CREDIT AGREEMENT

Exhibit 10.1

EXECUTION COPY

 

CREDIT AGREEMENT

Dated as of May 16, 2008

among

PUGET MERGER SUB INC.

as Borrower,

BARCLAYS BANK PLC

as Facility Agent,

and

THE LENDERS PARTY HERETO

 

DRESDNER BANK AG NEW YORK BRANCH

COBANK, ACB

as Co-Syndication Agents

and

THE BANK OF NOVA SCOTIA

THE ROYAL BANK OF SCOTLAND PLC

as Co-Documentation Agents

 

BARCLAYS CAPITAL, the investment banking division of Barclays Bank PLC and

DRESDNER BANK AG NEW YORK BRANCH

as Joint Mandated Lead Arrangers and Joint Bookrunners

 

Puget Holdco Credit Agreement

TABLE OF CONTENTS

 

 

 

 

SCHEDULES

 

EXHIBITS

 

 

 

CREDIT AGREEMENT

This CREDIT AGREEMENT (“ Agreement ”) is entered into as of May 16, 2008, among PUGET MERGER SUB INC., a Washington corporation (the “ Merger Sub ”), BARCLAYS BANK PLC, as Facility Agent and each lender from time to time party hereto (collectively, the “ Lenders ” and individually, a “ Lender ”).

RECITALS

Pursuant to the Merger Agreement (as this and other capitalized terms used in these recitals are defined in Section 1.01 below), the separate existence of the Merger Sub shall cease and the Merger Sub shall be merged with and into Puget Energy, Inc., a Washington corporation (the “ Company ”) (such merger, the “ Merger ”). The Company shall be the surviving corporation in the Merger, shall continue its corporate existence under the laws of the State of Washington and, following the Merger, the Company shall succeed to and assume all of the rights and obligations of the Merger Sub under this Agreement. The Merger Sub (prior to the Effective Time) and the Company (upon and after the Effective Time) are referred to herein as the “ Borrower ”.

In connection with the Merger, the Merger Sub has requested that the Lenders extend credit to the Borrower in the form of (i) term loans in an aggregate amount of up to $1,425,000,000 for the purpose of financing the Merger, paying fees and expenses in connection therewith and refinancing certain outstanding Indebtedness of the Borrower Group and (ii) term loans for the purpose of financing certain Utility Capital Expenditures (as further described herein) in an aggregate amount of up to $1,000,000,000, and the Lenders have indicated their willingness to extend credit to the Borrower on the terms and subject to the conditions set forth herein.

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

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

“ Additional CapEx ” means any generation-related Capital Expenditures or generation-related acquisitions which are not Base Capital Expenditures and which individually, or together as a series of related Capital Expenditures or acquisitions, exceed $100,000,000.

“ Additional Lender ” has the meaning specified in Section 2.11(d) .

“ Affiliate ” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

 

“ Affiliate Service Agreements ” means any contract or agreement between the Borrower or any Subsidiary and an Affiliate thereof providing for accounting, tax, treasury, advisory or other professional services to the Borrower or any Subsidiary.

“ AFUDC ” means the cost of both the debt and equity funds used to finance utility plant additions during the construction period for such additions, determined in accordance with GAAP.

“ Agent-Related Persons ” means the Agents, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.

“ Agents ” means, collectively, the Facility Agent and the Collateral Agent.

“ Agreement ” has the meaning specified in the introduction to this Agreement.

“ Alternate Base Rate ” means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day, and (b) the Federal Funds Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively.

“ Alternate Base Rate Loan ” means any Loan which bears interest at the Alternate Base Rate.

“ Anti-Terrorism Order ” has the meaning specified in Section 5.17(c) .

“ Applicable Margin ” means a percentage per annum determined as follows based upon the lower of the ratings for the Facilities from Moody’s and S&P listed for the applicable agency in the table below; provided , however , if the then applicable ratings from Moody’s and S&P are two or more levels apart, the higher of such ratings shall be deemed to be one level above the lower of the two ratings (for example only, if the ratings for the Facilities are BB from S&P and Baa3 from Moody’s, the Baa3 rating from Moody’s shall be deemed to be Ba1 from Moody’s):

 

 

“ Approved Bank ” has the meaning specified in clause (c) of the definition of “ Cash Equivalents ”.

“ Approved Fund ” means any Fund that is administered, advised or managed by a Lender or an Affiliate of a Lender.

“ Assignees ” has the meaning specified in Section 10.07(b) .

“ Assignment and Assumption ” means an Assignment and Assumption substantially in the form of Exhibit D .

“ Assumption Agreement ” means an Assumption Agreement substantially in the form of Exhibit J .

“ Attorney Costs ” means and includes, as the context requires, all reasonable and documented fees, expenses and disbursements of any external legal counsel.

“ Attributable Indebtedness ” means, on any date, in respect of any Capitalized Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.

“ Authorized Officer ” means the chief executive officer, president, chief financial officer, chief accounting officer, treasurer or assistant treasurer or other similar officer of the Borrower or any Subsidiary and, as to any document delivered on the Financial Closing Date, any secretary or assistant secretary of the Borrower or any Subsidiary.

“ Base Capital Expenditures ” means Capital Expenditures that are (i) required to be made by applicable Law, (ii) undertaken for health and safety reasons, (iii) undertaken to maintain and operate assets in accordance with Good Utility Practice, or (iv) required under any Contractual Obligations not entered into with the intention of circumventing the restrictions contained in this definition.

“ Blackout Period ” has the meaning specified in Section 10.07(b ).

“ Borrower ” has the meaning specified in the recitals to this Agreement.

“ Borrower Affiliate ” means any Affiliate of the Borrower other than Macquarie Affiliates.

 

“ Borrower Cash Interest Expense ” means, for any period, with respect to the Borrower determined in accordance with GAAP exclusive of any consolidated subsidiaries of the Borrower, the total interest expense (which for the avoidance of doubt, shall not include the benefit of AFUDC) of the Borrower for such period, less the sum of (in each case, to the extent included in determining total interest expense) (a) interest on any debt of the Borrower that is not payable in cash during such period, including any capitalized interest, (b) amortization of debt issuance costs, debt discount or premium and other financing fees and expenses incurred by the Borrower during such period and (c) all other non-cash items included in such calculation of interest expense during such period.

“ Borrower Group ” means the Borrower and the Operating Companies ¹ and “ Borrower Group Member ” means any of the Borrower or any Operating Company.

“ Borrower Interest ” means, for any period, the aggregate Borrower Cash Interest Expense for such period, including the portion of any payments made in respect of Capitalized Lease liabilities allocable to interest expense, plus the aggregate scheduled recurring fees, in each case, in respect of Indebtedness of the Borrower for such period, plus the net amount payable (or minus the net amount receivable) by the Borrower under Interest Hedging Agreements relating to Indebtedness of the Borrower (other than any such amount payable or receivable by the Borrower during such period as a result of the termination or reduction of the notional amount of any Interest Hedging Agreements to the extent such amount payable or receivable is not already included in Borrower Cash Interest Expense), in each case calculated in accordance with GAAP. For the avoidance of doubt, Borrower Interest shall exclude make whole payments.

“ Borrower Side Person ” has the meaning specified in the third proviso of Section 10.01 .

“ Borrowing ” means a Capital Expenditure Loan Borrowing or a Term Loan Borrowing, as the context may require.

“ Borrowing Request ” means each loan request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit A delivered to the Facility Agent.

“ Business Day ” means any day:

(a) which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York or Bellevue, Washington; and

(b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, on which dealings in Dollars are carried on in the London interbank market.

“ Business Plan ” has the meaning specified in Section 6.01(d) .

 

1	Lead Arrangers request a copy of separate stand alone financials for Puget Western.

 

“ Calculation Date ” means, as applicable, the date that is (a) with respect to the end of the fiscal year of the Borrower, the earlier of the delivery of financial statements referred to in Section 6.01(a) and 90 days after the end of such fiscal year, and (b) with respect to the first three fiscal quarters of the Borrower, the earlier of delivery of the financial statements referred to in Section 6.01(b) and 45 days after the end of such fiscal quarter.

“ Capital Expenditure Availability Period ” means the period from and including the Financial Closing Date until the earlier of (a) the date of termination of the Capital Expenditure Commitments in accordance with this Agreement and (b) the date that is ten (10) Business Days prior to Final Maturity Date.

“ Capital Expenditure Commitment ” means, as to any Capital Expenditure Lender, its obligation to make Capital Expenditure Loans to the Borrower in an aggregate principal amount not to exceed the amount set forth opposite such Capital Expenditure Lender’s name on Schedule 2.01 hereto under the caption “Capital Expenditure Commitment” or in the Assignment and Assumption pursuant to which such Capital Expenditure Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement. The aggregate amount of the Capital Expenditure Commitments of all Capital Expenditure Lenders as of the Effective Date is $1,000,000,000.

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

“ Capital Expenditure Loan ” means a Loan made pursuant to Section 2.01(b) .

“ Capital Expenditure Loan Borrowing ” means a borrowing consisting of Capital Expenditure Loans of the same Type and, in the case of LIBO Rate Loans, having the same Interest Period made by each of the Capital Expenditure Lenders pursuant to Section 2.01(b) .

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

“ Capital Expenditures ” means, with respect to any Person, the aggregate of (a) all expenditures (whether paid in cash or accrued as liabilities) by such Person that, in conformity with GAAP, are required to be included as additions during such period to Property, plant or equipment reflected in the balance sheet of such Person and (b) the value of all assets under Capitalized Leases incurred by such Person.

“ Capitalized Leases ” means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases; provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted for as a liability in accordance with GAAP.

“ Cash Available for Borrower Debt Service ” means, for any period, actual Cash Distributions received by the Borrower from the Operating Companies during such period minus

 

any expenses of the Borrower incurred in connection with its activities permitted pursuant to Section 7.08(b)(A) , (B)  or (C) .

“ Cash Distributions ” means (i) any dividend or other distribution paid in cash with respect to any Equity Interest held by the Borrower in any Operating Company, (ii) any payment in cash on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such Equity Interest, or on account of any return of capital to the Borrower in respect of any such Equity Interest, (iii) any payment in cash to the Borrower by any Operating Company of interest on or principal of Intercompany Loans made by the Borrower to any Subsidiary, or (iv) any amount paid in cash to the Borrower by any of its Subsidiaries pursuant to any tax-sharing arrangements, in each case other than such payments in respect of the Borrower’s or its Subsidiaries’ allocable share of tax liabilities of the consolidated tax group for U.S. Federal income tax purposes of which Puget Holdings is the “ common parent ” (within the meaning of Section 1504 of the Code) or any similar state, local or foreign tax liabilities, in each case which are actually paid during the relevant period.

