its
Organizational Documents or consent to any such termination, amendment, waiver,
modification or supplement, unless any of the foregoing actions could not
reasonably be expected to result in a Material Adverse Effect.

 

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SECTION 6.06. Transactions with Affiliates; Management Fees. (a) Enter into any
transaction of any kind with any Affiliate (including Affiliate Service
Agreements), whether or not in the ordinary course of business, other than
(i) on terms substantially as favorable to the Borrower Group Member as would be
obtainable by such Borrower Group Member at the time in a comparable
arm’s-length transaction with a Person other than an Affiliate,
(ii) Intercompany Loans to the extent permitted under Section 6.03, (iii) as
approved or required by any Governmental Authority or as required by applicable
Law, and (iv) the payment of Management Fees permitted by clause (b) below.

(b) Pay any Management Fees or enter into or permit to exist any agreement or
arrangement for the payment of Management Fees, unless such fees are expressly
subordinated to the Secured Obligations on the terms set forth in Exhibit M.

SECTION 6.07. Accounting Changes. Make any change in its fiscal year except to
the extent required by applicable Law and/or GAAP. In such event, the Borrower
may, upon written notice to the Administrative Agent, change its fiscal year to
any other fiscal year reasonably acceptable to the Administrative Agent, in
which case, the Borrower and the Administrative Agent will, and are hereby
authorized by the Lenders to, make any adjustments to this Agreement that are
necessary to reflect such change in fiscal year arising as a result of such
change in applicable Law.

SECTION 6.08. Restrictive Agreements. Directly or indirectly, enter into, or
incur or permit to exist any agreement or other arrangement that prohibits,
restricts or imposes any condition upon (a) the ability of any Borrower Group
Member to create, incur or permit to exist any Lien upon any of its material
Property or assets (except as permitted under Section 6.01), or (b) the ability
of PSE or any other wholly-owned Subsidiary to pay dividends or other
distributions with respect to, or to return capital in respect of its common
Equity Interests or to make or repay loans or advances to any Borrower Group
Member or to Guarantee Indebtedness of any Borrower Group Member; provided that
the foregoing shall not apply to:

(i) prohibitions, restrictions and conditions imposed by applicable Laws, any
Governmental Authority or this Agreement;

(ii) prohibitions, restrictions and conditions identified on Schedule 3.14 or
otherwise resulting from or relating to Existing Indebtedness (without
amendment, modification or waiver, other than in connection with Permitted
Refinancing Indebtedness) or prohibitions, restrictions and conditions not more
restrictive taken as a whole than such provisions in agreements entered into
after the Effective Date to evidence or govern Indebtedness that is permitted by
this Agreement;

(iii) provisions of the type described in clause (a) above imposed by the holder
of any Lien permitted by Section 6.01(d), (e), (h), (i), (m), (n), (r) and
(s) but solely with respect to the property purported to be encumbered by such
Lien;

(iv) any agreement in effect at the time any Person becomes a Subsidiary
pursuant to a Permitted Acquisition and not in contemplation of, or in
connection with, such Person becoming a Subsidiary and only relating to or in
connection with the Property or assets of such Person (and any extensions,
renewals, or replacements of such agreement so long as any restrictions and
conditions in such extended, renewed or replaced agreement are not more
restrictive than the applicable original agreement or extend to additional
Property);

(v) customary restrictions and conditions contained in agreements relating to
any Disposition of any asset or property; provided that such restrictions and
conditions only apply to the asset or property to be sold, assigned or
transferred and such sale, assignment or transfer is permitted by Section 6.02;
and

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(vi) customary provisions restricting assignment or transfer of any agreement
entered into in the ordinary course of business.

SECTION 6.09. Certain Financial Covenants.

(a) Group FFO Coverage Ratio. The Borrower will not permit the Group FFO
Coverage Ratio at the end of any Test Period to be less than 2.00 to 1.00.

(b) Maximum Leverage Ratio. The Borrower will not permit the Leverage Ratio to
be greater than 0.65 to 1.00 at any time.

SECTION 6.10. Preservation of Rights. Assign, cancel, terminate, waive any
material default under, material breach of or material right under, or
materially amend, supplement or modify or give any material consent under
(including any consent or assignment of), any Financing Document or material
Contractual Obligation, except, other than in the case of any Financing
Document, to the extent that any such action would not reasonably be expected to
result in a Material Adverse Effect.

ARTICLE VII

Events of Default

If any of the following events (“Events of Default”) shall occur:

(a) the Borrower shall fail to pay (i) any principal of any Loan when and as the
same shall become due or (ii) any reimbursement obligation in respect of any LC
Disbursement when and as the same shall become due and payable (and such failure
under this clause (ii) shall continue unremedied for a period of one
(1) Business Day), in each case, whether at the due date thereof or at a date
fixed for prepayment thereof or otherwise;

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any
other amount (other than an amount referred to in clause (a) of this Article)
payable under this Agreement or any other Financing Document, when and as the
same shall become due and payable, and such failure shall continue unremedied
for a period of three (3) Business Days;

(c) any representation or warranty made or deemed made by or on behalf of the
Borrower or any Subsidiary in or in connection with this Agreement or any other
Financing Document or any amendment or modification hereof or thereof or waiver
hereunder or thereunder, or in any report, certificate, financial statement or
other document furnished pursuant to or in connection with this Agreement or any
other Financing Document or any amendment or modification thereof or waiver
thereunder, shall prove to have been incorrect in any material respect when made
or deemed made;

(d) the Borrower shall fail to observe or perform any covenant, condition or
agreement contained in Section 5.03, 5.05 or 5.09 or in Article VI (other than
Sections 6.05(a), 6.05(b), 6.06 and 6.07);

(e) The Borrower or any Subsidiary fails to perform or observe any other
covenant, condition or agreement (not specified in clauses (a), (b) or (d) of
this Article VII) contained in any Financing Document on its part to be
performed or observed and such failure continues for thirty (30) days after
notice thereof to the Borrower by the Administrative Agent or the Borrower
having knowledge thereof; provided that if such failure is capable of remedy but
by its nature cannot reasonably be cured within such period, the Borrower shall
have such additional time not exceeding an additional sixty (60) days as may be
necessary to cure such failure so long as the Borrower is proceeding diligently
to cure such failure and such additional cure period could not reasonably be
expected to result in a Material Adverse Effect;

 

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(f) the Borrower or any Subsidiary shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any Material
Indebtedness/Material Swap Obligation, when and as the same shall become due and
payable (after giving effect to any applicable grace or cure period);

(g) any event or condition occurs that results in any Material
Indebtedness/Material Swap Obligation becoming due prior to its scheduled
maturity (other than Swap Agreements which become due as a result of the
voluntary prepayment of referenced debt described in such Swap Agreements) or
that enables or permits (with or without the giving of notice, the lapse of time
or both) the holder or holders of any Material Indebtedness/Material Swap
Obligation or any trustee or agent on its or their behalf to cause any Material
Indebtedness/Material Swap Obligation to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity; provided that this clause (g) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer of the property
or assets securing such Indebtedness;

(h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of the Borrower or any Subsidiary (other than any Immaterial Subsidiary)
or its debts, or of a substantial part of its assets, under any federal, state
or foreign bankruptcy, insolvency, receivership or similar law now or hereafter
in effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any Subsidiary
(other than any Immaterial Subsidiary) or for a substantial part of its assets,
and, in any such case, such proceeding or petition shall continue undismissed
for sixty (60) days or an order or decree approving or ordering any of the
foregoing shall be entered;

(i) the Borrower or any Subsidiary (other than any Immaterial Subsidiary) shall
(i) voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h) of this
Article, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower or any
Subsidiary (other than any Immaterial Subsidiary) or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing;

(j) (i) the Borrower or any Subsidiary (other than any Immaterial Subsidiary)
shall become unable, admit in writing its inability or fail generally to pay its
debts as they become due or (ii) any writ or warrant of attachment or execution
or similar process is issued or levied against all or any material part of the
property of the Borrower and its Subsidiaries (other than any Immaterial
Subsidiary), taken as a whole, and is not released, vacated or fully bonded
within thirty (30) days after its issue or levy;

(k) one or more judgments for the payment of money in an aggregate amount in
excess of $50,000,000 shall be rendered against the Borrower, any Subsidiary or
any combination thereof and the same shall remain undischarged for a period of
sixty (60) consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of the Borrower or any Subsidiary to enforce any such
judgment;

(l) an ERISA Event shall have occurred that, in the opinion of the Required
Lenders, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in a Material Adverse Effect;

(m) a Change in Control shall occur;

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(n) the occurrence of any “default”, as defined in any Financing Document (other
than this Agreement) or the breach of any of the terms or provisions of any
Financing Document (other than this Agreement), which default or breach
continues beyond any period of grace therein provided; or

(o) any material provision of any Financing Document for any reason ceases to be
valid, binding and enforceable in accordance with its terms (or the Borrower or
any Subsidiary shall challenge the enforceability of any Financing Document or
shall assert in writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Financing Documents has ceased to be
or otherwise is not valid, binding and enforceable in accordance with its
terms);

(p) at any time, any financial statements to be delivered pursuant to
Section 5.01 shall be qualified by the auditors and such qualification could
reasonably be expected to result in a Material Adverse Effect;

(q) the termination, transfer, revocation or modification of any material
contracts or leases to which the Borrower or any Subsidiary is a party, the
result of which could reasonably be expected to result in a Material Adverse
Effect and such termination, transfer, revocation or modification remains in
effect for a period of more than thirty (30) days after the occurrence thereof;
or

(r) any Security Document shall for any reason fail to create a valid and
perfected first priority security interest in the Collateral in excess of
$100,000,000 in the aggregate purported to be covered thereby, except as
permitted by the terms of any Financing Document;

then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other Obligations of the Borrower accrued hereunder and
under the other Financing Documents, shall become due and payable immediately,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; and in case of any event with respect to the
Borrower described in clause (h) or (i) of this Article, the Commitments shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other Obligations
accrued hereunder and under the other Financing Documents, shall automatically
become due and payable, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower. Upon the occurrence
and during the continuance of an Event of Default, the Administrative Agent may,
and at the request of the Required Lenders shall, exercise any rights and
remedies provided to the Administrative Agent under the Financing Documents or
at law or equity.

ARTICLE VIII

The Administrative Agent

Each of the Lenders and the Issuing Banks hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf, including execution of the other Financing
Documents, and to exercise such powers as are delegated to the Administrative
Agent by the terms of the Financing Documents, together with such actions and
powers as are reasonably incidental thereto.

 

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The bank serving as the Administrative Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.

The Administrative Agent shall not have any duties or obligations except those
expressly set forth in the Financing Documents. Without limiting the generality
of the foregoing, (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (b) the Administrative Agent shall not have any duty to take
any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Financing
Documents that the Administrative Agent is required to exercise in writing as
directed by the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 9.02), and (c) except as expressly set forth in the Financing Documents,
the Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02) or in the absence of its own gross negligence or
willful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in connection with any
Financing Document, (ii) the contents of any certificate, report or other
document delivered hereunder or in connection with any Financing Document,
(iii) the performance or observance of any of the covenants, agreements or other
terms or conditions set forth in any Financing Document, (iv) the validity,
enforceability, effectiveness or genuineness of any Financing Document or any
other agreement, instrument or document, (v) the creation, perfection or
priority of Liens on the Collateral or the existence of the Collateral or
(vi) the satisfaction of any condition set forth in Article IV or elsewhere in
any Financing Document, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent.

The Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.

The Administrative Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through their
respective Related Parties. The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.

Subject to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time by
notifying the Lenders, the Issuing Banks and the Borrower. Upon any such
resignation, the Required Lenders shall have the right,

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in consultation with the Borrower, to appoint a successor. If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Administrative Agent
gives notice of its resignation, then the retiring Administrative Agent may, on
behalf of the Lenders and the Issuing Banks, appoint a successor Administrative
Agent which shall be a bank with an office in the United States, or an Affiliate
of any such bank. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the
Administrative Agent’s resignation hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.

Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Financing Document
or any related agreement or any document furnished hereunder or thereunder.

None of the Lenders, if any, identified in this Agreement as a Syndication
Agent, Co-Documentation Agent, Joint Lead Arranger or Joint Bookrunner shall
have any right, power, obligation, liability, responsibility or duty under this
Agreement other than those applicable to all Lenders as such. Without limiting
the foregoing, none of such Lenders shall have or be deemed to have a fiduciary
relationship with any Lender. Each Lender hereby makes the same acknowledgments
with respect to the relevant Lenders in their respective capacities as
Syndication Agent or Co-Documentation Agents, as applicable, as it makes with
respect to the Administrative Agent in the preceding paragraph.

The Lenders are not partners or co-venturers, and no Lender shall be liable for
the acts or omissions of, or (except as otherwise set forth herein in case of
the Administrative Agent) authorized to act for, any other Lender. The
Administrative Agent shall have the exclusive right on behalf of the Lenders to
enforce the payment of the principal of and interest on any Loan after the date
such principal or interest has become due and payable pursuant to the terms of
this Agreement.

In its capacity, the Administrative Agent is a “representative” of the Secured
Parties within the meaning of the term “secured party” as defined in the New
York Uniform Commercial Code. Each Lender authorizes the Administrative Agent to
enter into each of the Security Documents to which it is a party and to take all
action contemplated by such documents. Each Lender agrees that no Secured Party
(other than the Administrative Agent) shall have the right individually to seek
to realize upon the security granted by any Security Document, it being
understood and agreed that such rights and remedies may be exercised solely by
the Administrative Agent for the benefit of the Secured Parties upon the terms
of the Security Documents. In the event that any Collateral is hereafter pledged
by any Person as collateral security for the Secured Obligations, the
Administrative Agent is hereby authorized, and hereby granted a power of
attorney, to execute and deliver on behalf of the Secured Parties any Financing
Documents necessary or appropriate to grant and perfect a Lien on such
Collateral in favor of the Administrative Agent on behalf of the Secured
Parties. The Lenders hereby authorize the Administrative Agent, at its option
and in its discretion, to release any Lien granted to or held by the
Administrative Agent upon any Collateral (i) as described in Section 9.02(d);
(ii) as permitted by, but only in accordance with, the terms of the applicable
Financing Document; or (iii) if approved, authorized or ratified in

 

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writing by the Required Lenders, unless such release is required to be approved
by all of the Lenders hereunder. Upon request by the Administrative Agent at any
time, the Lenders will confirm in writing the Administrative Agent’s authority
to release particular types or items of Collateral pursuant hereto. Upon any
sale or transfer of assets constituting Collateral which is permitted pursuant
to the terms of any Financing Document, or consented to in writing by the
Required Lenders or all of the Lenders, as applicable, and upon at least five
(5) Business Days’ prior written request by the Borrower to the Administrative
Agent, the Administrative Agent shall (and is hereby irrevocably authorized by
the Lenders to) execute such documents as may be necessary to evidence the
release of the Liens granted to the Administrative Agent for the benefit of the
Secured Parties herein or pursuant hereto upon the Collateral that was sold or
transferred; provided, however, that (i) the Administrative Agent shall not be
required to execute any such document on terms which, in the Administrative
Agent’s opinion, would expose the Administrative Agent to liability or create
any obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Secured Obligations or any Liens upon (or
obligations of the Borrower or any Subsidiary in respect of) all interests
retained by the Borrower or any Subsidiary, including (without limitation) the
proceeds of the sale, all of which shall continue to constitute part of the
Collateral.

In accordance with Article 6 of the Collateral Agency Agreement, the
Administrative Agent and the Lenders hereby designate and appoint JPMorgan Chase
Bank, N.A. as the successor Collateral Agent under the Collateral Agency
Agreement and the Security Documents, which appointment shall become effective
as of the Effective Date, whereupon JPMorgan Chase Bank, N.A., as the successor
Collateral Agent, shall become party to the Collateral Agency Agreement and the
Security Documents vested with all the authority, rights, powers, duties and
obligations as if originally named as the Collateral Agent thereunder. By its
execution hereof, JPMorgan Chase Bank, N.A. hereby accepts such designation and
appointment. The resignation of Barclays Bank PLC, as the existing Collateral
Agent, (and the Administrative Agent and the Lenders hereby authorize JPMorgan
Chase Bank, N.A., as successor Collateral Agent to notify Barclays Bank PLC of
such removal), shall become effective simultaneously with the acceptance of the
appointment by JPMorgan Chase Bank, N.A., without any further action on behalf
of the Lenders or the Administrative Agent. Further, each Lender and the
Administrative Agent hereby direct the Collateral Agent to enter into that
certain Amendment No. 1 to Amended and Restated Collateral Agency Agreement,
dated as of the date hereof, between Borrower and Collateral Agent, the form of
which is attached hereto as Exhibit I.

ARTICLE IX

Miscellaneous

SECTION 9.01. Notices. (a) Except in the case of notices and other
communications expressly permitted to be given by telephone (and subject to
paragraph (b) below), all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy, as follows:

(i) if to the Borrower, to it at Puget Energy, Inc., 10885 NE 4th Street, Suite
1200, Bellevue, Washington 98004-5591, Attention of Vice President Finance and
Treasurer, (Telecopy No. (424) 462-3300), (Telephone No.(425) 462-3870);

(ii) if to the Administrative Agent, to it at JPMorgan Chase Bank, N.A., Loan
Operations, 10 South Dearborn, 7th Floor, Chicago, IL 60603, Attention of Nan
Wilson, (Telecopy No. 1-888-292-9533), (Telephone No. (312) 385-7084), (Email:
jpm.agency.servicing.4@jpmchase.com), with a copy to (other than with respect to
a Borrowing Request or an Interest Election Request) (A) JPMorgan Chase Bank,
N.A., 10 South Dearborn, 9th

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Floor, Mail Code IL1-0090, Chicago, IL 60603, Attention of Helen D. Davis,
(Telecopy No. (312) 732-1762), (Telephone No. (312) 732-1759) and (B) JPMorgan
Chase Bank, N.A., Portfolio Management Administration, 10 South Dearborn, 9th
Floor, Mail Code IL1-0874, Chicago, IL 60603, Attention of Lisa Tverdek
(Telecopy No. (312) 325-3238), (Telephone No. (312) 325-3150);

(iii) if to the Swingline Lender, to it at JPMorgan Chase Bank, N.A., Loan
Operations, 10 South Dearborn, 7th Floor, Chicago, IL 60603, Attention of Nan
Wilson (Telecopy No. (312) 385-7096), (Telephone No. (312) 385-7084); and

(iv) if to any other Lender, to it at its address (or telecopy number) set forth
in its Administrative Questionnaire.

(b) Notices and other communications to the Lenders hereunder may be delivered
or furnished by electronic communications pursuant to procedures approved by the
Administrative Agent; provided that the foregoing shall not apply to notices
pursuant to Article II unless otherwise agreed by the Administrative Agent and
the applicable Lender. The Administrative Agent or the Borrower may, in its
discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it; provided that
approval of such procedures may be limited to particular notices or
communications.

(c) Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt if received by the recipient during its normal business hours.

SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative
Agent, any Issuing Bank or any Lender in exercising any right or power hereunder
or under any other Financing Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent, the Issuing
Banks and the Lenders hereunder and under the other Financing Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) of this Section, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. Without limiting the generality of the foregoing, the making of
a Loan or issuance of a Letter of Credit shall not be construed as a waiver of
any Default, regardless of whether the Administrative Agent, any Lender or any
Issuing Bank may have had notice or knowledge of such Default at the time.

(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders; provided that no
such agreement shall (i) increase the Commitment of any Lender without the
written consent of such Lender, (ii) reduce the principal amount of any Loan or
LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender directly affected
thereby, (iii) postpone the scheduled date of payment of the principal amount of
any Loan or LC Disbursement, or any interest thereon, or any fees payable
hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the written
consent of each Lender directly affected thereby, (iv) change Section 2.18(b) or
(d) in a manner that would alter the pro rata sharing of payments required
thereby, without the written consent of each Lender, (v) change any of the
provisions of this Section or the

 

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definition of “Required Lenders” or any other provision hereof specifying the
number or percentage of Lenders required to waive, amend or modify any rights
hereunder or make any determination or grant any consent hereunder, or
(vi) except as provided in clause (d) of this Section or to any Collateral
Document, release all of substantially all of the Collateral, without the
written consent of each Lender; provided further that no such agreement shall
amend, modify or otherwise affect the rights or duties of the Administrative
Agent, any Issuing Bank or the Swingline Lender hereunder without the prior
written consent of the Administrative Agent, the Issuing Bank or the Swingline
Lender, as the case may be.

(c) Notwithstanding the foregoing (but subject to the limitations set forth in
Sections 9.02(b)(i), 9.02(b)(ii) and 9.02(b)(iii)), this Agreement and any other
Financing Document may be amended (or amended and restated) with the written
consent of the Required Lenders, the Administrative Agent and the Borrower
(x) to add one or more credit facilities to this Agreement and to permit
extensions of credit from time to time outstanding thereunder and the accrued
interest and fees in respect thereof to share ratably in the benefits of this
Agreement and the other Financing Documents with the Revolving Loans and the
accrued interest and fees in respect thereof and (y) to include appropriately
the Lenders holding such credit facilities in any determination of the Required
Lenders and Lenders.

(d) The Lenders hereby irrevocably authorize the Administrative Agent, at its
option and in its sole discretion, to release any Liens granted to the
Administrative Agent by the Borrower on any Collateral (i) upon the termination
of all the Commitments, payment and satisfaction in full in cash of all Secured
Obligations (other than Unliquidated Obligations), and the cash
collateralization of all Unliquidated Obligations in a manner satisfactory to
the Administrative Agent, (ii) constituting property being sold or disposed of
if the Borrower certifies to the Administrative Agent that the sale or
disposition is made in compliance with the terms of this Agreement (and the
Administrative Agent may rely conclusively on any such certificate, without
further inquiry), (iii) constituting property leased to the Borrower or any
Subsidiary under a lease which has expired or been terminated in a transaction
permitted under this Agreement, or (iv) as required to effect any sale or other
disposition of such Collateral in connection with any exercise of remedies of
the Administrative Agent and the Lenders pursuant to Article VII. Any such
release shall not in any manner discharge, affect, or impair the Obligations or
any Liens (other than those expressly being released) upon (or obligations of
the Borrower in respect of) all interests retained by the Borrower, including
the proceeds of any sale, all of which shall continue to constitute part of the
Collateral.

(e) If, in connection with any proposed amendment, waiver or consent requiring
the consent of “each Lender” or “each Lender directly affected thereby,” the
consent of the Required Lenders is obtained, but the consent of other necessary
Lenders is not obtained (any such Lender whose consent is necessary but not
obtained being referred to herein as a “Non-Consenting Lender”), then the
Borrower may elect to replace a Non-Consenting Lender as a Lender party to this
Agreement, provided that, concurrently with such replacement, (i) another bank
or other entity which is reasonably satisfactory to the Borrower and the
Administrative Agent shall agree, as of such date, to purchase for cash at par
the Loans and other Obligations due to the Non-Consenting Lender pursuant to an
Assignment and Assumption and to become a Lender for all purposes under this
Agreement and to assume all obligations of the Non-Consenting Lender to be
terminated as of such date and to comply with the requirements of clause (b) of
Section 9.04, and (ii) the Borrower shall pay to such Non-Consenting Lender in
same day funds on the day of such replacement (1) all interest, fees and other
amounts then accrued but unpaid to such Non-Consenting Lender by the Borrower
hereunder to and including the date of termination, including without limitation
payments due to such Non-Consenting Lender under Sections 2.15 and 2.17, and
(2) an amount, if any, equal to the payment which would have been due to such
Lender on the day of such replacement under Section 2.16 had the Loans of such
Non-Consenting Lender been prepaid on such date rather than sold to the
replacement Lender.

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(f) Notwithstanding anything to the contrary herein the Administrative Agent
may, with the consent of the Borrower only, amend, modify or supplement this
Agreement or any of the other Financing Documents to cure any ambiguity,
omission, mistake, defect or inconsistency.

SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay
(i) all reasonable out-of-pocket expenses incurred by the Administrative Agent
and its Affiliates, including the reasonable fees, charges and disbursements of
counsel for the Administrative Agent, in connection with the syndication and
distribution (including, without limitation, via the internet or through a
service such as Intralinks) of the credit facilities provided for herein, the
preparation and administration of this Agreement and the other Financing
Documents or any amendments, modifications or waivers of the provisions hereof
or thereof (whether or not the transactions contemplated hereby or thereby shall
be consummated), (ii) all reasonable out-of-pocket expenses incurred by the
Issuing Banks in connection with the issuance, amendment, renewal or extension
of any Letter of Credit or any demand for payment thereunder and (iii) all
out-of-pocket expenses incurred by the Administrative Agent, any Issuing Bank or
any Lender, including the fees, charges and disbursements of any counsel for the
Administrative Agent, any Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement and
any other Financing Document, including its rights under this Section, or in
connection with the Loans made or Letters of Credit issued hereunder, including
all such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.

(b) The Borrower shall indemnify the Administrative Agent, each Issuing Bank,
each Lender and each Joint Lead Arranger, and each Related Party of any of the
foregoing Persons (each such Person being called an “Indemnitee”) against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the fees, charges and disbursements
of any counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of any Financing Document or any agreement or instrument
contemplated thereby, the performance by the parties hereto of their respective
obligations thereunder or the consummation of the Transactions or any other
transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use
of the proceeds therefrom (including any refusal by any Issuing Bank to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter
of Credit), (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Borrower or any of
its Subsidiaries, or any Environmental Liability related in any way to the
Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory, whether brought by a third
party or by the Borrower or any of its Subsidiaries, and regardless of whether
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee or the material breach in
bad faith by any Indemnitee of its express obligations hereunder pursuant to a
claim initiated by Borrower. This Section 9.03(b) shall not apply with respect
to Taxes other than any Taxes that represent losses or damages arising from any
non-Tax claim.

(c) To the extent that the Borrower fails to pay any amount required to be paid
by it to the Administrative Agent, any Issuing Bank or the Swingline Lender
under paragraph (a) or (b) of this Section, each Lender severally agrees to pay
to the Administrative Agent, and each Lender agrees to pay to the Issuing Bank
or the Swingline Lender, as the case may be, such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount (it being understood that the
Borrower’s failure to pay any such amount shall not relieve the Borrower of any
default in the payment thereof); provided that the unreimbursed expense or

 

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indemnified loss, claim, damage, liability or related expense, as the case may
be, was incurred by or asserted against the Administrative Agent, the Issuing
Bank or the Swingline Lender in its capacity as such.

(d) To the extent permitted by applicable law, the Borrower shall not assert,
and hereby waives, any claim against any Indemnitee (i) except to the extent
such damage is the result of such Indemnitiee’s gross negligence or willful
misconduct, for any damages arising from the use by others of information or
other materials obtained through telecommunications, electronic or other
information transmission systems (including the Internet), or (ii) on any theory
of liability, for special, indirect, consequential or punitive damages (as
opposed to direct or actual damages) arising out of, in connection with, or as a
result of, this Agreement, any other Financing Document or any agreement or
instrument contemplated hereby or thereby, the Transactions, any Loan or Letter
of Credit or the use of the proceeds thereof.

(e) All amounts due under this Section shall be payable not later than fifteen
(15) days after written demand therefor.

SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any Affiliate of
any Issuing Bank that issues any Letter of Credit), except that (i) the Borrower
may not assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Lender (and any attempted assignment
or transfer by the Borrower without such consent shall be null and void) and
(ii) no Lender may assign or otherwise transfer its rights or obligations
hereunder except in accordance with this Section. Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
(including any Affiliate of any Issuing Bank that issues any Letter of Credit),
Participants (to the extent provided in paragraph (c) of this Section) and, to
the extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent, the Issuing Banks and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

(b) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender
may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitments
and the Loans at the time owing to it) with the prior written consent (such
consent not to be unreasonably withheld or delayed) of:

(A) the Borrower (provided that the Borrower shall be deemed to have consented
to any such assignment unless it shall object thereto by written notice to the
Administrative Agent within five (5) Business Days after having received notice
thereof); provided, further, that no consent of the Borrower shall be required
for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if
an Event of Default has occurred and is continuing, any other assignee;

(B) the Administrative Agent; and

(C) the Issuing Banks;

provided that (x) no assignment to the Borrower or any Affiliate of the Borrower
shall be permitted and (y) any assignment made in violation of this proviso
shall be void ab initio.

(i) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an Approved Fund or an assignment of the entire remaining amount of the
assigning Lender’s Commitment or Loans of any Class, the amount of the
Commitment or Loans of the assigning Lender subject to each such assignment
(determined as of the date the

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Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 (in the case of
Commitments and Revolving Loans) unless each of the Borrower and the
Administrative Agent otherwise consent, provided that no such consent of the
Borrower shall be required if an Event of Default has occurred and is
continuing;

(B) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement,
provided that this clause shall not be construed to prohibit the assignment of a
proportionate part of all the assigning Lender’s rights and obligations in
respect of one Class of Commitments or Loans;

(C) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500, such fee to be paid by either the assigning
Lender or the assignee Lender or shared between such Lenders;

(D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire in which the assignee
designates one or more credit contacts to whom all syndicate-level information
(which may contain material non-public information about the Borrower and its
affiliates and their Related Parties or their respective securities) will be
made available and who may receive such information in accordance with the
assignee’s compliance procedures and applicable laws, including federal and
state securities laws; and

(E) without the prior written consent of the Administrative Agent, no assignment
shall be made to a prospective assignee that bears a relationship to the
Borrower described in Section 108(e)(4) of the Code.

For the purposes of this Section 9.04(b), the term “Approved Fund” has the
following meaning:

“Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.

(ii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv)
of this Section, from and after the effective date specified in each Assignment
and Assumption the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the assigning
Lender’s rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of
Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
Section 9.04 shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (c) of this Section.

(iii) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof
from time to time (the “Register”). The entries in the Register shall be
conclusive absent demonstrable error, and the Borrower, the Administrative
Agent, the Issuing Banks and the Lenders shall treat each Person whose

 

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name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower, any
Issuing Bank and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.

(iv) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register; provided that if
either the assigning Lender or the assignee shall have failed to make any
payment required to be made by it pursuant to Section 2.05(c), 2.06(d) or (e),
2.07(b), 2.18(e) or 9.03(c), the Administrative Agent shall have no obligation
to accept such Assignment and Assumption and record the information therein in
the Register unless and until such payment shall have been made in full,
together with all accrued interest thereon. No assignment shall be effective for
purposes of this Agreement unless it has been recorded in the Register as
provided in this paragraph.

(c) Any Lender may, without the consent of the Borrower, the Administrative
Agent, Issuing Banks or the Swingline Lender, sell participations to one or more
banks or other entities (a “Participant”) in all or a portion of such Lender’s
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (A) such Lender’s
obligations under this Agreement shall remain unchanged; (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations; and (C) the Borrower, the Administrative Agent, the Issuing
Banks and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement; provided, further that no participation may be sold to the Borrower
or any Affiliate of the Borrower. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 9.02(b) that affects such Participant.
The Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.15, 2.16 and 2.17 (subject to the requirements and limitations
therein, including the requirements under Section 2.17(f) (it being understood
that the documentation required under Section 2.17(f) shall be delivered to the
participating Lender)) to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section;
provided that such Participant (A) agrees to be subject to the provisions of
Sections 2.18 and 2.19 as if it were an assignee under paragraph (b) of this
Section; and (B) shall not be entitled to receive any greater payment under
Sections 2.15 or 2.17, with respect to any participation, than its participating
Lender would have been entitled to receive, except to the extent such
entitlement to receive a greater payment results from a Change in Law that
occurs after the Participant acquired the applicable participation. To the
extent permitted by law, each Participant also shall be entitled to the benefits
of Section 9.08 as though it were a Lender, provided such Participant agrees to
be subject to Section 2.18(d) as though it were a Lender. Each Lender that sells
a participation shall, acting solely for this purpose as a non-fiduciary agent
of the Borrower, maintain a register on which it enters the name and address of
each Participant and the principal amounts (and stated interest) of each
Participant’s interest in the Loans or other obligations under this Agreement
(the “Participant Register”); provided that no Lender shall have any obligation
to disclose all or any portion of the Participant Register to any Person
(including the identity of any Participant or any information relating to a
Participant’s interest in any Commitments, Loans, Letters of Credit or its other
obligations under any Financing Document) except to the extent that such
disclosure is necessary to establish that such Commitment, Loan, Letter of
Credit or other obligation is in registered form under Section 5f.103-1(c) of
the United States Treasury Regulations. The entries in

--------------------------------------------------------------------------------

the Participant Register shall be conclusive absent demonstrable error, and such
Lender shall treat each person whose name is recorded in the Participant
Register as the owner of such participation for all purposes of this Agreement
notwithstanding any notice to the contrary.

(d) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including without limitation any pledge or assignment to secure
obligations to a Federal Reserve Bank or any other central banking authority,
and this Section shall not apply to any such pledge or assignment of a security
interest; provided that no such pledge or assignment of a security interest
shall release a Lender from any of its obligations hereunder or substitute any
such pledgee or assignee for such Lender as a party hereto.

SECTION 9.05. Survival. All covenants, agreements, representations and
warranties made by the Borrower in the Financing Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Financing Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Financing Documents and the making of any Loans and issuance of
any Letters of Credit, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that the Administrative Agent, any
Issuing Bank or any Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan or any fee or any other amount payable
under this Agreement or any other Financing Document is outstanding and unpaid
or any Letter of Credit is outstanding and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and
Article VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any other Financing Document
or any provision hereof or thereof.

SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement, the other
Financing Documents and any separate letter agreements with respect to fees
payable to the Administrative Agent constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Except as provided in Section 4.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by facsimile or other electronic imaging
shall be effective as delivery of a manually executed counterpart of this
Agreement.

SECTION 9.07. Severability. Any provision of any Financing Document held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions thereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final and in whatever currency denominated) at any time held and other
obligations at any time owing by such Lender or Affiliate to or for the credit
or the account of the

 

77

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Borrower against any of and all of the Secured Obligations held by such Lender,
irrespective of whether or not such Lender shall have made any demand under the
Financing Documents and although such obligations may be unmatured. The rights
of each Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York.

(b) The Borrower hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of the Supreme Court of the State
of New York sitting in the Borough of Manhattan and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to any
Financing Document, or for recognition or enforcement of any judgment, and each
of the parties hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in such New York State or, to the extent permitted by law, in such federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Financing Document shall affect any right
that the Administrative Agent, any Issuing Bank or any Lender may otherwise have
to bring any action or proceeding relating to this Agreement or any other
Financing Document against the Borrower or its properties in the courts of any
jurisdiction.

(c) The Borrower hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or any other Financing Document in any
court referred to in paragraph (b) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.

(d) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 9.01. Nothing in this Agreement or
any other Financing Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.

SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER FINANCING DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Issuing
Banks and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that

--------------------------------------------------------------------------------

Information may be disclosed (a) to its and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent requested by any regulatory
authority (including any self-regulatory authority, such as the National
Association of Insurance Commissioners), (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
(d) to any other party to this Agreement, (e) in connection with the exercise of
any remedies under this Agreement or any other Financing Document or any suit,
action or proceeding relating to this Agreement or any other Financing Document
or the enforcement of rights hereunder or thereunder, (f) subject to an
agreement containing provisions substantially the same as those of this Section,
to (i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii)any
actual or prospective counterparty (or its advisors) to any swap or derivative
transaction relating to the Borrower and its obligations, (g) with the consent
of the Borrower or (h) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section or (ii) becomes
available to the Administrative Agent, any Issuing Bank or any Lender on a
nonconfidential basis from a source other than the Borrower. For the purposes of
this Section, “Information” means all information received from the Borrower
relating to the Borrower or its business, other than any such information that
is available to the Administrative Agent, any Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by the Borrower; provided that, in the
case of information received from the Borrower after the date hereof, such
information is clearly identified at the time of delivery as confidential. Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

SECTION 9.13. USA PATRIOT Act. Each Lender that is subject to the requirements
of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”) hereby notifies the Borrower that pursuant to the
requirements of the Act, it is required to obtain, verify and record information
that identifies the Borrower, which information includes the name and address of
the Borrower and other information that will allow such Lender to identify the
Borrower in accordance with the Act.

