Exhibit 10.1

EXECUTION COPY

 

 

 

CREDIT AGREEMENT

Dated as of May 16, 2008

among

PUGET MERGER SUB INC.

as Borrower,

BARCLAYS BANK PLC

as Facility Agent,

and

THE LENDERS PARTY HERETO

 

 

DRESDNER BANK AG NEW YORK BRANCH

COBANK, ACB

as Co-Syndication Agents

and

THE BANK OF NOVA SCOTIA

THE ROYAL BANK OF SCOTLAND PLC

as Co-Documentation Agents

 

 

BARCLAYS CAPITAL, the investment banking division of Barclays Bank PLC and

DRESDNER BANK AG NEW YORK BRANCH

as Joint Mandated Lead Arrangers and Joint Bookrunners

 

 

 

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TABLE OF CONTENTS

 

          Page ARTICLE I Definitions and Accounting Terms    1 SECTION 1.01.   
Defined Terms    1 SECTION 1.02.    Other Interpretive Provisions    35
SECTION 1.03.    Accounting Terms and Principles    35 SECTION 1.04.    Rounding
   36 SECTION 1.05.    References to Agreements, Laws, Etc.    36 SECTION 1.06.
   Times of Day    36 SECTION 1.07.    Timing of Payment of Performance    36
SECTION 1.08.    Authorized Officers    36 ARTICLE II The Commitments and Credit
Extensions and Continuations    37 SECTION 2.01.    The Loans    37
SECTION 2.02.    Borrowings    37 SECTION 2.03.    Prepayments; Reduction and
Termination of Commitments    38 SECTION 2.04.    Repayment of Loans    42
SECTION 2.05.    Interest    42 SECTION 2.06.    Fees    42 SECTION 2.07.   
Computation of Interest and Fees    43 SECTION 2.08.    Evidence of Indebtedness
   44 SECTION 2.09.    Payments Generally.    44 SECTION 2.10.    Sharing of
Payments    46 SECTION 2.11.    Incremental Facility    47 ARTICLE III Taxes,
Increased Costs Protection and Illegality    49 SECTION 3.01.    Taxes.    49
SECTION 3.02.    Illegality    51 SECTION 3.03.    Inability to Determine Rates
   51 SECTION 3.04.    Increased Cost and Reduced Return; Capital Adequacy;
Reserves on LIBO Rate Loans    52 SECTION 3.05.    Matters Applicable to All
Requests for Compensation    53 SECTION 3.06.   
Replacement of Lenders Under Certain Circumstances    53 SECTION 3.07.   
Survival    54 ARTICLE IV Conditions Precedent    54 SECTION 4.01.    Effective
Date    54 SECTION 4.02.    Financial Closing Date    56 SECTION 4.03.   
Conditions to All Borrowings    61

 

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ARTICLE V Representations and Warranties    62 SECTION 5.01.    Existence,
Qualification and Power; Compliance with Laws    62 SECTION 5.02.    Binding
Effect    63 SECTION 5.03.    Authorization; No Contravention    63
SECTION 5.04.    Governmental Authorization; Other Consents    63 SECTION 5.05.
   Taxes    63 SECTION 5.06.    No Default    64 SECTION 5.07.    Financial
Statements; No Material Adverse Effect; Indebtedness    64 SECTION 5.08.   
Ranking    65 SECTION 5.09.    Ownership of Assets    65 SECTION 5.10.    No
Other Business    65 SECTION 5.11.    Insurance    65 SECTION 5.12.   
Disclosure    65 SECTION 5.13.    Subsidiaries; Equity Interests    66
SECTION 5.14.    No Dividend Restrictions    66 SECTION 5.15.    Litigation   
66 SECTION 5.16.    Solvency    66 SECTION 5.17.    Margin Regulations;
Investment Company Act; USA PATRIOT Act; Federal Power Act    66 SECTION 5.18.
   ERISA Compliance    67 SECTION 5.19.    Environmental Compliance    67
SECTION 5.20.    Labor Disputes    68 SECTION 5.21.    Affiliate Transactions   
68 SECTION 5.22.    The Merger    68 SECTION 5.23.    Collateral    68
ARTICLE VI Affirmative Covenants    69 SECTION 6.01.    Financial Statements   
69 SECTION 6.02.    Compliance Certificate    71 SECTION 6.03.    Notices    71
SECTION 6.04.    Remedial Plan; Lock-Up Event    72 SECTION 6.05.    Compliance
with Laws    73 SECTION 6.06.    Preservation of Existence, Etc.    73
SECTION 6.07.    Compliance with Environmental Laws    73 SECTION 6.08.   
Maintenance of Properties; Ownership of Operating Companies    74 SECTION 6.09.
   Maintenance of Insurance    74 SECTION 6.10.    Use of Proceeds    74
SECTION 6.11.    Interest Hedging Agreements    74 SECTION 6.12.    Priority and
Application of Cash Distributions    75 SECTION 6.13.    Payment of Obligations
   75 SECTION 6.14.    Cooperation    75 SECTION 6.15.    Books and Records   
76 SECTION 6.16.    Transaction Documents; Material Documents    76
SECTION 6.17.    Maintenance of Ratings    76 SECTION 6.18.    Inspection Rights
   76

 

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SECTION 6.19.    Capital Expenditures    76 ARTICLE VII Negative Covenants    77
SECTION 7.01.    Liens    77 SECTION 7.02.    Dispositions    80 SECTION 7.03.
   Indebtedness    81 SECTION 7.04.    Investments    83 SECTION 7.05.   
Restricted Payments; Lock-Up Account    84 SECTION 7.06.    Fundamental Changes
   85 SECTION 7.07.    Operating Leases    86 SECTION 7.08.    Nature of
Business    86 SECTION 7.09.    Transactions with Affiliates; Affiliate Services
Agreements    86 SECTION 7.10.    Subsidiaries    87 SECTION 7.11.    Accounting
Changes    87 SECTION 7.12.    Restrictive Agreements    87 SECTION 7.13.   
Abandonment    88 SECTION 7.14.    Certain Financial Covenants    88
SECTION 7.15.    Existing Indebtedness    88 SECTION 7.16.    Preservation of
Rights    88 SECTION 7.17.    Equity Issuance    89 ARTICLE VIII Events of
Default and Remedies    89 SECTION 8.01.    Events of Default    89
SECTION 8.02.    Remedies Upon Event of Default    91 SECTION 8.03.   
Application of Funds    92 SECTION 8.04.    Equity Investors’ Right to Cure   
93 ARTICLE IX Facility Agent and Other Agents    93 SECTION 9.01.    Appointment
and Authorization of Agents    93 SECTION 9.02.    Delegation of Duties    94
SECTION 9.03.    Liability of Agents    94 SECTION 9.04.    Reliance by Agents
   95 SECTION 9.05.    Notice of Default    95 SECTION 9.06.    Credit Decision;
Disclosure of Information by Agents    95 SECTION 9.07.    Indemnification of
Agents    96 SECTION 9.08.    Agents in Their Individual Capacities    96
SECTION 9.09.    Successor Agents    97 SECTION 9.10.    Facility Agent May File
Proofs of Claim    97 SECTION 9.11.    Other Agents; Arrangers and Managers   
98 ARTICLE X Miscellaneous    98 SECTION 10.01.    Amendments, Etc.    98
SECTION 10.02.    Notices and Other Communications; Facsimile Copies    99
SECTION 10.03.    No Waiver; Cumulative Remedies    100

 

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SECTION 10.04.    Attorney Costs and Expenses    101 SECTION 10.05.   
Indemnification by the Borrower    101 SECTION 10.06.    Payments Set Aside   
103 SECTION 10.07.    Successors and Assigns    103 SECTION 10.08.   
Confidentiality    106 SECTION 10.09.    Setoff    107 SECTION 10.10.   
Counterparts    107 SECTION 10.11.    Integration    107 SECTION 10.12.   
Survival of Representations and Warranties    108 SECTION 10.13.    Severability
   108 SECTION 10.14.    GOVERNING LAW    108 SECTION 10.15.    WAIVER OF RIGHT
TO TRIAL BY JURY    108 SECTION 10.16.    Binding Effect    109 SECTION 10.17.
   Lender Action    109 SECTION 10.18.    USA PATRIOT Act    109

SCHEDULES

 

1.01A    Initial Material Adverse Effect 1.01B    Scheduled Base CapEx 2.01   
Commitments 5.04    Governmental Authorizations; Other Consents 5.13A   
Subsidiaries 5.13B    Equity Interests 5.14    Dividend and Other Restrictions
5.15    Existing Litigation 5.19    Environmental Matters 5.21    Equity
Investor Affiliate Transactions 6.08    Dispositions 6.09    Insurance 6.11(b)
   Interest Hedging Protocol 7.01(b)    Existing Liens 7.03(b)    Existing
Indebtedness 7.04(m)    Existing Investments 10.02    Facility Agent’s Office;
Certain Addresses for Notices

EXHIBITS

 

A    Form of Borrowing Request B-1    Form of Term Note B-2    Form of Capital
Expenditure Loan Note C-1    Form of Security Agreement C-2    Form of Pledge
Agreement C-3    Form of Parent Guarantee D    Form of Assignment and Assumption
E-1    Form of Opinion of Latham & Watkins LLP E-2    Form of Opinion of Perkins
Coie LLP

 

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E-3    Form of Opinion of Kirkpatrick & Lockhart Preston Gates Ellis LLP F   
Form of Collateral Agency Agreement G-1    Form of Financial Condition
Certificate of Borrower G-2    Form of Financial Condition Certificate of Parent
H    Form of Operating Company Credit Agreement I    Terms of Subordination J   
Form of Assumption Agreement

 

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CREDIT AGREEMENT

This CREDIT AGREEMENT (“Agreement”) is entered into as of May 16, 2008, among
PUGET MERGER SUB INC., a Washington corporation (the “Merger Sub”), BARCLAYS
BANK PLC, as Facility Agent and each lender from time to time party hereto
(collectively, the “Lenders” and individually, a “Lender”).

RECITALS

Pursuant to the Merger Agreement (as this and other capitalized terms used in
these recitals are defined in Section 1.01 below), the separate existence of the
Merger Sub shall cease and the Merger Sub shall be merged with and into Puget
Energy, Inc., a Washington corporation (the “Company”) (such merger, the
“Merger”). The Company shall be the surviving corporation in the Merger, shall
continue its corporate existence under the laws of the State of Washington and,
following the Merger, the Company shall succeed to and assume all of the rights
and obligations of the Merger Sub under this Agreement. The Merger Sub (prior to
the Effective Time) and the Company (upon and after the Effective Time) are
referred to herein as the “Borrower”.

In connection with the Merger, the Merger Sub has requested that the Lenders
extend credit to the Borrower in the form of (i) term loans in an aggregate
amount of up to $1,425,000,000 for the purpose of financing the Merger, paying
fees and expenses in connection therewith and refinancing certain outstanding
Indebtedness of the Borrower Group and (ii) term loans for the purpose of
financing certain Utility Capital Expenditures (as further described herein) in
an aggregate amount of up to $1,000,000,000, and the Lenders have indicated
their willingness to extend credit to the Borrower on the terms and subject to
the conditions set forth herein.

In consideration of the mutual covenants and agreements herein contained, the
parties hereto covenant and agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

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

“Additional CapEx” means any generation-related Capital Expenditures or
generation-related acquisitions which are not Base Capital Expenditures and
which individually, or together as a series of related Capital Expenditures or
acquisitions, exceed $100,000,000.

“Additional Lender” has the meaning specified in Section 2.11(d).

“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.

 

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

“Agent-Related Persons” means the Agents, together with their respective
Affiliates, and the officers, directors, employees, agents and attorneys-in-fact
of such Persons and Affiliates.

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

“Agreement” has the meaning specified in the introduction to this Agreement.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater
of (a) the Prime Rate in effect on such day, and (b) the Federal Funds Rate in
effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to
a change in the Prime Rate or the Federal Funds Rate shall be effective from and
including the effective date of such change in the Prime Rate or the Federal
Funds Rate, respectively.

“Alternate Base Rate Loan” means any Loan which bears interest at the Alternate
Base Rate.

“Anti-Terrorism Order” has the meaning specified in Section 5.17(c).

“Applicable Margin” means a percentage per annum determined as follows based
upon the lower of the ratings for the Facilities from Moody’s and S&P listed for
the applicable agency in the table below; provided, however, if the then
applicable ratings from Moody’s and S&P are two or more levels apart, the higher
of such ratings shall be deemed to be one level above the lower of the two
ratings (for example only, if the ratings for the Facilities are BB from S&P and
Baa3 from Moody’s, the Baa3 rating from Moody’s shall be deemed to be Ba1 from
Moody’s):

 

Rating

   Applicable Margin for
LIBO Rate Loans
(% per annum)     Applicable Margin
for Alternate Base
Rate Loans
(% per annum)     Commitment Fee
(% per annum)  

BB+ (S&P) and Ba1 (Moody’s) or higher

   2.00 %   1.00 %   0.75 %

BB+ and Ba2 or BB and Ba1

   2.25 %   1.25 %   0.84 %

BB and Ba2

   2.50 %   1.50 %   0.94 %

BB- or Ba3

   3.25 %   2.25 %   1.22 %

 

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Rating

   Applicable Margin for
LIBO Rate Loans
(% per annum)     Applicable Margin
for Alternate Base
Rate Loans
(% per annum)     Commitment Fee
(% per annum)  

B+ or B1 or below or unrated by either Moody’s or S&P

   4.50 %   3.50 %   1.69 %

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

“Approved Fund” means any Fund that is administered, advised or managed by a
Lender or an Affiliate of a Lender.

“Assignees” has the meaning specified in Section 10.07(b).

“Assignment and Assumption” means an Assignment and Assumption substantially in
the form of Exhibit D.

“Assumption Agreement” means an Assumption Agreement substantially in the form
of Exhibit J.

“Attorney Costs” means and includes, as the context requires, all reasonable and
documented fees, expenses and disbursements of any external legal counsel.

“Attributable Indebtedness” means, on any date, in respect of any Capitalized
Lease of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP.

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

“Base Capital Expenditures” means Capital Expenditures that are (i) required to
be made by applicable Law, (ii) undertaken for health and safety reasons,
(iii) undertaken to maintain and operate assets in accordance with Good Utility
Practice, or (iv) required under any Contractual Obligations not entered into
with the intention of circumventing the restrictions contained in this
definition.

“Blackout Period” has the meaning specified in Section 10.07(b).

“Borrower” has the meaning specified in the recitals to this Agreement.

“Borrower Affiliate” means any Affiliate of the Borrower other than Macquarie
Affiliates.

 

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“Borrower Cash Interest Expense” means, for any period, with respect to the
Borrower determined in accordance with GAAP exclusive of any consolidated
subsidiaries of the Borrower, the total interest expense (which for the
avoidance of doubt, shall not include the benefit of AFUDC) of the Borrower for
such period, less the sum of (in each case, to the extent included in
determining total interest expense) (a) interest on any debt of the Borrower
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 the Borrower during such period
and (c) all other non-cash items included in such calculation of interest
expense during such period.

“Borrower Group” means the Borrower and the Operating Companies1 and “Borrower
Group Member” means any of the Borrower or any Operating Company.

“Borrower Interest” means, for any period, the aggregate Borrower Cash Interest
Expense for such period, including the portion of any payments made in respect
of Capitalized Lease liabilities allocable to interest expense, plus the
aggregate scheduled recurring fees, in each case, in respect of Indebtedness of
the Borrower for such period, plus the net amount payable (or minus the net
amount receivable) by the Borrower under Interest Hedging Agreements relating to
Indebtedness of the Borrower (other than any such amount payable or receivable
by the Borrower during such period 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 Borrower Cash Interest
Expense), in each case calculated in accordance with GAAP. For the avoidance of
doubt, Borrower Interest shall exclude make whole payments.

“Borrower Side Person” has the meaning specified in the third proviso of
Section 10.01.

“Borrowing” means a Capital Expenditure Loan Borrowing or a Term Loan Borrowing,
as the context may require.

“Borrowing Request” means each loan request and certificate duly executed by an
Authorized Officer of the Borrower, substantially in the form of Exhibit A
delivered to the Facility Agent.

“Business Day” means any day:

(a) which is neither a Saturday or Sunday nor a legal holiday on which banks are
authorized or required to be closed in New York, New York or Bellevue,
Washington; and

(b) relative to the making, continuing, prepaying or repaying of any LIBO Rate
Loans, on which dealings in Dollars are carried on in the London interbank
market.

“Business Plan” has the meaning specified in Section 6.01(d).

 

 

1

Lead Arrangers request a copy of separate stand alone financials for Puget
Western.

 

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“Calculation Date” means, as applicable, the date that is (a) with respect to
the end of the fiscal year of the Borrower, the earlier of the delivery of
financial statements referred to in Section 6.01(a) and 90 days after the end of
such fiscal year, and (b) with respect to the first three fiscal quarters of the
Borrower, the earlier of delivery of the financial statements referred to in
Section 6.01(b) and 45 days after the end of such fiscal quarter.

“Capital Expenditure Availability Period” means the period from and including
the Financial Closing Date until the earlier of (a) the date of termination of
the Capital Expenditure Commitments in accordance with this Agreement and
(b) the date that is ten (10) Business Days prior to Final Maturity Date.

“Capital Expenditure Commitment” means, as to any Capital Expenditure Lender,
its obligation to make Capital Expenditure Loans to the Borrower in an aggregate
principal amount not to exceed the amount set forth opposite such Capital
Expenditure Lender’s name on Schedule 2.01 hereto under the caption “Capital
Expenditure Commitment” or in the Assignment and Assumption pursuant to which
such Capital Expenditure Lender becomes a party hereto, as applicable, as such
amount may be adjusted from time to time in accordance with this Agreement. The
aggregate amount of the Capital Expenditure Commitments of all Capital
Expenditure Lenders as of the Effective Date is $1,000,000,000.

“Capital Expenditure Lender” means, at any time, any Lender that has a Capital
Expenditure Commitment or that holds a Capital Expenditure Loan at such time.

“Capital Expenditure Loan” means a Loan made pursuant to Section 2.01(b).

“Capital Expenditure Loan Borrowing” means a borrowing consisting of Capital
Expenditure Loans of the same Type and, in the case of LIBO Rate Loans, having
the same Interest Period made by each of the Capital Expenditure Lenders
pursuant to Section 2.01(b).

“Capital Expenditure Note” means a promissory note of the Borrower payable to
any Capital Expenditure Lender, in substantially the form of Exhibit B-2 hereto,
evidencing the aggregate Indebtedness of the Borrower to such Capital
Expenditure Lender resulting from the Capital Expenditure Loans made by such
Capital Expenditure Lender.

“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 Capitalized Leases
incurred by such Person.

“Capitalized Leases” means all leases that have been or should be, in accordance
with GAAP, recorded as capitalized leases; provided that for all purposes
hereunder the amount of obligations under any Capitalized Lease shall be the
amount thereof accounted for as a liability in accordance with GAAP.

“Cash Available for Borrower Debt Service” means, for any period, actual Cash
Distributions received by the Borrower from the Operating Companies during such
period minus

 

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any expenses of the Borrower incurred in connection with its activities
permitted pursuant to Section 7.08(b)(A), (B) or (C).

“Cash Distributions” means (i) any dividend or other distribution paid in cash
with respect to any Equity Interest held by the Borrower in any Operating
Company, (ii) any payment in cash 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 in
respect of any such Equity Interest, (iii) any payment in cash to the Borrower
by any Operating Company of interest on or principal of Intercompany Loans made
by the Borrower to any Subsidiary, or (iv) any amount paid in cash to the
Borrower by any of its Subsidiaries pursuant to any tax-sharing arrangements, in
each case other than such payments in respect of the Borrower’s or its
Subsidiaries’ allocable share of tax liabilities of the consolidated tax group
for U.S. Federal income tax purposes of which Puget Holdings is the “common
parent” (within the meaning of Section 1504 of the Code) or any similar state,
local or foreign tax liabilities, in each case which are actually paid during
the relevant period.

“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;

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

(c) time deposits with, or insured certificates of deposit or bankers’
acceptances of, any commercial bank that (i) is a Lender or (ii) (A) (x) is
organized under the Laws of the United States or any state thereof, and is a
member of the Federal Reserve System and (y) has combined capital and surplus of
at least $1,000,000,000 and has outstanding unguaranteed and unsecured long-term
indebtedness that is rated A-/A3 or better by S&P and/or Moody’s, or (B) is one
of the twenty-five largest banks in the United States ranked by deposits and
having a short-term deposit rating of A-1 (or the equivalent thereof) or better
by S&P or P-1 (or the equivalent thereof) or better by Moody’s (any such bank in
the foregoing clause (i) or (ii) being an “Approved Bank”), in each case with
maximum maturities of not more than one (1) year from the date of acquisition
thereof;

(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;

 

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(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 which are administered by an Approved Bank, 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.

“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.

“Cash Sweep Calculation Date” means the date that is four (4) Business Days
after a Calculation Date occurring after a Cash Sweep Date.

“Cash Sweep Date” means any Quarter End Date which is the last day of any period
in respect of which a Lock-Up Event has been continuing for three (3) or more
consecutive Quarter End Dates (including such Quarter End Date).

“Casualty Event” means any event or any series or related events that gives rise
to the receipt by any Borrower Group Member of any insurance proceeds or
condemnation awards in respect of any equipment, fixed assets or real property
(including any improvements thereon) to replace or repair such equipment, fixed
assets or real property.

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

“Change in Law” means (a) the adoption of any law, rule or regulation, (b) any
change in law, rule or regulation or in the interpretation or application
thereof by any Governmental Authority, or (c) the adoption or making of any
interpretation, request, guideline or directive applying to any Lender (or, for
purposes of Section 3.04 of this Agreement, to any Lending Office of such Lender
or to such Lender’s holding company, if any) (whether or not having the force of
law) by any Governmental Authority made or issued after the Effective Date in
each of

 

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clause (a), (b), or (c) first made effective and applicable to a Lender after
the Effective Date (or in the case of a Lender that becomes a party to this
Agreement after the Effective Date, after the date such Lender becomes a party
hereto).

“Change of Control” means the earliest to occur of (a) Macquarie shall fail to
own and control, directly or indirectly, in the aggregate at least 33.33% of the
issued and outstanding common Equity Interests in Puget Holdings, the Parent or
the Borrower or (b) in the event that Macquarie shall fail to 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, the Board of Directors (or comparable governing body) of Puget
Holdings, the Parent or the Borrower, as the case may be, have not entered into
arrangements, after such failure by Macquarie, to provide in all material
respects that, with respect to the Parent and the Borrower (i) amendments to the
constitutive documents, (ii) mergers, (iii) acquisition, disposition or
encumbrance of material assets or assets with value in excess of $75,000,000 (as
adjusted annually for inflation), (iv) reductions or replenishments of capital
with a value in excess of $75,000,000 (as adjusted annually for inflation),
(v) liquidation, dissolution or bankruptcy and (vi) change in business lines,
will require the approval of the members of the Board of Directors (or
comparable governing body) representing holders of, or holders of common Equity
Interests representing, more than 66.67% of the issued and outstanding common
Equity Interests in Puget Holdings, the Parent or the Borrower, as the case may
be.

“Claim” has the meaning specified in Section 10.05(b).

“Class”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans constituting such Borrowing, are Term Loans or Capital
Expenditure Loans and, when used in reference to any Commitment, refers to
whether such Commitment is a Term Loan Commitment or Capital Expenditure
Commitment.

“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to
time, and rules and regulations related thereto.

“Co-Documentation Agents” means, collectively, The Bank of Nova Scotia and The
Royal Bank of Scotland plc, each in its capacity as a documentation agent
hereunder.

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

“Collateral Agency Agreement” means the Collateral Agency Agreement, dated as of
the Financial Closing Date, among the Collateral Agent, the Facility Agent, the
Interest Rate Hedge Banks and the Borrower, substantially in the form of
Exhibit F.

“Collateral Agent” means Barclays Bank PLC or one of its affiliates, 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 any Lender, the sum of the Term Loan
Commitments and Capital Expenditure Commitments of such Lender.

 

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“Commitment Fee” has the meaning specified in Section 2.06(a).

“Company” has the meaning specified in the recitals to this Agreement.

“Company Representations” has the meaning specified in Section 4.03(c)(i).

“Compensation Period” has the meaning specified in Section 2.09(b)(ii).

“Completion Date” means the date of consummation of the Merger.

“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.

“Conservation Expenditures” means at any date, all amounts that would, in
conformity with GAAP, be set forth opposite the caption “energy efficiency
expenditures” (or any like caption) on a consolidated statement of cash flows of
the Borrower and its Subsidiaries at such date.

“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 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 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 6.01 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

 

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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.
“Controls”, “Controlling” and “Controlled” have meanings correlative thereto.

“Co-Syndication Agents” means, collectively, Dresdner Bank AG New York Branch
and CoBank, ACB, each in its capacity as a syndication agent hereunder.

“Cure Amount” has the meaning specified in Section 8.04(a).

“Cure Right” has the meaning specified in Section 8.04(a).

“Debt Service” means, for any period of determination, the amount of principal
due and payable by the Borrower during such period, if any, and Borrower
Interest owed, in each case in respect of any Indebtedness of the Borrower
described in clauses (a), (b) and (c) of the definition of Indebtedness and that
is permitted under Section 7.03 during such period.

“Debt Service Coverage Ratio” means, for any Test Period, the ratio of (a) Cash
Available for Borrower Debt Service for such Test Period to (b) Borrower
Interest for such Test Period.

“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 that constitutes an Event of Default or
that, with the giving of any notice, the passage of time, or both, would be an
Event of Default.

“Default Rate” means (a) in the case of past due principal of any Loan, the
interest rate otherwise applicable to such Loan hereunder plus 2.0% per annum or
(b) in the case of any other past due amount, the Alternate Base Rate plus the
Applicable Margin plus 2.0% per annum.

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of
the Term Loans or Capital Expenditure Loans required to be funded by it
hereunder on the date required to be funded by it hereunder, unless the subject
of a good faith dispute or subsequently cured, (b) has otherwise failed to pay
over to the Facility Agent or any other Lender any other amount required to be
paid by it hereunder on the date when due, unless the subject of a good faith
dispute or subsequently cured, or (c) has been deemed insolvent or becomes the
subject of a bankruptcy or insolvency proceeding.

 

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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.

“Distributable Cash” means, during any applicable period beginning upon the
occurrence of an Excess Cash Sweep Event and/or a Lock-Up Event and ending when
an Excess Cash Sweep Event and/or Lock-Up Event (as applicable) no longer
exists, EBITDA of the Operating Companies plus, in each case, without
duplication for such period:

(i) interest income of the Operating Companies;

(ii) Net Cash Proceeds from Dispositions and Casualty Events of the Operating
Companies (excluding any Net Cash Proceeds that are actually reinvested or
applied to prepay the Facilities in accordance with the provisions of
Section 2.03(b)(i)(A) or (E));

(iii) the Net Cash Proceeds from issuances by the Operating Companies consisting
of Indebtedness (excluding borrowings consisting of commercial paper and any
other revolving facilities except those revolving facilities which are incurred
for the sole purpose of financing Utility Capital Expenditures) to the extent
not actually applied to prepay the Facilities pursuant to Section 2.03(b)(i)(D);
and

(iv) cash contributions made by the Borrower to the Operating Companies.

minus:

(v) 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;

(vi) Base Capital Expenditures made in cash during such period;

(vii) Conservation Expenditures made in cash during such period;

(viii) (A) repayments of the principal amount of Indebtedness of the Operating
Companies (excluding repayments of Indebtedness consisting of commercial paper
and any other revolving facilities except those revolving facilities (x) which
were incurred for the sole purpose of financing Utility Capital Expenditures and
(y) the repayments of which are financed through the borrowings of Indebtedness
that is not revolving or in the form of commercial paper or similar
instruments), (B) Cash Interest Expense applicable solely to the Operating
Companies (including interest expense in connection with the Operating Company
Hybrid Debt and dividends in connection with the Operating Company Preferred
Shares) and (C) any agency and other recurring fees paid by the Operating
Companies in connection with such Indebtedness; and

(ix) Cash Distributions to the Borrower (excluding any amount paid in cash to
the Borrower (x) for payment of the amounts specified in clause (v) above by any
of its

 

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Subsidiaries pursuant to any tax-sharing arrangements in respect of the
Borrower’s or its Subsidiaries’ allocable share of tax liabilities of the
consolidated tax group for U.S. Federal income tax purposes of which Puget
Holdings is the “common parent” (within the meaning of Section 1504 of the Code)
or any similar state, local or foreign tax liabilities or (y) to the extent
actually applied to prepay the Facilities pursuant to Section 2.03(b)(i)(D)).