“ Cash Equivalents ” means any of the following types of Investments, to the extent owned by the Borrower or any Subsidiary:

(a) Dollars held by it from time to time in the ordinary course of business;

(b) readily marketable obligations issued or directly and fully guaranteed or insured by the government or any agency or instrumentality of the United States or having maximum maturities of not more than one (1) year from the date of acquisition thereof;

(c) time deposits with, or insured certificates of deposit or bankers’ acceptances of, any commercial bank that (i) is a Lender or (ii) (A) (x) is organized under the Laws of the United States or any state thereof, and is a member of the Federal Reserve System and (y) has combined capital and surplus of at least $1,000,000,000 and has outstanding unguaranteed and unsecured long-term indebtedness that is rated A-/A3 or better by S&P and/or Moody’s, or (B) is one of the twenty-five largest banks in the United States ranked by deposits and having a short-term deposit rating of A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody’s (any such bank in the foregoing clause (i) or (ii)  being an “ Approved Bank ”), in each case with maximum maturities of not more than one (1) year from the date of acquisition thereof;

(d) commercial paper and variable or fixed rate notes issued by an Approved Bank or commercial paper and variable or fixed rate notes issued by, or guaranteed by, a corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody’s, in each case with maximum maturities of not more than two hundred seventy (270) days from the date of acquisition thereof; provided that no more than $50,000,000 in the aggregate of such commercial paper per issuer shall be outstanding at any time;

 

(e) repurchase agreements fully secured by obligations described in clause (b) above with any Approved Bank; and

(f) Investments with maximum maturities of twelve (12) months or less from the date of acquisition in (i) money market funds rated AAA (or the equivalent thereof) or better by S&P or Aaa (or the equivalent thereof) or better by Moody’s that are registered under the Investment Company Act of 1940, as amended, and which are administered by an Approved Bank, and the portfolios of which are limited solely to Investments of the character, quality and maturity described in the foregoing clauses (b) , (c) , (d)  and (e)  or (ii) the Federal Municipal Obligations Fund (or its successors) so long as such fund is rated AA (or the equivalent thereof) or better by S&P or Fitch Ratings Ltd. at the time of such Investment.

“ Cash Interest Expense ” means, for any period, with respect to the Borrower Group determined on a consolidated basis without duplication in accordance with GAAP, the total interest expense (which for the avoidance of doubt, shall not include the benefit of AFUDC) of the Borrower Group for such period, less the sum of (a) interest on any debt that is not payable in cash during such period, including any capitalized interest, (b) amortization of debt issuance costs, debt discount or premium and other financing fees and expenses incurred by any member of the Borrower Group during such period and (c) all other non-cash items included in such calculation of interest expense during such period.

“ Cash Management Obligations ” means obligations owed by any Borrower Group Member to any Lender or any Affiliate of a Lender in respect of any overdraft and related liabilities arising from treasury, depository and cash management services or any automated clearing house transfers of funds.

“ Cash Sweep Calculation Date ” means the date that is four (4) Business Days after a Calculation Date occurring after a Cash Sweep Date.

“ Cash Sweep Date ” means any Quarter End Date which is the last day of any period in respect of which a Lock-Up Event has been continuing for three (3) or more consecutive Quarter End Dates (including such Quarter End Date).

“ Casualty Event ” means any event or any series or related events that gives rise to the receipt by any Borrower Group Member of any insurance proceeds or condemnation awards in respect of any equipment, fixed assets or real property (including any improvements thereon) to replace or repair such equipment, fixed assets or real property.

“ CFO ” means the chief financial officer of the Borrower or person holding a similar position.

“ Change in Law ” means (a) the adoption of any law, rule or regulation, (b) any change in law, rule or regulation or in the interpretation or application thereof by any Governmental Authority, or (c) the adoption or making of any interpretation, request, guideline or directive applying to any Lender (or, for purposes of Section 3.04 of this Agreement, to any Lending Office of such Lender or to such Lender’s holding company, if any) (whether or not having the force of law) by any Governmental Authority made or issued after the Effective Date in each of

 

clause (a) , (b) , or (c)  first made effective and applicable to a Lender after the Effective Date (or in the case of a Lender that becomes a party to this Agreement after the Effective Date, after the date such Lender becomes a party hereto).

“ Change of Control ” means the earliest to occur of (a) Macquarie shall fail to own and control, directly or indirectly, in the aggregate at least 33.33% of the issued and outstanding common Equity Interests in Puget Holdings, the Parent or the Borrower or (b) in the event that Macquarie shall fail to own and control, directly or indirectly, in the aggregate more than 50.1% of the issued and outstanding common Equity Interests in Puget Holdings, the Parent or the Borrower, the Board of Directors (or comparable governing body) of Puget Holdings, the Parent or the Borrower, as the case may be, have not entered into arrangements, after such failure by Macquarie, to provide in all material respects that, with respect to the Parent and the Borrower (i) amendments to the constitutive documents, (ii) mergers, (iii) acquisition, disposition or encumbrance of material assets or assets with value in excess of $75,000,000 (as adjusted annually for inflation), (iv) reductions or replenishments of capital with a value in excess of $75,000,000 (as adjusted annually for inflation), (v) liquidation, dissolution or bankruptcy and (vi) change in business lines, will require the approval of the members of the Board of Directors (or comparable governing body) representing holders of, or holders of common Equity Interests representing, more than 66.67% of the issued and outstanding common Equity Interests in Puget Holdings, the Parent or the Borrower, as the case may be.

“ Claim ” has the meaning specified in Section 10.05(b) .

“ Class ”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are Term Loans or Capital Expenditure Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Term Loan Commitment or Capital Expenditure Commitment.

“ Code ” means the U.S. Internal Revenue Code of 1986, as amended from time to time, and rules and regulations related thereto.

“ Co-Documentation Agents ” means, collectively, The Bank of Nova Scotia and The Royal Bank of Scotland plc, each in its capacity as a documentation agent hereunder.

“ Collateral ” means all the “Collateral”, as defined in the Security Agreement and the Pledge Agreement.

“ Collateral Agency Agreement ” means the Collateral Agency Agreement, dated as of the Financial Closing Date, among the Collateral Agent, the Facility Agent, the Interest Rate Hedge Banks and the Borrower, substantially in the form of Exhibit F .

“ Collateral Agent ” means Barclays Bank PLC or one of its affiliates, in its capacity as collateral agent under the Collateral Agency Agreement and the other Security Documents, or any successor thereto in accordance with the terms of the Collateral Agency Agreement.

“ Commitment ” means, with respect to any Lender, the sum of the Term Loan Commitments and Capital Expenditure Commitments of such Lender.

 

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

“ Company ” has the meaning specified in the recitals to this Agreement.

“ Company Representations ” has the meaning specified in Section 4.03(c)(i) .

“ Compensation Period ” has the meaning specified in Section 2.09(b)(ii) .

“ Completion Date ” means the date of consummation of the Merger.

“ Conservation Amortization ” means at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption “conservation amortization” (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date.

“ Conservation Expenditures ” means at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption “energy efficiency expenditures” (or any like caption) on a consolidated statement of cash flows of the Borrower and its Subsidiaries at such date.

“ Consolidated Current Assets ” means, at any date, all amounts (without duplication) that would, in conformity with GAAP, be set forth opposite the caption “total current assets” (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date (other than (i) cash and Cash Equivalents, (ii) purchased gas adjustment receivables, (iii) unrealized gains on derivative instruments, (iv) prepaid taxes and (v) any current portion of deferred income taxes).

“ Consolidated Current Liabilities ” means, at any date, all amounts (without duplication) that would, in conformity with GAAP, be set forth opposite the caption “total current liabilities” (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date (other than (i) the current portion of any funded Indebtedness, (ii) without duplication of clause (i) above, all Indebtedness consisting of revolving loans to the extent otherwise included therein, (iii) unrealized losses on derivative instruments, (iv) any current portion of deferred taxes, (v) accrued expenses related to taxes and interest, (vi) purchased gas adjustment payables and (vii) all amounts set forth opposite the caption “other current liabilities” on the consolidated balance sheet of the Borrower and its Subsidiaries for the relevant period).

“ Consolidated Tangible Net Assets ” means at any date, the total of all assets of the Borrower Group (including revaluations thereof as a result of commercial appraisals, price level restatement or otherwise) as set forth on the balance sheet most recently delivered to the Lenders pursuant to Section 6.01 net of applicable reserves and deductions but excluding goodwill, trade names, trademarks, unamortized debt discount and all other like intangible assets (which term shall not be construed to include such revaluations) less the aggregate of the consolidated current liabilities of the Borrower Group appearing on such balance sheet.

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

 

Capital increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative.

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

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

“ Co-Syndication Agents ” means, collectively, Dresdner Bank AG New York Branch and CoBank, ACB, each in its capacity as a syndication agent hereunder.

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

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

“ Debt Service ” means, for any period of determination, the amount of principal due and payable by the Borrower during such period, if any, and Borrower Interest owed, in each case in respect of any Indebtedness of the Borrower described in clauses (a), (b) and (c) of the definition of Indebtedness and that is permitted under Section 7.03 during such period.

“ Debt Service Coverage Ratio ” means, for any Test Period, the ratio of (a) Cash Available for Borrower Debt Service for such Test Period to (b) Borrower Interest for such Test Period.

“ Debtor Relief Laws ” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

“ Default ” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

“ Default Rate ” means (a) in the case of past due principal of any Loan, the interest rate otherwise applicable to such Loan hereunder plus 2.0%  per annum or (b) in the case of any other past due amount, the Alternate Base Rate plus the Applicable Margin plus 2.0%  per annum .

“ Defaulting Lender ” means any Lender that (a) has failed to fund any portion of the Term Loans or Capital Expenditure Loans required to be funded by it hereunder on the date required to be funded by it hereunder, unless the subject of a good faith dispute or subsequently cured, (b) has otherwise failed to pay over to the Facility Agent or any other Lender any other amount required to be paid by it hereunder on the date when due, unless the subject of a good faith dispute or subsequently cured, or (c) has been deemed insolvent or becomes the subject of a bankruptcy or insolvency proceeding.

 

“ Disposition ” or “ Dispose ” means the sale, assignment, transfer or other disposition (including any sale and leaseback transaction and any termination of business lines) of any Property by the Borrower or any of its Subsidiaries to any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

“ Distributable Cash ” means, during any applicable period beginning upon the occurrence of an Excess Cash Sweep Event and/or a Lock-Up Event and ending when an Excess Cash Sweep Event and/or Lock-Up Event (as applicable) no longer exists, EBITDA of the Operating Companies plus , in each case, without duplication for such period:

(i) interest income of the Operating Companies;

(ii) Net Cash Proceeds from Dispositions and Casualty Events of the Operating Companies (excluding any Net Cash Proceeds that are actually reinvested or applied to prepay the Facilities in accordance with the provisions of Section 2.03(b)(i)(A) or (E) );

(iii) the Net Cash Proceeds from issuances by the Operating Companies consisting of Indebtedness (excluding borrowings consisting of commercial paper and any other revolving facilities except those revolving facilities which are incurred for the sole purpose of financing Utility Capital Expenditures) to the extent not actually applied to prepay the Facilities pursuant to Section 2.03(b)(i)(D) ; and

(iv) cash contributions made by the Borrower to the Operating Companies.

minus :

(v) consolidated cash income tax paid by the Borrower Group for such period or by the Parent, Parent Holdco (to the extent such Person is not Puget Holdings), or Puget Holdings in respect of the operations of the Borrower Group for such period;

(vi) Base Capital Expenditures made in cash during such period;

(vii) Conservation Expenditures made in cash during such period;

(viii) (A) repayments of the principal amount of Indebtedness of the Operating Companies (excluding repayments of Indebtedness consisting of commercial paper and any other revolving facilities except those revolving facilities (x) which were incurred for the sole purpose of financing Utility Capital Expenditures and (y) the repayments of which are financed through the borrowings of Indebtedness that is not revolving or in the form of commercial paper or similar instruments), (B) Cash Interest Expense applicable solely to the Operating Companies (including interest expense in connection with the Operating Company Hybrid Debt and dividends in connection with the Operating Company Preferred Shares) and (C) any agency and other recurring fees paid by the Operating Companies in connection with such Indebtedness; and

(ix) Cash Distributions to the Borrower (excluding any amount paid in cash to the Borrower (x) for payment of the amounts specified in clause (v)  above by any of its

 

Subsidiaries pursuant to any tax-sharing arrangements in respect of the Borrower’s or its Subsidiaries’ allocable share of tax liabilities of the consolidated tax group for U.S. Federal income tax purposes of which Puget Holdings is the “ common parent ” (within the meaning of Section 1504 of the Code) or any similar state, local or foreign tax liabilities or (y) to the extent actually applied to prepay the Facilities pursuant to Section 2.03(b)(i)(D) ).

