Unassociated Document


    Exhibit 10.2

    
 

    EXECUTION
COPY

     

    
      
        
          

        



       

      


    

    CREDIT
AGREEMENT

     

    Dated as
of February 6, 2009

     

    among

     

    PUGET
SOUND ENERGY, INC.

    as
Borrower,

     

    BARCLAYS
BANK PLC

    as
Facility Agent,

     

    THE
LENDERS PARTY HERETO

     

    and

     

    THE
ISSUING BANKS REFERRED TO HEREIN

    as
Issuing Banks

     

    ___________________

     

    DRESDNER
BANK AG NEW YORK BRANCH

    as
Syndication Agent

     

    and

     

    BAYERISCHE
LANDESBANK, NEW YORK BRANCH

     

    CAIXA
GERAL DE DEPOSITOS, NEW YORK BRANCH

     

    EXPORT
DEVELOPMENT CANADA

    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

     

    
      
        
          

        



       

      


    

    



    
      
         


      

      
         


        
        

      

      
         


      

    

    
 

    
      TABLE
OF CONTENTS

       

       

      
        	
                ARTICLE I
      Definitions and Accounting Terms

              


      

       

      
        	
                SECTION 1.01.

              	
                Defined
      Terms

              


      

      
        	
                SECTION 1.02.

              	
                Other
      Interpretive Provisions

              


      

      
        	
                SECTION 1.03.

              	
                Accounting
      Terms and Principles

              


      

      
        	
                SECTION 1.04.

              	
                Rounding

              


      

      
        	
                SECTION 1.05.

              	
                References
      to Agreements, Laws, Etc.

              


      

      
        	
                SECTION 1.06.

              	
                Times
      of Day

              


      

      
        	
                SECTION 1.07.

              	
                Timing
      of Payment of Performance

              


      

      
        	
                SECTION 1.08.

              	
                Authorized
      Officers

              


      

       

      
        	
                ARTICLE II
      The Commitments and Credit Extensions and
  Continuations

              


      

       

      
        	
                SECTION 2.01.

              	
                The
      Loans

              


      

      
        	
                SECTION 2.02.

              	
                Borrowings

              


      

      
        	
                SECTION 2.03.

              	
                Prepayments;
      Reduction and Termination of
Commitments

              


      

      
        	
                SECTION 2.04.

              	
                Repayment
      of Loans

              


      

      
        	
                SECTION 2.05.

              	
                Interest

              


      

      
        	
                SECTION 2.06.

              	
                Fees

              


      

      
        	
                SECTION 2.07.

              	
                Computation
      of Interest and Fees

              


      

      
        	
                SECTION 2.08.

              	
                Evidence
      of Indebtedness

              


      

      
        	
                SECTION 2.09.

              	
                Payments
      Generally.

              


      

      
        	
                SECTION 2.10.

              	
                Sharing
      of Payments

              


      

      
        	
                SECTION 2.11.

              	
                Incremental
      Facility

              


      

      
        	
                SECTION 2.12.

              	
                Liquidity
      Letters of Credit.

              


      

      
        	
                SECTION 2.13.

              	
                Energy
      Hedging Letters of Credit.

              


      

      
        	
                SECTION 2.14.

              	
                Existing
      Letters of Credit.

              


      

       

      
        	
                ARTICLE III
      Taxes, Increased Costs Protection and
Illegality

              


      

       

      
        	
                SECTION 3.01.

              	
                Taxes.

              


      

      
        	
                SECTION 3.02.

              	
                Illegality

              


      

      
        	
                SECTION 3.03.

              	
                Inability
      to Determine Rates

              


      

      
        	
                SECTION 3.04.

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

              


      

      
        	
                SECTION 3.05.

              	
                Matters
      Applicable to All Requests for
Compensation

              


      

      
        	
                SECTION 3.06.

              	
                Replacement of Lenders Under Certain Circumstances

              


      

      
        	
                SECTION 3.07.

              	
                Survival

              


      

       

      
        	
                ARTICLE IV
      Conditions Precedent

              


      

       

      
        	
                SECTION 4.01.

              	
                Effective
      Date

              


      

      
        	
                SECTION 4.02.

              	
                Financial
      Closing Date

              


      

      
        	
                SECTION 4.03.

              	
                Conditions
      to All Borrowings

              


      

       

      
        	
                ARTICLE V
      Representations and Warranties

              


      

       

      
        	
                SECTION 5.01.

              	
                Existence,
      Qualification and Power; Compliance with
Laws

              


      

      
        	
                SECTION 5.02.

              	
                Binding
      Effect

              


      

      
        	
                SECTION 5.03.

              	
                Authorization;
      No Contravention

              


      

      
        	
                SECTION 5.04.

              	
                Governmental
      Authorization; Other Consents

              


      

      
        	
                SECTION 5.05.

              	
                Taxes

              


      

      
        	
                SECTION 5.06.

              	
                No
      Default

              


      

      
        	
                SECTION 5.07.

              	
                Financial
      Statements; No Material Adverse Effect;
  Indebtedness

              


      

      
        	
                SECTION 5.08.

              	
                Ranking

              


      

      
        	
                SECTION 5.09.

              	
                Ownership
      of Assets

              


      

      
        	
                SECTION 5.10.

              	
                No
      Other Business

              


      

      
        	
                SECTION 5.11.

              	
                Insurance

              


      

      
        	
                SECTION 5.12.

              	
                Disclosure

              


      

      
        	
                SECTION 5.13.

              	
                Subsidiaries;
      Equity Interests

              


      

      
        	
                SECTION 5.14.

              	
                Affiliate
      Transactions

              


      

      
        	
                SECTION 5.15.

              	
                Litigation

              


      

      
        	
                SECTION 5.16.

              	
                Solvency

              


      

      
        	
                SECTION 5.17.

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

              


      

      
        	
                SECTION 5.18.

              	
                ERISA
      Compliance

              


      

      
        	
                SECTION 5.19.

              	
                Environmental
      Compliance

              


      

      
        	
                SECTION 5.20.

              	
                Labor
      Disputes

              


      

       

      
        	
                ARTICLE VI
      Affirmative Covenants

              


      

       

      
        	
                SECTION 6.01.

              	
                Financial
      Statements

              


      

      
        	
                SECTION 6.02.

              	
                Compliance
      Certificate

              


      

      
        	
                SECTION 6.03.

              	
                Notices

              


      

      
        	
                SECTION 6.04.

              	
                Inspection
      Rights

              


      

      
        	
                SECTION 6.05.

              	
                Compliance
      with Laws

              


      

      
        	
                SECTION 6.06.

              	
                Preservation
      of Existence, Etc.

              


      

      
        	
                SECTION 6.07.

              	
                Compliance
      with Environmental Laws

              


      

      
        	
                SECTION 6.08.

              	
                Maintenance
      of Properties; Ownership of the
Borrower

              


      

      
        	
                SECTION 6.09.

              	
                Maintenance
      of Insurance

              


      

      
        	
                SECTION 6.10.

              	
                Use
      of Proceeds

              


      

      
        	
                SECTION 6.11.

              	
                Capital
      Expenditures

              


      

      
        	
                SECTION 6.12.

              	
                Maintenance
      of Ratings

              


      

      
        	
                SECTION 6.13.

              	
                Payment
      of Obligations

              


      

      
        	
                SECTION 6.14.

              	
                Cooperation

              


      

      
        	
                SECTION 6.15.

              	
                Books
      and Records

              


      

      
        	
                SECTION 6.16.

              	
                Financing
      Documents; Material Documents

              


      

       

      
        	
                ARTICLE VII
      Negative Covenants

              


      

       

      
        	
                SECTION 7.01.

              	
                Liens

              


      

      
        	
                SECTION 7.02.

              	
                Dispositions

              


      

      
        	
                SECTION 7.03.

              	
                Indebtedness

              


      

      
        	
                SECTION 7.04.

              	
                Investments

              


      

      
        	
                SECTION 7.05.

              	
                Restricted
      Payments.

              


      

      
        	
                SECTION 7.06.

              	
                Fundamental
      Changes

              


      

      
        	
                SECTION 7.07.

              	
                Operating
      Leases

              


      

      
        	
                SECTION 7.08.

              	
                Nature
      of Business

              


      

      
        	
                SECTION 7.09.

              	
                Transactions
      with Affiliates; Affiliate Services
Agreements

              


      

      
        	
                SECTION 7.10.

              	
                Subsidiaries

              


      

      
        	
                SECTION 7.11.

              	
                Accounting
      Changes

              


      

      
        	
                SECTION 7.12.

              	
                Restrictive
      Agreements

              


      

      
        	
                SECTION 7.13.

              	
                Abandonment

              


      

      
        	
                SECTION 7.14.

              	
                Certain
      Financial Covenants

              


      

      
        	
                SECTION 7.15.

              	
                Existing
      Indebtedness

              


      

      
        	
                SECTION 7.16.

              	
                Preservation
      of Rights

              


      

      
        	
                SECTION 7.17.

              	
                Equity
      Issuance

              


      

       

      
        	
                ARTICLE VIII
      Events of Default and Remedies

              


      

       

      
        	
                SECTION 8.01.

              	
                Events
      of Default

              


      

      
        	
                SECTION 8.02.

              	
                Remedies
      Upon Event of Default

              


      

      
        	
                SECTION 8.03.

              	
                Application
      of Funds

              


      

      
        	
                SECTION 8.04.

              	
                Equity
      Investors’ Right to Cure

              


      

       

      
        	
                ARTICLE IX
      Facility Agent and Other Agents

              


      

       

      
        	
                SECTION 9.01.

              	
                Appointment
      and Authorization of Agents

              


      

      
        	
                SECTION 9.02.

              	
                Delegation
      of Duties

              


      

      
        	
                SECTION 9.03.

              	
                Liability
      of Agents

              


      

      
        	
                SECTION 9.04.

              	
                Reliance
      by Agents

              


      

      
        	
                SECTION 9.05.

              	
                Notice
      of Default

              


      

      
        	
                SECTION 9.06.

              	
                Credit
      Decision; Disclosure of Information by
Agents

              


      

      
        	
                SECTION 9.07.

              	
                Indemnification
      of Agents and Issuing Banks

              


      

      
        	
                SECTION 9.08.

              	
                Agents
      in Their Individual Capacities

              


      

      
        	
                SECTION 9.09.

              	
                Successor
      Agents

              


      

      
        	
                SECTION 9.10.

              	
                Facility
      Agent May File Proofs of Claim

              


      

      
        	
                SECTION 9.11.

              	
                Other
      Agents; Arrangers and Managers

              


      

       

      
        	
                ARTICLE X
      Miscellaneous

              


      

       

      
        	
                SECTION 10.01.

              	
                Amendments,
      Etc.

              


      

      
        	
                SECTION 10.02.

              	
                Notices
      and Other Communications; Facsimile
Copies

              


      

      
        	
                SECTION 10.03.

              	
                No
      Waiver; Cumulative Remedies

              


      

      
        	
                SECTION 10.04.

              	
                Attorney
      Costs and Expenses

              


      

      
        	
                SECTION 10.05.

              	
                Indemnification
      by the Borrower

              


      

      
        	
                SECTION 10.06.

              	
                Payments
      Set Aside

              


      

      
        	
                SECTION 10.07.

              	
                Successors
      and Assigns

              


      

      
        	
                SECTION 10.08.

              	
                Confidentiality

              


      

      
        	
                SECTION 10.09.

              	
                Setoff

              


      

      
        	
                SECTION 10.10.

              	
                Counterparts

              


      

      
        	
                SECTION 10.11.

              	
                Integration

              


      

      
        	
                SECTION 10.12.

              	
                Survival
      of Representations and Warranties

              


      

      
        	
                SECTION 10.13.

              	
                Severability

              


      

      
        	
                SECTION 10.14.

              	
                GOVERNING
      LAW

              


      

      
        	
                SECTION 10.15.

              	
                WAIVER
      OF RIGHT TO TRIAL BY JURY

              


      

      
        	
                SECTION 10.16.

              	
                Binding
      Effect

              


      

      
        	
                SECTION 10.17.

              	
                Lender
      Action

              


      

      
        	
                SECTION 10.18.

              	
                USA
      PATRIOT Act

              


      

       

    

    SCHEDULES

     

    
      	
               
      

            	
              1.01A

            	
              Initial
      Material Adverse Effect

            


    

    
      	
               
      

            	
              1.01B

            	
              Scheduled
      Base CapEx

            


    

    
      	
               
      

            	
              1.01C

            	
              Issuing
      Banks

            


    

    
      	
               
      

            	
              2.01

            	
              Commitments

            


    

    
      	
               
      

            	
              5.04

            	
              Governmental
      Authorizations; Other Consents

            


    

    
      	
               
      

            	
              5.13A

            	
              Subsidiaries

            


    

    
      	
               
      

            	
              5.13B

            	
              Equity
      Interests

            


    

    
      	
               
      

            	
              5.14

            	
              Equity
      Investor Affiliate Transactions

            


    

    
      	
               
      

            	
              5.15

            	
              Existing
      Litigation

            


    

    
      	
               
      

            	
              5.19

            	
              Environmental
      Matters

            


    

    
      	
               
      

            	
              6.08

            	
              Dispositions

            


    

    
      	
               
      

            	
              6.09

            	
              Insurance

            


    

    
      	
               
      

            	
              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-1

            	
              Form
      of Borrowing Request

            


    

    
      	
               
      

            	
              A-2

            	
              Form
      of Letter of Credit Request

            


    

    
      	
               
      

            	
              B-1

            	
              Form
      of Capital Expenditure Loan Note

            


    

    
      	
               
      

            	
              B-2

            	
              Form
      of Energy Hedging Loan Note

            


    

    
      	
               
      

            	
              B-3

            	
              Form
      of Liquidity Loan Note

            


    

    
      	
               
      

            	
              C

            	
              Form
      of Assignment and Assumption

            


    

    
      	
               
      

            	
              D-1

            	
              Form
      of Latham & Watkins LLP Financial Closing Date
  Opinion

            


    

    
      	
               
      

            	
              D-2

            	
              Form
      of Perkins Coie LLP Financial Closing Date
  Opinion

            


    

    
      	
               
      

            	
              E

            	
              Form
      of Financial Condition Certificate

            


    

    
      	
               
      

            	
              F

            	
              Terms
      of Subordination

            


    

     


    
      
         


      

      
         


        
        

      

      
         


      

    


    CREDIT
AGREEMENT

     

    This
CREDIT AGREEMENT (“Agreement”) is
entered into as of February 6, 2009, among PUGET SOUND ENERGY, INC., a
Washington corporation (the “Borrower”), BARCLAYS
BANK PLC, as Facility Agent, each Person from time to time party hereto as
Issuing Banks and each lender from time to time party hereto (collectively, the
“Lenders” and
individually, a “Lender”).

     

    RECITALS

     

    The
Borrower has requested that the Lenders extend credit to the Borrower in the
form of (i) revolving loans in an aggregate amount of up to $400,000,000 to
fund ongoing Utility Capital Expenditures (as further described herein, the
“Capital Expenditure
Facility”), (ii) revolving loans in an aggregate amount of up to
$350,000,000 to support energy purchases and hedging activities and for the
issuance of letters of credit in respect thereof (as further described herein,
the “Energy Hedging
Facility”), and (iii) revolving loans in an aggregate amount of up to
$400,000,000 to refinance certain existing indebtedness of the Borrower, for
general corporate purposes and for the issuance of letters of credit (as further
described herein, the “Liquidity Facility,”
and together with the Capital Expenditure Facility and the Energy Hedging
Facility, the “Facilities”) 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 Lender”
has the meaning specified in Section
2.11(b).

     

    “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.

     

    “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” means the
Facility Agent.

     

    “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.

     

    “Agreement” means this
Credit 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, to the
extent the then applicable ratings (x) from both Moody’s and S&P are
Investment Grade or higher, the Applicable Margin will be based on the higher of
such ratings or (y) from either Moody’s or S&P are lower than Investment
Grade, the Applicable Margin will be based on the lower of such ratings; provided, further, 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)

            
	
              A-
      or A3

            	
              0.55%

            	
              0.00%

            	
              0.17%

            
	
              BBB+
      or Baa1

            	
              0.70%

            	
              0.00%

            	
              0.21%

            
	
              BBB
      or Baa2

            	
              0.85%

            	
              0.00%

            	
              0.26%

            
	
              BBB-
      or Baa3

            	
              1.00%

            	
              0.00%

            	
              0.30%

            
	
              BB+
      or Ba1 or below or unrated by either Moody’s or S&P

            	
              1.50%

            	
              0.50%

            	
              0.45%

            


    

    


    “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 C.

     

    “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.

     

    “Available Amount” of
any Letter of Credit means, at any time, the maximum amount available to be
drawn under such Letter of Credit at such time (assuming compliance at such time
with all conditions to drawing).

     

    “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.

     

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

     

    “Borrowing” means a
Capital Expenditure Loan Borrowing, an Energy Hedging Loan Borrowing or a
Liquidity 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-1
hereto, 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).

     

    “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 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
$400,000,000.

     

    “Capital Expenditure
Facility” has the meaning specified in the recitals hereto.

     

    “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(a).

     

    “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(a).

     

    “Capital Expenditure
Note” means a promissory note of the Borrower payable to any Capital
Expenditure Lender, in substantially the form of Exhibit B-1 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 Collateralize”
means to pledge and deposit with or deliver to the Facility Agent, for the
benefit of the Issuing Banks and the Lenders, as collateral for the LC Exposure,
cash or deposit account balances pursuant to documentation in form and substance
reasonably satisfactory to the Facility Agent and the Issuing Banks (which
documents are hereby consented to by the Lenders).

     

    “Cash Equivalents”
means any of the following types of Investments, to the extent owned by the
Borrower or any Operating Company 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;

     

    (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 Operating Company
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 Operating Company 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 Operating Company 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 Operating Company 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.

     

    “Casualty Event” means
any event or any series or related events that gives rise to the receipt by any
Operating Company 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
Issuing Bank (or, for purposes of Section 3.04 of
this Agreement, to any Lending Office of such Lender or Issuing Bank or to such
Lender’s or Issuing Bank’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 clause (a),
(b), or (c) first made
effective and applicable to a Lender or Issuing Bank after the Effective Date
(or in the case of a Lender or Issuing Bank that becomes a party to this
Agreement after the Effective Date, after the date such Lender or Issuing Bank
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 the Parent or the Holding Company, (b)
the Holding Company ceases to hold 100% of the issued and outstanding Equity
Interests in the Borrower except for the Operating Company Preferred Shares
outstanding as of May 16, 2008, or (c) 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 the Parent or the
Holding Company, the Board of Directors (or comparable governing body) of the
Parent or the Holding Company, 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 Holding Company
(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 the Parent
or the Holding Company, 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 Capital Expenditure Loans, Energy Hedging Loans
or Liquidity Loans and, when used in reference to any Commitment, refers to
whether such Commitment is a Capital Expenditure Commitment, an Energy Hedging
Commitment or a  Liquidity 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, Bayerische Landesbank New York Branch, Caixa
Geral De Depositos, New York Branch and Export Development Canada, each in its
capacity as a documentation agent hereunder.

     

    “Commitment” means,
with respect to any Lender, the sum of the Capital Expenditure Commitments, the
Energy Hedging Commitments and the Liquidity Commitments of such
Lender.

     

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

     

    “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 Operating
Company 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 Operating Company Group
appearing on such balance sheet.

     

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

     

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

     

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

     

    “Credit Exposure”
means (a) with respect to any Liquidity Lender at any time, the sum of the
outstanding principal amount of such Liquidity Lender’s Liquidity Loans and its
Liquidity LC Exposure at such time, and (b) with respect to any Energy Hedging
Lender at any time, the sum of the outstanding principal amount of such Energy
Hedging Lender’s Energy Hedging Loans and its Energy Hedging LC Exposure at such
time.

     

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

     

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

     

    “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  Capital Expenditure Loans, the Energy Hedging Loans or the
Liquidity 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.

     

    “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.

     

    “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 Casualty Event 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 Operating Company Group, as determined on a
consolidated basis without duplication in accordance with GAAP, net income (or
loss) of the Operating Company 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 Operating Company 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
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.

     

    “Energy Hedging Availability
Period” means the period from and including the Financial Closing Date
until the earlier of (a) the date of termination of the Energy Hedging
Commitments in accordance with this Agreement and (b) the Final Maturity
Date.

     

    “Energy Hedging
Commitment” means, as to any Energy Hedging Lender, its obligation to
make Energy Hedging Loans to the Borrower in an aggregate principal amount not
to exceed the amount set forth opposite such Energy Hedging Lender’s name on
Schedule 2.01
hereto under the caption “Energy Hedging Commitment” or in the Assignment and
Assumption pursuant to which such Energy Hedging 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 Energy Hedging
Commitments of all Energy Hedging Lenders as of the Effective Date is
$350,000,000, a portion of which, referred to herein as the Energy Hedging
Letter of Credit Sublimit shall be available for the participation in Energy
Hedging Letters of Credit.

     

    “Energy Hedging
Facility” has the meaning specified in the recitals hereto.

     

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

     

    “Energy Hedging Issuing
Bank” means (a) each Energy Hedging Lender identified as a “Energy
Hedging Issuing Bank” on Schedule 1.01C, in
its capacity as the issuer of Energy Hedging Letters of Credit hereunder, and
its successors and assigns in such capacity as provided in Section 2.13 and
(b) (i) each other Energy Hedging Lender designated by the Borrower as an
“Energy Hedging Issuing Bank” hereunder that has agreed to such designation (and
is reasonably acceptable to the Facility Agent) and that specifies its maximum
Energy Hedging Issuing Bank Fronting Amount or (ii) any other Energy Hedging
Lender (acting directly or through an Affiliate) that has agreed in form and
substance satisfactory to the Borrower and the Facility Agent that such other
Energy Hedging Lender (or its Affiliate) will act as “Energy Hedging Issuing
Bank” hereunder and that specifies its maximum Energy Hedging Issuing Bank
Fronting Amount.  Any Energy Hedging Issuing Bank may, in its
discretion, arrange for one or more Energy Hedging Letters of Credit to be
issued by Affiliates of such Energy Hedging Issuing Bank, in which case the term
“Energy Hedging Issuing Bank” shall include any such Affiliate with respect to
Energy Hedging Letters of Credit issued by such Affiliate.  Each
reference to “Energy Hedging Issuing Bank” herein shall be a reference to each
and any Energy Hedging Issuing Bank.

     

    “Energy Hedging Issuing Bank
Fronting Amount” means the dollar amount set forth on Schedule 1.01C
opposite the name of each Energy Hedging Issuing Bank, as such amount may be
increased or decreased pursuant to the written agreement of the Borrower, the
applicable Energy Hedging Issuing Banks and the Facility Agent and reflected in
the Register maintained by the Facility Agent; provided that, the
Energy Hedging Issuing Bank Fronting Amount of an Energy Hedging Issuing Bank
shall be increased at the written request of the Borrower by the unutilized
portion of such Energy Hedging Issuing Bank’s Liquidity Issuing Bank Fronting
Amount to an amount not to exceed, together with the Energy Hedging Issuing Bank
Fronting Amounts of all other Energy Hedging Issuing Banks, the aggregate amount
of the Energy Hedging Commitments.

     

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

     

    “Energy Hedging LC
Exposure” means, at any time, the sum of (a) the aggregate undrawn amount
of all outstanding Energy Hedging Letters of Credit at such time plus (b) the
aggregate amount of all Energy Hedging LC Disbursements that have not yet been
reimbursed or financed by or on behalf of the Borrower at such time. The Energy
Hedging LC Exposure of any Energy Hedging Lender at any time shall be its pro rata share of the total
Energy Hedging LC Exposure at such time, based upon the respective Energy
Hedging Commitments of the Energy Hedging Lenders.

     

    “Energy Hedging
Lender” means, at any time, any Lender that has an Energy Hedging
Commitment or that holds an Energy Hedging Loan at such time.

     

    “Energy Hedging Letter of
Credit” has the meaning specified in Section 2.01(c)
hereof.

     

    “Energy Hedging Letter of
Credit Sublimit” means, on any date of determination, the sum of the
Energy Hedging Issuing Bank Fronting Amount for each Energy Hedging Issuing
Bank; provided
that the aggregate amount thereof shall at no time exceed the then aggregate
amount of the Energy Hedging Commitments.

     

    “Energy Hedging Loan”
means revolving loans (and including, for greater certainty, any Energy Hedging
Incremental Loans) incurred by the Borrower for the purpose of supporting energy
purchases and hedging activities of the Borrower and made by each of the Energy
Hedging Lenders and Energy Hedging Incremental Lender pursuant to Sections 2.01(b),
Section 2.11 or
Section
2.13.

     

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

     

    “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 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.

     

    “Excluded Taxes”
means, with respect to any Agent, any Lender, any Issuing Bank 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 or any Issuing Bank, in which its applicable Lending Office is located,
or a jurisdiction in which such Agent, Lender, Issuing Bank 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 or an Issuing Bank’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 Issuing Bank or recipient is located, (d) in the
case of a Foreign Lender (other than an 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, Issuing Bank 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.

     

    “Existing Letters of
Credit” means the letters of credit outstanding under the Existing
Revolving Credit Agreement on the Financial Closing Date; provided that the
aggregate amount of all outstanding Existing Letters of Credit shall not exceed
the aggregate amount, with respect to (x) Energy Hedging Facility, the Energy
Hedging Letter of Credit Sublimit and (y) the Liquidity Facility, the Liquidity
Letter of Credit Sublimit.

     

    “Existing Revolving Credit
Agreement” means the $500,000,000 Amended and Restated Credit Agreement,
dated as of March 29, 2007 by and among Puget Sound Energy, Inc., as Borrower,
the Lenders party thereto, Wachovia Bank, National Association, as
Administrative Agent, Citibank, National Association, as Syndication Agent, and
Wachovia Capital Markets, LLC and Citigroup Global Markets Inc., as Co-Lead
Arrangers and Joint Bookrunners.

     

    “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 Capital Expenditure Loans, the Energy Hedging Loans and the
Liquidity 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.

     

    “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 and the
Merger is consummated.

     

    “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 Fee Letters, and
(iii) the Notes.

     

    “First Mortgage Bond
Documents” means, collectively, (i) the First and Refunding Mortgage
dated as of June 2, 1924 issued by the Borrower (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 the Borrower (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 or Issuing Bank 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, administrative tribunal, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.

     

    “Guarantee” means, as
to any Person, without duplication, (a) any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other monetary obligation payable or
performable by another Person (the “Primary Obligor”) in
any manner, whether directly or indirectly, and including any obligation of such
Person, direct or indirect, (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or other monetary
obligation, (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.

     

    “Holding Company”
means, prior to the effective time of the Merger, Merger Sub and after the
effective time of the Merger, Puget Energy, Inc., a Washington
corporation.

     

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

     

    “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 Borrower 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 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).

     

    “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 the Holding Company to
any member of the Operating Company Group or by any member of the Operating
Company Group to any other member of the Operating Company 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.

     

    “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  Capital Expenditure Loan, an Energy Hedging
Loan or a Liquidity Loan, the Borrower elects in the related Borrowing Request
that such Capital Expenditure Loan, Energy Hedging Loan or Liquidity 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.

     

    “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.

     

    “Investment Grade”
shall mean with respect to the Moody’s corporate credit rating system a rating
of at least Baa3 and with respect to the S&P corporate credit rating system
a rating of at least BBB-.

     

    “Issuance” means any
issuance or sale after the Financial Closing Date by any member of the Operating
Company 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 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
Subsidiary 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.

     

    “Issuing Bank” means a
Liquidity Issuing Bank or an Energy Hedging Issuing Bank, as applicable. As used
herein, the term “Issuing Bank” shall
refer to each Issuing Bank.

     

    “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.

     

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

     

    “LC Exposure” means,
at any time, as applicable, (a) the Energy Hedging LC Exposure, or (b) the
Liquidity LC Exposure.

     

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

     

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

     

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

     

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

     

    “Liquidity Availability
Period” means the period from and including the Financial Closing Date
until the earlier of (a) the date of termination of the Liquidity
Commitments in accordance with this Agreement and (b) the Final Maturity
Date.

     

    “Liquidity Commitment”
means, as to any Liquidity Lender, its obligation to make Liquidity Loans to the
Borrower in an aggregate principal amount not to exceed the amount set forth
opposite such Liquidity Lender’s name on Schedule 2.01 hereto
under the caption “Liquidity Commitment” or in the Assignment and Assumption
pursuant to which such Liquidity 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 Liquidity Commitments of all
Liquidity Lenders as of the Effective Date is $400,000,000, a portion of which,
referred to herein as the Liquidity Letter of Credit Sublimit, shall be
available for the participation in Liquidity Letters of Credit.

     

    “Liquidity Facility”
has the meaning specified in the recitals hereto.

     

    “Liquidity Issuing
Bank” means (a) each Liquidity Lender identified as a “Liquidity
Issuing Bank” on Schedule 1.01C, in
its capacity as the issuer of Liquidity Letters of Credit hereunder, and its
successors and assigns in such capacity as provided in Section 2.12 and
(b) (i) each other Liquidity Lender designated by the Borrower as a
“Liquidity Issuing Bank” hereunder that has agreed to such designation (and is
reasonably acceptable to the Facility Agent) and that specifies its maximum
Liquidity Issuing Bank Fronting Amount or (ii) any other Liquidity Lender
(acting directly or through an Affiliate) that has agreed in form and substance
satisfactory to the Borrower and the Facility Agent that such other Liquidity
Lender (or its Affiliate) will act as “Liquidity Issuing Bank” hereunder and
that specifies its maximum Liquidity Issuing Bank Fronting
Amount.  Any Liquidity Issuing Bank may, in its discretion, arrange
for one or more Liquidity Letters of Credit to be issued by Affiliates of such
Liquidity Issuing Bank, in which case the term “Liquidity Issuing Bank” shall
include any such Affiliate with respect to Liquidity Letters of Credit issued by
such Affiliate.  Each reference to “Liquidity Issuing Bank” herein
shall be a reference to each and any Liquidity Issuing Bank.

