Document:

ggloanmod.htm

LOAN EXTENSION AND MODIFICATION AGREEMENT

 

THIS LOAN EXTENSION AND MODIFICATION AGREEMENT (“Agreement”) is entered into as of February 27, 2013, by and between National Integrity Life Insurance Company, a New York corporation (“Lender”), and NetREIT Garden Gateway LP, a California limited partnership (“Borrower”).

 

R E C I T A L S

 

A.           Borrower is indebted to Lender under a loan (the “Loan”) as evidenced by a promissory note (the “Note”), dated as of March 21, 2007, in the original principal amount of $11,000,000.00, by NetREIT, Inc., a Maryland corporation, previously NetREIT, a California corporation (“Original Borrower”), as maker, to the order of Lender, as assumed by Borrower as evidenced by that certain Memorandum of Loan Assumption, dated as of March 19, 2010, by and between Borrower, as trustor, and Lender, and recorded May 10, 2010 under Reception No. 210043360 in the Official Records of El Paso County, Colorado (the “County”).  The Note is secured by, among other things, that certain Deed of Trust to Public Trustee, Security Agreement, Assignment of Leases and Rents and, Fixture Filing, dated as of March 21, 2007 (the “Deed of Trust”), by Borrower, as successor in interest to Original Borrower, as trustor, for the benefit of Lender, as beneficiary, recorded on March 23, 2007 under Reception No. 207040032 in the Official Records of the County.

 

B.           The Note, the Deed of Trust, and any and all other documents, agreements and instruments evidencing, governing or securing the Loan executed prior to the date hereof are referred to herein as the “Existing Loan Documents”.

 

C.           The Loan is guaranteed by Jack K. Heilbron and Kenneth W. Elsberry, each an individual (collectively, “Original Guarantors”), pursuant to that certain Limited Recourse Guaranty (the “Original Guaranty”), dated as of March 21, 2007, by Original Guarantors in favor of Lender.

 

C.           Borrower and Lender desire to modify the Loan upon the terms and conditions contained herein.

 

NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, each of Borrower and Lender agree as follows:

 

AGREEMENT

 

 

1.           CERTAIN DEFINITIONS

 

“Effective Date” shall mean February 5, 2013.

 

“Recordation” shall mean the recordation of a memorandum of this Agreement in the form attached hereto as Exhibit “A” (the “Memorandum”) in the Official Records of the County.

 

“Title Company” shall mean Chicago Title Insurance Company.

 

“Title Policy” shall mean that certain Loan Policy (Policy No. 72107-3000996) issued by Title Company dated as of March 23, 2007, in favor of Lender, as the named insured, insuring the validity and first priority of the lien of the Deed of Trust.

 

Any capitalized term used but not otherwise defined herein shall have the meaning ascribed to such term in the Note, as amended.

 

 

 

2.           MODIFICATION OF LOAN

 

2.1.           Amended and Restated Note.  As of the Effective Date and subject to the terms and conditions of this Agreement, Borrower and Lender shall amend the Note, which modification shall be effective as of the Effective Date, by the execution and delivery of the Amended and Restated Promissory Note in the original principal amount of Seven Million Two Hundred Fifty Thousand Dollars and No/100 ($7,250,000), in the form of Exhibit "B" attached hereto (the “Amended Note”).  All references to the “Note” in any Existing Loan Document shall hereinafter refer to the Amended Note and all references to $11,000,000 in any Existing Loan Document shall hereinafter be to $7,250,000.

 

2.2           Affirmation of Existing Loan Documents.  Except as expressly modified by this Agreement or the Memorandum, each and every covenant, warranty and other provision of the Existing Loan Documents is hereby ratified and reaffirmed (as though restated in this Agreement as of the date hereof) and shall remain in full force and effect.  This Agreement is not intended and shall in no way act as a novation of the Loan or a release, relinquishment, alteration or reissue of the liens and security interests securing the payment of the Note.  Borrower hereby agrees to continue to be bound by terms, representations, warranties, covenants, indemnifications and provisions of the Existing Loan Documents as modified hereby.

 

2.3           Default.  Any default by Borrower in its obligations under this Agreement or any breach by Borrower of any representations or warranties contained herein shall constitute a default under the terms of the Note and the Deed of Trust.

 

2.4-           Guarantor.  Original Guarantors shall have no liability under the Guaranty for conditions or acts that occur after the Effective Date.

 

 

3.           CONDITIONS TO MODIFICATION.

 

The following are conditions precedent to the modification of the Loan under this Agreement, for the benefit of Lender only.  If any of the following conditions shall not be satisfied on or before February __, 2013, then without limitation on Lender’s rights and remedies at law or in equity, at Lender’s option, Section 2.1 of this Agreement shall be of no further force or effect.

3.1           Commitment of Title Company; Subordinations; Encumbrances.  The Title Company shall have committed to issue to Lender, at Borrower’s sole expense, an endorsement (the “Endorsement”) to the Title Policy, in an amount not less than the Loan amount, insuring that the Deed of Trust, as modified, is a valid first priority lien against the Property, showing no prior exceptions to title other than as described in the Title Policy.

 

3.2           Recordation.  The Recordation of the Memorandum, at Borrower’s sole expense, by the Title Company in the Official Records of the County.  Each of Lender and Borrower shall execute one or more counterpart originals of the Memorandum and deposit the same with the Title Company for recordation.

 

3.3           No Defaults.  No default shall have occurred under this Agreement, the Existing Loan Documents, any encumbrance affecting the property encumbered by the Deed of Trust (the “Property”) (whether junior or senior), or under any other agreement to which Borrower and Lender are parties, and no event has occurred that with notice or lapse of time or both would constitute a default under any of them.

 

3.4           Payment.  Borrower shall have paid (a) all expenses relating to this Agreement and the Loan including all closing costs, title charges, recording fees and taxes, bank charges, escrow fees and all attorneys’ fees and costs incurred by Lender, (b) a Ten Thousand Eight Hundred and Seventy Five Dollar ($10,875) administrative fee to Lender, and (c) a One Hundred Seventeen Thousand Four Hundred Fifty Eight Dollar and Fifty Four Cent ($117,458.54) extension and modification fee to Lender.

 

3.5           Deliveries.  Borrower shall have executed and delivered to Lender the Memorandum and the Amended Note.

 

3.6           Estoppel Certificates.  Borrower shall have delivered to Lender an estoppel certificate from each tenant of the Property in a form acceptable to Lender.

 

3.7           Guaranty.  Borrower shall have delivered to Lender a Limited Recourse Guaranty (the “Guaranty”) executed by NetREIT, Inc., a Maryland corporation (“Guarantor”), in favor of Lender, in the form as required by Lender.

 

3.8           Opinions.  Borrower shall have delivered to Lender opinions from Borrower's counsel as to the good standing of Borrower, the due authorization, execution and delivery of this Agreement, the Memorandum and the Amended Note, and the enforceability of the Amended Note and the Existing Loan Documents as modified by this Agreement, and such other matters as required by Lender.

 

 

4.           RELEASE AND WAIVERS

 

4.1           Release.  As of the date hereof and as of the Effective Date, Borrower, for itself and its successors and assigns, and for Original Guarantors (collectively, the “Borrower Parties”), hereby fully and forever releases, discharges and acquits Lender and its parent, subsidiary, affiliate and predecessor corporations, and their respective past and present officers, directors, shareholders, partners, attorneys, legal representatives, agents and employees, and their successors, heirs and assigns and each of them, of and from and against any and all claims, demands, obligations, duties, liabilities, damages, expenses, indebtedness, debts, breaches of contract, duty or relationship, acts, omissions, misfeasance, malfeasance, causes of action, sums of money, accounts, compensation, contracts, controversies, promises, damages, costs, losses and remedies therefor, chooses in action, rights of indemnity or liability of any type, kind, nature, description or character whatsoever, and irrespective of how, why or by reason of what facts, whether known or unknown, whether liquidated or unliquidated (collectively, “Claims”) which any of such Borrower Parties may now have, or heretofore have had against any of said persons, firms or entities, by reason of, arising out of or based upon conduct, events or occurrences on or before the Recordation relating to:  (i) the Loan or the Property; (ii) the review, approval or disapproval of any and all documents, instruments, projections, estimates, plans, specifications, drawings and all other items submitted to Lender in connection with the Loan or the Property; (iii) the disbursements of funds under the Loan; (iv) the amendment or modification of the Loan made pursuant to this Agreement; (v) Lender’s acts, statements, conduct, representations and omissions made in connection with the Loan and any amendment or modification relating thereto; or (vi) any fact, matter, transaction or event relating thereto, whether known or unknown; provided that, nothing contained herein shall be deemed a release of Lender’s obligations under this Agreement or (to the extent first arising and accruing after the Effective Date) the Existing Loan Documents, as modified.

 

4.2           Non-Reliance.  Each of the Borrower Parties hereby acknowledges that it has not relied upon any representation of any kind made by Lender in making the foregoing release.

 

4.3           No Transfer of Claims.  Each of the Borrower Parties represents and warrants that it has not heretofore assigned or transferred, or purported to assign or to transfer, to any person or entity any matter released hereunder or any portion thereof or interest therein, and Borrower agrees to indemnify, defend and hold the parties set forth hereinabove harmless from and against any and all claims based on or arising out of any such assignment or transfer or purported assignment or transfer.