At no time shall Distributable Cash be less than zero.

“Distributable Cash Balance” means, for any applicable period in which either an
Excess Cash Sweep Event and/or a Lock-Up Event has occurred, the amount of
Distributable Cash for such period plus the amount of any Distributable Cash for
any prior period that has not been applied pursuant to Section 2.03(b)(i)(G) to
prepay the Loans. The Distributable Cash Balance shall not be reduced by
prepayments required under any of the provisions of Section 2.03(b) other than
Section 2.03(b)(i)(G).

“Distributable Cash Sweep Amount” has the meaning specified in
Section 2.03(b)(i)(G).

“Dividend Prohibition” means, with respect to any Subsidiary, contractual
restrictions permitted pursuant to Section 7.12 or existing under applicable Law
that prohibit such Subsidiary from using the Net Cash Proceeds from any
Disposition, Issuance or Casualty Event, as applicable, to make a distribution,
dividend or other return of capital to the Borrower (directly or indirectly).

“Dollar” and “$” mean lawful money of the United States.

“EBITDA” means, for any period, with respect to the Borrower Group, as
determined on a consolidated basis without duplication in accordance with GAAP,
net income (or loss) of the Borrower Group for such period,

(a) plus, without duplication, and to the extent deducted in determining such
net income (or loss), the sum of (i) total interest for such period,
(ii) consolidated income tax expense for such period in respect of the operation
of the Borrower Group, (iii) all amounts attributable to depreciation and
amortization (including Conservation Amortization) for such period and (iv) any
extraordinary charges or non-cash charges for such period (provided that any
cash payment made with respect to any such non-cash charge shall be subtracted
in computing EBITDA during the period in which such cash payment is made), and

(b) minus, without duplication, and to the extent included in determining such
net income, (i) any non-cash gains or extraordinary gains for such period,
(ii) AFUDC, (iii) cash interest income, (iv) the income (or loss) of any Person
accrued prior to the date it becomes a Subsidiary of the Borrower or is merged
into or consolidated with the Borrower or any of its Subsidiaries or that
Person’s assets are acquired by the Borrower or any of its Subsidiaries and
(v) the income of any Subsidiary of the Borrower acquired or created after the
date hereof to the extent that the declaration or payment of dividends or
similar distributions by that Subsidiary of that income is not at the time
permitted by

 

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operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary.

“Effective Date” means the date that this Agreement is executed and all the
conditions precedent in Section 4.01 are satisfied or waived in accordance with
the terms of this Agreement.

“Effective Time” means the time the Merger shall become effective upon the
filing of the articles of merger in the office of the Secretary of State of the
State of Washington or upon the effective date specified in the articles of
merger so filed, whichever is later.

“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 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.

“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).

“Equity Investors” means, on any date, each Person that owns on such date any
issued and outstanding Equity Interests of Puget Holdings.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and rules and regulations related thereto.

“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(b),
(c), (m) or (o) of the Code.

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Borrower, any of its Subsidiaries or any ERISA Affiliate from
a Pension Plan

 

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subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal, within the meaning of Section 4203
or 4205 of ERISA, respectively (and for purposes of clarification, not including
a transaction described in Section 4204 of ERISA), by the Borrower, any of its
Subsidiaries or any ERISA Affiliate from a Multiemployer Plan; (d) the filing of
a notice of intent to terminate a Pension Plan or the treatment of a Pension
Plan amendment as a termination, in either case under Section 4041(c) of ERISA,
or the commencement of proceedings by the PBGC to terminate a Pension Plan under
Section 4042 of ERISA; (e) the conditions for imposition of a lien under
Section 303(k) of ERISA shall have been met with respect to any Pension Plan;
(f) a determination that any Pension Plan is in “at risk” status (within the
meaning of Section 303 of ERISA); or (g) the imposition of any material
liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA
Affiliate.

“Event of Default” has the meaning specified in Section 8.01.

“Excess Cash” means for any period of determination, Cash Available for Borrower
Debt Service during such period minus Debt Service during such period.

“Excess Cash Sweep Event” means (a) if the ratings of the Facilities are equal
to BB- from S&P and Ba3 from Moody’s, (b) if the ratings of the Facilities are
equal to (i) BB- from S&P and B1 from Moody’s or (ii) B+ from S&P and Ba3 from
Moody’s, or (c) if the ratings of the Facilities are equal to or below B+ from
S&P and B1 from Moody’s; provided, however, if the then applicable ratings from
Moody’s and S&P are two or more levels apart, the higher of such ratings shall
be deemed to be one level above the lower of the two ratings (for example only,
if the ratings for the Facilities are BB from S&P and Baa3 from Moody’s, the
Baa3 rating from Moody’s shall be deemed to be Ba1 from Moody’s).

“Excess Cash Sweep Percentage” means a percentage of Excess Cash as follows:
(i) in the case of an Excess Cash Sweep Event referred to in clause (a) of the
definition of such term, 25%, (ii) in the case of an Excess Cash Sweep Event
referred to in clause (b) of the definition of such term, 75%, and (iii) in the
case of an Excess Cash Sweep Event referred to in clause (c) of the definition
of such term, 100%.

“Excluded Taxes” means, with respect to any Agent, any Lender or any other
recipient of any payment to be made by or on account of any Obligation of the
Borrower, (a) income, franchise or similar taxes imposed on (or measured in
whole or in part by reference to) its net or overall gross 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, or a jurisdiction in
which such Agent, Lender or other recipient is engaged in business, other than a
business deemed to arise solely from such recipient having entered into,
received a payment under or enforced any Financing Document and activities
incidental thereto, (b) any taxes attributable to a Lender’s failure to comply
with Section 3.01(f) of this Agreement, (c) any branch profits taxes imposed by
the United States of America or any similar tax imposed by any other
jurisdiction in which the applicable Lender or recipient is located, (d) in the
case of a Foreign Lender (other than an

 

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Assignee pursuant to a request by the Borrower under Section 3.06(b) of this
Agreement), any tax that is imposed on amounts payable to such Foreign Lender
that is attributable to such Foreign Lender’s failure to comply with
Section 3.01(e) of this Agreement, and (e) in the case of any Agent, Lender or
other recipient, any United States withholding tax imposed on amounts payable to
such recipient at the time such recipient becomes a party to this Agreement
except to the extent that such recipient (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 tax pursuant to
Section 3.01(a) of this Agreement. For purposes of this paragraph, the term
“taxes” means all present or future taxes, duties, levies, imposts, deductions,
assessments, fees, withholdings or similar charges, and all liabilities
(including additions to tax, penalties and interest) with respect thereto.

“Existing Indebtedness” means (a) Indebtedness of the Borrower or any Subsidiary
that is outstanding on the Effective Date and listed on Schedule 7.03(b) and
(b) any Permitted Refinancing Indebtedness thereof.

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

“Facility” means any of the facilities provided in Article II for the making of
the Term Loans and the Capital Expenditure Loans, and “Facilities” means all of
such facilities in the aggregate.

“Facility Agent” means Barclays Bank PLC, acting in its capacity as Facility
Agent for the Lenders hereunder, or any successor Facility Agent.

“Facility Agent’s Office” means the Facility Agent’s address as set forth on
Schedule 10.02 or such other address as the Facility Agent may from time to time
notify the Borrower and the Lenders.

“Federal Funds Rate” means, for any day, the rate per annum (rounded upward, if
necessary, to a whole multiple of 1/100 of 1%) equal to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank on the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the immediately preceding Business
Day as so published on the next succeeding Business Day, and (b) if no such rate
is so published on such next succeeding Business Day, the Federal Funds Rate for
such day shall be the average rate (rounded upward, if necessary, to a whole
multiple of 1/100 of 1%) charged to the Facility Agent on such day on such
transactions as determined by the Facility Agent.

“Fee Letters” means (i) the Fee Letter dated as of October 26, 2007 between
Puget Holdings and Barclays Bank PLC, and (ii) the Fee Letter dated as of
October 26, 2007 between Puget Holdings and Dresdner Bank AG New York Branch.

“Final Maturity Date” means the fifth (5th) anniversary of the Financial Closing
Date.

 

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“Financial Closing Date” means the first date to occur on or prior to the
Termination Date on which all the conditions precedent in Section 4.02 are
satisfied or waived in accordance with the terms of this Agreement, the Merger
is consummated and the Term Loan is made.

“Financial Model” means the “Model” referred to in the letter dated February 15,
2008 with reference number MACQMSU-08PaduaReport0215 from KPMG to James Wilson,
Division Director, Macquarie Securities (USA) Inc.

“Financing Documents” means, collectively, (i) this Agreement, (ii) the Interest
Hedging Agreements with any Interest Rate Hedge Bank, (iii) the Security
Documents, (iv) if any Shareholder Funding is made as loans or indebtedness to
the Parent, the Parent Guarantee, (v) the Fee Letters, (vi) the Notes, (vii) the
Collateral Agency Agreement, (viii) if any Shareholder Funding is made as loans
or indebtedness to the Parent, the Shareholder Loan Subordination Agreement, and
(ix) the Assumption Agreement.

“First Mortgage Bond Documents” means, collectively, (i) the First and Refunding
Mortgage dated as of June 2, 1924 issued by PSE (as successor to Puget Sound
Power & Light Company) in favor of U.S. Bank National Association (as successor
to State Street Bank and Trust Company, as successor to Old Colony Trust
Company), as trustee, and (ii) the Indenture of First Mortgage dated as of
April 1, 1957 issued by PSE (as successor to Puget Sound Power & Light Company)
in favor of BNY Midwest Trust Company (as successor to Harris Trust and Savings
Bank), as trustee and any supplemental indenture issued pursuant thereto.

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than the United States of America, any State thereof or the
District of Columbia.

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

“Fund” means any Person (other than a natural person) that is engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar
extensions of credit in the ordinary course of business.

“GAAP” means generally accepted accounting principles in the United States of
America, as in effect from time to time, consistently applied.

“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 any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court,

 

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administrative tribunal, 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 EBITDA (if such item was included in the calculation
of EBITDA) (a) decreases in the Consolidated Working Capital of the Borrower
Group for such period, (b) cash interest income, and minus and in each case to
the extent included in the calculation of such EBITDA (if such item was included
in the calculation of 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) Conservation Expenditures for such period and (e) 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 minus Scheduled Base CapEx for such Test Period, to
(b) Group Interest for such Test Period.

“Group FFO Leverage Ratio” means, for any Test Period, the ratio of (a) Group
FFO for such Test Period minus Group Interest for such Test Period, to (b) Group
Net Debt outstanding as of the Quarter End Date on which such Test Period ends.

“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 Capitalized Lease liabilities allocable to interest expense, plus
the aggregate scheduled recurring fees in respect of 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.

“Group Net Debt” means consolidated Indebtedness of the Borrower Group minus the
amount of cash and Cash Equivalents of the Borrower or any Operating Company
(other than any segregated cash and Cash Equivalents the use of which is
restricted by Contractual Obligation or Law to any specified purpose and which
is specifically identified on the consolidated balance sheet of the Borrower
Group).

“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

 

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purchase or payment of) such Indebtedness or other monetary obligation, (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, or (iv) 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 (i) 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 (ii) any business trusts, limited liability companies,
limited partnerships or similar entities (a) substantially all of the common
equity, general partner or similar interests of which are owned (either directly
or indirectly through one or more Subsidiaries) at all times by any Borrower
Group Member, (b) that have been formed for the purpose of issuing securities,
trust preferred securities or deferrable interest subordinated debt of the type
described in clause (i) above, and (c) substantially all the assets of which
consist of (i) subordinated debt issued by any Borrower Group Member, and
(ii) payments made from time to time on such subordinated debt.

“Immaterial Subsidiary” means any Subsidiary designated on the Effective Date on
Schedule 5.13A or designated as such by the Borrower after the Effective Date in
a notice delivered to the Facility Agent; provided that at no time shall all
Immaterial Subsidiaries so designated have in the aggregate (x) total assets
(excluding intercompany receivables) at the relevant time of determination
having a gross asset value in excess of 1% of the consolidated total assets of
the Borrower Group or (y) total consolidated revenues for the twelve (12) months
ending at the relevant time of determination in excess of 1% of the consolidated
total revenues of the Borrower Group; provided, further, that (1) in the event
that a Subsidiary no longer qualifies as an Immaterial Subsidiary pursuant to
clauses (x) and (y) above, the Borrower shall advise the Facility Agent thereof
in a notice delivered to the Facility Agent and (2) in the event that the
Subsidiaries designated as Immaterial Subsidiaries at the relevant time of
determination in the

 

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aggregate do not comply with the first proviso, the Borrower shall designate one
of more of such Subsidiaries as an Operating Company and not an Immaterial
Subsidiary in a notice delivered to the Facility Agent.

“Impairment” shall mean, with respect to any Financing Document or Government
Approval, (a) the rescission, early termination, cancellation, repeal or
invalidity thereof, (b) the suspension or injunction thereof, (c) the inability
to satisfy in a timely manner stated conditions to effectiveness of such
Financing Document or Government Approval in whole or in part or (d) in the case
of any Government Approval only, the amendment, modification or supplementation
thereof. The verb “Impair” shall have a correlative meaning.

“Incremental Amendment” has the meaning specified in Section 2.11(d).

“Incremental Facility Availability Period” means the period commencing on the
third anniversary of the Financial Closing Date through the date that is ten
(10) Business Days prior to the Final Maturity Date.

“Incremental Facility Financial Closing Date” has the meaning specified in
Section 2.11(d).

“Incremental Loans” has the meaning specified in Section 2.11(a).

“Indebtedness” means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:

(a) all obligations of such Person for borrowed money and all obligations of
such Person evidenced by bonds, debentures, notes, loan agreements or other
similar instruments, including, without limitation, Hybrid Debt Securities
(including the Operating Company Hybrid Debt);

(b) letters of credit (including standby and commercial), bankers’ acceptances,
bank guaranties and similar instruments issued or created by or for the account
of such Person;

(c) 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);

(d) all obligations of such Person to pay the deferred purchase price of
property or services (other than (i) trade accounts payable in the ordinary
course of business, (ii) accrued expenses in the ordinary course of business,
(iii) any earn-out obligation until such obligation becomes a liability on the
balance sheet of such Person in accordance with GAAP and (iv) obligations with
respect to commodity purchase contracts);

(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on
property owned or being purchased by such Person (including indebtedness arising
under conditional sales or other title retention agreements and mortgage,
industrial revenue

 

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bond, industrial development bond and similar financings), whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse;

(f) all Attributable Indebtedness; and

(g) 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 (including, without limitation, Operating Company Preferred Shares) 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; and

(h) all Guarantees of such Person in respect of Indebtedness referred to in any
of the foregoing clauses (a) through (g).

“Indemnified Liabilities” has the meaning specified in Section 10.05(a).

“Indemnified Parties” has the meaning specified in Section 10.05(a).

“Independent Review” has the meaning specified in Section 6.04(a)(3).

“Information” has the meaning specified in Section 10.08.

“Information Memorandum” means the information memorandum dated as of January
2008 used by the Joint Mandated Lead Arrangers in connection with the
syndication of the Commitments.

“Initial Lenders” means Barclays Bank PLC and Dresdner Bank AG New York Branch.

“Initial Material Adverse Effect” means a “Company Material Adverse Effect”, as
such term is defined in the Merger Agreement, which definition for convenience
is set forth in Schedule 1.01A.

“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 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) as to any Loan other than an Alternate Base
Rate Loan, the last day of each Interest Period applicable to such Loan and the
Final Maturity Date; provided that if any Interest Period exceeds three (3)
months, the respective dates that fall every three (3) months after the
beginning of such Interest Period shall also be Interest Payment Dates, and
(b) as to any Alternate Base Rate Loan, each Quarter End Date and the Final
Maturity Date.

 

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“Interest Period” means, the period beginning on (and including) the date on
which a Loan is made, converted or continued and shall end on (but exclude) the
day which numerically corresponds to such date one, two, three or six months
thereafter or such other periods as may be agreed by the Facility Agent and the
Borrower if available to all Lenders (or, if such month has no numerically
corresponding day, on the last Business Day of such month), in either case as
the Borrower may select in its relevant notice pursuant to Section 2.02(a) or
Section 2.05(d); provided, however, that (a) if such Interest Period would
otherwise end on a day which is not a Business Day, such Interest Period shall
end on the next succeeding Business Day (or, if such next succeeding Business
Day falls on the next succeeding calendar month, on the next preceding Business
Day) and (b) no Interest Period may end later than the Final Maturity Date.

“Interest Rate” means, for any Interest Period, (i) the LIBO Rate for such
Interest Period plus the Applicable Margin or (ii) in the event that (a) the
LIBO Rate is unavailable as a result of the occurrence of the events described
in Section 3.02 and Section 3.03, (b) in the case of a Term Loan or a Capital
Expenditure Loan, the Borrower elects in the related Borrowing Request that such
Term Loan or Capital Expenditure Loan, as applicable, be made as an Alternate
Base Rate Loan or (c) such Interest Period would have a duration of less than
one month, the Alternate Base Rate plus the Applicable Margin, as the context
may require.

“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.

“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 or Indebtedness 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.

“Issuance” means any issuance or sale after the Financial Closing Date by any
member of the Borrower Group of any of its Preferred Interests, common Equity
Interests or Indebtedness; provided that Issuance shall not include (i) any
capital contribution from, any Equity Investor or any equity issued to such
Equity Investors in respect of such capital contribution, in each case for the
purpose of making capital contributions to PSE to pay for Utility Capital
Expenditures or which are applied in the exercise of a Cure Right, (ii) any
common Equity Interests sold or issued to management or employees of an
Operating Company from the exercise of options and warrants held by them,
(iii) any issuance of Equity Interests pursuant to “anti-dilution” provisions
applicable to Equity Interests outstanding at the time of such issuance or
(iv) any issuance, sale or incurrence of Indebtedness permitted under
Section 7.03.

 

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“Joint Mandated Lead Arrangers” means Barclays Capital, the investment banking
division of Barclays Bank PLC, and Dresdner Bank AG New York Branch, each in its
capacity as a Mandated Lead Arranger.

“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.

“Lender” means, at any time, any Person that has a Commitment or a Loan at such
time.

“Lender Side Person” has the meaning specified in the third proviso of
Section 10.01.

“Lending Office” means, as to any Lender, the office or offices of such Lender
(or of an Affiliate of such Lender) designated for such Lender’s Loans, or such
other office or offices as a Lender may from time to time notify the Borrower
and the Facility Agent.

“Letter of Credit” of a Person means a letter of credit or similar instrument
which is issued upon the application of such Person or upon which such Person is
an account party or for which such Person is in any way liable.

“LIBO Rate” shall mean, with respect to any Loan for any Interest Period, the
rate appearing on Moneyline Telerate Markets Page 3750 (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 Facility Agent from time to time
for purposes of providing quotations of interest rates applicable to Dollar
deposits in the London interbank market) at approximately 11:00 a.m., London
time, on the day that is two (2) Business Days prior to the commencement of such
Interest Period, as the rate for the offering of Dollar deposits with a maturity
comparable to such Interest Period; provided that, to the extent that an
interest rate is not ascertainable pursuant to the foregoing provisions of this
definition, the Facility Agent will request the Reference Banks to provide the
Facility Agent with their offer quotations for deposits in Dollars for such
Interest Period to prime banks in the London interbank market at approximately
11:00 a.m. (London time) on such second Business Day in a representative amount
and for a period approximately equal to such Interest Period and the Facility
Agent shall calculate LIBOR using the average of such quotations. Each
determination of the LIBO Rate by the Facility Agent pursuant to this definition
shall be conclusive absent manifest error.

“LIBO Rate Loan” means any Loan which bears interest at a rate determined by
reference to the LIBO Rate.

“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

 

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property, and any Capitalized Lease having substantially the same economic
effect as any of the foregoing).

“Loan” means a Term Loan or a Capital Expenditure Loan, as the context requires.

“Loan Parties” means the Parent and the Borrower.

“Lock-Up Account” has the meaning specified in the Security Agreement.

“Lock-Up Event” has the meaning specified in Section 7.05(b)(ii).

“Lock-Up Period” has the meaning specified in Section 7.05(c).

“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 Lenders” means, as of any date of determination, subject to the third
proviso of Section 10.01, Lenders having more than 50% of the sum of the
(a) Total Outstandings, (b) aggregate unused Term Loan Commitments and
(c) aggregate Unused Capital Expenditure Commitments; provided that for purposes
of determining Majority Lenders such calculation shall at all times be made by
excluding the Total Outstandings, the unused Term Loan Commitments and the
Unused Capital Expenditure Commitments of all Lenders that are Borrower
Affiliates.

“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 7.09(a)(i) or (iii) in its capacity as a lender pursuant to other
Indebtedness permitted under Section 7.03 to the extent such arrangements comply
with Section 7.09(a)(i) and such Affiliate is not an arranger, agent or
underwriter of such Indebtedness.

“Margin Differential” has the meaning specified in Section 2.11(c).

“Material Adverse Effect” means a material adverse effect on (i) the business,
operations, property, assets or condition (financial or otherwise) of the
Borrower and its Subsidiaries, taken as a whole, (ii) the ability of the
Borrower and its Subsidiaries, taken as a whole, to perform its obligations
under any of the Financing Documents, or (iii) the validity or enforceability of
any of the Financing Documents or the material rights and remedies of any
Lender, Interest Rate Hedge Bank or Agent-Related Person under any of the
Financing Documents.

 

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

“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.

“Merger” has the meaning specified in the recitals to this Agreement.

“Merger Agreement” means the Agreement and Plan of Merger dated as of
October 25, 2007, by and among the Company, Puget Intermediate Holdings Inc.,
Puget Holdings, the Merger Sub and the other parties thereto.

“Merger Sub” has the meaning specified in the introductory paragraph of this
Agreement.

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

“Multiemployer Plan” means any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA) of the type described in Section 4001(a)(3) of
ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to
make contributions, or during the preceding three (3) plan years, has made or
been obligated to make contributions.

“Net Cash Proceeds” means with respect to any Disposition by any member of the
Borrower Group or any Issuance by any member of the Borrower Group or any
Casualty Event, the gross proceeds of all cash actually received by such
Borrower Group Member in connection with such Disposition, Issuance or Casualty
Event; 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 or Casualty Event 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 or
Casualty Event (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 or Casualty Event, 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 7.01 on the Property that is the subject of such Disposition or Casualty
Event 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) 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

 

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Group Member after such sale or other disposition thereof, including pension and
other post-employment 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 or Casualty Event, 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.

“Newco” has the meaning specified in the definition of Permitted Acquisition.

“Non-Consenting Lender” has the meaning specified in Section 3.06.

“Note” means a Term Note or a Capital Expenditure Note, as the context requires.

“Obligations” means 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, the Obligations of the Borrower under the Financing Documents 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.

“OECD” means the Organisation for Economic Co-Operation and Development.

“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 Capital Expenditure Loans” means revolving loans incurred by
PSE under the Operating Company Credit Agreement for the purpose of paying for
Capital Expenditures of PSE.

“Operating Company Credit Agreement” means the Credit Agreement to be dated as
of the Financial Closing Date among PSE, the lenders party thereto and Barclays
Bank PLC, as facility agent, substantially in the form of Exhibit H.

 

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“Operating Company Facilities” means the “Facilities” as defined in the
Operating Company Credit Agreement.

“Operating Company Financing Documents” means the “Financing Documents” as
defined in the Operating Company Credit Agreement.

“Operating Company Hybrid Debt” means the $250,000,000 Series A Enhanced Junior
Subordinated Notes of PSE due June 2067.

“Operating Company Preferred Shares” means the second series 4.70% preferred
shares ($100 par value) and the third series 4.84% preferred shares ($100 par
value) of PSE.

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

“Other Taxes” has the meaning specified in Section 3.01(b).

“Outstanding Amount” means with respect to Term Loans and Capital Expenditure
Loans on any date, the aggregate outstanding unpaid principal amount thereof
after giving effect to any Borrowings and prepayments or repayments of Term
Loans and Capital Expenditure Loans, as the case may be, on such date.

“Overnight Rate” means, for any day, the Federal Funds Rate.

“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 Intermediate
Holdings, Inc., a Washington corporation; provided that the Parent shall be a
direct or indirect wholly-owned Subsidiary of Puget Holdings.

“Parent Guarantee” means the guarantee of the Parent substantially in the form
of Exhibit C-3.

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

“Participant” has the meaning specified in Section 10.07(e).

 

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“PBGC” means the Pension Benefit Guaranty Corporation (or any successor).

“Pension Plan” means any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by the Borrower or
any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes
or has an obligation to contribute, or in the case of a multiple employer or
other plan described in Section 4064(a) of ERISA, has made contributions at any
time during the immediately preceding three (3) plan years.

“Permitted Acquisition” means an acquisition consummated by or through PSE
(including any newly formed wholly-owned Subsidiary of PSE that is an Operating
Company (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 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
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 $600,000,000;

(iii) an Authorized Officer of the Borrower shall have delivered a certificate
substantially in the form of Exhibit G, 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 or Indebtedness assumed in connection with such acquisition are
otherwise permitted under Section 7.01 or Section 7.03, respectively;

(v) any expenditures in connection with such acquisition are Utility Capital
Expenditures;

(vi) such acquisition would either be made pursuant to a competitive
solicitation process or would be expected to promote PSE’s ability to meet
current and future needs for electric or gas service at a reasonable cost;

(vii) no Lock-Up Event shall have occurred and be continuing or would result
from the consummation of the proposed acquisition, nor shall any Lock-Up Event
exist on a pro forma basis; and

(viii) 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.

 

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“Permitted Collateral Liens” means Liens of the type specified in
Section 7.01(e), (m), (n) and (p).

“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 or Indebtedness referred to under Section 7.03(a); provided, that
for the avoidance of doubt, Permitted Refinancing Indebtedness shall not include
Indebtedness incurred to repay revolving loans or similar Indebtedness without a
corresponding permanent reduction in commitments for such loans or similar
Indebtedness; provided, further, that:

(i) The principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accredited
value, if applicable) of the Indebtedness extended, refinanced, renewed,
replaced, defeased or refunded (plus all refinancing expenses incurred in
connection therewith including, without limitation, closing fees, agency fees,
premiums, make-whole amounts or original issue discount);

(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 the Facilities, such
Permitted Refinancing Indebtedness is subordinated in right of payment to the
Facilities 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
Facility Agent at least five (5) Business Days (or such shorter period as the
Facility 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 Facility 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)(A) If the maturity of the Indebtedness being refinanced, renewed, replaced,
defeased or refunded is earlier than the Final Maturity Date, the Permitted
Refinancing Indebtedness has a maturity no earlier than the maturity of the
Indebtedness being refinanced, renewed, replaced, defeased or refunded or (B) if
the maturity of the Indebtedness being refinanced, renewed, replaced, defeased
or refunded is equal to or

 

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later than the Final Maturity Date, the Permitted Refinancing Indebtedness has a
maturity at least 365 days later than the Final Maturity Date;

(vi) 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

(vii) Such Permitted Refinancing Indebtedness shall have terms which shall be no
more restrictive, 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, that a certificate of an Authorized Officer of the Borrower
is delivered to the Facility Agent at least five (5) Business Days (or such
shorter period as the Facility 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 Indebtedness 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 Facility Agent notifies the Borrower within such period
that it disagrees with such determination (including a reasonable description of
the basis upon which it disagrees); provided, further, 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.