At no time shall Distributable Cash be less than zero.

“ Distributable Cash Balance ” means, for any applicable period in which either an Excess Cash Sweep Event and/or a Lock-Up Event has occurred, the amount of Distributable Cash for such period plus the amount of any Distributable Cash for any prior period that has not been applied pursuant to Section 2.03(b)(i)(G) to prepay the Loans. The Distributable Cash Balance shall not be reduced by prepayments required under any of the provisions of Section 2.03(b) other than Section 2.03(b)(i)(G) .

“ Distributable Cash Sweep Amount ” has the meaning specified in Section 2.03(b)(i)(G) .

“ Dividend Prohibition ” means, with respect to any Subsidiary, contractual restrictions permitted pursuant to Section 7.12 or existing under applicable Law that prohibit such Subsidiary from using the Net Cash Proceeds from any Disposition, Issuance or Casualty Event, as applicable, to make a distribution, dividend or other return of capital to the Borrower (directly or indirectly).

“ Dollar ” and “ $ ” mean lawful money of the United States.

“ EBITDA ” means, for any period, with respect to the Borrower Group, as determined on a consolidated basis without duplication in accordance with GAAP, net income (or loss) of the Borrower Group for such period,

(a) plus, without duplication, and to the extent deducted in determining such net income (or loss), the sum of (i) total interest for such period, (ii) consolidated income tax expense for such period in respect of the operation of the Borrower Group, (iii) all amounts attributable to depreciation and amortization (including Conservation Amortization) for such period and (iv) any extraordinary charges or non-cash charges for such period ( provided that any cash payment made with respect to any such non-cash charge shall be subtracted in computing EBITDA during the period in which such cash payment is made), and

(b) minus, without duplication, and to the extent included in determining such net income, (i) any non-cash gains or extraordinary gains for such period, (ii) AFUDC, (iii) cash interest income, (iv) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries or that Person’s assets are acquired by the Borrower or any of its Subsidiaries and (v) the income of any Subsidiary of the Borrower acquired or created after the date hereof to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by

 

operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary.

“ Effective Date ” means the date that this Agreement is executed and all the conditions precedent in Section 4.01 are satisfied or waived in accordance with the terms of this Agreement.

“ Effective Time ” means the time the Merger shall become effective upon the filing of the articles of merger in the office of the Secretary of State of the State of Washington or upon the effective date specified in the articles of merger so filed, whichever is later.

“ Environmental Laws ” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, initiatives, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution, the protection of the environment, natural resources, or, to the extent relating to exposure to Hazardous Materials, human health or safety or to the release of any Hazardous Materials into the environment, including air emissions and discharges to waste or public systems.

“ Environmental Liability ” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any of its Subsidiaries resulting from (a) the actual or alleged violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release, or presence of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“ Environmental Permit ” means any permit, approval, identification number, license or other authorization required from any Governmental Authority under any Environmental Law.

“ Equity Interests ” means, with respect to any Person, all of the shares, membership interests, rights, participations or other equivalents (however designated) of capital stock of (or other ownership or profit interests or units in) such Person and all of the warrants, options or other rights for the purchase, acquisition or exchange from such Person of any of the foregoing (including through convertible securities).

“ Equity Investors ” means, on any date, each Person that owns on such date any issued and outstanding Equity Interests of Puget Holdings.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and rules and regulations related thereto.

“ ERISA Affiliate ” means any trade or business (whether or not incorporated) that together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code.

“ ERISA Event ” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower, any of its Subsidiaries or any ERISA Affiliate from a Pension Plan

 

subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal, within the meaning of Section 4203 or 4205 of ERISA, respectively (and for purposes of clarification, not including a transaction described in Section 4204 of ERISA), by the Borrower, any of its Subsidiaries or any ERISA Affiliate from a Multiemployer Plan; (d) the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination, in either case under Section 4041(c) of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan under Section 4042 of ERISA; (e) the conditions for imposition of a lien under Section 303(k) of ERISA shall have been met with respect to any Pension Plan; (f) a determination that any Pension Plan is in “at risk” status (within the meaning of Section 303 of ERISA); or (g) the imposition of any material liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

“ Event of Default ” has the meaning specified in Section 8.01 .

“ Excess Cash ” means for any period of determination, Cash Available for Borrower Debt Service during such period minus Debt Service during such period.

“ Excess Cash Sweep Event ” means (a) if the ratings of the Facilities are equal to BB- from S&P and Ba3 from Moody’s, (b) if the ratings of the Facilities are equal to (i) BB- from S&P and B1 from Moody’s or (ii) B+ from S&P and Ba3 from Moody’s, or (c) if the ratings of the Facilities are equal to or below B+ from S&P and B1 from Moody’s; provided , however , if the then applicable ratings from Moody’s and S&P are two or more levels apart, the higher of such ratings shall be deemed to be one level above the lower of the two ratings (for example only, if the ratings for the Facilities are BB from S&P and Baa3 from Moody’s, the Baa3 rating from Moody’s shall be deemed to be Ba1 from Moody’s).

“ Excess Cash Sweep Percentage ” means a percentage of Excess Cash as follows: (i) in the case of an Excess Cash Sweep Event referred to in clause (a) of the definition of such term, 25%, (ii) in the case of an Excess Cash Sweep Event referred to in clause (b) of the definition of such term, 75%, and (iii) in the case of an Excess Cash Sweep Event referred to in clause (c) of the definition of such term, 100%.

“ Excluded Taxes ” means, with respect to any Agent, any Lender or any other recipient of any payment to be made by or on account of any Obligation of the Borrower, (a) income, franchise or similar taxes imposed on (or measured in whole or in part by reference to) its net or overall gross income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable Lending Office is located, or a jurisdiction in which such Agent, Lender or other recipient is engaged in business, other than a business deemed to arise solely from such recipient having entered into, received a payment under or enforced any Financing Document and activities incidental thereto, (b) any taxes attributable to a Lender’s failure to comply with Section 3.01(f) of this Agreement, (c) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the applicable Lender or recipient is located, (d) in the case of a Foreign Lender (other than an

 

Assignee pursuant to a request by the Borrower under Section 3.06(b) of this Agreement), any tax that is imposed on amounts payable to such Foreign Lender that is attributable to such Foreign Lender’s failure to comply with Section 3.01(e) of this Agreement, and (e) in the case of any Agent, Lender or other recipient, any United States withholding tax imposed on amounts payable to such recipient at the time such recipient becomes a party to this Agreement except to the extent that such recipient (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such tax pursuant to Section 3.01(a) of this Agreement. For purposes of this paragraph, the term “taxes” means all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities (including additions to tax, penalties and interest) with respect thereto.

“ Existing Indebtedness ” means (a) Indebtedness of the Borrower or any Subsidiary that is outstanding on the Effective Date and listed on Schedule 7.03(b) and (b) any Permitted Refinancing Indebtedness thereof.

“ Extraordinary Taxes ” means taxes paid in connection with Dispositions and other non-recurring events.

“ Facility ” means any of the facilities provided in Article II for the making of the Term Loans and the Capital Expenditure Loans, and “ Facilities ” means all of such facilities in the aggregate.

“ Facility Agent ” means Barclays Bank PLC, acting in its capacity as Facility Agent for the Lenders hereunder, or any successor Facility Agent.

“ Facility Agent’s Office ” means the Facility Agent’s address as set forth on Schedule 10.02 or such other address as the Facility Agent may from time to time notify the Borrower and the Lenders.

“ Federal Funds Rate ” means, for any day, the rate per annum (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the immediately preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to the Facility Agent on such day on such transactions as determined by the Facility Agent.

“ Fee Letters ” means (i) the Fee Letter dated as of October 26, 2007 between Puget Holdings and Barclays Bank PLC, and (ii) the Fee Letter dated as of October 26, 2007 between Puget Holdings and Dresdner Bank AG New York Branch.

“ Final Maturity Date ” means the fifth (5 ^th ) anniversary of the Financial Closing Date.

 

“ Financial Closing Date ” means the first date to occur on or prior to the Termination Date on which all the conditions precedent in Section 4.02 are satisfied or waived in accordance with the terms of this Agreement, the Merger is consummated and the Term Loan is made.

“ Financial Model ” means the “Model” referred to in the letter dated February 15, 2008 with reference number MACQMSU-08PaduaReport0215 from KPMG to James Wilson, Division Director, Macquarie Securities (USA) Inc.

“ Financing Documents ” means, collectively, (i) this Agreement, (ii) the Interest Hedging Agreements with any Interest Rate Hedge Bank, (iii) the Security Documents, (iv) if any Shareholder Funding is made as loans or indebtedness to the Parent, the Parent Guarantee, (v) the Fee Letters, (vi) the Notes, (vii) the Collateral Agency Agreement, (viii) if any Shareholder Funding is made as loans or indebtedness to the Parent, the Shareholder Loan Subordination Agreement, and (ix) the Assumption Agreement.

“ First Mortgage Bond Documents ” means, collectively, (i) the First and Refunding Mortgage dated as of June 2, 1924 issued by PSE (as successor to Puget Sound Power & Light Company) in favor of U.S. Bank National Association (as successor to State Street Bank and Trust Company, as successor to Old Colony Trust Company), as trustee, and (ii) the Indenture of First Mortgage dated as of April 1, 1957 issued by PSE (as successor to Puget Sound Power & Light Company) in favor of BNY Midwest Trust Company (as successor to Harris Trust and Savings Bank), as trustee and any supplemental indenture issued pursuant thereto.

“ Foreign Lender ” means any Lender that is organized under the laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia.

“ FRB ” means the Board of Governors of the Federal Reserve System of the United States.

“ Fund ” means any Person (other than a natural person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of business.

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

“ Good Utility Practice ” means any of the practices, methods, and acts engaged in or approved by a significant portion of the electric or gas utility industry in the State of Washington during the relevant time period, or any of the practices, method and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety, economy, and expedition and in a manner consistent with applicable Laws. Good Utility Practices is not intended to be limited to the optimum practice, methods, or act to the exclusion of all others, but rather to be acceptable practices, methods, or acts generally accepted in the region.

“ Governmental Authority ” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court,

 

administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“ Group FFO ” means, for any period, the consolidated EBITDA of the Borrower Group for such period plus without duplication and in each case to the extent deducted in the calculation of such EBITDA (if such item was included in the calculation of EBITDA) (a) decreases in the Consolidated Working Capital of the Borrower Group for such period, (b) cash interest income, and minus and in each case to the extent included in the calculation of such EBITDA (if such item was included in the calculation of EBITDA) (c) consolidated cash income tax paid by the Borrower Group for such period or by the Parent, Parent Holdco (to the extent such Person is not Puget Holdings) or Puget Holdings in respect of the operations of the Borrower Group for such period (excluding any Extraordinary Taxes), (d) Conservation Expenditures for such period and (e) increases in the Consolidated Working Capital of the Borrower Group for such period, in each case determined on a consolidated basis in accordance with GAAP.