     

    “Liquidity Issuing Bank
Fronting Amount” means the dollar amount set forth on Schedule 1.01C
opposite the name of each Liquidity Issuing Bank, as such amount may be
increased or decreased pursuant to the written agreement of the Borrower, the
applicable Liquidity Issuing Banks and the Facility Agent and reflected in the
Register maintained by the Facility Agent; provided that, the
Liquidity Issuing Bank Fronting Amount of a Liquidity Issuing Bank shall be
increased at the written request of the Borrower by the unutilized portion of
such Liquidity Issuing Bank’s Energy Hedging Issuing Bank Fronting Amount to an
amount not to exceed, together with the Liquidity Issuing Bank Fronting Amounts
of all other Liquidity Issuing Banks, the aggregate amount of the Liquidity
Commitments.

     

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

     

    “Liquidity LC
Exposure” means, at any time, the sum of (a) the aggregate undrawn amount
of all Liquidity Letters of Credit at such time plus (b) the aggregate amount of
all Liquidity LC Disbursements that have not yet been reimbursed or financed by
or on behalf of the Borrower at such time.  The Liquidity LC Exposure
of any Liquidity Lender at any time shall be its pro rata share of the total
Liquidity LC Exposure at such time, based upon the respective Liquidity
Commitments of the Liquidity Lenders.

     

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

     

    “Liquidity Letter of
Credit” has the meaning specified in Section 2.01(e)
hereof.

     

    “Liquidity Letter of Credit
Sublimit” means, on any date of determination, the sum of the Liquidity
Issuing Bank Fronting Amount for each Liquidity Issuing Bank; provided that the
aggregate amount thereof shall at no time exceed the then aggregate amount of
the Liquidity Commitments.

     

    “Liquidity Loan” means
a Loan made pursuant to Section 2.01(d) or
Section
2.12.

     

    “Liquidity Note” means
a promissory note of the Borrower payable to any Liquidity Lender, in
substantially the form of Exhibit B-3 hereto,
evidencing the aggregate Indebtedness of the Borrower to such Liquidity Lender
resulting from the Liquidity Loans made by such Liquidity Lender.

     

    “Loan” means a Capital
Expenditure Loan, an Energy Hedging Loan or a Liquidity Loan as the context
requires.

     

    “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 (a) Lenders having more than 50% of the
sum of the Total Outstandings, (b) aggregate unused Commitments and (c) LC
Exposure at such time; provided that for the
purposes of determining Majority Lenders, such calculation shall at all times be
made by excluding the Total Outstandings and the unused Commitments of all
Lenders that are Borrower Affiliates or Macquarie 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.

     

    “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 or Agent-Related Person under any of the Financing
Documents.

     

    “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.

     

    “Maximum Energy Hedging
Incremental Facility Amount” means, on any date,
$525,000,000.

     

    “Merger” means the
merger by which the separate existence of the Merger Sub shall cease and the
Merger Sub shall be merged with and into Puget Energy, Inc. pursuant to the
terms of the Merger Agreement.

     

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

     

    “Merger Sub” means
Puget Merger Sub Inc., a Washington corporation.

     

    “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 Casualty Event, the gross proceeds of all cash
actually received by such Operating Company Group Member in connection with such
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 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 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
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 Casualty Event and (y) the transferee of
(or holder of a Lien on) such Property requires that such Indebtedness be
repaid, (iii) “Net Cash Proceeds” shall be net of any cash or Cash
Equivalents received upon the disposition of any non-cash consideration by any
Operating Company Group Member as a result of any Casualty Event and
(iv) 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.

     

    “Note” means a Capital
Expenditure Note, Energy Hedging Note or Liquidity Note, as the context
requires, issued by the Borrower to the Lenders under this
Agreement.

     

    “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.

     

    “OECD Member Bank”
means a bank that (a) is organized under the laws of a country that is a member
of the OECD and (b) has outstanding unguaranteed and unsecured long-term
indebtedness that is rated A- or better by S&P and A3 or better by
Moody’s.

     

    “Operating Company 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.

     

    “Operating Company
FFO” means, for any period, the consolidated EBITDA of the Operating
Company 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 Operating Company 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 Operating Company 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 Operating Company Group for such period (excluding
 any Extraordinary Taxes), (d) Conservation Expenditures for such period
and (e) increases in the Consolidated Working Capital of the Operating Company
Group for such period, in each case determined on a consolidated basis in
accordance with GAAP.

     

    “Operating Company FFO
Coverage Ratio” means, for any Test Period, the ratio of
(a) Operating Company FFO for such Test Period minus Scheduled Base CapEx
for such Test Period, to (b) Operating Company Interest for such Test
Period.

     

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

     

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

     

    “Operating Company
Interest” means, for any period, the aggregate Cash Interest Expense of
the Operating Company 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 Operating Company Group for such period, plus the net amount payable (or
minus the net amount receivable) by the Operating Company Group under Interest
Hedging Agreements relating to interest during such period (other than any such
amount payable or receivable by the Operating Company 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, Operating
Company Interest shall exclude make whole payments.

     

    “Operating Company Net
Debt” means consolidated Indebtedness of the Operating Company Group
minus the amount of cash and Cash Equivalents of the Borrower or any Operating
Company Subsidiary (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
Operating Company Group).

     

    “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 the
Borrower.

     

    “Operating Company
Subsidiary” means a Subsidiary or Subsidiaries of the Borrower (other
than any Immaterial Subsidiary).

     

    “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 Operating Company Group Member designed to protect any
Operating Company 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 Capital Expenditure Loans, the Energy Hedging Loans and
the Liquidity Loans, on any date, the aggregate outstanding unpaid principal
amount thereof after giving effect to any Borrowings (including, without
limitation, issuances of Letters of Credit) and prepayments or repayments of
Capital Expenditure Loans, Energy Hedging Loans and Liquidity 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 Holding
Company, 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 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).

     

    “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 Borrower
(including any newly formed wholly-owned Subsidiary of Borrower that is an
Operating Company Subsidiary (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 Borrower (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 Operating Company 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 E, 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 the Borrower’s ability to meet current and
future needs for electric or gas service at a reasonable cost; and

     

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

     

    “Permitted Refinancing
Indebtedness” means any Indebtedness of any Operating Company 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 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 Company Subsidiaries 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) an Issuing Bank, (iv) 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, (v) 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, (vi) 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, (vii) the central bank
of any country that is a member of the OECD, (viii) 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 (ix) 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; provided, further that any
Permitted Replacement Lender in respect of the Energy Hedging Facility and
Liquidity Facility shall require the prior approval of the relevant Issuing Bank
for such approval.

     

    “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 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 the Borrower 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(o)(i);
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
the Borrower or the Operating Company Subsidiaries 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.

     

    “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.

     

    “Public Service
Property” means property that, pursuant to applicable Laws, is used and
useful or intended to be used and useful for the Borrower’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 the Borrower’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.

     

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

     

    “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 Operating
Company Group Member, the Parent, Parent Holdco (to the extent such Person is
not Puget Holdings), the Holding Company or Puget Holdings with, (b) any
required notice by any Operating Company Group Member, (c) any declaration
containing material obligations of any Operating Company Group Member made or
filed with, or (d) any Operating Company Group Member registration by or
with, any Governmental Authority.

     

    “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 Operating Company 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.

     

    “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.

     

    “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 Holding Company immediately after giving
effect to the Merger; provided that (a)
such investments and fundings shall not be secured by any assets of the Parent,
the Holding Company or any Operating Company Group Member or be recourse to the
Holding Company or any Operating Company 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 in a form reasonably satisfactory to Barclays
Bank, PLC, in its capacity as Collateral Agent.

     

    “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 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.

     

    “Syndication Agent”
means Dresdner Bank AG New York Branch, in its capacity as a syndication agent
hereunder.

     

    “Tax-Free Debt” means
Indebtedness of the Borrower 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).

     

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

     

    “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 Operating Company 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 Operating Company 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.

     

    “Unreimbursed Letter of
Credit Amounts” means the aggregate amount of all Letter of Credit
drawings for which the applicable Issuing Bank has not yet been
reimbursed.

     

    “Unused Capital Expenditure
Revolving Credit Commitment” means, with respect to any Capital
Expenditure Lender at any time, (a) such Capital Expenditure Lender’s
Commitment at such time minus (b) such
Capital Expenditure Loans at such time.

     

    “Unused Energy Hedging
Revolving Credit Commitment” means, with respect to any Energy Hedging
Lenders at any time, (a) such Energy Hedging Lender’s Commitment at such
time minus
(b) such Energy Hedging Lender’s Credit Exposure at such time.

     

    “Unused Liquidity Revolving
Credit Commitment” means, with respect to any Liquidity Lenders at any
time, (a) such Liquidity Lender’s Commitment at such time minus (b) such
Liquidity Lender’s Credit Exposure at such time.

     

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

     

    “Utility Capital
Expenditures” means (i) Capital Expenditures of the Borrower and (ii)
other expenditures of the Borrower, 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.

     

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

     

    ARTICLE II

     

    THE COMMITMENTS AND CREDIT
EXTENSIONS AND CONTINUATIONS

     

     
SECTION 2.01. The Loans.

     

    (a) The Capital Expenditure
Facility.  Each Lender severally agrees, on the terms and
conditions hereinafter set forth, to make advances to the Borrower from time to
time on any Business Day during the Capital Expenditure Availability Period in
an amount for each such Borrowing not to exceed such Lender’s Unused Capital
Expenditure Revolving Credit Commitment at such time. Within the limits of each
Lender’s Unused Capital Expenditure Revolving Credit Commitment, amounts
borrowed under this Section 2.01(a) and
repaid or prepaid may be reborrowed.

     

    (b) The Energy Hedging
Facility.  Each Lender severally agrees, on the terms and
conditions hereinafter set forth, to make advances to the Borrower from time to
time on any Business Day during the Energy Hedging Availability Period in an
amount for each such Borrowing not to exceed such Lender’s Unused Energy Hedging
Revolving Credit Commitment at such time. Within the limits of each Lender’s
Unused Energy Hedging Revolving Credit Commitment, amounts borrowed under this
Section 2.01(b)
and repaid or prepaid may be reborrowed.

     

    (c) The Energy Hedging Facility Letters
of Credit.  Each Energy Hedging Issuing Bank agrees, on terms
and conditions hereinafter set forth, to issue (or cause its Affiliate that is a
commercial bank to issue on its behalf) Letters of Credit (each, an “Energy Hedging Letter of
Credit”) in U.S. Dollars for the account of the Borrower from time to
time on any Business Day during the Energy Hedging Availability Period in an
aggregate Available Amount (i) for all Energy Hedging Letters of Credit issued
by such Energy Hedging Issuing Bank not to exceed at any time its Energy Hedging
Issuing Bank Fronting Amount at such time and (ii) for each such Energy Hedging
Letter of Credit not to exceed an amount equal to the aggregate Unused Energy
Hedging Revolving Credit Commitments of the Energy Hedging Lenders at such
time.

     

    (d) The Liquidity
Facility.  Each Lender severally agrees, on the terms and
conditions hereinafter set forth, to make advances to the Borrower from time to
time on any Business Day during the Liquidity Availability Period in an amount
for each such Borrowing not to exceed such Lender’s Unused Liquidity Revolving
Credit Commitment at such time. Within the limits of each Lender’s Unused
Liquidity Revolving Credit Commitment, amounts borrowed under this Section 2.01(d) and
repaid or prepaid may be reborrowed.

     

    (e) The Liquidity Facility Letters of
Credit.  Each Liquidity Issuing Bank agrees, on terms and
conditions hereinafter set forth, to issue (or cause its Affiliate that is a
commercial bank to issue on its behalf) Letters of Credit (each a “Liquidity Letter of
Credit”) in U.S. Dollars for the account of the Borrower from time to
time on any Business Day during the Liquidity Availability Period in an
aggregate Available Amount (i) for all Liquidity Letters of Credit issued by
such Liquidity Issuing Bank not to exceed at any time its Liquidity Issuing Bank
Fronting Amount at such time and (ii) for each such Liquidity Letter of Credit
not to exceed an amount equal to the aggregate Unused Liquidity Revolving Credit
Commitments of the Liquidity Lenders at such time.

     

     
SECTION 2.02. Borrowings.

     

    (a) Each of
the Capital Expenditure Loan Borrowings, Energy Hedging Loan Borrowings and
Liquidity Loan Borrowings 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,
Energy Hedging Loan Borrowing or Liquidity 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,
Energy Hedging Loan Borrowing or Liquidity Loan Borrowing.  Each such
Borrowing Request shall specify (i) whether the Borrower is requesting a Capital
Expenditure Loan Borrowing, Energy Hedging Loan Borrowing
or  Liquidity 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, Energy Hedging Loan Borrowing or Liquidity Loan
Borrowing, whether the related Capital Expenditure Loan, Energy Hedging Loan or
Liquidity 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).

     

    (b) Borrowings
of any Capital Expenditure Loans, Energy Hedging Loans and Liquidity Loans shall
be in minimum amounts of $1,000,000 and increments of $500,000 in excess
thereof; provided that with
respect to each Facility, (i) there shall be no more than sixty (60)
Borrowings, and (ii) there shall be no more than five (5) different
Interest Periods at any one time for each such Facility.

     

    (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 LIBO 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.

     

    (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 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;

     

    (B) unless
otherwise agreed by the Lenders, within three (3) Business Days after any date
on which any Operating Company 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 the Borrower 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 Operating Company 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
Operating Company 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 Operating Company
Group Member to reimburse the Borrower or Operating Company Group Member (as
applicable) for expenditures previously incurred to repair or replace the
Property which was the subject of such Casualty Event, (5) to the extent
that a Dividend Prohibition applies with respect to the applicable Operating
Company Subsidiary, except that if and to the extent that such Dividend
Prohibition subsequently ceases to apply the prepayment otherwise required by
this clause (B) shall
be reinstated, or (6) to the extent that such prepayment would reasonably be
likely to have an adverse impact on (I) any of the Borrower’s regulatory
approvals (or any applications for or renewals thereof), (II) the Borrower’s
standing with any applicable regulatory agency, (III) the ability of the
Borrower to achieve debt to equity ratios consistent with those of similarly
situated companies in the conduct of the Borrower’s business, or (IV) the rating
of any of the Borrower’s indebtedness or the ability of the Borrower to obtain
credit in the ordinary course of its business.

     

    (C) (I) The
Liquidity Letter of Credit Sublimit shall be permanently reduced from time to
time on the date of each reduction in the Liquidity Facility by the amount, if
any, by which the amount of the Liquidity Letter of Credit Sublimit exceeds the
Liquidity Facility after giving effect to such reduction of the Liquidity
Facility; and (II) The Energy Hedging Letter of Credit Sublimit shall be
permanently reduced from time to time on the date of each reduction in the
Energy Hedging Facility by the amount, if any, by which the amount of the Energy
Hedging Letter of Credit Sublimit exceeds the Energy Hedging  Facility
after giving effect to such reduction of the Energy Hedging
Facility.

     

    (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 first, ratably to the
Unreimbursed Letter of Credit Amounts, second, ratably to
prepay the outstanding Loans and reduce the Commitments in a corresponding
amount, and, third, to Cash
Collateralize the remaining LC Exposure. Upon the drawing of any Letter of
Credit that has been Cash Collateralized, the funds held as Cash Collateral
shall be applied (without any further action by or notice to or from the
Borrower) to reimburse the relevant Issuing Bank or the Lenders, as applicable;
and

     

           
(D) 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).

     

     
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 Commitments (as
such Commitments 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 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
Financial Closing Date 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, the
Holding Company 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 facilities of the Holding
Company, then a portion of such fee or other consideration shall be applied 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
facilities of the Holding Company, 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(g),
the Commitment Fee shall be 0.30% per annum.

     

    (b) The
Borrower agrees to pay (i) to the Facility Agent for the account of each
Lender a participation fee with respect to its participations in Letters of
Credit, which shall accrue at the Applicable Margin for LIBO Rate Loans on the
average daily amount of such Lender’s LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Financial Closing Date to but excluding the later of the date on
which such Lender’s Commitment terminates and the date on which such Lender
ceases to have any LC Exposure, and (ii) to any Issuing Bank of any such
Letter of Credit a fronting fee, which shall accrue at the rate of 0.125% per annum on the average
daily amount of the LC Exposure with respect to such Letter of Credit (excluding
any portion thereof attributable to unreimbursed LC Disbursements) during the
period from and including the Financial Closing Date to but excluding the later
of the date of termination of the Commitments and the date on which there ceases
to be any LC Exposure with respect to such Letter of Credit, as well as such
Issuing Bank’s standard fees with respect to the issuance, amendment, renewal or
extension of such Letter of Credit or processing of drawings
thereunder.  Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year shall
be payable on the third Business Day following such last day, commencing on the
first such date to occur after the Financial Closing Date; provided that all
such fees shall be payable on the date on which the Commitments terminate and
any such fees accruing after the date on which the Commitments terminate shall
be payable on demand.  Any other fees payable to any Issuing Bank
pursuant to this paragraph shall be payable within ten (10) days after written
demand.

     

    (c) 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, 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.  Each Issuing
Bank’s Energy Hedging Issuing Bank Fronting Amount or Liquidity Issuing Bank
Fronting Amount (and any assignment thereof), as applicable, shall be evidenced
by one or more accounts or records maintained by such Issuing Bank and evidenced
by one or more entries in the Register maintained by the Facility
Agent.  The accounts or records maintained by the Facility Agent of an
Issuing Bank’s Energy Hedging Issuing Bank Fronting Amount or Liquidity Issuing
Bank Fronting Amount, as applicable, shall be prima facie evidence absent
manifest error of such amount.  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 the foregoing 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 Note, 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 (or to the relevant Issuing Bank, in the case of
fees payable to it), 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 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 and purchase participations
in Letters of Credit 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 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) From time
to time upon at least 30 days’ prior written notice to the Facility Agent (which
notice shall be promptly transmitted by the Facility Agent to each of the
Lenders), the Borrower shall have the right, subject to the terms and conditions
set forth below, to increase the aggregate amount of the Energy
Hedging  Commitment (any such increase referred to herein, as an
“Energy Hedging
Incremental Loan”); provided that, (i) at
the time of any such request and upon the effectiveness of any such Energy
Hedging Incremental Loan, no Default or Event of Default shall exist or would
exist after giving effect thereto, (ii) such increase must be in a minimum
amount of $50,000,000 and in integral multiples of $5,000,000 above such amount,
(iii) the aggregate Energy Hedging Commitment shall not be increased to an
amount greater than the Maximum Energy Hedging Incremental Facility Amount
without the prior written consent of the Majority Lenders, (iv) no individual
Lender’s Commitment may be increased without such Lender’s written consent, (v)
the Borrower shall execute and deliver a Note or Notes as are necessary and
requested by the applicable Lenders to reflect the increase in the Energy
Hedging Commitment, (vi) Schedule 2.01 shall
be amended to reflect the revised Commitments of the Lenders and (vii) if any
Loans are outstanding at the time of an increase in the Energy Hedging
Commitment, the Borrower will prepay (provided that any such prepayment shall be
subject to Section
2.03), one or more existing Energy Hedging Loans in an amount necessary
such that after giving effect to the increase in the Energy Hedging Commitment,
each Energy Hedging Lender will hold its pro rata share (based on its share of
the revised Energy Hedging Commitment) of outstanding Energy Hedging
Loans.

     

    (b) Any such
increase in the Energy Hedging Commitment shall apply, at the option of the
Borrower, to (x) the Energy Hedging Commitment of one or more existing Lenders;
provided that each Energy Hedging Issuing Bank and any Lender whose Energy
Hedging Commitment is being increased must consent in writing thereto and/or (y)
the creation of a new Energy Hedging Commitment to one or more bank or other
financial institution (any such other bank or other financial institution being
called an “Additional
Lender”); provided that, any
such Additional Lender (A) must be approved by the Borrower and the Facility
Agent (such approval not to be unreasonably withheld) and each Energy Hedging
Issuing Bank and (B) must become a Lender under this Agreement by execution and
delivery of an Assignment and Assumption Agreement; provided further that, in no
event or at any time shall any Borrower Affiliate or Macquarie Affiliate be a
Lender for any Energy Hedging Incremental Loans (including by means of
assignment or participation pursuant to Section
10.07).

     

    (c) The
Borrower shall use the proceeds of the Energy Hedging Incremental Loans solely
for the purpose for which the proceeds of the Energy Hedging Loans may be
used.

     

    (d) Except as
otherwise set forth in this Section 2.11, all
Energy Hedging Incremental Loans shall be subject to the terms and conditions
set forth herein including any Applicable Margin.

     

     
SECTION 2.12. Liquidity Letters of
Credit.

     

    (a)  General.  Subject
to the terms and conditions set forth herein, the Borrower shall be entitled to
request from any Liquidity Issuing Bank the issuance of Liquidity Letters of
Credit in lieu of Borrowings from amounts available under the Liquidity
Facility, at any time and from time to time until the date that is seven (7)
Business Days prior to the Final Maturity Date; provided that the
Borrower shall not be entitled to request Liquidity Letters of Credit from any
Liquidity Issuing Bank that exceeds such Liquidity Issuing Bank’s Liquidity
Issuing Bank Fronting Amount and no Liquidity Issuing Bank shall be required to
issue Liquidity Letters of Credit in an aggregate amount in excess of its
Liquidity Issuing Bank Fronting Amount.  The Borrower shall at all
times be the account party under any Liquidity Letter of Credit and all
Liquidity Letters of Credit shall be issued in a form reasonably acceptable to
the Borrower, the Facility Agent and such Liquidity Issuing Bank.  In
the event of any inconsistency between the terms and conditions of this
Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by the Borrower to, or entered into by
the Borrower with, any Liquidity Issuing Bank relating to any Liquidity Letter
of Credit, the terms and conditions of this Agreement shall
control.

     

    (b)      Notice of Issuance, Amendment,
Renewal, Extension; Certain Conditions.  To request the
issuance of a Liquidity Letter of Credit (or the amendment, renewal or extension
of an outstanding Liquidity Letter of Credit), the Borrower shall hand deliver
or telecopy (provided, however, (i) the Borrower may transmit by electronic
communication, if arrangements for doing so have been approved by the relevant
Liquidity Issuing Bank and (ii) any Letter of Credit Request delivered to
Dresdner Bank AG New York Branch shall be confirmed by facsimile and e-mail to
the persons referred to in Exhibit A-2) to such Liquidity Issuing Bank and the
Facility Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a Letter of Credit Request, substantially in
the form of Exhibit
A-2 hereto, requesting the issuance of a Liquidity Letter of Credit, or
identifying the Liquidity Letter of Credit to be amended, renewed or extended,
and specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day), the date on which such Liquidity Letter of Credit is
to expire (which shall comply with clause (c) of
this Section), the amount of such Liquidity Letter of Credit (which amount shall
not be in excess of the applicable Liquidity Issuing Bank’s Liquidity Issuing
Bank Fronting Amount), the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such
Liquidity Letter of Credit. Such Letter of Credit Request shall be delivered no
later than 1:00 p.m., New York City time, at least four (4) Business Days prior
to the requested date of issuance, amendment, renewal or extension or such
shorter period of time as shall be acceptable to the applicable Issuing
Bank.  If requested by such Liquidity Issuing Bank, the Borrower also
shall submit a letter of credit application on such Liquidity Issuing Bank’s
standard form in connection with any request for a Liquidity Letter of
Credit.  A Liquidity Letter of Credit shall be issued, amended,
renewed or extended only if (and upon issuance, amendment, renewal or extension
of each Liquidity Letter of Credit the Borrower shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the stated amount of the Liquidity Letter of Credit, together
with the amount of the unused Liquidity Issuing Bank Fronting Amount, shall not
exceed the Liquidity Issuing Bank’s Liquidity Issuing Bank Fronting Amount,
(ii) the Liquidity LC Exposure of all Liquidity Lenders shall not exceed
the Liquidity Letter of Credit Sublimit and (iii) the sum of the total
Credit Exposure of all Liquidity Lenders shall not exceed the aggregate
Liquidity Commitments.

     

    (c)      Expiration
Date.  Each Liquidity Letter of Credit shall expire at or prior
to the close of business on the earlier of (i) the date one year after the
date of the issuance of such Liquidity Letter of Credit (or in the case of any
renewal or extension thereof, one year after such renewal or extension), and in
such case may provide for automatic renewal or extension thereof if notice to
the contrary is not delivered by the relevant Liquidity Issuing Bank and
(ii) the date that is one (1) Business Day prior to the Final Maturity
Date.

     

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

     

    (e)      Reimbursement.  If
a Liquidity Issuing Bank shall make any Liquidity LC Disbursement in respect of
a Liquidity Letter of Credit, the Borrower shall reimburse such Liquidity LC
Disbursement by paying to the Facility Agent an amount equal to such Liquidity
LC Disbursement not later than 12:00 p.m., New York City time, on the date that
such Liquidity LC Disbursement is made, if the Borrower shall have received
notice of such Liquidity LC Disbursement prior to 10:00 a.m., New York City
time, on the Business Day immediately preceding such date, or, if such notice
has not been received by the Borrower prior to such time on such date, then not
later than 12:00 p.m., New York City time, on the Business Day immediately
following the day that the Borrower receives notice of such Liquidity LC
Disbursement prior to 10:00 a.m. New York City time, provided that the
Borrower shall be entitled, subject to the conditions to borrowing Loans set
forth in this Agreement, to apply the proceeds of a Borrowing to the repayment
of such Liquidity LC Disbursement.  Any Liquidity LC Disbursement not
reimbursed by the Borrower on the date of such Liquidity LC Disbursement shall
constitute a Liquidity Loan until paid in accordance with the preceding
sentence, which Liquidity Loan shall accrue interest at an Interest Rate
referred to in clause
(h) below.  If the Borrower fails to make such payment when
due, the Facility Agent shall notify each Liquidity Lender of the applicable
Liquidity LC Disbursement, the payment then due from the Borrower in respect
thereof and such Liquidity Lender’s pro rata share
thereof.  Promptly following receipt of such notice, each Liquidity
Lender shall pay to the Facility Agent its pro rata share of the payment
then due from the Borrower, in the same manner as provided in Section 2.02(c)
with respect to Liquidity Loans made by such Liquidity Lender (and Section 2.02(c)
shall apply, mutatis
mutandis, to the payment obligations of the Liquidity Lenders), and the
Facility Agent shall promptly pay to such Liquidity Issuing Bank the amounts so
received by it from the Liquidity Lenders.  Promptly following receipt
by the Facility Agent of any payment from the Borrower pursuant to this
paragraph, the Facility Agent shall distribute such payment to such Liquidity
Issuing Bank or, to the extent that Liquidity Lenders have made payments
pursuant to this paragraph to reimburse such Liquidity Issuing Bank, then to
such Liquidity Lenders and such Liquidity Issuing Bank as their interests may
appear.  Any payment made by a Liquidity Lender pursuant to this
paragraph to reimburse a Liquidity Issuing Bank for any Liquidity LC
Disbursement shall not relieve the Borrower of its obligation to reimburse such
Liquidity LC Disbursement.

     

               (f)           Obligations
Absolute.  The Borrower’s obligation to reimburse Liquidity LC
Disbursements as provided in clause (e) of
this Section shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement under any and
all circumstances whatsoever and irrespective of (i) any lack of validity
or enforceability of any Liquidity Letter of Credit or this Agreement, or any
term or provision therein, (ii) any draft or other document presented under
a Liquidity Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect,
(iii) payment by any Liquidity Issuing Bank under a Liquidity Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Liquidity Letter of Credit, (iv) any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Obligations of the Borrower in respect of any Liquidity Letter of Credit related
document or any other amendment or waiver of or any consent to departure from
all or any of the Liquidity Letter of Credit related documents; (v) the
existence of any claim, set-off, defense or other right that the Borrower may
have at any time against any beneficiary or any transferee of a Liquidity Letter
of Credit (or any Persons for which any such beneficiary or any such transferee
may be acting), any Liquidity Issuing Bank or any other Person, whether in
connection with the transactions contemplated by the Liquidity Letter of Credit
related documents or any unrelated transaction; (vi) any exchange, release or
non perfection of any collateral or any release or amendment or waiver of or
consent to departure from any guarantee, for all or any of the Obligations of
the Borrower in respect of the Liquidity Letter of Credit related documents or
(vii) any other event or circumstance whatsoever, whether or not similar to
any of the foregoing, that might, but for the provisions of this Section 2.12
constitute a legal or equitable discharge of, or provide a right of setoff
against, the Borrower’s obligations hereunder.  Neither the Facility
Agent, the Liquidity Lenders nor any Liquidity Issuing Bank, nor any of their
related parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Liquidity Letter of Credit or
any payment or failure to make any payment thereunder (irrespective of any of
the circumstances referred to in the preceding sentence), or any error,
omission, interruption, loss or delay in transmission or delivery of any draft,
notice or other communication under or relating to any Liquidity Letter of
Credit (including any document required to make a drawing thereunder), any error
in interpretation of technical terms or any consequence arising from causes
beyond the control of any Liquidity Issuing Bank; provided that the
foregoing shall not be construed to excuse such Liquidity Issuing Bank from
liability to the Borrower to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the
Borrower to the extent permitted by applicable Law) suffered by the Borrower
that are caused by such Liquidity Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Liquidity
Letter of Credit comply with the terms thereof. The parties hereto expressly
agree that, in the absence of gross negligence or willful misconduct on the part
of a Liquidity Issuing Bank (as finally determined by a court of competent
jurisdiction), such Liquidity Issuing Bank shall be deemed to have exercised
care in each such determination.  In furtherance of the foregoing and
without limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Liquidity Letter of Credit, the relevant Liquidity Issuing
Bank may, in its sole discretion, either accept and make payment upon such
documents without responsibility for further investigation, regardless of any
notice or information to the contrary, or refuse to accept and make payment upon
such documents if such documents are not in strict compliance with the terms of
such Liquidity Letter of Credit.