“Permitted Replacement Lender” means (i) a Lender, (ii) an Affiliate of a
Lender, (iii) a commercial bank organized under the laws of the United States,
or any State thereof, and having total assets in excess of $250,000,000, (iv) a
savings and loan association or savings bank organized under the laws of the
United States, or any State thereof, and having deposits in excess of
$250,000,000, (v) a commercial bank organized under the laws of any other
country that is a member of the OECD or has concluded special lending
arrangements with the International Monetary Fund associated with its General
Arrangements to borrow or a political subdivision of any such country, and
having total assets in excess of $250,000,000, (vi) the central bank of any
country that is a member of the OECD, (vii) a finance company, insurance company
or other financial institution or fund (whether a corporation, partnership,
trust or other entity) that is engaged in making, purchasing or otherwise
investing in commercial loans in the ordinary course of its business and having
total assets in excess of $250,000,000, and (viii) any other Person approved by
the Facility Agent; provided that neither the Borrower nor any Affiliate of the
Borrower shall qualify as a Permitted Replacement Lender with the exception of
Macquarie Affiliates, which may qualify as Permitted Replacement Lenders for an
amount of Loans and Commitments not to exceed, in the aggregate together with
all other Loans and Commitments held by such Persons, $50,000,000.

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

“Plan” means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by the Borrower or any of its Subsidiaries
or, with respect to any such plan

 

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that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA
Affiliate, and with respect to which the Borrower or any of its Subsidiaries is
reasonably expected to have any material liabilities.

“Planned Indebtedness” means Indebtedness incurred by PSE between the date of
the Merger Agreement and the Financial Closing Date in an amount not to exceed
$250,000,000; provided, however, that (i) such Indebtedness has scheduled
payment terms which are consistent with the Financial Model provided pursuant to
Section 4.02(q); and (ii) such Indebtedness shall have terms which shall be no
more restrictive, and shall not, taken as a whole, be materially less favorable,
in any respect on PSE or the Operating Companies than the provisions of any
Existing Indebtedness in each case of clauses (i) and (ii) as certified by the
CFO to the Facility Agent as of the Financial Closing Date; provided further
that pricing terms may be at then-prevailing market price.

“Pledge Agreement” means the Pledge Agreement between the Parent and the
Collateral Agent, substantially in the form of Exhibit C-2.

“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.

“Primary Obligor” has the meaning specified in the definition of Guarantee.

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by Barclays Bank PLC 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.

“Projections” has the meaning specified in Section 6.01(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.

“Public Service Property” means property that, pursuant to applicable Laws, is
used and useful or intended to be used and useful for PSE’s provision of gas or
electric service to its customers and the capital invested in such property is
reasonably expected to be found to be prudently incurred (if applicable) and
recoverable in all material respects through PSE’s rates at the first
opportunity for regulatory approval, including a power cost only rate case to
the extent that such an accelerated approval process is available and
appropriate for such property.

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

“PUHCA” has the meaning specified in Section 5.17(d).

 

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

“Quarterly Period” means a quarterly period from (but excluding) one Quarter End
Date to (and including) the immediately following Quarterly End Date.

“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.

“Reference Banks” means, collectively, Barclays Bank PLC and Dresdner Bank AG
New York Branch.

“Register” has the meaning specified in Section 10.07(d).

“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.

“Reinstatement Date” means, with respect to any Dividend Prohibition, the date
on which such Dividend Prohibition ceases to apply.

“Remedial Plan” has the meaning specified in Section 6.04(a).

“Remedial Plan Event” has the meaning specified in Section 6.04(a).

“Reportable Event” means any of the events specified in Section 4043(c) of ERISA
or the regulations issued thereunder, other than events for which the
thirty (30) day notice period has been waived.

“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 dividend
payments on Operating Company Preferred Shares and payments made to Affiliates
pursuant to transactions permitted by Section 7.09(a) shall not constitute
Restricted Payments.

“Restricted Payment Date” has the meaning specified in Section 7.05(b).

 

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“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., and any successor thereto.

“Scheduled Base CapEx” means the amount for Capital Expenditures for the
applicable periods set forth on Schedule 1.01B.

“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 Facility Agent
from time to time pursuant to this Agreement.

“Security Agreement” means the Security Agreement between the Borrower and the
Collateral Agent, substantially in the form of Exhibit C-1.

“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.

“Shareholder Funding” means equity investments and/or other funding sources
contributed or made to Puget Holdings, Parent Holdco (to the extent such Person
is not Puget Holdings) or the Parent by the Equity Investors in an aggregate
amount of not less than 40% of the Total Capitalization of the Borrower
immediately after giving effect to the Merger; provided that (a) such
investments and fundings shall not be secured by any assets of the Parent or any
Borrower Group Member or be recourse to any Borrower Group Member, and (b) any
such investments and fundings made as loans or indebtedness to the Parent shall
be on terms and conditions set forth in the Shareholder Loan Subordination
Agreement.

“Shareholder Loan Subordination Agreement” means a subordination agreement among
the Parent, the Facility Agent and any Person providing Shareholder Funding in
the form of loans or indebtedness to the Parent in a form reasonably
satisfactory to the Majority Lenders.

“Signing Date” means, (a) October 26, 2007 and (b) for purposes of Section 2.06,
with respect to the Initial Lenders, October 26, 2007, and, with respect to each
other Lender (i) on or prior to the Effective Date, the earlier of (x) the date
such Lender agrees to purchase a portion of an Initial Lender’s Commitment
hereunder (in a manner satisfactory to such Initial Lender) and (y) the date
such Lender become party hereto and (ii) thereafter, the date such Lender
becomes a party hereto.

“Solvent” and “Solvency” means, with respect to any Person on any date of
determination, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including contingent
liabilities, of such Person, (b) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such

 

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Person’s ability to pay such debts and liabilities as they mature and (d) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person’s property would constitute
an unreasonably small capital. The amount of contingent liabilities at any time
shall be computed as the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.

“Specified Representations” has the meaning specified in Section 4.03(c)(i).

“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.

“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” has the meaning specified in Section 3.01(a).

“Term Lender” means, at any time, any Lender that has a Term Loan Commitment or
a Term Loan at such time.

“Term Loan” means a Loan made pursuant to Section 2.01(a).

“Term Loan Borrowing” means a borrowing consisting of Term Loans of the same
Type and, in the case of LIBO Rate Loans, having the same Interest Period made
by each of the Term Lenders pursuant to Section 2.01(a).

“Term Loan Commitment” means, as to each Term Lender, its obligation to make a
Term Loan to the Borrower pursuant to Section 2.01(a) in an aggregate principal
amount not to exceed the amount set forth opposite such Lender’s name on
Schedule 2.01 hereto under the caption “Term Loan Commitment” or in the
Assignment and Assumption pursuant to which such Term Lender becomes a party
hereto, as applicable, as such amount may be adjusted from time to time in
accordance with this Agreement. The aggregate amount of the Term Loan
Commitments is $1,425,000,000.

“Term Note” means a promissory note of the Borrower payable to any Term Lender,
in substantially the form of Exhibit B-1 hereto, evidencing the aggregate
Indebtedness of the Borrower to such Term Lender resulting from the Term Loans
made by such Term Lender.

“Termination Date” means the earlier of (i) April 30, 2009 and (ii) the date of
termination of the Merger Agreement.

 

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“Termination Payment” means any amount payable to or by the Borrower or any of
its Subsidiaries in connection with a termination (whether as a result of the
occurrence of an event of default or other termination event) of any Interest
Hedging Agreement; provided that for the avoidance of doubt, “Termination
Payment” shall not include regularly scheduled payments due under any Interest
Hedging Agreement.

“Test Period” means the period commencing twelve (12) months prior to and
including each Quarter End Date; provided, (i) the first Test Period shall be
the period commencing twelve (12) months prior to the first Quarter End Date
that is at least six (6) months after the Financial Closing Date and (ii) the
second Test Period shall be the period commencing twelve (12) months prior to
the first Quarter End Date that is at least nine (9) months after the Financial
Closing 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 6.01(a) or Section 6.01(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 of (a) Total Shareholders’
Equity at such time and (b) Total Indebtedness at such time.

“Total Indebtedness” means, at any time, consolidated Indebtedness of the
Borrower Group (excluding Intercompany Loans), in each case, excluding
make-whole payments.

“Total Outstandings” means the aggregate Outstanding Amount of all Loans.

“Total Shareholders’ Equity” means, at any time, the amount of total
shareholders’ equity of the Borrower Group (determined on a consolidated basis
without duplication in accordance with GAAP).

“Transaction Costs” means finance fees, commissions, costs and expenses, in each
case incurred by or on behalf of the Borrower in connection with the Merger.

“Transaction Documents” means (a) the Merger Agreement and all other material
documents, instruments and certificates delivered in connection with the Merger
Agreement, and (b) the Financing Documents.

“Type” when used in respect of any Loan, shall refer to its nature as an
Alternate Base Rate Loan or LIBO Rate Loan.

“United States” and “U.S.” mean the United States of America.

“Unused Capital Expenditure Commitment” means, with respect to any Capital
Expenditure Lender at any time, (a) such Lender’s Capital Expenditure Commitment
at such time minus (b) the sum of the aggregate principal amount of all Capital
Expenditure Loans made by such Lender (in its capacity as a Lender) and
outstanding at such time.

“USA PATRIOT Act” has the meaning specified in Section 5.17(c).

 

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“Utility Capital Expenditures” means (i) Capital Expenditures of PSE and
(ii) other expenditures of PSE, in each case of clauses (i) and (ii), which
Capital Expenditures and other expenditures are incurred in the acquisition,
renewal or replacement of Public Service Property, in accordance with Good
Utility Practice; provided, however, clause (ii) of the foregoing shall not
include operating expenditures or expenditures for working capital or general
corporate purposes, in each case that arise in the ordinary course of business.

“Wall” has the meaning specified in the third proviso of Section 10.01.

“wholly-owned” means, with respect to a Subsidiary of a Person, a Subsidiary of
such Person all of the outstanding Equity Interests of which (other than
(a) director’s qualifying shares and (b) shares issued to foreign nationals to
the extent required by applicable Law) are owned by such Person and/or by one or
more wholly-owned Subsidiaries of such Person.

SECTION 1.02. Other Interpretive Provisions. With reference to this Agreement
and each other Financing Document, unless otherwise specified herein or in such
other Financing 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 in any Financing Document shall refer to such Financing
Document as a whole and not to any particular provision thereof.

(i) Article, Section, Exhibit and Schedule references are to the Financing
Document in which such reference appears.

(ii) The term “including” is by way of example and not limitation.

(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 and in the other Financing Documents are included
for convenience of reference only and shall not affect the interpretation of
this Agreement or any other Financing Document.

SECTION 1.03. Accounting Terms and Principles.

(a) Except as set forth below, all accounting terms not specifically or
completely defined herein shall be construed in conformity with GAAP and all
accounting determinations required to be made pursuant hereto (including for
purpose of measuring compliance with

 

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Section 7.14) shall, unless expressly otherwise provided herein, be made in
conformity with GAAP.

(b) If any change in the accounting principles used in the preparation of the
financial statements referred to in Section 6.01 is hereafter required or
permitted by the rules, regulations, pronouncements and opinions of the
Financial Accounting Standards Board or the American Institute of Certified
Public Accountants (or any successors thereto) and such change is adopted by the
Borrower with the agreement of the Borrower’s accountants and results in a
change in any of the calculations required by Article VII (including
Section 7.14) that would not have resulted had such accounting change not
occurred, the Facility Agent and the Borrower agree (upon the request of the
Facility Agent or the Borrower) to enter into negotiations in order to amend
such provisions so as to equitably reflect such change such that the criteria
for evaluating compliance with such covenants by the Borrower shall be the same
after such change as if such change had not been made; provided, however, that
no change in GAAP that would affect a calculation that measures compliance with
any covenant contained in Article VII (including Section 7.14) shall be given
effect until such provisions are amended with the consent of the Majority
Lenders to reflect such changes in GAAP. Calculations with respect to any fiscal
quarter or any fiscal year of any Person shall reference the respective fiscal
quarters or fiscal years of such Person.

SECTION 1.04. Rounding. Any financial ratios required to be maintained by the
Borrower pursuant to this Agreement (or required to be satisfied in order for a
specific action to be permitted under this Agreement) shall be calculated by
dividing the appropriate component by the other component, carrying the result
to one place more than the number of places by which such ratio is expressed
herein and rounding the result up or down to the nearest number (with a
rounding-up if there is no nearest number).

SECTION 1.05. References to Agreements, Laws, Etc. Unless otherwise expressly
provided herein, (a) references to Organizational Documents, agreements
(including the Financing Documents) and other contractual instruments shall be
deemed to include all subsequent amendments, restatements, extensions,
supplements and other modifications thereto, but only to the extent that such
amendments, restatements, extensions, supplements and other modifications are
not prohibited by any Financing Document; and (b) references to any Law shall
include all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting such Law.

SECTION 1.06. Times of Day. Unless otherwise specified, all references herein to
times of day shall be references to Eastern time (daylight or standard, as
applicable).

SECTION 1.07. Timing of Payment of Performance. When the payment of any
obligation or the performance of any covenant, duty or obligation is stated to
be due or performance required on a day which is not a Business Day, the date of
such payment (other than as described in the definition of Interest Period) or
performance shall extend to the immediately succeeding Business Day.

SECTION 1.08. Authorized Officers. Any document delivered hereunder that is
signed by an Authorized Officer of any Borrower Group Member shall be

 

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conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such Borrower Group Member and
such Authorized Officer shall be conclusively presumed to have acted on behalf
of such Borrower Group Member.

ARTICLE II

THE COMMITMENTS AND CREDIT EXTENSIONS AND CONTINUATIONS

SECTION 2.01. The Loans.

(a) The Term Loan Borrowing. Subject to the terms and conditions set forth
herein, each Lender severally agrees to make to the Borrower a single Term Loan
on the Financial Closing Date in a principal amount up to but not exceeding such
Lender’s Term Loan Commitment. Amounts borrowed under this Section 2.01(a) and
repaid or prepaid may not be reborrowed. Any portion of the Term Loan
Commitments that shall remain undrawn at 5:00 p.m., New York City time, on the
Financial Closing Date shall be terminated.

(b) The Capital Expenditure Loan Borrowings. Subject to the terms and conditions
set forth herein, each Lender severally agrees to make Capital Expenditure Loans
to the Borrower from time to time during the Capital Expenditure Availability
Period in an aggregate principal amount at any one time outstanding not
exceeding such Lender’s Capital Expenditure Commitment. Amounts borrowed under
this Section 2.01(b) and repaid or prepaid may not be reborrowed.

SECTION 2.02. Borrowings.

(a) Each of the Term Loan and the Capital Expenditure Loans shall be made upon
the delivery by the Borrower of an irrevocable Borrowing Request (or telephonic
or email notice promptly confirmed by delivery of an irrevocable Borrowing
Request) to the Facility Agent (which shall give to each Lender prompt notice
thereof by facsimile transmission), given no later than 1:00 p.m., New York City
time, at least four (4) Business Days prior to the requested date of any Capital
Expenditure Loan Borrowing or Term Loan Borrowing; provided that if such Loan is
to be made as an Alternate Base Rate Loan, such notice shall be so delivered no
later than 1:00 p.m., New York City time, at least one (1) Business Day prior to
the requested date of any Capital Expenditure Loan Borrowing or Term Loan
Borrowing. Each such Borrowing Request shall specify (i) whether the Borrower is
requesting a Term Loan Borrowing or a Capital Expenditure Loan Borrowing,
(ii) the requested date of such Borrowing (which shall be a Business Day),
(iii) in the case of a Capital Expenditure Loan Borrowing or Term Loan
Borrowing, whether the related Capital Expenditure Loan or Term Loan is to be
made as an Alternate Base Rate Loan or a LIBO Rate Loan, (iv) if the related
Loan is to be made as a LIBO Rate Loan, the initial Interest Period applicable
to such Borrowing and (v) the aggregate principal amount of Loans to be borrowed
(and, subject to the terms and conditions set forth herein, the principal amount
to be borrowed from each Lender shall be its ratable share of such aggregate
principal amount, based upon the respective Commitments of each of the Lenders
at such time).

 

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(b) The Term Loan shall be borrowed in a single Borrowing. There shall be no
more than seven (7) different Interest Periods at any one time for the
outstanding Term Loan. Borrowings of Capital Expenditure Loans shall be in
minimum amounts of $5,000,000 and increments of $1,000,000; provided that there
shall be no more than sixty (60) Capital Expenditure Loan Borrowings. There
shall be no more than five (5) different Interest Periods at any one time for
the outstanding Capital Expenditure Loans.

(c) In the case of each Borrowing, each Lender shall make the amount of the Loan
to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds not later than 11:00 a.m., New York City time, to
the account of the Facility Agent most recently designated by it for such
purpose by notice to the Lenders. Upon satisfaction of the applicable conditions
set forth in Section 4.02 and Section 4.03, the Facility Agent shall make all
funds so received available not later than 1:00 p.m., New York City time, by
wire transfer of such funds, in each case in accordance with instructions
provided to (and reasonably acceptable to) the Facility Agent by the Borrower.

(d) The failure of any Lender to make the Loan to be made by it as part of any
Borrowing shall not relieve any other Lender of its obligation, if any,
hereunder to make its Loan on the date of such Borrowing, but no Lender shall be
responsible for the failure of any other Lender to make the Loan to be made by
such other Lender on the date of any Borrowing.

SECTION 2.03. Prepayments; Reduction and Termination of Commitments.

(a) Optional. The Borrower may, upon notice to the Facility Agent, at any time
or from time to time voluntarily prepay the Loans and/or terminate the
Commitments in whole or in part (provided, however, prior to the Financial
Closing Date, the Borrower shall be permitted to reduce the Commitments in part
but not in whole) without premium or penalty subject however to (x) any breakage
costs due in accordance with Section 2.07 and (y) the payment of any accrued
Commitment Fees and the fees set forth in the Fee Letters; provided that (i) in
the case of LIBOR Rate Loans, such notice must be received by the Facility Agent
not later than 11:00 a.m., New York City time, three (3) Business Days prior to
any date of prepayment or termination, (ii) in the case of Alternate Base Rate
Loans, such notice must be received by the Facility Agent not later than 11:00
a.m., New York City time, one (1) Business Day prior to any date of prepayment
or three (3) Business Days prior to any date of termination and (iii) any
partial prepayment of the Loans shall be in an aggregate minimum amount of
$500,000 and in integral multiples of $500,000 in excess thereof, or if less,
the entire principal amount thereof then outstanding. Each such notice shall
specify the date and amount of such prepayment or termination and the Type(s) of
Loans to be prepaid and/or Commitments to be terminated. The Facility Agent will
promptly notify each Lender of its receipt of each such notice, and of the
amount of such Lender’s ratable share of such prepayment or termination. If such
notice is given by the Borrower, the Borrower shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein. Each prepayment of the Loans pursuant to this Section 2.03(a)
shall be paid to the Lenders in accordance with their respective ratable share.

 

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(b) Mandatory. (i) The Borrower shall be required to prepay all or a portion of
the Loans and/or reduce the Commitments, in each case as provided in clause (ii)
below:

(A) unless otherwise agreed by the Lenders, within three (3) Business Days after
any date on which any Borrower Group Member receives Net Cash Proceeds of any
Disposition after the Financial Closing Date (other than Dispositions permitted
pursuant to Section 7.02(a), Section 7.02(b), Section 7.02(c), Section 7.02(e),
Section 7.02(f), Section 7.02(g), Section 7.02(h) or Section 7.02(i)), in the
event that the Net Cash Proceeds of such Disposition exceed $2,000,000
individually or in the aggregate in any fiscal year; provided that the foregoing
shall not apply (1) to the extent such Net Cash Proceeds are required to be
applied otherwise under the terms and conditions of Existing Indebtedness, the
Operating Company Facilities or Permitted Refinancing Indebtedness or, in the
case of a Disposition by PSE or its Subsidiaries, applicable Law, (2) to the
extent that a Dividend Prohibition applies with respect to the applicable
Subsidiary, except that if and to the extent that such Dividend Prohibition
subsequently ceases to apply (x) on or prior to the one-year anniversary of the
applicable Subsidiary’s receipt of such Net Cash Proceeds, the prepayment
otherwise required by this clause (A) shall be reinstated except to the extent
that such Net Cash Proceeds are reinvested as permitted by clause (3) below
following the applicable Reinstatement Date and (y) after the one-year
anniversary of the applicable Subsidiary’s receipt of such Net Cash Proceeds and
if such Net Cash Proceeds equal or exceed $10,000,000 individually or in the
aggregate, the prepayment otherwise required by this clause (A) shall be
reinstated except to the extent that such Net Cash Proceeds (I) shall have been
applied to repay Indebtedness of PSE or the applicable Subsidiary, and terminate
all commitments with respect thereto such that such Indebtedness may not be
reborrowed or (II) shall have been applied to fund Utility Capital Expenditures
or (3) with respect to Dispositions permitted under Section 7.02(d) or
Section 7.02(j), the Net Cash Proceeds thereof are (x) reinvested or
(y) committed to be reinvested (in property identified to the Facility Agent in
writing with reasonable specificity), in each case, in Utility Capital
Expenditures and within one hundred and eighty (180) days following such
Disposition and, in the case of clause (y), reinvested within twelve (12) months
after the receipt thereof (provided that to the extent that a Dividend
Prohibition exists with respect to the applicable Subsidiary at the time of
receipt of such Net Cash Proceeds such one hundred and eighty (180) day and
twelve (12) month periods shall run from the applicable Reinstatement Date if
such Net Cash Proceeds are held by the applicable Subsidiary in a segregated
investment or other account, unless and until so reinvested);

(B) unless otherwise agreed by the Lenders, on each Cash Sweep Calculation Date,
in an amount equal to amounts that were deposited by the Borrower and its
Subsidiaries into the Lock-Up Account pursuant to Section 6.04(c) and
Section 6.12, during the fiscal quarter ending on the Quarter End Date which is
two Quarter End Dates (for a total of six (6) months) prior to such Cash Sweep
Date;

(C) unless otherwise agreed by the Majority Lenders, the Borrower shall prepay
the Loans in full and terminate the Commitments upon the occurrence of a Change
of Control after the Financial Closing Date;

 

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(D) unless otherwise agreed by the Lenders, within three (3) Business Days after
any date on which any Borrower Group Member receives Net Cash Proceeds of any
Issuance that exceeds $5,000,000 individually or in the aggregate in any fiscal
year; provided that the foregoing shall not apply (1) to the extent that such
Net Cash Proceeds are required to be applied otherwise under the terms and
conditions of Existing Indebtedness, the Operating Company Facilities or
Permitted Refinancing Indebtedness or, in the case of an Issuance by PSE,
applicable Law or (2) to the extent that a Dividend Prohibition applies with
respect to the applicable Subsidiary, except that if and to the extent that such
Dividend Prohibition subsequently ceases to apply (x) on or prior to the
one-year anniversary of the applicable Subsidiary’s receipt of such Net Cash
Proceeds, the prepayment otherwise required by this clause (D) shall be
reinstated and (y) after the one-year anniversary of the applicable Subsidiary’s
receipt of such Net Cash Proceeds and if such Net Cash Proceeds equal or exceed
$10,000,000 individually or in the aggregate, the prepayment otherwise required
by this clause (D) shall be reinstated except to the extent that such Net Cash
Proceeds (I) shall have been applied to repay Indebtedness of PSE or the
applicable Subsidiary, and all commitments with respect thereto have been
terminated such that such Indebtedness may not be reborrowed, or (II) shall have
been applied to fund Utility Capital Expenditures;

(E) unless otherwise agreed by the Lenders, within three (3) Business Days after
any date on which any Borrower Group Member receives Net Cash Proceeds of any
Casualty Event occurring after the Financial Closing Date to the extent that
such Net Cash Proceeds exceed $5,000,000 individually or in the aggregate in any
fiscal year; provided that the foregoing shall not apply (1) to proceeds under
business interruption insurance, (2) to the Net Cash Proceeds of any Casualty
Event required to be applied otherwise under the terms and conditions of
Existing Indebtedness, the Operating Company Facilities or Permitted Refinancing
Indebtedness or, in the case of any such Net Cash Proceeds received by PSE or
its Subsidiaries, applicable Law, (3) to the extent that (I) the Borrower
advises the Facility Agent at the time of the receipt of the relevant Net Cash
Proceeds that it intends to use such Net Cash Proceeds to repair or replace the
Property subject to such Casualty Event or to reinvest in Utility Capital
Expenditures, (II) such Net Cash Proceeds are held by the Borrower or the
applicable Subsidiary in a segregated investment or other account until so used
to repair or replace such Property or invest in such Utility Capital
Expenditures and (III) such Net Cash Proceeds are committed to be applied to
repair or replace such Property (or invest in Utility Capital Expenditures)
within one hundred and eighty (180) days of the receipt of such Net Cash
Proceeds (it being understood that, in the event Net Cash Proceeds from more
than one Casualty Event are held by the Borrower or the applicable Subsidiary
such Net Cash Proceeds shall be deemed to be utilized in the same order in which
such Net Cash Proceeds were so received and, accordingly, any such Net Cash
Proceeds not so committed to be applied within one hundred and eighty (180) days
of receipt or not so applied within twelve (12) months of receipt shall be
forthwith applied to the prepayment of Loans as provided above), (4) with
respect to Net Cash Proceeds which the CFO certifies are being paid to the
Borrower or the applicable Borrower Group Member to reimburse the Borrower or
such Borrower Group Member (as applicable) for expenditures previously incurred
to repair or replace the Property which was the subject of such Casualty Event,
or (5) to the extent that a Dividend Prohibition applies with

 

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respect to the applicable Subsidiary, except that if and to the extent that such
Dividend Prohibition subsequently ceases to apply the prepayment otherwise
required by this clause (E) shall be reinstated;

(F) unless otherwise agreed by the Lenders, within four (4) Business Days after
a Calculation Date occurring after a Quarterly Period in which an Excess Cash
Sweep Event occurred or was continuing, in an amount equal to Excess Cash during
such Quarterly Period (provided, however, to the extent an Excess Cash Sweep
Event no longer exists at the end of such Quarterly Period, then the Excess Cash
during such period shall not be considered in this calculation) multiplied by
the applicable Excess Cash Sweep Percentage; and

(G) unless otherwise agreed by the Lenders, within four (4) Business Days after
a Calculation Date, in an amount equal to any Distributable Cash Balance, as
specified in the certificate of the CFO delivered pursuant to Section 6.04(c),
minus any Base Capital Expenditures (to the extent not already deducted in the
calculation of Distributable Cash) paid for with such Distributable Cash (the
amount resulting from the calculation referred to in this Section 2.03(b)(i)(G),
the “Distributable Cash Sweep Amount”); provided, however, the Borrower shall
only be required to make the prepayment referred to in this
Section 2.03(b)(i)(G) as and when proceeds of Distributable Cash are actually
received by it but the Borrower shall continue to be required to prepay an
amount equal to the Distributable Cash Sweep Amount until such amount is fully
prepaid.