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

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

“ Group Interest ” means, for any period, the aggregate Cash Interest Expense of the Borrower Group for such period, including the portion of any payments made in respect of Capitalized Lease liabilities allocable to interest expense, plus the aggregate scheduled recurring fees in respect of Indebtedness of the Borrower Group for such period, plus the net amount payable (or minus the net amount receivable) by the Borrower Group under Interest Hedging Agreements relating to interest during such period (other than any such amount payable or receivable by the Borrower Group as a result of the termination or reduction of the notional amount of any Interest Hedging Agreements to the extent such amount payable or receivable is not already included in Cash Interest Expense), in each case calculated on a consolidated basis in accordance with GAAP. For the avoidance of doubt, Group Interest shall exclude make whole payments.

“ Group Net Debt ” means consolidated Indebtedness of the Borrower Group minus the amount of cash and Cash Equivalents of the Borrower or any Operating Company (other than any segregated cash and Cash Equivalents the use of which is restricted by Contractual Obligation or Law to any specified purpose and which is specifically identified on the consolidated balance sheet of the Borrower Group).

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

 

purchase or payment of) such Indebtedness or other monetary obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance of such Indebtedness or other monetary obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the Primary Obligor so as to enable the Primary Obligor to pay such Indebtedness or other monetary obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other monetary obligation of any other Person, whether or not such Indebtedness or other monetary obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided that the term “Guarantee” shall not include endorsement for a collection or deposit in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “ Guarantee ” as a verb has a corresponding meaning.

“ Hazardous Materials ” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, toxic mold, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other such substances or wastes defined in or otherwise regulated as “hazardous” or “toxic” wastes or substances under applicable Environmental Law.

“ Hybrid Debt Securities ” means (i) any securities, trust preferred securities, or deferrable interest subordinated debt, which, in each such case, provides for the optional or mandatory deferral of interest or distributions, issued by any Borrower Group Member, or (ii) any business trusts, limited liability companies, limited partnerships or similar entities (a) substantially all of the common equity, general partner or similar interests of which are owned (either directly or indirectly through one or more Subsidiaries) at all times by any Borrower Group Member, (b) that have been formed for the purpose of issuing securities, trust preferred securities or deferrable interest subordinated debt of the type described in clause (i) above, and (c) substantially all the assets of which consist of (i) subordinated debt issued by any Borrower Group Member, and (ii) payments made from time to time on such subordinated debt.

“ Immaterial Subsidiary ” means any Subsidiary designated on the Effective Date on Schedule 5.13A or designated as such by the Borrower after the Effective Date in a notice delivered to the Facility Agent; provided that at no time shall all Immaterial Subsidiaries so designated have in the aggregate (x) total assets (excluding intercompany receivables) at the relevant time of determination having a gross asset value in excess of 1% of the consolidated total assets of the Borrower Group or (y) total consolidated revenues for the twelve (12) months ending at the relevant time of determination in excess of 1% of the consolidated total revenues of the Borrower Group; provided , further , that (1) in the event that a Subsidiary no longer qualifies as an Immaterial Subsidiary pursuant to clauses (x)  and (y)  above, the Borrower shall advise the Facility Agent thereof in a notice delivered to the Facility Agent and (2) in the event that the Subsidiaries designated as Immaterial Subsidiaries at the relevant time of determination in the

 

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

“ Impairment ” shall mean, with respect to any Financing Document or Government Approval, (a) the rescission, early termination, cancellation, repeal or invalidity thereof, (b) the suspension or injunction thereof, (c) the inability to satisfy in a timely manner stated conditions to effectiveness of such Financing Document or Government Approval in whole or in part or (d) in the case of any Government Approval only, the amendment, modification or supplementation thereof. The verb “ Impair ” shall have a correlative meaning.

“ Incremental Amendment ” has the meaning specified in Section 2.11(d) .

“ Incremental Facility Availability Period ” means the period commencing on the third anniversary of the Financial Closing Date through the date that is ten (10) Business Days prior to the Final Maturity Date.

“ Incremental Facility Financial Closing Date ” has the meaning specified in Section 2.11(d) .

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

“ Indebtedness ” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments, including, without limitation, Hybrid Debt Securities (including the Operating Company Hybrid Debt);

(b) letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties and similar instruments issued or created by or for the account of such Person;

(c) net obligations of such Person under any Interest Hedging Agreement (the amount of any such net obligation to be the amount that is or would be payable upon settlement, liquidation, termination or acceleration thereof at the time of calculation);

(d) all obligations of such Person to pay the deferred purchase price of property or services (other than (i) trade accounts payable in the ordinary course of business, (ii) accrued expenses in the ordinary course of business, (iii) any earn-out obligation until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP and (iv) obligations with respect to commodity purchase contracts);

(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements and mortgage, industrial revenue

 

bond, industrial development bond and similar financings), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(f) all Attributable Indebtedness; and

(g) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Redeemable Equity Interests in such Person (including, without limitation, Operating Company Preferred Shares) or any other Person or any warrants, rights or options to acquire such Equity Interests, valued, in the case of Redeemable Preferred Interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and

(h) all Guarantees of such Person in respect of Indebtedness referred to in any of the foregoing clauses (a) through (g) .

“ Indemnified Liabilities ” has the meaning specified in Section 10.05(a) .

“ Indemnified Parties ” has the meaning specified in Section 10.05(a) .

“ Independent Review ” has the meaning specified in Section 6.04(a)(3) .

“ Information ” has the meaning specified in Section 10.08 .

“ Information Memorandum ” means the information memorandum dated as of January 2008 used by the Joint Mandated Lead Arrangers in connection with the syndication of the Commitments.

“ Initial Lenders ” means Barclays Bank PLC and Dresdner Bank AG New York Branch.

“ Initial Material Adverse Effect ” means a “Company Material Adverse Effect”, as such term is defined in the Merger Agreement, which definition for convenience is set forth in Schedule 1.01A .

“ Intercompany Loans ” means loans, advances or other extensions of credit by any member of the Borrower Group to any other member of the Borrower Group.

“ Interest Hedging Agreements ” means any rate swap, cap or collar agreement or similar arrangement between the Borrower and one or more interest rate hedge providers designed to protect such Person against fluctuations in interest rates. For purposes of this Agreement and the other Financing Documents, the Indebtedness at any time of the Borrower under an Interest Hedging Agreement shall be determined at such time in accordance with the methodology set forth in such Interest Hedging Agreement.

“ Interest Payment Date ” means, (a) as to any Loan other than an Alternate Base Rate Loan, the last day of each Interest Period applicable to such Loan and the Final Maturity Date; provided that if any Interest Period exceeds three (3) months, the respective dates that fall every three (3) months after the beginning of such Interest Period shall also be Interest Payment Dates, and (b) as to any Alternate Base Rate Loan, each Quarter End Date and the Final Maturity Date.

 

“ Interest Period ” means, the period beginning on (and including) the date on which a Loan is made, converted or continued and shall end on (but exclude) the day which numerically corresponds to such date one, two, three or six months thereafter or such other periods as may be agreed by the Facility Agent and the Borrower if available to all Lenders (or, if such month has no numerically corresponding day, on the last Business Day of such month), in either case as the Borrower may select in its relevant notice pursuant to Section 2.02(a) or Section 2.05(d) ; provided , however , that (a) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls on the next succeeding calendar month, on the next preceding Business Day) and (b) no Interest Period may end later than the Final Maturity Date.

“ Interest Rate ” means, for any Interest Period, (i) the LIBO Rate for such Interest Period plus the Applicable Margin or (ii) in the event that (a) the LIBO Rate is unavailable as a result of the occurrence of the events described in Section 3.02 and Section 3.03 , (b) in the case of a Term Loan or a Capital Expenditure Loan, the Borrower elects in the related Borrowing Request that such Term Loan or Capital Expenditure Loan, as applicable, be made as an Alternate Base Rate Loan or (c) such Interest Period would have a duration of less than one month, the Alternate Base Rate plus the Applicable Margin, as the context may require.

“ Interest Rate Hedge Bank ” means (a) any Person that is a Lender or an Affiliate of a Lender at the time it enters into an Interest Hedging Agreement or (b) Macquarie Bank Limited to the extent it enters into an Interest Hedging Agreement, in each case in its capacity as a party thereto.

“ Investment ” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or Indebtedness of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other debt or Equity Interest in, another Person, including any partnership or joint venture interest in such other Person or (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or substantially all of the property and assets or business of another Person or assets constituting a business unit, line of business or division of such Person. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

“ Issuance ” means any issuance or sale after the Financial Closing Date by any member of the Borrower Group of any of its Preferred Interests, common Equity Interests or Indebtedness; provided that Issuance shall not include (i) any capital contribution from, any Equity Investor or any equity issued to such Equity Investors in respect of such capital contribution, in each case for the purpose of making capital contributions to PSE to pay for Utility Capital Expenditures or which are applied in the exercise of a Cure Right, (ii) any common Equity Interests sold or issued to management or employees of an Operating Company from the exercise of options and warrants held by them, (iii) any issuance of Equity Interests pursuant to “anti-dilution” provisions applicable to Equity Interests outstanding at the time of such issuance or (iv) any issuance, sale or incurrence of Indebtedness permitted under Section 7.03 .

 

“ Joint Mandated Lead Arrangers ” means Barclays Capital, the investment banking division of Barclays Bank PLC, and Dresdner Bank AG New York Branch, each in its capacity as a Mandated Lead Arranger.

“ Laws ” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

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

“ Lender Side Person ” has the meaning specified in the third proviso of Section 10.01 .

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

“ Letter of Credit ” of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable.

“ LIBO Rate ” shall mean, with respect to any Loan for any Interest Period, the rate appearing on Moneyline Telerate Markets Page 3750 (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Facility Agent from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, on the day that is two (2) Business Days prior to the commencement of such Interest Period, as the rate for the offering of Dollar deposits with a maturity comparable to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the Facility Agent will request the Reference Banks to provide the Facility Agent with their offer quotations for deposits in Dollars for such Interest Period to prime banks in the London interbank market at approximately 11:00 a.m. (London time) on such second Business Day in a representative amount and for a period approximately equal to such Interest Period and the Facility Agent shall calculate LIBOR using the average of such quotations. Each determination of the LIBO Rate by the Facility Agent pursuant to this definition shall be conclusive absent manifest error.

“ LIBO Rate Loan ” means any Loan which bears interest at a rate determined by reference to the LIBO Rate.

“ Lien ” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement, of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real

 

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

“ Loan ” means a Term Loan or a Capital Expenditure Loan, as the context requires.

“ Loan Parties ” means the Parent and the Borrower.

“ Lock-Up Account ” has the meaning specified in the Security Agreement.

“ Lock-Up Event ” has the meaning specified in Section 7.05(b)(ii) .

“ Lock-Up Period ” has the meaning specified in Section 7.05(c) .

“ Macquarie ” means The Macquarie Capital Group, which includes Macquarie Capital Group Limited, its direct or indirect subsidiaries, and the funds (or similar vehicles) they manage.

