Loan and Servicing Agreement


    


    Exhibit
      10.2

     

    Execution
      Copy


     

    
      
        

      



     

    LOAN
      AND
      SERVICING AGREEMENT 

     

    dated
      as
      of December 20, 2005

     

    among
      

     

    PSE
      FUNDING, INC., 

    as
      Borrower 

     

    PUGET
      SOUND ENERGY, INC., 

    as
      Servicer

     

     

    THE
      COMMERCIAL PAPER CONDUITS FROM TIME TO TIME

    PARTY
      HERETO AS CONDUIT LENDERS,

     

    THE
      FINANCIAL INSTITUTIONS FROM TIME TO TIME

    PARTY
      HERETO AS COMMITTED LENDERS,

     

    THE
      FINANCIAL INSTITUTIONS FROM TIME TO TIME

    PARTY
      HERETO AS MANAGING AGENTS,

     

    and

     

    JPMORGAN
      CHASE BANK, N.A. 

    as
      Program Agent 

    


    
 

     

      
        

      

    

    
      


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    





    TABLE
      OF
      CONTENTS

     

     

     

    ARTICLE
      I
      DEFINITIONS

     

    SECTION
      1.01. Certain Defined Terms

    SECTION
      1.02. Other Terms and Constructions

    SECTION
      1.03. Computation of Time Periods

     

    ARTICLE
      II AMOUNTS AND TERMS OF THE LOANS

     

    SECTION
      2.01. The Loans.

    SECTION
      2.02. Borrowing Procedures.

    SECTION
      2.03. Tranches.

    SECTION
      2.04. Interest and Fees

    SECTION
      2.05. Optional Prepayments

    SECTION
      2.06. Application of Collections Prior to Termination Date.

    SECTION
      2.07. Application of Collections After Termination Date.

    SECTION
      2.08. Deemed Collections

    SECTION
      2.09. Payments and Computations, Etc

    SECTION
      2.10. Interest Protection.

    SECTION
      2.11. Increased Capital.

    SECTION
      2.12. Funding Losses

    SECTION
      2.13. Taxes

    SECTION
      2.14. Security Interest

    SECTION
      2.15. Evidence of Debt

    SECTION
      2.16. Interest on Cash Secured Advances

    SECTION
      2.17. Repayment of Cash Secured Advances

    SECTION
      2.18. Use of Proceeds; Security Interest in Collateral Advance
      Account.

    SECTION
      2.19. Establishment of Collateral Advance Account.

     

    ARTICLE
      III CONDITIONS OF EFFECTIVENESS AND LOANS

     

    SECTION
      3.01. Conditions Precedent to Effectiveness and Initial Borrowing.

    SECTION
      3.02. Conditions Precedent to All Borrowings and Releases

     

    ARTICLE
      IV REPRESENTATIONS AND WARRANTIES

     

    SECTION
      4.01. Representations and Warranties of The Borrower Parties

    SECTION
      4.02. Financial Institution Representations and Warranties

     

    ARTICLE
      V
      GENERAL COVENANTS

     

    SECTION
      5.01. Affirmative Covenants of The Borrower Parties

    SECTION
      5.02. Negative Covenants of The Borrower Parties

     

    ARTICLE
      VI ADMINISTRATION OF RECEIVABLES

     

    SECTION
      6.01. Designation of Servicer.

    SECTION
      6.02. Duties of the Servicer.

    SECTION
      6.03. Rights of the Program Agent.

    SECTION
      6.04. Responsibilities of the Borrower

    SECTION
      6.05. Further Action Evidencing Program Agent’s Interest

    SECTION
      6.06. Collections

    SECTION
      6.07. Reports

    SECTION
      6.08. Servicer Fees

     

    ARTICLE
      VII EVENTS OF TERMINATION

     

    SECTION
      7.01. Events of Termination

     

    ARTICLE
      VIII INDEMNIFICATION

     

    SECTION
      8.01. Indemnities by The Borrower Parties

    SECTION
      8.02. Other Costs and Expenses

     

    ARTICLE
      IX THE AGENTS

     

    SECTION
      9.01. Authorization and Action

    SECTION
      9.02. Agents’ Reliance, Etc

    SECTION
      9.03. Agents and Affiliates

    SECTION
      9.04. Lender’s Loan Decision

    SECTION
      9.05. Delegation of Duties

    SECTION
      9.06. Indemnification

    SECTION
      9.07. Successor Agents

     

    ARTICLE
      X
      MISCELLANEOUS

     

    SECTION
      10.01. Amendments, Etc.

    SECTION
      10.02. Notices, Etc

    SECTION
      10.03. Assignability.

    SECTION
      10.04. Additional Lender Groups

    SECTION
      10.05. Consent to Jurisdiction.

    SECTION
      10.06. WAIVER OF JURY TRIAL

    SECTION
      10.07. Right of Setoff

    SECTION
      10.08. Ratable Payments

    SECTION
      10.09. Limitation of Liability.

    SECTION
      10.10. Taxes

    SECTION
      10.11. No Proceedings

    SECTION
      10.12. Confidentiality.

    SECTION
      10.13. No Waiver; Remedies

    SECTION
      10.14. GOVERNING LAW

    SECTION
      10.15. Execution in Counterparts

    SECTION
      10.16. Integration; Binding Effect; Survival of Termination

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBITS
      AND SCHEDULES 

     

    
      	
              EXHIBIT
                A

            	
              Credit
                and Collection Policy

            
	
              EXHIBIT
                B

            	
              Form
                of Borrowing Request

            
	
              EXHIBIT
                C-1

            	
              Form
                of Monthly Report

            
	
              EXHIBIT
                C-2

            	
              Form
                of Weekly Report

            
	
              EXHIBIT
                C-3

            	
              Form
                of Daily Report

            
	
              EXHIBIT
                D

            	
              Form
                of Blocked Account Agreement

            
	
              EXHIBIT
                E

            	
              List
                of Offices of Borrower where Records are Kept

            
	
              EXHIBIT
                F

            	
              List
                of Alternate Payment Locations; Deposit Account Banks, 

              Deposit
                Accounts and Lock-Boxes

            
	
              EXHIBIT
                G

            	
              List
                of Closing Documents

            
	
              EXHIBIT
                H

            	
              Form
                of Assignment and Acceptance

            
	
              EXHIBIT
                I

            	
              Form
                of Joinder Agreement

            
	
              EXHIBIT
                J

            	
              Form
                of Prepayment Notice

            
	
              EXHIBIT
                K

            	
              Form
                of Lock-Box Transfer Notice

            
	
              EXHIBIT
                L

            	
              Form
                of Compliance Certificate

               

            
	
              SCHEDULE
                I

            	
              Lender
                Groups

            
	
              SCHEDULE
                II

            	
              Notice
                Addresses

            
	
              SCHEDULE
                III

            	
              Special
                Concentration Limits

            
	
              SCHEDULE
                IV

            	
              Concentration
                Percentages

            
	
              SCHEDULE
                V

            	
              Approved
                Sub-servicers

            
	 	 


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    LOAN
      AND
      SERVICING AGREEMENT 

     

    This
      LOAN
      AND SERVICING AGREEMENT dated as of December 20, 2005 is among PSE FUNDING,
      INC., a Washington corporation (the “Borrower”), PUGET SOUND ENERGY, INC., a
      Washington corporation (“PSE” and as initial Servicer) (the Servicer together
      with Borrower, the “Borrower Parties” and each a “Borrower Party”), THE
      COMMERCIAL PAPER CONDUITS FROM TIME TO TIME PARTY HERETO (each individually,
      a
“Conduit Lender”), THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO
      (each individually, a “Committed Lender”; and collectively with the Conduit
      Lenders, the “Lenders”), THE ENTITIES FROM TIME TO TIME PARTY HERETO AS MANAGING
      AGENTS and their permitted successors and assigns (each individually, a
“Managing Agent”), and JPMORGAN CHASE BANK, N.A. (“JPMorgan”), as the Program
      Agent for the Lenders and the Managing Agents. Capitalized terms used herein
      shall have the meanings specified in Section
      1.01.

     

    PRELIMINARY
      STATEMENTS 

     

    WHEREAS,
      the Borrower may from time to time purchase Receivables from Originator pursuant
      to the Receivables Sale Agreement;

     

    WHEREAS,
      to fund its purchases under the Receivables Sale Agreement, the Borrower may
      from time to time request Loans from the Lenders on the terms and conditions
      of
      this Agreement;

     

    WHEREAS,
      the Conduit Lenders may, in their sole discretion, make Loans so requested
      from
      time to time, and if a Conduit Lender in any Lender Group elects not to make
      any
      such Loan, the Committed Lenders in such Lender Group have agreed that they
      shall make such Loan, in each case subject to the terms and conditions of this
      Agreement;

     

    NOW
      THEREFORE, in consideration of the premises, the mutual covenants and agreements
      herein contained and other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, each party agrees as
      follows:

     

    ARTICLE
      I 

    DEFINITIONS

     

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

     

    “Adjusted
      LIBO Rate”
means,
      for any Tranche Period, an interest rate per annum obtained by dividing (i)
      the
      LIBO Rate for such Tranche Period by (ii) a percentage equal to 100% minus
      the
      LIBO Rate Reserve Percentage for such Tranche Period.

     

    “Administrative
      Fee”
has
      the
      meaning set forth in the Fee Letter.

     

    “Adverse
      Claim”
means
      any lien (statutory or other), mortgage, pledge, hypothecation, assignment,
      deposit arrangement, encumbrance or preference, priority or other pledge and
      security agreement or preferential arrangement of any kind or nature whatsoever
      (including,
      without limitation,
      the
      interest of a vendor or lessor under any conditional sale, Capitalized Lease
      or
      other title retention agreement).

     

    “Affected
      Party”
means
      any Lender, the Program Agent, any Managing Agent, any Liquidity Provider,
      any
      insurance company, bank or other funding entity providing liquidity, credit
      enhancement or back-up purchase support or facilities to any Conduit Lender
      and,
      with respect to each of the foregoing, the parent company that controls such
      Person.

     

    “Affiliate”
means,
      with respect to any Person, any other Person that directly or indirectly
      controls or is controlled by or is under common control with such specified
      Person.

     

    “Aggregate
      Commitment”
means,
      at any time, the sum of the Commitments then in effect. The initial Aggregate
      Commitment as of the Effective Date is $200,000,000.

     

    “Aggregate
      Principal Balance”
means,
      at any time, the aggregate outstanding principal balance of the Loans hereunder
      at such time.

     

    “Agreement”
means
      this Loan and Servicing Agreement, as amended, restated, supplemented or
      otherwise modified from time to time.

     

    “Alternate
      Payment Location”
means
      each location listed on Exhibit
      F
      where
      Obligors are permitted to make payments in respect of the Receivables, as
      amended from time to time in accordance herewith.

     

    “Alternative
      Rate”
for
      any
      Tranche during any Tranche Period means an interest rate per annum equal to
      the
      sum of the Applicable Margin plus
      the
      Adjusted LIBO Rate for such Tranche Period; provided,
      however,
      that in
      case of:

     

    (a) any
      Tranche Period with respect to which the Adjusted LIBO Rate is not available
      pursuant to Section
      2.03,

     

    (b) any
      Tranche Period of less than one month,

     

    (c) any
      Tranche Period as to which the applicable Lender does not receive a request,
      by
      no later than 1:00 P.M. (New York City time) on the second Business Day
      preceding the first day of such Tranche Period, that the related Tranche be
      funded at the Adjusted LIBO Rate,

     

    (d) any
      Tranche Period for a Tranche, the Principal Balance of which is less than
      $500,000, or

     

    (e) any
      Tranche Period for which the Borrower elects to fund the related Tranche at
      the
      Base Rate, 

     

    the
      Alternative Rate for such Tranche Period shall be an interest rate per annum
      equal to the Base Rate in effect from time to time during such Tranche
      Period.

     

    “Applicable
      Margin”
has
      the
      meaning set forth in the Fee Letter.

     

    “Approved
      Sub-servicer”
means
      each Person (i) appointed by the Servicer pursuant to Section
      6.01
      to
      perform certain of the obligations of the Servicer hereunder, (ii) approved
      by
      the Borrower, the Servicer, the Program Agent and the Managing Agents and (iii)
      identified on Schedule
      V
      hereto,
      as such Schedule
      V
      may be
      amended from time to time with the consent of the Borrower, the Servicer, the
      Program Agent and the Managing Agents.

     

    “Asset
      Purchase Agreement”
means
      any asset purchase or other agreements pursuant to which a Conduit Lender may
      from time to time assign part or all of the Loans made by such Conduit Lender
      to
      a Liquidity Provider, as amended, restated, supplemented or otherwise modified
      from time to time.

     

    “Assignment
      and Acceptance”
means
      an agreement substantially in the form set forth as Exhibit
      H
      hereto
      pursuant to which a new Conduit Lender or Committed Lender becomes party to
      this
      Agreement.

     

    “Authorized
      Officer”
means,
      with respect to any Person, its president, corporate controller, treasurer,
      assistant treasurer or chief financial officer.

     

    “Bankruptcy
      Code”
means
      Title 11 of the United States Code, 11 U.S.C. Section 101 et
      seq.,
      as
      amended from time to time, or any successor thereto.

     

    “Base
      Rate”
means
      a
      fluctuating interest rate per annum as shall be in effect from time to time,
      which rate shall at all times be equal to the higher of: (A) the Prime Rate,
      and
      (B) the Federal Funds Rate plus 0.50%.

     

    “Base
      Rate Tranche”
has
      the
      meaning specified in Section
      2.03(b).

     

    “Billed
      Receivable”
means
      any Receivable which is not an Unbilled Receivable.

     

    “Blocked
      Account Agreement”
means
      an agreement with respect to a Deposit Account at a Deposit Account Bank, in
      substantially the form of Exhibit
      D
      or such
      other form as may be acceptable to the Program Agent and the Servicer, in their
      discretion, among the Borrower, Rainier, the Originator, the Program Agent
      and
      such Deposit Account Bank.

     

    “Borrower”
means
      PSE Funding, Inc., a Washington corporation, in its capacity as Borrower
      hereunder, together with its successors and permitted assigns.

     

    “Borrower
      Obligations”
means
      all present and future indebtedness and other liabilities and obligations
      (howsoever created or evidenced, whether direct or indirect, absolute or
      contingent, or due or to become due) of the Borrower to the Secured Parties
      arising under this Agreement or any other Facility Document or the transactions
      contemplated hereby or thereby, and shall include, without limitation, the
      repayment of the Aggregate Principal Balance and the payment of Interest,
      interest and principal on any Cash Secured Advances, Fees and all other amounts
      due or to become due from the Borrower under the Facility Documents (whether
      in
      respect of fees, expenses, indemnifications, breakage costs, increased costs
      or
      otherwise), including, without limitation, interest, fees and other obligations
      that accrue after the commencement of any bankruptcy, insolvency or similar
      proceeding with respect to any Transaction Party (in each case whether or not
      allowed as a claim in such proceeding).

     

    “Borrower
      Party”
has
      the
      meaning set forth in the preamble hereto.

     

    “Borrowing”
means
      a
      borrowing of Loans under this Agreement.

     

    “Borrowing
      Base”
means,
      at any time, an amount equal to (a) the product of (i) the Borrowing Base
      Percentage in effect at such time and (ii) the Net Receivables Pool Balance
      at
      such time minus
      (b) the
      Required Reserves at such time.

     

    “Borrowing
      Base Deficiency”
means,
      at any time, the excess, if any, of (i) the Aggregate Principal Balance over
      (ii) the Borrowing Base.

     

    “Borrowing
      Base Percentage”
      means:

     

    (i) during
      any Level 1, Level 2, Level 4A or Level 5 Ratings Period, 100%;

     

    (ii) during
      any Level 2A Ratings Period, (a) for the Monthly Periods of October through
      February, 100%, (b) for the Monthly Periods of April and May, 87% and (c) for
      the Monthly Periods of March and June through September, 95%; and

     

    (iii) during
      any Level 3 Ratings Period or any Level 4 Ratings Period, (a) for the Monthly
      Periods of November through March, 100%, (b) for the Monthly Periods of May
      and
      June, 96.75% and (c) for the Monthly Periods of April and July through October,
      98%.

     

    “Borrowing
      Date”
has
      the
      meaning specified in Section
      2.02(a)(i).

     

    “Borrowing
      Request”
has
      the
      meaning specified in Section
      2.02(a)(i).

     

    “Business
      Day”
means
      any day other than a Saturday, Sunday or public holiday or the equivalent for
      banks in New York City, New York and Chicago, Illinois and, if the term
“Business Day” is used in connection with the LIBO Rate, any day on which
      dealings are carried on in the London interbank market.

     

    “Capitalized
      Lease”
of
      a
      Person means any lease of Property by such Person as lessee which would be
      capitalized on a balance sheet of such Person prepared in accordance with
      GAAP.

     

    “Capitalized
      Lease Obligations”
of
      a
      Person means the amount of the obligations of such Person under Capitalized
      Leases which would be shown as a liability on a balance sheet of such Person
      prepared in accordance with GAAP.

     

    “Cash
      Collateral”
has
      the
      meaning specified in Section
      2.18(b).

     

    “Cash
      Secured Advance”
means,
      in respect of any Term-Out Lender, without duplication, the aggregate amount
      of
      the proceeds (a) of (i) the advance, if any, made by such Lender pursuant to
      Section
      2.01(d)
      and (ii)
      such Lender’s Pro Rata Share of any applications of Collections of Receivables
      during the Term Period for its related Lender Group to reduce the Principal
      Balance in respect of any Loan made by such Lender hereunder and (b) on deposit
      at such time in the Collateral Advance Account (including any such proceeds
      invested by the Program Agent, at such time in Permitted Investments pursuant
      to
Section
      2.19(a),
      it
      being understood that the amount of such Lender’s Cash Secured Advance shall be
      decreased by such Lender’s Pro Rata Share of the funds paid from time to time
      from the Collateral Advance Account to the Borrower in connection with a Loan
      made from time to time during the Term Period for its related Lender
      Group).

     

    “Cash
      Secured Advance Commencement Date”
means,
      with respect to any Lender Group, the Commitment Termination Date for such
      Lender Group (without giving effect to the proviso within the definition of
      Commitment Termination Date), provided
      that the
      Cash Secured Advance Commencement Date shall occur if, but only if, (i) the
      Termination Date shall not have occurred on or prior to such date, (ii) no
      Event
      of Termination exists on such date and no Incipient Event of Termination related
      to an Event of Termination described in Sections
      7.01(d)
      or
7.01(i)
      exists
      on such date, and (iii) the Borrower has delivered a notice to the Managing
      Agent, for such Lender Group at least five (5) Business Days prior to such
      Commitment Date that the Cash Secured Advance Date should occur.

     

    “Change
      in Control”
means
      (i) the acquisition by any Person, or two or more Persons acting in concert,
      of
      beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
      Exchange Commission under the Securities and Exchange Act of 1934) of 20% or
      more (by number of votes) of the outstanding shares of voting stock of PSE
      or
      (ii) PSE ceases to own, directly or indirectly, 100% of the outstanding capital
      stock of Borrower, free and clear of any Adverse Claim.

     

    “CNAI”
means
      Citicorp North America, Inc., a Delaware corporation.

     

    “Collateral”
has
      the
      meaning set forth in Section
      2.14.

     

    “Collateral
      Advance Account”
means
      the collateral deposit account to be opened after the date hereof at an Eligible
      Institution, in the name of the Program Agent, and under the control of the
      Program Agent for the ratable benefit of the Term-Out Lenders, as specified
      in
Section
      2.19(a).

     

    “Collateral
      Advance Account Bank”
has
      the
      meaning specified in Section
      2.19(a).

     

    “Collateral
      Advance Account Direction”
has
      the
      meaning specified in Section
      2.19(b).

     

    “Collection
      Account”
means
      the account, to be opened after the date hereof, in the name of the Program
      Agent on behalf of the Lenders, for the purpose of receiving Collections, or
      any
      other account which may be designated by the Program Agent from time to time
      upon written notice to the Servicer and the Borrower as specified in
Section
      6.03(c).

     

    “Collection
      Notice”
means
      a
      notice in the form attached to a Blocked Account Agreement pursuant to which
      the
      Program Agent notifies the applicable Deposit Account Bank this it is taking
      exclusive control of the applicable Deposit Account.

     

    “Collections”
means,
      with respect to any Receivable, any and all cash collections and other cash
      proceeds of such Receivable, including, without limitation, all cash proceeds
      of
      Related Security with respect to such Receivable, all amounts collected as
      fees
      or charges for late payments with respect to such Receivable, all recoveries
      with respect to each written off Receivable (net of amounts, if any, retained
      by
      any third party collection agent), and any amounts deemed to have been received
      with respect to such Receivable pursuant to Section
      2.08
      hereof.

     

    “Combined
      Reserve”
means,
      at any time, an amount equal to the product of (a) the Combined Reserve
      Percentage at such time and (b) the Net Receivables Pool Balance at such
      time.

     

    “Combined
      Reserve Percentage”
means,
      at any time, the greater of (a) the sum of (i) the Dynamic Loss Reserve
      Percentage at such time and (ii) the Dynamic Dilution Reserve Percentage at
      such
      time and (b) the sum of (i) the Loss Reserve Floor Percentage at such time
      and
      (ii) the Dilution Reserve Floor Percentage at such time.

     

    “Commitment”
of
      any
      Committed Lender means the Dollar amount set forth on Schedule
      I
      hereto
      or, in the case of a Committed Lender that becomes a party to this Agreement
      pursuant to an Assignment and Acceptance or a Joinder Agreement the amount
      set
      forth therein as such Committed Lender’s “Commitment”, in each case as such
      amount may be (i) reduced or increased by any Assignment and Acceptance entered
      into by such Committed Lender and the other parties thereto in accordance with
      the terms hereof and (ii) reduced pursuant to Section
      2.01(b).

     

    “Commitment
      Termination Date”
has
      the
      meaning assigned to that term in Section
      2.01(c);
      provided that, if, and only if, there shall have occurred a Cash Secured Advance
      Commencement Date, the Commitment Termination Date for the applicable Term-Out
      Lenders shall mean the earliest of clauses (ii) through (iii) of the definition
      of Termination Date.

     

    “Committed
      Lender”
means,
      as to any Lender Group, each of the financial institutions listed on
Schedule
      I
      as a
“Committed Lender” for such Lender Group, together with its respective
      successors and permitted assigns.

     

    “Concentration
      Limit”
means,
      for any Obligor and its Affiliates, at any time, (a) the Normal Concentration
      Limit or (b) such other higher percentages (each, a “Special
      Concentration Limit”)
      for
      such Obligors and its Affiliates as are set forth on Schedule
      III
      or such
      other Obligors and its Affiliates and percentages as may otherwise be consented
      to by all of the Managing Agents in writing from time to time, which Special
      Concentration Limit is subject to reduction or cancellation by any Managing
      Agent upon five (5) days’ notice to the Borrower, the other Managing Agents, the
      Program Agent and the Servicer.

     

    “Conduit
      Lenders”
means,
      collectively, the Persons identified as “Conduit Lenders” on Schedule
      I
      and
      their respective successors and permitted assigns.

     

    “Conduit
      Lending Limit”
means,
      for any Conduit Lender, the maximum principal amount of the Loans which may
      be
      advanced by such Conduit Lender as set forth on Schedule
      I
      (or on
      the signature pages to the Assignment and Acceptance or Joinder Agreement
      pursuant to which such Conduit Lender became a party hereto), subject to
      assignment pursuant to Section
      10.03,
      as such
      amount may be modified from time to time by notice from the related Managing
      Agent to the Borrower and the Program Agent.

     

    “Consolidated
      Indebtedness”
means
      at any time all Indebtedness of PSE and its Subsidiaries calculated on a
      consolidated basis as of such time.

     

    “Contingent
      Obligation”
of
      a
      Person means any agreement, undertaking or arrangement by which such Person
      assumes, guarantees, endorses, contingently agrees to purchase or provide funds
      for the payment of, or otherwise becomes or is contingently liable upon, the
      obligation or liability of any other Person, or agrees to maintain the net
      worth
      or working capital or other financial condition of any other Person, or
      otherwise assures any creditor of such other Person against loss, including,
      without limitation,
      any
      comfort letter, operating agreement, take or pay contract, application for
      a
      letter of credit or the obligations of any such Person as general partner of
      a
      partnership with respect to the liabilities of the partnership.

     

    “Contract”
means
      an agreement, instrument or other writing, tariff or other arrangement,
      including a purchase order or invoice, pursuant to or under which a Person
      is
      obligated to pay for goods purchased from, or services rendered by, the
      Originator from time to time.

     

    “CP
      Costs”
means,
      for each day, the sum of (i) discount or yield accrued on Pooled Commercial
      Paper of any Conduit Lender administered by JPMorgan on such day, plus
      (ii) any
      and all accrued commissions in respect of placement agents and commercial paper
      dealers, and issuing and paying agent fees incurred, in respect of Pooled
      Commercial Paper of such Conduit Lender for such day, minus
      (iii)
      any accrual of income net of expenses received on such day from investment
      of
      collections received under all receivable purchase or financing facilities
      funded substantially with Pooled Commercial Paper of such Conduit Lender,
minus
      (iv) any
      payment received on such day net of expenses in respect of Liquidation Fees
      related to the prepayment of any purchaser interest of such Conduit Lender
      pursuant to the terms of any receivable purchase or financing facilities funded
      substantially with Pooled Commercial Paper; provided,
      however,
      that in
      addition to the foregoing costs, if the Borrower shall request any additional
      Borrowing by such Conduit Lender during any period of time determined by such
      Conduit Lender’s Managing Agent in its sole discretion to result in an
      incrementally higher CP Costs applicable to such additional Purchase, the
      Tranche associated with any such additional Borrowing shall, during such period,
      be deemed to be funded by such Conduit Lender in a special pool (which may
      include capital associated with other receivable purchase facilities) for
      purposes of determining such higher CP Costs applicable only to such special
      pool and charged each day during such period against such Tranche.

     

    “CP
      Rate”
      means:

     

    (a)  with
      respect to any Conduit Lender for which CNAI is the Managing Agent, for any
      Tranche Period for any Tranche, to the extent such Conduit Lender funds such
      Tranche by issuing Promissory Notes, the per
      annum
      rate
      equivalent to the weighted average cost (as reasonably determined by the related
      Managing Agent, and which shall include (without duplication) the fees and
      commissions of placement agents and dealers, incremental carrying costs incurred
      with respect to Promissory Notes maturing on dates other than those on which
      corresponding funds are received by such Conduit Lender, and other borrowings
      by
      such Conduit Lender) to the extent related to the issuance of Promissory Notes
      that are allocated, in whole or in part, by such Conduit Lender or its related
      Managing Agent to fund or maintain such Tranche during such Tranche Period;
      provided,
      however,
      that if
      any component of any such rate is a discount rate, in calculating the “CP Rate”
for such Tranche Period, the related Managing Agent shall for such component
      use
      the rate resulting from converting such discount rate to an interest bearing
      equivalent rate per annum;

     

    (b)  with
      respect to any Conduit Lender for which JPMorgan is the Managing Agent, for
      any
      Tranche Period for any Tranche, to the extent such Conduit Lender funds such
      Tranche by issuing Promissory Notes, a per annum rate equal to a fraction,
      expressed as a percentage, the numerator of which shall be equal to the sum
      of
      the CP Costs, determined on a pro rata basis, based upon the percentage share
      that the dollar amount of such Tranche represents in relation to all assets
      or
      investments associated with any assets held by such Conduit Lender and funded
      substantially with Pooled Commercial Paper, for each day during such Tranche
      Period (or portion thereof), and the denominator of which is the weighted daily
      average Principal Balance of such Tranche during such Tranche Period;
      and

     

    (c)  for
      any
      Tranche Period for any Tranche funded by a Conduit Lender that becomes a party
      to this Agreement pursuant to an Assignment and Acceptance or Joinder Agreement,
      to the extent such Conduit Lender funds such Tranche by issuing Promissory
      Notes, the “CP Rate” set forth in such Assignment and Acceptance or Joinder
      Agreement, as applicable.

     

    “Credit
      and Collection Policy”
means,
      with respect to any Receivable, the credit and collection policies and practices
      attached as Exhibit
      A
      hereto
      relating to such Receivable and the related Obligor as modified from time to
      time in accordance with the terms of Section
      5.02(c).

     

    “Customer
      Deposits”
means
      any cash held by the Originator, Borrower or Servicer for the account of an
      Obligor as security for, or for application to, the payment of the Receivables
      of such Obligor.

     

    “Customer
      Deposit Overconcentration Amount”
means,
      at any time, the amount by which (a) the aggregate Customer Deposits at such
      time exceeds (b) the product of (i) the percentage set forth on Schedule IV
      hereto under the heading “Customer Deposit Overconcentration Percentage”
applicable to the Ratings Period then in effect at such time and (ii) the
      aggregate Customer Deposits at such time.

     

    “Daily
      Report”
means
      a
      report furnished by the Servicer to the Managing Agents on each Daily Reporting
      Date pursuant to Section
      6.07,
      in
      substantially the form of Exhibit
      C-3.

     

    “Daily
      Reporting Period”
means
      any period during which PSE’s Debt Rating shall be B or lower by S&P, or B2
      or lower by Moody’s.

     

    “Days
      Sales Outstanding Ratio”
means
      at any time, the ratio (expressed as a percentage) computed by multiplying
      (i)
      the aggregate Outstanding Balance of all Receivables as of the close of business
      on the last day of the prior Monthly Period divided by the aggregate amount
      of
      Collections received during such Monthly Period and (ii) 30.

     

    “Debt
      Rating”
means,
      with respect to any Person at any time the issuer rating assigned by S&P for
      such Person or the corporate credit rating assigned by Moody’s to such Person,
      in each case without giving effect to any third party credit
      enhancement.

     

    “Default
      Ratio”
means,
      as of any Monthly Reporting Date and continuing to (but excluding) the next
      succeeding Monthly Reporting Date, the fraction (expressed as a percentage)
      determined as of the last day of the immediately preceding Monthly Period by
      dividing (i) the aggregate Outstanding Balance of all Billed Receivables that
      are Defaulted Receivables on such date by (ii) the aggregate Outstanding Balance
      of all Receivables on such date.

     

    “Defaulted
      Receivable”
means
      a
      Receivable: (i) as to which any payment, or part thereof, remains unpaid for
      ninety-one (91) or more days from the original due date thereof, (ii) as to
      which the Obligor thereof is subject to an Event of Bankruptcy or (iii) which,
      consistent with the Credit and Collection Policy, has been or should be written
      off as uncollectible.

     

    “Deposit
      Account”
means
      each depositary account, concentration account or other similar account into
      which Collections are collected or deposited.

     

    “Deposit
      Account Bank”
means
      a
      financial institution at which a Deposit Account is maintained.

     

    “Diluted
      Receivable”
means
      that portion, and only that portion, of any Receivable which is either (a)
      reduced or canceled as a result of a Dilution Factor or (b) subject to any
      specific dispute, offset, counterclaim or defense whatsoever.

     

    “Dilution
      Factor”
means
      any of the following factors giving rise to dilution: (i) any defective,
      rejected or returned merchandise or services, any cash discount, or any failure
      by the Originator to deliver any merchandise or perform any services or
      otherwise perform as required by the underlying Contract or invoice, (ii) any
      change, allowance or cancellation of any terms of such Contract or invoice
      or
      any other adjustment by the Originator which reduces the amount payable by
      the
      Obligor on the related Receivable and (iii) any setoff in respect of any claim
      by the Obligor thereof (whether such claim arises out of the same or a related
      transaction or an unrelated transaction).

     

    “Dilution
      Horizon Factor”
means,
      as of any date a ratio (expressed as a percentage), computed as of the last
      day
      of the most recently ended Monthly Period by dividing (i) the sum of (a) the
      aggregate Original Balance of all Receivables generated during the two (2)
      most
      recently ended Monthly Periods plus
      (b) the
      aggregate Outstanding Balance of all Unbilled Receivables as of the last day
      of
      the most recently ended Monthly Period, by (ii) (a) the aggregate Outstanding
      Balance of all Receivables other than Receivables as to which any payment,
      or
      part thereof, remains unpaid for sixty-one (61) or more days from the original
      due date thereof minus
      (b) the
      aggregate amount of Unapplied Cash/Credit Memos as of the last day of the most
      recently ended Monthly Period.

     

    “Dilution
      Ratio”
means,
      as of any date, the ratio (expressed as a percentage) computed as of the last
      day of the most recently ended Monthly Period by dividing (i) the portion of
      all
      Receivables which became Diluted Receivables during such Monthly Period by
      (ii)
      the aggregate Original Balance of all Receivables generated during the second
      Monthly Period preceding the most recently ended Monthly Period.

     

    “Dilution
      Reserve Floor Percentage”
means,
      at any time, the product of (a) the average of the Dilution Ratios for the
      twelve (12) most recently ended Monthly Periods and (b) the Dilution Horizon
      Factor at such time.

     

    “Dilution
      Volatility Ratio”
means,
      as of any date, a ratio (expressed as a percentage) equal to the product of
      (i)
      the highest of the Two-Month Dilution Ratios calculated for each of the twelve
      most recently ended Monthly Periods minus
      the
      average of the Dilution Ratios calculated for each of the twelve most recently
      ended Monthly Periods, and (ii) the ratio calculated by dividing the highest
      of
      the Two-Month Dilution Ratios calculated for each of the twelve most recently
      ended Monthly Periods by the average of the Dilution Ratios calculated for
      each
      of the twelve most recently ended Monthly Periods.

     

    “Dollars”
and
      “$”
each
      mean the lawful currency of the United States of America.

     

    “Dynamic
      Dilution Reserve Percentage”
means,
      as of any Monthly Reporting Date and continuing to (but excluding) the next
      succeeding Monthly Reporting Date, a percentage, determined as of the last
      day
      of the immediately preceding Monthly Period, equal to the product of (a) the
      sum
      of (i) the product of (A) the Stress Factor and (B) the average of the Dilution
      Ratios for the twelve (12) most recently ended Monthly Periods, plus
      (ii) the
      Dilution Volatility Ratio as of such day, and (b) the Dilution Horizon Factor
      as
      of such day.

     

    “Dynamic
      Loss Reserve Percentage”
means,
      as of any Monthly Reporting Date and continuing to (but excluding) the next
      succeeding Monthly Reporting Date, a percentage determined as of the last day
      of
      the immediately preceding Monthly Period equal to the product of (i) the Stress
      Factor on such date, (ii) the Loss Horizon Ratio on such date and (iii) the
      highest of the Three-Month Loss Ratios calculated for each of the twelve most
      recently ended Monthly Periods.

     

    “Effective
      Date”
means
      December 20, 2005.

     

    “Eligible
      Institution”
means
      a
      financial institution approved by the Managing Agents and the Program
      Agent.