(ii) (A) In the case of any required prepayment or reduction of the Facilities
pursuant to Section 2.03(b)(i) on or after the Financial Closing Date the
applicable amount determined pursuant to Section 2.03(b)(i) shall be applied on
the date of receipt with respect to Net Cash Proceeds, the applicable Quarter
End Date or such other date specified in Section 2.03(b)(i) and shall be applied
to the Loans, first, ratably to prepay the Term Loans, and the Capital
Expenditure Loans and second, to reduce the Capital Expenditure Commitments; and

(B) The Borrower shall notify the Facility Agent in writing of any mandatory
prepayment of the Facilities required to be made pursuant to this
Section 2.03(b) at least three (3) Business Days prior to the date of such
prepayment. Each such notice shall specify the date of such prepayment and
provide a reasonably detailed calculation of the amount of such prepayment. The
Facility Agent will promptly notify each Lender of the contents of the
Borrower’s prepayment notice and of such Lender’s ratable share of the
prepayment.

(c) Accrued Interest; Funding Losses, Etc. All prepayments under this
Section 2.03 shall be made together with all accrued and unpaid interest on the
amount to be prepaid and, in the event that any such prepayment is made on a
date other than the last day of an Interest Period therefor, any amounts owing
in respect of such Loan pursuant to Section 2.07(b).

 

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(d) Termination of Commitments. Unless the Financial Closing Date shall have
occurred on or prior to the Termination Date, the Commitments shall terminate on
the Termination Date.

SECTION 2.04. Repayment of Loans. The Borrower shall repay to the Facility Agent
for the ratable account of the Lenders on the Final Maturity Date, the aggregate
principal amount of the Loans outstanding on such date.

SECTION 2.05. Interest.

(a) Subject to the provisions of Section 2.05(b) the Borrower hereby agrees to
pay to the Facility Agent for the account of each Lender interest on the unpaid
principal amount of each Loan made by such Lender for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full at the rate equal to the Interest Rate.

(b) Notwithstanding the provisions of Section 2.05(a) to the contrary, the
Borrower hereby agrees that all past due amounts hereunder shall bear interest
at a rate per annum equal to the Default Rate for the period from and including
the date such past due amount was due to but excluding the date such amount is
paid in full. Accrued and unpaid interest on past due amounts (including
interest on past due interest) shall be due and payable upon demand.

(c) Interest on each Loan shall be due and payable in arrears on each Interest
Payment Date applicable thereto and at such other times as may be specified
herein. Interest hereunder shall be due and payable in accordance with the terms
hereof before and after judgment, and before and after the commencement of any
proceeding under any Debtor Relief Law.

(d) Notices by the Borrower to the Facility Agent of a change in the duration of
Interest Periods or of the conversion of an Alternate Base Rate Loan to a LIBO
Rate Loan or of a LIBO Rate Loan to an Alternate Base Rate Loan, shall be
irrevocable and shall be effective only if received by the Facility Agent not
later than 1:00 p.m., New York City time, three (3) Business Days prior to the
first day of each subsequent Interest Period. Each such notice shall specify the
Loans to which such Interest Period is to relate. The Facility Agent shall
promptly notify the Lenders of the contents of each such notice.

SECTION 2.06. Fees.

(a) Commitment Fee. The Borrower shall pay to the Facility Agent for the ratable
account of each Lender a commitment fee (the “Commitment Fee”) on the daily
average unutilized amount of such Lender’s aggregate Term Loan Commitment and
Capital Expenditure Commitment (as such Term Loan Commitment and Capital
Expenditure Commitment may be reduced from time to time under Section 2.03) at a
rate per annum equal to the Commitment Fee rate set forth in the definition of
“Applicable Margin” at such time, for the period from and including the Signing
Date to but excluding the Final Maturity Date; provided that any Commitment Fee
accrued with respect to any of the Commitments of a Defaulting Lender during the
period prior to the time such Lender became a Defaulting Lender and unpaid at
such time shall not be payable by the Borrower so long as such Lender shall be a
Defaulting Lender except to the extent that such Commitment Fee shall otherwise
have been due and payable by the

 

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Borrower prior to such time and; provided, further, that no Commitment Fee shall
accrue on any of the Commitments of a Defaulting Lender so long as such Lender
shall be a Defaulting Lender. The Commitment Fee shall accrue at all times from
and including the Signing Date to but excluding the Final Maturity Date. The
accrued Commitment Fee shall become due and payable upon the Completion Date
(whether or not the Merger is financed by proceeds from the Facilities), and
thereafter shall become payable in arrears on each Quarter End Date commencing
on the first Quarter End Date following the Term Loan Borrowing until the
earlier of the date all remaining Commitments are terminated or the Final
Maturity Date. If the Merger Agreement is terminated, any Commitment Fee accrued
from and including the Signing Date to but excluding such termination date shall
become due and payable solely to the extent of any break up, topping or similar
fee or the payment of any other form of consideration (including reimbursement
of expenses) received by Puget Holdings, Parent Holdco (to the extent such
Person is not Puget Holdings), the Parent or the Borrower prior to the
application of such fee or other consideration for any other uses; provided,
however, if the amount of such fee or other consideration is insufficient to pay
the Commitment Fee accrued until the date of payment pursuant to this
Section 2.06 and any commitment fees owed to the lenders committed to the
Operating Company Facilities, then the Borrower shall pay a portion of such fee
or other consideration to the payment of the Commitment Fee under this
Section 2.06 and a portion to the payment of commitment fees owed to the lenders
committed to the Operating Company Facilities, on a pro rata basis.
Notwithstanding the foregoing, prior to the Facility Agent’s receipt of evidence
of the ratings referred to in Section 4.02(h), the Commitment Fee shall be
0.75% per annum.

(b) Other Fees. The Borrower shall pay such fees as shall have been separately
agreed upon in writing including, without limitation, pursuant to the Fee
Letters, in the amounts and at the times so specified.

SECTION 2.07. Computation of Interest and Fees.

(a) All computations of interest and fees shall be made on the basis of a
three-hundred-and-sixty- (360-) day year and actual days elapsed, 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). Interest shall accrue on each Loan for the day on which
the Loan is made, and shall not accrue on a Loan, or any portion thereof, for
the day on which the Loan or such portion is paid; provided that any Loan that
is repaid on the same day on which it is made shall, subject to Section 2.09(a),
bear interest for one (1) day. Each determination by the Facility Agent of an
interest rate or fee hereunder shall be conclusive and binding for all purposes,
absent manifest error.

(b) In the event of (i) the payment of any principal of any Loan other than on
the last day of the Interest Period for that Loan (including under Section 2.03
or as a result of an Event of Default or otherwise), (ii) the failure to borrow
on the date specified in any Borrowing Request or failure to repay or prepay any
Loan on any scheduled repayment or prepayment date or (iii) the assignment of
any Loan other than on the last day of its Interest Period as a result of a
request by the Borrower pursuant to Section 3.06, then, in any such event, the
Borrower shall compensate each Lender for the loss, cost and expense
attributable to any such event. Such loss,

 

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cost or expense to any Lender shall be deemed to include an amount reasonably
determined by such Lender to be the excess, if any, of (x) the amount of
interest that would have accrued on the principal amount of such Loan had such
event not occurred for the period from the date of such event to the last day of
the then current Interest Period for such Loan (or, in the case of a failure to
borrow, for the period that would have been the Interest Period for such Loan)
over (y) the amount of interest that would accrue on such principal amount for
that period at the interest rate that such Lender would bid were it to bid, at
the commencement of that period, for Dollar deposits of a comparable amount and
period from other banks in the eurodollar market; provided, however, that such
amount shall exclude any anticipated profit of such Lender. The Borrower shall,
upon demand of any Lender (with a copy to the Facility Agent) which demand shall
be accompanied by a calculation, in reasonable detail, of the amounts so
demanded, promptly pay such Lender the amounts due and payable hereunder.

SECTION 2.08. Evidence of Indebtedness.

(a) The Borrowings provided by each Lender shall be evidenced by one or more
accounts or records maintained by such Lender and evidenced by one or more
entries in the Register maintained by the Facility Agent, in each case in the
ordinary course of business. The accounts or records maintained by the Facility
Agent and each Lender shall be prima facie evidence absent manifest error of the
amount of the Borrowings provided by the Lenders to the Borrower and the
interest and payments thereon. Any failure to so record or any error in doing so
shall not, however, limit or otherwise affect the obligation of the Borrower
hereunder to pay any amount owing with respect to the Obligations. In the event
of any conflict between the accounts and records maintained by any Lender and
the accounts and records of the Facility Agent in respect of such matters, the
accounts and records of the Facility Agent shall control in the absence of
manifest error. Upon the request of any Lender made through the Facility Agent,
the Borrower shall execute and deliver to such Lender (through the Facility
Agent) a Term Note and/or a Capital Expenditure Note, as applicable payable to
such Lender, which shall evidence such Lender’s Loans in addition to such
accounts or records. Each Lender may attach schedules to its Note and endorse
thereon the date, amount and maturity of its Loans and payments with respect
thereto.

(b) Entries made in good faith by the Facility Agent in the Register pursuant to
Section 2.08(a), and by each Lender in its account or accounts pursuant to
Section 2.08(a), shall be prima facie evidence of the amount of principal and
interest due and payable or to become due and payable from the Borrower to, in
the case of the Register, each Lender and, in the case of such account or
accounts, such Lender, under this Agreement and the other Financing Documents,
absent manifest error; provided that the failure of the Facility Agent or such
Lender to make an entry, or any finding that an entry is incorrect, in the
Register or such account or accounts shall not limit or otherwise affect the
Obligations of the Borrower under this Agreement and the other Financing
Documents.

SECTION 2.09. Payments Generally.

(a) All payments to be made by the Borrower shall be made without condition or
deduction for any counterclaim, defense, recoupment or setoff. All payments by
the Borrower hereunder shall be made by wire transfer in immediately available
funds to the Facility Agent,

 

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for the account of the respective Lenders to which such payment is owed, not
later than 2:00 p.m., New York City time, on the date specified herein. The
Facility Agent will promptly distribute to each Lender its ratable share (or
other applicable share as provided herein) of such payment in like funds as
received by wire transfer to such Lender’s Lending Office. All payments received
by the Facility Agent after 2:00 p.m., New York City time, shall in each case be
deemed received on the next succeeding Business Day and any applicable interest
or fee shall continue to accrue.

(b) Unless the Borrower or any Lender has notified the Facility Agent, prior to
the date any payment is required to be made by it to the Facility Agent
hereunder, that the Borrower or such Lender, as the case may be, will not make
such payment, the Facility Agent may assume that the Borrower or such Lender, as
the case may be, has timely made such payment and may (but shall not be so
required to), in reliance thereon, make available a corresponding amount to the
Person entitled thereto. If, and to the extent that, such payment was not in
fact made to the Facility Agent in immediately available funds, then:

(i) if the Borrower failed to make such payment, each Lender shall forthwith on
demand repay to the Facility Agent the portion of such assumed payment that was
made available to such Lender in immediately available funds, together with
interest thereon in respect of each day from and including the date such amount
was made available by the Facility Agent to such Lender to the date such amount
is repaid to the Facility Agent in immediately available funds at the Federal
Funds Rate from time to time in effect; and

(ii) if any Lender failed to make such payment, such Lender shall forthwith on
demand pay to the Facility Agent the amount thereof in immediately available
funds, together with interest thereon for the period from the date such amount
was made available by the Facility Agent to the Borrower to the date such amount
is recovered by the Facility Agent (the “Compensation Period”) at a rate per
annum equal to the Federal Funds Rate from time to time in effect. When such
Lender makes payment to the Facility Agent (together with all accrued interest
thereon), then such payment amount (excluding the amount of any interest which
may have accrued and been paid in respect of such late payment) shall constitute
such Lender’s Loan included in the applicable Borrowing. If such Lender does not
pay such amount forthwith upon the Facility Agent’s demand therefor, the
Facility Agent may make a demand therefor upon the Borrower, and the Borrower
shall pay such amount to the Facility Agent, together with interest thereon for
the Compensation Period at a rate per annum equal to the rate of interest
applicable to the applicable Borrowing. Nothing herein shall be deemed to
relieve any Lender from its obligation to fulfill its Commitment or to prejudice
any rights which the Facility Agent or the Borrower may have against any Lender
as a result of any default by such Lender hereunder.

A notice of the Facility Agent to any Lender or the Borrower with respect to any
amount owing under this Section 2.09(b) shall be conclusive, absent manifest
error.

(c) If any Lender makes available to the Facility Agent funds for any Loan to be
made by such Lender as provided in the foregoing provisions of this Article II,
and such funds

 

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are not made available to the Borrower by the Facility Agent because the
conditions to the applicable Borrowing set forth in Article IV are not satisfied
or waived in accordance with the terms hereof, the Facility Agent shall promptly
return such funds to such Lender, without interest.

(d) The obligations of the Lenders hereunder to make Loans are several and not
joint. The failure of any Lender to make any Loan or to fund any such
participation on any date required hereunder shall not relieve any other Lender
of its corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to so make its Loan or purchase
its participation.

(e) Nothing herein shall be deemed to obligate any Lender to obtain the funds
for any Loan in any particular place or manner or to constitute a representation
by any Lender that it has obtained or will obtain the funds for any Loan in any
particular place or manner.

(f) Whenever any payment received by the Facility Agent under this Agreement or
any of the other Financing Documents is insufficient to pay in full all amounts
due and payable to the Facility Agent and the Lenders under or in respect of
this Agreement and the other Financing Documents on any date, such payment shall
be distributed by the Facility Agent and applied by the Facility Agent and the
Lenders in the order of priority set forth in Section 8.03. If the Facility
Agent receives funds for application to the Obligations of the Borrower under or
in respect of the Financing Documents under circumstances for which the
Financing Documents do not specify the manner in which such funds are to be
applied, the Facility Agent may, but at the direction of Majority Lenders shall,
elect to distribute such funds to each of the Lenders in accordance with such
Lender’s ratable share of the sum of the Outstanding Amount of all Loans and
other Obligations outstanding at such time in repayment or prepayment of such of
the outstanding Loans or other Obligations then owing to such Lender.

(g) Except to the extent otherwise provided herein: (i) each Borrowing of a
particular Class shall be made from the relevant Lenders and each termination or
reduction of the amount of the Commitments of a particular Class shall be
applied to the respective Commitments of such Class of the relevant Lenders, pro
rata according to the amounts of their respective Commitments of such Class,
(ii) each Borrowing of any Class shall be allocated pro rata among the relevant
Lenders according to the amounts of their respective Commitments of such Class
(in the case of the making of Loans) or their respective Loans of such Class
that are to be included in such Borrowing (in the case of conversions and
continuations of Loans), (iii) each payment or prepayment of principal of Loans
of any Class by the Borrower shall be made for account of the relevant Lenders
pro rata in accordance with the respective unpaid principal amounts of the Loans
of such Class held by them, and (iv) each payment of interest on Loans or any
Class by the Borrower shall be made for account of the relevant Lenders pro rata
in accordance with the amounts of interest on such Loans then due and payable to
the respective Lenders.

SECTION 2.10. Sharing of Payments. If, other than as expressly provided
elsewhere herein, any Lender shall obtain on account of the Loans made by it,
any payment (whether voluntary, involuntary, through the exercise of any right
of setoff, or otherwise) in excess of its ratable share (or other share
contemplated hereunder) thereof, such Lender shall immediately (a) notify the
Facility Agent of such fact, and (b) purchase from the

 

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other Lenders such participations in the Loans made by them as shall be
necessary to cause such purchasing Lender to share the excess payment in respect
of such Loans, pro rata with each of them; provided that if all or any portion
of such excess payment is thereafter recovered from the purchasing Lender under
any of the circumstances described in Section 10.06 (including pursuant to any
settlement entered into by the purchasing Lender in its discretion), such
purchase shall to that extent be rescinded and each other Lender shall repay to
the purchasing Lender the purchase price paid therefor, together with an amount
equal to such paying Lender’s ratable share (according to the proportion of
(x) the amount of such paying Lender’s required repayment to (y) the total
amount so recovered from the purchasing Lender) of any interest or other amount
paid or payable by the purchasing Lender in respect of the total amount so
recovered, without further interest thereon. The Borrower agrees that any Lender
so purchasing a participation from another Lender may, to the fullest extent
permitted by applicable Law, exercise all its rights of payment (including the
right of setoff, but subject to Section 10.09) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation. The Facility Agent will keep
records (which shall be conclusive and binding in the absence of manifest error)
of participations purchased under this Section 2.10 and will in each case notify
the Lenders following any such purchases or repayments. Each Lender that
purchases a participation pursuant to this Section 2.10 shall from and after
such purchase have the right to give all notices, requests, demands, directions
and other communications under this Agreement with respect to the portion of the
Obligations purchased to the same extent as though the purchasing Lender were
the original owner of the Obligations purchased.

SECTION 2.11. Incremental Facility.

(a) The Borrower may at any time or from time to time during the Incremental
Facility Availability Period, by notice to the Facility Agent (whereupon the
Facility Agent shall promptly deliver a copy to each of the Lenders), request
that one or more additional tranches of Capital Expenditure Loans (the
“Incremental Loans”) be made available to the Borrower. At the time of (i) any
such request and upon the effectiveness of any Incremental Amendment referred to
below (x) no Default or Event of Default shall exist or would exist after giving
effect thereto, (y) a Lock-Up Event shall not have occurred and be continuing
and (z) Group FFO Leverage Ratio shall not be less than 8.50% and (ii) the
initial request for a Borrowing of Incremental Loans, all Capital Expenditure
Commitments (which, for avoidance of doubt, shall not refer to commitments for
Incremental Loans) shall have been fully borrowed.

(b) Each tranche of Incremental Loans shall be in an aggregate principal amount
that is not less than $25,000,000 (provided, that such amount may be less than
$25,000,000 if such amount represents all remaining availability under the limit
set forth in the next sentence). Notwithstanding anything to the contrary
herein, the aggregate principal amount of the Incremental Loans shall not exceed
the sum of $750,000,000.

(c) The Incremental Loans (i) shall rank pari passu in right of payment and of
security with the Loans, (ii) shall not mature earlier than one year after the
Final Maturity Date, (iii) shall not be materially more restrictive, taken as a
whole, to the Borrower (including with respect to mandatory and voluntary
prepayments) than the terms of this Agreement; provided that a certificate of an
Authorized Officer of the Borrower is delivered to the Facility Agent at least
five (5) Business Days (or such shorter period as the Facility Agent may
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prior to the effectiveness of any Incremental Amendment, together with a
reasonably detailed description of the material terms and conditions of such
Indebtedness 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 Facility 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) shall have a weighted average life not shorter than that of the remaining
average life of the Capital Expenditure Loans and (v) shall otherwise be on
terms and conditions to the extent not consistent with the Facilities,
reasonably satisfactory to the Majority Lenders. If the Applicable Margin with
respect to the Incremental Loans exceeds the Applicable Margin then in effect
for the Loans, by more than 25 basis points (the amount of such excess above the
Applicable Margin being referred to herein as the “Margin Differential”), then
the Applicable Margin for the Loans shall automatically be increased by the
Margin Differential, effective upon the making of the Incremental Loans.

(d) Each notice from the Borrower pursuant to this Section shall set forth the
requested amount and proposed terms of the relevant Incremental Loans.
Incremental Loans may be made by any existing Lender (and each existing Lender
will have the right, but not an obligation, to make a portion of any Incremental
Loan on terms permitted in this Section 2.11) or by any other bank or other
financial institution (any such other bank or other financial institution being
called an “Additional Lender”); provided that in no event or at any time shall
any Borrower Affiliate or Macquarie Affiliate be a Lender for any Incremental
Loans (including by means of assignment or participation pursuant to
Section 10.07). Commitments in respect of Incremental Loans shall become
Commitments under this Agreement pursuant to an amendment (an “Incremental
Amendment”) to this Agreement and, as appropriate, the other Financing
Documents, executed by the Parent, the Borrower, each Lender agreeing to provide
such Commitment, if any, each Additional Lender, if any, and the Facility Agent.
The Incremental 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 Facility Agent and
the Borrower, to effect the provisions of this Section. The effectiveness of
(and, in the case of any Incremental Amendment, the borrowing under) any
Incremental Amendment shall be subject to the satisfaction on the date thereof
(each, an “Incremental Facility Financial Closing Date”) of each of the
conditions set forth in Section 4.03 (it being understood that all references to
the Financial Closing Date or “the date of such Loan” or similar language in
such Section 4.03 shall be deemed to refer to the effective date of such
Incremental Amendment) and such other conditions as the parties thereto shall
agree. The Borrower shall use the proceeds of the Incremental Loans solely for
the purpose for which the proceeds of Capital Expenditure Loans may be used. No
Lender shall be obligated to provide any Commitment with respect to any
Incremental Loans unless it so agrees.

(e) This Section 2.11 shall supersede any provisions in Section 10.01 to the
contrary.

 

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ARTICLE III

TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY

SECTION 3.01. Taxes.

(a) Except as provided in this Section 3.01, any and all payments by or on
behalf of the Borrower to or for the account of any Agent or any Lender under
any Financing Document shall be made free and clear of and without deduction for
any and all present or future taxes, duties, levies, imposts, deductions,
assessments, fees, withholdings or similar charges, and all liabilities
(including additions to tax, penalties and interest with respect thereto),
imposed, levied, collected, withheld or assessed by any Governmental Authority,
excluding in the case of each Agent and each Lender, Excluded Taxes. All taxes,
duties, levies, imposts, deductions, assessments, fees, withholdings or similar
charges, and liabilities described in the immediately preceding sentence other
than Excluded Taxes are hereinafter referred to as “Taxes”. If the Borrower
shall be required by any Laws to deduct any Taxes or Other Taxes from or in
respect of any sum payable under any Financing Document to any Agent or any
Lender, (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 3.01), each of such Agent and such Lender receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable Laws, and (iv) within sixty (60) days after the date
of such payment (or, if receipts or evidence are not available within sixty (60)
days, as soon as possible thereafter), the Borrower shall furnish to such Agent
or Lender (as the case may be) the original or a certified copy of a receipt
evidencing payment thereof to the extent such a receipt is issued therefor, or
other written proof of payment thereof that is reasonably satisfactory to the
Facility Agent. If the Borrower fails to pay any Taxes or Other Taxes when due
to the appropriate taxing authority or fails to remit to any Agent or any Lender
the required receipts or other required documentary evidence, the Borrower shall
indemnify such Agent and such Lender for any incremental taxes, interest or
penalties that may become payable by such Agent, or such Lender arising out of
such failure.

(b) In addition, the Borrower agrees to pay any and all present or future stamp,
court or documentary taxes and any other excise, property, intangible or
mortgage recording taxes or similar charges or levies which arise from any
payment made under any Financing Document or from the execution, delivery,
performance, enforcement or registration of, or otherwise with respect to, any
Financing Document (hereinafter referred to as “Other Taxes”).

(c) The Borrower agrees to indemnify each Agent and each Lender for (i) the full
amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section 3.01) paid by
such Agent and such Lender and (ii) any liability (including additions to tax,
penalties, interest and expenses) arising therefrom or with respect thereto
(other than those resulting from such Person’s gross negligence or willful
misconduct), in each case whether or not such Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority;
provided that such Agent or Lender, as the case may be, provides the Borrower
with a written statement thereof setting forth in reasonable detail the basis
and calculation of such amounts. Payment under this

 

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Section 3.01(c) shall be made within sixty (60) days after the date such Lender
or such Agent provides such written statement.

(d) Each Lender agrees that, upon the occurrence of any event giving rise to the
operation of Section 3.01(a), (b) or (c) with respect to such Lender, it will
use its commercially reasonable efforts to minimize any increased cost or other
compensation payable by the Borrower including, if requested by the Borrower,
designating (subject to such Lender’s overall internal policies of general
application and legal and regulatory restrictions) another Lending Office for
any Loan affected by such event; provided that such efforts are made on terms
that, in the judgment of such Lender exercised in good faith, cause such Lender
and its Lending Office(s) to suffer no material economic, tax, legal or
regulatory disadvantage, and provided further that nothing in this
Section 3.01(d) shall affect or postpone any of the Obligations of the Borrower
or the rights of such Lender pursuant to Section 3.01(a), (b) or (c). Nothing
herein contained shall interfere with the right of a Lender or Agent to arrange
its tax affairs in whatever manner it thinks fit nor oblige any Lender or Agent
to make available its tax returns or disclose any information relating to its
tax affairs (other than providing IRS forms, to the extent required by Sections
3.01(e) and (f)) or any computations in respect thereof or require any Lender or
Agent to do anything that would prejudice its ability to benefit from any other
refunds, credits, reliefs, remissions or repayments to which it may be entitled.

(e) Each Foreign Lender, if it is legally able to do so, shall deliver to the
Borrower (with a copy to the Facility Agent), prior to receipt of any payment
subject to withholding under the Code (or upon accepting an assignment of an
interest herein or upon designation of a new Lending Office), two (2) duly
signed and properly completed copies of either IRS Form W-8BEN or any successor
thereto (relating to such Foreign Lender and entitling it to an exemption from,
or reduction of, withholding tax on all payments to be made to such Foreign
Lender by the Borrower pursuant to the Financing Documents) or IRS Form W-8ECI
or any successor thereto (relating to all payments to be made to such Foreign
Lender by the Borrower pursuant to the Financing Documents) or such other
evidence satisfactory to the Borrower and the Facility Agent that such Foreign
Lender is entitled to an exemption from, or reduction of, Taxes, including any
exemption pursuant to Section 881(c) of the Code. Thereafter and from time to
time, each such Foreign Lender shall, (i) if it is legally able to do so,
promptly submit to the Borrower (with a copy to the Facility Agent) such
additional properly completed and duly signed copies of one of such forms (or
such successor forms as shall be adopted from time to time by the relevant
United States taxing authorities) as may then be required under then current
laws and regulations to avoid, or such evidence as is satisfactory to the
Borrower and the Facility Agent of any available exemption from or reduction of,
Taxes in respect of all payments to be made to such Foreign Lender by the
Borrower pursuant to the Financing Documents, and (ii) promptly notify the
Borrower and the Facility Agent of any change in circumstances which would
modify or render invalid any claimed exemption or reduction.

(f) If a Lender or successor Facility Agent is a United States person under
Section 7701(a)(30) of the Code, such person shall, at the request of the
Borrower or the Facility Agent, provide two duly signed and properly completed
copies of IRS Form W-9 (or any successor form thereto) to the Borrower (with a
copy to the Facility Agent), certifying that such person is entitled to a
complete exemption from United States backup withholding tax on payments
pursuant to the Financing Documents. Any person supplying forms pursuant to this

 

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Section 3.01(f) shall deliver to the Borrower and the Facility Agent additional
copies of the relevant forms on or before the date that such form expires, and
shall promptly notify the Borrower and Facility Agent of any change in
circumstances that would modify or render invalid any forms previously provided.

(g) If any Agent or Lender determines, in good faith and in its sole discretion,
that it has received a refund of Taxes or Other Taxes as to which it has
received additional amounts pursuant to this Section 3.01, it shall pay over
such refund to the Borrower (but only to the extent of additional amounts paid
by the Borrower under this Section 3.01 with respect to the Taxes or Other Taxes
giving rise to such refund), net of all reasonable out-of-pocket expenses of
such Agent or Lender (including any Taxes imposed with respect to such refund)
as is determined by such Agent or Lender in good faith and in its sole
discretion, and as will leave such Agent or Lender in no worse position than it
would be in if no such Taxes or Other Taxes had been imposed and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided, however, that Borrower, upon the request
of such Agent or Lender, agrees to promptly repay the amount paid over to the
Borrower (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to such Agent or Lender in the event such Agent or
Lender is required to repay such refund to such Governmental Authority.

