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   Exhibit 4.2  

June 2, 2004 

BNY
Trust Company of Canada,

4 King Street West,

Suite 1101,

Toronto, Ontario M5H 1B6. 

Re:  Fiscal Agency Agreement

Ladies
and Gentlemen: 

        This
letter of agreement (this "Agreement") will confirm the appointment by Hydro-Québec of BNY Trust Company of Canada (the "Fiscal Agent", which term shall, unless the
context otherwise requires, include its successors and assigns) upon the terms and conditions set forth below to act as fiscal agent, in The City of New York, in connection with the issuance by
Hydro-Québec of Medium-Term Notes Due Nine Months or More from Date of Issue (the "Notes"), guaranteed unconditionally as to payment of principal and premium, if any, and
interest by Québec (the "Guarantor"). The Notes shall be sold on behalf of Hydro-Québec by Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First
Boston LLC, CIBC World Markets Corp., Citigroup Global Markets Inc., J.P. Morgan Securities Inc., Putnam Lovell NBF Securities Inc., RBC Capital Markets Corporation and
Scotia Capital (USA) Inc. or such other agents as Hydro-Québec may appoint from time to time and of whose appointment the Fiscal Agent shall be notified in writing by
Hydro-Québec (the "Agents"). The Notes may also be sold by Hydro-Québec to an Agent, acting as principal, or by Hydro-Québec directly. 

Section 1.    Safekeeping, Completion and Issuance of Notes.  

        (a)   The
Fiscal Agent shall act as depositary for the safekeeping and as agent for the completion, authentication, issuance and delivery of the Notes provided by
Hydro-Québec to the Fiscal Agent from time to time. Notes will be represented by one or more fully registered global notes without coupons (each, a "Global Note") registered in the name
of The Depository Trust Company, as depositary, its nominee or another depositary or its nominee. Owners of beneficial interests in Global Notes will not be entitled to physical delivery of Notes
issued in definitive registered form without coupons ("Certificated Notes") except in the limited circumstances described in the Notes. Each Note shall be substantially in the form set forth in
Exhibit A hereto if the Note bears interest at a fixed rate ("Fixed Rate Notes") or Exhibit B hereto if the Note bears interest at rates determined by reference to a
reference rate ("Floating Rate Notes"), with such changes and additions as shall be subsequently approved on behalf of Hydro-Québec by an Authorized Official, as defined below. For the
purposes hereof, "Authorized Official" shall mean the persons authorized, pursuant to By-law 705 of Hydro-Québec (as such By-law may be amended from time to
time) and evidenced by a certificate of incumbency including specimen signatures, to sign documents relating to financial transactions of Hydro-Québec. If any Authorized Official ceases
to be an Authorized Official, the Fiscal Agent may nonetheless complete, countersign, issue and deliver any Note co-executed by such official until otherwise instructed by an Authorized
Official. The guarantee of the Guarantor (the "Guarantee") shall be endorsed on the Notes. No Note shall be a valid obligation of Hydro-Québec or the Guarantor until authenticated by a
Responsible Officer. For the purposes hereof, "Responsible Officer" shall mean any officer within the corporate trust department of the Fiscal Agent, including any vice president, assistant vice
president, assistant treasurer, trust officer or any other officer of the Fiscal Agent who customarily performs functions similar to those performed by the persons who at the time shall be such
officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for
the administration of this Agreement. 

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        (b)   The
terms of the Notes appearing on the face of the Notes delivered by Hydro-Québec to the Fiscal Agent, including the face amount, issue date, maturity
date, denominations, rate of interest or interest rate formula and other terms to be specified in a pricing supplement shall be in blank. The Notes delivered by Hydro-Québec to the
Fiscal Agent shall be executed on behalf of Hydro-Québec as provided in the applicable By-law of Hydro-Québec. The Fiscal Agent shall not authenticate a Note
until its date of issue. The Fiscal Agent shall take all reasonable measures to protect the blank Notes held by it in safekeeping against loss, disappearance, theft, damage or destruction and ensure
that they are secure at all times. The Fiscal Agent shall promptly advise Hydro-Québec and the Guarantor of any loss, disappearance, theft, damage to or destruction of blank Notes held
by it in safekeeping. Blank Notes held by the Fiscal Agent shall only be returned to Hydro-Québec upon instructions from an Authorized Official and not otherwise. 

        (c)   The
Fiscal Agent shall comply with all of the procedures set forth in the "Public Medium-Term Note Administrative Procedures for Fixed and Floating Rate
Notes" (the "Administrative Procedures"), as such Administrative Procedures may be agreed upon from time to time by the Agents, Hydro-Québec and the Fiscal Agent, including, but not
limited to, the procedures governing the issuance and settlement of the Notes. 

Section 2.    Payment of Principal, Premium and Interest.  

        (a)   The
Fiscal Agent shall, at least two Business Days (as defined in the Notes) prior to Maturity (as defined in the Notes) and Interest Payment Date (each as specified on
the face of the Notes), notify Hydro-Québec of the aggregate amount payable by Hydro-Québec at Maturity or on such Interest Payment Date in U.S. dollars. 

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        (b)   All
sums payable to the Fiscal Agent hereunder in respect of the Notes shall be paid in U.S. dollars to such account at such bank as the Fiscal Agent may from
time to time indicate to Hydro-Québec not less than two Business Days prior to the payment date. All payments shall be made in The City of New York in same-day funds. 

        (c)   In
order to provide for the payment of principal and any premium and interest in respect of the Notes as the same shall become due, Hydro-Québec shall
remit the amount referred to in Section 2(a) to the Fiscal Agent on each Interest Payment Date and at Maturity. 

        (d)   Promptly
after receiving the amount referred to in Section 2(a), the Fiscal Agent shall pay the interest on the Notes to the registered holders thereof on the
dates, at the rates and in the manner provided for in the Notes. The Fiscal Agent shall be responsible for withholding any taxes on interest paid on the Notes as required by applicable law, but shall
be relieved from any such responsibility if it acts upon the instructions of Hydro-Québec given pursuant to Section 11 or in good faith and in reliance upon an opinion of
counsel provided to it by Hydro-Québec. 

        (e)   All
Notes presented for payment at Maturity at the office of The Bank of New York specified in the Note shall be verified as to their authenticity by the Fiscal
Agent and the principal thereof, premium, if any, and interest thereon shall be paid in the manner provided for in the Notes. 

        (f)    At
least once per calendar year, the Fiscal Agent shall furnish to Hydro-Québec and the Guarantor a certificate, duly signed by a representative of the
Fiscal Agent, stating: 

	(i)
	the
aggregate Principal Amount of the Notes of any Issue which have been redeemed (or purchased) or paid and cancelled; and

	(ii)
	the
serial number of such Notes. 

        (g)   Unless
otherwise instructed by Hydro-Québec or the Guarantor, the Fiscal Agent shall destroy the cancelled Notes in its possession in accordance with its
customary procedures and furnish Hydro-Québec and the Guarantor with a destruction certificate duly signed by a representative of the Fiscal Agent. 

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        (h)   Hydro-Québec
reserves the right to appoint, at its discretion, additional agents for the payment of principal of, premium, if any, and interest on, the
Notes at such place or places as Hydro-Québec may determine. Hydro-Québec shall notify the Fiscal Agent of its appointment of any such agent. No such appointment shall in
any way affect the rights of the Fiscal Agent hereunder. 

        (i)    The
Fiscal Agent shall, to the extent permitted by law, promptly return to Hydro-Québec any funds transferred to it for payments with respect to the Notes
that are not paid to the holders of Notes (i) at the expiration of three years after the due date for payment thereof and upon the written request of Hydro-Québec or
(ii) if no such request is made, at the expiration of three years after the due date for payment of the full principal amount of the Notes or, as the case may be, the remaining part thereof;
thereafter, the holders of Notes shall look only to Hydro-Québec for any payment of such funds. 

        (j)    Payment
by the Fiscal Agent in respect of any Note shall only be made out of funds made available hereunder by or for Hydro-Québec or the Guarantor in
respect of that Note. 

Section 3.    Exchange of Notes.  

        The Fiscal Agent is hereby authorized from time to time in accordance with the provisions of the Notes to authenticate and deliver Notes in exchange for other
Notes of other authorized denominations in the manner provided for in the Notes. 

Section 4.    Register.  

        The Fiscal Agent, as agent of Hydro-Québec, shall act as registrar of the Notes and shall maintain a register for the Notes (the "Register") for
the registration of transfers of the Notes. Transfers of Notes shall be completed in the manner provided for in the Notes. No service charge shall be made for any registration, registration of
transfer or exchange of Notes, but the Fiscal Agent may require payment of a sum sufficient to cover any stamp or other tax or governmental charge in connection therewith. 

Section 5.    Terms and Conditions.  

        The Fiscal Agent accepts its obligations herein set out upon the terms and conditions hereof, including the following, to all of which Hydro-Québec
and the Guarantor agree: 

        (a)   The
Fiscal Agent shall receive from Hydro-Québec a duly certified copy of By-law No. 705 of Hydro-Québec authorizing
(i) the execution, delivery and performance of this Agreement, and (ii) the execution and delivery of Notes in accordance herewith; 

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        (b)   The
Fiscal Agent shall receive from the Guarantor a duly certified copy of Order in Council No. 632-2003 of the Government of Québec
approving the aforesaid Resolution and authorizing the Guarantee; 

        (c)   In
acting under this Agreement, the Fiscal Agent is acting solely as agent of Hydro-Québec and does not assume any obligation toward, or any relationship
of agency or trust for or with, any of the holders of the Notes; 

        (d)   Any
order, certificate, notice, request, direction or other communication from Hydro-Québec made or given under any provision of this Agreement shall be
sufficient if signed by any person whom the Fiscal Agent reasonably believes to be an Authorized Official; 

        (e)   The
Fiscal Agent shall be obliged to perform only such duties as are set out specifically herein, in the Administrative Procedures and the Notes and no implied duties,
terms or conditions shall be read into this Agreement, the Administrative Procedures and the Notes; and 

        (f)    The
Fiscal Agent shall incur no liability hereunder except for loss sustained by reason of its gross negligence, willful misconduct or bad faith, or that of its
directors, officers, employees or representatives. 

Section 6.    Resignation; Removal; Successors.  

        (a)   Except
as provided below, the Fiscal Agent may at any time resign as Fiscal Agent by giving written notice to Hydro-Québec and the Guarantor of such
intention on its part, specifying the date on which its desired resignation shall become effective, provided that such notice shall be given not fewer
than ninety days prior to the said effective date unless Hydro-Québec otherwise agrees in writing. Except as provided below, the Fiscal Agent may be removed by the filing with it of an
instrument in writing signed by Hydro-Québec specifying such removal and the date when it shall become effective. Such resignation or removal shall take effect only as provided in
Section 6(c) below. 

        (b)   If
at any time the Fiscal Agent shall resign or be removed, or shall become incapable of acting or shall be adjudged bankrupt or insolvent, or an order is made or
effective resolution is passed to wind up the Fiscal Agent, or if the Fiscal Agent shall file a voluntary petition in bankruptcy or make an assignment for the benefit of its creditors, or shall
consent to the appointment of a receiver or administrator of all or any substantial part of its property or other similar official, or shall admit in writing its inability to pay or meet its debts as
they mature, or if a receiver or administrator of the Fiscal Agent or of all or any substantial part of its property or other similar official shall be appointed, or if any order of any court shall be
entered approving any petition filed by or against the Fiscal Agent under the provisions of any applicable bankruptcy or insolvency law, or if any public officer shall take charge or control of the
Fiscal Agent or its property or affairs for the purpose of rehabilitation, conservation or liquidation, then a successor Fiscal Agent (which, to qualify as such, shall be a bank or trust company
organized and doing business under the laws of Canada or the United States of America or of any State thereof, in good standing and having an established place of business in The City of
New York and authorized under such laws to exercise corporate trust powers) shall be appointed by Hydro-Québec as hereinafter provided. 

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        (c)   Any
successor Fiscal Agent hereunder shall be appointed by Hydro-Québec by a written instrument signed by both Hydro-Québec and the
successor Fiscal Agent. Upon payment to the predecessor Fiscal Agent of all previously unpaid amounts due in connection with the performance of its duties and obligations hereunder, and upon receipt
by such predecessor Fiscal Agent of an executed copy of such signed, written instrument, (i) such predecessor Fiscal Agent shall become obliged to transfer and deliver, and such successor
Fiscal Agent shall be entitled to receive, copies of any relevant records maintained by such predecessor Fiscal Agent, including all Notes then in the custody of the Fiscal Agent, the Register and all
records of transfer and payment, together with an accounting for all Notes received by the Fiscal Agent pursuant to this Agreement, (ii) such successor Fiscal Agent without any further act,
deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations of such predecessor Fiscal Agent with like effect as if originally named the
Fiscal Agent hereunder and (iii) such predecessor Fiscal Agent shall thereupon cease to be Fiscal Agent hereunder. If an instrument of acceptance by a successor Fiscal Agent shall not have been
delivered to the Fiscal Agent, the Fiscal Agent may petition, at the expense of the Hydro-Quebec, any court of competent jurisdiction for the appointment of a successor Fiscal Agent. 

        (d)   Any
corporation into which the Fiscal Agent may be merged or converted, any corporation with which the Fiscal Agent may be consolidated or any corporation resulting from
any merger, conversion or consolidation to which the Fiscal Agent shall be a party, or any corporation to which the Fiscal Agent may sell or otherwise transfer all or substantially all of its
corporate trust assets or business shall, to the extent permitted by applicable law and provided that it shall be a responsible financial firm or institution having an established place of business in
The City of New York, be the successor Fiscal Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto. Notice of any
such merger, conversion or consolidation shall forthwith be given to Hydro-Québec and the Calculation Agent as designated in the Calculation Agency Agreement, dated June 2, 2004
between Hydro-Québec and BNY Trust Company of Canada. 

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Section 7.    Meetings of Holders of Notes  

        (a)   The
Fiscal Agent shall, on receipt of a written request of Hydro-Québec or a written request signed in one or more counterparts by the holders of not less
than 10% of the principal amount of the Notes then outstanding and upon being indemnified to its reasonable satisfaction by Hydro-Québec or the holders of Notes signing such request
against the costs which may be incurred in connection with the calling and holding of such meeting, convene a meeting of the holders of Notes for any lawful purpose affecting their interests. If the
Fiscal Agent fails to give notice convening such meeting within 30 days after receipt of such request and indemnity, Hydro-Québec or such holders of Notes, as the case may be,
may convene such meeting. Every such meeting shall be held in The City of New York or such other place as may be approved or determined by the Fiscal Agent. 

        (b)   At
least 21 days' notice of any meeting shall be given to the holders of Global Notes or Certificated Notes, as the case may be, in the manner provided pursuant
to the provisions under the heading "Notices" in the Notes and a copy thereof shall be sent by post to the Fiscal Agent unless the meeting has been called by it, and to Hydro-Québec,
unless the meeting has been called by Hydro-Québec, and to the Guarantor. Such notice shall state the day, time, place and purpose of the meeting and the general nature of the business
to be transacted thereat, and shall include a statement to the effect that, prior to 48 hours prior to the time fixed for the meeting, (i) in the limited circumstances in which
Certificated Notes have been issued, those holders of Certificated Notes who deposit such Notes with the Fiscal Agent or any other person authorized for such purpose by the Fiscal Agent or
Hydro-Québec or (ii) in the case of Notes being represented by the Global Notes, those persons recorded in the Register, shall be entitled to obtain voting certificates for
appointing proxies, but it shall not be necessary for any such notice to set out the terms of any resolution to be proposed at such meeting or any other provisions. 

        (c)   A
holder of Notes may appoint any person by instrument in writing as the holder's proxy in respect of a meeting of the holders of Notes or any adjournment of such
meeting, and such proxy shall have all rights of the holder of Notes in respect of such meeting. All notices of meetings to the holder of a Global Note shall contain a requirement that DTC must notify
DTC participants and, if known, owners of beneficial interests in the Notes of the meeting in accordance with procedures established from time to time by DTC. The registered holders of Notes shall
seek voting instructions on the matters to be raised at such meeting from DTC participants or, if known, from the owners of beneficial interests in the Notes in accordance with the applicable
procedure of DTC. For greater certainty, it is acknowledged that none of Hydro-Québec, the Fiscal Agent, any clearing agency or any intermediary or participant shall be required to
comply with the time limits set out in the applicable procedure of DTC but shall use all reasonable efforts to otherwise comply with such procedure and attempt to provide non-registered
holders of Notes with meeting materials and voting rights as if such non-registered holders of Notes were registered holders thereof. 

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        (d)   A
person, who need not be a holder of Notes, nominated in writing by the Fiscal Agent shall be chairman of the meeting and if no person is so nominated or if the person
so nominated is not present within 15 minutes from the time fixed for the holding of the meeting, the holders of Notes present in person or by proxy shall choose a person present to be chairman, and,
failing such choice, Hydro-Québec may appoint a chairman. 

        (e)   At
a meeting of holders of Notes, a quorum shall consist of two or more holders of Notes present in person or by proxy who represent at least a majority in aggregate
principal amount of the Notes at the time outstanding. If a quorum of the holders of Notes shall not be present within one-half hour after the time fixed for holding any meeting, the
meeting, if convened by or at the request of holders of Notes, shall be dissolved, but if otherwise convened the meeting shall stand adjourned without notice to the same day in the next week (unless
such day is not a business day in the place where the meeting is to take place in which case it shall stand adjourned until the next business day thereafter) at the same time and place unless the
chairman shall appoint some other place, day or time of which not less than seven days' notice shall be given in the manner provided above. At any adjourned meeting called by
Hydro-Québec or the Fiscal Agent two or more holders of Notes present in person or by proxy shall constitute a quorum and may transact the business for which the meeting was originally
convened notwithstanding that they may not represent at least a majority in aggregate principal amount of the Notes then outstanding. 

        (f)    The
chairman of any meeting at which a quorum of the holders of Notes is present may, with the consent of the holder(s) of a majority in aggregate principal amount of
the Notes represented thereat, adjourn any such meeting and no notice of such adjournment need be given except such notice, if any, as the meeting may prescribe. 

        (g)   Every
motion or question submitted to a meeting shall be decided by Extraordinary Resolution (as defined below) and in the first place by the votes given on a show of
hands. At any such meeting, unless a poll is duly demanded as herein provided, a declaration by the chairman that a resolution has been carried or carried unanimously or by a particular majority or
lost or not carried by a particular majority shall be conclusive of the fact. On any question submitted to a meeting when ordered by the chairman or demanded by a show of hands by one or more holders
of Notes acting in person or by proxy and holding at least 2% in aggregate principal amount of the Notes then outstanding, a poll shall be taken in such manner as the chairman shall direct. 