SECTION 9.14. Appointment for Perfection. Each Lender hereby appoints each other
Lender as its agent for the purpose of perfecting Liens, for the benefit of the
Administrative Agent and the Secured Parties, in assets which, in accordance
with Article 9 of the UCC or any other applicable law can be perfected only by
possession. Should any Lender (other than the Administrative Agent) obtain
possession of any such Collateral, such Lender shall notify the Administrative
Agent thereof, and, promptly upon the Administrative Agent’s request therefor
shall deliver such Collateral to the Administrative Agent or otherwise deal with
such Collateral in accordance with the Administrative Agent’s instructions.

SECTION 9.15. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.

 

79

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SECTION 9.16. No Advisory or Fiduciary Responsibility. In connection with all
aspects of each transaction contemplated hereby (including in connection with
any amendment, waiver or other modification hereof or of any other Financing
Document), the Borrower acknowledges and agrees that: (i) (A) the arranging and
other services regarding this Agreement provided by the Lenders are arm’s-length
commercial transactions between the Borrower and its Affiliates, on the one
hand, and the Lenders and their Affiliates, on the other hand, (B) the Borrower
has consulted its own legal, accounting, regulatory and tax advisors to the
extent it has deemed appropriate, and (C) the Borrower is capable of evaluating,
and understands and accepts, the terms, risks and conditions of the transactions
contemplated hereby and by the other Financing Documents; (ii) (A) each of the
Lenders and their Affiliates is and has been acting solely as a principal and,
except as expressly agreed in writing by the relevant parties, has not been, is
not, and will not be acting as an advisor, agent or fiduciary for the Borrower
or any of its Affiliates, or any other Person and (B) no Lender or any of its
Affiliates has any obligation to the Borrower or any of its Affiliates with
respect to the transactions contemplated hereby except those obligations
expressly set forth herein and in the other Financing Documents; and (iii) each
of the Lenders and their respective Affiliates may be engaged in a broad range
of transactions that involve interests that differ from those of the Borrower
and its Affiliates, and no Lender or any of its Affiliates has any obligation to
disclose any of such interests to the Borrower or its Affiliates. To the fullest
extent permitted by law, the Borrower hereby waives and releases any claims that
it may have against each of the Lenders and their Affiliates with respect to any
breach or alleged breach of agency or fiduciary duty in connection with any
aspect of any transaction contemplated hereby.

[Signature Pages Follow]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

 

PUGET ENERGY, INC., as the Borrower By:  

/s/ DONALD E. GAINES

  Name: Donald E. Gaines   Title: Vice President Finance and Treasurer

JPMORGAN CHASE BANK, N.A.,

as a Lender and as Administrative Agent

By:  

/s/ HELEN D. DAVIS

  Name: Helen D. Davis   Title: Vice President THE ROYAL BANK OF SCOTLAND PLC,
as a Lender By:  

/s/ TYLER J. MCCARTHY

  Name: Tyler J. McCarthy   Title: Director BARCLAYS BANK PLC, as a Lender By:  

/s/ ANN E. SUTTON

  Name: Ann E. Sutton   Title: Director

 

Signature Page to

Credit Agreement

(Puget Energy, Inc.)

--------------------------------------------------------------------------------

THE BANK OF NOVA SCOTIA, as a Lender By:  

/s/ THANE RATTEW

  Name: Thane Rattew   Title: Managing Director SCOTIABANC INC., as a Lender By:
 

/s/ THANE RATTEW

  Name: Thane Rattew   Title: Managing Director SUNTRUST BANK, as a Lender By:  

/s/ C. DAVID YATES

  Name: C. David Yates   Title: Managing Director UNION BANK, N.A., as a Lender
By:  

/s/ JEFFREY FESENMAIER

  Name: Jeffrey Fesenmaier   Title: Vice President ASSOCIATED BANK, N.A., as a
Lender By:  

/s/ KRISTIN A. ISLEIB

  Name: Kristin A. Isleib   Title: Senior Vice President COBANK, ACB, as a
Lender By:  

/s/ JOSH BATCHELDER

  Name: Josh Batchelder   Title: Vice President EXPORT DEVELOPMENT CANADA, as a
Lender By:  

/s/ MARCOS MAGALHAES

  Name: Marcos Magalhaes   Title: Project Finance Manager EXPORT DEVELOPMENT
CANADA, as a Lender By:  

/s/ DEENA PADAMADAN

  Name: Deena Padamadan   Title: Senior Associate

 

Signature Page to

Credit Agreement

(Puget Energy, Inc.)

--------------------------------------------------------------------------------

KEYBANK NATIONAL ASSOCIATION, as a Lender By:  

/s/ KEVEN D. SMITH

  Name: Keven D. Smith   Title: Senior Vice President US BANK, NATIONAL
ASSOCIATION, as a Lender By:  

/s/ HOLLAND H. WILLIAMS

  Name: Holland H. Williams   Title: AVP & Portfolio Manager BANK OF AMERICA,
N.A., as a Lender By:  

/s/ JAMES J. TEICHMAN

  Name: James J. Teichman   Title: Senior Vice President WELLS FARGO BANK, N.A.,
as a Lender By:  

/s/ YANN BLINDERT

  Name: Yann Blindert   Title: Director CANADIAN IMPERIAL BANK OF COMMERCE, NEW
YORK AGENCY, as a Lender By:  

/S/ ROBERT CASEY, JR.

  Name: Robert Casey, Jr.   Title: Executive Director By:  

/S/ EOIN ROCHE

  Name: Eoin Roche   Title: Executive Director

 

Signature Page to

Credit Agreement

(Puget Energy, Inc.)

--------------------------------------------------------------------------------

PUGET ENERGY INC.

SCHEDULES TO 2012 CREDIT AGREEMENT

--------------------------------------------------------------------------------

Schedule 1.01(a)

EXISTING INDEBTEDNESS

 

Existing Debt of Puget Sound Energy:                                     
Principal  

Series

   Coupon     Issue Date      Maturity      Outstanding  

MTN-B

     6.830 %      Aug-18-93         Aug-19-13       $ 3,000,000   

MTN-B

     6.900 %      Sep-30-93         Oct-1-13       $ 10,000,000   

MTN-C

     7.350 %      Sep-11-95         Sep-11-15       $ 10,000,000   

MTN-C

     7.360 %      Sep-11-95         Sep-15-15       $ 2,000,000   

5.197% Sr. Notes

     5.197 %      Oct-12-05         Oct-1-15       $ 150,000,000   

6.75% Sr. Notes

     6.750 %      Jan-23-09         Jan-15-16       $ 250,000,000   

Senior note A

     6.740 %      Jun-15-98         Jun-15-18       $ 200,000,000   

MTN-C

     7.150 %      Dec-20-95         Dec-19-25       $ 15,000,000   

MTN-C

     7.200 %      Dec-21-95         Dec-22-25       $ 2,000,000   

Senior note A

     7.020 %      Dec-22-97         Dec-1-27       $ 300,000,000   

Sr. MTN-B

     7.000 %      Mar-9-99         Mar-9-29       $ 100,000,000   

PCB

     5.100 %      Mar-11-03         Mar-1-31       $ 23,400,000   

PCB

     5.000 %      Mar-11-03         Mar-1-31       $ 138,460,000   

5.483% Sr. Notes

     5.483 %      May-27-05         Jun-1-35       $ 250,000,000   

6.724% Sr. Notes

     6.724 %      Jun-30-06         Jun-15-36       $ 250,000,000   

6.274% Sr. Notes

     6.274 %      Sep-18-06         Mar-15-37       $ 300,000,000   

5.757% Sr. Notes

     5.757 %      Sep-11-09         Oct-1-39       $ 350,000,000   

5.795% Sr. Notes

     5.795 %      Mar-8-10         Mar-15-40       $ 325,000,000   

5.764% Sr. Notes

     5.764 %      Jun-29-10         Jul-15-40       $ 250,000,000   

5.638% Sr. Notes

     5.638 %      Mar-25-11         Apr-15-41       $ 300,000,000   

4.434% Sr. Notes

     4.434 %      Nov-16-11         Nov-15-41       $ 250,000,000   

4.700% Sr. Notes

     4.700 %      Nov-22-11         Nov-15-51       $ 45,000,000   

6.974% Hybrid

     6.974 %      Jun-4-07         Jun-1-67       $ 250,000,000   

Demand Promissory Note with Puget Energy

     Variable        May-18-06         NA       $ 30,000,000   

Working Capital Facility - $400mm Commitment Amount

     Variable        Feb-9-09         Feb-9-14       $ 0   

Capital Expenditure Facility - $400mm Commitment Amount

     Variable        Feb-9-09         Feb-9-14       $ 0   

Hedging Facility - $350mm Commitment Amount

     Variable        Feb-9-09         Feb-9-14       $ 0   

Commercial Paper

     Variable        Various         Various       $ 10,000,000              

 

 

 

Total - Puget Sound Energy

           $ 3,810,860,000   

Existing Debt of Puget Energy:

          

6.50% Sr. Notes

     6.500 %      Dec-6-10         Dec-15-20       $ 450,000,000   

6.00% Sr. Notes

     6.000 %      Jun-3-11         Sep-1-21       $ 500,000,000              

 

 

 

Total - Puget Energy

           $ 950,000,000   

Grand Total

           $ 4,760,860,000   

--------------------------------------------------------------------------------

Schedule 1.01(b)

PERMITTED HOLDERS

Macquarie Entities (US) Holdings

MIP Padua Holdings

MIP A on behalf of MIP Padua Holdings, GP

MIP Canada on behalf of MIP Padua Holdings, GP

MIP International on behalf of MIP Padua Holdings, GP

MIP Padua Holdings Total

MIP II Washington Holdings

Padua MG Holdings LLC

Macquarie FSS Infrastructure Trust

B.C. Investment Management Corp.

CPP Investment Board

Alberta Investment Management Corp:

Alberta Investment Management

Alberta Investment Management

Alberta Investment Management Corp:

--------------------------------------------------------------------------------

Schedule 2.01

COMMITMENTS

 

LENDER

   COMMITMENT  

JPMORGAN CHASE BANK, N.A.

   $ 100,000,000   

THE ROYAL BANK OF SCOTLAND PLC

   $ 75,000,000   

THE BANK OF NOVA SCOTIA

   $ 37,500,000   

BARCLAYS BANK PLC

   $ 75,000,000   

SCOTIABANC INC.

   $ 37,500,000   

SUNTRUST BANK

   $ 75,000,000   

UNION BANK, N.A.

   $ 75,000,000   

COBANK, ACB

   $ 100,000,000   

EXPORT DEVELOPMENT CANADA

   $ 100,000,000   

KEYBANK NATIONAL ASSOCIATION

   $ 65,000,000   

US BANK, NATIONAL ASSOCIATION

   $ 65,000,000   

BANK OF AMERICA, N.A.

   $ 65,000,000   

WELLS FARGO BANK, N.A.

   $ 60,000,000   

CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY

   $ 50,000,000   

ASSOCIATED BANK, N.A.

   $ 20,000,000      

 

 

 

AGGREGATE COMMITMENTS

     $1,000,000,000   

--------------------------------------------------------------------------------

Schedule 3.04

REGULATORY APPROVALS

None.

--------------------------------------------------------------------------------

Schedule 3.13(a)

SUBSIDIARIES

Puget Sound Energy, Inc.

Puget Western Inc.

--------------------------------------------------------------------------------

Schedule 3.13(b)

SUBSIDIARIES JURISDICTIONS OF ORGANIZATION

 

Name of Subsidiary

  

Ownership

  

Jurisdiction of Organization

Puget Sound Energy, Inc.    100% by Puget Energy Inc.    Washington Puget
Western Inc.    100% by Puget Sound Energy, Inc.    Washington

--------------------------------------------------------------------------------

Schedule 3.14

EXISTING DIVIDEND RESTRICTIONS

The ability to pay dividends or make other distributions upon the capital stock
of Puget Sound Energy, Inc. (“PSE”) is restricted by:

 

  1. The provisions of the Washington Business Corporation Act, Title 23B of the
Revised Code of Washington;

 

  2. The Amended and Restated Bylaws of PSE;

 

  3. Contractual restrictions pursuant to PSE’s First Mortgage dated as of
June 2, 1924 as supplemented from time to time and particularly as supplemented
by the Fortieth Supplemental Indenture and the Forty-fourth Supplemental
Indenture (collectively, the “Mortgage Indenture”), the Washington Natural Gas
Company Indenture of First Mortgage dated as of April 1, 1957 as supplemented
from time to time (the “WNG Mortgage”) and PSE’s junior subordinated note
“hybrid” indenture (which contractual restrictions are summarized below);

 

  4. The provisions of the Washington State Utilities and Transportation
Commission Order 08 (the “WUTC Merger Order”) Approving and Adopting Settlement
Stipulation; Authorizing Transaction Subject to Conditions (summarized below);
and

 

  5. The restrictions on the ability of PSE to pay dividends set forth in the
that certain Amended and Restated Credit Agreement, dated as of February 6,
2009, as amended and restated as of March 31, 2010, among PSE, as Borrower,
Barclays Bank PLC, as Facility Agent and the lenders party thereto as in effect
on the Effective Date (the “Current PSE Credit Agreement”), as well as
restrictions on the ability of PSE to pay dividends set forth in any amendment,
supplement or other modification to the Current PSE Credit Agreement or
replacement of the Current PSE Credit Agreement by an Operating Company Credit
Agreement (as such term is defined in the Credit Agreement), provided that such
restrictions are not more onerous than those set forth in the Current PSE Credit
Agreement as in effect on the Effective Date.

Bylaws

Article III, Section 9 of PSE’s Amended and Restated Bylaws (the “Bylaws”)
requires Board Supermajority Approval (as defined therein) for any determination
of Distributable Cash (as defined therein) and the declaration of distributions.

--------------------------------------------------------------------------------

Contractual Restrictions

The Mortgage Indenture

Section 1.05 of the Forty-fourth Supplemental Indenture, which is in effect as
long as any First Mortgage Bonds issued under the Mortgage Indenture are
outstanding, prohibits declaration or payment of dividends on common stock, any
other distribution on common stock or redemption of any stock,

[I]f the aggregate amount of all such dividends, distributions and expenditures
made after December 31, 1957 would exceed the aggregate amount of the Company’s
net income available for dividends on its Common Stock, accumulated after
December 31, 1957 plus the sum of Seven Million Five Hundred Thousand Dollars
($7,500,000).

“Net income available for dividends on common stock” is defined as total
operating revenues and other income, less expenses, taxes (including taxes based
on income), interest charges and other appropriate items, including amounts
actually charged for provision for maintenance, provision for retirements,
depreciation or obsolescence, and provision for all dividends accrued on any
outstanding stock having preference over common stock as to dividends. Charges
for depreciation cannot be less than the minimum provision for depreciation as
defined in Section 1.32 of Part II of the Fortieth Supplemental Indenture, as
follows:

[T]he term “minimum provision for depreciation” for each calendar year . . .
shall mean an amount by which 15% of the gross operating revenues of the Company
derived from the operation of its utility property subject to the lien of the
Indenture (less an amount equal to the cost of electricity purchased, including
any standby or service charges or similar charges for electricity and net cost
of electricity interchanged, and all rentals and lease payments) exceeds the
charges for maintenance, repairs and renewals of such mortgaged utility property
included or which should be included in operating expenses pursuant to sound
accounting practice.

The calculation for net income excludes certain deductions and adjustments, as
set forth below:

[I]n determining the net income of the Company for the purposes of this Section
no deduction or adjustment shall be made for or in respect of (a) charges or
credits in connection with the redemption or retirement of any securities issued
by the Company, including any amount paid in excess of the sum of (i) the
principal amount or par or stated value of securities redeemed or retired and
(ii) the unamortized balance of any premium received on the sale of such
securities, and also including, in the event that such redemption or retirement
is effected with the proceeds of sale of other securities of the Company, any
interest or dividends on the securities redeemed or retired from the date on
which the funds required for such redemption or retirement are deposited in
trust for such purpose to the date of redemption or retirement; (b) profits or
losses from sales of property or other assets carried in plant or investment
accounts of the Company or from the reacquisition of any securities of the
Company, or taxes on or in respect of any such profits; (c) any change in or
adjustment of the book value of

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any assets owned by the Company arising from a revaluation thereof; (d) charges
to surplus on account of the amortization or elimination of utility plant
adjustment or acquisition accounts or intangibles; or (e) any earned surplus
adjustment applicable to any period prior to January 1, 1958.

WNG Mortgage

In connection with the merger (the “Merger”) of Puget Sound Power & Light
Company, Washington Energy Company and Washington Natural Gas Company (“WNG”),
PSE agreed in the Thirty-First Supplemental Indenture dated as of February 10,
1997 to the WNG Mortgage, among other things, to perform and fulfill all the
terms, covenants and conditions of the WNG Mortgage binding upon WNG in respect
of the trust estate subject to the WNG Mortgage. Therefore, covenants contained
in the WNG Mortgage, including any dividend restrictions, are subject to
performance and fulfillment by the Company.

Various supplements to the WNG Mortgage contain dividend restrictions. Typical
of the most restrictive covenant is contained in the Twenty-Eighth Supplemental
Indenture dated as of July 1, 1991 which prohibits the payment of dividends:

If the aggregate amount of all such dividends, distributions and expenditures
made since September 30, 1989, would exceed the aggregate amount of the net
income of WNG accumulated after September 30, 1989 plus the sum of $20,000,000.

Since WNG merged with and into PSE in the Merger, net income of WNG for the
purpose of the above test is the net income of the combined company, (that is
WNG (and not Washington Energy Company) and Puget Sound Power & Light Company
prior to the Merger, and PSE after the Merger) and, in accordance with the WNG
Mortgage, means the sum of (a) the total operating revenues of PSE, less an
amount equal to the total operating expenses of PSE, including but not limited
to (i) all taxes (including without limitation income, excess profits and other
taxes imposed on or measured by income or undistributed earnings or income),
(ii) rentals, insurance, current repairs and maintenance, (iii) provision for
retirements, depreciation or obsolescence, which shall be the amount actually
charged by PSE on its books of account (but in respect of depreciable gas
utility property not subject to prior liens, shall not be less than the minimum
provision for depreciation as defined in Section 1.32 of the WNG Mortgage), and
(iv) all charges on account of interest on indebtedness and on account of debt
discount and expense, and (b) net income or loss from the operation of
properties of WNG other than the trust estate and any other income received
(less applicable expenses) or loss from the operation of properties other than
the trust estate and any other income received (less applicable expenses) or
loss incurred by PSE; which sum shall be diminished by an amount equal to all
dividends accrued subsequent to September 30, 1989 (whether or not paid) on any
outstanding stock of PSE having preference over the common stock of PSE as to
dividends, assets or otherwise, all of the foregoing determined in accordance
with generally accepted accounting principles.

Since the Merger was accounted for as a pooling transaction, results for the
combined company (and not WNG alone) should be used.

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Junior Subordinated Note “hybrid” Indenture

PSE’s hybrid security issue contains a “dividend stopper” provision. The
dividend stopper applies, subject to exceptions, during any period in which PSE
has elected to defer interest payments. The provision is described in the
prospectus supplement relating to the offering, which is available via Edgar at:

http://www.sec.gov/Archives/edgar/data/81100/000119312507127052/d424b5.htm.

An excerpt from the prospectus supplement follows:

“Certain Limitations During an Optional Deferral Period

During any Optional Deferral Period, we will not, and our subsidiaries will not,
do any of the following:

 

  •  

declare or pay any dividends or distributions, or redeem, purchase, acquire or
make a liquidation payment on any of our capital stock;

 

  •  

make any payment of principal of, or interest or premium, if any, on or repay,
repurchase or redeem any of our debt securities (including guarantees) that rank
on a parity with or junior to the Junior Subordinated Notes (including debt
securities of other series issued under the Base Indenture); or

 

  •  

make any guarantee payments on any guarantee of debt securities if the guarantee
ranks on a parity with or junior to the Junior Subordinated Notes.

However, at any time, including during an Optional Deferral Period, we may:

 

  •  

pay dividends or otherwise make payments to Puget Energy in amounts sufficient
to permit Puget Energy to pay its operating expenses in the ordinary course of
business, provided that the proceeds of any such dividends or other payments are
used by Puget Energy to pay such operating expenses and are not used by Puget
Energy for the purpose of taking any action in respect of its securities that
would be prohibited by the provisions described in this section if such action
were taken by us;

 

  •  

pay any dividend within 60 days after the date of declaration thereof, if the
date of declaration was prior to the beginning of any interest deferral period,
whether optional or mandatory;

 

  •  

pay current interest in respect of debt securities that rank equally with the
Junior Subordinated Notes (“parity debt securities”) having the same interest
payment date as the Junior Subordinated Notes made ratably to the holders of one
or more series of such parity debt securities and the Junior Subordinated Notes
in proportion to the respective amounts due on such parity debt securities, on
the one hand, and on the Junior Subordinated Notes, on the other hand;

--------------------------------------------------------------------------------

  •  

make any payment of principal in respect of parity debt securities having the
same maturity date as the Junior Subordinated Notes made ratably to the holders
of one or more series of such parity debt securities and the Junior Subordinated
Notes in proportion to the respective amounts due on such parity debt
securities, on the one hand, and on the Junior Subordinated Notes, on the other
hand;

 

  •  

make any payment in respect of guarantees that rank equally with the Junior
Subordinated Notes (“parity guarantees”) made ratably to the beneficiaries of
one or more of such parity guarantees and the holders of the Junior Subordinated
Notes in proportion to the respective accrued and unpaid amounts due on such
parity guarantees, on the one hand, and accrued and unpaid amounts on the Junior
Subordinated Notes, on the other hand;

 

  •  

make payments for the purchase of fractional interests in shares of its capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged;

 

  •  

make payments as a direct result of, and only to the extent required in order to
avoid the issuance of fractional shares of capital stock following, a
reclassification of its capital stock or the exchange or conversion of one class
or series of its capital stock for another class or series of its capital stock;

 

  •  

acquire capital stock previously issued in connection with acquisitions of
businesses (which acquisitions of capital stock are made in connection with the
satisfaction of indemnification obligations of the sellers of such businesses);

 

  •  

pay stock dividends or distributions in additional shares, warrants or rights to
subscribe for or purchase shares of our capital stock where the dividend stock,
or stock issuable upon exercise of such warrants or rights, is the same stock as
that on which the dividend is being paid or ranks junior to such stock;

 

  •  

purchase or repurchase shares of our capital stock pursuant to a contractually
binding requirement to buy stock existing prior to the beginning of any interest
deferral period; or

 

  •  

at such time as our common stock is registered under Section 12(b) or
Section 12(g) of the Securities Exchange Act of 1934, as amended:

 

  •  

declare or pay a dividend in connection with the implementation of a
shareholders’ rights plan, or issue stock under such a plan or redeem or
repurchase such rights; or

 

  •  

purchase our common stock for issuance pursuant to any employee or agent benefit
plans or dividend reinvestment and direct stock purchase plans.”

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WUTC Merger Order

Pursuant to the terms of the WUTC Merger Order, PSE may not declare or pay
dividends if PSE’s common equity ratio, calculated on a regulatory basis, is
44.0% or below except to the extent a lower equity ratio is ordered by the
Washington State Utilities and Transportation Commission (the “WUTC”). In
addition, PSE may not declare or make any distribution unless on the date of
distribution PSE’s corporate credit/issuer rating is investment grade, or, if
its credit ratings are below investment grade, PSE’s ratio of Earnings Before
Interest, Tax, Depreciation and Amortization (“EBITDA”) to interest expect for
the most recently ended four fiscal quarter periods prior to such date is equal
to or great than three to one, in which case, any distribution will be limited
to an amount to service debt at Puget Energy, Inc. and to satisfy financial
covenants in the credit facilities of Puget Energy, Inc.

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Schedule 3.15

LITIGATION

None.

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Schedule 3.19

ENVIRONMENTAL MATTERS

None.

--------------------------------------------------------------------------------

Schedule 3.21

AFFILIATE TRANSACTIONS

None.

--------------------------------------------------------------------------------

Schedule 5.07

PROPERTIES AND ASSETS

None.

--------------------------------------------------------------------------------

Schedule 6.01(b)

EXISTING LIENS

 

Debtor

  

Secured Party

  

Collateral

   State    Jurisdiction    Original File Date
and Number   Related
Filings

Puget Sound Energy, Inc.

   Vestas-American Wind Technology, Inc.    Turbine equipment    WA   
Department
of Licensing    11/12/2008

#200831827627

  N/A

Puget Sound Energy, Inc.

   Air Liquide Industrial U.S. LP    Hydrogen tube pack Equipment    WA   
Department
of Licensing    3/24/2009

200908444375#

  N/A

--------------------------------------------------------------------------------

Schedule 6.03(l)

INVESTMENTS

None.

--------------------------------------------------------------------------------

EXHIBIT A

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex I attached hereto
are hereby agreed to and incorporated herein by reference and made a part of
this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including any letters of credit, guarantees, and swingline
loans included in such facilities) and (ii) to the extent permitted to be
assigned under applicable law, all claims, suits, causes of action and any other
right of the Assignor (in its capacity as a Lender) against any Person, whether
known or unknown, arising under or in connection with the Credit Agreement, any
other documents or instruments delivered pursuant thereto or the loan
transactions governed thereby or in any way based on or related to any of the
foregoing, including contract claims, tort claims, malpractice claims, statutory
claims and all other claims at law or in equity related to the rights and
obligations sold and assigned pursuant to clause (i) above (the rights and
obligations sold and assigned pursuant to clauses (i) and (ii) above being
referred to herein collectively as the “Assigned Interest”). Such sale and
assignment is without recourse to the Assignor and, except as expressly provided
in this Assignment and Assumption, without representation or warranty by the
Assignor.

 

1.    Assignor:      

 

   2.    Assignee:      

 

            [and is an Affiliate/Approved Fund of [identify Lender]1] 3.   
Borrower:       Puget Energy, Inc., a Washington corporation 4.   
Administrative Agent:       JPMorgan Chase Bank, N.A., as the administrative
agent under the Credit Agreement 5.    Credit Agreement:       The Credit
Agreement dated as of February 10, 2012 among Puget Energy, Inc., the Lenders
parties thereto and JPMorgan Chase Bank, N.A., as Administrative Agent

 

 

1 

Select as applicable.

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6. Assigned Interest:

 

Facility Assigned2

   Aggregate Amount of
Commitment/Loans for
all Lenders      Amount of
Commitment/
Loans Assigned      Percentage Assigned
of
Commitment/Loans3      $                    $                           %     $
                   $                           %     $                    $
                          % 

Effective Date:                          , 20    [TO BE INSERTED BY
ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF
TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR

[NAME OF ASSIGNOR]

By:

 

 

  Title: ASSIGNEE

[NAME OF ASSIGNEE]

By:

 

 

  Title:

 

2 

Fill in the appropriate terminology for the types of facilities under the Credit
Agreement that are being assigned under this Assignment (e.g., “Revolving
Commitment”, “Tranche A Term Loan Commitment”, “Tranche B Term Loan Commitment”,
etc.).

3 

Set forth, so at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders thereunder.

 

2

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[Consented to and Accepted: JPMORGAN CHASE BANK, N.A., as Administrative Agent
and as an Issuing Bank By:  

 

  Name:   Title: BANK OF AMERICA, N.A., as an Issuing Bank By:  

 

  Name:   Title:]4 [Consented to: PUGET ENERGY, INC. By:  

 

  Name:   Title: ]5

 

4 

To be added only if the consent of the Administrative Agent and the Issuing
Banks is required by the terms of the Credit Agreement

5 

To be added only if the consent of the Borrower is required by the terms of the
Credit Agreement.

--------------------------------------------------------------------------------

ANNEX I

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal
and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim and (iii) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any collateral thereunder, (iii) the financial condition of the
Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by the
Borrower, any of its Subsidiaries or Affiliates or any other Person of any of
their respective obligations under any Loan Document.

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be
satisfied by it in order to acquire the Assigned Interest and become a Lender,
(iii) from and after the Effective Date, it shall be bound by the provisions of
the Credit Agreement as a Lender thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 5.01 thereof, as applicable,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, and (v) if it is a Non-U.S. Lender,
attached to the Assignment and Assumption is any documentation required to be
delivered by it pursuant to the terms of the Credit Agreement, duly completed
and executed by the Assignee; and (b) agrees that (i) it will, independently and
without reliance on the Administrative Agent, the Assignor or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.

(b) agrees that (i) it will, independently and without reliance on the
Administrative Agent, the Assignor or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Documents, and (ii) it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.

2. Payments. From and after the Effective Date, the Administrative Agent shall
make all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignor for amounts which
have accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment

--------------------------------------------------------------------------------

and Assumption may be executed in any number of counterparts, which together
shall constitute one instrument. Delivery of an executed counterpart of a
signature page of this Assignment and Assumption by telecopy shall be effective
as delivery of a manually executed counterpart of this Assignment and
Assumption. This Assignment and Assumption shall be governed by, and construed
in accordance with, the law of the State of New York.

--------------------------------------------------------------------------------

EXHIBIT B

[RESERVED]

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EXHIBIT C

FORM OF INCREASING LENDER SUPPLEMENT

INCREASING LENDER SUPPLEMENT, dated                     , 20     (this
“Supplement”), by and among each of the signatories hereto, to the Credit
Agreement, dated as of February 10, 2012 (as amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among Puget
Energy, Inc. (the “Borrower”), the Lenders party thereto and JPMorgan Chase
Bank, N.A., as administrative agent (in such capacity, the “Administrative
Agent”).

W I T N E S S E T H

WHEREAS, pursuant to Section 2.20 of the Credit Agreement, the Borrower has the
right, subject to the terms and conditions thereof, to effectuate from time to
time an increase in the Aggregate Commitment under the Credit Agreement by
requesting one or more Lenders to increase the amount of its Commitment and/or
to participate in such a tranche;

WHEREAS, the Borrower has given notice to the Administrative Agent of its
intention to increase the Aggregate Commitment pursuant to such Section 2.20;
and

WHEREAS, pursuant to Section 2.20 of the Credit Agreement, the undersigned
Increasing Lender now desires to increase the amount of its Revolving Commitment
under the Credit Agreement by executing and delivering to the Borrower and the
Administrative Agent this Supplement;

NOW, THEREFORE, each of the parties hereto hereby agrees as follows:

1. The undersigned Increasing Lender agrees, subject to the terms and conditions
of the Credit Agreement, that on the date of this Supplement it shall have its
Revolving Commitment increased by $[        ], thereby making the aggregate
amount of its total Commitment equal to $[        ].

2. The Borrower hereby represents and warrants that no Default or Event of
Default has occurred and is continuing on and as of the date hereof.

3. Terms defined in the Credit Agreement shall have their defined meanings when
used herein.

4. This Supplement shall be governed by, and construed in accordance with, the
laws of the State of New York.

5. This Supplement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same document.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, each of the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.

 

[INSERT NAME OF INCREASING LENDER] By:  

 

Name:   Title:  

Accepted and agreed to as of the date first written above:

 

PUGET ENERGY, INC. By:  

 

Name:   Title:   Acknowledged as of the date first written above:

JPMORGAN CHASE BANK, N.A.

as Administrative Agent

By:  

 

Name:   Title:  

 

2

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EXHIBIT D

FORM OF AUGMENTING LENDER SUPPLEMENT

AUGMENTING LENDER SUPPLEMENT, dated             , 20     (this “Supplement”), to
the Credit Agreement, dated as of February 10, 2012 (as amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
among Puget Energy, Inc. (the “Borrower”), the Lenders party thereto and
JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the
“Administrative Agent”).

W I T N E S S E T H

WHEREAS, the Credit Agreement provides in Section 2.20 thereof that any bank,
financial institution or other entity may extend Commitments under the Credit
Agreement subject to the approval of the Borrower and the Administrative Agent,
by executing and delivering to the Borrower and the Administrative Agent a
supplement to the Credit Agreement in substantially the form of this Supplement;
and

WHEREAS, the undersigned Augmenting Lender was not an original party to the
Credit Agreement but now desires to become a party thereto;

NOW, THEREFORE, each of the parties hereto hereby agrees as follows:

1. The undersigned Augmenting Lender agrees to be bound by the provisions of the
Credit Agreement and agrees that it shall, on the date of this Supplement,
become a Lender for all purposes of the Credit Agreement to the same extent as
if originally a party thereto, with a Revolving Commitment of $[        ].

2. The undersigned Augmenting Lender (a) represents and warrants that it is
legally authorized to enter into this Supplement; (b) confirms that it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 5.01 thereof, as applicable,
and has reviewed such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Supplement; (c) agrees that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement or
any other instrument or document furnished pursuant hereto or thereto;
(d) appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers and discretion under the Credit
Agreement or any other instrument or document furnished pursuant hereto or
thereto as are delegated to the Administrative Agent by the terms thereof,
together with such powers as are incidental thereto; and (e) agrees that it will
be bound by the provisions of the Credit Agreement and will perform in
accordance with its terms all the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender.

3. The undersigned’s address for notices for the purposes of the Credit
Agreement is as follows:

[                    ]

[                    ]

[                    ]

4. The Borrower hereby represents and warrants that no Default or Event of
Default has occurred and is continuing on and as of the date hereof.

--------------------------------------------------------------------------------

5. Terms defined in the Credit Agreement shall have their defined meanings when
used herein.

6. This Supplement shall be governed by, and construed in accordance with, the
laws of the State of New York.

7. This Supplement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same document.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

2

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each of the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.

 

[INSERT NAME OF AUGMENTING LENDER] By:  

 

Name:   Title:  

 

Accepted and agreed to as of the date first written above: PUGET ENERGY, INC.
By:  

 

Name:   Title:  

Acknowledged as of the date first written above:

JPMORGAN CHASE BANK, N.A.

as Administrative Agent

By:  

 

Name:   Title:  

 

3

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EXHIBIT E

LIST OF CLOSING DOCUMENTS

[ATTACHED.]

--------------------------------------------------------------------------------

EXHIBIT E

LIST OF CLOSING DOCUMENTS

PUGET ENERGY, INC.

CREDIT FACILITY

February 10, 2012

LIST OF CLOSING DOCUMENTS1

A. LOAN DOCUMENTS

 

1. Credit Agreement (the “Credit Agreement”) by and among Puget Energy, Inc., a
Washington corporation (the “Borrower”), the institutions from time to time
parties thereto as Lenders (the “Lenders”) and JPMorgan Chase Bank, N.A., in its
capacity as Administrative Agent for itself and the other Lenders (the
“Administrative Agent”), evidencing a revolving credit facility to the Borrower
from the Lenders in an initial aggregate principal amount of $1,000,000,000.

SCHEDULES

 

Schedule 1.01(a)    –    Existing Indebtedness Schedule 1.01(b)    –   
Permitted Holders Schedule 2.01    –    Commitments Schedule 3.04    –   
Regulatory Approvals Schedule 3.13(a)    –    Subsidiaries Schedule 3.13(b)    –
   Subsidiaries Jurisdictions of Organization Schedule 3.14    –    Existing
Dividend Restrictions Schedule 3.15    –    Litigation Schedule 3.19    –   
Environmental Matters Schedule 3.21    –    Affiliate Transactions Schedule 5.07
   –    Properties and Assets Schedule 6.01(b)    –    Existing Liens Schedule
6.03(l)    –    Investments

EXHIBITS

 

Exhibit A    –    Form of Assignment and Assumption Exhibit B    –    [Reserved]
Exhibit C    –    Form of Increasing Lender Supplement Exhibit D    –    Form of
Augmenting Lender Supplement Exhibit E    –    List of Closing Documents
Exhibit F    –    Form of Revolving Loan Note Exhibit G-1    –    Form of
U.S. Tax Certificate (Non-U.S. Lenders That Are Not Partnerships)

 

1 

Each capitalized term used herein and not defined herein shall have the meaning
assigned to such term in the above-defined Credit Agreement. Items appearing in
bold and italics shall be prepared and/or provided by the Borrower and/or
Borrower’s counsel.

