Document:

<PAGE>
                                                                     Exhibit 4.4

         _____________________________________________________________

                         FIRST SUPPLEMENTAL INDENTURE

                                    between

                           PUGET SOUND ENERGY, INC.

                                      and

                         BANK ONE TRUST COMPANY, N. A.

                           Dated as of May 18, 2001

         _____________________________________________________________
<PAGE>

                                    CONTENTS
<TABLE>
<S>                                                                                                      <C>
ARTICLE I       DEFINITIONS............................................................................   2

   SECTION 1.1    Definition of Terms..................................................................   2

ARTICLE II      GENERAL TERMS AND CONDITIONS OF THE DEBENTURES.........................................   3

   SECTION 2.1    Designation and Principal Amount.....................................................   3

   SECTION 2.2    Maturity.............................................................................   3

   SECTION 2.3    Form and Payment.....................................................................   4

   SECTION 2.4    Global Debenture.....................................................................   4

   SECTION 2.5    Interest.............................................................................   6

ARTICLE III     REDEMPTION OF THE DEBENTURES...........................................................   7

   SECTION 3.1    Special Event Redemption.............................................................   7

   SECTION 3.2    Optional Redemption by Issuer........................................................   7

   SECTION 3.3    No Sinking Fund......................................................................   8

ARTICLE IV      EXTENSION OF INTEREST PAYMENT PERIOD...................................................   8

   SECTION 4.1    Extension of Interest Payment Period.................................................   8

   SECTION 4.2    Notice of Extension..................................................................   9

ARTICLE V       EXPENSES...............................................................................  10

   SECTION 5.1    Payment of Expenses..................................................................  10

   SECTION 5.2    Payment Upon Resignation or Removal..................................................  10

ARTICLE VI      SUBORDINATION..........................................................................  11

   SECTION 6.1    Agreement to Subordinate.............................................................  11

ARTICLE VII     COVENANT TO LIST ON EXCHANGE...........................................................  11
</TABLE>

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<TABLE>
<S>                                                                                                      <C>
   SECTION 7.1    Listing on an Exchange...............................................................  11

ARTICLE VIII    FORM OF DEBENTURES.....................................................................  11

   SECTION 8.1    Form of Debenture....................................................................  11

ARTICLE IX.     ORIGINAL ISSUE OF DEBENTURES...........................................................  18

   SECTION 9.1    Original Issue of Debentures.........................................................  18

ARTICLE X.      MISCELLANEOUS..........................................................................  18

   SECTION 10.1   Provisions of Indenture for the Sole Benefit of Parties and Holders of Trust
         Securities....................................................................................  18

   SECTION 10.2   Ratification of Indenture............................................................  18

   SECTION 10.3   Trustee Not Responsible for Recitals.................................................  18

   SECTION 10.4   Governing Law........................................................................  18

   SECTION 10.5   Separability.........................................................................  19

   SECTION 10.6   Counterparts.........................................................................  19
</TABLE>

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     FIRST SUPPLEMENTAL INDENTURE, dated as of May 18, 2001, (the "First
Supplemental Indenture"), between Puget Sound Energy, Inc., a Washington
Corporation (the "Issuer"), and Bank One Trust Company, N.A., as trustee (the
"Trustee") under the Indenture dated as of May 18, 2001 between the Issuer and
the Trustee (the "Indenture").

     WHEREAS, the Issuer executed and delivered the Indenture to the Trustee to
provide for the future issuance of the Issuer's Securities to be issued from
time to time in one or more series as might be determined by the Issuer under
the Indenture, in an unlimited aggregate principal amount which may be
authenticated and delivered as provided in the Indenture; and

     WHEREAS, Section 2.3 of the Indenture permits the terms of any series of
Securities to be established in an indenture supplemental to the Indenture; and

     WHEREAS, Section 8.1(d) of the Indenture provided that a supplemental
indenture may be entered into without the consent of any Holders of Securities
to supplement certain provisions of the Indenture; and

     WHEREAS, Section 8.1(e) of the Indenture provides that a supplemental
indenture may be entered into by the Issuer and the Trustee without the consent
of any Holders of the Securities to establish the form and terms of the
Securities of any series; and

     WHEREAS, pursuant to the terms of the Indenture, the Issuer desires to
provide for the establishment of a new series of its Securities to be known as
its 8.40% Subordinated Deferrable Interest Debentures due June 30, 2041 (the
"Debentures"), the form and substance of such Debentures and the terms,
provisions and conditions thereof to be set forth as provided in the Indenture
and this First Supplemental Indenture; and

     WHEREAS, Puget Sound Energy Capital Trust II, a Delaware statutory business
trust (the "Trust"), has offered to the public $206,186,000 million aggregate
liquidation amount of its 8.40% Trust Originated Preferred Securities (the
"Preferred Securities"), representing undivided beneficial interests in the
assets of the Trust and proposes to invest the proceeds from such offering,
together with the proceeds of the issuance and sale by the Trust to the Issuer
of $6,186,000  aggregate liquidation amount of its 8.40% Trust Originated Common
Securities (together with the Preferred Securities, the "Trust Securities"), in
$206,186,000 aggregate principal amount of the Debentures; and
<PAGE>

     WHEREAS, the Issuer wishes to supplement Section 13.2 of the Indenture with
respect to the Debentures and the Preferred Securities; and

     WHEREAS, the Issuer has requested that the Trustee execute and deliver this
First Supplemental Indenture and all requirements necessary to make this First
Supplemental Indenture a valid instrument in accordance with its terms, and to
make the Debentures, when executed by the Issuer and authenticated and delivered
by the Trustee, the valid obligations of the Issuer, have been performed, and
the execution and delivery of this First Supplemental Indenture has been duly
authorized in all respects.

     NOW THEREFORE, in consideration of the purchase and acceptance of the
Debentures by the Holders thereof, and for the purpose of setting forth, as
provided in the Indenture, the form and substance of the Debentures and the
terms, provisions and conditions thereof, the Issuer covenants and agrees with
the Trustee as follows:

                            ARTICLE I  DEFINITIONS

SECTION 1.1    Definition of Terms

     Unless the context otherwise requires:

     (a) a term defined in the Indenture has the same meaning when used in this
First Supplemental Indenture;

     (b) a term defined anywhere in this First Supplemental Indenture has the
same meaning throughout;

     (c) the singular includes the plural and vice versa;

     (d) a reference to a Section or Article is to a Section or Article of this
First Supplemental Indenture;

     (e) headings are for convenience of reference only and do not affect
interpretation;

     (f) the following terms have the meanings given to them in the Declaration:
(i) Clearing Agency; (ii) Delaware Trustee; (iii) Redemption Tax Opinion; (iv)
No Recognition Opinion; (v) Preferred Security Certificate; (vi) Property
Trustee; (vii) Regular Trustees; (viii) Special Event; (ix) Tax Event; (x)
Underwriting Agreement; (xi) Investment Company Event; and (xii) Distribution;

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     (g) the following terms have the meanings given to them in this Section
1.1(g):

     "Additional Interest" shall have the meaning set forth in Section 2.5.

     "Compounded Interest" shall have the meaning set forth in Section 4.1.

     "Coupon Rate" shall have the meaning set forth in Section 2.5.

     "Declaration" means the Amended and Restated Declaration of Trust of Puget
Sound Energy Capital Trust II, a Delaware statutory business trust, dated as of
May 18, 2001.

     "Deferred Interest" shall have the meaning set forth in Section 4.1.

     "Dissolution Event" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Declaration, and the Debentures held by the Property Trustee are to be
distributed to the holders of the Trust Securities issued by the Trust pro rata
in accordance with the Declaration.

     "Extended Interest Payment Period" shall have the meaning set forth in
Section 4.1.

     "Global Debenture" shall have the meaning set forth in Section 2.4.

     "Non Book-Entry Preferred Securities" shall have the meaning set forth in
Section 2.4.

     "Optional Redemption Price" shall have the meaning set forth in Section
3.2.
                   ARTICLE II   GENERAL TERMS AND CONDITIONS
                               OF THE DEBENTURES

SECTION 2.1    Designation and Principal Amount

     There is hereby authorized and established a series of unsecured Securities
designated the "8.40% Subordinated Deferrable Interest Debentures due June 30,
2041", limited in aggregate principal amount to $206,186,000, (except as
contemplated in Section 2(f)(2) of the Indenture).

SECTION 2.2    Maturity

     The Maturity Date of the Debentures is June 30, 2041.