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        (h)   On
a poll each holder of Notes present in person or represented by a proxy duly appointed by an instrument in writing shall be entitled to one vote in respect of each
US$1,000 principal amount of Notes then held by such holder. A proxy need not be a holder of Notes. In the case of Notes held jointly, any one of the joint holders present in person or by proxy may
vote in the absence of the other or others; but in case more than one of them be present in person or by proxy, only one of them may vote in respect of each US$1,000 principal amount of Notes of which
they are joint holders. 

        (i)    Hydro-Québec,
the Guarantor and the Fiscal Agent by their respective officers, directors and representatives, and the legal advisors of
Hydro-Québec, the Guarantor and the Fiscal Agent may attend any meeting of the holders of Notes, but shall have no vote as such. 

        (j)    Subject
to Section 18, in addition to all other powers conferred upon them by any other provision of this Agreement or by law, holders of Notes at a meeting shall
have the following powers, any one or combination of which may be exercised from time to time by Extraordinary Resolution: 

	(i)
	power
to confirm any modification or amendment of this Agreement or the terms and conditions of the Notes proposed by Hydro-Québec;

	(ii)
	power
to direct or authorize the Fiscal Agent to exercise any power, right, remedy or authority given to it by this Agreement or the Notes in any manner specified in
such Extraordinary Resolution or to refrain from exercising any such power, right, remedy or authority;

	(iii)
	power
to waive and direct the Fiscal Agent to waive any default on the part of Hydro-Québec in complying with any provisions of this Agreement or the
Notes or to waive and direct the Fiscal Agent to waive future compliance with any provision or provisions of this Agreement or the Notes; and 

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	(iv)
	power
to repeal, modify or amend any Extraordinary Resolution previously passed by the holders of Notes; 

provided, however, that no such modification nor amendment to this Agreement or to the terms and conditions of the Notes or any other action taken may,
without the consent of the holder of each such Note affected thereby: (a) change the Stated Maturity or Interest Payment Date(s) of any such Note; (b) reduce the Principal Amount of or
rate of interest on any such Note; (c) change the currency of payment of any such Note; (d) impair the right to institute suit for the enforcement of any payment on or with respect to
such Note or the Guarantee; (e) reduce the percentage of the holders of Notes necessary to modify or amend this Agreement or the terms and conditions of the Notes or reduce the percentage of
votes required for the taking of action or the quorum required at any meeting of holders of Notes; or (f) reduce the percentage of outstanding Notes necessary to waive any future compliance or
past default. 

        (k)   All
actions that may be taken and all powers that may be exercised by the holders of Notes at a meeting held as hereinbefore provided may also be taken and exercised by
the holders of not less than 662/3% of the aggregate principal amount of the Notes at the time outstanding by an instrument in writing signed in one or more counterparts and the
expression "Extraordinary Resolution" when used in this Agreement shall include an instrument so signed. 

        (l)    The
term "Extraordinary Resolution" means a resolution proposed to be passed at a meeting of holders of Notes duly convened for the purpose and held in accordance with
the provisions of this Agreement and passed by the affirmative vote of the holders of not less than 662/3% of the aggregate principal amount of the Notes represented at the meeting in
person or by proxy or as an instrument in writing signed by the holders of not less than 662/3% of the aggregate principal amount of the outstanding Notes. 

        (m)  Minutes
of all resolutions and proceedings at every meeting of holders of Notes held in accordance with the provisions of this Agreement shall be made and entered in
books to be from time to time provided for that purpose by the Fiscal Agent at the expense of Hydro-Québec and any such minutes, if signed by the chairman of the meeting at which such
resolutions were passed or proceedings taken, or by the chairman of the next succeeding meeting of the holders of Notes, shall be prima facie evidence of the matters therein stated and, until the
contrary is proved, every such meeting, in respect of the proceedings of which minutes shall have been made, shall be deemed to have been duly held and convened, and all resolutions passed and
proceedings taken thereat to have been duly passed and taken. 

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        (n) Every Extraordinary Resolution passed in accordance with the provisions of this Agreement at a meeting of holders of Notes shall be binding upon all the holders of Notes, whether
present at or absent from such meeting, and every instrument in writing signed by holders of Notes in accordance with Section 7(k) shall be binding upon all the holders of Notes (whether or not
a signatory). Subject to the provisions for its indemnity herein contained, the Fiscal Agent shall be bound to give effect accordingly to every such Extraordinary Resolution. 

        (o)
The Fiscal Agent, or Hydro-Québec with the approval of the Fiscal Agent, may from time to time make and from time to time vary such regulations as it shall from time
to time deem fit: 

	(i)
	for
the deposit of instruments appointing proxies at such place as the Fiscal Agent, Hydro-Québec or the holders of Notes convening a meeting, as the case
may be, may in the notice convening such meeting direct;

	(ii)
	for
the deposit of instruments appointing proxies at some approved place or places other than the place at which the meeting is to be held and enabling particulars of
such instruments appointing proxies to be mailed or sent by any other means of recorded communication before the meeting to Hydro-Québec or to the Fiscal Agent at the place where the
same is to be held and for the voting of proxies so deposited as though the instruments themselves were produced at the meeting. 

Any
regulation so made shall be binding and effective and votes given in accordance therewith shall be valid and shall be counted. Save as such regulations may provide, the only persons who shall be
entitled to vote at a meeting of holders of Notes shall be the holders thereof or their duly appointed proxies. 

        (p)
The powers and any combination of the powers in this Agreement stated to be exercisable by the holders of Notes by Extraordinary Resolution may be exercised from time to time and the
exercise of any one or more of such powers or any combination of powers from time to time shall not be deemed to exhaust the right of the holders of Notes to exercise such power or powers or
combination of powers then or any power or powers or combination of powers thereafter from time to time. 

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Section 8.    Responsibility of the Fiscal Agent; Indemnification.  

        (a)
Hydro-Québec agrees to indemnify and hold harmless the Fiscal Agent against all claims, actions, demands, damages, costs and losses (including all reasonable fees and
expenses) arising out of or relating to the Fiscal Agent's duties as fiscal agent, registrar, transfer agent and principal paying agent for Hydro-Québec with respect to the Notes,
except such as may result from the Fiscal Agent's gross negligence, willful misconduct or bad faith or that of its directors, officers, employees or representatives. 

        (b)
This Section shall remain operative and in full force and effect regardless of any termination of this Agreement or the resignation or removal of the Fiscal Agent. 

Section 9.    Fees and Expenses.  

        The Fiscal Agent shall be entitled to such compensation as may be agreed upon in writing with Hydro-Québec for all services rendered by the Fiscal
Agent hereunder, and Hydro-Québec promises to pay such compensation and to reimburse the Fiscal Agent for the reasonable out-of-pocket expenses (including
reasonable attorneys' fees and expenses) incurred by it in connection with the services rendered by it hereunder upon receipt of such invoices as Hydro-Québec shall reasonably require.
If the Fiscal Agent shall cease to be the Fiscal Agent hereunder, it shall repay to Hydro-Québec the unearned portion, calculated on a  pro rata basis, of said fee. Hydro-Québec will
pay all stamp and other duties, if any, to which, under the laws of
Québec, Canada or of the United States of America, this Agreement or the issuance of the Notes may be subject. 

Section 10.    Instructions.  

        (a)
All instructions from Hydro-Québec or the Guarantor to the Fiscal Agent provided for in this Agreement shall be given by written instructions.
Hydro-Québec or the Guarantor shall, as the case may be, confirm by telephone all instructions sent by telecopy. 

        (b)
Each of the Fiscal Agent and any agent appointed by the Fiscal Agent hereunder may consult with counsel of its choice and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered by it hereunder in good faith and without gross negligence and in accordance with such opinion. 

        (c)
Each of the Fiscal Agent and any agent appointed by the Fiscal Agent hereunder shall be protected and shall incur no liability for or in respect of any action taken or thing suffered
by it in reliance upon any notice, direction, consent, certificate, affidavit, statement, or other paper or document believed by it, in good faith, to be genuine and to have been passed upon or signed
by the proper parties thereto. 

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        (d)
The Fiscal Agent and any agent appointed by the Fiscal Agent hereunder and their respective officers, directors and employees may become the owners of, or acquire any interest in,
any Notes, with the same rights that they would have if they were not the Fiscal Agent, such agent or such person, and may engage or be interested in any financial or other transaction with
Hydro-Québec or the Guarantor, and may act on, or as depositary, trustee or agent for, any committee or body of holders of Notes or other obligations of Hydro-Québec or
the Guarantor, as freely as if they were not the Fiscal Agent, such agent or such person. 

        (e)
Whenever in the administration of this Agreement the Fiscal Agent shall deem it desirable that a matter of fact be proved or established prior to taking, suffering or omitting any
action hereunder, the Fiscal Agent (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon a certificate signed by an Authorized Official and
delivered to the Fiscal Agent as to such matter of fact. 

        (f)
The Fiscal Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request or direction of any of the holders, unless such
holders shall have offered to the Fiscal Agent security or indemnity satisfactory to the Fiscal Agent against the costs, expenses and liabilities which might be incurred by it in compliance with such
request or direction. 

        (g)
The Fiscal Agent may appoint The Bank of New York, as attorney-in-fact, to execute the DTC Letter of Representations, and to take such action as is
necessary to effectuate the transactions contemplated by this Agreement; and the Fiscal Agent shall be responsible for any willful misconduct or gross negligence on the part of The Bank of
New York. 

        (h)
The rights, privileges, protections, immunities and benefits given to the Fiscal Agent hereunder, including, without limitation, its right to be indemnified, are extended to, and
shall be enforceable by, the Fiscal Agent in each of its capacities hereunder, and each agent, custodian and other person authorized to act hereunder. 

Section 11.    Withholding Tax.  

        In the event that any Canadian withholding tax shall become applicable to any Notes already issued or to be issued pursuant to this Agreement, then
Hydro-Québec shall provide instructions to the Fiscal Agent with respect to the amount of withholding tax to be deducted at maturity, transfer or redemption. 

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Section 12.    Notices.  

        All communications hereunder shall be effective only on receipt, and shall be delivered or sent by letter or facsimile transmission (but in the case of
communication by facsimile transmission, with subsequent confirmation by telephone) as follows: 

	(a)
	to
Hydro-Québec: 

Hydro-Québec

75 René-Lévesque Boulevard West, Sixth Floor

Montréal, Québec

Canada H2Z 1A4

Tel: (514) 289-4284

Fax: (514) 289-5409

Attention: Corporate Treasurer 

	(b)
	to
the Guarantor: 

Ministère
des Finances

Direction de la documentation financière et

du Fonds de financement

12, rue Saint-Louis

Québec, Québec

Canada G1R 5L3

Tel.: (418) 643-8141

Fax: (418) 643-4700

Attention: Le directeur 

	(c)
	to
the Fiscal Agent: 

BNY
Trust Company of Canada

4 King Street West

Suite 1101

Toronto, Ontario M5H 1B6

Tel.: (416) 933-8505

Fax: (416) 360-1711

Attention: Corporate Trust Department;

                  Senior Trust Officer 

14

 

Section 13.    Governing Law.  

        This Agreement shall be governed by and construed in accordance with the laws of Québec and the laws of Canada applicable therein. 

Section 14.    Counterparts.  

        This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement. 

Section 15.    Benefit of Agreement.  

        This Agreement is solely for the benefit of the parties hereto and their successors and assigns and no other person shall acquire or have any rights under or by
virtue hereof. 

Section 16.    Waiver of Jury Trial; Service of Process; Waiver of Immunity.  

        Each of the Fiscal Agent, Hydro-Québec and the Guarantor hereby irrevocably waives, to the fullest extent permitted by law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. Nothing herein contained shall affect the right to serve process on
Hydro-Québec or the Guarantor in any manner permitted by law. Hydro-Québec and the Guarantor hereby irrevocably consent to the fullest extent permitted by law to the
giving of any relief including, without limitation, the making, enforcement or execution of any order or judgment made or given in connection with any proceedings arising out of or in connection with
this Agreement and the Notes. 

        Hydro-Québec
and the Guarantor hereby appoint the person from time to time who holds the position of Delegate General of Québec in New York, One
Rockefeller Plaza, 26th floor, New York, New York, 10020-2102, as their authorized agent (the "Authorized Agent") upon whom process may be served in any action by the Fiscal
Agent and based upon this Agreement which may be instituted in any State or Federal court in The City of New York, and expressly accept the non-exclusive jurisdiction of any such
court in respect of such action. Hydro-Québec and the Guarantor hereby irrevocably waive any immunity to service of process in respect of any such action to which the Authorized Agent
might otherwise be entitled. Such appointment shall be irrevocable as long as any of the Notes remain outstanding, except that, if for any reason the Authorized Agent ceases to be able to act as agent
or no longer has an address in The City of New York, Hydro-Québec and the Guarantor will appoint another person or persons in The City of New York, selected in their
discretion, as Authorized Agent(s). Hydro-Québec and the Guarantor will take any and all action, including the filing of any and all documents and instruments that may be necessary to
continue such appointment or appointments in full force and effect as aforesaid. Service of process upon the Authorized Agent, together with written notice of such service mailed or delivered to
Hydro-Québec and to the Guarantor at their respective addresses set forth in Section 12, shall be deemed in every respect effective service of process upon
Hydro-Québec and the Guarantor. Notwithstanding the foregoing, any action by the Fiscal Agent and based upon this Agreement may be instituted in any competent court in
Québec. Each of Hydro-Québec and the Guarantor hereby waives, to the fullest extent permitted by applicable law, any immunity to jurisdiction to which it might otherwise
be entitled in any action based on this Agreement which may be instituted as provided in this Section in any State or Federal court in The City of New York or in any competent court in
Québec. 

15

 

Section 17.    Severability.  

        In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby. 

Section 18.    Amendments.  

        This Agreement and the Notes may be amended by Hydro-Québec, the Guarantor and the Fiscal Agent without notice to, or the consent of, the holders
of Notes, for the purposes of: (i) curing any ambiguity; (ii) curing, correcting or supplementing any defective provisions contained in this Agreement or the Notes; or (iii) in
any other manner in which Hydro-Québec, the Guarantor and the Fiscal Agent, acting on the advice of independent counsel, may deem necessary or desirable and which will not be
inconsistent with this Agreement or the Notes, and which, in the reasonable opinion of Hydro-Québec, the Guarantor and the Fiscal Agent, will not adversely affect the interests of the
holders of Notes. 

        This
Agreement may also be amended by Extraordinary Resolution of the holders of the Notes as specified in Section 7 of this Agreement and under the heading "Modifications" in the
Notes. 

16

 

Section 19.    Force Majeure.  

        In no event shall the Fiscal Agent be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by,
directly or indirectly, forces beyond its control, including, without limitation strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural
catastrophes or acts of God; it being understood that the Fiscal Agent shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon
as practicable under the circumstances. 

17

 

Executed
in The City of New York as of June 2, 2004. 

	
 	
 	
HYDRO-QUÉBEC
	

	 	 	 
	
 	
 	

By:	

/s/  MICHEL ROBITAILLE      
 Name:    Michel Robitaille

Title:       Delegate General of Québec in New York
	
 	
 	
QUÉBEC
	

	 	 	 
	
 	
 	

By:	

/s/  MICHEL ROBITAILLE      
 Name:    Michel Robitaille

Title:       Delegate General of Québec in New York
	

	 	 	 

 

We
accept our appointment as Fiscal Agent on the foregoing terms and conditions. 

As
of the day and year first above written. 

BNY TRUST COMPANY OF CANADA, as Fiscal Agent

	

	 
	By:	/s/  MARCIA REDWAY      
 Name:    Marcia Redway

Title:       Authorized Officer
	

	 

  

 
 

EXHIBIT A    

1 [This
Note is a Global Note within the meaning of the Fiscal Agency Agreement hereinafter referred to and is registered in the name of a depositary or a
nominee thereof. This Global Note may not be exchanged in whole or in part for a Note registered, and no transfer of this Global Note in whole or in part may be registered, in the name of any Person
other than such depositary or a nominee thereof except in the limited circumstances described in the Fiscal Agency Agreement. 

Unless
this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC") to Hydro-Québec or its agent for registration
of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.] 

	REGISTERED

No.2 [G]FXR -             

3 [CUSIP]	 	REGISTERED

$

 
 

HYDRO-QUÉBEC
  4 [GLOBAL] MEDIUM-TERM NOTE
  (Fixed Rate)    
    

        The following summary of terms is subject to the information set forth on the reverse hereof. 

 PRINCIPAL AMOUNT: US$

ISSUE DATE:

INTEREST RATE:

INTEREST PAYMENT DATE(S):

RECORD DATE(S):

STATED MATURITY:

REDEMPTION DATE(S):  

	1
	Include
for Global Notes.

	2
	Include
for Global Notes.

	3
	Include
for Global Notes.

	4
	Include
for Global Notes. 

A-1

 

 MINIMUM DENOMINATION TO BE REDEEMED (IF OTHER THAN US$1,000):

INITIAL REDEMPTION PERCENTAGE:

ANNUAL REDEMPTION PERCENTAGE REDUCTION:

OPTIONAL REPAYMENT DATE(S):

MINIMUM DENOMINATION TO BE REPAID (IF OTHER THAN US$1,000):

ORIGINAL ISSUE DISCOUNT SECURITY:

        TOTAL AMOUNT OF OID:

        YIELD TO MATURITY:

        INITIAL ACCRUAL PERIOD OID:

OTHER PROVISIONS:  

HYDRO-QUÉBEC, for value received, hereby promises to pay to 5 [Cede & Co., as nominee of
DTC] 6 [                             ] or registered assigns, the Principal Amount
specified above at the Stated Maturity specified
above and to pay interest thereon at a rate per annum equal to the Interest Rate specified above until the principal hereof is paid or duly made available for payment. Interest on this Note will
accrue from, and including, the immediately preceding Interest Payment Date specified above in respect of which interest has been paid or duly provided for or, if no interest has been paid, from the
Issue Date specified above to, but excluding, the next succeeding Interest Payment Date or, in respect of any part of the Principal Amount due at Maturity (as defined below), Maturity, as the case may
be. Except as provided herein, Hydro-Québec will pay interest on the Interest Payment Date(s) specified above and in respect of any part of the Principal Amount due at Maturity, at
Maturity commencing on the first Interest Payment Date next succeeding the Issue Date, unless the Issue Date occurs between a Record Date (as defined below) and the Interest Payment Date to which such
Record Date pertains, in which case commencing on the Interest Payment Date following the next succeeding Record Date to the Holder (as defined below) on such next succeeding Record Date. The interest
so payable, and punctually paid or duly provided for, on any Interest Payment Date will be paid to the person in whose name this Note (or one or more predecessor Notes) is registered (the "Holder") in
the register of the names and addresses of Holders of Notes (the "Note Register") maintained by the Fiscal Agent (as defined on the reverse hereof) at the close of business on the date fifteen
calendar days prior to an Interest Payment Date (whether or not a Business Day (as defined on the reverse hereof) (a "Record Date"); provided,  however,
that interest payable at Maturity will be payable to the person to whom the part of the Principal Amount due at Maturity shall be payable. Any
such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Record Date and may either be paid to the person in whose name this Note (or one or
more predecessor Notes) is registered at the close of business on a special record date for the payment of such defaulted interest to be fixed by the Fiscal Agent, notice whereof shall be given to
Holders of Notes of this series not less than ten days prior to such special record date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities
exchange on which this Note may be listed, and upon such notice as may be required by such exchange. 