SECTION 3.02. Illegality. If any Lender shall reasonably determine in good faith
(which determination shall, upon notice thereof to the Borrower and the Facility
Agent, be conclusive and binding on the Borrower absent manifest error) that any
Law makes it unlawful, or any central bank or other Governmental Authority or
comparable agency asserts that it is unlawful, for such Lender to make, continue
or maintain any Loan as a LIBO Rate Loan, the obligations of such Lender to
make, continue or maintain any such Loans shall, upon such determination,
forthwith be suspended until such Lender shall notify the Facility Agent that
the circumstances causing such suspension no longer exist (and the Facility
Agent will promptly so notify the Borrower). Upon receipt of notice of such
determination, the Borrower shall upon demand from such Lender (with a copy to
the Facility Agent), prepay or convert such LIBO Rate Loans of such Lender to
Alternate Base Rate Loans, either on the last day of the Interest Period
therefor, if such Lender may lawfully continue to maintain such LIBO Rate Loans
to such day, or promptly, if such Lender may not lawfully continue to maintain
such LIBO Rate Loans. Upon any such prepayment or conversion, the Borrower shall
also pay accrued interest on the amount so prepaid or converted and all amounts
due, if any, in connection with such prepayment or conversion under
Section 2.07(b). Each Lender agrees to designate a different Lending Office if
such designation will avoid the need for such notice and will not, in the good
faith judgment of such Lender, otherwise be materially disadvantageous to such
Lender.

SECTION 3.03. Inability to Determine Rates. If prior to the commencement of any
Interest Period the Facility Agent shall have determined that by reason of
circumstances affecting the Facility Agent’s relevant market, adequate means do
not exist for ascertaining the LIBO Rate, or if the Majority Lenders determine
that the LIBO Rate for any requested Interest Period with respect to a proposed
Loan does not adequately and fairly reflect the cost to such Lenders of funding
such Loan, or that Dollar deposits are not being offered to banks in the London
interbank eurodollar market for the applicable amount and the Interest Period of
such Loan, the Facility Agent will promptly so notify the Borrower. Thereafter,
the

 

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obligation of the Lenders under this Agreement to make or continue any Loans as
LIBO Rate Loans shall forthwith be suspended until the Facility Agent shall
notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist. Upon receipt of notice of such determination,
(a) the Borrower shall upon demand by the Facility Agent (with a copy to the
Lenders), prepay or convert such LIBO Rate Loans to Alternate Base Rate Loans on
the last day of the Interest Period therefor and (b) the Borrower may revoke any
pending request for a Borrowing hereunder or, failing that, will be deemed to
have converted such request into a request for a Borrowing of Alternate Base
Rate Loans in the amount specified therein.

SECTION 3.04. Increased Cost and Reduced Return; Capital Adequacy; Reserves on
LIBO Rate Loans.

(a) If any Lender reasonably determines in good faith that as a result of any
Change in Law, or such Lender’s compliance therewith, there shall be any
increase in the cost to such Lender of agreeing to make or making, funding or
maintaining the Loans, or a reduction in the amount received or receivable by
such Lender in connection with the foregoing (excluding for purposes of this
Section 3.04(a) any such increased costs or reduction in amount resulting from
(i) Taxes, Excluded Taxes or Other Taxes (as to which Section 3.01 shall
govern), (ii) changes in the basis of taxation of overall net income or overall
gross income (including branch profits), and franchise (and similar) taxes
imposed in lieu of net income taxes, by the United States or any foreign
jurisdiction or any political subdivision of either thereof under the Laws of
which such Lender is organized or maintains a Lending Office and (iii) reserve
requirements contemplated by Section 3.04(c) then from time to time within
sixty (60) days after demand by such Lender setting forth in reasonable detail
such increased costs (with a copy of such demand to the Facility Agent given in
accordance with Section 2.07(b)), the Borrower shall pay to such Lender such
additional amounts as will compensate such Lender for such increased cost or
reduction.

(b) If any Lender reasonably determines in good faith that a Change in Law
regarding capital adequacy or any change therein or in the interpretation
thereof, or compliance by such Lender (or its Lending Office) therewith, has the
effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of such Lender’s
obligations hereunder (taking into consideration its policies with respect to
capital adequacy and such Lender’s desired return on capital), then from time to
time upon demand of such Lender setting forth in reasonable detail the charge
and the calculation of such reduced rate of return (with a copy of such demand
to the Facility Agent given in accordance with Section 2.07(b)), the Borrower
shall pay to such Lender such additional amounts as will compensate such Lender
for such reduction within sixty (60) days after receipt of such demand.

(c) The Borrower shall pay to each Lender, as long as such Lender shall be
required to comply with any reserve ratio requirement or analogous requirement
of any central banking or financial regulatory authority imposed in respect of
the maintenance of the Commitments or the Loans, such additional costs
(expressed as a percentage per annum and rounded upwards, if necessary, to the
nearest five decimal places) equal to the actual costs allocated to such
Commitment or Loan by such Lender (as reasonably determined by such Lender in
good faith) which in each case shall be due and payable on each date on which
interest is payable on such Loan; provided that the Borrower shall have received
at least sixty (60) days’ prior notice (with a copy to the Facility Agent) of
such additional interest or cost from such Lender. If a Lender fails

 

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to give notice sixty (60) days prior to the relevant payment date, such
additional interest or cost shall be due and payable sixty (60) days from
receipt of such notice.

(d) Failure or delay on the part of any Lender to demand compensation pursuant
to this Section 3.04 shall not constitute a waiver of such Lender’s right to
demand such compensation; provided that the Borrower shall not be required to
compensate a Lender pursuant to Section 3.04(a) or (b) for any such increased
cost or reduction incurred more than one hundred eighty (180) days prior to the
date that such Lender demands, or notifies the Borrower of its intention to
demand, compensation therefor; provided, further that, if the circumstance
giving rise to such increased cost or reduction is retroactive, then such
180-day period referred to above shall be extended to include the period of
retroactive effect thereof.

(e) If any Lender requests compensation under this Section 3.04, then such
Lender will use its commercially reasonable efforts to minimize any increased
cost or other compensation payable by the Borrower including, if requested by
the Borrower, designating another Lending Office for any Loan affected by such
event; provided that such efforts are made on terms that, in the reasonable
judgment of such Lender, cause such Lender and its Lending Office(s) to suffer
no material economic, legal or regulatory disadvantage, and; provided, further
that nothing in this Section 3.04(e) shall affect or postpone any of the
Obligations of any Borrower or the rights of such Lender pursuant to
Section 3.04(a), (b) or (d).

SECTION 3.05. Matters Applicable to All Requests for Compensation. Any Agent or
Lender claiming compensation under this Article III shall deliver a certificate,
prepared by the such Agent or Lender (as applicable) in good faith, to the
Borrower setting forth the additional amount or amounts to be paid to it
hereunder which shall be conclusive in the absence of manifest error. In
determining such amount, such Agent or Lender may use any reasonable averaging
and attribution methods.

SECTION 3.06. Replacement of Lenders Under Certain Circumstances

(a) If at any time (i) the Borrower becomes obligated to pay additional amounts
or indemnity payments described in Section 3.01 or Section 3.04 as a result of
any condition described in such Sections or any Lender ceases to make LIBO Rate
Loans as a result of any condition described in Section 3.02 or Section 3.03,
(ii) any Lender becomes a Defaulting Lender or (iii) any Lender becomes a
“Non-Consenting Lender” (as defined below in this Section 3.06), then the
Borrower may, on ten (10) Business Days’ prior written notice to the Facility
Agent and such Lender, replace such Lender by causing such Lender to (and such
Lender shall be obligated to) assign pursuant to Section 10.07(b) (with the
assignment fee to be paid by the Borrower in such instance) all of its rights
and obligations under this Agreement to one or more Permitted Replacement
Lenders; provided that neither the Facility Agent nor any Lender shall have any
obligation to the Borrower to find a replacement Lender or other such Person
and; provided, further that in the case of any such assignment resulting from a
claim for compensation under Section 3.04 or payments required to be made
pursuant to Section 3.01, such assignment will result in a reduction in such
compensation or payments.

(b) Any Lender being replaced pursuant to Section 3.06(a) above shall
(i) execute and deliver an Assignment and Assumption with respect to such
Lender’s Commitment and

 

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outstanding Loans and (ii) deliver any Notes evidencing such Loans to the
Borrower or Facility Agent. Pursuant to such Assignment and Assumption, (A) the
Assignee Lender shall acquire all or a portion, as the case may be, of the
assigning Lender’s Commitment and outstanding Loans, (B) all obligations of the
Borrower owing to the assigning Lender relating to the Loans so assigned shall
be paid in full by the Assignee Lender to such assigning Lender concurrently
with such Assignment and Assumption and (C) upon such payment and, if so
requested by the Assignee Lender, delivery to the Assignee Lender of the
appropriate Note or Notes executed by the Borrower, the Assignee Lender shall
become a Lender hereunder and the assigning Lender shall cease to constitute a
Lender hereunder with respect to such assigned Loans and Commitments, except
with respect to indemnification provisions under this Agreement, which shall
survive as to such assigning Lender.

(c) In the event that (i) the Borrower or the Facility Agent has requested the
Lenders to consent to a waiver of the obligation of the Borrower to prepay the
Loans and terminate the Commitments pursuant to Section 2.03(b)(i)(A), (B), (D),
(E), (F) or (G) and (ii) the Majority Lenders have agreed to such waiver, then
any Lender who does not agree to such waiver shall be deemed a “Non-Consenting
Lender”.

SECTION 3.07. Survival. All of the Borrowers’ obligations under this Article III
shall survive termination of the Commitments and repayment of all other
Obligations hereunder.

ARTICLE IV

CONDITIONS PRECEDENT

SECTION 4.01. Effective Date. The occurrence of the Effective Date and the
effectiveness of this Agreement are subject to the receipt by the Facility Agent
of each of the agreements and other documents, and the conditions precedent set
forth below, each of which shall be (x) (other than the documents referred to in
clause (c) below, which shall be deemed to be satisfactory) in form and
substance reasonably satisfactory to the Facility Agent and (y) if applicable,
in full force and effect (unless, in each case, waived by each Lender):

(a) this Agreement duly executed and delivered by the parties hereto, with all
Exhibits attached hereto;

(b) the following documents, each certified as indicated below:

(i) a copy of a certificate as to the existence/authorization of each of the
Borrower and the Parent from the Secretary of State of the Borrower’s and the
Parent’s respective state of organization dated as of a recent date;

(ii) a copy of the articles of incorporation or certificate of formation (or
such other constitutive documents as the case may be) of each of the Borrower
and the Parent, together with any amendments thereto, certified by the Secretary
of State of the Borrower’s and the Parent’s respective state of organization
dated as of a recent date; and

 

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(iii) a certificate of each of the Borrower and the Parent, executed by an
Authorized Officer of such Person certifying:

(A) that attached to such certificate is a true and complete copy of the
Organizational Documents of the Borrower and the Parent, as applicable, in each
case as amended and in effect on the date of such certificate;

(B) that attached to such certificate is a true and complete copy of resolutions
duly adopted by the authorized governing body of the Borrower and the Parent, as
applicable, authorizing the execution, delivery and performance of the
Transaction Documents to which it is a party and that such resolutions have not
been modified, rescinded or amended and are in full force and effect; and

(C) as to the incumbency and specimen signature of each officer, member or
partner (as applicable) of the Borrower and the Parent, as applicable, executing
the Transaction Documents to which the Borrower and the Parent, as applicable,
is a party and each other document to be delivered by the Borrower or the
Parent, as applicable, from time to time pursuant to the terms thereof (and the
Facility Agent and each Lender may conclusively rely on such incumbency
certification until it receives notice in writing from the Borrower or the
Parent, as applicable).

(c) a certified copy of the Borrower’s interest hedging protocol, which shall be
consistent with the terms set forth on Schedule 6.11(b) and otherwise in form
and substance reasonably satisfactory to the Facility Agent;

(d) a certified copy of the Merger Agreement and any material ancillary document
related thereto, each duly executed and delivered by the intended parties
thereto;

(e) receipt of the ratings evaluation service letter from S&P dated as of
October 22, 2007 and the ratings assessment service letter from Moody’s dated as
of October 19, 2007, each of which the Facility Agent acknowledges has been
received prior to the Effective Date;

(f) delivery of draft opinions from (x) Latham & Watkins LLP, New York counsel
to the Borrower and the Parent, substantially in the form of Exhibit E-1,
(y) Perkins Coie LLP, Washington State corporate counsel to the Borrower,
substantially in the form of Exhibit E-2 and (z) Kirkpatrick & Lockhart Preston
Gates Ellis LLP, Washington State corporate and regulatory counsel to the
Borrower, substantially in the form of Exhibit E-3; and

(g) payment of all fees and expenses due as of the Effective Date as the
Borrower shall have agreed to pay to any Lender, the Joint Mandated Lead
Arrangers or the Agents in connection herewith, including Attorney Costs of the
Agents and the Joint Mandated Lead Arrangers in connection with the negotiation,
preparation, execution and

 

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delivery of this Agreement, the other Financing Documents and the transactions
contemplated hereby and thereby

For the avoidance of doubt, the occurrence of the Effective Date and the
effectiveness of this Agreement shall not be subject to the receipt by the
Facility Agent of the executed Operating Company Financing Documents or the
effectiveness of the Operating Company Facilities.

SECTION 4.02. Financial Closing Date. The obligation of each Lender to make its
Commitments available to the Borrower and make Loans on the Financial Closing
Date hereunder is subject to the receipt by the Facility Agent of each of the
agreements and other documents, and the satisfaction of the conditions precedent
set forth below, in each case on or prior to the Termination Date, each of which
shall be (x) in form and substance reasonably satisfactory to the Facility
Agent, (y) if applicable, in full force and effect and (z) in the case of any
certification, true and correct (unless, in each case, waived by each Lender):

(a)(i) the Effective Date shall have occurred and (ii) delivery of each of the
Financing Documents (including each Interest Hedging Agreement required pursuant
to Section 6.11) duly executed and delivered by the parties thereto (it being
understood and agreed that if on the Financial Closing Date none of the
Shareholder Funding shall be made as loans or indebtedness to the Parent, the
execution and delivery of the Parent Guarantee or the Shareholder Loan
Subordination Agreement shall not be required and shall not be a condition to
the occurrence of the Financial Closing Date);

(b) a copy of the articles of incorporation or certificate of formation (or such
other constitutive documents as the case may be) of the Company, together with
any amendments thereto, certified by the Secretary of State of the Company’s
state of organization dated as of a recent date;

(c) the following documents, each certified as indicated below:

(i) a copy of a certificate as to the existence/authorization of the Company
from the Secretary of State of the Company’s state of organization dated as of a
recent date; and

(ii)(x) a certificate from the Company, executed by an Authorized Officer
certifying:

(A) that attached to such certificate is a true and complete copy of the
Organizational Documents of the Company, as amended and in effect on the date of
such certificate,

(B) that attached to such certificate is a true and complete copy of resolutions
duly adopted by the authorized governing body of the Company, authorizing the
execution, delivery and performance of the Merger Agreement and all other
documents, instruments and certificates delivered in connection with the Merger
Agreement and that such resolutions have not been modified, rescinded or amended
and are in full force and effect, and

 

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(C) that attached to such certificate is a true and complete copy of resolutions
duly adopted by the authorized governing body of the Company, authorizing the
execution, delivery and performance of the Assumption Agreement and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, and

(D) as to the incumbency and specimen signature of each officer, member or
partner (as applicable) of the Company executing the Assumption Agreement and
each other document to be delivered by the Company from time to time pursuant to
the terms thereof (and the Facility Agent and each Lender may conclusively rely
on such incumbency certification until it receives notice in writing from the
Company); and

(y) if on the Financial Closing Date the Parent is not Puget Intermediate
Holdings Inc., a Washington corporation, then the Parent shall be a corporation
incorporated under the laws of a State of the United States and the following
documents shall be delivered, each certified as indicated (A) a copy of a
certificate as to the existence/authorization of the Parent from the Secretary
of State of the Parent’s state of organization dated as of a recent date and
(B) a certificate from the Parent, executed by an Authorized Officer certifying
that attached to such certificate is a true and complete copy of (1) the
Organizational Documents of the Parent, as amended and in effect on the date of
such certificate, (2) resolutions duly adopted by the authorized governing body
of the Parent, authorizing the execution, delivery and performance of the
Transaction Documents to which the Parent is a party and that such resolutions
have not been modified, rescinded or amended and are in full force and effect
and (3) as to the incumbency and specimen signature of each officer, member or
partner (as applicable) of the Parent executing the Transaction Documents to
which the Parent is a party and each other document to be delivered by the
Parent from time to time pursuant to the terms thereof (and the Facility Agent
and each Lender may conclusively rely on such incumbency certification until it
receives notice in writing from the Parent);

(d) a certificate of an Authorized Officer of the Company (i) attaching copies
of all material shareholder approvals and Regulatory Approvals required in
respect of (x) the Merger (to the extent required under the Merger Agreement),
(y) the borrowing of the Facilities and (z) the granting of a Lien on the
Collateral and (ii) to the extent required to be delivered under the Merger
Agreement, certifying that PSE has all requisite shareholder approvals and
Regulatory Approvals to continue to carry on its business operations, but with
respect to this clause (ii), only to the extent that the lack of any such
shareholder or Regulatory Approval, individually or in the aggregate, may
reasonably be expected to result in an Initial Material Adverse Effect;

(e) delivery of executed opinions from (x) Latham & Watkins LLP, New York
counsel to the Borrower and the Parent, substantially in the form of
Exhibit E-1, (y) Perkins Coie LLP, Washington State corporate counsel to the
Borrower, substantially in

 

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the form of Exhibit E-2, and (z) Kirkpatrick & Lockhart Preston Gates Ellis LLP,
Washington State corporate and regulatory counsel to the Borrower, substantially
in the form of Exhibit E-3, in each case with such amendments reasonably
satisfactory to the Facility Agent; provided, however, if, on the Financial
Closing Date, the Parent is not Puget Intermediate Holdings, Inc., the Facility
Agent shall receive such opinions relating to the Parent set forth on Exhibits
E-1 and E-3 (as applicable) from counsel (if different from those counsels
referred to in this paragraph (e)) reasonably acceptable to the Facility Agent;

(f) a written instruction executed by an Authorized Officer of the Borrower
directing the Facility Agent to pay from the first utilization of the Term Loan
Facility all fees, costs and expenses due and payable by the Borrower under the
Financing Documents, the Fee Letters and any other fees and expenses as the
Borrower shall have agreed or shall otherwise be required to pay to any Lender,
Joint Mandated Lead Arranger or Agent in connection herewith on or prior to the
first utilization of the Term Loan Facility, including, without limitation,
Attorney Costs of the Agents and the Joint Mandated Lead Arrangers, in
connection with the negotiation, preparation, execution and delivery of this
Agreement, the other Financing Documents and the transactions contemplated
hereby and thereby;

(g) an updated Business Plan and a budget (which shall include updated
projections and a projected Capital Expenditure schedule) for the period from
the Effective Date through the end of the current fiscal year and certified as
provided in Section 6.01(c) and (d);

(h) evidence that the Borrower has received ratings on the Operating Company
Facilities and the Facilities, in each case, from S&P and Moody’s;

(i) evidence that the Shareholder Funding has been funded in full in cash;

(j) certificates of insurance evidencing that all insurance set forth in
Schedule 6.09 hereto has been obtained and is in effect together with a report
of Marsh Private Equity and M&A Services Group, dated as of a recent date, in
form and substance reasonably satisfactory to the Facility Agent;

(k) certification from an Authorized Officer of the Borrower that the Merger has
been or will be simultaneously completed in accordance with the Merger Agreement
without amendment, modification or waiver of any material provision thereof in a
manner materially adverse to the Lenders in any material respect without the
prior consent of the Facility Agent (acting on the instructions of the Majority
Lenders) (which consent shall not be unreasonably withheld or delayed);

(l) documentation and other information required by bank regulatory authorities
under applicable “know your customer” and anti-money laundering rules and
regulations, including, without limitation, the USA PATRIOT Act, shall have been
received by the Facility Agent and the Lenders and shall include, without
limitation, evidence consisting of the following information: (i) the Borrower’s
and the Company’s

 

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full legal name, (ii) the Borrower’s and the Company’s address and mailing
address, (iii) the Borrower’s and the Company’s W-9 forms including its tax
identification number, (iv) the Borrower’s and the Company’s articles of
incorporation, (v) a list of directors of the Borrower and the Company or list
of such persons controlling the Borrower or the Company, as applicable and
(vi) an executed resolution or other such documentation stating who is
authorized to open an account for the Borrower or the Company, as applicable, in
each case in form and substance reasonably satisfactory to the Facility Agent,
and such other similar information relating to the Borrower, the Company or the
Borrower Group as may reasonably be requested by the Facility Agent;

(m) delivery of (i) the consolidated audited statements of income, stockholder’s
equity and cash flows of the Company and its consolidated Subsidiaries for the
most recent fiscal year of the Company ending at least 90 days prior to the
Financial Closing Date; and (ii) unaudited consolidated balance sheets and
related statements of income, stockholders’ equity and cash flows of the Company
and its consolidated Subsidiaries for each fiscal quarter and portion of the
fiscal year ended after the delivery of the financial statements delivered
pursuant to the foregoing subclause (i) and at least 45 days prior to the
Financial Closing Date, which financial statements shall be prepared in
accordance with GAAP;

(n) a certificate from the CFO (or, in the case of clause (i)(y), an Authorized
Officer of the Parent) substantially in the form of Exhibit G, attesting to
(i) the Solvency (as evidenced by the updated Financial Model referred to in
Section 4.02(q)) of (x) the Borrower and its Subsidiaries (taken as a whole) and
(y) the Parent and its Subsidiaries (taken as a whole), in each case, after
giving effect to the transactions contemplated by the Transaction Documents,
(ii) the Group FFO Coverage Ratio being at least 1.30 to 1.00, calculated on the
basis of the financial projections delivered pursuant to Section 4.02(q) and
after giving effect to the transactions contemplated by the Transaction
Documents, for the period of twelve (12) months after the Financial Closing
Date, (iii) the Group FFO Leverage Ratio is at least 7.125%, for the period of
12 months occurring after the Financial Closing Date, calculated on the basis of
the financial projections delivered pursuant to Section 4.02(q) after giving
effect to the transactions contemplated by the Financing Documents and (iv) no
payment default by any Borrower Group Member in respect of principal, interest
or other amounts owing in respect of Indebtedness other than (x) Indebtedness
being repaid with the proceeds of Loans made on the Financial Closing Date and
(y) if such payment default is in respect of any Indebtedness having an
aggregate principal amount of less than $50,000,000, (1) such failure to pay is
caused by an error or omission of an administrative or operational nature;
(2) funds were available to such party to enable it to make the relevant payment
when due and there were no restrictions or prohibitions on the use of such funds
to make such payments at such time; and (3) such party confirms in writing to
the Facility Agent that such payment will be made within one (1) Business Day;

(o) evidence that the Borrower shall have taken all necessary actions such that,
after giving effect to the transactions contemplated hereby, all existing
Indebtedness of the Borrower and its Subsidiaries (other than Indebtedness
permitted by Section 7.03) shall have been repaid and any Liens associated
therewith shall have been released (other

 

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than Liens permitted by Section 7.01) and the Borrower and its Subsidiaries
shall have outstanding no Indebtedness other than Indebtedness permitted by
Section 7.03.

(p) each of the Security Agreement, the Pledge Agreement and the Liens created
thereunder shall be in full force and effect and perfected with the intended
priority, and all filings, registrations, recordings and other actions that are
necessary in order to establish and perfect the Lenders’ first priority
perfected Lien on the Collateral shall have been duly made or taken or delivered
in recordable form to the Facility Agent;

(q)(i) a certified copy of the updated audited Financial Model showing financial
projections up to the Final Maturity Date, reflecting the Borrower’s ability to
pay debt service up to the Final Maturity Date, accompanied by a certificate of
the CFO certifying that such financial projections were prepared in good faith
based upon reasonable assumptions, together with a reasonably detailed summary
of the material assumptions with respect thereto (but no representation shall be
made as to the actual attainability of such projections) and (ii) a certified
copy of a sources and uses of funds statement relating to the Merger, which
shall be reasonably consistent with the expected sources and uses as of the
Signing Date (subject to adjustment for Transaction Costs);

(r) delivery of an Assumption Agreement duly executed and delivered by the
Company, pursuant to which the Company shall assume all of the rights and
obligations of the Merger Sub under each of the Financing Documents to which the
Merger Sub is a party;

(s) evidence of the establishment of the Lock-Up Account;

(t) payment of all fees due as of the Financial Closing Date as the Borrower
shall have agreed to pay to any Lender or the Agents in connection herewith,
including the fees and expenses of New York counsel to the Facility Agent, in
connection with the negotiation, preparation, execution and delivery of this
Agreement, the other Financing Documents and the transactions contemplated
hereby and thereby;

(u) evidence that the Borrower shall be in compliance with Section 7.08(c);

(v) the Operating Company Credit Agreement duly executed and delivered by the
parties thereto and each Operating Company Financing Document shall be in full
force and effect and all conditions to the availability of the Operating Company
Facilities shall have been satisfied, except for those which by their terms are
not required to be satisfied until a later date and the satisfaction of
conditions to any initial borrowings thereunder;

(w) evidence that no Equity Investor owns, directly or indirectly, more than 50%
of Puget Holdings or the Parent and that Macquarie Group Limited does not own,
directly or indirectly, more than 50% of any other Equity Investor (other than
Padua MG Holdings Inc.); and

(x) there shall have been no activities conducted by the Borrower prior to the
Financial Closing Date other than the exercise of its rights and the performance
of its

 

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obligations under the Merger Agreement and the Financing Documents and
activities incidental thereto.

SECTION 4.03. Conditions to All Borrowings. The obligation of each Lender to
honor any Borrowing Request is subject to the following additional conditions
precedent:

(a) except with respect to the Term Loan to be made on the Financial Closing
Date, the Financial Closing Date shall have occurred;

(b) except with respect to the Term Loan to be made on the Financial Closing
Date, no Default or Event of Default has occurred and is continuing, or would
result from such proposed Borrowing or from the application of the proceeds
therefrom;

(c)(i) in the case of the Borrowing Request for the Term Loan to be made on the
Financial Closing Date, (A) the representations and warranties of the Company
and PSE contained in the Merger Agreement that are material to the interests of
the Lenders, but only to the extent that Puget Holdings has the right to
terminate its obligations under the Merger Agreement as a result of a breach of
any such Company Representations (determined without regard to whether any
notice is required to be delivered by Puget Holdings) (the “Company
Representations”) and (B) the representations and warranties of the Merger Sub
in Sections 5.01, 5.02, 5.03, 5.04, 5.07(c)(i), 5.17 and 5.23 (the “Specified
Representations”) shall be true and correct on and as of the date of such
Borrowing (or to the extent that such representations and warranties
specifically refer to an earlier date, as of such earlier date); or (ii) in the
case of each other Borrowing Request, the representations and warranties of the
Borrower contained in Article V and each other Financing Document shall be true
and correct in all material respects (provided that any representation and
warranty that is qualified as to “materiality”, “Material Adverse Effect” or
similar language shall be true and correct (after giving effect to any
qualification therein) in all respects) on and as of the date of such Borrowing
(or to the extent that such representations and warranties specifically refer to
an earlier date, as of such earlier date);

(d) in the case of a Borrowing Request for Capital Expenditure Loans, to the
extent the proceeds of such Capital Expenditure Loan are to be applied toward
Additional CapEx:

(A) Total Indebtedness to Total Capitalization of the Borrower, after giving
effect to any such Capital Expenditure Loan, shall not exceed 70%;

(B) if the proceeds of such Loan are to be applied towards Additional CapEx
relating to construction, the Borrower shall have delivered to the Facility
Agent (for distribution to the Lenders) (i) a budget and schedule for such
construction together with a certificate from an Authorized Officer of the
Borrower and a nationally recognized independent engineer certifying that, in
their opinion, such budget and schedule are reasonable and (ii) a certificate
from

 

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an Authorized Officer of the Borrower certifying that it is within 17.5% of the
aggregate original, certified construction budget; and

(C) the Borrower shall have delivered to the Facility Agent a certificate from
the Borrower certifying that it has received all material permits and licenses
(including those relating to the regulatory status) necessary to construct,
purchase and operate (as applicable) the asset to which the Additional CapEx is
to be applied, except for such permits and licenses as are customarily obtained
for the applicable undertaking at a later date or not obtainable prior to the
date of the certificate in the ordinary course of business;

(e) in the case of a Borrowing Request for Capital Expenditure Loans, if a
Lock-Up Event has occurred and is continuing and/or during the occurrence of an
Excess Cash Sweep Event (i) the proceeds of such Loans shall be applied toward
Base Capital Expenditures, (ii) there is no Distributable Cash Balance which has
not been prepaid pursuant to Section 2.03(b)(i)(G) and (iii) the Lock-Up Account
has a zero balance; and

(f) the Facility Agent shall have received a Borrowing Request in accordance
with the requirements of Section 2.02(a) or Section 2.11(d), as applicable.