     

    “Eligible
      Receivable”
means,
      at any time, a Receivable:

     

    (a) that
      is
      not a Receivable (i) as to which any payment, or part thereof, remains unpaid
      for sixty-one (61) or more days from the original due date thereof, (ii) as
      to
      which, to the actual knowledge of Borrower or the Servicer, the Obligor thereof
      is subject to an Event of Bankruptcy or (iii) which, consistent with the Credit
      and Collection Policy, has been or should be written off as
      uncollectible,

     

    (b) that,
      if
      a Billed Receivable, by its terms is due and payable within 30 days of the
      original billing date therefor and has not had its payment terms
      extended,

     

    (c) that
      is
      an “account” or “general intangible” within the meaning of Section 9-102 of the
      UCC of all applicable jurisdictions,

     

    (d) that
      is
      denominated and payable only in Dollars in the United States or for which
      payment is guaranteed in Dollars,

     

    (e) the
      Obligor of which maintains a service address in the United States,

     

    (f) the
      Obligor of which is not an Affiliate of any of the parties hereto or
      Originator,

     

    (g) which
      does not arise under a Contract created pursuant to a public assistance program,
      nor require payments based on a percentage of Obligor’s income,

     

    (h) that
      arises under a Contract that, together with such Receivable, is in full force
      and effect and constitutes the legal, valid and binding obligation of the
      related Obligor enforceable against such Obligor in accordance with its terms
      subject to no offset, counterclaim or other defense, except as such enforcement
      may be limited by applicable bankruptcy, insolvency or other similar laws
      affecting creditors’ rights generally,

     

    (i) that
      arises under a Contract that (A) does not require the Obligor under such
      Contract to consent to the transfer, sale or assignment of the rights and duties
      of Originator or any of its assignees under such Contract and (B) does not
      contain a confidentiality provision that purports to restrict the ability of
      any
      Secured Party to exercise its rights under this Agreement, including,
      without limitation,
      its
      right to review the Contract,

     

    (j) that
      arises under a Contract that contains an obligation to pay a specified sum
      of
      money, contingent only upon the sale of goods or power or the provision of
      services by Originator and not by and other Person (in whole or in
      part),

     

    (k) that,
      together with the Contract related thereto, does not contravene any law, rule
      or
      regulation applicable thereto (including,
      without limitation,
      any
      law, rule or regulation relating to truth in lending, fair credit billing,
      fair
      credit reporting, equal credit opportunity, fair debt collection practices
      and
      privacy) and with respect to which no part of the Contract related thereto
      is in
      violation of any such law, rule or regulation,

     

    (l) that
      satisfies in all material respects all applicable requirements of the Credit
      and
      Collection Policy,

     

    (m) that
      was
      generated in the ordinary course of Originator’s business,

     

    (n) that
      is
      not subject to any right of rescission, set-off, counterclaim, any other defense
      (including defenses arising out of violations of usury laws) of the applicable
      Obligor against Originator (it being understood that only a portion of a
      Receivable equal to the amount of such partial rescission, set-off, counterclaim
      or defense, if the amount of such partial rescission, set-off, counterclaim
      or
      defense can be quantified, shall be deemed not to be an Eligible Receivable)
      or
      any other Adverse Claim, and the Obligor thereon holds no right as against
      Originator to cause Originator to repurchase the goods or merchandise the sale
      of which shall have given rise to such Receivable (except with respect to sale
      discounts effected pursuant to the Contract, or defective goods returned in
      accordance with the terms of the Contract),

     

    (o) as
      to
      which Originator has satisfied and fully performed all obligations on its part
      with respect to such Receivable required to be fulfilled by it, and no further
      action is required to be performed by any Person with respect thereto other
      than
      payment thereon by the applicable Obligor,

     

    (p) all
      right, title and interest to and in which has been validly transferred by
      Originator directly to Borrower under and in accordance with the Receivables
      Sale Agreement, and Borrower has good and marketable title thereto free and
      clear of any Adverse Claim,

     

    (q) that
      is
      an account receivable representing all or a part of the sales price of
      merchandise sold or services rendered within the meaning of Section 3(c)(5)
      of
      the Investment Company Act of 1940, as amended

     

    (r) that,
      if
      funded with the proceeds of Promissory Notes, would constitute a “current
      transaction” within the meaning of Section 3(a)(3) of the Securities Act of
      1933, as amended, and

     

    (s) which,
      if
      an Unbilled Receivable, has remained unbilled for not more than 31 days since
      the date of creation.

     

    “ERISA”
means
      the Employee Retirement Income Security Act of 1974, as amended or any successor
      statute.

     

    “ERISA
      Affiliate”
means
      (a) a corporation which is a member of a controlled group of corporations with
      PSE within the meaning of Section 414(b) of the IRC, (b) a trade or business
      (whether or not incorporated) which is under common control with PSE within
      the
      meaning of Section 414(c) of the IRC or Section 4001(b)(1) of ERISA, (c) a
      member of an affiliated service group with PSE within the meaning of Section
      414(m) of the IRC, or (d) an entity treated as under common control with PSE
      by
      reason of Section 414(o) of the IRC.

     

    “ERISA
      Plan”
means
      any employee benefit plan (a) maintained by PSE or any ERISA Affiliate, or
      to
      which any of them contributes or is obligated to contribute, for its employees
      and (b) covered by Title IV of ERISA or to which Section 412 of the IRC
      applies.

     

    “Eurocurrency
      Liabilities”
has
      the
      meaning assigned to that term in Regulation D of the Board of Governors of
      the
      Federal Reserve System, as in effect from time to time.

     

    “Event
      of Bankruptcy”
means,
      with respect to any Person:

     

    (a) such
      Person shall fail generally to pay its debts as they come due, or shall make
      a
      general assignment for the benefit of creditors; or any case or other proceeding
      shall be instituted by such Person seeking to adjudicate it as bankrupt or
      insolvent, or seeking liquidation, reorganization, debt arrangement,
      dissolution, winding up, or composition or readjustment of debts of it or its
      debts under the Federal Bankruptcy Code or any other law relating to bankruptcy,
      insolvency, reorganization, winding up or composition or adjustment of debts,
      or
      seeking the entry of an order for relief or the appointment of a trustee,
      receiver, custodian, liquidator, assignee, sequestrator or the like for such
      Person or all or substantially all of its assets; or such Person shall take
      any
      corporate or limited liability company action to authorize any of such actions;
      or

     

    (b) a
      case or
      other proceeding shall be commenced, without the application or consent of
      such
      Person in any court seeking the liquidation, reorganization, debt arrangement,
      dissolution, winding up, or composition or readjustment of debts of such Person,
      the appointment of a trustee, receiver, custodian, liquidator, assignee,
      sequestrator or the like for such Person or all or substantially all of its
      assets, or any similar action with respect to such Person under the Federal
      Bankruptcy Code or any other law relating to bankruptcy, insolvency,
      reorganization, winding up or composition or adjustment of debts, and (A) such
      case or proceeding shall continue undismissed, or unstayed and in effect, for
      a
      period of sixty (60) consecutive days or (B) an order for relief in respect
      of
      such Person shall be entered in such case or proceeding or a decree or order
      granting such other requested relief shall be entered.

     

    “Event
      of Termination”
has
      the
      meaning set forth in Section
      7.01.

     

    “Excess
      Interest”
means,
      in respect of Cash Secured Advances at any time, the excess of (a) the aggregate
      unpaid accrued interest on the Cash Secured Advances at such time over (b)
      the
      aggregate interest, dividends and any net investment gains received by the
      applicable Managing Agent in respect of the Cash Collateral and available for
      withdrawal from the Collateral Advance Account at such time.

     

    “Excluded
      Receivables”
means
      all receivables of the Originator other than the Receivables.

     

    “Face
      Amount”
means
      in relation to any Promissory Notes (a) if issued on a discount basis, the
      face
      amount stated therein and (b) if issued on an interest-bearing basis, the
      principal amount stated therein plus the amount of all interest accrued or
      to
      accrue thereon on or prior to its stated maturity date.

     

    “Facility
      Documents”
means
      collectively, this Agreement, the Receivables Sale Agreement, the Fee Letter,
      each Blocked Account Agreement, each Lock-Box Transfer Notice and all other
      agreements, documents and instruments delivered pursuant thereto or in
      connection therewith.

     

    “Facility
      Limit”
means
      $200,000,000, adjusted as necessary to give effect to the application of any
      Joinder Agreement, any reduction pursuant to Section
      2.01(b)
      and any
      change in the amount of any Lender Group Limit.

     

    “Federal
      Funds Rate”
means,
      with respect to any Lender for any period, a fluctuating interest rate
per annum
      equal
      (for each day during such period) to the weighted average of the rates on
      overnight federal funds transactions with members of the Federal Reserve System
      arranged by federal funds brokers, as published for such day (or, if such day
      is
      not a Business Day, for the immediately preceding Business Day) by the Federal
      Reserve Bank of New York; or if such rate is not so published for any day which
      is a Business Day, the average of the quotations for such day on such
      transactions received by the applicable Managing Agent from three federal funds
      brokers of recognized standing selected by it.

     

    “Fee
      Letter”
means
      the Fee Letter dated as of the date hereof among the Managing Agents and the
      Borrower, as the same may be amended, restated, supplemented or otherwise
      modified from time to time.

     

    “Fee
      Payment Date”
means
      the third (3rd)
      Business Day of each Monthly Period.

     

    “Fees”
means,
      collectively, all Liquidity Fees, Program Fees, Administrative Fees and Other
      Fees.

     

    “Final
      Collection Date”
means
      the date on or following the Termination Date on which the Aggregate Principal
      Balance has been reduced to zero and all other Borrower Obligations have been
      paid in full.

     

    “Finance
      Charges”
means,
      with respect to a Contract, any finance, interest, late payment charges or
      similar charges owing by an Obligor pursuant to such Contract.

     

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

     

    “Governmental
      Authority”
means
      any national, state or local government (whether domestic or foreign), any
      political subdivision thereof or any other governmental, quasi-governmental,
      judicial, regulatory, public or statutory instrumentality, authority, body,
      agency, bureau or entity (including any zoning authority, the Federal Energy
      Regulatory Commission, the Comptroller of the Currency or the Federal Reserve
      Board, any central bank or any comparable authority) or any arbitrator with
      authority to bind a party to this Agreement at law.

     

    “Governmental
      Rule”
means
      any law, rule, regulation, ordinance, order, code interpretation, treaty,
      judgment, decree, directive, guidelines, policy or similar form of decision
      of
      any Governmental Authority.

     

    “Government
      Receivable”
means
      any Receivable the Obligor of which is a Governmental Authority.

     

    “Government
      Receivable Overconcentration Amount”
means,
      at any time, the aggregate, for all Obligors which are Governmental Authorities,
      of the amounts by which the aggregate Outstanding Balance of all Eligible
      Receivables of such Obligors at such time exceeds the product of (x) the
      percentage set forth on Schedule IV hereto under the heading “Government
      Receivables Overconcentration Percentage” applicable to the Ratings Period then
      in effect at such time and (y) the aggregate Outstanding Balance of all
      Receivables at such time.

     

    “Incipient
      Event of Termination”
means
      any event which, with the giving of notice or lapse of time or both, would
      constitute an Event of Termination.

     

    “Indebtedness”
of
      a
      Person means such Person’s (i) obligations for borrowed money, (ii) obligations
      representing the deferred purchase price of Property or services (other than
      accounts payable arising in the ordinary course of such Person’s business
      payable on terms customary in the trade), (iii) obligations, whether or not
      assumed, secured by Adverse Claims or payable out of the proceeds or production
      from Property now or hereafter owned or acquired by such Person, (iv)
      obligations which are evidenced by notes, bankers’ acceptances, or other
      instruments, (v) obligations to purchase accounts, securities or other Property
      arising out of or in connection with the sale of the same or substantially
      similar accounts, securities or Property, (vi) Capitalized Lease Obligations,
      (vii) other obligations for borrowed money or other financial accommodation
      which in accordance with GAAP would be shown as a liability on the consolidated
      balance sheet of such Person, (viii) net liabilities under interest rate swap,
      exchange or cap agreements, obligations or other liabilities with respect to
      accounts or notes, (ix) sale and leaseback transactions which do not create
      a
      liability on the consolidated balance sheet of such Person, (x) obligations
      in
      connection with other transactions (excluding operating leases under GAAP)
      which
      are the functional equivalent, or take the place, of borrowing but which do
      not
      constitute a liability on the consolidated balance sheet of such Person, and
      (xi) Contingent Obligations; provided,
      that,
      except for purposes of Section
      7.01(c),
      the
      following shall not constitute “Indebtedness”: (a) obligations with respect to
      Trust Preferred Securities that are not due and unpaid; (b) obligations arising
      under Qualified Receivables Transactions, (c) obligations with respect to
      preferred stock of such Person outstanding on the date hereof; and (d)
      obligations with respect to preferred stock of such Person issued after the
      date
      hereof.

     

    “Indemnified
      Party”
has
      the
      meaning set forth in Section
      8.01.

     

    “Independent
      Director”
shall
      mean a member of the Board of Directors of Borrower who is not at such time,
      and
      has not been at any time during the preceding five (5) years, (A) a director,
      officer, employee or affiliate of Borrower, Originator, or any of their
      respective Subsidiaries or Affiliates (other than Rainier), or (B) the
      beneficial owner (at the time of such individual’s appointment as an Independent
      Director or at any time thereafter while serving as an Independent Director)
      of
      any of the outstanding common shares of Borrower, Originator, or any of their
      respective Subsidiaries or Affiliates, having general voting
      rights.

     

    “Initial
      Borrowing”
means
      the first Borrowing made pursuant to this Agreement.

     

    “Interest”
means,
      for any Tranche and any Tranche Period, the sum for each day during such Tranche
      Period of the following:

     

    IR
      x
      PB/CB where:

     

    
      	
              where:

            	 	 
	 	 	 
	
              IR

            	
              =

            	
              the
                Interest Rate for such Tranche for such day.

            
	
              PB

            	
              =

            	
              the
                Principal Balance of such Tranche on such day.

            
	
              CB

            	
              =

            	
              (i)
                in the case of a Tranche, the Interest Rate for which is based on
                the Base
                Rate, 365 and (ii) in the case of any other Tranche,
                360.

            
	 	 	 


    

    


     

    “Interest
      Payment Date”
means,
      (i) with respect to any Tranche which accrues interest at the CP Rate, the
      third
      (3rd)
      Business Day of the month immediately succeeding the related Tranche Period,
      (ii) with respect to any Base Rate Tranche, the third (3rd)
      Business Day of the month immediately succeeding the month in which the related
      Tranche Period ends, and (iii) with respect to any LIBOR Tranche, the last
      day
      of the related Tranche Period and with respect to any such Tranche Period longer
      than three (3) months, every three months after the first day of the Tranche
      Period and on the last day of the related Tranche Period.

     

    “Interest
      Rate”
means,
      with respect to any Tranche for any day (a) to the extent such Tranche is funded
      on such day by a Conduit Lender through the issuance of Promissory Notes, the
      CP
      Rate and (ii) otherwise, the Alternative Rate; provided,
      that at
      all times following the occurrence and during the continuation of an Event
      of
      Termination, the Interest Rate for each Tranche on each day shall be an interest
      rate per annum equal to the Base Rate in effect from time to time plus
      2.00%.

     

    “IRC”
means
      the Internal Revenue Code of 1986, as amended from time to time, and any
      successor statute.

     

    “IRS”
means
      the Internal Revenue Service of the United States of America.

     

    “Joinder
      Agreement”
means
      a
      joinder agreement substantially in the form set forth as Exhibit
      I
      hereto
      pursuant to which a new Lender Group becomes party to this
      Agreement.

     

    “JPMorgan”
has
      the
      meaning set forth in the preamble.

     

    “Law”
means
      any law (including common law), constitution, statute, treaty, regulation,
      rule,
      tariff, ordinance, order, injunction, writ, decree or award of any Governmental
      Authority.

     

    “Lender”
means
      any Conduit Lender or Committed Lender, as applicable, and “Lenders”
means,
      collectively, the Conduit Lenders and the Committed Lenders.

     

    “Lender
      Group”
means
      any Managing Agent and its related Conduit Lenders and Committed
      Lenders.

     

    “Lender
      Group Limit”
means,
      for any Lender Group, the amount set forth on Schedule
      I
      (or in
      the Joinder Agreement pursuant to which such Lender Group became party hereto)
      subject to assignment pursuant to Section
      10.03,
      as such
      amount may be reduced in accordance with Section
      2.01(b).

     

    “Lender
      Group Percentage”
means,
      for any Lender Group, the percentage equivalent to a fraction (expressed out
      to
      five decimal places), the numerator of which is the aggregate Commitments of
      all
      Committed Lenders in such Lender Group and the denominator of which is the
      Aggregate Commitment.

     

    “Level
      1 Ratings Period”
means
      any period of time during which the Debt Rating of PSE is (i) BBB- or higher
      by
      S&P and (ii) Baa3 or higher by Moody’s.

     

    “Level
      2 Ratings Period”
means
      any period of time, other than a Level 2A Ratings Period, a Level 3 Ratings
      Period, Level 4 Ratings Period, Level 4A Ratings Period or Level 5 Ratings
      Period, during which the Debt Rating of PSE is below (i) BBB- by S&P or (ii)
      Baa3 by Moody’s.

     

    “Level
      2A Ratings Period”
means
      any period of time, during which the Debt Rating of PSE is (i) BB+ by S&P
      and (ii) Ba1 by Moody’s.

     

    “Level
      3 Ratings Period”
means
      any period of time, other than a Level 4 Ratings Period, Level 4A Ratings Period
      or Level 5 Ratings Period, during which the Debt Rating of PSE is below (i)
      BB+
      by S&P or (ii) Ba1 by Moody’s.

     

    “Level
      4 Ratings Period”
means
      any period of time, other than a Level 4A Ratings Period or Level 5 Ratings
      Period, during which the Debt Rating of PSE is below (i) BB- by S&P or (ii)
      Ba3 by Moody’s.

     

    “Level
      4A Ratings Period”
means
      any period of time other than any other Ratings Period during which the Debt
      Rating of PSE is (i) B or higher by S&P and (ii) B2 or higher by
      Moody’s.

     

    “Level
      5 Ratings Period”
means
      any period of time during which the Debt Rating of PSE is (a) below (i) B by
      S&P or (ii) B2 by Moody’s, or (b) withdrawn by either S&P or
      Moody’s.

     

    “LIBO
      Rate”
means,
      for any Tranche for any Tranche Period, the rate determined by the related
      Managing Agent by reference to the British Bankers’ Association Interest
      Settlement Rate for deposits in Dollars, with a maturity comparable to such
      Tranche Period, appearing on page 3750 of the Telerate Service (or any such
      page
      as may replace page 3750 on such service or any successor to or substitute
      for
      such service, providing rate quotations comparable to those currently provided
      by such service, as determined by the related Managing Agent from time to time
      for purposes of providing quotations of interest rates applicable to deposits
      in
      Dollars in the London interbank market) at approximately 11:00 a.m., London
      time, on the second Business Day before the first day of such Tranche Period.
      In
      the event that such rate is not available at such time for any reason, then
      the
“LIBO Rate” shall be the rate at which deposits in Dollars in a principal amount
      of not less than $1,000,000 and for a maturity comparable to such Tranche Period
      are offered by the related Reference Bank in immediately available funds in
      the
      London interbank market at approximately 11:00 a.m., London time, on the second
      Business Day before (and for value on) the first day of such Tranche
      Period.

     

    “LIBO
      Rate Reserve Percentage”
means,
      for any Tranche Period in respect of which Interest is computed by reference
      to
      the LIBO Rate, the reserve percentage applicable two Business Days before the
      first day of such Tranche Period under regulations issued from time to time
      by
      the Board of Governors of the Federal Reserve System (or any successor) (or
      if
      more than one such percentage shall be applicable, the daily average of such
      percentages for those days in such Tranche Period during which any such
      percentage shall be so applicable) for determining the maximum reserve
      requirement (including, without limitation, any emergency, supplemental or
      other
      marginal reserve requirement) with respect to liabilities or assets consisting
      of or including Eurocurrency Liabilities (or with respect to any other category
      of liabilities that includes deposits by reference to which the interest rate
      on
      Eurocurrency Liabilities is determined) having a term equal to such Tranche
      Period.

     

    “LIBOR
      Tranche”
has
      the
      meaning set forth in Section
      2.03(b).

     

    “Liquidation
      Fee”
means
      for any Tranche Period of any LIBOR Tranche held by a Lender (i) the amount,
      if
      any, by which the additional Interest which would have accrued during such
      Tranche Period on the reductions of the Principal Balance of the LIBOR Tranche
      relating to such Tranche Period had a reduction of the Principal Balance not
      occurred, exceeds (ii) the income, if any, received by the Lender which holds
      such LIBOR Tranche from the investment of the proceeds of such reductions of
      Principal Balance. A certificate as to the amount of any Liquidation Fee
      (including the computation of such amount) shall be submitted by the affected
      Lender to the Borrower and shall be conclusive and binding for all purposes,
      absent manifest error.

     

    “Liquidity
      Fee”
has
      the
      meaning set forth in the Fee Letter.

     

    “Liquidity
      Provider”
means
      any of the financial institutions from time to time party to any Asset Purchase
      Agreement or any liquidity loan agreement or similar arrangement with a Conduit
      Lender.

     

    “Loan”
means
      a
      loan made to the Borrower pursuant to Article
      II.

     

    “Lock-Box”
means
      any post office box maintained by the Originator, the Servicer or a Deposit
      Account Bank, in each case, for the purpose of receiving payments on Receivables
      or other Collections.

     

    “Lock-Box
      Transfer Notice”
means
      a
      notice in substantially the form attached hereto as Exhibit
      K.

     

    “Loss
      Horizon Ratio”
means,
      as of any date, a ratio computed by dividing (i) the sum of (a) the aggregate
      Original Balance of all Billed Receivables created by the Originator during
      the
      four most recently ended Monthly Periods and (b) the aggregate Outstanding
      Balance of all Unbilled Receivables as of such day by (ii) the amount equal
      to
      (a) the Outstanding Balance of all Receivables other than Receivables as to
      which any payment, or part thereof, remains unpaid for sixty-one (61) or more
      days from the original due date thereof as of the last day of the most recently
      ended Monthly Period minus
      (b) the
      aggregate Unapplied Cash/Credit Memos as of the last day of the most recently
      ended Monthly Period.

     

    “Loss
      Ratio”
means,
      as of any date, the ratio (expressed as a percentage) determined by dividing
      (i)
      the sum of (a) the aggregate Outstanding Balance of all Receivables that
      remained unpaid at least 91 days, but not greater than 120 days from their
      respective original due dates as of the most recently ended Monthly Period,
      plus
      (b) the
      aggregate Outstanding Balance of all Receivables that were (or should have
      been
      in accordance with the Credit and Collection Policy) written off during such
      Monthly Period but which remained unpaid less than 91 days from their respective
      original due dates by (ii) the aggregate Outstanding Balance of all Billed
      Receivables generated during the fourth Monthly Period prior to the most
      recently ended Monthly Period.

     

    “Loss
      Reserve Floor Percentage”
means,
      at any time, (a) during a Level 1 Ratings Period, Level 2 Ratings Period or
      Level 2A Ratings Period, the product of (i) 4 and (ii) the Normal Concentration
      Limit, and (b) during any other Ratings Period, the product of (i) 5 and (ii)
      the Normal Concentration Limit.

     

    “Majority
      Committed Lenders”
means,
      at any time, Committed Lenders whose Commitments together exceed fifty percent
      (50%) of the Aggregate Commitment at such time.

     

    “Majority
      Managing Agents”
means,
      at any time, Managing Agents whose Lender Group Limits together exceed fifty
      percent (50%) of the Facility Limit at such time.

     

    “Managing
      Agent”
means,
      as to any Conduit Lender or Committed Lender, the Person listed on Schedule
      I
      as the
“Managing Agent” for such Lenders, together with its respective successors and
      permitted assigns.

     

    “Material
      Adverse Effect”
means
      a
      material adverse effect on (i) the financial condition, operations or prospects
      of any Borrower Party and its Subsidiaries, (ii) the ability of any Borrower
      Party to perform its obligations under this Agreement or any other Facility
      Document, (iii) the legality, validity or enforceability of this Agreement
      or
      any other Facility Document, (iv) any Secured Party’s interest in the
      Receivables generally or in any significant portion of the Receivables, the
      Related Security or the Collections with respect thereto, or (v) the
      collectibility of the Receivables generally or of any material portion of the
      Receivables.

     

    “Monthly
      Period”
means
      each calendar month.

     

    “Monthly
      Report”
means
      a
      report, in substantially the form of Exhibit
      C-1,
      furnished by the Servicer to the Managing Agents for the Lenders pursuant to
      Section
      6.07.

     

    “Monthly
      Reporting Date”
means
      the fifteenth (15th)
      day of
      each Monthly Period (or, if such day is not a Business Day, the next succeeding
      Business Day).

     

    “Monthly
      Reporting Period”
means
      any period during which the PSE’s Debt Rating shall be BB+ or higher by S&P
      and Ba1 or higher by Moody’s.

     

    “Moody’s”
means
      Moody’s Investors Service, Inc., and its successors.

     

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

     

    “Net
      Worth”
means
      PSE’s consolidated stockholders’ equity.

     

    “Net
      Receivables Pool Balance”
means
      at any time, an amount equal to the Outstanding Balances of all Receivables
      reduced,
      without
      duplication, by the sum of (i) the Outstanding Balance of all Receivables that
      are not Eligible Receivables, (ii) the aggregate amount of Unapplied Cash/Credit
      Memos at such time, (iii) the Obligor Overconcentration Amount at such time,
      (iv) the Government Receivable Overconcentration Amount at such time, (v) the
      Unbilled Receivables Overconcentration Amount at such time, (vi) the Customer
      Deposit Overconcentration Amount at such time, (vii) the Taxes Overconcentration
      Amount at such time, (viii) the credit balance portion of all Receivables
      arising under an Obligor’s account which are subject to a balanced or levelized
      payment plan of Originator at such time, (ix) the aggregate amount of Finance
      Charges then due and owing with respect to all Eligible Receivables at such
      time
      and (x) the Unbilled Adjustment Factor for Ineligible Billed Receivables at
      such
      time.

     

    “Normal
      Concentration Limit”
means,
      at any time with respect to any Obligor, 2.25% of the Net Receivables Pool
      Balance.

     

    “Obligor”
means
      any Person obligated to make payments pursuant to a Contract.

     

    “Obligor
      Overconcentration Amount”
means,
      at any time, the aggregate, for all Obligors, of the amounts by which the
      aggregate Outstanding Balance of all Eligible Receivables of each such Obligor
      and its Affiliates exceeds the product of (i) the applicable Concentration
      Limit
      for such Obligor at such time, and (ii) the Net Receivables Pool Balance at
      such
      time.

     

    “Official
      Body”
means
      any Governmental Authority or any accounting board or authority (whether or
      not
      part of a government) which is responsible for the establishment or
      interpretation of national or international accounting principles, in each
      case
      whether foreign or domestic.

     

    “Original
      Balance”
means,
      with respect to any Receivable, the Outstanding Balance of such Receivable
      on
      the date it was originated.

     

    “Originator”
means
      Puget Sound Energy, Inc.

     

    “Other
      Fees”
means
      amounts owed by the Borrower hereunder pursuant to Sections
      2.10,
      2.11,
      2.12,
      2.13,
      8.01
      and
10.10.

     

    “Outstanding
      Balance”
means,
      with respect to a Receivable at any time, the then outstanding principal balance
      thereof.

     

    “Participant”
has
      the
      meaning specified in Section
      10.03(f).

     

    “Past
      Due Ratio”
means
      the ratio computed as of the most recently ended Monthly Period by dividing
      (i)
      the sum of (a) all Receivables which remained unpaid at least 61 days, but
      not
      greater than 90 days from their respective original due dates as of the most
      recently ended Monthly Period plus
      (b) the
      aggregate Outstanding Balance of all Receivables that were (or should have
      been
      in accordance with the Credit and Collection Policy) written off during such
      Monthly Period by (ii) the aggregate Original Balance of all Billed Receivables
      generated during the third Monthly Period prior to the most recently ended
      Monthly Period.

     

    “PBGC”
means
      the Pension Benefit Guaranty Corporation established pursuant to Subtitle A
      of
      Title IV of ERISA.

     

    “Permitted
      Investments”
shall
      mean:

     

    (a) direct
      obligations of, or guaranteed as to the full and timely payment of principal
      and
      interest by, the United States or obligations of any agency or instrumentality
      thereof, if such obligations are backed by the full faith and credit of the
      United States;

     

    (b) federal
      funds, certificates of deposit, time deposits, bankers’ acceptances (which shall
      each have an original maturity of not more than ninety (90) days and, in the
      case of bankers’ acceptances, shall in no event have an original maturity of
      more than 365 days) or demand deposits of any United States depository
      institution or trust company organized under the laws of the United States
      or
      any state and subject to supervision and examination by federal and or state
      banking authorities; provided,
      that
      the short-term obligations of such depository institution or trust company
      are
      rated in one of the two highest available rating categories by the Rating
      Agencies on the date of acquisition thereof;

     

    (c) commercial
      paper (having original maturities of not more than thirty (30) days) of any
      corporation incorporated under the laws of the United States or any state
      thereof which is rated A-1 or better by S&P and P-1 by Moody’s on the date
      of acquisition thereof;

     

    (d) securities
      of money market funds rated AA or better by S&P and Aa or better by Moody’s
      on the date of acquisition thereof; or

     

    (e) repurchase
      obligations secured by an investment described in clause (a)
      above
      with a market value greater than the repurchase obligation, provided
      that
      such security is held by a third party custodian which has a rating for its
      short-term, unsecured debt or commercial paper (other than such obligations
      the
      rating of which is based on the credit of a Person other than such custodian)
      of
      P-1 by Moody’s and at least A-1 by S&P on the date of acquisition
      thereof.

     

    “Person”
means
      an individual, partnership, corporation (including a business trust), joint
      stock company, limited liability company, trust, unincorporated association,
      joint venture, Governmental Authority or other entity.

     

    “Pooled
      Commercial Paper”
means
      Promissory Notes of a Conduit Lender subject to any particular pooling
      arrangement by such Conduit Lender, but excluding Promissory Notes issued by
      such Conduit Lender for a tenor and in an amount specifically requested by
      any
      Person in connection with any agreement effected by such Conduit
      Lender.

     

    “Prime
      Rate”
means,
      with respect to any Lender Group, the rate of interest announced publicly by
      the
      related Reference Bank from time to time as its prime or base rate (such rate
      not necessarily being the lowest or best rate charged by such Reference
      Bank).

     

    “Principal
      Balance”
means
      with respect to any Tranche, the original principal amount of a Loan made
      hereunder that has been allocated to such Tranche pursuant to Section
      2.03(a),
      as such
      amount may be divided or combined in accordance therewith, in each case as
      reduced from time to time by (i) payments made in accordance with Section
      2.05
      and (ii)
      Collections received by the applicable Lender holding such Tranche from
      distributions made pursuant to Section
      2.06
      or
Section
      2.07,
      as
      applicable, that have been applied to reduce the Principal Balance of such
      Tranche (or during the Term Period, deposited in the Collateral Advance
      Account); provided, that if such Principal Balance shall have been reduced
      by
      any distribution and thereafter all or a portion of such distribution is
      rescinded or must otherwise be returned for any reason, such Principal Balance
      shall be increased by the amount of such rescinded or returned distribution,
      as
      though it had not been received by such Lender.

     

    “Program
      Agent”
means
      JPMorgan, in its capacity as agent for the Lenders, together with its successors
      and permitted assigns.

     

    “Program
      Fee”
has
      the
      meaning set forth in the Fee Letter.

     

    “Program
      Fee Rate”
has
      the
      meaning set forth in the Fee Letter.

     

    “Prohibited
      Transaction”
means
      any transaction set forth in Section 406 of ERISA or Section 4975 of the IRC
      which is not exempt under Section 408 of ERISA or Section 4975(d) of the IRC
      (or
      any exemption issued thereunder).

     

    “Promissory
      Notes”
means
      commercial paper promissory notes issued by a Conduit Lender.

     

    “Property”
of
      a
      Person means any and all property, whether real, personal, tangible, intangible,
      or mixed, of such Person, or other assets owned, leased or operated by such
      Person.

     

    “Pro
      Rata Share”
means,
      at any time for any Committed Lender in any Lender Group, (a) the Commitment
      of
      such Committed Lender at such time divided by
      the sum
      of the Commitments of all Committed Lenders in such Lender Group at such time
      and (b) after the Commitments of all the Committed Lenders in such Lender Group
      have been terminated, the outstanding principal amount of the Loans funded
      by
      such Committed Lender at such time divided by the outstanding principal amount
      of the Loans funded by all the Committed Lenders in such Lender Group at such
      time.

     

    “PSE”
has
      the
      meaning set forth in the preamble hereto.

     

    “Qualified
      Receivables Transaction”
means
      any transaction or series of transactions that may be entered into by PSE or
      any
      Subsidiary pursuant to which PSE or any Subsidiary may sell, convey, pledge
      or
      otherwise transfer to a newly-formed Subsidiary or other special purpose entity,
      or any other Person, any accounts receivable (including chattel paper,
      instruments and general intangibles) or notes receivable and the rights and
      certain other property related thereto; provided
      that the
      Receivables Transaction Attributed Indebtedness incurred in all such
      transactions or series of transactions does not exceed $200,000,000 at any
      time
      outstanding.

     

    “Rainier”
means
      Rainier Receivables, Inc., a Washington corporation.

     

    “Rate
      Type”
means
      the Adjusted LIBO Rate, the Base Rate or the CP Rate.

     

    “Rating
      Agencies”
means
      each of S&P and Moody’s or their respective successors.

     

    “Ratings
      Period”
means
      each of a Level 1 Ratings Period, Level 2 Ratings Period, Level 2A Ratings
      Period, Level 3 Ratings Period, Level 4 Ratings Period, Level 4A Ratings Period,
      and Level 5 Ratings Period.

     

    “Receivable”
means
      all indebtedness and other obligations arising in connection with the sale
      of
      goods or the rendering of services by Originator and which are owed to
      Originator (at the time it arises, and before giving effect to any transfer
      or
      conveyance thereof) or Borrower (after giving effect to transfers or conveyances
      under the Receivables Sale Agreement) or in which Borrower or Originator has
      a
      security interest or other interest, including,
      without limitation,
      any
      indebtedness, obligation or interest constituting an account, chattel paper,
      instrument or general intangible, and which are identified on the books and
      records of Originator or Borrower (including its accounting system) with the
      account code “FERC 142 Account Receivable”, interest, finance charges, sales
      taxes and other taxes with respect thereto, and including, with respect to
      Unbilled Receivables existing on the Termination Date, 100% of the amount
      thereafter invoiced to any related Obligor after the Termination Date, and
      further includes, without limitation, the obligation to pay any Finance Charges
      with respect thereto. Indebtedness and other rights and obligations arising
      from
      any one transaction, including,
      without limitation,
      indebtedness and other rights and obligations represented by an individual
      invoice, shall constitute a Receivable separate from a Receivable consisting
      of
      the indebtedness and other rights and obligations arising from any other
      transaction; provided,
      that any
      indebtedness, rights or obligations referred to in the immediately preceding
      sentence shall be a Receivable regardless of whether the account debtor,
      Originator or Borrower treats such indebtedness, rights or obligations as a
      separate payment obligation.

     

    “Receivables
      Sale
      Agreement”
means
      that certain Receivables Sale Agreement dated as of the date hereof between
      the
      Originator and the Borrower, as amended, restated, supplemented or otherwise
      modified from time to time.

     

    “Receivables
      Transaction Attributed Indebtedness”
means,
      with respect to any Qualified Receivables Transaction on any date of
      determination, the unrecovered purchase price on such date of all assets sold,
      conveyed, pledged or otherwise transferred by PSE or any Subsidiary to the
      third-party conduit entity or other receivables credit provider under such
      Qualified Receivables Transaction.