 

2

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Exhibit G-2    –    Form of U.S. Tax Certificate (Non-U.S. Lenders That Are
Partnerships) Exhibit G-3    –    Form of U.S. Tax Certificate
(Non-U.S. Participants That Are Not Partnerships) Exhibit G-4    –    Form of
U.S. Tax Certificate (Non-U.S. Participants That Are Partnerships) Exhibit H   
–    Collateral Agency Agreement Exhibit I    –    Form of Amendment No. 1 to
Amended and Restated Collateral Agency Agreement Exhibit J    –    Form of
Solvency Certificate Exhibit K    –    Pledge Agreement Exhibit L    –   
Security Agreement Exhibit M    –    Terms of Subordination

 

2. Notes, if any, executed by the Borrower in favor of each of the Lenders, if
any, which has requested a note pursuant to Section 2.10(e) of the Credit
Agreement.

 

3. Amendment No. 1 to Amended and Restated Pledge Agreement between Puget Equico
LLC (“Equico”) and JPMorgan Chase Bank, N.A., as successor Collateral Agent (the
“Collateral Agent”), together with copies of the applicable pledged securities.

 

4. Amendment No. 1 to Amended and Restated Borrower Security Agreement between
the Borrower and the Collateral Agent, together with copies of the applicable
pledged securities.

 

5. Amendment No. 1 to Amended and Restated Collateral Agency Agreement between
the Lenders and the Collateral Agent.

B. CORPORATE DOCUMENTS

 

6. Certificate of the Secretary or an Assistant Secretary of the Borrower in his
or her capacity as such officer certifying (i) that there have been no changes
in the Certificate of Incorporation or other charter document of the Borrower,
as attached thereto and as certified as of a recent date by the Secretary of
State (or analogous governmental entity) of the State of Washington, since the
date of the certification thereof by such governmental entity, (ii) the By-Laws,
as attached thereto, of the Borrower as in effect on the date of such
certification, (iii) resolutions of the board of directors of the Borrower
authorizing the execution, delivery and performance of each Loan Document and
(iv) the names and true signatures of the incumbent officers of the Borrower
authorized to sign the Loan Documents and authorized to request a Borrowing or
the issuance of a Letter of Credit under the Credit Agreement.

 

7. Certificate of Existence for the Borrower from the Secretary of State of the
State of Washington.

 

8. Certificate of the Secretary or an Assistant Secretary of Equico in his or
her capacity as such officer certifying (i) that there have been no changes in
the Certificate of Incorporation or other charter document of Equico, as
attached thereto and as certified as of a recent date by the Secretary of State
(or analogous governmental entity) of the State of Washington, since the date of
the certification thereof by such governmental entity, (ii) the By-Laws, as
attached thereto, of Equico as in effect on the date of such certification,
(iii) resolutions of the board of directors of Equico authorizing the execution,
delivery and performance of Amendment No. 1 to Amended and Restated Pledge
Agreement and (iv) the names and true signatures of the incumbent officers of
Equico authorized to sign Amendment No. 1 to Amended and Restated Pledge
Agreement.

 

3

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C. OPINION

 

9. Opinion of Perkins Coie, counsel for the Borrower.

D. UCC DOCUMENTATION

 

10. UCC, tax lien and name variation search reports with respect to the Borrower
from the appropriate offices in the State of Washington.

 

11. UCC-3 Amendment naming the Collateral Agent as Secured Party under financing
statement number 200903733627 filed with the Department of Licensing of the
State of Washington.

 

12. UCC-3 Amendment naming the Collateral Agent as Secured Party under financing
statement number 200903733610 filed with the Department of Licensing of the
State of Washington.

 

13. Post-closing UCC search reports showing Items 11 and 12 as being of record
with the Department of Licensing of the State of Washington

E. CLOSING CERTIFICATES AND MISCELLANEOUS

 

14. A Certificate signed by the President, a Vice President or a Financial
Officer of the Borrower in his or her capacity as such officer certifying the
following: (i) all of the representations and warranties of the Borrower set
forth in the Credit Agreement are true and correct and (ii) no Default or Event
of Default has occurred and is then continuing.

 

15. Payoff documentation providing evidence satisfactory to the Administrative
Agent that the Existing Credit Agreement shall have been terminated and
cancelled and all indebtedness thereunder shall have been fully repaid (except
to the extent being so repaid with the initial Loans) and any and all liens
thereunder shall have been terminated and released (except to the extent
supporting the Secured Obligations under the Security Documents).

 

16. Resignation Letter of Barclays Bank Plc, as Collateral Agent under that
certain Amended and Restated Collateral Agency Agreement, dated as of
February 6, 2009 and as amended and restated as of March 31, 2010, among
Borrower, Equico, the Authorized Representatives and Barclays Bank Plc, as
collateral agent.

F. POST-CLOSING ITEMS

 

17. The Bank of New York Deposit Account Control Agreement

 

18. Wells Fargo Securities Account Control Agreement

 

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EXHIBIT F

FORM OF REVOLVING LOAN NOTE

REVOLVING LOAN NOTE

 

$            [DATE]

FOR VALUE RECEIVED, the undersigned, PUGET ENERGY, INC., a Washington
corporation (the “Borrower”), HEREBY UNCONDITIONALLY PROMISES TO PAY to the
order of [LENDER NAME] (the “Lender”) the aggregate unpaid principal amount of
all Revolving Loans made by the Lender to the Borrower pursuant to the “Credit
Agreement” (as defined below) on the Maturity Date or on such earlier date as
may be required by the terms of the Credit Agreement. Capitalized terms used
herein and not otherwise defined herein are as defined in the Credit Agreement.

The undersigned Borrower promises to pay interest on the unpaid principal amount
of each Revolving Loan made to it from the date of such Revolving Loan until
such principal amount is paid in full at a rate or rates per annum determined in
accordance with the terms of the Credit Agreement. Interest hereunder is due and
payable at such times and on such dates as set forth in the Credit Agreement.

At the time of each Revolving Loan, and upon each payment or prepayment of
principal of each Revolving Loan, the Lender shall make a notation either on the
schedule attached hereto and made a part hereof, or in such Lender’s own books
and records, in each case specifying the amount of such Revolving Loan, the
respective Interest Period thereof (in the case of Eurodollar Loans) or the
amount of principal paid or prepaid with respect to such Revolving Loan, as
applicable; provided that the failure of the Lender to make any such recordation
or notation shall not affect the Obligations of the undersigned Borrower
hereunder or under the Credit Agreement.

This Note is one of the notes referred to in, and is entitled to the benefits
of, that certain Credit Agreement dated as of February 10, 2012 by and among the
Borrower, the financial institutions from time to time parties thereto as
Lenders and JPMorgan Chase Bank, N.A., as Administrative Agent (as the same may
be amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”). The Credit Agreement, among other things, (i) provides for
the making of Revolving Loans by the Lender to the undersigned Borrower from
time to time in an aggregate amount not to exceed at any time outstanding such
Lender’s Revolving Commitment, the indebtedness of the undersigned Borrower
resulting from each such Revolving Loan to it being evidenced by this Note, and
(ii) contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events and also for prepayments of the principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified.

Demand, presentment, protest and notice of nonpayment and protest are hereby
waived by the Borrower. Whenever in this Note reference is made to the
Administrative Agent, the Lender or the Borrower, such reference shall be deemed
to include, as applicable, a reference to their respective successors and
assigns. The provisions of this Note shall be binding upon and shall inure to
the benefit of said successors and assigns. The Borrower’s successors and
assigns shall include, without limitation, a receiver, trustee or debtor in
possession of or for the Borrower.

This Note shall be construed in accordance with and governed by the law of the
State of New York.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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PUGET ENERGY, INC. By:  

 

Name: Title:

Signature Page to Note

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SCHEDULE OF LOANS AND PAYMENTS OR PREPAYMENTS

 

Date

   Amount of
Loan    Interest
Period/Rate    Amount of
Principal
Paid or
Prepaid    Unpaid
Principal
Balance    Notation
Made By                                                                        
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                              

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EXHIBIT G-1

FORM OF U.S. TAX CERTIFICATE

(For Non-U.S. Lenders That Are Not Partnerships For U.S. federal Income Tax
Purposes)

Reference is hereby made to the Credit Agreement dated as of February 10, 2012
(as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Puget Energy, Inc. (the “Borrower”), the Lenders party
thereto and JPMorgan Chase Bank, N.A., as administrative agent (in such
capacity, the “Administrative Agent”).

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of
which it is providing this certificate, (ii) it is not a bank within the meaning
of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder
of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (iv) it
is not a controlled foreign corporation related to the Borrower as described in
Section 881(c)(3)(C) of the Code and (v) the interest payments in question are
not effectively connected with the undersigned’s conduct of a U.S. trade or
business.

The undersigned has furnished the Administrative Agent and the Borrower with a
certificate of its non-U.S. person status on IRS Form W-8BEN. By executing this
certificate, the undersigned agrees that (1) if the information provided on this
certificate changes, the undersigned shall promptly so inform the Borrower and
the Administrative Agent and (2) the undersigned shall have at all times
furnished the Borrower and the Administrative Agent with a properly completed
and currently effective certificate in either the calendar year in which each
payment is to be made to the undersigned, or in either of the two calendar years
preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF LENDER] By:  

 

Name: Title: Date:             , 20[    ]

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EXHIBIT G-2

FORM OF U.S. TAX CERTIFICATE

(For Non-U.S. Lenders That Are Partnerships For U.S. federal Income Tax
Purposes)

Reference is hereby made to the Credit Agreement dated as of February 10, 2012
(as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Puget Energy, Inc. (the “Borrower”), the Lenders party
thereto and JPMorgan Chase Bank, N.A., as administrative agent (in such
capacity, the “Administrative Agent”).

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the Loan(s)
(as well as any Note(s) evidencing such Loan(s)) in respect of which it is
providing this certificate, (ii) its partners/members are the sole beneficial
owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)),
(iii) with respect to the extension of credit pursuant to this Credit Agreement,
neither the undersigned nor any of its partners/members is a bank extending
credit pursuant to a loan agreement entered into in the ordinary course of its
trade or business within the meaning of Section 881(c)(3)(A) of the Code,
(iv) none of its partners/members is a ten percent shareholder of the Borrower
within the meaning of Section 871(h)(3)(B) of the Code, (v) none of its
partners/members is a controlled foreign corporation related to the Borrower as
described in Section 881(c)(3)(C) of the Code, and (vi) the interest payments in
question are not effectively connected with the undersigned’s or its
partners/members’ conduct of a U.S. trade or business.

The undersigned has furnished the Administrative Agent and the Borrower with IRS
Form W-8IMY accompanied by an IRS Form W-8BEN from each of its partners/members
claiming the portfolio interest exemption. By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform the Borrower and the
Administrative Agent and (2) the undersigned shall have at all times furnished
the Borrower and the Administrative Agent with a properly completed and
currently effective certificate in either the calendar year in which each
payment is to be made to the undersigned, or in either of the two calendar years
preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF LENDER] By:  

 

Name: Title: Date:                  , 20[    ]

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EXHIBIT G-3

FORM OF U.S. TAX CERTIFICATE

(For Non-U.S. Participants That Are Not Partnerships For U.S. federal Income Tax
Purposes)

Reference is hereby made to the Credit Agreement dated as of February 10, 2012
(as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Puget Energy, Inc. (the “Borrower”), the Lenders party
thereto and JPMorgan Chase Bank, N.A., as administrative agent (in such
capacity, the “Administrative Agent”).

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate,
(ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code,
(iii) it is not a ten percent shareholder of the Borrower within the meaning of
Section 871(h)(3)(B) of the Code, (iv) it is not a controlled foreign
corporation related to the Borrower as described in Section 881(c)(3)(C) of the
Code, and (v) the interest payments in question are not effectively connected
with the undersigned’s conduct of a U.S. trade or business.

The undersigned has furnished its participating Lender with a certificate of its
non- U.S. person status on IRS Form W-8BEN. By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender in writing and
(2) the undersigned shall have at all times furnished such Lender with a
properly completed and currently effective certificate in either the calendar
year in which each payment is to be made to the undersigned, or in either of the
two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF LENDER] By:  

 

Name: Title: Date:                  , 20[    ]

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EXHIBIT G-4

FORM OF U.S. TAX CERTIFICATE

(For Non-U.S. Participants That Are Partnerships For U.S. federal Income Tax
Purposes)

Reference is hereby made to the Credit Agreement dated as of February 10, 2012
(as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Puget Energy, Inc. (the “Borrower”), the Lenders party
thereto and JPMorgan Chase Bank, N.A., as administrative agent (in such
capacity, the “Administrative Agent”).

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
participation in respect of which it is providing this certificate, (ii) its
partners/members are the sole beneficial owners of such participation,
(iii) with respect such participation, neither the undersigned nor any of its
partners/members is a bank extending credit pursuant to a loan agreement entered
into in the ordinary course of its trade or business within the meaning of
Section 881(c)(3)(A) of the Code, (iv) none of its partners/members is a ten
percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B)
of the Code, (v) none of its partners/members is a controlled foreign
corporation related to the Borrower as described in Section 881(c)(3)(C) of the
Code, and (vi) the interest payments in question are not effectively connected
with the undersigned’s or its partners/members’ conduct of a U.S. trade or
business.

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by an IRS Form W-8BEN from each of its partners/members claiming the
portfolio interest exemption. By executing this certificate, the undersigned
agrees that (1) if the information provided on this certificate changes, the
undersigned shall promptly so inform such Lender and (2) the undersigned shall
have at all times furnished such Lender with a properly completed and currently
effective certificate in either the calendar year in which each payment is to be
made to the undersigned, or in either of the two calendar years preceding such
payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF PARTICIPANT] By:  

 

Name: Title: Date:                  , 20[    ]

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EXHIBIT H

COLLATERAL AGENCY AGREEMENT

[ATTACHED]

--------------------------------------------------------------------------------

AMENDED AND RESTATED COLLATERAL AGENCY AGREEMENT

This AMENDED AND RESTATED COLLATERAL AGENCY AGREEMENT (this “Agreement”), dated
as of February 6, 2009, as amended and restated as of May 10, 2010, among PUGET
ENERGY INC., a Washington corporation (the “Company”) (successor in interest by
merger to Puget Merger Sub Inc. (“Merger Sub”), PUGET EQUICO LLC, a Washington
limited liability company (the “Parent”), BARCLAYS BANK PLC, as facility agent
under the Credit Agreement (as defined below) (in such capacity, together with
any successor facility agent appointed pursuant to the Credit Agreement, the
“Facility Agent”), BARCLAYS BANK PLC as collateral agent for the Secured Parties
(in such capacity, together with its successors and assigns, the “Collateral
Agent”), each Interest Rate Hedge Bank and each additional Authorized
Representative from time to time party hereto for the Additional Secured Parties
with respect to which it is acting in such capacity. Certain capitalized terms
used herein are defined in Article 1 of this Agreement.

W I T N E S S E T H :

WHEREAS, the Merger Sub entered into a Credit Agreement dated as of February 6,
2009 (said Agreement, as amended, amended and restated, supplemented or
otherwise modified from time to time, being the “Credit Agreement”) with the
Facility Agent, the Lenders and the other parties thereto;

WHEREAS, the Company, upon the consummation of the Merger, assumed, pursuant to
the Assumption Agreement, all of the obligations of the Merger Sub under the
Credit Agreement, this Agreement and all of the other Financing Documents to
which the Merger Sub was a party; the Merger Sub (prior to the Effective Time)
and the Company (upon and after the Effective Time) are referred to herein as
the “Borrower”;

WHEREAS, each of the Interest Rate Hedge Banks has entered into or shall enter
into after the date hereof an Interest Hedging Agreement with the Borrower
pursuant to which the Interest Rate Hedge Banks will provide certain protection
against movements in interest rates on the terms and subject to the conditions
set forth therein;

WHEREAS, the Borrower may from time to time issue or enter into one or more
notes, indentures, promissory notes, credit agreements or such other credit
documents, the obligations under which may be secured by a first priority lien
on the Collateral to the extent permitted under the Credit Documents; and

WHEREAS, the Facility Agent, as Authorized Representative for the Lenders under
the Credit Agreement, the Interest Rate Hedge Banks and the other Authorized
Representatives for the Additional Secured Parties wish to appoint the
Collateral Agent to act on their behalf in accordance with the provisions of the
Security Documents and the terms hereof.

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto hereby agree as follows:

Article 1. Definitions and Interpretation.

Section 1.01. Principles of Interpretation. With reference to this Agreement,
unless otherwise specified herein or in such other Security Document:

(a) The meanings of defined terms are equally applicable to the singular and
plural forms of the defined terms.

(b) The words “herein”, “hereto”, “hereof” and “hereunder” and words of similar
import when used herein shall refer to this Agreement as a whole and not to any
particular provision thereof.

(i) Article, Section, Exhibit and Schedule references are to this Agreement
unless specified to the contrary.

(ii) The term “including” is by way of example and not limitation.

 

4

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(iii) The term “documents” includes any and all instruments, documents,
agreements, certificates, notices, reports, financial statements and other
writings, however evidenced, whether in physical or electronic form.

(c) In the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including”; the words “to” and
“until” each mean “to but excluding”; and the word “through” means “to and
including”.

(d) Section headings herein are included for convenience of reference only and
shall not affect the interpretation of this Agreement.

Section 1.02. Definitions. In addition, the following terms shall have the
following meanings under this Agreement:

“Additional Credit Documents” shall mean any indenture, note, promissory note,
instrument or other agreement entered into by the Borrower after the date of
this Agreement, if any, pursuant to which the Borrower will incur Additional
Secured Obligations from time to time, to the extent permitted under the Credit
Documents, and which have been designated as Additional Credit Documents in
accordance with Section 9.09(b) of this Agreement.

“Additional Secured Obligations” shall mean any indebtedness and obligations of
the Borrower arising under any Additional Credit Document that the Borrower
designates as Additional Secured Obligations in accordance with Section 9.09(b)
of this Agreement, in each case to the extent permitted (if addressed therein,
or, otherwise, not prohibited) under the Credit Agreement and the other Credit
Documents as of the date of such designation; provided that the holder of such
indebtedness or other obligations (or the agent, trustee or representative
acting on behalf of the holder of such indebtedness or other obligation) shall
either be a party hereto or shall have executed and delivered to the Collateral
Agent a Joinder Agreement pursuant to which such holder (or such agent, trustee
or representative acting on behalf of such holder) has become a party to this
Agreement and has agreed to be bound by the obligations of a “Secured Party”
under the terms of this Agreement. Subject to meeting the requirements of the
preceding sentence, Additional Secured Obligations shall include (a) advances
to, and debts, liabilities, obligations, covenants and duties of the Borrower
arising under any Additional Credit Documents, whether direct or indirect
(including those acquired by assumption), absolute or contingent, due or to
become due, now existing or hereafter arising and including interest and fees
that accrue after the commencement by or against the Borrower, of any proceeding
under any Debtor Relief Laws naming such Person as the debtor in such
proceeding, regardless of whether such interest and fees are allowed claims in
such proceeding, (b) the obligation to pay principal, interest, reimbursement
obligations, charges, expenses, fees, Attorney Costs, indemnities and other
amounts payable by the Borrower under any Additional Credit Document and (c) the
obligation of the Borrower to reimburse any amount in respect of any of the
foregoing that any Additional Secured Party, in its sole discretion, may elect
to pay or advance on behalf of the Borrower.

“Additional Secured Parties” means any holders of any Additional Secured
Obligations and any Authorized Representative with respect thereto.

“Affiliate” means, with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified.

“Agent” shall mean the Collateral Agent, each Authorized Representative and each
of their respective successors and assigns.

“Agent-Related Persons” shall mean the Agents, together with their respective
Affiliates, and the officers, directors, employees, agents and attorneys-in-fact
of such Persons and Affiliates.

“Attorney Costs” shall mean and include, as the context requires, all reasonable
and documented fees, expenses and disbursements of any external legal counsel.

 

5

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“Authorized Representative” shall mean (a) in the case of any Credit Agreement
Obligations or the Lenders under the Credit Agreement, the Facility Agent,
(b) in the case of any Secured Hedge Obligations and the Interest Rate Hedge
Banks, such Interest Rate Hedge Bank or any Person appointed by such Interest
Rate Hedge Bank to act as its agent or representative and (c) in the case of any
Series of Additional Secured Obligations or Additional Secured Parties that
become subject to this Agreement after the date hereof, the Authorized
Representative named for such Series in the applicable Joinder Agreement.

“Bankruptcy Code” shall mean Title 11 of the United States Code, as amended.

“Borrower Group” shall mean the Borrower and the Operating Companies and
“Borrower Group Member” means any of the Borrower or any Operating Company.

“Borrower Side Person” has the meaning specified in Section 9.03(b).

“Business Day” shall mean any day which is neither a Saturday or Sunday nor a
legal holiday on which any financial institution or banks are authorized or
required to be closed in New York, New York or Bellevue, Washington.

“Cash Management Obligations” means obligations owed by any Borrower Group
Member to any Lender or any Affiliate of a Lender in respect of any overdraft
and related liabilities arising from treasury, depository and cash management
services or any automated clearing house transfers of funds.

“Collateral” shall mean all the “Collateral”, as defined in each of the Security
Documents.

“Commitments” shall have the meaning specified in the Credit Agreement.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or
otherwise. “Controls”, “Controlling” and “Controlled” have meanings correlative
thereto.

“Controlling Authorized Representative” shall mean (a) until the earlier to
occur of (i) the Discharge of Credit Agreement Obligations and (ii) the
occurrence of the Majority Non-Controlling Voting Party Enforcement Date (if
any), the Facility Agent and (b) from and after the earlier to occur of
(i) Discharge of Credit Agreement Obligations and (ii) the occurrence of the
Majority Non-Controlling Voting Party Enforcement Date, the Authorized
Representative for the Majority Non-Controlling Voting Parties at such time.

“Credit Agreement” has the meaning specified in the first recital hereto.

“Credit Agreement Obligations” shall mean all (a) advances to, and debts,
liabilities, obligations, covenants and duties of the Borrower arising under any
Financing Document or otherwise with respect to any Loan, whether direct or
indirect (including those acquired by assumption), absolute or contingent, due
or to become due, now existing or hereafter arising and including interest and
fees that accrue after the commencement by or against the Borrower, of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in such
proceeding, regardless of whether such interest and fees are allowed claims in
such proceeding, and (b) Cash Management Obligations. Without limiting the
generality of the foregoing, Credit Agreement Obligations include (x) the
obligation to pay principal, interest, reimbursement obligations, charges,
expenses, fees, Attorney Costs, indemnities and other amounts payable by the
Borrower under any Financing Document and (y) the obligation of the Borrower to
reimburse any amount in respect of any of the foregoing that any Lender, in its
sole discretion, may elect to pay or advance on behalf of the Borrower.

“Credit Document” shall mean, collectively (without duplication), each Financing
Document and any Additional Credit Document providing for or evidencing any
Additional Secured Obligations.

“Creditor Side Person” has the meaning specified in Section 9.03(b).

 

6

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“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

“Default” shall mean any event or condition that constitutes an Event of Default
under the Credit Agreement or any Additional Credit Document or that, with the
giving of any notice, the passage of time, or both, would be an Event of Default
under the Credit Agreement or any Additional Credit Document.

“Discharge of Credit Agreement Obligations” shall mean, except as expressly set
forth in Section 2.06(a) and Section 4.07(c), the payment in full in cash of all
outstanding principal amount of Loans under the Credit Agreement, all interest
due (including, without limitation, interest accruing at the then applicable
rate provided in the Credit Agreement after the maturity of the Loans and any
Post-Petition Interest) on all “Obligations” outstanding under the Credit
Agreement and all fees payable or otherwise accrued under the Financing
Documents (other than any contingent indemnity obligations that expressly
survive the termination of the Financing Documents).

“Discharge of Secured Obligations” shall mean, except as expressly set forth in
Section 2.06 and Section 4.07(c), the payment in full in cash of all
(a) outstanding Secured Obligations under any Credit Document, (b) interest
(including, without limitation, interest accruing at the then applicable rate
provided in the applicable Credit Document after the maturity of the Loans or
other indebtedness or other relevant Secured Obligations and Post-Petition
Interest) on all Secured Obligations outstanding under any Credit Document, and
all fees and other Secured Obligations outstanding under each Credit Document
(other than any contingent indemnity obligations that expressly survive the
termination of the Credit Documents).

“Early Termination Date” shall have the respective meaning assigned thereto
under each Interest Hedging Agreement.

“Environmental Law” shall mean any and all federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, initiatives,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution, the protection of the
environment, natural resources, or, to the extent relating to exposure to
Hazardous Materials, human health or safety or to the release of any Hazardous
Materials into the environment, including air emissions and discharges to waste
or public systems.

“Environmental Liability” shall mean any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any of its Subsidiaries resulting
from (a) the actual or alleged violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of any
Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release, or presence of any Hazardous Materials into the environment
or (e) any contract, agreement or other consensual arrangement pursuant to which
liability is assumed or imposed with respect to any of the foregoing.

“Equity Interests” shall mean, with respect to any Person, all of the shares,
membership interests, rights, participations or other equivalents (however
designated) of capital stock of (or other ownership or profit interests or units
in) such Person and all of the warrants, options or other rights for the
purchase, acquisition or exchange from such Person of any of the foregoing
(including through convertible securities).

“Event of Default” shall mean (a) an “Event of Default” under and as defined in
the Credit Agreement or any Additional Credit Document or (b) any event leading
to an “Early Termination Date” or an “Early Termination Event” under any
Interest Rate Hedging Agreement with respect to which the Borrower or any Loan
Party is the defaulting party or affected party, as the case may be.

“Financial Closing Date” shall mean February 6, 2009.

“Financing Documents” shall have the meaning specified in the Credit Agreement.

 

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“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, administrative tribunal, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or pollutants, including petroleum
or petroleum distillates, asbestos or asbestos-containing materials, toxic mold,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
such substances or wastes defined in or otherwise regulated as “hazardous” or
“toxic” wastes or substances under applicable Environmental Law.

“Hedge Default” shall mean the occurrence of any event specified in an Interest
Hedging Agreement that entitles the Interest Rate Hedge Bank party thereto to
cause the early termination thereof in accordance with the terms thereof.

“Hedge Termination Certificate” shall mean a certificate of any Interest Rate
Hedge Bank stating that an Early Termination Date has occurred or has been
designated under an Interest Hedging Agreement to which it is a party and
setting forth the resulting Settlement Amount.

“Immaterial Subsidiary” has the meaning specified in the Credit Agreement.

“Indemnified Liabilities” means all liabilities, obligations, losses, damages,
penalties, claims, demands, actions, judgments, suits, costs, expenses and
disbursements (including Attorney Costs) of any kind or nature whatsoever which
may at any time be imposed on, incurred by or asserted against any Indemnified
Party in any way relating to or arising out of or in connection with (a) the
execution, delivery, enforcement, performance or administration of any Credit
Document or any other agreement, letter or instrument delivered in connection
with the transactions contemplated thereby or (b) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory (including any investigation
of, preparation for or defense of any pending or threatened claim,
investigation, litigation or proceeding).

“Indemnified Party” means, collectively, the Collateral Agent, its Affiliates
and the directors, officers, employees, agents, representatives, trustees and
attorneys-in-fact of such Persons and Affiliates.

“Indemnified Secured Parties” has the meaning specified in Section 5.01(f).

“Insolvency or Liquidation Proceeding” means (a) any voluntary or involuntary
case or proceeding under Debtor Relief Laws with respect to any Loan Party,
(b) any other voluntary or involuntary insolvency, reorganization or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding with respect to any Loan Party or with respect to a
material portion of their respective assets, (c) any liquidation, dissolution,
reorganization or winding up of any Loan Party whether voluntary or involuntary
and whether or not involving insolvency or bankruptcy or (d) any assignment for
the benefit of creditors or any other marshalling of assets and liabilities of
any Loan Party.

“Intercreditor Vote” shall mean a vote conducted in accordance with the
procedures set forth in Article 3 hereof among the Voting Parties for the Series
entitled to vote with respect to the particular decision at issue.

“Interest Hedging Agreements” means any rate swap, cap or collar agreement or
similar arrangement between the Borrower and one or more interest rate hedge
providers designed to protect such Person against fluctuations in interest
rates. For purposes of this Agreement, the indebtedness at any time of the
Borrower under an Interest Hedging Agreement shall be determined at such time in
accordance with the methodology set forth in such Interest Hedging Agreement.

“Interest Rate Hedge Bank” shall mean (a) any Person that is a Lender or an
Affiliate of a Lender at the time it enters into an Interest Hedging Agreement
or (b) Macquarie Bank Limited to the extent it enters into an Interest Hedging
Agreement, in each case, in its capacity as a party to such Interest Hedging
Agreement and only for so long as any obligations of the Borrower remain
outstanding under the Interest Hedging Agreement to which such Interest Rate
Hedge Bank is a party; provided that such Interest Rate Hedge Bank executes a
Joinder Agreement pursuant to Section 3.03(b); and provided, further, that no
Affiliate of the Borrower other than Macquarie Bank Limited and its successors
shall become an Interest Rate Hedge Bank.

 

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“Joinder Agreement” shall mean a Joinder Agreement executed by the Collateral
Agent and each Authorized Representative for the Secured Obligations subject
thereto in accordance with Section 3.03(b) or Section 9.09(b), in form and
substance substantially in the form set forth as Appendix A hereto.

“Law” shall mean, collectively, all international, foreign, federal, state and
local statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.

“Lender” shall mean a “Lender” as defined in the Credit Agreement.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement, of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any easement, right of way or other encumbrance on title to real
property having substantially the same economic effect as any of the foregoing).

“Loans” shall mean “Loans” as defined in the Credit Agreement.

“Loan Party” shall mean each of the Borrower and the Parent.

“Lock-Up Account” has the meaning specified in the Security Agreement.

“Macquarie” means The Macquarie Capital Group, which includes Macquarie Capital
Group Limited, its direct or indirect subsidiaries, and the funds (or similar
vehicles) they manage.

“Macquarie Affiliates” means Macquarie Finance Americas Inc. and Affiliates of
Macquarie that are offshore banking units.

“Majority Non-Controlling Voting Parties” shall mean, at any time, the Secured
Parties owed or holding Secured Obligations that constitute the largest total
outstanding amount of any then outstanding Series of Secured Obligations.

“Majority Non-Controlling Voting Party Enforcement Date” shall mean with respect
to any Series of Secured Obligations, the date which is 90 days (throughout
which 90 day period such Series of Secured Obligations was the Series
constituting the Majority Non-Controlling Voting Parties) after the occurrence
of both (i) an Event of Default (under and as defined in the Credit Document
applicable to such Majority Non-Controlling Voting Parties) and (ii) the
Collateral Agent’s and each other Authorized Representative’s receipt of written
notice from the Authorized Representative for the Majority Non-Controlling
Voting Parties certifying that (x) the holders of such Series of Secured
Obligations are the Majority Non-Controlling Voting Parties and that an Event of
Default (under and as defined in the Credit Document applicable to such Majority
Non-Controlling Voting Parties) has occurred and is continuing and (y) the
Secured Obligations of such Series are currently due and payable in full
(whether as a result of acceleration thereof or otherwise) in accordance with
the terms of the applicable Credit Document governing the Series for such
Majority Non-Controlling Voting Parties; provided that the 90-day period
referenced above in this definition shall be stayed and the Majority
Non-Controlling Voting Party Enforcement Date shall be stayed and shall not
occur and shall be deemed not to have occurred with respect to any Collateral
(1) at any time the Collateral Agent has commenced and is diligently pursuing
any enforcement action with respect to such Collateral or (2) at any time any
Loan Party or any grantor which has granted a security interest in such
Collateral is then a debtor under or with respect to any Insolvency or
Liquidation Proceeding.

“Member” shall mean any Person owning of record or beneficially any of the
issued and outstanding Equity Interests in the Parent, the Borrower or Puget
Holdings LLC.

 

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“New Collateral Agent” has the meaning specified in Section 2.06(a).

“New Facility Agent” has the meaning specified in Section 2.06(a).

“Non-Voting Lender” has the meaning specified in Section 3.03(c).

“Notice of Default’ has the meaning specified in Section 4.01(a).

“Operating Company” means Puget Sound Energy, Inc., a Washington Corporation,
and each other Subsidiary of the Borrower other than any Immaterial Subsidiary
and, for the avoidance of doubt, the term Operating Company shall include Puget
Western, Inc.

“Parent” has the meaning specified in the introductory paragraph of this
Agreement.

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

“Possessory Collateral” shall mean any Collateral in the possession of the
Collateral Agent or any Authorized Representative (or its agents or bailees), to
the extent that possession thereof perfects a Lien thereon under the Uniform
Commercial Code of any jurisdiction. Possessory Collateral includes, without
limitation, any Certificated Securities, Instruments, and Chattel Paper, in each
case, delivered to or in the possession of the Collateral Agent or any
Authorized Representative (or its agent or bailees) under the terms of the
Security Documents. All capitalized terms used in this definition and not
defined elsewhere in this Agreement have the meanings assigned to them in the
New York Uniform Commercial Code.

“Post-Petition Interest” shall mean any interest or entitlement of fees or
expenses or other charges that accrues after the commencement of any Insolvency
or Liquidation Proceeding, whether or not allowed or allowable in any such
Insolvency or Liquidation Proceeding.

“Refinance” shall mean, in respect of any indebtedness, (a) such indebtedness
(in whole or in part) as extended, renewed, defeased, refinanced, replaced,
refunded, repaid, restated, supplemented, restructured, renewed, increased or
otherwise amended or modified and (b) any other indebtedness issued in exchange
or replacement for or to refinance such indebtedness, in whole or in part,
whether with the same or different lenders, arrangers and/or agents and whether
with a larger or smaller aggregate principal amount and whether for a longer or
shorter maturity, in each case to the extent permitted (if addressed therein or
otherwise not prohibited) under the terms of the Credit Agreement or any other
applicable Credit Document. “Refinanced” and “Refinancing” shall have
correlative meanings.

“Remedies Event of Default” shall mean (a) the occurrence of an Event of Default
under the Credit Agreement or any Additional Credit Document or (b) the
occurrence of a Hedge Default; provided that so long as Secured Obligations
(other than in respect of Interest Hedging Agreements with Interest Rate Hedge
Banks) are outstanding, a Hedge Default shall not constitute a Remedies Event of
Default unless an Event of Default described under the foregoing clause (a) has
occurred and is continuing at the time of such Hedge Default.

“Remedies Instruction” shall mean a written instruction to the Collateral Agent
from or on behalf of the Required Voting Parties (i) certifying that (x) a
Remedies Event of Default has occurred and is continuing under the applicable
Credit Document and (y) an Intercreditor Vote has been conducted in accordance
with the requirements of this Agreement with respect to such Remedies Event of
Default, (ii) describing with reasonable specificity which particular remedies
available to the Secured Parties are to be pursued and which particular action
are to be taken by the Collateral Agent in response to such Remedies Event of
Default, and (iii) containing such other information as is permitted under this
Agreement.

“Replacement Credit Agreement” has the meaning specified in Section 2.06(a).

“Required Voting Parties” shall mean, with respect to any proposed decision or
action hereunder, the Secured Parties owed or holding more than 50% of the Total
Outstandings at such time under (i) until the earlier to occur of

 

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(x) the Discharge of Credit Agreement Obligations and (y) the occurrence of the
Majority Non-Controlling Voting Party Enforcement Date (if any), the Credit
Agreement and (ii) from and after the earlier to occur of the (x) Discharge of
Credit Agreement Obligations and (y) the occurrence of the Majority
Non-Controlling Voting Party Enforcement Date, the applicable Credit Document
governing the Series of Secured Obligations of the Majority Non-Controlling
Voting Parties at such time.