     

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

     

    (h)      Interim
Interest.  If any Liquidity Issuing Bank shall make any
Liquidity LC Disbursement, then, unless the Borrower shall reimburse such
Liquidity LC Disbursement in full on the date such Liquidity LC Disbursement is
made, the unpaid amount thereof shall bear interest, for each day from and
including the date such Liquidity LC Disbursement is made to but excluding the
date that the Borrower reimburses such Liquidity LC Disbursement, at the
Alternate Base Rate plus the Applicable Margin; provided that, if the
Borrower fails to reimburse or finance such Liquidity LC Disbursement when due
pursuant to clause (e) of
this Section, then interest shall be paid on such past due amounts at the
Default Rate.  Interest accrued pursuant to this paragraph shall
be for the account of such Liquidity Issuing Bank, except that interest accrued
on and after the date of payment by any Liquidity Lender pursuant to clause (e) of
this Section to reimburse such Liquidity Issuing Bank shall be for the
account of such Liquidity Lender to the extent of such payment.

     

    (i)        Replacement of, and Assignments by,
Liquidity Issuing Banks.  A Liquidity Issuing Bank may be
replaced by, or assign all or a portion of its Liquidity Issuing Bank Fronting
Amount pursuant to, written agreement among the Borrower, the Facility Agent,
the replaced Liquidity Issuing Bank and the successor Liquidity Issuing
Bank.  The Facility Agent shall notify the Liquidity Lenders of any
such replacement of, or assignment by, such Liquidity Issuing
Bank.  At the time any such replacement or assignment shall become
effective, the Borrower shall pay all unpaid fees accrued for the account of the
replaced Liquidity Issuing Bank pursuant to Section 2.06(b),
and in the case of an assignment, the Liquidity Issuing Banks party to such
assignment shall pay a processing and recordation fee of $3,500 to the Facility
Agent.  From and after the effective date of any such replacement or
assignment, (i) the successor Liquidity Issuing Bank shall have all the
rights and obligations of a Liquidity Issuing Bank under this Agreement with
respect to Liquidity Letters of Credit to be issued thereafter and
(ii) references herein to the term “Liquidity Issuing Bank” shall be deemed
to refer to such successor, assignor, assignee or to any previous Liquidity
Issuing Bank, or to such successor, assignor, assignee and all previous
Liquidity Issuing Banks, as the context shall require. After the replacement of
a Liquidity Issuing Bank hereunder, the replaced Liquidity Issuing Bank shall
remain a party hereto and shall continue to have all the rights and obligations
of a Liquidity Issuing Bank under this Agreement with respect to Liquidity
Letters of Credit issued by it prior to such replacement or assignment, but
shall not be required to issue additional Liquidity Letters of Credit (unless it
shall have assigned only a portion of its Liquidity Issuing Bank Fronting Amount
hereunder).  Each replacement or assignment pursuant to this Section 2.12(i) shall
be recorded by the Facility Agent in the Register.

     

    (j)        Cash
Collateralization.  If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower receives notice from the
Facility Agent or the Majority Lenders (or, if the maturity of the Loans has
been accelerated, Liquidity Lenders with Liquidity LC Exposure representing
greater than 50% of the total Liquidity LC Exposure) demanding the deposit of
cash collateral pursuant to this clause (j), the
Borrower shall immediately deposit in an account with the Facility Agent, in the
name of the Facility Agent and for the benefit of the Liquidity Issuing Banks
and the Liquidity Lenders, an amount in cash equal to 103% of the Liquidity LC
Exposure as of such date plus any accrued and unpaid interest thereon; provided that the
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Borrower pursuant to Section 8.01(f).  Such
deposit shall be held by the Facility Agent as collateral for the payment and
performance of the reimbursement obligations of the Borrower under this
Agreement for the Liquidity LC Exposure. The Facility Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such
account.  Other than any interest earned on the investment of such
deposits, which investments shall be made at the option and sole discretion of
the Facility Agent and at the Borrower’s risk and expense, such deposits shall
not bear interest.  Interest or profits, if any, on such investments
shall accumulate in such account.  Moneys in such account shall be
applied by the Facility Agent to reimburse any Liquidity Issuing Bank for
Liquidity LC Disbursements for which it has not been reimbursed and, to the
extent not so applied, shall be held for the satisfaction of the reimbursement
obligations of the Borrower for the Liquidity LC Exposure at such time, but
shall not be applied for any other purpose.  If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three (3) Business Days
following the earlier of (i) the cure or waiver of all Events of Default or
(ii) the date there is no longer any outstanding Liquidity LC
Exposure.

     

     
SECTION 2.13. Energy Hedging Letters of
Credit.

     

    (a)  General.  Subject
to the terms and conditions set forth herein, the Borrower shall be entitled to
request from any Energy Hedging Issuing Bank the issuance of Energy Hedging
Letters of Credit in lieu of Borrowings from amounts available under the Energy
Hedging Facility, at any time and from time to time until the date that is seven
(7) Business Days prior to the Final Maturity Date; provided that the
Borrower shall not be entitled to request Energy Hedging Letters of Credit from
any Energy Hedging Issuing Bank that exceeds such Energy Hedging Issuing Bank’s
Energy Hedging Issuing Bank Fronting Amount and no Energy Hedging Issuing Bank
shall be required to issue Energy Hedging Letters of Credit in an aggregate
amount in excess of its Energy Hedging Issuing Bank Fronting
Amount.  The Borrower shall at all times be the account party under
any Energy Hedging Letter of Credit and all Energy Hedging Letters of Credit
shall be issued in a form reasonably acceptable to the Borrower, the Facility
Agent and such Energy Hedging Issuing Bank.  In the event of any
inconsistency between the terms and conditions of this Agreement and the terms
and conditions of any form of letter of credit application or other agreement
submitted by the Borrower to, or entered into by the Borrower with, any Energy
Hedging Issuing Bank relating to any Energy Hedging Letter of Credit, the terms
and conditions of this Agreement shall control.

     

    (b)      Notice of Issuance, Amendment,
Renewal, Extension; Certain Conditions.  To request the
issuance of an Energy Hedging Letter of Credit (or the amendment, renewal or
extension of an outstanding Energy Hedging Letter of Credit), the Borrower shall
hand deliver or telecopy (provided, however, (i) the Borrower may transmit by
electronic communication, if arrangements for doing so have been approved by the
relevant Energy Hedging Issuing Bank and (ii) any Letter of Credit Request
delivered to Dresdner Bank AG New York Branch shall be confirmed by facsimile
and e-mail to the persons referred to in Exhibit A-2) to such Energy Hedging
Issuing Bank and the Facility Agent (reasonably in advance of the requested date
of issuance, amendment, renewal or extension) a Letter of Credit Request,
substantially in the form of Exhibit A-2 hereto,
requesting the issuance of an Energy Hedging Letter of Credit, or identifying
the Energy Hedging Letter of Credit to be amended, renewed or extended, and
specifying the date of issuance, amendment, renewal or extension (which shall be
a Business Day), the date on which such Energy Hedging Letter of Credit is to
expire (which shall comply with clause (c) of
this Section), the amount of such Energy Hedging Letter of Credit (which amount
shall not exceed the Energy Hedging Issuing Bank’s Energy Hedging Issuing Bank
Fronting Amount), the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Energy
Hedging Letter of Credit. Such Letter of Credit Request shall be delivered no
later than 12:00 Noon, New York City time, at least four (4) Business Days prior
to the requested date of issuance, amendment, renewal or extension or such
shorter period of time as shall be acceptable to the applicable Issuing
Bank.  If requested by such Energy Hedging Issuing Bank, the Borrower
also shall submit a letter of credit application on such Energy Hedging Issuing
Bank’s standard form in connection with any request for an Energy Hedging Letter
of Credit.  An Energy Hedging Letter of Credit shall be issued,
amended, renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Energy Hedging Letter of Credit the Borrower shall be deemed
to represent and warrant that), after giving effect to such issuance, amendment,
renewal or extension (i) the stated amount of the Energy Hedging Letter of
Credit, together with the amount of the unused Energy Hedging Issuing Bank
Fronting Amount, shall not exceed the Energy Hedging Issuing Bank’s Energy
Hedging Issuing Bank Fronting Amount, (ii) the Energy Hedging LC Exposure
of all Energy Hedging Lenders shall not exceed the Energy Hedging Letter of
Credit Sublimit and (iii) the sum of the total Credit Exposure of all
Energy Hedging Lenders shall not exceed the aggregate Energy Hedging
Commitments.

     

    (c)      Expiration
Date.  Each Energy Hedging Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year
after the date of the issuance of such Energy Hedging Letter of Credit (or in
the case of any renewal or extension thereof, one year after such renewal or
extension), and in such case may provide for automatic renewal or extension
thereof if notice to the contrary is not delivered by the relevant Energy
Hedging Issuing Bank and (ii) the date that is one (1) Business Day
prior to the Final Maturity Date.

     

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

     

    (e)      Reimbursement.  If
an Energy Hedging Issuing Bank shall make any Energy Hedging LC Disbursement in
respect of an Energy Hedging Letter of Credit, the Borrower shall reimburse such
Energy Hedging LC Disbursement by paying to the Facility Agent an amount equal
to such Energy Hedging LC Disbursement not later than 12:00 p.m., New York City
time, on the date that such Energy Hedging LC Disbursement is made, if the
Borrower shall have received notice of such Energy Hedging LC Disbursement prior
to 10:00 a.m., New York City time, on the Business Day immediately preceding
such date, or, if such notice has not been received by the Borrower prior to
such time on such date, then not later than 12:00 p.m., New York City time,
on the Business Day immediately following the day that the Borrower receives
notice of such Energy Hedging LC Disbursement prior to 10:00 a.m. New York City
time; provided
that the Borrower shall be entitled, subject to the conditions to borrowing
Loans set forth in this Agreement, to apply the proceeds of a Borrowing to the
repayment of such Energy Hedging LC Disbursement.  Any Energy Hedging
LC Disbursement not reimbursed by the Borrower on the date of such Energy
Hedging LC Disbursement shall constitute an Energy Hedging Loan until paid in
accordance with the preceding sentence, which Energy Hedging Loan shall accrue
interest at an Interest Rate referred to in clause (h) below. If
the Borrower fails to make such payment when due, the Facility Agent shall
notify each Energy Hedging Lender of the applicable Energy Hedging LC
Disbursement, the payment then due from the Borrower in respect thereof and such
Energy Hedging Lender’s pro
rata share thereof.  Promptly following receipt of such notice,
each Energy Hedging Lender shall pay to the Facility Agent its pro rata share of the payment
then due from the Borrower, in the same manner as provided in Section 2.02(c)
with respect to Energy Hedging Loans made by such Energy Hedging Lender (and
Section 2.02(c)
shall apply, mutatis
mutandis, to the payment obligations of the Energy Hedging Lenders), and
the Facility Agent shall promptly pay to such Energy Hedging Issuing Bank the
amounts so received by it from the Energy Hedging Lenders.  Promptly
following receipt by the Facility Agent of any payment from the Borrower
pursuant to this paragraph, the Facility Agent shall distribute such payment to
such Liquidity Issuing Bank or, to the extent that Energy Hedging Lenders have
made payments pursuant to this paragraph to reimburse such Energy Hedging
Issuing Bank, then to such Energy Hedging Lenders and such Energy Hedging
Issuing Bank as their interests may appear.  Any payment made by an
Energy Hedging Lender pursuant to this paragraph to reimburse an Energy Hedging
Issuing Bank for any Energy Hedging LC Disbursement shall not relieve the
Borrower of its obligation to reimburse such Energy Hedging LC
Disbursement.

     

    (f)       Obligations
Absolute.  The Borrower’s obligation to reimburse Energy
Hedging LC Disbursements as provided in clause (e) of
this Section shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement under any and
all circumstances whatsoever and irrespective of (i) any lack of validity
or enforceability of any Energy Hedging Letter of Credit or this Agreement, or
any term or provision therein, (ii) any draft or other document presented
under an Energy Hedging Letter of Credit proving to be forged, fraudulent or
invalid in any respect or any statement therein being untrue or inaccurate in
any respect, (iii) payment by any Energy Hedging Issuing Bank under an
Energy Hedging Letter of Credit against presentation of a draft or other
document that does not comply with the terms of such Energy Hedging Letter of
Credit, (iv) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrower in respect of any
Energy Hedging Letter of Credit related document or any other amendment or
waiver of or any consent to departure from all or any of the Energy Hedging
Letter of Credit related documents; (v) the existence of any claim, set-off,
defense or other right that the Borrower may have at any time against any
beneficiary or any transferee of an Energy Hedging Letter of Credit (or any
Persons for which any such beneficiary or any such transferee may be acting),
any Energy Hedging Issuing Bank or any other Person, whether in connection with
the transactions contemplated by the Energy Hedging Letter of Credit related
documents or any unrelated transaction; (vi) any exchange, release or non
perfection of any collateral or any release or amendment or waiver of or consent
to departure from any guarantee, for all or any of the Obligations of the
Borrower in respect of the Energy Hedging Letter of Credit related documents or
(vii) any other event or circumstance whatsoever, whether or not similar to
any of the foregoing, that might, but for the provisions of this Section 2.13
constitute a legal or equitable discharge of, or provide a right of setoff
against, the Borrower’s obligations hereunder.  Neither the Facility
Agent, the Energy Hedging Lenders nor any Energy Hedging Issuing Bank, nor any
of their related parties, shall have any liability or responsibility by reason
of or in connection with the issuance or transfer of any Energy Hedging Letter
of Credit or any payment or failure to make any payment thereunder (irrespective
of any of the circumstances referred to in the preceding sentence), or any
error, omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to any Energy Hedging
Letter of Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence arising from
causes beyond the control of any Energy Hedging Issuing Bank; provided that the
foregoing shall not be construed to excuse such Energy Hedging Issuing Bank from
liability to the Borrower to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the
Borrower to the extent permitted by applicable Law) suffered by the Borrower
that are caused by such Energy Hedging Issuing Bank’s failure to exercise care
when determining whether drafts and other documents presented under an Energy
Hedging Letter of Credit comply with the terms thereof. The parties hereto
expressly agree that, in the absence of gross negligence or willful misconduct
on the part of an Energy Hedging Issuing Bank (as finally determined by a court
of competent jurisdiction), such Energy Hedging Issuing Bank shall be deemed to
have exercised care in each such determination.  In furtherance of the
foregoing and without limiting the generality thereof, the parties agree that,
with respect to documents presented which appear on their face to be in
substantial compliance with the terms of an Energy Hedging Letter of Credit, the
relevant Energy Hedging Issuing Bank may, in its sole discretion, either accept
and make payment upon such documents without responsibility for further
investigation, regardless of any notice or information to the contrary, or
refuse to accept and make payment upon such documents if such documents are not
in strict compliance with the terms of such Energy Hedging Letter of
Credit.

     

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

     

    (h)      Interim
Interest.  If any Energy Hedging Issuing Bank shall make any
Energy Hedging LC Disbursement, then, unless the Borrower shall reimburse such
Energy Hedging LC Disbursement in full on the date such Energy Hedging LC
Disbursement is made, the unpaid amount thereof shall bear interest, for each
day from and including the date such Energy Hedging LC Disbursement is made to
but excluding the date that the Borrower reimburses such Energy Hedging LC
Disbursement, at the Alternate Base Rate plus the Applicable Margin; provided that, if the
Borrower fails to reimburse or finance such Energy Hedging LC Disbursement when
due pursuant to clause (e) of
this Section, then interest shall be paid on such past due amounts at the
Default Rate.  Interest accrued pursuant to this paragraph shall
be for the account of such Energy Hedging Issuing Bank, except that interest
accrued on and after the date of payment by any Energy Hedging Lender pursuant
to clause (e) of
this Section to reimburse such Energy Hedging Issuing Bank shall be for the
account of such Energy Hedging Lender to the extent of such
payment.

     

    (i)       Replacement of, and Assignments by,
Energy Hedging Issuing Banks.  An Energy Hedging Issuing Bank
may be replaced by, or assign all or a portion of its Energy Hedging Issuing
Bank Fronting Amount pursuant to, written agreement among the Borrower, the
Facility Agent, the replaced or assigning Energy Hedging Issuing Bank and the
successor Energy Hedging Issuing Bank.  The Facility Agent shall
notify the Energy Hedging Lenders of any such replacement of, or assignment by,
such Energy Hedging Issuing Bank.  At the time any such replacement or
assignment shall become effective, the Borrower shall pay all unpaid fees
accrued for the account of the replaced Energy Hedging Issuing Bank pursuant to
Section 2.06(b),
and in the case of an assignment, the Energy Hedging Issuing Banks party to such
assignment shall pay a processing and recordation fee of $3,500 to the Facility
Agent.  From and after the effective date of any such replacement or
assignment, (i) the successor Energy Hedging Issuing Bank shall have all
the rights and obligations of an Energy Hedging Issuing Bank under this
Agreement with respect to Energy Hedging Letters of Credit to be issued
thereafter and (ii) references herein to the term “Energy Hedging Issuing
Bank” shall be deemed to refer to such successor, assignor, assignee or to any
previous Energy Hedging Issuing Bank, or to such successor, assignor, assignee
and all previous Energy Hedging Issuing Banks, as the context shall require.
After the replacement of an Energy Hedging Issuing Bank hereunder, the replaced
Energy Hedging Issuing Bank shall remain a party hereto and shall continue to
have all the rights and obligations of an Energy Hedging Issuing Bank under this
Agreement with respect to Energy Hedging Letters of Credit issued by it prior to
such replacement or assignment, but shall not be required to issue additional
Energy Hedging Letters of Credit (unless it shall have assigned only a portion
of its Energy Hedging Issuing Bank Fronting Amount hereunder).  Each
replacement or assignment pursuant to this Section 2.13(i) shall
be recorded by the Facility Agent in the Register.

     

    (j)        Cash
Collateralization.  If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower receives notice from the
Facility Agent or the Majority Lenders (or, if the maturity of the Loans has
been accelerated, Energy Hedging Lenders with Energy Hedging LC Exposure
representing greater than 50% of the total Energy Hedging LC Exposure) demanding
the deposit of cash collateral pursuant to this clause (j), the
Borrower shall immediately deposit in an account with the Facility Agent, in the
name of the Facility Agent and for the benefit of the Energy Hedging Issuing
Banks and the Energy Hedging Lenders, an amount in cash equal to 103% of the
Energy Hedging LC Exposure as of such date plus any accrued and unpaid interest
thereon; provided that the
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Borrower pursuant to Section 8.01(f).  Such
deposit shall be held by the Facility Agent as collateral for the payment and
performance of the reimbursement obligations of the Borrower under this
Agreement for the Energy Hedging LC Exposure. The Facility Agent shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over such account. Other than any interest earned on the investment of such
deposits, which investments shall be made at the option and sole discretion of
the Facility Agent and at the Borrower’s risk and expense, such deposits shall
not bear interest.  Interest or profits, if any, on such investments
shall accumulate in such account.  Moneys in such account shall be
applied by the Facility Agent to reimburse any Energy Hedging Issuing Bank for
Energy Hedging LC Disbursements for which it has not been reimbursed and, to the
extent not so applied, shall be held for the satisfaction of the reimbursement
obligations of the Borrower for the Energy Hedging LC Exposure at such time, but
shall not be applied for any other purpose.  If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three (3) Business Days
following the earlier of (i) the cure or waiver of all Events of Default or
(ii) the date there is no longer any outstanding Energy Hedging LC
Exposure.

     

     
SECTION 2.14. Existing Letters of
Credit.

     

    Existing Letters of
Credit.  Pursuant to terms and conditions reasonably
satisfactory to each applicable Issuing Bank, the Borrower and the Facility
Agent, each Existing Letter of Credit that is outstanding on the Financial
Closing Date shall (a) be continued hereunder on the Financial Closing Date, and
as of the Financial Closing Date the applicable Liquidity Lenders and Energy
Hedging Lenders shall acquire a participation therein as if such Existing Letter
of Credit were issued hereunder pursuant to the applicable Facility, (b) be
replaced with Letters of Credit issued hereunder under the applicable Facility
or (c) be permitted pursuant to Section
7.03(b).

     

    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, any Issuing Bank 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, each Issuing
Bank 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,
any Issuing Bank 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, such Issuing Bank 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, such Issuing Bank 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, any Issuing
Bank or any Lender the required receipts or other required documentary evidence,
the Borrower shall indemnify such Agent, such Issuing Bank and such Lender for
any incremental taxes, interest or penalties that may become payable by such
Agent, such Issuing Bank 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, each Issuing Bank 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, such Issuing Bank 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, Issuing Bank 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 Section 3.01(c)
shall be made within sixty (60) days after the date such Lender, such
Issuing Bank or such Agent provides such written statement.

     

    (d) Each
Lender and each Issuing Bank 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 or such Issuing Bank, 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 or such Issuing Bank’s overall internal policies of general application
and legal and regulatory restrictions) another Lending Office for any Loan or
Letter of Credit affected by such event; provided that such
efforts are made on terms that, in the judgment of such Lender or such Issuing
Bank exercised in good faith, cause such Lender or such Issuing Bank 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 or such Issuing Bank pursuant to Section 3.01(a),
(b) or (c).  Nothing
herein contained shall interfere with the right of a Lender, Issuing Bank or
Agent to arrange its tax affairs in whatever manner it thinks fit nor oblige any
Lender, Issuing Bank 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, Issuing Bank 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, an Issuing Bank 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 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, Issuing Bank 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, Issuing Bank or Lender
(including any Taxes imposed with respect to such refund) as is determined by
such Agent, Issuing Bank or Lender in good faith and in its sole discretion, and
as will leave such Agent, Issuing Bank 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, Issuing Bank 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, Issuing Bank or Lender in
the event such Agent, Issuing Bank 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 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 or Issuing Bank reasonably determines in good faith that as a result of
any Change in Law, or such Lender’s or Issuing Bank’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 any Issuing Bank or any Lender
participating in, issuing or maintaining any Letter of Credit, or a reduction in
the amount received or receivable by such Lender or Issuing Bank 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 or Issuing Bank 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
or Issuing Bank 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 or Issuing Bank such additional amounts as
will compensate such Lender for such increased cost or reduction.

     

    (b) If any
Lender or Issuing Bank 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 Issuing Bank (or its Lending Office)
therewith, has the effect of reducing the rate of return on the capital of such
Lender or Issuing Bank or any corporation controlling such Lender or Issuing
Bank as a consequence of such Lender’s or Issuing Bank’s obligations hereunder
(taking into consideration its policies with respect to capital adequacy and
such Lender’s or Issuing Bank’s desired return on capital), then from time to
time upon demand of such Lender or Issuing Bank 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 or Issuing Bank such additional amounts as
will compensate such Lender or Issuing Bank for such reduction within
sixty (60) days after receipt of such demand.

     

    (c) The
Borrower shall pay to each Lender or Issuing Bank, as long as such Lender or
Issuing Bank 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, the Loans or the
Letters of Credit, 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, Loan or Letter of Credit by such Lender or
Issuing Bank (as reasonably determined by such Lender or Issuing Bank 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
or Issuing Bank.  If a Lender or Issuing Bank fails 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 or Issuing Bank to demand compensation
pursuant to this Section 3.04
shall not constitute a waiver of such Lender’s or Issuing Bank’s right to demand
such compensation; provided that the
Borrower shall not be required to compensate a Lender or Issuing Bank 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 or Issuing Bank
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 or Issuing Bank requests compensation under this Section 3.04,
then such Lender or Issuing Bank 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 or Letter of Credit affected by such event; provided that such
efforts are made on terms that, in the reasonable judgment of such Lender or
Issuing Bank, cause such Lender or Issuing Bank 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, Issuing Bank 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, Issuing
Bank 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, or
(ii) any Lender becomes a Defaulting Lender, 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 outstanding Loans and participations in
Letters of Credit 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 and
participations in Letters of Credit, (B) all obligations of the Borrower
owing to the assigning Lender relating to the Loans and participations in
Letters of Credit 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 participations in Letters of Credit and Commitments, except
with respect to indemnification provisions under this Agreement, which shall
survive as to such assigning 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) 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 the Borrower from the
Secretary of State of the Borrower’s 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 the Borrower, together with any
amendments thereto, certified by the Secretary of State of the Borrower’s state
of organization dated as of a recent date; and

     

    (iii) a
certificate of the Borrower, executed by an Authorized Officer of the Borrower
certifying:

     

    (A) that
attached to such certificate is a true and complete copy of the Organizational
Documents of the Borrower, 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 as well as copies of
all shareholder resolutions authorizing the execution, delivery and performance
of the Financing 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 executing the Financing Documents to which the
Borrower is a party and each other document to be delivered by the Borrower 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).

     

    (c) 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; and

     

    (d) payment
of all fees and expenses due as of the Effective Date as the Borrower shall have
agreed to pay to any Lender or the Facility Agent in connection herewith,
including the fees and expenses of special New York and local counsel to the
Facility Agent 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.

     

                  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, 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 (or shall occur on the Financial Closing
Date) and (ii) delivery of each of the Financing Documents duly executed
and delivered by the parties thereto;

     

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

     

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

     

    (ii) a
certificate from the Borrower executed by an Authorized Officer
certifying:

     

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

     

    (B) that
attached to such certificate is a true and complete copy of resolutions duly
adopted by the authorized governing body of the Borrower, as well as copies of
all shareholder resolutions of the Borrower authorizing the execution, delivery
and performance of the Transaction Documents 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;

     

    (c) a
certificate of an Authorized Officer of the Borrower attaching: (i) copies of
all material shareholder approvals and Regulatory Approvals required in respect
of (x) the Merger (to the extent required under the Merger Agreement) and
(y) the borrowing of the Facilities and (ii) to the extent required to
be delivered under the Merger Agreement, certifying that the Borrower 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;

     

    (d) delivery
of executed opinions from (x) Latham & Watkins LLP, New York counsel to the
Borrower, substantially in the form of Exhibit D-1 and
(y) Perkins Coie LLP, Washington State corporate counsel to the Borrower,
substantially in the form of Exhibit D-2, with such amendments
reasonably satisfactory to the Facility Agent;

     

    (e) payment
of, or a written instruction executed by an Authorized Officer of the Borrower
directing the Facility Agent to pay from the first utilization of the Facilities
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, Agent or Issuing Bank in connection herewith on or prior to the
first utilization of the Facilities, 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;

     

    (f) 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);

     

    (g) evidence
that the Borrower has received ratings on the Facilities from S&P and
Moody’s;

     

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

     

    (i) 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;

     

    (j) 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);

     

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

     

    (l) delivery
of (i) the consolidated audited statements of income, stockholder’s equity
and cash flows of the Borrower and its consolidated Subsidiaries for the most
recent fiscal year of the Borrower ending at least ninety (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
Borrower 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 forty-five (45) days prior to the Financial Closing Date, which
financial statements shall be prepared in accordance with GAAP;

     

    (m) a
certificate from the CFO substantially in the form of Exhibit E,
attesting to (i) the Solvency (as evidenced by the updated Financial Model
referred to in Section
4.02(o)) of the Borrower after giving effect to the transactions
contemplated by the Transaction Documents, (ii) the Operating Company FFO
Coverage Ratio being at least 1.80 to 1.00, calculated on the basis of the
financial projections delivered pursuant to Section 4.02(o)
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 Operating Company FFO Leverage Ratio is at least 13.0%, 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(o) after
giving effect to the transactions contemplated by the Financing Documents,
(iv) no payment default by the Borrower 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;

     

    (n) 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 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;
and

     

    (o) (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).

     

     
SECTION 4.03. Conditions to All
Borrowings.  The
obligation of each Lender to honor any Borrowing Request, and of each Issuing
Bank to issue, amend, renew or extend any Letter of Credit, is subject to the
following additional conditions precedent:

     

    (a) on the
Financial Closing Date, no Default under Section 8.01(a),
Section 8.01(b)
(with respect to compliance with Section 7.13), Section 8.01(f),
Section 8.01(g)
or Section
8.01(k) has occurred and is continuing, or would result from the proposed
Borrowings or the proposed issuance, amendment, renewal or extension of such
Letter of Credit or from the application of the proceeds therefrom;

     

    (b) after the
Financial Closing Date, no Default or Event of Default has occurred and is then
continuing or would result from the proposed Borrowings or the proposed
issuance, amendment, renewal or extension of such Letter of Credit or from the
application of the proceeds therefrom;

     

    (c) (i) in
the case of the Borrowing Request or request for a Letter of Credit to be made
on the Financial Closing Date, (A) the representations and warranties of the
Holding Company and the Borrower 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
Borrower in Sections
5.01, 5.02, 5.03, 5.04, 5.07(c)(i) and 5.17 (the “Specified
Representations”) shall be true and correct on and as of the date of such
Borrowing or, with respect to a Letter of Credit, the date of the applicable
issuance, amendment, extension or renewal, as the case may be (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 or
request for a Letter of Credit, 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, with respect to a Letter of Credit, the
date of the applicable issuance, amendment, extension or renewal, as the case
may be (or to the extent that such representations and warranties specifically
refer to an earlier date, as of such earlier date);

     

    (d) the
Facility Agent shall have received a Borrowing Request or request for a Letter
of Credit in accordance with the requirements of Section 2.02(a),  Section 2.11(a),
Section 2.12(b)
or Section
2.13(b), as applicable.

     

    Each
Borrowing Request or request for a Letter of Credit submitted by the Borrower
shall be deemed to be a representation and warranty that the conditions
specified in this Section 4.03
have been satisfied on and as of the date of the applicable Borrowing or, with
respect to a Letter of Credit, the date of the applicable issuance, amendment,
extension or renewal, as the case may be.

     

    ARTICLE V

     

    REPRESENTATIONS AND
WARRANTIES

     

    The
Borrower hereby represents and warrants the following matters to the
Facility Agent, each Issuing Bank 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 and each
issuance, amendment or renewal of a Letter of Credit.

     

                  SECTION 5.01. Existence, Qualification and
Power; Compliance with Laws.  Each Operating Company
Group Member and, in the case of clause (e) only, each
of the other Subsidiaries of the Borrower, (a) is a Person duly organized
or formed, validly existing under the Laws of the jurisdiction of its
incorporation or organization, (b) has all requisite power and authority to
(i) own or lease its material assets and carry on its business and
(ii) in the case of the Borrower, execute, deliver and perform its
obligations under the Financing Documents to which it is a party, (c) is
duly organized and validly existing under the Laws of the jurisdiction of its
incorporation or organization and each 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
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 Financing
Document has been duly executed and delivered by the Borrower.  This
Agreement and each other Financing Document constitutes the legal, valid and
binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, except as such enforceability may be limited by
Debtor Relief Laws and by general principles of equity.