     

    “Records”
means
      all Contracts and all other agreements, documents, instruments, books, records
      and other information (including, without limitation, computer programs, tapes,
      discs, punch cards, data processing software and related property and rights)
      with respect to the Receivables, the related Obligors and the Related
      Security.

     

    “Reference
      Bank”
means,
      with respect to any Lender Group, the financial institution identified as the
      Reference Bank for such Lender Group on Schedule
      I
      or such
      other financial institution as shall be specified by the Managing Agent for
      such
      Lender Group in a written notice to the Borrower.

     

    “Related
      Entity”
means
      the Originator and each of its Affiliates and their respective
      successors.

     

    “Related
      Security”
means,
      with respect to any Receivable:

     

    (a) all
      of
      Borrower’s interest in the inventory and goods (including returned or
      repossessed inventory or goods), if any, the sale, licensing, financing or
      lease
      of which by Originator gave rise to such Receivable, and all insurance contracts
      with respect thereto,

     

    (b) all
      other
      security interests or liens and property subject thereto from time to time,
      if
      any, purporting to secure payment of such Receivable, whether pursuant to the
      Contract related to such Receivable or otherwise, together with all financing
      statements and security agreements describing any collateral securing such
      Receivable,

     

    (c) all
      guaranties, letters of credit, insurance, “supporting obligations” (within the
      meaning of Section 9-102(a) of the UCC of all applicable jurisdictions) and
      other agreements or arrangements of whatever character from time to time
      supporting or securing payment of such Receivable whether pursuant to the
      Contract related to such Receivable or otherwise,

     

    (d)  all
      service contracts and other contracts and agreements associated with such
      Receivable,

     

    (e)  all
      Records related to such Receivable,

     

    (f)  all
      of
      Borrower’s right, title and interest in, to and under the Receivables Sale
      Agreement with respect to such Receivable,

     

    (g)  all
      of
      Borrower’s right, title and interest in and to each Lock-Box, each Deposit
      Account and the Collection Account, and any and all agreements related thereto,
      and

     

    (h)  all
      proceeds of any of the foregoing.

     

    “Release”
has
      the
      meaning specified in Section
      2.06(a)(v).

     

    “Reportable
      Event”
means
      any of the events identified in section 4043(c) of ERISA for which the 30-day
      notice requirement has not been waived by statute, regulation or
      otherwise.

     

    “Required
      Reserves”
means,
      at any time, the sum of the Yield and Servicer Fee Reserve and the Combined
      Reserve at such time.

     

    “Restricted
      Junior Payment”
means
      (i) any dividend or other distribution, direct or indirect, on account of any
      shares of any class of capital stock of Borrower now or hereafter outstanding,
      except a dividend payable solely in shares of that class of stock or in any
      junior class of stock of Borrower, (ii) any redemption, retirement, sinking
      fund
      or similar payment, purchase or other acquisition for value, direct or indirect,
      of any shares of any class of capital stock of Borrower now or hereafter
      outstanding, (iii) any payment made to redeem, purchase, repurchase or retire,
      or to obtain the surrender of, any outstanding warrants, options or other rights
      to acquire shares of any class of capital stock of Borrower now or hereafter
      outstanding, and (iv) any payment of management fees by Borrower (except for
      reasonable management fees to the Originator or its Affiliates in reimbursement
      of actual management services performed).

     

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

     

    “Scheduled
      Termination Date”
means
      December 19, 2006, unless such date is extended pursuant to Section
      2.01(c).

     

    “Secured
      Parties”
means,
      collectively, the Lenders, each Managing Agent, the Program Agent and each
      other
      Indemnified Party.

     

    “Servicer”
means
      PSE, or such other Person(s) then authorized pursuant to Section
      6.01
      to
      service, administer, bill and collect Receivables.

     

    “Servicer
      Fee”
has
      the
      meaning set forth in Section 6.08; provided,
      that if
      the Servicer is not PSE or an Affiliate of PSE, the Servicer Fee shall be an
      amount equal to the market rate for servicing similar Receivables.

     

    “Servicer
      Fee Rate”
means
      a
      rate per annum equal to 0.25%.

     

    “Servicer
      Fee Reserve Percentage”
means,
      at any time, for purposes of calculating the Yield and Servicer Fee Reserve,
      an
      amount equal to the product of (a) the Servicer Fee Rate and (b) the sum of
      the
      Three-Month Days Sales Outstanding Ratio plus
      a
      collection delay factor of 10 divided
      by
      360.

     

    “Settlement
      Date”
means
      (i) during any Monthly Reporting Period, the second Business Day immediately
      following each Monthly Reporting Date, (ii) during any Weekly Reporting Period,
      the Business Day immediately following each day a Weekly Report is required
      to
      be delivered pursuant to Section
      6.07,
      (iii)
      during any Daily Reporting Period, the Business Day immediately following each
      day a Daily Report is required to be delivered pursuant to Section
      6.07
      and (iv)
      (A) during any period when the conditions precedent set forth in Section
      3.02
      are not
      satisfied and (B) on and after the occurrence of the Termination Date each
      other
      Business Day specified by the Program Agent (at the direction of any Managing
      Agent, which, in the discretion of any Managing Agent, may be as frequently
      as
      daily) in a written notice to the Borrower and the Servicer.

     

    “Significant
      Subsidiary”
means
      a
“significant subsidiary” (as defined in Regulation S-X of the Securities and
      Exchange Commission as in effect on the date of this Agreement) of
      PSE.

     

    “Special
      Concentration Limit”
has
      the
      meaning assigned to that term in the definition of “Concentration
      Limit.”

     

    “Springing
      Lien Indentures”
means
      (i) that certain Indenture of First Mortgage given by PSE (as successor to
      Washington Natural Gas Company) to BNY Midwest Trust Company (as successor
      to
      Harris Trust and Savings Bank), as Trustee, dated as of April 1, 1957, as such
      has been, and may further be, amended, restated, supplemented or otherwise
      modified from time to time, which amendments, restatements, supplements and
      modifications shall include, but not be limited to, all Supplemental Indentures
      and Security Agreements related thereto and (ii) that certain First and
      Refunding Mortgage given by PSE (as successor to Puget Sound Power & Light
      Company) to U.S. Bank National Association (as successor to Old Colony Trust
      Company of Boston), as Trustee, dated as of June 2, 1924, as such has been,
      and
      may further be, amended, restated, supplemented or otherwise modified from
      time
      to time, which amendments, restatements, supplements and modifications shall
      include, but not be limited to, all Supplemental Indentures and Real Estate
      Mortgages related thereto.

    


    “Stress
      Factor”
means
      (i) during any Level 1 Ratings Period, Level 2 Ratings Period, or Level 2A
      Ratings Period, 2.00, (ii) during any Level 3 Ratings Period, Level 4 Ratings
      Period or Level 4A Ratings Period, 2.25 and (iii) during any Level 5 Ratings
      Period, 2.50.

     

    “Subsidiary”
of
      a
      Person means (i) any corporation more than 50% of the outstanding securities
      having ordinary voting power of which shall at the time be owned or controlled,
      directly or indirectly, by such Person or by one or more of its Subsidiaries
      or
      by such Person and one or more of its Subsidiaries, or (ii) any partnership,
      limited liability company, association, joint venture or similar business
      organization more than 50% of the ownership interests having ordinary voting
      power of which shall at the time be so owned or controlled. Unless otherwise
      expressly provided, all references herein to a “Subsidiary” shall mean a
      Subsidiary of Borrower.

     

    “Taxes
      Overconcentration Amount”
means,
      at any time, the amount by which the aggregate amount of taxes included in
      the
      Outstanding Balance of all Receivables exceeds the product of (i) the percentage
      set forth on Schedule IV hereto under the heading “Taxes Overconcentration
      Percentage” applicable to the Ratings Period then in effect at such time and
      (ii) the aggregate amount of taxes included in the Outstanding Balance of all
      Receivables at such time.

     

    “Termination
      Date”
means
      the earliest to occur of (i) December 20, 2010, (ii) the declaration or
      automatic occurrence of the Termination Date pursuant to Section
      7.01,
      and
      (iii) that Business Day which the Borrower designates as the Termination Date
      by
      notice to the Program Agent at least five (5) Business Days prior to such
      Business Day.

     

    “Term-Out
      Lender”
means
      any Committed Lender which is a member of a Lender Group for which the Term
      Period has commenced.

     

    “Term
      Period”
means,
      for any Lender Group, the period commencing on the Cash Secured Advance
      Commencement Date, if any, for such Lender Group and ending on the Termination
      Date.

     

    “Three-Month
      Days Sales Outstanding Ratio”
means,
      for any Monthly Period, the average of the Days Sales Outstanding Ratio for
      such
      Monthly Period and the two immediately preceding Monthly Periods.

     

    “Three-Month
      Loss Ratio”
means,
      for any Monthly Period, the average of the Loss Ratios for such Monthly Period
      and the two immediately preceding Monthly Periods.

     

    “Total
      Capitalization”
means,
      at any time, the sum of the following for PSE and its Subsidiaries, determined
      on a consolidated basis in accordance with GAAP (without duplication and
      excluding minority interests in Subsidiaries):

     

    (a) Net
      Worth; plus

     

    (b) the
      aggregate obligations of PSE with respect to the Trust Preferred Securities;
      plus

     

    (c) the
      aggregate obligations of PSE with respect to any preferred stock of PSE,
      including any preferred stock subject to majority redemption, plus

     

    (d) the
      aggregate outstanding principal amount of all Consolidated
      Indebtedness.

     

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

     

    “Tranche
      Period”
means,
      with respect to any Tranche:

     

    (a) in
      the
      case of any Tranche in respect of which Interest is computed by reference to
      the
      CP Rate, (i) initially, the period commencing on (and including) the first
      Borrowing Date and ending on (and including) the last day of the Monthly Period
      in which such Borrowing Date occurs, and (ii) thereafter, each successive period
      commencing on (but excluding) the last day of the immediately preceding Monthly
      Period for such Tranche and ending on (and including) the last day of such
      Monthly Period; and

     

    (b) in
      the
      case of any Tranche in respect of which Interest is computed by reference to
      the
      Alternative Rate, each period from one to and including 30 days in the case
      of a
      Tranche funded at the Base Rate, or a period of one, two, three or six months
      or
      such other period as may be mutually agreeable to the applicable Managing Agent
      and the Borrower in the case of a Tranche funded at the Adjusted LIBO Rate,
      as
      the Borrower shall select in a written notice to the Program Agent and the
      Lenders not later than 1:00 P.M. (New York City time) on the second Business
      Day
      immediately before the first day of such Tranche Period, each such Tranche
      Period for such Tranche to commence on the last day of the immediately preceding
      Tranche Period for such Tranche (or if there is no such Tranche Period, on
      the
      applicable Borrowing Date thereof), except that if the Program Agent and the
      Lenders shall not have received such notice before 1:00 P.M. on such second
      Business Day, such Tranche Period shall be one day; provided,
      however,
      that:


     

    (c) any
      Tranche Period (other than of one day) which would otherwise end on a day which
      is not a Business Day shall be extended to the next succeeding Business Day
      (provided,
      however,
      that if
      Interest in respect of such Tranche Period is computed by reference to the
      Adjusted LIBO Rate, and such Tranche Period would otherwise end on a day which
      is not a Business Day, and there is no subsequent Business Day in the same
      calendar month as such day, such Tranche Period shall end on the next preceding
      Business Day);

     

    (d) in
      the
      case of any Tranche Period of one day, (A) if such Tranche Period is the initial
      Tranche Period for a Tranche, such Tranche Period shall be the applicable
      Borrowing Date; (B) any subsequently occurring Tranche Period which is one
      day
      shall, if the immediately preceding Tranche Period is more than one day, be
      the
      last day of such immediately preceding Tranche Period and, if the immediately
      preceding Tranche Period is one day, be the day next following such immediately
      preceding Tranche Period; and (C) if such Tranche Period occurs on a day
      immediately preceding a day which is not a Business Day, such Tranche Period
      shall be extended to the next succeeding Business Day;

     

    (e) in
      the
      case of any Tranche Period for any Tranche which commences before the
      Termination Date and would otherwise end on a date occurring after the
      Termination Date, such Tranche Period shall end on the Termination Date and
      the
      duration of each Tranche Period which commences on or after the Termination
      Date
      shall be a period from and including the last day of the immediately preceding
      Tranche Period (or, in the case of the initial Tranche Period immediately
      following the Termination Date, from and including the Termination Date) to
      but
      excluding the next Interest Payment Date; and

     

    (f) at
      any
      time when the Base Rate shall have been in effect for a Tranche Period of ten
      consecutive Business Days, and the conditions set forth in clauses (a) and
      (d)
      of the definition of Alternative Rate do not exist, any Lender may, upon one
      Business Day’s notice to the Borrower (with a copy to the Program Agent), select
      as the next succeeding Tranche Period for such Tranche (and any subsequent
      Tranche Periods designated by such Lender) a period of one month during which
      Interest shall be computed by reference to the Adjusted LIBO Rate; provided,
      however,
      that
      prior to such selection the Borrower may notify the applicable Lender that,
      in
      view of anticipated Collections and repayments, Interest should continue to
      be
      computed by reference to the Base Rate.

     

    “Transaction
      Parties”
means,
      collectively, the Borrower, the Originator and (so long as it is PSE or an
      Affiliate thereof) the Servicer.

     

    “Two
      Month Dilution Ratio”
means,
      for any Monthly Period, the average of the Dilution Ratios for such Monthly
      Period and the immediately preceding Monthly Period.

     

    “UCC”
means
      the Uniform Commercial Code as from time to time in effect in the applicable
      jurisdiction.

     

    “Unapplied
      Cash/Credit Memos”
means,
      as at any time, the sum of (i) the aggregate amount of Collections on hand
      at
      such time for payment on account of any Receivable, the Obligor of which has
      not
      been identified and (ii) the aggregate Outstanding Balance of all Receivables
      in
      respect of which any credit memo issued by the Originator or the Borrower is
      outstanding at such time.

     

    “Unbilled
      Adjustment Factor for Ineligible Billed Receivables”
means,
      at any time, the amount equal to the product of (i) the ratio calculated by
      dividing (a) the Outstanding Balance of all Billed Receivables that are not
      Eligible Receivables (excluding Receivables as to which any payment, or part
      thereof, remains unpaid for sixty-one (61) or more days from the original due
      date thereof) as of the end of the most recently ended Monthly Period by (b)
      the
      aggregate amount of outstanding Billed Receivables as of the end of the most
      recently ended Monthly Period and (ii) the Outstanding Balance of Unbilled
      Receivables as of the end of the most recently ended Monthly
      Period.

     

    “Unbilled
      Receivable”
means
      any Receivable for goods delivered or services performed for the related
      Obligor, with respect to which no invoice has been submitted to such Obligor
      for
      payment of the amount thereof and which is accounted for on the Originator’s
      books and records as “unbilled revenue” in accordance with its financial
      accounting practices.

     

    “Unbilled
      Receivable Overconcentration Amount”
means,
      at any time, the excess of (i) the aggregate Outstanding Balance of all Eligible
      Receivables which are Unbilled Receivables at such time over (ii) the product
      of
      (a) the percentage set forth on Schedule IV hereto under the heading “Unbilled
      Receivables Overconcentration Percentage” applicable to the Ratings Period then
      in effect at such time and (b) the aggregate Outstanding Balance of all Unbilled
      Receivables at such time.

     

    “Weekly
      Report”
means
      a
      report furnished by the Servicer to the Managing Agents on each Weekly Reporting
      Date pursuant to Section
      6.07,
      in
      substantially the form of Exhibit
      C-2,
      reflecting information for the seven (7) day period ending on the day
      immediately preceding such Weekly Reporting Date.

     

    “Weekly
      Reporting Period”
means
      any period during which PSE’s Debt Rating shall be lower than BB+ by S&P or
      Ba1 by Moody’s, but higher than B by S&P and B2 by Moody’s.

     

    “Yield
      and Fee Reserve Percentage”
means,
      on any date, a percentage equal to:

     

    ((1.5
      x
      LR) + AM + PF) x ((TDSO + CDF) / 360)

     

    where:

     

    
      	
              LR

               

            	
              =

               

            	
              the
                one-month LIBO Rate in effect on such date.

               

            
	
              AM

               

            	
              =

               

            	
              the
                Applicable Margin in effect on such date.

               

            
	
              PF

               

            	
              =

               

            	
              the
                Program Fee Rate in effect on such date.

               

            
	
              TDSO

               

            	
              =

               

            	
              the
                Three-Month Days Sales Outstanding Ratio for the most recently ended
                Monthly Period.

               

            
	
              CDF

               

            	
              =

               

            	
              a
                collection delay factor of 10.

               

            


    

    


     

    “Yield
      and Servicer Fee Reserve”
means,
      at any time, an amount equal to the sum of (a) the product of (i) the Yield
      and
      Fee Reserve Percentage at such time and (ii) the Aggregate Principal Balance
      at
      such time plus (b) the product of (i) the Servicer Fee Reserve Percentage at
      such time and (ii) the aggregate Outstanding Balance of all Receivables at
      such
      time.

    


     

    SECTION
      1.02.   Other
      Terms and Constructions.
      Under
      this Agreement, all accounting terms not specifically defined herein shall
      be
      construed in accordance with GAAP as in effect in the United States, and all
      accounting determinations made and all financial statements prepared hereunder
      shall be made and prepared in accordance with GAAP. All terms used in Article
      9
      of the UCC in the State of New York, and not specifically defined herein, are
      used herein as defined in such Article 9. The words “herein,” “hereof,” and
“hereunder” and other words of similar import refer to this Agreement as a
      whole, including the exhibits and schedules hereto, as the same may from time
      to
      time be amended or supplemented and not to any particular section, subsection,
      or clause contained in this Agreement, and all references to Sections, Exhibits
      and Schedules shall mean, unless the context clearly indicates otherwise, the
      Sections hereof and the Exhibits and Schedules attached hereto, the terms of
      which Exhibits and Schedules are hereby incorporated into this Agreement. The
      captions and section numbers appearing in this Agreement are inserted only
      as a
      matter of convenience and do not define, limit, construe or describe the scope
      or intent of the provisions of this Agreement. Each of the definitions set
      forth
      in Section
      1.01
      hereof
      shall be equally applicable to both the singular and plural forms of the defined
      terms. Unless specifically stated otherwise, all references herein to any
      agreements, documents or instruments shall be references to the same as amended,
      restated, supplemented or otherwise modified from time to time.

     

    SECTION
      1.03.   Computation
      of Time Periods.
      Unless
      otherwise stated in this Agreement, in the computation of a period of time
      from
      a specified date to a later specified date, the word “from” means “from and
      including” and the words “to” and “until” each means “to but
      excluding.”

     

    ARTICLE
      II  

    AMOUNTS
      AND TERMS OF THE LOANS 

     

    SECTION
      2.01.     The
      Loans.

     

    (a)  On
      the
      terms and subject to the conditions hereof, on the Effective Date, and
      thereafter from time to time prior to the Termination Date, each Conduit Lender
      may in its sole discretion, and each Committed Lender shall, if the Conduit
      Lender in its related Lender Group elects not to, make Loans to the Borrower
      in
      an amount, for each Lender Group, equal to its Lender Group Percentage of the
      amount requested by the Borrower pursuant to Section
      2.02;
      provided
      that no
      Lender shall make any such Loan if, after giving effect to such
      Loan:

     

    (i) the
      aggregate outstanding Principal Balance of the Tranches funded by such Lender
      hereunder shall exceed its Conduit Lending Limit (in the case of a Conduit
      Lender) or Commitment (in the case of a Committed Lender);

     

    (ii) the
      Aggregate Principal Balance shall exceed the Facility Limit; or

     

    (iii) the
      Aggregate Principal Balance shall exceed the Borrowing Base.

     

    If
      there
      is more than one Committed Lender in a Lender Group, each such Committed Lender
      shall lend its Pro Rata Share of such Lender Group’s Lender Group Percentage of
      each requested Loan, to the extent such Loan is not made by the related Conduit
      Lender. Each Borrowing shall be in a minimum principal amount equal to not
      less
      than $1,000,000 and in integral multiples of $100,000 in excess thereof. Subject
      to the foregoing and to the limitations set forth in Section
      2.05,
      the
      Borrower may borrow, prepay and reborrow the Loans hereunder.

     

    (b)  Reduction
      of the Facility Limit.
      The
      Borrower may, from time to time upon at least five (5) Business Days’ prior
      written notice to each Managing Agent, elect to reduce the Facility Limit in
      whole or in part, provided
      that
      after giving effect to any such reduction and any principal payments on such
      date, the Aggregate Principal Balance shall not exceed the Facility Limit.
      Any
      such reduction shall be in a minimum amount of $5,000,000 or an integral
      multiple thereof. Any such reduction shall, (i) reduce each Lender Group Limit
      (and the corresponding Conduit Lending Limit(s)) hereunder ratably in accordance
      with their respective Lender Group Percentages and (ii) reduce each Committed
      Lender’s Commitment ratably within its Lender Group in accordance with each
      Committed Lender’s Pro Rata Share. Once the Facility Limit is reduced pursuant
      to this Section
      2.01(b)
      it may
      not subsequently be reinstated without the consent of each Committed
      Lender.

     

    (c)  Extension
      of Scheduled Termination Date.
      The
      Borrower may, no more frequently than once each year (commencing in the year
      2006) by delivering written notice to the Managing Agents, request the Lenders
      to extend the date set forth in the definition of “Scheduled Termination Date”
(the “Commitment
      Termination Date”)
      for an
      additional 364 days past the then applicable Commitment Termination Date, with
      such extension to become effective as of the date one or more Committed Lenders
      having Commitments equal to 100% of the Facility Limit shall in their sole
      discretion consent to such extension. Any such request shall be subject to
      the
      following conditions: (i) at no time will any Commitment of any Committed Lender
      have a term of more than 364 days and, if any such request would result in
      a
      term of more than 364 days, such request shall be deemed to have been made
      for
      such number of days so that, after giving effect to such extension on the date
      requested, such term will not exceed 364 days, (ii) none of the Lenders will
      have any obligation to extend any Commitment, (iii) any such extension of the
      Commitment Termination Date will be effective only upon the written agreement
      of
      at least one Committed Lender and the Borrower and (iv) any request for such
      extension shall be made not more than sixty (60) nor less than forty-five (45)
      days prior to the then current and applicable Commitment Termination Date.
      The
      Managing Agent for each applicable Committed Lender will respond to any such
      request within thirty (30) days but in any event no earlier than thirty (30)
      days prior to the then current Commitment Termination Date, provided,
      that
      any Managing Agent’s failure to respond within such period shall be deemed to be
      a rejection of the requested extension.

     

    (d)  On
      the
      Cash Secured Advance Commencement Date, if any, for any Lender Group, each
      Committed Lender in such Lender Group shall, and severally agrees to, make
      an
      advance to the Borrower in Dollars in an amount equal to the excess of (i)
      such
      Committed Lender’s Commitment over (ii) the unpaid Principal Balance of Loans
      held by such Committed Lender on such date (including Loans purchased or to
      be
      purchased on such date pursuant to the Liquidity Agreement to which such
      Committed Lender is a party), and such Committed Lender shall make such advance
      by causing an amount equal to such advance to be deposited in same day funds
      into the Collateral Advance Account.

     

    SECTION
      2.02.   Borrowing
      Procedures.

     

    (a)  Borrowing
      Requests.

     

    (i) The
      Borrower shall request a Borrowing hereunder by submitting to each Managing
      Agent a written notice, substantially in the form of Exhibit
      B
      (each, a
“Borrowing
      Request”)
      at
      least two (2) Business Days prior to the date of the proposed Borrowing (each,
      a
“Borrowing
      Date”)
      if the
      Interest Rate thereon is to be calculated by reference to any LIBO Rate, at
      least one (1) Business Day prior to the date of the proposed Borrowing Date
      if
      the Interest Rate thereon is to be calculated by reference to any CP Rate or
      prior to 1:00 P.M. (New York City time) on the date of the proposed Borrowing
      Date if the Interest Rate thereon is to be calculated by reference to the Base
      Rate. Promptly after its receipt thereof, each Managing Agent shall promptly
      forward a copy of each Borrowing Request to the Lenders in its Lender
      Group.

     

    (ii) Each
      Borrowing Request shall: (A) specify (1) the amount of the requested Borrowing
      (which shall not be less than $1,000,000 and in additional increments of
      $100,000) and the allocation of such amount among the Lender Groups (which
      shall
      be proportional to the respective Conduit Lending Limits of the Conduit Lenders
      in each Lender Group), (2) the Aggregate Principal Balance after giving effect
      to such Borrowing, (3) the desired Borrowing Date, and (4) the account of the
      Borrower to which the proceeds of such Borrowing are to be remitted, and (B)
      certify that, after giving effect to the proposed Borrowing, no Borrowing Base
      Deficiency would exist.

     

    (b)  Conduit
      Lender Acceptance or Rejection.
      If a
      Conduit Lender shall receive a Borrowing Request, such Conduit Lender shall
      instruct the related Managing Agent to accept or reject such request by no
      later
      than the close of business on the Business Day immediately following the date
      of
      the applicable Borrowing Request. If a Conduit Lender rejects a Borrowing
      Request, the related Managing Agent shall promptly notify the Borrower and
      the
      related Committed Lenders of such rejection. If a Conduit Lender declines to
      fund its portion of any Borrowing Request, the Borrower may cancel and rescind
      such Borrowing Request in its entirety upon notice thereof received by the
      Program Agent and each Managing Agent prior to the close of business on the
      Business Day immediately prior to the proposed Borrowing Date. At no time will
      a
      Conduit Lender be obligated to make Loans hereunder regardless of any notice
      given or not given pursuant to this Section.

     

    (c)  Committed
      Lender’s Commitment.

     

    (i) If
      a
      Conduit Lender rejects a Borrowing Request and the Borrower has not cancelled
      such Borrowing Request in accordance with clause
      (b)
      above,
      any Loan requested by the Borrower in such Borrowing Request that would
      otherwise be made by such Conduit Lender shall be made by the related Committed
      Lenders in its Lender Group on a pro
      rata
      basis in
      accordance with their respective Pro Rata Shares of such Loan; provided,
      however,
      that
      during the Term Period, if any, each Committed Lender in the applicable Lender
      Group shall, at least two Business Days prior to the date of such Borrowing,
      instruct the Program Agent, to wire (or otherwise transfer in immediately
      available funds) on the date of such Borrowing to the Borrower at the account
      specified by the Borrower such Committed Lenders’ Pro Rata Share of the amount
      of the Borrowing to be made by its Lender Group out of the funds available
      therefor in the Collateral Advance Account.

     

    (ii) The
      obligations of any Committed Lender to make Loans hereunder are several from
      the
      obligations of any other Committed Lenders (whether or not in the same Lender
      Group). The failure of any Committed Lender to make Loans hereunder shall not
      release the obligations of any other Committed Lender (whether or not in the
      same Lender Group) to make Loans hereunder, but no Committed Lender shall be
      responsible for the failure of any other Committed Lender to make any Loan
      hereunder.

     

    (iii) Notwithstanding
      anything herein to the contrary, a Committed Lender shall not be obligated
      to
      fund any Loan at any time on or after the Termination Date or if, after giving
      effect to such Loan, the aggregate outstanding Loans funded by such Committed
      Lender hereunder would exceed an amount equal to (i) such Committed Lender’s
      Commitment less
      (ii)
      such Committed Lender’s ratable share of the aggregate outstanding principal
      balance of the Loans held by the Conduit Lender(s) in such Committed Lender’s
      Lender Group.

     

    (d)  Disbursement
      of Funds.
      On each
      Borrowing Date, each applicable Lender (other than the Lenders in a Term Period)
      shall remit its share of the aggregate amount of the Loans requested by the
      Borrower to the account of its related Managing Agent specified therefor to
      such
      Lender by 12:00 noon (New York City time) by wire transfer of same day funds
      (or
      during the Term Period for any Lender Group such funds will be so wired from
      the
      Collateral Advance Account by the applicable Managing Agent). Upon receipt
      of
      such funds, each Managing Agent shall remit such funds by wire transfer of
      same
      day funds to the account of the Borrower specified in the related Borrowing
      Request by 1:00 p.m. (New York City time) to the extent it has received such
      funds from the Lenders in its Lender Group no later than 12:00 noon (New York
      City time). Upon any disbursement made from the Collateral Advance Account
      to
      fund a Borrowing, each Lender in a Term Period will be deemed to have paid
      to
      the Borrower such Lender’s Pro Rata Share of such Lender Group’s amount of the
      Borrowing being made for all purposes of this Agreement.

     

    SECTION
      2.03.   Tranches.

     

    (a)  Generally.
      Each
      Loan shall be allocated to one or more “Tranche Periods” as set forth in the
      definition of such term. Any portion of a Loan having one Tranche Period and
      one
      Rate Type is referred to herein as a “Tranche”. The Borrower shall from time to
      time select Tranche Periods and Rate Types with respect to Tranches funded
      by
      the Committed Lenders, subject to the provisions of this Agreement and provided
      that no Event of Termination has occurred. At all times after the occurrence
      of
      an Event of Termination, each Committed Lender shall select the Tranche Periods
      and Rate Types with respect to the Tranches it funds hereunder. Either the
      Borrower or, following an Event of Termination, the applicable Lender, may,
      upon
      notice to the other party received at least three Business Days prior to the
      last day of any Tranche Period in the case of the Borrower giving notice, or
      up
      to the last day of such Tranche Period in the case of the Lender giving notice,
      either (i) divide any Tranche originating on such last day or having a Tranche
      Period ending on such last day into two or more Tranches having an aggregate
      Principal Balance equal to the Principal Balance of such divided Tranche, or
      (ii) combine any two or more Tranches originating on such last day or having
      Tranche Periods ending on such last day into a single Tranche having a Principal
      Balance equal to the aggregate of the Principal Balance of such Tranches;
provided,
      however,
      that no
      Tranche with respect to which Interest is determined by reference to the CP
      Rate
      may be combined with a Tranche with respect to which Interest is determined
      by
      reference to the Alternate Rate, and a Tranche held by one Lender may not be
      combined with any Tranche held by any other Lender.

     

    (b)  Illegality.
      Notwithstanding any other provision of this Agreement, if the adoption of or
      any
      change in any Law or in the interpretation or application thereof by any
      relevant Governmental Authority shall make it unlawful for any Lender, in its
      reasonable determination, to fund or maintain Tranches for which Interest is
      calculated by reference to the LIBO Rate (each a “LIBOR
      Tranche”)
      as
      contemplated by this Agreement or to obtain in the interbank Eurodollar market
      the funds with which to make or maintain any such LIBOR Tranche, such Lender
      shall promptly notify the Program Agent, its Managing Agent and the Borrower
      thereof whereupon, until such Lender notifies the Borrower and the Program
      Agent
      that the circumstances giving rise to such suspension no longer exist (which
      notice such Lender shall promptly give), (i) the obligation of such Lender
      to
      fund or maintain LIBOR Tranches shall forthwith be suspended and (ii) such
      Lender’s then outstanding LIBOR Tranches, if any, shall be converted on the last
      day of the Tranche Period for such Tranches or within such earlier period as
      required by Law into Tranches that accrue Interest based on the Base Rate (each
      a “Base
      Rate Tranche”).
      Before giving any notice to the Program Agent, its Managing Agent and the
      Borrower pursuant to this clause
      (b),
      such
      Lender shall designate a different office as its lending office if such
      designation would avoid the need for giving such notice and would not, in the
      judgment of such Lender, be otherwise disadvantageous to such
      Lender.

     

    (c)  LIBO
      Rate Inadequate; Inability to Determine LIBO Rate.
      If
      prior to the commencement of any Tranche Period for a LIBOR Tranche, either
      (i)
      the related Lender reasonably determines that the rate at which deposits of
      Dollars are being offered to such Lender in the London interbank market does
      not
      accurately reflect the cost to such Lender of funding or maintaining LIBOR
      Tranches for such Tranche Period or (ii) the related Lender is unable, after
      reasonable attempts, to obtain Dollars in the London interbank market to fund
      or
      maintain such Tranche for such Tranche Period, then such Lender shall give
      notice thereof to the Borrower, its Managing Agent and the Program Agent by
      telephone or telecopy as promptly as practicable thereafter and, until such
      Lender notifies the Borrower, its Managing Agent and the Program Agent that
      the
      circumstances giving rise to such suspension no longer exist (which notice
      such
      Lender shall promptly give), (A) the obligations of the such Lender to make
      LIBOR Tranches or to continue or convert outstanding Tranches as or into LIBOR
      Tranches shall be suspended, (B) each outstanding LIBOR Tranche funded by such
      Lender shall be converted into a Base Rate Tranche on the last day of the
      Tranche Period applicable thereto, and (C) if any Borrowing Request requests
      a
      LIBOR Tranche, the portion of such Borrowing to be funded by such Lender shall
      be made as a Base Rate Tranche.

     

    SECTION
      2.04.   Interest
      and Fees.
      On each
      Interest Payment Date for a Tranche, the Borrower shall pay to each Lender
      (or
      its related Managing Agent) all accrued and unpaid Interest with respect to
      such
      Tranche. The Borrower shall pay to each Managing Agent the Liquidity Fees,
      Administrative Fees and Program Fees in the amounts and on the dates set forth
      in the Fee Letter. On or before the first Business Day after the end of each
      Tranche Period in respect of which Interest is computed by reference to the
      CP
      Rate, the related Lender (or the related Managing Agent on behalf of such
      Lender) shall furnish the Borrower with an invoice setting forth the amount
      of
      the accrued and unpaid Interest and the calculation thereof for such Tranche
      Period. On or before the first Business Day after the end of each calendar
      month
      each Managing Agent shall furnish the Borrower with an invoice setting forth
      the
      amount of the accrued and unpaid Liquidity Fees, Administrative Fees and Program
      Fees payable to the Lenders in such Managing Agent’s Lender Group. All payments
      of Interest and fees shall be made out of Collections, the proceeds of Loans
      or,
      if the Program Agent consents, such other funds available to the
      Borrower.

     

    SECTION
      2.05.   Optional
      Prepayments.
      The
      Borrower may, at its option, prepay on any Business Day all or any portion
      of
      any Loan upon prior written notice delivered to each Managing Agent not later
      than 11:00 A.M. (New York City time) one (1) Business Day prior to the date
      of
      such payment. Each such notice shall be in the form attached as Exhibit
      J
      and
      shall (i) specify the aggregate amount of the prepayment to be made on the
      Loans
      and the Loans to which such prepayment is to be applied and (ii) specify the
      Business Day on which the Borrower will make such prepayment. Each such
      prepayment shall be in a minimum principal amount equal to $1,000,000 and in
      integral multiples of $100,000 in excess thereof and shall be made ratably
      among
      the Lenders based on the aggregate Principal Balance of the Tranches held by
      each. At the request of any Managing Agent, each such prepayment of the Loans
      to
      the Lenders in such Managing Agent’s Lender Group must be accompanied by a
      payment of all accrued and unpaid Interest on the amount prepaid and any other
      amounts (including amounts payable under Section
      2.12)
      due
      from the Borrower hereunder in respect of such prepayment. Any such prepayment
      shall be made out of Collections.

     

    SECTION
      2.06.   Application
      of Collections Prior to Termination Date.