Each Borrowing Request submitted by the Borrower shall be deemed to be a
representation and warranty that the conditions specified in Section 4.03(b),
(c), (d) and (e), as applicable, have been satisfied on and as of the date of
the applicable Borrowing.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

The Borrower (i) hereby makes to the Agents and the Lenders the Company
Representations and the Specified Representations as of the date of the initial
Borrowing of the Term Loans (as to itself and each of its Subsidiaries (as
applicable)) or, in each case, to the extent that such representations and
warranties specifically refer to an earlier date, as of such earlier date and
(ii) represents and warrants the following matters to the Agents and the Lenders
as to itself and each of its Subsidiaries (as applicable), as of the Financial
Closing Date and as of the date of each Borrowing or to the extent that such
representations and warranties specifically refer to an earlier date, as of such
earlier date.

SECTION 5.01. 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 each Loan Party, execute, deliver and perform its obligations under the
Transaction 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 business as now conducted requires
such qualification, (d) is in compliance in all material

 

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

SECTION 5.03. Authorization; No Contravention. The execution, delivery and
performance by each Loan Party of the Merger Agreement and each other
Transaction Document and the Merger and the consummation of the transactions
contemplated hereby and thereby are within such Loan Party’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 such Loan Party’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 7.01), 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 5.04. Governmental Authorization; Other Consents. Other than as
specified in Schedule 5.04, 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 or any other Loan Party of this Agreement or any other Financing
Document to which it is a party and the consummation of the transactions
contemplated hereby and thereby, (b) from and after the Financial Closing Date,
for the Merger and the consummation of the other transactions contemplated by
the Merger Agreement, or (c) the ability of the Operating Companies to operate
their businesses as currently operated, except for (i) 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 and (ii) in the case of clause (c) only, those Regulatory
Approvals and other approvals, consents, exemptions, authorizations or other
actions, notices or filings, the failure of which to obtain or make could not
reasonably be expected to result in, with respect to the Financial Closing Date
only, an Initial Material Adverse Effect and thereafter, a Material Adverse
Effect.

SECTION 5.05. 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

 

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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 5.06. 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.

SECTION 5.07. Financial Statements; No Material Adverse Effect; Indebtedness.

(a) The financial statements furnished pursuant to Section 4.02(m) fairly
present in all material respects the financial condition of the Company 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, there
has been (i) 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) 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 Transaction
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 Financial Closing 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 Financial Closing Date until the Final Maturity Date, copies of which
have been furnished to the Facility Agent prior to the Financial Closing 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, 2006, 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, (i) on the Financial Closing Date, an Initial Material
Adverse Effect or, (ii) after the Financial Closing Date, a Material Adverse
Effect.

 

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(d) No Borrower Group Member has any Indebtedness, other than Indebtedness
permitted pursuant to Section 7.03.

SECTION 5.08. 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 5.09. 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 7.01 and
(ii) each Borrower Group Member has good and defensible title in fee simple to,
or valid leasehold 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 7.01, 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 7.01.

SECTION 5.10. No Other Business. Prior to the Financial Closing Date, the Merger
Sub has not engaged in any business and has not incurred any liabilities other
than (a) the exercise of its rights and performance of its obligations under the
Merger Agreement and (b) as otherwise not prohibited under the Financing
Documents. From and after the Financial Closing Date, 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.

SECTION 5.11. Insurance. All insurance required to be obtained by the Borrower
Group Members pursuant to Section 6.09 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 5.12. 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 any Agent or any Lender or
Interest Rate Hedge Bank in connection with the transactions contemplated hereby
and the negotiation of this Agreement or delivered hereunder or any other
Transaction Document (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

 

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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 5.13. Subsidiaries; Equity Interests. As of the Financial Closing Date,
the Borrower has no other Subsidiaries other than those listed in
Schedule 5.13A, and Immaterial Subsidiaries created after the Effective Date.
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 7.01. As of the
Financial Closing Date, Schedule 5.13B (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 other than the Operating
Company Preferred Shares outstanding on the Effective Date.

SECTION 5.14. No Dividend Restrictions. Except as set forth in Schedule 5.14 or
as permitted by this Agreement, there are no contractual 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 5.15. 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 described in the Merger Agreement or
as set forth in Schedule 5.15, or which individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.16. Solvency. Prior to and after giving effect to the transactions
contemplated by the Transaction Documents, the Borrower, on a consolidated basis
with its Subsidiaries, is Solvent.

SECTION 5.17. 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.

 

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(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 Financial Closing Date, the Company 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
Company 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 Financial Closing Date, Company 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 5.18. 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 Pension
Plan; (ii) no Pension Plan has an “accumulated funding deficiency” (as defined
in Section 412 of the Code), whether or not waived; (iii) 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 (iv) 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 (iv) of this Section 5.18(b), as
could not reasonably be expected, individually or in the aggregate, to result in
a Material Adverse Effect.

SECTION 5.19. Environmental Compliance.

(a) Except as specified in Schedule 5.19, 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

 

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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 5.19, 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.

(c) Except as specified in Schedule 5.19, 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 5.19, 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 5.19, 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 5.20. 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 5.21. Affiliate Transactions.

(a) Except as specified on Schedule 5.21 or permitted by Section 7.09, no
Borrower Group Member has, directly or indirectly, entered into any transaction
since the Signing Date or that is in effect on the Signing Date and that is
otherwise permitted hereunder with or for the benefit of any Affiliate.

SECTION 5.22. The Merger. The Borrower has heretofore delivered to the Facility
Agent a true and complete copy of the Merger Agreement and the Merger Agreement
has been duly executed and delivered by each party thereto and is in full force
and effect.

SECTION 5.23. 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

 

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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 (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. The Loan Parties are the
legal and beneficial owners of the Collateral free and clear of any Lien, except
for Liens permitted under Section 7.01.

ARTICLE VI

AFFIRMATIVE COVENANTS

From and after the Effective Date (in the case of covenants applying to the
Borrower and only with respect to the covenants set forth in Sections 6.01(e),
(f) and (g) and Sections 6.03, 6.05, 6.06, 6.11(b), 6.13, 6.14, 6.15, 6.16 and
6.17, as such covenants pertain solely to the Merger Sub and the Financing
Documents) and the Financial Closing Date (in the case of covenants applying to
the Borrower Group Members) and in each case for so long as any Lender shall
have any Commitment hereunder or any Loan or other Obligation hereunder or under
any other Financing Document which is accrued and payable shall remain unpaid or
unsatisfied, the Borrower shall, and shall (except in the case of the covenants
set forth in Section 6.01, Section 6.02 and Section 6.03) cause each of the
Operating Companies to:

SECTION 6.01. Financial Statements. Deliver to the Facility 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
Securities and Exchange Commission, from and after the Financial Closing 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 Facility 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 and (ii) an “income statement variance
report” showing the actual experience for the current fiscal year (or portion
thereof) against the income statement projections for the current fiscal year
(or portion thereof);

(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 Securities and Exchange
Commission, from and after the Financial Closing Date, an unaudited consolidated
balance sheet of the Borrower and

 

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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 the CFO 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;

(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
Financial Closing Date, 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”), which Projections shall in each case be
accompanied by a certificate of the CFO stating that 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);

(d) simultaneously with the Projections delivered pursuant to Section 6.01(c), 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 schedule of Capital Expenditures and Business
Plan shall be accompanied by a certificate of the CFO stating that 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;

(e) 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 Securities and Exchange Commission, or
any Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange;

(f) such other information regarding the Borrower Group Members as the Facility
Agent or any Lender may reasonably request for the Facility 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

(g) such other information regarding the Borrower and its Subsidiaries as the
Facility Agent may reasonably request and which is reasonably available to the
Borrower and its Subsidiaries.

 

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SECTION 6.02. Compliance Certificate. Deliver to the Facility Agent (for prompt
further distribution to the Collateral Agent), if applicable, and each Lender,
(a) concurrently with any delivery of financial statements under Section 6.01(a)
or Section 6.01(b), a certificate of the CFO (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 7.14, 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 4.02(m) or, if
more recent, Section 6.01(a), (and except as described in the financial
statements provided pursuant to Section 4.02(m), or Section 6.01(a) or
Section 6.01(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 6.01(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 7.14 (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).

SECTION 6.03. Notices. Promptly 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 Facility 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 or proceeding with respect to
the Borrower or any of its Subsidiaries (or prior to the Financial Closing Date,
the Company 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 (or, prior
to the Financial Closing Date, the Company or any of its Subsidiaries); provided
that it is the present intention on the Effective Date that 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; and

(e) any Default or Event of Default.

 

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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 6.03(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 6.04. Remedial Plan; Lock-Up Event.

(a) Remedial Plan. In the event that (x) the Group FFO Coverage Ratio with
respect to a Quarter End Date occurring at least six (6) months following the
Financial Closing Date at the end of any Test Period is less than 1.40 to 1.00
or (y) a Cure Right shall have been exercised (each a “Remedial Plan Event”),
the Borrower shall prepare and implement a remedial plan (a “Remedial Plan”) in
the manner set forth below:

(1) the Borrower shall, within thirty (30) days of a Remedial Plan Event,
deliver to the Lenders a draft Remedial Plan, certified by the CFO, setting
forth, in reasonable detail, the reasons for the Remedial Plan Event, the action
taken or proposed to be taken by the Borrower in order to achieve a Group FFO
Coverage Ratio equal to or greater than 2.05 to 1.00 for following Test Periods,
and such other information with respect thereto as any Lender may reasonably
request;

(2) following receipt of the draft Remedial Plan, the Borrower and the Facility
Agent (acting on the instructions of the Majority Lenders) shall consult in good
faith to review the draft Remedial Plan in order to produce a Remedial Plan
agreed by both the Borrower and the Facility Agent;

(3) if within thirty (30) days of receipt of the draft Remedial Plan pursuant to
clause (2) above, no agreement has been reached between the Borrower and the
Facility Agent, the Facility Agent shall be entitled to commission an
independent review (an “Independent Review”) to be undertaken at the Borrower’s
sole cost and expense. The Independent Review shall examine the causes of the
Remedial Plan Event and recommend within fifteen (15) days of being commissioned
appropriate measures to remedy the Remedial Plan Event having regard to the need
for long-term stability for the Borrower Group’s business and shall include full
consultation with the Borrower. The Borrower will cooperate with the person
appointed to prepare the Independent Review, including providing such reasonable
access to the books, records and personnel of the Borrower Group Members as may
be required for these purposes; and

(4) the Borrower shall within fifteen (15) days of receipt of the Independent
Review produce a new draft Remedial Plan reflecting the proposals of the
Independent Review. Upon receipt of the new draft Remedial Plan, it shall become
the final Remedial Plan and shall be implemented by the Borrower.

(b) Lock-Up Event. Subject to Section 2.03(b)(ii), at any time that a Lock-Up
Event has occurred, until such time as the Borrower is again permitted to make
Restricted Payments in accordance with the terms of Section 7.05(c), all amounts
on deposit in the Lock-Up Account shall be applied in accordance with the terms
of Section 7.05(d) and the Security Agreement.

 

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(c) Distributable Cash Certificate. Upon the occurrence and during the
continuance of a Lock-Up Event or Excess Cash Sweep Event, the Borrower shall
deliver to the Facility Agent on each Calculation Date a certificate of the CFO
specifying and certifying the amount of Distributable Cash as of such date.

SECTION 6.05. Compliance with Laws.

(a) Subject to Section 6.07, comply in all material respects with all applicable
Laws, including, without limitation, ERISA and the Code and shall from time to
time obtain and renew, and shall comply in all material respects with, each
material Regulatory Approval as is or in the future shall be necessary for the
operation of its business under applicable Laws (except any such applicable Laws
and Regulatory Approvals the failure to obtain or the non-compliance with which
could not reasonably be expected to result in a Material Adverse Effect).

(b) No Borrower Group Member shall petition, request or take any legal or
administrative action that seeks any amendment, supplement or modification of
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
Operating Company or upon publication furnish to the Facility Agent a copy of
each material amendment, supplement or modification to any material Regulatory
Approval other than notices given by a Borrower Group Member in the ordinary
course of business. In the case of Regulatory Approvals required in respect of
(a) the acquisition under the Merger Agreement, (b) the borrowing of the
Facilities, or (c) the granting of collateral, said copies shall be certified by
an Authorized Officer of the Borrower.

(c) To the extent permitted by applicable Laws, the Borrower shall and shall
cause each Operating Company to issue such notices of transfer and shall take
such other actions as the Facility Agent, acting for the benefit of itself and
the Lenders, reasonably requests, without undue expense or delay, to secure for
the Facility Agent and the Lenders the benefit of each Regulatory Approval upon
the exercise of remedies under the Security Documents.

SECTION 6.06. Preservation of Existence, Etc.

(a) 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 7.06; 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 6.07. Compliance with Environmental Laws. Except as specified in
Schedule 5.19 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

 

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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.

SECTION 6.08. Maintenance of Properties; Ownership of Operating Companies.

(a) Except as contemplated by Schedule 6.08, 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 Financial Closing Date
own, directly, 100% of the Equity Interests of PSE, other than the Operating
Company Preferred Shares outstanding as of the Effective Date.

SECTION 6.09. Maintenance of Insurance. Maintain with financially sound and
reputable insurance companies (a) the insurance listed on Schedule 6.09, except
to the extent that such insurance cannot be obtained or renewed on commercially
reasonable terms, and (b) 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 insurance report
delivered pursuant to Section 4.02(j) or is consistent with the prudent
operation of its business and companies engaged in similar businesses.

SECTION 6.10. Use of Proceeds.

(a) The Borrower shall use the proceeds from the Term Loans to (i) partially
finance the Merger, (ii) repay certain of the outstanding Indebtedness of PSE
and the related fees, costs and make-whole premiums, if any, and (iii) pay
Transaction Costs.

(b) The Borrower shall use the proceeds from Capital Expenditure Loans to make
capital contributions or Intercompany Loans to PSE to fund Utility Capital
Expenditures.

SECTION 6.11. Interest Hedging Agreements.

(a) The Borrower shall have entered into and shall thereafter maintain in full
force and effect, (i) on or prior to 30 days after the Signing Date, one or more
Interest Hedging Agreements (in form and substance reasonably satisfactory to
the Facility Agent) having a notional principal amount equal to at least 75% of
the aggregate Term Loan Commitments and (ii) on or prior to the date that is 60
days after the incurrence by the Borrower Group (on a consolidated basis) of
other long-term Indebtedness, one or more Interest Hedging Agreements (in form
and substance reasonably satisfactory to the Facility Agent), having a notional
principal

 

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amount equal to an amount that after giving effect to (x) such Interest Hedging
Agreements, plus (y) all then existing fixed rate long-term Indebtedness, plus
(z) the notional principal amount of all other Interest Hedging Agreements of
any member of the Borrower Group then in effect, shall equal, in the aggregate,
at least 70% of the aggregate amount of the long-term Indebtedness of the
Borrower Group (exclusive of revolving credit Indebtedness) following the
Financial Closing Date.

(b) The Borrower and the Operating Companies shall not enter into any interest
hedging agreements that are not Interest Hedging Agreements or any Interest
Hedging Agreements that are not substantially in compliance with the interest
hedging protocol set forth in Schedule 6.11(b).

SECTION 6.12. Priority and Application of Cash Distributions.

(a) During any Lock-Up Period in which an Excess Cash Sweep Event has also
occurred, the Borrower shall first apply any Cash Distributions to make the
prepayment referred to in Section 2.03(b)(i)(F) (Excess Cash Sweep Event) and
after such prepayment shall apply any remaining Cash Distributions in accordance
with the following clause (b).

(b) During any Lock-Up Period and after making the prepayment required by
Section 2.03(b)(i)(F) (Excess Cash Sweep Event), if any such prepayment is
required, (i) the Borrower shall remit the proceeds of any Cash Distribution or
other distribution (whether in cash, securities or other property) made by a
Subsidiary and (ii) the Borrower shall remit the collected credit balance of any
bank account or securities account maintained by the Borrower, in each case to
and for deposit in the Lock-Up Account, except to the extent restricted by
applicable Laws, any Governmental Authority or as set forth in Schedule 5.14.

SECTION 6.13. 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 6.14. Cooperation. Perform such acts as are reasonably requested by the
Facility 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 Facility Agent, do, execute,
acknowledge, deliver, record, re-record, 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
Facility Agent, may reasonably require from time to time in order to (a) subject
any Loan Party’s or any of its Subsidiaries’ 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.

 

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SECTION 6.15. 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.

SECTION 6.16. Transaction 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 Transaction Document or other material Contractual
Obligation in accordance with the terms of such Transaction Document or other
material Contractual Obligation or otherwise (except for, prior to the Financial
Closing Date, the Merger Agreement, and for the expiration of any Transaction
Document or other material Contractual Obligation in accordance with its terms
and not as a result of a breach or default thereunder), 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, Agents or Joint Mandated Lead Arrangers) 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 6.17. Maintenance of Ratings. From and after the Financial Closing Date,
maintain monitored public ratings on the Facilities and the Operating Company
Facilities from S&P and Moody’s.

SECTION 6.18. 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 Facility 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 6.19. Capital Expenditures. The Borrower shall fund Capital Expenditures
of the Borrower Group from loans made by the Borrower to the Operating Companies
which loans must rank pari passu with senior unsecured Indebtedness at such
Operating Company, except to the extent the making of such loans, in the
reasonable opinion of

 

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the Borrower, would be reasonably likely to have an adverse impact on (a) any of
such Operating Company’s Regulatory Approvals (or any applications for or
renewals thereof), (b) such Operating Company’s standing with any applicable
regulatory agency, (c) the ability of such Operating Company to achieve
debt-to-equity ratios consistent with those of similarly situated companies or
otherwise determined to be desirable by the Borrower in the conduct of such
Operating Company’s business or (d) the rating of any of such Operating
Company’s indebtedness or the ability of such Operating Company to obtain credit
in the ordinary course of its business.

ARTICLE VII

NEGATIVE COVENANTS

With respect to the covenants set forth in Section 7.08(c) from and after the
Effective Date, and with respect to all other covenants in this Article VII,
from and after the Financial Closing Date, and in each case for so long as any
Lender shall have any Commitment hereunder or any Loan or other Obligation
hereunder or under any other Financing Document which is accrued and payable
shall remain unpaid or unsatisfied, the Borrower shall not, nor shall it permit
any of the Operating Companies, to:

SECTION 7.01. 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 7.01(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

 

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adequate reserves with respect thereto are maintained on the books of the
applicable 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 risk of forfeiture of any
assets of any of the Operating Companies or any Transaction 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 8.01(i);

(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 Capitalized Leases which are
secured solely by the assets acquired (and proceeds and products thereof), up to
$40,000,000 in the aggregate; provided that such Lien arises prior to or within
60 days after such acquisition or the incurrence of such Capital Lease;

(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 or any of the Operating
Companies;

(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 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

 

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any Borrower Group Member arising in the ordinary course of business from
netting services, overdraft protection, Cash Management Obligations and
otherwise in connection with the maintenance of deposit, securities and
commodities accounts;

(n) Liens solely on any cash earnest money deposits made by Borrower or any of
its Subsidiaries in connection with any 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 permitted under Section 7.03(m),
(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 Indebtedness permitted to be incurred pursuant to Section 7.03(m)
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 $50,000,000 in the aggregate; and

 

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(t) other Liens securing Indebtedness and other obligations in an aggregate
amount not to exceed $25,000,000 at any time;

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

SECTION 7.02. 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 6.08 or expected
to be sold or terminated under the Business Plan most recently delivered to the
Facility Agent prior to the Signing Date;

(c) Dispositions of Investments in Cash Equivalents;

(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 7.01;

(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 7.05;

(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; and

(j) other Dispositions, in one transaction or a series of related transactions,
resulting in Net Cash Proceeds not exceeding $10,000,000 in the aggregate in any
fiscal year;

provided that any Disposition of any property pursuant to this Section 7.02
shall be for no less than the fair market value of such property at the time of
execution of the relevant agreement

 

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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.

SECTION 7.03. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, except:

(a)(i) Indebtedness of the Borrower under the Financing Documents not to exceed
an outstanding principal amount of $2,425,000,000 plus any Incremental Loans,
not to exceed $750,000,000 and (ii) Indebtedness of PSE under the Operating
Company Financing Documents in an aggregate amount not to exceed an outstanding
principal amount of $1,150,000,000 plus incremental loans under the Energy
Hedging Facility (as defined in the Operating Company Credit Agreement) not to
exceed $175,000,000;

(b) Existing Indebtedness;

(c)(i) Indebtedness incurred by the Borrower in respect of Interest Hedging
Agreements or (ii) Indebtedness incurred by PSE in respect of Interest Hedging
Agreements or Other Hedging Agreements not for speculative purposes and to the
extent permitted by the Operating Company Financing Documents;

(d) Indebtedness constituting Investments permitted by Section 7.04(d);

(e) Indebtedness incurred by PSE consisting of commercial paper issuances to
fund the working capital of the Borrower Group in an aggregate principal amount
not to exceed, together with amounts outstanding under the “Liquidity Facility”
(as defined in the Operating Company Credit Agreement), $400,000,000;

(f)(i) Indebtedness of a Person or Indebtedness attaching to assets of a Person
that, in either case, becomes an Operating Company, or Indebtedness attaching to
assets that are acquired by any Borrower Group Member, in each case pursuant to
a Permitted Acquisition after the Financial Closing Date, in an aggregate
principal amount not to exceed $50,000,000 at any one time outstanding for all
such Indebtedness under this paragraph (f), provided that (x) such Indebtedness
existed at the time such Person became an Operating Company or at the time such
assets were acquired and, in each case, was not created in anticipation thereof
and (y) such Indebtedness is not guaranteed in any respect by any Borrower Group
Member (other than by any such person that so becomes an Operating Company or
that acquires such assets), and (ii) any replacements, refunding, renewal or
extension of any Indebtedness specified in subclause (i) above, provided, that
such replaced, refunded, renewed or extended Indebtedness satisfies the
definition of Permitted Refinancing Indebtedness as if such definition were
applicable to such Indebtedness;

(g) Indebtedness arising from Capitalized Leases or with respect to purchase
money security interests in an aggregate principal amount not exceeding
$40,000,000 at any one time outstanding;

 

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(h) Indebtedness arising from the deferred purchase price of property or
services in an aggregate principal amount not exceeding $15,000,000 at any one
time outstanding;

(i) Indebtedness under or reimbursement obligations in respect of letters of
credit and bankers acceptances issued for performance, surety, appeal or
indemnity bonds or with respect to workers’ compensation claims, insurance or
statutory obligations, in each case incurred in the ordinary course of business
in an aggregate principal amount not exceeding $100,000,000 at any one time
outstanding;

(j) Indebtedness arising from netting services, overdraft protection, Cash
Management Obligations and otherwise in connection with deposit, securities and
commodities accounts in the ordinary course of business;

(k) Permitted Refinancing Indebtedness;

(l) Tax-Free Debt in an aggregate amount not to exceed $250,000,000;

(m) Indebtedness owed to any Person providing property, casualty, business
interruption or liability insurance to Borrower or any Operating Company of
Borrower, so long as such Indebtedness shall not be in excess of the amount of
the unpaid cost 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;

(n) Indebtedness arising from agreements providing for indemnification,
holdbacks, working capital or other purchase price adjustments, earn-outs,
non-compete agreements, deferred compensation or similar obligations, or from
guaranties, surety bonds or performance bonds securing the performance of any
Borrower Group Member pursuant to such agreements, in connection with Permitted
Acquisitions or Dispositions permitted under Section 7.02;

(o) other Indebtedness incurred by PSE (x) under the First Mortgage Bond
Documents or (y) pursuant to the issuance of Hybrid Debt Securities (and, in the
case of each of clauses (x) and (y), any refinancing thereof incurred in
accordance with the definition of “Permitted Refinancing Indebtedness”, except
that the terms of such refinanced Indebtedness may permit make-whole payments
and call premiums) to repay Operating Company Capital Expenditure Loans in an
aggregate principal amount not exceeding $500,000,000 in any fiscal year after
the Financial Closing Date plus 100% of any unused amounts from the prior fiscal
years after the Financial Closing Date, such amount to be adjusted, with respect
to the fiscal year in which the Financial Closing Date occurs, on a pro rata
basis for the number of days remaining in such fiscal year since the Financial
Closing Date;

(p) all premiums (if any), interest (including post-petition interest), fees,
expenses, charges and additional or contingent interest on obligations described
in clauses (a) through (o) above;

 

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(q)(i) other Indebtedness incurred by PSE between the date of the Merger
Agreement and the Financial Closing Date in the ordinary course of business in
an amount not to exceed $50,000,000 in the aggregate and any Permitted
Refinancing Indebtedness thereof, and (ii) other Indebtedness incurred after the
Financial Closing Date in an aggregate amount not to exceed $25,000,000 at any
time; and

(r) Planned Indebtedness and any Permitted Refinancing Indebtedness thereof.

SECTION 7.04. 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 Financial Closing Date in
connection with Permitted Acquisitions, and (z) Subsidiaries consisting of
Immaterial Subsidiaries;

(f) the Merger;

(g) Permitted Acquisitions;

(h) 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;

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

(j) Investments made as a result of the receipt of non-cash consideration from a
Disposition in compliance with Section 7.02;

(k) 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;

(l) loans and advances made in the ordinary course of business to their
respective employees, officers and directors so long as the aggregate principal
amount

 

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thereof at any time outstanding (excluding temporary advances in the ordinary
course of business) shall not exceed $3,000,000;

(m) Investments existing on the date hereof and identified on Schedule 7.04(m);
and

(n) in addition to Investments permitted by clauses (a) through (m) above,
additional Investments so long as the aggregate amount invested, loaned or
advanced pursuant to this clause (n) does not exceed $10,000,000 in the
aggregate at any time outstanding.

SECTION 7.05. Restricted Payments; Lock-Up Account. Declare or make, directly or
indirectly, any Restricted Payment; provided, however that

(a) each Operating Company may declare and make Restricted Payments to the
Borrower and to another Borrower Group Member so long as such Restricted
Payments are declared and paid ratably to the shareholders, partners and other
equity holders of such Borrower Group Member;

(b) the Borrower may declare and make Restricted Payments in cash (provided
that, from and after the first Quarter End Date occurring at least six (6)
months after the Financial Closing Date, such payments may only be made once
following the end of each Test Period and on a date that is at least seven
(7) Business Days and not more than fifteen (15) Business Days following a
Calculation Date (such date, a “Restricted Payment Date”)), subject to the
satisfaction of each of the following conditions on the date of such Restricted
Payment and after giving effect thereto:

(i) no Default shall have occurred and be continuing and no Default shall occur
as a result of making such Restricted Payment;

(ii) from and after the first Quarter End Date occurring at least six (6) months
after the Financial Closing Date, at the time of such Restricted Payment, and
after giving effect thereto (and to any concurrent incurrence of Indebtedness),
(A) the Group FFO Coverage Ratio as at such Quarter End Date is equal to or
greater than 1.50 to 1.00 for the Test Period ending on such Quarter End Date
and (B) the Group FFO Leverage Ratio (expressed as a percentage) as at such
Quarter End Date is equal to or greater than 8.25%, for the Test Period ending
on such Quarter End Date; in the event that any of the conditions set forth in
this clause (ii) shall fail to be satisfied as at the end of any Test Period, a
“Lock-Up Event” shall have occurred; provided, for the avoidance of doubt, that
the conditions set forth in this clause (ii) shall not be applicable at any time
prior to the conclusion of the first Test Period; and

(iii) the Borrower shall have provided the Facility Agent with a certificate of
an Authorized Officer of the Borrower certifying that the Borrower Group is in
compliance with the provisions of the preceding clauses (i) and (ii).