“Secured Hedge Obligations” shall mean all amounts payable to any Interest Rate
Hedge Bank under any Interest Hedging Agreement.

“Secured Obligations” shall mean, (a) all Credit Agreement Obligations, (b) all
Secured Hedge Obligations, and (c) any Additional Secured Obligations, in each
case, whether fixed or contingent, matured or unmatured, whether or not allowed
or allowable in an Insolvency and Liquidation Proceeding.

“Secured Parties” shall mean, collectively, the Agents, the Lenders, the
Interest Rate Hedge Banks, any Additional Secured Parties and each co-agent or
sub-agent appointed by any Agent or from time to time pursuant to any Credit
Document or this Agreement.

“Security Interest” has the meaning specified in Section 2.02(a).

“Series” shall mean each of (i) the Credit Agreement Obligations, (ii) any
Additional Obligations incurred pursuant to any Additional Credit Document
which, pursuant to any Joinder Agreement, are represented hereunder by a common
Authorized Representative (in its capacity as such for such Secured Obligations)
and (iii) the Secured Hedge Obligations.

“Security Documents” shall mean, collectively, the Security Agreement, the
Pledge Agreement and any other security agreements, pledge agreements or other
similar agreements delivered to the Agents, the Lenders, the Interest Rate Hedge
Banks and the Additional Secured Parties, and any other agreements, instruments
or documents that create or purport to create a Lien in favor of the Collateral
Agent for the benefit of the Secured Parties.

“Settlement Amount” shall mean, as at any date of determination thereof, the
amount calculated to be due in respect of any Early Termination Date under any
Interest Hedging Agreement in accordance with the terms thereof.

“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned or controlled by such Person. Unless
otherwise specified, all references herein to a “Subsidiary” or to
“Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

“Total Outstandings” shall mean, with respect to any Credit Document (other than
any Interest Rate Hedging Agreement), at any time, an amount equal to the sum
of, without duplication, the aggregate unpaid principal amount of Loans or other
indebtedness outstanding under such Credit Document at such time after giving
effect to any borrowings, advances and prepayments or repayments of any Loans or
indebtedness under the Credit Agreement or such other Credit Document, as the
case may be, on such date, plus the amount of any unfunded Commitments under the
Credit Agreement or such other Credit Document, as the case may be, on such
date.

“Unanimous Voting Parties” shall mean, with respect to any Intercreditor Vote,
each of the Facility Agent, each of the Authorized Representatives appointed
under each Additional Credit Document and each Interest Rate Hedge Bank, in each
case casting votes representing 100% of the Voting Party Percentage applicable
to each such Series of Secured Obligations.

“Voting Parties” means the Lenders, any Additional Secured Party and, subject to
Section 3.03(b), each Interest Rate Hedge Bank.

 

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“Voting Party Percentage” shall mean, in connection with any proposed decision
or action hereunder, the actual percentage, as determined pursuant to
Section 3.04, of allotted votes cast in favor of such decision or action by the
Secured Parties entitled to vote with respect to such decision or action.

“Wall” has the meaning specified in Section 9.03(b).

Article 2. Appointment and Duties of Collateral Agent; Secured Parties’
Agreements; Collateral Matters.

Section 2.01. Appointment and Duties of Collateral Agent.

(a) Each of the Secured Parties hereby designates and appoints Barclays Bank PLC
to act as the Collateral Agent under the Security Documents, and authorizes the
Collateral Agent to execute each of the Security Documents on its behalf and
take such actions on its behalf under the provisions of the Security Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Collateral Agent by the terms of the Security Documents, together with
such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary in any Security Document, the Collateral Agent shall
not have any duties or responsibilities, except those expressly set forth herein
and in the Security Documents, and no implied covenants, functions or
responsibilities, fiduciary or otherwise, shall be read into any of the Security
Documents or otherwise exist against the Collateral Agent. Without limiting the
generality of the foregoing, the use of the term “agent” herein and in the other
Credit Documents with reference to any Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable Law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.

(b) The Collateral Agent shall give notice to the Secured Parties of any action
to be taken by it under any Security Document, and such notice shall be given
prior to the taking of such action unless the Collateral Agent determines that
to do so would be detrimental to the interests of the Secured Parties, in which
event such notice shall be given promptly after the taking of such action.

(c) Notwithstanding any provision to the contrary in any Security Document, the
Collateral Agent shall not be required to exercise any discretionary rights or
remedies under any of the Security Documents or give any consent under any of
the Security Documents or enter into any agreement amending, modifying,
supplementing or waiving any provision of any Security Document (other than this
Agreement) unless it shall have been directed to do so by the Controlling
Authorized Representative or the Required Voting Parties.

Section 2.02. Secured Parties’ Agreements; No Interference; Payment Over.

(a) Except as set forth in clause (b) below and in Sections 2.05(b) and 4.05(c)
hereof, each Secured Party agrees that, as among the Secured Parties, the
security interest in any Collateral granted under any Security Document (the
“Security Interest”) to the Collateral Agent for the benefit of such Secured
Party ranks and will rank equally in priority with the Security Interest of each
other Secured Party in the same Collateral.

(b) Notwithstanding anything to the contrary set forth in any Credit Document,
any proceeds of Collateral or amounts required to be deposited in the Lock-Up
Account pursuant to Section 6.12 of the Credit Agreement and Section 4.02 of the
Security Agreement received by any Secured Party (other than from the Collateral
Agent pursuant hereto) shall be transferred by such Secured Party to the
Collateral Agent solely for application towards payment of Credit Agreement
Obligations owing to the Lenders in accordance with the terms of the Financing
Documents.

(c) Each Secured Party agrees that the Collateral Agent may refrain from acting
or continuing to act in accordance with any instructions of the Required Voting
Parties to begin any legal action or proceeding arising out of or in connection
with any Credit Document until it shall have received such indemnity or security
from the Secured Parties as it may reasonably require (whether by payment in
advance or otherwise) for all costs, claims, losses, expenses (including
reasonable legal fees and expenses) and liabilities which it will or may expend
or incur in complying or continuing to comply with such instructions; provided,
that nothing in this subclause (c) shall be deemed to obligate any Secured Party
to provide any such indemnity or security.

 

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(d) Each Secured Party agrees that (i) it will not challenge or question in any
proceeding the validity or enforceability of any Secured Obligations of any
Series or any Credit Document or the validity, attachment, perfection or
priority of any Lien under any Security Document or the validity or
enforceability of the priorities, rights or duties established by or other
provisions of this Agreement; (ii) it will not take or cause to be taken any
action the purpose or intent of which is, or could be, to interfere, hinder or
delay, in any manner, whether by judicial proceedings or otherwise, any sale,
transfer or other disposition of the Collateral by the Collateral Agent,
(iii) except as provided in Section 2.04(e), it shall have no right to direct
the Collateral Agent or any other Secured Party to exercise any right, remedy or
power with respect to any Collateral unless such Secured Party is the
Controlling Authorized Representative, (iv) it will not institute any suit or
assert in any suit, bankruptcy, insolvency or other proceeding any claim against
the Collateral Agent or any other Secured Party seeking damages from or other
relief by way of specific performance, instructions or otherwise with respect to
any Collateral, and none of the Collateral Agent, any Controlling Authorized
Representative or any other Secured Party shall be liable for any action taken
or omitted to be taken by the Collateral Agent, such Controlling Authorized
Representative or other Secured Party with respect to any Collateral in
accordance with the provisions of this Agreement, (v) it will not seek, and
hereby waives any right, to have any Collateral or any part thereof marshalled
upon any foreclosure or other disposition of such Collateral and (vi) it will
not attempt, directly or indirectly, whether by judicial proceedings or
otherwise, to challenge the enforceability of any provision of this Agreement;
provided that nothing in this Agreement shall be construed to prevent or impair
the rights of any of the Collateral Agent or any other Secured Party to enforce
this Agreement or the right to take any action permitted by Section 2.04(e).

(e) Each Secured Party hereby agrees that if it shall obtain possession of any
Collateral or shall realize any proceeds or payment in respect of any
Collateral, pursuant to any Security Document or by the exercise of any rights
available to it under applicable Law or in any Insolvency or Liquidation
Proceeding or through any other exercise of remedies at any time prior to the
Discharge of each of Series of Secured Obligations, then it shall hold such
Collateral, proceeds or payment in trust for the other Secured Parties and
promptly transfer such Collateral, proceeds or payment, as the case may be, to
the Collateral Agent, to be distributed in accordance with the provisions of
Section 4.05 hereof.

Section 2.03. Possessory Collateral Agent as Gratuitous Bailee for
Perfection. (a) The Collateral Agent agrees to hold any Collateral constituting
Possessory Collateral that is part of the Collateral in its possession or
control (or in the possession or control of its agents or bailees) as gratuitous
bailee for the benefit of each Secured Party and any assignee solely for the
purpose of perfecting the security interest granted in such Possessory
Collateral, if any, pursuant to the applicable Security Documents, in each case,
subject to the terms and conditions of this Section 2.03. Pending delivery to
the Collateral Agent, each Authorized Representative agrees to hold any
Collateral constituting Possessory Collateral, from time to time in its
possession, as gratuitous bailee for the benefit of each other Secured Party and
any assignee, solely for the purpose of perfecting the security interest granted
in such Possessory Collateral, if any, pursuant to the applicable Security
Documents, in each case, subject to the terms and conditions of this
Section 2.03.

(b) The duties or responsibilities of the Collateral Agent and each Authorized
Representative under this Section 2.03 shall be limited solely to holding any
Collateral constituting Possessory Collateral as gratuitous bailee for the
benefit of each other Secured Party for purposes of perfecting the Lien held by
such Secured Parties therein.

(c) All such Possessory Collateral in the possession of any Authorized
Representative shall be delivered to the Collateral Agent as soon as
practicable.

 

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Section 2.04. Collateral Matters; Actions with Respect to Collateral;
Prohibition on Contesting Liens.

The Secured Parties irrevocably agree that:

(a) Upon request by the Collateral Agent at any time, the Secured Parties will
confirm in writing the Collateral Agent’s authority to release its interest in
particular types or items of property pursuant to this Section 2.04. In each
case as specified in this Section 2.04, the Collateral Agent will (and each
Secured Party irrevocably authorizes the Collateral Agent to), at the Borrower’s
expense, execute and deliver to the Borrower or any Loan Party, as applicable,
such documents as such Person may reasonably request to evidence the release of
such item of Collateral from the assignment and security interest granted under
the Security Documents, in accordance with the terms of this Agreement or any
other Credit Document.

(b) With respect to any Collateral, (i) only the Collateral Agent shall be
authorized to release Liens and exercise rights and remedies set forth in
Security Documents with respect to any Collateral and in accordance with
Section 2.07, (ii) the Collateral Agent shall not follow any instructions (other
than instructions pursuant to Section 2.04(e)(ii)) with respect to such
Collateral from any Authorized Representative or any Secured Party (other than
the Controlling Authorized Representative and the Required Voting Parties) and
(iii) no Authorized Representative who is not the Controlling Authorized
Representative or other Secured Party shall or shall instruct the Collateral
Agent to, commence any judicial or nonjudicial foreclosure proceedings with
respect to, seek to have a trustee, receiver, liquidator or similar official
appointed for or over, attempt any action to take possession of, exercise any
right, remedy or power with respect to, or otherwise take any action to enforce
its security interest in or realize upon, or take any other action available to
it in respect of, any Collateral, whether under any Security Document,
applicable Law or otherwise, it being agreed that only the Collateral Agent,
acting on the instructions of the Controlling Authorized Representative or the
Required Voting Parties and in accordance with the applicable Security
Documents, shall be entitled to take any such actions or exercise any such
remedies with respect to Collateral. No Authorized Representative or Secured
Party (other than the Controlling Authorized Representative or Required Voting
Parties) will contest, protest or object to any foreclosure proceeding or action
brought by the Collateral Agent in accordance with the terms of this Agreement
or any other exercise by the Collateral Agent of any rights and remedies
relating to the Collateral, or to cause the Collateral Agent to bring any
foreclosure proceedings or action or exercise any rights or remedies relating to
the Collateral except as permitted by Section 2.04(e)(ii).

(c) Each Authorized Representative and each other Secured Party agrees that it
will not accept any Lien on any Collateral for the benefit of any Secured
Obligations other than Liens created in favor of the Collateral Agent pursuant
to a Security Document, and by executing this Agreement (or a Joinder Agreement)
and by accepting the benefits of this Agreement and of each Security Document,
each Authorized Representative and each Secured Party for which it is acting
hereunder agree to be bound by the provisions of this Agreement and the Security
Documents applicable to it.

(d) Each of the Secured Parties agrees that it will not (and hereby waives any
right to) contest or support any other Person in contesting, in any proceeding
(including any Insolvency or Liquidation Proceeding), the perfection, priority,
validity or enforceability of a Lien held by the Collateral Agent on behalf of
any of the Secured Parties in all or any part of the Collateral, or the
provisions of this Agreement; provided that nothing in this Agreement shall be
construed to prevent or impair the rights of any of the Collateral Agent or any
Authorized Representative to enforce this Agreement.

(e) Section 2.04(b) shall not prohibit a Secured Party from taking the following
actions:

(i) in any Insolvency or Liquidation Proceeding commenced by or against the
Borrower or any other Loan Party, each Secured Party may file a claim or
statement of interest with respect to its Series of Secured Obligations, as
applicable;

(ii) each Authorized Representative may take and may direct the Collateral Agent
to take any action (not adverse to the Liens of the Collateral Agent securing
the Secured Parties) in order to preserve or protect its interest in and Liens
created by the Security Documents on the Collateral;

(iii) the Secured Parties shall be entitled to file any necessary responsive or
defensive pleadings in opposition to any motion, claim, adversary proceeding or
other pleading made by any Person objecting to or otherwise seeking the
disallowance of their claims, including any claims secured by the Collateral, if
any;

 

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(iv) in any Insolvency or Liquidation Proceeding, the Secured Parties shall be
entitled to file any pleadings, objections, motions or agreements which assert
rights or interests available to unsecured creditors of the Loan Parties arising
under either Debtor Relief Laws or applicable non-bankruptcy law, in each case
not in contravention of the terms of this Agreement;

(v) in any Insolvency or Liquidation Proceeding, the Secured Parties shall be
entitled to vote on any plan of reorganization; and

(vi) both before and during an Insolvency or Liquidation Proceeding, any Secured
Party may take any actions and exercise any and all rights that would be
available to a holder of unsecured claims, including, without limitation, the
commencement of an Insolvency or Liquidation Proceeding against any Loan Party
in accordance with applicable Law and the termination of any agreement by the
holder of any such obligation in accordance with the terms thereof.

(f) The Collateral Agent agrees to follow the instructions received from an
Authorized Representative pursuant to Section 2.04(e)(ii); provided, however,
that the Collateral Agent shall not follow such instructions to the extent that
they are expressly inconsistent with instructions received from the Controlling
Authorized Representative pursuant to Section 4.03 after receipt of a Default
Notice that has not been withdrawn. The Collateral Agent agrees to provide to
each Authorized Representative a copy of each instruction that it receives
pursuant to Section 2.04(e)(ii).

(g) The Collateral Agent agrees to provide to each Authorized Representative a
copy of each notice, letter or direction that it provides to or receives from a
Loan Party or another Authorized Representative pursuant to this Agreement.

Section 2.05. Absolute Rights of Secured Parties and Authorized
Representatives. (a) Notwithstanding any other provision of this Agreement or
any Security Document, but subject to Section 2.05(b) below, each of the
Authorized Representatives and each of the Secured Parties has an absolute and
unconditional right to receive payment of all of the Secured Obligations owing
to such Authorized Representative or such Secured Party, as the case may be,
when the same becomes due and payable and at the time and place and otherwise in
the manner set forth in the applicable Secured Document, and the right of each
such Authorized Representative and each such Secured Party to institute
proceedings for the enforcement of such payment on or after the date such
payment becomes due and to assert (to the extent permitted by Section 2.04(e))
its position as a secured creditor in a proceeding under any Debtor Relief Laws
in which any Loan Party is a debtor, and the obligation of such Loan Party to
pay all of the Secured Obligations owing to each of the Authorized
Representatives and each of the Secured Parties at the time and place expressed
therein, shall not be impaired or affected without the consent of such
Authorized Representative or such Secured Party. In addition, the right of any
Secured Party or any Authorized Representative, on behalf of itself or on behalf
of any such Secured Party, to receive payment from sources other than the
Collateral shall not be, and is not hereby, impaired or affected in any
manner. Without limiting the generality of the foregoing provisions of this
Section 2.05, the Facility Agent’s and a Lender’s right to receive its ratable
share of any amounts maintained in the Lock-Up Account, or any Authorized
Representative’s or Secured Party’s rights to receive its ratable share of
proceeds of any of the Collateral, or any part thereof, under the terms of this
Agreement and the Security Documents, shall not be diminished or affected in any
way by its right to receive proceeds of any right of setoff, or payment upon a
guaranty or from any other source.

(b) At any time prior to the Discharge of the Secured Obligations and after
(i) the commencement of any Insolvency or Liquidation Proceeding in respect of
any Loan Party or (ii) (A) the Credit Agreement Obligations, Additional Secured
Obligations or the Secured Hedge Obligations have become due and payable in full
(whether at maturity, upon acceleration or otherwise) or any Secured Obligations
in respect of the Credit Agreement Obligations, Additional Secured Obligations
or the Secured Hedge Obligations have not been paid when due and (B) a Remedy
Instruction has been provided by the Required Voting Parties, no payment of
money (or the equivalent of money) shall be made from the proceeds of Collateral
to the Collateral Agent for the benefit of any Secured Party or to any holder of
any Secured Obligations, except as provided for in Section 4.05(a); provided,
however, that nothing in this Section 2.05(b) shall prohibit any cash or funds
on deposit in the Lock-Up Account to be distributed to the Lenders in accordance
with the applicable terms of the Financing Documents and no other Secured Party
other than the Lenders shall be entitled to receive distributions of any cash or
funds on deposit in the Lock-Up Account.

 

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Section 2.06. Refinancings of Credit Agreement and Additional Credit Documents.

(a) Subject to the limitations set forth in the applicable Credit Documents (if
any), each Loan Party and each Secured Party acknowledges and agrees that the
Credit Agreement may be Refinanced in accordance with this Section 2.06(a). At
any time concurrently with or after the Discharge of Secured Obligations (or the
Discharge of Secured Obligations other than Additional Secured Obligations), the
Borrower thereafter enters into a Refinancing of the Credit Agreement (the
“Replacement Credit Agreement”) and any related Financing Document (as defined
in such Replacement Credit Agreement), then such Discharge of Secured
Obligations (or the Discharge of Secured Obligations other than Additional
Secured Obligations), as applicable, shall automatically be deemed not to have
occurred for purposes of this Agreement (other than with respect to any actions
taken as a result of the occurrence of such first Discharge of Secured
Obligations and (or Discharge of Secured Obligations other than Additional
Secured Obligations), the Replacement Credit Agreement and related Financing
Documents and the obligations under such Replacement Credit Agreement and
related Financing Documents shall automatically be treated as “Secured
Obligations”, “Credit Agreement Obligations”, “Credit Agreement”, and “Financing
Documents”, as applicable, and the lenders and agents party thereto “Lenders”,
“Secured Parties”, “Authorized Representatives” and “Agent Related Persons”, as
applicable, for all purposes of this Agreement, including the Lien priorities
and rights with respect to the Collateral set forth herein, and the new facility
agent thereunder (the “New Facility Agent”) shall automatically be deemed to be
the “Facility Agent” hereunder for all purposes of this Agreement.

(b) Upon termination of the Credit Agreement, including in connection with any
amendment and restatement or Refinancing, the Liens securing the Hedge
Obligations and the Additional Secured Obligations shall survive.

(c) Any Series of Additional Secured Obligations may be Refinanced without
affecting the priorities set forth in Section 4.05 or the provisions of this
Agreement defining the relative rights of any Series of Secured Obligations;
provided that the Authorized Representative of the holders of any such
Refinanced Additional Secured Obligations shall have executed a Joinder
Agreement on behalf of the holders of such Refinanced Secured Obligations.

Section 2.07. Release of Liens on Collateral. The Collateral Agent’s Liens upon
the Collateral may be released:

(a) in whole, upon the Discharge of the Secured Obligations;

(b) as to any Collateral that is released, sold, transferred or otherwise
disposed of by any Loan Person to a Person that is not (either before or after
such release, sale, transfer or disposition) the Borrower or any other Loan
Party in a transaction or other circumstance that complies with the terms of the
Credit Documents (for so long as any Credit Document is in effect) and is
permitted by all of the other Credit Documents, at the time of such release,
sale, transfer or other disposition or to the extent of the interest released,
sold, transferred or otherwise disposed of;

(c) as to a release of less than all or a material portion of the Collateral, at
any time prior to the Discharge of Secured Obligations, if consent to the
release of all Liens on such Collateral has been given by the Required Voting
Parties; and

(d) as to a release of all or any material portion of the Collateral (other than
pursuant to clause (a) above), if consent to release of that Collateral has been
given by the Unanimous Voting Parties.

 

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Article 3. Decision Making; Voting; Notice and Procedures.

Section 3.01. Decision Making.

(a) Subject to Section 4.02 and except for any action that may be taken
unilaterally by a Secured Party as expressly provided in any Credit Document, no
Secured Party may exercise or enforce any right, remedy, power or discretion,
give any consent or any waiver, or make any determination under or in respect of
any provisions of any Credit Documents, except in accordance with this
Agreement. In connection with any action permitted to be taken unilaterally by
the Collateral Agent pursuant to the express provisions of any Credit Document,
nothing herein shall preclude the Collateral Agent from consulting such Secured
Parties as the Collateral Agent may in its discretion deem desirable.

(b) Each decision made in accordance with the terms of this Agreement shall be
binding upon each of the Secured Parties.

Section 3.02. Voting Generally. Where, in accordance with this Agreement or any
other Credit Document, the modification, approval or other direction of the
Required Voting Parties is required, the determination of whether such
modification, approval or direction should be granted or withheld shall be
determined by an Intercreditor Vote.

Section 3.03. Intercreditor Votes: Each Party’s Entitlement to Vote.

(a) Except as otherwise provided in this Section 3.03, each Voting Party shall
be entitled to vote in each Intercreditor Vote under this Agreement.

(b) Unless and until any Interest Rate Hedge Bank shall have delivered to the
Collateral Agent and each Secured Party a Hedge Termination Certificate, such
Interest Rate Hedge Bank shall not have (i) any voting rights with respect to
Secured Obligations arising under any Interest Rate Hedging Agreement to which
it is a party or (ii) any voting rights with respect to any Intercreditor Vote;
provided that any such Interest Rate Hedge Bank shall at all times (subject to
Section 3.03(c) and 3.03(d)) be a Voting Party for purposes of the definition of
“Unanimous Voting Parties” in Section 1.01 hereof and for purposes of clauses
(i) and (ii) of the proviso contained in Section 9.03. If, after the date of
this Agreement, any Person becomes an Interest Rate Hedge Bank and such Person
has not previously executed a counterpart of this Agreement or a Joinder
Agreement in its capacity as an Interest Rate Hedge Bank, such Person shall
execute and deliver to the Collateral Agent (x) a Joinder Agreement and (y) such
other documentation as the Collateral Agent may reasonably request to evidence
the due authorization, execution and delivery of this Agreement by such
Person. By entering into or joining this Agreement, each Interest Rate Hedge
Bank shall be deemed to have agreed to be bound by the provisions set forth in
the other Financing Documents to which the Interest Rate Hedge Banks or the
Collateral Agent, on behalf of the Secured Parties, is a party.

(c) None of (i) any Affiliate of the Borrower or any Member that from time to
time holds any Commitment, any Loan or any other interest in a Secured
Obligation (other than, subject to Section 10.01 of the Credit Agreement and
Section 9.03 hereunder, Macquarie Affiliates in their respective capacity as a
Lender and Macquarie Bank Limited in its capacity as an Interest Rate Hedge
Bank) or (ii) any Lender that has agreed, directly or indirectly, to vote or
otherwise act at the direction or subject to the approval or disapproval of any
Person identified in clause (i) (each a “Non-Voting Lender”) shall be entitled
to participate in any Intercreditor Vote, and the Collateral Agent in
determining the percentage of votes cast shall deem each Non-Voting Lender to
have voted proportionately in accordance with the votes of the Lenders
thereunder entitled to vote.

(d) Notwithstanding any provision of this Agreement to the contrary, Macquarie
Bank Limited, solely in its capacity as an Interest Rate Hedge Bank, shall not
be entitled to vote on any matter that is subject to the vote of the Unanimous
Voting Parties or be entitled to cast any “tie-breaker” vote on any matter.

Section 3.04. Intercreditor Votes: Votes Allocated to Each Party.

(a) Each Voting Party, if entitled to cast a vote with respect to the matter
being considered, shall have the following number of votes in such Intercreditor
Vote:

(i) with respect to each Lender, a number of votes equal to the sum of the Total
Outstandings represented by or owed to such Lender;

 

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(ii) from and after the delivery of a Hedge Termination Certificate, with
respect to each Interest Rate Hedge Bank, a number of votes equal to the
Settlement Amount, if any, owing to such Interest Rate Hedge Bank set out in
such Hedge Termination Certificate; and

(iii) with respect to each Additional Secured Party with respect to any Series
of Additional Secured Obligations, a number of votes equal to the sum of the
Total Outstandings represented by or owed to such Additional Secured Parties
under such Series of Additional Secured Obligations.

(b) In calculating the Voting Party Percentage consenting to, approving, waiving
or otherwise providing direction with respect to a decision, the number of votes
cast in favor of the proposed consent, approval, waiver, direction or other
action shall be divided by the total number of votes entitled to be cast with
respect to such matter. The Secured Parties (including any Secured Party that
becomes a party hereto after the date hereof) hereby waive any and all rights
they may have to object to or seek relief from the decision of the Voting
Parties voting with respect to any matter and agree to be bound by such
decision. Nothing contained in this Section 3.04(b) shall preclude any Voting
Party from participating in any re-voting or further voting relating to such
matter.

Section 3.05. [Reserved].

Section 3.06. Exercise of Discretion With Respect to Intercreditor Aspects of
the Credit Documents. (a) Unless an Event of Default or Hedge Default has
occurred and is continuing, and only to the extent in all cases that the
discretion exercised by or the actions taken by the Collateral Agent could not
reasonably be expected to result in an Event of Default or Hedge Default or have
a material adverse effect on the interests of any Secured Party (but, for the
avoidance of doubt, with the consent of the Borrower or Parent, as applicable to
the extent such consent is required under the applicable Security Document), the
Collateral Agent may, without obtaining the consent of the Required Voting
Parties or any other Secured Party other than as set forth in Section 3.07,
modify any Security Document to which it is a party or this Agreement to
(i) cure any ambiguity or to cure, correct or supplement any provision contained
therein which is inconsistent with any other provisions contained therein ,
(ii) make, complete or confirm any grant of Collateral permitted or required by
this Agreement or the Security Documents or any release of any Collateral
permitted under this Agreement or (iii) to make changes that would provide
additional benefits or rights to the Secured Parties.

(b) Notwithstanding the other provisions of Section 9.03 or any other provision
of the Security Documents, the Borrower, the Parent and the Collateral Agent (at
the direction of the Facility Agent) and, following a Majority Non-Controlling
Voting Party Enforcement Date, the Authorized Representative for the Majority
Non-Controlling Voting Parties at such time) may (but shall not be obligated to)
amend or amend and restate this Agreement without the consent of any other
Secured Party in order to provide for Additional Secured Obligations of the Loan
Parties and liens securing such Additional Secured Obligations on all or an
portion of the Collateral with a priority junior to that of the Secured Parties,
so long as the incurrence of such obligations and Liens is not prohibited by the
terms of any Credit Document. The Borrower, the Parent and the Collateral Agent
may (but shall not be obligated to) amend, modify or supplement this Agreement
and/or any Security Document without the consent of any Secured Party, as may be
necessary from time to time in the reasonable discretion of the Collateral Agent
and the Borrower, to effect the provisions of Sections 2.06 and 9.09 of this
Agreement.

Section 3.07. Certain Modifications by the Secured Parties. The Secured Parties
may at any time and from time to time in accordance with the terms of the
applicable Credit Documents to which they are a party, without any consent of or
notice to any other Secured Party (but, for the avoidance of doubt, with the
consent of the Borrower or Parent, as applicable to the extent such consent is
required under the applicable Credit Document) and without impairing or
releasing the obligations of any Person under this Agreement: (i) amend the
Credit Document to which such Person is a party in accordance with the terms
thereof, (ii) release anyone liable in any manner under or in respect of the
Secured Obligations owing under the Credit Document to which such Person is a
party (but only in respect of such Secured Obligations) and (iii) waive any
provisions of any Credit Document to which such Person is a party (in each case,
provided such amendment or waiver shall not materially and adversely affect the
rights of any other Person under this Agreement).

 

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Section 3.08. Effect of Amendment on Collateral Agent. No party hereto shall
amend any provision of any Credit Document that materially affects the
Collateral Agent without the written consent of the Collateral Agent.

Section 3.09. Notification of Matters.

(a) If at any time (x) the Collateral Agent proposes to exercise any discretion
conferred on it under any Credit Document, (y) any Secured Party, in accordance
with this Agreement, notifies the Collateral Agent of a matter with respect to
which it believes the Collateral Agent should exercise its discretion or (z) the
Collateral Agent becomes aware (whether on its own or as a consequence of any
notification from a Secured Party) of any matter requiring a determination or
vote by the Secured Parties under this Agreement, then the Collateral Agent
shall promptly notify each other Secured Party of the matter in question,
specifying:

(i) if applicable, the manner in which the Collateral Agent proposes to exercise
its discretion;

(ii) the Required Voting Parties (if any) required for such determination or
vote; and

(iii) if applicable, the time period determined by the Collateral Agent within
which each Secured Party must provide it with instructions in relation to such
matter.

(b) The Collateral Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Hedge Default, unless the Collateral Agent shall
have received written notice from a Secured Party or the Borrower referring to
this Agreement, describing such Default or Hedge Default and stating that such
notice is a “notice of default.” The Collateral Agent will notify the Secured
Parties of its receipt of any such notice. The Collateral Agent shall take such
action with respect to any Remedies Event of Default as may be directed by the
Required Voting Parties in accordance with this Agreement; provided that unless
and until the Collateral Agent has received any such direction, the Collateral
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to a Event of Default or Hedge Default as it
shall deem advisable or in the best interest of the Secured Parties.

Section 3.10. Notice of Amounts Owed. In the event that the Collateral Agent is
instructed by the Required Voting Parties to proceed to foreclose upon, collect,
sell or otherwise dispose of or take any other action with respect to any or all
of the Collateral or to enforce any remedy under any other Credit Document, then
upon the request of the Collateral Agent, each Secured Party shall promptly
notify the Collateral Agent in writing, as of any time that the Collateral Agent
may reasonably specify in such request, of (i) the aggregate amount of the
respective Secured Obligations owing to such Secured Parties as of such date,
(ii) the components of such Secured Obligations and (iii) such other information
as the Collateral Agent may reasonably request.

Article 4. Default; Remedies.

Section 4.01. Notice of Defaults. Upon the occurrence of and at any time during
the continuation of a Default or an Event of Default or Hedge Default, if the
Authorized Representative of the applicable Credit Document under which such
Default, Event of Default or Hedge Default has occurred desires that the
Collateral Agent take action with respect to the Collateral, then such
Authorized Representative shall give to the Collateral Agent, the Controlling
Authorized Representative and each other Authorized Representative written
notice of such Default, Event of Default or Hedge Default, as applicable (a
“Notice of Default”). Each such Notice of Default shall specifically refer to
this Section 4.01 and shall describe such Default or Event of Default or Hedge
Default in reasonable detail (including the date of occurrence and a description
of the nature of any remedies such Authorized Representative is entitled to seek
as provided by the applicable Credit Document, the Security Documents, this
Agreement or applicable Law. Upon receipt by the Collateral Agent of any such
notice, it shall promptly send copies thereof to each Authorized Representative.

Section 4.02. Acceleration; Termination. Notwithstanding any provision to the
contrary in this Agreement, (a) the applicable Lenders may, at any time after
the occurrence and during the continuance of an Event of Default under the
Financing Documents, declare the unutilized Commitments terminated and
accelerate the Credit Agreement Obligations in accordance with the terms of the
Credit Agreement, (b) the applicable Additional

 

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Secured Parties under any Series of Additional Credit Obligations may, at any
time after the occurrence and during the continuance of an Event of Default
under the applicable Additional Credit Document, terminate all commitments and
accelerate such Additional Obligations under the applicable Additional Credit
Documents, and (c) any applicable Interest Rate Hedge Bank may at any time after
the occurrence and during the continuance of a Hedge Default cause the early
termination of the relevant Interest Hedging Agreement in accordance with the
terms thereof. No Remedies Instruction will be required to be taken or delivered
in respect of such Event of Default or Hedge Default, as the case may be, prior
to the applicable Lenders, any applicable Additional Secured Parties or any
applicable Interest Rate Hedge Bank, as the case may be, taking such action.

Section 4.03. Instructions Upon Event of Default.

(a) At any time, if a Remedies Event of Default has occurred and is continuing
and has not been rescinded or waived, the Controlling Authorized Representative
and the Required Voting Parties shall have the exclusive right to give the
Collateral Agent a Remedies Instruction in respect of such Remedies Event of
Default. The Collateral Agent shall follow the directions of the Required Voting
Parties with respect to the time, method and place of taking any action
requested. The Collateral Agent shall be entitled to rely conclusively on,
without independent verification, any written certification from any Authorized
Representative that from time to time certifies to the Collateral Agent that
(i) it is the Controlling Authorized Representative and (ii) it has the
exclusive right to deliver a Remedies Instruction.

(b) If the Collateral Agent has received a copy of a Remedies Instruction from
the Required Voting Parties and has not received written notice from the
Required Voting Parties that such Remedies Instruction has been withdrawn, the
Collateral Agent shall have the right, on behalf of the Secured Parties, to take
any and all actions and to exercise any and all rights, remedies and options
that it may have under any of the Security Documents (including any direction
contained in the Remedies Instruction or in a separate instrument in writing
executed and delivered to the Collateral Agent); provided, that, if requested by
the Collateral Agent, the Collateral Agent shall have received adequate security
or indemnity as provided in Section 2.02(c).

(c) The Collateral Agent shall not be obligated to follow any Remedies
Instruction received pursuant to Section 4.03(a) or otherwise under the Security
Documents to the extent the Collateral Agent has received an opinion of
independent counsel addressed to it to the effect that such Remedies Instruction
appear to be in conflict with any applicable Law or this Agreement or any other
Credit Document or could result in the Collateral Agent’s being subject to
(i) criminal liability or (ii) civil liability or civil litigation for which it
has not received adequate indemnity under Section 2.02(c) in any jurisdiction in
question; provided, however, under no circumstances shall the Collateral Agent
be liable for acting or refraining from acting in accordance with the Remedies
Instruction of the Required Voting Parties.

Section 4.04. Remedies.

(a) No remedy conferred upon or reserved to the Collateral Agent in this
Agreement or in the other Credit Documents is intended to be exclusive of any
other remedy or remedies, but every such remedy shall be cumulative and shall be
in addition to every other remedy conferred in this Agreement or in the other
Credit Documents or now or hereafter existing at law or in equity or by statute.

(b) No delay or omission of the Collateral Agent to exercise any right, remedy
or power accruing upon any Event of Default or Hedge Default shall impair any
such right, remedy or power or shall be construed to be a waiver of or
acquiescence in any Event of Default or Hedge Default. Every right, power and
remedy given by this Agreement, any Security Document or any other Credit
Document to the Collateral Agent may be exercised from time to time and as often
as may be deemed expedient by the Collateral Agent.

(c) All suits or proceedings to assert claims upon or under this Agreement and
the other Credit Documents to which the Collateral Agent is a party shall be
brought by the Collateral Agent in its name as Collateral Agent and any recovery
of judgment shall be held as part of the Collateral.