     

                  SECTION 5.03. Authorization; No
Contravention.  The execution, delivery and performance
by the Borrower of the Financing Documents, are within the Borrower’s corporate
or other powers, have been duly authorized by all necessary corporate or other
organizational action, and do not and will not (a) contravene the terms of
any of the Borrower’s Organizational Documents, (b) conflict with or result
in any breach or contravention of, or the creation of any Lien under (other than
as permitted by Section 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 no approval, consent, exemption,
authorization, or other action by, or notice to, or filing with any other Person
is necessary or required in connection with (a) the execution, delivery or
performance by, or enforcement against, the Borrower of this Agreement or any
other Financing Document and the consummation of the transactions contemplated
hereby and thereby, or (b) the ability of each Operating Company Group
Member to operate its 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 (b) 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 which Puget Holdings is the
“common parent” (within the meaning of Section 1504 of the Code) of such
group.  Each Operating Company 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.  None of the Borrower nor any Operating Company
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(l)
fairly present in all material respects the financial condition of the Borrower
and its Subsidiaries as of the dates thereof and their results of operations for
the period covered thereby in accordance with GAAP, consistently applied
throughout the periods covered thereby.  As of the date of such
financial statements, 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 Operating Company Group did not have any material contingent
liabilities, material liabilities for Taxes, material and unusual forward or
long-term commitments or material and unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
such financial statements or as arising solely from the execution and delivery
of the Financing Documents, in each case, which is not reflected in the
foregoing financial statements or in the notes thereto or has not otherwise been
disclosed in writing to the Lenders prior to the 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.

     

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

     

     
SECTION 5.08. Ranking.  The
Financing Documents and the Obligations evidenced thereby rank and will at all
times rank at least pari passu with all other
senior unsecured Indebtedness of the Borrower, whether now existing or hereafter
outstanding.

     

     
SECTION 5.09. Ownership of
Assets.

     

    (a) (i) Each
Operating Company 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 Operating Company 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 Operating Company
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) Neither
the Borrower nor any other Operating Company 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.  Since the Signing Date, the Borrower has not
engaged in any business other than those carried on by the Borrower and its
Subsidiaries as of such date or, after the Financial Closing Date, in connection
with any Permitted Acquisition and activities reasonably related
thereto.

     

                  SECTION 5.11. Insurance.  All
insurance required to be obtained by the Operating Company 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 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 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 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.

     

                  SECTION 5.14. Affiliate
Transactions. Except as specified on Schedule 5.14 or
permitted by Section
7.09, no Operating Company 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 5.15. 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) Neither
the Borrower nor any Operating Company Group Member is engaged nor will they
engage, principally or as one of its important activities, in the business of
purchasing or carrying margin stock (within the meaning of Regulation T, U and X
issued by the FRB), or extending credit for the purpose of purchasing or
carrying margin stock.

     

    (b) Neither
the Borrower nor any Operating Company 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 Operating Company 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 Borrower is a “holding company” within the
meaning of Section 1262(8) of the Public Utility Holding Company Act of
2005 solely with respect to its ownership of exempt wholesale
generators.  On and after the Financial Closing Date, the Borrower and
certain of its subsidiaries are exempt from the books and records access,
accounting, recordkeeping, reporting, and filing requirements of 18 C.F.R. §§
366.2, 366.21, 366.22, and 366.23 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
set forth 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
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 Company Group Members
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 Company Group 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 Operating Company Group Member 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
specified 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 Company Group
Members 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.

     

    ARTICLE VI

     

    AFFIRMATIVE
COVENANTS

     

    From and
after the Financial Closing Date and for so long as any Lender or Issuing Bank
shall have any Commitment hereunder or any Loan, Letter of Credit 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 Operating Company Group Member to:

     

     
SECTION 6.01. Financial
Statements.  Deliver
to the Facility Agent (for prompt further distribution 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, 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, an unaudited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of each such fiscal quarter, and the
related (i) consolidated statements of income or operations for such fiscal
quarter and for the portion of the fiscal year then ended and
(ii) consolidated statements of cash flows for the portion of the fiscal
year then ended, setting forth in each case in comparative form the figures for
the corresponding fiscal quarter of the previous fiscal year and the
corresponding portion of the previous fiscal year, all in reasonable detail and
certified by 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, 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
Operating Company Group and a comprehensive business plan of the Operating
Company 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
Operating Company 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 Operating Company 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.

     

                  SECTION 6.02. Compliance
Certificate.  Deliver to the Facility Agent for prompt
further distribution to 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(l)
or, if more recent, Section 6.01(a),
(and except as described in the financial statements provided pursuant to Section 4.02(l),
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 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 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 Operating Company 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 Operating Company 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 the
Borrower 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.

     

    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. 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 6.05. 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
Operating Company 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 of the other members of the Operating Company Group 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 an
Operating Company Group Member in the ordinary course of business. In the case
of Regulatory Approvals required in respect of (i) the borrowing of the
Facilities or (ii) the granting of collateral, said copies shall be certified by
an Authorized Officer of the Borrower.

     

     
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 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 the
Borrower.  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.

     

                  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 Operating Company 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(i) 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 of the Capital Expenditure Loans to fund Utility
Capital Expenditures.

     

    (b) The
Borrower shall use the proceeds of the Energy Hedging Loans to support energy
purchases and hedging activities (in each case in the ordinary course of
business and not for speculative purposes) and for the issuance of Letters of
Credit in respect thereof.

     

    (c) The
Borrower shall use the proceeds of the Liquidity Loans for general corporate
purposes of the Borrower, including commercial paper backup, working capital
purposes (for the avoidance of doubt, not to be used for Utility Capital
Expenditures or other Capital Expenditures), to replace and refinance the
Existing Revolving Credit Agreement (other than the Existing Letters of Credit)
and for the issuance of Letters of Credit with respect thereto.

     

                
 SECTION 6.11. Capital
Expenditures.  The
Borrower shall not make any Capital Expenditures other than Utility Capital
Expenditures.

     

      SECTION 6.12. Maintenance of
Ratings.  From
and after the Financial Closing Date, maintain monitored public ratings on the
Facilities from S&P and Moody’s.

     

                  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.

     

                  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 Operating Company Subsidiary, as the case may be.

     

      SECTION 6.16. Financing Documents;
Material Documents.

     

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

     

    (b) Take all
reasonable and necessary action to prevent the termination or cancellation of
any Financing Document or other material Contractual Obligation in accordance
with the terms of such Financing Document or other material Contractual
Obligation or otherwise (except for, prior to the Financial Closing Date, the
Merger Agreement, and for the expiration of any Financing 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, Issuing Bank, 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.

     

    ARTICLE VII

     

    NEGATIVE
COVENANTS

     

    For so
long as any Lender or Issuing Bank shall have any Commitment hereunder or any
Loan, Letter of Credit 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 other Operating
Company Group Member, 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 Lenders, the Issuing Banks and the Agent pursuant to any
Financing Document;

     

    (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
Operating Company 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
Operating Company 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 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 Operating Company Group Member;

     

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

     

    (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 Operating Company 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 any
Operating Company 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 the 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(l), (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(l) 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 Operating Company Subsidiary or existing on any property or
asset of any Person that becomes an Operating Company Subsidiary after the date
hereof pursuant to a Permitted Acquisition (or on such Person’s assets) prior to
the time such Person becomes an Operating Company Subsidiary; provided that (i)
such Lien is not created in contemplation of or in connection with such
acquisition or such Person becoming an Operating Company Subsidiary, as the case
may be, (ii) such Lien shall not apply to any other property or assets of the
Borrower or any other Operating Company 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
an Operating Company 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 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

     

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

     

     
SECTION 7.02. Dispositions.  Make
any Disposition or enter into any agreement to make any Disposition,
except:

     

    (a) Dispositions
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 Operating Company 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 Operating
Company 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 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) Indebtedness
of the Borrower under the Financing Documents not to exceed an outstanding
principal amount of $1,150,000,000 plus Energy Hedging Incremental Loans not to
exceed $175,000,000;

     

    (b) Existing
Indebtedness; provided, however, if such
Existing Indebtedness are obligations in respect of letters of credit issued
under the Borrower’s credit facilities prior to the Financial Closing Date, such
Existing Indebtedness shall be permitted only to the extent such letters of
credit are fully collateralized by either cash proceeds from Loans made
hereunder or Letters of Credit issued hereunder, in each case under the Energy
Hedging Facility or the Liquidity Facility, as applicable.

     

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

     

    (d) Indebtedness
incurred by the Borrower consisting of commercial paper issuances to fund the
working capital (for the avoidance of doubt, not including Utility Capital
Expenditures or other Capital Expenditures) of the Operating Company Group in an
aggregate principal amount not to exceed, together with amounts outstanding
under the Liquidity Facility, $400,000,000;

     

    (e) (i)
Indebtedness of a Person or Indebtedness attaching to assets of a Person that,
in either case, becomes an Operating Company Subsidiary, or Indebtedness
attaching to assets that are acquired by any Operating Company 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 (e), provided that (x)
such Indebtedness existed at the time such Person became an Operating Company
Subsidiary 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 Operating Company Group Member (other than by any such person
that so becomes an Operating Company Subsidiary 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;

     

    (f) 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;

     

    (g) 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;

     

    (h) 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;

     

    (i) 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;

     

    (j) Permitted
Refinancing Indebtedness;

     

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

     

    (l) Indebtedness
owed to any Person providing property, casualty, business interruption or
liability insurance to Borrower or any Operating Company Group Member, 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;

     

    (m) 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 Operating Company Group
Member pursuant to such agreements, in connection with Permitted Acquisitions or
Dispositions permitted under Section
7.02;

     

    (n) other
Indebtedness incurred by the Borrower (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 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;

     

    (o) Indebtedness
incurred by the Borrower in respect of Interest Hedging Agreements or Other
Hedging Agreements not for speculative purposes;

     

    (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;

     

    (q) Intercompany
Loans from the Holding Company;

     

    (r) (i) other
Indebtedness incurred by the Borrower 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 in an aggregate amount not to
exceed $25,000,000 at any time; and

     

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

     

     
SECTION 7.04. Investments.  Make
or hold any Investments, except:

     

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

     

    (b) Investments
in Interest Hedging Agreements permitted under Section
7.03;

     

    (c) Investments
in Other Hedging Agreements entered into in the ordinary course of business and
not for speculative purposes;

     

    (d) Intercompany
Loans from the Holding Company to the Borrower or any Operating Company
Subsidiary or from the Borrower to the Operating Company
Subsidiaries;

     

    (e) Equity
Interests in (x) Subsidiaries in existence on the date hereof, (y) Operating
Company Subsidiaries 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 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.  Declare
or make, directly or indirectly, any Restricted Payment; provided, however
that

     

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

     

    (b) the
Borrower may declare and make Restricted Payments in cash provided that no Event
of Default shall have occurred and be continuing and no Event of Default shall
occur as a result of making such Restricted Payment.

     

                  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 Subsidiary 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 Subsidiary into or with any other
Operating Company Subsidiary or the liquidation or dissolution of any Operating
Company Subsidiary into the Borrower or any other Operating Company Subsidiary;
provided, however, that in any
merger or amalgamation or consolidation involving the Borrower or any
liquidation or dissolution of any Operating Company Subsidiary into the
Borrower, the Borrower 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 Operating Company Group Members under
all operating leases entered into by the Operating Company 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 Operating Company Group Members on the Signing Date or in
connection with any Permitted Acquisition or any business reasonably related or
ancillary thereto.

     

    (b) 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 Operating Company Group
Member as would be obtainable by such Operating Company 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
to the Facilities on the terms set forth in Exhibit F.

     

                  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
Operating Company 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 Operating Company 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 Operating Company Group Member’s business or
operations are managed by any other Person (except the Borrower or a
wholly-owned Operating Company 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 Group Member if such action would
not be permitted hereunder if such Immaterial Subsidiary were an Operating
Company Group Member 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 Operating
Company 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 Operating Company
Group Member or to Guarantee Indebtedness of any Operating Company 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);

     

    (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 an Operating Company
Subsidiary pursuant to a Permitted Acquisition and not in contemplation of, or
in connection with, such Person becoming an Operating Company 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) Operating Company FFO Coverage
Ratio.  The Borrower will not permit the Operating Company FFO
Coverage Ratio at the end of any Test Period to be less than 1.80 to
1.00.

     

    (b) Operating Company FFO Leverage
Ratio.  The Borrower will not permit the Operating Company FFO
Leverage Ratio (expressed as a percentage) at the end of any Test Period to be
less than 13.0%, in respect of any Test Period; provided, however this covenant
shall not apply during any period in which the Borrower has an Investment Grade
or higher rating from both Moody’s and S&P.

     

                  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 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 Operating Company 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 any LC Disbursement 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 6.04,
Section 6.06(a),  Section 7.01,
Section 7.02,
Section 7.03,
Section 7.04,
Section 7.05,
Section 7.06,
Section 7.07,
Section 7.12,
Section 7.13,
Section 7.14 or
Section 7.15;
or

     

    (c) Other
Defaults.  The Borrower 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 the Borrower 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 (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.  Any
Operating Company 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.  Any Operating Company 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 member of the Operating Company Group; 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 any Operating Company Group Member a final judgment or order
(other than a judgment or order for a rate refund) for 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) Any Operating Company 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 Operating Company Group, taken as a whole, and is
not released, vacated or fully bonded within sixty (60) days after its
issue or levy; or

     

    (l) Material Contract or
Lease.  The termination, transfer, revocation or modification
of any license, leases or material contracts to which any Operating Company
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 sixty (60) 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;

     

    (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; and

     

    (d) require
that the Borrower Cash Collateralize the LC Exposure (in an amount equal to the
LC Credit Exposure at such time);

     

    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), all
amounts received by the Facility Agency on account of the Obligations owed to
the Facility Agent 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 and any Issuing Bank
(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
and LC Disbursements, 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
unreimbursed LC Disbursements and the Cash Management Obligations, ratably among
the Lenders in proportion to the respective amounts described in this clause Fourth
held by them;

     

    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, for the benefit
of the applicable Issuing Banks and Lenders to Cash Collateralize the LC
Exposure in an amount equal to 103% of the LC Exposure; 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 Loans.

     

     
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, the Holding Company 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”), (x)
the Borrower shall prepay an aggregate amount of the Loans (on a pro rata basis) in an amount equal to
the Cure Amount (and reduce the Commitments for such Loans in the same amount),
(y) Operating Company FFO 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.  Each Lender and Issuing Bank 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 herein or 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, Issuing Bank 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.

     

                  SECTION 9.02. Delegation of
Duties.  The Facility Agent may execute any of its
duties under this Agreement or any other Financing Document 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
Operating Company 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 for any failure of the Borrower 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 Operating Company Subsidiary or any Affiliate
thereof.

     

     
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 and the Issuing Banks 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 and each Issuing
Bank.

     

    (b) For
purposes of determining compliance with the conditions specified in Section 4.02,
each Lender that has signed this Agreement and each Issuing Bank 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 and Issuing Bank unless the Facility
Agent shall have received notice from such Lender or Issuing Bank 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, an Issuing Bank 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 and each Issuing
Bank.

     

                  SECTION 9.06. Credit Decision; Disclosure
of Information by Agents.  Each Lender and Issuing Bank
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 or Issuing
Bank as to any matter, including whether Agent-Related Persons have disclosed
material information in their possession.  Each Lender and Issuing
Bank represents to each Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Operating Company 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 and Issuing Bank 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 any Issuing Bank by any Agent herein, such Agent shall not have any duty or
responsibility to provide any Lender or Issuing Bank 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 and
Issuing Banks.

     

    (a) Whether
or not the transactions contemplated hereby are consummated, the Lenders and
each Issuing Bank or 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 or Issuing Bank 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(a).  In
the case of any investigation, litigation or proceeding giving rise to any
Indemnified Liabilities, this Section 9.07(a)
applies whether any such investigation, litigation or proceeding is brought by
any Lender, any Issuing Bank or any other Person.  Without limitation
of the foregoing, each Lender and Issuing Bank 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(a)
shall survive termination of the Commitments, the payment of all other
Obligations and the resignation of the Facility Agent.

     

    (b) If the
transactions contemplated hereby are consummated, the Lenders shall indemnify,
upon demand, each Issuing Bank (to the extent such Issuing Bank 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 (based upon its
Commitment) (at the time such indemnity is sought), and hold harmless such
Issuing Bank from and against any and all Indemnified Liabilities incurred by
it; provided that no Lender shall be liable for the payment to the Issuing Bank
of any portion of such Indemnified Liabilities resulting from the Issuing Bank’s
own gross negligence or willful misconduct, as determined by the final judgment
of a court of competent jurisdiction. In the case of any investigation,
litigation or proceeding giving rise to any Indemnified Liabilities, this Section 9.07(b)
applies whether any such investigation, litigation or proceeding is brought by
any Lender or any other Person. The undertaking in this Section 9.07(b) shall
survive termination of the Commitments, the payment of all other Obligations and
the resignation of such Issuing Bank.

     

                  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 or any Issuing Bank.  The Lenders and each
Issuing Bank acknowledge that, pursuant to such activities, Barclays
Bank PLC or its Affiliates may receive information regarding the Borrower
or its Affiliates (including information that may be subject to confidentiality
obligations in favor of the Borrower or such Affiliates) and acknowledge that
the 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, each Issuing Bank and
the Borrower.  If the Facility Agent resigns under this Agreement, the
Majority Lenders shall appoint a successor agent for the Lenders and each
Issuing Bank, 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 each Issuing Bank 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, 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 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 and Issuing Bank 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, Issuing Banks or other
Persons identified on the facing page or signature pages of this Agreement as
“joint bookrunner,” “arranger,” “syndication agent,” “documentation 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 or Issuing Banks, as the case may be.  Without limiting the
foregoing, none of the Lenders, the Issuing Banks or other Persons so identified
shall have or be deemed to have any fiduciary relationship with any Lender or
Issuing Bank.  Each Lender and Issuing Bank acknowledges that it has
not relied, and will not rely, on any of the Lenders, any Issuing Bank 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);

     

    (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
of any unreimbursed LC Disbursements, 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; or

     

    (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;

     

    provided further that (x) no
Borrower Affiliate or Macquarie Affiliate shall be entitled to a vote on any of
the matters specified in the foregoing clauses (a) through
(d), 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
and no amendment, waiver or consent shall, unless in writing and signed by any
Issuing Bank in addition to the Lenders required above, affect the rights or
duties of, or any fees or other amounts payable to, such Issuing Bank under this
Agreement.

     

     
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, 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, an Issuing Bank, or the Facility 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 Facility Agent
and Lenders.  The Facility Agent, each Issuing Bank 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, each
Issuing Bank 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 or an Issuing Bank may be recorded by
the Facility Agent or such Issuing Bank, and each of the parties hereto hereby
consents to such recording.

     

                  SECTION 10.03. No Waiver; Cumulative
Remedies.  No failure by any Lender, any Issuing Bank 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, 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 Facility Agent, the Joint Mandated Lead Arrangers and the Issuing
Banks 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 Facility Agent, the Joint Mandated Lead Arrangers, each
Issuing Bank 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 Issuing Bank, 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,
Loan or Letter of Credit 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
“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
expense.  The Borrower shall not be liable for any 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, any Issuing Bank or any Lender, or any
Agent, any Issuing Bank 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, such Issuing
Bank 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 and each Issuing Bank 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 the second proviso in Section 2.11(b), 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 (x) of the Facility Agent (such consent not to be unreasonably
withheld or delayed), (y) each Liquidity Issuing Bank (with respect to any
assignment of the Liquidity Loans and Liquidity Commitments) and (z) each Energy
Hedging Issuing Bank (with respect to any assignment of the Energy Hedging Loans
or Energy Hedging Commitments); 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 (12) 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.  Notwithstanding the
foregoing, and without limitation of each Issuing Bank’s consent rights set
forth in this Section
10.07(b), assignments of Liquidity Loans, Liquidity Commitments, Energy
Hedging Loans and Energy Hedging Commitments shall not be permitted hereunder to
Persons who are not OECD Member Banks.

     

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

     

    (i) 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;

     

    (ii) 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

     

    (iii) 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 Issuing Banks, and the Commitments of, and
principal amounts (and related interest amounts) of the Loans and amounts owing
to each Lender and Issuing Bank 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 Facility Agent, each Issuing Bank and the Lenders shall treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a
Lender or an Issuing Bank, as the case may be, hereunder for all purposes of
this Agreement, notwithstanding notice to the contrary.  The Register
shall be available for inspection by the Borrower, any Agent, any Issuing Bank
and any Lender, at any reasonable time and from time to time upon reasonable
prior notice.

     

    (e) Subject
to the second proviso in Section 2.11(b), any
Lender may at any time, without the consent of, or notice to, the Borrower or
the Facility Agent or each Issuing Bank, 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;
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
Facility Agent, each Issuing Bank 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 or
Macquarie Affiliates.  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 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 Facility Agent, each Issuing Bank 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 Facility
Agent, each Issuing Bank 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 service providers to the
Facility Agent, each Issuing Bank 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
Operating Company Subsidiary or its business, other than any such information
that is publicly available to any Agent, any Issuing Bank 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 Facility Agent 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 Facility Agent, any
Issuing Bank or the Lenders in any other Financing Document shall not be deemed
a conflict with 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, each Issuing Bank
and each Lender, regardless of any investigation made by any Agent, any Issuing
Bank or any Lender or on their behalf and notwithstanding that any Agent, any
Issuing Bank 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, EACH ISSUING BANK AND EACH LENDER
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS.  THE BORROWER, EACH AGENT, EACH ISSUING
BANK 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 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 Issuing Bank, each Lender and the
Facility Agent and thereafter shall be binding upon and inure to the benefit of
the Borrower, each Agent, each Issuing Bank and each Lender and their respective
permitted successors and assigns.

     

                  SECTION 10.17. Lender
Action.  Each Lender and Issuing Bank 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.]

     

    



    
      
         


      

      
         


        
        

      

      
         


      

    


    


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

     

    
      	
              PUGET
      SOUND ENERGY, INC.

               

            
	
              By

            	 
      
	
              Name:

            
	
              Title:

            


    

    


    


    
      	
              BARCLAYS BANK PLC, as
      Facility Agent

               

            
	
              By

            	 
      
	
              Name:

            
	
              Title:

            


    

    


    
      	
              DRESDNER BANK AG NEW YORK
      BRANCH, as Syndication Agent

               

            
	
              By

            	 
      
	
              Name:

            
	
              Title:

            


    

    


    
      	
              BAYERISCHE
      LANDESBANK, NEW
      YORK BRANCH, as Co-Documentation Agent

               

            
	
              By

            	 
      
	
              Name:

            
	
              Title:

            


    

    


    
      	
              CAIXA GERAL DE DEPOSITOS, NEW
      YORK BRANCH, as Co-Documentation Agent

               

            
	
              By

            	 
      
	
              Name:

            
	
              Title:

            


    

    


    
      	
              EXPORT DEVELOPMENT
      CANADA, as

              Co-Documentation
      Agent

               

            
	
              By

            	 
      
	
              Name:

            
	
              Title:

            


    

     

    
      	
              BARCLAYS BANK PLC, as
      Lender,

               

            
	
              By

            	 
      
	
              Name:

            
	
              Title:

            


    

    


    
      	
              DRESDNER
      BANK AG NEW YORK

              BRANCH, as
      Lender

               

            
	
              By

            	 
      
	
              Name:

            
	
              Title:

            


    

    


    
      	
              BARCLAYS BANK PLC, as
      Liquidity Issuing Bank

               

            
	
              By

            	 
      
	
              Name:

            
	
              Title:

            


    

    


    
      	
              DRESDNER BANK AG NEW YORK
      BRANCH, as Liquidity Issuing Bank

               

            
	By	 
      
	
              Name:

            
	
              Title:

            


    

    


    
      	
              BARCLAYS BANK PLC, as
      Energy Hedging Issuing Bank

               

            
	By 
      	 
      
	
              Name:

            
	
              Title:

            


    

    


    
      	
              DRESDNER BANK AG NEW YORK
      BRANCH, as Energy Hedging Issuing Bank

               

            
	
              By

            	 
      
	
              Name:

            
	
              Title:

            


    

    


    
      



      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
1.01A

       

      INITIAL
MATERIAL ADVERSE EFFECT

       

      “Company Material Adverse
Effect” shall mean any event, change or occurrence or development of a
set of circumstances or facts, which, individually or together with any other
event, change, occurrence or development, has or would have a material adverse
effect on the business, assets, liabilities, properties, financial condition or
results of operations of the Company and the Company Subsidiaries taken as a
whole; provided, however, that the term “Company Material Adverse Effect” shall
not include (i) any such effect resulting from any change, including any change
in law, rule, or regulation of any Governmental Authority (as defined in Section
4.4(c)), that applies generally to similarly situated Persons, (ii) any such
effect relating to or resulting from general changes in the electric or natural
gas utility industry, other than such effects having a disproportionate impact
on the Company as compared to similarly situated Persons, (iii) any such effect
relating to or resulting from the 2007 WUTC Rate Case (as defined in Section
6.1) before the Washington Utilities and Transportation Commission (“WUTC”), (iv) any such
effect relating to or resulting from changes to accounting standards, principles
or interpretations, (v) any such effect resulting from the announcement of the
execution of this Agreement or the consummation of the transactions contemplated
hereby (except to the extent that the Company has made an express representation
with respect to the effect of such consummation on the Company and the Company
Subsidiaries), including any such change resulting therefrom in the market value
of the Company Common Stock or the Company’s credit rating, or from any action,
suit or proceeding relating to this Agreement or the transactions contemplated
hereby, including any such action, suit or proceeding alleging a breach of
fiduciary duty in connection with the execution, delivery, approval or
consummation of the transactions contemplated by this Agreement, (vi) any such
effect resulting from the replacement of the Designated Credit Agreements as
contemplated by Section 7.17, or (vii) any such effect resulting from any action
taken by any of the parties outside the ordinary course of its business that is
required to be taken in order to comply with any provision of this Agreement,
including, to the extent applicable, Section 6.1 hereof; provided further,
however, that the exclusions specified in clauses (i), (iv), (v) and (vii) shall
not apply to the extent such matters are mandated in the order of the WUTC
approving the Merger and the other transactions contemplated hereby.1

       

      ________________  

      
        
          	
                  1

                	
                  Terms
      used in this Schedule 1.01A
      shall have the meaning provided to such terms in the Merger
      Agreement.  All section references in this Schedule 1.01A
      are references to the applicable section of the Merger
      Agreement.

                


        

      

      



      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
1.01B

       

      SCHEDULED
BASE CAPEX

       

      
        	
                Q2
      2008

              	
                $62,216,250

              
	
                Q3
      2008

              	
                $62,216,250

              
	
                Q4
      2008

              	
                $62,216,250

              
	 
      	 
      
	
                Q1
      2009

              	
                $53,622,500

              
	
                Q2
      2009

              	
                $53,622,500

              
	
                Q3
      2009

              	
                $53,622,500

              
	
                Q4
      2009

              	
                $53,622,500

              
	 
      	 
      
	
                Q1
      2010

              	
                $67,456,250

              
	
                Q2
      2010

              	
                $67,456,250

              
	
                Q3
      2010

              	
                $67,456,250

              
	
                Q4
      2010

              	
                $67,456,250

              
	 
      	 
      
	
                Q1
      2011

              	
                $63,034,000

              
	
                Q2
      2011

              	
                $63,034,000

              
	
                Q3
      2011

              	
                $63,034,000

              
	
                Q4
      2011

              	
                $63,034,000

              
	 
      	 
      
	
                Q1
      2012

              	
                $45,554,750

              
	
                Q2
      2012

              	
                $45,554,750

              
	
                Q3
      2012

              	
                $45,554,750

              
	
                Q4
      2012

              	
                $45,554,750

              
	 
      	 
      
	
                Q1
      2013

              	
                $46,333,053

              
	
                Q2
      2013

              	
                $46,333,053

              
	
                Q3
      2013

              	
                $46,333,053

              
	
                Q4
      2013

              	
                $46,333,053

              
	 
      	 
      
	
                Q1
      2014

              	
                $41,148,740

              
	
                Q2
      2014

              	
                $41,148,740

              


      

      


      


      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
1.01C

       

      ISSUING
BANKS

       

      
        	
                Name of Issuing Bank

              	
                Energy Hedging Issuing

                Bank Fronting Amount

              	
                Liquidity Issuing Bank 

                Fronting Amount

              
	
                Barclays
      Bank PLC

                 

              	
                65,625,000

              	
                75,000,000

              
	
                Dresdner
      Bank AG New York Branch

                 

              	
                65,625,000

              	
                75,000,000

              
	
                Wells
      Fargo, National Association

                 

              	
                87,500,000

              	
                100,000,000

              


      

      


      



      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
2.01

       

      COMMITMENTS

       

      
        	 
      	
                OpCo
      CapEx 

                Facility

              	
                OpCo
      Liquidity 

                Facility

              	
                OpCo
      Energy Hedging 

                Facility

              
	
                Barclays
      Bank PLC

              	
                48,404,986.33

              	
                51,621,769.55

              	
                45,169,048.35

              
	
                Dresdner
      Bank AG

              	
                48,404,986.33

              	
                51,621,769.54

              	
                45,169,048.35

              
	
                CoBank,
      ACB

              	
                29,818,181.82

              	
                29,818,181.82

              	
                26,090,909.08

              
	
                Bank
      of Nova Scotia

              	
                22,377,622.38

              	
                22,377,622.38

              	
                19,580,419.58

              
	
                Caixa
      Geral de Depositos, New York Branch

              	
                22,377,622.38

              	
                22,377,622.38

              	
                19,580,419.58

              
	
                Export
      Development Canada

              	
                22,377,622.38

              	
                22,377,622.38

              	
                19,580,419.58

              
	
                Royal
      Bank of Scotland plc

              	
                22,377,622.38

              	
                22,377,622.38

              	
                19,580,419.58

              
	
                Bayerische
      Landesbank, New York Branch

              	
                16,783,216.78

              	
                16,783,216.78

              	
                14,685,314.68

              
	
                Wells
      Fargo Bank, NA

              	
                13,986,013.98

              	
                13,986,013.98

              	
                12,237,762.24

              
	
                Bank
      of America, NA

              	
                26,086,956.52

              	
                26,086,956.52

              	
                22,826,086.96

              
	
                JPMorgan
      Chase Bank, NA

              	
                8,391,608.39

              	
                8,391,608.39

              	
                7,342,657.34

              
	
                KeyBank
      National Association

              	
                26,086,956.52

              	
                26,086,956.52

              	
                22,826,086.96

              
	
                SunTrust
      Bank

              	
                26,086,956.52

              	
                26,086,956.52

              	
                22,826,086.96

              
	
                The
      Bank of New York Mellon

              	
                20,869,565.22

              	
                20,869,565.22

              	
                18,260,869.56

              
	
                WestPac
      Banking Corporation

              	
                5,034,965.03

              	
                5,034,965.03

              	
                4,405,594.40

              
	
                Mizuho
      Corporate Bank, Ltd.