 

4.4           No Admission of Liability.  It is hereby further understood and agreed that the acceptance of delivery of this release by the parties released hereby shall not be deemed or construed as an admission of liability of any nature whatsoever arising from or related to the subject of the within release.

 

4.5           Advice of Counsel.  Each of the Borrower Parties hereby agrees, represents and warrants that it has had advice of counsel of its own choosing in negotiations for and the preparation of this Agreement, including the foregoing release and waivers, that it has read the provisions of this Agreement, including the foregoing release and waivers, that it has had the foregoing release and waivers fully explained by such counsel, and that it is fully aware of its contents and legal effect.

 

 

5.           REPRESENTATIONS AND WARRANTIES OF BORROWER

 

Borrower hereby represents and warrants to Lender as of the date hereof and as of the Recordation each of the following:

 

5.1           Litigation.  There are no actions, suits or proceedings, pending or threatened, at law or in equity, before any court or commission, agency or instrumentality, against or affecting (a) Borrower, which would affect the business or the financial condition of Borrower or the ability of Borrower to perform its obligations under the Loan, this Agreement or the Existing Loan Documents or (b) the Property.

 

5.2           Conflicts.  Borrower has the full power and authority to enter into this Agreement and the execution, delivery and performance by Borrower of this Agreement (and any other document executed in connection with the modification of the Loan) (a) has been duly and validly authorized by all necessary action on the part of Borrower and Guarantor, as applicable, (b) does not conflict with or result in a violation of Borrower’s or Guarantor’s governing organizational documents or any judgment, order or decree of any court or arbiter in any proceeding to which any of Borrower or Guarantor is a party, and (c) does not conflict with or constitute a breach of, or constitute a default under, any contract, agreement or other instrument by which any of the Borrower or Guarantor is bound or to which it is a party.

 

5.3           Consents.  Neither the execution and delivery by Borrower of this Agreement, nor the performance by Borrower of its obligations hereunder requires the consent, authorization or approval of, the giving of notice to, or the registration with, or the taking of any other action in respect of, any federal, state or foreign governmental authority or agency, pursuant to any law, rule or regulation applicable to Borrower or pursuant to any order, injunction or decree of any such authority or agency, any creditor of Borrower, or any other person or entity.

 

5.4           Authority.  Borrower has all requisite power and authority to perform the terms of this Agreement.

 

5.5           Defaults.  No event has occurred and is continuing, and no condition exists, which constitutes or which after notice or lapse of time, or both, would constitute an Event of Default or default under the Existing Loan Documents and all representations and warranties contained in the Existing Loan Documents are true and correct as if made as of the date hereof and the Date of Record.

 

5.6           Principal.  Borrower acknowledges that the principal balance of the Note as of February 13, 2013 was $9,224,151.73.

 

5.7           Accuracy of Representations.  Neither this Agreement, nor any document, certificate or statement referred to herein or furnished to Lender by Borrower pursuant hereto, contains any untrue statement of a material fact or omits to state a material fact.

 

 

6.           MISCELLANEOUS PROVISIONS

 

6.1           Waiver.  No failure on Lender’s part at any time to require the performance by Borrower of any term of this Agreement shall in any way affect Lender’s rights to enforce such term, nor shall any waiver by Lender of any term hereof be taken or held to be a waiver of any other term hereof or of any breach or subsequent breach hereof.  Borrower waives any defense arising by reason of any disability or other defense of any other person obligated with respect to the Loan, or by reason of the cessation from any cause whatsoever of the liability of Borrower or any other such person.

 

6.2           Expenses.  Borrower will pay and hold Lender harmless against any liability for the payment of: (a) all filing and recording fees and taxes payable to any taxing authority and any documentary transfer stamp taxes (including any interest and penalties in respect thereof) determined to be payable in connection with any of the transactions contemplated hereby; and (b) all other out-of-pocket expenses (including Lender’s attorneys’ fees and costs, and the cost of the Endorsement), incurred by Lender in connection with the preparation and execution of this Agreement, Lender’s performance of and compliance with the terms hereof, the procuring of title insurance, collection efforts, and the enforcement of Lender’s rights and remedies hereunder.

 

6.3           Confidentiality.  Prior to Recordation, Borrower shall keep the terms of this Agreement strictly confidential and shall not disclose or permit its employees or agents to disclose the terms of this Agreement (except for reasonably necessary disclosures to Borrower’s attorneys, accountants and representatives or as may be required by law).

 

6.4           Sole Parties.  Except for the released parties under Section 4 hereof, this Agreement is made exclusively for the benefit of and solely for the protection of Lender and Borrower (and their permitted successors and assigns), and no other person or persons shall have the right to enforce the provisions hereof by action or legal proceedings or otherwise.

 

6.5           Binding Effect and Amendment.  This Agreement shall be binding upon the parties hereto and their successors and permitted assigns.  This Agreement may be amended, altered or changed only by an instrument in writing signed by both parties.

 

6.6           Interpretation.  Whenever the context so requires, all words used in the singular will be construed to have been used in the plural, and vice versa, and each gender will include any other gender.  The headings used in this Agreement are inserted solely for the convenience of reference and are not part of, nor intended to govern, limit or aid in the construction of, any term or provision hereof.

 

6.7           Applicable Law.  This Agreement shall be determined as to its validity, construction, effect and enforcement, and in all other respects of the same or different nature, under the laws of the State of Colorado.

 

6.8           Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument.

 

6.9           Further Assurances.  From time to time, each party will execute and deliver in recordable form, if necessary, such further instruments and will take such other action as the other party reasonably may request in order to discharge and perform their obligations and agreements under this Agreement.

 

6.10           Time of Essence.  Time is of the essence in this Agreement.

 

6.11           Entire Agreement.  This Agreement, the Existing Loan Documents and the exhibits attached thereto constitute the entire agreement of Borrower and Lender concerning the transactions contemplated by this Agreement and supersede and cancel any and all previous negotiations, arrangements, agreements, understandings or letters of interest or intent.

 

6.12           References to Loan Documents.  All references to the Note, the Deed of Trust or to other Existing Loan Documents shall be deemed to refer to the same, as amended by this Agreement.  In the event of a conflict between this Agreement and the Existing Loan Documents, this Agreement will prevail.

 

6.13           Notices.  All notices and communications to any party hereunder and under the other Loan Documents shall be in writing and shall be deemed properly given if delivered to the addresses and as follows:

 

If to Lender:

 

National Integrity Life Insurance Company

 

400 Broadway

 

Cincinnati, Ohio  45202

 

Attention:  Michael Barnett, Esq.

 

with copy to:

 

Pircher, Nichols & Meeks

 

1925 Century Park East, Suite 1700

 

Los Angeles, California  90067

 

Attention:  Real Estate Notices (DLP/SQM/4317.36)

 

If to Borrower:

 

NetREIT Garden Gateway LP

 

1282 Pacific Oaks Place

 

Escondido, California  92029

 

Attention:  Kenneth W. Elsberry

 

 

6.14           Brokers.  Lender represents and warrants to Borrower, and Borrower represents and warrants to Lender, that no broker or finder has been engaged by it, respectively, in connection with any of the transactions contemplated by this Agreement or to its knowledge is in any way connected with any of such transactions.  In the event of a claim for broker’s or finder’s fee or commissions in connection herewith, then Lender shall indemnify, protect, defend and hold Borrower harmless from and against the same if it shall be based upon any statement or agreement alleged to have been made by Lender, and Borrower shall indemnify, protect, defend and hold Lender harmless from and against the same if it shall be based upon any statement or agreement alleged to have been made by Borrower.  The parties’ respective indemnification obligations under this paragraph shall survive the closing of the transaction contemplated hereunder or the earlier termination of this Agreement.

 

6.15           Assignment.  Borrower may not assign any rights under this Agreement.

 

6.16           Integration.  Borrower may not assign any rights under this Agreement.  This Agreement constitutes the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties.  There are no unwritten oral agreements between the parties.

 

[signatures on next page]

 

IN WITNESS WHEREOF, Borrower and Lender do hereby execute this Agreement as of the day and date set forth above.

 

 

BORROWER:

NETREIT GARDEN GATEWAY LP,

a California limited partnership

By:           NetREIT, Inc.,

a Maryland corporation,

its general partner

By:           ________________________________

Name:                      ________________________________

Its:           ________________________________

LENDER:

NATIONAL INTEGRITY LIFE INSURANCE COMPANY,

a New York corporation

By:           ________________________________

Name:                      ________________________________

Its:           ________________________________

By:           ________________________________

Name:                      ________________________________

Its:           ________________________________

 

CONSENT AND AGREEMENT TO LOAN EXTENSION AND MODIFICATION

The undersigned hereby approves and consents to the terms of the Loan Extension and Modification Agreement effective as of February 27, 2013 (the “Loan Modification Agreement”), and, without limitation, as consideration for the delivery of the Loan Modification Agreement by Lender and as a condition to its effectiveness, each hereby agrees to be bound by the terms and conditions of Section 4 thereof, which Section 4 is hereby incorporated herein by reference.