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SECTION 2.3    Form and Payment

     The Debentures shall be issued in fully registered form without interest
coupons.  Principal and interest on the Debentures issued in certificated form
will be payable, the transfer of such Debentures will be registrable and such
Debentures will be exchangeable for Debentures bearing identical terms and
provisions, at the office or agency of the Trustee in the Borough of Manhattan,
the City of New York; provided, however, that payment of interest may be made at
the option of the Issuer by check mailed to the Holder at such address as shall
appear in the Security Register or by wire transfer to an account maintained by
the Holder.  Notwithstanding the foregoing, so long as the Holder of any
Debentures is the Property Trustee, the payment of the principal of and interest
(including Compounded Interest and Additional Interest, if any) on such
Debentures held by the Property Trustee will be made at such place and to such
account as may be designated by the Property Trustee.

SECTION 2.4    Global Debenture

     (a) In connection with a Dissolution Event,

          (i)    the Debentures may be presented to the Trustee by the Property
                 Trustee in exchange for a global Debenture in an aggregate
                 principal amount equal to the aggregate principal amount of all
                 outstanding Debentures (a "Global Debenture"), to be registered
                 in the name of the Clearing Agency, or its nominee, and
                 delivered by the Trustee to the Clearing Agency for crediting
                 to the accounts of its participants pursuant to the
                 instructions of the Regular Trustees and the Clearing Agency
                 will act as Depository for the Debentures. The Issuer upon any
                 such presentation, shall execute a Global Debenture in such
                 aggregate principal amount and deliver the same to the Trustee
                 for authentication and delivery in accordance with the
                 Indenture and this First Supplemental Indenture. Payments on
                 the Debentures issued as a Global Debenture will be made to the
                 Depositary; and

          (ii)   if any Preferred Securities are held in non book-entry
                 certificated form, the Debentures may be presented to the
                 Trustee by the Property Trustee and any Preferred Security
                 Certificate which represents Preferred Securities other than
                 Preferred Securities held by the Clearing Agency or its nominee
                 ("Non Book-Entry Preferred Securities") will be deemed to
                 represent beneficial interests in Debentures presented to the
                 Trustee by the Property

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                 Trustee having an aggregate principal amount equal to the
                 aggregate liquidation amount of the Non Book-Entry Preferred
                 Securities until such Preferred Security Certificates are
                 presented to the Security Registrar for transfer or reissuance
                 at which time such Preferred Security Certificates will be
                 canceled and a Debenture, registered in the name of the holder
                 of the Preferred Security Certificate or the transferee of the
                 holder of such Preferred Security Certificate, as the case may
                 be, with an aggregate principal amount equal to the aggregate
                 liquidation amount of the Preferred Security Certificate
                 canceled, will be executed by the Issuer and delivered to the
                 Trustee for authentication and delivery in accordance with the
                 Indenture and this First Supplemental Indenture.

     (b) Except as provided in (c) below, a Global Debenture may be transferred,
in whole but not in part, only to another nominee of the Depositary, or to a
successor Depositary selected or approved by the Issuer or to a nominee of such
successor Depositary.

     (c) If at any time the Depositary notifies the Issuer that it is unwilling
or unable to continue as Depositary or if at any time the Depositary for such
series shall no longer be registered or in good standing under the Securities
Exchange Act of 1934, as amended, or other applicable statute or regulation, and
a successor Depositary for such series is not appointed by the Issuer within 90
days after the Issuer receives such notice or becomes aware of such condition,
as the case may be, the Issuer will execute, and, subject to Section 2.8 of the
Indenture, the Trustee, upon written notice from the Issuer, will authenticate
and deliver the Debentures in definitive registered form, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the Global Debenture in exchange for such Global Debenture.  In
addition, the Issuer may at any time determine that the Debentures shall no
longer be represented by a Global Debenture.  In such event the Issuer will
execute, and subject to Section 2.8 of the Indenture, the Trustee, upon receipt
of an Officers' Certificate evidencing such determination by the Issuer, will
authenticate and deliver the Debentures in definitive registered form, in
authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Debenture in exchange for such Global Debenture.
Upon the exchange of the Global Debenture for such Debentures in definitive
registered form, in authorized denominations, the Global Debenture shall be
canceled by the Trustee.  Such Debentures in definitive registered form issued
in exchange for the Global Debenture shall be registered in such names and in
such authorized denominations as the Depositary, pursuant to instructions from
its direct or indirect participants or

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otherwise, shall instruct the Trustee. The Trustee shall deliver such Debentures
to the Depositary for delivery to the Persons in whose names such Debentures are
so registered.

SECTION 2.5    Interest

     (a) Each Debenture will bear interest at the rate of 8.40% per annum (the
"Coupon Rate") from the original date of issuance until the principal thereof
becomes due and payable, and on any overdue principal and (to the extent that
payment of such interest is enforceable under applicable law) on any overdue
installment of interest, at the Coupon Rate, compounded quarterly, payable
(subject to the provisions of Article IV) quarterly in arrears on March 30, June
30, September 30, and December 30 of each year (each, an "Interest Payment
Date," commencing on September 30, 2001, to the Person in whose name such
Debenture or any predecessor Debenture is registered, at the close of business
on the regular record date for such interest installment, which, in respect of
any Debentures of which the Property Trustee is the Holder or a Global
Debenture, shall be the close of business on the Business Day next preceding
that Interest Payment Date.  Notwithstanding the foregoing sentence, if the
Preferred Securities are no longer in book-entry only form or, except if the
Debentures are held by the Property Trustee, the Debentures are not represented
by a Global Debenture, the regular record date for such interest installment
shall be the fifteenth day of the month in which the applicable Interest Payment
Date occurs.

     (b) The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months.  Except as provided in the
following sentence, the amount of interest payable for any period shorter than a
full quarterly period for which interest is computed, will be computed on the
basis of the actual number of days elapsed in such a 90-day period.  In the
event that any date on which interest is payable on the Debentures is not a
Business Day, then payment of interest payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.

     (c) If, at any time while the Property Trustee is the Holder of any
Debentures, the Trust or the Property Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any case, the Issuer will pay as additional interest ("Additional
Interest") on the Debentures held by the Property Trustee, such additional
amounts as shall be required so that the net

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amounts received and retained by the Trust and the Property Trustee after paying
such taxes, duties, assessments or other governmental charges will be equal to
the amounts the Trust and the Property Trustee would have received had no such
taxes, duties, assessments or other governmental charges been imposed.

                  ARTICLE III   REDEMPTION OF THE DEBENTURES

SECTION 3.1    Special Event Redemption

     If (a) a Tax Event has occurred and is continuing and (i) the Issuer has
received a Redemption Tax Opinion, or (ii) the Regular Trustees shall have been
informed by tax counsel that a No Recognition Opinion cannot be delivered to the
Trust, or (b) an Investment Company Event has occurred and is continuing, then,
notwithstanding Section 3.2(a) but subject to Section 3.2(b) and Article Eleven
of the Indenture, the Issuer shall have the right upon not less than 30 days'
nor more than 60 days' notice to the Holders of the Debentures to redeem the
Debentures, in whole or in part, for cash within 90 days following the
occurrence of such Special Event (the "90 Day Period") at a redemption price
equal to 100% of the principal amount to be redeemed plus any accrued and unpaid
interest thereon to the date of such redemption (the "Redemption Price"),
provided that if at the time there is available to the Issuer or the Trust the
opportunity to eliminate, within the 90 Day Period, the Special Event by taking
some ministerial action ("Ministerial Action"), such as filing a form or making
an election, or pursuing some other similar reasonable measure which has no
adverse effect on the Issuer, the Trust or the Holders of the Trust Securities
issued by the Trust, the Issuer shall pursue such Ministerial Action in lieu of
redemption, and, provided, further, that the Issuer shall have no right to
redeem the Debentures while the Trust is pursuing any Ministerial Action
pursuant to its obligations under the Declaration.  The Redemption Price shall
be paid prior to 12:00 noon, New York time, on the date of such redemption or
such earlier time as the Issuer determines, and the Issuer shall deposit with
the Trustee an amount sufficient to pay the Redemption Price by 10:00 a.m., New
York time, on the date such Redemption Price is to be paid.