              	
                2,797,202.80

              	
                2,797,202.80

              	
                2,447,552.44

              
	
                Toronto
      Dominion (Texas) LLC

              	
                8,695,652.17

              	
                8,695,652.17

              	
                7,608,695.66

              
	
                Cathay
      United Bank

              	
                6,433,566.42

              	
                0.00

              	
                0.00

              
	
                Intesa
      Sanpaolo

              	
                22,608,695.65

              	
                22,608,695.65

              	
                19,782,608.70

              
	 
      	
                $400,000,000.00

              	
                $400,000,000.00

              	
                $350,000,000.00

              


      

      



      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
5.04

       

      GOVERNMENTAL
AUTHORIZATIONS; OTHER CONSENTS

       

      
        	
                1.  

              	
                Approval
      of the Merger by the Washington Utilities and Regulatory Commission
      pursuant to RCW 80.12, and related approvals and/or notification filings
      pursuant to RCW 80.08 and 80.16 related to the credit facilities of Puget
      Sound Energy, Inc. and affiliated
interests.

              


      

      
        	
                2.  

              	
                Acquisition
      approval of the Federal Energy Regulatory Commission, pursuant to Section
      203 of the Federal Power Act.

              


      

      
        	
                3.  

              	
                Merger
      approval under the Hart-Scott-Rodino
Act.

              


      

      
        	
                4.  

              	
                Approval
      of the change in control of communication licenses by the Federal
      Communications Commission.

              


      

      
        	
                5.  

              	
                At
      least two-thirds (66.6%) majority approval vote from shareholders of Puget
      Energy, Inc. common stock.

              


      

      
        	
                6.  

              	
                Filing
      with the U.S. Committee on Foreign Investment, pursuant to the
      Exxon-Florio Amendment to the Defense Production Act of
    1950.

              


      

      



      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
5.13A

       

      SUBSIDIARIES

       

      Hydro
Energy Development Corp.

       

      Black
Creek Hydro, Inc.

       

      PSE
Funding, Inc.

       

      Puget
Western Inc.

       

      WNG CAP I, Inc.2

       

      _____________  

      
        
          	
                  2

                	
                  On
      May 6, 2008, the PSE Board of Directors approved the merger of WNG Cap I
      into PSE, and on May 7, 2008, articles of merger were filed with the
      Washington Secretary of State to effect the merger of WNG Cap I into PSE,
      with PSE the surviving
corporation.

                


        

      

      



      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
5.13B

       

      EQUITY
INTERESTS

       

      
        	
                Subsidiary

              	
                Jurisdiction

              	
                Ownership

              
	
                Hydro
      Energy Development Corp. (HEDC)

              	
                Washington

              	
                100%
      owned by PSE

              
	
                Black
      Creek Hydro, Inc.

              	
                Washington

              	
                100%
      owned by HEDC

              
	
                PSE
      Funding, Inc.

              	
                Washington

              	
                100%
      owned by PSE

              
	
                Puget
      Western Inc.

              	
                Washington

              	
                100%
      owned by PSE

              
	
                WNG CAP I, Inc.3

              	
                Washington

              	
                100%
      owned by PSE

              


      

      _____________  

      
        	
                3

              	
                On
      May 6, 2008, the PSE Board of Directors approved the merger of WNG Cap I
      into PSE, and on May 7, 2008, articles of merger were filed with the
      Washington Secretary of State to effect the merger of WNG Cap I into PSE,
      with PSE the 

              


      

       

      



      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
5.14

       

      EQUITY
INVESTOR AFFILIATE TRANSACTIONS

       

      1. The
Merger Agreement.

       

      2. Escrow
Agreement, dated as October 24, 2007, by and among PADUA HOLDINGS LLC, a
Delaware limited liability company (“Depositor”), a
Washington corporation code-named by the Depositor as “Padua” (the “Company”), and THE
BANK OF NEW YORK (“Escrow
Agent”).

       

      3. Common
Interest, Joint Defense and Confidentiality Agreement, dated as of January 17,
2008, among (1) Puget Energy, Inc. (the “Company”), a
corporation organized under the laws of the State of Washington; (2) Padua
Holdings LLC (the “Parent”), a limited
liability company organized under the laws of Delaware; (3) Macquarie
Infrastructure Partners A, L.P., Macquarie Infrastructure Partners
International, L.P. and Macquarie Infrastructure Partners Canada, L.P.
(collectively, “MIP”); (4) Canada
Pension Plan Investment Board (“CPP”); and (5) Padua
Investment Trust, Her Majesty the Queen in right of the Province of Alberta,
PIP2GV (Pad) Ltd. and PIP2PX (Pad) Ltd., Macquarie-FSS Infrastructure Trust, and
Padua MG Holdings Inc.

       

      4. Commitment
Letter, dated as of October 25, 2007, by and among MIP Padua Holdings, GP,
Macquarie Specialised Asset Management Limited as responsible entity for
Macquarie FSS Infrastructure Trust, Padua MG Holdings Inc., CPP Investment Board
(USRE II) Inc., Padua Investment Trust, PIP2PX (Pad) Ltd. and PIP2GV (Pad) Ltd.
(collectively, the “Investors”), on the
one hand, and Padua Holdings LLC, a Delaware limited liability company (“Parent”), and Padua
Intermediate Holdings Inc., a Washington corporation in respect of the
Shareholder Funding.

      



      
        
          
             


          

          
             


          

          
             


          

        

      

      


      Schedule
5.15

       

      EXISTING
LITIGATION

       

      1.           Residential Exchange:
Petitioners in several actions in the Ninth Circuit against BPA asserted that
BPA acted contrary to law in entering into or performing or implementing a
number of agreements, including the amended settlement agreement (and the May
2004 agreement) between BPA and PSE regarding the REP.  BPA rates used
in such agreements between BPA and PSE for determining the amounts of money to
be paid to PSE by BPA under such agreements during the period October 1, 2001
through September 30, 2006 were confirmed, approved and allowed to go into
effect by the Federal Energy Regulatory Commission (“FERC”).  Petitioners
in several actions in the Ninth Circuit against BPA also asserted that BPA acted
contrary to law in adopting or implementing the rates upon which the benefits
received or to be received from BPA during the October 1, 2001 through September
30, 2006 period were based.  A number of parties have claimed that the
BPA rates proposed or adopted in the BPA rate proceeding to develop BPA rates to
be used in the agreements for determining the amounts of money to be paid to PSE
by BPA during the period October 1, 2006 through September 30, 2009 are contrary
to law and that BPA acted contrary to law or without authority in deciding to
enter into, or in entering into or performing or implementing such
agreements.  In March 2008, BPA requested FERC to continue a stay of
FERC’s review of such rates in light of the reopened rate proceeding described
below arising out of the Ninth Circuit litigation.  On May 3, 2007,
the Ninth Circuit issued an opinion in Portland Gen. Elec. v. BPA,
No. 01-70003, in which proceeding the actions of BPA in entering into settlement
agreements regarding the BPA REP with PSE and with other investor-owned
utilities were challenged.  In this opinion, the Ninth Circuit granted
petitions for review and held the settlement agreements entered into between BPA
and the investor-owned utilities being challenged in that proceeding to be
inconsistent with statute.  On May 3, 2007, the Ninth Circuit also
issued an opinion in Golden Northwest Aluminum v. BPA, No. 03-73426, in which
proceeding the petitioners sought review of BPA’s 2002-06 power
rates.  In this opinion, the Ninth Circuit granted petitions for
review and held that BPA unlawfully shifted onto its preference customers the
costs of its settlements with the investor-owned utilities.  On
October 5, 2007, petitions for rehearing of these two opinions were
denied.  On February 1, 2008, PSE and other utilities filed in the
U.S. Supreme Court a petition for a writ of certiorari to review the decisions
of the Ninth Circuit.  In May 2007, following the Ninth Circuit’s
issuance of these two opinions, BPA suspended payments to PSE under the amended
settlement agreement (and the May 2004 agreement).  On August 29,
2007, the Washington Commission approved PSE’s accounting petition to defer as a
regulatory asset the excess BPA Residential Exchange benefit provided to
customers and accrue monthly carrying charges on the deferred balance from June
7, 2007 until the deferral is recovered from customers or BPA.  As of
March 31, 2008, PSE has a regulatory asset, including carrying cost, of $36.6
million.  On October 11, 2007, the Ninth Circuit remanded the May 2004
agreement to BPA in light of the Portland Gen. Elec. V. BPA opinion and
dismissed the remaining three pending cases regarding settlement
agreements.  On February 8, 2008, BPA issued a notice reopening its
WP-07 rate proceeding to respond to the various Ninth Circuit
opinions.  In the notice, BPA proposed to adjust its fiscal year 2009
rates and to determine the amounts of Residential Exchange benefits paid since
2002 that may be recovered.  BPA is proposing to determine an amount
that was improperly passed through to residential and small farm customers of
PSE and the other regional investor-owned utilities during the 2002 to 2008 rate
periods and to recover this amount over time by reducing future benefits under
the REP.  The amount to be recovered over future periods from PSE’s
residential and small farm customers in BPA’s initial proposal is approximately
$150.0 million.  However, this is an initial proposal and is subject
to BPA’s rate case process resulting in a final decision in approximately August
2008, and is also subject to subsequent administrative and judicial
review.  In March 2008, BPA and PSE signed an agreement pursuant to
which BPA made a payment to PSE related to the REP benefits for the fiscal year
ending September 30, 2008, which payment is under such agreement subject to
true-up depending upon the amount of any REP benefits ultimately determined to
be payable to PSE.  In March and April 2008, Clatskanie People’s
Utility District filed petitions in the Ninth Circuit for review of BPA actions
in connection with offering or entering into such agreement with PSE and similar
agreements with other investor-owned utilities.

       

      2.           InfrastruX:  In
connection with the sale of InfrastruX Group, Inc., a former subsidiary, the
Company entered into a Special Indemnification Agreement under which it agreed
to pay certain costs and expenses relating to a Justice Department investigation
of the activities of a subsidiary of InfrastruX Group, Inc., B&H Maintenance
and Construction, Inc. (“B&H”).  The
alleged activities occurred during a period in which B&H was an indirect
subsidiary of the Company.  The Company is not involved in that
investigation.  B&H and two of its employees were indicted in
connection with these activities.  The buyer of InfrastruX Group, Inc
has submitted invoices totaling approximately $2 million in connection with the
Special Indemnification Agreement.  The Company has agreed to pay and
paid approximately $500,000 of those invoices, and is disputing the
balance.  The Special Indemnification Agreement provides that the
maximum exposure to the Company for expense reimbursement or purchase price
refund is limited to $15 million.

       

      3.           Snoqualmie Falls
project:  The Snoqualmie Falls project was granted a new
40-year operating license by FERC on June 29, 2004.  Puget Sound
Energy estimates that the investment required to implement the conditions of the
new license will cost approximately $140.0 million.  The Snoqualmie
Tribe filed a request for rehearing of the new license and a request to stay the
FERC license on July 29, 2004.  On March 1, 2005, FERC issued an Order
on Rehearing and Dismissing Stay Request.  Appeals to the U.S. Court
of Appeals by the Snoqualmie Tribe and by Puget Sound Energy have been
consolidated.  Briefing of the case had been completed and oral
argument was held on February 8, 2007.  On March 12, 2007, the Court
issued a decision in Navajo
Nation v. U.S. Forest Service, 479 F.3d 1024 (2007), addressing claims of
southwestern Indian tribes unrelated to the Snoqualmie Indian Tribe, but the
ruling is potentially relevant to the Snoqualmie Falls appeal.  The
Snoqualmie Indian Tribe filed a Notice of Supplemental Authority on March 15,
2007 in which it brought the Navajo Nation decision to the
attention of the panel in the Snoqualmie matter.  Puget Sound Energy
responded to the Tribe’s argument by filing a Response to Notice of Supplemental
Authority on March 23, 2007.  On March 29, 2007, the Court issued an
order that “[s]ubmission in this case is vacated pending further order of the
court.” On October 17, 2007, the Ninth Circuit issued an order to hear the Navajo Nation v. U.S. Forest
Service case en banc.  The appeal regarding the Snoqualmie
Falls project is still pending before the Court.  An adverse ruling
from the Court or adverse action by FERC if the license issuance is remanded
could impact Puget Sound Energy’s future use of this generating
asset.

       

      4.           Colstrip Gross Inequity
Settlement:  In February 1997 Puget Sound Energy entered into a
settlement of several claims among Puget Sound Energy, Montana Power and Western
Energy Co.—Western then being an affiliate of Montana Power.  One
portion of the settlement resolved a “gross inequity” claim then pending in
arbitration between Puget Sound Energy (and the other Colstrip Units 3 & 4
owners) and Western (the coal supplier).  The other Colstrip Units 3
& 4 owners settled their claim against Western later that
year.  In both instances, the settlements resulted in a price
reduction for coal sold, but the Puget Sound Energy-specific reductions made
Puget Sound Energy’s coal less expensive than the coal sold to the
others.  Price reductions applied between 1997 and June 30,
2000.  Puget Sound Energy’s settlement provides that Puget Sound
Energy “assumes the risk” of coal taxes and royalties issues.  In
April 2004 the Minerals Management Service (the “MMS”) issued an order
to Western demanding payment of an additional $1.1 million in royalties for coal
mined from federal land during that period.  The order computes the
amount claimed by deeming the “real” price as the one that the other Units 3
& 4 owners paid.  In May 2005 the State of Montana issued a demand
to Western based upon the same theory in the amount of $0.2
million.  Puget Sound Energy has reserved the full amount of these
claims, including interest as it accrues.  No substantive external
developments in this matter have arisen since the filing of the “Statement of
Reasons” in the fall of 2004.  Puget Sound Energy convened a meeting
on September 4, 2007 with Western representatives to promote settlement of this
matter.  Since that time, Western’s counsel has contacted MMS and
learned that a decision on the pending appeal is expected soon.  As
such, MMS counsel expressed an inclination to await the decision before
discussing settlement.

       

      5.           Colstrip Coal
Transportation:  Western mines coal for Units 3 & 4 in
“Area C” of the Rosebud Mine, and delivers that coal to the distant end of a 41⁄2
mile long conveyor, which then moves the coal to the plant.  The price
under the coal supply agreement is established at the delivery point at the
mine-end of the conveyor.  Western built and operates the conveyor
under an agreement negotiated a year after the coal supply
agreement.  The Units 3 & 4 owners pay Western under that
“transportation” agreement for those services.  Royalties and
associated taxes have been charged for the sales price, but not for the
transportation costs, since the beginning.  In three similar orders
collectively covering the periods from January 1, 1991 through December 31,
2004, the MMS (and in related orders the Montana Department of Revenue) has
challenged this arrangement, alleging that royalties and associated taxes should
also apply to the transportation costs.  The three MMS orders allege a
total amount due of approximately $8.5 million, plus interest as it accrues; the
Montana State Department of Revenue claims total approximately $7.7 million,
plus interest as it accrues (at a much higher rate than the federal
amounts).  Puget Sound Energy’s exposure to these claims is related to
its purchases of coal.  Puget Sound Energy owns 25% of Units 3 &
4, plus purchases power under a long term contract with Northwestern Energy that
might result in some additional charges also being passed through under that
agreement.  Because the transportation method continues every day, the
amount of this exposure increases continually.  All three MMS orders
are on appeal to the U.S. Department of Interior Board of Land Appeals (the
“IBLA”).  WECO
has won some points during the appellate process that have reduced the
claims--but under applicable law, to pursue the appeals, the principal in
dispute cannot be paid, which causes interest to accrue.

       

      6.           Various proposed revisions
to Open Access Transmission Tariff, FERC Electric Tariff, Eighth Revised Volume
7 (FERC Docket No. ER07-1163):  This Section 205 filing was
submitted by Puget Sound Energy on July 16, 2007 seeking variations from the
Order No. 890 pro forma Open Access Transmission Tariff.  Arizona
Public Service filed a motion to intervene with comments in support of Puget
Sound Energy’s filing.  Powerex Corp. made a motion to intervene
reserving the right to file additional comments at a later date.  PPL
Montana, LLC and PPL EnergyPlus, LLC submitted a combined motion to intervene
with comments.  Puget Sound Energy has answered PPL Montana and PPL
EnergyPlus’s comments and is awaiting FERC acceptance of its revised tariff
sheets.

       

      7.           Proposed revised Section
30.3 to Open Access Transmission Tariff, FERC Electric Tariff, Eighth Revised
Volume 7 (FERC Docket No. ER07-1169):  This Section 205 filing
was submitted jointly with Avista, Idaho Power, Northwestern, and PacifiCorp on
July 13, 2007 in response to Order No. 890 requesting variation on deadlines
associated with undesignation of Designated Network Resources.  PPL
Montana, LLC and PPL EnergyPlus, LLC submitted a combined motion to intervene
with comments.  Puget Sound Energy has answered PPL Montana and PPL
EnergyPlus’s comments and is awaiting FERC acceptance of its revised tariff
sheets.

       

      8.           Section 206 compliance
filing of Open Access Transmission Tariff, Volume No. 7, to comply with Order
No. 890 (FERC Docket No. 0A07-0052):  This Section 206 Open
Access Transmission Tariff compliance filing was submitted by Puget Sound Energy
on July 13, 2007 in response to FERC Order No. 890.  Powerex Corp.
made a motion to intervene with comments.  Puget Sound Energy has
answered Powerex’s comments and is awaiting Commission acceptance of its tariff
filing.

       

      9.           Baker River Hydroelectric
Project – Relicensing (FERC Docket P-2150):  The Baker River
project’s current annual license expires on April 30, 2008.  However,
per FERC Order, the annual license is automatically renewed without further
order of the WUTC until the issuance of a new license.  Puget Sound
Energy submitted an application for a new license to FERC on April 30,
2004.  On November 30, 2004, Puget Sound Energy and 23 parties
(federal, state and local governmental organizations, Native American Indian
tribes, environmental and other non-governmental entities) filed a proposed
comprehensive settlement agreement on all issues relating to the relicensing of
the Baker River project.  The proposed settlement includes a set of
proposed license articles and, if approved by FERC without material
modification, would allow for a new license of 45 years or more.  The
proposed settlement would require an investment of approximately $360.0 million
over the next 30 years (capital expenditures and operations and maintenance
cost) in order to implement the conditions of the new license.  The
proposed settlement is subject to additional regulatory approvals yet to be
attained from various agencies and other contingencies that have yet to be
resolved.  A Final Environmental Impact Statement was issued by FERC
on September 8, 2006.  However, FERC has not yet ruled on the proposed
settlement and its ultimate outcome remains uncertain.

       

      36.           Proceeding Relating to the
Proposed Merger:  On October 26, 2007 and November 2, 2007, two
separate lawsuits were filed against the Company and all of the members of the
Company’s Board of Directors in Superior Court in King County,
Washington.  The lawsuits, respectively, are entitled, Tansey v. Puget
Energy, Inc., et al., Case No. 07-2-34315-6 SEA and Alaska Ironworkers Pension
Trust v. Puget Energy, Inc., et al., Case No. 07-2-35346-1 SEA.  The
lawsuits are both denominated as class actions purportedly on behalf of Puget
Energy’s shareholders and assert substantially similar allegations and causes of
action relating to the proposed merger.  The complaints allege that
Puget Energy’s directors breached their fiduciary duties in connection with the
merger and seek virtually identical relief, including an order enjoining the
consummation of the merger.  Pursuant to a court order dated November
26, 2007, the two cases were consolidated for all purposes and entitled In re
Puget Energy, Inc. Shareholder Litigation, Case No. 07-2-34315-6
SEA.  On February 6, 2008, the parties entered into a memorandum of
understanding providing for the settlement of the consolidated lawsuit, subject
to customary conditions including completion of appropriate settlement
documentation, confirmatory discovery and court approval.  Pursuant to
the memorandum of understanding, the Company agreed to include certain
additional disclosures in its proxy statement relating to the
merger.  The Company does not admit, however, that its prior
disclosures were in any way materially misleading or inadequate.  In
addition, the Company and the other defendants in the consolidated lawsuit deny
the plaintiffs’ allegations of wrongdoing and violation of law in connection
with the merger.  The settlement, if completed and approved by the
court, will result in dismissal with prejudice and release of all claims of the
plaintiffs and settlement class of the Company’s shareholders that were or could
have been brought on behalf of the plaintiffs and the settlement
class.  In connection with such settlement, the plaintiffs intend to
seek a court-approved award of attorneys’ fees and expenses in an amount up to
$290,000, which the Company has agreed to pay.  At March 31, 2008, the
Company has a loss reserve of $290,000 recorded at March 31, 2008 related to
this matter.

       

      37.           Coldstrip Ankney
Litigation:  In May 2003, approximately 50 plaintiffs brought
an action against the owners of Colstrip which has since been amended to add
additional claims.  The lawsuit alleges that (1) seepage from two
different wastewater pond areas caused groundwater contamination and threatened
to contaminate domestic water wells and the Colstrip water supply pond, and (2)
seepage from the Colstrip water supply pond caused structural damage to
buildings and toxic mold.  Plaintiffs were seeking compensatory
(including but not limited to unjust enrichment and abatement) and punitive
damages.  After a failed attempt at settlement in 2004, PSE
established a reserve of approximately $0.7 million, of which $0.5 million was
for PSE’s share of costs to extend city water to 13 plaintiffs and PSE reduced
its reserve to approximately $0.2 million.  Discovery was completed
and trial was scheduled for June 2008.  Recent developments in the
litigation have caused PSE to change its reserve.  On February 15,
2008, plaintiffs submitted supplemental expert disclosures which, among other
things, alleged new abatement claims significantly higher than prior
allegations.  On April 11, 2008 the trial court judge issued an order
denying defendant’s motion to dismiss plaintiffs’ substantial unjust enrichment
claims.  On April 22, 2008 the trial court judge issued an order that
PSE along with two other defendants would be held liable on all counts,
including a finding of malice for punitive damages, as a discovery
sanction.  Although the defendants submitted a motion for
reconsideration of this sanction on April 25, 2008, the defendants reached
agreement on a global settlement with all plaintiffs on April 29, 2008 and PSE’s
share of that settlement is approximately $10.7 million.  PSE expects
settlement documents to be finalized in the second quarter 2008 and as a result
have increased the reserve to $10.7 million.  PSE is also evaluating
whether it will file an accounting petition to defer such costs.

       

      38.           Proceedings Relating to the
Western Power Market:

      California Receivable and California
Refund Proceeding.  On March 18, 2008, the California
Independent System Operator (CAISO) filed a status report with its calculations
of interest owed by and owing to parties.  The report also identified
further work to perform in the CAISO’s “who owes what to whom”
calculation.  On March 25, 2008, FERC issued an order addressing,
among other things, 11 pending rehearing requests by the California parties –
all of which the order rejected.

      California
Litigation.  Lockyer v.
FERC.  In March and April 2008, FERC issued orders establishing
procedures for the Lockyer remand.  The orders commence a
seller-by-seller inquiry into the transaction reports filed by entities that
sold power in California during 2000.  The inquiry is to determine if
the transaction reports as filed masked the gathering of more than 20% of the
market during the period, by that seller.  PSE is confident that it
will not be found to have possessed 20% of any relevant market during any
relevant time.  The order also mandates a settlement process before an
Administrative Law Judge.  The California parties sought rehearing of
these orders on April 21, 2008.

      CPUC v. FERC.  On
August 2, 2006, the Ninth Circuit decided that FERC erred in excluding potential
relief for tariff violations for periods that pre-dated October 2, 2000 and
additionally ruled that FERC should consider remedies for transactions
previously considered outside the scope of the proceedings.  The
August 2, 2006 decision may adversely impact PSE’s ability to recover the full
amount of its CAISO receivable.  The decision may also expose PSE to
claims or liabilities for transactions outside the previously defined “refund
period.” At this time the ultimate financial outcome for PSE is
unclear.  Rehearing by the Ninth Circuit on this matter was sought on
November 16, 2007.  The rehearing petition has not been acted
upon.  In addition, parties have been engaged in court-sponsored
settlement discussions, and those discussions may result in some
settlements.

      Orders to Show
Cause.  On June 25, 2003, FERC issued two show cause orders
pertaining to its western market investigations that commenced individual
proceedings against many sellers.  One show cause order investigated
26 entities that allegedly had potential “partnerships” with
Enron.  PSE was not named in that show cause order.  On
January 22, 2004, FERC stated that it did not intend to proceed further against
other parties.  The second show cause order named PSE (Docket No.
EL03-169) and approximately 54 other entities that allegedly had engaged in
potential “gaming” practices in the CAISO and California PX
markets.  PSE and FERC staff filed a proposed settlement of all issues
pending against PSE in those proceedings on August 28, 2003.  The
proposed settlement, which admits no wrongdoing on the part of PSE, would result
in a payment of a nominal amount to settle all claims.  FERC approved
the settlement on January 22, 2004.  The California parties filed for
rehearing of that order.  On March 17, 2004, PSE moved to dismiss the
California parties’ rehearing request and awaits FERC action on that
motion.

      Pacific Northwest Refund
Proceeding.  In October 2000, PSE filed a complaint at FERC
(Docket No. EL01-10) against “all jurisdictional sellers” in the Pacific
Northwest seeking prospective price caps consistent with any result FERC ordered
for the California markets.  FERC dismissed PSE’s complaint, but PSE
challenged that dismissal.  On June 19, 2001, FERC ordered price caps
on energy sales throughout the West.  Various parties, including the
Port of Seattle and the cities of Seattle and Tacoma, then moved to intervene in
the proceeding seeking retroactive refunds for numerous
transactions.  The proceeding became known as the “Pacific Northwest
Refund Proceeding,” though refund claims were outside the scope of the original
complaint.  On June 25, 2003, FERC terminated the proceeding on
procedural, jurisdictional and equitable grounds and on November 10, 2003, FERC
on rehearing, confirmed the order terminating the proceeding.  On
August 24, 2007, the Ninth Circuit issued a decision concluding that FERC should
have evaluated and considered evidence of market manipulation in California and
its potential impact in the Pacific Northwest.  It also decided that
FERC should have considered purchases made by the California Energy Resources
Scheduler and/or the California Department of Water Resources in the Pacific
Northwest Proceeding.  On December 17, 2007, PSE and Powerex
separately filed requests for rehearing with the Ninth Circuit of this
decision.  Those requests remain pending.

      Wah Chang Suit.  In
June 2004, Wah Chang, an Oregon company, filed suit in federal court against
Puget Energy and PSE, among others.  The complaint is similar to the
allegations made in other cases that were dismissed as having no
merit.  The case was dismissed on the grounds that FERC has the
exclusive jurisdiction over plaintiff’s claims.  On March 10, 2005,
Wah Chang filed a notice of appeal to the Ninth Circuit.  Oral
argument took place on April 10, 2007 and the Ninth Circuit issued an opinion
affirming the lower court’s dismissal of the case on November 20,
2007.  Wah Chang filed a petition for rehearing; on January 15, 2008,
the Ninth Circuit denied rehearing.

      



      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
5.19

       

      ENVIRONMENTAL
MATTERS

       

      See also
items listed in Schedule 5.15 (referencing the items entitled:  Ankney, et al. v. PPLM, et
al. and Snoqualmie
Falls Project)

       

      1. Environmental
Remediation:  Puget Energy, Inc. and PSE (collectively, the
“Company”) are
subject to environmental laws and regulations by federal, state and local
authorities and has been required to undertake certain environmental
investigative and remedial efforts as a result of these laws and
regulations.  The Company has also been named by the Environmental
Protection Agency (EPA), the Washington State Department of Ecology (Ecology)
and/or other third parties as potentially responsible at several contaminated
sites and manufactured natural gas plant sites.  PSE has implemented
an ongoing program to test, replace and remediate certain underground storage
tanks (“UST”)
as required by federal and state laws.  The UST replacement component
of this effort is finished, but PSE continues its work remediating and/or
monitoring relevant sites.  During 1992, the Washington Commission
issued orders regarding the treatment of costs incurred by the Company for
certain sites under its environmental remediation program.  The orders
authorize the Company to accumulate and defer prudently incurred cleanup costs
paid to third parties for recovery in rates established in future rate
proceedings, subject to Washington Commission review.  The Company
believes a significant portion of its past and future environmental remediation
costs are recoverable from insurance companies, from third parties or from
customers under a Washington Commission order.  At December 31, 2007,
the Company had $1.9 million and $35.9 million in deferred electric and natural
gas environmental costs, respectively.

       

      2. Crystal Mountain Diesel
Release:  In November 2006, PSE’s Crystal Mountain Generation
Station had an accidental release of approximately 18,000 gallons of diesel
fuel.  PSE crews and consultants responded and worked with applicable
state and federal agencies to control and remove the spilled
diesel.  On July 11, 2007, PSE received a Notice of Completion for
work performed pursuant to the Administrative Order for Removal from the U. S.
Environmental Protection Agency (EPA).  The Notice stated that PSE had
met the requirements of the Order and the accompanying scope of
work.  Total removal costs as of March 31, 2008 were approximately
$14.1 million.  PSE estimates the total remediation cost to be
approximately $15.0 million, which has been accrued or paid.  At March
31, 2008, PSE had an insurance receivable recorded in the amount of $7.6 million
associated with this fuel release.  PSE received a partial payment of
$5.0 million on this receivable in January 2008.  On February 13,
2008, the U.S. Department of Justice, on behalf of the EPA, notified PSE of its
intent to issue a fine of $0.5 million under the Clean Water Act.  PSE
has since agreed to pay this fine.  On April 15, 2008, the Washington
State Department of Ecology fined PSE $0.4 million as a civil penalty pursuant
to the Clean Water Act.  PSE reserved $1.0 million for the penalties
in 2006.