	5
	Include
for Global Notes.

	6
	Include
for Certificated Notes. 

A-2

 

Upon presentation of this Note at Maturity at the corporate trust office of The Bank of New York maintained for that purpose in The City of
New York, or at such other office or agency of Hydro-Québec maintained by it in The City of New York for the purpose of making such payments, payment of the principal of
this Note and premium, if any, and interest due at Maturity will be made to the Holder of this Note at Maturity in immediately available
funds.7 [Payments of interest, other than at Maturity, on this Note will be made by check mailed to the address
of such Holder as it appears in the Note Register. A Holder of US$10,000,000 or more in aggregate principal amount of Notes (whether having identical or different terms and provisions) shall be
entitled to receive payments of interest, other than at Maturity, by wire transfer of immediately available funds if appropriate wire transfer instructions have been received by the Fiscal Agent not
less than ten days prior to the applicable Interest Payment Date.] Payment of the principal of and premium, if any, and interest on this
Note will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public or private debts. 

REFERENCE
IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE. 

Unless
the certificate of authentication hereon has been executed by the Fiscal Agent by manual signature, this Note shall not be entitled to any benefit under the Fiscal Agency Agreement or be valid
or obligatory for any purpose. 

	7
	Include
for Certificated Notes. 

A-3

 

	SIGNED ON BEHALF OF HYDRO-QUÉBEC.	 	 
	
 Dated:
                                         
            	
 	

 
	
 	
 	

 Authorized Official
	
 	
 	

 
	FISCAL AGENT'S CERTIFICATE

OF AUTHENTICATION	 	 
	
This is one of the Notes referred to in the

within-mentioned Fiscal Agency Agreement.	
 	

 
	
BNY TRUST COMPANY OF CANADA, as Fiscal Agent	
 	

 
	
 	
 	

 
	
 Authorized Officer	 	 

A-4

 
 
 

HYDRO-QUÉBEC
  MEDIUM-TERM NOTE
  FIXED RATE    
    

Terms and Conditions  

General  

This
Note is one of a duly authorized issue of Medium-Term Notes (the "Notes"), Due Nine Months or More from Date of Issue, as selected by the purchaser and agreed to by
Hydro-Québec. The Notes are issuable under a fiscal agency agreement, dated as of June 2, 2004 (the "Fiscal Agency Agreement"), among Hydro-Québec,
Québec and BNY Trust Company of Canada, as fiscal agent (the "Fiscal Agent", which term shall include, unless the context otherwise requires, its successors and assigns), in an
aggregate initial offering price of up to US$3,000,000,000 at any one time outstanding. This amount of Notes includes up to US$2,000,000,000 of debt securities that Hydro-Québec has
registered with the Securities and Exchange Commission pursuant to Registration Statements Nos. 33-76074 and 333-112298 for offer and sale in the
United States. The foregoing limits may be increased by Hydro-Québec if in the future it determines that it may wish to sell additional Notes. The Fiscal Agency Agreement may be
amended from time to time in accordance with the terms thereof, but any such amendment will not adversely affect the rights of the Holder hereunder. 

As
used herein, "Maturity", when used with respect to this Note, means the date on which the Principal Amount of this Note or any installment of the principal hereof becomes due and payable, whether
at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. 

Payments  

 General  

Interest
payments for this Note will be computed and paid on the basis of a 360-day year of twelve 30-day months. For purposes of disclosure under the Interest Act (Canada),
the yearly rate of interest which is equivalent to the rate of interest payable on this Note is the Interest Rate specified on the face hereof multiplied by the number of days in the year and divided
by 360. 

If
any Interest Payment Date or Maturity falls on a day that is not a Business Day, the required payment of principal, premium, if any, or interest will be made on the next succeeding Business Day
with the same force and effect as if made on such Interest Payment Date or at Maturity and no interest shall accrue for the period from and after such Interest Payment Date or Maturity, as the case
may be, to such next succeeding Business Day. As used herein, "Business Day" means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are
authorized or required by law or executive order to close in The City of New York. 

A-5

 

 Original Issue Discount Note  

If
this Note is designated on the face hereof as an Original Issue Discount Note, then, notwithstanding anything to the contrary contained in this Note, upon the redemption, repayment or acceleration
of the Stated Maturity of this Note there shall be payable, in lieu of the Principal Amount due at the Stated Maturity hereof, an amount equal to the Amortized Face Amount of this Note. The "Amortized
Face Amount" shall be the amount equal to (i) the Issue Price (as defined below) of this Note, plus (ii) that portion of the difference between the Issue Price and the Principal Amount
of this Note that has been amortized at the Stated Yield (as defined below) of this Note (computed in accordance with generally accepted United States bond yield computation principles) at the
date as of which the Amortized Face Amount is calculated, but in no event shall the Amortized Face Amount exceed the Principal Amount of this Note. As used in the previous sentence "Issue Price" means
the Principal Amount of this Note less the Total Amount of OID of this Note specified on the face hereof and the "Stated Yield" of this Note means the Yield to Maturity specified on the face hereof
(or if not so specified, the Yield to Maturity compounded semi-annually and computed in accordance with generally accepted United States bond yield computation principles) for the
period from the Issue Date of this Note to the Stated Maturity hereof on the basis of its Issue Price and Principal Amount. 

 Redemption at the Option of Hydro-Québec  

If
one or more Redemption Dates (or ranges of such dates) is specified on the face hereof, this Note is subject to redemption upon not less than thirty days' and not more than sixty days' prior notice
by mail, on any such date (or during any such range) as a whole, or from time to time in part, in increments of US$1,000 or such other minimum denomination specified on the face hereof (provided that
any remaining Principal Amount hereof shall be at least US$1,000 or such other minimum denomination), at the election of Hydro-Québec, at the Redemption Price (as defined below)
together with accrued interest to the Redemption Date; but any interest payment due on an Interest Payment Date falling on or prior to the Redemption Date will be payable to the Holder hereof (or one
or more predecessor Notes) of record at the close of business on the Record Date pertaining to such Interest Payment Date. If applicable, the "Redemption Price" for any such redemption shall be equal
to the Initial Redemption Percentage specified on the face hereof (as adjusted by the Annual Redemption Percentage Reduction specified on the face hereof, if applicable) multiplied by the portion of
the Principal Amount hereof (or, if this Note is an Original Issue Discount Note, the portion of the Amortized Face Amount hereof) to be redeemed; provided, however, that in no event shall the
Redemption Price be less than 100% of the portion of the Principal Amount hereof (or, if this Note is an Original Issue Discount Note, the portion of the Amortized Face Amount hereof) to be redeemed. 

A-6

 

Notice
of redemption having been given as aforesaid, this Note (or the portion of the Principal Amount hereof so to be redeemed) shall, on the Redemption Date, become due and payable at the Redemption
Price herein specified, and from and after such date (unless Hydro-Québec shall default in the payment of the Redemption Price and accrued interest) shall cease to bear interest. 

In
the case of any partial redemption at the election of Hydro-Québec of Notes, the Notes of a particular tenor to be redeemed shall be selected by the Fiscal Agent not more than sixty
days prior to the Redemption Date by such method as the Fiscal Agent shall deem fair and appropriate and which may provide for the selection for redemption of portions of the Principal Amount of
Notes. In the event of any redemption of this Note in part only, a new Note or Notes of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof, provided that such unredeemed portion shall be an authorized denomination for Notes of this series. 

 Repayment at the Option of Holder  

If
one or more Optional Repayment Dates (or ranges of such dates) is specified on the face hereof, this Note is subject to repayment on any such date (or during any such range) or, if such date is not
a Business Day, on the first Business Day following such date, as a whole or from time to time in part, in increments of US$1,000 or such other minimum denomination specified on the face hereof
(provided that any remaining Principal Amount hereof shall be at least US$1,000 or such other minimum denomination), at the election of the Holder hereof at the Repayment Price (as defined below)
together with accrued interest thereon to the Optional Repayment Date, but any interest payment due on an Interest Payment Date falling on or prior to the Optional Repayment Date will be payable to
the Holder hereof of record at the close of business on the Record Date pertaining to such Interest Payment Date. Such election shall be effected by the Holder hereof delivering to
Hydro-Québec at the corporate trust office of The Bank of New York in The City of New York not less than thirty nor more than sixty days prior to the date on which this
Note is to be repaid, or during such other notice period specified on the face hereof, a notice requesting such repayment in the form prescribed below and specifying the date upon which this Note is
to be repaid. Any notice given by a Holder pursuant to this paragraph shall consist of this Note with the form entitled "Option to Elect Repayment" set forth of the end of this Note duly completed.
Exercise of the repayment option by the Holder hereof will be irrevocable. Unless otherwise specified on the face hereof, the "Repayment Price" for any such repayment shall be 100% of the portion of
the Principal Amount hereof (or, if this Note is an Original Issue Discount Note, the portion of the Amortized Face Amount hereof) to be repaid. 

A-7

 

Status of the Notes and the Guarantee  

The
Notes shall be direct, unsecured and unconditional obligations of Hydro-Québec. The Notes shall rank equally among themselves and with all other unsecured debt securities issued by
Hydro-Québec and outstanding on the date hereof or issued hereafter. 

Québec
(the "Guarantor") will unconditionally guarantee the due and punctual payment of the principal of, premium, if any, and interest on the Notes, upon default in payment by
Hydro-Québec, when and as the same shall respectively become due and payable, at Stated Maturity, upon call for redemption prior to Maturity, by acceleration or otherwise (such
guarantee by the Guarantor is hereinafter referred to as the "Guarantee"). The Guarantee will be a direct, unconditional and unsecured obligation of Québec and will rank equally in
right of payment with all other unsecured obligations for borrowed money of Québec outstanding at the date hereof or in the future. 

Form, Denomination and Registration  

        8 [The Notes will be issued in the form of one or more fully registered Global Notes registered in the name of
Cede & Co., as nominee of DTC and held by the Fiscal Agent as custodian for DTC (the "Custodian"). The Notes will only be
sold] 9 [The Notes are fully registered, without
coupons,] in authorized denominations of US$1,000 and any integral multiple of US$1,000 in excess thereof. 

The
Fiscal Agent has been appointed registrar for the Notes, and Hydro-Québec will cause the Fiscal Agent to maintain a Note Register for the registration and transfer of Notes. 

10 [Owners of beneficial interests in this Note will not, except in the limited circumstances described herein,
be entitled to receive certificates representing the Notes ("Certificated Notes") or to have Notes registered in their names, and will not be considered holders thereof under the Fiscal Agency
Agreement. Unless and until it is exchanged in whole or in part for Certificated Notes, this Note may not be transferred except as a whole by DTC to a nominee of DTC, by a nominee of DTC to DTC or
another nominee of DTC, or by DTC or the nominee of DTC to a successor of DTC or a nominee of such successor.] 

	8
	Include
for Global Notes.

	9
	Include
for Certificated Notes.

	10
	Include
for Global Notes. 

A-8

 

11 [This Note may be transferred at the aforesaid corporate trust office
of The Bank of New York by surrendering this Note for cancellation, accompanied by a written instrument of transfer in form approved by Hydro-Québec and duly executed by the
Holder hereof in person or by the Holder's attorney duly authorized in writing, and thereupon the Fiscal Agent shall issue in the name of the transferee or transferees, in exchange herefor, a new Note
or Notes in an equal aggregate Principal Amount and in authorized denominations, subject to the terms and conditions set forth herein. 

The
Notes are exchangeable at said office for other Notes of like tenor in other authorized denominations and in an equal aggregate Principal Amount. All such exchanges of Notes will be free of
charge, but Hydro-Québec may require payment of a sum sufficient to cover any tax or other governmental charge in connection therewith. The date of registration of any Note delivered
upon any exchange or transfer of Notes shall be such that no gain or loss of interest results from such exchange or transfer. The Fiscal Agent shall not be required to make any transfers,
registrations or exchanges of Notes for a period of fifteen days preceding any Interest Payment Date.] 

In
the event of any redemption of Notes at the election of Hydro-Québec, the Fiscal Agent shall not be required to (i) issue, register the transfer of or exchange Notes of like
tenor during a period beginning at the opening of business fifteen days before any selection of such Notes to be redeemed and ending at the close of business on the day of mailing of the relevant
notice of redemption, or (ii) register the transfer of or exchange this Note, or, except in the case of a partial redemption, the unredeemed portion of this Note. Following the exercise of any
repayment option by the Holder hereof, the Fiscal Agent shall not be required to issue, register the transfer of or exchange that portion of this Note with respect to which such option has been
exercised. 

12 [Subject to the foregoing, this Note is not exchangeable, except for a Global Note or Global Notes in an equal
aggregate Principal Amount to be registered in the name of DTC or its nominee. 

	11
	Include
for Certificated Notes.

	12
	Include
for Global Notes. 

A-9

 

Certificated Notes  

No
owner of a beneficial interest in this Note will be entitled to receive a Certificated Note in definitive form except in the limited circumstances described herein. 

The
Notes represented by this Note are exchangeable for Certificated Notes of like tenor as such Notes in denominations of US$1,000 and integral multiples thereof only if DTC (i) notifies
Hydro-Québec that it is unwilling or unable to continue as depositary in connection with the Global Notes; (ii) ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended, at a time when it is required to be and a successor depositary is not appointed by Hydro-Québec within 90 days after receiving the notice or
becoming aware that DTC is no longer so registered; or (iii) acting on direct or indirect instructions of one or more Holders or any beneficial owner of an interest in this Note, requests in
writing from Hydro-Québec the exchange, in whole or in part, of this Note for Certificated Notes, but only after an event of default entitling the Holders to give
Hydro-Québec written notice that such Holders elect to declare the Principal Amount of the Notes held by them and represented by this Note to be due and payable has occurred and is
continuing; provided that if DTC is unwilling or does not promptly make such request to Hydro-Québec, then any beneficial owner of an
interest in this Note shall be entitled to make such request with respect to such interest. Hydro-Québec may also at any time and in its sole discretion notify the Fiscal Agent that all
the Notes held in the form of the Global Notes are to be exchanged for Certificated Notes and, in such event, Hydro-Québec shall issue or cause to be issued Certificated Notes upon
registration of, transfer of, or in exchange for such Global Notes. The date of registration of any Certificated Note delivered upon any exchange or transfer of a Global Note shall be such that no
gain or loss of interest results from such exchange or transfer. The Fiscal Agent shall not be required to make any transfers, registrations or exchanges of Global Notes for a period of fifteen days
preceding any Interest Payment Date. 

In
respect of any such issuance of Certificated Notes, (i) Hydro-Québec shall promptly provide the Fiscal Agent with a sufficient number of Certificated Notes in blank form to
proceed with such issuance, (ii) DTC shall cause this Note to be delivered by the Custodian to the Fiscal Agent and provide the Fiscal Agent with the necessary registration information for such
Certificated Notes, (iii) the Fiscal Agent shall authenticate and deliver such Certificated Notes in an aggregate principal amount equal to the principal amount of this Note to be exchanged for
such Certificated Notes, (iv) the Fiscal Agent shall cancel this Note and, in the case of a partial exchange, issue and deliver to or to the order of DTC a new Global Note in an aggregate
principal amount equal to the unexchanged portion of this Note partially exchanged for Certificated Notes and (v) the Fiscal Agent shall reduce accordingly the holdings of the Holder on the
Register. Such Certificated Notes shall be delivered as directed by the persons in whose names such Certificated Notes are to be registered. All Notes represented by Certificated Notes issued upon any
such issuance in exchange for the Notes represented by this Note shall have the Guarantee of the Guarantor endorsed thereon (which Guarantee shall be a valid obligation of Québec),
shall be a valid obligation of Hydro-Québec, shall be entitled to the same benefits under the Fiscal Agency Agreement as the Global Notes, and shall be so exchanged without charge to
the Fiscal Agent, DTC or the transferee. On or after any such exchange, the Fiscal Agent shall direct all payments in respect of such Certificated Notes to the registered holders thereof, including
when such exchange occurred after the record date for any payment and prior to the date of such payment. 

A-10

  

Hydro-Québec expressly acknowledges that if a Certificated Note is not promptly issued to a beneficial owner of an interest in this Note as contemplated herein, then such beneficial
owner shall be entitled to pursue any remedy under the Fiscal Agency Agreement, the Note or applicable law with respect to the portion of this Note that represents such beneficial owner's interest as
if such Certificated Note had been issued. 

Title  

Subject
to applicable law and the terms of the Fiscal Agency Agreement, Hydro-Québec, the Guarantor and the Fiscal Agent will deem and treat the persons in whose name the Global Notes
are registered, initially Cede & Co., as the absolute owners thereof for all purposes whatsoever notwithstanding any notice to the contrary. All payments to or on the order of the Holder
shall be valid and effectual to discharge the liability of Hydro-Québec, the Guarantor and the Fiscal Agent on the Notes to the extent of the sum or sums so paid.] 

Events of Default  

In
the event that (i) Hydro-Québec shall default in the payment of principal of or premium or interest on this Note as the same shall become due and payable, and such default
shall continue for a period of 30 days, or (ii) default shall be made in the due performance or observance by Hydro-Québec of any covenant or agreement contained in the
Notes, other than the payment of principal, premium or interest, or in the Fiscal Agency Agreement, and such default shall continue for a period of 60 days, or
(iii) Hydro-Québec shall default in the payment of any principal of or premium or interest on any indebtedness (direct or under a guarantee) for borrowed money, other than the
Notes, as the same shall be due and payable, and such default shall continue for a period of 30 days, provided that the foregoing shall not be
taken into account so long as the aggregate principal amount of all such indebtedness (direct or under a guarantee) for borrowed money with respect to which the foregoing has occurred does not exceed
US$50,000,000 (or its equivalent in other currencies), then at any time thereafter and during the continuance of such default the Holder of this Note (or its proxy) may deliver or cause to be
delivered to Hydro-Québec at its registered office in Montreal, Québec, Canada (with a copy to the Fiscal Agent) a written notice that such Holder elects to declare the
principal of the Notes held by him (the serial number or numbers 13 [of the Global Note representing
such Notes and the Principal Amount of the Notes owned by him and the subject of such declaration] being set forth in such notice) to be due
and payable and, in the
cases falling within either (i) or (iii) above, on the 15th day after delivery of such notice, or, in the cases falling within (ii) above, on the 30th day after delivery of such
notice, the principal of the Notes referred to in such notice plus any premium and accrued interest thereon shall become due and payable, unless prior to that time all such defaults theretofore
existing shall have been cured. 