 

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(c) Notwithstanding the foregoing, if a Lock-Up Event shall have occurred as of
any Quarter End Date, the Borrower shall not declare or make any Restricted
Payment (other than for the payment of taxes by the Parent, Parent Holdco (to
the extent such Person is not Puget Holdings) or Puget Holdings in accordance
with the proviso following clause (e) below) until the first Restricted Payment
Date after which the Borrower shall have satisfied each of the conditions set
forth in the foregoing clause (b)(ii) as of two consecutive Quarter End Dates
following the occurrence of such Lock-Up Event, the conditions in clause
(e) below and all of the other requirements of this Section 7.05 are satisfied
(the period during which the Borrower may not declare or make any Restricted
Payment pursuant to this sentence is referred to as a “Lock-Up Period”);
provided, for the avoidance of doubt, that the provisions set forth in this
clause (c) shall not be applicable at any time prior to the conclusion of the
first Test Period;

(d) During the Lock-Up Period, the Borrower may withdraw or otherwise apply
amounts in the Lock-Up Account only for (i) Base Capital Expenditures,
(ii) Borrower’s administrative expenses and (iii) other items consented to by
the Majority Lenders; provided, however, the Borrower shall not be permitted to
withdraw or otherwise apply amounts from the Lock-Up Account for Base Capital
Expenditures if, on the date of such withdrawal or application, there is a
positive Distributable Cash Balance; and

(e) Notwithstanding any provision of this Agreement to the contrary, if the
Borrower borrowed any Capital Expenditure Loans during any Lock-Up Period or
during any period that the Borrower was required to make prepayments of Excess
Cash pursuant to Section 2.03(b)(i)(F), the Borrower shall not be permitted to
make any Restricted Payments until such Capital Expenditure Loans have been
repaid in full;

provided, however, that notwithstanding any provision in any of the Financing
Documents, the Borrower Group may distribute cash and pay amounts to Puget
Holdings, Parent Holdco (to the extent such Person is not Puget Holdings) or the
Parent at all times and from time to time to enable Puget Holdings, Parent
Holdco (to the extent such Person is not Puget Holdings) or the Parent to make
all tax payments related to the operations and/or income of the Borrower Group.

SECTION 7.06. 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 7.02, (c) the
consummation of the Merger, (d) the liquidation or dissolution of any Immaterial
Subsidiary and (e) 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

 

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consolidation involving PSE or any liquidation or dissolution of any Operating
Company into PSE, PSE shall be the surviving corporation.

SECTION 7.07. Operating Leases. Enter into any operating lease as lessee except
to the extent that, after giving effect thereto, the net present value of
remaining lease payments required to be made by the Borrower Group Members under
all operating leases entered into by the Borrower Group Members on and after the
Financial Closing Date would not exceed $200,000,000.

SECTION 7.08. 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 Signing Date or in
connection with any Permitted Acquisition or any business reasonably related or
ancillary thereto.

(b) In the case of the Borrower from and after the Financial Closing 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
the Financing Documents and the other Transaction Documents, and (D) any
transaction that the Borrower is expressly permitted to enter into or consummate
under this Agreement.

(c) In the case of the Borrower only, prior to the Financial Closing Date,
conduct, transact or otherwise engage in any business or operations, including
without limitation, incurring any Indebtedness, creating, incurring or suffering
to exist any Liens on any of its Properties, assets or revenues, make any
Investment (other than in Cash Equivalents) or make any Restricted Payment,
other than to the extent required by or incidental to the performance of the
Financing Documents and the other Transaction Documents, and any transaction
that the Borrower is expressly permitted to enter into or consummate under this
Agreement.

(d) 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.

SECTION 7.09. Transactions with Affiliates; Affiliate Services Agreements.

(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 7.03, (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

 

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to the Facilities on the terms set forth in Exhibit I or with respect to the
Parent, on terms set forth in Section 13 of the Parent Guarantee, if such Parent
Guarantee is in full force and effect.

SECTION 7.10. Subsidiaries. Except as in existence on the Effective Date or
acquired or formed in connection with a Permitted Acquisition pursuant to
Section 7.04(g), (a) create, acquire or permit to exist any Subsidiary, except
for Immaterial Subsidiaries and wholly-owned Subsidiaries formed to make Utility
Capital Expenditures, (b) become a general or limited partner in any partnership
or a joint venturer in any joint venture except with any other Borrower Group
Member, (c) acquire any Equity Interest in or make any capital contribution to
any Person, (d) enter into any profit-sharing or royalty agreement or other
similar arrangement whereby the Borrower Group Member’s, income or profits are
or might be shared with any other Person, (e) enter into any material management
contract or material similar arrangement whereby a material portion of such
Borrower Group Member’s business or operations are managed by any other Person
(except the Borrower or a wholly-owned Borrower Group Member), other than in
each case as expressly contemplated by the Transaction Documents, (f) permit any
Subsidiary that is a wholly-owned Subsidiary on the Effective Date to become a
Subsidiary that is not wholly-owned (other than in connection with a Disposition
permitted by Section 7.02), or (g) permit any Immaterial Subsidiary to take any
action that would result in such Immaterial Subsidiary ceasing to be an
Immaterial Subsidiary and becoming an Operating Company if such action would not
be permitted hereunder if such Immaterial Subsidiary were an Operating Company
immediately prior to the taking of such action.

SECTION 7.11. 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 Facility Agent, change its fiscal year to any
other fiscal year reasonably acceptable to the Facility Agent, in which case,
the Borrower and the Facility 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 7.12. 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 7.01), or (b) the ability
of any 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 5.14 or
otherwise resulting from or relating to Existing Indebtedness (without
amendment, modification or waiver, other than in connection with Permitted
Refinancing Indebtedness);

 

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(iii) provisions of the type described in clause (a) above imposed by the holder
of any Lien permitted by Section 7.01(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 7.02;
and

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

SECTION 7.13. Abandonment. Abandon any of its businesses, other than
(a) pursuant to a transaction permitted by Section 7.02(b) and (b) dormant
companies acquired in connection with the Merger.

SECTION 7.14. 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 1.30 to 1.00.

(b) Debt Service Coverage Ratio. The Borrower will not permit the Debt Service
Coverage Ratio at the end of any Test Period to be less than 1.20 to 1.00.

(c) Group FFO Leverage Ratio. The Borrower will not permit the Group FFO
Leverage Ratio (expressed as a percentage) at the end of any Test Period to be
less than 7.125%, in respect of any Test Period.

SECTION 7.15. Existing Indebtedness. Prepay, prior to the stated maturity
thereof, any Indebtedness of the Borrower or any Subsidiary listed on
Schedule 7.03(b) or otherwise constituting Existing Indebtedness, unless such
prepayment is required by (i) applicable Law, (ii) any Governmental Authority,
(iii) the terms of such contractual obligations or (iv) is consented to by the
Majority Lenders (or is otherwise contemplated in Schedule 7.03(b)); provided
that this Section 7.15 shall not restrict any Permitted Refinancing Indebtedness
in respect of Existing Indebtedness.

SECTION 7.16. 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 Transaction Document or material
Contractual Obligation, except, other than

 

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in the case of any Transaction Document, to the extent that any such action
would not reasonably be expected to result in a Material Adverse Effect.

SECTION 7.17. Equity Issuance. Make any Equity Issuance that would result in
Puget Holdings, Parent Holdco (to the extent such Person is not Puget Holdings)
the Parent, the Borrower and the Subsidiaries not being a consolidated tax group
for U.S. Federal income tax purposes of which Puget Holdings is the “common
parent” (within the meaning of Section 1504 of the Code).

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

SECTION 8.01. Events of Default. The occurrence of any of the following from and
after the Financial Closing Date shall constitute an “Event of Default”:

(a) Non-Payment. The Borrower fails to pay when and as required to be paid
herein, (i) any amount of principal of any Loan or (ii) any interest on any Loan
or any other amount payable hereunder or with respect to any other Financing
Document, in each case to the extent that any such interest or other amount is
not paid within three (3) Business Days after the same becomes due; or

(b) Specific Covenants. The Borrower fails to perform or observe any term,
covenant or agreement contained in any of Section 6.03(e), Section 6.06(a),
Section 6.18, Section 7.01, Section 7.02, Section 7.03, Section 7.04,
Section 7.05, Section 7.06, Section 7.07, Section 7.08(c), Section 7.12,
Section 7.13, Section 7.14 or Section 7.15; or

(c) Other Defaults. The Borrower or any other Loan Party fails to perform or
observe any other covenant or agreement (not specified in Section 8.01(a) or
(b) above) 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 Facility 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; or

(d) Representations and Warranties. Any representation, warranty or
certification made or deemed made by or on behalf of any Loan Party herein, in
any other Financing Document or in any document required to be delivered in
connection herewith or therewith shall be untrue or misleading in any material
respect when made or deemed made; provided that such misstatement shall not
constitute an Event of Default if such condition or circumstance (i) is subject
to cure, (ii) the facts or conditions giving rise to such misstatement are cured
in such a manner as to eliminate such misstatement within sixty (60) days after
the earlier of (A) notice of such default from the Facility Agent and

 

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(B) the Borrower having knowledge thereof, and (iii) such cure period could not
reasonably be expected to result in a Material Adverse Effect; or

(e) Cross-Default. The Parent or any Borrower Group Member (i) fails to make any
payment beyond the applicable grace period with respect thereto, if any (whether
by scheduled maturity, required prepayment, acceleration, demand, or otherwise),
in respect of any Indebtedness (other than Indebtedness hereunder) having an
aggregate principal amount of more than $50,000,000, or (ii) fails to observe or
perform any other agreement or condition relating to any such Indebtedness, or
any other event occurs and continues beyond the applicable grace period, if the
effect of such failure or other event is to cause, or to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause such Indebtedness to become
due or to be repurchased, prepaid, defeased or redeemed (automatically or
otherwise) or an offer to repurchase, prepay, defease or redeem such
Indebtedness to be made, prior to its stated maturity; provided that clause
(ii) shall not apply to any secured Indebtedness that becomes due as a result of
the Disposition of any property or assets securing such Indebtedness, if such
Disposition is permitted pursuant to Section 7.02 and under the documents
providing for such Indebtedness; or

(f) Insolvency Proceedings, Etc. The Parent or any Borrower Group Member
institutes or consents to the institution of any proceeding under any Debtor
Relief Law, or makes an assignment for the benefit of creditors; or applies for
or consents to the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator, administrator, administrative receiver or similar
officer for it or for all or any material part of its property; or any receiver,
trustee, custodian, conservator, liquidator, rehabilitator, administrator,
administrative receiver or similar officer is appointed without the application
or consent of such Person and the appointment continues undischarged or unstayed
for sixty (60) calendar days; or any proceeding under any Debtor Relief Law
relating to any such Person or to all or any material part of its property is
instituted without the consent of such Person that continues undischarged or
unstayed for sixty (60) calendar days; or

(g) Illegality of Financing Documents. The Financing Documents or any material
provision of any Financing Document, (i) is declared in a final non-appealable
judgment to be illegal or unenforceable, (ii) should otherwise cease to be valid
and binding or in full force and effect or shall be materially Impaired (in each
case, except in connection with its expiration in accordance with its terms in
the ordinary course) and not related to any default hereunder, or (iii) is
(including the enforceability thereof) expressly terminated or repudiated by any
Loan Party or any other Borrower Group Member; or

(h) Material Qualification of Accounts. At any time, any financial statements to
be delivered pursuant to Section 6.01 shall be qualified by the auditors and
such qualification could reasonably be expected to result in a Material Adverse
Effect; or

(i) Judgments. There is entered against the Parent or any Borrower Group Member
a final judgment or order (other than a judgment or order for a rate refund) for

 

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the payment of money in an aggregate amount exceeding $50,000,000 and such
judgment or order shall not have been satisfied, vacated, discharged or stayed
or bonded pending an appeal for a period of sixty (60) consecutive days; or

(j) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or
Multiemployer Plan which has resulted or could reasonably be expected to result
in liability of the Borrower or any Subsidiary under Title IV of ERISA in an
aggregate amount which could reasonably be expected to result in a Material
Adverse Effect, or (ii) any Subsidiary or any ERISA Affiliate fails to pay when
due, after the expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under Section 4201 of ERISA
under a Multiemployer Plan in an aggregate amount which could reasonably be
expected to result in a Material Adverse Effect; or

(k) Inability to Pay Debts; Attachment. (i) The Parent or any Borrower Group
Member becomes unable or admits in writing its inability or fails 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 Group, taken as a whole, and is not
released, vacated or fully bonded within sixty (60) days after its issue or
levy; or

(l) Security Documents. (i) Any Security Document after delivery thereof shall
for any reason cease to create a valid and perfected Lien, with the priority
required by the Security Documents, on and security interest in any material
portion of the Collateral purported to be covered thereby, or any Loan Party
shall so assert in writing, or (ii) any of the Equity Interest of the Borrower
or PSE ceasing to be pledged pursuant to the Pledge Agreement or Security
Agreement, as applicable, free of Liens other than Liens created by the Pledge
Agreement or Security Agreement, as applicable, or any other Liens permitted
under Section 7.01, or any Loan Party shall so assert in writing; or

(m) Material Contract or Lease. The termination, transfer, revocation or
modification of any license, leases or material contracts to which any Borrower
Group Member 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.

SECTION 8.02. Remedies Upon Event of Default. If any Event of Default occurs and
is continuing, the Facility Agent may, and at the request of the Majority
Lenders shall, take any or all of the following actions:

(a) declare the Commitment of each Lender to make Loans to be terminated,
whereupon such Commitments and obligations shall be terminated;

(b) declare the unpaid principal amount of all outstanding Loans, all interest
accrued and unpaid thereon, and all other amounts owing or payable hereunder or
under any other Financing Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; and

 

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(c) exercise on behalf of itself and the Lenders all rights and remedies
available to it and the Lenders under the Financing Documents or applicable Law;

provided that upon the occurrence of an Event of Default under Section 8.01(f),
the obligation of each Lender to make Loans shall automatically terminate and
the unpaid principal amount of all outstanding Loans and all interest and other
amounts as aforesaid shall automatically become due and payable, in each case
without further act of the Facility Agent or any Lender, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Borrower.

SECTION 8.03. Application of Funds. After the exercise of remedies provided for
in Section 8.02 (or after the Loans have automatically become immediately due
and payable), any amounts received from the Collateral Agent pursuant to
Section 4.05 of the Collateral Agency Agreement on account of the Obligations
owed to the Agents and the Lenders shall be applied by the Facility Agent in the
following order:

First, to payment of that portion of the Obligations constituting fees,
indemnities, expenses and other amounts (other than principal and interest)
payable to the Facility Agent in its capacity as such (including Attorney Costs
payable under Section 10.04 and amounts payable under Article III), ratably in
proportion to the amounts described in this clause First then payable;

Second, to payment of that portion of the Obligations constituting fees,
indemnities and other amounts (other than principal and interest) payable to the
Lenders (including Attorney Costs payable under Section 10.04 and amounts
payable under Article III), ratably among them in proportion to the amounts
described in this clause Second payable to them;

Third, to payment of that portion of the Obligations constituting accrued and
unpaid interest on the Loans, ratably among the Lenders in proportion to the
respective amounts described in this clause Third payable to them;

Fourth, to payment of that portion of the Obligations constituting unpaid
principal of the Loans and the Cash Management Obligations, ratably among the
Lenders in proportion to the respective amounts described in this clause Fourth
held by them and the amount of cash required to be so deposited to such account;

Fifth, to the payment of all other Obligations of the Borrower that are due and
payable to the Facility Agent and the Lenders on such date, ratably based upon
the respective aggregate amounts of all such Obligations owing to the Facility
Agent and the Lenders on such date; and

Last, the balance, if any, after all of the Obligations have been indefeasibly
paid in full in cash, to the Borrower or as otherwise required by Law;

provided that with respect to any amounts payable in respect of principal of the
Loans, amounts shall be allocated ratably to the repayment of the Term Loans and
the Capital Expenditure Loans.

 

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SECTION 8.04. Equity Investors’ Right to Cure.

(a) Notwithstanding anything to the contrary contained in Section 8.01(b), in
the event that the Borrower fails to comply with the requirement of the
covenants set forth in Section 7.14, until the expiration of the tenth day after
the date on which financial statements with respect to the Test Period in which
such covenant is being measured are required to be delivered pursuant to
Section 6.01(a) or (b), as applicable, any of the Equity Investors (including
any Person becoming an Equity Investor as a result of such equity investment)
shall have the right to make a direct or indirect equity investment in the
Borrower in cash (the “Cure Right”), and upon the receipt by the Borrower of net
cash proceeds pursuant to the exercise of the Cure Right (including through the
capital contribution of any such net cash proceeds to such Person, the “Cure
Amount”), the Borrower shall prepay (x) an aggregate amount of the Term Loans
and Capital Expenditure Loans (on a pro rata basis) in an amount equal to the
Cure Amount, (y) Group FFO and Cash Available for Borrower Debt Service, as
applicable, for the most recently ended fiscal quarter for the applicable Test
Period shall be increased by an amount equal to the Cure Amount and (z) the
covenants set forth in such Section shall be recalculated, as if such prepayment
occurred immediately prior to the commencement of the applicable Test Period;
provided that such recalculation shall be solely for the purpose of determining
the existence of a Default or an Event of Default under the covenants set forth
in such Section with respect to any Test Period that includes the fiscal quarter
for which such Cure Right was exercised and not for any other purpose under any
Financing Document.

(b) If, after the exercise of the Cure Right and the recalculations pursuant to
clause (a) above, the Borrower shall then be in compliance with the requirements
of the covenants set forth in Section 7.14 during such Test Period (including
for purposes of Section 4.03), the Borrower shall be deemed to have satisfied
the requirements of such covenants as of the relevant date of determination with
the same effect as though there had been no failure to comply therewith at such
date, and the applicable Default or Event of Default under Section 8.01 that had
occurred shall be deemed cured. Notwithstanding any provision of this
Section 8.04 to the contrary, (i) there shall be no more than two (2) fiscal
quarters (and no more than one (1) fiscal quarter for any period of consecutive
fiscal quarters) in which a Cure Right is exercised and (ii) with respect to any
exercise of the Cure Right, the Cure Amount shall be no greater than the amount
required to cause the Borrower to be in compliance with the covenants set forth
in Section 7.14.

ARTICLE IX

FACILITY AGENT AND OTHER AGENTS

SECTION 9.01. Appointment and Authorization of Agents.

(a) Each Lender hereby appoints Barclays Bank PLC as the Facility Agent
hereunder and irrevocably appoints, designates and authorizes the Facility Agent
to take such action on its behalf under the provisions of this Agreement and
each other Financing Document and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of this Agreement or any
other Financing Document, together with such powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained elsewhere
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in any other Financing Document, the Facility Agent shall have no duties or
responsibilities, except those expressly set forth herein, nor shall the
Facility Agent have or be deemed to have any fiduciary relationship with any
Lender or participant, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or any
other Financing Document or otherwise exist against the Facility Agent. Without
limiting the generality of the foregoing sentence, the use of the term “agent”
herein and in the other Financing 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) Each of the Lenders hereby authorizes the Facility Agent, acting on its
behalf, to appoint Barclays Bank PLC as the Collateral Agent under and pursuant
to the terms of the Collateral Agency Agreement.

SECTION 9.02. Delegation of Duties. The Facility Agent may execute any of its
duties under this Agreement or any other Financing Document (including, if
applicable, for purposes of holding or enforcing any Lien on the Collateral (or
any portion thereof) granted under the Security Documents or of exercising any
rights and remedies thereunder) by or through agents, employees or
attorneys-in-fact including for the purpose of any Borrowings, such sub-agents
as shall be deemed necessary by the Facility Agent and shall be entitled to
advice of counsel and other consultants or experts concerning all matters
pertaining to such duties. The Facility 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).

SECTION 9.03. Liability of Agents. No Agent-Related Person shall (a) be liable
for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Financing Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct, as determined by the final judgment of a court of competent
jurisdiction, in connection with its duties expressly set forth herein), or
(b) be responsible in any manner to any Lender or participant for any recital,
statement, representation or warranty made by the Borrower, any Subsidiary or
any officer thereof, contained herein or in any other Financing Document, or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Facility Agent under or in connection with, this
Agreement or any other Financing Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Financing Document, 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 any Loan Party or any other party to any Financing Document to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Lender or participant to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Financing Document, or to inspect the
properties, books or records of the Borrower, any Subsidiary or any Affiliate
thereof.

 

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SECTION 9.04. Reliance by Agents.

(a) Each Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, communication, signature, resolution, representation,
notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, electronic mail message, statement or other document or
conversation 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 such Agent. Each Agent shall be fully justified in
failing or refusing to take any action under any Financing Document unless it
shall first receive such advice or concurrence of the Majority Lenders as it
deems appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
Each Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement or any other Financing Document in accordance
with a request or consent of the Majority Lenders (or such greater number of
Lenders as may be expressly required hereby in any instance) and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders.

(b) For purposes of determining compliance with the conditions specified in
Section 4.02, each Lender that has signed this Agreement shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to a Lender unless the Facility Agent shall have received notice
from such Lender prior to the proposed Financial Closing Date (or such earlier
date on which the approval of the Facility Agent may be required) specifying its
objection thereto.

SECTION 9.05. Notice of Default. The Facility Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default, except with respect to
Defaults in the payment of principal, interest and fees required to be paid to
the Facility Agent for the account of the Lenders, unless the Facility Agent
shall have received written notice from a Lender or the Borrower referring to
this Agreement, describing such Default and stating that such notice is a
“notice of default.” The Facility Agent will notify the Lenders of its receipt
of any such notice. The Facility Agent shall take such action with respect to
any Event of Default as may be directed by the Majority Lenders in accordance
with Article VIII; provided that unless and until the Facility Agent has
received any such direction, the Facility Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Event of Default as it shall deem advisable or in the best interest of the
Lenders.

SECTION 9.06. Credit Decision; Disclosure of Information by Agents. Each Lender
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 Lender as to any
matter, including whether Agent-Related Persons have disclosed material
information in their possession. Each Lender 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
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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
hereunder. Each Lender 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 Financing 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 Lenders and by any Agent
herein, such Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of
Borrower or any of its Affiliates which may come into the possession of any
Agent-Related Person.

SECTION 9.07. Indemnification of Agents. Whether or not the transactions
contemplated hereby are consummated, the Lenders shall indemnify upon demand the
Facility Agent (to the extent the Facility Agent is required to be but is not
reimbursed by or on behalf of the Borrower and without limiting the obligation
of the Borrower to do so), pro rata (at the time such indemnity is sought), and
hold harmless the Facility Agent from and against any and all Indemnified
Liabilities incurred by it; provided that no Lender shall be liable for the
payment to the Facility Agent of any portion of such Indemnified Liabilities
resulting from the Facility Agent’s own gross negligence or willful misconduct,
as determined by the final judgment of a court of competent jurisdiction;
provided that no action taken in accordance with the directions of the Majority
Lenders (or such other number or percentage of the Lenders as shall be required
by the Financing Documents) shall be deemed to constitute gross negligence or
willful misconduct for purposes of this Section 9.07. In the case of any
investigation, litigation or proceeding giving rise to any Indemnified
Liabilities, this Section 9.07 applies whether any such investigation,
litigation or proceeding is brought by any Lender or any other Person. Without
limitation of the foregoing, each Lender shall reimburse the Facility Agent upon
demand for its ratable share (determined at the time such reimbursement is
sought) of any costs or out-of-pocket expenses (including Attorney Costs)
incurred by the Facility Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Financing
Document, or any document contemplated by or referred to herein, to the extent
that the Facility Agent is not reimbursed for such expenses by or on behalf of
the Borrower. The undertaking in this Section 9.07 shall survive termination of
the Commitments, the payment of all other Obligations and the resignation of the
Facility Agent.

SECTION 9.08. Agents in Their Individual Capacities. 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 Facility Agent hereunder and without notice to or
consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, Barclays Bank PLC or its Affiliates may receive information

 

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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 Facility Agent shall be under no obligation
to provide such information to them.

SECTION 9.09. Successor Agents. The Facility Agent may resign as the Facility
Agent upon thirty (30) days’ notice to the Lenders and the Borrower. If the
Facility Agent resigns under this Agreement, the Majority Lenders shall appoint
a successor agent for the Lenders, which successor agent shall be consented to
by the Borrower at all times other than during the occurrence and continuance of
a Default (which consent of the Borrower shall not be unreasonably withheld or
delayed). If no successor agent is appointed prior to the effective date of the
resignation of the Facility Agent, the Facility Agent may appoint, after
consulting with the Lenders and subject to the consent of the Borrower as
provided for above, a successor agent from among the Lenders. Upon the
acceptance of its appointment as successor agent hereunder, the Person acting as
such successor agent shall succeed to all the rights, powers and duties of the
retiring Facility Agent and the term “Facility Agent,” shall mean such successor
Facility Agent, and the retiring Facility Agent’s appointment, powers and duties
as the Facility Agent shall be terminated. After the retiring Facility Agent’s
resignation hereunder as the Facility Agent, the provisions of this Article IX
and Section 10.04 and Section 10.05 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Facility Agent under this
Agreement. If no successor agent has accepted appointment as the Facility Agent
by the date which is thirty (30) days following the retiring Facility Agent’s
notice of resignation, the retiring Facility Agent’s resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of the Facility Agent hereunder until such time, if any, as the Majority
Lenders appoint a successor agent as provided for above. Upon the acceptance of
any appointment as the Facility Agent hereunder by a successor and upon the
execution and filing or recording of such financing statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as the Majority Lenders may request, in order to continue the
perfection of the Liens granted or purported to be granted by the Security
Documents, the Facility Agent shall thereupon succeed to and become vested with
all the rights, powers, discretion, privileges, and duties of the retiring
Facility Agent, and the retiring Facility Agent shall be discharged from its
duties and obligations under the Financing Documents. After the retiring
Facility Agent’s resignation hereunder as the Facility Agent, the provisions of
this Article IX shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Facility
Agent.

SECTION 9.10. Facility Agent May File Proofs of Claim. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Borrower or any of its Subsidiaries, the Facility Agent (irrespective of
whether the principal of any Loan shall then be due and payable as herein
expressed or by declaration or otherwise and irrespective of whether the
Facility Agent shall have made any demand on any Borrower) shall be entitled and
empowered, by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest
owing and unpaid in respect of the Loans and all other Obligations that are
owing and unpaid and to file such other documents as may be necessary or
advisable in order to have the claims of the Lenders and the Facility Agent
(including any claim for the

 

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reasonable compensation, expenses, disbursements and advances of the Lenders and
the Facility Agent and their respective agents and counsel and all other amounts
due the Lenders and the Facility Agent under Section 2.06 and Section 10.04)
allowed in such judicial proceeding; and

(b) to collect and receive any monies or other property payable or deliverable
on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Facility Agent and, in the event that
the Facility Agent shall consent to the making of such payments directly to the
Lenders, to pay to the Facility Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of the Agents and their
respective agents and counsel, and any other amounts due the Facility Agent
under Section 2.06 and Section 10.04.