The undersigned hereby reaffirm that certain Limited Recourse Guaranty, dated as of March 21, 2007 (the "Original Guaranty"), by the undersigned, but only for any conditions or acts arising and existing prior to the Effective Date (as defined in the Loan Modification Agreement), and hereby acknowledge and agree that such Original Guaranty was and is for the benefit of National Integrity Life Insurance Company, as lender, and not for the benefit of Western-Southern Life Assurance Company.

ORIGINAL GUARANTORS:

___________________________________

JACK K. HEILBRON, an individual

___________________________________

KENNETH W. ELSBERRY, an individual

Exhibits List

 

 

Exhibit “A”:  Form of Memorandum

Exhibit “B”:  Form of Amended and Restated Note

 

EXHIBIT “A”

 

FORM OF MEMORANDUM

 

RECORDING REQUESTED BY,

AND WHEN RECORDED MAIL TO:

 

Pircher, Nichols & Meeks

1925 Century Park East

Suite 1700

Los Angeles, California  90067

Attn: David L. Packer

                                                               

(SPACE ABOVE THIS LINE FOR RECORDER’S USE ONLY)

MEMORANDUM OF LOAN EXTENSION AND MODIFICATION AGREEMENT

 

AND AMENDMENT TO DEED OF TRUST AND DOCUMENTS OF RECORD

 

THIS MEMORANDUM OF LOAN MODIFICATION AGREEMENT AND AMENDMENT TO DEED OF TRUST AND DOCUMENTS OF RECORD is made as of February ___, 2013, by and between National Integrity Life Insurance Company, a New York corporation (“Lender”), and NetREIT Garden Gateway LP, a California limited partnership (“Borrower”), with respect to that certain Loan Extension and Modification Agreement, dated as of even date herewith, between Borrower and Lender (the “Loan Modification Agreement”).

 

NOTICE is hereby given that, pursuant to the Loan Modification Agreement, that certain promissory note (the “Note”), dated as of March 21, 2007, in the original principal amount of $11,000,000.00, by NetREIT, Inc., a Maryland corporation, previously NetREIT, a California corporation (“Original Trustor”), as maker, to the order of Lender, as assumed by Borrower pursuant to, among other things, that certain Memorandum of Loan Assumption, dated as of March 19, 2010, by and between Borrower, as trustor, and Lender as beneficiary, and recorded May 10, 2010 under Reception No. 210043360 in the Official Records of El Paso County, Colorado (collectively, all documents evidencing such assumption being referred to collectively herein as the “Assumption Documents”), is replaced with that certain Amended and Restated Promissory Note (the “Amended Note”) by Borrower in favor of Lender of even date herewith in the original amount of $7,250,000.  The Note was previously governed and secured by, among other things, that certain Deed of Trust to Public Trustee, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of March 21, 2007 (the “Deed of Trust”), by Original Trustor, as trustor, for the benefit of Lender, as beneficiary, recorded on March 23, 2007, under Reception No. 207040032 in the Official Records of El Paso County, Colorado, as assumed by Borrower pursuant to the Assumption Documents, and continues to be governed thereby.  The Deed of Trust encumbers certain real and personal property at the location more particularly described in Exhibit “A” attached hereto and made a part hereof.  Reference should be made to the Loan Modification Agreement and the Amended Note for the particular terms of the modification provided therein.  In the event of any conflict between the terms of this Memorandum and the terms of the Loan Modification Agreement, the terms of the Loan Modification Agreement shall control.

 

In addition to the foregoing, pursuant to the Loan Modification Agreement, Borrower and Lender are to modify the Deed of Trust and all other recorded Loan Documents as more particularly set forth herein.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Borrower agree as follows:

 

A.           AMENDMENTS TO DEED OF TRUST AND DOCUMENTS OF RECORD.

 

1.           All references in the Deed of Trust, to the “Note”, “note” or “Promissory Note” shall hereafter refer to the Amended Note.

 

2.           Any default under the Loan Modification Agreement shall also constitute a default under the Amended Note and under the Deed of Trust.

 

 

B.           MISCELLANEOUS.

 

1.           The amendments set forth herein shall become effective only upon recordation of this document in the Official Records of El Paso County, Colorado.

 

2.           Except as set forth herein and in the Loan Modification Agreement, the Deed of Trust and all other Existing Loan Documents of record are unamended and unmodified and the terms and provisions of the same are hereby ratified and affirmed.

 

IN WITNESS WHEREOF, this Memorandum was executed as of the date first stated above.

 

 

BORROWER:

NETREIT GARDEN GATEWAY LP,

a California limited partnership

By:           NetREIT, Inc.,

a Maryland corporation,

its general partner

By:           ________________________________

Name:                      ________________________________

Its:           ________________________________

LENDER:

National Integrity Life Insurance Company,

a New York corporation

By:           ________________________________

Name:                      ________________________________

Its:           ________________________________

By:           ________________________________

Name:                      ________________________________

Its:           ________________________________

Exhibit “A”

Legal Description

Lots 1, 2 and 3 in HAMILTON STANDARD SUBDIVISION NO. 1B, in the City of Colorado Springs, County of El Paso, State of Colorado.

[**INSERT APPLICABLE STATE NOTARY ACKNOWLEDGEMENT**]

State of California                                                                )

)  ss.

County of                                                      )

 

On ______________, 2013, before me, a notary public in and for said State, personally appeared __________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument, the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

 

Signature                                                                                                (Seal)

Capacity of Signatory                                                                                                

 

 

State of California                                                      )

)  ss.

County of                                                      )

 

On                 , 2013, before me, a notary public in and for said State, personally appeared ___________________ personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument, the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

 

Signature                                                                                                (Seal)

Capacity of Signatory                                                                                                

EXHIBIT “B”

FORM OF AMENDED AND RESTATED NOTE

AMENDED AND RESTATED PROMISSORY NOTE

 

US $7,250,000.00                                                                                                       Colorado Springs, Colorado

 

February 27, 2013

This Amended and Restated Promissory Note amends and restates and consolidates that certain Promissory Note Secured by Deed of Trust, dated as of March 21, 2007 (the "Original Note"), in the original principal amount of $11,000,000, by NetREIT, Inc., a Maryland corporation, previously NetREIT, a California corporation (“Original Borrower”), in favor of National Integrity Life Insurance Company, a New York corporation ("Lender"), as assumed by NetREIT Garden Gateway LP, a California limited partnership ("Borrower") pursuant to that certain Assumption Agreement, dated as of March 19, 2010, by and among Original Borrower, Borrower, Lender and R&R Enterprises, and Indiana partnership, as evidenced by that certain Memorandum of Loan Assumption, dated as of March 19, 2010, by and between Borrower, as trustor, and Lender, as beneficiary, and recorded May 10, 2010 under Reception No. 210043360 in the Official Records of the County of El Paso, State of Colorado (all documents evidencing such assumption being referred to collectively herein as the “Assumption Documents”), as amended by that certain Loan Extension and Modification Agreement dated as of the date hereof (the “Loan Modification”).

FOR VALUE RECEIVED, the undersigned promises to pay Lender at its home office located at 400 Broadway, Cincinnati, Ohio  45202 or at such other place as Lender may from time to time designate in writing, the principal sum of Seven Million Two Hundred Fifty Thousand Dollars ($7,250,000.00) (the “Loan”), together with interest on the unpaid principal balance from time to time outstanding in accordance with the provisions of this Amended and Restated Promissory Note (the “Note”).

	
1.  

	
INTEREST RATE.

 

	
  

	
1.1.

	
Fixed Rate.  Effective as of February 5, 2013, the unpaid principal balance under the Loan shall bear interest at the rate (the “Contract Rate”) of five percent (5.00%) per annum.

 

	
  

	
1.2

	
Calculation of Interest.  All interest payable under this Note shall be paid in arrears and shall be calculated on the basis of a 360-day year, 30-day month, except that first and last month shall be calculated by the actual number of days principal is outstanding.  Under no circumstances shall the interest, fees, and charges collected or to be collected under this Note exceed the maximum, if any, permitted by applicable law.  If any such law is interpreted so that said interest, fees, and/or charges would exceed any such maximum, and Borrower is entitled to the benefit of such law, then:

 

	
  

	
(i)

	
such interest, fees, and/or charges shall be reduced by the amount necessary to reduce the same to the permitted maximum; and

 

	
  

	
(ii)

	
any sums already collected from Borrower that exceed the permitted maximum will be refunded.  Lender may choose to make any refund either by treating the payments, to the extent of the excess, as prepayment of principal or by making a direct payment to Borrower.  No prepayment premium shall be assessed on prepayments under this subsection.  The provisions of this subsection shall control over any inconsistent provision of this Note or any other Loan Documents (as defined in Section 6 below).

 

	
2.  

	
MANNER OF PAYMENT.  Principal and interest shall be payable in installments as follows:

 

	
  

	
2.1

	
Commencing March 5, 2013, and on the fifth (5th) day of each succeeding month throughout the term of this Note, Borrower shall make level monthly payments of principal and interest of Forty-Two Thousand Three Hundred Eighty-Two and 78/100 Dollars ($42,382.78).  Borrower understands that the first payment will include principal, interest under the balance hereof, and interest on principal being repaid under the Original Note as of the date hereof.