	13
	Include
for Global Notes. 

A-11

 

Modification  

The
Fiscal Agency Agreement and the Notes may be amended by Hydro-Québec, the Guarantor and the Fiscal Agent without notice to, or the consent of, the holder of any Note, for the
purpose of (i) curing any ambiguity; (ii) curing, correcting or supplementing any defective provisions contained therein; or (iii) in any other manner which
Hydro-Québec, the Guarantor and the Fiscal Agent, acting on the advice of independent counsel, may deem necessary or desirable and which will not be inconsistent with the Notes and
which in the reasonable opinion of Hydro-Québec, the Guarantor and the Fiscal Agent will not adversely affect the interests of the holders of Notes. 

The
Fiscal Agency Agreement contains provisions for convening meetings of registered holders of Notes to modify or amend by Extraordinary Resolution (as defined in the Fiscal Agency Agreement) the
Fiscal Agency Agreement (except as provided in the immediately preceding paragraph) and the Notes (including the terms and conditions thereof) or waive future compliance therewith or past default
thereon by Hydro-Québec. An Extraordinary Resolution duly passed at any such meeting shall be binding on all holders of Notes, whether present or not; provided,
however, that no such modification or amendment to the Fiscal Agency Agreement or to the terms and conditions of the Notes or any other action taken may, without the consent of
the holder of each such Note affected thereby: (a) change the Stated Maturity or the Interest Payment Date(s) of any such Note; (b) reduce the Principal Amount of or rate of interest on
any such Note; (c) change the currency of payment of any such Note; (d) impair the right to institute suit for the enforcement of any payment on or with respect to such Note or the
Guarantee; (e) reduce the percentage of the holders of Notes necessary to modify or amend the Fiscal Agency Agreement or the terms and conditions of the Notes or reduce the percentage of votes
required for the taking of action or the quorum required at any meeting of holders of Notes; or (f) reduce the percentage of outstanding Notes necessary to waive any future compliance or past
default. 

A-12

 

Future Holders  

Any
action by the Holder of this Note shall bind all future Holders of this Note, and of any Note issued in exchange or substitution herefor or in place hereof, in respect of anything done or
permitted by Hydro-Québec or by the Fiscal Agent in pursuance of such action. 

Notices  

All
notices to the Holders of Global Notes will be given in writing mailed, first-class postage prepaid, to each Holder at each Holder's address as it appears in the Note Register. Any such notice
shall be deemed to have been given on the date of such mailing. 

However,
when Certificated Notes are outstanding, all notices to the Holders of Notes will be published in English in New York, New York in The Wall Street
Journal. If at any time publication in such newspaper is not practicable, notices will be valid if published in an English language newspaper with general circulation in such
market as Hydro-Québec, with the approval of the Fiscal Agent, shall determine. Any such notice shall be deemed to have been given on the date of such publication or, if published more
than once or on different dates, on the first date on which publication is made. 

Office or Agency of Hydro-Québec  

So
long as this Note shall be outstanding, Hydro-Québec will maintain an office or agency for the payment of the principal of and premium, if any, and interest on this Note as herein
provided in The City of New York, an office or agency in The City of New York for the transfer and exchange as aforesaid of the Notes and an office or agency in either The City of
New York or Toronto, Ontario for the registration as aforesaid of the Notes. Hydro-Québec may designate other agencies for the payment of said principal and premium, if any, and
interest at such place or places (subject to applicable laws and regulations) as Hydro-Québec may decide. So long as there shall be a Fiscal Agent, Hydro-Québec shall
keep the Fiscal Agent advised of the names and locations of such agencies, if any are so designated. 

A-13

 

No
recourse under or upon any covenant contained in this Note or because of the creation of the indebtedness represented hereby shall be had against any official or other representative, past, present
or future, as such, of Hydro-Québec whether by virtue of any statute or rule of law or by the enforcement of any assessment or penalty or otherwise, it being expressly agreed and
understood that this Note is solely the obligation of Hydro-Québec and that no personal liability whatever shall attach to or be incurred by any such officials or other representatives,
as such, because of the execution of this Note. 

Prescription  

Under
current Québec law, Hydro-Québec's obligation to make any payment on the Notes shall be extinguished three years after the date such payment is due unless such
right to payment is judicially exercised prior to the expiration of such three-year period. 

Governing Law  

The
Fiscal Agency Agreement, the Notes and the Guarantee shall be construed in accordance and governed by the laws of Québec and the laws of Canada applicable therein. 

Hydro-Québec
and Québec irrevocably consent to the fullest extent permitted by law to the giving of any relief (including, without limitation, the making or enforcement
of any order or judgment) made or given in connection with any proceedings arising out of or in connection with the Fiscal Agency Agreement, the Notes and the Guarantee. 

U.S. Dollars  

Reference
in this Note to "U.S. dollars" is to the currency of the United States of America. 

A-14

 
 
 

OPTION TO ELECT REPAYMENT  
    

The
undersigned hereby irrevocably requests and instructs Hydro-Québec to repay the within Note (or portion thereof specified below) pursuant to its terms at the Repayment Price, to the
undersigned at: 

                                        
                           
 

                                        
                           

                                        
                           

                                        
                           
 

                                        
                           

(PLEASE
PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF THE UNDERSIGNED) 

If
less than the entire Principal Amount of the within Note is to be repaid, specify the portion thereof which the Holder elects to have repaid: 

	

	
 	

;

14 [and specify the denomination or denominations (which shall not be less than the minimum authorized
denomination) of the Notes to be issued to the Holder for the portion of the within Note not being repaid (in the absence of any such
specification,] one
such 15 [Global] Note will be issued for
the portion not being repaid 16 [)]: 

	

	
 	

..

	
 Dated:
                                      	
 	

 
	
 	
 	

 NOTICE: This signature on this Option to Elect Repayment must correspond with the name as written upon the face of the within instrument in every particular without alteration or enlargement.

	14
	Include
for Certificated Notes.

	15
	Include
for Global Notes.

	16
	Include
for Certificated Notes. 

A-15

 
 
 

GUARANTEE BY QUÉBEC  
    

By
virtue of the powers conferred by the Parlement du Québec and of the authorization of the Gouvernement du Québec under Order in Council No
632-2003 dated June 4, 2003, as such Order in Council may be further amended or replaced, Québec hereby irrevocably and unconditionally guarantees to the holder of
this Note and pledges its full faith and credit for the due and punctual payment, upon default in payment by Hydro-Québec, of the principal of this Note and premium, if any, and the
interest thereon, as and when the same shall respectively become due and payable (without taking into account any applicable grace period or notice period set out in the terms and conditions of the
Notes), whether at stated maturity, upon previous call for redemption or by acceleration or otherwise; and hereby expressly waives the benefits of discussion and division and any prior notice or
protest to, demand upon or action against Hydro-Québec or Québec. 

This
Guarantee shall be construed in accordance with, and governed by, the laws of Québec and the laws of Canada applicable therein. 

Québec
irrevocably consents to the fullest extent permitted by law to the giving of any relief (including, without limitation, the making or enforcement of any order or judgment) made
or given in connection with any proceedings arising out of or in connection with this Guarantee. 

Dated
as of
                                         
             

Executed in The City of New York on behalf of Québec.  

	 	 	QUÉBEC
	

 	
 	

By:	

 
	 	 	 	
 Authorized Signatory

A-16

   EXHIBIT B 

17[This
Note is a Global Note within the meaning of the Fiscal Agency Agreement hereinafter referred to and is registered in the name of a depositary or a nominee thereof.
This Global Note may not be exchanged in whole or in part for a Note registered, and no transfer of this Global Note in whole or in part may be registered, in the name of any Person other than such
depositary or a nominee thereof except in the limited circumstances described in the Fiscal Agency Agreement. 

Unless
this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC") to Hydro-Québec or its agent for registration
of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.] 

	REGISTERED	 	REGISTERED
	No. 18[G]FLR —             	 	$
	19[CUSIP]	 	 

HYDRO-QUÉBEC

20[GLOBAL] MEDIUM-TERM NOTE

(Floating Rate)  

        The following summary of terms is subject to the information set forth on the reverse hereof. 

PRINCIPAL AMOUNT:

ISSUE DATE:

REFERENCE RATE:

SPREAD:

SPREAD MULTIPLIER:

INITIAL INTEREST RATE:

MAXIMUM INTEREST RATE:  

	17
	Include
for Global Notes.

	18
	Include
for Global Notes.

	19
	Include
for Global Notes.

	20
	Include
for Global Notes. 

B-1

 

MINIMUM INTEREST RATE:

INTEREST PAYMENT DATE(S):

INTEREST PAYMENT PERIOD:

INTEREST RESET DATE(S):

INTEREST RATE RESET PERIOD:

INTEREST DETERMINATION DATE(S):

CALCULATION DATE(S):

INDEX MATURITY:

CALCULATION AGENT:

RECORD DATE(S):

STATED MATURITY:

REDEMPTION DATE(S):

MINIMUM DENOMINATION TO BE REDEEMED (IF OTHER THAN US$1,000):

INITIAL REDEMPTION PERCENTAGE:

ANNUAL REDEMPTION PERCENTAGE REDUCTION:

OPTIONAL REPAYMENT DATE(S):

MINIMUM DENOMINATION TO BE REPAID (IF OTHER THAN US$1,000):

ORIGINAL ISSUE DISCOUNT SECURITY:

                TOTAL AMOUNT OF OID:

                YIELD TO MATURITY:

                INITIAL ACCRUAL PERIOD OID:

OTHER PROVISIONS:  

        HYDRO-QUÉBEC, for value received, hereby promises to pay to
21[Cede & Co., as nominee of DTC]

22[                                      ]
or registered assigns, the Principal Amount specified above at the Stated Maturity specified above and to pay
interest thereon at a rate per annum equal to the Initial Interest Rate specified above until the first Interest Reset Date specified above following the Issue Date specified above and thereafter at a
rate determined in accordance with the provisions on the reverse hereof under the heading "Determination of CD Rate", "Determination of CMT Rate", "Determination of Commercial Paper Rate",
"Determination of Federal Funds Rate", "Determination of LIBOR", "Determination of Prime Rate" or "Determination of Treasury Rate", depending upon whether the Reference Rate specified above is CD
Rate, CMT Rate, Commercial Paper Rate, Federal Funds Rate, LIBOR, Prime Rate or Treasury Rate, until the principal hereof is paid or duly made available for payment. Interest on this Note will accrue
from, and including, the immediately preceding Interest Payment Date specified above in respect of which interest has been paid or duly provided for or, if no interest has been paid, from the Issue
Date specified above to, but excluding, the next succeeding Interest Payment Date or, in respect of any part of the Principal Amount due at Maturity (as defined below), Maturity, as the case may be,
except that the interest payment at Maturity will include interest accrued to but excluding such date. Except as provided herein, Hydro-Québec will pay interest monthly, quarterly,
semi-annually or annually as specified above under "Interest Payment Period", commencing with the first Interest Payment Date specified above next succeeding the Issue Date, unless the
Issue Date occurs between a Record Date and the Interest Payment Date to which such Record Date pertains, in which case commencing on the Interest Payment Date following the next succeeding Record
Date and in respect of any part of the Principal Amount due at Maturity, at Maturity. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will be paid to
the person in whose name this Note (or one or more predecessor Notes) is registered (the "Holder") in the register of the names and addresses of Holders of Notes (the "Note Register") maintained by
the Fiscal Agent (as defined on the reverse hereof) on behalf of Hydro-Québec at the close of business on the date fifteen calendar days prior to an Interest Payment Date (whether or
not a Business Day (as defined on the reverse hereof) (a "Record Date"); provided, however, that
interest payable at Maturity will be payable to the person to whom the part of the Principal Amount due at Maturity shall be payable. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Record Date and may either be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business
on a special record date for the payment of such defaulted interest to be fixed by the Fiscal Agent, notice whereof shall be given to Holders of Notes of this series not less than ten days prior to
such special record date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which this Note may be listed, and upon such notice as
may be required by such exchange. 

	21
	Include
for Global Notes.

	22
	Include
for Certificated Notes. 

B-2

 

Upon presentation of this Note at Maturity at the corporate trust office of The Bank of New York maintained for that purpose in The City of
New York, or at such other office or agency of Hydro-Québec maintained by it in The City of New York for the purpose of making such payments, payment of the principal of
this Note and premium, if any, and interest due at Maturity will be made to the Holder of this Note at Maturity in immediately available funds. 23[Payments of interest, other
than at Maturity, on this Note are to be made by check mailed to the address of such Holder as it appears in the Note Register. A Holder of US$10,000,000 or more in aggregate principal amount of Notes
(whether having identical or different terms and provisions) shall be entitled to receive payments of interest, other than at Maturity, by wire transfer of immediately available funds if appropriate
wire transfer instructions have been received by the Fiscal Agent not less than ten days prior to the applicable Interest Payment Date.] Payment of the principal of and premium, if any,
and interest on this Note will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public or private debts. 

	23
	Include
for Certificated Notes. 

B-3

 

REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS IF SET FORTH AT THIS PLACE. 

Unless
the certificate of authentication hereon has been executed by the Fiscal Agent by manual signature, this Note shall not be entitled to any benefit under the Fiscal Agency Agreement or be valid
or obligatory for any purpose. 

B-4

 

SIGNED
ON BEHALF OF HYDRO-QUÉBEC. 

	Dated:
                                         
                 	 	 
	 	 	                                        
                  

Authorized Official

FISCAL AGENT'S CERTIFICATE

OF AUTHENTICATION  

This is one of the Notes referred to in the

within-mentioned Fiscal Agency Agreement. 

BNY TRUST COMPANY OF CANADA, as Fiscal Agent 

                                        
                  

Authorized Officer 

B-5

 
HYDRO-QUÉBEC

MEDIUM-TERM NOTE

FLOATING RATE  

Terms and Conditions  

General  

This
Note is one of a duly authorized issue of Medium-Term Notes (the "Notes"), Due Nine Months or More from Date of Issue, as selected by the purchaser and agreed to by
Hydro-Québec. The Notes are issuable under a fiscal agency agreement, dated as of June 2, 2004 (the "Fiscal Agency Agreement"), among Hydro-Québec,
Québec and BNY Trust Company of Canada, as fiscal agent (the "Fiscal Agent", which term shall include, unless the context otherwise requires, its successors and assigns), in an
aggregate initial offering price of up to US$3,000,000,000 at any one time outstanding. This amount of Notes includes up to US$2,000,000,000 of debt securities that Hydro-Québec has
registered with the Securities and Exchange Commission pursuant to Registration Statements Nos. 33-76074 and 333-112298 for offer and sale in the
United States. The foregoing limits may be increased by Hydro-Québec if in the future it determines that it may wish to sell additional Notes. The Fiscal Agency Agreement may be
amended from time to time in accordance with the terms thereof, but any such amendment will not adversely affect the rights of the Holder hereunder. 

As
used herein, "Maturity", when used with respect to this Note, means the date on which the Principal Amount of this Note or any installment of the principal hereof becomes due and payable, whether
at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. 

Interest  

 General  

Commencing
with the first Interest Reset Date specified on the face hereof following the Issue Date, the rate at which interest on this Note is payable shall be adjusted daily, weekly, monthly,
quarterly, semi-annually or annually as specified on the face hereof under "Interest Reset Period"; provided,  however, that the interest rate in effect for
the period from the Issue Date to the first Interest Reset Date will be the Initial Interest Rate. If any
Interest Reset Date would otherwise be a day that is not a Business Day (as defined below), such Interest Reset Date shall be postponed to the next succeeding day that is a Business Day, except that
in the case the Reference Rate is LIBOR, if such Business Day is in the next succeeding calendar month, such Interest Reset Date shall be the immediately preceding Business Day. The interest rate
applicable to an Interest Reset Period commencing on the related Interest Reset Date will be determined by reference to the applicable Reference Rate as of the particular "Interest Determination
Date", which, unless otherwise specified on the face hereof, will be: (i) with respect to the Commercial Paper Rate, Federal Funds Rate and the Prime Rate, the Business Day immediately
preceding the related Interest Reset Date; (ii) with respect to the CD Rate and the CMT Rate, the second Business Day preceding the related Interest Reset Date; (iii) with respect to
LIBOR, the second London Business Day (as defined below) preceding the related Interest Reset Date; and (iv) with respect to the Treasury Rate, the day in the week in which the related Interest
Reset Date falls on which day Treasury Bills (as defined below) are usually auctioned (i.e., Treasury Bills are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is usually held on the following Tuesday, except that the auction may be held on the preceding Friday); provided, however, that if an auction is held on the Friday
of the week preceding the related Interest Reset Date, the Interest Determination Date will be the preceding Friday. 

B-6

 

If
the interest rate of this Note is determined with reference to two or more Reference Rates, the Interest Determination Date will be the latest Business Day which is at least two Business Days
before the related Interest Reset Date on which each Reference Rate is determinable. 

Subject
to applicable provisions of law and except as specified herein, on each Interest Reset Date, the rate of interest payable on this Note shall equal the Reference Rate specified on the face
hereof, determined in accordance with the provisions of the applicable heading below, plus or minus the Spread, if any, specified on the face hereof or multiplied by the Spread Multiplier, if any,
specified on the face hereof. 

Determination of CD Rate.    If the Reference Rate is CD Rate, the CD Rate shall equal the rate on the Interest
Determination Date specified on the face hereof for negotiable certificates of deposit for the period of the Index Maturity specified on the face hereof as published in H.15(519) (as defined
below) under the heading "CDs (secondary market)" or any replacement heading on that service. 

If
such rate is not published in H.15(519) by 3:00 P.M., New York City time, on the Calculation Date (as specified on the face hereof) pertaining to such Interest Determination
Date, then the CD Rate shall be the rate set forth in H.15 Daily Update (as defined below) for that Interest Determination Date in respect of certificates of deposit having the Index Maturity
specified on the face hereof under the heading "CD(s) (secondary market)" or any replacement heading on that service or another recognized electronic source used for the purpose of displaying the
applicable rate. 

B-7

 

If
by 3:00 P.M., New York City time, on the Calculation Date such rate is not published in H.15(519), H.15 Daily Update or another recognized electronic source, then the CD Rate shall be
calculated by the Calculation Agent and shall be the arithmetic mean of the secondary market offered rates, as of 10:00 A.M., New York City time, on such Interest Determination Date, of
three leading non-bank dealers of negotiable U.S. dollar certificates of deposit in The City of New York (which may include the agents appointed by
Hydro-Québec for the purpose of soliciting purchases of the Notes by others from Hydro-Québec (the "Agents") and affiliates of the Agents) selected by the Calculation
Agent, after consultation with Hydro-Québec, for negotiable certificates of deposit of major United States money center banks with a remaining maturity closest to the Index
Maturity specified on the face hereof and in an amount that is representative for a single transaction in such market at such time. 