“ Macquarie Affiliates ” means Macquarie Finance Americas Inc. and Affiliates of Macquarie that are offshore banking units.

“ Majority Lenders ” means, as of any date of determination, subject to the third proviso of Section 10.01 , Lenders having more than 50% of the sum of the (a) Total Outstandings, (b) aggregate unused Term Loan Commitments and (c) aggregate Unused Capital Expenditure Commitments; provided that for purposes of determining Majority Lenders such calculation shall at all times be made by excluding the Total Outstandings, the unused Term Loan Commitments and the Unused Capital Expenditure Commitments of all Lenders that are Borrower Affiliates.

“ Management Fees ” means, for any period, the aggregate amount of all payments (including all fees, salaries and other compensation, but excluding amounts payable under Affiliate Service Agreements) paid or incurred by the Borrower and its Subsidiaries during such period to any of their Affiliates (including Macquarie) and not otherwise a Restricted Payment; provided , that Management Fees shall not include amounts payable to an Affiliate (i) in its capacity as a Lender pursuant to this Agreement or any Financing Document, (ii) in its capacity as an interest rate hedge provider pursuant to an Interest Hedging Agreement to the extent such Interest Hedging Agreement complies with Section 7.09(a)(i) or (iii) in its capacity as a lender pursuant to other Indebtedness permitted under Section 7.03 to the extent such arrangements comply with Section 7.09(a)(i) and such Affiliate is not an arranger, agent or underwriter of such Indebtedness.

“ Margin Differential ” has the meaning specified in Section 2.11(c) .

“ Material Adverse Effect ” means a material adverse effect on (i) the business, operations, property, assets or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, (ii) the ability of the Borrower and its Subsidiaries, taken as a whole, to perform its obligations under any of the Financing Documents, or (iii) the validity or enforceability of any of the Financing Documents or the material rights and remedies of any Lender, Interest Rate Hedge Bank or Agent-Related Person under any of the Financing Documents.

 

“ Material Communications ” means, any communication by the Borrower or any of its Subsidiaries with any Governmental Authority regarding an event or circumstance that could reasonably be expected to result in a Material Adverse Effect.

“ Material Notices ” means, with respect to any material Contractual Obligation, any notice sent or received by the Borrower or any of its Subsidiaries regarding a material event or circumstance, including the occurrence of any default under such Contractual Obligation or termination of such Contractual Obligation or any other development that could reasonably be expected to result in a Material Adverse Effect.

“ Merger ” has the meaning specified in the recitals to this Agreement.

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

“ Merger Sub ” has the meaning specified in the introductory paragraph of this Agreement.

“ Moody’s ” means Moody’s Investors Service, Inc. and any successor thereto.

“ Multiemployer Plan ” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA) of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding three (3) plan years, has made or been obligated to make contributions.

“ Net Cash Proceeds ” means with respect to any Disposition by any member of the Borrower Group or any Issuance by any member of the Borrower Group or any Casualty Event, the gross proceeds of all cash actually received by such Borrower Group Member in connection with such Disposition, Issuance or Casualty Event; provided that (i) Net Cash Proceeds shall be net of: (a) the amount of any legal, advisory, title, transfer and recording tax expenses, commissions and other fees and expenses paid by the Borrower or the applicable Subsidiary in connection with such transaction or Casualty Event and (b) any Federal, state and local income or other taxes estimated to be payable by Puget Holdings, the Borrower or the applicable Subsidiary as a result of such transaction or Casualty Event (but only to the extent that such estimated taxes are in fact paid to the relevant Federal, state or local Governmental Authority when due; provided that at the time such taxes are paid, an amount equal to the amount, if any, by which such estimated taxes exceed the amount of taxes actually paid shall constitute “Net Cash Proceeds” for all purposes hereunder), (ii) with respect to any Disposition or Casualty Event, Net Cash Proceeds shall be net of any repayments by the Borrower or the applicable Subsidiary of Indebtedness to the extent that (x) such Indebtedness is secured by a Lien permitted by Section 7.01 on the Property that is the subject of such Disposition or Casualty Event and (y) the transferee of (or holder of a Lien on) such Property requires that such Indebtedness be repaid, (iii) for all Dispositions, Net Cash Proceeds shall be net of any earn out or other similar obligation owed by the Borrower or applicable Subsidiary in connection with the acquisition thereof, (iv) any reserve for adjustment in respect of (x) the sale price of such asset or assets established in accordance with GAAP and (y) any liabilities (other than taxes deducted pursuant to clause (b)  above) associated with such asset or assets and retained by any Borrower

 

Group Member after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or with respect to any indemnification obligations associated with such transaction, and it being understood that “Net Cash Proceeds” shall include (A) any cash or Cash Equivalents received upon the Disposition of any non-cash consideration by any Borrower Group Member in any such Disposition and (B) upon the reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount) of any reserve described in this clause (iv)  or if such liabilities have not been satisfied in cash and the remaining amount of such reserve is not reversed within 365 days after such Disposition or Casualty Event, the remaining amount of such reserve and (v) if the applicable cash payments are in the first instance received by a Subsidiary that is not a wholly-owned Subsidiary, the related Net Cash Proceeds shall be net of the proportionate share of the common Equity Interests of such Subsidiary (and of any intermediate Subsidiary) owned by Persons that are not wholly-owned Subsidiaries of the Borrower.

“ Newco ” has the meaning specified in the definition of Permitted Acquisition.

“ Non-Consenting Lender ” has the meaning specified in Section 3.06 .

“ Note ” means a Term Note or a Capital Expenditure Note, as the context requires.

“ Obligations ” means all (a) advances to, and debts, liabilities, obligations, covenants and duties of, the Borrower arising under any Financing Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Borrower, of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding, and (b) Cash Management Obligations. Without limiting the generality of the foregoing, the Obligations of the Borrower under the Financing Documents include (x) the obligation to pay principal, interest, reimbursement obligations, charges, expenses, fees, Attorney Costs, indemnities and other amounts payable by the Borrower under any Financing Document and (y) the obligation of the Borrower to reimburse any amount in respect of any of the foregoing that any Lender, in its sole discretion, may elect to pay or advance on behalf of the Borrower.

“ OECD ” means the Organisation for Economic Co-Operation and Development.

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

“ Operating Company Capital Expenditure Loans ” means revolving loans incurred by PSE under the Operating Company Credit Agreement for the purpose of paying for Capital Expenditures of PSE.

“ Operating Company Credit Agreement ” means the Credit Agreement to be dated as of the Financial Closing Date among PSE, the lenders party thereto and Barclays Bank PLC, as facility agent, substantially in the form of Exhibit H .

 

“ Operating Company Facilities ” means the “Facilities” as defined in the Operating Company Credit Agreement.

“ Operating Company Financing Documents ” means the “Financing Documents” as defined in the Operating Company Credit Agreement.

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

“ Operating Company Preferred Shares ” means the second series 4.70% preferred shares ($100 par value) and the third series 4.84% preferred shares ($100 par value) of PSE.

“ Organizational Documents ” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement or limited liability company agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

“ Other Hedging Agreements ” means any swap, cap or collar agreement or similar arrangement between any Borrower Group Member designed to protect any Borrower Group Member against fluctuations in currency exchange rates or commodity prices.

“ Other Taxes ” has the meaning specified in Section 3.01(b) .

“ Outstanding Amount ” means with respect to Term Loans and Capital Expenditure Loans on any date, the aggregate outstanding unpaid principal amount thereof after giving effect to any Borrowings and prepayments or repayments of Term Loans and Capital Expenditure Loans, as the case may be, on such date.

“ Overnight Rate ” means, for any day, the Federal Funds Rate.

“ Parent ” means the Person that is the direct owner of 100% of the Equity Interests of the Borrower, which as of the Effective Date, is Puget Intermediate Holdings, Inc., a Washington corporation; provided that the Parent shall be a direct or indirect wholly-owned Subsidiary of Puget Holdings.

“ Parent Guarantee ” means the guarantee of the Parent substantially in the form of Exhibit C-3 .

“ Parent Holdco ” means the Person that is the direct owner of 100% of the Equity Interests of the Parent.

“ Participant ” has the meaning specified in Section 10.07(e) .

 

“ PBGC ” means the Pension Benefit Guaranty Corporation (or any successor).

“ Pension Plan ” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding three (3) plan years.

“ Permitted Acquisition ” means an acquisition consummated by or through PSE (including any newly formed wholly-owned Subsidiary of PSE that is an Operating Company (a “ Newco ”)), of all or substantially all, of the assets of or shares or other Equity Interests in a Person, or division or line of business of a Person (other than inventory, leases, materials and equipment in the ordinary course of business), in each case that is engaged in substantially the same general line of business or businesses as those in which PSE (not including any of its Subsidiaries for this purpose) is engaged or businesses reasonably related thereto; provided that:

(i) such acquisition shall be consensual and shall have been approved by the board of directors (or similar governing body) of the Person whose Equity Interests or assets are proposed to be acquired and shall not have been preceded by an unsolicited tender offer for such Equity Interests by, or proxy contest initiated by, Borrower or any of its Subsidiaries;

(ii) the aggregate purchase price paid by the Borrower Group for any such acquisition shall not exceed $600,000,000;

(iii) an Authorized Officer of the Borrower shall have delivered a certificate substantially in the form of Exhibit G , attesting to the Solvency of the Borrower and its Subsidiaries (taken as a whole, including the acquired Person or assets, after giving effect to such acquisition);

(iv) any Liens or Indebtedness assumed in connection with such acquisition are otherwise permitted under Section 7.01 or Section 7.03 , respectively;

(v) any expenditures in connection with such acquisition are Utility Capital Expenditures;

(vi) such acquisition would either be made pursuant to a competitive solicitation process or would be expected to promote PSE’s ability to meet current and future needs for electric or gas service at a reasonable cost;

(vii) no Lock-Up Event shall have occurred and be continuing or would result from the consummation of the proposed acquisition, nor shall any Lock-Up Event exist on a pro forma basis; and

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

 

“ Permitted Collateral Liens ” means Liens of the type specified in Section 7.01(e), (m), (n)  and (p) .