 

	
  

	
2.2

	
The entire unpaid principal balance on this Note, together with all accrued but unpaid interest and all other sums due under this Note and under any document securing this Note (collectively, the "Indebtedness") shall be due and payable on February 5, 2020 (the "Maturity Date"), if not sooner paid.

 

TIME IS OF THE ESSENCE IN THE PAYMENT OF ALL SUMS DUE UNDER THIS NOTE.

 

	
3.

	
APPLICATION OF PAYMENTS.  All payments received from, or on behalf of, Borrower shall be applied in the following order: (i) to any advancements of, or funds established for, payment of any insurance costs or premiums, taxes, assessments, or other advances or to any unpaid charges or fees as provided for in this Note or any other “Loan Documents” (as defined in Section 6 below), together with interest thereon at the “Default Rate” (as defined herein); (ii) any late charges as set forth in this Note; (iii) to any prepayment premiums payable pursuant to this Note; (iv) to interest on the unpaid principal balance of this Note; and then (v) to the unpaid principal balance of this Note. Without limitation of the foregoing, in the event of any partial payment hereunder, Lender shall have the sole right and authority to determine which portion of the Indebtedness any such partial payment made by Borrower and received by Lender hereunder may be applied against, if any; provided, however, that, nothing in the foregoing shall impose upon Lender any duty or obligation to accept or apply any partial payment received by Lender hereunder or under the “Deed of Trust” (as defined in Section 6 below).

 

	
4.

	
LATE CHARGES; DEFAULT INTEREST RATE.  Borrower recognizes that a default by Borrower in making the payments agreed to be paid under this Note and pursuant to the Deed of Trust when due, including any agreed Lender charges or fees, shall result in Lender incurring additional expense in servicing the Loan, in loss to Lender of the use of the money due, and in frustration to Lender in meeting its loan commitments.  Borrower therefore agrees as follows:

 

	
  

	
4.1

	
Borrower shall pay, on demand, an amount equal to five percent (5%) of each delinquent sum (the "Late Payment Charge") if any monthly installment or other payment is not paid by the date when such payment is due.  An additional sum of five percent (5%) of any delinquent sum shall be charged for each successive month that the monthly installment or other payment remains past due and shall be incurred on the fifth (5th) day of each month without a daily pro rata adjustment for payment made after the fifth (5th) day of the month.  Acceptance of such late charge by Lender shall not constitute a waiver of the default with respect to the overdue amount and shall not prevent Lender from exercising any other rights and remedies available to it.  Upon maturity, whether by acceleration, demand or otherwise, and at the Lender's option upon the occurrence and continuation of any Event of Default (as defined in paragraph 8 below), the Late Payment Charge shall not thereafter continue to apply; provided, however, that in either such event, the Loan shall bear interest at the Default Rate as set forth below.

 

	
4.2  

	
Upon the occurrence of an “Event of Default” (as defined in Section 8 below) (including failure to pay the outstanding principal balance hereof upon the Maturity Date), the Loan shall bear interest thereafter until paid in full at a default rate equal to the lesser of (i) the highest rate of interest allowable under the laws of the state where the Property is located or (ii) the Contract Rate plus five (5) percentage points per annum (the “Default Rate”).  The Default Rate shall continue to apply whether or not judgment shall be entered on the Note.

 

	
4.3  

	
Borrower agrees that both the Late Payment Charge and the Default Rate are imposed as liquidated damages for the purpose of defraying the Lender’s expenses incident to the handling of delinquent payments or other defaults under the terms of this Note and any other Loan Documents and that such charges are in addition to, and not in lieu of, the Lender’s exercise of any rights and remedies under this Note, under any other Loan Documents, or under applicable law and any reasonable fees and expenses of any agents or attorneys that the Lender may employ.  Borrower further acknowledges that the Late Payment Charge and Default Rate hereunder represent the reasonable estimate of those damages which would be incurred by Lender, and a fair return to Lender for the loss of the use of the funds not timely received from Borrower on account of a default by Borrower as herein specified, established by Borrower and Lender through good faith consideration of the facts and circumstances surrounding the transaction contemplated under this Note as of the date hereof. In addition, the Default Rate reflects the increased credit risk to the Lender of carrying a loan that is in default.  Borrower and Lender agree that such Late Payment Charge and Default Rate represent a fair and reasonable estimate of the anticipated and actual losses Lender will incur by reason of such late payment and default, and that the actual harm incurred by Lender cannot be estimated with certainty and without difficulty.

 

	
5.

	
PREPAYMENTS.  Borrower shall not have the privilege to prepay, and Lender shall not have an obligation to accept tendered prepayments of, the whole or any portion of the Loan, except as expressly stated below.

 

	
  

	
5.1

	
Upon not less than thirty (30) days prior written notice to Lender, Borrower shall have the privilege to fully prepay the Indebtedness, provided that Borrower simultaneously pays to Lender a premium (the “Prepayment Premium”) equal to the greater of:

 

	
  

	
(a)

	
the sum of (i) the present value of the scheduled monthly payments on this Note from the date of prepayment to the Maturity Date and (ii) the present value of the amount of principal and interest due on the Maturity Date of this Note (assuming all scheduled monthly payments due prior to the Maturity Date were made when due); minus (iii) the outstanding principal balance of this Note as of the date of prepayment.  The present values described in (i) and (ii) are to be computed on a monthly basis as of the date of prepayment, discounted at the yield to maturity of the U.S. Treasury Note or Bond that is closest in maturity with a price closest to 100 to the Maturity Date of this Note, as reported in The Wall Street Journal, absent manifest error, on the fifth (5th) business day preceding the date of prepayment; or

 

	
  

	
(b)

	
one percent (1%) of the outstanding principal balance of this Note as of the date of prepayment.

 

	
  

	
5.2

	
In the event that (i) Lender exercises its right to accelerate the Maturity Date following an Event of Default by Borrower in any of the terms of this Note or any other Loan Documents, or (ii) payment is tendered of the full amount due at any time prior to a foreclosure sale or other similar proceeding, either by Borrower, its successors, or assigns or by anyone on its behalf, it shall be deemed by the Lender that such events shall constitute an evasion of the Prepayment Premium and to be a voluntary prepayment; therefore, to the extent permitted by applicable law, such prepayment shall include the premium required to be paid under Section 5.1 above.

 

	
  

	
5.3

	
Notwithstanding Sections 5.1 and 5.2 above, (a) provided that Borrower gives not less than thirty (30) days prior written notice to Lender of its intent to prepay, Borrower shall have the privilege to prepay this Note in full, without any prepayment premium, at any time on or after November 5, 2019, and (b) no Prepayment Premium shall be due and payable in the event Lender elects to apply any insurance proceeds or condemnation awards payable with respect to the “Property” (defined in Section 6 below) to the Indebtedness in accordance with the terms of the Deed of Trust.

 

	
  

	
5.4

	
The prepayment premium required by this Section 5 is acknowledged by Borrower to be partial compensation to Lender for the cost of reinvesting the Loan proceeds and for the loss of the contracted rate of return on the Loan.  Furthermore, Borrower acknowledges that the loss that may be sustained by Lender as a result of such a prepayment by Borrower is not susceptible of precise calculation and the prepayment premium represents the good faith effort of Borrower and Lender to compensate Lender for such loss.

 

	
  

	
5.5

	
No partial prepayments shall be permitted except with the prior written consent of Lender, which may be withheld in Lender’s sole discretion.   In the event that a partial prepayment is permitted by Lender in writing, the Prepayment Premium shall be pro rated based on the amount of the principal prepaid.

 

	
6.

	
SECURITY.  This Note is given for the Loan in the above amount and is secured by the Deed of Trust to Public Trustee, Security Agreement, Assignment of Leases and Rents and Fixture Filing in favor of Lender and dated as of March 21, 2007 (the "Deed of Trust"), as assumed by Borrower pursuant to the Assumption Documents, which Deed of Trust is a first lien on certain real and personal property located in El Paso County, Colorado and more fully described in the Deed of Trust (the "Property").  The Deed of Trust, this Note, and all other documents executed in connection with the Loan are hereinafter collectively referred to as the “Loan Documents.”  Borrower hereby agrees to perform and comply with each of the terms, covenants and provisions contained in this Note and in all other Loan Documents, all such terms, covenants and provisions being hereby made a part of this Note to the same extent and with the same force and effect as if fully set forth in this Note.  The term “Property” shall mean both the real and personal property that is encumbered by the Deed of Trust.

 

	
7.  

	
DISBURSEMENTS.  Funds representing the proceeds of the Loan and evidenced by this Note that are disbursed by wire transfer, or other delivery to Borrower, to escrows, or otherwise delivered for the benefit of Borrower shall, for all purposes, be deemed outstanding under this Note and to have been received by Borrower as of the date of such wire transfer or other delivery, and interest shall accrue and be payable upon such funds from and after the date of such wire transfer or delivery and until repaid to Lender, notwithstanding the fact that such funds may not, at any time, have been received or remitted by such escrows to Borrower.

 

	
8.  

	
DEFAULT.  The occurrence of any of the following events shall be deemed an “Event of Default” under this Note: an Event of Default has occurred as defined in the Deed of Trust.