If
the dealers so selected by the Calculation Agent are not quoting, the CD Rate will be the CD Rate in effect on such Interest Determination Date. 

"H.15
(519)" means the weekly statistical release designated as "Statistical Release H.15(519), Selected Interest Rates", as published by the Board of Governors of the Federal Reserve System,
available through the world-wide-web site of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov/releases/h15, or any successor site or
publication. 

"H.15
Daily Update" means the daily update of H.15(519), available through the world-wide-web site of the Board of Governors of the Federal Reserve System at
http://www.federalreserve.gov/releases/h15/update, or any successor site or publication. 

Determination of CMT Rate.    If the Reference Rate is CMT Rate, the CMT Rate shall equal the rate on the
Interest Determination Date specified on the face hereof displayed on the CMT Telerate Page (as defined below) under the caption "...Treasury Constant Maturities ...Federal Reserve Board
Release H.15 ...Mondays Approximately 3:45 P.M.," under the column for the CMT Maturity Index (as defined below) for (i) if the CMT Telerate Page is 7051, such Interest
Determination Date or (ii) if the CMT Telerate Page is 7052, the week or the month, as applicable, ended immediately preceding the week in which the related Interest Determination Date occurs. 

If
such rate is no longer displayed on the relevant page, or if such rate is not displayed by 3:00 P.M., New York City time, on the Calculation Date (as specified on the face hereof)
pertaining to such Interest Determination Date, then the CMT Rate shall be such treasury constant maturity rate for the CMT Maturity Index for such Interest Determination Date as published in
H.15(519), or another recognized electronic source used for the purpose of displaying the applicable rate, under the heading "Treasury constant maturities" or any replacement heading on that service. 

B-8

 

If
such rate is no longer published, or is not published by 3:00 P.M., New York City time, on such Calculation Date, then the CMT Rate shall be such treasury constant maturity rate for
the CMT Maturity Index or other United States Treasury rate for the CMT Maturity Index for such Interest Determination Date as may then be published by either the Board of Governors of the
Federal Reserve System or the United States Department of the Treasury that the Calculation Agent determines to be comparable to the rate which would otherwise have been published in the
relevant H.15(519). 

If
such information is not provided by 3:00 P.M., New York City time, on such Calculation Date, then the CMT Rate shall be calculated by the Calculation Agent and shall be the yield to
maturity, based on the arithmetic mean of the secondary market bid prices as of approximately 3:30 P.M., New York City time, on such Interest Determination Date reported by three leading
primary United States government securities dealers in The City of New York (which may include the Agents or their affiliates) (each, a "Reference Dealer") selected by the Calculation
Agent (from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event
of equality, one of the lowest)) for obligations of the United States ("Treasury Notes") with an original maturity of approximately the CMT Maturity Index and a remaining term to maturity of
not less than such CMT Maturity Index minus one year and in an amount that is representative for a single transaction in such market at such time. 

If
three or four (and not five) of such Reference Dealers are quoting as described in the preceding paragraph, then the CMT Rate will be based on the arithmetic mean of the Treasury Notes quotations
obtained and neither the highest nor the lowest of such quotations will be eliminated. 

If
the Calculation Agent cannot obtain three Treasury Notes quotations, the CMT Rate shall be calculated by the Calculation Agent and shall be a yield to maturity based on the arithmetic mean of the
secondary market bid prices as of approximately 3:30 P.M., New York City time, on such Interest Determination Date of three Reference Dealers selected by the Calculation Agent (from five
Reference Dealers selected by the Calculation Agent and eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one
of the lowest)) for Treasury Notes with an original maturity of a number of years greater than the CMT Maturity Index and a remaining term to maturity closest to the CMT Maturity Index and in an
amount that is representative for a single transaction in such market at such time. 

B-9

 

If
three or four (and not five) of such Reference Dealers are quoting as described in the preceding paragraph, then the CMT Rate shall be based on the arithmetic mean of the Treasury Notes quotations
obtained and neither the highest nor the lowest of such quotations will be eliminated 

If
fewer than three Reference Dealers selected by the Calculation Agent are quoting as described in the second preceding paragraph, the CMT Rate shall be the CMT Rate in effect on such Interest
Determination Date. 

If
two Treasury Notes with an original maturity as described in the third preceding paragraph have remaining terms to maturity equally close to the CMT Maturity Index, the quotations for the Treasury
Notes with the shorter remaining term to maturity will be used. 

"CMT
Telerate Page" means the display on the Moneyline Telerate Service Inc., or any successor, on the page designated on the face hereof, or any other page as may replace such page on that
service for the purpose of displaying Treasury Constant Maturities as reported in H.15(519). If no such page is so specified on the face hereof, the CMT Telerate Page shall be 7052, for the most
recent week. 

"CMT
Maturity Index" means the original period to maturity of the United States Treasury securities (either 1, 2, 3, 5, 7, 10 or 20 years) specified on the face hereof with respect to
which the CMT Rate will be calculated. If no such maturity is specified on the face hereof, the CMT Maturity Index shall be two years. 

Determination of Commercial Paper Rate.    If the Reference Rate is Commercial Paper Rate, the Commercial Paper
Rate shall equal the Money Market Yield (as defined below) on the Interest Determination Date specified on the face hereof of the rate for commercial paper for the period of the Index Maturity
specified on the face hereof, as published in H.15(519) under the heading "Commercial paper — Nonfinancial" or any replacement heading on that service. 

If
such rate is not published in H.15(519) by 3:00 P.M., New York City time, on the Calculation Date (as specified on the face hereof) pertaining to such Interest Determination
Date, then the Commercial Paper Rate shall be the Money Market Yield (as defined below), on such Interest Determination Date, of the rate for commercial paper having the same Index Maturity specified
of the face hereof as published in H.15 Daily Update or any other recognized electronic source used for displaying that rate, under the heading "Commercial
paper — Nonfinancial" or any replacement heading on that service or another recognized electronic source used for displaying the applicable rate (with an Index
Maturity of one month or three months being deemed to be an Index Maturity of thirty days or ninety days respectively). 

B-10

   
If by 3:00 P.M., New York City time, on such Calculation Date, such rate is not published in H.15(519), H.15 Daily Update or another recognized electronic source, then the Commercial
Paper Rate shall be calculated by the Calculation Agent and shall be the Money Market Yield of the arithmetic mean of the offered rates as of 11:00 A.M., New York City time, on such
Interest Determination Date of three leading dealers of commercial paper in The City of New York (which may include the Agents and their affiliates) selected by the Calculation Agent, after
consultation with Hydro-Québec, for commercial paper for the period of the specified Index Maturity placed for an industrial issuer whose bond rating from a nationally recognized rating
agency is at least "AA" or the equivalent. 

If
such dealers selected by the Calculation Agent are not quoting, the Commercial Paper Rate shall be the Commercial Paper Rate in effect on such Interest Determination Date. 

"Money
Market Yield" shall be a yield calculated in accordance with the following formula: 

	Money Market Yield =	 	D × 360	 	 
	
	 	
	 	× 100
	 	 	360 - (D × M)	 	 

where
"D" refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal and "M" refers to the actual number of days in the Interest Reset
Period for which interest is being calculated. 

Determination of Federal Funds Rate.    If the Reference Rate is Federal Funds Rate, the Federal Funds Rate shall
equal the rate on the Interest Determination Date (as specified on the face hereof) for U.S. dollar Federal Funds as published in H.15(519) under the heading "Federal funds (effective)",
as that rate is displayed on Telerate Page (as defined below) 120, or any replacement heading on that service or another recognized electronic source used for the purpose of displaying the applicable
rate. 

If
such rate is not displayed on Telerate Page 120, or is not yet published in H.15(519) by 3:00 P.M., New York City time, on the Calculation Date specified on the
face hereof pertaining to such Interest Determination Date, then the Federal Funds Rate shall be the rate on such Interest Determination Date published in H.15 Daily Update, or another recognized
electronic source for displaying that rate under the heading "Federal funds (effective)" or any replacement heading on that service or another recognized electronic source used for the purpose of
displaying the applicable rate. 

B-11

 

If
by 3:00 P.M., New York City time, on such Calculation Date, such rate is not published in either H.15(519) or H.15 Daily Update, or another recognized electronic source, then
the Federal Funds Rate shall be calculated by the Calculation Agent and shall be the arithmetic mean of the rates for the last transaction in overnight Federal Funds arranged by three leading brokers
of Federal Funds transactions in The City of New York (which may include the Agents and their affiliates) selected by the Calculation Agent, after consultation with Hydro-Québec,
by 9:00 A.M., New York City time, on such Interest Determination Date. 

If
the brokers selected by the Calculation Agent are not quoting, the Federal Funds Rate shall be the Federal Funds Rate in effect on such Interest Determination Date. 

"Telerate
Page" means the display on Moneyline Telerate Service, Inc. or any successor, on the page or pages specified on the face hereof or the Prospectus Supplement, or any replacement page
or pages on that service. 

Determination of LIBOR.    If the Reference Rate is LIBOR, LIBOR shall be the London interbank offered rate for
deposit in the Index Currency specified on the face hereof. The interest rate payable shall equal LIBOR as determined on the Interest Determination Date specified on the face hereof in accordance with
the following provisions, in each case plus or minus the Spread, if any, specified on the face hereof or multiplied by the Spread Multiplier, if any, specified on the face hereof: 

With
respect to an Interest Determination Date, LIBOR shall be either (a) if "LIBOR Reuters" is specified on the face hereof, the arithmetic mean of the offered rates (unless the specified
LIBOR Page by its terms provides only for a single rate, in which case such single rate shall be used) for deposits in the specified Index Currency having the Index Maturity specified on the face
hereof, commencing on the Interest Reset Date, that appear on the LIBOR Page (as defined below) specified on the face hereof as of 11:00 A.M. London time, on such Interest Determination Date,
if at least two offered rates appear (unless, as aforesaid, only a single rate is required) on such LIBOR Page, or (b) if "LIBOR Telerate" is specified on the face hereof or if neither "LIBOR
Reuters" nor "LIBOR Telerate" is specified as the method for calculating LIBOR, the rate for deposits in the specified Index Currency having the Index Maturity specified on the face hereof and
commencing on the Interest Reset Date that appears on the LIBOR Page specified on the face hereof as of 11:00 A.M., London time, on such Interest Determination Date. 

B-12

 

If
fewer than two offered rates appear, or no rate appears, on the specified LIBOR Page, the Calculation Agent will select the principal London office of each of four major reference banks (which may
include affiliates of the Agents) in the London interbank market and request them to provide their offered quotation for deposits in the specified Index Currency for the period of the Index Maturity
specified on the face hereof, commencing on the Interest Reset Date, to prime banks in the London interbank market at approximately 11:00 A.M., London time, on such Interest Determination Date
and in a principal amount that is representative for a single transaction in such Index Currency in such market at such time. If at least two such quotations are provided, LIBOR shall be the
arithmetic mean of such quotations. 

If
fewer than two quotations are provided, LIBOR determined on such Interest Determination Date shall be calculated by the Calculation Agent as the arithmetic mean of the rates quoted at approximately
11:00 A.M., in the applicable Principal Financial Center (as defined below) on such Interest Determination Date by three major banks (which may include affiliates of the Agents) in such
Principal Financial Center selected by the Calculation Agent for loans in the specified Index Currency to leading European banks, having the Index Maturity specified on the face hereof and in a
principal amount that is representative for a single transaction in such specified Index Currency in such market at such time. 

If
the banks selected by the Calculation Agent are not quoting, LIBOR shall be LIBOR in effect on such Interest Determination Date. 

"LIBOR
Page" means either (i) if "LIBOR Reuters" is specified on the face hereof, the display on the Reuters Monitor Money Rates Service, or any successor service, for the purpose of displaying
the London interbank rates of major banks for the applicable Index Currency, or (ii) if "LIBOR Telerate" is specified on the face hereof or if neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified as the method for calculating LIBOR, the display on the Moneyline Telerate Service, Inc., or any successor, for the purpose of displaying the London interbank rates of major banks for
the applicable Index Currency. 

"Principal
Financial Center" will be the capital city of the country of the specified Index Currency, except that with respect to United States dollars, Canadian dollars, euros and Swiss
francs, the Principal Financial Center shall be The City of New York, Toronto, Brussels and Zurich, respectively. 

Determination of Prime Rate.    If the Reference Rate is Prime Rate, the Prime Rate shall equal the rate on the
Interest Determination Date specified on the face hereof that appears in H.15(519) under the heading "Bank Prime Loan" or any replacement heading on that service. 

B-13

 

If
such rate is not published in H.15(519) by 3:00 P.M., New York City time, on the Calculation Date specified on the face hereof pertaining to such Interest Determination Date,
then the Prime Rate will be the rate on such Interest Determination Date as published in H.15 Daily Update under the heading "Bank Prime Loan" or any replacement heading on that service, or another
recognized electronic source used for the purposes of displaying the applicable rate. 

If
by 3:00 P.M., New York City time, on such Calculation Date such rate is not published in either H.15(519) or H.15 Daily Update or other recognized electronic source, then the
Prime Rate will be calculated by the Calculation Agent and will be the arithmetic mean of the rates of interest publicly announced by each bank that appears on the Reuters Screen US PRIME 1 Page (as
defined below) as such bank's prime rate or base lending rate as of 11:00 A.M., New York City time, on such Interest Determination Date. 

If
fewer than four such rates appear on the Reuters Screen US PRIME 1 Page on such Calculation Date, the Prime Rate will be calculated by the Calculation Agent and will be the arithmetic mean of the
prime rates or base lending rates quoted on the basis of the actual number of days in the year divided by 360, as of the close of business on such Interest Determination Date by three major banks in
The City of New York (which may be affiliates of the Agents) selected by the Calculation Agent after consultation with Hydro-Québec. 

If
the banks selected by the Calculation Agent are not quoting, the Prime Rate shall be the Prime Rate in effect on such Interest Determination Date. 

"Reuters
Screen US PRIME 1 Page" means the display designated as page "US PRIME 1" on the Reuters Monitor Money Rates Service, or any other page as may replace the US PRIME 1 page on that service for
the purpose of displaying prime rates or base lending rates of major United States banks. 

Determination of Treasury Rate.    If the Reference Rate is Treasury Rate, the Treasury Rate shall equal the rate
for the auction of direct obligations of the United States ("Treasury Bills") sold at the auction on the applicable Interest Determination Date specified on the face hereof for the period of
the Index Maturity specified on the face hereof as such rate appears on Telerate Page 56 or 57 under the heading "INVESTMENT RATE" or any replacement heading on that service. 

If
the rate described above does not appear on Telerate Page 56 or 57 at 3:00 P.M., New York City time, on the Calculation Date specified on the face hereof pertaining to
such Interest Determination Date, the Treasury Rate shall be the Bond Equivalent Yield (as defined below) of the rate for such Interest Determination Date for the type of Treasury Bills described
above, as published in H. 15 Daily Update, or another recognized electronic source used for displaying that rate, under the heading "U.S. government securities/Treasury bills/Auction high". 

B-14

 

If
the results of the auction of Treasury Bills for the period of the specified Index Maturity are not published or reported as provided above by 3:00 P.M., New York City time, on such
Calculation Date, then the Treasury Rate shall be the Bond Equivalent Yield of the auction rate for such Interest Determination Date for Treasury Bills of the kind described above, as announced by the
United States Department of the Treasury. 

If
the auction rate described in the preceding paragraph is not so announced by 3:00 P.M., New York City time, on such Calculation Date, or if no such auction is held for the relevant
week, then the Treasury Rate shall be the Bond Equivalent Yield of the rate for such Interest Rate Determination Date for Treasury Bills having a remaining period to maturity closest to the period of
the specified Index Maturity, as published in H.15(519) under the heading "U.S. government securities/Treasury bills/secondary market". 

If
the rate described in the preceding paragraph does not appear in H.15(519) at 3:00 P.M., New York City time, on such Calculation Date, then the Treasury Rate shall be the rate
for such Interest Determination Date for Treasury Bills having a remaining period to maturity closest to the specified Index Maturity, as published in H.15 Daily Update, or another recognized
electronic source used for displaying that rate, under the heading "U.S. government securities/Treasury bills/secondary market". 

If
the rate described in the preceding paragraph does not appear in H.15 Daily Update or another recognized electronic source by 3:00 P.M., New York City time, on such Calculation Date,
the Treasury Rate for such Interest Determination Date shall be calculated by the Calculation Agent and shall be the Bond Equivalent Yield of the arithmetic mean of the secondary market bid rates, as
of approximately 3:30 P.M., New York City time, on such Interest Determination Date, of three primary United States government securities dealers (which may be the Agents or their
affiliates), as selected by the Calculation Agent after consultation with Hydro-Québec, for the issue of Treasury Bills with a remaining period to maturity closest to the Index Maturity
specified on the face hereof. 

If
the dealers selected by the Calculation Agent are not quoting, the Treasury Rate shall be the Treasury Rate in effect on such Interest Determination Date. 

"Bond
Equivalent Yield" shall be a yield calculated in accordance with the following formula: 

B-15

 

	Bond Equivalent Yield =	 	D × N × 100
	
	 	

	 	 	360 - (D × M)

where
"D" refers to the applicable per annum rate for Treasury Bills quoted on a bank discount basis and expressed as a decimal, "N" refers to 365 or 366, as the case may be, and "M" refers to the
actual number of days in the Interest Reset Period for which interest is being calculated. 

 Maximum/Minimum Interest Rate  

Notwithstanding
the foregoing, the interest rate hereon shall not be greater than the Maximum Interest Rate, if any, or less than the Minimum Interest Rate, if any, specified on the face hereof. The
Calculation Agent shall calculate the interest rate hereon in accordance with the foregoing on or before each Calculation Date. The interest rate on this Note will in no event be higher than the
maximum rate permitted by New York law, as the same may be modified by United States law of general application. 

 Interest Calculations  

The
Calculation Date, if applicable, pertaining to any Interest Determination Date is the earlier of (i) the tenth calendar day after such Interest Determination Date or if any such day is not
a Business Day, the next succeeding Business Day or (ii) the Business Day immediately preceding the applicable Interest Payment Date or Maturity, as the case may be. 

At
the request of the Holder hereof, the Calculation Agent will provide to the Holder hereof the interest rate hereon then in effect and, if determined, the interest rate which will become effective
as of the next Interest Reset Date. 