SECTION 3.2    Optional Redemption by Issuer

     (a) Subject to the provisions of Section 3.2(b) and to the provisions of
Article Eleven of the Indenture, the Issuer shall have the right to redeem the
Debentures, in whole or in part, from time to time, on or after June 30, 2006,
at a redemption price equal to 100% of the principal amount to be redeemed plus
any accrued and unpaid interest thereon to the date of such redemption (the
"Optional Redemption Price").  Any redemption pursuant to this paragraph will be
made upon not less than 30 days' nor more than 60 days' notice to the Holder of
the Debentures, at

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the Optional Redemption Price. If the Debentures are only partially redeemed
pursuant to this Section 3.2, the Debentures will be redeemed on a pro rata
basis provided that if at the time of redemption the Debentures are registered
as a Global Debenture, the Depository shall determine, in accordance with its
procedures, the principal amount of such Debentures held by each Holder of
Debentures to be redeemed. The Optional Redemption Price shall be paid prior to
12:00 noon, New York time, on the date of such redemption or at such earlier
time as the Issuer determines and the Issuer shall deposit with the Trustee an
amount sufficient to pay the Optional Redemption Price by 10:00 a.m., New York
time, on the date such Optional Redemption Price is to be paid.

     (b) If a partial redemption of the Debentures would result in the delisting
of the Preferred Securities from any national securities exchange or other
organization on which the Preferred Securities are then listed, the Issuer shall
not be permitted to effect such partial redemption and may only redeem the
Debentures in whole.

SECTION 3.3    No Sinking Fund

     The Debentures are not entitled to the benefit of any sinking fund.

               ARTICLE IV   EXTENSION OF INTEREST PAYMENT PERIOD

SECTION 4.1    Extension of Interest Payment Period

     The Issuer shall have the right, at any time and from time to time during
the term of the Debentures, to defer payments of interest by extending the
interest payment period of such Debentures for a period not exceeding 20
consecutive quarters (the "Extended Interest Payment Period"), during which
Extended Interest Payment Period no interest shall be due and payable; provided
that no Extended Interest Payment Period may extend beyond the Maturity Date.
To the extent permitted by applicable law, interest, the payment of which has
been deferred because of the extension of the interest payment period pursuant
to this Section 4.1, will bear interest thereon at the Coupon Rate compounded
quarterly for each quarter of the Extended Interest Payment Period ("Compounded
Interest").  At the end of the Extended Interest Payment Period, the Issuer
shall pay all interest accrued and unpaid on the Debentures, including any
Additional Interest and Compounded Interest (together, "Deferred Interest") that
shall be payable to the Holders of the Debentures in whose names the Debentures
are registered in the Security Register on the first record date after the end
of the Extended Interest Payment Period.  Prior to the termination of any
Extended Interest Payment Period, the Issuer may further extend such period,
provided that such period together with all such further extensions thereof
shall not exceed 20 consecutive quarters.  Upon the termination of any Extended
Interest

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Payment Period and upon the payment of all Deferred Interest then due, the
Issuer may commence a new Extended Interest Payment Period, subject to the
foregoing requirements. No interest shall be due and payable during an Extended
Interest Payment Period, except at the end thereof, but the Issuer may prepay at
any time all or any portion of the interest accrued during an Extended Interest
Payment Period.

     The limitations set forth in Section 3.5 of the Indenture shall apply
during any Extended Interest Payment Period.

SECTION 4.2    Notice of Extension

     (a) If the Property Trustee is the only registered Holder of the Debentures
at the time the Issuer elects an Extended Interest Payment Period, the Issuer
shall give written notice to the Regular Trustees, the Property Trustee and the
Trustee of its election of such Extended Interest Payment Period one Business
Day before the earlier of (i) the next succeeding date on which Distributions on
the Trust Securities issued by the Trust are payable, or (ii) the date the Trust
is required to give notice of the record date, or the date such Distributions
are payable, to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Preferred Securities, but in any event at
least one Business Day before such record date.

     (b) If the Property Trustee is not the only Holder of the Debentures at the
time the Issuer elects an Extended Interest Payment Period, the Issuer shall
give the Holders of the Debentures and the Trustee written notice of its
election of such Extended Interest Payment Period ten Business Days before the
earlier of (i) the next succeeding Interest Payment Date, or (ii) the date the
Issuer is required to give notice of the record or payment date of such interest
payment to the New York Stock Exchange or other applicable self-regulatory
organization or to Holders of the Debentures, but in any event at least 2
Business Days before such record date.

     (c) The quarter in which any notice is given pursuant to paragraph (a) or
(b) of this Section 4.2 shall be counted as one of the 20 quarters permitted in
the maximum Extended Interest Payment Period permitted under Section 4.1.

                             ARTICLE V   EXPENSES

SECTION 5.1    Payment of Expenses

     In connection with the offering, sale and issuance of the Debentures to the
Property Trustee and in connection with the sale of the Trust Securities by the
Trust, the Issuer, in its capacity as borrower with respect to the Debentures,
shall:

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<PAGE>

     (a) pay all costs and expenses relating to the offering, sale and issuance
of the Debentures, including commissions to the underwriters payable pursuant to
the Underwriting Agreement and the Pricing Agreements, and compensation of the
Trustee under the Indenture in accordance with the provisions of Section 6.6 of
the Indenture;

     (b) pay all costs and expenses of the Trust (including, but not limited to,
costs and expenses relating to the organization of the Trust, the offering, sale
and issuance of the Trust Securities (including commissions to the underwriters
in connection therewith), the fees and expenses of the Property Trustee and the
Delaware Trustee, the costs and expenses relating to the operation of the Trust,
including without limitation, costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, paying agent(s), registrar(s), transfer
agent(s), duplicating, travel and telephone and other telecommunications
expenses and costs and expenses incurred in connection with the acquisition,
financing, and disposition of Trust assets);

     (c) be primarily liable for any indemnification obligations arising with
respect to the Declaration; and

     (d) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust.

SECTION 5.2    Payment Upon Resignation or Removal

     Upon termination of this First Supplemental Indenture or the Indenture or
the removal or resignation of the Trustee pursuant to Section 6.10 of the
Indenture, the Issuer shall pay to the Trustee all amounts accrued to the date
of such termination, removal or resignation.  Upon termination of the
Declaration or the removal or resignation of the Delaware Trustee or the
Property Trustee, as the case may be, pursuant to Section 5.6 of the
Declaration, the Issuer shall pay to the Delaware Trustee or the Property
Trustee, as the case may be, all amounts accrued to the date of such
termination, removal or resignation.

                          ARTICLE VI   SUBORDINATION

SECTION 6.1    Agreement to Subordinate

     The Issuer covenants and agrees, and each Holder of Debentures issued
hereunder, by such Holder's acceptance thereof likewise covenants and agrees,
that pursuant to Section 2.3(f)(9) of the Indenture all Debentures shall be
issued as

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Subordinated Securities subject to the provisions of Article XII of the
Indenture and this Article VI; and each Holder of a Debenture by its acceptance
thereof accepts and agrees to be bound by such provisions.

                  ARTICLE VII   COVENANT TO LIST ON EXCHANGE

SECTION 7.1    Listing on an Exchange

     In connection with the distribution of the Debentures to the holders of the
Preferred Securities upon a Dissolution Event, the Issuer will use its best
efforts to list such Debentures on the New York Stock Exchange or on such other
exchange as the Preferred Securities are then listed.

                       ARTICLE VIII   FORM OF DEBENTURES

SECTION 8.1    Form of Debenture

     The Debentures and the Trustee's Certificate of Authentication to be
endorsed thereon are to be substantially in the following forms and the
Debentures shall have such additional terms as may be set forth in such form:

                          (FORM OF FACE OF DEBENTURE)

     [IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT - This Debenture is a
Global Debenture within the meaning of the Indenture hereinafter referred to and
is registered in the name of a Depositary or a nominee of a Depositary.  This
Debenture is exchangeable for Debentures registered in the name of a person
other than the Depositary or its nominee only in the limited circumstances
described in the Indenture, and no transfer of this Debenture (other than a
transfer of this Debenture as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary) may be registered except in limited circumstances.

     Unless this Debenture is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer or
its agent for registration of transfer, exchange or payment, and any Debenture
issued is registered in the name of Cede & Co.  or such other name as requested
by an authorized representative of The Depository Trust Company and any payment
hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede &
Co., has an interest herein.]

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No.

          $

CUSIP NO.

                           PUGET SOUND ENERGY, INC.