	
9.  

	
REMEDIES. Upon the occurrence of an Event of Default and the expiration of any applicable cure period, if any, then (i) the entire Indebtedness shall immediately become due and payable without further notice (which is hereby expressly waived by Borrower), at the option of Lender, and (ii) Lender may exercise any rights or remedies available to it under this Note and the Loan Documents and at law or in equity.  The remedies of the Lender as provided in this Note and the Loan Documents shall be cumulative and concurrent and may be pursued singly, successively, or together against the Borrower, the Property, any guarantor or indemnitor of this Note, and/or any other security at the sole discretion of the Lender.  Time is of the essence.

	
  

	
Borrower hereby agrees to pay all costs and expenses of collection when incurred (which costs and expenses may be added to the principal balance due under this Note and be receivable therewith), including reasonable attorneys' fees and costs.  Such attorneys’ fees and costs shall include, but not be limited to, the reasonable fees and costs incurred in all matters of collection and enforcement, construction, protection, and interpretation before and after suit, trial, proceedings and appeals, as well as appearance in and connected with any bankruptcy proceedings or creditors' reorganization or arrangement proceedings.

 

	
10.

	
LIMITATION OF LIABILITY.  Except as otherwise provided herein and in the Loan Documents, in the event Lender should take action at any time to enforce the collection of the Loan, Lender may exercise any remedy it may have against the Property, including without limitation, foreclosing on the Deed of Trust.

 

	
10.1  

	
If Lender elects to foreclose the Deed of Trust, and, as a result of the foreclosure and sale of the Property, a lesser sum is realized from the sale of the Property than the amount due and owing on the Indebtedness, Lender shall not seek or obtain any deficiency or other money judgment against Borrower, it being understood and agreed that Borrower and all partners, members, stockholders, or holders of beneficial interests in Borrower shall have no personal liability for the payment of the Indebtedness, and the Indebtedness shall be considered nonrecourse to Borrower, its partners, members, stockholders, or holders of beneficial interests, except as provided in Section 10.2 below and in any other Loan Document.

 

	
10.2  

	
The foregoing provisions of Section 10.1 notwithstanding, Lender shall have full recourse against Borrower and guarantors, if any, and the same shall be personally liable, jointly and severally (and Lender shall not be restricted from obtaining any monetary or other judgment against such persons and entities) pursuant to the terms and conditions of that certain Environmental Indemnity Agreement by Original Borrower, dated as of March 21, 2007, assumed by Borrower pursuant to the Assumption Documents, and Lender shall have full recourse against Borrower and guarantors, if any, and the same shall be personally liable, jointly and severally (and Lender shall not be restricted from obtaining any monetary or other judgment against such persons and entities) to the extent of any loss, cost (including reasonable attorney’s fees) or liability (collectively, the “Recourse Obligations”) suffered by Lender as a result of:  (1) the Borrower misapplying, or failing to remit to Lender, any condemnation awards, casualty proceeds, or security deposits attributable to the Property; (2) any act of fraud or breach of any representation or warranty of the Borrower or any partner, member, or stockholder of the Borrower (or holder of a beneficial interest therein, whether direct or indirect) contained in the Loan Documents or any other agreement, certificate, or instrument delivered pursuant to or in connection with the Loan Documents; (3) the Borrower collecting rents more than one (1) month in advance or the failure after the occurrence and during the continuance of an Event of Default to apply the rents toward the normal and necessary operating expenses of the Property, the curing of any default, or in the manner and for the purposes provided in the Deed of Trust or in any other Loan Documents; (4) the presence, release, threatened release, treatment or removal of any Hazardous Materials (including asbestos) or any underground or other storage tanks at the Property; (5) the violation of applicable environmental laws relating to Hazardous Materials or underground storage tanks, and any lien against any portion of the Property permitted or imposed by any environmental law; (6) any diminution in value of the Property or other collateral or security for the Loan, arising from the waste (either intentional/active or permissive/passive) of the Borrower; (7) any casualty or loss that was self-insured or under-insured or any deductible amount under any insurance policy relating to the Property, including, without limitation, those relating to terrorism and/or mold coverage; (8) the failure by Borrower to insure the Property as required under the terms of the Deed of Trust, including, without limitation, the failure to provide terrorism and/or mold coverage; (9) the failure by Borrower to pay any taxes or assessments on the Property; or (10) the filing of any bankruptcy or other reorganization proceeding by Borrower.

 

	
  

	
10.3

	
The foregoing limitation on personal liability is not intended and shall not be deemed to constitute a forgiveness of the Indebtedness or a release of the obligation to repay said Indebtedness according to the terms and provisions hereof, but shall operate solely to limit the remedies otherwise available to the holder hereof for the enforcement and collection of such Indebtedness.

	
  

	
10.4

	
Notwithstanding the foregoing provisions of Section 10.1, Lender's agreement that this Loan shall be non-recourse as provided in Section 10.1 shall be null and void, and the Loan shall be fully recourse, in the event of a default under Section 2.2.26 of the Deed of Trust.

	
11.

	
WAIVER; NO RELEASE.  The Borrower, any endorsers, sureties, guarantors, successors in interest, and all others who may become liable for all or any part of this obligation (i) severally waive presentment and demand for payment, protest, notice of protest, demand and dishonor, and nonpayment of this Note, (ii) expressly agree that the Maturity Date of this Note, or any payment hereunder, may be extended from time to time without in any way affecting the liability of each, and (iii) agree that the Lender hereof may release all or any part of the Property or any other collateral securing the Indebtedness on the payment hereof or release any party liable for this obligation, and such extension or release may be made without notice to any of such parties and without discharging the liability of any such party.  The Borrower also waives, to the extent applicable, all defenses based upon suretyship or impairment of collateral.  It is further agreed that no alteration, amendment or waiver of any provision of this Note or any of the Loan Documents made by agreement between Lender and any other person or party shall release, discharge, modify, change or affect the liability of Borrower under this Note of the Loan Documents.  The right to plead any and all statutes of limitation as a defense to any demand on this Note, or any agreement to pay the same, or any demand secured by the Loan Documents, or any and all obligations and liabilities arising out of or in connection with this Note or in the Loan Documents, is expressly waived by the Borrower and endorsers to the fullest extent permitted by law.  No delay or omission on the part of Lender in exercising any right hereunder shall operate as a waiver of such right or any other remedy under this Note.  A waiver on any one occasion shall not be construed as a bar to or waiver of such right or remedy on a future occasion.

 

	
12.  

	
CONTROLLING LAW.  This Note will be interpreted under, and the rights and liabilities of the Lender and the Borrower determined in accordance with, the laws of the state in which the Property is located, excluding its conflict of laws rules.  The Borrower hereby irrevocably consents to the exclusive jurisdiction of any state or federal court in such state; provided, however, that nothing contained in this Note will prevent the Lender from bringing any action, enforcing any award or judgment, or exercising any rights against the Borrower individually, against any security, or against any property of the Borrower within any other county, state or other foreign or domestic jurisdiction. The Borrower acknowledges and agrees that the venue provided above is the most convenient forum for both the Lender and the Borrower.  The Borrower waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Note.

 

	
13.

	
COMPLIANCE WITH LAWS; SEVERABILITY. If, under any circumstances whatsoever, the fulfillment of any provision of this Note conflicts with the mandatory requirements or prohibitions prescribed by any applicable statute or other applicable law with regard to obligations of like character or amount, then, to the fullest extent possible, this Note shall be construed so as to give effect to the intent manifested by any provision held to be invalid, illegal, unenforceable, or otherwise contrary to law.  If any provision of this Note is found to be invalid or unenforceable by a court, all other provisions of this Note will remain in full force and effect.

 

	
14.  

	
WAIVER OF JURY TRIAL.  THE BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHTS THE BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS NOTE, ANY OTHER LOAN DOCUMENTS, OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS.  THE BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

 

	
15.  

	
NOTICES.  All notices provided for or required by this Note shall be given as provided in the Loan Modification.

 

	
16.  

	
CAPTIONS.  The captions and headings of the Sections of this Note are for reference only and are not to be used to interpret or define the provisions hereof.

 

	
17.  

	
STATE-SPECIFIC PROVISIONS.

 

	
  

	
18.1

	
Borrower acknowledges and agrees that the loss which Lender may sustain from the late payment of any payment due under this Note may likely be difficult to prove, and that the amount of the late charge is reasonable and proportionate to the loss that Lender may sustain from any late payment.  Therefore, Borrower and Lender desire to liquidate the damages in advance to avoid such uncertainty.

 

	
  

	
18.2

	
Borrower acknowledges and agrees that the loss which Lender may sustain from any default under this Note may likely be difficult to prove, and that the default interest rate is reasonable and proportionate to the loss that Lender may sustain from any default.  Therefore, Borrower and Lender desire to liquidate the damages in advance to avoid such uncertainty.

 

The Borrower acknowledges that it has read and understood all the provisions of this Note, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate.

 

IN WITNESS WHEREOF, Borrower has executed this Note as of the day and year first above written.