     

    (a)  On
      each
      Business Day prior to the Termination Date, the Servicer shall cause all
      Collections received on such day to be applied in the following order and
      priority:

     

    (i) first,
      if a
      Borrowing Base Deficiency exists, or the Aggregate Principal Balance exceeds
      the
      Facility Limit, to the Managing Agents, on behalf of the applicable Lenders,
      an
      amount equal to such Borrowing Base Deficiency or the amount necessary to cause
      the Aggregate Principal Balance to be less than or equal to the Facility Limit,
      as applicable (such amount to be allocated among the Lenders ratably in
      accordance with the outstanding principal balance of the Loans held by each);
      provided,
      however,
      that
      during the Term Period, if any, for any Lender Group, the Servicer shall instead
      deposit such Lender Group’s ratable portion of such payment to the Collateral
      Advance Account (resulting in a reduction of the Loans of the Term-Out Lenders
      in such Lender Group and an increase in the Cash Secured Advances of such
      Lenders) to be held for the purposes set forth in Section
      2.18(a);

     

    (ii) second,
      in the
      event that at least one Committed Lender has agreed to any extension of the
      Commitment Termination Date pursuant to Section
      2.01(c)
      when
      requested by the Borrower, and at least one Lender has not agreed to such
      extension (each such Lender, other than any Term-Out Lender, a “Non-Renewing
      Lender”),
      then,
      from and after the occurrence of the Commitment Termination Date for any
      Non-Renewing Lender, to each such Non-Renewing Lender, in payment of the
      outstanding principal balance of its Loans, in an amount equal to such
      Non-Renewing Lender’s ratable share (in accordance with the respective
      outstanding principal balance of the Loans made by each of the Lenders) of
      the
      balance of such Collections (such ratable share to be determined on each
      Business Day, solely for the purposes of this clause
      (ii),
      based
      upon the outstanding Loans of the Lenders immediately preceding such Commitment
      Termination Date, until such Non-Renewing Lender’s outstanding Loans are reduced
      to zero;

     

    (iii) third,
      if the
      Managing Agent of a Conduit Lender has notified the Borrower and the Servicer
      that such Conduit Lender shall not make any more Loans, to such Conduit Lender,
      in reduction of its outstanding Loans, in an amount equal to such Conduit
      Lender’s ratable share of the balance of such Collections (in accordance with
      the outstanding principal balance of such Loans held by each Lender) until
      the
      principal balance of the Loans of such Conduit Lender is reduced to
      zero;

     

    (iv) fourth,
      if any
      Borrower Obligations (other than Interest, Liquidity Fees, Administrative Fees,
      Program Fees, the Servicer Fee and Loans) are then due and payable by the
      Borrower to any Secured Party, pay to each such Secured Party (ratably in
      accordance with the amounts owing to each) the Borrower Obligations so due
      and
      payable; and

     

    (v) fifth,
      remit
      any remaining Collections to the Borrower for application in accordance with
      Section
      2.06(c)
      below
      (any such remittance, a “Release”);
      provided
      that, if
      the conditions precedent for such Release set forth in Section
      3.02
      are not
      satisfied, the Servicer shall deposit such Collections into the Collection
      Account for application on the next Business Day in accordance with this
Section
      2.06
      or
Section
      2.07,
      as
      applicable.

     

    (b)  On
      each
      Interest Payment Date for a Tranche, the Servicer shall remit to the Managing
      Agents, on behalf of the applicable Lenders, solely out of Collections or the
      proceeds of Loans, the accrued and unpaid Interest in respect of such Tranche.
      On each Fee Payment Date, the Servicer shall pay, solely out of Collections,
      (i)
      all accrued and unpaid Fees then due and payable to the Persons entitled
      thereto, (ii) all Excess Interest, if any, accrued through the last day of
      the
      most recently ended Monthly Period in respect of all Cash Secured Advances
      to
      the applicable Managing Agents for the Term-Out Lenders, and (iii) to itself,
      all accrued and unpaid Servicer Fees then due and payable.

     

    (c)  Any
      Collections remitted to the Borrower pursuant to Section
      2.06(a)(v)
      shall be
      applied by the Servicer, on behalf of the Borrower: (i) first,
      if so
      requested by the Borrower, to pay or prepay (or set aside for the payment or
      prepayment of) Loans, (ii) second,
      to pay
      the purchase price for Receivables to be acquired by the Borrower from the
      Originator on such day under the Receivables Sale Agreement, and (iii)
third,
      in such
      other manner as the Borrower may specify and that is not prohibited by the
      terms
      of the Facility Documents.

     

    SECTION
      2.07.   Application
      of Collections After Termination Date.

     

    (a)  On
      the
      Termination Date, the Servicer shall deposit to the Collection Account all
      Collections held by it on such date (including amounts previously set aside
      or
      held by it pursuant to Section
      2.06).
      On
      each Business Day thereafter, the Servicer shall deposit to the Collection
      Account, within one (1) Business Day of its receipt thereof, all Collections
      received by it that have not previously been deposited to the Collection
      Account. The Servicer shall not make any withdrawals from the Collection Account
      during such period except for the purpose of distributing such Collections
      in
      accordance with this Section
      2.07.

     

    (b)  On
      each
      Settlement Date from and after the Termination Date, the Servicer shall apply
      all Collections received since the prior Settlement Date, and all funds, if
      any,
      on deposit in the Collection Account that have not been previously applied
      hereunder (including, without limitation, any investment earnings received
      with
      respect to such funds) in the following order of priority:

     

    (i) first,
      to the
      Program Agent an amount equal to the Borrower Obligations (other than those
      described in clause
      (iii)
      below)
      owing to the Program Agent in respect of costs and expenses of the type
      described in Section
      10.10
      incurred
      by it in connection with the enforcement of any Facility Document or the
      collection of any amounts due thereunder;

     

    (ii) second,
      to the
      Servicer (if not PSE or an Affiliate of PSE) the accrued and unpaid Servicer
      Fee
      and, if not otherwise paid, at the direction of the Majority Managing Agents,
      pay to each Approved Sub-servicer all amounts then due and payable pursuant
      to
      the contract between the Servicer and such Approved Sub-servicer;

     

    (iii) third,
      to the
      Lender and the Managing Agents on a pro
      rata basis,
      an
      amount equal to the aggregate accrued and unpaid Interest, Excess Interest
      accrued through the last day of the most recently ended Monthly Period in
      respect of all Cash Secured Advances, Liquidity Fees, Administrative Fees and
      Program Fees;

     

    (iv) fourth,
      to the
      Lenders an amount equal to the Aggregate Principal Balance (such amount to
      be
      allocated among the Lenders ratably in accordance with the outstanding principal
      balance of the Loans held by each);

     

    (v) fifth,
      if any
      Borrower Obligations (other than the amounts paid pursuant to clauses
      (i)
      through
(iv)
      above)
      are then due and payable by the Borrower to any Secured Party, to each such
      Secured Party (ratably in accordance with the amounts owing to each) the
      Borrower Obligations so due and payable;

     

    (vi) sixth,
      to the
      Servicer (if PSE or an Affiliate of PSE) the accrued and unpaid Servicer Fee;
      and

     

    (vii) seventh,
      on the
      Final Collection Date, remit any remaining funds to the Borrower.

     

    SECTION
      2.08.   Deemed
      Collections.
      If on
      any day the Outstanding Balance of any Receivable is either reduced or canceled
      as a result of a Dilution Factor, the Borrower shall be deemed to have received
      on such day, an amount equal to the amount of such reduction, or in the case
      of
      a cancellation, the Outstanding Balance of such Diluted Receivable; provided,
      that
      such Deemed Collections may be applied to the purchase price paid to the
      Originator for newly purchased Receivables to the extent permitted under the
      Receivables Sale Agreement. If the Borrower is on any day deemed to have
      received Collections pursuant to this Section
      2.08
      from and
      after the Termination Date, on such day the Borrower shall pay an amount of
      funds equal to such deemed Collections to the Servicer for allocation and
      application in accordance with Section
      2.07.

     

    SECTION
      2.09.   Payments
      and Computations, Etc.
      All
      amounts to be paid or deposited by the Borrower or the Servicer hereunder shall
      be paid or deposited in accordance with the terms hereof no later than 1:00
      p.m.
      (New York City time) on the day when due in lawful money of the United States
      of
      America in immediately available funds to the account as the Program Agent
      or
      the relevant Managing Agents may designate prior to such payment from time
      to
      time in writing. The Borrower and the Servicer (only with respect to amounts
      payable pursuant to Section
      8.02)
      shall,
      to the extent permitted by law, pay to the Affected Party interest on all
      amounts not paid or deposited or debited by such Person when due hereunder
      at 2%
      per annum above the Base Rate, payable on demand. All computations of interest
      (including, without limitation, interest on Cash Secured Advances during the
      Term Period) and all computations of Interest, Liquidity Fees, Administrative
      Fees, Program Fees and Servicer Fees hereunder shall be made on the basis of
      a
      year of 360 days for the actual number of days (including the first but
      excluding the last day) elapsed; provided,
      that
      all computations of Interest on Base Rate Tranches shall be made on the basis
      of
      a year of 365 days for the actual number of days (including the first but
      excluding the last day) elapsed. In no event shall any provision of this
      Agreement require the payment or permit the collection of Interest in excess
      of
      the maximum permitted by applicable law. In the event that any payment hereunder
      (whether constituting a repayment of Loans or a payment of Interest or any
      other
      amount) is rescinded or must otherwise be returned for any reason, the amount
      of
      such payment shall be restored and such payment shall be considered not to
      have
      been made.

     

    SECTION
      2.10.   Interest
      Protection.

     

    (a)  If
      due to
      either: (i) the introduction of or any change (including, without limitation,
      any change by way of imposition or increase of reserve requirements) in or
      in
      the interpretation by any Governmental Authority of any law or regulation (other
      than laws or regulations relating to taxes) after the date hereof, (ii) the
      compliance by any Affected Party with any directive or request from any central
      bank or other Governmental Authority (whether or not having the force of law)
      imposed after the date hereof, or (iii) or any change in any accounting
      guideline by an accounting board or authority (whether or not part of a
      government or instrumentality thereof) which is responsible for the
      establishment of or interpretation of national or international accounting
      principles (in each case whether foreign or domestic); (1) there shall be an
      increase in the cost to such Affected Party of funding or maintaining any
      Tranche which accrues Interest at the Adjusted LIBO Rate or the CP Rate
      hereunder or of extending a commitment in respect thereof, or (2) such Affected
      Party shall be required to make a payment calculated by reference to any Tranche
      which accrues Interest at the Adjusted LIBO Rate or the CP Rate funded by it
      or
      Interest received by it, then the Borrower shall, from time to time, within
      five
      (5) days after demand by the related Managing Agent, pay such Managing Agent
      for
      the account of such Affected Party (as a third party beneficiary, in the case
      of
      any Affected Party other than one of the Lenders), that portion of such
      increased costs incurred, amounts not received or required payment made or
      to be
      made, which such Managing Agent reasonably determines is attributable to funding
      and maintaining, or extending a commitment to fund, any Tranche which accrues
      Interest at the Adjusted LIBO Rate or the CP Rate hereunder or pursuant to
      any
      Asset Purchase Agreement or similar liquidity facility.

     

    (b)  Each
      Managing Agent will promptly notify the Borrower and the Program Agent of any
      event of which it has knowledge, occurring after the date hereof, which will
      entitle any Affected Party in its Lender Group to compensation pursuant to
      Section
      2.10(a).
      Each
      Affected Party will designate a different lending office if such designation
      will avoid the need for, or reduce the amount of, such compensation and will
      not, in the judgment of such Affected Party, be otherwise disadvantageous to
      it.
      In determining the amount of such compensation, such Affected Party may use
      any
      reasonable averaging and attribution methods. The applicable Affected Party
      (or
      such party’s related Managing Agent) shall submit to the Borrower a certificate
      describing such increased costs incurred, amounts not received or receivable
      or
      required payment made or to be made, which certificate shall be conclusive
      in
      the absence of manifest error.

     

    (c)  If
      less
      than all Lenders claim reimbursement from the Borrower pursuant to Section
      2.10(a),
      each
      such Lender claiming reimbursement shall be obligated, at the request of the
      Borrower, to assign all of its rights and obligations hereunder to (i) the
      Lenders of its Lender Group hereunder that are willing to accept such rights
      and
      obligations or (ii) another financial institution nominated by the Borrower
      which is reasonably acceptable to the other Lenders in such Lender Group and
      is
      willing to participate in this Agreement through the Scheduled Termination
      Date
      in place of such Lender; provided,
      that
      (x) the Lender claiming reimbursement receives payment in full, pursuant to
      an
      Assignment and Acceptance, of an amount equal to the aggregate outstanding
      principal balance of all Loans and all other accrued an unpaid Borrower
      Obligations owing to it and (ii) the replacement Committed Lender proposed
      by
      the Borrower otherwise satisfies the requirements of Section
      10.03(b).

     

    SECTION
      2.11.   Increased
      Capital.

     

    (a)  If
      (i)
      the introduction of or any change in or in the interpretation by any Official
      Body of any law or regulation, (ii) compliance by any Affected Party with any
      directive or request from any central bank or other Official Body (whether
      or
      not having the force of law) or (iii) or any change in any accounting guideline
      by an accounting board or authority (whether or not part of a government or
      instrumentality thereof) which is responsible for the establishment of or
      interpretation of national or international accounting principles (in each
      case
      whether foreign or domestic) imposed after the date hereof affects or would
      affect the amount of capital required or expected to be maintained by such
      Affected Party or such Affected Party reasonably determines that the amount
      of
      such capital is increased by or based upon the existence of any Lender’s
      agreement to make or maintain Loans hereunder and other similar agreements
      or
      facilities and such event would have the effect of reducing the rate of return
      on capital of such Affected Party by an amount deemed by such Affected Party
      to
      be material, then, within five (5) days after demand by such Affected Party
      or
      the related Managing Agent, the Borrower shall pay to such Affected Party (as
      a
      third party beneficiary, in the case of any Affected Party other than one of
      the
      Lenders) or the related Managing Agent for the account of such Affected Party
      from time to time, as specified by such Affected Party or such Managing Agent,
      additional amounts sufficient to compensate such Affected Party in light of
      such
      circumstances, to the extent that such Affected Party or such Managing Agent
      on
      behalf of such Affected Party reasonably determines such increase in capital
      to
      be attributable to the existence of the applicable Lender’s agreements
      hereunder.

     

    (b)  Each
      Managing Agent will promptly notify the Borrower and the Program Agent of any
      event of which it has knowledge, occurring after the date hereof, which will
      entitle any Lender or Affected Party in its Lender Group to compensation
      pursuant to Section
      2.11(a).
      Each
      Lender or Affected Party will designate a different lending office if such
      designation will avoid the need for, or reduce the amount of, such compensation
      and will not, in the judgment of such Lender or Affected Party, be otherwise
      disadvantageous to it. In determining the amount of such compensation, such
      Lender or Affected Party may use any reasonable averaging and attribution
      methods. The applicable Lender or Affected Party (or such party’s related
      Managing Agent) shall submit to the Borrower a certificate describing such
      compensation, which certificate shall be conclusive in the absence of manifest
      error.

     

    (c)  If
      less
      than all Lenders claim reimbursement from the Borrower pursuant to Section
      2.11(a),
      each
      such Lender claiming reimbursement shall be obligated, at the request of the
      Borrower, to assign all of its rights and obligations hereunder to (i) the
      Lenders of its Lender Group hereunder that are willing to accept such rights
      and
      obligations or (ii) another financial institution nominated by the Borrower
      which is reasonably acceptable to the other Lenders in such Lender Group and
      is
      willing to participate in this Agreement through the Scheduled Termination
      Date
      in place of such Lender; provided,
      that
      (x) the Lender claiming reimbursement receives payment in full, pursuant to
      an
      Assignment and Acceptance, of an amount equal to the aggregate outstanding
      principal balance of all Loans and all other accrued an unpaid Borrower
      Obligations owing to it and (ii) the replacement Committed Lender proposed
      by
      the Borrower otherwise satisfies the requirements of Section
      10.03(b).

     

    SECTION
      2.12.   Funding
      Losses.
      In the
      event that any Liquidity Provider or any Lender shall incur any loss, expense
      or
      Liquidation Fees (including, without limitation, any loss or expense incurred
      by
      reason of the liquidation or reemployment of deposits or other funds acquired
      by
      such Liquidity Provider or Lender in order to fund or maintain any Loan or
      interest therein) as a result of (i) any reduction of the Principal Balance
      of
      any LIBOR Tranche at any time or conversion of any Tranche to another Tranche
      prior to the originally scheduled last day of the applicable Tranche Period
      or
      (ii) any Loan not being made in accordance with a request therefor under
Section
      2.02,
      then,
      upon demand from the related Managing Agent to Borrower, Borrower shall pay
      to
      such Managing Agent for the account of such Liquidity Provider or Lender, the
      amount of such loss, expense or Liquidation Fees. Such written notice shall,
      in
      the absence of manifest error, be conclusive and binding upon
      Borrower.

     

    SECTION
      2.13.   Taxes.
      Except
      to the extent required by applicable law, any and all payments and deposits
      required to be made hereunder or under any instrument delivered hereunder by
      the
      Borrower hereunder shall be made free and clear of and without deduction for
      any
      and all present or future taxes, levies, imposts, deductions, charges or
      withholdings, and all liabilities with respect thereto (except for net income
      taxes that are imposed by the United States and franchise taxes, gross receipts
      taxes imposed in lieu of income taxes, and net income taxes that are imposed
      on
      such Affected Party by the state or foreign jurisdiction under the laws of
      which
      such Affected Party is organized or any political subdivision thereof). If
      the
      Borrower or the Servicer shall be required by law to make any such deduction,
      (i) the Borrower shall make an additional payment to such Affected Party, in
      an
      amount sufficient so that, after making all required deductions (including
      deductions applicable to additional sums payable under this Section
      2.13),
      such
      Affected Party receives an amount equal to the sum it would have received had
      no
      such deductions been made, (ii) the Borrower (or the Servicer, on its behalf)
      shall make such deductions and (iii) the Borrower (or the Servicer, on its
      behalf) shall pay the full amount deducted to the relevant taxation authority
      or
      other authority in accordance with applicable law.

     

    (a)  In
      addition, the Borrower agrees to pay any present or future stamp or other
      documentary taxes or any other excise or property taxes or similar levies which
      arise from any payment made hereunder or under any instrument delivered
      hereunder or from the execution, delivery or registration of, or otherwise
      with
      respect to, this Agreement or any instrument delivered hereunder.

     

    (b)  Each
      Affected Party which is not organized under the laws of the United States or
      any
      State thereof shall, on or prior to the date that such Affected Party becomes
      a
      party to or obtains rights under this Agreement, and prior to any payment being
      made by the Borrower to such Affected Party, deliver to the Borrower (i) two
      duly completed and executed copies of the IRS Form W-8 BEN or W-8 ECI (or any
      successor form) as applicable; and (ii) such other forms or certificates as
      may
      be required under the laws of any applicable jurisdiction (on or before the
      date
      that any such form expires or becomes obsolete), in order to permit the Borrower
      to make payments to, and deposit funds to or for the account of, such Affected
      Party hereunder and under the other Facility Documents without any deduction
      or
      withholding for or on account of any tax. Each such Affected Party shall submit
      to the Borrower (with copies to the Program Agent) two updated, completed,
      and
      duly executed versions of: (i) all forms referred to in the previous sentence
      upon the expiry of, or the occurrence of any event requiring a change in, the
      most recent form previously delivered by it to the Borrower or the substitution
      of such form; and (ii) such extensions or renewals thereof as may reasonably
      be
      requested by the Borrower.

     

    (c)  If
      the
      Borrower is required to pay additional amounts to or for the benefit of any
      Affected Party pursuant to this Section as a result of a change of law or treaty
      occurring after such Affected Party first became a party to this Agreement,
      such
      Affected Party will, at the Borrower’s request, change the jurisdiction of its
      applicable lending office if, in the reasonable judgment of such Affected Party,
      such change (i) will eliminate or reduce any such additional payment which
      may
      thereafter accrue and (ii) is not otherwise disadvantageous to such Affected
      Party.

     

    SECTION
      2.14.   Security
      Interest.
      As
      security for the performance by the Borrower of all the terms, covenants and
      agreements on the part of the Borrower to be performed under this Agreement
      or
      any other Facility Document, including the payment when due of all Borrower
      Obligations, the Borrower hereby grants to the Program Agent, for the benefit
      of
      the Secured Parties, a security interest in all of the Borrower’s right, title
      and interest in, to and under the following (collectively, the “Collateral”):

     

    (a)  all
      Receivables, whether now owned and existing or hereafter acquired or arising,
      together with all Related Security and Collections with respect
      thereto;

     

    (b)  the
      Collection Account, each Deposit Account, and each Lock-Box, including, without
      limitation, (i) all Collections held therein and all certificates and
      instruments, if any, from time to time representing or evidencing any of such
      accounts or any Collections held therein, (ii) all investment property and
      other
      financial assets representing Collections or proceeds thereof held in, or
      acquired with funds from, such accounts and all certificates and instruments
      from time to time representing or evidencing such investment property and
      financial assets, (iii) all notes, certificates of deposit and other instruments
      from time to time hereafter delivered or transferred to, or otherwise possessed
      by, the Program Agent in substitution for any of the then existing accounts
      and
      (iv) all interest, dividends, cash, instruments, financial assets, investment
      property and other property from time to time received, receivable or otherwise
      distributed in respect of or in exchange for any and all of such accounts,
      in
      each case, related to Receivables;

     

    (c)  all
      rights and remedies of the Borrower under the Receivables Sale Agreement,
      together with all financing statements filed by the Borrower against the
      Originator in connection therewith; and

     

    (d)  to
      the
      extent not included in the foregoing, all proceeds of any and all of the
      foregoing.

     

    The
      Borrower hereby authorizes the filing of financing statements, and continuation
      statements and amendments thereto and assignments thereof, describing the
      collateral covered thereby as “all of debtor’s personal property or assets” or
      words to that effect, notwithstanding that such wording may be broader in scope
      than the collateral described in this Section
      2.14.
      This
      Agreement shall constitute a security agreement under applicable
      law.

     

    SECTION
      2.15.   Evidence
      of Debt.
      Each
      Lender shall maintain an account or accounts evidencing the indebtedness of
      the
      Borrower to such Lender resulting from each Loan made by such Lender from time
      to time, including the outstanding principal balance of such Loans and the
      amount of Interest payable and paid to such Lender from time to time hereunder.
      The entries made in such accounts of the Lenders shall be prima
      facie
      evidence
      of the existence and amounts of the obligations recorded therein; provided,
      however, that the failure of any Lender to maintain such accounts or any error
      therein shall not in any manner affect the obligation of the Borrower to repay
      the Loans in accordance with the terms of this Agreement.

     

    SECTION
      2.16.   Interest
      on Cash Secured Advances.
      The
      Borrower shall pay interest to each Term-Out Lender on the unpaid principal
      amount of such Committed Lender’s Cash Secured Advance from the date of such
      Cash Secured Advance until such principal amount shall be repaid in full, at
      a
      rate per annum equal at all times during each Tranche Period at the Interest
      Rate for such Tranche Period, payable in arrears on each Interest Payment Date
      for such Tranche Period and on the Termination Date for all Tranches related
      to
      such Cash Secured Advance. On each Interest Payment Date for each Tranche Period
      after the Cash Secured Advance Commencement Date the Program Agent shall
      disburse, on behalf of the Borrower, those dividends from or net investment
      gains with respect to, the Cash Collateral which shall then be available to
      be
      withdrawn from the Collateral Advance Account, and the Program Agent shall
      distribute such funds to the Term-Out Lenders, ratably according to the
      respective outstanding principal amounts of their respective Cash Secured
      Advances, for application to the payment of unpaid accrued interest on the
      Cash
      Secured Advances. Any remaining unpaid accrued interest on the Cash Secured
      Advances shall be paid from the Collections of the Receivables pursuant to
      Sections
      2.06,
      2.07
      and
2.18(d).

     

    SECTION
      2.17.   Repayment
      of Cash Secured Advances.
      The
      Borrower shall repay to each Term-Out Lender the aggregate outstanding principal
      amount of such Lender’s Cash Secured Advance on the Termination Date for all
      Tranches related to such Cash Secured Advance.

     

    SECTION
      2.18.   Use
      of
      Proceeds; Security Interest in Collateral Advance Account.

     

    (a)  The
      Borrower hereby agrees that it shall use the proceeds of the Cash Secured
      Advances solely to fund and maintain the Collateral Advance Account for the
      purpose of funding Loans from time to time during the Term Period.

     

    (b)  The
      Borrower hereby grants to the Program Agent, for the ratable benefit of the
      Term-Out Lenders, a security interest in the following (collectively, the “Cash
      Collateral”):

     

    (i) the
      Collateral Advance Account, all funds from time to time credited to the
      Collateral Advance Account, all financial assets (including, without limitation,
      Permitted Investments) from time to time acquired with any such funds or
      otherwise credited to the Collateral Advance Account, all interest, dividends,
      cash, instruments and other investment property from time to time received,
      receivable or otherwise distributed in respect of or in exchange for any or
      all
      of such funds or such financial assets, and

     

    (ii) all
      proceeds of, collateral for, and supporting obligations relating to any and
      all
      of the Cash Collateral.

     

    (c)  The
      grant
      of a security interest by the Borrower to the Program Agent for the ratable
      benefit of the Term-Out Lenders, pursuant to clause
      (b)
      above
      secures the payment of the Borrower’s obligation to repay the Cash Secured
      Advances, and to pay interest thereon, pursuant to Sections
      2.16
      and
2.17,
      respectively.

     

    (d)  On
      the
      Termination Date for all Tranches if the Term Period has occurred, the Program
      Agent, shall: (i) convert the Cash Collateral that does not constitute cash
      into
      cash proceeds and (ii) pay to each Term-Out Lender, ratably according to the
      respective outstanding principal amounts of their respective Cash Secured
      Advances, for application, first,
      to the
      repayment of the outstanding principal amounts of the Cash Secured Advances
      and
second,
      to the
      payment of unpaid accrued interest on the Cash Secured Advances (to the extent
      such funds are available therefor).

     

    SECTION
      2.19.   Establishment
      of Collateral Advance Account.

     

    (a)  Subsequent
      to the date of this Agreement, the Servicer, for the benefit of the Term-Out
      Lenders, upon the request of the Program Agent, shall establish and maintain
      or
      cause to be established and maintained in the name of the Program Agent, with
      an
      Eligible Institution, an account (such account being the “Collateral
      Advance Account”
and
      such institution holding such account being the “Collateral
      Advance Account Bank”),
      bearing a designation clearly indicating that the funds deposited therein are
      held for the benefit of the Term-Out Lenders and entitled “JPMorgan Chase Bank,
      N.A., as Program Agent -- Collateral Advance Account for the PSE Funding Loan
      and Servicing Agreement.” The Collateral Advance Account shall be under the sole
      dominion and control of the Program Agent for the benefit of the Committed
      Lenders which have made Cash Secured Advances, and neither the Borrower, nor
      any
      Person claiming by, through or under the Borrower, shall have any right, title
      or interest in, or any right to withdraw any amount from, the Collateral Advance
      Account. At the time the Collateral Advance Account is established the Borrower
      shall cause the Collateral Advance Account Bank to agree in writing that it
      shall have no right of set-off or banker’s lien against, and no right to
      otherwise deduct from, any funds held in the Collateral Advance Account for
      any
      amount owed to it by any Person. The tax identification number associated with
      the Collateral Advance Account shall be that of the Borrower.

     

    (b)  At
      the
      time the Collateral Advance Account is established the Borrower shall cause
      the
      Collateral Advance Account Bank to agree in writing that it will comply with
      (A)
      all written instructions directing disposition of the funds in the Collateral
      Advance Account, (B) all notifications and entitlement orders that it receives
      directing it to transfer or redeem any financial asset in the Collateral Advance
      Account, and (C) all other directions concerning the Collateral Advance Account,
      including, without limitation, directions to distribute to the Program Agent,
      proceeds of any such transfer or redemption or interest or dividends on property
      in the Collateral Advance Account (any such instruction, notification or
      direction referred to in clause (A),
      (B)
      or
(C)
      above
      being a “Collateral
      Advance Account Direction”),
      in
      each case of clauses (A),
      (B)
      and
(C)
      above
      originated by the Program Agent, without further consent by the Borrower or
      any
      other Person. Except as specified in Section
      2.19(c),
      the
      Collateral Advance Account Bank will comply with Collateral Advance Account
      Directions and other directions concerning the Collateral Advance Account
      originated by, and only by, the Program Agent.

     

    (c)  Funds
      on
      deposit in the Collateral Advance Account shall, at the written direction of
      the
      Borrower, be invested by the Program Agent, in Permitted Investments as
      instructed by the Borrower in writing (which may be a standing instruction).
      All
      such Permitted Investments shall be held in the Collateral Advance Account
      for
      the benefit of the Program Agent, for the ratable benefit of the Committed
      Lenders which have made Cash Secured Advances. Such funds shall be invested
      in
      Permitted Investments that will mature so that funds will be available in
      amounts sufficient for the Program Agent, to make each distribution as and
      when
      required under the terms of this Agreement. All interest and other investment
      earnings (net of losses and investment expenses) received on funds on deposit
      in
      the Collateral Advance Account, to the extent such investment income is not
      needed for the ratable benefit of the Term-Out Lenders under the terms of this
      Agreement, shall be added to the Collateral Advance Account.

     

    ARTICLE
      III  

    CONDITIONS
      OF EFFECTIVENESS AND LOANS 

     

    SECTION
      3.01.   Conditions
      Precedent to Effectiveness and Initial Borrowing.
      As
      conditions precedent to the effectiveness of this Agreement and the Initial
      Borrowing, (i) the Managing Agents shall have received each of the documents,
      instruments, legal opinions and other agreements listed on Exhibit
      G,
      together with all fees due and payable on the date hereof and on the Effective
      Date, (ii) since September 30, 2005, no event has occurred which would have
      a
      Material Adverse Effect and (iii) each Lender shall have received all necessary
      credit approvals in order to consummate the transactions contemplated by this
      Agreement.

     

    SECTION
      3.02.   Conditions
      Precedent to All Borrowings and Releases.
      Each
      Borrowing (including, without limitation, the Initial Borrowing) made by the
      Lenders to the Borrower and each Release, shall be subject to the further
      conditions precedent that on the date of each Borrowing or Release, each of
      the
      following shall be true and correct both before and immediately after giving
      effect to such Borrowing or Release, as applicable:

     

    (a)  (i)
      with
      respect to such Borrowing or Release, each Managing Agent shall have received
      from the Servicer the Monthly Report, Weekly Report and Daily Report as
      applicable, most recently required to be delivered pursuant to Section
      6.07,
      and
      (ii) with respect to such Borrowing, each Managing Agent shall have received
      such other approvals, opinions or documents as it may reasonably request if
      such
      Managing Agent reasonably believes there has been a change in law or
      circumstance that affects the status or characteristics of the Receivables,
      Related Security or Collections, any Borrower Party or the Program Agent’s first
      priority perfected security interest in the Receivables, Related Security and
      Collections.

     

    (b)  with
      respect to such Borrowing, the representations and warranties contained in
      Article
      IV
      shall be
      correct in all material respects (except that the materiality standard in this
      clause (b) shall not apply to any such representation or warranty that is
      qualified by a materiality standard by its terms) on and as of such date as
      though made on and as of such date unless such representation and warranties
      by
      their terms refer to an earlier date, in which case they shall be correct on
      and
      as of such earlier date;

     

    (c)  (i)
      with
      respect to such Borrowing, no event has occurred and is continuing, or would
      result from such Borrowing which constitutes an Event of Termination or an
      Incipient Event of Termination and (ii) with respect to such Release, no event
      has occurred and is continuing, or would result from such Release which
      constitutes an Event of Termination (other than an Event of Termination
      described in Section 7.01(c));

     

    (d)  with
      respect to such Borrowing or Release, the Termination Date has not
      occurred;

     

    (e)  with
      respect to such Borrowing or Release, no Borrowing Base Deficiency shall exist;
      and

     

    (f)  only
      with
      respect to any such Borrowing requested to be made by a Conduit Lender, the
      related Managing Agent shall not have delivered to the Borrower a notice stating
      that such Conduit Lender shall not make any further Loans
      hereunder.

     

    Each
      delivery of a Borrowing Request to the Program Agent, and the acceptance by
      the
      Borrower of the proceeds of any Borrowing or any Release, shall constitute
      a
      representation and warranty by the Borrower that, as of the date of such
      Borrowing or Release, both before and after giving effect thereto and the
      application of the proceeds thereof, each of the applicable statements set
      forth
      in clauses
      (a)
      through
(f)
      above
      are true and correct.

     

    ARTICLE
      IV  

    REPRESENTATIONS
      AND WARRANTIES 

     

    SECTION
      4.01.   Representations
      and Warranties of The Borrower Parties.
      Each
      Borrower Party hereby represents and warrants to the Program Agent, each
      Managing Agent and the Lenders, as to itself, as of the date hereof and as
      of
      the date of each Borrowing and the date of each Release as follows:

     

    (a)  Corporate
      Existence and Power.
      Such
      Borrower Party is (a) a corporation duly organized, validly existing and in
      good
      standing under the laws of the jurisdiction of its incorporation; (b) has all
      requisite corporate power, and has all material governmental licenses,
      authorizations, consents and approvals, necessary to own its property and carry
      on its business as now being conducted; and (c) is qualified to do business
      in
      all jurisdictions in which the nature of the business conducted by it makes
      such
      qualification necessary and where failure so to qualify could reasonably be
      expected to have a Material Adverse Effect.

     

    (b)  Power
      and Authority; Due Authorization, Execution and Delivery.
      Such
      Borrower Party has all necessary corporate power and authority to execute and
      deliver this Agreement and each other Facility Document to which it is a party,
      and to perform its obligations hereunder and thereunder and, in the case of
      Borrower, to use the proceeds of Loans made hereunder. The execution and
      delivery by such Borrower Party of this Agreement and each other Facility
      Document to which it is a party, and the performance of its obligations
      hereunder and thereunder and, in the case of Borrower, the use of the proceeds
      of Loans made hereunder have been duly authorized by all necessary corporate
      action on the part of such Borrower Party; and this Agreement and each other
      Facility Document to which such Borrower Party is a party has been duly and
      validly executed and delivered by such Borrower Party.

     

    (c)  No
      Conflict.
      None of
      the execution and delivery by such Borrower Party of this Agreement and each
      other Facility Document to which it is a party, nor the performance of its
      obligations hereunder and thereunder will conflict with or result in a breach
      of, or a default under, or require any consent under, (i) its certificate or
      articles of incorporation or by-laws, (ii) any law, rule or regulation
      applicable to it, (iii) any agreement or instrument to which it is a party
      or by
      which it or any of its property is bound or subject, or (iv) any order, writ,
      judgment, injunction or decree of any court or governmental authority or agency
      binding on or affecting it or its property, and will not result in or require
      the creation or imposition of any Adverse Claim upon any of the revenues or
      assets of such Borrower Party or its Subsidiaries (except as created hereunder);
      and no transaction contemplated hereby requires compliance with any bulk sales
      act or similar law.