             8.40% SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE

     Puget Sound Energy, Inc., a Washington corporation (the "Issuer", which
term includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to Bank One Trust Company, N.A.,
not in its individual capacity, but solely as Property Trustee of Puget Sound
Energy Capital Trust II, or registered assigns, the principal sum of Two Hundred
Six Million One Hundred Eighty-six Thousand Dollars ($206,186,000) on June 30,
2041, and to pay interest on said principal sum from May 24, 2001 quarterly
(subject to deferral as set forth herein) on March 30, June 30, September 30 and
December 30 of each year (each such date, an "Interest Payment Date") commencing
September 30, 2001 at the rate of 8.40% per annum until the principal hereof
shall have become due and payable, and on any overdue principal and premium, if
any, and (without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at the
same rate per annum compounded quarterly. The amount of interest payable on any
Interest Payment Date shall be computed on the basis of a 360-day year of twelve
30-day months. In the event that any date on which interest is payable on this
Debenture is not a Business Day, then payment of interest payable on such date
will be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date. The interest installment so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the person in whose name this Debenture
(or one or more Predecessor Securities, as defined in said Indenture) is
registered at the close of business on the regular record date for such interest
installment, which shall be the close of business on the Business Day next
preceding such Interest Payment Date. [IF PURSUANT TO THE PROVISIONS OF THE
INDENTURE THE DEBENTURES ARE NO LONGER REPRESENTED BY A GLOBAL DEBENTURE --
which shall be the close of business on the 15th day of the month in which such
Interest Payment Date occurs.] If and to the extent the Issuer shall default in
the payment of the interest due on such Interest Payment Date, interest shall be
paid to the person in whose name this

                                      -12-
<PAGE>

Debenture is registered at the close of business on a subsequent record date
(which shall not be less than five Business Days prior to the date of payment of
such defaulted interest) established by notice given by mail by or on behalf of
the Issuer to the Holder of this Debenture not less than 15 days preceding such
subsequent Record Date.  The principal of (and premium, if any) and the interest
on this Debenture shall be payable at the office or agency of the Trustee in the
Borough of Manhattan, the City of New York maintained for that purpose in any
coin or currency of the United States of America that at the time is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Issuer by check mailed to the
registered Holder at such address as shall appear in the Security Register or by
wire transfer to an account maintained by the Holder.  Notwithstanding the
foregoing, so long as the Holder of this Debenture is the Property Trustee, the
payment of the principal of (and premium, if any) and interest on this Debenture
will be made at such place and to such account as may be designated by the
Property Trustee.

     The indebtedness evidenced by this Debenture is, to the extent provided in
the Indenture, subordinate and junior in right of payment to the prior payment
in full of all Senior Indebtedness, and this Debenture is issued subject to the
provisions of the Indenture with respect thereto.  Each Holder of this
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her attorney-in-
fact for any and all such purposes.  Each Holder hereof, by his or her
acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.

     This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.

     The provisions of this Debenture are continued on the reverse side hereof
and such continued provisions shall for all purposes have the same effect as
though fully set forth at this place.

     IN WITNESS WHEREOF, the Issuer has caused this instrument to be executed.

                                      -13-
<PAGE>

Dated:                                      Puget Sound Energy, Inc.

[Seal]                                      By ________________________________
                                            Name:______________________________
                                            Title:_____________________________

Attest:

By __________________________
Name:________________________
Title:_______________________

                    (FORM OF CERTIFICATE OF AUTHENTICATION)

                         CERTIFICATE OF AUTHENTICATION

     This is one of the Securities of the series of Securities described in the
within-mentioned Indenture.

                                    __________________________
                                    as Trustee
                                    By:
                                    Authorized Signatory

                        (FORM OF REVERSE OF DEBENTURE)

     This Debenture is one of a duly authorized series of Securities of the
Issuer (herein sometimes referred to as the "Debentures"), specified in the
Indenture, all issued or to be issued in one or more series under and pursuant
to an Indenture dated as of May 1, 2001, duly executed and delivered between the
Issuer and Bank One Trust Company, N.A., a national banking association, as
Trustee (the "Trustee"), as supplemented by the First Supplemental Indenture
dated as of May 1, 2001, between the Issuer and the Trustee (the Indenture as so
supplemented, the "Indenture"), to which Indenture reference is hereby made for
a description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Issuer and the Holders of the
Debentures.  By the terms of the Indenture, the Debentures are issuable in
series that may vary as to amount, date of maturity, rate of interest and in
other

                                      -14-
<PAGE>

respects as provided in the Indenture. This series of Debentures is limited in
aggregate principal amount as specified in said First Supplemental Indenture.

     The Issuer shall have the right to redeem this Debenture at the option of
the Issuer, without premium or penalty, in whole or in part at any time on or
after June 30, 2006, or at any time in certain circumstances upon the occurrence
of a Special Event, at a redemption price equal to 100% of the principal amount
plus any accrued but unpaid interest, to the date of such redemption.  Any
redemption pursuant to this paragraph will be made upon not less than 30 days'
nor more than 60 days' notice.  If the Debentures are only partially redeemed by
the Issuer pursuant to an Optional Redemption, the Debentures will be redeemed
pro rata.

     In the event of redemption of this Debenture in part only, a new Debenture
or Debentures of this series for the unredeemed portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.

     In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.

     The Indenture contains provisions permitting the Issuer and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Debentures and other Indenture securities of each series
affected at the time Outstanding and affected (voting as one class), as defined
in the Indenture, to execute supplemental indentures for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of the Indenture or of any supplemental indenture or of modifying in any manner
the rights of the Holders of the Debentures; provided, however, that the Company
and the Trustee may not, without the consent of the Holder of each Debenture
then Outstanding and affected thereby:  (a) change the time of payment of the
principal (or any installment) of any Debenture, or reduce the principal amount
thereof, or reduce the rate or change the time of payment of interest thereon,
or impair the right to institute suit for the enforcement of any payment on any
Debenture when due or (b) reduce the percentage in principal amount of the
Debentures, the consent of whose Holders is required for any such modification
or for any waiver provided for in the Indenture.  The Indenture also contains
provisions providing that prior to the acceleration of the maturity of any
Debenture or other securities outstanding under the Indenture, the Holders of a
majority in aggregate principal amount of Debentures of and other Securities
Outstanding under the Indenture with respect to which a default or/an Event of
Default shall have occurred and be continuing (voting as one class) may on
behalf of

                                      -15-
<PAGE>

the Holders of all such affected Securities (including the Debentures) waive any
past default and its consequences, except a default or an Event of Default in
respect of a covenant or provision of the Indenture or of any Debenture or other
Security which cannot be modified or amended without the consent of the Holder
of each Debenture or other Security affected. Any such consent or waiver by the
registered Holder of this Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Debenture and of any Debenture issued in exchange
herefor or in place hereof (whether by registration of transfer or otherwise),
irrespective of whether or not any notation of such consent or waiver is made
upon this Debenture.

     No reference herein to the Indenture and no provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Debenture at the time and place and at the rate and in the
money herein prescribed.

     The Issuer shall have the right at any time during the term of the
Debentures and from time to time to extend the interest payment period of such
Debentures for up to 20 consecutive quarters (an "Extended Interest Payment
Period"), at the end of which period the Issuer shall pay all interest then
accrued and unpaid (together with interest thereon at the rate specified for the
Debentures to the extent that payment of such interest is enforceable under
applicable law).  Before the termination of any such Extended Interest Payment
Period, the Issuer may further extend such Extended Interest Payment Period,
provided that such Extended Interest Payment Period together with all such
further extensions thereof shall not exceed 20 consecutive quarters.  At the
termination of any such Extended Interest Payment Period and upon the payment of
all accrued and unpaid interest and any additional amounts then due, the Issuer
may commence a new Extended Interest Payment Period.

     As provided in the Indenture and subject to certain limitations therein set
forth, this Debenture is transferable by the registered Holder hereof on the
Security Register of the Issuer, upon surrender of this Debenture for
registration of transfer at the office or agency of the Trustee in the City and
State of New York accompanied by a written instrument or instruments of transfer
in form satisfactory to the Issuer or the Trustee duly executed by the
registered Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Debentures of authorized denominations and for the
same aggregate principal amount and series will be issued to the designated
transferee or transferees.  No service charge will be made for any such
transfer, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in relation thereto.

                                      -16-
<PAGE>

     Prior to due presentment for registration of transfer of this Debenture,
the Issuer, the Trustee, any paying agent and the Security Registrar may deem
and treat the registered holder hereof as the absolute owner hereof (whether or
not this Debenture shall be overdue and notwithstanding any notice of ownership
or writing hereon made by anyone other than the Security Registrar) for the
purpose of receiving payment of or on account of the principal hereof and
premium, if any, and interest due hereon and for all other purposes, and neither
the Issuer nor the Trustee nor any paying agent nor any Security Registrar shall
be affected by any notice to the contrary.

     No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Issuer or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.