 

BORROWER:

NETREIT GARDEN GATEWAY LP,

a California limited partnership

By:           NetREIT, Inc.,

a Maryland corporation,

its general partner

By:           ___________________________

Name:                      ___________________________

Title:           ___________________________PE 2012 10K - Exhibit 10.35

Exhibit 10.35

PUGET SOUND ENERGY, INC.

SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN

Amended and Restated
Effective January 1, 2013

Table of Contents

		
	ARTICLE I
	ESTABLISHMENT AND PURPOSE    1

		
	1.1
	Establishment    1

		
	1.2
	Purpose    1

		
	ARTICLE II
	DEFINITIONS    1

		
	2.1
	Definitions    1

		
	2.2
	Number; Headings    6

		
	ARTICLE III
	ELIGIBILITY    6

		
	3.1
	General    6

		
	3.2
	Change of Control    6

		
	3.3
	Disability    6

		
	ARTICLE IV
	RETIREMENT BENEFIT    7

		
	4.1
	Amount    7

		
	(a)
	General Rule; Limitations    7

		
	(b)
	Umbrella Benefit    7

		
	(c)
	Disability    8

		
	(d)
	Nonduplication    9

		
	4.2
	Distribution    9

		
	(a)
	Normal Form of Payment    9

		
	(b)
	Alternate Forms of Payment    9

		
	(c)
	Reduction for Early Commencement    10

		
	(d)
	Payment Suspension for Specified Employees    10

		
	(e)
	Supplemental Agreements    10

		
	(f)
	Death Benefits    10

		
	4.3
	Other Forfeiture    11

		
	ARTICLE V
	ADMINISTRATION AND CLAIMS PROCEDURE    12

		
	5.1
	Administration    12

		
	5.2
	Claims Procedure    12

-i-

Table of Contents
(continued)

		
	(a)
	Filing a Claim    12

		
	(b)
	Claim Review    12

		
	(c)
	Appeal    13

		
	(d)
	Standard of Review    15

		
	(e)
	Legal Action    15

		
	5.3
	Finality of Determination    15

		
	5.4
	Expenses    15

		
	ARTICLE VI
	FUNDING OF THE PLAN    15

		
	ARTICLE VII
	AMENDMENT AND TERMINATION    16

		
	ARTICLE VIII
	GENERAL PROVISIONS    16

		
	8.1
	Withholdings for Taxes and Other Deductions    16

		
	8.2
	Nonalienation    16

		
	8.3
	Severability    17

		
	8.4
	No Right of Employment    17

		
	8.5
	Incompetency    17

		
	8.6
	Successors and Assigns    17

		
	8.7
	General Limitation of Liability    17

		
	8.8
	No Guaranty of Tax Consequences    17

		
	8.9
	Governing Law    18

8.10     Compliance with Code Section 409A    18

-ii-

PUGET SOUND ENERGY, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

As Amended and Restated Effective January 1, 2013

ARTICLE I
ESTABLISHMENT AND PURPOSE

1.1Establishment.  This Supplemental Executive Retirement Plan (the "Plan") was originally effective as of June 1, 1997 (the "Effective Date").  The Plan was previously amended and restated effective January 1, 2009, October 5, 2004 and February 24, 1999.  The Plan is now amended and restated effective for all amounts earned or vested on or after January 1, 2013 and shall apply to any Participant credited with an Hour of Service under the Plan on or after such date, other than as specified herein.  Any Retirement Benefit earned and vested prior to January 1, 2005 shall be paid in accordance with and subject to all of the terms and conditions of the Plan as in effect on December 31, 2004 and to the extent provided by this amendment and restatement.  Any Retirement Benefit earned or vested from January 1, 2005 through December 31, 2008 shall be governed by this amendment and restatement, as modified by the operations of the Plan during such period in accordance with Code Section 409A and then applicable IRS pronouncements (including transition relief).  No amendment to the Plan on and after January 1, 2009 is intended to, nor shall it be deemed to, apply to other than the applicable terms and conditions of the Plan in effect prior to January 1, 2005 unless expressly provided by such amendment. 

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

ARTICLE II
DEFINITIONS

2.1Definitions.  When used herein, the following terms shall have the meanings set forth below:

(a)"Actuarial Equivalent" means a benefit payable at a particular time and in a particular form and manner and which has the same value as the benefit which it replaces.  For purposes of lump sum payment calculations, such determination shall be made using the mortality table and interest rate prescribed by the Commissioner of Internal Revenue for purposes of Code Section 417(e)(3)(A) in effect on the date as of which the present value is being determined (based on the applicable interest rate or rates for the September immediately preceding the first day of the Plan Year).

1

For purposes of annuity payment calculations, such determination shall be made using the following actuarial assumptions:  (i) interest rate at eight percent (8%) per annum compounded annually; and (ii) participant mortality rate pursuant to the 1984 Unisex Pensioners Mortality Table.

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

(c)"Beneficiary" means the individual, trust or other entity designated by the Participant who, upon the Participant's death, may receive the payment of the Retirement Benefit to the extent provided in Section 4.2(f).  All Beneficiary designations shall be in writing and on a form prescribed by the Committee for such purpose, and any such designation shall only be effective if and when delivered to the Committee during the lifetime of the Participant.  The Participant may from time to time change a designated Beneficiary or Beneficiaries by filing a new beneficiary designation form with the Committee.  In the event the Participant shall fail to designate a Beneficiary or Beneficiaries, if such designation is ineffective, or if no designated Beneficiary survives the Participant, any payment then due to the Participant shall be paid to the Participant's estate.

(d)"Board" means the Board of Directors of the Company and includes any individual or entity to which such Board has delegated authority to act with respect to the Plan.

(e)"Change of Control" has the meaning set forth in the Company's Benefits
Protection Trust with respect to the Plan.

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

(g)"Committee" means the Compensation and Leadership Development Committee of the Board and includes any individual or entity to which such Committee has delegated authority to act with respect to the Plan.

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

(i)"Date of Termination" means the date the Participant ceases to be employed by the Company or any of its Affiliates.  In no event shall the Date of Termination be earlier than the Participant's "separation from service" within the meaning of Code Section 409A.

2

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

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

(l)"Early Commencement Date" means the date on which Retirement Benefits commence prior to the Normal Commencement Date and shall be the later of the date elected by the Participant in accordance with Section 4.2(c) and his or her Date of Termination.  In no event may the Early Commencement Date occur prior to the Participant attaining age 55.

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

(n)"Effective Date" has the meaning set forth in Section 1.1.  The effective date of this amendment and restatement is January 1, 2013.

(o)"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.

(p)"Frozen Retirement Benefit" means the monthly "Retirement Benefit" to which the Participant would have been entitled as of the Normal Commencement Date (or, if applicable, the Early Commencement Date) if the Participant had voluntarily terminated services without cause on December 31, 2004 and received a payment of the benefits available from the Plan in such form with the maximum payment value (after taking into account the Participant's age as of the actual Date of Termination and the benefit offsets calculated under Sections 3.2(a)(i) through (iv) as of the applicable commencement date under the terms of the Plan as in effect on December 31, 2004).  Notwithstanding the foregoing, the Frozen Retirement Benefit may increase to equal the present value (using reasonable actuarial assumptions) of the Retirement Benefit to which the Participant actually becomes entitled, at the time and in the form actually paid, determined under the terms of the Plan in effect on October 3, 2004 without regard to any further services rendered by the participant after December 31, 2004 or to any other events affecting the amount of or the entitlement to benefits (other than the Participant's election with respect to the time or form of an available benefit).  The calculation of the Frozen Retirement Benefit shall be consistent in all respects with Treasury Regulation Section 1.409A-6(a)(3)(i).

3

(q)"Highest Average Earnings" means the average of the Participant's highest three consecutive calendar years of Earnings among the last 10 complete calendar years completed by the Participant prior to the Date of Termination (with the calendar year in which the Date of Termination occurs counting as a complete calendar year).  If the Participant completes less than three complete calendar Years of Service prior to the Date of Termination, then the average shall be computed by adding together the Participant's monthly Earnings for all of the calendar months during which the Participant was employed by the Company or any of its Affiliates, dividing the result by the number of months in such period, and multiplying that result by 12.  Notwithstanding any provision of the Plan to the contrary, for any active Participant on December 31, 2012, such Participant's Highest Average Earnings shall not be less than the amount determined under this Section 2.1(q) as of such date, based on the "non-consecutive" definition of Highest Average Earnings then in effect.

(r)"Specified Employee" means a "key employee" (as defined in Code Section 416(i) without regard to Code Section 416(i)(5)) of the Company.  For purposes of the Plan, a Participant is a key employee if he or she meets the requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding Code Section 416(i)(5)) at any time during the 12-month period ending on an identification date.  If a Participant is a key employee as of an identification date, he or she is treated as a Specified Employee for the 12-month period beginning on the first day of the fourth month following the identification date.  The Committee may designate any date in a calendar year as the identification date provided that it uses the same identification date with respect to all arrangements, and any change to the identification date may not be effective for a period of 12 months.  If no identification date is designated, the identification date is December 31.  The Committee may prospectively designate an identification date through a separately adopted document.