     

    (d)  Governmental
      Authorization.
      Other
      than the filing of the financing statements required hereunder and the notice
      to
      the Washington Utilities and Transportation Commission (which Servicer has
      filed), no authorizations, approvals or consents of, and no notices to, or
      filings or registrations with, any governmental authority or regulatory
      authority or agency (other than informational filings) are necessary for the
      execution and delivery by such Borrower Party of this Agreement and each other
      Facility Document to which it is a party and the performance of its obligations
      hereunder and thereunder or for the validity or enforceability hereof or
      thereof.

     

    (e)  Actions,
      Suits.
      There
      are not, in any court or before any arbitrator of any kind or before or by
      any
      governmental body, any actions, suits or proceedings pending or, to such
      Borrower Party’s knowledge, threatened against or affecting such Borrower Party
      or any of its respective businesses or properties (i) except for actions, suits
      or proceedings (A) that exist as of the date of this Agreement and are disclosed
      in PSE’s Annual Report on Form 10-K for the year ended December 31, 2004, PSE’s
      Quarterly Reports on Form 10-Q for the quarters ended March 31, 2005, June
      30,
      2005 or September 30, 2005, or (B) which, singly or in the aggregate, could
      not
      reasonably be expected to have a Material Adverse Effect or (ii) which affect
      in
      any adverse manner the binding nature, validity or enforceability of any
      Facility Document. Such Borrower Party is not in default with respect to any
      order of any court, arbitrator or governmental body, which default could
      reasonably be expected to have a Material Adverse Effect.

     

    (f)  Binding
      Effect.
      This
      Agreement and each other Facility Document to which such Borrower Party is
      a
      party constitute the legal, valid and binding obligations of such Borrower
      Party
      enforceable against such Borrower Party in accordance with their respective
      terms, except as such enforcement may be limited by applicable bankruptcy,
      insolvency, reorganization or other similar laws relating to or limiting
      creditors’ rights generally and by general principles of equity (regardless of
      whether enforcement is sought in a proceeding in equity or at law).

     

    (g)  Accuracy
      of Information.
      No
      information, exhibit or report furnished by such Borrower Party or any of its
      Affiliates to the Program Agent, any Managing Agent or the Lenders in connection
      with the negotiation of, or compliance with, this Agreement (including any
      Monthly Report, Weekly Report or Daily Report) or any of the other Facility
      Documents contained any material misstatement of fact or omitted to state a
      material fact or any fact necessary to make the statements contained therein
      not
      misleading.

     

    (h)  Use
      of
      Proceeds.
      Such
      Borrower Party is not engaged principally, or as one of its important
      activities, in the business of extending credit for the purpose, whether
      immediate, incidental or ultimate, of buying or carrying margin stock, as
      defined in Regulation U promulgated by the Board of Governors of the Federal
      Reserve System from time to time, and no part of the proceeds of any Loan will
      be used to buy or carry any margin stock.

     

    (i)  Good
      Title.
      Borrower is the legal and beneficial owner of the Receivables and Related
      Security with respect thereto, free and clear of any Adverse Claim, except
      as
      created by the Facility Documents. There have been duly filed all financing
      statements or other similar instruments or documents necessary under the UCC
      (or
      any comparable law) of all appropriate jurisdictions to perfect Borrower’s
      ownership interest in each Receivable, its Collections and the Related
      Security.

     

    (j)  Perfection.
      This
      Agreement, together with the filing of the financing statements contemplated
      hereby, is effective to, and shall, upon each purchase hereunder, transfer
      to
      the Program Agent for the benefit of the Lenders (and the Program Agent for
      the
      benefit of the Lenders shall acquire from Borrower) a valid and perfected first
      priority undivided percentage security interest in each Receivable existing
      or
      hereafter arising and in the Related Security and Collections with respect
      thereto, free and clear of any Adverse Claim, except as created by the Facility
      Documents. There have been duly filed all financing statements or other similar
      instruments or documents necessary under the UCC (or any comparable law) of
      all
      appropriate jurisdictions to perfect the Program Agent’s (on behalf of the
      Lenders) security interest in the Receivables, the Related Security and the
      Collections.

     

    (k)  Jurisdiction
      of Organization; Places of Business and Locations of Records.
      The
      jurisdiction of organization, principal places of business and chief executive
      office of such Borrower Party and the offices where it keeps all of its Records
      are located at the address(es) listed on Exhibit
      E
      or such
      other locations of which the Program Agent has been notified in accordance
      with
Section
      5.02(a)
      in
      jurisdictions where all action required by Section
      5.01(h)
      has been
      taken and completed. Such Borrower Party’s organizational number assigned to it
      by its jurisdiction of organization and such Borrower Party’s Federal Employer
      Identification Number are correctly set forth on Exhibit E. Such Borrower Party
      has not, within a period of one year prior to the date hereof, (i) changed
      the
      location of its principal place of business or chief executive office or its
      organizational structure, (ii) changed its legal name, (iii) changed its
“location” (within the meaning of Section 9-307 of the UCC as in effect in all
      applicable jurisdictions), or (iv) become a “new debtor” (as defined in Section
      9-102(a)(56) of the UCC as in effect in all applicable jurisdictions) with
      respect to a currently effective security agreement previously entered into
      by
      any other Person. Such Borrower Party has not changed its jurisdiction of
      organization. Borrower is a Washington corporation and is a “registered
      organization” (within the meaning of Section 9-102 of the UCC as in effect in
      the State of Washington).

     

    (l)  Collections.
      The
      conditions and requirements set forth in Section
      5.01(j)
      and
Section
      6.06
      have at
      all times been satisfied and duly performed. The names and addresses of all
      Deposit Account Banks, together with the account numbers of the Deposit Accounts
      at each Deposit Account Bank and the post office box number of each Lock-Box,
      are listed on Exhibit F. Borrower has not granted any Person, other than the
      Program Agent as contemplated by this Agreement, dominion and control or
“control” (within the meaning of Section 9-104 of the UCC of all applicable
      jurisdictions) of any Lock-Box or Deposit Account, or the right to take dominion
      and control or “control” (within the meaning of Section 9-104 of the UCC of all
      applicable jurisdictions) of any such Lock-Box or Deposit Account at a future
      time or upon the occurrence of a future event. On and after the date which
      is 60
      days after the date hereof, each Borrower Party has taken all steps necessary
      to
      ensure that the Program Agent has “control” (within the meaning of Section 9-104
      of the UCC of all applicable jurisdictions) over all Deposit Accounts. Such
      Borrower Party has the ability to identify, within one Business Day of receipt
      or deposit, all amounts that are received in any Lock-Box or deposited to any
      Deposit Account as constituting Collections or non-Collections. Except for
      proceeds of Excluded Receivables (which shall be electronically swept or
      otherwise transferred out of such Deposit Account within one (1) Business Day
      of
      being deposited therein in accordance with Section
      5.01(j)),
      no
      funds other than the proceeds of Receivables are deposited to any Deposit
      Account. All Alternate Payment Locations are listed on Exhibit
      F.

     

    (m)  Material
      Adverse Effect.
      (i) The
      Servicer represents and warrants that, as of the date of this Agreement, since
      December 31, 2004, no event has occurred that would have a material adverse
      effect on the financial condition or operations of the Servicer and its
      Subsidiaries, (ii) the Servicer represents and warrants that since December
      31,
      2004, no event has occurred that would have a material adverse effect on the
      ability of the Servicer to perform its obligations under this Agreement or
      any
      other Facility Document to which it is a party, and (iii) Borrower represents
      and warrants that since December 31, 2004, no event has occurred that would
      have
      a material adverse effect on (A) the financial condition or operations of
      Borrower, (B) the ability of Borrower to perform its obligations under the
      Facility Documents, or (C) the collectibility of the Receivables generally
      or
      any material portion of the Receivables.

     

    (n)  Names.
      In the
      past five (5) years, Borrower has not used any corporate or other names, trade
      names or assumed names other than the name in which it has executed this
      Agreement.

     

    (o)  Ownership
      of Borrower.
      Originator owns, directly or indirectly, 100% of the issued and outstanding
      capital stock of Borrower, free and clear of any Adverse Claim. Such capital
      stock is validly issued, fully paid and nonassessable, and there are no options,
      warrants or other rights to acquire securities of Borrower.

     

    (p)  PUHCA;
      Investment Company Act.
      The
      Borrower is a wholly-owned Subsidiary of Puget Energy, Inc. and all of the
      common (or voting) stock of PSE is owned by Puget Energy, Inc. Puget Energy,
      Inc. is a public utility holding company under the Public Utility Holding
      Company Act of 1935, as amended (“PUHCA”), which is exempt from regulation under
      PUHCA and the Securities and Exchange Commission’s (“SEC”) rules thereunder
      (except for regulation under Section 9(a)(2) of PUHCA) pursuant to Section
      3(a)(1) and SEC Rule 2 under PUHCA. Such Borrower Party is not, and after giving
      effect to the transactions contemplated hereby, will not be required to register
      as, an “investment company” within the meaning of the Investment Company Act of
      1940, as amended, or any successor statute.

     

    (q)  Compliance
      with Law.
      Such
      Borrower Party has complied in all material respects with all applicable
      statutes, rules, regulations, orders and restrictions of any domestic or foreign
      government or any instrumentality or agency thereof having jurisdiction over
      the
      conduct of its businesses or the ownership of its property, except for any
      failure to comply with any of the foregoing that could not reasonably be
      expected to have a Material Adverse Effect. Each Receivable, together with
      the
      Contract related thereto, does not contravene any laws, rules or regulations
      applicable thereto (including,
      without limitation,
      laws,
      rules and regulations relating to truth in lending, fair credit billing, fair
      credit reporting, equal credit opportunity, fair debt collection practices
      or
      privacy), and no part of such Contract is in violation of any such law, rule
      or
      regulation.

     

    (r)  Compliance
      with Credit and Collection Policy.
      Such
      Borrower Party has complied in all material respects with the Credit and
      Collection Policy with regard to each Receivable and the related Contract,
      and
      has not made any change to such Credit and Collection Policy, except as
      permitted under Section
      5.02(c)
      and as
      to which each Managing Agent has been notified, and if applicable, as to which
      each Managing Agent has consented, in each case, in accordance with Section
      5.01(a)(vii).

     

    (s)  Payments
      to Originator.
      With
      respect to each Receivable transferred to Borrower under the Receivables Sale
      Agreement, Borrower has given reasonably equivalent value to Originator in
      consideration therefor and such transfer was not made for or on account of
      an
      antecedent debt. No transfer by Originator of any Receivable under the
      applicable Receivables Sale Agreement is or may be voidable under any section
      of
      the Federal Bankruptcy Code.

     

    (t)  Enforceability
      of Contracts.
      Each
      Contract with respect to each Receivable is effective to create, and has
      created, a legal, valid and binding obligation of the related Obligor to pay
      the
      Outstanding Balance of the Receivable created thereunder and any accrued
      interest thereon, enforceable against the Obligor in accordance with its terms,
      except as such enforcement may be limited by applicable bankruptcy, insolvency,
      reorganization or other similar laws relating to or limiting creditors’ rights
      generally and by general principles of equity (regardless of whether enforcement
      is sought in a proceeding in equity or at law).

     

    (u)  Eligible
      Receivables.
      Each
      Receivable included in the Net Receivables Pool Balance as an Eligible
      Receivable on any date is an Eligible Receivable on such date.

     

    (v)  Borrowing
      Base.
      Borrower has determined that, immediately after giving effect to each Borrowing
      hereunder, there is no Borrowing Base Deficiency.

     

    (w)  Accounting.
      The
      manner in which such Borrower Party accounts for the transactions contemplated
      by the Receivables Sale Agreement does not jeopardize the true sale
      analysis.

     

    (x)  Identification
      of Receivables.
      Each
      Borrower Party identifies the receivables purchased (or purported to be
      purchased) by Borrower under the Receivables Sale Agreement and which are
      included in the Net Receivables Pool Balance on its books and records (including
      any accounting system) with the account code “FERC 142 Account
      Receivable.”

     

    (y)  Nature
      of Receivables.
      No
      Receivable arises from the sale of minerals or the like, including oil and
      gas,
      at the wellhead or the minehead.

     

    (z)  ERISA.
      PSE and
      any other Person which is under common control (within the meaning of Section
      414(b) or (c) of the IRC) with PSE have fulfilled their obligations (if any)
      under the minimum funding standards of ERISA and the IRC for each ERISA Plan
      in
      compliance in all material respects with the currently applicable provisions
      of
      ERISA and the IRC and have not incurred any liability to the PBGC or an ERISA
      Plan under Title IV of ERISA (other than liability for premiums due in the
      ordinary course). Assuming that the credit extended hereby does not involve
      the
      assets of any employee benefit plan subject to ERISA or any plan subject to
      Section 4975 of the IRC, neither the execution of this Agreement nor the
      consummation of the transactions contemplated hereby will involve a Prohibited
      Transaction.

     

    (aa)  Springing
      Lien Indentures.
      No
“default” or other event which, with the giving of notice or the passage of time
      or both, would constitute a “default” has occurred under any Springing Lien
      Indenture. No Adverse Claim has been created, and no event has occurred which,
      with the giving of notice or the passage of time or both, would result in,
      or
      with the further action by a third party would result in, the creation of any
      Adverse Claim, on the Receivables, Related Security or the Collections pursuant
      to any Springing Lien Indenture or any other indenture, agreement, instrument
      or
      filing other than as contemplated by the Facility Documents.

     

    SECTION
      4.02.   Financial
      Institution Representations and Warranties.
      Each
      Committed Lender hereby represents and warrants to its Managing Agent and the
      Conduit Lenders in its Lender Group that:

     

    (a)  Existence
      and Power.
      Such
      Committed Lender is a corporation or a banking association duly organized,
      validly existing and in good standing under the laws of its jurisdiction of
      incorporation or organization, and has all corporate power to perform its
      obligations hereunder.

     

    (b)  No
      Conflict.
      The
      execution and delivery by such Committed Lender of this Agreement and the
      performance of its obligations hereunder are within its corporate powers, have
      been duly authorized by all necessary corporate action, do not contravene or
      violate (i) its certificate or articles of incorporation or association or
      by-laws, (ii) any law, rule or regulation applicable to it, (iii) any
      restrictions under any agreement, contract or instrument to which it is a party
      or any of its property is bound, or (iv) any order, writ, judgment, award,
      injunction or decree binding on or affecting it or its property, and do not
      result in the creation or imposition of any Adverse Claim on its assets. This
      Agreement has been duly authorized, executed and delivered by such Committed
      Lender.

     

    (c)  Governmental
      Authorization.
      No
      authorization or approval or other action by, and no notice to or filing with,
      any governmental authority or regulatory body is required for the due execution
      and delivery by such Financial Institution of this Agreement and the performance
      of its obligations hereunder.

     

    (d)  Binding
      Effect.
      This
      Agreement constitutes the legal, valid and binding obligation of such Committed
      Lender enforceable against such Committed Lender in accordance with its terms,
      except as such enforcement may be limited by applicable bankruptcy, insolvency,
      reorganization or other similar laws relating to or limiting creditors’ rights
      generally and by general principles of equity (regardless of whether such
      enforcement is sought in a proceeding in equity or at law).

     

    ARTICLE
      V 

    GENERAL
      COVENANTS 

     

    SECTION
      5.01.   Affirmative
      Covenants of The Borrower Parties.
      Until
      the date on which the Borrower Obligations have been indefeasibly paid in full
      and this Agreement terminates in accordance with its terms, each Borrower Party
      hereby covenants, as to itself, as set forth below:

     

    (a)  Financial
      Reporting.
      Such
      Borrower Party will maintain, for itself and each of its Subsidiaries, a system
      of accounting established and administered in accordance with GAAP, and furnish
      or cause to be furnished to each Managing Agent:

     

    (i)  Annual
      Reporting.
      As soon
      as available and in any event within 120 days after the end of each fiscal
      year
      of PSE, (i) a copy of the Annual Report on Form 10-K (or any successor form)
      for
      PSE for such year, together with a copy of the accompanying report of PSE’s
      independent certified public accounting firm; and (ii) a copy of the unaudited
      balance sheet of Borrower as at the close of each such period and statements
      of
      income and retained earnings and a statement of cash flows for Borrower for
      the
      period from the beginning of such fiscal year to the end of such fiscal year,
      all certified by its chief financial officer.

     

    (ii)  Quarterly
      Reporting.
      As soon
      as available and in any event within 60 days after the close of each of the
      first three quarterly accounting periods in each fiscal year of PSE, (i) a
      copy
      of the Quarterly Report on Form 10 Q (or any successor form) for PSE for such
      quarter; and (ii) unaudited balance sheets of Borrower as at the close of each
      such period and statements of income and retained earnings and a statement
      of
      cash flows for Borrower for the period from the beginning of such fiscal year
      to
      the end of such quarter, all certified by its chief financial
      officer.

     

    (iii)  Compliance
      Certificate.
      Together with the financial statements required hereunder, a compliance
      certificate in substantially the form of Exhibit
      L
      signed
      by such Borrower Party’s Authorized Officer and dated the date of such annual
      financial statement or such quarterly financial statement, as the case may
      be.

     

    (iv)  [Reserved.]

     

    (v)  S.E.C.
      Filings.
      Promptly upon the filing thereof, copies of all annual, quarterly, monthly
      or
      other regular reports, and promptly upon the request of any Managing Agent,
      copies of all registration statements, in each case, which Originator or any
      of
      its Subsidiaries files with the Securities and Exchange Commission.

     

    (vi)  Copies
      of Notices.
      Promptly upon its receipt of any notice, request for consent, financial
      statements, certification, report or other communication under or in connection
      with any Facility Document from any Person copies of the same.

     

    (vii)  Change
      in Credit and Collection Policy.
      At
      least thirty (30) days prior to the effectiveness of any material change in
      or
      material amendment to the Credit and Collection Policy, a copy of the Credit
      and
      Collection Policy then in effect and a notice (A) indicating such change or
      amendment, and (B) if such proposed change or amendment would be reasonably
      likely to adversely affect the collectibility of the Receivables or decrease
      the
      credit quality of any newly created Receivables, requesting each Managing
      Agent’s consent thereto.

     

    (viii)  Other
      Information.
      Promptly, from time to time, such other information, documents, records or
      reports relating to the Receivables or the condition or operations, financial
      or
      otherwise, of such Borrower Party as any Managing Agent may from time to time
      reasonably request in order to protect the interests of the Program Agent,
      the
      Managing Agents and the Lenders under or as contemplated by this
      Agreement.

     

    (b)  Notices.
      Such
      Borrower Party will notify the Program Agent in writing of any of the following
      promptly upon learning of the occurrence thereof, describing the same and,
      if
      applicable, the steps being taken with respect thereto:

     

    (i)  Events
      of Termination or Incipient Events of Termination.
      (A) The
      occurrence of each Event of Termination, by a statement of an Authorized Officer
      of such Borrower Party, and (B) the occurrence of each Incipient Event of
      Termination, by a statement of an Authorized Officer of such Borrower
      Party.

     

    (ii)  Judgment
      and Proceedings.
      (A)(1)
      The entry of any judgment or decree against the Servicer or any of its
      Subsidiaries if the aggregate amount of all judgments and decrees then
      outstanding against the Servicer and its Subsidiaries exceeds $25,000,000,
      (2)
      the institution of any litigation, arbitration proceeding, investigation or
      governmental proceeding against the Servicer which, individually or in the
      aggregate, could reasonably be expected to have a Material Adverse Effect;
      and
      (3) any material development in any previously disclosed litigation, arbitration
      proceeding, investigation or governmental proceeding; and (B) (1) the entry
      of
      any judgment or decree or the institution of any litigation, arbitration
      proceeding, investigation or governmental proceeding against Borrower and (2)
      any material adverse development in any previously disclosed litigation,
      arbitration proceeding, investigation or governmental proceeding.

     

    (iii)  Material
      Adverse Effect.
      The
      occurrence of any event or condition that has had, or could reasonably be
      expected to have, a Material Adverse Effect.

     

    (iv)  Termination
      Date.
      The
      occurrence of the “Termination Date” under and as defined in the Receivables
      Sale Agreement.

     

    (v)  Defaults
      Under Other Agreements.
      The
      occurrence of (A) any “default” or other event which, with the giving of notice
      or the passage of time or both, would constitute a “default” under any Springing
      Lien Indenture or any other material financing arrangement pursuant to which
      the
      Servicer is a debtor or an obligor, (B) the creation of any Adverse Claim on,
      or
      the occurrence of any event which, with the giving of notice or passage of
      time
      or both, would result in, or with further action by any third party would result
      in, the creation of any Adverse Claim on the Receivables, the Related Security
      or the Collections pursuant to any Springing Lien Indenture or any other
      indenture, agreement, instrument or filing, (C) a default or an event of default
      under any other financing arrangement in excess of $25,000,000 pursuant to
      which
      Servicer is a debtor or an obligor or (D) a default or an event of default
      under
      any other financing arrangement pursuant to which Borrower is a debtor or an
      obligor.

     

    (vi)  Downgrade
      of PSE.
      Any
      downgrade in the rating of any Indebtedness of PSE by S&P or by Moody’s,
      setting forth the Indebtedness affected and the nature of such
      change.

     

    (vii)  Modification
      of Springing Lien Indentures.
      Any
      amendment, restatement, supplement or modification, or any proposed amendment,
      restatement, supplement or modification, of any provision of any Springing
      Lien
      Indenture which (A) is related to the accounts receivable exception to the
      lien
      or security interest granted thereunder or the circumstances under which such
      exceptions will cease to exist or the events which could cause such exceptions
      to cease to exist or (B) in any way could impair the Program Agent’s security
      interest in the Receivables, Related Security and Collections or its rights
      under the Facility Documents.

     

    (c)  Compliance
      with Laws and Preservation of Corporate Existence.

     

    (i)  Such
      Borrower Party will comply with the requirements of all applicable laws, rules,
      regulations and governmental approvals, and all orders, writs, injunctions
      and
      decrees of any court or governmental authority or agency, if failure to comply
      with such requirements could reasonably be expected to have a Material Adverse
      Effect.

     

    (ii)  Such
      Borrower Party (A) will preserve and maintain its corporate existence, rights,
      franchises and privileges in the jurisdiction of its incorporation and (B)
      will
      qualify and remain qualified in good standing as a foreign corporation in each
      jurisdiction where its business is conducted, except where the failure to so
      qualify could not reasonably be expected to have a Material Adverse
      Effect.

     

    (d)  Audits.
      Such
      Borrower Party will furnish to each Managing Agent from time to time such
      information with respect to it and the Receivables as such Managing Agent may
      reasonably request. Such Borrower Party will, from time to time during regular
      business hours as requested by such Managing Agent upon reasonable notice and
      at
      the sole cost of such Borrower Party, permit such Managing Agent, or its agents
      or representatives, (i) to examine and make copies of and abstracts from all
      Records in the possession or under the control of such Person relating to the
      Receivables and the Related Security, including,
      without limitation,
      the
      related Contracts, and (ii) to visit the offices and properties of such Person
      for the purpose of examining such materials described in clause (i) above,
      and
      to discuss matters relating to such Person’s financial condition or the
      Receivables and the Related Security or any Person’s performance under any of
      the Facility Documents or any Person’s performance under the Contracts and, in
      each case, with any of the Authorized Officers of Borrower or the Servicer
      having knowledge of such matters (the activities referred to in the preceding
      clauses (i) and (ii), collectively, an “Audit”).
      Notwithstanding the foregoing, (i) unless an Event of Termination shall have
      occurred and be continuing or a Daily Reporting Period shall be in effect,
      Borrower Parties shall not be responsible for the costs of more than (A) during
      a Level 1 Ratings Period, one Audit performed during any consecutive 12-month
      period and (B) during any other Ratings Period, two Audits performed during
      any
      consecutive 12-month period and (ii) the Borrower Parties agree that they will
      cooperate with the Program Agent in connection with the performance of an Audit
      to be completed within 60 days after the date hereof.

     

    (e)  Keeping
      and Marking of Records and Books.

     

    (i) The
      Servicer will maintain and implement administrative and operating procedures
      (including,
      without limitation,
      an
      ability to recreate records evidencing Receivables in the event of the
      destruction of the originals thereof), and keep and maintain all documents,
      books, records and other information reasonably necessary or advisable for
      the
      collection of all Receivables (including,
      without limitation,
      records
      adequate to permit the immediate identification of each new Receivable and
      all
      Collections of and adjustments to each existing Receivable). The Servicer will
      give the Program Agent notice of any material change in the administrative
      and
      operating procedures referred to in the previous sentence.

     

    (ii) Such
      Borrower Party will (A) on or prior to the date hereof, mark its master data
      processing records and other books and records relating to the Receivables
      with
      a legend, acceptable to the Managing Agents, describing the interests of the
      Program Agent and the Secured Parties therein and (B) upon the request of the
      any Managing Agent (x) mark each Contract with a legend describing the interests
      of the Program Agent and the Secured Parties therein and (y) deliver to the
      Program Agent all Contracts (including,
      without limitation,
      all
      multiple originals of any such Contract) relating to the
      Receivables.

     

    (f)  Compliance
      with Contracts and Credit and Collection Policy.
      Such
      Borrower Party will timely (i) fully perform and comply with all provisions,
      covenants and other promises required to be observed by it under the Contracts
      related to the Receivables, and (ii) comply in all material respects with the
      Credit and Collection Policy in regard to each Receivable and the related
      Contract.

     

    (g)  Performance
      and Enforcement of Receivables
      Sale Agreement.
      Borrower will, and will require Originator to, perform each of their respective
      obligations and undertakings under and pursuant to the Receivables Sale
      Agreement, will purchase Receivables thereunder in strict compliance with the
      terms thereof and will vigorously enforce the rights and remedies accorded
      to
      Borrower under the Receivables Sale Agreement. Borrower will take all actions
      to
      perfect and enforce its rights and interests (and the rights and interests
      of
      the Program Agent and the Lenders as assignees of Borrower) under the
      Receivables Sale Agreement, as any Managing Agent may from time to time
      reasonably request, including,
      without limitation,
      making
      claims to which it may be entitled under any indemnity, reimbursement or similar
      provision contained in the Receivables Sale Agreement.

     

    (h)  Ownership.
      Borrower will take all necessary action to (i) vest legal and equitable title
      to
      the Receivables, the Related Security and the Collections purchased under the
      Receivables Sale Agreement irrevocably in Borrower, free and clear of any
      Adverse Claims other than Adverse Claims in favor of the Program Agent and
      the
      Secured Parties (including,
      without limitation,
      the
      filing of all financing statements or other similar instruments or documents
      necessary under the UCC (or any comparable law) of all appropriate jurisdictions
      to perfect Borrower’s interest in such Receivables, Related Security and
      Collections and such other action to perfect, protect or more fully evidence
      the
      interest of Borrower therein as the Program Agent or any Managing Agent may
      reasonably request), and (ii) establish and maintain, in favor of the Program
      Agent, for the benefit of the Secured Parties, a valid and perfected first
      priority security interest in all Receivables, Related Security and Collections
      to the full extent contemplated herein, free and clear of any Adverse Claims
      other than Adverse Claims in favor of the Program Agent for the benefit of
      the
      Secured Parties (including,
      without limitation,
      the
      filing of all financing statements or other similar instruments or documents
      necessary under the UCC (or any comparable law) of all appropriate jurisdictions
      to perfect the Program Agent’s (for the benefit of the Secured Parties) interest
      in such Receivables, Related Security and Collections and such other action
      to
      perfect, protect or more fully evidence the interest of the Program Agent for
      the benefit of the Secured Parties as the Program Agent or any Managing Agent
      may reasonably request).

     

    (i)  Lenders’
      Reliance.
      Borrower acknowledges that the Lenders are entering into the transactions
      contemplated by this Agreement in reliance upon Borrower’s identity as a legal
      entity that is separate from each Related Entity. Therefore, from and after
      the
      date of execution and delivery of this Agreement, Borrower shall take all
      reasonable steps, including,
      without limitation,
      all
      steps that the Program Agent, any Managing Agent or any Lender may from time
      to
      time reasonably request, to maintain Borrower’s identity as a separate legal
      entity and to make it manifest to third parties that Borrower is an entity
      with
      assets and liabilities distinct from those of each Related Entity and not just
      a
      division of any Related Entity. Without limiting the generality of the foregoing
      and in addition to the other covenants set forth herein, Borrower
      will:

     

    (i)  conduct
      its own business in its own name and require that all full-time employees of
      Borrower, if any, identify themselves as such and not as employees of any
      Related Entity (including,
      without limitation,
      by
      means of providing appropriate employees with business or identification cards
      identifying such employees as Borrower’s employees);

     

    (ii)  compensate
      all employees, consultants and agents directly, from Borrower’s own funds, for
      services provided to Borrower by such employees, consultants and agents and,
      to
      the extent any employee, consultant or agent of Borrower is also an employee,
      consultant or agent of any Related Entity, allocate the compensation of such
      employee, consultant or agent between Borrower and such Related Entity, on
      a
      basis that reflects the services rendered to Borrower and such Related
      Entity;

     

    (iii)  to
      the
      extent Borrower maintains a separate office for the operation of its business,
      clearly identify its offices (by signage or otherwise) as its offices and,
      if
      such office is located in the offices of any Related Entity, Borrower shall
      lease such office at a fair market rent;

     

    (iv)  have
      a
      separate telephone number, which will be answered only in its name and separate
      stationery, invoices and checks in its own name;

     

    (v)  conduct
      all transactions with each Related Entity and the Servicer and their respective
      Affiliates (including,
      without limitation,
      any
      delegation of its obligations hereunder as Servicer) strictly on an arm’s-length
      basis, allocate all overhead expenses (including,
      without limitation,
      telephone and other utility charges) for items shared between Borrower and
      any
      Related Entity on the basis of actual use to the extent practicable and, to
      the
      extent such allocation is not practicable, on a basis reasonably related to
      actual use;

     

    (vi)  at
      all
      times have a Board of Directors consisting of at least three members, at least
      one member of which is an Independent Director;

     

    (vii)  observe
      all corporate formalities as a distinct entity, and ensure that all corporate
      actions relating to (A) the selection, maintenance or replacement of the
      Independent Director, (B) the dissolution or liquidation of Borrower or (C)
      the
      initiation of, participation in, acquiescence in or consent to any bankruptcy,
      insolvency, reorganization or similar proceeding involving Borrower, are duly
      authorized by unanimous vote of its Board of Directors (including the
      Independent Director);

     

    (viii)  maintain
      Borrower’s books and records separate from those of each Related Entity and
      otherwise readily identifiable as its own assets rather than assets of any
      Related Entity;

     

    (ix)  prepare
      its financial statements separately from those of each Related Entity and insure
      that any consolidated financial statements of any Related Entity that include
      Borrower, including any that are filed with the Securities and Exchange
      Commission or any other governmental agency, have notes clearly stating that
      Borrower is a separate corporate entity and that its assets will be available
      first and foremost to satisfy the claims of the creditors of
      Borrower;

     

    (x)  except
      as
      herein specifically otherwise provided, maintain the funds or other assets
      of
      Borrower separate from, and not commingled with, those of any Related Entity
      and
      only maintain bank accounts or other depository accounts to which Borrower
      alone
      (or the Servicer in the performance of its duties hereunder) is the account
      party, and from which Borrower alone (or the Servicer in the performance of
      its
      duties hereunder or the Program Agent hereunder) has the power to make
      withdrawals;

     

    (xi)  pay
      all
      of Borrower’s operating expenses from Borrower’s own assets (except for certain
      payments by any Related Entity or other Persons pursuant to allocation
      arrangements that comply with the requirements of this Section
      5.01(i));

     

    (xii)  operate
      its business and activities such that: it does not engage in any business or
      activity of any kind, or enter into any transaction or indenture, mortgage,
      instrument, agreement, contract, lease or other undertaking, other than the
      transactions contemplated and authorized by this Agreement and the Receivables
      Sale Agreement; and does not create, incur, guarantee, assume or suffer to
      exist
      any indebtedness or other liabilities, whether direct or contingent, other
      than
      (1) as a result of the endorsement of negotiable instruments for deposit or
      collection or similar transactions in the ordinary course of business, (2)
      the
      incurrence of obligations under this Agreement, (3) the incurrence of
      obligations, as expressly contemplated in the Receivables Sale Agreement, to
      make payment to Originator thereunder for the purchase of Receivables under
      the
      Receivables Sale Agreement, and (4) the incurrence of operating expenses in
      the
      ordinary course of business of the type otherwise contemplated by this
      Agreement;

     

    (xiii)  maintain
      its corporate charter in conformity with this Agreement, such that it does
      not
      amend, restate, supplement or otherwise modify its Articles of Incorporation
      or
      By-Laws in any respect that would impair its ability to comply with the terms
      or
      provisions of any of the Facility Documents, including,
      without limitation,
      Section
      5.01(i)
      of this
      Agreement;

     

    (xiv)  maintain
      the effectiveness of, and continue to perform under the Receivables Sale
      Agreement, such that it does not amend, restate, supplement, cancel, terminate
      or otherwise modify the Receivables Sale Agreement, or give any consent, waiver,
      directive or approval thereunder or waive any default, action, omission or
      breach under the Receivables Sale Agreement or otherwise grant any indulgence
      thereunder, without (in each case) the prior written consent of each Managing
      Agent;

     

    (xv)  maintain
      its corporate separateness such that it does not merge or consolidate with
      or
      into, or convey, transfer, lease or otherwise dispose of (whether in one
      transaction or in a series of transactions, and except as otherwise contemplated
      herein) all or substantially all of its assets (whether now owned or hereafter
      acquired) to, or acquire all or substantially all of the assets of, any Person,
      nor at any time create, have, acquire, maintain or hold any interest in any
      Subsidiary.

     

    (xvi)  maintain
      at all times the Required Capital Amount (as defined in the Receivables Sale
      Agreement) and refrain from making any dividend, distribution, redemption of
      capital stock or payment of any subordinated indebtedness which would cause
      the
      Required Capital Amount to cease to be so maintained; and

     

    (xvii)  take
      such
      other actions as are necessary on its part to ensure that the facts and
      assumptions set forth in the opinion issued by Perkins Coie LLP, as counsel
      for
      Borrower, in connection with the closing or the Initial Borrowing under this
      Agreement and relating to substantive consolidation issues, and in the
      certificates accompanying such opinion, remain true and correct in all material
      respects at all times.

     

    (j)  Collections.
      Such
      Borrower Party will instruct all Obligors to remit all Collections directly
      to a
      Lock-Box, an Alternate Payment Location or a Deposit Account. Such Borrower
      Party will cause (1) all items from all Lock-Boxes and all items received from
      all Alternate Payment Locations to be processed and deposited to a Deposit
      Account within one (1) Business Day after such receipt or to be directly
      deposited by a Deposit Account Bank into a Deposit Account, (2) all
      non-Collection amounts deposited to any Deposit Account to be electronically
      swept or otherwise transferred out of such Deposit Account within one (1)
      Business Day of being deposited therein, and (3) each Lock-Box and Deposit
      Account to be subject at all times on and after the date which is 60 days after
      the date hereof to a Blocked Account Agreement that is in full force and effect.
      In the event any payments relating to Receivables are remitted directly to
      any
      Borrower Party or any Affiliate of any Borrower Party, such Borrower Party
      will
      remit (or will cause all such payments to be remitted) directly to a Deposit
      Account Bank and deposited into a Deposit Account within two (2) Business Days
      following receipt thereof, and, at all times prior to such remittance, such
      Borrower Party will itself hold or, if applicable, will cause such payments
      to
      be held in trust for the exclusive benefit of the Program Agent and the Secured
      Parties. Borrower will maintain exclusive ownership, dominion and control and
      “control” (within the meaning of Section 9-104 of the UCC of all applicable
      jurisdictions), subject to the terms of this Agreement, of each Lock-Box and
      Deposit Account and shall not grant the right to take dominion and control
      or
“control” (within the meaning of Section 9-104 of the UCC of all applicable
      jurisdictions) of any Lock-Box or Deposit Account at a future time or upon
      the
      occurrence of a future event to any Person, except to the Program Agent as
      contemplated by this Agreement. With respect to each Deposit Account, each
      Borrower Party shall take all steps necessary to ensure that the Program Agent
      has “control” (within the meaning of Section 9-104 of the UCC of all applicable
      jurisdictions) over each such Deposit Account on and after the date which is
      60
      days after the date hereof.