 

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Section 4.05. Distribution of Collateral Proceeds.

(a) Application of Proceeds. Except as otherwise herein expressly provided, the
proceeds of any collection, sale or other realization of all or any part of the
Collateral pursuant hereto and the Security Documents, and any other cash at the
time held by the Collateral Agent under this Article 4, shall be applied by the
Collateral Agent:

First, to the payment of the costs and expenses of such exercise of remedies,
including reasonable out-of-pocket costs and expenses of the Agents, the
reasonable fees and expenses of their agents and counsel and all other
reasonable expenses incurred and advances made by the Agents in that connection;

Next, to the payment in full of the remaining Secured Obligations equally and
ratably in accordance with their respective amounts then due and owing in
respect of the Credit Documents, or as the Secured Parties holding the same may
otherwise unanimously agree; and

Finally, subject to the rights of any other holder or holders of any Lien on the
relevant Collateral, to the payment to the Borrower, or its respective
successors or assigns, or as a court of competent jurisdiction may direct, of
any surplus then remaining.

(b) Borrower Remains Obligated. No sale or other disposition of all or any part
of the Collateral pursuant to the Security Documents shall be deemed to relieve
the Borrower of its obligations under any Credit Document to which it is a party
except to the extent the proceeds thereof are applied to the payment of the
Secured Obligations.

(c) As used in this Section 4.05, “proceeds” of the Collateral means cash,
securities and other property realized in respect of, and distributions in kind
of, the Collateral, including any securities entitlements and such proceeds of
the Collateral received under any reorganization, liquidation or adjustment of
debt of the Borrower on any of the Collateral, it being understood and agreed by
each of the parties hereto that any such “proceeds” in respect of funds or
property credited to the Lock-Up Account shall be the sole and exclusive
Collateral of the Lenders and shall be applied solely toward payment of the
Credit Agreement Obligations in accordance with the applicable provisions of the
Finance Documents.

(d) If any Authorized Representative or any holder of any Secured Obligation
collects or receives any proceeds of such foreclosure, collection or other
enforcement that should have been applied to the payment of the Secured
Obligations in accordance with clause (a) of Section 4.05, whether after the
commencement of an Insolvency or Liquidation Proceeding or otherwise, such
Authorized Representative or such Secured Party, as the case may be, will
forthwith deliver the same to the Collateral Agent, for the account of all
Secured Parties, to be applied in accordance with clause (a) of
Section 4.05. Until so delivered, such proceeds will be held by that Authorized
Representative or that Secured Party, as the case may be, for the benefit of all
Secured Parties.

(e) This Section 4.05 is intended for the benefit of, and will be enforceable as
a third party beneficiary by, each present and future Secured Party, each
present and future Authorized Representative and the Collateral Agent as holder
of the Liens.

(f) In connection with the application of proceeds pursuant to clause (a) of
Section 4.05, except as otherwise directed by the Required Voting Parties, the
Collateral Agent may sell any non-cash proceeds for cash prior to the
application of the proceeds thereof.

(g) If, in any Insolvency or Liquidation Proceeding, the Collateral Agent’s
security interest under the Security Documents is enforced with respect to some,
but not all, of the Secured Obligations then outstanding, the Collateral Agent
shall nonetheless apply the proceeds of the Collateral for the benefit of each
Secured Party in the proportions and subject to the priorities specified
herein. To the extent that the Collateral Agent distributes proceeds collected
with respect to Secured Obligations held by one Secured Party or on behalf of
Secured Obligations held by a second holder, the first holder shall be deemed to
have purchased a participation in the Secured Obligations held by the second
holder, or shall be subrogated to the rights of the second holder to receive any
subsequent payments and distributions made with respect to the portion thereof
paid or to be paid by the application of such proceeds.

 

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Section 4.06. Sharing. The parties hereto expressly acknowledge and agree that
it is the intention of the Secured Parties, in committing to extend and in
extending credit to the Borrower, that the proceeds of the Collateral and the
proceeds of any action taken pursuant to a Remedies Instruction are to be
distributed equally among the Secured Parties pro rata according to the
percentage of the aggregate Secured Obligations held by each such Secured Party
and, in each case such proceeds shall be distributed, applied or disposed of in
accordance with this Article 4, and the Secured Parties, as among themselves,
agree that, except as otherwise expressly provided herein, such proceeds shall
be distributed on such basis.

Section 4.07. Insolvency or Liquidation Proceedings. (a) In any Insolvency or
Liquidation Proceeding and prior to the Discharge of Obligations, the Collateral
Agent (acting at the direction of the Required Voting Parties) on behalf of all
Secured Parties and Authorized Representatives, may consent to any order:

(i) for use of cash collateral;

(ii) approving a debtor-in-possession financing secured by a Lien upon any
property of the estate in such Insolvency or Liquidation Proceeding;

(iii) granting any relief on account of Secured Obligations as adequate
protection (or its equivalent) for the benefit of the Secured Parties in the
Collateral subject to Liens granted to the Collateral Agent, for the benefit of
the Secured Parties (it being understood that payments or distributions
comprised of any such adequate protection shall not constitute “proceeds” of
Collateral for purposes of Section 4.05(c) or otherwise); or

(iv) relating to a sale of assets of any Loan Party that provides, to the extent
the Collateral sold is to be free and clear of Liens, that all Liens granted to
the Collateral Agent, for the benefit of the Secured Parties will attach to the
proceeds of the sale;

provided, however, that any Secured Party shall retain the right to object to
any cash collateral, debtor-in-possession financing or adequate protection order
to the extent such order provides for priming of Liens over any Collateral if
the terms thereof, including the terms of adequate protection (if any) granted
to the Secured Parties in connection therewith, do not provide for materially
equal treatment to all Secured Parties.

(b) Unless at the direction of, or as consented to by, the Required Voting
Parties, the Secured Parties will not file or prosecute in any Insolvency or
Liquidation Proceeding any motion for adequate protection (or any comparable
request for relief) based upon their interest in the Collateral under the Liens
granted to the Collateral Agent, for the benefit of the Secured Parties, except
that, without any action by the Required Voting Parties, they may vote their
claims in respect of the Series of Secured Obligations owed to them in
connection with, and have their right to object to, the confirmation of any plan
of reorganization or similar dispositive restructuring plan to the extent any
such action is not inconsistent with their obligations under this Agreement.

(c) If any Secured Party is required in any Insolvency or Liquidation Proceeding
or otherwise to turn over or otherwise pay to the estate of the Borrower or any
Loan Party for any reason, including without limitation, because it was found to
be a fraudulent or preferential transfer, any amount paid in respect of the
Secured Obligations, whether received as proceeds of security, enforcement of
any right of set-off or otherwise, then such Secured Party shall be entitled to
a reinstatement of the Secured Obligations with respect to all such recovered
amounts. In such event, (i) the Discharge of Secured Obligations or Discharge of
Credit Agreement Obligations, as applicable, shall be deemed not to have
occurred and (ii) if this Agreement shall have been terminated prior to such
recovery or avoidance action, this Agreement shall be reinstated in full force
and effect, and such prior termination shall not diminish, release, discharge,
impair or otherwise affect the obligations of the parties hereto from such date
of reinstatement.

Article 5. Rights of Collateral Agent.

Section 5.01. (a) The Collateral Agent may execute any of its duties under any
Security Document by or through agents, sub-agents or attorneys-in-fact and
shall be entitled to rely on the advice of counsel (including counsel to the
Borrower) concerning all matters pertaining to such duties. The Collateral Agent
shall not be responsible for the negligence or misconduct of any agent or
sub-agent or attorney-in-fact that it selects in the absence of gross negligence
or willful misconduct (as determined in the final judgment of a court of
competent jurisdiction).

 

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(b) Neither the Collateral Agent nor its Affiliates nor any of their respective
officers, directors, employees, agents or attorneys-in-fact shall be (i) liable
to any of the Secured Parties for any action lawfully taken or omitted to be
taken by it hereunder or under or in connection with any Security Document
(except for its gross negligence, willful misconduct or unlawful acts, as
determined by the final judgment of a court of competent jurisdiction, in
connection with its duties expressly set forth herein), or (ii) responsible in
any manner to any of the Secured Parties for any recitals, statements,
representations or warranties made by the Borrower or any other Loan Party or
any representative of any thereof contained in any Credit Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Collateral Agent under or in connection with, any Credit
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of the Credit Documents, or the perfection or priority of any
Lien or security interest created or purported to be created under the Security
Documents, or for any failure of the Borrower or any other Loan Party to perform
their obligations thereunder. The Collateral Agent as such shall not be under
any obligation to any Secured Party to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, any Credit Document or to inspect the properties, books or records of the
Borrower or any other Loan Party.

(c) The Collateral Agent shall be entitled to rely conclusively, and shall be
fully protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, telecopy, electronic mail message, telex or
teletype message, statement, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including counsel to
the Borrower), independent accountants and other experts selected by the
Collateral Agent. The Collateral Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any other Credit
Document in accordance with a request or consent of the Required Voting Parties
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all the Secured Parties.

(d) The Borrower agrees to pay, within 15 days after written demand, to the
Collateral Agent the amount of any and all reasonable and documented
out-of-pocket expenses, including the reasonable and documented Attorney Costs
of one New York counsel and one local state counsel in each other applicable
jurisdiction, and the reasonable costs of any experts and agents which the
Collateral Agent may reasonably incur in connection with (i) the administration
of the Security Documents, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement (whether through negotiations, legal proceedings or
otherwise) of any of the rights of the Collateral Agent or the Secured Parties
under any of the Security Documents or (iv) the failure by the Borrower, any
other Loan Party or any Affiliate thereof to perform or observe any of the
provisions of the Security Documents.

(e) Whether or not the transactions contemplated hereby are consummated, the
Secured Parties shall indemnify upon demand the Collateral Agent (to the extent
the Collateral Agent is required to be but is not reimbursed by or on behalf of
the Loan Parties and without limiting the obligation of the Loan Parties to do
so), pro rata (at the time such indemnity is sought), and hold harmless the
Collateral Agent from and against any and all Indemnified Liabilities incurred
by it; provided that no Secured Party shall be liable for the payment to the
Collateral Agent of any portion of such Indemnified Liabilities resulting from
the gross negligence or willful misconduct of the Collateral Agent as determined
by the final judgment of a court of competent jurisdiction; provided further
that no action taken in accordance with the directions of the Controlling
Authorized Representative or the Required Voting Parties shall be deemed to
constitute gross negligence or willful misconduct for purposes of this
Section 5.01(e). In the case of any investigation, litigation or proceeding
giving rise to any Indemnified Liabilities, this Section 5.01(e) applies whether
any such investigation, litigation or proceeding is brought by any Secured Party
or any other Person. The undertaking in this Section 5.01(e) shall survive
termination of the Secured Obligations, the payment of all other Obligations and
the resignation of the Collateral Agent.

(f) Whether or not the transactions contemplated hereby are consummated, the
Borrower shall indemnify and hold harmless the Collateral Agent (“Indemnified
Secured Party”) from and against any and all liabilities, obligations, losses,
damages, penalties, claims, demands, actions, judgments, suits, costs, expenses
and disbursements (including Attorney Costs) of any kind or nature whatsoever
which may at any time be imposed on, incurred by or asserted against the
Indemnified Secured Party in any way relating to or arising out of or in

 

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connection with (a) the execution, delivery, enforcement, performance or
administration of any Credit Document or any other agreement, letter or
instrument delivered in connection with the transactions contemplated thereby,
(b) any Commitment or Loan or the use or proposed use of the proceeds therefrom,
or (c) any actual or alleged presence or release of Hazardous Materials on or
from any property currently or formerly owned or operated by the Borrower or any
Subsidiary, or any Environmental Liability related in any way to the Borrower or
any Subsidiary, or (d) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory (including any investigation of, preparation
for or defense of any pending or threatened claim, investigation, litigation or
proceeding), in all cases, whether or not caused by or arising, in whole or in
part, out of the negligence of the Indemnified Secured Party; provided that such
indemnity shall not, as to the Indemnified Secured Party, be available to the
extent that such liabilities, obligations, losses, damages, penalties, claims,
demands, actions, judgments, suits, costs, expenses or disbursements resulted
from the gross negligence, bad faith or willful misconduct of the Indemnified
Secured Party. Neither the Indemnified Secured Party nor the Borrower shall have
any liability for any special, punitive, indirect or consequential damages
relating to this Agreement or any other Credit Document or arising out of its
activities in connection herewith or therewith (whether before or after the
Financial Closing Date). In the case of an investigation, litigation or other
proceeding to which the indemnity in this Section 5.01(f) applies, such
indemnity shall be effective whether or not any of the transactions contemplated
hereunder or under any of the other Credit Documents is consummated. All amounts
due under this Section 5.01(f) shall be paid within ten (10) Business Days after
demand therefor. The agreements in this Section 5.01(f) shall survive the
resignation of the Collateral Agent, the replacement of any Secured Party, the
termination of any Secured Obligation and the repayment, satisfaction or
discharge of all the other Obligations.

(g) Each Secured Party acknowledges that no Agent-Related Person has made any
representation or warranty to it, and that no act by any Agent hereafter taken,
including any consent to and acceptance of any assignment or review of the
affairs of the Borrower or any Affiliate thereof, shall be deemed to constitute
any representation or warranty by any Agent-Related Person to any Secured Party
as to any matter, including whether Agent-Related Persons have disclosed
material information in their possession. Each Secured Party represents to each
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Borrower Group, and all applicable bank or other regulatory Laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Borrower under the Credit Documents. Each
Secured Party also represents that it will, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Credit Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property,
financial and other condition and creditworthiness of the Borrower. Except for
notices, reports and other documents expressly required to be furnished to the
Secured Parties by any Agent herein, such Agent shall not have any duty or
responsibility to provide any Secured Party with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Borrower or any of its Affiliates which may
come into the possession of any Agent-Related Person.

(h) Barclays Bank PLC and its Affiliates may make loans to, accept deposits
from, acquire Equity Interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with the Borrower and
its Affiliates as though Barclays Bank PLC were not the Collateral Agent
hereunder and without notice to or consent of the Secured Parties. The Secured
Parties acknowledge that, pursuant to such activities, Barclays Bank PLC or its
Affiliates may receive information regarding the Borrower or its Affiliates
(including information that may be subject to confidentiality obligations in
favor of the Borrower or such Affiliates) and acknowledge that the Collateral
Agent shall be under no obligation to provide such information to them.

Article 6. Resignation or Removal of the Collateral Agent.

The Collateral Agent may resign as Collateral Agent upon ten days’ notice to
each of the Authorized Representatives and the Borrower and may be removed at
any time with or without cause by the Required Voting Parties, with any such
resignation or removal to become effective only upon the appointment of a
successor collateral agent under this Article 6. If the Collateral Agent shall
resign or be removed as Collateral

 

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Agent, then the Facility Agent and the Required Voting Parties shall (and if no
such successor shall have been appointed within 30 days of the Collateral
Agent’s notice of resignation or removal, the Collateral Agent may) appoint a
successor collateral agent for the Secured Parties, which successor collateral
agent (so long as no Default or Hedge Default has occurred and is continuing)
shall be reasonably acceptable to the Borrower, whereupon such successor
collateral agent shall succeed to the rights, powers and duties of the
Collateral Agent, and the term “Collateral Agent” shall mean such successor
collateral agent effective upon its appointment, and the former Collateral
Agent’s rights, powers and duties as Collateral Agent shall be terminated,
without any other or further act or deed on the part of such former Collateral
Agent (except that the former Collateral Agent shall deliver all Collateral then
in its possession to such successor collateral agent and execute such documents
and instruments as may be necessary to transfer the Liens of record under the
Security Documents in favor of the Collateral Agent to such successor collateral
agent) or any of the other Secured Parties. After resignation or removal
hereunder as collateral agent, the provisions of this Agreement shall inure to
the former Collateral Agent’s benefit, and continue to be binding upon the
former Collateral Agent, as to any actions taken or omitted to be taken by it
while it was Collateral Agent.

Article 7. No Impairments of Other Rights.

Nothing in this Agreement is intended or shall be construed to impair, diminish
or otherwise adversely affect any other right the Secured Parties may have or
may obtain against the Borrower or any other Loan Party.

Article 8. Termination.

This Agreement shall remain in full force and effect until the Discharge of
Secured Obligations has occurred.

Article 9. Miscellaneous.

Section 9.01. Waiver. No failure on the part of the Collateral Agent or the
other Secured Parties to exercise and no delay in exercising, and no course of
dealing with respect to, any right, remedy, power or privilege under this
Agreement shall operate as a waiver of such right, remedy, power or privilege,
nor shall any single or partial exercise of any right, remedy, power or
privilege under this Agreement preclude any other or further exercise of any
such right, remedy, power or privilege or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges provided
in this Agreement are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.

Section 9.02. Notices. All notices and communications to be given under this
Agreement shall be given or made in writing to the intended recipient at the
address specified below or, as to any party hereto, at such other address as
shall be designated by such party in a notice to each other party hereto. Except
as otherwise provided in this Agreement, all such written notices shall be
mailed, faxed or delivered to the applicable address, facsimile number or
electronic mail address. All such notices and other communications shall be
deemed to be given or made upon the earlier to occur of (i) actual receipt by
the relevant party hereto and (ii) (A) if delivered by hand or by courier, when
signed for by or on behalf of the relevant party hereto; (B) if delivered by
mail, four (4) Business Days after deposit in the mails, postage prepaid; (C) if
delivered by facsimile, when sent and receipt has been confirmed by telephone;
and (D) if delivered by electronic mail, when delivered and receipt has been
confirmed by telephone:

To the Borrower:

Puget Energy Inc.

Level 22, 125 West 55th Street

New York, NY 10019

Attention: Christopher Leslie

Phone: (212) 231-1686

Facsimile: (212) 231-1828

Email: Christopher.Leslie@macquarie.com

 

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To the Facility Agent:

Barclays Bank PLC

745 Seventh Avenue

New York, NY 10019

Phone: 212-412-3752

Fax: 212-412-7600

Attention: Ann Sutton

To the Collateral Agent:

Barclays Bank PLC

745 Seventh Avenue

New York, NY 10019

Phone: 212-526-1126

Fax: 212-526-5115

Attention: Ann Sutton

To each Interest Rate Hedge Bank:

As set forth on the signature page hereto or in the Joinder Agreement to which
such Interest Rate Hedge Bank is a party.

To each Additional Secured Party:

As set forth in the Joinder Agreement to which such Additional Secured Party is
a party.

Section 9.03. Amendments, Etc. (a) Subject to Section 3.03(c) and Section 3.06,
no provision of this Agreement may be modified, supplemented or waived except by
an instrument in writing duly executed by the Collateral Agent acting at the
direction of the Required Voting Parties; provided, however, (i) no amendment,
waiver or consent shall become effective without the prior written consent of
the Required Voting Parties and the Authorized Representative for the affected
Series of Secured Obligations if such amendment, waiver or consent (w) has the
effect of changing the definition of “Required Voting Parties”, the percentage
or composition of Secured Parties required to vote on a matter or this clause
(a)(i)(w)), (x) adversely affects the relative priority of payment due to any
Secured Party under the Credit Documents, whether by way of enforcement or
realization on Collateral or otherwise (including, without limitation, the
priorities set forth in Section 4.05), (y) has the effect of changing
Section 4.06, or (z) materially adversely affects any Series of Secured
Obligations disproportionately as compared to other Series of Secured
Obligations, (ii) no amendment, waiver or consent that has the effect of
changing the definition of “Unanimous Voting Parties” or Section 2.07(d) may be
effectuated without the prior written consent of the Unanimous Voting Parties
and (iii) no amendment, waiver or consent that affects the material rights and
duties of the Borrower shall be effective without the prior written consent of
the Borrower.

(b) No amendment waiver or consent (including, without limitation, any
Intercreditor Vote) of Macquarie Affiliates in such Person’s capacity as a
Lender or Participant (each a “Creditor Side Person”), shall be effective
(x) except, with respect to Loans and Commitments not in excess of $50,000,000
in the aggregate at any time and (y) unless each such Person has in place a Wall
between such Creditor Side Person and any Persons authorized to take action on
behalf of the Borrower (such Persons, “Borrower Side Persons”) such that
information is not shared between a Creditor Side Person and Borrower Side
Persons (other than on arm’s-length, third party terms) and decisions of
Creditor Side Persons are made, and actions taken, independent of considerations
of Borrower Side Persons. Any such modification, supplement or waiver shall be
for such period and subject to such conditions as shall be specified in the
instrument effecting the same and shall be binding upon the Collateral Agent and
each of the other parties hereto, and any such waiver shall be effective only in
the specific instance and for the

 

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purposes for which given. For purposes hereof, “Wall” shall mean with respect to
any Creditor Side Person and Borrower Side Person, such Persons (1) do not have
interlocking officers, directors or employees, (2) have separate offices and
information systems such that a Creditor Side Person does not have access to
non-public information in the possession of a Borrower Side Person (and vice
versa), and (3) have a formalized process or procedure prohibiting the
disclosure of non-public information to the other such Person. A Creditor Side
Person shall provide reasonable evidence of the Wall upon the reasonable request
of a Secured Party or the Collateral Agent.

Section 9.04. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Collateral Agent, the Secured Parties
and their respective successors and permitted assigns. The Collateral Agent may
assign or transfer its rights under this Agreement to any of its Affiliates
without the prior written consent of any party hereto; provided, that the
Collateral Agent shall notify the Borrower in writing of such assignment or
transfer promptly following the effectiveness thereof. Neither the Borrower nor
the Parent may assign or transfer its rights or obligations hereunder.

Section 9.05. Survival. All representations and warranties made in this
Agreement or in any certificate or other document delivered pursuant to or in
connection with this Agreement shall survive the execution and delivery of this
Agreement or such certificate or other document (as the case may be) or any
deemed repetition of any such representation or warranty.

Section 9.06. Severability. Any provision of this Agreement that is prohibited
or becomes unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction, and the parties
hereto shall enter into good faith negotiations to replace such prohibited or
unenforceable provision.

Section 9.07. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be effective for purposes of
binding the parties hereto, but all of which together shall constitute one and
the same instrument.

Section 9.08. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. (a)
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK.

(b) ANY LEGAL ACTION OR PROCEEDING ARISING UNDER THIS AGREEMENT OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS RELATED HERETO,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE BORROWER, EACH AGENT AND EACH SECURED PARTY CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. THE BORROWER, EACH AGENT AND EACH SECURED PARTY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR OTHER DOCUMENT RELATED HERETO.

(c) EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS
AGREEMENT OR ANY SECURITY DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO
THIS AGREEMENT, THE SECURITY DOCUMENTS, OR THE TRANSACTIONS RELATED THERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN
CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT

 

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ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION 9.08(C) WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL
BY JURY.

Section 9.09. Joinder. (a) Each Lender that becomes a “Lender” under the Credit
Agreement (in accordance with the provisions of Section 10.07(b) of the Credit
Agreement) after the date hereof shall become a party to this Agreement upon its
execution of an Assignment and Assumption Agreement contemplated by such
Section 10.07.

(b) The Borrower may designate additional obligations as Additional Secured
Obligations from time to time only if the incurrence of such obligations and the
grant of Liens securing such obligations is permitted under each of the Credit
Agreement and each other Additional Credit Document then in effect and this
Agreement. If so permitted, the Borrower shall only effect such designation by:

(i) delivering to the Collateral Agent and each Authorized Representative,
written notice from an Authorized Officer certifying:

(1) that the Borrower intends to incur additional obligations which shall
constitute Additional Secured Obligations, and specifying the agreement pursuant
to which such obligations will be incurred and designating such agreement as an
“Additional Credit Document” hereunder; and

(2) as to the specific name and address of the Authorized Representative for
such Series of Additional Secured Obligations; and

(ii) causing the Authorized Representative to execute and deliver to the
Collateral Agent and each other Authorized Representative, a Joinder Agreement,
which shall be acknowledged and approved by an Authorized Officer of the
Borrower.

(c) Each notice given by an Authorized Officer pursuant to Section 9.09(b) shall
constitute a representation and warranty by the Borrower that the incurrence of
the Additional Secured Obligations and the grant of Liens securing such
obligations are permitted under each of the Credit Agreement and each Additional
Credit Document then in effect and this Agreement. In signing a Joinder
Agreement, the Collateral Agent and each Authorized Representative shall be
entitled to rely, without inquiry or investigation, upon such representation and
warranty. The Collateral Agent shall not execute and deliver any Joinder
Agreement unless and until such Joinder Agreement has been executed and
delivered by the Borrower, the Parent and the Authorized Representative for such
Additional Secured Obligations.

Section 9.10. Specific Performance. Each Secured Party may demand specific
performance of this Agreement. Each party hereto irrevocably waives any defense
based on the adequacy of a remedy at law and any other defense which might be
asserted to bar the remedy of specific performance in any action which may be
brought by any other Secured Party.

Section 9.11. Agreement for Benefit of Parties Hereto. Except for the Secured
Parties and their respective successors and permitted assigns, nothing in this
Agreement, express or implied, is intended or shall be construed to confer upon,
or to give to, any Person other than the parties hereto and their respective
successors and permitted assigns, and Persons for whom the parties hereto are
acting as agents or representatives, any right, remedy or claim under or by
reason of this Agreement or any covenant, condition or stipulation hereof; and
the covenants, stipulations and agreements contained in this Agreement are and
shall be for the sole and exclusive benefit of the parties hereto and their
respective successors and permitted assigns and Persons for whom the parties
hereto are acting as agents or representatives.

Section 9.12. Integration. This Agreement constitutes the entire agreement and
understanding among the parties to this Agreement with respect to the matters
covered by this Agreement and supersedes any and all prior agreements and
understandings, written or oral, with respect to such matters.

 

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Section 9.13. Original Schedules and Exhibits. Except as otherwise expressly
modified by this Agreement, each of the Schedules, Exhibits and Appendices
attached to the Collateral Agency Agreement, dated as of February 6, 2009
between the parties hereto, shall be deemed attached to, and form a part of,
this Agreement without any amendment, modification or supplement.

[Signature Pages Follow.]

 

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APPENDIX A

FORM OF JOINDER AGREEMENT

Reference is made to that certain Amended and Restated Collateral Agency
Agreement, dated as of May 10, 2010 (the “Collateral Agency Agreement”), among
PUGET ENERGY INC., a Washington corporation, BARCLAYS BANK PLC, as Facility
Agent, BARCLAYS BANK PLC, as Collateral Agent and the other parties thereto.

The undersigned is party to [DESCRIBE INTEREST HEDGING AGREEMENT/ADDITIONAL
CREDIT DOCUMENT].

Pursuant to the terms of [Section 3.03(b)] / [Section 9.09(b)] of the Collateral
Agency Agreement, the undersigned hereby agrees to be bound by the Collateral
Agency Agreement as an [“Interest Rate Hedge Bank”] / [Additional Secured Party]
thereunder.

 

Dated:                      [Insert Name of Party to be Added] By: Name: Title:

 

Address for Notices:

Attn:        [                     ]

Tel No.:  [                    ]

Fax No.:    [                    ]

 

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PUGET ENERGY, INC. By:   Name:   Donald E. Gaines Title:   Vice President
Finance & Treasurer PUGET EQUICO, LLC. By:   Name:   Donald E. Gaines Title:  
Vice President Finance & Treasurer

BARCLAYS BANK PLC,

as Facility Agent

By:   Name:   Ann E. Sutton Title:   Director

BARCLAYS BANK PLC,

as Collateral Agent

By:   Name:   Ann E. Sutton Title:   Director

BARCLAYS BANK PLC,

as Interest Rate Hedge Bank

By:   Name:   Kevin Crealese Title:   Director

Address for Notices  

745 Seventh Avenue

New York, NY 10019

Telephone No.:   (212) 526-1412 Facsimile No.:   (917) 265-1183

COMMERZBANK AG (successor in interest to

DRESDNER BANK AG),

as Interest Rate Hedge Bank

By:   Name:   Mark Schindler Title:   Director By:  

Name:

 

Brian Smith

Title:

 

Managing Director

Address for Notices

 

Commerzbank AG

2 World Financial Center

New York, NY 10281-1050

Attention:

  Legal Department

Telephone No.:

  212.895.5269

Facsimile No.:

  212.208-6174

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Macquarie Bank Limited,

as Interest Rate Hedge Bank

By:

 

Name:

 

Amber Riley

Title:

 

Associate Director

Legal Risk Management

Fixed Income, Currencies and Commodities

By:

 

Name:

 

Russell Gripper

Title:

 

Division Director

Address for Notices

 

Macquarie Bank Limited

1 Martin Place

Sydney NSW 2000

Australia

Attention:

 

Executive Director, Legal Risk

Management Division, Fixed

Income, Currencies and

Commodities

Telephone No.:

  (+61 2) 8232 3333

Facsimile No.:

  (+61 2) 8232 4540

Email:

  ‘ficc.notices@macquarie.com’ and ‘IRDAdvisory@macquarie.com’

 

32

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AMENDMENT NO. 1

TO

AMENDED AND RESTATED COLLATERAL AGENCY AGREEMENT

This AMENDMENT NO. 1 TO AMENDED AND RESTATED COLLATERAL AGENCY AGREEMENT (this
“Amendment”), is made as of February 10, 2012, by JPMORGAN CHASE BANK, N.A.
(“JPMorgan”), in its capacity as successor Collateral Agent. Capitalized terms
used but not otherwise defined herein shall have the respective meanings given
to them in the Amended and Restated Collateral Agency Agreement referred to
below.

WHEREAS, Puget Energy, Inc., as successor to Puget Merger Sub Inc. (the
“Borrower”), is party to that certain Credit Agreement, dated as of May 16,
2008, among the financial institutions from time to time party thereto as
lenders and Barclays Bank PLC, as facility agent (as amended, restated,
supplemented or otherwise modified prior to the date hereof, the “Existing
Credit Agreement”);

WHEREAS, the Borrower, is party to that certain Amended and Restated Collateral
Agency Agreement, dated as of February 6, 2009 and as amended and restated as of
March 31, 2010, among Puget Equico LLC, Barclays Bank PLC, as collateral agent
and Barclays Bank PLC, as facility agent (as amended, restated, supplemented or
otherwise modified prior to the date hereof, the “Agreement”);

WHEREAS, on or about the date hereof, the Borrower repaid in full all of its
Obligations (as defined therein) under the Existing Credit Agreement;

WHEREAS, on the date hereof, the Borrower entered into that certain Credit
Agreement among the financial institutions from time to time party thereto as
Lenders and JPMorgan Chase Bank, N.A., as administrative agent (the
“Administrative Agent”) (as amended, restated, supplemented or otherwise
modified, the “Credit Agreement”);

WHEREAS, pursuant to Section 2.06 of the Agreement, the Lenders signatory hereto
and the Administrative Agent became (i) parties to the Agreement and (ii) the
Required Voting Parties upon the execution of the Credit Agreement;

WHEREAS, pursuant to Article 6 of the Agreement, Barclays Bank PLC resigned as
Collateral Agent as of the date hereof;

WHEREAS, in accordance with Article 6 of the Agreement, the Lenders and the
Administrative Agent, which constitute the Required Voting Parties, have
(i) appointed JPMorgan Chase Bank, N.A., as successor Collateral Agent and
(ii) directed the Collateral Agent to enter into this Amendment in that certain
Credit Agreement, dated as of the date hereof, by and among Borrower, the
Lenders (as defined therein) from time to time party thereto and JPMorgan Chase
Bank, N.A., as Administrative Agent (as defined therein); and

NOW THEREFORE, in consideration of the premises set forth above, the terms and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
have agreed to enter into this Amendment.

SECTION 1. Amendments to Agreement.

(a) The first whereas clause of the Agreement is amended and restated in its
entirety to read as follows:

WHEREAS, the Company (in such capacity, the “Borrower”) has entered into that
certain Credit Agreement, dated as of February 10, 2012, among the financial
institutions from time to time parties thereto as lenders and JPMorgan Chase
Bank, N.A., as the administrative agent (as amended, amended and restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”);

(b) Section 1.02 of the Agreement is amended to add the following new
definitions therein in the appropriate alphabetical order:

“Financing Documents” shall have the meaning specified in the Credit Agreement
or, if applicable, any Replacement Credit Agreement; provided, solely with
respect to any Replacement Credit Agreement, shall mean, if necessary, any
analogous defined term used in place thereof in the Replacement Credit
Agreement.

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“Pledge Agreement” means the Amended and Restated Pledge Agreement, dated as of
February 6, 2009 and amended and restated as of May 10, 2010, from Puget Equico
LLC, as pledgor to Collateral Agent (as amended, restated, supplemented or
otherwise modified from time to time)

“Restricted Lender Affiliate” shall have the meaning specified in the Credit
Agreement.

“Security Agreement” means the Amended and Restated Borrower Security Agreement,
dated as of February 6, 2009 and as amended and restated as of May 10, 2010 and
as further amended as of February 10, 2012, between the Borrower and the
Collateral Agent (as amended, restated, supplemented or otherwise modified from
time to time)

(c) The definitions of “Lock-up Account” and “Macquarie Affiliates” appearing in
Section 1.02 of the Agreement are deleted in their entirety.

(d) Clause (b) of Section 2.02 of the Agreement is amended and restated in its
entirety to read as follows: “[Reserved]”.

(e) Clause (a) of Section 2.05 of the Agreement is amended to (i) delete the
phrase “Secured Document” appearing therein and to replace such phrase with the
phrase “Security Document” and (ii) delete in its entirety the phrase “, the
Facility Agent’s and a Lender’s right to receive its ratable share of any
amounts maintained in the Lock-Up Account,” appearing therein.

(f) Clause (b) of Section 2.05 of the Agreement is amended to delete in its
entirety the proviso appearing therein.

(g) Clause (a) of Section 2.06 of the Agreement is amended to insert the phrase
“, which, for the avoidance of doubt, shall include any analogous administrative
capacity utilized in place thereof in any Replacement Credit Agreement,”
immediately following the phrase “Collateral set forth herein, and the new
facility agent” appearing therein.

(h) Clause (a) of Section 3.01 of the Agreement is amended to delete the phrase
“any provisions of any Credit Documents” appearing therein and replace such
phrase with the phrase “any provision of any Credit Document”.

(i) Clause (c) of Section 3.03 of the Agreement is amended to (i) delete the
section reference “Section 10.01” appearing therein and replace such section
reference with the section reference “Section 9.02” and (ii) delete the phrase
“Macquarie Affiliates” appearing therein and replace such phrase with the phrase
“Restricted Lender Affiliate”.

(j) Clause (c) of Section 4.05 of the Agreement is amended to delete in its
entirety the phrase “it being understood and agreed by each of the parties
hereto that any such “proceeds” in respect of funds or property credited to the
Lock-Up Account shall be the sole and exclusive Collateral of the Lenders and
shall be applied solely toward payment of the Credit Agreement Obligations in
accordance with the applicable provisions of the Finance Documents” appearing
therein.

(k) Section 9.02 of the Agreement is amended to delete in its entirety the
address appearing under the headings “To the Borrower” and to replace such
address with the following address:

Puget Energy, Inc.

10885 NE 4th Street, Suite 1200

Bellevue, WA 98004-5591

Phone: (425) 462-3870)

Facsimile: (424) 462-3300

Attention: Vice President Finance and Treasurer

 

34

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(l) Section 9.02 of the Agreement is amended to delete in their entirety the
addresses appearing under the headings “To the Facility Agent” and “To the
Collateral Agent” and to replace such addresses with the following address:

JPMorgan Chase Bank

10 S. Dearborn Street, 7th Flood

Chicago, IL 60603

Phone: (312) 385-7025

Facsimile: (888) 292-9533

Attention: Nan Wilson

(m) Clause (b) of Section 9.03 of the Agreement is amended and restated in its
entirety to read as follows:

(b) Notwithstanding the foregoing, no waiver or consent of any Restricted Lender
Affiliate shall be required for any amendment, waiver or other modification to
this Agreement pursuant to the terms of this Section 9.03. For the avoidance of
doubt, the foregoing shall not apply to any assignee of, or Person that
purchases participations from, a Restricted Lender Affiliate, other than an
assignee or Participant that constitutes a Restricted Lender Affiliate. The
Borrower agrees that upon request by the Collateral Agent, the Borrower shall
promptly (and in any case, not less than 3 Business Days), prior to the
effectiveness of any amendment, waiver or other modification pursuant to this
Section 9.03, provide to the Collateral Agent a list of all Restricted Lender
Affiliates who are, to the Borrower’s knowledge after due inquiry, holding any
Commitments at such time.