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

4

(t)"Participant" means one of a select group of management personnel or highly compensated employees designated by the Committee to participate in the Plan.  A Participant shall automatically cease to accrue additional benefits under the Plan and become an inactive Participant at the time the Participant ceases to be a member of management or a highly compensated employee, as determined by the Committee.  In addition, the Committee may revoke the active participation (and discontinue the benefit accruals) of any Participant at any time and for any reason.  Notwithstanding the foregoing, in no event shall the revocation of a Participant's active participation in the Plan (or the cessation of additional benefit accruals under the Plan) reduce the Retirement Benefit previously accrued by such Participant prior to such revocation or cessation.  Effective January 1, 2012, any Participant who is not an officer of the Company shall cease to accrue additional benefits under the Plan and become an inactive Participant; a Participant who is an officer of the Company on such date shall thereafter cease to accrue additional benefits under the Plan and become an inactive Participant at the time such Participant ceases to be an officer of the Company.  Effective January 1, 2012, no otherwise eligible individual shall become a Participant in the Plan unless and until such individual is an officer of the Company.

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

(v)"Plan" means this "Puget Sound Energy, Inc. Supplemental Executive 
Retirement Plan," together with any amendments hereto.

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

(x)"Retirement Benefit" means the benefit defined in Section 4.1(a)(i) to which the Participant is entitled under Article III at the Normal Commencement Date.

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

(z)"Section 409A" means Code Section 409A, as clarified or modified by regulations and pronouncements from the U.S. Department of Treasury or the Internal Revenue Service.

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

5

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

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

ARTICLE III
ELIGIBILITY

3.1General.  A Participant whose employment with the Company and its Affiliates terminates (or is terminated) for any reason other than death after completing five Participant Years of Service and attaining age 55 shall be entitled to receive a Retirement Benefit as of the Normal Commencement Date; provided, however, that a Participant on December 31, 2012 other than the Company's President and CEO shall be entitled to receive such Retirement Benefit after completing five Participant Years of Service while the Company's President and CEO on such date shall be entitled to receive such Retirement Benefit subject to the limitations set forth in Article IV.  A Participant who does not satisfy the applicable requirements of this Section shall not be entitled to any Retirement Benefit or other payment or benefit under the Plan.

3.2Change of Control.  A Participant whose employment with the Company and its Affiliates terminates (or is terminated) within 24 months after a Change of Control shall be treated for purposes of Section 3.1 as completing five Participant Years of Service and attaining age 55 as of the Date of Termination regardless of the Participant's actual Participant Years of Service and age.

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

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ARTICLE IV
RETIREMENT BENEFIT

4.1Amount.

(a)General Rule; Limitations.  

		
	(i)
	The benefit payable under the Plan is the Retirement Benefit.  The "Retirement Benefit" equals the umbrella benefit calculated in accordance with subsection (b) below, subject to the limitations below.  The portion of the Retirement Benefit that consists of the Frozen Retirement Benefit is subject to all of the terms and conditions of the Plan as in effect on December 31, 2004 or any earlier date as applicable, including those regarding the time and form of distributions, without regard to any changes in this amended and restated Plan.  The portion of the Retirement Benefit that is earned or vested after December 31, 2004 is subject to the terms and conditions of this or any other subsequent amended and restated Plan, as applicable.

		
	(ii)
	Effective January 1, 2012, no additional benefits under the Plan shall accrue for a Participant who is not an officer of the Company.

		
	(iii)
	With respect to the Company's President and CEO on December 31, 2012, the accrual of any additional benefits under the Plan shall be suspended effective January 1, 2013 until December 31, 2016.  If such Participant remains an active Participant on December 31, 2016, the terms of this Article IV shall be applied without regard to the suspension.  For the avoidance of doubt, if such Participant's Date of Termination occurs prior to December 31, 2016, the Retirement Benefit shall be limited to benefits accrued through December 31, 2012.

(b)Umbrella Benefit.  The umbrella benefit for purposes of Section 4.1(a) is the monthly amount payable for the life of the Participant commencing as of the Normal Commencement Date equal to the amount described in clause (i) below minus the sum of clauses (ii), (iii), and (iv) below.

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

7

		
	(ii)
	The monthly amount payable (or that would be payable) under the Retirement Plan to the Participant as of the Normal Commencement Date calculated as if such payment were made in the form of a Straight-Life Annuity (as defined in the Retirement Plan) commencing on such date and including all amounts previously paid or separated (or payable or separable) pursuant to a domestic relations order which the Retirement Plan's Plan Administrator has accepted as "qualified" with respect to the Participant's interest under such Plan; provided, however, that with respect to any Participant who ceases to accrue additional benefits under the Plan under Section 4.1(a)(ii) or (iii) prior to such Participant's Date of Termination, the calculation of the monthly amount for purposes of this clause shall be limited to such monthly amount payable (or that would be payable) under the Retirement Plan calculated as if the Participant had ceased to be eligible for pay credits under the Retirement Plan with respect to compensation earned after the applicable effective date on which accruals ceased.

		
	(iii)
	The monthly amount of any WNG Nonqualified Retirement Benefits payable (or that would be payable) to the Participant as of the Normal Commencement Date in the form of a single life annuity for the life of the Participant (or if such benefits are paid or payable as of another date and/or in another form, the Actuarial Equivalent monthly amount of such benefits calculated as a single life annuity payable for the life of the Participant and commencing as of the Participant's Normal Commencement Date); provided, that for the avoidance of doubt, this clause applies only to those Participants who elect to commence payment under the WNG Nonqualified Retirement Benefits.

		
	(iv)
	The Actuarial Equivalent monthly amount payable (or that would be payable) as of the Normal Commencement Date from any pension-type rollover accounts (including without limitation said accounts related to the Annual Cash Balance Restoration Account) within the Deferred Compensation Plan, using the Actuarial Equivalent methodology for purposes of lump sum payment calculations.

(c)Disability.  If a Participant suffers a Disability while employed by the Company or its Affiliates, then for purposes of this Section 4.1, the Participant's Highest Average Earnings shall be determined as of the date the Participant incurred the Disability.  If the Participant is reemployed after the Participant's Disability ends, then for purposes of this Section 4.1, the Highest Average Earnings shall be determined as of the subsequent Date of Termination and excluding the period of Disability.

8

(d)Nonduplication.  The Retirement Benefit is not intended to duplicate any other comparable payments or benefits under any other of the Company's plans, programs, policies or agreements.  Should any such other comparable payments or benefits be due, the amount of the Retirement Benefit shall be reduced by such other comparable payments or benefits in the manner and to the extent determined by the Committee.

4.2Distribution.

(a)Normal Form of Payment.  Except as provided otherwise in this Section 4.2, the Retirement Benefit shall be distributed to a Participant in the form of a lump sum payable within 90 days following the Normal Commencement Date.

(b)Alternate Forms of Payment.  At any time that is within 30 days of a Participant's initial eligibility under the Plan or on or before December 31, 2008 in accordance with Code Section 409A and all applicable transition guidance thereunder, a Participant may elect to receive the Actuarial Equivalent value of the Retirement Benefit in one of the methods identified below in lieu of the normal form of payment described in subsection (a) above:

		
	(i)
	Monthly installments over two to 20 years, commencing within 90 days following the Normal Commencement Date;

		
	(ii)
	Straight-life annuity, commencing at the specified date elected by the Participant following the Normal Commencement Date;

		
	(iii)
	Optional joint and survivor annuity (100%, 75%, 50% or 25%), commencing at the specified date elected by the Participant following the Normal Commencement Date; and

		
	(iv)
	Transfer of Actuarial Equivalent lump-sum value of the Retirement Benefit to the Deferred Compensation Plan (and thereafter payable in accordance with the terms and conditions of such plan), with the transfer to be completed on the Normal Commencement Date or, if the Date of Termination is on or after a Participant attaining age 55, the Early Commencement Date.

9

The terms and conditions of the optional joint and survivor annuity form of payment shall be the same as those for the corresponding annuity under Section 6.6 (or its successor) of the Retirement Plan to the maximum extent permitted by Code Section 409A.  An election of distribution method under this subsection (b) may be changed at least 12 months prior to the date payment is originally scheduled to commence.  Such election change may be made only two times by the Participant, and each election must result in a five-year delay of the actual commencement date.

(c)Reduction for Early Commencement.  Within 30 days of a Participant's initial eligibility under the Plan, the Participant may elect to commence the Retirement Benefit prior to the Normal Commencement Date as of the Early Commencement Date.  Any Retirement Benefit that becomes payable under this subsection (c) shall equal the Retirement Benefit set forth under Section 4.1(a) except the payment calculated under Section 4.1(b)(i) shall be further reduced (prior to applying the reductions of Sections 4.1(b)(ii) through (iv)) by 1/3% for each month that the Early Commencement Date occurs prior to the beginning of the month coincident with or next following the date the Participant would attain age 62.  The reductions of Section 4.1(b)(ii) through (iv) shall be similarly calculated based on said early commencement distribution date, notwithstanding any provision of Section 4.1(b) to the contrary.  Early commencement under this subsection (c) is available only for a Participant whose Date of Termination is on or after the date the Participant attains age 55.

(d)Payment Suspension for Specified Employees.  To the extent a Participant is designated as a Specified Employee as of the Date of Termination, any payment or payments due under subsection (a) or (b) above shall not be made during the period that begins on the Date of Termination and ends six months thereafter.  Any payment or payments so suspended shall be paid on the first business day following the end of such six-month period.