     

    (k)  Taxes.
      Such
      Borrower Party will file all tax returns and reports required by law to be
      filed
      by it and will promptly pay and discharge, before the same shall become
      delinquent, all taxes, assessments and governmental charges or levies imposed
      upon it or upon its property, except any such taxes, assessments, charges or
      levies (i) that are being diligently contested in good faith by appropriate
      proceedings or (ii) subject to the last sentence of this subsection (k), the
      non-payment of which could not reasonably be expected to have a Material Adverse
      Effect. Borrower will pay when due any taxes payable in connection with the
      Receivables, exclusive of taxes on or measured by income or gross receipts
      of
      any Lender, any Managing Agent or the Program Agent.

     

    (l)  Insurance.
      Such
      Borrower Party will maintain with responsible insurance companies or through
      PSE’s program of self-insurance, insurance against at least such risks and in at
      least such amounts as is customarily maintained by similar businesses, or as
      may
      be required by any applicable law, rule or regulation, any governmental
      approval, or any order, writ, injunction or decree of any court or governmental
      authority or agency.

     

    (m)  Payment
      to Originator.
      With
      respect to any Receivable purchased by Borrower from Originator, such sale
      shall
      be effected under, and in strict compliance with the terms of, the Receivables
      Sale Agreement, including,
      without limitation,
      the
      terms relating to the amount and timing of payments to be made to Originator
      in
      respect of the purchase price for such Receivable.

     

    (n)  Identification
      of Receivables.
      Such
      Borrower Party shall at all times identify receivables purchased (or purported
      to be purchased) by Borrower under the Receivables Sale Agreement and which
      are
      included the Net Receivables Pool Balance on its books and records (including
      its accounting system) with the account code “FERC 142 Account
      Receivable.”

     

    (o)  Frequency
      of Billing.
      Such
      Borrower Party will prepare and mail invoices with respect to all Receivables
      no
      less frequently than monthly.

     

    SECTION
      5.02.   Negative
      Covenants of The Borrower Parties.
      Until
      the date on which the Borrower Obligations have been indefeasibly paid in full
      and this Agreement terminates in accordance with its terms, each Borrower Party
      hereby covenants, as to itself, that:

     

    (a)  Name
      and Jurisdiction Change, Offices and Records.
      Such
      Borrower Party will not change its name, jurisdiction of organization, identity
      or corporate structure (within the meaning of Sections 9-503 and/or 9-507 of
      the
      UCC of all applicable jurisdictions), become a “new debtor” (as defined in
      Section 9-102(a)(56) of the UCC of all applicable jurisdictions) with respect
      to
      a currently effective security agreement previously entered into by any other
      Person, change its “location” (within the meaning of Section 9-307 of the UCC of
      all applicable jurisdictions) or relocate its chief executive office, principal
      place of business or any office where Records are kept unless it shall have:
      (i)
      given the Program Agent at least forty-five (45) days’ prior written notice
      thereof and (ii) delivered to the Program Agent all financing statements,
      instruments and other documents requested by the Program Agent or any Managing
      Agent in connection with such change, event or relocation.

     

    (b)  Change
      in Payment Instructions to Obligors.
      Except
      as may be required by the Program Agent pursuant to Section
      6.06,
      such
      Borrower Party will not add or terminate any bank as a Deposit Account Bank,
      or
      make any change in the instructions to Obligors regarding payments to be made
      to
      any Lock-Box or Deposit Account, unless the Program Agent shall have received,
      at least ten (10) days before the proposed effective date therefor, (i) written
      notice of such addition, termination or change and (ii) with respect to the
      addition of a Deposit Account Bank or a Deposit Account or Lock-Box, an executed
      Blocked Account Agreement and Lock-Box Transfer Notice, as applicable with
      respect to the new Deposit Account or Lock-Box; provided,
      however,
      that the
      Servicer may make changes in instructions to Obligors regarding payments if
      such
      new instructions require such Obligor to make payments to another existing
      Deposit Account or Lock-Box.

     

    (c)  Modifications
      to Contracts and Credit and Collection Policy.
      Such
      Borrower Party will not make any change to the Credit and Collection Policy
      that
      could adversely affect the collectibility of the Receivables or decrease the
      credit quality of any newly created Receivables. Except as provided in
Section
      6.02(d),
      the
      Servicer will not extend, amend or otherwise modify the terms of any Receivable
      or any Contract related thereto other than in accordance with the Credit and
      Collection Policy.

     

    (d)  Sales,
      Liens.
      Borrower will not sell, assign (by operation of law or otherwise) or otherwise
      dispose of, or grant any option with respect to, or create or suffer to exist
      any Adverse Claim upon (including,
      without limitation,
      the
      filing of any financing statement) or with respect to, any Receivable, Related
      Security or Collections, or upon or with respect to any Contract under which
      any
      Receivable arises, or any Lock-Box or Deposit Account, or assign any right
      to
      receive income with respect thereto (other than, in each case, the creation
      of
      the interests therein in favor of the Program Agent and the Secured Parties
      provided for herein), and Borrower will defend the right, title and interest
      of
      the Program Agent and the Lenders in, to and under any of the foregoing
      property, against all claims of third parties claiming through or under Borrower
      or Originator. Borrower will not create or suffer to exist any mortgage, pledge,
      security interest, encumbrance, lien, charge or other similar arrangement on
      any
      of its inventory.

     

    (e)  Borrowing
      Base Deficiency.
      At no
      time prior to the Termination Date shall Borrower permit a Borrowing Base
      Deficiency to exist for (i) at any time a Monthly Reporting Period is in effect,
      two (2) Business Days, and (ii) at any time a Daily Reporting Period is in
      effect, one (1) Business Day.

     

    (f)  Termination
      Date Determination.
      Borrower will not designate the Termination Date (as defined in the Receivables
      Sale Agreement), or send any written notice to Originator in respect thereof,
      without the prior written consent of each Managing Agent, except with respect
      to
      the occurrence of such Termination Date arising pursuant to Section 5.1(d)
      of
      the Receivables Sale Agreement.

     

    (g)  Restricted
      Junior Payments.
      From
      and after the occurrence of any Event of Termination or Incipient Event of
      Termination related to an Event of Termination described in Sections
      7.01(d)
      or
7.01(i),
      Borrower will not make any Restricted Junior Payment if, after giving effect
      thereto, Borrower would fail to meet its obligations set forth in Section
      5.02(e).

     

    (h)  Collections.
      Except
      for proceeds of Excluded Receivables (which shall be electronically swept or
      otherwise transferred out of such Deposit Account within one (1) Business Day
      of
      being deposited therein in accordance with Section
      5.01(j)),
      no
      Borrower Party will deposit or otherwise credit, or cause or permit to be so
      deposited or credited, to any Deposit Account cash or cash proceeds other than
      Collections. Except as may be required by the Program Agent pursuant to the
      last
      sentence of Section
      6.02(b),
      no
      Borrower Party will deposit or otherwise credit, or cause or permit to be so
      deposited or credited, any Collections or proceeds thereof to any lock-box
      account or to any other account not covered by a Blocked Account
      Agreement.

     

    ARTICLE
      VI 

    ADMINISTRATION
      OF RECEIVABLES

     

    SECTION
      6.01.   Designation
      of Servicer.

     

    (a)  The
      servicing, administering and collection of the Receivables shall be conducted
      by
      the Person so designated from time to time in accordance with this Section
      6.01.
      Until
      the Program Agent, with the consent or at the direction of the Managing Agents,
      gives notice to the Borrower and the Servicer of the designation of a new
      Servicer as provided in Section
      6.01(b)
      below,
      PSE is hereby designated as, and hereby agrees to perform the duties and
      obligations of, the Servicer pursuant to the terms hereof. The Borrower hereby
      grants to Servicer an irrevocable power of attorney, with full power of
      substitution, coupled with an interest, to take in the name of the Borrower
      any
      and all steps which are necessary or advisable to endorse, negotiate or
      otherwise realize on any writing or other right of any kind in connection with
      any Receivable or other Collateral.

     

    (b)  Upon
      the
      occurrence and during the continuation of any Event of Termination, the Program
      Agent may, with the consent or shall at the direction of any Managing Agent,
      upon written notice to the parties hereto designate as Servicer any Person
      to
      succeed PSE (or any successor Servicer) subject to the condition that any such
      Person so designated shall agree to perform the duties and obligations of the
      Servicer pursuant to the terms hereof. The Servicer shall not resign from the
      obligations and duties hereby imposed on it except upon the reasonable
      determination by the Servicer that (x) the performance of its duties hereunder
      is no longer permissible under applicable law and (y) there is no reasonable
      action which the Servicer could take to make the performance of its duties
      hereunder permissible under applicable law.

     

    (c)  PSE
      and
      any other Servicer agrees that, upon its resignation or replacement as Servicer
      pursuant to Section
      6.01(b)
      above,
      it will cooperate with the Borrower, the Program Agent and the successor
      Servicer in effecting the termination of its responsibilities and rights as
      Servicer hereunder, including, without limitation, (i) assisting the successor
      Servicer in enforcing all rights under the Receivables and Related Security,
      (ii) transferring, promptly upon receipt, to the successor Servicer, any
      Collections or other amounts related to the Receivables received by such
      Servicer, (iii) transferring to the successor Servicer all Records held by
      or
      under the control of such Servicer and (iv) permitting the successor Servicer
      to
      have access to all tapes, discs, diskettes and related property containing
      information concerning the Receivables and the Records and taking all actions
      necessary in its control to permit the successor Servicer to use all computer
      software that may facilitate the Servicer’s access to and use of such
      information and acting as data processing agent for such successor Servicer
      if
      requested. Upon the resignation or replacement of PSE as Servicer, PSE shall
      no
      longer be entitled to the Servicer Fee accruing from and after the effective
      date of such resignation or replacement.

     

    (d)  Without
      the consent of each Managing Agent, the Servicer shall not be permitted to
      delegate any of its duties or responsibilities as Servicer to any Person other
      than (i) an Approved Sub-servicer and (ii) with respect to certain Defaulted
      Receivables, outside collection agencies in accordance with its customary
      practices.

     

    (e)  Notwithstanding
      any such delegation pursuant to clause
      (d)
      above,
      (i) the Servicer shall remain liable for the timely and complete performance
      of
      its duties and obligations pursuant to the terms hereof, (ii) the Servicer
      shall
      retain management information systems and sufficient servicing capability,
      in
      the reasonable judgment of the Program Agent and each Managing Agent, to perform
      the servicing functions described herein, and (iii) any sub-servicing agreement
      that may be entered into and any other transactions or services relating to
      the
      Receivables involving an Approved Sub-servicer shall be deemed to be between
      such Approved Sub-servicer and the Servicer alone, and none of the Lenders,
      the
      Program Agent, the Managing Agents and the Liquidity Providers shall be deemed
      parties thereto or shall have any obligations, duties or liabilities with
      respect to any Approved Sub-servicer.

     

    SECTION
      6.02.   Duties
      of the Servicer.

     

    (a)  The
      Servicer shall take or cause to be taken all such actions as it deems necessary
      or advisable to collect each Receivable from time to time, all in accordance,
      in
      all material respects, with applicable laws, tariffs, rules, regulations and
      the
      Credit and Collection Policy. Each of the Borrower, each Lender, each Liquidity
      Provider, each Managing Agent and the Program Agent hereby appoints as its
      agent
      the Servicer, from time to time designated pursuant to Section
      6.01,
      to
      enforce its respective rights and interests in and under the Receivables and
      the
      Related Security. The Servicer (so long as it is PSE) will at all times apply
      the same standards and follow the same procedures with respect to the decision
      to commence litigation with respect to the Receivables, and in prosecuting
      and
      litigating with respect to Receivables, as it applies and follows with respect
      to trade accounts receivable serviced by it which are not Receivables;
provided,
      however,
      that
      from and after the Termination Date, the Servicer shall commence or settle
      any
      legal action to enforce collection of any Defaulted Receivable or to foreclose
      upon or repossess any Related Security with respect thereto as directed by
      the
      Program Agent. In no event shall the Servicer be entitled to make the Program
      Agent, any Managing Agent, any Lender or any Liquidity Provider a party to
      any
      litigation without such Person’s express prior written consent.

     

    (b)  The
      Servicer shall apply all Collections to the Receivables owed by the applicable
      Obligors in a timely manner in accordance with the business practices of the
      Originator in existence as of the date hereof. In the event the Servicer
      receives any Collections or other proceeds of the Collateral, it shall set
      aside
      and hold in trust for the Borrower and the Secured Parties such Collections
      and
      other proceeds for application and remittance in accordance with Section
      2.06
      or
2.07,
      as
      applicable, and it shall remit the same to the Collection Account to the extent
      required hereunder. The Servicer shall, upon the request of any Managing Agent,
      segregate, in a manner acceptable to such Managing Agent, all cash, checks
      and
      other instruments received by it from time to time constituting Collections
      from
      the general funds of the Servicer or Borrower prior to the remittance thereof
      in
      accordance with Article
      II.
      If the
      Servicer shall be required to segregate Collections pursuant to the preceding
      sentence, the Servicer shall segregate and deposit into the Collection Account
      such allocable share of Collections of Receivables set aside for the Secured
      Parties on the first Business Day following receipt by the Servicer of such
      Collections, duly endorsed or with duly executed instruments of
      transfer.

     

    (c)  The
      Servicer shall, as soon as practicable following receipt, turn over to the
      Person entitled thereto collections in respect of any receivable which is not
      a
      Receivable less, to the extent the Servicer performed any collection or
      enforcement actions which it was authorized by such Person to perform, all
      reasonable and appropriate out of pocket costs and expenses of such Servicer
      incurred in collecting and enforcing such receivable.

     

    (d)  The
      Servicer may, in accordance with the Credit and Collection Policy, extend the
      maturity of any Receivable or adjust the Outstanding Balance of any Receivable
      as the Servicer determines to be appropriate to maximize Collections thereof;
      provided,
      however,
      that
      such extension or adjustment shall not alter the status of such Receivable
      as a
      Defaulted Receivable or limit the rights of any Secured Party under this
      Agreement. Notwithstanding anything to the contrary contained herein, during
      the
      existence of any Event of Termination, the Program Agent shall have the absolute
      and unlimited right to direct the Servicer to commence or settle any legal
      action with respect to any Receivable or to foreclose upon or repossess any
      Related Security.

     

    (e)  The
      Servicer shall hold in trust for Borrower and the Secured Parties all Records
      that (i) evidence or relate to the Receivables, the related Contracts and
      Related Security or (ii) are otherwise necessary or desirable to collect the
      Receivables and shall, as soon as practicable upon demand of any Managing Agent
      or the Program Agent, during the existence of any Event of Termination, deliver
      or make available to the Program Agent all such Records, at a place selected
      by
      the Program Agent. The Servicer shall, as soon as practicable following receipt
      thereof turn over to Borrower any cash collections or other cash proceeds
      received with respect to Indebtedness not constituting Receivables. The Servicer
      shall, from time to time at the request of any Lender, furnish to the Lenders
      (promptly after any such request) a calculation of the amounts set aside for
      the
      Lenders pursuant to Article
      II.

     

    (f)  Any
      payment by an Obligor in respect of any indebtedness owed by it to Originator
      or
      Borrower shall, except as otherwise specified by such Obligor or otherwise
      required by contract or law and unless otherwise instructed by the Program
      Agent, be applied as a Collection of any Receivable of such Obligor (starting
      with the oldest such Receivable) to the extent of any amounts then due and
      payable thereunder before being applied to any other receivable or other
      obligation of such Obligor.

     

    SECTION
      6.03.   Rights
      of the Program Agent.

     

    (a)  Following
      the occurrence and during the continuation of any Event of Termination or an
      Incipient Event of Termination related to an Event of Termination described
      in
Sections
      7.01(d)
      or
7.01(i),
      or
      during any Daily Reporting Period, the Program Agent may with the consent of,
      and shall at the direction of, any Managing Agent (i) exercise its right to
      take
      exclusive ownership and control of the Collection Account, Lock-Boxes and the
      Deposit Accounts, and each of the Borrower and the Servicer hereby agrees to
      take any further action necessary that the Program Agent may reasonably request
      to effect such control, (ii) notify any or all of the Deposit Account Banks
      to
      remit all amounts deposited in the applicable Deposit Accounts to the Collection
      Account or to any other account designated by the Program Agent and (iii)
      deliver the Lock-Box Transfer Notices to the appropriate addressees thereof.
      From and after the date the Program Agent exercises its right to take exclusive
      control of the Collection Account, all withdrawals and distributions to be
      made
      from the Collection Account by the Servicer hereunder shall be made by the
      Program Agent.

     

    (b)  The
      Borrower hereby grants to the Program Agent an irrevocable power of attorney,
      with full power of substitution, coupled with an interest, to take in the name
      of the Borrower, following the occurrence and during the continuance of an
      Event
      of Termination or at any time after the Program Agent exercises its rights
      under
Section
      6.03(a),
      any and
      all steps which are necessary or advisable to endorse, negotiate or otherwise
      realize on any writing or other right of any kind in connection with any
      Receivable or other Collateral.

     

    (c)  At
      any
      time after the Effective Date, the Program Agent may, and upon the request
      of
      any Managing Agent shall, cause the Collection Account to be established at
      an
      Eligible Institution (the “Collection Account Bank”). The Borrower shall cause
      the Collection Account Bank to agree in writing that the Program Agent shall
      have exclusive dominion and control over the Collection Account and that the
      Collection Account Bank will comply with instructions originated by the Program
      Agent directing disposition of the funds in the Collection Account without
      further consent by the Borrower; provided that until the Program Agent provides
      such instructions to the Collection Account Bank (in accordance with
Section
      6.03(a)),
      the
      Collection Account Bank shall be entitled to comply with instructions originated
      by the Servicer directing disposition of the funds in the Collection Account
      without further consent by the Borrower or the Program Agent.

     

    SECTION
      6.04.   Responsibilities
      of the Borrower.
      Anything herein to the contrary notwithstanding, the Borrower shall (i) perform
      all of its obligations with respect to the Receivables to the same extent as
      if
      a security interest in the Receivables had not been granted hereunder and the
      exercise by the Program Agent of its rights hereunder shall not relieve Borrower
      from such obligations and (ii) pay when due any taxes, including without
      limitation, sales, excise and personal property taxes payable by it in
      connection with the Receivables. None of the Program Agent, the Managing Agents,
      the Lenders or the Liquidity Providers shall have any obligation or liability
      with respect to any Receivables or other Collateral, nor shall any of them
      be
      obligated to perform any of the obligations of the Borrower
      thereunder.

     

    SECTION
      6.05.   Further
      Action Evidencing Program Agent’s Interest.
      Each of
      the Borrower and the Servicer agrees that from time to time, at its expense,
      it
      will promptly execute and deliver all further instruments and documents, and
      take all further action that any Managing Agent or the Program Agent may
      reasonably request in order to perfect, protect or more fully evidence the
      interest of the Program Agent or the Secured Parties granted hereunder or to
      enable the Program Agent to exercise or enforce any of its or the Secured
      Parties’ rights hereunder. Without limiting the generality of the foregoing,
      each of the Borrower and the Servicer will (i) code its master data processing
      records evidencing such Receivables to evidence that a security interest therein
      has been granted to the Program Agent under this Agreement, and (ii) upon the
      request of any Managing Agent or the Program Agent, file such financing
      statements, continuation statements or amendments thereto or assignments
      thereof, and execute and file such other instruments or notices, as may be
      necessary or appropriate or as the Program Agent or any Managing Agent may
      reasonably request. If after the occurrence and during the continuation of
      any
      Event of Termination, either the Borrower or the Servicer fails to perform
      any
      of its respective agreements or obligations under this Agreement, the Program
      Agent may (but shall not be required to) itself perform, or cause performance
      of, such agreement or obligation, and the reasonable out-of-pocket expenses
      of
      the Program Agent incurred in connection therewith shall be payable by the
      Borrower or the Servicer, as applicable, upon the Program Agent’s demand
      therefor.

     

    SECTION
      6.06.   Collections.
      In the
      case of any remittances received in any Lock-Box or Deposit Account that shall
      have been identified, to the satisfaction of the Servicer, to not constitute
      Collections or other proceeds of the Receivables or the Related Security, the
      Servicer shall promptly remit such items to the Person identified to it as
      being
      the owner of such remittances. From and after the date the Program Agent
      delivers a Collection Notice to any Deposit Account Bank or a Lock-Box Transfer
      Notice to any post office pursuant to Section
      6.03,
      the
      Program Agent may request that the Servicer, and the Servicer thereupon promptly
      shall instruct all Obligors with respect to the Receivables, to remit all
      payments thereon to a new lock-box or depositary account specified by the
      Program Agent and, at all times thereafter, Borrower and the Servicer shall
      not
      deposit or otherwise credit, and shall not permit any other Person to deposit
      or
      otherwise credit to such new lock-box, post office box or depositary account
      any
      cash or payment item other than Collections.

     

    SECTION
      6.07.   Reports.
      The
      Servicer shall prepare and forward to each Managing Agent (i) (A) during a
      Monthly Reporting Period, on each Monthly Reporting Date, a Monthly Report,
      (B)
      during a Weekly Reporting Period, on each Monthly Reporting Date, a Monthly
      Report and on Tuesday of each calendar week (or if such day is not a Business
      Day, on the next succeeding Business Day), a Weekly Report covering the period
      from and including Monday of the preceding week to but excluding Monday of
      such
      week and (C) during a Daily Reporting Period, on each Monthly Reporting Date,
      a
      Monthly Report and on each Business Day (or such other schedule as may be
      consented to by the Managing Agents), a Daily Report and (ii) at such times
      as
      any Managing Agent shall reasonably request, a listing by Obligor of all
      Receivables together with an aging of Receivables. 

     

    SECTION
      6.08.   Servicer
      Fees.
      In
      consideration of PSE’s agreement to act as Servicer hereunder, the Lenders
      hereby agree that, so long as PSE shall continue to perform as Servicer
      hereunder, Borrower shall pay over to PSE a fee (the “Servicer
      Fee”)
      on the
      first calendar day of each month (or, if such day is not a Business Day, then
      the next Business Day thereafter), in arrears for the immediately preceding
      month, equal to 0.25% per annum of the average aggregate Outstanding Balance
      of
      all Receivables during such period, as compensation for its servicing
      activities. Notwithstanding the foregoing, if the Servicer is replaced by the
      Program Agent, the successor Servicer shall receive a servicing fee in an amount
      agreed upon by the Program Agent and the successor Servicer which reflects
      market rates for servicing similar portfolios of receivables.

     

    ARTICLE
      VII  

    EVENTS
      OF
      TERMINATION 

     

    SECTION
      7.01.   Events
      of Termination.
      If any
      of the following events (each, an “Event
      of Termination”)
      shall
      occur:

     

    (a)  Any
      Borrower Party shall fail:

     

    (i)  (A)
      to
      make any payment or deposit required hereunder when due and, such failure
      continues for two (2) Business Days, or (B) to perform or observe any term,
      covenant or agreement set forth in Section
      5.01(a)(vi)
      through
(viii),
      (b)(i)(A),
      (c)(ii)(A),
      (j),
      (n)
      or
(o)
      or
Section
      5.02,
      and,
      with respect to Servicer only, Section
      6.06
      and
Section
      6.07;

     

    (ii)  to
      perform or observe any term, covenant or agreement set forth in Section
      5.01(b)(i)(B),
      (d),
      (g),
      (h)
      or
(i)
      and such
      failure shall continue for five (5) consecutive Business Days after the earlier
      of (A) any Borrower Party obtains knowledge thereof or (B) the Program Agent
      or
      any Managing Agent delivers written notice thereof; or

     

    (iii)  to
      perform or observe any other term, covenant or agreement hereunder (other than
      as referred to in clauses (i) and (ii) of this subsection (a) and Section
      7.01(e))
      or any
      other Facility Document and such failure shall continue for thirty (30)
      consecutive days after the earlier of (A) any Borrower Party obtains knowledge
      thereof or (B) the Program Agent or any Managing Agent delivers written notice
      thereof.

     

    (b)  Any
      representation, warranty, certification or statement made by any Borrower Party
      in this Agreement, any other Facility Document or in any other document
      delivered pursuant hereto or thereto shall prove to have been materially false
      on the date as of which made or deemed made.

     

    (c)  Failure
      of Borrower to pay any Indebtedness when due or the failure of any other
      Borrower Party (or PSE at any time when PSE is not acting as Servicer) to pay
      Indebtedness when due in excess of $25,000,000 in the aggregate; or the default
      by any Borrower Party (or PSE at any time when PSE is not acting as Servicer)
      in
      the performance of any term, provision or condition contained in any agreement
      under which any such Indebtedness was created or is governed, the effect of
      which is to cause, or to permit the holder or holders of such Indebtedness
      to
      cause, such Indebtedness to become due prior to its stated maturity; or any
      such
      Indebtedness of any Borrower Party (or PSE at any time when PSE is not acting
      as
      Servicer) shall be declared to be due and payable or required to be prepaid
      (other than by a regularly scheduled payment) prior to the date of maturity
      thereof.

     

    (d)  (i)
      Any
      Borrower Party (or PSE at any time when PSE is not acting as Servicer) or any
      of
      its Significant Subsidiaries shall generally not pay its debts as such debts
      become due or shall admit in writing its inability to pay its debts generally
      or
      shall make a general assignment for the benefit of creditors; or (ii) any
      proceeding shall be instituted by any Borrower Party (or PSE at any time when
      PSE is not acting as Servicer) or any of its Significant Subsidiaries seeking
      to
      adjudicate it bankrupt or insolvent, or seeking liquidation, winding up,
      reorganization, arrangement, adjustment, protection, relief or composition
      of it
      or its debts under any law relating to bankruptcy, insolvency or reorganization
      or relief of debtors, or seeking the entry of an order for relief or the
      appointment of a receiver, trustee or other similar official for it or any
      substantial part of its property; or (iii) any proceeding shall be instituted
      against any Borrower Party (or PSE at any time when PSE is not acting as
      Servicer) or any of its Significant Subsidiaries seeking to adjudicate it
      bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
      arrangement, adjustment, protection, relief or composition of it or its debts
      under any law relating to bankruptcy, insolvency or reorganization or relief
      of
      debtors, or seeking the entry of an order for relief or the appointment of
      a
      receiver, trustee or other similar official for it or any substantial part
      of
      its property, and in the case of the Servicer, or PSE, such proceeding continues
      undismissed or unstayed for a period of 60 consecutive days or (iv) any Borrower
      Party (or PSE at any time when PSE is not acting as Servicer) or any of its
      Significant Subsidiaries shall take any corporate action to authorize any of
      the
      actions set forth in clauses (i), (ii) or (iii) above in this subsection
      (d).

     

    (e)  As
      of the
      close of business on any date, any Borrowing Base Deficiency shall exist (after
      giving effect to any increases or reductions to the Aggregate Principal Balance
      on such date) and such deficiency continues for (i) at any time a Monthly
      Reporting Period is in effect, two (2) Business Days, and (ii) at any time
      a
      Daily or Weekly Reporting Period is in effect, one (1) Business
      Day.

     

    (f)  As
      of the
      last day of any fiscal quarter of PSE, the aggregate outstanding principal
      amount of all Consolidated Indebtedness exceeds 65% of Total Capitalization
      as
      of the last day of such fiscal quarter.

     

    (g)  As
      at the
      end of any calendar month:

     

    (i)  the
      three
      month average Dilution Ratio shall exceed 1.50%;

     

    (ii)  the
      three
      month average Past Due Ratio exceeds 4.50%;

     

    (iii)  the
      three
      month average Default Ratio shall exceed 7.00%; or

     

    (iv)  the
      three
      month average Days Sales Outstanding Ratio shall exceed 60 days.

     

    (h)  A
      Change
      of Control shall occur.

     

    (i)  
      (i) One
      or more final judgments for the payment of money shall be entered against
      Borrower or (ii) one or more final judgments for the payment of money in an
      amount in excess of $25,000,000, individually or in the aggregate, shall be
      entered against the Servicer on claims not covered by insurance or as to which
      the insurance carrier has denied its responsibility, and such judgment shall
      continue unsatisfied and in effect for 60 days without a stay of execution
      or
      otherwise being appropriately contested in good faith.

     

    (j)  The
      “Termination Date” under and as defined in the Receivables Sale Agreement shall
      occur under the Receivables Sale Agreement or Originator shall for any reason
      cease to transfer, or cease to have the legal capacity to transfer, or otherwise
      be incapable of transferring Receivables to Borrower under the Receivables
      Sale
      Agreement, or Borrower shall for any reason cease to purchase, or cease to
      have
      the legal capacity to purchase, or otherwise be incapable of accepting
      Receivables from Originator under the Receivables Sale Agreement.

     

    (k)  This
      Agreement shall terminate in whole or in part (except in accordance with its
      terms), or shall cease to be effective or to be the legally valid, binding
      and
      enforceable obligation of any Borrower Party, or any Obligor shall directly
      or
      indirectly contest in any manner such effectiveness, validity, binding nature
      or
      enforceability, or the Program Agent for the benefit of the Secured Parties
      shall cease to have a valid and perfected first priority security interest
      in
      the Receivables, the Related Security and the Collections with respect thereto
      and the Deposit Accounts.

     

    (l)  [Reserved.]

     

    (m)  If
      PSE or
      any ERISA Affiliate should establish, maintain, contribute to or become
      obligated to contribute to any ERISA Plan and (i) a Reportable Event shall
      have
      occurred with respect to any ERISA Plan; or (ii) a trustee shall be appointed
      by
      a United States District Court to administer any ERISA Plan; or (iii) the PBGC
      shall institute proceedings to terminate any ERISA Plan; or (iv) a complete
      or
      partial withdrawal by PSE or any ERISA Affiliate from any Multiemployer Plan
      shall have occurred, or any Multiemployer Plan shall enter reorganization
      status, become insolvent, or terminate (or notify PSE or any ERISA Affiliate
      of
      its intent to terminate) under Section 4041A of ERISA; or (v) any ERISA Plan
      experiences an accumulated funding deficiency under Code Section 412(b); or
      (vi)
      PSE or any ERISA Affiliate incurs any liability for a Prohibited Transaction
      under ERISA Section 502; provided
      that any
      of the events described in this Section
      7.01(m)
      shall
      result in joint liability to PSE and all ERISA Affiliates in excess of
      $25,000,000.

     

    (n)  Any
      Transaction Party receives notice or becomes aware that a notice of federal
      tax
      lien has been filed against any Transaction Party unless such lien is released
      or is otherwise being contested in good faith within thirty (30) days of the
      filing thereof; provided that the thirty day period shall not be construed
      to
      apply to the occurrence of any event described in paragraph (k)
      above.

     

    (o)  Any
      event
      which constitutes a “default” (after the expiration of any applicable cure
      period) under any Springing Lien Indenture, shall have occurred.

     

    then,
      and
      in any such event, the Program Agent shall, at the request, or may with the
      consent, of any Managing Agent by notice to the Borrower, declare the
      Termination Date to have occurred; provided,
      however,
      that,
      in the case of any event described in subsection
      (d)
      above,
      the Termination Date shall be deemed to have occurred automatically upon the
      occurrence of such event. Upon any such declaration or automatic occurrence,
      the
      Program Agent and the Secured Parties shall have, in addition to all other
      rights and remedies under this Agreement or otherwise but subject to the
      following sentence and Section
      10.09
      hereof,
      all other rights and remedies provided under the UCC of the applicable
      jurisdiction and other applicable laws, which rights shall be cumulative. Upon
      the declaration or automatic occurrence of the Termination Date in accordance
      with this Section
      7.01,
      all
      obligations hereunder shall be immediately due and payable and all Loans shall
      be immediately due and payable.