       

      3. Gas Works
Park:  From the early 1900s to the mid 1950s, Puget Sound
Energy’s predecessors operated a manufactured gas plant along the northern
shores of Lake Union.  The City of Seattle purchased the site for a
park in the 1960s.  In 2000 and 2001, Puget Sound Energy performed a
remediation using source removal, capping and vapor extraction
methods.  As part of performing the remediation, Puget Sound Energy
obtained a release from liability from the City of Seattle for the uplands
(minus the area where the vapor extraction system is installed.

       

      4. North Lake Union
Sediments:  Puget Sound Energy is conducting a remedial
investigation/feasibility study (RI/FS) under the Agreed Order (AO) between
WDOE, Puget Sound Energy and the City of Seattle executed on March 18,
2005.  Puget Sound Energy submitted a Draft RI/FS report for the
Eastern Study Area offshore of Gas Works Park to WDOE on March 31, 2006 and has
responded to comments received from WDOE and other trustees.  Puget
Sound Energy has tendered a formal settlement offer to the City of
Seattle.

       

      5. Colstrip Wastewater Pond
Seepage:  Puget Sound Energy is 50% owner of Colstrip Units
1&2 and a 25% owner of Colstrip Units 3&4.  Both units have
related wastewater ponds that hold the process water from the scrubber system as
well as stormwater and other miscellaneous wastewater.  The three
areas of ponds are Effluent Holding Ponds (EHP) 1&2, EHP 3&4 and the
plant site ponds.  All areas have pond seepage
issues.  Colstrip has received two NOVs from the MTDEQ related to such
seepage, one in 1998 and one in 2005, stating that under Colstrip’s Montana
Facility Siting Act (MFSA) certificate all seepage must be contained on the site
property and because seepage has gone off the plant property there is a
violation of the MFSA certificate.  In an attempt to bring the plant
into compliance with the MFSA permit, the Colstrip owners approached MTDEQ to
enter into a consent decree that would address wastewater pond seepage issues
and a related MFSA certificate amendment.  A draft consent decree and
permit amendment request have been submitted and discussions with MTDEQ are
ongoing.

       

      6. System oil
(PCBs):  In limited areas of Puget Sound Energy’s natural gas
distribution system, limited quantities of an oily condensate has been
discovered and collected.  At a number of sites, customers have made
claims against Puget Sound Energy for loss of business or impacts to
equipment.  Analytical of this material has identified low levels of
PCBs being present in this material.  Puget Sound Energy has installed
separators at a number of high demand industrial customers to intercept this
material before it impacts the customer.  This oil is collected and
sent offsite for incineration.

       

      7. Containment Concerns at
Puget Sound Energy substations:  Puget Sound Energy has more
than 360 substations in service.  As a result of regular operations,
some of these substations have experienced leaks and spills that may be required
to be remediated at such time as retrofits are
undertaken.  Additionally, recent changes in Spill Prevention Control
and Countermeasure (“SPCC”) regulations require capital improvements and/or SPCC
plan modifications at more than half of these substations.  Currently,
Puget Sound Energy estimates that capital budget improvements and/or O&M
SPCC plan modifications will cost up to $75,000 per substation, although there
can be no assurance in this regard.

       

      8. Underground Storage Program
(site remediation):  At a number of Puget Sound Energy
facilities, there is known soil and ground water contamination that will require
remediation when facilities are removed granting access.  These sites
are included in Puget Sound Energy’s quarterly environmental reporting to the
WUTC and are specifically named in the attachment thereto.  Estimated
remediation costs are also included in this spreadsheet, although there can be
no assurance with regard to such costs.

       

      


      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
6.08

       

      DISPOSITIONS

       

      None.

       

      



      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule 6.091

       

      INSURANCE

       

      
        	
                PUGET
      ENERGY COVERAGES

              
	
                Coverage

              	
                Description

              	
                Insurer

              	
                Policy
      Number

              	
                Policy
      Period

              	
                Coverage
      Limits

              	
                Retention/Deductible

              
	
                General
      Liability

              	
                Public
      liability coverage for all PSE operations and all
      subsidiaries.  Includes terrorism coverage.

              	
                AEGIS

              	
                XO235A1A08

              	
                12/1/08-12/1/09

              	
                $35,000,000
      excess of $2,000,000 SIR

              	
                $
      2,000,000

              
	
                EIM

              	
                251045-08GL

              	
                12/1/08-12/1/09

              	
                $100,000,000
      excess of $35,000,000

              	
                N/A

              
	
                ACE

              	
                PSD-1396/AE02

              	
                12/1/08-12/1/09

              	
                $65,000,000
      excess of $135,000,000

              	
                N/A

              
	
                D&O
      Liability

              	
                Personal
      Liability Coverage for Director’s & Officer’s of Puget Energy &
      subs & coverage for corp. reimbursement to
      D’s&O’s.  Includes terrorism coverage.

              	
                AEGIS

              	
                DO235A1A08

              	
                4/15/08-4/15/09

              	
                $35,000,000
      excess of $2,000,000 SIR

              	
                $1,000,000/2000000

              
	
                EIM

              	
                290798-08DO

              	
                4/15/08-4/15/09

              	
                $25,000,000
      excess of $35,000,000

              	
                N/A

              
	
                Chubb

              	
                81463067

              	
                4/15/08-4/15/09

              	
                $10,000,000
      excess of $60,000,000

              	
                N/A

              
	
                ARCH

              	
                DOX0021030-01

              	
                4/15/08-4/15/09

              	
                $5,000,000
      excess of $70,000,000

              	
                N/A

              
	
                Special
      Side-A only coverage

              	
                XL/ELU

              	
                ELU104190-08

              	
                4/15/08-4/15/09

              	
                $25,000,000
      excess of $75,000,000

              	
                N/A

              
	
                Errors
      & Omissions

              	
                Engineer’s
      professional liability coverage.  Includes Terrorism
      coverage.

              	
                AEGIS

              	
                EO235A1A08

              	
                12/1/08-12/1/09

              	
                $
      10,000,000

              	
                $
      2,000,000

              
	
                Workers’
      Comp.

              	
                Covers
      PSE workers’ comp. liability exposure excess of self-insured
      retention.  Includes terrorism coverage.

              	
                AEGIS

              	
                CO235A1A08

              	
                12/1/08-12/1/09

              	
                $35,000,000
      excess of $2,000,000 SIR

              	
                $
      2,000,000

              
	
                EIM

              	
                251045-08GL

              	
                12/1/08-12/1/09

              	
                $65,000,000
      excess of $35,000,000

              	
                N/A

              
	
                Property

              	
                All-Risk,
      Replacement Cost, Physical damage coverage for PSE
      properties.  Includes terrorism coverage.

              	
                ACE
      35%

              	
                EUTN04291815

              	
                4/1/08-4/1/09

              	
                $4,000,000,000

              	
                $
      1,000,000

              
	
                Nat
      Union 35%

              	
                2637712

              	
                4/1/08-4/1/09

              	
                $
      1,000,000

              
	
                AEGIS
      20%

              	
                L3312A1A08

              	
                4/1/08-4/1/09

              	
                $
      1,000,000

              
	
                Prinston
      5%

              	
                58-A3-PP-0000035-00

              	
                4/1/08-4/1/09

              	
                $
      1,000,000

              
	
                EIM
      5%

              	
                310340-08GP

              	
                4/1/08-4/1/09

              	
                $1,000,000;
      Goldendale - $2,500,000

              
	
                Aircraft

              	
                Hull
      and liability coverage for PSE 1986 Beach King Air

              	
                USAIG

              	
                SIHL-158L

              	
                12/1/08-12/1/09

              	
                $50,000,000
      BI/PD $2,000,000 Hull

              	
                None

              
	
                Fiduciary
      Liability

              	
                Coverage
      for liabilities associated with administration of employee benefit
      programs.  Includes terrorism coverage.

              	
                Zurich

              	
                FLC5239576-04

              	
                4/15/08-4/15/09

              	
                $
      15,000,000

              	
                $
      1,000,000

              
	
                AXIS

              	
                MLN712703/01/2008

              	
                4/15/08-4/15/09

              	
                $
      10,000,000

              	
                N/A

              
	
                Crime

              	
                Theft,
      employee dishonesty

              	
                Hartford

              	
                FA022858908

              	
                2/10/08-2/10/09

              	
                $
      10,000,000

              	
                $
      500,000

              
	
                Auto
      Liability

              	
                Liability
      coverage for PSE vehicles travelling through British
    Columbia

              	
                Liberty
      Mutual

              	
                AS1-691-544535-018

              	
                6/30/08-6/30/09

              	
                $
      1,000,000

              	
                $
      10,000

              
	
                General
      Liability

              	
                Blackout/brownout
      liability coverage

              	
                AEGIS

              	
                XO676A1A08

              	
                6/1/08-6/1/09

              	
                $
      9,000,000

              	
                $
      1,000,000

              
	
                General
      Liability

              	
                Liability
      coverage for Baker Resort

              	
                ARCH

              	
                GAPKG0175903

              	
                4/30/08-4/30/09

              	
                $
      1,000,000

              	
                None

              
	
                Liability
      coverage for Baker Resort

              	
                ARCH

              	
                GAUMB0019603

              	
                4/30/08-4/30/09

              	
                $
      1,000,000

              	
                $
      1,000,000

              
	
                General
      Liability

              	
                Covers
      non-regulated activities

              	
                Liberty
      Mutual

              	
                TB1-691-544535-028

              	
                6/30/08-6/30/09

              	
                $
      2,000,000

              	
                None

              
	
                Workers’
      Comp.

              	
                Coverage
      for one PSE employee at Colstrip

              	
                Montana
      Fund

              	
                03-293737-7

              	
                12/1/08-12/1/09

              	
                Statutory

              	 
      
	
                General
      Liability

              	
                Coverage
      for Komo Kulshan Outdoor School

              	
                Scottsdale

              	
                CLS1465268

              	
                4/30/08-4/30/09

              	
                $2mm
      occurrence/ $2mm aggregate

              	
                $
      500

              
	
                Other

              	
                Railroad
      Protective Liability2

              	
                The
      Travelers Indemnity

              	
                SPS6337L22IND

              	
                4/28/08-4/28/09

              	
                $6MM
      occurrence/ $2MM aggregate

              	 
      
	
                PUGET
      WESTERN COVERAGES

              
	
                Coverage

              	
                Description

              	
                Insurer

              	
                Policy
      Number

              	
                Policy
      Period

              	
                Coverage
      Limits

              	
                Deductibles

              
	
                General
      Liability

              	
                Public
      liability coverage for activities of PWI

              	
                Liberty
      Mutual

              	
                TB1-691544535-068

              	
                6/30/08-6/30/09

              	
                $
      2,000,000

              	
                $
      2,500

              
	
                Property

              	
                Blanket
      replacement-cost coverage for PWI properties

              	
                Safeco

              	
                01CG182593-8

              	
                5/23/08-6/30/09

              	
                Replacement
      Cost

              	
                $
      1,000

              
	
                Crime

              	
                Theft,
      employee dishonesty

              	
                Hartford

              	
                FA022858908

              	
                2/10/08-2/10/09

              	
                $
      10,000,000

              	
                $
      500,000

              
	
                HYDRO
      ENERGY DEVELOPMENT CORP. COVERAGES

              
	
                Coverage

              	
                Description

              	
                Insurer

              	
                Policy
      Number

              	
                Policy
      Period

              	
                Coverage
      Limits

              	
                Deductibles

              
	
                Package

              	
                Packaged
      property & liability coverage

              	
                Liberty
      Mutual

              	
                TB1-691544535-088

              	
                6/30/08-6/30/09

              	
                $
      2,000,000

              	
                $2,500
      gen.liability $1,000 property/empl benefit lia.

              
	
                Property

              	
                Blanket
      replacement-cost coverage for HEDC properties

              	
                See
      PSE

              	
                See
      PSE

              	
                4/1/08-4/1/09

              	
                All-Risk
      replacement-cost coverage

              	
                $
      100,000

              
	
                Crime

              	
                Theft,
      employee dishonesty

              	
                Hartford

              	
                FAO22858908

              	
                2/10/08-2/10/09

              	
                $5,000,000

              	
                $
      250,000

              
	
                JACKSON
      PRAIRIE PROJECT COVERAGES

              
	
                Coverage

              	
                Description

              	
                Insurer

              	
                Policy
      Number

              	
                Policy
      Period

              	
                Coverage
      Limits

              	
                Deductibles

              
	
                Property

              	
                Blanket
      replacement-cost coverage for HEDC properties

              	
                See
      PSE

              	
                See
      PSE

              	
                4/1/08-4/1/09

              	
                All-Risk
      replacement-cost coverage

              	
                $
      500,000

              
	
                General
      Liability

              	
                Public
      liability coverage for activities of Jackson Prairie
    project

              	
                AEGIS

              	
                XO235A1A08

              	
                12/1/08-12/1/09

              	
                $35,000,000

              	
                $1,000,000
      auto $200,000 Gen. Liability

              
	
                EIM

              	
                251045-08GL

              	
                12/1/08-12/1/09

              	
                $100,000,000
      excess of $35,000,000

              	
                N/A

              
	
                ACE

              	
                PSD-1396/AE02

              	
                12/1/08-12/1/09

              	
                $65,000,000
      excess of $135,000,000

              	
                N/A

              
	
                Workers’
      Comp.

              	
                Covers
      PSE workers’ comp. liability exposure excess of self-insured
      retention.  Includes terrorism coverage.

              	
                AEGIS

              	
                CO235A1A08

              	
                12/1/08-12/1/09

              	
                $35,000,000

              	
                $
      2,000,000

              
	
                EIM

              	
                251045-08GL

              	
                12/1/08-12/1/09

              	
                $65,000,000
      excess of $35,000,000

              	
                N/A

              
	
                COLSTRIP
      UNIT 1 & 2 PROJECT COVERAGES

              
	
                Coverage

              	
                Description

              	
                Insurer

              	
                Policy
      Number

              	
                Policy
      Period

              	
                Coverage
      Limits

              	
                Deductibles

              
	
                General
      Liability

              	
                Public
      liability coverage for activities at Colstrip Project Units
      1&2

              	
                AEGIS

              	
                X3091A1A08

              	
                12/31/08-12/31/09

              	
                $
      35,000,000

              	
                $
      2,000,000

              
	
                Property

              	
                Physical
      damage coverage for Colstrip Units 1&2.  Includes terrorism
      coverage.

              	
                FM
      Global 50%

              	
                LR630

              	
                4/1/08-4/1/09

              	
                $2,000,000,000

              	
                $
      5,000,000

              
	
                EIM
      17.5%

              	
                310324-08GP

              
	
                AEGIS
      22.5%

              	
                LO117A1A08

              
	
                Lexington
      10%

              	
                8756840

              
	
                Auto

              	
                Auto
      Liability

              	
                Trinity
      Universal

              	
                CAP001284402

              	
                3/17/08-3/17/09

              	
                $
      500,000

              	
                None

              
	
                Workers’
      Comp.

              	
                Covers
      workers’ comp. liability exposure

              	
                Penn.
      State Ins.

              	
                WC1591794

              	
                12/31/08-12/31/09

              	
                Statutory
      coverage excess of SIR

              	
                $
      3,000,000

              
	
                General
      Liability

              	
                Blackout/brownout
      liability coverage

              	
                AEGIS

              	
                XO676A1A08

              	
                6/1/08-6/1/09

              	
                $
      9,000,000

              	
                $
      1,000,000

              
	
                COLSTRIP
      UNIT 3 & 4 PROJECT COVERAGES

              
	
                Coverage

              	
                Description

              	
                Insurer

              	
                Policy
      Number

              	
                Policy
      Period

              	
                Coverage
      Limits

              	
                Deductibles

              
	
                General
      Liability

              	
                Public
      liability coverage for activities at Colstrip Project Units
      3&4

              	
                AEGIS

              	
                X3091A1A08

              	
                12/31/08-12/31/09

              	
                $
      35,000,000

              	
                $
      2,000,000

              
	
                Property

              	
                Physical
      damage coverage for Colstrip Units 3&4.  Includes terrorism
      coverage.

              	
                FM
      Global 50%

              	
                LR630

              	
                4/1/08-4/1/09

              	
                $2,000,000,000

              	
                $
      5,000,000

              
	
                EIM
      17.5%

              	
                310324-08GP

              
	
                AEGIS
      22.5%

              	
                LO117A1A08

              
	
                Lexington
      10%

              	
                8756840

              
	
                Auto

              	
                Auto
      Liability

              	
                Trinity
      Universal

              	
                CAP001284402

              	
                3/17/08-3/17/09

              	
                $
      500,000

              	
                None

              
	
                General
      Liability

              	
                Blackout/brownout
      liability coverage

              	
                AEGIS

              	
                XO676A1A09

              	
                6/1/08-6/1/09

              	
                $
      9,000,000

              	
                $
      1,000,000

              
	
                EPCOR/FREDRICKSON
      PROJECT COVERAGES

              
	
                Coverage

              	
                Description

              	
                Insurer

              	
                Policy
      Number

              	
                Policy
      Period

              	
                Coverage
      Limits

              	
                Deductibles

              
	
                General
      Liability

              	
                Public
      liability coverage for activities at EPCOR/Fredrickson
    project

              	
                Liberty
      Mutual / AEGIS

              	
                X3620A1A08

              	
                7/1/08-7/1/09

              	
                Cdn
      $35,000,000

              	
                Cdn
      $500,000

              
	
                Property

              	
                Physical
      damage to Fredrickson Project Including Terrorism

              	
                FM
      Global

              	
                SU346

              	
                5/1/08-5/1/09

              	
                US
      $250,000,000

              	
                US
      $1,250,000

              
	
                Auto

              	
                Covers
      one 1/2-ton pickup

              	
                Liberty
      Mutual

              	
                AS1-641-437890-028

              	
                11/1/08-11/1/09

              	
                US
      $1,000,000

              	
                US
      $1,000

              
	
                Workers
      Comp. $ Employers Liability

              	
                Coverage
      for liability arising out of employee injury claims

              	
                Liberty
      Mutual

              	
                WC-641-437890-018

              	
                11/1/2008-11/1/2009

              	
                US
      $1,000,000

              	
                US
      $15,000

              


      

      _______________  

      
        1 After
the Financial Closing Date and subject to the terms of Section 6.09, the
issuers, policy numbers, policy periods and amounts of retention/deductible set
forth on this schedule may change from time to time and the coverage limits set
forth on this schedule may change to reflect modifications of the value of the
assets insured (e.g.:  following any Disposition permitted under
Section 7.02). 

      

      
        2 This
is a policy that is project specific and is not generally in
place.

      

      



      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
7.01(b)

       

      EXISTING
LIENS

       

      
        	
                Debtor

              	
                Secured
      Party

              	
                Collateral

              	
                State

              	
                Jurisdiction

              	
                Original
      File Date and Number

              	
                Related
      Filings

              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                PSE
      Funding, Inc.

              	
                JPMorgan
      Chase Bank, N.A., as

                Program
      Agent

              	
                Collection
      Account, Deposit

                Account,
      Receivable, Lock

                box

              	
                WA

              	
                Department

                of
      Licensing

              	
                12/22/2005

                #2005-357-9849-0

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility financing

                statement
      covering personal

                property
      as well as other

                property
      real/personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                9/15/1967

                #12672

              	
                Partial
      Release filed

                8/9/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility financing

                statement
      covering personal

                property
      as well as other

                property
      real/personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                9/13/1968

                #42984

              	
                Partial
      Release filed

                8/9/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility

                Fortieth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                2/3/1969

                #53469

              	
                Partial
      Releases filed

                1/13/81,
      12/23/82,

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                6/19/1970

                #96775

              	
                Partial
      Release filed

                8/9/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Fifty-Third
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                7/20/1970

                #99343

              	
                Partial
      Releases filed

                1/13/81,
      12/23/82,

                5/19/00,
      12/6/04

                Amendment
      Filed

                6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/23/1971

                #122686

              	
                Partial
      Release filed

                8/9/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Fifty-Fourth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                10/31/1972

                #179608

              	
                Partial
      Releases filed

                1/12/81,
      12/23/82,

                5/19/00,
      12/6/04

                Amendment
      Filed

                6/3/97,

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A,

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                11/8/1972

                #180444

              	
                Partial
      Release filed

                8/9/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Fifty-Fifth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                3/5/1974

                #245382

              	
                Partial
      Releases filed

                1/12/81,
      12/23/82,

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Fifty-Sixth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                11/12/1974

                #274716

              	
                Partial
      Releases filed

                1/12/81,
      12/23/82,

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97 Assignment Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                8/26/1975

                #308439

              	
                Partial
      Release filed

                8/9/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Fifty-Seventh
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                8/26/1975

                #308440

              	
                Partial
      Releases filed

                1/12/81,
      12/23/82,

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97 Assignment Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                9/19/1975

                #311323

              	
                Partial
      Release filed

                8/9/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Fifty-Seventh
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                10/22/1976

                #375837

              	
                Partial
      Releases filed

                1/12/81,
      12/23/82,

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97 Assignment Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                3/17/1977

                #397450

              	
                Partial
      Release filed

                8/9/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                7/15/1977

                #419270

              	
                Partial
      Release filed

                8/7/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Fifty-ninth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                7/13/1978

                #480583

              	
                Partial
      Releases filed

                1/12/81,
      12/23/82,

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                9/7/1978

                #8250099

              	
                Partial
      Release filed

                8/7/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                8/29/1979

                #1088886

              	
                Partial
      Release filed

                8/7/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Sixtieth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                12/3/1979

                #9337024

              	
                Partial
      Releases filed

                1/12/81,
      12/23/82,

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97 Assignment Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Sixty-first
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                12/11/1981

                #81345038

              	
                Partial
      Releases filed

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                1/12/1982

                #82012035

              	
                Partial
      Release filed

                8/7/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                8/24/1983

                #832360084

              	
                Partial
      Release filed

                8/7/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                8/24/1983

                #832360085

              	
                Partial
      Release filed

                8/7/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Sixty-second
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                6/25/1984

                #841780007

              	
                Partial
      Releases filed

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Sixty-third
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                1/7/1986

                #860080033

              	
                Partial
      Releases filed

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Sixty-fourth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/8/1986

                #860990009

              	
                Partial
      Release filed

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Sixty-fifth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/8/1986

                #860990010

              	
                Partial
      Releases filed

                5/19/00,
      12/6/04

                Amendment
      Filed

                6/20/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                7/21/1986

                #862030006

              	
                Partial
      Release filed

                8/7/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                8/26/1986

                #862030007

              	
                Partial
      Release filed

                8/7/89

                Amendment
      Filed 6/4/97 Assignment Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Sixty-sixth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                8/26/1986

                #862390145

              	
                Partial
      Releases filed

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Sixty-seventh
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                11/7/1986

                #863110074

              	
                Partial
      Releases filed

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Sixty-eighth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                9/21/1987

                #872640165

              	
                Partial
      Releases filed

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                12/21/1987

                #873550095

              	
                Partial
      Release filed

                8/7/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                8/15/1988

                #882280029

              	
                Partial
      Release filed

                8/7/89

                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                BLC
      Corporation

              	
                Transmitting
      Utility Filing

                Leased
      new/used vehicles,

                new
      Pratt and Whitney

                combustion
      turbines

              	
                WA

              	
                Department

                of
      Licensing

              	
                10/5/1988

                #882790648

              	
                Amendments
      Filed

                2/27/89,
      10/28/94,

                6/9/97,
      5/22/01, 8/8/02

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Sixty-ninth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                2/12/1990

                #900430048

              	
                Partial
      Releases filed

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                9/7/1990

                #902500022

              	
                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                9/7/1990

                #902500023

              	
                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Seventieth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                10/16/1990

                #902890049

              	
                Partial
      Releases filed

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Seventy-First
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/8/1991

                #911280074

              	
                Partial
      Releases filed

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust Company, N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                8/20/1991

                #912320049

              	
                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Seventy-Third
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                3/4/1992

                #920640036

              	
                Partial
      Releases filed

                5/19/00,
      12/6/04

                Amendments
      Filed

                6/3/97,
      6/3/97,

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Seventy-Fourth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                10/26/1992

                #923000032

              	
                Partial
      Release filed

                5/19/00,
      12/6/04

                Amendment
      Filed 6/3/97

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Seventy-Fifth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/22/1993

                #931120020

              	
                Partial
      Releases filed

                5/19/00,
      12/6/04

                Amendments
      Filed

                6/3/97,

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                6/17/1993

                #931680004

              	
                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                Puget
      Power Conservation

                Grantor
      Trust 1995-1

              	
                Transmitting
      Utility Filing

                The
      purchased Conservation

                Investment
      Assets to the

                Puget
      Power Conservation

                Grantor
      Trust 1995-1

              	
                WA

              	
                Department

                of
      Licensing

              	
                6/7/1995

                #951580004

              	
                Amendments
      Filed

                6/4/97,
      7/23/97

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                8/28/1995

                #952400003

              	
                Amendment
      Filed 6/4/97

                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Security
      Agreement is filed as

                a
      transmitting utility covering

                personal
      property and other

                property
      real and/or personal

              	
                WA

              	
                Department

                of
      Licensing

              	
                2/19/1997

                #970500019

              	
                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Sixty-Eighth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                6/3/1997

                #971540077

              	
                Partial
      Releases filed

                5/19/00,
      12/6/04

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Transmitting
      Utility

                Mortgage
      of personal property

                and
      mortgage upon real estate

              	
                WA

              	
                Department

                of
      Licensing

              	
                6/4/1997

                #971550143

              	
                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                Puget
      Power Conservation

                Grantor
      Trust 1995-1

              	
                Transmitting
      Utility Filing

                The
      purchased Conservation

                Investment
      Assets to the

                Puget
      Power Conservation

                Grantor
      Trust 1995-1

              	
                WA

              	
                Department

                of
      Licensing

              	
                6/4/1997

                #971550168

              	
                Amendment
      Filed

                7/23/97

              
	
                Puget
      Sound Energy, Inc.

              	
                BLC
      Corporation

              	
                Transmitting
      Utility

                Leased
      new/used vehicles,

                new
      Pratt and Whitney

                combustion
      turbines

              	
                WA

              	
                Department

                of
      Licensing

              	
                6/9/1997

                #971600050

              	
                Amendments
      Filed

                5/22/01,
      8/8/02

              
	
                Puget
      Sound Energy, Inc.

              	
                First
      Trust of California, National

                Association

              	
                Transmitting
      Utility Filing

                Combustion
      turbine

                generating
      unit manufactured

                by
      Turbo Power & Marine

                Systems,
      Inc.

              	
                WA

              	
                Department

                of
      Licensing

              	
                6/9/1997

                #971600051

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                Puget
      Sound Energy, Inc.

                Conservation
      Grantor Trust 1997

              	
                Transmitting
      Utility Filing

                Purchased
      Conservation

                Investment
      Assets to the

                Puget
      Sound Energy, Inc.

                Conservation
      Grantor Trust

                1997

              	
                WA

              	
                Department

                of
      Licensing

              	
                8/5/1997

                #972170065

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Seventy-Sixth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                12/17/1997

                #973510085

              	
                Amendment/Partial

                Release
      Filed 5/19/00

                Partial
      Release filed

                12/6/04

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Seventy-Seventh

                Supplemental
      Indenture is

                filed
      as a transmitting utility

                covering
      certain property

              	
                WA

              	
                Department

                of
      Licensing

              	
                3/3/1999

                #990620066

              	
                Amendment/Partial

                Release
      Filed 5/19/00,

                Partial
      Release filed

                12/6/04

                Assignment
      Filed 6/3/03

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Seventy-Eighth
      Supplemental

                Indenture
      is filed as a

                transmitting
      utility covering

                certain
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                11/1/2000

                #20003060059

              	
                Assignment
      Filed 6/3/03

                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/24/2002

                #200211450896

              	
                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/24/2002

                #200211450919

              	
                Assignments
      Filed

                4/24/02,
      6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility Filing

                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/31/2002

                #2002-154-8137-7

              	
                Assignment
      Filed 6/3/03

                Partial
      Release filed

                Filed
      12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility Filing

                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/31/2002

                #2002-154-8138-4

              	
                Assignment
      Filed 6/3/03

                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility Filing

                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/31/2002

                #2002-154-8139-1

              	
                Assignment
      Filed 6/3/03

                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility Filing

                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/31/2002

                #2002-154-8141-4

              	
                Assignment
      Filed 6/3/03

                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility Filing

                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/31/2002

                #2002-154-8142-1

              	
                Assignment
      Filed 6/3/03

                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility Filing

                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/31/2002

                #2002-154-8143-8

              	
                Assignment
      Filed 6/3/03

                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility Filing

                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/31/2002

                #2002-154-8144-5

              	
                Assignment
      Filed 6/3/03

                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility Filing

                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/31/2002

                #2002-154-8145-2

              	
                Assignment
      Filed 6/3/03

                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility Filing

                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/31/2002

                #2002-154-8146-9

              	
                Assignment
      Filed 6/3/03

                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility Filing

                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/31/2002

                #2002-154-8147-6

              	
                Assignment
      Filed 6/3/03

                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility Filing

                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/31/2002

                #2002-154-8148-3

              	
                Assignment
      Filed 6/3/03

                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility Filing

                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/31/2002

                #2002-154-8149-0

              	
                Assignment
      Filed 6/3/03

                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      National Bank Association

              	
                Transmitting
      Utility Filing

                In
      Lieu Financing Statement

                (collateral
      not described)

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/31/2002

                #2002-154-8150-6

              	
                Assignment
      Filed 6/3/03

                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      Bank National Association,

                Trustee
      under Mortgage dated

                June
      2, 1924, as supplemented

                and
      modified

              	
                Electric
      operating utility

                property

              	
                WA

              	
                Department

                of
      Licensing

              	
                6/3/2003

                #200315470660

              	
                Partial
      Release Filed

                12/6/04

              
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital, LLC

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                7/3/2003

                #200318465090

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                10/6/2003

                #2003-281-4398-8

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/15/2004

                #2004-107-9584-2

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                8/31/2004

                #2004-246-9334-9

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      Bank National Association,

                Trustee
      under Mortgage dated

                June
      2, 1924, as supplemented

                and
      modified

              	
                Electric
      operating utility

                property

              	
                WA

              	
                Department

                of
      Licensing

              	
                3/16/2005

                #2005-076-2148-1

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/19/2005

                #2005-110-2057-7

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/19/2005

                #2005-110-2058-4

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/19/2005

                #2005-110-2060-7

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/19/2005

                #2005-110-2061-4

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/27/2005

                #2005-118-4319-0

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Gas
      utility property

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/29/2005

                #2005-119-4935-9

              	
                Assignment
      Filed

                6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      Bank National Association,

                Trustee
      under Mortgage dated

                June
      2, 1924, as supplemented

                and
      modified

              	
                Electric
      operating utility

                property

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/29/2005

                #2005-119-4937-3

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                The
      Bank of New York Trust

                Company,
      N.A.