“ Permitted Refinancing Indebtedness ” means any Indebtedness of any Borrower Group Member, as applicable, issued in exchange for, or the Net Cash Proceeds of which are used to refund, refinance, replace, defease or discharge Existing Indebtedness or Indebtedness referred to under Section 7.03(a) ; provided , that for the avoidance of doubt, Permitted Refinancing Indebtedness shall not include Indebtedness incurred to repay revolving loans or similar Indebtedness without a corresponding permanent reduction in commitments for such loans or similar Indebtedness; provided , further , that:

(i) The principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accredited value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased or refunded (plus all refinancing expenses incurred in connection therewith including, without limitation, closing fees, agency fees, premiums, make-whole amounts or original issue discount);

(ii) Such Permitted Refinancing Indebtedness has weighted average life to maturity equal to or greater than the weighted average life to maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;

(iii) If the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Facilities, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Facilities on terms, taken as whole, at least as favorable to the Lenders as the subordination terms contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; provided that a certificate of an Authorized Officer of the Borrower is delivered to the Facility Agent at least five (5) Business Days (or such shorter period as the Facility Agent may reasonably agree) prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such subordination terms or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless the Facility Agent notifies the Borrower within such period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees);

(iv) Such Indebtedness is incurred by the Person who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;

(v)(A) If the maturity of the Indebtedness being refinanced, renewed, replaced, defeased or refunded is earlier than the Final Maturity Date, the Permitted Refinancing Indebtedness has a maturity no earlier than the maturity of the Indebtedness being refinanced, renewed, replaced, defeased or refunded or (B) if the maturity of the Indebtedness being refinanced, renewed, replaced, defeased or refunded is equal to or

 

later than the Final Maturity Date, the Permitted Refinancing Indebtedness has a maturity at least 365 days later than the Final Maturity Date;

(vi) The Permitted Refinancing Indebtedness is not secured by any Collateral not granted to the holders of the Indebtedness being financed, renewed, replaced, defeased or refunded; and

(vii) Such Permitted Refinancing Indebtedness shall have terms which shall be no more restrictive, and shall not, taken as a whole, be materially less favorable, in any respect on the Borrower or the Operating Companies than the provisions of the Indebtedness being refinanced, renewed, replaced, defeased or refunded; provided , however , that a certificate of an Authorized Officer of the Borrower is delivered to the Facility Agent at least five (5) Business Days (or such shorter period as the Facility Agent may reasonably agree) prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless the Facility Agent notifies the Borrower within such period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees); provided , further , the pricing terms may be less favorable where such Indebtedness has matured or is scheduled to mature within six (6) months and is being refinanced at then-prevailing market price.

“ Permitted Replacement Lender ” means (i) a Lender, (ii) an Affiliate of a Lender, (iii) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $250,000,000, (iv) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having deposits in excess of $250,000,000, (v) a commercial bank organized under the laws of any other country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to borrow or a political subdivision of any such country, and having total assets in excess of $250,000,000, (vi) the central bank of any country that is a member of the OECD, (vii) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having total assets in excess of $250,000,000, and (viii) any other Person approved by the Facility Agent; provided that neither the Borrower nor any Affiliate of the Borrower shall qualify as a Permitted Replacement Lender with the exception of Macquarie Affiliates, which may qualify as Permitted Replacement Lenders for an amount of Loans and Commitments not to exceed, in the aggregate together with all other Loans and Commitments held by such Persons, $50,000,000.

“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“ Plan ” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Borrower or any of its Subsidiaries or, with respect to any such plan

 

that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate, and with respect to which the Borrower or any of its Subsidiaries is reasonably expected to have any material liabilities.

“ Planned Indebtedness ” means Indebtedness incurred by PSE between the date of the Merger Agreement and the Financial Closing Date in an amount not to exceed $250,000,000; provided , however , that (i) such Indebtedness has scheduled payment terms which are consistent with the Financial Model provided pursuant to Section 4.02(q) ; and (ii) such Indebtedness shall have terms which shall be no more restrictive, and shall not, taken as a whole, be materially less favorable, in any respect on PSE or the Operating Companies than the provisions of any Existing Indebtedness in each case of clauses (i)  and (ii)  as certified by the CFO to the Facility Agent as of the Financial Closing Date; provided further that pricing terms may be at then-prevailing market price.

“ Pledge Agreement ” means the Pledge Agreement between the Parent and the Collateral Agent, substantially in the form of Exhibit C-2 .

“ Preferred Interests ” means, with respect to any Person, Equity Interests issued by such Person that are entitled to a preference or priority over any other Equity Interests issued by such Person upon any distribution of such Person’s property and assets, whether by dividend or upon liquidation.

“ Primary Obligor ” has the meaning specified in the definition of Guarantee.

“ Prime Rate ” means the rate of interest per annum publicly announced from time to time by Barclays Bank PLC as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

“ Projections ” has the meaning specified in Section 6.01(c) .

“ Property ” means any right or interest in or to property of any kind whatsoever, whether real or personal, or mixed and whether tangible or intangible, and including, for the avoidance of doubt, revenues and contractual rights.

“ PSE ” means Puget Sound Energy, Inc., a Washington corporation.

“ Public Service Property ” means property that, pursuant to applicable Laws, is used and useful or intended to be used and useful for PSE’s provision of gas or electric service to its customers and the capital invested in such property is reasonably expected to be found to be prudently incurred (if applicable) and recoverable in all material respects through PSE’s rates at the first opportunity for regulatory approval, including a power cost only rate case to the extent that such an accelerated approval process is available and appropriate for such property.

“ Puget Holdings ” means Puget Holdings LLC, a Delaware limited liability company.

“ PUHCA ” has the meaning specified in Section 5.17(d) .

 

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

“ Quarterly Period ” means a quarterly period from (but excluding) one Quarter End Date to (and including) the immediately following Quarterly End Date.

“ Redeemable ” means, with respect to any Equity Interest, any such Equity Interest that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder.

“ Reference Banks ” means, collectively, Barclays Bank PLC and Dresdner Bank AG New York Branch.

“ Register ” has the meaning specified in Section 10.07(d) .

“ Regulatory Approval ” means (a) any authorization, consent, approval, license, ruling, permit, tariff, certification, waiver, exemption, filing required by chapter 80.08 or 80.12 RCW, variance, order, judgment or decree of, by, or by any Borrower Group Member, the Parent, Parent Holdco (to the extent such Person is not Puget Holdings) or Puget Holdings with, (b) any required notice by any Borrower Group Member, (c) any declaration containing material obligations of any Borrower Group Member made by or filed with, or (d) any Borrower Group Member registration by or with, any Governmental Authority.

“ Reinstatement Date ” means, with respect to any Dividend Prohibition, the date on which such Dividend Prohibition ceases to apply.

“ Remedial Plan ” has the meaning specified in Section 6.04(a) .

“ Remedial Plan Event ” has the meaning specified in Section 6.04(a) .

“ Reportable Event ” means any of the events specified in Section 4043(c) of ERISA or the regulations issued thereunder, other than events for which the thirty (30) day notice period has been waived.

“ Restricted Payment ” means any dividend or other distribution (whether in cash, securities or other property, other than common Equity Interests in the Borrower) on account of any Equity Interest of any Borrower Group Member, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such Equity Interest, or on account of any return of capital to the Borrower’s stockholders, partners or members (or the equivalent Persons thereof); provided that dividend payments on Operating Company Preferred Shares and payments made to Affiliates pursuant to transactions permitted by Section 7.09(a) shall not constitute Restricted Payments.

“ Restricted Payment Date ” has the meaning specified in Section 7.05(b) .

 

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

“ Scheduled Base CapEx ” means the amount for Capital Expenditures for the applicable periods set forth on Schedule 1.01B .

“ Secured Obligations ” has the meaning assigned thereto in the Collateral Agency Agreement.

“ Secured Parties ” means, collectively, the Agents, the Lenders, the Interest Rate Hedge Banks and each co-agent or sub-agent appointed by the Facility Agent from time to time pursuant to this Agreement.

“ Security Agreement ” means the Security Agreement between the Borrower and the Collateral Agent, substantially in the form of Exhibit C-1 .

“ Security Documents ” means, collectively, the Security Agreement, the Pledge Agreement and any other security agreements, pledge agreements or other similar agreements delivered to the Agents, the Lenders and the Interest Rate Hedge Banks, and any other agreements, instruments or documents that create or purport to create a Lien in favor of the Collateral Agent for the benefit of the Secured Parties.

“ Shareholder Funding ” means equity investments and/or other funding sources contributed or made to Puget Holdings, Parent Holdco (to the extent such Person is not Puget Holdings) or the Parent by the Equity Investors in an aggregate amount of not less than 40% of the Total Capitalization of the Borrower immediately after giving effect to the Merger; provided that (a) such investments and fundings shall not be secured by any assets of the Parent or any Borrower Group Member or be recourse to any Borrower Group Member, and (b) any such investments and fundings made as loans or indebtedness to the Parent shall be on terms and conditions set forth in the Shareholder Loan Subordination Agreement.

“ Shareholder Loan Subordination Agreement ” means a subordination agreement among the Parent, the Facility Agent and any Person providing Shareholder Funding in the form of loans or indebtedness to the Parent in a form reasonably satisfactory to the Majority Lenders.

“ Signing Date ” means, (a) October 26, 2007 and (b) for purposes of Section 2.06 , with respect to the Initial Lenders, October 26, 2007, and, with respect to each other Lender (i) on or prior to the Effective Date, the earlier of (x) the date such Lender agrees to purchase a portion of an Initial Lender’s Commitment hereunder (in a manner satisfactory to such Initial Lender) and (y) the date such Lender become party hereto and (ii) thereafter, the date such Lender becomes a party hereto.

“ Solvent ” and “ Solvency ” means, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such

 

Person’s ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“ Specified Representations ” has the meaning specified in Section 4.03(c)(i) .

“ Subsidiary ” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned or controlled by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

“ Tax-Free Debt ” means Indebtedness of PSE to a state, territory or possession of the United States or any political subdivision thereof issued in a transaction in which such state, territory, possession or political subdivision issued obligations the interest on which is excludable from gross income pursuant to the provisions of Section 103 of the Code (or similar provisions), as in effect at the time of issuance of such obligations, and debt to a bank issuing a Letter of Credit with respect to the principal of or interest on such obligations.

“ Taxes ” has the meaning specified in Section 3.01(a) .

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

“ Term Loan ” means a Loan made pursuant to Section 2.01(a) .

“ Term Loan Borrowing ” means a borrowing consisting of Term Loans of the same Type and, in the case of LIBO Rate Loans, having the same Interest Period made by each of the Term Lenders pursuant to Section 2.01(a) .

“ Term Loan Commitment ” means, as to each Term Lender, its obligation to make a Term Loan to the Borrower pursuant to Section 2.01(a) in an aggregate principal amount not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 hereto under the caption “Term Loan Commitment” or in the Assignment and Assumption pursuant to which such Term Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement. The aggregate amount of the Term Loan Commitments is $1,425,000,000.

“ Term Note ” means a promissory note of the Borrower payable to any Term Lender, in substantially the form of Exhibit B-1 hereto, evidencing the aggregate Indebtedness of the Borrower to such Term Lender resulting from the Term Loans made by such Term Lender.

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

 

“ Termination Payment ” means any amount payable to or by the Borrower or any of its Subsidiaries in connection with a termination (whether as a result of the occurrence of an event of default or other termination event) of any Interest Hedging Agreement; provided that for the avoidance of doubt, “Termination Payment” shall not include regularly scheduled payments due under any Interest Hedging Agreement.

“ Test Period ” means the period commencing twelve (12) months prior to and including each Quarter End Date; provided , (i) the first Test Period shall be the period commencing twelve (12) months prior to the first Quarter End Date that is at least six (6) months after the Financial Closing Date and (ii) the second Test Period shall be the period commencing twelve (12) months prior to the first Quarter End Date that is at least nine (9) months after the Financial Closing Date. Any financial ratio or compliance with any covenant in respect of any Test Period shall be determined, as of the Quarter End Date on which such Test Period ends, on the date on which the financial statements pursuant to Section 6.01(a) or Section 6.01(b) have been, or should have been, delivered for the applicable fiscal period ending on such Quarter End Date.

“ Total Capitalization ” means, at any time, the sum of (a) Total Shareholders’ Equity at such time and (b) Total Indebtedness at such time.

“ Total Indebtedness ” means, at any time, consolidated Indebtedness of the Borrower Group (excluding Intercompany Loans), in each case, excluding make-whole payments.