     Debentures of this series so issued are issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof.  As
provided in the Indenture and subject to certain limitations herein and therein
set forth, Debentures of this series so issued are exchangeable for a like
aggregate principal amount of Debentures of this series in authorized
denominations, as requested by the Holder surrendering the same.

     All terms used in this Debenture that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

                          [END OF FORM OF DEBENTURE]

                                  ARTICLE IX.
                         ORIGINAL ISSUE OF DEBENTURES

SECTION 9.1   Original Issue of Debentures

     Debentures in the aggregate principal amount of $206,186,000 may, upon
execution of this First Supplemental Indenture, be executed by the Issuer and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Debentures to or upon the written order of the
Issuer, in accordance with Section 2.4 of the Indenture.

                                      -17-
<PAGE>

                                  ARTICLE X.
                                 MISCELLANEOUS

SECTION 10.1   Provisions of Indenture for the Sole Benefit of Parties and
     Holders of Trust Securities

     Notwithstanding Section 13.2 of the Indenture, for so long as any Trust
Securities remain outstanding, the Issuer's obligations under the Indenture and
this First Supplemental Indenture will also be for the benefit of the holders of
the Trust Securities, and the Issuer acknowledges and agrees that such holders
will be entitled to enforce certain payment obligations under the Debentures
directly against the Issuer to the extent provided in the Declaration.

SECTION 10.2   Ratification of Indenture

     The Indenture, as supplemented by this First Supplemental Indenture, is in
all respects ratified and confirmed, and this First Supplemental Indenture shall
be deemed part of the Indenture in the manner and to the extent herein and
therein provided.

SECTION 10.3   Trustee Not Responsible for Recitals

     The recitals herein contained are made by the Issuer and not by the
Trustee, and the Trustee assumes no responsibility for the correctness thereof.
The Trustee makes no representation as to the validity or sufficiency of this
First Supplemental Indenture.

SECTION 10.4   Governing Law

     This First Supplemental Indenture and each Debenture shall be deemed to be
a contract made under the internal laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of said State.

SECTION 10.5   Separability

     In case any one or more of the provisions contained in this First
Supplemental Indenture or in the Debentures shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this First
Supplemental Indenture or of the Debentures, but this First Supplemental
Indenture and the Debentures shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein or therein.

                                      -18-
<PAGE>

SECTION 10.6   Counterparts

     This First Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.

     (The remainder of this page has intentionally been left blank)

                                      -19-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed on the date or dates indicated in the
acknowledgments and as of the day and year first above written.

                                        PUGET SOUND ENERGY, INC., as Issuer

                                        By: /s/ Donald E. Gaines
                                           -------------------------------------
                                           Donald E. Gaines
                                           Vice President and Treasurer

By: /s/ James W. Eldredge
   ---------------------------
   James W. Eldredge
   Secretary

                                        BANK ONE TRUST COMPANY, N.A., as Trustee

                                        By: /s/ Janice Ott Rotunno
                                           -------------------------------------
                                           Name: Janice Ott Rotunno
                                           Title: Vice President

By: /s/ Steven M. Wagner
   ---------------------------
   Name: Steven M. Wagner
   Title: First Vice President

                                      -20-<PAGE>
                                                                     Exhibit 4.5

     _____________________________________________________________________

                   PREFERRED SECURITIES GUARANTEE AGREEMENT

                      PUGET SOUND ENERGY CAPITAL TRUST II

                           Dated as of May 18, 2001

     _____________________________________________________________________

<PAGE>

                                   CONTENTS

<TABLE>
<S>                                                                                                                       <C>
ARTICLE I   DEFINITIONS AND INTERPRETATION............................................................................    1

     SECTION 1.1  Definitions and Interpretation......................................................................    1

ARTICLE II   TRUST INDENTURE ACT......................................................................................    5

     SECTION 2.1  Trust Indenture Act; Application....................................................................    5

     SECTION 2.2  Lists of Holders of Securities......................................................................    5

     SECTION 2.3  Reports by the Preferred Guarantee Trustee..........................................................    5

     SECTION 2.4  Periodic Reports to Preferred Guarantee Trustee.....................................................    6

     SECTION 2.5  Evidence of Compliance with Conditions Precedent....................................................    6

     SECTION 2.6  Events of Default; Waiver...........................................................................    6

     SECTION 2.7  Event of Default; Notice............................................................................    6

     SECTION 2.8  Conflicting Interests...............................................................................    7

ARTICLE III   POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE................................................    7

     SECTION 3.1  Powers and Duties of the Preferred Guarantee Trustee................................................    7

     SECTION 3.2  Certain Rights of Preferred Guarantee Trustee.......................................................    9

     SECTION 3.3  Not Responsible for Recitals or Issuance of Guarantee...............................................   11

ARTICLE IV   PREFERRED GUARANTEE TRUSTEE..............................................................................   12

     SECTION 4.1  Preferred Guarantee Trustee; Eligibility............................................................   12

     SECTION 4.2  Appointment, Removal and Resignation of Preferred Guarantee Trustees................................   12

ARTICLE V   GUARANTEE.................................................................................................   13

     SECTION 5.1  Guarantee...........................................................................................   13

     SECTION 5.2  Waiver of Notice and Demand.........................................................................   14
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                                                       <C>
     SECTION 5.3  Obligations Not Affected............................................................................   14

     SECTION 5.4  Rights of Holders...................................................................................   15

     SECTION 5.5  Guarantee of Payment................................................................................   15

     SECTION 5.6  Subrogation.........................................................................................   15

     SECTION 5.7  Independent Obligations.............................................................................   16

ARTICLE VI   LIMITATION OF TRANSACTIONS; SUBORDINATION................................................................   16

     SECTION 6.1  Limitation of Transactions..........................................................................   16

     SECTION 6.2  Ranking.............................................................................................   16

ARTICLE VII   TERMINATION.............................................................................................   17

     SECTION 7.1  Termination.........................................................................................   17

ARTICLE VIII   INDEMNIFICATION........................................................................................   17

     SECTION 8.1  Exculpation.........................................................................................   17

     SECTION 8.2  Indemnification.....................................................................................   17

ARTICLE IX   MISCELLANEOUS............................................................................................   18

     SECTION 9.1  Successors and Assigns..............................................................................   18

     SECTION 9.2  Amendments..........................................................................................   18

     SECTION 9.3  Notices.............................................................................................   18

     SECTION 9.4  Benefit.............................................................................................   19

     SECTION 9.5  Governing Law.......................................................................................   19
</TABLE>
<PAGE>

                   PREFERRED SECURITIES GUARANTEE AGREEMENT

     This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated as
of May 18, 2001, is executed and delivered by Puget Sound Energy, Inc., a
Washington corporation (the "Guarantor"), and Bank One Trust Company, N.A., as
trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders (as
defined herein) from time to time of the Preferred Securities (as defined
herein) of Puget Sound Energy Capital Trust II, a Delaware statutory business
trust (the "Issuer").

     WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of May 18, 2001, among the trustees of the Issuer named
therein, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof 8,000,000 preferred securities, having an aggregate
liquidation amount of $200,000,000 designated the 8.40% Trust Originated
Preferred Securities (the "Preferred Securities");

     WHEREAS, as incentive for the Holders to purchase the Preferred Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Preferred Securities Guarantee, to pay to the Holders of the
Preferred Securities the Guarantee Payments (as defined herein) and to make
certain other payments on the terms and conditions set forth herein; and

     WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Common Securities Guarantee") in substantially identical terms
to this Preferred Securities Guarantee for the benefit of the holders of the
Common Securities (as defined herein), except that if an Event of Default (as
defined in the Indenture), has occurred and is continuing, the rights of holders
of the Common Securities to receive Guarantee Payments under the Common
Securities Guarantee are subordinated to the rights of Holders of Preferred
Securities to receive Guarantee Payments under this Preferred Securities
Guarantee;

     NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
<PAGE>

                  ARTICLE I   DEFINITIONS AND INTERPRETATION

SECTION 1.1   Definitions and Interpretation

     In this Preferred Securities Guarantee, unless the context otherwise
requires:

     (a)   Capitalized terms used in this Preferred Securities Guarantee but not
           defined in the preamble above have the respective meanings assigned
           to them in this Section 1.1;

     (b)   a term defined anywhere in this Preferred Securities Guarantee has
           the same meaning throughout;

     (c)   all references to "the Preferred Securities Guarantee" or "this
           Preferred Securities Guarantee" are to this Preferred Securities
           Guarantee as modified, supplemented or amended from time to time;

     (d)   all references in this Preferred Securities Guarantee to Articles and
           Sections are to Articles and Sections of this Preferred Securities
           Guarantee, unless otherwise specified;

     (e)   a term defined in the Trust Indenture Act has the same meaning when
           used in this Preferred Securities Guarantee, unless otherwise defined
           in this Preferred Securities Guarantee or unless the context
           otherwise requires; and

     (f)   a reference to the singular includes the plural and vice versa.