Nothing contained herein shall be deemed to authorize the Facility Agent to
authorize or consent to or accept or adopt on behalf of any Lender any plan of
reorganization, arrangement, adjustment or composition affecting the Obligations
or the rights of any Lender or to authorize the Facility Agent to vote in
respect of the claim of any Lender in any such proceeding.

SECTION 9.11. Other Agents; Arrangers and Managers. None of the Lenders or other
Persons identified on the facing page or signature pages of this Agreement as
“joint bookrunner,” “arranger,” “syndication agent,” “documentation agent,”
“Co-Syndication Agent” or “Co-Documentation Agent” 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
the Lenders or other Persons so identified shall have or be deemed to have any
fiduciary relationship with any other Lender. Each Lender acknowledges that it
has not relied, and will not rely, on any of the other Lenders or other Persons
so identified in deciding to enter into this Agreement or in taking or not
taking action hereunder.

ARTICLE X

MISCELLANEOUS

SECTION 10.01. Amendments, Etc. Except as otherwise set forth in this Agreement,
no amendment or waiver of any provision of this Agreement, and no consent to any
departure by the Borrower therefrom, shall be effective unless in writing signed
by the Majority Lenders (or by the Facility Agent acting on the written
instructions of the Majority Lenders) and the Borrower, and each such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided that, no such amendment, waiver or consent
shall:

(a) extend or increase the Commitment of any Lender without the written consent
of each Lender directly affected thereby (it being understood that a waiver of
any condition precedent set forth in Section 4.01, Section 4.02 or Section 4.03
or the waiver of any Default shall not constitute an extension or increase of
any Commitment of any Lender);

 

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(b) postpone any date scheduled for, or reduce or forgive the amount of, any
payment of principal or interest under Section 2.04 or Section 2.05, or waive an
Event of Default under Section 8.01(a), without the written consent of each
Lender directly affected thereby;

(c) reduce or forgive the principal of, or the rate of interest specified herein
on, any Loan or any fees (including fees set forth in Section 2.06 or other
amounts payable hereunder or under any other Financing Document), or extend,
postpone or waive the date upon which any fees are to be paid, without the
written consent of each Lender directly affected thereby;

(d) change any provision of this Section 10.01, the definition of “Majority
Lenders” or Section 2.03(d), Section 2.09(a), Section 2.09(g), or Section 2.10
without the written consent of each Lender affected thereby; or

(e) release all or any material portion of the Collateral in any transaction or
series of related transactions or release or limit the liability of Parent under
the Parent Guarantee (if the Parent Guarantee is required to be in effect),
without the written consent of each Lender (other than in accordance with the
terms of the Security Documents);

provided further that (x) no Borrower Affiliate shall be entitled to a vote on
any of the matters specified in the foregoing clauses (a) through (e), and
(y) no amendment, waiver or consent shall, unless in writing and signed by the
Facility Agent in addition to the Lenders required above, affect the rights or
duties of, or any fees or other amounts payable to, the Facility Agent under
this Agreement; provided, further, however, that no amendment, waiver or consent
of any Macquarie Affiliate that holds any Loans or Commitments (a “Lender Side
Person”) shall be effective (i) except with respect to Loans and Commitments not
in excess of $50,000,000 in the aggregate at any time and (ii) unless each such
Person has in place a Wall between such Lender 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 Lender Side Person
and Borrower Side Persons (other than on arm’s-length, third party terms) and
decisions of Lender Side Persons are made, and actions taken, independent of
considerations of Borrower Side Persons. For purposes of the preceding sentence,
“Wall” shall mean with respect to any Lender Side Person and Borrower Side
Person, such Persons (i) do not have interlocking officers, directors or
employees, (ii) have separate offices and information systems such that a Lender
Side Person does not have access to non-public information in the possession of
a Borrower Side Person (and vice versa), (iii) have a formalized process or
procedure prohibiting the disclosure of non-public information to the other such
Person. A Lender Side Person shall provide reasonable evidence of the Wall upon
the reasonable request of a Lender or the Facility Agent.

SECTION 10.02. Notices and Other Communications; Facsimile Copies.

(a) General. Unless otherwise expressly provided herein, all notices and other
communications provided for hereunder or under any other Financing Document
shall be in writing (including by facsimile transmission or electronic mail).
All such written notices shall be mailed, faxed or delivered to the applicable
address, facsimile number or electronic mail address,

 

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and all notices and other communications expressly permitted hereunder to be
given by telephone shall be made to the applicable telephone number, as follows:

(1) if to the Borrower, any Subsidiary, the Facility Agent or the Collateral
Agent, to the address, facsimile number, electronic mail address or telephone
number specified for such Person on Schedule 10.02 or to such other address,
facsimile number, electronic mail address or telephone number as shall be
designated by such party in a notice to the other parties; and

(2) if to any Lender, to the address, facsimile number, electronic mail address
or telephone number specified for such Lender on Schedule 10.02 or to such other
address, facsimile number, electronic mail address or telephone number as shall
be designated by such Lender in a notice to the Borrower and the Facility Agent.

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 (which form of delivery is subject to the provisions of
Section 10.02(c)), when delivered; provided that notices and other
communications to the Facility Agent pursuant to Article II shall not be
effective until actually received by such Person. In no event shall a voice mail
message be effective as a notice, communication or confirmation hereunder.

(b) Effectiveness of Facsimile Documents and Signatures. Financing Documents may
be transmitted and/or signed by facsimile. The effectiveness of any such
documents and signatures shall, subject to applicable Law, have the same force
and effect as manually signed originals and shall be binding on each party to
Financing Document.

(c) Reliance by Agents and Lenders. The Facility Agent and the Lenders shall be
entitled to rely and act upon any notices purportedly given by or on behalf of
the Borrower even if (i) such notices were not made in a manner specified
herein, were incomplete or were not preceded or followed by any other form of
notice specified herein, or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof. The Borrower shall indemnify
each Agent-Related Person and each Lender from all losses, costs, expenses and
liabilities resulting from the reliance by such Person on each notice
purportedly given by or on behalf of the Borrower in the absence of gross
negligence, bad faith or willful misconduct, in accordance with Section 10.05.
All telephonic notices to the Facility Agent may be recorded by the Facility
Agent and each of the parties hereto hereby consents to such recording.

SECTION 10.03. No Waiver; Cumulative Remedies. No failure by any Lender or the
Facility Agent to exercise, and no delay by any such Person in exercising, any
right, remedy, power or privilege hereunder or under any other Financing
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided,

 

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and provided under each other Financing Document, are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by Law.

SECTION 10.04. Attorney Costs and Expenses. The Borrower agrees (a) to pay or
reimburse the Agents and the Joint Mandated Lead Arrangers for all reasonable
and documented out-of-pocket costs and expenses incurred in connection with the
preparation, due diligence, negotiation, syndication and execution of this
Agreement and the other Financing Documents, and any amendment, waiver, consent
or other modification of the provisions hereof and thereof (whether or not the
transactions contemplated hereby and thereby are consummated), and the
consummation and administration of the transactions contemplated hereby and
thereby, including all Attorney Costs of Shearman & Sterling LLP, any local
counsel retained by the Facility Agent and any experts retained in connection
herewith and therewith, and (b) to pay or reimburse the Agents, the Joint
Mandated Lead Arrangers and each Lender for all documented out-of-pocket costs
and expenses incurred in connection with the enforcement of any rights or
remedies under this Agreement or the other Financing Documents (including all
such costs and expenses incurred during any legal proceeding, including any
proceeding under any Debtor Relief Law, and provided that Attorney Costs shall
be limited to Attorney Costs of one New York counsel and one local state counsel
to the Facility Agent and one New York counsel and one local state counsel for
all of the Lenders). The foregoing costs and expenses shall include all
reasonable search, filing and recording charges and fees and taxes related
thereto, and other reasonable and documented out-of-pocket expenses incurred by
any Agent. The agreements in this Section 10.04 shall survive the termination of
the Commitments and repayment of all of the Obligations. All amounts due under
this Section 10.04 shall be paid within ten (10) Business Days of receipt by the
Borrower of an invoice relating thereto setting forth such expenses in
reasonable detail. If the Borrower fails to pay when due any costs, expenses or
other amounts payable by it hereunder or under any Financing Document, such
amount may be paid on behalf of the Borrower by the Facility Agent in its sole
discretion.

SECTION 10.05. Indemnification by the Borrower.

(a) Whether or not the transactions contemplated hereby are consummated, the
Borrower shall indemnify and hold harmless each Agent-Related Person, each
Lender and their respective Affiliates, directors, officers, employees, agents,
representatives, trustees and attorneys-in-fact (collectively, the “Indemnified
Parties”) 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 any such
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
Financing 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) (all
the foregoing, collectively, the

 

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“Indemnified Liabilities”), in all cases, whether or not caused by or arising,
in whole or in part, out of the negligence of the Indemnified Party; provided
that such indemnity shall not, as to any Indemnified Party, be available to the
extent that such liabilities, obligations, losses, damages, penalties, claims,
demands, actions, judgments, suits, costs, expenses or disbursements resulted
from (i) the gross negligence, bad faith or willful misconduct of such
Indemnified Party or of any Affiliate, director, officer, employee, agent,
trustee or attorney-in-fact of such Indemnified Party or (ii) any actions or
claims solely among Indemnified Parties. No Indemnified Party shall be liable
for any damages arising from the use by others of any information or other
materials obtained through intralinks or other similar information transmission
systems in connection with this Agreement, nor shall any Indemnified Party or
the Borrower have any liability for any special, punitive, indirect or
consequential damages relating to this Agreement or any other Financing 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 10.05
applies, such indemnity shall be effective whether or not any of the
transactions contemplated hereunder or under any of the other Financing
Documents is consummated. All amounts due under this Section 10.05 shall be paid
within ten (10) Business Days after demand therefor. The agreements in this
Section 10.05 shall survive the resignation of the Facility Agent, the
replacement of any Lender, the termination of the Commitments and the repayment,
satisfaction or discharge of all the other Obligations.

(b) In the event that any claim or demand by a third party for which the
Borrower may be required to indemnify an Indemnified Party hereunder (a “Claim”)
is asserted against or sought to be collected from any Indemnified Party by a
third party, such Indemnified Party shall as promptly as practicable notify the
Borrower in writing of such Claim, and such notice shall specify (to the extent
known) in reasonable detail the amount of such Claim and any relevant facts and
circumstances relating thereto; provided, however, that any failure to give such
prompt notice or to provide any such facts and circumstances shall not
constitute a waiver of any rights of the Indemnified Party, except to the extent
that the rights of the Borrower are actually prejudiced thereby.

(c) The Borrower shall be entitled to appoint counsel of its choice at the
expense of the Borrower to represent an Indemnified Party in any action for
which indemnification is sought (in which case the Borrower shall not thereafter
be responsible for the fees and expenses of any separate counsel retained by
that Indemnified Party except as set forth below); provided, however, that such
counsel shall be satisfactory to such Indemnified Party. Notwithstanding the
Borrower’s election to appoint counsel to represent an Indemnified Party in any
action, such Indemnified Party shall have the right to employ separate counsel
(including local counsel, but only one such counsel in any jurisdiction in
connection with any action), and the Borrower shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel chosen by
the Borrower to represent the Indemnified Party would present such counsel with
a conflict of interest; (ii) the actual or potential defendants in, or targets
of, any such action include both the Indemnified Party and the Borrower and the
Indemnified Party shall have reasonably concluded that there may be legal
defenses available to it and/or other Indemnified Parties which are different
from or additional to those available to the Borrower; (iii) the Borrower shall
not have employed counsel to represent the Indemnified Party within a reasonable
time after notice of the institution of such action; or (iv) the Borrower shall
authorize the Indemnified Party to employ separate counsel at the Borrower’s
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settlement or compromise of any action or claim by an Indemnified Party affected
without the Borrower’s prior written consent, which consent shall not be
unreasonably withheld.

SECTION 10.06. Payments Set Aside. To the extent that any payment by or on
behalf of the Borrower is made to any Agent or any Lender, or any Agent or any
Lender exercises its right of setoff, and such payment or the proceeds of such
setoff or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by such Agent or such Lender in its discretion) to be
repaid to a trustee, receiver or any other party, in connection with any
proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of
such recovery, the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such setoff had not occurred, and (b) each Lender
severally agrees to pay to the Facility Agent upon demand its applicable share
of any amount so recovered from or repaid by any Agent, plus interest thereon
from the date of such demand to the date such payment is made at a rate per
annum equal to the applicable Overnight Rate from time to time in effect.

SECTION 10.07. 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, except that the Borrower may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
each Lender and no Lender may assign or otherwise transfer any of its rights or
obligations hereunder except (i) to an Assignee in accordance with the
provisions of Section 10.07(b)(1), (ii) by way of participation in accordance
with the provisions of Section 10.07(e), or (iii) by way of pledge or assignment
of a security interest subject to the restrictions of Section 10.07(g). 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, Assignees, Participants to the extent provided in
Section 10.07(e) and, to the extent expressly contemplated hereby, the
Indemnified Parties) any legal or equitable right, remedy or claim under or by
reason of this Agreement.

(b) Subject to the conditions set forth in clause (b)(1) below and
Section 2.11(d), any Lender may assign to one or more assignees (“Assignees”)
all or a portion of its rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans at the time owing to it) with
the prior written consent (such consent not to be unreasonably withheld or
delayed) of the Facility Agent; provided that no consent of the Facility Agent
shall be required for an assignment to a Lender, an Affiliate of a Lender or an
Approved Fund; provided, further, that from the date hereof until the date that
is twelve months after the Financial Closing Date (such period the “Blackout
Period”) no Borrower Affiliate or Macquarie Affiliate shall be an Assignee
without the prior consent of the Joint Mandated Lead Arrangers except that
during the Blackout Period Macquarie Affiliates (together with Macquarie
Affiliates who are Participants pursuant to clause (e) below) may hold an amount
of Loans and Commitments not to exceed, in the aggregate for all such Macquarie
Affiliates, $50,000,000 at any time.

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

 

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(i) prior to the date that is 60 days after the Effective Date, no Lender (other
than any Joint Mandated Lead Arranger in its capacity as a Lender or Lenders who
are Affiliates of the Joint Mandated Lead Arrangers) may transfer or assign any
of its Loans or Commitments to any other Person;

(ii) except in the case of an assignment to a Lender, 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, the amount of the Commitment or Loans of
the assigning Lender subject to each such assignment (determined as of the date
the Assignment and Assumption with respect to such assignment is delivered to
the Facility Agent) shall not be less than $1,000,000 (unless the Facility Agent
otherwise consents); provided that such amounts shall be aggregated in respect
of each Lender and its Affiliates or Approved Funds, if any;

(iii) the parties to each assignment shall execute and deliver to the Facility
Agent an Assignment and Assumption, together with a processing and recordation
fee of $3,500; and

(iv) the Assignee, if it shall not be a Lender, shall provide to the Facility
Agent its address, facsimile number, electronic mail address or telephone number
for receipt of notices and other communications hereunder.

Each assignment under this clause (b) shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement, including with respect to the separate Facilities.

(c) Subject to acceptance and recording thereof by the Facility Agent pursuant
to Section 10.07(d), from and after the effective date specified in each
Assignment and Assumption, the Assignee thereunder shall be a party to this
Agreement and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender (subject to the
restrictions hereunder with respect to Borrower Affiliates and Macquarie
Affiliates) 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 Section 2.07(b),
Section 3.01, Section 3.04, Section 10.04 and Section 10.05 with respect to
facts and circumstances occurring prior to the effective date of such
assignment). Upon request, and the surrender by the assigning Lender of its
Note, the Borrower (at its expense) shall execute and deliver a Note to the
Assignee Lender. Any assignment or transfer by a Lender of rights or obligations
under this Agreement that does not comply with clause (b) and this clause (c) of
this Section 10.07 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
Section 10.07(e).

(d) The Facility Agent, acting solely for this purpose as an agent of the
Borrower, shall maintain at the Facility Agent’s Office 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

 

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the Commitments of, and principal amounts (and related interest amounts) of the
Loans and amounts owing to each Lender pursuant to the terms hereof from time to
time (the “Register”). The entries in the Register shall be conclusive, absent
manifest error, and the Borrower, the Agents and the Lenders shall treat each
Person whose 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 Agent and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.

(e) Subject to Section 2.11(d), any Lender may at any time, without the consent
of, or notice to, the Borrower or the Facility Agent sell participations to any
Person (other than a natural person) (each, a “Participant”) in all or a portion
of such Lender’s rights and/or obligations under this Agreement (together with
all or a portion of its Commitment and/or the Loans owing to it); provided that
during the Blackout Period, without the prior consent of the Joint Mandated Lead
Arrangers, no Borrower Affiliate or Macquarie Affiliate shall be a Participant
with the exception of Macquarie Affiliates (including Macquarie Affiliates who
are Assignees pursuant to clause (b) above) for an amount of Loans and
Commitments not to exceed, in the aggregate for all such Macquarie Affiliates,
$50,000,000; provided, further, that (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Borrower, the Agents 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. 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 the other Financing Documents and
to approve any amendment, modification or waiver of any provision of this
Agreement or the other Financing Documents; provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification described in
the first proviso to Section 10.01 that directly affects such Participant;
provided further that no such consent shall be required from Participants that
are Borrower Affiliates and the consent of Participants that are Macquarie
Affiliates shall be subject to the third proviso of Section 10.01. Subject to
Section 10.07(f), the Borrower agrees that each Participant shall be entitled to
the benefits of Section 3.01, Section 3.04 and Section 2.07(b) to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to Section 10.07(c) but (x) shall not be entitled to recover greater
amounts under any such Section than the selling Lender would be entitled to
recover and (y) shall be subject to replacement by the Borrower under
Section 3.06 to the same extent as if it were a Lender. To the extent permitted
by applicable Law, each Participant also shall be entitled to the benefits of
Section 10.09 as though it were a Lender; provided that such Participant agrees
to be subject to Section 2.10 as though it were a Lender.

(f) A Participant shall not be entitled to receive any greater payment under any
of Section 3.01, Section 3.04 and Section 2.07(b) than the applicable Lender
would have been entitled to receive with respect to the participation sold to
such Participant, unless the sale of the participation to such Participant is
made with the Borrower’s prior written consent. A Participant shall not be
entitled to the benefits of Section 3.01 unless the Borrower is notified of the
participation sold to such Participant. Without limitation of the preceding,
(i) a Participant that would be a Foreign Lender if it were a Lender shall not
be entitled to the benefits of Section 3.01 of this Agreement unless the
Borrower is notified of the participation sold to such Participant and

 

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such Participant agrees, for the benefit of the Borrower, to comply with
Section 3.01(e) of this Agreement as though it were a Lender and (ii) a
Participant that is a United States resident individual shall not be entitled to
the benefits of Section 3.01 as if it were a Lender unless the Participant
agrees to comply with Section 3.01(f) of this Agreement as though it were a
Lender.

(g) Any Lender may at any time, without the consent of the Borrower or the
Facility Agent, pledge or assign a security interest in all or any portion of
its rights under this Agreement (including under its Note, if any) to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

(h) Notwithstanding anything to the contrary contained herein, (i) any Lender
may in accordance with applicable Law create a security interest in all or any
portion of the Loans owing to it and the Note, if any held by it and (ii) any
Lender that is a Fund may, without the consent of the Borrower or the Facility
Agent, create a security interest in all or any portion of the Loans owing to it
and the Note, if any, held by it to the trustee for holders of obligations owed,
or securities issued, by such Fund as security for such obligations or
securities; provided that unless and until such trustee actually becomes a
Lender in compliance with the other provisions of this Section 10.07, (x) no
such pledge shall release the pledging Lender from any of its obligations under
the Financing Documents and (y) such trustee shall not be entitled to exercise
any of the rights of a Lender under the Financing Documents even though such
trustee may have acquired ownership rights with respect to the pledged interest
through foreclosure or otherwise.

SECTION 10.08. Confidentiality. Each of the Agents and the Lenders agrees to
maintain the confidentiality of the Information, except that Information may be
disclosed (a) to its Affiliates and its Affiliates’ directors, officers,
employees, trustees, investment advisors 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 required to be disclosed to any Governmental Authority; (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) subject to an agreement
containing provisions substantially the same as those of this Section 10.08 (or
as may otherwise be reasonably acceptable to the Borrower), to any pledgee
referred to in Section 10.07(g), counterparty to a Interest Hedging Agreement or
Other Hedging Agreement, Assignee of or Participant in, or any prospective
Assignee of or Participant in, any of its rights or obligations under this
Agreement; (f) with the written consent of the Borrower; (g) to the extent such
Information becomes publicly available other than as a result of a breach of
this Section 10.08; (h) to any Governmental Authority or examiner (including the
National Association of Insurance Commissioners or any other similar
organization) regulating any Lender, to the extent requested by such
Governmental Authority or examiner; or (i) to any rating agency when required by
it (it being understood that, prior to any such disclosure, such rating agency
shall undertake to preserve the confidentiality of any Information relating to
the Borrower received by it from such Lender). In addition, the Agents and the
Lenders may disclose the existence of this Agreement and information about this
Agreement to market data collectors, similar service providers to the lending
industry, and

 

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service providers to the Agents and the Lenders in connection with the
administration and management of this Agreement, the other Financing Documents,
the Commitments and the Loans. For the purposes of this Section 10.08,
“Information” means all information received from the Borrower relating to the
Borrower or any Subsidiary or its business, other than any such information that
is publicly available to any Agent or any Lender prior to disclosure by the
Borrower other than as a result of a breach of this Section 10.08; provided
that, in the case of information received from the Borrower after the date
hereof, such information (i) is clearly identified at the time of delivery as
confidential or (ii) is delivered pursuant to Section 6.01, Section 6.02, or
Section 6.03 hereof.

SECTION 10.09. Setoff. In addition to any rights and remedies of the Lenders
provided by Law, upon the occurrence and during the continuance of any Event of
Default, each Lender and each of its Affiliates are authorized at any time and
from time to time, without prior notice to the Borrower or any of its
Subsidiaries, any such notice being waived by the Borrower (on its own behalf
and on behalf of its Subsidiaries) to the fullest extent permitted by applicable
Law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held by, and other Indebtedness at any
time owing by, such Lender and its Affiliates to or for the credit or the
account of the Borrower and its Subsidiaries against any and all Obligations
owing to such Lender and its Affiliates hereunder or under any other Financing
Document, now or hereafter existing, irrespective of whether or not such Agent
or such Lender or Affiliate shall have made demand under this Agreement or any
other Financing Document and although such Obligations may be contingent or
unmatured or denominated in a currency different from that of the applicable
deposit or Indebtedness. Each Lender agrees promptly to notify the Borrower and
the Facility Agent after any such set off and application made by such Lender;
provided that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Facility Agent and each Lender
under this Section 10.09 are in addition to other rights and remedies (including
other rights of setoff) that the Facility Agent and such Lender may have.

SECTION 10.10. Counterparts. This Agreement and each other Financing Document
may be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Delivery by telecopier or other means of electronic delivery of an
executed counterpart of a signature page to this Agreement and each other
Financing Document shall be effective as delivery of an original executed
counterpart of this Agreement and such other Financing Document. The Agents may
also require that any such documents and signatures delivered by telecopier or
other means of electronic delivery be confirmed by a manually signed original
thereof; provided that the failure to request or deliver the same shall not
limit the effectiveness of any document or signature delivered by telecopier or
other means of electronic delivery.

SECTION 10.11. Integration. This Agreement, together with the other Financing
Documents, comprises the complete and integrated agreement of the parties on the
subject matter hereof and thereof and supersedes all prior agreements, written
or oral, on such subject matter. In the event of any conflict between the
provisions of this Agreement and those of any other Financing Document, the
provisions of this Agreement shall control; provided that the inclusion of
supplemental rights or remedies in favor of the Agents, the Lenders or the
Interest Rate Hedge Banks in any other Financing Document shall not be deemed a
conflict with

 

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this Agreement. Each Financing Document was drafted with the joint participation
of the respective parties thereto and shall be construed neither against nor in
favor of any party, but rather in accordance with the fair meaning thereof.

SECTION 10.12. Survival of Representations and Warranties. All representations
and warranties made hereunder and in any other Financing Document or other
document delivered pursuant hereto or thereto or in connection herewith or
therewith shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by each Agent
and each Lender, regardless of any investigation made by any Agent or any Lender
or on their behalf and notwithstanding that any Agent or any Lender may have had
notice or knowledge of any Default at the time of any Borrowing.

SECTION 10.13. Severability. If any provision of this Agreement or the other
Financing Documents is held to be illegal, invalid or unenforceable, the
legality, validity and enforceability of the remaining provisions of this
Agreement and the other Financing Documents shall not be affected or Impaired
thereby. The invalidity of a provision in a particular jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 10.14. GOVERNING LAW.

(a) THIS AGREEMENT AND EACH OTHER FINANCING DOCUMENT 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 ANY FINANCING 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 ANY FINANCING DOCUMENT, OR THE
TRANSACTIONS RELATED THERETO, 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, EACH AGENT AND EACH
LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. THE BORROWER, EACH AGENT AND EACH LENDER
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 ANY FINANCING DOCUMENT OR OTHER DOCUMENT RELATED THERETO.

SECTION 10.15. 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 ANY FINANCING DOCUMENT OR IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY

 

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OF THEM WITH RESPECT TO ANY FINANCING 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 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 10.15 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.

SECTION 10.16. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrower, each Lender and each Agent and
thereafter shall be binding upon and inure to the benefit of the Borrower, each
Agent and each Lender and their respective permitted successors and assigns.

SECTION 10.17. Lender Action. Each Lender agrees that it shall not take or
institute any actions or proceedings, judicial or otherwise, for any right or
remedy against the Borrower under any of the Financing Documents (including the
exercise of any right of setoff, rights on account of any banker’s lien or
similar claim or other rights of self-help), or institute any actions or
proceedings, or otherwise commence any remedial procedures, with respect to any
Collateral or any other Property of the Borrower and its Subsidiaries, without
prior written notice to the Facility Agent. The provision of this Section 10.17
are for the sole benefit of the Lenders and shall not afford any right to, or
constitute a defense available to, the Borrower and its Subsidiaries.

SECTION 10.18. USA PATRIOT Act. Each Lender hereby notifies the Borrower that
pursuant to the requirements of the USA PATRIOT 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 USA PATRIOT
Act.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

 

PUGET MERGER SUB INC. By  

/S/    CHRISTOPHER LESLIE

Name:   Christopher Leslie Title:   President BARCLAYS BANK PLC, as Facility
Agent By  

/S/    SYDNEY G. DENNIS

Name:   Sydney G. Dennis Title:   Director DRESDNER BANK AG NEW YORK BRANCH, as
Co-Syndication Agent By  

/S/    JONATHAN NEWMAN

Name:   Jonathan Newman Title:   Director By  

/S/    JORGE RODRIGUEZ

Name:   Jorge Rodriguez Title:   Managing Director COBANK, ACB, as
Co-Syndication Agent By  

/S/    DALE KEYES

Name:   Dale Keyes Title:   Vice President

THE ROYAL BANK OF SCOTLAND PLC,

as Co-Documentation Agent

By  

/S/    ANDREW TAYLOR

Name:   Andrew Taylor Title:   Vice President

THE BANK OF NOVIA SCOTIA,

as Co-Documentation Agent

By  

/S/    THANE RATTEW

Name:   Thane Rattew Title:   Managing Director

 

      Puget Holdco Credit Agreement

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BARCLAYS BANK PLC, as Lender, By  

/S/    SYDNEY G. DENNIS

Name:   Sydney G. Dennis Title:   Director DRESDNER BANK AG NEW YORK BRANCH, as
Lender By  

/S/    JONATHAN NEWMAN

Name:   Jonathan Newman Title:   Director By  

/S/    JORGE RODRIGUEZ

Name:   Jorge Rodriguez Title:   Managing Director

 

      Puget Holdco Credit Agreement