“ Total Outstandings ” means the aggregate Outstanding Amount of all Loans.

“ Total Shareholders’ Equity ” means, at any time, the amount of total shareholders’ equity of the Borrower Group (determined on a consolidated basis without duplication in accordance with GAAP).

“ Transaction Costs ” means finance fees, commissions, costs and expenses, in each case incurred by or on behalf of the Borrower in connection with the Merger.

“ Transaction Documents ” means (a) the Merger Agreement and all other material documents, instruments and certificates delivered in connection with the Merger Agreement, and (b) the Financing Documents.

“ Type ” when used in respect of any Loan, shall refer to its nature as an Alternate Base Rate Loan or LIBO Rate Loan.

“ United States ” and “ U.S. ” mean the United States of America.

“ Unused Capital Expenditure Commitment ” means, with respect to any Capital Expenditure Lender at any time, (a) such Lender’s Capital Expenditure Commitment at such time minus (b) the sum of the aggregate principal amount of all Capital Expenditure Loans made by such Lender (in its capacity as a Lender) and outstanding at such time.

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

 

“ Utility Capital Expenditures ” means (i) Capital Expenditures of PSE and (ii) other expenditures of PSE, in each case of clauses (i)  and (ii) , which Capital Expenditures and other expenditures are incurred in the acquisition, renewal or replacement of Public Service Property, in accordance with Good Utility Practice; provided , however , clause (ii)  of the foregoing shall not include operating expenditures or expenditures for working capital or general corporate purposes, in each case that arise in the ordinary course of business.

“ Wall ” has the meaning specified in the third proviso of Section 10.01 .

“ wholly-owned ” means, with respect to a Subsidiary of a Person, a Subsidiary of such Person all of the outstanding Equity Interests of which (other than (a) director’s qualifying shares and (b) shares issued to foreign nationals to the extent required by applicable Law) are owned by such Person and/or by one or more wholly-owned Subsidiaries of such Person.

SECTION 1.02. Other Interpretive Provisions . With reference to this Agreement and each other Financing Document, unless otherwise specified herein or in such other Financing Document:

(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

(b) The words “ herein ”, “ hereto ”, “ hereof ” and “ hereunder ” and words of similar import when used in any Financing Document shall refer to such Financing Document as a whole and not to any particular provision thereof.

(i) Article, Section, Exhibit and Schedule references are to the Financing Document in which such reference appears.

(ii) The term “including” is by way of example and not limitation.

(iii) The term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form.

(c) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”; and the word “through” means “to and including”.

(d) Section headings herein and in the other Financing Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Financing Document.

SECTION 1.03. Accounting Terms and Principles .

(a) Except as set forth below, all accounting terms not specifically or completely defined herein shall be construed in conformity with GAAP and all accounting determinations required to be made pursuant hereto (including for purpose of measuring compliance with

 

Section 7.14 ) shall, unless expressly otherwise provided herein, be made in conformity with GAAP.

(b) If any change in the accounting principles used in the preparation of the financial statements referred to in Section 6.01 is hereafter required or permitted by the rules, regulations, pronouncements and opinions of the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or any successors thereto) and such change is adopted by the Borrower with the agreement of the Borrower’s accountants and results in a change in any of the calculations required by Article VII (including Section 7.14 ) that would not have resulted had such accounting change not occurred, the Facility Agent and the Borrower agree (upon the request of the Facility Agent or the Borrower) to enter into negotiations in order to amend such provisions so as to equitably reflect such change such that the criteria for evaluating compliance with such covenants by the Borrower shall be the same after such change as if such change had not been made; provided , however , that no change in GAAP that would affect a calculation that measures compliance with any covenant contained in Article VII (including Section 7.14 ) shall be given effect until such provisions are amended with the consent of the Majority Lenders to reflect such changes in GAAP. Calculations with respect to any fiscal quarter or any fiscal year of any Person shall reference the respective fiscal quarters or fiscal years of such Person.

SECTION 1.04. Rounding . Any financial ratios required to be maintained by the Borrower pursuant to this Agreement (or required to be satisfied in order for a specific action to be permitted under this Agreement) shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

SECTION 1.05. References to Agreements, Laws, Etc . Unless otherwise expressly provided herein, (a) references to Organizational Documents, agreements (including the Financing Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Financing Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.

SECTION 1.06. Times of Day . Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

SECTION 1.07. Timing of Payment of Performance . When the payment of any obligation or the performance of any covenant, duty or obligation is stated to be due or performance required on a day which is not a Business Day, the date of such payment (other than as described in the definition of Interest Period) or performance shall extend to the immediately succeeding Business Day.

SECTION 1.08. Authorized Officers . Any document delivered hereunder that is signed by an Authorized Officer of any Borrower Group Member shall be

 

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

ARTICLE II

THE COMMITMENTS AND CREDIT EXTENSIONS AND CONTINUATIONS

SECTION 2.01. The Loans .

(a) The Term Loan Borrowing . Subject to the terms and conditions set forth herein, each Lender severally agrees to make to the Borrower a single Term Loan on the Financial Closing Date in a principal amount up to but not exceeding such Lender’s Term Loan Commitment. Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed. Any portion of the Term Loan Commitments that shall remain undrawn at 5:00 p.m., New York City time, on the Financial Closing Date shall be terminated.

(b) The Capital Expenditure Loan Borrowings . Subject to the terms and conditions set forth herein, each Lender severally agrees to make Capital Expenditure Loans to the Borrower from time to time during the Capital Expenditure Availability Period in an aggregate principal amount at any one time outstanding not exceeding such Lender’s Capital Expenditure Commitment. Amounts borrowed under this Section 2.01(b) and repaid or prepaid may not be reborrowed.

SECTION 2.02. Borrowings .

(a) Each of the Term Loan and the Capital Expenditure Loans shall be made upon the delivery by the Borrower of an irrevocable Borrowing Request (or telephonic or email notice promptly confirmed by delivery of an irrevocable Borrowing Request) to the Facility Agent (which shall give to each Lender prompt notice thereof by facsimile transmission), given no later than 1:00 p.m., New York City time, at least four (4) Business Days prior to the requested date of any Capital Expenditure Loan Borrowing or Term Loan Borrowing; provided that if such Loan is to be made as an Alternate Base Rate Loan, such notice shall be so delivered no later than 1:00 p.m., New York City time, at least one (1) Business Day prior to the requested date of any Capital Expenditure Loan Borrowing or Term Loan Borrowing. Each such Borrowing Request shall specify (i) whether the Borrower is requesting a Term Loan Borrowing or a Capital Expenditure Loan Borrowing, (ii) the requested date of such Borrowing (which shall be a Business Day), (iii) in the case of a Capital Expenditure Loan Borrowing or Term Loan Borrowing, whether the related Capital Expenditure Loan or Term Loan is to be made as an Alternate Base Rate Loan or a LIBO Rate Loan, (iv) if the related Loan is to be made as a LIBO Rate Loan, the initial Interest Period applicable to such Borrowing and (v) the aggregate principal amount of Loans to be borrowed (and, subject to the terms and conditions set forth herein, the principal amount to be borrowed from each Lender shall be its ratable share of such aggregate principal amount, based upon the respective Commitments of each of the Lenders at such time).

 

(b) The Term Loan shall be borrowed in a single Borrowing. There shall be no more than seven (7) different Interest Periods at any one time for the outstanding Term Loan. Borrowings of Capital Expenditure Loans shall be in minimum amounts of $5,000,000 and increments of $1,000,000; provided that there shall be no more than sixty (60) Capital Expenditure Loan Borrowings. There shall be no more than five (5) different Interest Periods at any one time for the outstanding Capital Expenditure Loans.

(c) In the case of each Borrowing, each Lender shall make the amount of the Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds not later than 11:00 a.m., New York City time, to the account of the Facility Agent most recently designated by it for such purpose by notice to the Lenders. Upon satisfaction of the applicable conditions set forth in Section 4.02 and Section 4.03 , the Facility Agent shall make all funds so received available not later than 1:00 p.m., New York City time, by wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Facility Agent by the Borrower.

(d) The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any Borrowing.

SECTION 2.03. Prepayments; Reduction and Termination of Commitments .

(a) Optional . The Borrower may, upon notice to the Facility Agent, at any time or from time to time voluntarily prepay the Loans and/or terminate the Commitments in whole or in part ( provided , however , prior to the Financial Closing Date, the Borrower shall be permitted to reduce the Commitments in part but not in whole) without premium or penalty subject however to (x) any breakage costs due in accordance with Section 2.07 and (y) the payment of any accrued Commitment Fees and the fees set forth in the Fee Letters; provided that (i) in the case of LIBOR Rate Loans, such notice must be received by the Facility Agent not later than 11:00 a.m., New York City time, three (3) Business Days prior to any date of prepayment or termination, (ii) in the case of Alternate Base Rate Loans, such notice must be received by the Facility Agent not later than 11:00 a.m., New York City time, one (1) Business Day prior to any date of prepayment or three (3) Business Days prior to any date of termination and (iii) any partial prepayment of the Loans shall be in an aggregate minimum amount of $500,000 and in integral multiples of $500,000 in excess thereof, or if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment or termination and the Type(s) of Loans to be prepaid and/or Commitments to be terminated. The Facility Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s ratable share of such prepayment or termination. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Each prepayment of the Loans pursuant to this Section 2.03(a) shall be paid to the Lenders in accordance with their respective ratable share.

 

(b) Mandatory . (i) The Borrower shall be required to prepay all or a portion of the Loans and/or reduce the Commitments, in each case as provided in clause (ii) below:

(A) unless otherwise agreed by the Lenders, within three (3) Business Days after any date on which any Borrower Group Member receives Net Cash Proceeds of any Disposition after the Financial Closing Date (other than Dispositions permitted pursuant to Section 7.02(a) , Section 7.02(b) , Section 7.02(c) , Section 7.02(e) , Section 7.02(f) , Section 7.02(g) , Section 7.02(h) or Section 7.02(i) ), in the event that the Net Cash Proceeds of such Disposition exceed $2,000,000 individually or in the aggregate in any fiscal year; provided that the foregoing shall not apply (1) to the extent such Net Cash Proceeds are required to be applied otherwise under the terms and conditions of Existing Indebtedness, the Operating Company Facilities or Permitted Refinancing Indebtedness or, in the case of a Disposition by PSE or its Subsidiaries, applicable Law, (2) to the extent that a Dividend Prohibition applies with respect to the applicable Subsidiary, except that if and to the extent that such Dividend Prohibition subsequently ceases to apply (x) on or prior to the one-year anniversary of the applicable Subsidiary’s receipt of such Net Cash Proceeds, the prepayment otherwise required by this clause (A) shall be reinstated except to the extent that such Net Cash Proceeds are reinvested as permitted by clause (3) below following the applicable Reinstatement Date and (y) after the one-year anniversary of the applicable Subsidiary’s receipt of such Net Cash Proceeds and if such Net Cash Proceeds equal or exceed $10,000,000 individually or in the aggregate, the prepayment otherwise required by this clause (A) shall be reinstated except to the extent that such Net Cash Proceeds (I) shall have been applied to repay Indebtedness of PSE or the applicable Subsidiary, and terminate all commitments with respect thereto such that such Indebtedness may not be reborrowed or (II) shall have been applied to fund Utility Capital Expenditures or (3) with respect to Dispositions permitted under Section 7.02(d) or Section 7.02(j) , the Net Cash Proceeds thereof are (x) reinvested or (y) committed to be reinvested (in property identified to the Facility Agent in writing with reasonable specificity), in each case, in Utility Capital Expenditures and within one hundred and eighty (180) days following such Disposition and, in the case of clause (y) , reinvested within twelve (12) months after the receipt thereof ( provided that to the extent that a Dividend Prohibition exists with respect to the applicable Subsidiary at the time of receipt of such Net Cash Proceeds such one hundred and eighty (180) day and twelve (12) month periods shall run from the applicable Reinstatement Date if such Net Cash Proceeds are held by the applicable Subsidiary in a segregated investment or other account, unless and until so reinvested);