(n) The Agreement is amended to replace each reference to “Barclays Bank PLC”
with “JPMorgan Chase Bank, N.A.”.

(o) The Agreement is amended to replace each reference to “Facility Agent” with
“Administrative Agent”.

(p) Appendix A to the Agreement is deleted in its entirety and replaced with
Exhibit A hereto.

SECTION 2. Conditions of Effectiveness. This Amendment shall become effective as
of the date hereof (the “Effective Date”) when, and only when (i) the Collateral
Agent shall have received an executed counterpart of this Amendment from the
Collateral Agent, the Administrative Agent and each Lender and (ii) the New
Credit Agreement shall become effective in accordance with its terms and
conditions.

SECTION 3. Representations and Warranties. Each of the parties hereto represents
and warrants that this Amendment and the Agreement, as amended by this
Amendment, constitute legal, valid and binding obligations of such party
enforceable against such party in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors’ rights generally and general equitable
principles.

SECTION 4. Reference to and the Effect on the Agreement.

(a) On and after the effective date of this Amendment, each reference in the
Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like
import referring to the Agreement and each reference to the Agreement in any
certificate delivered in connection therewith, shall mean and be a reference to
the Agreement as amended hereby.

(b) Each of the parties hereto hereby agrees that, except as specifically
amended above, the Agreement is hereby ratified and confirmed and shall continue
to be in full force and effect and enforceable, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors’ rights generally and general equitable
principles.

 

35

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SECTION 5. Headings. Section headings in this Amendment are included herein for
convenience only and shall not constitute a part of this Amendment for any other
purpose.

SECTION 6. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart to this Amendment by facsimile, electronic
mail, portable document format (PDF) or similar means shall be effective as
delivery of a manually executed counterpart of this Amendment.

SECTION 7. Governing Law. This Amendment shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

36

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized signatories as of the day and year first
above written.

 

JPMORGAN CHASE BANK, N.A.,

as successor Collateral Agent

By:  

 

  Name:   Title:

--------------------------------------------------------------------------------

ACKNOWLEDGED AS OF THE DATE HEREOF:

 

PUGET ENERGY, INC.,

as the Borrower

By:  

 

  Name:   Title:

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APPENDIX A

FORM OF JOINDER AGREEMENT

Reference is made to that certain Amended and Restated Collateral Agency
Agreement, dated as of February 6, 2009 and as amended and restated as of
March 31, 2010, among PUGET ENERGY, INC., a Washington corporation, PUGET EQUICO
LLC, the other parties from time to time party thereto and JPMORGAN CHASE BANK,
N.A., as successor Collateral Agent (as amended, restated, supplemented or
otherwise modified from time to time, the “Collateral Agency Agreement”).

The undersigned is party to [DESCRIBE INTEREST HEDGING AGREEMENT/ADDITIONAL
CREDIT DOCUMENT].

Pursuant to the terms of [Section 3.03(b)] / [Section 9.09(b)] of the Collateral
Agency Agreement, the undersigned hereby agrees to be bound by the Collateral
Agency Agreement as an [“Interest Rate Hedge Bank”] / [Additional Secured Party]
thereunder.

Dated:             , 20    

 

[Insert Name of Party to be Added]

By:

 

 

  Name:   Title: Address for Notices: Attn: [                    ] Tel No.:
[                    ] Fax No.: [                    ]

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EXHIBIT I

[RESERVED]

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EXHIBIT J

FORM OF SOLVENCY CERTIFICATE

I, [                    ], the [                    ] of Puget Energy, Inc., a
Washington corporation, (the “Borrower”) with responsibility for financial
matters of the Borrower, hereby certify, in my capacity as such and not in my
individual capacity, on behalf of the Borrower that I am the
[                    ] of the Borrower, that I am familiar with the properties,
businesses, assets, finances and operations of the Borrower Group and that I am
duly authorized to execute this Solvency Certificate on behalf of the Borrower,
which is being delivered pursuant to the Credit Agreement, dated as of
February 10, 2012 (as amended, amended and restated, supplemented and/or
modified and in effect from time to time, the “Credit Agreement”), among the
Borrower, the Lenders party thereto from time to time and JPMorgan Chase Bank,
N.A., as Administrative Agent. Capitalized terms used herein but not defined
herein shall have the meanings assigned thereto in the Credit Agreement.

In reaching the conclusions set forth in this Solvency Certificate, I have
carefully reviewed the Loan Documents and the contents of this Solvency
Certificate and, in connection herewith, have taken into consideration all
things necessary or material, and I have made appropriate inquiries and
investigation with responsible officers and employees of the members of the
Borrower Group, in order to make the above and the following certifications.

I hereby further certify that:

l. To the best of my knowledge, on the date hereof, immediately after giving
effect to the consummation of the Permitted Acquisition, the fair value of the
property of the Borrower and its Subsidiaries, taken as a whole, is greater than
the total amount of liabilities (including contingent liabilities) of the
Borrower and its Subsidiaries. With respect to any contingent liabilities, the
amount of contingent liabilities on the date hereof shall be computed as the
amount that, in light of all of the facts and circumstances existing on the date
hereof, represents the amount that can reasonably be expected to become an
actual or matured liability.

2. To the best of my knowledge, on the date hereof, immediately after giving
effect to the consummation of the Permitted Acquisition, the present fair
saleable value of the assets of the Borrower and its Subsidiaries, taken as a
whole, is not less than the amount that will be required to pay the probable
liabilities of the Borrower and its Subsidiaries on their debts as they become
absolute and matured.

3. As of the date hereof, neither the Borrower nor any of its Subsidiaries
intends to incur, nor believes that it will incur, including after giving effect
to the consummation of the Permitted Acquisition, debts or liabilities beyond
the ability of the Borrower and its Subsidiaries, taken as whole, to pay such
debts or liabilities as they mature.

4. To the best of my knowledge, on the date hereof, immediately after giving
effect to the consummation of the Permitted Acquisition, the Borrower and its
Subsidiaries, taken as a whole, is neither engaged in business or in a
transaction, nor about to engage in business or in a transaction, for which the
property of the Borrower and its Subsidiaries, taken as a whole, would
constitute unreasonably small capital.

5. As of the date hereof, after giving effect to the transactions contemplated
by the Permitted Acquisition, the Group FFO Coverage Ratio is at least [2.00] to
1.00, calculated on the basis of revised financial projections, prepared in
accordance with the methodology of the financial projections delivered pursuant
to Section 5.01(c) of the Credit Agreement, for the period of twelve (12) months
after the date of the Permitted Acquisition.

--------------------------------------------------------------------------------

6. As of the date hereof, after giving effect to the transactions contemplated
by the Acquisition, the Leverage Ratio is greater than 0.65 to 1.00, calculated
on the basis of revised financial projections, prepared in accordance with the
methodology of the financial projections delivered pursuant to Section 5.01(c)
of the Credit Agreement, for the period of twelve (12) months after the date of
the Permitted Acquisition.

7. As of the date hereof, no Default or Event of Default shall exist immediately
prior to such Permitted Acquisition or, after giving effect to such Permitted
Acquisition, shall have occurred and be continuing, or would result from the
consummation of the proposed Permitted Acquisition.

[SIGNATURE PAGES FOLLOW]

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Dated:             , 20    

 

PUGET ENERGY, INC. By:  

 

Name:     Title:   Chief Financial Officer

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EXHIBIT K

PLEDGE AGREEMENT

[ATTACHED]

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AMENDED AND RESTATED PLEDGE AGREEMENT

Dated as of February 6, 2009

as amended and restated as of May 10, 2010

From

PUGET EQUICO LLC

as Pledgor

to

BARCLAYS BANK PLC

as Collateral Agent

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T A B L E   O F   C O N T E N T S

Section Page

 

Section 1.    Grant of Security Section 2.    Security for Obligations Section
3.    Pledgor Remains Liable Section 4.    Delivery and Control of Security
Collateral Section 5.    Representations and Warranties Section 6.    Further
Assurances Section 7.    Post-Closing Changes; Certain Additional Covenants
Section 8.    Voting Rights; Dividends; Etc. Section 9.    Transfers and Other
Liens; Additional Shares Section 10.    Collateral Agent Appointed
Attorney-in-Fact Section 11.    Collateral Agent May Perform Section 12.    The
Collateral Agent’s Duties Section 13.    Remedies Section 14.    Indemnity and
Expenses Section 15.    Amendments; Waivers; Etc. Section 16.    Notices, Etc.
Section 17.    Continuing Security Interest; Assignments Under the Credit
Agreement Section 18.    Termination Section 19.    Security Interest Absolute
Section 20.    Collateral Agency Agreement Controls Section 21.    Execution in
Counterparts Section 22.    Governing Law Section 23.    Waiver of Right to
Trial by Jury

SCHEDULES

 

Schedule I    –      Location, Chief Executive Office, Type Of Organization,
Jurisdiction Of Organization, Organizational Identification Number and Trade
Names Schedule II    –      Pledged Equity Schedule III    –      Changes in
Name, Location, Etc.

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AMENDED AND RESTATED PLEDGE AGREEMENT

AMENDED AND RESTATED PLEDGE AGREEMENT dated as of February 6, 2009, as amended
and restated as of may 10, 2010 (as amended, amended and restated, supplemented
or otherwise modified from time to time, this “Agreement”), made by PUGET EQUICO
LLC, a Washington limited liability company (the “Pledgor”), to BARCLAYS BANK
PLC, as collateral agent (in such capacity, together with any successor
collateral agent appointed pursuant to the Collateral Agency Agreement), the
“Collateral Agent”) for the Secured Parties.

RECITALS.

(1) Puget Merger Sub Inc. (“Merger Sub”) entered into a Credit Agreement dated
as of May 16, 2008 (said Agreement, as it may hereafter be amended, amended and
restated, supplemented or otherwise modified from time to time, being the
“Credit Agreement”) with the Lenders and the other parties thereto.

(2) Upon the consummation of the Merger, Puget Energy Inc. assumed, pursuant to
the Assumption Agreement, all of the obligations of the Merger Sub under the
Credit Agreement, this Agreement and all of the other Financing Documents to
which the Merger Sub was a party.

(3) The Borrower may from time to time after the date hereof issue or enter into
one or more notes, indentures, promissory notes, credit agreements or such other
Additional Credit Documents to the extent permitted under the Credit Documents,
the obligations under which may be secured by a first priority lien on the
Collateral.

(4) Pursuant to the Credit Agreement and the Additional Credit Documents, the
Pledgor is entering into this Agreement in order to grant to the Collateral
Agent for the ratable benefit of the Secured Parties a security interest in the
Collateral to secure the Secured Obligations.

(5) The Pledgor is the owner of the shares of stock or other Equity Interests
(the “Initial Pledged Equity”) set forth opposite the Pledgor’s name on and as
otherwise described on Schedule II hereto and issued by the Borrower.

(6) It is a condition precedent to the making of Loans by the Lenders under the
Credit Agreement, the entry into Interest Hedging Agreements by the Interest
Rate Hedge Banks that the Pledgor shall have granted the security interest
contemplated by this Agreement, and the Borrower desires to secure indebtedness
under the Additional Credit Documents in order to induce the providers of such
indebtedness to execute the Additional Credit Documents.

(7) The Pledgor will derive substantial direct and indirect benefit from the
transactions contemplated by the Financing Documents and the Additional Credit
Documents.

(8) Capitalized terms used herein but not otherwise defined shall have the
meanings ascribed to such terms in that certain Amended and Restated Collateral
Agency Agreement, dated as of May 10, 2010, among the Borrower, the Collateral
Agent, the Facility Agent, in its capacity as representative for the Lenders,
and each other Authorized Representative from time to time party thereto (as the
same may be amended, restated or supplemented from time to time, the “Collateral
Agency Agreement”). Further, unless otherwise defined in this Agreement, in the
Credit Agreement or in the Collateral Agency Agreement, terms defined in Article
8 or 9 of the UCC (as defined below) are used in this Agreement as such terms
are defined in such Article 8 or 9. “UCC” means the Uniform Commercial Code as
in effect, from time to time, in the State of New York; provided that, if
perfection or the effect of perfection or non-perfection or the priority of any
security interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, “UCC” means the
Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions hereof relating to such perfection,
effect of perfection or non-perfection or priority.

NOW, THEREFORE, in consideration of the premises and in order to induce the
Lenders to make Loans under the Credit Agreement, to induce the Interest Rate
Hedge Banks to enter into Interest Hedging

--------------------------------------------------------------------------------

Agreements from time to time and to induce the Additional Secured Parties to
extend credit under the Additional Credit Documents from time to time, the
Pledgor hereby agrees with the Collateral Agent for the equal and ratable
benefit of the Secured Parties as follows:

Section 1. Grant of Security. The Pledgor hereby grants to the Collateral Agent,
for the ratable benefit of the Secured Parties, a security interest in the
Pledgor’s right, title and interest in and to the following, in each case, as to
each type of property described below, whether now owned or hereafter acquired
by the Pledgor, wherever located, and whether now or hereafter existing or
arising (collectively, the “Collateral”):

(a) the following (the “Security Collateral”):

(i) the Initial Pledged Equity and the certificates, if any, representing the
Initial Pledged Equity, and all dividends, distributions, return of capital,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the Initial
Pledged Equity and all subscription warrants, rights or options issued thereon
or with respect thereto;

(ii) all additional shares of stock and other Equity Interests in the Borrower
from time to time acquired by the Pledgor in any manner (such shares and other
Equity Interests, together with the Initial Pledged Equity, being the “Pledged
Equity”), and the certificates, if any, representing such additional shares or
other Equity Interests, and all dividends, distributions, return of capital,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such shares
or other Equity Interests and all subscription warrants, rights or options
issued thereon or with respect thereto; and

(b) all proceeds of, collateral for and supporting obligations relating to, any
and all of the Collateral (including, without limitation, proceeds, collateral
and supporting obligations that constitute property of the types described in
clause (a) of this Section 1 and this clause (b)) and, to the extent not
otherwise included, all (A) payments under insurance (whether or not the
Collateral Agent is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral and (B) cash.

Section 2. Security for Obligations. This Agreement secures, in the case of the
Pledgor, the payment of all Secured Obligations. Without limiting the generality
of the foregoing, this Agreement secures, as to the Pledgor, the payment of all
amounts that constitute part of the Secured Obligations and would be owed to any
Secured Party under the Financing Documents and the Additional Credit Documents
but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving a Loan
Party.

Section 3. Pledgor Remains Liable. Anything herein to the contrary
notwithstanding, (a) the Pledgor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by the Collateral Agent of any
of the rights hereunder shall not release the Pledgor from any of its duties or
obligations under the contracts and agreements included in the Collateral and
(c) no Secured Party shall have any obligation or liability under the contracts
and agreements included in the Collateral by reason of this Agreement, any other
Financing Document or any Additional Credit Documents, nor shall any Secured
Party be obligated to perform any of the obligations or duties of the Pledgor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.

Section 4. Delivery and Control of Security Collateral. (a) All certificates or
instruments representing or evidencing Security Collateral shall be delivered to
and held by or on behalf of the Collateral Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
reasonably satisfactory to the Collateral Agent. In addition, upon the
occurrence of an Event of Default, the Collateral Agent shall have the right at
any time to exchange certificates or instruments representing or evidencing
Security Collateral for certificates or instruments of smaller or larger
denominations.

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(b) With respect to any Security Collateral in which the Pledgor has any right,
title or interest and that constitutes an uncertificated security, the Pledgor
will cause the issuer thereof either (i) to register the Collateral Agent as the
registered owner of such security or (ii) to agree in an authenticated record
with the Pledgor and the Collateral Agent that such issuer will comply with
instructions with respect to such security originated by the Collateral Agent
without further consent of the Pledgor, such authenticated record to be in form
and substance satisfactory to the Collateral Agent.

(c) With respect to any Security Collateral in which the Pledgor has any right,
title or interest and that is not an uncertificated security, upon the request
of the Collateral Agent, the Pledgor will notify each such issuer of Pledged
Equity that such Pledged Equity is subject to the security interest granted
hereunder.

Section 5. Representations and Warranties. The Pledgor represents and warrants
as follows as of the date hereof:

(a) The Pledgor’s exact legal name, as defined in Section 9-503(a) of the UCC,
is correctly set forth in Schedule I hereto. The Pledgor has not used any trade
name. The Pledgor is located (within the meaning of Section 9-307 of the UCC) in
the state or jurisdiction set forth in Schedule I hereto. The information set
forth in Schedule I hereto with respect to the Pledgor is true and accurate in
all respects. The Pledgor has not previously changed its name, type of
organization, jurisdiction of organization or organizational identification
number from those set forth in Schedule I hereto except as disclosed in
Schedule III hereto.

(b) All Security Collateral consisting of certificated securities and
instruments has been delivered to the Collateral Agent.

(c) The Pledgor is the legal and beneficial owner of the Collateral free and
clear of any Lien, claim, option or right of others, except for the security
interest created under this Agreement or permitted under the Credit
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of such Collateral or listing the Pledgor or any
trade name of the Pledgor as debtor with respect to such Collateral is on file
in any recording office, except such as may have been filed in favor of the
Collateral Agent relating to the Financing Documents or as otherwise permitted
under the Credit Agreement.

(d) The Pledged Equity pledged by the Pledgor hereunder has been duly authorized
and validly issued and is fully paid and non-assessable. With respect to the
Pledged Equity that is an uncertificated security, the Pledgor has caused the
issuer thereof either (i) to register the Collateral Agent as the registered
owner of such security or (ii) to agree in an authenticated record with the
Pledgor and the Collateral Agent that such issuer will comply with instructions
with respect to such security originated by the Collateral Agent without further
consent of the Pledgor.

(e) The Initial Pledged Equity pledged by the Pledgor constitutes the percentage
of the issued and outstanding Equity Interests of the issuers thereof indicated
on Schedule II hereto.

(f) All filings and other actions (including without limitation, actions
necessary to obtain control of Collateral as provided in Section 9-106 of the
UCC) necessary to perfect the security interest in the Collateral created under
this Agreement have been duly made or taken and are in full force and effect,
and this Agreement creates in favor of the Collateral Agent for the benefit of
the Secured Parties a valid and, together with such filings and other actions,
perfected first priority security interest in the Collateral (other than
Permitted Collateral Liens), securing the payment of the Secured Obligations.

(g) No authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other third party is
required for (i) the grant by the Pledgor of the security interest granted
hereunder or for the execution, delivery or performance of this Agreement by the
Pledgor, (ii) the perfection or maintenance of the security interest created
hereunder (including the first priority nature of such security interest),
except for the filing of financing and continuation statements under the UCC,
which financing statements have been duly filed and are in full force and
effect, and the actions described in Section 4 with respect to Security
Collateral, which actions have been taken and are in full force and effect or
(iii) the exercise by the Collateral Agent of its voting or other rights
provided for in this Agreement or the remedies in respect of the

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Collateral pursuant to this Agreement, except as may be required in connection
with the disposition of any portion of the Security Collateral by laws affecting
the offering and sale of securities generally or as may be required in
connection with the disposition of any portion of the Collateral under
Section 203 of the Federal Power Act or chapter 80.12 of the Revised Code of
Washington.

Section 6. Further Assurances. (a) The Pledgor agrees that from time to time, at
the expense of the Pledgor, the Pledgor will promptly execute and deliver, or
otherwise authenticate, all further instruments and documents, and take all
further action that may be necessary, or that the Collateral Agent may
reasonably request, in order to perfect and protect any pledge or security
interest granted or purported to be granted by the Pledgor hereunder or to
enable the Collateral Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, the Pledgor will promptly with respect to the Collateral: (i) if any
such Collateral shall be evidenced by a promissory note or other instrument,
deliver and pledge to the Collateral Agent hereunder such note or instrument
duly indorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Collateral Agent;
(ii) file such financing or continuation statements, or amendments thereto, and
such other instruments or notices, as may be necessary, or as the Collateral
Agent may request, in order to perfect and preserve the security interest
granted or purported to be granted by the Pledgor hereunder; (iii) deliver and
pledge to the Collateral Agent for benefit of the Secured Parties certificates
representing Security Collateral that constitutes certificated securities,
accompanied by undated stock powers executed in blank; (iv) take all action
necessary to ensure that the Collateral Agent has control of Collateral
consisting of investment property as provided in Section 9-106 of the UCC; and
(v) deliver to the Collateral Agent evidence that all other action that the
Collateral Agent may deem reasonably necessary or desirable in order to perfect
and protect the security interest created by the Pledgor under this Agreement
has been taken.

(b) The Pledgor hereby authorizes the Collateral Agent to file one or more
financing or continuation statements, and amendments thereto, including, without
limitation, one or more financing statements indicating that such financing
statements cover all Equity Interests in the Borrower owned by the Pledgor, in
each case without the signature of the Pledgor, and regardless of whether any
particular asset described in such financing statements falls within the scope
of the UCC or the granting clause of this Agreement. A photocopy or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law. The Pledgor ratifies its authorization for the
Collateral Agent to have filed such financing statements, continuation
statements or amendments filed prior to the date hereof.

(c) The Pledgor will furnish to the Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with such Collateral as the Collateral Agent
may reasonably request, all in reasonable detail.

Section 7. Post-Closing Changes; Certain Additional Covenants. (a) The Pledgor
will not change its name, type of organization, jurisdiction of organization or
organizational identification number or location from those set forth in
Section 5(a) of this Agreement without first giving at least 20 days’ prior
written notice to the Collateral Agent and taking all action reasonably required
by the Collateral Agent for the purpose of perfecting or protecting the security
interest granted by this Agreement. The Pledgor will hold and preserve its
records relating to the Collateral and will permit representatives of the
Collateral Agent to inspect and make abstracts from such records and other
documents as set forth in Section 6.18 of the Credit Agreement or the applicable
provisions of the Additional Credit Documents (as if such provisions were
applicable to the Pledgor instead of the Borrower). If the Pledgor does not have
an organizational identification number and later obtains one, it will forthwith
notify the Collateral Agent of such organizational identification number.

(b) The Pledgor will not:

(i) amend its Organizational Documents unless such amendment could not
reasonably be expected to result in a Material Adverse Effect (with clauses
(i) and (ii) of such definition being applicable to the Pledgor as well as the
Borrower and its Subsidiaries);

(ii) engage at any time in any business or business activity (including, without
limitation, any action or transaction that is required or restricted with
respect to the Borrower and its Subsidiaries under Article VII of the Credit
Agreement or the Additional Credit Documents without regard to any of the
enumerated exceptions to such

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covenants), other than (A) the ownership and acquisition of Equity Interests in
the Borrower, together with activities reasonably related thereto, (B) the
maintenance of its legal existence, together with activities reasonably related
thereto, (C) the performance of its obligations in connection with the Merger
Agreement and the other agreements contemplated thereby and in the Financing
Documents and the Additional Credit Documents (subject to any limitations
contained therein), (D) actions incidental to the consummation of the Merger and
(E) activities incidental to its maintenance and continuance and to the
foregoing activities (which shall include, without limitation (1) entering into
and incurring obligations under any insurance contract and employment agreements
and benefit plans for management or employees of the Borrower or any of its
Subsidiaries, (2) incurring liabilities incidental to its existence,
(3) entering into agreements with consultants, auditors and service providers to
provide services to the Borrower or any of its Subsidiaries, (4) maintaining any
Deposit Accounts, Securities Accounts and Lock-Up Accounts permitted or required
pursuant to the Security Agreement, (5) entering into confidentiality and
similar agreements for the Borrower or any of its Subsidiaries and (6) incurring
Indebtedness in the form of Shareholder Funding); provided that (i) Shareholder
Funding in the form of loans or indebtedness to the Pledgor shall only be
permitted to be incurred on or prior to the Financial Closing Date and
(ii) notwithstanding any other provision of clauses (A) through (E) to the
contrary, Indebtedness other than Shareholder Funding or referred to in
clause (2) of the preceding parenthetical shall not be permitted to be incurred
by the Pledgor; or

(iii) permit or consent to any amendment or modification of any of the
provisions of the documentation governing or evidencing the Shareholder Funding,
including, without limitation the Shareholder Loan Subordination Agreement (if
applicable), without the consent of the Collateral Agent or unless such
amendment is not adverse to the Required Voting Parties.

Section 8. Voting Rights; Dividends; Etc. (a) So long as no Event of Default
shall have occurred and be continuing:

(i) The Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Security Collateral or any part thereof for
any purpose; provided, however, that the Pledgor will not exercise or refrain
from exercising any such right if such action would have a material adverse
effect on the value of the Security Collateral or any part thereof.

(ii) The Pledgor shall be entitled to receive and retain any and all dividends,
interest and other distributions paid in respect of the Security Collateral if
and to the extent that the payment thereof is not otherwise prohibited by the
terms of the Financing Documents; provided, however, that any and all:

(A) dividends, interest and other distributions paid or payable other than in
cash in respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Security
Collateral,

(B) dividends and other distributions paid or payable in cash in respect of any
Security Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid-in-surplus, and

(C) cash paid, payable or otherwise distributed in respect of principal of, or
in redemption of, or in exchange for, any Security Collateral

shall be, and shall be forthwith delivered to the Collateral Agent to hold as,
Security Collateral and shall, if received by the Pledgor, be received in trust
for the benefit of the Collateral Agent, be segregated from the other property
or funds of the Pledgor and be forthwith delivered to the Collateral Agent as
Security Collateral in the same form as so received (with any necessary
indorsement).

(iii) The Collateral Agent will execute and deliver (or cause to be executed and
delivered) to the Pledgor all such proxies and other instruments as the Pledgor
may reasonably request for the purpose of enabling the Pledgor to exercise the
voting and other rights that it is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends or interest payments that it is
authorized to receive and retain pursuant to paragraph (ii) above.

(b) Upon the occurrence and during the continuance of an Event of Default:

(i) All rights of the Pledgor (x) to exercise or refrain from exercising the
voting and other consensual rights that it would otherwise be entitled to
exercise pursuant to Section 8(a)(i) shall, upon notice to the Pledgor by the
Collateral Agent, cease and (y) to receive the dividends, interest and other
distributions that it would otherwise be authorized to receive and retain
pursuant to Section 8(a)(ii) shall automatically cease, and all such rights
shall thereupon become vested in the Collateral Agent, which shall thereupon
have the sole right to exercise or refrain from exercising such voting and other
consensual rights and to receive and hold as Security Collateral such dividends,
interest and other distributions.

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(ii) All dividends, interest and other distributions that are received by the
Pledgor contrary to the provisions of paragraph (i) of this Section 8(b) shall
be received in trust for the benefit of the Collateral Agent, shall be
segregated from other funds of the Pledgor and shall be forthwith paid over to
the Collateral Agent as Security Collateral in the same form as so received
(with any necessary indorsement).

Section 9. Transfers and Other Liens; Additional Shares. (a) The Pledgor agrees
that it will not (i) sell, assign or otherwise dispose of, or grant any option
with respect to, any of the Collateral, or (ii) create or suffer to exist any
Lien upon or with respect to any of the Collateral of the Pledgor except for the
pledge, assignment and security interest created under this Agreement and Liens
permitted under the Credit Documents.

(b) The Pledgor agrees that it will (i) cause the Borrower not to issue any
Equity Interests in addition to or in substitution for the Pledged Equity issued
by the Borrower, except to the Pledgor, and (ii) pledge hereunder, immediately
upon its acquisition (directly or indirectly) thereof, any and all additional
Equity Interests issued to it.

Section 10. Collateral Agent Appointed Attorney-in-Fact. The Pledgor hereby
irrevocably appoints the Collateral Agent the Pledgor’s attorney-in-fact, with
full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time, upon the occurrence and during the
continuance of an Event of Default, in the Collateral Agent’s discretion, to
take any action and to execute any instrument that the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation:

(a) to ask for, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral,

(b) to receive, indorse and collect any drafts or other instruments or
documents, in connection with clause (a) above, and

(c) to file any claims or take any action or institute any proceedings that the
Collateral Agent may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of the Collateral Agent with
respect to any of the Collateral.

Section 11. Collateral Agent May Perform. If the Pledgor fails to perform any
agreement contained herein, the Collateral Agent may, as the Collateral Agent
deems necessary to protect the security interest granted hereunder in the
Collateral or to protect the value thereof, but without any obligation to do so
and without notice, itself perform, or cause performance of, such agreement, and
the expenses of the Collateral Agent incurred in connection therewith shall be
payable by the Pledgor under Section 14.

Section 12. The Collateral Agent’s Duties. (a) The powers conferred on the
Collateral Agent hereunder are solely to protect the Secured Parties’ interest
in the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not any Secured Party has or is
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against any parties or any other rights pertaining to
any Collateral. The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which it accords its own property.

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(b) Anything contained herein to the contrary notwithstanding, the Collateral
Agent may from time to time, when the Collateral Agent deems it to be necessary,
appoint one or more subagents (each a “Subagent”) for the Collateral Agent
hereunder with respect to all or any part of the Collateral. In the event that
the Collateral Agent so appoints any Subagent with respect to any Collateral,
(i) the assignment and pledge of such Collateral and the security interest
granted in such Collateral by the Pledgor hereunder shall be deemed for purposes
of this Agreement to have been made to such Subagent, in addition to the
Collateral Agent, for the ratable benefit of the Secured Parties, as security
for the Secured Obligations, (ii) such Subagent shall automatically be vested,
in addition to the Collateral Agent, with all rights, powers, privileges,
interests and remedies of the Collateral Agent hereunder with respect to such
Collateral, and (iii) the term “Collateral Agent,” when used herein in relation
to any rights, powers, privileges, interests and remedies of the Collateral
Agent with respect to such Collateral, shall include such Subagent; provided,
however, that no such Subagent shall be authorized to take any action with
respect to any such Collateral unless and except to the extent expressly
authorized in writing by the Collateral Agent.

Section 13. Remedies. If any Event of Default shall have occurred and be
continuing:

(a) The Collateral Agent may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party upon default under the UCC
(whether or not the UCC applies to the affected Collateral) and also
may: (i) without notice except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any of the
Collateral Agent’s offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Collateral Agent may deem
commercially reasonable; and (ii) exercise any and all rights and remedies of
the Pledgor under or in connection with the Collateral, or otherwise in respect
of the Collateral, including, without limitation, those set forth in
Section 9-607 of the UCC. The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten days’ prior written notice to the Pledgor
of the time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification. The Collateral
Agent shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.

(b) Any cash held by or on behalf of the Collateral Agent and all cash proceeds
received by or on behalf of the Collateral Agent in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
may, in the discretion of the Collateral Agent, be held by the Collateral Agent
as collateral for, and/or then or at any time thereafter applied (after payment
of any amounts payable to the Collateral Agent pursuant to Section 14) in whole
or in part by the Collateral Agent for the ratable benefit of the Secured
Parties against, all or any part of the Secured Obligations, in accordance with
the Collateral Agency Agreement.

(c) All payments received by the Pledgor in respect of the Collateral shall be
received in trust for the benefit of the Collateral Agent, shall be segregated
from other funds of the Pledgor and shall be forthwith paid over to the
Collateral Agent in the same form as so received (with any necessary
indorsement).

Section 14. Indemnity and Expenses(a). The Pledgor agrees to indemnify, defend
and save and hold harmless each Secured Party, and to pay the expenses of the
Collateral Agent, in each case in connection with this Agreement as set forth in
Sections 10.04 and 10.05 of the Credit Agreement as if such Sections were set
forth in this Agreement mutatis mutandis and as if such Sections applied to the
Pledgor instead of the Borrower.

Section 15. Amendments; Waivers; Etc. No amendment or waiver of any provision of
this Agreement, and no consent to any departure by the Pledgor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Collateral Agent (and the Pledgor in the case of an amendment or waiver), and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No failure on the part of the
Collateral Agent or any other Secured Party to exercise, and no delay in
exercising any right hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right.

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Section 16. Notices, Etc. All notices and other communications provided for
hereunder shall be provided in accordance with the Collateral Agency Agreement.

Section 17. Continuing Security Interest; Assignments Under the Credit
Documents. This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the indefeasible
payment in full in cash of the Secured Obligations (other than contingent
indemnity obligations not then due), termination of the Commitments and the
termination or expiration of the Interest Hedging Agreements, (b) be binding
upon the Pledgor, its successors and assigns and (c) inure, together with the
rights and remedies of the Collateral Agent hereunder, to the benefit of the
Secured Parties and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), any Lender
or Additional Secured Party may assign or otherwise transfer all or any portion
of its rights and obligations under the Credit Agreement (including, without
limitation, all or any portion of its Commitments, the Loans owing to it and the
Note or Notes, if any, held by it) or the Additional Credit Documents, as the
case may be, to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such Lender or the
Additional Secured Parties, as the case may be, herein or otherwise, in each
case as provided in Section 10.07 of the Credit Agreement or the applicable
provisions of the Additional Credit Documents, as applicable.

Section 18. Termination. Upon the indefeasible payment in full in cash of the
Secured Obligations (other than contingent indemnity obligations not then due),
termination of the Commitments and the termination or expiration of the Interest
Hedging Agreements, the security interest created by this Agreement shall
terminate and all rights to the Collateral shall revert to the Pledgor, and the
Collateral Agent shall (at the written request and sole cost and expense of the
Pledgor) promptly cause to be transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect thereof, to or on the order of the
Pledgor. The Collateral Agent shall also (at the written request and sole cost
and expense of the Pledgor) promptly execute and deliver to the Pledgor upon
such termination such Uniform Commercial Code termination statements, and such
other documentation as shall be reasonably requested by the Pledgor to effect
the termination and release of the Liens on the Collateral.

Section 19. Security Interest Absolute. The obligations of the Pledgor under
this Agreement are independent of the Secured Obligations or any other
Obligations of any other Loan Party under or in respect of the Credit Documents,
and a separate action or actions may be brought and prosecuted against the
Pledgor to enforce this Agreement, irrespective of whether any action is brought
against the Pledgor or any other Loan Party or whether the Pledgor or any other
Loan Party is joined in any such action or actions. All rights of the Collateral
Agent and the other Secured Parties and the pledge, assignment and security
interest hereunder, and all obligations of the Pledgor hereunder, shall be
irrevocable, absolute and unconditional irrespective of, and the Pledgor hereby
irrevocably waives (to the maximum extent permitted by applicable law) any
defenses it may now have or may hereafter acquire in any way relating to, any or
all of the following:

(a) any lack of validity or enforceability of any Credit Document or any other
agreement or instrument relating thereto;

(b) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Secured Obligations or any other Obligations of any other
Loan Party under or in respect of any of the Credit Documents or any other
amendment or waiver of or any consent to any departure from any Credit Document,
including, without limitation, any increase in the Secured Obligations resulting
from the extension of additional credit to any Loan Party or any of its
Subsidiaries or otherwise;

(c) any taking, exchange, release or non-perfection of any Collateral or any
other collateral, or any taking, release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Secured Obligations;

(d) any manner of application of any Collateral or any other collateral, or
proceeds thereof, to all or any of the Secured Obligations, or any manner of
sale or other disposition of any Collateral or any other collateral for all or
any of the Secured Obligations or any other Obligations of any other Loan Party
under or in respect of the Financing Documents, the Additional Credit Documents
or any other assets of any Loan Party or any of its Subsidiaries;

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(e) any change, restructuring or termination of the corporate structure or
existence of any Loan Party or any of its Subsidiaries;

(f) any failure of any Secured Party to disclose to any Loan Party any
information relating to the business, condition (financial or otherwise),
operations, performance, assets, nature of assets, liabilities or prospects of
any other Loan Party now or hereafter known to such Secured Party (the Pledgor
waiving any duty on the part of the Secured Parties to disclose such
information);

(g) the failure of any other Person to execute this Agreement or any other
Security Document, guaranty or agreement or the release or reduction of
liability of the Pledgor or other grantor or surety with respect to the Secured
Obligations; or

(h) any other circumstance (including, without limitation, any statute of
limitations) or any existence of or reliance on any representation by any
Secured Party that might otherwise constitute a defense available to, or a
discharge of, the Pledgor or any other Pledgor or a third party grantor of a
security interest.