     "Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.

     "Authorized Officer" of a Person means any Person that is authorized to
bind such Person.

     "Business Day" means any day other than a day on which banking institutions
in the City of New York, New York or Chicago Illinois are authorized or required
by any applicable law to close.

     "Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.

     "Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any

                                      -2-
<PAGE>

particular time, be principally administered, which office at the date of
execution of this Agreement is located at 1 Bank One Plaza, Suite IL1-0126,
Chicago, Illinois 60670-0126.

     "Covered Person" means any Holder or beneficial owner of Preferred
Securities.

     "Debentures" means the series of junior subordinated debt securities of the
Guarantor designated the 8.40% Subordinated Deferrable Interest Notes due June
30, 2041 held by the Property Trustee (as defined in the Declaration) of the
Issuer.

     "Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Preferred Securities Guarantee.

     "Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the
Declaration) that are required to be paid on such Preferred Securities to the
extent the Issuer shall have funds available therefor, (ii) the redemption
price, including all accrued and unpaid Distributions to the date of redemption
(the "Redemption Price") to the extent the Issuer has funds available therefor,
with respect to any Preferred Securities called for redemption by the Issuer,
and (iii) upon a voluntary or involuntary dissolution, winding-up or termination
of the Issuer (other than in connection with the distribution of Debentures to
the Holders in exchange for Preferred Securities as provided in the
Declaration), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid Distributions on the Preferred Securities to the date of
payment, to the extent the Issuer shall have funds available therefor, and (b)
the amount of assets of the Issuer remaining available for distribution to
Holders in liquidation of the Issuer (in either case, the "Liquidation
Distribution").  If an event of default under the Indenture has occurred and is
continuing, the rights of holders of the Common Securities to receive payments
under the Common Securities Guarantee Agreement are subordinated to the rights
of Holders of Preferred Securities to receive Guarantee Payments.

     "Holder" shall mean any holder, as registered on the books and records of
the Issuer of any Preferred Securities; provided, however, that, in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any Affiliate of the Guarantor.

                                      -3-
<PAGE>

     "Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate
of the Preferred Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees, custodians or agents of
the Preferred Guarantee Trustee.

     "Indenture" means the Indenture dated as of May 18, 2001, between the
Guarantor (the "Debenture Issuer") and Bank One Trust Company, N.A., as trustee,
and any indenture supplemental thereto pursuant to which certain subordinated
debt securities of the Debenture Issuer are to be issued to the Property Trustee
of the Issuer.

     "Majority in liquidation amount of the Securities" means, except as
provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of more than 50% of the liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all Preferred Securities.

     "Officers' Certificate" means, with respect to any Person, a certificate
signed by two Authorized Officers of such Person.  Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Preferred Securities Guarantee shall include:

     (a)   a statement that each officer signing the Officers' Certificate has
           read the covenant or condition and the definition relating thereto;

     (b)   a brief statement of the nature and scope of the examination or
           investigation undertaken by each officer in rendering the Officers'
           Certificate;

     (c)   a statement that each such officer has made such examination or
           investigation as, in such officer's opinion, is necessary to enable
           such officer to express an informed opinion as to whether or not such
           covenant or condition has been complied with; and

     (d)   a statement as to whether, in the opinion of each such officer, such
           condition or covenant has been complied with.

     "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

                                      -4-
<PAGE>

     "Preferred Guarantee Trustee" means Bank One Trust Company, N.A., until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.

     "Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer assigned to administer corporate trust matters and also
means, with respect to a particular matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.

     "Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.

     "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.

                        ARTICLE II TRUST INDENTURE ACT

SECTION 2.1    Trust Indenture Act; Application

     (a)  This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by such
provisions; and

     (b)  if and to the extent that any provision of this Preferred Securities
Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.

SECTION 2.2    Lists of Holders of Securities

     (a)  The Guarantor shall provide the Preferred Guarantee Trustee with a
list, in such form as the Preferred Guarantee Trustee may reasonably require, of
the names and addresses of the Holders of the Preferred Securities ("List of
Holders") as of such date, (i) within 14 days after January 1 and June 30 of
each year, and (ii) at any other time within 30 days of receipt by the Guarantor
of a written request for a List of Holders as of a date no more than 14 days
before such List of Holders is given to the Preferred Guarantee Trustee
provided, that the Guarantor shall not be obligated to provide such List of
Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Preferred Guarantee Trustee by the Guarantor.  The
Preferred Guarantee Trustee may destroy any List of Holders previously given to
it on receipt of a new List of Holders.

                                      -5-
<PAGE>

     (b)  The Preferred Guarantee Trustee shall comply with its obligations
under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.

SECTION 2.3   Reports by the Preferred Guarantee Trustee

     Within 60 days after May 15 of each year, the Preferred Guarantee Trustee
shall provide to the Holders of the Preferred Securities such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form and in
the manner provided by Section 313 of the Trust Indenture Act.

SECTION 2.4   Periodic Reports to Preferred Guarantee Trustee

     The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) and the
compliance certificate required by Section 314 of the Trust Indenture Act in the
form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.

SECTION 2.5   Evidence of Compliance with Conditions Precedent

     The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act.  Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.

SECTION 2.6   Events of Default; Waiver

     The Holders of a Majority in liquidation amount of Preferred Securities
may, by vote, on behalf of the Holders of all of the Preferred Securities, waive
any past Event of Default and its consequences.  Upon such waiver, any such
Event of Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Preferred Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.

SECTION 2.7   Event of Default; Notice

     (a)  The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee, transmit by mail, first class postage prepaid, to
the Holders of the Preferred Securities, notices of all such Events of Default,
unless such defaults have been cured before the giving of such notice, provided,
that, the Preferred

                                      -6-
<PAGE>

Guarantee Trustee shall be protected in withholding such notice, to the extent
permitted by the Trust Indenture Act, if and so long as a Responsible Officer of
the Preferred Guarantee Trustee in good faith determines that the withholding of
such notice is in the interests of the Holders of the Preferred Securities.

     (b)  The Preferred Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless the Preferred Guarantee Trustee shall have
received written notice, or a Responsible Officer of the Preferred Guarantee
Trustee charged with the administration of the Declaration shall have obtained
actual knowledge thereof.

SECTION 2.8   Conflicting Interests

     The Declaration shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.

     ARTICLE III  POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE

SECTION 3.1    Powers and Duties of the Preferred Guarantee Trustee

     (a)  This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the Preferred Securities,
and the Preferred Guarantee Trustee shall not transfer this Preferred Securities
Guarantee to any Person except a Holder of Preferred Securities exercising his
or her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee
Trustee on acceptance by such Successor Preferred Guarantee Trustee of its
appointment to act as Successor Preferred Guarantee Trustee.  The right, title
and interest of the Preferred Guarantee Trustee shall automatically vest in any
Successor Preferred Guarantee Trustee, and such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Preferred Guarantee
Trustee.

     (b)  If an Event of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee has occurred and is continuing, the Preferred
Guarantee Trustee shall enforce this Preferred Securities Guarantee for the
benefit of the Holders of the Preferred Securities.

     (c)  The Preferred Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred

                                      -7-
<PAGE>

Securities Guarantee, and no implied covenants shall be read into this Preferred
Securities Guarantee against the Preferred Guarantee Trustee. In case an Event
of Default has occurred (that has not been cured or waived pursuant to Section
2.6) and is actually known to a Responsible Officer of the Preferred Guarantee
Trustee, the Preferred Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Preferred Securities Guarantee, and use the same
degree of care and skill in its exercise thereof, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.