              	
                Gas
      utility property

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/29/2005

                #2005-119-4938-0

              	
                Assignment
      Filed

                6/21/06

              
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital

              	
                Leased
      property

              	
                WA

              	
                Department

                of
      Licensing

              	
                10/12/2005

                #200528507924

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                JPMorgan
      Chase Bank, N.A., as

                Program
      Agent

              	
                Transmitting
      Utility Filing

                Collection
      Account, Deposit

                Account,
      Receivable, Lock-

                box

              	
                WA

              	
                Department

                of
      Licensing

              	
                12/22/2005

                #2005-357-9855-1

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/1/2006

                #200612157523

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                5/24/2006

                #200614426016

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                U.S.
      Bank National Association,

                Trustee
      under Mortgage dated

                June
      2, 1924, as supplemented

                and
      modified

              	
                Electric
      operating utility

                property

              	
                WA

              	
                Department

                of
      Licensing

              	
                9/15/2006

                #2006-258-9059-2

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                1/18/2007

                #200701822868

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                IOS
      Capital

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                4/3/2007

                #200709335940

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                Ikon
      Financial Svcs

              	
                Leased
      equipment

              	
                WA

              	
                Department

                of
      Licensing

              	
                1/8/2008

                #200800858911

              	 
      
	
                Puget
      Sound Energy, Inc.,

                successor
      in interest to Puget

                Sound
      Power and Light Company

                Additional
      Debtors: Mei Fang

                Wang,
      Gloria R Hettel, Pine Lake

                Plateau
      Dental-Medical Building,

                LLC,
      Sammamish Properties,

                LLC,
      David J Hines and Lina

                Hines,
      Pine Lake Associates,

                LLC,
      Pierre V. Barmore, Jr. and

                Janice
      Barmore, King County, All

                unknown
      owners and all unknown

                tenants

              	
                Central
      Puget Sound Regional

                Transit
      Authority, d/b/a Sound

                Transit

              	
                Stipulated
      Judgment and

                Decree
      of Appropriation

                $2,623,000.00

              	
                WA

              	
                King
      County

              	
                9/15/2004

                #20040915000419

              	 
      
	
                Puget
      Sound Energy, Inc.

                Additional
      Debtor: City of Seattle

              	
                Constance
      A. Johnson

              	
                Stipulated
      Judgment Quieting

                Title

              	
                WA

              	
                King
      County

              	
                10/28/2004

                #20041028000034

              	 
      
	
                Puget
      Sound Energy, Inc. fka

                Puget
      Sound Traction, Light and

                Power
      Company

                Additional
      Debtors: BFS Retail &

                Commercial
      Operations, LLC,

                Cecil
      Lueng and Hazel Lueng,

                Tommy
      Wong, Lani Yiu, King

                County,
      all unknown owners and

                all
      unknown tenants

                 

              	
                Central
      Puget Sound Regional

                Transit
      Authority, d/b/a Sound

                Transit

              	
                Judgment
      and Decree of

                Appropriation
      and Stipulation

                for
      and Order Amendment (1)

                Petition;
      (2) Order Re Public

                Use
      and (3) order Re

                Possession
      and Use

                $1,850,000.00

              	
                WA

              	
                King
      County

              	
                11/10/2005

                #20051110001980

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                Christopher
      Todd Gerou

              	
                JUDGMENT

                $1,471.00

              	
                WA

              	
                King
      County District Court

                -
      East

                (Bellevue,

                WA)

              	
                5/1/2002

                Case
      #Y00020101

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                Petr
      D Dvosis

              	
                JUDGMENT

                $1,521.00

              	
                WA

              	
                King
      County District Court

                -
      East

                (Bellevue,

                WA)

              	
                5/1/2002

                Case
      #Y00020268

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                Jon
      Vevik

              	
                JUDGMENT

                $656.70

              	
                WA

              	
                King
      County District Court

                -
      East

                (Bellevue,

                WA)

              	
                10/14/2002

                Case
      #Y00020659

              	 
      
	
                Puget
      Sound Energy, Inc.

                Additional
      Debtor:

                Central
      Locating Service

              	
                R.L.
      Alia Company

              	
                JUDGMENT

                $609.80

              	
                WA

              	
                King
      County District Court

                -
      East

                (Bellevue,

                WA)

              	
                9/9/2004

                Case
      #SC4-01173

              	 
      
	
                Puget
      Sound Energy, Inc.

                Additional
      Debtor:

                Central
      Locating Service

              	
                R.L.
      Alia Company

              	
                JUDGMENT

                $4,021.00

              	
                WA

              	
                King
      County District Court

                -
      East

                (Bellevue,

                WA)

              	
                9/9/2004

                Case
      #SC4-01174

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                First
      & Utah Street Associates

              	
                JUDGMENT

                $4,030.00

              	
                WA

              	
                King
      County District Court

                -
      East

                (Bellevue,

                WA)

              	
                5/4/2007

                Case
      #75-001232

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                John
      M Adarno

              	
                JUDGMENT

                $4,500.00

              	
                WA

              	
                King
      County

                Superior

                Court

              	
                11/29/2001

                Judgment#
      01-9-19424-6

                Case#
      01-2-06298-1

              	 
      
	
                Puget
      Sound Energy, Inc.

              	
                Washington
      State of Labor &

                Industries

              	
                JUDGMENT

                $200.00

              	
                WA

              	
                King
      County

                Superior

                Court

              	
                12/28/2007

                Judgment#
      07-9-37556-8

                Case#
      06-2-33074-9

              	 
      
	
                Puget
      Western Company

              	
                Shear
      Transport, Inc.

              	
                JUDGMENT

                $27,860.00

              	
                WA

              	
                King
      County

                Superior

                Court

              	
                1/17/1997

                Judgment#
      97011700058

              	 
      


      

      


      


      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
7.03(b)

       

      EXISTING
INDEBTEDNESS

       

      Long-term Debt of Puget
Sound Energy

       

      
        	
                Series

              	
                Coupon

              	
                Issue

                Date

              	
                Maturity

                Date

              	
                Principal

              
	
                3.363%
      Senior notes

              	
                3.363%

              	
                Jun-4-03

              	
                Jun-1-08

              	
                $150,000,0004

              
	
                MTN-B

              	
                6.530%

              	
                Aug-18-93

              	
                Aug-18-08

              	
                $3,500,000

              
	
                MTN-B

              	
                6.510%

              	
                Aug-19-93

              	
                Aug-19-08

              	
                $1,000,000

              
	
                Senior
      note B

              	
                7.610%

              	
                Sep-8-00

              	
                Sep-8-08

              	
                $25,000,000

              
	
                Senior
      note B

              	
                6.460%

              	
                Mar-9-99

              	
                Mar-9-09

              	
                $150,000,000

              
	
                MTN-C

              	
                6.610%

              	
                Dec-20-95

              	
                Dec-21-09

              	
                $3,000,000

              
	
                MTN-C

              	
                6.620%

              	
                Dec-20-95

              	
                Dec-22-09

              	
                $5,000,000

              
	
                Senior
      note B

              	
                7.960%

              	
                Feb-22-00

              	
                Feb-22-10

              	
                $225,000,000

              
	
                MTN-C

              	
                7.120%

              	
                Sep-11-95

              	
                Sep-13-10

              	
                $7,000,000

              
	
                Senior
      note C

              	
                7.690%

              	
                Nov-9-00

              	
                Feb-1-11

              	
                $260,000,000

              
	
                MTN-B

              	
                6.830%

              	
                Aug-18-93

              	
                Aug-19-13

              	
                $3,000,000

              
	
                MTN-B

              	
                6.900%

              	
                Sep-30-93

              	
                Oct-1-13

              	
                $10,000,000

              
	
                MTN-C

              	
                7.350%

              	
                Sep-11-95

              	
                Sep-11-15

              	
                $10,000,000

              
	
                MTN-C

              	
                7.360%

              	
                Sep-11-95

              	
                Sep-15-15

              	
                $2,000,000

              
	
                5.197%
      Senior notes

              	
                5.197%

              	
                Oct-12-05

              	
                Oct-1-15

              	
                $150,000,000

              
	
                Senior
      note A

              	
                6.740%

              	
                Jun-15-98

              	
                Jun-15-18

              	
                $200,000,000

              
	
                FMB

              	
                9.570%

              	
                Sep-1-90

              	
                Sep-1-20

              	
                $25,000,000

              
	
                MTN-C

              	
                7.150%

              	
                Dec-20-95

              	
                Dec-19-25

              	
                $15,000,000

              
	
                MTN-C

              	
                7.200%

              	
                Dec-21-95

              	
                Dec-22-25

              	
                $2,000,000

              
	
                Senior
      note A

              	
                7.020%

              	
                Dec-27-97

              	
                Dec-1-27

              	
                $300,000,000

              
	
                Senior
      note B

              	
                7.000%

              	
                Mar-9-99

              	
                Mar-9-29

              	
                $100,000,000

              
	
                Pollution
      control bonds

              	
                5.100%

              	
                Mar-11-03

              	
                Mar-1-31

              	
                $23,400,000

              
	
                Pollution
      control bonds

              	
                5.000%

              	
                Mar-11-03

              	
                Mar-1-31

              	
                $138,460,000

              
	
                5.483%
      Senior notes

              	
                5.483%

              	
                May-27-05

              	
                Jun-1-35

              	
                $250,000,000

              
	
                6.724%
      Senior notes

              	
                6.724%

              	
                Jun-30-06

              	
                Jun-15-36

              	
                $250,000,000

              
	
                6.274%
      Senior notes

              	
                6.274%

              	
                Sep-18-06

              	
                Mar-15-37

              	
                $300,000,000

              
	
                6.974%
      Hybrid

              	
                6.974%

              	
                Jun-4-07

              	
                Jun-1-67

              	
                $250,000,000

              
	
                Total

              	 
      	 
      	 
      	
                $2,858,360,000

              


      

      


       

      Other Debt of Puget Sound
Energy

       

      
        	
                Credit
      Facility

              	
                Variable

              	
                Mar-29-07

              	
                Apr-4-12

              	
                $500,000,0005

              
	
                Credit
      Facility

              	
                Variable

              	
                Mar-29-07

              	
                Apr-4-12

              	
                $350,000,0005

              
	
                A/R
      Securitization Facility

              	
                Variable

              	
                Dec-20-05

              	
                Dec
      20-10

              	
                $200,000,0005

              
	
                Demand
      Promissory Note

              	
                Variable

              	
                Jun-1-06

              	
                NA

              	
                $30,000,0006

              


      

       

       

      
        
           

        

        
           

          
          

        

        
           

        

      

       

      Continued

       

      
        	
                Security

              	
                Dividend

              	
                Shares

              	
                Par

              	
                Amount
      Outstanding

              
	
                Preferred
      stock

              	
                4.70%

              	
                4,311

              	
                $100

              	
                $431,100

              
	
                Preferred
      Stock

              	
                4.84%

              	
                14,583

              	
                $100

              	
                $1,458,300

              


      

      


      ____________  

      
        4 Issue
likely to mature prior to merger completion date.  

      

      
        5 Represents
the commitment amount, not the amount outstanding.  These facilities
will be replaced by the Facilities on the Financial Closing Date; provided that
any letters of credit issued thereunder shall be permitted only to the extent
such letters of credit are fully collateralized by either cash proceeds from the
Loans made hereunder or Letters of Credit issued hereunder, in each case under
the Energy Hedging Facility or the Liquidity Facility, as
applicable.

      

      6 Among
Puget Sound Energy, Inc., as Borrower and Puget Energy, Inc., as Lender
(intercompany revolving credit facility).  This note does not contain
any restriction as to dividends, prepayment, redemption or change of
control.

      



      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
7.04(m)

       

      EXISTING
INVESTMENTS

       

      Investments
in subsidiaries as listed in Schedule 5.13(B).

       

      Various
in corporate owned life insurance (COLI) policies owned as of the date of this
agreement, owned by PSE.

       

      Development
rights to certain wind powered electric generating facilities in Washington
State, owned by PSE

       

      1.  In
February 2008, Puget Sound Energy acquired, for approximately $3.6 million,
assets intended to support the development of a wind powered generating
facility, with a nameplate capacity of 44 MW, adjacent to PSE’s existing Wild
Horse Wind Project in Kittitas County, Washington (the “Wild Horse
Expansion”).  Specifically, PSE acquired approximately 1400
acres of land, wind data, meteorological data collection towers (“met towers”),
environmental and other studies, a position in a transmission interconnection
queue, and related assets.

       

      2.  In
mid May 2008, PSE anticipates closing on the acquisition of assets intended to
support the development of a wind powered generating facility, with a nameplate
capacity of 70 MW, in Skamania County, Washington (the “Saddleback
Project”).  Specifically, for approximately $800,000, PSE will
acquire wind data, met towers, environmental and other studies, a position in a
transmission interconnection queue, and related assets.  Further, PSE
will enter into a lease with the property owner providing PSE with all necessary
real estate rights to the project site.

       

      $1.5
million investment in Kinetic Ventures, held by Puget Western,
Inc.:

      Puget
Western, Inc., a wholly owned subsidiary of PSE, has an 11.11% member’s interest
in an energy related utility venture capital fund, Kinetic Ventures Fund VI,
LLC., that is scheduled to terminate on December 31, 2009.  Puget
Western accounts for its investment in the fund in accordance with the FASB’s
EITF 03-01, with its carrying cost equal to the fund manager’s reported capital
account balance for Puget Western.  The principal assets of the fund
are equity investments in four non-public companies.  Audited
Financials are provided to the investors once a year.  Puget Western’s
reported member’s capital account balance was $1,528,108 at December 31,
2007.  Puget Energy is obligated to provide $193,080 in future capital
investments if capital calls are made by the managing investor of the fund prior
to December 31, 2009.

       

      $35.2
million in various real estate investments, held by Puget Western,
Inc.:

      Puget
Western’s primary business is the investment and development of commercial and
industrial properties in the Pacific Northwest.  At December 31, 2007,
the company owned 41 commercial/industrial properties in Western Washington with
a carrying value of $32,680,893.  Additionally, Puget Western held 8
promissory notes related to the prior sale of properties, with an aggregate
carrying value of $9,317,812 at December 31, 2007.  All notes are
secured by a first lien deed of trust and all notes were current at December 31,
2007.

       

      


      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      Schedule
10.02

       

      FACILITY
AGENT’S OFFICE; CERTAIN ADDRESSES FOR NOTICES

       

      Facility Agent; Collateral
Agent:

       

      Barclays
Bank PLC

      745
Seventh Avenue

      New York,
New York  10019

      Phone:  (212)
412-3752

      Facsimile:  (212)
412-7600

      Attention:  Ann
Sutton

       

      Borrower and
Subsidiaries:

       

      Puget
Sound Energy, Inc.

      10885 NE
4th Street

      Bellevue,
WA 98004-5591

      PO Box
97034, PSE-08N

      Bellevue,
WA 98009-9734

      Phone:  (425)
462-3451

      Facsimile:  (425)
462-3300

      Attention:  Assistant
Treasurer

      Email:  James.sant@pse.com

    

     

    
      


      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      EXHIBIT
A-1

      to Credit
Agreement

       

      FORM
OF BORROWING REQUEST

       

      Barclays
Bank PLC

      as
facility agent

      under the
below-defined Credit Agreement

      (in such
capacity, the “Facility
Agent”)

       

      Attention:  [________]

       

      [DATE]

       

      Reference
is made to the Credit Agreement, dated as of [_______], 2009 (as amended,
amended and restated, supplemented and/or modified and in effect from time to
time, the “Credit
Agreement”), among Puget Sound Energy, Inc., a Washington corporation
(the “Borrower”), the
Lenders party thereto from time to time and Barclays Bank PLC, as Facility
Agent.  Capitalized terms used but not defined herein have the
meanings assigned to them in the Credit Agreement.

       

      This
Borrowing Request is issued in accordance with Section 2.02(a) of
the Credit Agreement.

       

      The
undersigned hereby irrevocably requests a Borrowing of Loans under the Credit
Agreement as follows:

       

      
        	
                 
      

              	
                (i)

              	
                the
      date of the requested Borrowing is [__________],
  20[___];

              


      

       

      
        	
                 
      

              	
                (ii)

              	
                the
      Loans are comprised of [$[__________] of Capital Expenditure Loans]
      [$[__________] of Energy Hedging Loans] [$[__________] of Liquidity
      Loans];

              


      

       

      
        	
                 
      

              	
                (iii)

              	
                the
      aggregate amount of the Borrowing is $[_______];1
and

              


      

       

      
        	
                 
      

              	
                (iv)

              	
                the
      Loans are comprised of [Alternate Base Rate Loans] [LIBO Rate Loans having
      an initial Interest Period of [__________]
  month[s].

              


      

       

      Pursuant
to Section 4.02
of the Credit Agreement, the undersigned hereby certifies that the following
statements will be true on the date of the Borrowing or, if such representation
specifically refers to an earlier date, such earlier date:

       

      (a)           The
representations and warranties of the Borrower contained in Article V of the
Credit Agreement and each other Financing Document are 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
the requested Borrowing, before and after giving effect to the requested
Borrowing and to the application of the proceeds therefrom, as though made on
and as of such date, other than any such representations or warranties that, by
their terms, refer to a specific date other than the date of the requested
Borrowing, in which case, as of such date.

       

      (b)           No
Default or Event of Default has occurred and is continuing, or would result from
such requested Borrowing or from the application of the proceeds
therefrom.

       

      This
notice is being delivered by the undersigned to the Facility Agent not later
than 1:00 p.m., New York City time, on the [first]2 [fourth]3 Business Day prior to the date of the
requested Borrowing specified above.

       

      
        	 
      	
                PUGET
      SOUND ENERGY, INC.

              
	 
      	 
      
	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	 
      	
                Name:

              
	 
      	 
      	
                Title:

              


      

      
__________________

      
        1 All
Borrowings must be in minimum amounts of $1,000,000 and increments in excess
thereof of $500,000

        2
Insert if Alternate Base Rate Loan Borrowing.

      

      3
Insert if LIBO Rate Loan Borrowing.

    

     

    
      


      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      EXHIBIT
A-2

      to Credit
Agreement

       

      FORM
OF LETTER OF CREDIT REQUEST

       

      Note
that if so required by the Issuing Bank, the Borrower shall (in addition to
delivering

      this
form of Letter of Credit Request) submit a letter of credit application on such
Issuing

      Bank’s
standard form in connection with any request for a Letter of
Credit.

       

      [Issuing
Bank]4

      as
Issuing Bank

      under the
below-defined Credit Agreement

      (in such
capacity, the “Issuing
Bank”)

       

      Attention:  [_______]

       

      Barclays
Bank PLC

      as
facility agent

      under the
below-defined Credit Agreement

      (in such
capacity, the “Facility
Agent”)

       

      Attention:  [_______]

       

      [DATE]

       

      Reference
is made to the Credit Agreement, dated as of [_______], 2009 (as amended,
amended and restated, supplemented and/or modified and in effect from time to
time, the “Credit
Agreement”), among Puget Sound Energy, Inc., a Washington corporation
(the “Borrower”), the
Lenders party thereto from time to time and Barclays Bank PLC, as Facility
Agent.  Capitalized terms used but not defined herein have the
meanings assigned to them in the Credit Agreement.

       

      This
Borrowing Request is issued in accordance with [Section 2.12(b)]
[Section 2.13(b)]
of the Credit Agreement.

       

      The
undersigned hereby irrevocably requests the [issuance] [amendment] [renewal]
[extension] of [a] [Liquidity] [Energy Hedging] Letter[s] of Credit5 under the Credit Agreement as
follows:

       

      
        	
                (i)  

              	
                the
      date of the requested [issuance] [amendment] [renewal] [extension] is
      [_______], 20[__];

              


      

       

      
        	
                (ii)  

              	
                the
      date of expiry of the Letter of Credit is [_______],
    20[__];

              


      

       

      
        	
                (iii)  

              	
                the
      amount of the Letter of Credit is $[_______];
  and

              


      

       

      
        	
                (iv)  

              	
                the
      name and address of the beneficiary of the Letter of Credit are as
      follows:

              


      

       

      
        	
                Name:

              	________________________________ 
      
	
                Address:

              	________________________________ 
      
	 
      	________________________________ 
      
	________________________________ 
      
	________________________________ 
      
	 
      	 
      
	 
      	 
      


      

      Pursuant
to Section 4.02
of the Credit Agreement, the undersigned hereby certifies that the following
statements will be true on the date of the [issuance] [amendment] [renewal]
[extension] or, if such representation specifically refers to an earlier date,
such earlier date:

       

      (a) The
representations and warranties of the Borrower contained in Article V of the
Credit Agreement and each other Financing Document are true and correct on and
as of the date of the requested Borrowing, before and after giving effect to the
requested Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date, other than any such representations or warranties
that, by their terms, refer to a specific date other than the date of the
requested [issuance] [amendment] [renewal] [extension], in which case, as of
such date.

       

      (b) No
Default or Event of Default has occurred and is continuing, or would result from
such requested [issuance] [amendment] [renewal] [extension] or from the
application of the proceeds therefrom.

       

      This
notice is being delivered by the undersigned to the Facility Agent not later
than 1:00 p.m., New York City time, on the fourth Business Day prior to the date
of the requested [issuance] [amendment] [renewal] [extension] specified
above.

       

      
        	
              	 
      
	 
      	
                PUGET
      SOUND ENERGY, INC.

              
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                By:

              	 
	 
      	 
      	
                Name:

              
	 
      	 
      	
                Title

              


      

       

      ___________________ 

      
        
          	
                  4
      If this request is to Dresdner Bank AG, New York Branch in its
      capacity as Liquidity Issuing Bank or Energy Hedging Issuing Bank, notice
      must be provided to all of the individuals set forth on Annex A hereto, as
      such Annex A may be amended from time to time by written notice from
      Dresdner Bank AG, New York Branch in order for such request to be
      effective.

                



      

      
        
          	
                  5 Where
      requesting an amendment, renewal or extension of a Letter of Credit,
      please identify the Letter of Credit to be amended, renewed or
      extended.

                


        

      

      


      
        
          
             


          

          
             


            
            

          

          
             


          

        

      

      


      ANNEX A

       

      Dresdner Bank AG, New York
Branch Required Contact List6

       

      In order
for a Letter of Credit Request to Dresdner Bank AG to be considered effective,
all 5

      people
listed below must receive the Letter of Credit Request via both FAX &
EMAIL.

       

      Brian
Smith

      brian.smith@dkib.com

      
        
          	FAX:	 212
      895 1560
	

                  Phone: 

                	 212
      895 1632


        

         

      

      Thomas
Brady

      thomas.brady@dkib.com

      
        	FAX:	 212
      895 1560
	

                Phone: 

              	 212
      895 1763


      

       

      Michael
Rothehueser

      michael.rothehuser@dkib.com

      
        	FAX:	 212
      208 6091
	

                Phone: 

              	 212
      895 5154


      

       

      John
Fitzgerald

      john.fitzgerald@dkib.com

      
        
          	FAX:	 212
      429 4819
	

                  Phone: 

                	 212
      895 1971


        

         

      

      Kathleen
Bereswill

      kathleen.bereswill@dkib.com

      
        
          	FAX:	 212
      895 6965
	FAX:	 212
      895 6975
	

                  Phone: 

                	 212
      895 6442


        

         

      

      


      
___________

      
        
          	
                  6 Note
      that these names are subject to
change.

                


        

      

    

     

     

    
      

        
          
             


          

          
             


            
            

          

          
             


          

        


        EXHIBIT
B-1

        To Credit
Agreement

         

        FORM
OF CAPITAL EXPENDITURE NOTE

         

        $[____________]

         

        Dated:_________
__, ____

         

        FOR VALUE
RECEIVED, the undersigned, PUGET SOUND ENERGY, INC., a Washington corporation
(the “Borrower”), HEREBY
PROMISES TO PAY [____________] or its registered assigns (together, the “Capital Expenditure
Lender”) for the account of its applicable lending office the principal
amount of the Capital Expenditure Loans (as defined below) owing to the Capital
Expenditure Lender by the Borrower pursuant to that certain Credit Agreement,
dated as of [__________], 2009 (as amended, amended and restated, supplemented
and/or modified and in effect from time to time, the “Credit Agreement”),
among the Borrower, the Lenders party thereto from time to time and Barclays
Bank PLC, as facility agent (in such capacity, the “Facility Agent”), on
the dates and in the amounts specified in the Credit
Agreement.  Capitalized terms used herein but not defined herein shall
have the meanings assigned thereto in the Credit Agreement.

         

        The
Borrower promises to pay to the Capital Expenditure Lender or its registered
assigns interest on the unpaid principal amount of the Capital Expenditure Loans
from the date of the Borrowings thereof until such principal amount is paid in
full, at such interest rates and payable at such times as are specified in the
Credit Agreement.

         

        Both
principal and interest are payable in Dollars and in immediately available funds
to the Facility Agent in an account designated by the Facility
Agent.

         

        The
Capital Expenditure Loans owing to the Capital Expenditure Lender by the
Borrower, the maturity thereof, and all payments made on account of principal
thereof shall be recorded by the Capital Expenditure Lender, entered into the
Register maintained by the Facility Agent and, prior to any transfer thereof,
endorsed by the Capital Expenditure Lender on the grid attached hereto, which is
part of this Capital Expenditure Note; provided, however, that the
failure of the Capital Expenditure Lender to make any such recordation or
endorsement shall not affect the Obligations of Borrower under this Capital
Expenditure Note.

         

        This
Capital Expenditure Note is one of the Notes referred to in and is entitled to
the benefits of, the Credit Agreement.  The Credit Agreement, inter alia, (i) provides for
the making of loans (the “Capital Expenditure
Loans”) by the Capital Expenditure Lender to the Borrower from time to
time in an aggregate amount not to exceed at any one time outstanding the Dollar
amount first above mentioned, the Indebtedness of the Borrower resulting from
such Capital Expenditure Loans being evidenced by this Capital Expenditure Note
and (ii) contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.

         


        
          	 
      	
                  PUGET
      SOUND ENERGY, INC.

                
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                  By:

                	 
	 
      	 
      	
                  Name:

                
	 
      	 
      	
                  Title:

                


        

        



        
          
             


          

          
             


            
            

          

          
             


          

        


        CAPITAL
EXPENDITURE LOANS AND PAYMENTS OF PRINCIPAL

         

        
          	
                  Date

                	
                  Amount
      of Capital Expenditure Loans

                	
                  Amount
      of Principal Paid or Prepaid

                	
                  Unpaid
      Principal Balance

                	
                  Notation
      Made By

                
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      


        

        


         


        
          
             


          

          
             


            
            

          

          
             


          

        



        EXHIBIT
B-2

        To Credit
Agreement

         

        FORM
OF ENERGY HEDGING NOTE

         

        $[_________________] Dated:  _________
__, ___

         

        FOR VALUE
RECEIVED, the undersigned, PUGET SOUND ENERGY, INC., a Washington corporation
(the “Borrower”), HEREBY
PROMISES TO PAY [____________] or its registered assigns (together, the “Energy Hedging
Lender”) for the account of its applicable lending office the principal
amount of the Energy Hedging Loan and Energy Hedging LC Disbursements (each, as
defined below) owing to the Energy Hedging Lender by the Borrower pursuant to
that certain Credit Agreement, dated as of [                  ],
2009 (as amended, amended and restated, supplemented and/or modified and in
effect from time to time, the “Credit Agreement”),
among the Borrower, the Lenders party thereto from time to time and Barclays
Bank PLC, as facility agent (in such capacity, the “Facility Agent”), on
the dates and in the amounts specified in the Credit
Agreement.  Capitalized terms used herein but not defined herein shall
have the meanings assigned thereto in the Credit Agreement.

         

        The
Borrower promises to pay to the Energy Hedging Lender or its registered assigns
interest on the unpaid principal amount of the Energy Hedging Loans and Energy
Hedging LC Disbursements from the date of the Borrowing or disbursement thereof,
as applicable, until such principal amount is paid in full, at such interest
rates and payable at such times as are specified in the Credit
Agreement.

         

        Both
principal and interest are payable in Dollars and in immediately available funds
to the Facility Agent in an account designated by the Facility
Agent.

         

        The
Energy Hedging Loans and Energy Hedging LC Disbursements owing to the Energy
Hedging Lender by the Borrower, the maturity thereof, and all payments made on
account of principal thereof shall be recorded by the Energy Hedging Lender,
entered into the Register maintained by the Facility Agent and, prior to any
transfer thereof, endorsed by the Energy Hedging Lender on the grid attached
hereto, which is part of this Energy Hedging Note; provided, however, that the
failure of the Energy Hedging Lender to make any such recordation or endorsement
shall not affect the Obligations of the Borrower under this Energy Hedging
Note.