(e)Supplemental Agreements.  If an agreement between the Company and a Participant supplements the Retirement Benefit and related rights provided under the Plan, such agreement shall be incorporated by reference herein to the extent in compliance with the requirements of Code Section 409A.

(f)Death Benefits.

		
	(i)
	If a Participant dies (A) while actively employed by the Company or is entitled to a Retirement Benefit under Section 3.1 and (B) such death occurs on or before the date on which the Retirement Benefit is distributed (or commences to be distributed), no Retirement Benefit shall be payable under the Plan.

10

However, such Participant's spouse (as reasonably determined by the Committee as of the Participant's date of death) shall receive a spousal benefit equal to the lump-sum Actuarial Equivalent as of the Participant's Normal Commencement Date of the benefit that would have been payable under the 50% joint and survivor form of payment, which benefit shall be calculated by assuming that the Participant had died the day after the Normal Commencement Date and by using the actual Participant Years of Service and actual Years of Service completed by the Participant.  If the Participant is not actively employed immediately prior to the date of death on account of Disability, the actual Participant Years of Service and actual Years of Service will include the years of Disability.  If the Participant dies before attaining age 62, such spousal benefit shall be reduced to the extent provided in subsection (c) above.  Such spousal benefit shall be paid within 90 days of the Committee's receipt of the notice of the Participant's death.  A spousal benefit shall not be payable with respect to a Participant who dies while not actively employed by the Company and who is not entitled to a Retirement Benefit under Section 3.1.

		
	(ii)
	If a Participant dies after the date on which the Retirement Benefit commences to be distributed, the Beneficiary shall receive payment of the Retirement Benefit to the extent the form in which the Retirement Benefit is being paid provides for such benefit.

4.3Other Forfeiture.  If a Participant who is receiving benefits under the Plan following an Early Commencement Date (including via a transfer to the Deferred Compensation Plan) is at any time employed directly or indirectly as an employee or director of, or retained as an independent contractor, consultant or agent for, an electric or gas utility (including any federal, state or municipal utility authority or district) serving retail customers within Washington or Oregon, or a person or entity supplying or seeking to supply electric power or natural gas to retail customers within Washington or Oregon, then the Committee may suspend all benefits payable to the Participant under the Plan (or the Deferred Compensation Plan) during the period of such employment and may require repayment to the Company of any benefits received by the Participant during the period of such employment.  If the competitive employment is subsequently terminated, benefits hereunder (or under the Deferred Compensation Plan) shall resume without adjustment to reflect the suspension period.

11

ARTICLE V
ADMINISTRATION AND CLAIMS PROCEDURE

5.1Administration.  The Plan shall be administered by the Committee in accordance with the Plan's terms and applicable law.  The Committee shall have the full power and authority (discretionary and otherwise) to interpret, construe, and administer the Plan in its sole discretion and to make final and binding determinations for all parties.  The Committee shall establish and maintain such accounts or records as the Committee may from time to time consider necessary or convenient for the administration of the Plan.

5.2Claims Procedure.  

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

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

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

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

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

12

		
	(iv)
	a description of this Plan's claim appeal procedure (and the time limits applicable thereto), as set forth in Section 5.2(c);

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

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

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

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

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

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

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

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

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

13

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

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

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

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

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

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

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

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

14

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

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

(e)Legal Action.  Compliance with the foregoing provisions of this Article 14 is a mandatory prerequisite to a Claimant's right to commence any legal action with respect to any claim for benefits under this Plan.  If a Claimant wishes to file a court action after exhausting the foregoing procedures, the Claimant must file such action in a court of competent jurisdiction within 180 days after the date of the Committee's written denial of the appeal.  Court actions may not be commenced after such 180-day period.

5.3Finality of Determination.  The determination of the Committee with respect to any question arising out of or in connection with the administration, interpretation, and application of the Plan shall be final, binding, and conclusive on all persons and shall be given the greatest deference permitted by law.

5.4Expenses.  The expenses of administering the Plan shall be borne by the Company.

ARTICLE VI
FUNDING OF THE PLAN
All amounts paid under the Plan shall be paid from the general assets of the Company.  Benefits shall be reflected on the accounting records of the Company, but neither the Plan nor the maintenance of such accounting records shall be construed to affect, require, or prohibit the creation of a trust, custodial account, or escrow account with respect to the Participant.  

15

The Participant shall not have any right, title, or interest whatsoever in or to any investment reserves, accounts, or funds that the Company may purchase, establish, or accumulate to aid in providing the unfunded benefit payments described in the Plan.  Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create, or be construed to create, a trust or fiduciary relationship of any kind between the Company, the Board, the Committee or the Company's Executive Plans Committee and any Participant or any other person.  Participants and Beneficiaries shall have the status of general unsecured creditors of the Company.

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

ARTICLE VIII
GENERAL PROVISIONS

8.1Withholdings for Taxes and Other Deductions.  The Company may withhold from any payment of benefits hereunder any taxes required to be withheld and such sum as the Company may reasonably estimate to be necessary to cover any taxes which may be assessed with regard to benefits provided under the Plan.  In addition, the Company may deduct from any payment of benefits hereunder any amounts owed by the Participant to the Company or any of its Affiliates, but in no event more than $5,000 in total per year and as otherwise limited by Code Section 409A and applicable law.

8.2Nonalienation.  No benefit payable at any time under the Plan shall be subject in any manner to voluntary or involuntary alienation, sale, transfer, assignment, pledge, attachment, garnishment, or encumbrance of any kind, or subject to or reached by any legal or equitable process (including execution, garnishment, attachment, pledge, or bankruptcy) in satisfaction of any debt, liability, or obligation, prior to receipt.  Any attempt to alienate, sell, transfer, assign, pledge, or otherwise encumber any such benefit, whether presently or thereafter payable, shall be void.

16

8.3Severability.  In the event any provision of the Plan shall be held invalid or illegal for any reason, such illegality or invalidity shall not affect the remaining parts of the Plan, but the Plan shall be construed and enforced as if the illegal or invalid provision had never been inserted.

8.4No Right of Employment.  The establishment of the Plan shall not be construed as conferring any legal or other rights upon a Participant for a continuation of employment, nor shall it interfere with the rights of the Company and its Affiliates to discharge the Participant or otherwise act with relation to the Participant.  The Company and its Affiliates may take any action (including discharge) with respect to the Participant and may treat such person without regard to the effect that such action or treatment might have on such person as the Participant under the Plan.

8.5Incompetency.  Every person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally competent until the date on which the Committee receives a written notice, in a form and manner acceptable to the Committee, that such person is incompetent, and that a guardian, conservator, or other person legally vested with the care of such person's person or estate has been appointed; provided, however, that if the Committee shall find that any person to whom a benefit is payable under the Plan is unable to care for such person's affairs because of incompetency, any payment due (unless a prior claim therefor shall have been made by a duly appointed legal representative) may be paid to a third party as the Committee deems appropriate.  Any such payment so made shall be a complete discharge of liability therefor under the Plan.

8.6Successors and Assigns.  The Plan shall be binding on and inure to the benefit of the Company and its Affiliates, successors and assigns, and the Participant and his or her heirs, executors, administrators and legal representatives.

8.7General Limitation of Liability.  None of the Company, the Board, the Committee or any other person will be liable, either jointly or severally, for any act or failure to act or for anything whatsoever in connection with the Plan, or the administration thereof, except to the extent of any liability imposed because of gross negligence or willful misconduct.  All benefit payments will be made solely from the general assets of the Company.

8.8No Guaranty of Tax Consequences.  None of the Company, the Board, the Committee or any other person guaranties that any particular federal or state income, payroll or other tax consequence will occur because of participation in the Plan.  A Participant should consult with professional tax advisors regarding all questions relative to the tax consequences arising from participation in the Plan.

17

8.9Governing Law.  The Plan shall be governed and construed in accordance with the laws of the State of Washington to the extent not preempted by federal law.
8.10    Compliance with Code Section 409A.  The Plan is intended to comply with the requirements of Code Section 409A (including current IRS guidance) and to conform to the current operation of the Plan.  Notwithstanding any provision to the contrary, the Plan shall be interpreted, operated and administered in a manner consistent with this intention, so as to avoid the predistribution inclusion in income of amounts deferred under the Plan and the imposition of any additional tax or interest thereon.  In addition, the Plan shall be deemed to be amended, and any deferrals and distributions hereunder shall be deemed to be modified, to the extent permitted by and necessary to comply with Code Section 409A and to avoid or mitigate the imposition of additional taxes under Code Section 409A.  Notwithstanding the foregoing, no provision of the Plan shall be interpreted or construed to transfer any liability for failure to comply with Code Section 409A from a Participant or any other individual to the Company or any of its affiliates, employees or agents.
[Signature appears on following page.]

18

IN WITNESS WHEREOF, the Company has signed this Plan document as of the date indicated below.

	
		
	PUGET SOUND ENERGY, INC.

	By:
	/s/ Marla D Mellies

	Title:
	Senior Vice President, & Chief Administrative Officer

	Dated:
	November 29, 2012

19

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