     (d)  No provision of this Preferred Securities Guarantee shall be construed
to relieve the Preferred Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:

     (i)  prior to the occurrence of any Event of Default and after the curing
          or waiving of all such Events of Default that may have occurred:

          (A)   the duties and obligations of the Preferred Guarantee Trustee
                shall be determined solely by the express provisions of this
                Preferred Securities Guarantee, and the Preferred Guarantee
                Trustee shall not be liable except for the performance of such
                duties and obligations as are specifically set forth in this
                Preferred Securities Guarantee, and no implied covenants or
                obligations shall be read into this Preferred Securities
                Guarantee against the Preferred Guarantee Trustee; and

          (B)   in the absence of bad faith on the part of the Preferred
                Guarantee Trustee, the Preferred Guarantee Trustee may
                conclusively rely, as to the truth of the statements and the
                correctness of the opinions expressed therein, upon any
                certificates or opinions furnished to the Preferred Guarantee
                Trustee and conforming to the requirements of this Preferred
                Securities Guarantee; but in the case of any such certificates
                or opinions that by any provision hereof are specifically
                required to be furnished to the Preferred Guarantee Trustee, the
                Preferred Guarantee Trustee shall be under a duty to examine the
                same to determine whether or not they conform to the
                requirements of this Preferred Securities Guarantee;

     (ii) the Preferred Guarantee Trustee shall not be liable for any error of
          judgment made in good faith by a Responsible Officer of the Preferred
          Guarantee Trustee, unless it shall be proved that the Preferred
          Guarantee

                                      -8-
<PAGE>

            Trustee was negligent in ascertaining the pertinent facts upon which
            such judgment was made;

     (iii)  the Preferred Guarantee Trustee shall not be liable with respect to
            any action taken or omitted to be taken by it in good faith in
            accordance with the direction of the Holders of not less than a
            Majority in liquidation amount of the Preferred Securities relating
            to the time, method and place of conducting any proceeding for any
            remedy available to the Preferred Guarantee Trustee, or exercising
            any trust or power conferred upon the Preferred Guarantee Trustee
            under this Preferred Securities Guarantee; and

     (iv)   no provision of this Preferred Securities Guarantee shall require
            the Preferred Guarantee Trustee to expend or risk its own funds or
            otherwise incur personal financial liability in the performance of
            any of its duties or in the exercise of any of its rights or powers,
            if the Preferred Guarantee Trustee shall have reasonable grounds for
            believing that the repayment of such funds or liability is not
            reasonably assured to it under the terms of this Preferred
            Securities Guarantee or indemnity, reasonably satisfactory to the
            Preferred Guarantee Trustee, against such risk or liability is not
            reasonably assured to it.

SECTION 3.2   Certain Rights of Preferred Guarantee Trustee

     (a)    Subject to the provisions of Section 3.1:

             (i)   The Preferred Guarantee Trustee may conclusively rely, and
                   shall be fully protected in acting or refraining from acting
                   upon, any resolution, certificate, statement, instrument,
                   opinion, report, notice, request, direction, consent, order,
                   bond, debenture, note, other evidence of indebtedness or
                   other paper or document believed by it to be genuine and to
                   have been signed, sent or presented by the proper party or
                   parties.

             (ii)  Any direction or act of the Guarantor contemplated by this
                   Preferred Securities Guarantee shall be sufficiently
                   evidenced by an Officers' Certificate.

             (iii) Whenever, in the administration of this Preferred Securities
                   Guarantee, the Preferred Guarantee Trustee shall deem it
                   desirable that a matter be proved or established before
                   taking, suffering or omitting any action hereunder, the
                   Preferred

                                      -9-
<PAGE>

                Guarantee Trustee (unless other evidence is herein specifically
                prescribed) may, in the absence of bad faith on its part,
                request and conclusively rely upon an Officers' Certificate
                which, upon receipt of such request, shall be promptly delivered
                by the Guarantor.

          (iv)  The Preferred Guarantee Trustee shall have no duty to see to any
                recording, filing or registration of any instrument (or any
                rerecording, refiling or registration thereof).

          (v)   The Preferred Guarantee Trustee may consult with counsel of its
                choice, and the written advice or opinion of such counsel with
                respect to legal matters shall be full and complete
                authorization and protection in respect of any action taken,
                suffered or omitted by it hereunder in good faith and in
                accordance with such advice or opinion. Such counsel may be
                counsel to the Guarantor or any of its Affiliates and may
                include any of its employees. The Preferred Guarantee Trustee
                shall have the right at any time to seek instructions concerning
                the administration of this Preferred Securities Guarantee from
                any court of competent jurisdiction.

          (vi)  The Preferred Guarantee Trustee shall be under no obligation to
                exercise any of the rights or powers vested in it by this
                Preferred Securities Guarantee at the request or direction of
                any Holder, unless such Holder shall have provided to the
                Preferred Guarantee Trustee such security and indemnity,
                reasonably satisfactory to the Preferred Guarantee Trustee,
                against the costs, expenses (including attorneys' fees and
                expenses and the expenses of the Preferred Guarantee Trustee's
                agents, nominees or custodians) and liabilities that might be
                incurred by it in complying with such request or direction,
                including such reasonable advances as may be requested by the
                Preferred Guarantee Trustee; provided that, nothing contained in
                this Section 3.2(a)(vi) shall be taken to relieve the Preferred
                Guarantee Trustee, upon the occurrence of an Event of Default,
                of its obligation to exercise the rights and powers vested in it
                by this Preferred Securities Guarantee.

          (vii) The Preferred Guarantee Trustee shall not be bound to make any
                investigation into the facts or matters stated in any
                resolution, certificate, statement, instrument, opinion, report,
                notice, request,

                                      -10-
<PAGE>

                 direction, consent, order, bond, debenture, note, other
                 evidence of indebtedness or other paper or document, but the
                 Preferred Guarantee Trustee, in its discretion, may make such
                 further inquiry or investigation into such facts or matters as
                 it may see fit.

          (viii) The Preferred Guarantee Trustee may execute any of the trusts
                 or powers hereunder or perform any duties hereunder either
                 directly or by or through agents, nominees, custodians or
                 attorneys, and the Preferred Guarantee Trustee shall not be
                 responsible for any misconduct or negligence on the part of any
                 agent or attorney appointed with due care by it hereunder.

          (ix)   Any action taken by the Preferred Guarantee Trustee or its
                 agents hereunder shall bind the Holders of the Preferred
                 Securities, and the signature of the Preferred Guarantee
                 Trustee or its agents alone shall be sufficient and effective
                 to perform any such action. No third party shall be required to
                 inquire as to the authority of the Preferred Guarantee Trustee
                 to so act or as to its compliance with any of the terms and
                 provisions of this Preferred Securities Guarantee, both of
                 which shall be conclusively evidenced by the Preferred
                 Guarantee Trustee's or its agent's taking such action.

          (x)    Whenever in the administration of this Preferred Securities
                 Guarantee the Preferred Guarantee Trustee shall deem it
                 desirable to receive instructions with respect to enforcing any
                 remedy or right or taking any other action hereunder, the
                 Preferred Guarantee Trustee (i) may request instructions from
                 the Holders of a Majority in liquidation amount of the
                 Preferred Securities, (ii) may refrain from enforcing such
                 remedy or right or taking such other action until such
                 instructions are received, and (iii) shall be protected in
                 conclusively relying on or acting in accordance with such
                 instructions.

     (b)  No provision of this Preferred Securities Guarantee shall be deemed to
impose any duty or obligation on the Preferred Guarantee Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Preferred Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation.

                                      -11-
<PAGE>

No permissive power or authority available to the Preferred Guarantee Trustee
shall be construed to be a duty.

SECTION 3.3  Not Responsible for Recitals or Issuance of Guarantee

     The recitals contained in this Guarantee shall be taken as the statements
of the Guarantor, and the Preferred Guarantee Trustee does not assume any
responsibility for their correctness. The Preferred Guarantee Trustee makes no
representation as to the validity or sufficiency of this Preferred Securities
Guarantee.

                   ARTICLE IV   PREFERRED GUARANTEE TRUSTEE

SECTION 4.1  Preferred Guarantee Trustee; Eligibility

     (a)  There shall at all times be a Preferred Guarantee Trustee which shall:

           (i)  not be an Affiliate of the Guarantor; and

           (ii) be a bank organized and doing business under the laws of the
                United States of America or any State or Territory thereof or of
                the District of Columbia, or a bank or Person permitted by the
                Securities and Exchange Commission to act as an institutional
                trustee under the Trust Indenture Act, authorized under such
                laws to exercise corporate trust powers, having a combined
                capital and surplus of at least 50 million U.S. dollars
                ($50,000,000), and subject to supervision or examination by
                Federal, State, Territorial or District of Columbia authority.
                If such corporation publishes reports of condition at least
                annually, pursuant to law or to the requirements of the
                supervising or examining authority referred to above, then, for
                the purposes of this Section 4.1(a)(ii), the combined capital
                and surplus of such corporation shall be deemed to be its
                combined capital and surplus as set forth in its most recent
                report of condition so published.

     (b)  If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).

     (c)  If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.

                                      -12-
<PAGE>

SECTION 4.2  Appointment, Removal and Resignation of Preferred Guarantee
             Trustees

     (a)  Subject to Section 4.2(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.