         

        This
Energy Hedging Note is one of the Notes referred to in and is entitled to the
benefits of, the Credit Agreement.  The Credit Agreement, inter alia, (i) provides for
the making of loans (the “Energy Hedging
Loans”) by the Energy Hedging Lender and extensions of credit (“Energy Hedging
LC  Disbursements”) to the Borrower from time to time in an
aggregate amount not to exceed at any time outstanding the Dollar amount first
above mentioned, the Indebtedness of the Borrower resulting from such Energy
Hedging Loans and Energy Hedging LC Disbursements being evidenced by this Energy
Hedging Note and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for prepayments on
account of principal hereof prior to the maturity hereof upon the terms and
conditions therein specified.

         


        
          	 
      	
                  PUGET
      SOUND ENERGY, INC.

                
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                  By:

                	 
	 
      	 
      	
                  Name:

                
	 
      	 
      	
                  Title:

                


        

        



        
          
             


          

          
             


            
            

          

          
             


          

        


        ENERGY
HEDGING LOANS AND PAYMENTS OF PRINCIPAL

         

        
          	
                  Date

                	
                  Amount
      of Energy Hedging Loans/LC Disbursements

                	
                  Amount
      of Principal Paid or Prepaid

                	
                  Unpaid
      Principal Balance

                	
                  Notation
      Made By

                
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      


        

        



        
          
             


          

          
             


            
            

          

          
             


          

        


        EXHIBIT
B-3

        To Credit
Agreement

         

        FORM
OF LIQUIDITY NOTE

         

        $[_________________] Dated:  _________
__, ___

         

        FOR VALUE
RECEIVED, the undersigned, PUGET SOUND ENERGY, INC., a Washington corporation
(the “Borrower”), HEREBY
PROMISES TO PAY [____________] or its registered assigns (together, the “Liquidity Lender”)
for the account of its applicable lending office the principal amount of the
Liquidity Loans and Liquidity LC Disbursements (each, as defined below) owing to
the Liquidity Lender by the Borrower pursuant to that certain Credit Agreement,
dated as of [_________], 2009 (as amended, amended and restated, supplemented
and/or modified and in effect from time to time, the “Credit Agreement”),
among the Borrower, the Lenders party thereto from time to time and Barclays
Bank PLC, as facility agent (in such capacity, the “Facility Agent”), on
the dates and in the amounts specified in the Credit
Agreement.  Capitalized terms used herein but not defined herein shall
have the meanings assigned thereto in the Credit Agreement.

         

        The
Borrower promises to pay to the Liquidity Lender or its registered assigns
interest on the unpaid principal amount of the Liquidity Loans and Liquidity LC
Disbursements from the date of the Borrowing or disbursement thereof, as
applicable, until such principal amount is paid in full, at such interest rates
and payable at such times as are specified in the Credit Agreement.

         

        Both
principal and interest are payable in Dollars and in immediately available funds
to the Facility Agent in an account designated by the Facility
Agent.

         

        The
Liquidity Loans and Liquidity LC Disbursements owing to the Liquidity Lender by
the Borrower, the maturity thereof, and all payments made on account of
principal thereof shall be recorded by the Liquidity Lender, entered into the
Register maintained by the Facility Agent and, prior to any transfer thereof,
endorsed by the Liquidity Lender on the grid attached hereto, which is part of
this Liquidity Note; provided, however, that the
failure of the Liquidity Lender to make any such recordation or endorsement
shall not affect the Obligations of the Borrower under this Liquidity
Note.

         

        This
Liquidity Note is one of the Notes referred to in and is entitled to the
benefits of, the Credit Agreement.  The Credit Agreement, inter alia, (i) provides for
the making of loans (the “Liquidity Loans”) and
extensions of credit (“Liquidity LC
Disbursements”) by the Liquidity Lender to the Borrower from time to time
in an aggregate amount not to exceed at any time outstanding, the Dollar amount
first above mentioned, the Indebtedness of the Borrower resulting from such
Liquidity Loans and Liquidity LC Disbursements being evidenced by this Liquidity
Note and (ii) contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.

         


        
          	 
      	
                  PUGET
      SOUND ENERGY, INC.

                
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                  By:

                	 
	 
      	 
      	
                  Name:

                
	 
      	 
      	
                  Title:

                


        

        



        
          
             


          

          
             


            
            

          

          
             


          

        


        LIQUIDITY
LOANS AND PAYMENTS OF PRINCIPAL

         

        
          	
                  Date

                	
                  Amount
      of Liquidity Loans/LC Disbursements

                	
                  Amount
      of Principal Paid or Prepaid

                	
                  Unpaid
      Principal Balance

                	
                  Notation
      Made By

                
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      


        

        



        
          
             


          

          
             


            
            

          

          
             


          

        



        EXHIBIT
C

        To Credit
Agreement

         

        


         

        FORM
OF ASSIGNMENT AND ASSUMPTION

         

        Reference
is made to the Credit Agreement, dated as of [_______], 2009 (as amended,
amended and restated, supplemented and/or modified and in effect from time to
time, the “Credit
Agreement”), among Puget Sound Energy, Inc., a Washington corporation,
(the “Borrower”), the
Lenders party thereto from time to time and Barclays Bank PLC, as facility agent
(the “Facility
Agent”).

         

        Capitalized
terms used herein but not defined herein shall have the meanings assigned
thereto in the Credit Agreement.

         

        Each
Assignor referred to on Schedule 1 hereto
(each, an “Assignor”) and each
Assignee referred to on Schedule 1 hereto
(each, an “Assignee”) agrees
severally with respect to all information relating to it and its assignment
hereunder and on Schedule 1 hereto as
follows:

         

        1. Such
Assignor hereby sells and assigns, without recourse except as to the
representations and warranties made by it herein, to such Assignee, and such
Assignee hereby purchases and assumes from such Assignor, an interest in and to
such Assignor’s rights and obligations under the Credit Agreement as of the date
hereof equal to the percentage interest specified on Schedule 1 hereto of
all outstanding rights and obligations under and in respect of such Assignor’s
Loans or Commitments, as applicable, as specified on Schedule 1
hereto.  After giving effect to such sale and assignment, such
Assignee’s Commitments and the amount of the Loans owing to such Assignee will
be as set forth on Schedule 1
hereto.

         

        2. Such
Assignor (i) represents and warrants that its name set forth on Schedule 1 hereto is
its legal name, that it is the legal and beneficial owner of the interest or
interests being assigned by it hereunder and that such interest or interests are
free and clear of any adverse claim; (ii) makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with any Financing Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of, or the perfection or priority of any Lien or security interest created or
purported to be created under or in connection with, any Financing Document or
any other instrument or document furnished pursuant thereto and; (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower, any other Loan Party or any of their
respective Subsidiaries or the performance or observance by the Borrower or any
other Loan Party of any of its obligations under any Financing Document or any
other instrument or document furnished pursuant thereto; and (iv) attaches the
Note or Notes held by such Assignor and requests that the Facility Agent either
(a) exchange such Note or Notes for a new Note or Notes payable to the order of
such Assignee in an amount equal to the Commitments assumed by such Assignee
pursuant hereto or (b) issue new Notes payable to the order of such Assignee in
an amount equal to the Commitments assumed by such Assignee pursuant hereto and
such Assignor in an amount equal to the Commitments retained by such Assignor
under the Credit Agreement, respectively, as specified on Schedule 1
hereto.

         

        3. Such
Assignee (i) confirms that it has received a copy of the Credit Agreement,
together with copies of the financial statements referred to in Section 5.07 thereof
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption; (ii) agrees that it will, independently and without reliance upon
any Agent, any Assignor or any Lender or any of their respective Affiliates and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) represents and warrants that its name set
forth on Schedule
1 hereto is its legal name; (iv) confirms that it is an Eligible
Assignee; (v) appoints and authorizes each of the Facility Agent and the
Collateral Agent, respectively, to take such action as agent on its behalf and
to exercise such powers and discretion under the Financing Documents as are
delegated to such Person by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (vi) agrees that it will
perform in accordance with their terms all of the obligations that by the terms
of the Financing Documents are required to be performed by it as a Lender; and
(vii) agrees that if it is a Foreign Lender or an individual, attached to this
Assignment and Assumption is any documentation required to be delivered by it
pursuant to the terms of Section 3.01(e) or
(f),
respectively, of the Credit Agreement, duly completed and executed by such
Assignee.

         

        4. Following
the execution of this Assignment and Assumption, it will be delivered to the
Facility Agent for acceptance and recording by the Facility Agent in the
Register.  The effective date for this Assignment and Assumption (the
“Effective
Date”) shall be the date of acceptance hereof by the Facility Agent,
unless otherwise specified on Schedule 1
hereto.  On the Effective Date, the Assignor agrees to pay to the
Facility Agent a processing and recordation fee in an amount equal to $3,500, as
provided for in Section
10.07(b)(1)(ii) of the Credit Agreement.

         

        5. Upon such
acceptance and recording by the Facility Agent, as of the Effective Date, (i)
such Assignee shall be a party to the Credit Agreement and, to the extent
provided in this Assignment and Assumption, have the rights and obligations
thereunder of a Lender, (ii) such Assignor shall, to the extent provided in this
Assignment and Assumption, relinquish its rights and be released from its
obligations under the Credit Agreement (other than its rights and obligations
under the Financing Documents that are specified under the terms of such
Financing Documents to survive the payment in full of the Obligations of the
Borrower under the Financing Documents to the extent any claim thereunder
relates to an event arising prior to the Effective Date of this Assignment and
Assumption) and (iii) if this Assignment and Assumption covers all of the
remaining portion of the rights and obligations of such Assignor under the
Credit Agreement, such Assignor shall (except as aforesaid) cease to be a party
thereto and a Lender thereunder.

         

        6. Upon such
acceptance and recording by the Facility Agent, from and after the Effective
Date, the Facility Agent shall make all payments under the Credit Agreement and
the Notes in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and commitment fees with respect
thereto) to such Assignee.  Such Assignor and such Assignee shall
directly between themselves make all appropriate adjustments in payments under
the Credit Agreement and the Notes for periods prior to the Effective
Date.

         

        7. This
Assignment and Assumption shall be governed by, and construed in accordance
with, the law of the State of New York.

         

        8. This
Assignment and Assumption may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.  Delivery of an executed
counterpart of Schedule 1 to this
Assignment and Assumption by telecopier shall be effective as delivery of an
original executed counterpart of this Assignment and Assumption.

         

        IN
WITNESS WHEREOF, each Assignor and each Assignee have caused Schedule 1 to this
Assignment and Assumption to be executed by their officers thereunto duly
authorized as of the date specified thereon.

         


        
          
             


          

          
             


            
            

          

          
             


          

        


        SCHEDULE
1

         

        to
Assignment and Assumption

         

        
          	
                  ASSIGNORS:

                	 
      	 
      	 
      	 
      	 
      
	
                  Energy
      Hedging Loans/ Energy Hedging Commitment

                	 
      	 
      	 
      	 
      	 
      
	
                  Percentage
      interest assigned

                	
                  %

                	
                  %

                	
                  %

                	
                  %

                	
                  %

                
	
                  Energy
      Hedging Commitment assigned

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Outstanding
      principal amount of Energy Hedging Loan assigned

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Principal
      amount of Energy Hedging Notes payable to Assignor7

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Capital
      Expenditure Loans/Capital Expenditure Commitment

                	 
      	 
      	 
      	 
      	 
      
	
                  Percentage
      interest assigned

                	
                  %

                	
                  %

                	
                  %

                	
                  %

                	
                  %

                
	
                  Capital
      Expenditure Commitment assigned

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Outstanding
      principal amount of Capital Expenditure Loan assigned

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Principal
      amount of Capital Expenditure Notes payable to Assignor8

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Liquidity
      Loans/Liquidity Commitment

                	 
      	 
      	 
      	 
      	 
      
	
                  Percentage
      interest assigned

                	
                  %

                	
                  %

                	
                  %

                	
                  %

                	
                  %

                
	
                  Liquidity
      Commitment assigned

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Outstanding
      principal amount of Liquidity Loans assigned

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Principal
      amount of Liquidity Notes payable to Assignor9

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                


        

        


        _____________________ 

        
          7 Such
principal amount to be calculated after the Assignment and Assumption.  

        

        
          8 See
footnote 1.  

        

        
          9 Such
principal amount to be calculated after the Assignment and
Assumption.

        


        
          
             


          

          
             


          

          
             


          

        


        
          	
                  ASSIGNEES:

                	 
      	 
      	 
      	 
      	 
      
	
                  Energy
      Hedging Loans/ Energy Hedging Commitment

                	 
      	 
      	 
      	 
      	 
      
	
                  Percentage
      interest assigned

                	
                  %

                	
                  %

                	
                  %

                	
                  %

                	
                  %

                
	
                  Energy
      Hedging Commitment assigned

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Outstanding
      principal amount of Energy Hedging Loans assigned

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Principal
      amount of Energy Hedging Notes payable to Assignor

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Capital
      Expenditure Loans/Capital Expenditure Commitment

                	 
      	 
      	 
      	 
      	 
      
	
                  Percentage
      interest assigned

                	
                  %

                	
                  %

                	
                  %

                	
                  %

                	
                  %

                
	
                  Capital
      Expenditure Commitment assigned

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Outstanding
      principal amount of Capital Expenditure Loans assigned

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Principal
      amount of Capital Expenditure Notes payable to Assignor

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Liquidity
      Loans/ Liquidity Commitment

                	 
      	 
      	 
      	 
      	 
      
	
                  Percentage
      interest assigned

                	
                  %

                	
                  %

                	
                  %

                	
                  %

                	
                  %

                
	
                  Liquidity
      Commitment assigned

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Outstanding
      principal amount of Liquidity Loans assigned

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                
	
                  Principal
      amount of Liquidity Notes payable to Assignor

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                	
                  $

                


        

        



        
          
             


          

          
             


            
            

          

          
             


          

        


        Effective
Date (if other than date of acceptance by Facility Agent):

         

        10____________ __, _____

         

        
          	 
      	
                  Assignor

                	 
      
	 
      	 
      	
                  [Name OF

                  ASSIGNEE]_______________________,
      as

                  Assignor

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	_________________________________________ 
      
	 
      	 
      	 
      	
                  Name:

                
	 
      	 
      	 
      	
                  Title:

                
	 
      	 
      	 
      
	 
      	 
      	
                  Dated:  ____________
      __, _____

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	_________________________________________ 
      
	 
      	 
      	 
      	
                  Name:

                
	 
      	 
      	 
      	
                  Title:

                
	 
      	 
      	 
      
	 
      	 
      	
                  Dated:  ____________
      __, _____

                
	 
      	 
      	 
      
	 
      	
                  Assignee

                	 
      
	 
      	 
      	 
      
	 
      	 
      	
                  [Name OF ASSIGNEE]___, as
      Assignee]

                
	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	_________________________________________
      
	 
      	 
      	 
      	
                  Name:

                
	 
      	 
      	 
      	
                  Title:

                
	 
      	 
      	 
      
	 
      	 
      	
                  Dated:  ____________
      __, _____

                
	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	_________________________________________ 
      
	 
      	 
      	 
      	
                  Name:

                
	 
      	 
      	 
      	
                  Title:

                
	 
      	 
      	 
      
	 
      	 
      	
                  Dated:  ____________
      __, _____

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      


        

        


        __________________ 

        
          
            	
                    10

                  	
                    This
      date should be no earlier than five Business Days after the delivery of
      this Assignment and Assumption to the Facility
  Agent.

                  


          

           

        


        
          
             


          

          
             


            
            

          

          
             


          

        


        The
undersigned hereby [consents to][accepts]the assignment.

         

        
          	
                  BARCLAYS
      BANK PLC,

                
	
                  as
      Facility Agent

                
	 
      
	 
      
	 
      
	 
      
	
                  By:

                	 
	 
      	
                  Name

                
	 
      	
                  Title

                
	 
      	
                  Date:

                


        

        



        
          
             


          

          
             


          

          
             


          

        



        EXHIBIT
D-1

        To Credit
Agreement

         

        


         

        FORM
OF LATHAM & WATKINS LLP

        FINANCIAL
CLOSING DATE OPINION

         

        1.           The
Credit Agreement constitutes a legally valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its
terms.

         

        2.           The
execution and delivery of the Credit Agreement by the Borrower, the borrowing of
the loans and the requests for letters of credit by the Borrower and the
repayment of such loans

        and
reimbursement of letters of credit, do not on the date hereof:

        (i)           violate
any federal or New York statute, rule, or regulation application of the Borrower
(including, without limitation, Regulations T, U or X of the Board of Governors
of the Federal Reserve System, assuming the Borrower complies with the
provisions of the Credit Agreement relating to the use of proceeds),
or

        (ii)           require
any consents, approvals, or authorizations to be obtained by the Borrower from,
or any registrations, declarations or filings to be made by the Borrower with,
any governmental authority, under any federal or New York status, rule or
regulation applicable to the Borrower.

        3.           With
your consent based solely on a certificate of an officer of the Borrower as to
factual matters, the Borrower is not, and immediately after giving effect to the
borrowing of the loans pursuant to the Credit Agreement and the application of
the proceeds thereof in accordance with the terms thereof will not be, required
to be registered as an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.

        We do not express any opinion with
respect to the creation, validity, attachment, perfection or priority of any
security interest or lien.  The opinions above do not include any
opinions with respect to compliance with laws relating to permissible rates of
interest.


        
          
             


          

          
             


            
            

          

          
             


          

        



        EXHIBIT
D-2

        To Credit
Agreement

         

        


         

        FORM
OF PERKINS COIE LLP

         

        FINANCIAL
CLOSING DATE OPINION

         

        1.           The
Borrower is a corporation duly incorporated and validly existing under
Washington law.

         

        2.           The
Borrower has all necessary corporate power and corporate authority to enter
into, and to perform its obligations under, the Credit Agreement.

         

        3.           The
Borrower has authorized, by all necessary corporate action, the execution,
delivery and performance of the Credit Agreement, and the Borrower has executed
and delivered the Credit Agreement to the party or parties to whom the Credit
Agreement is to be given.

         

        4.           Execution
and delivery of the Borrower of, and the performance of its agreements in, the
Credit Agreement do not (a) violate the Borrower's articles of incorporation or
bylaws, (b) breach, or result in a default under or acceleration of (or entitle
any party to accelerate) the maturity of any obligation of the Borrower under,
or result in a or require the creation of any lien upon or security interest in
any property of the Borrower pursuant to the terms of, any existing obligation
of the Borrower under any of the material contracts described on Exhibit A,
provided to us in response to our request to the Borrower to provide us with all
material contracts to which the Borrower is a signatory or by which the Borrower
or its assets are bound, (c) breach or otherwise violate any court orders
described on Exhibit B, provided to us in response to our request of the
Borrower to provide us with all material court orders to which the Borrower is a
party of by which the Borrower or its assets are bound or (d) violate the
provisions of statutory laws or regulations of the state of
Washington.

         

        5.           No
approval, authorization or other action by, or filing with, any governmental
authority in the state of Washington, is required in connection with the
execution and delivery by the Borrower of the Credit Agreement and the
consummation of the transactions contemplated thereby, except for those that
have already been obtained and are in full force and effect.  We note,
however, that any intercompany loans from Puget Energy, Inc. to Borrower would
be subject to prior approval by the Washington Utilities and Transportation
Commission.

         


        
          
             


          

          
             


            
            

          

          
             


          

        


        EXHIBIT
E

        to Credit
Agreement

         

        FINANCIAL
CONDITION CERTIFICATE

         

        I,
[_______], the Chief Financial Officer of Puget Sound Energy, Inc., a Washington
corporation, (the “Borrower”) with
responsibility for financial matters of the Borrower, hereby certify, in my
capacity as such and not in my individual capacity, on behalf of the Borrower,
that I am the Chief Financial Officer of the Borrower, that I am familiar with
the properties, businesses, assets, finances and operations of the Borrower and
that I am duly authorized to execute this Financial Condition Certificate on
behalf of the Borrower, which is being delivered pursuant to Section 4.02(m) of
the Credit Agreement, dated as of [_______], 2009 (as amended, amended and
restated, supplemented and/or modified and in effect from time to time, the
“Credit
Agreement”), among the Borrower, the Lenders party thereto from time to
time and Barclays Bank PLC, as Facility Agent.  Capitalized terms used
herein but not defined herein shall have the meanings assigned thereto in the
Credit Agreement.

         

        In
reaching the conclusions set forth in this Financial Condition Certificate, I
have carefully reviewed the Financing Documents and the contents of this
Financial Condition Certificate and, in connection herewith, have taken into
consideration all things necessary or material, and I have made appropriate
inquiries and investigation with responsible officers and employees of the
Borrower, in order to make the above and the following
certifications.

         

        I hereby
further certify that (with respect to paragraphs 1, 2, 3 and 4, as evidenced by
the updated Financial Model referred to in Section 4.02(o) of
the Credit Agreement):

         

        1. To the
best of my knowledge, on the date hereof, immediately after giving effect to the
consummation of the transactions contemplated by the Credit Agreement and the
other Transaction Documents to be consummated on the date hereof, the fair value
of the property of the Borrower is greater than the total amount of liabilities
(including contingent liabilities) of the Borrower.  With respect to
any contingent liabilities, the amount of contingent liabilities on the date
hereof shall be computed as the amount that, in light of all of the facts and
circumstances existing on the date hereof, represents the amount that can
reasonably be expected to become an actual or matured liability.

         

        2. To the
best of my knowledge, on the date hereof, immediately after giving effect to the
consummation of the transactions contemplated by the Credit Agreement and the
other Transaction Documents, the present fair saleable value of the assets of
the Borrower is not less than the amount that will be required to pay the
probable liabilities of the Borrower on its debts as they become absolute and
matured.

         

        3. As of the
date hereof, the Borrower neither intends to incur, nor believes that it will
incur, debts or liabilities beyond the ability of the Borrower to pay such debts
or liabilities as they mature.

         

        4. To the
best of my knowledge, on the date hereof, immediately after giving effect to the
consummation of the transactions contemplated by the Credit Agreement and the
other Transaction Documents, the Borrower is neither engaged in business or in a
transaction, nor about to engage in business or in a transaction, for which the
property of the Borrower would constitute unreasonably small
capital.

         

        5. As of the
date hereof, after giving effect to the transactions contemplated by the Credit
Agreement and the other Transaction Documents, the Group FFO Coverage Ratio is
at least 1.80 to 1:00, calculated on the basis of the financial projections
delivered pursuant to Section 4.02(o) of
the Credit Agreement and for the period of twelve (12) months after such
date.

         

        6. As of the
date hereof, after giving effect to the transactions contemplated by the Credit
Agreement and the other Transaction Documents, the Group FFO Leverage Ratio is
at least 13.0%, calculated on the basis of the financial projections delivered
pursuant to Section 4.02(o) of the Credit
Agreement, for the period of 12 months occurring after the Financial Closing
Date.

         

        7. As of the
date hereof, there is no payment default by the Borrower 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 was 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 confirmed in
writing to the Facility Agent that such payment will be made within one (1)
Business Day.

         

         

        [Signature
pages follow]


        
          
             


          

          
             


            
            

          

          
             


          

        


        


        


        


        
          	 
      	
                  PUGET
      SOUND ENERGY, INC.

                
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                  By:

                	 
	 
      	
                  Name:

                
	 
      	
                  Title:  Chief
      Financial Officer

                
	 
      	 
      
	 
      	 
      


        

        Dated:  ________,
____


        
          
             


          

          
             


            
            

          

          
             


          

        



        EXHIBIT
F

        to Credit
Agreement

         

        TERMS
OF SUBORDINATION

         

        These
terms refer to the Credit Agreement dated as of [_________], 2009 (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”
among Puget Sound Energy, Inc., a Washington corporation, (the “Borrower”), the
Lenders party thereto from time to time and Barclays Bank PLC, in its capacity
as facility agent for the Lenders (in such capacity, the “Facility
Agent”).  Capitalized expressions in these terms shall, unless
otherwise defined in these terms, have the meaning given in the Credit Agreement
or, if not defined therein, the meaning given in the Collateral Agency
Agreement.

         

        All
Management Fees payable by the Borrower and its Subsidiaries shall include or be
subject to the following terms:

         

        1. General.  To
the extent and in the manner set forth herein, the payment of (a) any Management
Fee is expressly made subordinate and subject in right of payment to the prior
payment in full of all the Obligations.  Except to the extent
permitted pursuant to the last sentence of this paragraph, any Person entitled
to payment of Management Fees (each a “Payee”) agrees that
it will not ask, demand, sue for, take or receive from the Borrower, by set-off
or in any other manner, or retain payment (in whole or in part) of the
Management Fees, or any security therefor, unless and until all of the
Obligations have been paid in full in cash and the Commitments terminated (other
than contingent obligations not then due).  Each Payee directs the
Borrower to make, and the Borrower agrees to make, such prior payment of the
Obligations.  Notwithstanding the foregoing, payment by the Borrower
of or in respect of the Management Fees may be made, and the Payees may ask,
demand, sue for, take or receive from the Borrower, by set-off or in any other
manner, or retain payment of (in whole or in part) the Management Fees, in each
case to the extent (and at such times) that the Borrower is entitled to make
Restricted Payments pursuant to Section 7.05 of the
Credit Agreement.

         

        2. Payment Upon Dissolution,
Etc.  In the event of:

         

        (a) any
insolvency or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case or proceeding in connection therewith,
relative to the Borrower or any of its Subsidiaries or to any of their creditors
as such, or to any of their assets; or

         

        (b) any
liquidation, dissolution or other winding up of the Parent or the Borrower or
any of its Subsidiaries, whether partial or complete and whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy;
or

         

        (c) any
assignment for the benefit of creditors or any other marshalling of all or any
substantial part of the assets and liabilities of the Parent or the Borrower or
any of its Subsidiaries;

         

        then and
in any such event the Secured Parties shall be entitled to receive payment in
full of all amounts due or to become due on or in respect of all the Obligations
before the Payees shall be entitled to receive any payment on account of the
Management Fees, and to that end, any payment or distribution of any kind or
character, whether in cash, property or securities which may be payable or
deliverable in respect of the Management Fees, proceeding, dissolution,
liquidation or other winding up or event shall instead be paid or delivered
directly to the Secured Parties for application to the Obligations, whether or
not due, until the Obligations shall have first been fully paid and satisfied in
cash (other than contingent obligations not then due).

         

        3. No Payment When Facilities
in Default.  Except as may be permitted pursuant to the Credit
Agreement, if any Default, Event of Default or Lock-Up Event has occurred and is
continuing, then no payment shall be made by the Borrower on or in respect of
the Management Fees.

         

        4. Proceedings Against
Borrower; No Collateral.  The Payees shall not, without the
prior written consent of the Unanimous Voting Parties (as long as any Obligation
is outstanding):

         

        (a) commence
any judicial action or proceeding to collect payment of principal of or interest
on the Management Fees; or

         

        (b) commence
any judicial action or proceeding against the Borrower in bankruptcy, insolvency
or receivership law; or

         

        (c) take any
collateral security for the Management Fees.

         

        5. Further
Assurances.  Each Payee agrees to execute and deliver to the
Secured Parties all such further instruments, proofs of claim, assignments of
claim and other instruments, and take all such other action, as may be
reasonably requested by the Secured Parties to enforce the Secured Parties
rights hereunder.

         

        6. Notice;
Disclosure.  The Payees agree, for the benefit of each Secured
Party, that they will give the Collateral Agent on behalf of each Secured Party
prompt notice of any default by the Borrower of which the Payees are aware in
respect of the Management Fees.

         

        7. No Waiver; Modification to
Facilities.  (a) No failure on the part of
the Secured Parties, and no delay in exercising, any right, remedy or power
hereunder shall operate as a waiver thereof by Secured Parties, nor shall any
single or partial exercise by the Secured Parties of any right, remedy or power
hereunder shall preclude any other or future exercise of any other right, remedy
or power.  Each and every right, remedy and power hereby granted to
the Secured Parties or allowed to the Secured Parties by law or other agreement
shall be cumulative and not exclusive of any other, and may be exercised by the
Secured Parties from time to time.  All rights and interests of the
Secured Parties hereunder and all agreements and obligations of the Payees and
the Borrower hereunder shall remain in full force and effect irrespective
of:

         

        (i) any lack
of validity or enforceability of the Financing Documents; or

         

        (ii) any other
circumstance that might otherwise constitute a defense available to, or
discharge of, the Borrower.

         

        (b) Without
in any way limiting the generality of the foregoing paragraph (a), the Secured
Parties may, at any time and from time to time, without the consent of or notice
to the Payees, without incurring responsibility to the Payees, and without
impairing or releasing the subordination provided herein or the obligations
hereunder of the Payees, do any one or more of the following:

         

        (i) change
the manner, place or terms of payment of or extend the time of payment of, or
renew or alter, the Obligations under the Facilities, or otherwise amend or
supplement in any manner the Facilities or any instruments evidencing the same
or any agreement under which the Obligations are outstanding;

         

        (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing the Obligations;

         

        (iii) release
any person liable in any manner for the Obligations; and

         

        (iv) exercise
or refrain from exercising any rights against the Borrower or any other
person.

         

        8. Benefit of Subordination
Provisions.  These subordination provisions are intended to
benefit the Secured Parties.

         

        9. Provisions Solely to Define
Relative Rights.  These subordination provisions are intended
solely for the purpose of defining the relative rights of the Payees and their
successors and assigns, on the one hand, and the Secured Parties and their
successors and assigns, on the other hand.

         

        10. Transfers of Subordinated
Debt.  The Payees shall not sell, assign, pledge, encumber or
transfer the interests in the Management Fees unless such sale, assignment,
pledge, encumbrance or transfer is to a party that agrees to be bound by the
terms hereof.  The interests in the Management Fees shall remain
expressly subject to the terms hereof, notwithstanding any sale, assignment,
pledge, encumbrance or transfer.

         

        11. Further
Assurances.  The Payees, at their cost (to be reimbursed by the
Borrower on the same terms as payment of the Management Fees, other than nominal
costs), shall take all further action as the Secured Parties may reasonably
request in order more fully to carry out the intent and purpose of these
subordination provisions.

         

        12. Governing
Law.  THESE SUBORDINATION PROVISIONS SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

         

        13. Amendment.  These
subordination provisions may not be amended, modified or supplemented without
the prior written consent of each of the Secured Parties.

         

        14. Successors and
Assigns.  These subordination provisions shall be binding and
inure to the benefit of the Payees, the Secured Parties and their respective
successors and permitted assigns.