Accrued
interest hereon shall be an amount calculated by multiplying the Principal Amount as specified on the face hereof by an accrued interest factor. Such accrued interest factor is computed by
adding the interest factor calculated for each day from the Issue Date, or from the last date to which interest has been paid or duly provided for, to but excluding the date for which accrued interest
is being calculated. The interest factor for each such day is computed by dividing the interest rate applicable to such day by 360 if the Reference Rate is CD Rate, Commercial Paper Rate, Federal
Funds Rate, LIBOR or Prime Rate, as specified on the face hereof, or by the actual number of days in the year if the Reference Rate is CMT Rate or Treasury Rate, as specified on the face hereof. For
purposes of disclosure under the Interest Act (Canada), the yearly rate of interest which is equivalent to the rate of interest payable on this Note, except if the Reference Rate of this Note is the
CMT Rate or Treasury Rate, is the interest rate payable from time to time multiplied by the number of days in the year and divided by 360. 

B-16

 

Rounding  

        All percentages resulting from any calculation on this Note will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five
one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)), and all
dollar amounts used in or resulting from such calculation on this Note will be rounded to the nearest cent. 

Payments  

 General  

If
any Interest Payment Date falls on a day that is not a Business Day, the Interest Payment Date shall be postponed to the next succeeding Business Day. If Maturity falls on a day that is not a
Business Day, the required payment of principal, premium, if any, or interest will be made on the next succeeding Business Day with the same force and effect as if made at Maturity, and no interest
shall accrue for the period from and after Maturity to such next succeeding Business Day. In the case of payments of interest other than at Maturity, if the Reference Rate of this Note is LIBOR, as
specified above and such next Business Day falls in the next calendar month, such payment shall be made on the immediately preceding Business Day with the same force and effect as if made on such
Interest Payment Date. As used herein, "Business Day" means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required
by law or executive order to close in The City of New York; provided, however, that with respect
to Notes as to which LIBOR is the applicable Reference Rate, such day is also a "London Business Day". 

"London
Business Day" means a day on which commercial banks are open for business (including dealings in currencies other than U.S. dollars) in London, England. 

 Original Issue Discount Note  

If
this Note is designated on the face hereof as an Original Issue Discount Note, then, notwithstanding anything to the contrary contained in this Note, upon the redemption, repayment or acceleration
of the Stated Maturity of this Note there shall be payable, in lieu of the Principal Amount due at the Stated Maturity hereof, an amount equal to the Amortized Face Amount of this Note. The "Amortized
Face Amount" shall be the amount equal to (i) the Issue Price (as defined below) of this Note, plus (ii) that portion of the difference between the Issue Price and the Principal Amount
of this Note that has been amortized at the Stated Yield (as defined below) of this Note (computed in accordance with generally accepted United States bond yield computation principles) at the
date as of which the Amortized Face Amount is calculated, but in no event shall the Amortized Face Amount exceed the Principal Amount of this Note. As used in the previous sentence "Issue Price" means
the Principal Amount of this Note less the Total Amount of OID of this Note specified on the face hereof and the "Stated Yield" of this Note means the Yield to Maturity specified on the face hereof
(or if not so specified, the Yield to Maturity compounded semi-annually and computed in accordance with generally accepted United States bond yield computation principles) for the
period from the Issue Date of this Note to the Stated Maturity hereof on the basis of its Issue Price and Principal Amount. 

B-17

 

 Redemption at the Option of Hydro-Québec  

If
one or more Redemption Dates (or ranges of such dates) is specified on the face hereof, this Note is subject to redemption upon not less than thirty days' and not more than sixty days' prior notice
by mail, on any such date (or during any such range) as a whole, or from time to time in part, in increments of US$1,000 or such other minimum denomination specified on the face hereof (provided that
any remaining Principal Amount hereof shall be at least US$1,000 or such other minimum denomination), at the election of Hydro-Québec, at the Redemption Price (as defined below)
together with accrued interest to the Redemption Date; but any interest payment due on an Interest Payment Date falling on or prior to the Redemption Date will be payable to the Holder hereof (or one
or more predecessor Notes) of record at the close of business on the Record Date pertaining to such Interest Payment Date. If applicable, the "Redemption Price" for any such redemption shall be equal
to the Initial Redemption Percentage specified on the face hereof (as adjusted by the Annual Redemption Percentage Reduction specified on the face hereof, if applicable) multiplied by the portion of
the Principal Amount hereof (or, if this Note is an Original Issue Discount Note, the portion of the Amortized Face Amount hereof) to be redeemed; provided, however, that in no event shall the
Redemption Price be less than 100% of the portion of the Principal Amount hereof (or, if this Note is an Original Issue Discount Note, the portion of the Amortized Face Amount hereof) to be redeemed. 

Notice
of redemption having been given as aforesaid, this Note (or the portion of the Principal Amount hereof so to be redeemed) shall, on the Redemption Date, become due and payable at the Redemption
Price herein specified, and from and after such date (unless Hydro-Québec shall default in the payment of the Redemption Price and accrued interest) shall cease to bear interest. 

B-18

 

In
the case of any partial redemption at the election of Hydro-Québec of Notes, the Notes of a particular tenor to be redeemed shall be selected by the Fiscal Agent not more than sixty
days prior to the Redemption Date by such method as the Fiscal Agent shall deem fair and appropriate and which may provide for the selection for redemption of portions of the Principal Amount of
Notes. In the event of any redemption of this Note in part only, a new Note or Notes of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof, provided that such unredeemed portion shall be an authorized denomination for Notes of this series. 

 Repayment at the Option of Holder  

If
one or more Optional Repayment Dates (or ranges of such dates) is specified on the face hereof, this Note is subject to repayment on any such date (or during any such range) or, if such date is not
a Business Day, on the first Business Day following such date, as a whole or from time to time in part, in increments of US$1,000 or such other minimum denomination specified on the face hereof
(provided that any remaining Principal Amount hereof shall be at least US$1,000 or such other minimum denomination), at the election of the Holder hereof at the Repayment Price (as defined below)
together with accrued interest thereon to the Optional Repayment Date, but any interest payment due on an Interest Payment Date falling on or prior to the Optional Repayment Date will be payable to
the Holder hereof of record at the close of business on the Record Date pertaining to such Interest Payment Date. Such election shall be effected by the Holder hereof delivering to
Hydro-Québec at the corporate trust office of The Bank of New York in The City of New York not less than thirty nor more than sixty days prior to the date on which this
Note is to be repaid, or during such other notice period specified on the face hereof, a notice requesting such repayment in the form prescribed below and specifying the date upon which this Note is
to be repaid. Any notice given by a Holder pursuant to this paragraph shall consist of this Note with the form entitled "Option to Elect Repayment" set forth of the end of this Note duly completed.
Exercise of the repayment option by the Holder hereof will be irrevocable. Unless otherwise specified on the face hereof, the "Repayment Price" for any such repayment shall be 100% of the portion of
the Principal Amount hereof (or, if this Note is an Original Issue Discount Note, the portion of the Amortized Face Amount hereof) to be repaid. 

Status of the Notes and the Guarantee  

The
Notes shall be direct, unsecured and unconditional obligations of Hydro-Québec. The Notes shall rank equally among themselves and with all other unsecured debt securities issued by
Hydro-Québec and outstanding on the date hereof or issued hereafter. 

B-19

 

Québec
(the "Guarantor") will unconditionally guarantee the due and punctual payment of the principal of, premium, if any, and interest on the Notes, upon default in payment by
Hydro-Québec, when and as the same shall respectively become due and payable, at Stated Maturity, upon call for redemption prior to Maturity, by acceleration or otherwise (such
guarantee by the Guarantor is hereinafter referred to as the "Guarantee"). The Guarantee will be a direct, unconditional and unsecured obligation of Québec and will rank equally in
right of payment with all other unsecured obligations for borrowed money of Québec outstanding at the date hereof or in the future. 

Form, Denomination and Registration  

24
[The Notes will be issued in the form of one or more fully registered Global Notes registered in the name of Cede & Co., as nominee of DTC and held by the
Fiscal Agent as custodian for DTC (the "Custodian"). The Notes will only be sold] 25 [The Notes are fully registered, without coupons,] in authorized
denominations of US$1,000 and any integral multiple of US$1,000 in excess thereof. 

The
Fiscal Agent has been appointed registrar for the Notes, and Hydro-Québec will cause the Fiscal Agent to maintain a Note Register for the registration and transfer of Notes. 

26
[Owners of beneficial interests in this Note will not, except in the limited circumstances described herein, be entitled to receive certificates representing the Notes
("Certificated Notes") or to have Notes registered in their names, and will not be considered holders thereof under the Fiscal Agency Agreement. Unless and until it is exchanged in whole or in part
for Certificated Notes, this Note may not be transferred except as a whole by DTC to a nominee of DTC, by a nominee of DTC to DTC or another nominee of DTC, or by DTC or the nominee of DTC to a
successor of DTC or a nominee of such successor.] 

27
[This Note may be transferred by surrendering this Note at the aforesaid corporate trust office of The Bank of New York for cancellation, accompanied by a written
instrument of transfer in form approved by Hydro-Québec and duly executed by the Holder hereof in person or by the Holder's attorney duly authorized in writing, and thereupon the Fiscal
Agent shall issue in the name of the transferee or transferees, in exchange herefor, a new Note or Notes in an equal aggregate Principal Amount and in authorized denominations, subject to the terms
and conditions set forth herein. 

	24
	Include
for Global Notes.

	25
	Include
for Certificated Notes.

	26
	Include
for Global Notes.

	27
	Include
for Certificated Notes. 

B-20

  

The Notes are exchangeable at said office for other Notes of like tenor in other authorized denominations and in an equal aggregate Principal Amount. All such exchanges of Notes will be free of
charge, but Hydro-Québec may require payment of a sum sufficient to cover any tax or other governmental charge in connection therewith. The date of registration of any Note delivered
upon any exchange or transfer of Notes shall be such that no gain or loss of interest results from such exchange or transfer. The Fiscal Agent shall not be required to make any transfers,
registrations or exchanges of Notes for a period of fifteen days preceding any Interest Payment Date.] 

In
the event of any redemption of Notes at the election of Hydro-Québec, the Fiscal Agent shall not be required to (i) issue, register the transfer of or exchange Notes of like
tenor during a period beginning at the opening of business fifteen days before any selection of such Notes to be redeemed and ending at the close of business on the day of mailing of the relevant
notice of redemption, or (ii) register the transfer of or exchange this Note, or, except in the case of a partial redemption, the unredeemed portion of this Note. Following the exercise of any
repayment option by the Holder hereof, the Fiscal Agent shall not be required to issue, register the transfer of or exchange that portion of this Note with respect to which such option has been
exercised. 

28
[Subject to the foregoing, this Note is not exchangeable, except for a Global Note or Global Notes in an equal aggregate Principal Amount to be registered in the name of
DTC or its nominee. 

Certificated Notes  

No
owner of a beneficial interest in this Note will be entitled to receive a Certificated Note in definitive form except in the limited circumstances described herein. 

The
Notes represented by this Note are exchangeable for Certificated Notes of like tenor as such Notes in denominations of US$1,000 and integral multiples thereof only if DTC (i) notifies
Hydro-Québec that it is unwilling or unable to continue as depositary in connection with the Global Notes; (ii) ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended, at a time when it is required to be and a successor depositary is not appointed by Hydro-Québec within 90 days after receiving the notice or
becoming aware that DTC is no longer so registered; or (iii) acting on direct or indirect instructions of one or more Holders or any beneficial owner of an interest in this Note, requests in
writing from Hydro-Québec the exchange, in whole or in part, of this Note for Certificated Notes, but only after an event of default entitling the Holders to give
Hydro-Québec written notice that such Holders elect to declare the
Principal Amount of the Notes held by them and represented by this Note to be due and payable has occurred and is continuing; provided that if DTC is
unwilling or does not promptly make such request to Hydro-Québec, then any beneficial owner of an interest in this Note shall be entitled to make such request with respect to such
interest. Hydro-Québec may also at any time and in its sole discretion notify the Fiscal Agent that all the Notes held in the form of the Global Notes are to be exchanged for
Certificated Notes and, in such event, Hydro-Québec shall issue or cause to be issued Certificated Notes upon registration of, transfer of, or in exchange for such Global Notes. The
date of registration of any Certificated Note delivered upon any exchange or transfer of a Global Note shall be such that no gain or loss of interest results from such exchange or transfer. The Fiscal
Agent shall not be required to make any transfers, registrations or exchanges of Global Notes for a period of fifteen days preceding any Interest Payment Date. 

	28
	Include
for Global Notes. 

B-21

 

In respect of any such issuance of Certificated Notes, (i) Hydro-Québec shall promptly provide the Fiscal Agent with a sufficient number
of Certificated Notes in blank form to proceed with such issuance, (ii) DTC shall cause this Note to be delivered by the Custodian to the Fiscal Agent and provide the Fiscal Agent with the
necessary registration information for such Certificated Notes, (iii) the Fiscal Agent shall authenticate and deliver such Certificated Notes in an aggregate principal amount equal to the
principal amount of this Note to be exchanged for such Certificated Notes, (iv) the Fiscal Agent shall cancel this Note and, in the case of a partial exchange, issue and deliver to or to the
order of DTC a new Global Note in an aggregate principal amount equal to the unexchanged portion of this Note partially exchanged for Certificated Notes and (v) the Fiscal Agent shall reduce
accordingly the holdings of the Holder on the Register. Such Certificated Notes shall be delivered as directed by the persons in whose names such Certificated Notes are to be registered. All Notes
represented by Certificated Notes issued upon any such issuance in exchange for the Notes represented by this Note shall have the Guarantee of the Guarantor endorsed thereon (which Guarantee shall be
a valid obligation of Québec), shall be a valid obligation of Hydro-Québec, shall be entitled to the same benefits under the Fiscal Agency Agreement as the Global Notes,
and shall be so exchanged without charge to the Fiscal Agent, DTC or the transferee. On or after any such exchange, the Fiscal Agent shall direct all payments in respect of such Certificated Notes to
the registered holders thereof, including when such exchange occurred after the record date for any payment and prior to the date of such payment. 

B-22

 

Hydro-Québec
expressly acknowledges that if a Certificated Note is not promptly issued to a beneficial owner of an interest in this Note as contemplated herein, then such beneficial
owner shall be entitled to pursue any remedy under the Fiscal Agency Agreement, the Note or applicable law with respect to the portion of this Note that represents such beneficial owner's interest as
if such Certificated Note had been issued. 

Title  

Subject
to applicable law and the terms of the Fiscal Agency Agreement, Hydro-Québec, the Guarantor and the Fiscal Agent will deem and treat the persons in whose name the Global Notes
are registered, initially Cede & Co., as the absolute owners thereof for all purposes whatsoever notwithstanding any notice to the contrary. All payments to or on the order of the Holder
shall be valid and effectual to discharge the liability of Hydro-Québec, the Guarantor and the Fiscal Agent on the Notes to the extent of the sum or sums so paid.] 

Events of Default  

In
the event that (i) Hydro-Québec shall default in the payment of principal of or premium or interest on this Note as the same shall become due and payable, and such default
shall continue for a period of 30 days, or (ii) default shall be made in the due performance or observance by Hydro-Québec of any covenant or agreement contained in the
Notes, other than the payment of principal, premium or interest, or in the Fiscal Agency Agreement, and such default shall continue for a period of 60 days, or
(iii) Hydro-Québec shall default in the payment of any principal of or premium or interest on any indebtedness (direct or under a guarantee) for borrowed money, other than the
Notes, as the same shall be due and payable, and such default shall continue for a period of 30 days, provided that the foregoing shall not be
taken into account so long as the aggregate principal amount of all such indebtedness (direct or under a guarantee) for borrowed money with respect to which the foregoing has occurred does not exceed
US$50,000,000 (or its equivalent in other currencies), then at any time thereafter and during the continuance of such default the Holder of this Note (or its proxy) may deliver or cause to be
delivered to Hydro-Québec at its registered office in Montreal, Québec, Canada (with a copy to the Fiscal Agent) a written notice that such Holder elects to declare the
principal of the Notes held by him (the serial number or numbers29 [of the Global Note representing such Notes and the Principal Amount of the Notes owned by him and the
subject of such declaration] being set forth in such notice) to be due and payable and, in the cases falling within either (i) or (iii) above, on the 15th day after delivery
of such notice, or, in the cases falling within (ii) above, on the 30th day after delivery of such notice, the principal of the Notes referred to in such notice plus any premium and accrued
interest thereon shall become due and payable, unless prior to that time all such defaults theretofore existing shall have been cured. 

	29
	Include
for Global Notes. 

B-23

 

Modification  

The
Fiscal Agency Agreement and the Notes may be amended by Hydro-Québec, the Guarantor and the Fiscal Agent without notice to, or the consent of, the holder of any Note, for the
purpose of (i) curing any ambiguity; (ii) curing, correcting or supplementing any defective provisions contained therein; or (iii) in any other manner which
Hydro-Québec, the Guarantor and the Fiscal Agent, acting on the advice of independent counsel, may deem necessary or desirable and which will not be inconsistent with the Notes and
which in the reasonable opinion of Hydro-Québec, the Guarantor and the Fiscal Agent will not adversely affect the interests of the holders of Notes. 

The
Fiscal Agency Agreement contains provisions for convening meetings of registered holders of Notes to modify or amend by Extraordinary Resolution (as defined in the Fiscal Agency Agreement) the
Fiscal Agency Agreement (except as provided in the immediately preceding paragraph) and the Notes (including the terms and conditions thereof) or waive future compliance therewith or past default
thereon by Hydro-Québec. An Extraordinary Resolution duly passed at any such meeting shall be binding on all holders of Notes, whether present or not; provided,
however, that no such modification or amendment to the Fiscal Agency Agreement or to the terms and conditions of the Notes or any other action taken may, without the consent of
the holder of each such Note affected thereby: (a) change the Stated Maturity or the Interest Payment Date(s) of any such Note; (b) reduce the Principal Amount of or rate of interest on
any such Note; (c) change the currency of payment of any such Note; (d) impair the right to institute suit for the enforcement of any payment on or with respect to such Note or the
Guarantee; (e) reduce the percentage of the holders of Notes necessary to modify or amend the Fiscal Agency Agreement or the terms and conditions of the Notes or reduce the percentage of votes
required for the taking of action or the quorum required at any meeting of holders of Notes; or (f) reduce the percentage of outstanding Notes necessary to waive any future compliance or past
default. 

Future Holders  

Any
action by the Holder of this Note shall bind all future Holders of this Note, and of any Note issued in exchange or substitution herefor or in place hereof, in respect of anything done or
permitted by Hydro-Québec or by the Fiscal Agent in pursuance of such action. 

Notices  

All
notices to the Holders of Global Notes will be given in writing mailed, first-class postage prepaid, to each Holder at each Holder's address as it appears in the Note Register. Any such notice
shall be deemed to have been given on the date of such mailing. 