     

    ARTICLE
      VIII  

    INDEMNIFICATION 

     

    SECTION
      8.01.   Indemnities
      by The Borrower Parties.
      Without
      limiting any other rights that the Program Agent, any Managing Agent or any
      Lender may have hereunder or under applicable law, (A) Borrower hereby agrees
      to
      indemnify (and pay upon demand to) the Program Agent, each Managing Agent and
      each Lender and their respective Affiliates, successors, assigns, officers,
      directors, agents and employees (each an “Indemnified
      Party”)
      from
      and against any and all damages, losses, claims, taxes, liabilities, costs,
      expenses and for all other amounts payable, including reasonable attorneys’ fees
      (which attorneys may be employees of the Program Agent, such Managing Agent
      or
      such Lender) and disbursements (all of the foregoing being collectively referred
      to as “Indemnified
      Amounts”)
      awarded
      against or incurred by any of them arising out of or as a result of this
      Agreement, any other Facility Document or the transactions contemplated by
      any
      Facility Document, or any Receivable, Contract or Related Security, or the
      use
      of the proceeds of any Borrowing hereunder, or the funding either directly
      or
      indirectly, by a Lender of a Borrowing or any Indemnified Party’s interest in
      the Receivables, the Contract or any Related Security and (B) the Servicer
      hereby agrees to indemnify (and pay upon demand to) each Indemnified Party
      for
      Indemnified Amounts awarded against or incurred by any of them arising out
      of
      the Servicer’s activities as Servicer hereunder or under any other Facility
      Document excluding, however, in all of the foregoing instances under the
      preceding clauses (A) and (B):

     

    (a)  Indemnified
      Amounts to the extent a final judgment of a court of competent jurisdiction
      holds that such Indemnified Amounts resulted from gross negligence or willful
      misconduct on the part of the Indemnified Party seeking
      indemnification;

     

    (b)  Indemnified
      Amounts to the extent the same includes losses in respect of Receivables that
      are uncollectible on account of the insolvency, bankruptcy or lack of
      creditworthiness of the related Obligor; or

     

    (c)  taxes
      imposed by the United States federal government or the jurisdiction in which
      such Indemnified Party’s principal executive office is located, on or measured
      by the overall net or gross income of such Indemnified Party

     

    provided,
      however,
      that
      nothing contained in this sentence shall limit the liability of any Borrower
      Party or limit the recourse of the Indemnified Parties to any Borrower Party
      for
      amounts otherwise specifically provided to be paid by such Borrower Party under
      the terms of this Agreement or any other Facility Document. Without limiting
      the
      generality of the foregoing indemnification, each Borrower Party shall indemnify
      each Indemnified Party for Indemnified Amounts (including,
      without limitation,
      losses
      in respect of uncollectible receivables, regardless of whether reimbursement
      therefor would constitute recourse to Borrower or the Servicer) relating to
      or
      resulting from:

     

    (i)  any
      representation or warranty made by any Borrower Party or Originator (or any
      officers of any such Person) under or in connection with this Agreement, any
      other Facility Document or any other information or report delivered by any
      such
      Person pursuant hereto or thereto, which shall have been false or incorrect
      when
      made or deemed made;

     

    (ii)  the
      failure by Borrower, the Servicer or Originator to comply with any applicable
      law, rule or regulation with respect to any Receivable or Contract related
      thereto, or the nonconformity of any Receivable or Contract included therein
      with any such applicable law, rule or regulation or any failure of Originator
      to
      keep or perform any of its obligations, express or implied, with respect to
      any
      Contract;

     

    (iii)  any
      failure of Borrower, the Servicer or Originator to perform its duties, covenants
      or other obligations in accordance with the provisions of this Agreement or
      any
      other Facility Document;

     

    (iv)  any
      products liability, personal injury or damage suit, or other similar claim
      arising out of or in connection with merchandise, insurance or services that
      are
      the subject of any Contract or any Receivable;

     

    (v)  any
      dispute, claim, offset or defense (other than discharge in bankruptcy of the
      Obligor) of the Obligor to the payment of any Receivable (including,
      without limitation,
      a
      defense based on such Receivable or the related Contract not being a legal,
      valid and binding obligation of such Obligor enforceable against it in
      accordance with its terms), or any other claim resulting from the sale of the
      merchandise or service related to such Receivable or the furnishing or failure
      to furnish such merchandise or services;

     

    (vi)  the
      commingling of Collections of Receivables at any time with other
      funds;

     

    (vii)  any
      investigation, litigation or proceeding related to or arising from this
      Agreement or any other Facility Document, the transactions contemplated hereby
      or thereby, the use of the proceeds of any Borrowing, the ownership of the
      Loans, any lien under any Springing Lien Indenture or any other investigation,
      litigation or proceeding relating to Borrower, the Servicer or Originator in
      which any Indemnified Party becomes involved as a result of any of the
      transactions contemplated hereby or by any other Facility Document;

     

    (viii)  any
      inability to litigate any claim against any Obligor in respect of any Receivable
      as a result of such Obligor being immune from civil and commercial law and
      suit
      on the grounds of sovereignty or otherwise from any legal action, suit or
      proceeding;

     

    (ix)  any
      Event
      of Termination or Incipient Event of Termination described in Section
      7.01(d);

     

    (x)  any
      failure of Borrower to acquire and maintain legal and equitable title to, and
      ownership of any Receivable and the Related Security and Collections with
      respect thereto from Originator, free and clear of any Adverse Claim (other
      than
      as created hereunder); or any failure of Borrower to give reasonably equivalent
      value to Originator under the Receivables Sale Agreement in consideration of
      the
      transfer by Originator of any Receivable, or any attempt by any Person to void
      such transfer under statutory provisions or common law or equitable
      action;

     

    (xi)  any
      failure to vest and maintain vested in the Program Agent for the benefit of
      the
      Secured Parties, or to transfer to the Program Agent for the benefit of the
      Secured Parties a first priority perfected security interest in the Receivables,
      the Related Security and the Collections, free and clear of any Adverse Claim
      (except as created by the Facility Documents);

     

    (xii)  the
      failure to have filed, or any delay in filing, financing statements or other
      similar instruments or documents under the UCC of any applicable jurisdiction
      or
      other applicable laws with respect to any Receivable, the Related Security
      and
      Collections with respect thereto, and the proceeds of any thereof, whether
      at
      the time of any Borrowing or at any subsequent time;

     

    (xiii)  any
      action or omission by any Borrower Party which reduces or impairs the rights
      of
      the Program Agent or the Secured Parties with respect to any Collateral or
      the
      value of any Collateral;

     

    (xiv)  any
      attempt by any Person to void the security interest in the Collateral granted
      hereunder under statutory provisions or common law or equitable
      action;

     

    (xv)  the
      failure of any Receivable included in the calculation of the Net Receivables
      Pool Balance as an Eligible Receivable to be an Eligible Receivable at the
      time
      so included; or

     

    (xvi)  the
      failure of (i) any Deposit Account Bank to remit any amounts or items of payment
      held in a Deposit Account or in a Lock-Box pursuant to the instructions of
      the
      Program Agent given in accordance with this Agreement, the applicable Blocked
      Account Agreement or the other Facility Documents, whether by reason of the
      exercise of setoff rights or otherwise, or (ii) any sub-servicer or any other
      third party with a contractual relationship with the Borrower for the acceptance
      or processing of Collections, to remit any Collections received by it to a
      Lock-Box or a Deposit Account.

     

    SECTION
      8.02.   Other
      Costs and Expenses.
      Borrower shall reimburse the Program Agent, each Managing Agent and each Lender
      on demand for all reasonable costs and out-of-pocket expenses in connection
      with
      the preparation, negotiation, arrangement, execution, delivery, and
      administration of this Agreement, the transactions contemplated hereby and
      the
      other documents to be delivered hereunder, including,
      without limitation,
      the
      cost of any such Person’s auditors auditing the books, records and procedures of
      Borrower (subject to the cost restrictions set forth in Section
      5.01(d)
      and
      provided further that the Borrower shall not be required to reimburse the
      Managing Agents more than $25,000 collectively for the costs of the first audit
      performed after the Effective Date so long as no Event of Termination has
      occurred and is continuing), reasonable fees and out-of-pocket expenses of
      legal
      counsel for each Lender, each Managing Agent and the Program Agent (which such
      counsel may be employees of any of the Lenders, the Managing Agents or the
      Program Agent) with respect thereto and with respect to advising the Lenders,
      the Managing Agents and the Program Agent as to their respective rights and
      remedies under this Agreement (provided that the Borrower shall not be required
      to reimburse the Managing Agents more than $75,000 collectively for the fees
      and
      expenses of legal counsel for the preparation, negotiation, arrangement,
      execution and delivery of this Agreement and the other documents to be delivered
      hereunder on the Effective Date). Borrower shall reimburse the Program Agent,
      any Managing Agent and any Lender on demand for any and all costs and expenses
      of such Person, if any, including reasonable counsel fees and expenses in
      connection with the enforcement of this Agreement and the other documents
      delivered hereunder and in connection with any restructuring or workout of
      this
      Agreement or such documents, or the administration of this Agreement following
      an Event of Termination.

     

    ARTICLE
      IX 

    THE
      AGENTS 

     

    SECTION
      9.01.   Authorization
      and Action.
      Each
      Lender hereby appoints and authorizes its related Managing Agent and the Program
      Agent to take such action as agent on its behalf and to exercise such powers
      under this Agreement as are delegated to such Managing Agent or the Program
      Agent by the terms hereof, together with such powers as are reasonably
      incidental thereto. The provisions of this Article
      IX
      are
      solely for the benefit of the Managing Agents, the Program Agent and the
      Lenders. The Borrower shall not have any rights as a third-party beneficiary
      or
      otherwise under any of the provisions hereof. In performing their functions
      and
      duties hereunder, the Managing Agents shall act solely as the agent for the
      respective Conduit Lenders and the Committed Lenders in the related Lender
      Group
      and do not assume nor shall be deemed to have assumed any obligation or
      relationship of trust or agency with or for the other Lenders, the Borrower,
      the
      Servicer, the Originator, any Affiliate thereof or any of their respective
      successors and assigns. Each Managing Agent and each Lender authorizes the
      Program Agent to (i) file each of the UCC financing or continuation statements
      (and amendments thereto and assignments or terminations thereof) and (ii) to
      execute the Blocked Account Agreements on behalf of the Lenders (the terms
      of
      which will be binding on the Lenders).

     

    SECTION
      9.02.   Agents’
      Reliance, Etc.
      Neither
      the Program Agent nor any Managing Agent nor any of their respective directors,
      officers, agents or employees shall be liable for any action taken or omitted
      to
      be taken by it or such Managing Agent or the Program Agent under or in
      connection with this Agreement, except for its or their own gross negligence
      or
      willful misconduct. Without limiting the generality of the foregoing, each
      of
      the Program Agent and the Managing Agents: (i) may consult with legal counsel
      (including counsel for the Borrower, the Servicer or any other Affiliate of
      PSE), independent public accountants and other experts selected by it and shall
      not be liable for any action taken or omitted to be taken in good faith by
      it in
      accordance with the advice of such counsel, accountants or experts; (ii) makes
      no warranty or representation to any Lender and shall not be responsible to
      any
      Lender for any statements, warranties or representations made in or in
      connection with this Agreement; (iii) shall not have any duty to ascertain
      or to
      inquire as to the performance or observance of any of the terms, covenants
      or
      conditions of this Agreement on the part of the Borrower, the Servicer or any
      other Affiliate of PSE or to inspect the property (including the books and
      records) of the Borrower, the Servicer or any other Affiliate of PSE; (iv)
      shall
      not be responsible to any Lender for the due execution, legality, validity,
      enforceability, genuineness, sufficiency or value of this Agreement or any
      other
      instrument or document furnished pursuant hereto, or for the perfection,
      priority, condition, value or sufficiency of any collateral pledged in
      connection herewith; and (v) shall incur no liability under or in respect of
      this Agreement by acting upon any notice (including notice by telephone),
      consent, certificate or other instrument or writing (which may be by facsimile)
      believed by it to be genuine and signed or sent by the proper party or
      parties.

     

    SECTION
      9.03.   Agents
      and Affiliates.
      Each
      Managing Agent and the Program Agent and their respective Affiliates may engage
      in any kind of business with the Borrower, PSE or any Obligor, any of their
      respective Affiliates and any Person who may do business with or own securities
      of Borrower, PSE or any Obligor or any of their respective Affiliates, all
      as if
      such Persons were not Managing Agents and/or Program Agent and without any
      duty
      to account therefor to any Lender.

     

    SECTION
      9.04.   Lender’s
      Loan Decision.
      Each
      Lender acknowledges that it has, independently and without reliance upon the
      Program Agent, any Managing Agent, any of their respective Affiliates or any
      other Lender, and based on such documents and information as it has deemed
      appropriate, made its own evaluation and decision to enter into this Agreement
      and, if it so determines, to make Loans hereunder. Each Lender also acknowledges
      that it will, independently and without reliance upon the Program Agent, any
      Managing Agent, any of their respective Affiliates, or any other Lender, and
      based on such documents and information as it shall deem appropriate at the
      time, continue to make its own decisions in taking or not taking action under
      this Agreement.

     

    SECTION
      9.05.   Delegation
      of Duties.
      The
      Program Agent and each Managing Agent may each execute any of its duties under
      this Agreement by or through agents or attorneys-in-fact and shall be entitled
      to advice of counsel concerning all matters pertaining to such duties. Neither
      the Program Agent nor any Managing Agent shall be responsible for the negligence
      or misconduct of any agents or attorneys-in-fact selected by it with reasonable
      care.

     

    SECTION
      9.06.   Indemnification.
      Each
      Managing Agent severally agrees to indemnify the Program Agent (to the extent
      not reimbursed by the Borrower, the Servicer, the Originator or PSE), ratably
      according to its related Lender Group Percentage, from and against any and
      all
      liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
      costs, expenses or disbursements of any kind or nature whatsoever which may
      be
      imposed on, incurred by, or asserted against the Program Agent in any way
      relating to or arising out of this Agreement or any action taken or omitted
      by
      the Program Agent under this Agreement; provided,
      that
      (i) no Managing Agent shall be liable for any portion of such liabilities,
      obligations, losses, damages, penalties, actions, judgments, suits, costs,
      expenses or disbursements resulting or arising from the Program Agent’s gross
      negligence or willful misconduct and (ii) no Managing Agent shall be liable
      for
      any amount in respect of any compromise or settlement of any of the foregoing
      unless such compromise or settlement is approved by the Majority Managing
      Agents. Without limitation of the generality of the foregoing, each Managing
      Agent agrees to reimburse the Program Agent, ratably according to its related
      Lender Group Percentage, promptly upon demand, for any reasonable out-of-pocket
      expenses (including reasonable counsel fees) incurred by the Program Agent
      in
      connection with the 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;
provided,
      that no
      Managing Agent shall be responsible for the costs and expenses of the Program
      Agent in defending itself against any claim alleging the gross negligence or
      willful misconduct of the Program Agent to the extent such gross negligence
      or
      willful misconduct is determined by a court of competent jurisdiction in a
      final
      and non-appealable decision.

     

    SECTION
      9.07.   Successor
      Agents.
      The
      Program Agent and each Managing Agent may, upon five (5) days’ notice to the
      Borrower, each Lender and each other party hereto, resign as Program Agent
      or
      Managing Agent, as applicable. If any such party shall resign as Program Agent
      or Managing Agent under this Agreement, then, in the case of the Program Agent,
      the Majority Committed Lenders and in the case of any Managing Agent, its
      related Conduit Lenders, during such thirty-day period shall appoint a successor
      agent, whereupon such successor agent shall succeed to the rights, powers and
      duties of the Program Agent or applicable Managing Agent and references herein
      to the Program Agent or such Managing Agent shall mean such successor agent,
      effective upon its appointment; and such former Program Agent’s or Managing
      Agent’s rights, powers and duties in such capacity shall be terminated, without
      any other or further act or deed on the part of such former Program Agent or
      Managing Agent or any of the parties to this Agreement. After any retiring
      Program Agent’s or Managing Agent’s resignation hereunder as such agent, the
      provisions of Article
      VIII,
      this
Article
      IX
      and
Section
      10.09
      shall
      inure to its benefit as to any actions taken or omitted to be taken by it while
      it was Program Agent or a Managing Agent under this Agreement.

     

    ARTICLE
      X

    MISCELLANEOUS 

     

    SECTION
      10.01.   Amendments,
      Etc.

     

    (a)  No
      waiver
      of any provision of this Agreement nor consent to any departure by the Borrower
      or the Servicer therefrom shall in any event be effective unless the same shall
      be in writing and signed by the Program Agent and the Managing Agents and then
      such waiver or consent shall be effective only in the specific instance and
      for
      the specific purpose for which given.

     

    (b)  No
      amendment to this Agreement shall be effective unless the same shall be in
      writing and signed by each of the Borrower, the Servicer, the Program Agent,
      the
      Managing Agents and the Majority Committed Lenders, provided,
      however,
      that,
      without the written consent of all the Committed Lenders, no such amendment
      shall (i) extend the Termination Date, (ii) extend the date of any payment
      or
      deposit of Collections by the Borrower or by the Servicer or the time of payment
      of Interest, (iii) release the security interest in or transfer all or any
      material portion of the Collateral, (iv) change the outstanding principal amount
      of any of the Loans made by any Committed Lender hereunder other than as
      provided herein, (v) change the amount of any Lender Group Limit other than
      as
      provided herein or increase the Facility Limit hereunder, (vi) increase the
      Concentration Limit, (vii) amend, modify or waive any provision of the
      definitions of “Borrowing Base”, “Eligible Receivables”, “Majority Committed
      Lenders”, “Net Receivables Pool Balance” or “Required Reserves” or any of the
      defined terms used in such definitions or this Section
      10.01,
      (viii)
      consent to or permit the assignment or transfer by the Borrower or any of its
      rights and obligations under this Agreement or of any of its right, title or
      interest in or to the Receivables, (ix) amend or modify any provision of
Section
      7.01
      or
Section
      10.03,
      or (x)
      amend or modify any defined term (or any defined term used directly or
      indirectly in such defined term) used in clauses
      (i)
      through
(ix)
      above in
      a manner which would circumvent the intention of the restrictions set forth
      in
      such clauses.

     

    SECTION
      10.02.   Notices,
      Etc.
      All
      notices and other communications provided for hereunder shall, unless otherwise
      stated herein, be in writing (including communication by facsimile copy) and
      shall be personally delivered or sent by registered mail, return receipt
      requested, or by courier or by facsimile, to each party hereto, at its address
      set forth on Schedule
      II
      hereof
      or at such other address as shall be designated by such party in a written
      notice to the other parties hereto. All such notices and communications shall
      be
      effective, upon receipt, or in the case of overnight courier, two (2) days
      after
      being deposited with such courier, or, in the case of notice by facsimile,
      when
      electronic confirmation of receipt is obtained, in each case addressed as
      aforesaid.

     

    SECTION
      10.03.   Assignability.

     

    (a)  Any
      Conduit Lender may, (i) with notice to the Borrower and the Servicer, and with
      the consent of the Managing Agent for the Lender Group of which it is a member,
      assign at any time all or any portion of its rights and obligations hereunder
      and interests herein to (A) any other Lender, (B) any commercial paper conduit
      managed by such Conduit Lender’s sponsor or administrator bank (C) any Affiliate
      of such Conduit Lender’s sponsor bank or (D) any Liquidity Provider with respect
      to such Conduit Lender and (ii) with the consent of the Borrower (such consent
      not to be unreasonably withheld, delayed or conditioned) and the Managing Agent
      for the Lender Group of which it is a member, assign at any time all or any
      portion of its rights and obligations hereunder and interests herein to any
      other Person not listed in clause (i) above; provided that the consent of the
      Borrower shall not be required if an Event of Termination has occurred and
      is
      continuing. Any Managing Agent may, with notice to the Borrower and the
      Servicer, and with the consent of the Lenders in its Lender Group, assign at
      any
      time all or any portion of its rights and obligations hereunder and interests
      herein to any Lender or to any Affiliate of such Managing Agent or any
      Lender.

     

    (b)  Any
      Committed Lender may, with the consent of the Borrower (such consent not to
      be
      unreasonably withheld, delayed or conditioned) and with the consent of the
      Managing Agent for the Lender Group of which it is a member, assign at any
      time
      all or any portion of its rights and obligations hereunder and interests herein
      to any Person; provided,
      however,
      that
      the consent of the Borrower shall not be required in connection with any
      assignment by a Committed Lender (i) if an Event of Termination has occurred
      and
      is continuing or (ii) to any other Lender.

     

    (c)  With
      respect to any assignment hereunder

     

    (i) each
      such
      assignment shall be of a constant, and not a varying, percentage of all rights
      and obligations under this Agreement,

     

    (ii) the
      amount being assigned pursuant to each such assignment (determined as of the
      date of the Assignment and Acceptance with respect to such assignment) shall
      in
      no event be less than $10,000,000, and

     

    (iii) the
      parties to each such assignment shall execute and deliver to the Administrative
      Agent, for its acceptance and recording in the Register (as defined below),
      an
      Assignment and Acceptance, together with a processing and recordation fee of
      $2,500.

     

    Upon
      such
      execution, delivery, acceptance and recording from and after the effective
      date
      specified in such Assignment and Acceptance, (x) the assignee thereunder shall
      be a party to this Agreement and, to the extent that rights and obligations
      under this Agreement have been assigned to it pursuant to such Assignment and
      Acceptance, have the rights and obligations of a Lender thereunder and (y)
      the
      assigning Lender shall, to the extent that rights and obligations have been
      assigned by it pursuant to such Assignment and Acceptance, relinquish such
      rights and be released from such obligations under this Agreement (and, in
      the
      case of an Assignment and Acceptance covering all or the remaining portion
      of an
      assigning Lender’s rights and obligations under this Agreement, such Lender
      shall cease to be a party hereto).

     

    (d)  At
      all
      times during which any Loan is outstanding, the Program Agent shall maintain
      at
      its address referred to in Section
      10.02
      of this
      Agreement (or such other address of the Program Agent notified by the Program
      Agent to the other parties hereto) a register as provided herein (the
“Register”).
      The
      Aggregate Principal Balance and any interests therein, and any Assignments
      and
      Acceptances of the Aggregate Principal Balance or any interest therein delivered
      to and accepted by the Program Agent, shall be registered in the Register,
      and
      the Register shall serve as a record of ownership that identifies the owner
      of
      the Aggregate Principal Balances and any interest therein. Notwithstanding
      any
      other provision of this Agreement, no transfer of the Aggregate Principal
      Balances or any interest therein shall be effective unless and until such
      transfer has been recorded in the Register. The entries in the Register shall
      be
      conclusive and binding for all purposes, absent manifest error, and the
      Borrower, the Servicer, the Program Agent, the Managing Agents and the Lenders
      may treat each Person whose name is recorded in the Register as a Lender, as
      the
      case may be, under this Agreement for all purposes of this Agreement. This
      Section
      10.03(d)
      shall be
      construed so that the Aggregate Principal Balance and any interest therein
      is
      maintained at all times in “registered form” within the meaning of Sections
      163(f), 871(h) and 881(c) of the IRC, solely for the purposes of this
Section
      10.03,
      the
      Program Agent will act as an agent of the Borrower. The Register shall be
      available for inspection by the Borrower or any Managing Agent at any reasonable
      time and from time to time upon reasonable prior notice.

     

    (e)  Upon
      its
      receipt of an Assignment and Acceptance, the Program Agent shall, if such
      Assignment and Acceptance has been duly completed, (i) accept such Assignment
      and Acceptance, (ii) record the information contained therein in the Register
      and (iii) give prompt notice thereof to the Borrower.

     

    (f)  Any
      Lender may, without the consent of the Borrower, sell participations to one
      or
      more banks or other entities (each, a “Participant”)
      in all
      or a portion of its rights and obligations hereunder (including the outstanding
      Loan); provided
      that
      following the sale of a participation under this Agreement (i) the obligations
      of such Lender 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 Program Agent, the Servicer 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 such Lender sells such a participation shall
      provide that the Participant shall not have any right to direct the enforcement
      of this Agreement or the other Facility Documents or to approve any amendment,
      modification or waiver of any provision of this Agreement or the other Facility
      Documents; provided
      that
      such agreement or instrument may provide that such Lender will not, without
      the
      consent of the Participant, agree to any amendment, modification or waiver
      that
      (i) reduces the amount of principal or Interest that is payable on account
      of
      any Loan or delays any scheduled date for payment thereof or (ii) reduces any
      fees payable by the Borrower to the Program Agent (to the extent relating to
      payments to the Participant) or delays any scheduled date for payment of such
      fees. The Borrower acknowledges and agrees that any Lender’s source of funds may
      derive in part from its Participants. Accordingly, references in Sections
      2.11
      or 2.13
      and the other terms and provisions of this Agreement and the other Facility
      Documents to determinations, reserve and capital adequacy requirements,
      expenses, increased costs, reduced receipts and the like as they pertain to
      the
      Lenders shall be deemed also to include those of its Participants; provided,
      however,
      that in
      no event shall the Borrower be liable to any Participant under Sections
      2.11
      or
2.13
      for an
      amount in excess of that which would be payable to the applicable Lender under
      such sections.

     

    (g)  Neither
      the Borrower nor the Servicer may assign any of its rights or obligations
      hereunder or any interest herein without the prior written consent of the
      Program Agent and each Managing Agent.

     

    (h)  Notwithstanding
      any other provision of this Agreement to the contrary, any Lender may at any
      time pledge or grant a security interest in all or any portion of its rights
      (including, without limitation, rights to payment of the principal balance
      of
      the Loans and Interest with respect thereto) hereunder to secure obligations
      of
      such Lender to a Federal Reserve Bank, without notice to or consent of the
      Borrower or the Program Agent; provided, that no such pledge or grant of a
      security interest shall release a Lender from any of its obligations hereunder
      or substitute any such pledgee or grantee for such Lender as a party
      hereto.

     

    SECTION
      10.04.   Additional
      Lender Groups.
      Upon
      the Borrower’s request, an additional Lender Group may be added to this
      Agreement at any time by the execution and delivery of a Joinder Agreement
      by
      the members of such proposed additional Lender Group, the Borrower, the
      Servicer, PSE, the Program Agent and each of the Managing Agents, which
      execution and delivery shall not be unreasonably refused by such parties. Upon
      the effective date of such Joinder Agreement, (i) each Person specified therein
      as a “Conduit Lender” shall become a party hereto as a Conduit Lender, entitled
      to the rights and subject to the obligations of a Conduit Lender hereunder,
      (ii)
      each Person specified therein as a “Committed Lender” shall become a party
      hereto as a Committed Lender, entitled to the rights and subject to the
      obligations of a Committed Lender hereunder, (iii) each Person specified therein
      as a “Managing Agent” shall become a party hereto as a Managing Agent, entitled
      to the rights and subject to the obligations of a Managing Agent hereunder
      and
      (iv) the Facility Limit shall be increased by an amount equal to the aggregate
      Commitments of the Committed Lenders party to such Joinder Agreement. On or
      prior to the effective date of such Joinder Agreement, the Borrower and the
      new
      Managing Agent shall enter into an amendment to the Fee Letter for purposes
      of
      setting forth the fees payable to the members of such Lender Group in connection
      with this Agreement.

     

    SECTION
      10.05.   Consent
      to Jurisdiction.

     

    (a)  Each
      party hereto hereby irrevocably submits to the non-exclusive jurisdiction of
      any
      New York State or Federal court sitting in New York City in any action or
      proceeding arising out of or relating to this Agreement, and each party hereto
      hereby irrevocably agrees that all claims in respect of such action or
      proceeding may be heard and determined in such New York State court or, to
      the
      extent permitted by law, in such Federal court. The parties hereto hereby
      irrevocably waive, to the fullest extent they may effectively do so, the defense
      of an inconvenient forum to the maintenance of such action or proceeding. The
      parties hereto agree that a final judgment in any such action or proceeding
      shall be conclusive and may be enforced in other jurisdictions by suit on the
      judgment or in any other manner provided by law.

     

    (b)  Each
      of
      the Borrower and the Servicer consents to the service of any and all process
      in
      any such action or proceeding by the mailing of copies of such process to it
      at
      its address specified in Section
      10.02.
      Nothing
      in this Section
      10.05
      shall
      affect the right of any Lender or the Administrative Agent to serve legal
      process in any other manner permitted by law.

     

    SECTION
      10.06.   WAIVER
      OF JURY TRIAL.
      EACH
      PARTY HERETO HEREBY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
      TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY,
      ANY
      MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING
      OUT
      OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER FACILITY
      DOCUMENT.

     

    SECTION
      10.07.   Right
      of Setoff.
      Each
      Lender (including a Lender which has made Cash Secured Advances) is hereby
      authorized (in addition to any other rights it may have) at any time after
      the
      occurrence of the Termination Date due to the occurrence of an Event of
      Termination, or at any time that any Borrower Obligation hereunder is due and
      payable, to set off, appropriate and apply (without presentment, demand, protest
      or other notice which are hereby expressly waived) any deposits and any other
      indebtedness held or owing by such Lender to, or for the account of, the
      Borrower against the amount of the Borrower Obligations owing by the Borrower
      to
      such Person. Each Lender is hereby authorized (in addition to any other rights
      it may have) at any time after the occurrence of the Termination Date due to
      the
      occurrence of an Event of Termination, or at any time that any payment
      obligation of the Servicer hereunder is due and payable, to set off, appropriate
      and apply (without presentment, demand, protest or other notice which are hereby
      expressly waived) any deposits and any other indebtedness held or owing by
      such
      Lender to, or for the account of, the Servicer against the amount of such
      obligations owing by the Servicer to such Person.

     

    SECTION
      10.08.   Ratable
      Payments.
      If any
      Lender, whether by setoff or otherwise, has payment made to it with respect
      to
      any Borrower Obligations or obligation of the Servicer in a greater proportion
      than that received by any other Lender entitled to receive a ratable share
      of
      such amount, such Lender agrees, promptly upon demand, to purchase for cash
      without recourse or warranty a portion of such Borrower Obligations or Servicer
      obligation held by the other Lenders so that after such purchase each Lender
      will hold its ratable proportion of such Borrower Obligations or Servicer
      obligations, as applicable; provided
      that if
      all or any portion of such excess amount is thereafter recovered from such
      Lender, such purchase shall be rescinded and the purchase price restored to
      the
      extent of such recovery, but without interest.

     

    SECTION
      10.09.   Limitation
      of Liability.

     

    (a)  Except
      with respect to any claim arising out of the willful misconduct or gross
      negligence of any Lender, any Managing Agent, the Program Agent or their
      respective Affiliates, directors, officers, employees, attorneys or agents
      (each
      a “Lender Party”), no claim may be made by any Transaction Party or any other
      Person against any Lender Party for any special, indirect, consequential or
      punitive damages in respect of any claim for breach of contract or any other
      theory of liability arising out of or related to the transactions contemplated
      by this Agreement or any other Facility Document, or any act, omission or event
      occurring in connection herewith or therewith; and each of the Borrower and
      the
      Servicer hereby waives, releases, and agrees not to sue upon any claim for
      any
      such damages, whether or not accrued and whether or not known or suspected
      to
      exist in its favor.

     

    (b)  Notwithstanding
      anything to the contrary contained herein, the obligations of the Conduit
      Lenders under this Agreement are solely the corporate obligations of each such
      Conduit Lender and shall be payable only at such time as funds are actually
      received by, or are available to, such Conduit Lender in excess of funds
      necessary to pay in full all outstanding Promissory Notes issued by such Conduit
      Lender and, to the extent funds are not available to pay such obligations,
      the
      claims relating thereto shall not constitute a claim against such Conduit
      Lender. Each party hereto agrees that the payment of any claim (as defined
      in
      Section 101 of Title 11 of the Bankruptcy Code) of any such party shall be
      subordinated to the payment in full of all Promissory Notes.

     

    (c)  No
      recourse under any obligation, covenant or agreement of any Conduit Lender
      contained in this Agreement shall be had against any incorporator, stockholder,
      officer, director, member, manager, employee or agent of such Conduit Lender
      or
      any of its Affiliates (solely by virtue of such capacity) by the enforcement
      of
      any assessment or by any legal or equitable proceeding, by virtue of any statute
      or otherwise; it being expressly agreed and understood that this Agreement
      is
      solely a corporate obligation of such Conduit Lender, and that no personal
      liability whatever shall attach to or be incurred by any incorporator,
      stockholder, officer, director, member, manager, employee or agent of any
      Conduit Lender or any of its Affiliates (solely by virtue of such capacity)
      or
      any of them under or by reason of any of the obligations, covenants or
      agreements of such Conduit Lender contained in this Agreement, or implied
      therefrom, and that any and all personal liability for breaches by any Conduit
      Lender of any of such obligations, covenants or agreements, either at common
      law
      or at equity, or by statute, rule or regulation, of every such incorporator,
      stockholder, officer, director, member, manager, employee or agent is hereby
      expressly waived as a condition of and in consideration for the execution of
      this Agreement; provided
      that the
      foregoing shall not relieve any such Person from any liability it might
      otherwise have as a result of fraudulent actions taken or fraudulent omissions
      made by them.

     

    SECTION
      10.10.   Taxes.
      The
      Borrower shall pay any and all stamp, sales, transfer and other taxes (including
      income and franchise taxes) and fees (including, without limitation, UCC filing
      fees and any penalties associated with the late payment of any UCC filing fees)
      payable or determined to be payable in connection with the execution, delivery,
      filing and recording of this Agreement or the other agreements and documents
      to
      be delivered hereunder (including any UCC financing statements) and agrees
      to
      indemnify the Program Agent, the Managing Agents, the Lenders and the Liquidity
      Providers against any liabilities with respect to or resulting from any delay
      by
      the Borrower in paying or omission to pay such taxes and fees.

     

    SECTION
      10.11.   No
      Proceedings.
      The
      Borrower, the Servicer, each Lender, each Managing Agent and the Program Agent
      each hereby agrees that it will not institute against any Conduit Lender any
      proceeding of the type referred to in Section
      7.01(d)
      so long
      as any Promissory Notes of such Conduit Lender shall be outstanding or there
      shall not have elapsed one year plus
      one day
      since the last day on which any such Promissory Notes shall have been
      outstanding.

     

    SECTION
      10.12.   Confidentiality.

     

    (a)  By
      accepting delivery of this Agreement, the Borrower agrees not to disclose to
      any
      person or entity the contents of the Fee Letter except (i) to its and its
      affiliates’ officers, directors, employees, agents, accountants, legal counsel
      and other representatives (collectively, the “Borrower
      Representatives”)
      who
      have a need to know the Product Information for the purpose of assisting in
      the
      negotiation and completion of the Transaction and who agree to be bound by
      the
      provisions of this section applicable to the Borrower, (ii) in connection with
      any legal or regulatory action or proceeding relating to this Agreement or
      the
      transactions contemplated hereby or the exercise of any remedies hereunder,
      (iii) to extent required by applicable law, regulation, subpoena or other legal
      process or (iv) to the extent requested by any governmental or regulatory
      authority having jurisdiction over the Borrower, the Originator or any Borrower
      Representative. The Borrower will be responsible for any failure of any Borrower
      Representative to comply with the provisions of this clause (a).

     

    (b)  The
      Program Agent, the Managing Agents and the Lenders will not disclose to any
      person or entity the confidential or proprietary information of the Borrower
      or
      the Originator furnished to the Program Agent, the Managing Agents and the
      Lenders in connection with the Transaction (the “Borrower
      Information”),
      except (i) to their respective and their Affiliates’ officers, directors,
      employees, agents, accountants, legal counsel and other representatives
      (collectively, the “Lender
      Representatives”)
      who
      have a need to know the Borrower Information for the purpose of assisting in
      the
      negotiation and completion of the Transaction and who agree to be bound by
      the
      provisions in this section applicable to the Program Agent, the Managing Agents
      and the Lenders, (ii) to each other, (iii) to any prospective or actual assignee
      or participant of any of them who agree to be bound by the provisions of this
      section, (iv) to the extent required by applicable law, regulation, subpoena
      or
      other legal process, (v) to the extent requested by any governmental or
      regulatory authority having jurisdiction over the Program Agent, the Managing
      Agents, the Lenders or any Lender Representative, (vi) to the Rating Agencies,
      (vii) to any actual or potential subordinated investor in any Conduit Lender
      that has signed a confidentiality agreement containing restrictions on
      disclosure substantially similar to this Section or (vii) to liquidity
      providers, credit enhancers, dealers and investors in respect of Promissory
      Notes of any Conduit Lender in accordance with the customary practices of such
      Lender for disclosures to credit enhancers, dealers or investors, as the case
      may be or any entity organized for purposes of purchasing or making loans
      secured by, financial assets for which any Managing Agent acts as Program Agent
      and who agree to be bound by the provisions of this section. The Program Agent,
      the Managing Agents and each Lender, as the case may be, will be responsible
      for
      any failure of any related Lender Representative to comply with the provisions
      of this clause (b).

     

    (c)  Notwithstanding
      any other provision herein, the Borrower (and its employees, representatives
      or
      other agents) may disclose to any and all persons, without limitation of any
      kind, the U.S. tax treatment and U.S. tax structure of this Agreement and all
      materials of any kind (including opinions or other tax analyses) that are
      provided to such party relating to such U.S. tax treatment and U.S. tax
      structure, other than any information for which nondisclosure is reasonably
      necessary in order to comply with applicable securities laws.

     

    SECTION
      10.13.   No
      Waiver; Remedies.
      No
      failure on the part of the Program Agent, any Managing Agent, any Lender or
      any
      Liquidity Provider to exercise, and no delay in exercising, any right hereunder
      shall operate as a waiver thereof; nor shall any single or partial exercise
      of
      any right hereunder preclude any other or further exercise thereof or the
      exercise of any other right. The remedies herein provided are cumulative and
      not
      exclusive of any remedies provided by law.

     

    SECTION
      10.14.   GOVERNING
      LAW.
      THIS
      AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
      WITH, THE LAWS OF THE STATE OF NEW YORK.

     

    SECTION
      10.15.   Execution
      in Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and all of which when taken together
      shall constitute one and the same agreement. Delivery of an executed counterpart
      of a signature page to this Agreement by facsimile shall be effective as
      delivery of a manually executed counterpart of this Agreement.