(B) unless otherwise agreed by the Lenders, on each Cash Sweep Calculation Date, in an amount equal to amounts that were deposited by the Borrower and its Subsidiaries into the Lock-Up Account pursuant to Section 6.04(c) and Section 6.12 , during the fiscal quarter ending on the Quarter End Date which is two Quarter End Dates (for a total of six (6) months) prior to such Cash Sweep Date;

(C) unless otherwise agreed by the Majority Lenders, the Borrower shall prepay the Loans in full and terminate the Commitments upon the occurrence of a Change of Control after the Financial Closing Date;

 

(D) unless otherwise agreed by the Lenders, within three (3) Business Days after any date on which any Borrower Group Member receives Net Cash Proceeds of any Issuance that exceeds $5,000,000 individually or in the aggregate in any fiscal year; provided that the foregoing shall not apply (1) to the extent that such Net Cash Proceeds are required to be applied otherwise under the terms and conditions of Existing Indebtedness, the Operating Company Facilities or Permitted Refinancing Indebtedness or, in the case of an Issuance by PSE, applicable Law or (2) to the extent that a Dividend Prohibition applies with respect to the applicable Subsidiary, except that if and to the extent that such Dividend Prohibition subsequently ceases to apply (x) on or prior to the one-year anniversary of the applicable Subsidiary’s receipt of such Net Cash Proceeds, the prepayment otherwise required by this clause (D) shall be reinstated and (y) after the one-year anniversary of the applicable Subsidiary’s receipt of such Net Cash Proceeds and if such Net Cash Proceeds equal or exceed $10,000,000 individually or in the aggregate, the prepayment otherwise required by this clause (D) shall be reinstated except to the extent that such Net Cash Proceeds (I) shall have been applied to repay Indebtedness of PSE or the applicable Subsidiary, and all commitments with respect thereto have been terminated such that such Indebtedness may not be reborrowed, or (II) shall have been applied to fund Utility Capital Expenditures;

(E) unless otherwise agreed by the Lenders, within three (3) Business Days after any date on which any Borrower Group Member receives Net Cash Proceeds of any Casualty Event occurring after the Financial Closing Date to the extent that such Net Cash Proceeds exceed $5,000,000 individually or in the aggregate in any fiscal year; provided that the foregoing shall not apply (1) to proceeds under business interruption insurance, (2) to the Net Cash Proceeds of any Casualty Event required to be applied otherwise under the terms and conditions of Existing Indebtedness, the Operating Company Facilities or Permitted Refinancing Indebtedness or, in the case of any such Net Cash Proceeds received by PSE or its Subsidiaries, applicable Law, (3) to the extent that (I) the Borrower advises the Facility Agent at the time of the receipt of the relevant Net Cash Proceeds that it intends to use such Net Cash Proceeds to repair or replace the Property subject to such Casualty Event or to reinvest in Utility Capital Expenditures, (II) such Net Cash Proceeds are held by the Borrower or the applicable Subsidiary in a segregated investment or other account until so used to repair or replace such Property or invest in such Utility Capital Expenditures and (III) such Net Cash Proceeds are committed to be applied to repair or replace such Property (or invest in Utility Capital Expenditures) within one hundred and eighty (180) days of the receipt of such Net Cash Proceeds (it being understood that, in the event Net Cash Proceeds from more than one Casualty Event are held by the Borrower or the applicable Subsidiary such Net Cash Proceeds shall be deemed to be utilized in the same order in which such Net Cash Proceeds were so received and, accordingly, any such Net Cash Proceeds not so committed to be applied within one hundred and eighty (180) days of receipt or not so applied within twelve (12) months of receipt shall be forthwith applied to the prepayment of Loans as provided above), (4) with respect to Net Cash Proceeds which the CFO certifies are being paid to the Borrower or the applicable Borrower Group Member to reimburse the Borrower or such Borrower Group Member (as applicable) for expenditures previously incurred to repair or replace the Property which was the subject of such Casualty Event, or (5) to the extent that a Dividend Prohibition applies with

 

respect to the applicable Subsidiary, except that if and to the extent that such Dividend Prohibition subsequently ceases to apply the prepayment otherwise required by this clause (E) shall be reinstated;

(F) unless otherwise agreed by the Lenders, within four (4) Business Days after a Calculation Date occurring after a Quarterly Period in which an Excess Cash Sweep Event occurred or was continuing, in an amount equal to Excess Cash during such Quarterly Period ( provided , however , to the extent an Excess Cash Sweep Event no longer exists at the end of such Quarterly Period, then the Excess Cash during such period shall not be considered in this calculation) multiplied by the applicable Excess Cash Sweep Percentage; and

(G) unless otherwise agreed by the Lenders, within four (4) Business Days after a Calculation Date, in an amount equal to any Distributable Cash Balance, as specified in the certificate of the CFO delivered pursuant to Section 6.04(c) , minus any Base Capital Expenditures (to the extent not already deducted in the calculation of Distributable Cash) paid for with such Distributable Cash (the amount resulting from the calculation referred to in this Section 2.03(b)(i)(G) , the “ Distributable Cash Sweep Amount ”); provided , however , the Borrower shall only be required to make the prepayment referred to in this Section 2.03(b)(i)(G) as and when proceeds of Distributable Cash are actually received by it but the Borrower shall continue to be required to prepay an amount equal to the Distributable Cash Sweep Amount until such amount is fully prepaid.

(ii) (A) In the case of any required prepayment or reduction of the Facilities pursuant to Section 2.03(b)(i) on or after the Financial Closing Date the applicable amount determined pursuant to Section 2.03(b)(i) shall be applied on the date of receipt with respect to Net Cash Proceeds, the applicable Quarter End Date or such other date specified in Section 2.03(b)(i) and shall be applied to the Loans, first , ratably to prepay the Term Loans, and the Capital Expenditure Loans and second , to reduce the Capital Expenditure Commitments; and

(B) The Borrower shall notify the Facility Agent in writing of any mandatory prepayment of the Facilities required to be made pursuant to this Section 2.03(b) at least three (3) Business Days prior to the date of such prepayment. Each such notice shall specify the date of such prepayment and provide a reasonably detailed calculation of the amount of such prepayment. The Facility Agent will promptly notify each Lender of the contents of the Borrower’s prepayment notice and of such Lender’s ratable share of the prepayment.

(c) Accrued Interest; Funding Losses, Etc . All prepayments under this Section 2.03 shall be made together with all accrued and unpaid interest on the amount to be prepaid and, in the event that any such prepayment is made on a date other than the last day of an Interest Period therefor, any amounts owing in respect of such Loan pursuant to Section 2.07(b) .

 

(d) Termination of Commitments . Unless the Financial Closing Date shall have occurred on or prior to the Termination Date, the Commitments shall terminate on the Termination Date.

SECTION 2.04. Repayment of Loans . The Borrower shall repay to the Facility Agent for the ratable account of the Lenders on the Final Maturity Date, the aggregate principal amount of the Loans outstanding on such date.

SECTION 2.05. Interest .

(a) Subject to the provisions of Section 2.05(b) the Borrower hereby agrees to pay to the Facility Agent for the account of each Lender interest on the unpaid principal amount of each Loan made by such Lender for the period from and including the date of such Loan to but excluding the date such Loan shall be paid in full at the rate equal to the Interest Rate.

(b) Notwithstanding the provisions of Section 2.05(a) to the contrary, the Borrower hereby agrees that all past due amounts hereunder shall bear interest at a rate per annum equal to the Default Rate for the period from and including the date such past due amount was due to but excluding the date such amount is paid in full. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

(c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

(d) Notices by the Borrower to the Facility Agent of a change in the duration of Interest Periods or of the conversion of an Alternate Base Rate Loan to a LIBO Rate Loan or of a LIBO Rate Loan to an Alternate Base Rate Loan, shall be irrevocable and shall be effective only if received by the Facility Agent not later than 1:00 p.m., New York City time, three (3) Business Days prior to the first day of each subsequent Interest Period. Each such notice shall specify the Loans to which such Interest Period is to relate. The Facility Agent shall promptly notify the Lenders of the contents of each such notice.

SECTION 2.06. Fees .

(a) Commitment Fee . The Borrower shall pay to the Facility Agent for the ratable account of each Lender a commitment fee (the “ Commitment Fee ”) on the daily average unutilized amount of such Lender’s aggregate Term Loan Commitment and Capital Expenditure Commitment (as such Term Loan Commitment and Capital Expenditure Commitment may be reduced from time to time under Section 2.03 ) at a rate per annum equal to the Commitment Fee rate set forth in the definition of “Applicable Margin” at such time, for the period from and including the Signing Date to but excluding the Final Maturity Date; provided that any Commitment Fee accrued with respect to any of the Commitments of a Defaulting Lender during the period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrower so long as such Lender shall be a Defaulting Lender except to the extent that such Commitment Fee shall otherwise have been due and payable by the

 

Borrower prior to such time and; provided , further , that no Commitment Fee shall accrue on any of the Commitments of a Defaulting Lender so long as such Lender shall be a Defaulting Lender. The Commitment Fee shall accrue at all times from and including the Signing Date to but excluding the Final Maturity Date. The accrued Commitment Fee shall become due and payable upon the Completion Date (whether or not the Merger is financed by proceeds from the Facilities), and thereafter shall become payable in arrears on each Quarter End Date commencing on the first Quarter End Date following the Term Loan Borrowing until the earlier of the date all remaining Commitments are terminated or the Final Maturity Date. If the Merger Agreement is terminated, any Commitment Fee accrued from and including the Signing Date to but excluding such termination date shall become due and payable solely to the extent of any break up, topping or similar fee or the payment of any other form of consideration (including reimbursement of expenses) received by Puget Holdings, Parent Holdco (to the extent such Person is not Puget Holdings), the Parent or the Borrower prior to the application of such fee or other consideration for any other uses; provided , however , if the amount of such fee or other consideration is insufficient to pay the Commitment Fee accrued until the date of payment pursuant to this Section 2.06 and any commitment fees owed to the lenders committed to the Operating Company Facilities, then the Borrower shall pay a portion of such fee or other consideration to the payment of the Commitment Fee under this Section 2.06 and a portion to the payment of commitment fees owed to the lenders committed to the Operating Company Facilities, on a pro rata basis. Notwithstanding the foregoing, prior to the Facility Agent’s receipt of evidence of the ratings referred to in Section 4.02(h) , the Commitment Fee shall be 0.75%  per annum .

(b) Other Fees . The Borrower shall pay such fees as shall have been separately agreed upon in writing including, without limitation, pursuant to the Fee Letters, in the amounts and at the times so specified.

SECTION 2.07. Computation of Interest and Fees .

(a) All computations of interest and fees shall be made on the basis o