B-24

 

However,
when Certificated Notes are outstanding, all notices to the Holders of Notes will be published in English in New York, New York in The Wall Street
Journal. If at any time publication in such newspaper is not practicable, notices will be valid if published in an English language newspaper with general circulation in such
market as Hydro-Québec, with the approval of the Fiscal Agent, shall determine. Any such notice shall be deemed to have been given on the date of such publication or, if published more
than once or on different dates, on the first date on which publication is made. 

Office or Agency of Hydro-Québec  

So
long as this Note shall be outstanding, Hydro-Québec will maintain an office or agency for the payment of the principal of and premium, if any, and interest on this Note as herein
provided in The City of New York, an office or agency in The City of New York for the transfer and exchange as aforesaid of the Notes and an office or agency in either The City of
New York or Toronto, Ontario for the registration as aforesaid of the Notes. Hydro-Québec may designate other agencies for the payment of said principal and premium, if any, and
interest at such place or places (subject to applicable laws and regulations) as Hydro-Québec may decide. So long as there shall be a Fiscal Agent, Hydro-Québec shall
keep the Fiscal Agent advised of the names and locations of such agencies, if any are so designated. 

No
recourse under or upon any covenant contained in this Note or because of the creation of the indebtedness represented hereby shall be had against any official or other representative, past, present
or future, as such, of Hydro-Québec whether by virtue of any statute or rule of law or by the enforcement of any assessment or penalty or otherwise, it being expressly agreed and
understood that this Note is solely the obligation of Hydro-Québec and that no personal liability whatever shall attach to or be incurred by any such officials or other representatives,
as such, because of the execution of this Note. 

Prescription  

Under
current Québec law, Hydro-Québec's obligation to make any payment on the Notes shall be extinguished three years after the date such payment is due unless such
right to payment is judicially exercised prior to the expiration of such three-year period. 

Governing Law  

The
Fiscal Agency Agreement, the Notes and the Guarantee shall be construed in accordance and governed by the laws of Québec and the laws of Canada applicable therein. 

B-25

 

Hydro-Québec
and Québec irrevocably consent to the fullest extent permitted by law to the giving of any relief (including, without limitation, the making or enforcement
of any order or judgment) made or given in connection with any proceedings arising out of or in connection with the Fiscal Agency Agreement, the Notes and the Guarantee. 

U.S. Dollars  

Reference
in this Note to "U.S. dollars" is to the currency of the United States of America. 

B-26

 
 
 

OPTION TO ELECT REPAYMENT  
    

The
undersigned hereby irrevocably requests and instructs Hydro-Québec to repay the within Note (or portion thereof specified below) pursuant to its terms at the Repayment Price, to the
undersigned at: 

                                        
                                
 

                                        
                                

                                        
                                

                                        
                                

                                        
                                

(PLEASE
PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF THE UNDERSIGNED) 

If
less than the entire Principal Amount of the within Note is to be repaid, specify the portion thereof which the Holder elects to have repaid: 

                                        
                                          
                                         
                                          
                      ;
 

30
[and specify the denomination or denominations (which shall not be less than the minimum authorized denomination) of the Notes to be issued to the Holder for the portion
of the within Note not being repaid (in the absence of any such specification,] one such31 [Global] Note will be issued for the portion not being
repaid32 [)]: 

                                        
                                          
                                         
                                          
                      .
 

Dated:                                       
                    

	 	 	

	 	 	NOTICE: This signature on this Option to Elect Repayment must correspond with the name as written upon the face of the within instrument in every particular without alteration or enlargement.

	30
	Include
for Certificated Notes.

	31
	Include
for Global Notes.

	32
	Include
for Certificated Notes. 

B-27

 
 
 

GUARANTEE BY QUÉBEC  
    

By
virtue of the powers conferred by the Parlement du Québec and of the authorization of the Gouvernement du Québec under Order in Council No
632-2003 dated June 4, 2003, as such Order in Council may be further amended or replaced, Québec hereby irrevocably and unconditionally guarantees to the holder of
this Note and pledges its full faith and credit for the due and punctual payment, upon default in payment by Hydro-Québec, of the principal of this Note and premium, if any, and the
interest thereon, as and when the same shall respectively become due and payable (without taking into account any applicable grace period or notice period set out in the terms and conditions of the
Notes), whether at stated maturity, upon previous call for redemption or by acceleration or otherwise; and hereby expressly waives
the benefits of discussion and division and any prior notice or protest to, demand upon or action against Hydro-Québec or Québec. 

This
Guarantee shall be construed in accordance with, and governed by, the laws of Québec and the laws of Canada applicable therein. 

Québec
irrevocably consents to the fullest extent permitted by law to the giving of any relief (including, without limitation, the making or enforcement of any order or judgment) made
or given in connection with any proceedings arising out of or in connection with this Guarantee. 

Dated
as
of                                         
                   

Executed in The City of New York on behalf of Québec.  

	 	 	QUÉBEC
	

 	
 	
By:	

 Authorized Signatory

B-28

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EXHIBIT A

HYDRO-QUÉBEC 4 [GLOBAL] MEDIUM-TERM NOTE (Fixed Rate)

HYDRO-QUÉBEC MEDIUM-TERM NOTE FIXED RATE

OPTION TO ELECT REPAYMENT

GUARANTEE BY QUÉBEC

OPTION TO ELECT REPAYMENT

GUARANTEE BY QUÉBECQuickLinks
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Exhibit 10.8

EXECUTION COPY  

 
 

EXECUTIVE SUBSCRIPTION AGREEMENT    
    

        This EXECUTIVE SUBSCRIPTION AGREEMENT (this "Agreement") is dated as of February 28, 2003, by and between
McCormick & Schmick Holdings, LLC, a Delaware limited liability company (the "LLC" or "Company"),
and Ray Bean (the "Executive"). Capitalized terms used herein but not otherwise defined have the meaning set forth in  Section 1 below. 

        WHEREAS,
the parties desire to enter into an agreement regarding the acquisition by the Executive of the number of the LLC's Class B Units and Class C Units set forth on  Schedule I attached hereto,
 upon terms and conditions set forth herein; 

        WHEREAS,
the Class B Units and Class C Units acquired hereunder by the Executive are being issued by the LLC pursuant to compensation and incentive arrangements established
by the LLC's Board of Advisors; and 

        WHEREAS,
the Executive acknowledges and agrees that the provisions of this Agreement (including, without limitation, Sections 5,  6 and 7) are material to the LLC and its Subsidiaries and that the LLC would not have entered into this
Agreement without such provisions. 

        NOW,
THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows: 

        1.     Definitions. As used herein, the following terms shall have the following meanings. 

        "Affiliate" means, as to any Person, any other Person that directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or
indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise). 

        "Board of Advisors" means the LLC's Board of Advisors (as defined in the LLC Agreement). 

        "BRS" means Bruckmann, Rosser, Sherrill & Co. II, L.P., a Delaware limited partnership. 

        "Castle Harlan" means Castle Harlan Partners III, L.P., a Delaware limited partnership. 

        "Cause" means (a) conviction of the Executive for any crime constituting a felony in the jurisdiction in which it was committed,
or the commission of any other criminal act against the LLC or any of its Subsidiaries involving dishonesty or willful misconduct intended to injure the LLC or any of its Subsidiaries (whether or not
a felony and whether or not criminal proceedings are initiated); (b) failure or refusal of the Executive in any material respect to perform the duties of his employment or to follow the lawful
and proper directives of the Board, and such failure or refusal continues uncured for a period of twenty (20) days after the first written notice thereof (or for a period of five
(5) days after any subsequent written notice thereof), specifying the nature of such failure or refusal and requesting that it be cured, is given by the LLC to the Executive; (c) any
willful or intentional act of the Executive committed for the purpose, or having the reasonably foreseeable effect, of injuring the LLC, any of its Subsidiaries or their business or reputation or of
improperly or unlawfully converting for the Executive's own personal benefit any property of the LLC or any of its Subsidiaries; or (d) as otherwise defined in any employment agreement, letter
or other agreement with the Executive or in written policies or procedures of the LLC or any of its Subsidiaries. 

        "Class A Units" means the Class A-1 Units and the Class A-2 Units. 

        "Class A-1 Units" has the meaning set forth in the LLC Agreement. 

 

        "Class A-2 Units" has the meaning set forth in the LLC Agreement. 

        "Class B Units" has the meaning set forth in the LLC Agreement. 

        "Class C Units" has the meaning set forth in the LLC Agreement. 

        "Common Equity Value" means, on a consolidated basis, EBITDA of the Company and its Subsidiaries (before pre-opening expenses,
management fees and noncash deferred rental expenses) multiplied by six (6), minus net debt (including, without limitation, all debt incurred pursuant
to any senior credit facility of any of the LLC's Subsidiaries and all subordinated debt of any of the LLC's Subsidiaries; but excluding any asset or liability associated with the valuation under
FAS 133 of the interest rate swap arrangements under that certain ISDA Master Agreement, dated as of November 20, 2001, by and between Fleet National Bank and McCormick & Schmick
Acquisition Corp.), minus preferred equity (including, without limitation, the Senior Exchangeable Preferred Stock and the Preferred Units). 

        "Common Interests" means the LLC's Class A Units, Class B Units and Class C Units, as adjusted for any unit split,
unit dividend, or other combination, exchange, conversion, recapitalization, merger, consolidation or reorganization, or if such Common Interests are exchanged for different interests or securities of
the LLC, such other interests or securities and any other Common Interests of the LLC hereinafter issued. 

        "Common Units" means the Class A-1 Units, the Class A-2 Units and the Class B Units. For
purposes of this Agreement, a Person will be deemed to be a holder of Common Units whenever such Person has the right to acquire directly or indirectly such Common Units (upon conversion or exercise
in connection with a transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected. 

        "Company Group" means the LLC and its Subsidiaries. 

        "Disability" means the permanent and total inability of an individual to perform any gainful occupation for which he is reasonably fitted
by education, training, and experience. 

        "Executive Securities" means the LLC's Class B Units and Class C Units acquired by the Executive and will include units of
the LLC's Common Interests issued with respect to Executive Securities by way of
a split, dividend, combination, exchange, conversion, or other recapitalization, merger, consolidation or reorganization. 

        "Fair Market Value" of each unit of Executive Securities means the average of the closing prices of the sales of the applicable Common
Interests of the Company on all securities exchanges on which such Common Interests may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such Common Interests are not so listed, the average of the representative bid and asked prices
quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such Common Interests are not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices
on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value is being determined and the 20 consecutive business days prior to such day. If at any time the applicable Common
Interests are not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the Fair Market Value shall be the fair value of such Common
Interests determined in good faith by the Board of Advisors. 

        "Family Group" means, with respect to an individual who holds any of the LLC's units, such individual, such individual's spouse, siblings,
ancestors and descendants (whether natural, by marriage or adopted) and any trust or other estate planning vehicle solely for the benefit of such individual 

2

 

and/or
such individual's spouse, siblings, their respective ancestors and/or descendants (whether natural, by marriage or adopted). 

        "Independent Third Party" means any Person who, immediately prior to the contemplated transaction (i) does not own in excess of 5%
of the Common Units (any Person owning in excess of 5% of the Common Units being referred to herein as, a "5% Owner"), (ii) is not an Affiliate
of any such 5% Owner and (iii) is not the a member of the Family Group of any such 5% Owner. 

        "Investors" means BRS and Castle Harlan. 

        "Joinder Agreements" has the meaning set forth in Section 2(c) hereof. 

        "LLC Agreement" means that certain Amended and Restated Limited Liability Company Agreement of McCormick & Schmick Holdings, LLC,
dated as of August 22, 2001, by and among the LLC and each of the other parties thereto, as in effect from time to time. 

        "Members Agreement" means that certain Members Agreement, dated as of August 22, 2001, by and among the LLC and each of the other
parties thereto, as in effect from time to time. 

        "Original Cost" of each Class B Unit acquired hereunder shall be equal to $0.00, and Original Cost of each Class C Unit
acquired hereunder shall be equal to $0.00. 

        "Performance Vesting Executive Securities" means the Executive Securities that are Class B Units set forth below the term
"Performance Vesting Executive Securities" on Schedule I attached hereto. 

        "Person" means an individual, a partnership, a corporation, an association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. 

        "Preferred Units" has the meaning set forth in the LLC Agreement. For purposes of the definition of "Common Equity Value" in this
Agreement, the Preferred Units Warrant shall be treated as the number of Preferred Units that the holder of such Preferred Units Warrant could acquire through its exercise. 

        "Preferred Units Warrant" means that certain Preferred Units Purchase Warrant issued to Mellon Bank, N.A., as trustee for the Bell
Atlantic Master Trust ("Bell Atlantic"), pursuant to that certain Stock and Warrant Purchase Agreement, dated as of August 22, 2001, by and among
Bell Atlantic, McCormick & Schmick Acquisition Corp. II and the LLC, which represents the right to purchase a certain number of Preferred Units. 

        "Registration Rights Agreement" means that certain Registration Rights Agreement, dated as of August 22, 2001, by and among the LLC
and each of the parties thereto, as in effect from time to time. 

        "Sale of the Company" means the sale of the Company, including in one or more series of related transactions, to an Independent Third
Party or group of Independent Third Parties pursuant to which such party or parties acquire (i) equity securities of the Company constituting all or substantially all of the Common Units
(excluding all Class B Units that, immediately prior to the event(s) that could constitute a Sale of the Company, have not become vested) of the Company (whether by merger, consolidation, sale
or transfer of the Company's outstanding interests or units, or otherwise) or (ii) all or substantially all of the Company's consolidated assets. 

        "Securities Act" means the Securities Act of 1933, as amended from time to time. 

        "Senior Exchangeable Preferred Stock" means that certain 13% Senior Exchangeable Preferred Stock, par value $1.00 per share, of
McCormick & Schmick Acquisition Corp. II, a Delaware corporation, having all the rights and preferences set forth in the Amended and Restated Certificate of Incorporation of McCormick &
Schmick Acquisition Corp. II, dated as of August 22, 2001. 

3

 

        "Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership, association or other business
entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or
(ii) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership,
association or other business entity gains or losses or shall be or control the managing director, general partner or similar controlling Person of such limited liability company, partnership,
association or other business entity. 

        "Time Vesting Executive Securities" means the Executive Securities that are Class B Units set forth below the term "Time Vesting
Executive Securities" on Schedule I attached hereto. 

        "Vesting Executive Securities" means all of the Performance Vesting Equity Securities and Time Vesting Equity Securities. 

        2.     Executive Securities. 

        (a)   At
the Closing, subject to the terms and conditions set forth herein, the LLC shall grant to the Executive, and the Executive shall acquire from the LLC, the number of
Class B Units and Class C Units specified in the table on Schedule I attached hereto. 

        (b)   The
closing of the grant of the Class B Units and Class C Units (the "Closing") shall take place at the
offices of Kirkland & Ellis, 153 East 53rd Street, New York, New York 10022 at 10 a.m. New York time on the date hereof (the "Closing
Date"), or at such other place or such other time or date as the LLC may designate. At the Closing, the Executive shall execute and deliver to the LLC the Section 83(b)
election form (as attached hereto as Exhibit A) necessary for the Executive to make an effective
election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code and the regulations promulgated thereunder. 

        (c)   Upon
execution of this Agreement, the Executive shall execute and deliver a joinder to the LLC Agreement, the Members Agreement and the Registration Rights Agreement
(collectively, the "Joinder Agreements"), to the extent the Executive is not already a party to each of the Joinder Agreements. 

        (d)   In
connection with the acquisition of the Executive Securities, the Executive represents and warrants to the LLC that: 

          (i)  The
Executive Securities to be acquired by the Executive pursuant to this Agreement will be acquired for the Executive's own account and not with a view to, or
intention of, distribution thereof in violation of the Securities Act, or any applicable state securities laws, and the Executive Securities will not be disposed of in contravention of the Securities
Act or any applicable state securities laws. 

         (ii)  No
commission, fee or other remuneration is to be paid or given, directly or indirectly, to any Person for soliciting the Executive to acquire the Executive Securities. 

        (iii)  The
Executive is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Executive Securities and has determined
that such investment in the Executive Securities is suitable for the Executive, based upon the Executive's financial situation and needs, as well as the Executive's other securities of the LLC. 

4

 

        (iv)  The
Executive is able to bear the economic risk of the Executive's investment in the Executive Securities for an indefinite period of time and the Executive understands
that the Executive Securities have not been registered under the Securities Act and cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is
available. 

         (v)  The
Executive has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Executive Securities and has had full
access to such other information concerning the LLC as the Executive has requested. 

        (vi)  This
Agreement constitutes the legal, valid and binding obligation of the Executive, enforceable in accordance with its terms, and the execution, delivery and
performance of this Agreement by the Executive does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which the Executive is a party or any
judgment, order or decree to which the Executive is subject. 

       (vii)  The
Executive has not taken any action that constitutes a conflict with, violation or breach of, and the execution and delivery of this Agreement and the other
agreements contemplated hereby will not conflict with, violate or cause a breach of, any noncompete, nonsolicitation or confidentiality agreement to which Executive is a party or by which Executive is
bound. Executive agrees to notify the Board of Advisors of any matter (including, but not limited to, any potential acquisition by the LLC or any of its Subsidiaries) that, to Executive's knowledge,
might reasonably be expected to violate or cause a breach of any such agreement. 

        (e)   As
an inducement to the LLC to issue the Executive Securities to the Executive, and as a condition thereto, the Executive acknowledges and agrees that: 

          (i)  neither
the Executive's ownership of any equity of the LLC, the issuance of the Executive Securities to the Executive, nor any provision contained herein shall entitle
the Executive to remain in the employment of the Company or any of its Subsidiaries or affect the right of the Company or any of its Subsidiaries to terminate the Executive's employment at any time
for any reason; and 

         (ii)  the
Company shall have no duty or obligation to disclose to the Executive, and the Executive shall have no right to be advised of, any material information regarding
the Company and its Subsidiaries at any time prior to, upon or in connection with the repurchase of Executive Securities upon the termination of the Executive's employment with the Company and its
Subsidiaries or as otherwise provided hereunder. 

        (f)    The
Company and the Executive acknowledge and agree that this Agreement has been executed and delivered, and the Executive Securities have been issued hereunder, in
connection with and as a part of the compensation and incentive arrangements between the LLC and the Executive, which arrangements have been established by the Board of Advisors. 

        3.     Vesting of Vesting Executive Securities. 

        (a)   Date Hereof. None of the Vesting Executive Securities are vested as of the date hereof. Vesting Executive Securities that
have become vested are referred to herein as "Vested Class B Units," and all other Vesting Executive Securities are referred to herein as
"Unvested Class B Units." The number of Vested Class B Units shall not increase once the Executive ceases to be employed by the Company
and/or any of its Subsidiaries. 

5

 

        (b)   Time Vesting Executive Securities. 