     

    SECTION
      10.16.   Integration;
      Binding Effect; Survival of Termination.
      This
      Agreement and the other Facility Documents executed by the parties hereto on
      the
      date hereof contain the final and complete integration of all prior expressions
      by the parties hereto with respect to the subject matter hereof and shall
      constitute the entire agreement among the parties hereto with respect to the
      subject matter hereof superseding all prior oral or written understandings.
      This
      Agreement shall be binding upon and inure to the benefit of the parties hereto
      and their respective successors and permitted assigns (including any trustee
      in
      bankruptcy). Any provisions of this Agreement which are prohibited or
      unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
      to the extent of such prohibition or unenforceability without invalidating
      the
      remaining provisions hereof, and any such prohibition or unenforceability in
      any
      jurisdiction shall not invalidate or render unenforceable such provision in
      any
      other jurisdiction. This Agreement shall create and constitute the continuing
      obligations of the parties hereto in accordance with its terms and shall remain
      in full force and effect until the Final Collection Date; provided,
      however,
      that
      the provisions of 2.10,
      2.11,
      2.12
      and
      Article VIII, and the provisions of Sections
      10.06,
      10.09,
      10.10,
      10.11
      and
10.12
      shall
      survive any termination of this Agreement.

     

    


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    




    





    


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

     

    
      	 	
              PSE
                FUNDING, INC.,

            
	 	
              As
                Borrower

            
	 	 
	 	 
	 	
              By:
                /s/ Donald E. Gaines

            
	 	
              Name:
                Donald E. Gaines

            
	 	
              Title:
                President and Treasurer

            
	 	 
	 	 
	 	
              PUGET
                SOUND ENERGY, INC.,

            
	 	
              as
                Servicer

            
	 	 
	 	 
	 	
              By:
                /s/ Donald E. Gaines

            
	 	
              Name:
                Donald E. Gaines

            
	 	
              Title:
                Vice President Finance and Treasurer

            
	 	 
	 	 


    

    



    
      
        Signature
          Page to

        Loan
          and
          Servicing Agreement

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    
      	 	
              JPMORGAN
                CHASE BANK, N.A.,

            
	 	
              As
                Program Agent, as a Managing Agent and as a Committed
                Lender

            
	 	 
	 	 
	 	
              By:
                /s/ William W. Wood

            
	 	
              Name:
                William W. Wood

            
	 	
              Title:
                Vice President

            
	 	 
	 	 
	 	
              JUPITER
                SECURITIZATION CORPORATION

            
	 	
              as
                a Conduit Lender

            
	 	 
	 	 
	 	
              By:

            	
              JPMorgan
                Chase Bank, N.A.,

              attorney-in-fact

            
	 	 
	 	 
	 	
              By:
                /s/ William W. Wood

            
	 	
              Name:
                William W. Wood

            
	 	
              Title:
                Vice President

            
	 	 
	 	 
	 	 


    

    



    
      
        Signature
          Page to

        Loan
          and
          Servicing Agreement

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    
      	 	
              CITICORP
                NORTH AMERICA, INC.,

            
	 	
              as
                a Managing Agent

            
	 	 
	 	 
	 	
              By:
                /s/ Richard C. Simons

            
	 	
              Name:
                Richard C. Simons

            
	 	
              Title:
                Vice President

            
	 	 
	 	 
	 	
              CAFCO,
                LLC

            
	 	
              as
                a Conduit Lender

            
	 	 
	 	 
	 	
              By:

            	
              Citicorp
                North America, Inc.,

              as
                Attorney-in-Fact

            
	 	 
	 	 
	 	
              By:
                /s/ Richard C. Simons

            
	 	
              Name:
                Richard C. Simons

            
	 	
              Title:
                Vice President

            
	 	 
	 	 
	 	
              CITIBANK,
                NORTH AMERICA, INC.,

            
	 	
              as
                a Committed Lender

            
	 	 
	 	 
	 	
              By:
                /s/ Richard C. Simons

            
	 	
              Name:
                Richard C. Simons

            
	 	
              Title:
                Vice President 

            
	 	 


    

    


    



    
      
        
          Signature
            Page to

          Loan
            and
            Servicing Agreement

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          


        

      

    



    


    


    EXHIBIT
      A

     

    CREDIT
      AND COLLECTION POLICY 

     

    


     

    Attached

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    

      


      EXHIBIT
        B

       

      FORM
        OF
        BORROWING REQUEST 

       

      [DATE]

       

      
        	
                To:

              	
                JPMorgan
                  Chase Bank, N.A., as a Managing Agent Citicorp North America, Inc.,
                  as a
                  Managing Agent From:

              
	 	 
	
                From:

              	
                PSE
                  Funding, Inc. (the “Borrower”)

              
	 	 
	
                Re:

              	
                Loan
                  and Servicing Agreement, dated as of December 20, 2005 among the
                  Borrower,
                  Puget Sound Energy, Inc., as Servicer, the Persons from time to
                  time party
                  thereto as Conduit Lenders, the financial institutions from time
                  to time
                  party thereto as Committed Lenders, the Persons from time to time
                  party
                  thereto as Managing Agents and JPMorgan Chase Bank, N.A., as Program
                  Agent
                  for the Conduit Lenders and the Committed Lenders (as amended,
                  restated,
                  supplemented or otherwise modified from time to time, the “Agreement”).
                  Capitalized terms used but not defined herein shall have the meanings
                  given to them in the Agreement.

              
	 	 
	
                A.

              	
                (i)

              	
                Pursuant
                  to Section
                  2.02(a)
                  of
                  the Agreement, the undersigned hereby requests a Borrowing from
                  each
                  Lender Group in an aggregate amount equal to the following (which
                  shall be
                  at least $500,000, or integral multiples of $50,000 in excess
                  thereof):

              	
                $

              


      

       

      
        
          	
                  Lender
                    Group

                  (identified
                    by related Managing Agent)

                	
                  Dollar
                    Amount of Borrowing

                
	
                  JPMorgan
                    Chase Bank, N.A.

                	 	
                  $_______________

                
	
                  Chicago
                    North America, Inc.

                	 	
                  $_______________

                
	
                  Total

                	 	
                  $_______________

                


        

      

       

      
        	 	 
	 	
                (ii)

              	
                The
                  requested Borrowing Date is:

              	 
	 	 	 	 
	 	
                (iii)

              	
                The
                  Aggregate Principal Balance under the Agreement after giving effect
                  to the
                  requested Borrowing under (i) above will equal:

              	
                $

              
	 	 	 	 
	 	
                (iv)

              	
                The
                  proceeds of the requested Borrowing are requested to be remitted
                  to the
                  following account of the Borrower:

              	 
	 	 	 	 
	 	
                (v)

              	
                If
                  Conduit Lenders have declined to fund, the Borrower requests a
                  Loan based
                  on [LIBOR for a term of [___] months][the Base Rate].

              	 
	 
	
                B.

              	
                As
                  of the date hereof and the Borrowing Date of such
                  Borrowing:

              	 
	 
	 	
                (i)

              	
                The
                  representations and warranties contained in Article IV of the Agreement
                  are true and correct unless such representation and warranties
                  by their
                  terms refer to an earlier date, in which case they shall be correct
                  on and
                  as of such earlier date;

              	 
	 	 	 	 
	 	
                (ii)

              	
                No
                  event has occurred and is continuing, or would result from the
                  Borrowing
                  requested hereunder, that constitutes an Event of Termination or
                  an
                  Incipient Event of Termination; and

              	 
	 	 	 	 
	 	
                (iii)

              	
                After
                  giving effect to the requested Borrowing, no Borrowing Base Deficiency
                  shall exist.

              	 
	 	 	 	 
	 	
                (iv)

              	
                All
                  other conditions precedent set forth in Section 3.02 of the Agreement
                  have
                  been satisfied.

              	 
	 	 	 	 
	
                The
                  undersigned certifies that this Borrowing Request is correct in
                  all
                  material respects as of the date furnished.

              
	 	 	 
	 	 	 	
                PSE
                  FUNDING, INC.

              
	 	 	 	 
	 	 	 	 
	 	 	 	
                By:
                  ____________________________

              
	 	 	 	
                 Name:

              	
              
	 	 	 	
                 Title:

              	
                 

              


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


                                       

    

     



    


    EXHIBIT
      C-1

     

    FORM
      OF
      MONTHLY REPORT

     

    


     

    Attached

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    EXHIBIT
      C-2

     

    FORM
      OF
      WEEKLY REPORT 

     

    


     

    Attached
      

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    EXHIBIT
      C-3

     

    FORM
      OF
      DAILY REPORT

     

    


     

    Attached

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    EXHIBIT
      D

     

    FORM
      OF
      BLOCKED ACCOUNT AGREEMENT

     

    


     

    Attached

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    EXHIBIT
      E

     

    JURISDICTION
      OF ORGANIZATION; PLACES OF BUSINESS AND LOCATIONS OF RECORDS

    


    
      	
              Jurisdiction
                of Organization

            	
              ·  WA

               

            
	
              Chief
                Executive Office/Principal Place of Business

            	
              ·  10885
                NE 4th
                Street, Bellevue, WA 98004

               

            
	
              Location(s)
                of Records

            	
              ·  10885
                NE 4th
                Street, Bellevue, WA 98004

               

              ·  19900
                North Creek Parkway Bothell, WA 98012

               

            
	
              Organizational
                Number

            	
              ·  602-565-535

               

            
	
              Federal
                Employer's Identification Number

            	
              ·  20-3949361

               

            
	
              Other
                Names

            	
              ·  None

            


    

    


    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    EXHIBIT
      F

     

    LIST
      OF
      ALTERNATE PAYMENT LOCATIONS; DEPOSIT ACCOUNTS; DEPOSIT ACCOUNT BANKS AND
      LOCK-BOXES 

     

    
      	
              Lock-Box

            	
              Related
                Deposit Account

            
	
              P.O.
                Box No. 91269 at the U.S. Post Office branch located at 103rd
                Avenue NE, Bellevue, WA 98004

            	
              Union
                Bank of California Account no. 4430000808 for receipts from Payment
                Processing

            
	
              N/A

            	
              Union
                Bank of California Account no. 4430000816 for receipts from Bill
                Payment
                Consolidator

            
	
              N/A

            	
              Key
                Bank Account no. 479681024614 for Government Electronic Receipts,
                APS
                Receipts, Business Office Deposits

            
	
              N/A

            	
              Key
                Bank Account no. 479681024655 for receipts from Customer Internet
                Payments

            
	
              N/A

            	
              Key
                Bank Account no. 479681052383 for receipts from
                Checkfree

            
	
              N/A

            	
              Key
                Bank Account no. 479681024663 for receipts from Customer Credit Card
                Payments

            
	
              N/A

            	
              Citibank
                Account no. 30599544 for receipts from Customer Direct
                Debits

            
	
              N/A/

            	
              U.S.
                Bank Account no. 153501775586 for receipts from Port Townsend Business
                Office.

            


    

    


     

    


     

    List
      of
      Alternate Payment Locations

     

    
      	
              1.
                Internet via PSE’s customer website found at: http://www.pse.com/account/paying/ebill.html

            
	
              2.
                PSE Pay Station locations listed on PSE’s customer website found at:
                http://www.pse.com/account/paystations/paystations.html.

            
	
              3.
                Automatic Funds Transfer via a debit by PSE’s collection bank of the
                Customer’s bank account and a credit to a Deposit
                Account

            
	
              4.
                Credit card Payments via
                Payment-by-Phone

            


    

    


    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    EXHIBIT
      G

     

    LIST
      OF
      CLOSING DOCUMENTS

     

    Attached

     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    EXHIBIT
      H

     

    FORM
      OF
      ASSIGNMENT AND ACCEPTANCE 

     

    Dated
      as
      of [Date]

     

    Reference
      is made to the Loan and Servicing Agreement, dated as of December 20, 2005,
      among PSE Funding, Inc., as Borrower, Puget Sound Energy, Inc., as Servicer,
      the
      Persons from time to time party thereto as Conduit Lenders, the financial
      institutions from time to time party thereto as Committed Lenders, the Persons
      from time to time party thereto as Managing Agents and JPMorgan Chase Bank,
      N.A., as Program Agent for the Conduit Lenders and the Committed Lenders (as
      amended, restated, supplemented or otherwise modified from time to time, the
      “Agreement”).
      Terms
      defined in the Agreement are used herein with the same meaning.

     

    [Assigning
      Lender] (the “Assignor”),
      [Assignee]
      (the
“Assignee”)
      and
      [Assignor’s
      Managing Agent],
      in its
      capacity as Managing Agent for the Lender Group which includes the Assignor
      [and
      the Assignee] (in such capacity, the “Managing
      Agent”),
      hereby agree as follows:

     

    1. Purchase
      and Sale of Interest.
      The
      Assignor hereby sells and assigns to the Assignee, and the Assignee hereby
      purchases and assumes from the Assignor, an interest in and to all of the
      Assignor’s rights and obligations under the Agreement as of the date hereof
      (including, without limitation, its [Commitment] [Conduit Lending Limit] and
      all
      Loans, if any, or interests therein held by it) equal to the percentage (the
      “Percentage”)
      interest specified on the signature page hereto. After giving effect to such
      sale and assignment, [the Assignee will be a [Committed] [Conduit] Lender in
      the
      Lender Group that includes [__________] as the Managing Agent and] the
      Assignee’s [Commitment] [Conduit Lending Limit] will be as set forth in Section
      2 of the signature page hereto. [As consideration for the sale and assignment
      contemplated in this Section 1, the Assignee shall pay to the Assignor on the
      Effective Date (as hereinafter defined) in immediately available funds an amount
      equal to $[__________], representing the purchase price payable by the Assignee
      for the interests in the transferred interest sold and assigned to the Assignee
      under this Section 1.]1 

     

    2. Representations
      and Disclaimers of Assignor.
      The
      Assignor:

     

    (a) represents
      and warrants that it is the legal and beneficial owner of the interest being
      assigned by it hereunder and that such interest is free and clear of any adverse
      claim;

     

    (b) makes
      no
      representation or warranty and assumes no responsibility with respect to any
      statements, warranties or representations made in or in connection with any
      Facility Document or any other instrument or document furnished pursuant thereto
      or the execution, legality, validity, enforceability,
      genuineness, sufficiency or value of any Facility Document or any other
      instrument or document furnished pursuant thereto; and

     

    (c) makes
      no
      representation or warranty and assumes no responsibility with respect to the
      financial condition of the Originator, the Borrower or the Servicer, or the
      performance or observance by any such party of any of its respective obligations
      under the Facility Documents or any other instrument or document furnished
      pursuant thereto.

     

    3. Representations
      and Agreements of Assignee.
      The
      Assignee:

     

    (a) confirms
      that it has received a copy of the Agreement, together with copies of the most
      recent financial statements delivered pursuant to Section
      5.01(a)
      of the
      Agreement 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
      Acceptance;

     

    (b) agrees
      that it will, independently and without reliance upon the Program Agent, any
      Managing Agent, the Assignor or any other Lender and based on such documents
      and
      information as it shall deem appropriate at the time, continue to make its
      own
      credit decisions in taking or not taking action under the
      Agreement;

     

    (c) [appoints
      and authorizes the Program Agent and [__________], as its Managing Agent, to
      take such action as agent on its behalf and to exercise such powers under the
      Agreement and the other Facility Documents as are delegated to the Program
      Agent
      and such Managing Agent, respectively, by the terms thereof, together with
      such
      powers as are reasonably incidental thereto;]

     

    (d) agrees
      that it will perform in accordance with their terms all of the obligations
      which
      by the terms of the Agreement and this Assignment and Acceptance are required
      to
      be performed by it as a [Committed] [Conduit] Lender;

     

    (e) specifies
      as its address for notices the office set forth beneath its name on the
      signature pages hereof; and

     

    (f) represents
      that this Assignment and Acceptance has been duly authorized, executed and
      delivered by the Assignee pursuant to its [corporate] powers and constitutes
      the
      legal, valid and binding obligation of the Assignee.

     

    4. Effectiveness
      of Assignment.
      Following the execution of this Assignment and Acceptance by the Assignor,
      the
      Managing Agent, [and] the Assignee, [the Borrower and the Servicer,] it will
      be
      delivered to the Program Agent for acceptance and recording by the Program
      Agent. The effective date of this Assignment and Acceptance shall be the date
      of
      acceptance thereof by the Program Agent, unless otherwise specified in Section
      3
      of the signature page hereto (the “Effective
      Date”).

     

    5. Rights
      of the Assignee.
      Upon
      such acceptance and recording by the Program Agent, as of the Effective Date,
      [(i) the Assignee shall be a party to the Agreement and, to the extent provided
      in this Assignment and Acceptance, have the rights and obligations of a
      [Committed] [Conduit] Lender thereunder and hereunder and (ii)] the Assignor
      shall, to the extent provided in this Assignment and Acceptance, relinquish
      its
      rights and be released from its obligations under the Agreement.

     

    6. Payments.
      Upon
      such acceptance and recording by the Program Agent, from and after the Effective
      Date, all payments under the Agreement in respect of the interest assigned
      hereby (including, without limitation, all payments of fees with respect
      thereto) shall be made to the Assignee or the Assignee’s Managing Agent, for the
      benefit of the Assignee, in accordance with the Agreement. The Assignor and
      Assignee shall make all appropriate adjustments in payments under the Agreement
      for periods prior to the Effective Date directly between
      themselves.

     

    7. GOVERNING
      LAW.
      THIS
      ASSIGNMENT AND ACCEPTANCE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
      ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401
      OF
      THE GENERAL OBLIGATIONS LAWS BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW
      PRINCIPLES).

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance
      to be executed by their respective officers thereunto duly authorized, as of
      the
      date first above written.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    Signature
      Page to 

     

    Assignment
      and Acceptance 

     

    Dated
      as
      of [Date]

     

    
      	
              Section
                1.

            
	
                                                        
                Percentage:

            	
            	
              ________%

            
	 
	
              Section
                2.

            	 
	 	
              Assignee’s
                [Commitment] [Conduit Lending Limit] as of the

            
	 	
              Effective
                Date:

            	
              $_____________

            
	 
	 	
              Principal
                Balance of Loans

            
	 	
              held
                by Assignee as of the Effective Date:

            	
              $_____________

            
	 
	
              Section
                3.

            	 
	 
	 	
              Effective
                Date:* *

            	
              _________,
                200__

            
	 
	 	
              [NAME
                OF ASSIGNOR]

            
	 	 
	 	
              By:__________________________________

            
	 	 	
              Name:

            
	 	 	
              Title:

            
	 	 
	 	
              [NAME
                OF ASSIGNEE]

            
	 	 
	 	
              By:___________________________________

            
	 	 	
              Name:

            
	 	 	
              Title:

            
	 	 
	 	
              Address
                for Notices:

            
	 	
              [Insert]

            
	 	 
	 	
              Accepted
                this _____ day of

            
	 	
              ______________,
                200__

            
	 	 
	 	
              JPMorgan
                Chase Bank, N.A.,

            
	 	
              As
                Program Agent

            
	 	 
	 	
              By:
                __________________________________

            
	 	 	
              Name:

            
	 	 	
              Title:

            
	 	 	 
	
              AGREED
                TO THIS ____ DAY OF _______, 200___:

            
	 	 	 
	 	 	 
	
              [NAME
                OF MANAGING AGENT],

            	 	 
	
              as
                Managing Agent

            	 	 
	 
	 
	
              By:___________________________________

            
	 	
              Name:

            
	 	
              Title:

            
	 	 
	
              PSE
                FUNDING, INC.,

            
	
              as
                Borrower

            	 
	 	 
	 	 
	
              By:___________________________________

            
	 	
              Name:

            
	 	
              Title:

            
	 	 
	 	 
	
              PUGET
                SOUND ENERGY INC.,

            
	
              as
                Servicer

            
	 
	 
	
              By:___________________________________

            
	 	
              Name:

            
	 	
              Title:

            


    

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    EXHIBIT
      I


     

    FORM
      OF
      JOINDER AGREEMENT 

     

    Reference
      is made to the Loan and Servicing Agreement, dated as of December 20, 2005,
      among PSE Funding, Inc., as Borrower, Puget Sound Energy Inc., as Servicer,
      the
      Persons from time to time party thereto as Conduit Lenders, the financial
      institutions from time to time party thereto as Committed Lenders, the Persons
      from time to time party thereto as Managing Agents and JPMorgan Chase Bank,
      N.A., as Program Agent for the Conduit Lenders and the Committed Lenders (as
      amended, restated, supplemented or otherwise modified from time to time, the
      “Agreement”).
      To
      the extent not defined herein, capitalized terms used herein have the meanings
      assigned to such terms in the Agreement.

     

    [New
      Managing Agent]
      (the
“New
      Managing Agent”),
      [New
      Conduit Lender(s)]
      (the
“New
      Conduit Lender(s)”)
      and
      [New
      Committed Lender(s)]
      (the
“New
      Committed Lender(s)”;
      and
      together with the New Managing Agent and New Conduit Lender(s), the
“New
      Lender Group”)
      agree
      as follows:

     

    1. By
      execution and delivery of this Joinder Agreement and pursuant to Section
      10.04
      of the
      Agreement, the New Lender Group elects to become a “Lender Group” under the
      Agreement.

     

    2. The
      effective date (the “Effective
      Date”)
      of
      this Joinder Agreement shall be the later of (i) the date on which a fully
      executed copy of this Joinder Agreement is delivered to the Program Agent,
      (ii)
      the date of this Joinder Agreement [and (iii) the effective date of that certain
      assignment agreement of even date herewith between the [New Committed Lender]
      [New Conduit Lender] and [Name
      of [Committed] [Conduit] Lender Assignor].

     

    3. By
      executing and delivering this Joinder Agreement, each of the New Managing Agent,
      the New Conduit Lender(s) and the New Committed Lender(s) confirms to and agrees
      with each other party to the Agreement that (i) it has received a copy of the
      Agreement and such other documents and information as it has deemed appropriate
      to make its own credit analysis and decision to enter into this Joinder
      Agreement; (ii) it will, independently and without reliance upon the Program
      Agent, any other Managing Agent, any other 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 Agreement or any documents or agreements to be
      delivered thereunder; (iii) it appoints and authorizes the Program Agent to
      take
      such action as agent on its behalf and to exercise such powers pursuant to
      Article
      IX
      of the
      Agreement; (iv) it will perform in accordance with their terms all of the
      obligations which by the terms of the Agreement and the documents or agreements
      to be delivered thereunder are required to be performed by it as a Managing
      Agent, a Conduit Lender, or a Committed Lender, respectively; (v) its address
      for notices shall be the office set forth beneath its name on the signature
      pages of this Joinder Agreement; (vi) the Lender Group Limit for the New Lender
      Group shall be as set forth on the signature page hereto; and (vii) it is duly
      authorized to enter into this Joinder Agreement.

     

    4. On
      the
      Effective Date of this Joinder Agreement, each of the New Managing Agent, the
      New Conduit Lender(s) and the New Committed Lender(s) shall join in and be
      a
      party to the Agreement and, to the extent provided in this Joinder Agreement,
      shall have the rights and obligations of a Managing Agent, a Conduit Lender
      and
      a Committed Lender, respectively, under the Agreement. Schedule
      I
      to the
      Agreement shall be amended to incorporate the information set forth on
Schedule
      I
      to this
      Joinder Agreement and Schedule
      II shall
      be
      amended to incorporate the notice addresses set forth on the signature pages
      to
      this Joinder Agreement.

     

    5. This
      Joinder Agreement may be executed by one or more of the parties on any number
      of
      separate counterparts, and all of said counterparts taken together shall be
      deemed to constitute one and the same instrument.

     

    6. THIS
      JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
      LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL
      OBLIGATIONS LAWS BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW
      PRINCIPLES).

     

    7. Each
      of
      the parties hereto hereby waives any right to have a jury participate in
      resolving any dispute, whether sounding in contract, tort, or otherwise between
      or among the parties hereto, or any of them, arising out of, connected with,
      related to, or incidental to the relationship between them in connection with
      this Joinder Agreement. Instead, any dispute resolved in court will be resolved
      in a bench trial without a jury.

     

    REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    IN
      WITNESS WHEREOF, the parties hereto have caused this Joinder Agreement to be
      executed by their respective officers thereunto duly authorized, as of this
      [__]
      day of [________], [20__].

     

    The
      “Lender Group Limit” for the New Lender Group is $[________].

     

    
      	 	
              NEW
                CONDUIT LENDER(S)

            
	 	 
	 	
              [NAME(S)]

            
	 	 
	 	 
	 	
              By:__________________________________

            
	 	
              Name:

            
	 	
              Title:

            
	 	 
	 	
              Address
                or notices:

            
	 	
              [Address]

            
	 	 
	 	
              NEW
                MANAGING AGENT:

            
	 	 
	 	
              [NAME]

            
	 	 
	 	
              By:___________________________________

            
	 	
              Name:

            
	 	
              Title:

            
	 	 
	 	
              Address
                for Notices:

            
	 	
              [Address]

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    
      	 	 	 
	
              AGREED
                TO THIS ____ DAY OF _______, 200___:

            
	 	 	 
	
              JPMORGAN
                CHASE BANK, N.A.,

            	 	 
	
              as
                Program Agent

            	 	 
	 
	 
	
              By:___________________________________

            	 
	 	
              Name:

            	 
	 	
              Title:

            	 
	 
	 	 
	
              [EACH
                MANAGING AGENT],

            
	
              as
                a Managing Agent

            	 
	 	 
	 
	
              By:___________________________________

            	 
	 	
              Name:

            	 
	 	
              Title:

            	 
	 	 
	 	 
	
              PSE
                FUNDING, INC.,

            
	
              as
                Borrower

            
	 
	
              By:___________________________________

            	 
	 	
              Name:

            	 
	 	
              Title:

            	 
	 	 
	 	 
	
              PUGET
                SOUND ENERGY INC.,

            
	
              as
                Servicer

            
	 
	 
	
              By:___________________________________

            	 
	 	
              Name:

            	 
	 	
              Title:

            	 


    

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    SCHEDULE
      I 

     

    
      	
              Reference
                Bank for New Lender Group:

            	 
	 	 
	
              Conduit
                Lending Limit(s) for New Conduit Lender(s):

            	 
	 	 
	 	 
	 	 
	
              Commitment(s)
                of New Committed Lender(s):

            	 
	 	 
	 	 
	 	 


    

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    EXHIBIT
      J

     

    FORM
      OF
      PREPAYMENT NOTICE 

     

    [Date]

     

    
      	
              To:

            	
              JPMorgan
                Chase Bank N.A., as Program Agent,

            
	 	
              JPMorgan
                Chase Bank N.A., as a Managing Agent

            
	 	
              Citicorp
                North America, Inc., as a Managing Agent

            
	 
	
              From:

            	
              PSE
                Funding, Inc. (the “Borrower”)

            
	 
	
              Re:

            	
              Loan
                and Servicing Agreement, dated as of December 20, 2005, among the
                Borrower, Puget Sound Energy, Inc., as Servicer, the Persons from
                time to
                time party thereto as Conduit Lenders, the financial institutions
                from
                time to time party thereto as Committed Lenders, the Persons from
                time to
                time party thereto as Managing Agents and JPMorgan Chase Bank, N.A.,
                as
                Program Agent for the Conduit Lenders and the Committed Lenders (as
                amended, restated, supplemented or otherwise modified from time to
                time,
                the “Agreement”). Terms defined in the Agreement are used herein with the
                same meaning.

            
	 
	
              Pursuant
                to Section
                2.05
                of
                the Agreement, the undersigned hereby notifies each Managing Agent
                of its
                intent to make certain prepayments (which shall be made ratably among
                the
                Lenders based on the aggregate outstanding Principal Balance of the
                Loans
                held by each) as outlined below. This notice must be received no
                later
                than 11:00 A.M. (New York City time) three (3) Business Days prior
                to the
                date of such payment.

            
	 
	
              1.

            	
              The
                aggregate amount (which shall be at least $2,000,000, or integral
                multiples of $1,000,000 in excess thereof) of the prepayment is:
                $_____________

            
	 
	
              2.

            	
              The
                Loans to which such prepayment is to be applied are as
                follows:

            
	 
	
              Lender

            	
              Borrowing

            	
              Principal
                balance

              (before
                giving effect to

              prepayment)`

            	
              Amount
                of Prepayment

            
	 	 	 	 
	 	 	 	 
	 
	
              3.

            	
              The
                Business Day upon which the undersigned shall make such prepayment
                is:
                ______________.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    
      	 
	
              The
                undersigned hereby certifies that this prepayment notice is correct
                in all
                material respects as of the date so furnished.

            
	 	 
	 	
              PSE
                FUNDING, INC.

            
	 	 
	 	 
	 	
              By:
                _____________________________

            
	 	
              Name:

            
	 	
              Title:

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    EXHIBIT
      K

     

    FORM
      OF
      LOCK-BOX TRANSFER NOTICE

     

    Attached

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    EXHIBIT
      L

     

    FORM
      OF
      COMPLIANCE CERTIFICATE

    


    Attached


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    SCHEDULE
      I

     

    LENDER
      GROUPS

     

    


     

    


     

    
      	
              JPMorgan
                Chase Bank N.A. Lender Group

            
	 	 
	
              Managing
                Agent:

            	
              JPMorgan
                Chase Bank, N.A.

            
	 	 
	
              Conduit
                Lender:

            	
              Jupiter
                Securitization Corporation

            
	 	 
	
              Conduit
                Lending Limit:

            	
              $100,000,000

            
	 	 
	
              Committed
                Lender:

            	
              JPMorgan
                Chase Bank, N.A.

            
	 	 
	
              Commitments:

            	
              $100,000,000

            
	 	 
	
              Reference
                Bank:

            	
              JPMorgan
                Chase Bank, N.A.

            
	 	 
	 	 
	 	 
	
              Citicorp
                North America, Inc. Lender Group

            
	 	 
	
              Managing
                Agent:

            	
              Citicorp
                North America, Inc.

            
	 	 
	
              Conduit
                Lender:

            	
              CAFCO,
                LLC

            
	 	 
	
              Conduit
                Lending Limit:

            	
              $100,000,000

            
	 	 
	
              Committed
                Lender:

            	
              Citibank,
                N.A.

            
	 	 
	
              Commitments:

            	
              $100,000,000

            
	 	 
	
              Reference
                Bank:

            	
              Citibank,
                N.A.

            
	 	 


    

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    SCHEDULE
      II

     

    NOTICE
      ADDRESSES

     

    
      	 	 
	
              JPMorgan
                Chase Bank, N.A.

            	 
	
              1
                Bank One Plaza

            	 
	
              Suite
                IL1-0079

            	 
	
              Chicago,
                IL 60670

            	 
	
              Attention:
                Asset Backed Securities

            	 
	
              Telephone:
                (312) 732-7206

            	 
	
              Facsimile
                No.: (312) 732-1844

            	 
	
              E-mail:
                abs.treasury.dept@jpmorgan.com

            	 
	 	 
	 	 
	
              Jupiter
                Securitization Corporation

            	 
	
              c/o
                JPMorgan Chase Bank, N.A.

            	 
	
              1
                Bank One Plaza

            	 
	
              Suite
                IL1-0079

            	 
	
              Chicago,
                IL 60670

            	 
	
              Attention:
                Asset Backed Securities

            	 
	
              Telephone:
                (312) 732-7206

            	 
	
              Facsimile
                No.: (312) 732-1844

            	 
	
              E-mail:
                abs.treasury.dept@jpmorgan.com

            	 
	 	 
	 	 
	
              Citicorp
                North America, Inc.

            	 
	
              Citigroup
                Global Securitized Markets

            	 
	
              450
                Mamaroneck Avenue

            	 
	
              Harrison,
                New York 10528

            	 
	
              Attention:
                Global Securitization

            	 
	
              Facsimile
                No.: (914) 899-7890

            	 
	 	 
	 	 
	
              CAFCO,
                LLC

            	 
	
              450
                Mamaroneck Avenue

            	 
	
              Harrison,
                New York 10528

            	 
	
              Attention:
                Global Securitization

            	 
	
              Fax: (914)
                899-7890

            	 
	 	 
	 	 
	
              Citibank,
                N.A.

            	 
	
              388
                Greenwich Street

            	 
	
              New
                York, New York 10013

            	 
	
              Attention:
                Global Securitization

            	 
	
              Fax: (212)
                816-0262

            	 
	 	 
	 	 
	
              PSE
                Funding, Inc. 

            	 
	
              Address:

            	 
	
              10885
                NE 4th
                Street, PSE-08N

            	 
	
              Bellevue,
                WA 98004-5591

            	 
	
              Telephone:
                (425) 462-3752

            	 
	
              Facsimile
                No.: (425) 462-3490

            	 
	 	 
	
              Mailing
                Address for Notices:

            	 
	
              P.O.
                Box 97034

            	 
	
              Bellevue,
                WA 98009-9734

            	 
	
              Attention:
                Lisa Rice, Assistant Treasurer

            	 
	 	 
	 	 
	
              Puget
                Sound Energy, Inc.

            	 
	
              Address:

            	 
	
              10885
                NE 4th
                Street, PSE-08N

            	 
	
              Bellevue,
                WA 98004-5591

            	 
	
              Telephone:
                (425) 462-3752

            	 
	
              Facsimile
                No.: (425) 462-3490

            	 
	 	 
	
              Mailing
                Address for Notices:

            	 
	
              P.O.
                Box 97034

            	 
	
              Bellevue,
                WA 98009-9734

            	 
	
              Attention:
                Lisa Rice, Assistant Treasurer

            	 
	 	 
	 	 
	 	 


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    SCHEDULE
      III

     

    SPECIAL
      CONCENTRATION LIMITS

     

    


     

    


     

    None.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    


     

    SCHEDULE
      IV

     

    CONCENTRATION
      PERCENTAGES

     

    
      	 	
              Unbilled
                Overconcentration Percentage

               

            	
              Customer
                Deposit Overconcentration Percentage

               

            	
              Taxes
                Overconcentration Percentage

               

            	
              Government
                Receivables Overconcentration Percentage

               

            
	
              Level
                I 

              Ratings
                Period

            	
              100.00%

            	
              100.00%

            	
              100.00%

            	
              5.0%

            
	
              Level
                2 

              Ratings
                Period

            	
              100.00%

            	
              100.00%

            	
              100.00%

            	
              5.0%

            
	
              Level
                2A 

              Ratings
                Period

            	
              100.00%

            	
              75.0%

            	
              100.00%

            	
              5.0%

            
	
              Level
                3 

              Ratings
                Period

            	
              95.0%

            	
              50.0%

            	
              100.00%

            	
              5.0%

            
	
              Level
                4 

              Ratings
                Period

            	
              90.0%

            	
              0.0%

            	
              50.0%

            	
              0.0%

            
	
              Level
                4A

              Ratings
                Period

            	
              90.0%

            	
              0.0%

            	
              50.0%

            	
              0.0%

            
	
              Level
                5 

              Ratings
                Period

            	
              70.0%

            	
              0.0%

            	
              0.0%

            	
              0.0%

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    SCHEDULE
      V

     

    LIST
      OF
      APPROVED SUB-SERVICERS

     

    CheckFreePay

    15
      Sterling Drive

    P.O.
      Box
      5044

    Wallingford,
      Connecticut 06492

    


    


    Checkfree
      Corp.

    4411
      E.
      Jones Bridge Rd.

    Norcross,
      GA 30092

    


    


    Bank
      of
      America Merchant Services

    PO
      Box
      2485

    Spokane,
      WA 99210-2485