     (b)  The Preferred Guarantee Trustee shall not be removed in accordance
with Section 4.2(a) until a Successor Preferred Guarantee Trustee has been
appointed and has accepted such appointment by written instrument executed by
such Successor Preferred Guarantee Trustee and delivered to the Guarantor.

     (c)  The Preferred Guarantee Trustee appointed to office shall hold office
until a Successor Preferred Guarantee Trustee shall have been appointed or until
its removal or resignation. The Preferred Guarantee Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee Trustee.

     (d)  If no Successor Preferred Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Preferred Guarantee Trustee may petition any court of competent jurisdiction for
appointment of a Successor Preferred Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a Successor Preferred Guarantee Trustee.

     (e)  No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.

     (f)  Upon termination of this Preferred Securities Guarantee or removal or
resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2, the
Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued to
the date of such termination, removal or resignation.

                                      -13-
<PAGE>

                             ARTICLE V   GUARANTEE

SECTION 5.1  Guarantee

     The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by the Issuer), as and when due, regardless of any defense, right of set-off or
counterclaim that the Issuer may have or assert.  The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.  Notwithstanding anything to the contrary herein, the
Guarantor retains all of its rights under the Indenture to extend the interest
payment period on the Debentures and the Guarantor shall not be obligated
hereunder to pay during an Extension Period (as defined in the Indenture) any
monthly distributions on the Preferred Securities.

SECTION 5.2  Waiver of Notice and Demand

     The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Issuer or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.

SECTION 5.3  Obligations Not Affected

     Except as otherwise provided herein, the obligations, covenants, agreements
and duties of the Guarantor under this Preferred Securities Guarantee shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:

     (a)  the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Issuer;

     (b)  the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the

                                      -14-
<PAGE>

extension of any interest payment period on the Debentures or any extension of
the maturity date of the Debentures permitted by the Indenture);

     (c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Issuer granting indulgence or extension of any
kind;

     (d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;

     (e) any invalidity of, or defect or deficiency in, the Preferred
Securities;

     (f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or

     (g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.

     There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.

SECTION 5.4  Rights of Holders

     (a) The Holders of a Majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting of
any proceeding for any remedy available to the Preferred Guarantee Trustee in
respect of this Preferred Securities Guarantee or exercising any trust or power
conferred upon the Preferred Guarantee Trustee under this Preferred Securities
Guarantee.

     (b) Any Holder of Preferred Securities may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Preferred
Securities Guarantee, without first instituting a legal proceeding against the
Issuer, the Preferred Guarantee Trustee or any other Person.

SECTION 5.5  Guarantee of Payment

     This Preferred Securities Guarantee creates a guarantee of payment and not
of collection.

                                      -15-
<PAGE>

SECTION 5.6  Subrogation

     The Guarantor shall be subrogated to all (if any) rights of the Holders of
Preferred Securities against the Issuer in respect of any amounts paid to such
Holders by the Guarantor under this Preferred Securities Guarantee; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Preferred Securities
Guarantee, if, at the time of any such payment, any amounts are due and unpaid
under this Preferred Securities Guarantee.  If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.

SECTION 5.7  Independent Obligations

     The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Preferred Securities, and
that the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.

            ARTICLE VI   LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 6.1  Limitation of Transactions

     So long as any Preferred Securities remain outstanding, if there shall have
occurred an Event of Default or an event of default under the Declaration, then
(a) the Guarantor shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock, (b) the Guarantor
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities (including guarantees) issued by
the Guarantor which rank pari passu with or junior to the Debentures or (c) the
Guarantor shall not make any guarantee payments with respect to the foregoing
(other than, with respect to clauses (a), (b) and (c), (i) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, common stock of the Guarantor; (ii) any declaration of a
dividend in connection with the implementation of a shareholder's rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto; (iii) payments under the
Preferred Securities Guarantee Agreement; (iv) as a direct result of, and only
to the extent required in

                                      -16-
<PAGE>

order to avoid the issuance of fractional shares of capital stock, following a
reclassification of the Guarantor's capital stock or the exchange or conversion
of one class or series of the Guarantor's capital stock for another class or
series of the Guarantor's capital stock; and (v) the purchase of fractional
interests in shares of the Guarantor's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged).

SECTION 6.2  Ranking

     This Preferred Securities Guarantee will constitute an unsecured obligation
of the Guarantor and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Guarantor including the Debentures, except those
liabilities of the Guarantor made pari passu or subordinate by their terms, (ii)
pari passu with the most senior preferred or preference stock now or hereafter
issued by the Guarantor and with any guarantee now or hereafter entered into by
the Guarantor in respect of any preferred or preference stock of any Affiliate
of the Guarantor, and (iii) senior to the Guarantor's common stock.

                           ARTICLE VII   TERMINATION

SECTION 7.1  Termination

     This Preferred Securities Guarantee shall terminate (i) upon full payment
of the Redemption Price of all Preferred Securities, (ii) upon the distribution
of the Debentures to the Holders of all of the Preferred Securities or (iii)
upon full payment of the amounts payable in accordance with the Declaration upon
liquidation of the Issuer. Notwithstanding the foregoing, this Preferred
Securities Guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any Holder of Preferred Securities must restore
payment of any sums paid under the Preferred Securities or under this Preferred
Securities Guarantee.

                        ARTICLE VIII   INDEMNIFICATION

SECTION 8.1  Exculpation

     (a)  No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this Preferred Securities
Guarantee and in a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Preferred Securities Guarantee or by law, except that an Indemnified Person
shall be

                                      -17-
<PAGE>

liable for any such loss, damage or claim incurred by reason of such Indemnified
Person's gross negligence or willful misconduct with respect to such acts or
omissions.

     (b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Guarantor and upon such information, opinions, reports
or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.

SECTION 8.2  Indemnification

     The Guarantor agrees to indemnify each Indemnified Person for, and to hold
each Indemnified Person harmless against, any loss, liability or expense
incurred without gross negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Preferred Securities Guarantee or the
resignation or removal of the Preferred Guarantee Trustee.

                          ARTICLE IX   MISCELLANEOUS

SECTION 9.1  Successors and Assigns

     All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding.

SECTION 9.2  Amendments

     Except with respect to any changes that do not adversely affect the rights
of Holders (in which case no consent of Holders will be required), this
Preferred Securities Guarantee may only be amended with the prior approval of
the Holders of at least a Majority in liquidation amount (including the stated
amount that would be paid on redemption, liquidation or otherwise, plus accrued
and unpaid Distributions to the date upon which the voting percentages are
determined) of all the outstanding

                                      -18-
<PAGE>

Preferred Securities. The provisions of Section 12.2 of the Declaration with
respect to meetings of Holders of the Securities apply to the giving of such
approval.

SECTION 9.3  Notices

     All notices provided for in this Preferred Securities Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:

     (a) If given to the Preferred Guarantee Trustee, at the Preferred Guarantee
Trustee's mailing address set forth below (or such other address as the
Preferred Guarantee Trustee may give notice of to the Holders of the Preferred
Securities):

          Bank One Trust Company, N.A.
          Bank One Plaza, Suite IL1-0126
          Chicago, Illinois 60670-0126
          Attention:  Administrator
          Facsimile (312) 336-9436

     (b) If given to the Guarantor, at the Guarantor's mailing address set forth
below (or such other address as the Guarantor may give notice of to the Holders
of the Preferred Securities):

          Puget Sound Energy, Inc.
          411 108/th/ Avenue N.E.
          Bellevue, Washington 98004-5515
          Attention:  Donald E. Gaines
                      Vice President and Treasurer
          Facsimile (425) 462-3300

     (c) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Issuer.

     All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

                                      -19-
<PAGE>

SECTION 9.4  Benefit

     This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to Section 3.1(a), is not
separately transferable from the Preferred Securities.

SECTION 9.5  Governing Law

     This preferred securities guarantee shall be governed by, and construed and
interpreted in accordance with, the laws of the state of New York without regard
to the conflict of law principles thereof.

     THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year
first above written.

                                Puget Sound Energy, Inc., as Guarantor

                                By:  /s/ Donald E. Gaines
                                     ----------------------------------
                                     Donald E. Gaines
                                     Vice President and Treasurer

                                Bank One Trust Company, N.A., as Preferred
                                Guarantee Trustee

                                By:  /s/ Janice Ott Rotunno
                                     ------------------------------------
                                     Name:  Janice Ott Rotunno
                                     Title: Vice President

                                      -20-

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