          (i)  Normal Vesting. Except as otherwise provided in Section 3(b)(ii)
below, the Time Vesting Executive Securities shall become vested in accordance with the following schedule, if as of each such date the Executive is employed by the Company or any of its Subsidiaries: 

	Date
	 	Cumulative Percentage of Time

Vesting Executive Securities That Shall Vest

	August 23, 2004	 	20%
	August 23, 2005	 	50%
	August 23, 2006	 	100%

         (ii)  Acceleration of Vesting Upon a Sale of the Company. If the Executive is, and has been, continuously employed by the
Company or any of its Subsidiaries from the date of this Agreement until a Sale of the Company, the portion of the Executive's outstanding Time Vesting Executive Securities that has not become vested
at the date of such event shall immediately vest simultaneously with consummation of the Sale of the Company. 

        (c)   Performance Vesting Executive Securities. 

          (i)  Normal Vesting. The Performance Vesting Executive Securities acquired hereunder by the Executive shall become fully
vested on December 31, 2007, if and only if  the Executive is, and has been, continuously employed by the Company or any of its
Subsidiaries from the date of this Agreement through December 31, 2007. 

         (ii)  Acceleration of Vesting Based on Performance Targets. Notwithstanding  Section 3(c)(i) above, the Performance Vesting Executive Securities shall become vested based
on the achievement by the Company of certain Common
Equity Value targets at the end of each of Company's fiscal years as set forth on the following schedule (the "Target CEV"), if
and only if  the Executive is, and has been, continuously employed by the Company or any of its Subsidiaries from the date of this Agreement through the date at
the end of each such fiscal year: 

	Fiscal Year Ended
	 	Target CEV
	 	Percentage of Performance Vesting Executive Securities That Shall Vest

	December 31, 2002	 	($	7,900,000	)	20%
	December 31, 2003	 	$	4,300,000	 	20%
	December 31, 2004	 	$	13,000,000	 	20%
	December 31, 2005	 	$	26,800,000	 	20%
	December 31, 2006	 	$	38,300,000	 	20%

        In
the event that the Company does not achieve the Target CEV given above at the end of any fiscal year, the Performance Vesting Executive Securities that were not earned
at the end of such fiscal year or years shall vest, if and only if  (x) the Company achieves the Target CEV for any subsequent
fiscal year end given above and (y) the Executive is, and has been, continuously employed by the Company or any of its Subsidiaries from the date of this Agreement through the date at the end
of such subsequent fiscal year. 

        Such
vesting shall be determined upon the delivery of the Company's audited financial statements following the end of each of the Company's fiscal years given above, and
the effective date of any such vesting shall be the end of each such fiscal year. If the Executive ceases to be employed by the Company and its Subsidiaries on any date other than on a fiscal year end
given above, the percentage of the Executive's Performance Vesting Executive Securities that is vested shall equal the percentage of such Performance Vesting Executive Securities that was vested as of
the immediately preceding fiscal year end. 

6

 

        (iii)  Acceleration of Vesting Upon a Sale of the Company Resulting in Certain Cash Proceeds. If the Executive is, and has
been, continuously employed by the Company or any of its Subsidiaries from the date of this Agreement until a Sale of the Company, the portion of the Executive's outstanding Performance Vesting
Executive Securities that has not become vested at the date of such event shall immediately vest simultaneously with consummation of the Sale of the Company, if and only
if  the net cash proceeds actually received, in the aggregate, with respect to the Class A Units and Class B Units by the holders of the
Class A Units and Class B Units as a result of the Sale of the Company equals or exceeds $50,000,000. 

        4.     Right to Repurchase Executive Securities Upon the Executive's Termination. 

        (a)   Repurchase Option. If the Executive's employment with the Company and its Subsidiaries shall terminate for any reason,
including upon the Executive's death, Disability, voluntary resignation or termination with or without Cause (the date on which such termination occurs being referred to as the
"Termination Date"), the Executive Securities (whether held by the Executive or by one or more of the Executive's transferees) shall be subject to
repurchase by the Company and the Investors pursuant to the terms and conditions set forth in this Section 4 (the
"Repurchase Option"). 

        (b)   Repurchase by Company. The Board of Advisors, in its sole discretion, may cause the Company to elect to purchase all or
any portion of the Vested Class B Units, Unvested Class B Units and/or Class C Units by delivery of written notice (the "Repurchase
Notice") to the Executive or any other holders of the Executive Securities within 180 days after the Termination Date. The Repurchase Notice shall set forth the number
of Vested Class B Units, Unvested Class B Units and/or Class C Units to be acquired from the Executive and such other holder(s), the aggregate consideration to be paid for such
securities and the time and place for the closing of the transaction. The number of Executive Securities to be repurchased by the Company shall first be satisfied to the extent possible from the
Executive Securities held by the Executive at the time of delivery of the Repurchase Notice. If the number of Executive Securities then held by the Executive is less than the total number of Executive
Securities the Company has elected to purchase, then the Company shall purchase the remaining Executive Securities elected to be purchased from the other holders thereof, pro rata according to the
number of such Executive Securities held by each such holder at the time of delivery of such Repurchase Notice (determined as close as practicable to the nearest whole units). 

        (c)   Repurchase by Investors. If for any reason the Company does not elect to purchase all of the Executive Securities
pursuant to the Repurchase Option, the Investors shall be entitled to exercise the Repurchase Option for the Executive Securities the Company has not elected to purchase (the
"Available Securities"). As soon as practicable after the Company has determined that there will be Available Securities, but in any event within
120 days after the Termination Date, the Company shall give written notice (the "Option Notice") to the Investors setting forth the number of
Available Securities and the purchase price for the Available Securities. The Investors may elect to purchase any or all of the Available Securities by giving written notice to the Company within
45 days after the Option Notice has been given by the Company. If the Investors elect to purchase an aggregate number of securities greater than the number of Available Securities, the
Available Securities shall be allocated among the Investors in an amount equal to the lesser of (i) the maximum amount requested by each Investor and (ii) such Investor's pro rata share
of all Class A Units held by the Investors (with such allocation procedure being repeated until either all Available Securities requested to be purchased by the Investors have been so allocated
or no Available Securities remain available for purchase) As soon as practicable, and in any event within ten days after the expiration of the 45-day period set forth above, the Company
shall notify each holder of Executive Securities as to the number of Vested Class B Units, Unvested Class B Units and/or Class C Units being purchased from such holder by the
Investors 

7

 

(the
"Supplemental Repurchase Notice"). At the time the Company delivers the Supplemental Repurchase Notice to the holder(s) of Executive Securities,
the Company shall also deliver written notice to each Investor setting forth the number of Vested Class B Units, Unvested Class B Units and/or Class C Units such Investor is
entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction. 

        (d)   Purchase Price. 

          (i)  Unvested Class B Units and Class C Units. The purchase price for each Unvested Class B Unit and
each Class C Unit shall be the lesser of the Fair Market Value for each such unit and the Executive's Original Cost for each such unit. 

         (ii)  Vested Class B Units. In the event of the Executive's death, Disability or termination without Cause, the
purchase price for each Vested Class B Unit shall be the Fair Market Value for such unit. In the event of the Executive's voluntary resignation, the purchase price for each Vested
Class B Unit shall be 50% of the Fair Market Value for such unit. In the event of the Executive's termination for Cause, the purchase price for each Vested Class B Unit shall be the
lesser of the Fair Market Value for each such unit and the Executive's Original Cost for each such unit. 

        (iii)  Manner of Payment. If the Company elects to purchase all or any part of the Executive Securities pursuant to the
Repurchase Option, including Executive Securities held by one or more transferees, the
Company shall pay for such securities, at its option, by the delivery of (i) a certified or cashier's check or wire transfer of funds, (ii) a subordinated promissory note of the Company
or any of its Subsidiaries, or (iii) both (i) and (ii) above, in the aggregate amount of the purchase price for such securities. Such subordinated promissory note shall bear
interest at a rate per annum equal to the prime rate announced from time to time by Fleet National Bank (which shall be payable annually, at the Company's option, either in cash or in kind), shall
have all principal payment due on the fifth anniversary of the date of issuance, shall be subordinated on terms and conditions satisfactory to the holders of the Company's and/or its Subsidiaries'
indebtedness for borrowed money, and shall be subject to any restrictive covenants to which the Company and/or its Subsidiaries are subject at the time of such purchase. In addition, the Company may
pay the purchase price for such securities by offsetting amounts outstanding under any indebtedness or obligations owed by you to the Company. If any Investors elect to purchase all or any portion of
the Available Securities, such Investors shall pay for that portion of such Executive Securities by certified or cashier's check or wire transfer of funds. 

        (e)   Closing of Repurchase of Executive Securities. (e) The closing of the purchase of the Executive Securities
pursuant to the Repurchase Option shall take place on the date designated by the Company in the Repurchase Notice or Supplemental Repurchase Notice, which date shall not be more than 60 days
nor less than five days after the delivery of the later of either such notice to be delivered; provided, that no such Executive Securities shall be
purchased pursuant to this Section 4 within six (6) months after the vesting of such securities (the "6 Month
Restriction"). The purchasers of Executive Securities hereunder shall be entitled to receive customary representations and warranties from the sellers regarding such sale of
securities (including, without limitation, representations and warranties regarding good title to such securities, free and clear of any liens or encumbrances, and authority and capacity to sell) and
to require all sellers' signatures be guaranteed by a national bank or reputable securities broker. 

        (f)    Certain Restrictions. Notwithstanding anything to the contrary contained in this Agreement, all repurchases of Executive
Securities by the Company shall be subject to applicable restrictions (including, without limitation, the 6 Month Restriction and any applicable restrictions contained in the Delaware Limited
Liability Company Act, Delaware General Corporation Law, 

8

 

and
in the Company's and its Subsidiaries' debt and equity financing agreements). If any such restrictions prohibit the repurchase of Executive Securities hereunder that the Company is otherwise
entitled or required to make, the time periods provided in this Section 4 shall be suspended, and the Company may make such repurchases as soon
as it is permitted to do so under such restrictions. 

        (g)   Governing Provisions. The LLC and the Executive agree that the provisions of this  Section 4 shall govern the repurchase of any and all Executive Securities issued
pursuant to this Agreement (and the repurchase provisions of
Section 5.19 of the LLC Agreement shall not apply to any such repurchase). 

        5.     Confidential Information. The Executive acknowledges that the information and data obtained by him while employed by any
member of the Company Group concerning the business or affairs of any member of the Company Group, including any business plans, pricing information, sales figures, profit or loss figures, information
relating to customers, clients, suppliers, sources of supply and customer lists ("Confidential Information") are the property of such member of the
Company Group. Therefore, in exchange for the Executive Securities being issued to the Executive hereunder, the Executive agrees that, except as required by law or court order, he shall not disclose
to any unauthorized person or use for his own account any Confidential Information without the prior written consent of the Board of Advisors, unless and to the extent that the aforementioned matters
become generally known to and available for use by the public other than as a result of the Executive's acts or omissions to act. The Executive shall deliver to the LLC at the termination of such
Executive's employment, or at any other time the LLC may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating
to the Confidential Information, Work Product (as defined below) and the business of any member of the Company Group that he may then possess or have under his control. 

        6.     Inventions and Patents. The Executive agrees that all inventions, innovations, improvements, developments, methods,
designs, analyses, drawings, reports, and all similar or related information that relates to any member of the Company Group's actual or anticipated business, research and development or existing or
future products or services and that are conceived, developed or made by the Executive while employed by any member of the Company Group ("Work
Product") belong to and are the property of such member of the Company Group. The Executive will promptly disclose such Work Product to the Board of Advisors and perform all
actions reasonably requested by the Board of Advisors (whether during or after the Executive's employment period) to establish and confirm such ownership (including, without limitation, assignments,
consents, powers of attorney and other instruments). 

        7.     Money Damages Inadequate. The Executive recognizes and affirms that in the event of his breach of any provision of  Sections 5 or 6 of this Agreement, money damages would be inadequate and the Company Group would have no
adequate remedy at law. Accordingly, the Executive agrees that in the event of a breach or a threatened breach by the Executive of any of the provisions of Sections
5 or 6, the Company Group, in addition and supplementary to other rights and remedies existing in its favor, may apply to any
court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof (without posting a
bond or other security). 

        8.     Restrictions on Transfer. 

        (a)   If
certificated, the Executive Securities will bear the following legend: 

"THE
SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON [FEBRUARY    , 2003], AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE 

9

 

"ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER AND COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT
TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN EXECUTIVE SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND THE SIGNATORY THERETO DATED AS
OF [FEBRUARY    , 2003], AS AMENDED, RESTATED OR MODIFIED FROM TIME TO TIME. A COPY OF SUCH AGREEMENT MAY BE OBTAINED
FROM THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE. 

        (b)   No
holder of Executive Securities may sell, transfer or dispose of any units of Executive Securities (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the LLC an opinion of counsel (reasonably acceptable in form and substance to the LLC) that neither registration nor qualification under the Securities Act
and applicable state securities laws is required in connection with such transfer. 

        (c)   Each
holder of Executive Securities acknowledges and agrees that the Executive Securities are subject to additional restrictions contained in the Joinder Agreements. 

        9.     Representations and Warranties of the LLC. The LLC hereby represents and warrants to the Executive that: (a) there
are no statutory or contractual securityholders preemptive rights or rights of refusal with respect to the issuance of the Executive Securities hereunder that have not been waived, and (b) the
offer, sale and issuance of the Executive Securities hereunder do not require registration under the Securities Act or any applicable state securities laws. 

        10.   Notices. All notices, demands and other communications to be given or delivered under or by reason of provisions under
this Agreement (a) shall be in writing, (b) must be delivered via a nationally-recognized overnight delivery service (delivery charges prepaid) or via facsimile along with 

10

 

written
confirmation, and (c) shall be effective only upon actual receipt by the recipient at the addresses or facsimile numbers indicated below: 

	
To the LLC:
	

McCormick & Schmick Holdings, LLC

c/o Castle Harlan Partners III, L.P.

150 East 58th Street

New York, NY 10155
	Facsimile:	 	(212) 207-8042
	Attention:	 	David B. Pittaway

Justin Wender
	
With copies (which shall not constitute notice) to:
	

Bruckmann, Rosser, Sherrill & Co. II, L.P.

126 East 56th Street

New York, NY 10022
	Facsimile:	 	(212) 521-3799
	Attention:	 	Harold O. Rosser

Rice Edmonds

Jamie Wall
	

Castle Harlan Partners III, L.P.

150 East 58th Street

New York, NY 10155
	Facsimile:	 	(212) 207-8042
	Attention:	 	David B. Pittaway

Justin Wender
	

Kirkland & Ellis

Citigroup Center

153 East 53rd Street

New York, NY 10022
	Facsimile:	 	(212) 446-4900
	Attention:	 	Kimberly P. Taylor
	

Schulte Roth & Zabel LLP

919 Third Avenue

New York, NY 10022
	Facsimile:	 	(212) 593-5955
	Attention:	 	Michael R. Littenberg
	
To the Executive:
	

Ray Bean

McCormick & Schmick Management Group

720 SW Washington, #550

Portland, Oregon 97205-3507
	Facsimile:	 	(503) 552-8445

or
such other address, facsimile number or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. 

11

 

        11.   Miscellaneous. 

        (a)   Transfers in Violation of Agreement. Any transfer or attempted transfer of any Executive Securities in violation of any
provision of this Agreement or any of the Joinder Agreements shall be null and void, and the LLC shall not record such transfer on its books or treat any purported transferee of such Executive
Securities as the owner of such securities for any purpose. 

        (b)   Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but
this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 

        (c)   Complete Agreement. This Agreement and the Joinder Agreements embody the complete agreement and understanding among the
parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way. 

        (d)   Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all
of which taken together constitute one and the same agreement. 

        (e)   Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be
enforceable by the Executive, the LLC and their respective successors and assigns (including, without limitation, subsequent holders of Executive Securities);  provided, that the rights and obligations
of the Executive under this Agreement shall not be assignable except in connection with a transfer of
Executive Securities that is permitted hereunder and under the Joinder Agreements. 

        (f)    Governing Law. All questions concerning the construction, validity and interpretation of this Agreement and the exhibits
hereto will be governed by and construed in accordance with the domestic laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York; provided, that any questions requiring interpretation of
the laws governing limited liability companies shall be governed by the Delaware Limited Liability Company Act.

        (g)   Jurisdiction and Venue. ALL JUDICIAL PROCEEDINGS BROUGHT BY OR AGAINST THE LLC OR THE EXECUTIVE WITH RESPECT TO THIS
AGREEMENT, ANY OTHER AGREEMENT CONTEMPLATED HEREBY OR ANY TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY SHALL BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF DELAWARE
OR IN THE CITY OF NEW YORK IN THE STATE OF NEW YORK. BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE LLC AND THE EXECUTIVE ACCEPT FOR ITSELF AND HIMSELF AND IN CONNECTION WITH ITS OR HIS RESPECTIVE
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. THE
LLC AND THE EXECUTIVE HEREBY WAIVE ANY CLAIM THAT SUCH JURISDICTION IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE. 

        (h)   Waiver of Jury Trial. THE LLC AND THE EXECUTIVE HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN
ANY LITIGATION IN 

12

 

ANY
COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR THE VALIDITY, PROTECTION, INTERPRETATION OR ENFORCEMENT THEREOF. THE LLC AND THE EXECUTIVE AGREE THAT THIS SECTION IS
A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND WOULD NOT ENTER INTO THIS AGREEMENT IF THIS SECTION WERE NOT PART OF THIS AGREEMENT. 

        (i)    Remedies. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically,
to recover damages and costs (including, without limitation, reasonable attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor.
The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any
court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement. 

        (j)    Survival of Representations and Warranties. All representations and warranties contained herein or made in writing by any
party in connection herewith shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, regardless of any investigation made by the
Executive or on its behalf. 

        (k)   Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of
the LLC and the Executive. 

        (l)    Third-Party Beneficiaries. Certain provisions of this Agreement are entered into for the benefit of and shall be
enforceable by the Investors as provided herein. 

        (m)  Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute
a part of this Agreement. 

*
* * * * 

        IN
WITNESS WHEREOF, the parties hereto have executed this Executive Subscription Agreement as of the date first written above. 

	 	 	MCCORMICK & SCHMICK HOLDINGS, LLC
	

 	
 	

By:	
 	

/s/ DOUGLAS L. SCHMICK
 Its: President
	

 	
 	

 	
 	

/s/ RAY BEAN
 Ray Bean

13

 
 
 

Schedule I
  
    Executive Securities Granted to Ray Bean    

	Number of Class B Units Granted
 
	 	 

	Time Vesting Executive

Securities
	 	Performance Vesting Executive Securities
	 	Number of

Class C Units

Granted

	2,597.40 Class B Units	 	3,896.10 Class B Units	 	0.50 Class C Units

14

QuickLinks

EXECUTIVE SUBSCRIPTION AGREEMENT

Schedule I Executive Securities Granted to Ray Bean

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