This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Secured Obligations is rescinded or
must otherwise be returned by any Secured Party or by any other Person upon the
insolvency, bankruptcy or reorganization of any Loan Party or otherwise, all as
though such payment had not been made.

Section 20. Collateral Agency Agreement Controls. Notwithstanding anything
herein to the contrary, the lien and security interest granted to the Collateral
Agent, for the benefit of the Secured Parties pursuant to this Agreement and any
other Security Document and related agreements (including any control agreements
executed pursuant to the requirements of this Agreement), and the exercise of
any right or remedy by the Collateral Agent in respect of the Collateral are
subject to the provisions of the Collateral Agency Agreement. In the event of
any conflict or inconsistency between the provisions of this Agreement, any
other Security Documents and any such related document and the Collateral Agency
Agreement, the provisions of the Collateral Agency Agreement shall govern and
control.

Section 21. Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier or other means of electronic delivery shall be effective
as delivery of an original executed counterpart of this Agreement.

Section 22. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.

Any legal action or proceeding arising under this Agreement or in any way
connected with or related or incidental to the dealings of the parties hereto or
any of them with respect to this Agreement, in each case whether now existing or
hereafter arising, may be brought in the courts of the State of New York sitting
in New York City or of the United States for the Southern District of such
state, and by execution and delivery of this Agreement, the Pledgor consents,
for itself and in respect of its property, to the non-exclusive jurisdiction of
those courts. The Pledgor waives any objection, including any objection to the
laying of venue or based on the grounds of forum non conveniens, which it may
now or hereafter have to the bringing of any action or proceeding in such
jurisdiction in respect of this Agreement or any Financing Document.

Section 23. Waiver of Right to Trial by Jury. Each party to this Agreement
hereby expressly waives any right to trial by jury of any claim, demand, action
or cause of action arising under this Agreement, any Credit Document or in any
way connected with or related or incidental to its dealings with respect to this
Agreement, any Credit Document or the transactions related thereto, in each case
whether now existing or hereafter arising, and whether founded in contract or
tort or otherwise; and each party to this Agreement hereby agrees and consents
that any such claim, demand, action or cause of action shall be decided by court
trial without a jury, and that each party to this Agreement may file an original
counterpart or a copy of this Section 22 with any court as written evidence of
the consent of the signatories hereto to the waiver of its right to trial by
jury.

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Section 24. Original Schedules and Exhibits. Each of the Schedules and Exhibits
attached to the Pledge Agreement dated as of February 6, 2009 between the
parties hereto, shall be deemed attached to, and form a part of, this Agreement
without any amendment, modification or supplement.

[Signature pages follow]

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PUGET EQUICO, LLC By:   Name:   Donald E. Gaines Title:   Vice President
Finance & Treasurer

BARCLAYS BANK PLC,

as Collateral Agent

By:   Name:   Ann E. Sutton Title:   Director

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AMENDMENT NO. 1

TO

AMENDED AND RESTATED PLEDGE AGREEMENT

This AMENDMENT NO. 1 TO AMENDED AND RESTATED PLEDGE AGREEMENT (this
“Amendment”), is made as of February 10, 2012, by and between JPMORGAN CHASE
BANK, N.A., in its capacity as successor Collateral Agent (as defined below) and
PUGET EQUICO LLC, as pledgor (the “Pledgor”). Capitalized terms used but not
otherwise defined herein shall have the respective meanings given to them in the
Amended and Restated Collateral Agency Agreement (described below).

WHEREAS, on the date hereof, Barclays Bank PLC resigned as Collateral Agent
under than certain Amended and Restated Collateral Agency Agreement, dated as of
February 6, 2009 and as amended and restated as of March 31, 2010, among Puget
Energy, Inc., Pledgor, Barclays Bank PLC, as collateral agent and Barclays Bank
PLC, as facility agent;

WHEREAS, pursuant to Amendment No. 1 to Amended and Restated Collateral Agency
Agreement, dated as of the date hereof, JPMorgan Chase Bank, N.A. was appointed
as successor Collateral Agent (in such capacity, the “Collateral Agent”);

WHEREAS, the Collateral Agent and the Pledgor wish to amend that certain Amended
and Restated Pledge Agreement, dated February 6, 2009 and as amended and
restated as of March 31, 2010, between Collateral Agent, as successor collateral
agent and the Pledgor (as amended, restated, supplemented or otherwise modified
prior to the date hereof, the “Agreement”);

NOW THEREFORE, in consideration of the premises set forth above, the terms and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
have agreed to amend the Agreement as follows.

SECTION 1. Amendments to Agreement.

(a) Recital (1) to the Agreement is amended and restated in its entirety to read
as follows:

(1) Puget Energy, Inc. entered into that certain Credit Agreement dated as of
February 10, 2012 among the Lenders from time to time party thereto and JPMorgan
Chase Bank, N.A., as administrative agent (as amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”).

(b) Recital (6) to the Agreement is amended to delete the punctuation mark “,”
appearing immediately before the phrase “the entry into Interest Hedging
Agreements” appearing therein and to replace such punctuation mark with the word
“and”.

(c) Recital (8) is amended to insert the phrase “the Pledgor,” immediately
following the phrase “March 31, 2010, among the Borrower,” appearing therein.

(d) Recital (2) to the Agreement is deleted in its entirety.

(e) Recitals (3), (4), (5), (6) and (7) are renumbered as recitals (2), (3),
(4), (5) and (6) respectively.

(f) Clause (b)(ii) of Section 7 of the Agreement is amended to (i) delete the
punctuation mark “,” appearing immediately before the number “(5)” appearing
therein and to replace such punctuation mark with the word “and” and (ii) to
delete in its entirety the phrase “and (6) incurring Indebtedness in the form of
Shareholder Funding); provided that (i) Shareholder Funding in the form of loans
or indebtedness to the Pledgor shall only be permitted to be incurred on or
prior to the Financial Closing Date and (ii) notwithstanding any other provision
of clauses (A) through (E) to the contrary, Indebtedness other than Shareholder
Funding or referred to in clause (2) of the preceding parenthetical shall not be
permitted to be incurred by the Pledgor; or” appearing therein.

(g) Clause (b)(iii) of Section 7 of the Agreement is deleted in its entirety.

(h) Section 14 of the Agreement is amended to (i) delete the section reference
“Sections 10.04 and 10.05” appearing therein and to replace such section
reference with the section reference

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“Section 9.03”, (ii) delete the phrase “Sections were” and to replace such
phrase with the phrase “Section was” and (iii) to replace the word “Sections”
appearing immediately before the phrase “applied to the Pledgor” appearing
therein with the word “Section”.

(i) Section 17 of the Agreement is amended to delete the section reference
“Section 10.07” appearing therein and to replace such section reference with the
section reference “Section 9.04”.

(j) The Agreement is amended to replace each reference to “Barclays Bank PLC”
with “JPMorgan Chase Bank, N.A.”.

SECTION 2. Conditions of Effectiveness. This Amendment shall become effective as
of the date hereof (the “Effective Date”) when, and only when (i) the Collateral
Agent shall have received an executed counterpart of this Amendment from the
Collateral Agent and the Pledgor and (ii) the New Credit Agreement shall become
effective in accordance with its terms and conditions.

SECTION 3. Representations and Warranties. Each of the parties hereto represents
and warrants that this Amendment and the Agreement, as amended by this
Amendment, constitute legal, valid and binding obligations of such party
enforceable against such party in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors’ rights generally and general equitable
principles.

SECTION 4. Reference to and the Effect on the Agreement.

(a) On and after the effective date of this Amendment, each reference in the
Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like
import referring to the Agreement and each reference to the Agreement in any
certificate delivered in connection therewith, shall mean and be a reference to
the Agreement as amended hereby.

(b) Each of the parties hereto hereby agrees that, except as specifically
amended above, the Agreement is hereby ratified and confirmed and shall continue
to be in full force and effect and enforceable, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors’ rights generally and general equitable
principles.

SECTION 5. Headings. Section headings in this Amendment are included herein for
convenience only and shall not constitute a part of this Amendment for any other
purpose.

SECTION 6. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart to this Amendment by facsimile, electronic
mail, portable document format (PDF) or similar means shall be effective as
delivery of a manually executed counterpart of this Amendment.

SECTION 7. Governing Law. This Amendment shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized signatories as of the day and year first
above written.

 

PUGET EQUICO LLC, as Pledgor By:  

 

  Name:   Title:

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JPMORGAN CHASE BANK, N.A.,

as successor Collateral Agent

By:  

 

  Name:   Title:

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EXHIBIT L

SECURITY AGREEMENT

[ATTACHED]

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AMENDED AND RESTATED BORROWER SECURITY AGREEMENT

Dated as of February 6, 2009

as amended and restated as of May 10, 2010

From

PUGET ENERGY INC.

as Borrower

to

BARCLAYS BANK PLC

as Collateral Agent

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T A B L E  O F  C  O N T E N T S

 

Section Page

Section 1. Grant of Security

Section 2. Security for Obligations

Section 3. Borrower Remain Liable

Section 4. Delivery and Control of Security Collateral

Section 5. Deposit Accounts

Section 6. Reserved

Section 7. Release of Amounts

Section 8. Representations and Warranties

Section 9. Further Assurances

Section 10. Reserved

Section 11. Reserved

Section 12. Post-Closing Changes; Collections on Assigned Agreements,
Receivables and Related Contracts

Section 13. As to Intellectual Property Collateral

Section 14. Voting Rights; Dividends; Etc.

Section 15. Reserved

Section 16. As to Letter-of-Credit Rights

Section 17. Commercial Tort Claims

Section 18. Transfers and Other Liens; Additional Shares

Section 19. Collateral Agent Appointed Attorney in Fact

Section 20. Collateral Agent May Perform

Section 21. The Collateral Agent’s Duties

Section 22. Remedies

Section 23. Indemnity and Expenses

Section 24. Amendments; Waivers; Additional Borrower; Etc.

Section 25. Notices, Etc.

Section 26. Continuing Security Interest; Assignments under the Credit Agreement

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Section 27. Termination

Section 28. Collateral Agency Agreement Controls

Section 29. Execution in Counterparts

Section 30. Governing Law

Section 31. Waiver of Right to Trial by Jury

Schedules

 

Schedule I   

- Investment Property

Schedule II   

- Pledged Deposit Accounts

Schedule III   

- Assigned Agreements

Schedule IV   

- Intellectual Property

Schedule V   

- Commercial Tort Claims

Schedule VI   

- Location, Chief Executive Office, Type of Organization, Jurisdiction of

  

- Organization and Organizational Identification Number

Schedule VII   

- Changes in Name, Location, Etc.

Schedule VIII   

- Letters of Credit

Exhibits    Exhibit A    - Form of Withdrawal Certificate

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AMENDED AND RESTATED BORROWER SECURITY AGREEMENT

AMENDED AND RESTATED BORROWER SECURITY AGREEMENT (as amended, amended and
restated, supplemented or otherwise modified from time to time, this
“Agreement”) dated as of February 6, 2009, as amended and restated as of May 10,
2010 made by Puget Energy Inc., a Washington corporation (successor in interest
by merger to Puget Merger Sub Inc.) (the “Company”) to Barclays Bank PLC, as
collateral agent (together with any successor collateral agent appointed
pursuant to the Collateral Agency Agreement referred to below, the “Collateral
Agent”) for the Secured Parties.

PRELIMINARY STATEMENTS.

(1) Puget Merger Sub Inc. (“Merger Sub”) entered into a Credit Agreement dated
as of May 16, 2008 (said agreement, as it may hereafter be amended, amended and
restated, supplemented or otherwise modified from time to time, being the
“Credit Agreement”) with the Lenders and the other parties thereto.

(2) Upon the consummation of the Merger, the Company assumed, pursuant to the
Assumption Agreement, all of the obligations of the Merger Sub under the Credit
Agreement, this Agreement and all of the other Financing Documents to which the
Merger Sub was a party, and is the owner of the shares of stock or other Equity
Interests (the “Initial Pledged Equity”) set forth opposite the Borrower’s name
on and as otherwise described in Part I of Schedule I hereto and issued by Puget
Sound Energy, Inc. (“PSE”). The Merger Sub (prior to the Effective Time) and the
Company (upon and after the Effective Time) are referred to herein as the
“Borrower”.

(3) The Borrower may from time to time after the date hereof issue or enter into
one or more notes, indentures, promissory notes, credit agreements or such other
Additional Credit Documents to the extent permitted under the Credit Documents,
the obligations under which may be secured by a first priority lien on the
Collateral.

(4) The Borrower is the owner of the deposit accounts (the “Pledged Deposit
Accounts”) set forth opposite its name on Schedule II hereto.

(5) The Borrower is the owner of Account No. 110789 (the “Lock-Up Account”),
with The Bank of New York Mellon at its office at 101 Barclay Street, Floor 8W,
New York, NY 10286, Attention: Corporate Finance Group.

(6) It is a condition precedent to the making of Loans by the Lenders under the
Credit Agreement, the entry into Interest Hedging Agreements by the Interest
Rate Hedge Banks that the Borrower shall have granted the to the Collateral
Agent, for the ratable benefit of the Secured Parties, the security interest
contemplated by this Agreement, and the Borrower desires to secure indebtedness
under the Additional Credit Documents in order to induce the providers of such
indebtedness to execute the Additional Credit Documents. The Borrower will
derive substantial direct and indirect benefit from the transactions
contemplated by the Financing Documents and the Additional Credit Documents.

(7) Capitalized terms used herein but not otherwise defined shall have the
meanings ascribed to such terms in that certain Amended and Restated Collateral
Agency Agreement, dated as of May 10, 2010, among the Borrower, the Collateral
Agent, the Facility Agent, in its capacity as representative for the Lenders,
and each other Authorized Representative from time to time party thereto (as the
same may be amended, restated or supplemented from time to time, the “Collateral
Agency Agreement”). Further, unless otherwise defined in this Agreement, in the
Credit Agreement or in the Collateral Agency Agreement, terms defined in Article
8 or 9 of the UCC (as defined below) are used in this Agreement as such terms
are defined in such Article 8 or 9. The term “Withdrawal Certificate” shall mean
a certificate substantially in the form of Exhibit A, and the term “Withdrawal
Date” shall mean any date on which a withdrawal is to be made from the Lock-Up
Account.

(8) “UCC” means the Uniform Commercial Code as in effect from time to time in
the State of New York; provided that, if perfection or the effect of perfection
or non perfection or the priority of the security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, “UCC” means the Uniform Commercial Code as in effect
from time to time in such other jurisdiction for purposes of the provisions
hereof relating to such perfection, effect of perfection or non perfection or
priority.

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NOW, THEREFORE, in consideration of the premises and in order to induce the
Lenders to make Loans under the Credit Agreement, to induce the Interest Rate
Hedge Banks to enter into Interest Hedging Agreements from time to time and to
induce the Additional Secured Parties to extend credit under the Additional
Credit Documents from time to time, the Borrower hereby agrees with the
Collateral Agent for the ratable benefit of the Secured Parties as follows:

Section 1. Grant of Security. The Borrower hereby grants to the Collateral
Agent, for the ratable benefit of the Secured Parties, a security interest in
the Borrower’s right, title and interest in and to the following, in each case,
as to each type of property described below, whether now owned or hereafter
acquired by the Borrower, wherever located, and whether now or hereafter
existing or arising (collectively, the “Collateral”):

(a) all equipment in all of its forms, including, without limitation, all
machinery, tools, motor vehicles, vessels, aircraft, furniture and fixtures, and
all parts thereof and all accessions thereto, including, without limitation,
computer programs and supporting information that constitute equipment within
the meaning of the UCC (any and all such property being the “Equipment”);

(b) all inventory in all of its forms, including, without limitation, (i) all
raw materials, work in process, finished goods and materials used or consumed in
the manufacture, production, preparation or shipping thereof, (ii) goods in
which the Borrower has an interest in mass or a joint or other interest or right
of any kind (including, without limitation, goods in which the Borrower has an
interest or right as consignee) and (iii) goods that are returned to or
repossessed or stopped in transit by the Borrower, and all accessions thereto
and products thereof and documents therefor, including, without limitation,
computer programs and supporting information that constitute inventory within
the meaning of the UCC (any and all such property being the “Inventory”);

(c) all accounts (including, without limitation, health-care-insurance
receivables), chattel paper (including, without limitation, tangible chattel
paper and electronic chattel paper), instruments (including, without limitation,
promissory notes), letter-of-credit rights, general intangibles (including,
without limitation, payment intangibles) and other obligations of any kind,
whether or not arising out of or in connection with the sale or lease of goods
or the rendering of services and whether or not earned by performance, and all
rights now or hereafter existing in and to all supporting obligations and in and
to all security agreements, mortgages, Liens, leases, letters of credit and
other contracts securing or otherwise relating to the foregoing property (any
and all of such accounts, chattel paper, instruments, letter-of-credit rights,
general intangibles and other obligations, to the extent not referred to in
clause (d), (e), (f) or (g) below, being the “Receivables,” and any and all such
supporting obligations, security agreements, mortgages, Liens, leases, letters
of credit and other contracts being the “Related Contracts”);

(d) the following (the “Security Collateral”):

(i) the Initial Pledged Equity and the certificates, if any, representing the
Initial Pledged Equity, and all dividends, distributions, return of capital,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the Initial
Pledged Equity and all warrants, rights or options issued thereon or with
respect thereto;

(ii) all additional shares of stock and other Equity Interests in PSE from time
to time acquired by the Borrower in any manner (such shares and other Equity
Interests, together with the Initial Pledged Equity, being the “Pledged
Equity”), and the certificates, if any, representing such additional shares or
other Equity Interests, and all dividends, distributions, return of capital,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such shares
or other Equity Interests and all warrants, rights or options issued thereon or
with respect thereto;

(iii) all indebtedness from time to time owed to the Borrower (such indebtedness
being the “Pledged Debt”) and the instruments, if any, evidencing such
indebtedness, and all interest, cash, instruments and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such indebtedness;

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(iv) the Lock-Up Account, all security entitlements with respect to all
financial assets from time to time credited to the Lock-Up Account, and all
financial assets, and all dividends, distributions, return of capital, interest,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
security entitlements or financial assets and all warrants, rights or options
issued thereon or with respect thereto; and

(v) all other investment property (including, without limitation, all
(A) securities, whether certificated or uncertificated, (B) security
entitlements, (C) securities accounts, (D) commodity contracts and (E) commodity
accounts) in which the Borrower has now, or acquires from time to time
hereafter, any right, title or interest in any manner, and the certificates or
instruments, if any, representing or evidencing such investment property, and
all dividends, distributions, return of capital, interest, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such investment property and all
warrants, rights or options issued thereon or with respect thereto;

(e) each of the agreements listed on Schedule III hereto and each Interest
Hedging Agreement to which the Borrower is now or may hereafter become a party,
in each case as such agreements may be amended, amended and restated,
supplemented or otherwise modified from time to time (collectively, the
“Assigned Agreements”), including, without limitation, (i) all rights of the
Borrower to receive moneys due and to become due under or pursuant to the
Assigned Agreements, (ii) all rights of the Borrower to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to the Assigned
Agreements, (iii) claims of the Borrower for damages arising out of or for
breach of or default under the Assigned Agreements and (iv) the right of the
Borrower to terminate the Assigned Agreements, to perform thereunder and to
compel performance and otherwise exercise all remedies thereunder (all such
Collateral being the “Agreement Collateral”);

(f) the following (collectively, the “Account Collateral”):

(i) the Pledged Deposit Accounts, other deposit accounts and all funds from time
to time credited thereto, and all certificates and instruments, if any, from
time to time representing or evidencing the Pledged Deposit Accounts;

(ii) all promissory notes, certificates of deposit, checks and other instruments
from time to time delivered to or otherwise possessed by the Collateral Agent
for or on behalf of the Borrower in substitution for or in addition to any or
all of the then existing Account Collateral; and

(iii) all interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the then existing Account Collateral;

(g) the following (collectively, the “Intellectual Property Collateral”):

(i) all patents, patent applications, utility models and statutory invention
registrations, all inventions claimed or disclosed therein and all improvements
thereto (“Patents”);

(ii) all trademarks, service marks, domain names, trade dress, logos, designs,
slogans, trade names, business names, corporate names and other source
identifiers, whether registered or unregistered (provided that no security
interest shall be granted in United States intent-to-use trademark applications
to the extent that, and solely during the period in which, the grant of a
security interest therein would impair the validity or enforceability of such
intent-to-use trademark applications under applicable federal law), together, in
each case, with the goodwill symbolized thereby (“Trademarks”);

(iii) all copyrights, including, without limitation, copyrights in Computer
Software (as hereinafter defined), internet web sites and the content thereof,
whether registered or unregistered (“Copyrights”);

(iv) all computer software, programs and databases (including, without
limitation, source code, object code and all related applications and data
files), firmware and documentation and materials relating thereto, together with
any and all maintenance rights, service rights, programming rights, hosting
rights, test rights, improvement rights, renewal rights and indemnification
rights and any substitutions, replacements, improvements, error corrections,
updates and new versions of any of the foregoing (“Computer Software”);

--------------------------------------------------------------------------------

(v) all confidential and proprietary information, including, without limitation,
know-how, trade secrets, manufacturing and production processes and techniques,
inventions, research and development information, databases and data, including,
without limitation, technical data, financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and information (collectively, “Trade Secrets”), and all other
intellectual, industrial and intangible property of any type, including, without
limitation, industrial designs and mask works (in each case, subject to the
exclusion for intent to use applications set forth in clause (ii) above);

(vi) all registrations and applications for registration for any of the
foregoing, including, without limitation, those registrations and applications
for registration set forth in Schedule IV hereto, together with all reissues,
divisions, continuations, continuations-in-part, extensions, renewals and
reexaminations thereof (in each case, subject to the exclusion for intent to use
applications set forth in clause (ii) above);

(vii) all tangible embodiments of the foregoing, all rights in the foregoing
provided by international treaties or conventions, all rights corresponding
thereto throughout the world and all other rights of any kind whatsoever of the
Borrower accruing thereunder or pertaining thereto;

(viii) all agreements, permits, consents, orders and franchises relating to the
license, development, use or disclosure of any of the foregoing to which the
Borrower, now or hereafter, is a party or a beneficiary, including, without
limitation, the agreements set forth in Schedule IV hereto; and

(ix) any and all claims for damages and injunctive relief for past, present and
future infringement, dilution, misappropriation, violation, misuse or breach
with respect to any of the foregoing, with the right, but not the obligation, to
sue for and collect, or otherwise recover, such damages;

(h) the commercial tort claims described in Schedule V hereto (together with any
commercial tort claims as to which the Borrower have complied with the
requirements of Section 17);

(i) all books and records (including, without limitation, customer lists, credit
files, printouts and other computer output materials and records) of the
Borrower pertaining to any of the Collateral; and

(j) all proceeds of, collateral for, income, royalties and other payments now or
hereafter due and payable with respect to, and supporting obligations relating
to, any and all of the Collateral (including, without limitation, proceeds,
collateral and supporting obligations that constitute property of the types
described in clauses (a) through (i) of this Section 1) and, to the extent not
otherwise included, all (A) payments under insurance (whether or not the
Collateral Agent is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral, and (B) cash.

Provided, however, that in no event shall Collateral (or any of the
sub-categories of Collateral defined above) include: (a) any lease, license,
contract or agreement to which the Borrower is a party, and any of its rights or
interest thereunder, if and to the extent that a security interest is prohibited
by or in violation of (i) any law, rule or regulation applicable to the
Borrower, or (ii) a term, provision or condition of any such lease, license,
contract, property right or agreement (unless such law, rule, regulation, term,
provision or condition would be rendered ineffective with respect to the
creation of the security interest hereunder pursuant to Sections 9-406, 9-407,
9-408 or 9-409 of the UCC (or any successor provision or provisions) of any
relevant jurisdiction or any other applicable law (including the Bankruptcy
Code) or principles of equity; provided further that in no event shall the
Security Collateral be excluded by the first proviso in this paragraph, or
(b) in any of the outstanding capital stock of (i) a Controlled Foreign
Corporation (within the meaning of Section 957 of the Internal Revenue Code of
1986, as amended) in excess of 65% of the voting power of all classes of capital
stock of such Controlled Foreign Corporation entitled to vote and (ii) any
subsidiary of any such Controlled Foreign Corporation.

Section 2. Security for Obligations. This Agreement secures, in the case of the
Borrower, the payment of all Secured Obligations of the Borrower. Without
limiting the generality of the foregoing, this

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Agreement secures, as to the Borrower, the payment of all amounts that
constitute part of the Secured Obligations and would be owed by the Borrower to
any Secured Party under the Credit Documents but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower.

Section 3. Borrower Remain Liable. Anything herein to the contrary
notwithstanding, (a) the Borrower shall remain liable under the contracts and
agreements included in the Borrower’s Collateral to the extent set forth therein
to perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Collateral Agent
of any of the rights hereunder shall not release the Borrower from any of its
duties or obligations under the contracts and agreements included in the
Collateral and (c) no Secured Party shall have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Agreement or any other Financing Document, nor shall any Secured Party be
obligated to perform any of the obligations or duties of the Borrower thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.

Section 4. Delivery and Control of Security Collateral. (a) All certificated
securities or instruments representing or evidencing Security Collateral shall
be delivered to and held by or on behalf of the Collateral Agent pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent. The Collateral Agent shall have
the right at any time to exchange certificates or instruments representing or
evidencing Security Collateral for certificates or instruments of smaller or
larger denominations.

(b) With respect to the Lock-Up Account and any Security Collateral that
constitutes a security entitlement as to which the financial institution acting
as Collateral Agent hereunder is not the securities intermediary, the Borrower
will cause the securities intermediary with respect to such Account or security
entitlement either (i) to identify in its records the Collateral Agent as the
entitlement holder thereof or (ii) to agree with the Borrower and the Collateral
Agent that such securities intermediary will comply with entitlement orders
originated by the Collateral Agent without further consent of the Borrower, such
agreement to be in form and substance reasonably satisfactory to the Collateral
Agent (a “Securities Account Control Agreement” or “Securities/Deposit Account
Control Agreement,” respectively)

(c) With respect to any Security Collateral that constitutes an uncertificated
security, the Borrower will cause the issuer thereof either (i) to register the
Collateral Agent as the registered owner of such security or (ii) to agree with
the Borrower and the Collateral Agent that such issuer will comply with
instructions with respect to such security originated by the Collateral Agent
without further consent of the Borrower, such agreement to be in form and
substance satisfactory to the Collateral Agent (such agreement being an
“Uncertificated Security Control Agreement”).

(d) The Collateral Agent shall have the right at any time to convert Security
Collateral consisting of financial assets credited to the Securities Account to
Security Collateral consisting of financial assets held directly by the
Collateral Agent, and to convert Security Collateral consisting of financial
assets held directly by the Collateral Agent to Security Collateral consisting
of financial assets credited to the Lock-Up Account.

(e) The balance from time to time in the Lock-Up Account shall constitute part
of the Collateral of the Lenders hereunder and, except as otherwise provided
herein, shall not constitute payment of the Credit Agreement Obligations until
the occurrence of a Cash Sweep Date, whereupon a portion of such amounts
standing to the credit of the Lock-Up Account shall be applied as provided in
Section 2.03(b)(i)(B) of the Credit Agreement.

Section 5. Deposit Accounts. So long as any Secured Obligation shall remain
unpaid, any Interest Hedging Agreement shall be in effect or any Lender shall
have any Commitment:

(a) The Borrower will maintain deposit accounts only with the financial
institution acting as Collateral Agent hereunder or with a bank (a “Pledged
Account Bank”) that has agreed with the Borrower and the Collateral Agent to
comply with instructions originated by the Collateral Agent directing the
disposition of funds in such deposit account without the further consent of the
Borrower, such agreement to be in form and substance reasonably satisfactory to
the Collateral Agent (a “Deposit Account Control Agreement”); provided, however,
this Section 5(a) shall not apply to deposit accounts (i) with an aggregate
balance of no more than $250,000 at any time or (ii) operated solely as a
payroll account.

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(b) The Borrower agrees to terminate any or all Pledged Deposit Accounts and
related Deposit Account Control Agreements upon request by the Collateral Agent.

(c) The Collateral Agent may, at any time and without notice to, or consent
from, the Borrower, transfer, or direct the transfer of, funds from the Pledged
Deposit Accounts to satisfy the Borrower’s obligations under the Financing
Documents if an Event of Default shall have occurred and be continuing. In the
event that such a transfer shall take place, the Collateral Agent agrees to
provide notice to the Borrower thereafter as required by law, provided that the
failure to provide such notice shall not result in any liability under this
Agreement.

Section 6. Reserved.

Section 7. Release of Amounts. (a) So long as no Default under Section 8.01(a),
(f) or (k) of the Credit Agreement or an Event of Default shall have occurred
and be continuing, the Collateral Agent will pay and release, or direct the
applicable Pledged Account Bank to pay and release, to the Borrower or at its
order such amount, if any, as is then on deposit in the Pledged Deposit
Accounts, in each case to the extent permitted to be released under the terms of
the Credit Documents.

(b) The following provisions shall apply to withdrawals from the Lock-Up
Account:

(i) Withdrawal Certificate.

(A) Upon the conclusion of a Lock-Up Period, the Borrower shall be entitled to
withdraw monies from the Lock-Up Account by delivering to the Collateral Agent a
Withdrawal Certificate signed by the Borrower.

(B) The Borrower shall not be entitled to request any withdrawal from the
Lock-Up Account during the Lock-Up Period except withdrawals permitted pursuant
to Section 7.05(d) of the Credit Agreement. Any Withdrawal Certificate provided
to the Collateral Agent by the Borrower during a Lock-Up Period shall be
accompanied by a certification of an Authorized Officer of the Borrower in
accordance with clause (C) below, (including a certification with respect to the
Distributable Cash balance, if applicable); and

(C) No later than three Business Days prior to the Withdrawal Date, the Borrower
shall deliver to the Facility Agent, each other Authorized Representative and
the Collateral Agent, for purposes of any withdrawal, a Withdrawal Certificate
signed by an Authorized Officer of the Borrower specifying:

(i) the amount requested to be withdrawn from the Lock-Up Account;

(ii) the relevant Withdrawal Date on which such withdrawal is to be made;

(iii) the purpose for which the amount so withdrawn is to be used;

(iv) for any withdrawal under clause (A) above, that the Borrower is not and
will not be, after giving effect to such withdrawal in Default and, no Default
or Event of Default may reasonably be expected to occur as a result of such
withdrawal or the application of the withdrawn amounts in the manner
contemplated by such Withdrawal Certificate; and

(v) a certificate with respect to the Distributable Cash Balance on the date of
the Withdrawal Certificate.

(ii) Agents’ Review of Certificates; Delivery to Collateral Agent.

(A) In the event that prior to the relevant Withdrawal Date, the Facility Agent
shall reasonably determine that a Withdrawal Certificate is inconsistent with or
otherwise fails to satisfy the provisions of this Agreement and the other
Financing Documents, the Facility Agent shall notify the Collateral Agent and
the Borrower in writing promptly but in no case later than the third Business
Day following the Facility Agent’s receipt of such Withdrawal Certificate and
may either (A) return such Withdrawal Certificate to the Borrower with its
determinations noted thereon; or (B) in consultation with the Borrower, make
such corrections as it reasonably deems necessary to satisfy the requirements of
this Agreement. The Facility Agent and the Borrower will endeavor to agree and
complete the final form Withdrawal Certificate and deliver such certificate to
the Collateral Agent, no later than the Business Day prior to the Withdrawal
Date to which such certificate relates.

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(B) The Facility Agent and the Collateral Agent shall countersign any accepted
Withdrawal Certificate (which acceptance or counter-signature shall not be
unreasonably withheld, conditioned or delayed), and the Collateral Agent shall
implement such Withdrawal Certificate in accordance with Section 7(b)(iii).

(iii) Implementation of Withdrawal. Except as otherwise provided in this
Agreement, following receipt of an executed Withdrawal Certificate, the
Collateral Agent shall pay or transfer the amount(s) specified in such
Withdrawal Certificate by requesting that the Account Bank initiate such payment
or transfer not later than 12:00 Noon (New York City time) on the Withdrawal
Date set out in such Withdrawal Certificate for such payment or transfer (or if
such certificate is not received by the Collateral Agent at least one Business
Day prior to such Withdrawal Date, by 12:00 Noon (New York City time) on the
next succeeding Business Day following delivery of such Withdrawal Certificate
to the Collateral Agent).

Section 8. Representations and Warranties. The Borrower represents and warrants
as follows as of the date hereof:

(a) The Borrower’s exact legal name, type of organization, jurisdiction of
organization and organizational identification number is set forth in Schedule
VI hereto. The Borrower has no trade names other than as listed on Schedule VI
hereto. Within the five years preceding the date hereof, the Borrower has not
changed its name, type of organization, jurisdiction of organization or
organizational identification number from those set forth in Schedule VI hereto
except as set forth in Schedule VII hereto.

(b) The Borrower is the legal and beneficial owner of the Collateral granted or
purported to be granted by it free and clear of any Lien, claim, option or right
of others, except for the security interest created under this Agreement or
permitted under the Credit Agreement. No effective financing statement or other
instrument similar in effect covering all or any part of such Collateral or
listing the Borrower or any trade name of the Borrower as debtor is on file in
any recording office, except such as may have been filed in favor of the
Collateral Agent relating to the Financing Documents.

(c) The Borrower has no material Equipment or Inventory.

(d) None of the Receivables or Agreement Collateral is evidenced by a promissory
note or other instrument in excess of $250,000 that has not been delivered to
the Collateral Agent.

(e) PSE, as an issuer of Security Collateral, has received notice of the
security interest granted hereunder.

(f) The Pledged Equity pledged by the Borrower hereunder has been duly
authorized and validly issued and is fully paid and non assessable. The Pledged
Debt pledged by the Borrower hereunder has been duly authorized, authenticated
or issued and delivered, is the legal, valid and binding obligation of the
issuers thereof, is evidenced by one or more promissory notes (which promissory
notes have been delivered to the Collateral Agent) and is not in default.

(g) The Initial Pledged Equity pledged by the Borrower constitutes 100% of the
issued and outstanding Equity Interests of PSE.

(h) The Borrower has no investment property, other than the investment property
listed on Schedule I hereto and additional investment property as to which the
Borrower has complied with the requirements of Section 4.

(i) The Assigned Agreements to which the Borrower is a party, true and complete
copies of which (other than the Interest Hedging Agreements) have been furnished
to the Collateral Agent, have been duly authorized, executed and delivered by
all parties thereto, have not been amended, amended and restated, supplemented
or otherwise modified, are in full force and effect and are binding upon and
enforceable against all parties thereto in accordance with their terms. The
Borrower is not in default and, to the Borrower’s knowledge, there exists no
default under any Assigned Agreement to which the Borrower is a party by any
other party thereto.

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(j) The Borrower has no deposit accounts, other than the Pledged Deposit
Accounts listed on Schedule II hereto and additional Pledged Deposit Accounts as
to which the Borrower has complied with the applicable requirements of
Section 5.

(k) The Borrower is not a beneficiary or assignee under any letter of credit,
other than the letter of credit described in Schedule VIII hereto and additional
letters of credit as to which the Borrower has complied with the requirements of
Section 16.

(l) This Agreement creates in favor of the Collateral Agent for the benefit of
the Secured Parties a valid security interest in the Collateral granted by the
Borrower, securing the payment of the Secured Obligations; all actions necessary
to obtain control of Collateral as provided in Sections 9-104, 9-106 and 9-107
of the UCC have been taken (other than deposit accounts described in
Section 5(a)) and upon the filing with the Washington Department of Licensing of
an appropriate UCC financing statement naming the Borrower as debtor and the
Collateral Agent as secured party and describing the collateral as “all assets”
the security interest of the Collateral Agent in all collateral that can be
perfected by the filing of a UCC financing statement will be taken and such
security interest will be perfected and will be first priority, subject to no
other Liens other than Permitted Collateral Liens.

(m) No authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other third party is
required for (i) the grant by the Borrower of the security interest granted
hereunder or for the execution, delivery or performance of this Agreement by the
Borrower, (ii) the perfection or maintenance of the security interest created
hereunder (including the first priority nature of such security interest),
except for the filing of financing and continuation statements under the UCC,
which financing statements have been duly filed and are in full force and
effect, the recordation of the Intellectual Property Security Agreements
referred to in Section 13(f) with the U.S. Patent and Trademark Office and the
U.S. Copyright Office, and the actions described in Section 4 with respect to
the Security Collateral, which actions have been taken and are in full force and
effect, or (iii) the exercise by the Collateral Agent of its voting or other
rights provided for in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement, except as may be required in connection
with the disposition of any portion of the Security Collateral by laws affecting
the offering and sale of securities generally or as may be required in
connection with the disposition of any portion of the Collateral under
Section 203 of the Federal Power Act or chapter 80.12 of the Revised Code of
Washington.

(n) The Borrower has no material Intellectual Property Collateral.

(o) The Borrower has no commercial tort claims other than those listed in
Schedule V hereto and additional commercial tort claims as to which the Borrower
has complied with the requirements of Section 17.

Section 9. Further Assurances. (a) The Borrower agrees that from time to time,
at the expense of the Borrower, the Borrower will promptly execute and deliver,
or otherwise authenticate, all further instruments and documents, and take all
further action that may be necessary or desirable, or that the Collateral Agent
may reasonably request, in order to perfect and protect any pledge or security
interest granted or purported to be granted by the Borrower hereunder or to
enable the Collateral Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral of the Borrower; provided, however,
that in no event shall the Borrower be required to cause the notation of any
security interest on any certificate of title.

(b) The Borrower hereby authorizes the Collateral Agent to file one or more
financing or continuation statements, and amendments thereto, including, without
limitation, one or more financing statements indicating that such financing
statements cover all assets or all personal property (or words of similar
effect) of the Borrower, regardless of whether any particular asset described in
such financing statements falls within the scope of the UCC or the granting
clause of this Agreement. A photocopy or other reproduction of this Agreement
shall be sufficient as a financing statement where permitted by law. The
Borrower ratifies its authorization for the Collateral Agent to have filed such
financing statements, continuation statements or amendments filed prior to the
date hereof.

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(c) The Borrower will furnish to the Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral of
the Borrower and such other reports in connection with such Collateral as the
Collateral Agent may reasonably request, all in reasonable detail.

Section 10. Reserved.

Section 11. Reserved.

Section 12. Post-Closing Changes; Collections on Assigned Agreements,
Receivables and Related Contracts. (a) The Borrower will not change its name,
type of organization, jurisdiction of organization or organizational
identification number from those set forth in Section 8(a) of this Agreement
(except in connection with the Merger) without first giving at least 20 days’
prior written notice to the Collateral Agent and taking all action reasonably
required by the Collateral Agent for the purpose of perfecting or protecting the
security interest granted by this Agreement. The Borrower will hold and preserve
its records relating to the Collateral, including, without limitation, the
Assigned Agreements and Related Contracts, and will permit representatives of
the Collateral Agent to inspect and make abstracts from such records and other
documents as set forth in Section 6.18 of the Credit Agreement and otherwise
specified in the Additional Credit Documents. If the Borrower does not have an
organizational identification number and later obtains one, it will forthwith
notify the Collateral Agent of such organizational identification number.

(b) Except as otherwise provided in this subsection (b), the Borrower will
continue to collect, at its own expense, all amounts due or to become due the
Borrower under the Assigned Agreements, Receivables and Related Contracts. In
connection with such collections, the Borrower may take such action as the
Borrower or the Collateral Agent may deem necessary to enforce collection of the
Assigned Agreements, Receivables and Related Contracts; provided, however, that,
subject to the terms of the Collateral Agency Agreement, the Collateral Agent
shall have the right at any time, upon the occurrence and during the continuance
of an Event of Default and upon written notice to the Borrower of its intention
to do so, to notify the Obligors under any Assigned Agreements, Receivables and
Related Contracts of the assignment of such Assigned Agreements, Receivables and
Related Contracts to the Collateral Agent and to direct such Obligors to make
payment of all amounts due or to become due to the Borrower thereunder directly
to the Collateral Agent and, upon such notification and at the expense of the
Borrower, to enforce collection of any such Assigned Agreements, Receivables and
Related Contracts, to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as the Borrower might have
done, and to otherwise exercise all rights with respect to such Assigned
Agreements, Receivables and Related Contracts, including, without limitation,
those set forth in Section 9-607 of the UCC. After receipt by the Borrower of
the notice from the Collateral Agent referred to in the proviso to the preceding
sentence, (i) all amounts and proceeds (including, without limitation,
instruments) received by the Borrower in respect of the Assigned Agreements,
Receivables and Related Contracts of the Borrower shall be received in trust for
the benefit of the Collateral Agent hereunder, shall be segregated from other
funds of the Borrower and shall be forthwith paid over to the Collateral Agent
in the same form as so received (with any necessary indorsement) to be deposited
in an account secured for the benefit of the Collateral Agent on behalf of the
Secured Parties and either (A) released to the Borrower on the terms set forth
in Section 7 so long as no Default under Section 8.01(a), (f) or (k) of the
Credit Agreement, any substantially similar Default under any Additional Credit
Document or any Event of Default shall have occurred and be continuing or (B) if
any such event shall have occurred and be continuing, applied as provided in
Section 22(b) and (ii) the Borrower will not adjust, settle or compromise the
amount or payment of any Receivable or amount due on any Assigned Agreement or
Related Contract, release wholly or partly any Obligor thereof or allow any
credit or discount thereon. The Borrower will not permit or consent to the
subordination of its right to payment under any of the Assigned Agreements,
Receivables and Related Contracts to any other Indebtedness or obligations of
the Obligor thereof.

Section 13. As to Intellectual Property Collateral. The Borrower agrees that
should it obtain an ownership interest in any item of the type set forth in
Section 1(g), (a) the provisions of this Agreement shall automatically apply
thereto and (b) the Borrower shall execute and deliver to the Collateral Agent
any agreement, instrument or other document reasonably requested by the
Collateral Agent to perfect the security interest in such Collateral.

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Section 14. Voting Rights; Dividends; Etc. (a) So long as no Event of Default
hall have occurred and be continuing:

(i) The Borrower shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Security Collateral of the Borrower or any
part thereof for any purpose; provided however, that the Borrower will not
exercise or refrain from exercising any such right if such action would have a
material adverse effect on the value of the Security Collateral or any part
thereof.

(ii) The Borrower shall be entitled to receive and retain any and all dividends,
interest and other distributions paid in respect of the Security Collateral of
the Borrower if and to the extent that the payment thereof is not otherwise
prohibited by the terms of the Credit Documents; provided, however, that any and
all

(A) dividends, interest and other distributions paid or payable other than in
cash in respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Security
Collateral,

(B) dividends and other distributions paid or payable in cash in respect of any
Security Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid in surplus, and

(C) cash paid, payable or otherwise distributed in respect of principal of, or
in redemption of, or in exchange for, any Security Collateral shall be, and
shall be forthwith delivered to the Collateral Agent to hold as, Security
Collateral and shall, if received by the Borrower, be received in trust for the
benefit of the Collateral Agent, be segregated from the other property or funds
of the Borrower and be forthwith delivered to the Collateral Agent as Security
Collateral in the same form as so received (with any necessary indorsement).

(iii) The Collateral Agent will execute and deliver (or cause to be executed and
delivered) to the Borrower all such proxies and other instruments as the
Borrower may reasonably request for the purpose of enabling the Borrower to
exercise the voting and other rights that it is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends or interest payments that it is
authorized to receive and retain pursuant to paragraph (ii) above.

(b) Upon the occurrence and during the continuance of an Event of Default:

(i) All rights of the Borrower (x) to exercise or refrain from exercising the
voting and other consensual rights that it would otherwise be entitled to
exercise pursuant to Section 14(a)(i) shall, upon notice to the Borrower by the
Collateral Agent, cease and (y) to receive the dividends, interest and other
distributions that it would otherwise be authorized to receive and retain
pursuant to Section 14(a)(ii) shall automatically cease, and all such rights
shall thereupon become vested in the Collateral Agent, which shall thereupon
have the sole right to exercise or refrain from exercising such voting and other
consensual rights and to receive and hold as Security Collateral such dividends,
interest and other distributions.

(ii) All dividends, interest and other distributions that are received by the
Borrower contrary to the provisions of paragraph (i) of this Section 14(b) shall
be received in trust for the benefit of the Collateral Agent, shall be
segregated from other funds of the Borrower and shall be forthwith paid over to
the Collateral Agent as Security Collateral in the same form as so received
(with any necessary indorsement).

Section 15. Reserved

Section 16. As to Letter-of-Credit Rights. (a) The Borrower, by granting a
security interest in its Receivables consisting of letter-of-credit rights to
the Collateral Agent, intends to (and hereby does) assign to the Collateral
Agent its rights (including its contingent rights) to the proceeds of all
Related Contracts consisting of letters of credit of which it is or hereafter
becomes a beneficiary or assignee. The Borrower will promptly use commercially
reasonable efforts to cause the issuer of each letter of credit and each
nominated person (if any) with respect thereto to consent to such assignment of
the proceeds thereof pursuant to a consent in form and substance reasonably
satisfactory to the Collateral Agent and deliver written evidence of such
consent to the Collateral Agent.

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(b) Upon the occurrence of an Event of Default, the Borrower will, promptly upon
request by the Collateral Agent, (i) notify (and the Borrower hereby authorizes
the Collateral Agent to notify) the issuer and each nominated person with
respect to each of the Related Contracts consisting of letters of credit that
the proceeds thereof have been assigned to the Collateral Agent hereunder and
any payments due or to become due in respect thereof are to be made directly to
the Collateral Agent or its designee and (ii) with respect to any letters of
credit that are transferable, arrange for the Collateral Agent to become the
transferee beneficiary of letter of credit.

Section 17. Commercial Tort Claims. The Borrower will promptly give notice to
the Collateral Agent of any commercial tort claim that may arise after the date
hereof and will immediately execute or otherwise authenticate a supplement to
this Agreement, and otherwise take all necessary action, to subject such
commercial tort claim to the first priority security interest created under this
Agreement.

Section 18. Transfers and Other Liens; Additional Shares. (a) The Borrower
agrees that it will not (i) sell, assign or otherwise dispose of, or grant any
option with respect to, any of the Collateral other than as permitted under the
terms of the Credit Documents, or (ii) create or suffer to exist any Lien upon
or with respect to any of the Collateral of the Borrower except for the pledge,
assignment and security interest created under this Agreement and Liens
permitted under the Credit Documents.

(b) The Borrower agrees that it will (i) cause PSE not to issue any Equity
Interests in addition to or in substitution for the Pledged Equity issued by
such issuer, except to the Borrower, and (ii) pledge hereunder, immediately upon
its acquisition (directly or indirectly) thereof, any and all additional Equity
Interests issued to it.

Section 19. Collateral Agent Appointed Attorney in Fact. The Borrower hereby
irrevocably appoints the Collateral Agent the Borrower’s attorney in fact, with
full authority in the place and stead of the Borrower and in the name of the
Borrower or otherwise, from time to time, upon the occurrence and during the
continuance of an Event of Default, in the Collateral Agent’s discretion, to
take any action and to execute any instrument that the Collateral Agent may deem
necessary to accomplish the purposes of this Agreement, including, without
limitation:

(a) to ask for, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral,

(b) to receive, indorse and collect any drafts or other instruments, documents
and chattel paper, in connection with clause (a) above, and

(c) to file any claims or take any action or institute any proceedings that the
Collateral Agent may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce compliance with the terms and conditions
of any Assigned Agreement or the rights of the Collateral Agent with respect to
any of the Collateral.

Section 20. Collateral Agent May Perform. If the Borrower fails to perform any
agreement contained herein, the Collateral Agent may, but without any obligation
to do so and without notice, itself perform, or cause performance of, such
agreement, and the expenses of the Collateral Agent incurred in connection
therewith shall be payable by the Borrower under Section 23.

Section 21. The Collateral Agent’s Duties. (a) The powers conferred on the
Collateral Agent hereunder are solely to protect the Secured Parties’ interest
in the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not any Secured Party has or is
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against any parties or any other rights pertaining to
any Collateral. The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which it accords its own property.

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(b) Anything contained herein to the contrary notwithstanding, the Collateral
Agent may from time to time, when the Collateral Agent deems it to be necessary,
appoint one or more subagents (each a “Subagent”) for the Collateral Agent
hereunder with respect to all or any part of the Collateral. In the event that
the Collateral Agent so appoints any Subagent with respect to any Collateral,
(i) the assignment and pledge of such Collateral and the security interest
granted in such Collateral by the Borrower hereunder shall be deemed for
purposes of this Security Agreement to have been made to such Subagent, in
addition to the Collateral Agent, for the ratable benefit of the Secured
Parties, as security for the Secured Obligations, (ii) such Subagent shall
automatically be vested, in addition to the Collateral Agent, with all rights,
powers, privileges, interests and remedies of the Collateral Agent hereunder
with respect to such Collateral, and (iii) the term “Collateral Agent,” when
used herein in relation to any rights, powers, privileges, interests and
remedies of the Collateral Agent with respect to such Collateral, shall include
such Subagent; provided, however, that no such Subagent shall be authorized to
take any action with respect to any such Collateral unless and except to the
extent expressly authorized in writing by the Collateral Agent.

Section 22. Remedies. If any Event of Default shall have occurred and be
continuing:

(a) The Collateral Agent may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party upon default under the UCC
(whether or not the UCC applies to the affected Collateral) and also may: (i)
require the Borrower to, and the Borrower hereby agrees that it will at its
expense and upon request of the Collateral Agent forthwith, assemble all or part
of the Collateral as directed by the Collateral Agent and make it available to
the Collateral Agent at a place and time to be designated by the Collateral
Agent that is reasonably convenient to both parties; (ii) without notice except
as specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Collateral Agent’s offices or
elsewhere, for cash, on credit or for future delivery, and upon such other terms
as the Collateral Agent may deem commercially reasonable; (iii) occupy any
premises owned or leased by any of the Borrower where the Collateral or any part
thereof is assembled or located for a reasonable period in order to effectuate
its rights and remedies hereunder or under law, without obligation to the
Borrower in respect of such occupation; and (iv) exercise any and all rights and
remedies of the Borrower under or in connection with the Collateral, or
otherwise in respect of the Collateral, including, without limitation, (A) any
and all rights of the Borrower to demand or otherwise require payment of any
amount under, or performance of any provision of, the Assigned Agreements, the
Receivables, the Related Contracts and the other Collateral, (B) withdraw, or
cause or direct the withdrawal, of all funds with respect to the Account
Collateral and (C) exercise all other rights and remedies with respect to the
Assigned Agreements, the Receivables, the Related Contracts and the other
Collateral, including, without limitation, those set forth in Section 9-607 of
the UCC. The Borrower agrees that, to the extent notice of sale shall be
required by law, at least ten days’ prior written notice to the Borrower of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Collateral Agent shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.

(b) Any cash held by or on behalf of the Collateral Agent and all cash proceeds
received by or on behalf of the Collateral Agent in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
may, in the discretion of the Collateral Agent, be held by the Collateral Agent
as collateral for, and/or then or at any time thereafter applied (after payment
of any amounts payable to the Collateral Agent pursuant to Section 23) in whole
or in part by the Collateral Agent for the ratable benefit of the Secured
Parties against, all or any part of the Secured Obligations, in accordance with
the Collateral Agency Agreement.

(c) All payments received by the Borrower under or in connection with any
Assigned Agreement or otherwise in respect of the Collateral shall be received
in trust for the benefit of the Collateral Agent, shall be segregated from other
funds of the Borrower and shall be forthwith paid over to the Collateral Agent
in the same form as so received (with any necessary indorsement).

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(d) The Collateral Agent may, without notice to the Borrower except as required
by law and at any time or from time to time, charge, set off and otherwise apply
all or any part of the Secured Obligations against any funds held with respect
to the Account Collateral or in any other deposit account of the Borrower.

(e) The Collateral Agent may send to each bank, securities intermediary or
issuer party to any Deposit Account Control Agreement, Securities/Deposit
Account Control Agreement, Securities Account Control Agreement or
Uncertificated Security Control Agreement a “Notice of Exclusive Control” as
defined in and under such Agreement.

Section 23. Indemnity and Expenses. The Borrower agrees to indemnify, defend and
save and hold harmless each Secured Party, and to pay the expenses of the
Collateral Agent, in each case in connection with this Agreement, as set forth
in Sections 10.04 and 10.05 of the Credit Agreement as if such sections were set
forth in this Agreement mutatis mutandis.

Section 24. Amendments; Waivers; Additional Borrower; Etc. No amendment or
waiver of any provision of this Agreement, and no consent to any departure by
the Borrower herefrom, shall in any event be effective unless the same shall be
in writing and signed by the Collateral Agent (and the Borrower in the case of
an amendment or waiver), and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given. No
failure on the part of the Collateral Agent or any other Secured Party to
exercise, and no delay in exercising any right hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right.

Section 25. Notices, Etc. All notices and other communications provided for
hereunder shall be provided in accordance with the Collateral Agency Agreement.

Section 26. Continuing Security Interest; Assignments under the Credit
Documents. This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the indefeasible
payment in full in cash of the Secured Obligations (other than any contingent
indemnity obligations not then due), termination of the Commitments and the
termination or expiration of the Interest Hedging Agreements, (b) be binding
upon the Borrower, its successors and assigns and (c) inure, together with the
rights and remedies of the Collateral Agent hereunder, to the benefit of the
Secured Parties and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), any Lender
or Additional Secured Party may assign or otherwise transfer all or any portion
of its rights and obligations under the Credit Agreement (including, without
limitation, all or any portion of its Commitments, the Loans owing to it and the
Note or Notes, if any, held by it) or Additional Credit Document, as the case
may be, to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to such Lender or Additional
Secured Party, as the case may be, herein or otherwise, in each case as provided
in Section 10.07 of the Credit Agreement or in the Additional Credit Documents,
as applicable.

Section 27. Termination. Upon the indefeasible payment in full in cash of the
Secured Obligations (other than any contingent indemnity obligations not then
due), termination of the Commitments and the termination or expiration of the
Interest Hedging Agreements, the security interest created by this Agreement
shall terminate and all rights to the Collateral shall revert to the Borrower,
and the Collateral Agent shall (at the written request and sole cost and expense
of the Borrower) promptly cause to be transferred and delivered, against receipt
but without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect thereof, to or on the order of the
Borrower. The Collateral Agent shall also (at the written request and sole cost
and expense of the Borrower) promptly execute and deliver to the Borrower upon
such termination such Uniform Commercial Code termination statements, and such
other documentation as shall be reasonably requested by the Borrower to effect
the termination and release of the Liens on the Collateral.

Section 28. Collateral Agency Agreement Controls. Notwithstanding anything
herein to the contrary, the lien and security interest granted to the Collateral
Agent, for the benefit of the Secured Parties pursuant to this Agreement and any
other Security Document and related agreements (including any control agreements
executed pursuant to the requirements of this Agreement), and the exercise of
any right or remedy by the Collateral Agent in respect of the Collateral are
subject to the provisions of the Collateral Agency Agreement. In the event of
any conflict or inconsistency between the provisions of this Agreement, any
other Security Documents and any such

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related document and the Collateral Agency Agreement, the provisions of the
Collateral Agency Agreement shall govern and control. Notwithstanding anything
herein to the contrary, in accordance with the provisions of Sections 2.02(b),
2.05(b) and 4.05(c), the Lock-Up Account and any funds, cash, Securities
Entitlements credited thereto and any proceeds thereof shall be held by the
Collateral Agent solely for the benefit of the Lenders until all Credit
Agreement Obligations shall have been indefeasibly paid in full in cash.

Section 29. Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier or other means of electronic delivery shall be effective
as delivery of an original executed counterpart of this Agreement.

Section 30. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.

Any legal action or proceeding arising under this Agreement or in any way
connected with or related or incidental to the dealings of the parties hereto or
any of them with respect to this Agreement, in each case whether now existing or
hereafter arising, may be brought in the courts of the State of New York sitting
in New York City or of the United States for the Southern District of such
state, and by execution and delivery of this Agreement, the Borrower consents,
for itself and in respect of its property, to the non-exclusive jurisdiction of
those courts. The Borrower waives any objection, including any objection to the
laying of venue or based on the grounds of forum non conveniens, which it may
now or hereafter have to the bringing of any action or proceeding in such
jurisdiction in respect of this Agreement or any Financing Document.

Section 31. Waiver of Right to Trial by Jury. Each party to this Agreement
hereby expressly waives any right to trial by jury of any claim, demand, action
or cause of action arising under this Agreement or in any way connected with or
related or incidental to its dealings with respect to this Agreement, or the
transactions related thereto, in each case whether now existing or hereafter
arising, and whether founded in contract or tort or otherwise; and each party to
this Agreement hereby agrees and consents that any such claim, demand, action or
cause of action shall be decided by court trial without a jury, and that any
party to this Agreement may file an original counterpart or a copy of this
Section 31 with any court as written evidence of the consent of the signatories
hereto to the waiver of its right to trial by jury.

Section 32. Original Schedules and Exhibits. Each of the Schedules and Exhibits
attached to the Security Agreement, dated as of February 6, 2009 between the
parties hereto, shall be deemed attached to, and form a part of, this Agreement
without any amendment, modification or supplement.

[Signature pages to follow.]

 

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PUGET EQUICO, LLC By:   Name:   Donald E. Gaines Title:   Vice President
Finance & Treasurer

BARCLAYS BANK PLC,

as Collateral Agent

By:   Name:   Ann E. Sutton Title:   Director

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AMENDMENT NO. 1

TO

AMENDED AND RESTATED BORROWER SECURITY AGREEMENT

This AMENDMENT NO. 1 TO AMENDED AND RESTATED BORROWER SECURITY AGREEMENT (this
“Amendment”), is made as of February 10, 2012, by and between JPMORGAN CHASE
BANK, N.A., in its capacity as successor Collateral Agent (as defined below) and
PUGET ENERGY, INC., as borrower (the “Borrower”). Capitalized terms used but not
otherwise defined herein shall have the respective meanings given to them in the
Amended and Restated Collateral Agency Agreement (described below).

WHEREAS, on the date hereof, Barclays Bank PLC resigned as Collateral Agent
under than certain Amended and Restated Collateral Agency Agreement, dated as of
February 6, 2009 and as amended and restated as of March 31, 2010, among the
Borrower, Puget Equico LLC, Barclays Bank PLC, as collateral agent and Barclays
Bank PLC, as facility agent;

WHEREAS, pursuant to Amendment No. 1 to Amended and Restated Collateral Agency
Agreement, dated as of the date hereof, JPMorgan Chase Bank, N.A. was appointed
as successor Collateral Agent (in such capacity, the “Collateral Agent”);

WHEREAS, the Collateral Agent and the Borrower wish to amend that certain
Amended and Restated Borrower Security Agreement, dated February 6, 2009 and as
amended and restated as of March 31, 2010, between Collateral Agent, as
successor collateral agent and the Borrower (as amended, restated, supplemented
or otherwise modified prior to the date hereof, the “Agreement”);

NOW THEREFORE, in consideration of the premises set forth above, the terms and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
have agreed to amend the Agreement as follows.

SECTION 1. Amendments to Agreement.

(a) The preamble of the Agreement is amended to replace the word “Company”
appearing therein with the word “Borrower”.

(b) Recital (1) to the Agreement is amended and restated in its entirety to read
as follows:

(1) The Borrower is party to that certain Credit Agreement, dated as of
February 10, 2012, among the financial institutions from time to time party
thereto as lenders and JPMorgan Chase Bank, N.A., as administrative agent (as
amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”).

(c) Recital (6) to the Agreement is amended to (i) delete the punctuation mark
“,” appearing immediately following the phrase “under the Credit Agreement”
appearing therein and to replace such punctuation mark with the word “and” and
(ii) to delete the word “the” appearing immediately following the phrase
“Borrower shall have granted” appearing therein.

(d) Recital (7) to the Agreement is amended to (i) insert the phrase “Puget
Equico LLC,” immediately following the phrase “among the Borrower,” appearing
therein and (ii) to delete the last sentence thereof in its entirety.

(e) Recitals (2) and (5) to the Agreement are deleted in their entirety.

(f) Recitals (3), (4), (6), (7) and (8) are renumbered as recitals (2), (3),
(4), (5) and (6) respectively.

(g) Clause (d) of Section 1 of the Agreement is amended to (x) insert the word
“and” at the end of clause (iii) thereof, (y) delete clause (iv) appearing
therein in its entirety and (z) renumber clause (v) appearing therein as clause
(iv).

(h) Section 4 of the Agreement is amended to (i) delete the phrase “the Lock-Up
Account and” appearing in clause (a) thereof, (ii) delete the phrase “, and to
convert Security Collateral consisting of financial assets held directly by the
Collateral Agent to Security Collateral consisting of financial assets credited
to the Lock-Up Account” appearing in clause (c) thereof and (iii) to delete
clause (e) thereof in its entirety.

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(i) Clause (b) of Section 4 of the Agreement is amended to insert at the end
thereof the following proviso “provided, the deadline for delivery of a
Securities Account Control Agreement in respect of Account
No. 13014261 maintained at Wells Fargo Securities, LLC shall be February 29,
2012 (or such later date as may be agreed to by the Collateral Agent in its sole
discretion).

(j) Clause (a) of Section 5 of the Agreement is amended to (i) insert the
sub-heading “(x)” immediately preceding the phrase “this Section 5(a) shall not”
appearing therein and (ii) insert immediately following the phrase “(ii)
operated solely as a payroll account” the phrase “and (y) the deadline for
delivery of a Deposit Account Control Agreement in respect of Account
No. 1139127 maintained at The Bank of New York Mellon shall be February 29, 2012
(or such later date as may be agreed to by the Collateral Agent in its sole
discretion).

(k) Clause (a) of Section 7 of the Agreement is amended to delete the section
reference “Section 8.01(a), (f) or (k)” appearing therein and to replace such
section reference with the section reference “clauses (a), (h) or (i) of Article
VII”.

(l) Clause (b), including all subsections thereof, of Section 7 of the Agreement
is deleted in its entirety.

(m) Clause (a) of Section 12 of the Agreement is amended to (i) delete the
section reference “Section 6.18” appearing therein and to replace such section
reference with the section reference “Section 5.15” and (ii) delete in its
entirety the parenthetical “(except in connection with the Merger)” appearing
therein.

(n) Clause (b) of Section 12 of the Agreement is amended to delete the section
reference “Section 8.01(a), (f) or (k)” appearing therein and to replace such
section reference with the section reference “clauses (a), (h) or (i) of Article
VII”.

(o) Section 23 of the Agreement is amended to delete the section reference
“Sections 10.04 and 10.05” appearing therein and to replace such section
reference with the section reference “Section 9.03”.

(p) Section 26 of the Agreement is amended to delete the section reference
“Section 10.07” appearing therein and to replace such section reference with the
section reference “Section 9.04”.

(q) Section 28 of the Agreement is amended to delete the last sentence thereof
in its entirety.

(r) The Agreement is amended to replace each reference to “Barclays Bank PLC”
with “JPMorgan Chase Bank, N.A.”.

SECTION 2. Conditions of Effectiveness. This Amendment shall become effective as
of the date hereof (the “Effective Date”) when, and only when (i) the Collateral
Agent shall have received an executed counterpart of this Amendment from the
Collateral Agent and the Borrower and (ii) the New Credit Agreement shall become
effective in accordance with its terms and conditions.

SECTION 3. Representations and Warranties. Each of the parties hereto represents
and warrants that this Amendment and the Agreement, as amended by this
Amendment, constitute legal, valid and binding obligations of such party
enforceable against such party in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors’ rights generally and general equitable
principles.

SECTION 4. Reference to and the Effect on the Agreement.

(a) On and after the effective date of this Amendment, each reference in the
Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like
import referring to the Agreement and each reference to the Agreement in any
certificate delivered in connection therewith, shall mean and be a reference to
the Agreement as amended hereby.

(b) Each of the parties hereto hereby agrees that, except as specifically
amended above, the Agreement is hereby ratified and confirmed and shall continue
to be in full force and effect and

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enforceable, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or limiting
creditors’ rights generally and general equitable principles.

SECTION 5. Headings. Section headings in this Amendment are included herein for
convenience only and shall not constitute a part of this Amendment for any other
purpose.

SECTION 6. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart to this Amendment by facsimile, electronic
mail, portable document format (PDF) or similar means shall be effective as
delivery of a manually executed counterpart of this Amendment.

SECTION 7. Governing Law. This Amendment shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized signatories as of the day and year first
above written.

 

PUGET ENERGY, INC., as Borrower By:  

 

  Name:   Title:

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JPMORGAN CHASE BANK, N.A.,

as successor Collateral Agent

By:  

 

  Name:   Title:

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EXHIBIT M

TERMS OF SUBORDINATION

[ATTACHED]

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TERMS OF SUBORDINATION

These terms refer to the Credit Agreement, dated as of February 10, 2012 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”), among Puget Energy, Inc., a Washington corporation (the
“Borrower”), the Lenders party thereto from time to time and JPMorgan Chase
Bank, N.A., in its capacity as administrative agent for the Lenders (in such
capacity, the “Administrative Agent”). Capitalized terms shall, unless otherwise
defined in these terms, have the meaning given in the Credit Agreement or, if
not defined therein, the meaning given in the Collateral Agency Agreement.

All Management Fees payable by the Borrower and its Subsidiaries shall include
or be subject to the following terms:

1. General. To the extent and in the manner set forth herein, the payment of any
Management Fee is expressly made subordinate and subject in right of payment to
the prior payment in full of all the Obligations. Except to the extent permitted
pursuant to the last sentence of this paragraph, any Person entitled to payment
of Management Fees (each a “Payee”) agrees that it will not ask, demand, sue
for, take or receive from the Borrower, by set-off or in any other manner, or
retain payment (in whole or in part) of the Management Fees, or any security
therefor, unless and until all of the Obligations have been paid in full in cash
and the Commitments terminated (other than contingent obligations not then due).
Each Payee directs the Borrower to make, and the Borrower agrees to make, such
prior payment of the Obligations. Notwithstanding the foregoing, payment by the
Borrower of or in respect of the Management Fees may be made, and the Payees may
ask, demand, sue for, take or receive from the Borrower, by set-off or in any
other manner, or retain payment of (in whole or in part) the Management Fees.

2. Payment Upon Dissolution, Etc. In the event of:

(a) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in connection
therewith, relative to the Borrower or any of its Subsidiaries or to any of
their creditors as such, or to any of their assets; or

(b) any liquidation, dissolution or other winding up of the Parent or the
Borrower or any of its Subsidiaries, whether partial or complete and whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy;
or

(c) any assignment for the benefit of creditors or any other marshalling of all
or any substantial part of the assets and liabilities of the Parent or the
Borrower or any of its Subsidiaries;

then and in any such event the Secured Parties shall be entitled to receive
payment in full of all amounts due or to become due on or in respect of all the
Obligations before the Payees shall be entitled to receive any payment on
account of the Management Fees, and to that end, any payment or distribution of
any kind or character, whether in cash, property or securities which may be
payable or deliverable in respect of the Management Fees, proceeding,
dissolution, liquidation or other winding up or event shall instead be paid or
delivered directly to the Secured Parties for application to the Obligations,
whether or not due, until the Obligations shall have first been fully paid and
satisfied in cash (other than contingent obligations not then due).

3. No Payment When Credit Agreement in Default. Except as may be permitted
pursuant to the Credit Agreement, if any Default or Event of Default has
occurred and is continuing, then no payment shall be made by the Borrower on or
in respect of the Management Fees.

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4. Proceedings Against Borrower; No Collateral. The Payees shall not, without
the prior written consent of the Unanimous Voting Parties (as long as any
Obligation is outstanding):

(a) commence any judicial action or proceeding to collect payment of principal
of or interest on the Management Fees; or

(b) commence any judicial action or proceeding against the Borrower in
bankruptcy, insolvency or receivership law; or

(c) take any collateral security for the Management Fees.

5. Further Assurances. Each Payee agrees to execute and deliver to the Secured
Parties all such further instruments, proofs of claim, assignments of claim and
other instruments, and take all such other action, as may be reasonably
requested by the Secured Parties to enforce the Secured Parties rights
hereunder.

6. Notice; Disclosure. The Payees agree, for the benefit of each Secured Party,
that they will give the Collateral Agent on behalf of each Secured Party prompt
notice of any default by the Borrower of which the Payees are aware in respect
of the Management Fees.

7. No Waiver; Modification to Credit Agreement. (a) No failure on the part of
the Secured Parties, and no delay in exercising, any right, remedy or power
hereunder shall operate as a waiver thereof by the Secured Parties, nor shall
any single or partial exercise by the Secured Parties of any right, remedy or
power hereunder shall preclude any other or future exercise of any other right
remedy or power. Each and every right, remedy and power hereby granted to the
Secured Parties or allowed to the Secured Parties by law or other agreement
shall be cumulative and not exclusive of any other, and may be exercised by the
Secured Parties from time to time. All rights and interests of the Secured
Parties hereunder and all agreements and obligations of the Payees and the
Borrower hereunder shall remain in full force and effect irrespective of:

(i) any lack of validity or enforceability of the Financing Documents; or

(ii) any other circumstance that might otherwise constitute a defense available
to, or discharge of, the Borrower.

(b) Without in any way limiting the generality of the foregoing paragraph (a),
the Secured Parties may, at any time and from time to time, without the consent
of or notice to the Payees, without incurring responsibility to the Payees, and
without impairing or releasing the subordination provided herein or the
obligations hereunder of the Payees, do anyone or more of the following:

(i) change the manner, place or terms of payment of or extend the time of
payment of, or renew or alter, the Obligations under the Credit Agreement, or
otherwise amend or supplement in any manner the Credit Agreement or any
instruments evidencing the same or any agreement under which the Obligations are
outstanding;

(ii) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing the Obligations;

(iii) release any person liable in any manner for the Obligations; and

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(iv) exercise or refrain from exercising any rights against the Borrower or any
other person.

8. Benefit of Subordination Provisions. These subordination provisions are
intended to benefit the Secured Parties.

9. Provisions Solely to Define Relative Rights. These subordination provisions
are intended solely for the purpose of defining the relative rights of the
Payees and their successors and assigns, on the one hand, and the Secured
Parties and their successors and assigns, on the other hand.

10. Transfers of Subordinated Debt. The Payees shall not sell, assign, pledge,
encumber or transfer the interests in the Management Fees unless such sale,
assignment, pledge, encumbrance or transfer is to a party that agrees to be
bound by the terms hereof. The interests in the Management Fees shall remain
expressly subject to the terms hereof, notwithstanding any sale, assignment,
pledge, encumbrance or transfer.

11. Further Assurances. The Payees, at their cost (to be reimbursed by the
Borrower on the same terms as payment of the Management Fees, other than nominal
costs), shall take all further action as the Secured Parties may reasonably
request in order more fully to carry out the intent and purpose of these
subordination provisions.

12. Governing Law. THESE SUBORDINATION PROVISIONS SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

13. Amendment. These subordination provisions may not be amended, modified or
supplemented without the prior written consent of each of the Secured Parties.

14. Successors and Assigns. These subordination provisions shall be binding and
inure to the benefit of the Payees, the Secured Parties and their respective
successors and permitted assigns.